SilverBow Resources (SBOW) Valuation Update - Mar 2

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dan_s
Posts: 34467
Joined: Fri Apr 23, 2010 8:22 am

SilverBow Resources (SBOW) Valuation Update - Mar 2

Post by dan_s »

At the time of this post SBOW was trading at $27.67.

I listened to their Q4 results conference call this morning and I have updated my forecast/valuation model for SilverBow based on the Q4 actual results and their detailed guidance. My valuation stays at $79/share, but I definitely can justify a valuation multiple higher than 3.5X annualized operating cash flow because this company has lots of "running room" with a multi-year strategy of increasing production by more than 20% year-over-year for several years.
> 2022 Results: $15.82 operating CFPS
> 2023 Forecast: $20.90 operating CFPS
> 2024 Forecast: $32.67 operating CFPS
> Big shift in the production mix in 2023 as natural gas production will be up just ~3% YOY, but oil production is expected to double YOY.
> SilverBow's flexibility to move their operated rigs quickly to more oil-prone areas is a big part of my bullish outlook.
> SBOW's PV10 Net Asset Value based only on proved reserves at current strip prices is over $100/share. Based on their year-end 12-31-2022 reserve report using SEC pricing guidelines, their PV10 NAV is close to $190/share. < If you believe oil prices are going back to $100/bbl, this stock has a lot of upside for us.

My updated forecast model will be posted to the EPG website this afternoon.
Dan Steffens
Energy Prospectus Group
Fraser921
Posts: 2954
Joined: Mon Mar 22, 2021 11:48 am

Re: SilverBow Resources (SBOW) Valuation Update - Mar 2

Post by Fraser921 »

79!!! Insane

I hope they don't do a merger for 28.22 than nevermind on the 79!
ChuckGeb
Posts: 945
Joined: Thu Nov 21, 2013 2:46 pm

Re: SilverBow Resources (SBOW) Valuation Update - Mar 2

Post by ChuckGeb »

SBOW proved up their management ability by pulling the rigs out of Webb County as soon as ng prices tanked leaving 8 DUCs for later. Stellar move. Their acquisitions in 2022 are a big plus and open a lot of oily opportunities as well as increase their footprint for more bolt on opportunities. I have always liked this company but like it more now with their recent moves including their hedging strategy. I think these guys aren't going to bail like ROCC and will continue to be the acquirer. I think they clearly see the prize of Webb County gas paying off nicely in 2025 assuming the current green party syndicate doesn't screw up the scheduled Gulf Coast LNG facilities coming online in 2025. These guys (SBOW) are pretty pretty good.
dan_s
Posts: 34467
Joined: Fri Apr 23, 2010 8:22 am

Re: SilverBow Resources (SBOW) Valuation Update - Mar 2

Post by dan_s »

From Truist Financial: This note from Neal Dingmann was written before today conference call. Neal was on the CC and he asked several questions.
My comments are in blue.

SilverBow Resources, Inc. (SBOW)
4Q22 In-Line With Positively Adjusted 2023 Guide That Still Suggests Double Digit Growth

SilverBow reported 4Q22 EBITDAX and FCF largely in-line with Street estimates, driven
primarily by higher than expect oil and NGL production. The company updated its prior
2023 guide with the new expectations including a notably lower capital spend though also
lower total production. However, this year’s oil production is expected to increase as SBOW
shifts capital to oily projects from its gassy projects until gas prices recover. We favor the
company’s plan to continue to primarily focus on debt repayment until leverage is ≤1x, which
we forecast still occurs before YE23. < Production is lower on a Boepd basis, but revenues from more oil and NGL production will actually generate higher revenues than my pre-call forecast. Also, they said if natural gas prices do move over $4.00 they have several DUC wells in Webb county that they can complete to ramp up gas production in Q4.

Financial/Operational Highlights
• The company is shifting capital away from its Webb County assets to its oilier properties
including La Salle, McMullen, Atascosa, Live Oak, and even Lavaca/De Witt counties
• We expect the company’s liquids cut to approach 50% by YE23
• Gas pipeline bottlenecks also contributed to the push gas volumes until ’24, with several
prior ’23 DUCs now scheduled for early ‘24
• We anticipate the company continuing to use FCF towards debt repayment and potential
bolt-ons

Guidance Updates
• 1Q23 production guidance of 295-316 mmcfepd versus Truist Securities & Street
estimates of 354/337 mmcfepd < Much higher oil cut will generate about the same revenues.
• FY23 production guidance decreased to 335 mmcfepd versus Truist Securities & Street
estimates of 407/389 mmcfepd, however the company’s liquids cut rises dramatically
• FY23 capex guidance decreased to $463mm versus Truist Securities & Street estimates
of $495mm/$456mm
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 2

Post by ChuckGeb »

I think the market move today says it all.
JimRudwall
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Joined: Fri Aug 05, 2022 12:21 pm

Re: SilverBow Resources (SBOW) Valuation Update - Mar 2

Post by JimRudwall »

I wonder how short Fraser is of SBOW...like CRK???
Fraser921
Posts: 2954
Joined: Mon Mar 22, 2021 11:48 am

Re: SilverBow Resources (SBOW) Valuation Update - Mar 2

Post by Fraser921 »

LOL, I'm long both names, shows what you know. I rarely short anything

Was it fun, JimRudwall, riding CRK down from 20 to 11? I avoided the carnage? :lol:
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