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spk01: Hello and welcome to the Ring Energy first quarter 2023 earnings conference call. All participants will be in 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 telephone keypad. To withdraw from the question queue, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Al Petrie, Investor Relations. Please go ahead.
spk10: Thank you, Operator, and good morning, everyone. We appreciate your interest in Ring Energy. We'll 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 first quarter. We would then turn the call over to Travis Thomas, Ring Street Financial Officer, who will review our financial results. Paul would 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 Dias, 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 are welcome to re-enter the queue later with additional questions. I would also note that we have posted our first quarter 2023 earnings corporate presentation on our website. During the course of this conference call, the company were 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 were proved 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, it should not place undue reliance on forward-looking statements. These and other risks are described in yesterday's press release and in our fillings with the SEC. 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 differ materially. This conference call also includes references to certain non-GAAP financial measures. Reconciliations of these non-GAAP financial measures to the most directly comparable measure under GAAP are contained in yesterday's earnings release. Finally, as a reminder, this conference call is being recorded. I would now like to turn the call over to Paul McKinney, our chairman and CEO.
spk12: Thanks, Al. Welcome, everyone, and thank you for your interest in Ring Energy and for joining us today on our earnings call. The first quarter marked a positive start to the year, where we once again posted record sales volumes, adjusted EBITDA and cash flow from operations. Contributing to our results was a full quarter of production from wells brought online in December, new wells drilled and placed on production during the first quarter, and increased production from our re-completion activities. During the first quarter, we grew sales volumes 2% from the fourth quarter of 2022 to a record 18,292 barrels of oil per day. This was at the high end of our guidance range. Looking at year-over-year metrics, we grew sales volumes 106%, which primarily reflects a contribution of our stronghold acquisition. With respect to our capital spending activity during the first quarter, we drilled and completed two 1-mile horizontal wells in the Northwest Shelf, each with 100% working interest, and drilled and completed two 1.5-mile horizontal wells in the Northwest Shelf, one with a working interest of 99.8% and the other with a working interest of 75.4%. Additionally, we drilled and completed three vertical wells and performed six recompletions in CBP South, all of which having a working interest of 100%. We produced record adjusted EBITDA of 58.6 million during the first quarter that was 4% higher than the fourth quarter of 2022 and 65% higher than the same quarter for the previous year. We spent 38.9 million on capital projects, which was within our guidance range of 36 to $40 million. The result was $10.5 million of free cash flow that was 92% higher than the fourth quarter and marked our 14th consecutive quarter of free cash flow generation. We ended the first quarter with $179 million of liquidity, which was 151% higher year-over-year, although 5% lower than at year-end of 2022. As previously planned, during the first quarter we made the final deferred payment of $15 million for the Stronghold acquisition. We also made a payment of $3.5 million for post-closing adjustments. Although this contributed to a temporary net increase in borrowings of $7 million on a revolving credit facility during the first quarter, we look forward to accelerating debt reduction for the remainder of the year based on our current outlook. Turning to our capital spending outlook, we reiterate our plans to spend between $135 and $170 million during 2023. That includes a capital-efficient combination of drilling horizontal wells on our Legacy acreage and vertical wells on our CBP South acreage. This amount also includes planned spending for recompletions, capital workovers, infrastructure upgrades, leasing costs, and ESG-related projects. As you may recall, our budget plans for 2023 are based on WTI oil prices of between $70 and $90 per barrel of oil, and Henry Hub prices are between $2 and $4 per MCF. As in the past, we have designed our spending program with flexibility to respond to changes in commodity prices and other market conditions. With respect to our second quarter, we expect to spend $34 to $38 million to drill, complete, and place on production six to seven wells, perform targeted recompletions, and execute other capital projects. With respect to 2023 production guidance, we are reiterating full-year sales volumes of between 17,800 and 18,800 barrels of oil equivalent per day. Looking at the midpoint of our full-year guidance, we anticipate a year-over-year increase of approximately 48% and a 2.5% increase over fourth quarter 2022. For the second quarter of 2023, we expect sales volumes to come in between 17,900 barrels of oil equivalent per day and 18,400 barrels of oil equivalent per day. So with that, I will turn this call over to Travis to discuss our financial results and guidance in more detail. Travis?
spk08: Thank you, Paul, and good morning, everyone. During the first quarter of 2023, we sold approximately 1.1 million barrels of oil, 1.6 BCF of natural gas, and 240,000 barrels of NGLs for a total of 1.6 million BOE, or a record 18,292 BOE per day. First quarter 2023 realized pricing was $73.36 per barrel of crude oil, $0.66 per mcf of natural gas, and $14.30 per barrel of NGLs, or $53.50 per BOE. This was 12% lower than our realized pricing for the fourth quarter of 2022 of $60.69 per BOE. Keep in mind that beginning on May 1 of last year, GTP costs are reflected as a reduction to our realized price of natural gas. Our first quarter average oil price differential for the NYMEX WTI futures price was a negative $2.67 per barrel versus a negative $1.07 per barrel for the fourth quarter of 2022. This difference was mostly due to the Argus CMA roll that declined $1.27 per barrel on average for the period and the Argus WTI WTS which declined $0.56 per barrel for the fourth quarter. Our average natural gas price differential from NYMEX Futures for the first quarter was a negative $2.08 per MCF compared to a negative $3.79 per MCF for the fourth quarter. Our realized NGL price for the first quarter averaged 19% of WTI compared to 21% for the fourth quarter. The combined result was revenue for the first quarter 2023 of $88.1 million compared to fourth quarter 2022 revenue of $99.7 million. Looking at the more significant expense line items on the income statement, LOE was $17.5 million or $10.61 per BOE, which was essentially flat from the fourth quarter of 2022. Production taxes were $4.4 million or $2.68 per BOE versus $5.2 million or $3.16 per BOE for the fourth quarter, with the tax rate remaining steady at approximately 5%. DD&A was $21.3 million compared to $20.9 million for the fourth quarter of 2022. On a per BOE basis, DD&A increased from $12.92 from $12.71 in the fourth quarter. Cash G&A, which excludes share-based compensation, was $5.2 million versus $6.1 million for the fourth quarter. I would like to note that the fourth quarter included $1 million of transaction costs for the Stronghold acquisition. Adjusting for the transaction costs, fourth quarter 2022 Cash G&A was $3.14 per BOE versus $3.15 per BOE for this year's first quarter. Compared to last year's first quarter of $5.01 per BOE, we saw a 37% year-over-year decrease in cash G&A on a BOE basis, which is a direct reflection of the synergies afforded by the Stronghold transaction. Interest expense of $10.4 million versus $9.5 million for the fourth quarter with the increase substantially due to higher interest rates and additional number of days in the period. Keep in mind, this also includes interest expense of $400,000 per month in non-cash amortization. During the first quarter, we posted net income of $32.7 million, or 17 cents per diluted share. Excluding the after-tax impact of pre-tax items, including $10.1 million for non-cash unrealized gain on hedges and $1.9 million for share-based compensation expense, our first quarter 2023 adjusted net income was $25 million, or 14 cents per share. This is compared to fourth quarter 2022 net income of $14.5 million, or $0.08 per diluted share. Excluding the estimated after-tax impact of pre-tax items, including $5.4 million for non-cash unrealized gain on hedges and $2.2 million for share-based compensation expense and $1 million of transaction cost, our fourth quarter adjusted net income was $21.8 million, or $0.13 per share. Looking at adjusted EBITDA, we were pleased to generate a record of $58.6 million in the first quarter, compared to our previous record of $56.3 million for the fourth quarter of 2022. I would note that the first quarter of 2023 adjusted EBITDA was 65% higher than the $35.6 million reported in the same period in 2022. Again, a direct result of the Stronghold acquisition. our legacy field development campaign, and our targeted efforts to drive further efficiencies in the business. We were also pleased to record record cash flow from operations of $49.4 million for the first quarter, a 4% and 53% increase from last year's fourth and first quarters, respectively. Free cash flow for the first quarter of 2023 was $10.5 million, compared to $5.5 million in last year's fourth quarter. The increase was primarily due to lower capital spending, higher sales volumes, and lower realized hedge settlements, which was partially offset by lower realized pricing and higher interest expense. As of March 31st, we had $422 million drawn on our revolving credit facility with a current borrowing base of $600 million. At the end of the first quarter, we had $177.2 million available on the revolver net of letters of credit, Combined with the $1.7 million of cash, we had a liquidity of approximately $179 million as we entered this year's second quarter. As Paul discussed, our debt position increased $7 million in the first quarter primarily due to the $15 million final deferred payment associated with the Stronghold acquisition, along with a payment of $3.5 million for the post-closing adjustments. As we look to the remainder of 2023, we are focused on further debt reduction and realized commodity prices and the timing of capital spending impacting the cadence of quarterly debt pay down. Looking at our share count, during the first quarter, we had approximately 4.5 million common warrants exercised at 80 cents per warrant. Accordingly, our first quarter financials reflected the issuance of the 4.5 million shares of common stock and the receipt of approximately $3.6 million in cash. Additionally, last month we executed agreements with certain holders of nearly all of our remaining outstanding warrants that resulted in the early exercise of an aggregate of 14.5 million warrants. We received gross proceeds of approximately $9 million, which will be used to accelerate debt reduction. If you recall, these warrants were associated with the equity raise completed in October of 2020 and have been reflected in our fully diluted share count since that time. Following the early exercise of the warrants in April, we had approximately 78,000 warrants outstanding. Turning to our 2023 outlook for the full year and second quarter, As Paul discussed, our full-year 2023 capital spending plans of $135 to $170 million have not changed. For details associated with our capital spending plans, see our press release and presentation. Looking at our sales volume guidance, we continue to expect full year 2023 to average 17,800 to 18,800 BOE per day, of which approximately 68% is oil, 17% is natural gas, and 15% is NGLs. Looking at this year's second quarter, For the full second quarter, we expect to spend $34 to $38 million to drill, complete, and place on production six to seven wells, perform targeted re-completions, and execute other capital projects. Accordingly, the second quarter 2023 sales are expected to be in the range of 17,900 to 18,400 BOEs per day, of which we expect 69% to be oil, 15% natural gas, and 16% NGLs. For the full year 2023, we reiterate our LOE guidance of $11 to $11.60 per BOE. For the second quarter of 2023, we currently expect LOE to range between $11 and $11.40 per BOE. I would note that all of our 2023 guidance is included in yesterday's release and in the presentation on our website. Turning to our hedged positions, For the remainder of 2023, we currently have 1.4 million barrels of oil hedged, which equates to approximately 41% of our estimated oil sales based on the midpoint of our guidance. We also have 1.9 BCF of natural gas, which equates to approximately 38% of our estimated natural gas sales based on the midpoint of guidance. For a quarterly breakout of our hedge position, please see our presentation on our website, which includes the average price for each contract type. So with that, I will turn it back to Paul for his closing comments before Q&A. Paul?
spk12: Thank you, Travis. Over the past year, We made substantial progress increasing our size and scale, improving our per share metrics, and strengthening our financial position through the stronghold acquisition. We continued investing in high rate of return projects through our targeted capital spending program and continued initiatives to drive further efficiencies in our business. I want to thank our entire workforce for their continued hard work and dedication as we remain squarely focused on executing our value-focused proven strategy. Looking to the future, our immediate focus is on the efficient execution of our 2023 capital spending program and maximizing our free cash flow to pay down debt. We intend to remain focused and disciplined by prioritizing our capital spending on high rate return drilling and recompletion projects, which should allow us to maintain or slightly grow our production over fourth quarter levels. We believe targeting excess free cash flow to pay down debt will drive long-term value for our shareholders. As we have shared in the past, we are committed to positioning the company to return capital to stockholders and our efforts, both short-term and long-term, are planned with this in mind. We believe our stock will be more appealing to a wider cross-section of the investment community if we achieve greater size and scale. We also believe that our absolute debt levels justify our continued focus on improving the balance sheet. These two beliefs drive our strategic focus on pursuing accretive balance sheet enhancing acquisitions and maximizing free cash flow from our organic capital spending plans. As you know, the stronghold acquisition is an example of the transformational impact a strategic transaction can have on improving per share metrics in the balance sheet. Another transaction supporting our strategy was the accelerated exercise of the outstanding warrants last month. By simplifying and enhancing our capital structure, we increased the company's public float, accelerated debt repayment, and we believe trading liquidity on our stock should improve. So to pull all of this together, we believe staying the course with our sense of urgency, our resolve, and our commitment to our value-focused proven strategy better prepares a company to manage the risks and uncertainties associated with the volatility our industry is experiencing and will generate sustainable and competitive returns to our stockholders. With that, we'll turn the call over to our operator for questions. Operator?
spk01: Thank you very much. We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw from the question queue, please press star then two. At this time, we will pause momentarily to assemble our roster. Today's first question comes from Jeff Gramp with Alliance Global Partners. Please go ahead.
spk05: Guys, thanks for the time. Chris, first off, Paul, maybe you can just kind of give us your latest thinking on the CapEx side of things, understanding you guys are reiterating the full year, but obviously there's some variability in there. With prices acting the way they are, is kind of the midpoint still a fair point to think about, or how are you guys kind of thinking about managing the business given the volatility?
spk13: Yeah, managing the business associated with the volatility is the name of the game this year for us. So, I mean, I think we've said this more than once, and not just me, others here in other venues. So, you know, we've designed our budget to be between, you know, WTI prices of $70 and $90. If we're closer to the $70 average for the year, we're going to be on the lower end. If we're at $90 or closer to $90, we'll be on the higher end. We are being responsive. Again, we're looking at it from a standpoint of essentially two goals. We want to at least maintain flat production for the year on our fourth quarter levels. And so we'll spend the capital to do that. But we want to allocate every available dollar excess cash from operations to paying down debt. And that's what we're focused on this year. And so, but we will be responsive in our future capital spending. So at this stage right now, I think that midpoint is probably a good place to be. But don't be surprised if you see us change, if markets continue to volatility or it goes either steeply downward or upward in terms of price.
spk05: Got it. Okay, that's helpful. And kind of a related point, I think in the slides you guys had directionally assumed some well-cost inflation relative to 22. I assume maybe that was the case in the first part of the year, but are you guys seeing any softness on the service side, or how are you guys kind of seeing things trend on the oilfield service pricing side and how we should be thinking about well-cost moving forward?
spk11: Jeff, actually, this is the first week where we've started to see some softening, especially on the completion side. We think costs are going to come down. We haven't seen that yet. But as we've said in the past, for every well, we go through a bidding process. We re-bid everything, and we're staying current on the pricing. But haven't seen anything yet. We expect to start seeing it, though, towards the end or here in the near future.
spk05: Got it. That's helpful. Thanks, guys.
spk01: The next question comes from Patrick Enright with Truist. Please go ahead.
spk04: Hi, Paul, Travis, Alex. Congrats on a great quarter there to kick off the year. Thank you. My first question is, I guess, looking at your operating metrics and your LOE, I guess over like the last four quarters, you've come in sub $11 per BOE and at the same time in looking at your 23 guidance with that range of 11 to 1160, is there anything, is there a potential spike that we should anticipate I guess, in front of us here, whether it's with facilities maintenance or work over?
spk13: We'll let Moreno handle that initially, then we'll all chime in a little bit on that. Morning, Patrick.
spk11: One of the, you know, our total LOE was in line with what we expected. I think it's lower than guidance, mostly because we were on the higher end of production. You know, it's a numerator and denominator type thing. And that's one of the reasons. The other thing, we're not sure on cost. We were very, so far we've had the elevated cost, but our team has been doing an excellent job of keeping track of things. and making sure job costs don't increase, even though we've put some anticipated increases in kind of the numbers when we're coming up with guidance. So we may revise those down in the future. Right now, we just wanted to remain steady with what we're, just till we watch the rest of the year and maybe towards the next half, make adjustments.
spk13: Yeah, we're good. So just to kind of add on to that, When you bring on some of these newer wells and they do perform on the high side of things, you end up getting more production. So that affects that equation, right, in terms of your lifting costs. And so because we're a little higher on the production side than we were anticipating, it affected the operating costs as well on a lifting basis.
spk04: Good stuff there. As a follow-up here, I'd like to get your thoughts and get a better understanding around your financing as it relates to the regional bank death spiral that we're seeing right now. What's your overall outlook on financing and are you hearing anything in particular around further constraints.
spk13: Okay, very good. That's not a question I was planning to hear, but I'll take it. But it's actually a very good one because as we've been talking about this, the ongoing dialogue with our stockholders, we've been talking about the volatility that our industry has been in. Okay, so now we're seeing volatility in the banking industry that affects all industries, okay? This is part of the reason why our board of directors decided, even last year, that our focus on reducing the balance sheet, the leverage on our balance sheet, is really a number one goal. A fortress balance sheet, as several of our board members remind us, is just something that we need to achieve to achieve. need to achieve because of the volatility we're seeing in our own industry. And now with the banking industry being what it is, it just makes a lot of sense. So how does it affect our financing of things and some of our ambitions for this year? We believe that our syndicate is strong. The individual banks in there have not expressed and shown any issues that we should be concerned about. I do believe that there is a tightening going on. Anytime you have volatility like this, even with just the oil industry, you see little tightening in in the the financing arena but because we believe that we can structure future potential transactions with a combination of equity and cash or debt that we should find that 2023 I'm not going to say it's going to be easy but I believe that we can still be successful in this environment despite the volatility and despite the tightening that we're seeing in both industries. Does that answer your question, Patrick?
spk04: That's great. Really just really appreciated to get your outlook on that. Yeah, very good.
spk01: The next question comes from Noel Parks with Tuohy Brothers. Please go ahead.
spk13: Hi, good morning. Hey, good morning, Noel.
spk14: I just had a few things. I was wondering, you had mentioned that you're just now starting to get a sense of a little bit of softening on the cost side, and it seems like the pace of that has really varied basin to basin, and I'm just curious how those hints of softening kind of manifest themselves just a matter of tone? Or you talk to vendors? Are you getting inbound emails that you hadn't seen for a while? Just curious what you're seeing so far.
spk13: Well, oftentimes, you guys are on a lot of calls, and there's a lot of other operators out there. But If you go back to our strategy and what we're doing and what we're doing different from many of the companies that are in the Permian Basin, our focus is on the conventional reservoirs. And so we're applying the technologies developed for horizontal drilling and multi-track technologies for shales, and we're applying that to conventional reservoirs that are typically at shallower depths. And so many of the rigs and the services that we're seeking are not in nearly as much competition as It has been in some of these shale plays. And so some of the shales, especially outside of the Permian Basin, have much higher break-even costs. And so with the volatility we're seeing in prices, those are the areas where you'll see the reduction in drilling activity. And so those are the areas that some of these other operators may have already experienced reductions in prices. Well, it's because there have been a lot of competition for those sizes of rigs and those types of services. And in our area, although we're seeing signs of softening, you've got to remember our area wasn't as competitive as the shale areas. And so that had an impact. And so, no, we're not getting emails, but we are talking. We talk to a lot of people in the industry. You know, the industry is a very, very close-knit group of folks, and we're all sharing information. And so we're seeing the signs. But as Marinos indicated, we haven't directly seen that in any direct communications or in any of the bids, but we're seeing a sense that it's going to affect going forward because everybody else appears to be as well.
spk14: Gotcha. Makes sense. And, you know, one thing I just wanted to check on is with the stronghold acquisition, did you pick up any lease obligations and anything that – You need to drill the HBP that is on the table.
spk09: Yeah, this is Steve Brooks. No, actually, we did not pick up any real obligations with the stronghold acquisition, so that gives us a little bit of flexibility, obviously, in our capital spending down there. So, yeah, that was a plus.
spk13: And we're beyond our capital, our commitments and our legacy stuff too, right?
spk09: Yeah, we are. We had a commitment with UL lands and we've drilled that all up. So that's all behind us as well.
spk14: Great. And I just wanted to ask you, you know, when we're, I was pulled back a bit just very recently, but you know, the 70 plus the street we've been on for quite a while now. I'm a, thinking about your rates of return and if indeed we do finally see services come back meaningfully, I'm just wondering what sort of delta you might see in rates of return in the different areas if, I don't know, we get, you know, 10% or even better correction, say, by a year from now.
spk13: Well, Those are good questions, Noel, but I'll go back to some of the real core benefits of investing in Ring Energy is the fact that we have some really, really strong, solid assets. And so the undeveloped opportunities that we've been investing in since I've been here have all had excessively, very, very competitively low break-even costs. And so our rates will return are compelling compared to many, many of the shales, especially outside of the Permian, but even compared to many of them in the Permian. And so our program for any foreseeable prices generates in excess of 100% rates of return at surprisingly lower prices, much lower than we've experienced since the downturn that occurred in COVID. And so I don't look at our variability in terms of capital spending. being associated with, you know, being a pullback associated with some kind of a spike coming down or anything like that. I think our focus, again, though, is because of the volatility we're seeing in our industry, the volatility we're seeing now in the banking industry, we just believe the best thing we can do for our shareholders to develop a fortress balance sheet and pay down our absolute debt levels and be in a position to where we can withstand the risks associated with that kind of volatility.
spk14: Great. Thanks. That's all for me.
spk01: As a reminder, to ask a question, you may press star then 1. The next question is from Jeff Robertson with Water Tower Research. Please go ahead.
spk02: Thank you. Good morning. Hey, good morning. Paul or maybe for Alex or somebody else on the team, you all show on slide 17 of the investor deck Some improved performance on wells you've drilled in 2023, both horizontal and vertical. Are you doing something different with these wells and how you're drilling or completing them than you were doing last year, or is it just better site selections?
spk13: Yeah, so I'll answer that initially, but then I'll turn it over to both Marinos and Alex. Yes, we are doing a few things differently. When we acquired these assets from Stronghold, they had done a great job introducing the same type of strategy that we have been doing elsewhere and applying the newer, latest, greatest completion technologies. But since we've taken over and integrated these assets into our operations, we have spent quite a bit of time looking at how they fracked their wells, how they completed their wells, how they brought those wells back on, and then at the same time, newer different ideas. And so we're still testing and trying a few things. We're learning how and trying to figure out ways to optimize. And this is an ongoing thing that we do here. And I'm really proud of the results we've had. And so I'm going to turn it over to Marinos to hit on that or touch on it, and then Alex will follow up with him afterwards. Thank you, Paul.
spk11: So it Two different answers for the two different assets that we have on the legacy horizontal assets. We're actually seeing over time the more wells we drill in a specific section, the opposite of the parent-child effect that you see in other place. We actually see that our child wells are performing better than the parent wells over time as we deplete the reservoir and as we dewater it and also see an increase in performance on the parent wells when we bring a child well online. So that's part of the reason that we've been able to maintain and slightly increase the performance on the horizontal wells on the top left chart on the slide you're referring to. And then on the vertical stuff, like Paul was saying, we're actually seeing a reduction in well failures. We're trying to bring the wells on slower. decrease the amount of sand that we get back and the failures and costs associated with that. So that's kind of the performance increase there that we're seeing on the south and still a little early, but we're very excited on how much more is available for us to optimize on and increase efficiencies on.
spk06: And Jeff, let me add a few more things. Yeah, we on purpose created slide 17 to give investors and just the general community out there an insight to what our well performance is like. So I think the main message was, hey, we have consistent well performance for both horizontal and verticals. To add to what Marinos had said, from 20 and 21 to actually 22, more efficient completions, as he mentioned, but landing zones critical there and how we flow those back. And so just the overall learnings, and also if you recall, we started CBP drilling in 21, and we drilled a lot more in 22, and that had a lot of effect there too. So we have just really good horizontal wealth performance in both our Northwest Shelf and CBP asset. As far as the verticals, the vertical wealth performance increased from 20 and 21, inclusive in 22. Real reasons there is just applying learnings from the past, more stages, improved completions, optimizing lift, but the other real big thing that affected 22 is there's an area that we call PJ Lee, which you can actually see the well performance in one of the slides. I believe it's slide 18. There was no real drilling in 20 or 21 in PJ Lee. It was mostly done in 22, and so those wells are just really strong and really compete for capital, so that's why you've seen us in 23 drill a lot of PJ Lee wells.
spk02: Thank you. And Paul, under your credit agreement, I believe after June 30, you all could pay dividends based on certain conditions under the credit agreement. Do you have a balance sheet leverage metric in mind before you would be comfortable paying dividends?
spk13: Yeah, there's a lot of things that we need to consider when we think about paying dividends. And I've said this in the past, I believe that our company and our stock is more appealing to a broader cross-section of the investment community if we were to gain larger size and scale. Larger size and scale also contributes considerably to the sustainability. The last thing we want to do is introduce a dividend and then not be able to follow on and continue paying that dividend. And so it's going to be a balance of things. And then also, what's the really best investment opportunity at the time when we're eligible to make that decision? Now, I'll go back and refer to Travis about the timing and when we are actually eligible to pay dividends. My recollection from the credit facility was that we had to wait at least a year after the one-year anniversary after the amendment we put in place with the stronghold acquisition.
spk07: So yeah, Jeff, you're actually right. It's the second quarter financials once we've actually published them or at least given them to the bank and done all the analysis from there. So our leverage ratio for the credit agreement has to be less than two to one, which won't be a problem. And utilization rate has to be less than 80%. So then it will come back to how do we as a company, where do we need that leverage ratio to feel comfortable doing it?
spk00: Thank you.
spk01: The next question is a follow-up from Patrick Enright with Truist. Please go ahead.
spk04: Hi there, guys. Thanks very much for taking my additional question here. Questions with respect to gas price realizations and, I guess, from the results being soft this quarter, was it? really like a one offer, is there something else to it? And I guess along with that, I'm curious to know how you're mitigating any of your price realizations, any downside on it. Thanks.
spk13: Yeah, well, we're subject to, you know, Waha pricing, right?
spk07: Yeah, I'll pass it, Parmian.
spk13: Yeah. And so, you know, the issues that are affecting us are not unique. I think they're pretty well widespreadly shared by other operators that are producing into these same systems. And so, yeah, I think those things are going to take their natural course.
spk03: Understood there. Great there. Thank you.
spk01: At this time, there are no more questions in the queue. This concludes our question and answer session. I would now like to turn the call back over to Chairman and CEO Paul McKinney for any closing remarks.
spk13: Thank you, Operator. Well, hey, in closing, I'd like to inform our shareholders that we will be issuing additional information soon concerning an amendment to our Articles of Incorporation to increase authorized shares, the second item listed in our proxy up for vote May 25th. So that will be coming out soon. It is my hope that all of you on the call today and all of our stockholders share our enthusiasm for what we believe 2023 can bring to Ring Energy and its stockholders. Thank you again for your interest in Ring, and I hope you guys all enjoy the rest of your day.
spk01: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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