REI Q4 and 2022 Results

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cmm3rd
Posts: 420
Joined: Tue Jan 08, 2013 4:44 pm

REI Q4 and 2022 Results

Post by cmm3rd »

Dan,

Did you see any surprises in Ring's Q4 report (highlights below)? How do you think the market will assess their current leverage and the likely length of time it will take them to reduce their debt meaningfully?

Ring Energy Announces Record Fourth Quarter and Full Year 2022 Results, Nearly 80% Increase in Year-End 2022 Proved Reserves and Provides 2023 Guidance
March 09, 2023 4:44pm EST


~ Transformational Acquisition Helped Drive Record Production, Reserves, Revenue, Net Income and Adjusted EBITDA for Full Year 2022 ~

~ Expects 2023 Annual Sales Volumes to Increase More Than 40% Over 2022 ~

THE WOODLANDS, Texas, March 09, 2023 (GLOBE NEWSWIRE) -- Ring Energy, Inc. (NYSE American: REI) (“Ring” or the “Company”) today reported operational and financial results for the fourth quarter and full year 2022, including Ring’s year-end 2022 proved reserves. In addition, the Company provided first quarter and full year 2023 operational and capital spending guidance.

2022 Highlights and Recent Key Items

Significantly benefited from the Company’s acquisition of the Stronghold Energy assets that closed on August 31, 2022 (the “Stronghold Transaction”);
Grew fourth quarter 2022 sales volumes 34% to a record 17,856 barrels of oil equivalent per day (“Boe/d”) (68% oil) from 13,278 Boe/d (76% oil) for the third quarter of 2022;
Increased full year 2022 sales volumes by 45% to a record 12,364 Boe/d (77% oil) from 8,519 Boe/d (86% oil) for full year 2021;
Reported net income of $14.5 million, or $0.08 per diluted share, in the fourth quarter of 2022, versus net income of $75.1 million, or $0.49 per share in the third quarter of 2022;
Fourth quarter 2022 included a loss on derivative contracts of $19.3 million while third quarter 2022 included a gain on derivative contracts of $32.9 million;
Grew net income for full year 2022 to a record $138.6 million, or $0.98 per diluted share, compared to a net income of $3.3 million or $0.03 per diluted share, for full year 2021;
Posted Adjusted Net Income1 of $21.8 million, or $0.13 per share, for the fourth quarter of 2022, compared to $32.5 million, or $0.28 per share, in the third quarter of 2022;
Reported record Adjusted Net Income for the full year 2022 of $107.5 million, or $0.89 per share, a 251% increase from $30.6 million, or $0.31 per share, for full year 2021;
Generated record Adjusted EBITDA1 of $56.3 million for the fourth quarter of 2022, slightly exceeding the record set in the third quarter of $56.0 million;
Grew full year 2022 Adjusted EBITDA by 134% to a record $195.2 million from $83.3 million for 2021;
Delivered Free Cash Flow1 of $5.5 million and Cash Flow from Operations of $47.4 million in the fourth quarter of 2022;
Increased full year 2022 Free Cash Flow to $34.8 million and generated Cash Flow from Operations of $172.9 million, a year-over-year increase of 70% and 149%, respectively;
Remained cash flow positive for the 13th consecutive quarter;
Paid down $20.0 million of debt on the Company’s revolving credit facility during the fourth quarter of 2022 and $37.0 million since closing of the Stronghold Transaction on August 31, 2022;
Reduced Leverage Ratio2 by more than 50% to 1.6x from 3.5x at year end 2021;
Increased liquidity at year-end 2022 to approximately $188.0 million — a two-fold increase compared to December 31, 2021;
Successfully reaffirmed the Company’s borrowing base of $600.0 million under its revolving credit facility in December 2022;
Grew year-end 2022 proved reserves at Securities and Exchange Commission (“SEC”) pricing by 78% to 138.1 million barrels of oil equivalent (“MMBoe”), and increased the present value of SEC proved reserves discounted at 10% (“PV-10”)1 by 108% to $2.8 billion from $1.3 billion at year-end 2021;
Benefited from positive revisions of previous quantity estimates of 1.2 MMBoe due to positive well performance, extensions and discoveries of 0.8 MMBoe, and acquisitions of reserves related to the Stronghold Transaction of 62.9 MMBoe. Partially offsetting the additions to reserves was 4.5 MMBoe of production, resulting in replacement of 13.4 times 2022 production with new reserves;
Proved developed reserves increased 107% to 90.1 MMBoe at year end 2022 from 43.4 MMBoe at December 31, 2021;
Successfully completed the Company’s 2022 capital spending program focused on developing Ring’s high rate-of-return projects on its legacy and newly acquired assets:
Drilled, completed and placed on production four horizontal (“Hz”) wells (two in the Northwest Shelf (“NWS”) and two in the Central Basin Platform (“CBP”)) and five vertical wells in the CBP during the fourth quarter, as well as completed and placed on production three Hz wells in the NWS that were drilled in the third quarter. In addition, the Company performed nine recompletions in the CBP during the fourth quarter;
12 of the 21 wells placed on production during the fourth quarter did not contribute meaningfully until late December, which will benefit 2023 production;
During full year 2022, the Company drilled and completed 27 Hz wells (18 in the NWS and nine in the CBP) and five vertical wells in the CBP, as well as performed 12 recompletions in the CBP;
Commenced its 2023 drilling program in January with four NWS Hz wells drilled and three wells completed and placed on production;
Provided guidance for first quarter and full year 2023 sales volumes, operating expenses and capital spending; and
Expects first quarter 2023 sales volumes of 17,800 to 18,300 Boe/d and full year 2023 sales volumes of 17,800 to 18,800 Boe/d.
dan_s
Posts: 34463
Joined: Fri Apr 23, 2010 8:22 am

Re: REI Q4 and 2022 Results

Post by dan_s »

Thanks to the computer problems that I had yesterday, I am a bit behind. I will update the REI and REPX forecasts this morning.

I also have five profiles sitting here for my final review.
Dan Steffens
Energy Prospectus Group
ChuckGeb
Posts: 945
Joined: Thu Nov 21, 2013 2:46 pm

Re: REI Q4 and 2022 Results

Post by ChuckGeb »

REI currently has 58% open short interest. Lot of players betting against them. Not a great situation in this market. Up to Warburg Pincus to keep them propped up. Buyer beware.
dan_s
Posts: 34463
Joined: Fri Apr 23, 2010 8:22 am

Re: REI Q4 and 2022 Results

Post by dan_s »

I have updated my forecast/valuation model for Ring Energy and posted it to the EPG website. We will publish an updated profile next week.

My forecast:
> Ring should generate $220 to $230 million operating cash flow in 2023 ($1.28/share) < TipRank's CFPS estimate is $1.47/share
> Based on my conversation with Paul McKinney after the luncheon they hosted, he is committed to stay FCF positive and use the FCF to pay down debt.
> At the mid-point of their CapEx budget, FCF should be $70 to $75 million this year.
> Ring's leverage ratio actually doesn't look bad, considering the impact of the Stronghold Energy Acquisition, which IMO is a "Game Changer" for this company. Taking on more debt is risk, but I really like the deal.
> My current valuation of REI adjusts to $6.40 because Q4 results were a bit lower than I expected.
> Keys to getting a higher share price are oil prices and well results. They definitely have adequate "running room".
> The Central Basin Platform is not as "Sexy" as the Midland or Delaware basin, but well-level economics are good at $75/bbl oil price and they are GREAT at $100/bbl oil.

There is nothing that I can see which justifies REI trading for under 2X operating CFPS.
Dan Steffens
Energy Prospectus Group
Fraser921
Posts: 2953
Joined: Mon Mar 22, 2021 11:48 am

Re: REI Q4 and 2022 Results

Post by Fraser921 »

The name was over $ 5 in past year. From 5 to 2. If theya re doing so great , why has the name dropped 60 %?

Amazing short position as Chuck mentioned.
dan_s
Posts: 34463
Joined: Fri Apr 23, 2010 8:22 am

Re: REI Q4 and 2022 Results

Post by dan_s »

A large short position is bullish IMO. Ring has been free cash flow positive for 13 quarters in a row, including every quarter during the pandemic. Eventually those shorts have to cover.
Dan Steffens
Energy Prospectus Group
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