Ring Energy(US:REI)2021-11-10 20:50Financial Data and Key Metrics Changes - The company generated adjusted EBITDA of $19.7 million and free cash flow of $2.6 million during Q3 2021, while paying down $5.5 million of bank debt [12][23] - Revenue for Q3 2021 was $49.4 million, with a net income of $14.2 million or $0.12 per diluted share [23] - Liquidity at the end of Q3 2021 was approximately $56 million, a 9% increase from the end of Q2 2021 [12][28] Business Line Data and Key Metrics Changes - The company sold 758,387 barrels of oil equivalent (BOE) or 8,243 BOE per day in Q3 2021, which was 4% lower than Q2 2021 sales [13] - Oil sales were 659,247 barrels, and natural gas sales were 594,841 Mcf for a total of 758,387 BOE [24] - Realized pricing for Q3 2021 was $69.61 per barrel of oil and $5.86 per Mcf of natural gas, averaging $65.11 per BOE [25] Market Data and Key Metrics Changes - The company experienced lower than anticipated natural gas sales due to capacity constraints at third-party processing facilities [14] - Higher third-quarter prices for crude oil and natural gas contributed to a 3% increase in revenues over Q2 2021 [16] Company Strategy and Development Direction - The company aims to strengthen its balance sheet through debt reduction and capitalize on organic opportunities within its portfolio [11] - Future drilling programs are focused on high-rate return opportunities to maximize cash flow and mitigate production declines [17][21] - The company is actively pursuing strategic acquisitions that would improve leverage ratios and be accretive to existing shareholders [37][38] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the production from Phase III and Phase IV drilling programs, which are expected to significantly increase revenue and earnings in early 2022 [18][21] - The company is facing supply chain issues that may impact drilling plans, but is working to secure materials before resuming drilling [54][62] - Management anticipates continued strong oil price environments in 2022, with a gradual shift towards growth capital allocation as leverage metrics improve [61][62] Other Important Information - The company is finalizing its initial sustainability report, expected to be published before year-end [40] - The company is evaluating two rigs for its 2022 program and is prepared to resume drilling as conditions allow [52] Q&A Session Summary Question: Upside from Phase III Central Basin Platform wells - Management noted positive results from the new wells and changes in completion practices that encourage continued drilling in the area [46][48] Question: Rig release and future drilling plans - Both rigs used for Phase III have been released, and the company is evaluating options for 2022 [51][52] Question: G&A trend and cost management - G&A expenses have increased slightly due to hiring, while efforts to reduce operating expenses continue despite rising costs [74][76] Question: Delaware asset sale process - Interest remains strong, but potential buyers are facing challenges securing financing [79][80] Question: Acquisition opportunities outside the Horizontal San Andres - The company is exploring opportunities in the Permian Basin while focusing on maintaining a high-margin, low-decline asset portfolio [88][90] Question: Expectations regarding processing struggles and bank redetermination - Continued struggles with processing capacity are anticipated in Q4 guidance, and the bank redetermination process is progressing favorably [96][101]