Ring Energy, Inc. Announces 2018 Capital Expenditure Budget Increase to Estimated $197 Million
September 11 2018 - 4:05PM
Business Wire
Ring Energy, Inc. (NYSE American: REI) (“Ring”) (“Company”)
announced today an approximate $47 million increase in its capital
expenditure budget (“CAPEX”) for 2018, making an estimated total of
$197 million.
On February 20, 2018, the Company announced a preliminary CAPEX
for 2018 of $150 million. Included in that initial budget were the
drilling of approximately 60 new horizontal wells on its Central
Basin Platform (“CBP”), continued improvements and upgrading of the
existing infrastructure, the drilling of additional salt water
disposal wells, the upgrading and extension of the Company’s
electrical system in Andrews County and the completion of a gas
pipeline. All those items directly supported the ongoing drilling
and development program on the Company’s CBP asset. In addition,
the initial 2018 budget included the drilling of the first
horizontal well on its North Gaines property and the first
horizontal “Brushy Canyon” well on its Delaware Basin property.
In the first six months of 2018, the Company drilled 24 new
horizontal San Andres wells on its CBP asset. In addition, the
Company drilled one new horizontal well on its North Gaines
Property, one new horizontal Brushy Canyon well on its Delaware
Basin Property and three saltwater disposal wells. In the first six
months of 2018, the Company tested and filed IPs on 30 new
horizontal wells. In addition, the Company performed workovers on
nine existing San Andres horizontal wells and made extensive
infrastructure improvements and upgrades on all three assets.
Costs incurred in the first six months of 2018 but not included
in the initial budget were the result of workovers on existing CBP
horizontal wells due to iron sulfide buildup and additional
infrastructure which included an extension of the Company’s
existing oil, gas and water gathering system due to the Company
acquiring additional leases south of the Company’s core area in the
CBP. Based on the initial results of the Company’s first horizontal
well in the Delaware Basin, management felt it necessary to make
timely infrastructure improvements which included high pressure
flow lines and an additional disposal well which would have an
immediate, positive effect on the current operations, as well as
essential improvements for on-going future development. Management
noted that by adding those improvements in the second quarter, the
Company will be selling gas by the beginning of the fourth quarter
2018. Costs not in the initial 2018 budget associated with the
Company’s first North Gaines horizontal well were incurred based on
the decision to use the first well as a “test” well to determine
the optimum completion process. None of the additional costs
incurred were related to the actual new well drilling costs, as all
the horizontal wells drilled to date in 2018 have come in at, or
below budget.
The Company has increased its second half 2018 budget by $10
million to approximately $85 million. The budget includes the
drilling of 26 new horizontal San Andres wells on its CBP, two new
North Gaines horizontal wells and two new Brushy Canyon horizontal
wells on its Delaware Basin property. Additionally, the budget
includes multiple workovers on existing San Andres horizontal wells
and extensive infrastructure upgrades and improvements as the
Company continues to maximize the potential of all three
properties.
Management noted that the Company is not dependent on the
capital markets, as the additional CAPEX funds will consist of
current cash flow, as well as funds from the Company’s $175 million
borrowing base on its $500 million Senior Credit Facility.
Mr. Kelly Hoffman, CEO, stated, “The CAPEX budget increase will
allow us to maintain an aggressive drilling and development program
through the remainder of 2018. We continue to have no product
takeaway issues and stay in constant contact with our purchasers
and brokers who assist us with that process. Because of the price
differentials all the operators in the Permian Basin are currently
experiencing, we choose not to focus on benchmark prices, but
actual prices received. For example, at $50 per barrel of oil
equivalent (“BOE”) received on our one-mile laterals, our estimated
internal rate of return (“IRR”) is approximately 80%. We have
stated on numerous occasions that being cash flow positive by the
end of the year was at the top of our priority list. Also at the
top of the list is laying the groundwork to maximize our drilling
and development program both currently and going forward. We
strongly believe the prudent decision is to increase our budget
now, delaying our goal of being cash flow positive by the end of
the year, in preparation for the future development of all our
properties. We couldn’t be more excited about the results we are
seeing and the future potential of our existing assets. Our
production growth is back on track after resolving some minor
operational issues and we expect to continue that growth going
forward. As always, we continue to look for accretive
opportunities, through additional leasing or acquisition, that
complement and enhance our core assets.”
The amended 2018 CAPEX drilling and operational budget is
subject to change based on market conditions, commodity price
changes, rig availability, drilling results and general operational
results. The Company continues to look for acquisition
opportunities but has made no provision in its 2018 amended budget
for any acquisition.
About Ring Energy, Inc.
Ring Energy, Inc. is an oil and gas exploration, development and
production company with current operations in
Texas.www.ringenergy.com
Safe Harbor Statement
This release contains forward-looking statements within the
meaning of the “safe-harbor” provisions of the Private Securities
Litigation Reform Act of 1995 that involve a wide variety of risks
and uncertainties, including, without limitations, statements with
respect to the Company’s strategy and prospects. Such statements
are subject to certain risks and uncertainties which are disclosed
in the Company’s reports filed with the SEC, including its Form
10-K for the fiscal year ended December 31, 2017, its Form 10-Q for
the quarter ended June 30, 2018 and its other filings with the SEC.
Readers and investors are cautioned that the Company’s actual
results may differ materially from those described in the
forward-looking statements due to a number of factors, including,
but not limited to, the Company’s ability to acquire productive oil
and/or gas properties or to successfully drill and complete oil
and/or gas wells on such properties, general economic conditions
both domestically and abroad, and the conduct of business by the
Company, and other factors that may be more fully described in
additional documents set forth by the Company.
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K M Financial, Inc.Bill Parsons, (702) 489-4447
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