Sanchez Energy Corp. has revised its spending and operations guidance following the closing of the acquisition of South Texas assets from Hess Corp.
The company's new estimated 2013 production exit rate range of 15,000-17,000 boe/d represents an increase of more than 255%, at the midpoint of the range, over the 2012 exit rate of 4,500 boe/d.
Sanchez targets the liquids-rich Eagle Ford, as well as the Austin Chalk, Buda Limestone and Pearsall Shale. The acquisition from Hess consists of about 13.4 million boe of proved reserves, 4,500 boe/d of current production and about 43,000 net acres in Dimmit, Frio, LaSalle and Zavala counties in South Texas (see Shale Daily, March 20); they are referred to as the Cotulla assets.
"...[W]e have increased our 2013 capital program and activity levels," said CEO Tony Sanchez. "The primary change to our capital program is the result of the addition of the new Cotulla assets, where we expect to run one rig continuously drilling approximately 10 net wells for the remainder of 2013. Furthermore, due to continued strong well performance in our Palmetto area, we have increased the number of wells we expect to drill by 4.5 net (nine gross) wells to a total of 17 net (34 gross) wells in 2013.
"In order to accommodate the increased well count in the Palmetto area, we expect a third rig to be added during the second half of the year. Given that we, along with our partner Marathon Oil Corp., have shifted our development plans to an average of four wells per pad in this area, we expect the incremental production resulting from this increased well count to come on line either late in the fourth quarter of this year or early next year."
The company's estimated average production rate for May pro forma for the Cotulla acquisition was 12,200 boe/d, an increase of more than 200% over the first quarter rate of 3,943 boe/d.
Sanchez increased its 2013 total capital expenditure program to $475 million from $347 million, with more than 90% directed to the drilling and completion of 47 net (65 gross) wells. The estimated 2014 production exit range is 20,000-22,000 boe/d. Proved reserves, pro-forma for the acquired assets are of 36.3 million boe (87% liquids).
"In the Marquis area, we continue to experience strong well performance and are on track to drill a total of 18 gross and net wells this year," Sanchez said. "A second rig is expected to arrive in the area this month, and we have shifted our operations and development plans to focus on multi-well pad drilling.
"This increased level of activity is well within our technical and administrative capabilities and should enable us to reach a 2013 year-end production exit rate range of 15,000-17,000 boe/d as well as position us for continued strong production growth through 2014, which we expect to exit producing between 20,000 and 22,000 boe/d."