SilverBow Resources (SBOW) Valuation Update - Nov 1

[dan_s]

I have updated my forecast/valuation model for SBOW for Q3 actual results that beat my forecast and their updated guidance.
My model assumes that the Chesapeake South Texas Acquisition closes in the middle of Q4. The actual closing date will impact reported Q4 results, but not my valuation because operating cash flow between the Effective Date and the Closing Date is just a Purchase Price Adjustment.

My stock valuation increases by $3 to $82/share. My valuation is based on 3.5 X annualized operating cash flow, which is a VERY LOW multiple for a company that will have ~100,000 Boepd of production (30% oil, 20% NGLs and 50% ngas) after they close the acquisition. SilverBow will have a lot of HIGH-QUALITY RUNNING ROOM post-closing. < I love Running Room.

Post-Closing this company will move up in class to a "Mid-Cap" and draw a lot more of the Wall Street Gang's attention.

TipRanks' 2024 forecast, which will be adjusted higher later this week.
Net Income of $14.35/share with Operating Cash Flow of $30.36/share. < Whatever multiple you pick this stock is a "Screaming Buy" at the current share price.

SBOW closed today at $33.48

[knusser58]

Hi Dan,
SBOW will increase production significantly in 2024.
What is your estimate of capex for SBOW in 2024 (I think N. Dingmann has $670 million for 2024 capex).
Thank you and regards,
Klaus

[dan_s]

It sounds like they will run three operated rigs in 2024 and maybe add a 4th operated rig in Q3 if oil and gas prices hold where they are today ($80 oil and $3.50 natural gas). If so, Neal Dingmann's capex estimate sounds good.

Based on my forecast, SilverBow should generate close to $1 billion in operating cash flow next year. Free cash flow and strong production growth points to a much higher share price for this one.

[knusser58]

Thank you Dan

[ChuckGeb]

You might want to give this excerpt from SBOW’s 11/3 conference call to your intern to revise your recent portfolio. They have shifted back 1 rig to Webb County for gas development.

“As discussed on prior calls, we allocated 100% of our D&C capital to oil development through the third quarter. Currently, we have moved one of the two rigs back to our Webb County gas area where we are further testing the Austin Chalk formation.

We expect our two-rig program to remain split between oil and gas drilling through year-end. And as always, we remain flexible on our capital allocation as we optimize our drill schedule and completion activity accordingly.”

[Cliff_N]

Can anyone point me to the adjusted EPS for SBOW? Consensus estimate on Yahoo Finance was $2.27. SBOW came in at a loss.

[Cliff_N]

Wow, this was hard to find for SBOW:

Sep 2023 11/01/2023 Actual 2.28 Estimated: 2.33 Surprise: -2.15%

Yahoo had the consensus estimate of $2.27

[dan_s]

Cliff: Are you not able to get to my forecast models?

The actual results for each quarter shown on my models come directly from SEC filings (10Q and Annual Reports).