SilverBow Resources, Inc. (SBOW) CEO Sean Woolverton on Q4 2020 Results - Earnings Call Transcript

SilverBow Resources, Inc. (NYSE:SBOW) Q4 2020 Earnings Conference Call March 4, 2021 10:00 AM ET

Company Participants

Jeff Magids - Director of Finance & Investor Relations

Sean Woolverton - Chief Executive Officer

Steven Adam - Chief Operating Officer

Christopher Abundis - Chief Financial Officer

Conference Call Participants

Duncan McIntosh - Johnson Rice & Company

Neal Dingmann - Truist Securities

Jeff Robertson - Water Tower Research

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the SilverBow Resources' Fourth Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation there will be a question-and-answer session. [Operator Instructions]

Now, I'd like to hand the call conference over to Mr. Jeff Magids, Director of Finance Investor Relations. Please go ahead, sir.

Jeff Magids

Thank you, Angel, and good morning, everyone. Thank you very much for joining us for our fourth quarter and full year 2020 conference call. With me on the call today are: Sean Woolverton, our CEO; Steve Adam, our COO; and Chris Abundis, our CFO.

Yesterday afternoon, we posted a new corporate presentation to our website and will occasionally refer to it during this call. We encourage listeners to download the latest materials. Please note that we may make references to certain non-GAAP financial measures which are reconciled to their closest GAAP measure in the earnings press release.

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.

With that I will turn the call over to Sean.

Sean Woolverton

Thank you, Jeff, and thank you everyone for joining our call this morning. On behalf of SilverBow, I hope everyone who may have been affected by the weather-related events across the south are doing well. It has certainly been a challenging last few weeks. To start, I will review our impressive fourth quarter and full year results. I will then provide a brief overview of our 2021 business plan.

This past year showcased SilverBow's commitment towards our return-to-space strategy. We entered 2020 with the target of growing oil volumes by 70% and generating free cash flow in the second half of the year. By March, the global pandemic in commodity price environment necessitated a different approach to maximize stakeholder value.

In response, we took immediate actions to revise our original 2020 program. Specifically in the second quarter, we refocused our drilling schedule and temporarily altered our D&C spend. We curtail production and deferred completion activity, thereby aligning our volumes with higher prices later in the year.

By recognizing changes to our production profile, over the next 24 months, we brought forward $38 million in cash by monetizing excess oil derivatives in March. Finally, amidst this disruption, we also closed on two A&D transactions in the second quarter.

By year end, we have reduced our capital budget by nearly $100 million and paid down $50 million of debt. SilverBow generated more than $60 million the free cash flow over 2020, ahead of the $50 million guidance we stated on our last call. Fourth quarter free cash flow of $12 million marks five out of the last six quarters in which we were free cash flow positive.

The impressive results were a testament to the hard work and dedication of our team who executed on our mission, even with disruptions to their daily lives. Our operations team renegotiated rates with our service providers and reviewed our costs from top to bottom to find incremental savings. Our corporate office implemented a work-from-home schedule to protect our employees and found new ways to streamline activities and increase our efficiencies going forward.

Thus far, we have identified $2.2 million of cash G&A cost savings for 2021. We also reached a critical milestone in operational safety with zero total recordable incidents for the year. This is remarkable considering the pace of change within our operations. We're proud to set new standards for safety and efficiency here at SilverBow.

In addition, SilverBow was recognized as one of the top workplaces by the Houston Chronicle. On top of our safety achievements, SilverBow continued to set new operational efficiency records. This past year, we drilled more lateral feet and completed more stages per day, thereby reducing our capital costs per foot per stage and per well. In face of all the headwinds in 2020, SilverBow delivered record free cash flow, absolute debt reduction, and positioned itself to benefit from an improving commodity price outlook.

For the fourth quarter of 2020, net production averaged $178 million cubic feet of natural gas equivalent per day above the midpoint of our guidance. Our 2020 CapEx of $95 million was at the low end of our guidance, and coupled with favorable pricing and production performance, we generated $12 million of free cash and paid down $23 million of absolute debt during the fourth quarter. At year end, the PV-10 value of our approved reserves at $50 oil and $2.75 gas was approximately $850 million, which equates to a $35 share price after backing out our debt.

As we look ahead, we plan to hold our full year 2021 capital spend at similar levels to 2020. Our capital budget range of $100 million to $110 million delivers single digit production growth and continued debt pay down. Signature to SilverBow, we have the flexibility to adjust the cadence and hydrocarbon mix of our drill schedule and to maintain multiple playbooks to optimize real time.

With strengthening gas prices, we are poised to generate another year of meaningful free cash flow and debt reduction. At current strip, we expect full year 2021 free cash flow to be in the range of $20 million to $40 million. Our gas' [ph] position over the next two years utilizes a heavier mix of colors, preserving our upside to improving gas price fundamentals. Given the constructive fundamentals for gas, approximately 40% of our 2021 gas volumes are unhedged.

Included in our development plan this year is an Austin Chalk well, which is currently on flowback. We are encouraged by the early results from this test and see the potential for offset locations over our acreage position in Webb County.

Any inventory additions add incremental value to both our future reserves and our borrowing base. Our ground game leasing strategy is focused on and accretive A&D opportunities to add locations and extend lateral lengths.

Finally, we remain disciplined on larger scale M&A. We believe that the recent move up in commodity prices have brought both buyers and sellers closer to the table. Before turning the call over, I will add that our 2021 budget is not focused on just one year. We are taking the necessary steps to grow production in EBITDA, expand inventory, drive capital efficiencies and delever the balance sheet.

Our organizational culture is focused on empowering our team to drive incremental value in everything they do on a daily basis. We have demonstrated a track record of meeting or exceeding our objectives. And we look forward to continue to deliver on our corporate strategy in the years ahead.

And with that, I'll hand the call over to Steve.

Steven Adam

Thank you, Sean. Moving on to our operational results. This year, amidst all the disruptions of 2020, our team set new high watermarks in both safety and efficiency. First, I would like to congratulate the team for a recordable incident rate of zero in 2020, which is not just a milestone but is now a go-forward standard. At the same time, our team also continued to drive operational efficiencies and recognized cost savings. As shown on Slide 19 and 20 of our presentation, we drilled 44% more feet per day and reduced our drilling costs by 32% per foot compared to 2019. On the completion side, we completed 8% more stages per day and reduced completion cost per well by 13%.

In the fourth quarter, we drilled and completed three Fasken wells and began drilling our second six-well La Mesa pad. The Fasken pad achieved a record-setting 18 stages per day and was brought online in December $3 million under budget. With regards to our second La Mesa pad, we benefited significantly from the process improvement and cost efficiencies we learned from our first La Mesa pad, reducing drilling cycle times by 28%. In short, our team continues to demonstrate its track record of operational execution.

As Sean mentioned during the second quarter of 2020, we made strategic decisions to curtail volumes and defer completions. All curtailed wells were back online in the fourth quarter and we're producing as expected. On a full-year basis, we estimate the curtailment program amounted to 11 mmcf per day of net cash production, and 340 barrels per day of net oil production, which is approximately 8% of both our oil and gas production for 2020.

For the full-year 2020, we drilled 19 net wells and completed 15 net wells. Our drilling focus shifted from oil development in the early part of the year to gas development in the second half of the year. Looking forward to 2021, we plan to drill 15 net wells and complete 19 net wells. Our near term for focus over the first half of the year will be on our web county gas assets. Over the summer, we plan to allocate capital to liquids-weighted opportunities in our La Salle condensate area. Later in the year, we plan to ship capital back to our Webb County gas area.

As Sean noted, our full-year capital budget range is $100 million to $110 million, which we expect to deliver single digit production growth, positive free cash flow, and further debt reduction. From an investment standpoint, we expect our capital incurred to be higher in their first quarter as we complete our remaining La Mesa wells and bring on the Austin Chalk test.

Having the flexibility optimized our development program and capture the highest returns throughout the year remains core to our strategy. For the first quarter of 2021, we are guiding to average production of 168 to 179 mmcfe per day, with gas comprising approximately 78% of production at the midpoint.

For the full-year, average production guidance is 180 to 200 mmcf per day, with gas comprising approximately 79% of production, up from 76% in 2020. At the midpoint, our full-year of production guidance targets a 5% increase in production year-over-year. Note that our first quarter gas production has only a few weeks of contribution from our recent La Mesa pad.

Furthermore, we anticipate our oil production to pick back up in the third quarter as our La Salle wells are brought online. While we rejected ethane in January, we switch to full recovery in February and March and we'll continue to use our optionality to make monthly elections [ph] for the remainder of the year to optimize value.

On the cost front, we have several expense projects related to maintenance and production optimization of a portion of our production base, which will result in slightly higher LOE per unit in the first quarter. For a breakdown of our 2021 guidance, please review our latest press release in our corporate presentation on our website.

As we progress through the year, our goal is to continue to improve upon our efficiencies while maintaining safe and environmentally-responsible operations. As shown on Slide 6 in our corporate presentation SilverBow ranks amongst the lowest equivalent emission intensity operators in the Eagle Ford, both public and private. Our incident free safety record now stands at over 1,000 days and counting. Working to ensure the safety of our employees, contractors and service personnel is of paramount importance. This along with a balanced mix of our inventory and the flexibility of our development program were integral to our success in 2020 and will continue to be at the core of our strategy moving forward.

With that, I'll turn the call over to Chris.

Christopher Abundis

Thanks, Steve. In my comments this morning, I will highlight our fourth quarter and full year financial results as well as our operating costs, hedging program and capital structure.

Fourth quarter oil and gas sales were $53 million, excluding derivatives with natural gas representing 73% of production and 60% of sales. During the quarter, our realized oil price was 91% of NYMEX WTI. Our realized gas price was 101% of NYMEX Henry Hub and our realized NGL price was 37% of NYMEX WTI.

Due to higher commodity prices, our realized price excluding hedges was $3.217 per mcfe, an increased from $2.72 per mcfe in the third quarter of 2020, and $3.24 per mcfe in the fourth quarter of 2019. Our cash gain on settled hedged contracts was $1 million for the fourth quarter and $78 million for the full-year, inclusive of the monetized derivative contracts.

As of February 26, SilverBow had 63% of total estimated production volumes hedged for the full-year 2021, using the midpoint of production guidance. Our expected oil production is 91% hedged with a weighted average price of $46.91 per barrel of oil. Our expected gas production is 61% hedged with a weighted average price of $2.90 per mmbtu. Our expected NGL production is 46% hedged with a weighted average price of $23.94 per barrel of NGL.

Our hedges are a combination of swaps and collars with a weighted average price factoring in the ceiling price for the collars. Risk Management is a key aspect of our business and we are proactive in adding oil and gas basis and calendar month average role swaps to further supplement our hedging strategy. We continue to use basis swaps to manage our exposure to differentials. For 2021, we have guest basis hedges on 110 mmcf per day with a weighted average differential of negative $0.02.

SilverBow's hedges also provided relief from full-year 2020 benchmark prices. Excluding the impact of hedges, we realized an average gas price of $2.06 per mcf, an average oil price of $37.89 per barrel, and a total equivalent price of $2.66 per mcfe. Including the hedge impact of cash settled derivatives, our average realized prices were $2.44 per mcf for gas, $51.16 per barrel for oil, and $3.25 per mcfe on a total equivalency basis.

Our combination of SilverBow's hedges and production timing resulting in a $0.38 uplift in our realized gas price, and a $13 uplift in our realized oil price for the full year. This does not include the impact of our hedge monetization of $38 million received during the first quarter of 2020. While we are encouraged by the relative improvement in benchmark pricing during the fourth quarter and early in 2021, we plan to remain conservative in our capital investment and judicious in locking in favorable returns.

As shown on Slide 16 of the corporate presentation, we consistently realize prices close to NYMEX benchmarks and maintain favorable basis premiums. This is a key competitive advantage of our Gulf Coast asset base.

Turning to cost and expenses. LOE was $0.33 per mcfe for the fourth quarter. Transportation and processing costs were $0.27 per mcfe for the fourth quarter, while production taxes were 5.6% of sales or $0.18 per mcfe. All of these costs compared favorably to our guidance ranges, adding our LOE, T&P and production taxes together, we achieved total production expenses of $0.78 per mcfe, continuing our trend of total production expenses of less than $1 per mcfe and which we believe stands out amongst our gas producing tiers.

Cash G&A of $3.6 million for the fourth quarter, which excludes stock based compensation was below the midpoint of guidance of $4.3 million and more than a 20% reduction compared to the prior quarter and prior year periods. Total cash operating expenses including total production expenses and cash G&A totaled $1 per mcfe for the quarter.

For portfolio year 2021, we are guiding for cash G&A of $16.5 million [ph] at the midpoint, a 12% decrease from full-year 2020. We consider our lien cost structure to be a competitive advantage which allows us to sustain profitability during periods of volatile commodity prices. As we move through 2021, we intend to identify further savings.

Adjusted EBITDA for the fourth quarter was $38 million. Adjusted EBITDA for purposes of calculating our leverage ratio was $48 million, which includes amortized derivative add backs of approximately $9 million.

In conjunction with unwinding oil derivative contracts related to production periods in 2020 and 2021, SilverBow is able to amortize the $38 million we received in March of 2020 as add back gain in discrete amounts extending from April 2020 through December of 2021.

The amortized hedged gains factor into SilverBow's adjusted EBITDA calculation for covenant purposes over the same time period and therefore important for investors and research analysts to understand when tracking our leverage ratio.

On our last 12 month, or full-year 2020 basis, the add back was approximately $25 million. And our LTM adjusted EBITDA per leverage ratio was $171 million. Our year-end leverage ratio was 2.5x. In 2021, we will receive an add back benefit of approximately $14 million for purposes of calculating our leverage ratio. With the continued focus on our balance sheet and free cash flow generation, we are targeting closer to 2x leverage exiting 2021.

As reconciled in our earnings materials, we generated $12 million of free cash flow. As Sean noted earlier, this marks five out of the last six quarters of positive free cash flow. For the full year, SilverBow generated $61 million of free cash flow, more than $10 million above guidance.

Our net working capital deficit at year-end was $18 million and $11 million cash inflow quarter-over-quarter. Please note that changes in working capital are excluded from our free cash flow calculation. We continue to manage our cash needs from a receipts and disbursements standpoint as we optimize the balance between development activity timing and our liquidity.

CapEx on an accrual basis total $20 million for the quarter and $95 million for the full-year, representing a 64% reduction in full-year CapEx year-over-year. Nearly all of our capital investment in the fourth quarter was associated with our Webb County dry gas drilling. Our 2021 guidance, which Steve detailed in his comments targets capital spend at similar levels to 2020 with a modest production growth spurred on by the gas wells that have recently come online. Based on our current plan, our 2021 reinvestment rate is between 70% and 80%.

Our fourth quarter cash interest expense of $7 million was down approximately 20% from a year ago, and our full-year cash interest expense was down 17% compared to full-year 2019. These reductions were due to lower borrowings, effective cash and LIBOR tranche management and favorable interest rates.

In 2021, we expect our overhead to continue to decline as we prioritize debt pay down and realize further G&A savings. Turning to our balance sheet. We further reduced our total debt by $23 million during the quarter, totaling approximately $50 million of reductions under our revolving credit facility compared to the end of 2020.

As of December 31, we had $230 million outstanding under our credit facility, approximately $2 million of cash on hand and $82 million of liquidity. As it relates to our credit facility, there have been positive discussions and active dialogue with our lenders to extend the maturity date of our credit facility in conjunction with our semi-annual redetermination. I would like to thank J.P. Morgan and our full bank syndicate for their continued support. We plan to provide additional details on our first quarter conference call. At year-end, we were in full compliance with our financial covenants and had sufficient headroom to execute our strategy.

And with that, I will turn it over to Sean to wrap up our prepared remarks.

Sean Woolverton

Thanks, Chris. To summarize, SilverBow is set up for growth with similar CapEx to 2020, which leads to free cash flow and debt reduction in 2021. We expect SilverBow to continue to outperform other small cap peers. Our winning strategy is focused on a balanced portfolio, efficient operations, debt reduction and a low cost structure.

We hold a constructive outlook of domestic supply and demand dynamics that support higher gas prices. Encouraging results from our Austin Chalk test, as well as higher oil prices, expands our drilling inventory as well as our strategic playbook over the next several years.

Thank you for joining our call this morning and allowing us to share our results. In the face of uncertainty, we are focused on factors within our control. By concentrating on capital discipline, strengthening our balance sheet and cash on cash returns, SilverBow is positioned for greater stakeholder returns.

We look forward to providing further updates on our next call. And with that, I will turn the call back to the operator for questions.

Question-and-Answer Session

Operator

[Operator Instructions] And our first question comes from the line of Dun McIntosh with JRCO. Please, go ahead.

Duncan McIntosh

Good morning, Sean.

Sean Woolverton

Hey. Good morning, Dun.

Duncan McIntosh

I just wanted to kind of start big picture. Congrats on getting the debt down in 2020 and it was a particularly challenging year. But what are some things that give you confidence in the repeatability of that program for 2021? And as we kind of think a little longer term for SilverBow, mid-single digit growth, paying down debt, is that kind of what we should expect to see from you all going forward? And I guess we can start there.

Sean Woolverton

Yes. I think you characterized our long term strategy spot on. Our plan is to deliver, modest growth, probably in the 5% to 10% range. That's both on production and EBITDA while spending within probably 70% to 80% of our cash flow and then using proceeds from the remaining cash flow to pay down debt as we think that's the best way to return value to the shareholders.

Duncan McIntosh

Okay, great. Thanks. And then I guess if you could provide a little more color on the Austin Chalk test. What kind of running room do you think you could have there? What do you see in early days that gives you that you find encouraging so far?

Sean Woolverton

Yes. We're extremely excited about the adding the stamp-paid [ph] potential of the Austin Chalk into our inventory and expanding our inventory specifically in the dry gas window of the Webb County. We're starting to see more and more operators come out in the western Eagle Ford with Austin Chalk success. Both the EOG and SM Energy have had successful delineation programs and are now shifting to development and SilverBow is fast on that same path. So we drilled our first delineation well, the capital came in as expected and actually below what other operators are signaling their target cost start. So we think, we continue to lead as the low cost operator in the basin and we'll do that on the Austin Chalk. Results thus far, we're in very early days of flow back, but we're already exceeding our IP expectation on the well. And so, we think that this first test is a success in plan to drill additional delineation wells across our position in Webb County. And we think conservatively, it adds probably another 50 to 75 locations that will be high rates of return projects in the future years at strict pricing.

Duncan McIntosh

All right, that's great. And then I guess, just for one last one, if you could kind of give some color on what you're seeing in the M&A landscape. Some of your smaller cap peers were successful in getting deals done in the fourth quarter and at the beginning of the year. I guess a little bit on that, but then if you could kind of put it in context with your current inventory and how comfortable you feel there, that would be great.

Sean Woolverton

Yes. I appreciate that. I think we continue to focus on existing asset base. But do believe that our platform of being one of the low-cost operators and one of the few publicly traded companies that solely focuses on the Eagle Ford sets us up as a company that can participate in the consolidation of the Eagle Ford both in the privates that are looking for exits out of the basin as well as publics. We're firm believers in that gaining more scale is critical to driving down our cost and generating returns for our stakeholders. So that's our strategy. I do think that as I noted in my comments that, more stability and commodity prices is bringing folks closer together on bids [ph]. So we continue to be active in the market, continue to talk with a lot of people across the Eagle Ford and will at the right time at the right valuations will do deals if it makes sense to SilverBow.

Duncan McIntosh

All right. Thank you.

Sean Woolverton

Thank you, Dun. Have a good morning.

Operator

[Operator Instructions] Our next question comes from a line of Neil Dingmann with Truist. Please, go ahead.

Neal Dingmann

Good morning, all. Thanks for details. For Sean, just a quick one on what Dun was saying with the nuts with a bolt-ons with M&A. Remind me, what's your approximate for a lot of your web and in your other bigger areas? What's your kind of NRI or your working interest? And is there opportunities to continue to add more interest on some of that? Is that possible for M&A? What is that? Is it that you just can't get it out of the hands of folks that have it?

Sean Woolverton

Yes, to be honest with you, across just about all of our positions, we hold 100% working interest. So, not much in terms of non-operated positions to acquire. The one area, the one asset, where we have slightly below 100% working interest is on our Fasken property. We're partners with the SAKA [ph], and they continue to be very pleased with the asset and have given no interest of selling at this point in time. So I would love to acquire more non-opposition. I think it's the most efficient way to do acquisitions. But at this point, we control and own just about 100% of everything that we own.

Neal Dingmann

Okay. And then I think you'd mentioned maybe in the press release or maybe when we were talking. Last time, you talked a little bit about potential, some OFS [ph] inflation. I'm just wondering, one, maybe just talk about that a little bit more, what are you expecting for the rest of the year versus maybe what do you see right now? And then with your rigs and tracks, I know, one couple of the Permian -- larger Permian guys suggests that they still kind of called it 'Goldilocks', where the prices and inflation is still staying pretty low, but the availability is still very high. So I'm just kind of curious if you wanted to sort of move that a little bit? Or do you have to lock in on some longer rigs and frac operations? So both on the cost and availability?

Sean Woolverton

Yes. And probably everyone is different. We were one of the early movers in terms of completing our DUCs, we started completing our DUCs back in July and then brought our drilling rig on back in October. So the reference point I'll go from is maybe at the low of the market, where others waited until later in the fourth quarter and early this year to pick their activity back up. So what we're seeing relative to where we were at in the fourth quarter is probably increases in the 5% to 10% range, relative, again, to what we did mid-year of 2020 and fourth quarter of 2020. And we're just seeing activity starting to pick up across the space and expect that inflation is just a reality.

Neal Dingmann

Got it. And then could you talk a little bit a little on hedging? I'm just wondering, looking quite a ways forward, once you have, it does appear like your free cash flow is continuing in order. We do definitely think you'll be down around 2x or even better by the end of the year. I'm just wondering if that's the case with your hedging sort of policy still -- because certainly the banks aren't going to be pushing you to do as much. I'm just wondering if you're thinking maybe how you're thinking about sort of hedging next year if you are in a bit better leveraged position, would you still have the same type of plan? Or would you think about it a bit differently?

Sean Woolverton

Yes. Kind of the basis of our hedging strategy is to look at the returns of our drilling capital and make our allocation decisions based upon pricing that we think we can lock in over the first couple years. So, we always look in advance of our capital program to lock in the first 24 months. So 50% usually achieves that. And so, I don't think that strategy is going to change for us. We're always going to look to walking our returns in hedge, the appropriate volumes over the first 24 months.

Neal Dingmann

Okay. And maybe I can just get one more. Just wondering, Webb County continues to be a big area for you all. Could you give your expectations? How you see it today just on returns? When I look at maybe Webb versus La Salle, I don't know if it's too early to have any expectations on the Chalk -- my math says I think even more gas is now -- even though we've had a bit of a run up in oil, even at $2.75, I think your returns are still quite strong in Webb. So I guess, Sean, that's what I'm getting at, if you could give us maybe just some broad color on how you're thinking on just returns currently, or go forward, around a strip for Webb and La Salle.

Sean Woolverton

Yes, appreciate that. The makeup of commodity in Webb is essentially 100% dry gas, and at $2.75 returns there are north of 40% and even higher. So, that's a good benchmark return for Webb County at $2.75. La Salle, the commodity mix is really a third, a third, a third [ph]. And we're seeing strong commodity prices on all phases, including a strong move up of NGLs. So, that's why we're planning to allocate our summer drilling season capital to our La Salle project and that the returns there are north of probably 60% at the current commodity prices.

Neal Dingmann

Very good. Thanks so much for the details.

Sean Woolverton

Yes, appreciate the questions, Neal. Have a good day.

Operator

And our next question comes from a line of Jeff Robertson with Water Tower Research. Please, go ahead.

Jeff Robertson

Thanks. A question on the Austin Chalk. Are there opportunities to leverage your existing surface infrastructure? Either gas processing or just drilling locations to enhance the returns if you move toward a development program on the Chalk?

Sean Woolverton

Yes. Appreciate the question, Jeff. And definitely one of the reasons we're excited about it is, it's all stacked on top of our existing Eagle Ford development. So we're going to be able to leverage both our existing pads as well as the infrastructure, the gathering lines, the compressor stations that we have in place. So that enhances the returns there for sure.

Jeff Robertson

Are there any constraints in gathering and processing? Or I guess, it's dry gas so there's minimal processing. But are there any gathering constraints in that area? Or would you just manage how you would develop the Chalk versus how you would develop Fasken?

Sean Woolverton

No, at this point in time, and something we've always said about why we like South Texas is there's plenty of infrastructure and takeaway points. And so, with even increased development by us and other operators of the Austin Chalk, we think there's sufficient capacity to take away the growth and production that we could see from the play.

Jeff Robertson

And then lastly, can you talk about any additional wells that will be in the 2021 capital program to target to Chalk?

Sean Woolverton

I think what I mentioned is our CapEx, we're very pleased with. So as you think about developing a new target, the first thing you want to understand is that are your expectations on capital correct? We were very pleased with our performance on our first well, so we kind of checked the box there. Next is getting the IP in. I think I mentioned we're above our IP target. So now, it's to understand the initial decline, we're probably going to give it at least, though, four to six months of decline to see if we see similar declines which in other operators, Austin Chalk wells have been flatter than Eagle Ford. And so as long as we exhibit that, we'll probably look to be back out drilling another Austin Chalk in the second half of the year. And we'll take the delineation type approach across our Rio Bravo, Fasken, La Mesa, and acreage that we acquired last year that sits in the north, the east part of Webb.

Jeff Robertson

Great, thank you very much.

Sean Woolverton

Yes. Appreciate the questions. Have a good day.

Operator

And now I would like to turn the conference back over to Sean Woolverton for any closing remarks.

Sean Woolverton

Again, appreciate everyone's interest in SilverBow. Hope everyone is doing well and look forward to giving you an update when we speak again, sharing our first quarter results.

Operator

Ladies and gentlemen, thank you for your participation. This does conclude today's conference call. You may now disconnect.