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.”
Updated Decline Curves and Economics –
Northwest Shelf –
Old
New
Oil IP Rate (BOPD)
325
350
Gas IP Rate (MCFPD)
160
300
Initial Decline Rate for Oil and Gas
90%
85%
Time from first production to peak rate
(Days)
30
75
Final Decline Rate
5%
5%
Drilling costs remain at $2.4 million even though there have
been significant cost reductions. Management has used completion
cost reductions to increase size of frac jobs from approximately
600 lbs/ft to over 800 lbs/ft. Current results indicate a larger
frac has a significant positive effect on IPs and EURs. Management
has also included a $200K investment for converting from ESP to rod
pump after 12 months of production. Company is now running a 2-step
LOE model with one rate before rod conversion and a slightly lower
model after conversion to account for savings in equipment rental
and electrical costs.
Summary:
Old
New
All-In F&D Costs Per Net BOE (Drilling
+ Land Costs)
$7.55
$5.44
-28%
Lifetime LOE (All LOE incurred during Life
of Well)
$11.35
$8.74
-23%
Combined F&D + LOE
$18.90
$14.19
-24.9%
At $50/net BOE (Realized):
Net EUR (BOE)
443K
461K
+4.1%
Internal Rate of Return (IRR)
86%
130%
+51.1%
Return on Investment
(Discounted/Undiscounted)
2.6/4.9
3.5/7.3
PV10 Value
$3.891MM
$6.538MM
Central Basin Platform –
Old
New
Oil IP Rate (BOPD)
305
305
Gas IP Rate (MCFPD)
74
95
New Initial Decline Rate for Oil
93.5%
96.5%
New Initial Decline Rate for Gas
96.6%
96.5%
Final Decline Rate
6%
5%
Drilling costs have decreased from $2.2 million to $1.9 million
due to decreased service costs primarily in the completion phase.
Management has added a $250K investment for converting from ESP to
rod pump after 12 months of production. Company is now running a
2-step LOE model with one rate before rod conversion and a slightly
lower model after conversion to account for savings in equipment
rental and electrical costs.
Summary:
Old
New
All-In F&D Costs Per Net BOE (Drilling
+ Land Costs)
$6.74
$6.04
-10.4%
Lifetime LOE (All LOE incurred during Life
of Well)
$11.01
$9.07
-17.6%
Combined F&D + LOE
$17.74
$15.74
-11.3%
At $50/net BOE (Realized):
Net EUR (BOE)
342K
332K
-2.9%
Internal Rate of Return (IRR)
82%
99%
+20.7%
Return on Investment
(Discounted/Undiscounted)
2.7/5.2
2.8/5.7
PV10 Value
$3.764MM
$3.801MM
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.”
About Ring Energy, Inc.
Ring Energy, Inc. is an oil and gas exploration, development and
production company with current operations in Texas and New Mexico.
www.ringenergy.com
Safe Harbor Statement
This release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934. Forward-looking
statements involve a wide variety of risks and uncertainties, and
include, 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, 2018, its Form 10Q for the
quarter ended June 30, 2019 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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Bill Parsons K M Financial, Inc. (702) 489-4447
Ring Energy (AMEX:REI)
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