SilverBow Resources (SBOW) Update - July 6

[dan_s]

My current valuation of $86/share will be going up.

SBOW is a "gasser" that was recently promoted to our Sweet 16. This week's drop in oil prices has little impact on my 2022 forecast and valuation.
-------------------
SilverBow Resources Announces Closing of Sundance Acquisition and Updated Outlook
Tue, July 5, 2022 at 7:00 AM

Completed Strategic Acquisition of Sundance Energy
Updated 2022 Production and Capital Guidance
FY22 Oil Production to Increase Over 100% Year-Over-Year
Preliminary 2023 Guidance; Targeting 63,000 Boe/d
Projected 2023 Free Cash Flow Yield of 40%

HOUSTON, July 05, 2022--(BUSINESS WIRE)--SilverBow Resources, Inc. (NYSE: SBOW) ("SilverBow" or "the Company") announced today that it has closed its previously announced acquisition of substantially all of the oil and gas assets from Sundance Energy, Inc. and certain affiliated entities, (collectively, "Sundance"). Total purchase consideration due to Sundance, subject to customary closing adjustments, was comprised of approximately $225 million in cash and 4.1 million shares of SilverBow’s common stock. The cash portion of the purchase was funded with cash on hand and borrowings under the Company's revolving credit facility. Further, SilverBow updated its outlook to adjust for the recent closings of both the Sundance acquisition and the acquisition of the assets of the oil and gas assets of SandPoint Operating, LLC, a subsidiary of SandPoint Resources, LLC, (collectively, "SandPoint") on May 10, 2022. Additionally, the Company has provided its oil and gas hedged volumes as of the end of the second quarter of 2022.

MANAGEMENT COMMENTS

Sean Woolverton, SilverBow’s Chief Executive Officer, commented, "The successful closing of this acquisition provides a step-change to SilverBow’s production base, drilling inventory and cash flow profile. Our June production rate is set to increase by over 25% to over 58,000 Boe/d by year-end, driven by the combination of acquired production and the increase to our capital program by adding a second rig. Our multi-year growth profile is significant, as we estimate we will grow annual production 30% or more in both 2022 and 2023. Our increased scale is supported by over 600 high-return locations, providing over a decade of drilling inventory at a two-rig pace and operating cash flows that fund our development plan at a re-investment rate of approximately 60%." < This much "running room" deserves a higher valuation multiple.

Mr. Woolverton commented further, "Our balanced portfolio strategy provides us with optionality to allocate capital to projects depending upon prevailing commodity prices. With the current high oil and gas price environment, our plan is to dedicate one rig towards liquids development and one rig towards gas development for the near-term. Full year 2022 oil production is expected to increase over 100% year-over-year with nearly 50% of revenue coming from oil by year-end. Looking ahead, our preliminary 2023 outlook forecasts approximately $250 million in free cash flow, representing a 40% free cash flow yield. We expect to track toward 1.0x leverage and below while simultaneously pursuing our growth strategy."