Transcript : Ring Energy, Inc. - Special Call

Published: 2025-07-15 12:20:28 ET REI

Published on 07/15/2025 at 12:20 - Modified on 07/18/2025 at 06:21

Good morning. Thank you for joining us today for a fireside chat with Paul McKinney, Ring Energy's Chairman and Chief Executive Officer. I am Jeff Robertson, Managing Director for Natural Resources at Water Tower Research.

Before we begin, I would like to remind participants that today's discussion could include forward-looking statements as of today, July 15, 2025. Ring's disclosures regarding such forward-looking statements can be found under the Investor Relations tab of the company's corporate home page. We may refer to some slides from Ring's first quarter 2025 investor deck, which can also be found under the Investor Relations tab on Ring's home page.

With that housekeeping out of the way, Paul, I'd like to take a moment to welcome you and thank you for taking the time to join us today.

You're welcome, Jeff, and thank you for hosting this, and I'd like to also thank all of your audience for their interest in Ring Energy.

Just by way of a brief background, Ring is an exploration production company, whose assets are concentrated in conventional plays in the Permian Basin. The company closed a $100 million acquisition of assets on the Central Basin Platform in Andrews County, Texas from Lime Rock Resources on March 31, 2025.

First quarter 2025 total production averaged about 18,400 BOEs per day, including about 12,100 barrels per day of oil. The acquisition provided management with the flexibility to adapt Ring's development program to the prevailing market conditions and concentrate on debt reduction. Ring's latest outlook pegged the midpoint of second quarter 2025 total production at about 21,500 BOE a day and second half 2025 total production at about 20,000 BOEs per day.

Paul let's start with the recently acquired assets. The majority of those assets that were acquired from Lime Rock are adjacent to Ring's existing assets in the Shafter Lake area of Northern Andrews County. How do these assets enhance Ring's Central Basin Platform position in that area?

Well, in 2 ways. Number one, the proximity of those assets to our assets, and also the similarity. So they're very similar to the existing assets that we operate in that area. And so we were able to combine the operations and find efficiencies that led to lower operating costs, and we were able to do that on day 1.

This is one of the primary reasons we are focused on the Central Basin Platform and Northwest Shelf because we have strong operations there. We have assets, as you know, that we have been able to generate really strong returns with. And by combining existing operations that are very close, you spread out your field management team over more wells and more barrels, you're able to capture all kinds of synergies. We'll talk more about some of those synergies a little later. But the main thing is capturing those synergies really jump starts and really gives a great return to the shareholders, especially if you buy the assets right.

Oil accounted for about 75% of the total production on the Lime Rock assets, which is a little bit more than Ring's total corporate oil weighting. How does the production profile of these assets compared to the company's legacy assets?

Yes. So these assets are -- when you compare the assets that we acquired from Lime Rock to the average decline, for example, of Ring Energy, it's accretive. So they were a little over 13%, 13.5% decline, and as a company, we're about 22%. So that enhances, makes it easier to deliver returns to your shareholders. It reduces the capital necessary to maintain your production, reduces the cash required to grow.

And so the other thing you got to remember is that we don't -- the majority of our revenue comes from, if not all of our revenue here recently, comes from our oil. So we don't get a lot for our gas. So we're very focused on acquiring and developing assets that improve our oil percentage.

The asset or acquisition also added about 40 gross development locations to your inventory. Can you talk about how the economics of the new locations compared to your existing inventory and maybe fit into their -- into your capital program?

Yes. Well, again, because these assets are very similar, these assets are located in an area that Ring Energy is very focused on and has held now for the last several years, a very strong position in our capital spending program because of the returns. These 40 locations, and not all of them are San Andres horizontal oil well locations, but all of the San Andres horizontal oil well locations or nearly all of them are very, very competitive in our portfolio, driving very similar economics. And so they're immediately competitive in our portfolio.

And so -- we're looking for ways to build. As we've talked about in the past, we have the short and medium-term inventory taken care of. But the marketplace is rewarding companies that have long inventories, inventories of multiple years of drilling, 10 to 15 year. Up to now, Ring Energy hasn't really obtained that. We've had 5 years, 8 years kind of taken care of, but we haven't had the 10, 15 years taken care of it. So this acquisition helps us achieve that with very, very economic locations that are very competitive in our portfolio.

Can you walk us through the integration process now that you've owned this package for about 3 months' time and outline some of the cost synergy opportunities that you referred to earlier?

Yes, we can. So Lime Rock -- and we've already shared this with the public. The very first thing we did was combine the operations. And so we have lease operators out there going to our wells, checking the wells, keeping the wells operating properly. But when you expand in an area that is immediately offsetting your existing footprint, you can optimize. And so for example, they had 10 lease operators pumping their wells. We were able to eliminate 6 of them. So we immediately saw a reduction in the number of people necessary to operate the same assets. Their field leadership or supervision was duplicated because we already have that in place. So we eliminated the supervision and those associated operating costs.

But then there are several other things we're able to do. We talked about the combination of the saltwater disposal facilities. But we've also eliminated -- so because we were already operating in the area, we already had agreements and we were already working with certain service providers, we were able to take those same service providers and cover the same area. And so we've essentially eliminated anywhere from 1 to 1.5 roustabout crews that we have out there, making repairs, doing work, whatever is necessary.

We're also able to eliminate workover rigs. So they had essentially 2 rigs constantly working over, making repairs, replacing pumps, doing these types of things. And so we were able to eliminate those workover. Now we -- I think we increased our workover rig by another half a rig or something like that over the equivalent period of time. But essentially eliminated 1, 1.5 rigs. And so that is another area of savings.

Other things that we did was once we got into the details of their marketing agreements and compared that to our marketing agreements, we've already realized another $0.80 per barrel, for example, on selling of their oil. And so when we talk about combining operations and integrating, these are the types of things. There's other things like we compare their contract with the electricity supplier versus ours. And so whoever has the best electricity contract and lowest electricity cost, well, you tend to build your future operations to take advantage of those synergies and those lower costs. And so there's all kinds of ways.

And so I know the oil and gas industry has talked about synergies. But these are the types of things that you're able to do, and some of the things and most of these already, we've already captured with the integration of Lime Rock with us. And so I think the market is going to be pleasantly surprised to see how the operating cost of this company evolve over the next series of quarters versus what we use in the economics to acquire these. It's our experience right now with past acquisitions and is also the experience we're now realizing with the Lime Rock acquisition that our operating costs will continue to improve.

I'd like to touch on two things that you referenced. The first is saltwater disposal. Does the greater scale in this part of Andrews County add to your water handling capabilities, both for drilling, but also importantly, as everybody in the Permian Basin has to deal with produced water handling and I think -- and the disposal costs associated with it?

Yes. And so if you recall some of our past conversations, Jeff, we have used the drilling rig basically to help us optimize the utilization of the infrastructure. So in this area of Shafter Lake, we had and still do operate our saltwater disposal system. And so to minimize costs, what we would do is we would drill wells down here until we fill up that saltwater disposal system. And then we would move the rig away to another area to allow the wells to experience the natural declines, and then you build enough room in the infrastructure in the saltwater disposal system to take more water. So once you built up enough spare capacity, again, then you bring the rig back. And so we would do this so that we would minimize the investment in what we call nonperforming capital.

So the last thing you want to do is spend your money drilling saltwater disposal wells. You'd much rather drill oil wells that generate revenue. And so with the combination with Lime Rock, their saltwater disposal system that they operated was underutilized compared to its capacity. And so that's given us a runway now of additional capacity that minimizes our future capital investments necessary to continue to develop out here. And so it was a very nice add-on, very nice add-on.

I think to sum up the synergy notion, Paul, it sounds like from what you've said that the synergies that you are realizing and expect to realize in the coming quarters essentially will flow primarily through the operating expense line of the income statement and, therefore, flow directly to adjusted EBITDA and free cash flow.

That's exactly, right.

Do you anticipate that over time that will make this acquisition even more accretive than what you outlined at the time it was announced?

Yes. And I'm more excited today about the Lime Rock acquisition in terms of -- especially with respect to improving our operations, reducing our operating costs and capturing these types of synergies. We've talked about it. This deal improved -- and just in general sense, when you're focused like we are in the Central Basin Platform and southern part of the Northwest Shelf, when you increase your size as an operator out there, it improves your ability to negotiate with the local service providers. So these are the roustabout crews, the workover rigs and it allows you to improve the price we get for your product through marketing. And because we have more barrels now to market, you have more leverage and negotiating power with the purchasers because they want those barrels. We talked about electrical costs. There are just so many ways that becoming a larger, more significant increased scale operator, you have multiple ways of winning out there as you continue to operate.

Well, does some of that scale also play into how you think about future consolidation opportunities in that part of the Central Basin Platform to leverage some of those strengths that you talked about even more?

Yes. That's the key. That's a key component of our strategy. And I'm not going to say that we wouldn't consider acquiring assets outside of the Central Basin Platform or the southern part of Northwest Shelf. But that is an area we're currently focused on. If someone brings us some kind of an opportunity and it's competitive and it generates the financial returns that our shareholders have learned to expect from us, we would consider that. But right now, we're focused on the Central Basin Platform and Southern Shelf because of these synergies. It's a key component of our strategy.

We have learned that a lot of the operators out there are not applying the technologies to these conventional zones like we have. And I'm talking about the technologies that were originally developed for the unconventional shales. These technologies work really, really well here in the Central Basin Platform and is a key component of our future growth.

As I alluded to earlier, Ring updated its 2025 financial operating guidance in May to take into effect the acquired production, which gives some flexibility on the capital side to allow you to focus on debt reduction following the acquisition. Paul, how quickly can Ring adapt its operating plans to the changing economic conditions and some of the volatility we've seen in the market this year?

Yes. So that goes back to our contracting strategy with our service providers. And I'll just take drilling rigs as an example.

We have a 1 or 2 notice period to our drillers regarding our drilling contracts. And so we can essentially turn on a dime. We believe that volatility is here for the long-term. And -- Liberation Day kind of took us by surprise, but it emphasizes that we have to retain the flexibility to respond to market changes when the market changes occur.

So if you look at what happened, the weekend after Liberation Day, we met as a group on the weekend about our drilling program and where we were in the second quarter and how much money were -- we plan to spend. And so we believe at that time, and it's been reinforced all the way up until today, that this volatility, the current price environment has the potential of standing and staying around for a longer period of time.

And so we took immediate action. We immediately reduced our capital spending for the second quarter by 50%. And we were able to do that within a couple of days' notice. And so not many operators, especially those that are running these large pads where they're drilling multiple wells from a single pad, they don't have the ability to do that because once you're on the pad, you're not going to just stop those drilling operations.

And so that is one of the unique aspects of Ring Energy. We have the flexibility to respond in a moment's notice. And so within a rig, a well or 1 or 2 well notice, our drillers, we can make changes and do that kind of thing. So we'll see how it goes from here, but flexibility is a key component of our strategy as well.

Since we're only halfway through 2025 and 2026 is still a long way off, can you -- Paul, can you just share some high-level thoughts on what your thoughts around oil prices are? And then to the extent that you give thought to 2026, I know Ring does not have guidance for 2026, but can you outline for us over the next say, 18 months, different type of scenarios that you're thinking about and how that plays into your debt reduction goals?

Yes. And so -- for the -- right now, we have budgeted for the rest of the year, $60 oil, okay? And so every day, the price of oil is above $60, we're going to enjoy that additional cash flow. But at $60, we believe that even though it is a lower price environment, by adjusting and having the flexibility to adjust our capital spending program, we believe we'll pay down as much or more debt than we originally planned with the original budget we came out at the very beginning of the year, and then we were assuming $70, so a $10 difference in the oil price. But now we're focused on paying down debt to a higher degree.

So basically, Liberation Day, being the surprise to us that it was, it reinforces the need to have a strong balance sheet. So in my opinion, if you compare us to our peers, our leverage ratio is at the high end of our peers. We don't want to be at the high end of our peers. We want to be on the lower end of our peers.

And so we're taking advantage of this year, even though the prices are lower than we were originally anticipating, we've decided to emphasize debt repayment to a much higher degree. And so we still plan on having the Lime Rock acquisition paid off in 3 or 4 quarters, even at the lower prices. And so now I'm not -- I don't have the ability to predict oil prices. And if I was, I'd probably be in a different business.

I believe the volatility is here. If you look at the forecast that several very prominent prognosticators out there are publishing, some say that we could still see $50 price or a $5 handle on the front of our oil price. And so we are prepared for that.

So if you go to our first quarter earnings call presentation deck, on Page 9 there, we have some forecast of what this company could do at various different prices. So on Page 9, in the upper right-hand quadrant of that slide, we have a series of bar charts highlighted by saying maximizing 2025 estimated adjusted free cash flow. And so we show what our adjusted free cash flow was in 2023 and 2024 and what 2025 could be like at various different price cases. And so you can see $50, $55, $60, $65 and all the way up to $70 and the level of adjusted free cash flow. And also, we also reflect our adjusted free cash flow yield there.

And so as you can see, with our adjusted capital spending program that we adjusted responding to Liberation Day, we still have the ability to pay down debt. We have a considerable amount of adjusted free cash flow, and our free cash flow yield is very handsome at those various different prices. And so I encourage our shareholders to go back and look at that.

If we shift gears a little bit to the balance sheet and leverage metrics that you talked about, I know that improving Ring's leverage metrics and positioning the company to deliver shareholder value have really been hallmarks of your strategy since you and the current management team took over in 2020. How does the Lime Rock acquisition play into that?

And then as a second notion, you talked earlier about the 13% natural decline rate on those assets. And I think Ring's total corporate PDP decline rate at the end of the year in one of your slides you show is around 22%. But can you talk about how the asset base and how those characteristics fit into your strategy to deliver value and strengthen the balance sheet and give you the flexibility to adapt to some of the volatility that you outlined?

Yes. So the lower the decline rate, the less -- the lower the capital intensity is necessary to maintain your production. And so it requires us to spend less dollars to maintain our production, maintain our liquidity and deliver the returns to our shareholders. And so the best way to describe the Lime Rock acquisition is to compare it to another very similar acquisition we did a couple of years ago, the Founders acquisition.

So on Page 26 of our same first quarter earnings release, we've done a summary of the Lime Rock acquisition and what it did for the company. And so it did several things for us. On a pro forma basis, the company -- we were able to grow our net production, and we're also able to reduce our debt. So we paid off the Founders acquisition as a pro forma company in essentially 4 quarters.

And so we acquired it in the third quarter of 2023. And by the time we reached the third quarter of 2024, we were at -- we were $5 million less debt than we were that quarter before we made the acquisition. And so -- and then what we were left with was we had an additional 2,800 barrels a day of production at the end of that time period, which accelerated our ability to pay down debt.

And so when you look at the asset as an individual set of assets, the Founders acquisition, we improved our production by 38%, we lowered our operating costs by 20%. And we reduced the CapEx or the drilling and completion costs necessary to drill wells out there by 28%. And we increased the efficiency of our completion. So our 90-day cums on a per well basis increased by 24%.

And so overall, the reserves that we bought with Founders, we had increased our reserves by 46% from the time that we made the acquisition. Well, these may not be the exact same types of metrics you're going to get from Lime Rock, but Lime Rock is very similar, and we have already shown that we've been able to reduce our LOE. We just don't have enough track record to tell you for sure how much of a percentage that is. And we're continuing to find ways to reduce drilling and completion capital. They did not have a long history of drilling wells right up to the point of selling these assets. So that comparison may not be the best or an equal one either.

But the bottom line is Lime Rock is so much like Founders. It's going to have a tremendous impact to the pro forma company. And different from Founders and Lime Rock is the post-Liberation Day environment that we find ourselves in. And so what we're doing instead of trying to increase the production out there on these assets, we're really trying to maintain production out there on those assets and take advantage of the additional production to reduce our capital spending, so we can emphasize debt reduction. And so that's kind of it in a nutshell.

But the 2 acquisitions are extremely similar in so many different regards, and it's going to be a really good post-appraisal to share with our shareholders a year after we've owned these assets.

Am I hearing you right, Paul, that despite oil prices having gone from, let's call it, the mid-70s down to the mid-60s, mid- to upper 60s, since Ring closed the Lime Rock deal, you still anticipate that that acquisition will leave the company in a strengthened position despite the oil price decline?

That's right. That's right. So if you look at the acquisition, first of all, we bought it at the time for less than a PV-10 value of the proved producing assets. So the undeveloped opportunities basically came with no cost. We have now demonstrated that we are reducing operating costs out there considerably. And on our existing assets because of the combination with a larger footprint, we've even been able to lower the operating cost on our existing assets as a result of the acquisition.

And so -- so the synergy capture is real, and it generates real returns for our shareholders. And so although oil prices are low, I'd much rather have the higher oil prices because these synergies that we've captured -- and we were going to capture them no matter what the oil price environment was.

But again, I don't believe that although the oil price may have fallen, the acquisition of Lime Rock is still a great opportunity for us. It continues to allow us to pursue our strategy of growing in the Central Basin Platform, capturing these synergies, delivering lower operating costs and continue to sharpen the saw, so to speak.

You talked about -- or we've talked about volatility and especially as it pertains to your leverage goals. Just as a corporate strategy, how do you and the Board think about managing the balance sheet to withstand price volatility?

Yes, the best way to withstand price volatility and have a strong balance sheet, okay? And so leverage ratio is a term that is used commonly in our industry to report back on the health of a company regarding its debt.

And so -- but leverage ratio is more than just the amount of debt that you're carrying on the balance sheet. There's also a benchmark that utilizes the trailing 12 months of EBITDA, and EBITDA is oftentimes dictated by oil prices. So there's a component that we don't control in the leverage ratio, right? And so that's why I like to compare absolute debt levels to market cap and some other things.

But strengthening your balance sheet is the best way to withstand the volatility in the marketplace. That's also the reason why after Liberation Day and the additional volatility that pushed into oil and gas prices worldwide. We felt leverage and debt reduction, and our balance sheet has always been a really high priority. But because of that unexpected turn in terms of volatility, we decided we were going to emphasize debt reduction over growth.

And so that's where we are today. And we'll continue to be that way. If oil prices recover back to $75 or even $80, you're probably not going to see us change our capital spending plans for the rest of the year because we really think that the best thing for our shareholders right now is to reduce our leverage ratio. And our target is to get below 1. We won't be able to achieve that this year just simply because of product prices, and the trailing 12 months EBITDA won't allow that. But that's not going to change the fact that we'll probably exit this year, and if not -- upon the exit or early into next year, we'll be at or below the same debt levels we were at before we did Lime Rock.

I'd like to touch on the credit agreement. In June, Ring announced a credit facility borrowing base was reaffirmed at $585 million under its $1 billion senior secured credit facility and that the term was extended to June 2029 from August 2026. The new agreement also reduced the applicable pricing margin by 25 basis points and named Bank of America as the new administrative agent.

At the end of the first quarter, Ring had about $460 million outstanding on the facility. Paul, as you all went through the process of renewing the credit agreement, did you notice any changes in the bank market through that work?

Absolutely. And the one keyword that you can use to describe the environment is uncertainty. We were planning to do this. We knew that the existing credit facility we had was going to go current in August of this year, so we needed to either amend and extend or negotiate a new credit agreement this year. And so our plans were -- and this was before Liberation Day occurred. Our plans were to launch that process early and get it out of the way.

Liberation Day brought in a lot of uncertainty. And so while we were trying to negotiate an amendment and extension of the facility we had, all of the banks were going through an internal reassessment of really how do they need to position themselves, what price decks should they use. All this uncertainty really did affect things. And I was disappointed in some regard that Liberation Day got in the middle of all of that because I think it would have been a lot easier to negotiate a deal.

But I think in the end, we ended up negotiating a really handsome deal for our shareholders. We gave up about $15 million worth of liquidity to end up at a slightly lower pricing grid, as you pointed out, 25 basis points, which means that at the same debt levels, we're now paying lower interest expense. And that's great for continuing our quest of improving the balance sheet. So the lower the interest expense, the more debt -- more cash is going to be available to pay down debt, and it just compounds, right?

And so now I will say this, though. There are other aspects of the current oil and gas industry. I mean, through all the consolidation that has occurred over the last couple of years, that has allowed us to stand out. So we were able to attract larger, bigger banks to our credit facility.

And so Bank of America is part of our syndicate, Citibank joined our syndicate. We're very grateful for both of those -- both banks to join our syndicate. And so I think it also says a little bit more about Ring Energy, our assets and our management team that these larger banks think highly enough of us to join our syndicate, and they are there to help us grow. And so that should be a great sign to our shareholders.

Paul, I know RBL facilities frequently have hedging requirements. Did the updated agreement include any changes or any new hedging requirements for Ring?

No, they're identical. And so we're generally required to have 50% of our next 24 months hedged. There are certain conditions where we can reduce the hedging requirements for the last 12 months of that 24-month period, but that will require that we get down below 1.25x leverage, and our utilization has to be a certain point. [ You'll see these ] details there in our credit facility. But overall, there are actually no changes to our hedging requirements with the new facility.

Warburg Pincus has been systematically selling shares that they acquired in 2022 when Ring acquired Stronghold. I think as of the last filing that I saw, they still owned about 20 million shares. Without sifting all the way through the credit agreement, Paul, is there anything in the agreement that -- are there any provisions or limitations on Ring's ability to repurchase those shares if you had -- if you desire to or repurchase some of them?

Yes. So all of that remains essentially the same. We do have -- there's a bucket in there called restricted payments. And under certain conditions -- those conditions have not changed. We're not in a position right now to buy back shares. And I'm not sure that with our leverage being where it is, our balance sheet being where it is, I don't believe our shareholders would want us to take on more debt to buy back shares regardless the fact that, in my opinion, right now, the way our stock is trading, it's an incredible investment opportunity for anybody to pick up those shares.

So free -- the priority for free cash flow is still 100% toward debt reduction, right?

Yes. So maintaining our production at adequate level to retain our liquidity with the banks, and then every other dollar available goes towards paying down debt. And so this year, unlike the last couple of years, we were striving to organically grow. And so if you go back and look at 2024, we did grow organically. We're deemphasizing the growth and emphasizing to a higher level of degree debt reduction and strengthening the balance sheet.

Ring has closed 4 acquisitions since 2019 for just over $900 million. Whether you're in the market or not, Paul, can you just give us your take on the state of the acquisition market in the areas of the Permian Basin where Ring sees the best opportunity?

Yes. So currently -- and it kind of goes back to that word uncertainty, right? Sellers that have assets that they would like to sell really don't want to sell at $60 oil. And even though I'd love to buy them from $60 oil, a lot of them just -- so there's not the motivation on the seller's part to bring assets to market unless they absolutely have to.

And so that stands in the way. So until you get back above the $70 threshold, I think $75 is a really sweet spot because buyers can buy and sellers are willing to sell. And so the current state of the acquisition market right now is this uncertainty has put potential opportunities that could hit the market, put them on hold.

And so from my perspective, because I'm really focused on reducing debt, that's fine with me. We're still out there looking. We're still negotiating with parties that we believe have assets that we'd like to acquire. But I think the momentum in the acquisition [ anti-market ] right now, has slowed down as a result of the uncertainty. When that uncertainty goes away, I can promise you, you'll see a new acceleration of transactions and people out there more willing to do deals.

Paul, you've talked in recent quarters about increasing the company's exposure to internally generated growth opportunities. And I think some of that has to do with the scale that you all have added through the acquisitions over the last several years. Can you share your thoughts on how Ring's appetite may have changed as the asset base has grown?

And then secondly, with the capital program that was reduced earlier in the year, are your technical teams spending a lot more of their time trying to high-grade and identify new opportunities on the existing assets that could further expand the inventory?

Yes. And so our appetite for organic growth has only slowed down as a result of our renewed focus on reducing debt. We believe organic growth is going to continue to be and it's going to -- over time, you'll see this over quarters and years, not something you'll see overnight. But you're going to see that our organic growth is going to command and deliver a larger component of our overall company growth.

And so we're very interested in organic growth. So our appetite for it hasn't changed at all. But right now, with these oil prices the way they are, we're only drilling the opportunities that have the highest rates of return. Those high rate of return opportunities have very little uncertainty, okay? So when you start trying and testing some of the ideas on organic growth, you're going to naturally incur more risk. And so right now, we're going to stay away from some of that.

Now we're still going to do some still because some of these opportunities just look too good, and they have the ability to increase your undrilled inventory for a very little capital because you already own the acreage. And so some of these zones that we have, we haven't tested. And so we're going to continue to do that. We'll actually do some of that even this year, even in a reduced capital environment, just so because the potential is just too appealing. And so we'll see how that goes.

But organic growth is going to increasingly be part of this company's growth over time. And this year, not as much as we originally planning at the beginning of the year, just simply because of the cash flow requirements and our renewed interest in paying down debt.

But I'm very excited about testing because on our existing acreage in areas that we've been pursuing, for example, San Andres, and other areas where we've had these really inexpensive vertical wells with stacked pays, and we've been able to generate really good returns, there are untested opportunities out there, untested zones. And doing the homework on those, I think that that's going to lead to increased value for our shareholders on the existing footprint that we have. And so that will be borne out over the next multiple quarters and even years as time goes by.

Paul, I'd like to just bring us to a close today and have you summarize your thoughts on Ring's flexibility, maybe in the -- especially in the wake of the Lime Rock acquisition, to really adapt its business plan to volatile commodity prices and with the goal of building lasting value for the company.

Yes. And so that encapsulates almost everything we've talked about today. Retaining the flexibility in your go-forward drilling plans and operating plans to respond to the volatility we see in the marketplace is important, especially for a company as the size that we are.

And so -- and I don't think -- even when we get our debt on our balance sheet and we get our balance sheet in the condition that we want it, it's still not going to change the fact that our shareholders expect us to respond to the changing conditions in the marketplace to generate returns.

And so we have long-term goals to get our leverage ratio down, get our -- strengthen the balance sheet, achieve the size and scale that's meaningful, so that we can sustainably deliver a real capital return to our shareholders. Our long-term goal is to eventually put in a dividend of some kind.

And so we've got a few things we've got to get out of the way first. And all of that basically focuses on being responsive to the marketplace, retaining the flexibility in our operations and then also being open to the opportunities that meet us on the Street. So if an opportunity comes along that really fits our strategy, we will do whatever it takes to take that deal down.

And so if we do incur additional debt after we've paid down debt, it will be because we have a short sight to a quick paydown. And so the key is generating debt-adjusted per share value to our shareholders. And we believe that our strategy does that over the long-term. And I believe that, in a reasonable amount of time, we'll position this company to deliver a strong capital return to our shareholders. And so that's the strategy in the long-term and the short term. It all kind of goes together, and flexibility of being able to respond to the marketplace is kind of a key component of that.

Paul, I'd like to thank you for joining us today. Look, it sounds like we'll get an update on some of the synergies when Ring announces its second quarter earnings here in several weeks in early August. So thank you for taking the time.

Hey, you're welcome.

I'd like to thank participants for joining us for today's fireside chat with Paul McKinney, Ring Energy's CEO. Our research on Ring Energy can be addressed -- accessed from our website, which is www.watertowerresearch.com.

The views expressed in this fireside chat may not necessarily reflect the views of Water Tower Research LLC and are provided for informational purposes only. The fireside chat may not be redistributed or reproduced without the written consent of Water Tower Research and should not be considered research or a recommendation. WTR is an Investor Relations firm, not a licensed broker, broker-dealer, market maker, investment bank, underwriter or investment adviser. Additional disclaimers can be found at watertowerresearch.com.

Paul, once again, thanks for joining us today, and we look forward to another one of these fireside chats in the not-too-distant future.

Jeff, thank you, and thank you to all your audience for your interest in Ring Energy. We look forward to that next chat.

Thank you.