SilverBow Resources, Inc. (NYSE: SBOW) (“SilverBow” or “the
Company”) today announced operating and financial results for the
fourth quarter and full year 2020.
Highlights for the fourth quarter
include:
- Net production averaged 178 million cubic feet of natural gas
equivalent per day (“MMcfe/d”), at the high end of guidance; oil
and gas sales up 17% quarter-over-quarter driven by improving
commodity prices
- Reported net income of $9 million, Adjusted EBITDA of $38
million and free cash flow ("FCF") of $12 million1, representing
five out of the last six quarters with positive FCF. Adjusted
EBITDA and FCF are non-GAAP measures defined and reconciled in the
tables below
- Drilled nine wells and brought online three wells in its
prolific Webb County Gas area
- Reduced net debt by $24 million from the third quarter of
2020
Highlights for the full year 2020
include:
- Net production averaged 183 MMcfe/d (76% natural gas), at the
high end of guidance
- Reported a net loss of $309 million, Adjusted EBITDA of $146
million and FCF of $61 million1, representing a FCF yield of
approximately 100% based on SilverBow's market capitalization of
$63 million2 at year-end 2020
- Capital expenditures of $95 million, on an accrual basis, at
the low end of the $95-$100 million full year range
- Continued capital efficiencies with drilling costs per lateral
foot down 32% year-over-year and the number of stages completed per
day and proppant pumped per day up 8% and 13%, respectively,
year-over-year
- General and administrative ("G&A") expenses decreased $2.2
million year-over-year, with further savings expected to take
effect in 2021. Cash interest expense decreased $5.5 million
year-over-year
- Reduced outstanding long-term debt from $479 million to $430
million, a decrease of 10% year-over-year
- Strong balance sheet and liquidity position with $80 million of
undrawn capacity on a $310 million senior secured revolving credit
facility and a cash balance of $2.1 million at year-end 2020
- Year-end 2020 SEC total estimated proved reserves were 1.1
trillion cubic feet of gas equivalent ("Tcfe") (46% proved
developed; 86% natural gas), a Standardized Measure of $513 million
and a pre-tax present value of future net cash flows discounted at
10% (“SEC PV-10 Value," a non-GAAP measure) of $526 million at
Securities and Exchange Commission ("SEC") pricing. Utilizing the
same reserve database and development schedule, management's
internal estimate of PV-10 value of year-end proved reserves is
$851 million3 ("Adjusted PV-10 Value," a non-GAAP measure), based
on flat forward price assumptions of $50 per barrel ("Bbl") of West
Texas Intermediate ("WTI") oil and $2.75 per thousand cubic feet
("Mcf") of Henry Hub natural gas
- Completed the year with a total recordable incident rate of
0.00 across employees and contractors
2021 Capital Program and
Guidance:
- Full year estimated production of 180 - 200 MMcfe/d, growth of
4% year-over-year, with natural gas representing 79% at the
midpoint of full year guidance
- Full year capital program of $100-$110 million, with
flexibility to adjust as commodity prices dictate
- Based on its 2021 capital budget, operating plan, and existing
service costs, along with strip pricing and hedges as of the date
of this report, the Company anticipates full year FCF of $20-$40
million1
- As of February 26, 2021, the Company had 63% of total estimated
production volumes hedged for full year 2021, using the midpoint of
production guidance. Expected oil production is 91% hedged at
$46.91 per barrel and expected gas production is 61% hedged at
$2.90 per Mcf
MANAGEMENT COMMENTS
Sean Woolverton, SilverBow’s Chief Executive Officer, commented,
"We demonstrated resilience and resolve during a pivotal year for
our industry. The Company took immediate actions early in 2020 to
accelerate our free cash flow generation and pay down debt. These
actions included production curtailments, capex reductions and
unwinding excess oil derivative contracts. Combined with our
relentless focus on cost management and production optimization, we
generated over $60 million of free cash flow and reduced total debt
by roughly $50 million in 2020. In the second quarter of 2020, we
closed on the acquisition of producing assets in the Southern gas
window of our acreage position and divested non-core interests in
Wyoming to supplement our cash balance. Amidst all the disruptions
of 2020, we were able to execute on our operational plan while
maintaining a high level of safety. To this end, we achieved a
milestone, zero recordable incidents for the year, while setting
new efficiency records for the Company in both drilling and
completions ("D&C"). This time last year, we had just finished
our first six-well La Mesa pad which at the time set many Company
records from an execution standpoint. I am proud to say that our
second six-well La Mesa pad, which we recently brought online, set
new Company records in D&C costs and cycle times.”
Mr. Woolverton stated further, “Our outlook is increasingly
optimistic as we progress into 2021. Our capital program supports
prudent growth with the bulk of our production coming from natural
gas. During the first quarter, we expect to realize a significant
increase in production as we bring on our second six-well La Mesa
pad and our first Austin Chalk test well in our Webb County Gas
area. The increase in gas volume aligns with tightening gas markets
and strengthening gas prices, with the prompt month up roughly 30%
from a year ago. At current prices, we expect full year 2021 free
cash flow of $20 to $40 million. Our gas forecast is approximately
40% unhedged, preserving further upside on our gas volumes. We
ended 2020 with a leverage ratio4 of 2.5x as we focused on free
cash flow generation and absolute debt reduction. Going forward,
our priorities remain focused on top line growth, further debt
paydown and deleveraging our balance sheet, all while living within
cash flow."
OPERATIONS HIGHLIGHTS
During the fourth quarter of 2020, SilverBow drilled eight net
wells, completed two net wells and brought two net wells online.
For the full year, the Company drilled 19 net wells, completed 15
net wells and brought 15 net wells online. SilverBow's D&C
activity through the first quarter of 2020 was primarily focused on
its McMullen Oil assets. At the end of the first quarter, the
Company temporarily ceased D&C activity and strategically
curtailed production in order to maximize cash flows. These
curtailments had the greatest impact on second quarter production,
but extended to varying degrees through October. For the full year
2020, curtailments were estimated to average 11 MMcf/d of net gas
production and 340 Bbls/d of net oil production, or approximately
8% and 8% of net 2020 production, respectively.
In response to fluctuations in commodity prices, SilverBow
refocused its capital budget through the end of the year towards
the drilling of high rate of return dry-gas assets. Of the 11 net
wells drilled in the first quarter of 2020, eight wells were
deferred to the third quarter to turn to sales. All eight of the
deferred wells were located in the Company's McMullen Oil area. In
the fourth quarter of 2020, SilverBow commenced the drilling of a
nine well program in its Webb County Gas area. In addition to
resuming capital activity, all curtailed production volumes were
returned to production over the second half of 2020.
In the McMullen Oil area, the Company brought 10 net wells
online in 2020. SilverBow maintained focus on efficient asset
development, completing four wells with over 10,000 feet of
completed lateral length. Two of these four wells averaged nine
days from spud to rig release, highlighting the drilling team's
execution excellence. Two wells were brought online during the
first quarter of 2020 while the remaining eight wells, as part of
SilverBow's drilled but uncompleted program, were brought online
during the third quarter of 2020. All ten wells continue to perform
in-line with expectations.
In the La Salle Condensate area, the Company brought three net
wells online in 2020. These three wells were developed on a
recently acquired land tract adjacent to existing SilverBow
acreage. They provided for an opportunistic add-on to that
position. The wells continue to perform well and are expected to
achieve some of the strongest per well recoveries in the area.
In the Webb County Gas area, the Company brought two net wells
online in 2020. Eight net wells were drilled during the fourth
quarter of 2020 as part of SilverBow's renewed focus on its dry gas
assets. The drilling program consisted of two Fasken Upper Eagle
Ford net wells and six La Mesa net wells. The Fasken wells were
drilled, on average, in 9.4 days per well and achieved drilling
rates of 1,900 feet per day. The Fasken wells were completed with
2,600 pounds of proppant per foot, achieving an industry leading
number of 18 stages per day. These wells were turned to sales in
late December and are performing in-line with expectations. The La
Mesa wells were drilled, on average, in 9.6 days per well and
achieved 2,200 feet per day. The Company completed and brought
online the La Mesa wells during the first quarter of 2021.
SilverBow continued to set new Company records in efficiency and
safety while also enacting real-time changes to field schedules and
capital activity in response to fluctuating commodity prices and
the COVID-19 pandemic. SilverBow's La Mesa project is a recent
example of specific drilling efficiency improvements. During the
fourth quarter of 2020, the Company drilled its second six-well
pad. Compared to the first six-well pad drilled in the fourth
quarter of 2019, the three Lower Eagle Ford wells were drilled 26%
faster with a 32% reduction in per foot drilling cost and the three
Upper Eagle Ford wells were drilled 30% faster with a 26% reduction
in per foot drilling cost. These gains were the result of a focus
on all aspects of drilling cycle-time variables, engineering
designs, quality controls on vendors and active wellsite
management.
Across all of its operating areas in 2020, SilverBow drilled 44%
more lateral footage per day while lowering the per lateral foot
costs by 32% as compared to 2019. The Company completed 8% more
stages per day and reduced completion costs per well by 13% as
compared to 2019. SilverBow's demonstrated success in reducing
costs is a direct result of its operational and supply teams
working with vendors to negotiate prices and logistical
considerations for the materials used in its operations.
PRODUCTION VOLUMES, OPERATING COSTS AND REALIZED
PRICES
SilverBow's total net production for the fourth quarter of 2020
averaged 178 MMcfe/d, above the midpoint of guidance. Production
mix for the fourth quarter of 2020 consisted of 16% crude oil, 11%
NGLs, and 73% natural gas. Natural gas comprised 60% of total oil
and gas sales for the fourth quarter of 2020, compared to 55% in
the fourth quarter of 2019.
Lease operating expenses ("LOE") were $0.33 per thousand cubic
feet of natural gas equivalent ("Mcfe") for the fourth quarter of
2020. Net G&A expenses were $4.7 million or $0.29 per Mcfe, for
the fourth quarter of 2020. After deducting $1.1 million of
non-cash compensation expenses, cash G&A expenses were $3.6
million for the fourth quarter of 2020, with a per unit cash cost
of $0.22 per Mcfe. Transportation and processing expenses
("T&P") came in at $0.27 per Mcfe and production and ad valorem
taxes were 5.6% of oil and gas revenue for the fourth quarter of
2020. Total production expenses, which include LOE, T&P and
production taxes, were $0.78 per Mcfe fourth quarter of 2020. The
Company's total cash operating costs for the quarter, which include
total production expenses and cash general and administrative
expenses, were $1.00 per Mcfe. As a result of corporate cost
initiatives, SilverBow expects to realize approximately $2.0
million of cash G&A savings in 2021.
The Company continues to benefit from strong basis pricing in
the Eagle Ford, as well as improved benchmark prices. Crude oil and
natural gas realizations in the fourth quarter of 2020 were 91% and
101% of WTI and Henry Hub, respectively, excluding hedging.
SilverBow's average realized natural gas price, excluding the
effect of hedging, was $2.68 per Mcf in the fourth quarter of 2020
compared to $1.98 per Mcf in the third quarter of 2020. The average
realized crude oil selling price, excluding the effect of hedging,
was $38.93 per barrel in the fourth quarter of 2020 compared to
$37.45 per barrel in the third quarter of 2020. The average
realized NGL selling price in the fourth quarter of 2020 was $15.82
per barrel (37% of WTI benchmark), compared to $12.79 per barrel
(31% of WTI benchmark) in the third quarter of 2020.
YEAR-END 2020 RESERVES
SilverBow reported year-end estimated proved reserves of 1.1
Tcfe, a 22% decrease over year-end 2019. Specific highlights from
the Company’s year-end reserve report include:
- Standardized Measure of $513 million
- SEC PV-10 Value (non-GAAP measure) of $526 million
- Adjusted PV-10 Value of $851 million3, based on $50 per barrel
WTI and $2.75 per Mcf of natural gas
The table below reconciles 2019 reserves to 2020 reserves:
Total (MMcfe)
Proved reserves as of December 31,
2019
1,420,439
Extensions, discoveries and other
additions
31,651
Purchases (sales) of minerals in place
11,005
Revisions of prior reserve estimates:
Reclassification of PUD to unproved under
SEC 5-year rule
(224,990
)
Price and performance revisions
(64,890
)
Production
(66,800
)
Proved reserves as of December 31,
2020
1,106,415
Developed reserves accounted for 46% of SilverBow's total
estimated proved reserves at December 31, 2020. Total capital costs
incurred during 2020 were $100 million, which included
approximately $89 million for development costs, $6 million for
leasehold acquisition and prospect costs, and $5 million for
property acquisitions.
The SEC prices used for reporting the Company's year-end 2020
estimated proved reserves, which have been adjusted for basis and
quality differentials, were $2.13 per Mcf for natural gas, $11.66
per barrel for natural gas liquids and $37.83 per barrel for crude
oil compared to $2.62 per Mcf, $16.83 per barrel, and $58.37 per
barrel in 2019. Using the SEC prices, SilverBow's year-end 2020
reserves had a Standardized Measure of $513 million and a SEC PV-10
Value of $526 million. Based on forward prices of $50 per barrel
for WTI oil, $2.75 per Mcf for Henry Hub natural gas and $14.67 per
barrel (29% of WTI) for NGL, Adjusted PV-10 Value is $851 million3.
Adjusted PV-10 Value utilizes the same reserve database and
development schedule per the SEC PV-10 Value.
FINANCIAL RESULTS
SilverBow reported total oil and gas sales of $53.5 million for
the fourth quarter of 2020. On a GAAP basis, the Company reported
net income of $9.3 million for the fourth quarter of 2020, which
includes a net loss on the value of SilverBow's derivatives
portfolio of $5.6 million. For the full year 2020, the Company
reported a net loss of $309 million. Due to the effects of realized
prices and delayed timing of projects, SilverBow reported non-cash
impairment write-downs, on a pre-tax basis, totaling $355.9 million
on the Company's oil and natural gas properties for the full year
2020.
For the fourth quarter of 2020, SilverBow reported Adjusted
EBITDA (a non-GAAP measure) of $38.3 million and FCF (a non-GAAP
measure) of $12.1 million. For the full year 2020, the Company
reported Adjusted EBITDA for Leverage Ratio (a non-GAAP measure) of
$171.4 million, which, in accordance with the Leverage Ratio
calculation in its Credit Facility, includes gains for the period
related to previously unwound derivative contracts totaling $25.1
million.
Capital expenditures incurred during the fourth quarter of 2020
totaled $19.5 million on an accrual basis. For the full year 2020,
capital expenditures totaled $95.2 million on an accrual basis.
2021 CAPITAL PROGRAM
SilverBow provided its 2021 capital budget range of $100-$110
million (93% allocated to D&C activity). The budget provides
for 20 gross (19 net) operated wells completed, compared to 16
gross (15 net) operated wells completed in 2020. The cadence of
quarterly spending in 2021 is expected to be similar to 2020, and
supports gas production growth of approximately 8%
year-over-year.
In the first quarter of 2021, the Company completed and brought
online its second six-well La Mesa pad and completed its first
Austin Chalk well. Second and third quarter 2021 development will
be staggered from a well count perspective and will focus on
SilverBow's liquids-weighted assets. In the fourth quarter of 2021,
the Company will shift back towards gas development. SilverBow's
capital budget assumes the full cost incurrence of nine Fasken
wells to be drilled in the fourth quarter of 2021.
2021 GUIDANCE
For the first quarter of 2021, SilverBow is guiding for
estimated production of 168 - 179 MMcfe/d, with gas volumes
expecting to comprise 130 - 140 MMcf/d. For the full year 2021, the
Company is guiding for estimated production of 180 - 200 MMcfe/d,
with gas volumes expecting to comprise 142 - 160 MMcf/d or 79% of
full year production at the midpoint. SilverBow anticipates full
year 2021 FCF of $20 to $40 million1. Additional detail concerning
the Company's first quarter and full year 2021 financial and
operational guidance can be found in the table included with
today’s news release below and the most recent Corporate
Presentation uploaded to the Investor Relations section of the
SilverBow’s website.
HEDGING UPDATE
Hedging continues to be an important element of SilverBow’s
strategy to protect cash flow. The Company maintains an active
hedging program to provide predictable cash flows while still
allowing for flexibility in capturing price increases. In
conjunction with unwinding oil derivative contracts related to
production periods 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 February 26, 2021, SilverBow had 63% of total estimated
production volumes hedged for full year 2021, using the midpoint of
production guidance. For 2021, the Company has 92 MMcf/d of natural
gas production hedged at an average price of $2.90 per million
British thermal units ("MMBtu"), 2,996 barrels per day ("Bbls/d")
of oil hedged at an average price of $46.91 per barrel and 1,477
Bbls/d of natural gas liquids hedged at an average price of $23.94
per barrel. For 2022, SilverBow has 48 MMcf/d of natural gas
production hedged at an average price of $2.98 per MMBtu and 1,467
Bbls/d of oil hedged at an average price of $44.96 per barrel.
Notably, the Company's hedges are a combination of swaps and
collars with the weighted average price factoring in the ceiling
price of the collars.
CAPITAL STRUCTURE AND LIQUIDITY
SilverBow's liquidity as of December 31, 2020, was $82.1
million, consisting of $2.1 million of cash and $80.0 million of
availability under the Company’s credit facility. The Company
believes it has sufficient liquidity to meet its obligations for at
least the next twelve months and execute its long-term development
plans. SilverBow's net debt was $427.9 million, calculated as total
long-term debt of $430.0 million less $2.1 million of cash, a 10%
decrease from December 31, 2019. As of January 31, 2021, the
Company had 11.9 million total common shares outstanding.
CONFERENCE CALL AND UPDATED INVESTOR PRESENTATION
SilverBow will host a conference call for investors on Thursday,
March 4, 2021, 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/6756335
and using Conference ID 6756335. 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 “Fourth Quarter 2020 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.
Information on our website is not part of this release.
FORWARD-LOOKING STATEMENTS
This release includes “forward-looking statements” within the
meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended.
These forward-looking statements represent management's
expectations or beliefs concerning future events, and it is
possible that the results described in this release will not be
achieved. These forward-looking statements are based on current
expectations and assumptions and are subject to a number of risks
and uncertainties, many of which are beyond our control. All
statements, other than historical facts included in this press
release, including those regarding our strategy, future operations,
financial position, estimated production levels, expected oil and
natural gas pricing, estimated oil and natural gas reserves or the
present value thereof, reserve increases, future free cash flow,
capital expenditures, budget, projected costs, prospects, plans and
objectives are forward-looking statements. When used in this
report, the words “could,” “believe,” “anticipate,” “intend,”
“estimate,” "guidance," “budgeted,” “expect,” “may,” “continue,”
“predict,” “potential,” “project” and similar expressions are
intended to identify forward-looking statements, although not all
forward-looking statements contain such identifying words.
Important factors that could cause actual results to differ
materially from our expectations include, but are not limited to,
the following risks and uncertainties: the severity and duration of
world health events, including the COVID-19 pandemic, related
economic repercussions and the resulting severe disruption in the
oil and gas industry and negative impact on demand for oil and gas;
the supply of 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 and curtailment of production due to decreases
in available storage capacity or other factors; volatility in
natural gas, oil and NGL prices; future cash flows and their
adequacy to maintain our ongoing operations; liquidity, including
our ability to satisfy our short- or long-term liquidity needs; our
borrowing capacity and future covenant compliance; operating
results; the amount, nature and timing of capital expenditures,
including future development costs; timing, cost and amount of
future production of oil and natural gas; availability of drilling
and production equipment or availability of oil field labor;
availability, cost and terms of capital; timing and successful
drilling and completion of wells; availability and cost for
transportation of oil and natural gas; costs of exploiting and
developing our properties and conducting other operations;
competition in the oil and gas industry; general economic
conditions; opportunities to monetize assets; our ability to
execute on strategic initiatives; effectiveness of our risk
management activities, including hedging strategy; environmental
liabilities; counterparty credit risk; governmental regulation and
taxation of the oil and natural gas industry; developments in world
oil and natural gas markets and in oil and natural gas-producing
countries; uncertainty regarding our future operating results; and
other risks and uncertainties discussed in the Company’s reports
filed with the Securities and Exchange Commission ("SEC"),
including its Annual Report on Form 10-K for the year ended
December 31, 2020. Many of the foregoing risks and uncertainties,
as well as risks and uncertainties that are currently unknown to
us, are, and will be, exacerbated by the COVID-19 pandemic and any
consequent worsening of the global business and economic
environment. New factors emerge from time to time, and it is not
possible for us to predict all such factors. Should one or more of
the risks or uncertainties described in this annual report occur,
or should underlying assumptions prove incorrect, actual results
and plans could differ materially from those expressed in any
forward-looking statements. The Company's capital program, budget
and development plans are subject to change at any time.
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, except as required by law.
(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 without unreasonable
efforts. Such items could have a significant impact on the
Company's net income (loss).
2 Market capitalization is defined as total shares outstanding
multiplied by closing share price. As of December 31, 2020,
SilverBow had 11,936,679 shares outstanding and a closing share
price of $5.31.
3 Adjusted PV-10 Value at the presented forward price
assumptions is provided to illustrate reserve sensitivities to
expectations of commodity prices and does not comply with SEC
pricing assumptions. Actual future prices may vary significantly
from the flat forward prices used in Adjusted PV-10 Value;
therefore, actual revenue and value generated may be more or less
than Adjusted PV-10 Value. Neither SEC PV-10 Value nor Adjusted
PV-10 Value represent actual cash flows, revenues or production
that may be realized from reserves as of December 31, 2020.
4 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)
Consolidated Balance Sheets
(Unaudited)
SilverBow Resources, Inc. and Subsidiary
(in thousands, except share amounts)
December 31, 2020
December 31, 2019
ASSETS
Current Assets:
Cash and cash equivalents
$
2,118
$
1,358
Accounts receivable, net
25,850
36,996
Fair value of commodity derivatives
4,821
12,833
Other current assets
2,184
2,121
Total Current Assets
34,973
53,308
Property and Equipment:
Property and Equipment, Full-Cost Method,
including $28,090 and $41,201 of unproved property costs not being
amortized
1,343,373
1,247,717
Less – Accumulated depreciation,
depletion, amortization and impairment
(801,279
)
(380,728
)
Property and Equipment, Net
542,094
866,989
Right of use assets
4,366
9,374
Fair value of long-term commodity
derivatives
281
3,854
Deferred tax asset
—
22,669
Other long-term assets
1,421
3,622
Total Assets
$
583,135
$
959,816
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current Liabilities:
Accounts payable and accrued
liabilities
$
26,991
$
39,343
Fair value of commodity derivatives
8,171
6,644
Accrued capital costs
7,324
17,889
Accrued interest
983
1,397
Current lease liability
3,473
6,707
Undistributed oil and gas revenues
11,098
9,166
Total Current Liabilities
58,040
81,146
Long-term debt
424,905
472,900
Non-current lease liability
951
2,813
Deferred tax liabilities, net
303
1,582
Asset retirement obligations
4,533
4,055
Fair value of long-term commodity
derivatives
2,946
1,613
Other long-term liabilities
424
—
Commitments and Contingencies
Stockholders' Equity:
Preferred stock, $.01 par value,
10,000,000 shares authorized, none issued
—
—
Common stock, $.01 par value, 40,000,000
shares authorized, 12,053,763 and 11,895,032 shares issued and
11,936,679 and 11,806,679 shares outstanding
121
119
Additional paid-in capital
297,712
292,916
Treasury stock held, at cost, 117,084 and
88,353 shares
(2,372
)
(2,282
)
Retained earnings (Accumulated
deficit)
(204,428
)
104,954
Total Stockholders’ Equity
91,033
395,707
Total Liabilities and Stockholders’
Equity
$
583,135
$
959,816
Consolidated Statements of Operations
(Unaudited)
SilverBow Resources, Inc. and Subsidiary
(in thousands, except per-share amounts)
Year Ended December 31,
2020
Year Ended December 31,
2019
Revenues:
Oil and gas sales
$
177,386
$
288,631
Operating Expenses:
General and administrative, net
22,608
24,851
Depreciation, depletion, and
amortization
64,564
95,915
Accretion of asset retirement
obligations
354
329
Lease operating expense
21,360
20,763
Workovers
8
628
Transportation and gas processing
20,649
26,968
Severance and other taxes
10,514
13,874
Write-down of oil and gas properties
355,948
—
Total Operating Expenses
496,005
183,328
Operating Income (Loss)
(318,619
)
105,303
Non-Operating Income (Expense)
Net gain (loss) on commodity
derivatives
61,304
24,242
Interest expense, net
(31,228
)
(36,561
)
Other income (expense), net
72
90
Income (Loss) Before Income Taxes
(288,471
)
93,074
Provision (Benefit) for Income Taxes
20,911
(21,582
)
Net Income (Loss)
$
(309,382
)
$
114,656
Per Share Amounts:
Basic: Net Income (Loss)
$
(25.99
)
$
9.76
Diluted: Net Income (Loss)
$
(25.99
)
$
9.74
Weighted Average Shares Outstanding -
Basic
11,902
11,753
Weighted Average Shares Outstanding -
Diluted
11,902
11,778
Consolidated Statements of Operations
(Unaudited)
SilverBow Resources, Inc. and Subsidiary
(in thousands, except per-share amounts)
Three Months Ended December
31, 2020
Three Months Ended December
31, 2019
Revenues:
Oil and gas sales
$
53,465
$
69,850
Operating Expenses:
General and administrative, net
4,682
5,705
Depreciation, depletion, and
amortization
13,434
25,145
Accretion of asset retirement
obligations
91
73
Lease operating expense
5,337
5,689
Workovers
—
15
Transportation and gas processing
4,358
7,051
Severance and other taxes
3,001
2,830
Total Operating Expenses
30,903
46,508
Operating Income (Loss)
22,562
23,342
Non-Operating Income (Expense)
Net gain (loss) on commodity
derivatives
(5,580
)
(10,070
)
Interest expense, net
(7,352
)
(9,061
)
Other income (expense), net
22
(80
)
Income (Loss) Before Income Taxes
9,652
4,131
Provision (Benefit) for Income Taxes
304
(2,117
)
Net Income (Loss)
$
9,348
$
6,248
Per Share Amounts:
Basic: Net Income (Loss)
$
0.78
$
0.53
Diluted: Net Income (Loss)
$
0.77
$
0.53
Weighted Average Shares Outstanding -
Basic
11,937
11,795
Weighted Average Shares Outstanding -
Diluted
12,199
11,804
Consolidated Statements of Cash Flows
(Unaudited)
SilverBow Resources, Inc. and Subsidiary
(in thousands)
Year Ended December 31,
2020
Year Ended December 31,
2019
Cash Flows from Operating Activities:
Net income (loss)
$
(309,382
)
$
114,656
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating activities-
Write-down of oil and gas properties
355,948
—
Depreciation, depletion, and
amortization
64,564
95,915
Accretion of asset retirement
obligations
354
329
Deferred income tax expense (benefit)
21,390
(22,101
)
Share-based compensation expense
4,557
6,148
(Gain) Loss on derivatives, net
(61,304
)
(24,242
)
Cash settlements (paid) received on
derivatives
78,421
24,631
Settlements of asset retirement
obligations
(94
)
(83
)
Write-down of debt issuance cost
557
82
Other
3,061
2,930
Change in operating assets and
liabilities-
(Increase) decrease in accounts receivable
and other assets
9,011
11,605
Increase (decrease) in accounts payable
and accrued liabilities
(977
)
(7,100
)
Increase (decrease) in income taxes
payable
(480
)
519
Increase (decrease) in accrued
interest
(414
)
(116
)
Net Cash Provided by (Used in) Operating
Activities
165,212
203,173
Cash Flows from Investing Activities:
Additions to property and equipment
(114,738
)
(282,660
)
Acquisition of producing properties
(4,544
)
—
Proceeds from (adjustments to) the sale of
property and equipment
4,777
(96
)
Payments on property sale obligations
(826
)
(5,112
)
Net Cash Provided by (Used in) Investing
Activities
(115,331
)
(287,868
)
Cash Flows from Financing Activities:
Proceeds from bank borrowings
107,000
381,000
Payments of bank borrowings
(156,000
)
(297,000
)
Purchase of treasury shares
(90
)
(412
)
Payments of debt issuance costs
(31
)
—
Net Cash Provided by (Used in) Financing
Activities
(49,121
)
83,588
Net Increase (Decrease) in Cash and Cash
Equivalents and Restricted Cash
760
(1,107
)
Cash, Cash Equivalents and Restricted Cash
at Beginning of Year
1,358
2,465
Cash, Cash Equivalents and Restricted Cash
at End of Year
$
2,118
$
1,358
Supplemental Disclosures of Cash Flows
Information:
Cash paid during period for interest, net
of amounts capitalized
$
28,929
$
34,408
Changes in capital accounts payable and
capital accruals
$
(19,365
)
$
(21,584
)
Definition of Non-GAAP Measures as Calculated by the Company
(Unaudited)
The following non-GAAP measures are presented in addition to
financial statements as SilverBow believes these metrics and
performance measures are widely used by the investment community,
including investors, research analysts and others, to evaluate and
useful in comparing investments among upstream oil and gas
companies in making investment decisions or recommendations. These
measures, as presented, may have differing calculations among
companies and investment professionals and may not be directly
comparable to the same measures provided by others. A non-GAAP
measure should not be considered in isolation or as a substitute
for the related GAAP measure or any other measure of a company's
financial or operating performance presented in accordance with
GAAP. A reconciliation of each of these non-GAAP measures to the
most directly comparable GAAP measure or measures is presented
below. These measures may not be comparable to similarly titled
measures of other companies.
Adjusted EBITDA: The Company presents Adjusted EBITDA
attributable to common stockholders in addition to reported net
income (loss) in accordance with GAAP. Adjusted EBITDA is
calculated as net income (loss) plus (less) depreciation, depletion
and amortization, accretion of asset retirement obligations,
interest expense, impairment of oil and natural gas properties, net
losses (gains) on commodity derivative contracts, amounts collected
(paid) for commodity derivative contracts held to settlement,
income tax expense (benefit); and share-based compensation expense.
Adjusted EBITDA excludes certain items that SilverBow believes
affect the comparability of operating results, including items that
are generally non-recurring in nature or whose timing and/or amount
cannot be reasonably estimated. Adjusted EBITDA is used by the
Company's management and by external users of SilverBow's financial
statements, such as investors, commercial banks and others, to
assess the Company's operating performance as compared to that of
other companies, without regard to financing methods, capital
structure or historical cost basis. It is also used to assess
SilverBow's ability to incur and service debt and fund capital
expenditures. Adjusted EBITDA should not be considered an
alternative to net income (loss), operating income (loss), cash
flows provided by (used in) operating activities or any other
measure of financial performance or liquidity presented in
accordance with GAAP. Adjusted EBITDA is important as it is
considered among the financial covenants under the Company's First
Amended and Restated Senior Secured Revolving Credit Agreement with
JPMorgan Chase Bank, National Association, as administrative agent,
and certain lenders party thereto (as amended, the “Credit
Agreement”), a material source of liquidity for SilverBow. Please
reference the Company's 2020 Form 10-K 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 SilverBow's Credit
Agreement. The Company believes that Adjusted EBITDA for Leverage
Ratio is useful to investors because it reflects the last twelve
months EBITDA used by the administrative agent for SilverBow's
Credit Facility in the calculation of its leverage ratio
covenant.
Cash General and Administrative Expenses: Cash general
and administrative expenses is a non-GAAP measure calculated as net
general and administrative costs less share-based compensation. The
Company reports cash G&A expenses because it believes this
measure is commonly used by management, analysts and investors as
an indicator of cost management and operating efficiency on a
comparable basis from period to period. In addition, SilverBow
believes cash G&A expenses are used by analysts and others in
valuation, comparison and investment recommendations of companies
in the oil and gas industry to allow for analysis of G&A spend
without regard to stock-based compensation which can vary
substantially from company to company. Cash G&A expenses should
not be considered as an alternative to, or more meaningful than,
total G&A expenses.
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. The Company believes that free cash flow is
useful to investors and analysts because it assists in evaluating
the Company's operating performance, and the valuation, comparison,
rating and investment recommendations of companies within the oil
and gas industry. SilverBow uses this information as one of the
bases for comparing its operating performance with other companies
within the oil and gas industry. Free cash flow should not be
considered an alternative to net income (loss), operating income
(loss), cash flows provided by (used in) operating activities or
any other measure of financial performance or liquidity presented
in accordance with GAAP.
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.
Total Cash Operating Costs: Total Cash Operating Costs
are calculated as lease operating expenses plus transportation and
processing expenses plus production taxes plus cash G&A
expenses (non-GAAP). SilverBow believes that Total Cash Operating
Costs are useful to investors because it reflects both the
production expenses and overhead costs incurred from period to
period. The Company believes Total Cash Operating Costs to be a
true representation of its cost structure.
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 December
31, 2020
Three Months Ended December
31, 2019
Net Income (Loss)
$
9,348
$
6,248
Plus:
Depreciation, depletion and
amortization
$
13,434
$
25,145
Accretion of asset retirement
obligations
91
73
Interest expense
7,352
9,061
Derivative (gain)/loss
5,580
10,070
Derivative cash settlements
collected/(paid) (1)
1,143
8,035
Income tax expense/(benefit)
304
(2,117
)
Share-based compensation expense
1,054
1,057
Adjusted EBITDA
$
38,306
$
57,572
Plus:
Monetized derivative contracts
$
—
$
—
Cash interest expense, net
(6,639
)
(8,236
)
Capital expenditures (2)
(19,541
)
(54,243
)
Current income tax (expense)/benefit
—
(250
)
Free Cash Flow
$
12,126
$
(5,157
)
Adjusted EBITDA
$
38,306
$
57,572
Amortization of derivative contracts
9,239
—
Adjusted EBITDA for Leverage Ratio
(3)
$
47,545
$
57,572
(1) This 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 for Leverage Ratio
includes $9.2 million of proceeds from the amortization of
previously unwound derivative contracts for the fourth quarter of
2020.
Year Ended December 31,
2020
Year Ended December 31,
2019
Net Income (Loss)
$
(309,382)
$
114,656
Plus:
Depreciation, depletion and
amortization
64,564
95,915
Accretion of asset retirement
obligations
354
329
Interest expense
31,228
36,561
Write-down of oil and gas properties
355,948
—
Derivative (gain)/loss
(61,304)
(24,242)
Derivative cash settlements
collected/(paid) (1)
39,424
24,808
Income tax expense/(benefit)
20,911
(21,582)
Share-based compensation expense
4,557
6,148
Adjusted EBITDA
$
146,300
$
232,593
Plus:
Monetized derivative contracts
$
38,310
$
—
Cash interest expense, net
(28,929)
(34,408)
Capital expenditures (2)
(95,241)
(261,662)
Current income tax (expense)/benefit
480
(519)
Free Cash Flow
$
60,920
$
(63,996)
Adjusted EBITDA
$
146,300
$
232,593
Amortization of derivative contracts
25,075
—
Adjusted EBITDA for Leverage Ratio
(3)
$
171,375
$
232,593
(1) This 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 for Leverage Ratio
includes $25.1 million of proceeds from the amortization of
previously unwound derivative contracts for the full year 2020.
Calculation of Cash General & Administrative Expenses
(Unaudited) SilverBow Resources, Inc. and Subsidiary (in
thousands, except per unit amounts)
The below tables provide the calculation of cash G&A for the
following periods (in thousands).
Three Months Ended December
31, 2020
Three Months Ended December
31, 2019
General and administrative, net
$
4,682
$
5,705
Less: Share-based compensation expense
1,054
1,057
Cash general and administrative,
net
$
3,628
$
4,648
General and administrative, net (per
Mcfe)
$
0.29
$
0.26
Less: Share-based compensation expense
(per Mcfe)
0.07
0.04
Cash general and administrative, net
(per Mcfe)
$
0.22
$
0.22
Year Ended December 31,
2020
Year Ended December 31,
2019
General and administrative, net
$
22,608
$
24,851
Less: Share-based compensation expense
4,557
6,148
Cash general and administrative,
net
$
18,051
$
18,703
General and administrative, net (per
Mcfe)
$
0.34
$
0.29
Less: Share-based compensation expense
(per Mcfe)
0.07
0.07
Cash general and administrative, net
(per Mcfe)
$
0.27
$
0.22
Calculation of Standardized Measure of Discounted Future Net
Cash Flows
The following table provides a reconciliation between the
Standardized Measure (the most directly comparable financial
measure calculated in accordance with U.S. GAAP) and SEC PV-10
Value of the Company's proved reserves:
As of December 31,
(in millions)
2020
2019
2018
Standardized Measure of Discounted
Future Net Cash Flows
$
513
$
868
$
994
Adjusted for: Future income taxes
(discounted at 10%)
13
108
134
SEC PV-10 Value
$
526
$
976
$
1,128
Production Volumes & Pricing
(Unaudited)
SilverBow Resources, Inc. and
Subsidiary
Year Ended December 31,
2020
Year Ended December 31,
2019
Production volumes:
Oil (MBbl) (1)
1,521
1,605
Natural gas (MMcf)
50,988
64,388
Natural gas liquids (MBbl) (1)
1,114
1,717
Total (MMcfe)
66,800
84,320
Oil, Natural gas and Natural gas liquids
sales:
Oil
$
57,651
$
92,833
Natural gas
105,234
170,558
Natural gas liquids
14,500
25,241
Total
$
177,386
$
288,631
Average realized price:
Oil (per Bbl)
$
37.89
$
57.84
Natural gas (per Mcf)
2.06
2.65
Natural gas liquids (per Bbl)
13.02
14.70
Average per Mcfe
$
2.66
$
3.42
(1) Oil and NGLs are converted at the rate
of one barrel of oil equivalent to six Mcf
Three Months Ended December
31, 2020
Three Months Ended December
31, 2019
Production volumes:
Oil (MBbl) (1)
428
438
Natural gas (MMcf)
11,970
16,114
Natural gas liquids (MBbl) (1)
299
467
Total (MMcfe)
16,332
21,543
Oil, Natural gas and Natural gas liquids
sales:
Oil
$
16,672
$
24,391
Natural gas
32,065
38,617
Natural gas liquids
4,728
6,841
Total
$
53,465
$
69,850
Average realized price:
Oil (per Bbl)
$
38.93
$
55.70
Natural gas (per Mcf)
2.68
2.40
Natural gas liquids (per Bbl)
15.82
14.65
Average per Mcfe
$
3.27
$
3.24
(1) Oil and NGLs are converted at the rate
of one barrel of oil equivalent to six Mcf
First Quarter 2021 & Full
Year 2021 Guidance
Guidance
1Q 2021
FY 2021
Production Volumes:
Oil (Bbls/d)
3,350 - 3,450
3,200 - 3,400
Natural Gas (MMcf/d)
130 - 140
142 - 160
NGLs (Bbls/d)
2,950 - 3,050
3,100 - 3,300
Total Reported Production (MMcfe/d)
168 - 179
180 - 200
Product Pricing :
Crude Oil NYMEX Differential ($/Bbl)
($4.00) - ($1.00)
N/A
Natural Gas NYMEX Differential ($/Mcf)
$0.01 - $0.05
N/A
Natural Gas Liquids (% of WTI)
35% - 39%
N/A
Operating Costs & Expenses:
Lease Operating Expenses ($/Mcfe)
$0.38 - $0.42
$0.34 - $0.38
Transportation & Processing
($/Mcfe)
$0.31 - $0.35
$0.32 - $0.36
Production Taxes (% of Revenue)
5.0% - 5.6%
4.9% - 5.4%
Cash G&A, net ($MM)
$4.0 - $4.5
$16.0 - $17.0
*A forward-looking estimate of
net G&A expenses is not provided with the forward-looking
estimate of cash G&A (a non-GAAP measure) because the items
necessary to estimate net G&A expenses are not accessible or
estimable at this time without unreasonable efforts. Such items
could have a significant impact on net G&A expenses.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210303005920/en/
Jeff Magids Director of Finance & Investor Relations (281)
874-2700, (888) 991-SBOW
SilverBow Resources (NYSE:SBOW)
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