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SilverBow Sources (SBOW) could possibly generate roughly $124 million in optimistic money movement in 2022 at $100 WTI oil and $5 NYMEX fuel regardless of hedges that might trigger $128 million in realized losses at these commodity costs.
Total, SilverBow appears to be a great worth at its present share costs even when fuel and oil costs go down considerably after 2022. If SilverBow is ready to generate that $124 million in optimistic 2022 money movement, I would estimate its worth at $37 per share in a longer-term $70 WTI oil and $3.50 NYMEX fuel atmosphere.
Notes On This autumn 2021 Earnings
SilverBow reported $7.12 in earnings per diluted share in This autumn 2021. This was partially pushed by a $28.9 million ($1.86 per diluted share) achieve on commodity derivatives through the quarter.
The rationale for this achieve (primarily based on mark-to-market accounting) is that pure fuel futures had been decrease on the finish of This autumn 2021 in comparison with the top of Q3 2021, so SilverBow’s hedges (for future intervals) weren’t as closely within the crimson by the top of 2021. Given the massive upward motion in futures costs because the finish of 2021, SilverBow is prone to report an enormous loss on commodity derivatives in Q1 2022.
I desire to disregard the impact of positive factors/losses on future commodity derivatives on present quarter outcomes although, because the huge swings within the worth of these hedges can obscure what truly occurred through the quarter. Measures equivalent to free money movement are higher for assessing present outcomes.
In This autumn 2021, SilverBow’s whole manufacturing ended up on the excessive finish of its steerage vary, whereas its manufacturing of oil and NGLs considerably exceeded its steerage vary. SilverBow’s capital expenditures for 2021 additionally ended up a tad larger than its steerage vary, coming in at $131 million in comparison with a steerage vary of $115 million to $130 million.
Total, SilverBow’s efficiency throughout This autumn 2021 was optimistic, each by way of manufacturing and money movement. It reported $52.9 million ($3.30 per diluted share) in free money movement through the quarter regardless of paying $41.1 million in spinoff money settlements.
2022 Outlook At $100 Oil and $5.00 Gasoline
SilverBow expects to common roughly 245 MMcfe per day in manufacturing in 2022, with 77% of that manufacturing being pure fuel, 13% oil and 10% NGLs.
At $100 WTI oil and $5 Henry Hub fuel in 2022 (near present strip), SilverBow could be projected to generate $582 million in oil and fuel revenues earlier than hedges.
SilverBow’s 2022 hedges have an estimated detrimental $128 million in worth at these commodity costs. SilverBow has hedged roughly 65% of its pure fuel manufacturing, 60% of its oil manufacturing and 48% of its NGL manufacturing for 2022.
| Kind | Items | $/Unit | $ Million |
| Oil (Barrels) | 1,934,500 | $98.50 | $191 |
| NGLs (Barrels) | 1,551,250 | $36.00 | $56 |
| Pure Gasoline [MCF] | 68,437,500 | $4.90 | $335 |
| Hedge Worth | -$128 | ||
| Complete Income | $454 |
Supply: Creator’s Work
SilverBow has a capital expenditure price range of roughly $190 million in 2022, which accounts for almost all of its money prices.
This leads to an estimate that SilverBow can generate $124 million in optimistic money movement in 2022 at $100 WTI oil and $5 Henry Hub pure fuel.
| $ Million | |
| Lease Working Expense | $42 |
| Transportation & Processing | $27 |
| Taxes Different Than Revenue | $35 |
| Money G&A | $16 |
| Money Curiosity | $20 |
| Capital Expenditures | $190 |
| Complete Bills | $330 |
Supply: Creator’s Work
Debt Scenario And Valuation
SilverBow ended 2021 with $376 million in internet debt and will cut back its internet debt to round $252 million by the top of 2022 by way of the optimistic money movement it generates through the yr.
SilverBow additionally has not accomplished its $40 million at-the-market fairness distribution program but, so if it completes that it may find yourself with round $240 million in internet debt on the finish of 2022.
I’ve elevated SilverBow’s estimated worth to round $37 per share in a long-term (after 2022) $70 WTI oil and $3.50 NYMEX fuel state of affairs. The elevated valuation estimate is partly because of the robust (over $100 million in 2022) near-term money movement potential.
SilverBow’s estimated worth adjustments by round $5 per share for each $0.25 change in long-term pure fuel costs (mixed with a $5 change in long-term oil costs).
Conclusion
Sturdy near-term commodity costs might enable SilverBow to generate $124 million in optimistic money movement in 2022. It’s in fine condition almost about its debt, with its second-lien notice maturity pushed again to 2026 and its credit score facility borrowing base elevated to $460 million.
I estimate SilverBow’s worth at roughly $37 per share in a long-term $70 WTI oil and $3.50 NYMEX fuel state of affairs. This valuation can also be near the estimated PV-10 of SilverBow’s PDP reserves utilizing SEC costs (realized costs of $3.75 pure fuel and $63.98 oil).
