Texas-based upstream energy company Sanchez Energy Corporation SN recently divested its Eagle Ford Shale Marquis asset to Fort Worth based oil and gas company Lonestar Resources US Inc. LONE for $50 million cash and preferred stock of the later. The stock will be converted into 1.5 million common shares.
Marquis is located in the eastern part of the Eagle Ford Shale spanning roughly 21,000 net acres in Fayette and Lavaca counties, TX. It has 2.7 million barrels of oil equivalent (BOE) proven reserves with around 1,750 BOE per day net production. As much as 74% of the production is oil that is extracted from more than 100 wells.
Reason for the Sale
Sanchez Energy's divestment of the non-core Marquis asset is in line with the company's strategy of improving its liquidity and financial condition that is currently under stress with a debt load of approximately $1.9 billion. The acquisition of $2.3 billion Eagle Ford assets from Anadarko Petroleum Corporation APC in the beginning of 2017 with The Blackstone Group L.P. BX as partner has also put the company in a tough spot financially.
The transformation of the underutilized non-core asset into cash will help the company to focus on the growth of the Comanche, Catarina and Maverick areas of the Western Eagle Ford, which brings much higher returns than the eastern part. The company has acquired over 340,000 net acres here.
About the Company
Sanchez Energy is an oil and gas exploration and development company, which is focused on the exploration, acquisition and development of unconventional oil and natural gas resources. The company primarily operates in the Eagle Ford Shale in South Texas.
The company presently has a Zacks Rank #5 (Strong Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
In the last three months, Sanchez Energy’s shares fell 19.4%, while the broader Zacks categorized Oil and Gas - United States - Exploration and Production industry witnessed a decrease of 12.6%.
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