Sanchez Energy (SN) Posts Q3 Loss of $1.19/Share

November 7, 2016 6:35 AM EST

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Sanchez Energy (NYSE: SN) reported Q3 EPS of ($1.19), which does not compare to the analyst estimate of $0.03. Revenue for the quarter came in at $114.81 million versus the consensus estimate of $133.94 million. Adjusted Revenue was $142.9 million.

Adjusted EBITDA of approximately $83.8 million during the third quarter 2016 was up approximately 5 percent when compared to the prior quarter.

“As previously reported, we achieved excellent operating results in the third quarter 2016, with process improvements and efficiency gains driving our average well cost below $3.0 million per well,” said Tony Sanchez, III, Chief Executive Officer of Sanchez Energy. “The combination of strong production and lower costs has allowed us to achieve positive returns on our capital program. This is evident in our financial results, as our Adjusted EBITDA for the third quarter 2016, at approximately $83.8 million, was up 5 percent over the second quarter.

“Our strong operating and financial performance resulted in total liquidity, including availability under our undrawn credit facility, of approximately $629 million at the end of the third quarter. Our liquidity position benefitted from the closing of the Carnero Gathering Transaction with SPP, which resulted in a cash payment during the third quarter 2016 of $37 million and the assumption by SPP of an estimated $7.4 million in remaining capital commitments.

“In October 2016, we announced the sale of the Company’s 50 percent interest in Carnero Processing, LLC (“Carnero Processing”) and certain non-core producing assets, to SPP for approximately $74.7 million in cash and the assumption of an estimated $32.3 million in remaining capital commitments. Carnero Processing is developing a cryogenic natural gas processing plant in La Salle County, Texas, and these transactions further strengthen the business development relationship between Sanchez Energy and SPP. In addition, we entered into a definitive agreement in October 2016 to sell certain non-core producing assets for approximately $181 million in cash, subject to normal and customary closing adjustments. All of these transactions are expected to close before year-end and will provide capital to fund our drilling plans while creating what we believe is a key competitive advantage in today’s challenging commodity price environment.

“As we begin to craft our drilling plans for next year, our development focus remains on Catarina and the Maverick area of Cotulla where results continue to exceed expectations. Recent step out wells in South Central and Northwestern Catarina have provided further definition on the extent of their fairways. Recent wells, along with a pilot drilled in North Central Catarina, have confirmed the Upper Eagle Ford is aerially extensive across the western side of Catarina. We now estimate over 350 Upper Eagle Ford locations, more than double our initial projection. Additionally, enhanced completions are being tested in the Upper and Middle Eagle Ford with promising initial results. As of Sept. 30, 2016, we had drilled 39 of our 50 well annual drilling commitment at Catarina for the period from July 2016 through June 2017. Recent wells in the Maverick area of Cotulla are outperforming type curves by 10 to 15 percent and have returns in excess of 85 percent at recent strip pricing. We anticipate allocating a larger portion of development capital to the Maverick area of Cotulla going into 2017.”

For earnings history and earnings-related data on Sanchez Energy (SN) click here.

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