Ring Energy (NYSEAMERICAN:REI) executives used the company’s fourth-quarter 2025 earnings call to highlight record annual sales volumes, a continued streak of adjusted free cash flow generation, and progress reducing debt following the Lime Rock asset acquisition that closed in March 2025. Management also issued 2026 guidance built around a $60 per barrel WTI and $3.50 per Mcf Henry Hub planning case, emphasizing a disciplined capital program designed to hold production roughly flat while prioritizing debt reduction.
Leadership update and macro backdrop
Chief Executive Officer Paul McKinney opened the call by introducing Sonu Johl, who joined the company as Executive Vice President, Chief Financial Officer, and Treasurer. McKinney said Johl brings more than 20 years of upstream oil and gas investment banking and corporate finance experience, including a recent role as managing director and co-head of energy investment banking at Raymond James & Associates.
2025 highlights: record adjusted free cash flow and lower spending
McKinney characterized 2025 as a year that tested the company’s ability to adjust spending in response to oil price weakness, yet still deliver operational and financial results. He said Ring increased adjusted free cash flow by 15% year-over-year despite 18% lower realized commodity prices, setting a new company record and extending its streak to 25 consecutive quarters of adjusted free cash flow. He added that sales volumes rose 3% year-over-year, proved reserves increased 14%, and approved undeveloped inventory increased 17%, bringing identified total locations to “500 or more,” which management said represents more than 10 years of drilling inventory.
The CEO also cited a 35% reduction in capital spending year-over-year and said the company improved drilling capital efficiency to about $500 per lateral foot, a 3% year-over-year improvement and 19% improvement since 2023. He said all-in cash costs per Boe declined 4% year-over-year, while lease operating expense (LOE) during the last six months of 2025 fell 18%, or about $1.4 million per month, versus the pro forma run rate prior to the Lime Rock acquisition. McKinney added that Ring reduced debt by $40 million since closing the Lime Rock acquisition and also made a $10 million deferred payment in December related to that transaction.
Fourth-quarter results: lower realized prices, reduced LOE, impairment charge
Chief Accounting Officer Rocky Kwon said fourth-quarter 2025 sales volumes averaged 20,508 Boe per day, down about 1% sequentially from 20,789 Boe per day in the third quarter. He attributed part of the decline to a third-party gas plant shutdown due to a fire that affected sales volumes. Kwon said the fourth-quarter volumes were above the midpoint of guidance and contributed to record full-year 2025 sales volumes of 20,253 Boe per day, which benefited from nine months of production from Lime Rock and a drilling campaign focused on the company’s highest-rate-of-return inventory.
Pricing weighed on results in the quarter. Kwon said overall realized price declined 14% sequentially to $35.45 per Boe from $41.10 per Boe, driven by 11% lower realized oil pricing. He said Ring’s fourth-quarter crude oil differential averaged negative $1.66 per barrel versus negative $0.61 per barrel in the third quarter. The company’s natural gas price differential widened to negative $6.47 per Mcf in the fourth quarter from negative $4.22 per Mcf in the third quarter. Realized NGL pricing averaged 9% of WTI, up from 8% in the prior quarter.
Kwon said fourth-quarter revenue totaled $66.9 million, down 15% from $78.6 million in the third quarter. Oil revenue decreased $9.5 million due to an $8.3 million negative price variance and a $1.2 million negative production variance. Gas and NGL revenues increased $2.2 million quarter-over-quarter to a combined $2.5 million.
On costs, Kwon reported LOE of $18.9 million, down 8% sequentially. On a unit basis, LOE was $10.02 per Boe, which he said was 7% below the low end of the company’s guidance range. Cash G&A (excluding share-based compensation and transaction-related costs) was $3.46 per Boe versus $3.41 per Boe in the third quarter.
The company recorded a $17.5 million gain on derivative contracts in the fourth quarter, up from $0.4 million in the third quarter, which Kwon said was primarily due to lower relative pricing at quarter end. Ring reported a fourth-quarter net loss of $12.8 million, or $0.06 per diluted share, including $35.9 million of non-cash ceiling test impairment charges. Excluding certain items cited by management—including share-based compensation, the impairment, and non-cash unrealized hedge impacts—Kwon said adjusted net income was $3.6 million, or $0.02 per diluted share.
Capital expenditures totaled $24.3 million in the fourth quarter, in line with guidance, including $14 million in drilling and completion spending. Kwon said the quarter also included about $0.5 million for facility upgrades that contributed to emissions reductions, as well as more than $0.4 million in leasing costs.
Kwon said Ring generated $5.7 million of adjusted free cash flow in the fourth quarter and paid down $8 million of debt. For full-year 2025, the company generated $50.1 million of adjusted free cash flow and paid down $35 million of debt.
Balance sheet, liquidity, and 2026 hedge position
At year-end 2025, Kwon said Ring had $420 million drawn on its credit facility. With a borrowing base of $585 million reaffirmed in December, he said the company had $165 million available net of letters of credit, total liquidity of $166 million including cash, and a leverage ratio of 2.2 times.
On hedging, Kwon said Ring has about 2.3 million barrels of oil hedged for 2026—approximately 48% of expected oil sales based on midpoint guidance—and 4.7 Bcf of natural gas hedged, or about 66% of expected natural gas sales.
2026 guidance: flat production, $100 million to $130 million capital program
McKinney said the company’s approach for 2026 will remain consistent: invest enough to maintain or slightly grow production while directing remaining cash from operations toward debt reduction. Ring’s planning assumptions are $60 per barrel WTI and $3.50 per Mcf Henry Hub.
Management guided to average annual sales of 19,500 to 20,800 Boe per day (midpoint 20,150 Boe per day) and average annual oil sales of 12,500 to 13,400 barrels per day (midpoint 12,950 barrels per day). McKinney said those ranges are “essentially flat” versus 2025 after accounting for a recent divestiture of about 200 Boe per day of non-operated production and the impact of a January winter storm that temporarily reduced production by 540 Boe per day.
Ring guided to 2026 capital spending of $100 million to $130 million (midpoint $115 million), with plans to drill, complete, and bring online about 23 to 32 wells. First-quarter spending is expected to be $28 million to $34 million (midpoint $31 million). For LOE, management guided to $10.15 to $11.15 per Boe (midpoint $10.65), with McKinney noting the midpoint is below what the company achieved in 2025.
Executives also discussed the company’s ongoing work to shift toward longer laterals and increased horizontal development. In response to analyst questions, McKinney said Ring would drill its first 2-mile well in 2026 and has been positioning its leasehold for longer laterals for as much as two years. During prepared remarks, Chief Operating Officer Alexander Dyes said the company’s 2026 drilling program midpoint increases the horizontal mix to 85% (23 horizontals) from 67% in 2025, and described efforts to support multi-bench, longer laterals and co-development opportunities.
During Q&A, management said the 2026 program includes testing the repeatability of additional horizontal targets but did not specify which zones. Chief Exploration Officer James Parr said the company began testing prior vertical targets horizontally last year with “excellent results” and expects more data as 2026 progresses.
Management also quantified the recent sale of non-operated assets in Yoakum County. Dyes said Ring sold about 200 Boe per day of non-operated production for $4.5 million, describing the valuation as about 4.5 times next 12 months cash flow using a December strip price. McKinney added that the company has been diligent in monetizing assets that do not fit its criteria to help pay down debt, but suggested remaining divestiture inventory is limited.
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.
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