Ring Energy(REI) - 2023 Q4 - Annual Results

Ring Energy Q4 and Full Year 2023 Results 2023 Q4 and Full Year Highlights Ring Energy achieved record Q4 and full-year 2023 results, with significant growth in sales, Adjusted EBITDA, and Free Cash Flow, alongside debt reduction and strong reserves Q4 and Full Year 2023 Performance Highlights | Metric | Q4 2023 | Full Year 2023 | YoY Change (Full Year) | | :--- | :--- | :--- | :--- | | Total Sales Volumes (Boe/d) | 19,397 (Record) | 18,119 (Record) | +47% | | Oil Sales Volumes (Bo/d) | 13,637 (Record) | 12,548 (Record) | +32% | | Net Income ($ million) | $50.9 | $104.9 | -24% | | Adjusted Net Income ($ million) | $21.2 | $100.5 | -7% | | Adjusted EBITDA ($ million) | $65.4 (Record) | $236.0 (Record) | +21% | | Adjusted Free Cash Flow ($ million) | $16.3 (Record) | $45.3 | +30% | - The company paid down $3.0 million of debt in Q4 2023 and a total of $30.0 million since the Founders Acquisition in August 2023, exiting the year with a Leverage Ratio of 1.62x[4] - Year-end 2023 proved reserves were 129.8 million barrels of oil equivalent (MMBoe) with a PV-10 value of $1.6 billion, based on SEC pricing[4] Management Commentary Management credits 2023 record results to successful acquisitions and drilling, with 2024 focused on disciplined capital, debt reduction, and accretive acquisitions - Management credits the 47% increase in sales volumes and 21% increase in Adjusted EBITDA to the successful execution and integration of two acquisitions made over the past 18 months[4][5] - The strategic focus for 2024 includes: disciplined capital spending for oil production, allocating excess cash for debt reduction, and seeking accretive acquisitions[5] Financial and Operational Performance Record Q4 2023 sales volumes boosted revenue to $99.9 million, with $50.9 million net income and $174.5 million year-end liquidity Summary Results This section provides a concise overview of key quarterly and full-year financial and operational metrics Quarterly and Full-Year Financial Summary | Metric | Q4 2023 | Q3 2023 | FY 2023 | FY 2022 | | :--- | :--- | :--- | :--- | :--- | | Net Sales (Boe/d) | 19,397 | 17,509 | 18,119 | 12,364 | | Revenues ($MM) | $99.9 | $93.7 | $361.1 | $347.2 | | Net Income/Loss ($MM) | $50.9 | $(7.5) | $104.9 | $138.6 | | Adjusted EBITDA ($MM) | $65.4 | $58.6 | $236.0 | $195.2 | | Capital Expenditures ($MM) | $38.8 | $42.4 | $152.0 | $140.1 | | Adjusted Free Cash Flow ($MM) | $16.3 | $6.1 | $45.3 | $34.8 | Financial Overview This section details Q4 2023 financial performance, highlighting net income, Adjusted Net Income, Adjusted EBITDA, and Adjusted Free Cash Flow - Q4 2023 net income was $50.9 million, or $0.26 per diluted share, which included a $32.5 million pre-tax non-cash unrealized gain on commodity derivatives[7] - Adjusted Net Income for Q4 2023 was $21.2 million, or $0.11 per diluted share, after excluding items like unrealized derivative gains and share-based compensation[7] - Adjusted EBITDA reached a record $65.4 million in Q4 2023, a 12% increase from Q3 2023 and a 16% increase from Q4 2022[10] - Adjusted Free Cash Flow was a record $16.3 million in Q4 2023, a 165% increase from Q3 2023, primarily due to higher revenues and lower capital spending[11] Sales Volumes, Prices and Revenues This section analyzes Q4 2023 sales volumes, average realized prices, and total revenues across product types - Q4 2023 sales volumes were 19,397 Boe/d, comprised of 70% oil, 15% natural gas, and 15% NGLs[14] Q4 2023 Average Realized Sales Prices | Product | Realized Price | | :--- | :--- | | Crude Oil | $77.33 per barrel | | Natural Gas | $(0.12) per Mcf | | NGLs | $11.92 per barrel | | Combined | $56.01 per Boe | - Total revenues for Q4 2023 were $99.9 million, a 7% increase from Q3 2023, driven by higher sales volumes that were partially offset by lower overall realized prices[16] Operating Expenses This section details operating expenses, including Lease Operating Expense, production taxes, and General and Administrative expenses - Lease Operating Expense (LOE) was $10.50 per Boe in Q4 2023, down from $11.18 per Boe in Q3 2023[17] - Production taxes were $2.78 per Boe in Q4 2023, representing approximately 5.0% to 5.2% of revenue[20] - Adjusting for transaction costs, G&A (excluding share-based compensation) decreased 5% sequentially to $3.00 per Boe in Q4 2023[22] Derivative Instruments This section outlines commodity derivative activities, including net gains/losses and future hedging positions - In Q4 2023, the company recorded a net gain of $29.3 million on commodity derivatives, which included a $3.3 million realized cash loss and a $32.5 million unrealized non-cash gain[23] - For full-year 2024, the company has hedged approximately 2.1 million barrels of oil (45% of guidance midpoint) and 2.6 billion cubic feet of natural gas (43% of guidance midpoint)[25] Balance Sheet and Liquidity This section reviews the balance sheet and liquidity, including total liquidity, outstanding borrowings, and borrowing base reaffirmation - Total liquidity at the end of Q4 2023 was $174.5 million, consisting of $0.3 million in cash and $174.2 million available under the revolving credit facility[26] - The company had $425.0 million in borrowings outstanding on its revolving credit facility, which has a borrowing base of $600.0 million[26] - The borrowing base of $600 million was successfully reaffirmed during Q4 2023, with the next redetermination scheduled for May 2024[27] Capital Expenditures Q4 2023 capital expenditures were $38.8 million, with full-year capex of $152.0 million funding 31 wells and infrastructure - Q4 2023 capital expenditures were $38.8 million, used to drill four horizontal wells and three vertical wells, and complete ten wells[28] - Full-year 2023 capital expenditures totaled $152.0 million[29] 2023 Drilling and Completions Activity | Period | Wells Drilled | Wells Completed | Recompletions | | :--- | :--- | :--- | :--- | | Q1 2023 | 7 | 7 | 6 | | Q2 2023 | 6 | 6 | 3 | | Q3 2023 | 11 | 8 | 0 | | Q4 2023 | 7 | 10 | 0 | | FY 2023 Total | 31 | 31 | 9 | Full Year 2023 Summary Financial Review Full-year 2023 achieved $104.9 million net income, record $236.0 million Adjusted EBITDA (up 21%), and $361.1 million revenues (up 4%) Full Year 2023 vs. 2022 Financial Comparison | Metric | FY 2023 | FY 2022 | % Change | | :--- | :--- | :--- | :--- | | Net Income ($M) | $104.9 | $138.6 | (24)% | | Adjusted Net Income ($M) | $100.5 | $107.5 | (7)% | | Adjusted EBITDA ($M) | $236.0 | $195.2 | +21% | | Adjusted Free Cash Flow ($M) | $45.3 | $34.8 | +30% | | Adjusted Cash Flow from Ops ($M) | $197.0 | $172.9 | +14% | - Full-year 2023 revenues increased 4% to $361.1 million, driven by a 47% increase in sales volumes, which was a direct result of acquisitions and the company's capital spending program[33][34] - The average realized sales price for full-year 2023 was $54.60 per Boe, a significant decrease from $76.95 per Boe in 2022[35] 2024 Guidance 2024 guidance sets capital spending at $135-175 million for maintaining or slightly growing oil volumes, with total production forecast at 18,000-19,000 Boe/d - The full-year 2024 capital spending budget is set at $135 million to $175 million, which includes drilling 18-24 horizontal wells and 20-30 vertical wells[39] - Capital allocation for 2024 is planned as follows: 73% for drilling and completion, 24% for recompletions and workovers, and 3% for land and other costs[40][41] 2024 Full Year and Q1 Guidance | Metric | Q1 2024 Guidance | FY 2024 Guidance | | :--- | :--- | :--- | | Total Sales (Boe/d) | 18,000 - 18,500 | 18,000 - 19,000 | | Oil Sales (Bo/d) | 12,420 - 12,765 | 12,600 - 13,300 | | Capital Spending ($M) | $37 - $42 | $135 - $175 | | LOE (per Boe) | $10.75 - $11.25 | $10.50 - $11.50 | Year-End 2023 Proved Reserves Year-end 2023 proved reserves decreased to 129.8 MMBoe, with PV-10 value at $1.6 billion, primarily due to lower SEC commodity prices Proved Reserves Overview This section overviews year-end 2023 SEC proved reserves, including total volume, PV-10 value, and reserve mix - Year-end 2023 SEC proved reserves were 129.8 MMBoe, down from 138.1 MMBoe at year-end 2022, primarily due to lower SEC pricing, asset sales, and production[43] - The PV-10 value of proved reserves at year-end 2023 was $1.6 billion, compared to $2.8 billion at the end of 2022, reflecting lower SEC average prices ($74.70/bbl oil in 2023 vs. $90.15/bbl in 2022)[44][47] - The reserve mix at year-end 2023 was approximately 63% crude oil, 19% natural gas, and 18% NGLs, with proved developed reserves accounting for 68% of the total[45] Standardized Measure of Discounted Future Net Cash Flows This section presents the standardized measure of discounted future net cash flows and its reconciliation to PV-10 Standardized Measure of Discounted Future Net Cash Flows | Component | As of Dec 31, 2023 | As of Dec 31, 2022 | | :--- | :--- | :--- | | Future cash inflows | $6,622,410,752 | $9,871,961,000 | | Future production costs | $(2,413,303,488) | $(2,751,896,250) | | Future development costs | $(562,063,424) | $(647,196,750) | | Future income taxes | $(548,664,988) | $(1,142,147,641) | | Standardized Measure | $1,399,185,191 | $2,272,113,518 | Reconciliation of PV-10 to Standardized Measure (Dec 31, 2023) | Item | Amount | | :--- | :--- | | PV-10 | $1,647,031,127 | | Future Income Taxes, Discounted at 10% | $247,845,936 | | Standardized Measure | $1,399,185,191 | Financial Statements This section presents unaudited Q4 and full-year 2023 financial statements, including operations, balance sheet, and cash flows Condensed Statements of Operations This section summarizes condensed statements of operations for Q4 and full-year 2023 and 2022 Condensed Statements of Operations Summary | (In millions) | Q4 2023 | Q4 2022 | FY 2023 | FY 2022 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $99.9 | $99.7 | $361.1 | $347.2 | | Total Costs & OpEx | $59.0 | $53.9 | $215.3 | $155.5 | | Income from Operations | $40.9 | $45.8 | $145.8 | $191.7 | | Net Income (Loss) | $50.9 | $14.5 | $104.9 | $138.6 | Condensed Operating Data This section presents key condensed operating data, including average daily sales, realized prices, and per-Boe expenses Condensed Operating Data Summary | Metric | Q4 2023 | Q4 2022 | FY 2023 | FY 2022 | | :--- | :--- | :--- | :--- | :--- | | Avg Daily Sales (Boe/d) | 19,397 | 17,856 | 18,119 | 12,364 | | Avg Realized Price ($/Boe) | $56.01 | $60.69 | $54.60 | $76.95 | | LOE ($/Boe) | $10.50 | $10.60 | $10.61 | $10.57 | | G&A (excl. SBC) ($/Boe) | $3.20 | $3.74 | $3.08 | $4.42 | Condensed Balance Sheets This section summarizes condensed balance sheets as of December 31, 2023, and 2022 Condensed Balance Sheet Summary | (In millions) | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Total Current Assets | $55.9 | $63.2 | | Net Properties & Equipment | $1,293.4 | $1,180.1 | | Total Assets | $1,376.5 | $1,269.0 | | Total Current Liabilities | $113.8 | $141.8 | | Revolving Line of Credit | $425.0 | $415.0 | | Total Liabilities | $589.9 | $607.9 | | Total Stockholders' Equity | $786.6 | $661.1 | Condensed Statements of Cash Flows This section summarizes condensed statements of cash flows for full-year 2023 and 2022 Condensed Statement of Cash Flows Summary (Full Year) | (In millions) | FY 2023 | FY 2022 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $198.2 | $197.0 | | Net Cash Used in Investing Activities | $(222.6) | $(308.9) | | Net Cash Provided by Financing Activities | $21.0 | $113.2 | | Net (Decrease) in Cash | $(3.4) | $1.3 | Financial Commodity Derivative Positions As of December 31, 2023, the company holds commodity derivative contracts, including swaps and collars for WTI crude oil and Henry Hub natural gas, extending into 2025 Summary of Hedged Volumes for 2024 | Quarter | Oil Hedges (Bbl) | Gas Hedges (MMBtu) | | :--- | :--- | :--- | | Q1 2024 | 587,578 | 518,615 | | Q2 2024 | 537,422 | 743,203 | | Q3 2024 | 512,900 | 705,787 | | Q4 2024 | 496,800 | 672,546 | Non-GAAP Information This section provides definitions and reconciliations for key non-GAAP financial measures like Adjusted Net Income, EBITDA, and Free Cash Flow Reconciliation of Net Income to Adjusted Net Income This section reconciles net income to adjusted net income, detailing adjustments for non-recurring and non-cash items Adjusted Net Income Reconciliation | (In millions) | Q4 2023 | Q4 2022 | FY 2023 | FY 2022 | | :--- | :--- | :--- | :--- | :--- | | Net Income (Loss) | $50.9 | $14.5 | $104.9 | $138.6 | | Adjustments (Unrealized derivative gain/loss, SBC, etc.) | $(29.7) | $7.3 | $(5.6) | $(31.2) | | Adjusted Net Income | $21.2 | $21.8 | $100.5 | $107.5 | Reconciliation of Net Income to Adjusted EBITDA This section presents the reconciliation of net income to Adjusted EBITDA, highlighting key adjustments for non-operating expenses Adjusted EBITDA Reconciliation | (In millions) | Q4 2023 | Q4 2022 | FY 2023 | FY 2022 | | :--- | :--- | :--- | :--- | :--- | | Net Income (Loss) | $50.9 | $14.5 | $104.9 | $138.6 | | Adjustments (Interest, Taxes, DD&A, etc.) | $14.5 | $41.8 | $131.1 | $56.6 | | Adjusted EBITDA | $65.4 | $56.3 | $236.0 | $195.2 | Reconciliation to Adjusted Free Cash Flow This section details the reconciliation of net cash provided by operating activities to Adjusted Free Cash Flow Adjusted Free Cash Flow Reconciliation | (In millions) | Q4 2023 | Q4 2022 | FY 2023 | FY 2022 | | :--- | :--- | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $55.7 | $63.6 | $198.2 | $197.0 | | Less: Capital Expenditures | $(38.8) | $(42.6) | $(152.0) | $(140.1) | | Other Adjustments | $(0.6) | $(15.5) | $(0.9) | $(22.1) | | Adjusted Free Cash Flow | $16.3 | $5.5 | $45.3 | $34.8 | Reconciliation to Adjusted Cash Flow from Operations This section provides the reconciliation of net cash provided by operating activities to Adjusted Cash Flow from Operations Adjusted Cash Flow from Operations Reconciliation | (In millions) | Q4 2023 | Q4 2022 | FY 2023 | FY 2022 | | :--- | :--- | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $55.7 | $63.6 | $198.2 | $197.0 | | Changes in operating assets and liabilities | $(0.6) | $(16.3) | $(1.2) | $(24.1) | | Adjusted Cash Flow from Operations | $55.1 | $47.4 | $197.0 | $172.9 | Reconciliation of General and Administrative Expense This section reconciles General and Administrative expense, excluding share-based compensation and transaction costs G&A Reconciliation | (In millions) | Q4 2023 | Q4 2022 | FY 2023 | FY 2022 | | :--- | :--- | :--- | :--- | :--- | | General and administrative expense (G&A) | $8.2 | $8.3 | $29.2 | $27.1 | | Less: Share-based compensation | $(2.5) | $(2.2) | $(8.8) | $(7.2) | | Less: Transaction costs | $(0.4) | $(1.0) | $(0.4) | $(2.1) | | G&A excluding SBC and transaction costs | $5.4 | $5.2 | $19.9 | $17.8 | Calculation of Leverage Ratio This section presents the calculation of the company's leverage ratio as of December 31, 2023 Leverage Ratio Calculation (as of Dec 31, 2023) | Metric | Value | | :--- | :--- | | Revolving line of credit | $425,000,000 | | Pro Forma Consolidated EBITDAX (LTM) | $262,972,020 | | Leverage Ratio | 1.62x | | Maximum Allowed | ≤ 3.00x | Calculation of Current Ratio This section details the calculation of the company's current ratio as of December 31, 2023 Current Ratio Calculation (as of Dec 31, 2023) | Metric | Value | | :--- | :--- | | Current Assets per Covenant | $223,935,007 | | Current Liabilities per Covenant | $104,763,500 | | Current Ratio | 2.14x | | Minimum Allowed | ≥ 1.00x | Calculation of Cash Return on Capital Employed (CROCE) This section outlines the calculation of Cash Return on Capital Employed (CROCE) for 2023 and 2022 CROCE Calculation | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Adjusted Cash Flows From Operations (ACFFO) | $196,989,711 | $172,885,152 | | Average debt and stockholders' equity | $1,143,843,146 | $833,363,799 | | CROCE | 17.2% | 20.7% | All-In Cash Operating Costs This section presents the all-in cash operating costs per Boe for recent quarters and full years All-In Cash Operating Costs per Boe | Period | Q4 2023 | Q3 2023 | FY 2023 | FY 2022 | | :--- | :--- | :--- | :--- | :--- | | All-in cash operating costs per Boe | $23.52 | $24.61 | $23.46 | $24.84 |