Tue 09/11/2018 13:01 PM
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Sanchez Energy, the Eagle Ford-focused E&P wrestling with well underperformance in its Comanche asset and questions over its well location count, hired McKinsey & Co. to review and evaluate its operations as it seeks to become cash flow positive, according to sources. In the meantime, sources have told Reorg that bids for the company’s Maverick asset have fallen short of its expectations.

The company announced in its second-quarter earnings release on Aug. 7 that it had “engaged a leading global consulting firm to conduct an assessment of its performance across all aspects of the business, with a specific focus on operations.”

On its second-quarter conference call, Sanchez described the consultant as a “large national and an international consulting firm” that does “a lot of work for the oil and gas companies. They do have petroleum engineers on staff, but it is not a boutique engineering firm.”

“Our focus here, barring any asset sales, is to get to free cash flow positive as quickly as possible,” Sanchez said. The consulting firm will help the company “to get to cash flow positive as soon as possible and mak[e] sure that we have the funds and liquidity to do so.”

The Maverick asset - 108,000 net acres in the black oil window of the Western Eagle Ford with a PV-10 of $192.8 million, according to the company’s 2017 10-K - has drawn bids in the $180 million to $220 million range, according to sources. The company had sought about $400 million, the sources said.

Sanchez noted on the second-quarter call that the company is “still evaluating proposals” for its Maverick and Palmetto assets. “We think that there is a lot of value and until somebody pays us for that value, we're not going to sell it on the cheap,” Sanchez said.

Sanchez has spent little in Maverick over the past several years, choosing instead to focus on its Catarina and Comanche assets. Those assets, in the volatile oil window south of Maverick, will be the primary beneficiaries of capex through 2020. This year, the company is planning to spend some $15 million to $20 million in Maverick, where it has drilled three net wells and will turn three to production.

A spokesman for Sanchez declined to comment. McKinsey’s Houston office did not respond to requests for comment.
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