HOUSTON, Jan. 12, 2017 (GLOBE NEWSWIRE) — Sanchez Energy Corporation (NYSE:SN) (“Sanchez Energy”, “SN” or the “Company”) announced today that it and funds managed by Blackstone Energy Partners (NYSE:BX) (“Blackstone”) have entered a strategic 50/50 partnership and together they have signed a definitive purchase agreement to acquire Anadarko Petroleum Corporation’s (NYSE:APC) (“Anadarko”) working interest in approximately 318,000 gross operated acres in the Western Eagle Ford for approximately $2.3 billion, subject to normal and customary closing conditions and purchase price adjustments (the “Comanche Eagle Ford Asset”). Sanchez Energy and Blackstone will use cash on hand and commitments received from financial partners and commercial banks to provide financing for the acquisition and anticipate that the transaction will close in the first quarter of 2017.
TRANSACTION OVERVIEW (UNLESS OTHERWISE NOTED, HIGHLIGHTS BELOW REFERENCE THE INTERESTS HELD 50/50 BY SN AND BLACKSTONE)
- Approximately 318,000 gross operated acres (155,000 net to Sanchez Energy and Blackstone), contiguous to the Company’s Catarina asset;
- Current production of approximately 67,000 Boe/d (70 percent liquids) from the acquired assets, provides a substantial amount of immediate cash flow;
- Proved reserves of approximately 300 MMBoe (70 percent liquids, 75 percent proved developed) from the acquired asset;
- Estimated total resource potential of over 1,100 MMBoe;
- Significant near-term, low-risk production growth driven by 132 gross drilled but uncompleted wells (“DUCs”) located in the most attractive areas of the asset, with individual rates of return expected to exceed 100 percent;
- More than 4,000 Eagle Ford drilling locations, which provides over 20 years of economic drilling inventory at current strip prices;
- Eagle Ford Shale development covers approximately 80 percent of the acreage, with significant resource potential from the Austin Chalk and Pearsall Shale;
- Sanchez Energy will fully fund its 50% of the acquisition through a combination of cash on hand and commercial bank and preferred equity commitments at a newly formed non-recourse subsidiary; and
- Blackstone will fund its 50% of the acquisition through a separate entity via equity and commercial bank commitments.
|Net to Sanchez Energy|
|Total (MMBoe)||150||Production (Boe/d)||~33,500|
|Proved Reserves (MMBoe):||Drilling Inventory:|
“This accretive and transformative acquisition more than doubles our drilling inventory, adds 132 high rate of return DUCs, increases Sanchez Energy’s resource potential by over 550 MMBoe and provides a path for strong growth within projected cash flow,” said Tony Sanchez, III, Chief Executive Officer of Sanchez Energy. “With the asset strategically located adjacent to our existing Catarina asset, we anticipate substantial operating synergies and other benefits arising from the scale and concentration of our Eagle Ford position. Our continued focus on the Western Eagle Ford, expertise at multi-bench development, efficient cost structure and strong liquidity position will enable us to create significant value from the acquired assets.
“Upon completion of the acquisition, we will triple our exposure to the Upper and Middle Eagle Ford trends that have been successfully developed by the Company at Catarina. The Upper and Middle Eagle Ford sections thicken in Southern Dimmit County, where the majority of the acquired leasehold is concentrated. Upon closing the transaction, we believe we will have locked up the core of the trend within the volatile oil window. With the ability to duplicate the cost structure of our Catarina and Maverick operations throughout the Comanche Eagle Ford Asset, we expect to further improve operating efficiencies while enhancing our capability to achieve sustainability of well cost reductions over time.
“The Comanche Eagle Ford Asset generates free cash flow that can be allocated to help fund our 2017 capital budget and comes with a large inventory of high rate of return drilling opportunities that will build upon our already high quality drilling program. As a result, we project that Sanchez Energy will be producing in excess of 100,000 Boe/d while operating within cash flow in the next 12 to 18 months. Importantly, this transaction is expected to improve the Company’s leverage ratio by over one turn in the next 12 to 18 months.
“We are looking forward to working collaboratively with Blackstone in the development of these assets and to facilitate the growth of the Company.”
Angelo Acconcia, a Senior Managing Director at Blackstone Energy Partners who oversees their oil and gas investments, said, “We are excited to form this strategic partnership with Sanchez Energy, to help effectuate this transformative acquisition and to help Sanchez Energy grow and facilitate future acquisitions in the area. Sanchez Energy is a best in class operator, with a synergistic asset base and is uniquely positioned to drive significant value from these assets and future acquisitions in the area.”
“Sanchez is positioned to accelerate growth based on its scale, proven operational capability and financial structure,” commented Robert Horn, Senior Managing Director of GSO Capital. “We are excited to partner on this transformative transaction and future opportunities with Sanchez Energy.”
COMANCHE EAGLE FORD ASSET FINANCING AND STRUCTURE
Sanchez Energy’s portion of the acquisition will be funded utilizing two components. Through a restricted subsidiary, the Company expects to fund its portion of the acquisition with cash on hand. Additionally, a newly formed unrestricted subsidiary of Sanchez Energy (“UnSub”) will finance its portion of the acquisition with proceeds from non-convertible perpetual preferred equity issued to GSO Capital Partners LP (“GSO”), borrowings under a new revolving credit facility (non-recourse to SN), and a $100 million contribution in cash from Sanchez Energy. The preferred equity is structured to provide a 10 percent annual cash dividend and a 14 percent required return upon redemption to GSO and is not convertible into Sanchez Energy common stock. While the entirety of the transaction will be consolidated for financial reporting, the preferred equity and debt of UnSub will be non-recourse to SN.
The following table provides a breakdown of the assets and purchase price allocation:
|Funding Source ($MM):|
|RBL Draw/Preferred Equity||$||0||$||744||$||744|
|(1) Includes $100 million contribution to UnSub|
|(2) Prior to any purchase price adjustments|