Announced agreement to acquire certain South
Texas assets from Chesapeake for $700 million
Third quarter net production above high end of
guidance; Oil production increased 23% quarter-over-quarter
Reduced total debt by $78 million
quarter-over-quarter
Increased full year 2023 free cash flow
guidance to $20-$40 million
SilverBow Resources, Inc. (NYSE: SBOW) (“SilverBow” or the
“Company”) today announced operating and financial results for the
third quarter of 2023. Highlights include:
- Reported net production of 357 million cubic feet of natural
gas equivalent per day (“MMcfe/d”) (61% natural gas) for the third
quarter of 2023, above the high end of guidance
- Third quarter net oil production of 15.3 thousand barrels of
oil per day, within the Company's guidance range and an increase of
81% year-over-year
- Reported net loss of $5 million, which includes a net
unrealized loss on the value of the Company's derivative contracts
of $72 million, including WTI contingency payouts, Adjusted EBITDA
of $141 million and free cash flow ("FCF") of $18 million for the
third quarter of 2023. Adjusted EBITDA and FCF are non-GAAP
measures defined and reconciled in the tables below
- Full year 2023 estimated production of 336-342 MMcfe/d, a 26%
increase year-over-year. Full year 2023 capital budget range of
$400-$425 million remains unchanged
- Announced agreement to acquire certain oil and gas assets in
South Texas from Chesapeake Energy Corporation (“Chesapeake”) for a
purchase price of $700 million (the “Chesapeake Transaction”). The
transaction is expected to enhance SilverBow's production, Adjusted
EBITDA and FCF while allowing the Company to achieve a leverage
ratio of 1.0x by year-end 2024. The Chesapeake Transaction is
expected to close in the fourth quarter of 2023
- Received commitments from SilverBow's lending group to increase
the borrowing base under the Company's senior secured revolving
credit facility (“Credit Facility”) to $1.2 billion upon closing of
the Chesapeake Transaction, along with commitments for SilverBow’s
amended second lien notes (“Second Lien Notes”) to be upsized by
$350 million, which, subject to the closing of the Chesapeake
Transaction, will increase lender commitments under the Second Lien
Notes to $500 million and extend the maturity date for the Second
Lien Notes to December 15, 2028
- Priced $148 million follow-on equity offering, comprised of
~70% primary shares; net proceeds to SilverBow after offering
expenses of ~$97 million
- Reduced total debt by $78 million quarter-over-quarter,
inclusive of $50 million deposit for the Chesapeake Transaction.
Leverage ratio decreased to 1.34x at quarter-end compared to 1.56x
as of the second quarter. Leverage ratio is a non-GAAP measure
defined and reconciled in the tables below
MANAGEMENT COMMENTS
Sean Woolverton, SilverBow’s Chief Executive Officer, commented,
“Strong third quarter results reflect our leading operational and
capital efficiencies. Production exceeded the high end of our
guidance range and capital expenditures were below planned costs.
Strong free cash flow generation and the success of our follow-on
equity offering allowed SilverBow to reduce debt by nearly $80
million during the quarter, while also paying a $50 million deposit
for the Chesapeake Transaction. Cost savings and drilling
efficiencies year-to-date have allowed us to accelerate the
completion timing of several wells into 2023, which will bolster
2024 production while also remaining within our stated 2023 capital
budget range."
Mr. Woolverton continued, “The Chesapeake Transaction is
expected to drive significant production and free cash flow growth
while maintaining the Company's long-term leverage target. Our
strategy emphasizes operational flexibility and real-time capital
allocation, and our portfolio of high-return locations provides for
10+ years of inventory life. Looking ahead, we are excited about
the optionality in our development program to generate value
through strong oil prices as well as the startup of Gulf Coast
liquified natural gas infrastructure projects which we expect will
increase the regional demand for natural gas.”
OPERATIONS HIGHLIGHTS
During the third quarter of 2023, SilverBow drilled 10 net
wells, completed 9 net wells and brought online 9 net wells. The
Company operated an average of two drilling rigs during the
quarter, primarily on its Central Oil and Eastern Extension areas,
which reflect its oil-focused development program year-to-date.
SilverBow's team continues to increase operational efficiencies,
completing 10% more stages per day year-to-date in 2023 as compared
to similar jobs for full year 2022, and averaging pumping
efficiencies 20% higher over the same time periods. Third quarter
pumping efficiencies were the highest quarterly rate achieved
year-to-date in 2023 due to decreases in downtime, leading to the
increase in completed stages per day. Drilling costs continue to
benefit from greater efficiencies from high-grading of rigs and
ongoing cost deflation, particularly across casing costs and rig
rates, resulting in drilling costs per lateral foot approximately
13% lower year-to-date in 2023 as compared to full year 2022.
In its Central Oil area, the Company recently brought online a
four-well pad which produced a 30-day pad average of 4,349 Boe/d
(82% oil) with average lateral lengths of 7,500 feet. Also in its
Central Oil area, SilverBow brought online a two-well pad which
produced a 30-day pad average of 2,140 Boe/d (82% oil) with average
lateral lengths of 9,140 feet. Strong initial performance from
these pads are in-line with expectations and support the Company's
oil focused growth plans. Furthermore, SilverBow continues to test
optimal spacing and co-development potential of the Eagle Ford and
Austin Chalk formations across its oil assets.
PRODUCTION VOLUMES, OPERATING COSTS AND REALIZED
PRICES
SilverBow's total net production for the third quarter of 2023
averaged 357 MMcfe/d, above the high end of the Company's guidance
range. Production mix for the third quarter of 2023 consisted of
61% natural gas, 26% oil and 13% natural gas liquids (“NGLs”),
compared to 70% natural gas, 17% oil and 13% NGLs for the third
quarter of 2022. Total oil and gas sales for the third quarter of
2023 consisted of 26% natural gas, 65% oil and 9% NGLs, compared to
62% natural gas, 30% oil and 13% NGLs for the third quarter of
2022. Net oil production for the third quarter of 2023 averaged
15,326 Bbls/d, an increase of 81% compared to the third quarter of
2022.
For the third quarter, lease operating expenses (“LOE”) were
$0.71 per thousand cubic feet of natural gas equivalent (“Mcfe”),
transportation and processing expenses (“T&P”) were $0.42 per
Mcfe and production and ad valorem taxes were 6.0% of oil and gas
sales. Total production expenses, which include LOE, T&P and
production taxes, were $1.45 per Mcfe for the third quarter. Net
general and administrative expenses (“net G&A”) for the third
quarter were $4.4 million, or $0.14 per Mcfe. After deducting $1.5
million of non-cash compensation expense, cash general and
administrative expenses (“cash G&A”) (a non-GAAP measure), were
$3.0 million for the third quarter, or $0.09 per Mcfe.
Crude oil and natural gas realizations in the third quarter were
97% of WTI and 90% of Henry Hub, respectively, excluding hedging.
The average realized natural gas price, excluding hedging, was
$2.30 per thousand cubic feet of natural gas (“Mcf”) in the third
quarter compared to $7.81 per Mcf in the third quarter of 2022. The
average realized crude oil selling price, excluding hedging, was
$79.76 per barrel in the third quarter compared to $91.93 per
barrel in the third quarter of 2022. The average realized NGL
selling price, excluding hedging, was $21.16 per barrel (26% of WTI
benchmark) in the third quarter compared to $33.34 per barrel (36%
of WTI benchmark) in the third quarter of 2022. Please refer to the
tables included in this news release for production volumes and
pricing information.
FINANCIAL RESULTS
SilverBow reported total oil and gas sales of $174.0 million for
the third quarter of 2023. The Company reported a net loss of $4.8
million, which includes a net unrealized loss on the value of the
Company's derivative contracts of $72.4 million, including WTI
contingency payouts. For the third quarter of 2023, the Company
generated Adjusted EBITDA (a non-GAAP measure) of $141.4
million.
For the twelve months ended September 30, 2023, SilverBow
reported net income of $288.0 million and Adjusted EBITDA for
Leverage Ratio (a non-GAAP measure) of $485.1 million, which, in
accordance with the Leverage Ratio calculation in the Company's
Credit Agreement (as defined below), includes contributions from
acquired assets prior to their closing dates totaling $1.9
million.
Capital expenditures incurred during the third quarter of 2023
totaled $104.4 million on an accrual basis.
HEDGING UPDATE
Hedging continues to be an important element of SilverBow's
strategy to protect 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 October 27, 2023, SilverBow had 79% of total production
hedged for the remainder of 2023, using the midpoint of guidance.
SilverBow has 200 MMcf/d (92% of guidance) of natural gas
production hedged at an average price of $3.95 per million British
thermal units, 11,100 Bbls/d (66% of guidance) of oil hedged at an
average price of $74.56 per barrel and 3,750 Bbls/d (48% of
guidance) of NGLs hedged at an average price of $32.87 per barrel
for the remainder of 2023. For 2024, the Company has 211 MMcf/d of
natural gas production hedged and 11,800 Bbls/d of oil hedged. The
hedged amounts are inclusive of both swaps and collars with the
average price factoring in the floor price of the collars.
Please see SilverBow's Corporate Presentation and Form 10-Q
filing for the third quarter of 2023, which the Company expects to
file on Thursday, November 2, 2023, for a detailed summary of its
derivative contracts.
ACQUISITION UPDATE
On August 14, 2023, SilverBow announced that it has agreed to
acquire certain oil and gas assets in South Texas from Chesapeake
for a purchase price of $700 million, comprised of a $650 million
cash payment at the closing date and a $50 million deferred cash
payment due 12 months post-close, subject to customary purchase
price adjustments. Chesapeake may also receive up to $50 million in
contingent cash consideration based on future commodity prices. The
transformative acquisition is expected to be accretive to all key
financial and operating metrics, increasing SilverBow's size and
scale by approximately 50%.
GUIDANCE UPDATE
SilverBow is providing guidance for 2023 on a standalone basis.
The fourth quarter and full year 2023 statistics do not factor in
contributions from the Chesapeake Transaction. The Company expects
to update its 2023 guidance and release its preliminary 2024
outlook upon closing the Chesapeake Transaction, which is expected
to occur in the fourth quarter of 2023.
For the fourth quarter of 2023, SilverBow is guiding to
estimated production of 353-375 MMcfe/d, with expected oil volumes
comprising 16,400-17,000 Bbls/d or 28% of total production at the
midpoint. For full year 2023, the Company is guiding to a
production range of 336-342 MMcfe/d, with expected oil volumes of
13,900-14,100 Bbls/d or 25% of total production at the midpoint.
Based on guidance, SilverBow's full year 2023 oil production is
expected to increase roughly 94% year-over-year, with oil/liquids
comprising 40% of the total production mix in the fourth quarter of
2023. The Company also increased its free cash flow guidance for
full year 2023 to a range of $20-$40 million.
SilverBow is currently operating one drilling rig in its Central
Oil area and one drilling rig in its Webb County Gas area. As
previously mentioned, the Company plans on completing and bringing
online a four-well gas pad prior to year-end; additionally, the
Company now plans on accelerating the completion timing of two more
pads (one gas and one oil) which will bring capital forward into
2023. The associated capital for these projects are included within
full year 2023 capex guidance of $400-$425 million. Upon closing
the Chesapeake Transaction, SilverBow does not anticipate any
incremental capex on the acquired assets for the remainder of
2023.
Additional detail concerning the Company's fourth quarter and
full year 2023 guidance can be found in the table included with
today's news release and the Corporate Presentation in the Investor
Relations section of SilverBow's website.
CAPITAL STRUCTURE AND LIQUIDITY
On September 13, 2023, SilverBow priced a $148 million follow-on
equity offering and used net proceeds, after operating expenses,
attributable to SilverBow of approximately $97 million to repay
amounts outstanding on its Credit Facility. Strategic Value
Partners, LLC, one of SilverBow's largest shareholders,
participated in the follow-on as a selling shareholder. The base
deal consisted of 4,000,000 shares, of which approximately 70% were
primary shares issued by SilverBow.
As of September 30, 2023, the Company had $1.7 million of cash
and $498.0 million of outstanding borrowings under its Credit
Facility. SilverBow's liquidity position was $278.7 million
consisting of $1.7 million of cash and $277.0 million of
availability under the Credit Facility. The Company's net debt as
of September 30, 2023 was $646.3 million, calculated as total
long-term debt of $648.0 million less $1.7 million of cash.
As of October 27, 2023, SilverBow had 25.4 million total common
shares outstanding.
CONFERENCE CALL AND UPDATED INVESTOR PRESENTATION
SilverBow will host a conference call for investors on Thursday,
November 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 Resource's Third Quarter 2023 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 2023 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
anticipated benefits of the Chesapeake Transaction, future
operations, guidance and outlook, financial position, well
expectations and drilling plans, estimated production levels,
expected oil and natural gas pricing, long-term inventory
estimates, estimated oil and natural gas reserves or the present
value thereof, reserve increases, service costs, impact 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,” “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; risks related to the Chesapeake
Transaction including the timing, cost, financing of and the
ability to obtain any necessary consents or approvals for the
Chesapeake Transaction; completed acquisitions and integrations of
acquisitions; volatility in natural gas, oil and natural gas
liquids 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 capacity 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, instability in financial institutions,
political tensions and war (including future developments in the
ongoing conflicts in Ukraine and the Gaza Strip); the severity and
duration of world health events, including health crises and
pandemics, 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 annual report on Form 10-K for the year ended
December 31, 2022 (the "Annual Report"), its Quarterly Report on
Form 10-Q for the three months ended September 30, 2023 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.
(Financial Highlights to Follow)
Condensed Consolidated Balance Sheets
(Unaudited)
SilverBow Resources, Inc. and Subsidiary
(in thousands, except share amounts)
September 30, 2023
December 31, 2022
ASSETS
Current Assets:
Cash and cash equivalents
$
1,697
$
792
Accounts receivable, net
80,202
89,714
Fair value of commodity derivatives
50,189
52,549
Other current assets
3,825
2,671
Total Current Assets
135,913
145,726
Property and Equipment:
Property and equipment, full cost method,
including $27,821 and $16,272, respectively, of unproved property
costs not being amortized at the end of each period
2,861,267
2,529,223
Less – Accumulated depreciation,
depletion, amortization & impairment
(1,151,141
)
(1,004,044
)
Property and Equipment, Net
1,710,126
1,525,179
Right of use assets
10,085
12,077
Fair value of long-term commodity
derivatives
14,180
24,172
Deposit and other fees for oil and gas
property transaction
52,564
—
Other long-term assets
7,581
9,208
Total Assets
$
1,930,449
$
1,716,362
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current Liabilities:
Accounts payable and accrued
liabilities
$
74,731
$
60,200
Fair value of commodity derivatives
32,752
40,796
Accrued capital costs
56,424
56,465
Accrued interest
2,976
2,665
Current lease liability
5,507
8,553
Undistributed oil and gas revenues
22,462
27,160
Total Current Liabilities
194,852
195,839
Long-term debt, net
645,096
688,531
Non-current lease liability
4,604
3,775
Deferred tax liabilities
49,033
16,141
Asset retirement obligations
9,840
9,171
Fair value of long-term commodity
derivatives
21,560
7,738
Other long-term liabilities
922
3,588
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, 25,914,823 and 22,663,135 shares issued,
respectively, and 25,429,517 and 22,309,740 shares outstanding,
respectively
259
227
Additional paid-in capital
677,473
576,118
Treasury stock, held at cost, 485,306 and
353,395 shares, respectively
(10,616
)
(7,534
)
Retained earnings
337,426
222,768
Total Stockholders’ Equity
1,004,542
791,579
Total Liabilities and Stockholders’
Equity
$
1,930,449
$
1,716,362
Condensed Consolidated Statements of
Operations (Unaudited)
SilverBow Resources, Inc. and Subsidiary
(in thousands, except per-share amounts)
Three Months Ended September
30, 2023
Three Months Ended September
30, 2022
Revenues:
Oil and gas sales
$
173,963
$
242,181
Operating Expenses:
General and administrative, net
4,438
4,343
Depreciation, depletion, and
amortization
53,186
41,501
Accretion of asset retirement
obligations
254
166
Lease operating expenses
22,678
17,701
Workovers
672
284
Transportation and gas processing
13,710
9,662
Severance and other taxes
10,407
12,581
Total Operating Expenses
105,345
86,238
Operating Income
68,618
155,943
Non-Operating Income (Expense)
Gain (loss) on commodity derivatives,
net
(54,639
)
4,832
Interest expense, net
(19,811
)
(12,173
)
Other income (expense), net
112
5
Income (Loss) Before Income Taxes
(5,720
)
148,607
Provision (Benefit) for Income Taxes
(949
)
6,066
Net Income (Loss)
$
(4,771
)
$
142,541
Per Share Amounts:
Basic Earnings (Loss) Per Share
$
(0.21
)
$
6.39
Diluted Earnings (Loss) Per Share
$
(0.21
)
$
6.29
Weighted-Average Shares Outstanding -
Basic
22,985
22,308
Weighted-Average Shares Outstanding -
Diluted
22,985
22,669
Condensed Consolidated Statements of
Operations (Unaudited)
SilverBow Resources, Inc. and Subsidiary
(in thousands, except per-share amounts)
Nine Months Ended September
30, 2023
Nine Months Ended September
30, 2022
Revenues:
Oil and gas sales
$
440,317
$
554,442
Operating Expenses:
General and administrative, net
17,421
14,840
Depreciation, depletion, and
amortization
147,037
89,096
Accretion of asset retirement
obligations
718
366
Lease operating expenses
62,417
37,095
Workovers
2,263
933
Transportation and gas processing
37,001
22,784
Severance and other taxes
28,563
30,183
Total Operating Expenses
295,420
195,297
Operating Income
144,897
359,145
Non-Operating Income (Expense)
Gain (loss) on commodity derivatives,
net
57,604
(157,816
)
Interest expense, net
(54,746
)
(26,632
)
Other income (expense), net
117
57
Income (Loss) Before Income Taxes
147,872
174,754
Provision (Benefit) for Income Taxes
33,214
7,678
Net Income (Loss)
$
114,658
$
167,076
Per Share Amounts:
Basic Earnings (Loss) Per Share
$
5.06
$
8.85
Diluted Earnings (Loss) Per Share
$
5.02
$
8.69
Weighted-Average Shares Outstanding -
Basic
22,677
18,885
Weighted-Average Shares Outstanding -
Diluted
22,852
19,237
Condensed Consolidated Statements of
Cash Flows (Unaudited)
SilverBow Resources, Inc. and Subsidiary
(in thousands)
Nine Months Ended September
30, 2023
Nine Months Ended September
30, 2022
Cash Flows from Operating Activities:
Net income (loss)
$
114,658
$
167,076
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating activities
Depreciation, depletion, and
amortization
147,037
89,096
Accretion of asset retirement
obligations
718
366
Deferred income taxes
32,892
7,496
Share-based compensation
4,043
3,901
(Gain) Loss on derivatives, net
(57,604
)
157,816
Cash settlement (paid) received on
derivatives
70,670
(182,058
)
Settlements of asset retirement
obligations
(481
)
(47
)
Write down of debt issuance cost
—
350
Other, net
2,028
(6,425
)
Change in operating assets and
liabilities:
(Increase) decrease in accounts receivable
and other current assets
9,129
(47,320
)
Increase (decrease) in accounts payable
and accrued liabilities
(5,320
)
20,260
Increase (decrease) in income taxes
payable
321
(21
)
Increase (decrease) in accrued
interest
311
1,688
Net Cash Provided by (Used in) Operating
Activities
318,402
212,178
Cash Flows from Investing Activities:
Additions to property and equipment
(316,003
)
(163,567
)
Acquisition of oil and gas properties, net
of purchase price adjustments
(382
)
(293,880
)
Deposit and other fees for oil and gas
property transaction
(51,163
)
—
Proceeds from the sale of property and
equipment
—
4,415
Payments on property sale obligations
—
(750
)
Net Cash Provided by (Used in) Investing
Activities
(367,548
)
(453,782
)
Cash Flows from Financing Activities:
Proceeds from bank borrowings
334,000
679,000
Payments of bank borrowings
(378,000
)
(426,000
)
Net proceeds from issuances of common
stock
97,133
—
Net proceeds from stock options
exercised
—
39
Purchase of treasury shares
(3,082
)
(3,404
)
Payments of debt issuance costs
—
(7,228
)
Net Cash Provided by (Used in) Financing
Activities
50,051
242,407
Net Increase (Decrease) in Cash and Cash
Equivalents
905
803
Cash and Cash Equivalents at Beginning of
Period
792
1,121
Cash and Cash Equivalents at End of
Period
$
1,697
$
1,924
Supplemental Disclosures of Cash Flow
Information:
Cash paid during period for interest, net
of amounts capitalized
$
52,170
$
22,701
Non-cash Investing and Financing
Activities:
Changes in capital accounts payable and
capital accruals
$
13,363
$
60,595
Accrued other fees for oil and gas
property transaction
$
(1,401
)
$
—
Non-cash equity consideration for
acquisitions
$
—
$
(156,259
)
Definition of Non-GAAP Measures as Calculated by the Company
(Unaudited)
The following non-GAAP measures are presented in addition to
financial statements as SilverBow believes these metrics and
performance measures are widely used by the investment community,
including investors, research analysts and others, to evaluate and
useful in comparing investments among upstream oil and gas
companies in making investment decisions or recommendations. These
measures, as presented, may have differing calculations among
companies and investment professionals and may not be directly
comparable to the same measures provided by others. A non-GAAP
measure should not be considered in isolation or as a substitute
for the related GAAP measure or any other measure of a company's
financial or operating performance presented in accordance with
GAAP. A reconciliation of each of these non-GAAP measures to the
most directly comparable GAAP measure or measures is presented
below. These measures may not be comparable to similarly titled
measures of other companies.
Adjusted EBITDA: The Company presents Adjusted EBITDA
attributable to common stockholders in addition to reported net
income (loss) in accordance with GAAP. Adjusted EBITDA is
calculated as net income (loss) plus (less) depreciation, depletion
and amortization, accretion of asset retirement obligations,
interest expense, 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” and the borrowing facility provided thereby, the “Credit
Facility”), 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 the 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 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 the
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 and bank
fees, 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.
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.
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, 2023
Three Months Ended September
30, 2022
Net Income (Loss)
$
(4,771
)
$
142,541
Plus:
Depreciation, depletion and
amortization
53,186
41,501
Accretion of asset retirement
obligations
254
166
Interest expense
19,811
12,173
Loss (gain) on commodity derivatives,
net
54,639
(4,832
)
Derivative cash settlements
collected/(paid) (1)
17,806
(84,127
)
Income tax expense/(benefit)
(949
)
6,066
Share-based compensation expense
1,467
1,188
Adjusted EBITDA
$
141,443
$
114,676
Plus:
Cash interest expense and bank fees,
net
(18,830
)
(10,481
)
Capital expenditures(2)
(104,445
)
(109,975
)
Current income tax (expense)/benefit
(91
)
225
Free Cash Flow
$
18,077
$
(5,555
)
(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, 2023
Last Twelve Months Ended
September 30, 2022
Net Income (Loss)
$
288,018
$
281,350
Plus:
Depreciation, depletion and
amortization
191,923
112,240
Accretion of asset retirement
obligations
887
446
Interest expense
70,062
33,873
Loss (gain) on commodity derivatives,
net
(141,535
)
127,954
Derivative cash settlements
collected/(paid) (1)
33,487
(219,648
)
Income tax expense/(benefit)
35,136
14,484
Share-based compensation expense
5,227
5,097
Adjusted EBITDA
$
483,205
$
355,796
Plus:
Cash interest expense and bank fees,
net
(66,463
)
(37,992
)
Capital expenditures(2)
(432,608
)
(244,857
)
Current income tax (expense)/benefit
(115
)
(776
)
Free Cash Flow
$
(15,981
)
$
72,171
Adjusted EBITDA
$
483,205
$
355,796
Pro forma contribution from closed
acquisitions
1,886
139,267
Adjusted EBITDA for Leverage Ratio
(3)
$
485,091
$
495,063
(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. 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:
September 30, 2023
September 30, 2022
Credit Facility Borrowings due 2026
$
498,000
$
480,000
Second Lien Notes due 2026
150,000
150,000
Total debt
$
648,000
$
630,000
Adjusted EBITDA for Leverage Ratio (3)
485,091
495,063
Leverage Ratio
1.34x
1.27x
Production Volumes & Pricing
(Unaudited)
SilverBow Resources, Inc. and
Subsidiary
Three Months Ended September
30, 2023
Three Months Ended September
30, 2022
Production volumes:
Oil (MBbl) (1)
1,410
781
Natural gas (MMcf)
20,010
19,324
Natural gas liquids (MBbl) (1)
729
582
Total (MMcfe)
32,847
27,505
Oil, natural gas and natural gas liquids
sales (in thousands):
Oil
$
112,456
$
71,811
Natural gas
46,075
150,958
Natural gas liquids
15,432
19,412
Total
$
173,963
$
242,181
Average realized price before impact of
cash-settled derivatives:
Oil (per Bbl)
$
79.76
$
91.93
Natural gas (per Mcf)
2.30
7.81
Natural gas liquids (per Bbl)
21.16
33.34
Average per Mcfe
$
5.30
$
8.81
Price impact of cash-settled
derivatives:
Oil (per Bbl)
$
(3.45
)
$
(20.44
)
Natural gas (per Mcf)
1.00
(3.47
)
Natural gas liquids (per Bbl)
3.68
(1.86
)
Average per Mcfe
$
0.54
$
(3.06
)
Average realized price including impact of
cash-settled derivatives:
Oil (per Bbl)
$
76.30
$
71.49
Natural gas (per Mcf)
3.30
4.34
Natural gas liquids (per Bbl)
24.84
31.48
Average per Mcfe
$
5.84
$
5.75
(1) Oil and NGLs are converted at the rate
of one barrel to six Mcfe. Bbl refers to barrels, and MBbl refers
to one thousand barrels. MMcf refers to one million cubic feet.
Fourth Quarter 2023 & Full
Year 2023 Guidance
Guidance
4Q 2023
FY 2023
Production Volumes:
Oil (Bbls/d)
16,400 - 17,000
13,900 - 14,100
Natural Gas (MMcf/d)
210 - 225
209 - 213
NGLs (Bbls/d)
7,500 - 8,000
7,200 - 7,350
Total Reported Production (MMcfe/d)
353 - 375
336 - 342
Product Pricing:
Crude Oil NYMEX Differential ($/Bbl)
($2.50) - ($0.50)
N/A
Natural Gas NYMEX Differential ($/Mcf)
($0.80) - $0.00
N/A
Natural Gas Liquids (% of WTI)
23% - 27%
N/A
Operating Costs & Expenses:
Lease Operating Expenses ($/Mcfe)
$0.72 - $0.76
$0.70 - $0.74
Transportation & Processing
($/Mcfe)
$0.38 - $0.42
$0.38 - $0.42
Production Taxes (% of Revenue)
6.0% - 7.0%
6.0% - 7.0%
Cash G&A, net ($MM)
$4.0 - $4.5
$17.4 - $17.9
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/20231101090168/en/
Jeff Magids Vice President of Finance & Investor Relations
(281) 874-2700, (888) 991-SBOW
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