SilverBow Resources, Inc. (NYSE:SBOW) Q2 2020 Earnings Conference Call - Final Transcript

Aug 05, 2020 • 10:00 am ET

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SilverBow Resources, Inc. (NYSE:SBOW) Q2 2020 Earnings Conference Call - Final Transcript

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Q & A
Operator
Operator

[Operator Instructions] And your first question comes from Jeff Grampp with Northland Securities.

Analyst
Jeff Grampp

Hi guys. For Sean, or maybe Steve, on the well cost front, I know you guys have a couple of slides talking about some of the efficiencies and cost reductions that you've seen. Was hoping to dig in a little bit more, I guess, as we think about second half well cost for you guys. Can we kind of compare that to maybe what you were seeing at the start of the year? How much of a reduction have you seen? And if you had to kind of bifurcate that out in terms of kind of internal efficiencies versus maybe some attractive pricing you've seen from service companies, what that split might be?

Executive
Sean C. Woolverton

Hey Jeff, this is Sean. Steve and his team have done a great job driving down costs on top of capturing many efficiencies even coming into the downturn. So why don't I turn it to Steve and let him give you more details on what him and his team have been able to accomplish?

Executive
Steven W. Adam

Yes. Thank you, Sean. Jeff, what we've done is we've been able to capitalize on some level loading opportunities with some of the service companies that have commitments with some of the larger companies later in the year in order to fill some of those spaces early on in the year. That's what caused a slight acceleration of the DUCs. Most of that drilling -- most of that being on the completion side.

That said, more specific to your question, we're seeing about a 30% reduction from where we were at the end of last year and earlier this year as a current price basis. Much of that discount is coming from the service providers. And I would basically say about of that 30%, about 65% to 70% is coming from the service side and another 25% to 30% is coming from our increased operational efficiencies. As we advance through the year, we're looking for much of that price position to hold through the end of the year. That said, going into '21, we're estimating about maybe a 3% to 5% price increase in our AFE estimates by midpoint '21. Hopefully, that answers your question, Jeff.

Analyst
Jeff Grampp

Got it. That's really good. I appreciate that. My follow-up was just kind of wondering, I know you guys had a slide on some of the, I guess, a little bit of an improvement in performance from these wells that you guys had shut in. Was curious how you guys are kind of building in the expectations for the performance of those wells? Do you guys think there's some longer-term improvement? Is that just kind of a shorter-term bump that kind of normalizes over time? And how you guys are effectively, I guess, kind of planning for some of those dynamics.

Executive
Sean C. Woolverton

Hey Jeff, yes, again, this is Sean. From a guidance standpoint, we're modeling, assuming that those wells will return to previous historical decline trends.