Q1 2025 Ring Energy Inc Earnings Call
Operator: Good day and welcome to the Ring Energy's first quarter 2025 earnings conference. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.
Good day and welcome to the ring Energy first quarter 2025 earnings Conference call.
All participants will be in a listen only mode.
Should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
Operator: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star and 1 on a touch screen. If you'd like to withdraw your questions, please press star. that this event is being recorded.
After todays presentation, there will be an opportunity to ask questions.
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Al Petrie: I would now like to turn the conference over to Al Petrie, Investor Relations. Please go ahead. Thank you, Operator, and good morning, everyone. We appreciate your interest in Ring Energy.
Speaker Change: I would now like to turn the conference over to Al Petrie Investor Relations. Please go ahead.
Speaker Change: Thank you operator, and good morning, everyone. We appreciate your interest in Green energy well 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 2025 as well as our updated outlook. Joe will then turn the call.
Al Petrie: 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 2025, as well as our updated outlook.
Al Petrie: We'll then turn the call over to Travis Thomas, Ring's Executive VP and Chief Financial Officer, who will review our financial results.
Speaker Change: All 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 up for questions also joining us on our call today and available for the Q&A session are Alex Dias executive VP and chief.
Al Petrie: Paul will then return with some closing comments before we open the call up for questions.
Al Petrie: Also joining us on the call today and available for the Q&A session are Alex Dyes, Executive VP and Chief Operations Officer, James Parr, Executive VP and Chief Exploration Officer, and Shawn Young, Senior VP of Operations.
Speaker Change: <unk> Officer, James <unk>, Executive VP, and Chief Exploration Officer, and Sean Young senior VP of operations.
Al Petrie: During the Q&A session, we asked you to limit your questions to one and a follow-up. You are welcome to re-enter the queue later with additional questions.
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.
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 far-looking statements within the meaning of federal securities law. 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 statement. Finally, the company can give no assurance that such hard-looking statements will prove to be correct. Ring Energy disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
Speaker Change: Also note that we have posted an updated corporate presentation on our website.
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.
Speaker Change: <unk> disclaims any intention or obligation to update or revise any forward looking statements, whether as a result of new information future events or otherwise accordingly, you should not place undue reliance on forward looking statements. These and other risks are described in yesterday's press release and our filings with the SEC.
Al Petrie: Accordingly, you should not place undue reliance on forward-looking statements.
Al Petrie: These and other risks are described in yesterday's press release and our followings 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.
Speaker Change: These documents can be found in the investors section of our website located at www dot oriented true dotcom should one or more of these risks materialize or should underlying assumptions prove incorrect actual results may vary materially.
Al Petrie: 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.
Speaker Change: 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 Palmer.
Al Petrie: Finally, as a reminder, this conference call is being recorded.
Paul McKinney: I would now like to turn the call over to Paul McKinney, our chairman and CEO. Thanks, Al. We appreciate everyone for joining us today and for your interest in Ring Energy. We began 2025 with a strong first quarter where we met or exceeded all guidance targets. Driving our outperformance was exceptional oil sales volumes from newly drilled wells and our legacy assets through the outstanding efforts of our operations team maintaining our PDP production. During the quarter, we sold 18,392 barrels of oil equivalent per day, which was above the midpoint of our previously announced guidance range. And more importantly, we sold 12,074 barrels of oil per day, exceeding the high end of our guidance range, despite the impact of weather-related downtime in January.
Speaker Change: Kenny our chairman and CEO. Thanks Al we appreciate everyone for joining us today and for your interest in Green Energy. We began 2025 with a strong first quarter, where we met or exceeded all guidance targets driving our outperformance was exceptional all sales volumes from newly drilled wells and our legacy assets.
Speaker Change: Through the outstanding efforts of our operations team maintained our PDP production during the quarter. We sold 18392 barrels of oil equivalent per day, which was above the midpoint of our previously announced guidance range and more importantly, we sold 12074 barrels of oil per day exceeding the high.
Speaker Change: And all of our guidance range. Despite the impact of weather related downtime in January we drilled completed and placed on production seven wells in the first quarter, including four horizontal wells on the northwest shelf and three vertical wells in the starch based <unk> platform now.
Paul McKinney: We drilled, completed, and placed on production seven wells in the first quarter, including four horizontal wells in the Northwest Shelf and three vertical wells in the Central Basin Platform. not only have those wells all exceeded initial pre-drill production estimates.
Speaker Change: Not only have those well all exceeded initial pre drill production estimates another highlight.
Paul McKinney: Another highlight. is we improved our capital efficiency again this quarter with average well cost coming in around 7% less than budget. We also closed the highly accretive acquisition of Lime Rock CBP assets that continue to exceed the forecast originally used to value them. Similar to what we did to prepare for the founders acquisition closing, we strategically adjusted the timing of our drilling program and capital spending initiatives during the first quarter to reduce the capital spent to optimize our financial position and better position the balance. Like our founder's CBP asset acquisition that closed in the third quarter of 2023, the accretive Lime Rock transaction checks all the right boxes.
Speaker Change: As we improved our capital efficiency again, this quarter with average well costs coming in around 7% less than budget. We also closed the highly accretive acquisition of lime rock CVP assets that continue to exceed the forecast originally used to value them similar to what we did to prepare for the founders acquisition.
Speaker Change: Clothing, we strategically adjusted the timing of our drilling program and capital spending and initiatives during the first quarter to reduce our capital spend to optimize our financial position and better position the balance sheet like our founder CBP asset acquisition that closed in the third quarter of 2023, the accretive lime rock transaction.
Speaker Change: Action checks all the right boxes as a reminder, we purchased a little over 100 wells with approximately 75% oil cut with low decline production enhancing the companys metrics were both measures. The transaction also modestly increased scale and captures operating synergies through reductions in the number of <unk>.
Paul McKinney: As a reminder, we purchased a little over 100 wells with approximately a 75% oil cut with low decline production, enhancing the company's metrics for both measures. The transaction also modestly increased scale and captures operating synergies through reductions in the number of field personnel required to assets, benefits from integrating saltwater disposal systems, and lower costs from a variety of changes being made in the field. We also gained approximately 17,700 net acres, all held by production, with the majority of that acreage being contiguous with our legacy operations in the Shafter Lake area. The non-contiguous acreage to the south exposes Ring to additional active plays on the platform, providing additional opportunities when oil prices improve.
Speaker Change: Personnel required to operate the assets benefits from integrating saltwater disposal systems and lower costs from a variety of changes being made in the field. We also gained approximately 17700 net acres all held by production with the majority of that acreage being contiguous with our legacy operations.
Speaker Change: In the Shafter Lake area, the non contiguous acreage to the south exposes rang to additional active plays on the platform, providing additional opportunities when oil prices improve with this transaction over 40 gross drilling locations have been added to our existing high return drilling inventory that immediately competes for capital.
Paul McKinney: With this transaction, over 40 gross drilling locations have been added to our existing high-return drilling inventory that immediately competes for capital. Last but not least, production from these assets during April, our first month of operations, averaged over 2,500 barrels of oil equivalent per day, representing a 9% increase over the estimates used to value the assets. The result is an expected meaningful increase in adjusted free cash flow supported by 120 million of oil-weighted proved developed reserves, and ultimately, a stronger and more resilient company.
Speaker Change: Last but not least production from these assets during April our first month of operations averaged over 2500 barrels of oil equivalent per day, representing a 9% increase over the estimates used to value. The assets. The result is an expected meaningful increase in adjusted free cash flow supported by 120.
Speaker Change: Of all weighted proved developed reserves and ultimately a stronger and more resilient company rigor.
Paul McKinney: regarding our guidance for the remainder of 2025. Consistent with the revised second quarter outlook we provided last month, we are updating our outlook for the second half of the year to reflect a reduction in capital spending in response to the weakened price environment. As a result, for the final three quarters of 2025, Ring intends to reduce total capital spending by more than 47% or 36% for the full year, with only a modest reduction in production during the last half of the year, guiding to approximately 2% annual production growth over 2024. This is only made possible by the production outperformance for the new wells drilled in the first and second quarter, and higher than expected production from the existing and newly acquired assets.
Speaker Change: Regarding our guidance for the remainder of 2025 consistent with the revised second quarter outlook. We provided last month, we are updating our outlook for the second half of the year to reflect a reduction in capital spending in response to the weakened price environment as a result for the final three quarters of 2025.
Speaker Change: Ring intends to reduce total capital spending by more than 47% or 36% for the full year with only a modest reduction in production during the last half of the year guiding to approximate 2% annual production growth over 2024.
Speaker Change: This was only made possible by the production outperformance from our new wells drilled in the first and second quarter.
Speaker Change: And higher than expected production from the existing and newly acquired assets. All of this leads to projected higher adjusted free cash flow levels for more details on the adjusted free cash flow levels. Please refer to our investor presentation with that I will turn this over to Travis to provide financial details for the quarter.
Paul McKinney: All of this leads to projected higher Adjusted Free Cash Flow levels.
Travis Thomas: For more details on the Adjusted Free Cash Flow levels, please refer to our Investor With that, I will turn this over to Travis to provide financial details for the quarter, more details associated with our guidance ranges, and then return to share more about our plans to not only survive the potential for extended lower oil prices, but thrive and emerge even stronger. Thanks, Paul. And good morning, everyone. As Paul noted, we posted solid first quarter operational and financial performance driven by outstanding execution by our team across the board. The result was better than expected oil and total sales volumes, as well as inline operating and capital spending levels.
More details associated with our guidance ranges and then return to share more about our plans to not only survive the potential for extended lower oil prices, but thrive and emerge even stronger Travis.
Travis Thomas: Thanks, Paul and good morning, everyone. As Paul noted, we posted solid first quarter operational and financial performance driven by outstanding execution by our team across the board. The result was better than expected oil and total sales volumes as well as in line operating and capital spending levels.
Travis Thomas: The combination allowed us to conserve capital in anticipation of the closing of the highly accretive LimeRock CBP asset acquisition, which has outperformed initial expectations and places Ring in a much stronger position to better succeed in the current pricing environment. It also allows us to pay down debt at a faster rate than we could have done on a standalone basis. As I say every time, balance sheet improvement has been and will remain a top priority for the company.
Travis Thomas: The combination allowed us to conserve capital in anticipation of the closing of the highly accretive lime rock CBP asset acquisition, which has outperformed initial expectations and places ring in a much stronger position to better succeed in the current pricing environment.
Travis Thomas: It also allows us to pay down debt at a faster rate than we could have done on a standalone basis as I say every time balance sheet improvement has been and will remain a top priority for the company.
Travis Thomas: With that overview, let's take a closer look at the quarter. Starting at the top line, we sold 12,074 barrels of oil per day and 18,392 BOE per day with both exceeding guidance. As a reminder, with the March 31st closing, we began to benefit from the recent acquisition of the additional CBP assets beginning on the first day of the second quarter, which is reflected in our guidance for the remainder of 2025. Turning to the first quarter 2025 pricing, our overall realized price increased 4% to $47.78 per BOE from $46.14 per BOE in the fourth quarter of 2024.
Travis Thomas: With that overview, let's take a closer look at the quarter.
Travis Thomas: Starting at the top line, we sold 12074 barrels of oil per day, and 18392 Boe per day with both exceeding guidance as a reminder, the March 31st closing with the March 31st closing, we began to benefit from our recent acquisition of the additional C. B P assets beginning on the first.
Travis Thomas: Day of the second quarter, which is reflected in our guidance for the remainder of 2025.
Travis Thomas: Turning to the first quarter 'twenty twenty-five pricing, our overall realized price increased 4% to $47 78 per Boe from $46 14 per Boe in the fourth quarter of 2024.
Travis Thomas: Driving the overall increase was a 2% higher first quarter 2025 realized oil price. Our first quarter average crude oil differential from NYMEX WTI futures pricing was a negative 89 cents per barrel versus a negative $1.42 per barrel in the fourth quarter. This was mostly due to the Argus WTI WTS that increased by $0.59 per barrel offset by the Argus CMA roll that decreased by $0.08 per barrel on average from the fourth quarter. Our average natural gas price temperature from NYMEX futures price. for the first quarter was a negative $3.81 per MCF compared to a negative $3.83 per MCF for the fourth quarter.
Travis Thomas: Driving the overall increase was a 2% higher first quarter 'twenty twenty-five realized oil price.
Travis Thomas: Our first our first quarter average crude oil differential for Nymex Debbie T. I futures pricing was a negative 89 cents per barrel versus a negative dollar 42 per barrel in the first fourth quarter.
Travis Thomas: This was mostly due to the Rguest Meti Debbie T. S. They increased by 59 cents per barrel offset by the Argus C. M. A role that decreased by eight cents per barrel on average from the fourth quarter.
Travis Thomas: Our average natural gas price differential from Nymex futures pricing.
Travis Thomas: For the first quarter was a negative $3 81 per mcf compared to a negative $3 83 per mcf for the fourth quarter, our realized NGL price for the first quarter averaged 15% F. W. T I compared to 13% for the fourth quarter the.
Travis Thomas: Our realized NGL price for the first quarter averaged 15% of WTI compared to 13% for the The result was revenue for the first quarter of $79.1 million. We continue to target the higher oil mix opportunities as oil accounted for 97% of total revenue while it was only 66% of total production. Although we continue to see slightly negative realized natural gas pricing, there was a material improvement in the first quarter from the fourth quarter of 2024. While the majority of our GTP costs are reflected as a sales price reduction, the larger impact on realized prices is from the continued gas takeaway constraints in the basin.
Travis Thomas: The result was revenue for the first quarter of $79 $1 million, we continue to target the higher oil mix opportunities as oil accounted for 97% of total revenue while it was only 20, 66% of total production.
Travis Thomas: Although we continue to see slightly negative realized natural gas pricing there was a material improvement in the first quarter from the fourth quarter of 2024, while the majority of our G. T. P costs are reflected as a sales price reduction the larger impact on realized prices from the continued gas takeaway constraints in the basin.
Travis Thomas: However, we are starting to realize the benefits from additional takeaway capacity that came online with the Matterhorn Express Pipeline in late 2024. We are also excited about the prospect of increased large scale AI infrastructure in West Texas that could potentially use local gas for power generation. This increased usage could further alleviate in-basin takeaway constraints and give a boost to gas pricing going forward. Overall, our sequential revenue had a 5% decrease from the fourth quarter, which was driven by a negative $7.3 million volume variance, offset by a positive $3 million price drop.
Travis Thomas: However, we are starting to realize the benefits from additional takeaway capacity that came online with the Matterhorn Express pipeline in late 2024.
Travis Thomas: We are also excited about the prospect of increased large scale AI infrastructure in west, Texas that could potentially use local gas for power generation.
Travis Thomas: This increased usage could further alleviate and basin takeaway constraints and get a boost to gas pricing going forward.
Travis Thomas: Overall, our sequential revenue had a 5% decrease from the fourth quarter, which was driven by a negative $7 3 million dollar volume variance offset by a positive $3 million price variance.
Travis Thomas: Moving to expense. LOE was $19.7 million, or $11.89 per BOE, versus $20.3 million, or $11.24 per BOE for the fourth quarter. We are pleased to see LOE lower on absolute basis quarter to quarter and below our guidance midpoint of $12 per BOE. Cash G&A, which excludes share-based compensation, was $6.9 million, compared to $6.4 million in the fourth quarter. The increase was partially driven by annual costs associated with the audit, 10K, and proxy. Our first quarter results included a loss on derivative contracts of $900,000 versus a loss of $6.3 million in the fourth quarter. The first quarter loss included a $400,000 unrealized loss and a $500,000 realized loss.
Travis Thomas: Moving to expenses.
Travis Thomas: Hello, Louie was $19 $7 million or $11 89 per Boe.
Travis Thomas: Versus $23 million or $11.24 per B L.
Travis Thomas: For the fourth quarter.
Travis Thomas: We are pleased to see a low lower on an absolute basis quarter to quarter and below our guidance midpoint of $12 per Boe.
Travis Thomas: Cash G&A, which excludes share based compensation was $6 $9 million compared to $6 $4 million in the fourth quarter. The increase was partially driven by annual cost associated with the audited 10-K and proxy.
Travis Thomas: Our first quarter results included a loss on derivative contracts of $900000 versus a loss of $6 3 million in the fourth quarter. The first quarter loss included a $400000 unrealized loss and a $500000 realized loss.
Travis Thomas: As a reminder, the unrealized gain-loss is just the difference between the mark-to-market values period to period. Finally, for Q1, we reported net income of $9.1 million, or $0.05 per diluted share, compared to fourth quarter net income of $5.7 million, or $0.03 per diluted 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 first quarter 2025 adjusted net income was $10.7 million, or 5 cents per diluted share, while fourth quarter 2024 Adjusted Net Income was $12.3 million or 6 cents per diluted share. We posted first quarter 2025 adjusted EBITDA at $46.4 million versus $50.9 million for the fourth quarter, with most of the difference attributed to lower oil revenues.
Travis Thomas: As a reminder, the unrealized gain loss is just the difference between the mark to market values period to period.
Travis Thomas: Finally for Q1, we reported net income of $9 $1 million or five cents per diluted share compared to fourth quarter net income of $5 $7 million or <unk> <unk> per diluted share.
Travis Thomas: Excluding the estimated after tax impact of pre tax items, including noncash unrealized gains and losses on hedges and share based compensation expense. Our first quarter 2025, adjusted net income was $10 $7 million or five cents per diluted share while fourth quarter.
Travis Thomas: 2024, adjusted net income was $12 3 million or six cents per diluted share.
Travis Thomas: We posted first quarter 2025, adjusted EBITDA at $46 $4 million versus $50 9 million for the fourth quarter with most of the difference attributed to lower oil revenue.
Travis Thomas: During the first quarter, we invested $32.5 million in capital expenditures, which was 14% lower than the fourth quarter and within our guidance of $26 to $34 million. As Paul discussed, we have been extremely pleased with the production from the new wells coming in ahead of expectation and lower combined overall cost. Adjusted free cash flow was $5.8 million versus $4.7 million for the fourth quarter of 2024, with the net increase primarily associated with the $5.2 million lower capital spending partially offset by $4.5 million less in EBITDA compared to the fourth quarter. We ended the period with $460 million drawn on our credit facility, with the increase mostly due to the $63.6 million in cash required for closing on the acquisition of the Lime Rock CBP assets, along with the $5 million deposit earlier in the quarter.
Travis Thomas: During the first quarter, we invested $32 $5 million in capital expenditures, which was 14% lower than the fourth quarter and within our guidance at $26 million to $34 million as Paul discussed we have been extremely pleased with the production from the new wells coming in ahead of expectation and lower combined overall cost.
Travis Thomas: <unk>.
Travis Thomas: Adjusted free cash flow was $5 $8 million versus $4 $7 million for fourth quarter 2024, with a net increase primarily associated with the $5 2 million dollar lower capital spending partially offset by $4 $5 million less in EBITDA compared to the fourth quarter.
Travis Thomas: We ended the period with $460 million drawn on our credit facility with the increase mostly due to $63 $6 million in cash required for closing on the acquisition of the lime rock CVP assets, along with the $5 million deposit earlier in the quarter.
Travis Thomas: With the current borrowing base of $600 million, we began the second quarter with the availability of $140 million with a leverage ratio of 1.9 times, which includes a $10 million deferred payment due in December of 2021.
Travis Thomas: With a current borrowing base of $600 million, we began the second quarter with availability of $140 million with a leverage ratio of one nine times, which includes a $10 million deferred payment due in December 2025.
Travis Thomas: Moving to our hedge position. For the last nine months of 2025, we currently have approximately 1.7 million barrels of oil hedged with an average downside protection price of $64.44. This covers approximately 47% of our oil sales guidance midpoint. We also have two BCF of natural gas hedged with an average downside protection price of $3.43, covering approximately 37% of our estimated natural gas sales based on the midpoint. For a detailed breakout of our hedge position, please see our earnings release and presentation, which includes the average price for each contract type.
Travis Thomas: Moving to our hedge position for the last nine months of 'twenty 'twenty. Five we currently have approximately 1.7 million barrels of oil hedged with an average downside protection price 64 $44. This.
Travis Thomas: This covers approximately 47% of our oil sales guidance midpoint.
Travis Thomas: We also had two bcf of natural gas hedged with an average downside protection price of $3.43 covering approximately 37% of our estimated natural gas sales based on the midpoint.
Travis Thomas: For a detailed breakout of our hedge position. Please see our earnings release and presentation, which includes the average price for each contract type.
Travis Thomas: Looking at our guidance, we had provided full details in our earnings material. In addition, Paul did a great job explaining how our business model, including low break-even economics, places us in a solid position to navigate these pricing headwinds. Our proven value-focused model is battle-tested to drive success through the cycle, and we will pull all necessary levers to ensure we maintain a healthy financial position and capitalize on opportunities to further reduce debt. Consistent with our revised second quarter outlook we provided last month, we are updating our outlook for the second half of the year to reflect a reduction in capital spending in response to the weakened price environment.
Speaker Change: At our guidance, we had provided full details in our earnings materials. In addition, Paul did a great job of explaining how our business model, including low break breakeven economics places us in a solid position to navigate these pricing headwinds are proven value focus model is battle tested to drive success through the site.
Speaker Change: And we will pull all necessary levers to ensure we maintain a healthy financial position and capitalize on opportunities to further reduce debt.
Speaker Change: Consistent with our revised second quarter outlook. We provided last month, we are updating our outlook for the second half of the year to reflect a reduction in capital spending in response to the weekend price environment.
Travis Thomas: As a result, for full year 2025, Ring now expects total capital spending of $85 million to $113 million with a midpoint of $99 million versus our previously disclosed expectation of $138 to $170 million. Included in the Full Year 2025 CAPEX Guidance. is estimated spending of $14 to $22 million for the second quarter and $38 to $58 million in the last half of the year. Please refer to our first quarter earnings release and company presentation for full details by period, but I would note that of the two to three wells included in our drilling program for the second quarter, we have drilled, completed, and placed on production one horizontal and one vertical well to date.
Speaker Change: As a result for full year 2025 rig now expects total capital spending of $85 million to $113 million with a midpoint of $99 million versus our previously disclosed expectation of $138 million to $170 million.
Speaker Change: Included in our full year 2025, Capex guidance is estimated spending of $14 million to $22 million for the second quarter and $38 million to $58 million in the last half of the year.
Speaker Change: Please refer to our first quarter earnings release and company presentation for full details by period, but I would note that of the two to three wells included in our drilling program for the second quarter, we have drilled completed and placed on production one horizontal and one vertical well to date as.
Travis Thomas: As in the past, we will retain the flexibility to react to changing commodity prices and market conditions, as well as manage our quarterly cash flow. Our updated full year 2025 production guidance is 12,700 to 13,700 barrels of oil per day and 19,200 to 20,700 BOE per day. We continue to expect second quarter total sales volumes of 20,500 to 22,500 BOE per day and oil production to range between 13,700 and 14,700 barrels of oil per day, resulting For second half 2025, we are guiding it to total sales volume of 19,000 to 21,000 BOE per day and oil production to range between 12,500 and 14,000 barrels of oil per day, also a 66% oil mix.
Speaker Change: As in the past, we will retain the flexibility to react to changing commodity prices and market conditions as well as manage our quarterly cash flow.
Speaker Change: Our updated full year 2025 production guidance is 12700 to 13700 barrels of oil per day, and 19200 20700 Boe per day, we continue.
Speaker Change: To expect second quarter total sales volumes of 20000, and 522500 Boe per day and oil production to range between 13000 714007 hundred barrels of oil per day, resulting in a 66% oil mix.
Speaker Change: For second half 'twenty 'twenty five we are guiding to total sales volume of 19000 to 21000 Boe per day and oil production to range between 12000, and 514000 barrels of oil per day also a 66% oil mix.
Travis Thomas: On the cost side, I would note that we now anticipate full-year 2025 LOE of $11.25 to $12.25 per BOE, and are providing guidance of $11.50 to $12.50 per BOE for both the second quarter and second half of 2025.
Speaker Change: On the cost side I would note that we now anticipate full year 2025, low of $11 25 to $12 25 per Boe.
Speaker Change: And are providing guidance of $11 50 to $12 50 per Boe for both the second quarter and second half of 2025, so with that I will turn it back to Paul for his closing comments Paul. Thank you Travis as an industry, we have experienced a high level of oil price volatility over the last five.
Paul McKinney: So, with that, I will turn it back to Paul for his closing comments. Paul? Thank you, Travis. As an industry, we have experienced a high level of oil price volatility over the last five years, where the amplitude and frequency seem to be increasing. Although current oil prices remain above our break-even requirements. Most of our industry, both domestically and abroad, depends on higher oil prices to continue to invest and maintain production levels. For many of us, oil and gas price volatility has been with us for our entire careers, which is the reason we designed our strategy to be successful in low price environments and in high ones.
Speaker Change: Years, where the amplitude and frequency seem to be increasing.
Speaker Change: Although current oil prices remain above our breakeven cost requirements.
Speaker Change: Most of our industry, both domestically and abroad depends on higher oil prices to continue to invest and maintain production levels for many of us oil and gas price volatility.
Speaker Change: Has been with us for our entire careers, which is the reason we designed our strategy to be successful in low price environments and in high ones.
Paul McKinney: Our proven value-focused strategy is one with extreme focus on maximizing cash flow generation that has a proven track record over the last 22 reporting periods. And let me remind you, oil prices were much lower at times during that period than current prices today. Our strategy seeks to retain and acquire wells with shallow declining production, with long lives, low operating costs, and high net back interest. The shallower decline rates reduce the capital intensity required to maintain the company's production levels. Long life wells provide stability through the price cycles and better full cycle economics. The Low Operating Costs and High Netbacks Allow for the Highest Margins Regardless of the Oil Price.
Speaker Change: Our proven value focused strategy as one with extreme focus on maximizing cash flow generation that has a proven track record over the last 22 reporting periods.
Speaker Change: And let me remind you oil prices were much lower at times during that period, then current prices today.
Speaker Change: Our strategy seeks to retain and acquire wells with shallow decline in production with long lives low operating costs and high netback interests.
Speaker Change: The shallower decline rates reduce the capital intensity required to maintain the company's production levels.
Speaker Change: Long live wells provides stability through the price cycles and better full cycle economics, the low operating costs and high net backs allow for the highest margins regardless of the oil price. We also like highly oil weighted assets because Permian basin gas typically we're seeing a significant discount to Henry hub prices.
Paul McKinney: We also like highly oil-weighted assets because Permian Basin Gas typically receives significant discounts to Henry Hub prices, forcing us to occasionally pay to have our gas processed and delivered to market. We also seek to acquire and invest in undrilled development opportunities that have low break-even costs and superior economics. Regarding capital spending, our strategy also emphasizes extreme capital discipline, allocating capital to our highest returning opportunities with the execution flexibility necessary to ensure we meet our debt reduction goals and strengthen our balance sheet. This aspect of our strategy plays a big part in the terms negotiated in our drilling contracts and other operational services.
Speaker Change: Forcing us to occasionally pay to have our gas processed and delivered to market.
Speaker Change: We also seek to acquire and invest in and drilled development.
Speaker Change: Opportunities that have low breakeven costs and superior economics.
Speaker Change: Regarding capital spending our strategy also emphasizes extreme capital discipline allocating capital to our highest return opportunities with the execution flexibility necessary to ensure we meet our debt reduction goals and strengthen our balance sheet.
Speaker Change: This aspect of our strategy plays a big part in the terms negotiated in our drilling contracts and other operational services. They are designed to retain our flexibility to respond quickly to market changes.
Paul McKinney: They are designed to retain the flexibility to respond quickly to market changes. and minimize the costs associated with those changes. As we look to the remainder of 2025, we will capitalize on the production over performance experience so far this year and the benefits of the Lime Rock acquisition to reduce our capital spending and allocate more of our cash flow to paying down debt. Although our production guidance for the last half of the year is less than previously guided, our forecast suggests that we will deliver modest annual production growth of approximately 2% over the prior year.
Speaker Change: And minimize the costs associated with those changes.
Speaker Change: As we look to the remainder of 2025, we will capitalize on the production over performance experienced so far this year and the benefits of the lime rock acquisition to reduce our capital spending and allocate more of our cash flow to paying down debt, although our production guidance for the last half of the year is less than previously guided our fourth.
Speaker Change: Cash suggest that we will deliver modest annual production growth of approximately 2% over the prior year.
Paul McKinney: If oil prices recover to previous ranges, at this time, we do not intend to increase capital spending this year, keeping our focus on debt reduction. If oil prices recover to higher levels than previous ranges, we will evaluate and respond to those conditions in a way most beneficial for our stock market.
Speaker Change: If oil prices recover to previous ranges at this time, we do not intend to increased capital spending this year, keeping our focus on debt reduction if oil prices recover to higher levels in previous ranges, we will evaluate and respond to those conditions in a way most beneficial for our stockholders.
Paul McKinney: In closing, I want to emphasize one more time, our disciplined approach highlights the strength and flexibility of our proven value-focused strategy, ensuring we not only weather this price cycle, but emerge even stronger.
Speaker Change: I want to emphasize one more time, our disciplined approach highlights the strength and flexibility of our proven value focused strategy and Sharon we not only weather this price cycle, but emerge even stronger.
Operator: So with that, we will turn this call over to the operator for questions. Operator? We will now begin the question and answer session. To ask a question, you may press star, then one on your touchtone. If you are using a speaker phone, please pick up your handset before pressing the button. If at any time, your question has been addressed and you would like to withdraw your question. Press Star.
Speaker Change: So with that we will turn this call over to the operator for questions operator.
Speaker Change: We will now begin the question and answer session.
Speaker Change: To ask a question you May Press Star then one on your Touchtone phone.
Speaker Change: If you are using a speakerphone please pick up your handset before pressing the keys.
Speaker Change: If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.
Operator: At this time, we will pause momentarily to assemble our roster.
Speaker Change: At this time, we will pause momentarily to assemble our roster.
Jeffrey Robertson: The first question today comes from Jeff Robertson with Water Tower. Please go ahead. Thank you. Paul, do you have a leverage target in mind as you take as you allocate more free cash flow to debt reduction. this environment. Before you'd want to go back to trying to have a capital program that would generate more growth.
Our first question today comes from Jeff Robertson with water Tower Research. Please go ahead.
Speaker Change: Thank you.
Speaker Change: Paul do you have a leverage target in mind as you.
Speaker Change: As you allocate more free cash flow to debt reduction.
Speaker Change: In this environment before you'd wanted to go back to.
Speaker Change:
Speaker Change: Trying to have a capital program that would generate more growth.
Paul McKinney: Hey, good morning, Jeff, and good question, actually. And yes, we do. We've stated for a very long time that our long-term goal for our leverage ratio is to be comfortably below one. And in a low-price environment, of course, it's a lot more challenging to get that leverage ratio lower, because you've got to remember, oil prices are part of the denominator in that equation, and it makes it challenging. And so that's part of the reason for the increased emphasis on debt reduction. And so if you go to our investor presentation, we have several things that kind of forecast where our free cash flow levels are in the future with various different prices.
Jeff: Oh, Hey, good morning, Jeff Good question actually and yes, we do.
Jeff: We've stated for a very long time that are our long term goal for our leverage ratio has to be comfortably below one.
Jeff: And in a low price environment of course, there's a lot more challenging to get that leverage ratio lower because you've got to remember oil prices or part of the denominator in that equation and it makes it challenging and so that's part of the reason for the increased emphasis on debt reduction.
Jeff: And so.
Jeff: If you go to our Investor presentation, we have several things that kind of forecast, where our free cash flow levels are and in the future with various different prices of free cash flow levels levels are a direct.
Paul McKinney: Those free cash flow levels are a direct reflection of the amount of debt that we can pay down. It's your prediction or my prediction. I don't know if either one of us will be accurate in terms of predicting what future oil prices will be, so that leverage ratio is kind of hard to predict. But we're taking all the measures we can during this weakened price environment to ensure that we keep our leverage ratio as low as we can. And so this part of this equation is somewhat out of our control. But the parts that are in our control, we're taking every step we can to keep that leverage ratio as low as possible because, you know, we've been criticized in the past for having, you know, being on the higher end of the leverage ratio when compared to our peers, and so we are also very, very much a debt...
Jeff: A reflection of the amount of debt that we can pay down.
Jeff: If your prediction, nor my prediction I don't know if either one of those would be accurate in terms of predicting what future oil prices will be so that leverage ratio is kind of hard to predict but.
Jeff: But we're taking all the measures we can during this weak price environment to ensure that we keep our leverage ratio as low as we can and so that's part of this equation is somewhat out of our control.
Jeff: But the parks that are in our control. We're taking every step we can to keep that leverage ratio as low as possible because we have been criticized in the past are having.
Jeff: Being on the higher end of the leverage ratio when compared to our peers.
Jeff: And and and so we are also very very much a debt.
Paul McKinney: you know, resistant-type group of managers. We just don't like debt, and we know that debt has not been the friend of a capital-intensive industry like the oil and gas industry, and so we're very focused on that.
Jeff: You know resistant type.
Jeff: Managers, we just don't like that and we know that that is not has not been the friend of a capital intensive industry like the oil and gas industry and so we're very focused on that.
Paul McKinney: Oh, as you look at the back half of the year, and you're in the guidance that you laid out this morning for capital of 38 to $58 million. Do you assume any cost improvements in there? In other words, if you spend the $48 million midpoint. The go toward free cash flow and ultimately debt Yeah, that's another good question, actually. Right now, our forecasts for capital include current prices. We have not. And that kind of leads into we've already seen some reductions here very recently in terms of some of the capital costs.
Jeff: Well as you look at the back half of the year and your and the guidance that you laid out this morning for capital of 38% to $58 million.
Jeff: Do you assume any cost improvements and they are in other words if he.
Jeff: You spend the $48 million midpoint.
Jeff: And Costco lower would you think you could.
Jeff: Complete more absolute projects or would the delta in cost savings.
Jeff: Go toward free cash flow and ultimately debt reduction.
Jeff: Yeah.
Another good question actually right now our forecast for capital include.
Jeff: Right.
Jeff: We have not and N and M. S paddle lead then to weave.
Jeff: We've already seen some reductions here very recently in terms of our some.
Shawn Young: And I could ask Shawn to chime in here, but I think they're related to primarily the completion side and the FRACs. Right. Yeah, we are seeing some relaxation on both the FRAC costs as well as cementing and wireline on the drilling side. And those are in the range of when you're looking at our current cost structure. Anywhere from 4 to 6% at this point. And obviously, we expect that hopefully to relax some more, you know, with prices being where they are.
Jeff: Some of the capital cost and I can ask Sean to chime in here, but I think they're related to primarily the completion side and in Fracs.
Jeff: Yes.
Jeff: Yes, we are seeing some some relaxation on both.
Jeff: The frac costs as well as as cementing and wireline.
Jeff: On the drilling side so.
Jeff: And those are in the range of when you're looking at our current cost structure.
Jeff: Anywhere from 4% to 6% at this point and obviously, we expect that hopefully to relax some more.
Jeff: With prices being where they are.
Paul McKinney: And so to complete the answer to your question, Jeff, right now we've laid out a capital program selecting really the highest return opportunities we have in our portfolio, maximizing free cash flow. And so if we're fortunate enough to see, you know, continued reductions like, you know, like we said in the first quarter, all our capital program came in at approximately 7 percent lower than what we had budgeted. If that trend continues, all of that will go to repaying debt. We won't take advantage of the lower cost to squeeze in another well or two. Right now we're, you know, we've also learned, even though we have the ability to respond on a dime based on our drilling contracts, the contract strategies we have with our other operational services.
Jeff: And so to complete the answer to your question Jeff.
Jeff: Right now we've laid out a capital program.
Jeff: <unk> really the highest return opportunities we have in our portfolio maximizing free cash flow and so if we're fortunate enough to fee.
Jeff: Continued reductions like you know like we said in this in the <unk>.
Jeff: First quarter all of our capital program came in at approximately 7% lower than what we had budgeted if that trend continues all of that will go to repaying debt. We wont take advantage of the lower cost squeeze in another well or two right now are where we've also learned even though we have the ability to respond on a dime.
Jeff: Based on our drilling contract to contract our strategies, we have with our other operational services.
Paul McKinney: There is a loss of efficiency when you're jacking your program, you know, turn it on, turn it off. And so we try not to do that to the extent we can. We did, as you can see, respond very quickly to the price changes that occurred here recently. We deferred the picking up of another rig that we were going to drill horizontal wells with as a result of all of this, and that led to the 50% reduction in our capital spending for the second quarter.
Jeff: There is a loss of efficiency when you're when you Jack in your program turn it I'll turn it off and so we try not to do that.
Jeff: To the extent, we can we did as you can see our respond very quickly to the price changes that.
Jeff: That occurred here recently, we deferred that the.
Jeff: They're picking up a bunch of another rig that we were going to drill horizontal wells with as a result of all of this and that led to the 50% reduction in our capital spending for the second quarter.
Hmm.
Paul McKinney: But again, going back to your question, no, in times like this, or these, I should say, I think it's important to demonstrate to our shareholders the true flexibility and strength of our strategy and our commitment to reducing debt. We don't know whether we're going to be in an extended period of low prices. We could very easily. Now, I know we see a lot of volatility, and like I said, the amplitude is increasing, and so is the frequency, so we could see higher prices in a short period of time. But, because we don't have a crystal ball on that, we're going to take the conservative approach and emphasize the reduction of debt, strengthen the balance sheet, and prepare ourselves to continue our strategy for growth.
Jeff: But again going back to your question no as taught in times like this are these I should say.
Jeff: I think it's important to demonstrate to our shareholders the true flexibility and strength of our strategy and our commitment to reducing debt.
Jeff: We don't know, whether we're going to be an extended period of low prices. We could very easily now I know, where do you see a lot of volatility and like I said the amplitude is increasing and so has the frequency. So we can see higher prices in a short period of time.
Jeff: But because we don't have a crystal ball on that we're going to take a conservative approach and emphasize the reduction of debt strengthening the balance sheet and preparing ourselves to continue our strategy for growth.
Travis Thomas: Travis, I know there's a lot that goes into the black box that the banks use to come up with an RBL borrowing base, but can you talk about some of the moving parts with the asset base? with the inclusion of the Lime Rock assets as you look to your next redetermination. Sure, we're very excited about bringing the Lime Rock assets in for the next redetermination. If that is in process right now, it is the season for that. And you know, our assets and the low decline nature of them at the low cost really help us out when they're making them more bankable.
Speaker Change: Travis I know Theres, a lot that goes into the black box that the banks used to come up with an OBL borrowing base, but can you talk about some of the moving parts with the asset base.
Jeff: With the <unk>.
Jeff: Inclusion of the landmark assets as you look to your next Redetermination.
Jeff: Sure.
Jeff: Very excited about bringing the lime rock assets in for the next Redetermination at that is in process right now it is the season for that.
And you know our assets and the low decline nature of them at a low cost really helped us out when they're making a more bankable.
Travis Thomas: So we've got. good expectations and think that everything should go just normal.
Jeff: So we've got.
Jeff: Good expectations and think to everything should go just normal yeah. We're really early in that process right now, Jeff So it's kind of hard to predict.
Paul McKinney: Yeah, we're really early in that process right now, Jeff, so it's kind of hard to predict. But it kind of goes back to the strategy of, you know, selecting these shallow decline wells with high net interest and high margins, low operating costs. All these things lead to a much stronger portfolio, and like Travis said, a much more bankable portfolio. So we're early in the process. It's way too early to kind of predict how things are going to work out, but we're still very confident that it will turn out to be an average or typical, you know, redetermination process.
Jeff: But it kind of goes back to the strategy of selecting these shallow decline wells with high.
Jeff: Net interest and hi.
Jeff: Margins low operating costs, all these things lead to a much stronger portfolio much like Travis said, a much more bankable portfolio. So.
Jeff: We're early in the process is way too early to kind of predict how things are going to work out, but we're still very confident that it'll it'll turn out to be a eye.
Jeff: On an average or typical.
Jeff: No redetermination process.
Paul McKinney: Paul, as you laid out your focus is on reducing debt with free cash flow. And I'm wondering, is there anything in the credit facility? that limits Ring's ability to repurchase shares. In other words, do you have any kind of leverage test that you have to meet? if you wanted to repurchase shares. Yeah, so our leverage ratio has to be less than two. And we also have to be within a certain percentage of our draw on the total credit, I believe that's 80%. 80%. And we also have the free cash flow bucket, available free cash flow for trailing 12 months.
Jeff: Paul as you laid out your focus is on reducing debt with free cash flow I'm wondering if is there anything in the credit facility.
Jeff: That limits rings, the ability to repurchase shares in other words do you have any kind of leverage tests that you have to meet.
Jeff: If he wanted to repurchase shares.
Jeff: Yeah, So our leverage ratio has to be.
Jeff: Less than two.
Jeff: And and we also have to be within a certain percentage of our draw on the total credit facility I believe that's 80% or 80% and we also have the free cash flow bucket.
Jeff: Well free cash flow for the trailing 12 months that's right. So.
Paul McKinney: That's right. Exactly. So... They're very typical, I think, in terms of what's typically required of a company. Nothing out of the usual.
Jeff: So.
Jeff: There are very typical I think in terms of whats typically required of the.
Jeff: The company nothing.
Jeff: Nothing out of the.
Jeff: As usual.
Paul McKinney: Okay, thank you. You bet. Thanks, Jeff.
Jeff: Okay. Thank you.
Jeff: You bet Thanks, Jeff.
Noel Parks: As a reminder, if you have a question, please press star and one to be joined into the question The next question comes from Noel Parks with Tui Brothers. Please go ahead. Hi, good morning. I was just wondering if you could talk a little bit about, you know, just the state of activity on the platform and on the shelf. I'm just thinking about sort of the state of, you know, there's always kind of like an influx or an outflow of capital into various plays. I'm just wondering, you know, sort of what the trend is now. We've seen – it seems like we've seen more exits and consolidation than we've seen sort of, you know, money from new parties coming in.
Speaker Change: As a reminder, if you have a question. Please press Star then one do they joined into the question queue.
Speaker Change: The next question comes from Noel Parks with Tuohy Brothers. Please go ahead.
Noel Parks: Hi, good morning.
Speaker Change: Okay.
Speaker Change: I was just wondering.
Speaker Change: If you could talk a little bit about you know just the state of activity.
Speaker Change: On the platform and and on the shelf.
I'm, just thinking about sort of the state of you know, there's always kind of like an influx or an outflow of capital into various plays and I'm just wondering.
Speaker Change: What what the trend is now.
Speaker Change: We've seen it sounds like we've seen more exits and consolidation than we've seen sort of.
Paul McKinney: So I just wondered if you could sort of characterize what you've seen. Yeah, that's a really good question. It's actually a complex question, because we've seen things on both sides. So if you recall from last summer, Hillcourt made a big entry into the Central Basin Platform with two very large acquisitions, both of which we were interested in, at least portions of those dispositions. And so they picked up Apache's position on the Central Basin Platform. They also picked up ExxonMobil's position on the platform. And they paid a very, in my opinion, a very premium, a large premium for that.
Speaker Change: The money from new parties coming in so I was wondering if you could sort of characterize what you're seeing.
Speaker Change: Yeah. That's a really good question, that's actually a complex question because we've seen things on both sides. So if you recall from last summer.
Speaker Change: <unk> made a big entry into the Central basin platform with two very large acquisitions both of what we were interested in at least portions of those those dispositions.
And so they picked up Apache position on the Central Basin platform. They also picked up exxonmobil position on the platform and they paid a very.
Speaker Change: In my opinion, a very premium large premium for that.
Paul McKinney: And so they paid, just as an example, they paid $950 million for the Apache assets. And so to us, we couldn't get to a value that high. And so that represented what I would like to think is a high watermark. So that demonstrates that, and we've been predicting this for years, Noel, and you've been with us during this time period. We've been focused on the Central Basin Platform because we believe there's a lot of overlooked conventional oil and gas assets there that can be exploited with modern drilling and completion technology, like we are, and generate really positive returns.
Speaker Change: So they paid just as an example, they paid $950 million for the Apache.
Speaker Change: Assets and so to us.
Speaker Change: We couldn't get to a value that high.
Speaker Change: And so that that represented what I would like to think as a high watermark so that.
Speaker Change: Demonstrates that and we've been predicting this for years now and you've been with US. During this time period, we've been focused on the central basin platform, because we believe theres a lot of overlooked conventional oil and gas assets there.
Speaker Change: That can be explored with modern drilling and completion technologies like we are and generate really positive returns and so but because the rest of the industry was focus on the Delaware basin and the Midland Basin. We felt that we had that fair way to ourselves and we've been trying to take advantage of that I mean, I don't think we've hidden.
Paul McKinney: But because the rest of the industry was focused on the Delaware Basin and the Midland Basin, we felt that we had that fairway to ourselves. And we've been trying to take advantage of that. I mean, I don't think we've hidden our desire and our quest to become the aggregator of the Central Basin Platform and Northwest Shelf assets. We have demonstrated that we know those assets and how to operate those assets. We've also demonstrated very successfully in low prices and high prices that we know how to drill the wells and generate strong returns for our shareholders.
Speaker Change: Our our desire and our quest to become the aggregator in the Central basin platform and northwest shelf assets.
Speaker Change: We have demonstrated that we know those assets and how to operate those assets. We also demonstrated very successfully and low prices and high prices that we know how to.
Speaker Change: Drill the wells and generate strong returns for our shareholders. So we're very focused there.
Paul McKinney: So we're very focused there. But having said that.
Speaker Change: But having said that.
Paul McKinney: In a low price environment like this, I think you'll find a mix because Most people are not going to want to sell their assets in a low-price environment because they're looking to achieve different goals or whatever. So unless the companies are in trouble or have a strategic need to get out of them, you may not see as many assets hit the market. Now that doesn't mean that we're going to give up, we're not going to continue to try. We think that the best time to actually make an acquisition is when prices are low. So it's all a function of finding the right assets.
Speaker Change: In a low price environment like this I think you'll find a mix because.
Speaker Change: Most people are not going to want to sell their assets in a low price environment, because they're looking to achieve a different goals or wherever.
Speaker Change: West of companies were in trouble or have a strategic need to get out of them you may not see as many assets hit the market.
Speaker Change: That doesn't mean that we're going to give up we're not going to continue to try we think that the best how to actually make an acquisition is when prices are low.
Speaker Change: So it's all a function of finding the right assets.
Paul McKinney: We, as you know, over the last four and a half, five years, we're very selective on the types of assets we acquire. We, in the past, have sold the assets that don't fit, that are in our portfolio, that don't fit our strategy because we're constantly looking for ways to reduce our operating costs and maximize our margins. We like to shout out to clients. They all bring a lot of virtues, but I do believe, though, that although at one point we thought we were alone out here, we're not alone anymore because other people have seen the success we've had, and so we anticipate continued interest in assets in the Central Basin Platform.
As you know over the last 455 years, we're very selective on the types of assets we acquire.
Speaker Change: In the past have sold the assets that don't fit that are in our portfolio that don't fit our strategy. Because we are constantly looking for ways to reduce our operating costs and maximize our margins.
Speaker Change: We like the shallow declines they all bring a lot of virtues, but I do believe though that although at one point, we thought we were alone out here, we're not alone anymore.
Because other people have seen the success, we've had and so we anticipate a continued interest in assets in the central basin platform.
Paul McKinney: We'll have to get our elbows up to compete in that regard, but we will not overpay. But there is kind of a mix right now out there. We've seen larger private operators like Helitor come in in a large way. I'm not sure that they're done. I don't know anything about that company's desires to move forward, but we still like the area, and we'll continue to compete there. In addition, though, to the M&A market, because we are predicting that the industry is going to turn more towards areas like the Central Basin Platform because the entry costs are a lot lower than they are in the Midland and the Delaware Basin.
Speaker Change: To get our elbows up to compete in that regard, but we will not overpay.
Speaker Change: But there is kind of a mix right now out there we've seen larger private operators like him come in in a large way I'm not sure that they're done I don't know anything about that company's desires to move forward.
Speaker Change: But we.
Speaker Change: We still like the area and we will continue to compete there. In addition to the M&A market because we are predicting that the industry is going to turn more towards.
Speaker Change: Areas like the Central basin platform, because the entry costs are a lot lower than they are in the Midland and the Delaware Basin.
Paul McKinney: We've decided to expand and increase the capability of our Geoscience Department, led by James Parr, where we are focusing on organic growth in the same area. So we're mapping all aspects of the central basin platform, the southern part of the shelf. We're identifying remaining opportunities that compete and can compete with our portfolio. We're seeing whether or not those operators value those assets the same way we do, whether they're investing those assets the same way we are. And if there are acquisition opportunities, we're knocking on doors. We're trying to negotiate things and trying to prevent those assets from actually hitting the street.
Speaker Change: We decided to expand and increase the capability of our Geoscience Department led by James Park, where we are focusing on organic growth in the same area. So we're mapping all aspects of the central basin platform. The southern part of the shelf, we're identifying remaining opportunities that compete and can compete.
Speaker Change: With our portfolio, we're seeing whether or not those operators.
Speaker Change: Value those assets the same way, we do whether they are investing those assets family. We are and if there are acquisition opportunities where knocking on doors and we're trying to negotiate things and try to prevent those assets from actually hitting the street. So that's another component of our go forward strategy.
Paul McKinney: So that's another component of our go-forward strategy. But, again, going back to your question, Noel, yes, there's a mixed bag right now of interest in the central basin platform. But I believe as time goes on, you're going to see an increased interest in the central basin platform.
Speaker Change: But again going back to your question no. Yes, there is a mixed bag right now of interest in the Central Basin platform, but I believe as time goes on you're going to see an increased interest in the central basin platform.
Noel Parks: Right, I think what What I was really interested in, I was thinking about, I guess it's about 10 years back when the first work was quietly being done on horizontals to the San Andres, which sort of seemed impractical for a long time. And I just started thinking about whatever the next wave of new resource potential might be, alternate horizons, or... just step out that hadn't been tried. But you know, the area is so vast that I'm, you know, it seems that to get critical mass, it's, it's ideal if you do have a good bit of investment going on.
Speaker Change: Right I think what.
Speaker Change: What I was really interested in what I was thinking about I guess, it's about 10 years back when the first work was quietly being done on horizontals to the San and dress, which sort of seemed impractical for for a long time.
Speaker Change: And I'm, just sort of thinking about whatever the next wave of <unk>.
New resource potential might be alternate horizons or you know just.
Speaker Change: Just a step out that debt.
Speaker Change: Haven't been tried.
Speaker Change: But you know the area is so vast that I'm it seems that to get critical mass. Its ideal if you do have a good bit of investment going on.
Paul McKinney: And, but to your point, it's not it sounds like there, there is least awareness coming, coming into the basin. I guess then the assumption is that capital would follow to help a bunch of companies prove up whatever next might be done. Absolutely, and you know, Noel, you've been studying this area for a long time, so your insights are right on, and that also, you know, your insights really highlight some of the other benefits that we really haven't talked a lot about with respect to lime rock acquisition. So we've spent a lot of time talking about the synergies associated with combining operations up there in the Shafter Lake area, but the acreage that we have in the south truly does expose us to some of the newer emerging plays, like the Barnett and the Woodford, and these zones have extreme interest by other operators.
Speaker Change: And but to your point, it's not it sounds like there is at least awareness.
Speaker Change: Coming into the basin and I guess, then the assumption is that you know.
Speaker Change: Capital would followed it you know.
Speaker Change: A bunch of companies prove up whatever whatever next might be done.
Speaker Change: Absolutely.
Speaker Change: No.
Speaker Change: You've been studying this airdrie a long time. So your insights are right on and then also you know your insights really highlight some of the other benefits that we really haven't talked a lot about.
Speaker Change: With respect to lime rock acquisition. So we've spent a lot of time talking about the synergies associated with combining the operations up there and the Shafter Lake area, but the acreage that we have in the south truly does expose us to some of the newer emerging plays.
Speaker Change: The Barnett and Woodford and and and these zones have extreme interest by other operators and so our analysis right now suggest that theyre not quite as competitive as the investments we have been making but we know in a slightly higher oil price or they will be competitive and they will generate the types of return.
Paul McKinney: And so our analysis right now suggests that they're not quite as competitive as the investments we have been making, but we know in a slightly higher oil price that they will be competitive and they will generate the types of returns that our shareholders expect from us, and we like the idea and the aspect of being exposed to some of these new plays. The other thing that you can go back and look at is that in the south, where we made the two acquisitions, the stronghold acquisition and also the founders acquisition. Those areas are predominantly conventional vertical wells where we apply the unconventional completion technology, where you perfrac and plug all the various different stack zones and you bring them all on in vertical sense, and you generate really strong returns.
Speaker Change: And that our shareholders expect from us.
Speaker Change: And we like the idea and the aspect of being exposed to some of these new plants. The other thing that you can go back and look at is that in the south where we made the two acquisitions a strong hold acquisition and also the founders acquisition.
Speaker Change: Those are are those.
Speaker Change: Those areas are predominantly.
Speaker Change: Conventional vertical wells, where we have applied the unconventional completion technology, where you per frac plug all the various different stack zones and you bring them all on vertical SaaS.
Speaker Change: SaaS and you generate really strong returns as you also know our founders assets have really outperformed our original estimates.
James Parr: As you also know, our founders' assets have really outperformed our original estimates. We're currently looking at the application of horizontal drilling technology in those very same areas. So instead of developing them with inexpensive verticals, we can go with fewer wells but longer laterals and higher capital efficiency. And there's a little bit of risk associated with that. But other operators are already pioneering some of these changes. We're looking at that. And so the potential on our acres in the south is also as appealing in the very same zones that we're currently looking at from a vertical perspective.
Speaker Change: We're currently looking to add the application of horizontal drilling technology in those very same area. So instead of developing them with inexpensive verticals. We can go with fewer wells, but longer laterals and higher capital efficiency and that theres, a little bit of risk associated with that but other operators are already pie.
Speaker Change: And some of these changes we're looking at that and so the potential on our acreage in the South is also is appealing in the very same zones that we're also looking at that we're currently looking at from a vertical perspective.
Paul McKinney: And so that also lends right into, we love this area. There are other operators that are not as active. They haven't been allocating capital. They don't understand, perhaps, these opportunities as well as we do. And so we're very active in terms of trying to take advantage of our footprint down there and expand our growth through organic means. And the acquisitions that we made, both the stronghold and the founders, have demonstrated more drilling opportunities and more opportunities to add reserves than what we used originally when we made those investments.
Speaker Change: And so that also lends right into we love. This area. There are other operators are not as active they haven't been allocating capital they don't understand perhaps.
Speaker Change: These opportunities as well as we do and so we're very active in terms of trying to.
Speaker Change: Take advantage of our of our footprint down there and expand or grow through organic means and the acquisitions that we've made both the stronghold and the founders have demonstrated more drilling opportunities and more opportunities to add reserves and what we use originally when we made those those those investments.
Noel Parks: Great, and just sort of my last sort of just wrap up the line of thinking is, so it's probably difficult to characterize because, you know, again, such a vast area. But in general, what's the land situation like there in terms of, you know, legacy production held by production, maybe talking about to the south in particular, you know, shallow rights versus, you know, versus deep rights is, if you identified something that you know, a trend you thought was going to be successful. Is that going to be a steep climb to put together a position or, or Not so, so different.
Speaker Change: Great and just sort of my last visit or just wrap up there.
Speaker Change: Right I'm thinking is.
Speaker Change: So.
It's probably difficult to characterize because you know again, such a vast area, but in general what's the land situation like there in terms of you know legacy production held by production maybe.
Speaker Change: Maybe talking about to the south in particular shallow rights versus.
Speaker Change: No versus deep rights.
Speaker Change: It is if you identify something that you have.
Speaker Change: And you thought it was going to be successful.
Speaker Change: Is that going to.
Speaker Change: Yeah.
Speaker Change: A steep climb to put together a position or or.
Speaker Change: Not so so difficult do you think.
Paul McKinney: Well, it's always difficult. Let's put it that way. Nothing comes easy in this regard. And so, I don't know if anybody else has anything you want to chime in on that.
Speaker Change: Well, it's always difficult to split it out.
Speaker Change: There's nothing that's going to be.
Speaker Change: In this regard.
Speaker Change: <unk>.
Speaker Change: Oh, and so I don't know if anybody else has anything you want to chime in on that.
James Parr: I'd like to chime in.
James Park: I'd like to chime in this is James.
James Parr: This is James. Obviously, the held by production shallow is pretty well established, but with companies focusing, as Paul mentioned, on the Midland and Delaware basins and going after the shale plays, which have been the flavor of the month for the last 10 years. A lot of the deeper horizons, which are being proved up and tested by other companies, they've closed out, and they are available. Now, the complexity then gets into doing the lease checks and the ownership to see what is available. So as Paul said, nothing comes easy. But knowing the area and being active in it, we're able to chase down, and we've got our land department looking at opportunities, which, if in our initial tests of these plays prove attractive.
James Park: Obviously, the held by production shallow.
James Park: Is pretty well established but with companies focusing as Paul mentioned on the Midland and Delaware basins and going after the shale plays which have been the flavor of the month for the last say.
James Park: 10 years.
James Park: A lot of the deeper horizons, which are being proved up and tested by other companies they've pugh closed out and they are available now the complexity then gets into doing beliefs checks in the ownership to see what is available. So as Paul said nothing comes easy.
But knowing the area and being active in it we're able to chase down we've got our land department looking at opportunities, which if and our initial tests of these plays prove attractive.
Paul McKinney: How do we grow our position? As Paul said, there are two different levers of growing, one of which is buying assets and the rights that come with the acquisition and the lease. And we're employing all strategies to grow the company cost-effectively. And, you know, along that point, James, in addition, the acquisitions of many of our assets that we've put into our portfolio are older vintage leases, and so these older vintage leases don't include those few causes. They also come with higher netbacks, and so in many cases, in some areas, we actually had really high percentages, over 90% ownership in natural gas, and even over 90% ownership or 85% ownership, 88% ownership in the oil rights.
James Park: How do we grow off position as Paul said, there are two different levers of growing one of which is buying assets in the rights that come with the acquisition and the leasing.
James Park: And where we're employing all strategies to grow the company cost effectively.
James Park: And you know it along that point James in addition.
James Park: The acquisitions of many of our assets that we've put into our portfolio.
James Park: Our older vintage leases and so these older vintage leases don't include those few causes they also come with higher net backs and so in many cases in some areas, we actually had really high percentages over 90% ownership in natural gas.
James Park: Over 90% ownership of our 85% ownership, 88% ownership in the oil rights and so thats.
Paul McKinney: And so that's, and in all those older leases, which the Central Basin Platform is really known for, because it's a very old and matured development area, that provides the opportunity both shallow and deep.
James Park: And then on those older leases, which the central basin platform.
James Park: Really known for because it's a very old and matured development area that provides the opportunity both shallow and deep.
Paul McKinney: Now, I will also say, it kind of goes back to what James was saying. There are areas that we believe some of these overlooked opportunities, we know that they fall outside of areas that had been previously developed. Wells were drilled, but because they were not economic at the time, they were drilled, because of the technology and all of that. Those acreage positions are oftentimes left unleased. And so that goes back to extensively mapping, understanding the central basin platform in the southern part of the shelf, identifying from logs rock that looks a lot like the rock that we're very successfully and economically developing.
James Park: Now I'll also say it kind of goes back to what James was saying.
James Park: There are areas that we believe some of these overlooked opportunities we know that they fall.
James Park: Fall outside of areas that had been previously developed.
James Park:
James Park: Wells were drilled but because they were not economic at the time they were drilled because of the technology and all of that.
James Park: <unk> acreage positions are oftentimes left at least and so we that goes back to extensively mapping understanding the central basin platform, the southern part of the shelf.
James Park: Identifying from logs rock that looks a lot like the rocket were very successfully and economically developing.
Paul McKinney: And then when we identify those opportunities, we're out leasing. And so leasing is at times where prices are like they are today, most people tend to cut back on their leasing. And we are prioritizing, but we're not going to shut down our leasing program, because we've identified opportunities. And we've got an active program trying to acquire those opportunities to move from a small to medium term inventory to more of a longer term. It's very clear, but the marketplace rewards those companies that have the 10 and 15 and 20-year inventory lives. And here we are with essentially a five-year inventory life.
James Park: And then when we identify those opportunities were out leasing and so leasing is.
James Park: At times, where prices are like they are today, most people tend to cut back on their leasing that we are prioritizing, but we're not going to shut down our leasing program because we've identified opportunities and we've got an active program trying to acquire those opportunities to move.
James Park: Move from a.
James Park: Small to medium term inventory to more of a longer term is very clear, but the marketplace rewards those companies that had the 10 and 15 and 20 year.
Inventory lives and here, we are with essentially a five year inventory life and we'd love to have that 10, 15, or 20 year inventory life and so the way do you do that.
Paul McKinney: And we'd love to have that 10, 15, or 20-year inventory life. And so the way to do that is all means possible through A&D, when you have a balance sheet and the capability to do it, and you find somebody that's willing to sell the assets for something you're willing to pay. The other one is organically leasing and doing it the traditional fashion.
James Park: <unk> all means possible through A&D, when you have a balance sheet and the capabilities to do it and you find somebody who is willing to sell the assets or something you are willing to pay the other one is organically leasing and doing it at the traditional fashion way.
James Park: Yes.
Operator: Great, thanks a lot, really interesting.
Speaker Change: Great. Thanks, a lot of really interesting.
Paul McKinney: There are no further questions at this time.
Speaker Change: There are no further questions at this time I would like to turn the conference back over to Paul Mckinney, Chairman and CEO for any closing remarks.
Paul McKinney: I would like to turn the conference back over to Paul McKinney, Chairman and CEO, for any closing remarks. Thank you. On behalf of the entire team and board of directors, I want to once again thank everyone for listening and participating in today's call. We are pleased to have posted solid operational financial results for the first quarter of 2025, and our outlook for the remainder of the year remains solid despite the current price environment. We will continue to keep everyone apprised of our progress, and thank you again for your interest in Ring Energy.
Paul McKinney: Thank you on behalf of the entire team and board of directors I want to once again, thank everyone for listening and participating in today's call. We're pleased to have posted solid operational and financial results for the first quarter of 2025, and our outlook for the remainder of the year remains solid despite the current price environment. We will continue to keep everyone apprised of.
Paul McKinney: Our progress and thank you again for your interest in renewable energy have a great day.
Operator: Have a great day.
Paul McKinney: Yeah.
Operator: The conference is now concluded. Thank you for attending today's presentation.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Operator: You may now disconnect.
Speaker Change: Yeah.
Speaker Change: [music].