SBOW - Earnings call transcript Q1 2020

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the SilverBow Resources First Quarter 2020 Earnings Conference Call. [Operator Instructions] As a reminder, today's conference is being recorded.

It is now my pleasure to hand the conference over to Mr. Jeff Magids. Please go ahead, sir.

Jeff Magids

good and Nicole, you, morning, everyone. Thank very quarter XXXX you much for first our for us conference joining Thank call. Chris With me Steve and CEO; Sean Woolverton, our on the call Adam, today our are our Abundis, CFO. COO; will a posted this presentation website it we afternoon, occasionally new to Yesterday refer to corporate our and call. during latest to We encourage materials. listeners download the

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

risks statements and which Our many on and more discussion to include website. are our uncertainties, risks the forward-looking are which These which fully on our today uncertainties beyond are SEC, documents available file with of subject may also described in control. our are

With over I that, turn the will call to Sean.

Sean Woolverton

everyone, this you, our Thank and for you, morning. thank call joining Jeff,

we that COVID-XX of the as well. foremost, impacted the life. and day-to-day our listening hope macro The both everyone economy outlook has virus First and

precautionary vendors conditions, In safeguard decline We to our strategic and take to in the commodity recent contractors, our including to the response and outbreak optimize we operating of XXXX prices employees, the continue decisions made outlook, COVID-XX plan. stakeholders. rapid measures current other economic and to market

standpoint, at a of we suspend from activity to until capital First, year. drilling least all part latter the elected this

industry, commodity We We plan. do what the a highest to are opportunistic returns-driven not which liquids company, exist A&D. of unlocked focused development through believe the price support be within did outlook the and will was returns a originally be slated superior

production Second, we undertaken management program. effective an have

prices economic economically and in future. are by returns ensuring aligning supportive curtailments production with We the through production

balance measures liquidity. of million for position monetized oil program. the debt our term. XXXX bring XXXX in decreased derivatives increasing proceeds our proactive over We near sheet $XX to regards we quarter-over-quarter, management we thereby remainder net our excess cash bolster forward $XX In our and by to to the million of March, Third, risk took

returns uplift recent layer advantage into development. of allows additional We hedging This also in of the XXXX. on in to gas have taken ahead lock future prices to us

activity strategy While business our and the our budget outlook same. changed, has remains

building We advantage in taking well-balanced of natural portfolio the outperformance prices. gas and are relative a mix

compared the across volatility built We are in upside into our variables prices with our suited optionality navigate peers We both focus the gas given to D&C prices. near-term portfolio commodity generate in to and oil and control to returns sustainable program. better leverage to on look our

development gas current this to the strip, to gas year. year the pivot Given we optionality late early next have and

in acreage a arsenal. gas lever has been always our key Our low-cost

gas further we we previously acquisition, should doubled This disclosed, provides end. closed recently after upside SilverBow our As which continue prices with to improve. gas acreage just natural through an quarter

noncore second very divested working remotely. to of to team's also I'm overriding on ability execute Wyoming, we our royalty quarter. in which expect interest We the well-timed close in these proud transactions while

to year We to current a are million $XX $XX our free our for range. to million XX% CapEx or approximately million $XX guidance XXXX. strip prior compared XXXX million, million approximately targeting a flow reduced of to At cash we decrease prices, $XXX of range full $XX of

Assuming activity, free above drilling to flow that in range expect no generate further cash XXXX. we

of have we bit earlier, mentioned A&D have have I optionality recent generate rates operational through today in the acreage. drill and we we made Many return of are transactions opportunities improvements quarters. to As our high the of on result gas the

of liquidity $XX the and cash acreage acquisition of Ford western window. for increased in the flow first and our maintenance range CapEx production midpoint $XX Based XXXX, year. implied for $XX upon million the quarter, quarter levels million of resulted gas in Eagle per of million $XX free in well-timed actions the to million our is exit In rate our summary, of guidance the offsetting

compelling We prices. our reward have for established over risk next years the a current at stakeholders opportunity several

the Based a borrowing the redetermination. XX% process reduction of ramping from borrowing our have to $XXX enact current XX% semiannual and liquidity with Despite expect in business are stated our reduction, base up plan. of We commodity base. this state million banking we to conversations anticipated prices our our go-forward sufficient on syndicate, constructive we

navigating Finally, in optimizes a require headwinds time. near-term that will flexible real returns strategy

demand to oil investors. the the that including our pertaining free cash changes market rates our with and prices any assess favorable factors crude We plan. on dynamics provide demand We supply to support will updates we higher of return continue the an to business lower interim supply gas material necessary and optimistic portfolio see of setup the in and market COVID-XX and yield gas very outlay. impact plan Currently, natural of our for within as natural

I go ahead. will to that, over call operational the please With provide to an update. turn Steve Steve,

Steve Adam

Sean. you, Thank

safety reflect deliver first we to the to At time, we contractors families. the impacts results. adjusting field their the been our best-in-class of on As extremes of work employees, operations our the economic to has are and quarter, ensure one as and we meet same it

We we our office environment our protect actions a enhanced our will safe work value We to personnel took mid-March, and sheet commenting highlights, maintain are base. and the as for field we production economic and our of the resource we on as balance on employees to curtail to preserve bringing this our line action maximize view In prudent operations. defer cash we to Before quarterly a existing share new work key well as protocols to flow. our elected that some front our production. ensure

pricing per XX X,XXX production. We approximately net of production oil feet per improved and day during gas forecasted this plan half this curtailed to back online currently bring with latter net cubic have year. barrels We day production the million of of

online this sales in the total X We bring and area, wells McMullen in to that also elected quarter completed defer wells we intend X of DUCs of oil previously for to and turning previously to the third -- a X year.

per increasing mix XXX equivalent second of and to feet full of cubic million the quarter gas. an production reflects feet the XXX day XXX for updated Our XXX equivalent year to for million guidance million cubic million

to XX development for days. Slide have demonstrated XXXX, in between on X of as as development amount XX as especially in span brought oil our late over our well -- of little program and XXXX. corporate pivot XXXX and production months as on gas day gas As in a further per per gas the ability cubic as million the XX illustrated a ability potential or Since This supports to bring the locations, time view we short feet of the X,XXX net of presentation, next beginning early oil online significant we over our frame. we day barrels the

and our workflow to We expenses reducing our have focus industry-leading mutual continue value contingency as with efficiencies, with ensure success. operating We built completion them relationships our and we work providers partners drilling optimizations. on service and to through the continue schedules

As drilled first quarter, it relates five to XX, the wells. and eight completed we sales turned net to

improvement Our a efficiencies results over XXX a than or demonstrate is drilling more per XXXX. day, of foot, decrease XX% feet drilling of which XXXX. an lateral $XX XX% per in over represents cost reduction This

day very we two maintaining oil than continued well and team day while increased pad well turned XX% lateral choke-managed five footages completed successfully more X,XXX purchase sales and XXXX, laterals. per foot a rate routinely The trend net X% barrels similar completed two oil per day liquids two wells. eight, strong its yielded at to across equivalent sales drilled completions In of of per cost. They Our per as XX,XXX well. length area, proppant our improvement placed McMullen

capital program As we look natural we the toward to gas with initiate aligned materially higher part prices. of XXXX, latter are a preparing

optionality experience predictable We have ample for Webb developing where County have dry the we deep inventory, returns. additional technical and gas

updates operating are roughly expense taxes now we $XX this plan, G&A. the to reductions across in operating LOE, targeting and T&P, our Given year production million

result savings of efficiencies to implementing expect our our closely further working vendors, realize and further improved We expertise. with cost area a leveraging as

are no process million day PDP of Ford Eagle integrating feet approximately at we production X recent in cubic which wells Finally, additional XX incremental overhead the across of per costs. adds acquisition, our

assets expense offsetting operating We expect as acreage. immediately they these existing on are synergies to realize our

We higher the include to which development now the future. best position, large partner could acreage with in a fund this the prices are strategy assessing gas development of seeking

I to that, turn will Chris. it With over

Chris Abundis

first capital structure. and In morning, this will Steve. comments as program I my results financial well hedging our quarter highlight Thanks, operating cost, our as

and Our Realized revenue revenue. with representing was gas first pricing for WTI quarter Hub XX% NGLs. of of of million, for was XX% XX% $XX.X natural WTI of Henry XX% and and quarter both NYMEX the production

Although our realized premium asset competitive have advantage. markets Coast our slight consistently other quarters, and trade recent Gulf pullback basins its base seen from a a at benefits to in prices

gas versus peers. of realized XX As higher on we pricing both and corporate our shown presentation, oil Slide on in-basin

$XX Our Sean not midpoint for $XX total of guidance, is was million hedge XX% from of realized estimated the remainder previously our monetization the XXXX. on approximately the quarter contracts the production gain hedging million, mentioned. for our on hedged the Based including

gas is weighted per is a our $XX.XX $X.XX hedged average oil. oil And production XX% Our MMBtu. hedged of per approximately average price a production with XX% weighted barrel with of approximately price of

MMBtu, weighted have $X.XX average we at collars. gas hedged floor per prices XXXX, XX of of inclusive For our gas price for a MMcf/d of

upside Our average gas preserving have our exposure position per ceiling year material weighted XX% of and next of gas natural $X.XX collars a price represent prices. approximately hedge MMBtu, to

price average per $XX.XX day X. hedged oil barrel. of this barrels our Please X,XXX over have reflects per as we hedge a weighted of note, at of May book Additionally,

Inclusive XXXX the the now gas risk prices million been secured roll a protection our over have months. for XX The key and on taken made monthly and budget, additional of in million adding is strength the basis revenue our gas We oil we business, have advantage of year of to we full aspect $XX for next and the changes hedges. have proactively of downside management XXXX. remainder in layer recent to $XX

of to expenses expenses the total Transportation $X.XX were $X.XX LOE, was Turning taxes per taxes per oil and together, and per for cost. costs operating Production Mcfe. million. X.X% Mcfe. Mcfe. gas. processing TMP production were $X.X our were production Adding Cash were quarter $X.XX and Lease G&A

operating expenses, per ago. to Our low-cost maximize including managed to and totaled maintain our year compared G&A $X.XX proactively Mcfe our structure. $X.XX cash We a G&A, efficiency

advantage remain curve, gives price Our ends we allows us our low structure of peters. at the to profitable and competitive us cost a distinct to believe

million. $XX was Adjusted quarter EBITDA the for

end generated As measures the cash free we million Inclusive line, of Sean we towards the cash to and for sheet earlier, our took protect cash quarter. hedging from the quarter flow proceeds $XX balance the the of noted approximately maximize flow. of prudent free

surrounding macroeconomic commodity prices, per a our in temporarily on factors basis. Given unit we guidance the suspending uncertainty cost are

reduced sheet. quarter. during We turning debt our Finally, to $XX the net million balance by

This $XX of purposes, $XXX not X.Xx million been able approximately to transaction the to note our have $XXX to Approximately that XXXX to second we We net XX, Starting in of liquidity recognize they of ratio. with calculating had our will to EBITDA March facility. outstanding reduced it million positions year-over-year. cash a our to as of us calculation the $XX in our for had adjusted million proceeds provides the leverage As million be Xx better and the month would us from in $XX in adjusted under million. million debt revolving the EBITDA cash position our covenant settled offset $XX if in quarter, be near is unwound. This we important the purposes from added of impact on pricing for lower they XXXX term. leverage in unwound and the credit

syndicate mentioned support. next meet to our compliance borrowing I we we our week significant would continued As financial headroom. and have like had finalized the thank and were their sufficient to full Sean in first the our At with be in for we to believe redetermination covenants all the of banking end obligations. base liquidity our earlier, expect quarter,

Sean will our I that, wrap to up with over remarks. prepared And to turn it

Sean Woolverton

free gas Chris. SilverBow $X.XX of up the increase set an To meaningful that will for flow. every Thanks, cash cash per to free in incremental we price, $X XXXX annualized estimate summarize, remainder of Mcf for is million realize and flow generate We XXXX.

executing strategic plan. optimizing our Our go-forward team objectives continues our and

that we to later hold pivot support result, to a constructive a prepared prices. development are of year gas dynamics outlook domestic higher and As this demand supply we gas and

always, are returns we As focused.

efficiency. today's improving supported in position hedge capital spending strong will Additional and environment by a be

B As to will the the plan of make improvements a with for A critical our generate future that and year and continue portfolio believe our favorable in rates stakeholders. return highest success further to bolster our we our We play opportunities. unfolds, we strategic will will role

families forward to to us well. person and To your I allowing future. you hope joining that our results. We staying Thank in the for you safe look further and us progresses. listening, today's as near providing in and call you year to for for look seeing you are share I the everyone updates forward

the the I Q&A the that, turn the will With call. of call portion operator back to for

Operator

The Instructions] from first [Operator Rice. of come line Duncan the Johnson question will with McIntosh

Duncan McIntosh

for uncertainty detailed thanks for tough second out there guidance and XXXX. off, the now. so much with I know to in environment a it's First quarter both guide right

giving quarter really idea how and pretty kind I of of both understandably, is, us wide ranges the question looking at appreciate you in year. an So you're the you obviously. My of are 'XX and second the rest the provided,

assumptions what's volumes the with of would curtailments that or of those of talk be the on? some So if color around lower that you kind if of -- would appreciated. maybe the Any you scenarios back end in bringing could baked maybe about higher there kind towards and put range, there

Sean Woolverton

the and guidance, business we difficult wanted at that environment we we felt get there. Definitely well. our to least ranges to comments understand out as Specific guidance, well quarter, with both but the the anticipating ranges oil Dun, provide as enough that some the in gas. is and release what to are commented continued we've as the we on through our curtailment second that the

now, For the start third the anticipates those we'll volumes at back that to guidance of quarter. return production our

maintain Of prices. either down, to course, to wellhead and up we're realized adjust going net that our plan, relative or flexibility, we'll

well. fees but As lower price only lower, gathering you and know, line differentials as our are not top is also

the definitely at wellhead are net we looking our prices decision. make realized to So

Duncan McIntosh

a color newly next And we possibility the out you into you're as about thinking as the remarks, any look on the how this back then year, focus 'XX your and of on to end maybe year kind kind acquired you In mentioned of a the shift for gas, positions. program? opening drillco of

color more would be little a there great. maybe just So

Sean Woolverton

will is almost second the as and Yes. be third No doubt, be XXXX going a year last quarter. least quarter, to for that, at viewed

So into a anticipate year year. to be to current our end and we environment. next towards objective this than up drilling was potentially through rig as picking get position prior really We would the that as gas on is coming into 'XX of then mentioned, our a macro And do the to the do we into position. position we company and 'XX operationally, financially it at

would acreage we In terms that of the amount bring to of a gas partner we now in. hold, look

gas interest. higher built we've Over we relationships number those move the and and a have will restarting to players, expect prices be as with expressed both towards expanded domestic we're discussions of forward that with years, as international, interest assets, gas looking the well in the there as SilverBow's position,

year. capital to wells Steve that XX% a Our team continue terms can to operational thing drill drill plan by in One of flows. so program is XX% more cash is footage efficient that's have with to his and each become in done supported only we

living program. within in of help to flow, support capital-efficient a partner envision that in bringing cash we And very terms so that's where

Operator

of question line from next SunTrust. come will Dingmann Neal The with the

Jordan Levy

Levy calling in Jordan It's Neal. for

into talking trying to -- less gas sort of of Just oil operators shut-in about production what kind curtailed and stream gas associated and the it volumes? drove to as gas window the of window wells oil or the both sense what mixed a the and, from both obviously, the component we that seen what the some volumes, is decision -- two the but looking side, we've are maybe get of on dry just just a lot on so of relates of

Steve Adam

to But reduced shut-in terms production. some production. did make gas the dry wells some also shut-in gas oil that curtailment, we we In of decision both

low prices bearing of prices I over the the probably anticipate strengthening already oil-producing gas So see the we will of dry plus significant gas in that wells XX with at couple strips months, day, of prices a or out. be XX% looking XX% is it a remaining would the but and associated million with say XX%, wells. of and economics gas economic being that just did we with low. And And do the the associated minus next position

low that withdraw next numbers, well of inventory whole year's oil As oil these year. by being should anticipating capital over part the out shut-in the this investment season, out the really 'XX. really or set at withdraw gas And we're the into bear in reduction on and will of and latter up very half industry, 'XX the wells coming for of really strong even

Jordan Levy

just could. And I more, if one

you Just about thinking -- the it's of the characteristics guys deals? sort executed last that for that some of some on? more would characteristics the you to all accretive now. right But relates if going broadly just guys you just forward challenged And the definitely things could bill deal it of M&A the in kind you as liked what highlight knowing of environment, fit

Sean Woolverton

returns-driven Like a to we've and it the A&D drill be company, returns, we're transactions. we'll or always said, look bit through through capture

purchase was recent a and a basis like optionality the deal felt PDP And we with amount our capital. tremendous returns that it. of upside the we did drilling with PDP favorably on competed So essentially acreage to associated

excited years environment. the the that be couple strategy last on in that what will sets current and working about model that we're really and low-cost to continue is well we've So of what single environment. this a over one we up been hard employ And in base

business their be number forced think in not be profitable we companies will continue to margins these high a unfortunately and situation margins least that liquidate. And be keep environments. at that a in It's that the will low-price and to competitors of

even or So their for to look compete capital bit we'll up drill for that capital. head continue opportunities A&D

Operator

question [Operator [indiscernible]. from will Instructions] next come Our

Unidentified Analyst

of A quick questions. couple

they're impact you guys in talk the what analysis is been these about bit some there there's your turn the shut-in. when a unconventional did? back wells on? And downhole wells the terms Can out well when little of to productivity on you view one, So debate you

Sean Woolverton

can both wells There the wells then protect in you Steve record in, interference. shale shutting as Yes, is against as welcome wells of start and business, you're I shut-in to has weigh to development and some oil history and well. in horizontal frac infill track occurred

shut-in history years. an It to days. for in So where The XX are beyond that. interesting wells environment different being industry It been probably back shut-in vertical XXs early of day had if will in over hasn't really see we've XX-plus and periods extend wells. significantly well the be there of period XX, was times course, XXs, common more in shut-in more proration extended

So long-term doing assess help appropriate will I to bit add you'd those understand little pressures, a building. terms we're on it's EUR reservoir looking what pressures to us And great opportunity reservoir very and be how side, to tell assess. also to at know to are We like productivity. monitor our enhance we'll gas monitor decisions open those the think, any up. estimates, but to make caution, comments. look to of a if back more will of feel those performance, It shut-in is time don't The impact on comfortable to the side. Steve, oil the in dry when I

Steve Adam

seeing couple progressive points. we've One, a of pressures. buildup very Just strong been

energy of part remind the everyone, Secondly, I kind higher in the of we're basin.

dry then cases, we obviously, gas retrograde. gas, have, and some oil also have that's associated we with in So

we've some basin cessations where lastly, do to then mentioned, like to some to energy RTPs. production. we've us return had had the respect with helps part And just of the So out high Sean

And week. volumes anyway, for part tracking that with surprised they're because EUR strong XX in favorably the it to longer, we to reductions XX back the the to were that look the it very of does cost back But pleasantly curtailment. right were bit now, appears prior cases little production a some shut-in, days they of position returning better after those

So favorable accordingly. so far, and we're modeling that

Unidentified Analyst

gas sense and more a particular set second QX what be a question. on? price of go ahead that Like there the see target the that Or make essentially QX price you strip bring back was for at looking fall, rig on there do in until actually are gas a for you waiting seeing curve rig forward rig locking guess guys. point you the gas been then interesting would enough? back the on where And guys? lock you'd in It's you pretty rise strip count late make the price potentially I as Is stable including that you'd schedule? kind to terms for for that you'd of of bring a that and the

Chris Abundis

associated XX-plus very show than a our and competes favorably. slide corporate XXX. a plays In did Webb at cycle, We like in the that that. gas return threshold projects. return position across debt typically Would country, higher terms corporate pricing tell at the in returns, looks that drill to full our County XX% add is of we you We of our rate to

really program. So, to in probably locking to advance start for we're $X-plus prices development environment looking of $X.XX in the

And view now, going holding in forward macro a have continue we the start and But level that waiting for we will of to logical is there we is $X-plus we're upon that get views hedges. a take in to our and do hedging be how And progression before a out what our lock 'XX, folks put lot based we target. in we that different think very for and anything. off realistic into to reviewing and assessing 'XX

sub-$X PDP in stages then the We'll at program probably that's past employed very look to the the first, have it. successful level. the and in gas with lock those strategy as we've with And lock in development been start and in improve, prices

Operator

showing at we are this questions that, time. With no audio further

Sean Woolverton

you Jeff, up the to Okay. want call? wrap

Jeff Magids

our first forward and quarter for providing Thanks, the look second everyone, update to Thanks again. an call in Yes. for quarter August. joining

Operator

your you thank your We lines. that participation ask That you for disconnect concludes today's please and conference call.

SilverBow Resources (SBOW) 10 May 202020 Q1 Earnings call transcript