Ring Energy Q3 2026 Earnings Results & Report

Ring Energy EPS Results

• Actual EPS: $0.10
• Consensus EPS: $0.0667
• Beat/Miss: Beat by +$0.0333
• One Year Ago EPS: N/A
• EPS Beat Rate: 5 of last 8 quarters

Ring Energy Revenue Results

• Actual Revenue: $102.34 million
• Expected Revenue: $91.87 million
• Beat/Miss: Beat by +$10.48 million
• YoY Revenue Growth: N/A

Ring Energy (NYSEAMERICAN:REI) (NYSE American: REI) is an independent oil and natural gas exploration and production company. The company focuses on the acquisition, development, exploration and operation of oil and gas properties, with an emphasis on generating production from established assets.

Ring Energy’s operations are concentrated in the Permian Basin, one of the most significant oil-producing regions in the United States. Its properties are primarily located in the Northwest Shelf of the Permian Basin in southeastern New Mexico and West Texas. The company produces crude oil, natural gas and natural gas liquids from its operated and non-operated interests.

Founded in 2004 and headquartered in The Woodlands, Texas, Ring Energy became a publicly traded company in 2013. Its strategy centers on developing its existing acreage, improving production and pursuing acquisitions that can expand its Permian Basin asset base. Paul D. McKinney serves as the company’s president and chief executive officer.

Ring Energy Q3 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Ring expects 2027 production growth of about 10%—to 21,000–23,000 BOE per day—with a preliminary $135 million–$165 million capital program. Management attributes the outlook to longer, co-developed laterals and says the program uses slightly less capital than the prior year.
• Negative Sentiment: Adjusted free cash flow was negative in the third quarter as Ring invested approximately $64 million to advance longer-lateral development and related infrastructure. Management described this as deliberate and expects spending to step down in the fourth quarter, with positive free cash flow for the full year.
• Positive Sentiment: Ring sold about $30.5 million of non-core assets, using proceeds to reduce revolver borrowings by $10 million and acquire acreage near its core operations. Debt was down $70 million from the start of the year, liquidity rose to about $236 million, and leverage improved to approximately 1.5 times.
• Positive Sentiment: The company strengthened oil downside protection for the first half of 2027, when development capital is expected to be concentrated; about 59% of forecast first-half oil volumes are hedged. Management says the additional protection is intended to support positive free cash flow even at $65 WTI.
• Neutral Sentiment: Third-quarter revenue was $102.3 million, down 2% sequentially, while adjusted EBITDA increased 5% to $57.1 million. Better natural gas realizations and stronger NGL pricing partly offset a 12% decline in realized oil prices.

Presentation

[Al Petrie, Head of Investor Relations at Ring Energy]

Thank you, operator, and good morning, everyone. We appreciate your interest in Ring Energy. We will begin our call with comments from Paul McKinney, our Chairman of the Board and CEO, who will provide an overview of key matters for the third quarter of 2026. We will then turn the call over to Sonu Johl, Ring Energy's Executive Vice President, Chief Financial Officer, and Treasurer, who will review our financial results. Paul will then return with some closing comments before we open up the call for questions. During the Q&A session, we ask you to limit your questions to one and a follow-up. You are welcome to re-enter the queue later with additional questions. I would also note that we have posted an updated corporate presentation on our website. During the course of this conference call, the company will be making forward-looking statements within the meaning of federal securities laws.

[Al Petrie, Head of Investor Relations at Ring Energy]

Investors are cautioned that forward-looking statements are not guarantees of future performance, and those actual results or developments may differ materially from those projected in the forward-looking statements. Finally, the company can give no assurance that such forward-looking statements will prove to be correct. Ring Energy disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Accordingly, you should not place undue reliance on forward-looking statements. These and other risks are described in yesterday's press release and in our filings with the SEC. These documents can be found in the investors section of our website, located at www.ringenergy.com. Should one or more of these risks materialize or should underlying assumptions prove incorrect, actual results may vary materially. This conference call also includes references to certain non-GAAP financial measures.

[Al Petrie, Head of Investor Relations at Ring Energy]

Reconciliations of these non-GAAP financial measures to the most directly comparable measure under GAAP are contained in yesterday's earnings release. Finally, as a reminder, this conference call is being recorded. I would now like to turn the call over to Paul McKinney, our Chairman and CEO.

[Paul McKinney, CEO and Chairman of the Board at Ring Energy]

Thank you, Al, and good morning, everyone. As you may recall, we entered 2026 focused on positioning Ring for the next phase of the company development. Our priorities were clear: improve the quality of the portfolio, deepen our development inventory, and build a more capital-efficient and repeatable development model. The progress we made during the third quarter moved each of these priorities meaningfully forward. During the quarter, we completed approximately $30.5 million of non-core asset sales, representing approximately 130 BOE per day, 63% of which was oil, and approximately 9,800 net acres. We applied $10 million of those proceeds to reducing the borrowings under our revolving credit facility and approximately $18.8 million towards acquiring leasehold interests within and offsetting our existing Central Basin Platform operating footprint.

[Paul McKinney, CEO and Chairman of the Board at Ring Energy]

Together, these actions reflect a capital allocation framework we have executed successfully in the past and intend to keep following in the future: selectively invest in higher return opportunities within our core operating areas, monetize assets that are not expected to compete for near-term capital, and use a portion of the proceeds to reduce debt. At the same time, we continued to execute on our development program and delivered strong operating results. Total sales volumes averaged 20,635 BOE per day, up 3% from the second quarter, while oil sales volumes averaged 12,818 barrels of oil per day, up 1% sequentially. We drilled eight horizontal wells during the quarter and completed seven. In Crane County, we drilled six and completed five two-mile horizontal wells, representing Ring's first five completed two-mile and co-developed laterals.

[Paul McKinney, CEO and Chairman of the Board at Ring Energy]

We also drilled and completed two 1.5-mile horizontal wells in Andrews County and completed the saltwater disposal well that was underway at the end of the second quarter. The development activity this quarter also reflects how Ring has evolved and how we think about investing capital today. When I became CEO, one of my key priorities was building a business that could consistently live within its means. That discipline helped us strengthen the balance sheet and establish the financial foundation we have today. With that foundation in place, we now have greater flexibility to invest ahead of production when we see opportunities that we believe can generate attractive returns. During the third quarter, we did just that. We invested approximately $64 million to advance our co-developed longer lateral program and supporting infrastructure.

[Paul McKinney, CEO and Chairman of the Board at Ring Energy]

We have continued to shift capital forward this year to accelerate our transition to a more capital-efficient development of our reserves and resources. As a result, our adjusted free cash flow was negative during the third quarter. This was a deliberate decision where we took advantage of continued higher commodity prices and surplus proceeds from our disposition and leasing efforts to accelerate our capital spending this quarter, positioning the company for significant organic growth going into 2027. Let me be clear about this. We have not lost focus on maximizing adjusted free cash flow, strengthening our balance sheet, and lowering the leverage ratio. With the capital spending stepping down in the fourth quarter, we expect to return to positive free cash flow and remain positive for the full year.

[Paul McKinney, CEO and Chairman of the Board at Ring Energy]

Ultimately, our focus is on allocating capital to opportunities where we believe we can generate the strongest risk-adjusted returns, improve capital efficiency, and create durable per-share value. The portfolio actions and development investments we made during the third quarter reflect that approach and position us well as we move into 2027. As you can see, that strategy is beginning to show through our updated outlook. For the fourth quarter of 2026, adjusted for the asset divestitures, we expect oil sales volumes to be between 12,900 and 13,500 barrels per day, and total sales volumes of 20,400 to 21,200 BOE per day. We expect fourth quarter LOE of $9.80-$10.30 per BOE, and capital spending of approximately $43 million-$48 million.

[Paul McKinney, CEO and Chairman of the Board at Ring Energy]

Looking further ahead to 2027, we expect oil sales volumes to be 13,200-14,300 barrels per day, and total sales volumes of 21,000-23,000 barrels of oil equivalent per day. Our preliminary capital range is $135 million-$165 million, including 20-30 new horizontal wells with laterals longer than 1.5 miles. We expect LOE of $9.70-$10.50 per BOE. We are excited about the momentum we have built as we move into 2027. We have strengthened the portfolio, expanded our own development inventory, and are advancing our long lateral, more capital-efficient program that we believe can deliver sustainable growth at attractive returns. With that, I will turn the call over to Sonu to discuss the financial results, balance sheet, and capital allocation in greater detail. Sonu?

[Sonu Johl, EVP, CFO, and Treasurer at Ring Energy]

Thank you, Paul. I'll focus my comments on our financial performance during the quarter, the progress we continue to make on the balance sheet, and then I'll discuss our approach to commodity price risk. With Paul having covered volumes, I'll start with revenue and pricing. Revenue was $102.3 million, down just 2% from the second quarter, despite a 12% decline in our realized oil price. Importantly, our overall realized price declined by a more modest 6% to $53.91 per BOE, as significantly improved natural gas realizations and stronger NGL pricing partially offset the impact of lower oil prices. Natural gas realizations improved meaningfully during the quarter. Our net realized natural gas price was negative $0.30 per MCF, compared with negative $5.20 per MCF in the second quarter.

[Sonu Johl, EVP, CFO, and Treasurer at Ring Energy]

Last quarter, we said we expected some relief as additional Permian takeaway and processing capacity came online, and we began to see that benefit during the third quarter. NGL pricing also strengthened during the quarter, with our realized NGL price increasing to $10.38 per barrel from $9.96 in the second quarter. That improvement, combined with better natural gas realizations, helped partially offset the decline in oil pricing. Against that pricing backdrop, our financial performance strengthened during the quarter. Adjusted EBITDA increased approximately 5% sequentially to $57.1 million, with Adjusted EBITDA margin improving to 56% from 52%, while adjusted free cash flow from operations increased approximately 7% to $50.4 million. That performance, despite a 6% decline in our overall realized price, reflects the resilience of the underlying business and continued cost discipline.

[Sonu Johl, EVP, CFO, and Treasurer at Ring Energy]

Turning to costs, LOE was $10.20 per BOE, compared with $10.12 in the second quarter, remaining relatively stable on a per-unit basis. Overall, all-in cash operating costs declined to $21.03 per BOE from $21.59 in the second quarter. Cash G&A increased to $3.45 per BOE from $3.19 in the second quarter, primarily reflecting higher professional services and legal costs during the quarter. Our core employee costs remain relatively stable, and the higher professional services costs are not indicative of an increase in our underlying run rate G&A. Interest expense also continued to move lower, declining to $7.7 million from $8.4 million in the second quarter, reflecting lower debt balances. Turning to the balance sheet, we continued to make meaningful progress during the quarter.

[Sonu Johl, EVP, CFO, and Treasurer at Ring Energy]

We ended September with $350 million outstanding under our revolving credit facility, down $10 million from the end of the second quarter and $70 million from the beginning of the year. At the same time, total liquidity increased to approximately $236 million, compared with approximately $226 million at the end of the second quarter. Our leverage ratio, based on total debt to last quarter annualized Adjusted EBITDA, improved to approximately 1.5x from 1.7x last quarter. We remain fully compliant with all financial covenants and continue to target long-term leverage of less than 1.25x. The progress we continue to make strengthening the balance sheet gives us greater flexibility in how we allocate capital across the business while maintaining financial discipline. I'll finish with a few comments on hedging. Our hedge strategy is an extension of how we think about capital allocation and risk management.

[Sonu Johl, EVP, CFO, and Treasurer at Ring Energy]

Our objective is not to predict commodity prices, but to provide greater certainty around the cash flow supporting our development program and balance sheet while retaining appropriate exposure to the commodity price upside. As we look to 2027, we've been particularly focused on protecting the first half of the year when we expect our development capital to be more concentrated. With that in mind, we recently strengthened our oil hedge position by increasing the level of downside protection on a portion of our existing hedged volumes. Importantly, this was less about increasing the percentage of production we have hedged and more about improving the quality of the protection.

[Sonu Johl, EVP, CFO, and Treasurer at Ring Energy]

Based on the midpoint of our Full Year 2027 oil sales guidance, approximately 59% of our first half 2027 oil volumes are currently hedged, and the additional swaps we put in place provide greater cash flow certainty during the period when we expect our capital requirements to be highest. For additional detail on our current hedge positions, including volumes, pricing, and contract structure, I'd refer you to the hedging disclosure in our investor presentation. The impact becomes meaningful in a lower price environment. Based on our current outlook for the first half of 2027, the additional protection is designed to help ensure we remain free cash flow positive even at $65 WTI. That gives us greater confidence in our ability to execute the development program while maintaining balance sheet discipline through a range of commodity price environments. On natural gas, we're taking a similarly disciplined approach.

[Sonu Johl, EVP, CFO, and Treasurer at Ring Energy]

Given the volatility we've seen in Permian gas pricing, we're managing both commodity price and regional basis exposure to provide additional protection around our expected gas cash flows. The key financial takeaway is this: the third quarter was a deliberate investment quarter. We funded that investment and high-graded the portfolio while reducing debt, increasing liquidity, and lowering leverage. With capital stepping down in the fourth quarter, greater hedge protection around the first half of 2027, and a stronger balance sheet, we believe we're well-positioned to fund our 2027 development program and continue reducing debt. With that, I'll turn the call back to Paul.

[Paul McKinney, CEO and Chairman of the Board at Ring Energy]

Thanks, Sonu. We accomplished a lot during the third quarter, but more importantly, the actions we took strengthened the foundation of this company. We improved the portfolio, expanded our undeveloped inventory, advanced our longer lateral development program, and reduced debt. As we look to 2027, we believe we have the asset base, financial flexibility, and development opportunity to continue improving capital efficiency, generate strong returns, and position this company to deliver profitable organic growth. Our focus is straightforward: allocate capital to the highest return opportunities, maintain financial discipline, and continue creating durable per-share value for our stockholders. We are excited about the momentum we have created this year, and even more importantly, we believe we can take this company from here. With that, operator, we are ready to open the call for questions.

[Operator]

Yes, thank you. We will now begin the question-and-answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. Anytime your question has been addressed and you would like to withdraw it, please press star then two. At this time, we will pause momentarily to assemble the roster. Today's first question comes from Jeff Robertson with Water Tower Research.

[Jeff Robertson, Analyst at Water Tower Research]

Thank you. Good morning, Paul. I am looking at slide 14 of the deck where you talk about some operational improvements. For 2027, as you think about capital efficiency, can you share your perspective on the metrics with respect to how much production Ring would expect to add as you pivot to 1.5-mile horizontals or two-mile horizontals compared to where you have been in the past couple of years?

[Paul McKinney, CEO and Chairman of the Board at Ring Energy]

Yeah, good morning, Jeff. Yeah, that is a really good question, and this is what we have been trying to communicate to the investment community about the transition we are in the middle of right now. Based on the early well results that we have seen, we believe that switching to longer laterals, co-developing our locations, so on a location where you have multiple zones that are productive, you drill all of your wells per dollar spent. Right now, we believe we can generate, like we have already guided, 10% production growth next year on a very similar, actually slightly lower capital spending program. That is an indication, should be an indication to you as to what kind of capital efficiency you are going to see.

[Paul McKinney, CEO and Chairman of the Board at Ring Energy]

But the challenge that we have, and that the shareholder is going to have to be a little patient, it's going to take a couple of quarters for the results of this shift to a more capital-efficient program to actually follow through and be revealed in the financials. For example, of the co-developed wells that we developed this quarter, only two of those wells were on early enough to have a measurable contribution to our production this quarter. This is something that we were really having a difficult time trying to predict last quarter when we gave guidance. But the other wells that we completed this quarter are going to contribute meaningfully to the fourth quarter, and I think we'll begin to show the benefit of this transition. Sonu, you have anything else you want to add, or Alex? Appreciate it. Does that answer your question, Jeff?

[Jeff Robertson, Analyst at Water Tower Research]

Yeah. So just on that, Paul, when you co-develop wells on pads, as you complete them, are you shutting in offset production to accommodate, or to avoid some of the frac impacts that you might see as you complete new wells, so you get a bit of a sawtooth-type production curve or production profile?

[Paul McKinney, CEO and Chairman of the Board at Ring Energy]

That's exactly right. If you remember our past program where we just drilled a single horizontal on a pad, once you moved the rig off, we had the completion crew in there and complete our frac jobs and drill our plugs out and get these wells on really quickly. Now what you're going to see is going to be a little bit more lumpy because we're going to stay on that location. Let's say it's two, three, four, or five wells per location. You'll drill them all, and then you'll complete them all, and then you'll bring them all on. And the point that you brought up, yes, not in every instance, but most instances, we will be shutting in production offsetting because that we're trying to minimize the frac interference and other things. That is a reality to the program we're going to.

[Paul McKinney, CEO and Chairman of the Board at Ring Energy]

But what you'll find is on a multiple quarter basis, you're going to see higher sustained production delivery. And then when you look at the resulting financials and metrics, we'll be delivering considerably more production per dollar spent as we go into 2027.

[Jeff Robertson, Analyst at Water Tower Research]

You said the 2027 capital program is weighted toward the first half of the year. What is informing your view of what kind of capital activity you might want in the second half of 2027? I am guessing that the capital spent in the fourth quarter of this year and the first half of next year is really what will shape the production profile for all of 2027. Is that correct?

[Paul McKinney, CEO and Chairman of the Board at Ring Energy]

That is correct, and that is part of the reason why we like to front-load, because you get the benefit of that production all year long. But the other thing that we have purposely done in our forecast, again, we have front-loaded our capital for 2027, but we do not know what the future holds, right? We do not know where future oil prices are going to go. We will have a decision to make as we enter the mid-year of next year with a lot more certainty with regard to all of that. We may curtail capital spending, or we may increase capital spending, all based on cash flow, the progress we have made in terms of reducing our debt and getting our leverage ratio where we really want it. We really want to get below 1.25x, but I really want it below 1x.

[Paul McKinney, CEO and Chairman of the Board at Ring Energy]

I believe that if we continue to be in this higher-for-longer environment, we are poised to get our leverage ratio below 1x next year.

[Jeff Robertson, Analyst at Water Tower Research]

Thank you.

[Operator]

Thank you. Once again, please press star then one if you would like to ask a question. Our next question comes from Noel Parks with Tuohy Brothers.

[Noel Parks, Analyst at Tuohy Brothers]

Hi, good morning.

[Paul McKinney, CEO and Chairman of the Board at Ring Energy]

Good morning.

[Noel Parks, Analyst at Tuohy Brothers]

I was curious on the acreage you divested, I realize they're a pretty small percentage of total production represented, but I was wondering if you could talk a little bit about just how you sort of rate the acreage that you have. I think you said in the release that it didn't really compete for capital in the near term. Just a little bit about how you're selecting what you're willing to sell near term.

[Paul McKinney, CEO and Chairman of the Board at Ring Energy]

Yeah, no, that's a very good question, and you're actually pointing out an issue that we actually changed our own opinion over the year. Earlier in the year, I really did not believe that we had very many assets within our portfolio that we would want to sell. But as we watched the rest of the industry and the industry's interest in some of these deeper, more expensive plays where we had interest, we found that those other parties were more interested in our acreage because although that was acreage that we could eventually get to one day in the future, it wasn't something that was going to earn capital investment anytime soon, not in the next couple years with us.

[Paul McKinney, CEO and Chairman of the Board at Ring Energy]

It became very apparent to us that these assets that we had were more valuable in the hands of somebody else, and they were willing to pay the going price. Those prices, as you can see, are very attractive, very accretive. We took advantage of that to accelerate the value of those assets in our portfolio and then reinvest that to expand our acreage position where we are currently focused, where we have a current very profitable program going on, and build inventory. At the same time, we were also able to pay down debt. It also gave us the opportunity to accelerate some of these investments that we made this quarter. The most significant of that is basically the co-developed longer lateral wells that we drilled this quarter, and also the infrastructure necessary to support that.

[Paul McKinney, CEO and Chairman of the Board at Ring Energy]

So, as a result of the events in 2026, first of all, the conflict in Iran gave us an environment of higher prices. The market was opened last summer very briefly for an equity raise that we took advantage of, and that position this company basically catapulted us about a year and a half, almost two years forward in terms of debt reduction, financial stability, and wherewithal, and it gave us the opportunity to invest. We knew we had to invest in the infrastructure, so before we could actually start drilling these really highly capital-efficient locations. We took advantage of all of that, and that's where we are today. These sales is just part of that same strategy.

[Paul McKinney, CEO and Chairman of the Board at Ring Energy]

How do we move our balance sheet forward in time, in terms of if you just did it organically, we really had the ability to accelerate debt reduction, position the balance sheet so it's much stronger. Now, getting below 1x is not unreasonable for next year. We're really excited about what all that has done. But the sales are just another part of that, Noel.

[Noel Parks, Analyst at Tuohy Brothers]

Terrific. Thanks for the background. It would be great to just hear some about getting a little more production history on what you have done before in Crane and Ector, and also from the offsetting wells. In the release, you said you were encouraged and felt like you were on the right track in your development program from the recent drilling. Anything you could update us on with that would be great.

[Paul McKinney, CEO and Chairman of the Board at Ring Energy]

Well, we are not going to talk about specific well performance right now, primarily because pardon me. Primarily because we are still acquiring acreage. We do not want to point out our specific successes yet, because we believe we have an opportunity to capture more acreage in and around where we operate that can provide significant inventory. We still believe we can acquire that acreage at attractive prices, and we just do not want to drive up the competition. I will say this, the two wells that we completed earlier in the quarter are at least meeting, I believe they are actually exceeding. Alex, you have anything you want to say about that?

[Alex Dyes, EVP and COO at Ring Energy]

Yeah. Thanks, Paul. Noel, really the big confidence that we showed the market is by updating our guidance, showing that we are going to grow more than we have in previous years, because we do believe in these investments. As well, on page 14, we show an EUR per foot, and it is very similar to last year's EUR per foot, both on barrels of oil and BOEs. But the big difference is that previously, we had two proved horizontal targets, while now we have proved up five horizontal targets. As we keep developing and getting more knowledge about these zones, we will be coming out with more and more data. But as Paul said, we are actively leasing, so we do not want to release exactly where we are active.

[Noel Parks, Analyst at Tuohy Brothers]

Totally understand. I just wondered if you could maybe characterize it a bit as far as, have you been happiest kind of with the geology meeting your expectations, or have you been the most encouraged by just the ability to drill, pace at which you are drilling, staying in zone, sort of the engineering side of it?

[James Parr, EVP and Chief Exploration Officer at Ring Energy]

Hi, Noel. This is James. Great question, because we're exploring in a basin that's been developed for 100 years, and the encouragement we're finding from the zones we're encountering, without naming names, it's all part of the stratigraphy on the Central Basin Platform that is very attractive. They're all oil charged. As you expect, it's early days, but we're getting encouragement in all of the zones that we're drilling. Some of them are exceeding our expectations, some are normal, and some we're improving what we're doing from an operations standpoint. In an overall portfolio add, it's adding a tremendous amount of inventory that's attractive for us to now operationally gear up in terms of the infrastructure, the water handling, and the frac, to go to pad drilling to exploit these zones. The geology is all excellent. As you know, these rocks are all charged.

[James Parr, EVP and Chief Exploration Officer at Ring Energy]

We're focused on the conventional reservoirs, which are being charged by both of the adjacent basins, and these carbonates are really lending themselves to horizontal wells, extended reach wells, to improve the capital efficiency and the productivity per foot. We're very excited by it. Some of these wells, when we come out with them, they've even given us further encouragement. That's why, as Paul McKinney said, we're picking up more acreage in the area, because we're encouraged to expand our position. Great question.

[Paul McKinney, CEO and Chairman of the Board at Ring Energy]

Yeah, it is. I'll just add a little bit more to that. Some of these stacked pays in the Central Basin Platform, as you got away from the core areas of those reservoirs, a lot of these areas were believed not to be economic vertically, because the technology just didn't allow them to meet economic thresholds, right? What we've found is by applying these new technologies, some of these areas where we knew that the zones were there, we knew that they were oil charged, but historically, they were believed to be not economic. Now this new emerging technology, the ability to get longer laterals at the shallower depths, and also apply the frac technology, the multi-stage, we're finding that what was previously believed to be uneconomic and everybody forgot about, that's why we're able to pick up this acreage.

[Paul McKinney, CEO and Chairman of the Board at Ring Energy]

We believe there's a lot of application out here, and we want to get as far ahead of it as we can. So far, our only competition has been in private. We haven't found any public companies that are competing with us for this. We think that there's a real strategy associated with expanding on the Central Basin Platform in the southern part of the Northwest Shelf, because these stacked pays. We know they're oil charged, and we're just now realizing that applying these new technologies is the way to go. A great question, Noel.

[Noel Parks, Analyst at Tuohy Brothers]

Great. Thanks a lot.

[Operator]

Thank you. We have a follow-up question from Jeff Robertson of Water Tower Research.

[Jeff Robertson, Analyst at Water Tower Research]

Thank you. Sonu, how does the decreasing leverage ratio affect the hedge requirements under the RBL?

[Sonu Johl, EVP, CFO, and Treasurer at Ring Energy]

Yeah, we're not quite at the leverage metric we need to be to, where we're going to impact the amount we need to hedge. We're still on that rolling 24-month basis, but we've made significant improvement on how much debt we've paid down this year. Our borrowing base redetermination is coming up in December, and we're going to have an opportunity to talk to the banks and kind of understand what movement we can have on that covenant. But the way it's written now, we haven't made enough progress to get to that 1.25x leverage metric. Now, depending on how oil price plays out over the next year, if oil is $75, then it's going to take us Q3, Q4 to get below that debt metric. If oil is above $80, then we start to hit there somewhere Q2, maybe into Q1.

[Sonu Johl, EVP, CFO, and Treasurer at Ring Energy]

It really depends on the pricing environment we are at and how quickly we can get to that leverage ratio.

[Paul McKinney, CEO and Chairman of the Board at Ring Energy]

But the actual definition in our credit facility is, you have to be below 1.25x, and you have to be at least 50% or less drawn on your borrowing base, and then you qualify at that point not to only have to hedge 25% of your production for months 13 through 24. And if you can get it below 25% drawn on your borrowing base, well, then you do not have any hedging requirements on months 13 through 24.

[Jeff Robertson, Analyst at Water Tower Research]

Thanks, Paul.

[Paul McKinney, CEO and Chairman of the Board at Ring Energy]

Yeah.

[Operator]

Thank you. This concludes our question and answer session. I would like to turn the comments back over to Paul McKinney, CEO, for any closing remarks.

[Paul McKinney, CEO and Chairman of the Board at Ring Energy]

Yeah, very good. As you know, we had a great quarter, or we believe we did, and we also believe we are going to have a great quarter next year, and we were really looking forward to 2027. We are focused on growing through disciplined execution, improved capital efficiency, protecting the balance sheet, and creating long-term per-share value. We look forward to updating you guys in the future, all of our shareholders and all of our interested parties. On behalf of the entire team, the board of directors, I want to once again thank you again for listening and participating in today's call. Have a great weekend, everyone.

[Operator]

Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.

Participants

Executives

• Al Petrie, Head of Investor Relations
• Paul McKinney, CEO and Chairman of the Board
• Sonu Johl, EVP, CFO, and Treasurer
• Alex Dyes, EVP and COO
• James Parr, EVP and Chief Exploration Officer

Analysts

• Jeff Robertson, Analyst at Water Tower Research
• Noel Parks, Analyst at Tuohy Brothers