Ring Energy secures Founders Oil & Gas Central Basin Platform assets to boost Permian Basin position
Ring Energy, Inc. (NYSE American: REI), a key player in the energy sector, has successfully concluded its highly anticipated acquisition of Founders Oil & Gas IV, LLC’s Central Basin Platform (CBP) assets. These strategic assets, prominently situated in the heart of Texas’s Permian Basin in Ector County, span approximately 3,600 net acres. They align seamlessly with Ring Energy’s CBP assets obtained in 2022 from Stronghold Energy Operating II, LLC.
Key highlights from this acquisition include an immediate boost to Ring Energy’s production, reserves, and Adjusted Free Cash Flow. The deal not only fast-tracks Ring Energy’s capacity to pare down debt but also amplifies its stockpile of low-risk, high return drilling locales. This added inventory paves the way for enhanced capital allocation agility for the company.
Ring Energy disclosed its intention to assimilate Founders Oil & Gas IV, LLC’s CBP assets in July 2023, earmarking a $75 million cash transaction.
The assets, reminiscent of Ring Energy’s 2022 CBP acquisitions from Stronghold Energy Operating II, LLC, produced an estimated 2,500 net barrels of oil daily in Q2 2023, with an impressive 99% working interest. These assets, laden with significant economic returns, present approximately 50 undeveloped drilling locations, promising cost-efficiency and heightened efficacy.
Paul D. McKinney, Ring Energy’s CEO and Board Chairman, expressed enthusiasm over the completion of the acquisition. “This transaction harmonizes perfectly with our conventional-focused CBP assets in the Permian Basin. We are swiftly transitioning to incorporate these operations and strategizing detailed development agendas for these newly-acquired assets,” he said. McKinney emphasized leveraging their profound expertise, implementing cutting-edge conventional and unconventional technologies, and delivering on the company’s long-term objectives for stakeholders.
The transaction’s financial details reveal a staggered payment structure, which includes an initial cash deposit of $7.5 million, processed on July 11, 2023, a subsequent cash payment of around $42.5 million at the deal’s closure, and a deferred cash sum of $15.0 million, expected by December 15, 2023.
To finance the closing payment, Ring Energy leveraged its senior revolving credit mechanism.
On the advisory front, Raymond James exclusively spearheaded the financial advice, with Jones & Keller, P.C. stepping in for legal counsel on behalf of Ring Energy. In contrast, TenOaks Energy Advisors exclusively catered to Founders’ financial and technical advice, with legal guidance provided by O’Melveny & Myers LLP.