Ring Energy, Inc. (AMEX:REI) Q3 2025 Earnings Call Transcript

Ring Energy, Inc. (AMEX:REI) Q3 2025 Earnings Call Transcript November 7, 2025

Operator: Good morning, and welcome to the Ring Energy Third Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I will now turn the call over to Al Petrie, Investor Relations for Ring Energy.

Al Petrie: Thank you, operator, and good morning, everyone. We appreciate your interest in Ring Energy. We’ll 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 2025. We will then turn the call over to Rocky Kwon, Ring Energy’s VP and Interim Chief Financial Officer, who will review our financial results. Paul will then return with some closing comments before we open up the call for questions. Also joining us on the call today and available for the Q&A session are Alex Dyes, Executive VP and Chief Operations Officer; James Parr, Executive VP and Chief Exploration Officer; and Shawn Young, Senior VP of Operations. [Operator Instructions] You are welcome to reenter 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. 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. 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: Thanks, Al, and thank you, everyone, for joining us today and for your continued interest in Ring Energy. We are pleased to announce another strong quarter. During the third quarter, we were able to achieve or exceed our goals despite the volatility and challenges associated with commodity prices. We were able to do this because we continue to focus on the operational and financial items within our control to maximize adjusted free cash flow. We also benefited from our historical efforts to optimize and build an asset portfolio defined by high margins, shallow declines and long reserve life, the virtues that lead to resilience and sustainability no matter where we are in commodity price cycle. So let’s get into the numbers.

Our oil sales were 13,332 barrels of oil per day, which was slightly below the midpoint of our guidance. And our total sales were 20,789 barrels of oil equivalent per day, which was above the midpoint of our BOE guidance. Production from our recently acquired Lime Rock assets as well as the new wells drilled so far this year continue to perform better than expected and continue to help mitigate the natural decline of our legacy assets during this period of capital discipline. We deployed $24.6 million in capital spending during the quarter, which was near the low end of our guidance range and allowed us to drill and complete the necessary wells to achieve our production targets. As we have shared in the past, our discipline in this regard is focused on striking the right balance of maintaining modest year-over-year production growth and liquidity with managing our leverage ratio and paying down debt.

Another item associated with our focus on maximizing adjusted free cash flow is our cost-cutting efforts in the field, which continue to yield great results. Our lifting costs during the quarter were $10.73 per BOE, which was below the low end of our guidance range for the second consecutive quarter and only 3% shy of the lifting costs recorded last quarter. Our lifting cost reductions have been driven primarily by reducing the number of operators in the field required to operate our wells, lower chemical expense, reducing well failures and the costs associated with well repairs and production efficiencies gained through longer run times and proactive well interventions. Our third quarter results demonstrate that Ring Energy is successfully executing on our operational plans and managing the important issues within our control.

Despite weak oil and natural gas prices, Ring generated $13.9 million in adjusted free cash flow during the quarter, which was primarily driven by the operational items we just discussed. Our operational performance enabled Ring to reduce debt by $20 million, which was $2 million more than we guided for the quarter. Our continued and unwavering focus on improving our leverage ratio will continue into the foreseeable future, and we intend to maintain the momentum of the successes from the first half of this year as we finish out 2025 and enter 2026. As we stated in our earnings release, if we encounter higher oil and natural gas prices in the future, we will continue with our capital discipline to prioritize reductions and improving our leverage ratio to competitive levels with our peers.

Having said all this, I would like to turn this call over to and introduce you to our Vice President and Interim Chief Financial Officer, Rocky Kwon. He will share the highlights and details of our third quarter financial position. Afterwards, I will return to share more about the priorities and our outlook for the future. Rocky?

Rocky Kwon: Thanks, Paul, and good morning, everyone. The takeaway for the quarter is that Ring continues to successfully execute its plan to reduce costs, maximize free cash flow generation with a focus on further debt reduction. In Q3, similar to Q2, we paired strong sales volumes with disciplined capital deployment and a focus on cost reduction. The combination of these actions resulted in adjusted free cash flow of $13.9 million, which enabled us to pay down $20 million of debt. As we have said every quarter, balance sheet improvement has been and will remain a top priority for the company. Turning now to the metrics for the quarter. It’s clear that the team is executing the operational plan effectively. Starting with sales volumes.

We sold 13,332 barrels of oil per day, just below the midpoint of our guidance and 20,789 BOE per day above the midpoint of guidance. Third quarter 2025 overall realized pricing decreased 4% to $41.10 per BOE from $42.63 in the second quarter. Driving the overall decrease was a 16% reduction in NGL prices to $5.22 for the quarter. This was offset by 3% higher realized oil prices of $64.32. Realized gas price remained at a negative value of $1.22. However, that was an improvement from a negative $1.31 in the second quarter. Plant processing fees continue to reduce realized pricing for both NGL and gas. Our third quarter average crude oil differential from NYMEX WTI futures pricing was a negative $0.61 per barrel versus a negative $0.99 for the second quarter.

This was mostly due to the Argus CMA role that increased $0.76 per barrel, offset by the Argus WTI WTS that decreased by an average of $0.41 per barrel from the second quarter. Our average natural gas price differential from NYMEX futures pricing for the third quarter was a negative $4.22 per Mcf compared to a negative $4.67 per Mcf for the second quarter. Our realized NGL price averaged 8% of WTI compared to 10% for the second quarter. The result was revenue for the third quarter of $78.6 million despite the weakening prices. We continue to target higher oil mix opportunities as oil accounted for 100% of our total revenue, while it was only 64% of total production. Overall, our sequential revenue decreased by 5% from the second quarter, which was driven by a negative $5.8 million volume variance, offset by a positive $1.8 million price variance.

Moving to expenses; LOE was $20.5 million or $10.73 per BOE compared to $20.2 million or $10.45 per BOE in the second quarter. We were pleased to see the trend of lower LOE on a BOE basis over the last two quarters, which was well below our guidance of $11 to $12 per BOE. Cash G&A, which excludes share-based compensation, was $6.5 million compared to $5.8 million for the second quarter. The slight increase was primarily driven by an increase in salaries and bonuses related to the separation of a former executive. Our third quarter results included a gain on derivative contracts of $0.4 million compared to a gain of $14.6 million for the second quarter. The third quarter gain included a $2.1 million unrealized loss and a $2.5 million realized gain.

As a reminder, the unrealized gain loss is simply the difference between the mark-to-market period-to-period. For Q3, we reported a net loss of $51.6 million or $0.25 per diluted share, which includes $72.9 million of noncash ceiling test impairment charges compared to the second quarter net income of $20.6 million or $0.10 per diluted share. Excluding the estimated after-tax impact of pretax items, including share-based compensation expense, noncash ceiling test impairment and noncash unrealized gains and losses on hedges, our third quarter 2025 adjusted net income was $13.1 million or $0.06 per diluted share while second quarter 2025 adjusted net income was $11 million or $0.05 per diluted share. We posted third quarter 2025 adjusted EBITDA of $47.7 million compared to $51.5 million in the second quarter, with most of the difference attributed to lower oil revenue and higher cash G&A offset by higher realized hedges.

During the third quarter, we invested $24.6 million in capital expenditures, which was below the midpoint of guidance of $27 million. Adjusted free cash flow was $13.9 million compared to $24.8 million for the second quarter, with a net decrease primarily associated with approximately $7.8 million in higher capital spending, combined with $3.7 million lower EBITDA compared to the second quarter. We ended the period with $428 million drawn on our credit facility after a $20 million paydown. With the current borrowing base of $585 million, we ended the quarter with $157 million in availability with a leverage ratio of 2.1x, which includes the $10 million deferred payment related to the Lime Rock acquisition due in December of 2025. Moving to the hedge positions.

For the last three months of 2025, we currently have approximately 0.6 million barrels of oil hedged with an average downside protection price of $62.08. This covers approximately 53% of our oil sales guidance midpoint. We also have 0.6 Bcf of natural gas hedged with an average downside protection price of $3.27, covering approximately 33% of our estimated natural gas sales based on the midpoint of guidance. For a breakdown of our hedge positions, please refer to our earnings release and presentation, which includes the average price for each contract type. We updated our guidance for the fourth quarter and the full year 2025. Full year production guidance is now 13,100 to 13,500 barrels of oil per day and 19,800 to 20,400 BOE per day. Guidance for the fourth quarter total sales volumes is now 19,100 to 20,700 BOE per day and oil production ranges between 12,700 and 13,600 barrels of oil per day, resulting in a 66% oil mix.

On the cost side, we updated guidance to $10.75 to $11.75 per BOE for the fourth quarter and $10.95 to $11.25 for the full year of 2025. Please refer to our third quarter earnings release and company presentation for full details by period. As in the past, we retain the flexibility to react to changing commodity prices and market conditions while also managing our quarterly cash flow. So with that, I will turn it back to Paul for his closing comments. Paul?

Paul McKinney: Thank you, Rocky. Ring Energy’s value proposition is clear. Our enviable portfolio of oil-rich assets with shallow declines, long reserve lives and higher margins allow for resilient cash generation. Our focus on building an inventory of drilling opportunities with low breakeven costs provides flexibility and optionality to maintain our production levels and liquidity. Together with our capital discipline, flexibility and focus on maximizing adjusted free cash flow generation to manage our leverage ratio and improve our balance sheet emphasizes the virtues of our value-focused proven strategy and the potential for strong revenue and earnings growth when higher commodity prices return. Ring stockholders have observed two consecutive quarters of disciplined capital allocation and improvements in capital and operational efficiencies that led to strong cash flow generation and debt reduction during these post Liberation Day commodity prices.

We intend to remain on course with these priorities regardless of future commodity prices and intend to do so until we drive our leverage ratio down to competitive levels with our peers. Regarding acquisitions, it is challenging in my mind that Ring would acquire producing assets of any reasonable or significant size with our leverage ratio being what it is today and our stock, in my opinion, being as undervalued in the marketplace as it is today. Having said that, though, there are attractive opportunities out there that would make great additions to our portfolio because they meet our strict criteria. So I feel compelled to say that we are and will continue to evaluate available opportunities to acquire, but — and until some of these individual and macro level issues change, it is unlikely that we could or would do anything in this regard of any significant size.

Regarding divestitures, as many of you know, we have a small package on the street of quality non-operated working interest. We are testing the market to see if we can repeat the performance achieved in the past when we were able to sell assets at valuations accretive to our trading multiples. The proceeds from future asset sales will be allocated to debt reduction. Regarding implementing a stockholder capital return framework, we currently do not pay dividends and have not pursued a stock buyback program. With all things considered and having had conversations with many of our large stockholders, we believe prioritizing debt reduction and improving our leverage ratio is our most important focus. We also believe that achieving a more relevant size and scale in the marketplace is also important.

With respect to growth, until we achieve leverage ratio competitiveness, our focus will be on reserves and inventory growth. As you may recall, we did not complete any acquisitions during 2024, yet we grew our production and reserves through organic means. Having more ways to grow today is important, and we no longer have to rely on acquisitions of producing assets to achieve our growth ambitions. By focusing on reserves and inventory growth during these times of challenging commodity prices, we can continue our focus on improving our balance sheet and prepare ourselves for the future when our leverage ratio, debt levels and commodity prices provide the opportunity and the flexibility for significant growth. With that, we will turn this call over to the operator for questions.

Operator?

Q&A Session

Operator: [Operator Instructions] The first question comes from Noel Parks with Tuohy Brothers.

Noel Parks: One thing I was wondering about is on the balance sheet, it’s something I don’t know if I’ve asked about recently. Any thoughts about possibly terming out the revolver since we’re kind of in this transitional interest rate environment and it seems like there are some folks out there who think we might not see a lot further down move in longer-term rates. So just wondering if that was on the table these days.

Paul McKinney: Yeah. Noel, that’s a really good question. And to be quite frank with you, everything is on the table, right? And so yes, we are looking at not only that, but all other opportunities that we have to strengthen the balance sheet. What are the ways to reduce risk out there in the marketplace? And so there are advantages and disadvantages associated with various different financing alternatives. The credit facility that we currently have in the reserve-based loan still does stand at the lowest cost of capital for us, and that’s where we are right now. But as markets change and as risks change going forward because you got all kinds of things moving. You got interest rates that are moving, you have energy prices that are moving.

Everything appears to be very volatile. So yes, we do our best to try to stay abreast with all these changes. And what does that mean in terms of the best way to finance our future growth and the debt that we have on the balance sheet. Rocky, is there anything else you can say?

Rocky Kwon: No, I just want to echo that comment, Paul. All options are on the table. We are exploring all opportunities to strengthen our balance sheet, especially when it comes to our debt levels. So we are exploring opportunities, and we are continually keeping abreast to all our options out there.

Paul McKinney: Yeah. So the only thing I can say is that although we’re evaluating, we’re not in a position right now to announce any kind of a change or anything like that. But I think every company out there, just including us, especially those that are in the public space, you have to stay abreast of these types of changes. But yeah, that’s a very good question. We don’t have any — we’re not anticipating any kind of changes in the near-term, but we are looking at all of those things continually. Does that answer your question, Noel?

Noel Parks: Sure does. And another thing I was wondering is, in this environment, we’ve had some relative weakness in crude compared to where we’ve been. So would you say it’s safe to assume looking into next year, flattish service costs kind of at worst heading into next year?

Paul McKinney: Yeah. So if you’ve got a crystal ball on what future energy prices are, that would be probably the best prognostication you could have, I guess. And I’m going to turn this over to my operational guys. But there has been changes in the cost for services that we’ve seen since post Liberation Day. Shawn, I don’t know if there’s anything more you can say in that regard.

Shawn Young: Yeah. Obviously, with the activity levels and commodity prices where there are, there’s continued pressure on service costs. And I’m not sure we’ve seen the bottom yet. So we’re continuing to work with our vendors and continuing to negotiate the best cost we can. But yeah, it’s — hopefully, we do see some improvement in commodity prices and maybe that does keep service costs relatively flat. But right now, we are still continuing to take advantage of some savings that we’re able to negotiate.

Paul McKinney: Yeah. And we’re anticipating a few more here in the near term. Yeah. That’s good. Good question, Noel.

Operator: The next question comes from Jeff Robertson with Water Tower Research.

Jeffrey Robertson: Paul, in your opening remarks, you talked about the stock price, and you talked a little bit about it on the August conference call. Can you just share any thoughts with 90 days later, how you think Ring is relatively positioned as you look out into 2026?

Paul McKinney: Yes. I mean if you look back at where we were this time last quarter, there are a couple of things that have changed. The most significant change is that Warburg has since completely exited their position in Ring Energy stock. And we also believe all of the institutional repositioning associated with the Russell 3000 is also over. So from my perspective, Ring Energy is now free from what has been described by others as an overhang or additional selling pressure against our stock. And so I’m really excited about that. Now where we are trading today, I still believe we are at a discount to our peer companies. And I believe that our performance is very competitive versus that peer group. And so I believe that we will see a gradual increase in our stock price performance versus our peers just because I believe that’s the rightful place where we should be.

And if we continue to deliver to our stockholders quarter-over-quarter, I don’t know how long it will take for us. But if you look back in history, if you look at the history of our stock price and performance versus our peers, we’ve suffered three years of additional selling pressure that really put us at the lower end of that peer group when our operational and financial performance during that time period was at the higher end. And so I believe we’re going to get there. What does that mean? It’s kind of hard to say. But if you just look at the trading metrics, we’re just not trading where many of the other peer companies are and yet our performance is superior. So I think that there’s a bit of a re-rating that can occur there.

Jeffrey Robertson: With the emphasis on debt reduction, I think Rocky you mentioned the $10 million deferred payment [indiscernible] Lime Rock during the fourth quarter. Paul, can you talk about what the scenarios that you think about for 2026 for further debt reduction? And should we take the slide that you all have, I think it’s the bottom right panel on Slide 7 as an indication of what might be possible for debt reduction in 2026?

Paul McKinney: Yeah. Yeah, another good question, and that was intentional. And Rocky will jump in here shortly as well. But before getting into any of the numbers, though, I think we need to emphasize to our investors that there are several variables between now and the end of the year with regarding that will impact our debt as we exit the year. But having said that, we believe, based on our current projections of operational performance and also the assumptions associated with commodity prices remaining at current levels, of course, we can’t forget that, right? We should be able to pay down somewhere in the $10 million range in the fourth quarter. Rocky, is there anything more you want to say?

Rocky Kwon: Yes, there is. I’d just like to reemphasize the uncertainties that we have the potential to pay down and that would affect the number — the $10 million number that you just shared, Paul. Some of these issues can improve the amount and one or two of these could actually reduce the amount, but I just want to emphasize the uncertainty of that nature. But importantly, I think it’s worthwhile to note again that we do have a $10 million deferred payment due in December. So if it wasn’t for the $10 million deferred payment from the Lime Rock acquisition, that repayment, that reduction would actually be approximately $20 million. But again, I just want to reemphasize the uncertainty of the nature and there’s — it could improve or it could reduce the amount.

Paul McKinney: Yeah. So going back to that, I mean, we just paid down $20 million worth of debt in the third quarter. If it wasn’t for that deferred payment, thank you for mentioning that, Rocky. We would be paying down another $20 million next quarter. All of these changes that we’ve made in terms of how we’re allocating capital, the priority associated with debt reduction. I think if anything, we’ve learned from Liberation Day that the leverage ratios that we currently have really need to be lower. We need to position ourselves so that we have more flexibility and more optionality, especially with our dealings with commodity hedges and everything else. And so we’re not going to lose focus on paying down debt. And so if it wasn’t for the deferred payment, we’d be paying down more next quarter. But hey, we still have a couple of things up our sleeve. We might be able to exceed that. But I think $10 million is a good number. [ Al ]?

Alexander Dyes: Yes. And one more thing, hi, good morning, Jeff. And as Paul mentioned on the call just earlier, we are looking at rationalizing our portfolio. So we are also looking at noncore divestitures specifically a non-op divestiture. So that asset class is tending to trade at better multiples than us. And so if we can potentially sell it at a premium like we did last year where we sold an asset, we’ll try to do that, too.

Paul McKinney: So that’s another potential that could increase our debt reduction. So put it this way, Jeff, we’re going to — we’re very, very focused on debt reduction. And back when oil prices were $75, $80, we could continue to pay down debt and also pursue organic growth or growth. But at these prices, we’re squarely focused on paying down debt. So I think $10 million is a good number to go with. And so we’ll see how things turn out. Does that answer your question?

Jeffrey Robertson: Yes, it does.

Operator: [Operator Instructions] The next question comes from Poe Fratt with Alliance Global Partners.

Charles Fratt: Just to follow up on that $10 million debt reduction number in the fourth quarter. Can you give us a range? Rocky, you talked about some good things and potentially some bad things. What’s the best case scenario for debt reduction in the fourth quarter?

Paul McKinney: Poe, come on now?

Charles Fratt: And what’s the worst case? I mean just how tight is that range?

Rocky Kwon: Again, thanks for the question. That’s a really tough question to quantify any ranges due to the uncertainty of the nature, commodity prices, several aspects that we are working on in-house such as the non-op divestiture piece that we have out there. And again, the $10 million deferred payment that we have. So if you strip that out, we’re looking at approximately a $20 million paydown. But again, the uncertainty of the nature, I can’t go into too much and put out a range.

Paul McKinney: Yeah. And so Poe, the reason why I really wanted Rocky to answer that question because I know that he would give you a much more conservative number than I might. But I’ll put some quantification. I mean it’s going to be at least $8 million. But if you go back to what Alex mentioned, there’s a potential to pay down $12 million, $13 million or $14 million. And so, is that the high end of the range? It’s kind of hard to say because we are still making progress. And some of the big surprises that I’ve had as a CEO really is the progress that our field guys are making in terms of reducing operating costs out there and then our drillers and guys completing our wells. They’re continuing to find ways the capital that we’re planning to spend in the fourth quarter, we’re finding ways to reduce that — those costs, and that will go straight to debt reduction.

And at the same time, any more progress we make on reducing operating costs, that’s going to go towards paying down debt as well. And so it’s kind of hard to put a range on it, but that’s probably the best we can give you, Poe. Is that all right?

Charles Fratt: No. From what I think I heard, the high end of the range potentially includes the sale of the non-op working interest. So should I be thinking about the potential proceeds from that sale of — in the $3 million to $5 million range? Is that sort of a reasonable expectation?

Paul McKinney: Well, it’s kind of hard to say there because if you look at the range out there in the marketplace, it could be considerably higher than that. That’s part of the reason why I said we’re testing the markets with this. If we don’t get what we think is the right value, we won’t sell it at all. So then there won’t be any benefit to that. So it truly is a test in the marketplace. We expect to get a very strong trading multiple out of the sale of those assets. Otherwise, we won’t sell them. So that’s a real risk that we just actually don’t close on a deal in the fourth quarter, and we don’t apply that to paying down debt.

Charles Fratt: Yeah. What did the working — non-op working interest contribute in the third quarter as far as production?

Paul McKinney: Yeah, it’s less than 200 BOEs a day, yeah.

Charles Fratt: Okay. So yeah, on the margin, it’s not going to move the needle significantly on your debt reduction program. Okay. And then I noticed this may be a little nitpicky, but I noticed the third quarter production, the oil cut dropped. Is there anything that drove that or is that — it sounds like it may be temporary from the standpoint of looking at your fourth quarter guidance, oil cut rebounded to 66% from 64%. But anything going on there?

Paul McKinney: Yeah. I mean, actually, you’re digging into the numbers and you’re identifying a lot of things that we don’t spend a lot of time talking about. But prior quarters, we had — and we had this consistently. We have — some of the gas gatherers are systems that are a little on the older side. And so the reliability of those gas gathering systems. When these plants go down or there’s a line leak and they got to replace a line, oftentimes, we find our gas not going to sales. And so that is the swing typically that you see in our ratios from one quarter to the next. And it’s more a reflection of the takeaway capacity and whether or not they’re actually taking. Shawn, is there more you can share there?

Shawn Young: Yeah. So yeah, Paul hit it right on the head. In the second quarter, we did have a lot more downtime associated with gas takeaway. And so our gas volumes were not as strong in the second quarter versus where we were in the third quarter, and that’s what’s making the splits there change.

Charles Fratt: Okay, great. And then if you look at the midpoint of your CapEx guidance for the fourth quarter, can you give me an idea of the mix between vertical and horizontal wells that you’re going to drill?

Shawn Young: Can you repeat that question?

Paul McKinney: You want to know the mix between horizontal and verticals in the fourth quarter [indiscernible].

Alexander Dyes: Yes, I think we’ve got 3 horizontal wells and 1 vertical well planned for the fourth quarter, so.

Charles Fratt: Great. And then Jeff talked about Page 7, the lower right box. Is that your current working guidance for 2026 or how should we look at that? Is that more of a hypothetical at this point in time or should we view that as the guidance for ’26?

Paul McKinney: It’s actually hypothetical. It’s basically assuming that we continue with the same capital spending levels that we have. We are looking at and actually in the final throes of assembling our budget for next year, and we intend to review that with our Board of Directors to get approval for that. And so then we’ll come out with official guidance once we’ve got that pinned down. And so yeah, there’s a lot of moving parts in that regard right now because I think it’s probably safe to say at this early stage that unless something changes, $60 will probably be the price assumption, a flat $60 case going into next year associated with our projected cash flows and all this kind of stuff. And if you use that as a basis, that’s going to affect the capital spending levels.

And again, we’re going to continue our preference for paying down debt and strengthening the balance sheet through a stronger leverage ratio. And so we’ll be managing all of that. But at this point, it is the tail projections from basic assumptions that were designed for 2025. That tends to get updated and will be updated here before we exit the year, and we’ll be reviewing that with the Board immediately after the New Year. And so when we come out with our fourth quarter results, we’ll have clear guidance at that time.

Charles Fratt: Okay. Just wanted to make sure that, that was hypothetical and that we really shouldn’t be looking at those numbers unless oil prices change from where they are now, right?

Paul McKinney: Yeah. And so — but if you look at — I will say this, the assumptions that went into that, even though it’s a hypothetical, those assumptions in this current price environment are not going to be a whole lot different than what was used to put that together. So it could change. Alex, is there any more you want to say there?

Alexander Dyes: Yeah. So as Paul was alluding to here, it’s more of — if you look at what the realized oil price this year, it’s about $64 to $65. So this base model for ’26 outlook was based on that. If we really do remain in the $60 price environment, then we will look at pulling back our capital some to try to still maintain production, but the reinvestment rate would obviously be — we’re trying to stay pretty level around that 50% to 55%.

Paul McKinney: Yeah. And so the reinvestment level is important. And again, because we’re not going to lose sight of debt reduction, you can’t lose sight of leverage ratios either. And so it’s a balance. It’s a mix. But yeah, so that would imply a slightly lower capital spend, and that would affect EBITDA and same with the oil price assumption, too.

Charles Fratt: Okay. Sounds good. And then, Rocky, just a nitpicky one on G&A expense. You had mentioned Travis leaving that hit the G&A expense line this quarter. Will it bleed into the fourth quarter or will G&A fall back into the sort of the second quarter range?

Rocky Kwon: No. So G&A will kind of be back in line. That was a onetime recognition of the costs related to the departure of our executive. Based on the rules, we had to take the — we had to recognize all the costs within the period that it incurred and it was in the third quarter.

Operator: [Operator Instructions] We now have a follow-up from Jeff Robertson with Water Tower Research.

Jeffrey Robertson: Paul, you talked about organic growth in the past. But if you’re not in the acquisition market just because of dynamics, what do you do with the existing asset base to try to categorize or catalog organic growth opportunities that you can take advantage of in the future?

Paul McKinney: Yeah. And so I’m going to allow James Parr to jump in on this. But again, it goes back to the price environment that we are. If we’re in a higher price environment, you can focus on more than just one endeavor that leads to share price appreciation, right? And so in the past, when we’re in the $75 price range, we were paying down debt and also seeking to grow. Right now, we’re focused on debt repayment. And so what are the other things you can do? So if you go back to 2024, we were very successful in terms of growing the company through organic means. And so that’s acquiring additional leases within our cash flow and drilling wells identified through organic means. And we not only grew our reserves, but we also grew our production.

Right now, we don’t intend to grow our production. And so by focusing on reserves and inventory, building your undeveloped inventory, we’ll position the company so that when energy prices return and then our balance sheet is in a strong position, our leverage ratio is where we want it, then we have the optionality to actually pull — take advantage of the built inventory and deliver significant growth. That could be in significant production, revenue and EBITDA growth. And so right now, I think we’re focused in the Central Basin Platform and the Northwest Shelf in terms of identifying the opportunities. I think, James, I mean, I’m sure there’s a lot you can say here.

James Parr: Yeah. No, great question, Jeff. In tight times, how do you continue to maintain the company and pay down the debt. So I’m excited by the multiple organic opportunities that we’ve got across most of our assets that we’ve purchased through previous deals that we’ve got. And for instance, down in Crane County, [ offset ] operators have successfully drilled and derisked additional stratigraphic intervals that extend on to our acreage. So pursuing these deeper targets in the future will enable us to have more of a horizontal well program going forward, replace and grow our reserves organically and increase our capital efficiency through the shared cost of the facilities we have, drill longer laterals, et cetera. So these deeper benches that are across our acreage holdings give us a really robust future inventory to replace production, pay down debt and grow prices even in this — grow the company or maintain it even in this depressed price environment without resorting to an acquisition.

So we feel good about what we’ve got ahead of us, and there’s a lot of potential.

Paul McKinney: Yeah, [ Joe ], I mean, organic developed opportunities typically are considerably more economic than the opportunities that you buy in the marketplace when you make an acquisition. And so — and we proved that to ourselves last year. That was also part of the reason why we hired James, and we have continued — we call it adding more tools to the toolbox. We want more ways to win in higher prices than in the past, without the staff necessary that was necessary to identify these types of opportunities, you grew through acquisitions. But just because we’re in a position right now where acquisitions are less likely, that doesn’t mean we’re not growing and growing reserves and growing our undeveloped inventory is the best thing we can do during these times so that when oil prices do return and our balance sheet is stronger, then we can really pour it on and we can deliver growth through organic means.

And so getting back to what James said, we do have several operators, and he mentioned Crane County, there’s an operator down there, a private operator that’s just doing a great job, a great organization, and they’ve proved many of the zones that go across our acreage. And so we’re going to test and we’re going to try some of these. We’re going to build those — that inventory so that when prices are right, we’ll be able to get after it. And so that represents a great opportunity for investors. When you look at a company like Ring, that growth could be very significant, especially when you consider our current size and how meaningful that could be. So can we see significant multiples in terms of our future production and revenue growth? I believe it’s possible, and that’s the best thing you can do during times like this when we’re just paying down debt.

Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Paul McKinney, Chairman and CEO, for any closing remarks.

Paul McKinney: Yeah. Thank you. On behalf of the entire team and Board of Directors, I want to once again thank everyone for listening and participating in today’s call. We are pleased to have posted solid operational and financial results for the third quarter of 2025, and our outlook for the remainder of the year remains solid despite the current price environment. We will continue to keep everyone appraised of our progress and thank you again for your interest in Ring Energy. Have a great weekend, everybody.

Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.