SilverBow Resources (SBOW) Update - Nov 12

SilverBow Resources (SBOW) Update - Nov 12

Postby dan_s » Fri Nov 12, 2021 2:39 pm

At the time of this post SBOW was trading at $28.21. First Call's price target is $54.00

I have updated my forecast/valuation model for SBOW. I have increased my current valuation by $6 to $70/share, primarily because I am now giving equal weight to the 2021 and 2022 operating cash flow per share forecasts, $16.04 for 2021 and $18.96 for 2022.

SBOW is a "gasser" in our Small-Cap Growth Portfolio. At the mid-point of their guidance, production will be up ~16.3% YOY with most of the growth coming in the 4th quarter. Thanks to an acquisition set to close in December, SilverBow should end the year with production over 250,000 Mcfepd (73% natural gas, 14% crude oil and 13% NGLs).

SilverBow will have less than 15 million shares outstanding at year-end, so adjustments to any of my forecast assumptions have a significant per share impact, therefore I am only using a multiple of 4X operating cash flow per share. If their 2022 guidance confirms my model and they continue to use FCF to de-leverage the balance sheet a multiple of 6X may be justified.

Since the current share price is less than 2X my 2022 operating CFPS forecast this one has low risk and a lot of upside.
Dan Steffens
Energy Prospectus Group
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