Jordan Blum, editorial director, Hart Energy: We are here at Hart Energy's A&D Strategies and Opportunities Conference in Dallas. I'm joined by Paul McKinney, the CEO of Ring Energy. Thank you so much for being here. We appreciate it.

Paul McKinney, CEO, Ring Energy: Thank you for having me. I really appreciate the opportunity.

JB: So you're big in the Permian Central Basin platform. It had been a bit quieter, [but] t's now starting to get more active and heating up a bit. Can I get you to take me through how things are evolving over there?

PM: Yeah. I joined Ring Energy in October of 2020, and at the time the Central Basin platform, the Northwest Shelf, was basically dominated by private companies. Not very many public companies [were] investing there. All the investments were occurring in the Delaware Basin and the Midland Basin. What we've seen over these last four years is incredible appetite to acquire assets in the Delaware and the Midland basins because of the huge resource there. Those resources are meaningful to these larger companies. They move the needle, so to speak. And so that's where all the investment's been. And so up until this summer, the central Basin platform, the southern part of the shelf has been basically left for us to acquire and grow in. We've been doing a great job there. We've grown more than double the size of our company in terms of reserves and production. We've improved our balance sheet from four times to one and a half times.

And so it's been a great place to grow. But now we're seeing more attention. This last summer, Apache sold a large package of assets for, as you know, $950 million is what they announced. They haven't announced who actually acquired that yet. But what we're seeing is renewed interest, and I think it'll be interesting to see how it plays out over the years. But I believe that there are more assets on the Central Basin Platform and the southern part of the shelf that are going to hit the market in the future. We're very interested in those assets. Hopefully we don't have to pay the same level that the Apache assets sold for because I think that they sold for a higher price than, well for sure, what we could afford. And so we'll see how that goes.

JB: Very good. So what are you looking for both on the buying and selling side?

PM: Okay, selling. When we make acquisitions, we evaluate those assets and those assets that have the lower operating costs and undeveloped opportunities that are competitive in our portfolio. We want to keep the assets that are higher [in] operating costs. [The ones that] don't have competitive undeveloped opportunities that meet our economic thresholds, well, we tend to peel those off. So, you'll see us do smaller dispositions before and after acquisitions to continue to reduce debt, improve our metrics and improve the financial returns for our shareholders. But we're always looking for assets to acquire. A&D has been our primary method of growing. And so our strategy has been centered around allocating just enough capital to keep our production as primarily oil production growing at a small single digit level, and then the rest of the capital we use to pay down debt and strengthen the balance sheet. So when we look at acquisitions, we're looking for assets that have undeveloped opportunities, that have economics that are competitive in our portfolio. And I think if you look at our financial over the last four years, we've demonstrated that the economics of the investment we're making are stellar and we're generating the type of returns that people are looking for. That's been the only avenue and the only way we've been able to pay down the debt and get our balance sheet in line like we have through constant attention to paying down debt and also the way we structure our deals, that has also had a big play in how we've strengthened that balance sheet.

JB: Like you said, you're also in the Northwest Shelf. I'm assuming, or it seems like it's just a matter of time before that even starts heating up as well. How do you kind of see that playing out from here?

PM: It's a great play. There is a couple of opportunities out there. We continue to invest there and we are trying to extend the play in certain areas. And so, there's a bit of an acquisition component out there. And there are other operators, both private and public, that are competing in that same area. When you have an area like this, it has such strong economics. And so right now the future is all about future drilling and completion technologies, primarily completion technologies. Drilling technologies also in terms of longer laterals and whether or not they actually are incrementally economic. Downspacing out there is a little different than what you've seen in the Delaware and the Midland basins in that the parent/child relationships that you see in those two shale plays, the children tend to be a little bit less economic than the parents.

Whereas what we found in the San Andres horizontal oil play, that's not the case. Oftentimes the children are more economic than the parent, and actually by drilling the children, the parent wells become more economic. And so it's a phase behavior phenomena that's occurring up there in Yoakum County, [Texas], that's kind of unique. That doesn't appear to be the same case in Andrews County, [Texas] where we're also drilling San Andres horizontal wells. The mechanism is a little different there. It's a little bit shallower. Wells cost a little bit less. Economics are equally superior. And so that's a real active play. And what we've learned now is that that technology not only applies to the San Andres now, we believe that it can apply to all the other different stack pays that are out there in the Central Basin Platform all the way up to the San Andres.

JB: Great. Well, thank you again so much for being here. We really appreciate it. To read and watch more, please visit online at hartenergy.com.

PM: Thank you for having me.

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