Ring Energy, Inc

Ring Energy, Inc (NYSE: REI), an exploration and production company, engages in the acquisition, exploration, development, and production of oil and natural gas in Texas and New Mexico. As of December 31, 2020, the company's proved reserves consisted of approximately 76.5 million barrel of oil equivalent.

Why Should Investors Keep a Watch Stance?

• Falling from crucial resistance level: REI shares are facing strong resistance near USD 4, which is acting as supply zone in the stock. Last time also in October 2021 the stock fell from the same levels and lost almost 50% of its value in a span of 2 months. Unless its shares decisively breach the current resistance and upside potential would be tough.
• Volatile Oil prices: Oil is one of the most volatile commodities now a days and condition going to remain same for next couple of months. However, REI stock has benefited from recent rally in the oil prices but a sharp plunge in the oil prices could also have an exponential negative impact on the stock.
• Leveraged Balance Sheet and Lower risk protection metrices: The company Debt/Equity ratio as of September 31, 2021, stood at 1.08x, significantly higher compared to industry median of 0.61x. Moreover, together with leveraged balance sheet, the company’s risk protection metric is also poor with Net Debt to EBITDA ratio stood at 8.81x compared to industry median of 4.62x respectively, implies a greater balance sheet risk.

Stock recommendation

Despite strong underlying commodity prices the company’s fundamentals are not so strong and recent rally in the underlying commodity seems fairly prices in the current stock price. Moreover, the company is also exposed to adverse move in the oil prices which can have a weigh on the stock prices. Though, if company is able to capitalize higher underlying commodity prices and able to deleverage its balance sheet and improve debt protection metrics, the it could be a positive for its shares. Hence, based on the above rationale and technical indicators, we recommend a “Watch” rating on the stock at the closing price USD 3.70, as of March 09, 2022.

1-Year price chart (as on March 09, 2022). Source: REFINITIV, Analysis by Kalkine Group

Technical Analysis Summary:

Note: Investors can evaluate the stock based on the support and resistance levels provided in the report in case of keen interest taking into consideration the risk-reward scenario.

Disclaimer

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