REI - Ring Energy: A Founders Ticket To A Solution

2024-07-17 13:44:04 ET

Summary

• Ring Energy, Inc.'s acquisition of Founders resulted in higher-than-expected production and lower costs.
• Despite being all debt, the Founders acquisition may be financially beneficial for the company, with the debt expected to be repaid within a year and a half.
• The acquisition has increased free cash flow and improved profitability. This led to a $15 million debt repayment in the second quarter.
• The company clearly has inventory to execute a target of high oil percentage production capital budget for some time.
• Currently, strong oil prices should indicate that the debt progress will accelerate to add to profitability and free cash flow progress already made.

When Ring Energy, Inc. ( REI ) announced that it had made the Founders acquisition , there were plenty of comments about adding debt “at a time like this” (to cleanly explain a lot of shareholder frustration with the deal). But now comes the announcement of higher-than-expected production (both total and oil) as well as an expectation of lower costs to be reported in future earnings.

The last article was focused on cash flow progress. But that progress is difficult to see when commodity prices were declining. Now that has changed, and we are at least slightly headed in the other direction. Declining costs similarly have things going in the right direction. The future is brightening for debt payments and an end to the debt situation....

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