Ring Energy(REI) - 2025 Q2 - Quarterly Results

Q2 2025 Financial and Operational Results Overview and Management Commentary 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] - The company's strategic focus is on maximizing cash flow, controlling costs, and prioritizing debt reduction to strengthen its financial position[5] 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 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] Operational Performance 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][11][12] Balance Sheet and Liquidity 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] - The company paid down $12 million of debt in Q2 2025, reducing borrowings on its credit facility from $460 million to $448 million[9] - A new credit agreement was established with an extended maturity of 34 months to June 2029 and a borrowing base of $585 million[4] Updated Guidance Second Half 2025 and Q3 Sales Volumes, Capital Investment and Operating Expense Guidance 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] - Full-year 2025 capital expenditures guidance is now set at a midpoint of $97 million[14] - 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] Financial Statements Condensed Statements of Operations 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 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 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 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 Financial Commodity Derivative Positions 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] 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 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 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 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) 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 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 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 |