Sanchez Energy enters into a Midstream joint venture in South Texas

Sanchez Energy Corporation has announced that it has entered into joint venture agreements with Targa Resources Partners LP to construct a new cryogenic natural gas processing plant and associated high pressure gathering pipelines near Sanchez Energy's Catarina asset in the Eagle Ford Shale.

The processing plant will be located in La Salle County, Texas, and is anticipated to have initial capacity of 200 million ft3/d with the ability to increase to 260 million ft3/d. In connection with the joint venture agreements, Sanchez Energy intends to invest approximately US$115 million and receive a 50% ownership interest in the plant and the approximately 45 miles of high pressure gathering pipelines that will connect SN's existing Catarina gathering system to the plant. Targa will hold all of the transportation capacity on the pipeline, and the gathering joint venture will receive fees for transportation.

The new midstream joint ventures are expected to provide significant operational and commercial benefits and improve yields, increase net-back prices, and lower the gathering and transportation fees SN currently pays for its Catarina production. The Company has the option to deliver additional volumes and commit additional acreage to the new plant as production increases.

"These South Texas midstream joint ventures are a key part of our strategy aimed at capturing opportunities across the hydrocarbon value chain," said Tony Sanchez III, CEO of Sanchez Energy. "Our participation in the joint ventures and commitment to anchor these projects are expected to result in access to attractive midstream assets that are central to SN's major development activity in South Texas. The modern plant design is expected to deliver better liquids yields and lower processing fees, resulting in lower operating costs, higher net-backs, and greater price realisation on our natural gas liquids revenue stream. The joint ventures are expected to also improve our access to end markets, including the developing Mexico and global LNG markets, and provide opportunities to increase revenue through utilisation of the new midstream system to transport and process third party volumes."

"Importantly,” continued Sanchez III, “these South Texas midstream assets are expected to provide stable cash flows which a master limited partnership may find attractive and financeable at favorable rates. As the project develops, we intend to explore potential alternative financing or other options for the joint ventures to maintain our liquidity, while also exploring whether there are any mutually beneficial funding strategies with Sanchez Production Partners LP that might be attractive to us. We look forward to updating the investment community as our plans advance."

The natural gas processing plant and gathering pipelines will be designed, built and operated by Targa; the plant is due to be operational by early 2017.

Edited from press release by

Published on 06/10/2015


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