KLR Group downgraded Sanchez Energy (NYSE: SN) from Buy to Hold with a price target of $8.00 (from $9.00) on valuation.

Analyst John Gerdes commented, "We are downgrading SN from Buy to Hold. We are decreasing our target price $1 to $8 per share due to lower liquids price realizations and slightly higher operating expense. Since late January, SN has tripled and now approximates our target price, thus requiring a downgrade to Hold.

Sanchez’s mid-cycle (’18) capital yield (cash recycle ratio) is 105%-110% versus the industry median of ~130%. Our ’16 production expectation of ~55 Mboepd is ~6% above company guidance (48-52 Mboepd). Our economic model assumes Sanchez conducts a three-rig program in ’17 and four-rig program in ’18 assuming a commodity price recovery."

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Shares of Sanchez Energy closed at $8.36 yesterday.