SilverBow Resources, Inc. (SBOW) Misses Q3 EPS by $1.38, Revenues Miss

SilverBow Resources, Inc. (NYSE: SBOW) reported Q3 EPS of ($0.58), $1.38 worse than the analyst estimate of $0.80. Revenue for the quarter came in at $45.7 million versus the consensus estimate of $48.2 million.

Highlights include:

• Net production averaged approximately 183 million cubic feet of natural gas equivalent per day (“MMcfe/d”), above the high end of guidance
• Reported a net loss of approximately $7 million, Adjusted EBITDA of $36 million and free cash flow ("FCF") of $9 million. Adjusted EBITDA and FCF are non-GAAP measures defined and reconciled in the tables below
• Anticipate full year 2020 FCF of approximately $50 million, a $5 million increase at the midpoint from previously stated guidance range of $40-$50 million1
• Reduced total debt by $17 million compared to prior quarter and $37 million compared to first quarter 2020; leverage ratio2 of 2.5x and liquidity of $78 million at quarter-end
• Completed and brought online eight deferred wells one month ahead of schedule due to operational efficiency gains and timing of favorable marketing agreements. Drilling and completion costs for five drilled but uncompleted (“DUC”) wells $8 million below budget
• All previously curtailed net oil production returned to sales. Approximately 20 million cubic feet per day ("MMcf/d") of net gas production remained shut-in at quarter-end, but was brought back online in late October
• Commenced nine-well gas development program on October 1st; poised to capture favorable gas prices in 2021
• Implemented corporate cost reduction initiatives representing annualized savings of $2.5 million starting in 2021
• Cash general and administrative ("G&A") costs of $4.8 million (a non-GAAP measure calculated as $5.8 million in net G&A costs less $1.1 million of share-based compensation), a 5% decrease from the prior quarter

MANAGEMENT COMMENTS

Sean Woolverton, SilverBow’s Chief Executive Officer, commented, "As year-end quickly approaches, SilverBow is well-positioned to benefit from higher natural gas prices with exposure to unconstrained, premium Gulf Coast markets. Our team continues to execute on the factors within our control by driving down costs, optimizing our production and generating free cash flow to reduce absolute debt. 2020 has presented unique challenges to the oil and gas industry due to the ongoing global pandemic and extreme volatility in commodity prices, and these challenges are not likely to abate in the near term. In the face of it all, SilverBow generated $9 million of free cash flow during the third quarter, marking our third consecutive quarter of positive free cash flow, and we are on pace to deliver full year free cash flow of approximately $50 million. During the third quarter, we completed and turned to sales eight wells one month ahead of schedule. Compared to the first quarter of 2020, we have reduced our revolver borrowings by $37 million to $253 million at quarter-end."

Mr. Woolverton commented further, "As we look ahead, we began our nine-well gas development program in October, targeting our high-rate-of-return Webb County dry gas assets. Our strategy of maintaining a balanced portfolio and low-cost structure has allowed us to generate significant free cash flow and pay down debt while organically funding these high-return gas projects. We see favorable underlying supply and demand factors supporting a sustained improvement of natural gas prices and stand to benefit from our gas development, mix of collars, and unhedged production. Our returns-focused mindset remains at the core of our business strategy. Given our current scale and balance sheet, we will continue to prioritize debt reduction as our primary use of cash flow over the near-term. Based on preliminary estimates for next year, we expect to achieve modest production growth, sustain a maintenance level of capex, and generate a meaningful amount of free cash flow. As always, we are opportunistic in identifying accretive transactions, large or small, that further support our mission to be the premier Eagle Ford oil and gas company. I want to thank our stakeholders who underpin SilverBow's success."

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

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