Ring Energy(US:REI)2022-03-17 17:51Financial Data and Key Metrics Changes - The company generated free cash flow of $9.3 million in Q4 2021 and $20.5 million for the full year 2021, marking the ninth consecutive quarter of positive cash flow [9][10] - Adjusted EBITDA for the full year 2021 was $83.3 million, with adjusted net income of $30.6 million, a 48% increase compared to 2020 [11] - Liquidity at the end of 2021 was $61.6 million, a 10% increase from Q3 2021 and 52% higher year-over-year [12] Business Line Data and Key Metrics Changes - The company averaged 9,153 barrels of oil equivalent per day in Q4 2021, with 85% being oil, reflecting an 11% sequential sales volume growth [13] - The 2021 drilling program included 11 wells drilled and 13 wells completed, with significant performance improvements noted in the Central Basin Platform [14][15] Market Data and Key Metrics Changes - Realized pricing for Q4 2021 was $76.35 per barrel of oil and $6.65 per Mcf for natural gas, averaging $70.85 per BOE [28] - For the full year 2021, realized pricing was $67.56 per barrel of oil and $5.83 per Mcf for natural gas, averaging $63.13 per BOE [29] Company Strategy and Development Direction - The company plans to increase capital spending in 2022 to grow production and adjusted EBITDA, while continuing to pay down debt [18] - A continuous drilling program was initiated in late January 2022, focusing on high-rate return inventory in the Northwest Shelf and Central Basin Platform [19][20] - The company aims to reduce its leverage ratio from approximately 3.5x at the end of 2021 to less than 2x by the end of 2022 [19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to capitalize on improved commodity prices and generate higher revenue, assuming strong market conditions [18] - The company is focused on maintaining operational excellence and is prepared to adjust capital spending based on commodity price fluctuations [21][34] Other Important Information - The company made substantial progress on ESG initiatives, issuing its inaugural ESG report and updating corporate governance practices [23] - The company has a $1 billion revolving credit facility with a borrowing base of $350 million, reaffirmed in December 2021 [12] Q&A Session Summary Question: Has third-party facilities downtime been included in the 2022 guidance? - Yes, forecasts have incorporated the best estimates regarding third-party facilities, with some uncertainty remaining [42] Question: Will bankers continue to impose hedging requirements in 2023? - Current credit facility only requires maintaining existing hedges into 2022, with no new requirements for 2023 [43] Question: What is the outlook for inflation and rig contracts? - The company has a five-well rolling contract that allows adjustments for inflation, with significant increases in costs observed [56][57] Question: Are there opportunities for acquisitions in the current market? - The company remains focused on acquisitions but faces stiff competition for superior assets [70][72] Question: What is driving the success of recent well performances? - Success attributed to the geoscience and engineering teams focusing on technology and geology to improve well performance [75]