Net production at midpoint of guidance;
increased 26% quarter-over-quarter
Capturing higher returns with two rigs
currently drilling in Webb County Gas area
Closed accretive bolt-on liquids-weighted
acquisition in DeWitt and Gonzales counties
Established new dry gas position in Dorado play
of Webb County
SilverBow Resources, Inc. (NYSE: SBOW) (“SilverBow” or the
“Company”) today announced operating and financial results for the
third quarter of 2022. Highlights include:
- Reported net production of 299 million cubic feet of natural
gas equivalent per day (“MMcfe/d”) (70% natural gas) for the third
quarter of 2022, at the midpoint of guidance
- Reported net income of $143 million, which includes a net
unrealized gain on the value of the Company's derivative contracts
of $89 million, and Adjusted EBITDA of $115 million for the third
quarter of 2022. Adjusted EBITDA is a non-GAAP measure defined and
reconciled in the tables below
- Reduced total debt by $14 million quarter-over-quarter.
Leverage ratio of 1.27x1 at quarter-end; targeting leverage ratio
of less than 1.0x1
- Established new 7,500 net acre block in the Dorado play of Webb
County, adding over 50 net locations of stacked pay, co-development
inventory across the Austin Chalk and Eagle Ford formations.
Approximately $38 million of the total $45 million spend in the
area was incurred during the third quarter of 2022
- Closed the acquisition of incremental working interests and new
adjacent acreage in the Karnes trough of DeWitt and Gonzales
counties for $87 million, subject to customary closing adjustments,
on October 31, 2022. Adds 5,200 net acres, net production of 1,100
barrels of oil equivalent per day (“Boe/d”), and over two rig-years
of stacked pay inventory. Consolidated acreage block provides for
extended laterals and more efficient development
- Recently shifted both drilling rigs to Webb County given the
strong Austin Chalk performance in the Dorado play. Increased
working interest in 12 of the 16 wells planned for this area over
the third and fourth quarters of 2022 from 64% to 100% which
represents an incremental PV-10 value of approximately $100
million
- Guided to 2023 production growth of ~50% year-over-year with
plans to potentially add a third rig in the second half of 2023 to
develop Karnes trough assets; Expanded capital program contingent
upon commodity price environment
- Proved Developed Producing (“PDP”) PV-10 of $2.1 billion2 as of
September 30, 2022 using the U.S. Securities and Exchange
Commission (“SEC”) pricing
- Average realized prices for crude oil and natural gas were 100%
and 95% 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,
“Our strong third quarter results highlight the success of our
differentiated strategy to deliver growth while maintaining balance
sheet discipline. We increased total production more than 40%
year-over-year, with oil production up more than 100%, reflecting
the impact of our seven strategic acquisitions over the past five
quarters. We are proud of all that we accomplished in the quarter,
including the announcement of a new dry gas position in the Dorado
play of Webb County, which adds stacked pay development
opportunities to our near-term drilling schedule. We also acquired
incremental working interest and adjacent properties located at our
liquids-weighted Karnes trough area. The enhanced economics and
development potential of this area compete for drilling capital
within our portfolio and warrant a dedicated drilling rig, which we
currently plan to activate during the middle of 2023. The
culmination of our acquisitions to date is reflected in our PDP
PV-10 of $2.1 billion.”
Mr. Woolverton commented further, “Looking ahead, both our 2023
production and EBITDA are set to increase over 50% year-over-year.
We have visibility and have taken significant steps towards
reaching a key scale target during 2024 of over 0.5 billion cubic
feet equivalent per day of production. Our capital spend range
provides SilverBow with the flexibility to adjust our drilling
activity in line with commodity prices. Adding a third rig focused
on liquids in the second half of 2023 supports our objective of
having a 50/50 mix of oil and gas revenue while driving double
digit production growth into 2025. As our leverage declines below
1.0x, we have a range of options to deploy capital, including
re-investing in the drillbit, financing further in-basin
consolidation and implementing a shareholder returns plan. We are
pleased with the execution of our disciplined growth strategy and
opportunities ahead for SilverBow as we balance organic growth and
acquisitions while prioritizing significant cash flow
generation."
OPERATIONS HIGHLIGHTS
During the third quarter of 2022, SilverBow drilled 13 net wells
and completed and brought online 11 net wells. In its Webb County
Gas area, the Company completed and brought online a two-well pad
which produced a 30-day average of 30 MMcf/d (100% gas). Of the two
wells, one targeted the Austin Chalk formation and represents
SilverBow's best performing Austin Chalk well to date. In its
Central Oil area, the Company completed and brought online a
two-well pad which had been drilled by the previous operator prior
to SilverBow taking ownership on June 30, 2022. Performance from
the wells has exceeded expectations with a 30-day average of 2,400
Boe/d (94% liquids), however the drilling rig experienced
operational delays prior to SilverBow taking ownership and,
ultimately, a third well that was drilled on the pad had to be
abandoned due to a mechanical failure. The Company also brought
online a three-well pad in its Central Oil area early in the fourth
quarter with initial results exceeding expectations.
Net equivalent production for the third quarter of 2022 was at
the midpoint of guidance. Gas volumes came in at the high-end of
guidance, with NGL volumes exceeding guidance. Oil volumes were
lower than anticipated due to the mechanical failure on the
aforementioned two-well pad and resultant timing delays of the
remaining wells drilled during the third quarter. However, as
mentioned above, the performance to date from the wells in the
Central Oil area remains strong and is exceeding expectations. The
rig subsequently returned to expected efficiency levels by the end
of July. The Company does not expect any other impact outside of
first sales occurring later in the year than what was originally
planned. As detailed further in the 2022 guidance section,
SilverBow is guiding to estimated production of 315-329 MMcfe/d
(70% gas) for the fourth quarter of 2022 and 270-274 MMcfe/d (73%
gas) for full year 2022.
SilverBow operated two drilling rigs for the entirety of the
third quarter, and the Company intends to continue at this pace for
the remainder of 2022. At the beginning of October, SilverBow moved
both its drilling rigs to its Webb County Gas area. This decision
was based on the continued strong Austin Chalk results in the
Dorado play. Combining the third and fourth quarters, the Company
will have drilled 16 wells at its Fasken property, with 15 of them
targeting the Austin Chalk and 1 targeting the Upper Eagle Ford.
The returns SilverBow is generating in the Austin Chalk warranted
this shift and much of this development should benefit from strong
winter gas prices. In addition, the Company's non-op partner
elected not to participate in 12 of the 16 wells which will add an
incremental 4.5 net wells to SilverBow's 2022 development as it
increases its working interest in those wells from 64% to 100%.
Management believes this near-term drilling opportunity will result
in significant accretion to reserve PV-10 value and increased gas
production beyond 2022, which more than offsets the lower near-term
oil production from the recent scheduling changes. As a
returns-focused company, SilverBow has continued to benefit from
its ability to be nimble and deploy capital where the economics
make the largest impact.
SilverBow revised its 2022 capital budget to a range of
$320-$340 million. The 5% increase to the capital budget reflects
the higher working interest captured across the aforementioned Webb
County Gas wells drilled in the fourth quarter and land and leasing
spend of approximately $7.5 million. Inflationary pressures remain
persistent in the current service market but had previously been
factored into SilverBow's 2022 capital budget outlook and were not
a primary driver of the updated range. With two fully utilized
rigs, the Company has greater line of sight into upcoming activity
levels and is addressing cost inflation through enhanced
procurement initiatives, pre-ordering key materials and employing a
range of short and long-term contracts. As always, SilverBow
optimizes its drilling schedule based on commodity prices, returns
on investment and strategically proving up additional inventory
within the portfolio.
PRODUCTION VOLUMES, OPERATING COSTS AND REALIZED
PRICES
SilverBow's total net production for the third quarter of 2022
averaged 299 MMcfe/d. Production mix for the third quarter
consisted of 70% natural gas, 17% oil and 13% natural gas liquids
(“NGLs”). Natural gas comprised 62% of total oil and gas sales for
the third quarter, compared to 63% in the third quarter of
2021.
For the third quarter of 2022, lease operating expenses (“LOE”)
were $0.65 per Mcfe, transportation and processing expenses
(“T&P”) were $0.35 per Mcfe and production and ad valorem taxes
were 5.2% of oil and gas sales. Total production expenses, which
include LOE, T&P and production taxes, were $1.46 per Mcfe for
the third quarter. Net general and administrative (“net G&A”)
expenses for the third quarter of 2022 were $4.3 million, or $0.16
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 $3.2 million for the third quarter
of 2022, or $0.11 per Mcfe.
The Company continues to benefit from strong basis pricing in
the Eagle Ford. Crude oil and natural gas realizations in the third
quarter were 100% of WTI and 95% of Henry Hub, respectively,
excluding hedging. SilverBow's average realized natural gas price
for the third quarter of 2022, excluding hedging, was $7.81 per
thousand cubic feet of natural gas (“Mcf”) compared to $4.14 per
Mcf in the third quarter of 2021. The average realized crude oil
selling price in the third quarter of 2022, excluding hedging, was
$91.93 per barrel compared to $68.54 per barrel in the third
quarter of 2021. The average realized NGL selling price in the
third quarter, excluding hedging, was $33.34 per barrel (36% of WTI
benchmark) compared to $30.92 per barrel (44% of WTI benchmark) in
the third 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 $242.2 million for
the third quarter of 2022. The Company reported net income of
$142.5 million, which includes a net unrealized gain on the value
of the SilverBow's derivative contracts and WTI contingency payouts
of $89 million.
For the third quarter of 2022, the Company generated Adjusted
EBITDA (a non-GAAP measure) of $114.7 million. For the twelve
months ended September 30, 2022, SilverBow reported Adjusted EBITDA
for Leverage Ratio (a non-GAAP measure) of $495.1 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 $139.3 million.
Capital expenditures incurred during the third quarter of 2022
totaled $110.0 million on an accrual basis.
2022 GUIDANCE AND 2023 OUTLOOK
SilverBow is currently running its two rigs in Webb County,
which will result in higher gas production and greater returns in
2023. Together, the near-term Webb County drilling and recent
leasing activity totals approximately $30 million of incremental
spend in 2022. The Company is increasing its full year 2022 capex
by $15 million, or 5%, at the midpoint to a range of $320-$340
million. For the fourth quarter of 2022, SilverBow is guiding to
estimated production of 315-329 MMcfe/d, with natural gas volumes
comprising 218-230 MMcf/d or 70% of total production at the
midpoint. For the full year 2022, the Company is guiding to a
production range of 270-274 MMcfe/d, with natural gas volumes
comprising 73% of total production at the midpoint. Incorporated in
the fourth quarter guidance range is previously unscheduled plant
maintenance on third party systems. It is anticipated that these
maintenance projects will impact dry gas volumes out of Webb County
during the quarter.
SilverBow maintains a high degree of flexibility in its drilling
and completion schedule. The Company's 2023 capital plan is
contingent upon meeting certain thresholds, including a
re-investment rate below 75% and a leverage ratio between
0.5x-1.0x. For 2023, SilverBow anticipates running 2 to 2.5 rigs on
average. The Company is increasing its production outlook from 380
MMcfe/d to 400-420 MMcfe/d, an 8% increase compared to the
Company's prior outlook. The production increase is driven by a
higher working interest and a greater gas mix from SilverBow
capturing higher returns on its gas development in the near-term.
Full year 2023 capital is expected to range between $450-$550
million, with the high end reflecting a third rig added in the
second half of 2023.
Additional detail concerning the Company's fourth 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 the 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.
As of October 28, 2022, SilverBow has 167 MMcf/d of natural gas
production hedged, 8,418 Bbls/d of oil hedged and 3,750 Bbls/d of
NGLs hedged for the remainder of 2022. For 2023, the Company has
179 MMcf/d of natural gas production hedged, 7,291 Bbls/d of oil
hedged and 3,750 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 third quarter of 2022, which the Company expects to
file on Thursday, November 3, 2022, for a detailed summary of its
derivative contracts.
CAPITAL STRUCTURE AND LIQUIDITY
As of September 30, 2022, SilverBow had $1.9 million of cash and
$480.0 million of outstanding borrowings under its Credit Facility.
The Company's liquidity position was $296.9 million consisting of
$1.9 million of cash and $295.0 million of availability under the
Credit Facility. SilverBow's net debt as of September 30, 2022 was
$628.1 million, calculated as total long-term debt of $630.0
million less $1.9 million of cash.
As of October 28, 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,
November 3, 2022, at 9:00 a.m. Central Time (10:00 a.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 Third 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 “Third 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, supply chain disruptions, and operational
challenges including remote work arrangements and protecting the
health and well-being of our employees; further actions by the
members of the Organization of the Petroleum Exporting Countries,
Russia and other allied producing countries with respect to oil
production levels and announcements of potential changes in such
levels; risk related to recently completed acquisitions; 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 future covenant compliance; cash flow and
liquidity; 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 and political conditions, including inflationary
pressures, further increases in interest rates, a general economic
slowdown or recession, political tensions and war (including future
developments in the ongoing Russia-Ukraine conflict); 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; actions by third parties, including customers, service
providers and shareholders; 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 Based on management's estimates of reserve volumes and values
using an effective date and SEC prices as of September 30, 2022.
Inclusive of acquired assets with closing date on or before
September 30, 2022. Figures reported as unaudited.
(Financial Highlights to Follow)
Condensed Consolidated Balance Sheets
(Unaudited)
SilverBow Resources, Inc. and Subsidiary
(in thousands, except share amounts)
September 30, 2022
December 31, 2021
ASSETS
Current Assets:
Cash and cash equivalents
$
1,924
$
1,121
Accounts receivable, net
102,691
49,777
Fair value of commodity derivatives
33,205
2,806
Other current assets
6,468
1,875
Total Current Assets
144,288
55,579
Property and Equipment:
Property and equipment, full cost method,
including $17,478 and $17,090, respectively, of unproved property
costs not being amortized at the end of each period
2,345,317
1,611,953
Less – Accumulated depreciation,
depletion, amortization & impairment
(959,139
)
(869,985
)
Property and Equipment, Net
1,386,178
741,968
Right of use assets
13,669
16,065
Fair value of long-term commodity
derivatives
27,410
201
Other long-term assets
18,368
5,641
Total Assets
$
1,589,913
$
819,454
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current Liabilities:
Accounts payable and accrued
liabilities
$
80,107
$
35,034
Fair value of commodity derivatives
108,618
47,453
Accrued capital costs
54,210
7,354
Accrued interest
2,385
697
Current lease liability
8,579
7,222
Undistributed oil and gas revenues
32,318
23,577
Total Current Liabilities
286,217
121,337
Long-term debt, net
626,351
372,825
Non-current lease liability
5,379
9,090
Deferred tax liabilities
14,012
6,516
Asset retirement obligations
8,255
5,526
Fair value of long-term commodity
derivatives
29,950
8,585
Other long-term liabilities
2,764
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, 22,663,135 and 16,822,845 shares issued,
respectively, and 22,309,740 and 16,631,175 shares outstanding,
respectively
227
168
Additional paid-in capital
574,885
413,017
Treasury stock, held at cost, 353,395 and
191,670 shares, respectively
(7,534
)
(2,984
)
Retained earnings (Accumulated
deficit)
49,407
(117,669
)
Total Stockholders’ Equity
616,985
292,532
Total Liabilities and Stockholders’
Equity
$
1,589,913
$
819,454
Condensed Consolidated Statements of
Operations (Unaudited)
SilverBow Resources, Inc. and Subsidiary
(in thousands, except per-share amounts)
Three Months Ended
September 30, 2022
Three Months Ended
September 30, 2021
Revenues:
Oil and gas sales
$
242,181
$
99,249
Operating Expenses:
General and administrative, net
4,343
5,257
Depreciation, depletion, and
amortization
41,501
16,054
Accretion of asset retirement
obligations
166
77
Lease operating expenses
17,701
6,978
Workovers
284
423
Transportation and gas processing
9,662
5,913
Severance and other taxes
12,581
4,908
Total Operating Expenses
86,238
39,610
Operating Income
155,943
59,639
Non-Operating Income (Expense)
Gain (loss) on commodity derivatives,
net
4,832
(88,554
)
Interest expense, net
(12,173
)
(7,433
)
Other income (expense), net
5
(3
)
Income (Loss) Before Income Taxes
148,607
(36,351
)
Provision (Benefit) for Income Taxes
6,066
(408
)
Net Income (Loss)
$
142,541
$
(35,943
)
Per Share Amounts:
Basic Earnings (Loss) Per Share
$
6.39
$
(2.85
)
Diluted Earnings (Loss) Per Share
$
6.29
$
(2.85
)
Weighted-Average Shares Outstanding -
Basic
22,308
12,629
Weighted-Average Shares Outstanding -
Diluted
22,669
12,629
Condensed Consolidated Statements of
Operations (Unaudited)
SilverBow Resources, Inc. and Subsidiary
(in thousands, except per-share amounts)
Nine Months Ended
September 30, 2022
Nine Months Ended
September 30, 2021
Revenues:
Oil and gas sales
$
554,442
$
255,850
Operating Expenses:
General and administrative, net
14,840
14,872
Depreciation, depletion, and
amortization
89,096
45,485
Accretion of asset retirement
obligations
366
226
Lease operating expenses
37,095
18,767
Workovers
933
512
Transportation and gas processing
22,784
17,175
Severance and other taxes
30,183
11,974
Total Operating Expenses
195,297
109,011
Operating Income
359,145
146,839
Non-Operating Income (Expense)
Gain (loss) on commodity derivatives,
net
(157,816
)
(152,879
)
Interest expense, net
(26,632
)
(21,888
)
Other income (expense), net
57
6
Income (Loss) Before Income Taxes
174,754
(27,922
)
Provision (Benefit) for Income Taxes
7,678
(408
)
Net Income (Loss)
$
167,076
$
(27,514
)
Per Share Amounts:
Basic Earnings (Loss) Per Share
$
8.85
$
(2.24
)
Diluted Earnings (Loss) Per Share
$
8.69
$
(2.24
)
Weighted-Average Shares Outstanding -
Basic
18,885
12,283
Weighted-Average Shares Outstanding -
Diluted
19,237
12,283
Condensed Consolidated Statements of
Cash Flows (Unaudited)
SilverBow Resources, Inc. and Subsidiary
(in thousands)
Nine Months Ended
September 30, 2022
Nine Months Ended
September 30, 2021
Cash Flows from Operating Activities:
Net income (loss)
$
167,076
$
(27,514
)
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating activities
Depreciation, depletion, and
amortization
89,096
45,485
Accretion of asset retirement
obligations
366
226
Deferred income taxes
7,496
—
Share-based compensation
3,901
3,450
(Gain) Loss on derivatives, net
157,816
152,879
Cash settlement (paid) received on
derivatives
(182,058
)
(28,976
)
Settlements of asset retirement
obligations
(47
)
(151
)
Write down of debt issuance cost
350
229
Other
(6,425
)
1,883
Change in operating assets and
liabilities:
(Increase) decrease in accounts receivable
and other current assets
(47,320
)
(20,941
)
Increase (decrease) in accounts payable
and accrued liabilities
20,260
7,215
Increase (decrease) in income taxes
payable
(21
)
—
Increase (decrease) in accrued
interest
1,688
(137
)
Net Cash Provided by (Used in) Operating
Activities
212,178
133,648
Cash Flows from Investing Activities:
Additions to property and equipment
(163,567
)
(98,219
)
Acquisition of oil and gas properties, net
of purchase price adjustments
(293,880
)
(13,219
)
Proceeds from the sale of property and
equipment
4,415
—
Payments on property sale obligations
(750
)
(1,084
)
Net Cash Provided by (Used in) Investing
Activities
(453,782
)
(112,522
)
Cash Flows from Financing Activities:
Proceeds from bank borrowings
679,000
195,000
Payments of bank borrowings
(426,000
)
(227,000
)
Net proceeds from issuances of common
stock
—
12,756
Net proceeds from stock options
exercised
39
—
Purchase of treasury shares
(3,404
)
(612
)
Payments of debt issuance costs
(7,228
)
(2,400
)
Net Cash Provided by (Used in) Financing
Activities
242,407
(22,256
)
Net Increase (Decrease) in Cash and Cash
Equivalents
803
(1,130
)
Cash and Cash Equivalents at Beginning of
Period
1,121
2,118
Cash and Cash Equivalents at End of
Period
$
1,924
$
988
Supplemental Disclosures of Cash Flow
Information:
Cash paid during period for interest, net
of amounts capitalized
$
22,701
$
20,277
Non-cash Investing and Financing
Activities:
Changes in capital accounts payable and
capital accruals
$
60,595
$
11,393
Non-cash equity consideration for
acquisitions
$
(156,259
)
$
(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 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: 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.
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
September 30, 2022
Three Months Ended
September 30, 2021
Net Income (Loss)
$
142,541
$
(35,943
)
Plus:
Depreciation, depletion and
amortization
41,501
16,054
Accretion of asset retirement
obligations
166
77
Interest expense
12,173
7,433
Loss (gain) on commodity derivatives,
net
(4,832
)
88,554
Realized gain (loss) on commodity
derivatives, net (1)
(84,127
)
(19,327
)
Income tax expense/(benefit)
6,066
(408
)
Share-based compensation expense
1,188
1,191
Adjusted EBITDA
$
114,676
$
57,631
Plus:
Cash interest expense and bank fees,
net
(10,481
)
(6,995
)
Capital expenditures(2)
(109,975
)
(51,330
)
Current income tax (expense)/benefit
225
408
Free Cash Flow
$
(5,555
)
$
(286
)
(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
September 30, 2022
Last Twelve Months Ended
September 30, 2021
Net Income (Loss)
$
281,350
$
(18,166
)
Plus:
Depreciation, depletion and
amortization
112,240
58,920
Accretion of asset retirement
obligations
446
317
Interest expense
33,873
29,240
Loss (gain) on commodity derivatives,
net
127,954
158,460
Realized gain (loss) on commodity
derivatives, net (1)
(219,648
)
(31,026
)
Income tax expense/(benefit)
14,484
(104
)
Share-based compensation expense
5,097
4,504
Adjusted EBITDA
$
355,796
$
202,145
Plus:
Cash interest expense and bank fees,
net
(37,992
)
(29,317
)
Capital expenditures(2)
(244,857
)
(129,989
)
Current income tax (expense)/benefit
(776
)
408
Free Cash Flow
$
72,171
$
43,247
Adjusted EBITDA
$
355,796
$
202,145
Amortization of derivative contracts
—
20,690
Pro forma contribution from closed
acquisitions
139,267
6,648
Adjusted EBITDA for Leverage Ratio
(3)
$
495,063
$
229,483
(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
September 30, 2022
Three Months Ended
September 30, 2021
Production volumes:
Oil (MBbl) (1)
781
368
Natural gas (MMcf)
19,324
15,092
Natural gas liquids (MBbl) (1)
582
372
Total (MMcfe)
27,505
19,530
Oil, natural gas and natural gas liquids
sales (in thousands):
Oil
$
71,811
$
25,230
Natural gas
150,958
62,530
Natural gas liquids
19,412
11,489
Total
$
242,181
$
99,249
Average realized price:
Oil (per Bbl)
$
91.93
$
68.54
Natural gas (per Mcf)
7.81
4.14
Natural gas liquids (per Bbl)
33.34
30.92
Average per Mcfe
$
8.81
$
5.08
Price impact of cash-settled
derivatives:
Oil (per Bbl)
$
(20.44
)
$
(17.18
)
Natural gas (per Mcf)
(3.47
)
(0.69
)
Natural gas liquids (per Bbl)
(1.86
)
(7.07
)
Average per Mcfe
$
(3.06
)
$
(0.99
)
Average realized price including impact of
cash-settled derivatives:
Oil (per Bbl)
$
71.49
$
51.36
Natural gas (per Mcf)
4.34
3.45
Natural gas liquids (per Bbl)
31.48
23.85
Average per Mcfe
$
5.75
$
4.09
(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 $3.6 million in
settled oil hedges related to our Sundance acquisition.
Fourth Quarter 2022 & Full
Year 2022 Guidance
Guidance
4Q 2022
FY 2022
Production Volumes:
Oil (Bbls/d)
10,100 - 10,300
6,950 - 7,050
Natural Gas (MMcf/d)
218 - 230
197 - 200
NGLs (Bbls/d)
6,000 - 6,150
5,150 - 5,250
Total Reported Production (MMcfe/d)
315 - 329
270 - 274
Product Pricing:
Crude Oil NYMEX Differential ($/Bbl)
($1.50) - $0.00
N/A
Natural Gas NYMEX Differential ($/Mcf)
($1.05) - ($0.75)
N/A
Natural Gas Liquids (% of WTI)
30% - 34%
N/A
Operating Costs & Expenses:
Lease Operating Expenses ($/Mcfe)
$0.61 - $0.65
$0.55 - $0.59
Transportation & Processing
($/Mcfe)
$0.30 - $0.34
$0.30 - $0.34
Production Taxes (% of Revenue)
6.5% - 7.5%
5.5% - 6.5%
Cash G&A, net ($MM)
$4.2 - $4.7
$15.1 - $15.6
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/20221102006029/en/
Jeff Magids Director of Finance & Investor Relations (281)
874-2700, (888) 991-SBOW
SilverBow Resources (NYSE:SBOW)
Historical Stock Chart
From Jul 2024 to Aug 2024
SilverBow Resources (NYSE:SBOW)
Historical Stock Chart
From Aug 2023 to Aug 2024