CAPScall of the Week: Sanchez Energyhttp://www.fool.com/investing/general/2013/03/19/capscall-of-the-week-sanchez-energy.aspx Sean Williams
March 19, 2013
For years, satirical late-night TV host Stephen Colbert has been running a series on his show called "Better Know a District," which highlights one of the 435 U.S. congressional districts and its representative. While I am no Stephen Colbert, I am brutally inquisitive when it comes to the 5,000-plus listed companies on the U.S. stock exchanges.
For this week's round of "Better Know a Stock," I'm going to take a closer look at Sanchez Energy (NYSE: SN).
What Sanchez Energy does
For 2012, Sanchez Energy reported 468.8 million barrels of oil equivalent production, or MBOE, which was a 170% improvement over its production in 2011. Although production volume surged, average production per well dipped as demand dropped and the company spent heavily in bringing 19 new wells online. Revenue for the year grew 197% to $43.2 million despite a dramatic drop in natural gas prices, although the company produced a loss of $0.56 for the year.
Whom it competes against
Unlike its Eagle Ford Shale acreage, which it nearly owns outright, many of its undeveloped acreage is shared interest. Sanchez has 1,500 net acres in the Haynesville Shale region of Louisiana, which it listed in its S-1 prospectus as operated by Chesapeake Energy (NYSE: CHK) and EnCana (NYSE: ECA). Neither of these two natural gas behemoths have been looking to splurge recently with natural gas prices down, so this 1,500 acres, while small, could be a troublesome asset to sell if Sanchez has no plans to utilize it.
In the Palmetto region, which is located in the Eagle Ford Shale, it does share a 50/50 working interest with Marathon Oil (NYSE: MRO). With the Palmetto area more rich in volatile oils, it's not devastating for a company like Sanchez to share its working interests here. The key is that its Maverick region is ripe with black oil, and it owns full right to those wells.
Clearly, there are risks involved for a newer company like Sanchez. It runs the risk overexp