Earnings Call: Q1 2021

May 11, 2021

Good day, and welcome to the Ring Energy First Quarter twenty twenty one Earnings Conference Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note, today's event is being recorded. I would now like to turn the conference over to David Fowler, Investor Relations Coordinator. Please go ahead, sir. Thank you, Rocco, and thank you, everyone, for joining us this morning. We appreciate you taking the time to join us and for 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 first quarter. We will then turn the call over to Travis Thomas, our Chief Financial Officer, who will review our detailed financial results. Paul will then discuss our future plans and outlook. Also joining us on the call today are Alex Dice, our Executive Vice President of Engineering and Corporate Strategy and Marinos Baghdadi, our Executive Vice President of Operations and Steve Brooks, our Executive Vice President of Land, Legal, Human Resources and Marketing, all of whom will be available for our Q and A session. During the session, we ask that you limit your questions to one and a follow-up, and then you can reenter the queue with additional questions. During the course of this conference call, the company will be making forward looking statements. 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. 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 the reports filed with the Securities and Exchange Commission. As a reminder, this conference is being recorded. I would now like to turn the call over to Paul McKinney, our Chairman and CEO. Hey, thank you, David, and welcome, everyone, to our first quarter twenty twenty one earnings call. Let me begin with a few key highlights of the period. By the challenges all of us in Texas faced in February with the unusually severe winter storm and its aftermath, we were pleased to still remain free cash flow positive during the quarter, even with an active drilling program underway. Continuing to generate free cash flow allows us to further pay down debt and increase our liquidity during the period. As you know, our first quarter sales volumes were significantly impacted by the winter storm. We sold 716,422 barrels of oil equivalent or 7,960 BOEs per day, which was approximately 15% less in the fourth quarter. We incurred shut in and deferral of more than 60% of our production for the majority of the storm with restoration of most of the production taking more than two weeks to complete. Our first quarter financial performance was also negatively impacted by additional cost to bring these wells back online. Further contributing to the decrease in sales volumes from the fourth quarter was temporary downtime associated with shutting in offset wells during the completion operations of our four Northwest Shelf Phase 1 wells we completed during the quarter. We also experienced temporary downtime during the quarter on the nine wells we converted from electrical submersible pumps to rod pumps or what we call CTRs. Of those nine CTRs, we completed seven in Northwest Shelf and two in the Central Basin Platform. And as a reminder, and as we have discussed in the past, our CTRs reduce overall operating costs and help stabilize production levels, and we will continue this initiative moving forward. Due to the incredible efforts of our employees during the storm, many of whom at the same time were facing their own challenges at home, were able to return our operations back substantially pre storm production levels as quickly as possible. This was evidenced by our average net sales volume of almost 9,100 barrels of oil equivalent per day for March, which does not include approximately 200 barrels of oil equivalent per day associated with the full restoration of certain third party gas processing facilities damaged during the storm. Our targeted development activities helped to partially offset the impact of the storm as we completed and placed on production the four wells included in the Northwest Shelf Phase one drilling program. We saw collective production from the four wells of 37,550 barrels of oil equivalent in March and production levels from the wells continue to meet or exceed our expectations. As important, all four wells were completed on schedule and within budget. Finally, we benefited from a much higher commodity price environment during the first quarter, which resulted in a 26% increase in revenues from the fourth quarter despite the impact of the lower sales volumes. This has included an average realized sales price for crude oil of $58 a barrel that was 43% higher than the fourth quarter. For natural gas, our average realized sales price of $6.46 per Mcf represented almost threefold increase from fourth quarter and was primarily driven by the spike in natural gas prices during February's winter storm. The combined effect from all the factors I just described resulted in first quarter twenty twenty one adjusted EBITDA of $19,000,000 that contributed almost $3,000,000 of free cash flow. I am pleased to report this marks our sixth consecutive quarter of free cash flow generation. Also contributing to free cash flow during the first quarter was the sale and exchange of certain oil and gas assets in Andrews County, Texas with Den Fisher Operating Inc, for which we received a net value consideration of $2,000,000 in cash. We utilized a portion of our free cash flow during the first quarter to pay down $7,500,000 of bank debt and ended the period with approximately $46,000,000 of liquidity, a 14% increase from the end of the fourth quarter. With that, I will turn the call over to Travis to discuss our financials in more detail. I will then come back to make a few closing comments. Travis? Thanks, Paul. For the 2021, we generated revenues of $39,500,000 and recorded a net loss of $19,100,000 or $0.19 loss per share. Included in the loss were pre tax items including $25,700,000 for non cash unrealized losses on hedges as a result of the change in oil prices and $355,000 for share based compensation expense. Excluding these items, our adjusted net income was $7,000,000 or a $07 gain per share. During the 2021, we had $15,400,000 in cash flow from operations, dollars 14,500,000.0 in capital expenditures and $2,000,000 in proceeds from the Fisher transaction. The combined result was positive free cash flow of $2,900,000 For the three months ended 03/31/2021, we had oil sales of 610,121 barrels and gas sales of 637,808 Mcf for a total of 716,422 BOE. As Paul discussed, our realized prices were significantly higher in the first quarter compared to the fourth quarter. This included first quarter average pricing of $58 per barrel of oil and the exceptionally high price of $6.46 per Mcf on natural gas for an average of $55.14 per BOE. The differential between our average oil price received and the weighted average NYMEX WTI was $0.37 per barrel in the 2021. This was an improvement from our average fourth quarter differential of approximately $2 This was primarily a result of renegotiating our oil contracts to receive a better marketing adjustment at the February. The WTI, WTS spread went from an average of $0.16 in the fourth quarter to an average of $1.8 in the first quarter and the ARGUS CMA roll went from an average of negative $0.35 in the fourth quarter to an average of negative $01 for the first quarter. For detailed discussions of our other income statement line items, please refer to our earnings release and 10 Q that was filed yesterday. Of course, I will be happy to answer any questions you may have during today's Q and A session. Echoing Paul's comments, we are pleased to generate free cash flow once again during the 2021 and further pay down debt of $7,500,000 We expect to continue to use much of our free cash flow for this purpose with the cadence of debt paydown primarily driven by market conditions and the timing of capital spending. As of 03/31/2021, we had $305,500,000 drawn on our revolving credit facility and liquidity of $46,200,000 including $45,500,000 available on the revolver and $1,700,000 in cash. Finally, despite the impact of our winter storm on our first quarter results, we are reaffirming our full year 2020 outlook, including year over year average sales volume growth of 2% with approximately 85% to 87% oil. For full year 2021, we anticipate an average lifting cost of $10 to $10.5 per BOE, which reflects a decrease compared to the full year of 2020 lifting cost of $10.52 per BOE. Lifting costs include lease operating expenses and gathering transportation and processing costs. Turning to our 2021 capital investment program, we continue to target capital spending of 44,000,000 to $48,000,000 with all expenditures to be funded by cash on hand and cash from operations. In addition to company directed drilling and completion activities, our capital spending outlook includes targeted well reactivations, workovers, infrastructure upgrades and continuing our successful CPR program in Northwest Shelf and Central Basin Platform areas. Also included is anticipated spending for leasing, contractual drilling obligations and non operated drilling completion and capital workovers. Our 2021 capital program has been designed to sustain or minimally grow our production and reserve levels and have returns sufficient to generate free cash flow to further reduce debt. I would note that our existing commodity hedges were implemented last year to ensure that the necessary cash flow was there to adhere to these plans. So with that, I will turn it back to Paul. Thank you, Travis. While we clearly had to navigate some significant operational challenges during the first quarter as a result of the winter storm that crippled much of Texas for several days in February, we remain focused on the execution of our work program and more importantly, strategic vision. If you recall during the fourth quarter and full year twenty twenty earnings call in mid March, we provided a detailed discussion of our strategy and how we expect to achieve sustainable long term success for the benefit of our shareholders. First, we emphasize that our future success is dependent on our ability to attract, develop, retain the best people. We also define what we mean by operational excellence and why we believe it is important to pursue operational excellence with a sense of urgency as a fundamental aspect that defines our culture. This includes executing our operations in a safe and environmentally responsible manner, being quick to apply advanced technologies where it makes sense, delivering low cost, consistent and efficient execution of our drilling campaigns and our work programs, continuously seeking ways to improve our margins and reduce our operating cash costs on a per barrel basis. All of these things are vital to our future success. We also reviewed why it is so important to allocate our capital to the highest risk adjusted rate of return projects in our inventory. Earlier, we discussed the success we have seen from our four Northwest Shelf Phase one drilling program wells were all placed on production in the first quarter, with collective production results to date meeting or exceeding our original expectations. We also previously announced our three well Northwest Shelf Phase two drilling program where we began drilling in early April and have since successfully finished those operations. Similar to our Phase one program, all three Phase two wells are anticipated to be completed on schedule and within budget. We expect all wells to be online by the May. We also said that the combination of reducing our operating cost per barrel and targeting the development of only the highest risk adjusted rate of return projects in our inventory supports our ultimate goal of generating a continued sustainable free cash flow. This will allow us to further strengthen our financial and market position, drive meaningful returns to our shareholders and provide additional financial flexibility to manage commodity price cycles in the future. As such, we remain focused on steadily paying down debt, divesting of non core assets and becoming a peer leader in debt to EBITDA metrics. And since I mentioned the divestiture of non core assets, I thought it would take a moment to announce that we are opening our virtual data room and launching the sales process of our Delaware assets tomorrow. We have seen considerable interest in our Delaware assets since making our plans known earlier this year and are encouraged by the interest shown. And finally, we also shared that we will continue to pursue strategic accretive acquisitions that maintain or reduce our breakeven costs. We said we will only focus on acquisitions, mergers, dispositions that not only improve our breakeven costs, but also enhance our margins, lower our operating costs and are accretive on a cash flow basis. We also said that our financial strategies associated with these efforts will focus on delivering competitive risk and debt adjusted per share returns to our shareholders. So what has changed since we last spoke about growing through MD and A? Well, one thing is that we are starting to see asset sales entering the marketplace that we believe would make great additions to our portfolio. We also believe that other operators with similar assets are planning to bring them to market for sale as well and perhaps soon. We would like to take advantage of these acquisition opportunities before oil prices improve very much more. And as we have previously stated, we would like to accelerate the strengthening of balance sheet through one or more strategic and accretive acquisitions. So how do we do that? We believe that the best way for us to finance an accretive acquisition at this time is to primarily use equity. We also believe that if our existing stockholders are going to agree with us, we will need to demonstrate two essential things. First, the transaction will need to bring in sufficient production, revenue and cash flow to improve our debt to EBITDA ratio, thereby strengthening our balance sheet. And second, the transaction metrics will need to be accretive to our existing shareholders. So the bottom line is this, we will not acquire assets using equity unless it meets these two tests. Now, before we take your questions, I want to let you know about a change underway in the management of our investor relations effort. David Fowler is stepping out of his investor relations and business development role with Ring to start a new company called Permian Energy Partners that will be headquartered in Midland. His new firm will provide A and D and other BD services. And as such, he will continue to assist us and others in the marketplace to potentially identify and bring in merger and acquisition opportunities in for consideration. I want to personally thank David for his many years of dedicated service to Ring. He has held senior management positions and has always been a trusted public face for Ring. Since I joined the company last year, David has been an invaluable and steady resource to myself and the other new members of the management team and board. And for that, I am truly grateful and David is a true friend. We wish David great success in his new business endeavor and look forward to his continued business relationship with him for years to come. Now, earlier this year, to assist David in our Investor Relations efforts, we engaged Al Petrie Advisors, who many of you know from their advising a number of other E and P and OFS companies. Al and his team have a long history of successfully working with many clients in the oil and gas sector, and we look forward to their continued assistance as we further enhance our investor communication program. In our earnings release, we included Al's contact info as he will be the primary contact for investors and analysts following David's departure later this month. And so with that, I would like to turn it back over to the operator for questions. Operator? Today's first question comes from Jeffrey Campbell with Alliance Global, excuse me, Alliance Global Partners. Please go ahead. Good morning. Hey. Good morning, Jeff. How are you? I'm fine. Let me second the congratulations to David while we're at it. My first question was bearing in mind you bet. Bearing in mind the storm and the reduced volumes during the '21, What are you guys doing to catch up considering that 2021 guidance remains unchanged? I'll tell you what, I'm going to turn that over to Moreno's Baghdadi, our Executive Vice President of Operations. Good morning. If we look at the total BOE production we've had to date and what we're estimating April and May to be, then what we need starting June 1 forward is around 94 to 9,500 BOEs per day in order to meet our 9,000 BOEs per day average for the year guidance. And we think we can get there with the Phase two drilling program and the addition of the 200 BOEs per day that is currently shut in due to the the purchaser in in the CVP area. Okay. Great. Thanks. I appreciate that color. And, David, I mean, excuse me. On the m and a front, you just said that you opened up the data room for the Delaware Basin sale. I'm just wondering if the stronger oil prices and increased industrial activity that we're starting to see, how that you feel that supports the sale broadly. And, also, is is an increasing specific interest in the saltwater disposal assets that you're contemplating making available to third parties. Well, yeah, you're right on both accounts. But I tell you what, I'm going to turn this question over to our Executive Vice President of Engineering and Corporate Strategy, Alex Dies. Alex, you want to take that? Yes. Good morning. So yes, we've seen a renewed interest, obviously, with the prices coming up and then the more activity in the Delaware Basin, Delaware disposal asset that we currently have does have an increased value. So right now, we just have spent some time getting the field up to date. And as Paul mentioned, we're getting it back onto the market as of tomorrow, and we'll run accelerated process and hopefully report back in the near future. Okay. Great. Thank you. And our next question today comes from Neil Dingmann with Choice Securities. Please go ahead. Good morning, Al. Hey, Paul. Paul, my first one is for you or the team. Just, you you mentioned about, you know, just going after the highest sort of return locations in order to keep generating that free cash flow. Could you talk a little bit about that, I guess, sort of two pronged there? One, how many kind of locations you all identify when you're thinking about this right now in the portfolio? It still seems you have quite a few. And then secondly, you know, how you plan to bal I'd like to hear a little more how you plan to balance that that you know, obviously, we wanna see free cash flow. We'd like to see you know, you mentioned the earlier answer about keeping the production flat. So if you could talk a little on that. Thank you. Yeah. Very good. And as you know, we do have a very handsome inventory of high rate return opportunities, not only in the Northwest Shelf, but although not quite as attractive. At these prices today, Central Basin platform opportunities also are economic. But one of the things that we committed to our shareholders, we committed to ourselves because we think it's just good business practice. We also committed to our bank syndicate that we were going to remain disciplined until we brought our debt level down to certain levels. As you know, our credit agreement has a four debt to EBITDA ratio covenant. That's above what we consider conforming levels. We would like to get our bank debt and our balance sheet improved to the point where we're well below 3.5% or 2.5 And so during this time period where we still are subject to the potential liabilities of having this much debt, we're gonna remain disciplined. And so, yes, we could pour it on, but what that does, it also accumulates debt. If prices were to fall back down to $2,020.20 levels, I just would hate to be put into a tough situation again. So we're laser focused on strengthening the balance sheet, reducing our debt. And when we get our debt levels down, then the balancing act will shift a little bit more towards growth and also generating returns for, you know, for shareholders. I hope that answered your question, Neil. No. That that that did. And then do you all have I know in the past, you've had some workover and various other opportunities to maybe not boost production, but but certainly mitigate mitigate decline. I'm just kind of curious now on the portfolio, is there still opportunities there? Have you already performed most of those and that will keep the production, the baseline production flat already? Go ahead, Mario. Yes. We're continuing to push those through our workover and capital program in order to kind of maintain production. So yes, those are still placed in our work program and are being performed. Yes. And just to add to that, the larger the production base and the larger group of wells that you manage, workover opportunities are just things that come along with age and with more knowledge, people work in the area. And so workovers will continue to be an active component of our capital spending program. These types of projects tend to have higher rates of return. They do require a lot less capital than drilling programs or major infrastructure programs and that kind of thing. And so yes, you can expect to see us continue that. The level or the participation of the percentage of our actual capital program from one year to the next or one quarter to the next is really going to be a function of what opportunities actually present themselves during that time period. Very good. Thanks for the details, guys. And our next question today comes from Noel Parks at Tuohy Brothers. Please go ahead. Good morning. Hey, good morning, Noel. I also wanted to touch on the topic of inventory. You know, we we are enjoying these oil prices in the sixties. Rest of 2021 strip, I think, is in the sixties, and I think 2022 is maybe '57 or something like that. So if with your location count, in in in your slides, you sort of describe the pubs, probable possible, and then prospective locations, the the last group being, of course, a much bigger bucket. Is it fair if we assume 50 or better realized or let alone 55 better realized pricing going forward, Is it fair to to think about how many of those might find their way back, you know, graduate up a tier just in in rough terms with, you know, this better pricing environment? And I guess just connected to that, do you think there's any fresh technical evaluation that would be required in looking at those at this point? Well, I'm gonna tag team that with Alex. But before I get started, you gotta remember, our PUD inventory is is something that is defined using SEC rules for determining reserves. Okay? So first of all, you have, you know, offset rules and all that kind of stuff. But the biggest thing that drives the number of of PUDs in one area or another this last year really was a remarkably low price that we used for determining the reserves. Current prices are considerably higher. And so the inventory that we listed as proved undeveloped was largely due to the prices that we were required to use to determine them. So then they end up falling over into another category. And so we do enjoy a very sizable inventory, both in the Northwest Shelf and the Central Basin Platform. I think anyone that really understands how the economics and the mechanics work associated with the accounting and reporting the disclosure of proven undeveloped locations under SEC rules, they understand what those limitations are. And so I think it would be safe to say that we have a bigger inventory today at today's prices than those SEC prices. Alex, is there anything you want to add? No. The only thing I would add is since we took over as a management team, we did bring in a new both engineering and geologic review and technical review. So that's an ongoing process. And so we'll high grade more and more of those locations that you're talking about, and there'll be different prices that they'll become more economical than others. So but we also want to make sure that we maintain a very capital disciplined approach. So we'll take those quarter to quarter, and we'll add that inventory as needed. That's it. Great. And just my second one. Do you have a rough sense of when you might have the borrowing base results and any sort of intelligence from the banks as far as where they're looking at price deck going into it? Yeah. And and so we are you know, that process is ongoing, so I I would hate to really share too much. They have already shared with us the the the bank price deck that we'll be using is is higher than what we used in the last quarter. That's a good thing. Everything is going along very smoothly and we should complete this redetermination this month. And we'll have more to disclose when that occurs. But right now, it's just going on as a normal process and everything seems to be going along very smoothly. Great. Thanks a lot. Our next question today comes from Mark Olimich, a private investor. Please go ahead. Good morning, Mark. Hey. Good morning. Sorry. I had my mute on. Good morning. Thanks for taking my call. You're welcome. I know you're working on lots of good things, and I know you touched on this generally that regarding return to returns to the investors, can you put any timeline on when you think you might get to the point where there would be dividends? And maybe as a a a connected topic, is is there I know a lot of money gets spent on the hedging. Is that any rethinking given to the hedging strategy about the money money that gets spent on that, or is that still gonna stay the same? Yeah. If you don't mind, Mark, I'm gonna take the your two points in reverse order. So let's talk about hedges. You know, last fall, when we entered in our hedges, that was in November. Is when we started. You know, three weeks prior to layering in our first hedge for 02/2021, the oil price was $35. If you recall back in those days, we had already done the analysis and determined what was the price level that we needed that would guarantee our ability to fund the work program that would maintain our production or slightly grow it, but also provide us the cash flow so that we could ensure that we could pay down debt at a level that meets or exceeded the bank's requirements. And that price was $45. And so when we had the opportunity to lock in the cash flows, And during that time period, you got to remember, people were just talking about COVID vaccines, and we were talking about all these other different things. We had no idea what 2021 was going to show. We had more confidence that 2022 would be better than 2021, but 2021, we just wanted to make sure that we could ensure that we had those cash flows. And we were not unlike a lot of the different companies. And so going back to your question, at that point, we were in a defensive position in our opinion and that we were going to take whatever steps that were necessary to secure those cash flows. And if we were fortunate to be in a higher price environment, we were willing to forego the additional revenue just to make sure that we could guarantee the debt repayment to our banks and that we could have a work program to sustain our production and maintain our liquidity. That was really, really important. Well, as you know, and I'm glad you actually pointed this out, things have changed. And so as we go forward, now we're looking at using our future hedges and the hedging that we'll do in the future will be more opportunistic. And so now we'll be looking at it from a standpoint, not only do we want to make sure that we ensure our capital work programs, but now we'll be looking at the marketplace in a more opportunistic way so that we actually can capture and retain the upside for our shareholders. And so we are right now in the process. As we go through 2021 and going into 2022, we are now switching from a defensive hedging strategy more to an opportunistic hedging strategy. Alright. Thank you. The other part of that question was any timeline on when you think you might do dividends? At this point, I can't really tell you. Here's the thing. That depends on several things, first of all. And so the healthier we get our balance sheet and the quicker we can get that balance sheet to a healthy position, the quicker we'll be able to do either stock buybacks or variable dividends or perhaps continuing with strategic acquisitions that generate real returns for our shareholders. But and so what are the things that will contribute to getting that balance sheet in a stronger position? Well, the sale of our Delaware assets will contribute to that. The success in being able to use equity and bringing down one or two of these asset acquisitions in an accretive manner that strengthens the balance sheet, increases the cash flow so we can pay down our debt even more. Once we get to a position where we agree that our balance sheet is strong enough, we will at that point one of the things I said in the last call, if you look at the amount of our cash flow that we're allocating to paying down debt, when we're in a position where we no longer need to do that, that'll be about the time where we can take that amount of cash flow, we can turn that into real returns for our shareholders. And so it's really difficult for me to tell you when that will happen. Stay tuned, watch us. We'll be reporting on that. You'll get a clearer vision for that. And so the more success we have in terms of accelerating the repair of our our balance sheet, the quicker we'll get to the point where we're generating and and delivering real returns to our shareholders. Cool. I appreciate the the answers. Thank you. You're welcome. We're getting And our next question our next question comes from Jeffrey Campbell with Alliance Global Partners. Please go ahead. Great. Thanks for taking my follow ups. Paul, first thing, when you're looking at the attractive assets that you've alluded to as potential acquisitions, are you willing to go outside your current sphere of operations, or are you focusing primarily on your Central Basin Platform Northwest Shelf backyard? The answer is yes to both. Okay? So first of all, we are focused in the area where we currently have operations, and and it just makes a lot of sense to do that because I already have an outstanding field operating team. If I can take that field operating management team and spread them over more wells and more production, I reduce my cost on a per well basis. And so we are focused in the Permian Basin where we currently operate. However, we're more focused on the right types of properties that generate the right types of returns. If we can buy producing properties in the core of some other basin that delivers the same type of returns, that has undeveloped opportunities, that have the same type of economics, we would be interested in that as well. And we've worked all over North America. We know the bases in The United States very well. We know what those would be. But right now, we are focused in the area that we currently operate because it makes all the sense because you can combine all the synergies and really and have a few more things working for you. Okay. Thanks for that color. And if I can add one more onto this theme, you you you're definitely emphasizing increasing EBITDA with acquired production when you're talking about leverage and and and so forth. Wondering, are you concerned are you concerned with adding inventory as well as production? Or if the price is right and the returns are great, you'd be willing to mainly acquire a producing asset without a lot of undeveloped upside. There you go. So, you know, I would be willing to consider production, but typically, there would have to be an an advantage. We would have to have some kind of advantage in terms of being able to significantly reduce operating costs or or create some additional value. But I really do get excited about an opportunity that brings in with it undeveloped opportunities that have similar economics as our existing portfolio. And so that's where I really get excited. But I'm not saying that other investments that are just producing properties would be off the table because, again, we look at ourselves as a logical aggregator and consolidator of assets out here on the Central Basin Platform. Many of these assets are a little older, but we also believe that we're a low cost operator. And as we go throughout 2021 and 2022, we're continuing to work on that very issue. We believe that being the low cost operator is going to be a key attribute to anyone who's going be a successful aggregator out here on the Central Basin Platform, the Southern Shelf. Okay, great. Yeah. And that makes perfect sense. Thanks very much for the follow-up. We got time for one more? Absolutely. Our final question today comes from Jack Yedid, a private investor. Please go ahead. Yes. Thank you. In your 44,000,000 to $48,000,000 CapEx program for this year, which I know includes the money you spent in Q1, and after putting online the three Phase two wells later this month, are you guys planning to put online any more wells between the May and the end of the year? I'm going to turn that over to Moreno, so he'll talk a little bit more about our drilling and other capital programs. Yes, past the second quarter with the three wells of Phase two, once we bring those online, we have plans in dollars allocated in our capital budget to add two to three more wells. Okay. And the other question I have is respect to hedging for 2022. If I remember right, you have about 500 barrels or about 5%, 5.5 of your production hedged for 2022. Other than being opportunistic, which obviously makes sense, do you have any kind of schedule in mind in terms of adding more 2022 hedges? I'll turn that over to Travis. Yes. So we added the 500 barrels this year. But in total, we've got two thousand two and fifty, I believe. And we're also looking at another idea right now that we haven't put in place to unlock some upside potential in 2021. So potentially, we could take the ceiling off of one of our collars and put 1,500 barrels per day for the balance of 2021 and push that out into 2022 into a swap that would be higher than our average pricing that we have now. So that would add to that balance at a decent rate, but that would also free up cash flow, actual cash dollars for this year and give us more time next year just to add more production to kind of eat that up. And so this kind of goes back to what we were talking about a little earlier. We're at the point in time now with the stronger oil prices that our strategy is significantly changing. Last year, when prices were up and down from $42 to $35 and we didn't know when the pandemic induced economic downturn that really caused a sharp downward pressure on all worldwide oil prices. You know, at that point, we we just wanted to make sure we could guarantee in our cash flows. But now we're looking at everything from an opportunistic standpoint. And what Travis just described is an opportunity or strategy change that we're actually looking at right now. We're actually in the conversations with with the traders about finalizing that deal. And so you're gonna see more of that going forward. But with respect to 02/2022, we're still studying that. We're still reviewing those with our board and our risk committee. And and so we'll we'll be announcing more on that as time goes on throughout the rest of this year. Great. Thank you very much for that color. You're welcome. And then, ladies and gentlemen, I'd like to turn the conference back over to Paul McKinney for any final remarks. Again, everyone, thank you very much for your interest in Ring. We are really, really excited about the future here. The economy is starting to open up. People are going places. We're seeing the opening up of the economy influencing energy prices. Energy prices have risen. I would love to see them continue to rise. Of course, many of us in the industry would like to see that. But our work programs right now are mainly described by discipline. We are going to continue to remain disciplined until we get our balance sheet in the order that we think it needs to be. We think that's the right thing to do for our shareholders. We think it's the right thing to do for our business. It's the right thing to do to manage our risk. And once we get our balance sheets squared away, at that point, look out because we're going to be looking to start drilling our wells that we have in the inventory. We'll be looking to make more strides and additional strides in pursuing acquisitions. MD and A activity Have full line of sight on growing this company, and we'd like to ensure that we keep all of you as invested partners. Thank you very much for your interest, and we look forward to talking to you again soon. Thank you, sir. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.