Please ensure Javascript is enabled for purposes of website accessibility

Why Sanchez Energy Corp's Stock Is Slumping Today

By Matthew DiLallo – Aug 7, 2018 at 11:45AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Eagle Ford shale driller disappointed investors once again.

What happened

Shares of Sanchez Energy Corp. (NYSE: SN) slumped more than 15% by 10 a.m. EDT on Tuesday after the Eagle Ford shale driller posted disappointing second-quarter results.

So what

"The second quarter 2018 was a challenging operational quarter" at the company's Comanche position in the Eagle Ford, according to CEO Tony Sanchez. He noted that "we continued to see higher than projected production declines from wells brought on-line during the second half of 2017 and early 2018." As a result of those issues, Sanchez produced only 79,516 barrels of oil equivalent per day (BOE/D) during the quarter, which was below the company's guidance range of 80,000 to 84,400 BOE/D.

A drilling rig at sunset.

Image source: Getty Images.

In addition to fumbling its production target, Sanchez also missed analysts' earnings expectations. Instead of posting an adjusted profit of $0.07 per share as analysts anticipated, the company's adjusted loss widened to $0.26 per share.

On a more positive note, the company did bring several wells on line in its Catarina and North Central areas that performed in line with expectations. That's worth noting since Sanchez experienced some production issues in the first half of last year at Catarina. However, its corrective actions have enhanced the performance of that asset, enabling it to grow production by 23%. That leaves Sanchez confident that it can also improve the performance of Comanche.

Now what

As part of its effort to improve operational performance, the company is working with a global consulting firm to assist with a comprehensive review, focusing on its operational and technical strategies. "We believe this effort, combined with the proactive initiatives already underway, will lead to improved operational, production, and financial performance that will ultimately deliver enhanced shareholder returns," said the CEO. However, while management believes it can turn things around, the company has had a string of disappointments over the past couple of years. That's why investors would be better off watching from a distance and considering these top oil stocks instead.

Matthew DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.