EX-99.3 5 exhibit993-chk8xkproformaf.htm EX-99.3 Document

EXHIBIT 99.3
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

Acquisition of Chesapeake's South Texas Assets

On November 30, 2023, SilverBow Resources, Inc. and its operating subsidiary, SilverBow Resources Operating, LLC (“SilverBow” or the “Company”), closed the previously announced Purchase and Sale Agreement (the “Purchase Agreement”) with Chesapeake Energy Corporation, through its wholly owned subsidiaries Chesapeake Exploration, L.L.C., Chesapeake Operating, L.L.C., Chesapeake Energy Marketing, L.L.C. and Chesapeake Royalty, L.L.C. (collectively “Chesapeake”), to buy Chesapeake's South Texas assets (the “South Texas Rich Properties”, the transaction collectively, the “ Chesapeake Transaction”). Under the terms and conditions of the Purchase Agreement, which has an economic effective date of February 1, 2023, the aggregate consideration for the Chesapeake Transaction consists of $700,000,000, comprised of cash in the amount of $650,000,000, paid at the closing of the Chesapeake Transaction, subject to certain purchase price adjustments and cash in the amount of $50,000,000 due on the first anniversary of the closing of the Chesapeake Transaction. The Chesapeake Transaction also includes a contingent earn-out payment contingent upon the average monthly settlement price of NYMEX West Texas Intermediate (“WTI”) crude oil for the 12 month period beginning on the first trading day of the next full calendar month following the closing date of the Chesapeake Transaction. If the average monthly settlement price of WTI during the 12 month period (a) exceeds $80 per barrel, SilverBow shall pay Chesapeake an amount equal to $50 million or (b) is between $75 per barrel and $80 per barrel, SilverBow shall pay Chesapeake an amount equal to $25 million. If the average monthly settlement price of WTI during the 12 month period is below $75 per barrel, SilverBow shall not owe Chesapeake a contingent earn-out payment.

The Chesapeake Transaction was funded with borrowings under the Company's First Amended and Restated Senior Secured Revolving Credit Agreement, dated as of April 19, 2017, and amended as of November 30, 2023 (the “Credit Facility”), among the Company, the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent for the lenders, and proceeds from the issuance of additional second lien notes (“Second Lien Notes”) pursuant to the Company's Note Purchase Agreement, dated as of December 15, 2017 and amended as of November 30, 2023, among the Company, as issuer, U.S. Bank Trust Company, National Association (as successor-in-interest to U.S. Bank National Association), as agent and collateral agent, and the other parties thereto, and cash on hand. In conjunction with the Chesapeake Transaction, the Company has secured $425 million of incremental commitments under its Credit Facility from existing and new lenders, which increased lender commitments under the Credit Facility to $1.2 billion, and the Company’s Second Lien Notes were upsized by $350 million, which increased lender commitments under the Company’s Second Lien Notes to $500 million and extend the maturity date for the Second Lien Notes to December 15, 2028 (together, the “Related Financing”).

Acquisition of Sundance Assets

On June 30, 2022, SilverBow and its operating subsidiary, SilverBow Operating, closed the previously announced purchase and sale agreement dated April 13, 2022 with Sundance Energy, Inc. and certain affiliated entities (collectively, “Sundance”), thereby acquiring oil and gas assets in the Eagle Ford (the “Sundance Transaction” and together with the Chesapeake Transaction, the “Transactions”). After consideration of closing adjustments, total aggregate consideration was approximately $344.9 million, consisting primarily of $220.9 million in cash, 4,148,472 shares of our common stock valued at approximately $117.7 million based on the Company's share price on the closing date and contingent consideration with an estimated fair value of $7.4 million. The contingent consideration consisted of up to two earn-out payments of $7.5 million each, contingent upon the average monthly settlement price of NYMEX West Texas Intermediate crude oil exceeding $95 per barrel for the period from April 13, 2022 through December 31, 2022 which would trigger a payment of $7.5 million in 2023 and $85 per barrel for 2023 which would trigger a payment of $7.5 million in 2024 (the “2022 WTI Contingency Payout”). The contingent payout for the period of April 13, 2022 through December 31, 2022 did not materialize. As part of our post-close settlement, we settled the 2022 WTI Contingency during the second quarter of 2023. As such, we are no longer required to make a contingency payment related to the 2022 WTI Contingency Payout. We incurred approximately $6.8 million in transaction costs during the year ended December 31, 2022 related to the Sundance Transaction.

Unaudited Pro Forma Condensed Combined Financial Statements

The following unaudited pro forma condensed combined financial statements are derived from the historical consolidated financial statements of SilverBow, historical South Texas Rich Properties Statements of Revenues and Direct Operating Expenses related to the Chesapeake Transaction and from the historical financial activity of Sundance through June 30, 2022, the closing date of the Sundance Transaction.


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The Company expects to account for the Chesapeake Transaction as an asset acquisition under accounting principles generally accepted in the United States of America, as the assets and operations acquired in the Chesapeake Transaction do not meet the definition of a business under the Financial Accounting Standards Board Accounting Standards Codification Topic 805, Business Combinations (referred to as “ASC 805”), since substantially all of the fair value of the assets acquired are concentrated in a single asset group.

Certain historical amounts of Sundance and Chesapeake's South Texas Rich Properties have been reclassified to conform to SilverBow’s financial statement presentation. The unaudited pro forma condensed combined balance sheet as of September 30, 2023 presented below was prepared as if the Chesapeake Transaction and related financing had occurred on September 30, 2023. The Sundance Transaction closed on June 30, 2022. Therefore, the Sundance Transaction is already included in SilverBow's condensed consolidated balance sheet as of September 30, 2023. The unaudited pro forma condensed combined statements of operations for the nine-month period ended September 30, 2023 and the year ended December 31, 2022 presented below were prepared as if the Transactions and Related Financing had occurred on January 1, 2022.

The unaudited pro forma condensed combined financial statements reflect the following pro forma adjustments related to the Transactions, based on available information and certain assumptions that SilverBow believes are reasonable:

the Transactions, accounted for as asset acquisitions and the Related Financing;
SilverBow’s related borrowing on its Credit Facility and issuance of Second Lien Notes, as applicable, to fund the cash portion of the Transactions;
adjustments to conform the classification of expenses in Chesapeake’s South Texas Rich Properties historical statement of Revenues and Direct Operating Expenses to SilverBow’s classification for similar expenses;
adjustments to conform the classification of revenues and expenses in Sundance’s historical statements of operations to SilverBow’s classification for similar revenues and expenses; and
the recognition of estimated tax impacts of the pro forma adjustments.

Assumptions and estimates underlying the pro forma adjustments are described in the accompanying notes, which should be read in conjunction with the unaudited pro forma condensed combined financial statement. In SilverBow’s opinion, all adjustments that are necessary to present fairly the pro forma information have been made. The historical consolidated financial statements have been adjusted in the unaudited pro forma condensed combined financial statements to give effect to the Transactions and the Related Financing.

The Company expects to account for the Chesapeake Transaction as an asset acquisition under accounting principles generally accepted in the United States of America. The acquisition method of accounting as it relates to the Chesapeake Transaction is dependent upon certain valuations and other studies that, as of the date hereof, have yet to commence or progress to a stage where there is sufficient information for a definitive measure. SilverBow has performed a preliminary valuation analysis of the relative fair value of Chesapeake’s assets to be acquired and liabilities to be assumed and has made certain adjustments to the historical book values of the assets and liabilities of Chesapeake to reflect preliminary estimates of the relative fair value necessary to prepare the unaudited pro forma condensed combined financial statements. A final determination of the relative fair value of Chesapeake’s assets and liabilities will be based on the actual net tangible and intangible assets and liabilities of Chesapeake that exist as of the closing date of the Chesapeake Transaction and, therefore, could not be made prior to the completion of the Chesapeake Transaction. As a result of the foregoing, the pro forma adjustments are preliminary and are subject to change as additional information becomes available and as additional analysis is performed. The preliminary pro forma adjustments have been made solely for the purpose of providing the unaudited pro forma condensed combined financial statements presented below. SilverBow estimated the fair value of Chesapeake’s assets and liabilities based on discussions with Chesapeake’s management, preliminary valuation studies, due diligence, and information presented in Chesapeake’s historical financial statements. Any increases or decreases in the relative fair value of assets acquired and liabilities assumed upon completion of the final valuations will result in adjustments to the unaudited pro forma condensed combined balance sheet and/or statement of operations. The final purchase price allocation may be materially different than that reflected in the pro forma purchase price allocation presented herein.

The unaudited pro forma condensed combined financial information is not intended to represent what SilverBow’s financial position or results of operations would have been had the Transactions and Related Financing actually been consummated on the assumed dates nor does it purport to project the future operating results of the combined company following the Chesapeake Transaction. The unaudited pro forma condensed combined financial information does not reflect future events that may occur after the Chesapeake Transaction, including, but not limited to, the anticipated realization of ongoing savings from potential operating efficiencies, asset dispositions, cost savings, or economies of scale that the combined company may achieve with respect to the combined operations. Specifically, the unaudited pro forma condensed combined statement of operations does not include projected synergies expected to be achieved as a result of the Transactions and any associated costs that may be required to be incurred to

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achieve the identified synergies. The unaudited pro forma condensed combined statements of operations also exclude the effects of costs of integration activities and asset dispositions that may result from the Transactions.

The unaudited pro forma condensed combined financial statement should be read in conjunction with the historical consolidated financial statements and accompanying notes contained in SilverBow’s Annual Report on Form 10-K for the year ended December 31, 2022, the historical consolidated financial statements and accompanying notes thereto of Sundance filed as Exhibit 99.1 to the Current Report on Form 8-K filed with the SEC on June 6, 2022, and Quarterly Report on Form 10-Q for the nine months ended September 30, 2023 and historical South Texas Rich Properties Statement of Revenues and Direct Operating Expenses and accompanying notes thereto filed as Exhibits 99.1 and 99.2 to this Current Report on Form 8-K/A of which this Exhibit 99.3 is a part.

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SilverBow Resources, Inc. and Subsidiary Pro Forma Condensed Combined Balance Sheet
As of September 30, 2023 (Unaudited)
 (in thousands, except per share amounts)SilverBow HistoricalChesapeake Transaction Adjustments (Note 2)Pro Forma Combined
ASSETS  
Current Assets:  
Cash and cash equivalents$1,697 $— $1,697 
Accounts receivable, net80,202 — 80,202 
Fair value of commodity derivatives50,189 — 50,189 
Other current assets3,825 — 3,825 
Total Current Assets135,913 — 135,913 
Property and Equipment:  
Property and equipment, full cost method, including $27,821 of unproved property costs not being amortized at the end of the period2,861,267 673,018 (a)3,534,285 
Less – Accumulated depreciation, depletion, amortization & impairment(1,151,141)— (1,151,141)
Property and Equipment, Net1,710,126 673,018 2,383,144 
Right of Use Assets10,085 200 (a)10,285 
Deposit and Other Fees for Oil and Gas Properties52,564 (52,564)(b)— 
Fair Value of Long-Term Commodity Derivatives14,180 — 14,180 
Other Long-Term Assets7,581 — 7,581 
Total Assets$1,930,449 $620,654 $2,551,103 
LIABILITIES AND STOCKHOLDERS’ EQUITY  
Current Liabilities:  
Accounts payable and accrued liabilities$74,731 $— $74,731 
Fair value of commodity derivatives32,752 — 32,752 
Accrued capital costs56,424 — 56,424 
Accrued interest2,976 — 2,976 
Current lease liability5,507 59 (a)5,566 
Undistributed oil and gas revenues22,462 — 22,462 
Deferred acquisition payment— 50,000 (a)50,000 
Total Current Liabilities194,852 50,059 244,911 
Long-Term Debt, Net645,096 547,241 (c)1,192,337 
Non-Current Lease Liability4,604 141 (a)4,745 
Deferred Tax Liabilities49,033 — 49,033 
Asset Retirement Obligations9,840 634 (a)10,474 
Fair Value of Long-Term Commodity Derivatives21,560 22,579 (a)44,139 
Other Long-Term Liabilities922 — 922 
Stockholders' Equity:  
Preferred stock— — — 
Common stock259 — 259 
Additional paid-in capital677,473 — 677,473 
Treasury stock, held at cost(10,616)— (10,616)
Retained earnings337,426 — 337,426 
Total Stockholders’ Equity1,004,542 — 1,004,542 
Total Liabilities and Stockholders’ Equity$1,930,449 $620,654 $2,551,103 
See accompanying notes to unaudited pro forma condensed combined financial information.

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SilverBow Resources, Inc. and Subsidiary Pro Forma Condensed Combined Statement of Operations For Nine Months Ended September 30, 2023 (Unaudited)
 (in thousands, except per share amounts)SilverBow Historical
Chesapeake Historical
Chesapeake Reclassification Adjustments (Note 2)
Transaction Accounting Adjustments (Note 2)
Pro Forma Combined
Revenues: 
Oil and gas sales$440,317 $291,807 $— $— $732,124 
Operating Expenses:
Direct Operating Expenses— 122,371 (122,371)(d)— — 
General and administrative, net17,421 — — — 17,421 
Depreciation, depletion, and amortization147,037 — — 64,548 (f)211,585 
Accretion of asset retirement obligations718 — — — 718 
Lease operating expenses62,417 — 26,537 (d)— 88,954 
Workovers2,263 — 908 (d)— 3,171 
Transportation and gas processing37,001 — 76,151 (d)— 113,152 
Severance and other taxes28,563 — 18,775 (d)— 47,338 
Total Operating Expenses295,420 122,371 — 64,548 482,339 
Operating Income (Loss)144,897 169,436 — (64,548)249,785 
Non-Operating Income (Expense)
Gain (loss) on commodity derivatives, net57,604 — — — 57,604 
Interest expense, net(54,746)— — (47,369)(g)(102,115)
Other income (expense), net117 — — — 117 
Income (Loss) Before Income Taxes147,872 169,436 — (111,917)205,391 
Provision (Benefit) for Income Taxes33,214 — — 12,798 (h)46,012 
Net Income (Loss)$114,658 $169,436 $— $(124,715)$159,379 
Per Share Amounts: 
Basic: Loss Per Share$5.06 $— $— $— $7.03 
Diluted: Loss Per Share$5.02 $— $— $— $6.97 
Weighted-Average Shares Outstanding - Basic22,677 — — — 22,677 
Weighted-Average Shares Outstanding - Diluted22,852 — — — 22,852 
See accompanying notes to unaudited pro forma condensed combined financial information.


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SilverBow Resources, Inc. and Subsidiary Pro Forma Condensed Combined Statement of Operations For the Year Ended December 31, 2022 (Unaudited)
Sundance Historical

(in thousands, except per share amounts)SilverBow Historical
January 1, 2022 Through March 31, 2022
Sundance Historical April 1, 2022 through June 30, 2022Chesapeake Historical
 Sundance Reclassification Adjustments (Note 2)
Chesapeake Reclassification Adjustments (Note 2)
Sundance Transaction Adjustments (Note 2)
Chesapeake Transaction Adjustments (Note 2)Pro Forma Combined
Revenues:
Oil and gas sales$753,420 $— $— $483,383 $102,282 (e)$— $— $— $1,339,085 
Oil sales45,023 38,499 — (83,522)(e)— — — — 
Natural gas sales3,298 4,249 — (7,547)(e)— — — — 
Natural gas liquid sales6,384 4,829 — (11,213)(e)— — — — 
Operating Expenses: 
Direct Operating Expenses— — — 189,018 — (189,018)(d)— — — 
General and administrative, net21,395 1,727 — — — — — — 23,122 
Depreciation, depletion, and amortization133,982 273 — — (137)(e)— 26,016 (f)65,756 (f)225,890 
Accretion of asset retirement obligations534 — — — 137 (e)— — — 671 
Lease operating expense55,329 9,510 8,746 (2,016)(e)27,318 (d)— — 98,887 
Workovers1,655 — — 2,016 (e)2,050 (d)— — 5,721 
Transportation and gas processing32,989 3,624 3,621 — 133,376 (d)— — 173,610 
Severance and other taxes41,761 3,807 3,856 — 26,274 (d)— — 75,698 
Exploration expense— — — — — — — — — 
Loss (gain) on commodity derivative financial instruments— 29,818 — — (29,818)(e)— — — — 
Other expense, net— 208 — — — — — — 208 
Total Operating Expenses287,645 48,967 16,223 189,018 (29,818)— 26,016 65,756 603,807 
Operating Income (Loss)465,775 5,738 31,354 294,365 29,818 — (26,016)(65,756)735,278 
Non-Operating Income (Expense)
Net gain (loss) on commodity derivatives(73,885)— — — (29,818)(e)— — — (103,703)
Interest expense, net(41,948)(2,289)— — — — (2,720)(g)(67,982)(g)(114,939)
Other income (expense), net95 — — — — — — — 95 
Income (Loss) Before Income Taxes350,037 3,449 31,354 294,365 — — (28,736)(133,738)516,731 
Provision (Benefit) for Income Taxes9,600 — — — — — 1,350 (h)35,739 (h)46,689 
Net Income (Loss)$340,437 $3,449 $31,354 $294,365 $— $— $(30,086)$(169,477)$470,042 
Per Share Amounts: 
Basic:  Net Loss$17.24 $— $— $— $— $— $— $— $23.80 
Diluted:  Net Income Loss$16.94 $— $— $— $— $— $— $— $23.39 
Weighted Average Shares Outstanding - Basic19,748 — — — — — — — 19,748 
Weighted Average Shares Outstanding - Diluted20,097 — — — — — — — 20,097 
See accompanying notes to unaudited pro forma condensed combined financial information.



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Notes to Unaudited Pro Forma Condensed Combined Financial Information

(1) Basis of Pro Forma Presentation

The accompanying unaudited pro forma condensed combined financial information was prepared based on the historical consolidated financial statements of the Company, the historical South Texas Rich Properties Statement of Revenues and Direct Operating Expenses related to the Chesapeake Transaction, and from the historical financial activity of Sundance through June 30, 2022, the closing date of the Sundance Transaction. The Unaudited Pro Forma Condensed Combined Statement of Operations for the nine months ended September 30, 2023 and the year ended December 31, 2022 were prepared assuming the Transactions and Related Financing occurred on January 1, 2022. The Unaudited Pro Forma Condensed Combined Balance Sheet at September 30, 2023 was prepared as if the Chesapeake Transaction and related financing had occurred on September 30, 2023. The Sundance Transaction closed on June 30, 2022. Therefore, the Sundance Transaction is already included in SilverBow's condensed consolidated balance sheet as of September 30, 2023.

The unaudited pro forma condensed combined financial statement reflects pro forma adjustments that are described in the accompanying notes and are based on available information and certain assumptions that SilverBow believes are reasonable, however, actual results may differ from those reflected in this statement. In SilverBow’s opinion, all adjustments that are necessary to present fairly the pro forma information have been made. The unaudited pro forma condensed combined financial statement does not purport to represent what SilverBow’s financial position or results of operations would have been if the Transactions had actually occurred on the dates indicated above, nor is it indicative of SilverBow’s future financial position or results of operations. The unaudited pro forma condensed combined financial statement should be read in conjunction with the historical consolidated financial statements and related notes of SilverBow and Chesapeake, as applicable, for the period presented.

(2) Pro Forma Adjustments

The Company expects to account for the Chesapeake Transaction as an asset acquisition under accounting principles generally accepted in the United States of America, as the assets and operations acquired in the Chesapeake Transaction do not meet the definition of a business under the Financial Accounting Standards Board Accounting Standards Codification Topic 805, Business Combinations (referred to as “ASC 805”), since substantially all of the fair value of the assets acquired are concentrated in a single asset group. The allocation of the preliminary estimated purchase price is based upon management’s estimates of and assumptions related to the relative fair value of assets to be acquired and liabilities to be assumed as of September 30, 2023 using currently available information. Due to the fact that the unaudited pro forma condensed combined financial information has been prepared based on these preliminary estimates, the final purchase price allocation and the resulting effect on financial position and results of operations may differ significantly from the pro forma amounts included herein. SilverBow expects to finalize its allocation of the purchase consideration as soon as practicable after completion of the Chesapeake Transaction.

The preliminary purchase price allocation is subject to change due to several factors, including but not limited to:
changes in the estimated fair value of Chesapeake’s assets acquired and liabilities assumed as of the date of the closing of the Chesapeake Transaction, resulting from the finalization of SilverBow’s detailed valuation analysis, including changes in future oil and gas commodity prices, reserve estimates, interest rates and other factors;
valuation of ASC 842 Leases as it relates to Chesapeake’s lease obligations and right of use assets expected to be recorded as part of purchase accounting upon the closing of the Chesapeake Transaction; and
changes in the estimated fair value of the Contingent Consideration as of the date of the closing of the Chesapeake Transaction.

The following adjustments have been made to the accompanying unaudited pro forma condensed combined financial statements:

(a)    Consideration for the Chesapeake Transaction was approximately $700.0 million, (i) cash in the amount of $650.0 million due at the closing of the transaction, subject to certain purchase price adjustments (estimated $58.0 million reduction in cash consideration below) and (ii) cash in the amount of $50.0 million due on the first anniversary of the closing of the transaction. The table below represents the preliminary allocation of the total cost of the Chesapeake Transaction to the assets acquired and liabilities assumed, as follows:

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(in thousands)
Total Cost
Cash consideration$592,000 
Deferred acquisition payment50,000 
Fair value of contingent consideration 22,579 
Total Consideration$664,579 
Transaction costs7,805 
Total Cost of Transaction$672,384 
Allocation of Total Cost of Transaction
Assets
Oil and gas properties$673,018 
Right of use assets200 
Total Assets673,218 
Liabilities
Asset retirement obligations634 
Current lease liability59 
Non-current lease liability141 
Total liabilities assumed$834 
Net Assets Acquired and Liabilities Assumed$672,384 

(b)    Reflects reclassification of the deposit and other acquisition related fees associated with the Chesapeake Transaction.
(c)    Reflects incremental long-term debt calculated as the aggregate of the cash consideration and transaction costs less the deposit and other acquisition related fees (noted above).

(d)    Chesapeake Reclassification and Conforming Adjustments:
Reflects reclassification of approximately $122.4 million from Direct Operating Expenses to the respective operating expenses by category ($26.5 million to Lease operating expenses, $0.9 million to Workovers, $76.2 million to Transportation and gas processing and $18.8 million to Severance and other taxes) on the Pro Forma Condensed Combined Statement of Operations for the nine months ended September 30, 2023.
Reflects reclassification of approximately $189.0 million from Direct Operating Expenses to the respective operating expenses by category ($27.3 million to Lease operating expenses, $2.1 million to Workovers, $133.4 million to Transportation and gas processing and $26.3 million to Severance and other taxes) on the Pro Forma Condensed Combined Statement of Operations for the year ended December 31, 2022.

(e)    Sundance Reclassification and Conforming Adjustments:
Reflects reclassification of approximately $102.3 million to oil and gas sales from the respective sales revenues by product ($83.6 million for oil sales, $7.5 million for gas sales and $11.2 million for NGL sales);
Reflects reclassification of approximately $0.1 million from depreciation, depletion and amortization to accretion of asset retirement obligation;
Reflects reclassification of approximately $2.0 million from lease operating expenses to workovers; and
Reflects the reclassification of approximately $29.8 million of loss on commodity derivatives financial instruments from Operating Expenses to Non-Operating Income (Expense).

(f)    Depreciation, depletion and amortization (“DD&A”) related to the Chesapeake Transaction for the nine months ended September 30, 2023 and for the year ended December 31, 2022 and Sundance Transaction for the year ended December 31, 2022 was calculated using the unit-of-production method under the full cost method of accounting, and adjusts DD&A for (i) the increase in DD&A reflecting the relative fair values and production volumes attributable to the Transactions and (ii) the revision to the Company’s DD&A rate reflecting the reserve volumes acquired in the Transactions.

(g)    Interest expense associated with borrowings under the Company's Second Lien Notes and Credit Facility utilizing current interest rates, as applicable, for each Transaction.

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(h)    Adjustments to Income tax provision reflects the historical and adjusted Income (Loss) Before Income Taxes for each Transaction, as applicable, multiplied by 22.25% effective tax rate for the periods presented.

(3) Supplemental Oil and Gas Reserve Information

Estimated Quantities of Proved Oil and Natural Gas Reserves

The following tables present information regarding net proved oil and natural gas reserves attributable to the Company's interests in proved properties as of December 31, 2022 and 2021. The information set forth in the tables regarding historical reserves of the Company is based on proved reserves reports prepared in accordance with Securities and Exchange Commission’s (“SEC”) rules. H.J. Gruy and Associates, Inc. (“Gruy”), independent petroleum engineers, prepared the Company's proved reserves reports as of December 31, 2022 and 2021.

In addition, the following tables also set forth information as of December 31, 2022 and 2021 about the estimated net proved oil and natural gas reserves attributable to the Chesapeake Transaction, and the pro forma estimated net proved oil and natural gas reserves as if the Chesapeake Transaction had occurred on January 1, 2021. The reserve estimates attributable to the Chesapeake Transaction at December 31, 2022 and 2021 presented in the table below were prepared based upon information provided by Chesapeake and was prepared in accordance with the authoritative guidance of the FASB and the SEC on oil and natural gas reserve estimation and disclosures.

In addition, the following tables also set forth information as of December 31, 2021 about the estimated net proved oil and natural gas reserves attributable to the Sundance Transaction, and the pro forma estimated net proved oil and natural gas reserves as if the Sundance Transaction had occurred on January 1, 2021. The Sundance Transaction closed on June 30, 2022. Therefore, the net proved oil and natural gas reserves attributable to the Sundance Transaction are reflected in SilverBow's historical reserves as of December 31, 2022. The reserve estimates attributable to the Sundance Transaction at December 31, 2021 presented in the table below were prepared based upon information provided by Sundance and was prepared in accordance with the authoritative guidance of the FASB and the SEC on oil and natural gas reserve estimation and disclosures.

Reserve estimates are inherently imprecise and are generally based upon extrapolation of historical production trends, analogy to similar properties and volumetric calculations. Accordingly, reserve estimates are expected to change, and such changes could be material and occur in the near term as future information becomes available.


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 Natural Gas (Mcf)
 SilverBow Historical
Chesapeake Transaction
Sundance TransactionSundance Transaction Adjustments Pro Forma Combined
Estimates of Proved Reserves    
December 31, 2020948,094,943 148,585,717 50,144,876 — 1,146,825,536 
Revisions(199,625,710)74,107,492 (7,691,299)— (133,209,517)
Extensions, discoveries and other additions324,625,474 82,671,630 19,805,640 — 427,102,744 
Purchases of minerals in place142,794,045 — — — 142,794,045 
Production(60,509,606)(20,113,575)(2,463,333)— (83,086,514)
December 31, 20211,155,379,146 285,251,264 59,795,884 — 1,500,426,294 
Revisions561,425 38,966,441 — — 39,527,866 
Extensions, discoveries and other additions514,492,260 11,755,384 — — 526,247,644 
Purchases of minerals in place126,849,989 — — (59,795,884)(a)67,054,105 
Sales of minerals in place(772,177)— (59,795,884)(a)59,795,884 (a)(772,177)
Production(70,958,470)(20,909,750)— — (91,868,220)
December 31, 20221,725,552,173 315,063,339 — — 2,040,615,512 
Proved Developed Reserves
December 31, 2020415,390,459 148,585,717 22,666,672 — 586,642,848 
December 31, 2021525,736,580 183,596,848 15,499,234 — 724,832,662 
December 31, 2022695,481,580 229,553,642 — — 925,035,222 
Proved Undeveloped Reserves
December 31, 2020532,704,484 — 27,478,205 — 560,182,689 
December 31, 2021629,642,566 101,654,416 44,296,646 — 775,593,628 
December 31, 20221,030,070,593 85,509,697 — — 1,115,580,290 

 Oil (Bbl)
 SilverBow HistoricalChesapeake TransactionSundance TransactionSundance Transaction AdjustmentsPro Forma Combined
Estimates of Proved Reserves   
December 31, 202012,531,501 18,022,345 28,897,502 — 59,451,348 
Revisions(1,644,367)6,720,786 (5,250,851)— (174,432)
Extensions, discoveries and other additions3,930,631 6,466,685 5,501,816 — 15,899,132 
Purchases of minerals in place10,942,051 — — — 10,942,051 
Production(1,461,657)(2,555,411)(1,554,079)— (5,571,147)
December 31, 202124,298,159 28,654,405 27,594,388 — 80,546,952 
Revisions(1,097,823)2,505,226 — — 1,407,403 
Extensions, discoveries and other additions5,423,639 1,984,143 — — 7,407,782 
Purchases of minerals in place26,393,737 — — (27,594,388)(a)(1,200,651)
Sales of minerals in place(194,839)— (27,594,388)(a)27,594,388 (a)(194,839)
Production(2,633,679)(2,637,577)— (5,271,256)
December 31, 202252,189,194 30,506,197 — — 82,695,391 
Proved Developed Reserves
December 31, 20206,962,826 18,022,345 12,156,565 — 37,141,736 
December 31, 20219,692,076 20,348,596 9,676,355 — 39,717,027 
December 31, 202223,360,025 22,276,526 — — 45,636,551 
Proved Undeveloped Reserves
December 31, 20205,568,676 — 16,740,936 — 22,309,612 
December 31, 202114,606,082 8,305,809 17,918,029 — 40,829,920 
December 31, 202228,829,169 8,229,671 — — 37,058,840 


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 Natural Gas Liquids (Bbl)
 SilverBow HistoricalChesapeake TransactionSundance TransactionSundance Transaction AdjustmentsPro Forma Combined
Estimates of Proved Reserves   
December 31, 202013,855,188 20,648,406 8,171,134 — 42,674,728 
Revisions1,836,746 10,479,354 (855,428)— 11,460,672 
Extensions, discoveries and other additions1,860,900 10,681,462 2,940,777 — 15,483,139 
Purchases of minerals in place3,019,773 — — — 3,019,773 
Production(1,472,222)(2,853,311)(424,929)— (4,750,462)
December 31, 202119,100,385 38,955,911 9,831,554 — 67,887,850 
Revisions548,238 3,523,627 — 4,071,865 
Extensions, discoveries and other additions3,366,839 1,509,852 — 4,876,691 
Purchases of minerals in place11,709,713 — — (9,831,554)(a)1,878,159 
Sales of minerals in place(119,211)— (9,831,554)(a)9,831,554 (a)(119,211)
Production(1,949,894)(2,645,702)— (4,595,596)
December 31, 202232,656,070 41,343,688 — — 73,999,758 
Proved Developed Reserves
December 31, 20208,163,666 20,648,406 3,401,266 — 32,213,338 
December 31, 202112,390,263 25,086,112 2,525,000 — 40,001,375 
December 31, 202219,522,859 30,178,639 — — 49,701,498 
Proved Undeveloped Reserves
December 31, 20205,691,522 — 4,769,867 — 10,461,389 
December 31, 20216,710,122 13,869,799 7,306,553 — 27,886,474 
December 31, 202213,133,211 11,165,049 — — 24,298,260 
(a) Amounts and adjustments reflect the purchase and sale of minerals in place associated with the Sundance Transaction, which closed on June 30, 2022.

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Changes in commodity prices may significantly impact the Company’s estimates of oil and natural gas reserves. Sustained lower commodity prices can reduce the quantity of the Company’s reserves by causing the economic limit of the proved developed and proved undeveloped wells (the point at which the costs to operate exceed the value of estimated future production, assuming constant prices and costs under SEC rules) to occur earlier in their productive lives than would be the case with higher prices. The undeveloped reserves may also be reduced by the elimination of wells because they would not meet the investment criteria to be economically producible at such prices and costs. The proved undeveloped reserves may also be eliminated by the deferral of drilling of otherwise economic wells beyond the five year proved reserve development horizon as a result of revisions to the Company’s development plan adopted in response to lower prices or otherwise.

Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil and Gas Reserves

The following table presents the Standardized Measure of Discounted Future Net Cash Flows relating to the proved oil and natural gas reserves of the Company, Chesapeake and Sundance on a pro forma combined basis as of December 31, 2022 and 2021. The Standardized Measure shown below represents estimates only and should not be construed as the current market value of the Company’s estimated oil and natural gas reserves or those acquired estimated oil and natural gas reserves attributable to the Chesapeake Transaction.
 
December 31, 2022
 SilverBow HistoricalChesapeake TransactionPro Forma Combined
(In thousands)
Future gross revenues$16,660,470 $5,120,415 $21,780,885 
Future production costs(4,039,248)(1,153,162)(5,192,410)
Future development costs(2,063,508)(282,790)(2,346,298)
Future income taxes(1,953,345)(743,654)(2,696,999)
Future net cash flows8,604,369 2,940,809 11,545,178 
Discount at 10% per annum(4,564,123)(1,462,980)(6,027,103)
Standardized Measure of discounted future net cash flows$4,040,246 $1,477,829 $5,518,075 

 
December 31, 2021
 SilverBow HistoricalChesapeake TransactionSundance TransactionPro Forma Combined
(In thousands)
Future gross revenues$6,370,628 $3,321,630 $2,188,156 $11,880,414 
Future production costs(1,853,856)(805,328)(858,212)(3,517,396)
Future development costs(753,046)(184,595)(533,540)(1,471,181)
Future income taxes(584,613)(473,873)(47,186)(1,105,672)
Future net cash flows3,179,113 1,857,834 749,218 5,786,165 
Discount at 10% per annum(1,620,651)(899,630)(336,350)(2,856,631)
Standardized Measure of discounted future net cash flows$1,558,462 $958,204 $412,868 $2,929,534 




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The following table sets forth the principal changes in the Standardized Measure of discounted future net cash flows applicable to estimated net proved oil and natural gas reserves of the Company, the Chesapeake Transaction and of the Sundance Transaction on a pro forma combined basis as of December 31, 2022 and 2021:
SilverBow HistoricalChesapeake TransactionSundance TransactionSundance Transaction AdjustmentsPro Forma Combined
(In thousands)
January 1, 2022 balance$1,558,462 $958,204 $412,868 $— $2,929,534 
Net changes in prices, net of production costs1,852,439 663,937 — — 2,516,376 
Net changes in future development costs(208,188)(86,658)— — (294,846)
Net changes due to revisions in quantity estimates(4,218)202,136 — — 197,918 
Accretion of discount181,678 119,239 — — 300,917 
Other(176,112)(107,766)— — (283,878)
Total revisions1,645,599 790,888 — — 2,436,487 
New field discoveries and extensions, net of future production and development costs968,093 138,778 — — 1,106,871 
Purchase of reserves1,051,869 — — (412,868)(a)639,001 
Sales of minerals in place(5,209)— (412,868)(a)412,868 (a)(5,209)
Sales of oil and natural gas produced, net of production costs(621,686)(294,365)— — (916,051)
Previously estimated development costs108,566 32,972 — — 141,538 
Net change in income taxes(665,448)(148,648)— — (814,096)
Net change in Standardized Measure of discounted future net cash flows2,481,784 519,625 (412,868)— 2,588,541 
December 31, 2022 balance$4,040,246 $1,477,829 $— $— $5,518,075 
(a) Amounts and adjustments reflect the purchase and sale of minerals in place associated with the Sundance Transaction, which closed on June 30, 2022.
SilverBow HistoricalChesapeake TransactionSundance TransactionPro Forma Combined
(In thousands)
January 1, 2021 balance$512,952 $192,122 230,804 $935,878 
Net changes in prices, net of production costs781,786 577,781 272,732 1,632,299 
Net changes in future development costs1,569 (34,445)(42,547)(75,423)
Net changes due to revisions in quantity estimates(43,379)416,962 (19,717)353,866 
Accretion of discount52,627 19,212 23,109 94,948 
Other29,303 (143,808)(30,765)(145,270)
Total revisions821,906 835,702 202,812 1,860,420 
New field discoveries and extensions, net of future production and development costs400,008 365,709 64,454 830,171 
Purchase of reserves345,300 — — 345,300 
Sales of minerals in place— — — — 
Sales of oil and natural gas produced, net of production costs(336,028)(201,110)(83,194)(620,332)
Previously estimated development costs59,318 1,969 22,035 83,322 
Net change in income taxes(244,994)(236,188)(24,043)(505,225)
Net change in Standardized Measure of discounted future net cash flows1,045,510 766,082 182,064 1,993,656 
December 31, 2021 balance$1,558,462 $958,204 $412,868 $2,929,534 

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