SilverBow Resources Inc. Playbook

With the operational flexibility to quickly shift drilling and completion activity among crude oil, liquids and dry gas assets in the Eagle Ford, SilverBow Resources Inc. is refocusing on oil drilling in keeping with plans for 5%-10% annual growth, says CEO Sean Woolverton.

However, in a basin in need of consolidation, the Houston-based company is looking beyond expansion solely by the drill bit, he adds.

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“We recognize the need to scale up the company to get the benefits that come with it,” Woolverton says. “As a result, we are actively looking for a transaction, whether a merger or acquisition, involving a large asset base.”

A prominent player in South Texas since predecessor Swift Energy entered the region about 30 years ago, SilverBow has grown its footprint in recent years mostly through bolt-on acquisitions near existing leases that typically ranged 300-1,500 acres, he reviews. Larger available tracts in the South Texas play are hard to come by, Woolverton says.

At the start of 2021, SilverBow held just over 155,000 net acres and planned to concentrate efforts on dry gas drilling, but with rising oil prices the focus has shifted to oil drilling in northern McMullen and Southwest LaSalle counties, where a reactivated rig likely will spend the rest of the year, he says.

“We may drill a couple more gas wells but our returns get better with higher oil prices,” Woolverton says.

On its McMullen acreage, where two-thirds of reserves are oil, the company brought 10 net wells on line in 2020, completing four wells with laterals over 10,000 feet long. Historic IPs at McMullen have been 750-1,200 boe/d, he says. At its Artesia acreage in LaSalle County, where production is roughly in thirds of oil, liquids and dry gas, SilverBow has experienced peak IPs ranging from 850 to 1,250 boe/d, Woolverton adds.

Completion designs generally include 2,000-2,500 pounds/foot using a hybrid design with slickwater and some gel pumped in 150-200 foot stages, he details.

Despite the early focus on oil, the company remains bullish on natural gas, Woolverton says. He estimates overall 2021 production of 180 MMcfe/d-200 MMcfe/d, up 4% year-over-year, with natural gas representing 79% of output.

In December, SilverBow brought on line a second, six-well La Mesa pad in Webb County along the Mexico border after completing an initial six-well pad on the property in late 2019, he explains. Initial production on the new pad is consistent with the first pad, which produced about 100 MMcf/d in the first month of operations, from both the upper and lower Eagle Ford, Woolverton says.

Altogether, the company has a producing inventory of about 350 gross operated wells and 400-500 identified undrilled locations, equating to roughly a 10-year inventory, Woolverton says. SilverBow’s capital guidance includes $100 million-$110 million with a strategy of reinvesting 70%-80% of cash flow.

Recent News

SilverBow Resources buys PETROEDGE OPERATING IV LLC Assets

SilverBow Resources, Inc. (NYSE: SBOW) (“SilverBow” or “the Company”) announced today it has entered into definitive agreements to acquire oil and gas assets in the Eagle Ford (collectively, “the Acquisition” or “the Transaction”) from an undisclosed seller.

Acquisition Highlights:

All stock Transaction for approximately $33 million, consisting of approximately 1.5 million shares of SilverBow common stock 45,000 total net acres in the Eagle Ford, bolstering SilverBow’s gas position in McMullen and Live Oak counties, while adding new oil positions in Atascosa, Lavaca, and Fayette counties
April 2021 net production of approximately 1,580 barrels of oil equivalent per day, 39% liquids. Net oil production of 569 barrels per day

MANAGEMENT COMMENTS

Sean Woolverton, SilverBow’s Chief Executive Officer, commented, “We continue to execute on accretive opportunities and bolster our balanced oil and gas portfolio. This marks the second acquisition we have announced since the beginning of August. Our first deal increased our high-return Eagle Ford and Austin Chalk locations, as well as incremental working interest in producing wellbores, in our La Mesa position. Today’s announcement expands our gas portfolio in the Western Eagle Ford, while also adding oil acreage in three new counties. Each transaction is accretive to Adjusted EBITDA and further reduces our pro forma leverage ratio(1) via the assets’ incremental cash flow. Our ability to use stock as consideration reflects the constructiveness of Eagle Ford partners to share in SilverBow’s long-term value creation.”

TRANSACTION DETAILS

The Transaction has an effective date of June 1, 2021 and is expected to close on or about October 1, 2021, subject to customary closing conditions. The total purchase price for these Eagle Ford assets is approximately $33 million, consisting of approximately 1.5 million shares of SilverBow common stock based on its 30-day volume weighted average price as of July 7, 2021.

SilverBow Resources, Inc. Company Information

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Address

920 Memorial City Way,
Suite 850
Houston, TX 77024


Company Information

SilverBow Resources, Inc. (NYSE: SBOW) is a Houston-based energy company actively engaged in the exploration, development, and production of oil and gas in the Eagle Ford Shale in South Texas. With over 30 years of history operating in South Texas, the Company possesses a significant understanding of regional reservoirs which it leverages to assemble high quality drilling inventory while continuously enhancing its operations to maximize returns on capital invested. 

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