I have updated my forecast/valuation model for Ring Energy and I have posted it to the EPG website.
My valuation is now $4.45 per share, lower by $0.45 due to the increased share count caused by the warrants being exercised. The Company did get $9 million of much needed cash when the warrants were exercised that they used to pay down debt, which is a good thing.
REI closed today at $1.675.
Ring is profitable and they are generating free cash flow. My 2023 forecast is $0.49 EPS and $1.05 Operating CFPS. Profitable upstream companies should trade for more than 1.5 X CFPS. 4X CFPS is reasonable for Ring.
As long as Ring continues to generate free cash flow they will be fine. They appear to have steady production growth locked in and they have plenty of running room in the CBP. Selling the Lea County, NM assets for a decent price would lower debt, which is the Company's primary problem in this market.
Ring Energy (REI) Valuation Update - May 11
Ring Energy (REI) Valuation Update - May 11
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Ring Energy (REI) Valuation Update - May 11
Hi Dan,
are the $9MM from the warrants included in your Q2 2023 cashflow (line 45) before capex?
Regards,
Klaus
are the $9MM from the warrants included in your Q2 2023 cashflow (line 45) before capex?
Regards,
Klaus
Re: Ring Energy (REI) Valuation Update - May 11
No, because proceeds from warrants will be included in Cash From Financing Activities in their reports to the SEC for Q2. My valuations are based on Operating Cash Flow per share. However, a stronger balance sheet does raise the confidence that I have in my valuation.
Last edited by dan_s on Sun May 14, 2023 3:03 pm, edited 1 time in total.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group