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.

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After today's presentation, there will be an opportunity to ask questions.

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 you also director of Investor Relations for range of oil Corporation. We are pleased today to discuss our third quarter 2021, the operational and financial results in recent accomplishments.

With me today.

Darrin Hinky, our president and Chief Executive Officer and director.

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

And Julia Gwaltney, our senior Vice President of development.

Before we begin I would note that today, we will discuss certain non-GAAP measures definitions and reconciliation of these measures to the most comparable gap 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 law.

These 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 will hand, it over to Darren to discuss our results in recent events Darren.

Thank you play we.

We appreciate everyone joining today's call. The last several months marked an incredible period of positive transformation for the company.

I'm, 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 Lone Star acquisition.

We've 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.

Or eight consecutive quarter.

We set numerous internal operational and efficiency records.

And we rebranded the company to Ranger oil.

As mentioned, many strategic financial and operational advancements have already been achieved this year.

Even more excited about what the future holds for Ranger oil.

I believe the positive momentum generated to date.

We will continue next year and beyond.

While our disciplined investment strategy continues with the two rig drilling program neck.

Next year, we will drill approximately 25% more lateral footage versus this year.

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 Rees.

Resulting in 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 a free cash flow that maintain are strong balance sheet will be investigated for the benefit of our shareholders.

Lastly, we continued to see a significant opportunity for ongoing based on 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 cost expand margins enhance 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 or 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 range of 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 will begin the question and answer session.

To ask a question you May press Star and then one on your Touchtone telephones, if you're using a speaker phone. We do ask you. Please pick up your handset before pressing the keys.

To withdraw your questions you May press star into.

Once again that is star in one to join the question Q.

Well pause momentarily to assemble the roster.

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

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

Good morning Charles.

I want a follow up.

On.

Something that noted in your press release about legacy Ranger volume is being flat.

Three Q <unk> about the and I think 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 you're going to wrap up in <unk> is that going to be the kind of thing.

<unk> into early 22, and and what will be the.

What do you expect to see as the as the payoff for all that work.

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

Great 2022, so it will be lowering line pressures and adding adding to our gas lift system. So we will have more gaslit gas available for for the wells that will be we've already drilled in future wells.

Got it so that so that should.

That should lead to higher oil reached down the line once the workers, Don if I'm understanding correctly and.

Exactly you.

Got it.

And then.

Specific too.

Two four Q, because I wanted to try to.

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

Four.

22 is going to start off can you give a sense for for what your completion schedule is going to look like and <unk> and how that.

How that breaks out across legacy Ranger and and more the.

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

The oil gas mix might might shift.

In <unk>.

And the implications for 22.

Yeah. So.

Completion schedule in the fourth quarter will be running a consistent frat 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 the legacy Penn Virginia assets.

So we're tearing apart the lone star inventory and getting the getting.

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

Got it that's helpful. Thank you Darren.

You bet. Thank you.

And our next question comes from Neil Diamond from Suntrust. Please go ahead with your question.

Yes, good morning, guys.

Just had a question was looking now at the slides and looking at slide 10, now that so just shows all the sticks in that central air yet.

Question now I guess they are in for you now that you've been there awhile, you've obviously drilled up quite a bit of this.

He is now I guess the confidence fully that you.

You've delineated this now from the upper let's say the state area all the way down the Labaki and if so you know maybe maybe just talk a bit about how the economics might vary or maybe they don't vary between these are you just seen a lot of.

Of course reality there.

We do see Neil a lotta tremendous commercial holiday across the entire legacy of the central area position.

This year, we have drilled some wells in the dam road wells earlier in the year and the update part of the acreage in those wells are performing very strong very very good returns and and we're laying out a great program in that area for a 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 lone star in 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 Ranger oil.

And then.

Let's see notable the efficiencies you continue to get with the two rig program.

Discuss a bit.

In.

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

<unk> and if so when you and Rusty think about that.

I know you don't have a full 22 plant out but will most of that efficiencies just you'll you'll continue I guess, what I'm getting at is.

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

Yeah. So what we've talked about is drilling with the same two rigs that we ran this year next year will will drill about 25% more total lateral footage with those wells and so reducing that will that will help us keep our our costs and check from a dollar per.

Lateral foot base.

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 to rig program and also a continuous frat crew.

And will bring in a in an occasional second frat crew S as needed.

Very good thank you all.

Thank you.

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

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

Good morning team How're you doing.

Good well thank you.

I was hoping you could expand a little bit and I know, it's still fairly early but.

I don't know it kind of central core area, where there's a lot of overlapping assets.

With the Lone Star.

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

I guess I guess what are the plans what's the.

It's kind of a timeline that y'all are looking at you 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 to see so far in those areas.

Yeah. So.

We have a slide in the in the deck, where we shove some synergies of the of the merger and.

One of those.

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

Look at the map on page 15, you can see where some lone star acreage fits perfectly and this is in the central area fits perfectly into the legacy.

In Virginia acreage and we'll 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 lone star acreage fits very well with our legacy acreage and allows us to drill longer laterals and we will have a more.

Isn't program and we're going to get after that acreage run away.

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

And Lasalle and Brazos County at this point, I mean, what where where do we stand with those.

The stuff that's a little further afield.

Yeah. 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 drilling our very best highest return wells first.

On down.

God I appreciate it thanks for the time.

Yes. Thank you.

And ladies and gentlemen at this time will be ending today's question and answer session I'd like to turn the floor back over to Darren Hinky for any closing remarks.

Thanks, everyone for participating on the call today.

We've had a serious step change and 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 base and consolidation strategy. So thanks for participating in the look forward to talking to you in the future.

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