SBOW - Earnings call transcript Q3 2021

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Operator

Hello, and welcome to the SilverBow Resources Third Quarter 2021 Earnings Conference Call. All lines have been placed on muted to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. I would now like to turn the call over to Mr. Magids. Jeff sir. ahead, go Please

Jeff Magids

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

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

Sean Woolverton

results you, the made and objectives, Thank our presentation. we for I quarter am we you, joining progress extremely show Jeff, proud everyone, Slide toward third SilverBow's our this X of call have of our thank key on morning. which and

Since financial inventory strategic M&A. both accretive across Eagle accretive Ford are the During further the Chalk metrics announced beginning quarter, flow, executing three we and our focused we on have on maximizing in which cash adding and our full of key year objectives. high-return acquisitions, free and August, Austin the

cash production and flow. to is while EBITDA objective grow living first within Our

our development. XX% nearly up we wrapped quarter the remainder production midyear of Third as oil sequentially liquids increased

increase growth we the should Inclusive X% production production year-over-year. XX% now increased of XX% expect at year-over-year. the For in by our December acquisitions, midpoint, roughly rate and we exit year, guidance full our

free now cash our from the of range midpoint flow this million, third $XX cash our year, guidance $XX in million at expect the flow range. time We increase also for to the prior free increased and XX% a

Our and XX%. of XX% updated free yield guidance implies a cash reinvestment greater flow rate than a

objective our through and inventory on accretive delineation is second acquisitions. Our Austin focused expanding Chalk

of add both inventory drilling five the during Austin to Austin Eagle and recent and organic brought Webb six quarter. regards Chalk. to years Chalk acquisitions our online rig County Ford life Our well spanning development, we the third second our In

As to Steve days the over will average further, per well. through XX XX detail day the produced first first has similar performing is second on the well MMcf and

brought County, Webb in Austin added program. Chalk our recently online have what early in County and results. the development we successful M&A over through Austin appraisal we third well like and Year-to-date, our Webb Chalk drilling we XX addition, seeing In and are we from locations

structure. is peer-leading objective third Our cost and capital to efficiency drive

to We have equated our in reduce the lower per XXXX foot gains roughly G&A full do compared D&C G&A change efficiency which as integrate acquisitions. continued XX% expect third $X Furthermore, even XXXX. million on lateral our lowered costs. quarter, to of our cost year a completion recent guidance we are we this to In to year, the and not our material savings

presentation. our on our Slide returns. allows from end, least, balance have through year-end. to our year-end $XX was to and total by down $XX we seek decrease structure highlight our is we leverage anticipate XXXX. of debt we of Last down debt and free of to transactions. X.Xx the full-cycle the cost by reduction debt paid to not ratio which generate quarter peers X.Xx, yield, And end high Year-over-year, attractive since but delever total of flow X.XXx SilverBow us end million quarter accretive reduced XXXX. the at further million lean cash of XX Our our sheet on first at our leverage We At

We increased also drilling into liquidity our at rate semiannual in and we run December. XX% cash for as And La as double-digit right the next return thresholds. we of as cash This of X-rig the inclusive warranted Mesa expect flow latest to borrowing free the time same is sustained complete resume we recent and to by provides XXXX reinvest rig year. at cash At base production our the annual as beyond. and We flow from flow free to generate compared growth, look XXXX coming year, an Reinvesting significantly acquisitions. at our wells look will expectation to time, to contributions free full this EBITDA, a we year to X/X weeks. our increase pace our throughout plan leverage expect run drive redetermination approximately in and right approximately lower

call and acquired ahead. Ford Chalk that will the Steve, Eagle recently Our and associated properties update. over equation. operational an to Steve add please I to Austin the provide turn locations With that, go only to

Steve Adam

Thank wells you, wells. Sean. quarter, we XX the drilled In net net completed six third and

remainder liquids focused La was completion development condensate area. Salle Our the majority midyear our was the of in on our which program, activity of

development liquids day optimize delivered rate also of AFE two-well La Salle pad recent performance well cut. we our a well online area, program. are designs. a times reduce completed below $X strong cycle and a We per XX% We as and these planned wells condensate In cost million brought our X,XXX BOE with we from seeing further our XX-day

brought well inventory oil of confirmation We of NBR oil high-return is area. and per a outperforming currently the a also This asset, cut. four-well additional provides and liquids in a locations. day BOE with well pad X,XXX our expectations a XX% online brought XX-day online single we rate In McMullen

days. has in our the first this February, mentioned, has Bcf SilverBow Chalk has over well, well MMcf XX for XXX about the In to average X.X day cumulatively Austin of online In XX more focus than first date, per year. As over Chalk a or County. key Sean been cumulatively. we To well Webb or Austin produced days August, brought brought area the this Bcf Webb Chalk second MMcf our per we produced XX which first X.X online day County on

our successful Austin added our through locations, to acquisitions. inventory XX have drilling has recent significant added addition Chalk that program In we

As high-return across outlined presentation, inventory that shown Slide we our on asset our exists X base. our of

XXXX. the compared On team quarter operational reduce as cycle times efficiency nine front, our approximately drilling quarter averaged the days well continued the in days during times per to third our in to seven

As shown day compared on of more we presentation, XX% XX per our and XXXX. drilled XX Slides feet to

more per cost reduced On and stages day the well completed side, completion completion per X% XX%. we by

our Webb foot XXX XXXX. into the Salle, to position County. of of acquisitions DeWitt per which lateral additional in McMullen, our production, last Southern On over the October, future announced acquisition bolstered by and XX% X BOE our AWP Ford we August, This total and adjacent we an Atascosa wells working and Taken at Northeast an oil call drilling Lavaca together, month, positions. in these incremental Ford cost interest and Austin per footprint bring we Counties. Later acreage of XX also in of Mesa of compared County and locations Chalk Eagle day La in of announced our reduced and in and second we net in third D&C acquisition the producing Altogether, a formations. XX,XXX net net our in Eagle Ford, expanded Eagle the X,XXX window in the closed to Lavaca acres announced La acquisition XX,XXX oil window north the acres a Counties. In

later to we X, closed the on acquisition close acquisition October expect this and third Second year.

And Our team is of in assets cost expect assets operating across greater realize as scale. the and structure. a size these integrating SilverBow's currently synergies we larger process result these of to into

of averaged the high third day, end XXX Our guidance. per production quarter near MMcfe

of of performance third in X cultural pride sequentially. also production condensate since has a our Salle continued the will amongst over increased result last its XXX a nearly incident. time of recordable well reportable our As and days incidents, La before, lost last SilverBow our oil mentioned as XX% quarter area, and since organization. X,XXX point days over our accident It been streak

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

are per to we XXX XXXX, increasing production our of to MMcfe range year a full XXX day. For guidance

X Our closed. have from the the acquisitions guidance which impact includes

We XX% year-over-year. growth expect production to deliver

are capital and for commercially offset the price is been pertains labor. pressures trucking, it supply various experiencing increases through cost Much service tubular the impact optimizations. operating select and chemicals both improved to and these we around pockets of other costs, To currently to production efficiencies sides business. inflationary pumping, of we proppant, date, and able As goods, on of inflation markets for the have pressure

forward look and SilverBow's we low has costs work X% we towards cost And vendors XX% X% Maintaining quarter for planning continue as in this XXXX. structure operating with the on expect a third expenditures future we increase an million and key contractors. capital totaled our are success. accrual the as However, cost of costs and we Capital to to critical for X% to year-end structure $XX basis. to competitive foreseeable been a for net in

CapEx $XXX million year is $XXX full to guidance Our unchanged million. at

we However, given X wells, the in cost planned wells be were Rio quarter have and which completed now the early Bravo favorable returns are originally XXXX. completed a These third to online. savings environment, identified in

to at resume drilling our La asset Additionally, we Mesa plan in December.

free the fourth CapEx year flow. expected quarter of cash third majority generate being full is the our to the substantial With through quarter, incurred

are adaptable us in portfolio process allow schedule conditions. the and next budget will capital remain we year, flexible While to to market drilling our our finalizing of balanced for and

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

Chris Abundis

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

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

price was Coast gas higher oil of realized WTI. prices, the was price XX% the our WTI, NYMEX Hub was price quarter, $X.XX markets. of Mcf, Gulf Hub Henry the our per operating and was of NGL the realized than gas of NYMEX For in realized attractiveness Notably, XXX% our price benchmark highlighting realized our XX% NYMEX Henry

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

in per presentation in barrels hedged. and adding of to XX-Q expect XXX our both and aspect today. A Form X,XXX has MMcf swaps of we collars. XXXX, of day we SilverBow filing month are to amounts our and management production detailed Risk strategy. summary of and contracts And hedged proactive is supplement file bases oil contained for gas oil derivative of which XXXX, quarter key business. our natural the per further roll a later is inclusive average swaps gas are of hedge our calendar day approximately For and third The hedging

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

costs total were $X production of expenses Cash processing million, costs taxes decrease taxes cost. and production trend XX% Adding total Mcfe. the X% $X.XX quarter $X.XX were per together, to G&A Mcfe. year-over-year. Mcfe. $X less expenses T&P Lease sales. LOE, were were Turning for and of per than $X.XX per continuing gas our Mcfe, and production per oil Transportation operating expenses of Production our were a

to meaningful pro $X increase cash a year, our We For not consider allowing lean structure of advantage, exclusive recent lowered to commodity the profitability competitive full from our be below do prices. of cost amortized derivative guidance for G&A contributions to to periods during closed volatile million, and the million we related acquisitions. SilverBow forma anticipate EBITDA our sustain G&A and contract was acquisitions. quarter a gains to $XX Adjusted

was the in the materials, As our large cash a earnings a as D&C occurred spend in in generated full during This slight a third timing flow quarter. reconciled year deficit portion effect of our we quarter.

spending, our As the some helped Steve to noted, flows. we of to D&C offset savings cash on impact timing of significant which amount identified a

guidance $XX XX% a flow year, increase. million full $XX the million, midpoint to increased we cash a of have a from midpoint of our For

flows Turning the flat We to cash budget. the and payments our and during which our for $XX ATM million CapEx. for year our total represents quarter, Strong net sheet. million issued ATM proceeds outlay $XX shares $XX CapEx in XX% in our $XX our acquisition cash to The we $XX our raised of proceeds. and our million regards allowed approximately flat from year-over-year million million and program debt balance to reduced held net roughly quarter, full had In hold by XXX,XXX us debt a debt quarter-over-quarter. program,

offset acquisitions. for As of raise I recent payment our mentioned, this the cash one

to on In million million and conjunction oil from outstanding had borrowing under add-back of received $XXX support discrete working time its in and and September like investors research with $XX and increase of credit same gains undergoing XXXX, adjusted XX, to when Ford consolidation $X line. our liquidity. leverage million credit our look hedge we million XXXX periods base is purposes facility, continued gains for The approximately with semiannual factor and I related we a through was into availability important amounts thank Chalk The of XXXX. their production our revolving in of for currently cash under calculation unwinding efforts. our it company sizable As amortize EBITDA to the $XXX tracking bank redetermination in in contracts covenant able our anticipates derivative for analysts its the of is as to constructively XXXX XXXX March SilverBow them to would syndicate Austin further understand and ratio. forward April as hand therefore, and SilverBow's over December period, extending amortized Eagle

adjusted forma includes contributions leverage its from of purposes acquired EBITDA SilverBow assets calculating for and Additionally, ratio. pro

And bringing $XXX of quarter for XXXX, the and XX-month million basis, $XX the For our end leverage that, quarter compliance I the At sufficient totaled were headroom. turn of over full $X third On covenants X.XXx. our and million. financial remarks. the Sean we last our covenant approximately up ratio million, to with prepared it wrap had third add-backs the to add-back will purposes to EBITDA adjusted end our LTM totaled quarter, in to with a

Sean Woolverton

our oil strength positioned and To grow the evidenced cash make generating across one of and to recent caps, the stocks summarize, been both high-return broadens real-time all small. market our the prices optimizations while optionality in and the by inventory, sheet. development flow is The program. balance delevering commodity Thanks, expand we of substantial best-performing Chris. as EBITDA has SilverBow to Year-to-date, and large SilverBow inventory, free gas

organic to while and deliver continue opportunistic We the accretive in remaining growth on market.

built low-cost to the of resilience Austin be structure. apart given Ford Eagle is is and tailwinds delineation. questions. we operations, a expansion efficient quality see strategy will culture execution, our on from the winning structure, an forward a strong ongoing assets, on exceptional exciting price back three SilverBow. look I our We financial continuing have track and outlook our strengthening and us We What record our turn and It the of Chalk and solid to our full with at sheet, call. asset, further to for all capital environment, Our to favorable additional people. sets place, to next updates others that, harness balance as it our And is time the stands potential designed today, call operator in providing greatest

Operator

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

Neal Dingmann

My is the so is, out job in seen as doesn't far. M&A there, preference M&A the these look it out if run-up wondered gas Obviously, your robust your so, good. the just has or been days quite is market, data what oil we've more question there? the side? look towards given nice that Sean, And prices,

Sean Woolverton

on and gas of inventory to continue both forward. commodities look a to number in both our balance Eagle we going to the expanding Ford we position oil yes, the across Neal, open We're assets further in see market as windows. our position

while the But we're continue at and leverage grow run-up do current at pragmatic transactions the on comment at obviously, higher position. our keeps time be to we're accretive inventory prices, target we seller of currently from to our any same transactions thoughtful – expectations going to that where and or Your side. in since very our

XXXX. happy from standpoint, we've very done accretive forward move and trying here with get we the them So done additional into to to deals done. We've valuation as an look transactions

Neal Dingmann

And upside far. wondered, That’s Austin the stock. then a No. obviously, Good. so I helpful on just nice

plans? but or thoughts yet you thoughts out this let's the, on you on now say, have for that XXXX guide, have budgets play had. a if wondering don't – on the any I even out Just thoughts changed just know the

Sean Woolverton

have inventory of yes. very two on to XX in third terms both we weeks, is wells the been recently Definitely returns. of well where and first performance. Yes, high days wells Austin first attractive at in data did a two tracking just rank just very couple the look similar Chalk, on a of but least our well. That on We bring has

our tests continue Austin at into So start to look spacing drilling as probably and year, as is next our we XXXX plan about we to expanding – get we Chalk well. think current as some

So about well look to set leasing the as opportunities for And Austin as opportunities. grassroot the additional opportunity there. very Western acquisition trend Chalk excited continue in we

Neal Dingmann

thanks. Pretty good,

Sean Woolverton

the questions. Appreciate

Operator

next Your comes line with the Meade from question Charles of Johnson Rice.

Michael Furrow

for Furrow in This Michael filling is Charles.

kind it little A&D Just on back a bit, of but market. just kind going the to hit of already

have three You August. since deals announced

years You pretty of an over inventory in period. a five had short

potential market So insight guys now? should pace us we obviously, that Deals are making? pretty you expect more now. be might some right give current looking at And if looking all? could the that at some is currently How deals have you on you to that opportunistic change,

Sean Woolverton

a it relationships with very A&D Great that so right? SilverBow's of And in to sellers, we've especially with, occur of we've but desire relationships overnight, question. market in took with basin years. active didn't number activity, No. We've number stock. take seller's to many just Through been done a transactions that for Yes. the build the these time of the built

in comfort seen well have I we think manage stock upside as it of the way the reflection in our shows that properties. sellers a as

have continue number we've you tell discussions with relationships additional a that folks. of there's So built, and that to I open would we

of telegraphing that, In more can't we deals, we additional forward forward. as to look getting the across some terms line do but transactions probably move

Michael Furrow

news good Great. That's to hear.

unrelated To side, full it regarding how of on of us operational sell rig that you the obvious us plan kind to for a of efficiencies works? you it of Sort be you What kind is for not sort the follow-up all. on or details? us running. as might Can as

Sean Woolverton

that I don't Steve let answer Why Yes. question.

Steve Adam

Yes. line we full had to rig inconsistent Up a line date, of Michael. rig Thank an here late. have schedule schedule. had We've not you,

pad-to-pad forward do the going to for middle beginning going full a we're well-to-well, that, that well-to-well in efficiency things And lot now optimizing XXXX, our couple of around and year, But schedule of a then work through efficiency. the rig to had far. We've us. here moves with One, So efficiency. it's a design going December, into likely as so line XXXX to we drill only of get rig and through our not get we're schedule that. going we're for but pad-to-pad

in the out that some to there, So side. trucking the to casing oil and well that's as along some comments of then with go at with as allows logistically this drilling mentioned we're rig pipe and rig on costs, some goods, scale optimizations that procuring level, of the I at as us least on aside. getting and tubular where the it plan further furthermore, sourced greater And pricing that get not the only in seeing country side,

a well and of to south motor area we on this the go opportunity use of one there Then kind with assemblies go us we we thing we've and cover maybe whereas forth go hole of that And different we to in the from on drill West some now go schedule. all now side. is, areas each as it bottom opportunities prematurely kind And other because to different tools to before will as we that focused have those, basin respect to So allow with the other areas drilling the muds from gives different as to of area, the back towards north opportunities us those of use. assemblies, the side are had little the bands, about east, the more we there. as on

we're clear costs, to process operational are So not And always some efficiency see. costs. of real we unit looking then, the our of that at those mention course, those

of completion or consistent On efficiencies frac one spread you pretty further as that know, with even us spread. will rather versus one commented, and much company. the people side, than in has we'll inherent it up to take consistent many trailing as a frac lock able even because it different another have picking a to be And lot

a as maintain we'll able surface as things knowledge, a do downhole personnel So of perspective way be as we support. in that with from efficiencies, to well high both as spread trailing frac the logistical well process which the degree

on So efficiencies we're more aside. the versus looking completion side either that side again, and drilling trucking the for of on

Michael Furrow

Thank my color. taking you, that’s appreciate a I very good you questions.

Sean Woolverton

Thanks Michael.

Operator

I further like no time, to back this remarks. At call Woolverton, questions. turn Sean for to there are would closing CEO, the

Sean Woolverton

Everyone, for attendance I report forward again to year. day. we their with Well, want everyone our March look next have of updates call this their interest you nice as in our thank to year-end SilverBow of in additional a sharing results and morning. We

Operator

This concludes conference. today's

disconnect. You may now

SilverBow Resources (SBOW) 7 Nov 212021 Q3 Earnings call transcript