Sanchez Energy Continues Likely Comanche-Driven Short Squeeze With Another Big Day

Sanchez Energy Corp SN is following up a big gain on Friday with another big jump on Tuesday after announcing a deal to purchase half of Anadarko Petroleum Corporation APC’s Comanche Eagle Ford assets for $1.15 billion. The market certainly seems to like the price Sanchez paid, despite the leverage the company took on to make the deal.

However, the 52 percent two-day move suggests a short squeeze could also be in play.

Sanchez’s share price is up an incredible 390 percent in the past year as investors seem to be growing more confident that the company has avoided falling victim to the global oil downturn. Yet despite the major move higher in the past year, Sanchez’s sizable short interest has only declined about 10.3 percent.

Sanchez bears likely see the company’s dubious balance sheet. At the end of Q3, Sanchez had more than -$760 million in equity and more than $1.7 billion in long-term debt. In fact, in order to complete the new transaction, Sanchez had to form several new subsidiaries.

However, with the worst of the commodities downturn now in the past and the possibility of a major new production boost ahead, short sellers may now be jumping ship.

According to shortsqueeze.com, Sanchez currently has an elevated short percent of float of 22.2 percent. There are currently more than 10.8 million shares held short with 7.7 days to cover. Sanchez’s big two-day move has likely in large part been driven by a major short squeeze.

Another factor that could be giving the stock a boost is a price target change from Northland Securities, which lifted the target from $11 to $20.