SBOW - Earnings call transcript Q1 2018

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Operator

Good morning. My name is Sonya, and I will be your conference operator today. At this time, I would like to welcome everyone to The SilverBow Resources First Quarter 2018 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session [Operator Instructions]. you. Thank Mr. Manager IR, Senior your may Finance conference. of Atkinson, you and begin Doug

Doug Atkinson

and Thank morning, for you, good Thank Sonya, everyone. joining you us. much very

our Web COO; during Joining Steve an our to updated on the it on today this we posted Sean me to will presentation our refer call CFO. We Adam and Gleeson and Woolverton our corporate Van site, Riet, call. are CEO; occasionally

non-GAAP release. make financial to investors it. note references review to to may closest the certain which So measure I encourage their measures, that Please reconciled are in we GAAP earnings press

Our statements, are also on the SEC, risk beyond Web to on Sean. will that, fully uncertainties discussion which These file and with I'll our the turn control. more today documents and over risks include which are call available to site. our are our of which And are forward-looking uncertainties, with many described subject in

Sean Woolverton

thank our And joining you for Doug. you, Thank everyone morning. this call

to quarter pleased another are solid great and start XXXX. report We to a

Our ability portfolio. to demonstrate execute our consistent financial our across results and operational

the levels strong came Our from gas and combined production Fasken, contributed with performance program end high Ford guidance. wells our our Eagle to in flatter our production at our in in of Southern position, profiles that

cost structure, to we the we to while On team metrics, ways the is cost side, testament a continue in improving our safety lower find to which upon our have place.

ago operating of for of compares in provided huge per guidance. lease to quarter, expenses favorably our $X.XX focus levels cost on year Our which the $X.XX into a Mcfe

by over will we year unit LOE just XX% basis. our So per one in over reduced period, a on a have

operator achieving our way our low becoming goal We basin. the the stated are well in of to on cost

half With to two drilling, back expect capital prying our program. to the year for enter the rigs of growth. we Turning now

is strategic and Our the for appraisal. drilling delineation around program built year

Southern for customized the while where Live LaSalle, rig and in We blocks the dozen Ford gas acres. Fasken assets we Eagle Artesia, our is have focusing one Eagle rig and assembled deeper window. in a specifically Ford Counties have on do XX,XXX over Southern in gas Oak With shallower our McMullen wells

multiple the testing and on work our On area. choke as in all best testing sizes designs regimes throughout volumes portfolio, with are we management of of concepts, areas each as advanced management ranges stimulation what completion well side, in different pressure honing

basin We actions Finally, on front, the you approximately in with the in fast early was know, leasing fairway XXXX, leasing a the XX,XXX gas believe play were the our mover the positioned standpoint. from of portfolio. available we the to as acreage a adding us in in pursuing acres that best some

While remain basin our for entering has to leasing an the companies opportunities M&A or increasing, standpoint. landscape whether play portfolio, we the bonuses ample more more lease add competitive and believe the become there be to us it’d in with a from

We opportunities crosses full will on with focus continue desk to any a disciplined returns. that our cycle evaluate

significant growth second the great Company hand Steve. in for the the rig. half over And year scale and well-positioned will are in by I as saying from we to with we I addition So start and benefits that the XXXX. and to realize will off back that, of of The is the a production poised close it

Steve Adam

you, Sean. Thank

feet shallower production. wells reflect the from the new from for These by strong quarter Moving of our of in day driven equivalent quarter. Fasken results and was first cubic operational managed our onto pressure initiative. declines Production our base per shallower gas XXX in million declines performance

on Moving to cost.

and procedures chain and functions. optimizing unit We supply of are for evaluating our operating and all processes costs, our

services selective and CapEx both and for de-bundling on along focuses granular the OpEx spends. chain our forward, aggregation Moving of value

our bottom already see are to expenses. impact on starting and operating this We line lease

expenses decline the operating with divestiture growth lease second to our production in and rig. combined discipline XXXX associated We with our AWP throughout due continued expect our cost Olmos to

additional are service selectively we from provides rig services manufacturers. second scale, leveraging The which to procure and and companies goods directly

dedicated as our ability a slots our pumping with secured have quality greatly timing we enhanced which such vendors, select services, the and operations. time to Specifically, of control

have to potential for monitoring service We been in cost the price. oil due inflation increasing

such, with potential efficiencies. cost expect we XXXX As operating to in offset inflation any improved

will Our bid keys rigorous in performances our production to success management services. refinements include completion commercial of and vendor this selections, and drilling, year

first this day quarter, pad from deliverability which the approximately XX six over our performance each a the Three wells pad and tighter a Turning history. stage space. as wells average proppant the an Ford, million design a month. completed increasing back million its Eagle completion from Upper delivered in of Eagle The were the for average we way day Fasken of Company's well well change by first in earlier, pad pad the in as production. of this foot demonstrate Fasken, the This month average rate to was with the results an pounds of mentioned completed Ford largest the asset. and is these per Upper X,XXX XX first of believe lateral We

our optimize is sand to spacing plan increasing further forward, volumes to pounds by stage X,XXX Going per tighter keeping and foot.

potential, design another and us since existing $X six fluid the infrastructure pay tech meet they Fasken, contracted provide significant took large pads Drilling Average our our drilled for We type moving came pad consistencies including Developing pad at Company’s inventory. the Austin Fasken different rig. a immediately economic water. from us cost for using zones is pad further test million to six plan Testing lowest opportunity and is recently for growing cost can we well upside. are both stack companies Chalk a beneficial to that leverage our slick goals. our method well for estimate. the curve additional service the from high efficiencies well hybrid as the in and system, these to also for learnings under in We a this

at encouraging early the to Fasken Ford productivity are results now As and such, upper in we planning due more stimulation. Eagle development

As Grande wells targets Grande second up including moving four in call. Mas. gas our dedicated to entire Southern have Eagle to and potentially in our we two AWP The These quarter, confirm wells X,XXX Sean At Oro foot X,XXX higher pounds Mas, in Oro were customized stages late finishing to per to some Eagle pressured Ford AWP. additional same report in wells rig currently which Oro be will is pound. the area, the in with of currently the testing our significant lower over we These including proppant mentioned, more spud landing have up quarter thicknesses lateral evaluated. of and able section. will thickness both brought were section rig, been approximately is deeper pumped Ford other which two in and and with online April, soon warrant Uno are Eagle Grande during zones, Ford, across This Uno being in

forward going multiple challenge is these and intervals. spots Our successfully appraise to delineate sweet the across

evaluating designs, other driven proppant and stage in We loading intensities AWP Mas. facings, are currently for fluids, value and including Uno completion our wells Oro our Grande,

initiative and Specific rock out techniques our We our management further designs are enhanced pressure Bracken XXXX, with focus treat because that management our overly frac to we completed We of for length. optimize across wells, choke wellbore near stimulation effectively on recovery believe returns, testing two opposed reaching delivering management, in are portfolio. area. as and that our efficiencies to continue long pressure higher to

all these practices see from implying to are we that, We various wells I’ll to to the to assess Oro management also under With in similar expect methods. program. choke completed from wells turn values better same of over Gleeson. recoveries results our it Grande This and said, our

Gleeson Van Riet

Steve. Thanks

As equivalent from day, frac the decrease represents the approximately number million first Olmos reflects fourth quarter. slight series one-time properties. in decrease the including XXX of a mentioned, feet a production averaged of impact quarter from interference of our and mitigation for gas deliveries, sale a of which AWP the change events, per cubic This

year to Looking of Mcfe as guiding and out the production XXX XXX completed we’re accelerate half up of rig. from start to we our the quarter further to day, in per second then wells second rebound back delivering into for XXXX,

of was First our quarter gas production natural XX% revenue million representing XX% and revenues. $XX.X of with

in ASC adoption starting public January is are recorded and standard revenue evaluating gas all NGLs transportation X see and and XXX follow at recognition to Historically, process gross existing our of those have accounting this with standard. recorded that revenue U.S will determined for new our our After companies new we disclosure describing consistent related XX-Q processing the some historical required expense. we of of all value, You as method contracts, an that our T&P year. fees

sale our method of accounting have oil we expenses. changed such, and and As not gas for

and XX% NYMEX pricing natural NGLs. realized During gas, of NYMEX per XXX% NYMEX oil XXX% was the of WTI our WTI quarter, of

quarter. now While getting lagged recently NGL XX% realizations realizations rallied, the have we’re to to XX% oil second NGL have prices so for

contracts on was Our quarter settled hedging for gain approximately the $XXX,XXX.

We to for active guidance. our be XX% now XXXX production program, balance with our and hedge have midpoint the of hedging our on approximately based of the continue of

approval hedge our gas In addition, to lenders differentials. LOE received recently us to we from our and enable

locking producing started are we So at in it. dynamics favorable pricing

to per Turning down was XX% quarter fourth Mcfe, and was flat expenses which lease QX, to levels. operating to compared compared $X.XX cost, XXXX

expecting second we’re the of Mcfe. LOE $X.XX XXXX, per For $X.XX quarter expense to of

cost and also Olmos efficiencies Eagle of those costs Ford, achieving operating divestiture lower for We’re in the higher the assets. through

March Xst million the period for reminder, selling a As adjustments Olmos on in proceeds $XX prior closed direct after expense. divestiture AWP cash and

wells January As results. associated our and first February those and are LOE revenues with quarter in a result, included

representative current cost the quarter clean second first AWP will quarter The represent more our and without structure. of Olmos assets, is the

peers. X.X% quarter oil quarter on OpEx step for quarters, unit as were production increase levels which We was costs fourth we increase first up expect the T&P an the together, have due our revenues to we to the basis half in estimates taxes. XXXX the compared for year. processing $X.XX our Production of believe $X.XX, LOE our gas a taxes ad and in was valorem and LOE and an continued Transportation per first favorably back which of to for our improvement compares a Adding of total we Mcfe. per

valorem which taxes developed value significantly during increased on ad our are Texas Specifically, reserves, based the of XXXX.

results strong Additionally, $X.X adjusted were to quarter. and quarter, focus $XX.X guidance levels million fourth levels fourth XX, interest favorably in driven lien total, for was and EBITDA which our associated the $X.X from of million notes, million. XXXX. with continued an second In interest of expense several G&A credits. quarter December compared $X of XXXX Cash expense by cost full increase Cash quarter quarter benefited production the on in issued million of one-time

two on are expected expenditures annual Capital in rigs We a quarter, and XX% representing approximately to budget. capital to our in with full completions. to CapEx activity the reflect million increased Turning expenditures. quarter $XX drilling increase associated spend of second

several However, sales completions of not the will quarter, the and until given third drilling. to timing nature turn pad

such, growth end XXXX our is production to expected back As weighted. be

quarterly $XX.X is these obligations removed our production million our total liability AWP deal million stands in our our term expenditures CapEx, $X.X year total. classified prior capital abandonment Chene in in $X.X transaction of million $X.X is $XX.X with million to $XX.X to The Combined, liability, reiterated of another while for associated as back We signed sale transactions as addition guidance million. liability and the remaining cash XXXX. the current books in from the plugging divestiture in full This spent ARO Olmos which and our In a $X.X million. for $X.X liability. removed a long-term reduced Bay million after December and million we’ve De now at classified we

Additionally, our refer for it expectations. presentation, XXXX please latest quarter guidance our so corporate we second the to provided in

$XXX liquidity million. approximately of Our as XXst March was

borrowing announced, redetermination. AWP during to our our Olmos backdrop. we and XXXX gas favorable challenging spring redetermination the given base view $XXX previously We As a reaffirmed the outcome divestiture price spring million

a and entire liquidity are and to thank our strong their Our continued team’s support. efforts, to sheet I’d testament solid syndicate like for our bank balance

with all with I’ll expect fully At first and of And in fund that, the We and we’re facility. cash on wrap the turn our Sean prepared comments. to borrowings to it of operations, end headroom. significant up full financial our to with have covenants, our credit generated quarter, from XXXX program over compliance capital

Sean Woolverton

Thanks, Gleeson.

rig. a was a great have So when the half full ourselves of the and expect positioned into of back response ’XX benefits heading momentum from with we to the quarter associated to second we realize the first production scale as start of lot our summarize,

production think and our is we As drilling goal grow rates about and beyond, low our operating of by wells maximizing still margins XXXX with by attractive our leveraging costs. return to

structure. efficiencies operational and focus leading pure driving a We operating on continue with to cost

growth inventory continuously drilling that this robust a clean strong a and to coming with years. has portion high rate operator to with the developed a liquidity back Q&A that, of are positioned team, set. we opportunity balance have the substantial and working the that certain strong turn well are operating with over for a We of call. locations I’ll attractive Along grade it number returns, deliver we And of the sheet for

Operator

you Thank [Operator Instructions].

comes Mills Johnson Rice. Your from from line first of question Ron the

Your line is open.

Ron Mills

as you highlighted the those to proppant levels the water. Steve, of spacing on slick frac terms completion increased a basing, and changes, of some relates cluster side test stage to tighter it in moving within tighter lot of stages, and things

and track those of curve, the particularly backdrop you Eagle So of could of in Ford Fasken to of bit you what going -- iteration, to are for your second on just that Upper do in wells tweaks a XX the some terms your from iteration provide area? bcf first a expect little which forward,

Steve Adam

lot a earlier rapidly have Eagle though is opportunities difference the experience lower seeing the Ford What initially two. the we’ve of Upper optimize. in try of and is the in Eagle done and between general there some that character We some described Ford from to basically meantime Eagle we front, those

returns forecasting, we've also X,XXX additional of appear to around stages. to mention whereby that’s have lines still the strong the gone clear in to not generate to the be jury ahead X,XXX, for and versus the And less to a the fluid tightening of stages proppant productivity, a done to forward have may to Eagle tightening and So the bit be clearly for. we deepen rock fluid and Clusters of the and pathway to increasing up Upper loading little correlation can that that proppant of to some modeling But design see improved some looking a more upwards EURs a we’re looks up have frac along outstanding. seeing even first. and a fluid more characteristic design going representative our we changes

Ron Mills

the the in the at the as What of look at looking increased the side most tracking And recent work through XX you Bcf you intensity presentation clearly expect that mentioned curve, Ford, upcoming do level I to that on when project? completion upper test. Eagle wells as test

Steve Adam

to a go to slick a and from test going water. We’re ahead moving more hybrid

cluster the more a going minus, range. XXX We’re as spacing foot XXX XX overall proppant also like going somewhere to a type plan towards XXX, on that pushing of in plus I test loadings, foot And XX stage to from proppant disperse to more and we two likely using. say, to X,XXX we

Ron Mills

of lead when the look I management management. partly presentation internal of shallower profiles, the which that helped the that differential guess the in is has decline data, practiced then quarter? And what on that production the shows you’ve side, first accomplished driving in But production to you choke terms the some what's such at base that

Steve Adam

was a some peak now somewhat takes production. conservative then where pressure. maximize early pressure been some and change proprietary cleanup data to we there we refined have we’ve Utica. applied, The that deeper choke, can our merit. that work from knowing and out cleanup, with us by of Haynesville a and managed historical setting taken choke and lot the We've from we based we has part through has of then gives whereby practice information early us of come a into very and further going that it there, our with our choke chokes have a we on to the strong management then that, And the And that here that differentials some have a data

that get that improve we and we learnings regime Ron, answer to where some well that done. provides -- to we well short tweaked practices elsewhere, managed historical deep current a and the we that from IP had is the we choke day as cleanup -- a And as have gas both So the as tests EUR. into we go now

Ron Mills

well whether currently both any as impacts, months. such over where you you few stand focus the and impacts? are be Are drilling any it’d the you wells And spacing, an on upper aerial test parent-child from your past or seeing lower, on relationships given vertical

Steve Adam

what in-play spacing. seeing to And are Fasken what other legacy Ron, XXX somewhere we’re there, roughly people in XXX both spacing interference the about areas, the similar the area, on and seeing, is we’re oriented assets play, acre and been in And our lower, legacy about asset In upper the resource in Eagle in we’re in Ford. our XXX were that seeing XXX, there acres. in the interference type more has

in the we’re as side. North, elsewhere. the our legacy of in Eagle gas on assets of the However, being parts the developed side vertical we’re seeing the highly on And to compare lower to interference type the upper, you Ford other experienced already. that’s Ford the not Eagle That’s more

again as basin side So over we side; there test the looking in-playing on vertically near summarizing in have the fixed much you’re as and the on to and our Grande the where Uno little; don’t Oro very at we wells sections. of and not resource Mas, very have north legacy

we’re clearly we’re so well comfortable know haven’t even dealing yet in-playing part planning we the any in future. the that stack and drill in to in we the side-by-side. far it course, not future, very And of development when the about not we’re we in near the where feel concerned the lower, seen vertical. around of about But And

Ron Mills

or about spread even talked the Steve, some two into dedicated you you you standpoint, Sean, as At having potentially moving would about next? Thanks. frac and think dedicated slots. a do consider maybe rest you from one, we or develop your how adding think this with of frac last that point, running. -- one year rigs then And from your

Sean Woolverton

thought that months. have that as option, option do the given been an an our both with plan service and for our provider in couple past as near-term we’ve well considerable And XXXX. going And that of into we’ve as as the over we dealing in

advances right up it’s present provider, drilling side, at we’ve to that been with service the the So of some we’ve discussions now they’re positive and our and able that opened make those with on the time. so opportunity just

Operator

comes line SunTrust. Dingman question next of from Your of Neal the

open. line is Your

Neal Dingman

that. had, on the one I looks just talk of nit know a noticed quarter -- go? will those about had, I bit a long had know am I guys you’ve constraint. about on wondering and Fasken, Ford can wells, that how some can been of you Uno if Probably your that, delivery you the choke Thanks. of some Oro first I talk gas about, Mas then pretty number I on conservative about about guess And into you like we’ve and talk you’ve AWP, management, I your Grande, the talked tying Eagle two?

Steve Adam

volume in a there our At as based the on constraint know, have Howard. you Fasken, we deliveries

And develop on so our we and mindful capital how we’re very spend there.

possible, in position So our overspending deliverability deliver position always in in certainly not and but that of in we’re always a over to terms deliver where we’re to when a be to that, that area.

opportunities. the plug in of terms goes doing committed it low the system. pressure the Uno increase and management, that Taking that we completions. cleaning as high all there to with So Grande cleanout our we’re wells. terms disposable perf medium stages, we’re development and over there Mas and pressure and There in choke both in to we both with choke wells both our hand-in-hand -- very And and Oro how a up

of hybrid regime. from we're those chokes we the we've take wells committed historically, And currently three as well that [MTB]. and up then in a done there, way a choke plus And the cleaning from three to early between then we're So as approach what part our what thing a basins. deep conservatively the optimize year internalizing EUR work we IP, to very other

Neal Dingman

like outperforming your gas likes then number of us of It same been these a it to southern wells, Eagle And looks with fact some looks just lastly, staying type area. them have in curve. Ford

Just bit? versus a current on type boosting your curve thoughts potentially those

Sean Woolverton

Mas there to Bcf. from AWP XX out put Grande ranging type several through with XX Oro the to of Uno curves range We over

We’re finding brought still seeing that that half that within perform we on. wells range dozen we’re early wells

wells, to move better XX acreage get we we fewer I towards rock. through may the year think wells able on we’ll be get and get that honing start dozen type this of across as block, another understanding given in curves type that even large the as curve

So right not upwards to the we’re now, or kind of downwards staying ready that. revise for course

Operator

the from is from Grampp line question Capital. next Jeff of Your Northland

now Your open. line is

Sean Woolverton

Operator, the caller why to in move don’t queue? we next

Operator

Certainly.

line Your from Ben Stephens. next Wyatt of question from comes the

is line Your open.

Ben Wyatt

about that days that maybe we call -- two did ask to we six did on I One wanted then more? you wells even to What rig side spec getting, only always days, the Thanks. we the high asset. base you you maybe that like month should If with did? like look what expect well just the guys the question drill of And the D&C think have. that per drilling guys pad conversations on on look improve drill the new guys have, it

Steve Adam

recently, per were wells there legacy we spots through upper lower. some lower, penetration that. been were in both some our been sweet identify that on and referring work able asset, per we rates. to and had to in advance now the to that upper, the X.X In to able petrophysical we two aided wells Well, we've Fasken But our month lagging month just greatly

in from upper, So X going the we’re as now X.X well. to

present time likely to and plus two there the X.X like upper at in see just to. the We’re

and made levels improvements of in that high to we’ve asset, they So repeatable. look quality all ROP both be legacy

flex pumps, your X,XXX the The that it’s is their typical one that what’s the new hit doing us, without many system one to that sometimes the other too is into relates for just details with what it But deeper. capability rig threes work getting interest, of doing even specs super and of of mass particular market. is rig and three of thing as

articulating walking So it’s it not full a rig, rigs. a is rail

in big now doing and is us where by pads. since pads are didn’t generally two able as now big to those that side the on to and walk multi-well latitude before both the these we’re drilling efficiencies. multi-well the have area pressure So that fro giving And Fasken well pumps, we as the ability as we’re what that gives we side in tell historically added

and generating is to So rate, flexibility faster not technical of but clearly the the rig penetration also the only terms it’s mobility well. The in part of hand-in-hand. well sub-surface

Ben Wyatt

then Should maybe on those and on if along year-end? just And update though, see we Gleeson side. year the little just us to feel later improvement maybe your starting of completions like the you’ll lines, think some or about you but ducts maybe that, guys ducts better is at a what look unchanged

Gleeson Van Riet

year-end your Yes, around ducts? question

Ben Wyatt

But Yes, just the now. I’m obviously, confidence is improve more you change there you have days update continue will that? guys as that to assuming around improves if and drill no

Gleeson Van Riet

fair. that’s think I

you we’ll I think be will to at second any our be we able change, call to, that in have give able so be stage. quarter we’ll next if be will by early guidance August then

Operator

this questions This further concludes [Operator today’s Instructions] no There are at time. conference.

You may now disconnect.

Sean Woolverton

you. Thank

SilverBow Resources (SBOW) 9 May 182018 Q1 Earnings call transcript