- Total production averaged approximately 160 million cubic feet of natural gas equivalent per day (“Mmcfe/d”)
- Current production of ~200 Mmcfe/d representing ~33% growth in last 30 days
- Third Quarter production guidance of 187 – 204 Mmcfe/d
- Latest Upper Eagle Ford wells outperforming type curves
- Revenues of $51.3 million, Net Income of $2.3 million, and Adj. EBITDA (a non-GAAP measure) of $31.3 million
- Lease operating expenses of $0.26/Mcfe which represents the Company’s first full quarter of LOE without the previously divested AWP Olmos wells
- Crude oil and natural gas realizations in the second quarter were 101% and 105% of WTI and Henry Hub, respectively, excluding hedging, as a result of favorable basis pricing in the Eagle Ford
- Maintained strong balance sheet with $255 million of liquidity
Sean Woolverton, SilverBow’s Chief Executive Officer, commented, “The second quarter marked another solid performance for the Company as we continued to deliver consistent results across our asset base. While we are encouraged by results to date, the third quarter results will be a pivot point in the growth trajectory of the Company and will more fully reflect the pace and nature of our drilling program. The midpoint of our third quarter 2018 guidance reflects a significant increase in production over our second quarter 2018 results. Additionally, our two-rig program has allowed us to secure key completion services, which greatly enhance our ability to control the quality, timing and costs of our capital program.”
“While our drilling and completion activities have increased, our team continues to find efficiencies in our business to lower our cost structure. Our lease operating expenses on a per unit basis were $0.26/Mcfe in the second quarter compared to $0.36/Mcfe in the same period a year ago – a 28% decrease. Our general and administrative costs on a per unit basis declined 22% year-over-year to $0.40/Mcfe. Additionally, our results in the quarter benefited from strong crude oil and natural gas differentials resulting from advantaged pricing dynamics in the Eagle Ford. We continue to advance our Eagle Ford growth strategy and believe we are positioned for an impressive production ramp over the back half of this year. Our operations team is executing on several growth initiatives, including testing stacked pay zones on our acreage, optimizing stimulations and further delineating the Southern Eagle Ford gas fairway. The improved performance of our Upper Eagle Ford wells at Fasken reflect our completion optimization efforts. Our goal to be a leading low-cost gas company is now being realized with our intense focus on per unit costs. We are excited about where the Company is now positioned.”
The second quarter marked the first full quarter of running two drilling rigs for the Company. As such, capital activity expanded accordingly, and the growth is now being realized as wells from this activity are being completed and brought to sales. For the first half of the year, the Company brought seven net wells to sales. For the second half of the year, the Company expects to bring 18-20 net wells to sales, of which eight were brought on in the month of July.
During the second quarter 2018, the Company spud seven gross (seven net) wells while completing seven gross (six net) wells. The Company produced 137 Mmcf/d of gas in the second quarter, driven by four completions spread across its Oro Grande and AWP areas and three completions (two net) in Fasken. Oil production of 1,546 Bbls/d was driven by better than anticipated performance from operational enhancements at the Company’s Artesia and Northern AWP assets. For the full year, the Company remains on track to drill 31-33 and complete 25-27 net wells with the majority of the activity occurring in the second half of the year.
The Company continues to evaluate completion designs across its asset base, assessing stage lengths, clusters per stage, fluid volumes and proppant types and concentrations. The Company is integrating new concepts to improve asset performance, increase capital efficiency and reduce operating costs.
PRODUCTION VOLUMES, OPERATING COSTS, AND REALIZED PRICES
SilverBow’s total net production for the second quarter averaged approximately 160 Mmcfe/d. Production mix for the quarter consisted of approximately 86% natural gas, 8% NGLs, and 6% oil.
Lease operating expenses during the second quarter of $0.26/Mcfe came in better than the Company’s guidance range, primarily driven by continued cost reduction initiatives.
General and administrative costs of $0.40/Mcfe were lower than the $0.51/Mcfe reported in the second quarter of 2017. After deducting $1.3 million of non-cash compensation expense, cash general and administrative costs were $4.5 million, which compared favorably to guidance due to ongoing efforts to streamline the workforce and reduce associated administrative costs.
Transportation and processing expenses came in at $0.37/Mcfe while production and ad valorem taxes were 5.2% of oil and gas revenues for the quarter. Production and ad valorem taxes were lower compared to first quarter levels primarily due to severance tax adjustments on wells qualifying for reduced rates. The Company’s ad valorem taxes are based on the value of developed reserves, which increased significantly during 2017.
The Company’s average realized natural gas price, excluding the effect of hedging, was $2.93/Mcf compared to $3.00/Mcf in the first quarter of 2018. The average realized crude oil selling price, excluding the effect of hedging, was $68.53/Bbl in the quarter, up from $64.59/Bbl in the first quarter. The average realized NGL selling price in the quarter was $25.36/Bbl versus $22.39/Bbl in the first quarter.
The Company reported total oil and gas revenues of $51.3 million for the second quarter 2018. On a GAAP basis, the Company reported net income of $2.3 million for the quarter, which includes a loss on the value of the Company’s hedge portfolio of $10.8 million.
The Company reported Adjusted EBITDA of $31.3 million in the quarter. Adjusted EBITDA is a non-GAAP financial measure. Please see the tables included with today’s news release for a reconciliation of net income to Adjusted EBITDA.
Capital expenditures incurred during the quarter totaled approximately $72 million.
The Company reiterated its 2018 capital expenditure budget of $245 to $265 million and tightened its average full year production to 179 – 191 MMcfe/d from 175 – 195 MMcfe/d. For the third quarter 2018, the Company is guiding for 187 – 204 Mmcfe/d. Additional detail concerning the Company’s third quarter 2018 and full year financial and operational 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 before the conference call.
Hedging continues to be an important element of SilverBow’s strategy. The Company maintains an active hedging program to provide predictable cash flows while still allowing for flexibility in capturing increases in prices. SilverBow has approximately 70% of total production volumes hedged for the remainder of 2018 as of June 30, 2018, using the mid-point of production guidance. The Company continues to layer on additional hedges when prices are favorable. Please see SilverBow’s Form 10-Q filing, which the Company expects to be filed on Wednesday, August 8, 2018, for a detailed summary of derivative contracts.
CAPITAL STRUCTURE AND LIQUIDITY
The Company had liquidity of $255 million as of June 30, 2018, primarily consisting of availability on the Company’s $330 million bank credit facility. As of August 1, 2018, the Company had 11.7 million total common shares outstanding.
CONFERENCE CALL & UPDATED INVESTOR PRESENTATION
SilverBow will host a conference call for investors on Wednesday, August 8, 2018, at 10:00 a.m. Central Time (11:00 a.m. Eastern Time). Interested investors can listen to the call by dialing 1-877-420-2751 (U.S.) or 1-442-275-1680 (International) and requesting SilverBow’s Second Quarter 2018 Earnings Conference Call or by visiting our website.
A simultaneous webcast of the call may be accessed over the internet by visiting our website at www.sbow.com, clicking on “Investor Relations” and “Events and Presentations” and then clicking on the “Second Quarter 2018 Earnings Conference Call” link. The webcast will be archived for replay on the SilverBow website for 14 days. Additionally, an updated Corporate Presentation will be uploaded to the Investor Relations section of the Company’s website before the conference call.
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 in South Texas. With almost 30 years of history operating in South Texas, the Company possesses a significant understanding of regional reservoirs which we leverage to assemble high quality drilling inventory while continuously enhancing our operations to maximize returns on capital invested. For more information, please visit www.sbow.com.