SilverBow Resources (SBOW) Price Target - Aug 15

[dan_s]

Note below is from Neal Dingmann at Truist Financial on 8-15-2022

SilverBow Resources, Inc. (SBOW, $43.47, Buy with Price Target of $62.00)
Building Scale While Focusing on Impeccable Balance Sheet

SBOW plans to run an active drilling strategy that will focus on gas and oil near-term though we believe it could turn to exclusively gas if the materially high prices hold. We forecast the latest D&C program to generate solid FCF that the company is likely to use to continue repaying debt (leverage soon <1x) that could position it for another key accretive acquisition that would smartly build scale. We anticipate further Austin Chalk success to go along with solid Eagle Ford results. SBOW shares continue to trade at a deep discount, which could prompt action from one of the larger holders.
Neal Dingmann

My valuation of SBOW is $104.00, which is 5.5 X my annualized operating cash flow per share forecast. SilverBow has recently closed two significant acquisitions have increased their production by more than 30% to ~50,000 Boepd. SilverBow is a "gasser" because ~80% of their production on a BOE basis is natural gas and NGLs. ~42% of SilverBow's 2H 2022 revenues (net of cash settlements on their hedges) is forecast to be from crude oil sales.

We will be publishing an updated profile on SilverBow in a few days.

[dan_s]

I just finished my detailed review of the updated SilverBow Resources profile and forecast model. They will be posted to the EPG website later this afternoon and sent to all EPG members via email tomorrow morning.

Bottomline: SilverBow is an "Aggressive Growth Gasser" that has a lot of "running room"; over 600 low-risk / high return horizontal development drilling locations in South Texas (Eagle Ford and Austin Chalk).

My current valuation of $104/share is now based on what appears to be conservative natural gas prices. If the HH natural gas price averages $5.00/mcf in 2023, SilverBow should generate close to $27/share of operating cash flow next year. The 2023 NYMEX strip for HH ngas is now $5.48 to $9.44.

Timing on this one is good because Q3 2022 will be the first full quarter that includes the impact of the Sandpoint and Sundance Acquisitions.

If you think natural gas and NGL prices will remain high for awhile, then you need to read this profile carefully.