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Scaling Business Through Acquisitions & Development

Acquisitions are expected to remain a centerpiece of management’s three-pronged strategy to increase scale in the asset base, reduce outstanding debt, and ultimately position the company to return cash to shareholders. The Stronghold acquisition in 3Q22, followed by the Founders acquisition in 3Q23, added operational scale and inventory depth on the southern portion of the Central Basin Platform (CBP). Together with Ring’s Northwest Shelf (NWS) assets, the inventory provides a diverse set of horizontal and vertical development opportunities. Consistent performance from horizontal and vertical wells across the asset base contributes to Ring’s capital allocation model, which aims to balance maintaining production levels from a portion of cash flow and deploying the remainder to debt reduction. Management has laid out a $135-175 million capital program for FY24 that includes one horizontal and one vertical rig. The program is designed for maximum flexibility to adjust spending levels based on results and economic conditions. New well performance and efficiency gains in field operations contributed to record 4Q23 production, which averaged ~19,400 BOE/d (70% oil). Initial well results since Ring took over operations of assets in the Penwell area from Founders have demonstrated superior performance from other recent wells in the area. Proved reserves totaled ~130 MMBOE (63% oil, 81% liquids) as of December 31, 2023. Proved developed reserves accounted for 68% of total reserves. Based on SEC pricing, the PV-10 of proved developed reserves was ~$1.3 billion and the PV-10 of total proved reserves was ~$1.6 billion. Management estimates the current asset base includes more than 450 total gross development and exploitation locations. Our updated FY24 adjusted EBITDA estimate is $246 million based on average NYMEX reference prices of $79.19/bbl for oil and $$2.23/MMBtu for natural gas. Based on the midpoint of FY24 capital spending, our FY24 estimates suggest Ring could convert ~20% of adjusted EBITDA into $50 million of free cash flow, which our model uses to reduce RBL borrowings. Ring is trading at 3.0x and 2.7x our FY24 and FY25 adjusted EBITDA estimates. The company is trading at a 35% discount to its year-end 2023 proved developed SEC PV-10 value and a 50% discount to its total proved PV-10 value.