Ring Energy Inc., as part of its second-quarter 2020 operations update, said its average daily production rate is returning to pre-curtailment levels, it expects its 2020 capital expenditure budget to be $25-27 million, and it could restart its drilling and development program in early 2021.
On March 9, 2020, management stated in a release that the company had ceased all drilling activity due to the drop in commodity prices (OGJ Online, Mar. 10, 2020). In addition, beginning the last week of April, essentially all production, other than that associated with the company’s Delaware basin property, was curtailed. Production began to ramp up in early June as commodity prices improved, returning to near April levels by the end of the quarter.
In the first 2 weeks of July, production has approached 9,000 boe/d net and anticipates on-going improvement.
During the quarter, the company performed four conversions from electrical submersible pumps (ESP) to rod pumps—two in the Northwest Shelf (NWS), and two in the Central Basin Platform (CBP).
In the 6 months ended June 30, the company has drilled four new horizontal wells on its NWS asset. Over the same period, 13 conversions from ESP to rod pumps were performed (6 NWS, CBP).
“As we move forward with our rod conversion program, we continue to be encouraged by the lowering of our failure rates and overall expenses. Overall run times across the fields have increased dramatically. In addition, the lower costs to work on the rod pumped wells is leading to greatly reduced capital needs,” said Danny Wilson, executive vice-president and chief operating officer.
Net estimated production for second-quarter 2020 was 495,000 boe, or an average of 5,500 boe/d. June 2020 average net production was 6,968 boe/d. For the 6 months ended June 30, net estimated production was 1,486,000 boe, as compared to net production of 1,545,130 boe for the 6 months ended June 30, 2019.
Assuming no additional drilling or curtailments this year, the company anticipates 2020 annual production to decrease by about 20% compared to 2019, and a drilling program restart could begin in 2021, said Kelly Hoffman, Ring’s chief executive officer.
With the spring redetermination of its senior credit facility, Ring’s borrowing base was reduced to $365 million from $425 million. The outstanding balance has been reduced to $375 million from $388 million and the company expects proceeds of the pending sale of its Delaware property to further reduce outstanding debt (OGJ Online, Apr. 14, 2020).
“If improved commodity pricing continues through the 2nd half of 2020, and we realize a sustainable received price per BOE in the low to mid $40’s, we could drill 18-20 new horizontal wells in 2021, all drilled and completed within existing cash flow,” Hoffman said.
