Q3 2021 Ranger Oil Corp Earnings Call

Good morning, everyone and welcome to the Ranger oil third quarter 2021 earnings Conference call.

All participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.

After todays presentation, there will be an opportunity to ask questions. Please.

Please also note today's event is being recorded.

At this time I'd like to turn the floor over to the management team for the conference call. Please.

Please go ahead.

Thank you and good morning, everyone I'm Clay <unk> director of Investor Relations for Ranger Oil Corporation. We are pleased today to discuss our third quarter 2021 to operational and financial results and recent accomplishments.

With me today.

Darrin Hinky, our President Chief Executive Officer and director.

Also joining us and available for our Q&A session are Rusty Kelley, our senior Vice President Chief Financial Officer and Treasurer.

And Julia <unk>, our senior Vice President of development.

Before we begin I would note that today, we will discuss certain non-GAAP measures definitions and reconciliations of these measures to the most comparable GAAP measure are provided in the company's third quarter earnings presentation and press release that can be found at www Dot Ranger oil.

Dot com.

Our comments today will also contain forward looking statements within the meaning of the federal Securities laws.

These statements are subject to a number of risks and uncertainties that could cause actual results to be materially different from those forward looking statements, including those identified in the risk factors in the company's most recent annual report on Form 10-K, and quarterly reports on Form 10-Q.

So with that I'll hand, it over to Darren to discuss our results and recent events Darrin.

Thank you clay, we appreciate everyone joining today's call. The last several months marked an incredible period of positive transformation for the company.

I am so very proud of the many accomplishments our team made in such a short period.

And just over four months, we closed our highly accretive Lonestar acquisition.

We strengthened our balance sheet and liquidity with our unsecured notes offering.

We outperformed the midpoint of our third quarter guidance for both production and capital and generated $29 million of free cash flow.

Our eight consecutive quarter.

We set numerous internal operational and efficiency records and.

And we rebranded the company to Ranger oil.

As mentioned, many strategic financial and operational advancements have already been achieved this year I'm, even more excited about what the future holds for our Ranger oil.

I believe the positive momentum generated to date will continue next year and beyond.

While our disciplined investment strategy continues with the two rig drilling program next year, we will drill approximately 25% more lateral footage versus this year yielding.

Yielding a highly capital efficient program for 2022 that should generate mid to high single digit production growth year over year.

With this disciplined capital program and operational efficiencies coupled with the current commodity price environment, we expect the company's EBITDAX and free cash flow profile to materially accelerate in 2022.

With current projections significantly exceeding $200 million.

Free cash flow next year.

<unk> and a leverage ratio of one times or less being achieved in the first half of next year.

As we approach this goal all potential options for accretive uses of free cash flow that maintain our strong balance sheet will be investigated for the benefit of our shareholders.

Lastly, we continued to see a significant opportunity for ongoing basin consolidation and seek to be a leader in this area.

Numerous subscale operators in the basin create a robust set of potential acquisition candidates.

As such we look forward to evaluating additional targeted acquisitions that will further reduce per unit costs expand margins enhanced returns and increase financial strength and market relevance.

However, all targeted acquisitions would need to demonstrate substantial shareholder accretion along with maintaining our strong balance sheet.

As in the past our strategy continues to remain squarely focused on long term shareholder accretion.

Rigorous capital discipline balance.

Balance sheet strength.

Robust cash on cash returns.

And an unwavering commitment to operating in an environmentally and socially responsible manner.

Finally, I wish to express my gratitude and admiration of the entire Ranger team for their continued hard work and dedication.

Without their efforts this transformation would not have been possible.

So with that we will open up the call to questions operator.

Ladies and gentlemen at this time, we'll begin the question and answer session.

To ask a question you May press Star and then one on your Touchtone telephone if.

If you are using a speaker phone we do ask you. Please pickup your handset before pressing the keys.

So withdraw your question you May press star into.

Once again that is star and then one to join the question queue.

We will pause momentarily to assemble the roster.

Our first question today comes from Charles Meade from Johnson Rice. Please go ahead with your question.

Good morning, Darrin to you and your whole team there.

Good morning Charles.

I wanted to follow up.

On.

It's something you noted in your press release about legacy Ranger volume as being flat.

<unk> <unk> about the <unk>.

It was it was to work on some infield compression and things of that nature can you give us an idea is that something that is youre going to wrap up in <unk> is that going to be the kind of thing that extends into early 'twenty two and.

And what will be the what do you expect to see as the as the payoff for all of that work.

Yeah. Good good question. So we do anticipate that we'll be wrapping up those compression upgrades and other facility upgrades in the fourth quarter really setting ourselves up for.

A great 2022.

So it will be lowering line pressures and adding adding to our gas lift system. So we will have more gas lift gas available for for the wells that will be we've already drilled and then future wells.

Got it so that's that should.

That should lead to higher oil rates down the line once the work is done if I'm understanding correctly.

Exactly.

Alright.

And then <unk>.

Specific to.

Two four Q, because I wanted to try to.

I guess dial in as much as I can to expectations for what youre going to look like in <unk> as a baseline for.

For <unk>.

<unk> 22 was going to start off can you give a sense for what your completion schedule.

Going to look like in <unk>, and how that how that breaks out across legacy Ranger and more the.

Versus the Lonestar assets and really what I'm, what I'm looking for is that how the.

The oil gas mix might might shift.

And <unk>.

And the implications for 'twenty two.

Yes so.

Completion schedule in the fourth quarter, we will be running a consistent frac crew through almost all of the fourth quarter and all of the work going on in the fourth quarter, both drilling and completion will be on the legacy Penn Virginia assets.

So we are tearing apart the lonestar inventory and getting the getting.

Those wells in the queue and we will start drilling on those assets next year, but everything in the fourth quarter will be legacy Penn, Virginia drilling and completion.

Got it that's helpful. Thank you Darren.

You bet. Thank you.

Yeah.

And our next question comes from Neal Dingmann from Suntrust. Please go ahead with your question.

Yes, good morning, guys.

Just had a question was looking now like a <unk>.

Slides and looking at slide 10, now that said it shows all the sticks in that central area.

The question now I guess Darren for you now that you've been there a while you've obviously drilled up quite a bit of this.

It is now you know I guess the confidence fully that Hugh.

You've delineated this now from the upper lets say the state area, all the way down to low Voc and if so.

Maybe just talk a bit about how the economics might vary or maybe they don't vary between these are you just seeing a lot of.

Commerciality there.

We do see Neil a lot of tremendous commerciality across the entire legacy or the central area position.

This year, we've drilled some wells in the Emerald wells earlier in the year and the update part of the acreage and those wells are performing very strong very very good returns and we're laying out a great program in that area for really long laterals looking as we look to the future.

All through the central part of the field, we've had really strong well results and then also up on the northeast part of the field, where we've picked up significant lonestar and Rocky Creek resources acreage earlier this year really filled in some puzzle pieces and again very strong well results in that part of the field as well so really just.

Confirmation of our tremendous inventory that we that we have here at range of oil.

And then.

Honestly notable the efficiencies you continue to get with the two rig program.

Discuss a bit.

Again.

The latest on that I think the last you've talked about maybe 25% type.

Efficiencies and if so when you and rusty thinks about that.

I know you don't have a full 20 to plan out but will most of that efficiencies just youll continue I guess, what I'm getting at is.

Will you see that through just more production upside with the same type of spend or would you be able to cut the spend or how do you guys think about take advantage of that efficiency.

Yes, so what we've talked about is drilling with the same two rigs that we ran this year next year, we'll we'll drill about 25% more total lateral footage with those wells.

So reducing that'll that'll help us keep our our costs in check from a $1 per.

Lateral foot.

The basis that we complete.

The.

Production standpoint, we're going to grow production year over year mid to high single digits. That's really an outcome of the program. What we're really trying to do Neil is design, a very efficient program that we can execute with excellence maintaining two rig program and also our continuous frac crew.

And we will bring in a in an occasional second frac crew as needed.

Very good thank you all.

Thank you.

Once again, if you would like to ask a question. Please press star and one.

Draw your questions you May press star two.

Okay.

Our next question comes from Nicholas Pope from Seaport Global. Please go ahead with your question.

Good morning, Tim how are you doing.

Doing well thank you.

I was hoping you could expand a little bit.

I know, it's still fairly early but.

Out of the out of that kind of a central core area, where there's a lot of overlapping assets.

With the Lonestar.

Additions when you look at the acreage kind of the further north and the further southwest.

I guess I guess what are the plans whats the.

Kind of a timeline that you all are looking at to really kind of attack that.

The stuff, that's really out of that central area and kind of what have you all been able to see so far in those areas.

Yes, so we have a slide in the deck, where we show some synergies of the merger.

<unk>.

One of those that's.

That's on page 15, actually the deck, we're going to attack if.

If you look at the map on page 15, you can see where some lonestar acreage.

It's perfectly and this is in the central area fits perfectly into the legacy.

Penn, Virginia acreage and we will be able to drill longer laterals. When we combine combine all that acreage position. So we're going to start developing in that area. Early next year and so there is some great synergies in the central area, where the lonestar acreage fits very well with our legacy acreage and allows us to drill longer laterals and we will have a more.

Efficient program, and we're going to get after that acreage right away.

And is there any plan at this point when you look at the stuff that's.

And Lasalle in Brazos County at this point.

Or do we stand with those.

The stuff that's a little further afield.

Yes, so we're studying those areas and really understanding the inventory.

Some of the some of those areas, we need probably a little more acreage for critical mass we're looking at ways to extend our lateral lengths by picking up additional acreage in those areas doing looking at trades things of that nature. Some of the acreage may ultimately not be core for us and we will we will look at.

Doing what's best for our shareholders with that acreage as well if it ends up not being core in the program, but the majority of it fits a majority of the acreage fits in really well within our.

Within our inventory and we will develop it as it makes sense.

As we go down the line drill in our very best highest return wells first.

On down.

Got it I appreciate it thanks for the time.

Yes. Thank you.

And ladies and gentlemen at this time, we will be ending today's question and answer session I would like to turn the floor back over to Darin <unk> for any closing remarks.

Thanks, everyone for participating on the call today.

<unk> had a serious step change in operating and financial performance, we've transformed the balance sheet that eight consecutive quarters of free cash flow and we've begun initiation.

Initiating and executing on our basin consolidation strategy.

Thanks for participating and look forward to talking to you in the future.

Ladies and gentlemen that does conclude today's conference call. We do thank you for attending you may now disconnect your lines.