Last week Sanchez Energy (NYSE:SN) announced the acquisition of over 100,000 contiguous acres in the southwestern corner of the Eagle Ford Shale near Laredo. This land, called 'Catarina Ranch,' was acquired from Royal Dutch Shell (NYSE:RDS.A) (NYSE:RDS.B). With the Catarina acquisition, Sanchez doubled its acreage in the Eagle Ford.
This deal went for only $639 million, which is estimated at only $10.65 per barrel equivalent, according to Ryder-Scott. Apparently, Shell was eager to get rid of this acreage because it was unable to get much of a profit from it. According to Sanchez, Shell's internal rate of return was below 20% on the Catarina acreage. Still, the deal is immediately accretive to cash flow...
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