Sanchez Energy Reduces '14 Capital Plan - Analyst Blog

Exploration and production (E&P) company, Sanchez Energy Corp. SN revised its 2014 capital expenditure plan. The company reduced the capital budget from $650-$700 million to $600-$650 million as a result of decline in drilling and completion costs and more efficient operations.

However, production guidance and drilling activity target remains unchanged. Currently, Sanchez Energy produces about 19,500 barrels of oil equivalent per day (Boe/d). The company plans to spend the capex budget on completing 70 net wells in 2014, in addition to funding acquisitions and other related expenditures.

Of the total capital budget, almost 94% will be directed toward drilling and completion activities. Moreover, out of the total amount allocated for drilling and completion operations, 89% will be invested in Eagle Ford Shale's ongoing development activities.

Sanchez Energy currently has 4 operated and 2 non-operated rigs working in the Eagle Ford region on 15 gross wells that are in the completion process.

On the drilling front, the company intends to use multi-well pads for 90% of its wells in 2014, compared with 75% last year. This shift is beneficial for the company as it leads to a decrease in drilling time as well as an increase in the average footage drilled per day. Sanchez Energy also seems to be well positioned on the completions end with declining well costs.

Headquartered in Houston, TX, Sanchez Energy is involved in acquisition, exploration and development of oil and natural gas assets, primarily in the Eagle Ford Shale in South Texas.

Sanchez Energy currently carries a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.

Meanwhile, some better-ranked players in the oil and gas E&P sector are Range Resources Corporation RRC, Diamondback Energy, Inc. FANG and Clayton Williams Energy Inc. CWEI. While RRC sports a Zacks Rank #1 (Strong Buy), FANG and CWEI hold a Zacks Rank #2 (Buy).