Participants

Alfred Petrie; Head-Investor Relations; Ring Energy Inc.

Paul McKinney; Chief Executive Officer, Chairman of the Board; Ring Energy Inc.

Travis Thomas; Executive Vice President, Chief Financial Officer, Treasurer; Ring Energy Inc.

Shawn Young; Vice President-Operations; Ring Energy Inc.

Alexander Dyes; Executive Vice President-Engineering and Corporate Strategy; Ring Energy Inc.

Bertrand Donnes; Analyst; Truist Securities

Noel Parks; Analyst; Tuohy Brothers Investment Research

Jeffrey Robertson; Analyst; Water Tower Research LLC

Presentation

Operator

Good morning and welcome to the Ring Energy fourth-quarter and full-year 2024 earnings conference call. At this time, all participants are on listen-only mode. A question-and-answer session will follow the formal presentation. (Operator Instructions) Please note this event is being recorded.
I would now like to hand the call over to Al Petrie, Investor Relations for Ring Energy. Please go ahead.

Alfred Petrie

Thank you, operator. And good morning everyone. We appreciate your interest in Ring Energy. We'll begin our call with comments from Paul McKinney, our Chairman of the Board and CEO, who will provide an overview of key matters for the fourth-quarter and full-year 2024, as well as our outlook. We will then turn the call over to Travis Thomas, Ring's Executive VP and Chief Financial Officer, who will review our financial results. Paul will then return with some closing comments before we open the call up for questions. Also joining us on the call today and available for the Q&A session are Alex Dyes, Executive VP and Chief Operations Officer; and Shawn Young, Senior Vice President of Operations.
During the Q&A session, we ask you to limit your questions to one and a follow-up. You're welcome to re-enter the queue later with additional questions. I would also note that we have hosted an updated investor corporate presentation on our website.
During the course of this conference call, the company will be making forward-looking statements within the meaning of federal securities laws. Investors are cautioned that forward-looking statements are not guarantees of future performance, and those actual results or developments may differ materially from those projected in the forward-looking statements. Finally, the company can give no assurance that such forward-looking statements will prove to be correct. Ring Energy disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events, or otherwise. Accordingly, you should not place undue reliance on forward-looking statements. These and other risks are described in yesterday's press release and in our filings with the SEC. These documents can be found in the Investors section of our website located at www.ringenergy.com. Should one or more of these risks materialize or should underlying assumptions proven correct, actual results may vary materially.
This conference call also includes references to certain non-GAAP financial measures. Reconciliations of these non-GAAP financial measures to the most directly comparable measure on the GAAP are contained in yesterday's earnings release.
Finally, as a reminder, this call is being recorded.
I'd now like to turn the call over to Paul, the Chairman and CEO.

Paul McKinney

Thanks, Al, and good morning everyone and thank you for joining us today. The fourth quarter of 2024 represented a strong ending to a year in which the Ring Energy team enhanced nearly every controllable metric. Our total sales grew 8% over 2023 to a record 19,648 barrels of oil per day. And oil sales grew 6% to a record 13,283 barrels of oil per day. We reduced our year-over-year all-in cash operating costs on a per Boe basis by 2%. We drilled 13 more wells in 2024 than the prior year for slightly less capital, representing a substantial increase in capital efficiency for both our horizontal and vertical wells.
For the year ended December 31, 2024, we spent $151.9 million which included cost of drill, complete and placed on production 21 horizontal wells including 5 in the northwest shelf and 16 in the northern portion of the CBP and 22 vertical walls in the CBP. Also included in the full year capital spending were costs for capital workovers, infrastructure upgrades, recompletions, facility upgrades to reduce emissions, and leasing.
We paid down debt by $40 million and $70 million since the closing of the Founders acquisition in August of 2023. We exited the year with $385 million of debt on the balance sheet and approximately $217 million of liquidity. Our performance led to generating adjusted EBITDA of $233.3 million despite a 7% reduction in realized prices. Supported by our focus on capital discipline, we delivered adjusted free cash flow of $43.6 million, remaining cash flow positive for over five years.
Turning to reserves, we grew proved reserves by 4.4 million barrels of oil equivalent or 3% to 134.2 million barrels of oil equivalent. A key point to note regarding our 2024 reserves was that we organically added 16 million barrels of oil equivalent that more than offset the 7.2 million barrels of oil equivalent of production, the 1.2 million Boe from sales of non-core assets, and 3.2 million Boe and reserve reductions due to lower SEC prices. On our proved reserves, PV-10 was approximately 1.5 billion at year end 2024. Included in that total was approximately 1.1 billion of PV-10 for 92.6 million barrels of oil equivalent approved developed reserves.
The primary contributors to our success in 2024 are directly related to the benefits of our Stronghold and Founders acquisitions in 2022 and 2023. These acquisitions have exceeded our expectations in many regards, further established our strategic foothold in the Central Basin platform, and significantly increased our undeveloped inventory of highly economic drilling locations. As we have previously stated, we continue to look for similar acquisitions that can help us replicate the success of those two transactions. We believe the proposed Lime Rock transaction does that.
As previously released, the purchase price of $100 million is comprised of $80 million of cash and up to 7.4 million shares of Ring common stock at closing and an additional $10 million deferred cash payment due nine months after closing. The transaction has an effective date of October 1, 2024, and is expected to close by the end of the first quarter of 2025. In short, Lime Rock's CBP acreage is in Andrews County, Texas, where the majority directly offsets Ring's core Shafter Lake operations, and the remaining acreage to the south is perspective from multiple horizontal targets and exposes Ring to active new plays. The acquisition ideally suits Ring's focus on consolidating and producing assets in core counties on the CBP defined by shallow declines, high margin production, and undeveloped inventory that immediately competes for capital. Additionally, and as previously disclosed, these assets add significant near term opportunities for field level synergies and cost savings.
Regarding our guidance for 2025, our estimates include three full quarters of operations with the Lime Rock assets. Driving the top line, we anticipate an average annual sales midpoint of 21,000 barrels of oil equivalent per day and 13,900 barrels of oil per day, a 7% and 5% increase, respectively. And an annual capital spending midpoint of 154 million essentially flat with the prior year and a midpoint of approximately 49 total wells drilled completed and placed online.
In summary, our 2025 plans will follow a very similar playbook from the past. We will remain focused on maximizing free cash flow generation. We will maintain a disciplined capital spending program that maintains or slightly grows our production and liquidity. And allocate the balance of our cash flow to paying down debt.
Travis will provide more detail regarding our guidance, along with other comments concerning our fourth- quarter and full-year financial results. So with that, I will turn it over to Travis. Travis?

Travis Thomas

Thanks, Paul. And good morning, everyone. We were pleased with our overall outcome for the fourth quarter. In addition to the results that met our overall guidance, the fourth quarter capped off another successful year for Ring. Similar to past calls, I will take a few minutes to cover some additional color detailing the most significant sequential quarterly results. Let's start with production.
During the fourth quarter, we sold 19,658 Boe per day compared to 20,108 Boe per day in the third quarter, a slight decrease of 2%. A portion of the decrease was attributable to a third-party gas plant being shut down due to a fire impacting our sales volumes. Our fourth quarter total sales volumes were above the midpoint of our guidance range and contributed to a record full-year 2024 sales of 19,648 Boe per day. The year benefited from a full year of production from our Founders acquisition which closed in August of 2023. As Paul discussed, also materially contributing to our record full-year 2024 sales volumes was another successful drilling campaign across our asset base with continued focus on our highest rate of return inventory.
Turning to the fourth quarter 2024 pricing, our overall realized price declined 4% to $46.14 per Boe from $48.24 per Boe in the third quarter. Driving the overall sequential decline was the 7% lower realized pricing for oil in the fourth quarter of 2024. Our fourth quarter average crude oil price differential from NYMEX WTI futures pricing was a negative $1.42 per barrel versus a negative $0.56 per barrel for the third quarter. This was mostly due to the Argus WTI WTS that decreased by $0.36 per barrel offset by the Argus CMA roll that decreased by $0.44 per barrel on average for the third quarter. Our average natural gas price differential from NYMEX futures pricing for the fourth quarter was a negative $3.83 per MCF compared to a negative $4.43 per MCF for the third quarter. Our realized NGL price for the fourth quarter averaged 13% of WTI compared to 11% for the third quarter.
Oil revenue decreased by $5.8 million with a $3.8 million price variance, a $2 million production variance. Gas and NGL revenues, on the other hand, saw a combined $2.6 million increase quarter to quarter providing a combined total of $1.5 million for the fourth quarter compared to a $1.2 million negative in the third. This resulted in fourth quarter revenue of $83.4 million compared to $89.2 million in the third quarter, a 7% decrease.
Fourth quarter LOE of $20.3 million was essentially flat compared to the third quarter. On a unit basis, fourth quarter LOE was $11.24 per Boe which was within our guidance range. Third quarter LOE was $10.98 per Boe. Cash G&A, which excludes share-based compensation and transaction-related costs, was $3.51 per Boe for the fourth quarter versus $3.45 per Boe for the third quarter.
Our fourth-quarter 2024 results included a loss on derivative contracts of $6.3 million versus a gain of $24.7 million for the third quarter which was primarily due to lower relative pricing at the end of the fourth quarter. We recorded an income tax provision of $1.8 million during Q4 2024 versus a provision of $10.1 million in the third quarter which was driven by the increase in pretax book income.
Finally, for Q4, reported net income of $5.7 million or $0.03 per diluted share. Excluding the estimated after-tax impact of pretax items including non-cash, unrealized gains and losses on hedges, share-based compensation expense, and transaction costs, our fourth quarter adjusted net income was $12.3 million or $0.06 per diluted share. This is compared to a third quarter 2024 net income of $33.9 million or $0.17 per diluted share and adjusted net income of $13.4 million or $0.07 per diluted share.
Moving to our hedged position. For 2025, we currently have approximately 2.4 million barrels of oil hedged or approximately 48% of our estimated oil sales based on the midpoint of guidance. We also have 2.4 BCF of natural gas hedged or approximately 33% of our estimated natural gas sales based on the midpoint. For a quarterly breakout of our hedge positions for 2025, please see our earnings release and presentation which includes the average price for each contract type.
Turning now to the balance sheet, we incurred $37.6 million in CapEx in the fourth quarter which was in line with the midpoint in guidance. We reduced D&C CapEx by 23% to $22 million in the fourth quarter from $29 million in the third. We incurred costs of approximately $4.7 million for facilities upgrades which contribute to our year-over-year reduction in emissions. Also included in our fourth quarter CapEx was over $1 million in leasing costs, approximately 60% of our full-year leasing, which added to our reserve replacement and organic inventory growth.
As Paul discussed, we drilled 13 more wells in 2024 than the prior year for slightly less capital, representing a substantial increase in capital efficiency for both our horizontal and vertical wells. The result was a full-year 2024 total CapEx of $151.9 million which was slightly lower than 2023.
At year end 2024, we had $385 million drawn on our credit facility. With a borrowing base of $600 million that was reaffirmed in December, we had $215 million available net of letters of credit. Combined with cash, we had a liquidity of $217 million and a leverage ratio of 1.66 times.
During the fourth quarter of 2024, we generated $4.7 million of adjusted free cash flow and paid down $7 million in debt, resulting in debt reduction of $70 million since completing the Founder's acquisition in mid-August 2023.
For full-year 2024, we paid down $40 million of debt and generated $43.6 million in adjusted free cash flow. We will continue to utilize our free cash flow to improve our long-term financial profile through further debt repayment which we expect will be fueled primarily through further growth in cash flow driven by our successful execution of our targeted 2025 development program. Our primary focus remains the same, utilizing our substantial free cash flow generation to primarily reduce debt and better position ourselves to ultimately provide a meaningful return of capital to shareholders.
Looking at our 2025 outlook. We plan to follow the same general approach as in 2024. In addition, our guidance reflects the recently announced agreement to acquire Lime Rock CBP assets and includes results from those operations after closing which is expected by March 31.
As Paul discussed and we have said in the past, our focus is on maintaining or slightly growing Boe per day total production while continuing to grow crude oil sales. Our full-year 2025 total sales guidance is 20,000 to 22,000 Boe per day and 13,600 to 14,200 barrels of crude oil per day.
I would point you to yesterday's press release for quarterly guidance. We expect to spend $138 million to $170 million on our full-year 2025 development program with anticipated capital spending of between $26 million and $34 million for the first quarter. We also anticipate full-year 2025 LOE to be between $11.25 and $12.25 per Boe and between $11.75 and $12.25 per Boe for the first quarter.
All prices and estimates are based on assumed WTI oil prices of $65 to $75 per barrel and Henry Hub prices of $2 to $4 per MCF.
So with that, I will turn it back to Paul for his closing comments. Paul?

Paul McKinney

Thank you, Travis. Up to this point, we reviewed our fourth quarter and full year 2024 results and discussed generally our outlook and guidance for 2025. What we haven't shared though are our thoughts associated with managing the company through the volatility we continue to experience in commodity markets. The question that could be asked, what are our priorities and how will those priorities impact our decision making going forward? So let's discuss what Ring is likely to do if WTI oil prices remain substantially at or below $65 a barrel.
Before going there though, I think it is good to remind ourselves of the virtues associated with our assets. Turn to page 8 of our investor presentation, Ring Energy has the second highest margin on a $1 per barrel basis in our peer group. This enables the company to have a relatively better ability to manage the challenges of low oil prices compared to many of our peer group if we don't consider the benefits or the differences in company hedging practices.
Furthermore, as shown on page 9, Ring has the second lowest production decline rate in our peer group, which means if we want to maintain our production levels, we would require a relatively lower level of capital spending to achieve that goal.
Another thing we can discuss is our hedging practices. As you know, Ring strives to hedge 50% of our forecasted PDP production from our most recent reserve report as a method of limiting their exposures to sustained low oil and natural gas prices and to protect future cash flows supporting our debt repayment and our capital spending plans.
Having said all that, if WTI oil prices remain at or below $65 per barrel for an extended period of time, we believe the right thing to do is to cut back on our capital spending in favor of reducing debt. On page 7 of our investor presentation, we show estimates of among other things our projected leverage ratio at different WTI oil prices. I am referring to the chart on the lower right of the page entitled, Enhancing Balance sheet, Targeting Leverage Ratio Less than 1 times. The scenarios depicted in the chart assume our capital spending levels remain the same. Only the oil price assumptions were changed. The $65 per barrel case shows that we believe our leverage ratio under those assumptions will reduce only modestly.
If we stay at $65 per barrel for a duration of that forecast, we are more likely to reduce our capital spending to a lower level than that assumed in the $65 per Boe scenario depicted there. And we will apply more of our cash flow to paying down debt. Although the calculation is very complicated and lower capital spending levels would imply lower production revenue and EBITDA levels, we believe we would end up at a better leverage ratio by focusing on reducing absolute debt.
Another point I'd like to make is associated with our success in organically growing our proved reserves in 2024 and what that means regarding our future plans for growth. Earlier today and in the past, you have heard us say we intend to allocate a portion of our cash flow from operations to maintaining or slightly growing our production and liquidity and allocating the balance of reducing debt and that our growth will come from accretive balance sheet-enhancing acquisitions.
Building on that strategy, in 2024, we began focusing on identifying and capturing opportunities for reserve and inventory growth with our cash flow and as a part of our capital program. We intend to increase our focus on organically growing our reserves and undeveloped inventory over time. And by doing so, we are adding another component to our growth strategy, another way to win, so to speak, and not rely solely on acquisitions for reserve and underdevelopment inventory growth. We believe the benefits of adding organic growth to our growth strategy are compelling.
Another point refers to the question, why did Ring use stock as part of the total consideration in the pending Lime Rock transaction? There are a couple of reasons. The primary one being our balance sheet. By using a small amount of equity, we anticipate having a stronger balance sheet and corresponding leverage ratio at closing. Another benefit is related to the confidence Lime Rock has in our ability to create value. As you may know, Lime Rock is a premier oil field operator and the parent company provides growth capital for the energy industry.
The last subject I would like to address before turning this call over to the operator to answer questions is our low stock price. Our stock price hasn't been this low since 2021. Since that time, we have increased our reserves and production per share, lowered our leverage ratio, and are a larger and more resilient company than we were then. The value proposition established with our current stock price is compelling and in my opinion, represents a very opportunistic investment opportunity.
And with that, we will turn this call over to the operator for questions. Operator?

Question and Answer Session

Operator

Thank you. We will now begin the question-and-answer session. (Operator Instructions) At this time, we will pause momentarily to assemble our roster.
Bert Donnes, Truist.

Bertrand Donnes

Hey. Good morning, team. I saw your note on the new guide that it does not assume any synergies or cost reductions in it from the recent acquisition. I was just wondering if maybe you could talk us through low-hanging fruit on the savings you might be able to find on the combined assets? And then maybe how quickly do you expect to kind of fold in those those 40 new locations that you just added to the portfolio.

Paul McKinney

Yeah. Very good. And I'm going to allow a couple of other people to join me in answering this question because it's a very good one. And so, our operations are literally right next door and the operations are very, very similar to what we're currently doing. One of the areas that we've identified that we believe represents an opportunity is, and it relates back to one of the primary causes or cause in our operating costs, and that's basically handling water. They have a saltwater disposal system over there and I believe they have 12 saltwater disposal wells. It is underutilized, especially compared to our system. If you recall in the past, Bert, we have had to manage our drilling program so that we don't produce too much water -- more water than our saltwater disposal system could handle. This provides opportunities there to not only combine the system but also reduce the resulting operating cost. And then so -- if you don't mind, I'll just turn it over to Shawn. Shawn, we just visited the assets for the first time this last week, and so what did you discover while you were over there, Shawn?

Shawn Young

I think there's definitely some opportunities for synergies. Beyond just the water infrastructure, we have an extensive oil infrastructure there as well. And also just taking advantage of our personnel, our office that is currently right there, so there's some synergies there as well. Also just pointing to our track record, right, if you look back at the FOG acquisition, the lifting costs and cost structure here is somewhat similar. And we've been able to reduce our lifting costs in that FOG acquisition by over 22%. So while there's not anything in the forecast that basically outlines those synergies, they're definitely there and we expect to capitalize on them.

Paul McKinney

Yeah. The challenge we had, Bert, is we really didn't want to get out of our skis and predict something before we had an opportunity to actually see what those potential savings would be firsthand. But again, pointing out what Shawn identified, we have a track record of doing this and we're very confident. It could even result in just changing the pumper routes and reducing the number of people just to operate the wells. There's all kinds of opportunities there. And so we just didn't want to get over our skis and so we want to make sure that we just continue to use in our forecast the operating cost track record that Lime Rock had, but we do believe that the combined benefit of both areas, now all being one, we'll see some cost reductions.
Now going to the second part of your question about the undeveloped inventory, again, the playbook is going to be similar to what we did with Founders. The first thing we want to do is get our arms around the operations, get those wells and operations integrated into our company. And then start the process of drilling. So right now, we anticipate drilling some of the first Lime Rock opportunities in the second half of the year. Alex, is there more you'd want to share there?

Alexander Dyes

Yes, definitely. Hi Bert. This is Alex. Just a few things, talking about the inventory, much like we did at Ring over the last few years, disproportionately, the CBP horizontal assets have been taking a lot of our capital to drilling very good performing horizontal wells, mainly due to the cost structures dropped a lot there and so we're going to do the very same things on the Lime Rock assets, right? We've found a better way to drill the wells, stay more in zone, optimize the frac, and our cost structure has dropped about 15% to 20% over the last couple of years. So our new cost structure with the more improved completion and better landing zone should lead to really good inventory that will compete for capital today.

Paul McKinney

Yeah. That goes back to some other things we've talked in the past, Bert. Technology is our friend. The early parts or early stages of developing the San Andres horizontal oil play both in Yoakum County and Andrews County and gains primarily though in Andrews and Yoakum. Technologies continue to roll on and we've learned how to develop higher recoveries from the same wells and the same lateral lengths. And so, yeah, techno technology is a friend. I think we answered your question, Bert.

Bertrand Donnes

I think you shared it and I think you're doing the right thing. Keep the guidance conservative and give yourself a chance to beat it there. And then my second question just on the M&A front, you continue to fold in accretive bolt-ons. I just want to get an update on maybe how you think about the volatility that we're seeing. Does this maybe slow that down? Or do you think it's the other way? Maybe third-party operators are maybe looking to sell some of their assets and shore up their balance sheets and maybe you'll be the beneficiary of that. And just the other side of that as well, you sold about 6 million in those high-cost, non-core wells, is there anything left at the company on that front?

Paul McKinney

Currently, our inventory, we don't have more really to sell, but with every acquisition, because no portfolio that you acquire will be a perfect set of assets, and so some of those assets will fall into the bucket of non-core or an area that are well types that we, if you have undeveloped opportunities, they may not compete and not every economic opportunity. Even in the Lime Rock acquisition, it's equally economic. So if you look at some of the opportunities in the South, we've identified some of those the Barnet and the Devonian opportunities, those are economic and they work especially at higher oil prices. But they're not as economically attractive as the San Andres horizontal opportunities that we have offsetting our Shafter Lake operations, okay? And so that's where we are there. I don't think anybody else has anything else to say or want to chime in.

Bertrand Donnes

Just a follow-up on the first part, are there more Lime Rocks out there or do you think the volatility in the market affects your ability to find more Lime Rocks?

Paul McKinney

Thanks for the reminder. The volatility is a challenge, but it's also complicated. The volatility tends to bring buyers' and sellers' expectations closer together, so you're more likely to get a transaction done. The challenge for us is to lower the prices. Aand if you're in a sustainably lower price environment, we're going to protect our balance sheet and our first priority is to strengthen the balance sheet so we can enter the marketplace again. And so I'm not going to tell you that we're not going to do a deal because there's all kinds of creative ways to structure deals. But in a lower price environment, right after completing a transaction like we're hoping to do with this pending transaction, our balance sheet won't be strong enough for us to want to go out there and keep going. So again, there will be a time period for us where we're going to concentrate on restoring the balance sheet, so we can get out there and get active when the next opportunities come out.

Alexander Dyes

Let me add to that. Actually, we have a new slide, Bert, slide 14. Think about Founders, what we did in 2023, right? So it took us a little bit to integrate it and optimize it and you can see all the metrics there. But we cleaned up the balance sheet and strengthened it up to be able to do another deal. So it's just the same concept here.

Bertrand Donnes

That's perfect. Thanks for the update, guys.

Operator

Noel Parks, Tuohy Brothers.

Noel Parks

Good morning. Just a couple. One, could you just talk a bit about inventory quality and your footprint and what closed bolto-ons like Shafter Lake do for you? I'm thinking from just a location standpoint, I don't know if there's lateral length implications, but it would just be good to hear about that.

Paul McKinney

Okay. I'll give you a stab at that, Noel. I think you're touching on subjects that we hear frequently from investors and shareholders. And so, as you know, we have had the benefit of undeveloped locations that had superior economics, especially when you compare to many of the plays that other people are pursuing in the broader Permean Basin. Our San Andres horizontal locations have competed compete very handsomely against some of the Devonian, the Delaware and Midland Basin wells, shale wells that people are drilling. And so, that's a key component of our growth strategy. And you've heard me say this in the past, Noel, we would love to have that 15- or 20-year inventory of undeveloped locations that have similar economics. But the fact remains, we just don't have that. And so that's why we're keenly focused on making these acquisitions that meet specific criteria that, along come with it, undeveloped opportunities that compete in our portfolio.
One of the things that we've talked about and is a change that has occurred over the last little over a year now, we have been focusing on organically identifying and capturing these opportunities, so we don't also have to do that with acquisitions.
And so, by identifying and capturing future growth opportunities organically, we're using our cash flow in our annual budget, so to speak, to capture them. And although that additional capital could otherwise have gone to paying down debt, it is the most attractive way and the least costly way and the opportunity presents itself as having the best economics going forward in terms of growing the inventory and capturing opportunities for sustained growth.

Shawn Young

Let me add to that, Noel, I'd like to address a little bit of your inventory quality question. We actually put in a new slide on page 25 of the slide deck. And that just shows year-over-year what our inventory looks like both on the horizontal basis and a vertical basis. So if you look at that, year-over-year, we're still drilling really good horizontal wells, but for a reduced cost structure, 11% on horizontals. And then on the vertical sense, we actually increased substantially on well performance. That's mostly due to the Founders acquisition because when we did that, the Founders acquisition brought in good and even better inventory, yet we still reduced our vertical costs on a per-stage basis by like 3%. So the inventory quality is still there and actually, we have really good breakeven. So in these lower oil prices, we have more optionality and flexibility.

Paul McKinney

Yeah. Our breakevens compare very favorably to our peer group. We have a great inventory. Is it a 15- or 20- year in inventory? No. But that's part of the strategy. That's part of what we're doing. We're out there looking for additional opportunities. We like the Central Basin platform, the southern part of the shelf, because that's the playground we've been playing in for a long time. We know that playground. And we believe that there's a lot of opportunities. Again, going back to the investor presentation. The entire Central Basin platform has conventional reservoirs that have been historically overlooked by other operators and are still being overlooked. And so to the extent that we can continue to pursue them and continue to build that inventory, I believe that we have a great opportunity ahead of us right here in the very playground that we've been playing. And who knows, there could be a day in the in the future where we actually expand beyond our current playground. We'll see. Did that answer your question, Noel?

Noel Parks

Sure did. And in the deal slides, I saw some -- you had a mention of Devonian potential, and that sounds familiar to me. But I've only read a little bit about our net potential in your neck of the woods. I guess that's sort of in the boundary between the Central Basin platform and the Midland basin, so that was a new topic for me.

Paul McKinney

Yeah. This is an area that's been developing. If you were to take a little bit of time to understand or study what is actually going on on the eastern side of the Central basin platform, the Barnett play is a very successful play that several companies are still spending money trying to acquire acreage in it. And so it does present a really nice optionality, especially if we ever get back to an environment where you're above $75 wall. And so above $75 wall, these things are very attractive and some of the other things that are very interesting if you were to study the play, the operating costs where most of these Barnett wells are really, low. So you have really high cash-generating capacity. And so that's part of why we're so excited about that play. Now at $65, I don't believe we'd be able to allocate capital to those opportunities. But the bottom line is acquisitions like this provides optionality in the future, especially in an environment where prices rebound and are stronger.

Noel Parks

And so is there a learning curve that conceivably just lower that that threshold of what you'd need to make finance work at slightly better price?

Paul McKinney

Noel, I think you already know the answer to that question. Yes, there's always a learning curve, and again, technology is your friend. We have learned that technology and climbing the learning curve associated with the experiences and figure out the best ways to drill and complete the wells is the key to taking what used to be Tier 1 acreage or Tier 2 acreage and turning into Tier 1 acreage economics. And so yes, there is a learning curve. But again, in a stage like you find us today and where we will be after we close the pending acquisition with Lime Rock, our balance sheet and our current price environment right now, it'd be very challenging for us to want to allocate capital to a development program where we know that we have to climb that learning curve. We would want to do that in a higher price environment.

Noel Parks

Got it. Thanks a lot.

Operator

(Operator Instructions)
Jeff Robertson, Water Tower Research.

Jeffrey Robertson

Thanks. Good morning, Paul. Just to follow up on the organic growth concept, can you talk about what Ring is doing in with maybe some portion of your capital or at least with your GNG to identify additional organic growth opportunities on the existing footprint, whether it's new zones or applying a different technology to an existing zone?

Paul McKinney

That's a good question actually. And so we are evaluating the very first step that you do is to evaluate all the potential zones under your existing acreage. And as you map those various different zones, you tend to map beyond your acreage and so we're also looking at acreage near and close to where we currently operate. That's the easiest simplest, least expensive way to expand and identify and capture, economic opportunities and so. We're starting there on our existing anchorage, we are very much aware of development opportunities both vertically and also horizontally and what's kind of interesting is the horizontal opportunities in areas that are have traditionally been for us anyway, vertical development areas.
And so we drilled a couple of wells this last year. We have one of those horizontal wells that remained a duck over the year. We're going to be completing that here this year. That duck as well as we study, the completion methods and again, the potential learning curve associated with that. But several other offsetting operators have been very successful pursuing these plays, and that's part of the reason why we are now, in a study mode, so to speak, to decide how we want to allocate our capital to the least, risky or the least risk adjusted path forward to maximize free capital generation. And so, but yeah, we are very excited about that. There are quite a few opportunities.
In the southern part of our acres, so in Crane County, also in Ector County where we can, where we have been historically developing things vertically, but right now we believe there's a, there are opportunities to test and try horizontal technology to improve the capital efficiency and increase the. The NPV, so to speak, of each each location, reduce the number of locations that are required. So your surface footprint is a lot lower. You have fewer facilities, so you also have fewer emissions and they're a lot easier to manage. It's just overall a much more efficient way to pursue in our our future growth.

Jeffrey Robertson

Then on the balance sheet, Paul or maybe Travis, can you talk about whether or not the Lime Rock assets will have a material impact on The RBL when you fo when you fold those in and I guess spring redetermination.

Paul McKinney

Yeah. We typically have a spring redetermination, right now we have the room and liquidity on our balance sheet to close this transaction and we plan to do that. However, we do believe that with the added assets, we probably could deserve a higher borrow base. That's something that the banks will have to decide after we, provide all the information and all that. So I don't want to get out over my seas and predicting that. Travis, is there a point you'd like to make in that?

Travis Thomas

They're just very bankable assets with the load decline rate, so we think that the banks will really like them. It's also very it's PDP heavy. We've got some upside, a lot of upside, but the banks are like the PDP aspect of it as well. So we'll wait for the spring redetermination.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to Paul McKinney for any closing remarks.

Paul McKinney

On behalf of the management team and Board of Directors, I want to once again thank everyone for your interest and for joining today's call. We appreciate your continued support and we look forward to keeping everyone a rise for progress. Have a great day.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.