Ring Energy (REI) Update - August 13
Posted: Tue Aug 13, 2019 10:44 am
I took a hard look at Ring Energy and I have updated my forecast/valuation model for the company. I have lowered my valuation by $0.15 to $8.35.
Ring is a pure play on the Permian's Central Basin Platform area.
REI is now trading for $2.11, so it has a lot of upside for us if my model is close to accurate.
Q2 results are the first full quarter since they closed the acquisition of Wishbone on 2-1-2019. Their Q2 production exceeded my forecast and I am expecting production to ramp up to an exit rate of more than 12,000 Boepd by year-end. Ring's production mix is 90% crude oil and 10% natural gas. They report natural gas and NGLs on a combined basis.
Natural gas and NGL prices in the Permian Basin are terrible, but should improve by year-end as more pipeline access is coming soon.
Ring is only running one operated rig now, so they should be funding all D&C going forward with cash flow from operations. CF from operations s/b over $25 million in Q3 and over $30 million in Q4 if WTI goes up to my forecast of $60/bbl for Q4.
IMPORTANT: All of Ring's hedges are collars with $50 floors and $68 ceilings. This means that if oil prices do increase, there is significant upside to my valuation.
FWIW First Call's price target is $6.75.
Ring is a pure play on the Permian's Central Basin Platform area.
REI is now trading for $2.11, so it has a lot of upside for us if my model is close to accurate.
Q2 results are the first full quarter since they closed the acquisition of Wishbone on 2-1-2019. Their Q2 production exceeded my forecast and I am expecting production to ramp up to an exit rate of more than 12,000 Boepd by year-end. Ring's production mix is 90% crude oil and 10% natural gas. They report natural gas and NGLs on a combined basis.
Natural gas and NGL prices in the Permian Basin are terrible, but should improve by year-end as more pipeline access is coming soon.
Ring is only running one operated rig now, so they should be funding all D&C going forward with cash flow from operations. CF from operations s/b over $25 million in Q3 and over $30 million in Q4 if WTI goes up to my forecast of $60/bbl for Q4.
IMPORTANT: All of Ring's hedges are collars with $50 floors and $68 ceilings. This means that if oil prices do increase, there is significant upside to my valuation.
FWIW First Call's price target is $6.75.