Ring Energy (NYSEAMERICAN:REI) executives said the company is positioning for higher production, improved capital efficiency and lower leverage in 2027 as it expands horizontal drilling across its Central Basin Platform assets in West Texas.
Speaking at the Water Tower Virtual Insights Conference, Chief Executive Officer Paul McKinney said the company’s strategy centers on maintaining low operating costs, shallow production declines and a sufficient inventory of drilling opportunities. He said those characteristics can help the company withstand commodity-price volatility while supporting sustainable EBITDA growth.
Horizontal Development Expands Opportunity Set
McKinney said Ring’s acquisitions of Stronghold, Founders and Lime Rock were initially viewed largely as vertical-well development opportunities. However, the company has since applied horizontal drilling and multi-stage completion techniques to stacked conventional formations in the Central Basin Platform.
The company said it has found that longer horizontal laterals can be economic in formations that had historically been developed vertically or were not considered attractive under older technologies. Ring’s approach includes “co-development,” in which it develops multiple formations from one location.
According to McKinney, co-development can reduce the number of surface locations needed while improving the amount of production and reserves generated per dollar spent. He said the method has expanded Ring’s inventory of potential drilling locations and could support production and EBITDA growth with less capital than a primarily vertical program.
Johl compared the company’s current transition to the evolution seen elsewhere in the Permian Basin, where operators moved from vertical drilling to horizontal drilling and then to multiwell pad development. He said Ring’s acquired acreage overlaps with areas where the company is now conducting horizontal development.
McKinney also described the Central Basin Platform as a “target rich environment,” saying many public operators remain focused on unconventional development in the Delaware and Midland basins. He said Ring sees less competition in certain Central Basin Platform areas, including for formations and acreage that had not been economic under vertical development methods.
Infrastructure Spending Accelerated
Ring said its May equity offering, combined with stronger oil prices during 2026, strengthened its balance sheet and enabled it to accelerate infrastructure investments that management believes are needed ahead of a larger drilling program.
McKinney said the company has expanded investments in frack ponds, saltwater disposal and handling facilities, produced-water treatment capacity and larger tank batteries. The facilities are intended to support higher initial production volumes from co-developed pads, which may bring several wells online at the same time.
“All of these investments are what was necessary,” McKinney said, adding that the accelerated work could position Ring for growth earlier than it otherwise might have pursued.
The company has also been testing stacked pay zones that were historically less attractive because of low porosity and permeability. McKinney said the testing is intended to identify the zones and areas most suitable for co-development as Ring prepares for its 2027 program.
2027 Outlook, Debt Reduction and Hedging
During the discussion, executives referenced Ring’s initial 2027 outlook, which calls for more than 10% year-over-year total production growth on a capital budget of approximately $135 million to $165 million. The plan is expected to be driven in part by doubling the number of horizontal wells with lateral lengths greater than 1.5 miles compared with the 2026 program.
Johl said Ring is using $75 per barrel oil as its base case for 2027 planning and has stress-tested its outlook at $60 oil. He said the company expects to be free-cash-flow positive at $60 oil in 2027 and targets a year-end 2027 leverage ratio of about 1x under its $75 oil base case.
Management said reducing leverage is particularly important because lower debt levels could reduce the company’s future hedge requirements under its reserve-based lending facility. McKinney said reaching certain leverage and borrowing-base thresholds would reduce the requirement to hedge production in months 13 through 24 from 50% to 25%.
Johl said Ring expects to retain more commodity-price exposure as its development program expands, although it will continue to layer on hedges to comply with bank requirements. He said the company currently forecasts that roughly 60% of production will be exposed to commodity prices and expects future hedges to take the form of collars.
Looking ahead, McKinney said investors should monitor the performance of Ring’s longer horizontal wells and co-developed locations. “Are we going to deliver what we said we’re going to deliver?” he said. “If we do, look out, because this company has a real significant opportunity for organic production and EBITDA growth.”
Johl said Ring sees “multiple ways to win,” including organic development, land leasing and potential acquisitions. McKinney said the company believes it can grow from its existing footprint while continuing to evaluate acquisition opportunities.
About Ring Energy (NYSEAMERICAN:REI)
Ring Energy, Inc is an independent oil and natural gas exploration and production company focused on acquiring, developing and operating producing properties in the Permian Basin. The company’s activities are concentrated in the oil-rich regions of West Texas and southeastern New Mexico.
Ring Energy’s operations include the drilling and completion of horizontal wells, workovers and other development activities designed to increase production from its acreage. Its product portfolio primarily consists of crude oil, natural gas and natural gas liquids, which are marketed to third-party purchasers.
Founded in 2004 and headquartered in The Woodlands, Texas, Ring Energy has grown through a combination of drilling programs and acquisitions of Permian Basin assets.
