Sanchez Energy Corporation (the "Company" or "Sanchez Energy"), a fast growing independent oil and gas company focused on the liquids rich Eagle Ford formation in Texas, today announced the Company's operating and financial results for the first quarter 2013, which included the following highlights:
Highlights For First Quarter 2013
Production of 355 MBOE, an increase of 106%, over the fourth quarter of 2012 and an increase of 320%, over the same period a year ago.
Revenues of $30.8 million, an increase of 85% over the fourth quarter of 2012 and an increase of 303% over the same period a year ago.
Adjusted earnings before interest, income tax, depletion, depreciation and amortization, and unrealized derivative activity ("Adjusted EBITDA attributable to common stockholders"), a non-GAAP financial measure defined and reconciled below, of $17.5 million, an increase of 114% over the fourth quarter of 2012 and an increase of 388% over the same period a year ago.
Adjusted Net Income attributable to common stockholders ("Adjusted Net Income"), a non-GAAP financial measure defined and reconciled below, of $4.3 million, an increase of 166% over the fourth quarter of 2012 and an increase of 197% over the same period a year ago.
Tony Sanchez, III, President and Chief Executive Officer of Sanchez Energy, commented: "Production and revenues grew substantially this quarter as a result of our new well completions, continued strong oil prices and the start of natural gas processing in both our Palmetto and Marquis areas.
We exited the first quarter with 36 gross producing wells and have brought another 13 gross wells on line since that time. Our current daily net production is now in excess of 7,500 boe/d with nine additional gross wells either drilling, waiting on completion or undergoing completion. As a result of this growth in production, which started late in the first quarter, we foresee ongoing improvements in our key financial metrics in the second quarter and beyond.
We are on schedule to close the announced acquisition of the Cotulla area properties during the second quarter of this year. That acquisition is expected to add approximately 4,000 to 5,000 boe/d of production resulting in an expected pro forma second quarter production exit rate in excess of 12,000 boe/d. Upon closing of the transaction, or shortly thereafter, we will provide more specific, updated guidance pertaining to 2013 production and capital spending forecasts."
Sanchez Energy currently has 49 gross producing wells and currently has nine gross wells in various stages of drilling or completion. Nine new Palmetto wells have recently come on line with average initial production rates of 1,381 boe/d, bringing total producing well count in this area to 25 wells with four additional wells waiting on completion and two wells drilling.
Additionally, five new Prost wells in the Marquis area have recently come on line with average initial production rates of 1,044 boe/d, bringing total producing well count in this area to nine wells with one additional well undergoing completion, one well waiting on completion, and one well drilling. A second rig will be deployed in Marquis in June. Our first well in Maverick for the year will spud in late May and is planned with a pilot hole to log and core the Pearsall and then complete horizontally in the Eagle Ford.
RESULTS FOR THREE MONTHS ENDED MARCH 31, 2013
Production volumes for the three months ended March 31, 2013 were 354.9 MBOE, an increase of 320% over the first quarter of 2012. The production increases in 2013 were due to the drilling and completing of 25 new wells since the first quarter of 2012, partially offset by normal production declines. At March 31, 2013, Sanchez Energy had 36 gross producing wells, 12 gross wells undergoing completion, three gross wells waiting on completion, and three gross wells drilling.
Revenues were $30.8 million for the first quarter of 2013, which includes oil revenues of $29.3 million. This represents a 303% increase over first quarter 2012 revenues of $7.6 million. The Company's realized oil price, before the effects of derivatives, was $105.91 per barrel for the first quarter of 2013 compared to $107.13 for the same period a year ago. The realized price for NGLs for the first quarter of 2013 was $17.83 per barrel compared to $36.16 for the same period a year ago.
The realized price for natural gas for the first quarter of 2013 was $3.37 per Mcf compared to $2.08 for the same period a year ago. Overall, the average realized price that the Company received was $86.81 per BOE for the first quarter of 2013 as compared to $90.48 for the same period a year ago. For the first quarter of 2013, the impact of unrealized losses on derivatives was $8.12 per BOE and the impact of realized losses on derivatives was $2.10 per BOE. For the first quarter of 2012, unrealized losses on derivatives were $6.96 per BOE and realized losses on derivatives were $5.26.
Lease operating expenses ("LOE") were $3.0 million, or $8.53 per BOE, for the first quarter of 2013, as compared to $0.8 million, or $9.17 per BOE, for the first quarter of 2012. Production and ad valorem taxes were $2.1 million, or $5.77 per BOE, for the first quarter of 2013, as compared to $0.4 million, or $4.66 per BOE, for the first quarter of 2012. This quarter's LOE increase was driven by the higher producing well count and was also adversely impacted by artificial lift problems at the first two wells drilled last year in our Marquis area. Remedial work was performed to solve these problems. We do not expect this unusual expense to be recurring.
General and administrative expense, excluding stock-based compensation expense, was $4.6 million for the first quarter of 2013, or $12.97 per BOE, as compared to $2.3 million, or $27.02 per BOE, for the first quarter of 2012. This increase was due primarily to increased salary and wages as a result of additional staffing and support to manage the increasing levels of activity, as well as higher costs associated with being a new public company, consisting primarily of legal expenses, investor relation costs and consulting services. In addition, we incurred $0.6 million in acquisition related costs. For the three months ended March 31, 2013, we recorded non-cash stock-based compensation expense of approximately $3.1 million, or $8.83 per BOE, compared to $4.0 million, or $46.97 per BOE, for the first quarter of 2012.
Adjusted EBITDA attributable to common stockholders was $17.5 million, or $0.53 per basic and $0.48 per diluted common share, during the first quarter of 2013, as compared to $3.6 million, or $0.11 per basic and diluted common share, in the first quarter of 2012.
Depletion, depreciation, amortization and accretion expense for the first quarter of 2013 decreased to $37.68 per BOE, or $13.4 million, from $38.46 per BOE, or $6.6 million, for the fourth quarter of 2012 and increased to $37.68 per BOE, or $13.4 million, from $26.55 per BOE, or $2.2 million, for the first quarter of 2012. This increase in the depletion rate primarily resulted from a substantial increase in the basis of our oil and natural gas properties, including $560.2 million in future development costs for our proved undeveloped reserves, which was an increase of 363% over our March 31, 2012 estimate of $70.0 million. Estimated reserves at March 31, 2013 were 227% higher than at March 31, 2012. Higher production for the first quarter of 2013 as compared to the same period in 2012 resulted in a $7.2 million increase in expense and the change in the depletion rate resulted in a $3.9 million increase in expense.
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