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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Presentation
Executive
Sean C. Woolverton

anticipate the majority of the production and EBITDA benefit from this development to start in the first quarter of 2021.

However, we do expect our EBITDA, inclusive of our amortized hedge gains, to return to first quarter levels for the fourth quarter of 2020. Looking into '21, SilverBow is poised to generate meaningful free cash flow and benefit from increase in gas prices, which we believe are biased higher in '21 from current levels. At current strip pricing, we plan to spend within cash flow, grow production in the high single-digits and maintain a similar EBITDA level, inclusive of amortized hedge gains.

In addition to hitting this trifecta, we expect free cash flow in the range of $20 million to $40 million. We forecast the growth in our production to come from our gas assets, with oil and NGLs flat year-over-year. Based upon our current share price, our full year 2020 guidance implies a 90% free cash flow yield and a greater than 50% free cash flow yield in 2021.

Furthermore, we have additional capacity in our hedge portfolio from a gas exposure standpoint. Looking at gas prices today, the curve has moved up by close to 15% in 2021 compared to pre-COVID levels. Chris will provide further detail in his comments about our use of collars to execute our risk-mitigation strategy.

As we look to formalize our 2021 budget over the coming months, our strategy remains the same. Having a well-balanced portfolio provides us both drilling optionality and the opportunity to pursue accretive corporate and asset level transactions. We see oil and gas prices inversely correlated, and thus our countercyclical bolt-on activity is a key differentiator for us. Furthermore, we're optimistic about underlying gas price fundamentals and continue to manage our balance sheet to provide us with financial strength and flexibility.

With that, I will turn the call over to Steve to provide an operational update. Steve, please go ahead.

Executive
Steven W. Adam

Thank you, Sean. Over the second quarter, we curtailed on average 57 MMcf per day of net gas production and nearly 2,000 barrels per day of net oil production. From a timing standpoint, May was the low point in production for the quarter. In June, we returned approximately 2,750 barrels per day of net oil production to sales as a result of favorable midstream partnerships.

We returned these wells to production ahead of schedule, which drove our oil and NGL volumes above their guidance ranges for the quarter. We anticipate the remaining 850 barrels per day of net oil production to return to sales in the third quarter and the remaining 43 MMcf per day of net gas production by year-end.

By and large, our technical teams are not seeing any degradation in well performance related to curtailments as we show on Slide 16 of the corporate presentation. We are currently performing two operational processes to optimize the management of our curtailed program. First, we are managing these lease obligations and other requirements to ensure compliance.

Second, as shut-in