In This Article:
Release Date: May 08, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
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Ring Energy Inc (REI) exceeded its oil sales volume guidance, selling 12,074 barrels of oil per day, surpassing the high end of their guidance range.
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The company improved capital efficiency with average well costs coming in around 7% less than budgeted.
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The acquisition of Limerock CBP assets was highly accretive and exceeded initial forecasts, adding over 40 gross drilling locations to their inventory.
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Ring Energy Inc (REI) reported a meaningful increase in adjusted free cash flow, supported by $120 million of oil-weighted proved developed reserves.
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The company reduced total capital spending by more than 47% for the final three quarters of 2025, while still projecting a 2% annual production growth over 2024.
Negative Points
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Ring Energy Inc (REI) experienced weather-related downtime in January, impacting production.
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The company reported a sequential revenue decrease of 5% from the fourth quarter, driven by a negative $7.3 million volume variance.
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Realized natural gas pricing remained slightly negative, although there was a material improvement from the previous quarter.
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The company faces challenges in reducing its leverage ratio due to the low price environment, which affects the denominator in the leverage calculation.
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Ring Energy Inc (REI) anticipates a modest reduction in production during the last half of the year due to reduced capital spending.
Q & A Highlights
Q: Do you have a leverage target in mind as you allocate more free cash flow to debt reduction before you'd want to go back to trying to have a capital program that would generate more growth? A: Paul McKinney, Chairman and CEO: Yes, our long-term goal is to have our leverage ratio comfortably below one. In a low-price environment, it's challenging to lower the leverage ratio because oil prices are part of the denominator in that equation. We are focused on debt reduction, and our investor presentation forecasts our free cash flow levels, which reflect the amount of debt we can pay down.
Q: As you look at the back half of the year and the guidance for capital of $38 to $58 million, do you assume any cost improvements? If costs go lower, would you complete more projects, or would the savings go to free cash flow and debt reduction? A: Paul McKinney, Chairman and CEO: Our forecasts include current prices, and we've seen some recent reductions in capital costs, particularly in completion costs. If costs continue to decrease, all savings will go towards repaying debt rather than adding more wells. We aim to demonstrate our strategy's flexibility and commitment to debt reduction.