Press Release

SilverBow Resources Announces Fourth Quarter 2017 Results Ahead of Expectations

Company Release - 2/28/2018 5:26 PM ET

4Q17 Production Increases 13.6% Compared to 3Q17

Reports 2017 Year-End Reserves growth of 38% to 1.0 Tcfe

Increasing Development Through Adding Second Drilling Rig

HOUSTON--(BUSINESS WIRE)-- SilverBow Resources, Inc. (NYSE: SBOW) (“SilverBow” or the “Company”) today announced operating and financial results for the fourth quarter 2017. Highlights include:

  • Net production averaged 177 million cubic feet of natural gas equivalent per day (“Mmcfe/d”), exceeding the high end of guidance
  • Oil and gas revenues of $58.7 million, a 20% increase from third quarter 2017
  • Lease operating expenses of $0.34/Mcfe compared to $0.41/Mcfe in the third quarter 2017
  • Net Income of $25.1 million, or $2.17 per diluted share compared to $1.12 in the third quarter 2017
  • Adjusted EBITDA (a non-GAAP measure) of $42.0 million, a 35% increase from third quarter 2017
  • Year-end 2017 reserves of 1.0 Tcfe, up 38% from prior year with PV-10 growth of 82% to $805 million with a Standardized Measure of $732 million. For a reconciliation of PV-10 (non-GAAP) to Standardized Measure (GAAP), please see table in the back.
  • Greater than 600% reserve replacement at a finding, development, and acquisition (FD&A) cost of $0.59/Mcfe
  • Acquisition of an additional ~10,000 net acres during 4Q17 and ~36,500 net acres for the full year bringing total net acreage to over 100,000 in the Eagle Ford
  • Sale of AWP Olmos non-core assets for $28.8 million in the first quarter of 2018
  • Full year 2018 capital expenditure guidance of $245 to $265 million with plan to have two drilling rigs active by end of first quarter 2018
  • Reaffirmed full year 2018 production guidance of 175 to 195 Mmcfe/d, an increase of 22% to 37% pro forma for divestitures

Management Comments

Sean Woolverton, SilverBow’s Chief Executive Officer, commented, “We finished 2017 with another strong quarter operationally, with both production and operating costs comparing favorably to our guidance. Fourth quarter production levels were driven by strong base production performance combined with bringing two additional net wells online in our southern Eagle Ford gas position as well as two net wells in Fasken. We continue to focus on driving efficiencies with a best-in-class cost structure in the basin as evidenced by lease operating expenses declining 17% on a per unit basis compared to third quarter levels. This strong operational performance generated adjusted EBITDA of $42.0 million, an increase of 35% compared to the third quarter.”

Woolverton commented further, “I’m also pleased to announce we reported reserve growth of 38% to just over 1.0 trillion cubic feet of natural gas equivalent compared to year-end 2016 levels. We believe we have significant potential to grow proved reserves within our existing asset base as we strategically develop our Eagle Ford acreage. Additionally, after adding over approximately 36,000 acres to our Eagle Ford position in 2017, our focus now shifts to execution and demonstrating the consistency of our results and our full resource potential. We have taken steps to strengthen our operating team and now have a position of scale that provides us with substantial drilling inventory. We enter 2018 in a strong position to continue generating production and EBITDA growth.”

OPERATIONS HIGHLIGHTS

During the fourth quarter 2017, the Company drilled five net wells while completing four net wells. For the full year, the Company drilled 18 net wells and completed 22 net wells. The Company drilled in all areas of its portfolio in 2017 with a focus on demonstrating the commercial viability of the Company’s extensive drilling inventory. With solid results across all areas, SilverBow has successfully transferred its learnings from Fasken to other assets of the Eagle Ford, including a successful seven well program in the condensate window in Artesia as well as experiencing encouraging initial results in Oro Grande and Uno Mas.

SilverBow completed its first well in Uno Mas in the fourth quarter. The well was drilled with a 7,500-foot lateral and completed with approximately 2,500 pounds of proppant per foot of lateral. Results to date are encouraging and the Company will have more to report on this well on their first quarter 2018 earnings conference call. The Company plans on drilling three net wells in Uno Mas in 2018. Also during the quarter, SilverBow completed its second well in Oro Grande, the NMC 2H. The Company drilled the NMC 2H with a 7,500-foot lateral and completed with 2,500 pounds of proppant per foot of lateral, compared to 3,500 pounds of proppant per foot of lateral for the NMC 1H. The Company moved a drilling rig back to Oro Grande in the first quarter of 2018 to drill a two well pad. The Company plans on drilling five net wells in Oro Grande during 2018.

SilverBow’s most recent six well pad drilled in Fasken during the fourth quarter included three wells targeting the Lower Eagle Ford and three wells targeting the Upper Eagle Ford. This pad was recently completed and utilized 300 foot frac stage spacing and 1,500 pounds of proppant per foot of lateral. The average lateral length for this six well pad was 7,500 feet. Early results from this six well pad are encouraging and further support multi-zone development and added efficiencies for our Fasken acreage and other assets. The Company plans to drill approximately 13 net wells in Fasken in 2018.

PRODUCTION VOLUMES, OPERATING COSTS, AND REALIZED PRICES

SilverBow’s total net production for the fourth quarter averaged approximately 177 Mmcfe/d, which was above the high end of guidance. Production mix during the fourth quarter consisted of approximately 79% natural gas, 13% NGLs, and 8% oil.

Lease operating expenses during the fourth quarter of $0.34/Mcfe came in better than the Company’s guidance range of $0.38/Mcfe to $0.42/Mcfe primarily driven by continued cost initiatives enacted throughout the year.

Transportation and processing expenses came in at $0.32/Mcfe while production and ad valorem taxes were 3.1% of oil and gas revenues for the quarter. Production and ad valorem taxes were positively impacted by certain, non-reoccurring tax refunds in the quarter.

General and administrative costs of $0.45/Mcfe were higher than the $0.42/Mcfe reported in the third quarter primarily due to one-time severance costs related to several officer departures.

The Company’s average realized natural gas price, excluding the effect of hedging, was $2.88/Mcf compared to $3.01/Mcf in the third quarter of 2017. The average realized crude oil selling price, excluding the effect of hedging, was $57.64/Bbl in the fourth quarter of 2017, up from $46.93/Bbl in the third quarter of 2017. The average realized NGL selling price in the fourth quarter of 2017 was $24.37/Bbl versus $21.67/Bbl in the third quarter of 2017.

YEAR-END 2017 RESERVES

SilverBow reported year-end proved reserves of 1.0 trillion cubic feet equivalent (Tcfe), an increase of 38% over year-end 2016. Specific highlights from the Company’s year-end reserve report include:

  • Finding and development costs of $0.59/Mcfe
  • All-sources reserve replacement of 609%
  • Standardized Measure of $732 million
  • PV-10 value (non-GAAP measure) of $805 million, an increase of 82% over prior year

The table below reconciles 2016 reserves to 2017 reserves.

 
Total
(Mmcfe)
Proved reserves as of December 31, 2016 743,741
Extensions, discoveries, and other additions 317,024
Revisions of previous estimates (8,748 )
Purchases of minerals in place 33,405
Sales of minerals in place (4,866 )
Production (56,135 )
 
Proved reserves as of December 31, 2017 1,024,421  
 

As of December 31, 2017, 82% of SilverBow’s year-end proved reserves were natural gas and 97% were located in the Eagle Ford Shale. Approximately 45% of the year-end proved reserves were classified as proved developed and 55% were classified as proved undeveloped.

Total costs incurred during 2017 were $203 million, which included approximately $149 million for development costs, $45 million for leasehold acquisition and prospect costs, and $9 million for property acquisitions.

The SEC prices used for reporting SilverBow’s year-end 2017 proved reserves, which have been adjusted for basis and quality differentials, were $2.95/Mcf for natural gas, $20.32/Bbl for natural gas liquids and $50.38/Bbl for crude oil compared to $2.43/Mcf, $16.13/Bbl, and $41.07/Bbl in 2016. Assuming SEC prices, the pre-tax present value of future net cash flows discounted at 10% (“PV-10”) of the year-end 2017 proved reserves were $805 million with a Standardized Measure of $732 million.

FINANCIAL RESULTS

The Company reported total oil and gas revenues of $58.7 million for the fourth quarter 2017 which increased 20% compared to third quarter 2017 levels. On a GAAP basis, the Company reported net income of $25.1 million for the fourth quarter, which includes a gain on the value of the Company's hedge portfolio of $3.4 million.

The Company reported Adjusted EBITDA of $42.0 million. 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 fourth quarter totaled approximately $50 million inclusive of $22 million spent on acquisitions, leasing, and prospect development. In addition, the Company spent $16.3 million associated with the divestiture of the Bay De Chene field located in South Louisiana.

Effective December 22, 2017, the Company closed a Purchase and Sale contract for the Company's wellbores and facilities in Bay De Chene for $16.3 million, which will be paid by the Company, as seller. The buyer assumed approximately $20.9 million of plugging and abandonment liability. Please see the Company’s Form 10-K filing, which the Company expects to be filed on Thursday, March 1, 2018, for more information regarding this transaction.

AWP OLMOS SALE UPDATE

On January 24th, 2018, SilverBow Resources executed a definitive purchase and sale agreement to divest certain wells in its AWP Olmos area for approximately $28.8 million plus the assumption of $6.2 million of asset retirement obligations, subject to customary purchase price adjustments. This transaction is expected to close on or about March 1, 2018 and has an effective date of January 1, 2018. These assets are located in McMullen County, Texas and include 491 wells with total proved reserves of 28 Bcfe at 12/31/17 (100% proved developed). Full year 2017 production from these properties was approximately 9.5 Mmcfe/d (57% natural gas). Cash proceeds from the sale will be used to repay outstanding borrowings under the Company’s revolving credit facility. SilverBow anticipates that its borrowing base will remain unchanged at $330 million after closing this transaction and will be reviewed as normal during its regularly scheduled Spring redetermination.

2018 GUIDANCE

The Company recently announced a 2018 capital expenditure budget of $245 to $265 million, which provides for average full year production of 175 to 195 Mmcfe/d. For the first quarter 2018, the Company is guiding for 156 to 162 Mmcfe/d. Additional detail concerning the Company's first 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.

The Company recently contracted a second high-spec drilling rig. SilverBow is currently mobilizing this rig with plans to commence drilling later in the first quarter with completions from this rig turning to production early in the third quarter. The Company plans on testing multiple initiatives in 2018 aimed at further delineating its acreage position as well as testing stimulation designs and choke management protocols. The Company is also assessing the viability of stacked development in certain areas of its portfolio. These multi-zone development initiatives have the potential to significantly increase the Company’s drilling inventory and allow for a more robust co-development pattern across our portfolio.

HEDGING UPDATE

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 55% of total production volumes hedged for full year 2018 using the mid-point of production guidance. The Company continues to layer on additional hedges. Please see the Company’s Form 10-K filing, which the Company expects to be filed on Thursday, March 1, 2018, for a detailed summary of derivative contracts.

CAPITAL STRUCTURE AND LIQUIDITY

The Company had liquidity of approximately $260 million as of December 31, 2017, primarily consisting of availability on the Company’s $330 million bank credit facility. The Company closed on $200 million of Senior Secured Second Lien Notes on December 15, 2017. For more information regarding the Second Lien Notes, please see the Company’s Corporate Presentation posted on www.sbow.com.

As of February 28, 2018, the Company had 11.6 million total common shares outstanding.

CONFERENCE CALL & UPDATED INVESTOR PRESENTATION

SilverBow will host a conference call for investors on Thursday, March 1, 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 Fourth Quarter 2017 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 “Fourth Quarter 2017 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 (NYSE: SBOW) is a Houston-based energy company actively engaged in the exploration, development, and production of oil and gas from 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.

Forward-Looking Statements

This release includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The opinions, forecasts, projections, or other statements other than statements of historical fact, are forward-looking statements. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, no assurances can be given that such expectations will prove to have been correct. Certain risks and uncertainties inherent in the Company’s business are set forth in the filings of SilverBow Resources, Inc. with the Securities and Exchange Commission.

(Financial Highlights to Follow)

 

Consolidated Balance Sheets

SilverBow Resources, Inc. and Subsidiaries (in thousands, except share amounts)

 
        Successor
December 31, 2017       December 31, 2016
ASSETS
Current Assets:
Cash and cash equivalents $ 7,806 $ 303
Accounts receivable, net 27,263 17,490
Fair value of commodity derivatives 5,148 458
Other current assets 2,352   3,228  
Total Current Assets 42,569   21,479  
 
Property and Equipment:

Property and Equipment, Full Cost Method, including $50,377 and $33,354

of unproved property costs not being amortized

712,166 517,074
Less – Accumulated depreciation, depletion, amortization and impairment (216,769 ) (169,879 )
Property and Equipment, Net 495,397   347,195  
Other Long-Term Assets 13,304   8,625  
Total Assets $ 551,270   $ 377,299  

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities:
Accounts payable and accrued liabilities $ 44,437 $ 40,434
Fair value of commodity derivatives 5,075 15,823
Accrued capital costs 10,883 11,954
Accrued interest 2,106 1,721
Undistributed oil and gas revenues 12,996   9,192  
Total Current Liabilities 75,497   79,124  
 
Long-term debt 265,325 198,000
Asset retirement obligations 8,678 22,291
Other long-term liabilities 8,312 1,829
 
Commitments and Contingencies
 
Stockholders' Equity:
Preferred stock, $.01 par value, 10,000,000 shares authorized, none issued

Common stock, $.01 par value, 40,000,000 shares authorized, 11,621,385

and 10,076,059 shares issued and 11,570,621 and 10,053,574 shares

outstanding

116 101
Additional paid-in capital 279,111 232,917
Treasury stock held, at cost, 50,764 and 22,485 shares (1,452 ) (675 )
Retained earnings (Accumulated deficit) (84,317 ) (156,288 )
Total Stockholders’ Equity 193,458   76,055  
Total Liabilities and Stockholders’ Equity $ 551,270   $ 377,299  
 
 

Consolidated Statements of Operations

SilverBow Resources, Inc. and Subsidiaries (in thousands, except per-share amounts)

 
        Successor       Predecessor

Year Ended

December 31,

2017

   

Period from

April 23, 2016

through

December 31,

2016

Period from

January 1,

2016 through

April 22, 2016

   

Year Ended

December 31,

2015

Revenues:        
Oil and gas sales $ 195,910 $ 121,386 $ 43,027 $ 246,270
 
Operating Expenses:
General and administrative, net 30,000 22,538 9,245 42,611
Depreciation, depletion, and amortization 46,933 36,436 20,439 177,512
Accretion of asset retirement obligation 2,322 2,878 1,610 5,572
Lease operating expense 21,908 25,777 14,933 70,188
Transportation and gas processing 19,360 13,038 6,090 21,741
Severance and other taxes 8,205 6,713 3,917 17,090
Write-down of oil and gas properties       133,496   77,732       1,562,086  
Total Operating Expenses 128,728       240,876   133,966       1,896,800  
 
Operating Income (Loss) 67,182 (119,490 ) (90,939 ) (1,650,530 )
 
Non-Operating Income (Expense)
Net gain (loss) on commodity derivatives 17,913 (19,677 ) 186
Interest expense, net (15,070 ) (15,310 ) (13,347 ) (75,870 )
Reorganization items (1,639 ) 956,142 (6,565 )
Other income (expense), net (8 )     (172 ) (245 )     (1,735 )
 
Income (Loss) Before Income Taxes 70,017 (156,288 ) 851,611 (1,734,514 )
 
Income Taxes (1,954 )             (80,543 )
 
Net Income (Loss) $ 71,971       $ (156,288 ) $ 851,611       $ (1,653,971 )
 
Per Share Amounts-
 
Basic: Net Income (Loss) $ 6.28 $ (15.61 ) $ 19.06 $ (37.20 )
 
Diluted: Net Income (Loss) $ 6.25 $ (15.61 ) $ 18.64 $ (37.20 )
 
Weighted Average Shares Outstanding - Basic 11,453 10,013 44,692 44,463
 
Weighted Average Shares Outstanding - Diluted 11,514 10,013 45,697 44,463
 
 

Consolidated Statements of Operations

SilverBow Resources, Inc. and Subsidiaries (in thousands, except per-share amounts)

 
        Successor

Three Months

Ended

December 31,

2017

     

Three Months

Ended

December 31,

2016

Revenues:      
Oil and gas sales $ 58,694 $ 42,846
 
Operating Expenses:
General and administrative, net 7,324 6,619
Depreciation, depletion, and amortization 14,558 9,815
Accretion of asset retirement obligation 600 947
Lease operating expense 5,528 8,515
Transportation and gas processing 5,293 3,969
Severance and other taxes 1,828 2,166
Write-down of oil and gas properties          
Total Operating Expenses 35,131         32,031  
 
Operating Income (Loss) 23,563 10,815
 
Non-Operating Income (Expense)
Net gain (loss) on commodity derivatives 3,448 (12,553 )
Interest expense, net (3,953 ) (5,173 )
Reorganization items (170 )
Other income (expense), net 125          
 
Income (Loss) Before Income Taxes 23,183 (7,081 )
 
Income Taxes (1,954 )        
 
Net Income (Loss) $ 25,137         $ (7,081 )
 
Per Share Amounts-
 
Basic: Net Income (Loss) $ 2.17 $ (0.71 )
 
Diluted: Net Income (Loss) $ 2.17 $ (0.71 )
 
Weighted Average Shares Outstanding - Basic 11,561 10,013
 
Weighted Average Shares Outstanding - Diluted 11,602 10,013
 
 

Consolidated Statements of Cash Flows

 
        Successor       Predecessor

Year Ended

December 31,

2017

   

Period from April

23, 2016 through

December 31,

2016

     

Period from

January 1,

2016 through

April 22, 2016

   

Year Ended

December 31,

2015

Cash Flows from Operating Activities:          
Net income (loss) $ 71,971 $ (156,288 ) $ 851,611 $ (1,653,971 )

Adjustments to reconcile net income (loss) to net cash

provided by (used in) operating activities-

Write-down of oil and gas properties 133,496 77,732 1,562,086
Depreciation, depletion, and amortization 46,933 36,436 20,439 177,512
Accretion of asset retirement obligation 2,322 2,878 1,610 5,572
Deferred income tax benefit (80,133 )
Share-based compensation expense 6,849 3,618 886 4,435
Loss (gain) on derivatives (17,913 ) 19,676 (186 )
Cash settlements (paid) received on derivatives (1,411 ) (1,928 ) 2,544
Settlements of asset retirement obligations (2,335 ) (2,993 ) (848 )
Write-down of debt issuance cost 2,676
Reorganization items (non-cash) (977,696 ) 6,565
Other (559 ) 1,351 229 (3,189 )
Change in operating assets and liabilities-
(Increase) decrease in accounts receivable and other assets (7,169 ) 16,812 (5,474 ) 26,747
Increase (decrease) in accounts payable and accrued liabilities 6,089 (6,689 ) (9,647 ) (15,003 )
Increase (decrease) in income taxes payable (435 )
Increase (decrease) in accrued interest 385       1,058         (308 ) 9,730  
Net Cash Provided by (Used in) Operating Activities 107,838 47,427 (41,466 ) 42,274
Cash Flows from Investing Activities:
Additions to property and equipment (192,982 ) (45,671 ) (24,530 ) (139,688 )
Acquisition of producing properties (9,426 )
Proceeds from the sale of property and equipment 702       45,985         48,661     1,164  
Net Cash Provided by (Used in) Investing Activities (201,706 ) 314 24,131 (138,524 )
Cash Flows from Financing Activities:
Proceeds from long-term debt issuances 198,000
Proceeds from bank borrowings 404,700 84,000 328,000 281,100
Payments of bank borrowings (529,700 ) (139,000 ) (324,900 ) (153,500 )
Net proceeds from issuances of common stock 39,179 302
Purchase of treasury shares (777 ) (675 ) (4 ) (154 )
Payments of debt issuance costs (10,031 )     (502 )       (6,482 ) (2,444 )
Net Cash Provided by (Used in) Financing Activities 101,371 (56,177 ) (3,386 ) 125,304
 
Net Increase (Decrease) in Cash and Cash Equivalents 7,503 (8,436 ) (20,721 ) 29,054
Cash and Cash Equivalents at Beginning of Period 303       8,739         29,460   406  
Cash and Cash Equivalents at End of Period $ 7,806       $ 303         $ 8,739   $ 29,460  
 
Supplemental Disclosures of Cash Flows Information:
Cash paid during period for interest, net of amounts capitalized $ 10,428 $ 12,517 $ 10,367 $ 63,132
Cash paid during period for income taxes $ $ $ $ 450
Cash paid for reorganization items $ $ 12,929 $ 15,643 $
Changes in capital accounts payable and capital accruals $ 9,894 $ (6,265 ) $ 1,843 $ (27,611 )
Changes in other long-term liabilities for capital expenditures $ 5,000 $ $ $
 

SilverBow Resources, Inc.

Non-GAAP Financial Measures

Reconciliation of Net Income (GAAP) to Adjusted EBITDA (Non-GAAP)

and Standardized Measure (GAAP) to PV-10 (Non-GAAP)

(In thousands)

(Unaudited)

 

We present adjusted EBITDA attributable to common stockholders (“Adjusted EBITDA”) in addition to our reported net income (loss) in accordance with U.S. GAAP. Adjusted EBITDA is a non-GAAP financial measure that is used as a supplemental financial measure by our management and by external users of our financial statements, such as investors, commercial banks and others, to assess our operating performance as compared to that of other companies in our industry, without regard to financing methods, capital structure or historical costs basis. It is also used to assess our ability to incur and service debt and fund capital expenditures.

Our Adjusted EBITDA should not be considered an alternative to net income (loss), operating income (loss), cash flows provided by (used in) operating activities or any other measure of financial performance or liquidity presented in accordance with U.S. GAAP. Our Adjusted EBITDA may not be comparable to similarly titled measures of another company because all companies may not calculate Adjusted EBITDA in the same manner.

 
    Successor   Predecessor

Year Ended

December 31, 2017

 

Period from April 23,

2016 through

December 31, 2016

Period from January

1, 2016 through April

22, 2016

Net Income (Loss) $ 71,971   $ (156,288 ) $ 851,611
Plus:
Depreciation, depletion and amortization 46,933 36,436 20,439
Accretion of asset retirement obligations 2,322 2,878 1,610
Interest expense 15,070 15,310 13,347
Impairment of oil and gas properties 133,496 77,732
Reorganization items 1,639 (956,142 )
Derivative (gain)/loss (17,913 ) 19,677
Derivative cash settlements collected/(paid) (1) (1,545 ) (2,130 )
Income tax expense/(benefit) (1,954 )
Share-based compensation expense 6,849     3,618   886  
Adjusted EBITDA $ 121,733     $ 54,636   $ 9,483  

(1) This includes accruals for settled contracts covering commodity deliveries during the period where the actual cash settlements occur outside of the period.

 
    Successor

Three Months Ended
December 31, 2017

   

Three Months Ended
December 31, 2016

Net Income (Loss) $ 25,137     $ (7,081 )
Plus:
Depreciation, depletion and amortization 14,558 9,815
Accretion of asset retirement obligations 600 947
Interest expense 3,953 5,173
Impairment of oil and gas properties
Reorganization items (170 )
Derivative (gain)/loss (3,448 ) 12,553
Derivative cash settlements collected/(paid) (1) 807 (1,173 )
Income tax expense/(benefit) (1,954 )
Share-based compensation expense 2,311       486  
Adjusted EBITDA $ 41,964       $ 20,550  
(1) This includes accruals for settled contracts covering commodity deliveries during the period where the actual cash settlements occur outside of the period.
 

Standardized Measure of Discounted Future Net Cash Flows. The following table provides a reconciliation between the Standardized Measure (the most directly comparable financial measure calculated in accordance with U.S. GAAP) and PV-10 Value of the Company's proved reserves.

     
As of December 31,
(in millions) 2017       2016       2015
PV-10 Value $ 805 $ 442 $ 374
Less: Future income taxes (discounted at 10%) 73   35  
Standardized Measure of Discounted Future Net Cash Flows $ 732   $ 407   $ 374
         

Production Volumes & Pricing (Unaudited)

SilverBow Resources and Subsidiaries

 
Successor Predecessor

Year Ended
December 31,
2017

   

Period from April
23, 2016 through
December 31,
2016

Period from
January 1, 2016
through April 22,
2016

   

Year Ended
December 31,
2015

All Fields        
 
Net Sales Volume:
Oil (MBbls) 685 786 522 2,406
Natural Gas Liquids (MBbls) 1,046 727 380 1,433
Natural gas (MMcf) 45,751   29,109   11,431   43,839
Total (MMcfe) 56,135 38,190 16,842 66,877
 
Average Sales Price:
Oil (Per Bbl) $ 50.98 $ 44.79 $ 31.43 $ 47.11
Natural Gas Liquids (Per Bbl) $ 21.61 $ 16.39 $ 11.04 $ 14.54
Natural gas (Per Mcf) $ 3.03 $ 2.55 $ 1.96 $ 2.56
Total (Per Mcfe) $ 3.49 $ 3.18 $ 2.55 $ 3.68
 
Average Production Cost (Per Mcfe sold) (1) $ 0.74 $ 1.00 $ 1.26 $ 1.38
 

(1) Average production cost includes transportation and gas processing costs but excludes severance and ad valorem taxes.

   

Successor

Three Months
Ended
December 31, 2017

   

Three Months
Ended
December 31, 2016

All Fields    
 
Net Sales Volume:
Oil (MBbls) 229 240
Natural Gas Liquids (MBbls) 347 226
Natural gas (MMcf) 12,847   9,551
Total (MMcfe) 16,303 12,347
 
Average Sales Price:
Oil (Per Bbl) $ 57.64 $ 47.10
Natural Gas Liquids (Per Bbl) $ 24.37 $ 18.84
Natural gas (Per Mcf) $ 2.88 $ 2.86
Total (Per Mcfe) $ 3.60 $ 3.47
 
Average Production Cost (Per Mcfe sold) (1) $ 0.66 $ 1.11
 
(1) Average production cost includes transportation and gas processing costs but excludes severance and ad valorem taxes.
   

First Quarter 2018 & Full Year 2018 Guidance

 
      Guidance
1Q 2018     FY 2018
Production Volumes:
Oil (Bbls/d) 1,900 - 2,000 1,600 - 1,800
NGLs (Bbls/d) 3,000 - 3,100 2,575 - 2,900
Natural Gas (Mmcf/d)     127 - 131     150 - 167
Million Cubic Feet of Gas Equivalent (Mmcfe/d)     156 - 162     175 - 195
Pro Forma Production (MMcfe/d)(1) 150 - 156 175 - 195
 
Operating Costs & Expenses :
Lease Operating Expense ($/Mcfe) $0.35 - $0.36 $0.25 - $0.28
Transportation & Processing Expense ($/Mcfe) $0.34 - $0.35 $0.34 - $0.38
Production & Ad Val Taxes (% of O&G Revenue) 4.5% - 5.0% 4.5% - 5.0%
Cash G&A, net (in millions) $4.7 - $5.1 $18.1 - $19.1
DD&A Expense ($/Mcfe) $0.89 - $0.95 $0.89 - $1.00
Cash Interest Expense ($MM) $5.3 - $6.3 N/A
Product Pricing :
Natural Gas NYMEX Differential (per Mcf) ($0.06) – ($0.01) N/A
Crude Oil NYMEX Differential (per Bbl) $0.75 - $1.75 N/A
Natural Gas Liquids (% of WTI) 36% - 38% N/A
 

(1) Pro Forma for divested properties in 2017 and for AWP Olmos divestiture  in 1Q18

Finding and Development (“F&D”) Cost Calculation:

(Unaudited)

F&D costs are commonly used to assist in the evaluation of how much it costs the Company, on a per Mcfe basis, to add proved reserves. We present F&D costs in addition to and used in conjunction with our financial statements prepared in accordance with U.S. GAAP. Due to various factors, including but not limited to timing differences, F&D costs do not necessarily reflect precisely the costs associated with particular reserves. Further, our F&D costs may not be comparable to similarly titled measures of another company because all companies may not calculate F&D costs in the same manner.

F&D All-In costs are calculated by dividing the total acquisition, exploration, and development costs for the year by extensions, discoveries, and other additions, purchases of minerals in place, and total revisions for the year.

Reserve replacement ratio is calculated by dividing the sum of extensions, discoveries, and other additions, purchases of minerals in place, and total revisions for the year by production.

 
F&D Cost reconciliation
     

Year Ended
December 31, 2017

in $000's
Lease acquisitions and prospect costs $ 44,569
Exploration
Development 149,293
Acquisition of property $ 9,426  
Total acquisition, exploration, and development $ 203,288  
 
in Mmcfe
Proved reserves as of December 31, 2016 743,741
Extensions, discoveries, and other additions(1) 317,024
Revisions of previous estimates (8,748 )
Purchases of minerals in place 33,405
Sales of minerals in place (4,866 )
Production (56,135 )
 
Proved reserves as of December 31, 2017 1,024,421  
 
F&D Costs ($/Mcfe) 0.59
 
Reserve replacement ratio 609 %
 
(1)   The increase in 2017 was primarily attributable to extensions added based on drilling results and leasing of adjacent acreage.

SilverBow Resources, Inc.
Doug Atkinson, CFA, (281) 874-2700, (800) 777-2412
Senior Manager - Finance & Investor Relations

Source: SilverBow Resources, Inc.