Sanchez Energy Corp (NYSE:SN) has completed the acquisition process of 318,000 acres that was sold by Anadarko Petroleum Corporation in a 50/50 partnership agreement. The 50/50 partnership is between Blackstone Energy Partners and Sanchez Energy’s subsidiaries. On the 318,000 acres, there are proven reserves of oil of about three hundred million barrels.
“[W]e view this transaction as a key step toward deleveraging the Company’s balance sheet and anticipate that this strong production growth and reduced leverage will enable us to deliver significant value to our shareholders…” Sanchez Energy’s CEO, Tony Sanchez said with regards to the transaction.
Sustainable liquidity levels
With the completion of the transaction, Sanchez Energy was able to maintain about $602 million of total liquidity. This is inclusive of a borrowing capacity that $457 with the rest being cash and its equivalents.
With the transaction, Sanchez Energy is aiming to complete 132 wells which are expected to be in full production in the next one year. This will increase the proved reserves by about 78% from what it was a year ago. If the development plan is actualized, the production rate in 2018 is expected to be double what it was in 2016.
Sanchez Energy has also completed a financing arrangement through a new subsidiary. The arrangement will see it get about half a billion dollars in proceeds. Citigroup Global Markets Inc and JPMorgan Chase Bank, N.A. led the financing arrangement by acting as the administrative agents. A total of 16 lenders took part in providing the secured credit facility whose borrowing base will initially be $330 million. This figure can be re-determined periodically.
Currently, about 80% of natural gas and oil volumes have been hedged by Sanchez Energy from April this year to September next year. There is also a hedging arrangement that will run from October next year to March 2020.
The independent oil and natural gas production company’s current focus is in South Texas in Eagle Ford where Sanchez Energy has assembled an acreage of more than 335,000 acres.
In Thursday’s trading session, shares of Sanchez Energy Corp fell by 5.60% to close the day at $11.30.