Analyst Day Presentation – Sanchez Energy Corp

Sanchez Energy Corp · Aug 26, 2014 · 108 slides

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Results Driven. Manufacturing Focused. Analyst Day Presentation August 26, 2014 www.sanchezenergycorp.com
Agenda INTERNAL USE ONLY Topic Presenter Company Overview Tony Sanchez, III 9:00 am 9:15 am President & CEO Operations Chris Heinson, SVP, COO 9:15 am 10:00 am Steve Adam, SVP, Operations Will Satterfield, SVP, Asset Development Asset…
Company Overview INTERNAL USE ONLY 4 2014 Sanchez Energy Corporation
Key Considerations INTERNAL USE ONLY One of the fastest growing E&P companies in North America Strong, successful history of reserve, production and EBITDA growth since our IPO Attractive, Low- Organic growth through the drill-bit…
Eagle Ford Shale Position INTERNAL USE ONLY SN Eagle Ford Position Summary Net Acres 224,000 Current Production (Boe/d) 37,000 Operated Rigs Non-Operated Rigs Gross Producing Wells 422 Hausser Wycross Talbutt Trust Alexander Ranch…
Transformational Growth INTERNAL USE ONLY At IPO Today (12/31/11) (6/30/14) Production 609 Boe/d 61x 37,000 Boe/d 6.7 MMBoe 17x 117 MMBoe Proved Reserves 14% PD 51% PD PV-10 152 million 13x 1,977 million LTM Revenue 15…
Delivering Strong Results INTERNAL USE ONLY Production Revenue and Adjusted EBITDA Actual PF Catarina Actual PF Catarina Adj. EBITDA 40,000 250 35,000 200 30,000 25,000 150 (MBOE/D) ( Millions) 20,000 15,000 100…
2014-2015 Production & Capital Guidance INTERNAL USE ONLY Guidance Metrics 3Q14 4Q14 2015 Production Guidance (BOE/D) Period Average 36,000 - 40,000 48,000 - 50,000 53,000 - 58,000 Year-End Exit Rate 48,000 - 50,000 55,000 -…
Capital Expenditures Focused On Eagle Ford (1) 2014 Capital Plan (MM) INTERNAL USE ONLY Gross % of % of Full Year Net Wells Net Wells Operating D&C Project Area Rig Count Spud Completed Capex Capital Plan Capital Plan Catarina 1.0 25…
Analyst Day Highlights INTERNAL USE ONLY Deep inventory of high-return, low risk locations underpins growth 2,800+ net drilling locations 2015 production guidance midpoint 55,000 boe/d Low cost and efficient producer Technically…
Operations A Manufacturing Transformation INTERNAL USE ONLY 12 2014 Sanchez Energy Corporation
Manufacturing Culture INTERNAL USE ONLY Highly collaborative company focused on being data driven and consistently generating increasing returns. Organizational Components Manufacturing Experienced petro-technical staff Focus…
Operational Strategy INTERNAL USE ONLY Organic Growth Strategic Acquisitions Asset Exploitation Capital Efficiency Sustainable Return Oriented Growth 14 2014 Sanchez Energy Corporation
Asset Exploitation INTERNAL USE ONLY 15 2014 Sanchez Energy Corporation
Asset Development Life Cycle INTERNAL USE ONLY Appraisal Vertical Wells and Cores 2D and 3D Seismic Areal Extent Determination New Data Integration Growth Appraisal Landing Depth and Well Placement Cycle Lateral Length…
Marquis Prost Project Cycle Example INTERNAL USE ONLY SN successfully grew Marquis from unproven to 9,000+ gross Boe/d in 2 years 1Q12 1Q13 10 miles 1 pilot + development well (LEF) 3D seismic; 2 pilots; 6 LEF appraisal…
Tailored Programs Enhancing Returns INTERNAL USE ONLY Buda open hole lateral development Longer laterals, higher proppant UEF standalone, load trials Down spacing UEF/LEF stacking pilots, UEF/Buda overlap tests Longer…
Stacked Lateral Potential INTERNAL USE ONLY Cotulla-La Salle/Frio Palmetto Catarina Wycross Marquis Cotulla- Upper Eagle Ford Lower Eagle Ford Target 1 Lower Eagle Ford Target 2 Buda 19 Development…
Return Focused Completion Design INTERNAL USE ONLY Well designs are customized to maximize net present value Wycross Target Window NPV 0.0 Fracture Simulation Size 20 2014 Sanchez Energy Corporation
Capital Efficiency INTERNAL USE ONLY 21 2014 Sanchez Energy Corporation
Anatomy of a Well Cost INTERNAL USE ONLY 5% Lift Supply Chain Demand Planning 5% Facilities Unit Direct Sourcing Cost Examples Driven - Proppants - Artificial Lift Completions - Chemicals - OCTG 50% - Tanks - Facilities…
Operational Support System (OSS) Overview INTERNAL USE ONLY Home Page Shows Tasks and Action Items assigned to user Action Items Rig Schedule Logging and tracking of Chronological listing of wells needed actions to be drilled…
Industrial Based Supply Chain Team INTERNAL USE ONLY Supply Chain Management Strategic Sourcing Approach Secured first-order savings by optimizing suppliers and terms High Fracking Leverage OSS forecasts to secure Services…
Well Cost Reductions SN Competitive Advantage INTERNAL USE ONLY Multi-Well Pad Field Development Appraisal Well + Zipper Frac Savings and Well Design Savings SN Competitive 14.0 Advantage 12.0 10.0 8.0 MM 6.0 12.9…
Drilling Process Commercialization INTERNAL USE ONLY Rotary Steerable vs. Optimized Conventional Performance Rotary Steerable (RSS) Average Cost/Foot Drilled Optimized Conventional (BHA) 12 1,400 12 1,400 10 1,200 1,200 10 1,000…
Completions Process Efficiencies INTERNAL USE ONLY Time to Production (Rig Release to First Pump) Mapped completion processes 60 Parallel and competing initiatives Rig Release to First Pump (Days) 50 40 30 Cross-functional…
2014 2015 Cost Improvement Initiatives INTERNAL USE ONLY 100% 30% 35% Increase Increase in 40% Decrease in 2013 Decrease in in Average Number of Total Well Ft. Drilled Frac Stages Results Spud to TD Per Day Pumped Per Cost…
Strategic Acquisitions INTERNAL USE ONLY 29 2014 Sanchez Energy Corporation
Acquisition History INTERNAL USE ONLY Acquisition : Five Mile Creek Timing : July 2013 Purchase Price (MM) : 29 Acquisition : Cotulla Timing : May 2013 Purchase Price (MM) : 265 Acquisition : Wycross Timing : October…
Acquisition Strategy INTERNAL USE ONLY Opportunistic with Acquisitions 1. Cost structure improves return of capital following acquisition 2. Less expensive alternative to leasing with reduced risk and lease expiration burden 3.…
Scalable Organization Prepared for Growth INTERNAL USE ONLY Process Driven Project Management Rigs and frac spreads fully utilized immediately following acquisition Bullpen of drill ready locations provides options to accelerate…
Cost Reductions Expanding Core INTERNAL USE ONLY 33 2014 Sanchez Energy Corporation
Cotulla Acquisition INTERNAL USE ONLY Cenizo Talbutt Wright Ranch Alexander Ranch Briggs 1P Value 2P Value Locations Valued Area 3/31/13 2P Locations 6/30/14 at Acquisition (MM) (MM) Alexander Ranch 46 241 73 400…
Optimization of Alexander Ranch INTERNAL USE ONLY In May 2013, acquired operated assets across 44,461 net acres in the Eagle Ford Shale from Hess Corporation for 265 million cash plus 15 million cash in customary closing adjustments…
Catarina Acquisition Rationale INTERNAL USE ONLY Highly Accretive & Attractive Valuation Significant Additional Upside Immediately accretive to EPS, CFPS, production per share Acquisition Metrics based on UEF production and reserves…
Asset Detail INTERNAL USE ONLY 37 2014 Sanchez Energy Corporation
Catarina Asset INTERNAL USE ONLY 38 2014 Sanchez Energy Corporation
Catarina Map INTERNAL USE ONLY 39 2014 Sanchez Energy Corporation
Catarina Overview INTERNAL USE ONLY 106,000 net acres with one primary surface and mineral owner in Dimmit, La Salle, and Webb counties 29,000 net acres HBP Significant midstream and water infrastructure in place Opportunity to…
Catarina Status Update INTERNAL USE ONLY Since closing the acquisition on June 30, we have moved swiftly to develop Catarina After brief transition period with Shell, SN took over full operations on August 1 Drilling: 2 rigs pad…
Western Catarina Offset Operator Performance INTERNAL USE ONLY APC Briscoe Ranch EUR: 600+ MBoe IRR: 70+% Anadarko Acreage Avg. EUR: 550 Mboe IRR: 50%+ Lewis Petroleum Swift Energy Private Operator Avg EUR: 675 Mboe IRR: 44-49% APC…
Western Margin Zone Targeting INTERNAL USE ONLY A3 PILOT 10 TOC 0 SN Catarina Development Focus on TOC rich Lower Eagle Ford Target zone of Rosetta, APC, SM, etc. (all offsetting operators) Multiple targets in both the Upper…
Stacked Lateral Potential INTERNAL USE ONLY Western Catarina Type Log SN intends to target the Lower Eagle Ford (LEF) with additional infill potential in the Upper Eagle Ford (UEF) as a secondary target The majority of wells…
Eastern Catarina Potential INTERNAL USE ONLY Regional Cross Section of Lower Eagle Ford Potential A A Successful SN wells from Alexander Ranch and Alexander A Briggs Ranch have similar LEF core & log rock Ranch quality as the…
Optimization of Base Production Tubing Installation INTERNAL USE ONLY Catarina Well Sample EUR Comparison (Tubing vs. No Tubing) 120 MBoe EUR uplift associated with wells that currently have tubing installation Cumulative…
Catarina Upper Eagle Ford Economics INTERNAL USE ONLY Western Catarina Area Previous Operator Upper Eagle Ford Results Upper Eagle Ford (450-500 MBoe EUR) 47 2014 Sanchez Energy Corporation
Catarina Prospective Economics INTERNAL USE ONLY Western Catarina Area Lower Eagle Ford Type Curves and Well Economics (1) 1,200 700 MBoe EUR 6.5 MM Capex Gas Price ( / Mcf) 4.00 4.50 5.00 NPV-10 (MM) 4.3 4.7 5.0 IRR 47% 51% 55%…
Tuscaloosa Marine Shale Asset INTERNAL USE ONLY 49 2014 Sanchez Energy Corporation
Acreage Position and Activity INTERNAL USE ONLY 58,000 net acre position in the core of the TMS Contiguous blocky acreage with 3+ years of average remaining lease term SN anticipates spudding up to 4 gross (2 net) operated wells…
Sanchez Position in Core of the TMS INTERNAL USE ONLY SNs acreage position is highlighted in yellow 51 2014 Sanchez Energy Corporation
Tuscaloosa Marine Shale INTERNAL USE ONLY Tuscaloosa Marine Shale Operations Mechanical Earth Model Industry increases in TMS related capital spend expected to continue Experience gained in Eastern Eagle Ford key in quickly…
Keys to Exploiting TMS INTERNAL USE ONLY Technical Operational Mechanical earth modeling Utilizing Eagle Ford leverage to Reservoir characterization secure critical resources Casing designs (upper & lower TMS) Planning units to…
New Growth Cycle - TMS Development Potential INTERNAL USE ONLY Current well costs estimated between 12.5 - 15MM per well SN expects to reduce well costs to 10MM in 2015 with continued operational improvements Prior to drill string…
TMS Area Type Curve & Economics INTERNAL USE ONLY TMS Area Single Well Economics TMS Area Development Well Economics 800 MBoe EUR 15.0 MM Capex 800 MBoe EUR 10.0 MM Capex Oil Price ( / Bbl) 80.00 90.00 100.00 Oil Price ( / Bbl) 80.00…
Cotulla Asset INTERNAL USE ONLY 56 2014 Sanchez Energy Corporation
Cotulla Map INTERNAL USE ONLY HAUSSER TALBUTT ALEXANDER RANCH 57 2014 Sanchez Energy Corporation
Cotulla Acreage Breakdown INTERNAL USE ONLY Cotulla (La Salle) 18,100 Net Acres Cotulla Acreage & Inventory High return inventory of locations in Alexander Total Net Acres 41,000 Ranch, Talbutt, Briggs, Cenizo Ranch & Wright Average…
Alexander Ranch: Drilling & Completions Efficiency INTERNAL USE ONLY Average Days Spud to TD 35% reduction in well costs from previous operator while using the same drilling rig 12 11.0 Cost reductions attributable to cycle time…
Alexander Ranch Development INTERNAL USE ONLY After acquiring Hess properties, SNs analysis has resulted in tighter well spacing, higher ultimate recovery and more wells drilled at Alexander Ranch, La Salle County Drilling locations…
Alexander Ranch: Well Cost Reductions INTERNAL USE ONLY SN has achieved substantially lower than expected well costs in the Cotulla area The previous operator was drilling wells at an average cost of 8.8 million At the time of the…
Cotulla La Salle (Alexander Ranch) Economics INTERNAL USE ONLY Cotulla (La Salle) Well Snapshot EUR (MBoe) 450 PV-10 (MM) 4.0 - 4.5 IRR (%) 45% - 57% Gross Well Cost (MM) 5.5 - 6.0 % Oil / Liquids 69% / 82% 62 2014 Sanchez…
Wycross 40 Acre Development INTERNAL USE ONLY UEF Corvette Gran Torino Sting Ray LEF BUDA 63 2014 Sanchez Energy Corporation
Wycross Harvest Development & Domal Appraisal INTERNAL USE ONLY Recently completed (and continuing to develop) near domal appraisal drilling in the Lower Eagle Ford Results proving economic viability of drilling the salt dome…
Wycross: Drilling & Completions Efficiency INTERNAL USE ONLY Wycross 2014 Total Well Cost Reductions 10.0 Experienced a 31% decrease in total well (0.6) 9.0 costs during initial 6 months of drilling (2.1) 8.0 9.4 Technical…
Cotulla Wycross Economics INTERNAL USE ONLY Cotulla (Wycross) Well Snapshot EUR (MBoe) 500 PV-10 (MM) 6.6 - 7.6 IRR (%) 72% - 109% Gross Well Cost (MM) 6.0 - 7.0 % Oil / Liquids 82% / 90% 66 2014 Sanchez Energy Corporation
Hausser Ranch Potential Development INTERNAL USE ONLY Hausser 1H Pilot Kincaid Ranch UEF Hausser Ranch LEF Virtex McLean-5 1,700 lbs/ft sand BUDA IP: 953 BOPD 67 2014 Sanchez Energy Corporation
Marquis Asset INTERNAL USE ONLY 68 2014 Sanchez Energy Corporation
Marquis Map INTERNAL USE ONLY Prost Area Pilot UEF LEF BUDA 69 2014 Sanchez Energy Corporation
Marquis Fayette & Lavaca County Breakdown INTERNAL USE ONLY Prost/Moulton 13,500 acres Marquis Acreage & Inventory High return Lower Eagle Ford locations in the Prost Total Net Acres 71,000 (1) and Moulton areas Average Working…
Marquis Project Cycle Example 1Q12 INTERNAL USE ONLY 1 Pilot; 1 LEF Devleopment Well 1Q12 Marquis Well Economics (450 MBoe EUR) Gross Well Cost (MM) 15.0 IRR (%) Uneconomic PV-10 (MM) Uneconomic 71 2014 Sanchez Energy…
Marquis Project Cycle Example 1Q13 INTERNAL USE ONLY 3D Seismic; 2 Pilots; 6 LEF development wells 1Q13 Marquis Well Economics (450 MBoe EUR) Gross Well Cost (MM) 12.0 IRR (%) 11% PV-10 (MM) 0.2 72 2014 Sanchez Energy…
Marquis Project Cycle Example 1Q14 INTERNAL USE ONLY 3D Seismic; 6 Pilots; 45 LEF development wells; Planned UEF Appraisal 1Q14 Marquis Well Economics (450 MBoe EUR) Gross Well Cost (MM) 8.0 IRR (%) 38% PV-10 (MM) 4.2…
Marquis Project Cycle Example Projected YE14 INTERNAL USE ONLY 3D Seismic; 6 Pilots; 75-85 LEF development wells ; 4 UEF Appraisal wells; UEF & Buda Stacked pay potential development YE14 Marquis Well Economics (450 MBoe EUR)…
Prost: Drilling & Completions Efficiency INTERNAL USE ONLY Average Days Spud to TD Technically challenging area of the Eagle Ford shale play; 3-string casing design 35 32.3 Operational effectiveness has resulted in 30 faster…
Prost: Resulting Well Cost Reductions INTERNAL USE ONLY Operations have decreased total well costs 40% over prior year in the Prost area Prost Well Costs Prost IRR Sensitivity to Capex and Pricing Drilling Completions…
Prost / Moulton LEF Field Economics INTERNAL USE ONLY Prost / Moulton Well Snapshot EUR (MBoe) 450 PV-10 (MM) 4.2 - 5.2 IRR (%) 38% - 53% Gross Well Cost (MM) 7.0 - 8.0 % Oil / Liquids 80% / 92% 77 Well results include both…
Five Mile Creek: Future Development INTERNAL USE ONLY EF BUDA Shallow decline production profile with prevalent natural fractures throughout the play Successfully de-risked Lower Eagle Ford development in the play…
Five Mile Creek: Drilling & Completions Efficiency INTERNAL USE ONLY Recent Well Results and Forward Projections Expectations for further cost reductions; similar to that of South Texas assets 2-string casing design Drilling cost…
Marquis Five Mile Creek Field Economics INTERNAL USE ONLY Five Mile Creek Well Snapshot EUR (MBoe) 350 PV-10 (MM) 2.3 3.3 IRR (%) 26% - 40% Gross Well Cost (MM) 6.0 - 7.0 % Oil / Liquids 80% / 92% 80 2014 Sanchez Energy…
Offset Operator Results Upper Eagle Ford INTERNAL USE ONLY Prost Area Pilot 2014 SN UEF Tests Key UEF Production UEF LEF Sabine Targac 1 (2013) 1,034 boepd PVA Fojtik 1 (2013) 1,209 boepd Cum: 84 mbo PVA Welhuassen…
Marquis Regional Eagle Ford Section INTERNAL USE ONLY WEST EAST UEF LEF 82 BUDA 2014 Sanchez Energy Corporation
Palmetto Asset INTERNAL USE ONLY 83 2014 Sanchez Energy Corporation
Palmetto Map INTERNAL USE ONLY UEF LEF BUDA 84 2014 Sanchez Energy Corporation
Palmetto Overview INTERNAL USE ONLY Acreage & Inventory Palmetto Area Acreage Total Net Acres 9,000 Average Working Interest 50% Average Net Revenue Interest 37% Planned Well Spacing (Acres) 40 Net Identified Drilling Locations…
Palmetto Down spacing Results INTERNAL USE ONLY 40 Acre Development Results Early results produced less than a 10% degradation in total EUR Results in increased NPV per unit relative to 60 60 acre acre development 2015…
Palmetto Field Economics INTERNAL USE ONLY Palmetto Well Snapshot EUR (MBoe) 450 750 PV-10 (MM) 4.2 13.3 IRR (%) 45% 200% Gross Well Cost (MM) 7.0 7.5 % Oil / Liquids 75% / 89% 87 2014 Sanchez Energy Corporation
Midstream & Marketing INTERNAL USE ONLY 88 2014 Sanchez Energy Corporation
Delivery Options Snapshot INTERNAL USE ONLY South Texas has a long history of oil & gas with significant existing takeaway capacity In addition to existing pipeline infrastructure, short-haul trucking is a viable economic alternative…
Liquids Weighted Hydrocarbon Mix INTERNAL USE ONLY Pro Forma Q2 Hydrocarbon Mix Liquids constitute 76% of production 12% 37% is oil production between 42- 44API 27% Enhanced processing of liquid rich gas 37% 24% Infrastructure…
Oil Marketing INTERNAL USE ONLY Higher crude to condensate ratios derive greater value as measured to WTI benchmark NE. Eagle Ford S. Eagle Ford Marquis Catarina API 42 API 60 Lease sales at LLS less 5.00-7.00 Pipeline and lease…
Condensate Marketing INTERNAL USE ONLY Condensate marketing focused on new markets Catarina production marketed as processed condensate 40,000 BOPD Processing Capability; 8 x 5000 Bbl distillation units; 2 CPFs (Central Processing…
Condensate Strategy INTERNAL USE ONLY SN believes that Catarina facilities can be fit for export All wells at Catarina are permitted gas wells Hydrocarbon at Catarina exists in the reservoir in a gaseous state. At the surface…
Gas Marketing INTERNAL USE ONLY Gas connected to pipelines 98% liquids rich gas produced Firm takeaway covers 77% of forecasted long-term production, supplemented with interruptible contracts NE. Eagle Ford S. Eagle Ford Five Mile…
NGL Marketing INTERNAL USE ONLY NGLs currently processed and sold as products: Average price for Q214 of 30.96 Gas processing flexibility to trigger Ethane rejection operation Average liquid content of 6.5 GPM increases product…
Midstream Strategy INTERNAL USE ONLY Multiple markets are key to achieve best net-back Evaluating projects that create new markets Port Projects Gas & Condensate Processing Trucks & Pipelines Control of Midstream allows SN to:…
Hedge Summary INTERNAL USE ONLY Hedging program protects cash flow, development and capital spend Hedging program targets 50% of production over the next 12-18 months 30% of anticipated balance of 2014 production hedged at mid-point…
Financial Review INTERNAL USE ONLY 98 2014 Sanchez Energy Corporation
Conservative Financial Strategy INTERNAL USE ONLY Target 2.0x 2.5x leverage given volatility of commodity prices Preserve financial flexibility and dry powder through undrawn revolver facility and cash Continue to maintain a…
Capitalization INTERNAL USE ONLY Current liquidity of 811 million 2Q14 Capitalization Table & Liquidity (MM) As of 386 million in cash 6/30/14 437.5 million borrowing base with an Cash and Equivalents 386 elected commitment of 425…
Capitalization Summary INTERNAL USE ONLY Revolving credit facility (due 2018) 437.5 MM borrowing base with an elected commitment of 425 million and an interest rate of LIBOR + 1.50% - 2.50% Restrictive covenant: Net Debt < 4.0x TTM…