Sanchez Energy Raises Eagle Ford Production Guidance

Sanchez Energy Eagle Ford Shale Map

Sanchez Energy has raised it's Eagle Ford production exit rate guidance to 15,000-17,000 boe/d for 2013. Capital expenditures have also been revised to $475 million compared to $347 million previously.

The big increase is due to the purchase of 43,000 net acres from Hess. The deal closed on May 31, 2013, with a price tag of ~$280 million. Read more about the deal in the article: Sanchez - Hess Reach Eagle Ford Deal For $265 Million

Over 90% of the $475 million capital budget will be spent drilling and completing 65 gross (46.7 net) wells. Ten of those wells will be directed at the newly acquired Cotulla assets.

Tony Sanchez III, President and Chief Executive Officer of Sanchez Energy, commented: "As a result of the closing of our Cotulla asset acquisition and an updated review of our operational opportunities, we have increased our 2013 capital program and activity levels.

Sanchez is also increasing its development plans in the Palmetto area in Gonzales County, TX, after realizing better well results than expected. A total of 9 gross (4.5 net) more wells will be drilled in the area. That brings the total number of planned wells in the Palmetto area to 34 gross (17 net) this year.

Sanchez will run three rigs in the Palmetto area in the second half of the year.

Read the full press release at sanchezenergycorp.com

Sanchez - Hess Reach Eagle Ford Deal For $265 Million

Sanchez Energy Maverick Area Map

Sanchez and Hess have reached a $265 million agreement for 43,000 net acres in Dimmit, Frio, La Salle, and Zavala counties in the gas condensate and oil window of the Eagle Ford. Sanchez also mentioned potential in the Austin Chalk, Buda Limestone, and Pearsall Shale.

Tony Sanchez, CEO, commented, "We will initially focus on the development of the Eagle Ford section; however, this area is currently experiencing considerable Buda Limestone and Pearsall Shale activity from other operators which may provide us with additional potential growth opportunities."

Current production is 4,500 boe/d with a little more than 70% considered oil from 50 gross operated wells. The deal more than doubles Sanchez Energy's production from 3,800 boe/d to 8,300 boe/d.

Hess had 13.4 million boe of proved reserves related to the properties.

Tony Sanchez, CEO, said, "The Eagle Ford assets we are acquiring are highly strategic and accretive on a variety of metrics, and provide critical mass and scale for the company by significantly increasing our reserves and more than doubling our current production rate.

If we assume Sanchez paid $60,000 per flowing boe of production, that means the company paid only $6,000 per acre. That's far less than deals we've seen trade for more than $10,000 an acre and a few that have traded for more than $20,000 per acre. Hess has not been one of the most active operators in the Eagle Ford, so I assume this acreage is discounted for a multitude of reasons -

• Some acreage is not likely held by producing wells (HBP)
• Facilities & midstream are not likely built out
• There may be questions regarding well productivity in areas

Read more at sanchezenergy.com

ZaZa Energy - Hess JV Terminated in the Eagle Ford and France

ZaZa Energy and Hess have agreed to end their joint venture agreement in the Eagle Ford Shale and the Paris Basin of France. ZaZa is taking control of the partnership's Eagle Ford assets and Hess is taking control of exploration licenses in France. In terminating the agreement, Hess is paying $15 million upfront and will pay an additional $70 million when the transaction closes. Both Hess and ZaZa are keeping overriding royalty interests in the assets forfeited.

After closing, ZaZa’s portfolio of assets will comprise approximately 72,000 net acres in the Eagle Ford core, 98,520 nearly contiguous net acres in the Woodbine/Eaglebine play in Grimes, Madison, and Walker Counties, approximately 24,260 wholly-owned acres of conventional producing assets in the Paris Basin, and a 5% ORRI in the Paris Basin exploration licenses. ZaZa is Operator on almost all of the portfolio acreage. Net total production from the conventional French assets is approximately 850 barrels of oil per day (“bopd”), with total 2P reserves of approximately ten (10) million barrels of oil. Net oil sales in the Eagle Ford will decrease from 301 bopd to 281 bopd pro forma the agreement, and net natural gas sales will increase from 619 thousand cubic feet of gas per day (“mcfd”) to 729 mcfd (all figures as at June 6, 2012). The Company’s pro forma total net sales will be 1,131 bopd and 729 mcfd.

ZaZa is now marketing its Eagle Ford and Eaglebine assets in hopes of securing another joint venture partner(s).

Read more at ZaZa.com.

Hess Encouraged in the Eagle Ford

Hess announced third quarter earnings today (Oct. 26). The Eagle Ford was only mentioned briefly. The question was posed whether or not the Eagle Ford is core to the company.

Analyst:

Paying $3,000 per acre is significant, but is the company ready to call the area "Core".

John Hess:

"Focus is on delineation and what we have now. We've been encouraged to date."

Analyst:

Are you still acquiring acreage?

John Hess:

"(Hess) is being opportunistic. Pricing is pretty high, but as we see opportunity we'll do it. But, only if it will make money."

Hess is a partner with ZaZa Energy across a portion of its acreage.  The companies have acreage in less explored areas like Fayette County.  Drilling over the next year will most definitely determine whether the Eagle Ford becomes a core development area for Hess. For a company with lots of opportunities, Bakken Shale, Utica Shale, and offshore, you can bet the decision will be driven by the statement "if it will make money".

ZaZa Energy - Toreador Resources Merge

ZaZa Energy and Toreador Resources have agreed to a merger that will create a new public company that will trade on the NASDAQ under the symbol ZAZA. This is an interesting merger in that both companies are rumored to have joint venture agreements with Hess - ZaZa on its Eagle Ford acreage and Toreador on its Paris Basin acreage. The new ZaZa will bring the two partnerships under one roof. ZaZa's Eagle Ford Shale properties will provide a drilling inventory that gives the new company time to fully assess Toreador's Paris Basin assets. The French aren't real excited about hydraulic fracturing and the current fracking ban makes drilling in the Liassic shale more of a question than a plan. 

Toreador Resources Corporation (NASDAQ:TRGL) (Paris: TOR) (“Toreador”) and ZaZa Energy, LLC (“ZaZa”), a privately held oil and gas company based in Houston, Texas, today announced that on August 9, 2011, they signed a definitive agreement to combine the companies. The combined portfolio comprises three areas – the Eagle Ford core and the emerging Eagle Ford/Woodbine (“Eaglebine”) resource plays in Texas and the Paris Basin in France with a current total of 423,000 net acres. Both the Eagle Ford and Paris Basin businesses have strategic partnerships with subsidiaries of Hess Corporation. Based on the closing share price of Toreador on Tuesday, August 9, 2011, the implied market capitalization for the combined company is approximately $294 million

In the Eagle Ford core, ZaZa holds 123,000 gross acres; the joint venture work program forecasts over 280 wells drilled by the end of 2013. In the Eaglebine, leasing is underway to expand the existing 70,000 gross acres to over 100,000 gross acres within the next 12 months. ZaZa has been in discussions with potential joint venture partners for the Eaglebine acreage and plans to spud a first well by the first quarter of 2012