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SilverBow to Cut 55% of Capex Plan to Combat Coronavirus Fallout
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SilverBow Resources, Inc. (SBOW - Free Report) recently announced its downward revision of 2020 capital budget in the wake of a weak commodity pricing scenario amid the coronavirus-forced demand contraction. Reduction in demand at a time of surplus supply caused a dramatic decline in crude oil prices, which have plunged 63.3% year to date. Meanwhile, natural gas, on which the company is heavily dependent, recently hit an all-time low since 1995.
At present, there are hardly any indications of an upward revision in oil or natural gas consumption. Natural gas is on the defensive because of mild winter weather (causing diminished demand for room heating) even when production is at optimum level. Further, with governments worldwide imposing a complete lockdown to break the chain of the coronavirus spread, demand will persistently be weak.
Capital Budget Cut
The company is planning to control capital spending by 55% from the midpoint of its previously provided capital budget outlook to the range of $80-$95 million. With commodity prices now trending in the bearish territory as the coronavirus pandemic has been hurting global energy demand, the outlook for exploration and production business seems downbeat. SilverBow is hugely affected by the crude oil and natural gas price crash. The stock has slumped 68.1% year to date.
Operational and Production Update
This Houston, Texas-based E&P player plans to halt any further drilling and completion activity until commodity prices improve sufficiently. SilverBow postponed its plan of completion and production from eight oil wells until/through at least July.
This energy player had already reduced 35 million cubic feet per day (MMcf/d) of net gas production in the second half of the last month. It further plans to cut back a total of 50 MMcf/d of net gas and nearly 2,000 barrels per day of net oil production, this month.
For the first quarter of 2020, SilverBow anticipates a total net production of around 230 million cubic feet equivalent per day, comprising 79% natural gas, 12% oil and 9% natural gas liquids.
At the end of the first quarter, SilverBow had $35.6 million of cash plus a $110-million credit facility for total liquidity of $145.6 million. The company has $454.4 million in net debt on its balance sheet.
SilverBow announced an acquisition in the Eagle Ford shale. The acquired properties produce 10 MMcf/d. At the same time, the company is divesting a portion of its Powder River Basin assets.
Notably, this Zacks Rank #3 (Hold) company is not the only exploration and production entity that will slash its capital spending in current times. Murphy Oil (MUR - Free Report) , Ovintiv Inc. (OVV - Free Report) and Devon Energy (DVN - Free Report) too simplified their expenditure plan to sustain liquidity. These industry participants intend to tide over the tough times while maintaining financial flexibility and operational excellence. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
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SilverBow to Cut 55% of Capex Plan to Combat Coronavirus Fallout
SilverBow Resources, Inc. (SBOW - Free Report) recently announced its downward revision of 2020 capital budget in the wake of a weak commodity pricing scenario amid the coronavirus-forced demand contraction. Reduction in demand at a time of surplus supply caused a dramatic decline in crude oil prices, which have plunged 63.3% year to date. Meanwhile, natural gas, on which the company is heavily dependent, recently hit an all-time low since 1995.
At present, there are hardly any indications of an upward revision in oil or natural gas consumption. Natural gas is on the defensive because of mild winter weather (causing diminished demand for room heating) even when production is at optimum level. Further, with governments worldwide imposing a complete lockdown to break the chain of the coronavirus spread, demand will persistently be weak.
Capital Budget Cut
The company is planning to control capital spending by 55% from the midpoint of its previously provided capital budget outlook to the range of $80-$95 million. With commodity prices now trending in the bearish territory as the coronavirus pandemic has been hurting global energy demand, the outlook for exploration and production business seems downbeat. SilverBow is hugely affected by the crude oil and natural gas price crash. The stock has slumped 68.1% year to date.
Operational and Production Update
This Houston, Texas-based E&P player plans to halt any further drilling and completion activity until commodity prices improve sufficiently. SilverBow postponed its plan of completion and production from eight oil wells until/through at least July.
This energy player had already reduced 35 million cubic feet per day (MMcf/d) of net gas production in the second half of the last month. It further plans to cut back a total of 50 MMcf/d of net gas and nearly 2,000 barrels per day of net oil production, this month.
For the first quarter of 2020, SilverBow anticipates a total net production of around 230 million cubic feet equivalent per day, comprising 79% natural gas, 12% oil and 9% natural gas liquids.
SilverBow Resources Inc. Price
SilverBow Resources Inc. price | SilverBow Resources Inc. Quote
Balance Sheet & Other Updates
At the end of the first quarter, SilverBow had $35.6 million of cash plus a $110-million credit facility for total liquidity of $145.6 million. The company has $454.4 million in net debt on its balance sheet.
SilverBow announced an acquisition in the Eagle Ford shale. The acquired properties produce 10 MMcf/d. At the same time, the company is divesting a portion of its Powder River Basin assets.
Notably, this Zacks Rank #3 (Hold) company is not the only exploration and production entity that will slash its capital spending in current times. Murphy Oil (MUR - Free Report) , Ovintiv Inc. (OVV - Free Report) and Devon Energy (DVN - Free Report) too simplified their expenditure plan to sustain liquidity. These industry participants intend to tide over the tough times while maintaining financial flexibility and operational excellence. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>