Ring Energy - New Update Jan 10

[dan_s]

Note from John White this morning:

REI: Operations Update: Overall Positive

The bad news is REI’s announced production of 4,587 BOE per day for 4Q 2017 missed our estimate of 4,962 BOE per day. Our figure was slightly lower than the consensus of 5,070 BOE per day. The good news is REI’s announced production during the month of December was 5,352, 8% higher than our run rate for 4Q 2017. In our opinion, the December points to a strong production figure for 1Q 2018.

In our opinion, the miss on our full quarter production figure in contrast to the positive December production number is timing of completed wells and the date the completed wells were put on production. It is likely more wells were put on production later in the quarter and thus contributed more to the December production figure than they contributed to the full quarter.

REI does not issue written guidance, however during the 3Q 2017 earnings conference call, REI commented that it expected “double digit production growth” in 4Q 2017 versus 3Q 2017. And in fact REI delivered on this goal, posting an 11% sequential increase in production in 4Q 2017 versus 3Q 2017.

Based on the operations update, REI’s Hz San Andres program continues to unfold positively and essentially in line with our expectations. During 4Q 2017 REI completed, tested and filed IP reports on 13 new Hz San Andres wells. Eight of these wells were drilled in 3Q 2017 and five were drilled in 4Q 2017. The average IP on the 13 completed wells in 4Q 2017 was approximately 458 BOE per day, in line with our expectations. REI has 20 new Hz San Andres wells which are currently in varying stages of completion and testing. Again, this points to a strong 1Q 2018, in our opinion.

Management indicated a press release addressing the 2018 capital expenditure plan will be delivered in the near future.

We will incorporate this update, together with other relevant data, and revise our estimates accordingly.

[dan_s]

Mr. Kelly Hoffman, Ring’s Chief Executive Officer, stated, “Our CBP property continues to show excellent results. The Company drilled, completed and brought on line 27 wells in 2017, with 20 more wells in process. We couldn’t be more pleased as the average initial production, as well as the type curve, continues to exceed our original projections. We are currently working on our capital expenditure budget (“CAPEX”) for 2018. Management is committed in their desire to work within existing operational cash flow while continuing to deliver exceptional annual growth. We plan on issuing a release detailing the 2018 CAPEX in the very near future. We continue to seek opportunities that will complement our existing acreage with a focus on the CBP and expanding that footprint. Having a strong balance sheet with ample cash and no debt, we look for 2018 to be an exciting year for Ring, its employees and our shareholders.”

[dan_s]

I have posted an updated forecast/valuation model for REI to the EPG website.

[wilmawatts]

good company, good management