Houston-based Sanchez Production Partners LP (SPP) plans to change its name to Sanchez Midstream Partners LP as it completes its transformation to a midstream company.
SPP is selling its remaining operated Oklahoma production assets for $5.5 million. The previously announced deal is expected to close during the second quarter.
“Given the transitional nature of our business during the first half of this year and having yet to realize the full financial benefits of the midstream capital projects in various phases of completion, we expected this to be a challenging quarter,” Gerry Willinger, CEO of the general partner of SPP, said Monday during an earnings conference call.
Natural gas throughput on SPP’s Western Catarina Midstream system during the first quarter was lower than expected before the addition of 14 horizontal wells at Catarina late in the quarter by Sanchez Energy. “However, with most of our South Texas projects expected to come online in the second quarter 2017, we continue to forecast improved results in the second half of this year,” Willinger said.
“We believe our prospects for sustainable midstream growth have improved considerably with Sanchez Energy’s acquisition of the Comanche asset in South Texas. We continue to evaluate opportunities to secure additional midstream capacity for the new production coming from the Comanche asset, and look forward to growing along with Sanchez Energy as they continue to execute their strategy in the Western Eagle Ford.”
SPP reiterated its previous full-year guidance based on ongoing expectations for midstream projects in South Texas.
During the first quarter revenue totaled $25.8 million compared with $23.2 million in the year-ago quarter. The partnership recorded a net loss of $7.7 million for the first quarter compared with a net profit of $5.3 million in the year-ago quarter on higher operating and other expenses.
As of March 31, the partnership had $160.5 million in debt outstanding under its credit facility, which had a borrowing base of $215.1 million and an elected commitment amount of $200 million. The borrowing base was set at $215.6 million on April 17. The sale of Oklahoma production assets will not affect borrowing capacity as the reserves from these assets were previously excluded from the borrowing base determination.