Good morning, and welcome to Ring Energy's Fourth Quarter and Full Year 2022 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Al Petrie, Investor Relations. Please go ahead.

Thank you, Operator, and good morning, everyone. We appreciate your interest in Ring Energy. We will 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. We will then turn the call over to Travis Thomas, Ring's Chief Financial Officer, who will review our financial results. Paul will then return to discuss our future plans and outlook 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 of Engineering and Corporate Strategy; Marinos Baghdati, Executive VP of Operations; and Steve Brooks, Executive VP of Land, Legal, Human Resources and Marketing. During the Q&A session, we ask you to limit your questions to one and a follow-up. You’re welcome to reenter the queue later with additional questions. I'd also note that, we have posted a Q4 and full year 2022 earnings corporate presentation to 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 and 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 at ringenergy.com. Should one or more of these risk factors materialize or should underlying assumptions prove incorrect, 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 under GAAP are contained in yesterday's earnings release. Finally, as a reminder, this conference is being recorded. I'd now like to turn the call over to Paul McKinney, our Chairman and CEO.

Thanks, Al. Welcome everyone, and thank you for your interest in Ring Energy and for joining us today for our fourth quarter and year-end 2022 earnings call. We are pleased with our record operational and financial performance during the fourth quarter. Contributing to our success was a full 3 months of production from our Stronghold acquisition, the continued implementation of our targeted 2022 capital spending program, and our ongoing initiatives to drive further efficiencies in the business. During the fourth quarter, we grew sales volume by 34% over the third quarter to a record of 17,856 barrels of oil equivalent per day. Although this was slightly below our guidance, it was primarily due to downtime associated with the impact of the winter storm conditions, gas purchaser of system constraints limiting our gas sales and the CBP and Northwest Shelf areas and adjustments for a year in reversionary interest and after payout conditions. We brought on line seven new horizontal wells, including five in Northwest Shelf and to in the Legacy Central Basin Platform area, an area we now call the CBP North. We also brought on five new vertical wells in the Stronghold acreage in area which we call CBP South. We also perform nine recompletions in CBP South. We produce a record adjusted EBITDA of $56.3 million during the fourth quarter, that was 135% higher than the same quarter for the previous year. We spent $42.6 million on capital projects, what was at the lower end of our guidance of $42 million to $46 million. The result was $5.5 million of free cash flow, which was our 13th consecutive quarter of free cash flow generation. Additionally, we reduced our debt position by $20 million during the quarter and $37 million since closing the transaction on August 31, 2022. We…

Thanks, Paul, and good morning, everyone. Echoing Paul's comments we are very pleased with our record results for the fourth quarter and full year of 2022. Our fourth quarter benefited from 3 months results from the recently acquired Stronghold assets as well as the continued strong performance of our targeted 2022 development campaign and ongoing efforts to drive further operational efficiencies. With that backdrop, during the fourth quarter of 2022, we sold approximately 1.1 million barrels of oil 1.7 Bcf of natural gas and 241,000 barrels of NGLs for a total of 1.6 million BOE. This is 34% higher than sales of 1.2 million BOE in the third quarter. For the full year of 2022, we grew sales volumes to 4.5 million BOE, a 45% increase from 3.1 million BOE in 2021. Fourth quarter of 2022 realized pricing was $81.62 per barrel of crude oil, $2.39 per Mcf of natural gas, and $17.21 per barrel of NGLs or $60.69 per BOE. This was moderately lower than our realized pricing for the third quarter of $77.28 per BOE. However, for the full year of 2022, we saw a 22% increase in realized pricing, growing to $76.95 per BOE from $63.14 in 2021. Our fourth quarter average oil price differential from NYMEX WTI futures pricing was a negative $1.07 per barrel versus a positive $2.28 for the third quarter of 2022. This difference is due mostly to the Argus CMA role that declined to $1.79 per barrel on average for the period and the Argus WTI, WTS, which declined $1.68 per barrel from the third quarter. Our average natural gas price differential from NYMEX futures pricing for the fourth quarter was a negative $3.79 per Mcf compared to a negative $3.15 for the third quarter. Our realized NGL price for the fourth…

Thank you, Travis. Before opening this call up for questions, I'd like to reemphasize several points we have made in the past. First and foremost, the Stronghold acquisition has substantially increased our size and scale, lowered our overall cost structure and improved nearly every per share metric normally considered when comparing similar transactions. We are a stronger more diverse energy company, better positioned to manage the risks associated with price volatility and unforeseen operational issues such as power outages or mechanical failures or weather related downtime. We have significantly increased our ability to generate revenue due to higher sales volumes and the roll off of lower price hedges. The improved capital efficiency of our undeveloped inventory provides the opportunity to further optimize our future capital programs to maximize cash flow generation and to remain focused on reducing debt. The improved capital efficiency is demonstrated with the progress we have made regarding our return on capital employed, which was over 20% for 2022, representing an increase over our performance in 2021 of more than 75%. The improved capital efficiency also provides enhanced flexibility to respond to changing market conditions or to proactively adjust our capital spending plans to accommodate our pursuit of accretive balance sheet enhancing acquisitions. The bottom line is simply this. Ring Energy today is larger, stronger and more efficient with an improved balance sheet and enhanced ability to pay down debt. As previously shared, we pay down $20 million of debt in the fourth quarter, and $37 million in the last 4 months of the year. We have also increased our liquidity more than 200% over the previous year, and our proved reserves by almost 80%. So having said that, we have talked about the state of the company, our plans for 2023, and our strategy. But we haven't yet talked about the principles driving our strategy. Simply put, we tried to align our actions to those we believe create long-term value for our stockholders. We believe this company needs more size and scale to help our common stock be eligible as an investment opportunity to a wider cross section of the investment community. While we have materially reduced our leverage ratio, we believe our absolute debt levels justify our continued commitment to pay down debt. We believe continuing to pursue accretive balance sheet enhancing acquisitions is one method of achieving both of these objectives. We believe we should position this company to return capital to our stockholders. In short, we believe staying the course on our value focused proven strategy, we'll continue to position this company for success in 2023 and beyond creating long-term value for our stockholders. And with that, we will turn this call over to the operator for questions. Operator?

And the first question will be from Neal Dingmann from Truist. Please go ahead.

Good morning, guys. Thanks for the time. Paul, my question for you or the team is just you did lay this out on a press release. But I'm wondering when it comes to sort of operational optionality, it sounds like now with Stronghold you've got obviously a lot more options. Just wondered, I guess my question is, how does the verticals over there compete with the horizontal sort of legacy and maybe just talk to that I know you did lay out kind of how many you've drilled thus far year-to-date and kind of what the plans are. So I'm just wondering, what is the -- how much optionality you have in the plan? And maybe for you or the guys how they compete for returns between the two?

Yes, go ahead. I'm going to give a first stab at that. And I'm going to let a couple of you guys kind of share their points of view. But bottom line is this. The undeveloped opportunity that came with the acquisition have very, very competitive economics. Some of them are actually superior due to the short cycle time from the date of [indiscernible] to the date you start getting oil into the tanks type of thing. And so -- but at the same time, we have system constraints. We've talked about this in the past with respect to Northwest Shelf and the Central Basin Platform [indiscernible] across CBP North now. We've tried to balance our drilling programs and our undeveloped programs and our capital spending programs to maximize the efficiency of the infrastructure that we have. And the primary issue up in the North was saltwater disposal. Well in the South, we have very attractive rates of returns, very quick payouts and turnaround times, very capital efficient program. But we also have other limitations. We also have saltwater disposal constraints down there, we also have power grid or power and electricity constraints. And so we are maximizing the cash flow generation from these assets, trying to minimize investments in infrastructure where it's not necessary. We are making investments in infrastructure where it is necessary, but it's a balanced program. And so as it turns out, some of our best economics are on the -- are associated with some of the vertical wells or drilling in the South. And so they're very, very robust from an economic perspective, and they're very robust from a standpoint of the impact it can have for the company. And so I don't know if there's any more I need to say, Marinos how about you?

The only thing I'd add, Paul, is that in terms of optionality, our rate contracts this year are all well to -- well to well with extensions. So there's no commitment -- long-term commitment in terms of multiple wells. We can pivot at any point. The same thing with the casing, we've secured casing for multiple projects in both areas. And so that gives us a lot of flexibility to adjust accordingly with the infrastructure constraints that we -- that might catch by surprise. In terms of the saltwater, the constraints in the South that we visited a little bit about, on the last call, on the SWD side, we have resolved a lot of those constraints. The SWD is no longer a constraint in the South. The freshwater supply has also been restrained. So we're really just facing the electrical supply kind of pivoting and trying to resolve those, which for the most part have also -- we've made a great headway there too.

Great. And, Paul, maybe that leads into my -- go ahead, I'm sorry. Go ahead.

Yes, sorry, Neal. This is Alex. I wanted to echo on and piggyback off of Paul's and Marinos comments. We specifically anticipated some of these conversations or questions. So you'll see that we really revamped our IR deck. And if you go to Page 21 on our deck, it really kind of tackles your question there a little bit more clearly giving you a feel for what is the average well performance between horizontal well and a vertical well and the differences in cost. But that is the blended average of every single well we have. And so when you’re asking will you be spending capital on vertical wells, yes, as Paul mentioned, there is some very, very high rate of return, very short cycle time investments there. And that’s specifically due to our PJ Lea fields and that the reason that one is even greater economics is because the NRIs are really high in that asset. So if you look at Page 22, you will also get a flavor for IP 60 and present oil. And so as far as optionality, we are obviously going to focus our capital to the highest rate of return investments. In both the Slides 21, 22, really kind of answer your question.

Yes, I like that. I saw those, that’s why I was thinking more, Alex, just on sort of future, because you’re right. I like the way you really gave some good details on what the sort of average has been so far. That’s why I was just kind of thinking on just [indiscernible] Stronghold. And then kind of my follow-up is, Paul, little bit on the same thing if you or Marinos, I wonder you guys want to jump in, is more -- there's a lot of different forecast out there for prices, [indiscernible] today and some thought before it was going to be recessionary fears. I’m just wondering how stable I guess is the easiest way to answer it or ask a question is how stable is your plan, I mean, the prices look here we are today at, let's call it $77 oil. Oil goes up to 85 or goes down to 65, you anticipate having relatively the same plan. I would be curious to know, because you seem to be in a great spot to what leverage already getting down there, you’re still going to be down under one times, so like all that. So I guess my big question is just maybe when you think about just pricing sensitivity, Paul.

Yes. And so -- and you’re not the only one who has asked this question online and privately. And so we shared [indiscernible] that our budget plans are assuming prices between $70 and $90 in WTI and Henry Hub of between $2 and $4. So let's just drop a hypothetical, if oil prices fall below $65 versus [indiscernible] period of time, we got flexibility to change our capital spending program limited to just the absolute highest ones we can. And so, again, we’ve got debt repayment goals this year and we're going to stick to it one way or another. And so we know we got the capacity, I mean, for example, if you look at January's production, January '23, our January '23 production averaged higher than the high-end of our production guidance for this year, okay. And so that should send a very clear message that we are going to be capital discipline this year. And so that capital discipline is going to be related to price. So let's take the opposite scenario. So let's say we are above $85 or $90 versus same period time where we’ve got ability to port on the growth organically. And we will do that subject to these system limitations that we have in infrastructure. Alex, do you want to [indiscernible] something?

Yes. And to also echo, Paul's comment here, I think that if you look at our guidance, we also had a bigger range on CapEx to try to [indiscernible] for that.

Does that answer your question, Neal?

You guys spot on. I think that’s kind of what I thought. I think is that you guys in fantastic position. Thank you, Paul.

Thank you, Neal.

[Operator Instructions] The next question is from Jeff Robertson with Water Tower Research. Please go ahead.

Thank you, Paul. You've closed the Stronghold acquisition in August and having owned those assets now for and operated them for 5 or 6 months, is there anything you've learned since you've -- since you did your diligence that you think about is playing a significant role in the 2023 capital program?

Yes, there's quite a bit we've learned. I will say this, we are every bit as excited today about this acquisition as we are the day we signed the purchase and sale agreement. We have learned several things. I'm going to turn this over to Marinos, because he can expound a little bit more on these. But we are experimenting and trying different completion techniques. We've evaluated the condition of many of the wellbores and so many of the wellbore completions may end up because of the condition of those wells. We think that through increased efficiencies, other things, we may end up redrawing those wells instead of recompleting, that's going to be a case by case basis. We have come to realize and as mentioned by Alex just a little earlier, we have certain areas in the CBP South that actually do demonstrate superior economics to even the portfolio we had before the acquisition. So -- and everybody knows how strong our economics are in the Northwest Shelf and Central Basin Platform, the legacy acreage that we have, but the rates of return and the economics of these opportunities that came in with this acquisition truly are outstanding and very competitive in this portfolio. And so we're really, really excited about that. Do you want to say anything more about the operation?

No, the only thing I'd add is that, Paul said, we’re just as excited. I think from an operations standpoint, we're more excited than we were doing acquisition. We've actually found on the PDP side, we've had five or six projects, where we've gone in and cleaned out the wells and performed a little stimulation and so forth, and actually significantly increased our production and [indiscernible] some decline. So we feel really good about the asset. We're learning a lot about it and extremely excited.

I'll add one more thing too. Due to the nature that we got several fields that we didn't even assign a lot of value on during the acquisition, that we are testing certain concepts that have proved valid, both in McKnight and PJ Lea and some of the other assets. And I think that you'll see us throughout some future calls, share some of those results. So more to come.

Thanks. Just a quick follow-up on that, and then I have another redrilling wells rather than recompleting, is that because you think you can get a better completion over maybe a broader zone and then just being able to go in and use the existing casing?

That's right. This is a combination of a couple of things. With the condition of the casing and also what kind of [indiscernible] job do they have and the quantity of [indiscernible]. And so as you know, we're fracking these wells. And so really the objective is to exploit the resource for the lowest costs and lowest risk. And so it's just a balance of all of those factors as we evaluate each one of these opportunities individually. We'll make a call on that. But one thing that we have learned when you look at the results that we've seen, new wells tend to have superior producing rates, and EUR is associated with them than the recompletion wells. And so this is what's primarily driving that.

And as a follow-up, Paul, you mentioned continuing to build scale in the Permian, Stronghold gave Ring a lot more options in terms of types of projects to invest your capital in. Can you just briefly describe what are the characteristics of an acquisition that fit the existing Ring asset base?

Yes, that's a really good question. And I think we are very fortunate with the Stronghold acquisition and that the acquisition, the way it was structured, and [indiscernible] negotiated with the sellers, it turned out to be a very, very accretive across the board on nearly every metric. I don't know the metric that it wasn't accretive on. It did a lot for this company. We targeted that set of assets. We went to them and as a result of our first offer not being sufficient for them, they decided to run a process and we prevailed through that process. But we're very -- we chose those assets for that area because of what it provided. We're still doing a similar type of analysis on other assets in the Central Basin Platform and in the Permian Basin. And so it's going to look a lot like that. Now our -- that's what we target. Now that doesn't mean that we'll end up with something that looks just like it. And the reason being is because we've been approached and we are approaching others in the marketplace that have certain types of assets, certain assets. And so we would be willing to do a PDP buy without a lot of development opportunities if we got it for the right price. But our preference is to find production, existing PDP production, that lowers our operating costs, and has showered declines long lives and then have undeveloped opportunities that have similar or at least competitive economics with the project that we have in our current inventory. I've said this in the past, Jeff, I don't want to dilute the quality of my inventory by buying stuff that's lower quality. Now, lower quality compared to the portfolio I have may still be very robust…

It does. Thank you.

Very good.

Okay. And our next question is from Noel Parks from Tuohy Brothers. Please go ahead.

Hi, good morning.

Hey, Noel.

Actually, I have done a little late, so apologies for being covered already. But just based on your last comments about what you might consider evaluating for acquisition. With a PDP acquisition, are there properties out there where there would be meaningful recompletion opportunities that could move the needle on the value of some things [indiscernible] not there?

There are actually. And it's all a function of who the prior operator was, Noel. There are certain operators in the Central Basin Platform and the Greater Permian Basin, that are known to work their properties really, really hard. And so they've already mined many of those opportunities. And then there's other operators that have focus their capital spending elsewhere. And so some of their assets could be classified as not having been worked as hard. And so that was the benefit of the Stronghold acquisition. If you look at the position that Stronghold acquired from Devon and Chevron, they had developed those assets and been managing those assets for quite some time. They tried some ideas, but they found that their capital -- they allocated their capital elsewhere. And so they left behind these type of opportunities for Stronghold, and then now us. And so -- but, yes, there are on the Central Banking Platform itself, in other areas in Northwest Shelf, we've identified assets that would be quite classified kind of what you were saying pretty much PDP, maybe not a whole lot of drone opportunities, but there are some re-completion opportunities out there as well.

Great, thanks a lot.

And the next question will be from [indiscernible]. Please go ahead.

Hey, guys. Just one quick question, I keep getting from my clients. We made a great acquisition. We've got record numbers, we're making money, we're paying down debt. But our stock can hold $2 a share. What are the suspicions out there in the market that maybe we're not talking about? Can you help me explain that?

Rick, I get asked that question more than any other question it seems like. And that's a really tough one to understand. The marketplace as and if you go back to the investor presentation, we actually lay out kind of the argument as to why it is that we are undervalued in the marketplace. I believe that today, Ring Energy stand as probably one of the best investments in the oil and gas space. And so why is our stock so undervalued? We know that the industry has been hit hard since last summer, with the change in oil prices. And we know that the smaller companies that we've kind of fall in that category have been hit disproportionately a little harder than some of the bigger companies. But in my opinion, ring energy has generated superior at least better as good or better returns than our peer group. Yet we're trading at a much lower multiple. And so to explain that would take quite a bit of time of divesting -- investigating the marketplace, and what's been happening. And so I believe that there are couple of things that probably contribute to that, I think there are some people that will not invest in a company with the debt levels that we have. But as you point out, we're, quickly and very rapidly addressing that, and we're going to have a balance sheet, a really strong balance sheet soon just from our organic ability to pay down debt. And if we can do something similar to what we did with the Stronghold acquisition, we can strengthen that balance sheet even more. So I'd hate to think that people are penalizes too heavily for that. But to be honest with you, Rick, your question probably is better addressed to some of the analysts that follows us such as Jeff or Neil or Noel and John White dudes, who is not on the call today, but some of them would probably have more insight than I do in terms of why we're being held down. Alex, you have something you want to say?

Alex you have something you want to say.

I do. I would also add the comments that this is the first quarter that we announced all of our metrics as a full performance company, meaning all Stronghold for 3 months. And so I think that a lot of the Street and the public is waiting to see. So now, once we get a couple of quarters underneath us watching the performance of the company, you'll really start seeing the effect of that acquisition.

Yes, and I also question and I'll throw in a little bit more here. As Travis shared, 4.5 million cover, just 4.5 million warrants were converted and exercise and converted into common shares this quarter. And so that has to have an impact, Rick, on why our stock performance is the way it is, is there an overhang? These are the types of questions that a lot of people ask. I believe if there is an overhang out there, its temporary, it's not long-term. I believe that if we continue to generate the returns, we continue to strengthen our balance sheet, and we continue to do all the right things, eventually the marketplace is going to come around. And that is a reason why I personally believe when I look at the oil and gas space, other companies that are similar or would be considered peers, we represent the most compelling investment opportunity out there on the market today.

Okay. Thanks.

You’re welcome. Thanks for the question, Rick.

And the next question is a follow-up from Jeff Robertson from Water Tower Research. Please go ahead.

Follow along the lines of leverage and in the $90, high-end of your -- the way you're budgeting, if prices went back up to $90, how do you balance increasing capital versus accelerating deleveraging? If people are concerned with deleveraging?

Yes, and so again, part of the reason why we gave that range of $70 to $90, is because when you fall below 70, and I use 65, as an example, for an extended or sustained period of time, that would really encourage us to change our capital spending programs. Now if we're at $90, I'm going to take the additional excess cash from operations to pay down debt. Now, if we get above $90, for a sustained period of time, let's just say we're at 100 bucks, well, then we're probably going to add capital because we're going to grow organically. And now it'll also be dependent on other factors such as, do we have something our size, are we successful in negotiating the deal? Will there will we bring a deal down this year these type of things? But yes, so that was the purpose of providing the guidance. But if we're at sustainably above 100 bucks, yes, I believe the marketplace could expect us to at least pick up the drilling and capital spending a little bit more than what we've shown here. But again, our preferences is going to be paying down debt. And so if the capital spend versus our EBITDA for the year gets below 50%, well we'll probably keep it at that 50% level or more.

So at a higher commodity price deck, you could both increase deleveraging and also grow the production base to support higher EBITDA numbers. So you get lower leverage and higher EBITDA numbers, which in theory should flow through to the valuation?

It certainly would. In those types of scenarios, yes, I believe we could surpass our debt repayment goals for the year. And that type of scenario or EBITDA is coming up. Yes, we could make substantial reductions in the leverage ratio itself, even to the point to where we're down around [indiscernible] even though potentially below one.

Great, thank you.

Ladies and gentlemen, at this time, there are no further questions. So let's turn the conference back to Paul McKinney, for any closing remarks.

Okay. Thank you again for your interest and join us on the call today. We are looking forward to 2023. We are very excited about what this year can do for Ring's shareholders. We are working hard and diligently and continue with the value focus proven strategy that we’ve laid out. And we hope to hear from you again [indiscernible] on the next call, but in the meantime we will be working hard for you. Thanks for joining us on the call today.

And thank you, sir. The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.