Ring Energy – Q2 Operations & Financials, Oil Production Growth Within The Central Permian Basin
Summary
Ring Energy (REI) posted Q2 2026 net income of $64.8M, Adjusted EBITDA up 42% sequentially, and produced 12,683 barrels of oil per day within guidance.
Management pivoted 2026 capex toward mostly two-mile horizontal wells in the Central Basin Platform, targeting about 10% production growth in 2027 on a smaller capital program.
CFO Sonu Johl says breakevens stay below $60 WTI even covering full G&A and corporate costs, and the team targets net debt leverage below 1.25x by mid-2027 at $75 oil.
A roughly $69M equity raise in May 2026 was used to repay revolver debt, giving the team optionality to redirect excess cash flow into growth drilling instead of debt paydown.
CEO Paul McKinney argues that long-lateral horizontal drilling is reopening conventional multi-bench inventory in the Central Basin, where public-company competition remains surprisingly thin.
Paul McKinney's takeaways
- Top takeaway The guest argues Ring Energy has a runway on the Central Basin Platform that public peers are not contesting — most active operators there are private — and says he prefers leasing drillable land from mineral owners over acquisitions to grow organically without overpaying
- Says applying modern two-mile horizontal drilling and multi-stage fracs to multi-stack pay zones is unlocking conventional reservoirs on the Central Basin Platform that were historically written off as uneconomic under older vertical technology
- Joins as chairman and CEO in 2020 at the board's request when the company was producing about 8,600 barrels a day with leverage above 4x; since then oversaw three acquisitions — Stronghold in summer 2022 (50% debt / 50% equity), the Founders deal in Hector County TX, and Lime Rock in Q1 2025 in Andrews County
- Targets a leverage ratio at or just below 1x; states the development program is stress-tested to remain free-cash-flow positive down to $60 WTI in 2027 and that breakevens (including full G&A and corporate costs) sit well below that, so the capital outlook would not change absent a deeper price shock
- Hired James Parr as VP / chief exploration officer from an Anadarko and Apache background to run an in-house exploration group, framing organic prospect generation as a third leg of growth alongside acquisitions and leasing
Sonu Johl's takeaways
- Top takeaway The guest argues the equity is mispriced — says approved reserves alone imply a stock price above $3.50 versus a sub-$400M market cap, and that at a $75 oil deck the company is tracking roughly $250M of 2027 EBITDA and trading near 3x forward EBITDA, a discount to Central Basin peers
- Closed an equity raise in May 2025 of close to $69M and deployed the entire proceeds to debt paydown, which he describes as giving the company optionality to redeploy excess cash flow into growth capex in the second half of 2026 instead of straight deleveraging
- Raised 2026 capital guidance from an original $130M toward $160–170M as the program pivoted from verticals and shorter laterals toward two-mile horizontal wells and additional infrastructure, while targeting about 10% production growth into 2027 on lower spend and fewer than 20 horizontal wells
- States Ring has been free-cash-flow positive for six consecutive years and will be seven by year-end 2026, generating roughly $50M of free cash flow per quarter at current prices, with about $360M of debt and leverage around 1.9x
- Hedging program rolls 24 months forward with roughly 5,000 barrels a day hedged for 2027 using wide collars that capture both higher ceilings and higher floors than last year's structures; says stress testing shows free-cash-flow positivity even at $60 WTI on the accelerated 2027 program