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RE

RING ENERGY, INC. (REI)·Q1 2025 Earnings Summary

Executive Summary

  • Oil volumes exceeded guidance and drove solid profitability: 12,074 Bo/d (> high end) and 18,392 Boe/d (> midpoint); net income rose to $9.1M ($0.05) and Adjusted EBITDA was $46.4M .
  • Revenue declined 5% QoQ and 16% YoY on lower volumes and weaker NGL/gas pricing; realized price per Boe improved 4% QoQ to $47.78 but was down YoY .
  • Management cut FY 2025 capex by ~36% (to $85–$113M) and Q2 capex by >50% (to $14–$22M) while maintaining Q2 volume guidance; updated full-year production guidance modestly lower .
  • Closed accretive Lime Rock CBP acquisition on March 31 (2,300 Boe/d >80% oil, ~17,700 net acres, $120–$121M PD PV-10) and highlighted synergy and FCF contributions; leverage ~1.9x, liquidity $141.1M .
  • Hedging provides downside protection (~1.7MM bbl oil at $64.44 floor; ~2.0 Bcf gas at $3.43); potential catalysts: disciplined capex/FCF focus, faster debt reduction, CBP synergies, gas takeaway improvements .

What Went Well and What Went Wrong

What Went Well

  • Exceeded guidance targets: “We met or surpassed all guidance targets, driven by exceptional oil sales volumes,” with 12,074 Bo/d and 18,392 Boe/d in Q1 .
  • Capital efficiency and execution: “Average well costs came in around 7% less than budget,” with seven wells drilled/completed and LOE below guidance midpoint ($11.89/Boe vs $12.00 midpoint) .
  • Accretive acquisition outperforming: Lime Rock CBP assets averaged >2,500 Boe/d in April (+9% vs valuation estimates), adding >40 locations and meaningful AFCF at shallow decline .

What Went Wrong

  • Revenue and profitability headwinds vs prior year: Revenues fell to $79.1M (−16% YoY) and Adjusted EBITDA to $46.4M (−25% YoY) on weaker pricing and lower volumes .
  • Cost pressure and mix: LOE per Boe increased to $11.89 (+12% YoY), and G&A per Boe rose to $5.21 (+21% YoY); oil mix slipped to 66% (from 70% YoY) .
  • Natural gas/NGL pricing impacted by fees and takeaway constraints: realized gas −$0.19/Mcf and NGL $9.65/bbl (offset by fees), with gas differentials −$3.81/Mcf; constraints are easing with new pipeline capacity .

Financial Results

MetricQ1 2024Q4 2024Q1 2025
Revenue ($USD Millions)$94.5 $83.4 $79.1
Net Income ($USD Millions)$5.5 $5.7 $9.1
Diluted EPS ($USD)$0.03 $0.03 $0.05
Adjusted EBITDA ($USD Millions)$62.0 $50.9 $46.4
LOE ($/Boe)$10.60 $11.24 $11.89
Average Daily Sales (Boe/d)19,034 19,658 18,392
Product Mix & Realized PricesQ1 2024Q4 2024Q1 2025
Oil mix (%)70% 66% 66%
Oil (Bo/d)13,394 12,916 12,074
Gas (Mcf/d)16,445 18,302 17,947
NGL (Bbl/d)2,899 3,691 3,326
Realized Price – Oil ($/Bbl)$75.72 $68.98 $70.40
Realized Price – Gas ($/Mcf)−$0.55 −$0.96 −$0.19
Realized Price – NGL ($/Bbl)$11.47 $9.08 $9.65
Realized Price – Boe ($/Boe)$54.56 $46.14 $47.78
KPIsQ1 2024Q4 2024Q1 2025
Capital Expenditures ($USD Millions)$36.3 $37.6 $32.5
Adjusted Free Cash Flow ($USD Millions)$15.6 $4.7 $5.8
Adjusted Cash Flow from Operations ($USD Millions)$51.9 $42.2 $38.2
Liquidity ($USD Millions)—$216.8 $141.1
Leverage Ratio (LTM) (x)1.67x 1.66x 1.90x

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total Capex ($USD Millions)FY 2025$138 – $170 $85 – $113 Lowered
Total Sales (Boe/d)FY 202520,000 – 22,000 (midpoint 21,000) 19,200 – 20,700 (updated full-year) Lowered
Oil Sales (Bo/d)FY 202513,600 – 14,200 (midpoint 13,900) 12,700 – 13,700 Lowered
Capex ($USD Millions)Q2 2025$34 – $42 $14 – $22 (midpoint $18) Lowered (>50%)
Sales (Boe/d)Q2 202520,500 – 22,500 20,500 – 22,500 Maintained
Oil Sales (%)Q2 202566% 66% Maintained
LOE ($/Boe)Q2 2025$11.50 – $12.50 $11.50 – $12.50 Maintained
Capex ($USD Millions)2H 2025—$38 – $58 (midpoint $48) New (lower run-rate)

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024, Q4 2024)Current Period (Q1 2025)Trend
Capex discipline & FCF focusEmphasized debt reduction; divested non-core verticals; Q3 Adjusted FCF $1.9M; paid down $15M debt ; FY 2024 Adjusted FCF $43.6M; paid down $40M debt Cut FY 2025 capex by ~36%; Q2 cut >50% while maintaining volumes; prioritize debt reduction More defensive; FCF over growth
Gas takeaway & pricingNoted negative gas realizations; constraints impacting pricing Matterhorn Express easing takeaway; watching AI infrastructure-driven demand in West Texas Improving setup
Hedging policyIncreased hedging into Q4/Q1 ~1.7MM bbl oil at $64.44 floor; ~2.0 Bcf gas at $3.43; basis hedges Consistent protection
M&A/consolidation (CBP/NWS)Non-core divestiture; consolidation narrative Closed Lime Rock CBP acquisition; >40 locations; >80% oil; immediate synergies Accretive scale-up
Leverage & balance sheet1.59x–1.66x LTM; liquidity $208M–$217M 1.90x including CBP acquisition; liquidity $141.1M; target <1.0x LT Near-term higher, LT deleveraging

Management Commentary

  • “We met or surpassed all guidance targets, driven by exceptional oil sales volumes… closed the highly accretive acquisition of Lime Rock’s CBP assets… strategically adjusted the timing of our drilling program and capital spending initiatives” — Paul McKinney .
  • “Average well costs came in around 7% less than budget… LOE below guidance midpoint… adjusted free cash flow was $5.8 million” — Travis Thomas .
  • “Production from these assets during April… averaged over 2,500 Boe/d, representing a 9% increase over the estimates used to value the assets… expected meaningful increase in adjusted free cash flow” — Paul McKinney (CBP acquisition) .
  • “We’re updating our outlook… reduce total capital spending by more than 47% for the final 3 quarters… guiding to ~2% annual production growth over 2024” — Paul McKinney .

Q&A Highlights

  • Leverage target: Management reiterated long-term leverage goal “comfortably below 1” and near-term focus on debt reduction given price volatility .
  • Capex savings usage: Any cost reductions in 2H would go to debt paydown rather than adding wells; recent frac/cement/wireline costs easing 4–6% .
  • Borrowing base: Confident redetermination with low-decline, low-cost assets including Lime Rock; process underway .
  • Share repurchase constraints: Facility requires leverage <2x, <80% draw, and available FCF bucket for buybacks .
  • Basin activity/new plays: Increased interest in CBP; Ring pursuing organic leasing and evaluating Barnett/Woodford horizons; horizontal potential in founders’ areas .

Estimates Context

MetricConsensus (Q1 2025)Actual (Q1 2025)# of Estimates
Primary EPS ($)0.053*0.05 3*
Revenue ($USD Millions)79.34*79.09 3*
EBITDA ($USD Millions)46.75*46.44 —

Notes:

  • Values with asterisk (*) retrieved from S&P Global. The consensus figures are compared to company-reported actuals. S&P Global indicates Q1 2025 consensus EPS of ~$0.053 and revenue of ~$$79.34M; Adjusted EBITDA consensus ~$46.75M versus reported $46.44M [GetEstimates]. Values retrieved from S&P Global.

Key Takeaways for Investors

  • Volume execution strong vs guidance; oil-led mix and hedges cushioned lower NGL/gas realizations — supports FCF generation in a weak price tape .
  • Strategic pivot to lower capex (Q2 and FY) without sacrificing near-term volumes reflects disciplined focus on deleveraging and balance sheet resilience — a supportive setup for credit metrics .
  • Lime Rock CBP deal adds oily, low-decline PDP and >40 drilling locations with immediate synergies and AFCF — enhances inventory quality and near-term cash flow .
  • Gas pricing/takeaway headwinds are easing (Matterhorn Express) with potential demand uplift from AI infrastructure — tail risk moderating for realizations .
  • Watch LOE/G&A per Boe; cost inflation lifted unit costs YoY; management is seeing service cost deflation (frac/cement/wireline) that could aid margins in 2H .
  • Near-term stock drivers: capex cuts (positive for FCF), debt reduction pace, CBP synergy capture, hedging coverage, and any borrowing base outcomes .
  • Medium-term: pathway to <1.0x leverage and potential capital returns hinges on commodity prices, continued cost discipline, and sustained execution on oily projects .