Ring Energy (REI) Update - July 4

[dan_s]

This is the last of the Small-Caps that needed to be updated. Susan told me that I can only work four hours on a National Holiday, so I will update all the forecasts for our High Yield Income Portfolio on Tuesday and Wednesday.

REI closed on July 1 at $2.64. First Call's price target is $4.80 and my adjusted current valuation has been lowered for natural gas prices by $0.30 to $7.00.

The natural gas prices shown in my forecast may look high to you, but it is because Ring reports natural gas and NGLs on a combined basis. They still have some crappy oil hedges to work off in 2022, but the Company is now free cash flow positive. They should generate approximately $25 million of FCF in 2022. If they can avoid hedging away their upside in 2023, next year's FCF should top $80 million.

There is nothing "sexy" about Ring. It is not a shale play. It is developing two core areas in the Central Basin Platform area of the Permian Basin.

What is "sexy" is that with WTI at $100/bbl, Ring's PV10 Net Asset Value at 12-31-2022 could be over $15/share.