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Already producing more than last year, U.S. shale player Sanchez Energy said it was increasing its spending plans with big payoffs expected in 2018.
Sanchez said its revenue of $111 million was up 39 percent from the first quarter in part because the price of oil rebounded from below $30 per barrel. Total and average production, primarily from its shale holdings in Texas, was up by an average 5 percent.
“We are encouraged by our strong operating and financial results in the first half of 2016,” Sanchez CEO Tony Sanchez III said in a statement.
As a result, the company said it aims to increase its spending on exploration and production this year by as much as $50 million, which it said would translate to a production increase of between 5 percent and 7 percent in 2017.
Much of the focus for Sanchez is in the Catarina section of the Eagle Ford shale reserve area in Texas. Production from the fourth quarter was 32 percent higher year-on-year. Full-year 2015 output was 72 percent higher than for all of 2014.
The company started the year with a spending cut. With crude oil prices up more than 20 percent from the start of the year, Sanchez said it was at a competitive advantage to respond to continued improvements in the market.
Production for the rest of the year is expected to remain relatively flat, but pay off in the years ahead.
“We expect this year’s capital spending increase to have an even more meaningful impact on 2018 production,” the company’s CEO said.