SilverBow Resources, Inc. (NYSE: SBOW) (“SilverBow” or the
“Company”) today announced operating and financial results for the
second quarter of 2020. Highlights include:
- Net production averaged approximately 142 million cubic feet of
natural gas equivalent per day (“MMcfe/d”), above the high end of
guidance
- Returned approximately 50 MMcfe/d of previously curtailed net
production to sales in June; approximately 50 MMcfe/d of net
production remains shut-in
- Closed divestiture of non-core Wyoming assets for approximately
$5 million of total proceeds
- Reported a net loss of $306 million primarily due to a $260
million non-cash impairment write-down on a pre-tax basis, Adjusted
EBITDA of $26 million and free cash flow ("FCF") of $14 million1.
Adjusted EBITDA and FCF are non-GAAP measures defined and
reconciled in the tables included with today's news release
- Anticipate $40-$50 million of FCF (a non-GAAP measure) for full
year 2020, inclusive of a gas development program planned for the
fourth quarter
- $20 million reduction in revolver borrowings compared to prior
quarter; leverage ratio2 of 2.4x and liquidity of $67 million at
quarter-end
- Active hedging program to combat price volatility; primed for
gas development in late 2020
MANAGEMENT COMMENTS
Sean Woolverton, SilverBow’s Chief Executive Officer, commented,
"Over the course of the second quarter, the SilverBow team was
focused on production management, cost reduction initiatives and
optimizing multiple playbooks for various commodity price
scenarios. The second quarter will mark the low point in our
production profile for 2020. Looking forward to the remainder of
the year, we will be returning the remainder of our curtailed
volumes to sales and are currently in the process of bringing
online our inventory of drilled but uncompleted wells ("DUCs") in
the third quarter. Our plan is to restart our drilling program
during the fourth quarter of 2020, targeting the development of our
high rate of return gas projects. Over the next 18 months, our goal
remains to maximize our free cash flow generation and protect our
balance sheet. We are on track to achieve our stated objective of
$40-$50 million of free cash flow for full year 2020, inclusive of
the additional gas development expenditures we have allocated to
our capital budget. The planned increase in capital expenditures in
the fourth quarter of 2020 bolsters our preliminary 2021 free cash
flow target of $20-$40 million at current strip prices, with
potential tailwinds from higher gas prices this winter and through
next year. Our visibility into cash flows over the near-term is
supported by our hedged position on oil, which covers a substantial
portion of our forecasted oil production through year-end 2021, as
well as our gas hedging strategy, which has utilized a heavier
weighting of two-way collars next year and intentionally preserves
meaningful upside exposure to any improvement in 2021 gas strip
from current levels. Additionally, at the midpoint of our
production guidance, we would reach quarterly highs on our oil
production combined with rising gas production rates as we exit the
year. Moving into 2021, we have the flexibility to allocate capital
across a well-balanced portfolio of gas and liquids development
locations."
Mr. Woolverton commented further, "I want to thank our
employees, contractors and vendors who continue to find innovative
solutions to drive value amidst ongoing disruptions to our daily
lives. As I have stated before, our employees are our greatest
asset. We have an established track record of executing on our
goals, and continue to deploy a winning strategy that is
returns-focused and risk-mitigated. As the economy starts to find
equal footing, we expect natural gas prices to increase. Our
business strategy remains the same. Specifically, we focus on
owning high-quality assets with proximity to premium markets,
maintaining a balanced commodity mix, and driving shareholder
returns through our strong margins and low-cost structure.
Proactive balance sheet management and operational agility will
remain critical in managing the near term. We believe that our
success in identifying attractive acquisition and divestiture
opportunities and locking in returns through our active hedging
program will continue to differentiate SilverBow from its peers. We
are well positioned to capitalize on an expanding merger and
acquisition landscape over the next several years, creating a
favorable risk-reward for stakeholders with the ultimate goal of
sustainable growth in shareholder returns.”
OPERATIONS HIGHLIGHTS
During the second quarter of 2020, SilverBow had essentially no
drilling and completion ("D&C") activity as a result of
releasing its super spec rig at the beginning of April. In addition
to temporarily suspending its D&C program, the Company
curtailed an average of 57 million cubic feet per day ("MMcf/d") of
net natural gas and 1,930 barrels per day ("Bbls/d") of net oil
production during the quarter. SilverBow commenced voluntary well
shut-ins in March, and increased the amount of shut-in production
in April. Working with our midstream partners, approximately 2,750
Bbls/d of curtailed net oil production was returned to sales ahead
of schedule in June, driving oil and natural gas liquids ("NGL")
volumes above the second quarter guidance range. As the year
unfolds, the Company will continue assessing optimal production
timing in response to the evolving commodity price environment.
The wells that have been returned to production to-date have not
experienced degradation and have exhibited higher production rates
compared to pre-shut-in levels. The Company is analyzing the
performance of these wells in real-time to optimize choke
management strategy and maximize production profiles and estimated
ultimate recoveries.
On the expense management front, SilverBow is actively engaging
in further cost savings initiatives, primarily related to
chemicals, rentals and other ancillary services. The Company values
its strong vendor relationships and is working together with them
to ensure mutual success. As it pertains to SilverBow's recent
acquisition, the Company has already identified a number of cost
saving measures primarily through the use of existing
infrastructure. SilverBow continues to analyze the subsurface
characteristics of the new acreage to plan for future capital
investment.
Consistent with the Company's strategy to align production start
dates with higher prices, SilverBow intends to bring eight wells in
the McMullen Oil area online over the second half of 2020. The
Company secured favorable service pricing for the five wells it
intends to complete in the third quarter, driving down capital
costs by approximately 30% compared to initial estimates.
SilverBow's procurement initiatives are laying the groundwork for
the resumption of the Company's drilling program in the fourth
quarter.
PRODUCTION VOLUMES, OPERATING COSTS AND REALIZED
PRICES
SilverBow's total net production for the second quarter averaged
approximately 142 MMcfe/d. Production mix for the second quarter
consisted of approximately 82% natural gas, 10% oil and 8% NGL.
Natural gas comprised 73% of total oil and gas sales for the second
quarter, compared to 59% in the first quarter of 2020.
Lease operating expenses ("LOE") were $0.39 per Mcfe for the
second quarter. After deducting $1.2 million of non-cash
compensation expense, cash general and administrative costs were
$5.0 million for the second quarter, with a per unit cash cost of
$0.39 per Mcfe. Transportation and processing expenses ("T&P")
came in at $0.35 per Mcfe and production and ad valorem taxes were
8.2% of oil and gas revenue for the second quarter. Total
production expenses, which include LOE, T&P and production
taxes, were $0.90 per Mcfe for the quarter. The Company's all-in
cash operating expenses for the quarter, which includes cash
general and administrative costs, were $1.29 per Mcfe.
SilverBow continues to benefit from strong basis pricing in the
Eagle Ford, while recent conditions have impacted historical oil
averages. Crude oil and natural gas realizations in the second
quarter were 86% of West Texas Intermediate ("WTI") and 99% of
Henry Hub, respectively, excluding hedging. The Company’s average
realized natural gas price, excluding the effect of hedging, was
$1.70 per thousand cubic feet of natural gas ("Mcf") compared to
$2.66 per Mcf in the second quarter of 2019. The average realized
crude oil selling price, excluding the effect of hedging, was
$23.82 per barrel compared to $61.60 per barrel in the second
quarter of 2019. The average realized NGL selling price in the
quarter was $9.49 per barrel (34% of WTI benchmark) compared to
$14.53 per barrel (24% of WTI benchmark) in the second quarter of
2019.
FINANCIAL RESULTS
SilverBow reported total oil and gas sales of $24.8 million for
the second quarter. On a GAAP basis, the Company reported a net
loss of $306.0 million for the second quarter. Due to the effects
of pricing and timing of projects, SilverBow reported a non-cash
impairment write-down, on a pre-tax basis, of $260.3 million on the
Company's oil and natural gas properties in the second quarter.
Additionally, included in the second quarter’s net loss is an
unrealized loss on the value of the SilverBow's derivative
contracts of $26.5 million and a $22.4 million net tax
provision.
For the second quarter, SilverBow generated Adjusted EBITDA (a
non-GAAP measure) of $26.0 million and FCF (a non-GAAP measure) of
$14.0 million.
At quarter-end, the Company's net debt was $463.4 million,
calculated as total long-term debt of $470.0 million less $6.6
million of cash, a $14.3 million reduction compared to year-end
2019.
Capital expenditures during the second quarter, excluding
acquisition and divestiture activity, totaled $4.8 million on an
accrual basis.
2020 GUIDANCE AND OUTLOOK
Third Quarter:
The third quarter marks the return to sales of the majority of
the previously curtailed volumes and the completion of five DUCs.
For the third quarter, SilverBow is guiding for estimated
production of 173-180 MMcfe/d, with natural gas volumes expected to
comprise 125-130 MMcf/d, although additional curtailments
necessitated by storage constraints, commodity prices or other
impacts from the COVID-19 pandemic could result in lower third
quarter production. Regardless of commodity prices, the Company
carefully considers the production economics and the net benefit to
its borrowing base and its financials before committing to future
capital investment.
Full Year:
For the full year 2020, SilverBow increased the midpoint of its
2020 capital budget by $12.5 million, with a revised range of
$95-$105 million. The Company plans to add a rig in the fourth
quarter and commence a nine-well gas development program in Webb
County. For the full year, SilverBow is guiding to a production
range of 176-184 MMcfe/d with natural gas volumes expected to
comprise 135-140 MMcf/d. Additional curtailments necessitated by
storage constraints, commodity prices or other impacts from the
COVID-19 pandemic could result in lower full year production and
adversely affect the Company's ability to achieve FCF and other
guidance. SilverBow is reaffirming its FCF target of $40-$50
million for the full year, inclusive of the additional D&C
activity planned for the fourth quarter. This gas development
project in late 2020 accelerates the Company's ability to generate
approximately $20-$40 million of free cash flow3 in 2021 while
maintaining upside to higher gas prices by utilizing more two-way
collars in its hedge strategy.
Additional detail concerning SilverBow's third quarter and full
year 2020 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.
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 preserves
exposure to higher commodity prices. In conjunction with unwinding
oil derivative contracts in 2020 and 2021, SilverBow is amortizing
the $38 million of cash inflow it received in discreet amounts for
each month over the same time period. The amortized hedge gains
will factor into the Company's calculation of Adjusted EBITDA for
covenant compliance purposes through the end of 2021.
As of July 31, 2020, the Company had 67% of total estimated
production volumes hedged for the remainder of 2020, using the
midpoint of production guidance. For the remainder of 2020,
SilverBow has 87 MMcf/d hedged at an average price of $2.60 per
million British thermal units ("MMBtu") and 4,811 Bbls/d of oil
hedged at an average price of $45.34 per barrel. For 2021, the
Company has 67 MMcf/d hedged at an average price of $2.34 per MMBtu
and 3,364 Bbls/d of oil hedged at an average price of $45.19 per
barrel. Notably, SilverBow's hedges are a combination of swaps and
collars with the weighted average price factoring in the floor. As
of July 31, 2020, the Company's mark-to-market value of its hedge
portfolio was $11.8 million.
Please see SilverBow's Form 10-Q filing for the second quarter
of 2020, which the Company expects to file on Wednesday, August 5,
2020, for a detailed summary of its derivative contracts.
CAPITAL STRUCTURE AND LIQUIDITY
As of June 30, 2020, SilverBow's liquidity position was $66.6
million, consisting of $6.6 million of cash and $60.0 million of
availability under the Company’s credit facility. SilverBow’s net
debt was $463.4 million, calculated as total long-term debt of
$470.0 million less $6.6 million of cash, a 3% decrease from
December 31, 2019. As of July 31, 2020, SilverBow had 11.9 million
total common shares outstanding.
CONFERENCE CALL AND UPDATED INVESTOR PRESENTATION
SilverBow will host a conference call for investors on
Wednesday, August 5, 2020, at 9:00 a.m. Central Time (10:00 a.m.
Eastern Time). Investors and participants can register for the call
in advance by visiting
http://www.directeventreg.com/registration/event/7269448. After
registering, instructions and dial-in information will be provided
on how to join the call.
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 “Second Quarter 2020 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 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: the severity and duration of world health
events, including the COVID-19 pandemic, related economic
repercussions and the resulting severe disruption in the oil and
gas industry and negative impact on demand for oil and gas, which
is negatively impacting our business; the current significant
surplus in the supply of crude oil and actions by the members of
the Organization of the Petroleum Exporting Countries (“OPEC”) and
Russia (together with OPEC and other allied producing countries,
“OPEC+”) with respect to oil production levels and announcements of
potential changes in such levels, including the ability of the
OPEC+ countries to agree on and comply with supply limitations;
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; shut-in or curtailment of production due to decreases
in available storage capacity or other factors; 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
Securities and Exchange Commission ("SEC"), including its Annual
Report on Form 10-K for the year ended December 31, 2019 and
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K
filed thereafter. All statements, other than historical facts
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 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.
(Footnotes)
1 Free cash flow ("FCF") is a non-GAAP financial measure.
Definitions of non-GAAP financial measures and reconciliations of
non-GAAP financial measures to the closest GAAP-based financial
measures appear at the end of this release.
2 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.
3 A forward-looking estimate of net income (loss) is not
provided with the forward-looking estimate of FCF (a non-GAAP
measure) because the items necessary to estimate net income (loss)
are not accessible or estimable at this time.
(Financial Highlights to Follow)
Condensed Consolidated Balance Sheets
(Unaudited)
SilverBow Resources, Inc. and Subsidiaries
(in thousands, except share amounts)
June 30, 2020
December 31, 2019
ASSETS
Current Assets:
Cash and cash equivalents
$
6,610
$
1,358
Accounts receivable, net
23,572
36,996
Fair value of commodity derivatives
20,822
12,833
Other current assets
3,028
2,121
Total Current Assets
54,032
53,308
Property and Equipment:
Property and equipment, full cost method,
including $30,043 and $41,201, respectively, of unproved property
costs not being amortized at the end of each period
1,303,551
1,247,717
Less – Accumulated depreciation,
depletion, amortization & impairment
(773,836
)
(380,728
)
Property and Equipment, Net
529,715
866,989
Right of Use Assets
7,586
9,374
Fair Value of Long-Term Commodity
Derivatives
4,679
3,854
Deferred Tax Asset
—
22,669
Other Long-Term Assets
2,022
3,622
Total Assets
$
598,034
$
959,816
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current Liabilities:
Accounts payable and accrued
liabilities
$
15,800
$
39,343
Fair value of commodity derivatives
4,248
6,644
Accrued capital costs
5,436
17,889
Accrued interest
1,257
1,397
Current lease liability
5,972
6,707
Undistributed oil and gas revenues
5,916
9,166
Total Current Liabilities
38,629
81,146
Long-Term Debt, Net
464,390
472,900
Non-Current Lease Liability
1,778
2,813
Deferred Tax Liabilities
—
1,582
Asset Retirement Obligations
4,312
4,055
Fair Value of Long-Term Commodity
Derivatives
2,412
1,613
Other Long-Term Liabilities
162
—
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, 12,049,810 and 11,895,032 shares issued,
respectively, and 11,933,684 and 11,806,679 shares outstanding,
respectively
120
119
Additional paid-in capital
295,479
292,916
Treasury stock, held at cost, 116,126 and
88,353 shares, respectively
(2,368
)
(2,282
)
(Accumulated deficit) Retained
earnings
(206,880
)
104,954
Total Stockholders’ Equity
86,351
395,707
Total Liabilities and Stockholders’
Equity
$
598,034
$
959,816
Condensed Consolidated Statements of
Operations (Unaudited)
SilverBow Resources, Inc. and Subsidiaries
(in thousands, except per-share amounts)
Three Months Ended June 30,
2020
Three Months Ended June 30,
2019
Revenues:
Oil and gas sales
$
24,846
$
74,703
Operating Expenses:
General and administrative, net
6,180
6,624
Depreciation, depletion, and
amortization
13,716
24,029
Accretion of asset retirement
obligations
88
86
Lease operating costs
5,000
5,035
Workovers
—
(127
)
Transportation and gas processing
4,554
6,728
Severance and other taxes
2,037
3,950
Write-down of oil and gas properties
260,342
—
Total Operating Expenses
291,917
46,325
Operating Income (Loss)
(267,071
)
28,378
Non-Operating Income (Expense)
Gain (loss) on commodity derivatives,
net
(8,458
)
24,925
Interest expense, net
(8,026
)
(9,306
)
Other income (expense), net
(1
)
(28
)
Income (Loss) Before Income Taxes
(283,556
)
43,969
Provision (Benefit) for Income Taxes
22,420
(20,735
)
Net Income (Loss)
$
(305,976
)
$
64,704
Per Share Amounts
Basic: Net Income (Loss)
$
(25.69
)
$
5.51
Diluted: Net Income (Loss)
$
(25.69
)
$
5.49
Weighted-Average Shares Outstanding -
Basic
11,910
11,746
Weighted-Average Shares Outstanding -
Diluted
11,910
11,780
Condensed Consolidated Statements of
Operations (Unaudited)
SilverBow Resources, Inc. and Subsidiaries
(in thousands, except per-share amounts)
Six Months Ended June 30,
2020
Six Months Ended June 30,
2019
Revenues:
Oil and gas sales
$
78,222
$
146,768
Operating Expenses:
General and administrative, net
12,093
12,900
Depreciation, depletion, and
amortization
37,156
45,834
Accretion of asset retirement
obligations
173
168
Lease operating costs
10,812
9,567
Workovers
—
519
Transportation and gas processing
11,197
13,135
Severance and other taxes
5,001
7,266
Write-down of oil and gas properties
355,948
—
Total Operating Expenses
432,380
89,389
Operating Income (Loss)
(354,158
)
57,379
Non-Operating Income (Expense)
Gain (loss) on commodity derivatives,
net
79,829
20,903
Interest expense, net
(16,433
)
(18,065
)
Other income (expense), net
107
37
Income (Loss) Before Income Taxes
(290,655
)
60,254
Provision (Benefit) for Income Taxes
21,179
(20,503
)
Net Income (Loss)
$
(311,834
)
$
80,757
Per Share Amounts
Basic: Net Income (Loss)
$
(26.28
)
$
6.89
Diluted: Net Income (Loss)
$
(26.28
)
$
6.85
Weighted-Average Shares Outstanding -
Basic
11,868
11,727
Weighted-Average Shares Outstanding -
Diluted
11,868
11,786
Condensed Consolidated Statements of
Cash Flows (Unaudited)
SilverBow Resources, Inc. and Subsidiaries
(in thousands)
Six Months Ended June 30,
2020
Six Months Ended June 30,
2019
Cash Flows from Operating Activities:
Net income (loss)
$
(311,834
)
$
80,757
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating activities
Depreciation, depletion, and
amortization
37,156
45,834
Write-down of oil and gas properties
355,948
—
Accretion of asset retirement
obligations
173
168
Deferred income taxes
21,087
(20,732
)
Share-based compensation
2,437
3,339
(Gain) Loss on derivatives, net
(79,829
)
(20,903
)
Cash settlement (paid) received on
derivatives
67,496
4,381
Settlements of asset retirement
obligations
(15
)
(47
)
Write down of debt issuance cost
459
—
Other
1,814
1,160
Change in operating assets and
liabilities
(Increase) decrease in accounts receivable
and other current assets
14,293
13,411
Increase (decrease) in accounts payable
and accrued liabilities
(10,137
)
(6,928
)
Increase (decrease) in income taxes
payable
92
—
Increase (decrease) in accrued
interest
(140
)
(180
)
Net Cash Provided by (Used in) Operating
Activities
99,000
100,260
Cash Flows from Investing Activities:
Additions to property and equipment
(85,594
)
(174,138
)
Acquisition of oil and gas properties
(3,394
)
—
Proceeds from the sale of property and
equipment
4,752
(96
)
Payments on property sale obligations
(426
)
(2,840
)
Net Cash Provided by (Used in) Investing
Activities
(84,662
)
(177,074
)
Cash Flows from Financing Activities:
Proceeds from bank borrowings
50,000
227,000
Payments of bank borrowings
(59,000
)
(149,000
)
Purchase of treasury shares
(86
)
(318
)
Net Cash Provided by (Used in) Financing
Activities
(9,086
)
77,682
Net Increase (Decrease) in Cash and Cash
Equivalents
5,252
868
Cash and Cash Equivalents at Beginning of
Period
1,358
2,465
Cash and Cash Equivalents at End of
Period
$
6,610
$
3,333
Supplemental Disclosures of Cash Flow
Information:
Cash paid during period for interest, net
of amounts capitalized
$
15,006
$
17,128
Changes in capital accounts payable and
capital accruals
$
(28,618
)
$
(16,521
)
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.
Total Cash Operating Expenses: Total Cash Operating
Expenses is calculated as lease operating expenses plus
transportation and processing expenses plus production taxes plus
cash general and administrative expenses. Cash general and
administrative expenses is a non-GAAP measure calculated as net
general and administrative costs less share-based compensation
Adjusted EBITDA: 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 the Company 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 also important
as it is considered among the financial covenants under SilverBow'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 the Company. Please reference the SilverBow's 2019 Form 10-K
and second quarter 2020 Form 10-Q for discussion of the Credit
Agreement and its covenants.
Adjusted EBITDA for Leverage Ratio: Adjusted EBITDA for
Leverage Ratio is calculated as Adjusted EBITDA (defined above)
plus amortization of derivative contracts, in accordance with the
covenant compliance calculations under the Credit Agreement.
Adjusted EBITDA Margin: Adjusted EBITDA Margin is
calculated as Adjusted EBITDA (defined above) divided by oil and
gas sales plus amounts collected (paid) for commodity derivative
contracts held to settlement.
Free cash flow ("FCF"): 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.
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.
Reconciliation of Net Income (GAAP) to Adjusted EBITDA to
Free Cash Flow (Non-GAAP) (Unaudited)
SilverBow presents Adjusted EBITDA attributable to common
stockholders and Adjusted EBITDA Margin in addition to reported net
income (loss) in accordance with GAAP. Both metrics are non-GAAP
measures that are used by SilverBow's management and by external
users of the Company's financial statements, such as investors,
commercial banks and others, to assess SilverBow'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 the Company's ability to incur and
service debt and fund capital expenditures.
SilverBow defines Adjusted EBITDA 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 for Leverage Ratio is defined as Adjusted EBITDA
plus amortization of derivative contracts.
SilverBow defines Free Cash Flow as Adjusted EBITDA:
Plus (Less):
- Monetized derivative contracts
- Cash interest expense, net;
- Capital expenditures; and
- Current income tax (expense) benefit
SilverBow defines Adjusted EBITDA Margin as Adjusted EBITDA
divided by the sum of oil and gas sales and derivative cash
settlements collected or paid. The Company's Adjusted EBITDA and
Adjusted EBITDA Margin should not be considered alternatives 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.
SilverBow's Adjusted EBITDA and Adjusted EBITDA Margin may not be
comparable to similarly titled measures of another company because
all companies may not calculate Adjusted EBITDA and Adjusted EBITDA
Margin in the same manner.
Calculation of Adjusted EBITDA, Free
Cash Flow and Adjusted EBITDA Margin (Unaudited)
SilverBow Resources, Inc. and Subsidiaries
(in thousands, except share amounts)
The below tables provide the calculation
of Adjusted EBITDA, Free Cash Flow and Adjusted EBITDA Margin for
the following periods (in thousands).
Three Months Ended June 30,
2020
Three Months Ended June 30,
2019
Net Income (Loss)
$
(305,976
)
$
64,704
Plus:
Depreciation, depletion and
amortization
13,716
24,029
Accretion of asset retirement
obligations
88
86
Interest expense
8,026
9,306
Impairment of oil and gas properties
260,342
—
Derivative (gain)/loss
8,458
(24,925
)
Derivative cash settlements
collected/(paid) (1)
17,731
4,319
Income tax expense/(benefit)
22,420
(20,735
)
Share-based compensation expense
1,176
1,648
Adjusted EBITDA
$
25,981
$
58,432
Plus:
Cash interest expense, net
(6,959
)
(8,825
)
Capital expenditures(2)
(4,804
)
(69,640
)
Current income tax (expense)/benefit
(268
)
21,033
Free Cash Flow
$
13,950
$
1,000
Adjusted EBITDA Margin
61
%
74
%
Adjusted EBITDA
$
25,981
$
58,432
Amortization of derivative contracts
6,737
—
Adjusted EBITDA for Leverage Ratio
(3)
$
32,718
$
58,432
(1) Includes accruals for settled
contracts covering commodity deliveries during the period where the
actual cash settlements occur outside of 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 includes $6.7 million
of proceeds from the amortization of previously unwound derivative
contracts for the second quarter of 2020. Adjusted EBITDA for
Leverage Ratio for the twelve months ended June 30, 2020 is $199.2
million.
Production Volumes & Pricing
(Unaudited)
SilverBow Resources, Inc. and
Subsidiaries
Three Months Ended June 30,
2020
Three Months Ended June 30,
2019
Production volumes:
Oil (MBbl) (1)
221
405
Natural gas (MMcf)
10,624
16,409
Natural gas liquids (MBbl) (1)
156
424
Total (MMcfe)
12,884
21,385
Oil, natural gas and natural gas liquids
sales (in thousands):
Oil
$
5,265
$
24,940
Natural gas
18,103
43,597
Natural gas liquids
1,478
6,166
Total
$
24,846
$
74,703
Average realized price:
Oil (per Bbl)
$
23.82
$
61.60
Natural gas (per Mcf)
1.70
2.66
Natural gas liquids (per Bbl)
9.49
14.53
Average per Mcfe
$
1.93
$
3.49
Price impact of cash-settled
derivatives:
Oil (per Bbl)
$
49.52
$
(0.01
)
Natural gas (per Mcf)
0.64
0.17
Natural gas liquids (per Bbl)
—
3.78
Average per Mcfe
$
1.38
$
0.20
Average realized price including impact of
cash-settled derivatives:
Oil (per Bbl)
$
73.34
$
61.59
Natural gas (per Mcf)
2.34
2.83
Natural gas liquids (per Bbl)
9.49
18.31
Average per Mcfe
$
3.31
$
3.69
(1) Oil and NGLs are converted at the rate
of one barrel to six Mcfe. MBbl refers to one thousand barrels.
Third Quarter 2020 & Full
Year 2020 Guidance
Guidance
3Q 2020
FY 2020
Production Volumes:
Oil (Bbls/d)
5,150 - 5,350
4,150 - 4,450
Natural Gas (MMcf/d)
125 - 130
135 - 140
NGLs (Bbls/d)
2,900 - 3,000
2,700 - 2,800
Total Reported Production (MMcfe/d)
173 - 180
176 - 184
% Gas
72%
76%
Product Pricing:
Crude Oil NYMEX Differential ($/Bbl)
($5.50) - ($1.50)
N/A
Natural Gas NYMEX Differential ($/Mcf)
($0.05) - ($0.01)
N/A
Natural Gas Liquids (% of WTI)
29% - 35%
N/A
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200804005962/en/
Jeff Magids Director of Finance & Investor Relations (281)
874-2700, (888) 991-SBOW
SilverBow Resources (NYSE:SBOW)
Historical Stock Chart
From Aug 2024 to Sep 2024
SilverBow Resources (NYSE:SBOW)
Historical Stock Chart
From Sep 2023 to Sep 2024