Ring Energy (REI) Valuation Update - Mar 14

[dan_s]

At the time of this post REI was trading at $1.78, which is less that 2X Adjusted Operating Cash Flow per share of $1.00 for 2023.

I have updated my forecast/valuation model for their good Q4 results and their detailed guidance for 2024. Due to weather related issues in January, Q1 production will be ~18,250 Boepd, compared to 19,397 Boepd in Q4. They completed several horizontal wells in Q4 that gave production a nice boost into year-end. After Q1, Ring's production should ramp up steadily.

Ring continues to generate free cash flow, using it to pay down debt.

My valuation is now $4.25/share. TipRanks' price target is $3.00.

I've heard from a reliable source that Warburg Pincus has finally finish selling off their position in REI. They sold the last of their shares mid-February. Take a look at the stock price chart and you'll see that REI is up more than $0.50 since then (40%). Now that the overhang is gone, REI should move up to $3.00, which is still less than my operating cash flow per share forecast for 2024 of $1.02, which BTW is less than TipRanks' CFPS forecast of $1.05 for 2024.

Ring's Q4 revenues were more than 93% from the sale of oil. If WTI stays over $80/bbl they should generate more than $10 million of free cash flow per quarter.