SilverBow Resources (SBOW) Valuation Update - July 7

[dan_s]

On July 5th SilverBow announced that they have closed both the Sundance and Sandpoint Acquisitions. The combination is a STRATEGIC and TRANSFORMATIVE deal for this Sweet 16 company. The acquisitions are why I decided to promote it to the Sweet 16.
SilverBow also provided detailed production guidance for this year and for 2023 along with an update on their hedges.

At the time of this post SBOW was trading at $25. My updated valuation is $100/share.

I spent the morning updating my forecast/valuation model for SilverBow. It is an "Aggressive Growth" company that now has 30% year-over-year production growth locked in for both 2022 and 2023. In addition to the growth (and key to my valuation), SilverBow is going to generate solid free cash flow (FCF) from operations. This is the primary reason that I have increased my valuation multiple from 4.5X to 5.0X annualized operating cash flow per share. That is still a low multiple for a company with this much running room.

I expect the Company's two rig drilling program to ramp up production to a 2022 exit rate of approximately 60,000 Boepd, which compares to their Q1 2022 actual production of 37,667 Boepd.

My updated forecast/valuation model for SBOW has been posted to the EPG website. Focus on Row 45 "Operating Cash Flow per Share".

SilverBow should draw lots of attention from the Wall Street Gang after they release Q2 results.

[Fraser921]

25 >>> 100

wow, this must be your best one

[dan_s]

30% year-over-year production growth in both 2022 and 2023 that is going to be fully funded by operating cash flow deserves a much higher share price.

BTW prior to SilverBow's July 5 press release, Neal Dingmann at Truist Financial's price target was $62.00. I expect Neal to update his price target much closer to my valuation now that both acquisitions are closed.