Shares of Sanchez Energy Corp (NYSE: SN) tumbled nearly 13% by 12:45 p.m. EDT on Friday after updating investors on its operations during the first quarter.
Due to multiple factors, the Eagle Ford Shale-focused driller's production came in below its guidance range. While Sanchez Energy anticipated that output would average between 82,000 to 84,00 barrels of oil equivalent per day (BOE/D) during the first quarter, actual production came in well under that level at 80,572 BOE/D. Among the factors causing the company to miss the mark was a weather-related disruption, a temporary problem with third-party natural gas infrastructure, and some operational issues due to testing new ways to complete wells.
"We are actively working to remedy the operational impacts on production," said CEO Tony Sanchez, who also noted that despite the weaker results, the company continues seeing "good rates of return." However, because of these problems, output in the second quarter will only average 80,000 to 84,000 BOE/D, which means the company likely won't reach 90,000 BOE/D by the end of the first half, as it initially expected. Meanwhile, Sanchez's full-year output appears poised to miss the mark as well because the company still plans to pull back the throttle in the second half, reducing its activity from eight drilling rigs to four, and its completion crews from four to two-and-a-half. While that activity level will enable the company to stick within its $420 million to $470 million budget, it might not be enough to make up its first-quarter shortfall.
Sanchez Energy is one of the more volatile oil stocks around thanks to its small size and weaker balance sheet. Because of those factors, it's highly susceptible to big moves, making it a less-than-ideal option for most investors. That's why a better idea, in my opinion, is to take a look at some larger oil stocks that are screaming bargains right now since they seem to have lower-risk upside.