Ring Energy To Return To Rapid Growth, Says Imperial Capital

Imperial Capital sees 31 percent potential upside in the shares of Ring Energy Inc REI, as it initiated coverage of the stock with an Outperform rating and $13.50 target price.

Ring Energy has started a transition from a vertical Central Basin Platform San Andres program to horizontal San Andres development, in addition to an upcoming Delaware Basin horizontal program in the Permian sands.

"We believe Central Basin Platform horizontals may offer higher IRRs (133 percent) and return the company to rapid growth; upcoming results of first three wells are important potential catalysts," analyst Kim Pacanovsky wrote in a note.

Related Link: If No OPEC Deal Is Reached, Price Of Oil Will "Hit $40 Well Before It Has Any Chance Of Hitting $50"

The analyst expects 2016 production to grow 61 percent assuming the company drills 20 wells. Notably, the company plans to drill 20–30 horizontal wells on the Platform in 2016. News on the first three wells is anticipated in the early fourth quarter with operational release in mid-to-late October.

Meanwhile, Ring Energy expects to be able to fine tune its guidance in the coming months, as it is soon to complete its first two horizontals back to back.

On the balance sheet front, the company has no debt and has $8.3 million in cash.

"Based upon our relatively conservative assumptions used to model 2017 production, we believe that the company has adequate liquidity in 2017," Pacanovsky continued.

Shares of Ring Energy closed Monday's trading 1.57 percent higher at $10.32.

Full ratings data available on Benzinga Pro.

Do you have ideas for articles/interviews you'd like to see more of on Benzinga? Please email feedback@benzinga.com with your best article ideas. One person will be randomly selected to win a $20 Amazon gift card!