SilverBow Resources (SBOW) Valuation Update - Mar 10

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dan_s
Posts: 34469
Joined: Fri Apr 23, 2010 8:22 am

SilverBow Resources (SBOW) Valuation Update - Mar 10

Post by dan_s »

I have posted my updated valuation model for Silverbow. My valuation is still $79/share.

SBOW is trading today at less than 1.3 X operating CFPS.

This is an Aggressive Growth company that is funding all organic growth with operating cash flow. They are running 2 rigs and production growth s/b ~25% this year. Oil production growth s/b ~100% YOY.

~65% of 2023 revenues s/b from liquid sales.

Our updated profile will be on the EPG website this afternoon.
Dan Steffens
Energy Prospectus Group
ChuckGeb
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Joined: Thu Nov 21, 2013 2:46 pm

Re: SilverBow Resources (SBOW) Valuation Update - Mar 10

Post by ChuckGeb »

Agree with Dan though I don't believe we are going to see $79 per share any time soon. SBOW is well hedged on its gas portfolio, is operationally nimble and has made astute moves to focus on a promising oil portfolio that will continue to prosper thru these turbulent waters. In my view, this is the best small company in the Sweet 16. For those who have the fortitude to buy into this dubious marketplace this is one for strong consideration.
ChuckGeb
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Joined: Thu Nov 21, 2013 2:46 pm

Re: SilverBow Resources (SBOW) Valuation Update - Mar 10

Post by ChuckGeb »

This one for those with long term investment horizon. Projected to grow production in 2023 with zero FCF. Unless gas surprises to upside this is not a candidate for Fraser in 23.
Fraser921
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Joined: Mon Mar 22, 2021 11:48 am

Re: SilverBow Resources (SBOW) Valuation Update - Mar 10

Post by Fraser921 »

For me, it’s all about the FCF. (This year and next.)

What’s a company worth that isn’t making cash?

On the plus side, I think crude will move up and agree Sbow looks interesting with higher prices.

Biden wants to raise taxes on the evil oil companies

Also there is a market risk which will affect all industries. If the Dow gets whacked by 1000 points energy isn’t moving up. Next week will be very interesting.
dan_s
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Joined: Fri Apr 23, 2010 8:22 am

Re: SilverBow Resources (SBOW) Valuation Update - Mar 10

Post by dan_s »

I also like FCF, but don't make it the only thing you look at. Why? Because any upstream company can go free cash flow positive by shutting down their drilling program. Yes, they'd have great short-term FCF, but they'd be rapidly depleting their proved reserves and doing nothing to turn P2 ("probable") reserves into P1 reserves.

At any point in time, an upstream oil & gas company should be worth at least the PV10 Net Asset Value of its P1 reserves.

"Running Room" is also extremely valuable. For example, Matador Resources (MTDR) was outspending operating cash flow for many years and the stock price kept going up because they were increasing production and P1 reserves by double-digits year-after-year.

Of all the companies that I follow, EOG as the most running room, which is why it trades at the highest multiple of operating cash flow per share. EOG will soon go over 1,000,000 Boepd of production. It controls some of the most valuable real estate on Earth.

I just recorded my weekly podcast, just for you!
Dan Steffens
Energy Prospectus Group
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