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spk09: Good morning and welcome to Ring Energy's third quarter 2022 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touch-tone phone. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Al Petrie with Investor Relations. Please go ahead.
spk04: Thank you, Operator, and good morning, everyone. We will begin our call with comments from Paul McKinney, our chairman of the board and CEO, who will provide an overview of key matters for the quarter. We'll then turn the call over to Travis Thomas, Ring's chief financial officer, who will review our financial results. Paul will then return to discuss our future plans and outlook before we open the call for questions. Also joining us on the call today and available for the Q&A session are Alex Diaz, Executive VP of Engineering and Corporate Strategy, Marinos Baghdadi, Executive VP of Operations, and Steve Brooks, Executive VP of Land, Legal, Human Resources, and Marketing. During the Q&A session, we asked you to limit your questions to one and a follow-up. You're welcome to reenter the queue later with additional questions. I would also note that we have posted a Q3 2022 earnings corporate presentation to our website. During the course of this conference call, the company will be making forward-looking statements within the meaning of federal securities laws. Investors are cautioned that forward-looking statements are not guarantees of future performance and those actual results or developments may differ materially from those projected in the forward-looking statements, and the company can give no assurance that such forward-looking statements will prove to be correct. Ring Energy disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Accordingly, you should not place undue reliance on forward-looking statements. These and other risks are described in yesterday's press release and in our filings with the Securities and Exchange Commission. These documents can be found in the Investors section of our website, www.ringenergy.com. Should one or more of these risks materialize or should underlying assumptions prove incorrect, actual results may vary materially. This conference call can also include references to certain non-GAAP financial measures. Reconciliation in these non-GAAP financial measures to the most directly comparable measure under GAAP are contained in our earnings announcement released yesterday. Finally, as a reminder, this conference call is being recorded. I'd like to now turn the call over to Paul McKinney, our chairman and CEO. Thanks, Al.
spk05: Welcome, everyone, and thank you for your interest in Ring Energy. We appreciate you joining us today to discuss our recent results and outlook for the rest of the year. The third quarter marked a transformational period for our company and our shareholders as we announced and completed the acquisition of Stronghold Energy's assets. As you know, these operations are focused on the development of 37,000 net acres in the Permian Basin's Central Basin Platform, where we also conduct operations. As a reminder, we closed the acquisition on August 31st, so the third quarter only reflected one month of Stronghold's operations. This bodes well for the fourth quarter during which we will record three full months of results with the stronghold assets, which should set us up for a strong finish to the year. We are extremely pleased with our third quarter results, which is a direct reflection of our ability to execute on our value-focused, proven strategy, in addition to the acquisition of the stronghold assets. Our third quarter benefited from the continued strong performance of our legacy drilling, completion, recompletion, and capital workover programs, as well as our ongoing focus on operating cost control. While pricing did pull back some from the levels experienced during the second quarter, overall, they were still strong, and we continued to benefit. The combined result was record quarterly production, revenue, net income, and adjusted EBITDA. We also posted another quarter of free cash flow generation, our 12th consecutive quarter, and we're pleased to pay down $17 million of debt since we closed the acquisition on August 31st. Our posted sales volumes for the quarter were 13,278 barrels of oil equivalent per day, which was 42% higher than the second quarter. As I said earlier, primarily driving the increase was the addition of one month of sales volumes from the stronghold assets, as well as a continued success of our 2022 drilling, completion, recompletion, and capital workover programs. With respect to the fourth quarter, we stand by our previously released guidance and expect sales volumes to be between 18,000 and 19,000 barrels of oil equivalent per day due to the three full months of production from the stronghold assets. Looking specifically at our drilling program, During the third quarter, we drilled eight horizontal wells, including five in the northwest shelf and three in the central basin platform, thereby bringing the total number of horizontal wells drilled during the first nine months of the year to 23. During the third quarter, we completed nine horizontal wells, including four wells that were drilled in the second quarter and five wells drilled in the third quarter, bringing the total number of horizontal wells completed and placed on production year-to-date to 20. We are very pleased with the results from our Northwest Shelf and Central Basin Platform horizontal wells and attribute our success to remaining focus on the geology, selecting the best landing zones, and improving our completion methods. We also believe that remaining focus on these technologies will bode well in our future drilling and completion activities in the newly acquired stronghold properties. With respect to the other activity completed during the third quarter, we recompleted three wells on the Stronghold Acquisition acreage and converted six horizontal wells with ESPs to rod pumps, something we call CTRs. Five of the CTRs were in the Northwest Shelf and one was on our legacy CBP acreage. As many of you know, our CTR program has been a significant contributor to reducing our total cost of operations. At this point, We have converted the majority of our inventory of CTR candidates and, moving forward, will be performing fewer CTRs. With respect to capital spending, excluding our investment for the stronghold transaction, we spent $40.3 million during the third quarter compared to $41.8 million during the second quarter. We continue to efficiently execute on our drilling completion program that is designed to drive additional efficiencies and increase production rates. For the fourth quarter, we expect to spend $42 to $46 million, which includes the drilling of four horizontal wells on our legacy acreage and four to five vertical wells on our stronghold acreage. We expect to complete and place on production seven horizontal wells and two to three vertical wells. The combined results of our efforts to date has been free cash flow generation that was used to reduce our debt and further strengthen our balance sheet. we ended the third quarter with a leverage ratio of 1.4 times, which was 33% lower than the 2.1 times at the end of the second quarter, and 60% lower than the 3.5 times leverage ratio we had at the beginning of the year, exceeding expectations we set for ourselves. As you know, the bar and base of our credit facility was increased more than 70% to $600 million due to the acquisition and continued strength of our legacy business, And after paying down $17 million in debt, we ended the quarter with more than $165 million of liquidity, which places us in a strong position as we finish the year and make plans for 2023. So with that, I will turn it over to Travis to discuss our financial results in more detail. Travis?
spk03: Thanks, Paul, and good morning, everyone. We appreciate your participation on today's call in interest in Ring Energy. As in the past, my comments today will primarily focus on our financial position and sequential quarterly results. For detailed discussion concerning comparisons to last year's third quarter, please see our press release and 10Q we filed yesterday with the SEC. As Paul discussed, our third quarter results were positively impacted by the Stronghold acquisition, which closed on August 31st, as well as the continued strong performance of our targeted 2022 development campaign and ongoing efforts to drive further operational efficiencies in the business. With that backdrop, during the third quarter of 2022, We sold 933,000 barrels of oil, 953,000 MCF natural gas, and 130,000 barrels of NGLs for a total of 1.2 million BOE. This is compared to sales of 729,000 barrels of oil and 723,000 MCF natural gas, or a total of 850,000 BOEs for the second quarter of 2022. As a result of the Stronghold transaction, beginning July 1, 2022, we began reporting revenues on a three-stream basis, separately reporting crude oil, natural gas, and NGL sales. For periods prior to July 1, 2022, sales and reserve volumes, prices, and revenues for NGLs were included in natural gas. Third quarter realized pricing was $92.64 per barrel of crude oil. and $4.89 per mcf of natural gas and $25.68 per barrel of NGLs or $77.28 per BOE. During the second quarter, we had realized pricing of $109.24 per barrel and $7.29 per mcf or $99.95 per BOE. Our third quarter average oil price differential from NYMEX WTI was a positive $2.28 per barrel versus a positive 81 cents per barrel for the second quarter of 2022. This difference is mostly attributed to the Argus WTI WTS, which averaged a positive 96 cents in the third quarter compared to a negative 46 cents in the second. And the Argus CMA roll, which averaged $2.90 per barrel in the third quarter and $2.60 per barrel in the second quarter. Our average natural gas differential from Henry Hub for the third quarter was a negative $3.15 per MCF compared to a negative differential of 23 cents per MCF for the second quarter. Our realized NGL averaged 29% of WTI. Contributing to the difference was the two stream to three stream conversion, as well as the gathering, transportation and processing or GTP costs netted from the revenue starting in May of 2022. The combined result was a record quarterly revenues of $94.4 million that were 11% higher than the second quarter revenues of $85 million. Looking at the more significant expense line items on the income statement, LOE was $13 million or $10.67 per BOE compared to $8.3 million or $9.77 per BOE for the second quarter. Higher production on our legacy assets combined with the additional production from the acquired assets primarily contributed to the increase in overall LOE. Higher labor costs and industry-wide inflationary pressures also contributed to the increase and resulted in higher LOE per BOE. We did not record any GTP costs in the third quarter. As we discussed in our second quarter earnings call, due to a contractual change effective May 1st, we no longer maintain ownership and control of natural gas through processing. GTP costs are now reflected as a reduction to the natural gas sales price and not as an expense line item. As such, for modeling purposes, the gas price deduct should be used in lieu of the GTP expense. Production taxes were $4.6 million versus $4.2 million in the second quarter, with the tax rate remaining steady at a little less than 5%. DD&A was $14.3 million compared to $10.7 million for the second quarter. On a BOE basis, DD&A decreased from $12.65 in the second quarter to $11.73 for the third quarter. Cash G&A, which excludes share-based compensation, was $5.9 million versus $3.9 for the second quarter of 2022, and $4.79 and $4.63, respectively, on a per BOE basis. Included in the third quarter G&A was $1.1 million of transaction costs. Interest expense was $7 million versus $3.3 million for the second quarter, with the increase substantially due to a higher average daily balance in long-term debt associated with the additional borrowings on our new revolving credit facility at the closing of the Stronghold transaction on August 31, 2022. Also contributing to the increase were higher interest rates and the write-off of the unamortized deferred financing costs related to the exiting lenders. During the third quarter, we posted net income of $75.1 million, or 49 cents per diluted share, excluding the after-tax impact of pre-tax items, including $47.7 million for non-cash, unrealized gain on hedges, and $1.5 million for share-based compensation expense, and $1.1 million of transaction costs for the stronghold acquisition, Our third quarter adjusted net income was $32.5 million or 28 cents per share. This is compared to the second quarter 2022 net income of $41.9 million or 32 cents per diluted share. Excluding the estimated after-tax impact of pre-tax items including $12.2 million for non-cash unrealized gain on hedges and $1.9 million for share-based compensation expense, our second quarter adjusted net income was $31.3 million, or 29 cents per share. As of September 30th, we had $435 million drawn on our revolving credit facility. As Paul discussed, the borrowing base on our credit facility was increased more than 70% to $600 million upon the closing of the transaction. We owe a special thank you to our banks, especially the underwriters, who made this increase possible. As a result, we ended the quarter with $165.1 million in liquidity, including $900,000 in cash and $164.2 million available on the revolver, which reflects a reduction for $800,000 for letters of credit. We are pleased to pay down the facility by an additional $17 million subsequent to the closing of the transaction on August 31st, and we look forward to further debt reduction moving forward based on the timing of our capital spending and overall market conditions. Looking at our share count, during the third quarter, we had a total of 3 million of our common warrants exercised at a price of 80 cents per warrant. Accordingly, our third quarter results reflect the issuance of 3 million shares of common and the receipt of $2.4 million in cash. There are currently approximately 20 million common warrants that remain unexercised. In addition, as part of the consideration for the stronghold acquisition, we issued approximately 21.3 million shares of common stock and 153,176 shares of convertible preferred stock to the owners of the stronghold assets. This is the primary driver of the variance in our average basic and diluted shares outstanding count for the third quarter. The convertible preferred stock was converted into approximately 42.5 million shares of common stock following the approval of the conversion by a stockholder vote on October 27th. As a result, we currently have approximately 174.4 million common shares outstanding. Turning to the outlook. For the fourth quarter of 2022, we continue to expect sales volumes of 18,000 to 19,000 BOEs per day, with the midpoint of our guidance representing a 39% increase from the third quarter. This reflects a full quarter of production from the acquired stronghold assets and the benefit of the continuous drilling program we initiated in late January. As Paul discussed, we anticipate fourth quarter capital expenditures of $42 to $46 million, which is approximately 15% lower than our prior estimate. Our spending outlook includes completing and placing online the remaining three wells drilled in the third quarter, drilling and completing eight to nine wells, including four horizontal wells, including two in the northwest shelf and two in the central basin platform north, and four to five vertical wells in CBP south. We also expect to re-complete eight to twelve wells in the central basin platform south. For the fourth quarter LOE, we are targeting a range of $10.25 to $11.40 per BOE. In terms of the 2023 calendar year, we are reiterating our outlook of a plan to maintain or slightly grow 2023 full year average sales volumes compared to the anticipated fourth quarter 22 sales volumes. Capital expenditures of $150 to $175 million that include a balanced capital efficient combination of drilling horizontal wells on legacy assets and vertical wells on the recently acquired CBP South assets. as well as performing recompletions and CTRs. I would note that all projects and estimates are based on an assumed WTI oil price of $75 to $90 per barrel and Henry Hub natural gas prices of $5 to $6 per MCF. If prices were to pull back materially, we have the flexibility to reduce capital spending as necessary. As we discussed in our last call, in late June we began to add to our hedge position to secure strong pricing levels in support of our acquisition of Strongholds CBP assets, and we continued to opportunistically add more hedges throughout the third quarter. Our expanded RBL requires us to hedge 50% of our PDP production on a rolling 24-month basis. For reference, we have included in our earnings release and 10-Q a table with a summary of our oil and gas hedge positions. We are also looking forward to the roll off the remaining low price hedges we put on during COVID. I will now turn it back to Paul for his closing comments before we answer questions. Paul?
spk05: Thank you, Travis. As I said at the beginning of the call, the third quarter represents the beginning of a truly transformational period for our company and our shareholders, as we are now in a much stronger financial position with the flexibility to react to changes in the marketplace and take advantage of opportunities that may appear. During 2023, we plan to target our capital spending program on maintaining or slightly growing our production and use our excess cash from operations to reduce debt because we believe our absolute debt levels justify our continuing focus in this regard. If we enjoy sustained higher oil and natural gas prices than what we are enjoying today, the company will have the flexibility to pursue the available opportunities that maximize long-term shareholder value, whether that be accelerating debt reduction, expanding our development program to organically grow production, further pursue targeted acquisitions, or return capital to the shareholders. In closing, I want to thank our workforce for their tireless efforts and dedication. As important, though, I also want to thank our shareholders for their continued support as we further position Ring for long-term success and value creation. With that, I will turn the call back to the operator, and we look forward to answering your questions. Operator?
spk09: Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. And again, we remind you to please limit yourself to one question and one follow-up. Should you have additional questions, please re-enter the question queue. At this time, we will pause just a moment to assemble that roster. And the first question today will be from Jeffrey Campbell from Allianz Global Partners. Please go ahead.
spk02: Good morning and congratulations on the strong quarter. Paul, I first wanted to ask about the new drilling production data on slide 18, the stronghold new drilling data. Looks like the expectation is somewhat more positive for new drilling in target area one versus target area two. I was wondering if you could compare these two areas based on their relative size using whatever measurement you want to. And can you indicate whether target area one will be drilled preferentially over target area two in 2023?
spk06: Yeah, I'm going to give a first stab to that, but then I'll turn it over to some of my guys to give more color. And so we've got several things that we'll be juggling. And we've talked about this in the past. When we made allocation decisions on our legacy acreage, we moved the rig and allowed our production to maximize the utility of the existing infrastructure. And so we would drill until we filled, for example, saltwater disposal systems in the northwest shelf, and we moved down to the central basin platform, drilled wells until we filled that up. And by that time, we'd go back up and the wells had declined enough so we had more room so we could drill again in the north. The same thing will happen in our southern acreage as well. We've got a couple of areas that have very strong economics with respect to the new wells that we plan to drill. We have infrastructure limitations, whether it be saltwater disposal or electricity. And so you'll find that we'll be moving our rigs back and forth basically to minimize what we call non-performing capital. We don't want to drill so much that it forces us to drill additional saltwater disposal wells, for example. That's just how the program will go forward. It's all a function of maximizing the value of the existing infrastructure that we have, but again, we will be targeting the highest rates of returns. The next well drill typically will always be at the top of the next best things list, if you want to call it that. That's my take on it. I would love to turn this over to Marinos and have him explain a little bit more.
spk07: Paul, you hit it perfectly. It's all about the infrastructure in target area one versus two in the southern assets, the vertical assets. We have a couple of bottlenecks that we're working through right now. Once we get those things resolved, we'll be able to pivot. at a moment's notice so that we don't have to spend the non-performing capital like Paul mentioned.
spk02: Okay. No, that was a really excellent caller. I appreciate that. We've had a period of very supportive commodity prices for some time, yet the shallow Delaware basin assets remain unsold. I was just wondering if the completion improvements that you've had in your horizontal program or maybe lessons that you'll learn are still to be learned in the stronghold completions. Might make it worth giving the Delaware Basin assets another look at some point.
spk06: Well, I mean, that's a good question as well, and this isn't the first time we've heard similar type questions. We do have undeveloped opportunities out there in the Delaware Basin, and they are economic at today's prices. But when you look at it from my perspective, my responsibility is to allocate capital where I can get the best returns for my shareholders. And right now, those investment opportunities in the Delaware Basin just don't stack up to any of the opportunities that I have in the Northwest Shelf and either in our northern or southern areas of the Central Basin platform. And so it's real challenging for me to allocate capital there. Again, as we've mentioned in the past, this is truly a non-core area for us. It's much shallower production, much lower costs. The returns are still economic, but they just don't stack up. That's really it in a nutshell, Jeff. We just can't find ourselves allocating capital. It's something when we have better places to invest.
spk02: Is there anything further left to do to try to affect the sale of the assets since they don't compete in your portfolio?
spk06: Actually, there are, and we continue to work with parties that have expressed interest, and we believe it will be successful. But whether we are successful with these ongoing discussions and expressions of interest, if all that dries up, we might find ourselves selling at an auction. There's no telling what we'll do. But again, it's not an area of focus for us, and I don't think it will be an area of focus for us because we have our sights set elsewhere. And I think Alex wants to say a couple of things. You want to jump in there, Alex?
spk01: Yes. Jeff, this is Alex. I just wanted to kind of echo Paul's comments here on the Delaware. And you had a very valid question. Yes, we probably could apply some of the lessons learned from our CBP and Northwest Shelf assets to that asset. But one big thing that distinguishes that asset is It is shallower, but you're also, because of where it's located, you're competing with the bigger guys, the big boys. And so just competing for that equipment and services there versus where we are in our CBP assets in Northwest Shelf, those economics just keep proving to be superior. So that's another reason why we still just focus on our assets, on our traditional.
spk02: Yeah, well, I think that's a very interesting point. Thanks, Alex. Thanks for the answers. I appreciate it.
spk09: And the next question will be from Neil Dingman from Truist. Please go ahead.
spk10: Do you guys talk about the refract opportunities and where you set an infrastructure? Thank you.
spk06: I'll take it on.
spk07: There's multiple areas on the vertical assets, and some of them have some electrical constraints that we're navigating through. Our partners there, Encore, which provides the electricity, is going through some changes to the transmission lines and the substations, and they're anticipating for all those bottlenecks to go away by the middle of 2023. So that'll open up things that we can do. We also are looking at... fresh water supply on one of our areas, the target area one that has the better production results. Once we get those, we're navigating through getting those resolved right now. Once we get those resolved, that'll allow us to maybe become more active in that area compared to the other area. Basically what we've provided for guidance is given the information that we have right now, as we update and become more efficient in certain things, then we'll revise and improve on what we've provided so far. And Alex has something to add too.
spk01: Yeah, and Neil, I'd like to add one more thing. And so as you can see, we have a variety of investment types, and obviously we have the drilling both in Northwest Shelf and CBP, both horizontal and vertical. But these re-completions, to Marina's point, obviously there's certain things that the ops team is working through. But you're going to see that in our program, we're able to sprinkle a few of these projects every month here and there, depending on where that is. And we've added a new slide on page 18 where it gives you a feel for what that performance and what that investment type is like.
spk06: Now, getting back to your question, though, Neil, with respect to Refrax, there is an opportunity for Refrax out here. Again, but we have not only infrastructure limitations, Fresh water limitations associated with you know Having the water so you can frack and so we will be testing and trying some ideas out there this year and as those ideas Generate results. Well, I believe that we'll have more to talk about as we go into 2023 as part of what makes 2023 such an exciting year for us And I hope we've answered your question. Did that answer your question now? I
spk02: Thank you, guys. You bet.
spk09: Thank you. And the next question will be from Jeff Robertson from Water Tower Research. Please go ahead. Thank you. Good morning.
spk10: Paul, can you talk about the rates of the performance of the recompletions that you performed on the stronghold assets in the quarter? And then also, as you talk about allocating capital amongst the highest return assets, can you just provide a little bit of detail or ranking of where the Northwest Shelf and the new stronghold assets rank in your rate of return stack?
spk06: Yeah, no, very good. That's a very good question, and we get it quite often. Historically, if you go back and look at our operations on the legacy assets, the Northwest Shelf tended to provide the lower break-even cost, the higher rates of return. And so if you recall what we did last year and at the tail end of 2020, as we were evaluating our legacy acreage in the Central Basin Platform, we decided to try some new ideas. Our geologists felt like we could improve on our landing zones. Our engineers felt like they could apply some changes to the completion methods. And that demonstrated really positive results. Matter of fact, we've got one or two wells that we drilled last year and this year that still rank right up there with the Northwest Shelf Wells. And so the rates of return and the low break-even costs are very similar between the two areas. And so the rates of return in the southern part that we just acquired through Stronghold, they too have very competitive rates of return. But the added benefit to the ones in the South is that the costs are less and the capital efficiency improves just simply because, and I think I've mentioned this in the past, by the time you get your oil production going into the tanks, you're just now starting to receive the invoices from the service companies that provided the service to help us drill and complete the wells. And so the turnaround time and the rates of return tend to be superior just simply because you get revenue so much quicker. And so... All of these areas are very, very competitive. And it turns out that when you look at them, you can find opportunities in the south that rival or equal the ones that we have in the northwest shelf and the northern part of the Central Basin Platform. And so we find ourselves, and that's what you'll see that's going on next year. We will have a rig up in the northern areas and northwest shelf in the northern part of the Central Basin Platform where we'll bounce back and forth. But we'll also have a rig running in the southern part of the Central Basin Platform, and we'll be sprinkling them all in based on our perception of those returns. But to get back to your question, all of these are very competitive, all of these opportunities. And so they're very similar rates of return, and they're all within our ability to measure them pre-drill.
spk10: And does some of the allocation... come down to how quickly you can cycle your capital, which it sounds like there's a shorter capital cycle, so maybe a faster payback on some of the southern CBP assets?
spk06: Absolutely. And so that cycle time is very, very important, and it leads to that rate of return, right? The sooner you can start paying yourself for your investment, that just improves the rate of return. However, it's also hard to get away from the large increases in net present value you create by drilling the horizontal wells in the northwest shelf. And so we have the benefit of a more diverse investment portfolio, all of which, the entire portfolio, have low break-even costs and high rates of return. And so by mixing that up, it's going to allow us to have a much more steady production profile as we go forward for the capital investments that we make. So I hope that answered your question, Jeff.
spk01: Jeff, let me take that first part of that question you asked about the three recompletes since we took over operations, you know, September 1 on the stronghold acquisition. Again, I'll reference slide 8. Slide 8 gives you not only historical recompletion well performance, of a lot of the re-completes that the Tronco team did prior to us doing the acquisition. Those wells are in gray. That's the chart on the right-hand side of that slide on the top. But the blue is the average of every re-complete done in 2022, which includes those three wells in there. Oh, slide 18, I'm sorry. Yeah, you said slide 18. Apologize.
spk10: Thanks. Yeah, I didn't see any well data on slide eight, so I'm going back to 18.
spk06: Exactly.
spk10: He had a word on that as well. Thank you.
spk09: And once again, if you have a question, please press star then one. The next question is from Noel Parks from Toohey Brothers. Please go ahead.
spk08: Hi, good morning. Hey, good morning, Noel. Just a couple things. You know, just as you are a few months in with the stronghold assets, I wonder if you could just talk a bit about, well, you already mentioned sort of electricity being an issue in the region, but just in terms of how you found the properties, what was the sort of maintenance status of legacy wells, and also what land management, permitting, things like that, was it all pretty tight, or have you had some cleanup to do to sort of align it with your own standards and practices?
spk06: Yeah, that's a really good question, and it kind of goes back to part of the reason why we targeted these assets. The assets have been very well taken care of. I'd be proud for a railroad commissioner to come out to the location that Stronghold was managing. They did a very good job They're very conscientious associated with keeping their locations clean and well constructed. They're all neat and tidy. With respect to any acquisition, you're always going to find some surprises. But the good thing about the surprises that we have encountered up to now, they're typical in terms of the type of surprises you get with an acquisition. And so, so far, although we're not completely done integrating all of our records and all of our accounting and all that in, we've taken over operations. And everything is going very smoothly. And so we will finish the integration of these assets this quarter. And I think by mid-quarter, before we go into the holidays, we will, you know, these assets will be just another set of assets that we're managing under our existing management team. And so we're very happy with the way that's going.
spk08: Okay, great. And... Could you talk about, given the cost environment, maybe using sort of, I don't want to say worst case, but just assumptions of maybe water handling being on the more expensive side, materials being on the more expensive side, where roughly are we talking about for a break even for the assets? I think the last time maybe we talked talked about it a lot, you know, services weren't quite as tight. So just with that inflation component, I mean, just roughly ballpark, do you have a good breakeven or maybe also a good economic price?
spk06: Yeah, so that's a real complex question, actually, when you start drilling down. And so when you look at our existing operations, the breakeven costs there are basically our margins. And so we have very high margins on both the properties in the south and all of our legacy acreage. And so when you talk about what our breakeven costs for future investments, we have enjoyed perhaps, and I'm not going to say they are the lowest, but we've enjoyed some of the lowest breakeven costs in the industry. I don't care where you look. And it's a nature of the type of investments we've been pursuing. Again, we've mentioned this in the past. We believe that there's our strategy of pursuing investments you know, conventional assets and applying the technologies developed for unconventional resources has proven to be a winning strategy because the conventional rot tends to deliver more production with a much shallower decline and they have much longer lives. And so just there's a niche there. The economics are very, very superior. And so we have, you know, the break-even costs, in the southern part of the CBP, like I said, are just as competitive as many in the northern CBP and in the northwest shelf. And so we are enjoying right now a portfolio that's very well balanced, but very diverse. Everything from the re-completions, because those re-completions, we're talking less than a million dollars, and we have drilling opportunities now that are in the 1.3 to 1.5 million dollar range. We have wells that we can drill, you know, that are in the two and a half to three million dollar range, and wells that we can drill for 2.8 to $3.4 million range, all of which have slightly different profiles, all of which have superior rates of return and very, very low break-even costs. And so what that does, that diversity helps with our balance sheet, helps generate a more stable return, a more predictable return. And so I think I've answered your question. Is there anything else you have on that?
spk04: Well, I guess just for the ballpark,
spk06: Sorry? Yeah, I'm going to allow Moreno to jump in here.
spk07: So if I can jump in and talk about the services, I didn't mean to alarm anyone on the electricity and the water. It's just that it's not easy, but we are not facing the challenges that others face in shell plays or whatnot. With our assets, we feel like we can solve these problems, but until we do, we're not going to bank on it or plan on it. We're We're planning everything based on what we have available right now, and as we solve the problems that we are going to solve, we feel comfortable that that's going to happen. Once that happens, we'll pivot and maybe do a little more activity in the higher, more productive types of new drills or whatnot. So it's not something that we can't solve or are worried about. It's just something we have to go through and plan. We're firm believers we're planning our work, and that's what we're going to do.
spk08: Great. Well, I guess just for perspective, I mean, and this is way before we've seen our recent commodity price boom. Certainly during the lean times, I sort of remember that, you know, realized oil in the 30s, so I'll call that WTI upper 30s, was actually economically doable to move ahead and drill. So I'm thinking with inflation and everything, I mean, if, say, we're looking at a $45 dollar WTI, does that still work for all the properties, some of the properties?
spk06: You know, again, you're bringing up some very good points, Noel. If you look back at what the environment was during COVID, and we shared this with our shareholders, we needed $45. And even though our break-even costs were $25, you've got to remember an organization like this, we've got GNA, we've got other costs that we've got to carry. So it's more than just the cost of drilling the wells. that influence our decision. So if you look at today's environment post the inflation that we've seen and whether you believe we're going to have more inflation, yes, the costs have come up. And so would we continue to pursue activity at $45? We probably can. I haven't gone back to look at that calculation. But if you look at it from a standpoint of this environment that we are today, because we're in a much higher cost environment than we were during COVID, Has it gone up to $50? I bet you $50 would be a good, and I'm shooting from the hip here, but yeah, as long as we were getting $50 a barrel, you can still maintain some activity because the capital investments for sure pay out of that. And at that price, we also could also carry the cost of our GNA and our office and rent and everything else that we have. And so, you know, back in COVID, it was $45. Is it $50 today, or is it $51, or is it $49? It's kind of hard to say. But, yeah, if you look at the economics of the investment that we are making and the cost that we carry as an overall organization, I still believe that Ring enjoys a very favorable position, very favorable position compared to many others in this industry right now. Great. Thanks a lot. Thank you, Noel. Good questions, by the way.
spk09: Ladies and gentlemen, at this time I'm showing no further questions, so I'd like to turn the conference back over to Paul McKinney for any closing remarks.
spk06: Yeah, thank you, Chad. Again, I'd like to thank all of you that joined us today for your time and interest, and all of our investors for your trust and investment. We are truly excited about what the rest of this year and 2023 will bring. We believe that 2020 23 will bring an exciting year for Ring and our stockholders. And so we look forward to the next time we get to talk about them. In the meantime, everybody take care. Thank you again for your interest in Ring.
spk09: And thank you, sir. The conference has now concluded. Thank you for attending today's presentation. You may now be dismissed.
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