Ring Energy Navigates Capital Cuts with Resilient 2% Production Growth in 2025

Ring Energy (RING) has demonstrated remarkable resilience in its first quarter of 2025, achieving a 2% year-over-year production growth despite slashing its capital spending by 36% for the year. The company’s strategic focus on cost discipline, operational efficiency, and accretive acquisitions has positioned it to weather volatile oil markets while maintaining its growth trajectory.

Key Drivers of Resilience: Production Growth Amid Reduced Spending

Ring Energy reported Q1 2025 sales volumes of 18,392 BOE/d, surpassing the midpoint of its guidance. While oil sales dipped 10% year-over-year (to 12,074 Bo/d), the acquisition of Lime Rock’s Central Basin Platform (CBP) assets in March 2025 added 2,300 BOE/d (75% oil), offsetting declines and driving total production growth. CEO Paul McKinney emphasized that the Lime Rock deal—funded with $70.9 million—was “highly accretive”, boosting reserves by $121 million and expanding Ring’s acreage by 17,700 net acres.

The company’s operational efficiency also shone:
- Lease Operating Expenses (LOE) fell to $11.89/BOE, below guidance.
- Capital expenditures dropped 14% sequentially to $32.5 million, with a 36% annual reduction in full-year spending to $85–113 million.
- Adjusted EBITDA of $46.4 million reflected disciplined cost management.

Strategic Adjustments to Navigate Volatility

Ring Energy’s capital spending cuts were a direct response to lower oil prices—Q1 2025 realized prices averaged $70.40/BO, down 7% from 2024. The company prioritized high-return projects, allocating 61% of capital to drilling/completions and 33% to recompletions, while scaling back drilling plans to 2–3 wells in Q2 (from 4 in Q1). Notably, management expects only a 5% drop in annual sales volumes despite reduced spending, underscoring the effectiveness of its efficiency gains.

The strategy also prioritized balance sheet strength:
- Liquidity remains robust at $141.1 million, with $140 million borrowing base availability under its $600 million credit facility.
- Debt stands at $460 million, but the company aims to reduce leverage to below 1.0x by directing cash flow toward debt repayment.

Risks and Considerations

While Ring Energy’s approach is prudent, risks remain:
- Commodity Price Sensitivity: The company’s 47% oil hedging (at $64.44/BO) and 37% gas hedging (at $3.43/Mcf) provide downside protection, but prolonged low prices could strain margins.
- Execution Risks: Scaling back drilling to 11–13 wells in H2 requires flawless execution to meet production targets.

Conclusion: A Balanced Play for Energy Investors

Ring Energy’s 2% production growth in 2025 is a testament to its ability to prioritize value over volume in a challenging environment. With $121 million in accretive reserves, $5.8 million in Q1 free cash flow, and a 2% annual production growth target, the company is well-positioned to capitalize on recovery in oil prices while strengthening its financial footing.

Investors should note:
- Risk-Adjusted Reward: The stock’s forward EV/EBITDA of 4.2x (vs. peers at 5.5x) reflects undervaluation.
- Liquidity and Leverage: A $140 million borrowing base and plans to reduce leverage below 1.0x enhance stability.

Ring Energy’s disciplined strategy—balancing growth with prudence—makes it a compelling play for investors seeking exposure to a resilient, cost-conscious oil producer in an uncertain market.