Ring Energy(US:REI)2020-08-11 21:12Financial Data and Key Metrics Changes - For Q2 2020, the company reported revenues of $10.6 million, a net loss of $135 million, and a loss per diluted share of $1.99, which included a pre-tax unrealized loss on hedges of $26.8 million and $147.9 million in ceiling test impairment [7] - For the first six months of 2020, revenues were $50.2 million, with a net loss of $91.2 million and a loss per diluted share of $1.34 [8] - The company achieved $9.7 million in net cash flow for Q2 and $33.6 million for the first half of 2020, with capital expenditures of $1.8 million and $17.9 million respectively [10][31] - The average received price for oil was $24.23 per barrel and $38.16 per barrel for the first six months [11] Business Line Data and Key Metrics Changes - Oil sales for Q2 were 429,751 barrels, and gas sales were 417,491 MCF, totaling 499,333 BOE [11] - The company limited production during May due to low prices, resulting in a differential of approximately $2.50 per barrel compared to WTI [12] - The company completed 4 ESP to rod conversions in Q2, significantly reducing workover costs from approximately $200,000 to around $30,000 [27][28] Market Data and Key Metrics Changes - Current production is approximately 9,000 BOE per day, with an anticipated 20% year-over-year drop in production from 2019 to 2020 [29] - The company has a high-quality inventory of over 340 Tier 1 and Tier 2 locations, providing over a 15-year drilling inventory [39] Company Strategy and Development Direction - The company plans to use cash flows to reduce debt under its credit facility, which was reduced to $375 million during the spring redetermination [14] - The company is focused on maintaining positive cash flow while minimizing capital expenditures, with plans to drill new wells contingent on stabilized oil prices in the mid-$40 range [33][66] - The company is not actively pursuing new leasing but is renewing acreage that shows promise for development [74] Management's Comments on Operating Environment and Future Outlook - Management noted that M&A activity has been underperforming due to the pandemic and expects further activity to be pushed to 2021 [36] - The management expressed optimism about the market's gradual improvement and the potential for increased drilling activity if prices stabilize [66][84] Other Important Information - The company has received $4.5 million in non-refundable payments related to the divestiture of Delaware assets, indicating ongoing negotiations and interest from buyers [21][98] - The company has approximately 30 permits ready for drilling, indicating preparedness for future operations [77] Q&A Session Summary Question: When will the company resume drilling activities? - The company plans to focus predominantly on the Northwest Shelf for future drilling activities [44] Question: What is the company's outlook on hedging for 2021? - The company has hedges in place for 2021 at an average floor of $42.22 for approximately 4,500 barrels a day [47] Question: Can the company provide a breakdown of impairments by area? - The company stated that impairments are not calculated by area due to full cost accounting practices [63] Question: What is the expected CapEx if prices stay above $40 but below $45? - The company anticipates a CapEx spend of $25 million to $27 million for the year, with potential acceleration in drilling if prices stabilize [68] Question: What is the status of the Delaware asset sale? - The company confirmed that the buyer is actively working on arrangements and has provided non-refundable payments, indicating a strong commitment to the deal [21][91]