SilverBow Resources (SBOW) Valuation Update - Dec 16

[dan_s]

I have updated my forecast/valuation model for SilverBow and I have decided to lower the valuation multiple from 4X to 3X annualized operating cash flow per share. I have lowered my valuation by $21 to $60 per share. < I am still super bullish on this stock.

SBOW closed on Friday at $28.53.

I lowered the valuation multiple just to force my stock valuation closer to the two most recent price target updates submitted to TipRanks.
> On 12-3-2023 Neal Dingmann at Truist Financial rated SBOW a BUY with a price target of $50.
> On 12-1-2023 Donovan Schafer at Northland Securities rated SBOW a BUY with a price target of $55.

SilverBow closed the Chesapeake South Texas Acquisition on 11-30-2023. It is a VERY BIG DEAL for a company of this size. They issued common stock and took on more debt to close the deal. There is a lot of field work and back office work required for deals of this size. < IMO selling stock to partially fund the acquisition is a good thing because SilverBow has a low number of shares outstanding for a company of its size. It needs more trading activity.

My 2024 forecast (based on the higher share count) is very close to the updated forecast now on TipRanks (based on the forecasts submitted by Neal Dingmann and Donovan Schafer)
My Forecast (TipRank's Forecast)
> 2024 Revenues: $1,263 million ($1,230 million) < SilverBow has some very good natural gas hedges for 2024.
> 2024 Earnings per share: $10.29 ($10.24)
> 2024 Operating cash flow per share: $26.25 ($26.81) < If SilverBow's guidance for 2024 ends up being close to this CFPS, a much higher price target will be justified.

SilverBow's current production is close to 95,000 Boepd. The mid-point of their preliminary guidance for 2024 is 97,000 Boepd.

SilverBow is currently running three operated drilling rigs. If they stay with that, the Company should generate a lot of free cash flow in 2024.

[marc.wolin@yahoo.com]

Silverbow - one of the obstacles to Wall Street putting a value on this stock appears to be that they are always in a state of flux and never stable enough to value. When will this clear up?
Marc Wolin

[dan_s]

When they announce 2024 guidance it will help, but after a BIG acquisition a lot of the Wall Street Gang wants to see a full quarter of combined results.

Size does matter in this business and now that SilverBow has ~100,000 Boepd of production, it deserves more coverage. Look at row 52 of my forecast model; the Company's production growth has been very strong.