SilverBow Resources, Inc. (NYSE: SBOW) (“SilverBow” or the
“Company”) today announced operating and financial results for the
third quarter of 2020. Highlights include:
- Net production averaged approximately 183 million cubic feet of
natural gas equivalent per day (“MMcfe/d”), above the high end of
guidance
- Reported a net loss of approximately $7 million, Adjusted
EBITDA of $36 million and free cash flow ("FCF") of $9 million.
Adjusted EBITDA and FCF are non-GAAP measures defined and
reconciled in the tables below
- Anticipate full year 2020 FCF of approximately $50 million, a
$5 million increase at the midpoint from previously stated guidance
range of $40-$50 million1
- Reduced total debt by $17 million compared to prior quarter and
$37 million compared to first quarter 2020; leverage ratio2 of 2.5x
and liquidity of $78 million at quarter-end
- Completed and brought online eight deferred wells one month
ahead of schedule due to operational efficiency gains and timing of
favorable marketing agreements. Drilling and completion costs for
five drilled but uncompleted (“DUC”) wells $8 million below
budget
- All previously curtailed net oil production returned to sales.
Approximately 20 million cubic feet per day ("MMcf/d") of net gas
production remained shut-in at quarter-end, but was brought back
online in late October
- Commenced nine-well gas development program on October 1st;
poised to capture favorable gas prices in 2021
- Implemented corporate cost reduction initiatives representing
annualized savings of $2.5 million starting in 2021
- Cash general and administrative ("G&A") costs of $4.8
million (a non-GAAP measure calculated as $5.8 million in net
G&A costs less $1.1 million of share-based compensation), a 5%
decrease from the prior quarter
MANAGEMENT COMMENTS
Sean Woolverton, SilverBow’s Chief Executive Officer, commented,
"As year-end quickly approaches, SilverBow is well-positioned to
benefit from higher natural gas prices with exposure to
unconstrained, premium Gulf Coast markets. Our team continues to
execute on the factors within our control by driving down costs,
optimizing our production and generating free cash flow to reduce
absolute debt. 2020 has presented unique challenges to the oil and
gas industry due to the ongoing global pandemic and extreme
volatility in commodity prices, and these challenges are not likely
to abate in the near term. In the face of it all, SilverBow
generated $9 million of free cash flow during the third quarter,
marking our third consecutive quarter of positive free cash flow,
and we are on pace to deliver full year free cash flow of
approximately $50 million. During the third quarter, we completed
and turned to sales eight wells one month ahead of schedule.
Compared to the first quarter of 2020, we have reduced our revolver
borrowings by $37 million to $253 million at quarter-end."
Mr. Woolverton commented further, "As we look ahead, we began
our nine-well gas development program in October, targeting our
high-rate-of-return Webb County dry gas assets. Our strategy of
maintaining a balanced portfolio and low-cost structure has allowed
us to generate significant free cash flow and pay down debt while
organically funding these high-return gas projects. We see
favorable underlying supply and demand factors supporting a
sustained improvement of natural gas prices and stand to benefit
from our gas development, mix of collars, and unhedged production.
Our returns-focused mindset remains at the core of our business
strategy. Given our current scale and balance sheet, we will
continue to prioritize debt reduction as our primary use of cash
flow over the near-term. Based on preliminary estimates for next
year, we expect to achieve modest production growth, sustain a
maintenance level of capex, and generate a meaningful amount of
free cash flow. As always, we are opportunistic in identifying
accretive transactions, large or small, that further support our
mission to be the premier Eagle Ford oil and gas company. I want to
thank our stakeholders who underpin SilverBow's success."
OPERATIONS HIGHLIGHTS
During the third quarter of 2020, SilverBow resumed completion
activity by bringing online eight wells in its McMullen Oil area.
The Company completed three of these wells in the first quarter of
2020, but deferred bringing them online due to prevailing market
conditions. The remaining five wells were drilled but uncompleted
during the first quarter of 2020. As planned, all eight of these
oil-weighted wells were placed on production in the third quarter
of 2020, with the five DUCs completed nearly one month ahead of
schedule. SilverBow's total well costs for the five DUCs were $8
million below budget, collectively. In addition to resuming capital
activity, all remaining curtailed oil volumes were returned to
sales during the third quarter. Approximately 20 MMcf/d of net gas
production remained shut-in at quarter-end. The Company recently
returned these volumes to production in late October to align with
favorable natural gas prices.
To date, wells that have been returned to sales have not
experienced any degradation and in some cases have exhibited higher
production rates compared to pre-shut-in levels, as noted last
quarter. SilverBow continues to monitor and analyze well data in
real-time and implement choke management practices that optimize
and preserve the integrity of each well. The Company believes these
are primary drivers for the strong performance of the wells
returned to sales.
The operations team carried out significant pre-planning and
contingency practices, and engaged in rigorous vendor bidding
activities, to ensure continuation of the Company’s low-cost
platform and operational efficiencies given the activity hiatus in
the second quarter of 2020. The team also performed regular,
in-depth reviews of operating and capital costs. On the operating
cost side, labor, compression, salt-water disposal and chemicals
were the notable areas that led to further lease operating expense
("LOE") savings. On the capital side, service-pricing remains in a
deflationary environment and the SilverBow team has been able to
capture further savings through selective de-bundling of capital
costs and process efficiencies.
At the beginning of October, the Company resumed drilling
activity in the Webb County Gas area. SilverBow drilled the first
three wells in the Upper Eagle Ford at Fasken with first production
expected towards year-end. The other six wells comprise the second,
co-developed La Mesa pad. The first pad was drilled and completed
last year and has demonstrated some of the strongest returns in the
Company's portfolio. SilverBow expects to finish the drilling and
completion of the six-well La Mesa pad in early 2021, with first
sales expected by the end of the first quarter.
PRODUCTION VOLUMES, OPERATING COSTS AND REALIZED
PRICES
SilverBow's total net production for the third quarter averaged
approximately 183 MMcfe/d. Production mix for the third quarter
consisted of approximately 71% natural gas, 17% oil and 12% natural
gas liquids ("NGLs"). Natural gas comprised 51% of total oil and
gas sales for the third quarter, compared to 73% in the second
quarter of 2020.
LOE were $0.31 per million cubic feet of natural gas equivalent
("Mcfe") for the third quarter. After deducting $1.1 million of
non-cash compensation expense, cash G&A costs were $4.8 million
for the third quarter, with a per unit cash cost of $0.28 per Mcfe.
Transportation and processing expenses ("T&P") came in at $0.30
per Mcfe and production and ad valorem taxes were 5.5% of oil and
gas revenue for the third quarter. Total production expenses, which
include LOE, T&P and production taxes, were $0.76 per Mcfe for
the quarter. The Company's all-in cash operating expenses for the
quarter, which includes cash G&A costs, were $1.05 per Mcfe.
Beginning in 2021, SilverBow expects to save approximately $2.5
million in annualized G&A costs as a result of corporate cost
initiatives.
The Company 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 third
quarter were 92% of West Texas Intermediate ("WTI") and 100% of
Henry Hub, respectively, excluding hedging. SilverBow’s average
realized natural gas price, excluding the effect of hedging, was
$1.98 per thousand cubic feet of natural gas ("Mcf") compared to
$2.32 per Mcf in the third quarter of 2019. The average realized
crude oil selling price, excluding the effect of hedging, was
$37.45 per barrel compared to $57.14 per barrel in the third
quarter of 2019. The average realized NGLs selling price in the
quarter was $12.79 per barrel (31% of WTI benchmark) compared to
$11.99 per barrel (21% of WTI benchmark) in the third quarter of
2019.
FINANCIAL RESULTS
SilverBow reported total oil and gas sales of $45.7 million and
a net loss of $6.9 million for the third quarter. Included in the
third quarter’s net loss is an unrealized loss on the value of the
SilverBow's derivative contracts of $19.2 million and a $0.6
million net tax benefit.
For the third quarter, SilverBow generated Adjusted EBITDA (a
non-GAAP measure) of $36.0 million and FCF (a non-GAAP measure) of
$9.1 million.
At quarter-end, the Company's net debt was $451.8 million,
calculated as total long-term debt of $453.0 million less $1.2
million of cash, a $25.9 million reduction compared to year-end
2019.
Capital expenditures during the third quarter, excluding
acquisition and divestiture activity, totaled $20.2 million on an
accrual basis.
2020 GUIDANCE AND PRELIMINARY 2021 OUTLOOK
For the fourth quarter, SilverBow is guiding for estimated
production of 170-183 MMcfe/d, with natural gas volumes expected to
comprise 125-133 MMcf/d, although commodity prices or other impacts
from the Coronavirus Disease 2019 ("COVID-19") pandemic could
affect production guidance. The Company carefully considers the
production economics and the net benefit to its borrowing base and
its financials before committing to future capital investment.
For the full year 2020, SilverBow's capital expenditure guidance
of $95-$100 million is $3 million lower at the midpoint compared to
prior guidance of $95-$105 million. As planned, the Company added a
rig at the beginning of the fourth quarter, commencing the
nine-well gas development program in Webb County. For the full
year, SilverBow is guiding to a production range of 181-184 MMcfe/d
with natural gas volumes expected to comprise 138-140 MMcf/d.
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
anticipates FCF to be approximately $50 million, at the high end of
its previously stated guidance range of $40-$50 million for the
full year.
While still finalizing the 2021 budget, SilverBow is planning
for single digit production growth, capital expenditures consistent
with 2020 levels, and FCF1 generation of $20-$40 million, implying
a greater than 50% FCF yield with strip pricing.
Additional detail concerning SilverBow's fourth 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 discrete 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 October 31, 2020, the Company had 71% of total estimated
production volumes hedged for the remainder of 2020, using the
midpoint of production guidance. For the remainder of 2020,
SilverBow has 95 MMcf/d of natural gas production hedged at an
average price of $2.67 per million British thermal units ("MMBtu")
and 5,094 barrels per day ("Bbls/d") of oil hedged at an average
price of $44.88 per barrel. For 2021, the Company has 67 MMcf/d of
natural gas production hedged at an average price of $2.87 per
MMBtu and 3,294 Bbls/d of oil hedged at an average price of $47.43
per barrel. Notably, SilverBow's hedges are a combination of swaps
and collars with the weighted average price factoring in the
ceiling price of the collars.
Please see SilverBow's Form 10-Q filing for the third quarter of
2020, which the Company expects to file on Thursday, November 5,
2020, for a detailed summary of its derivative contracts.
CAPITAL STRUCTURE AND LIQUIDITY
As of September 30, 2020, SilverBow's liquidity position was
$78.2 million, consisting of $1.2 million of cash and $77.0 million
of availability under the Company’s credit facility, which had a
$330 million borrowing base as of such date prior to the November
2, 2020 redetermination. SilverBow’s net debt was $451.8 million,
calculated as total long-term debt of $453.0 million less $1.2
million of cash, a 5% decrease from December 31, 2019. Subsequent
to quarter end, the borrowing base under the Company's credit
facility was redetermined as of November 2, 2020 to be $310
million, and the maximum leverage ratio2 was decreased to 3.5x from
4.0x. As of October 28, 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 Thursday,
November 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/5165505. 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 “Third 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, natural gas
and NGL 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 FCF; 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 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.
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.
(Financial Highlights to Follow)
Condensed Consolidated Balance Sheets
(Unaudited)
SilverBow Resources, Inc. and Subsidiary
(in thousands, except share amounts)
September 30, 2020
December 31, 2019
ASSETS
Current Assets:
Cash and cash equivalents
$
1,222
$
1,358
Accounts receivable, net
28,884
36,996
Fair value of commodity derivatives
11,850
12,833
Other current assets
2,628
2,121
Total Current Assets
44,584
53,308
Property and Equipment:
Property and equipment, full cost method,
including $30,661 and $41,201, respectively, of unproved property
costs not being amortized at the end of each period
1,323,789
1,247,717
Less – Accumulated depreciation,
depletion, amortization & impairment
(787,830
)
(380,728
)
Property and Equipment, Net
535,959
866,989
Right of Use Assets
6,093
9,374
Fair Value of Long-Term Commodity
Derivatives
2,291
3,854
Deferred Tax Asset
—
22,669
Other Long-Term Assets
1,752
3,622
Total Assets
$
590,679
$
959,816
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current Liabilities:
Accounts payable and accrued
liabilities
$
22,707
$
39,343
Fair value of commodity derivatives
10,420
6,644
Accrued capital costs
4,915
17,889
Accrued interest
892
1,397
Current lease liability
4,807
6,707
Undistributed oil and gas revenues
8,619
9,166
Total Current Liabilities
52,360
81,146
Long-Term Debt, Net
447,644
472,900
Non-Current Lease Liability
1,392
2,813
Deferred Tax Liabilities
—
1,582
Asset Retirement Obligations
4,344
4,055
Fair Value of Long-Term Commodity
Derivatives
4,045
1,613
Other Long-Term Liabilities
292
—
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, 12,053,763 and 11,895,032 shares issued,
respectively, and 11,936,679 and 11,806,679 shares outstanding,
respectively
121
119
Additional paid-in capital
296,629
292,916
Treasury stock, held at cost, 117,084 and
88,353 shares, respectively
(2,372
)
(2,282
)
(Accumulated deficit) Retained
earnings
(213,776
)
104,954
Total Stockholders’ Equity
80,602
395,707
Total Liabilities and Stockholders’
Equity
$
590,679
$
959,816
Condensed Consolidated Statements of
Operations (Unaudited)
SilverBow Resources, Inc. and Subsidiary
(in thousands, except per-share amounts)
Three Months Ended September
30, 2020
Three Months Ended September
30, 2019
Revenues:
Oil and gas sales
$
45,699
$
72,014
Operating Expenses:
General and administrative, net
5,833
6,247
Depreciation, depletion, and
amortization
13,975
24,937
Accretion of asset retirement
obligations
90
88
Lease operating costs
5,211
5,507
Workovers
8
93
Transportation and gas processing
5,094
6,782
Severance and other taxes
2,512
3,778
Write-down of oil and gas properties
—
—
Total Operating Expenses
32,723
47,432
Operating Income (Loss)
12,976
24,582
Non-Operating Income (Expense)
Gain (loss) on commodity derivatives,
net
(12,944
)
13,409
Interest expense, net
(7,444
)
(9,435
)
Other income (expense), net
(56
)
134
Income (Loss) Before Income Taxes
(7,468
)
28,690
Provision (Benefit) for Income Taxes
(572
)
1,039
Net Income (Loss)
$
(6,896
)
$
27,651
Per Share Amounts
Basic: Net Income (Loss)
$
(0.58
)
$
2.35
Diluted: Net Income (Loss)
$
(0.58
)
$
2.35
Weighted-Average Shares Outstanding -
Basic
11,935
11,762
Weighted-Average Shares Outstanding -
Diluted
11,935
11,780
Condensed Consolidated Statements of
Operations (Unaudited)
SilverBow Resources, Inc. and Subsidiary
(in thousands, except per-share amounts)
Nine Months Ended September
30, 2020
Nine Months Ended September
30, 2019
Revenues:
Oil and gas sales
$
123,921
$
218,781
Operating Expenses:
General and administrative, net
17,926
19,146
Depreciation, depletion, and
amortization
51,130
70,771
Accretion of asset retirement
obligations
263
257
Lease operating costs
16,023
15,074
Workovers
8
613
Transportation and gas processing
16,291
19,917
Severance and other taxes
7,513
11,044
Write-down of oil and gas properties
355,948
—
Total Operating Expenses
465,102
136,822
Operating Income (Loss)
(341,181
)
81,959
Non-Operating Income (Expense)
Gain (loss) on commodity derivatives,
net
66,884
34,312
Interest expense, net
(23,876
)
(27,500
)
Other income (expense), net
50
173
Income (Loss) Before Income Taxes
(298,123
)
88,944
Provision (Benefit) for Income Taxes
20,607
(19,464
)
Net Income (Loss)
$
(318,730
)
$
108,408
Per Share Amounts
Basic: Net Income (Loss)
$
(26.81
)
$
9.24
Diluted: Net Income (Loss)
$
(26.81
)
$
9.21
Weighted-Average Shares Outstanding -
Basic
11,890
11,739
Weighted-Average Shares Outstanding -
Diluted
11,890
11,776
Condensed Consolidated Statements of
Cash Flows (Unaudited)
SilverBow Resources, Inc. and Subsidiary
(in thousands)
Nine Months Ended September
30, 2020
Nine Months Ended September
30, 2019
Cash Flows from Operating Activities:
Net income (loss)
$
(318,730
)
$
108,408
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating activities
Depreciation, depletion, and
amortization
51,130
70,771
Write-down of oil and gas properties
355,948
—
Accretion of asset retirement
obligations
263
257
Deferred income taxes
21,087
(19,735
)
Share-based compensation
3,503
5,091
(Gain) Loss on derivatives, net
(66,884
)
(34,312
)
Cash settlement (paid) received on
derivatives
76,150
16,087
Settlements of asset retirement
obligations
(27
)
(67
)
Write down of debt issuance cost
459
—
Other
2,436
1,782
Change in operating assets and
liabilities
(Increase) decrease in accounts receivable
and other current assets
7,413
13,746
Increase (decrease) in accounts payable
and accrued liabilities
(3,981
)
(8,824
)
Increase (decrease) in income taxes
payable
(480
)
217
Increase (decrease) in accrued
interest
(505
)
(356
)
Net Cash Provided by (Used in) Operating
Activities
127,782
153,065
Cash Flows from Investing Activities:
Additions to property and equipment
(102,713
)
(234,859
)
Acquisition of oil and gas properties
(3,441
)
—
Proceeds from the sale of property and
equipment
4,752
(96
)
Payments on property sale obligations
(426
)
(4,402
)
Net Cash Provided by (Used in) Investing
Activities
(101,828
)
(239,357
)
Cash Flows from Financing Activities:
Proceeds from bank borrowings
71,000
315,000
Payments of bank borrowings
(97,000
)
(228,000
)
Purchase of treasury shares
(90
)
(323
)
Net Cash Provided by (Used in) Financing
Activities
(26,090
)
86,677
Net Increase (Decrease) in Cash and Cash
Equivalents
(136
)
385
Cash and Cash Equivalents at Beginning of
Period
1,358
2,465
Cash and Cash Equivalents at End of
Period
$
1,222
$
2,850
Supplemental Disclosures of Cash Flow
Information:
Cash paid during period for interest, net
of amounts capitalized
$
22,290
$
26,172
Changes in capital accounts payable and
capital accruals
$
(25,641
)
$
(27,905
)
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 third 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.
Free cash flow: 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 in addition to reported net income (loss) in
accordance with GAAP. Adjusted EBITDA is a non-GAAP measure that is
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
The Company's 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. SilverBow's 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.
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 September
30, 2020
Three Months Ended September
30, 2019
Net Income (Loss)
$
(6,896
)
$
27,651
Plus:
Depreciation, depletion and
amortization
13,975
24,937
Accretion of asset retirement
obligations
90
88
Interest expense
7,444
9,435
Impairment of oil and gas properties
—
—
Derivative (gain)/loss
12,944
(13,409
)
Derivative cash settlements
collected/(paid) (1)
7,938
11,407
Income tax expense/(benefit)
(572
)
1,039
Share-based compensation expense
1,066
1,752
Adjusted EBITDA
$
35,989
$
62,900
Plus:
Cash interest expense, net
(7,284
)
(9,045
)
Capital expenditures(2)
(20,191
)
(49,459
)
Current income tax (expense)/benefit
572
(41
)
Free Cash Flow
$
9,086
$
4,355
Adjusted EBITDA
$
35,989
$
62,900
Amortization of derivative contracts
9,099
—
Adjusted EBITDA for Leverage Ratio
(3)
$
45,088
$
62,900
(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 $9.1 million
of proceeds from the amortization of previously unwound derivative
contracts for the third quarter of 2020. Adjusted EBITDA for
Leverage Ratio for the twelve months ended September 30, 2020 is
$181.4 million.
Production Volumes & Pricing
(Unaudited)
SilverBow Resources, Inc. and
Subsidiary
Three Months Ended September
30, 2020
Three Months Ended September
30, 2019
Production volumes:
Oil (MBbl) (1)
472
506
Natural gas (MMcf)
11,897
15,958
Natural gas liquids (MBbl) (1)
347
507
Total (MMcfe)
16,809
22,034
Oil, natural gas and natural gas liquids
sales (in thousands):
Oil
$
17,665
$
28,894
Natural gas
23,595
37,040
Natural gas liquids
4,439
6,080
Total
$
45,699
$
72,014
Average realized price:
Oil (per Bbl)
$
37.45
$
57.14
Natural gas (per Mcf)
1.98
2.32
Natural gas liquids (per Bbl)
12.79
11.99
Average per Mcfe
$
2.72
$
3.27
Price impact of cash-settled
derivatives:
Oil (per Bbl)
$
6.91
$
2.39
Natural gas (per Mcf)
0.39
0.51
Natural gas liquids (per Bbl)
(0.01
)
4.14
Average per Mcfe
$
0.47
$
0.52
Average realized price including impact of
cash-settled derivatives:
Oil (per Bbl)
$
44.36
$
59.53
Natural gas (per Mcf)
2.37
2.83
Natural gas liquids (per Bbl)
12.78
16.14
Average per Mcfe
$
3.19
$
3.79
(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
Fourth Quarter & Full Year
2020 Guidance
Guidance
4Q 2020
FY 2020
Production Volumes:
Oil (Bbls/d)
4,450 - 4,850
4,100 - 4,200
Natural Gas (MMcf/d)
125 - 133
138 - 140
NGLs (Bbls/d)
3,100 - 3,450
3,000 - 3,100
Total Reported Production (MMcfe/d)
170 - 183
181 - 184
% Gas
73%
76%
Product Pricing:
Crude Oil NYMEX Differential ($/Bbl)
($5.00) - ($2.00)
N/A
Natural Gas NYMEX Differential ($/Mcf)
($0.05) - ($0.01)
N/A
Natural Gas Liquids (% of WTI)
31% - 35%
N/A
Operating Costs & Expenses:
Lease Operating Expenses ($/Mcfe)
$0.32 - $0.36
$0.30 - $0.34
Transportation & Processing
($/Mcfe)
$0.29 - $0.33
$0.30 - $0.34
Production Taxes (% of Revenue)
5.2% - 5.8%
5.8% - 6.2%
Cash G&A, net ($MM)
$4.4 - $4.8
$18.8 - $19.2
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201104005662/en/
Jeff Magids Director of Finance & Investor Relations (281)
874-2700, (888) 991-SBOW
SilverBow Resources (NYSE:SBOW)
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