Expansion of Eagle Ford position through
accretive acquisitions
Continued success with Austin Chalk
delineation
Reduced total debt by $27 million
quarter-over-quarter
Targeting leverage ratio of less than 1.0x by
year-end 2022
SilverBow Resources, Inc. (NYSE: SBOW) (“SilverBow” or the
“Company”) today announced operating and financial results for the
first quarter of 2022. Highlights include:
- Reported net production of 226 million cubic feet of natural
gas equivalent per day (“MMcfe/d”) (77% natural gas) for the first
quarter of 2022, at the midpoint of guidance
- Reported a net loss of $64 million, which includes a net
unrealized loss on the value of the Company's derivative contracts
of $112 million, Adjusted EBITDA of $74 million and free cash flow
(“FCF”) of $28 million for the first quarter of 2022. Adjusted
EBITDA and FCF are non-GAAP measures defined and reconciled in the
tables below
- Reduced total debt by $27 million quarter-over-quarter.
Leverage ratio of 1.24x1 at quarter end; targeting year-end 2022
leverage ratio below 1.0x1
- SilverBow's Austin Chalk wells in Webb County continue to
exceed expectations. Brought online in early 2022 the Company's
fourth Austin Chalk well, and two more Austin Chalk wells are
currently being completed as part of an eight-well La Mesa pad
drilled in the first quarter of 2022
- Increased borrowing base under SilverBow's senior secured
revolving credit facility (“Credit Facility”) to $525 million as of
April 12, 2022; a 14% increase from prior borrowing base
- Announced agreements to acquire the assets of Sundance Energy,
Inc. and certain affiliated entities (collectively, “Sundance”) for
a total consideration of approximately $354 million and SandPoint
Operating, LLC, a subsidiary of SandPoint Resources, LLC,
(collectively, “SandPoint") for a total consideration of
approximately $71 million (the “Acquisitions”)
- The Acquisitions are expected to enhance SilverBow's pro forma
production, Adjusted EBITDA, FCF and FCF per share while allowing
the Company to achieve a leverage ratio of less than 1.0x by
year-end 2022
- Updated full year 2022 guidance and upsized borrowing base
amount expected to be announced in conjunction with the closing of
the Acquisitions
MANAGEMENT COMMENTS
Sean Woolverton, SilverBow’s Chief Executive Officer, commented,
“First quarter financial results were exceptional, with SilverBow
generating $28 million of free cash flow and reducing total debt by
$27 million since year-end 2021. In June, we will see a significant
ramp in production as we bring online 11 new wells leading to
double-digit growth year-over-year on the existing assets with a
re-investment rate less than 70%. Strong commodity prices combined
with a full rig line of efficiencies have helped drive financial
performance above expectations and offset inflation in the service
market. With increased liquidity from our upsized borrowing base
and strong free cash flow generation, SilverBow is well-positioned
to fund future growth and expand its portfolio, both through the
drill-bit and through accretive acquisitions.”
Mr. Woolverton commented further, “In April, we announced
agreements to acquire the assets of Sundance and SandPoint, which
we expect to have an immediate impact upon close. The base
production, future locations and acreage overlap with our La Salle
and McMullen areas drive compelling industrial logic, increase our
production and oil mix, and add nearly a decade of high-return
inventory spanning Eagle Ford and Olmos zones. These acquisitions
are accretive to key financial and operational metrics and allows
us to quickly scale our cash flows within a favorable commodity
environment while providing SilverBow a platform to continue our
consolidation strategy. On a pro forma basis, SilverBow is expected
to increase Adjusted EBITDA, further delever the balance sheet and
further expand liquidity through an upsized borrowing base.”
OPERATIONS HIGHLIGHTS
During the first quarter of 2022, SilverBow drilled nine net
wells, completed one well and brought one well online. The
Company's first quarter activity focused primarily on its La Mesa
area, where one Austin Chalk well drilled to a lateral length of
approximately 9,800 feet was brought online, representing the
longest lateral SilverBow has drilled in the Austin Chalk to date.
Additionally, SilverBow drilled an eight-well La Mesa pad, the
largest pad in the Company’s history. The eight wells were
co-developed using a wine-rack configuration, of which three
targeted the Lower Eagle Ford, three targeted the Upper Eagle Ford
and two targeted the Austin Chalk. First production from this pad
is expected towards the end of the second quarter of 2022.
SilverBow's drilling rig will shift its focus from our Webb
County Gas and Austin Chalk assets in the first quarter towards our
La Salle and McMullen oil assets in the second quarter. In the back
half of the year, the Company anticipates drilling a mix of Webb
County Gas wells and locations acquired in 2021. SilverBow
anticipates adding a second rig upon closing of the Sundance
acquisition. The Company continues to optimize its drilling
schedule based on commodity prices and first production timing.
PRODUCTION VOLUMES, OPERATING COSTS AND REALIZED
PRICES
SilverBow's total net production for the first quarter of 2022
averaged 226 MMcfe/d. Production mix for the first quarter
consisted of 77% natural gas, 13% oil and 10% natural gas liquids
(“NGLs”). Natural gas comprised 60% of total oil and gas sales for
the first quarter, compared to 73% in the first quarter of
2021.
For the first quarter of 2022, lease operating expenses (“LOE”)
were $0.48 per Mcfe, transportation and processing expenses
(“T&P”) were $0.31 per Mcfe and production and ad valorem taxes
were 6.0% of oil and gas sales. Total production expenses, which
include LOE, T&P and production taxes, were $1.18 per Mcfe for
the first quarter. Net general and administrative (“net G&A”)
expenses for the first quarter of 2022 were $4.8 million, or $0.24
per Mcfe. After deducting $1.0 million of non-cash compensation
expense, cash general and administrative (“cash G&A”) (a
non-GAAP measure) expenses were $3.7 million for the first quarter
of 2022, or $0.18 per Mcfe.
The Company continues to benefit from strong basis pricing in
the Eagle Ford. Crude oil and natural gas realizations in the first
quarter were 98% of West Texas Intermediate (“WTI”) and 100% of
Henry Hub, respectively, excluding hedging. The Company's average
realized natural gas price for the first quarter of 2022, excluding
hedging, was $4.96 per thousand cubic feet of natural gas (“Mcf”)
compared to $4.98 per Mcf in the first quarter of 2021. The average
realized crude oil selling price in the first quarter of 2022,
excluding hedging, was $92.59 per barrel compared to $55.49 per
barrel in the first quarter of 2021. The average realized NGL
selling price in the first quarter, excluding hedging, was $34.89
per barrel (37% of WTI benchmark) compared to $22.30 per barrel
(39% of WTI benchmark) in the first quarter of 2021. Please refer
to the tables included with today's news release for production
volumes and pricing information.
FINANCIAL RESULTS
SilverBow reported total oil and gas sales of $129.7 million for
the first quarter of 2022. The Company reported a net loss of $64.3
million, which includes a net unrealized loss on the value of the
Company's derivative contracts of $112.0 million.
For the first quarter of 2022, SilverBow generated Adjusted
EBITDA (a non-GAAP measure) of $73.9 million and FCF (a non-GAAP
measure) of $27.6 million. For the twelve months ended March 31,
2022, the Company reported Adjusted EBITDA for Leverage Ratio (a
non-GAAP measure) of $281.4 million, which, in accordance with the
Leverage Ratio calculation in its Credit Facility, includes
contributions from acquired assets prior to their closing dates
totaling $25.3 million.
Capital expenditures incurred during the first quarter of 2022
totaled $40.4 million on an accrual basis.
SECOND QUARTER GUIDANCE
For the second quarter of 2022, SilverBow, on a standalone basis
(excluding the Acquisitions), is guiding to estimated production of
219-232 MMcfe/d, with natural gas volumes expected to comprise
175-185 MMcf/d or 80% of total production at the midpoint. The
Company plans to release updated 2022 guidance in conjunction with
the closing of the Sundance transaction. As always, SilverBow
maintains a high degree of flexibility in its drilling schedule as
it closely monitors commodity prices and the service cost
environment.
HEDGING UPDATE
Hedging continues to be an important element of SilverBow's
strategy to protect cash flow. The Company's active hedging program
provides greater predictability of cash flows and is structured to
preserve exposure to higher commodity prices while staying in
compliance with the financial covenants under SilverBow's debt
facilities. In conjunction with the acquisition announcements, the
Company layered on additional commodity derivatives for oil,
natural gas and NGLs.
As of April 29, 2022, SilverBow, on a standalone basis
(excluding the production volumes and hedges associated with the
Acquisitions), has 131 MMcf/d of natural gas production hedged,
3,929 Bbls/d of oil hedged and 2,780 Bbls/d of NGLs hedged for the
remainder of 2022. For 2023, the Company has 134 MMcf/d of natural
gas production hedged, 2,873 Bbls/d of oil hedged and 2,250 Bbls/d
of NGLs hedged. The hedged amounts are inclusive of both swaps and
collars.
Please see SilverBow's Corporate Presentation and Form 10-Q
filing for the first quarter of 2022, which the Company expects to
file on Thursday, May 5, 2022, for a detailed summary of its
derivative contracts.
CAPITAL STRUCTURE AND LIQUIDITY
As of March 31, 2022, SilverBow's liquidity position was $261.6
million, consisting of $1.6 million of cash and $260.0 million of
availability under the Credit Facility. SilverBow's net debt as of
March 31, 2022 was $348.4 million, calculated as total long-term
debt of $350.0 million less $1.6 million of cash, a $27.5 million,
or 7%, decrease from December 31, 2021.
In conjunction with its regularly scheduled semi-annual
redetermination, SilverBow entered into the Ninth Amendment to its
Credit Facility, effective April 12, 2022, which increased the
borrowing base under the Credit Facility to $525 million. Adjusted
for the increase to the borrowing base, the Company had $325.0
million of undrawn capacity and $1.6 million of cash, resulting in
$326.6 million of liquidity before giving effect to the cash
consideration payments for the pending Acquisitions.
As of April 29, 2022, SilverBow had 16.9 million total common
shares outstanding.
CONFERENCE CALL AND UPDATED INVESTOR PRESENTATION
SilverBow will host a conference call for investors on Thursday,
May 5, 2022, at 8:00 a.m. Central Time (9:00 a.m. Eastern Time).
Investors and participants can listen to the call by dialing
1-833-979-2485 (U.S.) or 1-236-738-2199 (International) and
requesting SilverBow Resource's First Quarter 2022 Earnings
Conference Call or by visiting the Company's website. A
simultaneous webcast of the call may be accessed over the internet
by visiting SilverBow's website at www.sbow.com, clicking on
“Investor Relations” and “Events and Presentations” and then
clicking on the “First Quarter 2022 Earnings Conference Call” link.
The webcast will be archived for replay on the Company's website
for 14 days. Additionally, an updated Corporate Presentation will
be uploaded to the Investor Relations section of SilverBow's
website before the conference call.
ABOUT SILVERBOW RESOURCES, INC.
SilverBow Resources, Inc. (NYSE: SBOW) is a Houston-based energy
company actively engaged in the exploration, development, and
production of oil and gas in the Eagle Ford and Austin Chalk in
South Texas. With over 30 years of history operating in South
Texas, the Company possesses a significant understanding of
regional reservoirs which it leverages to assemble high quality
drilling inventory while continuously enhancing its operations to
maximize returns on capital invested. For more information, please
visit www.sbow.com. Information on our website is not part of this
release.
FORWARD-LOOKING STATEMENTS
This release includes “forward-looking statements” within the
meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended.
These forward-looking statements represent management's
expectations or beliefs concerning future events, and it is
possible that the results described in this release will not be
achieved. These forward-looking statements are based on current
expectations and assumptions and are subject to a number of risks
and uncertainties, many of which are beyond our control. All
statements, other than statements of historical fact included in
this press release, including those regarding our strategy, the
benefits of the recently announced Sundance and SandPoint
transactions, future operations, 2022 guidance, financial position,
well expectations and drilling plans, estimated production levels,
expected oil and natural gas pricing, estimated oil and natural gas
reserves or the present value thereof, reserve increases, service
costs, impacts of inflation, future free cash flow and expected
leverage ratio, capital expenditures, budget, projected costs,
prospects, plans and objectives of management are forward-looking
statements. When used in this report, the words “will,” “could,”
“believe,” “anticipate,” “intend,” “estimate,” “budgeted,”
“guidance,” “expect,” “may,” “continue,” “predict,” “potential,”
“plan,” “project” and similar expressions are intended to identify
forward-looking statements, although not all forward-looking
statements contain such identifying words. Important factors that
could cause actual results to differ materially from our
expectations include, but are not limited to, the following risks
and uncertainties: the severity and duration of world health
events, including the COVID-19 pandemic, related economic
repercussions, including disruptions in the oil and gas industry;
actions by the members of the Organization of the Petroleum
Exporting Countries (“OPEC”) and Russia (together with OPEC and
other allied producing countries) with respect to oil production
levels and announcements of potential changes in such levels;
general economic and political conditions, including political
tensions or war; risks related to the recently announced Sundance
and SandPoint transactions, including the risk that the
acquisitions will not be completed on the timeline or terms
currently contemplated, that the benefits of the transactions may
not be fully realized or may take longer to realize than expected,
that the cost of the acquisitions will be significant, and that
management attention will be diverted to transaction-related
issues; operational challenges relating to the COVID-19 pandemic
and efforts to mitigate the spread of the virus, including
logistical challenges, protecting the health and well-being of our
employees, remote work arrangements, performance of contracts and
supply chain disruptions; volatility in natural gas, oil and NGL
prices; future cash flow and its adequacy to maintain our ongoing
operations; liquidity, including our ability to satisfy our short-
or long-term liquidity needs; our borrowing capacity and future
covenant compliance; operating results; asset disposition efforts
or the timing or outcome thereof; ongoing and prospective joint
ventures, their structures and substance, and the likelihood of
their finalization or the timing thereof; the amount, nature and
timing of capital expenditures, including future development costs;
timing, cost and amount of future production of oil and natural
gas; impairments on our properties; well results; availability of
drilling and production equipment or availability of oil field
labor; availability, cost and terms of capital; timing and
successful drilling and completion of wells; availability and cost
for transportation of oil and natural gas; costs of exploiting and
developing our properties and conducting other operations;
competition in the oil and natural gas industry; opportunities to
monetize assets; our ability to execute on strategic initiatives;
effectiveness of our risk management activities, including hedging
strategy; environmental liabilities; counterparty credit risk;
governmental regulation and taxation of the oil and natural gas
industry; developments in world oil and natural gas markets and in
oil and natural gas-producing countries; uncertainty regarding our
future operating results; and other risks and uncertainties
discussed in the Company’s reports filed with the SEC, including
its Annual Report on Form 10-K for the year ended December 31,
2021.
All forward-looking statements speak only as of the date of this
news release. You should not place undue reliance on these
forward-looking statements. The Company’s capital budget, operating
plan, service cost outlook and development plans are subject to
change at any time. The issuance of the stock consideration in the
Sundance transaction requires approval of SilverBow stockholders in
accordance with the listing rules of the New York Stock Exchange,
and the Company cannot provide assurances on the timing or outcome
of that approval. Although we believe that our plans, intentions
and expectations reflected in or suggested by the forward-looking
statements we make in this release are reasonable, we can give no
assurance that these plans, intentions or expectations will be
achieved. The risk factors and other factors noted herein and in
the Company's SEC filings could cause its actual results to differ
materially from those contained in any forward-looking statement.
These cautionary statements qualify all forward-looking statements
attributable to us or persons acting on our behalf.
All subsequent written and oral forward-looking statements
attributable to us or to persons acting on our behalf are expressly
qualified in their entirety by the foregoing. We undertake no
obligation to publicly release the results of any revisions to any
such forward-looking statements that may be made to reflect events
or circumstances after the date of this release or to reflect the
occurrence of unanticipated events, except as required by law.
(Additional Information and Where to Find
It)
This communication does not constitute an offer to buy, or
solicitation of an offer to sell, any securities of SilverBow. This
communication relates to a proposed transaction involving SilverBow
and Sundance that is the subject of a proxy statement filed with
the U.S. Securities and Exchange Commission (the “SEC”) that
provides full details of the proposed transaction and the attendant
benefits and risk. This communication is not a substitute for the
proxy statement or any other document that SilverBow may file with
the SEC or send to its shareholders in connection with the proposed
transaction. INVESTORS AND SHAREHOLDERS ARE URGED TO READ THE PROXY
STATEMENT AND ANY OTHER RELEVANT DOCUMENTS, BECAUSE THEY CONTAIN
IMPORTANT INFORMATION ABOUT SILVERBOW AND THE PROPOSED TRANSACTION.
Investors and shareholders will be able to obtain these materials
and other documents filed with the SEC free of charge at the SEC’s
website, www.sec.gov. In addition, copies of the proxy statement
and other relevant documents may be obtained free of charge by
accessing SilverBow’s website at www.sbow.com by clicking on the
“Investors” link, or upon written request to SilverBow, 920
Memorial City Way, Suite 850, Houston, Texas 77024, Attention:
Investor Relations. Shareholders may also read and copy any
reports, statements and other information filed by SilverBow with
the SEC, at the SEC at 1-800-SEC-0330 or on the SEC’s website.
(Participants in the Solicitation)
SilverBow and certain of its directors, executive officers and
other members of management and employees may be deemed to be
participants in the solicitation of proxies from shareholders in
respect of the transaction under the rules of the SEC. Information
regarding SilverBow’s directors and executive officers is available
in its definitive proxy statement filed with the SEC on March 30,
2022 in connection with its 2022 annual meeting of shareholders.
Other information regarding the participants in the proxy
solicitation and a description of their direct and indirect
interests, by security holdings or otherwise, are contained in
SilverBow’s proxy statement and other relevant materials filed with
the SEC. Investors should read the proxy statement and other
relevant documents carefully before making any voting or investment
decisions.
(Footnotes)
1 Leverage ratio is defined as total long-term debt, before
unamortized discounts, divided by Adjusted EBITDA for Leverage
Ratio (a non-GAAP measure defined and reconciled in the tables
included with today's news release) for the trailing twelve-month
period.
(Financial Highlights to Follow)
Condensed Consolidated Balance Sheets
(Unaudited)
SilverBow Resources, Inc. and Subsidiary
(in thousands, except share amounts)
March 31, 2022
December 31, 2021
ASSETS
Current Assets:
Cash and cash equivalents
$
1,645
$
1,121
Accounts receivable, net
46,095
49,777
Fair value of commodity derivatives
1,679
2,806
Other current assets
2,164
1,875
Total Current Assets
51,583
55,579
Property and Equipment:
Property and equipment, full cost method,
including $23,623 and $17,090, respectively, of unproved property
costs not being amortized at the end of each period
1,651,497
1,611,953
Less – Accumulated depreciation,
depletion, amortization & impairment
(891,158
)
(869,985
)
Property and Equipment, Net
760,339
741,968
Right of use assets
16,163
16,065
Fair value of long-term commodity
derivatives
76
201
Other long-term assets
3,629
5,641
Total Assets
$
831,790
$
819,454
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current Liabilities:
Accounts payable and accrued
liabilities
$
41,909
$
35,034
Fair value of commodity derivatives
140,941
47,453
Accrued capital costs
11,128
7,354
Accrued interest
862
697
Current lease liability
7,998
7,222
Undistributed oil and gas revenues
18,731
23,577
Total Current Liabilities
221,569
121,337
Long-term debt, net
346,003
372,825
Non-current lease liability
8,427
9,090
Deferred tax liabilities
3,613
6,516
Asset retirement obligations
5,644
5,526
Fair value of long-term commodity
derivatives
19,089
8,585
Other long-term liabilities
1,663
3,043
Commitments and Contingencies
Stockholders' Equity:
Preferred stock, $0.01 par value,
10,000,000 shares authorized, none issued
—
—
Common stock, $0.01 par value, 40,000,000
shares authorized, 17,141,724 and 16,822,845 shares issued,
respectively, and 16,812,851 and 16,631,175 shares outstanding,
respectively
171
168
Additional paid-in capital
414,127
413,017
Treasury stock, held at cost, 328,873 and
191,670 shares, respectively
(6,592
)
(2,984
)
Accumulated deficit
(181,924
)
(117,669
)
Total Stockholders’ Equity
225,782
292,532
Total Liabilities and Stockholders’
Equity
$
831,790
$
819,454
Condensed Consolidated Statements of
Operations (Unaudited)
SilverBow Resources, Inc. and Subsidiary
(in thousands, except per-share amounts)
Three Months Ended March 31,
2022
Three Months Ended March 31,
2021
Revenues:
Oil and gas sales
$
129,656
$
86,741
Operating Expenses:
General and administrative, net
4,786
4,782
Depreciation, depletion, and
amortization
21,154
13,393
Accretion of asset retirement
obligations
99
75
Lease operating expenses
9,125
6,274
Workovers
647
13
Transportation and gas processing
6,352
5,056
Severance and other taxes
7,764
3,489
Total Operating Expenses
49,927
33,082
Operating Income
79,729
53,659
Non-Operating Income (Expense)
Gain (loss) on commodity derivatives,
net
(140,242
)
(18,259
)
Interest expense, net
(6,557
)
(7,019
)
Other income (expense), net
61
(1
)
Income (Loss) Before Income Taxes
(67,009
)
28,380
Provision (Benefit) for Income Taxes
(2,754
)
—
Net Income (Loss)
$
(64,255
)
$
28,380
Per Share Amounts:
Basic Earnings (Loss) Per Share
$
(3.84
)
$
2.36
Diluted Earnings (Loss) Per Share
$
(3.84
)
$
2.31
Weighted-Average Shares Outstanding -
Basic
16,719
12,029
Weighted-Average Shares Outstanding -
Diluted
16,719
12,294
Condensed Consolidated Statements of
Cash Flows (Unaudited)
SilverBow Resources, Inc. and Subsidiary
(in thousands)
Three Months Ended March 31,
2022
Three Months Ended March 31,
2021
Cash Flows from Operating Activities:
Net income (loss)
$
(64,255
)
$
28,380
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating activities
Depreciation, depletion, and
amortization
21,154
13,393
Accretion of asset retirement
obligations
99
75
Deferred income taxes
(2,902
)
—
Share-based compensation
1,047
1,070
(Gain) Loss on derivatives, net
140,242
18,259
Cash settlement (paid) received on
derivatives
(24,554
)
(3,063
)
Settlements of asset retirement
obligations
(38
)
(104
)
Other
1,138
344
Change in operating assets and
liabilities:
(Increase) decrease in accounts receivable
and other current assets
2,794
(878
)
Increase (decrease) in accounts payable
and accrued liabilities
(10,144
)
10,301
Increase (decrease) in income taxes
payable
149
—
Increase (decrease) in accrued
interest
165
69
Net Cash Provided by (Used in) Operating
Activities
64,895
67,846
Cash Flows from Investing Activities:
Additions to property and equipment
(35,228
)
(35,852
)
Acquisition of oil and gas properties, net
of purchase price adjustments
436
(205
)
Net Cash Provided by (Used in) Investing
Activities
(34,792
)
(36,057
)
Cash Flows from Financing Activities:
Proceeds from bank borrowings
122,000
57,000
Payments of bank borrowings
(149,000
)
(87,000
)
Purchase of treasury shares
(2,462
)
(488
)
Payments of debt issuance costs
(117
)
—
Net Cash Provided by (Used in) Financing
Activities
(29,579
)
(30,488
)
Net Increase (Decrease) in Cash and Cash
Equivalents
524
1,301
Cash and Cash Equivalents at Beginning of
Period
1,121
2,118
Cash and Cash Equivalents at End of
Period
$
1,645
$
3,419
Supplemental Disclosures of Cash Flow
Information:
Cash paid during period for interest, net
of amounts capitalized
$
5,816
$
6,424
Non-cash Investing and Financing
Activities:
Changes in capital accounts payable and
capital accruals
$
5,037
$
(3,588
)
Non-cash equity consideration for
acquisitions
$
1,134
$
—
Definition of Non-GAAP Measures as Calculated by the Company
(Unaudited)
The following non-GAAP measures are presented in addition to
financial statements as SilverBow believes these metrics and
performance measures are widely used by the investment community,
including investors, research analysts and others, to evaluate and
useful in comparing investments among upstream oil and gas
companies in making investment decisions or recommendations. These
measures, as presented, may have differing calculations among
companies and investment professionals and may not be directly
comparable to the same measures provided by others. A non-GAAP
measure should not be considered in isolation or as a substitute
for the related GAAP measure or any other measure of a company's
financial or operating performance presented in accordance with
GAAP. A reconciliation of each of these non-GAAP measures to the
most directly comparable GAAP measure or measures is presented
below. These measures may not be comparable to similarly titled
measures of other companies.
Adjusted EBITDA: The Company presents Adjusted EBITDA
attributable to common stockholders in addition to reported net
income (loss) in accordance with GAAP. Adjusted EBITDA is
calculated as net income (loss) plus (less) depreciation, depletion
and amortization, accretion of asset retirement obligations,
interest expense, impairment of oil and natural gas properties, net
losses (gains) on commodity derivative contracts, amounts collected
(paid) for commodity derivative contracts held to settlement,
income tax expense (benefit); and share-based compensation expense.
Adjusted EBITDA excludes certain items that SilverBow believes
affect the comparability of operating results, including items that
are generally non-recurring in nature or whose timing and/or amount
cannot be reasonably estimated. Adjusted EBITDA is used by the
Company's management and by external users of SilverBow's financial
statements, such as investors, commercial banks and others, to
assess the Company's operating performance as compared to that of
other companies, without regard to financing methods, capital
structure or historical cost basis. It is also used to assess
SilverBow's ability to incur and service debt and fund capital
expenditures. Adjusted EBITDA should not be considered an
alternative to net income (loss), operating income (loss), cash
flows provided by (used in) operating activities or any other
measure of financial performance or liquidity presented in
accordance with GAAP. Adjusted EBITDA is important as it is
considered among the financial covenants under the Company's First
Amended and Restated Senior Secured Revolving Credit Agreement with
JPMorgan Chase Bank, National Association, as administrative agent,
and certain lenders party thereto (as amended, the “Credit
Agreement”), a material source of liquidity for SilverBow. Please
reference the Company's 2021 Form 10-K and subsequent 8-Ks for
discussion of the Credit Agreement and its covenants.
Adjusted EBITDA for Leverage Ratio: In accordance with
the Leverage Ratio calculation for SilverBow's Credit Facility, the
Company makes certain adjustments to its calculation of Adjusted
EBITDA. Adjusted EBITDA for Leverage Ratio is calculated as
Adjusted EBITDA (defined above) plus (less) amortization of
derivative contracts and pro forma EBITDA contributions related to
closed acquisitions. The Company believes that Adjusted EBITDA for
Leverage Ratio is useful to investors because it reflects the last
twelve months EBITDA used by the administrative agent for
SilverBow's Credit Facility in the calculation of its leverage
ratio covenant.
Cash General and Administrative Expenses: Cash G&A
expenses is a non-GAAP measure calculated as net general and
administrative costs less share-based compensation. The Company
reports cash G&A expenses because it believes this measure is
commonly used by management, analysts and investors as an indicator
of cost management and operating efficiency on a comparable basis
from period to period. In addition, SilverBow believes cash G&A
expenses are used by analysts and others in valuation, comparison
and investment recommendations of companies in the oil and gas
industry to allow for analysis of G&A spend without regard to
stock-based compensation which can vary substantially from company
to company. Cash G&A expenses should not be considered as an
alternative to, or more meaningful than, total G&A expenses.
The Company has provided forward-looking Cash G&A expenses
estimates; however, SilverBow is unable to provide a quantitative
reconciliation of these forward-looking non-GAAP measures to the
most directly comparable forward-looking GAAP measure because the
items necessary to estimate such forward-looking GAAP measure are
not accessible or estimable at this time without unreasonable
efforts. The reconciling items in future periods could be
significant.
Free Cash Flow and Free Cash Flow per Share: Free cash
flow is calculated as Adjusted EBITDA (defined above) plus (less)
monetized derivative contracts, cash interest expense, capital
expenditures and current income tax (expense) benefit. The Company
believes that free cash flow is useful to investors and analysts
because it assists in evaluating SilverBow's operating performance,
and the valuation, comparison, rating and investment
recommendations of companies within the oil and gas industry. Free
cash flow per share is calculated by taking free cash flow divided
by the number of common shares outstanding of the Company at a
given date. Free cash flow should not be considered an alternative
to net income (loss), operating income (loss), cash flows provided
by (used in) operating activities or any other measure of financial
performance or liquidity presented in accordance with GAAP.
Total Debt to Adjusted EBITDA (Leverage Ratio): Leverage
Ratio is calculated as total debt, defined as long-term debt
excluding unamortized discount and debt issuance costs, divided by
Adjusted EBITDA (defined above) for the most recently completed
12-month period. The Company has provided a forward-looking
Leverage Ratio estimate; however, SilverBow is unable to provide a
quantitative reconciliation of this forward-looking non-GAAP
measure to the most directly comparable forward-looking GAAP
measure because the items necessary to estimate such
forward-looking GAAP measure are not accessible or estimable at
this time without unreasonable efforts. The reconciling items in
future periods could be significant.
Net Debt: Net debt is calculated as the total principal
amount of second lien notes plus borrowings on the Company's Credit
Facility less cash and cash equivalents.
Calculation of Adjusted EBITDA and Free
Cash Flow (Unaudited)
SilverBow Resources, Inc. and Subsidiary
(in thousands, except share amounts)
The below tables provide the calculation
of Adjusted EBITDA and Free Cash Flow for the following periods (in
thousands).
Three Months Ended March 31,
2022
Three Months Ended March 31,
2021
Net Income (Loss)
$
(64,255
)
$
28,380
Plus:
Depreciation, depletion and
amortization
21,154
13,393
Accretion of asset retirement
obligations
99
75
Interest expense
6,557
7,019
Loss (gain) on commodity derivatives,
net
140,242
18,259
Realized gain (loss) on commodity
derivatives, net (1)
(28,201
)
(4,782
)
Income tax expense/(benefit)
(2,754
)
—
Share-based compensation expense
1,047
1,070
Adjusted EBITDA
$
73,889
$
63,414
Plus:
Cash interest expense and bank fees,
net
(5,816
)
(6,424
)
Capital expenditures(2)
(40,358
)
(32,961
)
Current income tax (expense)/benefit
(149
)
—
Free Cash Flow
$
27,566
$
24,029
(1) Amounts relate to settled contracts covering the production
months during the period. (2) Excludes proceeds/(payments) related
to the divestiture/(acquisition) of oil and gas properties and
equipment, outside of regular way land and leasing costs.
Last Twelve Months Ended March
31, 2022
Last Twelve Months Ended March
31, 2021
Net Income (Loss)
$
(5,875
)
$
(275,144
)
Plus:
Depreciation, depletion and
amortization
76,391
54,518
Accretion of asset retirement
obligations
330
344
Interest expense
28,667
29,841
Impairment of oil and gas properties
—
260,342
Loss (gain) on commodity derivatives,
net
245,001
45,241
Realized gain (loss) on commodity
derivatives, net (1)
(96,675
)
22,030
Income tax expense/(benefit)
3,644
22,152
Share-based compensation expense
4,622
4,366
Adjusted EBITDA
$
256,105
$
163,690
Plus:
Cash interest expense and bank fees,
net
(30,317
)
(27,306
)
Capital expenditures(2)
(137,900
)
(77,497
)
Current income tax (expense)/benefit
(335
)
304
Free Cash Flow
$
87,553
$
59,191
Adjusted EBITDA
$
256,105
$
163,690
Amortization of derivative contracts
—
28,605
Pro forma contribution from closed
acquisitions
25,343
—
Adjusted EBITDA for Leverage Ratio
(3)
$
281,448
$
192,295
(1) Amounts relate to settled contracts
covering the production months during the period.
(2) Excludes proceeds/(payments) related
to the divestiture/(acquisition) of oil and gas properties and
equipment, outside of regular way land and leasing costs.
(3) Adjusted EBITDA for Leverage Ratio,
which is calculated in accordance with SilverBow's Credit Facility,
includes pro forma EBITDA contributions reflecting the results of
acquired assets' operations for referenced time periods preceding
the acquired assets' close date. For referenced last twelve month
periods prior to 2022, proceeds from the amortization of previously
unwound derivative contracts are also included in the Adjusted
EBITDA for Leverage Ratio in accordance with the calculation in its
Credit Facility.
Production Volumes & Pricing
(Unaudited)
SilverBow Resources, Inc. and
Subsidiary
Three Months Ended March 31,
2022
Three Months Ended March 31,
2021
Production volumes:
Oil (MBbl) (1)
429
315
Natural gas (MMcf)
15,587
12,624
Natural gas liquids (MBbl) (1)
359
285
Total (MMcfe)
20,319
16,224
Oil, natural gas and natural gas liquids
sales (in thousands):
Oil
$
39,741
$
17,466
Natural gas
77,372
62,914
Natural gas liquids
12,543
6,361
Total
$
129,656
$
86,741
Average realized price:
Oil (per Bbl)
$
92.59
$
55.49
Natural gas (per Mcf)
4.96
4.98
Natural gas liquids (per Bbl)
34.89
22.30
Average per Mcfe
$
6.38
$
5.35
Price impact of cash-settled
derivatives:
Oil (per Bbl)
$
(30.04
)
$
(12.75
)
Natural gas (per Mcf)
(0.84
)
(0.01
)
Natural gas liquids (per Bbl)
(6.11
)
(2.07
)
Average per Mcfe
$
(1.39
)
$
(0.29
)
Average realized price including impact of
cash-settled derivatives:
Oil (per Bbl)
$
62.55
$
42.74
Natural gas (per Mcf)
4.12
4.97
Natural gas liquids (per Bbl)
28.78
20.23
Average per Mcfe
$
4.99
$
5.06
(1) Oil and NGLs are converted at the rate
of one barrel to six Mcfe. Bbl refers to barrels, and MBbl refers
to one thousand barrels. MMcf refers to one million cubic feet.
Second Quarter 2022
Guidance
Guidance
2Q 2022
Production Volumes:
Oil (Bbls/d)
3,850 - 4,050
Natural Gas (MMcf/d)
175 - 185
NGLs (Bbls/d)
3,550 - 3,700
Total Reported Production (MMcfe/d)
219 - 232
% Gas
80%
Product Pricing:
Crude Oil NYMEX Differential ($/Bbl)
($1.50) - $1.50
Natural Gas NYMEX Differential ($/Mcf)
($0.20) - ($0.10)
Natural Gas Liquids (% of WTI)
35% - 39%
Operating Costs & Expenses:
Lease Operating Expenses ($/Mcfe)
$0.45 - $0.49
Transportation & Processing
($/Mcfe)
$0.28 - $0.32
Production Taxes (% of Revenue)
5.0% - 6.0%
Cash G&A, net ($MM)
$3.7 - $4.2
Note: 2Q 2022 guidance reflects standalone
SilverBow only; does not include announced transactions. Updated
guidance will be provided upon closing of the Acquisitions.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220504006027/en/
Jeff Magids Director of Finance & Investor Relations (281)
874-2700, (888) 991-SBOW
SilverBow Resources (NYSE:SBOW)
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