Ring Energy Completes Strategic Acquisition in the Permian Basin
Ring Energy Completes Strategic Acquisition
In a significant development for the oil and gas industry, Ring Energy, Inc. (NYSE: REI) recently announced the successful completion of its acquisition of assets from Lime Rock Resources IV, LP. This strategic transaction allows Ring to enhance its existing operations in the Permian Basin and marks a key milestone in its growth trajectory.
Overview of the Acquisition
The acquisition centers around the Central Basin Platform (CBP) assets, predominantly situated in the oil-rich Permian Basin. With approximately 17,700 net acres, this acquisition not only expands Ring’s operational footprint but also integrates new active plays that align with its existing assets in the region.
Mr. Paul D. McKinney, Chairman and CEO of Ring Energy, expressed enthusiasm about the integration of these assets, highlighting their similarity to Ring's current CBP holdings in the Shafter Lake area, thus facilitating a seamless operational merger.
Key Highlights of the Transaction
The acquisition is characterized by several notable features:
- Accretive Production: The CBP assets provide 2,300 barrels of oil equivalent per day, predominantly oil, which significantly contributes to projected 2025 adjusted EBITDA of $34 million.
- Enhanced Operational Scale: The new 17,700 acres are nearly entirely contiguous to existing operations, fostering potential cost synergies and operational efficiencies.
- Free Cash Flow Generation: This acquisition aims to enhance adjusted free cash flow, bolstered by notable oil-weighted reserves.
- Strengthened Inventory Portfolio: With over 40 new locations available for drilling, the acquisition boosts Ring's drilling inventory, providing immediate investment prospects in high-potential areas.
- Resilience and Growth: This move is seen as a pivotal step towards solidifying Ring's status as a leading operator in the Permian Basin, ensuring sustainable operational and financial strength.
Financial Dynamics of the Transaction
The financial structure of the acquisition included a cash payment of approximately $63.6 million, accounting for prior adjustments and deposits. Additionally, the deal involves a deferred cash payment of $10 million due later and the issuance of around 6.5 million shares of common stock, showcasing Ring’s strategic use of resources to facilitate growth.
This financial arrangement highlights Ring's focus on maintaining liquidity while strategically acquiring valuable assets to elevate its market position.
Advisory Support
In executing this transaction, Ring Energy received guidance from various financial and legal advisors. Greenhill, affiliated with Mizuho, acted as the primary financial advisor while Jones & Keller, P.C. provided legal counsel.
About Ring Energy, Inc.
Ring Energy, Inc. is dedicated to exploring, developing, and producing oil and gas resources, with a concentrated focus on its advancements in the Permian Basin. The company's track record of strategic acquisitions and operational efficiencies positions it well for sustainable growth in the energy sector.
Frequently Asked Questions
What was the overall investment for the acquisition by Ring Energy?
The total consideration for the acquisition included a cash payment of approximately $63.6 million, along with a $10 million deferred cash payment and approximately 6.5 million shares of common stock.
How does this acquisition impact Ring Energy's operational capacity?
This acquisition significantly enhances Ring Energy's operational capacity by adding 17,700 net acres of new production and increasing its drilling inventory with over 40 competitive locations.
What are the expected financial benefits from the acquired assets?
The acquired assets are projected to generate approximately 2,300 barrels of oil equivalent per day and contribute to an adjusted EBITDA of $34 million for 2025, thus enhancing the company's financial performance.
Who advised Ring Energy during the acquisition process?
Ring Energy was advised by Greenhill, a Mizuho affiliate, as the financial advisor, while Jones & Keller, P.C. served as legal counsel during the transaction.
How does the market view this acquisition?
The market has responded positively to the acquisition, viewing it as a strategic move that strengthens Ring’s position in the competitive Permian Basin while enhancing financial and operational synergies.
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