Business Overview and History
Ring Energy, Inc. is a growth-oriented independent oil and natural gas exploration and production company based in The Woodlands, Texas. The company is focused on oil and gas development, production, acquisition, and exploration activities in the prolific Permian Basin of West Texas. Over the past several years, Ring Energy has executed a strategic plan to consolidate its acreage position and optimize its operations in this premier hydrocarbon-producing region.
Ring Energy was founded with the goal of acquiring and developing oil and gas properties in the Permian Basin. The company's operations have been primarily focused on two core areas within the Permian: the Northwest Shelf and the Central Basin Platform (CBP). In 2019, Ring significantly expanded its footprint by acquiring properties in the Northwest Shelf, consisting of 49,750 gross acres (38,230 net acres) in Yoakum County, Texas and Lea County, New Mexico.
Over the years, Ring has faced several challenges, including managing commodity price volatility and navigating the seasonal nature of the oil and gas industry. In 2020, the company recorded a substantial $277.5 million impairment of capital assets due to a sharp decline in commodity prices. To mitigate these risks, Ring has focused on building a portfolio of low-decline, high-margin production assets and maintaining an active hedging program.
The company has also had to contend with an evolving regulatory environment, particularly concerning emissions and environmental requirements. This has necessitated investments in infrastructure and operational improvements to ensure compliance and minimize environmental impact.
Despite these challenges, Ring has continued to grow and evolve its business through strategic acquisitions and operational enhancements. The company has consistently worked to optimize its operations and capital allocation to address seasonal fluctuations and market volatility. Ring's focus on generating free cash flow and strengthening its balance sheet has been crucial to its progress over time.
In 2022, Ring completed a significant acquisition in the Central Basin Platform, adding approximately 37,000 net acres to its portfolio. This acquisition, along with others, has been instrumental in expanding the company's inventory of drilling locations and enhancing its operational efficiency.
Financial Performance and Liquidity
Ring Energy has demonstrated a solid financial performance in recent years, despite the inherent volatility in commodity prices. In 2024, the company reported record full-year production of 19,648 barrels of oil equivalent per day (Boe/d), a 9% increase over 2023. This growth was driven by the successful execution of the company's drilling program, which included the completion of 43 operated wells (22 horizontal and 22 vertical) during the year.
For the full year 2024, Ring reported revenues of $366.3 million, an increase of 1.5% compared to 2023. The company's net income for the year was $67.5 million, or $0.34 per diluted share. Importantly, Ring maintained strong capital discipline, with total capital expenditures of $151.9 million for the year, slightly lower than the $152.6 million spent in 2023.
The company's focus on cost control and operational efficiency has been evident in its all-in cash operating costs, which declined by 2% on a per-Boe basis in 2024 compared to the prior year. Ring's Adjusted EBITDA for the full year 2024 was $233.3 million, despite a 7% reduction in realized prices.
Ring's balance sheet has also strengthened in recent years, supported by its disciplined capital allocation and debt reduction efforts. As of the end of 2024, the company had $385 million in outstanding debt under its revolving credit facility, down from $425 million at the end of 2023. This debt reduction, combined with the company's year-end 2024 liquidity of $217 million, has positioned Ring to be more resilient in the face of potential commodity price volatility.
In the most recent quarter, Ring reported revenue of $83.4 million, a 7% decrease compared to the prior year quarter, primarily due to a 4% decline in realized oil prices and a 2% decrease in production volumes. Net income for the quarter was $5.7 million, representing an 83% decrease compared to the prior year quarter, mainly due to a $31 million swing in derivatives gain/loss.
The company's financial position remains solid, with a debt-to-equity ratio of 0.45, cash on hand of $1.87 million, and $215 million available under its $600 million revolving credit facility. Ring's current ratio stands at 0.48, while its quick ratio is 0.44, indicating a relatively tight liquidity position that requires careful management.
Strategic Acquisitions and Organic Growth
The transformative acquisitions of Stronghold and Founders have been key drivers of Ring's growth and evolution. These deals have not only expanded the company's acreage position but have also provided it with a substantial inventory of high-quality, low-cost drilling locations in the CBP.
The Stronghold acquisition, completed in 2022, added approximately 37,000 net acres to Ring's portfolio, primarily in Andrews and Crane Counties, Texas. This acreage is situated directly adjacent to Ring's existing core operations in the CBP, allowing for operational synergies and efficiencies. The Founders acquisition in 2023 further strengthened Ring's position in the region, adding 64,890 net acres in Ector County, Texas.
In addition to these strategic acquisitions, Ring has also focused on organically growing its reserve base and undeveloped inventory. In 2024, the company was able to organically add 16 million barrels of oil equivalent (Boe) to its proved reserves, more than offsetting the 7.2 million Boe of production during the year, as well as the 1.2 million Boe from non-core asset sales and 3.2 million Boe in reserve reductions due to lower commodity prices.
Ring's total proved reserves as of the end of 2024 stood at 134.2 million Boe, with a pre-tax PV-10 value of approximately $1.5 billion. Notably, 69% of these reserves were classified as proved developed, highlighting the quality and maturity of the company's asset base.
The pending acquisition of Lime Rock's CBP assets, announced in February 2025, is expected to further enhance Ring's position in the region. The $100 million transaction, which includes $80 million in upfront cash, a $10 million deferred payment, and up to 7.4 million shares of Ring common stock, will add approximately 17,700 net acres adjacent to the company's core Shafter Lake operations.
Operational Efficiency and Sustainability
Ring's focus on operational excellence and sustainability has been a key component of its strategy. The company has implemented various initiatives to optimize its operations and reduce its environmental footprint.
In 2024, Ring drilled 43 operated wells (22 horizontal and 22 vertical) for a total capital expenditure of $151.9 million, representing a substantial increase in capital efficiency compared to the prior year. This was achieved through the continued application of advanced drilling and completion technologies, as well as the integration of the Stronghold and Founders assets.
The company has also made significant investments to upgrade its infrastructure and reduce emissions. In 2024, Ring spent approximately $4.7 million on facility upgrades, which contributed to a year-over-year reduction in its overall emissions profile.
Ring's commitment to sustainability is further demonstrated by its annual Sustainability Report, which provides comprehensive information about the company's environmental, social, and governance (ESG) initiatives and progress. The 2024 report highlighted Ring's efforts to minimize its environmental impact, ensure the safety and well-being of its employees, and maintain strong corporate governance practices.
Core Operating Areas
Ring Energy's operations are concentrated in two core areas within the Permian Basin: the Northwest Shelf and the Central Basin Platform.
The Northwest Shelf, located in Yoakum County, Texas and Lea County, New Mexico, is a significant part of Ring's portfolio. As of December 31, 2024, the company owned interests in 12,570 gross (8,720 net) developed acres and 14,980 gross (11,550 net) undeveloped acres in this region. Ring maintains an average proved operated working interest of 91% and net revenue interest of 69% in the Northwest Shelf. The company had interests in approximately 5 gross vertical and 151 gross horizontal producing wells in this area, primarily targeting the San Andres conventional reservoir.
The Central Basin Platform, spanning Andrews, Gaines, Crane, Ector, Winkler, and Ward Counties in Texas, represents Ring's other core operating area. As of year-end 2024, the company owned interests in 63,710 gross (56,620 net) developed acres and 6,340 gross (4,030 net) undeveloped acres in this region. Ring maintains an average proved operated working interest of 97% and net revenue interest of 83% in the Central Basin Platform. The company had interests in approximately 581 gross vertical and 198 gross horizontal producing wells in this area, targeting various conventional pay sands including Holt, Glorieta, Clear Fork, Wichita Albany, Tubb, Wolfcamp, and Devonian reservoirs.
Outlook and Risks
Looking ahead, Ring Energy has provided guidance for 2025 that reflects its strategic priorities of maintaining production levels, prudent capital allocation, and further strengthening its balance sheet.
For the full year 2025, the company expects to achieve average daily sales of 20,000 to 22,000 Boe/d, with oil production ranging from 13,600 to 14,200 barrels per day. This represents a 7% increase in total sales and a 5% increase in oil sales compared to 2024. Ring plans to invest $138 million to $170 million in its 2025 capital program, which is expected to include the drilling and completion of approximately 49 total wells.
The company's guidance assumes WTI oil prices of $65 to $75 per barrel and Henry Hub natural gas prices of $2 to $4 per Mcf. Ring has also provided lease operating expense (LOE) guidance of $11.25 to $12.25 per Boe for the full year 2025. It's worth noting that the current guidance does not include potential synergies or cost reductions from the pending Lime Rock acquisition, although the company expects to realize benefits from combining operations.
While Ring's recent performance and strategic initiatives have been encouraging, the company is not immune to the inherent risks associated with the oil and gas industry. Factors such as commodity price volatility, regulatory changes, and competition for acreage and talent could pose challenges to the company's future growth and profitability.
Additionally, the successful integration of the Stronghold, Founders, and Lime Rock assets, as well as the company's ability to continue optimizing its operations and reducing costs, will be critical to its long-term success. Investors should closely monitor Ring's progress in executing its strategic plan and managing these risks.
Conclusion
Ring Energy has demonstrated its ability to navigate the dynamic landscape of the oil and gas industry through strategic acquisitions, operational optimization, and a relentless focus on capital discipline. The company's consolidation of acreage in the Permian Basin's Central Basin Platform, combined with its organic growth initiatives, have positioned it as a compelling player in the region.
Ring's success in meeting or exceeding its 2024 guidance, including growing proved reserves by 3% to 134.2 million Boe and generating $43.6 million in adjusted free cash flow, underscores the effectiveness of its strategy. The company's ability to drill 13 more wells in 2024 than the prior year for slightly less capital demonstrates a substantial increase in capital efficiency.
Looking ahead, Ring's commitment to strengthening its balance sheet, improving its sustainability profile, and delivering consistent operational performance should continue to be key drivers of shareholder value. The company's 2025 guidance, which projects further growth in production and maintains disciplined capital spending, reflects confidence in its operational strategy and asset base.
As Ring Energy navigates the challenges and opportunities in the years to come, investors will be closely watching its progress in executing its strategic plan, realizing synergies from recent acquisitions, and maintaining its competitive edge in the Permian Basin. The company's focus on the Northwest Shelf and Central Basin Platform, combined with its growing proved reserve base and efficient operations, positions it well for continued success in the dynamic oil and gas industry.