Sanchez Energy Downgraded by RBC to Sector Perform

Sanchez Energy (SN) received an investment-rating downgrade Wednesday to sector perform from outperform from RBC Capital Markets following the oil-and-gas explorer and producer’s Tuesday report of a wider-than-expected Q2 loss.

Sanchez also reported Tuesday that it has “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.”

RBC cut its price target on the stock to $3.50 per share from $6. The stock tumbled 28% in Tuesday’s session on the Q2 report to close at $3.31 and edged up 1.7% in recent Wednesday pre-market trading to $3.36.

In a note to clients, RBC described Sanchez’s Q2 report as “the most painful in a string of lowered expectations and operational missteps.”

The firm added: “While the addition of a consultant could pay dividends in the long run, we do not see investors giving SN credit for a stabilization of the asset base before the company demonstrates several quarters of consistent performance.”

Tuesday, Sanchez reported it swung to a Q2 net loss of $0.71 per share, compared with a year-earlier profit of $0.39 per share and three analysts’ mean estimate according to Capital IQ of a loss of $0.03 per share. The company reported adjusted earnings before interest, taxes, depreciation, depletion, amortization and exploration expenses — or adjusted EBITDAX — of $107.7 million, up from the prior-year period’s $85.1 million but missing five analysts’ mean estimate of $124.6 million.

Revenue totaled $259.3 million, up from $175.7 million a year earlier and surpassing six analysts’ mean estimate of $250.6 million.