SilverBow Resources Announces Fourth Quarter and Full Year 2023 Results and 2024 Outlook

2023 performance advances business strategy with strong free cash flow generation, efficient production growth and lower than expected capital investments

2024 outlook to benefit from recent transformational acquisition that brings efficient, high-margin production, product diversification, additional capital efficiencies, free cash flow generation and balance sheet flexibility

HOUSTON–(BUSINESS WIRE)–SilverBow Resources, Inc. (NYSE: SBOW) (“SilverBow” or “the Company”) today announced operating and financial results for the fourth quarter and full year 2023. Supplemental slides have been posted to SilverBow’s website and can be accessed at www.sbow.com. The Company plans to host a conference call at 9 a.m. CT (10 a.m. ET) on Thursday, February 29, 2024. Participation details can be found within this release.

Full Year 2023 Highlights:

• Generated net income of $298 million, or $12.63 per diluted share (all per share amounts stated on a diluted basis), non-GAAP Adjusted EBITDA of $536 million¹ and non-GAAP free cash flow (“FCF”) of $56 million¹
• Created additional scale and commodity optionality through transformational acquisition of South Texas assets, adding more than 300 high-return locations and 32 thousand barrels of oil equivalent per day (“MBoe/d”); SilverBow has more than 1,000 high-value locations, or more than a decade of inventory at its current development pace
• Reported average net production of 59.4 MBoe/d (39% oil/liquids), in the upper half of guidance; more than doubled year-over-year net oil production to 14.6 thousand barrels of oil per day (“MBbls/d”)
• Invested $409 million in capital (below guidance midpoint), excluding acquisitions
• Achieved full year 2023 return on capital employed (“ROCE”) of 16%; three-year average ROCE (2021-23) of 21%¹
• Advanced key elements of its corporate strategy, including expanding its portfolio of high-return opportunities, profitably growing production, creating capital efficiencies to enhance margins, delivering FCF and strengthening the balance sheet

Fourth Quarter 2023 Highlights:

• Generated net income of $183 million, or $7.12 per share, non-GAAP Adjusted EBITDA of $172 million¹ and non-GAAP FCF of $74 million¹, the highest quarterly amount in SilverBow’s history
• Reported average net production of 72.1 MBoe/d (43% oil/liquids), in the upper half of guidance; grew year-over-year net oil production to 19.3 MBbls/d, an increase of nearly 75%
• Invested $79 million in capital (below midpoint of guidance), excluding acquisitions

2024 Outlook:

• In response to commodity prices, the Company lowered its previously planned capital investments in dry gas-focused areas by approximately $75 million, resulting in a revised 2024 capital program budget of $470 – $510 million
• At current commodity prices, the Company expects to generate $125 – $150 million of estimated FCF, which is currently earmarked for significant debt reduction
• The Company is maintaining planned investment in oil and liquids projects while keeping oil and liquids production guidance at previously announced levels. Revised capital investments reduce expected natural gas volumes by 13%
• Production is expected to increase approximately 50% year-over-year to 85.2 – 93.5 MBoe/d, post-recent acquisition, oil production is expected to increase 70% year-over-year and comprise 25% – 30% of 2024 production mix

MANAGEMENT COMMENTS

Sean Woolverton, SilverBow’s Chief Executive Officer, said, “We performed exceptionally well in 2023, advancing our strategy to create value and dramatically strengthen SilverBow with the recent high-value South Texas acquisition. Our team has a track record of successfully integrating acquisitions and will apply our proven operating practices and low-cost platform to generate synergies and to extract value from this transaction. As we enter 2024, SilverBow has a more durable asset base, flexibility to shift investments between oil and gas, and a longer runway of high-quality drilling opportunities. 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.”

FOURTH QUARTER FINANCIAL AND OPERATING SUMMARY

For the fourth quarter of 2023, SilverBow reported net income of $183 million, or $7.12 per share, which included a net unrealized gain on the value of the Company’s derivative contracts of $161 million. Non-GAAP Adjusted EBITDA was $172 million and non-GAAP FCF was $74 million¹. Financial results in the period were driven by production results in the upper half of SilverBow’s guidance. Quarterly average net production increased 37% over the prior year to 72.1 MBoe/d. Oil production averaged 19.3 MBbls/d, up nearly 75% over the comparable period. Production mix for the fourth quarter consisted of 57% natural gas, 27% crude oil and 16% natural gas liquids (“NGLs”).

Strong production in the quarter was related to performance from the Central Oil area, where the Company recently brought online a four-well pad with a 30-day pad average of 4,605 Boe/d (83% oil, 8,280’ average lateral length). In its Eastern Extension area, SilverBow brought online a three-well pad with a 30-day pad average of 4,279 Boe/d (71% oil, 9,240′ average lateral length).

Stated without the impact of hedging, crude oil and natural gas realizations for the quarter were 97% and 83% of West Texas Intermediate (“WTI”) and Henry Hub, respectively. Average realized prices by product were $76.21 per barrel of oil, $2.39 per thousand cubic feet of natural gas (“Mcf”) and $20.83 per barrel of NGLs (27% of WTI benchmark). Please refer to the tables included in this release for complete production volumes and pricing information.

Total production expenses in the quarter, which include lease operating expenses, transportation and processing expenses and production taxes, were $8.67 per barrel of oil equivalent (“Boe”), in-line with expectations.

Capital investments during the quarter were in the lower half of guidance and totaled $79 million on an accrual basis. In the quarter, the Company operated two rigs and brought online 12 net wells.

FULL YEAR 2023 FINANCIAL AND OPERATING SUMMARY

For full year 2023, SilverBow reported net income of $298 million, or $12.63 per share, which includes a net unrealized gain on the value of the Company’s derivative contracts of $151 million. Non-GAAP Adjusted EBITDA was $536 million and non-GAAP FCF was $56 million¹. Financial results in the period were driven by average production results in the upper half of SilverBow’s guidance. Average net production was above the midpoint of guidance and increased 32% over the prior year to 59.4 MBoe/d. Oil production averaged 14.6 MBbls/d, up 100% over the comparable period. Production mix for the full year consisted of 61% natural gas, 25% crude oil and 14% NGLs.

Stated without the impact of hedging, crude oil and natural gas realizations in the year were 97% and 85% of WTI and Henry Hub, respectively. Average realized prices by product were $75.32 per barrel of oil, $2.34 per Mcf of natural gas and $20.74 per barrel of NGLs (27% of WTI benchmark). Please refer to the tables included in this release for complete production volumes and pricing information.

SilverBow posted significant year-over-year operational efficiency gains in 2023, completing 16% more stimulation stages per day, with average pumping efficiencies up 13%. Fourth quarter pumping efficiencies were 84%, the highest quarterly rate achieved during the year. Performance reflected less downtime with an average of 14.3 completed stages per day. Drilling costs decreased throughout 2023 due to efficiencies from high-graded rigs and ongoing cost deflation, particularly in rig rates and tubular products. As a result, 2023 total well costs per lateral foot decreased 3% year-over-year, and highlighting the magnitude of cost improvement throughout the year, fourth quarter well costs per lateral foot decreased 20% year-over-year. For the year, drilling and completion (“D&C”) costs were 10% below planned costs.

Capital investments for the year, excluding acquisitions, totaled $409 million on an accrual basis, which was below the midpoint of the Company’s $400 – $425 million guidance. Including cash acquisition cost of $605 million, SilverBow invested approximately $1.0 billion in 2023. The Company brought online 49 net wells during the year.

PROVED RESERVES

SilverBow increased its proved reserves by 20% year-over-year. SEC proved reserves at year-end 2023 were 446 million barrels of oil equivalent (“MMBoe”), of which 37% were oil/liquids and 45% were proved developed. The increase in proved reserves was primarily related to acquisitions and an increase in oil reserves through extensions due to successful drilling on existing leases, as well as new leases acquired in 2023. Excluding the impact of acquisitions and commodity prices, proved reserve replacement was more than 200% of 2023 production. The Standardized Measure was $2.3 billion and the pre-tax present value of future net cash flows discounted at 10% was $2.7 billion utilizing SEC prices (“SEC PV-10 Value,” a non-GAAP measure).

The table below reconciles 2022 proved reserves to 2023 proved reserves:

	Total (MBoe)
Proved reserves as of December 31, 2022	372,437
Extensions, discoveries, and other additions	43,687
Revisions of prior reserve estimates	(91,346	)
Purchases of minerals in place	142,738
Production	(21,667	)
Proved reserves as of December 31, 2023	445,850

SEC prices used in the 2023 calculation were $76.79 per barrel of oil, $2.30 per Mcf of natural gas and $25.43 per barrel of NGLs, as compared to $94.36 per barrel of oil, $6.14 per Mcf of natural gas and $34.76 per barrel of NGLs used in 2022.

2024 OUTLOOK

Mr. Woolverton commented, “Our outlook for 2024 reflects the positive impacts of our recent transaction and ability to exercise flexibility in our operating plan in response to commodity prices. Given low natural gas prices, we reduced our planned investments in our Webb County Gas area to preserve valuable inventory for the future, while our development activity in our expanded oil opportunities continues. This flexibility is a result of our acquisition strategy and allows us to capitalize on our competitive advantage in the Eagle Ford. 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. We are positioned to benefit from the significant and sustainable capital efficiencies we have created over the past year, and expect to continue optimizing our development program in real-time as dictated by our returns-focused mindset.”

SilverBow’s current planned capital investments are $470 – $510 million, with approximately 90% allocated to D&C activity. This represents a $75 million, or 13%, reduction when compared to the midpoint of the Company’s preliminary 2024 outlook. The plan is expected to generate $125 – $150 million of FCF at current prices. Annual production is expected to average 85.2 – 93.5 MBoe/d, a 50% increase over the prior year. Oil volumes are expected to average 23.5 – 26.5 MBbls/d, a 71% increase over the prior year. SilverBow’s full year gas volumes are expected to be 13% lower at the midpoint compared to its prior guidance range.

The Company plans to operate three drilling rigs through the first half of 2024, and operate two drilling rigs in the second half of the year. The Company is directing the majority of its investments to liquids development, including approximately 50% of its full year D&C activity directed toward its Western Condensate area and approximately 30% of its D&C activity directed toward its Central Oil and Eastern Extension areas. SilverBow expects to drill 62 gross (49 net) operated wells drilled, compared to 46 gross (45 net) operated wells drilled in 2023.

For the first quarter of 2024, the Company expects to produce 86.5 – 93.3 MBoe/d, with expected oil volumes of 22.5 – 25.0 MBbls/d. Additional detail on SilverBow’s guidance can be found in the table included in this release.

RISK MANAGEMENT

SilverBow consistently uses the derivatives market to mitigate commodity price risks and ensure cash flow to fund its annual capital program. As of February 23, 2024, SilverBow had approximately 60% of total production hedged for full year 2024, using the midpoint of guidance; approximately 75% of full year 2024 gas production is hedged at a weighted average price of $3.83 per Mcf, using the floor price of collars. For complete disclosure on the Company’s hedging program, please see the most recent presentation posted to the Investor Relations section of the Company’s website.

CAPITAL STRUCTURE

Due to the underlying strength of SilverBow’s business and increasing scale, the Company’s liquidity more than doubled year-over-year. At year-end 2023, SilverBow had approximately $479 million of liquidity, consisting of $1 million of cash and $478 million of availability under its senior secured revolving credit facility (“Credit Facility”). As of January 31, 2024, the Company had $509 million of undrawn capacity and $1 million of cash resulting in $510 million of liquidity. This represents $60 million of total debt reduction in the two months since closing the South Texas acquisition; debt reduction remains the primary use of FCF in the near-term.

For full year 2023, SilverBow reported year-end debt of $1.2 billion and non-GAAP Adjusted EBITDA for Leverage Ratio of $782 million², which, in accordance with the leverage ratio calculation in its Credit Facility, includes pro forma contributions from acquired assets prior to their closing dates totaling $245 million. At year-end 2023, the Company had a leverage ratio of 1.56x² and 25.4 million total common shares outstanding as of February 23, 2024.

CONFERENCE CALL DETAILS

SilverBow plans to host a conference call for investors at 9 a.m CT (10 a.m. ET), on Thursday, February 29, 2024. Investors and participants can listen to the call by dialing 1-888-415-4465 (U.S.) or 1-646-960-0140 (International) and requesting SilverBow Resources’ Fourth Quarter and Full Year 2023 Earnings Conference Call (Conference ID: 5410161) or by visiting the Company’s website. A simultaneous webcast of the call may be found at www.sbow.com/investor-relations/Investor-Relations-Events-Presentations/event-calendar/default.aspx. The webcast will be archived for replay on the Company’s website for 14 days.

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 and Austin Chalk in South Texas. With over 30 years of history operating in South Texas, the Company possesses a significant understanding of regional reservoirs which it leverages to assemble high quality drilling inventory while continuously enhancing its operations to maximize returns on capital invested. For more information, please visit www.sbow.com. Information on our website is not part of this release.

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. These forward-looking statements represent management’s expectations or beliefs concerning future events, and it is possible that the results described in this release will not be achieved. These forward-looking statements are based on current expectations and assumptions and are subject to a number of risks and uncertainties, many of which are beyond our control. All statements, other than statements of historical fact included in this press release, including those regarding our strategy, the benefits of the acquisitions, future operations, guidance and outlook, financial position, well expectations and drilling plans, estimated production levels, expected oil and natural gas pricing, long-term inventory estimates, estimated oil and natural gas reserves or the present value thereof, reserve increases, service costs, impact of inflation, future free cash flow and expected leverage ratio, value and development of locations, capital expenditures, budget, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this report, the words “will,” “could,” “believe,” “anticipate,” “intend,” “estimate,” “budgeted,” “guidance,” “expect,” “may,” “continue,” “potential,” “plan,” “project,” “positioned,” “should” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. Important factors that could cause actual results to differ materially from our expectations include, but are not limited to, the following risks and uncertainties: further actions by the members of the Organization of the Petroleum Exporting Countries, Russia and other allied producing countries with respect to oil production levels and announcements of potential changes in such levels; risk related to recently completed acquisitions and integrations of these acquisitions; volatility in natural gas, oil and NGL prices; ability to obtain permits and government approvals; our borrowing capacity, future covenant compliance, cash flow and liquidity, including our ability to satisfy our short- or long-term liquidity needs; asset disposition efforts or the timing or outcome thereof; ongoing and prospective joint ventures, their structures and substance, and the likelihood of their finalization or the timing thereof; the amount, nature and timing of capital expenditures, including future development costs; timing, cost and amount of future production of oil and natural gas; availability of drilling and production equipment or availability of oil field labor; availability, cost and terms of capital; timing and successful drilling and completion of wells; availability and cost for transportation and storage capacity of oil and natural gas; costs of exploiting and developing our properties and conducting other operations; competition in the oil and natural gas industry; general economic and political conditions, including inflationary pressures, further increases in interest rates, a general economic slowdown or recession, instability in financial institutions, political tensions and war (including future developments in the ongoing conflicts in Ukraine and the Gaza Strip); the severity and duration of world health events, including health crises, and related economic repercussions, including disruptions in the oil and gas industry, supply chain disruptions, and operational challenges; opportunities to monetize assets; our ability to execute on strategic initiatives, including acquisitions; effectiveness of our risk management activities, including hedging strategy; counterparty and credit market risk; pending legal and environmental matters, including potential impacts on our business related to climate change and related regulations; actions by third parties, including customers, service providers and shareholders; current and future governmental regulation and taxation of the oil and natural gas industry; developments in world oil and natural gas markets and in oil and natural gas-producing countries; uncertainty regarding our future operating results; and other risks and uncertainties discussed in the Company’s reports filed with the SEC, including its annual report on Form 10-K for the year ended December 31, 2023.

All forward-looking statements speak only as of the date of this news release. You should not place undue reliance on these forward-looking statements. The Company’s capital budget, operating plan, service cost outlook and development plans are subject to change at any time. Although we believe that our plans, intentions and expectations reflected in or suggested by the forward-looking statements we make in this release are reasonable, we can give no assurance that these plans, intentions or expectations will be achieved. The risk factors and other factors noted herein and in the Company’s SEC filings could cause its actual results to differ materially from those contained in any forward-looking statement. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf.

All subsequent written and oral forward-looking statements attributable to us or to persons acting on our behalf are expressly qualified in their entirety by the foregoing. We undertake no obligation to publicly release the results of any revisions to any such forward-looking statements that may be made to reflect events or circumstances after the date of this release or to reflect the occurrence of unanticipated events, except as required by law.

(Footnotes)

¹ Adjusted EBITDA, FCF and ROCE are non-GAAP measures defined and reconciled in the tables included in this news release.

² Leverage ratio is defined as total long-term debt, before unamortized discounts, divided by Adjusted EBITDA for Leverage Ratio (a non-GAAP measure defined and reconciled in the tables included in this news release) for the trailing twelve-month period.

(Financial Highlights to Follow)

Consolidated Balance Sheets (Unaudited)
SilverBow Resources, Inc. and Subsidiary (in thousands, except share amounts)
	December 31, 2023				December 31, 2022
ASSETS
Current Assets:
Cash and cash equivalents	$	969			$	792
Accounts receivable, net		138,343				89,714
Fair value of commodity derivatives		116,549				52,549
Other current assets		5,590				2,671
Total Current Assets		261,451				145,726
Property and Equipment:
Property and Equipment, Full-Cost Method, including $28,375 and $16,272 of unproved property costs not being amortized		3,597,160				2,529,223
Less – Accumulated depreciation, depletion, amortization and impairment		(1,223,241	)			(1,004,044	)
Property and Equipment, Net		2,373,919				1,525,179
Right of use assets		12,888				12,077
Fair value of long-term commodity derivatives		55,114				24,172
Other long-term assets		31,090				9,208
Total Assets	$	2,734,462			$	1,716,362
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable and accrued liabilities	$	98,816			$	60,200
Deferred acquisition liability		50,000				—
Fair value of commodity derivatives		5,509				40,796
Accrued capital costs		31,900				56,465
Current portion of long-term debt		28,125				—
Accrued interest		9,668				2,665
Current lease liability		4,001				8,553
Undistributed oil and gas revenues		20,425				27,160
Total Current Liabilities		248,444				195,839
Long-term debt, net of current portion		1,173,766				688,531
Non-current lease liability		8,899				3,775
Deferred tax liabilities, net		99,227				16,141
Asset retirement obligations		11,584				9,171
Fair value of long-term commodity derivatives		2,504				7,738
Other long-term liabilities		710				3,588
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, 25,914,956 and 22,663,135 shares issued and 25,429,610 and 22,309,740 shares outstanding		259				227
Additional paid-in capital		679,202				576,118
Treasury stock held, at cost, 485,346 and 353,395 shares		(10,617	)			(7,534	)
Retained earnings		520,484				222,768
Total Stockholders’ Equity		1,189,328				791,579
Total Liabilities and Stockholders’ Equity	$	2,734,462			$	1,716,362

Contacts

Jeff Magids

Vice President of Finance & Investor Relations

(281) 874-2700, (888) 991-SBOW

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