Sanchez to buy Eagle Ford acreage from Shell for $639 million

Sanchez Energy Corp., Houston, has agreed to acquire 100% working interest in 106,000 net acres in Dimmit, LaSalle, and Webb Counties, Tex., from Royal Dutch Shell PLC for $639 million, effective Jan. 1. The agreement is expected to close at the end of the second quarter.

The sale includes 176 operated producing wells and associated field facilities and infrastructure. The assets consist of 60 million boe of proved reserves and 24,000 boe/d of average first-quarter production, with 60% liquids.

Sanchez’s total position in the Eagle Ford will amount to 226,000 acres with as many as 3,000 potential drilling locations.

The company’s average production rate for this year’s first quarter will rise to 42,800 boe/d, which includes an estimated Catarina production rate of 20,000 boe/d. Total proved reserves will increase 100% to 119 million boe.

The acquired assets are expected to generate a substantial amount of near-term cash flow and fully fund their drilling and completion activities in 2015, with only a modest outspend in 2014, Sanchez said.

Last year, Sanchez bought assets with high working interests in 43,000 net acres in Dimmit, Frio, LaSalle, and Zavala counties in the Eagle Ford from Hess Corp. for $265 million (OGJ Online, Mar. 18, 2013).

The transaction is part of Shell’s restructuring of its North Americas shale oil and gas plays portfolio to focus on acreage positions that can reach the scale required by the company.

Shell previously divested its acreage position in the Mississippi Lime in Kansas, its Utica shale position in Ohio, and a portion of its acreage in the Sandwash Niobrara basins in Colorado (OGJ Online, Mar. 7, 2014).