SilverBow Resources, Inc. (NYSE: SBOW) (“SilverBow” or the
“Company”) today announced operating and financial results for the
third quarter 2017. Highlights include:
- Net production averaged 156 million
cubic feet of natural gas equivalent per day (“Mmcfe/d”), exceeding
the high end of guidance
- Oil and gas revenues of $49.0 million,
a 7% increase from second quarter 2017
- Lease Operating expenses of
$0.41/Mmcfe
- Net Income of $12.9 million, or $1.12
per diluted share
- Adjusted EBITDA (a non-GAAP measure) of
$31.1 million, a 15% increase from second quarter 2017
- Acquired an additional ~15,000 net
acres bringing total acreage to approximately 91,400 net acres
- Initial Oro Grande well, the NMC 1H,
supports 14 Bcf type curve; currently completing second well
- Latest Lower Eagle Ford Fasken wells
tracking above 14 Bcf type curve
- Re-engineered seven well program in
Artesia yielding strong performance
- Continued expansion of hedge book
Management Comments
Sean Woolverton, SilverBow’s Chief Executive Officer, commented,
“We continue to make significant progress in transforming SilverBow
into the premier operator in the Eagle Ford gas fairway. We are
delivering on our primary 2017 goals of expanding our inventory of
de-risked, high rate of return drilling locations while generating
strong production and EBITDA growth. Specific to our drilling
inventory expansion, we now have over 20 years of drilling
development locations at our current one rig program. We have
reached this milestone through our strategic leasing program,
adding approximately 28,000 net acres while nearly doubling the
inventory of high rate of return drilling locations since the first
quarter. We now have over 91,000 net acres in the core Eagle Ford
gas fairway. Additionally, through a combination of enhanced well
productivity from more recent completion designs in Artesia and the
Upper Eagle Ford in Fasken and encouraging results from our
successful delineation well in Oro Grande, we have confirmed the
strong returns profile of our future development opportunities.
These results provide SilverBow clear running room for future
production and reserves growth.”
Mr. Woolverton continued, “Supported by our strong base
production, new well productivity, and an acute focus on costs
reductions and efficiencies, daily production and adjusted EBITDA
grew 7% and 15% in the third quarter, respectively, compared to
second quarter 2017 levels. Since the fourth quarter of 2016, we
have grown production by 23%(1) while increasing adjusted EBITDA by
50%. These results highlight our low cost structure and high
performance assets. Additionally, we have initiated a process to
divest of our non-core Olmos production. We believe the resulting
streamlined portfolio should lead to even better long-term returns
and a more efficient organizational structure as the Olmos accounts
for more than 60% of our producing wells but less than 10% of total
production. As we look ahead, our focus shifts towards execution on
our asset base and further driving down our costs as we continue
building a premier position in the Eagle Ford with industry leading
margins.”
OPERATIONS HIGHLIGHTS
During the third quarter 2017, the Company drilled and completed
five wells. Specifically, SilverBow drilled three wells in Fasken
and two wells in Artesia while completing five wells in Artesia.
Through the third quarter of this year the Company has drilled
twenty-two wells and completed nineteen wells. The drilled wells
include twelve in Fasken, seven in Artesia, two in AWP, and one in
Oro Grande. The completed wells include nine in Fasken, seven in
Artesia, two in AWP, and one in Oro Grande. Since the close of the
third quarter, the Company has brought online three wells in
Fasken, including two Upper Eagle Ford wells, and is currently
drilling its first well in Uno Mas.
As previously announced, SilverBow completed its first well in
Oro Grande, the NMC 1H well, earlier in the year. The well had
cumulative production of approximately 940 Mmcfe after ninety
producing days with flowing tubing pressure of over 6,000 psi.
Results to date are supportive of the Company’s internal 14 Bcf
type curve for the area. The Company moved a drilling rig back to
Oro Grande in the third quarter and recently finished drilling the
NMC 2H with plans to drill another well in early 2018.
SilverBow’s most recent three well pad drilled in Fasken during
the third quarter included one well targeting the Lower Eagle Ford
and two wells targeting the Upper Eagle Ford. This pad was
completed early in the fourth quarter and utilized 300 foot frac
stage spacing and 1,500 pounds of proppant per foot of lateral.
Early results from this three well pad are encouraging and the
Company plans on reporting more details surrounding its performance
on the fourth quarter earnings conference call.
The Company continued its liquids-rich drilling program in
Artesia by deploying the latest generation of drilling and
completion technology. Earlier wells in this area were drilled
without the benefit of processed and evaluated 3-D seismic, target
window identification, and modern completion design tied to longer
laterals. SilverBow has completed seven wells in northern Artesia
year to date, including five in the third quarter, with lateral
lengths ranging from 6,000 feet to 11,000 feet in accordance with
lease configurations. These wells are currently tracking in line
with their 1,500 Mboe type curve.
PRODUCTION VOLUMES, OPERATING COSTS, AND REALIZED
PRICES
SilverBow’s total net production for the third quarter averaged
approximately 156 Mmcfe/d, which was above the high end of
guidance. Production mix during the third quarter consisted of
approximately 82% natural gas, 11% NGLs, and 7% oil.
Lease operating expenses during the third quarter of $0.41/Mmcfe
came in better than the Company’s guidance range of $0.47/Mmcfe to
$0.48/Mmcfe primarily driven by compression optimization and labor
force reductions at the field level.
Transportation and processing expenses came in at $0.34/Mmcfe
while production and ad valorem taxes were 5.1% of oil and gas
revenues for third quarter.
General and administrative costs of $0.42/Mcfe compared
favorably to second quarter 2017 levels of $0.51/Mmcfe.
The Company’s average realized natural gas price excluding the
effect of hedging was $3.01 per Mcf compared with $3.16 per Mcf in
the second quarter of 2017. The average realized crude oil selling
price excluding the effect of hedging was $46.93 per barrel in the
third quarter of 2017, up slightly from $46.82 per barrel in the
second quarter of 2017. The average realized NGL selling price in
the third quarter of 2017 was $21.67 per barrel versus $18.49 per
barrel in the second quarter of 2017.
FINANCIAL RESULTS & GUIDANCE
The Company reported total oil and gas revenues of $49.0 million
for the third quarter 2017 which increased 7% compared to second
quarter 2017 levels. On a GAAP basis, the Company reported net
income of $12.9 million for the third quarter, which
includes a loss on the value of the Company's hedge portfolio of
$1.6 million.
The Company reported Adjusted EBITDA of $31.1 million.
Adjusted EBITDA is a non-GAAP financial measure. Please see the
tables included with today's news release for a reconciliation of
net income to Adjusted EBITDA.
Capital expenditures incurred during the third quarter totaled
$60.4 million inclusive of approximately $13 million spent on
leasing.
The Company is expanding its 2017 budget to $205-$215 million to
reflect the success of its strategic leasing program which has
successfully added an additional 28,000 acres and 300 locations to
the portfolio since the first quarter of 2017. The Company also
guided for fourth quarter production of 160 - 171Mmcfe/d yielding
full year 2017 production of 150 - 152 Mmcfe/d. Additional detail
concerning the Company's fourth quarter 2017 and full year
financial and operational guidance can be found in the table
included with today’s news release and the Corporate Presentation
uploaded to the Investor Relations section of the Company’s website
before the conference call.
HEDGING UPDATE
Hedging continues to be an important element of SilverBow’s
strategy. The Company maintains an active hedging philosophy to
provide predictable cash flows while still allowing for flexibility
in capturing increases in prices. SilverBow has approximately 65%
of total production volumes hedged for the fourth quarter using the
mid-point of production guidance. The Company continues to layer on
additional hedges in 2018, 2019, and 2020. Please see the Company’s
Form 10-Q filing, which the Company expects to be filed on Tuesday,
November 7, 2017, for a detailed summary of derivative
contracts.
CAPITAL STRUCTURE AND LIQUIDITY
The Company had liquidity of approximately $90
million as of September 30, 2017, primarily consisting of
availability on the Company’s $330 million bank credit facility.
The Company is currently in the process of its Fall borrowing base
redetermination; the preliminary commitments of which provide for a
$40 million increase from $330 million to $370 million.
As of November 1, 2017, the Company had 11.6 million total
common shares outstanding.
CONFERENCE CALL & UPDATED INVESTOR PRESENTATION
SilverBow will host a conference call for investors
on Tuesday, November 7, 2017, at 10:00 a.m. Central
Time (11:00 a.m. Eastern Time). Interested investors can
listen to the call by dialing 1-877-420-2751 (U.S.) or
1-442-275-1680 (International) and requesting SilverBow’s Third
Quarter 2017 Earnings Conference Call or by visiting our
website.
A simultaneous webcast of the call may be accessed over the
internet by visiting our website at www.sbow.com, clicking on “Investor Relations” and
“Events and Presentations” and then clicking on the “Third Quarter
2017 Earnings Conference Call” link. The webcast will be archived
for replay on the SilverBow website for 14 days.
Additionally, an updated Corporate Presentation will be uploaded
to the Investor Relations section of the Company's website before
the conference call.
ABOUT SILVERBOW RESOURCES, INC.
SilverBow Resources (NYSE: SBOW) is a Houston-based energy
company actively engaged in the exploration, development, and
production of oil and gas from the Eagle Ford Shale in South Texas.
With almost 30 years of history operating in South Texas, the
Company possesses a significant understanding of regional
reservoirs which we leverage to assemble high quality drilling
inventory while continuously enhancing our operations to maximize
returns on capital invested. For more information, please visit
www.sbow.com.
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.
The opinions, forecasts, projections, or other statements other
than statements of historical fact, are forward-looking statements.
Although the Company believes that the expectations reflected in
such forward-looking statements are reasonable, no assurances can
be given that such expectations will prove to have been correct.
Certain risks and uncertainties inherent in the Company’s business
are set forth in the filings of SilverBow Resources, Inc. with the
Securities and Exchange Commission.
(1) Excludes assets sold in 4Q16
(Financial Highlights to Follow)
Condensed Consolidated Balance
Sheets
SilverBow Resources and Subsidiaries (in
thousands, except share amounts)
Successor September 30, 2017
December 31, 2016 (Unaudited) ASSETS
Current Assets: Cash and cash equivalents $ 12,861 $ 303 Accounts
receivable, net 22,222 17,490 Other current assets 5,155
3,686 Total Current Assets 40,238 21,479
Property and Equipment: Property and Equipment, full cost
method, including $52,075 and $33,354 of unproved property costs
not being amortized at the end of each period 668,398 517,074 Less
– Accumulated depreciation, depletion, amortization &
impairment (202,211 ) (169,879 ) Property and Equipment, Net
466,187 347,195 Other Long-Term Assets 9,905
8,625 Total Assets $ 516,330 $ 377,299
LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities:
Accounts payable and accrued liabilities $ 41,998 $ 56,257 Accrued
capital costs 19,721 11,954 Accrued interest 1,635 1,721
Undistributed oil and gas revenues 10,249 9,192 Total
Current Liabilities 73,603 79,124 Long-Term
Debt 250,000 198,000 Asset Retirement Obligations 24,174 22,291
Other Long-Term Liabilities 2,431 1,829 Commitments and
Contingencies (Note 10) Stockholders' Equity: Preferred
stock, $.01 par value, 10,000,000 shares authorized, none issued —
— Common stock, $.01 par value, 40,000,000 shares authorized,
11,595,020 and 10,076,059 shares issued and 11,551,468 and
10,053,574 shares outstanding, respectively 116 101 Additional
paid-in capital 276,753 232,917 Treasury stock, held at cost,
43,552 and 22,485 shares (1,293 ) (675 ) Accumulated deficit
(109,454 ) (156,288 ) Total Stockholders’ Equity 166,122
76,055 Total Liabilities and Stockholders’ Equity $ 516,330
$ 377,299
Condensed Consolidated Statements of
Operations (Unaudited)
SilverBow Resources and Subsidiaries (in
thousands, except per-share amounts)
Successor
Three Months EndedSeptember 30,
2017
Three Months EndedSeptember 30,
2016
Revenues: Oil and gas sales $ 49,019 $ 47,959 Operating
Expenses: General and administrative, net 6,031 11,691
Depreciation, depletion, and amortization 11,832 13,287 Accretion
of asset retirement obligations 582 1,099 Lease operating costs
5,831 9,481 Transportation and gas processing 4,921 4,883 Severance
and other taxes 2,479 2,683 Total Operating Expenses
31,676 43,124 Operating Income (Loss) 17,343
4,835 Non-Operating Income (Expense) Net gain (loss) on
commodity derivatives (1,603 ) 2,603 Interest expense, net (2,868 )
(5,880 ) Reorganization items, net — (1,193 ) Other income
(expense), net 12 29 Income (Loss) Before
Income Taxes 12,884 394 Provision (Benefit) for Income Taxes
— — Net Income (Loss) $ 12,884 $ 394
Per Share Amounts- Basic: Net Income (Loss) $
1.12 $ 0.04 Diluted: Net Income (Loss) $ 1.12 $ 0.04
Weighted Average Shares Outstanding - Basic 11,531 10,000
Weighted Average Shares Outstanding - Diluted 11,545 10,361
Condensed Consolidated Statements of
Cash Flows (Unaudited)
SilverBow Resources and Subsidiaries (in
thousands)
Successor
Predecessor
Nine Months
Ended
September 30,
2017
Period from
April 23, 2016
through
September 30,
2016
Period from
January 1,
2016 through
April 22, 2016
Cash Flows from Operating Activities: Net income (loss) $ 46,834 $
(149,207 ) $ 851,611
Adjustments to reconcile net income (loss)
to net cash provided
by (used in) operating activities-
Depreciation, depletion, and amortization 32,375 26,621 20,439
Write-down of oil and gas properties — 133,496 77,732 Accretion of
asset retirement obligations 1,722 1,931 1,610 Share-based
compensation expense 4,538 3,132 886 Loss (gain) on derivatives
(14,465 ) 7,308 — Cash settlements on derivatives (2,503 ) (1,100 )
— Settlements of asset retirement obligations (2,245 ) (1,919 )
(848 ) Write-down of debt issuance cost 2,401 — — Reorganization
items (non-cash) — — (977,696 ) Other 760 1,721 229 Change in
operating assets and liabilities- (Increase) decrease in accounts
receivable and other current assets (3,884 ) 14,669 (5,474 )
Increase (decrease) in accounts payable and accrued liabilities
1,605 (8,283 ) (9,647 ) Increase (decrease) in accrued interest (86
) 1,041 (308 ) Net Cash Provided by (Used in) Operating
Activities 67,052 29,410 (41,466 ) Cash Flows from
Investing Activities: Additions to property and equipment (141,636
) (36,794 ) (24,530 ) Proceeds from the sale of property and
equipment 653 594 48,661 Net Cash Provided by
(Used in) Investing Activities (140,983 ) (36,200 ) 24,131
Cash Flows from Financing Activities: Proceeds from bank borrowings
349,000 49,000 328,000 Payments of bank borrowings (297,000 )
(48,000 ) (324,900 ) Net proceeds from issuances of common stock
39,180 — — Purchase of treasury shares (618 ) — (4 ) Payments of
debt issuance costs (4,073 ) (502 ) (6,482 ) Net Cash Provided by
(Used in) Financing Activities 86,489 498 (3,386 )
Net increase (decrease) in Cash and Cash Equivalents 12,558 (6,292
) (20,721 ) Cash and Cash Equivalents at Beginning of Period 303
8,739 29,460 Cash and Cash Equivalents at End
of Period $ 12,861 $ 2,447 $ 8,739
SilverBow Resources, Inc.Non-GAAP
Financial MeasuresReconciliation of Net Income (GAAP) to
Adjusted EBITDA (Non-GAAP)(In
thousands)(Unaudited)
We present adjusted EBITDA attributable to common stockholders
(“Adjusted EBITDA”) in addition to our reported net income (loss)
in accordance with U.S. GAAP. Adjusted EBITDA is a non-GAAP
financial measure that is used as a supplemental financial measure
by our management and by external users of our financial
statements, such as investors, commercial banks and others, to
assess our operating performance as compared to that of other
companies in our industry, without regard to financing methods,
capital structure or historical costs basis. It is also used to
assess our ability to incur and service debt and fund capital
expenditures.
Our 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 U.S. GAAP.
Our Adjusted EBITDA may not be comparable to similarly titled
measures of another company because all companies may not calculate
Adjusted EBITDA in the same manner.
Successor
Three Months Ended
September 30, 2017
Three Months Ended
September 30, 2016
Net Income (Loss) $12,884 $394 Plus:
Depreciation, depletion and amortization 11,832 13,287 Accretion of
asset retirement obligations 582 1,099 Interest expense 2,868 5,880
Impairment of oil and gas properties — — Reorganization items —
1,193 Derivative (gain)/loss 1,603 (2,603) Derivative cash
settlements collected/(paid) (1) (63) (957) Share-based
compensation expense 1,403 2,942
Adjusted
EBITDA $31,109 $21,235
(1) This includes accruals for settled
contracts covering commodity deliveries during the period where the
actual
cash settlements occur outside of the
period.
Production Volumes & Pricing
(Unaudited)
SilverBow Resources and Subsidiaries
Three Months Ended
September 30, 2017
(Successor)
Three Months Ended
September 30, 2016
(Successor)
Production volumes: Oil (MBbl) (1) 170 293 Natural
gas (MMcf) 11,723 11,494 Natural gas liquids (MBbl) (1) 267
255 Total (MMcfe) 14,346
14,780 Oil, Natural gas and Natural gas liquids
sales: Oil $ 7,996 $ 12,664 Natural gas 35,242 31,120 Natural gas
liquids 5,780 4,176 Total $ 49,019
$ 47,959 Average realized price:
Oil $ 46.93 $ 43.27 Natural gas 3.01 2.71 Natural gas liquids 21.67
16.38 Total $ 3.42
$ 3.24 Price impact of cash-settled derivatives: Oil
$ (0.02 ) $ 1.63 Natural gas (0.01 ) (0.12 ) Natural gas liquids —
— Total $ (0.01 ) $ (0.06
) Average realized price including cash settled derivatives:
Oil $ 46.91 $ 44.91 Natural gas 3.00 2.58 Natural gas liquids 21.67
16.38 Total $ 3.41
$ 3.18 (1) Oil and natural gas liquids are converted
at the rate of one barrel of oil equivalent to six Mcfe
Fourth Quarter & Full Year 2017
Guidance
Guidance
4Q 2017
FY 2017 Production Volumes: Oil (Bbls/d) 2,100
- 2,225 1,780 - 1,810 NGLs (Bbls/d) 3,100 - 3,500 2,700 - 2,800
Natural Gas (Mmcf/d) 129 - 137
123 - 125 Million Cubic Feet of Gas Equivalent
(Mmcfe/d) 160 - 171
150 - 152
Operating Costs & Expenses
: Lease Operating Expense ($/Mcfe) $0.38 - $0.42 $0.40 - $0.41
Transportation & Processing Expense ($/Mcfe) $0.35 - $0.37
$0.35 - $0.36 Production & Ad Val Taxes (% of O&G Revenue)
4.5% - 5.0% 4.5% - 5.0% Cash G&A, net (in millions) $4.9 - $5.5
$23.0 - $23.6 DD&A Expense ($/Mcfe) $0.82 - $0.87 $0.80 - $0.82
Cash Interest Expense ($MM) $3.0 N/A
Product Pricing :
Natural Gas NYMEX Differential (per Mcf) ($0.03 - $0.08) N/A Crude
Oil NYMEX Differential (per Bbl) $0.50 - $1.50 N/A Natural Gas
Liquids (% of WTI) 41% - 43% N/A
View source
version on businesswire.com: http://www.businesswire.com/news/home/20171106006559/en/
SilverBow Resources, Inc.Doug Atkinson, CFA, (281) 874-2700,
(800) 777-2412Senior Manager - Finance & Investor Relations
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