Sanchez Energy Corp. said a new well targeting the Eagle Ford Shale in South Texas achieved record 24-hour initial production (IP) and had 30-day peak production significantly higher than its type curve for the area, as the company headed toward growing its year-over-year production by 65%.

The Stumberg Ranch 55H well in Dimmit County, within the company’s Comanche asset area of the Eagle Ford, posted a record setting 24-hour IP rate of 3,800 boe/d, 72% weighted to oil. The well, with a 10,000-foot lateral targeting the Lower Eagle Ford, also realized an average 30-day peak production rate of 2,900 boe/d.

“Based on the well’s production results and using current strip pricing, the Stumberg Ranch 55H appears on pace to achieve payout in only 12 months,” said CEO Tony Sanchez.

Additional production results at Comanche during 2Q2017 from wells completed in the Briscoe Catarina North area, part of a large inventory of drilled but uncompleted (DUC) wells acquired from Anadarko Petroleum Corp. earlier this year, exceeded the company’s type curves, he said. One well reached a 30-day peak production rate of 2,397 boe/d, while four other wells had rates that have already averaged more than 1,600 boe/d.

“In addition to producing above our type curve, these wells are showing a higher oil weighting than we originally modeled,” the CEO said.

The company reported total production of 6.7 million boe (73,341 boe/d) during 2Q2017, 37% weighted to natural gas, 32% to natural gas liquids (NGL) and 31% to oil. Total production for the quarter was 31% higher year/year (5.1 million boe, 55,900 boe/d), and 46% higher sequentially (4.6 million boe, 51,800 boe/d).

Despite the production increase, 2Q2017 production still was below its expectations. Management attributed the shortfall, in part, to 11 underperforming wells in the Catarina asset in the Eagle Ford, which were brought online as part of an enhanced completion design trial.

The wells had “significantly higher proppant loading of approximately 3,000 pounds/foot, which is 70% more proppant and fluids compared to our standard design,” Sanchez said. “The wells that made up the larger completion design trial at Catarina have underperformed expectations, as the higher fluids content has led to facility constraints and lower than expected production performance due in large part to apparent over-stimulation of the reservoir.

“As a result, we have returned to our standard well completion design for the 32 Catarina wells that remain in our 2017 development plan.”

With the decision to revert back to its standard design, and assuming a normal pace of drilling and completion activity, production guidance for the third quarter is 70,000-74,000 boe/d, with 80,000-84,000 boe/d forecast for the fourth quarter. The production guidance includes 22,000-24,000 b/d of oil in 3Q2017 and 29,000-31,000 b/d in 4Q2017.

Despite the success, the Houston-based exploration and production company plans to drop three operated rigs, to five from eight, by the end of September, and reduce projected capital expenditures (capex) for 2018 by nearly 43%, to $100 million from $175 million.

“Given the current oil and gas price environment,” Sanchez said, reduced spend in 2018 will “better align capital spending with operating cash flow, while remaining focused on higher rate of return projects that optimize capital efficiency.”

“The timing of completions, and therefore IP, has become more weighted to the second half of 2017 than originally planned,” said the CEO. “As a result of this change in timing, we now anticipate that production growth to approximately 90,000-100,000 boe/d projected for year-end 2017 will be realized in the first half of 2018, even with reduced 2018 spending levels.”

The company spud 48 gross (33.9 net) wells and completed 63 gross (27 net) wells during 2Q2017. It also brought 59 wells online during the quarter, with 42 at Comanche, 11 at Catarina and six at its Maverick asset in the Eagle Ford. The company at the end of the quarter had 1,975 gross (767 net) producing wells and 154 gross wells in various stages of completion.

The CEO said that despite going down to five rigs come September, the company plans to maintain its completion rate and flow back activity levels. The rig reduction should help reduce the rate of capex spending for the rest of 2017.

Last month, the company agreed to sell 21,000 net acres within its Marquis asset in the Eagle Ford to Lonestar Resources US Inc. Besides Catarina, Comanche, Marquis and Maverick, the company also owns Palmetto, also in the Eagle Ford.