www.sanchezenergycorp.com
Results Driven. Manufacturing Focused.
Corporate Presentation
November 2014
© 2014 Sanchez Energy Corporation
Legal DisclaimersForward Looking Statements This presentation contains, and our officers and representatives may from time to time make, “forward-looking statements” within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, included in this presentation that address activities, events, conditions or developments that Sanchez Energy expects, estimates, believes or anticipates will or may occur or exist in the future are forward-looking statements. These statements are based on certain assumptions made by the company based on management’s experience, perception of historical trends and technical analyses, current conditions, anticipated future developments and other factors believed to be appropriate and reasonable by management. When used in this presentation, words such as “will,” “potential,” “believe,” “estimate,” “intend,” “expect,” “may,” “should,” “anticipate,” “could,” “plan,” “predict,” “project,” “profile,” “model,” “strategy,” “future” or their negatives or the statements that include these words, are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. In particular, statements, express or implied, concerning Sanchez Energy’s future operating results and returns or Sanchez Energy’s ability to replace or increase reserves, increase production, generate income or cash flows are forward-looking statements. Forward-looking statements are not guarantees of performance. Although Sanchez Energy believes that the expectations reflected in its forward-looking statements are reasonable and are based on reasonable assumptions, no assurance can be given that these assumptions are accurate or that any of these expectations will be achieved (in full or at all) or will prove to have been correct. Important factors that could cause Sanchez Energy’s actual results to differ materially from the expectations reflected in its forward-looking statements include, among others:
Sanchez Energy’s ability to successfully execute its business and financial strategies;
Sanchez Energy’s ability to replace the reserves it produces through drilling and property acquisitions;
the realized benefits of Sanchez Energy’s various acquisitions including Sanchez Energy’s Catarina acquisition referred to herein and the liabilities assumed in connection with these acquisitions;
the extent to which Sanchez Energy’s drilling plans are successful in economically developing its acreage in, and to produce reserves and achieve anticipated production levels from, its existing and future projects;
the accuracy of reserve estimates, which by their nature involve the exercise of professional judgment and may therefore be imprecise;
the extent to which Sanchez Energy can optimize reserve recovery and economically develop its plays utilizing horizontal and vertical drilling, advanced completion technologies and hydraulic fracturing;
Sanchez Energy’s ability to successfully execute its hedging strategy and the resulting realized prices therefrom;
competition in the oil and gas exploration and production industry for employees and other personnel, equipment, materials and services and, related thereto, the availability and cost of employees and other personnel, equipment, materials and services;
Sanchez Energy’s ability to access the credit and capital markets to obtain financing on terms it deems acceptable, if at all, and to otherwise satisfy its capital expenditure requirements;
the availability, proximity and capacity of, and costs associated with, gathering, processing, compression and transportation facilities;
the timing and extent of changes in prices for, and demand for, crude oil and condensate, natural gas liquids, natural gas and related commodities;
Sanchez Energy’s ability to compete with other companies in the oil and natural gas industry;
the impact of, and changes in, government policies, laws and regulations, including tax laws and regulations, environmental laws and regulations relating to air emissions, waste disposal, hydraulic fracturing and access to and use of water, laws and regulations imposing conditions and restrictions on drilling and completion operations and laws and regulations with respect to derivatives and hedging activities;
developments in oil-producing and natural-gas producing countries;
Sanchez Energy’s ability to effectively integrate acquired crude oil and natural gas properties into its operations, fully identify existing and potential problems with respect to such properties and accurately estimate reserves, production and costs with respect to such properties;
unexpected results of litigation filed against Sanchez Energy;
the extent to which Sanchez Energy’s crude oil and natural gas properties operated by others are operated successfully and economically;
the use of competing energy sources and the development of alternative energy sources;
the extent to which Sanchez Energy incurs uninsured losses and liabilities or losses and liabilities in excess of its insurance coverage; and
the other factors described under ITEM 1A, “Risk Factors,” on pages 26 through 52 of Sanchez Energy’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013 and any updates to those factors set forth in its subsequent Quarterly Reports on Form 10-Q or Current Reports on Form 8-K.
In light of these risks, uncertainties and assumptions, the events anticipated by Sanchez Energy’s forward-looking statements may not occur, and, if any of such events do, Sanchez Energy may not have correctly anticipated the timing of their occurrence or the extent of their impact on its actual results. Accordingly, you should not place any undue reliance on any of Sanchez Energy’s forward-looking statements. Any forward-looking statement speaks only as of the date on which such statement is made and Sanchez Energy undertakes no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable law.
Oil and Gas Reserves The Securities and Exchange Commission (“SEC”) requires oil and gas companies, in their filings with the SEC, to disclose “proved oil and gas reserves” (i.e., quantities of oil and gas that are estimated with reasonable certainty to be economically producible) and permits oil and gas companies to disclose “probable reserves” (i.e., quantities of oil and gas that are as likely as not to be recovered) and “possible reserves” (i.e., additional quantities of oil and gas that might be recovered, but with a lower probability than probable reserves). We may use certain terms in this presentation, such as “resource potential” that the SEC’s guidelines strictly prohibit us from including in filings with the SEC. The calculation of resource potential, and any other estimates of reserves and resources that are not proved, probable or possible reserves are not necessarily calculated in accordance with SEC guidelines. Investors are urged to consider closely the disclosure in Sanchez Energy’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013.
Non-GAAP Measures Included in this presentation are certain non-GAAP financial measures as defined under Securities and Exchange Commission Regulation G. Investors are urged to consider closely the disclosure in Sanchez Energy’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K and the reconciliation to GAAP measures provided in this presentation.
2
© 2014 Sanchez Energy Corporation
Positioned to thrive in a period of volatile commodity prices
Managing activity to support economic growth and maintain financial flexibility
Balanced reserve and production weighting between liquids and natural gas
72% of reserves are liquids
Eagle Ford is Flagship Asset ~2,800+ net drilling locations
Tuscaloosa Marine Shale Upside
Ample Liquidity $896 million at 3Q14
Market Cap (1) ~$1,285 MMEnterprise Value (1) ~$2,440 MM
Sanchez Energy Overview
3
Net Acreage: ~226,000 acres1P Reserves: 125 MMBoe (2)
3Q14 Average Production: ~39,000 Boe/d
Eagle Ford Shale
Net Acreage: ~61,000 acres (3)
Tuscaloosa Marine Shale (“TMS”)
1. Based on a closing stock price of $17.38 as of 11/7/14 and includes convertible preferred stock at book value (~$269 million)2. Based on SN’s internally estimated proved reserves at 9/30/143. SN has acquired ~20,000 net acres in the TMS area of mutual interest (“AMI”) since 1/1/14 on behalf of the JV with SR Acquisition I, L.L.C. (“SR”). Under the AMI terms, SN has an obligation to offer SR an interest in the
acquired acres
© 2014 Sanchez Energy Corporation
Eagle Ford Shale Position
4
SN Eagle Ford Position Summary
Net Acres ~226,000
3Q14 Average Production (Boe/d) ~39,000
Operated Rigs
Non-Operated Rigs
Gross Producing Wells 458
AlexanderRanch
BriggsRanch
Hausser
Wycross
TalbuttTrust
© 2014 Sanchez Energy Corporation
5
Transformational Growth
At IPO(12/31/11)
Today(9/30/14)
Production •609 Boe/d •~39,000 Boe/d
Proved Reserves•6.7 MMBoe•14% PD
•~125 MMBoe (1)
•46% PD
PV-10 •$152 million •$2,082 million (1)
LTM Revenue •$15 million •$885 million (2)
LTM Adj. EBITDA •$7 million •$639 million (2)
Acreage (3) •92,000 Eagle Ford•226,000 Eagle Ford•61,000 TMS
Market Capitalization
•$0.7 billion •$1.3 billion (4)
64x
19x
14x
91x
2.5xEntered new basin
1.9x
59x
1. Based on SN’s internally estimated proved reserves at 9/30/142. LTM Revenue and Adj. EBITDA are pro forma for 12 months of ownership of Catarina and Wycross3. 2.5x growth figure represents increase in Eagle Ford Shale acreage4. Based on a closing stock price of $17.38 as of 11/7/14 and includes convertible preferred stock at book value (~$269 million)
© 2014 Sanchez Energy Corporation
0
25
50
75
100
125
150
12/31/11 6/30/12 12/31/12 6/30/13 12/31/13 6/30/14 9/30/14
MM
Bo
e
PD PUD
7 15
21 82%91%86%
70%
43
30%
59
58%
42%
117
56%
44%
125
54%
46%
6
Delivering Strong Results
Reserves by Product Mix (9/30/14) (1)
125 MMBoe (46% PD)
Reserves by Product Mix (9/30/14) (1) Production (Boe/d)
Revenue and Adjusted EBITDA ($MM)
Oil 47%
NGL 25%
Gas 28%
0
10,000
20,000
30,000
40,000
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q
2012 2013 2014
$0
$50
$100
$150
$200
$250
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q
Revenue Adj. EBITDA
2012 2013 2014
1. Based on SN’s internally estimated proved reserves at 9/30/14
© 2014 Sanchez Energy Corporation
Capital Expenditure & Production Guidance
7
1. Annualized preferred stock dividends and interest expense total $16.0 million and $116.9 million, respectively
Preliminary Revised
2015 Capital 2015 Capital
Budget Budget
Catarina 2.5 2.5
Cotulla / Wycross 1.5 1.5
Marquis 2.0 1.0
Palmetto 1.0 1.0
Total Eagle Ford 7.0 6.0
TMS 1.0 0.25
Total 8.0 6.25
Gross Rigs
Reflecting the downturn in oil prices, SN has revised its preliminary 2015 capital plan range downwards to $850 – $900
million, a reduction of $250 – $300 million from the previous guidance’s midpoint
Focus will be on the development drilling of SN’s existing multi-year inventory of high rate of return projects
Land position mostly held by production, preserving optionality
Expected 2015 average production of 50,000 Boe/d, a 70% increase over 2014 and a 4Q15 over 4Q14 expected increase
over 25%
Anticipated 2015 capital program expected to be fully funded through cash and cash flow from operations without utilizing
SN’s revolving credit facility (assumes average oil prices of $80 / Bbl and natural gas prices of $3.75 / MMBtu)
Metrics 4Q14 2015
Production Guidance (BOE/D)
Period Average 40,000 - 44,000 50,000
Operating Cost & Expense Guidance ($/BOE)
Oil & Natural Gas Production Expenses $9.00 - $10.00 $9.00 - $10.00
Production & Ad Valorem Taxes $3.00 - $4.00 $2.50 - $3.50
Cash G&A $3.00 - $4.00 $2.50 - $3.50
Preferred Stock Dividends & Interest Expense (1)
$8.00 - $9.00 $7.30
DD&A $26.00 - $28.00
Effective Corporate Tax Rate
~35% (100% Deferred)
Guidance
© 2014 Sanchez Energy Corporation
Tailored Programs Enhancing Returns
99
Down spacing pilots
Buda open hole lateral
development
UEF standalone, UEF/LEF
stacking overlap
Down spacing pilots, UEF/Buda
tests
Longer laterals, down spacing
pilots
Longer laterals, higher proppant
load trials
LEF/UEF stacking, radiator pattern
fracs
Higher proppant load trials in UEF, pending for LEF
© 2014 Sanchez Energy Corporation
Stacked Lateral Potential
1010
Upper Eagle Ford
Buda
Lower Eagle Ford Target 2
Lower Eagle Ford Target 1
Mar
qu
is
Palm
etto
Co
tulla
Wyc
ross
Co
tulla
La
Sal
le
Cat
arin
a
Development Appraisal
© 2014 Sanchez Energy Corporation
Manufacturing Process Drives Capital Efficiency
11
$9.5 $7.3
$12.9
$0.0
$2.0
$4.0
$6.0
$8.0
$10.0
$12.0
$14.0
$M
M
SN Competitive Advantage
Appraisal Well
Multi-Well Pad + Zipper Frac Savings
Field Development and Well Design Savings
• Multi-well pad drilling and zipper fracturing
• Walking and skidding rigs
• Segmented de-risking of the wellbore
First Order Capital Savings
• Optimized well design
• Direct sourcing of chemicals and proppant
• Demand planning and staggered dedication of services
Opportunity to drive
Competitive Advantage
© 2014 Sanchez Energy Corporation
Track Record of Reducing Capital
12
Prost Well Cost Reductions
$-
$2.0
$4.0
$6.0
$8.0
$10.0
Previous Operator 3Q13 4Q13 1Q14
($M
M)
Drilling Completions Facilities
5 Wells
8 Wells
7 Wells
Alexander Rach Well Cost Reductions
0%
20%
40%
60%
80%
100%
120%
$80 $90 $100
IRR
Oil Price / Bbl
$5 MM Well $6 MM Well
$7 MM Well Previous Operator
0%
20%
40%
60%
80%
$80 $90 $100
IRR
Oil Price / Bbl
$7 MM Well $8 MM Well $9 MM Well
© 2014 Sanchez Energy Corporation
$30.91 $24.95
$6.73 $5.55 $6.47$3.35
$9.37
$7.26
$9.21 $9.41 $7.48 $9.68
$4.78
$4.53
$4.47 $6.15 $4.21$3.07
$4.72
$10.99 $9.72$9.09
$8.41
$45.06$41.46
$31.40 $30.83$27.25
$24.51
2011 2012 2013 (1) 1Q14 2Q14 (1) 3Q14 (1)
Interest & Preferred Dividends Taxes LOE Cash G&A
Low Cost Operator With Sustained Cost Reductions
13
1. 2013, 2Q14, and 3Q14 cash G&A per Boe excludes $1.07/Boe, $0.48/Boe, and $0.26/Boe in non-recurring acquisition expenses, respectively.
Total Cash Operating Cost Including Interest & Preferred Dividends ($/Boe)
© 2014 Sanchez Energy Corporation
Catarina Overview
15
Total Net Acres ~106,000
Average Working Interest 100%
Average Net Revenue Interest 75%
Planned Well Spacing (Acres) 75 – 100
Net Identified Drilling Locations 1,250 - 1,650
Gross Wells On Production (1) 187
Awaiting / Undergoing Completions (1) 21
EURs (MBoe) 600 – 700
D&C Costs ($MM) $6.5
F&D Cost ($ / Boe) $9.29 – $10.83
IRR @ $4.50 / Mcf 33% – 51%
NPV ($MM) $3.0 – $4.7
LEF Well Economics
Acreage, Inventory & Operational Update
1. Well status as of 11/4/14
Western Catarina (~43,000 net acres)
─ Partially developed; excellent offset operator results
─ ~200 LEF drilling locations
─ 71 Proven UEF locations; ~180 potential locations in
UEF
─ Recently completed 11 UEF wells exceeding
expectations (24-hr IP ranging from 973 – 2193
boe/d)
─ Added potential to book up to 200 additional UEF
locations
Eastern Catarina (~37,000 net acres)
─ Largely underexplored; excellent LEF core & log rock
quality in the LEF
─ ~400 LEF potential drilling locations with additional
upside locations in the UEF
─ Similar characteristics to Alexander Ranch but
significantly larger
Central Catarina (~26,000 net acres)
─ Exploration area; full 3D seismic coverage and UEF
potential
PUD Locations only in Western Catarina
Western Catarina
Central Catarina
Eastern Catarina
Catarina Gross Rigs 2.5
Revised 2015 Capital Plan
© 2014 Sanchez Energy Corporation
16
Initial Catarina Well Results
These wells were drilled by the previous operator in the Upper Eagle Ford and completed by SN
Initial pad average IP 70% higher than the previous operator’s average wells
SN is using a much lighter gel load (10# vs 20#+ from the previous operator) and tighter frac cluster spacing
likely causing the uplift
Well Name
24 Hour IP
(Boe/d)
%
Liquids
Choke
Size
Lateral
Length
(Feet) Stages
D20 HE 2,117 63% 24 5,399 22
D20 HB 1,589 64% 20 5,960 24
D20 HW 1,560 63% 22 5,268 21
D20 HD 1,491 66% 20 5,953 24
D20 HA 1,405 66% 16 5,728 23
D20 HX 1,264 63% 14 5,046 21
D20 HZ 1,117 63% 16 4,851 20
D20 HY 1,099 62% 14 5,311 21
D20 HV 973 62% 16 3,029 12
A24 HY 2,193 60% 24 4,454 18
A24 HZ 1,358 62% 18 5,061 21
Average D20 Pad 1,402 64% 18 5,172 21
Average A24 Pad 1,776 61% 21 4,758 20
Previous Operator Average 825 62% 5,226 22
© 2014 Sanchez Energy Corporation
EURs (MBoe) 500
D&C Costs ($MM) $6.0 - $7.0
F&D Cost ($ / Boe) $12.00 - $14.00
IRR @ $90 / Bbl 72% - 109%
IRR @ $80 / Bbl 51% - 77%
NPV @ $90 / Bbl ($MM) $6.6 - $7.6
NPV @ $80 / Bbl ($MM) $4.8 - $5.8
% Oil / Liquids 82% / 90%
Total Net Acres ~41,000
Average Working Interest 85%
Average Net Revenue Interest 64%
Planned Well Spacing (Acres) 40
Net Identified Drilling Locations (1) 700+
Cotulla / Wycross Gross Rigs 1.5
Cotulla Overview
17
1. Assumes 80% of net undeveloped acres are drillable and spaced on 40 acres 2. Well status as of 11/4/14
Wycross Well Economics
Revised 2015 Capital Plan
Gross Wells On Production 122
Awaiting / Undergoing Completion 8
EURs (MBoe) 450
D&C Costs ($MM) $5.5 - $6.0
F&D Cost ($ / Boe) $12.22 - $13.33
IRR @ $90 / Bbl 45% - 57%
IRR @ $80 / Bbl 32% - 40%
NPV @ $90 / Bbl ($MM) $4.0 - $4.5
NPV @ $80 / Bbl ($MM) $2.6 - $3.1
% Oil / Liquids 69% / 82%
Cotulla Acreage & Inventory
Operational Update (2)
Alexander R. Well Economics
Alexander Ranch
Wycross
Wright Ranch
Talbutt Trust
Hausser
© 2014 Sanchez Energy Corporation
EURs (MBoe) 450 – 750
D&C Costs ($MM) $7.0 - $7.5
F&D Cost ($ / Boe) $9.33 - $16.67
IRR @ $90 / Bbl 45% - 200%
IRR @ $80 / Bbl 30% - 145%
NPV @ $90 / Bbl ($MM) $4.2 - $13.3
NPV @ $80 / Bbl ($MM) $2.7 - $10.7
% Oil / Liquids 75% / 89%
EURs (MBoe) 350
D&C Costs ($MM) $6.0 - $7.0
F&D Cost ($ / Boe) $17.14 - $20.00
IRR @ $90 / Bbl 26% - 40%
IRR @ $80 / Bbl 17% - 27%
NPV @$90 / Bbl ($MM) $2.3 - $3.3
NPV @$80 / Bbl ($MM) $1.0 - $2.0
% Oil / Liquids 80% / 92%
EURs (MBoe) 450
D&C Costs ($MM) $7.0 - $8.0
F&D Cost ($ / Boe) $15.56 - $17.78
IRR @ $90 / Bbl 38% - 53%
IRR @ $80 / Bbl 26% - 37%
NPV @ $90 / Bbl ($MM) $4.2 - $5.2
NPV @ $80 / Bbl ($MM) $2.6 - $3.6
% Oil / Liquids 80% / 92%
Total Net Acres ~71,000
Average Working Interest 100%
Average Net Revenue Interest 75%
Planned Well Spacing (Acres) 60
Net Identified Drilling Locations (1) 900+
Marquis & Palmetto Overview
181. Assumes 80% of net undeveloped acres are drillable and
spaced on 60 acres 2. Assumes 90% of net undeveloped acres are drillable and
spaced on 40 acres3. Well status as of 11/4/14
Prost / Moulton Well EconomicsMarquis Acreage & Inventory
Palmetto Well Economics
Gross Wells On Production 79
Awaiting / Undergoing Completion 13
Marquis Operational Update (3)
Gross Wells On Production 64
Awaiting / Undergoing Completion 0
Palmetto Operational Update (3)
Total Net Acres ~9,000
Average Working Interest 50%
Average Net Revenue Interest 37%
Planned Well Spacing (Acres) 40
Net Identified Drilling Locations (2) 175+
Palmetto Acreage & Inventory
Palmetto
Marquis
Five Mile Creek Well Economics
Marquis Gross Rigs 1.0
Palmetto Gross Rigs 1.0
Revised 2015 Capital Plan
© 2014 Sanchez Energy Corporation
TMS Acreage Position and Activity
19
~61,000 net acre position in the core of the TMS
Contiguous blocky acreage with 3+ years of average remaining lease term
St. Davis Unit #1H in Amite County, Mississippi is undergoing completion and currently drilling the Morris Unit #2 in
Wilkinson County, Mississippi
SN’s acreage position is highlighted in yellow
EncanaLawson 25H-1
24 HR IP: 498 Boe/d
SNDry Fork East #2H
24 HR IP: 712 Boe/d
EncanaAsh 31H-2
24 HR IP: 730 Boe/d
EncanaAnderson 18H-1
24 HR IP: 1,178 Boe/d30 Day IP: 1,072 Boe/d
GoodrichSmith 5-29H-1
24 HR IP: 1,045 Boe/d
EncanaAnderson 17H-2
24 HR IP: 1,540 Boe/dEncana
Weyerhaeuser 60H-1
24 HR IP: 1,100 Boe/d
EncanaHorseshoe Hill
10H-124 HR IP: 813 Boe/d30 Day IP: 695 Boe/d
DevonMurphy 63H-1
24 HR IP: 460 Boe/d30 Day IP: 506 Boe/d
EncanaAnderson 17H-1
24 HR IP: 1,083 Boe/d30 day IP: 933 Boe/d
GoodrichBlades 33H #1
24 HR IP: 1,270 Boe/d
GoodrichCrosby 12-1H
24 HR IP: 1,300 Boe/d30 Day IP: 1,137 Boe/d
GoodrichNunnery 12-1H-1
24 HR IP: 815 Boe/d
GoodrichCH Lewis 30-19H-1
24 HR IP: 1,450 Boe/d
HalconHorseshoe Hill
11-22H 24 HR IP: 1,548 Boe/d
HalcónFassmann 9H-1
Completing
HalcónShuckrow 10H-1
Completing
GoodrichCMR / Foster Creek
24-13H-124 HR IP: 1,215 Boe/d
GoodrichCMR/Foster Creek 31-
22H-124 HR IP: 1,144 Boe/d
EncanaSabine 12H-1 & 2
Drilling
GoodrichBates 25-24-1
24 HR IP: 1,000 Boe/d
GoodrichSpears 31-61H-1
24 HR IP: 1,360 Boe/d
HalcónGeorge Martens
et al. 1HDrilling
HalcónS.D. Smith 1H
24 HR IP: 786 Boe/d
GoodrichSLC, Inc. 81H-1
24 HR IP: 900 Boe/d
EncanaAsh 13H-1 & 2
Drilling
GoodrichDenkmann33-28H-2
24 HR IP: 1,258 Boe/d
EncanaMathis 29-32H-124 HR IP: 1,300
Boe/d
EncanaLewis 7-18H-124 HR IP: 1,500
Boe/d
HalcónBlackstone Minerals 4H-2
24 HR IP: 637 Boe/d
SNSt. Davis #1HCompleting
SNMorris Unit #2H
Drilling
ComstockCMR Foster Creek 28-
40 1HDrilling
© 2014 Sanchez Energy Corporation
Capitalization
3Q14 liquidity of $896 million
$596 million in cash
$362.5 million borrowing base with an elected commitment of $300 million and $0 million drawn
No debt maturities until 2018
Revolver currently 2018
Senior notes 2021
Common shares outstanding as of 9/30/14:
Basic: 58.6 million
Diluted: 71.1 million
1. Based on a closing stock price of $17.38 as of 11/7/14 and includes convertible preferred stock at book value (~$269 million)2. Liquidity is equal to cash on hand plus availability under our revolving credit facility, which is currently $362.5 million with an elected commitment of $300 million3. As of 9/30/14 pro forma LTM EBITDA includes Wycross and Catarina acquisitions as if SN had owned the assets since 10/1/13
21
3Q14 Capitalization Table & Liquidity ($MM)As of
9/30/14
Cash and Equivalents $596
Revolving Credit Facility ($300 MM Available) -
Senior Notes 1,750
Total Debt $1,750
Net Debt 1,154
Perpetual Convertible Preferred Stock 269
Common Equity 810
Book Capitalization $2,829
Market Value as of 11/7/14
Fully Diluted Market Capitalization (1) 1,286
Enterprise Value $2,440
Liquidity (2)
$896
Total Debt / LTM EBITDA (3) 2.7x
Net Debt / LTM EBITDA (3) 1.8x
Total Debt / Proved Reserves ($/Boe) $15.00
Total Debt / Proved Developed Reserves ($/Boe) $34.39
PV-10 / Total Debt 1.2x
Total Debt / Enterprise Value 72%
© 2014 Sanchez Energy Corporation
Hedging program protects cash flow, development, and capital spend
~45% of anticipated total 2015 production hedged at the mid-point of production guidance range
• Hedging revenue objectives based on ~$90 oil pricing and ~$4 gas pricing environment for 2015 • ~50% of forecasted 2015 revenue hedged if un-hedged positions were firmed up at current price levels
Currently scaling in 2016 hedges with target of ~25% by year end
Use a variety of derivatives (swaps, costless collars, 3-way collars, and enhanced swaps)
Only enter into derivative agreements with counterparties that are “A” rated or better
Actively manage credit exposure per counterparty
Hedge Summary
22
Oil Hedges Gas Hedges
$78.00
$82.00
$86.00
$90.00
$94.00
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
Q1:15 Q2:15 Q3:15 Q4:15 Q1:16 Q2:16 Q3:16 Q4:16
Bb
ls p
er
day
Oil (Bbls) Oil Cap ($/Bbls) Oil Floor ($/Bbls)
$3.50
$3.70
$3.90
$4.10
$4.30
$4.50
$4.70
$4.90
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
Q1:15 Q2:15 Q3:15 Q4:15 Q1:16 Q2:16 Q3:16 Q4:16
MC
F p
er
day
Gas (Mcf) Gas Cap ($/Mcf) Gas Floor ($/Mcf)
© 2014 Sanchez Energy Corporation
23
Capitalization Summary Revolving credit facility (due 2018)
─ $362.5 MM borrowing base with an elected commitment of $300 million and an interest rate of LIBOR + 1.50% - 2.50%
─ Restrictive covenant: Net Debt < 4.0x TTM EBITDA
$600 MM of 7.75% senior unsecured notes (due 2021)─ No liquidity or performance based covenants
$1,150 MM of 6.125% senior unsecured notes (due 2023)─ No liquidity or performance based covenants
$92 MM of 4.875% cumulative perpetual convertible preferred stock, series A─ Convertible into 4.3 million shares of common stock ($21.51/share)
─ Mandatorily convertible after 10/5/17 if common stock trades above $27.96 for at least 20 out of 30 trading days
─ No liquidity or performance based covenants
$177 MM of 6.50% cumulative perpetual convertible preferred stock, series B─ Convertible into 8.3 million shares of common stock ($21.40/share)
─ Mandatorily convertible after 4/6/18 if common stock trades above $27.82 for at least 20 out of 30 trading days
─ No liquidity or performance based covenants
Common shares outstanding as of 9/30/14:
─ Basic: 58.6 million
─ Fully diluted: 71.1 million (assuming full conversion of both series of preferred stock)
© 2014 Sanchez Energy Corporation
24
Summary Investment Highlights Deep inventory of high-return, low risk locations underpins growth
─ 2,800+ net drilling locations across ~226,000 net acres in the Eagle Ford
2015 production guidance midpoint: ~50,000 Boe/d
Operational and financial flexibility to respond to changing commodity price environments
─ Ability to satisfy all drilling commitments and continue to grow production
Manufacturing process drives capital efficiency
─ Technically driven corporate culture focused on manufacturing efficiency and returns on capital
Reserve and production growth drivers
─ Catarina acquisition fits operational sweet spot
─ Stacked pay potential across Eagle Ford trend
─ TMS has potential to add high rate of return oil inventory
Self-funded with conservative financial profile
─ Low Net Debt to EBITDA and strong liquidity
Management experienced with Gulf Coast trends and with resource play development
© 2014 Sanchez Energy Corporation
26
Non–GAAP Reconciliation and Measures
Reconciliation of Net Income (Loss) To Adjusted EBITDA ($M)
Reconciliation of PV-10 To Standardized Measure ($MM)
Explanation of Non-GAAP MeasuresAdjusted EBITDA is defined by the Company as net income (loss) PLUS: (1) interest expense, including net losses (gains) on interest rate derivative contracts; (2) net losses (gains) on commodity derivatives; (3) net settlements received (paid) on commodity derivatives; (4) premiums (paid) on commodity derivative contracts; (5) depletion, depreciation, amortization, and accretion; (6) stock-based compensation expense; (7) acquisition costs included general and administrative; (8) income tax expense (benefit); (9) loss (gain) on sale of oil and natural gas properties; (10) impairment of oil and natural gas properties; and (11) other non-recurring items that we deem appropriate; LESS: (1) interest income; and (2) other non-recurring items that we deem appropriate.
Adjusted EBITDA is used as a supplemental financial measure by our management and by external users of our financial statements, such as investors, commercial banks and others, to assess our operating performance as compared to that of other companies in our industry, without regard to financing methods, capital structure, or historical cost basis. It is also used to assess our ability to incur and service debt and fund capital expenditures.
Our Adjusted EBITDA should not be considered an alternative to net income (loss), operating income (loss), cash flow provided by or used in operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. Our Adjusted EBITDA may not be comparable to similarly titled measures of another company because all companies may not calculate Adjusted EBITDA in the same manner.
Standardized measure is calculated in accordance with Statement of Financial Accounting Standards No. 69, “Disclosures About Oil and Gas Producing Activities,” as codified in ASC Topic 932, “Extractive Activities—Oil and Gas.” For further information regarding the calculation of the standardized measure, see “Unaudited Supplementary Information” included in the financial statements included in our Annual Report for the fiscal year ended December 31, 2013.
Pro Forma Actual
LTM Ended LTM Ended
9/30/14 12/31/11
Net Income (Loss) $98,114 $1,968
Plus:
Interest Expense 96,667 -
Net Losses On Commodity Derivatives (3,274) 480
Net Settlement On Commodity Derivatives (10,318) -
Premiums Paid On Commodity Derivatives Contracts (1,325) -
Depreciation, Depletion, Amortization, And Accretion 374,842 4,252
Stock-Based Compensation 29,270 -
Acquisition Costs Included in G&A 1,945 -
Income Tax Expense 53,329 -
Less:
Interest Income (100) (1)
Adjusted EBITDA $639,151 $6,699
As of As of
9/30/14 12/31/11
PV-10 $2,082 $152
Present Value of Future Income Taxes
Discounted at 10% (248) (19)
Standardized Measure $1,834 $133