Sign in

You're signed outSign in or to get full access.

SR

SILVERBOW RESOURCES, INC. (SBOW)·Q4 2023 Earnings Summary

Executive Summary

  • Q4 2023 delivered record free cash flow of $74.4M and Adjusted EBITDA of $172.0M on oil and gas sales of $212.0M; diluted EPS was $7.12, boosted by a $161M unrealized derivatives gain, while production rose to 72.1 MBoe/d with oil up ~75% YoY to 19.3 MBbls/d .
  • Management cut 2024 dry-gas capital by ~$75M (to $470–$510M), maintained oil/liquids investment, and guided to FY24 production of 85.2–93.5 MBoe/d with oil at 23.5–26.5 MBbls/d, targeting $125–$150M FCF for debt reduction .
  • Operational execution was strong: Q4 prices realized at 97% of WTI and 83% of Henry Hub, total production expenses at $8.67/Boe, and high-efficiency pad performance across Central Oil and Eastern Extension .
  • S&P Global consensus estimates for Q4 2023 were unavailable due to mapping constraints; estimate beat/miss comparisons cannot be assessed (attempted via SPGI tool; unavailable).

What Went Well and What Went Wrong

What Went Well

  • Record quarterly FCF and strong Adjusted EBITDA driven by upper-half production and liquids mix; “the recent South Texas acquisition was a game changer and significantly improves the trajectory of our business” (CEO) .
  • Oil growth and pad performance: Central Oil 4-well pad averaged 4,605 Boe/d (83% oil), Eastern Extension 3-well pad averaged 4,279 Boe/d (71% oil), supporting higher-margin mix .
  • Cost and pricing discipline: realized prices at 97% of WTI and 83% of Henry Hub, total production expenses of $8.67/Boe, capex $79M below guidance midpoint with 12 net wells online .

What Went Wrong

  • Reported EPS/net income inflated by unrealized derivative gains ($161M), obscuring underlying profitability quality; net income margin appears elevated due to mark-to-market impacts .
  • Natural gas price weakness persisted (Q4 gas realized $2.39/Mcf), prompting 2024 gas-directed capital cuts and lower gas volume guidance (–13% vs prior guidance) .
  • DD&A ($72.1M) and interest expense ($25.4M) remain notable headwinds; leverage ratio at 1.56x (pro forma) with $1.22B total debt at YE, though liquidity improved .

Financial Results

MetricQ2 2023Q3 2023Q4 2023
Revenue (Oil & Gas Sales, $USD Millions)$126.4 $174.0 $212.0
Diluted EPS ($)$1.10 $(0.21) $7.12
Net Income ($USD Millions)$24.9 $(4.8) $183.1
Adjusted EBITDA ($USD Millions)$111.7 $141.4 $172.0
Free Cash Flow ($USD Millions)$(22.7) $18.1 $74.4
Avg Net Production (MBoe/d)~55.0 (330 MMcfe/d ÷ 6) ~59.5 (357 MMcfe/d ÷ 6) 72.1
Oil Production (MBbls/d)12.5 15.3 19.3
Adjusted EBITDA Margin (%)~88.3% (111.7/126.4) ~81.3% (141.4/174.0) ~81.1% (172.0/212.0)
Net Income Margin (%)~19.7% (24.9/126.4) n/a (loss) ~86.3% (183.1/212.0)

Segment/product detail

MetricQ2 2023Q3 2023Q4 2023
Oil Sales ($USD Millions)$80.2 $112.5 $135.5
Gas Sales ($USD Millions)$33.8 $46.1 $54.5
NGL Sales ($USD Millions)$12.4 $15.4 $22.0
Oil Volume (MBbl)1,137 1,410 1,778
Gas Volume (MMcf)19,124 20,010 22,791
NGL Volume (MBbl)677 729 1,058
Avg Realized Price Oil ($/Bbl)$70.51 $79.76 $76.21
Avg Realized Price Gas ($/Mcf)$1.77 $2.30 $2.39
Avg Realized Price NGL ($/Bbl)$18.39 $21.16 $20.83

KPIs

KPIQ2 2023Q3 2023Q4 2023
Capex ($USD Millions, accrual)$117.4 $104.4 $78.7
Total Production Expenses ($/Boe or $/Mcfe)$1.35/Mcfe $1.45/Mcfe $8.67/Boe
Derivative Cash Settlements ($USD Millions)$29.7 $17.8 $23.1

Note: Q4 reported net income includes $161M unrealized derivatives gain; Adjusted EBITDA and FCF are non-GAAP metrics per company definitions .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Capital Investments ($USD Millions)FY 2024Not disclosed (preliminary plan)$470–$510Lowered by ~$75M vs preliminary midpoint
Total Production (MBoe/d)FY 2024N/A85.2–93.5New disclosure; ~+50% YoY
Oil Volumes (MBbls/d)FY 2024Maintained (level not disclosed)23.5–26.5Maintained vs previously announced levels
Gas VolumesFY 2024Higher prior gas guidance280–300 MMcf/dLowered by ~13% vs prior guidance
FCF ($USD Millions)FY 2024N/A$125–$150New disclosure; earmarked for debt reduction
Total Production (MBoe/d)Q1 2024N/A86.5–93.3New quarterly guidance
Oil Volumes (MBbls/d)Q1 2024N/A22.5–25.0New quarterly guidance
LOE ($/Boe)Q1 2024N/A$3.80–$4.20New quarterly guidance
T&P ($/Boe)Q1 2024N/A$4.40–$4.80New quarterly guidance
Cash G&A ($MM)FY 2024N/A$21.0–$22.0New annual guidance

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2023)Previous Mentions (Q3 2023)Current Period (Q4 2023)Trend
Acquisition/ScaleStrategy to pivot between oil/gas; operational efficiencies; hedging Announced $700M Chesapeake South Texas asset acquisition; leverage path to 1.0x; debt reduction CEO: South Texas acquisition “game changer”; improves trajectory; plan to unlock efficiencies and value Strengthening integration, scale benefits
Capital Allocation FlexibilityOil-focused program; optionality to complete gas wells contingent on prices Accelerated completions; 2023 capex unchanged; oil growth 2024 gas capex cut by ~$75M, maintain oil/liquids levels; maximize FCF Shift to liquids, cash flow focus
Operational EfficiencyD&C costs –11% YoY; +17% stages/day; higher pumping efficiency Highest pumping efficiency in Q3; drilling cost per foot –13% YoY Q4 pumping efficiency 84%; well costs per foot –20% YoY in Q4; D&C costs 10% below plan Continued efficiency gains
Hedging/Risk Mgmt73% total production hedged rest of 2023 79% total production hedged rest of 2023 ~60% 2024 total production hedged; ~75% gas at $3.83 floor Robust hedge coverage sustained
Balance Sheet/LiquidityLiquidity $200M; net debt $725M Debt reduced $78M QoQ; leverage 1.34x Liquidity $479M YE; $510M as of Jan 31; leverage 1.56x pro forma Liquidity improving; leverage elevated but targeted down

Management Commentary

  • “Our recent South Texas acquisition was a game changer and significantly improves the trajectory of our business. We are confident in our ability to unlock capital efficiencies, improve well productivity and returns, and continue to create value for our shareholders.” — CEO Sean Woolverton .
  • “Our current 2024 plan high-grades our large, high-return portfolio of opportunities to create a plan that maximizes free cash flow and allows for debt reduction… expect to continue optimizing our development program in real-time.” — CEO .
  • Q4 operations: realized prices at 97% of WTI and 83% of Henry Hub; production expenses $8.67/Boe; capex $79M; 12 net wells online .

Q&A Highlights

  • Capital allocation: management emphasized cutting gas-directed capital by $75M while maintaining oil/liquids to maximize FCF and preserve gas inventory for better price environments .
  • Shareholder/value focus: “SilverBow’s management team and our Board are committed to working for all of our shareholders to deliver shareholder value,” signaling focus amid activist context .
  • Integration/execution: call reiterated operational efficiencies and high-return pads underpinning revised 2024 plan .
  • Guidance clarifications: FY24 production and FCF targets linked to liquids weighting and hedges; quarterly guidance detailed for Q1 2024 .

Estimates Context

  • S&P Global consensus for Q4 2023 EPS, revenue, and EBITDA was unavailable due to CIQ mapping constraints; beat/miss analysis versus Wall Street estimates cannot be provided at this time (tool error on SPGI data retrieval).
  • Given management’s 2024 capex reduction in gas and lower gas volume guidance, Street estimates likely need to reflect lower dry-gas volumes, higher liquids mix, and FCF prioritization for deleveraging .

Key Takeaways for Investors

  • Record quarterly FCF ($74.4M) and strong Adjusted EBITDA ($172.0M) on liquids-led growth; underlying quality of EPS impacted by non-cash derivative gains — focus on cash metrics for valuation .
  • 2024 pivot: ~$75M cut to gas capex, liquids maintained; FY24 FCF guided to $125–$150M with explicit near-term debt reduction priority — supportive for credit/EV trajectories .
  • Operational momentum: pad performance and efficiency gains (84% pumping efficiency; well cost per foot –20% YoY in Q4) should sustain margins despite gas weakness .
  • Hedging provides cash flow stability: ~60% of 2024 total production hedged; ~75% of gas at $3.83 floor — downside protection while retaining upside through collars .
  • Production trajectory: FY24 total 85.2–93.5 MBoe/d (+~50% YoY), oil 23.5–26.5 MBbls/d (+~71% YoY), supporting liquids-weighted mix and margin resilience .
  • Balance sheet: YE liquidity $479M (rising to $510M by Jan 31); leverage 1.56x (pro forma) — deleveraging path a near-term catalyst if FCF realized .
  • Near-term trading lens: monitor liquids pricing, hedge settlements, and integration/efficiency execution; upside catalysts include sustained liquids strength and faster debt paydown; risks include persistent gas weakness and service cost inflation .