SilverBow Resources, Inc. (NYSE: SBOW) (“SilverBow” or the
“Company”) today announced operating and financial results for the
first quarter of 2021. Highlights include:
- Net production averaged approximately 180 million cubic feet of
natural gas equivalent per day (“MMcfe/d”), above the high end of
guidance
- Reported net income of $28 million, Adjusted EBITDA of $63
million and free cash flow ("FCF") of $24 million. Adjusted EBITDA
and FCF are non-GAAP measures defined and reconciled in the tables
below
- Increased full year 2021 FCF guidance range by $10 million at
the midpoint to a range of $30-$50 million1
- Reduced total debt by $30 million quarter-over-quarter and by
$90 million year-over-year; leverage ratio of 2.1x2 and liquidity
of $113 million at quarter-end. Anticipated year-end 2021 leverage
ratio below 2.0x2
- Success of first Austin Chalk well supports further delineation
across SilverBow's acreage in 2021; potential to expand existing
inventory with additional high-return locations
- The Company's second La Mesa pad, as pre-released, achieved a
peak pad production rate of 90 million cubic feet of natural gas
per day ("MMcf/d"), further reduced drilling times by 10%, and
capital costs were 13% below authorization for expenditure
(“AFE”)
- Extended the maturity of SilverBow’s $600 million senior
secured revolving credit facility (the “Credit Facility”), governed
by a borrowing base of $300 million, to April 2024; provides ample
liquidity to execute business strategy
- Expanded and accelerated mid-year liquids-focused drilling
program beginning in April with incremental oil locations added;
corresponding production uplift expected in the third quarter of
2021
- Full year 2021 total production guidance range unchanged at
180-200 MMcfe/d; expected full year 2021 oil production increased
by 12% at the midpoint reflecting the shift in mid-year
development
- Full year 2021 capital guidance unchanged at $100-$110 million,
inclusive of expanded oil drill schedule
MANAGEMENT COMMENTS
Sean Woolverton, SilverBow’s Chief Executive Officer, commented,
"In April, we provided a preview of our stellar results for the
quarter. We paid down $30 million of debt, or 13% of our revolver
borrowings, and reduced our leverage ratio to 2.1x. We successfully
renegotiated and extended our Credit Facility, which provides us
the runway to expand our development program and pursue our
strategic objectives. We generated free cash flow for the fifth
consecutive quarter and raised the midpoint of our 2021 free cash
flow guidance to $40 million, a $10 million increase from our prior
guidance. Operationally, we continue to see strong performance from
our first Webb County Austin Chalk well and plan to drill
additional appraisal wells this year, with the goal of increasing
our inventory with incremental, high-return locations. The
continued capital efficiency gains we demonstrated on our second La
Mesa pad should support further upside potential to our stakeholder
returns as we apply those learnings and efficiencies across our
balanced portfolio."
Mr. Woolverton commented further, "Our plan entering 2021
intentionally included breaks in our drilling program to allow us
to assess market conditions and optimize our development plan
real-time. With the significant improvement in oil prices over the
first quarter, we have allocated capital to drill more oil
locations this year than initially planned. This shift in capital
will drive improved cash flows. We recently picked up a drilling
rig, ahead of our planned summer schedule. Our capital budget
remains at $105 million at the midpoint while factoring in our
expanded oil development. This is made possible by the improved
efficiencies and strong returns we have delivered to-date, and the
application of those efficiency learnings going forward. By
year-end, we anticipate our leverage ratio to be below 2.0x. As
always, our strategy is based on the flexibility to quickly adapt
our development toward the highest rate of return opportunities.
SilverBow has positioned itself as an in-basin leader generating
sustainable free cash flow and strengthening its balance sheet in
the pursuit of accretive deals, both large and small."
OPERATIONS HIGHLIGHTS
During the first quarter of 2021, the Company drilled one well
and completed seven wells in its Webb County Gas area. Six of these
completed wells comprised SilverBow's second La Mesa pad, which was
drilled in fourth quarter of 2020. The pad’s total drilling and
completion ("D&C") costs came in 13%, or $5 million, below AFE
and 15% below the Company’s first La Mesa pad. The cost efficiency
gains were a result of further applied learnings from the first
pad. The wells were brought online approximately 15 days ahead of
schedule and achieved an average pad production rate of 84 MMcf/d
over the first 30 days of production (“IP30”). Importantly, both La
Mesa pads co-developed the upper and lower Eagle Ford, which
supports SilverBow's understanding of constructive interference and
minimal-to-no impact from offset well interference and parent-child
well performance degradation. The efficiency gains from 2020
carried into the first quarter of 2021 with the faster cycle times
on the La Mesa pad and lower AFE costs. These efficiencies
ultimately provided SilverBow with both the time and capital to add
the Webb County Austin Chalk test during the first quarter of 2021.
The Company's Austin Chalk well achieved an IP30 of 13 MMcf/d,
exceeding initial expectations and commercial criteria. Given the
strong performance and competitive economics exhibited to date,
SilverBow plans to drill additional Austin Chalk wells this
year.
The extreme cold weather during February 2021 temporarily
impacted first quarter production by approximately 2 MMcfe/d.
SilverBow was able to mitigate the effect of the storm through
numerous pre-planning procedures and existing storm response
procedures in place. Per normal practice, the Company maintains a
portion of its natural gas sales tied to daily gas indexes.
Therefore, the Company did have some natural gas sales exposed to
the unprecedented volatility in daily spot prices during the cold
weather event in February 2021, resulting in unusually high
realized natural gas prices in the first quarter of 2021. The
impact of these factors on SilverBow's financial results for the
first quarter of 2021 is not expected to recur at this magnitude in
future quarters. Notably, the Company continues to operate at a
zero total recordable incident rate (“TRIR”) despite the weather
events in the field.
Scheduled maintenance projects during the first quarter of 2021
resulted in a slight increase to lease operating expenses (“LOE”).
Additionally, measures taken to prepare for and recover from the
storm resulted in higher than typical expenses. For the first
quarter of 2021, the Company offset minor service pricing increases
in its D&C activities. On the drilling side, SilverBow has been
able to hold service costs flat based on close vendor relationships
and existing contracts. On the completions side, costs remain
mostly flat as service price inflation has primarily been offset
through continued de-bundling of sand and other logistics and
consumables. Additionally, the Company has been able to lower
facility hookup costs per well by $40,000 on average through
improved design processes and utilizing vendors with greater scale
and volume discounting.
In mid-April 2021, the Company began its mid-year drilling
program targeting liquids-rich opportunities across its McMullen
Oil and La Salle Condensate area. SilverBow's expectation is to
release the drilling rig in August 2021, and for the wells to be
brought online toward the end of the third quarter 2021. The
Company then plans to resume its drilling program in the fourth
quarter of 2021 with a focus on its high-return gas assets.
SilverBow's Austin Chalk well provides compelling economics, and
based on initial learnings, the Company plans to drill additional
Austin Chalk wells in the second half of 2021 with the ultimate
goal of achieving full-scale development that competes with
SilverBow's existing inventory portfolio.
PRODUCTION VOLUMES, OPERATING COSTS AND REALIZED
PRICES
SilverBow's total net production for the first quarter of 2021
averaged approximately 180 MMcfe/d. Production mix for the first
quarter consisted of approximately 78% natural gas, 12% oil and 10%
natural gas liquids ("NGLs"). Natural gas comprised 73% of total
oil and gas sales for the first quarter, compared to 60% in the
fourth quarter of 2020.
LOE was $0.39 per million cubic feet of natural gas equivalent
("Mcfe") for the first quarter. Net general and administrative
("G&A") expenses for the first quarter were $4.8 million, or
$0.29 per Mcfe. After deducting $1.1 million of non-cash
compensation expense, cash G&A (a non-GAAP measure) expenses
were $3.7 million for the first quarter of 2021, with a per unit
cash cost of $0.23 per Mcfe. Transportation and processing expenses
("T&P") came in at $0.31 per Mcfe and production and ad valorem
taxes were 4.0% of oil and gas revenue for the first quarter of
2021. Total production expenses, which include LOE, T&P and
production taxes, were $0.91 per Mcfe for the first quarter of
2021. The Company's total cash operating costs (a non-GAAP measure)
for the first quarter of 2021, which includes total production
expenses and cash G&A expenses, were $1.14 per Mcfe. SilverBow
anticipates total cash operating costs to trend downward throughout
the year despite the typical higher unit costs associated with oil
production.
The Company continues to benefit from strong basis pricing in
the Eagle Ford, while recent conditions have impacted historical
averages. Crude oil and natural gas realizations in the first
quarter were 96% of West Texas Intermediate ("WTI") and 185% of
Henry Hub, respectively, excluding hedging. In February 2021,
extreme cold weather conditions across much of the southern U.S.
resulted in unusually high spot prices for natural gas. SilverBow's
standard practice is to maintain a portion of natural gas volumes
tied to daily price indexes, and therefore first quarter realized
natural gas prices were unusually high due to unforeseen
volatility, and such price fluctuations are not expected to recur.
The Company's average realized natural gas price for the first
quarter of 2021, excluding the effect of hedging, was $4.98 per
thousand cubic feet of natural gas ("Mcf") compared to $1.91 per
Mcf in the first quarter of 2020. The average realized crude oil
selling price in the first quarter, excluding the effect of
hedging, was $55.49 per barrel compared to $45.05 per barrel in the
first quarter of 2020. The average realized NGLs selling price in
the first quarter was $22.30 per barrel (39% of WTI benchmark)
compared to $12.35 per barrel (27% of WTI benchmark) in the first
quarter of 2020.
FINANCIAL RESULTS
SilverBow reported total oil and gas sales of $86.7 million for
the first quarter of 2021. The Company reported net income of $28.4
million for the first quarter of 2021, which includes a net
unrealized loss on the value of SilverBow's derivative contracts of
$13.3 million.
For the first quarter, the Company generated Adjusted EBITDA (a
non-GAAP measure) of $63.4 million and FCF (a non-GAAP measure) of
$24.0 million. SilverBow's Adjusted EBITDA for Leverage Ratio (a
non-GAAP measure) of $66.9 million for the first quarter of 2021,
which, in accordance with the Leverage Ratio calculation in its
Credit Facility, includes gains for the period related to
previously unwound derivative contracts totaling $3.5 million.
Capital expenditures incurred during the first quarter of 2021
totaled $33.0 million on an accrual basis.
2021 CAPITAL PROGRAM & GUIDANCE
For the full year 2021, SilverBow's capital budget range of
$100-$110 million is unchanged. The Company added a rig in April
2021, one month ahead of schedule, to pursue an accelerated and
expanded oil development program. The program, which has already
commenced, will extend into the third quarter of 2021.
For the second quarter of 2021, SilverBow is guiding to
estimated production of 201-213 MMcfe/d, with natural gas volumes
expected to comprise 165-175 MMcf/d or 82% of total production at
the midpoint. For the full year, the Company is guiding to a
production range of 180-200 MMcfe/d, with oil production of
3,500-3,900 barrels per day ("Bbls/d"), a 12% increase in oil
production at the midpoint compared to prior guidance.
SilverBow anticipates full year FCF to be $30-$50 million1, a
33% increase at the midpoint compared to prior guidance. Additional
detail concerning the Company's second quarter and full year 2021
guidance can be found in the table included with today’s news
release and the Corporate Presentation uploaded to the Investor
Relations section of SilverBow’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 related to production periods in 2020 and
2021, SilverBow is amortizing the $38 million of cash inflow it
received in discrete amounts each month over the same time period
that the derivative contracts would have settled. 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 April 30, 2021, SilverBow had 60% of total estimated
production volumes hedged for the remainder of 2021. For the
remainder of 2021, the Company has 88 MMcf/d (59% of guidance) of
natural gas production hedged, 2,916 Bbls/d (77% of guidance) of
oil hedged and 1,590 Bbls/d (48% of guidance) of NGLs hedged. For
2022, SilverBow has 61 MMcf/d of natural gas production hedged and
2,093 Bbls/d of oil hedged. The hedged amounts are inclusive of
both swaps and collars, and the percent hedged amounts are based on
the midpoint of production guidance.
Please see SilverBow's Corporate Presentation and Form 10-Q
filing for the first quarter of 2021, which the Company expects to
file on Thursday, May 6, 2021, for a detailed summary of its
derivative contracts.
CAPITAL STRUCTURE AND LIQUIDITY
As of March 31, 2021, SilverBow's liquidity position was $113.4
million, consisting of $3.4 million of cash and $110.0 million of
availability under the Credit Facility, which had a $310 million
borrowing base as of such date prior to the April 16, 2021
redetermination. The Company's net debt as of March 31, 2021 was
$396.6 million, calculated as total long-term debt of $400.0
million less $3.4 million of cash, a 7% decrease from December 31,
2020.
In conjunction with its regularly scheduled semi-annual
redetermination, SilverBow entered into the Seventh Amendment to
the Credit Facility, effective April 16, 2021, which among other
things, redetermined the borrowing base under the Credit Facility
to $300 million and extended the maturity date to April 19, 2024.
For further information, please see the Company's current report on
Form 8-K filed with the Securities and Exchange Commission (“SEC”)
on April 19, 2021.
As of April 30, 2021, SilverBow had 12.2 million total common
shares outstanding.
CORPORATE OFFICE RELOCATION
Effective May 17, 2021, SilverBow will be relocating its
corporate headquarters to the Memorial City area in Houston, TX.
SilverBow's progressive approach towards adopting new work-place
trends and identifying ways to further streamline efficiencies are
core to its culture. The new office space will span half the square
footage of its previous space, while providing offices for the same
number of employees based on a new, permanent flex schedule going
forward. Below are SilverBow's current headquarters address and new
address:
Prior to May 17, 2021
May 17, 2021 and After
SilverBow Resources
SilverBow Resources
575 North Dairy Ashford, Suite
1200
920 Memorial City Way, Suite
850
Houston, TX 77079
Houston, TX 77024
CONFERENCE CALL AND UPDATED INVESTOR PRESENTATION
SilverBow will host a conference call for investors on Thursday,
May 6, 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/2256468.
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 “First Quarter
2021 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.
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 statements of historical fact included in
this press release, including those regarding our strategy, future
operations, financial position, well expectations and drilling
plans, 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 and
expected leverage ratio, capital expenditures, budget, projected
costs, prospects, plans and objectives of management are
forward-looking statements. When used in this report, the words
“could,” “believe,” “anticipate,” “intend,” “estimate,” “budgeted,”
"guidance," “expect,” “may,” “continue,” “predict,” “potential,”
"plan," “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, including disruptions in the oil and gas industry;
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; asset disposition efforts
or the timing or outcome thereof; ongoing and prospective joint
ventures, their structures and substance, and the likelihood of
their finalization or the timing thereof; 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 natural 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. 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 forward-looking statements that may be made to reflect events
or circumstances after the date of this release or to reflect the
occurrence of unanticipated events, 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 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)
March 31, 2021
December 31, 2020
ASSETS
Current Assets:
Cash and cash equivalents
$
3,419
$
2,118
Accounts receivable, net
26,075
25,850
Fair value of commodity derivatives
1,958
4,821
Other current assets
2,388
2,184
Total Current Assets
33,840
34,973
Property and Equipment:
Property and equipment, full cost method,
including $29,113 and $28,090, respectively, of unproved property
costs not being amortized at the end of each period
1,375,961
1,343,373
Less – Accumulated depreciation,
depletion, amortization & impairment
(814,691
)
(801,279
)
Property and Equipment, Net
561,270
542,094
Right of Use Assets
3,409
4,366
Fair Value of Long-Term Commodity
Derivatives
769
281
Other Long-Term Assets
1,162
1,421
Total Assets
$
600,450
$
583,135
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current Liabilities:
Accounts payable and accrued
liabilities
$
20,601
$
26,991
Fair value of commodity derivatives
18,193
8,171
Accrued capital costs
6,611
7,324
Accrued interest
1,052
983
Current lease liability
2,292
3,473
Undistributed oil and gas revenues
26,416
11,098
Total Current Liabilities
75,165
58,040
Long-Term Debt, Net
395,172
424,905
Non-Current Lease Liability
1,126
951
Deferred Tax Liabilities
303
303
Asset Retirement Obligations
4,489
4,533
Fair Value of Long-Term Commodity
Derivatives
3,869
2,946
Other Long-Term Liabilities
270
424
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, 12,336,876 and 12,053,763 shares issued,
respectively, and 12,159,615 and 11,936,679 shares outstanding,
respectively
123
121
Additional paid-in capital
298,841
297,712
Treasury stock, held at cost, 177,261 and
117,084 shares, respectively
(2,860
)
(2,372
)
(Accumulated deficit) Retained
earnings
(176,048
)
(204,428
)
Total Stockholders’ Equity
120,056
91,033
Total Liabilities and Stockholders’
Equity
$
600,450
$
583,135
Condensed Consolidated Statements of
Operations (Unaudited)
SilverBow Resources, Inc. and Subsidiary
(in thousands, except per-share amounts)
Three Months Ended March 31,
2021
Three Months Ended March 31,
2020
Revenues:
Oil and gas sales
$
86,741
$
53,377
Operating Expenses:
General and administrative, net
4,782
5,913
Depreciation, depletion, and
amortization
13,393
23,439
Accretion of asset retirement
obligations
75
86
Lease operating costs
6,274
5,812
Workovers
13
—
Transportation and gas processing
5,056
6,643
Severance and other taxes
3,489
2,964
Write-down of oil and gas properties
—
95,606
Total Operating Expenses
33,082
140,463
Operating Income (Loss)
53,659
(87,086
)
Non-Operating Income (Expense)
Gain (loss) on commodity derivatives,
net
(18,259
)
88,287
Interest expense, net
(7,019
)
(8,407
)
Other income (expense), net
(1
)
107
Income (Loss) Before Income Taxes
28,380
(7,099
)
Provision (Benefit) for Income Taxes
—
(1,241
)
Net Income (Loss)
$
28,380
$
(5,858
)
Per Share Amounts:
Basic Earnings (Loss) Per Share
$
2.36
$
(0.50
)
Diluted Earnings (Loss) Per Share
$
2.31
$
(0.50
)
Weighted-Average Shares Outstanding -
Basic
12,029
11,825
Weighted-Average Shares Outstanding -
Diluted
12,294
11,825
Condensed Consolidated Statements of
Cash Flows (Unaudited)
SilverBow Resources, Inc. and Subsidiary
(in thousands)
Three Months Ended March 31,
2021
Three Months Ended March 31,
2020
Cash Flows from Operating Activities:
Net income (loss)
$
28,380
$
(5,858
)
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating activities
Depreciation, depletion, and
amortization
13,393
23,439
Write-down of oil and gas properties
—
95,606
Accretion of asset retirement
obligations
75
86
Deferred income taxes
—
(1,065
)
Share-based compensation
1,070
1,260
(Gain) Loss on derivatives, net
18,259
(88,287
)
Cash settlement (paid) received on
derivatives
(3,063
)
47,650
Settlements of asset retirement
obligations
(104
)
(2
)
Other
344
1,142
Change in operating assets and
liabilities
(Increase) decrease in accounts receivable
and other current assets
(878
)
9,436
Increase (decrease) in accounts payable
and accrued liabilities
10,301
(6,937
)
Increase (decrease) in income taxes
payable
—
(176
)
Increase (decrease) in accrued
interest
69
(211
)
Net Cash Provided by (Used in) Operating
Activities
67,846
76,083
Cash Flows from Investing Activities:
Additions to property and equipment
(35,852
)
(52,618
)
Acquisition of oil and gas properties
(205
)
—
Payments on property sale obligations
—
(142
)
Net Cash Provided by (Used in) Investing
Activities
(36,057
)
(52,760
)
Cash Flows from Financing Activities:
Proceeds from bank borrowings
57,000
50,000
Payments of bank borrowings
(87,000
)
(39,000
)
Purchase of treasury shares
(488
)
(83
)
Net Cash Provided by (Used in) Financing
Activities
(30,488
)
10,917
Net Increase (Decrease) in Cash and Cash
Equivalents
1,301
34,240
Cash and Cash Equivalents at Beginning of
Period
2,118
1,358
Cash and Cash Equivalents at End of
Period
$
3,419
$
35,598
Supplemental Disclosures of Cash Flow
Information:
Cash paid during period for interest, net
of amounts capitalized
$
6,424
$
8,048
Non-cash Investing and Financing
Activities:
Changes in capital accounts payable and
capital accruals
$
(3,588
)
$
(1,989
)
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 and first quarter 2021 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 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 March 31,
2021
Three Months Ended March 31,
2020
Net Income (Loss)
$
28,380
$
(5,858
)
Plus:
Depreciation, depletion and
amortization
13,393
23,439
Accretion of asset retirement
obligations
75
86
Interest expense
7,019
8,407
Impairment of oil and gas properties
—
95,606
Loss (gain) on commodity derivatives,
net
18,259
(88,287
)
Derivative cash settlements
collected/(paid) (1)
(4,782
)
12,613
Income tax expense/(benefit)
—
(1,241
)
Share-based compensation expense
1,070
1,260
Adjusted EBITDA
$
63,414
$
46,025
Plus:
Monetized derivative contracts
—
38,310
Cash interest expense, net
(6,424
)
(8,048
)
Capital expenditures(2)
(32,961
)
(50,962
)
Current income tax (expense)/benefit
—
176
Free Cash Flow
$
24,029
$
25,501
Adjusted EBITDA
$
63,414
$
46,025
Amortization of derivative contracts
3,530
—
Adjusted EBITDA for Leverage Ratio
(3)
$
66,944
$
46,025
(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 $3.5 million
of proceeds from the amortization of previously unwound derivative
contracts for the first quarter of 2021. Adjusted EBITDA for
Leverage Ratio for the twelve months ended March 31, 2021 is $192.3
million, which includes $28.6 million of proceeds from the
amortization of previously unwound derivative contracts.
Production Volumes & Pricing
(Unaudited)
SilverBow Resources, Inc. and
Subsidiary
Three Months Ended March 31,
2021
Three Months Ended March 31,
2020
Production volumes:
Oil (MBbl) (1)
315
401
Natural gas (MMcf)
12,624
16,498
Natural gas liquids (MBbl) (1)
285
312
Total (MMcfe)
16,224
20,775
Oil, natural gas and natural gas liquids
sales (in thousands):
Oil
$
17,466
$
18,050
Natural gas
62,914
31,472
Natural gas liquids
6,361
3,855
Total
$
86,741
$
53,377
Average realized price:
Oil (per Bbl)
$
55.49
$
45.05
Natural gas (per Mcf)
4.98
1.91
Natural gas liquids (per Bbl)
22.30
12.35
Average per Mcfe
$
5.35
$
2.57
Price impact of cash-settled
derivatives:
Oil (per Bbl)
$
(12.75
)
$
11.09
Natural gas (per Mcf)
(0.01
)
0.50
Natural gas liquids (per Bbl)
(2.07
)
—
Average per Mcfe
$
(0.29
)
$
0.61
Average realized price including impact of
cash-settled derivatives:
Oil (per Bbl)
$
42.74
$
56.15
Natural gas (per Mcf)
4.97
2.40
Natural gas liquids (per Bbl)
20.23
12.35
Average per Mcfe
$
5.06
$
3.18
(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.
Second Quarter & Full Year
2021 Guidance
Guidance
2Q 2021
FY 2021
Production Volumes:
Oil (Bbls/d)
2,700 - 2,850
3,500 - 3,900
Natural Gas (MMcf/d)
165 - 175
140 - 156
NGLs (Bbls/d)
3,300 - 3,500
3,200 - 3,400
Total Reported Production (MMcfe/d)
201 - 213
180 - 200
% Gas
82%
78%
Product Pricing:
Crude Oil NYMEX Differential ($/Bbl)
($4.00) - ($1.00)
N/A
Natural Gas NYMEX Differential ($/Mcf)
($0.05) - ($0.01)
N/A
Natural Gas Liquids (% of WTI)
31% - 35%
N/A
Operating Costs & Expenses:
Lease Operating Expenses ($/Mcfe)
$0.31 - $0.35
$0.34 - $0.38
Transportation & Processing
($/Mcfe)
$0.33 - $0.37
$0.30 - $0.34
Production Taxes (% of Revenue)
4.9% - 5.5%
4.5% - 5.0%
Cash G&A, net ($MM)
$4.0 - $4.5
$16.0 - $17.0
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210505006017/en/
Jeff Magids Director of Finance & Investor Relations (281)
874-2700, (888) 991-SBOW
SilverBow Resources (NYSE:SBOW)
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