🛢️ DEEP VALUE IN OIL
Below are the best value plays in Oil & Gas
🎲 What’s actually inside PV-10
Think of it as a mini-DCF for oil in the ground:
Start with proved reserves (PDP + PUD)
What barrels have already been discovered and are expected to be producedForecast production over time
Decline curves (wells produce less each year)Apply oil & gas prices (SEC pricing)
Usually backward-looking average pricesSubtract costs
Operating (LOE)
Development (capex to drill remaining wells)
Transportation/taxes
Discount everything at 10%
👉 That final number = PV-10
🎲 A Complicated Formula, But Gives a Simple Answer
PV-10=∑Future Net Cash Flow from Reserves(1+10%)tPV\text{-}10 = \sum \frac{\text{Future Net Cash Flow from Reserves}}{(1 + 10\%)^t}PV-10=∑(1+10%)tFuture Net Cash Flow from Reserves
What is the Net Present Value (NPV) of the cash I can pull out of the ground from my reserves, discounted at 10%
🎲 A Simple Analogy
You own a gold mine (oil field)
You estimate how much gold you’ll sell each year
Subtract costs
Discount future profits because money later is worth less
👉 PV-10 = what that gold mine is worth today
🎲 Why You Should Care
PV-10 is the cleanest measure of asset value in oil & gas.
It lets you answer:
“What are the actual reserves worth vs what the stock is trading for?”
Ring Energy is our #1 favorite idea:
REI has an 18-year reserve life with a fully loaded extraction price of $22 a barrel
PV-10 $1.3 billion @ $61 oil @ $88 oil it is more like $1.8 billion
REI is valued at a $250 million market cap with $420 million debt
REI, using an $85 average oil price in 2026, hit $200+ million in EBITDA
REI is valued at roughly 3x EV/EBITDA
REI should generate close to $90+ million in free cash flow on 200 million shares
If REI simply de-levers, and the EV stays the same at $650 million, $90 million in free cash flow should accrue to REI shareholders or .40 cents a share on a $1.39 stock
Start Here: www.ringenergy.com go to latest investor presentation
Notes from below
EV/PV-10: Means market cap+ total debt/Present Value of Cash Flows Discounted at 10%. Lower is better, but has to be taken in context.
EV/FMV: Means what is the enterprise value (market cap + net debt) vs what it could be worth. We aimed on the low side for our upside targets.
R/R: Risk reward score which means for every $1 of downside how much upside is in the stock. Therefore, REI using the data could drop $1.40 to $1 and upside was $2.50 this would be $1.10 upside/.40 cent downside = 3x or you could make if this was correct 3x for every $1 you could lose. Nothing is perfect but this is used as a roughly framework for sizing positions.
