Sanchez Energy Corp., Houston, and funds managed by private equity firm Blackstone Energy Partners LP have entered a 50-50 partnership and agreed to acquire working interest in 318,000 gross operated acres in the western Eagle Ford shale of South Texas from Anadarko Petroleum Corp., The Woodlands, Tex., for $2.3 billion.
Encompassing the Comanche area, the 155,000 acres net to Sanchez Energy and Blackstone is contiguous to Sanchez Energy’s Catarina area, where the firm has 106,000 net acres in Dimmit, LaSalle, and Webb counties with 100% working interest. Eagle Ford shale development covers 80% of the acreage to be acquired, with resource potential from the Austin Chalk and Pearsall shale.
Current production from the assets averages 67,000 boe/d, of which 70% is liquids. Proved reserves total 300 million boe, of which 70% is liquids and 75% is proved developed.
Sanchez Energy says the deal includes 132 gross drilled but uncompleted (DUC) wells with individual rates of return expected to exceed 100%, and more than 4,000 Eagle Ford drilling locations that provide more than 20 years of economic drilling inventory at current strip prices.
Tony Sanchez, III, chief executive officer of Sanchez Energy, commented, “Upon completion of the acquisition, we will triple our exposure to the Upper and Middle Eagle Ford trends that have been successfully developed by the company at Catarina. The Upper and Middle Eagle Ford sections thicken in southern Dimmit County, where the majority of the acquired leasehold is concentrated. Upon closing the transaction, we believe we will have locked up the core of the trend within the volatile oil window.”
Sanchez Energy now projects it will produce more than 100,000 boe/d while operating within cash flow in the next 12-18 months.
The deal is expected to close in the first quarter. Sanchez Energy will fully fund its half through a combination of cash on hand and commercial bank and preferred equity commitments at a newly formed nonrecourse subsidiary, and Blackstone will fund its half through a separate entity via equity and commercial bank commitments.
Sanchez Energy in October 2016 boosted its liquidity by agreeing to sell noncore Eagle Ford assets to Carrizo Oil & Gas Inc. for $181 million in cash, and its 50% interest in Carnero Processing LLC and noncore assets in South Texas as part of a $107-million deal with Sanchez Production Partners LP (OGJ Online, Oct. 25, 2016).
Blackstone’s involvement in oil and gas operations in recent months includes the formation alongside Jetta Operating Co. Inc. of Jetta Permian LP, a Fort Worth-based firm focused on the Delaware basin; and formation alongside Jay Still of Dallas-based, Midland basin-focused Guidon Energy (OGJ Online, Aug. 26, 2016).
Anadarko’s strategic shift
Anadarko's sponsored master limited partnership, Western Gas Partners LP, will continue to own and operate its midstream assets in South Texas and is expected to benefit from drilling commitments made by the buyers in conjunction with the deal.
Prior to its agreement with Sanchez Energy and Blackstone, Anadarko had 388,000 gross acres in Dimmit, LaSalle, Maverick, and Webb counties.
“The ongoing success of our portfolio-management activities provides us with the flexibility to further accelerate capital investments in our higher-return oil opportunities in the Delaware basin, the DJ basin, and the deepwater Gulf of Mexico, which drive our ability to deliver a 12-14% 5-year compounded annual oil growth rate,” explained Al Walker, Anadarko chairman, president, and chief executive officer.
Anadarko’s first move of the year follows a busy December in which it agreed to sell operated and nonoperated upstream assets and operated midstream assets in the Marcellus shale to Alta Marcellus Development LLC for $1.24 billion (OGJ Online, Dec. 21, 2016); and closed its $2-billion purchase of Freeport McMoRan Oil & Gas’s deepwater Gulf of Mexico assets (OGJ Online, Sept. 12, 2016).
The firm in November sold its Carthage upstream and midstream assets in East Texas to Castleton Commodities International LLC (CCI) for $1 billion (OGJ Online, Nov. 12, 2016).
Anadarko plans to further increase drilling activity in the Delaware and DJ basins in 2017. By the end of the first quarter, it expects to have 14 operated rigs in the Delaware and 6 in the DJ, compared with 7 and 1 in the basins, respectively, at the end of last year’s third quarter.
Contact Matt Zborowski at [email protected].
