Ring Energy(US:REI)2022-11-10 19:44Financial Data and Key Metrics Changes - The third quarter of 2022 marked a transformational period for the company, with record quarterly production, revenue, net income, and adjusted EBITDA [11][13] - Sales volumes for the quarter were 13,278 barrels of oil equivalent per day, a 42% increase from the second quarter [14] - The company posted net income of $75.1 million or $0.49 per diluted share, with adjusted net income of $32.5 million or $0.28 per share [32][33] - The leverage ratio improved to 1.4x, down 33% from 2.1x at the end of the second quarter [20][22] Business Line Data and Key Metrics Changes - The company sold 933,000 barrels of oil, 953,000 Mcf of natural gas, and 130,000 barrels of NGLs for a total of 1.2 million BOE in Q3 2022, compared to 850,000 BOE in Q2 2022 [24] - The average realized pricing for crude oil was $92.64 per barrel, while natural gas was $4.89 per Mcf, and NGLs were $25.68 per barrel [25] - The company drilled eight horizontal wells in Q3, bringing the total for the year to 23 [15] Market Data and Key Metrics Changes - The average oil price differential from NYMEX WTI was a positive $2.28 per barrel in Q3, compared to $0.81 in Q2 [26] - The average natural gas differential from Henry Hub was a negative $3.15 per Mcf in Q3, worsening from a negative $0.23 in Q2 [27] Company Strategy and Development Direction - The company plans to maintain or slightly grow production in 2023, with capital expenditures projected between $150 million to $175 million [38] - The strategy includes a balanced capital-efficient combination of drilling horizontal wells on legacy assets and vertical wells on newly acquired properties [38] - The company is focused on maximizing the value of existing infrastructure and targeting the highest rates of return for capital allocation [49][52] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's strong financial position and flexibility to react to market changes [42] - The company anticipates a strong finish to the year, with expectations of sales volumes between 18,000 and 19,000 BOE per day in Q4 2022 [36] - Management highlighted the importance of maintaining low breakeven costs and high margins across its portfolio [81] Other Important Information - The company ended the quarter with over $165 million in liquidity, including $900,000 in cash [33] - The borrowing base on the credit facility was increased by more than 70% to $600 million due to the acquisition [22] Q&A Session Summary Question: Comparison of new drilling production data in target areas - Management discussed the allocation of drilling based on maximizing existing infrastructure and production efficiency [46][49] Question: Potential for Delaware Basin assets - Management indicated that while there are economic opportunities in the Delaware Basin, current investments in other areas provide better returns [52][54] Question: Refrac opportunities and infrastructure issues - Management noted ongoing infrastructure improvements that would enhance operational efficiency and allow for increased activity in the future [56][58] Question: Performance of recompletions on Stronghold assets - Management provided insights into the competitive rates of return between Northwest Shelf and Stronghold assets, emphasizing the efficiency of capital allocation [64][66]