Q2 2023 Ring Energy Inc Earnings Call
Okay.
Good morning, and welcome to the ring Energy second quarter 2023 earnings Conference call.
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I will now turn the call over to Al Petrie Investor Relations for ring energy. Thank you operator, and good morning, everyone. We appreciate your interest and ring energy, we will begin our call with comments from Paul Mckinney, Our chairman of the board and CEO , who will provide an overview of key matters for the second quarter and subsequent events.
He will then turn the call over to Travis Thomas Ring, EVP, and Chief Financial Officer, who will review our financial results.
Paul will then return to discuss our future plans and outlook before we open the call for questions also joining us on the call today and available for the Q&A session are Alex Dias 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.
Welcome to reenter the queue later with additional questions.
I would also note that we have posted a second quarter 2023 earnings corporate presentation on our website. During the course of this conference call. The company, 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 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 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.
These documents can be found in the investors section of our website www Dot ring energy Dot com.
Should one or more of these risks materialize or should underlying assumptions prove incorrect actual results may differ materially.
This conference call May also include references to certain non-GAAP financial measures.
Conciliations that these non-GAAP financial measures to the most directly comparable measure under GAAP are contained in yesterday's earnings release. Finally as a reminder, this conference is being recorded so now let me turn the call over to Paul Mckinney, Our chairman and CEO .
Thanks Al welcome everyone and thank you for your interest in ring energy and for joining us today.
Our second quarter of 2023 was highlighted by strong cash flow generation, despite lower commodity prices and lower production levels when compared to the first quarter.
Through a combination of lower capital spending reduced Delaware lower cash G&A expense.
Proceeds from the sale of our non core Delaware basin assets and proceeds from the early exercise of the substantial remainder of our outstanding warrants, we paid down 25 million and borrowings over the correct under our credit facility.
There is a lot to unpack here, so let's get into the details.
During the second quarter, we sold 17271 barrels of oil equivalent per day, which fell short of our earlier expectations, primarily due to two things. The previously announced sale of our non core Delaware basin assets and the deferral of certain drilling and workover projects due to lower commodity prices.
And the anticipated funding and incremental benefits of the founders acquisition. However, when looking at year end our year over year metrics. We grew sales volume is 85% over the second quarter last year.
Impacting this year's second quarter was our ongoing efforts to drive further cost efficiencies in the business. This included posting lower lease operating expense of $10 14 per Boe.
It was 9% lower than the midpoint of our guidance and 4% lower than the first quarter. We also saw a reduction in sequential quarterly G&A expense.
Excluding share based compensation and transaction costs with the sale of our Delaware Basin assets, we recorded second quarter G&A expense of $2 75 per BOE, which was a 13% decrease from the first quarter and a 41% decrease from second quarter of last year Travis will share more details on this.
Regard in his comments.
During the second quarter, we drilled and completed two one mile horizontal wells in the north West shelf, each with 91, 1% working interest.
We also drilled 215 mile horizontal wells in north West shelf, one with a working interest of 100 per cent and the other with a working interest of 75, 4%.
Additionally, we drilled and completed two vertical wells and performed three re completions and our CVP south acreage all of which had a working interest of 100%.
In the second quarter of 2023, we reported net income of $28 8 million or 15 cents per diluted share. We also generated adjusted EBITDA of $53 5 million that was 9% lower than the first quarter, but 13% higher than last year's second quarter.
On an accrual basis, we spent $31 6 million on capital projects, which was below our guidance range of $34 million to 38 million, primarily due to our decision to defer certain drilling and workover projects.
In the second quarter, we also generated strong adjusted free cash flow of $12 6 million that was 20% higher than the first quarter and marked our 15th consecutive quarter of adjusted free cash flow generation.
During the second quarter, we were pleased to complete the sale of our non core Delaware basin assets for net proceeds of $8 million. The sale emphasizes our focus on building and developing our core positions in the northwest shelf and the Central basin platform that continues to generate significant returns for our stockholders.
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As you May know.
We are pursuing the potential sale of our new Mexico assets, what we hope will help us consolidate our core development efforts in Texas.
As previously announced in April we entered into agreements with certain holders of the company's outstanding warrants for the early exercise of 14, and a half million warrants that resulted in net cash proceeds of $8 $7 million at the end of the second quarter, only 78200 warrants to purchase shares of our common stock.
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Strong cash flow generation combined with the net proceeds from the sale of our Delaware basin assets and the early exercise of the warrants resulted in the pay down of $25 million worth of debt.
As a result, we ended the second quarter with $204 million of liquidity, which was 14% higher than the first quarter and 150% higher year over year.
Finally, we ended the second quarter with a leverage ratio of 1.64 times before turning this over to Travis I'd like to discuss our recently announced founders acquisition and our outlook for the remainder of this year.
Last month, we announced that we had entered into an agreement to acquire the central basin platform assets, our founders oil and gas founders operations are located in Ector County, Texas and are focused on the development of approximately 3600 acres that are similar to the CBD assets that we acquired in the third quarter of last year.
The total consideration of $75 million subject to customary closing closing adjustments consists of $60 million in cash at closing and a $15 million deferred cash payment due for months. After closing the transaction is expected to close later this month hopefully August 15th and.
It has an effective date of April 1st.
The founders acquisition is immediately accretive to ring stockholders, including production reserves adjusted free cash flow and other key metrics the transaction strengthens our balance sheet by lowering our leverage ratio accelerates our ability to pay down debt further increases our inventory of low risk high rate of return.
Drilling locations and improves our capital allocation flexibility.
The transaction strategically expands our core operating area with existing infrastructure that provides takeaway capacity opportunities to reduce costs improve efficiencies and captures the synergies associated with expanding our core operating area.
These assets are similar to the CVP assets, we acquired last year, having stacked pay zones of high quality rock with proven performance as we have successfully done with our other assets, we intend to leverage our extensive expertise applying the newest conventional and unconventional technologies to optimally develop the hint.
Centaury of undeveloped drilling locations afforded by the transaction.
In the announcement for the transaction, we provided pro forma third and fourth quarter 2023 guidance to reflect the pending transaction as well as the impact of the completed sale of our Delaware basin assets during the second quarter.
We are targeting total pro forma capital spending of 67 million to $77 million in the second half of 2023.
That brings our full year 2023 capital spending program to $137 5 million to $147 5 million, which is 10 million less at the midpoint in our guidance prior to the acquisition announcement.
Our second half 2023 development program includes a balanced and capital efficient combination of drilling eight to 11 horizontal wells on our legacy acreage and four to six vertical wells and a few re completions in the CVP south acreage. Additionally.
Our capital spending program.
Includes funds for targeted capital Workovers infrastructure upgrades leasing cost and non operated drilling completion and capital Workovers.
All projects and estimates are based on an assumed W. T I oil price of 60 between $65 and $85 per barrel.
As in the past, we have designed our standing program with flexibility to respond to changes in commodity prices and other market conditions.
With respect to the third quarter of 2023 production guidance. We continue to expect sales volumes of 18100 barrels of oil equivalent per day to 18600 barrels of oil equivalent per day with 58% of those volumes being oil.
With respect to the fourth quarter, we expect 18900 barrels of oil equivalent per day to 19500 barrels of oil equivalent per day, and 69% of those volumes being oil.
Assuming the midpoint of guidance. This represents a six and 11% increase for the third and fourth quarters, respectively. From this year's second quarter. So with that I will turn the call over to Travis to discuss our financial results and guidance in more detail Travis.
Thanks, Paul and good morning, everyone to sum up the second quarter, there was a pullback in oil and gas prices. So we adjusted our Capex program. Accordingly. This resulted in lower production, but also reduced our.
Combined with lower G&A. This helped preserve our cash flow from operations further supported by the net proceeds from the early warrant exercise and sale of our Delaware Basin assets, we were able to pay down $25 million on our credit facility to prepare for the pending founders acquisition.
Looking at the second quarter 2023 in more detail, we sold approximately one 1 million barrels of oil one six bcf of natural gas and 233000 barrels of Ngls for a total of $1 6 million Boe or.
Were 17271 Boe per day.
Realized pricing was $72 30 per barrel of crude oil a negative 71 cents per mcf of natural gas and $10 35 per barrel of Ngls or 50, $50 49 per Boe.
This was 6% lower than the first quarter of 2023 of $53.50 per Boe.
Driving the negative realized price of natural gas for the second quarter was process processing costs that exceeded Henry hub pricing less basis differentials. Please see the 10-Q for more details.
Our second quarter average oil price differential from Nymex, Debbie Ti futures pricing was a negative $1 77 per barrel versus a negative $2 67 per barrel for the first quarter.
This was due to the Rguest Debbie Ti WTS, the increased 84 cents per barrel and the Rguest CMA role to increase 23 cents per barrel on average from the first quarter.
Our average natural gas price differential from Nymex futures pricing for the second quarter was a negative $3.07 per mcf compared to a negative $2.08 per mcf for the first quarter.
Our realized NGL price for the second quarter averaged 13% at Debbie Ti compared to 19% for the first quarter.
The combined result was revenue for second quarter, 2023 of $79 $3 million, which was down $8 7 million from the first quarter, but only down 7.9 million after realized hedges.
Louise was $15 $9 million versus $17 5 million for the first quarter.
On a per BOE basis, LOE for the second quarter was $10 14 sets or 4% lower than the $10 61 per Boe for the first quarter and 9% below the midpoint of our guidance.
Contributing to the decrease in absolute alloy was to celebrate Delaware assets and lower variable costs associated with reduced sales volumes.
Taxes were $4 million or $2 55 per Boe.
Versus $4 $4 million or $2 68 per Boe for the first quarter with the tax rate remaining steady at approximately 5%.
DD&A was $20 8 million compared to $21.3 million for the first quarter on a per BOE basis, DD&A increased to $13.23 from $12 92.
Cash G&A, which excludes share based compensation was $4 $5 million versus $5 two for the first quarter.
In addition, the second quarter included about $220000 of transaction costs for the sale of our Delaware assets.
Adjusting for the transaction costs cash G&A was $2 75 per Boe versus $3.15 per Boe at.
A 13% decrease.
Contributing to the sequential decrease was approximately 600000 for the employee retention tax credit received in the second quarter.
Year over year, we saw a 41% decrease in cash G&A on a Boe basis.
Interest expense was $10 $6 million versus $10 4 million for the first quarter with a slight increase substantially due to the higher interest rate and one additional day in the period I would also note that the interest expense includes about $400000 per day per month and noncash amortization.
Our gain on derivative contracts was $3.3 million compared to $9 5 million for the first quarter.
We recorded an income tax benefit of $6 $4 million versus a provision of $2 million in the first quarter, primarily driving the second quarter noncash income tax benefit was a partial release of our valuation allowance.
As of June 2023, the company is in a three year cumulative income position as a result future forecasted pretax book income was considered as positive evidence and assessing the valuation allowance. We released a portion of the allowance in the second quarter recording a tax benefit of $7.7 million is a discrete item with the <unk>.
Expectation of a full release of the valuation allowance by the end of 2023 based on current projections.
During the second quarter, we reported net income of $28 $8 million or <unk> 15 cents per diluted share.
Excluding the estimated after tax impact of pre tax items, including $3 $1 million for noncash unrealized gain on hedges $2 3 million for share based compensation expense and approximately 200000 and transaction costs. Our second quarter 2023, adjusted net income was $28 million or <unk>.
14 cents per diluted share.
This is compared to our first quarter 2023, net income of $32 $7 million or <unk> 17 cents per diluted share.
Excluding the estimated 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. Adjusted net income was $25 million or 13 cents per diluted share.
We generated adjusted EBITDA of $53 $5 million versus $58 6 million in the first quarter second quarter, adjusted EBITDA was 13% higher than the $47 four.
4 million reported in the same period in 2020 to you. Despite a 49% decrease in realized pricing on a Boe basis.
More than offsetting the year over year decrease in pricing, we materially increased adjusted EBITDA is a direct result of last year's acquisition of additional CBP assets are targeted legacy field development initiatives and ongoing efforts to drive further cost efficiencies.
Adjusted free cash flow the second quarter of 2023 was $12 $6 million, a 20% increase from the $10 5 million in the first quarter.
So let me repeat that we saw a 20% increase in adjusted free cash flow, despite lower pricing and lower production.
This demonstrates the optionality and discipline associated with our second quarter capital spending program.
Looking at our share count I'll discuss that in April 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 net proceeds of $8 $7 million, which helped us accelerate debt reduction.
At June 30.
I only had 78000 warrants outstanding.
Additionally, during the second quarter, we received $8 million in net proceeds from the sale of our non core Delaware assets still.
Strong cash flow generation from operations combined with the net proceeds from the sale of our Delaware assets, an early exercise of the outstanding warrants resulted in a pay down $25 million of debt during the second quarter.
As a result at June 30, we had $397 million drawn on our credit facility with a current borrowing base of 600 million, we had $202 2 million available net of letters of credit.
Combined with the $1.7 million in cash we had liquidity of approximately $204 million a leverage ratio of 1.64 times.
Okay.
As Paul discussed while the founders acquisition will add debt to our balance sheet in the near term. We believe we will be better positioned to pay down debt more quickly once we close the acquisition.
As we look beyond the funding commitments for the transaction, we remain focused on further debt reduction.
Realized commodity prices, the timing and level of capital spending and other considerations will impact the cadence of quarterly debt Paydown.
Turning to our outlook for the third and fourth quarters.
Please see our earnings press release and presentation for details.
We are reaffirming our target for capital spending pro forma for the founders transaction of $67 million to $77 million in the second half of 2023.
<unk> volume guidance.
We continue to expect sales volumes of 18100 to 18600 Boe's per day, including 68% oil for the third quarter and 18900 to 19500 Boe per day, including 69% oil for the fourth quarter.
Looking at the midpoint of guidance. This represents a 6% and 11% increase for the third and fourth quarters, respectively from the second quarter.
For operating expenses pro forma for the founders acquisition, we continue to target third and fourth quarter low of $10.50 to $11 per Boe.
Now, let's talk about our hedge position.
For the remainder of 2023, we currently have approximately 1.2 million barrels of oil hedged or approximately 52% of our estimated oil sales based on the midpoint of guidance. We also have one three bcf of natural gas hedged or approximately 39% of our estimated natural gas sales based on midpoint.
For a quarterly breakout of our hedge position. Please see our earnings release and presentation, which includes the average price for each contract type.
So with that I will turn it back to Paul for his closing comments Paul.
Thank you Travis.
Over the past year, we have made substantial progress increasing our size and scale, improving our per share metrics and strengthening our financial position.
As we look to the near term a key priority is closing the pending transaction with founders oil and gas and integrating those assets into our operations.
As I emphasized earlier it is immediately accretive to ring stockholders on multiple metrics. It strengthens our balance sheet accelerates our ability to pay down debt and further increased our inventory of highly economic drilling locations and strategically expand our core operating area, allowing us to capture those operating and G&A cost synergies I talked about before in.
In short we view this transaction as another step in positioning the company to deliver on our long term goals and stockholders with respect to the rest of the year. Our focus remains on efficient execution of our 2023 capital spending program, continuing our relentless focus on reducing operating costs and maximizing our free cash flow generation to pay down.
On that.
As in the past, we will remain disciplined by prioritizing our capital spending on high rate of return drilling and re completion projects, we believe targeting excess free cash flow to pay down debt will drive long term value for stockholders.
All of our non core Delaware basin assets and accelerated exercise of our outstanding warrants are additional examples and support our strategy focusing on our core asset positions and simplifying our capital structure.
These initiatives have allowed us to accelerate debt repayment.
In short and as I've consistently said in the past, 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 industry and should generate sustainable and competitive returns for our stockholders.
And with that we will turn this call over to the operator for questions operator.
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 you are using a speaker phone we ask you. Please pickup your handset before pressing the keys.
So enjoy your question. Please press Star then two.
Today's first question comes from Neal Dingmann with Truest. Please go ahead.
Good morning, guys. Thanks for the time.
Paul maybe a little premature but just.
Curious the mall.
And the team are looking at.
Well economics.
Legacy acreage now in <unk>.
Maybe just how quickly you plan on I know that David.
Okay, Great do you.
I wanted to get off of that.
Yeah, Good question and good morning, Neil.
Economics, let's just talk about.
The assets for a little bit.
The founders as ads.
The founders team have not completed really Theyre 40 acre Downspacing. If you go back and compare for example.
To some of this a stronghold assets we acquired last year. This area is considered less mature in my opinion. So you.
You have not only the 40 acre Downspacing program out there to complete but you also have the 20 acre downspacing. So so.
Economically dealer very competitive to anything we really have in our in our portfolio. These drilling opportunities had the short cycle times.
Get.
The return on your investment a very quickly and so.
The best way to answer to your question is that I think that they are very very competitive in our portfolio and equally as economic as many of the best investment opportunities, we have and so how quickly will we get onto these projects.
We have not planned at this point to drill wells.
This year.
Now that's not to say that we won't.
But the first thing we're going to do I'm going to turn this question over to to Marino to have him flush out a little bit more detail, but.
To sum it up we've identified opportunities out there to change some of the operations, especially on how the salt waters.
Systems disposal systems, our manage we believe we can reduce operating costs and once we get our arms around that then we will move forward with with our capital spending program drilling wells and Marinos is there more you want to share there.
That's exactly right, we see an opportunity to optimize the current production and in terms of lowering operating cost as much as we can in an increasing production to kind of optimize that side of it before we'll get our arms Ryan wrapped around it before we actually start drilling new wells and then it also adds flexibility in terms of.
Being able to pivot from one area to the next with infrastructure restraints that we always talk about and all that so we're really excited about the assets.
One more thing.
Go ahead sorry.
Yes, hi, good morning, Neal this is Alex on pay.
<unk> 37 of our new earnings deck, you can actually see what Paul is talking about on how these investments compared to some of our other CDP vertical investments and they're pretty competitive there a little bit more.
However, they're 90 over 90% oil so thats, what really makes it a compelling investment so once once we get the operations handled.
You'll see us deploy.
Capital.
Nice combination to grow some horizontal wells some other vertical recompete as well is drilled this vertically.
Good morning.
Well, that's a question either for the new acreage or an existing maybe just talk you guys have talked about on legacy acreage about the refreshed another reworked opportunities I'm. Just wondering you know again not trying to get pretty much locked down or is that maybe just talk about really knows Alex you know quality yes.
The opportunity is on the on potentially on the new or an existing or reworking and leaf rack type opportunities. Thank you.
Okay I'll take I'll take that initially then we'll have our own points to make.
Part of what we've tried to do.
Through our acquisition efforts is to not only identify assets that fit into our core operating areas.
But we're specifically focused on identifying acquisition opportunities that bring with it undeveloped opportunities that have very similar or maybe even superior economics. Okay. So.
We're very choosy in terms of the assets that were presumed it's not.
Not to say that I wouldn't buy a PDP production, but I'd have to get it at a very compelling value to do that and.
And so right now we're focused on.
Acquiring assets that have very competitive economics, and so right now the way. The company is situated with the legacy assets in a stronghold assets and then also the way we will be situated once we complete this transaction.
We have.
Investment opportunities that are very competitive in all of these areas and so it gives us a lot of it.
Industrial flexibility, we can move capital from one project to the next depending on system constraints are or whatever it might be and so.
That's my my response to your question on and I think that Alex and Moreno is both have simple point that they would like to make so I'll just turn it over to them.
Yes, Neal this is Alex again in regards to your question as far as like how are we going to handle our.
Both of these assets, bringing like a cap workovers or some kind of recompete, yes, I think part of our portfolio moving forward as we continuously do quarter to quarter, we will always being more re completes and ore.
What we call blocking tackling cap workover small acid jobs, whatever it just that it takes to maintain our production base until what we always call blocking and tackling.
That will bring us anything you'd like to ask you guys none.
Governance did that answer your question Neal.
Fantastic Thanks, guys.
Youre welcome.
Thank you and ladies and gentlemen, as a reminder, if you'd like to ask a question. Please press Star then one on your telephone keypad.
Today's next question comes from John White with Roth Capital. Please go ahead.
Yes.
Good morning, gentlemen.
Thanks, Good morning, Josh.
Good morning.
Following up on the founders' transaction is there a date set for closing.
We have targeted August 15th.
Just on the progress we've made in terms of expecting there.
The assets and looking for environmental issues.
All of the inspections associated with verifying titled all that everything appears to be going along very well and so I can't guarantee that we will close on August 8th day, but we're still targeting August 15th.
Thanks, very much and good luck with that.
And on the asset.
Would your first activity be re completions or vertical wells or horizontal wells.
The first thing we're going to do is really it.
I'll get into the operation to understand how their systems work. We believe we have ideas on how to significantly change the operating the operations, there and reduce costs and improve efficiencies and so that's what we're going to spend the first amount of time doing so that's going be very little capital.
Once we get our arms around that I think the next thing we'll be doing is drilling wells, we've got quite a few yes, well. So we will start on a program of 40 acre downspacing.
I'll be evaluating and completing the geological work associated with taking down to the 20 acre spacing as well but.
But yes, you can see us.
Targeting to drill wells just as soon as we get our arms around the operations.
And also to answer the part of the question two these will be vertical wells.
Foot vertical stacked or more more than 1000 foot vertical stack pay that we'll do the multi multi stage completions on just like we do in our CVP South assets is really analogous to that and so at this time, we're not really contemplating horizontal wells, but we are.
Discussing it internally and that May pop up later, but for now we're looking at vertical new drills and so since these wells are a little deeper so the wells will cost a little bit more but because they have such a higher oil content in the production.
The economics are very robust.
Okay and.
The 40 acre downspacing in the 20 acre down spacing do those involve different reservoirs.
No actually they are the same.
Okay.
That'll do it for me and I'll pass it back to the operator. Thank you.
Thank you John .
Hi, good morning.
Good morning.
So and I apologize if you touched on this already but.
With.
This rally patent in the oil and.
Assuming that at the time you were working on pulling the trigger on and founders that.
Maybe it was a little bit less favorable any any symptoms.
Incremental return improvement you might see it.
If we stay comfortably at day, 70, fiver or better for extended period.
Yeah. So I mean, there's a lot that can be said there when we first when we were negotiating the deal as you remember earlier this year we were experiencing.
Lowe's in the oil price.
Below what we had originally guided to in terms of 70 to $90, where we were originally guiding our budget. So we were below $70 for a good part of the quarter and last quarter and so.
And so and that was about the time that we were really finalizing negotiations on this deal we were faced with a couple of things.
With the lower prices, we felt compelled to pull back on some of our capital spending.
And then with the rebound now of course.
The opportunity to grow our production cost effectively is there.
But.
Yeah, but our goal is basically to maintain our production and but and to focus on paying down debt and so that's kind of where we are.
Got it and.
Actually you talked about.
The opex.
Opportunity for Downspacing and the.
And that's.
That's definitely developed out.
Uh huh.
Properties and I was just wondering.
Do you.
Do you have a sense of what the tightest game.
You might actually be able to do on the on the honors.
Yeah.
Well again, the rock is very similar although a slightly deeper depths is very similar to what we have in our mcknight area that we picked up with the stronghold acquisition I think 20 acre down spacing is pretty well proven in the industry right now.
Even though its not proven on these assets it would more be it would be classified as probable in many regards some of them will be proven but but still.
I think 20 acres is probably pretty safe now now if you recall in our announcement, we basically said that we have approximately 50 drilling locations and that would be the combination of probable and so are the 40 acre and the 20 acres.
It is my hope that when we're done we will actually have the benefit of more than 50, well locations that at this point right now or wait until the engineers actually finished that analysis.
We'll know more as we drill wells and into next year and the year after.
But some of our offset operators have gone to even tighter spacing than 20 acre they've gone down to the 10 acre spacing.
Over in the Mcknight area in.
We're not planning for it right now, but there is a possibility that we may end up there.
Areas as well.
Okay, great and.
Yes.
Assuming that with legacy penetrations over the years.
There may be add a lot of.
Prices, you're expecting to see a geologically.
But or.
I guess I'm wondering do you feel like founders had.
Right.
To bear sort of everything they could with with current technology in there and the drilling or completion.
Yes, we do at this point they've done an excellent job, but we believe we haven't we need to get our arms around and dig into the details and we feel that there may be some improvements we can do on on the capital expenditures, but we're not we didn't plan for them or bank on them right now.
But there's a lot of possibilities are improving things as we as we get familiar with the assets and get our arms around them.
Yeah, and I'll add to that no as you know technology is the oil and gas industry's friend and.
And I'll just kind of draw an example to kind of give a bit of a foreshadow what might happen in the future.
If you look at our stronghold assets.
We looked at the development in those areas strictly as as vertical development and so right now now that we've gotten into the details of those developments.
There may be opportunities to apply horizontal drilling technology that a few things like that and so.
That's the benefit when you have a mature area or an area here that has multiple.
<unk> pays over thick.
Intervals, there is a lot of resources out there and technology has proven to be our friend in terms of signing more and newer ways to extract and recover moral long <expletive> and so we'll see how that goes but I'm cautiously optimistic not only with the founders of simply because there is a lot like what we have in the south and Crane County.
And I've seen how things are maturing now that we've evaluated the stronghold of assets.
The team is continuously coming up with new ideas and so don't be surprised if we tried some horizontal drilling here sometime going into next year on some of these assets that we originally thought would be just verticals and we have the benefit of operating these properties.
With the long term in mind, we're taking our time studying things, we're not rushing into making a decision that they may affect us for the long term, we're making sure every decision is the right one so.
Okay, great. Thanks, a lot.
Thank you Paul.
Gentlemen, this concludes our question and answer session.
To turn the conference back over to Paul Mckinney for closing remarks.
Thank you very much and on behalf of the management team and the board of directors I want to thank everyone for listening and participating in our call. Today. We appreciate your continued support of the company and we look forward to keeping you appraised on our progress. Thank you again for your interest in ring and have a great day and a week great weekend.
Thank you Sir This concludes today's conference call.
Thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.