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Capital Program and Efficiency Gains Contributing to Production Outperformance

On July 8, 2024, Ring increased its 2Q24 production guidance to 13.5-13.7 MB/d of oil (19.5-19.7 MBOE/d) from 13.0-13.4 MB/d of oil (18.5-19.1 MBOE/d) reflecting the continuation of outperformance exhibited in 1Q24 (Figure 1). Production volumes are benefiting from outperformance in Ring’s development program and increased operational efficiencies in the company’s base production. The midpoint reflects gains of ~2% Q/Q and 15% Y/Y. The Y/Y gain partially reflects the addition of assets acquired in the Central Basin Platform from August 2023. 1H24 production performance bodes well for Ring’s FY24 production outlook. Using the midpoint of 2Q24 oil production guidance, implied 1H24 oil volumes averaged ~13.5 MB/d, compared with management’s FY24 guidance of ~13.0 MB/d included in the May 6 earnings release. Management guided to FY24 total production of 18.0-19.0 MBOE/d on May 6. Management will update FY24 guidance to reflect the solid 1H24 production performance in early August coinciding with 2Q24 financial and operational results. Ring’s latest (May 6, 2024) FY24 oil production guidance range was 12.6-13.3 Mb/d. 1H24 average oil production of ~13.5 Mb/d is well ahead of the 12.95 Mb/d midpoint of previous FY24 oil production guidance. Debt reduction is one of management’s primary objectives. Ring reduced RBL borrowings by $15 million in 2Q24 to $407 million and has reduced borrowings by $48 million since the August 2023 closing of the Founders acquisition. The RBL borrowing base was reaffirmed at $600 million in the latest redetermination. At the end of 2Q24, $193 million was available under the facility. The production outperformance coupled with stable oil prices support management’s goal of pushing Ring’s leverage ratio lower and improving the company’s liquidity position. We suspect Ring’s capital program will continue to be constructed to maintain stable production allowing management to allocate free cash flow to further debt reduction. Management’s ultimate goal is to position Ring to return capital to shareholders. To put Ring in that position, we expect management to continue its pursuit of accretive acquisitions and a capital program geared toward maintaining production in order to grow the cash flow profile of the company, improve the leverage ratio, and generate sufficient excess cash flow to fund capital returns. Figures 2 to 4 detail our updated estimates based on Ring’s 2Q24 updated production outlook. Our cost estimates remain within the ranges in the May 6, 2024, guidance. We will update our FY24 and FY25 estimates to incorporate any outlook changes following the 2Q24 financial and operational results release in early August.