Ring Energy (REI) Update - Oct 15

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dan_s
Posts: 34471
Joined: Fri Apr 23, 2010 8:22 am

Ring Energy (REI) Update - Oct 15

Post by dan_s »

Ring reports outstanding new wells in CBP.

MIDLAND, Texas--(BUSINESS WIRE)--

Management Provides New Decline Curves and Economics on Northwest Shelf and Central Basin Platform Wells

Ring Energy, Inc. (NYSE American: REI) (“Ring”) (“Company”) today released its operations update for the third quarter of 2019. In the three months ended September 30, 2019, the Company drilled six new one-mile horizontal (“Hz”) San Andres wells on its Northwest Shelf (“NWS”) asset. Of the six new wells drilled, three were completed, tested and had Initial Potentials (“IPs”) filed, while the remaining three were completed and are in varying stages of testing. In addition to the three new wells drilled in the third quarter which had IPs filed, the company completed testing and filed IPs on eight additional horizontal wells drilled in the first and second quarters of 2019 (5 Central Basin / 3 NWS). The average IP rate for all the horizontal wells (11 wells) completed and IPs filed in the third quarter of 2019 was 475 Barrels of Oil Equivalent (“BOE”) per day, or 101 BOE/ 1,000 feet on an average lateral of 4,741 feet. The Company also performed nine conversions from electrical submersible pumps (“ESP”) to rod pumps (4 NWS / 5 Central Basin). Management believes these conversions will lower future operating expense by reducing electrical usage, eliminating monthly rental costs on the ESPs and lowering future pulling costs by as much as 80%. All drilling activities and workover projects were completed on time and within budget.

Historical Horizontal Drilling Results –

The Company began its horizontal drilling program in the third quarter of 2016 and has had the following results –

Average IP rate for all Hz wells completed and IPs filed 2016 & 2017 (50 wells) —
578 BOPE/d or 114 BOE / 1,000 ft.
Average IP rate for all Hz wells completed and IPs filed in 2018 (57 wells) —
432 BOE/d or 103 BOE / 1,000 ft.
Average IP rate for all Hz wells completed and IPs filed in 1st Qrt. 2019 (15 wells) —
429 BOE/d or 103 BOE / 1,000 ft.
Average IP rate for all Hz wells completed and IPs filed in 2nd Qrt. 2019 (5 wells) —
497 BOE/d or 123 BOE / 1,000 ft.
Average IP rate for all Hz wells completed and IPs filed in 3rd Qrt. 2019 (11 wells) —
475 BOE/d or 101 BOE / 1,000 ft.

Mr. Danny Wilson, Ring’s Executive Vice President and Chief Operating Officer, commented, “We continued to focus on the NWS in the third quarter. We drilled six new horizontal San Andres wells, all one mile in length. The results continue to exceed our initial expectations. Although the NWS wells tend to take a little longer to reach peak rates, we continue to be encouraged by the higher IP rates and flatter declines as compared to our legacy Central Basin Platform (“CBP”) wells. We continue to communicate with other operators in the area, sharing information and ideas in an effort to constantly refine our completion and production techniques with the ultimate goal of lowering costs and improving recoveries. After operating the NWS properties for the last six months, we firmly believe the horizontal San Andres play on the NWS yields superior returns and has the potential to get even better. As a result of the excellent results we are experiencing on both the NWS and CBP, we are updating the slides related to each asset on our corporate presentation to reflect the new decline curves and improved economics on both assets. It is important for us to provide this detailed information to the investment community so they can accurately assess the true value of these two assets and the impact they will have on the future growth of the Company. Below is a summary of those changes. In addition to our drilling activities, we performed nine pump conversions, which will substantially reduce future operating costs, and completed one small infrastructure project on the CBP related to our saltwater disposal system.”
Dan Steffens
Energy Prospectus Group
dan_s
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Joined: Fri Apr 23, 2010 8:22 am

Re: Ring Energy (REI) Update - Oct 15

Post by dan_s »

As a result, net production for the third quarter of 2019 was approximately 1,015,000 BOEs (11,033 BOEPD), as compared to net production of 600,000 BOEs (Ring Only / Prior to NWS Acquisition) for the third quarter of 2018, a 69.2% increase, and net production of 976,000 BOE for the second quarter of 2019, an approximate 4% increase. September 2019 average net production was approximately 11,400 BOEs, as compared to net daily production of 7,294 BOEs (Ring Only) in September 2018, a 56.3% increase, and net daily production of 10,800 BOEs in June 2019, a 5.5% increase. Net production for the nine months ended September 30, 2019 was approximately 3,041,000 BOEs, compared to 1,639,000 BOEs (Ring Only) for nine months ended September 30, 2018, an 85.5% increase.

The estimated price received for oil was $53.09 per barrel and the estimated price received for natural gas was $0.98 per mcf in the third quarter 2019. This resulted in an estimated received price of $47.40 per BOE. This compares to an average price per BOE received in the second quarter 2019 of $51.94, a decrease of 8.7%. The current price differential the Company is experiencing from WTI pricing is less than $3.00.

Mr. Kelly Hoffman, Ring’s Chief Executive Officer, stated, “This is the first full quarter of drilling and development on our newly acquired NWS property. Since moving a drilling rig onto the property in mid-April, we have focused on rebuilding our inventory of new wells. The current results reflect that effort. Our engineering and operations teams have done an excellent job in the evaluation and on-going development of all our assets. We have been able to decrease our overall drilling and operating costs on both our NWS property and our Central Basin property. We have provided a summary of the results we are experiencing in this release and encourage all shareholders to visit the Company website at www.ringenergy.com to see the new slides on both the Northwest Shelf and Central Basin properties with updated decline curves and economics. The Company continues to focus on its goals of continued production growth and becoming cash flow neutral by year-end.”
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My forecast for Q3 was 11,050 Boepd. My Q3 realized prices were $53/bbl for oil and $1.00 for gas. Ring is on-track to generate $1.60/share of cash flow from operations this year. My valuation is $8.15/share.
Dan Steffens
Energy Prospectus Group
dan_s
Posts: 34471
Joined: Fri Apr 23, 2010 8:22 am

Re: Ring Energy (REI) Update - Oct 15

Post by dan_s »

Note from John White at Roth Capital:

We have employed a blended valuation of a 30% weighting of REI’s PV10% NAV per share and a 70% weighting of REI’s Leverage-Production Adjusted Multiple NAV per share which resulted in a blended NAV of $4.76 which we adjusted lower to $4.75 which is our price target.

REI: 3Q Operations Update: Positive

REI recorded net production for 3Q 2019 of 11,033 BOE per day which is in line with our estimate of 11,064. The average IP rate for all Hz wells completed and IPs filed in 3Q 2019 (11 wells) was 475 BOE per day or 101 BOE/1,000 foot which is in line with the average IP rate for all Hz wells completed and IPs filed in 2Q 2019 (5 wells) of 497 BOE per day or 123 BOE / 1,000 foot.

REI's net production for 3Q 2019 of 11,033 BOE per day was also in line with the consensus estimate of 11,150 BOE per day.

REI drilled six new one mile Hz San Andres wells on its Northwest Shelf (NWS) asset. Of the six new wells drilled, three were completed, tested and had IPs filed, while the remaining three were completed and are in varying stages of testing. In addition to the three new wells drilled in 3Q 2019 which had IPs filed, REI completed testing and filed IPs on eight additional Hz wells drilled in 1Q and 2Q 2019 (5 Central Basin/3 NWS).

REI also performed nine conversions from electrical submersible pumps (ESP) to rod pumps (4 NWS/5 Central Basin). REI believes these conversions will lower future operating expense by reducing electrical usage, eliminating monthly rental costs on the ESPs and lowering future pulling costs by as much as 80%. All drilling activities and workover projects were completed on time and within budget.

At the NWS REI advised drilling costs remain at $2.4 million and on the Central Basin REI reported drilling costs have decreased from $2.2 million to $1.9 million due to decreased service costs primarily in the completion phase.

We will further examine these results and revise our estimates accordingly.
Dan Steffens
Energy Prospectus Group
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