One of the most resourceful companies in Eagle Ford has been Sanchez Production Partners LP (NYSEMKT:SPP). The small cap energy firm operates predominantly in the Eagle Ford Shale area. Initially, the firm had a small position in one of the most productive areas in Gonzalez, Texas but acquisition after acquisition has seen the small cap energy company grow its stake.
In 2014 Sanchez Energy acquired the Eagle Ford acreage belonging to Hess before it went on to acquire the acreage belonging to Shell in 2015. Earlier this year, Sanchez Energy acquired the acreage belonging to Anadarko.
Top four producer
The latest acquisition brings the total acreage that Sanchez Energy owns in Eagle Ford to 335,000 acres. This will make it one of the biggest producers in one of the most economical shale drilling areas in the United States. The small energy company will only have been beaten to the top three position by bigger energy companies that are well established.
After acquiring these positions, Sanchez Energy has turned them around and made them profitable. In the case of the position previously held by Shell, Sanchez Energy managed in under nine months to double the production. While the cost of operating a well in this area was previously $7.5 million, the small cap energy company has managed to whittle that down to $3 million.
Well recoveries
In addition, Sanchez Energy has managed to increase the well recoveries by approximately double what they previously were. Even at today’s low prices of oil, Sanchez has managed to get a rate of return that is acceptable from the acreage that was previously in Shell’s hands.
Sanchez Energy’s most recent acquisition from Anadarko is in the Comanche area and its size is larger than the position the small cap energy company acquired from Shell. Analysts, therefore, expect Sanchez Energy to turn it around and even get better rates of return since it will be enjoying economies of scale. Though currently a small-cap energy company, if the price of oil goes up, the prospects of Sanchez Energy will improve greatly.
On Wednesday shares of Sanchez Production Partners LP rose by 2.43 percent to close the day at $13.95.
