Ring Energy, Inc. (NYSE American: REI) (“Ring” or the “Company”)
today reported operational and financial results for the fourth
quarter and full year 2022, including Ring’s year-end 2022 proved
reserves. In addition, the Company provided first quarter and full
year 2023 operational and capital spending guidance.
2022 Highlights and Recent Key
Items
-
Significantly benefited from the Company’s acquisition of the
Stronghold Energy assets that closed on August 31, 2022 (the
“Stronghold Transaction”);
-
Grew fourth quarter 2022 sales volumes 34% to a record 17,856
barrels of oil equivalent per day (“Boe/d”) (68% oil) from 13,278
Boe/d (76% oil) for the third quarter of 2022;
-
Increased full year 2022 sales volumes by 45% to a record 12,364
Boe/d (77% oil) from 8,519 Boe/d (86% oil) for full year 2021;
-
Reported net income of $14.5 million, or $0.08 per diluted share,
in the fourth quarter of 2022, versus net income of $75.1 million,
or $0.49 per share in the third quarter of 2022;
-
Fourth quarter 2022 included a loss on derivative contracts of
$19.3 million while third quarter 2022 included a gain on
derivative contracts of $32.9 million;
-
Grew net income for full year 2022 to a record $138.6 million, or
$0.98 per diluted share, compared to a net income of $3.3 million
or $0.03 per diluted share, for full year 2021;
-
Posted Adjusted Net Income1 of $21.8 million, or $0.13 per share,
for the fourth quarter of 2022, compared to $32.5 million, or $0.28
per share, in the third quarter of 2022;
-
Reported record Adjusted Net Income for the full year 2022 of
$107.5 million, or $0.89 per share, a 251% increase from $30.6
million, or $0.31 per share, for full year 2021;
-
Generated record Adjusted EBITDA1 of $56.3 million for the fourth
quarter of 2022, slightly exceeding the record set in the third
quarter of $56.0 million;
-
Grew full year 2022 Adjusted EBITDA by 134% to a record $195.2
million from $83.3 million for 2021;
-
Delivered Free Cash Flow1 of $5.5 million and Cash Flow from
Operations of $47.4 million in the fourth quarter of 2022;
-
Increased full year 2022 Free Cash Flow to $34.8 million and
generated Cash Flow from Operations of $172.9 million, a
year-over-year increase of 70% and 149%, respectively;
-
Remained cash flow positive for the 13th consecutive quarter;
-
Paid down $20.0 million of debt on the Company’s revolving credit
facility during the fourth quarter of 2022 and $37.0 million
since closing of the Stronghold Transaction on August 31, 2022;
-
Reduced Leverage Ratio2 by more than 50% to 1.6x from 3.5x at year
end 2021;
-
Increased liquidity at year-end 2022 to approximately $188.0
million — a two-fold increase compared to December 31, 2021;
-
Successfully reaffirmed the Company’s borrowing base of $600.0
million under its revolving credit facility in December 2022;
-
Grew year-end 2022 proved reserves at Securities and Exchange
Commission (“SEC”) pricing by 78% to 138.1 million barrels of oil
equivalent (“MMBoe”), and increased the present value of SEC proved
reserves discounted at 10% (“PV-10”)1 by 108% to $2.8 billion from
$1.3 billion at year-end 2021;
-
Benefited from positive revisions of previous quantity estimates of
1.2 MMBoe due to positive well performance, extensions and
discoveries of 0.8 MMBoe, and acquisitions of reserves related to
the Stronghold Transaction of 62.9 MMBoe. Partially offsetting the
additions to reserves was 4.5 MMBoe of production, resulting in
replacement of 13.4 times 2022 production with new reserves;
-
Proved developed reserves increased 107% to 90.1 MMBoe at year end
2022 from 43.4 MMBoe at December 31, 2021;
-
Successfully completed the Company’s 2022 capital spending program
focused on developing Ring’s high rate-of-return projects on its
legacy and newly acquired assets:
-
Drilled, completed and placed on production four horizontal (“Hz”)
wells (two in the Northwest Shelf (“NWS”) and two in the Central
Basin Platform (“CBP”)) and five vertical wells in the CBP during
the fourth quarter, as well as completed and placed on production
three Hz wells in the NWS that were drilled in the third quarter.
In addition, the Company performed nine recompletions in the CBP
during the fourth quarter;
-
12 of the 21 wells placed on production during the fourth quarter
did not contribute meaningfully until late December, which will
benefit 2023 production;
-
During full year 2022, the Company drilled and completed 27 Hz
wells (18 in the NWS and nine in the CBP) and five vertical wells
in the CBP, as well as performed 12 recompletions in the CBP;
-
Commenced its 2023 drilling program in January with four NWS Hz
wells drilled and three wells completed and placed on
production;
-
Provided guidance for first quarter and full year 2023 sales
volumes, operating expenses and capital spending; and
-
Expects first quarter 2023 sales volumes of 17,800 to 18,300 Boe/d
and full year 2023 sales volumes of 17,800 to 18,800 Boe/d.
_________________1A non-GAAP financial measure;
see “Non-GAAP Information” section in this release for more
information including reconciliations to the most comparable GAAP
measures.2 Based on annualized third and fourth quarter EBITDA
adjusted for the pro-forma effects of the Stronghold Transaction,
as per the Credit Agreement.
Mr. Paul D. McKinney, Chairman of the Board and
Chief Executive Officer, commented, “We are pleased with our fourth
quarter performance. The Company benefited from three full months
of production from our Stronghold acquisition, the results of our
successful 2022 capital spending program, and our continuing focus
on cost reduction initiatives. The result was record quarterly
sales volumes and Adjusted EBITDA. We also paid down debt by an
additional $20 million.”
Mr. McKinney continued, “The fourth quarter
marked the successful conclusion to a transformational year for the
Company and places us in a strong position for continued success.
Our immediately accretive acquisition of Stronghold’s complementary
assets has substantially increased our size and scale, lowered our
overall cost structure, and materially increased the inventory and
capital efficiency of our low cost, high rate-of-return investment
opportunities, allowing for increased free cash flow generation. A
significant benefit of the enhanced free cash flow is we can pay
down debt at a faster rate than we could have done on a standalone
basis. The Stronghold Transaction also significantly improved our
financial position. We ended 2022 with approximately
$188 million of liquidity — more than $125 million higher than
year-end 2021 and reduced our leverage ratio substantially from 3.5
times at year-end 2021 to 1.6 times as of December 31, 2022. Our
enhanced financial flexibility and improved capital efficiency are
critical as we continue to execute our proven value driven
strategy.”
Mr. McKinney concluded, “Turning our attention
to the future, we believe energy price volatility will continue and
an effective way to reduce risks associated with continuing to
deliver competitive returns is to build a strong balance sheet. In
keeping with our beliefs, we have developed a disciplined and
flexible 2023 capital budget that takes advantage of our improved
capital efficiency, designed to maintain or slightly grow
production, and allocate excess cash from operations to paying down
debt. We believe this focus will drive long-term value for our
stockholders and improve our ability to manage the risks associated
with ongoing price volatility. It will also allow us to remain
steadfast in our pursuit of accretive and balance-sheet-enhancing
acquisitions, and should position the Company to return capital to
our stockholders in the future.”
Financial Overview: For the
fourth quarter of 2022, the Company reported net income of $14.5
million, or $0.08 per diluted share, which included a $5.4 million
before tax non-cash unrealized commodity derivative loss, $2.2
million in before tax share-based compensation and $1.0 million in
before tax transaction related costs for the Stronghold acquisition
(“Transaction Costs”). Excluding the estimated after-tax impact of
the adjustments, the Company’s Adjusted Net Income was $21.8
million, or $0.13 per share. In the third quarter of 2022, the
Company reported net income of $75.1 million, or $0.49 per diluted
share, which included a $47.7 million before tax non-cash
unrealized commodity derivative gain, $1.5 million for before tax
share-based compensation, and $1.1 million in before tax
Transaction Costs. Excluding the estimated after-tax impact of
these adjustments, the Company’s Adjusted Net Income was $32.5
million, or $0.28 per share. In the fourth quarter of 2021, Ring
reported net income of $24.1 million, or $0.20 per diluted share,
which included a $15.2 million before tax non-cash unrealized
commodity derivative gain, and $0.9 million in before tax
share-based compensation. Excluding the estimated after-tax impact
of these adjustments, Adjusted Net Income in the fourth quarter of
2021 was $9.9 million, or $0.10 per share.
Adjusted EBITDA was $56.3 million for the fourth
quarter of 2022, essentially flat with $56.0 million for the third
quarter of 2022. Lower realized pricing for the fourth quarter
significantly reduced the benefit of the 34% increase in sales
volumes. Fourth quarter of 2021 Adjusted EBITDA was $24.0
million.
Free Cash Flow for the fourth quarter of 2022
was $5.5 million compared to $9.7 million in the third quarter of
2022 with the decrease primarily due to lower realized pricing and
higher interest expense and capital spending in the fourth quarter,
partially offset by higher sales volumes. Fourth quarter 2022 Free
Cash Flow decreased 41% from $9.3 million for the fourth quarter of
2021 primarily due to higher capital spending, partially offset by
increased sales volumes and realized oil pricing.
Cash Flow from Operations was $47.4 million for
the fourth quarter of 2022 compared to $48.9 million for the third
quarter of 2022 and $20.6 million for the fourth quarter of
2021.
Adjusted Net Income, Adjusted EBITDA, Free Cash
Flow, Cash Flow from Operations and PV-10 are non-GAAP financial
measures, which are described in more detail and reconciled to the
most comparable GAAP measures, in the tables shown later in this
release under “Non-GAAP Information.”
Sales Volumes, Prices and
Revenues: As a result of the Stronghold Transaction,
beginning July 1, 2022, the Company began reporting revenues on a
three-stream basis, separately reporting oil, natural gas, and
natural gas liquids (“NGLs”) sales. For periods prior to July 1,
2022, sales and reserve volumes, prices, and revenues for NGLs were
included in natural gas.
Sales volumes for the fourth quarter of 2022
were 17,856 Boe/d (68% oil, 17% natural gas and 15% NGLs), or
1,642,715 Boe, compared to 13,278 Boe/d (76% oil, 13% natural gas
and 11% NGLs), or 1,221,616 Boe, for the third quarter of 2022, and
9,153 Boe/d (85% oil and 15% natural gas), or 842,110 Boe, in the
fourth quarter of 2021. Fourth quarter 2022 sales volumes were
slightly below guidance due to downtime associated with the impact
of winter storm conditions, gas purchaser system constraints
limiting gas sales in the CBP and NWS, and adjustments for
reversionary interests and after-payout conditions. Fourth quarter
2022 sales volumes were comprised of 1,121,371 barrels (“Bbls”) of
oil, 1,680,401 thousand cubic feet (“Mcf”) of natural gas and
241,277 Bbls of NGLs.
For the fourth quarter of 2022, the Company
realized an average sales price of $81.62 per barrel of crude oil,
$2.39 per Mcf for natural gas and $17.21 per barrel of NGLs. The
combined average realized sales price for the period was $60.69 per
Boe, down 22% versus $77.28 per Boe for the third quarter of 2022,
and down 14% from $70.85 per Boe in the fourth quarter of 2021. The
average oil price differential the Company experienced from WTI
NYMEX futures pricing in the fourth quarter of 2022 was a negative
$1.07 per barrel of crude oil, while the average natural gas price
differential from NYMEX futures pricing was a negative $3.79 per
Mcf.
Revenues were $99.7 million for the fourth
quarter of 2022 compared to $94.4 million for the third quarter of
2022 and $59.7 million for the fourth quarter of 2021. The 6%
increase in fourth quarter 2022 revenues from the third quarter was
driven by higher sales volumes largely offset by lower realized
pricing.
Lease Operating Expense
(“LOE”): LOE, which includes expensed workovers and
facilities maintenance, was $17.4 million, or $10.60 per Boe, in
the fourth quarter of 2022 versus $13.0 million, or $10.67 per Boe,
in the third quarter of 2022 and $7.7 million, or $9.12 per Boe,
for the fourth quarter of 2021.
Gathering, Transportation and Processing
(“GTP”) Costs: As previously disclosed, due to a
contractual change effective May 1, 2022, the Company no longer
maintains ownership and control of natural gas through processing.
As a result, GTP costs are now reflected as a reduction to the
natural gas sales price and not as an expense item.
Ad Valorem Taxes: Ad valorem
taxes were $0.96 per Boe for the fourth quarter of 2022 compared to
$0.98 per Boe in the third quarter of 2022 and $0.16 per Boe for
the fourth quarter of 2021. Ad valorem taxes for the fourth quarter
of 2021 reflect lower assessed property values compared to
estimates.
Production Taxes: Production
taxes were $3.16 per Boe in the fourth quarter of 2022 compared to
$3.74 per Boe in the third quarter of 2022 and $3.36 per Boe in
fourth quarter of 2021. Production taxes ranged between 4.7% to
5.2% of revenue for all three periods.
Depreciation, Depletion and Amortization
(“DD&A”) and Asset Retirement Obligation Accretion:
DD&A was $12.71 per Boe in the fourth quarter of 2022 versus
$11.73 per Boe for the third quarter of 2022 and $12.44 per Boe in
the fourth quarter of 2021. Asset retirement obligation accretion
was $0.22 per Boe in the fourth quarter of 2022 compared to $0.20
per Boe for the third quarter of 2022 and $0.22 per Boe in the
fourth quarter of 2021.
Operating Lease
Expense: Operating lease expense was $113,138
for the fourth quarter of 2022 versus $83,590 for the third quarter
of 2022 and $83,591 in the fourth quarter of 2021. These expenses
are primarily associated with the Company’s office leases.
General and Administrative Expenses
(“G&A”): G&A, excluding non-cash share-based
compensation, was $6.1 million for the fourth quarter of 2022
($3.74 per Boe) versus $5.9 million for the third quarter of 2022
($4.79 per Boe) and $4.0 million in the fourth quarter of 2021
($4.79 per Boe). The fourth quarter and third quarter of 2022
included Transaction Costs of $1.0 million and $1.1 million,
respectively. Adjusting for Transaction Costs, fourth quarter 2022
G&A, excluding non-cash share-based compensation, was $3.14 per
Boe compared to $3.85 per Boe for the third quarter of 2022 — an
18% decrease and direct reflection of the synergies afforded by the
Stronghold Transaction.
Interest Expense: Interest
expense was $9.5 million in the fourth quarter of 2022 versus $7.0
million for the third quarter of 2022 and $3.5 million for the
fourth quarter of 2021. Interest expense increased for both
comparative periods primarily due to a higher average daily
borrowing balance of long-term debt associated with additional
borrowings on the Company’s revolving credit facility associated
with the closing of the Stronghold Transaction on August 31,
2022.
Derivative (Loss) Gain: In the
fourth quarter of 2022, Ring recorded a net loss of $19.3 million
on its commodity derivative contracts, including a realized $13.9
million cash commodity derivative loss and an unrealized $5.4
million non-cash commodity derivative loss. This compared to a net
gain of $32.9 million in the third quarter of 2022, including a
realized $14.8 million cash commodity derivative loss and an
unrealized $47.7 million non-cash commodity derivative gain, and a
net loss of $4.3 million in the fourth quarter of 2021, including a
realized $19.5 million cash commodity derivative loss and an
unrealized $15.2 million non-cash commodity derivative gain.
A summary listing of the Company’s outstanding
derivative positions at December 31, 2022 is included in the tables
shown later in this release. A quarterly breakout is provided in
the Company’s investor presentation.
For full year 2023, the Company currently has
approximately 1.7 million barrels of oil (38% of oil sales guidance
midpoint) hedged and 2.4 billion cubic feet of natural gas (35% of
natural gas sales guidance midpoint) hedged.
Income Tax: The Company
recorded a non-cash income tax provision of $2.5 million in the
fourth quarter of 2022 versus a non-cash income tax provision of
$4.3 million in the third quarter of 2022 and a non-cash income tax
benefit of $51,601 for the fourth quarter of 2021.
Balance Sheet and Liquidity:
Total liquidity at the end of the fourth quarter of 2022 was $188.0
million, a 14% increase from September 30, 2022 and a 205% increase
from December 31, 2021. Liquidity at December 31, 2022
consisted of cash and cash equivalents of $3.7 million and $184.2
million of availability under Ring’s revolving credit facility,
which includes a reduction of $0.8 million for letters of credit.
On December 31, 2022, the Company had $415.0 million in borrowings
outstanding on its revolving credit facility that has a current
borrowing base of $600.0 million. Ring paid down $20 million
of debt during the fourth quarter of 2022 and $37.0 million
since the closing of the Stronghold Transaction. The Company is
targeting further debt reduction during 2023 dependent on market
conditions, the timing of capital spending and other
considerations. Since September 30, 2022, 5,317,427 outstanding
common stock warrants have been exercised, of which 4,517,427
common stock warrants have been exercised to date in 2023.
Currently, 14,590,366 common stock warrants remain outstanding.
During the fourth quarter of 2022, Ring
successfully reaffirmed the Company’s borrowing base of $600.0
million under its revolving credit facility. The next regularly
scheduled bank redetermination is scheduled to occur during May
2023. Ring is currently in compliance with all applicable covenants
under its revolving credit facility.
Capital Expenditures: During
the fourth quarter of 2022, capital expenditures on an accrual
basis were $42.6 million as compared to Ring’s previous guidance of
$42 million to $46 million. The Company drilled four Hz wells (two
in the CBP and two in NWS) and five vertical wells (all in the
CBP); completed 12 wells (seven in the CBP and five in the NWS);
and, recompleted nine wells (all in the CBP). Also included in
fourth quarter 2022 capital spending were costs for capital
workovers, infrastructure upgrades, and leasing costs.
For the twelve months ended December 31, 2022,
capital expenditures were $140.1 million, which included costs to
drill, complete and place on production 27 Hz wells (18 in the NWS
and nine in the CBP) and five vertical wells in the CBP. Similar to
the fourth quarter, also included in capital spending were costs
for recompletions, capital workovers, infrastructure upgrades, and
leasing costs. Ring also participated in the drilling and
completion of three non-operated wells in the NWS.
The table below sets forth Ring’s drilling and
completions activities by quarter for 2022:
Quarter |
|
Area |
|
Wells Drilled |
|
Wells Completed |
|
Recompletions |
|
|
|
|
|
|
|
|
|
1Q 2022 |
|
Central Basin Platform
(Horizontal) |
|
4 |
|
4 |
|
— |
|
|
Central Basin Platform
(Vertical) |
|
— |
|
— |
|
— |
|
|
Northwest Shelf |
|
2 |
|
— |
|
— |
|
|
|
|
|
|
|
|
|
2Q 2022 |
|
Central Basin Platform
(Horizontal) |
|
— |
|
— |
|
— |
|
|
Central Basin Platform
(Vertical) |
|
— |
|
— |
|
— |
|
|
Northwest Shelf |
|
9 |
|
7 |
|
— |
|
|
|
|
|
|
|
|
|
3Q 2022 |
|
Central Basin Platform
(Horizontal) |
|
3 |
|
3 |
|
— |
|
|
Central Basin Platform
(Vertical) |
|
— |
|
— |
|
3 |
|
|
Northwest Shelf |
|
5 |
|
6 |
|
— |
|
|
|
|
|
|
|
|
|
4Q 2022 |
|
Central Basin Platform
(Horizontal) |
|
2 |
|
2 |
|
— |
|
|
Central Basin Platform
(Vertical) |
|
5 |
|
5 |
|
9 |
|
|
Northwest Shelf |
|
2 |
|
5 |
|
— |
Full Year 2022
Financial Review
The Company reported record net income for full
year 2022 of $138.6 million, or $0.98 per diluted share, and record
Adjusted Net Income of $107.5 million, or $0.89 per share. For full
year 2021, Ring reported net income of $3.3 million, or $0.03 per
diluted share, and Adjusted Net Income of $30.6 million, or $0.31
per share.
In full year 2022, the Company grew Adjusted
EBITDA by 134% to a record $195.2 million, or $1.61 per share and
$43.27 per Boe, from $83.3 million, or $0.84 per share and $26.80
per Boe, in 2021. Ring generated Free Cash Flow for full year 2022
of $34.8 million versus $20.5 million in 2021 — a 70% increase. For
full year 2022, the Company grew Cash Flow from Operations by 149%
to a record $172.9 million from $69.5 million in 2021.
Revenues totaled a record $347.2 million for
2022 compared to $196.3 million in 2021, with the 77% increase
driven by higher sales volumes and increased realized commodity
prices.
Net sales for full year 2022 were 12,364 Boe/d,
or 4,512,610 Boe, comprised of 3,459,840 Bbls of oil, 4,088,642 Mcf
of natural gas, and 371,329 Bbls of NGLs. Full year 2021 net sales
averaged 8,519 Boe/d, or 3,109,470 Boe, which included 2,686,939
Bbls of oil and 2,535,188 Mcf of natural gas. The increase in sales
volumes was a direct result of the Stronghold Transaction, as well
as organic growth from the Company’s capital spending program.
For the full year 2022, the Company’s realized
crude oil sales price was $92.80 per barrel, the natural gas sales
price was $4.57 per Mcf, and the NGLs sales price was $20.18 per
barrel. The combined average sales price for full year 2022 was
$76.95 per Boe compared to $63.13 per Boe for full year 2021.
For the full year 2022, LOE was $47.7 million,
or $10.57 per Boe, versus $30.3 million, or $9.75 per Boe, for full
year 2021. The increase in LOE on an absolute basis was primarily
associated with a 45% increase in production, as well as increased
costs for goods and services due to higher activity levels and
inflation.
GTP costs were $1.8 million, or $0.41 per Boe,
for full year 2022 compared to $4.3 million, or $1.39 per Boe in
2021, with the decrease year-over-year due to the aforementioned
contractual change effective May 1, 2022. Ad valorem taxes
increased to $4.7 million, or $1.04 per Boe, in 2022 from $2.3
million, or $0.73 per Boe, for full year 2021. Driving the increase
was a higher pricing basis for tax valuations as well as $0.8
million for the assets acquired in the Stronghold Transaction.
Production taxes for 2022 were $17.1 million, or $3.80 per Boe,
versus $9.1 million, or $2.93 per Boe, in 2021. As a percentage of
oil and natural gas sales, 2022 production taxes increased slightly
to 4.93% from 4.65% for 2021 due to higher Texas natural gas
revenue in 2022, which is taxed at 7.5%.
For the full year 2022, G&A, excluding
non-cash share-based compensation, was $19.9 million, or $4.42 per
Boe, compared to $13.6 million, or $4.39 per Boe for full year
2021. Excluding Transaction Costs of $2.1 million, full year 2022
G&A, net of non-cash share-based compensation, was $3.94 per
Boe — a 10% decrease from full year 2021.
For the full year 2022, the Company recorded a
non-cash income tax provision of $8.4 million compared to a
non-cash income tax provision of $0.1 million in full year
2021.
2023 Capital
Investment, Sales Volumes, and Operating Expense
Guidance
In January, the Company commenced its 2023
drilling and recompletion program, including drilling and
completing three Hz wells in the NWS, all of which have been placed
on production. A fourth Hz well in the NWS has been drilled and is
expected to be completed and placed on production by the end of
March. Additionally, the Company picked up a rig in the CBP to
drill three vertical wells and anticipates having all three wells
online by the end of March.
For full year 2023, Ring expects total capital
spending of $135 million to $170 million that includes a balanced
and capital efficient combination of drilling Hz wells on legacy
acreage and vertical wells on the recently acquired CBP assets, as
well as performing recompletions. Additionally, the full year
capital spending program includes funds for targeted capital
workovers, infrastructure upgrades, leasing costs, and non-operated
drilling, completion, and capital workovers.
All projects and estimates are based on assumed
WTI oil prices of $70 to $90 per barrel and Henry Hub prices of $2
to $3 per Mcf. As in the past, Ring has designed its spending
program with flexibility to respond to changes in commodity prices
and other market conditions as appropriate.
Based on the $152.5 million mid-point of
spending guidance, the Company expects the following estimated
allocation of capital investment, including:
-
70% for drilling, completion, and related infrastructure;
-
22% for recompletions and capital workovers; and
-
8% for land, environmental, social and governance (“ESG”) and
non-operated capital.
The Company remains squarely focused on
continuing to generate free cash flow in 2023. All 2023 planned
capital expenditures will be fully funded by cash on hand and cash
from operations, and excess free cash flow is currently targeted
for further debt reduction.
Supported by a full year of production from the
Stronghold Transaction, its targeted development program and
continued focus on operational excellence, the Company currently
forecasts full year 2023 sales volumes of 17,800 to 18,800 Boe/d
(68% oil, 17% natural gas, 15% NGLs), compared with full year 2022
average sales volumes of 12,364 Boe/d (77% oil, 23% natural gas
& NGLs). Assuming the mid-point of its full year 2023 sales
volumes guidance, Ring expects a 48% increase from full year 2022
and a 2.5% increase from the fourth quarter of 2022.
The guidance in the table below represents the
Company's current good faith estimate of the range of likely future
results for the full year and first quarter of 2023. Guidance could
be affected by the factors discussed below in the "Safe Harbor
Statement" section.
|
|
Q1 |
|
FY |
|
|
2023 |
|
2023 |
|
|
|
|
|
Sales
Volumes: |
|
|
|
|
Total (Boe/d) |
|
17,800-18,300 |
|
17,800-18,800 |
Oil (%) |
|
68% |
|
66-70% |
NGLs (%) |
|
15% |
|
14-16% |
Gas (%) |
|
17% |
|
16-18% |
|
|
|
|
|
Capital
Program: |
|
|
|
|
Capital spending(1)(millions) |
|
$36-$40 |
|
$135-$170 |
|
|
|
|
|
Hz wells drilled |
|
4 |
|
12-15 |
Vertical wells drilled |
|
3 |
|
12-25 |
Wells completed and online |
|
5-7 |
|
24-40 |
|
|
|
|
|
Operating
Expenses: |
|
|
|
|
LOE (per Boe) |
|
$11.10-11.50 |
|
$11.00-11.60 |
(1) In addition to Company-directed drilling and
completion activities, the capital spending outlook includes funds
for targeted well reactivations, capital workovers, and
infrastructure upgrades. Also included is anticipated spending for
leasing costs, and non-operated drilling, completion, and capital
workovers.
Year-End 2022
Proved Reserves
The Company's year-end 2022 SEC proved reserves
were 138.1 MMBoe compared to 77.8 MMBoe at year-end 2021 — a 78%
increase year-over-year. During 2022, Ring recorded reserve
additions of 62.9 MMBoe for acquisitions, 1.2 MMBoe for revisions
of previous quantity estimates, and 0.8 MMBoe for extensions,
discoveries and improved recovery. Partially offsetting the overall
increase was 4.5 MMBoe of production. The result was an all-in
replacement ratio of 13.4 times based on the Company’s year-end
2022 proved reserves.
The SEC twelve-month first day of the month
average prices used for year-end 2022 were $90.15 per barrel of
crude oil (WTI) (Plains Posted) and $6.36 per MMBtu of natural gas
(Henry Hub), both before adjustment for quality, transportation,
fees, energy content, and regional price differentials, while for
year-end 2021 they were $63.04 per barrel of crude oil and $3.598
per MMBtu of natural gas.
Year-end 2022 SEC proved reserves were comprised
of approximately 64% crude oil, 19% natural gas, and 17% natural
gas liquids. At year end, approximately 65% of 2022 proved reserves
were classified as proved developed and 35% as proved undeveloped.
This is compared to year-end 2021 when approximately 56% of proved
reserves were classified as proved developed and 44% were
classified as proved undeveloped.
The present value of the Company’s reported SEC
proved reserves, discounted at 10% ("PV-10"), at year-end 2022 was
$2,773.7 million, up 108% from $1,332.1 million at the end of
2021.
|
|
Oil(Bbl) |
|
Gas(Mcf) |
|
Natural Gas Liquids (Bbl) |
|
Net(Boe) |
|
PV-10(1) |
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2021 |
|
65,838,609 |
|
|
71,773,789 |
|
|
— |
|
|
77,800,907 |
|
|
$ |
1,332,097,625 |
|
|
|
|
|
|
|
|
|
|
|
Purchases of minerals in place |
|
28,086,920 |
|
|
108,456,107 |
|
|
16,715,626 |
|
|
62,878,564 |
|
|
|
Extensions, discoveries and improved recovery |
|
628,978 |
|
|
522,178 |
|
|
52,810 |
|
|
768,818 |
|
|
|
Production |
|
(3,459,477 |
) |
|
(4,088,642 |
) |
|
(371,337 |
) |
|
(4,512,254 |
) |
|
|
Revisions of previous quantity estimates |
|
(2,390,287 |
) |
|
(18,792,983 |
) |
|
6,708,559 |
|
|
1,186,108 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31,
2022 |
|
88,704,743 |
|
|
157,870,449 |
|
|
23,105,658 |
|
|
138,122,143 |
|
|
$ |
2,773,656,500 |
(1) PV-10 for this presentation excludes any
provision for asset retirement obligations or income taxes and is a
non-GAAP financial measure as defined by the SEC, and is derived
from the standardized measure of Discounted Futures Net Cash Flows,
which is the most directly comparable generally accepted accounting
principles (“GAAP”) measure.
In accordance with guidelines established by the
SEC, estimated proved reserves as of December 31, 2022 were
determined to be economically producible under existing economic
conditions, which requires the use of the 12-month average
commodity price for each product, calculated as the unweighted
arithmetic average of the first-day-of-the-month price for the year
end December 31, 2022. The SEC average prices used for year-end
2022 were $90.15 per barrel of crude oil (WTI) and $6.358 per MMBtu
of natural gas (Henry Hub), both before adjustment for quality,
transportation, fees, energy content, and regional price
differentials. Such prices were held constant throughout the
estimated lives of the reserves. Future production and development
costs are based on year-end costs with no escalations.
Standardized Measure of Discounted
Future Net Cash Flows
Ring’s standardized measure of discounted future
net cash flows relating to proved oil and natural gas reserves and
changes in the standardized measure as described below were
prepared in accordance with GAAP.
As of December 31, |
|
|
2022 |
|
|
|
2021 |
|
|
|
|
|
|
Future cash inflows |
|
$ |
9,871,961,000 |
|
|
$ |
4,853,709,000 |
|
Future production costs |
|
|
(2,751,896,250 |
) |
|
|
(1,395,437,250 |
) |
Future development costs |
|
|
(647,196,750 |
) |
|
|
(347,757,000 |
) |
Future income taxes |
|
|
(1,142,147,641 |
) |
|
|
(501,586,949 |
) |
Future net cash flows |
|
|
5,330,720,359 |
|
|
|
2,608,927,801 |
|
10% annual discount for
estimated timing of cash flows |
|
|
(3,058,606,841 |
) |
|
|
(1,471,562,953 |
) |
|
|
|
|
|
Standardized Measure
of Discounted Future Net Cash Flows |
|
$ |
2,272,113,518 |
|
|
$ |
1,137,364,848 |
|
Reconciliation of PV-10 to Standardized
Measure
PV-10 is derived from the Standardized Measure
of Discounted Future Net Cash Flows (“Standardized Measure”), which
is the most directly comparable GAAP financial measure for proved
reserves calculated using SEC pricing. PV-10 is a computation of
the Standardized Measure on a pre-tax basis. PV-10 is equal to the
Standardized Measure at the applicable date, before deducting
future income taxes, discounted at 10 percent. We believe that the
presentation of PV-10 is relevant and useful to investors because
it presents the discounted future net cash flows attributable to
our estimated net proved reserves prior to taking into account
future corporate income taxes, and it is a useful measure for
evaluating the relative monetary significance of our oil and
natural gas properties. Further, investors may utilize the measure
as a basis for comparison of the relative size and value of our
reserves to other companies. Moreover, GAAP does not provide a
measure of estimated future net cash flows for reserves other than
proved reserves or for reserves calculated using prices other than
SEC prices. We use this measure when assessing the potential return
on investment related to our oil and natural gas properties. PV-10,
however, is not a substitute for the Standardized Measure. Our
PV-10 measure and the Standardized Measure do not purport to
represent the fair value of our oil and natural gas reserves.
The following table reconciles the pre-tax PV-10 value of our
SEC pricing proved reserves as of December 31, 2022 to the
Standardized Measure.
SEC Pricing Proved Reserves |
Standardized Measure
Reconciliation |
|
|
Pre-Tax Present Value of Estimated Future Net Revenues (PV-10) |
|
$ |
2,773,656,500 |
Future Income Taxes, Discounted
at 10% |
|
501,542,982 |
Standardized Measure of
Discounted Future Net Cash Flows |
|
$ |
2,272,113,518 |
Conference Call
Information
Ring will hold a conference call on Friday,
March 10, 2023 at 11:00 a.m. ET to discuss its fourth quarter
and full year 2022 operational and financial results. An updated
investor presentation will be posted to the Company’s website prior
to the conference call.
To participate in the conference call,
interested parties should dial 833-953-2433 at least five minutes
before the call is to begin. Please reference the “Ring Energy
Fourth Quarter and Full Year 2022 Earnings Conference Call”.
International callers may participate by dialing 412-317-5762. The
call will also be webcast and available on Ring’s website at
www.ringenergy.com under “Investors” on the “News & Events”
page. An audio replay will also be available on the Company’s
website following the call.
About Ring Energy, Inc.
Ring Energy, Inc. is an oil and gas exploration,
development, and production company with current operations focused
on the conventional development of its Permian Basin assets in West
Texas and New Mexico. For additional information, please visit
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, 2022, 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.
Contact Information
Al Petrie Advisors
Al Petrie, Senior Partner
Phone: 281-975-2146
Email: apetrie@ringenergy.com
RING ENERGY,
INC.Condensed Statements of
Operations
|
(Unaudited) |
|
|
|
|
|
Three Months Ended |
|
Twelve Months Ended |
|
December 31, |
|
September 30, |
|
December 31, |
|
December 31, |
|
December 31, |
|
|
2022 |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
|
|
|
|
|
|
|
|
Oil, Natural Gas, and
Natural Gas Liquids Revenues |
$ |
99,697,682 |
|
|
$ |
94,408,948 |
|
|
$ |
59,667,156 |
|
|
$ |
347,249,537 |
|
|
$ |
196,305,966 |
|
|
|
|
|
|
|
|
|
|
|
Costs and Operating
Expenses |
|
|
|
|
|
|
|
|
|
Lease operating expenses |
|
17,411,645 |
|
|
|
13,029,098 |
|
|
|
7,678,140 |
|
|
|
47,695,351 |
|
|
|
30,312,399 |
|
Gathering, transportation and processing costs |
|
(16,223 |
) |
|
|
— |
|
|
|
1,449,884 |
|
|
|
1,830,024 |
|
|
|
4,333,232 |
|
Ad valorem taxes |
|
1,570,039 |
|
|
|
1,199,385 |
|
|
|
131,663 |
|
|
|
4,670,617 |
|
|
|
2,276,463 |
|
Oil and natural gas production taxes |
|
5,186,644 |
|
|
|
4,563,519 |
|
|
|
2,831,560 |
|
|
|
17,125,982 |
|
|
|
9,123,420 |
|
Depreciation, depletion and amortization |
|
20,885,774 |
|
|
|
14,324,502 |
|
|
|
10,474,159 |
|
|
|
55,740,767 |
|
|
|
37,167,967 |
|
Ceiling test impairment |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Asset retirement obligation accretion |
|
365,747 |
|
|
|
243,140 |
|
|
|
183,383 |
|
|
|
983,432 |
|
|
|
744,045 |
|
Operating lease expense |
|
113,138 |
|
|
|
83,590 |
|
|
|
83,591 |
|
|
|
363,908 |
|
|
|
523,487 |
|
General and administrative expense (including share-based
compensation) |
|
8,346,896 |
|
|
|
7,393,848 |
|
|
|
4,964,711 |
|
|
|
27,095,323 |
|
|
|
16,068,105 |
|
|
|
|
|
|
|
|
|
|
|
Total Costs and Operating Expenses |
|
53,863,660 |
|
|
|
40,837,082 |
|
|
|
27,797,091 |
|
|
|
155,505,404 |
|
|
|
100,549,118 |
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from
Operations |
|
45,834,022 |
|
|
|
53,571,866 |
|
|
|
31,870,065 |
|
|
|
191,744,133 |
|
|
|
95,756,848 |
|
|
|
|
|
|
|
|
|
|
|
Other Income
(Expense) |
|
|
|
|
|
|
|
|
|
Interest income |
|
— |
|
|
|
4 |
|
|
|
— |
|
|
|
4 |
|
|
|
1 |
|
Interest (expense) |
|
(9,468,684 |
) |
|
|
(7,021,385 |
) |
|
|
(3,542,514 |
) |
|
|
(23,167,729 |
) |
|
|
(14,490,474 |
) |
Gain (loss) on derivative contracts |
|
(19,330,689 |
) |
|
|
32,851,189 |
|
|
|
(4,266,942 |
) |
|
|
(21,532,659 |
) |
|
|
(77,853,141 |
) |
Net Other Income (Expense) |
|
(28,799,373 |
) |
|
|
25,829,808 |
|
|
|
(7,809,456 |
) |
|
|
(44,700,384 |
) |
|
|
(92,343,614 |
) |
|
|
|
|
|
|
|
|
|
|
Income (Loss) Before
Provision for Income Taxes |
|
17,034,649 |
|
|
|
79,401,674 |
|
|
|
24,060,609 |
|
|
|
147,043,749 |
|
|
|
3,413,234 |
|
|
|
|
|
|
|
|
|
|
|
Benefit from
(Provision for) Income Taxes |
|
(2,541,980 |
) |
|
|
(4,315,783 |
) |
|
|
51,601 |
|
|
|
(8,408,724 |
) |
|
|
(90,342 |
) |
|
|
|
|
|
|
|
|
|
|
Net Income
(Loss) |
$ |
14,492,669 |
|
|
$ |
75,085,891 |
|
|
$ |
24,112,210 |
|
|
$ |
138,635,025 |
|
|
$ |
3,322,892 |
|
|
|
|
|
|
|
|
|
|
|
Basic Earnings (Loss)
per share |
$ |
0.09 |
|
|
$ |
0.65 |
|
|
$ |
0.24 |
|
|
$ |
1.14 |
|
|
$ |
0.03 |
|
Diluted Earnings
(Loss) per share |
$ |
0.08 |
|
|
$ |
0.49 |
|
|
$ |
0.20 |
|
|
$ |
0.98 |
|
|
$ |
0.03 |
|
|
|
|
|
|
|
|
|
|
|
Basic Weighted-Average Shares
Outstanding |
|
162,743,445 |
|
|
|
115,376,280 |
|
|
|
99,789,095 |
|
|
|
121,264,175 |
|
|
|
99,387,028 |
|
Diluted Weighted-Average
Shares Outstanding |
|
178,736,799 |
|
|
|
151,754,998 |
|
|
|
123,297,240 |
|
|
|
141,754,668 |
|
|
|
121,193,175 |
|
RING ENERGY,
INC.Condensed Operating
Data(Unaudited)
|
Three Months Ended |
|
Twelve Months Ended |
|
December 31, |
|
September 30, |
|
December 31, |
|
December 31, |
|
December 31, |
|
2022 |
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
|
|
|
|
|
|
|
|
|
Net sales
volumes: |
|
|
|
|
|
|
|
|
|
Oil (Bbls) |
1,121,371 |
|
|
932,770 |
|
|
715,163 |
|
|
3,459,840 |
|
|
2,686,939 |
|
Natural gas (Mcf) |
1,680,401 |
|
|
952,762 |
|
|
761,682 |
|
|
4,088,642 |
|
|
2,535,188 |
|
Natural gas liquids
(Bbls)(1) |
241,277 |
|
|
130,052 |
|
|
— |
|
|
371,329 |
|
|
— |
|
Total oil, natural gas and
natural gas liquids (Boe)(1)(2) |
1,642,715 |
|
|
1,221,616 |
|
|
842,110 |
|
|
4,512,610 |
|
|
3,109,470 |
|
% Oil |
68 |
% |
|
76 |
% |
|
85 |
% |
|
77 |
% |
|
86 |
% |
|
|
|
|
|
|
|
|
|
|
Average daily equivalent sales
(Boe/d) |
17,856 |
|
|
13,278 |
|
|
9,153 |
|
|
12,364 |
|
|
8,519 |
|
|
|
|
|
|
|
|
|
|
|
Average realized sales
prices: |
|
|
|
|
|
|
|
|
|
Oil ($/Bbl) |
81.62 |
|
|
92.64 |
|
|
76.35 |
|
|
92.80 |
|
|
67.56 |
|
Natural gas ($/Mcf) |
2.39 |
|
|
4.89 |
|
|
6.65 |
|
|
4.57 |
|
|
5.83 |
|
Natural gas liquids
($/Bbls) |
17.21 |
|
|
25.68 |
|
|
0.00 |
|
|
20.18 |
|
|
0.00 |
|
Barrel of oil equivalent
($/Boe) |
60.69 |
|
|
77.28 |
|
|
70.85 |
|
|
76.95 |
|
|
63.13 |
|
|
|
|
|
|
|
|
|
|
|
Average costs and
expenses per Boe ($/Boe): |
|
|
|
|
|
|
|
|
|
Lease operating expenses |
10.60 |
|
|
10.67 |
|
|
9.12 |
|
|
10.57 |
|
|
9.75 |
|
Gathering, transportation and
processing costs |
-0.01 |
|
|
0.00 |
|
|
1.72 |
|
|
0.41 |
|
|
1.39 |
|
Ad valorem taxes |
0.96 |
|
|
0.98 |
|
|
0.16 |
|
|
1.04 |
|
|
0.73 |
|
Oil and natural gas production
taxes |
3.16 |
|
|
3.74 |
|
|
3.36 |
|
|
3.80 |
|
|
2.93 |
|
Depreciation, depletion and
amortization |
12.71 |
|
|
11.73 |
|
|
12.44 |
|
|
12.35 |
|
|
11.95 |
|
Ceiling test impairment |
0.00 |
|
|
0.00 |
|
|
0.00 |
|
|
0.00 |
|
|
0.00 |
|
Asset retirement obligation
accretion |
0.22 |
|
|
0.20 |
|
|
0.22 |
|
|
0.22 |
|
|
0.24 |
|
Operating lease expense |
0.07 |
|
|
0.07 |
|
|
0.10 |
|
|
0.08 |
|
|
0.17 |
|
General and administrative
(including share-based compensation) |
5.08 |
|
|
6.05 |
|
|
5.90 |
|
|
6.00 |
|
|
5.17 |
|
General and administrative
(excluding share-based compensation) |
3.74 |
|
|
4.79 |
|
|
4.79 |
|
|
4.42 |
|
|
4.39 |
|
(1) Beginning July 1, 2022, revenues were reported on a
three-stream basis, separately reporting crude oil, natural gas,
and natural gas liquids volumes and sales. For periods prior to
July 1, 2022, volumes and sales for natural gas liquids were
presented with natural gas.(2) Boe is determined using the ratio of
six Mcf of natural gas to one Bbl of oil (totals may not compute
due to rounding.) The conversion ratio does not assume price
equivalency and the price on an equivalent basis for oil, natural
gas, and natural gas liquids may differ significantly.
RING ENERGY,
INC.Condensed Balance Sheets
As of December 31, |
|
|
2022 |
|
|
|
2021 |
|
ASSETS |
|
|
|
|
Current
Assets |
|
|
|
|
Cash and cash equivalents |
|
$ |
3,712,526 |
|
|
$ |
2,408,316 |
|
Accounts receivable |
|
|
42,448,719 |
|
|
|
24,026,807 |
|
Joint interest billing
receivable |
|
|
983,802 |
|
|
|
2,433,811 |
|
Derivative assets |
|
|
4,669,162 |
|
|
|
— |
|
Inventory |
|
|
9,250,717 |
|
|
|
— |
|
Prepaid expenses and other
assets |
|
|
2,101,538 |
|
|
|
938,029 |
|
Total Current
Assets |
|
|
63,166,464 |
|
|
|
29,806,963 |
|
Properties and
Equipment |
|
|
|
|
Oil and natural gas
properties, full cost method |
|
|
1,463,838,595 |
|
|
|
883,844,745 |
|
Financing lease asset subject
to depreciation |
|
|
3,019,476 |
|
|
|
1,422,487 |
|
Fixed assets subject to
depreciation |
|
|
3,147,125 |
|
|
|
2,089,722 |
|
Total Properties and
Equipment |
|
|
1,470,005,196 |
|
|
|
887,356,954 |
|
Accumulated depreciation,
depletion and amortization |
|
|
(289,935,259 |
) |
|
|
(235,997,307 |
) |
Net Properties and
Equipment |
|
|
1,180,069,937 |
|
|
|
651,359,647 |
|
Operating lease
asset |
|
|
1,735,013 |
|
|
|
1,277,253 |
|
Derivative
assets |
|
|
6,129,410 |
|
|
|
— |
|
Deferred financing
costs |
|
|
17,898,973 |
|
|
|
1,713,466 |
|
Total
Assets |
|
$ |
1,268,999,797 |
|
|
$ |
684,157,329 |
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY |
|
|
|
|
Current
Liabilities |
|
|
|
|
Accounts payable |
|
$ |
111,398,268 |
|
|
$ |
46,233,452 |
|
Financing lease liability |
|
|
709,653 |
|
|
|
316,514 |
|
Operating lease liability |
|
|
398,362 |
|
|
|
290,766 |
|
Derivative liabilities |
|
|
13,345,619 |
|
|
|
29,241,588 |
|
Notes payable |
|
|
499,880 |
|
|
|
586,410 |
|
Deferred cash payment |
|
|
14,807,276 |
|
|
|
— |
|
Total Current
Liabilities |
|
|
141,159,058 |
|
|
|
76,668,730 |
|
|
|
|
|
|
Non-current
Liabilities |
|
|
|
|
Deferred income taxes |
|
|
8,499,016 |
|
|
|
90,292 |
|
Revolving line of credit |
|
|
415,000,000 |
|
|
|
290,000,000 |
|
Financing lease liability,
less current portion |
|
|
1,052,479 |
|
|
|
343,727 |
|
Operating lease liability,
less current portion |
|
|
1,473,897 |
|
|
|
1,138,319 |
|
Derivative liabilities |
|
|
10,485,650 |
|
|
|
— |
|
Asset retirement
obligations |
|
|
30,226,306 |
|
|
|
15,292,054 |
|
Total
Liabilities |
|
|
607,896,406 |
|
|
|
383,533,122 |
|
Commitments and
contingencies |
|
|
|
|
Stockholders'
Equity |
|
|
|
|
Preferred stock - $0.001 par
value; 50,000,000 shares authorized; no shares issued or
outstanding |
|
|
— |
|
|
|
— |
|
Common stock - $0.001 par
value; 225,000,000 shares authorized; 175,530,212 shares and
100,192,562 shares issued and outstanding, respectively |
|
|
175,530 |
|
|
|
100,193 |
|
Additional paid-in
capital |
|
|
775,241,114 |
|
|
|
553,472,292 |
|
Accumulated deficit |
|
|
(114,313,253 |
) |
|
|
(252,948,278 |
) |
Total Stockholders’
Equity |
|
|
661,103,391 |
|
|
|
300,624,207 |
|
Total Liabilities and
Stockholders' Equity |
|
$ |
1,268,999,797 |
|
|
$ |
684,157,329 |
|
RING ENERGY,
INC.Condensed Statements of Cash
Flows
|
|
(Unaudited) |
|
|
|
|
|
|
Three Months Ended |
|
Twelve Months Ended |
|
|
December 31, |
|
September 30, |
|
December 31, |
|
December 31, |
|
December 31, |
|
|
|
2022 |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From
Operating Activities |
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
14,492,669 |
|
|
$ |
75,085,891 |
|
|
$ |
24,112,210 |
|
|
$ |
138,635,025 |
|
|
$ |
3,322,892 |
|
Adjustments to reconcile net income (loss) to net cash provided by
operating activities: |
|
|
|
|
|
|
|
|
|
|
Depreciation, depletion and amortization |
|
|
20,885,774 |
|
|
|
14,324,503 |
|
|
|
10,474,159 |
|
|
|
55,740,767 |
|
|
|
37,167,967 |
|
Asset retirement obligation accretion |
|
|
365,747 |
|
|
|
243,140 |
|
|
|
183,383 |
|
|
|
983,432 |
|
|
|
744,045 |
|
Amortization of deferred financing costs |
|
|
1,222,400 |
|
|
|
1,095,073 |
|
|
|
169,349 |
|
|
|
2,706,021 |
|
|
|
665,882 |
|
Share-based compensation |
|
|
2,198,043 |
|
|
|
1,543,033 |
|
|
|
933,593 |
|
|
|
7,162,231 |
|
|
|
2,418,323 |
|
Bad debt expense |
|
|
242,247 |
|
|
|
— |
|
|
|
— |
|
|
|
242,247 |
|
|
|
— |
|
Deferred income tax expense (benefit) |
|
|
2,890,984 |
|
|
|
4,279,047 |
|
|
|
123,536 |
|
|
|
8,720,992 |
|
|
|
265,479 |
|
Excess tax expense (benefit) related to share-based
compensation |
|
|
(312,268 |
) |
|
|
— |
|
|
|
(175,187 |
) |
|
|
(312,268 |
) |
|
|
(175,187 |
) |
(Gain) loss on derivative contracts |
|
|
19,330,689 |
|
|
|
(32,851,189 |
) |
|
|
4,266,942 |
|
|
|
21,532,659 |
|
|
|
77,853,141 |
|
Cash received (paid) for derivative settlements, net |
|
|
(13,932,072 |
) |
|
|
(14,861,116 |
) |
|
|
(19,490,022 |
) |
|
|
(62,525,954 |
) |
|
|
(52,768,154 |
) |
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
4,086,757 |
|
|
|
(6,907,079 |
) |
|
|
(4,466,561 |
) |
|
|
(17,214,150 |
) |
|
|
(9,483,639 |
) |
Inventory |
|
|
(5,597,845 |
) |
|
|
— |
|
|
|
— |
|
|
|
(5,597,845 |
) |
|
|
— |
|
Prepaid expenses and other assets |
|
|
1,145,031 |
|
|
|
(40,823 |
) |
|
|
360,772 |
|
|
|
(1,163,509 |
) |
|
|
(541,920 |
) |
Accounts payable |
|
|
16,816,386 |
|
|
|
27,144,096 |
|
|
|
7,119,652 |
|
|
|
50,808,461 |
|
|
|
15,449,215 |
|
Settlement of asset retirement obligation |
|
|
(193,036 |
) |
|
|
(881,768 |
) |
|
|
(404,053 |
) |
|
|
(2,741,380 |
) |
|
|
(2,186,832 |
) |
Net Cash Provided by Operating Activities |
|
|
63,641,506 |
|
|
|
68,172,808 |
|
|
|
23,207,773 |
|
|
|
196,976,729 |
|
|
|
72,731,212 |
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From
Investing Activities |
|
|
|
|
|
|
|
|
|
|
Payments for the Stronghold Acquisition |
|
|
5,535,839 |
|
|
|
(183,359,626 |
) |
|
|
— |
|
|
|
(177,823,787 |
) |
|
|
— |
|
Payments to purchase oil and natural gas properties |
|
|
(352,012 |
) |
|
|
(467,840 |
) |
|
|
(789,281 |
) |
|
|
(1,563,703 |
) |
|
|
(1,368,437 |
) |
Payments to develop oil and natural gas properties |
|
|
(45,556,105 |
) |
|
|
(34,121,878 |
) |
|
|
(16,621,196 |
) |
|
|
(129,332,155 |
) |
|
|
(51,302,131 |
) |
Payments to acquire or improve fixed assets subject to
depreciation |
|
|
(161,347 |
) |
|
|
(66,838 |
) |
|
|
40,801 |
|
|
|
(319,945 |
) |
|
|
(568,832 |
) |
Sale of fixed assets subject to depreciation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
134,600 |
|
|
|
— |
|
Proceeds from divestiture of oil and natural gas properties |
|
|
(1,366 |
) |
|
|
— |
|
|
|
— |
|
|
|
23,700 |
|
|
|
2,000,000 |
|
Net Cash (Used in) Investing Activities |
|
|
(40,534,991 |
) |
|
|
(218,016,182 |
) |
|
|
(17,369,676 |
) |
|
|
(308,881,290 |
) |
|
|
(51,239,400 |
) |
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From
Financing Activities |
|
|
|
|
|
|
|
|
|
|
Proceeds from revolving line of credit |
|
|
44,000,000 |
|
|
|
541,500,000 |
|
|
|
25,750,000 |
|
|
|
636,000,000 |
|
|
|
60,150,000 |
|
Payments on revolving line of credit |
|
|
(64,000,000 |
) |
|
|
(376,500,000 |
) |
|
|
(30,750,000 |
) |
|
|
(511,000,000 |
) |
|
|
(83,150,000 |
) |
Proceeds from issuance of common stock and warrants |
|
|
640,000 |
|
|
|
2,400,000 |
|
|
|
126,240 |
|
|
|
8,203,126 |
|
|
|
367,509 |
|
Proceeds from option exercise |
|
|
— |
|
|
|
— |
|
|
|
200,000 |
|
|
|
— |
|
|
|
200,000 |
|
Payments for taxes withheld on vested restricted shares |
|
|
(256,715 |
) |
|
|
(6,790 |
) |
|
|
(385,330 |
) |
|
|
(521,199 |
) |
|
|
(385,330 |
) |
Proceeds from notes payable |
|
|
78,051 |
|
|
|
316,677 |
|
|
|
64,580 |
|
|
|
1,323,354 |
|
|
|
1,297,718 |
|
Payments on notes payable |
|
|
(455,802 |
) |
|
|
(333,341 |
) |
|
|
(335,321 |
) |
|
|
(1,409,884 |
) |
|
|
(711,308 |
) |
Payment of deferred financing costs |
|
|
(129,026 |
) |
|
|
(18,762,502 |
) |
|
|
(27,931 |
) |
|
|
(18,891,528 |
) |
|
|
(104,818 |
) |
Reduction of financing lease liabilities |
|
|
(161,064 |
) |
|
|
(103,392 |
) |
|
|
(118,965 |
) |
|
|
(495,098 |
) |
|
|
(325,901 |
) |
Net Cash (Used in) Financing Activities |
|
|
(20,284,556 |
) |
|
|
148,510,652 |
|
|
|
(5,476,727 |
) |
|
|
113,208,771 |
|
|
|
(22,662,130 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net Increase
(Decrease) in Cash |
|
|
2,821,959 |
|
|
|
(1,332,722 |
) |
|
|
361,370 |
|
|
|
1,304,210 |
|
|
|
(1,170,318 |
) |
Cash at Beginning of
Period |
|
|
890,567 |
|
|
|
2,223,289 |
|
|
|
2,046,946 |
|
|
|
2,408,316 |
|
|
|
3,578,634 |
|
Cash at End of
Period |
|
$ |
3,712,526 |
|
|
$ |
890,567 |
|
|
$ |
2,408,316 |
|
|
$ |
3,712,526 |
|
|
$ |
2,408,316 |
|
RING ENERGY,
INC.Financial Commodity Derivative
PositionsAs of December 31, 2022
The following table reflects the prices of
contracts outstanding as of December 31, 2022 (Quantities are
in barrels of the oil derivative contracts and in million British
thermal units (MMBtu) for the natural gas derivative
contracts.):
|
Oil Hedges (WTI) |
|
|
2023 |
|
|
2024 |
|
|
|
|
Swaps: |
|
|
|
Hedged volume (Bbl) |
|
389,250 |
|
|
894,000 |
Weighted average swap
price |
$ |
77.55 |
|
$ |
66.94 |
|
|
|
|
Deferred premium
puts: |
|
|
|
Hedged volume (Bbl) |
|
773,500 |
|
|
91,000 |
Weighted average strike
price |
$ |
90.64 |
|
$ |
83.75 |
Weighted average deferred
premium price |
$ |
15.25 |
|
$ |
17.32 |
|
|
|
|
Two-way
collars: |
|
|
|
Hedged volume (Bbl) |
|
487,622 |
|
|
475,350 |
Weighted average put
price |
$ |
52.16 |
|
$ |
67.88 |
Weighted average call
price |
$ |
62.94 |
|
$ |
83.32 |
|
|
|
|
Three-way
collars: |
|
|
|
Hedged volume (Bbl) |
|
66,061 |
|
|
— |
Weighted average first put
price |
$ |
45.00 |
|
$ |
— |
Weighted average second put
price |
$ |
55.00 |
|
$ |
— |
Weighted average call
price |
$ |
80.05 |
|
$ |
— |
|
Gas Hedges (Henry Hub) |
|
|
2023 |
|
|
2024 |
|
|
|
|
NYMEX
Swaps: |
|
|
|
Hedged volume (MMBtu) |
|
159,890 |
|
|
552,000 |
Weighted average swap
price |
$ |
2.40 |
|
$ |
4.61 |
|
|
|
|
Two-way
collars:(1) |
|
|
|
Hedged volume (MMBtu) |
|
2,258,317 |
|
|
1,712,250 |
Weighted average put
price |
$ |
3.18 |
|
$ |
4.00 |
Call hedged volume
(MMBtu) |
|
2,140,317 |
|
|
1,712,250 |
Weighted average call
price |
$ |
4.89 |
|
$ |
6.29 |
RING ENERGY,
INC.Financial Commodity Derivative
PositionsAs of December 31, 2022
|
Gas Hedges (basis differential) |
|
2023 |
|
|
2024 |
|
|
|
|
Waha basis
swaps: |
|
|
|
Hedged volume (MMBtu) |
1,339,685 |
|
|
— |
Weighted average swap
price |
(2) |
|
$ |
— |
(1)The two-way collars for the first quarter of 2023 include 2x1
collars where the put volumes of 236,000 are two times the call
volumes of 118,000. (2)The WAHA basis swaps in place for the
calendar year of 2023 consist of two derivative contracts, each
with a fixed price of the Henry Hub natural gas price less a fixed
amount (weighted average of $0.55 per MMBtu).
RING ENERGY, INC.
Non-GAAP Information
Certain financial information included in Ring’s
financial results are not measures of financial performance
recognized by accounting principles generally accepted in the
United States, or GAAP. These non-GAAP financial measures are
“Adjusted Net Income”, “Adjusted EBITDA”, “Free Cash Flow” and
“Cash Flow from Operations”. Management uses these non-GAAP
financial measures in its analysis of performance. In addition,
Adjusted EBITDA is a key metric used to determine the Company’s
incentive compensation awards. These disclosures may not be viewed
as a substitute for results determined in accordance with GAAP and
are not necessarily comparable to non-GAAP performance measures
which may be reported by other companies.
Reconciliation of Net Income (Loss) to
Adjusted Net Income
Adjusted Net Income does not include the
estimated after-tax impact of share-based compensation, ceiling
test impairment, and unrealized loss (gain) on change in fair value
of derivatives. Adjusted Net Income is presented because the timing
and amount of these items cannot be reasonably estimated and affect
the comparability of operating results from period to period, and
current periods to prior periods.
|
(Unaudited) |
|
|
|
|
|
Three Months Ended |
|
Twelve Months Ended |
|
December 31, |
|
September 30, |
|
December 31, |
|
December 31, |
|
December 31, |
|
|
2022 |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
|
|
|
|
|
|
|
|
Net
Income |
$ |
14,492,669 |
|
|
$ |
75,085,891 |
|
|
$ |
24,112,210 |
|
|
$ |
138,635,025 |
|
|
$ |
3,322,892 |
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation |
|
2,198,043 |
|
|
|
1,543,033 |
|
|
|
933,593 |
|
|
|
7,162,231 |
|
|
|
2,418,323 |
|
Ceiling test impairment |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Unrealized loss (gain) on
change in fair value of derivatives |
|
5,398,617 |
|
|
|
(47,712,305 |
) |
|
|
(15,223,080 |
) |
|
|
(40,993,295 |
) |
|
|
25,084,987 |
|
Transaction costs - Stronghold
Acquisition |
|
993,027 |
|
|
|
1,142,963 |
|
|
|
— |
|
|
|
2,135,990 |
|
|
|
— |
|
Tax impact on adjusted
items |
|
(1,281,788 |
) |
|
|
2,447,351 |
|
|
|
30,646 |
|
|
|
536,088 |
|
|
|
(225,432 |
) |
|
|
|
|
|
|
|
|
|
|
Adjusted Net
Income |
$ |
21,800,568 |
|
|
$ |
32,506,933 |
|
|
$ |
9,853,369 |
|
|
$ |
107,476,039 |
|
|
$ |
30,600,770 |
|
|
|
|
|
|
|
|
|
|
|
Weighted-Average Shares
Outstanding |
|
162,743,445 |
|
|
|
115,376,280 |
|
|
|
99,789,095 |
|
|
|
121,264,175 |
|
|
|
99,387,028 |
|
|
|
|
|
|
|
|
|
|
|
Adjusted Net Income
per Share |
$ |
0.13 |
|
|
$ |
0.29 |
|
|
$ |
0.10 |
|
|
$ |
0.89 |
|
|
$ |
0.31 |
|
Reconciliations of Adjusted EBITDA, Free
Cash Flow and Cash Flow from Operations
The Company also presents the non-GAAP financial
measures Adjusted EBITDA and Free Cash Flow. The Company defines
Adjusted EBITDA as net income (loss) plus net interest expense,
unrealized loss (gain) on change in fair value of derivatives,
ceiling test impairment, income tax (benefit) expense,
depreciation, depletion and amortization, asset retirement
obligation accretion and share-based compensation. Company
management believes this presentation is relevant and useful
because it helps investors understand Ring’s operating performance
and makes it easier to compare its results with those of other
companies that have different financing, capital and tax
structures. Adjusted EBITDA should not be considered in isolation
from or as a substitute for net income, as an indication of
operating performance or cash flows from operating activities or as
a measure of liquidity. Adjusted EBITDA, as Ring calculates it, may
not be comparable to Adjusted EBITDA measures reported by other
companies. In addition, Adjusted EBITDA does not represent funds
available for discretionary use.
The Company defines Free Cash Flow as Adjusted
EBITDA (defined above) less net interest expense (excluding
amortization of deferred financing cost), capital expenditures and
proceeds from divestiture of oil and natural gas properties. For
this purpose, the Company’s definition of capital expenditures
includes costs incurred related to oil and natural gas properties
(such as drilling and infrastructure costs and the lease
maintenance costs) and equipment, furniture and fixtures, but
excludes acquisition costs of oil and gas properties from third
parties that are not included in the Company’s capital expenditures
guidance provided to investors. Company management believes that
Free Cash Flow is an important financial performance measure for
use in evaluating the performance and efficiency of its current
operating activities after the impact of accrued capital
expenditures and net interest expense and without being impacted by
items such as changes associated with working capital, which can
vary substantially from one period to another. There is no commonly
accepted definition Free Cash Flow within the industry.
Accordingly, Free Cash Flow, as defined and calculated by the
Company, may not be comparable to Free Cash Flow or other similarly
named non-GAAP measures reported by other companies. While the
Company includes net interest expense in the calculation of Free
Cash Flow, other mandatory debt service requirements of future
payments of principal at maturity (if such debt is not refinanced)
are excluded from the calculation of Free Cash Flow. These and
other non-discretionary expenditures that are not deducted from
Free Cash Flow would reduce cash available for other uses.
The following tables present (i) a
reconciliation of the Company’s net income (loss), a GAAP measure,
to Adjusted EBITDA and (ii) a reconciliation of Adjusted EBITDA, a
non-GAAP measure, to Free Cash Flow, as both Adjusted EBITDA and
Free Cash Flow are defined by the Company. In addition, a
reconciliation of cash flow from operations is presented.
|
(Unaudited for All Periods) |
|
Three Months Ended |
|
Twelve Months Ended |
|
December 31, |
|
September 30, |
|
December 31, |
|
December 31, |
|
December 31, |
|
|
2022 |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
|
|
|
|
|
|
|
|
Net Income
(Loss) |
$ |
14,492,669 |
|
|
$ |
75,085,891 |
|
|
$ |
24,112,210 |
|
|
$ |
138,635,025 |
|
|
$ |
3,322,892 |
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
9,468,684 |
|
|
|
7,021,385 |
|
|
|
3,542,514 |
|
|
|
23,167,729 |
|
|
|
14,490,473 |
|
Unrealized loss (gain) on change in fair value of derivatives |
|
5,398,617 |
|
|
|
(47,712,305 |
) |
|
|
(15,223,080 |
) |
|
|
(40,993,295 |
) |
|
|
25,084,987 |
|
Ceiling test impairment |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Income tax (benefit) expense |
|
2,541,980 |
|
|
|
4,315,783 |
|
|
|
(51,601 |
) |
|
|
8,408,724 |
|
|
|
90,342 |
|
Depreciation, depletion and amortization |
|
20,885,774 |
|
|
|
14,324,502 |
|
|
|
10,474,159 |
|
|
|
55,740,767 |
|
|
|
37,167,967 |
|
Asset retirement obligation accretion |
|
365,747 |
|
|
|
243,140 |
|
|
|
183,383 |
|
|
|
983,432 |
|
|
|
744,045 |
|
Transaction costs - Stronghold Acquisition |
|
993,027 |
|
|
|
1,142,963 |
|
|
|
— |
|
|
|
2,135,990 |
|
|
|
— |
|
Share-based compensation |
|
2,198,043 |
|
|
|
1,543,033 |
|
|
|
933,593 |
|
|
|
7,162,231 |
|
|
|
2,418,323 |
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA |
$ |
56,344,541 |
|
|
$ |
55,964,392 |
|
|
$ |
23,971,178 |
|
|
$ |
195,240,603 |
|
|
$ |
83,319,029 |
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
Margin |
|
57 |
% |
|
|
59 |
% |
|
|
40 |
% |
|
|
56 |
% |
|
|
42 |
% |
|
|
|
|
|
|
|
|
|
|
Weighted-Average Shares
Outstanding |
|
162,743,445 |
|
|
|
115,376,280 |
|
|
|
99,789,095 |
|
|
|
121,264,175 |
|
|
|
99,387,028 |
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA per
Share |
$ |
0.35 |
|
|
$ |
0.49 |
|
|
$ |
0.24 |
|
|
$ |
1.61 |
|
|
$ |
0.84 |
|
|
(Unaudited for All Periods) |
|
Three Months Ended |
|
Twelve Months Ended |
|
December 31, |
|
September 30, |
|
December 31, |
|
December 31, |
|
December 31, |
|
|
2022 |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA |
$ |
56,344,541 |
|
|
$ |
55,964,392 |
|
|
$ |
23,971,178 |
|
|
$ |
195,240,603 |
|
|
$ |
83,319,029 |
|
|
|
|
|
|
|
|
|
|
|
Net interest expense (excluding amortization of deferred financing
costs) |
|
(8,246,284 |
) |
|
|
(5,926,308 |
) |
|
|
(3,373,165 |
) |
|
|
(20,461,708 |
) |
|
|
(13,824,591 |
) |
Capital expenditures |
|
(42,618,754 |
) |
|
|
(40,295,388 |
) |
|
|
(11,292,707 |
) |
|
|
(140,051,159 |
) |
|
|
(50,994,541 |
) |
Proceeds from divestiture of oil and natural gas properties |
|
(1,366 |
) |
|
|
— |
|
|
|
— |
|
|
|
23,700 |
|
|
|
2,000,000 |
|
|
|
|
|
|
|
|
|
|
|
Free Cash
Flow |
$ |
5,478,137 |
|
|
$ |
9,742,696 |
|
|
$ |
9,305,306 |
|
|
$ |
34,751,436 |
|
|
$ |
20,499,897 |
|
|
(Unaudited for All Periods) |
|
Three Months Ended |
|
Twelve Months Ended |
|
December 31, |
|
September 30, |
|
December 31, |
|
December 31, |
|
December 31, |
|
|
2022 |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by
Operating Activities |
$ |
63,641,506 |
|
|
$ |
68,172,808 |
|
|
$ |
23,207,773 |
|
|
$ |
196,976,729 |
|
|
$ |
72,731,212 |
|
|
|
|
|
|
|
|
|
|
|
Changes in operating assets
and liabilities |
|
(16,257,293 |
) |
|
|
(19,314,426 |
) |
|
|
(2,609,810 |
) |
|
|
(24,091,577 |
) |
|
|
(3,236,824 |
) |
|
|
|
|
|
|
|
|
|
|
Cash Flow from
Operations |
$ |
47,384,213 |
|
|
$ |
48,858,382 |
|
|
$ |
20,597,963 |
|
|
$ |
172,885,152 |
|
|
$ |
69,494,388 |
|
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