SilverBow Resources, Inc. (SBOW) Reports Q2 Revenues Miss

SilverBow Resources, Inc. (NYSE: SBOW) reported Q2 revenue for the quarter came in at $24.85 million versus the consensus estimate of $31.3 million.

• Net production averaged approximately 142 million cubic feet of natural gas equivalent per day (“MMcfe/d”), above the high end of guidance
• Returned approximately 50 MMcfe/d of previously curtailed net production to sales in June; approximately 50 MMcfe/d of net production remains shut-in
• Closed divestiture of non-core Wyoming assets for approximately $5 million of total proceeds
• Reported a net loss of $306 million primarily due to a $260 million non-cash impairment write-down on a pre-tax basis, Adjusted EBITDA of $26 million and free cash flow ("FCF") of $14 million1. Adjusted EBITDA and FCF are non-GAAP measures defined and reconciled in the tables included with today's news release
• Anticipate $40-$50 million of FCF (a non-GAAP measure) for full year 2020, inclusive of a gas development program planned for the fourth quarter
• $20 million reduction in revolver borrowings compared to prior quarter; leverage ratio2 of 2.4x and liquidity of $67 million at quarter-end
• Active hedging program to combat price volatility; primed for gas development in late 2020

MANAGEMENT COMMENTS

Sean Woolverton, SilverBow’s Chief Executive Officer, commented, "Over the course of the second quarter, the SilverBow team was focused on production management, cost reduction initiatives and optimizing multiple playbooks for various commodity price scenarios. The second quarter will mark the low point in our production profile for 2020. Looking forward to the remainder of the year, we will be returning the remainder of our curtailed volumes to sales and are currently in the process of bringing online our inventory of drilled but uncompleted wells ("DUCs") in the third quarter. Our plan is to restart our drilling program during the fourth quarter of 2020, targeting the development of our high rate of return gas projects. Over the next 18 months, our goal remains to maximize our free cash flow generation and protect our balance sheet. We are on track to achieve our stated objective of $40-$50 million of free cash flow for full year 2020, inclusive of the additional gas development expenditures we have allocated to our capital budget. The planned increase in capital expenditures in the fourth quarter of 2020 bolsters our preliminary 2021 free cash flow target of $20-$40 million at current strip prices, with potential tailwinds from higher gas prices this winter and through next year. Our visibility into cash flows over the near-term is supported by our hedged position on oil, which covers a substantial portion of our forecasted oil production through year-end 2021, as well as our gas hedging strategy, which has utilized a heavier weighting of two-way collars next year and intentionally preserves meaningful upside exposure to any improvement in 2021 gas strip from current levels. Additionally, at the midpoint of our production guidance, we would reach quarterly highs on our oil production combined with rising gas production rates as we exit the year. Moving into 2021, we have the flexibility to allocate capital across a well-balanced portfolio of gas and liquids development locations."

Mr. Woolverton commented further, "I want to thank our employees, contractors and vendors who continue to find innovative solutions to drive value amidst ongoing disruptions to our daily lives. As I have stated before, our employees are our greatest asset. We have an established track record of executing on our goals, and continue to deploy a winning strategy that is returns-focused and risk-mitigated. As the economy starts to find equal footing, we expect natural gas prices to increase. Our business strategy remains the same. Specifically, we focus on owning high-quality assets with proximity to premium markets, maintaining a balanced commodity mix, and driving shareholder returns through our strong margins and low-cost structure. Proactive balance sheet management and operational agility will remain critical in managing the near term. We believe that our success in identifying attractive acquisition and divestiture opportunities and locking in returns through our active hedging program will continue to differentiate SilverBow from its peers. We are well positioned to capitalize on an expanding merger and acquisition landscape over the next several years, creating a favorable risk-reward for stakeholders with the ultimate goal of sustainable growth in shareholder returns.”

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

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