Proposes Significant Corporate Governance
Enhancements
Concludes Kimmeridge’s Proposal Substantially
Undervalues SilverBow; Believes Shareholders Need Relevant
Information About KTG Asset Value
Launches www.FutureOfSilverBow.com, Providing
Additional Information for Shareholders
Files Preliminary Proxy Statement and Sends
Letter to Shareholders
SilverBow Resources, Inc. (NYSE: SBOW) (“SilverBow” or the
“Company”) today filed its preliminary proxy statement with the
U.S. Securities and Exchange Commission in connection with the
Company’s 2024 annual meeting of shareholders (the “2024 Annual
Meeting”).
Also in connection with the 2024 Annual Meeting, SilverBow today
sent a letter to its shareholders highlighting:
- The successful implementation of the Company’s strategy to
drive positive business momentum and deliver substantial
shareholder value;
- Recent governance enhancements that the Company has made and
that the SilverBow Board of Directors (the “Board”) is proposing at
the 2024 Annual Meeting to serve shareholders’ best interests;
- SilverBow’s extensive history of engagement with Kimmeridge
Energy Management Company, LLC (“Kimmeridge”) to find a path toward
a value-creating transaction for ALL SilverBow shareholders;
- The Board’s decision to NOT nominate the nominees put forth by
Kimmeridge following a comprehensive, independent process by the
Board’s Nominating and Strategy Committee;
- The Board’s conclusion, after consultation with its independent
financial and legal advisors, that Kimmeridge’s most recent
proposal substantially undervalues SilverBow. The Board believes it
is vital to conduct due diligence on Kimmeridge Texas Gas (“KTG"),
as the Board and shareholders need relevant information to
determine the actual value, not Kimmeridge’s assertion of value, of
the KTG assets; and
- The Board’s commitment to delivering value for ALL
shareholders, including continuing to engage with Kimmeridge
regarding its proposed transaction.
Materials related to the 2024 Annual Meeting, including a fact
sheet outlining the Company’s observations on what it believes are
false claims made by Kimmeridge, are available at
www.FutureOfSilverBow.com.
The full text of the letter sent to shareholders today
follows:
Dear Fellow Shareholders,
The Board of Directors (the “Board”) and
management team of SilverBow Resources, Inc. (“SilverBow” or the
“Company”) have been, and always will be, committed to delivering
substantial value to our shareholders. We have made significant
progress positioning our company to follow through on that
commitment, and SilverBow’s recent results underscore our belief
that we have the right strategy in place to generate strong
shareholder returns as the market continues to improve for our
industry over the coming years.
In addition to discussing our 2023 progress
and 2024 priorities, we want to highlight the recent governance
enhancements we have made and those we are putting up for a vote at
the 2024 annual meeting of shareholders (the “2024 Annual
Meeting”). We will also touch on some additional items you will be
asked to vote on this year.
Importantly, we want to set the record
straight regarding what we believe are false claims made by
Kimmeridge Energy Management Company, LLC (“Kimmeridge”) – a fact
sheet outlining our observations can be found here.
Successfully
Implementing Our Strategy
SilverBow has been successfully implementing
our strategy of building a scalable and durable portfolio, driving
efficiencies and enhancing margins, protecting the balance sheet,
and delivering profitable growth. From 2020 to 2023, we have more
than doubled our portfolio to approximately 1,000 gross locations
across 220,000 acres. We have driven efficiencies across our
portfolio – nearly doubling our EBITDA margins1 while almost
halving our cash G&A1 on $/Boe terms from 2020 to 2023. We have
also strengthened our balance sheet by significantly reducing our
leverage. We have delivered profitable growth, with corporate-level
ROCE of 21%1 over the last three years. Our strategy has proven to
be resilient through market cycles and has delivered significant
shareholder value, with total shareholder returns of more than 550%
since 2021.
Our Positive
Business Momentum
Our results are telling a clear story of the
positive momentum in our business. Despite a challenging operating
environment, SilverBow delivered record results across multiple
metrics in the fourth quarter of 2023, including:
- Net income of $183 million, or $7.12 per share
- Non-GAAP adjusted EBITDA of $172 million1
- Non-GAAP free cash flow of $74 million1
- Year-over-year oil production growth of nearly 75%
Our recent and transformative acquisition in
South Texas strengthened our business and provided us with a
significant expansion of our capital allocation options. Our
portfolio allowed us to effectively adapt to today’s low natural
gas prices and optimize our 2024 plan to maximize free cash flow,
profitably grow oil volumes and reduce debt. The significant and
deliberate steps taken by management and our Board have positioned
us well.
We are confident that our strategy, ability
to execute our plan and proven team will continue to drive
substantial value for our shareholders in the near-and
long-term.
Further
Strengthening Our Board to Drive Shareholder Value
We have conducted a long-term and ongoing
director search process with the assistance of a globally
recognized search firm. Most recently, this process led us to
announce the appointment of Leland T. “Lee” Jourdan to our Board.
Lee replaces Christoph O. Majeske, who concurrently resigned from
the Board following the Strategic Value Partners’ (“SVP”) sell
down.
We are thrilled to welcome Lee to our Board.
A veteran and former officer of the United States Army, he also is
a distinguished public company energy executive with more than 30
years of industry experience. Lee’s final executive post was being
the Chief Diversity and Inclusion Officer of Chevron Corporation.
He brings a demonstrated track record in international and domestic
LNG markets, natural gas trading, business development and, most
recently, being at the forefront of diversity and inclusion efforts
at one of the world’s largest energy companies.
Lee’s appointment builds on our ongoing
commitment to enhance the Board with new skill sets and collective
experiences to help successfully execute our strategy – as well as
further improve the Board’s diversity profile, which is an
important priority for us. Since early 2023, SilverBow has added
four new independent directors.
Enhancing Our
Governance to Serve Your Best Interests
Our commitment to enhancing our governance
goes beyond adding new talent to our Board. We are in constant
dialogue with our shareholders – we hear your feedback and value
your perspectives. To that end, we are pleased to share that the
Board is proposing significant governance changes at the upcoming
2024 Annual Meeting. These include proposals to:
- Declassify the Board and provide for the annual election of all
directors;
- Adopt a majority voting standard in uncontested elections of
directors; and
- Eliminate the supermajority vote requirements for shareholders
to amend certain provisions of our certificate of
incorporation.
These proposals are being made to further
enhance SilverBow’s governance following SVP’s recent sell down in
December 2023, as the Board believes that the historical
post-emergence governance structure is no longer in the best
interests of SilverBow shareholders.
Kimmeridge’s
Self-Serving Proxy Fight
At the 2024 Annual Meeting, you will also be
asked to vote for either SilverBow’s three highly qualified
directors, or those nominated by Kimmeridge in connection with its
proxy fight.
Kimmeridge has repeatedly informed SilverBow
that its ultimate goal is to gain control of the Board by the 2025
annual meeting of shareholders through successive proxy fights.
This could enable it to force a combination between SilverBow and
Kimmeridge Texas Gas (“KTG”).
Kimmeridge’s assertion that we have failed to
engage with Kimmeridge is absolutely false. In our March 1, 2024
letter and as a part of our preliminary proxy statement filed with
the U.S. Securities and Exchange Commission (the “SEC”) on March
28, 2024 (the “Preliminary Proxy Statement”), we have detailed our
history of extensive engagement with Kimmeridge. Over the last two
years, we have worked in good faith to find a path toward a
value-creating transaction for ALL SilverBow shareholders, and not
just Kimmeridge. Engagement to date includes (among others):
- 30+ meetings since June 20, 2022;
- Entry into two NDAs and an amendment to NDA to facilitate
confidential information sharing;
- A proposal by SilverBow with respect to a combination with KTG
in September 2022, which Kimmeridge rejected in favor of its stated
goal of acquiring control of the Company through share
accumulations; and
- An agreement on terms for an all-cash acquisition proposal in
February 2023 – which Kimmeridge failed to consummate due to lack of financing
(despite Kimmeridge’s representation that its proposal was not
subject to any financing contingencies and that it had confirmed
financing).
SilverBow has been
and continues to be open to exploring a transaction at an
appropriate valuation. As with prior engagements, Kimmeridge is
once again demanding that SilverBow acquire KTG on its proposed
valuation and financing terms.
Interestingly,
Kimmeridge has not tried to sell KTG in a competitive process,
which would be a logical action to crystallize value for KTG’s
investors if KTG is as valuable as Kimmeridge claims it to be.
Notably, Kimmeridge has not made public the relevant information
for SilverBow and its shareholders to be able to independently
evaluate these assets. At the same time, in case Kimmeridge is not
able to force its proposed transaction in the near-term, Kimmeridge
is trying to install its director nominees on the Board, in order
to take control of the Company without paying an appropriate
premium and have their newly appointed directors force the KTG
transaction at a later date.
Our goal is to drive value, and we do not
believe a wasteful proxy fight is in your best interest. Despite
Kimmeridge’s tactics, we offered Kimmeridge a solution where we
would interview and appoint an independent board nominee with its
input, among other settlement provisions. Unfortunately, Kimmeridge
rejected this proposal in favor of today’s proxy fight and refused
to engage in any reasonable settlement that would have restricted
its ability to pursue one or more wasteful proxy fights.
Voting for
Directors: The Choice Is Clear
We are providing you with the facts to help
you make the right decision about which director candidates to
support at the 2024 Annual Meeting.
All three of Kimmeridge’s nominees have close
ties to or history with Kimmeridge, calling into question their
independence and ability to represent the interests of all
SilverBow shareholders. In addition, the Kimmeridge nominees have
mixed track records that include destruction of value.
- Douglas Brooks served as a director at California Resources
during Kimmeridge’s campaign at the company.
- Carrie Fox has a $3 million limited partnership interest in
Kimmeridge Fund VI and served as a director alongside Ben Dell,
Kimmeridge’s Managing Partner, at two Kimmeridge-controlled
companies, Extraction Oil and Civitas Resources.
- Katherine Minyard was appointed to Ovintiv’s Board as a
Kimmeridge nominee.
Furthermore, the Kimmeridge nominees have
been promised seats on the proposed combined company board of
SilverBow and KTG. The Board believes this “special deal” conflicts
Kimmeridge in independently evaluating its proposal against other
potentially value-maximizing opportunities available to SilverBow.
SilverBow has provided additional information about the Kimmeridge
nominees at www.FutureOfSilverBow.com.
In contrast, the Company’s proposed slate is
made up of three independent, highly qualified directors – Gabriel
L. Ellisor, Kathleen McAllister and Charles W. Wampler – with
extensive public company board and executive leadership experience.
Of note, Kathleen McAllister was recently added to our Board in
January 2023 and joined both our Audit Committee and Nominating and
Strategy Committee in May 2023. Additional information about the
SilverBow nominees can be found at www.FutureOfSilverBow.com.
Our thorough assessment of the Kimmeridge
nominees and our decision not to nominate them follows a
comprehensive, independent process conducted by our Nominating and
Strategy Committee to evaluate each of the nominees, including
thorough interviews to better understand their relationships with
Kimmeridge and purported qualifications.
Our Commitment to
Value
The Board is committed to delivering value
for ALL shareholders, and we will continue to engage with
Kimmeridge regarding its proposed transaction. Following
Kimmeridge’s notice to nominate for three board seats in February
2024, our Board met with Kimmeridge’s Managing Partner in person to
continue to discuss a potential combination. It’s important that
you know we will only pursue opportunities that would provide full
and fair value for our assets and are in the best interests of ALL
SilverBow shareholders.
The Board has been reviewing Kimmeridge’s
proposal with respect to the most recent variation of a potential
transaction between SilverBow and KTG. The Board has concluded,
after consultation with its independent financial and legal
advisors, that this most recent proposal substantially undervalues
SilverBow. The Board has concerns over the alleged value of the KTG
assets, which we believe may be overstated in a manner that would
advantage Kimmeridge in a combination at the expense of our other
shareholders. We believe it is vital to conduct due diligence on
KTG, as the Board and the Company’s shareholders need relevant
information to determine the actual value, not Kimmeridge’s
assertion of value, of the KTG assets.
Your Support for
SilverBow’s Directors and Proposals at the 2024 Annual Meeting Is
Critical
Your vote is critical, and we want to ensure
you have all the facts to make the right choice. We encourage you
to protect your investments by voting FOR the Company’s proposed
slate – Gabriel L. Ellisor, Kathleen McAllister and Charles W.
Wampler – over Kimmeridge’s conflicted nominees and AGAINST its
proposal to remove a fourth director, Lee Jourdan.
We look forward to engaging with you further
ahead of the 2024 Annual Meeting and hearing your perspectives. If
you have any questions, please call Innisfree M&A Incorporated,
SilverBow’s proxy solicitor, at the number indicated below. Thank
you for your continued investment in SilverBow.
Sincerely,
The SilverBow Board of Directors
If you have any questions, please call
SilverBow’s proxy solicitor:
Innisfree M&A Incorporated 501
Madison Avenue, 20th Floor New York, New York 10022 Shareholders:
(877) 825-8793 (toll-free from the U.S. or Canada) or (412)
232-3651 (from other countries) Banks and brokers may call collect:
(212) 750-5833
ABOUT SILVERBOW RESOURCES, INC.
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 and Austin Chalk
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. For more information, please
visit www.sbow.com. Information on the Company’s website is not
part of this release.
FORWARD-LOOKING STATEMENTS
This communication includes “forward-looking statements” within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. These forward-looking statements represent management’s
expectations or beliefs concerning future events, and it is
possible that the results described in this communication will not
be achieved. These forward-looking statements are based on current
expectations and assumptions and are subject to a number of risks
and uncertainties, many of which are beyond our control. All
statements, other than statements of historical fact included in
this communication, including those regarding our strategy, the
benefits of the acquisitions, future operations, guidance and
outlook, financial position, prospects, plans and objectives of
management are forward-looking statements. When used in this
report, the words “will,” “could,” “believe,” “anticipate,”
“intend,” “estimate,” “budgeted,” “guidance,” “expect,” “may,”
“continue,” “potential,” “plan,” “project,” “positioned,” “should”
and similar expressions are intended to identify forward-looking
statements, although not all forward-looking statements contain
such identifying words. Important factors that could cause actual
results to differ materially from our expectations include, but are
not limited to, the following risks and uncertainties: risk related
to recently completed acquisitions and integrations of these
acquisitions; volatility in natural gas, oil and natural gas liquid
prices; cash flow and liquidity, including our ability to satisfy
our short- or long-term liquidity needs; general economic and
political conditions, including inflationary pressures, further
increases in interest rates, a general economic slowdown or
recession, instability in financial institutions, political
tensions and war (including future developments in the ongoing
conflicts in Ukraine and the Gaza Strip); the severity and duration
of world health events, including health crises, and related
economic repercussions, including disruptions in the oil and gas
industry, supply chain disruptions, and operational challenges; our
ability to execute on strategic initiatives; effectiveness of our
risk management activities, including hedging strategy;
counterparty and credit market risk; actions by third parties,
including customers, service providers and shareholders; current
and future governmental regulation and taxation of the oil and
natural gas industry; developments in world oil and natural gas
markets and in oil and natural gas-producing countries; uncertainty
regarding our future operating results; and other risks and
uncertainties discussed in the Company’s reports filed with the
U.S. Securities and Exchange Commission (the “SEC”), including its
annual report on Form 10-K for the year ended December 31,
2023.
All forward-looking statements speak only as of the date of this
communication. You should not place undue reliance on these
forward-looking statements. The Company’s capital budget, operating
plan, service cost outlook and development plans are subject to
change at any time. Although we believe that our plans, intentions
and expectations reflected in or suggested by the forward-looking
statements we make in this communication are reasonable, we can
give no assurance that these plans, intentions or expectations will
be achieved. The risk factors and other factors noted herein and in
the Company’s SEC filings could cause its actual results to differ
materially from those contained in any forward-looking statement.
These cautionary statements qualify all forward-looking statements
attributable to us or persons acting on our behalf.
All subsequent written and oral forward-looking statements
attributable to us or to persons acting on our behalf are expressly
qualified in their entirety by the foregoing. We undertake no
obligation to publicly release the results of any revisions to any
such forward-looking statements that may be made to reflect events
or circumstances after the date of this communication or to reflect
the occurrence of unanticipated events, except as required by
law.
IMPORTANT ADDITIONAL INFORMATION AND WHERE TO FIND IT
The Company, its directors and certain of its executive officers
and employees are or will be participants in the solicitation of
proxies from shareholders in connection with the 2024 Annual
Meeting. The Company has filed a preliminary proxy statement (the
“Preliminary Proxy Statement”) with the SEC on March 28, 2024 in
connection with the solicitation of proxies for the 2024 Annual
Meeting, together with a WHITE proxy card.
The identity of the participants, their direct or indirect
interests, by security holdings or otherwise, and other information
relating to the participants are available in the Preliminary Proxy
Statement (available here) in the section entitled “Security
Ownership of Board of Directors and Management” and Appendix F. To
the extent holdings of the Company’s securities by the Company’s
directors and executive officers changes from the information
included in this communication, such information will be reflected
on Statements of Change in Ownership on Forms 3, 4 or 5 filed with
the SEC. These documents are available free of charge as described
below.
SHAREHOLDERS ARE URGED TO READ THE PRELIMINARY PROXY STATEMENT
AND THE DEFINITIVE PROXY STATEMENT (WHEN IT BECOMES AVAILABLE) AND
ANY OTHER DOCUMENTS TO BE FILED BY THE COMPANY WITH THE SEC
CAREFULLY AND IN THEIR ENTIRETY BECAUSE THEY CONTAIN OR WILL
CONTAIN IMPORTANT INFORMATION. Shareholders are able to obtain,
free of charge, copies of all of the foregoing documents, any
amendments or supplements thereto at the SEC’s website
(http://www.sec.gov). Copies of the foregoing documents, any
amendments or supplements thereto are also available, free of
charge, at the “Investor Relations” section of the Company’s
website (https://www.sbow.com/investor-relations).
Appendix A
Reconciliation of Net Income (Loss) to Adjusted EBITDA and
Free Cash Flow (Unaudited) SilverBow Resources, Inc. and
Subsidiary
The below tables provide the calculation of Adjusted EBITDA,
Free Cash Flow and EBITDA margin for the following periods (in
thousands, except per Boe information)
Three Months Ended December
31, 2023
Three Months Ended December
31, 2022
Net Income (Loss)
$
183,058
$
173,360
Plus:
Depreciation, depletion and
amortization
$
72,080
$
44,886
Accretion of asset retirement
obligations
266
169
Interest expense
25,373
15,316
Loss (gain) on commodity derivatives,
net
(183,706
)
(83,932
)
Derivative cash settlements
collected/(paid) (1)
23,053
(33,856
)
Income tax expense/(benefit)
50,398
1,922
Share-based compensation expense
1,483
1,185
Adjusted EBITDA (2)
$
172,005
$
119,050
Plus:
Cash interest and bank fees, net
$
(18,683
)
$
(14,293
)
Capital expenditures (3)
(78,685
)
(102,702
)
Current income tax (expense)/benefit
(204
)
207
Free Cash Flow (2)
$
74,433
$
2,262
EBITDA Margin (per Boe) (4)
$
25.93
$
24.64
(1) Amounts relate to settled contracts
covering the production months during the period
(2) Refer to Appendix E of the Preliminary
Proxy Statement for additional information
(3) Excludes proceeds/(payments) related
to the divestiture/(acquisition) of oil and gas properties and
equipment, outside of regular way land and leasing costs
(4) EBITDA margin is calculated as
Adjusted EBITDA divided by total production
Reconciliation of Net Income (Loss) to Adjusted EBITDA and
Free Cash Flow (Unaudited) SilverBow Resources, Inc. and
Subsidiary
The below tables provide the calculation of Adjusted EBITDA,
Free Cash Flow and EBITDA margin for the following periods (in
thousands, except per Boe information)
Year Ended December 31,
2023
Year Ended December 31,
2022
Net Income (Loss)
$
297,716
$
340,437
Plus:
Depreciation, depletion and
amortization
$
219,116
$
133,982
Accretion of asset retirement
obligations
985
534
Interest expense
80,119
41,948
Loss (gain) on commodity derivatives,
net
(241,309
)
73,885
Derivative cash settlements
collected/(paid) (1)
90,395
(212,416
)
Income tax expense/(benefit)
83,613
9,600
Share-based compensation expense
5,526
5,086
Adjusted EBITDA (2)
$
536,161
$
393,056
Plus:
Cash interest and bank fees, net
$
(70,853
)
$
(44,038
)
Capital expenditures (3)
(408,591
)
(327,504
)
Current income tax (expense)/benefit
(526
)
26
Free Cash Flow (2)
$
56,191
$
21,540
EBITDA Margin (per Boe) (4)
$
24.75
$
23.95
(1) Amounts relate to settled contracts
covering the production months during the period
(2) Refer to Appendix E of the Preliminary
Proxy Statement for additional information
(3) Excludes proceeds/(payments) related
to the divestiture/(acquisition) of oil and gas properties and
equipment, outside of regular way land and leasing costs
(4) EBITDA margin is calculated as
Adjusted EBITDA divided by total production
Reconciliation of Net Income (Loss) to Adjusted EBITDA and
Free Cash Flow (Unaudited) SilverBow Resources, Inc. and
Subsidiary
The below tables provide the calculation of Adjusted EBITDA,
Free Cash Flow and EBITDA margin for the following periods (in
thousands, except per Boe information)
Year Ended December 31,
2020
Year Ended December 31,
2019
Net Income (Loss)
$
(309,382
)
$
114,656
Plus:
Depreciation, depletion and
amortization
$
64,564
$
95,915
Accretion of asset retirement
obligations
354
329
Interest expense
31,228
36,561
Write-down of oil and gas properties
355,948
—
Loss (gain) on commodity derivatives,
net
(61,604
)
(24,242
)
Derivative cash settlements
collected/(paid) (1)
39,424
24,808
Income tax expense/(benefit)
20,911
(21,582
)
Share-based compensation expense
4,557
6,148
Adjusted EBITDA (2)
$
146,300
$
232,593
Plus:
Monetized derivative contracts
$
38,310
$
—
Cash interest and bank fees, net
(28,929
)
(34,408
)
Capital expenditures (3)
(95,241
)
(261,662
)
Current income tax (expense)/benefit
480
(519
)
Free Cash Flow (2)
$
60,920
$
(63,996
)
EBITDA Margin (per Boe) (4)
$
13.14
$
16.55
(1) Amounts relate to settled contracts
covering the production months during the period
(2) Refer to Appendix E of the Preliminary
Proxy Statement for additional information
(3) Excludes proceeds/(payments) related
to the divestiture/(acquisition) of oil and gas properties and
equipment, outside of regular way land and leasing costs
(4) EBITDA margin is calculated as
Adjusted EBITDA divided by total production
Reconciliation of General & Administrative Expenses to
Cash General & Administrative Expenses (Unaudited)
SilverBow Resources, Inc. and Subsidiary
The below tables provide the calculation of cash G&A for the
following periods (in thousands, except per Boe information)
Year Ended December 31,
2023
Year Ended December 31,
2022
General and administrative, net
$
24,520
$
21,395
Less: Share-based compensation expense
5,526
5,086
Cash general and administrative,
net
$
18,994
$
16,309
General and administrative, net (per
Boe)
$
1.13
$
1.30
Less: Share-based compensation expense
(per Boe)
0.25
0.31
Cash general and administrative, net
(per Boe)
$
0.88
$
0.99
Year Ended December 31,
2020
Year Ended December 31,
2019
General and administrative, net
$
22,608
$
24,851
Less: Share-based compensation expense
4,557
6,148
Cash general and administrative,
net
$
18,051
$
18,703
General and administrative, net (per
Boe)
$
2.03
$
1.77
Less: Share-based compensation expense
(per Boe)
0.41
0.44
Cash general and administrative, net
(per Boe)
$
1.62
$
1.33
Reconciliation of Net Income (Loss) to Return on Capital
Employed (Unaudited) SilverBow Resources, Inc. and
Subsidiary
The below tables provide the calculation of Return on Capital
Employed for the following periods (in thousands)
Year Ended December 31,
2023
Year Ended December 31,
2022
Year Ended December 31,
2021
Net Income (Loss)
$
297,716
$
340,437
$
86,759
Plus:
Depreciation, depletion and
amortization
219,116
133,982
68,629
Accretion of asset retirement
obligations
985
534
306
Interest expense
80,119
41,948
29,129
Derivative (gain)/loss
(241,309
)
73,885
123,018
Derivative cash settlements
collected/(paid) (1)
90,395
(212,416
)
(73,256
)
Income tax expense/(benefit)
83,613
9,600
6,398
Share-based compensation expense
5,526
5,086
4,645
Adjusted EBITDA
$
536,161
$
393,056
$
245,628
Less: Depreciation, depletion and
amortization
(219,116
)
(133,982
)
(68,629
)
Adjusted EBIT (A)
$
317,045
$
259,074
$
176,999
Total Debt
$
692,000
$
377,000
$
430,000
Shareholders Equity (2)
791,579
292,532
446,981
Capital Employed - Beginning of
Year
$
1,483,579
$
669,532
$
876,981
Total Debt
$
1,222,000
$
692,000
$
377,000
Shareholders Equity
1,189,328
791,579
292,532
Capital Employed - Year-End
$
2,411,328
$
1,483,579
$
669,532
Average Capital Employed (B)
(3)
$
1,947,454
$
1,076,556
$
773,256.5
Return on Capital Employed (ROCE) (A /
B) (4)
16
%
24
%
23
%
(1) Includes accruals for settled
contracts covering commodity deliveries during the period where the
actual cash settlements occur outside of the period.
(2) Shareholder’s Equity at Beginning of
Year 2021 excludes the impact of write-down of oil and gas
properties during 2020
(3) B = Average of Beginning of Year and
Year-End Capital Employed
(4) Refer to Appendix E of the Preliminary
Proxy Statement for additional information
1 Non-GAAP measure. Refer to Appendix A of this letter for
definitions and reconciliations.
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