Sanchez Midstream (SNMP) To Vend Non-Core Production Assets

In an attempt to fortify its transition from energy explorer to midstream operator, Sanchez Midstream Partners LP (NYSE:SN) recently announced plans to divest the non-core production assets in Texas. The partnership will offload oil and gas wells along with other assets in the region to an undisclosed buyer for $6.3 million.

The move comes after the partnership changed its name from Sanchez Production Partners to Sanchez Midstream Partners to reflect its shift in focus on midstream activities. The company is owned by affiliates of Sanchez Energy Corporation (NYSE:SN) . The Houston-based partnership recently offloaded the remaining Oklahoma production assets for $5.5 million. Both these asset sales in Texas and Oklahoma are scheduled to close in the third quarter of this year.

The asset sales will also enable Sanchez Midstream Partners to increase its focus in the midstream operations in the Eagle Ford shale. The partnership also announced in June that its Raptor Gas Processing Facility has come online. The move is in sync with the partnership’s continued focus in the advancement of its midstream strategies and operations. The facility has a processing capacity of 200 million cubic feet equivalent per day (MMcfe/d), expandable to 260 MMcfe/d. The project is a 50/50 joint venture with Targa Resources, Inc. (NYSE:TRGP) .

Sanchez Midstream Partners owns the Western Catarina Midstream system in the Eagle Ford and has a 50% interest in the Carnero Gathering Line connected to its Western Catarina Midstream system .The partnership also owns the complete stake in SECO pipeline, a dry gas take-away pipeline connected to its Raptor facility. The pipeline’s Phase 1 is almost complete which will enable Raptor facility to access gas markets in Texas when it becomes operational later this month. These assets form the core components in the partnership’s portfolio are expected to generate stable cash flows for the firm in the coming quarters.

Zacks Rank and Key Pick

Sanchez Midstream engages in the acquisition, development, ownership, and operation of midstream and other energy production assets in the United States.

The partnership has seen negative earnings estimate revisions for the current quarter and year. For the current year, the consensus estimate dropped widened from a loss of $1.48 a share to a loss of $2.21 over a month. For the current quarter, the consensus estimate went down to a loss of 44 cents a share from a loss of 40 cents over the past 30 days. The stock’s share price has dropped 21% in the last three months. Sanchez Midstream, under the Zacks categorized U.S. Oil and Gas Production & Exploration industry, currently carries a Zacks Rank #4 (Sell).

Sanchez Production Partners LP Price

A better-ranked player in the energy space includes Cheniere Energy, Inc. (NYSE:LNG) which sports a Zacks Rank #1 (Strong Buy). Cheniere Energy delivered a positive earnings surprise of 14% in the trailing four quarters. You can see the complete list of today’s Zacks #1 Rank stocks here.

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