Ranger Oil Corp (ROCC) 2021 Q3 法說會逐字稿

Good morning, everyone, and welcome to the Ranger Oil Third Quarter 2021 Earnings Conference Call. (Operator Instructions) Please also note today's event is being recorded. At this time, I'd like to turn the floor over to the management team for the conference call. Please go ahead.

Thank you, and good morning, everyone. I am Clay Jeansonne, Director of Investor Relations for Ranger Oil Corporation. We are pleased today to discuss our third quarter 2021 operational and financial results and recent accomplishments.

With me today, Darrin Henke, our President, Chief Executive Officer and Director. Also joining us and available for our Q&A session are Rusty Kelley, our Senior Vice President, Chief Financial Officer and Treasurer; and Julia Gwaltney, our Senior Vice President of Development.

Before we begin, I would note that today, we will discuss certain non-GAAP measures. Definitions and reconciliations of these measures to the most comparable GAAP measure are provided in the company's third quarter earnings presentation and press release that can be found at www.rangeroil.com.

Our comments today will also contain forward-looking statements within the meaning of the federal securities law. These statements are subject to a number of risks and uncertainties that could cause actual results to be materially different from those forward-looking statements, including those identified in the risk factors in the company's most recent annual report on Form 10-K and quarterly reports on Form 10-Q.

So with that, I'll hand it over to Darrin to discuss our results and recent events. Darrin?

Thank you, Clay. We appreciate everyone joining today's call. The last several months marked an incredible period of positive transformation for the company. I'm so very proud of the many accomplishments our team made in such a short period.

In just over 4 months, we closed our highly accretive Lonestar acquisition. We strengthened our balance sheet and liquidity with our unsecured notes offering. We outperformed the midpoint of our third quarter guidance for both production and capital and generated $29 million of free cash flow, our eighth consecutive quarter.

We set numerous internal operational and efficiency records, and we rebranded the company to Ranger Oil. As mentioned, many strategic, financial and operational advancements have already been achieved this year. I'm even more excited about what the future holds for Ranger Oil.

I believe the positive momentum generated to date will continue next year and beyond. While our disciplined investment strategy continues with the 2-rig drilling program, next year, we will drill approximately 25% more lateral footage versus this year, yielding a highly capital-efficient program for 2022 that should generate mid to high single-digit production growth year-over-year.

With this disciplined capital program and operational efficiencies, coupled with the current commodity price environment, we expect the company's EBITDAX and free cash flow profile to materially accelerate in 2022 with current projections significantly exceeding $200 million of free cash flow next year, resulting in a leverage ratio of 1x or less being achieved in the first half of next year.

As we approach this goal, all potential options for accretive uses of free cash flow that maintain our strong balance sheet will be investigated for the benefit of our shareholders.

Lastly, we continue to see a significant opportunity for ongoing basin consolidation and seek to be a leader in this area. Numerous subscale operators in the basin create a robust set of potential acquisition candidates. As such, we look forward to evaluating additional targeted acquisitions that will further reduce per unit cost, expand margins, enhance returns and increase financial strength and market relevance. However, all targeted acquisitions would need to demonstrate substantial shareholder accretion along with maintaining our strong balance sheet.

As in the past, our strategy continues to remain squarely focused on long-term shareholder accretion, rigorous capital discipline, balance sheet strength, robust cash-on-cash returns and an unwavering commitment to operating in an environmentally and socially responsible manner.

Finally, I wish to express my gratitude and admiration of the entire Ranger team for their continued hard work and dedication. Without their efforts, this transformation would not have been possible.

So with that, we will open up the call to questions. Operator?

(Operator Instructions) And our first question today comes from Charles Meade from Johnson Rice.

I want to follow up on something you noted in your press release about legacy Ranger volumes being flat, 3Q to 4Q, about the -- and I think it was to work on some infield compression and things of that nature. Can you give us an idea, is that something that is -- you're going to wrap up in 4Q? Is that going to be the kind of thing that extends into early '22? And what will be the -- what do you expect to see as the payoff for all that work?

Yes. Good question. So we do anticipate that we'll be wrapping up those compression upgrades and other facility upgrades in the fourth quarter, really setting ourselves up for a great 2022. So we'll be lowering line pressures and adding to our gas lift system. So we'll have more gas, lift gas available for the wells that will be -- we've already drilled and then future wells.

Got it. So that should lead to higher oil rates down the line once the work is done, if I'm understanding correctly.

Exactly.

Got it. Okay. And then specific to 4Q, because I want to try to, I guess dial in as much as I can to expectations for what you're going to look like in 4Q as a baseline for how '22 is going to start out. Can you give a sense for what your completion schedule is going to look like in 4Q? And how that breaks out across legacy Ranger and more the -- versus the Lonestar assets? And really what I'm looking for is that how the oil/gas mix might shift in 4Q? And what that -- and the implications for '22?

Yes. So completion schedule in the fourth quarter will be running a consistent frac crew through almost all of the fourth quarter. And all of the work going on in the fourth quarter, both drilling and completion, will be on the legacy Penn Virginia assets. So we're tearing apart the Lonestar inventory and getting those wells in the queue, and we'll start drilling on those assets next year. But everything in the fourth quarter will be legacy Penn Virginia drilling and completion.

And our next question comes from Neal Dingmann from SunTrust.

Just had a question. I was looking now -- I mean I really like the slides and looking at Slide 10 now that shows all the sticks in that central area. My question now, I guess, Darrin, for you, now that you've been there a while, you've obviously drilled up quite a bit of this. Is now -- I guess the confidence fully that you've delineated this now from the upper, let's say, the Fayette area all the way down to Lavaca. And if so, maybe just talk a bit about how the economics might vary or maybe they don't vary between these? Are you just seeing a lot of commerciality there?

We do see, Neal, a lot of tremendous commerciality across the entire legacy at the central area position. This year, we've drilled some wells and the Emerald wells earlier in the year in the updip part the acreage, and those wells are performing very strong; very, very good returns. And we're laying out a great program in that area for really long laterals looking -- as we look to the future.

All through the central part of the field, we've had really strong well results. And then also up on the Northeast part of the field where we've picked up significant Lonestar and Rocky Creek Resources acreage earlier this year, really filled in some puzzle pieces and again, very strong well results in that part of the field as well. So really just confirmation of our tremendous inventory that we have here at Ranger Oil.

And then obviously notable the efficiencies you continue to get with the 2-rig program. Can you just discuss a bit again? The latest on that, I think the last you've talked about maybe 25% type efficiencies. And if so, when you and Rusty think about that, I know you don't have a full '22 plan out, but will most of that efficiencies just -- you'll continue? I guess what I'm getting at is will you see that through just more production upside with the same type of spend? Or would you be able to cut the spend? Or how do you guys think about taking advantage of that efficiency?

Yes. So what we've talked about is drilling with the same 2 rigs that we ran this year. Next year, we'll drill about 25% more total lateral footage with those wells. And so reducing -- that will help us keep our cost in check from a dollar per lateral foot basis that we complete. The production standpoint, we're going to grow production year-over-year, mid to high single digits. That's really an outcome of the program. What we're really trying to do, Neal, is design a very efficient program that we can execute with excellence, maintaining the 2-rig program and also a continuous frac crew, and we'll bring in an occasional second frac crew as needed.

(Operator Instructions) Our next question comes from Nicholas Pope from Seaport Global.

I was hoping you could expand a little bit, and I know it's still fairly early, but out of that kind of central core area where there's a lot of overlapping assets with the Lonestar additions, when you look at the acreage, kind of the further north and the further southwest, I guess what are the plans? What's the kind of the time line that you all are looking at to really kind of attack that -- the stuff that's really out of that central area and kind of what have you all been able to see so far in those areas?

Yes. So we have a slide in the deck where we show some synergies of the merger. And one of those is on Page 15, actually of the deck, where we're going to attack -- if you look at the map on Page 15, you can see where some Lonestar acreage fits perfectly, and this is in the central area, fits perfectly into the legacy Penn Virginia acreage. And we'll be able to drill longer laterals when we combine all that acreage position. So we're going to start developing in that area early next year. And so there's some great synergies in the central area where the Lonestar acreage fits very well with our legacy acreage and allows us to drill longer laterals and we'll have a more efficient program, and we're going to get after that acreage right away.

And is there any plan at this point, when you look at the stuff that's in LaSalle and Brazos County at this point? I mean where do we stand with those? That's the stuff that's a little further afield.

Yes. We're studying those areas and really understanding the inventory. Some of those areas, we need probably a little more acreage for critical mass. We're looking at ways to extend our lateral lengths by picking up additional acreage in those areas, doing -- looking at trades, things of that nature. Some of the acreage may ultimately not be core for us, and we'll look at doing what's best for our shareholders with that acreage as well, if it ends up not being core in the program. But the majority of it fits -- majority of the acreage fits in really well within our inventory, and we'll develop it as it makes sense as we go down the line, drilling our very best highest return wells first [on down].

And ladies and gentlemen, at this time, we'll be ending today's question-and-answer session. I'd like to turn the floor back over to Darrin Henke for any closing remarks.

Thanks, everyone, for participating on the call today. We've had a serious step change in operating and financial performance. We've transformed the balance sheet at 8 consecutive quarters of free cash flow, and we've begun initiation -- initiating and executing on our basin consolidation strategy. So thanks for participating, and we look forward to talking to you in the future.

Ladies and gentlemen, that does conclude today's conference call. We do thank you for attending. You may now disconnect your lines.