Sale of interest in South Texas processing plant includes an initial payment of approximately $47.7 million in cash and the release of approximately $32.3 million in remaining capital spending commitments
Sale of certain non-core producing oil and gas assets in South Texas includes total consideration of approximately $27 million
HOUSTON, Oct. 06, 2016 (GLOBE NEWSWIRE) — Sanchez Energy Corporation (NYSE:SN) (“Sanchez Energy” or the “Company”) today announced that the Company has executed definitive agreements with Sanchez Production Partners LP (NYSE MKT:SPP) (“SPP”) pursuant to which the Company anticipates:
- SPP will acquire the Company’s 50% interest in Carnero Processing, LLC (“Carnero Processing”) for an initial payment of approximately $47.7 million in cash and the assumption by SPP of remaining capital commitments to Carnero Processing, which are estimated at approximately $32.3 million (the “Carnero Processing Transaction);
- SPP will acquire certain non-core producing oil and gas assets, located in South Texas, from the Company for total consideration of $27 million, prior to normal and customary closing adjustments (the “Production Asset Transaction”); and
- SPP will obtain an option to acquire a lease, currently held by a wholly-owned subsidiary of Sanchez Energy, for a tract of land leased from the Calhoun Port Authority in Point Comfort, Texas, the location of which is intended for the construction of a marine crude storage terminal.
Carnero Processing, which is constructing a cryogenic natural gas processing plant in La Salle County, Texas (the “Raptor Plant”), is currently jointly owned by Sanchez Energy and Targa Resources Corp. (NYSE:TRGP) (“Targa”). The Raptor Plant is expected to be operational in early 2017. Sanchez Energy has invested approximately $40.2 million in Carnero Processing since entering the joint venture with Targa in October 2015.
The Raptor Plant, together with the Carnero Gathering System (which is 50% owned by each of SPP and Targa) that will connect the Company’s Catarina asset to the plant, is expected to provide significant operational and commercial benefits to Sanchez Energy, including better yields and higher net-back pricing. The Company has firm capacity for 125,000 Mcf/d of plant processing and associated pipeline capacity for five years, and has dedicated its Catarina acreage and all production developed at the asset during the term of its 15 year agreement with the joint ventures. The Company also has the option to deliver additional volumes and commit additional acreage to the Raptor Plant as production increases. Sanchez Energy currently plans to spend approximately two-thirds of its 2016 drilling and completion budget at Catarina, and considers the asset a key part of its development focus and growth strategy.
The Production Asset Transaction includes working interests in 23 producing Eagle Ford wellbores located in Dimmit and Zavala counties in South Texas together with escalating working interests in an additional 11 producing wellbores located in the Palmetto Field in Gonzales County, Texas. The Production Asset Transaction encompasses approximately 700 Boe/d of production, on average, in 2017. The estimated proved reserves from the producing wellbores is approximately 2,136 MBoe, of which 73% is oil, 13% natural gas liquids, and 14% natural gas.
The Carnero Processing Transaction and the Production Asset Transaction, which are expected to close in the fourth quarter 2016, are subject to the satisfaction of customary closing conditions, including SPP’s arrangement of financing to pay the purchase price under each transaction agreement.
“The transactions announced today are further evidence of the benefits of our strategic relationship with SPP,” said Tony Sanchez, III, Chief Executive Officer of Sanchez Energy. “Proceeds from the transactions, which are expected to close in the fourth quarter 2016, are expected to enhance the Company’s already strong liquidity position which, as of the end of the third quarter 2016, totaled approximately $629 million, consisting of approximately $329 million in cash and cash equivalents and an undrawn bank credit facility with an elected commitment amount of $300 million. As we look to pursue asset acquisitions and an organic growth strategy that stems from our extensive inventory of drilling opportunities that are highly economic at today’s commodity price levels, we continue to see our liquidity as a key competitive advantage.”
The transactions were reviewed and approved by the Board of Directors (the “Board”) of Sanchez Energy following review and approval by the Board’s Audit Committee, which is comprised of independent directors. Jefferies LLC acted as sole financial advisor to the Board’s Audit Committee. Richards, Layton & Finger, P.A. served as counsel to the Board’s Audit Committee and Akin Gump Strauss Hauer & Feld LLP represented Sanchez Energy in connection with the negotiation of the transactions.
ABOUT SANCHEZ ENERGY CORPORATION
Sanchez Energy Corporation (NYSE:SN) is an independent exploration and production company focused on the acquisition and development of unconventional oil and natural gas 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 200,000 net acres, and the Tuscaloosa Marine Shale. For more information about Sanchez Energy Corporation, please visit our website: www.sanchezenergycorp.com.