Houston-based Sanchez Energy Corp. said Thursday its lenders have doubled the company’s borrowing base to $650 million, a move that shows the strength of Sanchez’s collateral.
The company generated strong reserve growth through drilling and acquisitions, said Michael G. Long, executive vice president and chief financial officer. The company has also used geologic and engineering studies to determine the amounts of recoverable oil and gas in undeveloped properties thought to hold reserves.
As of Sept. 30, Sanchez had $600 million in cash and short-term, high credit-quality securities, and $300 million in loans it can draw on immediately.
The company can increase the amount of funds available to more than $1.2 billion if need be, Long said. Sanchez expects to fully fund its 2015 drilling program through cash and securities on hand and cash flow from operations. The company doesn’t expect to borrow additional money, assuming average oil prices of $80 per barrel and natural gas prices of $3.75 per thousand cubic feet.
Sanchez is an independent energy company now focused on the Eagle Ford Shale in south Texas where the company has 226,000 acres under lease, and the Tuscaloosa Marine Shale in Mississippi and Louisiana, where the company has 61,000 acres under lease.
Earlier this month, Sanchez said it planned to chop $250 million to $300 million from its 2015 drilling budget and temporarily halt development in the Tuscaloosa. The company originally planned to spend $1.1 billion to $1.2 billion in the Eagle Ford and Tuscaloosa, which covers the midsection of Louisiana and stretches into Mississippi.
The Tuscaloosa is still in the early development stages, so well costs are much higher than in more developed formations.