Good morning and welcome to the Ring Energy First Quarter 2024 Earnings Conference Call. [Operator Instructions] Please also noted that this event is being recorded. At this time, I will turn the floor over to Al Petrie, Investor Relations for Ring Energy. Sir, you may begin.

Thank you, operator. 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 first quarter of 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 up the call 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 are welcome to reenter the queue later with additional questions. I would also note that we have posted an updated 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 those 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 prove incorrect, actual results may vary materially. This conference call also includes references to certain non-GAAP financial measures. Reconciliation of these non-GAAP financial measures to the most directly comparable measures under GAAP are contained in yesterday's earnings release. Finally, as a reminder, this conference call is being recorded. I would now like to turn the call over to Paul McKinney, our Chairman and CEO.

Thank you, Al and thank you for everyone joining us today and your interest in Ring Energy. As you may have read by now, we began 2024 with a solid first quarter. Sales volumes exceeded the high end of our guidance, while operating expenses and capital spending, both came in below our guidance ranges, placing us in a strong position for the rest of the year. The primary driver of our sales volume performance was the robust returns from our drilling program and reduced downtime since the winter storm we incurred in January. The key factors contributing to our lower-than-expected capital costs were increased efficiencies associated with our well completions and the improved logistics of drilling our wells. Additionally, we benefited from lower costs realized by an improved macro environment associated with the drilling and completion services for our wells. LOE, on a per BOE basis, came in below our guidance range as well, primarily due to our continuing focus on reducing costs generally and more specifically associated with the progress we are making integrating the Founders' assets into our operations. These efforts not only led to lower costs but lower downtime as well that contributed to our sales volumes performance, as mentioned earlier. Our results this quarter are a direct reflection of the dedication and commitment of our employees in both the field and the office. And on behalf of the Board and management team, we thank all of you for your hard work. With respect to our performance this quarter, we sold 13,394 barrels of oil per day, which was 5% higher than the top end of our sales guidance. On a total product basis, we reported first quarter 2024 sales volumes of 19,034 barrels of oil equivalent per day, that was 3% above the top end of…

Thanks, Paul and good morning, everyone. As Paul discussed, we are pleased to have a strong start to 2024 with the solid first quarter results that exceeded expectations on multiple key fronts, including higher sales volumes, lower operating expenses and lower capital expenditures. We continue to materially benefit from our 2 strategic acquisitions completed over the past 2 years. Also contributing to the first quarter results was the successful kickoff and initial execution of our 2024 drilling program complemented by further efficiencies achieved through our expanded scale and focused on the best operational practices. The combined result was continued strong generation of adjusted free cash flow during the first quarter of 2024 that was used to further pay down debt with balance sheet improvement remaining a top priority for the company. With that overview, let's take a look at the quarter in more detail. As in the past, I'm going to focus my comments on the most important sequential quarterly results. During the first quarter, we sold 13,394 barrels of oil per day and 19,034 BOE per day, both of which were higher than the top end of our guidance. The slight decrease in sales volumes from the fourth quarter was primarily due to approximately 10 days of partial downtime due to the winter storm in January. Also impacting first quarter results was the overall realized pricing of $54.56 per BOE, a 3% decrease from the fourth quarter. Our first quarter average crude oil price differential from NYMEX WTI futures pricing was a negative $1.34 per barrel versus a negative $0.92 per barrel for the fourth quarter. This was mostly due to the Argus WTI, WTS that increased $0.96 per barrel, offset by the Argus CMA roll that decreased by [ $1.4 ] per barrel on average from the fourth…

Thank you, Travis. We believe our operational and financial success this quarter demonstrate the long-term benefits of our strategy designed to leverage the low breakeven cost of our drilling inventory and the quality of our assets to drive sustainable free cash flow generation. In short, our focus remains the same as in the past. And while I have discussed the components of our strategy previously, it is worth repeating again today. . First, we will continue to pursue operational excellence with a sense of urgency and remain focused on safety and environmental stewardship. Second, we will continue to high-grade and execute our targeted drilling program focused on our highest rate of return prospects to organically maintain or slightly grow our production while maximize free cash flow generation. Next, we will continue our focus on improving the balance sheet. And finally, we will seek growth through the pursuit of strategic, accretive and balance sheet-enhancing acquisitions. To sum it up, our commitment to our value-focused proven strategy better prepares the company to manage industry risks and uncertainties, results in the generation of sustainable and competitive returns and supports our efforts to achieve the necessary business size and scale to position Ring to sustainably return capital to stockholders. I want to thank our stockholders for their continued support. I also want to once again thank everyone for participating in today's call. And with that, we will turn this over to the operator for questions. Operator?

[Operator Instructions] Our first question today comes from Neal Dingmann from Truist Securities.

Nice quarter, Paul and team. Paul, my first question maybe just, now you've got -- the footprint has nicely increased. Just wondering, my first question then would be sort of on your -- what I'd call your regional focus, specifically. Could you talk about maybe the remainder of this year and into next year, will -- how much of the plan will be focused more on the multi-stack vertical play in the South versus more on the San Andres horizontal development up North. I'm just wondering if you could talk about how much we focus on each and how different in today's economics, how different the returns are between those 2 sort of broad areas?

Yes. Good question, Neal. Yes. And so we're fortunate that the economics of the investment types are very similar. Very, very robust. We've demonstrated over the last several years, the economics of the San Andres horizontal oil play, both in Yoakum County and also in Andrews County. What we've discovered here this quarter with the drilling results from the wells we drilled in Penwell, Founders' assets, those are coming in really strong, really robust. And the good thing about them is that we -- they have a much higher percentage of oil. And so as you know, we're concentrated on that, especially when we're actually paying to have our natural gas hauled away. And so -- but looking at the future, right now, we're still looking at a balanced program and that balancing more has to do with limitations in infrastructure, a few things like that. In some areas, we're a little challenged getting the fresh water to frac the wells. Other areas we can tap out the salt water disposal capacity of those systems. And so we tend to move the rig back and forth. And so, right now, we are looking at the drilling program and we are basically selecting the wells that gives us the highest cash flow generating capital spending program that we can deliver. So we're looking for returns. And so we juggle the wells around even today. I know we're only in the first quarter but we've already rearranged our drilling schedule for this year because we've identified what we believe are the wells that have the quickest payout and the highest cash flow generating capacity. And so again, the capital allocation will have more to do with trying to maximize our free cash flow generation than it is looking at one area versus the other.

No, that makes a lot of sense. And then you kind of go in the direction of my second question when it comes to the 2 plays. I know you all have done a nice job of investing in infrastructure and all, maybe could you just talk about -- you were talking about I get it on the front end sort of fresh water and getting things there. What about on sort of the back end when it comes to infrastructure and takeaway and all? I know you certainly [ track ] the oil but when it comes to gas and everything else, infrastructure, do you see many limitations either in that northern or southern play of yours now? Or maybe if you could just talk about details on -- I know you put some development in that area.

Yes. So we still tend to struggle with what we consider the older infrastructure and -- in the Central Basin Platform. The gas takeaway is not nearly as predictable. For example, I'm not going to get into the details but we have struggled in the past there and we are still struggling today with gas takeaway. And so I think the Permian Basin in general has issues, as you can see in the discounts from Henry Hub. And so when you consider that you have a Permian Basin regional takeaway issue and then at the same time, we're producing some of our gas into the older infrastructure that has not as consistent run times. That's a challenge. And so we are purposely focusing our capital spending program on these wells that produce a higher percentage oil and much less gas just because of those circumstances. Now, this fall, we understand there will be some additional infrastructure that should help out the Permian Basin in terms of these -- the discount from Henry Hub. We'll see how that goes. We should have a period, I think, coming on into 2024, where you will be able to sell more natural gas out of the Permian Basin. And so we'll see how things go. But if you just look at history, the Permian Basin has this magical ability to fill that capacity pretty quick because there's a lot of volumes being flared that otherwise would go to market if they could do it. And at the same time, the ingenuity of the American oilfield workers just has an ability to increase production to fill that capacity when it's there. So we'll see how that goes. I hope I answered your question, Neal.

[Operator Instructions] And gentlemen, at this point I'm showing no additional questions. I'd like to turn the floor back over to Paul McKinney for any closing remarks.

Well, yes, very good. It looks like Neal Dingmann just jumped back in there with another question. If Neal had another question, you'd like to follow up?

We do have Neal back in the queue. And Mr. Dingmann, if you would like to ask your follow-up, please proceed.

Just, could you just talk about opportunities. You guys have done a great job. I want to give you a little time to -- on M&A, it seems like around your -- now out of the woods, when I look especially in both these areas, now that you've added both Founders and Stronghold, I'm just wondering, when you're looking specifically in that area, you see bolt-ons. Maybe just talk about the M&A opportunities in that area.

Yes. Very good. Thank you for that, Neal. Yes, there are bolt-ons. But there are other -- and so I got to be a little careful here. We're predicting that we're going to see additional assets become available in the Central Basin Platform, the southern part of the Northwest shelf as a result of some of these larger transactions we've seen close and/or that are pending. And so many of the operators that have been purchased operate out here and many of the operators that are doing the purchasing and acquiring also have assets out here that have not been their focus and fall in the category that we believe anyway in their halls would be considered nonstrategic. So we anticipated them come into the marketplace for sale. And we're really excited about this area. We've done a lot of mapping. We've identified several opportunities out there that we would like. As you may recall, in the past, we have tried to negotiate transactions in the past. That's how the Stronghold deal started but it ended up being a process that we ultimately prevailed in, Founders was a negotiated deal after a failed sale. And so we're not opposed to doing that. We are constantly seeking to make acquisitions and that ranges everything from smaller bolt-ons that are just on the other side of the fence from us because it makes a lot of sense. We can continue to play that in the capital programs that we're currently doing. But at the same time, there's other areas out there that are very close to our operations that allow us to capture the synergies of our operating team and our expertise. And so we believe that the pipeline is basically there for the next several years, probably more opportunities than we ourselves can take down. And so we're excited about it. And so we'll see how 2024 goes. I think one of the things that we have going for us right now is a little -- what appears to be a little bit more stability in oil prices. So if you can stay between $75 and $85 for a sustained period of time, I think you'll find more people willing to sell. And at the same time, increase the probability of a transaction, just simply because the expectations can -- are closer -- more closely aligned in a more stable oil price environment. So we'll see how that goes. But anything from small bolt-ons to large acquisitions that could be as mean as a Stronghold deal and a Founders deal where that were -- were for us in the past.

Sure. No, I love the options. And then if I could do one last one. Just on the multi-stack vertical. Again, could you remind me -- I mean, again, have you -- it seems like you continue to add sort of different zones and you -- and the guys who are in the team keep adding, maybe talk about what makes most sense today to target and how that is different maybe than 1 year or so ago?

Yes. So 1 year or so ago, we had -- we're looking at opportunities. If you look at what the Stronghold acquisition the [ Magnite ] area has a lot of opportunity but the natural gas is a much larger percentage of the product flow. And so we've decided to concentrate more in the P.J. Lea area down in Crane County and also in the Penwell area for the newly acquired Founders acquisition. And the reason why P.J. Lea is so attractive is, #1, the returns are great. We've had really good results. And with many of the wells that we drill, we're adding PUDs. And so we're increasing reserves by expanding that play out beyond where we originally defined. And so what we're -- what we believe in that area that we have a lot more reserve to add than it was included in the original acquisition. And so we're really excited about that. So anytime you can drill and add additional PUD reserves and extend the field and continue to have the success we're having, is really exciting. Now when you go to Founders, we just got started out there. We drilled 3 wells there, this last quarter. We're very pleased with the results. We feel like that program has a lot of running room and so it will get more allocation of our capital than perhaps we originally thought but we'll see how that goes. But if the robust returns continue in both of those areas, it'll have -- and so again, this year, we're just -- we just happen to have the benefit of wells that came in higher than our type curves. I think 1 well is right on our time curves, everything else is slightly above. And so when you have those kind of returns, yes, we might even have to adjust our production going forward for the rest of the year if we continue to have this type of success.

[Operator Instructions] And our next question comes from Jeff Grampp from Alliance Global Partners.

Maybe just to build on that last comment. I noticed in the slide deck, those P.J. Lea and Penwell vertical results look really impressive there. Can you touch on how much more capital can you put into those areas, taking into account, I suppose, infrastructure, maybe inventory management constraints, if there are any? And just how much more aggressive could you guys be, if any, relative to the 5, 6 wells a quarter pace that you guys seem to be at, at least for Q1?

Yes. And so I probably need to defer that to Marinos Baghdati.

Yes, we have flexibility there to add. We're still on the Penwell there. Let me back up. On the P.J. Lea area, yes, we've eliminated pretty much all constraints in terms of electrical, salt water disposal and frac water to complete the wells. So we can accelerate at whatever pace we want to at P.J. Lea. One of the things that we're doing there is being very diligent about, like Paul mentioned, adding PUDs because we're stepping out to the outskirts of the reservoir there. So we're wanting to see some results before we really accelerate the number of well count there. Over at Penwell, we are still going through some salt water disposal, kind of making sure we eliminate any bottlenecks there before we can say we can really accelerate but we do have capacity to drill more than 3 wells a quarter as it stands right now. We're just really comfortable around that. So we don't -- I won't say waste capital but just spend more capital than we absolutely have to. Does that kind of answer your question, Jeff?

Yes. Yes. No, that's perfect. I appreciate it. My follow-up on the CapEx side, obviously, really nice quarter coming in below the guide. And I know you guys have talked about some cost efficiencies, particularly with the Founders' assets early on. I noticed the guide for Q2 is kind of consistent with Q1, even though you guys did have some better performance. Is there -- is that just kind of some general conservatism? Are there some other things related to maybe capitalized workovers or other things beyond new drills explaining that variance? Or just, I guess, maybe looking for a little more context Q1 versus Q2 on CapEx?

We may add additional SWD wells in Q2. It hasn't been decided yet. So that would increase CapEx over Q1. I know we drilled 1 in Q1, we may do 2 in Q2 and this for the Penwell area. In addition to that, we spent about $1.5 million on ESG infrastructure improvements in the first quarter. We think that may accelerate in the second quarter. We're trying to go as fast as we can but at the same time, be efficient. And then first quarter, we talked about our operational efficiency. All our AFEs have contingency costs. That's normal to have. We didn't have any contingency issues with any of our work in the first quarter. We may have a couple of operational hiccups with second quarter wells. So we're -- we still kept those contingency dollars in there and that's why the capital seems to not have changed very much. But we'll see as the quarter goes, so far, in the second quarter, we haven't had any issues. So we feel pretty good about that, too.

And ladies and gentlemen, at this point I'm showing no additional questions. I'd like to turn the floor back over to Paul McKinney for closing comments.

Thank you, Jamie. On behalf of the management team and Board of Directors, I want to thank everyone for listening and participating in today's call. We appreciate your continued support of the company. We look forward to keeping everyone appraised of our progress. Thank you again for your interest in Ring and have a great day.

Ladies and gentlemen, that will conclude today's conference call and presentation. We thank you for joining. You may now disconnect your lines.