SBOW - Earnings call transcript Q1 2022

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Operator

Good day and thank you for standing by. Welcome to SilverBow Resources First Quarter 2022 Earnings Conference Call. [Operator Instructions]. I would now like to hand the call over to your speaker today, Mr. Jeff Magids, Director of Finance and Investor Relations. ahead. go Please

Jeff Magids

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

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

Sean Woolverton

this and Thank call joining our the to SilverBow start is everyone, off for Jeff, thank a year. you, strong you, morning. to

production per consistently cash results, at of attractively and and winning and a Combined, exemplify Boe of purchase X.Xx. price increase, of borrowing a strategy and XX. day we quarter have The less transactions as of USDXX,XXX SandPoint fifth view valued these multiple flowing we than per current on. recently transactions we flow August acquisitions announced at -- production first Our acquisitions base marked fourth have executed Sundance the the since announced

adding the the we the from combined projected scale stand about to base. our to are in Ford, and legacy efficiencies asset Western growth the gain, Eagle We position excited

several past outlined strategic quarters, the we our For objectives. have

living while we cash growth flow. targeting production double-digit First, within are

are our acquisitions focused leasing. on inventory organic we expanding accretive and through Second,

sheet through our And objective flow cash to debt structure. balance generation. to last, peers efficiency reduction capital want is we delever our fourth lead and the Third, in and cost

we we quarter, is and Chalk strong online is earlier further these increase ended in same continued 'XX. on the USDXX equity. first we quarter-end so, which effect the XXX%-plus million quarter-over-quarter the coming wells XQ single Austin liquidity. are seeing to quarter, of that USDXXX in cash doing XX%, first base, Operationally, million flow stock free the a into borrowing the and reduced reduced to the La of off leverage the progress being amount. our X Notably, in position performance increase with Mesa at and with well ratio went our does drilled During year. In not net we We generated our up over debt objectives. liquidity a brought in our our XX. April And reflect Year-to-date, first this by quarter,

X shift development our Chalk X-well is we Mesa represents other of and drilled were a Chalk in history in which company's drilled pad The Austin La assets. quarter, largest pad towards wells part the Austin of our full-scale the a

forward. that our count. add SilverBow's pursuing and to are in shareholder and announcements formation our have to made Chalk of exhibit continues opportunities inventory, the enhanced across to the several locations on we shown As value Austin highest we XX-plus we locations which Slide Chalk additional returns Austin portfolio, Currently, year. April, actively to XX, major some In this going we drill plan proposition

Notably, enhances our our First, million liquidity. increase results, we acquisitions. announced we The increased which include to our base the spring any contribution further pending uplift not did million. USDXXX or redetermination from USDXX borrowing

closing our our of further base acquisition, RBL bank upon to the increase borrowing group We increase availability. which expect to receive Sundance consents the from substantially should

X of for value X paid the PV-XX value announcement accretive base online, increases to XX,XXX PDP McMullen contribute combined acres borrowing USDXXX With million. a these The adds net with XXX which new we anticipate approximately more gross with the expected acres of XX,XXX acquisition acquisition of with announced million, this what and production La per we redetermination, in counties USDXXX for SandPoint MBoe day later to oil-weighted Salle and assets we the The USDXX Following transaction is acquisitions million of occur wells locations. than PV-XX approximately approximately million PDP a assets. adds Sundance USDXX and coming closing a with inventory month. net X significantly value our

industrial in SilverBow achieve roughly as scale billion, G&A overlap OpEx and the As pro over compelling Artesia oil transformational years. a high-return we to forward, and our benefit representing term to time of Chalk has and Austin Combined, shift prevailing a this can upon the and to of these liquids focused XX believe Slides deep and and, candidly, in what with the producing our production ensuring portfolio, of is a pro core mix oil which County. counties PV-XX day. generating of shift high as fields. locations, have and basis, shift, acreage position prices. increase logic pricing commodity have rate McMullen strategy of flexibility locations, competitive which SilverBow synergistic and in January, The portfolios. Sundance do value XX%, especially to has assets who greater the be AWP Webb opportunities to we advantage quickly positions or will development return not extensive the on much-needed will a can ample oil a XX% inventory the contiguous Salle meaningful same USDX.X we their on returns The between XX pillar which based have been has will emergence an oil in X shown we while compared balanced XX peers in with is MBoe production same We we for strength compared of in XXXX. PDP the in forma from at deals a change mix commodity in per long both forma a A in our SilverBow in given refer experience. drilling which gas have the were inventory continue On and rig La our gas a quickly the provide areas moving greater of step

We at for updated closing updated in XXXX anticipate June we'll guidance Sundance release have which or this not published acquisition point. We guidance. at July, the time

we XX, standalone the compared of SilverBow. Slide conveyed year XXXX to company pro these projections, on magnitude full reference, deals For increase from the which forma show the

metrics, closing the Sundance XX, flow we per those Upon highlight particularly rig, Additionally, accretion on anticipate the share. cash we primarily key Slide free a will second acquisition, on adding assets. focus across financial which

our oil utilization greater gas will is near-term with double-digit frac The efficiencies forma drilling essentially for Our inventory. base full can continued We time, enable drilling crew. XX-XX pro capital which asset to plan and development rig should have full will and gas our between and oil of annually. drive pursue one allocate for production optimized one we a plan growth

we USDX We driving achieve fact, rate XX% with now can free growth a XX%, billion years. the next few greater cash over In while to growth than reinvestment the flow XXXX. below are through XX% projecting

adjusted sight we to achieve XXXX, enterprise XXXX. million EBITDA At million Assuming has adjusted EBITDA have through year-end creation just towards than same and free target equity value while delevering far of line the ratio debt time, our of accelerate expect latest XXXX value in pace less Xx. USDXXX on growth in incredible from strip of proposition pricing, the of an compared of USDXXX converting through leverage to SilverBow's we flow under to thus bit cash generation. focused growth drill

With price acquisitions environment sheet within cash SilverBow year, and and the favorable share commodity we rapidly the have scaled improved last its accretive its a per metrics. over made flows has balance

In growth services. and the ago. seeing prudent strategy. pressures term, the where will And our on all For operational a is and inflationary a critical the year of were closing value capital it of forget successful efficiencies, environment, the are will strong easy towards focus discipline, price management realizing to remain near risk integration just prices we commodity acquisitions. remain Therefore, full furthermore, across continued our

-- which have outlook, opportunities. optionality given consolidation in are now, to cash to us. active remain things strong optionally further balance and Right balance sheet X SilverBow we our allow clear flow have our will We given

turn First, which is Ford go ahead. and years, pro capabilities coming value. has stakeholder forma update. Steve bolster track SilverBow will record the that, in Eagle charge. is an to call lead consolidation portfolio deliver set will strong the I to over to growth the operational our please drive a second, the and Steve, up ripe And and provide With to SilverBow for

Steven Adam

area Essentially, online. wells, net well, drilled in La first activity County net well our lateral at we net we you, well Thank all have X,XXX X longest a D&C well X X In the and approximately drilled where quarter, the of Webb Sean. Chalk gas we of feet, completed was to chalk length brought X our Mesa Austin date. drilled

online Ford, which the an Lower Chalk. pad in single targeted of to pad have co-development as This spacing drilled Chalk. extended in wells the X Mesa X and Mesa test the La our formation pad, The The the wine-rack first date. Chalk Eagle the we to the approach is began we Additionally, Austin in history. for these the and La and locations completing largest company Ford, in spacing of X-well Austin brought Upper a is X utilized compared delineations Eagle

and our outperformed NPVs prices, As periods better. results are have the less wells Austin commercial These year current expectations even Slide strong of at payback are strip periods shown and our returns. a on Chalk per are well than XX, showing exhibiting payback and

XXX range. right averaged guidance day, the at our midpoint production quarter First per of MMcfe

and market low We volumes labor end efficiency rate earlier this current fleets in nonoperated their issues losses year. expectations. at our their we prior returned came and tight with the in initial a has well ranges service in oil caused efficiency Those temporary, the weather-related and upcycle performance Our and brought have to observed rig impacted in as the the prove levels. surface this industry drilling sector. The guidance NGL of

few gains crew. to provide operationally size we This we a this over the add the last We assets efficiencies frac Sundance summer. forward. and a greater with and to will years continue utilizing us the rig the intend Furthermore, scale of have expect going level-loaded made on

SilverBow asset that to say is All costs base. have with higher to work rising utilization across will our provide service of to partners greater we mitigate as this abilities the

of production decline timing in sequentially ramp maximize the and as June production in Mesa strong online. day subsequent This the 'XX, to For minimal timing guiding standalone roughly we the brought a the before have XX% drive also second rates monthly production mix. and our the standalone X-well higher per on production basis year XX% optimized should first XXX gas well a first Due is first hitting last natural to the flat quarter, This quarter SilverBow's for to La our is year production the midpoint daily of production the -- and to on average pad with of schedule developed approximately accelerate activity are second first from to representing wells of our a quarter pad our Furthermore, of on of first compared drilling based remainder D&C second the over MMcfe to size to we at the as of the half. the selections the year. fourth should we returns production of in half production. quarter production quarter in basis of

tubular as Given 'XX continues a acquisition and this guidance a CapEx to is rig. efficiencies has full production periods. our budget experiencing are is the until original efficiencies, remain to cost changes return market from committed acquisition. us goods, Specific for of our the full inflation, year we which of such X identify proppant, for development increasing diesel impact are and our within horsepower, It program, basis, adaptable the announcements, our year labor which worth highest on Sundance to cost pulling as offsetting our in closing This constraints. the the a first and standalone flexible stay production are SilverBow's allowed unchanged timing to withholding we inflation, where levels, We fuel, provides team remains wells. short areas rate budget noting field time meaningfully most actively forward

and spudder has our our of side, drilling utilizing time cost-effective helped rig. days the on drilling efficiencies to number needed rig cycle On pads maintain reduce the from super-spec a

primarily been have site. costs we side, completion sand the the and On on well land focused at

As such, effects offset utilized with a and stimulations. sands other we of have regional tradeoffs logistical to along imported our the of blend inflationary help

first to service greater to are us. providers completion our able turn, rig pumped. grow stage the program, from with to to we're time to to of working greater further able utilization also partners who, are reduce provide size Again, We release cost efficiencies in we as our provide

to and there Looking year. XX drill acquisitions weighted in XXXX our drilling we ahead, from X will our the locations assets acquisitions. has liquids with moved are rig will In acquired locations last target total, last year's we

SilverBow quarter. incur should CapEx standalone scenario, shift deficit County From expect cash a we second rig slight roughly drilling for USDXX in flow the in standpoint, the fourth million in to a basis, quarter. on And again, Assuming to gas would a standalone of back the this Webb quarter. this a result in timing

over the Chris. us half significant wells timing of will the higher-return second that, cash turn to up With it production However, pulling set forward year. and flow of the for through free I'll

Christopher Abundis

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

oil with of quarter million, of USDXXX excluding gas First representing gas natural sales. and production sales were XX% and derivatives, XX%

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

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

million. XXX contracts X,XXX the as approximately loss remainder Based hedged, we day day barrels and realized first and of do which of derivative X,XXX quarter detailed our XXX on barrels USDXX hedged. oil the of today. XX, our expect hedging of oil to A in MMcf hedged acquisitions. contained have corporate per natural hedged, XXXX, inclusive amounts barrels our XX-Q per per hedged, we approximately of per MMcf XXXX, for contracts book file was filing The of hedge quarter gas per of and day include X,XXX of X,XXX have NGLs the natural hedged. Our and of April NGLs not are per day day collars XXXX, for on day of the hedged, both just later swaps over of barrels presentation summary pending is and for we gas

which Mcfe. oil Lease to per Mcfe. sales. costs were expenses and USDX.XX operating were Production per a over processing for our the stock-based of the to LOE were due last gas compensation, was liquids cost which Transportation USDX.X production, Turning increase We cost. year. and taxes unit USDX.XX anticipate to X% Cash higher-cost G&A, year-over-year. was much decrease of million acquired quarter, X% excludes first

function As do to Adjusted sustain a our Rather, meaningful scale unit we size we was structure continue organic per profitability a volatile of advantage, to decline periods be growth, compared add consider during first to the We to G&A. the increase for competitive expect basis both and prices. on acquisitive ranges. to anticipate a of commodity the G&A company, cost to lean not allowing EBITDA a SilverBow and million. of historical USDXX quarter we

free quarter. flow USDXX our cash earnings we during As million of generated in reconciled materials, the

on and service we standalone as track original have scheduling with efficiencies full cost particularly noted, on range basis, Steve CapEx budget helped our optimizations inflation. a mitigate remain rig As

Strong our million sheet. by to allowed approximately forward Turning million. in we in to totaled realizations nearly We debt which balance quarter of USDXX USDXX CapEx, price reduce million total accrued reduced USDXX debt which us a quarter-over-quarter. pulled

million facility, of outstanding cash USDXXX of million of XX, As and liquidity. million we March hand, USDX our credit under approximately USDXXX had on

the in our in banks, of rest a which included borrowing bank their support. like thank I X the agent our admin, mentioned, new redetermination well in member spring as our had for As to the as syndicate, Sean for the million. ratio over April our USDXX would USDXXX covenants our base resulted leverage USDXXX efforts. first to of headroom. wrap up that, constructively close and million. acquisitions totaled basis, were the first full LTM together with EBITDA approximately includes turn leverage contributions to further end the period bringing working X.XXx. facility, credit EBITDA which calculation. We I ratio covenant pending will with to And of to financial and consolidation of the our for million At closed compliance prepared quarter ending with of Sean in an assets sufficient our used our for entirety SilverBow, as On quarter from is for our adjusted contributions it the and look purposes we to acquisitions accordance we remarks. the quarter, acquired from with forward period, end LTM XXXX, LTM-adjusted

Sean Woolverton

to the XX Thanks, creation. grown Chris. over SilverBow months the and actions company last has resulted taken significant in have value

should float EBITDA. potential with over attention. to milestone And set A flow have SilverBow latest the in cash sight to garner going to increased are we of which USDXXX for USDXXX year, combined liquidity, reach and forward, was of line we million EBITDA. million next increase SilverBow's investor key greater With acquisitions, annualized

flows to we still see return As we ways investment find continue transactions. bit to and debt, cash drill the and scale on our accretive the through highest pay down

to with I Furthermore, X-rig in our forward and has and will support. Our stakeholders accelerate to further as narrative surrounding cash synergies. EBITDA to amount we expanded for updates turn the We providing The the thank above operator the The call for a integrate want value levels additional plan look through to changed SilverBow's assets their proposition that, of meaningfully continued will back flow time. I next new our our current short free call. identify we questions. will And on growth XXXX. into move drive significant is growth program.

Operator

Instructions]. [Operator

Your first Johnson Meade question of is from Rice. Charles

Michael Furrow

in Furrow Michael is Charles Meade. for filling This

Could and other Ford, the was to large to that you'll So Ford, there wine-rack are little pads on why X further targets in wells. the La similar X if opportunities for mentioned And one? this provide further a configuration regards X Eagle configuration that chosen? Austin pad, Eagle Mesa you detail X-well Chalk Upper Lower

Steven Adam

as this history work and time Eagle we the Michael, high and which again, that going chosen our as able in a appropriate spacing Ford, Steve. development obviously, density was Lower Upper data XXX in we've continuing Chalk density you in We've Eagle and well that, area, that That Eagle in the been delineation well as as to the demonstrated is Upper offset is been of that using Eagle Ford to as Ford know, grow has Austin in testing said, The doing, been that we've Lower been learnings Ford. heavy Yes. in Fasken configuration at foot also to information reason We in this particular development now X,XXX X,XXX have we know right foot able to greater in forward. stage the the to as the get that want be typically well. somewhere spacing. that and

provided a looking So, handily offsetting to therefore, all the from for the it up with development Eagle quite way wine-rack readily the Lower Ford and takes vertical Chalk.

Sean Woolverton

pad Yes. X plan X% Michael, a will have the do forward, to to range. We we as of to is then count X. X% in moving add forward And optimized larger our our couple to majority that development the closer be but just I'd X, probably X probably X move versus pads,

Michael Furrow

Great.

And sounds that like drilled. so it been X-well pad has fully

So you number the point, forward? at are completed some can of detail some upon timing more wells and of going that the this based provide

Sean Woolverton

right. Everything everything this TDed. Yes. perspective, has Yes. From a the you're fracked, early we're has of in At flowback. stages point, and been drilling been

weeks. ramp production see to few the significant in next expect a So

Austin both have down Chalk to zones, ranging wells you're million in in all the through IPs a -- aware, anywhere Eagle range. from XX Ford, area, million As Upper this XX day and Lower,

production. above couldn't prices ramp to wells, a with now. better on timing it from gas X any we're our USDX perspective, bringing significant going be And So in a see with

Michael Furrow

acquisition. is that. around No Sundance the question about and SandPoint doubt My second

deals? quarter. timing or do the in the to that quarter the So the major second Sundance closing point, could in close anything with standpoint to transactions is see with potentially you At expected close like anticipated hurdles to any this of third these the miss related

Sean Woolverton

on We've transactions. both been working

should the future. transaction early between on record X ability difference have quarter, the which very second the the here be the XX. SandPoint a The scheduled closing quarter. mentioned demonstrate quarter, to now late Sundance you a the near Everything schedule track vote, June for third transactions remains we're in these shareholder that planned. in to preliminarily We get And Sundance in as one requires is targeting is closed.

around point Sundance pivot timing closed. getting the that's So the transaction

Michael Furrow

helpful. That's Great. very

Operator

question Bertrand is next Truist. Your from of Donnes

Bertrand Donnes

Or indicated basins not other you're pursuing Some In talk step other have your Are with differently? done market the looks? upside how operators Can can it prepared some off some and little remarks, oil for acquisitions. volatile you're because the it you a approaching equity guys the you be of back lease may taken in a prices. sellers? strip maybe you acquisitions, for take you using

Sean Woolverton

Yes.

Eagle we're a for seeing. now. me you active in Ford the been We've what quite opportunities Let very walk through looking for while

being participate cash we seller over folks we've last the believe provides and actually done in provide sellers. XX And through we a based So as with with to as with component far combination been the the exposed as relationships have the accretion. taking the months well value buyer. have the so longer-term we've we've table that upon opportunity transactions -- that then that believe stock. the stock value We transacted recognized cash to built both that have the of that some Offering off upside the

that prices. do transact opportunity out think amount of assets with acquirer entities Eagle a sets number the logical in these of runway are a for higher tremendous at we looking And There's there that so of private to we're a of probably Ford. opportunities

we that disciplined. continue all said, with Now to to remain very want

averaged I think across the day. opening X I per of mentioned we've a remarks XX,XXX price in purchase that my about Boe transactions,

it and go-forward going volatility a get starting buyers until challenging end be the to other and a strip. what high these continue prices high probably is overpaying seeing of at environment would to this we volatile push acquisitions are consider for stabilized in we to We market, the

diligent continue it be very hard, going we're to So but smart making to work in transactions.

Bertrand Donnes

-- I acreage. shifting run just the was you assume that a value already? going on you're that the continuous that they additional the when That gears, close? costs based stable in second a that rig then sense. the all decision is bringing you're look your program. rig Is sense, in, And the like can more And time the part acquisitions, on locked with make maybe Or total makes game or is what of to acquisitions new be

Sean Woolverton

that drilling the up. -- close. second our And is the start it's acquisitions soon -- rig contract have firmed plan drilling to as actually We as

So that's it's active, have with strong our rig again, providers. good a currently relationship service

And work second timing so to work with around on bringing the right close the the rig them of the transaction. Sundance

pretty Sundance the So what excited locations to going the can teed that already hit ground be running. year, this to ready so to we're we're go We're we running. the ground that to to up best able closely they the we're working and identify were getting hit those and team opportunities with hit felt

Bertrand Donnes

That sounds great.

Operator

Instructions]. [Operator

question Daniel Energy next of Your Geoff is Partners. from Jay

Geoff Jay

a Just that. to follow-up

confident the So incremental next rig What's that, the the you is guess, into the we that feel already that locked for year? potential is be that? that -- secured. rig with term down a rig inflation about think that for should X line will In words, on rig? do months, rate how I other

Sean Woolverton

capture in upside in lock trying to pricing. perspective, them companies future entering Yes. type are try moving environment for from, operator's pad we're were several to now haven't contracts those short, in We're looking the now where last service the years. years seen over longer-term keep where to that From more pad, so at they rates trying to contracts. Definitely, we're an can many we an

can right, made long too to balance the past that, avoid that volatile. getting prices in trying has and we're the be that mistakes So knowing commitments, of industry

the scale. makes entities. well, And are sides So we've both of find the have several put amount in we term is efficiencies to costs operations you think to from as try benefiting we're as balance, continued of over lower. for trying -- becomes more to the what what wring and we from continued standpoint, then drive inflation last We, to have out our That provider a what system. challenging both more But it. increased the ways agreeable is to teams drilling an sense reasonable seeing years,

that things more ability So consistency come longer-term importantly, to all the arrangements. type the just having commit power, forward. in having more to more purchasing going having schedule that, But with

to ago, running XX a were at months Just XX half rig. we

X be rigs essentially will to schedule. more to and, importantly, frac us So efficient a almost allow commit running just full utilization more

we're the line to from morning. Operator, pretty up are we're the going queue? additional in can be hold the we this to continued offset on through there If for inflation efficiencies scaled-up optimistic wrap So capital, that not, able program. any call calls the

Operator

No more continue. sir. questions, Please

Sean Woolverton

Okay. joining it news as updates We us additional to this forward everyone providing look us. morning. and Well, appreciate warrants activity from

So everyone, have a good morning.

Operator

And today's this concludes you conference call. participating. for Thank

may disconnect. You now

SilverBow Resources (SBOW) 8 May 222022 Q1 Earnings call transcript