Q3 2022 Ring Energy Inc Earnings Call
[music].
Good morning, and welcome to Ring Energy's third quarter 2022 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 to ask a question you May Press Star then one on your question.
To withdraw your question. Please press Star then two.
Please note this event is being recorded.
I would now like to turn the conference over to Al Petrie with Investor Relations. Please go ahead.
Thank you operator, and good morning, everyone. We.
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 quarter. He will then turn the call over to Travis Thomas Rings, 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.
Question Ali.
Also joining us on the call today and available for the Q&A session are Alex Dias executive VP of engineering and corporate strategy.
He knows Baghdad executive VP of operations, and Steve Brooks Executive VP of land legal human resources and marketing.
During the Q&A session. We ask you to limit your questions to one and a follow up.
Youre welcome to reenter the queue later with additional questions. I would also note that we have posted a Q3 2022 earnings corporate presentation to our website.
During the course of this conference call. The company, we're 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.
The company can give no assurance that such forward looking statements will prove 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 or 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 Securities and Exchange Commission.
These documents can be found in the investors section of our website Www Dot ring energy dotcom should one or more of these risks materialize or should underlying assumptions prove incorrect actual results may vary materially. This conference call can also include references to certain non.
non-GAAP financial measures reconciliations of these non-GAAP financial measures to the most directly comparable measure under GAAP are contained in our earnings announcement released yesterday. Finally as a reminder, this conference call is being recorded I would like to now turn the call over to Paul Mckinney, Our chairman and CEO.
Yes.
Thanks Al welcome everyone and thank you for your interest in ring energy. We appreciate you joining us today to discuss our recent results and outlook for the rest of the year.
The third quarter, Mark a transformational period for our company and our shareholders as we announced and completed the acquisition of stronghold energy assets.
As you know these operations our focus on the development of 37000 net acres in the Permian Basin Central Basin platform, where we also conduct operations.
As a reminder, we closed the acquisition on August 31st So the third quarter only reflected one month of stronghold operations. This bodes well for the fourth quarter during which we will record three full months of results with a strong whole assets, which should set us up for a strong finish to the year.
We were extremely pleased with our third quarter results, which is a direct reflection of our ability to execute on our value focused proving strategy. In addition to the acquisition of the stronghold as as our third quarter benefited from a continued strong performance of our legacy drilling completion re completion and capped.
Workover program as well as our ongoing focus on operating cost control, while pricing did pull back some from the level experienced during the second quarter overall, they were still strong and we continued to benefit. The combined result was a record quarterly production revenue net income and adjusted EBITDA.
We also posted another quarter of free cash flow generation, our 12 consecutive quarter and were pleased to pay down $17 million of debt. Since we closed the acquisition on August 31.
Our posted sales volumes for the quarter were 13278 barrels of oil equivalent per day, which was 42% higher than the second quarter as I said earlier, primarily driving the increase was the addition of one month of sales volumes from the strong hole assays as well as the continued success of our two.
<unk> thousand 22 drilling completion, Recompete and capital Workover programs with respect to the fourth quarter. We stand by our previously released guidance and expect sales volume to be between 18019 thousand barrels of oil equivalent per day due to the three full months of production from a stronghold of assets.
Looking specifically at our drilling program during the third quarter, we drilled eight horizontal wells, including five in the northwest shelf and three in the Central basin platform, thereby bringing the total number of horizontal wells drilled during the first nine months of the year to 23.
During the third quarter, we completed nine horizontal wells, including four wells that were drilled in the second quarter and five wells drilled in the third quarter, bringing the total number of horizontal wells completed and placed on production year to date to 20.
We are very pleased with the results from our north West shelf and Central basin platform horizontal wells and attribute our success to remaining focus on the geology selecting the best landing zones and improving our completion methods. We also believe that remaining focused on these technologies will bode well in our future drilling and completion activities in the newly acquired.
Wired stronghold properties.
With respect to the other activity completed during the third quarter. We re completed three wells on the stronghold acquisition acreage and converted six horizontal wells with ESP to Rod pumps, something we call <unk>.
Let's leave yard where on the northwest shelf and one was on our legacy CBP acreage.
As many of you know our Ctr program has been a significant contributor to reducing our total cost of operations. At this point, we have converted the majority of our inventory of Ctr candidates and moving forward, we will be performing fewer C. T ours with respect to capital spending.
Excluding our investment for the stronghold transaction, we spent $43 million during the third quarter compared to $41 $8 million during the second quarter, we continue to efficiently execute on our drilling and completion program that is designed to drive additional efficiencies and increase production rates for the.
Our fourth quarter, we expect to spend $42 million to $46 million, which includes the drilling of four horizontal wells on our legacy acreage in four to five vertical wells on our stronghold acreage, we expect to complete and placed on production seven horizontal wells and two to three vertical wells the.
The combined result of our efforts to date has been free cash flow generation that was used to reduce our debt and further strengthen our balance sheet.
We ended the third quarter with a leverage ratio of 1.4 times, which was 33% lower than the two one times at the end of the second quarter and 60% lower than the three and a half time leverage ratio. We had at the beginning of the year exceeding expectations, we set for ourselves.
As you know the borrowing base of our credit facility was increased more than 70% to $600 million due to the acquisition and continued strength of our legacy business.
And after paying down $17 million in debt, we ended the quarter with more than $165 million of liquidity, which places us in a strong position as we finish the year and make plans for 2023.
So with that I will turn it over to Travis to discuss our financial results in more detail Travis.
Thanks, Paul and good morning, everyone. We appreciate your participation on today's call and interest in ring energy.
As in the past my comments today will primarily focus on our financial position and sequential quarterly results for a detailed discussion concerning comparisons to last year's third quarter. Please see our press release and 10-Q, we filed yesterday with the SEC.
As Paul discussed our third quarter results were positively impacted by the stronghold acquisition, which closed on August 31, as well as the continued strong performance of our targeted 2022 development campaign and ongoing efforts to drive further operational efficiencies in the business.
With that backdrop during the third quarter of 2022, we sold 933000 barrels of oil 953000, Mcf of natural gas and 130000 barrels of Ngls for a total of 1.2 million Boe.
This is compared to sales of 729000 barrels of oil and 723000 Mcf of natural gas or a total of 850000 Boe for the second quarter of 2022.
As a result of the strong hold transaction beginning July one 2022, we began reporting revenues on a three stream basis separately reporting crude oil natural gas and NGL sales for periods. Prior to July one 2022 sales in reserve volumes prices and revenues for Ngls were included natural gas.
Third quarter realized pricing was $92.64 per barrel of crude oil and $4 89 per mcf of natural gas and $25 68 per barrel of Ngls or $77 28 per Boe.
During the second quarter, we had realized pricing of $109.24 per barrel and $7 29 per Mcf for $99 95 per Boe.
Our third quarter average oil price differential from Nymex W. T. I was a positive $2 28 per barrel versus a positive 81 cents per barrel for the second quarter of 2022. This.
This difference is mostly attributed to the Rguest W. T I, WTS, which averaged a positive 96 cents in the third quarter compared to a negative 46 cents in the second and the Rguest CMA role, which averaged $2 90 per barrel in the third quarter and $2 60 per barrel in the second quarter, our average natural gas <unk>.
Sorrento from Henry hub for the third quarter was a negative $3 15 per mcf compared to a negative differential of <unk> 23 per Mcf for the second quarter, our realized NGL averaged 29% of Debbie Ti.
Contributing to the difference was the two stream to three stream conversion as well as the gathering transportation and processing or GTP cost netted from the revenue starting in May of 2022.
The combined result was a record quarterly revenues of $94 $4 million, there werent, 11% higher than the second quarter revenues of $85 million looking.
Looking at the more significant expense line items on the income statement, although he was $13 million or $10 67 per Boe compared to $8 3 million or $9 77 per Boe for the second quarter.
Production on our legacy assets combined with the additional production from the acquired assets primarily contributed to the increase in overall low.
Higher labor cost and industry wide inflationary pressures also contributed to the increase and resulted in higher LOE per Boe.
We did not record any G T P cost in the third quarter as we discussed in our second quarter earnings call due to a contractual change effective may one we no longer maintain ownership and control of natural gas through processing GTP.
G. T. P costs are now reflected as a reduction to the natural gas sales price and not as an expense line item as such for modeling purposes. The gas price Ddos that should be used in lieu of the G. T P expense.
Production taxes were $4 $6 million versus $4 2 million in the second quarter with the tax rate remaining steady at a little less than 5% J.
DD&A was $14 3 million compared to $10 7 million for the second quarter.
On a Boe basis and D. D N a decrease from $12.65 in the second quarter to $11 73 for the third quarter.
G&A, which excludes share based compensation was $5 9 million versus $3 nine for the second quarter of 2022.
And $4.79 and $4.63, respectively on a per Boe basis, and cleared in the third quarter G&A was $1 1 million of transaction cost.
Interest expense was $7 million versus $3 $3 million for the second quarter with the increase substantially due to a higher average daily balance of long term debt associated with the additional borrowings on our new revolving credit facility at the closing of the stronghold transaction on August 31, 2020 to you.
Also contributing to the increase were higher interest rates and the write off unamortized deferred financing costs related to the exiting lenders.
During the third quarter, we posted net income of $75 $1 million or 49 cents per diluted share excluding the after tax impact of pre tax items, including $47 $7 million for noncash unrealized gain on hedges and $1.5 million for share based compensation expense and $1.
$1 million of transaction costs for the stronghold acquisition, our third quarter adjusted net income was $32 $5 million or 28 cents per share.
This is compared to the second quarter 2022, net income of $41 $9 million or 32 cents per diluted share. Excluding the estimated after tax impact of pretax items, including $12 $2 million for noncash unrealized gain on hedges and $1 $9 million for share based compensation expense our <unk>.
Quarter, adjusted net income was $31.3 million or 29 cents per share.
As of September 30th we had $435 million drawn on our revolving credit facility as Paul discussed the borrowing base on our credit facility was increased more than 70% to $600 million. Upon the closing of the transaction. We have a special thank you to our banks, especially the underwriters who made this increase possible.
As a result, we ended the quarter with $165 $1 million in liquidity, including 900000 in cash and $164 2 million available on our revolver, which reflects a reduction for 800000 for letters of credit. We are pleased to pay down the facility by an additional $17 million subsequent to the closing of the transaction.
Action on August 31st and we look forward to further debt reduction moving forward based on the timing of our capital spending and overall market conditions.
Looking at our share count during the third quarter, we had a total of $3 million of our common warrants exercised at a price of 80 cents per warrant accordingly, our third quarter results reflect the issuance of 3 million shares of common and the receipt of $2.4 million in cash. There are currently approximately 20 million common warrants that remain.
Unexercised.
In addition, as part of the consideration for the stronghold acquisition, we issued approximately $21 3 million shares of common stock and 153176 shares of convertible preferred stock to the owners of the stronghold assets.
This is the primary driver of the variance in our average basic and diluted shares outstanding count for the third quarter.
The convertible preferred stock was converted into approximately 42 5 million shares of common stock following the approval of the conversion by a stockholder vote on October 27.
As a result, we currently have approximately $174 4 million common shares outstanding.
Turning to the outlook for the fourth quarter of 2022, we continue to expect sales volumes of 18000 to 19000 Boe's per day with the midpoint of our guidance representing a 39% increase from the third quarter. This reflects a full quarter of production from the acquired stronghold assets and the benefit of that continue.
U S drilling program, we initiated in late January as Paul discussed, we anticipate fourth quarter capital expenditures of $42 million to $46 million, which is approximately 15% lower than our prior estimate our spending outlook includes completing and placing online the remaining three wells drilled in the third quarter.
Drilling and completing eight to nine wells, including four horizontal wells, including two in the north West shelf and two in the Central Basin platform, North and 45 vertical wells and C. B piece out we.
We also expect to re complete eight to 12 wells in the Central basin platform itself.
For the fourth quarter L. O E. We are targeting a range of $10 25 to $11 40 per Boe.
In terms of the 2023 calendar year, we are reiterating our outlook of a plan to maintain or slightly grow 2023 full year average sales volumes compared to the anticipated fourth quarter 22 sales volumes cap.
Capital expenditures of $150 million to $175 million that included a balanced capital efficient combination of drilling horizontal wells on our legacy assets and vertical wells on our recently acquired <unk> south assets as well as performing re completions and ctr's.
I would note that all projects and estimates are based on an assumed W. T. I oil price of 75 to $90 per barrel and Henry hub natural gas prices of $5 to $6 per Mcf if prices were to pull back materially we have the flexibility to reduce capital spending as necessary.
As we discussed on our last call in late June we began to add to our hedge position to secure strong pricing levels in support of our acquisition of stronghold CVP assets and we continued to opportunistically add more hedges throughout the third quarter.
Our expanded RV L requires us to hedge 50% of our PDP production on a rolling 24 month basis for reference we have included in our earnings release and 10-Q, a table with a summary of our oil and gas hedge positions.
We are also looking forward to the roll off the remaining low price hedges, we put on during Covid I will now turn it back to Paul for his closing comments before we answer questions Paul.
Thank you Travis as I said at the beginning of the call. The third quarter represents the beginning of a truly transformational period for our company and our shareholders and we are now in a much stronger financial position with the flexibility to react to changes in the marketplace and take advantage of opportunities that may appear.
During 2023, we plan to target our capital spending program on maintaining or slightly growing our production and use of our excess cash from operations to reduce debt because we believe our absolute debt levels justify our continuing focus in this regard if.
If we enjoy sustained higher oil and natural gas prices than what we are enjoying today. The company will have a flexibility to pursue the available opportunities that maximize long term shareholder value whether that be accelerated debt reduction expanding our development program to organically grow production.
Further pursue targeted acquisitions or return capital to the shareholders.
In closing I want to thank our workforce for their tireless efforts and dedication as important though I also want to thank our shareholders for their continued support as we further position <unk> for long term success and value creation with that I will turn the call back to the operator, and we look forward to answering your questions opera.
Yeah.
Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad, if youre using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then two and.
And again, we remind you to please limit yourself to one question and one follow up should you have additional questions. Please reenter the question queue.
At this time, we will pause just a moment to assemble that roster.
And the first question today will be from Jeffrey Campbell from audience Global partners. Please go ahead.
Good morning, congratulations on the strong quarter.
Oh I first wanted to ask about the near term.
Willing production data on slide 18.
Arnold they're drilling data.
Looks like the expectation somewhat more positive for new drilling target area one.
<unk> started area too I was wondering if you could compare these two areas.
Their relative size.
Whatever measurement you want to.
And can you indicate whether target area, one will preferentially overtime.
In 2023.
Yeah, I'm going to give a first stab at that but I'll turn it over to some of my God to give more color.
And so we've got several things that will be juggling and we've talked about this in the past.
When we made allocation decisions on our legacy acreage we.
We moved the rig and allowed our production to maximize the utility of the existing infrastructure.
And so we would drill until we filled for example, a saltwater disposal systems in the northwest shelf and we've moved out of the Central Basin platform drill wells until we fill that up and by that time, we'd go back up in the wells the decline and that's where we had more rooms, where we can drill again in the north.
Same thing will happen in our southern acreage as well, we've got a couple of areas.
They have very strong economics with respect to the new wells that we plan to drill we have infrastructure limitations, whether it'd be saltwater disposal or electricity and so you'll find that we'll be moving rigs back and forth basically too.
Minimize the not what we call nonperforming capital well like well, we don't want to drill so much that it forces us to drill additional saltwater disposal wells for example.
And so that's just kind of how the program will go forward as it's all a function of maximizing the value of the existing infrastructure that we have but again, we will be targeting the highest rates of returns.
And so the the next well drilled typically will always have.
It will be at the top of the best things less if you want to call it that and so.
That's my take on I would love to turn this over to Marinos and have him explain a little bit more.
Paul you you hit it perfectly.
It's all about the infrastructure and target area, one versus two in the North Sea.
Southern assets the vertical assets.
We have a couple of bottlenecks to we're working through right now and once we get those things resolved, we'll be able to pivot at a moment's notice. So that we don't have to spend the nonperforming capital like Paul mentioned.
Okay now that that was that was really.
Excellent color I appreciate that.
What we've had.
They're very supportive commodity prices for some time, yet the shallow Delaware basin assets. So I was just wondering if the completion improvements that you've had in your horizontal programs or maybe lessons.
You'll learn.
To be alerted strong hole completions might.
It might make it worth giving you the Delaware basin assets.
One point.
Well I mean, that's a good question as well and this isn't the first time, we've heard somewhere similar type questions.
We do have undeveloped opportunities out there in the Delaware basin.
And they are economic at today's prices.
But when you look at it from my perspective, my responsibility is to allocate capital where I can get the best returns for my shareholders and right now those investment opportunities in the Delaware Basin, just don't stack up to any of the opportunities that I have in northwest shelf.
Either in our northern or southern areas of the Central Basin platform and so it's real challenging for me to allocate capital there.
Again, as we've mentioned in the past this is truly a non core area for us.
And so.
It's a much shallower production much lower cost the returns are still economic but they just don't stack up and so that's really it in a nutshell Geoff we just we just can't find ourselves allocating capital to do something in a way when we have a better place to.
To invest.
Is there anything is there any.
Anything further left to do to try to.
Effective sale of the assets since they don't compete in your portfolio.
Yes actually there are.
And we continue to work with part of that have expressed interest and we.
Believe it will be successful by weather.
We are successful with these ongoing discussions and expressions of interest.
All of that drives up we might find ourselves so that wasn't an auction there's no telling what we'll do but again, we're not it's not an area of focus for us and I don't think it will be an area of focus for us because we have our sights set elsewhere and I think Alex wants to say a couple of things you want to jump in there Alex Yes. Geoff This is Alex I, just wanted to kind of Echo Pauls comments here on that.
Delaware.
A very valid question, yes, we probably could apply some of the lessons learned from our CDP and northwest shelf assets to that asset, but one thing that distinguishes that asset is it is shallower and but you're also because of where its located you're competing with the bigger guys are baked voice and so just competing for that equipment.
And services, there versus where we are in our CDP assets in northwest shelf those economics, just proving to be superior. So that's another reason why we still just focus on our on our assets.
Well I think I think that's a very interesting point, thanks, Alex yes.
Thanks for the answers I appreciate it.
And the next question.
The next question will be from Neal Dingmann from Truest. Please go ahead you guys can you guys talk about the re frac opportunities in what you said on infrastructure. Thank you.
Yes.
I'll take it on so.
There's multiple areas on the vertical assets and some of them have some electrical constraints that we're navigating through our partners. There on core which provides the electricity is going through some some changes to the transmission lines and substations in there.
Dissipating for all those bottlenecks to go away by the Middle of 2023, So that'll open up things that we can do we also are looking at.
Fresh water supply on one of our areas.
The target area, one that has the better production results.
Once we get those we're navigating through getting those resolved right now once we get those resolved that'll.
That will allow us to maybe become more active.
In that area compared to the other area basically what we've provided for guidance is given the information that we have right now as we update and become more efficient in certain things then, we'll we'll revise and improve on what we've provided so far.
And Alex is that something that to.
Neil I'd like to add one more thing and so as you can see we have a variety of investment types and obviously, we have the drilling both in north west shelf and GDP, both horizontal and vertical but these re completions to Marina Pointe obviously, there are certain things that the ops team is working through but youre going to see that in our program, we're able to sprinkle a.
These projects every month here and there depending on where that is and so.
We've added a new slide on page 18, where it gives you a feel for what that performance and what that investment type is like now.
Now getting back to your question, though Neal with respect our re Fracs. There is an opportunity for re fracs out here.
Again, but we have.
Not only infrastructure limitations.
Freshwater limitations associated with <unk>.
Having the water. So you can frac and so we will be testing and trying some ideas out there this year and as those ideas generate results will I believe it will have more to talk about as we go into 2023 as part of what makes 2023, such an exciting year for us.
And I hope we've answered your question to ask your question Neal.
Thank you guys.
You bet.
Thank you and the next question will be from Jeff Robertson from water Tower Research. Please go ahead.
Thank you good morning.
Paul or can you talk about the rates.
Performance of the re completions that you.
Performed on the stronghold assets in the quarter.
And then also as you talk about allocating capital amongst the highest return assets can you just provide a little bit of detail or a ranking of.
Where the northwest shelf in the new stronghold assets rank in your rate of return stack.
Yeah, no very good that's a very good question and we get it quite often.
Historically, if you go back and look at our operations on the legacy assets the northwest shelf tended to provide the lower breakeven costs are higher rates of return.
Hum.
And so if you recall, what we did last year and at the tail end of 2020 as we are evaluating our legacy acreage in the central Basin platform.
Sided to try some new ideas, our geologists felt like we could prove on our landing zones are engineers felt like they could apply some change.
Changes to their completion methods and that that demonstrated a really positive results matter of fact, we've got one or two wells that we drilled last year and this year.
That still rank right up there with the northwest shelf wells and so.
The rates of return and.
You know the low breakeven costs are very similar between the two areas.
And so the rates of return in the southern part that we just acquired through strong hall, they too have very competitive rates of return.
The added benefit to the ones in the thousands that the costs are less.
And the capital efficiency improves just someone's driving I think I've mentioned this in the past.
By the time, you get your oil production going into the tanks, you're just now starting to receive the invoices from the service companies that provide the service to help us drill and complete the wells and so.
The turnaround time and the rates of return tend to be superior just because you get revenue so much quicker and so.
All of these areas are very very competitive and it turns out that when you look at them you can find opportunities in the south.
That rival our equal the ones that we have in the northwest shelf in the northern part of the Central Basin platform and so we find ourselves and that's what you'll see this going on next year.
We will have a rig.
Up in the northern areas in North West shelf.
In the northern part of the Central Basin platform, where we will bounce back and forth.
And then but we'll also have a rig running in the southern part of the Central Basin platform and will be surprise frankly in demo and based on.
Our perception of those returns.
To get back to your question.
All of these are very competitive all of these opportunities and so theyre very similar rates of return and they are all within our ability to measure them pre drill.
And just some of the allocation.
Yeah.
Come down to how quickly you can cycle your capital, which it sounds like you.
There is a shorter capital cycles, so maybe a faster payback on some of the southern CVP assets.
Absolutely.
And so that cycle time is very very important.
And it goes and it leads to that rate of return right sooner.
Sooner you can start paying yourself for your investment.
And proves that the rate of return. However, it's also hard to get away from the <unk>.
The large increase the net present value create by drilling the horizontal wells on the northwest shelf and so we have the benefit of a more diverse investment portfolio all of which the entire portfolio have low breakeven costs and high rates of return and so by mixing that up.
It's going to allow us to have a much more steady.
You know <unk>.
<unk> profile as we go forward for the capital investments that we make so I hope that answered your question, Jeff Jeff Let me take that first part of that question you asked about the three week complete since we took over operations.
September one on the stronghold acquisition.
Again, I'll reference slide eight.
On slide eight.
Not only historical re completion and well performance.
A lot of the recently.
Okay prior to us doing the acquisition those are those wells are in gray.
The chart on the right hand side of that slide on the top.
The Blue is the average of every recently done in 2022, which includes <unk>.
Yes.
2018.
Slide 18.
Yes.
Thank you.
Ed.
Thanks, Yes, I didn't see any well data on slide eight.
Yeah exactly.
Worried on that.
Yeah.
Thank you.
Okay.
And once again, if you have a question. Please press Star then one.
The next question is from Noel Parks from Tuohy Brothers. Please go ahead.
Hi, good morning.
Hey, good morning, all.
Just a couple of things.
You know just a few months and with the strong hold assets I Wonder if you could just talk.
Talk a bit about well you already mentioned sort of electricity being an.
That issue in that region, but just in terms of how you found the properties what was the sort of maintenance status of legacy wells.
And.
Also.
Permitting things like that was was it all pretty pretty tight or have you had some clean up to do the start of our lineup with your own standards and practices.
Yes, that's a really good question Ken.
Can it goes back to part of the reason why we targeted these assets.
They vary.
Our efforts have been very well taken care of I'd be proud for a railroad commissioner to come out to the locations that stronghold with managing they did a very good job. There, we're very conscientious associated with keeping their locations clean.
And well constructed they're all neat and tidy.
With respect to any acquisition you are always going to find some surprises, but the good thing about the surprise that we have encountered up to up to now there are typical in terms of the type of surprises you get with an acquisition.
And so so far although we're not completely done integrating all of our records in all of our accounting and all that and we've taken over operations and.
And everything is going very smoothly and so we will finish the integration of these assets in this quarter and I think by mid quarter before we go into the holidays.
We will.
These assets will be just another set of assets that were managing under under our existing management team and so we're very happy with the way that's going.
Okay great.
Could you talk about given.
Given the close.
Cost environment.
Maybe using sort of Oh I see.
At worst case, but Jeff.
Sometimes it may be.
Water handling being on the more expensive side materials being on the more expensive side.
They're roughly are we talking about for a breakeven for the assets I think the last time, maybe we are.
Talked about it a lot you know services werent quite as tight so just with that inflation component I mean, just roughly ballpark do you have a breakeven.
Or maybe also a good.
Price.
Yeah. So that's a real complex question actually when you start drilling down and so when you look at our existing operations. The breakeven cost there are basically our margins and so we have very high margins on both the properties in the south and all of our legacy acreage.
And so when you talk about what our breakeven costs for future investments.
We havent enjoyed perhaps and I'm like I say they are the lowest but we've enjoyed some of the lowest breakeven cost in the industry I don't care, where you look.
And as a nature of the type of investments we've been pursuing again.
We've mentioned this in the past we believe that there are.
Our strategy of pursuing.
Conventional assets and applying the technology developed for unconventional.
Resources has proven to be a winning strategy because.
The conventional rock tends to deliver.
More production with a much shallower decline.
And they have much longer lives and so just there's a niche there there is the economics are very very superior so.
We have.
The breakeven cost in the southern part of the CVP like I said are just as competitive as many in the northern CVP and in the North West shelf and so we are enjoying right now our portfolio is very well balanced but very diverse everything from the re completions because also <unk>.
Completions, we're talking less than a million dollars.
And then we have drilling opportunities now that are in the one three to $1 $5 million range. We have wells, we can drill that.
Or in that two $5 million to $3 million range in wells that were drilled for $2 eight at three $4 million range, all of which have slightly different profiles all of which have superior rates of return and very very low breakeven costs and so what that does that that diversity helps with our balance sheet.
It helps generate a more stable return a more predictable return and so I think I've answered. Your question is there anything else.
I have on that.
Well I guess, you said you wanted a ballpark.
Oh, sorry.
Yes.
So to jump in here, so if I can jump in and talk about the services I Didnt mean to alarm anyone on the electricity in the water.
It's just that.
It's not easy, but we are not facing the challenges.
Others faced in shale plays where we're not with our assets we feel like we can solve these problems, but until we do we're not going to bank on annual plan on it where we're planning everything based on what we have available right now and as we solve the problems of where we are going to solve we feel comfortable that that's going to happen once that happens.
Pivot and maybe do a little more activity in the higher more productive types of.
The new drills or whatnot. So it's not something that we can't solve or are worried about it's just something we have to go through and plant. We're firm believers, we're planning our work and that's what we're going to do.
Great well I guess just for perspective I mean, this is way before we have seen a recent commodity price book.
Certainly during the lean times.
I sort of remember that.
Our realized oil.
Thirties.
I'll call that UTI upper thirties.
Actually economic doable can move ahead any drill so I'm thinking with inflationary thing I mean, if I'm. If it's say, we're looking at a $45 that'd be ti.
That's still work for all the properties some of the property.
Again, youre, bringing up some very good points at all if you look back at what are the environment was during COVID-19.
We shared this with our shareholders we needed $45.
And even though our breakeven costs were $25 you got to remember an organization like this we've got G&A, we'd rather the cost that we got a carry so it's more than just that.
The cost of drilling the wells that.
That influence our decision. So if you look at today's environment post the inflation that we've seen and whether you believe youre going to have more inflation, yes, the costs have come up.
And so.
Would we continue to pursue activity at $45, we probably can't I haven't gone back to look at that calculation, but if you look at it from a.
From a standpoint of this environment.
Today, we're in a much higher cost environment than we were during COVID-19.
Has that gone up to $50.
I bet, you $50 would be a good.
And I'm shooting from the hip here, but yes as long as we were getting $50 a barrel you can still maintain some activity because.
The capital investments for sure a pay out of that and that.
At that price. We also could also carry the cost of our of our G&A in our office in rent and everything else that we have and so.
Back in <unk>. It was 45 Bucks is at $50 today or is it 51 or is it 49, it's kind of hard to say.
But yeah, if you look at.
The economics of the investment that we're making.
And the cost that we carry is our overall organization I still believe that ring enjoys a very favorable position very favorable position compared to many others in this industry right now.
Great. Thanks, a lot.
Thank you all good questions by the way.
Ladies and gentlemen at this time I'm showing no further questions. So I'd like to turn the conference back over to Paul Mckinney for any closing remarks.
Yeah. Thank you Chad.
Again I'd like to thank all of you that joined US today for your time and interest.
And all of our investors for your trust and investment we are truly excited about what the rest of this year and 2023 will bring we believe that 2023, we'll bring an exciting year for ring and our stockholders.
So we look forward to the next time, we get to talk about them in the meantime, everybody take care. Thank you again for your interest in <unk>.
And thank you Sir.
France has now concluded. Thank you for attending today's presentation you may now disconnect.
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