Q1 2024 Ring Energy Inc Earnings Call
Operator: Good morning, and welcome to the Ring Energy first quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. The question and answer session will follow the formal presentation. If you need assistance, please contact a conference specialist by pressing the star key followed by zero. Please also note today's event is being recorded. At this time, I'll turn the floor over to Al Petrie, Investor Relations for Ring Energy. Sir,
Good morning, and welcome to the ring energy first quarter 'twenty 'twenty four earnings conference call.
Operator: At this time all participants are in a listen only mode.
Operator: And the answer session will follow the formal presentation.
Operator: Should you need assistance. Please they know a conference specialist by pressing the Starkey followed by zero.
Operator: Please also note today's event is being recorded.
Operator: At this time I'll turn the floor over to Al Petrie Investor Relations for ring energy, Sir you may begin.
Al Petrie: Thank you, Operator. Good morning, everyone.
Al Petrie: Thank you operator, and good morning, everyone. We appreciate your interest in right now energy, we will begin our call with comments from Paul Mckinney, Our chairman of the board and CEO will provide an overview of key matters for the first quarter of 2024 as well as our outlook. We will then turn the call over to Travis Thomas Rick.
Al Petrie: We appreciate your interest in Ring Energy. We'll 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 of 2024, as well as our outlook. We will then turn the call over to Travis Thomas, Ring's Executive VP and Chief Financial Officer, who will review our financial results. Paul will then return with some closing comments before we open up the call for questions.
Travis T. Thomas: <unk> executive VP, and Chief Financial Officer, who will review our financial results. Paul will then return with some closing comments before we open up the call for questions also joining us on the call today and available for the Q&A session or Alex <unk> executive VP of engineering and corporate strategy arenas.
Al Petrie: Also joining us on the call today and available for the Q&A session are Alex Dyes, Executive VP of Engineering and Corporate Strategy, Marinos Baghdati, 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're welcome to re-enter the queue later with additional questions.
Al Petrie: Daddy executive VP of operations, and Steve brake executive VP of land legal human resources and marketing.
Al Petrie: 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. I would also note that we have posted an updated corporate presentation on our website.
Al Petrie: I would also note that we have posted an updated corporate presentation on our website. During the course of this conference call, the company was making forward-looking statements within the meaning of federal securities law. Investors are cautioned that forward-looking statements are not guarantees of future performance, and actual results or developments may differ materially from those projected in those forward-looking statements. Finally, the company can give no assurance that such forward-looking statements will prove to be correct.
Al Petrie: During the course of this conference call. The company, we're making forward looking statements within the meaning of federal Securities laws.
Al Petrie: <unk> 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 those forward looking statements and finally the company can give no assurance that such forward looking statements will prove to be correct Green energy.
Al Petrie: 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 documents can be found in the Investors section of our website, located at www.ringenergy.com. Should one or more of these risks materialize, or should underlying assumptions prove incorrect, actual results may vary materially.
Al Petrie: <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.
Al Petrie: These and other risks are described in yesterday's press release and in our filings with the SEC. These documents can be found in the investors section of our website located at Www Dot ring energy Dot com should one or more of these risks materialize or should underlying assumptions prove incorrect actual results may vary.
Al Petrie: Materially.
Al Petrie: This conference call also includes references to certain non-GAAP financial measures. Reconciliation of these non-GAAP financial measures to the most directly comparable measure under GAAP is 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.
Al Petrie: This conference call also includes references to certain non-GAAP financial measures reconciliation 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.
Paul D. McKinney: Our chairman and CEO.
Paul D. McKinney: Thank you, Al, and thank you for everyone joining us today and for your interest in Ring Energy. As you may have read by now, we began 2024 with a solid first quarter. Sales volumes exceeded the high end of our guidance, while operating expenses and capital spending both came in below our guidance range, placing us in a strong position for the rest of the year. The primary driver of our sales volume performance was the robust returns from our drilling program and reduced downtime since the winter storm may occur in January.
Paul D. McKinney: Thank you al and thank you for everyone joining us today and your interest in ring energy.
Paul D. McKinney: As you May have read by now we began 2024 with a solid first quarter sales volumes exceeded the high end of our guidance, while operating expenses and capital spending both came in below our guidance ranges, placing us in a strong position for the rest of the year.
Paul D. McKinney: The primary driver of our sales volume performance was a robust returns from our drilling program.
Paul D. McKinney: And reduced downtime since the winter storm, we incur in January.
Paul D. McKinney: The key factors contributing to our lower-than-expected capital costs were increased efficiencies associated with our well completions and the improved logistics of drilling our wells. Additionally, we benefited from lower costs realized by an improved macro environment associated with the drilling and completion services for our wells.
Paul D. McKinney: The key factors contributing to our lower than expected capital costs were increased efficiencies associated with our well completions and the improved logistics of drilling our wells.
Paul D. McKinney: Additionally, we benefited from lower costs realized by an improved macro environment associated with the drilling and completion services for our wells.
Paul D. McKinney: LOE on a per BOE basis came in below our guidance range as well, primarily due to our continuing focus on reducing costs generally and more specifically associated with the progress we were making integrating the founders assets into our operation. These efforts not only led to lower costs but lower downtime as well, which contributed to our sales volumes performance as mentioned earlier. Our results this quarter are a direct reflection of the dedication and commitment of our employees in both the field and the office.
Paul D. McKinney: Hello, Lee on a per BOE basis came in below our guidance range as well primarily due to our continuing focus on reducing costs generally and more specifically associated with the progress we are making integrating the founders assets into our operations. These efforts not only led to lower costs.
Paul D. McKinney: The lower downtime as well that contributed to our sales volumes performance as mentioned earlier.
Paul D. McKinney: Our results this quarter are a direct reflection of the dedication and commitment of our employees in both the field and the office and on behalf of the board and management team. We thank all of you for your hard work.
Paul D. McKinney: And on behalf of the board and management team, we thank all of you for your hard work. With respect to our performance this quarter... We sold 13,394 barrels of oil per day, which was 5% higher than the top end of our sales guide. On a total product basis, we reported first quarter 2024 sales volumes of 19,034 barrels of oil equivalent per day. That was 3% above the top end of our BOE sales guide. As important, we increased oil to 70% of our product mix. Lease Operating Expenses, or LOE, during the first quarter were $10.60 per BOE.
Paul D. McKinney: With respect to our performance this quarter.
Paul D. McKinney: We sold 13394 barrels of oil per day, which was 5% higher than the top end of our sales guidance on.
Paul D. McKinney: On a total product basis, we reported first quarter 2024 sales volumes of 19034 barrels of oil equivalent per day that was 3% above the top end of our sales guidance.
Paul D. McKinney: As important we increased oil to 70% of our product mix.
Paul D. McKinney: Lease operating expenses or LOE during the first quarter were $10 60 per Boe.
Paul D. McKinney: The combined impact of higher-than-expected sales volumes and lower-than-anticipated LOE per BOE led to adjusted net income of $20.3 million, adjusted EBITDA of $62 million, and net cash provided by operating activities of $45.2 million. During the first quarter, we invested $36.3 million in capital expenditures, which included the drilling and completion of five horizontal wells, three of which were in the Central Basin Platform and two in the Northwest Shelf, and the drilling and completion of six vertical wells, all in the CBP South, three in Hector County and three in Crane County.
Paul D. McKinney: The combined impact of higher than expected sales volumes and lower than anticipated LOE per BOE led to adjusted net income of $23 million.
Paul D. McKinney: Adjusted EBITDA of $62 million and net cash provided by operating activities of $45 $2 million.
Paul D. McKinney: During the first quarter, we invested $36 $3 million in capital expenditures, which include the drilling and completion of five horizontal wells three of which were in the central basin platform and two in the north West shelf and a drilling and completion of six vertical wells all in the CBD South three after counting and three in crane.
Paul D. McKinney: Tony.
Paul D. McKinney: Total capital spending included capital workovers, infrastructure upgrades, and leasing as well. Adjusted free cash flow was $15.6 million for the first quarter of 2024, which was 48% higher than the same quarter a year ago and represents the 18th consecutive quarter of positive adjusted free cash flow for the company. Turn to the balance sheet. We paid down $3 million of debt in the first quarter and $33 million since the closing of the founders' acquisition in late August. This allowed us to exit the quarter with $179.3 million in liquidity.
Paul D. McKinney: Total capital spending included capital Workovers infrastructure upgrades and leasing as well.
Paul D. McKinney: Adjusted free cash flow.
Paul D. McKinney: Was $15 6 million for the first quarter of 2024, which was 48% higher than the same quarter a year ago and represented the 18th consecutive quarter of positive adjusted free cash flow for the company.
Paul D. McKinney: Turning to the balance sheet, we paid down $3 million of debt in the first quarter and $33 million since the closing of the founders acquisition late August this allowed us to exit the quarter with $179 $3 million of liquidity.
Paul D. McKinney: Regarding our guidance for the year, we still plan to drill an average of five horizontal and six vertical wells per quarter, which is consistent with what we did in the first quarter. We intend to continue utilizing a phased two-rig drilling program, including one horizontal rig and one vertical rig, as opposed to a continuous drilling approach to retain the flexibility to react to changing commodity prices and market conditions, as well as manage. Our phase-driven program is designed to organically maintain or slightly grow our oil production, and so we are not changing our full-year production guidance at this time.
Paul D. McKinney: Regarding our guidance for the year, we still plan to drill an average of five horizontal and six vertical wells per quarter, which is consistent with what we did in the first quarter. We intend to continue utilizing a phase two rig drilling program included one horizontal rig and one vertical rig.
Paul D. McKinney: As opposed to a continuous drilling approach.
Paul D. McKinney: To retain the flexibility to react to changing commodity prices and market conditions as well as manage our quarterly cash levels.
Paul D. McKinney: Our phase drilling program designed to organically maintain or slightly grow our oil production and so we are not changing our full year production guidance at this time.
Paul D. McKinney: Regarding the second quarter, we anticipate our production to range between 18,500 and 19,100 barrels of oil equivalent per day. And, perhaps more importantly, our oil production to range between 13,000 and 13,400 barrels of oil per day. This implies an oil mix of approximately or slightly more than 70%. With that, I will turn this over to Travis to provide more details on the quarter, and we'll return with closing comments before we open the call for questions. Travis. Thanks, Paul.
Paul D. McKinney: Regarding the second quarter, we anticipate our production to range between 18000 519100 barrels of oil equivalent per day, and perhaps more importantly, our oil production to range between 13000, and 13400 barrels of oil per day. This implies an oil mix of.
Travis: Or slightly more than 70%.
Paul D. McKinney: With that I will turn this over to Travis to provide more details on the quarter and will return with closing comments before we open the call for questions Travis.
Travis T. Thomas: Thanks, Paul, and good morning, everyone. As Paul discussed, we're pleased to have a strong start to 2024 with solid first quarter results that exceeded expectations on multiple key fronts, including higher sales volumes, lower operating expenses, and lower capital expenditures. We continue to materially benefit from our two strategic acquisitions completed over the past two years. Also contributing to the first quarter results was the successful kickoff and initial execution of our 2024 drilling program, complemented by further efficiencies achieved through our expanded scale and focused on the best operational practices.
Travis: Thanks, Paul and good morning, everyone. As Paul discussed we are pleased to have a strong start to 2024 with a solid first quarter results that exceeded expectations on multiple key fronts, including higher sales volumes lower operating expenses and lower capital expenditures we continue.
Travis T. Thomas: To materially benefit from our two strategic acquisitions completed over the past two years.
Travis T. Thomas: Also contributing to the first quarter results was the successful kickoff and initial execution of our 2024 drilling program complemented by further efficiencies achieved through our expanded scale and focused on the best operational practices.
Travis T. Thomas: The combined result was continued strong generation of adjusted free cash flow during the first quarter of 2024 that was used to further pay down debt, with balance sheet improvement remaining a top priority for the company. With that in mind, let's take a look at the quarter in more detail. As in the past, I'm going to focus my comments on the most important sequential quarterly results. During the first quarter, we sold 13,394 barrels of oil per day and 19,034 VOE per day, both of which were higher than the top end of our guidance. The slight decrease in sales volumes from the fourth quarter was primarily due to approximately 10 days of partial downtime due to the winter storm in January.
Travis T. Thomas: The combined result was continued strong generation of adjusted free cash flow during the first quarter of 2024 that was used to further pay down debt with balance sheet improvement remaining a top priority for the company.
Travis T. Thomas: Also impacting first quarter results was the overall realized price of $54.56 per BOE, a 3% decrease from the fourth quarter. Our first quarter average crude oil price differential from NYMEX WTI Futures Pricing was a negative $1.34 per barrel versus a negative $0.92 per barrel for the fourth quarter. This was mostly due to the Argus WTI WTS that increased 96 cents per barrel, offset by the Argus CMA roll that decreased by $1.04 per barrel on average from the fourth quarter. Our average natural gas price differential from NYMEX Futures Pricing for the first quarter was a negative $2.57 per mcf, compared to a negative $3.12 per mcf for the fourth quarter.
Travis T. Thomas: With that overview, let's take a look at the quarter in more detail.
Speaker Change: As in the past I'm going to focus my comments on the most important sequential quarterly results.
Travis T. Thomas: During the first quarter, we sold 13394 barrels of oil per day, and 19034 Boe per day, both of which right now are higher than the top end of our guidance. The slight decrease in sales volumes from the fourth quarter was primarily due to approximately 10 days of partial downtime due to the winter storm.
Travis T. Thomas: In January.
Travis T. Thomas: Also impacting first quarter results was the overall realized pricing of $54 56 per Boe at 3% decrease from the fourth quarter.
Travis T. Thomas: Our first quarter average crude oil price differential from Nymex, Debbie Ti futures pricing was a negative $1 34 per barrel versus a negative <unk> 92 per barrel for the fourth quarter.
Travis T. Thomas: This was mostly due to the Rguest <unk> WTS the increased 96 per barrel offset by the Rguest CMA role that decreased by $1 four per barrel on average from the fourth quarter.
Travis T. Thomas: Our average natural gas price differential from Nymex futures pricing for the first quarter was a negative $2 57 per mcf compared to a negative $3 12 per mcf for the fourth quarter.
Travis T. Thomas: Our realized NGL price for the first quarter averaged 15% of <unk> compared to 14% for the fourth quarter.
Travis T. Thomas: Our realized MGL price for the first quarter averaged 15% of WTI compared to 14% for the fourth quarter. The result was revenue for the first quarter of $94.5 million, a 5% decrease from the fourth quarter. As noted, we are targeting higher oil mix opportunities since oil accounted for 98% of the revenue, even though it was 70% of our production.
Travis T. Thomas: The result was revenue for the first quarter of $94 5, Million% to 5% decrease from the fourth quarter. As noted we are targeting higher oil mix opportunities since oil accounted for 98% of the revenue even though it was 70% of our production while.
Travis T. Thomas: While the gas revenue was negative, NGLs contributed $3 million, so overall, our wellhead gas contributed $2.2 million for the quarter. LOE was $18.4 million versus $18.7 million for the fourth quarter. Echoing Paul's comments, we are pleased to see LOE come in below the low end of our guidance range of $10.75 to $11.25 per BOE. LOE per BOE increased nominally in the first quarter to $10.60 per BOE versus $10.50 per BOE in the fourth quarter.
Travis T. Thomas: While the gas revenue was negative Ngls contributed $3 million of overall, our wellhead gas contributed $2 $2 million for the quarter.
Travis T. Thomas: Although <unk> was $18 4 million versus $18 seven for the fourth quarter.
Travis T. Thomas: Paul's comment comments, we were pleased to see <unk> come in below the low end of our guidance range of $10 75 to $11 25 per Boe.
Travis T. Thomas: LOE per BOE increased nominally in the first quarter to $10 60 per Boe versus $10 50 per Boe in the fourth quarter.
Travis T. Thomas: Cash G&A, which excludes share-based compensation and transaction-related costs, was $5.7 million for the first quarter versus $5.3 million for the fourth quarter, contributing to the sequential quarterly increase in cash G&A or additional costs attributable to administrative functions related to the year-end audit, SOX compliance, and 10K preparation. Our first quarter results included a loss on derivative contracts of $19 million versus a gain of $29.3 million for the As a reminder, the gain and loss is just the difference between the mark-to-market values from period to period.
Travis T. Thomas: Cash G&A, which excludes share based compensation and transaction related costs was $5 7 million for the first quarter versus $5 three for the fourth quarter.
Travis T. Thomas: Contributing to the sequential quarterly increase in cash G&A, where additional cost attributable to administrative functions related to the year end audit Sox compliance and 10-K preparation.
Travis T. Thomas: Our first quarter results included a loss on derivative contracts of $19 million versus a gain of $29 3 million for the fourth quarter.
Travis T. Thomas: As a reminder, the gain and loss is just the difference between the mark to market values period to period.
Travis T. Thomas: Finally, for Q1, we reported net income of $5.5 million, or $0.03 per diluted share. However, excluding the after-tax impact of pre-tax items including non-cash, unrealized gains and losses on hedges, share-based compensation expense, and transaction costs, our first quarter adjusted net income was $20.3 million, or $0.10 per diluted share. This is compared to the fourth quarter 2023 net income of $50.9 million or $0.26 per diluted share and adjusted net income of $21.2 million or $0.11 per diluted share.
Travis T. Thomas: Finally for Q1, we reported net income of $5 5 million or <unk> <unk> per diluted share exclude.
Travis T. Thomas: Excluding the after tax impact of pre tax items, including noncash unrealized gains and losses on hedges share based compensation expense and transaction costs. Our first quarter. Adjusted net income was $23 million or <unk> 10 cents per diluted share.
Travis T. Thomas: This is compared to the fourth quarter 2023, net income of $50 9 million or 26 per diluted share and adjusted net income of $21 2 million or 11 cents per diluted share.
Travis T. Thomas: First quarter 2024 adjusted EBITDA was $62 million, and net cash provided by operating activities was $45.2 million versus $65.4 million and $55.7 million, respectively, for the fourth quarter. During the first quarter, we invested $36.3 million in capital expenditures. Importantly, actual first quarter CAPEX came in below our guidance of $37 to $42 million, while the actual number of producing wells drilled and completed, 11 in total, was at the high end of our guidance for well count. We also drilled an SWD originally planned for the second quarter. The primary driver for the lower CapEx was reduced well completion costs and drilling efficiency.
Travis T. Thomas: First quarter 2024, adjusted EBITDA was $62 million and net cash provided by operating activities was $45 2 million versus $65 $4 million and $55 7 million, respectively for the fourth quarter.
Travis T. Thomas: During the first quarter, we invested $36 3 million and capital expenditures importantly, actual first quarter Capex came in below our guidance of $37 million to $42 million, while the actual number of producing wells drilled and completed 11 in total was at the high end of our guidance for well count we also drilled in SWT.
Travis T. Thomas: Originally planned for the second quarter.
Travis T. Thomas: The primary driver for the lower Capex was reduced well completion costs and drilling efficiencies.
Travis T. Thomas: The combined result was adjusted free cash flow of $15.6 million for the first quarter versus $16.3 million for the fourth. We paid down an additional $3 million of borrowings on a revolver in the first quarter and $33 million since the closing of the Founders Acquisition last August. Impacting the level of debt reduction in the first quarter was the annual payment of ad valorem taxes and other once-yearly costs, as well as the growth in our cash balance of approximately $1 million.
Travis T. Thomas: The combined result was adjusted free cash flow of $15 $6 million for the first quarter versus $16 3 million for the fourth we paid down an additional $3 million of borrowings on our revolver in the first quarter and $33 million since the closing of the founders acquisition last August.
Travis T. Thomas: Impacting the level of debt reduction in the first quarter was the annual payment of AD valorem taxes and other once a year cost as well as the growth in our cash balance of approximately $1 million.
Travis T. Thomas: Moving to our hedge position, for the last nine months of 2024, we currently have approximately 1.5 million barrels of oil hedged, or approximately 43% of our estimated oil sales, based on the midpoint of guidance. We also have 1.9 billion cubic feet of natural gas hedged, or approximately 41% of our estimated natural gas sales based on the midpoint. For a quarterly breakout for a hedge position through Q2 through Q4 of 2024, please see our earnings release and presentation, which includes the average price for each contract type.
Travis T. Thomas: Moving to our hedge position for the last nine months of 2024. We currently have approximately one 5 million barrels of oil hedged or approximately 43% of our estimated oil sales based on the midpoint of guidance. We also have $1 9 billion cubic feet of natural gas hedged or approximately 41% of our estimated natural gas.
Travis T. Thomas: Sales based on the midpoint for.
Travis T. Thomas: A quarterly breakout per hedge position through for Q2 through Q4 of 2024. Please see our earnings release and presentation, which includes the average price for each contract type.
Travis T. Thomas: Now, let's turn to the balance sheet in more detail. At March 31, we had $422 million drawn on our credit facility. With a current borrowing base of $600 million, we had approximately $178 million available, net of letters of credit. Combined with cash, we had liquidity of $179.3 million with a leverage ratio of 1.67 times.
Travis T. Thomas: Now, let's turn to the balance sheet in more detail at.
Travis T. Thomas: At March 31, we had $422 million drawn on our credit facility with current borrowing base of $600 million, we had approximately $178 million available net of letters of credit combined with cash we had liquidity of $179 3 million with a leverage ratio of 167 times.
Travis T. Thomas: To be clear, our primary focus remains the same, improving our balance sheet to better position the company to ultimately provide a meaningful return of capital to our shareholders. To accomplish this, we will continue to evaluate and execute on available opportunities that drive modest growth through organic development projects and cost reduction initiatives with a focus on more significant growth through acquisitions that are accretive, enhance size and scale, generate significant near and long-term cash flow, reduce overall operating expenses, and provide strategic benefits. See our Outlook and Guide.
Travis T. Thomas: To be clear our primary focus remains the same.
Travis T. Thomas: Proving our balance sheet to better position the company to ultimately provide a meaningful return of capital to shareholders.
Travis T. Thomas: To accomplish this we will continue to evaluate and execute on available opportunities that drive modest growth through the organic development projects and cost reduction initiatives with a focus on more significant growth through acquisitions that are accretive enhanced size and scale generate significant near and long term cash flow reduce overall.
Travis T. Thomas: Operating expenses and provides strategic benefits.
Travis T. Thomas: Looking at our outlook and guidance during.
Travis T. Thomas: During full year 2024, we are utilizing a phased drilling program that maintains our flexibility to react to changing market conditions, adjust spending levels as appropriate, as well as manage our cash flows quarter to quarter. Our focus is on maintaining or slightly growing DOE production per day while continuing to grow crude oil sales. Our average daily sales volume guidance for the full year of 2024 remains unchanged, with crude oil sales volumes of 12,600 to 13,300 barrels of oil per day and BOE sales volumes of 18,000 to 19,000 BOE per day, or 70% oil.
Travis T. Thomas: During full year 2024, we are utilizing a phased drilling program.
Travis T. Thomas: That maintains our flexibility to react to changing market conditions adjust spending levels as appropriate as well as manage our cash flows quarter to quarter. Our focus is on maintaining or slightly growing production per day, while continuing to grow crude oil sales.
Travis T. Thomas: Our average daily sales volume guidance for full year of 2024 remains unchanged.
Travis T. Thomas: Crude oil sales volumes.
Travis T. Thomas: <unk> thousand 600 to 13300 barrels of oil per day and sales volumes of 18000 to 19000 Boe per day or 70% oil.
Travis T. Thomas: For the second quarter, we are providing a sales outlook of crude oil sales volumes of 13,000 to 13,400 barrels of oil per day and BOE sales volumes of 18,500 to 19,100 BOE per day at 70% oil. For CapEx, we continue to expect a spin. $135 million to $175 million on our full-year development program and are providing an estimate of between $37 and $42 million for the second quarter. We also continue to anticipate full-year 2024 LOE of $10.50 to $11.50 per BOE and are providing guidance of $10.75 to $11.25 per BOE for the second quarter of 2024.
Travis T. Thomas: For the second quarter, we are providing our sales outlook of crude oil sales volumes of 13000 to 13400 barrels of oil per day and sales volumes of 18500 to 19100 Boe per day at 70% oil.
Travis T. Thomas: For Capex, we continue to expect to spend.
Travis T. Thomas: $135 million to 175 million, our full year development program and are providing an estimate of between 37% and $42 million for the second quarter.
Travis T. Thomas: We also continue to anticipate full year 2024, low of $10 50 to $11 50 per Boe and.
Travis T. Thomas: And are providing guidance of $10 75 to.
Travis T. Thomas: To $11 25 per Boe for the second quarter of 2024.
Travis T. Thomas: Finally, I would like to note that all projects and estimates are based on assumed WTI oil prices of $70 to $90 per barrel and Henry Hub prices of $2 to $3 per MCF. So with that, I will turn it back to Paul for his closing comments.
Travis T. Thomas: Finally, I would like to note that all projects and estimates are based on <unk> oil prices of 70 to $90 per barrel and Henry hub prices of two to $3 per Mcf, so with that I will turn it back to Paul for his closing comments Paul.
Paul: Thank you Travis.
Paul D. McKinney: We believe our operational and financial success this quarter demonstrates the long-term benefits of our strategy designed to leverage the low break-even costs of our drilling inventory and the quality of our assets to drive sustainable, free cash flow generation. In short, our focus remains the same as in the past.
Travis T. Thomas: We believe our operational and financial success this quarter demonstrate the long term benefits of our strategy designed to leverage the low breakeven cost of our drilling inventory and the quality of our assets to drive sustainable free cash flow generation ensure.
Paul D. McKinney: In short our focus remains the same as it has in the past and while I have discussed the components of our strategy previously it is worth repeating again today first we will continue to pursue operational excellence with a sense of urgency and remain focused on safety and environmental stewardship.
Paul D. McKinney: And while I have discussed the components of our strategy previously, it is worth repeating again today. First, we will continue to pursue operational excellence with a sense of urgency and remain focused on safety and environmental stewardship. Second, we will continue to high-grade and execute our targeted drilling program, focused on our highest rate of return prospects, to organically maintain or slightly grow our production while maximizing free cash flow generation. Next, we will continue our focus on improving the balance sheet.
Paul D. McKinney: We will continue to high grade and execute our targeted drilling program focused on our highest rate of return prospects to organically maintain or slightly grow our production, while maximizing free cash flow generation.
Paul D. McKinney: Next we will continue our focus on improving the balance sheet and finally, we will grow through the pursuit of strategic accretive and balance sheet enhancing acquisitions to sum it up our commitment to our value focus proven strategy better prepares a company to manage industry risks and uncertainties result in the generation of.
Paul D. McKinney: And finally, we will grow through the pursuit of strategic, accretive, and balance sheet-enhancing acquisitions. To sum it up, our commitment to our value-focused, proven strategy better prepares the company to manage industry risks and uncertainties, results in a generation of sustainable and competitive returns, and supports our efforts to achieve the necessary business size and scale to position Ring to sustainably return capital to shareholders. I want to thank our stockholders for their continued support. I also want to once again thank everyone for participating in today's call. And with that, we will turn this over to the operator for questions. Operator?
Paul D. McKinney: Annabelle and competitive returns and supports our efforts to achieve the necessary business size and scale to position range as a sustainably returned capital to stockholders.
Paul D. McKinney: I want to thank our stockholders for their continued support I also want to once again, thank everyone for participating in today's call and with that we will turn this over to.
Paul D. McKinney: To the operator for questions operator.
Operator: Ladies and gentlemen, we'll now begin that question and answer session. To ask a question, you may press star and then one on the touch-tone telephone. If you are using a speakerphone, we ask that you please pick up your handset before pressing the keys to ensure the best sound quality. To withdraw your questions, you may press star and 2. At this time, we will pause momentarily to assemble the roster. Our first question today comes from Neal Dingmann from Truist Securities. Please go ahead with your question.
Speaker Change: Ladies and gentlemen, we will now begin that question and answer session.
Operator: Ask the question you May press Star and then one using a touchtone telephone you are using a speakerphone. Please pick up your handset before pressing the keys to ensure the best quality.
Speaker Change: With your all your questions you May press Star two.
Neal David Dingmann: At this time, we will pause momentarily to assemble the roster.
Operator: Our first question today comes from Neal Dingmann from <unk> Securities. Please go ahead with your question.
Neal David Dingmann: Morning guys, nice quarter falling team. Paul, my first question maybe just... Now you've got, you know, the footprint has nicely increased. Just one of my first questions then would be sort of on your what I call your regional focus. Specifically, could you talk about maybe the remainder of this year and then next year? Well, how much of the plan will be focused more on the multi-stack vertical play in the south versus more on the San Andreas sort of horizontal development up north. I'm just wondering if you could talk about how much we focus on each and, in today's economy, how different the returns are between those two sort of broad areas.
Neal David Dingmann: Good morning, guys nice quarter pollen team Paul My first question, maybe just now.
Neal David Dingmann: And now you've got.
Neal David Dingmann: The footprint is nicely increase just wondering Mike. My first question, then would be sort of on your what I would call. Your regional focus specifically could you talk about maybe the remainder of this year and into next year.
Neal David Dingmann: How much of the plan will be focused more on the multi stacked vertical play in the south versus.
Neal David Dingmann: More on the San Andres horizontal development up North I'm, just wondering if you could talk about how much we focus on each and how different in today's.
Neal David Dingmann: Economics are different the returns are between those two broad areas.
Paul D. McKinney: Yeah, good question, and good morning, Neal. Yeah, and so we're fortunate that the economics of the investment types are very similar, very, very robust. We've demonstrated over the last several years the economics of the Sinatra Horizontal Oil Play, both in Yoakum County and also in Andrews County. What we've discovered here this quarter with the drilling results from the wells we drilled in Penwell, the old founders' assets, those are coming in really strong, really robust. And the good thing about them is that they have a much higher percentage of oil.
Paul: Yes, good question and good morning, Neil.
Paul D. McKinney: Yes, so we're fortunate that the economics of the.
Paul D. McKinney: The investment types are very similar very very robust.
Paul D. McKinney: We've demonstrated over the last several years the economic.
Paul D. McKinney: The economics of the.
Paul D. McKinney: The <unk> horizontal oil play.
Paul D. McKinney: Both and Yoakum County, and also in Andrews County.
Paul D. McKinney: What we've discovered here this quarter with the drilling results from the wells, we drilled in Penwell founders assets those are coming in really strong really robust and the good thing about them is that they have a much higher percentage of oil and so as you know we're concentrated on that especially when we're actually pay.
Paul D. McKinney: And so, as you know, we're concentrating on that, especially when we're actually paying to have our natural gas hauled away. So by looking at the future, right now, we're still looking at a balanced program. And that balancing has to do with limitations in infrastructure and a few things like that. In some areas, we're a little challenged getting the freshwater to frack the wells. In other areas, we can tap into the saltwater disposal capacity of those systems.
Paul D. McKinney: We have our natural gas hauled away.
Paul D. McKinney: So.
Paul D. McKinney: And so but looking at the future right now we're still looking at a balanced.
Paul D. McKinney: Program and that balancing more has to do with limitations and infrastructure and a few things like that.
Paul D. McKinney: In some areas.
Paul D. McKinney: A little challenge getting the fresh water to Frac the wells other areas.
Paul D. McKinney: We can tap out the saltwater disposal capacity of those systems and so we tend to move the rig back and forth and so.
Paul D. McKinney: And so we tend to move the rig back and forth. We are looking at the drilling program, and we are basically selecting the wells that give us the highest cash flow-generating capital spending program that we can deliver. So we're looking for returns, and so we juggle the wells around. Even today, I know we're only in the first quarter, but we've already rearranged our drilling schedule for this year because we've identified what we believe are the wells that have the quickest payouts and the highest cash flow generating capacity. So again, the capital allocation will have more to do with trying to maximize our free cash flow generation than it will have to do with looking at one area versus the other.
Paul D. McKinney: Right now we are looking at the drilling program and we are basically selecting the wells that gives us the highest cash flow generating capital spending program that we can we can deliver so we're looking for returns and so we juggle the wells around even today I know, we're only in the first quarter, but we've already rearrange our drilling schedule for.
Paul D. McKinney: This year.
Paul D. McKinney: We've identified what we believe are the wells that have the quickest payout in the highest casually generating capacity and so.
Paul D. McKinney: Again, the capital allocation, we will have more to do with trying to maximize our free cash flow generation than it is looking at one area versus the other.
Paul D. McKinney: No, that makes a lot of sense. And then you're kind of going in the direction of my second question when it comes to the two plays. I know you all have done a nice job of investing in infrastructure and all, but maybe could you just talk about, you were talking about, I get it on the front end, sort of fresh water and getting things there. What about sort of the back end when it comes to infrastructure and takeaway and all?
Speaker Change: No that makes a lot of sense and then you kind of go and address my second question when it when it comes to the two plays.
Paul D. McKinney: I know you all have done a nice job of investing in infrastructure and al maybe you could you just talk about you talked about I get it on the front end sort of freshwater and getting things there.
Paul D. McKinney: About on sort of the backend when it comes to infrastructure and takeaway and all I know sort of a truck the oil but.
Paul D. McKinney: I know you can certainly truck the oil, but when it comes to gas and everything else, infrastructure, do you see many limitations either in that northern or southern play of yours now? Or maybe if you could just talk about details on, I know you've put some development in that area.
Paul D. McKinney: When it comes to gas and everything else.
Paul D. McKinney: Restructure.
Paul D. McKinney: Do you see many limitations either.
Paul D. McKinney: That northern or southern play meters now or maybe if you could just talk about details on.
Paul D. McKinney: No.
Paul D. McKinney: You put some development in that area.
Paul D. McKinney: Yeah, so we still tend to struggle with what we consider the older infrastructure in the Central Basin Platform. The gas takeaway is not nearly as predictable, you know, for example, and I'm not going to get into the details, but we have struggled in the past there, and we are still struggling today with gas takeaway. And so I think the Permian Basin, in general, has issues, as you can see in the discounts from Henry Hub.
Speaker Change: Yeah. So we still tend to struggle with what we consider the older infrastructure in.
Paul D. McKinney: In the Central Basin platform, the gas takeaway is not nearly as predictable.
Paul D. McKinney: For example, and I'm not going to get into the detail, but we have.
Paul D. McKinney: Struggled in the past there and we are still struggling today.
Paul D. McKinney: With gas takeaway and so I think the Permian basin in general has issues as you can see in the discounts from from Henry hub.
Paul D. McKinney: And so when you consider that you have a Permian Basin regional takeaway issue and, at the same time, we're producing some of our gas into the older infrastructure that has not had as consistent run times, that's a challenge. We are purposely focusing our capital spending program on these wells that produce a higher percentage of oil and much less gas just because of those circumstances. Now, you know, this fall, we understand there will be some additional infrastructure that should help out the Permian Basin in terms of these wells, the discount from Henry Hubb.
Paul D. McKinney: And so when you consider that you have a Permian basin regional takeaway issue and then at the same time, we're producing some of our gas into the older infrastructure that has <unk>.
Paul D. McKinney: Not as consistent run times.
Paul D. McKinney: That's a challenge and so we are.
Paul D. McKinney: Purposely focusing our capital spending program on these wells that produce a higher percentage of <unk> and much less gas.
Paul D. McKinney: Just because of those circumstances now this fall we understand there will be some additional infrastructure that should help out of the Permian basin in terms of these.
Paul D. McKinney: We'll see how that goes. We should have a period, I think, coming on into 2024 where you will be able to sell more natural gas out of the Permanent Basin, and so we'll see how things go. But if you just look at history, the Permanent Basin has this magical ability to fill that capacity pretty quick because there's a lot of volumes being flared that otherwise would go to market if they could do it. And at the same time, the ingenuity of the American oil field worker just has an ability to increase production to fill that capacity when it's there.
Paul D. McKinney: The discount from from Henry Hub, we'll see how that goes we should have a period I think coming on into 2024, where you will be able to sell more natural gas out of the Permian basin and so we'll see how things go but if you just look at history, the Permian basin hazards magical ability to fill that capacity pretty quick because there's a lot of volumes being flared that otherwise would go to.
Paul D. McKinney: Market, if they could do it.
Paul D. McKinney: And at the same time, you know the ingenuity.
Paul D. McKinney: Oil field worker, just hasnt ability to increase production to fill that capacity when it's there. So we'll see how that goes I hope I answered your question Neal.
Neal David Dingmann: So we'll see how that goes. I hope I answered your question, Neal. You did. Very complete. Thank you all.
Operator: You did very well. Thank you all again. Nice quarter. Very good. Once again, if you would like to ask...
Speaker Change: You did very complete thank you all again nice quarter.
Speaker Change: Very good.
Operator: Well, yeah, very good. It looks like Neal Dingmann just jumped back in there with another question. Does Neal have another question you'd like to follow up on?
Operator: Once again, if you would like to ask a question, please press star and then 1. To withdraw your questions, you may press star and 2. Again, that is star and then one to join the question queue. And gentlemen, at this point, having asked no additional questions, I'd like to turn the floor back over to Paul McKinney for any closing remarks.
Speaker Change: Once again, if you would like to ask a question. Please press star and then one to withdraw your question you May Press Star two.
Paul D. McKinney: Then that is star and then one to join the question queue.
Operator: Okay.
Operator: And gentlemen at this point in showing no additional questions I'd like to turn the floor back over to Paul Mckinney for any closing remarks.
Paul D. McKinney: Yes, very good it looks like <unk>.
Operator: David just jump back in there with another question. This is Neal have another question you'd like to follow up.
Operator: We do have Neal back in the queue, and Mr. Dingmann, if you would like to ask your follow-up question, please proceed.
Paul D. McKinney: We do have Neil back in the queue and Mr. Damon If you would like to ask you a follow up. Please proceed yes.
Neal David Dingmann: Thanks for the time, Paul, for putting me back in. Could you just talk about opportunities? You guys have done a great job. I wanted to give you a little time on M&A. It seems like around your neck, now the woods, when I look, especially in both these areas, now that you've added both founders and Stronghold, I'm just wondering when you look specifically in that area, do you see bolt-ons? Maybe just talk about the M&A opportunities in that area.
Neal: Thanks for the time that put me back in just could you just talk about opportunities you guys have done a great job I wanted to give you a little time on M&A seemed like around your neck of the woods when I look, especially in both these areas now that you've added both boundaries at strong haul Im just wondering when you look specifically in that area.
Neal David Dingmann: You see bolt on <unk>, maybe just talk about the M&A opportunities in that area.
Paul D. McKinney: Yeah, it was very good. Thank you for that, Neal. Yeah, there are bolt-ons, but there are other... I've got to be a little careful here. We're predicting that we're going to see additional assets, you know, become available, and the Central Basin Platform, the southern part of the Northwest Shelf, as a result of some of these larger transactions we've seen close or that are pending. And so many of the operators that have been purchased operate out here, and many of the operators that are doing the purchasing and acquiring also have assets out here that have not been their focus and fall in the category that we believe, anyway, in their halls would be considered non-strategic.
Paul: Yes, very good thank you for that.
Paul D. McKinney: Yes, there are bolt ons.
Paul D. McKinney: But there are other.
Paul D. McKinney: So.
Paul D. McKinney: Got to be a little careful here, we're predicting that we're going to see.
Paul D. McKinney: Additional assets.
Paul D. McKinney: It become available.
Paul D. McKinney: In the Central Basin platform, the southern part of the North West shelf as a result of some of these larger transactions, we've seen close and or that are pending and so many of the operators that have been purchased operate out here and many of the operators that are doing the purchasing and acquiring also have assets out here that have.
Paul D. McKinney: Not been their focus.
Paul D. McKinney: And fall in the category that we believe anyway in there and Theyre halls would be considered non strategic so we anticipated them come into the marketplace for sale.
Paul D. McKinney: So we anticipate that they're coming to the marketplace for sale. And we're really excited about this area. We've done a lot of mapping. We've identified several opportunities out there that we would like. As you may recall, in the past, we tried to negotiate transactions in the past. That's how the stronghold deal started, but it ended up being a process that we ultimately prevailed in. Founders was a negotiated deal after a failed sale.
Paul D. McKinney: And we're really excited about this area we've done a lot of mapping we've identified.
Paul D. McKinney: Several opportunities out there that we would like as you may recall in the past we have tried to negotiate transactions in the past that's how the stronghold deal started but it ended up being a process that we ultimately prevailed in founders was a negotiated deal after a <unk> sale.
Paul D. McKinney: And so we're not opposed to doing that. We are constantly seeking to make acquisitions, and that ranges everything from smaller bolt-ons that are just on the other side of the fence from us because it makes a lot of sense. We can continue the investments in the capital programs that we're currently doing, but at the same time, there are other areas out there that are very close to our operations that allow us to capture the synergies of our operating team and our expertise.
Paul D. McKinney: And so we're not opposed to doing that.
Paul D. McKinney: We are constantly seeking to make acquisitions in that range is everything from <unk>.
Paul D. McKinney: Smaller bolt ons that are just on the other side of the fence from us.
Paul D. McKinney: Because it makes a lot of sense. We can continue the plays in the capital programs that we're currently doing but at the same time, there's other areas out there that.
Paul D. McKinney: Our very close to our operations that allow us to capture the synergies of our operating team and our expertise and so we believe that the pipeline is basically there for the next several years is probably more opportunity than we ourselves can take down and so we're excited about it and so we'll see how 2024 goes I think we're one of the things that we have going for us.
Paul D. McKinney: And so we believe that the pipeline is basically there for the next several years, probably more opportunities than we ourselves can handle. And so we're excited about it. And so we'll see how 2024 goes. But I think one of the things that we have going for us right now is what appears to be a little bit more stability in oil prices. So, if you can stay between 75 and 85 for a sustained period of time, I think you'll find more people willing to sell.
Paul D. McKinney: Now is a little what appears to be a little bit more stability in oil prices. So if you can stay between 75 and 85 for a sustained period of time I think youll find more people willing to sell and at the same time.
Paul D. McKinney: And at the same time, increase the probability of a transaction just simply because the expectations are more closely aligned in a more stable oil price environment. So we'll see how that goes. But anything from small bolt-ons to large acquisitions, that could be as meaningful as a stronghold deal and the founders' deal with it were for us in the past.
Paul D. McKinney: Increase the probability of a transaction if it will because the expectations can.
Paul D. McKinney: Our closer more closely aligned in a more stable oil price environment. So we'll see how that goes but.
Paul D. McKinney: Anything from small bolt ons to large acquisitions that could be as meaningful as a stronghold deal and the founders deal with it.
Paul D. McKinney: We're for us in the past.
Neal David Dingmann: Sure, I love all the options. And then if I could do one last one, just on the multi-stack vertical, again, could you remind me, I mean, again, you continue to add sort of different zones and you and, you know, the guys in the team keep adding, maybe, maybe talk about what makes most sense today to target and, you know, how that is different maybe than, than a year or so ago.
Speaker Change: Well I love the options and then if I could do one last one just on the multi stack vertical again could you remind me I mean.
Neal David Dingmann: Again, it seems like you continue to add to that.
Neal David Dingmann: Different zones.
Neal David Dingmann: The guys are in team keep added maybe maybe talk about what what makes most sense today to targeting now how that is different maybe than a year or so ago.
Paul D. McKinney: So a year or so ago, we were looking at opportunities. If you look at the Stronghold Acquisition. The McKnight area has a lot of opportunity, but their natural gas is a much larger percentage of the product flow, and so we've decided to concentrate more in the PJ Lee area down in Crane County and also in the Penwell area for what the newly acquired founders have acquired. And the reason why PJ Lee is so attractive is, number one, the returns are great.
Speaker Change: Yes so.
Neal David Dingmann: A year or so ago, we had.
Paul D. McKinney: We're looking at opportunities if you look at what the stronghold acquisition the.
Paul D. McKinney: Mcknight area has a lot of opportunity, but the natural gas is a much larger percentage of the product flow and so we've decided to concentrate more in the P. J lease area down in Crane County, and also in the <unk> area for with the newly acquired founders acquisition.
Paul D. McKinney: And the reason why Pega Lee is so attractive is number one the returns are great. We've had really good results and with many of the wells that we drill we're adding pubs and so we're increasing reserves by expanding that play out beyond where we.
Paul D. McKinney: We've had really good results, and with many of the wells that we drill, we're adding puds. And so we're increasing reserves by expanding that play out beyond where we originally defined it. And so we believe in that area that we have a lot more reserves to add than was included in the original acquisition.
Paul D. McKinney: Originally defined and so what we're what we believe in that area that we have a lot more reserves to add and it was included in the original acquisition and so we're really excited about that so anytime you can drill and add additional pud reserves and extend the field and continue to have the success. We're having is really exciting now when you go to founders we just got to start.
Paul D. McKinney: And so we're really excited about that. So anytime you can drill and add additional reserves and extend the field and continue to have the success we're having, it's really exciting. Now when you go to founders, we just got started out there.
Paul D. McKinney: We drilled three wells there this last quarter, and we're very pleased with the results. We feel like that program has a lot of running room, and so it'll get more allocation of our capital than perhaps we originally thought. But we'll see how that goes. And so again, this year, we just happen to have the benefit of wells that come in higher than our type curves. I think one well was right on our type curves.
Paul D. McKinney: Out there we drilled three wells there this last quarter, we're very pleased with the results.
Paul D. McKinney: It feels like that program has a lot of running room and so it will get.
Paul D. McKinney: More allocation.
Paul D. McKinney: Of our capital than perhaps we originally thought but we will see how that goes but if the robust returns continue in both of those areas.
Paul D. McKinney: <unk>.
Paul D. McKinney: It will have.
Paul D. McKinney: So again this year. We're just we just happen to have the benefit of wells that came in higher than our type curves I think one well was right on our type curves everything else slightly above and so when you have those kind of returns.
Paul D. McKinney: Everything else is slightly above average. And so when you have those kind of returns, yeah, we might even have to adjust our production going forward for the rest of the year if we continue to have this type of situation. Yeah, I love that option.
Paul D. McKinney: Yes, we might even have to adjust our production going forward for the rest of the year. If we continue to have this type of success.
Paul D. McKinney: Yeah, I love that option, Alec. Yeah, you bet.
Speaker Change: Yes love that Optionality. Thanks, Paul.
Paul D. McKinney: Yeah, you bet.
Operator: Once again, if you would like to ask a question, please press star and 1. To withdraw your question, you may press star and 2. And our next question comes from Jeff Grampp from Alliance Global Partners. Please go ahead with your question.
Speaker Change: Once again, if you would like to ask a question. Please press star and one to withdraw all of your questions. You May Press Star two.
Jeffrey Scott Grampp: And our next question comes from Jeff Grant from Alliance Global Partners. Please go ahead with your question.
Jeffrey Scott Grampp: Morning, guys. Maybe just to build on that last comment, I noticed on the slide that those PJ Lee and Penwell vertical results look really impressive there. Can you touch on how much more capital you can put into those areas, taking into account, I suppose, infrastructure, maybe inventory management constraints, if there are any, and just how much more aggressive you guys could be, if any, relative to the five, six wells a quarter pace that you guys seem to be at, at least for Q1?
Jeffrey Scott Grampp: Good morning, guys.
Jeffrey Scott Grampp: Maybe just to build on that that last comment I noticed in the slide deck those P. Dalian penwell.
Jeffrey Scott Grampp: Critical results look really impressive there can you can you touch on.
Jeffrey Scott Grampp: How much more capital can you put into those areas taking into account.
Jeffrey Scott Grampp: Both infrastructure and maybe inventory management constraints, if there are any Ian and just how how much more aggressive could you guys be if any relative to the $5 six wells a quarter pace that you guys seem to be at least for Q1.
Paul D. McKinney: Yeah. And so... I probably need to defer that to Marino Baghdati. (inaudible)
Speaker Change: Yes so.
Marinos Christos Baghdati: I, probably need to defer that to.
Marinos Christos Baghdati: Marino Baghdad.
Marinos Christos Baghdati: Good morning, Jeff. Yeah, we have some flexibility there to add. We're still in the Penwell area. Let me back up.
Marinos Christos Baghdati: Good morning, Jeff, Yes, we have flexibility there to add.
Marinos Christos Baghdati: We're still on the <unk>, let me backup on the PGA Lee area, Yes, we've eliminated pretty much all constraints in terms of the electrical salt water disposal.
Marinos Christos Baghdati: On the PJLE area, yes, we've eliminated pretty much all constraints in terms of electrical, saltwater disposal, and frack water to complete the wells, so we can accelerate at whatever pace we want to at PJLE. One of the things that we're doing there is being very diligent about, like Paul mentioned, adding pods. Because we're stepping out to the outskirts of the reservoir there, so we're wanting to see some results before we really accelerate the number of wells there.
Marinos Christos Baghdati: And.
Marinos Christos Baghdati: Frac water.
Marinos Christos Baghdati: To complete the wells, so we can accelerate at whatever pace.
Marinos Christos Baghdati: We want to have P. J Lee one of the things that we're doing there is being very diligent about like Paul mentioned, adding puds, because we're stepping out to the outskirts of the reservoir. There. So we're wanting to see some results before we really accelerate the number of well count there over.
Marinos Christos Baghdati: Over at Penwell, we are still going through some saltwater disposal, kind of making sure we eliminate any bottlenecks there before we can say we can really accelerate. But we do have the capacity to drill more than three wells a quarter as it stands right now. We're just going to get really comfortable around that so we don't. I'm going to say waste capital, but just spend more capital than we absolutely have. Perfect, can I answer your first question?
Marinos Christos Baghdati: Penwell, we are still going through some salt water disposal kind of making sure we eliminate any bottlenecks there before we can say we can really.
Marinos Christos Baghdati: Accelerate but we do have capacity to drill more than three wells a quarter as it stands right now.
Marinos Christos Baghdati: Really comfortable around that so we don't.
Marinos Christos Baghdati: I'm going to say waste capital, but just spend more capital than we absolutely have to.
Speaker Change: Perfect I cant answer your question I'm, sorry, yes, yes, no that's perfect I appreciate it.
Jeffrey Scott Grampp: Yep, yep, no, that's perfect; I appreciate it. For my follow-up, on the CapEx side, obviously, a really nice quarter coming in below the guide, and I know you guys have talked about some cost efficiencies, particularly with the Founders App that's early on. I noticed the guide for Q2 is kind of consistent with Q1, even though you guys did have some better performance. Is that just kind of some general conservatism, or are there some other things related to maybe capitalized workovers or other things beyond new drills? Explaining that variance, or just, I guess, maybe looking for a little more context, Q1 versus Q2 on CapEx?
Jeffrey Scott Grampp: My follow up on the Capex side, obviously really nice quarter coming in below the guide and I know you guys had talked about some cost efficiencies, particularly with the founders assets early on.
Jeffrey Scott Grampp: I noticed the guide for Q2 is kind of consistent with Q1, even though you guys did have some better performance. It is there is that just kind of some general conservatism or are there. Some other things related to maybe capitalized workovers or other things beyond new drills.
Jeffrey Scott Grampp: Explaining that variance or just I guess, maybe looking for a little more context Q1 versus Q2 on capex.
Marinos Christos Baghdati: We may add additional SWD wells in Q2. It hasn't been decided yet, so that would, you know, increase CAPEX over Q1. I know we drilled one in Q1, but we may do two in Q2, and this for the Pennwell area.
Jeffrey Scott Grampp: We may add additional has to be D. Wells in Q2, it hasnt been decided yet so that would increase capex over Q1, I know we drilled one in Q1, but we may do to in Q2.
Marinos Christos Baghdati: And this for the panel area. In addition to that we spent about 1 million and a half on ESG infrastructure improvements in the first quarter. We think that may accelerate in the second quarter were kind of goes as fast as we can but at the same time be efficient and then first.
Marinos Christos Baghdati: In addition to that, we spent about a million and a half on ESG infrastructure improvements in the first quarter. We think that may accelerate in the second quarter. We're trying to go as fast as we can but, at the same time, be efficient.
Marinos Christos Baghdati: And then in the first quarter, we talked about our operational efficiency. All our AFEs have contingency costs. That's normal to have.
Marinos Christos Baghdati: We've talked about our operational efficiency.
Marinos Christos Baghdati: Fees have contingency costs, that's normal to have we didn't have any contingency issues with any of our of our work in the first quarter. We may have a couple of operational hiccups with second quarter wells. So we're we still kept those contingency dollars in there and that's why the the capital seems to not have <unk>.
Marinos Christos Baghdati: We didn't have any contingency issues with any of our work. In the first quarter, we may have had a couple of operational hiccups with second quarter wells. We still kept those contingency dollars in there, and that's why the capital seems to not have changed very much. We'll see as the quarter goes. So far, you know, in the second quarter, we haven't had any issues, so we feel pretty good about that, too.
Marinos Christos Baghdati: Change very much but.
Marinos Christos Baghdati: We will see as a portal goes so far in the second quarter, we haven't had any issues. So we feel pretty good about that too.
Marinos Christos Baghdati: Yeah.
Jeffrey Scott Grampp: Perfect. That makes a lot of sense. I appreciate the details, guys.
Speaker Change: Perfect that makes a lot of sense I appreciate the details guys.
Paul D. McKinney: You bet. Thanks, Jeff.
Speaker Change: You bet Thanks, Jeff.
Paul D. McKinney: And ladies and gentlemen, at this point, having shown no additional questions, I'd like to turn the floor back over to Paul McKinney for closing comments.
Paul D. McKinney: And ladies and gentlemen at this point in showing no additional questions I'd like to turn the floor back over to Paul Mckinney for closing comments.
Paul D. McKinney: Thank you, Jamie. On behalf of the management team and board of directors, I want to thank everyone for listening and participating in today's call. We appreciate your continued support of the company, and we look forward to keeping everyone appraised of our progress. Thank you again for your interest in Ring, and have a great day.
Paul D. McKinney: Thank you Jamie.
Paul D. McKinney: Half of the management team and board of directors I want to thank everyone for listening and participating in today's call. We appreciate your continued support of the company and we look forward to keeping everyone apprised of our progress.
Paul D. McKinney: You again for your interest in ring and have a great day.
Operator: Ladies and gentlemen, that will conclude today's conference call and presentation. We thank you for joining us. You may now disconnect your lines.
Speaker Change: Ladies and gentlemen that will conclude today's conference call and presentation. We thank you for joining you may now disconnect your lines.