Ring Energy Inc. Q1 2023 Earnings Call
Hello, and welcome to the ring Energy first quarter 2023 earnings conference call, all participants will be in listen only mode.
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I would now like to turn the conference over to Al Petrie Investor Relations. Please go ahead.
Thank you operator, and good morning, everyone. We appreciate your interest in Marine energy 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 first quarter. We will then turn the call over to Travis Thomas <unk> Chief Financial Officer.
To review our financial results. Paul will then return to discuss our future plans and outlook before we open the call for questions.
Joining us on the call today and available for the Q&A session or Alex <unk> Executive VP of engineering, and corporate strategy Marinos 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.
You are welcome to reenter the queue later with additional questions.
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, 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.
Those actual results or developments may differ materially from those projected in the forward looking statements and the company can get no assurance that such forward looking statements will prove to be correct.
<unk> 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.
<unk> can be found in the investors section of our website www <unk> dot 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 .
Thanks Al.
Welcome everyone and thank you for your interest in <unk> 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.
Turning 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 18292 barrels of oil per day.
This was at the high end of our guidance range looking at year over year metrics. We grew sales volume of 106%, which primarily reflects the contribution of our strong whole acquisition.
With respect to our capital spending activity during the first quarter, we drilled and completed two one mile horizontal wells in the north west shelf, each with 100% working interest and drilled and completed two one and a half mile horizontal wells in the north West shelf, one where the organizers of 99, 8% in the other where they're working.
Just of 75, 4%. Additionally, we drilled and completed three vertical wells and performed six re completions and CVP, 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.
The range of $36 million to $40 million. The result was 10, a half man dollars 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 fibers not 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 three and a half million for post closing adjustments. Although this contributed to a temporary net increase in borrowings of $7 million on our 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 plan 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 re completions capital Workovers infrastructure upgrades leasing costs and ESG related projects.
As you May recall, our budget plans for 2023 are based on W. T. I oil prices of between 70 and $90 per barrel of oil and Henry hub prices of between $2 and $4 per Mcf.
As in the past we have designed our spending program reflects our ability to respond to changes in commodity prices and other market conditions.
With respect to our second quarter, we expect to spend $34 million to $38 million to drill complete and place on production six to seven wells perform targeted re completions and execute other capital projects.
With respect to 2023 production guidance, we are reiterating full year sales volumes of between 17000 818800 barrels of oil equivalent per day looking at the mid point of our full year guidance, we anticipate a year over year increase of approximately 48% and a two.
5% increase over fourth quarter 2022.
For the second quarter of 2023, we expect sales volumes to come in between 17900 barrels of oil equivalent per day, and 18400 barrels of oil equivalent per day.
With that I'll turn this call over to traveling to discuss our financial results and guidance in more detail Travis.
Thank you Paul and good morning, everyone.
During the first quarter of 2023 we sold approximately one 1 million barrels of oil one six bcf of natural gas and 240000 barrels of Ngls for a total of 1.6 million Boe or a record 18292 Boe per day first.
Quarter, 2023 realized pricing was $73.36 per barrel of crude oil 66 cents 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 up $60 69 per Boe.
Keep in mind that beginning on may 1st of last year G. P. P costs are reflected as a reduction to our realized price of natural gas.
First quarter average oil price differential from the Nymex Debbie Ti futures price was a negative $2 67 per barrel versus a negative $1 seven per barrel for the fourth quarter of 2022.
This difference was mostly due to the Rguest CMA role the declined $1 27 per barrel on average for the period and the Argus, <unk> and Etfs, which declined 56 cents 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 Debbie Ti 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 <unk> was $17 $5 million or $10 61 per BOE, which was essentially flat in 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 nine from $12 71 in the fourth quarter.
Cash G&A, which excludes share based compensation was $5 $2 million versus $6 one 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 and <unk> per BOE, a 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 billion 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 $400000 per month and noncash 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 noncash unrealized gain on hedges and $1 9 million for share based compensation expense. Our first quarter 2023, adjusted net income was $25 million.14 per share.
This is compared to fourth quarter 2022, net income of $14 5 million or eight cents per diluted share.
Excluding the estimated after tax impact of pre tax items, including $5 $4 million for noncash unrealized gain on hedges and $2 $2 million for share based compensation expense and $1 million of transaction costs, our fourth quarter. Adjusted net income was $21 8 million or 13.
<unk> per share.
Looking at adjusted EBITDA, we were pleased to generate a record at $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 are also pleased to record record cash flow from operations of $49 4 million for the first quarter up 4% and 53% increase from last year's board 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 and higher sales volumes and lower realized hedge settlements, which was partially offset by lower realized pricing and higher interest expense.
As of March 31, 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 our revolver net of letters of credit.
And with the $1 7 million of cash we had liquidity of approximately of $179 million as we entered this year 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 the 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 Paydown.
Looking at our share count during the first quarter, we had approximately $4 5 million common warrants exercised at 80 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 had been reflecting a fully diluted share count since that time.
Following the early exercise of the warrants in April we had approximately 78000 warrants outstanding.
Turning to our 2023 outlook for full year and second quarter.
As Paul discussed our full year 2023 capital spending plans of $135 million 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 17800 to 18800 Boe per day of which approximately 68% is oil, 17% natural gas and 15% Ngls.
Looking at this year's second quarter.
For the full second quarter, we expect to spend $34 million to $38 million to drill complete and place on production, 6% 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 $17900.
18400 Boe 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 hedge position.
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 one nine 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.
Thank you Travis over.
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 bid.
I want to thank our entire workforce for their continued hard work and dedication as we remain squarely focused on executing our value focused proving 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 return drilling and re completion 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 our plan 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 cap.
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 and the balance sheet.
Another transaction supporting our strategy was 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 focus proven strategy better prepare the company to manage the risks and uncertainties associated with the volatility of our industry is experiencing and will generate sustainable and competitive returns to our stockholder.
With that we will turn the call over to our operator for questions operator.
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 mckeith.
Jonathan 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 Gramm with Alliance Global Partners. Please go ahead.
Hey, guys. Thanks for the time.
Curious 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.
Variability in there with prices acting the way. They are is kind of the midpoint still a fair point to think about or are you guys kind of thinking about managing the business given the volatility.
Yeah, I'm 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 on more than what's in and not just many others here and other venues.
Venues.
So we've designed our budget to be between you know W. Gi prices of 70 and $90 of work closer to the $70 average for the year, we're going to be on the lower end.
At $90 or closer to $9 will 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 will 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 mid point is probably a good place to be.
But don't be surprised if you see us change.
If market's continued volatility or it goes either steeply downward or upward in terms of price.
Got it okay. That's helpful and kind of related point I think in the slides you guys had had directionally assumed some.
Well cost inflation relative to 'twenty two.
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 thing things trend on the oilfield.
Oil field service pricing side, and how we should be thinking about well costs moving forward.
Jeff were actually this is the first week, where we've started to see some some softening, especially on the completion side, we think costs are going to come down and we haven't seen that yet but.
As we've said in the past for every well we go through a bidding process, we rebid everything in where we're staying current on the pricing, but how.
I haven't seen anything yet we expect to start seeing it though towards the end of the or here in the near future.
Got it that's helpful. Thanks, guys.
The next question comes from Patrick Enright with Truest. Please go ahead.
Hi, Paul Travis Alex there congrats on a great great quarter, there to kick off the year.
Thank you so much.
My first question I guess looking at your operating metrics and Yeah, you are low.
Over like the last four quarters.
You've come in sub $11 per Boe.
And at the same time and looking at your 'twenty three guidance.
With that range of.
11% to $11 60.
Is there anything is there a potential spike that we should anticipate.
Uh huh.
I guess in front of us here.
It's with facilities maintenance or a workover.
Well I'll, let <unk> handle that initially then well I'll chime in a little bit on that morning, Patrick one of the you know our total LOE.
Was in line with what we expected I think it's lower than the guidance, mostly because we were on the higher end of production.
It's a numerator and denominator type thing and Thats one of the reasons.
The other thing.
We're not sure on cost we were we were very.
So 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 increases anticipated increases in kind of the numbers when we're coming up with guidance.
So we may revise those down in the future where right now we just wanted to remain steady with what were just just till we watch the rest of the year and maybe towards the next half make adjustments.
Okay.
Yes, we're good so.
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 do you end up getting more production so that that affects that equation right in terms of your lifting cost and so because we were a little higher on the on the production side than we were anticipating it affected the operating costs as well.
Lifting basis.
Okay.
Yeah.
Good stuff there.
Follow up here.
To get your your thoughts and get a better get better understanding around your.
<unk> financing.
As it relates to I guess, I mean really the regional.
Really it's the regional bank death spiral that we're seeing right now.
And talking in.
What's your what's your overall outlook on on financing and are are you hearing anything in particular around further constraints.
Okay very good.
That's not a question I was planning to here, 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.
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 our number one goal a fortress balance sheet is looking at several of our board members I'll remind us is this something that.
We need to achieve.
Need to achieve because of the volatility that we're seeing in our own industry and now with the banking industry being what it is it just makes a lot of sense and 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 and they have not expressed in shown any issues that we should be concern.
And about I do believe that there is a tightening going on anytime you have volatility utility like this even with just the all industry you see a little tightening in the financing arena, but because we believe that.
We can structure, a future potential transactions with a combination of equity and cash or debt.
That.
We shed find that 2023.
I'm not going to say, it's going to be easy, but I believe that we can scale become successful in this environment. Despite the volatility and despite the tightening that we're seeing.
And both industries does that answer your question Patrick.
That's great really just really appreciate it if you get your outlook on that.
Yes, very good.
The next question comes from Noel Parks with Tuohy Brothers. Please go ahead.
Hi, good morning.
Hey, good morning Noel.
Uh huh.
Thanks.
I was wondering are you.
You had.
You 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 very basin to basin.
Dan.
I'm just curious how the.
Those hence the softening kind of manifest itself just a matter of tone.
Talk to vendors are you getting inbound emails that we hadn't seen for a while it just queue.
What what youre seeing so far.
Yes.
Often times.
You guys are on a lot of calls and Theres 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 for many of the companies that are in the Permian basin. Our focus is on the conventional reservoirs and so we're applying that.
<unk> technology developed for our horizontal drilling and multi frac technology for shales and we're applying that to conventional reservoirs that are typically shallower depths and so many of the rigs and the services that were seeking or not in nearly as much competition as.
It has been in some of these these shale plays and some of those some of the shales, especially outside of the Permian basin have much higher breakeven costs and so with the volatility we're seeing in prices those are the areas, where you'll see the little.
The reduction in drilling activity and so those are the areas that so some of these other operators may have already experienced reductions in price as well as because there've 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 got to remember.
Our area wasn't as competitive as the shale areas and so that impact and so no. We're not getting emails, but we are talking we talked 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 <unk> indicated we haven't directly seen that in any direct communications or in any of the bids, but we're seeing a SaaS I just go into effect.
Going forward, because everybody else appears to be as well.
Gotcha.
Makes sense.
One thing I was.
I just wanted to check on it.
Long hold acquisition did you pick.
Pick up any.
Any lease obligations and anything that.
You need to drill to H H B P that.
You got that on the table.
Yes, 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 on our capital spending down there. So yes that was a plus and we're beyond our capital our commitments and our legacy stuff too right. Yes. We are we had a commitment with <unk> and <unk>.
Drill that all up so that's all behind us as well.
Great.
And I just wanted to ask you you know when.
Where we are.
Call back a bit just very recently, but the 70 plus.
The Street, we've had for quite a while now.
Uh huh.
Thinking about your rates of return and if indeed, we do we do finally see services.
Come back meaningfully.
I'm, just wondering what sort of Delta you Mike.
And rates of return in the different areas.
I don't know we get.
So the 10% or even better corrections by a year from now.
Well.
Those are good questions no, but I'll go back to.
Some of the real core benefits of investing and 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 fit well since I've been here have all had excessively very very competitively low breakeven costs and so our rates of 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.
And surprisingly lower price is much lower than we've experienced since the downturn that occurred in COVID-19 and so I don't look at our variability in terms of capital spending.
Been associated with.
Being a pullback because there was some kind of a spike coming down or anything like that.
Thank 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 that 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.
Great. Thanks, that's all for me.
As a reminder to ask a question you May Press Star then one.
The next question is from Jeff Robertson with water Tower Research. Please go ahead.
Thank you good morning.
Hey, good morning, all or maybe Paul or maybe for Alex or somebody else on the team you all show on slide 17 of the Investor deck.
Improved performance on wells you drilled in 2023, both horizontal and vertical.
Is there any are you doing something different with these wells and how youre drilling or completing them than you were doing last year or is it just better site selection.
Yes.
After that initially, but then I'll turn it over to Maria Das <unk> Alex.
<unk>.
So.
Yes, we are doing a few things differently.
When we acquired these.
Assets from 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 in.
And integrating these assets into our operations, we have spent quite a bit of time looking at how they frac 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 tried 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 Maria to hit on that or touch on it and then Alex will follow up with him afterwards.
Thank you Paul.
So.
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 child parent child effect that you see in other in other place, we actually see that our.
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 it increasing 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 on the top left chart on the 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 in the the failures and costs associated with that so that's kind of the performance increase there that wishing on this.
South.
A little early but we're very excited.
How much more is available for us to optimize on them and increase efficiencies.
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 and insight to what our well performance slide. So I think that the main message was hey, we have consistent well performance for both horizontal and vertical.
To add to what marinas had said from 'twenty, one from 2020, one to actually 2000 Teu.
More efficient completions as he mentioned, but landing zones critical there and how we flow those back and so just the overall learnings and I'll say if you recall, we started CDP drilling in 'twenty, one and that we build a lot more in 'twenty, two and that had a lot of that care team. So we have just really good horizontal well performance in both our north west shelf.
EVP asset as far as the verticals.
The vertical well performance increase from 2020, one and inclusive in 'twenty two.
Reasons, there is just applying learnings from the past more stages improved completions optimizing left but the other real big thing that affected 2002 is.
There is a area that we call P. J, Lee, which you can actually see the well performance and one of the slides ethylene to slide 18.
There was no real drilling in 'twenty or 'twenty, one and P. J Lee It was mostly done in 'twenty two and so those wells are just really strong really compete for capital. So that's why you've seen us in 'twenty three drove a lot of PJ Lee wealth.
Thank you.
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.
Do you have a balance sheet leverage metrics in mind before you would be comfortable paying dividends.
Okay.
Yes, there is 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.
Contribute considerably to the 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 are what's the really best investment opportunity at a time when we are eligible to make that decision now I'll go back and we will refer to.
Two Travis about the timing of when we are actually eligible to.
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 Jeff.
Jeff Youre actually right its the second quarter financials, once we've actually published them or at least given them to the bank and done.
Well the analysis from there so our leverage ratio per 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 I will come back to how do we as a company where do we need that leverage ratio to be to feel comfortable doing it.
Thank you.
Okay.
The next question is a follow up from project and right with Trust. Please go ahead.
Hi, there guys. Thanks very much for taking.
Taking my my my additional question here.
Questions with respect to gas price realizations and.
From the results.
Being soft this quarter.
Quarter was it.
One offer is there something else to it.
And I guess, along with that I'm curious to know how you're mitigating any your price realizations any downside on that thanks.
Okay.
Yes, well.
Sure.
We're subject to long haul pricing.
El Paso Permian.
Yes.
So.
Yes.
The issues.
That are affecting us are not unique.
They are pretty well.
A widespread Lee shared by other operators that are producing into the same systems and so yes, I think those things are going to take their natural course.
Understood there.
Great. Thank you.
At this time there are no more questions. Thank you. 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.
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.
Fifth so that'll be coming out soon.
And finally 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 <unk> and I Hope you guys. All enjoy the rest of your day.
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The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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