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PROP vs. REI: Which Oil Stock Under $5 Is Worth Holding Now?
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Key Takeaways
Prairie Operating expanded rapidly in the DJ Basin, but faces high costs and dilution risks.
Ring Energy delivered record oil sales, strong free cash flow, and lower lease operating costs.
PROP stock dropped 74% in a year, while REI fell 40%, highlighting investor skepticism on growth.
In the world of smaller oil/energy companies, Prairie Operating Co. ((PROP - Free Report) ) and Ring Energy ((REI - Free Report) ) are two prominent names. Both companies explore for and produce oil and gas in the United States, their stocks trade for less than $5 a share, and they are both navigating a tough market. For investors, it might be a good time to compare these two similar companies to see which is better placed.
Both companies are aiming for growth, but are starting from very different places. PROP is focused on expanding quickly by buying up new areas in the Denver-Julesburg (DJ) Basin. Meanwhile, Ring Energy is taking a slower, more steady approach in the Permian Basin. Let’s take a closer look at both companies to figure out which stock offers better prospects.
The Case for PROP Stock
Prairie Operating Co. has grown aggressively in the DJ Basin by acquiring other companies. Its land now covers about 60,000 acres, giving it enough space to drill for a decade. In the second quarter of 2025, it reached a major milestone, with production jumping five times from the previous quarter. New drilling sites have met or exceeded expectations, and the company plans to bring 41 new wells online this year.
However, there are big risks with this rapid growth. The company has a very ambitious goal for 2025, but it has already faced delays. The cost to drill each well has also gone up, raising concerns about whether the company can make a good profit with current oil prices. In other words, PROP's future seems less confident because of the huge scale of its expansion.
Financially, Prairie Operating Co.’s financial foundation appears increasingly shaky due to substantial equity dilution. The company closed the Bayswater acquisition in the first quarter of 2025, which was expected to add around 26,000 barrels of oil-equivalent per day of production. However, second-quarter average output — at 21,052 barrels of oil-equivalent per day — fell well short despite rising significantly from the January-March period, with much of the gap linked to third-party offset completions.
At the same time, well costs came in higher than planned, reducing project returns in today’s commodity price environment. Another concern is dilution. The fully diluted share count in the second quarter showed a big jump from Q1 due to Series F preferred equity. While the company intends to retire this instrument by the end of 2025, risks remain from conversions.
The Case for REI Stock
Ring Energy is proving that a slow-and-steady approach can be effective. In the second quarter of 2025, REI had record oil sales, beating its own forecasts and showing that its operations are reliable. With a production mix skewed toward oil, which accounts for over 70% of total output, the company is able to pull in higher margins than gas-heavy peers. Ring Energy also generated $25 million in free cash flow despite lower realized oil prices, giving it the flexibility to pay down debt or fund future projects. The upstream player’s policy of allocating capital toward high-return projects maximizes cash flow and profitability.
REI is also good at managing its costs. Its lease operating expenses fell 12% from the previous quarter, improving its profit margins. The company has also made smart acquisitions that added to its oil reserves and created operational efficiencies. A major investor has also sold off all of its shares, which removes a lingering uncertainty for the stock and allows its fundamentals to drive its performance.
However, Ring Energy still faces challenges. Its debt remains high at nearly $450 million, and this number has grown as oil prices have softened. It has less financial room to maneuver if oil or gas prices fall further. While its growth has been helped by acquisitions, depending on deals can introduce risks.
Price Performance
The market hasn’t been kind to either name, but PROP has fared worse. Over the past year, REI shares are down about 40%, while Prairie Operating Co. has lost a staggering 74%. The sharp divergence underscores investor skepticism about PROP’s ambitious targets and dilution risk, while REI has retained at least some market confidence thanks to steady execution.
Image Source: Zacks Investment Research
Valuation Comparison
Ring Energy currently trades at 0.58X forward price-to-sales (P/S) with a Zacks Value Score of A, reflecting market recognition of its high-margin oil-weighted production and cash generation. PROP, on the other hand, trades at just 0.21X forward sales with a Value Score of C. While the lower multiple may appear attractive, it largely reflects concerns about dilution, execution, and a less stable financial foundation.
Image Source: Zacks Investment Research
EPS Outlook
Earnings momentum favors Ring Energy. Over the past 30 days, the Zacks Consensus Estimate for REI’s 2025 earnings has been revised up by 20%, while 2026 estimates remain steady.
Image Source: Zacks Investment Research
PROP has seen no upward revisions for 2025 and a 38% cut to 2026 estimates, highlighting mounting concerns about profitability. This divergence suggests that analysts see REI on firmer footing while expecting PROP’s earnings to come under more pressure.
Image Source: Zacks Investment Research
Conclusion
Both Prairie Operating Co. and Ring Energy are risky bets, but their differences are clear. PROP's aggressive expansion has given it scale, but its financial weakness and operational challenges make the stock risky. REI, on the other hand, offers more stable cash flow, better cost control, and a clearer path to financial health. Given these dynamics, REI — which carries a Zacks Rank #3 (Hold) — appears better positioned than PROP, which holds a Zacks Rank #5 (Strong Sell).
Image: Bigstock
PROP vs. REI: Which Oil Stock Under $5 Is Worth Holding Now?
Key Takeaways
In the world of smaller oil/energy companies, Prairie Operating Co. ((PROP - Free Report) ) and Ring Energy ((REI - Free Report) ) are two prominent names. Both companies explore for and produce oil and gas in the United States, their stocks trade for less than $5 a share, and they are both navigating a tough market. For investors, it might be a good time to compare these two similar companies to see which is better placed.
Both companies are aiming for growth, but are starting from very different places. PROP is focused on expanding quickly by buying up new areas in the Denver-Julesburg (DJ) Basin. Meanwhile, Ring Energy is taking a slower, more steady approach in the Permian Basin. Let’s take a closer look at both companies to figure out which stock offers better prospects.
The Case for PROP Stock
Prairie Operating Co. has grown aggressively in the DJ Basin by acquiring other companies. Its land now covers about 60,000 acres, giving it enough space to drill for a decade. In the second quarter of 2025, it reached a major milestone, with production jumping five times from the previous quarter. New drilling sites have met or exceeded expectations, and the company plans to bring 41 new wells online this year.
However, there are big risks with this rapid growth. The company has a very ambitious goal for 2025, but it has already faced delays. The cost to drill each well has also gone up, raising concerns about whether the company can make a good profit with current oil prices. In other words, PROP's future seems less confident because of the huge scale of its expansion.
Financially, Prairie Operating Co.’s financial foundation appears increasingly shaky due to substantial equity dilution. The company closed the Bayswater acquisition in the first quarter of 2025, which was expected to add around 26,000 barrels of oil-equivalent per day of production. However, second-quarter average output — at 21,052 barrels of oil-equivalent per day — fell well short despite rising significantly from the January-March period, with much of the gap linked to third-party offset completions.
At the same time, well costs came in higher than planned, reducing project returns in today’s commodity price environment. Another concern is dilution. The fully diluted share count in the second quarter showed a big jump from Q1 due to Series F preferred equity. While the company intends to retire this instrument by the end of 2025, risks remain from conversions.
The Case for REI Stock
Ring Energy is proving that a slow-and-steady approach can be effective. In the second quarter of 2025, REI had record oil sales, beating its own forecasts and showing that its operations are reliable. With a production mix skewed toward oil, which accounts for over 70% of total output, the company is able to pull in higher margins than gas-heavy peers. Ring Energy also generated $25 million in free cash flow despite lower realized oil prices, giving it the flexibility to pay down debt or fund future projects. The upstream player’s policy of allocating capital toward high-return projects maximizes cash flow and profitability.
REI is also good at managing its costs. Its lease operating expenses fell 12% from the previous quarter, improving its profit margins. The company has also made smart acquisitions that added to its oil reserves and created operational efficiencies. A major investor has also sold off all of its shares, which removes a lingering uncertainty for the stock and allows its fundamentals to drive its performance.
However, Ring Energy still faces challenges. Its debt remains high at nearly $450 million, and this number has grown as oil prices have softened. It has less financial room to maneuver if oil or gas prices fall further. While its growth has been helped by acquisitions, depending on deals can introduce risks.
Price Performance
The market hasn’t been kind to either name, but PROP has fared worse. Over the past year, REI shares are down about 40%, while Prairie Operating Co. has lost a staggering 74%. The sharp divergence underscores investor skepticism about PROP’s ambitious targets and dilution risk, while REI has retained at least some market confidence thanks to steady execution.
Valuation Comparison
Ring Energy currently trades at 0.58X forward price-to-sales (P/S) with a Zacks Value Score of A, reflecting market recognition of its high-margin oil-weighted production and cash generation. PROP, on the other hand, trades at just 0.21X forward sales with a Value Score of C. While the lower multiple may appear attractive, it largely reflects concerns about dilution, execution, and a less stable financial foundation.
EPS Outlook
Earnings momentum favors Ring Energy. Over the past 30 days, the Zacks Consensus Estimate for REI’s 2025 earnings has been revised up by 20%, while 2026 estimates remain steady.
PROP has seen no upward revisions for 2025 and a 38% cut to 2026 estimates, highlighting mounting concerns about profitability. This divergence suggests that analysts see REI on firmer footing while expecting PROP’s earnings to come under more pressure.
Conclusion
Both Prairie Operating Co. and Ring Energy are risky bets, but their differences are clear. PROP's aggressive expansion has given it scale, but its financial weakness and operational challenges make the stock risky. REI, on the other hand, offers more stable cash flow, better cost control, and a clearer path to financial health. Given these dynamics, REI — which carries a Zacks Rank #3 (Hold) — appears better positioned than PROP, which holds a Zacks Rank #5 (Strong Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.