Ring Energy, Inc.

Good morning and welcome to the Ring Energy second quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. To ask a question, please press star then 1 on your telephone keypad. To remove yourself from queue, please press star then 2. Please note, today's event is being recorded. I will now turn the call over to Al Petrie, Investor Relations for Ring Energy.

Thank you, Operator, and good morning, everyone. We appreciate your interest in Ring Energy. 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 second quarter and subsequent events. We will then turn the call over to Travis Thomas, Ring's EVP and 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 are welcome to re-enter the queue later with additional questions. I would also note that we have posted a second quarter 2023 earnings corporate presentation on our website. During the course of this conference call, the company was 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, 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 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, the actual results may differ materially. This conference call may also include 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 is being recorded, so now let me turn the call over to Paul McKinney, our chairman and CEO.

Thanks, Al. Welcome, everyone, and thank you for your interest in Ring Energy and for joining us today. Our second quarter of 2023 was highlighted by strong cash flow generation, despite lower commodity prices and lower production levels when compared to the first quarter. Through our combination of lower capital spending, reduced LOE, lower cash G&A expense, proceeds from the sale of our non-core Delaware Basin assets, and proceeds from the early exercise of the substantial remainder of our outstanding warrants, we paid down $25 million in borrowings over the under our credit facility. There is a lot to unpack here, so let's get into the details. During the second quarter, we sold 17,271 barrels of oil equivalent per day, which fell short of our earlier expectations primarily due to two things, the previously announced sale of our non-core Delaware Basin assets and the deferral of certain drilling and work over projects due to lower commodity prices and the anticipated funding and incremental benefits of the founders acquisition. However, when looking at year end or year over year metrics, we grew sales volumes 85% over the second quarter of last year. Impacting this year's second quarter was our ongoing efforts to drive further cost efficiencies in the business. This included posting lower lease operating expense of $10.14 per BOE, which was 9% lower than the midpoint of our guidance and 4% lower than the first quarter. We also saw a reduction in sequential quarterly G&A expense. Excluding share-based compensation and transaction costs for the sale of our Delaware basin assets, we recorded second quarter G&A expense of $2.75 per BOE, which was a 13% decrease from the first quarter and a 41% decrease from second quarter of last year. Travis will share more details in this regard in his comments. During the second quarter, we drilled and completed two one-mile horizontal wells in the northwest shelf. each with 91.1% working interest. We also drilled two 1.5-mile horizontal wells in the Northwest Shelf, one with a working interest of 100% and the other with a working interest of 75.4%. Additionally, we drilled and completed two vertical wells and performed three recompletions in our CBP South acreage, all of which have a working interest of 100%. In the second quarter of 2023, we reported net income of 28.8 million or 15 cents per diluted share. We also generated adjusted EBITDA of 53.5 million. That was 9% lower than the first quarter, but 13% higher than last year's second quarter. On an accrual basis, we spent 31.6 million on capital projects, which was below our guidance range of 34 million to 38 million, primarily due to our decision to defer certain drilling and work over projects. In the second quarter, we also generated strong adjusted free cash flow of 12.6 million that was 20% higher than the first quarter and marked our 15th consecutive quarter of adjusted free cash flow generation. During the second quarter, we were pleased to complete the sale of our non-core Delaware Basin assets for a net proceeds of $8 million. The sale emphasizes our focus on building and developing our core positions in the Northwest Shelf and the Central Basin platform that continue to generate significant returns for our stockholders. As you may know, we are pursuing the potential sale of our New Mexico assets, which we hope will help us consolidate our core development efforts in Texas. As previously announced, in April we entered into agreements with certain holders of the company's outstanding warrants for the early exercise of 14.5 million warrants that resulted in net cash proceeds of $8.7 million. At the end of the second quarter, only 78,200 warrants to purchase shares of our common stock remained outstanding. Strong cash flow generation combined with the net proceeds from the sale of our Delaware Basin assets and the early exercise of the warrants resulted in the pay down of $25 million worth of debt. As a result, we ended the second quarter with $204 million of liquidity, which was 14% higher than the first quarter and 150% higher year over year. Finally, we ended the second quarter with a leverage ratio of 1.64 times. Before turning this over to Travis, I'd like to discuss our recently announced Founders acquisition and our outlook for the remainder of this year. Last month, we announced that we had entered into an agreement to acquire the Central Basin Platform assets of Founders Oil and Gas. Founders operations are located in Ector County, Texas, and are focused on the development of approximately 3,600 acres that are similar to the CBP assets that we acquired in the third quarter of last year. The total consideration of $75 million subject to customary closing adjustments consists of $60 million in cash at closing and a $15 million deferred cash payment due four months after closing. The transaction is expected to close later this month, hopefully August 15th, and it has an effective date of April 1st. The founder's acquisition is immediately accretive to ring stockholders, including production, reserves, adjusted free cash flow, and other key metrics. The transaction strengthens our balance sheet by lowering our leverage ratio, accelerates our ability to pay down debt, further increases our inventory of low-risk, high-rated return drilling locations, and improves our capital allocation flexibility. The transaction strategically expands our core operating area with existing infrastructure that provides takeaway capacity, opportunities to reduce costs, improve efficiencies, and captures the synergies associated with expanding the core operating area. These assets are similar to the CBP assets we acquired last year, having stacked pay zones of high-quality ROC with proven performance. As we have successfully done with our other assets, we intend to leverage our extensive expertise applying the newest conventional and unconventional technologies to optimally develop the inventory of undeveloped drilling locations afforded by the transaction. In the announcement for the transaction, we provided pro forma third and fourth quarter 2023 guidance to reflect the pending transaction as well as the impact of the completed sale of our Delaware Basin assets during the second quarter. We are targeting total pro forma capital spending of $67 million to $77 million in the second half of 2023. That brings our full year 2023 capital spending program to $137.5 million to $147.5 million, which is $10 million less at the midpoint than our guidance prior to the acquisition announcement. Our second half 2023 development program includes a balanced and capital efficient combination of drilling eight to 11 horizontal wells on our legacy acreage and four to six vertical wells and a few re-completions in the CBP south acreage. Additionally, our capital spending program includes funds for targeted capital workovers, infrastructure upgrades, leasing costs, and non-operated drilling completion and capital workovers. All projects and estimates are based on an assumed WTI oil price of between $65 and $85 per barrel. As in the past, we have designed our sending program with flexibility to respond to changes in commodity prices and other market conditions. With respect to the third quarter of 2023 production guidance, we continue to expect sales volumes of 18,100 barrels of oil equivalent per day to 18,600 barrels of oil equivalent per day, with 68% of those volumes being oil. With respect to the fourth quarter, we expect 18,900 barrels of oil equivalent per day to 19,500 barrels of oil equivalent per day, and 69% of those volumes being oil. Assuming the midpoint of guidance, this represents a 6% and 11% increase for the third and fourth quarters respectively from this year's second quarter. So with that, I will turn the call over to Travis to discuss our financial results and guidance in more detail. Travis?