SN = Good News
SN = Good News
Sanchez Energy Doubles Proved Reserves And Production With Acquisition Of 106,000 Contiguous Net Acres In The Eagle Ford Trend Of South Texas
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: SN = Good News
Does this change your value? I really appreciate your research on these winners.
Re: SN = Good News
My current valuation for SN is $44.50/share. The acquisition from Shell appears to be immediately accretive to earnings and cash flow from operations. It also gives SN a lot of running room (3,000 drilling locations) in the Eagle Ford. It definitely should raise my valuation, but I want to spend more time on it before I can "officially" raise my Fair Value Estimate.
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HOUSTON (The Deal) -- Oil and gas explorer Sanchez Energy (SN_) will almost double its holding in the Eagle Ford shale after picking up assets from Royal Dutch Shell (RDS.A_) for $639 million.
Sanchez said late Wednesday the assets include 60 million barrels of oil equivalent of proved reserves and 24,000 barrels of oil equivalent per day of production in the first quarter, 60% of which is liquids.
It is acquiring a 100% working interest and a 75% net revenue interest in 106,000 acres in Dimmit, LaSalle and Webb counties. That is expected to bring Sanchez's holdings in the Eagle Ford to 226,000 acres with up to 3,000 potential drilling locations and average first-quarter production of 42,800 barrels of oil equivalent per day.
NOTE: SN will not get to include the production in their totals until after the deal closes (probably by June 30). The "Effective Date" is January 1, so revenues less expenses for the first six months will be a purchase price adjustment. - Dan
The acquisition, which will be backdated to Jan. 1, also comes with 200 low-risk drilling locations, with 35% to 50% rates of return and 800 potential locations, bringing the company's potential drilling locations to almost 3,000 wells.
Sanchez said it expects the deal to immediately add to earnings and cash flow per share. It said the deal was worth $10.65 per barrel of oil equivalent based on year-end 2013 reserves and $32,000 per barrel of oil equivalent per day based on estimated production in May of 20,000 barrels of oil equivalent per day. The producing assets come with infrastructure. Sanchez said it plans to pay for the deal with $950 million in committed debt financing.
Sanchez Energy CEO Tony Sanchez III said the company's initial estimates put the acquisition's resource potential at up to 500 million barrels of oil equivalent. The deal should close in the second quarter if it clears regulators. [Very little risk of the deal not closing. - Dan}
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HOUSTON (The Deal) -- Oil and gas explorer Sanchez Energy (SN_) will almost double its holding in the Eagle Ford shale after picking up assets from Royal Dutch Shell (RDS.A_) for $639 million.
Sanchez said late Wednesday the assets include 60 million barrels of oil equivalent of proved reserves and 24,000 barrels of oil equivalent per day of production in the first quarter, 60% of which is liquids.
It is acquiring a 100% working interest and a 75% net revenue interest in 106,000 acres in Dimmit, LaSalle and Webb counties. That is expected to bring Sanchez's holdings in the Eagle Ford to 226,000 acres with up to 3,000 potential drilling locations and average first-quarter production of 42,800 barrels of oil equivalent per day.
NOTE: SN will not get to include the production in their totals until after the deal closes (probably by June 30). The "Effective Date" is January 1, so revenues less expenses for the first six months will be a purchase price adjustment. - Dan
The acquisition, which will be backdated to Jan. 1, also comes with 200 low-risk drilling locations, with 35% to 50% rates of return and 800 potential locations, bringing the company's potential drilling locations to almost 3,000 wells.
Sanchez said it expects the deal to immediately add to earnings and cash flow per share. It said the deal was worth $10.65 per barrel of oil equivalent based on year-end 2013 reserves and $32,000 per barrel of oil equivalent per day based on estimated production in May of 20,000 barrels of oil equivalent per day. The producing assets come with infrastructure. Sanchez said it plans to pay for the deal with $950 million in committed debt financing.
Sanchez Energy CEO Tony Sanchez III said the company's initial estimates put the acquisition's resource potential at up to 500 million barrels of oil equivalent. The deal should close in the second quarter if it clears regulators. [Very little risk of the deal not closing. - Dan}
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: SN = Good News
Stifel has raised their price target for SN by $2.00 to $38/share.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: SN = Good News
From Stifel Report:
Highly Accretive to CFPS and NAV Estimates
The deal is highly accretive to our CFPS and NAV estimates. We are increasing
our 2014 and 2015 EPS/CFPS estimates 16%/20% and 25%/46%, respectively.
We are also raising our proved and total risked NAV estimates 53% and 22% to
$23/share and $44/share (Figure 2). Notably, our total risked NAV excludes 2P
and 3P resource potential on the acquired properties.
Boosting Drilling Inventory
The acquisition includes 176 wells, which hold 29,000 net acres and 600 to 800
potential drilling locations. The latter includes 200 Lower Eagle Ford locations on
the western portion of the acreage where EURs are 600 to 700 MBoe/well. The
eastern acreage holds another 400 locations in both the Upper and Lower Eagle
Ford while the central block has Upper Eagle Ford potential. SN plans to run 2 to 3
rigs and spend $205 to $215mn in 2H14 and $330 to $370mn to drill 50 to 60 wells
in 2015.
Heightened Balance Sheet Risk
The acquisition is expected to be funded with debt. The company has secured debt
financing commitments of $950mn, contingent upon closing (expected 6/30/14).
We estimate debt/TTM EBITDA of 2.9x at 3Q14 to decline to 2.3x by YE15.
Highly Accretive to CFPS and NAV Estimates
The deal is highly accretive to our CFPS and NAV estimates. We are increasing
our 2014 and 2015 EPS/CFPS estimates 16%/20% and 25%/46%, respectively.
We are also raising our proved and total risked NAV estimates 53% and 22% to
$23/share and $44/share (Figure 2). Notably, our total risked NAV excludes 2P
and 3P resource potential on the acquired properties.
Boosting Drilling Inventory
The acquisition includes 176 wells, which hold 29,000 net acres and 600 to 800
potential drilling locations. The latter includes 200 Lower Eagle Ford locations on
the western portion of the acreage where EURs are 600 to 700 MBoe/well. The
eastern acreage holds another 400 locations in both the Upper and Lower Eagle
Ford while the central block has Upper Eagle Ford potential. SN plans to run 2 to 3
rigs and spend $205 to $215mn in 2H14 and $330 to $370mn to drill 50 to 60 wells
in 2015.
Heightened Balance Sheet Risk
The acquisition is expected to be funded with debt. The company has secured debt
financing commitments of $950mn, contingent upon closing (expected 6/30/14).
We estimate debt/TTM EBITDA of 2.9x at 3Q14 to decline to 2.3x by YE15.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: SN = Good News
Sanchez Energy price target raised to $41 from $36 at Canaccord
Canaccord raised its price target on Sanchez Energy to $41 following its acquisition of acreage in the Eagle Ford Shale. The firm, which keeps a Buy rating on the shares, noted Sanchez is one of the most levered companies in the space and its production and cash flow growth should lead to a higher stock price.
Canaccord raised its price target on Sanchez Energy to $41 following its acquisition of acreage in the Eagle Ford Shale. The firm, which keeps a Buy rating on the shares, noted Sanchez is one of the most levered companies in the space and its production and cash flow growth should lead to a higher stock price.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group