Seeking Alpha | Richard Zeits
Well cost reductions by E&P operators are ahead of projections with changes in the industry’s cost structure, and Sanchez Energy is identified as an impressive exemplar in cost per well prices.
While the decline in well costs is the U.S. resource plays is of course nothing new, this earnings season will likely surprise with the magnitude of the reductions and the speed with which these reductions have been achieved. For many operators, well cost reductions will likely materially exceed guidance provided earlier this year. Sanchez has reported that its average well costs in Catarina, the asset that the company acquired last year from Royal Dutch Shell and where it is focusing the majority of its drilling and completion budget in 2015, are currently trending below $4.5 million. The cost per well is nothing short of spectacular for the Eagle Ford and well performance results reported by Sanchez to date lend support to a belief that this property may ultimately turn into a solid economic asset that will define the company’s portfolio.