Raising full year 2021 free cash flow guidance
to $80-$90 million1
Announced three accretive acquisitions which
add over five rig-years of inventory
Continued success with Austin Chalk
delineation
Targeting leverage ratio of ~1.25x by year-end
2021
SilverBow Resources, Inc. (NYSE: SBOW) (“SilverBow” or the
“Company”) today announced operating and financial results for the
third quarter of 2021. Highlights include:
- Net production of 212 million cubic feet of natural gas
equivalent per day (“MMcfe/d”). Net oil production of 4,000 barrels
per day ("Bbls/d"), above the high end of guidance and a 46%
increase quarter-over-quarter
- Full year 2021 production guidance range increased to 210-215
MMcfe/d, a 4% increase at the midpoint
- Full year 2021 free cash flow ("FCF") guidance range increased
to $80-$90 million1 from $45-$55 million previously, a 70% increase
at the midpoint. Full year guidance implies a FCF yield of
approximately 20%2
- Full year 2021 capital guidance range unchanged at $115-$130
million; 2021 re-investment rate of 60%3
- Reported a net loss of $36 million, which includes a net
unrealized loss on the value of the Company's derivative contracts
of $61 million, and Adjusted EBITDA of $58 million. Adjusted EBITDA
is a non-GAAP measure defined and reconciled in the table
below
- Reduced total debt by $55 million year-over-year; further
reduced leverage ratio to 1.73x4. Targeting year-end 2021 leverage
ratio of approximately 1.25x4
- SilverBow's Austin Chalk wells in Webb County continue to
exceed expectations. The second Austin Chalk well brought on during
the third quarter produced over 12 million cubic feet of natural
gas per day ("MMcf/d") through the first 60 days, or more than 0.6
billion cubic feet of natural gas ("Bcf") cumulative. The first
Austin Chalk well has produced approximately 11 MMcf/d through the
first 250 days, or approximately 2.7 Bcf cumulative
- Three acquisitions announced since August 2021 together add
approximately 60,000 net acres, over 5,700 barrels of oil
equivalent per day ("Boe/d") of production and more than 215 oil
and gas locations spanning both the Eagle Ford and Austin Chalk.
Acquisitions will be immediately accretive on all key financial
metrics
MANAGEMENT COMMENTS
Sean Woolverton, SilverBow’s Chief Executive Officer, commented,
"SilverBow has been active on the M&A front since our last
update. We announced three accretive acquisitions since August
which increase our production base, expand our Austin Chalk
development and add more than five rig-years of drilling inventory.
For the third quarter, oil production increased almost 50%
sequentially and is expected to increase into year-end as we
capitalize on our mid-year liquids development program. In our Webb
County area, our second Austin Chalk well continues to outperform
its type curve. Year-to-date, we have added approximately 50
high-return Austin Chalk locations through successful delineation
across our acreage position."
Mr. Woolverton commented further, "For the full year, production
is expected to increase by over 15%. We raised our 2021 free cash
flow guidance by $35 million at the midpoint to a range $80-$90
million, which implies a re-investment rate of 60%. As we look to
2022 and inclusive of the recent acquisitions, we expect to see
double digit production growth with a re-investment rate of
approximately 75% and a meaningful free cash flow yield. We
anticipate running a full rig for the calendar year which
immediately incorporates locations acquired through recent
acquisitions, as well as additional Austin Chalk development.
Operating at a continuous one-rig pace maximizes our field
efficiencies and generates greater returns in today's environment.
As we have demonstrated in recent years, we will remain flexible
and adaptable in our activity levels and capital allocation
framework to reduce leverage, increase liquidity and maximize
returns for our stakeholders."
OPERATIONS HIGHLIGHTS
During the third quarter of 2021, SilverBow drilled six net
wells, completed 11 wells and brought 11 wells online. As expected,
the Company concluded its mid-year liquids development program with
the majority of completion activity focused in its La Salle
Condensate and McMullen Oil areas. As a result of strong well
performance, oil production increased nearly 50%
quarter-over-quarter. In the La Salle Condensate area, SilverBow
brought online a Briggs Knolle two-well pad which produced a 30-day
average of 2,524 Boe/d (72% liquids), and a Briggs Knolle four-well
pad which produced a 30-day average of 4,202 Boe/d (78%
liquids).
Across the 11 total well completions during the quarter, the
Company realized $9 million of cost savings due to reduced cycle
times for both drilling and completion ("D&C") operations along
with various well design and construction optimizations.
Year-to-date, D&C costs per lateral foot are 14% lower compared
to 2020. Additionally, SilverBow extended its streak of zero total
recordable incidents on a rolling twelve month basis from the
beginning of 2020 through the third quarter of 2021. Safety is core
to SilverBow’s operations and the Company has demonstrated a
commitment to delivering high-returns without compromising on its
industry-leading safety environment.
The Company continues to drill and appraise the Austin Chalk and
is reviewing early and encouraging results from its second Austin
Chalk well in Webb County. The Fasken 201H, which came online in
August, produced over 12 MMcf/d on average over the first 60 days,
and thus far is producing in-line with SilverBow's first Austin
Chalk well at Rio Bravo. Both wells are exceeding offset type
curves in the area and are exhibiting some of the highest
commercial economics in the Company's portfolio. SilverBow is also
assessing the initial results of a third Webb County Austin Chalk
well which started producing in October.
The Company currently does not have a drilling rig active, but
plans to add one rig in December which will drill one net La Mesa
well by year-end. As previously discussed, the Company has elected
to participate in three gross (one net) non-operated Webb County
wells which are expected to be brought online during the fourth
quarter.
PRODUCTION VOLUMES, OPERATING COSTS AND REALIZED
PRICES
SilverBow's total net production for the third quarter averaged
approximately 212 MMcfe/d. Production mix for the third quarter
consisted of approximately 77% natural gas, 11% oil and 12% natural
gas liquids ("NGLs"). Natural gas comprised 63% of total oil and
gas sales for the third quarter, compared to 51% in the third
quarter of 2020.
For the third quarter, lease operating expenses ("LOE") were
$0.38 per Mcfe, transportation and processing expenses ("T&P")
were $0.30 per Mcfe and production and ad valorem taxes were 4.9%
of oil and gas sales. Total production expenses, which include LOE,
T&P and production taxes, were $0.93 per Mcfe for the third
quarter. Net general and administrative ("net G&A") expenses
for the third quarter were $5.3 million, or $0.27 per Mcfe. After
deducting $1.2 million of non-cash compensation expense, cash
general and administrative ("cash G&A") (a non-GAAP measure)
expenses were $4.1 million for the third quarter, or $0.21 per
Mcfe. The Company's total cash operating costs (a non-GAAP measure)
for the third quarter, which includes total production expenses and
cash G&A expenses, were $1.14 per Mcfe. SilverBow anticipates
total cash operating costs to remain flat from third quarter levels
through the remainder of the year as oil production increases,
which typically carries higher per unit costs, and as production
taxes increase as a function of higher realized pricing compared to
prior quarters.
The Company continues to benefit from strong basis pricing in
the Eagle Ford. Crude oil and natural gas realizations in the third
quarter were 97% of West Texas Intermediate ("WTI") and 103% of
Henry Hub, respectively, excluding hedging. The Company's average
realized natural gas price for the third quarter, excluding
hedging, was $4.14 per thousand cubic feet of natural gas ("Mcf")
compared to $1.98 per Mcf in the third quarter of 2020. The average
realized crude oil selling price in the third quarter, excluding
hedging, was $68.54 per barrel compared to $37.45 per barrel in the
third quarter of 2020. The average realized NGL selling price in
the third quarter, excluding hedging, was $30.92 per barrel (44% of
WTI benchmark) compared to $12.79 per barrel (31% of WTI benchmark)
in the third quarter of 2020.
FINANCIAL RESULTS
For the third quarter, SilverBow reported total oil and gas
sales of $99.2 million and a net loss of $35.9 million, which
includes a net unrealized loss on the value of the Company's
derivative contracts of $61.2 million.
For the third quarter, SilverBow generated Adjusted EBITDA (a
non-GAAP measure) of $57.6 million. The Company's Adjusted EBITDA
for Leverage Ratio (a non-GAAP measure) was $62.5 million for the
third quarter. In accordance with the Leverage Ratio calculation
for SilverBow's senior secured revolving credit facility ("Credit
Facility"), the Company includes certain adjustments for its
calculation of Adjusted EBITDA. For the three months ended
September 30, 2021, SilverBow included gains related to previously
unwound derivative contracts totaling $4.0 million. Additionally,
the Company included pro forma EBITDA contributions related to
closed acquisitions, which reflect the results of operations of the
acquired assets for referenced time periods preceding the
acquisition close date, totaling $0.8 million. Adjusted EBITDA for
Leverage Ratio for the twelve months ended September 30, 2021 was
$229.5 million, which includes $20.7 million related to the
amortization of previously unwound derivative contracts and $6.6
million related to the pro forma EBITDA contribution related to
closed acquisitions.
In accordance with the Leverage Ratio calculation for
SilverBow's Credit Facility, the Company includes certain
adjustments to its calculation of Adjusted EBITDA. Adjusted EBITDA
for Leverage Ratio is calculated as Adjusted EBITDA (defined above)
plus (less) amortization of derivative contracts and pro forma
EBITDA contributions related to closed acquisitions, 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.
Capital expenditures incurred during the third quarter of 2021
totaled $51.3 million on an accrual basis.
2021 GUIDANCE AND PRELIMINARY 2022 OUTLOOK
For the fourth quarter of 2021, SilverBow is guiding to
estimated production of 240-250 MMcfe/d, with natural gas volumes
expected to comprise 180-189 MMcf/d or 75% of total production at
the midpoint. For the full year 2021, the Company is guiding to a
production range of 210-215 MMcfe/d, a 4% increase at the midpoint
compared to prior guidance. Production guidance is inclusive of the
two acquisitions which SilverBow announced in August 2021, both of
which have since closed.
For the full year 2021, the Company anticipates FCF to be
$80-$90 million1, a $35 million or 70% increase at the midpoint
compared to prior guidance. Full year capital budget guidance is
unchanged at $115-$130 million, but now reflects four gas well
completions, which were previously going to be deferred to early
2022, as a result of cost savings realized in the third quarter.
The 2021 capital program is focused on inventory expansion, Austin
Chalk delineation and free cash flow generation, and represents a
re-investment rate of approximately 60%3.
Year-to-date, SilverBow has incurred $110 million, or
approximately 90%, of its full year capital budget. Thus, based on
full year guidance and cash flows generated through the third
quarter, SilverBow expects to generate a significant amount of FCF1
during the fourth quarter of 2021.
The Company expects to resume drilling at its La Mesa position
in December 2021. The preliminary 2022 outlook assumes development
remains at a one rig pace throughout the year, compared to
approximately a 3/4 rig average in 2021. 2022 production is
expected to increase by double digits, driven by increased rig
activity as well as a full year contribution from acquisitions
announced in the second half of 2021. The Company is currently in
the process of finalizing its budget for next year and plans to
release formal guidance in early 2022. As always, SilverBow
maintains a high degree of flexibility in its drilling schedule and
operates with a returns-focused mindset.
Additional detail concerning the Company's fourth 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 October 29, 2021, SilverBow had 64% of total estimated
production volumes hedged for the remainder of 2021. For the
remainder of 2021, the Company has 121 MMcf/d (66% of guidance) of
natural gas production hedged, 3,884 Bbls/d (73% of guidance) of
oil hedged and 2,090 Bbls/d (44% of guidance) of NGLs hedged. For
2022, SilverBow has 113 MMcf/d of natural gas production hedged,
3,093 Bbls/d of oil hedged and 1,623 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 third quarter of 2021, which the Company expects to
file on Thursday, November 4, 2021, for a detailed summary of its
derivative contracts.
CAPITAL STRUCTURE AND LIQUIDITY
As of September 30, 2021, SilverBow's liquidity position was
$103.0 million, consisting of $1.0 million of cash and $102.0
million of availability under the Credit Facility. The Company is
currently in the process of its semi-annual borrowing base
redetermination and anticipates a sizeable increase to the
availability under its revolving credit line.
SilverBow's net debt as of September 30, 2021 was $397.0
million, calculated as total long-term debt of $398.0 million less
$1.0 million of cash, a $30.9 million, or 7%, decrease from
December 31, 2020.
On August 13, 2021, the Company entered into an equity
distribution agreement under which it may sell from time to time
shares of its common stock up to an aggregate offering price of
$40.0 million (the “ATM Program”). For the three months ended
September 30, 2021, SilverBow sold 0.7 million shares for net
proceeds of $12.8 million after sales agents' commissions and other
related expenses.
As of October 29, 2021, SilverBow had 14.7 million total common
shares outstanding.
CONFERENCE CALL AND UPDATED INVESTOR PRESENTATION
SilverBow will host a conference call for investors on Thursday,
November 4, 2021, at 11:00 a.m. Central Time (12:00 p.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 Resource's Third 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 SilverBow's website at www.sbow.com, clicking on
“Investor Relations” and “Events and Presentations” and then
clicking on the “Third 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 and Austin Chalk 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 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 The Company is unable to provide a quantitative reconciliation
of the forward-looking estimate of FCF (a non-GAAP measure) to the
most directly comparable forward-looking GAAP measure because the
items necessary to estimate such forward-looking GAAP measure are
not accessible or estimable at this time without unreasonable
efforts. The reconciling items in future periods could be
significant.
2 Free cash flow yield is estimated by dividing the full year
2021 free cash flow guidance by the Company's market
capitalization, as of October 29, 2021. Market capitalization is
defined as total shares outstanding multiplied by the closing share
price at a given date. As of October 29, 2021, SilverBow had
14,726,605 shares outstanding and a closing share price of
$27.60.
3 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.
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)
Condensed Consolidated Balance Sheets
(Unaudited)
SilverBow Resources, Inc. and Subsidiary
(in thousands, except share amounts)
September 30, 2021
December 31, 2020
ASSETS
Current Assets:
Cash and cash equivalents
$
988
$
2,118
Accounts receivable, net
44,190
25,850
Fair value of commodity derivatives
668
4,821
Other current assets
4,016
2,184
Total Current Assets
49,862
34,973
Property and Equipment:
Property and equipment, full cost method,
including $24,988 and $28,090, respectively, of unproved property
costs not being amortized at the end of each period
1,476,586
1,343,373
Less – Accumulated depreciation,
depletion, amortization & impairment
(846,822
)
(801,279
)
Property and Equipment, Net
629,764
542,094
Right of Use Assets
15,787
4,366
Fair Value of Long-Term Commodity
Derivatives
18
281
Other Long-Term Assets
2,904
1,421
Total Assets
$
698,335
$
583,135
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current Liabilities:
Accounts payable and accrued
liabilities
$
38,000
$
26,991
Fair value of commodity derivatives
94,778
8,171
Accrued capital costs
20,482
7,324
Accrued interest
846
983
Current lease liability
6,292
3,473
Undistributed oil and gas revenues
17,328
11,098
Total Current Liabilities
177,726
58,040
Long-Term Debt, Net
393,726
424,905
Non-Current Lease Liability
9,723
951
Deferred Tax Liabilities
303
303
Asset Retirement Obligations
4,706
4,533
Fair Value of Long-Term Commodity
Derivatives
21,989
2,946
Other Long-Term Liabilities
846
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, 13,576,285 and 12,053,763 shares issued,
respectively, and 13,384,615 and 11,936,679 shares outstanding,
respectively
136
121
Additional paid-in capital
324,106
297,712
Treasury stock, held at cost, 191,670 and
117,084 shares, respectively
(2,984
)
(2,372
)
Accumulated deficit
(231,942
)
(204,428
)
Total Stockholders’ Equity
89,316
91,033
Total Liabilities and Stockholders’
Equity
$
698,335
$
583,135
Condensed Consolidated Statements of
Operations (Unaudited)
SilverBow Resources, Inc. and Subsidiary
(in thousands, except per-share amounts)
Three Months Ended September
30, 2021
Three Months Ended September
30, 2020
Revenues:
Oil and gas sales
$
99,249
$
45,699
Operating Expenses:
General and administrative, net
5,257
5,833
Depreciation, depletion, and
amortization
16,054
13,975
Accretion of asset retirement
obligations
77
90
Lease operating expenses
6,978
5,211
Workovers
423
8
Transportation and gas processing
5,913
5,094
Severance and other taxes
4,908
2,512
Total Operating Expenses
39,610
32,723
Operating Income
59,639
12,976
Non-Operating Income (Expense)
Gain (loss) on commodity derivatives,
net
(88,554
)
(12,944
)
Interest expense, net
(7,433
)
(7,444
)
Other income (expense), net
(3
)
(56
)
Income (Loss) Before Income Taxes
(36,351
)
(7,468
)
Provision (Benefit) for Income Taxes
(408
)
(572
)
Net Income (Loss)
$
(35,943
)
$
(6,896
)
Per Share Amounts:
Basic Earnings (Loss) Per Share
$
(2.85
)
$
(0.58
)
Diluted Earnings (Loss) Per Share
$
(2.85
)
$
(0.58
)
Weighted-Average Shares Outstanding -
Basic
12,629
11,935
Weighted-Average Shares Outstanding -
Diluted
12,629
11,935
Condensed Consolidated Statements of
Operations (Unaudited)
SilverBow Resources, Inc. and Subsidiary
(in thousands, except per-share amounts)
Nine Months Ended September
30, 2021
Nine Months Ended September
30, 2020
Revenues:
Oil and gas sales
$
255,850
$
123,921
Operating Expenses:
General and administrative, net
14,872
17,926
Depreciation, depletion, and
amortization
45,485
51,130
Accretion of asset retirement
obligations
226
263
Lease operating expenses
18,767
16,023
Workovers
512
8
Transportation and gas processing
17,175
16,291
Severance and other taxes
11,974
7,513
Write-down of oil and gas properties
—
355,948
Total Operating Expenses
109,011
465,102
Operating Income (Loss)
146,839
(341,181
)
Non-Operating Income (Expense)
Gain (loss) on commodity derivatives,
net
(152,879
)
66,884
Interest expense, net
(21,888
)
(23,876
)
Other income (expense), net
6
50
Income (Loss) Before Income Taxes
(27,922
)
(298,123
)
Provision (Benefit) for Income Taxes
(408
)
20,607
Net Income (Loss)
$
(27,514
)
$
(318,730
)
Per Share Amounts:
Basic Earnings (Loss) Per Share
$
(2.24
)
$
(26.81
)
Diluted Earnings (Loss) Per Share
$
(2.24
)
$
(26.81
)
Weighted-Average Shares Outstanding -
Basic
12,283
11,890
Weighted-Average Shares Outstanding -
Diluted
12,283
11,890
Condensed Consolidated Statements of
Cash Flows (Unaudited)
SilverBow Resources, Inc. and Subsidiary
(in thousands)
Nine Months Ended September
30, 2021
Nine Months Ended September
30, 2020
Cash Flows from Operating Activities:
Net income (loss)
$
(27,514
)
$
(318,730
)
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating activities
Depreciation, depletion, and
amortization
45,485
51,130
Write-down of oil and gas properties
—
355,948
Accretion of asset retirement
obligations
226
263
Deferred income taxes
—
21,087
Share-based compensation
3,450
3,503
(Gain) Loss on derivatives, net
152,879
(66,884
)
Cash settlement (paid) received on
derivatives
(28,976
)
76,150
Settlements of asset retirement
obligations
(151
)
(27
)
Write down of debt issuance cost
229
459
Other
1,883
2,436
Change in operating assets and
liabilities:
(Increase) decrease in accounts receivable
and other current assets
(20,941
)
7,413
Increase (decrease) in accounts payable
and accrued liabilities
7,215
(3,981
)
Increase (decrease) in income taxes
payable
—
(480
)
Increase (decrease) in accrued
interest
(137
)
(505
)
Net Cash Provided by (Used in) Operating
Activities
133,648
127,782
Cash Flows from Investing Activities:
Additions to property and equipment
(98,219
)
(102,713
)
Acquisition of oil and gas properties
(13,219
)
(3,441
)
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
(112,522
)
(101,828
)
Cash Flows from Financing Activities:
Proceeds from bank borrowings
195,000
71,000
Payments of bank borrowings
(227,000
)
(97,000
)
Net proceeds from issuances of common
stock
12,756
—
Purchase of treasury shares
(612
)
(90
)
Payments of debt issuance costs
(2,400
)
—
Net Cash Provided by (Used in) Financing
Activities
(22,256
)
(26,090
)
Net Increase (Decrease) in Cash and Cash
Equivalents
(1,130
)
(136
)
Cash and Cash Equivalents at Beginning of
Period
2,118
1,358
Cash and Cash Equivalents at End of
Period
$
988
$
1,222
Supplemental Disclosures of Cash Flow
Information:
Cash paid during period for interest, net
of amounts capitalized
$
20,277
$
22,290
Non-cash Investing and Financing
Activities:
Changes in capital accounts payable and
capital accruals
$
11,393
$
(25,641
)
Non-cash equity consideration for
acquisitions
$
(10,023
)
$
—
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 third quarter 2021 Form
10-Q for discussion of the Credit Agreement and its covenants.
Adjusted EBITDA for Leverage Ratio: In accordance with
the Leverage Ratio calculation for SilverBow's Credit Facility, the
Company makes certain adjustments to its calculation of Adjusted
EBITDA. Adjusted EBITDA for Leverage Ratio is calculated as
Adjusted EBITDA (defined above) plus (less) amortization of
derivative contracts and pro forma EBITDA contributions related to
closed acquisitions. 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 and Free Cash Flow Yield: 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. Free
cash flow yield is calculated by taking free cash flow divided by
the market capitalization of the Company at a given date. 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. From
time to time the Company provides forward-looking free cash flow
and free cash flow yield estimates or targets; however, SilverBow
is unable to provide a quantitative reconciliation of these
forward-looking non-GAAP measures to the most directly comparable
forward-looking GAAP measure because the items necessary to
estimate such forward-looking GAAP measure are not accessible or
estimable at this time without unreasonable efforts. The
reconciling items in future periods could be significant.
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.
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. SilverBow believes
that re-investment rate is useful to investors because it reflects
the magnitude of capital needed to be invested back into the
Company'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. SilverBow 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). The Company 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. SilverBow 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 September
30, 2021
Three Months Ended September
30, 2020
Net Income (Loss)
$
(35,943
)
$
(6,896
)
Plus:
Depreciation, depletion and
amortization
16,054
13,975
Accretion of asset retirement
obligations
77
90
Interest expense
7,433
7,444
Loss (gain) on commodity derivatives,
net
88,554
12,944
Derivative cash settlements
collected/(paid) (1)
(19,327
)
7,938
Income tax expense/(benefit)
(408
)
(572
)
Share-based compensation expense
1,191
1,066
Adjusted EBITDA
$
57,631
$
35,989
Plus:
Cash interest expense and bank fees,
net
(6,995
)
(7,284
)
Capital expenditures(2)
(51,330
)
(20,191
)
Current income tax (expense)/benefit
408
572
Free Cash Flow
$
(286
)
$
9,086
Adjusted EBITDA
$
57,631
$
35,989
Amortization of derivative contracts
3,993
9,099
Pro forma contribution from closed
acquisitions
846
—
Adjusted EBITDA for Leverage Ratio
(3)
$
62,470
$
45,088
(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 for Leverage Ratio
includes proceeds from the amortization of previously unwound
derivative contracts and pro forma EBITDA contributions reflecting
the results of acquired assets' operations for referenced time
periods preceding the acquired assets' close date.
Last Twelve Months Ended
September 30, 2021
Last Twelve Months Ended
September 30, 2020
Net Income (Loss)
$
(18,166
)
$
(312,482
)
Plus:
Depreciation, depletion and
amortization
58,919
76,275
Accretion of asset retirement
obligations
317
336
Interest expense
29,240
32,937
Impairment of oil and gas properties
—
355,948
Loss (gain) on commodity derivatives,
net
158,459
(56,814
)
Derivative cash settlements
collected/(paid) (1)
(31,026
)
46,317
Income tax expense/(benefit)
(104
)
18,490
Share-based compensation expense
4,504
4,560
Adjusted EBITDA
$
202,143
$
165,567
Plus:
Monetized derivative contracts
—
38,310
Cash interest expense and bank fees,
net
(26,916
)
(30,526
)
Capital expenditures(2)
(129,989
)
(129,944
)
Current income tax (expense)/benefit
408
230
Free Cash Flow
$
45,646
$
43,637
Adjusted EBITDA
$
202,143
$
165,567
Amortization of derivative contracts
20,689
15,836
Pro forma contribution from closed
acquisitions
6,648
—
Adjusted EBITDA for Leverage Ratio
(3)
$
229,480
$
181,403
(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 for Leverage Ratio
includes proceeds from the amortization of previously unwound
derivative contracts and pro forma EBITDA contributions reflecting
the results of acquired assets' operations for referenced time
periods preceding the acquired assets' close date.
Production Volumes & Pricing
(Unaudited)
SilverBow Resources, Inc. and
Subsidiary
Three Months Ended September
30, 2021
Three Months Ended September
30, 2020
Production volumes:
Oil (MBbl) (1)
368
472
Natural gas (MMcf)
15,092
11,897
Natural gas liquids (MBbl) (1)
372
347
Total (MMcfe)
19,530
16,809
Oil, natural gas and natural gas liquids
sales (in thousands):
Oil
$
25,230
$
17,665
Natural gas
62,529
23,595
Natural gas liquids
11,489
4,439
Total
$
99,249
$
45,699
Average realized price:
Oil (per Bbl)
$
68.54
$
37.45
Natural gas (per Mcf)
4.14
1.98
Natural gas liquids (per Bbl)
30.92
12.79
Average per Mcfe
$
5.08
$
2.72
Price impact of cash-settled
derivatives:
Oil (per Bbl)
$
(17.18
)
$
6.91
Natural gas (per Mcf)
(0.69
)
0.39
Natural gas liquids (per Bbl)
(7.07
)
(0.01
)
Average per Mcfe
$
(0.99
)
$
0.47
Average realized price including impact of
cash-settled derivatives:
Oil (per Bbl)
$
51.36
$
44.36
Natural gas (per Mcf)
3.46
2.37
Natural gas liquids (per Bbl)
23.85
12.78
Average per Mcfe
$
4.09
$
3.19
(1) Oil and NGLs are converted at the rate
of one barrel to six Mcfe. Bbl refers to barrels, and MBbl refers
to one thousand barrels. MMcf refers to one million cubic feet.
Fourth Quarter & Full Year
2021 Guidance
Guidance
4Q 2021
FY 2021
Production Volumes:
Oil (Bbls/d)
5,250 - 5,350
3,800 - 3,950
Natural Gas (MMcf/d)
180 - 189
164 - 167
NGLs (Bbls/d)
4,750 - 4,850
3,850 - 4,000
Total Reported Production (MMcfe/d)
240 - 250
210 - 215
% Gas
75%
78%
Product Pricing:
Crude Oil NYMEX Differential ($/Bbl)
($3.50) - ($0.50)
N/A
Natural Gas NYMEX Differential ($/Mcf)
($0.15) - ($0.05)
N/A
Natural Gas Liquids (% of WTI)
45% - 49%
N/A
Operating Costs & Expenses:
Lease Operating Expenses ($/Mcfe)
$0.35 - $0.39
$0.35 - $0.36
Transportation & Processing
($/Mcfe)
$0.29 - $0.33
$0.29 - $0.33
Production Taxes (% of Revenue)
4.5% - 5.0%
4.7% - 4.9%
Cash G&A, net ($MM)
$4.2 - $4.7
$15.6 - $16.1
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211103006114/en/
Jeff Magids Director of Finance & Investor Relations (281)
874-2700, (888) 991-SBOW
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