Operations

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About Permian Basin Pure Play E&P

The Permian Basin is unique in its size, vast infrastructure, thickness of strata, and multiple producing horizons/benches, providing a variety of exploration opportunities to develop oil and gas reserves. As a result, the Permian Basin is the top producing basin in North America.

The Permian Basin produces approximately 4.5 million Bo/d—about 37% of the U.S. daily production of approximately 12.6 million Bo/d (EIA week ending 12/31/19).

Relationships

Over the years it’s been said that “good Permian Basin deals don’t make it out of Midland”. Although this statement isn’t completely accurate, it’s probably truer than not, and, as a result, management strategically located REI’s headquarters in Midland, Texas. With the clear majority of REI’s management team being from the Permian Basin area, and having built other successful companies here, their relationships run deep and continue to positively impact its ability to acquire assets and build its infrastructure.

About Northwest Shelf

Target Reservoir

REI acquired the Northwest Shelf (NWS) in April 2019 located in Yoakum County, Texas, and Lea County, New Mexico. Like the Central Basin asset, the NWS is targeting the San Andres formation, a “conventional shallow carbonate reservoir” at approximately 5,000’ (approximately 87% oil). The San Andres reservoir on the NWS is thicker and more consistent than the CBP San Andres, resulting in a gentler decline rate, boasts a higher rate-of-return (IRR), and higher return on investment (ROI’s) than the CBP. For this reason, REI has focused the majority of their 2020 development drilling on the NWS.

Acreage

REI’s leasehold position in Yoakum County, Texas and Lea County, New Mexico as of Q4’2019 totals 48,188 gross / 36,599 net acres. This gives REI an approximate inventory of 371 gross locations equaling an approximate 10-year drilling inventory running one rig.

Horizontal Success

At the time of acquisition, the NWS asset included 49 horizontal San Andres wells that had been drilled and completed by the previous operator. Upon closing, REI immediately spudded their first horizontal San Andres well and as of Q2’20 has drilled and completed 20 successful horizontal San Andres wells.

Infrastructure

The purchase of the NWS assets included 1,385 surface acres on which 15 saltwater disposal (SWD) wells were drilled and completed with permitted capacity of ~241,000 Bw/d. Other infrastructure assets in the purchase include 15 water supply wells with greater than 12,000 Bw/d of supply capacity, 5 frac ponds that are centrally located, and 3 caliche pits that provide all the caliche needed for road materials and new locations. This REI owned and operated infrastructure provides a significant savings in drilling, completion, and ongoing monthly operating costs.

Top Tier Returns

The benefits of horizontal drilling enable San Andres reserves to be economically accessed beyond traditional field boundaries at reduced development costs, have increased ultimate oil recoveries, and generate individual well Internal rate-of-returns (IRRs) that exceed an average of 98% (based on $40/bbl oil net realized price received) and includes ESP to Rod conversion costs. See page 11 of REI’s Corporate Presentation for the single well economics on a Northwest Shelf horizontal San Andres well.

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About Central Basin Platform

Target Reservoir

On the Central Basin Platform (CBP), REI is targeting the San Andres formation. The San Andres is a highly oil saturated “conventional shallow non-contiguous carbonate reservoir” at approximately 5,000’ and is primarily an oil-bearing formation (approximately 95% oil) that has been drilled and produced for over 90 years. Of the over 30 billion barrels produced from the Permian Basin approximately 40%, or 12 billion barrels, came from the San Andres reservoir. Although traditionally produced vertically, REI has focused on drilling the San Andres horizontally, resulting in enhanced rate-of-return (IRR’s) that exceed an average of 65% ($40/bbl oil net realized price received and includes ESP to Rod conversion costs). See page 14 of REI’s Corporate Presentation for the single well economics on a Central Basin Platform horizontal San Andres well.

Acreage

REI’s leasehold position in Andrews and Gaines Counties as of Q4’2019 totals 48,189 gross / 27,901 net acres of which approximately 26,800 net acres is within its horizontal footprint. This gives REI a significant drilling inventory of approximate 10 years.

Horizontal Success

After drilling and completing three successful horizontal San Andres pilot wells at the end of 2016, REI initiated a horizontal development drilling program on the CBP in early 2017 within its core development area of Andrews and Gaines Counties. As of Q2’20 Ring has drilled 116 total gross horizontal wells and operates 18 saltwater disposal wells (SWDs).

Infrastructure

To reduce disposal costs REI purchased approximately 100 surface acres on which to drill their own SWD’s to eliminate landowner royalties/fees. As of Q2’20 REI owns and operates 18 saltwater disposal wells (SWDs) with a permitted disposal capacity of 255,000 Bw/d with current volumes of 101,400 Bw/d. To reduce distribution and transportation costs REI also owns and operates 61 miles of water gathering pipeline, 58 miles of oil pipeline, 33 miles of gas pipeline, and an oil storage tank facility with a capacity of 4,000 Bbls and sales point.

About Delaware Basin

Target Reservoir

REI’s Delaware Basin asset is located in northern Culberson and Reeves counties, with production primarily from the “conventional” Delaware Mountain Group which includes the Bell Canyon, Cherry Canyon, and Brushy Canyon formations ranging in depth from 2,000’– 6,000’ respectively. Since acquiring the asset in June 2015, REI has drilled 10 successful vertical Cherry Canyon wells, recompleted 9 wells in different producing intervals, drilled five Brushy Canyon horizontal wells, revamped the existing disposal infrastructure and continues to enhance product takeaway capacity. REI believes the asset also has additional horizontal potential in both the Cherry and the deeper Brushy Canyon Formations as evidenced by the log and core analyses from recently drilled wells.

Acreage

REI’s leasehold position in Culberson and Reeves counties as of Q2’20 totals 20,219 gross / 19,998 net acres, providing a potential inventory of 676 vertical Cherry Canyon gross locations and 276 horizontal Brushy Canyon gross locations. Also noteworthy is all the acreage is held-by-production (no obligation to drill).

Horizontal Success

The success of REI’s first horizontal Brushy Canyon test well drilled in early 2018 resulted in three additional Brushy Canyon development wells being drilled in Q4’18.

Infrastructure

To reduce the disposal costs associated with the Cherry and Brushy Canyon production REI purchased 1,328 surface acres and drilled six saltwater disposal wells with permitted capacity of 95,000 Bw/d. To further reduce operating overhead and transportation costs, REI also owns and operates 39 miles of water gathering pipeline and 23 miles of gas pipeline.

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