Successfully closed two acquisitions adding
scale
New Austin Chalk wells continuing to
outperform; additional development planned for second half of
2022
Targeting leverage ratio of approximately 1.0x
by year-end 2022
Significant production ramp expected into 2023;
projected 2023 Free Cash Flow Yield >25%
SilverBow Resources, Inc. (NYSE: SBOW) (“SilverBow” or the
“Company”) today announced operating and financial results for the
second quarter of 2022. Highlights include:
- Reported net production of 238 million cubic feet of natural
gas equivalent per day (“MMcfe/d”) (78% natural gas) for the second
quarter of 2022
- Reported net income of $89 million, which includes a net
unrealized gain on the value of the Company's derivative contracts
of $44 million, and Adjusted EBITDA of $85 million for the second
quarter of 2022. Adjusted EBITDA is a non-GAAP measure defined and
reconciled in the tables below
- Leverage ratio of 1.42x1 at quarter-end; targeting year-end
2022 leverage ratio of approximately 1.0x1
- In conjunction with closing the acquisition of substantially
all of the oil and gas assets of Sundance Energy, Inc. and its
affiliated entities (collectively, "Sundance"), SilverBow's
borrowing base under its senior secured revolving credit facility
(“Credit Facility”) increased to $775 million from $525 million on
June 22, 2022
- Production is estimated to grow approximately 30% per year in
both 2022 and 2023 with a 2023 free cash flow yield exceeding 25%2.
FY22 oil production is expected to increase by 100% compared to
2021
- Proved Developed Producing ("PDP") PV-10 of $1.8 billion3 as of
June 30, 2022 using the U.S. Securities and Exchange Commission
("SEC") pricing
- Average realized prices for crude oil and natural gas were 101%
and 102% of West Texas Intermediate ("WTI") and Henry Hub,
respectively, excluding hedging, as a result of favorable basis
pricing in the Eagle Ford
MANAGEMENT COMMENTS
Sean Woolverton, SilverBow’s Chief Executive Officer, commented,
“During the second quarter, we successfully closed two acquisitions
while upsizing our revolver from $525 million to $775 million. The
team is integrating these new assets into our operations and is
encouraged by the efficiencies that SilverBow stands to gain. Our
daily production increased in May as we brought online wells
drilled earlier this year, and June's production rate hit a
year-to-date high as result. With the closing of the Sundance
acquisition, we added a second rig and expect to continue to run at
a two-rig pace for the foreseeable future. Given the inventory
additions we have made over the last twelve months, SilverBow has
over a decade of high-return drilling locations at a two-rig pace.
As of June 30th and using SEC prices, our estimated PDP PV-10 value
stood at $1.8 billion compared to our enterprise value of
approximately $1.6 billion4."
Mr. Woolverton commented further, “Looking ahead, our production
is expected to ramp significantly through the second half of 2022
and into 2023. We estimate we will grow second half 2022 production
by more than 35% compared to the first half of 2022, and increase
our oil production by 150% over the same time period. We estimate
we will grow production by approximately 30% in both 2022 and 2023
with a 2023 free cash flow yield exceeding 25%. The increased
liquidity from our upsized borrowing base and our strong cash flow
outlook positions SilverBow to fund future growth and continue
expanding its portfolio, both through the drill-bit and through
accretive acquisitions."
OPERATIONS HIGHLIGHTS
During the second quarter of 2022, SilverBow drilled seven net
wells and completed and brought online 15 net wells. The Company
completed and brought online an eight-well pad in its Webb County
Gas area. This was the largest pad developed in SilverBow’s
history, achieving excellent pad pumping efficiency and averaging
11 stages completed per day comprising 4.6 million pounds of sand
per day. Two of the eight wells on this pad were located in the
Austin Chalk formation and are the best performing Austin Chalk
wells the Company has drilled to date when normalized on a per
lateral foot basis. SilverBow also completed and brought online a
three-well pad in its Western Condensate area and a three-well pad
in its Central Oil area during the second quarter. Both pads are
currently outperforming expectations with initial production rates
exceeding their respective type curves.
SilverBow operated one drilling rig throughout the second
quarter, and as previously planned added a second rig in
conjunction with the closing of the Sundance acquisition on June
30, 2022. The Company intends to continue drilling at a two rig
pace through the second half of 2022, with one rig drilling
primarily gas-weighted locations and one rig drilling primarily
liquids-weighted locations. Capital and operating costs continue to
face inflationary pressures as a result of high demand for
products, materials and services provided by vendors in conjunction
with overall supply chain disruptions and tight labor market
conditions. SilverBow is addressing cost inflation through enhanced
procurement initiatives, pre-ordering key materials and a focus on
operational efficiencies. With two fully utilized rigs, the Company
has greater line of sight into upcoming activity levels and is
employing a range of short and long-term contracts to secure
equipment while maintaining cost discipline. As always, SilverBow
optimizes its drilling schedule based on commodity prices, returns
on investment and strategically proving up additional inventory at
key focus areas such as the Austin Chalk. The Company anticipates
realizing cost efficiencies on its recently acquired assets as they
are fully integrated into SilverBow’s cost structure over the
second half of the year.
PRODUCTION VOLUMES, OPERATING COSTS AND REALIZED
PRICES
SilverBow's total net production for the second quarter of 2022
averaged 238 MMcfe/d. Production mix for the second quarter
consisted of 78% natural gas, 11% oil and 11% natural gas liquids
(“NGLs”). Natural gas comprised 68% of total oil and gas sales for
the second quarter, compared to 67% in the second quarter of
2021.
For the second quarter of 2022, lease operating expenses (“LOE”)
were $0.47 per Mcfe, transportation and processing expenses
(“T&P”) were $0.31 per Mcfe and production and ad valorem taxes
were 5.4% of oil and gas sales. Total production expenses, which
include LOE, T&P and production taxes, were $1.24 per Mcfe for
the second quarter. Net general and administrative (“net G&A”)
expenses for the second quarter of 2022 were $5.7 million, or $0.26
per Mcfe. After deducting $1.7 million of non-cash compensation
expense, cash general and administrative (“cash G&A”) (a
non-GAAP measure) expenses were $4.0 million for the second quarter
of 2022, or $0.19 per Mcfe.
The Company continues to benefit from strong basis pricing in
the Eagle Ford. Crude oil and natural gas realizations in the
second quarter were 101% of WTI and 102% of Henry Hub,
respectively, excluding hedging. SilverBow's average realized
natural gas price for the second quarter of 2022, excluding
hedging, was $7.29 per thousand cubic feet of natural gas (“Mcf”)
compared to $2.95 per Mcf in the second quarter of 2021. The
average realized crude oil selling price in the second quarter of
2022, excluding hedging, was $109.94 per barrel compared to $63.62
per barrel in the second quarter of 2021. The average realized NGL
selling price in the second quarter, excluding hedging, was $39.51
per barrel (36% of WTI benchmark) compared to $21.65 per barrel
(33% of WTI benchmark) in the second quarter of 2021. Please refer
to the tables included with today's news release for production
volumes and pricing information.
FINANCIAL RESULTS
SilverBow reported total oil and gas sales of $182.6 million for
the second quarter of 2022. The Company reported net income of
$88.8 million, which includes a net unrealized gain on the value of
the SilverBow's derivative contracts of $44.0 million.
For the second quarter of 2022, the Company generated Adjusted
EBITDA (a non-GAAP measure) of $85.4 million. For the twelve months
ended June 30, 2022, SilverBow reported Adjusted EBITDA for
Leverage Ratio (a non-GAAP measure) of $452.9 million, which, in
accordance with the Leverage Ratio calculation in the Company's
Credit Facility, includes contributions from acquired assets prior
to their closing dates totaling $154.2 million.
Capital expenditures incurred during the second quarter of 2022
totaled $74.5 million on an accrual basis.
2022 GUIDANCE AND PRELIMINARY 2023 OUTLOOK
The Company's forward looking guidance is unchanged from its
July update. For the third quarter of 2022, SilverBow is guiding to
estimated production of 293-308 MMcfe/d, with natural gas volumes
comprising 200-210 MMcf/d or 68% of total production at the
midpoint. For the full year 2022, the Company is guiding to a
production range of 272-282 MMcfe/d, with natural gas volumes
comprising 71% of total production at the midpoint. Production is
expected to increase substantially through the second half of 2022,
with December exit-rate production approximately 30% higher
compared to the SilverBow's June production. The Company
anticipates full year 2022 capital expenditures to be $300-$330
million. This capital budget guidance reflects the addition of a
second drilling rig on recently acquired assets in the second half
of the year and management's latest outlook on cost inflation.
SilverBow's preliminary 2023 guidance assumes a continuous
two-rig development program. 2023 average daily production is
expected to increase more than 35% year-over-year to approximately
380 MMcfe/d. The Company expects to generate approximately $250
million of free cash flow in 2023 based on $90 WTI and $4.75 Henry
Hub pricing. SilverBow estimates that every $5.00 change in WTI oil
price would result in a change of $20 million in free cash flow and
every $0.50 change in Henry Hub natural gas price results in a
change of $20 million in free cash flow, assuming the Company's
hedge position as of July 29, 2022. As always, SilverBow maintains
a high degree of flexibility in its drilling and completion
schedule and operates with a returns-focused mindset.
Additional detail concerning the Company's third quarter and
full year 2022 guidance can be found in the table included with
today's new 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 is structured to
preserve exposure to higher commodity prices while staying in
compliance with the financial covenants under SilverBow's debt
facilities. In conjunction with the closing of the acquisitions,
the Company assumed the hedge books and layered on additional
commodity derivatives for oil and natural gas.
As of July 29, 2022, SilverBow has 166 MMcf/d of natural gas
production hedged, 8,204 Bbls/d of oil hedged and 3,166 Bbls/d of
NGLs hedged for the remainder of 2022. For 2023, the Company has
161 MMcf/d of natural gas production hedged, 7,291 Bbls/d of oil
hedged and 2,750 Bbls/d of NGLs hedged. The hedged amounts are
inclusive of both swaps and collars.
Please see SilverBow's Corporate Presentation and Form 10-Q
filing for the second quarter of 2022, which the Company expects to
file on Thursday, August 4, 2022, for a detailed summary of its
derivative contracts.
CAPITAL STRUCTURE AND LIQUIDITY
As of June 30, 2022, SilverBow had $9.4 million of cash and
$494.0 million of outstanding borrowings under its Credit Facility.
The Company's liquidity position was $284.3 million consisting of
$9.4 million of cash and $274.9 million of availability under the
Credit Facility, which factors in $6.1 million in letters of
credit. SilverBow's net debt as of June 30, 2022 was $634.6
million, calculated as total long-term debt of $644.0 million less
$9.4 million of cash.
On June 22, 2022, in conjunction with the closing of the
Sundance acquisition, SilverBow entered into the Tenth Amendment to
its Credit Facility which increased the borrowing base to $775
million, extended the maturity date for the credit agreement to
October 19, 2026 (or to the extent earlier, the date that is 91
days prior to the scheduled maturity of the Company's Second Lien
notes) and reduced the interest rate margin for amounts
outstanding, amongst other things.
As of July 29, 2022, SilverBow had 22.3 million total common
shares outstanding.
CONFERENCE CALL AND UPDATED INVESTOR PRESENTATION
SilverBow will host a conference call for investors on Thursday,
August 4, 2022, at 11:00 a.m. Central Time (12:00 p.m. Eastern
Time). Investors and participants can listen to the call by dialing
1-888-415-4465 (U.S.) or 1-646-960-0140 (International) and
requesting SilverBow Resource's Second Quarter 2022 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 “Second Quarter 2022 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, the
benefits of the acquisitions, future operations, guidance and
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, service costs, impacts of inflation,
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 “will,” “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; general economic and political
conditions, including increased interest rates, inflationary
pressures, a general economic slowdown or recession, political
tensions or war; risks related to the acquisitions, including that
the benefits of the acquisitions may not be fully realized or may
take longer to realize than expected, that we fail to successfully
integrate the properties and assets into our business, and that
management attention will be diverted to integration-related
issues; 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; volatility in natural gas, oil and NGL
prices; future cash flow and its 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; impairments on our properties; well results; 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; 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, 2021
(the “Annual Report”), and subsequent quarterly reports on Form
10-Q and current reports on Form 8-K.
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. The Company’s capital budget, operating
plan, service cost outlook and development plans are subject to
change at any time. 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 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.
2 Free cash flow yield is estimated by dividing the free cash
flow guidance for the referenced time period by the Company's
market capitalization. Market capitalization is defined as total
shares outstanding multiplied by the closing share price at a given
date. As of July 29, 2022, SilverBow had 22.3 million shares
outstanding and a closing share price of $45.19.
3 Based on management's estimates of reserve volumes and values
using a 6/30/22 effective date and SEC prices as of 6/30/22.
Inclusive of acquired assets with closing date on or before
6/30/22. Figures reported as unaudited.
4 Enterprise value is defined as the Company's market
capitalization plus net debt. As of July 29, 2022, SilverBow had
22.3 million shares outstanding and a closing share price of
$45.19. Net debt as of June 30, 2022 was $634.6 million.
(Financial Highlights to Follow)
Condensed Consolidated Balance Sheets
(Unaudited)
SilverBow Resources, Inc. and Subsidiary
(in thousands, except share amounts)
June 30, 2022
December 31, 2021
ASSETS
Current Assets:
Cash and cash equivalents
$
9,408
$
1,121
Accounts receivable, net
110,093
49,777
Fair value of commodity derivatives
10,094
2,806
Other current assets
7,201
1,875
Total Current Assets
136,796
55,579
Property and Equipment:
Property and equipment, full cost method,
including $21,412 and $17,090, respectively, of unproved property
costs not being amortized at the end of each period
2,200,603
1,611,953
Less – Accumulated depreciation,
depletion, amortization & impairment
(917,619
)
(869,985
)
Property and Equipment, Net
1,282,984
741,968
Right of use assets
16,705
16,065
Fair value of long-term commodity
derivatives
5,829
201
Other long-term assets
10,041
5,641
Total Assets
$
1,452,355
$
819,454
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current Liabilities:
Accounts payable and accrued
liabilities
$
78,778
$
35,034
Fair value of commodity derivatives
136,185
47,453
Accrued capital costs
24,166
7,354
Accrued interest
1,420
697
Current lease liability
9,188
7,222
Undistributed oil and gas revenues
23,323
23,577
Total Current Liabilities
273,060
121,337
Long-term debt, net
640,175
372,825
Non-current lease liability
7,788
9,090
Deferred tax liabilities
7,721
6,516
Asset retirement obligations
8,375
5,526
Fair value of long-term commodity
derivatives
36,913
8,585
Other long-term liabilities
5,066
3,043
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, 22,652,048 and 16,822,845 shares issued,
respectively, and 22,306,690 and 16,631,175 shares outstanding,
respectively
227
168
Additional paid-in capital
573,259
413,017
Treasury stock, held at cost, 345,358 and
191,670 shares, respectively
(7,095
)
(2,984
)
Accumulated deficit
(93,134
)
(117,669
)
Total Stockholders’ Equity
473,257
292,532
Total Liabilities and Stockholders’
Equity
$
1,452,355
$
819,454
Condensed Consolidated Statements of
Operations (Unaudited)
SilverBow Resources, Inc. and Subsidiary
(in thousands, except per-share amounts)
Three Months Ended June 30,
2022
Three Months Ended June 30,
2021
Revenues:
Oil and gas sales
$
182,605
$
69,861
Operating Expenses:
General and administrative, net
5,710
4,834
Depreciation, depletion, and
amortization
26,441
16,039
Accretion of asset retirement
obligations
101
74
Lease operating expenses
10,270
5,515
Workovers
2
76
Transportation and gas processing
6,769
6,206
Severance and other taxes
9,838
3,577
Total Operating Expenses
59,131
36,321
Operating Income
123,474
33,540
Non-Operating Income (Expense)
Gain (loss) on commodity derivatives,
net
(22,406
)
(46,067
)
Interest expense, net
(7,902
)
(7,436
)
Other income (expense), net
(10
)
12
Income (Loss) Before Income Taxes
93,156
(19,951
)
Provision (Benefit) for Income Taxes
4,366
—
Net Income (Loss)
$
88,790
$
(19,951
)
Per Share Amounts:
Basic Earnings (Loss) Per Share
$
5.05
$
(1.64
)
Diluted Earnings (Loss) Per Share
$
4.95
$
(1.64
)
Weighted-Average Shares Outstanding -
Basic
17,581
12,190
Weighted-Average Shares Outstanding -
Diluted
17,938
12,190
Condensed Consolidated Statements of
Operations (Unaudited)
SilverBow Resources, Inc. and Subsidiary
(in thousands, except per-share amounts)
Six Months Ended June 30,
2022
Six Months Ended June 30,
2021
Revenues:
Oil and gas sales
$
312,261
$
156,602
Operating Expenses:
General and administrative, net
10,497
9,616
Depreciation, depletion, and
amortization
47,595
29,431
Accretion of asset retirement
obligations
200
148
Lease operating expenses
19,395
11,789
Workovers
649
90
Transportation and gas processing
13,121
11,262
Severance and other taxes
17,602
7,066
Total Operating Expenses
109,059
69,402
Operating Income
203,202
87,200
Non-Operating Income (Expense)
Gain (loss) on commodity derivatives,
net
(162,648
)
(64,326
)
Interest expense, net
(14,459
)
(14,454
)
Other income (expense), net
52
9
Income (Loss) Before Income Taxes
26,147
8,429
Provision (Benefit) for Income Taxes
1,612
—
Net Income (Loss)
$
24,535
$
8,429
Per Share Amounts:
Basic Earnings (Loss) Per Share
$
1.43
$
0.70
Diluted Earnings (Loss) Per Share
$
1.40
$
0.68
Weighted-Average Shares Outstanding -
Basic
17,146
12,110
Weighted-Average Shares Outstanding -
Diluted
17,506
12,379
Condensed Consolidated Statements of
Cash Flows (Unaudited)
SilverBow Resources, Inc. and Subsidiary
(in thousands)
Six Months Ended June 30,
2022
Six Months Ended June 30,
2021
Cash Flows from Operating Activities:
Net income (loss)
$
24,535
$
8,429
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating activities
Depreciation, depletion, and
amortization
47,595
29,431
Accretion of asset retirement
obligations
200
148
Deferred income taxes
1,205
—
Share-based compensation
2,714
2,260
(Gain) Loss on derivatives, net
162,648
64,326
Cash settlement (paid) received on
derivatives
(90,603
)
(10,708
)
Settlements of asset retirement
obligations
(54
)
(166
)
Write down of debt issuance cost
350
229
Other
1,668
1,202
Change in operating assets and
liabilities:
(Increase) decrease in accounts receivable
and other current assets
(34,422
)
(1,387
)
Increase (decrease) in accounts payable
and accrued liabilities
(1,254
)
(502
)
Increase (decrease) in income taxes
payable
304
—
Increase (decrease) in accrued
interest
723
(28
)
Net Cash Provided by (Used in) Operating
Activities
115,609
93,234
Cash Flows from Investing Activities:
Additions to property and equipment
(93,746
)
(56,995
)
Acquisition of oil and gas properties, net
of purchase price adjustments
(272,225
)
(207
)
Proceeds from the sale of property and
equipment
2,532
—
Payments on property sale obligations
(750
)
(1,084
)
Net Cash Provided by (Used in) Investing
Activities
(364,189
)
(58,286
)
Cash Flows from Financing Activities:
Proceeds from bank borrowings
482,000
123,000
Payments of bank borrowings
(215,000
)
(155,000
)
Net proceeds from stock options
exercised
39
—
Purchase of treasury shares
(2,965
)
(603
)
Payments of debt issuance costs
(7,207
)
(2,400
)
Net Cash Provided by (Used in) Financing
Activities
256,867
(35,003
)
Net Increase (Decrease) in Cash and Cash
Equivalents
8,287
(55
)
Cash and Cash Equivalents at Beginning of
Period
1,121
2,118
Cash and Cash Equivalents at End of
Period
$
9,408
$
2,063
Supplemental Disclosures of Cash Flow
Information:
Cash paid during period for interest, net
of amounts capitalized
$
12,228
$
13,282
Non-cash Investing and Financing
Activities:
Changes in capital accounts payable and
capital accruals
$
20,882
$
1,307
Non-cash equity consideration for
acquisitions
$
(156,259
)
$
—
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 Annual Report and subsequent 8-Ks 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.
The Company has provided forward-looking Cash G&A expenses
estimates; 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.
Free Cash Flow and Free Cash Flow Yield: Free cash flow
is calculated as Adjusted EBITDA (defined above) plus (less) 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.
PV-10: PV-10 is a non-GAAP measure that represents the
estimated future net cash flows from estimated proved reserves
discounted at an annual rate of 10 percent before giving effect to
income taxes. PV-10 is most comparable to the Standardized Measure
which represents the discounted future net cash flows of the
after-tax estimated future cash flows from estimated proved
reserves discounted at an annual rate of 10 percent, determined in
accordance with GAAP. The Company uses non-GAAP PV-10 value as one
measure of the value of its estimated proved reserves and to
compare relative values of proved reserves amount exploration and
production companies without regard to income taxes. Management
believes PV-10 value is a useful measure for comparison of proved
reserve values among companies because, unlike standardized
measure, it excludes future income taxes that often depend
principally on the characteristics of the owner of the reserves
rather than on the nature, location and quality of the reserves
themselves. The Company has provided a PV-10 estimate; however,
SilverBow is unable to provide a quantitative reconciliation of
this non-GAAP measure to the most directly comparable GAAP measure
because the items necessary to estimate such GAAP measure are not
accessible or estimable at this time without unreasonable efforts.
The reconciling items in future periods could be significant.
Total Debt to Adjusted EBITDA (Leverage Ratio): Leverage
Ratio is calculated as total debt, defined as long-term debt
excluding unamortized discount and debt issuance costs, divided by
Adjusted EBITDA (defined above) for the most recently completed
12-month period. The Company has provided a forward-looking
Leverage Ratio estimate; however, SilverBow is unable to provide a
quantitative reconciliation of this forward-looking 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.
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.
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,
2022
Three Months Ended June 30,
2021
Net Income (Loss)
$ 88,790
$ (19,951)
Plus:
Depreciation, depletion and
amortization
26,441
16,039
Accretion of asset retirement
obligations
101
74
Interest expense
7,902
7,436
Loss (gain) on commodity derivatives,
net
22,406
46,067
Realized gain (loss) on commodity
derivatives, net (1)
(66,233)
(8,060)
Income tax expense/(benefit)
4,366
—
Share-based compensation expense
1,667
1,189
Adjusted EBITDA
$ 85,440
$ 42,794
Plus:
Cash interest expense and bank fees,
net
(13,448)
(9,259)
Capital expenditures(2)
(74,469)
(26,157)
Current income tax (expense)/benefit
(258)
—
Free Cash Flow
$ (2,735)
$ 7,378
(1) Amounts relate to settled contracts
covering the production months during 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.
Last Twelve Months Ended June
30, 2022
Last Twelve Months Ended June
30, 2021
Net Income (Loss)
$
102,866
$
10,881
Plus:
Depreciation, depletion and
amortization
86,793
56,841
Accretion of asset retirement
obligations
357
330
Interest expense
29,133
29,251
Loss (gain) on commodity derivatives,
net
221,340
82,850
Realized gain (loss) on commodity
derivatives, net (1)
(154,848
)
(3,761
)
Income tax expense/(benefit)
8,010
(268
)
Share-based compensation expense
5,100
4,379
Adjusted EBITDA
$
298,751
$
180,503
Plus:
Cash interest expense and bank fees,
net
(34,506
)
(29,606
)
Capital expenditures(2)
(186,212
)
(98,850
)
Current income tax (expense)/benefit
(593
)
572
Free Cash Flow
$
77,440
$
52,619
Adjusted EBITDA
$
298,751
$
180,503
Amortization of derivative contracts
—
25,796
Pro forma contribution from closed
acquisitions
154,172
—
Adjusted EBITDA for Leverage Ratio
(3)
$
452,923
$
206,299
(1) Amounts relate to settled contracts
covering the production months during 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,
which is calculated in accordance with SilverBow's Credit Facility,
includes pro forma EBITDA contributions reflecting the results of
acquired assets' operations for referenced time periods preceding
the acquired assets' close date. For referenced last twelve month
periods prior to 2022, proceeds from the amortization of previously
unwound derivative contracts are also included in the Adjusted
EBITDA for Leverage Ratio in accordance with the calculation in its
Credit Facility.
Production Volumes & Pricing
(Unaudited)
SilverBow Resources, Inc. and
Subsidiary
Three Months Ended June 30,
2022
Three Months Ended June 30,
2021
Production volumes:
Oil (MBbl) (1)
400
250
Natural gas (MMcf)
16,918
15,879
Natural gas liquids (MBbl) (1)
387
332
Total (MMcfe)
21,643
19,367
Oil, natural gas and natural gas liquids
sales (in thousands):
Oil
$
44,014
$
15,890
Natural gas
123,296
46,791
Natural gas liquids
15,295
7,180
Total
$
182,605
$
69,861
Average realized price:
Oil (per Bbl)
$
109.94
$
63.62
Natural gas (per Mcf)
7.29
2.95
Natural gas liquids (per Bbl)
39.51
21.65
Average per Mcfe
$
8.44
$
3.61
Price impact of cash-settled
derivatives:
Oil (per Bbl)(2)
$
(42.96
)
$
(20.49
)
Natural gas (per Mcf)
(2.75
)
(0.13
)
Natural gas liquids (per Bbl)
(6.38
)
(2.79
)
Average per Mcfe
$
(3.06
)
$
(0.42
)
Average realized price including impact of
cash-settled derivatives:
Oil (per Bbl)
$
66.99
$
43.13
Natural gas (per Mcf)
4.54
2.82
Natural gas liquids (per Bbl)
33.13
18.86
Average per Mcfe
$
5.38
$
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.
(2) Excludes approximately $3.6 million in
settled oil hedges related to our Sundance acquisition.
Third Quarter 2022 & Full
Year 2022 Guidance
Guidance
3Q 2022
FY 2022
Production Volumes:
Oil (Bbls/d)
9,700 - 10,100
7,900 - 8,200
Natural Gas (MMcf/d)
200 - 210
194 - 200
NGLs (Bbls/d)
5,800 - 6,200
5,100 - 5,400
Total Reported Production (MMcfe/d)
293 - 308
272 - 282
Product Pricing:
Crude Oil NYMEX Differential ($/Bbl)
($0.50) - $2.50
N/A
Natural Gas NYMEX Differential ($/Mcf)
($0.30) - ($0.20)
N/A
Natural Gas Liquids (% of WTI)
33% - 37%
N/A
Operating Costs & Expenses:
Lease Operating Expenses ($/Mcfe)
$0.71 - $0.75
$0.59 - $0.63
Transportation & Processing
($/Mcfe)
$0.33 - $0.37
$0.32 - $0.36
Production Taxes (% of Revenue)
5.0% - 6.0%
5.5% - 6.5%
Cash G&A, net ($MM)
$4.2 - $4.7
$16.0 - $17.0
*A forward-looking estimate of net G&A
expenses is not provided with the forward-looking estimate of cash
G&A (a non-GAAP measure) because the items necessary to
estimate net G&A expenses are not accessible or estimable at
this time without unreasonable efforts. Such items could have a
significant impact on net G&A expenses.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220803005872/en/
Jeff Magids Director of Finance & Investor Relations (281)
874-2700, (888) 991-SBOW
SilverBow Resources (NYSE:SBOW)
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