Natural gas-heavy SilverBow Resources Inc., an Eagle Ford Shale pure-play, completed more wells than planned during 2018 and increased production by 20%, a strategy that is set to continue in 2019, even as spending comes down.

Total net production in 4Q2018 averaged 227 MMcfe/d, 18% higher sequentially and above the midpoint of guidance. Production mix was 84% natural gas, 10% natural gas liquids (NGL) and 6% crude oil. During 2018, net production averaged 185 MMcfe/d, a 20% increase over 2017.

Balancing investments between natural gas and liquids opportunities is the strategy this year, even with a 17% reduction in capital expenditures (capex) to $250-260 million.

At that spending level, output is forecast to average 225-239 MMcfe/d, implying a 25% increase year/year at the mid-point, with a 17% increase in gas and a 69% increase in liquids.

During 2018, SilverBow “pursued a more active drilling program specifically designed to delineate our asset base,” CEO Sean Woolverton said. “We completed more wells than originally planned and selectively moved toward high intensity slickwater fractures resulting in better well results…

“By leveraging our competitive lifting costs and taking advantage of our proximity to key downstream markets and favorable basis differentials, we continue to create sustainable value for our shareholders…” The 2019 capital program “should allow us to reach cash flow positive in the second half of 2019 while still generating meaningful annual production growth.”

The expected gains will come even with a one-rig program beginning in the second quarter.

Last year SilverBow launched initiatives to reduce capex by moving to offline production cementing, using more regional sand and conducting more simultaneous operations.

Offline production cementing, which allows drilling rigs to reduce walking time in between wells, last year saved roughly one-half day/well on multi-well pads. The company also pumped more than 200 million pounds of regional sand, 30%-plus of the total for the year, and it plans to boost the percentage in 2019.

Using simultaneous operations, including flowback and drill-out activities, helped decrease the time to bring a well online by about two days.

“These shortened cycle times, combined with our artificial intelligence guided rate-transient analysis, allow the company to turn wells online faster and manage them better during the critical initial flowback period,” management said.

During the fourth quarter, 12 net wells were turned to sales. For the year, 33 net wells were drilled, with 32 completed, which was ahead of the guidance of 25-27.

In the southern Eagle Ford natural gas fairway, which includes the Oro Grande, Uno Mas and south AWP Olmos areas, SilverBow delineated and appraised a 60,000-acre position, and it continued to add to the acreage through leasing and acreage trades.

The company swapped 2,300 net isolated acres for 4,300 net acres contiguous to its gassy southern acreage, a trade that added 35 drilling locations. Additionally, the acreage traded away “was stranded and would have required a significant amount of midstream capital investment in order to develop.”

In the gassy Webb County area, which includes the Fasken development, 13 net wells came online. SilverBow also delineated some Upper Eagle Ford locations.

SilverBow also cited some impressive oil-directed results during the final quarter, including a two-well pad in the McMullen area that delivered a 30-day average initial production rate of 147,000 boe/d per well, 94% liquids.

The McMullen area includes the northern part of AWP where SilverBow had not been active for several years, but the company set a record during 4Q2018 with an 11,400-foot lateral.

The company last year decreased its drilling costs/lateral foot on a three-well pad in McMullen by 27%, compared to a three-well pad drilled in 2014. The developments have affected both the cost and the speed of drilling, with a spud to total depth record of 6.8 days on the SMR 21H well, a 31% reduction from the prior record.

The liquids-heavy La Salle area, which includes Artesia, had five wells come online last year. Because of operational improvements and oilfield service price reductions, the company realized an 18% reduction in total well cost/foot from a two-well pad that was brought online in the third quarter and a three-well pad that was brought online in the fourth quarter.

Net income was $56.8 million ($4.85/share) in 4Q2018, versus $25.1 million ($2.17) in 4Q2017. Profits for 2018 came in at $74.62 million ($640/share), compared with 2017’s $71.97 million ($6.28).

Revenues climbed 36% sequentially to $88.2 million, up sharply from year-ago revenues of $58.7 million, and they were 36% higher sequentially. Oil realizations during the final quarter of 2018 that were 104% of West Texas Intermediate and 105% of Henry Hub. Revenue for 2018 increased year/year to $257 million from $196 million.

SilverBow fetched an average realized natural gas price, excluding hedging, of $3.84/Mcf in 4Q2018, versus $2.97/Mcf in 3Q2018. Oil prices, excluding the effect of hedging, averaged $61.19/bbl, compared to $71.68 sequentially, while NGLs fetched $22.81/bbl from $30.59 in the third quarter.

Year-end estimated proved reserves were 1.35 Tcfe, a 31% increase from 2017. The company’s proved reserves are 81% gas, 13% NGLs and 6% crude oil, with 41% total proved reserves, all in Texas, were developed.