Completed transformational acquisition of
Chesapeake’s remaining South Texas assets
Preliminary 2024 outlook of 551-611 MMcfe/d;
liquids to comprise ~40% of production mix
Anticipated 2024 capex of $550-$580 million
supports 3-rig drilling program
The Company now holds over 220,000 net acres
with 1,000 drilling locations identified
Capital structure provides for ~$500 million of
liquidity by year-end 2023 and extended maturity
SilverBow Resources, Inc. (NYSE: SBOW) (“SilverBow” or “the
Company”) announced today the closing of its acquisition of
Chesapeake Energy Corporation’s (“Chesapeake”) oil and gas assets
in South Texas for a purchase price of $700 million, comprised of a
$650 million upfront cash payment paid at closing and an additional
$50 million deferred cash payment due 12 months post close, subject
to customary adjustments (the “Chesapeake Transaction”).
Consideration for the purchase was funded with cash on hand,
borrowings under the Credit Facility (as defined below) and
proceeds from the sale of additional second lien notes. Chesapeake
may also receive up to $50 million in additional contingent cash
consideration based on future commodity prices. In addition, the
Company provided updated 2023 guidance and a preliminary 2024
outlook.
MANAGEMENT COMMENTS
Sean Woolverton, SilverBow’s Chief Executive Officer, commented,
“We are excited to close the Chesapeake Transaction, which
materially increases our scale in South Texas and transforms
SilverBow into the largest public pure-play Eagle Ford operator.
Our differentiated growth and acquisition strategy has positioned
us with a stronger balance sheet, a broader commodity mix and a
portfolio of locations across a single, geographically advantaged
basin. The acquired Chesapeake assets further enhance our
optionality to continue allocating capital to our highest return
projects and will immediately compete for capital.”
Mr. Woolverton commented further, “The SilverBow team looks
forward to extending its proven track record of integrating and
growing assets in South Texas through a combination of its existing
team and the new employees recently hired from Chesapeake. We plan
to expand our capital program to develop the high return inventory
acquired, with three rigs running across our portfolio in 2024. Our
current expectation is to run two rigs on our liquids properties
and one rig on our dry gas properties. As always, our development
plan and capital allocation remain flexible based on prevailing
commodity prices. Strong production growth is expected to generate
significant free cash flow which will allow us to pay down debt,
reduce leverage to 1.0x and below and stay opportunistic towards
our strategic objectives.”
2023 GUIDANCE & PRELIMINARY 2024 OUTLOOK
SilverBow’s updated 2023 guidance and preliminary 2024 outlook
are provided in the table below, inclusive of the acquired
Chesapeake assets.
Updated
2023 Guidance & Preliminary 2024 Outlook
4Q23
FY23
FY24
Production
Volumes:
Oil (BBLS/D)
18,000 – 20,000
14,300 – 14,900
23,500 – 26,500
Gas (MMCF/D)
230 – 255
214 – 221
320 – 350
NGL
(BBLS/D)
10,000 –
12,000
7,850 –
8,350
15,000 –
17,000
Total Reported Production (MMCFE/D)
398 – 447
347 – 361
551 – 611
% Gas
57%
61%
58%
Costs &
Expenses:
Lease Operating Expenses ($/MCFE)
$0.63 - $0.67
$0.68 - $0.72
$0.57 - $0.63
Transportation and Processing ($/MCFE)
$0.53 - $0.57
$0.44 - $0.48
$0.76 - $0.84
Production Taxes (% of Sales)
6.0% - 7.0%
6.0% - 7.0%
6.0% - 7.0%
Cash G&A ($MM)
$3.7 - $4.2
$17.1 - $17.6
$22.0 - $23.0
Capital Expenditures ($MM)
$75 - $95
$400 - $425
$550 - $580
For the remainder of 2023, there is no material change to
SilverBow’s development plans as previously provided in early
November. SilverBow expects to continue operating two drilling rigs
across its acreage and does not anticipate any incremental capex on
the acquired assets. The Company's full year 2023 free cash flow
range of $40-$60 million represents a 67% increase at the midpoint
from SilverBow’s prior range and includes one month of contribution
from the acquired assets. For 2024, SilverBow plans to operate
three drilling rigs with one rig dedicated to the recently acquired
assets. Oil production is expected to increase ~70% year-over-year
and average 25,000 barrels per day (“Bbls/d”). The Company’s full
year production mix is expected to be more than 40% oil/NGLs.
RISK MANAGEMENT
To help manage the impacts of commodity price movements,
SilverBow utilizes various financial derivative contracts to reduce
the volatility of its revenues. For 2024, the Company has entered
into hedges on approximately 55% of its estimated total production.
SilverBow has 217 million cubic feet per day (“MMcf/d”) (65% of
guidance) of natural gas production hedged at an average floor
price of $3.83 per million British thermal units (“MMBtu”) and at
an average ceiling price of $4.21 per MMBtu. The Company has 12,775
Bbls/d (51% of guidance) of oil production hedged at an average
floor price of $74.02 per barrel and at an average ceiling price of
$76.46 per barrel. SilverBow has 4,400 Bbls/d (34% of guidance) of
NGLs hedged at an average price of $25.92 per barrel. The hedged
amounts are as of November 30, 2023 and are inclusive of swaps and
collars.
CAPITAL STRUCTURE & LIQUIDITY
In connection with the closing the Chesapeake Transaction,
SilverBow increased the borrowing base and aggregate elected
commitment amount under the Company’s First Amended and Restated
Senior Secured Revolving Credit Agreement, dated as of April 19,
2017, and amended by the Eleventh Amendment as of November 30, 2023
(the “Credit Facility”), among the Company, the lenders party
thereto and JPMorgan Chase Bank, N.A., as administrative agent for
the lenders from $775 million to $1.2 billion. Further, SilverBow
issued and sold under the Company’s Note Purchase Agreement, dated
as of December 15, 2017, and amended by the Fourth Amendment as of
November 30, 2023 (the “Note Purchase Agreement”) an additional
$350 million principal amount of second lien notes, resulting in
$500 million aggregate principal amount of second lien notes
outstanding. Additionally, the Company extended the maturity date
of its second lien notes from December 15, 2026 to December 15,
2028 and modified certain other terms of the Note Purchase
Agreement.
As of November 30, 2023, the Company had $449 million of undrawn
capacity and approximately $15 million of cash resulting in
approximately $464 million of liquidity.
INVESTOR PRESENTATION AND OTHER DETAILS
SilverBow has posted a presentation under the “Investor
Relations” section of the Company’s website, www.sbow.com.
Investors are encouraged to access for additional details and
information.
ABOUT SILVERBOW RESOURCES, INC.
SilverBow Resources, Inc. (NYSE: SBOW) is a Houston-based energy
company actively engaged in the exploration, development and
production of oil and gas in the Eagle Ford Shale and Austin Chalk
in South Texas. With over 30 years of history operating in South
Texas, the Company possesses a significant understanding of
regional reservoirs that it leverages to assemble high quality
drilling inventory while continuously enhancing its operations to
maximize returns on capital invested.
FORWARD-LOOKING STATEMENTS
This release includes “forward-looking statements” within the
meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended.
These forward-looking statements represent management's
expectations or beliefs concerning future events, and it is
possible that the results described in this release will not be
achieved. These forward-looking statements are based on current
expectations and assumptions and are subject to a number of risks
and uncertainties, many of which are beyond our control. All
statements, other than statements of historical fact included in
this press release, including those regarding our strategy, the
benefits of the Chesapeake Transaction, future operations, guidance
and outlook, financial position, well expectations and drilling
plans, estimated production levels, expected oil and natural gas
pricing, future free cash flow, capital expenditures, budget,
projected costs, prospects, plans and objectives of management are
forward-looking statements. When used in this report, the words
“will,” “could,” “believe,” “anticipate,” “intend,” “estimate,”
“budgeted,” ”guidance,” “outlook,” “expect,” “may,” “continue,”
“predict,” “potential,” “plan,” “project” and similar expressions
are intended to identify forward-looking statements, although not
all forward-looking statements contain such identifying words.
Important factors that could cause actual results to differ
materially from our expectations include, but are not limited to,
risks and uncertainties discussed in the Company’s reports filed
with the Securities and Exchange Commission. All forward-looking
statements speak only as of the date of this news release. You
should not place undue reliance on these forward-looking
statements.
All subsequent written and oral forward-looking statements
attributable to us or to persons acting on our behalf are expressly
qualified in their entirety by the foregoing. We undertake no
obligation to publicly release the results of any revisions to any
such forward-looking statements that may be made to reflect events
or circumstances after the date of this release or to reflect the
occurrence of unanticipated events, except as required by law.
NON-GAAP MEASURES
This release contains forward-looking free cash flow, a non-GAAP
measure. Free cash flow is calculated as EBITDA plus (less)
monetized derivative contracts, cash interest expense, capital
expenditures and current income tax (expense) benefit. EBITDA is
defined as net income (loss) plus (less) depreciation, depletion
and amortization, accretion of asset retirement obligations,
interest expense, impairment of oil and natural gas properties, net
losses (gains) on commodity derivative contracts, amounts collected
(paid) for commodity derivative contracts held to settlement,
income tax expense (benefit); and share-based compensation expense.
The Company believes that free cash flow is useful to investors and
analysts because it assists in evaluating SilverBow’s operating
performance, and the valuation, comparison, rating and investment
recommendations of companies within the oil and gas industry.
SilverBow uses this information as one of the bases for comparing
its operating performance with other companies within the oil and
gas industry. The Company has provided forward-looking free cash
flow in this release; however, SilverBow is unable to provide a
quantitative reconciliation of these forward-looking non-GAAP
measures to the most directly comparable forward-looking GAAP
measure because the items necessary to estimate such
forward-looking GAAP measure are not accessible or estimable at
this time without unreasonable efforts. The reconciling items in
future periods could be significant.
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version on businesswire.com: https://www.businesswire.com/news/home/20231130309121/en/
Jeff Magids Vice President of Finance & Investor Relations
(281) 874-2700, (888) 991-SBOW
SilverBow Resources (NYSE:SBOW)
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