Increasing full year 2021 production and free
cash flow guidance
Lowering full year 2021 per unit expense
guidance
Continuing to de-lever balance sheet
Acquiring non-operated working interest and
high rate of return acreage at La Mesa
SilverBow Resources, Inc. (NYSE: SBOW) (“SilverBow” or the
“Company”) today announced operating and financial results for the
second quarter of 2021. Highlights include:
- Net production of 213 million cubic feet of natural gas
equivalent per day (“MMcfe/d”), at high end of guidance
- Full year 2021 production guidance range increased to 200-210
MMcfe/d, an 8% increase at the midpoint
- Full year 2021 free cash flow ("FCF") guidance range increased
to $45-$55 million1, a 25% increase at the midpoint
- Full year 2021 capital guidance range revised to $115-$130
million; selective allocation of FCF towards high-return inventory
provides for a re-investment rate of approximately 70%2
- Lease operating expenses ("LOE") of $0.29 per million cubic
feet of natural gas equivalent ("Mcfe"), transportation and
processing expenses ("T&P") of $0.32 per Mcfe, net general and
administrative ("net G&A") expenses of $4.8 million and cash
general and administrative ("cash G&A") (a non-GAAP measure)
expenses of $3.6 million. LOE, T&P and cash G&A expenses
were all below the low end of guidance for the second quarter of
2021
- Reduced full year 2021 LOE and T&P per unit guidance on
anticipated cost savings and efficiencies
- Reported a net loss of $20 million, Adjusted EBITDA of $43
million and FCF of $7 million. Adjusted EBITDA and FCF are non-GAAP
measures defined and reconciled in the tables below
- Reduced total debt by $2 million quarter-over-quarter and by
$72 million year-over-year; leverage ratio of 1.93x3 and liquidity
of $104 million at quarter-end. Anticipate year-end 2021 leverage
ratio below 1.75x3
- Acquired non-operated working interest in SilverBow operated La
Mesa property; adds 10 million cubic feet of natural gas per day
("MMcf/d") of net production, 850 net acres, and 20 gross (17 net)
drilling locations in the prolific Eagle Ford and Austin Chalk
trends for a total consideration of $24 million
MANAGEMENT COMMENTS
Sean Woolverton, SilverBow’s Chief Executive Officer, commented,
"During the second quarter we generated $7 million of free cash
flow while further reducing our total debt and leverage ratio. At
quarter-end, our leverage ratio was 1.9x compared to 2.5x at
year-end 2020. This is a result of increasing operational
efficiencies, lowering costs and realizing favorable prices across
all products. The SilverBow team continued to streamline our cost
structure, with total cash operating expenses below $1.00 per Mcfe
this quarter, at the same time as achieving another quarter of zero
recordable incidents. Our first Austin Chalk well in Webb County
continues to exceed expectations and we are now drilling additional
wells across the Company's acreage to further define our potential
drilling inventory in this emerging play. Furthermore, we continue
to add to our portfolio through accretive acquisitions, with our
announced La Mesa transaction bolstering our Eagle Ford and Austin
Chalk opportunity set."
Mr. Woolverton commented further, "We are capitalizing on the
strength in commodity prices to increase free cash flow, further
reduce debt, accelerate the de-levering of the Company and expand
our high-return inventory over the next 18 months. Inclusive of our
revised capital program, we are increasing our 2021 free cash flow
guide by 25% to a range of $45-$55 million. Additionally, our
preliminary 2022 outlook shows the potential to deliver free cash
flow above 2021 levels. We believe that reducing leverage,
increasing liquidity and generating free cash flow best positions
SilverBow to be active in strategic opportunities and to drive
greater shareholder returns."
OPERATIONS HIGHLIGHTS
During the second quarter of 2021, SilverBow drilled 10 wells,
completed one well and brought one well online. Drilling and
completion (“D&C”) spending during the quarter was primarily
related to drilling activity in the liquids-rich La Salle
Condensate area. As previously planned, the Company accelerated
activity of its mid-year oil development program. Due to further
reduced drilling cycle times and efficiencies, SilverBow was able
to drill three additional wells in the second quarter. Notably, the
Company drilled a four well pad in approximately 25 days, or six
days per well on average. First production from the nine La Salle
Condensate wells is expected in the third quarter of 2021.
SilverBow is reviewing early data and appraising its Austin Chalk
acreage through the one well completed in the second quarter.
SilverBow continues to further its capital and operational
efficiencies across its operating areas. Year-to-date, the Company
drilled 20% more lateral feet per day and reduced drilling costs by
9% compared to 2020. On the completion side, SilverBow completed
17% more stages per day, pumped 8% more proppant per day and
reduced completion costs by 2%. Taken altogether, D&C costs per
lateral foot are 5% lower in 2021 as compared to 2020.
Production management remains a key focus area for the Company,
and the maintenance and optimization projects executed during the
first quarter of 2021 continue to support strong performance from
the developed production base. In the second quarter of 2021,
further base production optimizations were realized through
expanded compression and artificial lift installations. This focus
on base production management is driving production uplifts with
shallower declines. The continued outperformance of SilverBow's
initial Austin Chalk well, which came online in February 2021,
further supported its production base during the second quarter. As
of the date of this news release, the well is still producing above
10 MMcf/d and has produced a cumulative 1.9 billion cubic feet
("Bcf") over the first five months.
For the third quarter of 2021, SilverBow plans to drill six net
wells across the McMullen Oil and Webb County Gas areas, and
complete and bring online 11 net wells across the La Salle
Condensate, McMullen Oil and Webb County Gas areas. The development
program reflects the acceleration of liquids-rich wells planned
earlier this year, as well as a balancing of high-rate gas wells to
capture favorable prices heading into year-end. Not included in the
well counts are three gross (one net) non-operated wells in the
Webb Count Gas area, which the Company has elected to participate
in during the third quarter of 2021, and which adds approximately
$5 million to the full year capital budget. By early fourth quarter
2021, SilverBow expects substantially all its D&C activity for
the year to be incurred.
Through the first half of 2021, the Company maintained zero
recordable incidents. Safety is core to SilverBow’s operations and
the Company has demonstrated a commitment to delivering
high-returns through its industry-leading safety environment.
PRODUCTION VOLUMES, OPERATING COSTS AND REALIZED
PRICES
SilverBow's total net production for the second quarter averaged
approximately 213 MMcfe/d. Production mix for the second quarter
consisted of approximately 82% natural gas, 8% oil and 10% natural
gas liquids ("NGLs"). Natural gas comprised 67% of total oil and
gas sales for the second quarter, compared to 73% in the second
quarter of 2020.
LOE was $0.29 per Mcfe for the second quarter, a $0.10 per Mcfe
reduction compared to the previous quarter and year ago comparable
periods. T&P was $0.32 per Mcfe and production and ad valorem
taxes were 5.1% of oil and gas sales for the second quarter. Total
production expenses, which include LOE, T&P and production
taxes, were $0.79 per Mcfe for the second quarter. Net G&A
expenses for the second quarter were $4.8 million, or $0.25 per
Mcfe. After deducting $1.2 million of non-cash compensation
expense, cash G&A (a non-GAAP measure) expenses were $3.6
million for the second quarter, with a per unit cash cost of $0.19
per Mcfe. The Company's total cash operating costs (a non-GAAP
measure) for the second quarter, which includes total production
expenses and cash G&A expenses, were $0.98 per Mcfe. SilverBow
anticipates total cash operating costs to trend flat to slightly
higher through the remainder of the year as oil production
increases, which typically carries higher per unit costs.
The Company continues to benefit from strong basis pricing in
the Eagle Ford. Crude oil and natural gas realizations in the
second quarter were 96% of West Texas Intermediate ("WTI") and 104%
of Henry Hub, respectively, excluding hedging. The Company's
average realized natural gas price for the second quarter,
excluding hedging, was $2.95 per thousand cubic feet of natural gas
("Mcf") compared to $1.70 per Mcf in the second quarter of 2020.
The average realized crude oil selling price in the second quarter,
excluding hedging, was $63.62 per barrel compared to $23.82 per
barrel in the second quarter of 2020. The average realized NGL
selling price in the second quarter, excluding hedging, was $21.65
per barrel (33% of WTI benchmark) compared to $9.49 per barrel (34%
of WTI benchmark) in the second quarter of 2020.
FINANCIAL RESULTS
For the second quarter, SilverBow reported total oil and gas
sales of $69.9 million and a net loss of $20.0 million, which
includes a net unrealized loss on the value of the Company's
derivative contracts of $35.6 million.
For the second quarter, SilverBow generated Adjusted EBITDA (a
non-GAAP measure) of $42.8 million and FCF (a non-GAAP measure) of
$7.4 million. The Company's Adjusted EBITDA for Leverage Ratio (a
non-GAAP measure) was $46.7 million for the second quarter, which,
in accordance with the Leverage Ratio calculation in its Credit
Facility, includes gains for the period related to previously
unwound derivative contracts totaling $3.9 million.
Capital expenditures incurred during the second quarter of 2021
totaled $26.2 million on an accrual basis.
2021 CAPITAL PROGRAM & GUIDANCE
For the third quarter of 2021, SilverBow is guiding to estimated
production of 200-215 MMcfe/d, with natural gas volumes expected to
comprise 156-168 MMcf/d or 78% of total production at the midpoint.
For the full year 2021, the Company is guiding to a production
range of 200-210 MMcfe/d, an 8% increase at the midpoint compared
to prior guidance. Production guidance is inclusive of the
incremental working interest acquired at La Mesa subsequent to
quarter-end.
For the full year 2021, SilverBow anticipates FCF to be $45-$55
million1, a 25% increase at the midpoint compared to prior
guidance. The Company revised its full year capital budget to
$115-$130 million, which reflects accelerated mid-year oil
development and opportunistic gas drilling. The changes to the
program provide for inventory expansion, further delineation and
participation in high-return wells while continuing to maintain a
re-investment rate of approximately 70%2.
From a timing perspective, substantially all of the remaining
2021 D&C spending should be incurred by early fourth quarter.
Thus, SilverBow expects to outspend in the third quarter of 2021
and generate the balance of its full year 2021 FCF during the
fourth quarter 2021.
The Company's preliminary 2022 outlook assumes development
remains at approximately a 3/4 rig pace. 2022 production is
anticipated to grow greater than 10% year-over-year given the
additional La Mesa working interest and high-return inventory
additions. Free cash flow is forecasted above 2021 levels with an
implied re-investment rate lower than 2021.
Additional detail concerning the Company's third quarter and
full year 2021 guidance can be found in the table included with
today’s news release and the Corporate Presentation in 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 July 30, 2021, SilverBow had 66% of total estimated
production volumes hedged for the remainder of 2021. For the
remainder of 2021, the Company has 107 MMcf/d (66% of guidance) of
natural gas production hedged, 3,509 Bbls/d (79% of guidance) of
oil hedged and 2,090 Bbls/d (48% of guidance) of NGLs hedged. For
2022, SilverBow has 97 MMcf/d of natural gas production hedged,
2,593 Bbls/d of oil hedged and 623 Bbls/d of NGLs 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 second quarter of 2021, which the Company expects to
file on Thursday, August 5, 2021, for a detailed summary of its
derivative contracts.
CAPITAL STRUCTURE AND LIQUIDITY
As of June 30, 2021, SilverBow's liquidity position was $104.1
million, consisting of $2.1 million of cash and $102.0 million of
availability under the senior secured revolving credit facility
("Credit Facility"). The Company's net debt as of June 30, 2021 was
$395.9 million, calculated as total long-term debt of $398.0
million less $2.1 million of cash, a $31.9 million, or 7%, decrease
from December 31, 2020.
As of July 30, 2021, SilverBow had 12.2 million total common
shares outstanding.
CONFERENCE CALL AND UPDATED INVESTOR PRESENTATION
SilverBow will host a conference call for investors on Thursday,
August 5, 2021, at 9:00 a.m. Central Time (10:00 a.m. Eastern
Time). Investors and participants can listen to the call by dialing
1-833-772-0370 (U.S.) or 1-236-738-2241 (International) and
requesting SilverBow's Second Quarter 2021 Earnings Conference Call
or by visiting the Company's website. A simultaneous webcast of the
call may be accessed over the internet by visiting
https://event.on24.com/wcc/r/3190240/00074C22DCE952CEA17B5778192DA169,
or by visiting SilverBow's website at www.sbow.com, clicking on
“Investor Relations” and “Events and Presentations” and then
clicking on the “Second 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, 2021 guidance and 2022 preliminary outlook, 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)
with respect to oil production levels and announcements of
potential changes in such levels; 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 Re-investment rate is defined is calculated as capital
expenditures divided by the sum of capital expenditures and free
cash flow (a non-GAAP measure defined and reconciled in the tables
included with today's news release) for the calendar year.
3 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)
June 30, 2021
December 31, 2020
ASSETS
Current Assets:
Cash and cash equivalents
$
2,063
$
2,118
Accounts receivable, net
25,957
25,850
Fair value of commodity derivatives
736
4,821
Other current assets
3,055
2,184
Total Current Assets
31,811
34,973
Property and Equipment:
Property and equipment, full cost method,
including $24,312 and $28,090, respectively, of unproved property
costs not being amortized at the end of each period
1,402,202
1,343,373
Less – Accumulated depreciation,
depletion, amortization & impairment
(830,749
)
(801,279
)
Property and Equipment, Net
571,453
542,094
Right of Use Assets
16,609
4,366
Fair Value of Long-Term Commodity
Derivatives
1
281
Other Long-Term Assets
3,069
1,421
Total Assets
$
622,943
$
583,135
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current Liabilities:
Accounts payable and accrued
liabilities
$
23,887
$
26,991
Fair value of commodity derivatives
45,369
8,171
Accrued capital costs
12,114
7,324
Accrued interest
955
983
Current lease liability
6,029
3,473
Undistributed oil and gas revenues
13,570
11,098
Total Current Liabilities
101,924
58,040
Long-Term Debt, Net
393,446
424,905
Non-Current Lease Liability
10,670
951
Deferred Tax Liabilities
303
303
Asset Retirement Obligations
4,586
4,533
Fair Value of Long-Term Commodity
Derivatives
10,286
2,946
Other Long-Term Liabilities
490
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, 12,388,208 and 12,053,763 shares issued,
respectively, and 12,196,978 and 11,936,679 shares outstanding,
respectively
124
121
Additional paid-in capital
300,088
297,712
Treasury stock, held at cost, 191,230 and
117,084 shares, respectively
(2,975
)
(2,372
)
(Accumulated deficit) Retained
earnings
(195,999
)
(204,428
)
Total Stockholders’ Equity
101,238
91,033
Total Liabilities and Stockholders’
Equity
$
622,943
$
583,135
Condensed Consolidated Statements of
Operations (Unaudited)
SilverBow Resources, Inc. and Subsidiary
(in thousands, except per-share amounts)
Three Months Ended June 30,
2021
Three Months Ended June 30,
2020
Revenues:
Oil and gas sales
$
69,861
$
24,846
Operating Expenses:
General and administrative, net
4,834
6,180
Depreciation, depletion, and
amortization
16,039
13,716
Accretion of asset retirement
obligations
74
88
Lease operating expenses
5,515
5,000
Workovers
76
—
Transportation and gas processing
6,206
4,554
Severance and other taxes
3,577
2,037
Write-down of oil and gas properties
—
260,342
Total Operating Expenses
36,321
291,917
Operating Income (Loss)
33,540
(267,071
)
Non-Operating Income (Expense)
Gain (loss) on commodity derivatives,
net
(46,067
)
(8,458
)
Interest expense, net
(7,436
)
(8,026
)
Other income (expense), net
12
(1
)
Income (Loss) Before Income Taxes
(19,951
)
(283,556
)
Provision (Benefit) for Income Taxes
—
22,420
Net Income (Loss)
$
(19,951
)
$
(305,976
)
Per Share Amounts:
Basic Earnings (Loss) Per Share
$
(1.64
)
$
(25.69
)
Diluted Earnings (Loss) Per Share
$
(1.64
)
$
(25.69
)
Weighted-Average Shares Outstanding -
Basic
12,190
11,910
Weighted-Average Shares Outstanding -
Diluted
12,190
11,910
Condensed Consolidated Statements of
Operations (Unaudited)
SilverBow Resources, Inc. and Subsidiary
(in thousands, except per-share amounts)
Six Months Ended June 30,
2021
Six Months Ended June 30,
2020
Revenues:
Oil and gas sales
$
156,602
$
78,222
Operating Expenses:
General and administrative, net
9,616
12,093
Depreciation, depletion, and
amortization
29,431
37,156
Accretion of asset retirement
obligations
148
173
Lease operating expenses
11,789
10,812
Workovers
90
—
Transportation and gas processing
11,262
11,197
Severance and other taxes
7,066
5,001
Write-down of oil and gas properties
—
355,948
Total Operating Expenses
69,402
432,380
Operating Income (Loss)
87,200
(354,158
)
Non-Operating Income (Expense)
Gain (loss) on commodity derivatives,
net
(64,326
)
79,829
Interest expense, net
(14,454
)
(16,433
)
Other income (expense), net
9
107
Income (Loss) Before Income Taxes
8,429
(290,655
)
Provision (Benefit) for Income Taxes
—
21,179
Net Income (Loss)
$
8,429
$
(311,834
)
Per Share Amounts:
Basic Earnings (Loss) Per Share
$
0.70
$
(26.28
)
Diluted Earnings (Loss) Per Share
$
0.68
$
(26.28
)
Weighted-Average Shares Outstanding -
Basic
12,110
11,868
Weighted-Average Shares Outstanding -
Diluted
12,379
11,868
Condensed Consolidated Statements of
Cash Flows (Unaudited)
SilverBow Resources, Inc. and Subsidiary
(in thousands)
Six Months Ended June 30,
2021
Six Months Ended June 30,
2020
Cash Flows from Operating Activities:
Net income (loss)
$
8,429
$
(311,834
)
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating activities
Depreciation, depletion, and
amortization
29,431
37,156
Write-down of oil and gas properties
—
355,948
Accretion of asset retirement
obligations
148
173
Deferred income taxes
—
21,087
Share-based compensation
2,260
2,437
(Gain) Loss on derivatives, net
64,326
(79,829
)
Cash settlement (paid) received on
derivatives
(10,708
)
67,496
Settlements of asset retirement
obligations
(166
)
(15
)
Write down of debt issuance cost
229
459
Other
1,202
1,814
Change in operating assets and
liabilities:
(Increase) decrease in accounts receivable
and other current assets
(1,387
)
14,293
Increase (decrease) in accounts payable
and accrued liabilities
(502
)
(10,137
)
Increase (decrease) in income taxes
payable
—
92
Increase (decrease) in accrued
interest
(28
)
(140
)
Net Cash Provided by (Used in) Operating
Activities
93,234
99,000
Cash Flows from Investing Activities:
Additions to property and equipment
(56,995
)
(85,594
)
Acquisition of oil and gas properties
(207
)
(3,394
)
Proceeds from the sale of property and
equipment
—
4,752
Payments on property sale obligations
(1,084
)
(426
)
Net Cash Provided by (Used in) Investing
Activities
(58,286
)
(84,662
)
Cash Flows from Financing Activities:
Proceeds from bank borrowings
123,000
50,000
Payments of bank borrowings
(155,000
)
(59,000
)
Purchase of treasury shares
(603
)
(86
)
Payments of debt issuance costs
(2,400
)
—
Net Cash Provided by (Used in) Financing
Activities
(35,003
)
(9,086
)
Net Increase (Decrease) in Cash and Cash
Equivalents
(55
)
5,252
Cash and Cash Equivalents at Beginning of
Period
2,118
1,358
Cash and Cash Equivalents at End of
Period
$
2,063
$
6,610
Supplemental Disclosures of Cash Flow
Information:
Cash paid during period for interest, net
of amounts capitalized
$
13,282
$
15,006
Non-cash Investing and Financing
Activities:
Changes in capital accounts payable and
capital accruals
$
1,307
$
(28,618
)
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 second 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 G&A
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
SilverBow's operating performance, and the valuation, comparison,
rating and investment recommendations of companies within the oil
and gas industry. The Company 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 SilverBow's
Credit Facility less cash and cash equivalents.
Re-Investment Rate: Re-investment rate is calculated as
capital expenditures divided by the sum of capital expenditures and
FCF (defined above) for a given time period. The Company believes
that re-investment rate is useful to investors because it reflects
the magnitude of capital needed to be invested back into
SilverBow's operations, relative to the total potential cash flows
to which stakeholders could have received. Within the oil and gas
industry, shale development typically requires substantial, ongoing
capital investments to sustain production due to the nature of
high-decline rates in shale wells. The Company uses re-investment
rate to supplement its analysis of future capital investments to
the business against returns for stakeholders. Re-investment rate
could vary in definition from company to company, and a higher or
lower measure does not necessarily indicate better or worse;
therefore re-investment rate should not be considered an
alternative to operating income (loss), cash flows provided by
(used in) operating activities, cash flows provided by (used in)
investing activities or any other measure of financial performance
or liquidity presented in accordance with GAAP.
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 June 30,
2021
Three Months Ended June 30,
2020
Net Income (Loss)
$
(19,951
)
$
(305,976
)
Plus:
Depreciation, depletion and
amortization
16,039
13,716
Accretion of asset retirement
obligations
74
88
Interest expense
7,436
8,026
Impairment of oil and gas properties
—
260,342
Loss (gain) on commodity derivatives,
net
46,067
8,458
Derivative cash settlements
collected/(paid) (1)
(8,060
)
17,731
Income tax expense/(benefit)
—
22,420
Share-based compensation expense
1,189
1,176
Adjusted EBITDA
$
42,794
$
25,981
Plus:
Cash interest expense and bank fees,
net
(9,259
)
(6,959
)
Capital expenditures(2)
(26,157
)
(4,804
)
Current income tax (expense)/benefit
—
(268
)
Free Cash Flow
$
7,378
$
13,950
Adjusted EBITDA
$
42,794
$
25,981
Amortization of derivative contracts
3,928
6,737
Adjusted EBITDA for Leverage Ratio
(3)
$
46,722
$
32,718
(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 $3.9 million
of proceeds from the amortization of previously unwound derivative
contracts for the second quarter of 2021. Adjusted EBITDA for
Leverage Ratio for the twelve months ending June 30, 2021 is $206.3
million, which includes $25.8 million of proceeds from the
amortization of previously unwound derivative contracts
Production Volumes & Pricing
(Unaudited) SilverBow Resources, Inc. and Subsidiary
Three Months Ended June 30,
2021
Three Months Ended June 30,
2020
Production volumes:
Oil (MBbl) (1)
250
221
Natural gas (MMcf)
15,879
10,624
Natural gas liquids (MBbl) (1)
332
156
Total (MMcfe)
19,367
12,884
Oil, natural gas and natural gas liquids
sales (in thousands):
Oil
$
15,890
$
5,265
Natural gas
46,791
18,103
Natural gas liquids
7,180
1,478
Total
$
69,861
$
24,846
Average realized price:
Oil (per Bbl)
$
63.62
$
23.82
Natural gas (per Mcf)
2.95
1.70
Natural gas liquids (per Bbl)
21.65
9.49
Average per Mcfe
$
3.61
$
1.93
Price impact of cash-settled
derivatives:
Oil (per Bbl)
$
(20.49
)
$
49.52
Natural gas (per Mcf)
(0.13
)
0.64
Natural gas liquids (per Bbl)
(2.79
)
—
Average per Mcfe
$
(0.42
)
$
1.38
Average realized price including impact of
cash-settled derivatives:
Oil (per Bbl)
$
43.13
$
73.34
Natural gas (per Mcf)
2.82
2.34
Natural gas liquids (per Bbl)
18.86
9.49
Average per Mcfe
$
3.19
$
3.31
(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.
Third Quarter & Full Year
2021 Guidance
Guidance
3Q 2021
FY 2021
Production Volumes:
Oil (Bbls/d)
3,600 - 3,850
3,650 - 3,900
Natural Gas (MMcf/d)
156 - 168
155 - 163
NGLs (Bbls/d)
3,800 - 4,000
3,800 - 4,000
Total Reported Production (MMcfe/d)
200 - 215
200 - 210
% Gas
78%
78%
Product Pricing:
Crude Oil NYMEX Differential ($/Bbl)
($4.00) - ($1.00)
N/A
Natural Gas NYMEX Differential ($/Mcf)
($0.05) - ($0.01)
N/A
Natural Gas Liquids (% of WTI)
37% - 41%
N/A
Operating Costs & Expenses:
Lease Operating Expenses ($/Mcfe)
$0.30 - $0.34
$0.31 - $0.35
Transportation & Processing
($/Mcfe)
$0.30 - $0.34
$0.29 - $0.33
Production Taxes (% of Revenue)
4.5% - 5.1%
4.4% - 4.9%
Cash G&A, net ($MM)
$4.0 - $4.5
$16.0 - $17.0
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210804005959/en/
Jeff Magids Director of Finance & Investor Relations (281)
874-2700, (888) 991-SBOW
SilverBow Resources (NYSE:SBOW)
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