n response to a continued improvement in crude oil prices and following the success of its 2021 drilling program, in late January Ring commenced a 2022 continuous one-rig drilling program that is focused on the Company’s highest rate-of-return inventory in its NWS and CBP acreage positions. To date, four wells in the CBP have been drilled and completed, including two wells that were placed on production in March and two wells that are expected to be online in April. The rig was moved from the CBP and is currently drilling the first of 16 targeted wells in the NWS, before moving back to the CBP.

For full year 2022, Ring expects total capital spending of $120 million to $140 million, which includes the estimated cost to drill 25 to 33 horizontal wells and complete 25 to 30 horizontal wells, primarily in the Company’s NWS assets. Ring’s full year capital spending outlook includes targeted well reactivations, workovers, infrastructure upgrades, and continuing its successful CTR program in the NWS and the CBP. Also included in the full year estimate is anticipated spending for leasing, contractual drilling obligations and non-operated drilling, completion and capital workovers. Based on the $130 million mid-point of spending guidance, the Company expects the following estimated allocation of capital investment, including:

• 82% for drilling, completion, and related equipment and facilities;
• 12% for CTRs, recompletions and capital workovers; and
• 6% for land, non-operated capital and other investments.

The Company remains focused on generating free cash flow in 2022, after all expenses, costs and capital expenditures. The increased level of capital investment in 2022 is expected to generate almost 10% sales growth at the midpoint of full year 2022 guidance. All 2022 planned capital expenditures will be fully funded by cash on hand and cash from operations, and excess free cash flow is currently targeted for further debt reduction. The combination of anticipated growth in Adjusted EBITDA resulting from higher prices and growth in sales volumes, along with planned further debt reduction, is expected to significantly reduce Ring’s leverage ratio by year-end 2022.    

Supported by its targeted development program and continued focus on operational excellence, the Company currently forecasts full year 2022 sales volumes of 9,000 to 9,600 Boe/d (87% oil), compared with full year 2021 average sales volumes of 8,519 Boe/d (86% oil).

Drilling under Ring’s new continuous drilling program began in late January 2022; as a result, there is minimal additional production impact expected from the new wells in the first quarter. Including the expected normal decline in production during the first quarter and some short-term weather-related sales disruptions, first quarter 2022 sales are expected to be in the range of 8,500 to 8,700 Boe/d (85% oil). Second quarter 2022 sales are expected to reflect the benefit of the new continuous drilling program.

Ring Energy operates out of the Permian Basin of Texas and New Mexico. The Permian Basin is unique in its size, vast infrastructure, thickness of strata, and multiple producing horizons/benches, providing a variety of exploration opportunities to develop oil and gas reserves. As a result, the Permian Basin is the top producing basin in North America.

KeyFacts Energy Industry Directory: Ring Energy