Sanchez Energy Provides Eagle Ford Shale Operations Update
HOUSTON, July 18, 2012 /PRNewswire/ -- Sanchez Energy Corporation (SN), today provided a reserves, drilling, and production update on the Company's activities in the Eagle Ford Shale, where it has approximately 95,000 net acres.
Sanchez Energy has announced that proved reserves increased by 125%, reaching 15.0 million barrels of oil equivalent ("MMBOE") at June 30, 2012, up from 6.7 MMBOE at December 31, 2011. 87% of Sanchez Energy's proved reserves at June 30, 2012 were oil-weighted, and 91% of the Company's proved reserves were classified as proved undeveloped at June 30, 2012 as compared to 86% at December 31, 2011. The present value of the future net revenues ("PV10") of Sanchez Energy's proved reserves at June 30, 2012 was $308.9 million as compared to $152.4 million at December 31, 2011.
Additionally, Sanchez Energy's mid-year 2012 reserve report identified 9.8 MMBOE of probable reserves and 4.0 MMBOE of possible reserves, for total 3P reserves of 28.8 MMBOE. The majority of Sanchez Energy's 3P reserves are located within its 9,500 net acres in the Palmetto area in Gonzales County, Texas. The Company's estimated reserves, including the estimated probable and possible reserves, were prepared by its independent reservoir engineering firm, Ryder Scott & Company, L.P.
Sanchez Energy has internally estimated that it has between 800 and 1,200 net unrisked Eagle Ford drilling locations across its 95,000 net acre position (using a range of 120 acre to 80 acre well spacing) targeting a total resource potential of approximately 250 to 380 MMBOE.
Second Quarter 2012 Exit Production Rate and Operational Update
Sanchez Energy's estimated net production exit rate at June 30, 2012 was approximately 1,200 barrels of oil equivalent ("BOE") per day, of which approximately 90% was oil, which represents a 50% increase over March 31, 2012 estimated net production exit rate of 800 BOE/day. At June 30, 2012, the Company had five wells waiting on completion. There are two rigs currently running, one in the Palmetto area and one in the Marquis area, with an additional rig to be added to the Palmetto area in August. Production is expected to continue growing in the third and fourth quarters as the Company executes the remainder of its 2012 drilling plan and adds the five wells currently waiting on first production. Sanchez Energy reaffirms its 2012 production exit rate guidance range of 4,000 to 5,000 BOE/day.
Significant second quarter operational highlights by area include:
Palmetto Area in Gonzalez County:
- The Barnhart #7 well (W.I. 50%, 15 frack stages), a short lateral, lease off-set well located in the Company's northern portion of its Palmetto area, was drilled to a measured depth of 14,020 feet (lateral length of 4,332 feet) and placed on production May 25, 2012. Initial production was approximately 502 BOE/day and average production for the first 30 days was 369 BOE/day on a 14/64 choke.
- The Barnhart #8 well (W.I. 50%, 10 frack stages), also located in the Company's northern portion of its Palmetto area, was drilled to a measured depth of 12,595 feet (lateral length of 3,678 feet) and placed on production June 18, 2012. Initial production was approximately 555 BOE/day on a 16/64 choke. The well encountered mechanical issues entailing lost returns of drilling fluids and a suboptimal cement job, all resulting in a short lateral and only 10 frack stages.
- The Barnhart #9 well (W.I. 50%) and the Ward E #1 well (W.I. 50%) have been drilled and cased and are waiting on completion.
- Drilling on the Barnhart #14 well (W.I. 50%) will commence shortly and will be immediately followed by the Barnhart #15 (W.I. 50%) using the same rig and pad. These two wells will be located adjacent to the Barnhart #5 and #6, which are the best two performing wells in our Palmetto area to date.
- A second rig will start drilling the Barnhart #10, followed by the Barnhart #11 (both W.I. 50%), in early August from the same surface location as the Barnhart #5 and #6. The two rigs drilling in the Palmetto area are expected to work continuously throughout 2012 to drill an expected 9 gross, 4.5 net wells on the Company's southern acreage area for a total of 13 gross, 6.5 net wells for 2012.
Maverick Area in Zavala and Frio Counties:
- The Ray #1H well (W.I. 100%, 16 frack stages) was drilled to a measured depth of 11,965 feet (lateral length of 5,395 feet) and placed on production May 19, 2012. Initial production was approximately 214 BOE/day and average production for the first 30 days was 113 BOE/day on a 20/64 choke.
- The Petro-Pards #1H well (W.I. 100%, 16 frack stages) was drilled to a measured depth of 12,385 feet (lateral length of 6,155 feet) and placed on production June 26, 2012. Initial production was approximately 312 BOE/day on a 48/64 choke.
- The Petro-Pards #2H well (W.I. 100%, 18 frack stages) was drilled to a measured depth of 12,830 feet (lateral length of 6,414 feet) and placed on production June 26, 2012. Initial production was approximately 456 BOE/day on a 48/64 choke.
- The Goodwin #1V well (W.I. 100%), the Company's second vertical well in the Maverick area, was drilled to a measured depth of 6,400 feet and was completed using a single-stage frack. The well was placed on production June 30, 2012, and its initial production was approximately 264 BOE/day on a 12/64 choke.
- The Mark & Sandra #2H well (W.I. 100%) has been drilled and cased and is currently undergoing completion.
- Sanchez Energy has drilled all five gross and net wells in its 2012 drilling plan for the Maverick area. After reviewing the vertical wells' results, which have been encouraging to date, we will likely add another three to four vertical Maverick wells to our budget for the second half of this year.
Marquis Area in Fayette and Lavaca Counties:
- The Prost #1H and Prost #2H wells (both W.I. 100%) have been drilled and cased and are waiting on completion. Completion operations are expected to commence during the second half of July, and these wells will be fracked back-to-back.
- The rig used to drill the Prost #2H well is currently moving to the next Marquis location, which will be the Sante A #1H, and it will drill two 100% W.I. wells back to back from adjoining units with the second well to be the Salud A #1H. Initial production results from the two Prost wells are expected in August.
- Sanchez Energy plans to drill a total of six gross and net horizontal wells in its Marquis area in 2012.
Tony Sanchez III, Chairman and CEO of Sanchez Energy, said: "We have positioned Sanchez Energy as a unique pure-play growth story within the Eagle Ford oil trend, and each day we are focused on growing value per share by cost effectively increasing production and reserves. The second quarter saw a substantial increase in operational activity and marked a turning point in our drilling program with development operations underway in all three of our project areas. We reaffirm our previous 2012 production guidance. We expect to begin the completion of the Marquis wells by the end of July and have initial production rates by mid to late August. While we are pleased with the results of the quarter, we experienced challenges common to the start-up of a drilling program, and we anticipate the full benefit of more sustained production from the completed wells in our Palmetto and Maverick areas and the initial production from the first two completed wells at Marquis to be realized in the third and fourth quarters. The timing of our Marquis drilling was impacted by weather-related delays and a concerted effort to prudently extract as much technical data from the two wells bores in this new area. We expect drilling times to decrease significantly on future wells.
Executing our drilling program in Palmetto and Maverick to date has resulted in an increase to our proved reserves from 6.7 MMBOE to 15.0 MMBOE, an increase of 125% from year-end 2011. We are continuing to delineate and develop our Palmetto area, where we plan to drill 13 to 14 gross, or 6.5 to 7 net wells, in 2012.
After reviewing 3-D seismic received in early June across the southern portion of our Palmetto acreage, we are ready to start drilling eight to nine gross wells, which are more developmental in nature, drilled in similar fashion to the Barnhart #5 and #6. We will also plan to utilize tighter spacing across the southern portion of our acreage, moving initially to 80 acre spacing from 120 acre spacing.
Our initially planned drilling activities for Maverick in 2012 have been on track and near completion with three horizontal wells online and a fourth horizontal well undergoing completion. We added one vertical well to the plan, which is now online. The Ray #1H well was the first horizontal well to come online and had an initial production rate of over 200 BOE/day. Both the Petro-Pards #1H and #2H came online at the end of June with initial production rates over 300 BOE/day and 450 BOE/day, respectively. The Goodwin #1V was completed as a single-stage fracked well and had an initial production rate of 264 BOE/day. We will evaluate production results from our vertical wells and may drill three to four additional vertical wells this year to continue our assessment of a vertical development program in the Maverick area. Initial results from the vertical wells in the Maverick area have been promising, and we are encouraged by the opportunity to develop this asset using a vertical well program, which should result in significantly lower per well costs and comparable or even favorable economic returns.
In Marquis, the Prost #1H and #2H have been drilled and both are waiting on completion. We expect first production results in August. We will commence drilling the Sante A Unit #1H later this month followed by the Salud A Unit #2H using the same rig. The Cheers Unit #1H and #2H will both be drilled during the fourth quarter.
During the second quarter, we were also able to acquire additional Eagle Ford leases, increasing our total Eagle Ford position to 95,000 net acres from 92,000 net acres. Approximately half of the increase came in the Marquis area and the other half in the Maverick area."
Sanchez Energy Corporation is a Houston, TX based growth oriented independent exploration and production company currently focused on the prolific Eagle Ford Shale trend of south Texas. The company has 95,000 net acres in the volatile oil, black oil, and gas condensate windows of the Eagle Ford. For more information about Sanchez Energy Corporation, please visit our website: www.sanchezenergycorp.com
Forward Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical facts, included in this press release that address activities, events or developments that Sanchez Energy expects, believes or anticipates will or may occur in the future are forward-looking statements. These statements are based on certain assumptions made by the company based on management's experience, perception of historical trends and technical analyses, current conditions, anticipated future developments and other factors believed to be appropriate and reasonable by management. When used in this press release, the words "will," "potential," "believe," "estimate," "intend," "expect," "may," "should," "anticipate," "could," "plan," "predict," "project," "profile," "model," or their negatives, other similar expressions or the statements that include those words, are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of Sanchez Energy, which may cause actual results to differ materially from those implied or expressed by the forward-looking statements, including but not limited to, the continued production of oil and gas at historical rates, costs of operations, delays, and any other difficulties related to producing oil or gas, the price of oil or gas, marketing and sales of produced oil and gas, estimates made in evaluating reserves, competition, general economic conditions and the ability to manage and continue growth. Further information on such assumptions, risks and uncertainties is available in Sanchez Energy's filings with the Securities and Exchange Commission ("SEC") filings. The Sanchez Energy's filings with the SEC are available on its website at www.sanchezenergycorp.com and on the SEC's website at www.sec.gov.. Any forward-looking statement speaks only as of the date on which such statement is made and Sanchez Energy undertakes no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable law.
Cautionary Note to U.S. Investors
The SEC permits oil and gas companies, in their filings with the SEC, to disclose only proved, probable and possible reserves. We use certain terms in this press release, such as total resource potential and other variations of the foregoing terms that the SEC's guidelines strictly prohibit us from including in filings with the SEC. U.S. Investors are urged to consider closely the reserves disclosures in our filings with the SEC available on our website at www.sanchezenergycorp.com and the SEC's website at www.sec.gov. You can also obtain this information from the SEC by calling its general information line at 1-800-SEC-0330.
Michael G. Long
Senior Vice President and Chief Financial Officer
Sanchez Energy Corporation
SOURCE Sanchez Energy Corporation