Acquisitions Support Pathway to Strengthened Balance Sheet
We hosted a fireside chat on March 26, 2024, with Chairman and CEO Paul McKinney to discuss Ring’s strategy to grow the company in a disciplined manner. This report contains a transcript of the conversation, which can be accessed on demand. Link accessible in our full report. Ring combines an existing conventional-focused asset base in the Permian Basin consisting of long-lived, low-decline producing wells supported by a development inventory consisting of more than 450 opportunities. Management’s ultimate goal is to position Ring to return capital to shareholders through disciplined execution of its growth strategy. Producing property acquisitions play an integral role in management’s two-pronged goals of scaling the asset base and the balance sheet for future growth. Management targets conventional assets in Ring’s core areas of the Central Basin Platform (CBP) and Northwest Shelf (NWS) that add current production and inventory that immediately competes for capital. Asset rationalization resulting from the recent consolidation wave in the Permian Basin is expected to generate future acquisition opportunities. The 3Q23 Founders acquisition added oil-weighted inventory in the CBP, upgrading the company’s opportunity set. The performance of wells drilled and completed since Ring took control of the assets has exceeded management’s expectations, contributing to production outperformance in 1Q24. Oil production exceeded the high end of guidance by 5% in 1Q24. The FY24 capital program is geared to reinvest a portion adjusted EBITDA to maintain production, with the remainder dedicated to reducing leverage. Management’s FY24 production guidance is 18-19 MBOE/d (~70% oil/~85% liquids). Capital spending is expected to fall in the range of $135-175 million. Ring has generated positive adjusted free cash flow for 18 consecutive quarters. 1Q24 adjusted EBITDA was $62.0 million, a 6% Y/Y gain, and adjusted free cash flow was $15.6 million, a 48% Y/Y gain. 1Q24 oil production averaged ~13.4 Mb/d, up 6% Y/Y, while total production averaged ~19.0 MBOE/d, up 4% Y/Y. As of March 31, long-term debt totaled $422 million, the leverage ratio was 1.67x, and total liquidity was $179 million.Ring Energy is an exploration and production company that is engaged in oil and natural gas acquisition, exploration, development and production activities. The company's primary drilling operations target the Central Basin Platform in Andrews County and Gaines County, TX and the Delaware Basin in Reeves County and Culberson County, TX, all of which are part of the Permian Basin. The company principally sell its oil and natural gas production to end users, marketers and other purchasers that have access to nearby pipeline facilities. In areas where there is no practical access to pipelines, oil is trucked to storage facilities.
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