[[{“value”:”
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
HOUSTON, Mar. 28 /BusinessWire/ — 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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