Sanchez to Acquire Tuscaloosa Shale Assets

Sanchez Energy announced Thursday it has entered into agreements to acquire approximately 40,000 net undeveloped acres in the core of the Tuscaloosa Marine Shale (TMS) trend for cash and shares of its common stock plus an initial 3 well drilling carry.

Transaction Highlights

Pursuant to the terms of the agreements, Sanchez established an area of mutual interest (AMI) with its affiliate SR Acquisition I, LLC (SR) in the TMS. As part of the transaction, Sanchez will acquire all of the working interests in the AMI owned by an unaffiliated private equity firm plus a portion of SR's working interests, resulting in Sanchez owning an undivided 50 percent working interest across the AMI through the TMS formation. The AMI holds rights to approximately 115,000 gross acres and 80,000 net acres.

Total consideration for the transactions will be approximately $78 million consisting of $70 million of cash and 342,760 shares of common stock (valued at approximately $8.2 million based on the closing price per share as of August 7). SR will receive approximately $13.5 million in cash for the sale of its interest and the balance of the common stock and cash will be paid to unaffiliated third parties, including the previously mentioned private equity firm which made its initial investment in 2010.

Sanchez has further committed, as a part of the total consideration, to carry SR for its 50 percent working interest in an initial 3 gross (1.5 net) TMS wells to be drilled within the AMI and at Sanchez's election it may carry SR in an additional 3 gross (1.5 net) TMS wells if it desires to participate in additional drilling within the AMI.

Management Comments

Tony Sanchez, III, president and chief executive officer, said, "For almost three years, we have been watching the evolution of the TMS and assessing the technical and economic development of the play. We now believe it is an appropriate time for Sanchez Energy to enter the play and we have the opportunity to do so by leveraging the groundwork undertaken by Sanchez Resources over the past several years.

"With the closing of this acquisition we believe we have secured a solid acreage position in the core of this rapidly developing trend. Recent well results by other operators in the area are encouraging with respect to both strong well performance and decreasing drilling and completion costs. We expect to commence our operated TMS drilling program in early 2014 and also anticipate participating in several non-operated wells given our proximity to other active operators in the area.

"We are excited to bring our development skills and expertise to such a dynamic basin, and believe the strategic diversification to the TMS will continue our track record of building shareholder value."

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