• Average Daily Sales Volume: 20,108 BOE per day, with oil sales at 13,204 barrels per day.
• Lease Operating Expenses (LOE): $10.98 per BOE.
• Adjusted EBITDA: $54 million, down from $66.4 million in the second quarter.
• Capital Expenditures (CapEx): $42.7 million, near the midpoint of guidance.
• Adjusted Free Cash Flow: $1.9 million for the third quarter.
• Net Income: $33.9 million or 17 per diluted share.
• Revenue: $89.2 million, a 10% decrease from the second quarter.
• Debt Reduction: $15 million paid down in the third quarter, $33 million year-to-date.
• Liquidity: $208 million with a leverage ratio of 1.59 times.
• Full Year 2024 Production Guidance: 19,500 to 19,800 BOE per day, with oil production at 13,250 to 13,450 barrels per day.

• Warning! GuruFocus has detected 3 Warning Signs with REI.

Release Date: November 07, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Ring Energy Inc (REI) reported a record sales volume for the third quarter, exceeding the high end of their guidance.
• The company successfully executed its drilling and completion program, contributing to strong operational performance.
• Ring Energy Inc (REI) achieved a 34% increase in year-to-date adjusted free cash flow, demonstrating effective capital discipline.
• The company reduced its debt by $15 million in the third quarter, totaling a $33 million reduction year-to-date.
• Ring Energy Inc (REI) has a strong liquidity position with $208 million available and a leverage ratio of 1.59 times.

Negative Points

• The company experienced a 10% decrease in total realized pricing from the second quarter, impacting revenue.
• Adjusted EBITDA for the third quarter was $54 million, down from $66.4 million in the second quarter.
• Ring Energy Inc (REI) faced higher lease operating expenses due to increased workover costs and higher sales volumes.
• Cash G&A expenses increased due to severance payments and higher regulatory consulting fees.
• The company reported a net negative impact of $1.2 million from natural gas sales due to negative realized pricing.

Q & A Highlights

Q: Can you provide an overview of Ring Energy's current inventory and how it has changed with recent drilling activities? A: Paul McKinney, CEO, explained that Ring Energy has approximately 450 opportunities in its inventory. While they don't have a 10-15 year runway like larger companies, they are focused on acquisitions and organic growth to expand their inventory. The company is investing in geoscience and engineering to identify new opportunities and expects to build inventory through both acquisitions and organic means.

Q: How do you view opportunities between the Central Basin Platform and the Northwest Shelf, and how do the economics compare? A: Paul McKinney noted that the economics have improved due to a slight decrease in drilling and completion costs. The company is optimistic about future opportunities, especially with potential dispositions from larger companies. Alex Dyes, EVP of Engineering, added that cost structures have improved, making investments in both vertical and horizontal wells more robust.

Q: What is the company's approach to exploration and organic growth, and how much capital is allocated to these efforts? A: Paul McKinney emphasized the focus on reducing debt and strengthening the balance sheet. While they are cautious with high-risk investments, they are drilling four wells this quarter to expand inventory, representing about 25% of the capital. The goal is to balance risk with debt reduction and production maintenance.

Q: With the recent non-core asset sales, are there more assets you consider non-core that might be sold? A: Paul McKinney stated that the company has largely cleaned up its portfolio, but they remain open to selling non-core assets if the right opportunity arises. The recent sale helped reduce debt and improve operating costs.

Q: How does Ring Energy plan to allocate capital once the balance sheet goals are achieved, particularly regarding dividends or share repurchases? A: Paul McKinney mentioned that capital returns to shareholders could include dividends or share repurchases, depending on the best investment opportunity for shareholders. The decision will consider stock price, intrinsic value, and the ability to sustainably deliver dividends.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.