SBOW - Earnings call transcript Q1 2021

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Operator

Good day, and thank you for standing by. Welcome to the SilverBow Resources First quarter 2021 Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. now for hand of today, Investor would to conference Finance I Relations. speaker your Jeff Instructions] like the to over and [Operator Magids, Director ahead. go Please

Jeff Magids

occasionally for refer latest everyone. Thank corporate it our Chris conference that XXXX presentation are and Abundis, COO; we'll their afternoon, GAAP listeners certain our me the to call. today Yesterday reconciled you you, this download we to CEO; closest good release. call encourage With which measure for we morning, materials. our the new to We financial Sean Lashauna, references very website first CFO. during and call. note much measures, in posted and are non-GAAP to press may joining the to make on Please quarter Steve us earnings our our Thank a Woolverton, Adam,

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

Sean Woolverton

call Thank this you for you, this ground everyone Jeff, the morning. year. joining and hit our SilverBow thank running

strategy. Our on talk our business will about first positioned our free in and forefront remain of quarter deliver flow This results and at cash down morning, I debt our forward exceeded us key go year to Maximizing our plan. and expectations the accomplishments beyond. objectives paying this recent

to million, a our a free $XX we continued during quarter $XX million free ago. paid The favorable Due our drop debt also to cash year. continue $XX flexibility out provide at syndicate, this was real-time of the the cash reduction. midpoint anticipate $XX to from Core flow to and range million full will alongside closing XX% $XX to strategy optimize prior SilverBow new a end year to of of of bank drill and expand primary highlight cash section range two lenders high the million. of RBL gains, raise and flow date in schedule amended and bringing million. guidance business his free million, dynamic of trailing liquidity free to strategy. which our maturity D&C borrowings pricing, borrowings on to $XX Furthermore, million first headroom to for flexibility ratio Chris quarter existing XX-month including well-balanced I'd their from remains efficiency this times our our to $XX with I leverage both $XX flow the extends we by SilverBow million its year and in our First and use is covenant like down below our inventory the thank to credit facility, would support. prices. our return like increase XXXX cash and pursuing of of our the SilverBow's portfolio commodity a program to flow

oil at is we million, million we This accelerated update to of guidance our expanded optionality have things. quarter's of and an CapEx $XXX $XXX changing accomplishes plug-and-play the our year Without full program. have our example mid-year This two disposal. development

volumes with the third in exposure to increases it recent in the to late come SilverBow's quarter. online strength First, oil prices

Chalk our acreage. Austin potential furthers appraisal of it Second, our across

Austin on provide its internal we and further and are slow is inventory test Chalk is to activity to exceeding and Our decline both line rate. above producing well its date improvements additions. have sight with D&C production well next our cumulative seen The results forecast, initial This expectations. implementing well our we of our the

within remaining for XX% in allocation this our D&C year, XX% by just guidance and full at expanded of production returns plans have development, year to while actively now range. XX% to underway, original With great budget the compared our in is oil navigating in year wells midpoint. our price focused in these contribution our by year increased oil our shifted Note, production meaningfully XXXX our is commodity partial only demonstration liquids quarter. are This really increase the directed our is have we shift as now SilverBow how remainder approach. development flexible, program that mix planned adaptable, the towards online budget original environment We late come full of employing the as a third presented of captures the March.

provides focus Looking efficiencies and ahead, capital operational a we our living the generation instances, right platform known and low for We cost we cash we'll flow to continue sustained some EBITDA, on choose the further to for. free Reinvesting In XX% as plan while flow reduction, plan returns the within rate. by living and we warranted debt as up lower may cash wells beyond XX% time in reinvest to increased that reinvestment are leverage to additional at XXXX. free right peripherals.

Finally, being key we success continue date. a to to be our to opportunistic with factor small-scale A&D

ability demonstrated to returns our greater on Our such for costs has stakeholders. reduce opportunities efficiencies increase and driven

balance turn appraisal the cash With Steve, operational SilverBow go continue has will ongoing, the free large both over our Steve further please As I will catalysts evaluate to With SilverBow of and the establishes an horizon. deals, we call Chalk provide Austin platform update. to its to that, a ahead. sheet, flow accretive multiple small. and consistent strengthens on

Steve Adam

our County in of all fourth in Mesa Thank you, Webb quarter were the and quarter, pad. we second the Sean. first drilled net comprised La In Six these wells seven completed area. wells our

XX Austin was test learnings came This times, continues in faster our seventh with believe more cubic had stages future first well an per carried of IPXX first per line an our production chalk than cost an well into which plan. the and all-in capital and day capital second estimated XX% improvements million, can This pad dry our $X.X development short, in cumulative about delivered and design will and gas the in efficiency in be XX-day feet. we be pad cycle forward Austin MMcf The test well, future. X day completed optimistic In Our the a or which pumped of we $X to Chalk quarter perform delivered to are expectations million Mesa full success pad the a of costs. and development. more scale was of better below billion planned La reduced

plan of wells further this more across Slide presentation. full our opportunity understanding development the initial to reservoir economics, upgrade year please of well, our and well the For XX to to of on additional performance acreage. to as details our corporate view We commercial refer date our as the of

our XXXX. drilling further to pause assets, November Chalk operations expanded which rich later drilling gas current program a wells As XX briefly in will development. targeting Currently, April program. sets expect our Sean fourth We we resume up strong quarters. assets. the our assess and SilverBow La approximately to rig McMullen our we quarter, month and first encompasses conditions, term and of ahead developing market results spanning for drilling our in natural in Similar the have to, a fully net and second in contracted the This near quarter and optimize alluded start then we liquids schedule between one Condensate start to to areas, Austin Salle its mid-year accelerated third August our allow to Oil

offsetting we Although, slight seen through proactively service in we pricing, multiple have increases are those levers. increases

existing costs and based contracts. the side, hold on vendor drilling to relationships service On able flat SilverBow has been

pricing completion and the sand On other side, consumables debundling gains. to efficiency and continue logistics led of both and that

Additionally, discounting. by design and well scale enabled company $XX,XXX been utilizing has volume lower facility with processes to vendors the and greater costs to per improve

of XXX impact of quarter Southern above our estimate conditions SilverBow’s and of day. across X first which shut day, the outages range. production the per much and MMcfe production in production guidance February, power end averaged extreme MMcfe the was U.S. was impacted per resulted cold associated the quarter on first and industry. shut-ins the We Our In portion approximately weather high

production Our losses. helped pre-planning storm and preparation mitigate procedures

portion natural cold was for to and volatile expect Impressively, the event, supply streak SilverBow gas tied to we practice, price sales February brief amongst maintains a of highly period recordable zero a unusual indexes. the daily usual a recur throughout going For exposed sales pride disruptions, Therefore, a of our highly did do some demand weather. have during however, forward. conditions to the incidents, at of a and point we continued prices not February team. SilverBow

XXX guiding of a to were of with range day XXX midpoint. production representing quarter, XX% natural MMcfe the gas per to For the second we

reflects the of oil For per XX%. Sean day of full production year expanded mentioned, our oil MMcfe This increased XXX of to our XXXX, unchanged. development as And is production program. midpoint guidance our full year the midyear impact XXX

this impact therefore, from a expect in the to We on volumes the uplifts the oil our implying greater development volumes to year. have oil of only second third half production, initial quarter partial

versus latest Our single between accordance year-over-year our in prices. remainder This and This to prevailing with to gas the on commodity recovery another. we aligned guidance an elections volumes extent, expect of on for continue basis. NGL lesser the also we'd current volumes online largely will year. of a one deliver is by oil to plan equivalent strength late year, the prices monthly growth the us ethane and be to commodity the guidance, driven make this in online and pivot assumes quarter, although, coming Based first digit will with our allows production

La current is development and Our goal learnings in from our to and pads, programs. the those near carryover efficiency apply production to the our to term optimization Mesa

to allows While proven remain late, us volatility uncertainties and diverse to flexible in of operations. has our adaptable market to portfolio be our constant

regards development. turn a to returns it future to over I will mindset we As driven operate continue Chris. such, in any With that, with

Chris Abundis

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

derivatives For revenue million, quarter, natural $XX excluding first gas production sales. representing and the of with of XX% XX% was

oil of price the was NYMEX WTI. XX% For our quarter, realized

NYMEX Hub, NYMEX WTI. NGL gas XX% realized XXX% price was was of our Our realized Henry and of price

yet earlier, Henry which prices January price February mentioned natural MMBTU experienced a Hub at brief gas per $XX.XX on The monthly the to of spike XX, significant in compares Steve gas $X.XX. of spot average As natural February. spot closed

Henry period hub both benchmark recent and was such, first gas should average any higher realized one-time a historical event. As SilverBow's and be than quarter considered price natural the significantly

$X hedged, gas Based on The XX% XX% realized April XX% for remainder of of total guidance hedge hedged. our has our the estimated on was for contracts XXXX. of XX, XX% loss NGLs quarter of natural of midpoint is and of and production book hedged as Our hedge million. hedging company production the oil the approximately our

production gas quarter our midpoint and flat through math hedged presentation natural of hedged Assuming SilverBow the and guidance filings summary XXXX, calendar proactive above contained Form basis and The swaps collars. we XXXX oil adding in for XX% held today. file has we first hedging inclusive month a has our of corporate contracts supplement is XX-Q detailed and is average our year later of to are swaps full of strategy. XX% of in of and XXXX. A of expect key derivative oil are aspect the management our roll Risk hedged. business which and further to gas

on to presentation, we shown realized corporate Slide XX benchmarks. prices As NYMEX have our of historically close

Cash our Adjusted lean of expect basis, period. amortized quarter LOE million, contract gas G&A reduce maintenance costs, G&A were competitive storm to year-over-year. first $X.XX $X in XX% production we expenses EBITDA of for resulted quarter, TNP compared better. a and preparation and of well per gain. production expenses cost measures SilverBow to consider decrease than $X.XX advantage midpoint for derivative the were trend to lease projects On $X.XX was sustain less Oil of were MMcfe. were were a cost per were slight preventative taxes Adding our Turning by $X the below our as per to a MMcfe. taxes of as prior per year MMcfe. total full be expenses and periods cash Continuing of cost We quarter commodity sales. the processing profitability to million, increase exclusive costs a MMcfe. during together, prices. the $XX allowing Scheduled or volatile operating our our to Transportation during year-over-year. XX% structure XXXX oil X% expenses guidance Production production LOE, total approximately production

free positive out of materials, As six in $XX in of quarter. This earnings reconciled flow. last the our we million generated cash free quarters seven cash the of marks flow achieving

and quarter-over-quarter $XX our total we to reduce year-over-year. Turning sheet, million balance our $XX debt further million by

outstanding borrowing things credit to million Subsequent on is of which $XXX and The covenant March April liquidity. $XXX ratio the to our amended X.XX his date million year As the we and end XX, quarter leverage XX, reduces $XXX Starting of cash SilverBow we $X under other to among in credit determined extended at maturity had the effective covenant times. million leverage April times XXXX, facility, million approximately facility, X.X XXXX. and end. base at through of maximum in hand

As our syndicate we appreciative are very believe in this have of industry. of which Sean we strengthened the alluded time to, during banks, unique we

For see SEC Form we the on headroom. our on with At further report were end and XX. filed in sufficient the the compliance had the of information, first financial please company's current April with X-K quarter, covenants

borrowing. down expense interest a from was decreased cash year Our primarily to ago, XX% due

pay additional trending to the an our savings basis. accrual capital efficiencies by Capital expense lower interest finishing The debt. year, our our vast on we down was to million County Thanks $XX as cash Webb development our majority team. to program. expect and We devoted capital of further throughout totaled expenditures continue identified

from XXXX April Our purposes The year ratio. our of remainder into liquid full unchanged our and in leverage the to analysts able of gain therefore gains rich December calculation assets. our as related factored XXXX amortize million XXXX, extending unwinding of XX% production the The discreet and guidance with same with XXXX. in $XX development capital our range March investors is weighted The XX% derivative late in is budget amortized through SilverBow amounts, to when $XXX over $XXX it conjunction D&C oil remaining important SilverBow's year approximately and was XXXX to back towards hedge million covenant adjusted time add million. of contracts asset. capital budget the gas our for County EBITDA to targets Webb period, of tracking our spend for In XXXX of research understand periods received

months was add-back the I receive rolls On first last the our full bringing leverage for the will end our a to XX of $XX quarter, For EBITDA XXXX At covenant to to will turn time original $XX times. off, ratio. approximately that, XX-month for over $XXX our adjusted add-back and prepared quarter million, period Sean million. the of the basis, of approximately unwind ratio to million last $X X.X totaled year with purposes purposes our it wrap million adjusted benefit calculating a approximately leverage EBITDA And up remarks. our

Sean Woolverton

flow prices To The in recent down return Thanks, constructive its dynamics optionality demand borrowings XXXX Chris. oil that We remainder higher a hold summarize SilverBow generated free meaningful support down paid the improvement cash to in of and first quarter. of paying flow and prices for into company XXXX. outlook positioned and debt free supply and XX% the and gas high generating cash the our revolver broaden is domestic of the inventory. of continue

year this mix. towards in the that by shift evidenced schedule oil As higher

SilverBow to small outperform expect continue cap other peers. to We

month, second been performing best cap large small the expo all cap stock the EMPs. has across and Over past

focused Our winning cost delineation. execution, structure. on and low on favorably This our resilience, up for sets current and efficient crisis operations, continued of outlook us strategy Chalk momentum is Austin strengthening financial our solid balance positive sheet given a

our on that, to look further back multiple catalysts Our for intact with Operator for the to the call next updates We providing forward turn I'll with And questions. strategy future. remains call. the

Operator

Your Truist question of Dingmann Securities. comes Instructions] from line [Operator first Neal the with

Neal Dingmann

and just on results potential you Chalk And happen Austin guys. morning, could there? about upside maybe talk to if a overall that on Chalk? have that you Good successful continue bit Could what activity Austin

Sean Woolverton

you. prices to continue returns million. in upon Good $XX at from our look of our in hear to We Good generated Yes. to to Neal. million commodity within cash We're flows. live cash cash XX% $XX flow free to generating and to going excess flow remain based committed XX% morning, really of

free and cash, drill keeping to bit prices generate wealth advantage see high program we year also success through commodity and and as that of drilling capable the our with that could returns performance has in if well, Chalk year, running expanding to saw probably well conjunction support additional the our little rig envision plan would a our if more of. So capital we first shown chalk the Austin Austin this that that take in our we we more similar full really

Neal Dingmann

continue to talk all set -- then you And kind capital of Would that? the have I that is reallocated to either Sean Or my it be spend follow are you fortunately have up pretty there. issue? or, continue from Could if an you around other on areas? would start, mean, success

Sean Woolverton

and can We flexible tell you capital. Yes. very reallocating in that we're efficient

looking projects. to capital our always reallocate return we're of to highest So rate

perform our as the we we've allocated supposed to came continue the we we So, think if $X.X But capital gas as our of actually significantly to follow the to to Austin can like goal project into our our to returns see more move first desired costs projects. be exceed I start the towards liquids the the move programs. up was million, oils of higher, year, as oil at start those projects best well, Chalk, look wells

program. into shift Austin back So probably our Chalk capital the

Neal Dingmann

what on the talking just opportunities talk just kind Good guess, a a to there. about position go little can of out given the M&A hear. of like looks then you in forward, about just on I kind you market And what you're lastly, see bit, and now

Sean Woolverton

Yes.

we've XX couple but closed and for of that over seen M&A you small opportunities large we're more in last transactions, As the number you market, over than the the seeing smaller know, activity past months. tell we of market look we'll a we continue both to today the in years,

there are transact. to market coming sellers there opportunities more out think prices, with I the are looking So to higher

transaction, months be going feel opportunities to there like we to XX, we're right but XX diligent in us of the ago. And today than on there's front continue more was so

Neal Dingmann

Sean. Thanks,

Operator

line [Operator Meade, Instructions] You of Rice. the Johnson have a question Charles from

Charles Meade

Sean your down related you a question team about natural to maybe the the and the of trajectory kind I it's year, and strip. morning Good to in of there. for pay Yes. debt to ask want the gas also move

made call a that said benefit as the last the debt and But, guys at big chunk month You $X.XX, storm your remainder on in back guess you obviously in I made in onetime had we look ago, the you'd big, up the year, had a But for the that strip month, a in progress by it. XQ slug pricing, come of of $X.XX of next big down QX. year's would've half I would the pay natural the gas. moved from

actually, sense And will so your progress price of progress of a price you to under you and be what is planning XQ, some kind XQ you make can and deck it give looks able that you like but incrementally deck? planning see what

Sean Woolverton

of cadence Yes, capital spend, we'll We see bring spend up cash everything the back see, timeframe. of yes. up. our then as come go in, we such And we flows as program, we'll set obviously quarter-to-quarter out that capital positive the

this program our we And that So spend significant we'll program move a as the the a probably amount in fourth quarter. a of we the have stay currently into completion we're enter paid around see little third up as that then drilling. again of down drop the activity us probably quarter, second seeing debt year quarter. our has or of cadence flat It'll the in bit

to are at the oil. year, second seeing half exposure We the really looking of

in through this on move and about what our are of year hedged targets were up heavily oil. first we prices half talk oil there, the the You

higher to things the allocation increase exposed being the just attracted to our new of us One price. oil is that oil those to volumes, capital

yet. And not that's some of in hedged

flows sooner. move be where going lastly, year, And you, think move stands, down we cash the $XX even do we're stated will tell it by even below drive track on that to see us help of see – continues oil that to publicly I leverage but really it times we're will to end of north definitely to or pathway remain we that a if that there two So debt beneficial I'll further.

Charles Meade

then in your that what whether the of Right. that's have you Or the first you've Austin guys big then could falls for question that want of County. well, going EOG's you calling you Austin into a outside edge specifically -- position have which Webb be say are Slide that's of Right. slug perspective? Dorado where is to be XX. don't maybe but about what story I acreage that got of what that part outline technically questions see you spans their I see believe Chalk corner, this talk a eastern for Webb I southern guys? But there big And LaSalle. the Chalk. you whether southwest that Chalk and about your to Play, is Austin Can they're have you on acreage about And

Sean Woolverton

Yes, yes.

information will outline EOG's of play west and you there subsurface block. we know logs that east do that that XX the map a correct. really Chalk detail on east, play The cover of on the you to west larger Slide Dorado on thins. You're is as Austin tell I of good some there, move We the that but outline. have not do

risk a block So with Chalk. is Austin comes pervasive perspective, Chalk that thicker, thinner to it's transitioning from Austin as more still but

there's there, tests risk or about to but as considering, there more other conduct some move of line. help little Dorado But bit probably in do still activity what watch the de-risk area you see the a and it. we're we comes So immediate potential east

Charles Meade

thick is county? that you in how and than so some and further is, thick. as XXX expect put you are my say what said, you quantify even it where just are, down it's Is feet that, Webb like you your thick in it. or and guys numbers to and where -- you that block a want maybe Got to it's more you could to And southwest as all I that that, east understanding move

Sean Woolverton

give I don't Why Yes. question? the opportunity Steve that to answer

Steve Adam

a to to if interval, D the consider area we C, that and the be see entire our close a we A, Charles. of feet little head you intervals, the overall were D you, bit over XXX in get be it looking as feet. Thank then chalk, combined. levels, you're intervals, the into down the anywhere XXX be in XXX more you and to thick and east to to there trending Down largely well down from it's XXX those B, of productive Okay. north towards thick to feet when with C XXX to And Southwest, the

Charles Meade

Got it.

that's it. a call section, that thick So recognize that It's a in differently. real recognize a as up I to act but going as for detail. that But thank you

Sean Woolverton

Yes, still work by it. So be more both others place that's no, economic into big is what ground. in the definitely the and done. appreciate about hydrocarbon be potential Like the in of determining zone? said, part to pay there most time, across stack to some get excited we're this way work we there's And over will is that us probably

Charles Meade

Thank you, gentlemen.

Operator

There are for turn management no closing other questions in it remarks. queue. over I'll to back

Sean Woolverton

morning and for everyone update forward to call August. Thanks. this an providing Thank in joining look our for you

Operator

conference you call. Ladies today's participation. and this gentlemen, does your for Thank conclude

You may now disconnect.

SilverBow Resources (SBOW) 9 May 212021 Q1 Earnings call transcript