SilverBow Resources Announces Actions Taken in Response to Current Market Conditions
April 13 2020 - 8:30AM
Business Wire
SilverBow Resources, Inc. (NYSE: SBOW) (“SilverBow” or “the
Company”) today provided an update on actions taken in response to
the unprecedented global health and safety events impacting the oil
and gas market.
Sean Woolverton, SilverBow’s Chief Executive Officer, commented,
“The safety of our employees, contractors, and partners in the
communities in which we operate remains our top priority. We have
and will continue to take all necessary actions to ensure the
well-being of our stakeholders.”
Mr. Woolverton continued, “In light of this unforeseeable abrupt
decline in commodity prices, as well as the heightened uncertainty
with respect to the duration of depressed prices, we are taking
prudent steps to protect our balance sheet while also adjusting
capital spend to ensure return thresholds continue to be met. We
continue to preserve optionality in order to respond efficiently
once market conditions show signs of recovery. SilverBow’s
long-term strategy of building a diversified commodity portfolio in
a single basin with a peer-leading cost structure provides us with
many opportunities to quickly adapt to market conditions.
Furthermore, our proactive risk management strategy to hedge
commodity prices in advance of development programs has positioned
us to persevere through a protracted period of low prices.”
Mr. Woolverton concluded, “I want to acknowledge and express how
proud I am of our employees’ dedication and continued optimism
during the challenging time that we find ourselves in.”
The actions announced include:
CAPITAL INVESTMENT
- SilverBow suspended drilling and completions activity until
commodity prices warrant further investment. As such the Company is
now guiding to a 2020 capital program of $80-$95 million, a 55%
reduction at the midpoint from the previous guidance.
- The Company deferred completing and bringing online eight oil
wells until at least the second half of 2020.
- SilverBow is contemplating a pivot to gas development late in
2020 if prices support return thresholds.
PRODUCTION MANAGEMENT
- SilverBow expects first quarter total net production to average
approximately 230 MMcfe/d, with a commodity mix of 79% natural gas,
12% oil, and 9% natural gas liquids.
- During the second half of March, the Company elected to curtail
approximately 35 MMcf/d of net gas production. In April, SilverBow
has elected to curtail a total of 50 MMcf/d of net gas production
and approximately 2,000 Bbls/d of net oil production.
- In light of extremely low commodity prices, SilverBow is
currently assessing the economic merits of curtailing additional
production.
RISK MANAGEMENT
- With the decrease in capital investment, SilverBow elected to
tactically unwind a series of oil derivative contracts in 2020 and
2021 above its expected production, resulting in approximately $38
million of cash inflow in the month of March.
- For the balance of 2020, from April through December, the
Company’s hedge position covers 100% of its existing 2020 oil
volumes at an average price of $53.27 per barrel and 61% of its
existing 2020 gas volumes at an average price of $2.63 per
MMBtu.
- The Company recently added derivative positions, for the period
of January 2021 through March 2021, of 45 MMcf/d at an average
price of $2.68 per MMBtu.
- As of April 9, 2020 and pro forma for the recent hedge
activity, SilverBow’s mark-to-market value of its hedge position
was approximately $41 million.
ACQUISITION & DIVESTITURE UDPATE
- SilverBow recently acquired a private entity with Eagle Ford
assets and entered into a definitive agreement to divest certain
assets located in the Powder River Basin.
- The strategic acquisition adds 10 MMcf/d of net natural gas
production directly offsetting the Company’s existing assets,
bringing SilverBow’s combined acreage to more than 200,000 net
acres in the western portion of the Eagle Ford. The Company has the
opportunity to recognize synergistic upside if natural gas prices
improve in the future.
- The divesture includes an overriding royalty interest in 188
net acres across Campbell, Converse and Niobrara Counties, Wyoming.
The transaction is expected to close during the second
quarter.
FINANCIAL UDPATE
- As of March 31, 2020, SilverBow’s liquidity was $145.6 million,
consisting of $35.6 million of cash and $110.0 million of
availability under the Company’s revolving credit facility.
- SilverBow’s net debt was $454.4 million, calculated as total
long-term debt of $490.0 million less $35.6 million of cash, a 5%
decrease from December 31, 2019.
- The Company expects to generate free cash flow at current strip
pricing for the balance of 2020.
Given the prudent measures currently undertaken and under
consideration to protect SilverBow’s balance sheet and maximize
free cash flow, the Company’s previously issued 2020 guidance
should no longer be relied upon. SilverBow continues to assess a
wide range of further measures to maximize value in the prevailing
commodity price environment, including further curtailments of
certain oil and gas production until prices improve to required
return thresholds. The Company expects to update its detailed
financial and operational guidance in conjunction with its first
quarter earnings release next month.
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 Shale 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.
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 subject to a number
of risks and uncertainties, many of which are beyond our control,
which could cause actual results to differ materially from the
results discussed in the forward-looking statements, including
among other things: oil and natural gas price levels and
volatility; our ability to satisfy our short- or long-term
liquidity needs; our ability to execute our business strategy,
including the success of our drilling and development efforts;
timing, cost and amount of future production of oil and natural
gas; expectations regarding future free cash flow; and other
factors discussed in the Company’s reports filed with the SEC,
including its Annual Report on Form 10-K for the year ended
December 31, 2019 and Quarterly Reports on Form 10-Q filed
thereafter. All statements, other than statements of historical
fact included in this press release, regarding our strategy, future
operations, financial position, future cash flows, estimated
production levels, expected oil and natural gas pricing, estimated
oil and natural gas reserves or the present value thereof, reserve
increases, capital expenditures, budget, projected costs,
prospects, plans and objectives of management are forward-looking
statements.
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. 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. New factors emerge from time to
time, and it is not possible for us to predict all such
factors.
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version on businesswire.com: https://www.businesswire.com/news/home/20200413005144/en/
Jeff Magids Director of Finance & Investor Relations (281)
874-2700, (888) 991-SBOW
SilverBow Resources (NYSE:SBOW)
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