Ring Energy (NYSE:REI) +6.4% pre-market after saying on Tuesday said it agreed to acquire Warburg Pincus-owned Stronghold Energy in a $465M cash and stock deal that will make Stronghold the company’s largest shareholder with a ~34% stake.
Stronghold’s operations are located primarily in Crane County, Texas, and focused on the development of ~37K net acres (99% operated) in the Permian Basin’s Central Basin Platform.
Ring (REI) said the deal will increase its proved reserves by more than 80% and nearly double its estimated Q4 2022 sales volumes from the midpoint of previous guidance.
The company will pay $200M in cash at closing as well as $230M in equity, and the deal includes a $15M deferred cash payment due six months after closing and $20M of existing Stronghold hedge liability.
The borrowing base of Ring’s (REI) $1B credit facility will be increased to $600M from $350M.
“We believe the transaction will provide for a material increase in our size and scale, and more importantly, will be immediately accretive across all of the key operational and financial metrics for Ring’s existing stockholders,” Chairman and CEO Paul McKinney said.
Ring Energy (REI) is “getting ‘back on track’ with the original plan to convert to an operating company with an optimal amount of production,” Long Player writes in a bullish analysis newly published on Seeking Alpha.