Ring Energy, Inc. Price & Performance (REI)

During the Q and A session, we ask you to limit your questions to one and a follow-up. You're welcome to reenter the queue later with additional questions. I would also note that we have posted an updated investor 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 on the GAAP are contained in yesterday's earnings release. Finally, as a reminder, this call is being recorded. I'd now like to turn the call over to Paul McKenny, our Chairman and CEO. Thanks, Al, and good morning, everyone, and thank you for joining us today. The fourth quarter twenty twenty four represented a strong ending to a year in which the Ring Energy team enhance nearly every controllable metric Our total sales grew 8% over 2023, to a record 19,648 barrels per day. And oil sales grew 6% to a record thirteen thousand two eighty three barrels a oil per day. We reduced our year over year all in cash operating costs per BOE basis by 2%. We drilled 13 more wells in 2024 than the prior year for slightly less capital, representing a substantial increase in capital efficiency for both our horizontal and vertical wells. For the year ended 12/31/2024, $151,900,000 which included cost to Ring, complete and place on 21 horizontal wells including five in the Northwest Shelf, and 16 in the northern portion of the CBP, and 22 vertical wells in the CVP.

Also included in the full year capital spending were costs for capital workovers, infrastructure upgrades, recompletions, facility upgrades to reduce emissions and leasing. We paid down debt by $40,000,000 and $70,000,000 since the closing of the Founder's acquisition in August of twenty twenty three. We exited the year with $385,000,000 of debt on the balance sheet and approximately $217,000,000 of liquidity. Our performance led to generating adjusted EBITDA of $233,300,000 to Supported by our focus on capital discipline, we delivered adjusted free cash flow of $43,600,000 remaining cash flow positive for five years for over five years. Turning to reserves, we grew proved reserves by 4,400,000 barrels of oil equivalent or 3% to 134,200,000 barrels all equipment, A key point to note regarding our 2024 reserves was that we organically added 16,000,000 barrels of oil equivalent that more than offset the 7,200,000 barrels of oil equivalent of production, the 1,200,000 BOE from sales of non core and $3,200,000 BOE in reserve reductions due to lower SEC prices. Our proved reserves PV-ten was approximately $1,500,000,000 at year end 2024. Included in total was approximately $1,100,000,000 of PV-ten for 20 I'm sorry, 92,600,000 barrels of oil equivalent approved developed reserves. The primary contributors to our success in 2024 are directly related to the benefits of our strong hold in Founders acquisitions in 2022 and 2023.

These acquisitions have exceeded our expectations in many regards further established our strategic foothold in the Central Basin platform and significantly increased our undeveloped inventory of highly economic drilling locations As we have previously stated, we continue to look for similar acquisitions can help us replicate the success of those two transactions.

We believe the proposed Limerock transaction does that.

As previously released, the purchase price of $100,000,000 is comprised of $80,000,000 of cash and up to 7,400,000.0 shares of Ring common stock at closing and an additional $10,000,000 deferred cash payment due months after closing.

The transaction has an effective date of 10/01/2024 and is expected to close by the end of the first quarter of twenty twenty five. In short, Lime Rock CVP Acreage Is In Andrews County, Texas where the majority directly offsets Ring's core Shafter Lake operations. And the remaining acreage to the south is prospective for multiple horizontal tar The acquisition ideally suits Ring's focus on consolidating producing assets in core counties on the CVP defined by shallow declines, high margin production and undeveloped inventory that immediately competes for capital. Additionally, and as previously disclosed, these assets add significant near term opportunities for field level synergies and cost savings. Regarding our guidance for 2025, our estimates include three full quarters of operations with the Lime Rock assets. Driving the top line, we anticipate an average annual sales midpoint of 21,000 barrels of oil equivalent per day and 13,900 barrels of oil per day a 75% increase respectively. And annual capital spending midpoint of $154,000,000 essentially flat and a midpoint of approximately 49 total wells drilled completed and placed on In summary, 2025 plans will follow a very similar playbook from the past We will remain focused on maximizing free cash flow generation, We will maintain a disciplined capital spending program that maintains or slightly grows our production and liquidity [indiscernible] and allocate the balance of our cash flow to paying down debt.

Travis will provide more detail regarding our guidance Along with other comments concerned our fourth quarter and full year financial results, So with that, I will turn it over Travis?

Thanks, Paul, and good morning, everyone. We were pleased with our overall outcome for the fourth quarter. Addition to the results that met our overall guidance, the fourth quarter capped off another successful year for Ring.

Similar to past calls, I will take a few minutes to cover some additional color detailing the most significant sequential quarterly results. Let's start with production. During the fourth quarter, we sold 19,658 BOE per day compared to 20,108 BOE per day in the third quarter a slight decrease of 2%. Portion of the decrease was attributable to a third party gas plant being shut down due to a fire impacting our sales volumes. Our fourth quarter total sales volumes were above the midpoint of our guidance range and contributed to a record full year 2024 sales of 19,648 BOE per day.

The year benefited from a full year of production from our Founder's acquisition, which closed in August of twenty twenty three. As Paul discussed, also materially contributing to our record full year 2024 sales volumes was another successful drilling campaign across our asset base with continued focus on our highest rate of return in [indiscernible] Turning to the fourth quarter twenty twenty four Ring, our overall realized price declined 4% to $46.14 per BOE, from $48.24 per BOE in the third quarter driving the overall sequential decline was 7% lower realized pricing for oil in the fourth quarter of twenty twenty four. Our fourth quarter average crude oil price differential from NYMEX WTI futures price was a negative $1.42 per barrel versus a negative $0.56 per barrel for the third quarter. This was mostly due to the Argus WTI WTS that decreased by $0.36 per barrel offset by the Argus CMA roll that decreased by $0.44 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 $3.83 per Mcf compared to a negative $4.43 per Mcf for the third quarter. Our realized NGL price for the fourth quarter averaged 13% of WTI compared to 11% for the third quarter.

Oil revenue decreased by $5,800,000 with a $3,800,000 price variance and $2,000,000 production variance. Gas and NGL revenues on the other hand saw a combined $2,600,000 increase quarter to quarter providing a combined total of $1,500,000 of compared to $1,200,000 negative in the third This resulted in fourth quarter revenue of $83,400,000 compared to $89,200,000 in the third quarter a 7% decrease. Fourth quarter LOE of $20,300,000 was essentially flat compared to the third quarter On a unit basis, fourth quarter LOE was $11.24 per BOE which was within our guidance range. Third quarter LOE was $10.98 per BOE. Cash G and A, which excludes share based compensation and transaction related costs, was $3.51 per BOE for the fourth quarter versus $3.45 per BOE for the third quarter Our fourth quarter twenty twenty four results included a loss on derivative contracts of $6,300,000 versus a gain of $20.24700000.0 dollars for the third quarter lower relative pricing at the end of the fourth quarter.

We recorded an income tax provision of $1,800,000 during Q4 twenty twenty four versus a provision of $10,100,000 in the third quarter which was driven by the increase in pre tax book income. Finally, For Q4, we reported net income of $5,700,000 or $0.03 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 $12,300,000 or $0.06 per diluted share.

This is compared to a third quarter twenty twenty four net income of $33,900,000 or $0.17 per diluted share and adjusted net income of $13,400,000 or $0.07 per diluted share.

Moving to our hedge position. For 2025, we currently have approximately 2,400,000 barrels of oil hedged or approximately 48% our estimated oil sales based on the midpoint of guidance. We also have 2.4 Bcf of natural gas hedged, or approximately 33% of our estimated natural gas sales based on the midpoint. A quarterly breakout of our hedge positions for 2025, please see our earnings release and presentation which includes the average price each contract type. Turning now to the balance sheet. We incurred $37,600,000 in CapEx in the fourth quarter, was in line with the midpoint of guidance. Reduced D and C CapEx by 23% to $22,000,000 in the fourth quarter from $29,000,000 in the Ring, We incurred costs of approximately $4,700,000 for facilities upgrades, which contributed to our year on year over year reduction in emissions. Also included in our fourth quarter CapEx was over $1,000,000 in leasing costs approximately 60% of our full year leasing which added to our reserve replacement and organic inventory growth. As Paul discussed, we drilled 13 more wells in 2024 than the prior year with slightly less capital representing a substantial increase in capital efficiency for both our horizontal and vertical wells. The result was a full year 2024 total CapEx of hundred and $51,900,000 which was slightly lower than 2023.

At year end 2024, we had $385,000,000 drawn on our credit facility.

With a borrowing base of $600,000,000 that was reaffirmed in December we had $215,000,000 available net of letters of credit. Combined with cash, we had liquidity of $217,000,000 and a leverage ratio of 1.66 times. During the fourth quarter of twenty twenty four, we generated $4,700,000 of adjusted free cash flow and paid down $7,000,000 in debt resulting in debt reduction of $70,000,000 since completing the Founders acquisition in mid August twenty twenty three.

For full year 2024, we paid down $40,000,000 of debt generated $43,600,000 in adjusted free cash flow. We will continue to utilize our free cash flow to improve our long term financial profile through further debt repayment which we expect will be fueled primarily through further growth in cash flow driven by our successful execution of our targeted 2025 development program, Our primary focus remains the same, utilizing our substantial free cash flow generation, to primarily reduce debt and better position ourselves ultimately provide a meaningful return of capital to shareholders. Looking at our 2025 outlook, We plan to follow the same general approach as in 2024. In addition, our guidance reflects the recently announced agreement to acquire LimeRock CVP assets and includes results from those operations after Ring, which is expected by March 31.

As Paul discussed and we have said in the past, our focus is on maintaining or slightly growing BOE per day total production while continuing to grow crude oil sales. Our full year 2025 total sales guidance is 20,000 to 22,000 BOE per day and 13,600 to 14,200 barrels of crude oil per day, I would point you to yesterday's press release for quarterly guidance.

We expect to spend $138,000,000 $170,000,000 on our full year 2025 development program with anticipated capital spending of between 26,000,000 and $34,000,000 for the first quarter.

We also anticipate full year 2025 LOE to be between $11.25 and $12.25 per BOE and between $11.75 and $12.25 per BOE for the first quarter. All prices and estimates are based on assumed WTI oil prices $65 to $75 per barrel Henry Hub prices of $2 to $4 per Mcf. So with that, I will turn it back to Paul for his closing comments. [indiscernible] Thank you, Travis. Up to this point, we've reviewed our fourth quarter and full year 2024 results. And discuss generally our outlook and guidance for 2025.

What we haven't shared though Are our thoughts associated with managing the company through the volatility we continue to experience in commodity markets.

The question that could be asked what are our priorities and how will those priorities impact our decision making going forward. So let's discuss what Ring is likely to do if WTI oil prices remain substantially at or below $65 of our Before going there though, think it is good to remind ourselves of the virtues associated with our assets. Turning to Page eight of our investor presentation. Ring Energy has the second highest margin on a dollar per barrel basis This enables the company to have a relatively better ability to manage the challenges of low oil prices.

Compared to many of our peer group. If we don't consider the benefits or the differences in company hedging practices, Furthermore, as shown on Page nine, Ring has the second lowest production decline rate in our peer group, which means if we want to maintain our production levels, we would require a relatively lower level of capital spending to achieve that goal. Another thing we can discuss is our hedging practices. As you know, Ring strives to hedge 50% of our forecasted PDP production from our most recent reserve report as a method of limiting the exposures to sustained low oil and natural gas prices and to protect future cash flows supporting our debt repayment, and our capital spending plans. Having said all that, if WTI oil prices remain at or below $65 per barrel for an extended period of time, we believe the right thing to do is to cut back on cash On Page seven of our investor presentation, we show estimates Of among other things, our projected leverage ratio at different WTI oil prices. I am referring to the chart on the lower right of the page entitled enhancing balance sheet targeting leverage ratio less than one times.

The scenario depicted in the chart assume our capital spending levels remain the same.

Only the oil price assumptions were changed. The $65 per barrel case shows that we believe our leverage ratio under those discussions we'll reduce only modestly If we stay at $65 per barrel for a duration of that forecast, We are more likely to reduce our capital spending to a lower level than that assumed in the $65 per BOE scenario depicted there. And we will apply more of our cash flow to paying down debt. Although the calculation is very complicated, and lower capital spending levels would imply lower at a better leverage ratio by focusing on reducing absolute debt. Another point I'd like to make is associated with our success in organically growing our proved reserves in 2024 Ring. And what that means regarding our future plans for growth. Earlier today and in the past, you have heard us say we intend to allocate a portion of our cash flow from operations to maintaining or slightly Ring our production and liquidity and allocating the balance of reducing debt. And that our growth will come from accretive balance sheet enhancing acquisitions. Building on that strategy, in 2024, we began focusing on identifying Ring capturing and as a part of our capital program.

We intend to increase our focus on organically growing our reserves and undeveloped inventory over time And by doing so, we are adding another component to our growth strategy, another way to Ring, so to speak. And not rely solely on acquisitions for reserve and undeveloped inventory growth. We believe the benefits of adding organic growth to our growth strategy compelling Another point refers to the question why did Ring use stock as part of the total consideration in the pending Limerock transaction? There are a couple of reasons. The primary one being our balance sheet.

By using a small amount of equity, we anticipate having a stronger balance sheet and corresponding leverage ratio at closing. Another benefit is related to the confidence LimeRock has in our ability to create value. As you may know, Limerock is a premier oilfield operator and the parent company provides growth capital for energy, for the energy industry. The last subject I would like to address before turning this call over to the operator to answer questions is our low stock price. Our stock price hasn't been this low since 2021. Since that time, we have increased our reserves and production per share lowered our leverage ratio and are larger and more resilient company than we were then. The value proposition established with our current stock price is compelling and in my opinion represents a very opportunistic investment opportunity. And with that, we will turn this call over to the operator for questions.

Operator?

Thank you. We will now begin the question and answer session. And the first question will come from Bert Dons with Truist. Hey, good Ring, team. Good morning, Bert Ring. I saw your note on the new guide that it does not [indiscernible] low hanging fruit on the savings you might be able to find on the combined assets And then maybe how quickly do you expect to kind of fold in those those 40 new locations that you just added to the portfolio?

Yes, very good. And I'm going to allow a couple of other people to join me answering question because it's a very good one. So, our operations are literally right next door and the operations are very, very similar to what we're currently doing. One of the areas that we've identified that we believe represents an opportunity is and it relates back to one of the primary causes or costs in our operating costs and that's basically handling water. They have a saltwater disposal system over there and I believe they have 12 saltwater disposal wells It is underutilized especially compared to our system. If you recall Ring the past, Bert, we have had to manage our drilling program so that we don't produce too much water more water than our saltwater disposal system could handle. This provides opportunities there to not only combine the system, but also reduce operating the resulting operating costs. And Ring and then so if you don't mind, I'll just turn it over to Sean. Sean, we just visited the assets for the first time this last week And so what did you discover while you're over there, Sean? Yes, I think there's definitely some opportunities for synergies beyond just the water infrastructure.

We have an extensive oil infrastructure there as well. And also just taking advantage of our personnel, our office That is currently right there. So there's some synergies there as well. [indiscernible] point to kind of our track record, right? If you look back at the the FOG acquisition, the lifting costs and cost structure here is is somewhat similar. And we've been able to reduce our lifting costs in that FOG acquisition by over 22%. So in the forecast that basically outlines kind of those synergies. They're definitely there and we expect to capitalize on them.

Yes. The challenge we had, Berg, is we really didn't want get out over our skis and predict something before we had an opportunity to see what those potential savings would be, it's firsthand. But again, pointing out [indiscernible] identified. We have a track record of doing this and we're very confident. It could even result in just changing the pumper routes reducing number of people just to operate the wells. There's all kinds of opportunities there. And so we just didn't want to get over our skis and so we want to make sure that we just continue to use in our forecast the operating cost track record that Lime Rock had, but we do believe that the combined benefit of both areas now all being one, we'll see some cost reductions. Now going to the second part of your question about the inventory, Again, the playbook is going to be similar to what we did with founders. The first thing we want to do is get our arms around the operations, get those wells and operations integrated into our company and then start the process of drilling. So right now, we anticipate drilling some of the first Limerick opportunities in the second half of the year.

Alex, is there more you want to share there?

Yes, definitely. Hi, Bert. This is Alex. Just a few things about the inventory, much like we did at Ring, over the last few years, disproportionately the CBP horizontal to drilling very good performing horizontal wells, mainly due to the cost structures dropped a lot there. And so we're going to do the very same things on the Lime Rock assets, right? We've found a better way to drill the wells, stay more in zone, optimize the the frac And so and our cost structure has dropped about 15% to 20% over the last couple of years. So our new cost structure with a more improved completion and better landing zone should lead to really good inventory that will compete for capital today. [indiscernible] Yes. That goes back to some other things we've talked in the past, Bert.

Technology is our friend. The early parts, early stages of developing this in Andres horizontal oil play, both in Yoakum County and Andrews County and Gaines, primarily though in Andrews and Yocum. Technology has continued to roll on and we've learned how to develop higher recoveries from the same wells and the same lateral lengths. And so, yes, technology is our friend.

Think we answered your question, Bert. I think you sure didn't. I think you're doing the right thing. Keep the guidance conservative give yourself a chance to beat it there. And then on my second question, just on the M and A front, continue to fold in accretive bolt ons. I just want to get an update on maybe how you think about the volatility that we're seeing Does this maybe slow that down or you think it's the other way, maybe third party operators or maybe looking to sell some of their assets and shore up their balance sheets and maybe you'll be beneficiary of that Just the other side of that as well, you sold about $6,000,000 in those high cost [indiscernible] is there anything left at the company to [indiscernible] Yes. Currently, our inventory, we don't have more really to sell. But with every acquisition, [indiscernible] because no portfolio that you acquire will be a perfect set of assets. And so some of those assets fall into the bucket of non core or an area that or well types that we if you have undeveloped opportunities, they may not compete Not every economic opportunity, even in the Limelight acquisition is equally economic.

So if you look at some of the opportunities Ring the South, we've identified some of those, the the Barnett and the Devonian opportunities. Those are economic and they work especially at higher oil prices, but they're not as economically attractive as the San Andreas horizontal opportunities that we have offsetting our shaft Lake operations. Okay.

And so so that's kind of where we are there. I don't know if anybody else has anything else that you want to chime in.

Just follow-up on the first part. Just could are there more lime rocks out there or do you think the volatility in the market kind of affects your ability to find more lime rocks? Yes. Thanks for the reminder. The volatility is a challenge. But it's also complicated. The volatility tends to bring buyers and sellers' expectations closer together. So you're more likely to get a transaction done. The challenge for us is the lower the prices and if you're in a sustainably lower price environment, we're going to protect our balance sheet in our first priority is to strengthen the balance sheet, so we can enter the marketplace again. And so I'm not going to tell you that we're not going to do a deal because there's all kinds of creative ways to structure deals. But in a lower price environment, right after completing a transaction like we're hoping to do with this pending transaction. Our balance sheet won't be in strong enough for us to want to go out there and and keep going. So again, there will be a time period for us where we're going concentrate on restoring the balance sheet so we can get out there and get active when the next opportunities come up.

Think about founders Ring what we did in 2023, right? So it took us a little bit to integrate it and optimize it and you can see all the metrics there, but we cleaned up the balance sheet and strengthened it up to be able to do another So it's the same concept here. [indiscernible] Hey, you're welcome, Bert. And the next question will come from Noel Parks with Tuohy Brothers.

Hi, good morning.

Just a couple.

One, well, just could you just talk a bit about inventory quality and your footprint and what close bolt ons like Shafter Lake do for you? I'm thinking sort of from just a location standpoint, a I don't know if there's lateral length implications but it would just be good to hear about that. Okay. I'll give you a stab at that, Noel. I think those you're touching on subjects that We hear frequently from investors and shareholders And so as you know, we have had the benefit of of undeveloped locations that had superior economics. Especially when you compare it to many of of the plays that other people are pursuing in the broader Basin. Our St. Agris horizontal locations have competed very handsomely against some of the Devonian or the Delaware And Midland Basin wells that shale wells that people are drilling And so that's part of as a key component of our growth strategy. And you've heard me say this in the past, Noel, we would love to have that fifteen or twenty year inventory of undeveloped locations that have similar economics, but the fact remains we just don't have that. And so that's why we're keenly focused on making these acquisitions that meet specific criteria that along come with it undeveloped opportunities that compete in our portfolio.

One of the things that we've talked about and I and it's a change that has occurred over the last little over a year now we have been focusing on organically identifying and capturing these opportunities So we don't also have to do that with acquisitions. And so by identifying and capturing future growth opportunities organically, we're using our cash flow in our annual budget, so to speak, to capture them Although that additional capital could otherwise have gone to paying down debt, it is the most attractive way and the least costly way and opportunity presents itself as having the best economics going forward in terms of growing the inventory and capturing opportunities versus Let me add to that. Noel, I'd like to address a little bit of your inventory quality question. Actually put in a new slide on the Page 25 of the slide deck.

And that just shows year over year what our inventory looks like both on the horizontal basis and the vertical basis. So if you look at that year over year, we're still drilling really good horizontal wells. But for a reduced cost structure. 11% on horizontals, And then on the vertical sense, we actually increased substantially on well performance. That's mostly due to the Founders acquisition because we did that, the Founders acquisition brought in good and even better inventory yet we still reduced our vertical costs on a per stage basis by like 3%. So the inventory quality is still there and actually we have really good breakeven. So in these lower Yes. Our breakevens compare very favorably to our peer group. We have a great inventory. Is it a fifteen or twenty year inventory? No. But that's part of the strategy. That's part of what we're doing. We're out there looking for additional opportunities.

We like the central basin platform in the southern part of the shelf because that's where the playground we've been playing in for a long time. We know that playground. And we believe that there's a lot of opportunities. Again, going back to the investor presentation, the entire Central Basin platform has Conventional reservoirs that have been historically overlooked by other operators Ring are still being overlooked. And so to the extent that we can continue to pursue them and continue to build that inventory, I believe that we have a great opportunity ahead of us right here in the very playground that we've been playing. And And who knows, I can there could be a day in the future where we actually expand beyond our current playground. We'll see. Does that answer your question Noel?

Sure did. And Ring the deal slides, I saw you had a mention of Devonian potential and that sounds familiar to me. But I've only read a little bit about our net potential in your neck of the woods. I guess that's sort of in the the boundary between the Central Basin platform in the Midland Basin. So that was a new topic for me.

Yes. This is an area that's been developing. If you were to take a little bit of time to understand or study what is actually going on on on the eastern side of the Central Basin Platform. The Barnett play is a very successful play that's several companies are still spending money trying to acquire acreage in it. And so it does present really nice optionality, especially if we ever get back an environment where you're above $75 oil. And so above $75 oil, these things are very attractive some of the other things that are very interesting Ring you were to study the play that the operating costs for most of these Barnett wells are really, really low. So you have really, really high cash generating capacity. And so that's part of why we're so excited about that play. Now $65 oil, I don't believe we'd be able to allocate capital to those opportunities. But the bottom line is acquisitions like this provides optionality in the future, especially in an environment where prices rebound and are stronger. And just to so is there a learning curve that conceivably sort of just lower that threshold of of what you'd need to make Barnett's work at slightly better price.

Yes. No, I think already know the answer to that question. Yes, there's always a learning curve. And again, technology is your friend. We have learned that technology and climbing the learning curve associated with experiences figure out the best ways to drill and complete the wells is the key to taking what used to be Tier one acreage Tier two acreage and turning into Tier one acreage economics. And so yes, there is a learning curve But again, in a stage like you find us today and where we will be after we close Ring pending acquisition with Lime Rock. Our balance sheet and our current price environment right now it'd be very challenging for us to want to allocate capital to a development program where we know that we'd have to climb that learning curve. We would want to do that in a higher price environment.

Got it. Thanks a lot. Your next question will come from Jeff Robertson with Water Tower Research. Thanks. Good morning. Paul, just a follow-up on the organic growth concept. Can you talk about what Ring is doing with maybe some portion of your capital or at least with your G and G to identify additional organic growth opportunities on the existing foot footprint, whether it's new zones or applying different technology to an existing zone? Yes, very that's a good question actually. And so we are evaluating the very first step you do is you evaluate all the potential zones under your existing acreage. And as you map those various zones, you tend to map beyond your acreage. And so we're also looking at acreage near and close to where we currently operate. That's the easiest, simplest least expensive way to expand and identify and capture economic opportunities. And so we're starting there.

On our existing acreage Ring, we are very much aware [indiscernible] development opportunities both vertically and also horizontally And what's kind of interesting is the horizontal opportunities in areas that are have traditionally been for us anyway vertical. Development areas. And so we drilled a couple of wells this last year We have one of those horizontal wells that remained a DUC over the year. We're going to be completing that here this year, that DUC as well as we study the completion methods and again potential learning curve associated with that. But several other offsetting operators have been very successful pursuing these plays and that's part of the reason why we are now in a study mode, so to speak, to decide how we want to allocate our capital to the least risky or the least risk adjusted path forward to maximize free cash flow generation. And so but yes, we are very excited about that. There are quite a few opportunities in the southern part of our acreage, so in Crane County, also in Nekter County, where we can where we have been historically developing things vertically. But right now, we believe there's an there are opportunities to test and try horizontal technology to improve the capital efficiency, and increase the net present value, so to speak, of each each location, reduce the number of locations that are required.

So your surface footprint is a lot lower. Have fewer facilities, so you also have fewer emissions and so they're a lot easier to manage. It's just overall a much more efficient way to pursue Ring our future growth.

And then on the balance sheet, Paul or maybe Travis, can you talk about whether or not the Lime Rock assets will have a material impact on the RVL when you felt when you fold those in and I guess Ring redetermination? [indiscernible] we typically have a spring redetermination Right now, we have the room and liquidity on our balance sheet to close this transaction and we plan to do that. However,