SBOW - Earnings call transcript Q2 2022

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Operator

Good day, and welcome to the SilverBow Resources Second Quarter 2022 Earnings Conference Call. Please note, today's conference call is being recorded. [Operator Instructions] Thank you. At this time, I turn the conference over to Jeff Magids, Director of Finance and Investor Relations at SilverBow Resources.

Jeff Magids

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

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

Sean Woolverton

and for the half first call you, joining a has least. thank of It Thank everyone, the our been say you, morning. this dynamic year to Jeff,

higher the of marked degree in have the prices of commodity importance steadily While XXXX, underscores remaining volatility market disciplined.

quarter. ending road facility of price XX program we the credit the and the have in for largest portion Sundance these critical weighted end and transactions, funded oil our our On and an To second our the XX. were our we we we accomplishments the we Sundance the are the our strategic acquisitions added cash and objectives, while liquidity had the cash presentation, Our XX% months. a marking flows, developing second million purchase $XXX borrowing map quarter the approximately was to assets. rig closed which strategy also SandPoint the In transaction, operating base more on briefly SilverBow's in our is to drilling than outlined The Slide dedicated fifth for to fourth going forward. XX closed conjunction, and inflection growth business. of the of last to mark with We which quarter, point of which through our closed recap our these June at first was upsized quarter

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

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

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

We to XXXX in production XXXX. our expect grow approximately both XX% and

production recently Our oil second our wells and online quarter inventory. assets. from rig develop brought closing increased the a contribution from production Sundance, acquired we we as Upon added SandPoint new to

going XX% production half step-up Taken meaningful together, the growth year. acquired with of first and this drive from the forward, production second in contribution will drilling approximately activity higher than half

inventory, mix to Our over made we have objective is a locations now progress balanced during than a we drilling approximately and our on quarter. high-return XXX portfolio, The added both our to net this locations of strategic drilling X-rig decade SandPoint current second and oil This XXX of and and front acquisitions pace. gas. Sundance expand significant our across more supports the at

our is structure. to peers lead and in efficiency Our cost third capital objective

than reinvestment yield a and approximately by rate flow Our a underpinned next growth of free XX%. is cash greater year XX%

Our cost efficiencies deliver to targets. been inflationary have our planned on offset pressures, and some we've CapEx able

integrates further realize synergies expect will low-cost we cost as into team Steve detail, also our As to the acquisitions platform. the

realized delever Last, in this approximately sheet year. ratio while as $XXX to on reduction we is track by higher our Year-to-date, achieve acquisition million have of the debt fourth but unit announced pricing a mix and flows. to greater leverage Our through least, on a value, increase oil balance cash not remaining cash to Xx end production basis. an continue will higher margins equivalent the captures objective

our transactions, free debt but quarter ratio the quickly reduce timing of second the expect closing balance was of cash Our using cash for reflective flow. to leverage we

balance liquidity powder reduction our to end million June. at since end debt to accretive continue end of Furthermore, the the the it was Our needs pursue of $XX SilverBow million, July position dry providing a opportunities. to of million, July $XXX at exceeded $XXX

this with outlook and calls of of amount year, represents for This XXXX cash EBITDA beyond preliminary roughly Looking million yields. valuation beyond delevering requirements a the our above growth generation over free and million $XXX based significant cash a of and flow. $XXX and compelling we upon fund the flow next plans our EBITDA, to see Combined objectives. our months, XX leverage growth cash

We given a through will be likely the continue pipeline please the It Eagle will the to of turn or acquisitions. opportunities operational highest further go call reinvestment consolidate over opportunities see I of provide Ford. to to Steve, the both ahead. update. the combination accretive to With continue Steve either an drill to bit that,

Steve Adam

the Eagle wells, completed brought Chalk pumped second first with our the day. mentioned, the by Sean. pressure pad previously. has pumping X.X at of the Thank when transition Chalk, gas the also second the first should development. we developed utilization quarter. single mark They represent our to Sean Austin date. drilled for this In online Chalk to confirms successfully and X La X pad foot. we wells an pounds have drilled brought of delineations XX% and This Mesa per net the face largest and are inventory cost our Upper as of XX pressures, our rates profile. date an online in to Austin our you, in north delivering wells. online test additional Webb XX just Ford on And team quarter X-well stages Eagle were the full-scale achieved and The over Chalk constraints brought Chalk inflection brought spacing normalized as AFE and X were view pad. formation In supply unlocking growth to quarter, net compared in we we X best-performing more lateral wells have the well to inflationary as well we million completing wells compares SilverBow point X Of production completed than area, go-forward X This Austin we were sand online Lower our and of Ford. In County costs chain X This is

As back we In a had Oil Central XX we pad and in of less Chalk presentation, of Slide a completed rates IPXX online wells our XXX%. pad. our on X,XXX and our X-well return than Austin above pay generate year and an BOE mix. show This of curves are well area, these per Western costs. respective achieved of pads of another and their and day liquids outperforming XX% X,XXX day and area, we an Both mix. per online In Condensate type IPXX BOE pad liquids a with brought our completed a AFE X-well brought XX%

we completed well, an on shown of brought SandPoint during XX This exceptional we which acquisition and the well, as asset's IPXX MMcfe May, quality online presentation, in highlights our from Slide Additionally, which the produced per the on an XX day gas of quarter. DUC well acquisition. is our of

XXX MMcfe in averaged production production our month. which day, with update last quarter line was from per Second

approximately expense industry contributions included across SandPoint given of all is year-over-year XX This June production to up move major and costs quarter's capital basins. the our no XX operating In continues the closing. the days cost XX% higher. [VSMA] from inflation are upcycle, current contribution assets, assets, Sundance from but

On rates, day the fuel and coming side, cement. cost the casing, drilling largest are from increases

the market which diesel and tight service the results side, chemicals, completion are labor sand pressure. horsepower, challenges. the seeing the remains most in across typically On service-related Furthermore, sector,

observed As our in activated we in the noted year on with call, the last December. this earlier we rig

similar in operations result with as from We team experienced taken conjunction actions of rig have our Sundance. providers, service the the by However, we challenges losses efficiency with those efficiency been corrected. added our

line we our have expectations. SilverBow's more that returning is best By rig line our team with our plan. and costs business with delivered achieved that the taken the efficiency AFE continuing operations, to Now levels in practices, operations control of targets has are to implement in

activity, a pace partners, the preordering X, a like rate our to expect cost have team To addressing of procurement cycle and has going utilization contractors forward. our amongst and greater SilverBow's organization. inflation drive our even through mention full to employees, The initiatives with the drilling team times is key we standards. incident even achieved core Year-to-date, upholding synergies for of increase materials. culture. would frac I improved crew We is that enhanced pride cost the recordable thank and our of safety you and service SilverBow of in of maintained the point pillar all which its total this X-rig

the we to the the of midpoint, with are per For third compared production of representing XX% for at mix day gas our natural second XX% quarter, XXX quarter. to MMcfe production guiding

XXXX, of per full guiding day For the midpoint. at we MMcfe year production to XXX are

XXXX. of the third XX% a second implies a guidance half the production XX% Our increase quarter sequentially in in and increase

production full guidance is on $XXX million. rig that and Our Note and cost year guidance schedule. views and X CapEx to recent update unchanged our XXXX July from million CapEx inflation represents is $XXX our our

Looking preliminary rate day, forecast to XX% per MMcfe XXXX, growth is representing year-over-year. our a XXX production

Sean free of of cash flow roughly and million we As next mentioned, forecasting $XXX $XXX are EBITDA million year.

in rates optimized allocate commodity to projects our time and always, of timing prices, SilverBow As schedule return. its real highest-returning to based expected drilling prevailing capital production on

guide over XXXX may And make with our to further we I'll subject turn such, maximize optimizations Chris. based As to it is change to that, returns. preliminary on

Chris Abundis

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

oil and XX% sales sales. derivatives, gas with XX% gas of natural quarter of Second excluding million, production $XXX were and representing

Hub was XX% realized competitive realized price higher was operating Henry our NYMEX Gulf was Henry $X.XX was benchmark Mcf XXX% per NGL of price realized than and the XXX% prices, NYMEX market. WTI. quarter, SilverBow's in Coast our WTI, highlighting Hub price our realized Notably, of the our gas price advantage oil gas of During NYMEX

Our gas for of July we book remainder have million. the the of per barrels was X,XXX our day hedged $XX day barrels realized hedged. X,XXX approximately oil on contracts per per day XX, quarter hedged, of hedging on as NGLs XXX hedge Based of 'XX, and natural MMcf for loss of

which X,XXX per barrels natural of The hedging today. and of hedged our NGLs are in gas our derivative have include presentation and of A XX-Q hedged, collars we later contained For day hedged. for MMcf quarter, per expect summary our contracts approximately second the inclusive to existing both the from day file the day XXXX, per of assumption math oil is hedge of of swaps X,XXX recent detailed books XXX filing we and barrels and acquisitions.

portion past the was taxes operating year. have to over to base, $X.XX Cash and higher Transportation the due unit per given million Production a closed LOE Mcfe. for which to the elevated $X We which oil comprises quarter. we per stock-based our of production larger Mcfe. were our G&A, cost processing liquids compensation, now production, and much cost be expenses excludes Turning acquisitions costs $X.XX cost. anticipate Lease were sales. X% of were going forward gas

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

As reconciled deficit base earnings million materials, fees This and recent $X extension. facility slight our flow generated in quarter. free the bank a borrowing for our associated of with includes credit increase approximately cash onetime we

flow expect would XXXX. positive to an $XX Excluding basis we free expenditures activity. cash on the the this have acquisition second million. for in been and fees, half cash of for Capital and This quarter accrual excludes flow approximately divestiture second totaled the generate free we quarter,

credit operating in offset just second sheet. balance EBITDA We million. Total $XXX the cash for cash Sundance was flow. million. payments SandPoint $XXX was the by and funded using our debt which our payments totaled to and these quarter Higher Turning acquisitions, cash over adjusted facility

million acquisitions from increased Even SilverBow, to acquired X.XXx. period liquidity in of for had and for XX, leverage million under EBITDA on credit basis, contributions cash of liquidity. outlay our of an the with approximately purposes credit the to acquisitions the $XXX letters totaled to hand, for million million calculation. we June $X $XXX used facility, period accordance includes in LTM ratio $XX debt, adjusted with and the of closed As $XXX quarter-end increase LTM the facility, our our $XXX the from entirety million, for the total credit resulting quarter-over-quarter quarter covenant leverage of bringing contributions ratio ending second adjusted driving with our for by million $X outstanding cash million. properties EBITDA LTM On of of our XXXX, our the

We with of As on to from million, our us Sean to our unanimously our plan. track ample mentioned, our approved year continue the $XXX million by executing liquidity achieve Xx providing to banker base increase target ratio had $XXX to borrowing leverage end. remain

ratio work second I headroom. leverage their and $XX bank I pro contributions like At our would prepared will support. over quarter, end to Sundance syndicate, had come will remarks. to as million compliance to to thank the about. their financial And year-end forma Our together includes opportunities prior since of continuing EBITDA in We to member which from from for and with our X benefit that, to new with wrap full we the it turn Sean forward April our covenants were up of sufficient date. closing look banks SandPoint full

Sean Woolverton

consolidation, strategy. significant scale and that will a is investor continue to Chris. cash potential base. garner execute to forward. the in-basin flow creation Thanks, increased continues value company We going and Between believe organic for growth positioned the SilverBow broader its

was our annual in reach One of $XXX key milestones EBITDA. to million

Given line aforementioned execution, the $XXX million towards next we year. of now of sight EBITDA have

As see the to providing expand will our with accretive call dry stay all updates investment bit questions. debt turn highest look continue acquisitions. to will And want the on production down powder opportunistic Ford drill of to conservative support. and that, call. to their increase us debt, cash rates, growth, flow stakeholders forward the and the Eagle With our reinvestment ways we reduction liquidity for consolidation. continued and time, I for the we over find our position pay further through to to thank operator back providing on We further return in next I

Operator

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

Bertrand Donnes

prepared price. in remarks, right be active the your the From have M&A like sounds to market, it assuming pretty you plan

some forma the it target priority is to So the pro Just I'm it just the these what flow of if Or idea leverage? is of an cash add wondering kind Or of inventory? is trying get to share? free transactions per is. future

Sean Woolverton

And lay quite the you well out Yes. Thanks question. targets for there.

industrial existing base? First primary with So the first that's and Does capital Does it improve for make efficiencies? look it asset foremost, our we the sense logic. target.

cash our existing is inventory a to way. After or flow -- inventory. high shares? So enhance sheet Next Will it inventory list. displace And is balance it? further at is the existing we on that, the improve, look conservative expand accretive maintaining it accretive along our then

as it we'll we done in past, of to opportunities assets a So a cash it look combination and probably for we've fund trade buy currently sense. at and the where wherever makes to through discount look to stock

Bertrand Donnes

basis. side, wells a but but nominal well type have lateral sounds on shorter they X,XXX-foot looking on to was at the boxes. a still Chalk were came bit curve, It cost those outperforming moving you're than Austin in your in wells, a to then it check And like like on looks Okay. the results all lower one them the at least that just of they the even you

that, takeaway Or these maybe that and is that that cost results to at same have longer to the the and drove it increased you like the them from productivity? is apply you well lower lateral the take So the want price? design

Sean Woolverton

necessarily stimulation that The and that primarily exploring part we Yes. designs of pad or shorter, the configuration was we were the lease lower laterals not shorter was lateral. X this by costs the here driven had that X-well were different and across

Nothing to stimulation we So lateral or going depending there drilling upon from a back and or that, the that range length changing were lease X-mile laterals and lateral optimizing configuration. average probably hey, read length in revert our forward, our to configuration. to will will anywhere mile X,XXX-foot

Operator

question Furrow the line comes with Johnson Michael of next from Your Rice.

Michael Furrow

these as and the do going guys just SandPoint to and So be areas closed integration now acquisitions Sundance forward? that activity are more you see have the going going smoothly, to seems expect

Sean Woolverton

we areas? seeing Just to understand we Or are activity? make I are sure in our those investment capital question, the more acquisition increasing

Michael Furrow

both, activity capital but the investment honestly, on going was forward. question more Well, the

Sean Woolverton

And question. allocation the will at second gas. of Sundance capital way I SilverBow we it. move No. capital to forward dry the is the the we're a rig. Thanks for Yes. appreciate Yes, historical on the one transaction, assets are that rig as added confirming close primarily we allocating be

locations come be drilling the well The SandPoint for have closed will part that other year. through rig primarily dedicated oil to the most as that Sundance last and weighted, but liquids-weighted through transactions as late transactions, we

add these is of one on So have targets to we inventory. the acquisitions -- as accretive we

we as sure look the we're and/or projects. return high-grading doing drilling want to So it's take, at inventory deals, rate we equivalent either of make

capital important to as for as dedicate new and efficiently that's us quickly these possible. to So acquisitions

Michael Furrow

plenty is strong out But kind on the guys and very it Great. just specifically sense bit like little are of seems well some already. hit Chalk, a County. of having on question makes of a next helpful. That you My pretty it results, Webb follow-up

wondering So the the if wells speak you on portfolio? little up detail a stack and I of these was how rest to provide could

Sean Woolverton

Yes, that we've our to and the have. delineate continued position currently position acreage we

done have that. We

Steve we've spacing X the with pad well we brought test first online that second our As mentioned, quarter. done the in

of on development we're fall into So move prepared fact, look very they it, at compete our as now they portfolio. drilling a From returns favorably. in X,XXX-foot a the And we more perspective, the list to scenario, them the spacing. of top to

we're of to Chalk on as bit gas dedicate allocation planning So Austin we move to quite drilling. our capital the forward, a rig

Operator

time. turn any to are at There conference no remarks. the over Instructions] this [Operator for I'll closing questions further Woolverton Sean

Sean Woolverton

morning, appreciate you. we us forward updates call. next further our providing this joining everyone on I look Erica. to Thanks, and Thank quarterly

Operator

Thank you for participating.

time. this at disconnect may You

SilverBow Resources (SBOW) 6 Aug 222022 Q2 Earnings call transcript