Core Insights - Ring Energy (NYSE: REI) reported oil sales volumes exceeding expectations for Q2 2025, indicating strong operational performance [2] - The company achieved a significant reduction in lease operating expenses, with a 12% decrease compared to Q1 2025, and anticipates a further 4% reduction in the second half of 2025 [2] Company Performance - Ring Energy's oil sales volumes surpassed market expectations for the second quarter of 2025, showcasing robust demand and operational efficiency [2] - The reduction in lease operating expenses reflects effective cost management strategies, contributing positively to the company's financial health [2] Future Outlook - The expectation of a continued decrease in lease operating expenses for the latter half of 2025 suggests a favorable cost structure moving forward, which may enhance profitability [2]

Core Viewpoint - Ring Energy, Inc. has set a debt reduction target of approximately $18 million for the third quarter of 2025, reflecting its commitment to strengthening its balance sheet amid volatile oil prices [2][3]. Debt Reduction and Financial Position - The company anticipates having around $430 million in borrowings outstanding on its credit facility by September 30, 2025, a decrease from $448 million as of June 30, 2025 [2]. - The debt reduction target of $18 million is part of the company's strategy to maximize free cash flow generation and pay down debt in response to earlier drops in oil prices [3]. Ownership Changes - Warburg Pincus has exited its full common equity position in Ring Energy, marking a significant change in the company's ownership structure [2][3]. Company Overview - Ring Energy, Inc. is focused on oil and gas exploration, development, and production, with current operations centered on its assets in the Permian Basin [4].

Oil Market Overview - Oil prices have stabilized, with Brent crude at $67.73 per barrel and U.S. WTI at $63.66 per barrel, marking the first weekly gains in three weeks [1] - The stabilization was driven by a larger-than-expected drawdown in U.S. crude inventories, indicating strong demand [1] - Geopolitical risks, particularly related to the stalled Russia-Ukraine peace talks and potential new sanctions on Russian oil, continue to inject uncertainty into the market [1][2] Economic Influences - Weak economic data from Germany has raised concerns about global consumption, impacting oil demand [2] - Anticipation of signals from the Federal Reserve's Jackson Hole conference regarding potential interest rate cuts could stimulate economic growth and boost oil demand [2] Investment Opportunities - Investors are encouraged to look for undervalued energy stocks that can capitalize on market volatility while limiting downside risk [3] - Identified stocks include Ring Energy (REI), RPC, Inc. (RES), and Kosmos Energy (KOS), all trading under $5 and holding a Value Score of A [3][10] Company Profiles Ring Energy (REI) - An independent exploration and production company focused on oil and natural gas in the Permian Basin of Texas, with a high level of operational control [4] - Utilizes modern drilling techniques to create long-life wells with low breakeven costs, emphasizing predictable growth and strong cash flow [5] - Currently trading at less than $1 per share, with a 50% increase in the Zacks Consensus Estimate for 2025 earnings over the past 60 days [6] RPC, Inc. (RES) - A U.S.-based oilfield services provider with a diverse portfolio serving exploration and production companies [7] - Known for a debt-free balance sheet and consistent returns of excess free cash to shareholders, with a recent acquisition enhancing its service mix [8] - Shares trade for less than $5, with a projected 7.8% growth in 2025 revenues according to the Zacks Consensus Estimate [9] Kosmos Energy (KOS) - A deepwater exploration and production company with a balanced portfolio across proven basins, including offshore Ghana and the U.S. Gulf of Mexico [11] - Focuses on disciplined growth and sustainable cash generation, with recent milestones supporting future free cash flow [12] - Currently priced at $1.84 per share, with a 26% increase in the Zacks Consensus Estimate for 2025 earnings over the past 60 days [13]

Summary of Ring Energy (REI) Conference Call - August 18, 2025 Company Overview - **Company Name**: Ring Energy - **Headquarters**: The Woodlands, Texas - **Industry**: Independent oil and gas - **Focus Area**: Permian Basin, specifically the Southern part of the Northwest Shelf and the Central Basin Platform [6][7] Key Financial Metrics - **Average Production**: Over 21,000 barrels per day, with approximately 14,500 barrels per day being crude oil [9][21] - **Approved Reserves**: 134 million barrels valued at approximately $1.5 billion at SEC prices, with an additional 12 million barrels added from the Limerick acquisition [7] - **Record Adjusted Free Cash Flow**: Nearly $25 million, an increase of over 300% [11][31] - **Operating Costs**: Lease operating costs reduced by 12%, and all-in cash operating costs also dropped by 12% [10][31] - **Leverage Ratio**: Improved by 50% since the company’s leadership change, currently at around two times [15][40] Strategic Focus - **Long-term Strategy**: Focused on maximizing free cash flow through operational excellence and cost reduction [12][40] - **Technological Application**: Utilizing technologies developed for shales on conventional rock, leading to significant returns [8] - **Debt Reduction**: Prioritizing debt repayment in the current price environment, aiming for a leverage ratio below one times [15][41] Operational Highlights - **Production Growth**: Increased production by over 23% compounded annually since 2020 [13] - **Reserve Growth**: Proved reserves increased by 88%, including the effects of selling non-core assets [13] - **Acquisition Strategy**: Successful integration of LimeRock assets, leading to a 13% increase in production per share and a 250% increase in adjusted free cash flow [31][30] Market Position and Comparisons - **Peer Comparison**: Second lowest decline rate in a peer group of 11 companies, with the longest reserve life at 18.7 years [17][18] - **Operating Margins**: Ranked third in terms of highest operating margins among peers, allowing resilience against oil price volatility [20] - **Valuation Perspective**: Current stock price undervalued compared to recent transactions in the Central Basin Platform, suggesting a potential trading value of $2.51 per share [37] Future Outlook - **Guidance for Production**: Anticipated production of 14,200 barrels of oil per day, with a focus on maintaining operational efficiency [21][22] - **Capital Spending**: Planned capital spending of $97 million for the year, a reduction of 36% from previous guidance [27][25] - **Price Sensitivity**: Adjusted free cash flow projections based on oil prices ranging from $55 to $75 per barrel, indicating strong cash flow generation potential [28][29] Conclusion - **Company Resilience**: Ring Energy is positioned as a strong and resilient company, focusing on operational efficiency, debt reduction, and maximizing shareholder value in a volatile market environment [16][40]

[Q2 2025 Financial and Operational Results](index=1&type=section&id=Q2%202025%20Financial%20and%20Operational%20Results) [Overview and Management Commentary](index=1&type=section&id=Overview%20and%20Management%20Commentary) Ring Energy achieved record oil and total sales volumes in Q2 2025, generating a record $24.8 million in Adjusted Free Cash Flow despite an 11% sequential decrease in realized pricing - Management successfully executed its revised plan to reduce capital spending, achieving a **36% year-over-year reduction** while maintaining **2% production growth**[3](index=3&type=chunk) - The company's strategic focus is on maximizing cash flow, controlling costs, and prioritizing debt reduction to strengthen its financial position[5](index=5&type=chunk) Q2 2025 Key Highlights | Metric | Value | Note | | :--- | :--- | :--- | | **Oil Sales** | 14,511 Bo/d | Record, exceeding midpoint of guidance | | **Total Sales** | 21,295 Boe/d | Record, near midpoint of guidance | | **Net Income** | $20.6 million | $0.10 per diluted share | | **Adjusted Net Income** | $11.0 million | $0.05 per diluted share | | **Adjusted EBITDA** | $51.5 million | - | | **Lease Operating Expense (LOE)** | $10.45 per Boe | 9% below the low end of guidance | | **Capital Expenditures** | $16.8 million | 48% lower than Q1 2025 | | **Adjusted Free Cash Flow (AFCF)** | $24.8 million | Record | | **Debt Reduction** | $12 million | Paid down during the quarter | | **Liquidity** | $137.0 million | As of June 30, 2025 | [Financial Performance Summary](index=2&type=section&id=Financial%20Performance%20Summary) Ring Energy's Q2 2025 revenues increased 4% sequentially to $82.6 million, with net income surging 126% to $20.6 million, driven by reduced capital expenditures and record Adjusted Free Cash Flow Quarterly Financial Performance Comparison | Metric | Q2 2025 | Q1 2025 | QoQ Change | Q2 2024 | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | | **Revenues ($ million)** | $82.6 | $79.1 | 4% | $99.1 | (17)% | | **Net Income ($ million)** | $20.6 | $9.1 | 126% | $22.4 | (8)% | | **Adjusted EBITDA ($ million)** | $51.5 | $46.4 | 11% | $66.4 | (22)% | | **Capital Expenditures ($ million)** | $16.8 | $32.5 | (48)% | $35.4 | (53)% | | **Adjusted Free Cash Flow ($ million)** | $24.8 | $5.8 | 328% | $21.4 | 16% | Key Expenses per Boe | Expense Category ($/BOE) | Q2 2025 | Q1 2025 | QoQ Change | | :--- | :--- | :--- | | **Lease operating expenses** | $10.45 | $11.89 | (12)% | | **General and administrative expenses** | $3.68 | $5.21 | (29)% | | **Interest expense** | $6.07 | $5.74 | 6% | - The company recorded a significant gain on derivative contracts of **$14.6 million** in Q2 2025, primarily driven by unrealized gains, compared to a loss of $0.9 million in Q1 2025[8](index=8&type=chunk) [Operational Performance](index=2&type=section&id=Operational%20Performance) Q2 2025 operational performance saw record crude oil sales of 14,511 Bo/d and total sales of 21,295 Boe/d, with drilling and completion activity scaled back to two new wells Average Daily Sales Volumes | Product | Q2 2025 | Q1 2025 | QoQ Change | | :--- | :--- | :--- | :--- | | **Crude Oil (Bo/d)** | 14,511 | 12,074 | 20% | | **Total (Boe/d)** | 21,295 | 18,392 | 16% | Q2 2025 Drilling & Completion Activity | Area | Wells Drilled | Wells Completed | | :--- | :--- | :--- | | Central Basin Platform (Horizontal) | 1 | 1 | | Central Basin Platform (Vertical) | 1 | 1 | | **Total** | **2** | **2** | - The company drilled and completed **two wells** in the Central Basin Platform in Q2 2025, a significant reduction from the seven wells completed in Q1 2025[10](index=10&type=chunk)[11](index=11&type=chunk)[12](index=12&type=chunk) [Balance Sheet and Liquidity](index=3&type=section&id=Balance%20Sheet%20and%20Liquidity) Ring Energy maintained a solid liquidity of $137.0 million as of June 30, 2025, reducing debt by $12 million and extending its credit facility maturity to June 2029 - Total liquidity was approximately **$137.0 million** at the end of Q2 2025, consisting of cash and availability under the credit facility[9](index=9&type=chunk) - The company paid down **$12 million of debt** in Q2 2025, reducing borrowings on its credit facility from $460 million to **$448 million**[9](index=9&type=chunk) - A new credit agreement was established with an extended maturity of 34 months to June 2029 and a borrowing base of **$585 million**[4](index=4&type=chunk) [Updated Guidance](index=4&type=section&id=Updated%20Guidance) [Second Half 2025 and Q3 Sales Volumes, Capital Investment and Operating Expense Guidance](index=4&type=section&id=Second%20Half%202025%20and%20Q3%20Sales%20Volumes,%20Capital%20Investment%20and%20Operating%20Expense%20Guidance) Ring Energy reaffirmed its production and capital expenditure guidance for 2H 2025, while lowering LOE guidance, with Q3 sales volumes projected between 19,200-21,200 Boe/d and capital spending between $23-31 million Q3 and 2H 2025 Guidance | Metric | Q3 2025 | 2H 2025 | | :--- | :--- | :--- | | **Total Sales (Boe/d)** | 19,200 - 21,200 | 19,000 - 21,000 | | **Capital Spending ($ millions)** | $23 - $31 | $38 - $58 | | **LOE (per Boe)** | $11.00 - $12.00 | $11.00 - $12.00 | - The company lowered its LOE per Boe guidance for the second half of 2025, while reaffirming production and capital expenditures guidance[4](index=4&type=chunk) - Full-year 2025 capital expenditures guidance is now set at a midpoint of **$97 million**[14](index=14&type=chunk) - The capital allocation for 2H 2025 is estimated to be **61% for drilling and completion**, **33% for recompletions and workovers**, and **6% for other activities**[15](index=15&type=chunk) [Financial Statements](index=6&type=section&id=Financial%20Statements) [Condensed Statements of Operations](index=6&type=section&id=Condensed%20Statements%20of%20Operations) For Q2 2025, Ring Energy reported total revenues of $82.6 million and a net income of $20.6 million, or $0.10 per diluted share, a significant increase from Q1 2025 Statement of Operations Highlights (Three Months Ended June 30, 2025) | Line Item | Amount (USD) | | :--- | :--- | | **Revenues** | $82,602,759 | | **Total Costs and Operating Expenses** | $59,126,818 | | **Income from Operations** | $23,475,941 | | **Gain on derivative contracts** | $14,648,054 | | **Net Income** | $20,634,887 | | **Diluted Earnings per Share** | $0.10 | [Condensed Operating Data](index=7&type=section&id=Condensed%20Operating%20Data) In Q2 2025, total sales volumes reached 1,937,850 Boe (21,295 Boe/d), with crude oil comprising 68% of production, and an average realized price of $42.63 per Boe Q2 2025 Operating Metrics | Metric | Value | | :--- | :--- | | **Total Sales (Boe)** | 1,937,850 | | **Average Daily Sales (Boe/d)** | 21,295 | | **Oil as % of Total** | 68% | | **Average Realized Price ($/Boe)** | $42.63 | | **Average Realized Oil Price ($/Bbl)** | $62.69 | | **Lease Operating Expenses ($/Boe)** | $10.45 | [Condensed Balance Sheets](index=8&type=section&id=Condensed%20Balance%20Sheets) As of June 30, 2025, total assets increased to $1.516 billion, with total liabilities at $618.4 million due to an increased revolving line of credit, and total stockholders' equity rising to $897.9 million Balance Sheet Summary | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total Assets** | $1,516,330,871 | $1,408,099,474 | | **Total Liabilities** | $618,435,102 | $549,459,492 | | Revolving line of credit | $448,000,000 | $385,000,000 | | **Total Stockholders' Equity** | $897,895,769 | $858,639,982 | [Condensed Statements of Cash Flows](index=9&type=section&id=Condensed%20Statements%20of%20Cash%20Flows) For Q2 2025, net cash provided by operating activities was $33.3 million, while investing activities used $18.4 million and financing activities used $16.0 million, reflecting debt paydown Cash Flow Summary (Three Months Ended June 30, 2025) | Cash Flow Category | Amount (USD) | | :--- | :--- | | **Net Cash Provided by Operating Activities** | $33,297,251 | | **Net Cash Used in Investing Activities** | ($18,359,030) | | **Net Cash Used in Financing Activities** | ($16,039,072) | [Supplementary Information](index=10&type=section&id=Supplementary%20Information) [Financial Commodity Derivative Positions](index=10&type=section&id=Financial%20Commodity%20Derivative%20Positions) As of June 30, 2025, Ring Energy hedged 55% of its expected 2H 2025 oil production at $64.87/bbl and 42% of natural gas at $3.37/MMBtu to mitigate price volatility - For the second half of 2025, the company has hedged approximately **55% of its oil sales guidance** at an average downside protection price of **$64.87** and **42% of its natural gas sales guidance** at an average downside protection price of **$3.37**[8](index=8&type=chunk) Oil & Gas Hedge Summary (Q3 2025) | Hedge Type | Hedged Volume | Weighted Avg. Price | | :--- | :--- | :--- | | **Oil Swaps (WTI)** | 471,917 Bbl | $68.64 | | **Oil Collars (WTI)** | 225,400 Bbl | Put: $65.00, Call: $78.91 | | **Gas Swaps (Henry Hub)** | 300,500 MMBtu | $3.88 | | **Gas Collars (Henry Hub)** | 309,350 MMBtu | Put: $3.17, Call: $4.98 | [Non-GAAP Financial Reconciliations](index=11&type=section&id=Non-GAAP%20Financial%20Reconciliations) This section defines and reconciles non-GAAP measures like Adjusted Net Income, Adjusted EBITDA, and Adjusted Free Cash Flow, providing a clearer view of core operational performance by excluding non-cash or non-recurring items [Adjusted Net Income](index=11&type=section&id=Adjusted%20Net%20Income) Adjusted Net Income for Q2 2025 was $11.0 million ($0.05 per diluted share), reflecting core operational profitability after adjusting GAAP net income for non-cash items Reconciliation of Net Income to Adjusted Net Income (Q2 2025) | Line Item | Amount (USD) | | :--- | :--- | | **Net income** | $20,634,887 | | Unrealized (gain) on derivatives | ($13,970,211) | | Share-based compensation | $1,351,839 | | Tax impact on adjusted items | $2,964,996 | | **Adjusted Net Income** | **$10,982,511** | [Adjusted EBITDA](index=12&type=section&id=Adjusted%20EBITDA) Adjusted EBITDA for Q2 2025 increased 11% to $51.5 million, providing a metric for underlying operational cash flow generation by excluding non-cash and non-operating charges Reconciliation of Net Income to Adjusted EBITDA (Q2 2025) | Line Item | Amount (USD) | | :--- | :--- | | **Net income** | $20,634,887 | | Interest expense, net | $11,687,746 | | Income tax expense | $6,107,425 | | Depreciation, depletion and amortization | $25,569,914 | | Unrealized (gain) on derivatives | ($13,970,211) | | Share-based compensation | $1,351,839 | | **Adjusted EBITDA** | **$51,458,788** | [Adjusted Free Cash Flow (AFCF)](index=13&type=section&id=Adjusted%20Free%20Cash%20Flow%20(AFCF)) The company generated a record Adjusted Free Cash Flow of $24.8 million in Q2 2025, representing cash available for debt reduction and other discretionary uses after adjusting operating cash flow for capital expenditures Reconciliation to Adjusted Free Cash Flow (Q2 2025) | Line Item | Amount (USD) | | :--- | :--- | | **Net Cash Provided by Operating Activities** | $33,297,251 | | Changes in operating assets and liabilities | $8,312,480 | | Capital expenditures | ($16,827,513) | | **Adjusted Free Cash Flow** | **$24,779,703** | [Leverage Ratio](index=15&type=section&id=Leverage%20Ratio) As of June 30, 2025, Ring Energy's leverage ratio was 2.05x, well below the maximum permitted 3.00x, indicating a healthy debt position relative to its earnings Leverage Ratio Calculation (as of June 30, 2025) | Metric | Value | | :--- | :--- | | **Consolidated Total Debt** | $458,000,000 | | **Pro Forma Consolidated EBITDAX (LTM)** | $223,297,611 | | **Leverage Ratio** | **2.05x** | | **Maximum Allowed** | ≤ 3.00x | [Other Non-GAAP Measures](index=18&type=section&id=Other%20Non-GAAP%20Measures) In Q2 2025, All-In Cash Operating Costs decreased to $21.51 per Boe, resulting in a Cash Operating Margin of $21.12 per Boe, reflecting improved operational profitability Cash Costs and Margin per Boe (Q2 2025) | Metric ($/Boe) | Q2 2025 | Q1 2025 | | :--- | :--- | :--- | | **Realized revenues per Boe** | $42.63 | $47.78 | | **All-in cash operating costs per Boe** | $21.51 | $24.33 | | **Cash Operating Margin per Boe** | **$21.12** | **$23.45** |

Financial Data and Key Metrics Changes - The company achieved record adjusted free cash flow of $24.8 million, marking the twenty-third consecutive quarter of generating free cash flow [12][21] - Net income for Q2 2025 was $20.6 million or $0.10 per diluted share, compared to $9.1 million or $0.05 per diluted share in Q1 2025 [20] - Adjusted EBITDA increased to $51.5 million from $46.4 million in the previous quarter, primarily due to higher oil revenue and lower G&A expenses [21] Business Line Data and Key Metrics Changes - The company sold 14,511 barrels of oil per day, near the high end of guidance, and 21,295 barrels of oil equivalent per day, just below the midpoint of guidance [12][16] - Lease operating expenses (LOE) were $10.45 per BOE, significantly lower than the guidance range of $11.5 to $12.5 per BOE [19] - Capital expenditures were $16.8 million, 48% lower than the first quarter [21] Market Data and Key Metrics Changes - The overall realized price decreased by 11% to $42.63 per BOE from $47.78 in Q1 2025, driven by a lower realized oil price of $62.69 [17] - NGL prices decreased by 36% to $6.19, while the average natural gas price differential from NYMEX futures pricing was negative $4.67 per Mcf [17] Company Strategy and Development Direction - The company is prioritizing debt reduction in the current lower price environment, with a focus on maintaining capital discipline [26] - The management team is exploring opportunities in other emerging plays, such as the Barnett, while continuing to focus on the San Andres horizontal wells [72][78] - The integration of LimeRock assets has led to significant operational efficiencies and cost reductions, which are expected to continue [8][46] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to manage operations effectively despite external challenges, emphasizing a strong operational performance [25] - The company anticipates that higher oil prices in the future will allow for increased capital allocation towards testing new intervals [78] Other Important Information - The company entered into an amended credit agreement with a $585 million borrowing base, providing a 34-month extension and improved terms [15][16] - The company has approximately 1.3 million barrels of oil hedged with an average downside protection price of $64.87, covering about 55% of oil sales guidance [22] Q&A Session Summary Question: Thoughts on stock performance relative to peers - Management noted that stock performance is influenced by various factors, including debt levels and company size, which may affect market perception [29][31] Question: Allocation of free cash flow from LimeRock acquisition - Management indicated plans to use free cash flow from LimeRock to reduce leverage while maintaining production levels [43][45] Question: Impact of midstream developments on gas price realizations - Management acknowledged that while there are ongoing midstream developments, infrastructure limitations will continue to affect price differentials in the near term [83]

Q2 2025 Performance Highlights - Ring Energy's Q2 2025 net production reached 21,295 Boe/d, with 68% oil and 85% liquids[7] - The company achieved a realized price of $42.63 per Boe in Q2 2025[13] - Adjusted EBITDA for Q2 2025 was $51.5 million, compared to $46.4 million in Q1 2025[13] - Adjusted Free Cash Flow (AFCF) hit a company record of $24.8 million in Q2 2025[11, 13] - Lease operating costs were reduced by 12% quarter-over-quarter to $10.45 per Boe[11, 13] - Capital expenditures decreased by 48% quarter-over-quarter to $16.8 million[11, 13] Updated Guidance and Reserves - The company updated its FY 2025E AFCF guidance to between ~$50 to ~$75 million, assuming $55 to $75 per BO WTI[11] - FY 2025 capital expenditure guidance was reduced by 36% year-over-year, while maintaining 2% year-over-year growth[11] - 2024 SEC Proved Reserves are 134 MMBoe with a PV10 of ~$1.5 billion[7] - The Lime Rock Acquisition added ~12 MMBoe with a PV10 of ~$160 million[7] Strategic Focus and Valuation - The company's leverage ratio decreased from ~40x in early 2021 to ~20x in Q2 2025[11] - The company hedged the remainder of 2025 with ~13 million BO at an average floor price of $64.87 per Bbl and FY 2026 with ~23 million BO at an average floor price of $65.44 per Bbl[11] - An analysis suggests that Ring Energy is trading at a discount, with a potential share price of $2.51 based on APA Divestiture and MNR Acquisition valuation metrics[56]

Core Insights - Ring Energy reported revenue of $82.6 million for the quarter ended June 2025, a decrease of 16.7% year-over-year, with EPS at $0.10 compared to $0.12 in the same quarter last year [1] - The revenue exceeded the Zacks Consensus Estimate of $81.11 million by 1.85%, while the EPS surprised positively by 900% against the consensus estimate of $0.01 [1] Financial Performance Metrics - Average realized sales price for natural gas was $-1.31 per thousand cubic feet, significantly lower than the estimated $0.46 [4] - Net sales volumes for oil were reported at 1,320.51 MBBL, slightly above the estimated 1,296.00 MBBL [4] - Net sales volumes for natural gas were 1,703.81 MMcf, below the estimated 1,867.50 MMcf [4] - Average realized sales price for oil was $62.69, exceeding the estimated $59.74 [4] - Revenues from oil were $82.78 million, compared to the average estimate of $78.67 million, reflecting a year-over-year decline of 16.6% [4] - Revenues from natural gas liquids were $2.06 million, above the estimated $1.55 million, but down 26.9% year-over-year [4] - Revenues from natural gas were reported at $-2.24 million, significantly lower than the estimated $0.84 million, representing a 24.7% decline year-over-year [4] Stock Performance - Over the past month, shares of Ring Energy have returned -4.7%, contrasting with the Zacks S&P 500 composite's +0.5% change [3] - The stock currently holds a Zacks Rank 4 (Sell), indicating potential underperformance relative to the broader market in the near term [3]

Group 1 - Ring Energy reported quarterly earnings of $0.1 per share, exceeding the Zacks Consensus Estimate of $0.01 per share, but down from $0.12 per share a year ago, representing an earnings surprise of +900.00% [1] - The company posted revenues of $82.6 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 1.85%, but down from $99.14 million year-over-year [2] - Over the last four quarters, Ring Energy has surpassed consensus EPS estimates two times and topped consensus revenue estimates two times [2] Group 2 - The stock has underperformed, losing about 45.3% since the beginning of the year, compared to the S&P 500's gain of 7.1% [3] - The current consensus EPS estimate for the coming quarter is $0.03 on revenues of $83.18 million, and for the current fiscal year, it is $0.12 on revenues of $318.96 million [7] - The Zacks Industry Rank for Oil and Gas - Exploration and Production - United States is currently in the bottom 27% of over 250 Zacks industries, indicating potential underperformance compared to higher-ranked industries [8]

PART I — FINANCIAL INFORMATION [Item 1. Condensed Financial Statements](index=7&type=section&id=Item%201.%20Condensed%20Financial%20Statements) This section presents the unaudited condensed balance sheets, statements of operations, stockholders' equity, and cash flows, along with detailed notes on accounting policies and key financial components [Condensed Balance Sheets](index=8&type=section&id=Condensed%20Balance%20Sheets) The balance sheet as of June 30, 2025, shows an increase in total assets to **$1.52 billion** from **$1.41 billion** at year-end 2024, primarily driven by growth in oil and natural gas properties, with total liabilities increasing to **$618.4 million** and total stockholders' equity growing to **$897.9 million** Condensed Balance Sheet Summary (in millions) | Balance Sheet Items | June 30, 2025 ($) | December 31, 2024 ($) | | :--- | :--- | :--- | | **Total Current Assets** | 62.4 | 50.4 | | **Net Properties and Equipment** | 1,435.2 | 1,342.1 | | **Total Assets** | **1,516.3** | **1,408.1** | | **Total Current Liabilities** | 98.3 | 105.0 | | **Revolving line of credit** | 448.0 | 385.0 | | **Total Liabilities** | **618.4** | **549.5** | | **Total Stockholders' Equity** | **897.9** | **858.6** | [Condensed Statements of Operations](index=9&type=section&id=Condensed%20Statements%20of%20Operations) For the three months ended June 30, 2025, revenues decreased to **$82.6 million** from **$99.1 million** year-over-year, while net income slightly declined to **$20.6 million** from **$22.4 million**, though for the six-month period, net income increased to **$29.7 million** from **$27.9 million** due to derivative gains Key Operational Results (in millions, except EPS) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | **Revenues** | $82.6 | $99.1 | $161.7 | $193.6 | | **Income from Operations** | $23.5 | $41.8 | $45.8 | $79.4 | | **Net Income** | $20.6 | $22.4 | $29.7 | $27.9 | | **Diluted EPS** | $0.10 | $0.11 | $0.15 | $0.14 | [Condensed Statement of Stockholders' Equity](index=10&type=section&id=Condensed%20Statement%20of%20Stockholders%20Equity) Stockholders' equity increased from **$858.6 million** at the end of 2024 to **$897.9 million** as of June 30, 2025, primarily driven by net income of **$29.7 million** and a **$7.4 million** common stock issuance for the Lime Rock Acquisition Changes in Stockholders' Equity (For the Six Months Ended June 30, 2025) | Description | Amount ($) | | :--- | :--- | | **Balance, December 31, 2024** | 858,639,982 | | Common stock issuance for Lime Rock Acquisition | 7,420,811 | | Net income | 29,745,625 | | Share-based compensation | 1,690,958 | | Payments for tax withholdings, net | (953,446) | | **Balance, June 30, 2025** | **897,895,769** | [Condensed Statements of Cash Flows](index=11&type=section&id=Condensed%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2025, net cash from operating activities decreased to **$61.7 million** from **$95.8 million** year-over-year, while net cash used in investing activities significantly increased to **$121.0 million** due to the Lime Rock Acquisition, leading to net cash provided by financing activities of **$57.4 million** Cash Flow Summary (For the Six Months Ended June 30) | Cash Flow Activity | 2025 ($) | 2024 ($) | | :--- | :--- | :--- | | **Net Cash Provided by Operating Activities** | 61,668,259 | 95,807,099 | | **Net Cash Used in Investing Activities** | (120,966,327) | (76,367,768) | | **Net Cash Provided by (Used in) Financing Activities** | 57,431,673 | (18,556,903) | | **Net (Decrease) Increase in Cash** | (1,866,395) | 882,428 | [Notes to the Condensed Financial Statements](index=13&type=section&id=Notes%20to%20the%20Condensed%20Financial%20Statements) This section provides detailed explanations of the company's accounting policies and specific financial items, including the Lime Rock Acquisition, derivative instruments, the revolving line of credit, and the determination of a single reportable segment - The company completed the Lime Rock Acquisition on March 31, 2025, for a total consideration of **$87.7 million**, consisting of cash, common stock, and a deferred payment, with the transaction accounted for as an asset acquisition[99](index=99&type=chunk)[100](index=100&type=chunk)[102](index=102&type=chunk) - The company utilizes derivative instruments (swaps and collars) to manage commodity price risk, with the fair value of derivative assets at **$21.4 million** and liabilities at **$6.2 million** as of June 30, 2025, which are not designated as hedges for accounting purposes[103](index=103&type=chunk)[106](index=106&type=chunk)[120](index=120&type=chunk) - On June 18, 2025, the company amended its credit agreement, which has a borrowing base of **$585 million** and matures in June 2029, with **$448 million** outstanding as of June 30, 2025[122](index=122&type=chunk)[123](index=123&type=chunk)[127](index=127&type=chunk) - The company determined it has a single reportable segment, Exploration and Production, as its operations in the Permian Basin exhibit similar economic characteristics and are managed by a single chief operating decision maker group[144](index=144&type=chunk)[146](index=146&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=43&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) The MD&A section details the company's operational and financial performance, strategic focus, and market conditions, including the Lime Rock Acquisition, ongoing drilling activities, and the impact of commodity prices on revenues and production costs [Overview and 2025 Developments](index=43&type=section&id=Overview%20and%202025%20Developments) The company focuses on oil and natural gas development in the Permian Basin, balancing debt reduction and production growth, with a major development in 2025 being the Lime Rock Acquisition and continued drilling activities - The company's primary business strategy is to balance long-term debt reduction with the development of its oil and gas properties, aiming to operate within its generated cash flow[156](index=156&type=chunk) - On March 31, 2025, the company completed the Lime Rock Acquisition, acquiring oil and gas interests in Andrews County, Texas[158](index=158&type=chunk) Drilling and Completion Activity H1 2025 | Quarter | Area | Wells Drilled | Wells Completed | | :--- | :--- | :--- | :--- | | **1Q 2025** | Northwest Shelf (Horizontal) | 4 | 4 | | | Central Basin Platform (Vertical) | 3 | 3 | | **2Q 2025** | Central Basin Platform (Horizontal) | 1 | 1 | | | Central Basin Platform (Vertical) | 1 | 1 | | **Total** | | **9** | **9** | [Results of Operations](index=46&type=section&id=Results%20of%20Operations) This sub-section provides a detailed comparison of financial results for the three and six months ended June 30, 2025, and 2024, highlighting a **17%** decrease in Q2 2025 revenues to **$82.6 million** due to a **22%** drop in average realized oil price, despite an **8%** increase in total production volume Q2 2025 vs. Q2 2024 Performance | Metric | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | **Total Sales** | $82.6M | $99.1M | (17)% | | **Total Production (Boe)** | 1,937,850 | 1,800,570 | 8% | | **Average Oil Price (per Bbl)** | $62.69 | $80.09 | (22)% | | **Lease Operating Expenses (LOE)** | $20.2M | $19.3M | 5% | | **Average LOE per Boe** | $10.45 | $10.72 | (3)% | H1 2025 vs. H1 2024 Performance | Metric | H1 2025 | H1 2024 | % Change | | :--- | :--- | :--- | :--- | | **Total Sales** | $161.7M | $193.6M | (16)% | | **Total Production (Boe)** | 3,593,109 | 3,532,627 | 2% | | **Average Oil Price (per Bbl)** | $66.17 | $77.93 | (15)% | | **Lease Operating Expenses (LOE)** | $39.9M | $37.7M | 6% | | **Average LOE per Boe** | $11.11 | $10.66 | 4% | - For Q2 2025, the company recorded a gain on derivative contracts of **$14.6 million**, a significant reversal from the **$1.8 million** loss in Q2 2024, primarily due to changes in crude oil futures prices[197](index=197&type=chunk)[199](index=199&type=chunk) [Liquidity and Capital Resources](index=57&type=section&id=Liquidity%20and%20Capital%20Resources) As of June 30, 2025, the company had no cash on hand, with net cash from operations for H1 2025 at **$61.7 million**, down from **$95.8 million** YoY, and **$448 million** outstanding on its **$585 million** borrowing base credit facility, maintaining a strategic focus on maximizing cash flow and reducing debt - Net cash provided by operating activities for H1 2025 was **$61.7 million**, a decrease from **$95.8 million** in H1 2024, primarily due to lower revenues[209](index=209&type=chunk) - As of June 30, 2025, the company had **$448 million** outstanding on its credit facility, which has a borrowing base of **$585 million** and matures in June 2029[211](index=211&type=chunk) - The company maintains a portfolio of oil and gas hedges (swaps and collars) extending into Q2 2027 to manage price risk and increase cash flow predictability[212](index=212&type=chunk)[213](index=213&type=chunk)[214](index=214&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=60&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risks are commodity price volatility, customer credit risk, and interest rate fluctuations, with commodity price risk actively managed through hedging and interest rate risk on its variable-rate credit facility potentially impacting annual interest expense by an estimated **$4.5 million** for a **1%** rate change - The company's major market risk is commodity price volatility for its oil and natural gas production, which it mitigates by entering into hedging arrangements[223](index=223&type=chunk)[224](index=224&type=chunk) Customer Concentration (H1 2025) | Purchaser | % of Revenues | % of A/R | | :--- | :--- | :--- | | Phillips 66 Company | 66% | 73% | | Concord Energy LLC | 13% | 10% | | NGL Crude Partners | 9% | 7% | - The company is exposed to interest rate risk on its **$448 million** of variable-rate debt, where a **1%** change in interest rates would result in an estimated **$4.5 million** change in annual interest expense[227](index=227&type=chunk)[228](index=228&type=chunk) [Item 4. Controls and Procedures](index=61&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2025, ensuring timely and accurate reporting, with no material changes to internal control over financial reporting during the quarter - Management concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[233](index=233&type=chunk) - There were no changes in internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal controls[236](index=236&type=chunk) PART II — OTHER INFORMATION [Item 1. Legal Proceedings](index=61&type=section&id=Item%201.%20Legal%20Proceedings) There were no material developments in legal proceedings during the quarter ended June 30, 2025 - No material developments occurred in the company's legal proceedings during the quarter ended June 30, 2025[238](index=238&type=chunk) [Item 1A. Risk Factors](index=61&type=section&id=Item%201A.%20Risk%20Factors) This section refers the reader to the company's Annual Report on Form 10-K for the year ended December 31, 2024, for a detailed discussion of risk factors, stating that the company is subject to various risks and hazards inherent in its business - For a discussion of risk factors, the report directs readers to "Item 1A. Risk Factors" in the Annual Report on Form 10-K for the year ended December 31, 2024[239](index=239&type=chunk) [Other Items (Items 2, 3, 4, 5, 6)](index=61&type=section&id=Other%20Items%20(Items%202,%203,%204,%205,%206)) This section consolidates minor items, including the incorporation by reference of a Form 8-K regarding unregistered sales of equity securities, confirmation of no defaults on senior securities or mine safety issues, and a listing of exhibits filed with the report - Information regarding unregistered sales of equity securities was previously disclosed in a Form 8-K filed on April 4, 2025, and is incorporated by reference[240](index=240&type=chunk) - The company reports no defaults upon senior securities and has no mine safety disclosures to report[241](index=241&type=chunk)[242](index=242&type=chunk) - No directors or officers adopted, terminated, or modified a Rule 10b5-1 trading arrangement during the quarter[243](index=243&type=chunk)