SilverBow Resources, Inc. (SBOW) Reports 1Q Revenues Miss

SilverBow Resources, Inc. (NYSE: SBOW) reported Q1 EPS of ($0.50), $1.37 worse than the analyst estimate of $0.87. Revenue for the quarter came in at $53.38 million versus the consensus estimate of $59.4 million.

MANAGEMENT COMMENTS

Sean Woolverton, SilverBow’s Chief Executive Officer, commented, “Due to ongoing market conditions, we made immediate and decisive changes to our 2020 budget and operating plan. In this market, our focus is on maximizing cash flows, preserving future value and deleveraging the balance sheet. SilverBow's strategy of building a well-balanced mix of both oil and gas locations within a low-cost, single basin remains the same. We continue to take a returns-focused approach to our decision making, by taking near-term actions that align with the current environment our industry is facing while at the same time focusing on long-term shareholder value creation.”

Mr. Woolverton commented further, “During 2020 and 2021, we plan to significantly increase our cash flow generation, and are targeting FCF of $40-50 million in 2020 and more than $50 million in 2021 based on current strip pricing. With an operating cost structure of less than $1.00 per Mcfe and a hedge portfolio that protects the majority of our revenue for the remainder of the year, we are positioned to navigate the coming quarters with a disciplined approach. Although we anticipate a decline in production and revenue over the next two quarters, our plan is to shift capital allocation to development of our high-quality dry gas assets starting in the fourth quarter assuming economic and industry conditions begin to return to more normalized conditions. Our plan is to ramp up gas production in alignment with improving natural gas prices starting towards the end of this year and continuing into 2021. This strategy will position the Company to efficiently return to operating and financial levels prior to the disruption brought on by the novel coronavirus (“COVID-19”) pandemic and the related economic repercussions that have created significant volatility, uncertainty and turmoil in the oil and gas industry.”

Mr. Woolverton concluded his statements, “At SilverBow our greatest asset is our people. Our proven execution throughout 2019 and into 2020 has solidified our position not just as a cost-and-efficiency-focused company, but as a team with a winning strategy. I want to thank our entire organization for their relentless determination over the past two months. There is no doubt many challenges remain in the months ahead, but because of our employees' and contractors' dedication, we are positioned to weather these challenges and continue to create value for all of our stakeholders.”

2020 GUIDANCE AND OUTLOOK

Second Quarter:

In response to deteriorating commodity markets, SilverBow has suspended its drilling and completions activity until prices warrant further investment. Production guidance for the second quarter assumes significant curtailments of both oil and gas volumes. Currently, the Company plans to return these volumes to sales over the course of the third and fourth quarter. For the second quarter, SilverBow is guiding for estimated production of 115-140 MMcfe/d, with natural gas volumes expected to comprise 105-120 MMcf/d, although additional curtailments necessitated by storage constraints, commodity prices or other impacts from the COVID-19 pandemic could result in lower second quarter production. As SilverBow released its drilling rig early in the second quarter, and has deferred bringing to production eight wells, second quarter capital expenditures on an accrual basis are expected to be minimal.

Full Year:

For the full year 2020, SilverBow is guiding to a revised 2020 capital budget of $80-$95 million. The timing of bringing curtailed production back online and turning the eight wells to sales will be optimized to align with higher prices. For the full year, the Company is guiding for estimated production of 164-185 MMcfe/d, with natural gas volumes expecting to comprise 130-145 MMcf/d. Based on current strip pricing, SilverBow is targeting FCF of $40-50 million for the full year, or greater than 75% free cash flow yield using the Company’s trailing 30-day weighted average market capitalization. The revised plan provides SilverBow the ability to pivot to gas development in late 2020 and early 2021, with production hedged at prices above the Company’s return threshold. This has the potential to generate a meaningful amount of Adjusted EBITDA and FCF for SilverBow in 2021. Regardless of commodity prices, the Company carefully balances the production economics and the net benefit to its borrowing base and its financial covenants before committing to a development program.

Additional details concerning SilverBow's second quarter and full year 2020 guidance can be found in the table included with today’s news release and the Corporate Presentation uploaded to the Investor Relations section of the Company’s website.

For earnings history and earnings-related data on SilverBow Resources, Inc. (SBOW) click here.

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