Sanchez Energy Announces Fourth Quarter And Full-Year 2014 Financial Results And Updates Operations; Record Fourth Quarter Revenues Rise 33% On 133% Higher Production Compared To Fourth Quarter 2013

HOUSTON, March 2, 2015 /PRNewswire/ -- Sanchez Energy Corporation (NYSE: SN) (the "Company," "Sanchez Energy," "we," "our" or similar terms), today announced the Company's operating and financial results for the fourth quarter and full-year 2014, which included the following highlights:

HIGHLIGHTS FOR FOURTH QUARTER 2014

• Record revenues of $172.5 million, an increase of 33% over the prior year
• Record production of 4,039 MBOE; an average of 43,897 BOE/D
• Adjusted EBITDA, a non-GAAP financial measure defined below, of $133.7 million, an increase of 36% over the prior year
• Current production of approximately 44,000 BOE/D
• Estimated proved reserves of approximately 135 MMBOE at December 31, 2014, up more than 7 MMBOE, or 6%, from approximately 127 MMBOE at September 30, 2014, and up over 76 MMBOE, or 129%, from approximately 59 MMBOE at December 31, 2013
• First quarter and full year 2015 production guidance range re-affirmed at 40,000 to 44,000 BOE/D
• Capital plan for 2015 re-affirmed at $600 - $650 million
• Net loss attributable to common stockholders of $66.1 million, which includes a non-cash after tax impairment charge of $139.0 million due to the decline in commodity prices
• Liquidity of $774 million as of December 31, 2014 consisting of $474 million in cash and cash equivalents and a $650 million unused available borrowing base with a $300 million elected commitment amount under our revolving credit facility

HIGHLIGHTS FOR FULL-YEAR 2014

• Record revenues of $666.1 million, an increase of 112% over the prior year
• Record production of 11,141 MBOE; an average of 30,523 BOE/D
• Adjusted net income attributable to common stockholders, a non-GAAP financial measure defined below, of $23.8 million
• Adjusted EBITDA of $490.6 million, an increase of 116% over the prior year
• Net loss attributable to common stockholders of $55.4 million, resulting in basic and diluted losses per share of $1.06, which includes a non-cash after tax impairment charge of $139.0 million due to declining commodity prices
• Net mark-to-market gains on commodity derivative contracts of $137.2 million, and a net fair value of derivative instruments of $123.3 million
• 2014 year-end proved reserves increased 129% over previous year-end to approximately 135 MMBOE, with a PV-10, a non-GAAP measure defined below, of $1.9 billion as compared to $1.5 billion at year-end 2013

MANAGEMENT COMMENTS

Tony Sanchez, III, President and Chief Executive Officer of Sanchez Energy, commented: "Throughout the past year, we achieved significant production and reserves growth through both the transformative acquisition of the Catarina asset as well as the ongoing development of our legacy Eagle Ford assets. Revenues, production, and proved reserves all more than doubled in 2014. Our success at Catarina was driven by our ability to seamlessly assume drilling, completion, and production operations, combined with our innovative supply chain initiatives and the continuation of our manufacturing-based efficiencies. Sustaining a focus on cost and operating efficiency has increased our inventory of high quality drilling locations in spite of the decline in commodity prices, thus setting us up to achieve continued production and reserves growth in 2015. 

At Catarina, well costs are approaching $4.5 million, a significant reduction from $8 million, which was the cost of drilling and completing wells when we assumed operations in July 2014. Regarding well performance, early indications suggest that our Lower Eagle Ford Catarina wells are meeting or exceeding the original Lower Eagle Ford type curve of 600 to 700 MBOE. Additionally, Upper Eagle Ford Catarina wells completed by Sanchez Energy are outperforming the previous operator's average of 430 MBOE per well by over 50%, indicating that these Upper Eagle Ford wells are performing more in line with our initial expectations for the Lower Eagle Ford. Our dramatically lower cost structure, combined with better performing wells, is delivering enhanced rates of return even at today's lower commodity prices. We expect to meet our 50 well drilling commitment in Catarina early in the second quarter 2015 and to start banking wells for next year, giving us the option to manage activity levels, if desired, until commodity prices recover. This operational flexibility enables us to thrive in this uncertain environment while also positioning us to be opportunistic as we position the Company for continued growth in the years to come.

Our capital plan for 2015, recently revised to $600 to $650 million, is expected to be fully funded through operating cash flow and cash on hand, without utilizing any of our undrawn bank credit facility. The strength of our balance sheet, combined with our industry leading low cost structure and large amount of low-risk drilling locations, will enable us to maintain current production levels and leave us well positioned during the low commodity price environment." 

OPERATIONS UPDATE

Sanchez Energy currently has 513 gross producing wells with 37 gross wells in various stages of completion. The Company continues to focus the majority of its resources on Catarina and plans to average 4 gross (3.5 net) rigs over the course of 2015. Front-loading much of the drilling activity in the first half of the year allows us to capitalize on the substantial cost reductions resulting from lower commodity prices and provides us with significant operational flexibility with regards to drilling commitments to preserve liquidity and sustain high rates of return on capital invested in the current environment.

Continued efficiencies with respect to both drilling and completion operations have sustained, and further increased, cost reductions across the Company's asset base. In Catarina, total well costs are now approaching $4.5 million, a 35% to 40% decrease from costs realized upon acquisition. With respect to formation stimulation, the Company has been able to realize an approximate 30% to 40% reduction in per stage cost while maintaining its current completion design.

Well results are tracking above the anticipated 600 to 700 MBOE Lower Eagle Ford type curve. This represents a substantial increase above the previous operator's results in the Upper Eagle Ford. The Company has brought 29 wells online to date in Catarina and intends to bring online an additional 10 to 15 Catarina wells in the first quarter 2015.

Regarding Sanchez Energy's other operated Eagle Ford assets, the Company expects to bring online 3 additional wells in Marquis and 7 additional wells in Wycross between now and the end of the second quarter 2015. The Company is currently in the process of drilling the last planned well in Wycross and intends to spud the first of 3 gross wells in the Tuscaloosa Marine Shale in early March.

PRODUCTION VOLUMES, AVERAGE SALES PRICES, OPERATING COSTS PER BOE, AND CAPITAL EXPENDITURES

Sanchez Energy's mix of hydrocarbon production during the fourth quarter 2014 consisted of approximately 45% crude oil, 28% natural gas liquids (total liquids constituted 73%) and 27% natural gas. By area, Catarina, Marquis, Cotulla (excluding Wycross), Palmetto, and Wycross comprised approximately 56%, 16%, 12%, 10%, and 6%, respectively, of the Company's total fourth quarter 2014 production volumes. 

Revenue for the three months ended December 31, 2014 totaled $172.5 million, an increase of 33% over the same period a year ago, due to the addition of 297 gross new wells since the fourth quarter 2013, including 121 gross wells from existing operations and 176 gross wells from the acquisition of new properties.

Production, average sales prices, and operating costs and expenses per BOE for the fourth quarter 2014 and year to date 2014 are summarized below:

Sanchez Energy announced that estimated proved reserves increased to approximately 135 MMBOE at December 31, 2014, up more than 7 MMBOE, or 6%, from approximately 127 MMBOE at September 30, 2014, and up over 76 MMBOE, or 129%, from approximately 59 MMBOE at December 31, 2013. Crude oil constituted 48% (total liquids constituted 74%) of Sanchez Energy's estimated proved reserves, and 52% of the Company's proved reserves were classified as proved undeveloped compared to 54% at September 30, 2014.

Guidance for the first quarter and full year 2015 is summarized below:

CAPITAL EXPENDITURES

Capital expenditures, before estimated accruals, for the fourth quarter 2014 were approximately $259 million, and capital expenditures incurred during the fourth quarter 2014, including accruals, were approximately $289 million.  

HEDGING UPDATE

During the fourth quarter 2014 and subsequent to year end, Sanchez Energy entered into additional derivative contracts covering anticipated future production in 2015 through 2019. As of March 2, 2015, Sanchez Energy has approximately 5.1 million barrels of anticipated crude production and 24.4 Bcf of gas production for 2015 hedged, or approximately 9.2 MBOE (25,144 BOE/D), which represents approximately 60% of its anticipated total 2015 production at the mid-point of its guidance range. Further detail regarding current hedges for anticipated future production is included herein.

SHARE COUNT

As of December 31, 2014, the Company had 58.6 million total common shares outstanding with a quarterly weighted average outstanding share count of 55.9 million. If all Series A Convertible Perpetual Preferred Stock and Series B Convertible Perpetual Preferred Stock were assumed to be converted, total outstanding shares as of December 31, 2014 would have been 71.1 million.

CONFERENCE CALL

Sanchez Energy will host a conference call for investors on March 3, 2015 at 2:00 p.m. ET (1:00 p.m. CT, 12:00 p.m. MT and 11:00 a.m. PT, respectively). Interested investors can listen to the call by visiting our website at www.sanchezenergycorp.com and clicking on the Fourth Quarter 2014 Conference Call button. Webcast, both live and rebroadcast, will be available over the internet at: http://edge.media-server.com/m/p/5igtbbpg/lan/en

ABOUT SANCHEZ ENERGY CORPORATION

Sanchez Energy Corporation is an independent exploration and production company focused on the acquisition and development of unconventional oil resources in the onshore U.S. Gulf Coast, with a current focus on the Eagle Ford Shale in South Texas where we have assembled approximately 226,000 net acres, and the Tuscaloosa Marine Shale. For more information about Sanchez Energy Corporation, please visit our website:  www.sanchezenergycorp.com

FORWARD LOOKING STATEMENTS

This press release contains, and our officers and representatives may from time to time make, 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, including statements relating to estimates of our future production, estimates of our future hydrocarbon mix, the anticipated benefits of our acquisitions, any planned takeover of operations, and the rate of development of new plays that we enter into. 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," "strategy," "future," 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 failure of acquired assets to produce as anticipated, failure to successfully integrate acquired assets, failure to continue  to produce  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, our expectations regarding the timing and ability to meet our drilling commitments with respect to our Catarina assets, and other factors described in Sanchez Energy's most recent Annual Report on Form 10-K and any updates to those risk factors set forth in Sanchez Energy's Quarterly Reports on Form 10-Q.  Further information on such assumptions, risks and uncertainties is available in Sanchez Energy's filings with the Securities and Exchange Commission (the "SEC"). Sanchez Energy's filings with the SEC are available on our website at www.sanchezenergycorp.com and on the SEC's website at www.sec.gov.  In light of these risks, uncertainties and assumptions, the events anticipated by Sanchez Energy's forward-looking statements may not occur, and, if any of such events do occur, Sanchez Energy may not have correctly anticipated the timing of their occurrence or the extent of their impact on its actual results.  Accordingly, you should not place any undue reliance on any of Sanchez Energy's forward-looking statements.  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 proved, probable and possible reserves.  We may use certain terms in our press releases, such as net 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.

Company contact:

Michael G. Long
Executive Vice President and Chief Financial Officer
Sanchez Energy Corp.
713-783-8000     

Gleeson Van Riet
Senior Vice President, Capital Markets and Investor Relations
Sanchez Energy Corp.
713-783-8000

(Financial Highlights to follow)

SANCHEZ ENERGY CORPORATION
HEDGING ACTIVITY SUMMARY

As of December 31, 2014, the Company had the following NYMEX WTI crude oil hedging transactions covering anticipated future production:

As of December 31, 2014, the Company had the following NYMEX Henry Hub natural gas hedging transactions covering anticipated future production:

Subsequent to December 31, 2014, the Company entered into NYMEX WTI crude oil swaps and NYMEX Henry Hub natural gas swaps covering anticipated future production as indicated below:

The following table presents a reconciliation of our net income to Adjusted EBITDA (in thousands):

The following table presents a reconciliation of our net income (loss) to Adjusted Net Income (Loss) (in thousands, except per share data):

SOURCE Sanchez Energy Corporation

Related Links

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