Ring Energy, Inc. (AMEX:REI) Q4 2023 Earnings Call Transcript

Ring Energy, Inc. (AMEX:REI) Q4 2023 Earnings Call Transcript March 8, 2024

Ring Energy, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good morning, and welcome to the Ring Energy Fourth Quarter and Full Year 2023 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Al Petrie, Investor Relations for Ring Energy. Please go ahead.

Al Petrie: Thank you, operator, and good morning, everyone. We appreciate your interest in Ring Energy. We’ll begin our call with comments from Paul McKinney, our Chairman of the Board and CEO, who will provide an overview of key matters for the fourth quarter and full year 2023 as well as our outlook. We’ll then turn the call over to Travis Thomas, Ring’s Executive VP and Chief Financial Officer, who will review our financial results. Paul will then return with some closing comments before we open the call for questions. Also joining us on the call today and available for the Q&A session are Alex Dyes, Executive VP of Engineering and Corporate Strategy; Marinos Baghdati, Executive VP of Operations; and Steve Brooks, Executive VP of Land, Legal, Human Resources and Marketing.

During the Q&A session, we ask you to limit your questions to one and a follow-up. You are welcome to re-enter the queue later with additional questions. I would also note that we have posted an updated corporate presentation on our website. During the course of this conference call, the company will be making forward-looking statements within the meaning of federal securities laws. Investors are cautioned that forward-looking statements are not guarantees of future performance, and those actual results or developments may differ materially from those projected in the forward-looking statements. Finally, the company can give no assurance that such forward-looking statements will prove to be correct. Ring Energy disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Accordingly, you should not place undue reliance on forward-looking statements. These and other risks are described in yesterday’s press release and in our filings with the SEC. These documents can be found in the Investors section of our website located at www.ringenergy.com. Should one or more of these risks materialize or should underlying assumptions prove incorrect, actual results may vary materially. This conference call also includes references to certain non-GAAP financial measures. Reconciliations of these non-GAAP financial measures to the most directly comparable measure under GAAP are contained in yesterday’s earnings release. Finally, as a reminder, this conference call is being recorded. And I’d now like to turn the call over to Paul McKinney, our Chairman and CEO.

Paul McKinney: Thanks, Al, and thank you to everyone joining us today and your interest in Ring Energy. Looking back to 2023, it was a very good year. We ended at establishing new records during the fourth quarter and the full year, both operationally and financially. As we shared in our earnings release, we grew our year-over-year production related sales volumes by 47%, our adjusted EBITDA by approximately 21%, and our adjusted free cash flow by 30%. This was a direct result of our team’s ongoing efforts related to the key aspects of our growth strategy. The primary contributors to our success are directly related to the successful integration of the two acquisitions executed over the past 18 months, the Stronghold Energy II and the Founders oil and gas assets acquisitions.

Our disciplined and highly successful capital spending program also contributed significantly, as did our continuous focus on reducing operating costs. These acquisitions have further established our strategic foothold in the Central Basin platform of the Permian Basin and have significantly increased our undeveloped inventory of highly economic drilling locations. Another contributor to our success was the divestiture of certain non-core assets located in the Delaware Basin, the operated assets in the state of New Mexico and a few assets in Gaines County, Texas. As a result, all our operated acreage is now located in a business-friendly state of Texas. Our average operating costs are lower since the assets sold had higher per BOE operating cost than most of our retained assets, and we moved the undeveloped opportunities of these assets that were challenged to compete in our portfolio to operators that value them higher.

The outperformance of our fourth quarter capital spending program is largely due to new well production performance that brought our sales volumes near the high end of guidance, providing for an 11% increase in our daily BOE production over the third quarter of 2023. During the fourth quarter, we invested $38.8 million in capital expenditures and drilled four horizontal wells, three in the CBP, and one in the Northwest Shelf and two vertical wells in the Central Basin platform. We completed 10 wells, six in the CBP and four in the Northwest Shelf. Additionally, costs for capital workovers, infrastructure upgrades and leasing were also included. For the year ended December 31, 2023, we spent $152 million, which included cost to drill, complete and place on production 20 horizontal wells, 14 in Northwest Shelf and 6 in the Central Basin platform and 11 vertical wells in the Central Basin platform.

Also included in the full year capital spending were cost for capital workovers, infrastructure upgrades, recompletions and leasing. Ring also participated in the drilling and completion of five non-operated wells in the Northwest Shelf and Central Basin platform. Adjusted EBITDA was a record $65.4 million for the fourth quarter, which represents a 12% increase over the previous quarter of $58.6 million and a 16% increase over the fourth quarter of 2022, which was $56.3 million. Adjusted free cash flow for the fourth quarter was a record $16.3 million compared to $6.1 million in the third quarter of 2023 with a 165% increase primarily due to increased revenue and lower capital spending in the fourth quarter. Fourth quarter 2023 adjusted free cash flow increased 197% from $5.5 million for the fourth quarter of 2022.

Adjusted cash flow from operations was a record $55.1 million for the fourth quarter compared to $48.5 million for the prior quarter and $47.4 million for the fourth quarter of the prior year 2022. With respect to our cash return on capital employed, in 2023, our capital spending program generated slightly more than 17% return. At this point, and on behalf of the Board of Directors and management team, I would like to thank our employees for their hard work and dedication for the success we enjoyed in 2023 and to express my excitement for the opportunity to continue working along their side in the future as we further execute our value-focused proven strategy. With respect to our reserves, we ended 2023 with SEC total proved reserves of 129.8 million barrels of oil equivalent versus 138.1 million barrels of oil equivalent at the end of 2022.

We benefited from reserve additions of 8.2 million barrels of oil equivalent from acquisitions and 4.8 million BOE from our internal development efforts. Offsetting these increases were 6.6 million barrels of oil equivalent of production, 5.7 million barrels of oil equivalent for the sale of non-core assets, 3.7 million barrels of oil equivalent related to changes in performance and other economic factors, and 5.3 million barrels of oil equivalent for reductions in year-over-year prices. In short, a significant driver in the reduction in our year-end SEC proved reserves was associated with the decreased SEC prices. The PV-10 of our total proved reserves was approximately $1.6 billion as of year-end, assuming SEC prices. Turning to the balance sheet.

We paid down an additional $3 million of borrowings on our revolver in the fourth quarter. The level of debt reduction was impacted by the final net payment for the Founders acquisition in December of approximately $11.9 million. I would note that through year-end 2023, we paid down $30 million of borrowings since the closing of the transaction in August, which had a final net purchase price of approximately $62 million. And finally, we entered 2024 with liquidity of approximately $175 million, including a recently reaffirmed borrowing base of $600 million. Our debt at year-end was $425 million. The company continues to remain focused on cash flow generation and reducing our debt. Looking at our guidance for 2024, while Travis will go through more details in his comments, I wanted to provide a high-level overview and strategic rationale driving our full year plans.

The immediately accretive 2022 Stronghold and 2023 Founders acquisitions materially improved our size, scale and drilling inventory. This backdrop provides key support and flexibility as we execute a 2024 drilling program specifically designed to organically maintain or slightly grow our oil production. Our current plan is to drill an average of five horizontal and six vertical wells per quarter. As in the past, we are focused on developing our highest rate of return inventory while also investing in necessary field infrastructure and other critical capital projects. For 2024, we are planning a two-rig phase drilling program, including one horizontal and one vertical rig. We are using a phased versus continuous drilling approach in 2024 to provide maximum flexibility to react to commodity price fluctuations and other market conditions in the current environment.

After Travis provides his comments, I will come back with some additional thoughts on our business position and where we are headed. With that, I will hand it off to Travis to discuss our recent financial results and outlook in more detail. Travis?

Travis Thomas: Thanks, Paul, and good morning, everyone. Paul summed it all up nicely, but to further recap, our fourth quarter and full year 2023 operational and financial results materially benefited from our two acquisitions completed over the past 18 months. Also, driving our results was the successful execution of our 2023 drilling program, complemented by additional efficiencies achieved through our expanded scale and leveraging the best operational practices. We also executed targeted divestitures of non-core assets. We might sound like a broken record, but that’s what we did. We broke records. In the fourth quarter and full year of 2023, we had record sales volumes, record adjusted EBITDA, record adjusted cash flow from operations, and record adjusted free cash flow.

So, here are my takeaways. We drove record adjusted EBITDA and adjusted free cash flow for Q4 and 2023 despite lower overall realized pricing. Supporting our results was an 11% increase in Q4 sales volumes and a 47% increase in full year sales volumes. We also focused on growing crude oil production as a percent of product mix, given the enhanced economics and will continue to do so in 2024. We paid the final $12 million Founders deferred payment in December, and we were able to pay down $3 million on a revolver during Q4. We have been extremely pleased with the results from the Founders acreage. And through year-end, we paid down $30 million of debt since closing on the transaction in mid-August. With the net purchase price for Founders of around $62 million, we are quickly recouping our investment.

As in the past, we will continue to focus on paying down debt as fast as appropriate. Next, we completed our successful 2023 development program. Our 2024 drilling program has been underway since January, and we look forward to keeping our stockholders apprised of our progress. With that background, let’s hit the other key highlights. I’m going to focus my comments on the most important sequential quarterly results. We benefited from a full quarter of production from our Founders acquisition completed in mid-August and a full year of production uplift and scale provided by the Stronghold acquisition that closed in August of 2022. In addition, our ongoing field development efforts continue to drive further cost efficiencies. During the fourth quarter, we sold 19,400 BOE per day at the higher end of our guidance range.

Partially offsetting the increase in sales volumes was a lower overall realized pricing of $56.01 per BOE, a 4% decrease from the third quarter. Our fourth quarter average crude oil price differential from NYMEX WTI futures pricing was a negative $0.92 per barrel versus a negative $0.78 per barrel for the third quarter. This was mostly due to the Argus WTI WTS that decreased $1.07 per barrel, offset by the Argus CMA roll that increased by $0.85 per barrel on average for the third quarter. Our average natural gas price differential from NYMEX futures pricing for the fourth quarter was a negative $3.12 per Mcf compared to a negative $2.45 per Mcf for the third quarter. Our realized NGL price for the fourth quarter averaged 14% of WTI compared to 16% for the third quarter.

The combined result was revenue for the fourth quarter of $99.9 million, let’s call it an even $100 million, a 7% increase from the third quarter despite the lower overall realized pricing environment. For full year of 2023, we posted revenue of $361 million, almost $1 million a day, a 4% increase year-over-year. LOE was $18.7 million versus $18 million for the third quarter. On a per BOE basis, LOE decreased sequentially 6% in the fourth quarter to $10.50 versus $11.18 per BOE for the third quarter. The absolute increase in LOE was mostly driven by the full quarter of the Founders assets, but the higher production reduced the per BOE rate. I would note that our Q4 LOE per BOE results were at the low end of our guidance of $10.50 to $11 per BOE.

Cash G&A, which excludes share-based compensation and transaction-related costs, was $3 per BOE for Q4 versus $3.15 per BOE for the third quarter. We are pleased to see a 24% year-over-year decrease in cash G&A per BOE cost. Our fourth quarter results included a gain on derivatives of $29 million versus a loss of $39 million for the third quarter. You may recall, we discussed during our last call that prices at the end of the third quarter were higher, which resulted in a mark-to-market derivative loss, then the decline in prices in the fourth quarter reversed it to a mark-to-market gain. We recorded an income tax provision of $7.9 million during Q4 2023 versus a benefit of $3.4 million in the third quarter, which was primarily associated with the increase in pre-tax book income.

Finally, for Q4, we reported net income of $50.9 million or $0.26 per diluted share. Excluding the estimated after-tax impact of pre-tax items, including non-cash unrealized gains and losses on hedges, share-based compensation expense and transaction costs, our fourth quarter adjusted net income was $21.2 million or $0.11 per diluted share. This is compared to third quarter of 2023 with a net loss of $7.5 million or a negative $0.04 per diluted share, and adjusted net income of $26.3 million or $0.13 per diluted share. Moving to our hedge position. For 2024, we currently have approximately 2.1 million barrels of oil hedged or approximately 45% of our estimated oil sales based on the midpoint of guidance. We also have 2.6 billion cubic feet of natural gas hedged or approximately 43% of our estimated natural gas sales based on the midpoint.

For a quarterly breakout of our hedge positions for 2024, please see our earnings release and presentation, which includes the average price of each contract type. Turning to the balance sheet. Our primary focus remains the same: reducing debt to better position ourselves to ultimately provide a meaningful return of capital to our shareholders. At year-end 2023, we have $425 million drawn on our credit facility. With the recently reaffirmed borrowing base of $600 million, we had $174.2 million available net of letters of credit. Combined with cash, we had liquidity of $175 million with a leverage ratio of 1.62 times, only slightly higher than year-end 2022 despite additional borrowings for the Founders acquisition. As a reminder, from transaction completion in mid-August of 2023 through the end of the year, we paid down debt by $30 million, another clear indication of the cash flow generation afforded by our significant asset base and our dedication to improving our long-term financial profile.

To be clear, we will continue to pull all the levers at our disposal to further reduce our debt position, including driving further growth in operating cash flow through the successful execution of our targeted 2024 development program and further cost reductions. Let’s pivot to our 2024 outlook. In summary, during 2024, we are utilizing a phased versus continuous drilling program approach that better maximizes our ability to react to changing market conditions and adjust spending levels as appropriate. Our focus is on maintaining or slightly growing BOE per day production levels while continuing to grow our crude oil sales. We expect to spend $135 million to $175 million on our full year development program and anticipate capital spending between $37 million to $42 million for the first quarter.

We also anticipate full year 2024 LOE to be between $10.50 and $11.50 per BOE and between $10.75 and $11.25 for the first quarter. All projects and estimates are based on assumed WTI prices of $70 to $90 per barrel and Henry Hub prices of $2 to $3 per Mcf. So, with that, I will turn it back to Paul for his closing comments. Paul?

Paul McKinney: Thank you, Travis. We view our record results for Q4 and full year 2023 as clear indications of the long-term potential of our strategy, the quality of our assets and the low breakeven cost of our undeveloped drilling inventory. The opportunity provided by our expanded business plan and our focus remains the same as in the past. We will continue to pursue operational excellence and further cost efficiencies through the business, both on the capital and operating cost fronts. We will continue to high-grade and execute our targeted drilling and development campaign focused on our highest rate of return prospects to organically maintain or slightly grow our production while maximizing cash flow generation. We will continue to focus on improving the balance sheet by reducing debt.

We will continue to pursue growth through the evaluation and execution of acquisition opportunities to provide immediate accretion to our Ring stockholders and improve our balance sheet. In summary, we remain committed to our value-focused proven strategy, which we believe better prepares the company to manage the risks and uncertainties associated with our industry and should generate sustainable and competitive returns for our stockholders. The focus of our strategy remains on achieving the necessary business size and scale that positions our company to sustainably return capital to stockholders. I want to take the time to thank our stockholders for their trust in us and for all of you who have joined us on the call today. With that, we will turn this call over to the operator for questions.

Operator?

Operator: We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Jeff Grampp with Alliance Global Partners. Please go ahead.

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Q&A Session

Jeff Grampp: Good morning, guys. Thanks for the time.

Paul McKinney: Good morning.

Travis Thomas: Hi, Jeff.

Jeff Grampp: You made it a point a few times in the release as well as on the call here to kind of differentiate between these phased versus continuous drilling programs. So, I wanted to spend a minute there. Is that the management of the CapEx spending in the pace? Do you guys expect that to maybe create some lumpiness in quarterly production capital spending? And it sounds like the main benefit there is just to give you a little bit more nimbleness to manage the volatility in commodity prices. But just any other additional commentary there would be helpful. Thanks.

Paul McKinney: Yes. I’ll do a first stab, and then I’ll turn it over to Marinos. Yes, the thing that we’re trying to manage right now is we’re really trying to maximize our free cash flow generation and focus on paying down debt. If we keep a continuous rig going all year long, the burn rate — it increases our production, but it also limits the amount of debt that we can pay down. And so that’s one consideration. The other one is because of the volatility we’ve experienced over the last year, actually several years, we want to be nimble, and we want to be able to respond. And so by going with the phased drilling contracts, we can make decisions from quarter-to-quarter. The consequence of that is some quarters might be slightly higher than others. It’s all a function of the timing of when you actually drill the wells and when you bring them on. And so yes, the lumpiness may very well continue to be there. You want to add any more?

Marinos Baghdati: No. I just want to reemphasize that with the phased drilling program, we continue our rigs being well-to-well contracts. So we can stop at any moment if we decide to or we can just continue extending the contract for future wells. So, it gives us a lot of flexibility, which we like.

Jeff Grampp: Great. Good to hear. Okay. And for my follow-up, return of capital obviously remains a big goal that you guys continue to work towards. I assume durable balance sheet and large enough kind of operating scale are probably two of the bigger items that you guys are working on to kind of achieve that. But Paul, I’m curious, are there any specific KPIs that you guys are working towards in that regard or anything else that you guys kind of measure that would, I guess, kind of effectively get you guys to climb to that summit to a point where you’d be able to return capital to shareholders. Like what are the main KPIs that we should be tracking towards to get you to that?

Paul McKinney: Yes. That’s a really good question. We get that question pretty often, actually. We don’t have, at this point, specified any specific KPIs. We look at every opportunity out there. We know that this is a long-term goal. We believe that the marketplace has made it very clear that investors expect the oil and gas industry to return capital to their shareholders. And so, we’re working on that. Right now, we believe that our debt levels are just too high. If we were to do a stock buyback or pay out a dividend, the big issue there is our debt. But with respect to a specific KPI, I don’t really — we haven’t identified that.

Jeff Grampp: That’s fair. Thought I’d try. All right. Thank you guys for the time.

Operator: Your next question is from Neal Dingmann with Truist. Please go ahead.

Neal Dingmann: Good morning, guys. Nice results. Paul, my first question is on the Founders assets. Specifically, I’m just wondering it seems like they’re doing quite good. I’m just wondering, as you and the team look at them today versus kind of what they’re doing versus your initial estimates, I’m just wondering can you maybe give me a broadband of broad results kind of what has improved. It certainly seems like they have. I’m just wondering maybe how they look since you initially were looking at them. And then secondly, I’m just wondering when it comes to sort of completions, what’s changed. Is that what has improved in these? Or what’s kind of been the improvement on these assets?

Paul McKinney: Yeah, again, Marinos and I will both tackle this. If you recall what our intentions were when we made the acquisition, we wanted to get our arms around the operating cost and their production methods because we felt like we could make improvements across the board there. And so, we concentrated on the water handling initially, and we also concentrated on the production practices. We have moved water to and dispose of water differently because we just believe that our operations could reduce cost, and we’ve done that very successfully. The other thing we wanted to do, we spent quite a bit of time studying what has been done in the past in terms of drilling and completion practices so that when we did go out there to drill and we have, we’ve drilled several wells out there, it’s kind of premature to talk about them, but I have to say that we’re very, very impressed with the results.

And so overall, our impression of the Founders acquisition is that it is going to overperform the forecast and the predictions we used when we first assessed the value of it. We also believe there’s additional drilling locations out there now that we’ve looked at it closer than what we originally booked and what we originally shared with our investors. You want to go into any more detail, Marinos?

Marinos Baghdati: No, just to say that our drilling and completion costs on the first — few wells in the first quarter, we’ve exceeded expectations even the ones that we set. And so, lower costs are obviously going to improve the economics of those wells. We’re very excited on the performance so far. Also, when we first got our hands around the project, our team did a really good job of identifying some small capital workovers where we lowered our ESPs closer to drop the bottom hole producing pressures, and that stabilized production significantly. So, we’re exceeding what we thought — how we thought the assets were declining just on the base production. So, we’re very, very happy and excited about the asset.

Paul McKinney: Yeah. That change in decline on that base rate is pretty substantial. The work that they did, this is just what I call the blocking and tackling of a very conscientious production engineering team. They’ve done a great job evaluating things out there. And like he mentioned, lowering the pumps, but it’s surprising actually that the base production has responded so favorably to our operations and really has extended those declines. So, I’m really, really happy with that acquisition.

Neal Dingmann: Great to hear. Good details by the way guys. And then my second question, something you had been talking about in the prepared press release, which is on the refrac and workover opportunities. I’m just wondering, I think you had mentioned, I assume this will continue to be a pretty large part of your overall plan. And if so, are there specific entities that are more opportune for this?

Paul McKinney: I don’t know that we’re really focused on refracs, Neal. We’ll say that the things that we’re tackling that where we’re spending a lot of time, we’re trying to remove all of the infrastructure limitations to programs in both the North and the Northwest Shelf, also in the Central Basin platform portion of the Northern and legacy assets and also in the South because all of these areas have very, very economic undrilled opportunities and freeing ourselves from those limitations that gives us more flexibility in terms of where we spend the capital. And so, I think the primary thing that we’ve been working on instead of refracs is really eliminating the infrastructure. And then, like Marinos kind of pointed out, also reducing costs.

And so, the point that he made about the first couple of Founders wells we drilled out there, we believe that we could drill them cheaper than the Founders organization were drilling them and then now our actual costs are actually coming in substantially less than what we actually [indiscernible]. So, we’re very happy with all the efforts. It’s a combination of making changes to the way we do things and also the impact and the effect of the change in the trajectory of inflation. So, costs on many things have come down. And so, it’s a variety of things that allowed us to perform as well as we are.

Neal Dingmann: Yeah, that makes sense. That’s fine. Thanks. And then on that infrastructure, that’s the point I was getting at, are you now getting to a point where you think most infrastructure is built up? Or is that built out? Or is that something that will go on most of this year still?

Marinos Baghdati: Yeah. So, there’s a few batteries that we have to build based on our 2024 capital program. But in general, all the bottlenecks that we were facing, when we first — especially down in the South when we first took over the assets, we’ve pretty much knocked out, and that’s really helped a lot on the capital efficiency that we’ve been seeing. And then we’ve also emphasized the backbone — what I consider the backbone of our organization, the boots on the grounds guys in the field, taking ownership of our operations and making it theirs to where they’re looking at little bitty things that one at a time don’t really significantly change things, but when you add everything together, we’re seeing significant improvements in our operational efficiency and in conducting our operations safely. So, we’re really proud on how we’re generating that culture.

Neal Dingmann: Great details, Marinos. Thanks guys so much.

Operator: The next question is from Noel Parks with Tuohy Brothers. Please go ahead.

Noel Parks: Hi, good morning.

Paul McKinney: Hi, good morning, Noel.

Noel Parks: Just a couple of things. You mentioned a few minutes ago that you believe that there are going to be some additional drilling locations out there than you had originally modeled. I was wondering, is that a function of density or just a function of just the size of the individual targets you’re finding?

Paul McKinney: Yeah, that is pushing the boundaries out a little bit on the area that is developable and also includes additional downspacing. So, it’s both.

Noel Parks: Okay. Great. And I did notice, speaking of locations that in the reserve breakout, in the PDMP category, it seemed that just the aggregate appeared a little gassier. And I just wondered, is that due to just production mix in locations in a particular area or anything in particular that you attribute that to.

Paul McKinney: Yes, if you recall, the Stronghold acquisition brought more associated gas production to our portfolio. And the Founders acquisition is now bringing us back to be more oily. And so…

Marinos Baghdati: I will also say, too, that, especially in the Founders, we’ve really focused again on the field operations, and we’ve actually been able to increase our gas production or sales compared to the previous team that Founders have had the assets. So that’s also slightly increased our gas to oil ratios there at that.

Noel Parks: Okay. Great. Thanks a lot.

Operator: [Operator Instructions] The next question is from Jeff Robertson with Water Tower Research. Please go ahead.

Jeff Robertson: Thanks, and good morning. Paul and Marinos, you mentioned in fourth quarter ’23 that you had some performance that helped production, I think, especially on oil. Was that related to well performance, Marinos? Or is that related to some of the field operations that you all started to implement on the acquired assets? And can you talk about how that plays into the guidance that you have out for 2024?

Marinos Baghdati: Sure. In the first part of your question, it’s a little bit of both. We’ve continued in the fourth quarter, we developed some horizontal wells in the Central Basin platform in our legacy Andrews area that outperformed expectations, I would say. But in the base production, we were able to do a little bit better than anticipated because of we didn’t really have a lot of cold weather in the fourth quarter of 2023, but we did experience some in the first month of 2024 in January. We had about 12 days of the really strong cold front come through that affected our production early on in the quarter, and that led to a little bit of what we guided towards. So, I hope that answers the question.

Paul McKinney: Yeah. There’s a couple of other things, Jeff, and this goes back to the lumpiness of a continuous versus a phased drilling program. If you recall, we were a little disappointed in our production levels last summer. And so towards the end of the year, we went to a continuous program to try to catch up. And so the timing of going to that continuous program really helped us out in the fourth quarter and the kind of boosted the production. And so again, that goes back to managing continuous versus phased drilling. So the fourth quarter actually benefited from additional drilling that occurred in the third quarter where those wells came on in the fourth quarter.

Jeff Robertson: Paul, the way you constructed your 2024 development plan, it sounds like you’re focusing more on higher-margin oil production. Does that mean — will it be a noticeable or material impact on free cash flow per dollar of capital spend as you think about how the capital program for ’24 works out and the ability to delever over the course of the year?

Paul McKinney: That’s exactly right. So, we are focused on maximizing our free cash flow generation. One of the things we’ve learned, especially with natural gas prices where they are with the discounts to the wellhead where we’re actually having a pay to take gas. We’re laser-focused on maximizing our oil production to maximize our free cash flow generation, so that we pay down debt.

Jeff Robertson: Thank you.

Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Paul McKinney for any closing remarks.

Paul McKinney: Thank you, operator. Well, hey, on behalf of the management team and the Board of Directors, I want to thank everyone for listening and participating in today’s call. We appreciate your continued support of the company, and we look forward to keeping everyone apprised of our progress. Thank you again for your interest in Ring, and have a great day, and have a great weekend.

Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.