Ring targets 48% y-o-y production growth through asset integration

Ring Energy expects full year 2023 production growth of 48% at the midpoint compared with full year 2022. The growth is attributed to integration of Permian basin assets acquired from privately held Stronghold Energy assets in 2022.

OGJ editors

March 10, 2023

3 min read

Ring Energy Inc. expects full year 2023 production growth of 48% at the midpoint compared with full year 2022. The growth, attributed to integration of Permian basin assets acquired from Stronghold Energy II Operating LLC and Stronghold Energy II Royalties LP in a deal that closed in August 2022, is a 2.5% increase from fourth-quarter 2022 (OGJ Online, July 5, 2022).

The company forecasts full year 2023 sales volumes of 17,800-18,800 boe/d (68% oil, 17% natural gas, 15% NGLs), compared with full year 2022 average sales volumes of 12,364 boe/d (77% oil, 23% natural gas & NGLs).

First-quarter 2023 sales volumes of 17,800-18,300 boe/d are expected. The company began its 2023 drilling and recompletion program in January with four Northwest Shelf (NWS) horizontal wells drilled and three wells completed and placed on production. The fourth is expected to be placed on production by the end of the month.

A rig was added to the company’s Central Basin Platform (CBP) asset to drill three vertical wells. All three are expected online by the of the month.

For full year 2023, Ring expects total capital spending of $135-170 million that includes a combination of drilling horizontal wells on legacy acreage and vertical wells on the recently acquired CBP assets, as well as performing recompletions.

Based on the $152.5 million mid-point of spending guidance, Ring expects to allocate 70% for drilling, completion, and related infrastructure; 22% for recompletions and capital workovers; and 8% for land, environmental, social and governance and non-operated capital.

Full year 2022

Net income for full year 2022 was $138.6 million and record adjusted net income was $107.5 million. This compares with full year 2021 net income of $3.3 million and adjusted net income of $30.6 million.

Revenues were record $347.2 million for 2022 compared with $196.3 million in 2021, with the 77% increase driven by higher sales volumes and increased realized commodity prices.

For the twelve months ended Dec. 31, 2022, capital expenditures were $140.1 million.

During full year 2022, Ring drilled and completed 27 horizontal wells (18 NWS, nine CBP) and five vertical wells in the CBP, as well as performed 12 recompletions in the CBP.

Net sales for full year 2022 were 12,364 boe/d comprised of 3,459,840 b/o, 4,088,642 Mcf of natural gas, and 371,329 bbl of NGLs. Full year 2021 net sales averaged 8,519 boe/d, which included 2,686,939 b/o and 2,535,188 Mcf of natural gas. The increase was a direct result of the Stronghold acquisition, as well as organic growth from the company’s capital spending program.

Fourth-quarter 2022

Net income for fourth-quarter 2022 was $14.5 million versus net income of $75.1 million in third-quarter 2022. Adjusted net incomewas $21.8 million for the quarter, compared with $32.5 million in third-quarter 2022.

Cash flow from operations was $47.4 million for the quarter compared with $48.9 million for third-quarter 2022 and $20.6 million for fourth-quarter 2021.

In fourth-quarter 2022, capital expenditures on an accrual basis were $42.6 million compared with Ring’s previous guidance of $42-46 million. The company drilled four horizontal wells (two CBP, two NWS) and five vertical wells (all in CBP); completed 12 wells (seven CBP, five NWS); and recompleted nine wells (all CBP).