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Sanchez Energy files for Chapter 11 bankruptcy

Eagle Ford shale player estimates second quarter loss of $53 million

Houston-based Sanchez Energy has filed for Chapter 11 bankruptcy as the company struggled with lower commodity price environment and production declines.

"Over the last year, we have taken proactive steps to address the challenging oil and natural gas price environment, including stabilizing our production profile, improving our capital efficiency and reducing our overall cost structure," chief executive Tony Sanchez said in a statement.

"Undergoing a financial restructuring through a voluntary process represents the next phase for Sanchez Energy, as we work with our creditors on a plan to right-size our balance sheet, further invest in our assets and generate long-term value for our stakeholders."

Sanchez said it had received commitments from senior lenders for $175 million in new financing. The company said $25 million of that new financing will go toward repaying borrowings, replacing an outstanding letter of credit under Sanchez’s existing credit facility. Cash on hand and operating cash flow will support and fund the businesses throughout the bankruptcy process, the company said.

The company's first hearing is set for Tuesday, although Sanchez did not offer a target date for emerging from the process.

Sanchez Energy explores strategic alternatives

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Sanchez expects to continue operating in the south Texas Eagle Ford shale play, where it holds around 472,000 gross leasehold acres (271,000 net acres), according to the company website.

The US independent also holds around 34,000 net acres in the Tuscaloosa Marine Shale, another shale play in south-west Mississippi and north-east Louisiana.

Sanchez in December announced it would begin pursuing strategic alternatives.

According to a filling with the Securities and Exchange Commission, Sanchez estimated a second quarter net loss of $53 million, compared to a loss of $35 million in the year-ago period.

Sanchez noted that the quarterly net loss was primarily attributable to a decrease in revenues from lower production of oil, natural gas and natural gas liquids.

Last week, another independent shale player, Halcon Resources, also filed for a pre-packaged reorganization that would eliminate more than $750 million of debt.

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