Q2 2024 Ring Energy Inc Earnings Call

Good morning, and welcome to the ring energy second quarter 'twenty 'twenty four earnings conference call. At this time, all participants will be in a listen only mode.

Operator: Good morning, and welcome to the Ring Energy Second Quarter 2024 Earnings Conference Call. At this time, all participants will be in a listen-only mode. A question and answer session will follow the formal presentation. To ask a question, you may press star, then one, on a touch-tone phone. To withdraw your question, please press the star key, followed by two. Should you need assistance, please signal a conference specialist by pressing the star key, followed by zero. Please note, this event is being recorded. I would now like to turn the conference over to Al Petrie, Investor Relations, Ring Energy. Please go ahead.

<unk> and answer session will follow the formal presentation.

Speaker Change: To ask a question you May press Star then one on a touchtone phone to withdraw your question. Please press Star then two so do you need assistance. Please signal a conference specialist by pressing the star key followed by zero. Please note. This event is being recorded.

Speaker Change: I would now like to turn the conference over to Al Petrie Investor Relations for Ring Energy. Please go ahead.

Al Petrie: Thank you, Operator, and good morning, everyone. We appreciate your interest in 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 of 2024, as well as our updated outline. Paul 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 the call for questions.

Al Petrie: Thank you operator, and good morning, everyone. We appreciate your interest and ring energy will be general 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 of 'twenty 'twenty four is.

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, and Sean Young, VP of Operations. During the Q&A session, we asked you to limit your questions to one and a follow-up. You're welcome to reenter the queue later with additional questions.

Speaker Change: Well as our updated outlook. We will then turn the call over to Travis Thomas brings executive VP and Chief Financial Officer, who will review our financial results. Paul will then return with some closing comments before we open the call for questions.

Speaker Change: Also joining us on the call today and available for the Q&A session or Alex Dias Executive VP of engineering, and corporate strategy and shown young VP of operations.

Speaker Change: 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 is making forward-looking statements within the meaning of federal security 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 the forward-looking statement. Finally, the company can give no assurance that such forward-looking statements will prove to be correct.

Speaker Change: During the course of this conference call. The company, we're making forward looking statements within the meaning of federal Securities laws.

Speaker Change: 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.

Speaker Change: Finally, the company can give no assurance that such forward looking statements will prove to be correct.

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?

Speaker Change: Ring energy disclaims any intention or obligation to update or revise any forward looking statements.

Speaker Change: Whether as a result of new information future events or otherwise accordingly, you should not place undue reliance on forward looking statements.

Speaker Change: These and other risks are described in yesterday's press release and in our filings with the U S. A C D.

Speaker Change: These documents can be found in the investors section of our website located at Www Dot ring energy Dot com.

Speaker Change: Should one or more of these risks materialize or should underlying assumptions prove incorrect actual results may vary materially. This conference call also includes references to certain non-GAAP financial measures reconciliations of these non-GAAP financial measures to the most directly comparable measure under GAAP are contained in yesterday's.

Al Petrie: Actual results may vary materially. This conference call also includes references to certain non-GAAP financial measures. Reconciliations of these non-GAAP financial measures to the most directly comparable measure under GAAP are contained in yesterday's earnings release. Finally, as a reminder, this conference call is being recorded. I would now like to turn the call over to Paul McKinney, our Chairman and CEO.

Speaker Change: The earnings release finally, as a reminder, this conference call is being recorded I would now like to turn call over to Paul Mckinney, Our chairman and CEO.

Paul McKinney: Thanks, Al, and thank you everyone for joining us today and for your interest in Ring Energy. Before I begin to discuss our second quarter results, I wanted to welcome two new Ring executives, Sean Young and Phillip Feiner. As we announced in late June, Sean was promoted to lead our operations team. And, as announced yesterday, Phillip joined us last week to lead the legal and human resources efforts here.

Paul McKinney: Thanks Al and thank you everyone for joining us today and your interest in ring energy before.

Speaker Change: Before I begin to discuss our second quarter results I wanted to welcome two new ring executives, Sean Young and Philips diner, as we announced in late June Shawn was promoted to lead our operations team and as announced yesterday Philip joined US last week to lead our legal and human resources efforts here all of us here at <unk>.

Paul McKinney: All of us here at Ring are pleased to be working with them and look forward to properly growing Ring Energy together for the benefit of our stockholders. Let's now turn our attention to the subject at hand, our second quarter performance. We are pleased to post record sales volumes and record cash generation for both the second quarter and year to date. We used our excess cash from this record quarter to pay down $15 million of debt and intend to make additional and material progress reducing debt over the coming quarters, subject, of course, to oil remaining at the range or in the range of current and or more recent prices.

Speaker Change: <unk> are pleased to be working with them and look forward to profitably growing ring energy together for the benefit of our stockholders.

Speaker Change: Let's now turn our attention to the subject at hand, our second quarter performance. We are pleased to post record sales volumes and record cash generation for both the second quarter and year to date.

We use our excess cash from this record quarter to pay down $15 million of debt and intend to make additional and material progress with reducing debt over the coming quarters subject of course to all remaining at the range or in the range of current and or more recent prices similar to the first quarter second quarter.

Paul McKinney: Similar to the first quarter, second quarter sales volumes exceeded the high end of our initial guidance, while operating expenses and capital spending both came in below our guidance range. Combined with our improved operational outlook for the second half of 2024, we are well-positioned for ongoing success for the remainder of the year and into next.

Speaker Change: <unk> volumes exceeded the high end of our initial guidance, while operating expenses and capital spending both came in below our guidance ranges.

Speaker Change: Bind with our improved operational outlook.

Speaker Change: For the second half of 2024, we are well positioned for ongoing success for the remainder of the year and into next the primary driver of our record sales volumes in the second quarter was our continued strong returns from our drilling program and the outstanding performance of our operating.

Paul McKinney: The primary driver of our record sales volumes in the second quarter was the continued strong returns from our drilling program and the outstanding performance of our operating team maintaining our existing production. The result for the period was a sale of 13,623 barrels of oil per day, which is 2% higher than the first quarter. On a total product basis, we reported second quarter 2024 sales volumes of 19,786 barrels of oil equivalent per day, which was 4% above the first quarter.

Speaker Change: Maintaining our existing production.

Speaker Change: The result for the period was the sale of 13623 barrels of oil per day, which was 2% higher than the first quarter on a total product basis, we reported second quarter 2024 sales volumes of 19786 barrels of oil equivalent per day, which was 4% above.

Speaker Change: The first quarter another point to make is a high oil percentage of our product mix of 69%.

Paul McKinney: Another point to make is a high oil percentage of our product mix of 69%. We will continue to focus our capital spending on undeveloped opportunities with high oil percentage, especially during these times of favorable realized pricing relative to natural gas. Turning over to lease operating costs, lease operating expenses, or LOE, during the second quarter were $10.72 per BOE, which is below the low end of our guidance. Similar to first quarter performance, our second quarter LOE results reflect our continuing focus on reducing costs and down time and completing the integration of the founder's assets into our operation. I'd like to thank our operating team for their hard work and their dedication to these efforts. Thank you, everyone.

Speaker Change: We will continue to focus our capital spending on undeveloped opportunities with high oil percentage, especially during these times of favorable realized pricing relative to natural gas.

Speaker Change: Turning over to lease operating cost lease operating expenses are L. O E. During the second quarter were $10 seven sue cents per Boe.

Speaker Change: What was below the low end of our guidance range similar to first quarter performance, our second quarter <unk> results.

Speaker Change: Reflect our continuing focus on reducing costs and downtime and completing the integration of the founders assets into our operations I'd like to thank our operating team for their hard work and their dedication to these ever so thank you everyone.

Paul McKinney: Higher-than-anticipated sales volumes and lower-than-expected LOE per BOE, supported by a backdrop of solid oil prices, resulted in record-adjusted EBITDA of $66.4 million for the second quarter, as well as year-to-date growth of 15%. Looking at CapEx, we were pleased to once again post spending levels that were less than the low end of our guidance, while the number of producing wells drilled The key factors contributing to our lower than expected capital costs were increased efficiencies associated with our well completions, enhanced drilling and related logistics, and an improved macro environment associated with our drilling and completion services costs.

Speaker Change: Higher than anticipated sales volumes and lower than expected LOE per BOE supported by a backdrop a solid oil pricing resulted in record adjusted EBITDA of $66 $4 million for the second quarter.

Speaker Change: As well as year to date growth of 15%.

Speaker Change: Looking at Capex, we were pleased to once again post spending levels that were less than the low end of our guidance, while the number of producing wells drilled and completed it was at the high end of our guidance. The key factors contributing to our lower than expected capital costs were increased efficiencies associated with our well completions enhanced drilling and related logistics.

Speaker Change: And I and an improved macro environment associated with our drilling and completion services cost during the second quarter, we invested $35 4 million of capital expenditures, which included a drilling and completion of five horizontal wells in the C. B P.

Paul McKinney: During the second quarter, we invested $35.4 million in capital expenditures, which included the drilling and completion of five horizontal wells in the CBP and the drilling and completion of six vertical wells in CBP South, three in Ector County and three in Crane County. Total capital spending also included capital workovers, infrastructure upgrades, and leases.

Speaker Change: And the drilling and completion of fixed vertical wells and CVP South three in Ector County, and three in Crane County total capital spending also included capital Workovers infrastructure upgrades and leasing.

Paul McKinney: Record-adjusted EBITDA and lower-than-expected CAPEX resulted in record-adjusted free cash flow of $21.4 million for the second quarter of 2024, which was 70% higher than the same quarter a year ago and represents the 19th consecutive quarter of positive, adjusted free cash flow for the company. Combined with our success in the first quarter, we posted record year-to-date adjusted free cash flow of $37 That was 60% higher than last year.

Speaker Change: Record adjusted EBITDA and lower than expected Capex resulted in record adjusted free cash flow of $21 $4 million for the second quarter of 2024, which was 70% higher than the same quarter a year ago and represents the 19th consecutive quarter of positive adjusted free cash flow for the company.

Speaker Change: Bind with our success in the first quarter, we posted record year to date adjusted free cash flow of $37 million that was 60% higher than last year.

Paul McKinney: Turn to the balance sheet. We used a portion of our adjusted free cash flow to pay down $15 million of debt in the second quarter and $48 million since closing the founder's acquisition last August. As a result, we ended the second quarter with liquidity of $194.1 million and a leverage ratio of 1.59 times, which was 5% lower than at the beginning of the period. Regarding our guidance for the year, we are updating our full year 2024 outlook to reflect our first half performance and a solid view for the remainder of the year.

Speaker Change: Turning to the balance sheet, we used a portion of our adjusted free cash flow to pay down $15 billion of debt in the second quarter and 48 million since closing the founders acquisition last August as a result, we ended the second quarter with liquidity of $194 1 million and a leverage ratio of 1.59.

Speaker Change: <unk>, which was 5% lower than at the beginning of the period.

Speaker Change: Regarding our gardens, our guidance for the year, we are updating our full year 2024 outlook to reflect our first half performance and a solid view for the remainder of 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 second quarter.

Paul McKinney: 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 second quarter. This approach provides flexibility to react to changing commodity prices and market conditions, as well as manage our quarterly cash flow. As we have discussed in the past, our drilling program is designed to organically maintain or slightly grow our oil production.

Speaker Change: This approach provides flexibility to react to changing commodity prices and market conditions as well as manage our quarterly cash flow as we have discussed in the past our drilling program is designed to organically maintain or slightly grow our oil production gear.

Paul McKinney: Given the success we are seeing in our development efforts, we are increasing our full-year 2024 production guidance to 13,200 to 13,800 barrels of oil per day and 19,000 to 19,800 barrels of oil equivalent per day, which represents an increase of 4% and 5%, respectively, from our initial guidance earlier this year, assuming the mid-pandemic. Regarding the third quarter, we anticipate sales volumes of 19,000 to 19,800 barrels of oil equivalent per day, and, more importantly, our oil production to range between 13,200 and 13,800 barrels of oil per day, or an oil mix of approximately 70%. With that, I will turn this over to Travis to provide more details on the quarter, and we will return with closing comments before we open the call for questions. Travis?

Speaker Change: Given the success, we are seeing in our development efforts, we are increasing our full year 2024 production guidance to 13200 to 13800 barrels of oil per day and 19002.

Speaker Change: To 19800 barrels of oil equivalent per day, which represents an increase of four and 5% respectively.

Speaker Change: From our initial guidance earlier this year, assuming the mid points.

Speaker Change: Regarding the third quarter, we anticipate sales volumes of 19000 to 19800 barrels of oil equivalent per day and more importantly, our oil production to range between 13000 213800 barrels of oil per day or an all mix of approximately 70%.

Speaker Change: 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 and good morning, everyone. As Paul discussed we are pleased to post second quarter operational and financial performance that exceeded our initial expectations.

Travis Thomas: Thanks, Paul. And good morning, everyone. As Paul discussed, we are pleased to post second quarter operational and financial performance that exceeded our initial expectations. The combination of record sales volumes along with below guidance LOE per BOE and CapEx contributed to the generation of record adjusted free cash flow that we used to materially pay down debt. To be clear, balance sheet improvement has been and will remain a top priority for the company. With that overview, let's look at the quarter in more detail. As in the past, my prepared comments will be focused on our key sequential quarterly results.

Travis: The combination of record sales volumes, along with below guidance L. O E per Boe and Capex contributed to the generation of record adjusted free cash flow that we used to materially pay down debt to be clear balance sheet improvement has and will remain a top priority for the company with that overview, let's look at the quarter.

Travis Thomas: During the second quarter, we sold 13,623 barrels of oil per day and 19,786 BOE per day. This represents an increase from the first quarter of 2% and 4%, respectively, and, again, was above the top end of our initial guidance. As Paul discussed, the primary driver of our record sales volumes in the second quarter was the outsized positive impact of our drilling program. Our second quarter average crude oil price differential from NYMEX WTI Futures Pricing was a negative $0.61 per barrel versus a negative $1.34 per barrel for the first quarter.

Travis: In more detail as in the past my prepared comments will be focused on our key sequential quarterly results. During the second quarter. We sold 13623 barrels of oil per day and 19786 BOE per day. This represents an increase from the first quarter of 2% and 4% respectively.

Travis Thomas: This was mostly due to the Argus CMA roll that increased $0.80 per barrel offset by the Argus WTI WTS that decreased $0.30 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 $4.31 per mcf compared to a negative $2.57 per mcf for the first quarter.

Speaker Change: And again was above the top end of our initial guidance as Paul discussed the primary driver of our record sales volumes in the second quarter was the outsized positive impact of our drilling program.

Speaker Change: Our second quarter average crude oil price differential from Nymex W. T. I futures pricing was a negative 61 cents per barrel versus a negative $1.34 per barrel for the first quarter. This was mostly due to the Argus CMA role. They increased 80 cents per barrel offset by the Rguest W. T. I W. T S.

Speaker Change: The decreased 30 cents per barrel on average from the first quarter, our average natural gas price differential for my Nymex futures pricing for the second quarter was a negative $4.31 per mcf compared to a negative $2.57 per mcf for the first quarter.

Speaker Change: Our realized NGL price for the second quarter averaged 12% F. W. T I compared to 15% for the first quarter. The result was revenue for the second quarter of $99 $1 million, a 5% increase from the first quarter, which was due to a 2 million dollar volume variance and $2 6 million dollar price variance.

Travis Thomas: Our realized NGL price for the second quarter averaged 12% of WTI compared to 15% for the first quarter. The result was revenue for the second quarter of $99.1 million, a 5% increase from the first quarter, which was due to a $2 million volume variance and $2.6 million price variance. As noted, we are targeting higher oil mix opportunities since oil accounted for 100% of the revenue, while it was 69% of our total production.

Speaker Change: As noted we are targeting higher oil mix opportunities since oil accounted for 100% of the revenue while it was 69% of our total production.

Travis Thomas: That means our positive NGL sales were not quite able to fully offset our negative gas sales, resulting in a minor net loss. As I noted, in the second quarter, we continue to see negative realized prices for natural gas. While the majority of our GTP costs are reflected as a reduction of the sales price, the larger impact on our realized natural gas pricing reflects the continued product takeaway constraints we have seen in the base. The good news is that additional third-party takeaway capacity is expected to come online with the Matterhorn Express pipeline in West Texas around the end of 2024, which we hope will alleviate some pricing pressure.

Speaker Change: That means our positive NGL sales were not quite able to fully offset our negative gas sales, resulting in a minor net loss as I noted in the second quarter. We continued to see negative realized pricing for natural gas, while the majority of our G. T. P costs are reflected as a reduction of the sales price the larger impact on our realized natural.

Speaker Change: Gas pricing reflects the continued product takeaway constraints, we have seen in the basin. The good news is additional third party takeaway capacity is expected to come online with the Matterhorn Express pipeline in West, Texas around the end of 'twenty 'twenty four that we hope will alleviate some pricing pressure Halloween was 19.3.

Travis Thomas: LOE was $19.3 million for the second quarter versus $18.4 million for the first quarter. Echoing Paul's comments, we were pleased to see LOE come in below the low end of our guidance range of $10.75 to $11.25 per BOE. Due to lower-than-expected workover costs, partially offset by higher electricity and chemical costs, LOE per BOE increased slightly in the second quarter to $10.72 per BOE from $10.

Speaker Change: Billion dollars for the second quarter versus $18 $4 million for the first quarter echoing Paul's comments, we were pleased to see our we come in below the low end of our guidance range of $10 75 to $11.25 per Boe.

Speaker Change: It's a lower than expected due to lower than expected workover cost, partially offset by higher electricity and chemical costs.

Hello, <unk> per BOE increased slightly in the second quarter to $10 72 per Boe from $10 60 per Boe in the first quarter cash.

Travis Thomas: Cash G&A, which excludes share-based compensation, was $5.6 million for the second quarter, essentially flat with the $5.7 million from the first quarter. Our second quarter results included a loss on derivative contracts of $1.8 million compared to a loss of $19 million for the first quarter, of which $2.6 million was a realized loss offset by an $800,000 unrealized gain. As a reminder, unrealized gain-loss is just the difference between mark-to-market values from period to period.

Cash G&A, which excludes share based compensation was $5 $6 million for the second quarter, essentially flat with a $5 7 million from the first quarter. Our second quarter results include a loss on derivative contracts of $1 8 million compared to a loss of $19 million for the first quarter of which $2 six was a really.

Speaker Change: Sauce offset by an 800000 unrealized gain.

Speaker Change: As a reminder, the unrealized gain loss is just the difference between the mark to market values from period to period.

Travis Thomas: Finally, for Q2, we reported net income of $22.4 million, or 11 cents per diluted share. This was a significant improvement compared to the first quarter net income of $5.5 million, or 3 cents per deleted share. Excluding the estimated after-tax impact of pre-tax items, including non-cash unrealized gains and losses on hedges and share-based compensation expense, our second quarter adjusted net income was $23.4 million, or $0.12 per diluted share, compared to first quarter adjusted net income of $20.3 million, or $0.10 per diluted share.

Speaker Change: Finally for Q2, we reported net income of $22 $4 million or 11 cents per diluted share.

Speaker Change: This was a significant improvement compared to the first quarter net income of $5 $5 million or three cents per diluted share excluding.

Speaker Change: Excluding the estimated after tax impact of pretax items, including noncash unrealized gains and losses on hedges and share based compensation expense, our second quarter. Adjusted net income was $23 $4 million or 12 cents per diluted share while first quarter adjusted net income of $29 20.

Speaker Change: Point $3 million or 10 cents per diluted share.

Travis Thomas: We posted a record second quarter 2024 adjusted EBITDA of $66.4 million versus $62 million for the first quarter, which was a 7% increase. As Paul mentioned, during the second quarter, we invested $35.4 million in capital expenditures. This was below our guidance of $37 to $42 million, and the actual number of producing wells drilled and completed, 11 in total, was at the high end of guidance. The primary driver for lower CapEx was reduced well completion costs and drilling efficiency.

Speaker Change: We posted record second quarter 'twenty 'twenty, four adjusted EBITDA of $66 $4 million versus $62 million for the first quarter, which was a 7% increase.

Speaker Change: As Paul mentioned during the second quarter, we invested $35 $4 million in capital expenditures. This was below our guidance of $37 million to $42 million and the actual number of producing wells drilled and completed 11 in total was at the high end of guidance. The primary driver for lower Capex was reduced well completion costs.

Speaker Change: And drilling efficiencies.

Travis Thomas: The combined result of record operating cash flow and lower than expected CapEx drove record adjusted free cash flow of $21.4 million for the second quarter, versus $15.6 million for the first quarter. In addition, we generated record year-to-date adjusted free cash flow of $37 million, which was 60% higher than the same period in 2023. We used our record excess cash flow to pay down $50 million of borrowings on our revolver in the second quarter and $48 million since the closing of the founder's acquisition in late August.

Speaker Change: The combined result of record operating cash flow and lower than expected Capex drove record adjusted free cash flow of $21 $4 million for the second quarter.

Speaker Change: Versus $15.6 million for the first quarter and.

Speaker Change: In addition, we generated record year to date adjusted free cash flow of $37 million that was 60% higher than the same period in 2023.

Speaker Change: We used our record excess cash flow to pay down $50 million of borrowings on our revolver in the second quarter and $48 million since the closing of the founders acquisition in late August.

Speaker Change: The difference between our adjusted free cash flow and the debt pay down was due to working capital changes, including a $9 $1 million decrease in accounts payable of quarter to quarter.

Travis Thomas: The difference between our adjusted free cash flow and the debt pay down was due to working capital changes, including a $9.1 million decrease in accounts payable quarter to quarter. As I mentioned in the beginning of my comments, further balance sheet improvement through additional debt pay down remains a top priority for the company. Moving to our head position,

Speaker Change: As I mentioned at the beginning of my comments further balance sheet improvement through additional debt Paydown remains a top priority for the company.

Speaker Change: Moving to our hedge position.

Travis Thomas: For the last six months of 2024, we currently have approximately 1.2 million barrels of oil hedged, or approximately 49% of our estimated oil sales based on the midpoint of our revised guidance. We also have 1.2 BCF of natural gas hedged, or approximately 38% of our estimated natural gas sales based on the midpoint. For a quarterly breakdown of our hedge positions for Q3 and Q4 of 2024, please see our earnings release and presentation, which includes the average price for each contract type.

Speaker Change: For the last six months of 'twenty 'twenty four we currently have approximately 1.2 million barrels of oil hedged or approximately 49% of our estimated oil sales based on the midpoint of our revised guidance.

Speaker Change: We also have 1.2 Bcf of natural gas hedged at approximately 38% of our estimated natural gas sales based on the midpoint.

Speaker Change: For a quarterly breakout of our hedge positions for Q3, and Q4 of 'twenty 'twenty four please see our earnings release and presentation, which includes the average price for each contract type.

Travis Thomas: Now, let's turn to the balance sheet in some more detail. At June 30, we had $407 million drawn on our credit facility. With a current borrowing base of $600 million, we had $192.9 million available, net of letters of credit.

Speaker Change: Now, let's turn to the balance sheet and some more detail.

Speaker Change: At June 30, we had $407 million drawn on our credit facility with occurring current borrowing base of $600 million, we had $192 $9 million available net of letters of credit.

Travis Thomas: Combined with cash, we have liquidity of $194.1 million with a leverage ratio of 1.59 times. Looking at our Outlook and Guidelines, For the second half of 2024, we will continue to utilize a 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 BOE per day production levels while continuing to grow crude oil sales.

Speaker Change: Combined with cash we have liquidity liquidity of $194 1 billion with a leverage ratio of 1.59 times looking at our outlook and guidance for the second half of 'twenty 'twenty. Four we will continue to utilize a drilling program that maintains our flexibility to react to changing market conditions adjust spending.

Speaker Change: Levels as appropriate as well as manage our cash flows quarter to quarter. Our focus is on maintaining or slightly growing Boe per day production levels, while continuing to grow crude oil sales. Our average daily sales volume guidance for full year 2024 have been increased from the previous including.

Travis Thomas: Our average daily sales volume guidance for full year 2024 has been increased from the previous, including crude oil sales volumes of 13,200 to 13,800 barrels of oil per day, and BOE sales volumes of 19,000 to 19,800 BOE per day, or 70% oil. For the third quarter, we are providing a sales outlook of crude oil sales volumes of 13,200 to 13,800 barrels of oil per day and BOE sales volumes of 19,000 to 19,800 BOEs per day at 70% oil.

Speaker Change: Crude oil sales volumes of 13200 to 13800 barrels of oil per day, and <unk> sales volumes of 19000 to 19800 Boe per day or 70% oil for.

Speaker Change: For the third quarter, we are providing our sales outlook of <unk>.

Speaker Change: Crude oil sales volumes of 13200 to 13800 barrels of oil per day N. P. O E sales volumes of 19000 to 19800 Boe's per day at 70% oil.

Travis Thomas: Those who are still paying attention probably have noticed that our third quarter and full year of production guidance mirror each other and reflect a midpoint that is similar to where we ended the first half of 2024. For CapEx, we now expect to spend $141 million to $161 million on our full-year development plan, which is 3% lower at the midpoints compared to our previous full-year guidance. In addition, we are providing an estimate of between $35 million and $45 million for the third quarter.

Speaker Change: Those who are still paying attention probably have noticed that our third quarter and full year production guidance mirror each other and reflect a midpoint the similar to where we ended the first half of 'twenty 'twenty four.

Speaker Change: For Capex, we now expect to spend $141 million to $161 million on a full year development plan, which is 3% lower at the mid points to our previous full year guidance. In addition, we are providing an estimate of between 35 million to 45 million for the third quarter.

Speaker Change: We now anticipate full year 2024 L. O E of $10 50 to $11 25 per BOE and are providing guidance of $10 50 to $11 25 per Boe for the third quarter of 2024.

Travis Thomas: We now anticipate full-year 2024 LOE of $10.50 to $11.25 per BOE and are providing guidance of $10.50 to $11.25 per BOE for the third quarter of 2024. Finally, I would 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. Paul.

Speaker Change: Finally, I would note that all projects and estimates are based on assumed W. T. I oil prices of 70 to $90 per barrel and Henry hub prices of two to $3 per Mcf.

Speaker Change: So with that I will turn it back to Paul for his closing comments Paul.

Paul: Thank you Travis.

Paul McKinney: Thank you, Travis. Similar to the first quarter, we view our operational financial success during the second quarter as a direct reflection of the merits of our proven and disciplined strategy designed to maximize free cash flow generation, further improve the balance sheet, profitably grow the business, and ultimately provide a sustainable return of capital to stockholders. In short, we are executing a plan that we believe generates sustainable value and is in the best interest of our stockholders.

Paul: Similar to the first quarter, we view our operational financial success. During the second quarter is a direct reflection of the merits of our proven and disciplined strategy designed to maximize free cash flow generation further improve the balance sheet profitably grow the business and ultimately provide a sustainable return of capital to stockholders.

Paul: In short we are executing the plan that we believe generate sustainable value and it is in the best interest of our stockholders.

Paul: Having said that I want to address in my closing comments several key questions related to our strategy that we continue to hear from our institutional and individual stockholders, perhaps the most common question appears to be regarding our commitment to paying down debt as I have stated previously we are focused on reducing our absolute <unk>.

Paul McKinney: Perhaps the most common question appears to be regarding our commitment to paying down debt. As I've stated previously, we are focused on reducing our absolute debt levels. And our goal is to make material progress in this regard in the future, depending on oil prices and other factors that affect our ability to do so. However, there are opportunities for growth that may require increases in the absolute debt levels that can have a material benefit to our stockholders. I am referring to opportunities to grow through strategic and accretive acquisitions.

Paul: At levels.

Paul: And our goal is to make material progress in this regard in the future depending on oil prices and other factors that affect our ability to do so.

Paul: However, there are opportunities for growth that may require increases in the absolute debt levels that can have a material benefit to our stockholders I am referring to opportunities to grow through strategic and accretive acquisitions regarding the debt that we could incur associated with a potential acquisition.

Paul McKinney: Regarding the debt that we could incur associated with a potential acquisition, you have heard me say in the past that we intend any future acquisitions, in addition to being accretive to our stockholders, to be balance sheet-enhancing. We have also said that if they are not balance sheet enhancing, we will attempt to keep the deal as close to being balance sheet neutral as we can with clear sight to the pay down of the debt incurred. Two examples of how our intentions in this regard have panned out in the past are the acquisitions we closed during the last two years, the Stronghold Acquisition and the Founders Acquisition.

Paul: Position you have heard me say in the past that we intend any future acquisitions. In addition to being accretive to our stockholders to be balance sheet enhancing.

Paul: We have also said that if they are not balance sheet enhancing we will attempt to keep the deal is closed as being balance sheet neutral as we can with clear sight to the paydown of the debt incurred.

Paul: Two examples of how our intentions in this regard have panned out in the past.

Paul: Are the acquisitions, we closed during the last two years, the stronghold acquisition and the founders acquisition.

Paul McKinney: Let's look at the details of those transactions, specifically regarding their impact on our balance sheet and our leverage ratio. As you recall, we structured the finances of Stronghold Acquisition with a mixture of debt, equity, a deferred cash payment, and a novation of their hedge position. The result of that extremely accretive deal was that our leverage ratio went from 3.5 times our trailing 12-month EBITDA to 1.4 times, greatly enhancing our balance sheet. When considering the founder's acquisition and the impact that deal had on our balance sheet, we drew down the funds necessary to purchase those assets from our credit facility.

Paul: Let's look at the details of those transactions specifically regarding their impact on our balance sheet and our leverage ratio.

If you recall when we structured the financing of the stronghold acquisition with a mixture of debt equity a deferred cash payment and the novation of their hedge position.

Paul: <unk> of that extremely accretive deal was that our leverage ratio went from three five times, our trailing 12 months EBITDA to one four times greatly enhancing our balance sheet.

Paul: When considering the founders acquisition and the impact that deal had on our balance sheet, we drew down the funds necessary to purchase those assets from our credit facility. So the deal increased our absolute debt. However, we structured the deal and took advantage of several attributes of the assets to position the transaction.

Paul McKinney: So the deal increased our absolute debt. However, we structured the deal and took advantage of several attributes of the assets to position the transaction so that it was essentially balance sheet neutral from a leverage ratio perspective. Let me explain.

Paul: So that it was essentially balance sheet neutral from a leverage ratio perspective.

Paul: Let me explain first we took advantage of the cash flow from the high cash flow and has asked to help reduce the amount we had to draw down on our credit facility at closing.

Paul McKinney: First, we took advantage of the cash flow from the high cash flow in assets to help reduce the amount we had to draw down on the credit facility at closing. We paid $75 million for the assets, with an effective date of April 1, 2023. The cash flow from the assets from the effective date until closing on August 15, 2023, reduced the amount owed to $62 million. Additionally, part of the closing obligation was deferred for four months in the form of a deferred payment of $15 million, reducing the draw against the credit facility at the closing even more. The next thing we included in that deal was the ability to apply post-COVID adjustments to the deferred payment. Thus, instead of paying the $15 million as originally planned, we paid $11.9 million.

Paul: We paid $75 million of the assets with an effective date of April one 2023, the cash flow from the assets from the effective date until closing August 15th 2023, reduce the amount owed to $62 million.

Paul: Part of the closing obligation was deferred for months in the form of a deferred payment of $15 million, reducing the draw against our credit facility and to closing even more the next thing. We included in that deal was the ability to apply post closing adjustments to the deferred payment instead of paying a $15 million as.

Paul: Planned we paid $11 9 million and if you recall, we did not have to draw the $11 9 million against the credit facility because the company's cash flow during the quarter was sufficient to cover the deferred payment and pay down debt.

Paul McKinney: And if you recall, we did not have to draw the $11.9 million against a credit facility because the company's cash flow during the quarter was sufficient to cover the deferred payment and pay down debt. After including the tumbling 12-month EBITDA from the acquired assets, the deal was essentially balance sheet neutral from a leverage ratio perspective when not including the deferred payment. Since closing, we have paid down $48 million of the debt incurred and are on track to pay off the entire amount very soon, hopefully by the end of this quarter if oil prices return to recent levels.

After including the trailing 12 months EBITDA from the acquired assets. The deal was essentially balance sheet neutral from a leverage ratio perspective, we're not including the deferred payment since.

Paul: Since closing, we have paid down $48 million of the debt incurred and are on track to pay off the entire amount very soon hopefully by the end of this quarter if oil prices return to recent levels.

Paul McKinney: So the bottom line is this, we incurred additional debt for the Founders Deal, but it was essentially balance sheet neutral from a leverage ratio perspective. We had and still have a very clear path to a rapid pay down of the debt incurred.

Paul: So the bottom line is this we incurred additional debt for the founders deal, but it was essentially balance sheet neutral from a leverage ratio perspective, we had and still have a very clear side to a rapid paydown of the debt incurred the benefits of the stock over is that after the debt is paid off we will have approximately an additional 2000 barrels.

Paul McKinney: The benefit to the stockholder is that after the debt is paid off, we will have approximately an additional 2,000 barrels of oil equivalent per day of production or more to accelerate the repayment of the remaining debt. Another question we often get is regarding our stock price and what many have identified as a disconnect between our operational financial performance and our stock price performance. As you know, there are numerous factors that affect stock price performance, and investors and industry pundits have shared with us the issues they believe are having the largest impact.

Paul: As of oil equivalent per day of production or more to accelerate the repayment of the remaining debt.

Speaker Change: Another question, we often get is regarding our stock price and what what many have identified as a disconnect between our operational financial performance and our stock price performance.

Speaker Change: As you know there are numerous factors that affect stock price performance and investors and industry pundits have shared with us the issues. They believe are having the largest impact I don't plan to speculate in this regard to try to force rank, which are the most are the most important or whether some of them are truly affecting our stock price but.

Paul McKinney: I don't plan to speculate in this regard or try to force-bag which are the most important or whether some of them are truly affecting our stock price, but what I will do is share the things we are doing to help improve our stock price performance. First, we don't believe a large enough cross-section of the investment community knows about Ring Energy. We also don't believe many are adequately educated about our assets in the Northwest Shelf and the Central Basin Platform and what makes them different from the assets they typically know about in the Delaware and the Midland Basins.

Speaker Change: What I will do is share the things we're doing to help improve our stock price performance.

Paul McKinney: We also believe there is more we can do to educate the investment community about our strategy and the aspects of Ring that make us different from other public oil and gas investment opportunities. To help with all of this, we are stepping up our communication strategy by participating in more industry events and conferences to educate and tell our story. We are also scheduling more non-deal roadshows, both in person and virtually, with potential investors, institutional investors, lenders, and a broader cross-section of the banking and investment banking communities, all with the hopes of attracting long-term institutional investors.

Speaker Change: We don't believe a large enough cross section of the investment community knows about ring energy. We also don't believe many are adequately educated about our assets in the north west shelf and the Central basin platform and what makes them different from the assets. They typically know about in the Delaware and the Midland basins.

Speaker Change: We also believe there is more we can do to educate the investment community about our strategy and the aspects of rain that make us different from other public oil and gas investment opportunities to help with all of this we are stepping up our communication strategy by participating in more industry events and conferences to educate and tell our story.

Speaker Change: We are also scared me more non deal roadshows, both in person and virtually with potential investors institutional investors lenders and a broader cross section of the banking and investment banking communities, all with hopes of attracting long term institutional investors.

Speaker Change: Another related thing we're trying to do is attract more analyst coverage, we have and continue to meet with analysts that for one reason or another have not yet initiated coverage on us our efforts to date have been focused on understanding the requirements and to position the company to meet those requirements.

Paul McKinney: Another related thing we are trying to do is attract more analyst coverage. We have and continue to meet with analysts that, for one reason or another, have not yet initiated coverage on us. Our efforts to date have been focused on understanding their requirements and positioning the company to meet those requirements. Last, but certainly not least, is our debt.

Speaker Change: Last but certainly not least is our debt we are focused on improving our balance sheet and absolute debt levels, we believe making material progress in this regard can have a positive impact on the value creation, we are targeting getting our leverage ratio comfortably below one times and believe that it is a realistic and achievable goal to.

Paul McKinney: We are focused on improving our balance sheet and absolute debt levels. We believe making material progress in this regard can have a positive impact on value creation. We are targeting getting our leverage ratio comfortably below one times and believe that it is a realistic and achievable goal. To sum up, we believe our value-focused, proven strategy better prepares a company to manage industry risks and uncertainties, results in the 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 stockholders.

Speaker Change: To sum up we believe our value focus proven strategy better prepares a company to manage the industry risks and uncertainties resulted in generation of sustainable and competitive returns and supports our efforts to achieve the necessary business size and scale to position range sustainably returned capital to stockholders. We also believe.

Paul McKinney: We also believe staying the course with our strategy will ultimately deliver growth and competitive returns despite the continuing volatility we endure in our industry. I want to thank all of you for your interest in Ring Energy and for participating in our call today. I also want to thank our stockholders for their continued support and trust. And with that, we will turn this call over to the operator for questions. Operator? Thank you.

Speaker Change: <unk> staying the course with our strategy will ultimately deliver growth and competitive returns. Despite the continuing volatility we endure in our industry I want to thank all of you for your interest in ring energy and for participating in our call. Today I also want to thank our stockholders for their continued support and trust and with that.

Speaker Change: We will turn this call over to the operator for questions operator.

Speaker Change: Thank you.

Operator: Thank you. We will now begin the question and answer session. To ask a question, you may press star and then one on your touch-tone phone. If you are using a speaker phone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question comes from Neal Dingmann with Truist. Please go ahead.

We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.

Speaker Change: You are using a speakerphone please pick up your handset before pressing the keys.

Anytime you question has been addressed and you like to withdraw your question. Please press Star then two.

Speaker Change: At this time, we will pause momentarily to assemble our roster.

Speaker Change: The first question comes from Neal Dingmann with Truest. Please go ahead.

Neal Dingmann: Good morning, good night. This is an update, Paul and team.

Neal Dingmann: Good morning, Good nice update Paul and team. My first question is on your inventory specifically guys looking at that Slide 26, no doubt you all continue to put up some nice vertical and horizontal wells in the platform as well as in the shelf.

Neal Dingmann: My first question is on your inventory. Specifically, guys, looking at slide 26, no doubt you all continue to put up some nice vertical and horizontal wells on the platform as well as on the shelf and, you know, even the re-completion activities. So I guess what I'm wondering here is can you remind me, the majority of this year, sort of going forward in the remainder, you know, and even into next year, where you're thinking about the capital to be allocated and maybe just talk about inventory depth. It's just, you know, it's interesting to me about all the vertical and horizontal potential as well as the refract potential.

Speaker Change: And even the B completion activities. So I guess, what I'm wondering here is can you remind me the majority of this year sort of going forward the remainder of <unk> and then even into next year.

Speaker Change: What are you thinking about the capital will be allocated and maybe just talk about inventory depth.

Speaker Change: And beyond all the vertical and horizontal potential as well as the re frac potential.

Speaker Change: Yeah very good other good questions.

Paul McKinney: Yeah, very good. Those are good questions. We like the allocation mix that we currently have, and we've talked about this in the past. Our allocation strategy, really, in terms of how we allocate capital, is basically based on two things. Number one, cash flow generation is the first consideration. But the other thing is the results of, or the issues associated with managing infrastructure constraints, where we have the saltwater disposal capacity, whether there are electrical constraints, whether there's enough fresh water or water we can use for the frac jobs. All of these types of constraints go into planning all of that.

Speaker Change: We liked the allocation mix.

Speaker Change: That we currently have.

Speaker Change: And prime and we've talked about this in the past our allocation strategy really in terms of how we allocate capital are basically <unk>.

Speaker Change: Based on two things number one.

Speaker Change: Cash flow generation as the first consideration, but the other thing is as a result of our the issued associated with managing infrastructure constraints.

Speaker Change: Where we have.

Speaker Change: Saltwater disposal capacity, whether their electrical constraints, whether there's enough fresh water or water or we can use for frac jobs all of these types of construction.

Speaker Change: <unk> go into planning all of that and so all of that works together to maximize.

Paul McKinney: And so all of that works together to maximize capital generation. And so the allocation between horizontals and verticals, the horizontals tend to generate larger production volumes and also higher net present value, but when mixed with the verticals, they have a very rapid payback.

Speaker Change: Cash flow generation and so the allocation between Horizontals.

Speaker Change: And the verticals the horizontals tend to generate a larger producing volumes and also to a higher net present value.

Speaker Change: But the mix with the verticals.

Speaker Change: Have very rapid payback.

Speaker Change: And many of the vertical areas have higher oil percentages. We're also focused on that.

Speaker Change: And so now getting back to the depth of the inventory I've said and I'll say it again, we have a really handsome short medium term inventory to keep us going for the next several years. However, we don't have the luxury that many of the other companies have especially those in the Delaware and Midland Basin of a big 15% to 20 year inventory. So that's the reason why we're so.

Paul McKinney: And many of the vertical areas have higher oil percentages, so we're also focused on that. And so, now getting back to the depth of the inventory, I've said, and I'll say it again, we have a really handsome, short, medium-term inventory to keep us going for the next several years. However, we don't have the luxury that many of the other companies have, especially those in the Delaware and Midland Basins, of a big 15 to 20-year inventory.

Paul McKinney: So that's the reason why we're so focused on acquisition. And we believe, though, that in the area that we're focused on, there's plenty of opportunity to continue to fill the hopper so that we can continue to deliver the types of returns. Now the other thing that's going on that we haven't really talked much about, and I think you'll hear us talk more about this as we go into the future, is that we're now at the point where we're testing ideas on our existing acreage that could organically generate additional drilling opportunities.

Focused on acquisitions.

Speaker Change: And so we believe though that in the area that we're focused there is plenty of opportunity to continue to fill the hopper. So that we can continue to deliver the types of returns now the other thing thats going on that we haven't really talked much about it I think you'll hear us talk more about this as we go into the future is that we're now to the point where testing ideas on our existing.

Speaker Change: <unk> acreage that could organically generate additional drilling opportunities. Some of these would be verticals. Some of these would be horizontal and so there is a little sprinkle of capital allocation towards these higher risk.

Paul McKinney: Some of these would be vertical, some of these would be horizontal. And so there is a little sprinkle of capital allocation towards these higher risk tests, but the benefit to that was we could significantly improve our inventory, and we could do that organically. And that's a lot better than going out and acquiring undeveloped opportunities for acquisition. That's kind of the... I hope that answers your question.

Speaker Change: But the benefit to that was we could significantly improve our inventory and we can do that organically and that's a lot better than going out and acquired.

Undeveloped opportunities for acquisition so.

Speaker Change: That's kind of what you can see the muscle.

Speaker Change: I hope that answered your question Neal.

Neal Dingmann: and it certainly did and what you said sort of tied right into my second question that is just on the upcoming conventional M&A opportunity seems to me there's several I you know I've even heard of some conventional packages really interesting packages already out there sounds like there's more that may hit the market so just wondering maybe what you know where you guys see it if you've heard the same and you know again kind of what your restrictions are to you know when you're looking at some of these deals

Neal Dingmann: It certainly did and what you said sort of tied right into my second question that is just on the upcoming.

Neal Dingmann: Upcoming conventional M&A opportunity it seems to me there are several.

Speaker Change: I'd, even heard of some conventional packages is really interesting and packages are already out there. It sounds like there is more that may hit the market. So just wondering maybe what.

Speaker Change: Where do you guys see it if you've heard the same end.

Speaker Change: Getting kind of what's your.

Speaker Change: Restrictions are that you know when youre looking at some of these deals.

Speaker Change: Yeah, and so you heard us say in the past that we believe that the activity of the larger.

Paul McKinney: Yeah, and so you've heard us say in the past that we believe that the activity of the larger organizations in our industry, as they consolidate the middle in Delaware, that they would want to help Pay Down or Pay Off or reduce their leverage associated with those deals by selling what they consider noncore assets, assets where they have not historically allocated a lot of capital to. And so it's proved not to be true.

Speaker Change: Organizations in our industry as they consolidate the Midland and Delaware that they would want to help.

Speaker Change: Pay down or pay off and reduce our leverage associated with those deals.

Speaker Change: Our selling what they consider noncore.

Speaker Change: Assets assets, where they have not historically allocated a lot of capital too and so it's proven out to be true as you know and I'm not gonna name any of these but.

Paul McKinney: As you know, and I'm not going to name any of these, but there are several packages out there on the street. We do hear, like you have heard, that we believe there are more packages that are going to hit the street over the next couple of years. As we've said in the past, we believe that the number of opportunities that will hit the street will exceed our ability to take them all down. And several of these we've been mapping and looking at for quite some time. Some of these we've actually approached to try to initiate a negotiated deal, but we haven't been successful in that regard all the time.

Speaker Change: There are several packages out there on the street.

Speaker Change: We do hear like you have heard that we believe there are more packages that are going to hit the street over the next couple of years we've.

Speaker Change: We've said this in the past we believe that the number of opportunities that will hit the street, we will exceed our ability to take them all down and we have.

Speaker Change: Several of these we've been mapping and looking at for quite some time some.

Speaker Change: Some of these we've actually approach a trial tried to initiate a negotiated deal we haven't been successful in that regard all the time.

Paul McKinney: But yeah, we're very interested. Currently, we are focused on the very areas that we currently operate in. Again, because we can capture the synergies associated with spreading our operating team over more wells and more production. This is an area that we know very well. It's an area that we've been concentrating on. Our geoscience teams have been mapping and identifying undeveloped opportunities that reside under other people's acreage. And so we're actually very excited about what we're seeing play out.

Speaker Change: But yes.

Speaker Change: Yes, we're very interested currently we are focused in the very areas that we currently operate again, because we can we can capture the synergies associated with spread and our operating team over more wells and more production.

Speaker Change: This is an area that we know very well and it's an area that would be concentrating on our geoscience teams have been mapping identifying undeveloped opportunities that reside under other people's acreage and so we're actually very excited about what we're seeing play out.

Paul McKinney: And in some respects, we're kind of hoping that maybe these acquisition opportunities would hit the market a little bit more widely so that we'd have a better chance of capturing some. But some of them are coming so fast that we will have to let one or two of them go just simply because we can't take it all in, right?

Speaker Change: In some regards we're kind of hoping that maybe the these acquisition opportunities will hit the market a little more spread out so that we'd have a better chance of Catherine so and some of them are coming so fast.

Speaker Change: We'll have to let one or two of them go just because we can't take it all in right.

Neal Dingmann: No, well said. Thank you. Thank you, Paul. Oh, go ahead.

Paul: Well said thank you. Thank you Paul Oh go ahead.

Speaker Change: Sure.

Alex Dyes: If I may, this is Alex. We created a slide specifically for this question, slide 15, and it should give both the analysts and just the investing community an idea of our acquisition strategy, and it backs up everything Paul just covered.

Alice: If I if I may this is Alice we created specifically a slide for this question Slide 15 initiative.

Speaker Change: Both both analysts and listeners and back and community with our acquisition strategy Backstop everything Prologis covered yes.

Paul McKinney: Yeah, if you go back to that slide, you'll notice that if you look at all of the potential acquisition opportunities that reside out there in the very area that we're focused on, it represents, you know, 480 plus thousand barrels of oil equivalent per day of production. That's a huge target for a company our size, and it's just self-explanatory. By observation, you know that we can't take all of that down, but that just does represent the true opportunity that's out there before us.

Speaker Change: Yes, if you go back to that slide you'll notice that if you look at all of the potential acquisition opportunities that reside out there in the very area that we're focused on it.

Speaker Change: <unk> represents you know 480, plus thousand barrels of oil equivalent per day of production as a huge target for a company our size and its just is self explanatory.

Speaker Change: My observation you know that we can't take all of that down but that just does represent the true opportunity that that's out there before us.

unknown: Great comments. Thanks, guys. Thanks, Al. The next question comes from John White with Ross Capital. Please go ahead.

Speaker Change: Great. Thanks, guys. Thanks al.

Speaker Change: Okay.

Paul McKinney: Actually, they're slightly coming down, and so we're taking advantage of that. And so we believe that the rest of the year, unless something changes, we can enjoy that. We'll see quite a bit of savings. Now, we're still targeting, essentially, the same number of wells. We're just saying that we can now drill them and complete them and bring them online for less money than we originally estimated. And John, there's actually a slide, slide six, describing exactly what I'm talking about.

John White: No, we have not. The guidance for our CapEx that we have provided for the rest of the year does represent, if you consider just the midpoints, a slight reduction in our capital spending. Again, we are enjoying a time period in the macro environment where the drilling activity in the Permian Basin has not increased. It's actually, you know, been holding flat or slightly down a little bit. And so, in my opinion, the oil field services industry has... They're designed, really, to operate at a higher activity level than we currently are. And so as a result, we're not seeing the pressures, the inflationary pressures on the increase in cost.

Speaker Change: Our next question comes from John White with Roth Capital. Please go ahead.

John White: Good morning, and congratulations on a strong quarter and year.

Speaker Change: Got it.

Speaker Change: Congrats on your increased production guidance.

Speaker Change: But to be clear are you <unk>.

Speaker Change: Have not announced an increase in Capex right.

Speaker Change: No we have not the guidance for our Capex that we have provided for the rest of the year does represent if you had considered at the midpoint a slight reduction in our capital spending again.

Speaker Change: We are enjoying a time period, the macro environment, where the drilling activity in the Permian Basin has not increase has actually been holding.

Speaker Change: Flat or slightly down a little bit and so in my opinion the oilfield oilfield.

Oil field services industry has.

Speaker Change: They're designed really to operate at a higher activity level that we're currently are and so as a result.

Speaker Change: We're not seeing the pressures inflationary pressures on increase in costs actually theres slightly coming down. So we're taking advantage of that and so we believe that.

Speaker Change: The rest of the year unless something changes.

Speaker Change: We can enjoy that we'll see quite a bit of say now we're still targeting essentially the same number of wells. We're just saying that we can now drill them and complete them and bring them online for less money than we originally estimated.

Jonathan: And Jonathan that's it.

unknown: And John, there's actually a slide, slide 6, that describes exactly what Paul's talking about. And comparing the original guidance that we provided at the beginning of the year compared to this updated guidance, the midpoints are a 3% reduction.

Slide Slide six described exactly what you're talking about and comparing the original guidance that we provided the beginning of the year compared to the updated guidance the midpoint of 3% reduction.

Jonathan: Okay.

Jonathan: It was less favorable and thanks for the detail.

Jonathan: Youre welcome.

Jonathan: The next question comes from Jeff Gramm with Alliance Global Partners. Please go ahead.

unknown: The next question comes from Jeff Grampp with Alliance Global Partners. Please go ahead.

Jeff Grampp: Hey guys, couple questions on the capital side for you. Obviously, really nice performance thus far in the first half of the year. I think you've probably averaged something in the neighborhood of like 35 million a quarter in CapEx. Activity levels in the back half of the year sound like they'll be similar to the first half, but CapEx is probably gonna be more like the 40 million a quarter range. So I was just wondering if that's just general conservatism on your part or if there's any, you know, perhaps specific reasons why capital might creep a little bit higher in the back half versus the first half given the consistency in your activity levels.

Jeff Gramm: Hey, guys.

Jeff Gramm: Questions on the capital side for you.

Jeff Gramm: Obviously really nice performance, thus far in the first half of the year I think you'd probably average something in the neighborhood of like 35 million a quarter in capex.

Activity levels in the back half of the year sounds like will be similar to the first half, but capex is probably gonna be more like $40 million a quarter range. So I was just wondering is that just general conservatism. There on your part or if there's any you know perhaps specific reasons why capital might creep a little bit higher in the back half versus the first half given the.

Jeff Gramm: Consistency in your activity levels.

Speaker Change: Yeah, it's actually a combination of a couple of things.

Paul McKinney: Yeah, it's actually a combination of a couple of things. Our estimates are probably a little high versus the inflationary pressures we've seen, kind of going back to the question we just discussed with John White. But at the same time, and I don't mind sharing this, because of the success we've had in the first half and because of the success of the ongoing programs we've budgeted for the year, we're also allocating a little bit of capital towards some more risky investments that could potentially prove up significant additional reserves organically. And so that's really what represents a higher end. Sean, I don't know if you've got anything you could add to that.

Speaker Change: Our estimates.

Speaker Change: Probably are a little high versus the inflationary pressures, we are seeing the kind of going back to the question. We just failed to with John John White.

Speaker Change: But at the same time and I don't mind share on this.

Speaker Change: Because of the success, we've had in the first half and because of the success of the ongoing programs. We budgeted for the year. We're also allocating a little bit of capital towards some more risky.

Speaker Change: Investments that could potentially prove up significant additional reserves organically and so that's really the.

Speaker Change: What represents a higher end shall I don't know if you've got more you could add to that yes again, if you do look at slide number six and the guidance. We provided there there is a little bit of an increase in activity and as Paul mentioned, we do have a few more wells that that we do plan to drill in the fourth quarter and.

Sean Young: Yeah, again, if you do look at slide number six and the guidance we've provided, there is a little bit of an increase in activity, and as Paul mentioned, we do have a few more wells that we do plan to drill in the fourth quarter, and so that's the majority of that incremental capex that you're seeing. And I think we're also going to...

Paul: So that's that's the majority of that incremental capex that you're seeing.

Paul McKinney: And I think we're also going to step up some of our spending on... You know, some of our facility upgrades. You know, putting in, capturing emissions, doing that kind of thing. A few additional capital costs that we've decided to throw in. So, you know, we believe that our guidance range is just about right. I'd love to come in below it, but if it does, it'll be because of industry inflation; the macro environment will continue to improve.

Paul: I think we're also going to step up some of our spending on.

Paul: Some of our facility upgrades.

Paul: Putting in capturing emissions doing that kind of thing.

Speaker Change: Additional capital cost that we've decided to throw and so we believe that our guidance ranges just about right.

Speaker Change: Love to come in below it but.

Speaker Change: If it does it'll because industry.

Speaker Change: <unk> the macro environment will continue to improve.

Jeff Grampp: I understand. Thanks for those details. And my follow-up question, you guys have a slide kind of noting a bit of the well-cost reductions towards the back end of the deck, I believe. Should we think about those as being mostly kind of near-term and maybe more transitory related to softness in the overall OFS market, or are there some more kind of ring-specific internal efficiencies where maybe some of those cost reduction captures a little bit more permanent, if

Speaker Change: Understood. Thanks for those details and my follow up you guys have a slide kind of noting a bit of the well cost reductions towards the back end of the deck I believe.

Speaker Change: Should we think about those as being mostly kind of near term and maybe more transitory related to softness in the overall market or are there some more kind of range specific internal efficiencies where.

Speaker Change: Maybe some of those costs.

Speaker Change: Production captures a little bit more permanent.

Speaker Change: Thank you will.

Paul McKinney: That's kind of hard to predict. I'm going to turn this over to Sean to ask, but it's really hard to predict because we assume the same level of efficiency when we're drilling and completing the wells, and I have to turn my hats off to my drilling department because they continue to improve their efficiency beyond our assumptions. So Sean, you got more to say there? Yeah, just to add a little color there, we are seeing some improvements in our overall efficiencies on the drilling side and the completion side where we are just, you know, driving out costs by being faster and more efficient.

That's kind of hard to predict and I'm going to turn this over to John to ask but it is really hard to predict because we assume the same level of efficiency when we're drilling and completing the wells and I had to turn.

Speaker Change: My hats off to my drilling the par because they continue to improve their efficiency beyond what our assumptions. So Sean you have more to say there yeah just to add a little color there.

Sean: We are seeing some improvements in our overall efficiencies on the drilling side and the completion side, where we are just.

Sean: Driving out costs by by being faster and more efficient and and so.

Sean: Yes, there is a component of that is just the overall relaxation in the prices of the service industry.

Paul McKinney: And so, yeah, there is a component of that that is just the overall relaxation in the prices of the service industry, but there's definitely some that we are going to be able to realize going forward just from the performance of our drilling team and completion team.

Sean: But there is definitely some that we are going to be able to realize going forward just from our.

The performance of our of our drilling team and completion team.

Speaker Change: Got it I appreciate the detail. Thank you guys.

Jeff Grampp: Got it. I appreciate this detail. Thank you, guys.

Sean: Yes.

Speaker Change: Again, if you have a question. Please press Star then one our next question will come from Jeff Robertson with water Tower Research. Please go ahead.

Jeff Robertson: Again, if you have a question, please press star then 1. Our next question will come from Jeff Robertson with Water Tower Research. Please go ahead.

Jeff Robertson: Thank you. Paul, production this year seems to have benefited from two things. One is performance on the wells you drilled, but also a lot of the field level steps Ring has taken to either increase run times or deal with water disposal and things like that. Has a lot of the heavy lifting on the field operations with respect to the founders' acquisition or the existing asset bases been done? Or do you see further opportunity to enhance production just by better field level operations?

Jeff Robertson: Thank you Paul.

Speaker Change: <unk> production this year seems to have benefited from.

Speaker Change: Two things one is performance on the wells you've drilled but also.

Speaker Change: A lot of the field level steps you ring has taken to either increased run times, our deal with water disposal and things like that.

Speaker Change: There's a lot of the heavy lifting on the field operations with respect to the founders acquisition or the existing asset base has that been done or do you see further opportunity to.

Speaker Change: To enhance production just by better better field level operations.

Speaker Change: Yeah. This is Shawn I'll I'll I'll take a stab at that one.

Sean Young: Yeah, this is Sean. I'll... I'll take a stab at that one. Yeah, I think there's always room for improvement, and as we continue to have more time in the saddle with these acquisitions, we do expect that we'll continue to see some improvement. But we are seeing it in our other assets as well, not just the newly acquired properties, with some of the bottom hull assemblies and things that we've incorporated into our rod designs and artificial lift designs have really started to make an impact, and so you're able to see that in the numbers now.

Shawn: Yeah, I think there's there's always there's always room for improvement.

Speaker Change: And.

Speaker Change: As we continue to.

Speaker Change: To have more time in the saddle with these acquisitions you know we do we do expect that we will continue to see some improvement.

Speaker Change: But we are we are seeing it in our other assets as well not just the.

Speaker Change: The newly acquired properties just with some of the.

Speaker Change: The bottom hole assemblies and things that we've.

Speaker Change: Incorporated in our in our Rod designs and artificial lift designs that have really started to to.

Speaker Change: To make an impact and so youre able to see that in the numbers now.

Jeff Robertson: Paul, on the case study you talked about for the Founders Acquisition... Does the type of asset that includes a pretty heavy PDP base, with, as one of your slides points out, your corporate decline curve being a lot less than some of the peers who are probably more focused on unconventional assets? And in those types of deals, are you able to pick up inventory at a relatively low cost because of the conventional nature?

Paul: Paul on the case study you talked about for the founders acquisition.

Speaker Change: Does the type of asset that fit that.

Paul: Include a pretty heavy PDP base.

Paul: As you know one of your slides points out your corporate decline curve being a lot less than some of the peers, who were probably more focused on <unk>.

Speaker Change: Conventional assets in those types of deals.

Speaker Change: Are you able to pick up inventory at a relatively low cost because of the conventional nature.

Speaker Change: Yes, it's actually the conventional major tends to reduce the competition for those opportunities and so I will say this if you look at what's out there in the marketplace today for sale there is a mix of the offer.

Paul McKinney: Yeah, it's actually the conventional nature tends to reduce the competition for those opportunities. And so I will say this, if you look at what's out there in the marketplace today for sale, there's a mix of acquisition targets that bring with them quite a few undeveloped opportunities based on our mapping and our analysis. There are also opportunities out there to pick up acreage that may be more closely to fully or almost fully developed. So there's not as many; it'd be more considered a PDP buy.

Speaker Change: Acquisition targets that bring with them quite a few undeveloped opportunities based on our mapping and our analysis. There is also opportunities out there to pick up acreage that.

Speaker Change: May be more closely to fully or almost fully developed so theres not as mayor it would be more considered a PDP by ey.

Paul McKinney: Each one of these asset acquisition opportunities brings different virtues that we consider. Some of them are very beneficial to the company. So we look at all of those things. And so it's kind of hard to predict. And at the same time, you also always have to consider that you have a low chance of being captured for any one of these acquisition opportunities. And so you do the best you can, and you compete the best you can. You don't want to overpay, but all of these things have various different virtues that could actually enhance the value for our shareholders. So we will look at all of them.

Speaker Change: Each one of these assets.

Speaker Change: Acquisition opportunities bring different virtue that we consider some of them are very beneficial to the company. So we look at all of those things and so it's kind of hard to predict that at the same time you always have always got to consider that you have a low chance of capture for any one of these acquisition opportunities and so you do the best you can.

Speaker Change: And you compete the best you can you don't want to overpay.

Speaker Change: All of these things have various different virtues that could actually enhance the value for our shareholders. So we look at all of that.

Jeff Robertson: If I could slip one more in. Paul, you talked about some higher-risk opportunities in the drilling program. Is that applying new technology to known reservoirs, or new technology to reservoirs that may not have been commercial in the past?

Speaker Change: If I could slip one more in Paul you talked about some high risk up higher risk opportunities in the drilling program is that applying new technology to known reservoirs or new technology of reservoirs that may not have been commercial in the past.

Paul: And the answer is yes.

Paul McKinney: The answer is yes. And so it's kind of hard to explain all that, but, you know, what we've done is, as you.....

Speaker Change: And so it's kind of hard to explain all of that but what we've done is as you.

Speaker Change: March through the development of one area and you learn what works what doesn't work and you have your geologists continuing to work the acreage that you have and even acreage position that you don't have you Youll look at the logs you look at the opportunity as you look at all the evidence that this.

Paul McKinney: March through the development of one area, and you learn what works and what doesn't work. And you have your geologists continuing to work the acres that you have and even acreage positions that you don't have. You look at the logs, you look at the opportunities, you look at all the evidence that was uncovered before us. And you start asking questions. Well, why won't this work over here, even though it hasn't been tried?

Speaker Change: That was it.

Speaker Change: Uncovered before us.

Speaker Change: And Youll start asking questions of why won't this work over here, even though it hasnt been tried.

Paul McKinney: And so you do that. Some of these, we call them slightly higher risk, but when you look at the logs and you compare the information that you have about the rocks and the oil that's in the rocks, A lot of times it's just the fact that they haven't been tried. And so some of them, although we call them higher risk, they may not be higher risk in the end. And so the good thing about it is that we're not only looking at these types of opportunities, but what we're doing, exactly where we're doing it, is immediately offset on the other side of the fence.

Speaker Change: And so you do that so some of these we call them slightly higher risk, but when you look at the logs and you compare that.

Speaker Change: The information that you have about the rocks and the oil that's in the rocks.

Speaker Change: A lot of times, it's just it's just the fact that hasnt been tried and so.

Speaker Change: Some of them, although we call them higher risk they may not be higher risk in the end and so the good thing about it is that we're not only looking at these type of opportunities are doing what we're doing exactly where we're doing it.

Speaker Change: Immediately offsetting on the other side of the Fayetteville. We're also looking at opportunities on our acreage, where we can apply horizontal drilling in areas that hasn't been applied yet and so yeah. We're really excited about that.

Paul McKinney: But we're also looking at opportunities on our acreage where we can apply horizontal drilling in areas that haven't been applied yet. So yeah, we're really excited about that. The opportunities that underlie our existing acreage, we believe, can be very significant. And so I'm proud to say that we've just now gotten to this point, and we're still not finished building out our team. But our geoscience team is doing more than just steering the drill bit to keep our wells in line on our horizontals and that kind of stuff and evaluating our own acreage. But we're expanding now. We're now generating ideas so that we can grow organically outside of the acquisition front.

Speaker Change: The opportunities.

Speaker Change: That underlie our existing acreage.

Speaker Change: We believe can be very significant and so I'm proud to say that we've just now gotten to the point and we're still not finished building out our team, but our geoscience team has is doing more than just.

Speaker Change: Staring the drill bit to keep ours wells in line on our horizontals in that kind of stuff and evaluated our own acreage, but we're expanding our generating now ideas. So that we can grow organically outside of the acquisition front.

Speaker Change: Thank you for taking my bonus question.

Jeff Robertson: Thank you for taking my bonus question. You're welcome.

Speaker Change: Youre welcome.

Operator: Again, if you have a question, please press star then 1. If there are no further questions, this will conclude our Q&A session. I would like to turn the conference back over to Paul McKinney for any closing remarks.

Speaker Change: Again, if you have a question. Please press Star then one.

Speaker Change: Seeing no further questions. This will conclude our Q&A session I would like to turn the conference back over to Paul Mckinney for any closing remarks.

Paul McKinney: Thank you Nick on behalf of the management team and board of Directors I want to once again. Thank you everyone for listening and participating in today's call. We're pleased to have posted record operational and financial results to date for 2024.

Paul McKinney: Thank you, Nick. On behalf of the management team and board of directors, I want to once again thank you, everyone, for listening and participating in today's call. We are pleased to have posted record operational financial results to date for 2024 and are looking forward to the remainder of the year, which we believe remains strong. We will continue to keep everyone appraised of our progress, and again, I'd like to thank you for your interest in Ring Energy. Have a great day!

Paul McKinney: And are looking forward to the remainder of the year, which we believe remains strong we will continue to keep everyone appraised of our progress.

Speaker Change: I'd like to thank you for your interest and bring energy have a great day.

Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

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Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: