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Ring Energy Releases Complete Fourth Quarter and Twelve Month 2018 Financial and Operational Results in Support of 2018 10K Filing


MIDLAND, Texas–(BUSINESS WIRE)–Ring Energy, Inc. (NYSE American: REI) (“Ring”)(“Company”) announced today financial results for the three months and twelve months ended December 31, 2018. For the three month period ended December 31, 2018, the Company reported oil and gas revenues of $27,561,908, compared to revenues of $23,308,668 for the quarter ended December 31, 2017. For the twelve months ended December 31, 2018, the Company reported oil and gas revenues of $120,065,361, compared to $66,699,700 for the twelve months ended December 31, 2017.

For the three months ended December 31, 2018, Ring reported a net loss of $7,079,308, or $0.11 per diluted share, compared to a net loss of $4,509,935, or $0.08 per fully diluted share for the three months ended December 31, 2017. For the twelve months ended December 31, 2018, the Company reported net income of $8,999,760, or $0.15 per diluted share, compared to net income of $1,753,869, or $0.03 per fully diluted share for the twelve month period ended December 31, 2017.

For the three months ended December 31, 2018, the net income included a pre-tax “Realized Loss on Derivatives” of $4,553,476, an “Unrealized Gain on Derivatives” of $6,424,910, a non-cash charge for stock-based compensation of $779,598 and a ceiling test impairment of $14,172,309. Excluding these items, the net income per diluted share would have been $0.07. For the twelve months ended December 31, 2018, the net income included a pre-tax “Realized Loss on Derivatives” of $11,153,702, an “Unrealized Gain on Derivatives” of $3,968,287, a non-cash charge for stock-based compensation of $3,870,934 and a ceiling test impairment of $14,172,309. Excluding these items, the net income per diluted share would have been $0.47.

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 December 31, 2018, oil sales volume increased to 542,964 barrels, compared to 418,165 barrels for the same period in 2017, a 29.8% increase, and gas sales volume increased to 302,890 MCF (thousand cubic feet), compared to 201,966 MCF for the same period in 2017, a 49.9% increase. On a barrel of oil equivalent (“BOE”) basis for the three months ended December 31, 2018, production sales were 593,446 BOEs, compared to 451,826 BOEs for the same period in 2017, a 31.3% increase, and 601,720 BOEs for the third quarter of 2018, a 1.3% decrease. For the twelve months ended December 31, 2018, oil sales volume increased to 2,047,295 barrels, compared to 1,311,727 barrels for the same period in 2017, a 56% increase, and gas sales volume increased to 1,112,177 MCF, compared to 761,517 MCF for the same period in 2017, a 46% increase. On a BOE basis for the twelve months ended December 31, 2018, production sales increased to 2,232,658 BOEs, compared to 1,438,647 BOEs for the same period in 2017, a 55.1% increase.

The average commodity prices received by the Company were $49.62 per barrel of oil and $2.05 per MCF of natural gas for the quarter ended December 31, 2018, compared to $53.16 per barrel of oil and $3.35 per MCF of natural gas for the quarter ended December 31, 2017. On a BOE basis for the three month period ended December 31, 2018, the average price received was $46.44. The average prices received for the twelve months ended December 31, 2018 were $56.99 per barrel of oil and $3.05 per MCF of natural gas, compared to $48.97 per barrel of oil and $3.23 per MCF of natural gas for the twelve month period ended December 31, 2017. On a BOE basis for the twelve month period ended December 31, 2018, the average price received was $53.78.

Lease operating expenses, including production taxes, for the three months ended December 31, 2018 were $15.81 per BOE, an 8.4% increase from the prior year. Depreciation, depletion and amortization costs, including accretion, increased 11% to $17.80 per BOE. General and administrative costs, which included a $779,598 charge for stock-based compensation, were $5.77 per BOE, a 11% decrease. For the twelve months ended December 31, 2018, lease operating expenses, including production taxes, were $14.97 per BOE, a 12.5% increase. Depreciation, depletion and amortization costs, including accretion, were $17.75 per BOE, a 21.1% increase, and general and administrative costs, which included a $3,870,934 charge for stock-based compensation, were $5.76 per BOE, a 21% decrease.

Cash provided by operating activities, before changes in working capital, for the three and twelve months ended December 31, 2018 was $10,631,255, or $0.17 per fully diluted share, and $66,151,782, or $1.09 per fully diluted share, compared to $14,625,846 and $40,909,153, or $0.26 and $0.77 per fully diluted share for the same periods in 2017. Earnings before interest, taxes, depletion and other non-cash items (“Adjusted EBITDA”) for the three and twelve months ended December 31, 2018 was $10,973,726, or $0.18 per fully diluted share, and $66,481,825, or $1.09 per fully diluted share, compared to $14,584,307 and $40,618,071, or $0.26 and $0.77 in 2017. (See accompanying table for a reconciliation of net income to adjusted EBITDA).

As of December 31, 2018, $39,500,000 was outstanding on the Company’s $500 million senior secured credit facility.

The Company announced today that its estimated total proved reserves of oil and natural gas as of December 31, 2018 increased 14.6% to 36.6 million barrels of oil equivalent (BOE), from 31.9 million BOE at year end 2017, and 21.5% when adjusted for 2018 oil and gas sales. Ring replaced 308% of production in 2018. The 2018 year-end proved reserves consisted of 27.8 million barrels of crude oil (76%) and 52.8 Bcf of natural gas (24%). Of the 36.6 million BOE of total proved reserves, 67% are proved developed and 33% are proved undeveloped. The proved developed reserves consist of proved developed producing (61%) and proved developed non-producing (6%).

The estimated present value, using a 10% discount rate, of the future net cash flows before income taxes (“PV-10”) of the Company’s proved oil and natural gas reserves as of December 31, 2018 was $541.6 million, using year-end average received pricing of $58.74 per barrel for oil and $3.26 per Mcf for natural gas. These estimates were audited by the independent engineering firm of Cawley, Gillespie & Associates, Inc., Fort Worth, Texas.

The following table summarizes our total net proved reserves, pre-tax PV10 value and Standardized Measure of Discounted Future Net Cash Flows as of December 31, 2018. All of our reserves are in the Permian Basin in the State of Texas.

Oil (Bbl)

Natural
Gas (Mcf)

Total (Boe)

Pre-Tax PV10
Value

Standardized
Measure of
Discounted Future
Net Cash Flows

27,809,748 52,765,698 36,604,031 $ 541,576,052 $ 455,944,641

Total capital expenditures for 2018 were approximately $214.7, which included $15.86 million for property acquisitions.

About Ring Energy, Inc.

Ring Energy, Inc. is an oil and gas exploration, development and production company with current operations in Texas.
www.ringenergy.com

Safe Harbor Statement

This release contains forward-looking statements within the meaning of the “safe-harbor” provisions of the Private Securities Litigation Reform Act of 1995 that involve a wide variety of risks and uncertainties, including, 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, 2018. 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 Twelve Months Ended
December 31, December 31,
2018 2017 2018 2017
Oil and Gas Revenues $ 27,561,908 $ 23,308,668 $ 120,065,361 $ 66,699,700
Costs and Operating Expenses .
Oil and gas production costs 8,163,826 5,496,693 27,801,989 15,978,362
Oil and gas production taxes 1,225,119 1,090,347 5,631,093 3,152,562
Depreciation, depletion and amortization 10,448,829 7,084,291 39,024,886 20,517,780
Ceiling test impairment 14,172,309 14,172,309
Asset retirement obligation accretion 113,236 147,245 606,459 567,968
General and administrative expense 3,425,359 2,939,496 12,867,686 10,515,887
Total Costs and Operating Expenses 37,548,678 16,758,072 100,104,422 50,732,559
Income (Loss) from Operations (9,986,770 ) 6,550,596 19,960,939 15,967,141
Other Income (Expense)
Interest income 0 41,540 97,855 291,083
Interest expense (342,471 ) (427,898 )
Realized loss on derivatives (4,553,476 ) (119,897 ) (11,153,702 ) (119,897 )
Unrealized gain (loss)on change in fair value of derivatives 6,424,910 (4,034,115 ) 3,968,287 (3,968,287 )
Net Other Income (Expense) 1,528,963 (4,112,472 ) (7,515,458 ) (3,797,101 )
Income (Loss) Before Provision for Income Taxes (8,457,807 ) 2,438,124 12,445,481 12,170,040
Provision for Income Taxes 1,378,499 (6,948,059 ) (3,445,721 ) (10,416,171 )
Net Income (Loss) ($7,079,308 ) ($4,509,935 ) $ 8,999,760 $ 1,753,869
Basic Earnings (Loss) Per Common Share ($0.12 ) ($0.08 ) $ 0.15 $ 0.03
Diluted Earnings (Loss) Per Common Share ($0.11 ) ($0.08 ) $ 0.15 $ 0.03
Basic Weighted-Average Common Shares Outstanding 60,857,325 54,177,202 59,531,200 51,383,008
Diluted Weighted-Average Common Shares Outstanding 61,715,829 55,647,451 60,848,177 52,806,712
COMPARATIVE OPERATING STATISTICS
Three Months Ended December 31,
2018 2017 Change
Net Sales – BOE per day 6,450 4,911 31 %
Per BOE:
Average Sales Price $ 46.44 $ 51.59 -10 %
Lease Operating Expenses 13.75 12.17 13 %
Production Taxes 2.06 2.41 -14 %
DD&A 17.61 15.68 12 %
Accretion 0.19 0.33 -42 %
General & Administrative Expenses 5.77 6.51 -11 %
Twelve Months Ended December 31,
2018 2017 Change
Net Sales – BOE per day 6,117 3,941 55 %
Per BOE:
Average Sales price $ 53.78 $ 46.36 16 %
Lease Operating Expenses 12.45 11.11 12 %
Production Taxes 2.52 2.19 15 %
DD&A 17.48 14.26 22 %
Accretion 0.27 0.39 -31 %
General & Administrative Expenses 5.76 7.31 -21 %
RING ENERGY, INC.
BALANCE SHEET
December 31, December 31,
2018 2017
ASSETS
Current Assets
Cash $ 3,363,726 $ 15,006,581
Accounts receivable 12,643,478 12,833,883
Joint interest billing receivable 578,144 1,054,022
Prepaid expenses and retainers 258,909 229,438
Total Current Assets 16,844,257 29,123,924
Property and Equipment
Oil and natural gas properties subject to amortization 641,121,398 433,591,134
Fixed assets subject to depreciation 1,465,551 1,884,818
Total Property and Equipment 642,586,949 435,475,952
Accumulated depreciation, depletion and amortization (100,576,087 ) (61,864,932 )
Net Property and Equipment 542,010,862 373,611,020
Deferred Income Taxes 7,786,479 11,232,200
Deferred Financing Costs 424,061 135,342
Total Assets $ 567,065,659 $ 414,102,486
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts payable $ 51,910,432 $ 44,475,163
Derivative liabilities 3,968,286
Total Current Liabilities 51,910,432 48,443,449
Revolving line of credit 39,500,000
Asset retirement obligations 13,055,797 9,055,697
Total Liabilities 104,466,229 57,499,146
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;
63,229,710 shares and 54,224,029 shares
issued and outstanding, respectively 63,230 54,224
Additional paid-in capital 494,892,093 397,904,769
Accumulated deficit (32,355,893 ) (41,355,653 )
Total Stockholders’ Equity 462,599,430 356,603,340
Total Liabilities and Stockholders’ Equity $ 567,065,659 $ 414,102,486
STATEMENTS OF CASH FLOW
Twelve Months Ended
December 31, December 31,
2018 2017
Cash Flows From Operating Activities
Net income (loss) $ 8,999,760 $ 1,753,869
Adjustments to reconcile net income (loss) to net cash
Provided by operating activities:
Depreciation, depletion and amortization 39,024,886 20,517,780
Ceiling test impairment 14,172,309
Accretion expense 606,459 567,968
Share-based compensation 3,870,934 3,685,079
Deferred income tax expense 2,537,837 3,862,827
Excess tax benefit related to share-based compensation 907,884 (49,896 )
Adjustment to deferred tax asset for change in effective tax rate 6,603,240
Change in fair value of derivative instruments (3,968,286 ) 3,968,286
Changes in assets and liabilities:
Accounts receivable 666,283 (9,980,206 )
Prepaid expenses (318,190 ) 268,080
Accounts payable 4,435,269 12,375,772
Settlement of asset retirement obligation (577,824 ) (766,595 )
Net Cash Provided by Operating Activities 70,357,321 42,806,204
Cash Flows from Investing Activities
Payments to purchase oil and natural gas properties (4,656,484 ) (28,682,298 )
Payments to develop oil and natural gas properties (198,870,366 ) (124,680,469 )
Proceeds from disposal of fixed assets subject to depreciation 105,536
Purchase of equipment, vehicles and leasehold improvements (335,507 )
Purchase of inventory for development (4,214,686 )
Net Cash Used in Investing Activities (203,421,314 ) (157,912,960 )
Cash Flows From Financing Activities
Proceeds from revolving line of credit 39,500,000
Proceeds from issuance of common stock, net of offering costs 81,821,138 59,026,956
Proceeds from option exercise 100,000
Net Cash Provided by Financing Activities 121,421,138 59,026,956
Net Increase (Decrease) in Cash (11,642,855 ) (56,079,800 )
Cash at Beginning of Period 15,006,581 71,086,381
Cash at End of Period $ 3,363,726 $ 15,006,581
Supplemental Cash flow Information
Cash paid for interest $ 323,916
Noncash Investing and Financing Activities
Asset retirement obligation incurred during development 1,311,956 1,297,289
Asset retirement obligation acquired 2,571,549
Asset retirement obligation revision of estimate 87,980
Oil and natural gas assets and properties acquired
through stock issuance 11,204,258
Capitalized expenditures attributable to drilling projects
financed through current liabilities 25,000,000 23,000,000
Use of inventory in property development 5,797,113
RECONCILIATION OF CASH FLOW FROM OPERATIONS
Net cash provided by operating activities $ 70,357,321 $ 42,806,204
Change in operating assets and liabilities 4,205,538 1,897,051
Cash flow from operations $ 66,151,783 $ 40,909,153
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
Twelve Months Ended
December 31, December 31,
2018 2017
NET INCOME $ 8,999,760 $ 1,753,869
Net other (income) expense 7,515,458 3,797,101
Realized loss on derivatives (11,153,702 ) (119,897 )
Income tax expense 3,445,721 10,416,171
Depreciation, depletion and amortization 39,024,886 20,517,780
Accretion of discounted liabilities 606,459 567,968
Ceiling test impairment 14,172,309
Stock based compensation 3,870,934 3,685,079
ADJUSTED EBITDA $ 66,481,825 $ 40,618,071

Contacts

For further information contact:
Bill Parsons, K M Financial, Inc. (702) 489-4447



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