Ring Energy (REI) Update - June 14

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dan_s
Posts: 34465
Joined: Fri Apr 23, 2010 8:22 am

Ring Energy (REI) Update - June 14

Post by dan_s »

Today I am updating our profile on Ring Energy with the goal of finishing it early this afternoon. Below is good news because it removes any near-term debt problems.

Last week Ring Energy, Inc. (NYSE American: REI) (“Ring” or the “Company”) announced that the borrowing base under its senior revolving credit facility (the “Credit Facility”) was successfully reaffirmed at its current level of $350 million.

Key Highlights

Reaffirmation of the borrowing base at $350 million;

Easing of the minimum required oil hedges for calendar 2022 from 4,000 barrels per day (“Bbls/d”) to 3,100 Bbls/d, which is fully covered by oil hedges currently in place;

Enhances price optionality and increases forecasted 2021 cash flow generation; and

Next regularly scheduled bank redetermination will be on or around November 1, 2021.

Mr. Paul D. McKinney, Chairman of the Board and Chief Executive Officer, commented, “We are very pleased with the positive outcome of our spring 2021 bank redetermination. Our focus on operational excellence and cost reduction initiatives, coupled with the substantial improvement in economic activity and increased oil prices, helped to solidify this positive outcome. We appreciate our banking group’s clear recognition of the enhanced global backdrop as evidenced by the more than 20% reduction of required hedging levels for calendar 2022 included in the amended agreement. As a result, we have pivoted to a more opportunistic hedging strategy that allows us to benefit from a higher oil price environment for the second half of 2021, but also adds potential for increased free cash flow generation in 2022. Our primary focus remains on maximizing free cash flow generation to better position Ring to capitalize on future opportunities for the benefit of our shareholders.”

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About Ring Energy, Inc.

Ring Energy, Inc. is an oil and gas exploration, development, and production company with current operations focused on the conventional development of its Permian Basin assets in West Texas and New Mexico. For additional information, please visit www.ringenergy.com.
Dan Steffens
Energy Prospectus Group
dan_s
Posts: 34465
Joined: Fri Apr 23, 2010 8:22 am

Re: Ring Energy (REI) Update - June 14

Post by dan_s »

My updated forecast/valuation model for Ring Energy has been posted to the EPG website. Ring is a small-cap that is a pure play on the Permian Basin / Central Basis Platform area. It is heavily weighted to oil.

I expect Ring to get a good price for their Delaware Basin assets that are for sale. If so, the sale and proceeds used to pay down more debt should draw a positive response from the Wall Street Gang.

REI is currently trading at $2.77. My current valuation increases by $1.30 to $5.00 per share, primarily because of the improving outlook for crude oil prices. Also, the news about the extension of their bank credit facility removes all near-term debt problems.

Ring does have some "Bad Hedges" that will be worked off this year. Despite realized oil prices locked in by hedges in the mid-$50s thru year-end, Ring will generate $30 to $40 million of free cash flow from operations this year. If WTI stays in the $70s, I expect them to add another drilling rig in Q4, which would increase my 2020 production forecast.
NONE of their gas or NGLs are hedged. With 2022 realized prices (net of cash settlements and regional differentials) of $63/bbl for oil and $3.25/mcfe for their combined natural gas and NGLs, Ring should generate earnings per share of $0.65 to $0.70 and operating cash flow of $1.30 to $1.40 next year. A 12-month price target of 5X operating CFPS is reasonable for this small-cap.
Dan Steffens
Energy Prospectus Group
Fraser921
Posts: 2954
Joined: Mon Mar 22, 2021 11:48 am

Re: Ring Energy (REI) Update - June 14

Post by Fraser921 »

Dan

You did it again! Ring leads all energy stocks higher, up 8.7 %!

Pretty soon you will have your own Reddit channel!

Keep up the good work and as you say that's why we pay you the big bucks!
dan_s
Posts: 34465
Joined: Fri Apr 23, 2010 8:22 am

Re: Ring Energy (REI) Update - June 14

Post by dan_s »

Some of our members are "Heavy Hitters" that manage a lot of money. I know they are rotating money from tech to oil & gas and I'm sure that they read my updated profiles carefully. WTI testing $72/bbl probably has more to do with REI's move today. It is a "Screaming Buy" under $3.00.

This morning I talked to my #1 contact in Calgary. He talked Defense Metals Corp. into hosting our webinar tomorrow. He has a copper company that I hope to get on a webinar soon.

He is also in regular contract with the CEOs of Hemisphere Energy (HMENF) and InPlay Oil (IPOOF). He said they are both extremely bullish. His forecast is that if WTI stays over $70/bbl that HMENF should be over $3/share and IPOOF should be over $5/share within a year.

Hemisphere's Polymer Flood has started and they should have some bullish news to share with us when they report Q2 results.

InPlay has some "Bad Hedges" that expire June 30, so their operating cash flow will be going much higher in 2H 2021 ($12 to $15Cdn per quarter). InPlay is an example of how leverage works both ways. Although they have more debt than Hemisphere, they have more production (over 5,000 Boepd) and an extremely valuable acreage position in the Duvernay Shale Play, which probably has a value of more than the market-cap of InPlay today.
Dan Steffens
Energy Prospectus Group
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