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

February 28, 2019 Business Wire

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