Ring Energy (NYSEAMERICAN:REI) reported higher second-quarter production, improved unit operating costs and stronger realized pricing, while outlining a larger capital program intended to support longer lateral wells, multi-zone development and infrastructure expansion.
The company said total sales volumes averaged 19,990 barrels of oil equivalent per day during the second quarter of 2026, up 3% from 19,351 BOE per day in the first quarter. Oil sales averaged 12,683 barrels per day.
Costs Improve as Production Grows
Lease operating expense totaled $18.4 million during the quarter, compared with $18.1 million in the first quarter. On a per-unit basis, LOE declined 3% sequentially to $10.12 per BOE from $10.41 per BOE. All-in cash costs fell 1% from the prior quarter to $21.59 per BOE.
Cash general and administrative expense, excluding share-based compensation and transaction-related costs, was $3.19 per BOE, down from $3.40 per BOE in the first quarter.
Johl said natural-gas prices remained pressured by Permian Basin takeaway and processing constraints, with Ring’s average natural-gas differential to NYMEX at negative $8.14 per Mcf. He said the company had seen modest improvement following the Gulf Coast Connector expansion startup and expects further relief as additional capacity becomes available later in the year.
Equity Offering Reduces Revolver Debt
During the quarter, Ring completed an underwritten public equity offering that generated approximately $65 million of net proceeds. The company used all proceeds to reduce borrowings under its revolving credit facility.
As a result, liquidity increased to about $226 million, while outstanding borrowings declined to roughly $360 million. Ring said its leverage ratio improved to approximately 1.7 times on a last-quarter annualized basis and that it remained compliant with its financial covenants.
The company continues to target long-term leverage below 1.25 times. Chairman and Chief Executive Officer Paul McKinney said potential proceeds from dispositions of non-core assets, which Ring continues to evaluate, would also be directed toward debt reduction. He did not provide an expected value or timing for any potential asset sales during the question-and-answer session.
Capital Program Targets Longer Laterals and Co-Development
Ring spent approximately $43.2 million on capital expenditures in the second quarter as it expanded investments supporting longer horizontal laterals and co-development of stacked pay zones. McKinney said the company is moving from a focus on proving its resource base toward optimizing well spacing, landing zones, completion designs and development sequencing.
Operational activity during the quarter included seven wells drilled and four wells completed. In the Northwest Shelf, the company drilled and completed one 1.5-mile horizontal well and one 1-mile horizontal well. In the Central Basin Platform, it drilled and completed one 1.5-mile horizontal well each in Andrews County and Crane County, and drilled three additional 2-mile horizontal wells in Crane County that had not been completed at quarter-end.
Ring was also drilling a saltwater disposal well in Crane County as of June 30. Management said investments in water infrastructure, centralized facilities and other development infrastructure are intended to reduce future drilling and completion costs and improve capital efficiency.
Based on its initial 2027 outlook, which contemplates drilling about 20 to 30 horizontal wells, Ring estimates its initiatives could reduce future drilling and completion costs by at least $7.5 million. The estimate assumes savings of approximately $50 to $100 per lateral foot.
Updated 2026 Outlook and Initial 2027 Guidance
For the second half of 2026, Ring expects oil sales volumes of 13,000 to 13,950 barrels per day, representing a midpoint increase of approximately 2% from its previous guidance. The company expects LOE of $10 to $10.60 per BOE for the period, a midpoint reduction of about 2%.
Ring increased its planned second-half capital spending range to $80 million to $100 million, bringing expected full-year 2026 capital expenditures to $158 million to $178 million. Management said it expects to fund the expanded program primarily through operating cash flow while continuing to reduce leverage.
- 2027 oil sales guidance: 13,550 to 14,650 barrels per day.
- 2027 total BOE sales guidance: 21,500 to 23,500 BOE per day.
- Expected midpoint BOE sales growth: About 10% over estimated 2026 sales.
- 2027 LOE guidance: $9.80 to $10.60 per BOE.
- 2027 capital spending guidance: $135 million to $165 million.
McKinney said the 2027 capital range represents an approximately 10% midpoint reduction from estimated 2026 spending while supporting production growth. During the call, Johl said the company was using $75 oil in the near term and had stress-tested its 2027 development program at $60 oil, where management expects it could still generate marginal free cash flow.
Hedging Limits Some Oil-Price Upside
Management said stronger oil prices during the second quarter were partly offset by the company’s hedge position. Johl said Ring has about 1.7 million barrels of oil hedged for the remainder of 2026, representing about 70% of estimated oil sales at the midpoint of updated guidance. Approximately 30% of expected oil production remains unhedged, while a significant portion of hedged volumes consists of collars that retain some exposure to higher commodity prices.
Ring also has 2.4 billion cubic feet of natural gas hedged, or about 62% of estimated gas sales based on midpoint guidance. McKinney said reducing leverage below the company’s target could lessen longer-term hedge requirements under its credit agreement, though Johl noted that timing would depend on commodity prices and leverage levels.
About Ring Energy (NYSEAMERICAN:REI)
Ring Energy, Inc is an independent oil and natural gas exploration and production company focused on the development, acquisition and operation of upstream assets in the United States. Headquartered in Odessa, Texas, the company concentrates its activities on onshore hydrocarbon plays, where it seeks to optimize production through technical innovation, cost management and disciplined capital allocation. Ring Energy trades on the NYSE American under the ticker symbol REI.
The company’s core operations are centered in the Permian Basin, one of North America’s most prolific oil-producing regions.
