Piper Jaffray Positive On Sanchez Energy's $44 Million Midstream Monetization

Piper Jaffray is positive on Sanchez Energy Corp SN's monetization of its 50 percent interest in Carnero Gathering, LLC for a total of $44 million.

Sanchez will get initial payment of $37 million, an assumption of $7.4 million of remaining capital commitments to Carnero and future payments from Sanchez Production Partners (SPP) dependent upon meeting certain targets.

"We view as a positive transaction on the margin which should increase liquidity and slightly reduce capital obligations," analyst Kashy Harrison wrote in a note.

Carnero Gathering, a JV that is 50 percent owned by Targa Resources Corp TRGP, will own a total of approximately 45 miles of high pressure, natural gas gathering pipelines.

"The Carnero Gathering System will ultimately connect to a cryogenic natural gas processing plant that is under construction in La Salle County, Texas, owned by a separate joint venture between Sanchez Energy and Targa," according to Harrison. The processing plant is expected to be operational in early 2017.

Harrison has a Neutral rating and $8 price target on Sanchez stock, which was up 2.40 percent at $6.84 at time of writing.