Fast-Growing Eagle Ford Producer Is A Must-Have For Aggressive Growth Investors

| About: Sanchez Energy (SN)

Growth is getting very hard to come by in this market right now. Only 40% of the S&P companies that have reported in the third quarter have beaten sales estimates and revenues are basically flat with 3Q2011. One sector that is showing consistent and continuing growth is the domestic energy industry as North America rapidly expands its production capacity. There are myriad fast growing firms in this space, one I like as an aggressive growth play is Sanchez Energy (NYSE:SN) which is exponentially ramping up production from its prime Eagle Ford acreage.

Two huge recent positives for Sanchez :

  • It just released a production update. The company is averaging 1,700 BOE/D in production in September up 42% from second quarter production of 1,200 BOE/D as well up an impressive increase of 350% Y/Y. Current production is 86% oil.
  • The company recently issued Series A Cumulative Perpetual Convertible Preferred Stock, raising approximately $144 million in proceeds. The company also secured a $250 million credit facility and a $250 million term loan to provide more liquidity. Sanchez Energy will use the proceeds to accelerate the development of the company's 95,000 net acre position in the Eagle Ford Shale

Sanchez Energy Corporation is an independent exploration and production company which has over 90,000 net leasehold acres in the oil and condensate, or black oil and volatile oil, windows of the Eagle Ford Shale.

  1. The nine analysts that cover the stock have a mean price target of over $29 a share on SN, more than 50% above its current stock price.
  2. Revenue is exploding. The company is on track for almost a 300% sales increase in FY2012 and analysts expect more than a 250% revenue increase in FY2013.
  3. Earnings are following revenues. The company earned just 11 cents a share in FY2011 but is looking to post over 30 cents a share in FY2012. Consensus projections call for more than $1.40 of EPS in FY2013.
  4. The company has a solid balance sheet with over $30mm in net cash on the books. Sanchez turned operating cash flow positive in FY2011 and has grown cash flow by more than 250% over the trailing 12 months over FY2011's figure. Given its growth, the stock is cheap at less than 13 times forward earnings.

Disclosure: I am long SN. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.