Ring Energy Inc (REI) 2021 Q1 法說會逐字稿

Good day, and welcome to the Ring Energy First Quarter 2021 Earnings Conference Call. (Operator Instructions) 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 Dyes, our Executive Vice President of Engineering and Corporate Strategy; and Marinos Baghdati, 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 Q&A session.

During this session, we ask that you limit your questions to one and a follow-up, and then you can -- and re-enter 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 will now like to turn the call over to Paul McKinney, our Chairman and CEO.

Thank you, David, and welcome everyone to our first quarter 2021 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 allowed 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 is 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 2 weeks to complete.

Our first quarter financial performance was also negatively impacted by additional costs 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 4 Northwest Shelf Phase I wells we completed during the quarter. We also experienced temporary downtime during the quarter on the 9 wells we converted from electrical submersible pumps to rod pumps or what we call CTRs. Of those 9 CTRs, we completed 3 in Northwest Shelf and 2 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 we're facing their own challenges at home were able to return our operations back to 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 help to partially offset the impact of the storm as we completed and placed on production the 4 wells included in the Northwest Shelf Phase I drilling program. We saw collective production from the 4 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 4 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 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 the severe winter storm. The combined effect from all the factors I just described resulted in first quarter of 2021 adjusted EBITDA of $19 million that contributed almost $3 million 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 a sale and exchange of certain oil and gas assets in Andrews County, Texas with Vin Fisher Operating, Inc. for which we received a net value consideration of $2 million in cash. We utilized a portion of our free cash flow during the first quarter to pay down $7.5 million of bank debt and ended the period with approximately $46 million 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 first quarter of 2021, we generated revenues of $39.5 million and recorded a net loss of $19.1 million or $0.19 loss per share. Included in the loss were pre-tax items including $25.7 million 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 million or a $0.07 gain per share.

During the first quarter of 2021, we had $15.4 million in cash flow from operations, $14.5 million in capital expenditures, and $2 million in proceeds from the Vin Fisher transaction. The combined result was positive free cash flow of $2.9 million. For the 3 months ended March 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 first quarter of 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 beginning of 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 role went from an average of negative $0.35 in the fourth quarter to an average of negative $0.01 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&A session.

Echoing Paul's comments we are pleased to generate free cash flow once again during the first quarter of 2021 and further pay down debt of $7.5 million. We expect to continue to use much of our free cash flow for this purpose with the cadence of debt pay down primarily driven by market conditions and the timing of capital spending. As of March 31, 2021, we had $305.5 million drawn on our revolving credit facility and liquidity at $46.2 million, including $45.5 million available on the revolver and $1.7 million in cash.

Finally, despite the impact of a 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% to 8% that equates to 9,000 to 9,500 Boes per day with approximately 85% to 87% oil. For full year 2021, we anticipate an average lifting cost of $10 to $10.50 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 million to $48 million 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 CTR program in Northwest Shelf and the 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'll 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 our strategic vision.

If you recall during the fourth quarter and full year 2020 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 and 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 4 Northwest Shelf Phase I drilling program wells where all are placed on production in the first quarter with collective production results to date meeting or exceeding our original expectations.

We also previously announced our 3 well Northwest Shelf Phase II drilling program where we began drilling in early April and have since successfully finished those operations. Similar to our Phase I program, all 3 Phase II wells are anticipated to be completed on schedule and within budget. We expect all wells to be online by the end of 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 and 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 divesture of non-core assets, I thought I 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&A. Well, one thing is that we are starting to see asset sales entering the marketplace that we believe will 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 our 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 refinance -- 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 2 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 2 tests.

Now before we take your questions, I want to let you know about a change under way 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&D and other B&D -- BD services and as such, he will continue to assist us and others in the marketplace to potentially identifying and bringing 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 and -- management team and Board, and for that, I'm truly grateful and David is a true friend. We wish David great success in his new business endeavor and look forward to his continued 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&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 communications 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?

(Operator Instructions) Today's first question comes from Jeffrey Campbell with Alliance Global Partners.

Let me second the congratulations to David while we're at it. My first one bearing in mind the storm and the reduced volumes during the first quarter '21 what are you guys doing to catch up considering that 2021 guidance remains unchanged?

Tell you what, I'm going to turn that over to Marinos Baghdati, our Executive Vice President of Operations.

If we look at the total POE 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 90 -- around 9,400 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 II drilling program and the addition of the 200 Boes per day that is currently shut-in due to the purchaser in the CP area.

Okay. Great. I appreciate that color. And David -- I mean, excuse me, on the M&A front you just said that you opened up the data room for the Delaware Basin sale. I was just wondering the stronger oil prices and the increased industrial activity that we're starting to see how that -- you feel that supports the sale broadly and also, is it increasing specific -- I understand there's saltwater disposal assets that you're contemplating making available to third parties?

Well, yes, you're right on both accounts. But I'll tell you what I'm going to turn this question over to our Executive Vice President of Engineering and Corporate Strategy, Alex Dyes. Alex, you want to take that?

Yes. So yes, we've seen a renewed interest obviously, with the prices coming up and in the -- looking at more activity in the Delaware Basin saltwater 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 on to the market as of tomorrow and we'll run accelerated process and hopefully report back in the near future.

And our next question today comes from Neal Dingmann with Truist Securities.

Paul, my first one is for you or the team just -- you mentioned about just going after the highest sort of return locations order if you generate that free cash flow, can you talk a little bit about that? I guess sort of 2-pronged there, one, how many kind of locations you all identify when you're thinking about this right now, the portfolio still seems you have quite a few? And then secondly, how you plan to balance -- I'd like to hear a little more how you plan to balance that obviously, we want to see free cash flow, we'd like to see -- you mentioned in the earlier answer about keeping that production flat, so if you could talk a little on that?

Yes. Very good. And as you know, we do have a very handsome inventory of high rate of return opportunities not only in Northwest Shelf but although not quite as attractive but at these prices today our 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 and 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 4 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 going to remain disciplined. And so yes, we could pour it on but what that does it also accumulated debt and if prices were to fall back down to 2020 levels, I just -- I 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 our shareholders. I hope that answered your question, Neal.

No, that did. And then you all have -- I know in the past you've had some workover and various other opportunities to maybe not boost production but certainly mitigate the decline. I'm just kind of curious now in 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, Marinos.

Yes, we're continuing to push those through our workover and capital program and 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 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 1 year to the next or 1 quarter to the next is really going to be a function of what opportunities actually present themselves during that time period.

And our next question today comes from Noel Parks of Tuohy Brothers.

I also wanted to touch on the topic of inventory. We are enjoying these we are enjoying these oil prices in the 60s, rest of 2020 you -- one strip I think is in the 60s and I think 2022 is maybe $67 or something like that. So if -- with your location column in your slides you've sort of described the PUDs, probable and possible and the prospective locations 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 think about how many of those might find their way back graduate up a tier just in rough terms with this better pricing environment, and I guess, just connected to that do you think there's any fresh technical evaluation that would be required and looking at those at this point?

Well, I'm going to tag team that with Alex but before I get started, you got to remember our PUD inventory is something that is defined using as the SEC rules for determining reserves. Okay. So first of all, you have offset rules that kind of stuff, but the biggest thing that drives the number 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 price that we were required to determine them. So they may end up falling over into another category.

And so we do enjoy a very sizable inventory, both in the Northwest shelf and in the Central Basin Platform. I think it's -- I think any -- anyone that really understands how the economics and the mechanics work associated with the accounting and reporting and 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?

The only thing I would add is since we took over at 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 will 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 will 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 that price deck going into it?

Yes. And so we are -- that process is ongoing, so I would hate to really share too much. They have already shared with us the bank price deck that we'll be using 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 will 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.

And our next question today comes from [Mark Olemic], a private investor.

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 connected topic, is there -- I know a lot of money gets spent on the hedging, is that any rethinking given to the hedging strategy about the amount of money that gets spent on that or is that still going to stay the same?

Yes. If you don't mind, Mark, I'm going to take your 2 points in reverse order. So let's talk about hedges. Last fall when we entered in our hedges, that was in November that's when we started, 3 weeks prior to layering in our first hedge for 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 can ensure that we can 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 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 can 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 have been a higher price environment, we were willing to forgo the additional revenue just to make sure that we could guarantee the debt repayment and -- 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 asked 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 will 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 a opportunistic hedging strategy.

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 a 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 bring it down 1 or 2 of these asset acquisitions in an accretive manner that strengthens the balance sheet, increases the cash flows, 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 position where we no longer need to do that, that will be about the time where we can take that amount of cash flow, we can turn that into a 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 balance sheet, the quicker we'll get to the point where we're generating and delivering real returns to our shareholders.

Our next question comes from Jeffrey Campbell with Alliance Global Partners.

Great. Paul, first thing, when you're looking at the attractive assets as 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 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 costs 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 topic economics we would be interested in that as well. And we've worked all over North America, we know the basins in the United States wery 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. And if I'm going to add one more on to this theme, you're definitely emphasizing increasing EBITDA with acquired production when you're talking about leverage and so forth. I just want to...

Correct.

Are you concerned with adding inventory as well as production or if the price is right and the returns of rates you'd be willing to mainly acquire a producing asset without a lot of undeveloped upside?

There you go. So I would be willing to consider production, but typically there would have to be an advantage. We would have to have some kind of advantage in terms of being able to significantly reduce operating costs 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've also believed 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 is going to be a successful aggregator out here on the Central Basin Platform in the Southern shelf. We got time for one more.

Absolutely. Our next -- our final question from [Jack Yetu], a private investor.

Yes. In your $44 million to $48 million CapEx program for this year, which I know includes the money you spent in Q1 and after putting online the 3 Phase II wells later this month, are you guys planning to put online anymore wells between the end of May and the end of the year?

I'm going to turn that over to Marinos who will talk a bit more about our drilling and other capital programs.

Yes. Past the second quarter with the 3 wells of Phase II, once we bring those online, we have plans and dollars allocated in our capital budget to add 2 to 3 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 Travis.

Yes. So we added the 500 barrels this year. But in total, we've got 2,250, I believe. And we are also looking at another idea right now that we haven't put in place to unlock some upside potential in 2021. Ao potentially we could take the ceiling off of one of our callers and put 1,500 barrels per day for the balance of 2021 and push that out into 2022 and do a swap there would be higher than our average pricing that we have now. So that would add to that balance 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 heat that up.

So this kind of goes back to what we were talking about 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 or $35 and we didn't know when the pandemic-induced economic downturn that really causes a sharp downward pressure on worldwide oil prices at that point, we just wanted to make sure we could guarantee 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 the traders about finalizing that deal. And so you're going to see more of that going forward. But with respect to 2022, we're still studying that, we're still reviewing those with our Board and our Risk Committee. And so, we'll be announcing more on that as time goes on throughout the rest of this year.

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, and 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. I mean, 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 risks 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&A activity will also increase. We have full line of sight on growing this company and we'd like to ensure that we keep all of you as invested partners. And so, 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.