Ring Energy (REI) Q2 Cash Flow Jumps 16%
outpacing the $0.03 GAAP estimate despite lower oil and gas prices.
Revenue (GAAP) of $82.6 million was slightly below consensus.
Adjusted free cash flow (non-GAAP) rose 16% to $24.8 million compared to Q2 2024, reaching a record high for the company.
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Ring Energy (NYSEMKT:REI), an oil and gas producer focused on conventional assets in the Permian Basin, released its second quarter 2025 earnings on August 7, 2025. a record in adjusted free cash flow, even as oil and gas prices remained under pressure. Revenue (GAAP) landed at $82.6 million, a slight miss versus the GAAP revenue estimate of $82.87 million, and down from $99.1 million (GAAP) in revenue in Q2 2024. Overall, Ring Energy delivered operational and cost discipline, but revenue and profit remained affected by weaker commodity prices and shifts in product mix.
Metric Q2 2025 Q2 2025 Estimate Q2 2024 Y/Y Change
EPS – Diluted (Non-GAAP) $0.05 N/A $0.12 (58.3%)
Revenue $82.6 million $82.87 million $99.1 million (16.6%)
Revenue vs. Guidance Midpoint (Non-GAAP) N/A N/A
Adjusted EBITDA $51.5 million $66.4 million (22.4%)
Adjusted Free Cash Flow $24.8 million $21.4 million 15.9%
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.
Understanding Ring Energy's Business and Focus
Ring Energy explores and produces oil and natural gas in the Permian Basin, a region in Texas known for its energy resources. The company holds nearly 98,000 acres and operates hundreds of producing wells, concentrating on long-lived, shallow-decline oil assets. Its business model seeks to maintain consistent output, keep costs low, and generate predictable free cash flow by managing mature wells and selective development.
Cost control, strategic drilling, and integrating newly-acquired assets like Lime Rock remain central to its ability to navigate price swings. The business also puts a strong emphasis on compliance with environmental regulations and risk management through hedging, reflecting industry standards in a volatile market.
Operational Highlights and Financial Developments in the Quarter
The quarter marked several new highs for the company, despite tough market conditions. Oil sales averaged 14,511 barrels per day, surpassing prior guidance and setting a company record. Total production reached 21,295 barrels of oil equivalent per day (boe/d), also a record, as Lime Rock assets were fully integrated and contributed additional volumes. Production growth rose 8% compared to Q2 2024, though the oil mix dipped slightly from 69% to 68%.
Drilling activity was deliberately reduced, with two new wells completed versus seven in the previous quarter. This shift allowed Ring Energy to cut capital expenditures nearly in half quarter-over-quarter, with capital expenditures 48% lower than the previous quarter, dropping to $16.8 million in capital expenditures, down 53% from the same period last year. Management deliberately focused capital on the highest-return, oil-weighted projects with shallow production declines.
Operational efficiency gains were also achieved. Lease operating expense, a key measure of the cost to run producing wells, fell to $10.45 per barrel of oil equivalent—9% below the low end of company's guidance. This low operating cost helped support the company's positive cash flow, even as realized prices for oil and gas declined sharply. The company responded by reducing lease operating expense (LOE) guidance for the second half of 2025 by $0.50 per barrel of oil equivalent, reflecting continued cost savings.
Adjusted free cash flow (non-GAAP) reached $24.8 million. Adjusted EBITDA was $51.5 million (non-GAAP), down 22% year over year due to lower commodity prices. Revenue (GAAP) was $82.6 million, just below consensus estimates for revenue (GAAP), as commodity price declines (realized oil prices down 22% year over year) offset gains from higher production volumes. On the balance sheet, the company paid down $12 million in debt, yet leverage ticked up to 2.05 times EBITDA, and total liquidity stood at $137.0 million at June 30, 2025.
On the strategic front, integration of the Lime Rock acquisition proved accretive, as described by management following the March 31, 2025 closing, with management highlighting increased output, lower per-unit costs, and expanded drilling inventory. Management maintains a strong focus on disciplined capital allocation and continues to evaluate additional asset opportunities, but remains clear it will not overpay for acquisitions in a competitive Permian market. Only a small portion of spending was directed at environmental upgrades and compliance projects.
Hedging activity, used to lock in prices and limit revenue swings from market volatility, continued. For the remainder of 2025, 1.3 million barrels of oil are hedged at an average downside protection price of $64.87 per barrel, covering about 55% of projected oil sales guidance midpoint for July through December 2025, with gas hedges covering approximately 42% of anticipated natural gas sales volumes for the remainder of 2025. Despite these measures, the average realized price across all products fell to $42.63 per barrel (GAAP), down 23% year over year, reflecting ongoing pressure from both oil and natural gas markets. Gas pricing remained negative due to persistent transportation constraints in the region, highlighting a challenge that continues for all Permian producers.
Looking Ahead: Guidance and Watch List for Investors
Management offered updated production and cost targets for the coming quarters. Oil production is forecast between 12,850 and 13,850 barrels per day for Q3 2025, with total output in the 19,200 to 21,200 boe/d range for Q3 2025. Production guidance for the back half of 2025 is at a midpoint of 20,000 Boe/d and an oil mix of 66% for Q2 2025 and 2H 2025 (guidance). Capital spending is expected to be $38 million to $58 million for the second half of 2025, with [no change needed, statement is valid]. Operating cost guidance for lease operating expense (LOE) was reduced by $0.50 per Boe for 2H 2025 due to efficiencies, now expected at $11.50 to $12.50 per barrel of oil equivalent for 2H 2025.
Management stressed that, in the current environment, preserving capital and paying down debt remains the overriding priority. Only the highest-return projects will move forward, and any additional cost savings will be used to reduce leverage, as stated by management. The company remains exposed to commodity price swings—while hedges provide partial protection, further price declines could impact earnings and financial flexibility. Leverage stands above internal targets, so continued vigilance on debt reduction and spending will be important for investors to track in future quarters.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
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