SilverBow Resources (SBOW) Valuation Update - Mar 11

[dan_s]

I am finishing up my review of SilverBow's updated profile.
> One of the benefits of the Chesapeake South Acquisition is that the Company's lenders required them to hedge a lot of their 2024 and 2025 production volumes. As a result they have some of the best hedges in the Sweet 16.
> Per the Company: As of February 23, 2024, SilverBow had approximately 60% of total production hedged for full year 2024, using the midpoint of guidance; approximately 75% of full year 2024 gas production is hedged at a weighted average price of $3.83 per Mcf, using the floor price of collars.

Q1 2024 will be the first full quarter of results from the assets acquired from Chesapeake.

For my valuation of $58/share I am only using a valuation multiple of 2.5 X annualized operating cash flow. If Q1 2024 results confirm my forecast model assumptions, the valuation multiple should increase. I've also got lots of "cushions" built into the model.

Q4 2023 production was 72,161 Boepd (57.3% natural gas, 26.8% crude oil, 15.9% NGLs). < 67% of Q4 2023 revenues were from liquid sales, which is why SBOW is not really a "gasser".

For the first quarter of 2024, the Company expects to produce 86.5 - 93.3 MBoe/d, with expected oil volumes of 22.5 - 25.0 MBbls/d. < This production spike is one of the reasons that I like the timing on this one.

The Company plans to operate three drilling rigs through the first half of 2024, and operate two drilling rigs in the second half of the year. The Company is directing the majority of its investments to liquids development, including approximately 50% of its full year D&C activity directed toward its Western Condensate area and approximately 30% of its D&C activity directed toward its Central Oil and Eastern Extension areas. SilverBow expects to drill 62 gross (49 net) operated wells drilled, compared to 46 gross (45 net) operated wells drilled in 2023.

[Fraser921]

Kimmeridge is trying to buy for $ 34 and use its NG assets to pay for it.
I say offer is DOA

https://seekingalpha.com/news/4078780-kimmeridge-makes-new-offer-to-acquire-silverbow-resources#comments

[ChuckGeb]

As I think about this, it might make for an interesting deal but will in my view depend on the perceived chemistry of Kimmeridge players with SBOW management and of course the quality and relative valuation of the natural gas assets. The timing of the combination could be optimal if it is closed about the time the anticipated two LNG plants come online in late 2024 assuming the open on schedule. The South Texas gas assets are strategically located to supply the Gulf Coast LNG and the ever-expanding Mexican export market. It would also be great if they could get closer to Dan's valuation.