Expanding Central Basin Platform Core Area
Ring is pursuing a strategy to position the company to ultimately return capital to shareholders. Execution involves accretive acquisitions that generate free cash flow, which can be applied to the balance sheet to reduce leverage. Please see our June 22, 2023, Management Series Report “Conventional Path to Shareholder Value” for discussion of the strategy. The report can be found in our full report or on our website. In keeping with its strategy, Ring announced an agreement to acquire producing properties to expand its conventional core area on the Central Basin Platform (CBP) on July 11, 2023, for $75 million. Funding will be provided by borrowings on Ring’s RBL facility, which has a borrowing base of $600 million. Availability was ~$202 million on June 30, 2023... Ring provided updated 3Q23 and 4Q23 guidance reflecting a contribution from assets to be acquired and the Delaware Basin assets that were sold in 2Q23. The acquisition is expected to close around August 15, 2023... We have updated our estimates to incorporate the acquisition/divestiture impact based on management’s guidance. Our estimates suggest Ring could generate sufficient free cash flow in FY24 to lower the companies leverage ratio to 1.2x from 1.9x at the end of 2022.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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