Energy Prospectus

Sanchez Energy Announces Record Third Quarter 2014 Production of 3,552 MBOE, an Increase of 91% Over Second Quarter 2014 and an Increase of 228% Over the Third Quarter 2013, and Provides Operations Update.
PR Newswire
Sanchez Energy Corporation

HOUSTON, Oct. 23, 2014 /PRNewswire/ -- Sanchez Energy Corporation (SN) ("Sanchez Energy" or the "Company") today provided an update on its third quarter 2014 production and operations.

Highlights For Third Quarter 2014 Operations
•Estimated third quarter 2014 production of approximately 3,552 MBOE (38,613 BOE/D), an increase of 91% over the second quarter 2014 and an increase of 228% compared to the same period a year ago, above the midpoint of the Company's production guidance range of 36,000 to 40,000 BOE/D
•Reported production volumes consisted of 47% oil, 27% NGLs, and 26% natural gas
•9 Catarina Upper Eagle Ford wells that were drilled by the previous operator have been completed and brought online with initial 24 hour production rates ranging from 973 BOE/D to 2,117 BOE/D with an average production rate of 1,402 BOE/D
•50 gross wells are in various stages of completion
•Internally estimated proved reserves have increased to over 125 MMBOE at September 30, 2014, an increase of approximately 8 MMBOE compared to mid-year 2014, with 46% classified as proved developed
•Liquidity of approximately $900 million as of September 30, 2014, consisting of $600 million in cash and cash equivalents and a $362.5 million unused borrowing base (with a $300 million elected commitment amount) under its revolving credit facility

complete story-------

http://finance.yahoo.com/news/sanchez-e ... 00715.html

Total production above my forecast, but oil production slightly below my forecast. I will take a hard look at SN this afternoon. I have to set up for today's luncheon at the Hess Club.

might be of interest to some:
https://rbcnew.bluematrix.com/docs/pdf/ ... c9681b.pdf?

From RBC:
"Downside scenario
Our downside case for Sanchez Energy assumes that Catarina,
the non-Alexander Ranch Cotulla acreage and the TMS are
ultimately not economic. We also assume some downside to
commodity pricing. Our downside scenario assumes a lower
long-term price deck of $85 oil and $4.50 gas. This gives a
downside NAV of approximately $23 per share, or 41% below
our base NAV. Our downside valuation is $16."

It's interesting how closely many of the SMID cap stocks now are trading in the basement and almost to the cold clammy floor. SN needs only to fall an additional 10% but look at the plays which would have to prove uneconomic. How rigorously do you suppose Mr. Sanchez and his team stress tested those acquisitions? Perhaps not as aggressively as did those sellers, but still...

RBC has adjusted their price target to $28/share, which seems a bit harsh to me. I think they are reacting to the drop in production guidance for Q4, which the company says is being caused by 3rd party midstream issues and completion delays. They expect to be caught up on completions by year-end and they are holding to their 2015 production guidance of 53,000 to 58,000 boepd for 2015. Production should be over 45,000 boepd by year-end.

I am assuming 54,000 boepd in my forecast model for 2015.

I have updated the SN Net Income & Cash Flow Forecast model and posted it under the Sweet 16 Tab.

My Fair Value Estimate is now $41.00, compared to First Call's Price Target of $37.65.

Sanchez has more than enough liquidity to fund their drilling program through the end of 2015 even if oil & gas prices remain at current levels. Most of their acreage is now HBP, so they can delay some drilling if necessary.