Bullish indicating open at $55-$60, IPO prices at $37
Introduction & Market Context
Ring Energy Inc (NYSE American:REI) released its Q1 2025 earnings presentation on May 8, 2025, highlighting the completion of its Lime Rock Resources acquisition while announcing significant capital expenditure reductions in response to lower oil prices. The company’s stock currently trades at $0.85, near its 52-week low of $0.78, despite management’s emphasis on consistent free cash flow generation and strategic growth initiatives.
The presentation focused on Ring’s successful closing of the Lime Rock Resources acquisition on March 31, 2025, which expanded the company’s footprint in its core Permian Basin operating areas. Simultaneously, management announced a 50% reduction in Q2 2025 capital expenditures, resulting in a 47% reduction for the remainder of the year, while maintaining near-term production guidance.
Quarterly Performance Highlights
Ring Energy reported Q1 2025 oil sales of 12,074 barrels per day, representing a 7% decrease compared to Q4 2024. Total (EPA:TTEF) sales reached 18,392 barrels of oil equivalent per day (Boe/d), down 6% quarter-over-quarter, with oil comprising 66% of the production mix.
As shown in the following quarterly scorecard, the company generated $46.4 million in Adjusted EBITDA (down 9% from Q4) while reducing capital expenditures to $32.5 million (down 14% from Q4). Notably, adjusted free cash flow increased 23% to $5.8 million despite lower production and commodity prices:
Lease operating costs increased slightly to $11.89 per Boe (up 6% from Q4), while realized prices improved to $47.78 per Boe (up 4% from Q4). The company’s debt balance increased to $460 million (up 19% from Q4) due to the Lime Rock acquisition, pushing the leverage ratio to 1.90x (from 1.66x in Q4).
Ring Energy emphasized its track record of generating positive adjusted free cash flow for 22 consecutive quarters, highlighting the company’s resilience through commodity price cycles.
Strategic Initiatives
The acquisition of Lime Rock Resources’ Shafter Lake and Midland Farms assets represents a significant strategic expansion for Ring Energy. The $100 million transaction closed on March 31, 2025, adding approximately 17,700 net acres contiguous to Ring’s existing footprint in Andrews County, Texas.
The following slide details the acquisition’s impact on Ring’s asset base, adding approximately 2,300 Boe/d of production (>75% oil), with a shallow 13% production decline rate and over 40 gross drilling locations:
The acquisition is expected to be immediately accretive, with the assets having generated approximately $31 million in LTM adjusted EBITDA with no drilling capital from the prior operator. Management highlighted the assets’ 59% EBITDA margin and sub-$40/bbl breakeven on San Andres inventory.
Ring Energy’s pro forma proved reserves following the acquisition increased to approximately 146 MMBoe, with the Lime Rock assets adding approximately 12 MMBoe with a PV-10 value of $160 million. The company’s reserve profile remains heavily weighted toward proved developed reserves (69% for legacy assets, 75% for acquired assets) and oil (60% for legacy assets, 71% for acquired assets).
Forward-Looking Statements
In response to lower oil prices, Ring Energy has significantly revised its capital expenditure guidance while maintaining near-term production targets. The company’s updated pro forma guidance reflects both the integration of the Lime Rock assets and the strategic shift toward capital preservation:
For Q2 2025, Ring projects total production of 21,500 Boe/d (including the newly acquired assets), with capital expenditures reduced to $18 million (down from $32.5 million in Q1). For the second half of 2025, production is expected to average 20,000 Boe/d with capital expenditures of $48 million.
The company has reduced its full-year 2025 capital expenditure guidance by 36% to $99 million, with 61% allocated to drilling, completions, and infrastructure. Despite the reduced spending, Ring maintains its focus on maximizing free cash flow, projecting $30-80 million in adjusted free cash flow for FY 2025 (at oil prices of $50-70 per barrel).
Management emphasized that the company’s shallow production decline rates, high operating margins, and long-lived reserves position it to deliver value despite market volatility. Ring has hedged approximately 1.7 million barrels of oil at an average floor price of $64.44/Bbl for the remainder of 2025 (47% of mid-point oil guidance) and 1.8 million barrels at $66.89/Bbl for 2026.
Competitive Industry Position
Ring Energy highlighted several distinguishing attributes that differentiate it from peers, including its focus on conventional Permian assets with shallow decline rates, high netbacks, and long-lived wells:
The company emphasized its lower production decline rate compared to peers, longer reserve life (18.7 years versus peer median), and higher oil weighting in its production mix. These factors contribute to Ring’s high operating margins, which management presented as a key competitive advantage:
With cash operating margins of approximately $28 per Boe (trailing twelve months), Ring positions itself as well-equipped to withstand commodity price volatility while generating consistent free cash flow. Management noted that these strong margins enable debt reduction and provide flexibility in capital allocation.
The company also highlighted its track record of strategic consolidation, having completed four acquisitions since 2019 that have increased net production by more than 3.0x. Ring continues to pursue accretive, balance sheet-enhancing acquisitions in the Central Basin Platform and Northwest Shelf areas of the Permian Basin.
As shown in the following slide, the company’s deep inventory of high-return drilling and re-completion locations provides a foundation for future development:
Ring Energy’s management team remains focused on maximizing free cash flow generation to strengthen the balance sheet, with a target leverage ratio below 1.0x. The company’s disciplined capital program retains flexibility to respond to changing market conditions while delivering competitive returns, positioning Ring to potentially return capital to stockholders in the future.
Full presentation:
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