Driving Synergies, Strengthening Assets and Boosting Financial Performance
This week, Ring Energy Inc. announced its agreement to acquire the Central Basin Platform (CBP) assets of Lime Rock Resources IV, LP for $100 million. The transaction includes an $80 million upfront cash payment, a $10 million deferred cash payment due nine months after closing, and up to 7.4 million shares of Ring common stock, subject to customary closing adjustments. The acquisition is expected to close by the end of Q1 2025.
The newly acquired acreage, located in Andrews County, is adjacent to Ring Energy’s core operations, as shown in Figure 1, an asset coverage map of Ring Energy and Lime Rock Resources in Andrews County provided by TGS Well Data Analytics.
Figure 1. TGS Well Data Analytics application showing Ring Energy and Lime Rock Resources wells in Andrews County.
The Lime Rock position has been a key strategic target for Ring Energy, aligning with the company’s efforts to consolidate producing assets in core CBP counties. Spanning over 17,000 net acres, the acquired assets are expected to contribute to high-margin, lower-decline unconventional production in CBP. By the end of 2024, production from the Lime Rock assets in Andrews County averaged approximately 2,400 barrels of oil per day (bbl/d) from around 85 actively producing wells since 2014 (Figure 2). The acquisition also adds more than 40 gross drilling locations that are immediately competitive for capital investment, further enhancing Ring’s development potential.
Figure 2. TGS Well Data Analytics application image showing Ring Energy and Lime Rock Type Curve and historical production.
Running the TGS well economics model on two of the Lime Rock 2021 wells demonstrates strong economic performance, with a 19% internal rate of return, an NPV of $8 million, a 3.4-year payout period, and a breakeven price of approximately $60 per barrel. As shown in Figure 3, the cash flow analysis indicates positive free cash flow at the asset level throughout its entire lifecycle.
Figure 3. TGS Cash Flow chart shows asset-level monthly revenue, operating expenses, and free cash flow for two recent Lime Rock wells.
This aligns with the expectations outlined in the press release, as the acquisition is expected to significantly boost Adjusted Free Cash Flow (AFCF) by capitalizing on strong cash flow from the Lime Rock assets, shallow production declines, and a reduced reinvestment rate, ultimately accelerating debt reduction. Additionally, the acquisition strengthens Ring’s portfolio of proven drilling locations with high-return, shallow-decline assets, further enhancing long-term cash flow generation. Overall, this transaction reinforces Ring’s operational and financial position, solidifying its status as a leading conventional Permian consolidator.
With TGS Well Data Analytics, this type of comparative analysis and benchmarking can be completed in minutes. For more information on TGS Well Data Analytics or to schedule a demo, please contact us at WDPSales@tgs.com.
