Ring Energy(US:REI)2022-05-12 00:18Financial Data and Key Metrics Changes - First quarter sales volumes were 8,870 barrels of oil equivalent per day, exceeding guidance by almost 2% [11] - Adjusted EBITDA grew by almost 50% compared to the fourth quarter, reaching approximately $36 million [13] - Free cash flow generated was almost $13 million, with $10 million used to pay down debt, resulting in liquidity of $71 million, a 16% increase from the end of 2021 [15][30] - Net income for the first quarter was $7.1 million or $0.06 per diluted share, with adjusted net income at $22.3 million or $0.22 per share [29] Business Line Data and Key Metrics Changes - Sold 676,000 barrels of oil and 732,000 Mcf of natural gas in the first quarter, totaling 798,000 Boe, compared to 842,000 Boe in the fourth quarter [23] - Realized pricing for the first quarter was $93.80 per barrel and $6.49 per Mcf, leading to first quarter revenues of $68.2 million, a 14% increase from the fourth quarter [25] Market Data and Key Metrics Changes - Average oil price differential from NYMEX WTI was a negative $0.90 per barrel for the first quarter, compared to negative $1.12 in the fourth quarter [24] - Average natural gas price differential from Henry Hub was a positive $1.81 per Mcf for the first quarter, slightly down from $1.85 in the fourth quarter [25] Company Strategy and Development Direction - The company plans to implement a continuous one rig drilling program throughout 2022, targeting high return inventory across Central Basin Platform and Northwest Shelf [16][17] - The capital spending for 2022 is projected between $120 million to $140 million, including drilling and completion of 25 to 33 wells [33] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong commodity price outlook and its impact on revenue and cash flow for the remainder of the year [10] - The company aims to reduce its leverage ratio to below 2x by the end of 2022, improving from just under 3.5x at the end of 2021 [39] Other Important Information - The company has secured casing supplies through October and is managing sand supply issues effectively [45] - The company is experiencing inflationary pressures on service costs, particularly for steel and labor, but has not faced significant supply disruptions [44][75] Q&A Session Summary Question: Are there any supply chain challenges affecting operations? - Management confirmed no supply disruptions but acknowledged significant inflationary pressures on costs [44] Question: What is the leverage target for potential rig additions or market transactions? - Management stated that cash flows need to be balanced with capital spending and debt reduction before considering additional rigs [46] Question: How do the Central Basin Platform and Northwest Shelf compare in terms of returns? - Management indicated that returns from both areas are closely comparable, with Central Basin Platform wells performing well [52] Question: Are there any issues with scheduling frac teams? - Management reported successful scheduling and coordination with completion service companies, exceeding planned timelines [70] Question: How are labor costs and service utilization affecting operations? - Management noted rising labor costs and full utilization of services, impacting efficiency and costs [75][78]