Today’s Daily Alert features a high-potential energy company researched and recommended by William Velmer’s S.A. Advisory.
“Sanchez Energy Corp. (SN, $18) is an independent exploration and production (E&P) company that currently is focused on the Eagle Ford Shale trend of South Texas. The company has 95,000 net acres in the volatile oil, black oil and gas condensate windows of the Eagle Ford.
“Sanchez just released a press release that shows current production of 1,700 boepd (barrels of oil equivalent per day) ending the third quarter and reaffirms a 2012 exit rate of 4,000-5,000 boepd. The company recently completed a $150 million convertible preferred equity offering and this will allow SN to accelerate their drilling program.
“The company is also testing tighter spacing in each of their drilling areas, which may allow SN to increase their 800-1,200 potential drilling sites and their 250-300 million boe net resources potential on 80-120 acre well spacing. At present Sanchez has 13 wells in various stages of drilling, completion or initial flow back following fracture stimulation. In addition, Sanchez plans to spud 12 wells during November and December.
“Sanchez has received a $250 million credit facility, a $250 million term loan and completed a $150 million preferred convert. This huge available cash horde will allow for dramatic development of their ‘prime’ Eagle Ford acreage in Texas. Earnings estimates are due to explode from $0.30 per share for 2012 to $1.40 for 2013. The brokerage community has 10 Buy ratings on SN with a high target price of $38.00 and a mean valuation of $29.00.
“In our opinion, SN is a winner today and will be a huge winner tomorrow. S.A. seriously doubts that SN will be a standalone company by the end of 2013. This company has the management, acreage and cash to deliver the numbers that will double the share price before the end of 2013, unless they get bought out! If you are looking for a ‘pure’ Eagle Ford play at a discounted value with little risk, then SN is for your portfolio. We rate SN with a Strong Buy at current levels.”
- William Velmer, S.A. Advisory, October 31, 2012