Ring Energy, Inc.

Q4 2022 Earnings Conference Call


spk_0: the morning and welcome to ring energies fourth quarter and four year two thousand twenty two earnings conference call ah participants will be in this know me know should you need assistance please ignore conference specialists for pressing the starkey followed by zero after today's presentation there will be an opportunity to ask questions to ask a question if you may first star than one from your telephone keypad to withdraw your question please press star than you please note this event is being recorded our knowledge teleconference virtue of how petri investor relations please go ahead thank you operator figuring ever going to be appreciated your rangers and ring energy we begin our car with comments from home mchenry or chairman of the board and ceo to provide an overview of key matters for the fourth quarter and four year with then turn the call over travels thomas rings chief financial officer
spk_1: the review our financial results power then returned to discuss our future plans and outlook before we open the call for questions also joining us in the call today and available for the queue in a session mark alex die executive vp of engineering and corporate strategy
spk_0: marina this baghdad a executive vp of operations in stay brooks executive vp of land legal human resources and marketing during the q and a session we ask you to limit your questions to one and of our you're welcome to reenter the queue later with additional questions i would also know that we posted a queue for
spk_1: and four year twenty twenty two earnings corporate presentation to our website during the course of this conference call the comedy were making forward looking statements within the meaning of federal securities laws investors are caution that forward looking statements are not guarantees a future performance in those actual results are developments may differ materially from those projected in the forward looking statements in the company can get
spk_0: no assurance that such fine looking statements were proved to be correct ring energy disclaims any intention or obligation to update or revise any forward looking statements were as a result of new information future events or otherwise accordingly you should not place undue reliance on for looking statements these another race are described in yesterday's press release and enough allies with the se these documents can be found investors section of our website at ring energy dot com said one or more these risk factors materialize richard underlying assumptions proven correct actual results may vary materially this conference call also includes references to certain non gaap financial measures
spk_1: reconciliation for these non gaap financial measures to the most directly copper measure and a gap or contained in yesterday's earnings release finally as reminder this conference is being recorded i would now like to turn a call over the pa mckinney or chairman and ceo
spk_0: thanks out welcome everyone in thank you for your interest and ring energy and for joining us today for our fourth quarter and year and two thousand twenty two earnings call we are pleased with our record operational and financial performance during the fourth quarter controlling to our success was a full three months of production from are strong whole acquisition the continued implementation of are targeted two thousand twenty two capital spending program and are ongoing mission is to drive further efficiencies in the business during the fourth quarter we grew sales volume by thirty four percent of the third quarter to a record of seventeen thousand eight hundred and fifty six barrel of oil per day although this was slightly below or guidance it was primarily due to downtime associated with the impact of the winter storm conditions gas purchaser of system constraints living our gas sales and the cbp and northwest shelf areas and adjustments for year and reversion your interest and after pay or conditions we brought on line seven new horizontal wells including five the northwest shelf and to in a legacy central and platform area and area we now call the cdp north we also brought on five new virgo wild and stronghold acreage in area which we call cbp south we also perform now completions and cbp south we produce a record adjusted ebitda or fifty six point three million during the fourth quarter that was a hundred and thirty five percent higher than the same quarter for the previous year we spent forty two point six million on capital projects what was at the lower end of our guidance of forty two million to forty six nine the result was five have me in a free cash flow which was are thirteen consecutive quarter of free cash flow generation additionally we reduce our deposition by twenty million during the quarter and thirty seven million since closing the transaction on august thirty first two thousand twenty two we also reaffirmed the company's barmaids or six hundred main under our revolving credit silly in december the fourth quarter mark and and or transformational year for the company we began two thousand and twenty two with a solid base of core ass as in the northwest south and central beijing platform and a well defined plan to further develop our hi ray return inventory through a continuous one rig drilling program our pursuit of a creative acquisitions was rewarded in the third quarter by closing strong a lack of vision and we ended the year with a successful integration of those assets into our operations accounting and land records systems two thousand twenty was marked my several highlight including record sales volumes of twelve thousand three hundred and sixty four barrels of oil equivalent per day that were forty five percent higher than two thousand twenty one record net income of a hundred and thirty eight point six million or ninety eight cents per diluted share growth in adjusted net income up two hundred and fifty one percent to a record one hundred and seven point five million or eighty nine cents per share a one hundred and thirty four percent increase in adjusted ebitda from the previous year to a record of a hundred ninety five point two million and a strong free cash flow of thirty four point eight million and record cash flow from operation is a hundred and seventy two point nine million a seventy percent and on one hundred and forty nine percent year over year increase respectively we ended the year with four hundred and fifty million dollars of debt on the balance sheet and one hundred and eighty eight main and liquidity which is three times a liquidity we had at the end of two thousand twenty one we lowered our leverage ratio by more than fifty percent from the previous year to one point six times during the full year of today thousand twenty two we drilled in completed twenty seven horizontal wells include an eighteen and northwest shelf and nine and the central base and platform north and five virgo wells and central beijing platform south we also performed twelve or completions and cbp south our success in two thousand twenty two was also reflected in our year and se si total proved reserves which grew seventy percent to a record one hundred and thirty eight point one million barrels of oil equivalent of the prior year contributing to the increase was sixty two point nine million barrels of oil equivalent from acquisitions one point two million barrels of oil a quote from positive well performance revisions and point eight million barrels of oil equivalent from extensions in discoveries partially offsetting the overall increase was a proxy for a half million barrels of oil equivalent of production the result was and all and replacement ratio of thirteen point four times or production for the year the pt tan our total proved reserves used as a see prices grew hundred and eight percent to two point eight billion dollars terms are outlawed we intend to span between one hundred and thirty five and one hundred and seventy million dollars during two thousand twenty three that includes a capital efficient combination of drawing horizontal wells our legacy a grudge and birchall wells on our cbp south acreage this amount also includes plan spending for incompletions capital workers infrastructure upgrades leasing cars and sg related projects in january we began our two thousand twenty three capital spending program with the drilling and completion of three horizontal wells in the north where shelf all of which have been placed on production a fort worth our while in north or south has been drilled and as expected to be completed placed on production by the end of this month additionally we picked up a reagan simply south area to drill three vocal wells and anticipate having all three wells online but and of the month as well or two thousand twenty three budget assumes dhabi t i o prices are between seventy dollars and nine dollars per barrel of oil and henry how prices and between two dollars and four hours per mcf as in the past when designed are spending program with flexibility respond to changes in commodity prices and other market conditions we expect full year two thousand twenty three sales volumes to be between seventeen thousand eight hundred and eighteen thousand eight hundred barrels of oil equivalent per day when considering the midpoint of our four year two thousand twenty three sales boy guidance we anticipate a forty eight percent increase over four year two thousand twenty two and a two point five percent increase over fourth quarter two thousand twenty two for the first quarter of two thousand twenty three we expect sales go the in between seventeen thousand eight hundred and eighteen thousand three hundred barrels of awkward for day so that i'll turn his cholera travis to discuss our financial results in guidance in more detail travis thanks paul and good morning everyone echoing past comments were very pleased with our record results for the fourth quarter and full year of twenty twenty you are fourth quarter benefited from three months results from the recently acquired stronghold assets as well as a continued strong performance of are targeted twenty twenty two develop
spk_1: me campaign and ongoing efforts to drive further operational efficiencies with that backdrop during the fourth quarter of twenty twenty of we saw that price my one point one million barrels of oil one point seven bcf of natural gas and two hundred forty one thousand barrels benji else for a total of one point six million
spk_2: be a week
spk_1: this is thirty four percent higher than sales of one point two million ble in the third quarter for full year of twenty twenty two we grew sales volumes to four point five million theory a forty five percent increase from three point one million billion twenty twenty one fourth quarter of twenty twenty realize pricing was eighty one dollars and sixty two cents per view oh of crude oil two dollars and thirty nine cents per mcf natural gas and seventeen dollars and twenty one cents per barrel of and g else for sixty dollars and sixty nine cents per be a week
spk_0: this was moderately lower than are realized pricing for the third quarter have seventy seven dollars and twenty eight cents per ble however for the full year of twenty twenty two we saw a twenty two percent increase in realize pricing growing to seventy six dollars and ninety five cents per ble from sixty three dollars and fourteen cents and twenty twenty one
spk_1: or fourth quarter average all price differential from guy next to me to i futures pricing was a negative dollar and seven cents per barrel versus a positive two dollars and twenty eight cents for the third quarter of twenty twenty two this difference is due mostly to the argosy i'm a role that declined dollar seventy nine per barrel on average for the period and the august i meet ya bts which declined a dollar sixty eight per burial from the third quarter or average natural gas price differential from nymex futures pricing for the fourth quarter was a negative three dollars and seventy nine cents per mcf compared to a negative three dollars and fifteen cents for the third fourth
spk_0: i realize and your price for the fourth quarter average twenty one percent of daddy t i compared to twenty eight percent for the third quarter
spk_1: this combine result was record revenue for the fourth quarter of ninety nine point seven million dollars that was six percent higher than third quarter revenues and ninety four point four million dollars we also posted record revenues for the full year of twenty twenty two have three hundred and forty seven point two million dollars represented a seventy seven percent increase when the one hundred ninety six point three million for twenty twenty one looking at the more significant expense line items on the income statement hello he was seventeen point four million dollars or ten dollars and sixty cents per be a we compared to thirteen million dollars or ten hours and sixty seven cents per ble for the third quarter of twenty twenty two you are absolute he rose due to the increase sales by him during the quarter mile eloise per be oh he was a bit lower than the prior quarter and below the midpoint of guidance range of ten hours and twenty five cents to eleven dollars and forty cents per ble production taxes or five point two million dollars or three dollars and sixteen cents per ble versus four point six billion or three hours and seventy four cents per b o e for the third quarter with the tax rate remained steady at approximately five percent dna was twenty point nine million dollars compared to fourteen point three million dollars for the third quarter twenty two two on a per be o e basis dna increased to twelve dollars and seventy one cents from eleven dollars and seventy three cents in the third quarter cast your name which excludes share based compensation was six point one million dollars versus by point nine million for the third quarter but the fourth and third quarters of twenty twenty two each included about one million dollars a transaction cost adjusting for the transaction costs fourth quarter twenty twenty two cashier a was three hours and fourteen cents per
spk_0: yeah we compared to three dollars and eighty five cents per ble for the third quarter this represents an eighteen percent decrease in a direct reflection of the synergies of forty by the stronghold transaction
spk_1: interest expense was nine point five million dollars versus seven million dollars for the third quarter with the increase substantially due to a higher average daily balance of long term debt associate with the additional borrowings on the revolving credit facility due to the stronghold transaction during the fourth quarter we posted net income of fourteen point five million dollars or eight cents per diluted share excluding the estimated after tax impact of pretax items including five point four million dollars of noncash on realize loss on hedges and two point two million for share based compensation expense and nine hundred ninety three thousand a transaction costs for stronghold acquisition our fourth quarter adjusted net income was twenty one point eight nine dollars or thirteen cents per share this is compared to third quarter twenty twenty you net income of seventy five point one million or forty nine cents per diluted share excluding the estimated after tax impact pretax items including forty seven point seven million for non cash on realize gain on hedges and one point five nine for share based compensation expense and one point one me and for transaction costs or third quarter adjusted net income was thirty two point five million or twenty eight cents per share for full year of twenty twenty of we posted a record adjusted net income of a hard seven point five million or eighty nine cents per share this was more than two hundred fifty percent higher than three point six million for thirty one cents per share for twenty twenty one looking i adjusted ebitda we're pleased to report a record fifty six point three million dollars in the fourth quarter compared to fifty six million in the third quarter as lower realized pricing for the fourth quarter significantly reduce the benefit from the thirty four percent increase in sales volumes from their quarter fourth quarter twenty twenty you adjusted ebitda was were that hundred and thirty five percent higher than the twenty four million dollars reporter for the same period and twenty twenty one
spk_0: for for year of twine twenty you we posted record adjusted even doth of one hundred and ninety five point two million dollars which was a hundred and thirty four percent higher than the eighty three point three million for twenty twenty one free cash flow out for the fourth quarter of twenty twenty two was five point five million dollars compared to the nine point seven million and they're gone
spk_1: there
spk_0: the decrease was primarily due to a lower realize pricing and higher interest expense and capital spending partially offset by higher sales volumes
spk_1: for four year twenty twenty two regenerated free cash flow of thirty four point eight million dollars that was seventy percent higher than the twenty point five million and twenty twenty one as of december thirty first we had four hundred and fifty million dollars drawn on a revolving credit facility which reflects a debt paid out of twenty million dollars in the fourth quarter and a total of thirty seven million dollars since it closing of the stronghold transaction with current buying base of six hundred million dollars at the end of twenty twenty two we had a one hundred eighty four point two nine available on the revolver net of letters a credit combined with three point seven million of cash we ended twenty twenty two with liquidity of hundred and eighty eight million dollars we are focused on further debt reduction twenty twenty three of course realize commodity prices and the timing of capital spending will have an impact on the cadence of quarterly debt pay down
spk_0: i would also note that we recently paid the fifteen million dollar deferred payment associated with stronghold transaction
spk_1: looking at her share count during the fourth quarter we had eight hundred thousand and common whites exercise that eighty cents per white accordingly or fourth quarter financials reflected the issue i said the eight hundred thousand shares of common stock in receipt of six hundred forty thousand dollars of cash to date and twenty twenty three we have had
spk_0: price me four point five million common awards exercise resulting in a price my fourteen point six million common wind sorry main outstanding turning to our twenty twenty three outlet for the full year and first square as paul discussed for the full year of twenty twenty three we anticipate capital spending have one hundred thirty five two hundred seventy million dollars which includes he estimated cost to you drill twelve to fifteen new horizontal wells drilled twelve to twenty five new vertical wells complete and place on line twenty four to for a new wells and read complete six to ten miles
spk_1: also included and or for your outlook is spending for rican pollutions capital workers and infrastructure upgrades as well as leasing cost and not operating drilling completion and capital workers
spk_3: based on the hundred fifty two point five million dollar midpoint of spinning guidance we expect the following estimated allocation of capital investment including seventy percent for drilling completion and relayed equipment and facilities twenty two percent for re completions and capital workers and eight percent for land yes sg in
spk_1: offering capital looking at our sales my guidance we expect full year of twenty twenty three to average seventeen thousand eight hundred to eighteen thousand eight hundred billion per day of which are price my sixty eight percent is oil seventeen percent is natural gas and fifteen percent is anti else looking at this year's first quarter as pulled us guest in january we kicked off or twenty twenty three capital investment program including drilling and completing three horizontal wells in the northwest shelf to date with all well as placed on production a fourth horizontal well in the northwest shelf has been drilled as expected to be completed and place the action by the into this month
spk_0: additionally we picked up or egg and cbp south to draw three vertical wells anticipate having the three well as completed and an online by the end of this month
spk_1: as such there will be minimal benefit for the first quarter production results associate with these for wells accordingly first quarter twenty twenty three sales are expected to be in the range of seventeen thousand eight hundred to eighteen thousand three hundred billion per day of which we expect sixty eight percent to be oil seventeen percent natural gas and fifteen percent angie else for four year twenty twenty three we anticipate alloway of eleven dollars to eleven dollars and sixty cents per ble for the first quarter of twenty twenty three we currently expect our to range between eleven dollars and ten cents to eleven hours and fifty cents per ble i would note that all over twenty twenty three guidance is included in yesterday's release and presentation on our website turning to the hedge position for four years twenty twenty three we currently have a price a one point seven million barrels of oil hedged or thirty eight percent of our oil sales based on the midpoint of guidance we also have two point four bc other natural gas or thirty five percent of our natural gas sales based on their point of guidance
spk_0: for quarterly break out of her head position please see our presentation on our website which includes the average price for each contract type cell with that our turn it back to paul for is closing comments before que una pol thank you travis before opening this call up for questions i'd like to emphasize several points we have made in the past first and foremost the strong who acquisition has substantially increase or size and scale lord our overall cost roger and improve nearly every per share metric normally considered when comparing similar to transactions we are a stronger more diverse energy company better position to manage risk associated with price volatility an unforeseen operational issues such as power outages are mechanical failures or weather related downtime
spk_1: we have significantly increase our ability to generate revenue due to higher sales volumes and roll off of lower price hedges
spk_0: the improved capital efficiency of our underground inventory provides the opportunity to further optimize our future capital programs to maximize cash flow generation in the remain focused on reducing debt
spk_1: the improve capital fish see he is demonstrated with the progress we've made regarding our return on capital employed which was over twenty percent for two thousand twenty two representing an increase overall performance in two thousand twenty one or more than seventy five percent
spk_0: the improve capital efficiency also provides enhanced like to believe respond to changing market conditions or to proactively adjust our capital spending plans to accommodate our pursuit of a creative balance sheet enhancing acquisitions the bottom line is simply this ring energy today is larger stronger and more efficient with an improved balance sheet and has ability to pay down debt as previously shared we paid out twenty million of debt in the fourth quarter and thirty seven million in the last four months of the year we have also increase on the clearly more than two hundred percent over the previous year and are prove his or my almost eighty percent so having said that we've talked about the stay the company our plans for two thousand twenty three in our strategy but we haven't yet talked about the principles drive in our strategy simply put we try to align our actions to those we believe create a long term value for our stockholders we believe this country needs more size and scale to help or common stock be eligible as an investment opportunity to a wider cross section of the investment community while we have materially reduce or leverage ratio we believe our absolute debt levels just by our continued commitment to pay down debt we believe continuing to pursue a creative balance sheet enhancing acquisitions is one method of achieving both of these objectives we believe we should position this company to return capital to our stockholders in short we believe stay in the course on our value focused proven strategy will continue to position this company for success in two thousand twenty three mb on creating a long term die for our stalkers and with that we will turn his call over to the opera for questions operator thank you are we will now begin the question and answer session to ask a question you may press start in one on your total keypad if you're using a speaker phone please take up your hand said before personally keys to withdraw your question please post star been too we ask that you please let yourself one question in one follow if you have additional questions you may real question here and it is time we will pause momentarily to simple our roster
spk_4: and the first question will be from neil gaiman from truest please go ahead armani get thanks for the time all my question for you that he and his just you did latest out of the personally am when it when it comes to sorted operational optionality sounds like knowledge stronghold you've got out if a lot more an option is i just wanted
spk_0: get my question is you know how does the verticals over there compete with the horizontal sort of legacy and bit maybe just talked about your i know you did layout kind of how many you drill dutch far year to date and kind of what the plan sarge suggest wondering what do you see on how much optionality have a plan and maybe you know for you guys how they compare
spk_5: heat for returns between the two
spk_6: yeah go ahead i'm gonna i'm gonna do a forced out of that rather let accompanied gotta share their point of view but
spk_5: are there the undeveloped opportunity that came with the acquisition have very very competitive economic from them were actually for pure your due to the shore cycle time from the date of birth to the date you start getting all and and attacks doctor thing and so bad at the same time we have system can strike we talk about this in a pass with respect to northwest sheldon of aggravating platinum runner with coffee bean or it now we've tried out
spk_1: around ballots are druid programs around develop programs and are out of a program to maximize efficiency at the infrastructure that we have and the primary issue up in the north
spk_5: while some water just all while in a foul we have very attractive rachel return very quick pay out in turn around time very capital does your program but we also have other limitations we also have follow orders novel or straight down there we also have power greater power electricity constraints and so we are maximizing
spk_1: the cat or generation from these as that i try to minimize investments in infrastructure will read that is not necessary or we are making a as was an infrastructure where it is necessary but if about program and so as it turns out some of our best economics
spk_7: our on the are associated with some of the bird a for drilling in the south and solar very very robot from an economic perspective and are very robust from a standpoint of the impact it can have run the company and so i ordered a more early to say a of how much daunting don't think i've always that in terms of optionality or week contractors you're all well to well to well with extensions so there's no commitment long term commitment over multiple wells we can pivot at any point the same thing with the casing was a crude case and for multiple projects and both old the areas and so that gives us lot of flexibility to adjust accordingly with the infrastructure constraints the we the my catches was i put by surprise
spk_5: in terms of the sour the constraints on the south the we does a little bit about on last call
spk_7: on the has to be decide we have we have resolved a lot of those constraints that the as to be do is no longer have a disclaimer the south the first water supply is also been a resign so we're really just facing the electrical supply can are you know pivoting and and trying to resolve those
spk_4: which for the most part of also we've made a lot great had way there too
spk_8: the did in your paul maybe that lead me i might go ahead i'm sorry get yeah or any other valid that i wanted an echo on an empty battlefront up causing a marine of his comments are we specifically anticipated some of these conversations or question so see that we really revamped our i are that
spk_9: age twenty one on our deck it really kind of tackles your question their little bit more clearly giving you a feel for what is the average well performance between for on a well in a vertical well and the differences and cost but that is that the landed average of every single wealthy have and so when your ass
spk_8: you will you be funny capital on vertical well one yeah paul mentioned there are some very very high rate of return very short cycle time investment there and that specifically due to our pj leave field
spk_4: and that the reason that that one's even greater economics has become in our eyes are really high in that after so if you look at page twenty two you also get a flavor for ip sixty and percent oil and sale as far as optionality were obviously going to focus our cat
spk_0: the to the highest rate of return investments and both it's like twenty one twenty two you really kind of answer your question he i like that i saw those that's what i was taken more else just on on sort of future because you're right i liked the way you really get some good details on what the sort averages been so far that's i'll just tell take it on just just just so wrong called on and then turn up kind of my solid is paul will bid on the same vein as if you are married when it goes one champion is more you know there's a lot of about lot of different you know our forecasts out there for prices in the like oils up over but today and kill some time before it was in a recessionary fears i'm just wondering how how stable i guess is like answers or as the question is how stable is your plan and need a places you know like here we are today at the was called seventy seven dollar whale oil goes up to eighty five years you know goes down to sixty five do anticipate having relatively the same same plan gadget be curious to know because you seem to be in a spot test the like the leverage already getting down there your soon get be down at one time so that like all that get my big question is just maybe we think about
spk_5: just price insensitivity fall yeah and so on and europe the only one that as as as question of of puff on online him and privately and so we shared flu earlier that our budget plans are suing prices between seventy nine dollars and for a dog is the and henry harbor between two and four so our was just drop a hypothetical if if or prices fall below sixty five dollars were sustained period of time we've got the flexibility to change or chattel spending program limited to just as high as ones are we can an egg and so again and we've got debt repayment goals this year we're gonna stick to the are one way or another i'm in so we know we got the capacity or mean for example i mean if you look at january's production january twenty three aren't january twenty three production average higher than the high end of our production guides for this year okay and so that should send a very clear message that we are going to be tapped all discipline this year and so on
spk_8: and so in that kept discipline is going to be related to price and so let's take the opposite snares a list they were about eighty five or nine dollars versus same period of time where we got a bill to deport on the growth organically and we will do that subject to visa system limitations that we have an interest of as yours stolen something yes and and to also echo of comments yeah i think that if you look at our guidance we also had a fever range on catholics to triumph of stuff
spk_5: no account for that pay for that
spk_4: then as your question the of
spk_10: spot on at that's kind of what i thought i think a is sexy as intense as position thank you costs
spk_0: does that you know and once again if you would i to ask questions please press star once the next question is from jeff robertson with water tower research since go ahead
spk_5: when she told your clothes the stronghold acquisitions in august and having only those assets now for and operator them for five or six months is or anything you've learned since you since you did you diligence that you think about is playing oh scene of the world and the twenty twenty three capital for were yeah there's quite a bit we've learned some
spk_1: i will say this we are every bit as excited today about this acquisition as we are the day we are we sign the parts of the sale
spk_5: we have learned several things on returned as over term rentals because he can expound will be more on nice nights are we are experimenting and and trying different completion techniques we've vi vi where did the condition of many the well wars and so many the well bore we completions may end up because of the condition of as well we think that through increased efficiencies other things we may end up or redrawn as well than stellar reek bleeding that's can be a case by case basis we have come to realize and as mentioned by alex is a little earlier we have certain areas in the cbp south that actually do demonstrates superior economics to even a portfolio we had before the acquisition so and everybody knows how strong are are economics are in the northwest shellfish database and platform a legacy yet
spk_7: was we have at the race return the economics of these opportunities that came in with this acquisition truly are outstanding a very competitive in this for voters or really really excited about that you're sending more about the operation not the don't think that is is the paulson were just as excited thing from an operation standpoint was more excited than we were done acquisition was actually found on the pdp side we fell five or six projects moved on him and and cleaned of the wells and and performed a little stimulation
spk_8: and so forth and action significantly increase the production and arrested some declined so we we feel really good about the acid were learning a lot about it and sixteen excited at one more thing too
spk_11: few to the nature that we got several fields that we didn't even have a sign a lot of value on during that position that we are testing certain concepts and proved valid but the next night
spk_12: on some of the other assets and i think this you'll see us through out some future called share some of those results so more to come
spk_0: thanks it's just a quick follow up on that in the to have another we drilling wells rather than we completing his act because he thinks you can get a better completion
spk_5: over maybe as as an older daughter's owned and than just been able to go in and use existing cases that's right this is a combination of a couple things was a condition of the casing not or will kind of smidge job do they have quoted a smidgen and so as you know or fracking these wells and so really the objective is to you know exploit the reasons for the lowest cost and laws risk and so is this a balance of all those factors as we evaluate each one of these operators individually i will make a call on that below one thing that we have learned when you look at the results that we've seen new wells tend to have superior
spk_13: producing race and he was associated with them than the we completion wells and so this is west side
spk_1: primarily driving as a follow up for you mentioned continuing to build scale and in the permian
spk_12: stronghold gave ring a lot more options in terms of types of projects to invest your capital in can you just briefly describe one of the characteristics
spk_5: of an acquisition that that fit the existing ring asset base yeah yes as a really good question and i think we're very fortunate with the straw whole acquisition and that v on the acquisition the way was structured
spk_13: in housing negotiated with the sellers i turned out to be a very very a creative cross board on nearly every metric maverick i don't know the metric that it wasn't afraid of on
spk_5: and did a lot for the company we targeted that said of assets we went to them are and as a result of our first offer not be insufficient for them they decide to run process and i will prevail through that process but i'm still very would we chose as as though that area because of whatever biden we're still during the summer type of analysis on other as as in central by some platform and in the permian basin and so is gonna look a lot like that now now our that's what we tore his now that doesn't mean that will end up with something that looks just like it and reason being is because we've been approached and we are approaching others in the marketplace a have certain types of as as certain as as and so we would be won't do a ptp by without a lot of development opportunities of regatta for the rights try nice but our progressive to find production existing p p production that lowers are operating costs as shallow declines long lives
spk_14: and and have undeveloped opportunities that have similar or at least competitive economics with the project or we have in our current inventory
spk_15: our little as i said isn't the past ah how i don't want to dilute the quality of my inventory my mind stuff as a lot of only now lower quality
spk_5: compared to the portfolio have may still be very robust we economic and and i gotta be honest way it's does a lot of companies out there that would are envious of of the the the rates of returns and a cloudy of are on the undeveloped doctors says so that being what it is we do believe there are opportunities out there but we believe that there are more opportunities out there that are currently our size can take down by ourselves and so we're really excited about the future we will do believe that there's a transaction to be made again here sometime in two thousand two idea to down twenty four as all a function of have a negotiation goes i whether we can structure the of the deal
spk_0: in a way that it is a creative to my existing shareholder and it reduces and maybe reduce dead but actually striking the balances and so those are the main criteria
spk_16: but again we really like
spk_17: the metrics and financial performance it's company can generate a we don't want to dilute that and so were to be very disciplined we're just not going to buy job we're not going to buy a bunch of una we're not going to do you stats effects so that if your question yes it does thank you
spk_12: good
spk_0: can our next question is from know parks from two brothers please go ahead i'd morning i know
spk_5: i'm an excerpt i have done little later apologies for to be covered already but just a senior i'm your last comments about dad what you might consider that you're eating for for acquisition i'm with the ttc acquisition are there are there rom properties out there were there would be meaningful three completion opportunities that could that could move the needle on and a valuable than of says something something jam out there there are actually in is all functional to the prior operator was no you know there are certain operators in saturday's and platform and the greater permian basis that are known to work their properties really really hard and so they've already mind many those opportunities and then there's other operators as have ah
spk_1: you know focus or capital spending elsewhere and so i have similar as as to be classified as as not having been worked at heart and soul on that was the benefit of the strong whole acquisition if you look at the position that stronghold choir from from devon and chevron
spk_18: they had a developed those assets and imagine those assets are quite some time
spk_0: they try some ideas but they found at their capital
spk_19: you know that may be allocated their capital elsewhere as will be left behind these stopped opportunities for for a stronghold in and now us and so on but yes there are on the central beijing flap on herself in other areas in northwest yeah we've identified as assets or would be quelled classified cannot what you're same pretty much pdp maybe not a whole lot of drone operators but out there are some reagan police officers after a while great thanks alot and the next question will be from rick shelling lines from far them stark please go ahead
spk_5: hey guys just one quick question i keep it from my clients we made a great acquisition record numbers were making money we're paying down debt but our stock channel two dollars share what is a suspicious after the market maybe we're not talking about could you help me explain you know rick i get asked that question more of an area any other question seems like and that's a really tough one not to to understand in the marketplace as and in if you go back to the industry presentation we actually layout kind of the argument as to why it is that we are undervalued the marketplace i believe that today ring energy stands as probably one of the best investments in the war das base ah and so why is our thoughts are so undervalued
spk_15: are we know the the industry has been hit hard since last summer with the change in oil prices i we know that the smaller companies that we've got a phone that category i have been hit a disproportionately a little harder than some the bigger companies
spk_5: but in my opinion ring energy has has generated superior at least better as good or better returns and are peer group
spk_15: yet we're trading at a much lower multiple insult to to explain that would take quite a bit of time of died at divesting investigating the marketplace and what's been happening
spk_8: and so i believe that there are a couple things that probably contribute to that arctic star some people that will not invest in a company with the debt levels that we have rights as you point out were were quickly and very rapidly addressing mad and we're going to have a balance sheets are really strong balance sheets soon just from our own
spk_20: organic abilities to pay down debt
spk_5: and if we can do something similar to what we did with the throttle acquisition we can strengthen about even more so i hate to think of people penalizes too heavily for for that but to be honest with you wreck your question probably is better addressed to somebody else follows thousand such as jaffer neil earth or know and and john why do so
spk_20: not on the called call a but some of them would probably have more insight than i do in terms of why we're being held up our to have some you want to say idea i would also add comments that this is the first quarter that we announced all of our metrics as a fool pro forma company mean of stronghold for three months and so i think
spk_5: that a lot of this the street in the public is waiting to see rhino now once you get a couple of quarters underneath us watching the performance of the company usually start seeing the effects to that position yeah and i also question and i'll throw in a little more here you know as travis shared
spk_19: you know for to a me and
spk_5: common or reform have made warrants were converted and exercise convert into common shares this this corner and so there has to have an impact wreck on on on why our star performers his weight as is there an overhand either
spk_0: ah a question that a lot of people ask believe if if if there is an overhang out there is a is is is temporary is not long term i believe that if we continue to do to generate the returns we continue to strengthen our balance sheets and we continue to do all the right things eventually the marketplace going to come around in and out of the reason why i personally believe when i look at the oil gas based other companies that are similar would be considered for years we represent the most compelling investment opportunity out there in the market today okay thanks
spk_5: joachim sector question risk
spk_21: and the next question is a fall from jeff robertson from water tower research please go ahead
spk_5: follow along the lines of leverage leveraging in the ninety dollar high end of your the way your budgeting if prices went back up to ninety how do you balance increasing capital vs accelerating t leveraging it's as if people are concerned with the languages yeah and so again for the reason why we gave that range of seventy to ninety is because when you fall below sadly i use sixty five that example for an extended or sustained period times that wouldn't really encourage us to change our capita spending programs now if we're at ninety dollars i'm gonna take the additional excess cash from operation to pay down debt now if we get above ninety dollars for sustained periods damage to say when hundred bucks
spk_0: well then we're probably going to add capital because we're going to grow organically and now it'll also be dependent on other factors such as
spk_5: see or do we have something and our size or we successful negotiate a deal with will therefore we bring a deal down this year the type of things
spk_15: but down yeah so that was the purpose of providing the guidance but we're at sustainably about one hundred bucks a yellow an ugly the marketplace could expect us to leave pick up the drawing and and cabals been a little bit more than what we've shown here but again our preferences gonna be ah
spk_5: he opened our dad and so if if if the capital spanned vs are a bit off for the air gets below fifty percent will will probably keep it at after the present level or or more so it at a higher commodity price dutch decency to both increase the leveraging nelson grow the production those to to support higher either done number so you get lower leverage and hire a bit on numbers which in theory should slow through to us to violations
spk_22: is is certainly word in those types of scenarios
spk_0: yeah i believe wicked does
spk_5: surpass our our debt repayment goals with a year in that towards the scenario where he dies coming up ah yeah we could make a substantial reductions in the leverage ratio itself even to the point where down around one even potentially below one
spk_23: great thank you
spk_5: these gentlemen it is time there and and further questions so that's a teleconference back of the fall mckinney for any clues remarks okay thank you again for your interests and join us on the call today
spk_0: we are looking forward to two thousand and twenty three we're very excited about what this year can do for rings shareholders

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