September 30, 2020

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Ring Energy Announces Second Quarter and Six Month 2020 Financial and Operational Results

Three Consecutive Quarters Cash Flow Positive

MIDLAND, Texas–(BUSINESS WIRE)–Ring Energy, Inc. (NYSE American: REI) (“Ring”) (“Company”) announced today financial results for the three months and six months ended June 30, 2020. For the three-month period ended June 30, 2020, the Company reported oil and gas revenues of $10,636,593. For the six months ended June 30, 2020, the Company reported oil and gas revenues of $50,206,921.

For the three months ended June 30, 2020, Ring reported a net loss of $135,000,066 or $1.99 per diluted share. For the six months ended June 30, 2020, the Company reported a net loss of $91,195,948 or $1.34 per diluted share.

For the three months ended June 30, 2020, the net income included a pre-tax unrealized loss on derivatives of $26,771,529, a pre-tax ceiling test impairment of $147,937,943 and a non-cash charge for stock-based compensation of $1,317,542. Excluding these items, the net income per diluted share would have been $0.02. For the six months ended June 30, 2020, the net income included a pre-tax unrealized gain on derivatives of $20,315,152, a pre-tax ceiling test impairment of $147,937,943 and a non-cash charge for stock-based compensation of $1,991,337. Excluding these items, the net income per diluted share would have been $0.14. The Company believes results excluding these items are more comparable to estimates provided by security analysts and, therefore, are useful in evaluating operational trends of the Company and its performance, compared to other similarly situated oil and gas producing companies.

For the three months ended June 30, 2020, oil sales volume was 429,751 barrels, and gas sales volume was 417,491 MCF (thousand cubic feet). On a barrel of oil equivalent (“BOE”) basis for the three months ended June 30, 2020, production sales were 499,333 BOEs. For the six months ended June 30, 2020, oil sales volume was 1,285,354 barrels, and gas sales volume was 1,183,042 MCF. On a BOE basis for the six months ended June 30, 2020, production sales were 1,482,528 BOEs.

The average commodity prices received by the Company were $24.23 per barrel of oil and $0.53 per MCF of natural gas for the quarter ended June 30, 2020. On a BOE basis for the three-month period ended June 30, 2020, the average price received was $21.30. The average prices received for the six months ended June 30, 2020 were $38.16 per barrel of oil and $0.98 per MCF of natural gas. On a BOE basis for the six month period ended June 30, 2020, the average price received was $33.86.

The average price differential the Company experienced from WTI pricing in the second quarter 2020 was approximately $2.50.

During May 2020, the Company unwound the costless collars for June 2020 and July 2020, resulting in the receipt of a cash payment of $5,435,136. Concurrently, the Company entered into Swap contracts at $33.24 for 5,500 barrels per day for June and July 2020, equal to the barrels for which the costless collars were unwound. Similar to costless collars, there is no cost to enter into the Swap contracts. On Swap contracts, there is no spread and payments will be made or received based on the difference between WTI and the Swap contract price. The costless collar and Swap pricing does not take into account any pricing differentials between NYMEX WTI pricing and the price received by the Company.

Lease operating expenses (“LOE”), including production taxes, for the three months ended June 30, 2020 were $15.03 per BOE. Depreciation, depletion and amortization costs, including accretion, were $15.16 per BOE, and general and administrative costs, which included a $1,317,542 charge for stock-based compensation and $292,207 for an operating lease expense, were $8.95 per BOE. For the six months ended June 30, 2020, lease operating expenses, including production taxes, were $13.33 per BOE. Depreciation, depletion and amortization costs, including accretion, were $14.49 per BOE, and general and administrative costs, which included a $1,991,337 charge for stock-based compensation and $581,258 for operating lease expenses, were $5.26 per BOE.

Cash provided by operating activities, before changes in working capital, for the three and six months ended June 30, 2020 was $9,668,873, or $0.14 per fully diluted share, and $33,614,062, or $0.49 per fully diluted share. Earnings before interest, taxes, depletion and other non-cash items (“Adjusted EBITDA”) for the three and six months ended June 30, 2020 were $13,732,830, or $0.20 per fully diluted share, and $41,737,429, or $0.61 per fully diluted share. (See accompanying table for a reconciliation of net income to adjusted EBITDA).

Total capital expenditures for the three and six months ended June 30, 2020 were approximately $1.8 million and $17.9 million.

On June 17, 2020, the Company announced it had completed the spring 2020 redetermination of its senior credit facility. The Company entered into a new amendment which reduced the immediate borrowing base from $425 million to $375 million. As of June 30, 2020, the outstanding balance on the Company’s $1 billion senior credit facility was $375 million. The weighted average interest rate on borrowings under the senior credit facility was 4.5%. The next redetermination evaluation is scheduled for November 2020.

The Company’s Chief Executive Officer, Mr. Kelly Hoffman, stated, “While volatility continued in the energy space in the second quarter, we began to see some improvement and stability in the commodity price itself. We had essentially shut-in all of our production and in early June began bringing the wells back on line. Currently we are producing approximately 9,000 net BOEs per day. With production curtailed in the 2nd quarter, we made the necessary decisions to reduce costs and improve efficiencies wherever possible. Operationally, in combination with the revenue derived from the hedges we had in place, not only did we operate profitably, but we continued to be cash flow positive for the third consecutive quarter. In June, we completed the spring redetermination on the Company’s senior credit facility. The immediate borrowing base was reduced to $375 million and the current outstanding balance on our facility is $375 million. We will continue to operate within cash flow and pay down our debt through a combination of excess cash flow and strategic asset sales. Commodity prices are continuing to strengthen and the economy is showing signs of improvement. We are anxious to resume our drilling and development program once we see sustainable received prices in the low to mid $40’s per BOE. We are confident that Ring will continue to grow and prosper in this extremely challenging environment.”

About Ring Energy, Inc.

Ring Energy, Inc. is an oil and gas exploration, development and production company with current operations in Texas and New Mexico.

www.ringenergy.com

Safe Harbor Statement

This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements involve a wide variety of risks and uncertainties, and include, without limitations, statements with respect to the Company’s strategy and prospects. Such statements are subject to certain risks and uncertainties which are disclosed in the Company’s reports filed with the SEC, including its Form 10-K for the fiscal year ended December 31, 2019, its Form 10Q for the quarter ended June 30, 2020 and its other filings with the SEC. Readers and investors are cautioned that the Company’s actual results may differ materially from those described in the forward-looking statements due to a number of factors, including, but not limited to, the Company’s ability to acquire productive oil and/or gas properties or to successfully drill and complete oil and/or gas wells on such properties, general economic conditions both domestically and abroad, and the conduct of business by the Company, and other factors that may be more fully described in additional documents set forth by the Company.

RING ENERGY, INC.
STATEMENTS OF OPERATIONS

Three Months Ended

Six Months Ended

June 30,

June 30,

2020

2019

2020

2019

(restated)
Oil and Gas Revenues

$

10,636,593

$

51,334,225

$

50,206,921

$

93,132,540

Costs and Operating Expenses .
Oil and gas production costs

7,072,296

11,569,109

17,450,757

20,977,873

Oil and gas production taxes

433,760

2,412,895

2,304,005

4,495,770

Depreciation, depletion and amortization

7,338,108

14,615,270

21,021,104

27,544,324

Ceiling test impairment

147,937,943

147,937,943

Asset retirement obligation accretion

231,367

229,234

463,329

445,179

Operating lease expense

292,207

128,175

581,258

256,350

General and administrative expense

4,176,609

4,743,127

7,212,504

11,541,144

Total Costs and Operating Expenses

167,482,290

33,697,810

196,970,900

65,260,640

Income (Loss) from Operations

(156,845,697

)

17,636,415

(146,763,979

)

27,871,900

Other Income (Expense)
Interest income

1

1,260

6

13,496

Interest expense

(4,253,040

)

(4,259,908

)

(8,501,538

)

(5,032,925

)

Realized gain on derivatives

13,753,567

17,087,695

Unrealized gain (loss)on change in fair value of derivatives

(26,771,529

)

1,530,230

20,315,152

1,189,545

Net Other Income (Expense)

(17,271,001

)

(2,728,418

)

28,901,315

(3,829,884

)

Income (Loss) Before Provision for Income Taxes

(174,116,698

)

14,907,997

(117,862,664

)

24,042,106

(Provision for) Benefit from Income Taxes

39,116,632

(3,565,400

)

26,666,716

(8,430,159

)

Net Income (Loss)

($135,000,066

)

$

11,342,597

($

91,195,948

)

$

15,611,857

Basic Earnings (Loss) Per Common Share

($1.99

)

$

0.17

($1.34

)

$

0.24

Diluted Earnings (Loss) Per Common Share

($1.99

)

$

0.17

($1.34

)

$

0.24

Basic Weighted-Average Common Shares Outstanding

67,980,794

67,357,645

67,987,295

65,305,081

Diluted Weighted-Average Common Shares Outstanding

67,980,794

67,670,259

67,987,295

65,852,348

COMPARATIVE OPERATING STATISTICS

Three Months Ended June 30,

2020

2019

Change

Net Sales – BOE per day

5,487

10,859

-49.5

%

Per BOE:
Average Sales Price

$

21.30

$

51.94

-58.9

%

Lease Operating Expenses

14.16

11.71

20.9

%

Production Taxes

0.87

2.44

-64.3

%

DD&A

14.70

14.79

-0.6

%

Accretion

0.46

0.23

100.0

%

General & Administrative Expenses

8.36

4.80

74.2

%

Operating Lease Expense

0.59

Six Months Ended June 30,

2020

2019

Change

Net Sales – BOE per day

8,145

10,314

-21.0

%

Per BOE:
Average Sales price

$

33.87

$

49.89

-32.1

%

Lease Operating Expenses

11.77

11.24

4.7

%

Production Taxes

1.55

2.41

-35.7

%

DD&A

14.18

14.75

-3.8

%

Accretion

0.31

0.24

29.1

%

General & Administrative Expenses

4.86

6.18

-21.3

%

Operating Lease Expense

0.39

RING ENERGY, INC.
BALANCE SHEET

June 30,

December 31,

2020

2019

ASSETS
Current Assets
Cash

$

17,229,780

$

10,004,622

Accounts receivable

8,652,807

22,909,195

Joint interest billing receivable

523,439

1,812,469

Derivative asset

12,770,803

Prepaid expenses and retainers

584,395

3,982,255

Total Current Assets

39,761,224

38,708,541

Property and Equipment
Oil and natural gas properties subject to amortization

953,891,407

1,083,966,135

Financing lease asset subject to depreciation

858,513

858,513

Fixed assets subject to depreciation

1,465,551

1,465,551

Total Property and Equipment

956,215,471

1,086,290,199

Accumulated depreciation, depletion and amortization

(178,095,148

)

(157,074,044

)

Net Property and Equipment

778,120,323

929,216,155

Operating lease asset

1,285,786

1,867,044

Derivative asset

4,544,271

Deferred Income Taxes

20,665,540

Deferred Financing Costs

2,836,243

3,214,408

Total Assets

$

847,213,387

$

973,006,148

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable

$

19,164,925

$

54,635,602

Financing lease liability

288,386

$

280,970

Operating lease liability

$

936,270

$

1,175,904

Derivative liabilities

3,000,078

Total Current Liabilities

20,389,581

59,092,554

Deferred income taxes

6,001,176

Revolving line of credit

375,000,000

366,500,000

Financing lease liability, less current portion

275,998

424,126

Operating lease liability, less current portion

349,516

691,140

Asset retirement obligations

16,996,355

16,787,219

Total Liabilities

413,011,450

449,496,215

Stockholders' Equity
Preferred stock – $0.001 par value; 50,000,000 shares authorized;
no shares issued or outstanding

Common stock – $0.001 par value; 150,000,000 shares authorized;
67,980,575 shares and 67,993,797 shares
issued and outstanding, respectively

67,981

67,994

Additional paid-in capital

528,189,246

526,301,281

Retained earnings (accumulated deficit)

(94,055,290

)

(2,859,342

)

Total Stockholders' Equity

434,201,937

523,509,933

Total Liabilities and Stockholders' Equity

$

847,213,387

$

973,006,148

RING ENERGY
STATEMENTS OF CASH FLOW

Six Months Ended

June 30,

June 30,

2020

2019 (restated)

Cash Flows From Operating Activities
Net income (loss)

($91,195,948

)

$15,611,857

Adjustments to reconcile net income (loss) to net cash
Provided by operating activities:
Depreciation, depletion and amortization

21,021,104

27,544,324

Ceiling test impairment

147,937,943

Accretion expense

463,329

445,179

Amortization of deferred financing costs

378,165

Share-based compensation

1,991,337

1,643,199

Deferred income tax provision

(25,048,702

)

5,049,219

Excess tax deficiency related to share-based compensation

(1,618,014

)

3,380,940

Change in fair value of derivative instruments

(20,315,152

)

(1,189,545

)

Changes in assets and liabilities:
Accounts receivable

15,545,418

(9,847,686

)

Prepaid expenses and retainers

3,397,860

(6,388,823

)

Accounts payable

(22,050,677

)

(451,965

)

Settlement of asset retirement obligation

(320,580

)

(384,956

)

Net Cash Provided by Operating Activities

30,186,083

35,411,743

Cash Flows from Investing Activities
Payments to purchase oil and natural gas properties

(1,017,434

)

(268,120,579

)

Payments to develop oil and natural gas properties

(30,302,779

)

(81,051,832

)

Net Cash Used in Investing Activities

(31,320,213

)

(349,172,411

)

Cash Flows From Financing Activities
Proceeds from revolving line of credit

21,500,000

321,000,000

Payments on revolving line of credit

(13,000,000

)

Reduction of financing lease liabilities

(140,712

)

(24,076

)

Net Cash Provided by Financing Activities

8,359,288

320,975,924

Net Change in Cash

7,225,158

7,215,256

Cash at Beginning of Period

10,004,622

3,363,726

Cash at End of Period

$17,229,780

$10,578,982

Supplemental Cash flow Information
Cash paid for interest

$8,320,562

$932,896

Noncash Investing and Financing Activities
Asset retirement obligation incurred during development

66,387

441,244

Operating lease assets obtained in exchange for new operating lease liability

539,577

Financing lease assets obtained in exchange for new financing lease liability

637,757

Capitalized expenditures attributable to drilling projects
financed through current liabilities

1,750,000

41,800,000

Acquisition of oil and gas properties
Assumption of joint interest billing receivable

1,464,394

Assumption of prepaid assets

2,864,554

Assumption of accounts and revenue payables

(1,234,862

)

Asset retirement obligation incurred through acquisition

(2,979,645

)

Common stock issued as partial consideration in asset acquisition

(28,356,396

)

Oil and gas properties subject to amortization

296,910,774

RECONCILIATION OF CASH FLOW FROM OPERATIONS
Net cash provided by operating activities

$30,186,083

$35,411,743

Change in operating assets and liabilities

3,427,979

17,073,430

Cash flow from operations

$33,614,062

$52,485,173

Management believes that the non-GAAP measure of cash flow from operations is useful information for investors because it is used internally and is accepted by the investment community as a means of measuring the Company's ability to fund its capital program. It is also used by professional research analysts in providing investment recommendations pertaining to companies in the oil and gas exploration and production industry.
RING ENERGY, INC.
NON-GAAP DISCLOSURE RECONCILIATION
ADJUSTED EBITDA
Six Months Ended
June 30, June 30,

2020

2019 (restated)

NET INCOME (LOSS)

($91,195,948

)

$15,611,857

Net other (income) expense

(28,901,315

)

3,829,884

Realized gain on derivatives

17,087,695

Ceiling test impairment

147,937,943

Income tax expense (benefit)

(26,666,716

)

8,430,159

Depreciation, depletion and amortization

21,021,104

27,544,324

Accretion of discounted liabilities

463,329

445,179

Stock based compensation

1,991,337

1,643,199

ADJUSTED EBITDA

$41,737,429

$57,504,602

Contacts

Bill Parsons

K M Financial, Inc.

(702) 489-4447

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