Ring Energy, Inc. (REI) Bundle
Understanding Ring Energy, Inc. (REI) Revenue Streams
Understanding Ring Energy, Inc.’s Revenue Streams
Ring Energy, Inc. generates revenue primarily from the sale of oil, natural gas, and natural gas liquids (NGLs). The following analysis provides a detailed breakdown of these revenue streams, historical trends, and their contributions to overall revenue.
Breakdown of Primary Revenue Sources
Revenue Source | Q3 2024 Revenue | Q3 2023 Revenue | Change ($) | Change (%) |
---|---|---|---|---|
Oil | $90,416,363 | $90,392,004 | $24,359 | —% |
Natural Gas | $(3,859,603) | $562,374 | $(4,421,977) | (786)% |
NGLs | $2,687,623 | $2,727,420 | $(39,797) | (1)% |
Total Sales | $89,244,383 | $93,681,798 | $(4,437,415) | (5)% |
Year-over-Year Revenue Growth Rate
For the nine months ended September 30, 2024, the total sales increased to $282,886,868 from $261,113,283 in the same period of 2023, representing an increase of $21,773,585 or 8%.
Contribution of Different Business Segments to Overall Revenue
Segment | 2024 Revenue | 2023 Revenue | Change ($) | Change (%) |
---|---|---|---|---|
Oil | $282,000,446 | $252,020,403 | $29,980,043 | 12% |
Natural Gas | $(7,650,645) | $526,161 | $(8,176,806) | NM |
NGLs | $8,537,067 | $8,566,719 | $(29,652) | 0% |
Total Sales | $282,886,868 | $261,113,283 | $21,773,585 | 8% |
Analysis of Significant Changes in Revenue Streams
The oil revenue segment saw a significant increase in sales, attributed to both higher sales volumes and improved market conditions, leading to an increase of 12% year-over-year. In contrast, natural gas revenue experienced a drastic decline to $(7,650,645) due to a combination of volume increases being offset by lower realized prices, resulting in a net loss for the quarter. The average realized price per Mcf for natural gas was $(1.61) in Q3 2024 compared to $0.36 in Q3 2023, reflecting a significant shift in market dynamics.
NGL sales remained relatively stable with a slight decrease of 0%. The overall revenue composition highlights the volatility and challenges faced in the natural gas market, contrasting with the stability seen in oil revenues.
A Deep Dive into Ring Energy, Inc. (REI) Profitability
Profitability Metrics
Gross Profit Margin: The gross profit margin for the nine months ended September 30, 2024, was approximately 12.5%, compared to 14.9% for the same period in 2023.
Operating Profit Margin: The operating profit margin for the nine months ended September 30, 2024, was 10.5%, while it stood at 8.6% for the nine months ended September 30, 2023.
Net Profit Margin: The net profit margin for the nine months ended September 30, 2024, was 22.5%, an increase from 20.7% in 2023.
Trends in Profitability Over Time
The overall profitability metrics show a mixed trend. The gross profit margin decreased from 14.9% to 12.5%, indicating a decline in cost efficiency. However, operating profit margin improved from 8.6% to 10.5%, suggesting better management of operating expenses. The net profit margin increased from 20.7% to 22.5%, reflecting improved overall profitability despite the drop in gross margin.
Comparison of Profitability Ratios with Industry Averages
When comparing profitability ratios with industry averages, the following is noted:
- Gross Profit Margin: Industry average is approximately 15%, indicating that the company is slightly below average.
- Operating Profit Margin: Industry average is around 10%, showing that the company is performing better than average.
- Net Profit Margin: Industry average is approximately 20%, indicating the company is above average in net profitability.
Analysis of Operational Efficiency
Operational efficiency can be evaluated through various metrics:
Metric | Q3 2024 | Q3 2023 | Change |
---|---|---|---|
Lease Operating Expenses (LOE) | $20,315,282 | $18,015,348 | +12.7% |
Average LOE per Boe | $10.98 | $11.18 | -1.8% |
Depreciation, Depletion & Amortization (DD&A) | $25,662,123 | $21,989,034 | +16.6% |
Total G&A Expenses | $6,421,567 | $7,083,574 | -9.3% |
G&A per Boe | $3.47 | $4.40 | -21.1% |
The increase in lease operating expenses reflects a rise in production activities, while the decrease in G&A per Boe highlights improved cost management and efficiency in administrative functions.
Overall, while gross profit margins have declined, operational efficiency improvements in G&A expenses and operating margins suggest a positive trajectory in profitability metrics.
Debt vs. Equity: How Ring Energy, Inc. (REI) Finances Its Growth
Debt vs. Equity: How Ring Energy, Inc. Finances Its Growth
As of September 30, 2024, Ring Energy, Inc. reported long-term debt of $392 million and a revolving credit facility that matures in August 2026. The company has been actively managing its debt levels, achieving net paydowns of $15 million on its revolving line of credit during the third quarter of 2024 .
The debt-to-equity ratio stands at approximately 0.48, indicating a balanced approach to financing compared to industry standards, where typical ratios range from 0.5 to 1.0. This suggests that the company is leveraging its equity base to finance growth while maintaining a manageable level of debt .
Recent Debt Issuances and Refinancing Activity
In recent months, Ring Energy has focused on refinancing activities to optimize its capital structure. The company has a borrowing base under its credit facility of $600 million, which is redetermined semi-annually . Interest expense for the third quarter of 2024 was approximately $10.8 million, down from $11.4 million in the prior year, reflecting a decrease in outstanding amounts .
Debt Financing vs. Equity Funding
Ring Energy balances its growth strategies through a combination of debt financing and equity funding. The company's total stockholders' equity has increased to $851 million as of September 30, 2024, up from $733 million a year prior . This growth in equity has been supported by net income of $61.8 million for the nine months ended September 30, 2024, compared to $54 million in the previous year .
Financial Metric | Q3 2024 | Q3 2023 |
---|---|---|
Long-term Debt | $392 million | $407 million |
Debt-to-Equity Ratio | 0.48 | 0.55 |
Total Stockholders' Equity | $851 million | $733 million |
Net Income | $61.8 million | $54 million |
Interest Expense | $10.8 million | $11.4 million |
Assessing Ring Energy, Inc. (REI) Liquidity
Assessing Ring Energy, Inc. Liquidity
The financial health of a company is critically assessed through its liquidity and solvency metrics. For Ring Energy, Inc. (REI), understanding these metrics is essential for investors looking to gauge the company's operational efficiency and financial stability.
Current and Quick Ratios
As of September 30, 2024, Ring Energy, Inc. reported a current ratio of 1.01, indicating that the company has slightly more current assets than current liabilities, which is a positive sign for liquidity. The quick ratio, which excludes inventory from current assets, stood at 0.85, suggesting potential liquidity constraints as it falls below the ideal threshold of 1.0.
Metric | Value |
---|---|
Current Ratio | 1.01 |
Quick Ratio | 0.85 |
Analysis of Working Capital Trends
Working capital, defined as current assets minus current liabilities, is a crucial indicator of the company's operational liquidity. As of September 30, 2024, Ring Energy's working capital was approximately $5.5 million, compared to $7.3 million at the end of 2023. This decline may indicate tightening liquidity conditions, but the overall working capital remains positive.
Cash Flow Statements Overview
Analyzing the cash flow from various activities provides further insight into the liquidity position of Ring Energy:
- Operating Cash Flow: For the nine months ended September 30, 2024, net cash provided by operating activities was $147.1 million, an increase from $142.4 million in 2023.
- Investing Cash Flow: Net cash used in investing activities was $113.2 million in 2024, significantly lower than $170.9 million in 2023, reflecting a more conservative investment approach.
- Financing Cash Flow: Cash used in financing activities totaled $34.3 million, primarily due to a net paydown of $33 million on the credit facility.
Cash Flow Activity | 2024 (Nine Months) | 2023 (Nine Months) |
---|---|---|
Net Cash from Operating Activities | $147.1 million | $142.4 million |
Net Cash Used in Investing Activities | $113.2 million | $170.9 million |
Net Cash Used in Financing Activities | $34.3 million | $24.9 million |
Potential Liquidity Concerns or Strengths
Despite the positive operating cash flow, the quick ratio below 1.0 raises concerns regarding the company’s ability to meet short-term obligations without relying on inventory liquidation. Furthermore, the declining working capital suggests the need for careful cash management and operational efficiency improvements.
As of September 30, 2024, the company maintained $0.0 million in cash on hand, reflecting a strategic decision to minimize cash reserves while optimizing debt levels. The outstanding amount on the Credit Facility was $392 million, with a borrowing base of $600 million, providing a safety net for liquidity management going forward.
Is Ring Energy, Inc. (REI) Overvalued or Undervalued?
Valuation Analysis
Price-to-Earnings (P/E) Ratio
The current price-to-earnings (P/E) ratio stands at 4.67 based on the trailing twelve months (TTM) earnings per share (EPS) of $0.31 and a stock price of approximately $1.45.
Price-to-Book (P/B) Ratio
The price-to-book (P/B) ratio is currently 1.70, with total equity of $851.31 million and a market capitalization of approximately $1.45 billion.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The enterprise value (EV) is calculated at approximately $1.84 billion, with EBITDA for the last twelve months at around $205 million, resulting in an EV/EBITDA ratio of 8.98.
Stock Price Trends
Over the past 12 months, the stock price has fluctuated between a low of $0.88 and a high of $2.10. The year-to-date performance shows a decrease of approximately 12%.
Dividend Yield and Payout Ratios
The company currently does not pay a dividend, thus the dividend yield stands at 0%. The payout ratio is also N/A due to the absence of dividend payments.
Analyst Consensus on Stock Valuation
Analyst consensus indicates a rating of Hold with a target price of $1.80, suggesting limited upside potential based on current valuations.
Valuation Metric | Value |
---|---|
P/E Ratio | 4.67 |
P/B Ratio | 1.70 |
EV/EBITDA Ratio | 8.98 |
12-Month Stock Price Low | $0.88 |
12-Month Stock Price High | $2.10 |
Year-to-Date Performance | -12% |
Dividend Yield | 0% |
Analyst Consensus | Hold |
Target Price | $1.80 |
Key Risks Facing Ring Energy, Inc. (REI)
Key Risks Facing Ring Energy, Inc.
Overview of Internal and External Risks
Ring Energy, Inc. faces several internal and external risks that could impact its financial health. Key risks include:
- Industry Competition: The company operates in a highly competitive oil and gas sector, which can affect pricing and market share.
- Regulatory Changes: Changes in regulations regarding drilling, environmental standards, and taxation can impose additional costs or limit operations.
- Market Conditions: Fluctuations in oil and gas prices significantly influence revenue. For instance, the average realized price per barrel of oil decreased from $81.69 to $74.43, a drop of 9% in the third quarter of 2024 compared to the same period in 2023 .
Operational Risks
Operational risks highlighted in recent filings include:
- Production Costs: Lease operating expenses rose from $18.0 million to $20.3 million in Q3 2024, reflecting a 13% increase .
- Natural Gas Pricing: The company reported negative natural gas sales of $(3.9 million) in Q3 2024, a decrease of 786% compared to the previous year .
Financial Risks
Financial risks include:
- Debt Levels: Interest expense increased to $33.2 million in 2024 due to higher interest rates, with a weighted average annual interest rate of 9.3% .
- Cash Flow Volatility: Cash flows from operating activities were $147.1 million for the nine months ended September 30, 2024, compared to $142.4 million in the same period of 2023 .
Market Conditions
The company’s financial results are heavily influenced by commodity prices. Recent market conditions have led to:
- Negative Natural Gas Prices: The company has experienced negative realized gas prices at times due to pipeline capacity constraints .
- Commodity Price Volatility: The average sales price for natural gas liquids fell from $11.22 to $7.66, a 32% decline .
Mitigation Strategies
To address these risks, the company has implemented several mitigation strategies:
- Cost Management: The company is closely monitoring operational costs to counter inflationary pressures. Total lease operating expenses increased by 13% due to higher production .
- Diversification of Assets: The Founders Acquisition aimed to enhance production capabilities and mitigate risks related to legacy assets.
Risk Factor | Current Impact | Mitigation Strategy |
---|---|---|
Commodity Price Volatility | Negative gas sales of $(3.9 million) | Cost management and diversification of assets |
Operational Costs | Lease operating expenses increased to $20.3 million | Monitoring and controlling operational expenses |
Debt Levels | Interest expense of $33.2 million, 9.3% interest rate | Reviewing financing options and debt management |
Future Growth Prospects for Ring Energy, Inc. (REI)
Future Growth Prospects for Ring Energy, Inc.
Analysis of Key Growth Drivers
Ring Energy, Inc. is strategically positioned to capitalize on several growth drivers:
- Product Innovations: The company is employing advanced drilling and completion techniques, optimizing operations through technological advancements.
- Market Expansions: Significant drilling activities have been noted in the Central Basin Platform and Northwest Shelf, with numerous wells completed in 2024.
- Acquisitions: The company has a history of strategic acquisitions, including the recent Founders Acquisition, which is expected to enhance production capabilities and asset value.
Future Revenue Growth Projections and Earnings Estimates
Projected revenue growth for the upcoming quarters is as follows:
Period | Projected Revenue ($ Million) | Earnings Estimate ($ Million) |
---|---|---|
Q4 2024 | 90.0 | 30.0 |
2025 | 360.0 | 110.0 |
Strategic Initiatives or Partnerships That May Drive Future Growth
The company is focusing on:
- Enhancing Cash Flow: With net cash provided by operating activities of $147.1 million in 2024, the focus remains on maximizing liquidity.
- Debt Reduction: The intention to reduce long-term debt through excess cash flow and potential asset sales.
Competitive Advantages That Position the Company for Growth
Key competitive advantages include:
- Strong Operational Efficiency: The company's low-cost structure results from innovative drilling techniques, which improve profit margins.
- Robust Asset Base: The recent acquisitions have expanded the company's resource base significantly, with an increase in oil production from 3,325,323 barrels to 3,673,356 barrels in 2024.
Furthermore, the company reported net income of $61.8 million for the nine months ended September 30, 2024, compared to $53.9 million in the previous year, demonstrating solid growth potential moving forward.
Conclusion
The potential for Ring Energy, Inc. to harness its growth opportunities is significant, driven by strategic initiatives and a strong operational foundation.
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Updated on 16 Nov 2024
Resources:
- Ring Energy, Inc. (REI) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Ring Energy, Inc. (REI)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Ring Energy, Inc. (REI)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.