REI - Earnings call transcript Q1 2022

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Operator

Good day, and welcome to the Ring Energy’s First Quarter 2022 Earnings Conference Call. All participants will be in 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 for Ring Energy. ahead. go Please

Al Petrie

CEO, and in operator, comments everyone. appreciate the Board We Paul of an Thank matters key Energy. good We'll interest for and the of Ring our quarter. with will begin your provide McKinney, overview you, first Chairman morning, who our from call

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

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

welcome I to the are presentation with note earnings later website. posted QX to queue have also our corporate we XXXX would You a additional questions. reenter any that

also future or or statements those information, whether forward-looking intentions statements company not those of Securities differ projected Investors the the forward-looking conference new statements update any prove you to may otherwise. to will assurance forward-looking conference cautioned a and most comparable in described correct. includes press in and www.ringenergy.com. financial the risks Accordingly, non-GAAP give directly forward-looking with be actual Energy future non-GAAP or materially. measures. as such reliance and Should at can underlying of forward-looking statements. call, the measure meaning undue These making from references materialize of these any and other performance Laws. obligations results one company or Investors documents that are result release vary risks Ring place disclaims yesterday. found Reconciliations in be the actual incorrect, are call certain or events During our These GAAP no the of or section assumptions to prove developments released that website of contained statements, revise be statements SEC. This course of the not announcement our more forward-looking of under this results should Federal guarantees filings those can to measures materially will are earnings on our yesterday's in within financial are these may in should

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

Paul McKinney

and Thank We interest discuss us you you, Welcome, our to of rest joining your the results year. Al. everybody the thank outlook for in appreciate and Energy. recent for today Ring you

for cash quarters, foundation and strong. solid revenue to continue the year anticipate indicative executing are seen operational on set which financial We this value our our our quarter. this believe strategy. results of in as as performance We XXXX in remain be There the for remaining flow prices focused are clearly quarter a can long we proven first for increase and and sales results

equivalent key two which first were operational volumes day, guidance this As oil Contributing exceeded you know, barrels performance factors. quarter almost of by sales X,XXX were range our to X%. per

originally drilled of during quarter on anticipated. Basin First, than all wells Platform the four placed production we Central sooner were the first

certain Second, compressors, field gas complete benefited we to were of sales. which able natural the installation

realized was EBITDA of grow almost almost and during quarter. pricing, gas half higher We strong million sales fourth lower and adjusted quarter, what realized enabled XX from generated cost as on natural XX% compared focus end us adjusted generated ongoing of sales were which year. in approximately the our hedged. last our expired and all control combination of to of prices majority to volumes, XXXX oil considerably of by none benefited of oil The gas natural at the also EBITDA the of hedges we We priced a our first higher

Although wells ahead came spending first capital in schedule, activity Platform Central budget. under online increased placed the for Basin four of our we quarter and

a quarter time pay Our increase our work liquidity, million million free team of spending. XX% million quarter. of job lower We was of year. executing capital majority debt program the has adjusted that spending, XXXX, our in we we of strong implement almost the a at higher than respect one XX the generated our during With commodity end in done great further driving used this development flow price completion and cash down and with efficiencies program, $XX advantage With drilling and of a over to in decided we XX outlook ended capital drilling initiatives, capital same XXXX. rig last from higher a to the and which continuous approximately to XX% take EBITDA

within flow and production, drive revenue, ratio growth year. cash and significantly leverage remain EBITDA adjusted Our of lower the by end to program to and is the designed

our inventory As and in the Central of highest our past, we Northwest are Shelf Platform across Basin acreage. rate targeting return

As XXX% in the January Central all you first Platform wells two wells wells know, wells the Shelf four late quarter. and having This working we drilled initiated Northwest Basin six interest. in in in our XXXX and included development campaign with

since two in four the on production the we quarter, Platform wells. brought Basin and Shelf Central Northwest I have were and online As placed completed mentioned, first well the

and last drilling have leveraging to squarely remain completion from We the program, the our by selecting we geology, on our seen results focused landing are learnings date the from our encouraged year, methods. we XXXX zones, improving best

electrical our program downhole first four Shelf the work CTRs. call continuing CTRs in Northwest pumps capital also in we a wells pumps, We from to convert rod performed are quarter. submersible program We to

lives the the of our of economic reserves. to larger significantly considerably we and and recovery As future lower cost in lower These costs lead repair electricity wells oil long-term gas lower reduce the CTR with improve usage, have the past, allows discussed program us our targeted of operating costs. to operating benefit and ultimate

to to drill the expect we to in on XX to second wells miles. forward completing quarter, while nine X wells production place and Looking seven

XX are XX to planning wells XX and we and between and drill complete still online full-year, wells wells the For XX between wells. place and

will Of course, ability any program to adjust changes commodity our and spending to retain capital reflect continue prices. drilling material the in to other we

So, with more that, I will turn results Travis? in Travis detail. over to discuss financial our to

Travis Thomas

quarterly Thanks Paul, will financial comments position morning My our and today and focus good results. everyone. primarily on sequential

detailed see For to XX-Q press SEC. we last yesterday release year's comparisons please with first discussion, quarter, filed our and the concerning

Mcf of oil This a XXX,XXX of During quarter the a of first total to we of XXX,XXX the natural and total XXX,XXX compared gas barrels XXX,XXX and for sold of XXX,XXX natural sales barrels fourth XXX,XXX of Boe. XXXX. Mcf oil gas, of for quarter is XXXX, or Boe of

First realized Mcf barrel per $X.XX pricing Boe. quarter per $XX.XX or $XX.XX and was per

or the and During per barrel, natural of fourth Mcf $XX.XX we per pricing quarter, had oil per pricing gas $X.XX realized Boe. $XX.XX of

price for Our average quarter the the from first per barrel $X.XX fourth was a first quarter WTI quarter NYMEX $X.XX versus oil for per of negative differential barrel a negative XXXX.

for result than price million. for million Mcf, $X.XX $XX.X Our of gas per average positive the quarter of a higher Hub was per natural differential were to that from of This fourth a Mcf $XX.X first quarter was combined compared quarter. XX% the quarter fourth $X.XX positive first XXXX differential revenues Henry revenues

million million LOE compared more at production. was $X.X million expense $XX.XX in $X.X the the was Gathering, versus a income a million for line remaining primarily the in Boe share million to wells both quarter to expense $X.X higher at for Boe, or to $X.X taxes amount XXXX, RBL. workovers was Boe million quarter were quarter performed substantially of lower It basis. per decrease for on a excludes average transportation, tax XX.X periods. the which both fourth the fourth was was million, periods. $X.X sales. fourth per $X.X with quarter flat than based usual or quarter with return million processing, to XXXX. statement, at and balance Interest primarily compared pressures lower cost steady X.X% from decreased Cash items on a to to $X.X GTP gas on to $X.X the of borrowing due or $X a was the unchanged due of $X rate significant cost DD&A million for increase and million Production fourth the fourth for XXXX, daily Looking $X.XX contributing versus G&A, inflationary compensation

including During non-cash a share estimated the $XX.X and first excluding quarter, items, for or of impact $X.X $X.X million we income posted for share, $X.XX million net on pre-tax compensation after million based of expense. hedges, losses unrealized tax diluted per the

net million first with $XX.X per income $X.XX fourth or $XX.X per adjusted diluted $X.XX share. share. XXXX of was net or Our income million This compared is quarter quarter

share approximately was million quarter including items, pre-tax on of impact our based compensation for tax fourth expense, unrealized $X.X and $X.XX $XX.X after for gains income hedges net non-cash the Excluding share. a per million $XXX,XXX or adjusted

With As million million million, our XX-month the receipt by quarter X.X further We common shares year-end. unexercised. March stock note the our would would down on early a warrant. and of with ratio better quarter had XXXX. facility common debt to even X.X which our XX, the of a looks annualize [LQA] addition remain million] of it warrants $XXX exercised of million EBITDA at outstanding of our up, were $X simple of revolving leverage EBL, common of first pleased million had to approximately $X.X of $XXX reduction for we leverage currently quarter, $XX that versus the It credit all $X.XX million cash. were also million XX facility second including are the To of available [ph] the first forward on price per a liquidity X.Xx our and to reflect I drawn of warrants is of remainder [$XX when letters and cash Xx. will sum million first revolver, bring in a in calculate to and ratio million. reductions $XX a quarter look the under increased Accordingly, during the issuance quarter of There April, EBITDA, great $XX math of to we $XXX approximately that million X.Xx at of we pay trailing results reflects total of which [ph] the our million credit. on adjusted

outlook. our to Turning

X,XXX guidance. expect a to full-year volumes sales using the is day, midpoint of of XXXX X% year-over-year to X,XXX increase per continue Boe We which our

full-year to and million for to estimated wells, total of XX drill capital wells wells the in the $XXX $XXX anticipate XX XX XX complete continue We wells to million Shelf. XXXX, which primarily to includes Northwest spending to cost

contractual leasing, well Shelf program non-operated in Also includes Basin spending CTR successful continuing targeted drilling as capital full-year completion, workovers, and anticipated Northwest spending Our obligations Platform. capital and the workovers. upgrades, Central our for reactivations, and outlook infrastructure and included, drilling,

necessary. noted, to have favorable our capital assumes to were capital materially, pull If the pricing’s program environment. XXXX reduce Paul spending flexibility as As spending a commodity we pricing back

For of we anticipate Boe, Boe. of to full-year $X.XX XXXX, $XX cost $XX.XX per to $X GTP LOE and per

we second Boe drilling X,XXX program reflects targeting fully to the the X,XXX increase of benefit are a that we and The day. quarter For guidance sales January. initiated late quarter volumes X% in continuous more represents of XXXX, from midpoint our first a per of

and Paul As on second wells to wells X quarter. drill the production expect wells complete to during X we wells X and discussed, place to XX

of per $X per for the and GTP LOE expect also We $X.XX to quarter. cost $XX second of Boe Boe to $XX.XX

of were substantially we of our back opportunity provides pleased it now cash quarter the revenue In will higher to As have our a and closing position, XXXX, terms Paul? continued lower reflected assuming first I majority in comments in price year at to the we beginning the oil operating strong answer environment. us hedges this results, of with Paul questions. his the for turn price flow for hedge before roll-off our

Paul McKinney

Thank you, Travis.

natural we have our the drilling for supported have initial by we today, oil rig benefits continuous seen transition discussed gas. stronger of and program a one prices to As realized

flow initiatives Consistent efficiencies to the with and strong, past, cash further these are remain continue production our steadily Complementing of ongoing to efforts debt. will fully our the operating we further cost to and in cash our fund we expect capital more continue throughout drive long plan investment operating remainder online. wells bring as as reduce to hydrocarbon structure. operating XXXX, and grow our prices to use plans flow We

year which XXXX for a end We our things Ring expect is at targeting we the good as Xx say less remain scale, on the a a production have substantial greater from end to X.Xx by just up than and on ratio industry we company the in speak and improvement of past, in stockholders. acquisition and be to me this leverage the year, place to are can current XXXX. stability we of under of increasing Energy a outlook, and To our of sum based a potential with heard greater We size so that radar right the provide by focused earnings investors. finding believe opportunity audience you and on

is any per we strategic Operator? completed operator and will turn of accretive Our transaction look to in equity we share debt the existing your on our commitment be forward With to stockholders to adjusted that, basis. look back progress though and everyone We forward keeping questions. to will the apprised call I in our this answering guard. a using

Operator

Partners. go Global the Instructions] [Operator will question And Alliance you. be Thank Jeffrey from ahead. from first Please Campbell

Jeffrey Campbell

supply to if or challenges bring supply of discussion your that sand area you're wondered that specific long-term inflation noted we've regards hearing any steel being to not cost lack are I from necessary railroad services generally contracts constraints. heard Good LOE morning. materials? service course, front, some press and in quarters release, similar on delivered due and Paul in status operating and of the and even

Paul McKinney

we Yes. not any At have experienced supply disruptions. point, this

to We any seeing behind in up other comments with you'd respect and I your the continue costs. at with we're do though following that, we our Marinos, to significant experiencing our other supply question, other have also experienced answering not ability respect are inflationary pressures increases you and things, all. steel have the also make? guess any Jeff, like to directly operations, but some and completion electricity chain to interruptions

Marinos Baghdati

plays We everyone through as October now, our secured right is to of don’t get October. issue. the the but the basin. an as to completions and and securing also the require with have that volume else, been issue of other the fighting in hasn't emphasize of as casing comfortably Delaware us We're some or sand in it much that we beyond, want And an nature process the Midland of we're

us operations. puts bit in that volume that regard advantage for of little terms require So, the in that in a we of an our

Jeffrey Campbell

Okay, sense? continue if I you are noted transact appreciate production that deal you the commodity you Ring’s reduction enable last and market release supportive press down And EBITDA, pay you. have either in add do increase and mind industrial if color. leverage leverage to thank debt as in the available target to a would that accretive rig was or prices in an late a

Paul McKinney

Yes, that's a very complex question, Jeff.

cash stage this associated projected flow, spending with now, also have at keep to our when capital our our at yes, so right within industry And very we look strip we at but current are reducing needs program flows debt. we cash prices, the our targets specific balancing

you enough costs back with you up can know quickly that pick And of while run gets so, very can, rig, production starting anytime you the a a lot you'll rig you or start those money. high you're rig and incurring another for costs pay spend down, where until to and they're a

we be cash or prices rig, whatever, more cash before so, the need or sustained flows, our there. up another higher balancing to And flows, pick

be of a follow reasons. lot to And your pursue for that for strategically but sheet. through Did have you your from a fortressed on paying goal really that revolving commitment ensure also us of we continue the the capacity to our because So may strengthen a It's facility advantage the standpoint mean, ultimately, presented to that credit is that just with opportunities I marketplace. the of banks sheet. question, debt does have we side balance a to answer that opportunities balance can good that our Jeff? taking down, use relationship way those utilizing on liquidity the proper the your you strategic clear with is and in

Jeffrey Campbell

Actually that it. appreciate did. color. It Yes. I great was

Operator

Thank be Dingmann you. Truist Neal And next ahead. question go from will the Please from Securities.

Neal Dingmann

Good morning, alright? Hear guys. me,

Paul McKinney

you? Neal. How are morning, Good

Neal Dingmann

you and the both, question of great guys combination bit, when the Marinos my a you're you are on pretty Paul just stack specifically, with shelf think you other of speak then of is the the and Hey, platform be which side, of I how you could right active continue just exciting wondering, see, of both to seeing, areas? I’m they work to you a nice to over operational now, each? how to speak all each discuss at Good. look Good. sort pretty maybe versus for returns opportunities each in could up on both the

Paul McKinney

and of stab it distinguish placed wells had to Basin that category you a the done, first hard our a now Shelf. have Platform the of pleased little at teams Basin that our give between wells Basin in it's They're I’ll Northwest might when good so expert. Central result range outcomes, in look Platform really both Platform we've Geoscience bit we've and a turn a economic over such sure. work we've and What as and to really close. experienced I'll the Yes, Central that returns engineering my results the Central of Typically, difference in but better, the the we’re Shelf regard. Northwest the be

And concerning over to the really that. I'll I'll you, so Marinos. all that's turn say rest

Marinos Baghdati

that have Paul. don't add to it you really I answered perfectly. mean, I anything to

Paul McKinney

we then we we the it what want board, was of year, we results. there. We down the do. saw with three hard. pleased felt we put of time see And acreage study came yes, it to on And were when spend first the very drilled program. wells, effort legacy lot that. obligated We test last kind in those a first could so, to And data a when And really to we

Central has with do cost drilling with the associated the development. Shelf between Platform program Basin more and now to balancing our right so, And Northwest the

the we a on wells the Platform can and in up then in back some of of earlier go coming back these necessary and and by to the Basin four on, of water. when production wells drilling drill only water handle north, dispose first to Shelf, let to Central us minimizing to that. Central So, there our bring infrastructure so, right? the year made get so When to the going decline wells allows Basin up new the our and down me Northwest decision lot much, wells investments you that the disposable there later explain you the And to Platform

So, it's what a issue time. at going where to and really an operational management we're rig have to as

balancing addition And of the color individual we're a other with to that so, wells. lot you're your cost. of a lot Did the just things just has overall in to give looking for? It the performance do also you managing

Neal Dingmann

continue can each as sides and Just hit tight you service you Could of in You rig, you you make sort you all going on obviously of you of sits you decided on are both just is to about, ask other one to areas? takeaway the how are to you, was how actually takeaway then drill ever both know, sort of plays at and that you sort and the did, two in looking when side? the led, infrastructure to just, keep or get kind on things I sure on rig see sit for of two logistically, pipe ensure all each pieces those if areas. if the both rig that on progresses, have, just you of things you

Paul McKinney

we first for it need to more cash all, have of up us another flow. rig, Yes to to step

if the this quickly. very year, at program, we're the rest and spending our money rig with one So, the are, projections way you of look

Okay.

cashflow. so And run to want out your don't you

up purchases be every not significantly to to were we second getting up. with if managing rig keep a do necessary supply rig brought would but you sand, time crews to frac pay the So, long that that sourcing increase all we chain, the that able associated the pick the intend we're things lined to just the debt lead other those We up going, issues, that may down because quarter.

had in regard. change infrastructure the another same the the step goes to that that's then that it water And and to we production. back handle the time, So at

stage, right circumstances I this we're do that really intending to not pick a to up at year, so us rig now this that. And imagine the can't would second cause

And happen, capital come you opportunities running out last associated could eyes in there on that the brought rigs programs. do XXXX or potential into our that not several but those existing with we may opportunities point the going acquisitions, may and different with have Now, up marketplace.

second And that so wouldn't, the the with rig an the we opportunities it and the acquisitions. economics it shouldn't on depending those surprise of acquisition, and size shareholders would running, keep

Marinos Baghdati

to Paul, can dedicated than and D&A having that drilling mentioning, that we infrastructure current completing mentioned that possibly XX% would was is another that ensure quantify would And need than on our costs that capital we budget effort guidance we so tremendous dedicated more if infrastructure in infrastructure, about us make less we come is and of there. the and did sure our the is be that I XX% XX% adding equipping to Paul of a will rest online. production – to rig to and wells change directions scheduling minimize our

Paul McKinney

That's good color. Yeah.

Neal Dingmann

great Thanks color No, what that's Nice exactly guys. quarter. both. from was for. I looking No,

Paul McKinney

you. Thank

Operator

from Please Instructions] Noel next is [Operator question Parks go ahead. from Tuohy The Brothers.

Noel Parks

morning. Hi, good

Paul McKinney

you? Hey, good are morning Noel. How

Noel Parks

good. Real Thanks.

talked all the put into and about things. completion I wondering effort you drilling just couple plans the and logistics you a pace. the was Just of the of

are to Do wondering, [indiscernible] room frac with issue of that you usual you right want you pairing any your when – leave the, plans? have these the like is sort according teams of smoothly days? or now, more to Just arriving going up them do to the having fairly than you

Marinos Baghdati

we've get every so seven exceeded up show we've couple a quarters. you leaving online rig asked way really weeks the brought including because and one schedule able to drilling I'm Noel, we between out. we're eight to way us wells the the crews actually We of the location that this things in being and far really lead of the that of frac proud year, actually glad gave about

that. of proud very we're So,

the companies Our it in and far. a an service issue Being job. so with constant done been has not has communication team completion great

Noel Parks

environment I Central a sort is Terrific. And the point here these at the of Platform these even economic have, this out inventory price wondering at was was prices? at terrific Especially Basin of this prices? we reasonably furthest

Paul McKinney

you same year. everything we this wells the really year, again, Yes. at return this drilling of did various adjusted look each to we’re approach selecting what of are highest taking the risks with at the We're that we drill. year, looking locations. No, last the drilling We're rate risk if associated

to During we this every the balance we strengthen feel period, to can time make we squeeze compelled last dollar increase sheet. out investment of every production so our

so bring other do undeveloped wells the have that And efficiency. it's in you And know, price, We of drilling several is. the Basin up, we're opportunities about just that, economic books that the economic all today's have we're that has as not but Delaware drilling. wells, portfolio returns the they're they’re PUDs our it at the I'll on don't as ones

sure we of our better for feel we of every At stage compelled. returns that and higher feel pursuit our to we shareholders, optimize make this compelled So, investment. last

And continue so we'll what do. to that's

Noel Parks

service that it. and you just is our platform, now, or I'm less full rigs? wondering been I'm your both against have we're with curious had the labor reality? fracs third more way of end at now a and also the And pretty costs much shelf expectations in-line utilization the Got than forecasting just more on of year, And the

Paul McKinney

the already and level all we year, our program I'll what to Marinos, the on pressure had planned question. but turn when supplies complete products services programs. over inflationary of I'll experiencing been and to to we part this of that consider first be rest equipment need that we and we high take our the

our build we to that into so, tried program. And

They're having know and that, goes employ labor you and the we of one that let to to prices most their so, we're but that fast prices companies steel industry. costs people they now, not is the availability after oil that earlier not to of back going their of kind pandemic, with we're on them crews earlier going salaries answered we're is to service attracting that there you're do doing have and the we are experienced. benefit And a get going can seeing the questions of so up, that the hard was They're left challenge. what be attract predict large it's are it talent percentage for pressures the are things the that back sand because back are And competition to causing patch. packages. the mean up. sweetening I up as the labor all to to difficulty force very there a dealing happen And – seeing

from you crews, to that XX have these from hours. the now the crews same So, running efficiencies during used can't these daylight run are hours only

causes so programs to And our that longer. take

to it as I get So, as and costing the you we also we don't if to that? would otherwise soon want production is add on more. don’t know there’s more any

Marinos Baghdati

XX% than the higher We is is an a Shelf. lot second the Central and fracs the to but bid. our is – I'm bid out bid best company and services your second just part out wise, start of our the Paul, the the XX% to bid with in built and going Basin of of question, perfect those, that’s all much another the next Northwest cost, Platform for all best the the percentage course in is give best XXX% example, but we completion and and than No, out bid higher the utilized are numbers, bid we've pretty not best

that that to we've companies that, our in for done, cost could, costs. of might that So, are cost end order that wells it if the a us higher work range but on to know tried you go and give the the big up adjust with we get start could changing having a

Paul McKinney

it crews, of more is their job. complete cost, out And the they of busy they people things that when versus need oftentimes other and associated and one to the you the to or are inventory low coming availability with not in that a another, chemicals a bid how it's seems with the that or the funny the same be thing about job sand

volatility, have and with volatility of not and we're shortages gas of only a pressures of the lot various we're a there's inflationary that so, prices relationships providers have the seeing we experiencing, the supplies lot but they price that because associated And with. service dealing oil in they're with

ahead. And teams, headwinds and just so knew completion times. they're program. said great very getting of about crews, crews, drilling will job second a our had this what our these that our work scheduling. They've interesting we out done I into leading it's Marinos We

a efficiency us we maintain calling the And it's and programs benefit started relationships have. to we and on so, that all allowed like keep were going things early, we our of those

Noel Parks

high Well, Right. problems $XXX at oil. class

[indiscernible]. I guess So,

Paul McKinney

There you go.

Noel Parks

Thanks lot. a

Paul McKinney

Noel. you, Thank

Operator

further At questions. this no time, are there

So, I Paul the turn for back like over to Chairman would McKinney, any and remarks. CEO to closing conference

Paul McKinney

Thank [Chad] tuned that had of today in say. we to thank And to to what you you, all listen you [ph].

excited We are year. about very this

have a going. challenges our prices but on. really of lot things things of going really benefits enjoying in a really the We have our we good operational high. all have we're program, Product do really, year good are these We because

And keep we're with [ph] [intuned] you what so, and we'll stay doing. tuned,

Operator

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

disconnect. may now You

Ring Energy (REI) 12 May 222022 Q1 Earnings call transcript