Ring Energy(REI)2024-05-07 21:21Financial Data and Key Metrics Changes - In Q1 2024, the company sold 13,394 barrels of oil per day, which was 5% higher than the top end of sales guidance, and total product sales volumes were 19,034 barrels of oil equivalent (Boe) per day, 3% above guidance [9][10] - Adjusted net income for Q1 was $20.3 million, or $0.10 per diluted share, compared to $21.2 million, or $0.11 per diluted share in Q4 2023 [19] - Adjusted EBITDA for Q1 was $62 million, down from $65.4 million in Q4 2023, while net cash provided by operating activities was $45.2 million, compared to $55.7 million in Q4 2023 [34] Business Line Data and Key Metrics Changes - The company increased oil to 70% of its product mix, with lease operating expenses (LOE) at $10.60 per Boe, below guidance [10][12] - Capital expenditures for Q1 were $36.3 million, which included drilling and completion of 5 horizontal wells and 6 vertical wells, coming in below guidance [10][34] Market Data and Key Metrics Changes - The average natural gas price differential from NYMEX futures pricing for Q1 was a negative $2.57 per Mcf, an improvement from negative $3.12 per Mcf in Q4 2023 [18] - Revenue for Q1 was $94.5 million, a 5% decrease from Q4 2023, with oil accounting for 98% of revenue despite being 70% of production [18] Company Strategy and Development Direction - The company plans to maintain a phased 2-rig drilling program to retain flexibility in response to changing commodity prices and market conditions [15][24] - The focus remains on operational excellence, improving the balance sheet, and pursuing strategic acquisitions to enhance growth [24][36] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the operational and financial success of Q1, attributing it to strategic acquisitions and improved efficiencies [31] - The company anticipates production for Q2 to range between 18,500 and 19,100 Boe per day, with oil production between 13,000 and 13,400 barrels per day [15][23] Other Important Information - The company paid down $3 million of debt in Q1 and $33 million since the Founders acquisition, exiting the quarter with $179.3 million of liquidity [14][21] - Adjusted free cash flow for Q1 was $15.6 million, representing the 18th consecutive quarter of positive adjusted free cash flow [13] Q&A Session Summary Question: Can you discuss the economics of the investment types in your areas? - Management noted robust economics in the San Andres horizontal oil play and strong drilling results from Founders' assets, which have a higher percentage of oil [26] Question: What are the limitations regarding infrastructure and takeaway? - Management acknowledged challenges with gas takeaway in the Central Basin Platform but noted that additional infrastructure improvements are expected [28] Question: How much capital can be allocated to P.J. Lea and Penwell areas? - Management confirmed flexibility to add capital in P.J. Lea, with no constraints, while Penwell is still addressing some saltwater disposal issues [70] Question: Why is the Q2 CapEx guidance consistent with Q1 despite better performance? - Management indicated that the consistency in guidance reflects conservatism and potential additional costs related to operational hiccups and ESG improvements [71]