Sanchez Energy Corp. (fka SNECQ)

[DocLevi]

Here's a nice article on Sanchez state of mind... err... paying highest know / acre price ... lol... okay here

Sanchez expands in Eagle Ford Shale with $220 million Rock Oil asset buy

Houston (Platts)--9Sep2013/508 pm EDT/2108 GMT

Small upstream operator Sanchez Energy's Eagle Ford Shale operation in South Texas bulked up in that expansive play Monday after inking a deal to buy producing assets from privately held Rock Oil Company for about $220 million in cash.

Under the definitive agreement, Houston-based Sanchez will purchase proved reserves of about 11 million barrels of oil equivalent and 2,000 boe/d of of production (81% oil, 8% natural gas liquids) spread across 3,600 net acres in McMullen County. Average working interest is 60%; 12 wells are currently producing on the properties.

The transaction is due to close at the end of this month, the company said in a statement.Jefferies analyst Subash Chandra noted Sanchez is paying $110,000/flowing boe, "similar to the $111,500 paid in July by Exco [Resources] to Chesapeake" Energy for Eagle Ford assets. That deal, for $1 billion, also included assets in Louisiana's Haynesville Shale.

But "the numbers on a per-acre basis are vastly different, as Sanchez paid $61,000/acre, while Exco paid $12,400," Chandra said in an investor note. "This ... appears to be one of the more expensive per-acre deals we've tracked in the play."

Sanchez in a statement noted the Wycross wells that will be acquired average initial 24-hour production rates of 1,000 boe/d and 30-day rates of more than 800 boe/d.

Those rates "rival some of the best wells in the Eagle Ford," company CEO Tony Sanchez said.

On the other hand, "a sample set of Hess' LaSalle [County] wells averaged 410 boe/d," said Chandra.

Denver-based Rock Oil declined to comment.

Sanchez' current production rate is about 13,500 boe/d. The company posted production of roughly 7,800 b/d of oil equivalent in Q2, up about 800% from 859 boe/d a year earlier.

Robert W. Baird analyst Hsulin Peng said the McMullen County acreage "is a bit of a step-out from Sanchez's existing ... position with its nearby leasing focused in northwest LaSalle County and further northwest in Zavala and Frio Counties."

The assets "provide an excellent combination of high quality production and reserves with a continuous development program for at least the next two years," Tony Sanchez said.

Sanchez said his company has assumed well spacing 60 acres apart, but expects optimal future development will occur on 40-acre spacing.

Wycross "is adjacent to our [existing] Cotulla area and can be integrated into our operations seamlessly," said the CEO. "We believe this capital plan along with our high-quality asset mix will enable us to double our total ... production volumes from 2013 to 2014."

Formed in August 2011, Sanchez Energy went public in December of that year. The company, which boasts a market cap of just under $800 million and about 130 employees, characterizes itself as a "rapidly growing independent."

Last month, Sanchez closed a $78 million transaction for 40,000 net undeveloped acres in the Tuscaloosa Marine Shale that straddles Mississippi and Louisiana. And in May it bought Eagle Ford Shale assets in South Texas for about $280 million from Hess that supplied 13.4 million barrels of oil equivalent and 4,500 boe/d of production.

But most independents start small, with one or two core operations, and bulk up over time. For example, Anadarko Petroleum, one of industry's largest independents, was formed in 1959 to operate in the US' Anadarko Basin. By 1998 it had about 700 Houston-area employees and production of 130,000 boe/d. After an acquisitive period in the early-to-mid 2000s, when it bought Union Pacific Resources, Kerr-McGee Corp and a few smaller producers in rapid succession, Anadarko now has 5,200 employees worldwide and reported Q2 production of 750,000 boe/d.

Also, Devon Energy was a small San Juan Basin producer in the 1980s that made some small company buys before stepping up its acquisitive focus. It then embarked on an expensive buying spree, gobbling up several large producers in rapid succession in the late 1990s and early 2000s. Devon had operated globally but pared down a few years ago, and now concentrates on North American unconventional resources. Devon now has a $24 billion market cap and 5,700 employees.

Chesapeake Energy was founded in 1989, operating in Oklahoma and East Texas and grew through a series of acquisitions in the late 1990s/early 2000s. Later, it was an early mover in the shale boom of the 2000s and expanded enormously across those plays. It is now one of the US' largest oil companies.

--Starr Spencer, [e-mail]
--Edited by Derek Sands, [e-mail]
http://www.platts.com/latest-news/oil/houston/sanchez-expands-in-eagle-ford-shale-with-220-21532669
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