REI - Earnings call transcript Q4 2020

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Operator

Good morning, and welcome to the Ring Energy Fourth Quarter 2020 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions]. After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions]. is event this note, being recorded. Please now David Fowler would like to to over conference the with turn I Investor Relations. Please go ahead.

David Fowler

and this us Thank taking in Chad, good Thank everyone. you, you Ring the Energy. time for morning and join to your interest morning, for

Board our of the reserve key full the quarter CEO, will matters Chairman begin Paul year, our provide and review year-end with during report. call We who of including from will comments McKinney, of and overview our a an fourth

President Baghdati, will review Paul to whom review who return Engineering We available on for and President the Broaddrick, Operations; Randy of morning Q&A call President over a of this plans of strategy; the Corporate and then session. call our our turn of is XXXX. our will Resources CFO, us Steve Dyes, Human Also of Vice with Marketing; Vice will Brooks, Executive will Marinos strategy and and and all Land, be results. our joining financial then our Vice our Executive Alex Executive for Legal,

During a our will question-and-answer limit you follow-up. one to session, your questions to we and ask

reenter always can questions. queue with You additional the

risks yesterday's and forward-looking reports statements. with forward-looking events and intention that disclaims or undue on of the not this otherwise. those and the Energy in should as Investors of the the result other may Accordingly, materially place that developments Commission. update be differ Ring a performance, During of new forward-looking the obligation statements. any cautioned from to actual projected any course or company in and are information, will are press future statements forward-looking making Exchange future revise are filed conference whether in statements, forward-looking reliance Securities guarantees release call, statements. or not results described These or you

and CEO. call over is Paul I Chairman this being the call would reminder, to to McKinney, now As turn our recorded. a conference like

Paul McKinney

David, you, XXXX and call. Thank our to year-end welcome, everyone,

the a was of of of the guidance barrels our our sales start continuation exceeded with oil. which key end a high successful day, review and We equivalent highly reactivation X,XXX was workover quarter. outperformance efforts. XX% Let's our to highlights Contributing per oil of production with of of of our fourth volumes

X Platform. Shelf We also performed X the Central quarter, CTRs the fourth in Basin the X including in in and Northwest

CTR electrical submersible ongoing pumps rod wells Our workovers. lessens operating overall and converts from reduces which pumps, costs to program future costly

had marking cash we fourth EBITDA during the of cash generated period, consecutive and During the utilized quarter million we of cash of our down contributed million hand on what $XX liquidity, free more flow period million the ended our adjusted than end flow of at free that the million $XX by the We fifth free of of XX% the to cash third quarter. than quarter, with $XX increasing flow. debt and pay liquidity our $XX bank

return a inventory. program of in the campaign of winter and Finally, production. completed price drilling on equity oil drilled All in and rising wells been by X Northwest on early supported with from our Shelf highest our focuses December, initiated we that rays funds have are targeted environment, the rate drilling

and is release, B in over the is XXX the day oil well currently we of Badger first a cleaning our barrels still noted we drilled, XXH, XXX As producing up.

initial our expectations. see have wells production from results exceeded We are these pleased X to

the year a full XXXX. Now let's look take at

in CTRs, including oil Our We XX performed of X,XXX the average was the equivalent XX% and of barrels which XX sales in Shelf Northwest Platform. XX per Central day, oil. Basin were

of lifting that initiatives, year-over-year. cost with X% of per $XX free to used $XX EBITDA to during We XXXX. $XX of which down ongoing a our cash Our pay contributed optimization million continuing flow, CTR million decrease generated bank million debt BOE, reactivation help adjusted and combined workover $XX.XX targeted of we programs, cost contributed an to

and reserve of year-end barrels gas, year-end we XXXX. yes, which oil of our $X.XX SEC our was oil prices XXXX million to year-end equivalent per reserves Turning prices million of at of based reported XXXX natural of of on and proved we down equivalent, modestly per $XX.XX had MMBtu -- barrels SEC XX.X reserves XX.X the BOE oil or average from barrels

gas. of For oil comparison, XXXX in MMBtu of barrel SEC per $XX.XX per $X.XX crude average were prices and natural

X.X recorded and we by X.X equivalent million of oil offset of barrels equivalent barrels of to million production. barrels well XXXX, oil and reductions oil net of million that to of X.X lower improved During upward additions, were primarily equivalent related of due revisions revisions performance prices technical commodity

comprised XX% reserves with classified of remaining natural oil reserves total of developed, SEC proved and proved XX.X% proved crude gas, the as as XX% and were Our undeveloped. XX.X% proved

proved end proved Our $XXX SEC and years. year-end SEC cash XXXX reserve life ratio year-end based future the which reserves, the of down The of measure our from million was flows, XX% to XXXX primarily our due taken $XXX reserves on prices. standard XXXX was XXXX PVXX of was at million, production XX.X from lower

will to carrying in Randy With even strong XXXX now will momentum are we results, we financials where financial forward turn over better With more discuss the these have year. into our to a that, a believe call operational we detail. I

Randy Broaddrick

occurred our for or XXXX earnings was for XX-K you, as without that loss per the was a typo in it loss. the that yesterday our The It filing. a typo the was presented discovered of share published denoting after conversion parentheses is Thank XX-K Paul.

correct this We will practical XX-K/A filing a be as as soon to typo.

of items revenues of net $X.XX loss the quarter these adjusted or per million $X.X in and compensation approximately a for lower generated oil reserves income a in value Without gas of pretax income a net $XXX.X from million losses and $X.X price $XXX.X Included per for adjusting pricing, million $XX.X ceiling result or impairment of for share-based effect reduction unrealized million on on been fourth and diluted of the and $XX.X allowance in million of loss oil expense. including share. as were a a the taxes million we the diluted gain due loss the would items our For a have share. of the $X.XX to after valuation recorded hedges changes for XXXX, $XX.X test million, the items,

including a $X.X for the the for For ceiling generated in full $XXX loss million and million year test were XXXX, we a $XXX.X net or $X.XX. impairment, pretax after share revenues $XX.X a $X.X of per the on reported Without items, million share-based effect and adjusted expense for million diluted net of Included the per of compensation items on million losses the of $XXX.X hedges would loss income items loss of taxes result a of price. unrealized valuation as in or adjusting gain million diluted have the for approximately million $X.XX changes our and share. been income allowance, oil these $XX.X

had flow, quarter flow or During we $XX.X in XXXX, $XX.X of for operations in the positive million million cash from free of and flow, $X.X fourth expenditures million. cash cash post-CapEx capital

cash full in year XXXX, we $XX.X had million capital free the million. $XX from resulted For $XX.X in million which flow of in expenditures, flow cash operations,

sales BOE. oil of months XXX,XXX X XXX,XXX and For a of XXX,XXX had for of XXXX, we sales ended gas the XX, barrels total December Mcf

received averaged barrel were oil WTI and The XXXX. BOE. barrel $XX.XX oil, differential received a per price weighted Mcf per per Our $XX.XX for per gas, between of fourth average the approximately $X.XX an our quarter of NYMEX for of of prices $X average

BOE. had For a full oil barrels total the X,XXX,XXX XXXX, X,XXX,XXX for we X,XXX,XXX Mcf gas of of and year sales sales of

BOE. $XX.XX per were XXXX. WTI the averaged prices yes, $XX.XX oil per per $X.XX for Mcf barrel full an price received Our for of our barrel -- per barrel of approximately per the a received average differential and The between gas average $X weighted year of oil, for NYMEX

yesterday. For detailed various I'm our XX-K our on discussions answer that release line questions refer any was income them statement happy during items, Q&A. to earnings and of our please to filed

Paul we again XXXX, fourth pleased of cash As consecutive during once quarterly generate quarter fifth were to period. our the discussed, free flow

free continue targeted purpose. even flow comments, debt million our in will much During we and in credit cash paid $XX will that for XXXX, the our by we more we return use Paul prospects. inventory closing high down pay of of rates drilling to to but afforded a position on deep initiated stronger his of our detail the drilling facility, recently given down program, in faster with discuss are

we As set fall was December, we in completed $XXX at bank our previously borrowing our announced, redetermination, base million. and

of of cash As we drawn and million and had of resulted facility, the million, our million liquidity $XX.X cash in $XX including available credit equivalents. revolver million December $X.X XX, on which on $XXX

day with X%, on Finally, BOE affirming growth XX% XXXX February to XX% sales to X,XXX the per X,XXX we year-over-year average year between outlook XX, we provided to and full which equates are X% oil. approximately including

we which reflects -- of XXXX, an decrease BOE, XXXX, year anticipate we $XX.XX cost $X.XX per cost full anticipate lifting an average For of yes, year per to average full BOE. $XX.XX sorry, XXXX to lifting compared a

XXXX investment the XX and to XXXX. wells to during year drill X Turning complete capital to X we plan program, our to X wells full

capital We from $XX million to and by spending million, expenditures all are cash with hand to funded of targeting total operations. on cash $XX be

drilling, leasing, included activities, spending successful company-directed in to well our obligations Northwest Basin infrastructure completion contractual capital and Shelf Also our and and outlook upgrades the reactivations, and areas. includes Central workovers, and addition completion non-operated capital program drilling In drilling spending anticipated CTR targeted continuing for Platform workovers. is

program XXXX have Our production grow further reserve to to sustain minimally flow levels reduce free and designed to debt. returns and been sufficient has capital cash or our generate

the flow to when implemented ensure these hedges existing Our commodity were were cash year adhere necessary lower last to to prices plans.

that, turn to Paul. back So I with will it

Paul McKinney

discussed and better. competitive were for we quarter Thank has challenges we last third earnings spoke, A as past you, Ring's our months On since strengths lot mostly we them. changed the in X detail over as the the face well I addressing call, how Randy.

amount and, However, a winter most of our I a here XX% of the production took weeks more storm We or an the us to our hit the more want considerable affected to industry storm. energy X Texas down severe downtime how that production. for restore. incurred in little that affected in February, the it on more had We about specifically, majority than unusual talk of

we a result of this Our less be predicting what as originally than downtime. quarter first were will production

we we not going we are sixth to our year next However, full production, The other new we have debt, still in will new discuss with and we still quarter, seeing our continued our down our change flow vision. want cash initiatives, guidance. for the thing improvements I a the generate are straight strategic will wells pay to our free of and is and performance restored

and are These in debt-to-EBITDA knowing of them leader people, best and will strengthening to future operate; we and continue financial we to and a flow to communities margins steadily reductions squarely by paying strategic cash guide we free only improve and and excellence generate value safety environmental and our opportunities; to the sustainable can capital balance our which are sheet committed objectives: highest-returning the principles becoming key to attract noncore we work rigorous commitment first, down We pursuing are on achieved capital build pursuing employees. operating and following focused discipline cost success assets that the through us, targeting principles X strong and debt, driving peer employees committed divesting that a our health, by continuing our ensuring to by on: efficiencies; be metrics. and our continuously focused a foundation; key improving will additional and in retain

Second, that we will a a objective define future excellence of is will sense success. culture This foundation and our operational urgency. pursue with

work that does XXXX basis. our operating efficient consistent ways what plan manner, a with cash sense XXXX. can lessens mean cost of execution environmentally decrease our to seek highly responsible reduces high and advanced example the to So BOE our low-cost, will costly from $XX.XX operating program to seen in from deliver lifting all a which urgency. program, and a be and campaigns, expenses of this successful $XX.XX cost our in An our drilling on workovers. execute operations per-barrel is apply operations, exactly? technologies reduce We other of impact and continuously per in safe We in in programs and this our CTR The

the BOE. our our reflected is cost savings, closing Our of the the the communication, office, Woodlands culture Midland $X.XX continuing yet Tulsa consolidation $XX.XX allowing executive cost cost downsized meaningful to our of process example continuing per the from field and to year and it And for savings. leasing resulting anywhere culture. not closed to is our relocated from execution reducing build office, of lower are we to is the But confidence this in another management our change forecast this the biggest office, improved and headquarters aspect of the annual expenses this of is in impact in strategizing, Andrews and in teams,

to the cash will to in grow allow rate programs third work flow inventory. This our debt. return on of Moving only strategic the invest and the and highest prioritize we us and pay production our objective down free projects reserve profitably levels to to excess is risk-adjusted need our generate in

discussed already Shelf Northwest have both we from demonstrate free CTR dollar can program, We our and spend. our our we as cash commitment these every program but generate of flow to drilling as much

Early and wells December completing next cleanup. X we at oil above expectations, know, and Andres X-mile full results you program San drilled we been months. wells to now or stages X.X-mile All completed X various horizontal January, wells in horizontal production of well. the at As X Northwest horizontal forward and the have look Shelf over producing and few including are

launch to shareholders financial excess on and during in cash our fourth provides balance to returns reduce to from the Moving assets. this reducing maintain And strategic noncore we divest additional fifth We to and committed cycles in this of through to which manage of commodity through our sheet potentially final will pursue from the that second that still proceeds our a strategic is to the focus by which moving future. the the to plan. objective are Basin use Delaware also regard flexibility of debt. price the is our on assets objective, to -- announced quarter meaningful focused acquisitions our generating month, Last breakeven and year, strategic to and strengthening sale for the and do our cash process we lead is flow sales Remaining disciplined or this to intend cost. free of operations plan on

on dispositions on improve our that improve focus acquisitions, accretive cost operating margins, and cash basis. and our flow a mergers will costs accretive but We not lower our breakeven are only

efforts debt-adjusted the share Our comments risk- to and prepared end financial team once returns I focus for our strategies delivering want thanking with on per these shareholders. associated my entire competitive scale, modern especially Ring will by, their gas of on industry. employees has been a work times past clearly the for and challenging for dedication. year hard The and continued most global in the and oil again,

While the over the Ring's X in determination the little levels employees have at quickly only to I a I company been have come months, for of collective appreciate organization. of and dedication all

their new strive way important, As operational team appreciate evident we I the is value. to our result in so have as of to financial new a I quickly shareholder continuing results increase forward our closely and embraced our further work company as which the and actions. with to look direct take to vision, they strategic heights

session of with the Q&A operator like our moderate so call. it And this to I that, over to would to turn

Operator

question [Operator Jeffrey with from Campbell Partners. Instructions] come And will Alliance the Global first

Jeffrey Campbell

Basin the was might I last is environment a if you as different asset valued year. conducted question sale is in anything than if see sales first the sale. more regarding wondering how be XXXX or supportive generally, year Delaware this My and

Paul McKinney

Yes. Good XXXX a question. year. Yes, better is

peak that -- right which in If you the purchase XXXX, and probably was pandemic we downturn. of of in recall, entered agreement a April actually sale we signed the

this we year. so prices believe And that are yes, the better

associated be also disposal. of also that production made and used a facilities that with looking job in commercial for saltwater have facilities actually stabilize and those production, out We portions to our at our could investments of separating our and done better we've there out are

get can doing forward so value looking And so think to and this good really assets, we're our for we so year. we that

Jeffrey Campbell

into asking variables. that you Okay. and you appreciate without on some Great. M&A, if us secret for the broad that. give I regard desire any sauce, items a financing gating assets of And digging sort M&A little both with wondered any bit to the could so

Paul McKinney

transaction we address okay? last sell would that. now the equity making back level, that we like come to were we low, kind -- would that. assets oil. obvious use that's balance if We have, prices a with There load we've whereas sellers to Very sellers emerge like willing sheet, can. reasonable challenging -- their there because nobody prices, can at wanted at you the We're And November, want and sheet, at to progress. where do of out the prices first pretty Yes. have from with a these thing. back got up call at further our Yes, good. I'll so debt a that more in to them think if to financing balance that we believe of any are more strengthen sell still we to look more We there, -- when you really, year $XX December the are

with to that back question the area really like we portion getting own really Now economics in we're your We the that what projects of of in. of we inventory. the assets, like our well, type associated the have

ideally, our in operating like and so very effective production over to more the that would yes, more operate. spread we barrels of we And areas team wells

synergies the obvious thing. an So is

if the however, -- bring And payouts Basin costs currently probably buy thing. we declines, platform, high breakeven to of type you similar assets because around undeveloped we them short outside I where I'm the of do be oil with venture that in shallow primarily low acquisition and operate. not have the we of the it'll margins, Shelf, and attributes well. opportunity, as attributes that and would will And so only But Southern of going say tell Central that

Operator

Rice. question the next with comes McIntosh And from Johnson Dun

Dun McIntosh

Appreciate winter the on storm. the color

drilled of January, January December how XX. What's out. playing on course a kind baked wondering we that kind timing And of over if and that I see the Is assume -- in of 'XX program would those dig the the little XX more the the wells that's I to and this year? was and X XX or to XX the of completions you So that could in right? into

Paul McKinney

That completed but is were correct. were Yes, they -- in wells drilled in XXXX. X December, and

Dun McIntosh

Okay. of then be year? weighted remainder the of guess the about, kind that and Should you so knock Or so it, remainder the that to you kind out or X year, leaves for end over the X towards -- then I the year. second, third, of the get And is of pretty program those the call fourth should as quarter? or reevaluate of

Paul McKinney

Well, we're daily accelerating being to that higher on were campaign But product anybody our pick thinking the basis we're start are, prices levels they next today about was originally little going are thinking forced We a couple things drilling in the sometime they summer. of to because kind than of program actually predicting just to a reevaluate ago. were drilling at of months being being with we our rig up what bit. a prices the what a

if quarter. surprised second drilling the start we be in don't So

Dun McIntosh

Okay. second year? talked CapEx $XX about that you I for And then in rig to about included but be in the million adding clarify listen, would of just when that the and talking to you're $XX then million guess I'll the that summer,

Paul McKinney

it Yes, would.

Operator

Noel from And will with the next Touhy come Brothers. question Parks

Noel Parks

miles The laterals? one of couple regular of that that is XXX a length was X.X one well results Or things. XXH, of for in the length that B release, the the you gave laterals? Badger Just the

Paul McKinney

lateral. miles X.X a It's

Noel Parks

would a what's production Northwest production you Shelf, past Eastern for just the so the of everything. now of far? of does the the curious, in longest you've at Longest well? not history have help -- lateral the there And this Shelf acquisition history Shelf? a And Eastern and the with how much have assumption. the length have out X-mile of wells couple just presentations the economics think -- I into been years Great. curves the the had sort lateral Okay. you I'm

Paul McKinney

Vice is Engineering of and Dyes, This take President our Executive You want Corporate to Alex strategy. Alex? that,

Alex Dyes

Sure.

just So presentation -- in to X-mile normalized it's a the our lateral. before

miles. question? just up it what I get -- was didn't the quite the part And that. to multiply first X.X you of catch that would So move to it

Noel Parks

about your maybe just might be history asking production curves Just -- where now and where type headed?

Alex Dyes

Sure.

far operator So a wells history, operators 'XX, there's XXXX, as drilled extra extra mile an and location you started I in X.X-miles it's the already so the for you because in get mean, to get bit history that. well, lot first of quite set the within had a as those up that original of wells. the area the drilling And there X.X production have and from beneficial production completion other

you want maybe, bit to a So more? little elaborate Marinos,

Marinos Baghdati

X.X-miles lateral. X-mile of lateral are Yes. compared The cost to XX% incremental the the

So when with get, we and the that we the drill to EUR laterals X.X-miles beneficial increased that can. it's

Paul McKinney

the the demonstrated, some this other Yes. team of X.X-miles all my only the also be observations, of Based not area, on with wells operators to have but with beneficial. in

everybody X.X tries as been beneficial. to they long the -- as position, it's miles, the to have equity So drill

So EURs you but in ultimate the IPs, see it of not you so much of terms considerably as it the wells. see economics and do in the

Operator

from Richard [Operator One. will be Instructions] question next Tullis with The Capital

Richard Tullis

quick one clarification. Paul, question, for Just

currently So depending then the continue one pick for rig running year. the Is look what in drilling but pricing to that you the and the would the not it? for would rig, the quarter possibly consider program second you're get after X up with at you that and on then do drop to to of the way X to rest year wells a proper

Paul McKinney

the at way That it. look proper to is

Operator

And the Private next question will Bloomfield], Investor. from [Michael come

Unidentified Analyst

from balance yourself, you're level you balance great to that From growth," forward to and level sheet, usage reach am debt standpoint of internal the cash the maximize all saying once the flow comfortable question the comfort. that and that is you gives sheet and target on in to that the on to get "I be the down understand sensitivity A focus balance it. this I where the of need to of reduction, an going for that

Just that you've curious identified number. if

Paul McKinney

as forecasts continue I if out I'd or some the prices if that be will remain have there we of the Mike, or below say, to of future, prefer some right take because pretty higher on if we our close or past, the pundits actually advantage to be who to thing to for tempted Xx prices in capital some X.Xx said optimistic we debt-to-EBITDA. shareholders have think really that I've I'm to And for get going the significant to strong Well, the I off the oil those forecasts, debt-to-EBITDA would of going do in below, to those though, growth. at some come pour be to deliver inventory to prices.

Unidentified Analyst

in the $X When in total I'm easy Yes. produce agreement between fair business, we the well coming basis Is stream, a million for with that gross number? an million that. each talk And and question. on math revenues. $X that one annualized last people are would the wells about new aren't of on new

Paul McKinney

that and to number. back have go I'd check

Alex Dyes

LOE is So then depends on different prices. it have Alex. in different LOEs. Yes, your this also areas And

easy it's not So easy -- a answer. very

So I would offline. that say we'd probably take

Unidentified Analyst

a current And appear a or many nonoil just and just so you'd barrels to wells, it and value would times again, you about interesting additional $XX you as revenues It of start be, appeared times take million an because curiosity get number. in $XX it the you was at Okay. guy, number. it million a be looking X to that days question talking market produced was when kind

Paul McKinney

on you with back that. get we'll Michael,

Operator

a Alliance is question follow-up Campbell with Jeffrey Global the Partners. from And next

Jeffrey Campbell

how several fairly for for a ESP-derived And for I this ratable 'XX? are tap program in. Great. back years? pump me forecast was many wondering, of is the letting more a have over on do conversions the Thanks just next you

Paul McKinney

Vice I'll that going Operations, turn what, President you Baghdati. our Executive to Yes. tell of to question Marinos I'm over

Marinos Baghdati

forecast new to Yes, sir. XX rod because wells throughout we'll There's have, life volumes. on their frequencies that probably on have their failure We conversions this based XX We high converted to that the that will currently have pump of our water ESP, of are the year. XX we excluding anticipate, won't rod be that wells the and pump end -- by to XX wells.

we'll conversions wells be at XX point, the point the be a an converted. in to pump that all XX point, rod at it'll to drill, XXXX, that done. get are need that after rod be they And where So that new we just converted XXXX, to once with to be they'll that wells pump additional

Operator

gentlemen, back to question-and-answer would and Ladies McKinney the like any Paul I turn session. remarks. over to concludes closing this our conference for

Paul McKinney

your Very you, for and Ring. thank all Chad, good. interest in Thank of you

holds excited Ring shareholders. for Energy We our and are future really the about what

single working day to are actively really look XXXX dollars that up going We the a have we and forward put the to good XXXX best beyond. to uses. to we and best that end And trying we really year, every is think with

one to, like I'd on and -- and talk time, again, So will you call. thank last next we again the

Operator

And thank you Thank now for sir. concluded. presentation. conference you, has The today's attending

may You now disconnect.

Ring Energy (REI) 17 Mar 212020 Q4 Earnings call transcript