Ring Energy Provides Operational and Financial Update and Initial 2021 Plans & Guidance in Line With New Strategic Vision
February 22 2021 - 5:33AM
Business Wire
Ring Energy, Inc. (NYSE American: REI) (“Ring” or the
“Company”) today provided an update on its fourth quarter 2020
operational and financial results and announced initial plans and
guidance for 2021. Ring also provided additional details regarding
its new strategic vision focused on continued free cash flow
generation, capital discipline, cost reductions and debt
reduction.
Operational and Financial Highlights
- Remained cash flow positive for the fifth consecutive quarter
even with the recent resumption of development drilling;
- Reduced debt by $47 million during fourth quarter 2020, with
$313 million outstanding against the Company’s Senior Credit
Facility as of December 31, 2020;
- Exceeded fourth quarter 2020 production guidance and produced
9,307 net barrels of oil equivalent per day (“Boepd”), of
which 86% was oil, despite no new wells coming online during the
quarter;
- Performed eight conversions from electrical submersible pumps
to rod pumps (“CTR”) in Q4 2020, with four in the Northwest
Shelf (“NWS”) and four in the Central Basin Platform
(“CBP”) resulting in a total of 29 CTR for the year (17 NWS
and 12 CBP) reducing future overall operating costs and lessening
costly workovers;
- Drilled four NWS San Andres Horizontal wells in December and
January, including three 1.5-mile horizontal wells and one 1.0-mile
horizontal well, with all wells expected to be completed and on
production by the first week of March 2021, providing a strong
boost to current production in a rising oil price environment;
- Stabilized Delaware production and improved operating
efficiencies of the oil producing assets and the saltwater disposal
assets in preparation for a 2021 disposition; and
- Relocated corporate headquarters to The Woodlands, TX,
downsized the Midland office, closed the Andrews field office, and
closing the Tulsa office, reducing leasing expenses, resulting in
meaningful annual cost savings.
Mr. Paul McKinney, Chairman of the Board and Chief Executive
Officer, commented, “Despite the pandemic induced challenges we
faced in 2020, Ring has executed well and has now achieved a total
of five consecutive quarters of free cash flow. In the fourth
quarter, we exceeded our production guidance and delivered 9,307
Boepd. This was driven primarily by our CTR program and other high
rate-of-return workover projects that not only continue to reduce
our operating costs but also steady our production levels.
Benefitting from our strong free cash flow position, and with oil
prices improving, we secured a drilling rig in early December and
initiated an NWS drilling program on some of our highest
rate-of-return acreage in Yoakum County, Texas. All four wells are
expected to be completed and on production by the first week of
March. With solid operational and financial results, we enter 2021
well positioned financially to continue to pay down debt and
execute our high return development drilling and workover
projects.”
Strategic Vision and 2021 Guidance
- Key pillars of Ring’s new strategic vision include:
- Continue to generate free cash flow to improve and build a
sustainable financial foundation;
- Maintain operational excellence with a strong commitment to
safety, the environment, Ring’s employees, and the communities in
which we work and operate;
- Pursue rigorous capital discipline focused on Ring’s highest
returning opportunities;
- Improve margins and drive value by targeting additional
operating cost reductions and capital efficiencies;
- Strengthen the balance sheet by steadily paying down debt,
divesting non-core assets and becoming a peer leader in Debt/EBITDA
metrics;
- Plans to drill six to eight wells and complete eight to ten
wells in 2021;
- Estimates total 2021 capital spending to be between $44 to $48
million;
- Expects all 2021 capital expenditures to be fully funded by
cash on hand and cash from operations, with excess free cash flow
planned to be used for debt reduction;
- Forecasting full year (“FY”) 2021 average production
growth to be 3% to 8% over FY 2020 average of 8,790 Boepd;
- Expects FY 2021 lifting cost1 to average $10.00/Boe to
$10.50/Boe, a decrease compared to FY 2020 lifting cost of
$10.58/Boe;
- Launch Delaware Basin Asset sales process during 2Q 2021,
subject to market conditions.
“I am very proud of all that we have accomplished and the
strategic vision that we are implementing. We have generated free
cash flow every quarter since Q4 2019, while paying down $75
million of debt in 2020. Our focus remains clear with our strategy
centered around five key pillars: free cash flow generation,
operational excellence, rigorous capital discipline, cost control,
and strengthening our balance sheet through non-core asset sales
and steadily paying down debt. As we look to 2021, our preliminary
guidance is underpinned by our new strategy. We have a disciplined
capital program that is expected to be fully funded by operational
cash flow and is designed to maintain production levels with the
potential for some minimal growth. Our production portfolio is
characterized by the long life and shallow declines of
predominately the San Andres formation which meaningfully reduces
the capital needed to maintain production. We have continued to
implement efficiencies in the field to reduce monthly operating
costs to further improve margins. We have stabilized our production
and improved the operational efficiencies of our Delaware Basin
assets and are currently investigating commercializing a large
portion of the salt-water disposal infrastructure there in
preparation of launching a Delaware Basin Asset sales process
during the second quarter 2021. The bottom line is we are focused
on improving our balance sheet and are forecasting strong free cash
flow well into the future which will allow us to continue to
steadily pay down debt while increasing shareholder value,”
concluded Mr. McKinney.
Operational and Financial Update
Ring continued to generate free cash flow for the fifth
consecutive quarter and used a portion of that free cash flow to
pay down $47 million on the Company’s senior credit facility during
the fourth quarter of 2020. Ring had $313 million outstanding on
its credit facility as of December 31, 2020.
For the fourth quarter 2020, Ring produced 9,307 Boepd,
exceeding the Company’s previous guidance range of 8,900 to 9,000
Boepd. Despite not bringing online any new wells during the
quarter, Ring was able to continue to capture cost savings through
its CTR program and other high rate-of-return workover projects,
which also helped to minimize natural decline.
Leveraging a much-improved commodity price outlook, Ring
recently resumed select drilling and completions activities
targeting its substantial well inventory of low risk, high rate of
return prospects. Ring anticipates all four wells to be on full
production by the first week of March 2021. The Company believes
that these four producing wells will improve production levels in
the first quarter of 2021 and help to maintain a more consistent
level of production throughout 2021.
2021 Preliminary Guidance
FY 2021 production is expected to exceed FY 2020 production by
3% to 8% and average between 9,100 and 9,450 Boepd with
approximately 85% to 87% oil.
FY 2021 capital spending program is expected to be between $44
million to $48 million, which includes the estimated cost to drill
up to eight new horizontal wells and complete up to ten new
horizontal wells primarily in its NWS asset area. It includes well
reactivations, workovers, infrastructure upgrades, and continuing
the CTR program in the NWS and CBP areas. Anticipated leasing,
contractual drilling obligations and non-operated drilling,
completion, and capital workover projects are also included.
FY 2021 lifting costs are expected to average $10.00/Boe to
$10.50/Boe, based on the production guidance given above and the
ongoing CTR program and other cost cutting initiatives being
pursued.
Management intends to launch a sales process during the second
quarter 2021 to divest all of the Company’s Delaware Basin assets,
subject to market conditions.
The Company’s 2021 capital spending, lease operating, and
non-core asset divestiture programs support the Company’s strategic
efforts to maintain a solid base of proved developed producing
reserves that generate additional free cash flow to further pay
down debt and drive long-term shareholder value.
About Ring Energy, Inc.
Ring Energy, Inc. is an oil and gas exploration, development,
and production company with current operations focused on the
conventional development of its Permian Basin assets in West Texas
and New Mexico. For additional information, please visit
www.ringenergy.com.
Safe Harbor Statement
This release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934. Forward-looking
statements involve a wide variety of risks and uncertainties, and
include, without limitations, statements with respect to the
Company’s strategy and prospects. Such statements are subject to
certain risks and uncertainties which are disclosed in the
Company’s reports filed with the SEC, including its Form 10-K for
the fiscal year ended December 31, 2019, its Form 10Q for the
quarter ended September 30, 2020 and its other filings with the
SEC. Readers and investors are cautioned that the Company’s actual
results may differ materially from those described in the
forward-looking statements due to a number of factors, including,
but not limited to, the Company’s ability to acquire productive oil
and/or gas properties or to successfully drill and complete oil
and/or gas wells on such properties, general economic conditions
both domestically and abroad, and the conduct of business by the
Company, and other factors that may be more fully described in
additional documents set forth by the Company.
1 Lifting cost = lease operating expenses excluding severance
& ad valorem tax divided by total barrels of oil equivalent
sold during the same period
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version on businesswire.com: https://www.businesswire.com/news/home/20210222005439/en/
David A. Fowler, Investor Relations Ring Energy, Inc. Office:
432-682-7464 dfowler@ringenergy.com
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