Quarterly / Earnings Reports | Third Quarter (3Q) Update | Drilling Activity | Drilling Program-Rig Count

Sanchez Energy's Production Continues to Fall

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Sanchez Energy reported its Q3 2018 results.

Production in 'Recovery' After Q3 Drop

- Q3 production of 75,750 BOEPD (down -5% from 2Q18 and up +2% YOY)

• Production results were negatively impacted by a high level of rainfall in South Texas, which resulted in approximately 3,000 net Boe/d of shut-in production at Comanche starting in mid-September 2018 and lasting through the first week of October 2018.

• With a decline in production seen in Q3, Sanchez did note that October 2018 production exceeded 80,000 Boe/d, as a focus on drilling the Lower Eagle Ford formation at Comanche, implementation of operational initiatives aimed at improving production results and continued drilling success at Catarina combined to yield production recovery and gains over the third quarter 2018

President & CEO Tony Sanchez III commented: "After fighting to offset production declines throughout the first half of 2018, I am pleased to report the company began to see the positive impact of recent operational initiatives toward the end of third quarter 2018. We knew the efforts undertaken to manage the declines earlier this year reverting to a more conservative choke strategy, implementing a completions optimization strategy and increasing artificial lift conversion and workover activity would take time to stabilize and ultimately improve our production performance. We are now seeing the impact of these improvements in the operational results, with production averaging over 80,000 Boe/d for the month of October 2018."

Sanchez Company Production

Rig Count to be Cut in 4Q

Drilling activity, which currently consists of four rigs and three completion crews, is expected to decrease to three rigs by the middle of fourth quarter 2018 as the company reduces capital spending levels.

CEO Sanchez commented: "After peaking at eight rigs and four completion crews in May 2018, drilling activity has been reduced to four rigs and three completion crews. We expect to release one more rig by year-end 2018, resulting in an expected capital run rate of approximately $350 million heading into 2019. As we develop the capital plan for next year, we anticipate our better performing Catarina drilling locations will continue to be prioritized over the company's other assets."

Q3 Drilling Ops - Tests New Cost-Effective Completion Design

• The company drilled 41 gross (22 net) wells, completed 59 gross (31 net) wells and brought 55 gross wells online (36 at Comanche, 16 at Catarina and three at Maverick).

At Comanche, completions activity was predominately split between Area 3 and Area 5. The company brought a total of 36 gross wells online, all of which targeted the Lower Eagle Ford A or B formations. The company also tested a more cost-effective completion design in the Briscoe Catarina West area. So far, production results from this test are in-line with a larger completion design used on an adjacent pad. The company plans to improve well economics by utilizing more cost-effective completion designs on future wells.

At Catarina, the company brought 16 wells online during the quarter, six of which were located in South Central Catarina and 10 of which were located in Western Catarina. Notably, seven wells brought online along the southern border of Western Catarina have shown positive results, improving the company's confidence in the surrounding undrilled acreage.

At Maverick, three wells were brought online, completing the 2018 development program for the asset.

As of Sept. 30, 2018, the company had 2,341 gross (908 net) producing wells with 47 gross wells in various stages of completion, as detailed in the following table: