Q4 2023 SilverBow Resources Inc Earnings Call

Okay.

Operator: Hello, and thank you for standing by. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Silver Bow Resources' fourth quarter and year-end 2023 earnings conference call. All lines have been placed on mute to prevent any background noise.

Hello, and thank you for standing by my name is Regina and I will be your conference operator today at this time I would like to welcome everyone to the silver about resources fourth quarter and year end 2023 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number 1 on your telephone keypad. If you'd like to withdraw your question, press star 1 again.

If you would like to ask a question. During this time simply press Star then the number one on your telephone keypad, if you'd like to withdraw your question press. The star one again, we do ask that you. Please limit your questions to one and one follow up you may reenter the queue for any additional questions that you might have with that I will turn the conference over to Jeff Maggert Vice President.

Operator: We do ask that you please limit your questions to one and one follow-up. You may re-enter the queue for any additional questions that you might have. With that, I will turn the conference over to Jeff Magids, Vice President, Finance, and Investor Relations. Please go ahead.

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Jeff Magids: Thank you. Good morning, everyone. I'm joined today by our CEO, Sean Woolverton, and other members of our management team. Together, we will address your questions following our brief prepared remarks. By now, I hope you have had a chance to go through our earnings release and the slides posted to our website, as we will refer to these materials this morning. Please note that we may make references to certain non-GAAP financial measures which are reconciled to their closest GAAP measure in the earnings news release.

Thank you.

Good morning, everyone I'm joined today by our CEO, Sean Woolverton and other members of our management team together.

Together, we will address your questions following our brief prepared remarks.

By now I hope you've had the chance to go through our earnings release and the slides posted to our website as we offer to these materials. This morning.

Please note that we may make references to certain non-GAAP financial measures, which are reconciled to their closest GAAP measure in the earnings news release.

Jeff Magids: Our discussion today may include forward-looking statements, which are subject to risks and uncertainties, many of which are beyond our control. These risks and uncertainties are described more fully in our documents on file with the SEC, which are also available on our website. During Q&A, please limit your time to one question and one follow-up. This allows us to get more of your questions in today. I will now turn the call over to Sean. Thanks, Jeff. And good morning, everyone.

Our discussion today may include forward looking statements, which are subject to risks and uncertainties many of which are beyond our control. These risks and uncertainties are described more fully in our documents on file with the SEC, which are also available on our website.

During Q&A. Please limit your time to one question and one follow up this allows us to get more of your questions into that I will now turn the call over to Sean.

Thanks, Jeff and good morning, everyone.

Sean C. Woolverton: We appreciate your time today and your interest in the Silver Boat story. In the next few minutes, I want to talk about three things. First, the progress we have made over the last year to build a stronger company is remarkable. It is important that you understand our strategy and how recent steps have positioned us to create value for shareholders. Next, I will highlight our 2023 results. All the details can be found in our materials.

We appreciate your time today and your interest in the silver both story.

Over the next few minutes I want to talk about three things.

First the progress we made over the last year to build a stronger company is remarkable.

It is important that you understand our strategy and how recent steps have positioned us to create value for shareholders.

Next I will highlight our 2023 result.

All the details can be found in our materials.

Sean C. Woolverton: Our solid execution provides strong momentum as we enter this year. And lastly, I will cover our 2024. Our plan benefits from recent operational efficiencies and efficiency gains, and we enter this year with scale, a more durable asset base, and enhanced capital flexibility. With near-term weakness in natural gas prices, we are electing to cut gas-directed capital to maximize cash flow and maintain a strong balance sheet. Let's get started.

Our solid execution provides strong momentum as we enter this year.

And lastly, I will cover our 2020 for outlook.

Our planned benefits from recent operational efficiencies.

Our efficiency gains and we enter this year with scale a more.

More durable asset base and enhanced capital flexibility.

With near term weakness in natural gas prices, we are electing to cut gas directed capital to maximize cash flow and maintain a strong balance sheet.

Let's get started.

Sean C. Woolverton: Silverboe has a proven and clear strategy to create value. Our 2023 accomplishments show the four key elements of this strategy in action. First, we have a scaled and durable portfolio. Last year, we increased our regional scale in Eagleford through our South Texas acquisition.

Silver Bowl has a proven and clear strategy to create value.

Our 2023 accomplishments show the four key elements of this strategy in action.

First we have a scaled and durable portfolio.

Last year, we increased our regional scale in the Eagle Ford through our South Texas acquisition.

Sean C. Woolverton: This was our largest deal to date. It established us as the largest public pure play Eagle for an operator and expanded our low cost operating platform to drive synergies and unlock value. SilverBow now has more than a decade of high return drilling opportunities across our 220,000 net acres.

This was our largest deal to date.

Stablish.

As the largest public pure play Eagle Ford, operator, and expanded our low cost operating platform.

To drive synergies and unlock value.

Silver BOE now has more than a decade of high return drilling opportunities across our 220000 net acres.

Sean C. Woolverton: We are advantaged due to our low cost structure, operational efficiency, commodity optionality, and existing infrastructure in proximity to premium Gulf Coast markets. This combination yields one of the highest EBITDA margins in the peer group.

We are advantage due to our low cost structure.

Operational efficiencies.

Commodity optionality existing.

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In proximity to premium Gulf Coast markets.

This combination yields one of the highest EBITDA margins in the peer group.

Sean C. Woolverton: Slide 7 in today's deck highlights our peer-leading cost structure and margin profile. The second element of our strategy is generating corporate efficiencies and enhancing margins. We have peer-leading margins, and we are unwavering in our commitment to improve on them. As you can see in today's deck, we are enhancing our returns through operational efficiencies. These include faster days to death.

Slide seven in today's deck highlights, our peer leading cost structure and margin profile.

Okay.

The second element of our strategy is generating corporate efficiencies and enhancing margins.

We have peer leading margins and we are unwavering in our commitment to improve on them.

As you can see in today's deck, we are enhancing our returns through operational efficiencies.

These include faster days to depth.

Sean C. Woolverton: More stages pumped per day and increased pump time. But more importantly, we accomplished these gains with a lower cost per foot in drilling and completion. These gains are sustainable. SilverBow continues to demonstrate that assets are better in our hands due to our proven operating platform. We have a low-cost structure and a culture that constantly looks for safe and innovative ways to create efficiency. However, Eagleford remains one of the most fragmented basins, and assets will continue to migrate to more efficient operators.

More stages pumped per day and increased pump times.

More importantly, we accomplished these gains with lower cost per foot and drilling and completions.

Yeah.

These gains are sustainable.

Silver bow continues to demonstrate that assets are better in our hands due to our due to our proven operating platform.

We have a low cost structure and a culture that constantly looks first safe and innovative ways to create efficiencies.

The Eagle Ford remains one of the most fragmented basins and assets will continue to migrate to more efficient operators.

Sean C. Woolverton: Silver Bow is well positioned today. The third pillar of our strategy is to maintain a strong balance sheet. We have built scale through accretive acquisitions that generate free cash flow that we use to reduce leverage and to fund our high-return development program. Since year-end 2020, we have transacted on $1.4 billion in acquisitions, while also increasing our liquidity and reducing leverage by one full turn. Our ability to maintain low leverage is a testament to the quality of our asset base and the high margins we generate as a low-cost operator. We remain on a clear path to reduce debt.

Silver bow is well positioned today.

Okay.

The third pillar of our strategy is to maintain a strong balance sheet.

We have built scale through accretive acquisitions that generate free cash flow that we used to reduce leverage and to fund our high return development program.

Since year end 2020, we have transacted on $1 4 billion in acquisitions.

While also increasing our liquidity and reducing leverage by one full turn.

Our ability to maintain low leverage is a testament to the quality of our asset base and the high margins, we generate as a low cost operator.

We remain on a clear path to reduce debt.

Sean C. Woolverton: In the three months alone since closing our South Texas acquisition, we have eliminated more than $80 million in debt. There is no doubt that 2023 and now 2024 have seen a challenging natural gas market. As we did last year, we are once again showcasing the flexibility in our capital allocation and are taking responsive actions to address low gas prices, while our longer-term outlook for gas is very constructive. We are reducing gas-directed capital investments this year by nearly 15% to maximize free cash flow and move towards our leverage target of below one turn. I'll talk more about this shortly.

In the three months alone since closing, our South Texas acquisition, we have eliminated more than $80 million in debt.

No doubt that 2023, and now 2024 have seen a challenging natural gas market.

As we did last year, we are once again showcasing the flexibility in our capital allocation and are taking responsive actions to address low gas prices.

While our longer term outlook for gas is very constructive we are reducing gas directed capital investments this year by nearly 15% to maximize free cash flow and move towards our leverage target of below one turn.

I'll talk more about this shortly.

Sean C. Woolverton: The fourth pillar of our strategy is profitable growth. We have shown that an E&P company can combine capital discipline, quality assets, and an unrelenting focus on efficiencies to profitably grow. Over the last three years, we have generated an average return on capital employed of 21%, reflecting the success of our long-term strategy. Let me quickly cover our fourth quarter and full year results. Again, all the details are in today's materials.

The fourth pillar of our strategy is profitable growth.

We have shown that an E&P company can combined capital discipline quality assets and an unrelenting focus on efficiencies to profitably grow.

Over the last three years, we have generated an average return on capital employed of 21%.

Reflecting the success of our long term strategy.

Yeah.

Let me quickly cover our fourth quarter and full year results.

Again, all the details are in today's materials.

Yes.

Sean C. Woolverton: We executed extremely well in 2023. We doubled our oil production and posted fourth quarter and full year volumes at the upper half of guidance across all products. More importantly, we accomplished this with capital investments in the lower half of Guyton. Full-year capital investments totaled approximately $410 million, excluding acquisition.

We executed extremely well in 2023.

We doubled our oil production and posted fourth quarter and full year volumes at the upper half of guidance across all products.

More importantly, we accomplished this with capital investments in the lower half of guidance.

Full year capital investments totaled approximately $410 million <unk>.

Excluding acquisitions.

Sean C. Woolverton: Production results were impressive, as were efficiency gains. Comparing 2023 to 2022, we drilled 13% more feet per day, completed 16 percent more stages per day, and improved average pump times by 13 percent. Completion costs per foot decreased 5% year-over-year, and total well costs per foot declined 3%; well costs decreased throughout 2023 as we benefited from a high-graded rig fleet, cost deflation, and faster cycle time. In fourth quarter, 23 DNC costs per foot decreased 20% year over year, highlighting the magnitude of our cost efficiency gains throughout the year.

Production results were impressive as were efficiency gains.

Comparing 2023 to 2022, we drilled 13% more feet per day.

Completed 16% more stages per day, and improved average pump times by 13%.

Completion cost per foot decreased 5% year over year, and total well cost per foot declined 3%.

Well cost decrease throughout 2023, as we benefited from a high graded rig fleet cost deflation.

Foster cycle times.

Fourth quarter, 'twenty, three D&C cost per foot decreased 20% year over year.

Highlighting the magnitude of our cost efficiency gains throughout the year.

Sean C. Woolverton: Taken together, we delivered our 2023 wells 10% below planned cost. For the fourth quarter, our results exceeded expectations. We generated record free cash flow of $74 million. Adjusted EBITDA also set a record, coming in at $172 million. Our net income was $183 million, or $12.63 per share.

Taken together, we delivered our 2023 wells, 10% below planned costs.

For the fourth quarter, our results exceeded expectations.

We generated record free cash flow of $74 million.

Adjusted EBITDA also set a record coming in at $172 million.

Our net income was $183 million or $12 63 per share.

Sean C. Woolverton: Our total production increased nearly 40% year over year to approximately 72 MBOE per day, and oil production was up 74% to 19.3 thousand barrels per day. Capital investments of $79 million came in at the low end of our guidance, and our operating expenses were $8.67 per BOE and were in line with guidance. Our performance in 2023 created strong momentum as we enter this year. Our 2024 program builds on our strategy and is focused on maximizing free cash flow through disciplined development. Today, we have more flexibility in how we allocate our capital to achieve our desired outcomes.

Our total production increased nearly 40% year over year to approximately 72 Boe per day.

And oil production was up 74% to 19 3000 barrels per day.

Capital investments of $79 million came in at the low end of our guidance and our operating expenses were $8 67 per Boe and in line with guidance.

Our performance in 2023 created strong momentum as we enter this year.

Our 2024 program builds on our strategy and is focused on maximizing free cash flow through disciplined.

Development.

Today, we have more flexibility in how we allocate our capital to achieve our desired outcomes.

Sean C. Woolverton: We have been proactive in response to near-term weakness in natural gas prices. Our Advantage portfolio, which benefits from a low-cost structure, proximity to premium Gulf Coast markets, and peer-leading margins, provides optionality to respond to today's market. We recently took some decisive steps to reduce investments in dry natural gas projects. Let me outline these actions. We reduced year-over-year investments by 13% or $75 million to a revised midpoint of $490 million. Activity Reductions were solely focused on dry gas investments.

We have been proactive in response to near term weakness in natural gas prices.

Our advantage portfolio, which better freight benefits from a low cost structure proximity to premium Gulf coast markets, and a peer leading and peer leading margins provides optionality to respond to today's market.

We recently took some decisive steps.

So to reduce investments and dry natural gas projects.

Let me outline these actions.

We reduced year over year investments by 13% or $75 million to a revised midpoint of $490 million.

Activity reductions, we're solely focused on dry gas investments.

Sean C. Woolverton: We plan to run three operated rigs in the first half of the year and two in the second half. We now expect our full-year production to average 89 MBOE per day at the midpoint. Importantly, oil and liquids volumes are unchanged from previous guidance, and gas volumes will be about 13% lower when compared to prior guidance.

We plan to run three operated rigs in the first half of the year and two in the second half.

We now expect our full year production to average 89 Boe per day at the midpoint.

Importantly, oil and liquids volumes are unchanged from previous guidance.

And gas volumes will be about 13% lower when compared to prior guidance.

Sean C. Woolverton: Total production will be up about 50% year-over-year, with oil expected to increase 70% to nearly 25,000 barrels per day. For the year, we expect to drill 49 net wells and bring online 45 net wells. At recent strip prices, our plan will generate an estimated $125 to $150 million of free cash flow. We have high certainty in our cash flow estimates, with about 60% of our 2024 budget hedged at attractive prices. In fact, 75% of our gas is hedged at an average price above $3.80.

Total production will be up about 50% year over year with oil expected to increased 70% to nearly 25000 barrels per day.

For the year, we expect to drill 49, net wells and bring online 45 net wells.

At recent strip prices, our plan will generate an estimated $125 million to $150 million of free cash flow.

We have high certainty in our cash flow estimates with about 60% of our 2020 for budget hedged at attractive prices.

In fact, 75% of our gas is hedged at an average price above $3 80.

Sean C. Woolverton: Prioritizing cash flow will allow us to reduce debt and move toward our leverage target of less than one times. We will not sacrifice our balance sheet to pursue unprofitable gas production. We will preserve our valuable gas inventory for the future. In the longer term, we remain bullish on the expanding LNG market and meeting energy needs within an evolving industry landscape. We are uniquely positioned along the Gulf Coast to grow into this emerging market, where exports are expected to increase significantly over the next several years. There are some impressive case studies in our deck today, showcasing the tremendous gains we have achieved. Our focus on maintaining a low-cost structure drives our peer-leading margins, including EBITDA margin and per-unit G&A costs.

Prioritizing cash flow will allow us to reduce debt and move toward our leverage target of less than one times.

We will not sacrifice our balance sheet to pursue unprofitable gas production.

We will preserve our valuable gas inventory for the future.

Longer term, we remain bullish on the expanding LNG market and meeting energy needs within an evolving industry landscape.

We are uniquely positioned along the Gulf coast to grow into this emerging market.

Where exports are expected to increase significantly over the next several years.

There are some impressive case studies in our deck today showcasing the tremendous gains we have achieved.

Our focus on maintaining a low cost structure drives our peer leading margins, including EBITDA margin and Pierre <unk> <unk>.

Including EBITA margin and per unit G&A costs.

Sean C. Woolverton: In our deck, we highlight our well performance on acquired assets compared to prior operators. For example, on our Sundance assets acquired in 2022, we are seeing an average uplift of 25% in first year cumulative production compared to the prior operator. In our Teal Conoco area, which we put together through acquisitions in 2021 and 2022, early results show a 60% improvement in first-year cumulative production.

In our deck, we highlight our well performance on acquired assets compared to prior operators.

On our Sundance Sundance assets acquired in 2022, we are seeing an average uplift of 25% in first year cumulative production compared to the prior operator.

And our TL Conoco area, which we've put together through acquisitions in 2021 and 2022 early results show a 60% improvement in first year cumulative production.

Sean C. Woolverton: To summarize, our 2024 plan maximizes free cash flow, strengthens our balance sheet, and preserves valuable gas inventory for the future. We will also benefit from continued capital discipline and ongoing efficiency gains across our portfolio. First, let me recap today's takeaway. Our strategy is clear.

To summarize our 2024 plan maximizes free cash flow strengthens our balance sheet and preserves valuable gas inventory for the future.

We will also benefit from continued capital discipline and ongoing efficiency gains across our portfolio.

Yeah.

Let me recap today's takeaways.

First.

Our strategy is clear.

Sean C. Woolverton: It's proven, and it's creating value for shareholders. We have quality assets, and the scale we have created provides flexibility and optionality for us today.

It's proven and it's creating value for shareholders.

We have quality assets and the scale, we have created provides flexibility and optionality for us today.

Second.

Sean C. Woolverton: We have a track record of creating sustainable operating efficiency. Our teams are focused on execution today, constantly innovating to safely reduce costs. I can tell you they are excited to have their hands on our new South Texas app. Finally, we optimized our 2024 plan to maximize free cash flow and maintain our commitment to a strong balance sheet. We reduced investment levels in dry gas areas by $75 million and maintained our oil and liquids production.

We have a track record of creating sustained sustainable operating efficiencies.

Our teams are focused on execution today constantly innovating to safely reduce costs.

I can tell you. They are excited to have their hands on our new South Texas assets.

Finally, we optimized our 2024 plan to maximize free cash flow and maintain our commitment to a strong balance sheet.

We reduced investment levels and dry gas areas by $75 million and maintained our oil and liquids production.

Operator: We appreciate your time today, as well as your investment in our company. And with that, operator, we are ready to take questions. At this time, I would like to remind everyone that in order to ask a question, press the star followed by the number one on your telephone keypad.

We appreciate your time today as well as our investments in our company.

And with that operator, we are ready to take questions.

At this time I would like to remind everyone in order to ask a question press star followed by the number one on your telephone keypad. We do ask that you. Please limit your questions to one and one follow up and then reenter the queue for any additional questions that you might have our first question will come from the line of Neal Dingmann with Truest. Please go ahead.

Operator: We do ask that you please limit your questions to one and one follow-up and then re-answer the queue for any additional questions that you might have. Our first question will come from the line of Neal Dingmann with Truist. Please go ahead.

Neal David Dingmann: Hey, good morning, guys. On the first question, I just wanted to highlight your free cash flow use. I think you're making it pretty clear that you're going to divert most of the free cash flow to debt repayment. Looks like you even did some in one cup.

Hey, good morning, guys on the first question I just wanted to highlight your your free cash flow use.

I think you've made it pretty clear that youre going to divert most of the free cash flow to debt repayment.

Like even did some in <unk>, but.

Neal David Dingmann: But I would assume you're also still on the outlook, you know, on the lookout for acquisitions. So just trying to get a temperature check on the priorities. Does an acquisition maybe need to have a PDP component so that it doesn't impact the leverage? Or, you know, could a right, you know, inventory pack, No, thanks for the question.

I would assume Youre also still on the outlook look out for acquisitions. So just trying to get a temperature check on the priorities.

It was an acquisition maybe you need to have a PDP component so that it doesn't impact the leverage or CDR right.

Inventory package makes sense.

No. Thanks for the question, Yes, first and foremost.

Sean C. Woolverton: Yeah, first and foremost, a core strategy for us is protecting our balance sheet. We have a stated goal of getting to a long-term leverage target of less than one times. So our free cash flow, for now, is dedicated towards debt pay-down. But I will tell you that we will remain active in the M&A market, looking for accretive opportunities. We have in the past and will continue to use our standard checklist of what we look for in acquisitions, and that includes it must make sense from an industrial logic standpoint, it must add to the quality of our inventory and compete for capital immediately, and it has to be accretive to our shareholders in terms of how we finance it. The focus for this year, though, is on bringing down our debt and protecting our balance sheet and demonstrating the quality of our durable and scale That makes a lot of sense.

Core strategy for us is protecting our balance sheet. We have a stated goal of getting to our long term leverage target of less than one times.

So our free cash flow for now is dedicated towards debt paydown.

I will tell you that we will remain.

<unk> active in the M&A market looking for accretive opportunities we have in the past and we will continue to use our standard checklist of what we look for in acquisitions and that includes it must make sense from an industrial logic standpoint, it must add to the quality of our inventory and compete for capital.

Immediately and it has to be accretive to our shareholders in terms of how we finance it.

Focus for this year, though is on bringing down our debt and protecting our balance sheet and demonstrating the quality of our durable and.

Scaled portfolio.

That makes a lot of sense and then my follow up is on slide 11, you outline a pretty impressive uplift versus the prior operators on the acreage.

Sean C. Woolverton: And then my follow-up question is, on slide 11, you outline a pretty impressive uplift versus the prior operators on the acreage. I was just wondering if you want to, you know, on the drilling or the completion items, which ones stand out? And then maybe you can apply those techniques to the Chesapeake assets, or is that not it?

Was just wondering if you wanted to on the drilling or the completion items, which one stand out and then maybe can you apply those techniques to the Chesapeake assets or is that not applicable.

Sean C. Woolverton: I appreciate the question, and we are very dedicated to driving efficiency and enhancing our returns, and so the examples that we lay out really demonstrate that. We're able to achieve improved performance in properties that we acquire, very much focused around drilling wells in-zone. That's a key focus for our operating team, and we've greatly enhanced that over prior operators, as well as improved our completion designs. We believe our completion designs are optimized over historical operations. So, yeah, we have a demonstrated track record. The examples that we lay out that you pointed out show that.

No I appreciate the question.

We are very dedicated towards driving efficiency enhanced and enhancing our returns.

So the <unk>.

Examples that we lay out really demonstrate that.

Where we're able to achieve improved performance in our properties that we acquire very much focus around.

Drilling wells in zone.

That's a key focus for our operating team and we've greatly enhanced that over prior operators as well as improving our completion designs. We believe our completion designs are optimized over historical operations.

Yes, we have a demonstrated track record.

The examples that we lay out that you pointed to show that yes, we're very excited too.

Leo Paul Mariani: Yes, we're very excited to apply our expertise and our efficiencies to the Chesapeake assets. We just recently moved a drilling rig onto those properties, so we're out of the gate quick on that asset. The first well we drilled, we TD'd ahead of schedule and significantly improved on cycle times from the prior operators, so we're looking forward to sharing some more results on that property in the coming quarters. Your next question comes from the line of Leo Mariani with Roth MKM. Please go ahead.

Apply our expertise and our efficiencies onto the Chesapeake assets.

<unk> recently moved in a drilling rig onto those properties.

So we're out of the gate quick on that asset the first well we drilled.

TD ahead of schedule and significantly improved on cycle times from the prior operators. So we're looking forward to sharing some of our some of some more results on that property in the coming quarters.

Your next question comes from the line of Leo Mariani with Rotten km. Please go ahead.

Sean C. Woolverton: Hey guys, wanted to just maybe stay on the Chesapeake asset here at this point in time. I know it's only been a handful of months since you kind of got this under your belt, but wanted to see if you could kind of comment on the performance of the base production on the asset. How is that trending, you know, versus your, you know, internal forecast?

Hey, guys wanted to just maybe stay on the Chesapeake asset here at this point in time.

Now, it's only been a handful of months since you had kind of took this under your belt, but.

Wanted to see if you can kind of comment on the performance of the base production on the asset how has that trended versus your <unk>.

Internal forecast and I know, it's early but have you been kind of able to get out there and make some operational improvements such as you know maybe try and Tim improved run time or lower LOE or anything like that obviously I know it's.

Sean C. Woolverton: And I know it's early, but have you been kind of able to get out there and make some operational improvements such as, you know, maybe trying to improve runtime or lower LOE or anything like that? Obviously, I know it's a pretty good chunk of the overall company production. So, obviously, you talked about the drilling a minute ago being early, but just any kind of comments you can give us around the base production and plans for that here as we roll into 24. I appreciate the question. I think what I'll start and highlight is since closing the acquisition on December 1st, we have paid down approximately $80 million of debt from that time frame. So it came in, it exited the year, and it came into the year generating some strong free cash flow.

I'm pretty good chunk of the overall company production. So obviously you talked about the drilling a minute a minute ago being early but just any kind of comments you can give us around the base production and plans for that here as we roll into 'twenty four.

Okay.

I appreciate the question I think what I'll I'll start and highlight is since closing the acquisition on December one we have paid down approximately $80 million of debt.

From that time frame so.

Came in and exited the year and came into the year generating some strong free cash flow and a lot of that is coming from the base performance on that asset.

Sean C. Woolverton: And a lot of that is coming from the base performance on that asset. We were seeing the asset performing in line with what we modeled during our underwrite of the acquisition. So we exited the year where we were expecting and come in really with having our hands on the asset for 30 days with a lot of ideas, including getting some workover rigs onto the property to try to enhance that base production. We had identified a number of workovers to be completed. So, no results to speak of today.

We're seeing the asset performing in line with what we've.

Modeled during our underwrite of the acquisition.

So we exited the year.

Where we were expecting.

And come in really with.

Having our hands on the asset for 30 days with a lot of ideas, including getting.

Some workover rigs onto the property to try to enhance that base production, we had identified a number of workover.

Workovers to be completed so no results to speak to today, but we like what we're seeing thus far we've been very excited to bring on.

Sean C. Woolverton: But we like what we're seeing thus far. We've been very excited to bring on the employees that worked on the asset prior. They bring a lot of knowledge.

Employees that work.

Asset prior they bring a lot of knowledge and I know, they're excited to be working on an asset now that is a core for silver Bowl.

Sean C. Woolverton: And I know they're excited to be working on an asset now that is a core for SilverBow. But it's still early days. We like what we see thus far, and we look forward to giving more details on not just the base performance but, in the coming quarters, really how the capital programs are performing as well. This year we'll have about 30% of our capital dedicated to that asset. So, to your point, it is a big part of our business, and we're excited to own this property. Okay, I appreciate that color.

So still early days, we like what we see thus far and we look forward to giving more details on not just the base performance, but in the coming quarters really how how the capital programs.

Performing as well this year, we will have about 30% of our capital dedicated to that asset. So to your point. It is a big part of our business and we're excited to own this property.

Okay, No I appreciate that color.

Sean C. Woolverton: And I also just wanted to see, you know, if you guys had any kind of just general response to some of the recent board of director elections. I know that's something that will get flushed out more fully at the annual meeting, but just kind of how are you sort of thinking about the situation at this point? Yeah, I'll tell you that we really want to focus our call today on, you know, just the strong performance that we exhibited in 2023 and our outlook for 2024. But what I will say is that, you know, SilverBow's management team and our board are committed to working for all of our shareholders to deliver shareholder value. So that's all I really want to comment on this call and want to stay focused on what the company has going on and what we're excited about for 2024. Our next question will come from the line of Charles Meade with Johnson Rice. Please go ahead. Good morning, Sean, to you and the rest of the Silverboat team out there. Hey, good morning, Charles.

And I also just wanted to see if you guys had any kind of just general response to some of the recent.

Our board of director elections.

That's something that will get flushed out more fully at the annual meeting, but just kind of how are you sort of thinking about the situation at this point.

Yes, I'll tell you that we really want to focus our call today on just the strong performance that we exhibited in 2023 and our outlook for 2024, but what I will say is that silver <unk> management team and our board are committed to working for all of our shareholders.

To deliver shareholder value. So that's all I really want to comment on this call and wanted to stay focused on what the company has going on and what we're excited about for 2024.

Our next question will come from the line of Charles Meade with Johnson Rice. Please go ahead.

Yes.

Good morning, Sean to you and the rest of the Silverado team there.

Hey, good morning Charles.

Charles Arthur Meade: Um, so I think it's a positive move that you guys cut back on the natural gas activity and, I think that's worked well for other operas, but I wondered if you could characterize how much natural gas activity is still in the plan and what the rationale for it might be, whether it's lease maintenance or concept testing. Just tell us what you do have that's kind of dedicated to natural gas. Yeah, yeah, no, I appreciate it.

So I think it's a positive move that you guys have cut back on the.

Natural gas activity.

And I think that's worked well for other operators, but I wondered if you could characterize.

Of the how much natural gas activity is still in the plan.

And what the rationale for it might be whether it's lease payments or concept testing just tell us what what would you do have that's got a dedicated natural gas in 'twenty four.

Yes, yes, no I appreciate it would tell you right. This is the second year.

Sean C. Woolverton: I would tell you, right, this is the second year that the company has really enacted this strategy to defer, you know, much investment into our gas assets. We think it really demonstrates the strategy that we started to employ several years ago, so as much as we'd like to see higher gas prices, we are reacting appropriately to it. In terms of our plan for this year, approximately 15% of our capital is dedicated to Webb County dry gas.

Companies.

Really enacted this strategy to differ.

Much investment into our gas assets.

It really demonstrates the the.

The strategy that we started to employ several years ago.

So.

As much as we'd like to see higher gas prices.

We are reacting appropriately to it in terms of our plan for this year of approximately 15% of our capital is dedicated to web county dry gas we did.

Sean C. Woolverton: We did come into the year when prices were higher, having drilled several wells, so we completed those late last year and early part of this year. So there's some capital early on dedicated to the gas that those wells are online and producing now. And then late in the year, we have a number of wells that are slated to be drilled, really twofold. One is to meet lease commitments on those wells, and then the second is to drill into what we anticipate will be higher gas prices in 2021. I got it.

Come into the year when prices were higher having drilled several wells. So we completed those late last year and early part of this year. So there are some capital early on.

Dedicated to the gas that those wells are online and producing now and then late in the year. We have a number of wells that are slated to be drilled really twofold. One is to meet lease commitments on those wells and then the second is to drill into what we anticipate strong.

Gas prices in 2025.

Got it so the message of the natural gas activity is really back half of the year. It is with the exception of the completions done early.

Sean C. Woolverton: So the message of the natural gas activities really stands out. It is, with the exception of the completions done early. Right, got it.

Right got it and then second I think is a simple one.

Sean C. Woolverton: And then, uh, second, I think it's a simple one, um... Just some guesses or maybe some indications around Q1 CapEx. If I look at, you know, just let's pick 500 for a kind of a middle-of-the-road number for the year, and you're going to be running three rigs in the first half of the year, and I think you mentioned you just picked up So we should be thinking maybe for one Q, maybe 150, 160. Is that reasonable? Yeah, I think that is pretty close to being reasonable, maybe a little bit less than the 150 number.

Just some some guesses or maybe some indications around Q1 Capex if I look at just 504.

Kind of a middle of the road number for the year and Youre going to be running three rigs in the first half of the year and I think you mentioned you just picked up a rig so we should be thinking maybe for <unk>, maybe $1 50, 160 <unk> is that reasonable.

Okay.

Yes, I think that is pretty close to being reasonable maybe a little bit less.

And the $1 50 number.

Sean C. Woolverton: We did pick up the third rig on February 1st, so we won't have three rigs for the full first half of the year, so that's probably the difference. We anticipated bringing it in on the 1st of January, but a prior operator had some problems on the rig, so we got it a little later than anticipated. To give a little bit more guidance, for the first half of the year, we're anticipating probably 55% of our spend in the first half of the year and 45% in the second. Your next question will come from Tim Rezvan with KeyBank. Please go ahead. Hi, this is John Mardini on. Good morning, John.

We did pick up the third rig.

February one so won't have three rigs for the for the full.

First half of the year, so that's probably probably the difference.

Anticipated, bringing along first of January but a prior operator had.

We had some.

On the rigs so we got a little later than anticipated to guide or give a little bit more guidance for the first half of the year, we're anticipating probably 55% of our spend in the first half of the year and 45% in the second half.

Your next question will come from the line of Tim <unk> with Keybanc. Please go ahead.

Okay.

Hi, This is John Martin any answer Tim.

Timothy A. Rezvan: Good morning, team. Hey, good morning. I know your team's focused on your oily acres this year, but can you just speak to the state of natural gas takeaway in Webb County today? You spoke a little bit about it, but I was wondering if gas prices weren't just an increase in capital allocation to the area, if you're confident whether there's enough capital capacity. Yeah, no, no. I appreciate the question.

Hey, John Great teams.

Hey, good morning.

I don't know teams focused on or the acreage this year, but can you just speak to the state of natural gas takeaway in Webb County today.

A little bit about it but just wondering if.

Gas prices and increased capital allocation to the area. They are confident whether there's enough gas to capacity for the Columbia gas.

Yes, no no I appreciate the question.

Sean C. Woolverton: And as you recall, remind the listeners that during 2022, under strong gas prices, activity and the web really grew significantly and outpaced takeaway capacity. For us, that issue was resolved starting November of 2023, with our midstream provider bringing on an expanded pipe in the area that more than meets our needs and our capacity. So, you know, for Silver Bow, takeaway capacity out of Webb County is no longer an issue. Okay, great.

And as you recall remind listeners that <unk>.

During 2022 under strong gas prices activity in web really grew significantly and outpaced take.

Takeaway capacity for us.

That issue was resolved starting November of 2023, with our midstream provider, bringing on an expanded pipe in the area that more than meets our needs and our capacity. So.

For silver bow takeaway capacity out of web County is no longer an issue.

Okay, great. Thanks.

Sean C. Woolverton: Thanks. Another one in the past, you mentioned mixed awesome chalk results on your Eastern Extension oil acreage. Just looking into 2024, is there any, you know, any more delineation or spacing initiatives you're pursuing over there? purely a year of development. Yeah, no, thanks for that question as well.

And another one in the past you mentioned mixed Austin chalk results on the eastern extension of our acreage.

Looking into 2024 is there any yes.

Delineation and spacing initiatives.

Pursuing over there or is it going to be purely a year of development drill.

Yes no.

Thanks for that question as well the eastern extension area, we drilled four Austin chalk wells there in 2023.

Sean C. Woolverton: In the Eastern Extension area, we drilled four Austin chalk wells there in 2023. I would tell you that we're probably going to defer drilling additional chalk wells in the Eastern Extension at least for the first half of 2024 as we assess the long-term decline profiles. IPs came in lower than what we were anticipating there, but we're seeing very flat declines, so we want to give those wells a little more time to assess what the economics look like in light of a kind of a different decline profile than what we were anticipating. What we are excited about for that area is that Eagleford has really exceeded our expectations. Putting those two assets together has allowed us to drill much longer laterals, and the Eagleford is really exceeding expectations.

I'd tell you that we're going to probably defer drilling additional chalk wells in these in the eastern extension at least for the first half of 'twenty four as we assess the long term decline profiles ip's came in lower than what we were anticipating there, but we're seeing very flat declines.

So we wanted to.

I've give those wells a little more time to assess what the.

The economics look like in light of a kind of a different decline profile than what we were anticipating when we are excited about for that area is the Eagle Ford has really exceeded our expectations.

Putting those two assets together.

Has allowed us to drill much longer laterals.

In the Eagle Ford is really exceeding expectations in fact.

Sean C. Woolverton: In fact, you know, we were coming into the year with one of the three rigs planned to be drilling in Webb County Gas. We actually shifted that rig onto the Eastern Extension properties and drilled a two-well pad there that is coming on as we speak. We love the Eagleford over there.

We were coming into the year with one of the three rigs planned to be drilling in Webb County gas, we actually shifted that rig onto the eastern extension properties and drilled a two well pad there thats coming on as we speak so.

We love the Eagle Ford over their Austin chalk, it's kind of a wait and see for us at this point.

Your next question comes from the line of Paul Diamond with Citi. Please go ahead.

Sean C. Woolverton: Austin Chalk is kind of a wait and see for us. Your next question comes from the line of Paul Diamond with Citi. Please go ahead. Thank you and good morning.

Thank you and good morning, Thanks for taking my call.

Hey, good morning.

Hi, good morning.

Wanted to talk to <unk> inventory life over the last year last year in guidance. This year, you guys talked about commodity optionality.

Paul Diamond: Thanks for taking my call. I just want to talk quickly about inventory life. Over the last year and guidance this year, you guys talk about commodity optionality, especially the shift away from nat gas. I just want to see in your view how inventory management over the longer term kind of affects or influences that decision-making process.

She can't wait towards Nat gas I was wondering.

And Youre SBU, how inventory management over the longer term kind of effects that are influencing that decision making process.

Yes.

We've identified just around 1000 drilling locations on our assets, we still think there is more.

Inventory defined our teams continue to look at the stacked pay potential.

We're looking at obviously lower Eagle Ford, but upper Eagle Ford still remains perspective for us.

In the Austin chalk still has stacked pay with lower and middle Austin chalk.

Sean C. Woolverton: Yeah, you know, we've identified just around 1,000 drilling locations on our assets. We still think there's more inventory to find. Our teams continue to look at the stack pay potential. We're looking at, obviously, Lower Eagleford, but Upper Eagleford still remains prospective for us. And Austin Chalk still has stack pay, with Lower and Middle Austin Chalk having an opportunity set.

And.

<unk> said, so well we think the 1000 locations is is kind of where it's at today and it will probably expand and then we think there is some uphold potential we actually plan to drill a couple almost wells later in the year. So.

<unk> as we've gotten bigger we are finding that the stacked opportunity within the basin is really rich.

That said in terms of your question.

Right now probably 70% of that inventory is oil liquids weighted and 30% gas.

Sean C. Woolverton: So we think that 1,000 locations is kind of where it's at today, and it'll probably expand. And then we think there's some uphold potential. We actually plan to drill a couple of almost wells later in the year. So definitely, as we've gotten bigger, we're finding that the stacked opportunity within the basin is really rich. All that said, in terms of your question, right now, probably 70% of that inventory is oil, liquids weighted, and 30% is gas. So, you know, as we think about the long-term, our goal is to maintain a 10-year inventory at the current rate. We drill approximately 25 wells per year to give you kind of a burn rate there.

So as we think about long term.

The inventory our goal is to maintain a 10 year inventory at current rig pace.

We drill approximately 25 wells per year to give you a kind of.

Burn rate there.

But.

Inventory aside our focus is generating the best returns. So if we find that gas prices are really strong we would be willing to accelerate the development of that inventory if it makes sense.

It's multiple lever decision.

But returns is the key driver of it.

But at the same time, maintaining inventory, but thats kind of a secondary driver.

Understood. Thanks for the clarity just one quick follow up as you guys think about your hedging book going forward as you progress towards your leverage target to gain scale over time, how do you anticipate that strategy evolving you maintained it at the high level of spend or will that ticked down over time.

Sean C. Woolverton: But, You know, inventory aside, our focus is generating the best returns. So if we find that gas prices are really high, we would be willing to accelerate the development of that inventory if it makes sense. So it's a multiple lever decision, but returns is the key driver of it, you know, but at the same time, maintaining inventory. But that's kind of a secondary driver.

I think.

As we do reduce leverage.

Our ability to maintain.

To maintain or protect the balance sheet, we'd be able to take on a little more risk. So I think you as time evolves, we find ourselves in a lower leverage position, probably slow lower than one times.

Sean C. Woolverton: Understandable. Thanks for the clarification. Just one quick follow-up. As you guys think about your hedging book going forward, as you progress towards your leverage target and gain scale over time, how do you anticipate that strategy evolving? Will you maintain it at the high level it's been, or will that tick down?

We revisit our hedging strategy, we have been very successful with that strategy.

<unk> systematic around it typically we're.

Hedging out our next year program late in the year prior to the program and that's worked well for us but to your point I think exposure to commodity prices.

Sean C. Woolverton: I think, you know, as we do reduce leverage, the ability to, you know, maintain or protect the balance sheet, we'd be able to take on a little more risk. So I think, you know, as time evolves, we find ourselves in a lower leverage position, probably lower than at one time. We revisit our hedging strategy. We've been very successful with that strategy. We're very systematic around it.

With a lower leverage profile is something that will strongly consider.

Your next question will come from the line of Donovan Schafer with Northland Capital. Please go ahead.

Hi, This is skyler Donovan.

Hey, good morning.

Good morning, So just wanted to know about.

About leverage ratio. So we just noticed that you had all this presentation for the South Texas acquisition. So I think it's on slide 10 that you say that you can get to about one <unk> leverage ratio by two.

Sean C. Woolverton: Typically, we're hedging out our next year's program late in the year prior to the program, and that's worked well for us. But to your point, I think exposure to quantity prices with a lower leverage profile is something that we'll strongly consider. Your next question will come from the line of Donovan Schafer with Northland Capital. Please go ahead. Hi, this is Kailash for Donovan.

2020 full.

We noticed that on the slide eight of the February deck, you to say a lesser than one <unk> and Q4 'twenty 'twenty beautiful. So can you just help us understand whats changed is it just strictly a micro in Florida natural gas prices.

Donovan Due Schafer: So good morning. So we just noticed that in your August presentation for the South Texas acquisition, so I think it's on slide 10 that you say that you can get to about 1x leverage ratio by year 2024. But we noticed that on slide 8 of the February deck, you just say less than 1.5x in Q4 2024.

There are some drivers that theyre not seeing that.

Yes, no good question and it demonstrates I think the opportunity set the upside that the company has.

You go back to early August.

Sure.

Listeners it was not just higher natural gas prices.

But it was also higher oil prices I think at the time.

Oil was over <unk> was over $80.

Sean C. Woolverton: So can you just help us understand what's changed? Is it just strictly a matter of lower natural gas prices? Or are there some drivers that we're not seeing here?

And 2020 for gas prices were approximately $4. So.

That change is definitely a shift driven by by commodity prices, but.

Sean C. Woolverton: Thanks. Yeah, no, no good question. And it demonstrates, I think, the opportunity set, the upside that the company has. If you go back to early August, there, you know, remind listeners, it was not just higher natural gas prices. But it was also higher oil prices. I think at the time, oil was over WTI was over $80, and gas prices in 2024 were approximately $4.

Also.

Back then we did envision three three rigs running for the full year 2024, so the flexibility that we're demonstrating in the asset base right is hey, react to lower prices dialed back activity, which.

Clothes that pay down a little bit, but we think it's the prudent thing to do.

Thanks, that's helpful. When you take the rest offline.

Thank you have a good day.

Again, Brian a question press Star one and our next question will come from the line of Noel Parks with Tuohy Brothers. Please go ahead.

Sean C. Woolverton: So, that change is definitely a shift driven by commodity prices. But, you know, also, back then, we did anticipate three rigs running for the full year of 2024. So, the flexibility that we're demonstrating in the asset base, right, is, hey, react to lower prices, dial back activity, which, you know, slows that pay down a little bit, but we think it's the prudent thing to do. Thanks. That's very helpful.

Hi, good morning.

Hey, good morning.

So just a couple of things.

With it being our second year.

Yes.

Correct and Capex away from your gassy areas in Webb County.

Just wondering could you talk a little bit about.

For yourselves and for the.

The industry overall.

Date of land and.

And leasing out there I'm just wondering if we if we have a couple of years of lower activity.

Is that.

Okay, any HPT issues or opportunistically might it will create issues like that for.

Sean C. Woolverton: We'll take the rest off. Hey, thank you. Have a good day. Again, for any questions, press star 1, and our next question will come from the line of Noel Parks with Toy Brothers. Please go ahead.

Some of your competitors.

Yes, yes, our.

<unk> I'll speak to that.

Over 80% ABP.

So the majority of our acreage is held.

However.

It is not.

Noel Augustus Parks: Hi, good morning, and good morning. So just a couple things, you know, with it being the second year of directing CapEx away from your gassier areas in Webb County. I just wonder, could you talk a little bit about, you know, for yourselves and for the industry overall, sort of the state of land and leasing out there? I'm just wondering if we have a couple years of lower activity, does that create any HBP issues, or, opportunistically, might it, you know, create issues like that for some of your competitors? Yeah, yeah, you know, our position, I'll speak to that. We're over 80% HBP. So the majority of our acreage is in health. However, where it is not necessarily still in the primary term is in Webb County, with that area really evolving since 2020.

Necessarily and it's still in the primary term is in Webb County.

That area are really evolving since 2020.

So yes, we'll have some capital that we'll need to dedicate there to maintain those leases.

Be strategic in how we do that.

We are still bullish on long term gas so definitely something we want to do and keep that optionality in place, but minimize the capital outlay in the near term no.

The that's our situation.

I think it's safe to say others face the same situation as well so it.

It will be something that we'll definitely watch.

Been very successful.

On the ground leasing we've built a ton of relationships with the mineral owners out in this part of the play.

And have a great reputation of.

Implementing safe and prudent operations on their properties. So I think we're well positioned to take advantage of any acreage that does become available due to other companies letting their lands expired due to low prices.

Sean C. Woolverton: So yeah, we'll have some capital that we'll need to dedicate there to maintain those leases. And we'll, you know, be strategic in how we do that. We are still bullish on long-term gas, so definitely something we want to do and keep that optionality in place, but minimize the capital outlay in the near term. Knowing that that's our situation, you know, I think it's safe to say others face the same situation as well. So it'll be something that we'll definitely watch.

Great. Thanks.

And.

Gentlemen, I was wondering is.

As you as you look at.

Okay.

Bolt ons in the other other potential acquisitions in the area and just wondering if you have any updated thoughts on your current footprint.

And any any additions in particular I would like to make.

To it.

And whether you see if you could maybe characterize a little bit of.

Whats out there.

Sean C. Woolverton: We've been very successful in on-the-ground leasing. We've built a ton of relationships with the mineral owners out in this part of the play and have a great reputation for implementing safe and prudent operations on their property. So I think we're well-positioned to take advantage of any acreage that does become available due to other companies letting their lands expire due to low prices. Great. Thanks.

With on your on your wish list.

Would be exciting if you could check it moves from somebody I mean, just in general terms, yes.

Yes, yes.

When you look at the basins and where much of the M&A activity has occurred over the last 18 months.

There's been quite a bit in the Eagle Ford, but not near to the.

The scale of consolidation that has occurred in other basins.

We still think there's a tremendous amount of M&A activity to be realized in the Eagle Ford.

Sean C. Woolverton: I think the other thing I was wondering is, um... As you look at Boltons and other potential acquisitions in the area. I'm just wondering if you have any updated thoughts on your current footprint and any additions you in particular would like to make to it and whether you could maybe characterize a little bit of what's out there that's on your wish list. That would be exciting if you could shake it loose from somebody. I mean, just in general terms. Yeah, you know, when you look at the basins and where much of the M&A activity has occurred over the last 18 months, there's been quite a bit in Eagleford, but not near to the scale of consolidation that has occurred in other basins.

Where we've really focused has been on the western part of the play that is the area that we like that we know well.

Have a proven track record in.

There remains.

Still a number of opportunity sets.

In that area and we've demonstrated right over the years that hey, putting bringing assets into are really efficient operating platform.

We can unlock a ton of value so.

Not any specific ones that I would speak to but just tell you that there remains a strong inventory of consolidation to occur in the basin.

Okay. Good enough. Thanks.

Thanks have a good day.

Sean C. Woolverton: So, we still think there's a tremendous amount of M&A activity to be realized in Eagleford, but where we've really focused has been on the western part of the play. That is the area that we like, that we know well, and have a proven track record in. There still remains a number of opportunity sets in that area. And we've demonstrated right over the years that, hey, bringing assets into our really efficient operating platform, we can unlock a ton of value. So not any specific ones that I would speak to, but just tell you that there remains a strong inventory of consolidation to occur in the future.

With that I'll turn the call back to Sean Woolverton for any closing remarks.

Well. Thank you everyone for joining our call today, we appreciate your interest in silver bow and your investments in the company and look forward to talking to you soon thank you.

Everyone that will conclude our call for today, we thank you all for joining you may now disconnect your lines.

[music].

Sean C. Woolverton: Okay, good enough, thanks. Thanks, Noel. Have a good day. With that, I'll turn the call back to Sean Woolverton for any closing remarks. Well, thank you, everyone, for joining our call today. We appreciate your interest in SilverBow and your investments in the company and look forward to talking to you soon. Thank you. Everyone, that will conclude our call for today. We thank you all for joining us. You may now disconnect your line.

Okay.

[music].

Okay.

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