Sheehan, a PGA TOUR member for the last four seasons, had seven birdies and a bogey in the second round and stands at 7-under-par 133 for a one-shot lead over Andrew Johnson.
He made three of his seven birdies on the first four holes at Panama Golf Club, including a 25-foot putt at the par-4 third.
'Making three birdies on the first four holes set the tone for the rest of the day,' said Sheehan, who claimed a Nationwide Tour win in 2002.
'I didn't have a good putting year on [the PGA] TOUR last year and typically I've been a pretty good putter, so it was nice to see them go in today,' he added.
For the fourth straight year the Nationwide Tour opened its season in Panama, where strong winds and high temperatures have been the norm.
'You have to do everything well on this golf course,' Sheehan said. 'You can't play out of the rough here. You've got to hit the fairway and I did that today.'
Johnson collected eight birdies in his 64 and moved from a tie for 23rd place overnight into solo second at 6-under 134.
He began his round on the back nine and established a tournament record there with a 7-under 28 (he added a birdie and a double-bogey on the front nine).
Johnson's round was highlighted by a 50-foot birdie putt on No. 17, a par-3.
'When the putt on No. 17 went in, I just started laughing. That is when I knew it was my day,' Johnson said.
Hunter Haas, one of three overnight co-leaders, shot a 68 and is tied for third place with Adam Riddering (65) at 5-under 135. Kevin Johnson (67) and Miguel Carballo (67) are a shot further back at 136.
The cut line fell at 3-over 143. Among those missing the weekend was Ricky Barnes (148), who failed to make the cut for the first time in 24 starts.