Ring Energy to expand Permian Basin operations with $100m acquisition

Ring Energy, Inc. has taken a decisive step toward expanding its footprint in the Permian Basin with the acquisition of the Central Basin Platform assets from Lime Rock Resources IV, LP. The $100 million transaction is expected to provide substantial operational synergies and strengthen the company’s position as a leading consolidator of conventional oil assets. The move aligns with Ring Energy’s strategic focus on integrating high-quality, oil-weighted properties that enhance cash flow and improve financial stability.

With an effective date of October 1, 2024, and an expected closure by the end of the first quarter of 2025, this acquisition is projected to accelerate debt reduction and bolster the company’s drilling inventory. The assets, located in Andrews County, Texas, will complement Ring Energy’s existing operations at Shafter Lake. This expansion reinforces the company’s long-term strategy of targeting shallow-decline, high-margin production with a portfolio that immediately competes for capital.

What Are the Financial Terms of the $100 Million Acquisition?

The acquisition is structured with a combination of cash and equity, ensuring a balanced approach to financial obligations. Ring Energy will pay $80 million in upfront cash, a $10 million deferred cash payment due nine months after closing, and issue up to 7.4 million shares of its common stock. The equity portion of the deal is based on the company’s 10-day volume-weighted average stock price of $1.35 per share as of February 24, 2025.

Funding for the transaction will come from a combination of cash on hand and borrowings under the company’s existing credit facility. This structured payment method allows Ring Energy to manage liquidity while maintaining operational flexibility. Given the assets’ ability to generate meaningful adjusted free cash flow, the company anticipates a swift return on investment, further strengthening its financial position.

How Does This Acquisition Align With Ring Energy’s Growth Strategy?

Ring Energy has consistently pursued a disciplined approach to acquiring and integrating strategic assets within the Permian Basin. This latest transaction follows the company’s successful acquisition of Founders Oil & Gas in 2023, which outperformed initial projections by increasing production by over 40% and reducing lifting costs by approximately 20%.

The newly acquired Central Basin Platform properties offer a strong production base with significant operational efficiencies. The assets include approximately 17,700 net acres, with production averaging 2,300 barrels of oil equivalent per day as of the third quarter of 2024. Over 80% of this output is oil, aligning with Ring Energy’s goal of expanding its high-margin, oil-weighted portfolio.

By integrating these assets, Ring Energy is poised to capitalize on cost savings and field-level optimization. The company has identified multiple horizontal drilling targets, increasing the potential for future development. These strategic additions will enhance the company’s drilling inventory and provide opportunities for further production growth.

What Are the Expected Operational Synergies and Cost Savings?

The Central Basin Platform acquisition is expected to deliver substantial operational synergies by seamlessly integrating into Ring Energy’s existing infrastructure. The company has identified opportunities to reduce costs through improved efficiency, enhanced drilling techniques, and economies of scale.

Historically, Ring Energy has demonstrated a strong ability to optimize acquired assets. The success of the Founders Oil & Gas acquisition provides a clear precedent for the company’s ability to enhance production while driving down operational expenses. Management expects to apply a similar approach to the newly acquired Lime Rock assets, focusing on cost-effective production methods and leveraging existing infrastructure to maximize profitability.

How Will This Deal Impact Ring Energy’s Financial Outlook?

The transaction is expected to be accretive to key financial and operational metrics. Notably, the acquired assets have an estimated Proved Developed PV-10 valuation of $120 million based on February 19, 2025, NYMEX strip pricing. Given the purchase price, this translates to a valuation at less than 85% of Proved Developed PV-10, representing an attractive investment for shareholders.

Additionally, the acquired properties are forecasted to generate approximately $34 million in adjusted EBITDA in 2025. This free cash flow will allow the company to accelerate debt reduction while maintaining a disciplined approach to capital allocation. Ring Energy’s strategic focus on acquisitions that deliver immediate financial benefits underscores its commitment to shareholder value.

What Does This Mean for Ring Energy’s Position in the Permian Basin?

This acquisition solidifies Ring Energy’s role as a key player in the Permian Basin’s conventional oil segment. By expanding its asset base in a region known for its stable production and long-life reserves, the company is positioning itself for sustained growth.

With a portfolio that includes over 40 gross drilling locations that immediately compete for capital, the company is poised to continue expanding production while maintaining a focus on cost efficiency. The acquisition reinforces Ring Energy’s standing as a disciplined consolidator, leveraging strategic deals to drive long-term success.

How Has the Market Responded to the Acquisition Announcement?

Investor sentiment following the announcement has been positive, with Ring Energy’s stock price rising by 6.3% in pre-market trading. This uptick suggests confidence in the company’s ability to execute its acquisition strategy effectively. The market response reflects optimism about the potential for enhanced cash flow, debt reduction, and future production growth.

Financial analysts have noted that the acquisition aligns well with Ring Energy’s long-term objectives and offers a compelling value proposition. The deal’s structure, which balances upfront cash with equity, minimizes immediate financial strain while allowing the company to capitalize on long-term growth opportunities.

What Are the Next Steps for Ring Energy Following This Acquisition?

With the transaction expected to close by the end of the first quarter of 2025, Ring Energy will focus on the seamless integration of the Central Basin Platform assets into its existing operations. The company has outlined a strategy to apply its proven operational expertise to maximize efficiency and optimize production from the newly acquired properties.

Ring Energy remains committed to disciplined capital allocation and debt reduction while continuing to explore additional opportunities for strategic growth. The success of past acquisitions provides a strong foundation for the company’s ongoing expansion efforts.

As the oil and gas industry continues to evolve, Ring Energy’s focus on high-margin, oil-weighted assets positions it well for future success. The company’s ability to execute strategic acquisitions and optimize production will be critical in driving long-term shareholder value.