Full year 2022 production increased 26%
year-over-year; oil production increased 80%
Over 650 high return drilling locations provide
10+ years of inventory life
2023 capital budget supports two-rig drilling
program focused on oil development
Full year 2023 production guidance implies ~25%
growth year-over-year
SilverBow Resources, Inc. (NYSE: SBOW) (“SilverBow” or “the
Company”) today announced operating and financial results for the
fourth quarter and full year 2022. Highlights include:
- Reported net production of 315 million cubic feet of natural
gas equivalent per day (“MMcfe/d”) (66% natural gas) for the fourth
quarter of 2022; oil and natural gas liquids (“NGL”) production
above the high end of guidance. Oil and gas revenue increased 31%
year-over-year driven by increased production and higher commodity
prices
- Recorded net income of $173 million, Adjusted EBITDA of $119
million and free cash flow (“FCF”) of $2 million for the fourth
quarter of 2022. For full year 2022, SilverBow recorded net income
of $340 million, Adjusted EBITDA of $393 million and FCF of $22
million. Adjusted EBITDA and FCF are non-GAAP measures defined and
reconciled in the tables below
- Delivered double digit year-over-year growth for full year net
production, net income and Adjusted EBITDA for the second year in a
row as SilverBow continues to efficiently scale through successful
development activity and acquisitions
- Capital expenditures of $328 million, on an accrual basis,
below the midpoint of guidance as the Company continues to deliver
on planned costs and offset service cost inflation through
operational efficiencies
- Closed four accretive acquisitions during 2022 which
significantly increased SilverBow's production, year-end reserves
and progress towards key scale targets. Acquisitions and leasing
activity in 2022 added over 350 gross drilling locations across a
balanced commodity mix spanning the Eagle Ford Shale and Austin
Chalk
- High quality inventory of drilling locations at year-end 2022
provides over 10 years of development at a two-rig pace
- Borrowing base under the Company's senior secured revolving
credit facility (“Credit Facility”) of $775 million at year-end
2022, an increase of $315 million or 68% year-over-year
- Year-end 2022 total debt of $692 million. Leverage ratio of
1.35x1 at year-end 2022, while also funding approximately $370
million in cash for acquisitions under the Company's Credit
Facility
- Full year 2022 return on capital employed (“ROCE”) of 24%;
three-year average ROCE of 19% from 2020 to 2022. ROCE is a
non-GAAP measure defined and reconciled in the tables below
- Year-end 2022 total estimated proved reserves were 2.2 trillion
cubic feet of gas equivalent (“Tcfe”) (43% proved developed; 77%
natural gas), a Standardized Measure of $4.0 billion and a pre-tax
present value of future net cash flows discounted at 10% (“PV-10
Value,” a non-GAAP measure) of $5.0 billion utilizing Securities
and Exchange Commission (“SEC”) pricing. Proved reserves,
Standardized Measure and PV-10 Value increased 58%, 154% and 173%
year-over-year, respectively
2023 Capital Program and
Guidance:
- Full year estimated production of 325 - 345 MMcfe/d,
representing a 24% increase year-over-year and a compound annual
growth rate of more than 20% since full year 2020; third
consecutive year of double digit growth
- Full year capital program of $450-$475 million with two rigs
dedicated to oil development, in accordance with SilverBow's
strategy of allocating capital towards highest return projects
given prevailing commodity prices; maintaining flexibility to
adjust as commodity prices dictate
- Based on 2023 capital budget and operating plan, full year oil
production is expected to increase by 100% year-over-year; focus on
developing acquired assets and expanding oil inventory through
Austin Chalk delineation
- Increased oil and NGL production as a percentage of total
production to drive higher cash margins per Mcfe; liquids
production expected to comprise approximately 40%-50% of total
production by year-end 2023
- As of February 24, 2023, SilverBow had 89% of 2023 gas volumes
hedged based on the midpoint of full year guidance
MANAGEMENT COMMENTS
Sean Woolverton, SilverBow’s Chief Executive Officer, commented,
“In 2022, SilverBow continued to execute on its growth strategy
through the drillbit and accretive acquisitions to increase scale
while remaining leverage neutral. The four accretive acquisitions
we closed during the year significantly expanded our production
base and high-return inventory, with an emphasis on oil locations.
Additionally, we achieved positive results with our Webb County
Austin Chalk delineation efforts where we delivered some of the
highest returning wells in our portfolio and have identified
inventory upside. In total, our borrowing base increased by nearly
70% during the year, and our proved reserves and PV-10 value
increased by 58% and 173% year-over-year, respectively. At year-end
2022, our SEC PV-10 value was $5.0 billion reflecting organic
development and the aforementioned acquisitions. It was an
exceptional year for SilverBow and we are excited about the many
opportunities ahead."
Mr. Woolverton commented further, “Core to SilverBow's strategy
is operational flexibility and allocating capital to our highest
returning projects. Given the relative strength of oil prices
compared to natural gas prices, we intend to operate two rigs
dedicated to oil development in 2023. Our strategy of pivoting
between oil and gas development has been a key differentiator for
us and has allowed us to generate an average ROCE of 19% over the
last three years during volatile pricing and operating
environments. We will continue maximizing return on capital with
repeatable execution and flexible capital allocation."
OPERATIONS HIGHLIGHTS
During the fourth quarter of 2022, the Company drilled 15 net
wells, completed 13 net wells and brought 11 net wells online. For
full year 2022, SilverBow drilled 45 net wells, and completed 39
net wells and brought online 37 net wells. SilverBow operated one
drilling rig for the first six months of 2022, primarily focused on
its Webb County Gas area. Then, in conjunction with closing the
Sundance acquisition on June 30, 2022, the Company added a second
drilling rig and continued operating at a two-rig drilling pace
through the end of 2022. SilverBow targeted both oil and gas
opportunities throughout the second half of the year, and in the
fourth quarter of 2022 operated both rigs in its Webb County Gas
area. The Company expects to remain operationally flexible going
forward and will continue to optimize its drilling program in
response to commodity prices and expected returns.
In the Webb County Gas area, SilverBow drilled 24 net wells and
completed and brought 20 net wells online during 2022. The Austin
Chalk formation was a key focus area of the Company's delineation
and development plan, and comprised 15 of the 24 net wells drilled
in the area during 2022. Well performance in the Webb County Austin
Chalk continues to exceed expectations and exhibit strong
commercial economics, and during the third quarter of 2022,
SilverBow completed and brought online its best performing Austin
Chalk well to date with a 30-day average production of 17 million
cubic feet per day (“MMcf/d”) (100% gas). In 2022, the Company
drilled and completed multi-well pads that targeted both the Austin
Chalk and Eagle Ford formations, which supported SilverBow's
expectations for high rate of return potential in full-scale
development mode, and marks a progression from the single well
delineation pads targeting the Austin Chalk in prior years.
Additionally, the Company focused on expanding its Webb County and
Austin Chalk position during the year with the establishment of a
new acreage block within Webb County, comprising ~7,500 net acres
through a series of bolt-on acquisitions, leasing and drill-to-earn
agreements.
For the full year 2022, SilverBow's capital expenditures,
excluding acquisitions, on an accrual basis were $327.5 million,
below the midpoint of the Company's full year guidance range of
$320 to $340 million. Throughout 2022, the Company experienced
inflationary pressures on its capital and operating expenses 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. The SilverBow team took actions to
mitigate the impact of these inflationary cost pressures through
enhanced procurement initiatives, pre-ordering of key materials and
a focus on operational efficiencies and planning. The mid-year
increase from one drilling rig to two drilling rigs supported
increased scale and achieved even better overall cycle-times. This
enhanced activity provided greater line of sight to secure
available service equipment at favorable contract rates. In
aggregate, the Company's drilling and completion (“D&C”) costs
during the year were within 1% of planned costs for the year due to
the cost mitigation efforts and operational efficiencies delivered
by the team.
SilverBow closed four acquisitions in 2022. The acquired assets
provide SilverBow a deep runway of future oil and gas development
locations in the Eagle Ford and Austin Chalk. The Company added
more than 350 gross drilling locations from acquired assets in
2022, with further inventory upside potential based on optimization
of well costs, spacing and lateral lengths given the highly
contiguous leasehold footprints with SilverBow's existing acreage.
The acquisition activity in 2022 reflects a continued focus on
identifying opportunities to add to core positions in high-return
areas.
PRODUCTION VOLUMES, OPERATING COSTS AND REALIZED
PRICES
SilverBow's total net production for the fourth quarter of 2022
averaged 315 MMcfe/d, within the Company's guidance range.
Production mix for the fourth quarter consisted of 66% natural gas,
21% crude oil and 13% NGLs. Natural gas comprised 50% of total oil
and gas sales for the fourth quarter of 2022, compared to 63% in
the fourth quarter of 2021.
For the fourth quarter of 2022, lease operating expenses (“LOE”)
were $0.63 per thousand cubic feet of natural gas equivalent
(“Mcfe”). Transportation and processing expenses (“T&P”) were
$0.35 per Mcfe and production and ad valorem taxes were 5.8% of oil
and gas revenue for the fourth quarter of 2022. Total production
expenses, which include LOE, T&P and production taxes, were
$1.38 per Mcfe for the fourth quarter of 2022. Net general and
administrative (“net G&A”) expenses for the fourth quarter were
$6.6 million or $0.23 per Mcfe. After deducting $1.2 million of
non-cash compensation expenses, cash general and administrative
(“cash G&A”, a non-GAAP measure) expenses were $5.4 million for
the fourth quarter of 2022, or $0.19 per Mcfe.
Crude oil and natural gas realizations in the fourth quarter of
2022 were 99% and 84% of West Texas Intermediate (“WTI”) and Henry
Hub, respectively, excluding hedging. The average realized natural
gas price, excluding the effect of hedging, was $5.24 per thousand
cubic feet of natural gas (“Mcf”) in the fourth quarter of 2022
compared to $5.64 per Mcf in the fourth quarter of 2021. The
average realized crude oil selling price, excluding the effect of
hedging, was $81.80 per barrel in the fourth quarter of 2022
compared to $75.65 per barrel in the fourth quarter of 2021. The
average realized NGL selling price in the fourth quarter of 2022
was $24.25 per barrel (29% of WTI benchmark), compared to $32.82
per barrel (43% of WTI benchmark) in the fourth quarter of 2021.
Please refer to the tables included in this news release for
production volumes and pricing information.
YEAR-END 2022 RESERVES
SilverBow reported year-end estimated proved reserves of 2.2
Tcfe, a 58% increase over year-end 2021. Specific highlights from
the Company’s year-end reserve report include:
- Standardized Measure of $4.0 billion, a 154% increase over
year-end 2021
- PV-10 Value (non-GAAP measure) of $5.0 billion, a 173% increase
over year-end 2021
- Proved developed producing (“PDP”) PV-10 Value (non-GAAP
measure) of $2.6 billion, a 150% increase over year-end 2021
The table below reconciles 2021 reserves to 2022 reserves:
Total (MMcfe)
Proved reserves as of December 31,
2021
1,415,770
Extensions, discoveries, and other
additions
567,235
Revisions of prior reserve estimates
(2,736
)
Purchases of minerals in place
355,471
Sales of minerals in place
(2,656
)
Production
(98,460
)
Proved reserves as of December 31,
2022
2,234,624
Proved developed reserves accounted for 43% of SilverBow's total
estimated proved reserves at December 31, 2022. The SEC prices used
for reporting the Company's year-end 2022 estimated proved
reserves, which have been adjusted for basis and quality
differentials, were $6.14 per Mcf for natural gas, $34.76 per
barrel for natural gas liquids and $94.36 per barrel for crude oil
compared to $3.75 per Mcf, $25.29 per barrel, and $63.98 per barrel
in 2021.
FINANCIAL RESULTS
SilverBow reported total oil and gas sales of $199.0 million for
the fourth quarter of 2022. The Company reported net income of
$173.4 million for the fourth quarter of 2022, which includes a net
unrealized gain on the value of SilverBow's derivative contracts
and WTI contingency payouts of $117.8 million. For full year 2022,
the Company reported net income of $340.4 million.
For the fourth quarter of 2022, SilverBow reported Adjusted
EBITDA (a non-GAAP measure) of $119.1 million and FCF (a non-GAAP
measure) of $2.3 million. For full year 2022, SilverBow reported
Adjusted EBITDA of $393.1 million and FCF of $21.5 million. For
full year 2022, the Company reported Adjusted EBITDA for Leverage
Ratio (a non-GAAP measure) of $511.4 million, which, in accordance
with the Leverage Ratio calculation in its Credit Facility,
includes pro forma contributions from acquired assets prior to
their closing dates totaling $118.3 million.
Capital expenditures incurred during the fourth quarter of 2022
totaled $102.7 million on an accrual basis. For full year 2022,
capital expenditures totaled $327.5 million on an accrual
basis.
2023 CAPITAL PROGRAM
SilverBow's 2023 capital budget range is $450-$475 million
(approximately 90% allocated to D&C activity). The budget
provides for 60 gross (52 net) operated wells drilled, compared to
47 gross (45 net) operated wells drilled in 2022. The Company
expects to operate two drilling rigs throughout 2023 (as compared
to a 1.5 rig average in 2022) with approximately 95% of D&C
activity directed towards oil development across its Central Oil,
Eastern Extension and Western Condensate areas. The emphasis on oil
drilling is a returns-based decision based on a number of factors
including the relative strength of oil prices versus natural gas
prices, and the limited visibility into Webb County takeaway
capacity in 2023. The budget supports production growth of
approximately 25% year-over-year funded by cash flows from
operations.
2023 GUIDANCE
For the first quarter of 2023, the Company is guiding to total
net production of 295 - 316 MMcfe/d, with expected oil volumes of
10,500 - 11,500 Bbls/d. For full year 2023, SilverBow is guiding to
total net production of 325 - 345 MMcfe/d, with expected oil
volumes of 13,750 - 15,000 Bbls/d. The two-rig focus on oil
development throughout 2023 should accelerate the Company's
production mix toward a more balanced split between natural gas and
liquids. Under its current 2023 development program, SilverBow's
full year oil production is expected to increase by 100%
year-over-year. Furthermore, by the fourth quarter 2023, the
Company's liquids production is expected to comprise nearly 45% of
total production. Due to a combination of constrained takeaway
capacity and lower natural gas prices, SilverBow is producing at
contracted firm pipeline capacity and has elected to defer
completion activity in Webb County until 2024. The Company's first
quarter 2023 and full year 2023 production guidance assume that gas
production from Webb County is limited to contracted firm pipeline
capacity. Additional detail concerning SilverBow's first quarter
and full year 2023 guidance can be found in the table included in
this news release and the most recent Corporate Presentation posted
to the Investor Relations section of the Company's website.
HEDGING UPDATE
Hedging continues to be an important element of SilverBow's
strategy to provide greater predictability of cash flow. The
Company's hedging program is structured to provide exposure to
higher commodity prices while also protecting against periods of
low prices. As of February 24, 2023, SilverBow had 73% of total
production hedged for full year 2023, using the midpoint of
guidance. For 2023, the Company has 179 MMcf/d (89% of guidance) of
natural gas production hedged at an average price of $3.84 per
million British thermal units, 7,291 Bbls/d (51% of guidance) of
oil hedged at an average price of $74.19 per barrel and 3,750 (46%
of guidance) Bbls/d of NGLs hedged at an average price of $33.01
per barrel. For 2023, SilverBow has secured gas basis hedges on 157
MMcf/d to mitigate further risk. For 2024, the Company has 118
MMcf/d of natural gas production hedged and 3,032 Bbls/d of oil
hedged. SilverBow's hedges consist of both swaps and collars with
the average price factoring in the floor price of the collars.
Please see the Company's Corporate Presentation and Form 10-K for
the year ended December 31, 2022, which SilverBow expects to file
on Thursday, March 2, 2023, for a detailed summary of its
derivative contracts.
CAPITAL STRUCTURE AND LIQUIDITY
As of December 31, 2022, SilverBow had $0.8 million of cash and
$542.0 million of outstanding borrowings under its Credit Facility.
The Company's liquidity position was $233.8 million, consisting of
$0.8 million of cash and $233.0 million of availability under the
Credit Facility. SilverBow's net debt as of December 31, 2022 was
$691.2 million, calculated as total debt of $692.0 million less
$0.8 million of cash. As of February 24, 2023, the Company had 22.5
million total common shares outstanding.
CONFERENCE CALL AND UPDATED INVESTOR PRESENTATION
SilverBow will host a conference call for investors on Thursday,
March 2, 2023, 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 Resources' Fourth Quarter and Full Year 2022
Earnings Conference Call (Conference ID: 5410161) 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 “SilverBow Resources Fourth
Quarter and Full Year 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
posted to the Investor Relations section of SilverBow's website
prior to the conference call.
ABOUT SILVERBOW RESOURCES, INC.
SilverBow Resources, Inc. (NYSE: SBOW) is a Houston-based energy
company actively engaged in the exploration, development, and
production of oil and gas in the Eagle Ford Shale 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,” "should" 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: 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 and integrations of these acquisitions;
volatility in natural gas, oil and NGL prices; ability to obtain
permits and government approvals; our borrowing capacity, future
covenant compliance, cash flow and liquidity, including our ability
to satisfy our short- or long-term liquidity needs; 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 and storage 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); the severity and duration of world health
events, including health crises and pandemics 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;
opportunities to monetize assets; our ability to execute on
strategic initiatives; effectiveness of our risk management
activities, including hedging strategy; counterparty and credit
market risk; pending legal and environmental matters, including
potential impacts on our business related to climate change and
related regulations; actions by third parties, including customers,
service providers and shareholders; current and future 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 Form 10-K
for the year ended December 31, 2022.
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.
(Financial Highlights to Follow)
Consolidated Balance Sheets
(Unaudited)
SilverBow Resources, Inc. and Subsidiary
(in thousands, except share amounts)
December 31, 2022
December 31, 2021
ASSETS
Current Assets:
Cash and cash equivalents
$
792
$
1,121
Accounts receivable, net
89,714
49,777
Fair value of commodity derivatives
52,549
2,806
Other current assets
2,671
1,875
Total Current Assets
145,726
55,579
Property and Equipment:
Property and Equipment, Full-Cost Method,
including $16,272 and $17,090 of unproved property costs not being
amortized
2,529,223
1,611,953
Less – Accumulated depreciation,
depletion, amortization and impairment
(1,004,044
)
(869,985
)
Property and Equipment, Net
1,525,179
741,968
Right of use assets
12,077
16,065
Fair value of long-term commodity
derivatives
24,172
201
Other long-term assets
9,208
5,641
Total Assets
$
1,716,362
$
819,454
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current Liabilities:
Accounts payable and accrued
liabilities
$
60,200
$
35,034
Fair value of commodity derivatives
40,796
47,453
Accrued capital costs
56,465
7,354
Accrued interest
2,665
697
Current lease liability
8,553
7,222
Undistributed oil and gas revenues
27,160
23,577
Total Current Liabilities
195,839
121,337
Long-term debt
688,531
372,825
Non-current lease liability
3,775
9,090
Deferred tax liabilities, net
16,141
6,516
Asset retirement obligations
9,171
5,526
Fair value of long-term commodity
derivatives
7,738
8,585
Other long-term liabilities
3,588
3,043
Commitments and Contingencies
Stockholders' Equity:
Preferred stock, $.01 par value,
10,000,000 shares authorized, none issued
—
—
Common stock, $.01 par value, 40,000,000
shares authorized, 22,663,135 and 16,822,845 shares issued and
22,309,740 and 16,631,175 shares outstanding
227
168
Additional paid-in capital
576,118
413,017
Treasury stock held, at cost, 353,395 and
191,670 shares
(7,534
)
(2,984
)
Retained earnings (Accumulated
deficit)
222,768
(117,669
)
Total Stockholders’ Equity
791,579
292,532
Total Liabilities and Stockholders’
Equity
$
1,716,362
$
819,454
Consolidated Statements of Operations
(Unaudited)
SilverBow Resources, Inc. and Subsidiary
(in thousands, except per-share amounts)
Year Ended December 31,
2022
Year Ended December 31,
2021
Revenues:
Oil and gas sales
$
753,420
$
407,200
Operating Expenses:
General and administrative, net
21,395
21,799
Depreciation, depletion, and
amortization
133,982
68,629
Accretion of asset retirement
obligations
534
306
Lease operating expense
55,329
27,206
Workovers
1,655
514
Transportation and gas processing
32,989
24,145
Severance and other taxes
41,761
19,307
Total Operating Expenses
287,645
161,906
Operating Income (Loss)
465,775
245,294
Non-Operating Income (Expense)
Net gain (loss) on commodity
derivatives
(73,885
)
(123,018
)
Interest expense, net
(41,948
)
(29,129
)
Other income (expense), net
95
10
Income (Loss) Before Income Taxes
350,037
93,157
Provision (Benefit) for Income Taxes
9,600
6,398
Net Income (Loss)
$
340,437
$
86,759
Per Share Amounts:
Basic: Net Income (Loss)
$
17.24
$
6.61
Diluted: Net Income (Loss)
$
16.94
$
6.42
Weighted Average Shares Outstanding -
Basic
19,748
13,118
Weighted Average Shares Outstanding -
Diluted
20,097
13,520
Consolidated Statements of Operations
(Unaudited)
SilverBow Resources, Inc. and Subsidiary
(in thousands, except per-share amounts)
Three Months Ended December
31, 2022
Three Months Ended December
31, 2021
Revenues:
Oil and gas sales
$
198,978
$
151,349
Operating Expenses:
General and administrative, net
6,555
6,927
Depreciation, depletion, and
amortization
44,886
23,144
Accretion of asset retirement
obligations
169
80
Lease operating expense
18,233
8,439
Workovers
722
2
Transportation and gas processing
10,206
6,970
Severance and other taxes
11,578
7,333
Total Operating Expenses
92,349
52,895
Operating Income (Loss)
106,629
98,454
Non-Operating Income (Expense)
Net gain (loss) on commodity
derivatives
83,932
29,862
Interest expense, net
(15,316
)
(7,241
)
Other income (expense), net
37
5
Income (Loss) Before Income Taxes
175,282
121,080
Provision (Benefit) for Income Taxes
1,922
6,806
Net Income (Loss)
$
173,360
$
114,274
Per Share Amounts:
Basic: Net Income (Loss)
$
7.77
$
7.35
Diluted: Net Income (Loss)
$
7.65
$
7.12
Weighted Average Shares Outstanding -
Basic
22,310
15,539
Weighted Average Shares Outstanding -
Diluted
22,650
16,044
Consolidated Statements of Cash Flows
(Unaudited)
SilverBow Resources, Inc. and Subsidiary
(in thousands)
Year Ended December 31,
2022
Year Ended December 31,
2021
Cash Flows from Operating Activities:
Net income
$
340,437
$
86,759
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating activities-
Depreciation, depletion, and
amortization
133,982
68,629
Accretion of asset retirement
obligations
534
306
Deferred income tax expense (benefit)
9,625
6,212
Share-based compensation expense
5,086
4,645
(Gain) Loss on commodity derivatives,
net
73,885
123,018
Cash settlements (paid) received on
derivatives
(219,626
)
(70,582
)
Settlements of asset retirement
obligations
(48
)
(158
)
Write-down of debt issuance cost
350
229
Other
3,010
2,877
Change in operating assets and
liabilities-
(Increase) decrease in accounts receivable
and other assets
(29,522
)
(23,513
)
Increase (decrease) in accounts payable
and accrued liabilities
11,788
17,507
Increase (decrease) in income taxes
payable
(229
)
83
Increase (decrease) in accrued
interest
1,969
(286
)
Net Cash Provided by (Used in) Operating
Activities
331,241
215,726
Cash Flows from Investing Activities:
Additions to property and equipment
(272,443
)
(133,638
)
Acquisition of oil and gas properties
(367,024
)
(51,734
)
Proceeds from the sale of property and
equipment
4,347
—
Payments on property sale obligations
(750
)
(1,084
)
Net Cash Provided by (Used in) Investing
Activities
(635,870
)
(186,456
)
Cash Flows from Financing Activities:
Payments of long-term debt
—
(50,000
)
Proceeds from bank borrowings
841,000
335,000
Payments of bank borrowings
(526,000
)
(338,000
)
Net proceeds from issuances of common
stock
—
26,956
Net proceeds from stock options
exercised
39
—
Purchase of treasury shares
(3,397
)
(612
)
Payments of debt issuance costs
(7,342
)
(3,611
)
Net Cash Provided by (Used in) Financing
Activities
304,300
(30,267
)
Net Increase (Decrease) in Cash and Cash
Equivalents
(329
)
(997
)
Cash, Cash Equivalents at Beginning of
Year
1,121
2,118
Cash, Cash Equivalents at End of Year
$
792
$
1,121
Supplemental Disclosures of Cash Flows
Information:
Cash paid during period for interest
$
36,994
$
27,221
Changes in capital accounts payable and
capital accruals
$
54,372
$
(4,033
)
Non-cash equity consideration for
acquisitions
$
(156,252
)
$
(83,522
)
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 2022 Form 10-K 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: 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. 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 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.
Return on Capital Employed (“ROCE”): ROCE is defined as
(A) Adjusted EBITDA less DD&A expense, divided by (B) the
average of Capital Employed - Beginning of Year (Total Debt plus
Shareholders Equity) and Capital Employed - Year-End. SilverBow
believes ROCE presents a comparable metric across multiple business
sectors and sizes and is a meaningful measure because it quantifies
how well the Company generates Adjusted EBITDA relative to the
capital it has employed in its business and illustrates the
profitability of a business or project taking into account the
capital employed. SilverBow uses ROCE to assist in capital resource
allocation decisions and in evaluating business performance.
Additionally, the Company also evaluates average ROCE over a
trailing three-year period to adjust for short term (one year)
fluctuations and illustrate profitability over a longer time
period. Although ROCE is commonly used as a measure of capital
efficiency, definitions of ROCE differ, and SilverBow's computation
of ROCE may not be comparable to other similarly titled measures of
other companies.
Reconciliation of Net Income (Loss) to 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,
Free Cash Flow and Adjusted EBITDA for Leverage Ratio for the
following periods (in thousands).
Three Months Ended
December 31, 2022
Three Months Ended
December 31, 2021
Net Income (Loss)
$
173,360
$
114,274
Plus:
Depreciation, depletion and
amortization
$
44,886
$
23,144
Accretion of asset retirement
obligations
169
80
Interest expense
15,316
7,241
Loss (gain) on commodity derivatives,
net
(83,932
)
(29,862
)
Derivative cash settlements
collected/(paid) (1)
(33,856
)
(41,087
)
Income tax expense/(benefit)
1,922
6,806
Share-based compensation expense
1,185
1,195
Adjusted EBITDA
$
119,050
$
81,791
Plus:
Cash interest and bank fees, net
(14,293
)
(8,247
)
Capital expenditures (2)
(102,702
)
(20,055
)
Current income tax (expense)/benefit
207
(594
)
Free Cash Flow
$
2,262
$
52,895
(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
Year Ended
December 31, 2022
Year Ended
December 31, 2021
Net Income (Loss)
$
340,437
$
86,759
Plus:
Depreciation, depletion and
amortization
133,982
68,629
Accretion of asset retirement
obligations
534
306
Interest expense
41,948
29,129
Derivative (gain)/loss
73,885
123,018
Derivative cash settlements
collected/(paid) (1)
(212,416
)
(73,256
)
Income tax expense/(benefit)
9,600
6,398
Share-based compensation expense
5,086
4,645
Adjusted EBITDA
$
393,056
$
245,628
Plus:
Cash interest and bank fees, net
(44,038
)
(30,924
)
Capital expenditures (2)
(327,504
)
(130,503
)
Current income tax (expense)/benefit
26
(186
)
Free Cash Flow
$
21,540
$
84,015
Adjusted EBITDA
$
393,056
$
245,628
Plus:
Amortization of derivative contracts
—
14,093
Pro forma contribution from closed
acquisitions
118,329
40,977
Adjusted EBITDA for Leverage Ratio
(3)
$
511,385
$
300,698
(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. Leverage Ratio is calculated as total debt,
defined as Credit Facility borrowings plus Second Lien notes,
divided by Adjusted EBITDA for Leverage Ratio for the most recently
completed twelve month period. The below table provides the
calculation for Leverage Ratio for the following periods:
Year Ended
December 31, 2022
Year Ended
December 31, 2021
Credit Facility Borrowings due 2026
$
542,000
$
227,000
Second Lien Notes due 2026
150,000
150,000
Total debt
$
692,000
$
377,000
Adjusted EBITDA for Leverage Ratio (3)
511,385
300,698
Leverage Ratio
1.35x
1.25x
Reconciliation of General & Administrative Expenses to
Cash General & Administrative Expenses (Unaudited)
SilverBow Resources, Inc. and Subsidiary (in thousands, except
per unit amounts)
The below tables provide the calculation of cash G&A for the
following periods (in thousands).
Three Months Ended
December 31, 2022
Three Months Ended
December 31, 2021
General and administrative, net
$
6,555
$
6,927
Less: Share-based compensation expense
1,185
1,195
Cash general and administrative,
net
$
5,370
$
5,732
General and administrative, net (per
Mcfe)
$
0.23
$
0.30
Less: Share-based compensation expense
(per Mcfe)
0.04
0.05
Cash general and administrative, net
(per Mcfe)
$
0.19
$
0.25
Year Ended
December 31, 2022
Year Ended
December 31, 2021
General and administrative, net
$
21,395
$
21,799
Less: Share-based compensation expense
5,086
4,645
Cash general and administrative,
net
$
16,309
$
17,154
General and administrative, net (per
Mcfe)
$
0.22
$
0.28
Less: Share-based compensation expense
(per Mcfe)
0.05
0.06
Cash general and administrative, net
(per Mcfe)
$
0.17
$
0.22
Reconciliation of Net Income (Loss) to Return on Capital
Employed (Unaudited)
SilverBow Resources, Inc. and Subsidiary (in thousands, except
share amounts)
The below tables provide the calculation of Return on Capital
Employed for the following periods (in thousands).
Year Ended
December 31,
2022
Year Ended
December 31,
2021
Year Ended
December 31,
2020
Net Income (Loss)
$
340,437
$
86,759
$
(309,382
)
Plus:
Depreciation, depletion and
amortization
133,982
68,629
64,564
Accretion of asset retirement
obligations
534
306
354
Interest expense
41,948
29,129
31,228
Write-down of oil and gas properties
—
—
355,948
Derivative (gain)/loss
73,885
123,018
(61,304
)
Derivative cash settlements
collected/(paid) (1)
(212,416
)
(73,256
)
39,424
Income tax expense/(benefit)
9,600
6,398
20,911
Share-based compensation expense
5,086
4,645
4,559
Adjusted EBITDA
$
393,056
$
245,628
$
146,302
Less: Depreciation, depletion and
amortization
(133,982
)
(68,629
)
(64,564
)
Adjusted EBIT (A)
$
259,074
$
176,999
$
81,738
Total Debt
$
377,000
$
430,000
$
479,000
Shareholders Equity (2)
292,532
446,981
395,707
Capital Employed - Beginning of
Year
$
669,532
$
876,981
$
874,707
Total Debt
$
692,000
$
377,000
$
430,000
Shareholders Equity (2)
791,579
292,532
446,981
Capital Employed - Year-End
$
1,483,579
$
669,532
$
876,981
Average Capital Employed (B)
(3)
$
1,076,556
$
773,257
$
875,844
Return on Capital Employed (ROCE) (A /
B)
24
%
23
%
9
%
(1) Includes accruals for settled
contracts covering commodity deliveries during the period where the
actual cash settlements occur outside of the period.
(2) Shareholder's Equity in 2020 excludes
impact of write-down of oil and gas properties
(3) B = Average of Beginning of Year and
Year-End Capital Employed
Calculation of Standardized Measure of Discounted Future Net
Cash Flows
The following table provides a reconciliation between the
Standardized Measure (the most directly comparable financial
measure calculated in accordance with U.S. GAAP) and SEC PV-10
Value of the Company's proved reserves:
As of December 31,
(in millions)
2022
2021
2020
Standardized Measure of Discounted
Future Net Cash Flows
$
4,040
$
1,558
$
513
Adjusted for: Future income taxes
(discounted at 10%)
924
259
13
SEC PV-10 Value
$
4,964
$
1,817
$
526
Production Volumes & Pricing (Unaudited)
SilverBow Resources, Inc. and Subsidiary
Year Ended
December 31, 2022
Year Ended
December 31, 2021
Production volumes:
Oil (MBbl) (1)
2,634
1,462
Natural gas (MMcf)
70,958
60,510
Natural gas liquids (MBbl) (1)
1,950
1,472
Total (MMcfe)
98,460
78,113
Oil, Natural gas and Natural gas liquids
sales:
Oil
$
239,247
$
98,607
Natural gas
451,863
267,687
Natural gas liquids
62,310
40,906
Total
$
753,420
$
407,200
Average realized price:
Oil (per Bbl)
$
90.84
$
67.46
Natural gas (per Mcf)
6.37
4.42
Natural gas liquids (per Bbl)
31.96
27.78
Average per Mcfe
$
7.65
$
5.21
Price impact of cash-settled
derivatives:
Oil (per Bbl) (2)
$
(19.78
)
$
(16.50
)
Natural gas (per Mcf)
(2.21
)
(0.69
)
Natural gas liquids (per Bbl)
(1.88
)
(5.07
)
Average per Mcfe
$
(2.16
)
$
(0.94
)
Average realized price including impact of
cash-settled derivatives:
Oil (per Bbl) (2)
$
71.06
$
50.96
Natural gas (per Mcf)
4.16
3.73
Natural gas liquids (per Bbl)
30.08
22.71
Average per Mcfe
$
5.49
$
4.27
(1) Oil and natural gas liquids are
converted at the rate of one barrel to six Mcfe
(2) Excludes approximately $3.6 million in
settled oil hedges related to our Sundance acquisition
Three Months Ended
December 31, 2022
Three Months Ended
December 31, 2021
Production volumes:
Oil (MBbl) (1)
1,023
529
Natural gas (MMcf)
19,129
16,915
Natural gas liquids (MBbl) (1)
621
484
Total (MMcfe)
28,993
22,992
Oil, Natural gas and Natural gas liquids
sales:
Oil
$
83,681
$
40,021
Natural gas
100,237
95,453
Natural gas liquids
15,059
15,876
Total
$
198,978
$
151,349
Average realized price:
Oil (per Bbl)
$
81.80
$
75.65
Natural gas (per Mcf)
5.24
5.64
Natural gas liquids (per Bbl)
24.25
32.82
Average per Mcfe
$
6.86
$
6.58
Price impact of cash-settled
derivatives:
Oil (per Bbl)
$
(5.89
)
$
(16.37
)
Natural gas (per Mcf)
(1.56
)
(1.72
)
Natural gas liquids (per Bbl)
3.36
(6.88
)
Average per Mcfe
$
(1.17
)
$
(1.79
)
Average realized price including impact of
cash-settled derivatives:
Oil (per Bbl)
$
75.91
$
59.28
Natural gas (per Mcf)
3.68
3.92
Natural gas liquids (per Bbl)
27.61
25.94
Average per Mcfe
$
5.70
$
4.80
(1) Oil and natural gas liquids are
converted at the rate of one barrel to six Mcfe
Reserve Replacement Ratio Calculation (Unaudited):
Reserve replacement ratio is calculated by dividing the sum of
extensions, discoveries, and other additions, purchases and sales
of minerals in place, and total revisions for the year by
production:
Reserve Replacement
(in MMcfe)
Year Ended December 31,
2022
Proved reserves as of December 31,
2021
1,415,770
Extensions, discoveries, and other
additions(1)
567,235
Revisions of previous estimates
(2,736
)
Purchases of minerals in place
355,471
Sales of minerals in place
(2,656
)
Production
(98,460
)
Proved reserves as of December 31,
2022
2,234,624
Reserve replacement ratio
932
%
(1) The 2022 additions were due to
discovery and extensions of 567.2 Bcfe attributable to drilling
results of 159.5 Bcfe and leasing of adjacent acreage of 407.7
Bcfe
First Quarter 2023 & Full Year 2023
Guidance
Guidance
1Q 2023
FY 2023
Production Volumes:
Oil (Bbls/d)
10,500 - 11,500
13,750 - 15,000
Natural Gas (MMcf/d)
195 - 210
195 - 205
NGLs (Bbls/d)
6,100 - 6,200
7,900 - 8,400
Total Reported Production (MMcfe/d)
295 - 316
325 - 345
% Gas
66%
60%
Product Pricing :
Crude Oil NYMEX Differential ($/Bbl)
($4.50) - ($2.50)
N/A
Natural Gas NYMEX Differential ($/Mcf)
($1.00) - $0.00
N/A
Natural Gas Liquids (% of WTI)
28% - 32%
N/A
Operating Costs & Expenses:
Lease Operating Expenses ($/Mcfe)
$0.72 - $0.76
$0.71 - $0.75
Transportation & Processing
($/Mcfe)
$0.35 - $0.39
$0.30 - $0.34
Production Taxes (% of Revenue)
6.5% - 7.5%
5.0% - 6.0%
Cash G&A, net ($MM)
$4.5 - $5.0
$17.0 - $18.0
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230301005977/en/
Jeff Magids Vice President of Finance & Investor Relations
(281) 874-2700, (888) 991-SBOW
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