History
Sanchez Energy listed at $22 in 2011, borrowed heavily to buy Eagle Ford acreage, was hit by falling oil prices, and in 2020 emerged from bankruptcy with its shareholders wiped out.
2011-2012: A family company goes public
Sanchez Energy floated on the New York Stock Exchange on 19 December 2011 at $22 a share. The money was to develop Eagle Ford acreage in South Texas. The family partnership Sanchez Energy Partners I contributed its Eagle Ford interests, and the company paid Ross Exploration about $89 million in cash and 909,091 shares for 55,000 net undeveloped acres across five counties. It had no employees of its own: a services agreement had Sanchez Oil & Gas supply all the people who ran it. That mix of family control, outside management and acreage bought with fresh capital shaped everything that followed.
In June 2012 the family partnership handed about 21.8 million shares, 65% of the company, to its own partners for no payment. In September the company raised $150 million from convertible preferred shares paying 4.875%, and in November it put in its first bank debt: a $250 million first lien revolver (a credit line secured by a first claim on assets) and a $250 million second lien term loan. A. R. Sanchez, Jr. joined the board in December.
2013-2014: The buying spree
In 2013 Sanchez turned from startup to acquirer. In March it placed a second preferred series paying 6.5% to help fund an acquisition. In June it completed the $280.4 million purchase of Hess's Cotulla assets and doubled its revolver to $500 million. It then issued $400 million of 7.75% senior notes due 2021 to clear the revolver.
In August it agreed to buy into the Tuscaloosa Marine Shale alongside its affiliate Sanchez Resources, its only significant move outside the Eagle Ford. In September it agreed to buy Rock Oil's Wycross assets, sold 9.6 million shares at $23.00, and added $200 million to the notes, taking them to $600 million. Wycross closed in October at $230.1 million. Shares on issue rose from 33.8 million at the end of 2012 to 46.4 million at the end of 2013.
In May 2014 it agreed to buy Shell's Catarina assets for about $639 million, with 60 million barrels of proved reserves. In June it sold 5 million shares at $35.25. Sanchez Oil & Gas, TAEP Security Trust and A. R. Sanchez, Jr. granted the underwriters an option on up to 750,000 more shares, with no proceeds going to the company. The company closed $850 million of 6.125% notes due 2023 on 27 June and completed the Catarina acquisition on 30 June; a further $300 million of the notes in September took them to $1.15 billion. This was the last financing before oil prices collapsed.
2015-2016: Selling to the family, and the banks tighten
With prices down, Sanchez began selling assets to its affiliate Sanchez Production Partners. In April 2015 it sold partial interests in 59 Palmetto wellbores for $81.6 million plus units in the buyer. In July 2015 it adopted a rights plan to protect its tax loss carryforwards. In October it closed the sale of the Catarina gathering system for $345.8 million, and signed a 15-year gathering agreement with minimum volume commitments and per-unit fees.
In January 2016 the banks cut the borrowing base from $500 million to $425 million. The seventh credit amendment in March gave the lenders control over deposit accounts, required unrestricted cash above $35 million to be used for prepayment if a borrowing base deficiency arose, and added half a point of interest. In October Sanchez agreed to sell its half of the Carnero processing plant to the affiliate for $47.7 million plus $32.3 million of assumed commitments.
2017-2018: The Comanche bet
In October 2016 Sanchez agreed to sell its non-core eastern Cotulla assets to Carrizo Oil & Gas. The sale raised about $160.6 million by January 2017, roughly half what it had paid. Days later it agreed to buy Anadarko's Comanche assets, 318,000 gross acres, for $2.275 billion, splitting the cost 50/50 with a Blackstone vehicle. It paid its half partly through an unrestricted subsidiary placed outside its bond covenants, while its borrowing base stood at $350 million.
In February 2017 it sold 11.5 million shares at $12.50, about a third of the 2014 price. Comanche closed in March, with Blackstone's Gavilan Resources taking the other half. In August it sold more LaSalle and Webb County assets to Vitruvian for about $105 million. In February 2018 it issued $500 million of 7.25% notes secured by a first lien, which put them ahead of the existing unsecured bondholders. In November 2018 restructuring specialist Eugene Davis joined the board, and Cameron George became interim finance chief.
2018-2019: Delisting and bankruptcy
In December 2018 the NYSE warned that the shares had averaged under $1 for thirty trading days. In January 2019 it flagged a second breach: market value below $50 million, against roughly $2 billion of debt. On 20 February 2019 it began delisting proceedings and suspended trading, and Sanchez did not appeal. The shares moved to the over-the-counter market. Exchange filings to remove the stock followed in March, the last amended on 25 March 2019.
On 12 August 2019 Sanchez and ten subsidiaries filed for Chapter 11 in Houston, with a $175 million loan from holders of the 2018 secured notes. It drew the first $50 million ten days later. Having spent about $3 billion on Eagle Ford acreage between 2013 and 2017, it could no longer service its borrowings.
2020: Plan confirmed, equity cancelled
The case dragged on. In February 2020 the bankruptcy financing was restructured and enlarged, still funded by the secured noteholders. Sanchez missed the extended 26 March deadline to file a plan, and on 27 March its DIP agent gave notice that the $150 million would be accelerated on 3 April. On 30 March the lenders abated the notice after agreeing in principle on a plan.
The court confirmed the reorganisation plan on 30 April 2020. All 102.3 million common shares and both preferred series were cancelled for no distribution. New equity went to creditors, mainly the holders of the 2018 secured notes. The business continued under new ownership. On 14 May 2020 Sanchez terminated the registration of a class of its securities, ending its reporting obligation for them.
Written from the 48 story beats below (2011 to 14 May 2020), which come from the company's own announcements and filings.