REI - Earnings call transcript Q2 2021

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, and welcome to the Ring Energy Second Quarter 2021 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] Please note, this event is being recorded. I would now like to turn the conference over to Al Petrie, Investor Relations. ahead. go Please

Al Petrie

comments and overview the Matt, your everyone. appreciate second who call We in the Chairman Thank and quarter. key Board to good matters join taking CEO, with our begin time Energy. provide for Paul us you McKinney, Ring of an you, will We'll morning, from of today interest the and for

and results. our Paul then Land, the Corporate Alex Dyes, Strategy; the then joining Legal Marketing. Human our available call Chief Thomas, Brooks, Financial turn Travis review of Executive and Also Officer, Executive will session Baghdati, future Steve Engineering We President detailed Resources Vice call our to and of for financial the Marinos Operations; will discuss Q&A outlook. of plans Vice will VP who over today and are and on President Executive us

During the one ask follow-up. to we a to questions your you limit Q&A session, and

later are with You the welcome questions. additional to reenter queue

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

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

Paul McKinney

XXXX everyone I to want earnings to quarter Thank you, Al. call. second our welcome

utilized This debt. seventh that partially makes We for with quarter second free generating flow overall results consecutive we further our cash pay to of the quarter. the are pleased down

our in detail. more results at Looking

equivalent sales first Phase XXXX, or Northwest per or II production oil our we which success of of XX% year's equivalent sold barrels drilling Phase per I day. X,XXX XXX,XXX day, an second XXX,XXX oil was and to quarter Shelf of equivalent of barrels of the BOE Contributing programs. was this quarter the higher During of X,XXX the oil barrels from increase

As expectations. discussed a as production and our within budget our on or we and program earnings Phase result, came last I results call, on meet our continue schedule original collective exceed and to Well in

June. production the produced of equivalent the well. the I, per equivalent During wells of online per second wells total production collectively, we gross Similar with wells. the production XX per drilled, results collective and all of XX,XXX well completed placed barrels or or X. brought budget also oil and of XXX original day within or four Also last days oil wells our exceeded schedule The the second during oil XX,XXX have came from the barrels wells Phase barrels in the and three Phase equivalent on of approximately XXX to June II per Phase by quarter, BOE met all quarter, three from for estimates, approximately II day II including three wells Phase on

increase restoration storm winter our development in recall, of of and a first you by call, severe our the success in volumes ongoing anticipated February. disrupted expected conference given sales If natural on we quarter gas quarter significant the second programs sales the

due lower gas these sales. processing volumes quarter first downtime did negatively While facilities anticipated in they quarter, third-party from natural platform primarily continuing the to that the Central than second from XX% sales increase Basin were affected

several by experienced the completed back wells further lightning In late of June, sounds. online Northwest to the that May early constraints the our capacity impacted Additionally, our facilities we also oil repairs quarter brought with damage sales and pipeline period, mid-July. for the gas during in natural and we that shelf strike impacted related incurred

sales natural pay on these impact BOE portion when of free a in flow III know, revolver up total gas gas although during flow you increase quarter. sales When the to the EBITDA our total on With announced minor and Yesterday, initiated considering is from we crude As had impacted the and first week a the our a EBITDA, down by In to last and benefited sales original basis, adjusted higher increase $X.X component two cash end items two to they an million a plans. million. crude We million of volumes rigs $XX combined drilling quarter. to pricing million period large respect higher generated during with $X million borrowings relatively in natural contributed sales response and XX% ended the reduced of revenue, liquidity, the first drilling the cash pricing a our our minor the which, for quarter impact the a environment. oil XX% over $XX.X second reduced from sales on as to program. oil free utilized first we The ongoing revenues million of free resulted debt the in of crude cost drilling our bank four-well of $X.X first XXXX wells with We increase Phase flow. EBITDA cash XX% of reduction of overall these picked quarter we period of million increase the of $XX.X the from the XXXX, $XX.X approximately as half combined well of our quarter. initiatives in adjusted revenue, the

in wells. XXX% these all interest have of working We

to given IV fourth price shelf the for one the with be while be wells invested current the wells are be anticipate ones drill platform more II or in on plan to planned program Basin these to two to less We to additional the X.X-mile the wells Central Phase in or wells payback up an a environment. are follow Northwest planned X-mile laterals, early year current laterals. the The capital one-rig beginning in Our the is Phase quarter.

XXXX. volumes. Although current us a not position new strong a in the XXXX that will will more price in very closing Travis place financials on that, turn Keep these call I'll mind to Travis? then enter production come remarks. detail. few to environment impact will volumes discuss continues, I anticipated we our the and as a production have With Thomas the in over back meaningful make

Travis Thomas

Thanks, Paul.

a as on result oil XXXX, a quarter change including $XXX,XXX and noncash of pretax net per $XX.X second we of share. million, items, or For of price loss Included share-based the the loss loss expense. compensation $XX.X of were in recorded a the million in revenues million $XX.X in generated of hedges approximately unrealized losses $X.XX of

share. per items, Excluding these our was net $X.X million or income adjusted $X.XX

of flow positive During result the of million in a million. free had XXXX, cash capital from second $XX.X $X.X operations, was flow $XX.X cash million quarter we The combined expenditures. in

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

XXXX differential and NYMEX of was of barrel natural and compared pricing for of a per realized The quarter oil of average $XX an per our oil WTI per barrel. barrel per was gas 'XX second $X.XX negative of negative BOE. of quarter the $X.XX price $X.XX differential first a average $X.XX between quarter second Our for to and per our average received Mcf

release XX-Q statement items, was yesterday. of line our refer and please our other discussions to income that detailed filed For earnings

I course, questions to Of may today's Q&A happy will during session. any answer have you be

debt discussed, down of we flow $X by As XXXX paying once free generate Paul second the are and to further quarter pleased cash again during million.

purpose with forward, conditions. Moving of driven and will cash our continue we flow market flow level for the paid of free use and cadence much debt the down, of primarily capital to free of the timing spending this by cash

and June had credit $XXX.X $X.X including available liquidity our on on As million of XXXX, the XX, $XX.X we million of cash. of drawn $XX.X million and million, facility revolving revolver

for of outlook year. this remainder our to Turning the

We expect to oil sales of second X,XXX barrels including of per X,XXX X,XXX per to day. BOE X,XXX XXXX day, half

program, excess the high sales our of IV III expect guidance. completion to half of and the and timing exit end Phase successful the of with Phase in Assuming volumes XXXX drilling second we

of and We expenses expect include BOE. lease processing costs. costs cost the $XX.XX of $XX average and lifting second XXXX half transportation operating to Lifting gathering, an per for

our Including IV announced to spending with Phase second of million $XX to $XX II all we cash cash and the we year, half X capital XXXX wells from Phase X the to total for by expenditures capital on investment million and operations. Turning a program. yesterday, hand this funded of expect

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

production been return second generate our capital further in and flow minimally have reserve allow and free reduce to stronger to XXXX to - sufficient sufficient a levels, enter XXXX sustain or position. Our debt half designed have cash to has us program returns grow

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

Paul McKinney

Thank you, Travis.

meaningful has continue been have debt our in more and million The of sheet pay than us seven generated a balance last the flow quarters, cash has $XX market we strengthening helped Over free program. that result our down and position. drilling

quarter, we peer every will debt-to-EBITDA on metrics. annual leader not on becoming focused and basis in remain a Although flow we cash may an

two definitive will of as from acquisitions. to have call, Regarding shared details more have demonstrate Delaware the of in our number with last to in once assets, enter this we essential I our ongoing we we regard. process to you sales And garden agreement. parties things earnings we are interest We sell a and that on our seen strategic pursuit promised hopeful detail significant announce a

transaction strengthening to in will improve flow bring leverage production, sufficient our cash ratio, sheet. balance revenue First, potential thereby a to and our need

Second, the our to shareholders. transaction accretive need to existing be metrics will

the it to this: the several So, in marketplace tests. meet to acquire we it questions. operator we two been not ensure these over And using these unless the to that, we have over for like line the meets months, bottom is equity yours. all Matt, criteria. I With opportunities turn our screening assets would will it's last

Operator

first begin [Operator Campbell Our Instructions] now with ahead. Alliance from We will session. Partners. come Global the Jeffrey will go question Please question-and-answer

Jeffrey Campbell

Good morning.

Paul McKinney

Jeff. morning, Good

Jeffrey Campbell

on quarter. the Congratulations

Paul McKinney

you. Thank

Jeffrey Campbell

drilling. myself the Phase on III I'll to questions limit a couple the of IV Phase and

been some about about throughout The steel is, and first here we've anticipated hearing of this earnings provide lengths increased on the costs color you well during thinking side. hosted - inflation? I'm cost And can any one industries well

Paul McKinney

what going to Yes, Marinos that. are tell questions. good I'll those I'm Jeff, take And you let

Marinos Baghdati

be III X.X-mile are Good planned laterals. and be Phase to to North CBP wells Shelf morning. forecast are The be plan X-mile are X-mile And Phase laterals. wells to West or laterals IV the then going

cost to quotes have the range all of seen costs industry, tubulars as of we've costs, but XX% in service the the we primarily just of and terms program, the costs, the tubular. and drilling the increases, received been casing of for cost for the some on the other rest casing In APs preparation like increase the major well as and been has XX%

Alex Dyes

to add And to I'd that... like

Jeffrey Campbell

Sure.

Alex Dyes

This is Alex Dyes.

We presentation of guidelines in what our put posted have a with well still and earnings this the the time, presentation. we costs are that of increase within we in range along

if more and well want see what you cost, on So can to miles cost you it reference there. X.X well

Jeffrey Campbell

follow-up presentation. you. is my Thank And the Yeah, X. and the that on X I did have question

fourth all, that you to going the should whenever four will bearing you. intend identified, completed that in completed quarter these be finally, are be to And mind these Phase want 'XX Phase III hedges? we the you likely to IV quarter wells you first do rapid of returns identify. wells with in in First wells the Thank all expect protect XXXX paybacks on be or

Marinos Baghdati

expected end the we've the are be wells there. I'll Phase on be quarter. regards able wells In were online timing The us to over to to contingent turn Paul. the to Phase to dates online it of the secured based current II And take frac hedges, the fourth dates the IV I'll in by expected frac on quarter, the our third maintain question late already. being

Paul McKinney

hedges. Yeah. Yes. I'll the take

future our we But additional we flows, requirements hedging will not future our to XXXX. And cash any although, will down Jeff, into a Hedging currently significant be component well. details have year. always the also a plans. going our in time, of hedging are more at same layer those heavily into yes, for pay protecting - be So, shareholders ability do in an so of as upside to But the new our like more capture opportunistic share we we'll backward we and this, employ to going the hedges as dated seeking strategy environment debt.

Jeffrey Campbell

I Great. Thank Okay. understand. you.

Operator

question next with from Our Dingmann ahead. come go Truist. will Neal Please

Neal Dingmann

of the how remarks about Paul, question, on you the build you talk my here at release. Could you've looking about in mentioned the as kind well, first the just balancing think prepared question that a of one-year really, saying, production I the the debt as especially some at than take think, love nice to, both. was Jeff less course, provide - I'd optionality look repayment growth, and payback to last

glad think about wondering you now of a I'm with done how you just that, rigs. debt bit that couple again, So this repayment growth. of you've a terms, added in balancing guys just broader the

Paul McKinney

Neal. Good Yes, question.

And to reducing is, right period during is the we going of committed what team we are debt-to-EBITDA leverage. that do. when as I now, core so management concentrate sheet committed are state you when metrics, continue and is pointed that committed becoming we're - to leaders to mean heavily a time truly industry that. our so the peer and and it out I - to think on we this to levered balance

slightly of continue program capital goal production whole grow debt our or our we paydown. the so that is so maintain that to And can

ratio, know there's in discussed the as don't that. shareholders are to and we past, us that that of that divest we also properties increase that. to of reduce strategy capital We're to towards an for employ are our help divert that opportunities believe accelerate But more looking could that core believe our believe help will business and drilling trying you to accelerate to production do. we growth we acquisition as also our continue the to certain to also provide we we've As leverage our

Until continue balancing Does growth. concentrate a ratio that get better more the of answer we'll on a we that question? leverage But And act to leverage into that. we'll so towards more it's position, that position, we now. stronger into ratio contributing your as you'll a right see get our and capital start

Neal Dingmann

Yes, absolutely.

more year hockey cycle details, color I'm just I'm year? production guess, rigs and I that. - nothing said like this there just little you On was the feel think think the I last payback, guys do confidence 'XX, makes sort I high how of lot reading the combination XXXX? you gives about should some guide as night, a the in, earlier probably it you're you leading on again, you statement you'd trying about year. thinking the side sense. release, confident at end sounds on it to talk time you we I stick could these And think And wondering, really about quick of come the guys rigs, this ramp? now just and Is the years that a like well. specific was to there that end in something. just a maybe get more no guys I these hit the two but for around would advantages bit of not you quick it then have it the into that have If have be production, a how the bit now two in this of or

Paul McKinney

have year. again, that in plan. late observant, and is is, we the that last This and year year, early the Well, very

we hedges. you the As know, defensive in put

that the of roll as end year. is the in strong didn't year. going benefit program really in really off so those the strong really And earlier to exceed. advantage capital production of generate allow our at production respect And much. But this purpose affect to know stream take a we of puts coming can year flows But new can that that these is we the in hedges the of what the affecting this the can into hedges is outside us prices this the position year's limited the too we we it added production, is production cash to with anticipate

So ways and revenue generation now looking XXXX, and towards the line. our optimize bottom we're yes, looking we're that to the for EBITDA hit

Neal Dingmann

Thanks, Paul. answer. Great

Paul McKinney

you. Thank

Operator

Parks [Operator next from go Instructions] Our Brothers. Noel question Please Tuohy will ahead. come with

Noel Parks

Hi, good morning.

Paul McKinney

Good morning.

Noel Parks

just had to by want things a few I I run you.

the was the out taking that you thoughts was of something just curious to wanting I instead sort for more So you're wells And Or way. two saw on time? a a getting good the be around stagger while of drilling, in were wondering the steadily. trying same cluster with by the last head - that that on commodity we had at as you to I'm as largely decision environment. if determined on go maybe update price the on Was out there had - rigs completion about you both of them little operations suggested in a on just there far running might dates back tightly price good

Paul McKinney

you to of things he the our tell that going Well, address issues I'm some I Marinos there's of the logistical over that can turn back came what, and with rigs. lot into decision. a this to associated

Marinos Baghdati

Phase And with before wanted After we're make wanted a the and II you hard the getting that in service the a continuous time the dates forward And pricing sure that, moving that, with having results the program like wells availability, monitor the wells, we we we're changed. environment to mentioned. finding schedule not get. to to doing frac

had executed a dates we one available the time and efficient way window and get by of the so the longer. to most same both was frac than employing little Shelf CBP in taking and thought rather bit just a rigs two around And those Northwest that

and up question? the back we to So that that two to was fourth plan we X for Does now quarter. in a picking dates going major those frac rigs. stagger your IV, because In rig we're think those decision for Phase go can answer

Noel Parks

from rate in first to the production was a strike at the of your the did bit it half, looking I It hand, relative other little me thing little guidance a run just straight with again, second does. for sort to just if And to you is that was wondering making - do half. timing or was bit anything having second frac I in anything was for cautious setting expectations there conservative. there

Paul McKinney

call issues had of discussed Well, time, winter we incur in that February, the that the make impact Central that were was if you we winter not continue created the the and as up we can production. first of we that that gas going remember that in result the were At in we that facilities Basin the we told deferred our Platform endured to that thought to we aware for storm shareholders storm. our a process that

still has we've And production that restored, deliver and predict so gas been to they production. will on when steady up that trying not given and fully restored

And that see believe people you conservative, so these can't we estimates, continue can would I little we've why but do. going are look they a what to predict decided to other

decided the that had we good focus we on. production so And to oil that on handle we knew a

surprised, And the hope other hands so but we're of I we're people. in

Marinos Baghdati

I'd few a you hit a because online dates come current something to we the In are original our ones our the that, with to last guidance, wells anticipated forecast, of that mentioned. that sooner to like lot what frac little coming you on. than program sooner capital drilling XXXX bit had the of on add the our budget or

impacts also we're guidance as the well. of that bit a So second the giving little for year the half

Noel Parks

wondering, given curious, about originally, weren't until was later the guess definitely thought a in first what in I timing forth the specifically be in I like to so then That factors and involved I base I getting on. with wells half much more I had II there we've was up heading rig that and And And the really year. going this then just was into sounded where decline was fills you coming in among shape to curve Thanks. Great. you out it XXXX, thinking of with. activity come extract, Phase the the on. just there touched additional the and gap the the

So is mix in thinking? your of that also the

Paul McKinney

will Yes. a of wells when impact. The timing we always big our drill have

in we So our far, and we've if opinion, accurate. you have forecast been oil at for my surprisingly, look that the production, remarkably internally

but associated really basically of it's in primarily been mentioned, The lightning the regard. coming in with gas. to like the we wells strikes, So seen due been in have in far that past. the the the, good unanticipated have are so declines biggest the have in The we've misses downtime as we

And really question. your so I don't know answers if that

Noel Parks

me one conversions. just it No, way with does. it totally come I that for long other the remember seems have pump if is you rod a And right,

of or that talk I I rework just that And wrapping first, the more that recompletion a might the inventory. what workover so you other maybe of on the And guess, have rest of or I'm most could for assuming curious deck up sort other if sort about you was little year. you're bit of

Paul McKinney

this. say will I Yes,

we're wells out As initially drilling here the drilling of long pumps. electrical we because that as submersible in wells all put we're

program. will there be of always going-forward so a component our CTR And

these But have, We electrical a many do progress retain to as towards submersible also made out, you pointed we sizable pretty of lot converting rod a still pumps of inventory. pump.

continue So approach next that well program we'll throughout into platform. come We Basin in as along their of opportunities the do have latter year. this part Central that life. the fortunate and as We're year ongoing workover

horizons multiple capital for this with the year, kind recompletion have also retain our component But that We and next we a year of of CTR go-forward sizable pretty thing. will associated program. spend opportunities and and

Marinos Baghdati

and Shelf And the are interest still Yes, has that, on currently to wells horizontal Northwest XX the wells, XX Northwest the on sir. of in shelf add ESP.

total a still production pump well. we We little XX in in wells And to fluid those have, CBP a they XXX reach be CBP that on where point expect converted ESP. the rod will The those is as of to are higher. of

to wells at of converted we expect half will. them pump don't at of some So least those but point, rod all to be

wells new a still time. number we wells program we have CTR addition that our under to of in going over that drill to are So the be

Paul McKinney

to rod and less than usage. of kind watch are as parts the we get starting repairs, into TA get expensive over rod these so them after And get costs, now as where And the full our you're in interesting Yes. submersible electrical much months you reduction these operating electrical of of converted you you it's couple pumps. see repairs really effect the

seeing operating impact you're as on, so time And goes reduction in the of costs. meaningful our

past, said you tell seeing that those costs so the down but operating really quarter-over-quarter. come And I'll enjoy we've in what, we

Alex Dyes

Noah, addresses And our to is of a had. will deck on that Alex we lot again. earnings slide Slide release. the attached you this that comment is I the XX questions

of historical shows failures going it with the CTRs. we're and bit where little the a So,

Noel Parks

Okay, great. a Thanks lot.

Paul McKinney

Thank you, Noel.

Operator

[Operator Our with Partners. is Jeffrey question Alliance Instructions] next Global go Please from a follow-up ahead. Campbell

Jeffrey Campbell

I to. Yeah. of Thanks quick acquisitions, back for one more potential to in. impending for optionality your that's M&A in that letting a assets wanted a Bearing mind stock transaction me And to question. likely about or just consummate milestones ask do I all-stock combination you and of believe is the you're the cash. an thinking ask

Paul McKinney

Yes.

And that any organizations stock. lot think I the be owners their have are to - we rare. okay? in be or the do in preference of environment, so Jeff. many sell expression receptive prefer could there's all deal. would there's In that assets from of We to marketplace said different several can't of an all-stock seen Those an the potentially But a one trying to that regard, say going more are and that be I interest we another, current that assets, cash, or

will ratio deleveraging the shareholders, think that be it it. do you when combination, and a won't combination, transaction. will stock at the we we a to debt. deal improving again, time, be accretive an with of otherwise, I combination will in usage, And respect and leverage right look same at the But it share that

opinion And hitting the these for oil so that order that's that increase now prices increase assets a we've in our and seen, the with in oil a anyway, in tall we've seen gas competitiveness the they're right because Street. rapid

willing now competitive. are so willing buy people and there becoming and are now more And more people is to sell, and to

And we've so we're we're shareholders. evaluating, the out but not there screening sight to made promises we're of two our competing. losing We're deals,

Jeffrey Campbell

No, answer. I that Thank appreciate comprehensive you.

Operator

questions, this Mr. turn concludes our remarks. no any As like conference question-and-answer to closing there for McKenney back session. over are the to would I more

Paul McKinney

you that all on for of your you are Thank thank you, time. and And Energy, the in for trust. call, Thank Matt. for your Ring your thank you interest you

follow always us. on you than to is available you're to and more those any If have up take transfers Al them and welcome contact questions, calls he Petrie us. and to send And

and your again, have of day. thanks rest great anyway, So a

Operator

The attending now today's presentation. conference you has concluded. Thank for

may disconnect. now You

Ring Energy (REI) 10 Aug 212021 Q2 Earnings call transcript