SilverBow Resources, Inc., First Quarter 2023 Results

Sean Woolverton, SilverBow's Chief Executive Officer, commented, "Our team continues to execute our 2023 business plan and drive greater operational efficiencies. We achieved strong initial results from oil wells brought online this year reflecting the value of our recent acquisitions and our consolidated acreage blocks. With the relative strength in oil prices since our last update, our development plans are largely unchanged as we expect to double our 2023 oil production year-over-year by continuing with two drilling rigs focused on our oil assets. We expect this oil growth will drive increasing revenue and EBITDA for the remainder of the year and establish a well-balanced PDP production base by year end, providing us optionality in our future development program."

Mr. Woolverton continued, "SilverBow's differentiated growth strategy and commitment to spending within cash flow sets up compelling returns over our multi-year outlook. Our 2023 gas production is over 90% hedged, mitigating downside exposure to lower pricing, and we can elect to complete several Webb County Gas wells by year end should pricing improve. Our strategy emphasizes operational flexibility and real-time capital allocation to our highest returns on investment. The ability to pivot between oil and gas development has been, and will continue to be, a competitive advantage for SilverBow."

OPERATIONS HIGHLIGHTS

During the first quarter of 2023, SilverBow drilled 13 net wells, completed 11 net wells and brought online 13 net wells. The Company operated two drilling rigs during the quarter, primarily on its Central Oil and Western Condensate areas, which reflect its ongoing focus on oil development in the near term. SilverBow's operations team set a new Company record in pumping efficiency during the quarter, completing 25% more stages per day as compared to similar jobs for full year 2022. Drilling and completion costs year to date have trended below levels experienced in 2022, including drilling dayrates, horsepower, sand and chemicals.

In its Central Oil area, the Company completed and brought online two three-well pads which produced 30-day averages of 2,000 Boe/d (93% oil) with average lateral lengths of 7,550 feet. In its Western Condensate area, SilverBow completed and brought online a three-well pad which produced a 30-day average of 2,700 Boe/d (26% oil) with an average lateral length of 7,200 feet. Strong initial performance from these pads are in-line with expectations and support consistent results across the Company's oil development program. As expected, net gas production in SilverBow's Webb County Gas area was limited to contracted firm capacity levels during the quarter. The Company continues to plan for limited interruptible takeaway capacity until late 2023 as new pipelines come into service.

PRODUCTION VOLUMES, OPERATING COSTS AND REALIZED PRICES

SilverBow's total net production for the first quarter of 2023 averaged 304 MMcfe/d, within the Company's guidance range. Production mix for the first quarter consisted of 66% natural gas, 22% oil and 12% natural gas liquids ("NGLs"). Natural gas comprised 38% of total oil and gas sales for the first quarter, compared to 60% in the first quarter of 2022. Net oil production for the first quarter averaged 11,362 Bbls/d, an increase of 138% compared to the first quarter of 2022.

For the first quarter, lease operating expenses ("LOE") were $0.78 per thousand cubic feet of natural gas equivalent ("Mcfe"), transportation and processing expenses ("T&P") were $0.42 per Mcfe and production and ad valorem taxes were 6.7% of oil and gas sales. Total production expenses, which include LOE, T&P and production taxes, were $1.54 per Mcfe for the first quarter. Net general and administrative ("net G&A") expenses for the first quarter were $7.7 million, or $0.28 per Mcfe. After deducting $1.1 million of non-cash compensation expense, cash general and administrative ("cash G&A") (a non-GAAP measure) expenses were $6.5 million for the first quarter, or $0.24 per Mcfe.

Crude oil and natural gas realizations in the first quarter were 96% of WTI and 86% of Henry Hub, respectively, excluding hedging. The average realized natural gas price, excluding hedging, was $2.94 per thousand cubic feet of natural gas ("Mcf") in the first quarter compared to $4.96 per Mcf in the first quarter of 2022. The average realized crude oil selling price, excluding hedging, was $73.01 per barrel in the first quarter compared to $92.59 per barrel in the first quarter of 2022. The average realized NGL selling price, excluding hedging, was $22.95 per barrel (30% of WTI benchmark) in the first quarter compared to $34.89 per barrel (37% of WTI benchmark) in the first quarter of 2022. Please refer to the tables included in this news release for production volumes and pricing information.

FINANCIAL RESULTS

SilverBow reported total oil and gas sales of $140.0 million for the first quarter of 2023. The Company reported net income of $94.5 million, which includes a net unrealized gain on the value of the SilverBow's derivative contracts and WTI contingency payouts of $72 million.

For the first quarter of 2023, the Company generated Adjusted EBITDA (a non-GAAP measure) of $111.0 million. For the twelve months ended March 31, 2023, SilverBow reported net income of $499.2 million and Adjusted EBITDA for Leverage Ratio (a non-GAAP measure) of $492.8 million, which, in accordance with the Leverage Ratio calculation in the Company's Credit Agreement (as defined below), includes contributions from acquired assets prior to their closing dates totaling $62.7 million.

Capital expenditures incurred during the first quarter of 2023 totaled $108.0 million on an accrual basis.

GUIDANCE UPDATE

SilverBow continues to operate two drilling rigs on its oil acreage, consistent with its original budget plans detailed in March. The Company also re-affirmed its full year 2023 capex guidance range of $450-$475 million. During the second quarter of 2023, SilverBow will shift its drilling rig from its Western Condensate area to its Eastern Extension area, where early results are showing strong well performance and potential inventory upside from both the Eagle Ford and Austin Chalk formations. Additionally, included in the 2023 capital budget is the completion of a four-well pad in the Webb County Gas area at year-end, which will be subject to commodity prices and timing of regional midstream expansion projects coming online.

For the second quarter of 2023, SilverBow is guiding to estimated production of 317-332 MMcfe/d, with expected oil volumes of 11,900-12,300 Bbls/d. For the full year 2023, the Company's guidance is unchanged with a production range of 325-345 MMcfe/d, and with expected oil volumes of 13,750-15,000 Bbls/d. Based on guidance, SilverBow's full year 2023 oil production is expected to increase roughly 100% year-over-year and comprise 40%-50% of total production mix by the fourth quarter. The Company's production guidance assumes that gas production from Webb County is limited to contracted firm pipeline capacity for the full year 2023.

Additional detail concerning the Company's second quarter and full year 2023 guidance can be found in the table included with today's new release and the Corporate Presentation in the Investor Relations section of the SilverBow's website.

HEDGING UPDATE

Hedging continues to be an important element of SilverBow's strategy to protect cash flow. The Company's hedging program is structured to provide exposure to higher commodity prices while also protecting against periods of low prices.

As of April 28, 2023, SilverBow had 72% of total production hedged for the remainder of 2023, using the midpoint of guidance. SilverBow has 181 MMcf/d (91% of guidance) of natural gas production hedged at an average price of $3.79 per million British thermal units, 7,399 Bbls/d (48% of guidance) of oil hedged at an average price of $74.55 per barrel and 3,750 Bbls/d (42% of guidance) of NGLs hedged at an average price of $32.98 per barrel for the remainder of 2023. For 2024, the Company has 118 MMcf/d of natural gas production hedged and 3,273 Bbls/d of oil hedged. The hedged amounts are inclusive of both swaps and collars with the average price factoring in the floor price of the collars.

Please see SilverBow's Corporate Presentation and Form 10-Q filing for the first quarter of 2023, which the Company expects to file on Thursday, May 4, 2023, for a detailed summary of its derivative contracts.

CAPITAL STRUCTURE AND LIQUIDITY

As of March 31, 2023, SilverBow had $2.2 million of cash and $559.0 million of outstanding borrowings under its Credit Facility. The Company's liquidity position was $218.2 million consisting of $2.2 million of cash and $216.0 million of availability under the Credit Facility. SilverBow's net debt as of March 31, 2023 was $706.8 million, calculated as total long-term debt of $709.0 million less $2.2 million of cash.

As of April 28, 2023, SilverBow had 22.6 million total common shares outstanding.