Ring Energy Announces Fourth Quarter and Full Year 2021 Results, Year-End 2021 Proved Reserves and Provides 2022 Guidance
Ring Energy (REI) reported strong operational and financial results for Q4 2021, highlighting an 11% increase in sales volumes to 9,153 Boe/d and net income of $24.1 million, up 70% from Q3 2021. Full year net income was $3.3 million, a significant recovery from a $253.4 million loss in 2020. Adjusted EBITDA rose 21% year-over-year to $24 million in Q4. The company reduced debt by $23 million and reaffirmed a borrowing base of $350 million. For 2022, Ring plans capital spending of $120-$140 million to support drilling of 25-33 wells, targeting a 10% sales increase.
- Sales volumes increased by 11% in Q4 2021 to 9,153 Boe/d.
- Q4 2021 net income of $24.1 million, up 70% from Q3 2021.
- Full year 2021 net income was $3.3 million, a significant recovery from a $253.4 million loss in 2020.
- Adjusted EBITDA increased by 21% year-over-year to $24 million in Q4.
- Reduced debt by $23 million in 2021, enhancing liquidity.
- Free cash flow decreased to $9.3 million in Q4 2021 from $12.7 million in Q4 2020.
- Total revenue for 2021 was $196.3 million, reflecting a prior year's increase but still less than the peak levels, raising concerns about sustained growth.
~ Continuing to Generate Free Cash Flow, Reduce Debt and Increase Liquidity ~
~ 2022 Capital Budget of
THE WOODLANDS, Texas, March 16, 2022 (GLOBE NEWSWIRE) -- Ring Energy, Inc. (NYSE American: REI) (“Ring” or the “Company”) today reported operational and financial results for the fourth quarter and full year 2021, including Ring’s year-end 2021 proved reserves. In addition, the Company provided first quarter and full year 2022 guidance and an update on its 2022 drilling program.
Highlights and Recent Key Items
- Grew fourth quarter 2021 sales volumes
11% to 9,153 barrels of oil equivalent per day (“Boe/d”) (85% oil) compared to the third quarter of 2021, with full year 2021 sales volumes of 8,519 Boe/d (86% oil); - Reported net income of
$24.1 million , or$0.20 per diluted share, in the fourth quarter of 2021, up70% compared with net income of$14.2 million , or$0.12 per share in the third quarter of 2021;- Net income for full year 2021 was
$3.3 million , or$0.03 per diluted share, compared with a loss of$253.4 million or$3.48 per share, in full year 2020;
- Net income for full year 2021 was
- Posted Adjusted Net Income1 of
$9.9 million , or$0.10 per share, for the fourth quarter of 2021, up46% compared with$6.8 million , or$0.07 per share, in the third quarter of 2021;- Adjusted Net Income for the full year 2021 was
$30.6 million , or$0.31 per share, up48% from$20.7 million , or$0.28 per share, in full year 2020;
- Adjusted Net Income for the full year 2021 was
- Increased Adjusted EBITDA1 by
21% fourth quarter over fourth quarter to$24.0 million and generated$83.3 million in Adjusted EBITDA for full year 2021; - Delivered Net Cash Provided by Operating Activities of
$23.2 million and Free Cash Flow1 of$9.3 million in the fourth quarter of 2021.- Net Cash Provided by Operating Activities and Free Cash Flow were
$72.7 million and$20.5 million , respectively, for full year 2021;
- Net Cash Provided by Operating Activities and Free Cash Flow were
- Remained cash flow positive for the ninth consecutive quarter;
- Paid down
$23.0 million of debt on the Company’s revolving credit facility during full year 2021, including$5.0 million in the fourth quarter;- Resulted in lower interest expense of
$3.1 million in full year 2021 – an18% decrease from 2020; - Successfully reaffirmed the Company’s borrowing base of
$350 million under its revolving credit facility in December 2021;
- Resulted in lower interest expense of
- Grew proved reserves
2% to 77.8 million barrels of oil equivalent (“MMBoe”) at year-end 2021, more than replacing its full year 2021 production; - Successfully drilled and completed, on time and within budget, Ring’s Phase IV program of two wells (one in the Northwest Shelf (“NWS”) and one in the Central Basin Platform (“CBP”)), with both wells placed on production in the fourth quarter of 2021;
- Completion of the Phase IV program marks the culmination of a successful 2021 development campaign;
- Drilled 11 wells, including eight in the NWS and three in the CBP, and participated in the drilling of two non-operated wells in the NWS;
- Completed 13 wells, including 10 in the NWS and three in the CBP, and participated in the completion of two non-operated wells in the NWS;
- Completion of the Phase IV program marks the culmination of a successful 2021 development campaign;
- Reduced future costly workovers and long-term operating costs by converting 25 wells from downhole electrical submersible pumps (“ESPs”) to rod pumps (“CTRs”) during full year 2021, including 19 in the NWS and six in the CBP;
- Commenced Ring’s 2022 continuous drilling program in late January with four CBP wells drilled, with two wells placed on production in March and two wells that are expected to be online in April;
- Currently drilling the first of 16 targeted wells in the NWS before moving back to the CBP;
- Announced 2022 capital program of
$120 million to$140 million , an increase of over130% compared to prior year;
- Reaffirmed commitment to remain cash flow positive on an annual basis; and
- Provided guidance for first quarter and full year 2022 sales volumes, capital spending and operating expenses.
________________________
1 A non-GAAP financial measure; see “Non-GAAP Information” section in this release for more information including reconciliations to the most comparable GAAP measures.
Mr. Paul D. McKinney, Chairman of the Board and Chief Executive Officer, commented, “We are pleased to report our strong fourth quarter operating and financial results. Contributing to our performance during the period were sales volumes of 9,153 Boe per day, which was
Mr. McKinney continued, “On January 1, 2022, nearly
Mr. McKinney concluded, “As previously announced, we initiated our 2022 drilling program in January and have since drilled four wells in the CBP, moved the rig to the NWS asset area and spud our fifth well this week. We have completed two of our CBP wells and plan to complete the third and fourth wells in April. We intend to drill and complete between 25 and 33 wells in 2022, install related facilities and infrastructure, continue our successful CTR and other capital workover programs, and acquire additional leases. Our capital spending program will be flexible and adjusted to remain in-line with commodity prices and within cash flow from operations. In short, we believe 2022 will be a transformational year for Ring and our shareholders through the continued pursuit of our value focused proven strategy.”
Financial Overview: For the fourth quarter of 2021, the Company reported net income of
Adjusted EBITDA grew by
Free Cash Flow for the fourth quarter of 2021 was
Adjusted Net Income, Adjusted EBITDA and Free Cash Flow 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: Sales volumes for the fourth quarter of 2021 were 9,153 Boe/d (
For the fourth quarter of 2021, the Company realized an average sales price of
Revenues were
Lease Operating Expense (“LOE”): LOE, which includes expensed workovers and facilities maintenance, was
Gathering, Transportation and Processing (“GTP”) Costs: GTP costs, which are associated with natural gas sales, were
Ad Valorem Taxes: Ad valorem taxes were
Production Taxes: Production taxes were
Depreciation, Depletion and Amortization (“DD&A”) and Asset Retirement Obligation Accretion: DD&A was
Operating Lease Expense: Operating lease expense was
General and Administrative Expenses (“G&A”): G&A, excluding share-based compensation, was
Interest Expense: Interest expense was
Derivative (Loss) Gain: In the fourth quarter of 2021, Ring recorded a loss of
The Company did not add any new commodity derivative contracts in the fourth quarter of 2021, but on February 1, 2022 added the following new crude oil derivative position:
| Average | Weighted Avg. | ||||
| Date Entered Into | Production Period | Instrument | Daily Volumes | Swap Price | |
| Crude Oil - WTI | (Bbls) | (per Bbl) | |||
| 02/01/2022 | Balance of calendar year 2022 | Swaps | 1,000 | ||
On January 1, 2022, nearly
Income Tax: The Company recorded a non-cash income tax benefit of
Balance Sheet and Liquidity: Total liquidity at the end of the fourth quarter of 2021 was
During the fourth quarter of 2021, Ring successfully reaffirmed the Company’s borrowing base of
Capital Expenditures: During the fourth quarter of 2021, capital expenditures on an accrual basis were
The Phase IV program utilized one rig and both wells were drilled and completed on schedule and within budget. The well in the NWS was a 1.0-mile lateral and the well in the CBP was a 1.5-mile lateral, with both wells placed on production in the fourth quarter.
In the third quarter of 2021, capital expenditures were
For the twelve months ended December 31, 2021, capital expenditures were
Full Year 2021 Financial Review
The Company reported net income for full year 2021 of
Revenues totaled
Net sales for full year 2021 were 8,519 Boe/d, or 3,109,470 Boe, comprised of 2,686,939 Bbls of oil and 2,535,188 Mcf of natural gas. Full year 2020 net sales averaged 8,790 Boe/d, or 3,217,278 Boe, which included 2,801,528 Bbls of oil and 2,494,502 Mcf of natural gas.
For the full year 2021, the Company’s realized crude oil sales price was
For the full year 2021, LOE was
GTP costs were
For the full year 2021, G&A, including share-based compensation, was
For the full year 2021, the Company recorded a non-cash income tax provision of
2022 Capital Investment, Sales Volumes, and Operating Expense Guidance
In response to a continued improvement in crude oil prices and following the success of its 2021 drilling program, in late January Ring commenced a 2022 continuous one-rig drilling program that is focused on the Company’s highest rate-of-return inventory in its NWS and CBP acreage positions. To date, four wells in the CBP have been drilled and completed, including two wells that were placed on production in March and two wells that are expected to be online in April. The rig was moved from the CBP and is currently drilling the first of 16 targeted wells in the NWS, before moving back to the CBP.
For full year 2022, Ring expects total capital spending of
82% for drilling, completion, and related equipment and facilities;12% for CTRs, recompletions and capital workovers; and6% for land, non-operated capital and other investments.
The Company remains focused on generating free cash flow in 2022, after all expenses, costs and capital expenditures. The increased level of capital investment in 2022 is expected to generate almost
Supported by its targeted development program and continued focus on operational excellence, the Company currently forecasts full year 2022 sales volumes of 9,000 to 9,600 Boe/d (
Drilling under Ring’s new continuous drilling program began in late January 2022; as a result, there is minimal additional production impact expected from the new wells in the first quarter. Including the expected normal decline in production during the first quarter and some short-term weather-related sales disruptions, first quarter 2022 sales are expected to be in the range of 8,500 to 8,700 Boe/d (
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 2022. Guidance could be affected by the factors discussed below in the "Safe Harbor Statement" section.
| Q1 | FY | |||
| 2022 | 2022 | |||
| Sales Volumes: | ||||
| Total (Boe/d) | 8,500 - 8,700 | 9,000 - 9,600 | ||
| Oil (Bo/d) | 7,200 - 7,400 | 7,800 - 8,350 | ||
| Capital Program: | ||||
| Capital spending(1) (millions) | ||||
| Number of new wells drilled | 6 | 25 - 33 | ||
| Number of new wells completed and online | 2 | 25 - 30 | ||
| Operating Expenses: | ||||
| LOE (per Boe) | ||||
| GPT (per Boe) | ||||
| (1) In addition to Company-directed drilling and completion activities, the capital spending outlook includes funds for targeted well reactivations, workovers, infrastructure upgrades, and continuing the Company's successful CTR program in its NWS and CBP areas. Also included is anticipated spending for lease costs, contractual drilling obligations and non-operated drilling, completion and capital workovers. | ||||
First quarter and full year 2022 LOE is expected to be higher than 2021 primarily due to inflationary-related increases partially offset by the ongoing CTR program, lower costs due to the purchase of leased ESPs, and other cost reduction initiatives.
Year-End 2021 Proved Reserves
The Company's year-end 2021 SEC proved reserves were 77.8 MMBoe compared to 76.5 MMBoe at year-end 2020. Ring recorded reserve additions of 2.3 MMBoe for acquisitions and 4.9 MMBoe for extensions, discoveries and improved recovery. Partially offsetting the overall increase was 0.6 MMBoe for property dispositions, 2.2 MMBoe for revisions of previous quantity estimates and 3.1 MMBoe of production.
The SEC twelve-month first day of the month average prices used for year-end 2021 were
Year-end 2021 SEC proved reserves were comprised of approximately
Ring’s reserve life ratio at year-end 2021, based on year-end 2021 SEC proved reserves and 2021 production was 25.0 years.
The present value of the Company’s reported SEC proved reserves, discounted at
| Oil | Gas | Net | |||||||||||
| (Bbl) | (Mcf) | (Boe) | PV-10(1) | ||||||||||
| Balance, December 31, 2020 | 66,264,286 | 61,305,027 | 76,481,791 | $ | 638,107,637 | ||||||||
| Purchases of minerals in place | 2,180,497 | 824,512 | 2,317,916 | ||||||||||
| Extensions, discoveries and improved recovery | 3,975,675 | 5,172,392 | 4,837,740 | ||||||||||
| Sales of minerals in place | (462,970 | ) | (555,879 | ) | (555,617 | ) | |||||||
| Production | (2,686,577 | ) | (2,535,188 | ) | (3,109,108 | ) | |||||||
| Revisions of previous quantity estimates | (3,432,302 | ) | 7,562,925 | (2,171,815 | ) | ||||||||
| Balance, December 31, 2021 | 65,838,609 | 71,773,789 | 77,800,907 | $ | 1,332,097,625 | ||||||||
(1) PV-10 for this presentation excludes any provision for asset retirement obligations or income taxes and it may be considered 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 GAAP measure.
In accordance with guidelines established by the SEC, estimated proved reserves as of December 31, 2021 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, 2021. The SEC average prices used for year-end 2021 were
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 generally accepted accounting principles.
| December 31, | 2021 | 2020 | ||||||
| Future cash inflows | $ | 4,853,709,000 | $ | 2,682,488,655 | ||||
| Future production costs | (1,395,437,250 | ) | (821,515,126 | ) | ||||
| Future development costs | (347,757,000 | ) | (244,323,270 | ) | ||||
| Future income taxes | (501,586,949 | ) | (208,645,934 | ) | ||||
| Future net cash flows | 2,608,927,801 | 1,408,004,325 | ||||||
| (1,471,562,953 | ) | (852,133,072 | ) | |||||
| Standardized Measure of Discounted Future Net Cash Flows | $ | 1,137,364,848 | $ | 555,871,253 | ||||
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, 2021 to the Standardized Measure.
| SEC Pricing Proved Reserves | ||||
| Standardized Measure Reconciliation | ||||
| Pre-Tax Present Value of Estimated Future Net Revenues (Pre-Tax PV-10) | $ | 1,332,097,625 | ||
| Future Income Taxes, Discounted at | (194,732,777 | ) | ||
| Standardized Measure of Discounted Future Net Cash Flows | $ | 1,137,364,848 | ||
Update on Sales Process for Delaware Basin Assets
As previously announced, Ring launched a sales process during 2021 to divest of its Delaware Basin assets. The Company will provide further updates as definitive information is known. Ring anticipates using the net proceeds from the potential sale of its Delaware Basin assets to further reduce its debt.
Conference Call Information
Ring will hold a conference call on Thursday, March 17, 2022 at 11:00 a.m. ET to discuss its fourth quarter and full year 2021 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 Year End 2021 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, 2021, 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, | ||||||||||||||||
| 2021 | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||
| Oil and Natural Gas Revenues | $ | 59,667,156 | $ | 49,376,176 | $ | 31,351,673 | $ | 196,305,966 | $ | 113,025,138 | ||||||||||
| Costs and Operating Expenses | ||||||||||||||||||||
| Lease operating expenses | 7,678,140 | 6,983,196 | 7,866,057 | 30,312,399 | 29,753,414 | |||||||||||||||
| Gathering, transportation and processing costs | 1,449,884 | 1,051,163 | 1,256,282 | 4,333,232 | 4,090,238 | |||||||||||||||
| Ad valorem taxes | 131,663 | 703,774 | 717,766 | 2,276,463 | 3,125,221 | |||||||||||||||
| Oil and natural gas production taxes | 2,831,560 | 2,240,759 | 1,497,044 | 9,123,420 | 5,228,090 | |||||||||||||||
| Depreciation, depletion and amortization | 10,474,159 | 9,310,524 | 11,162,567 | 37,167,967 | 43,010,660 | |||||||||||||||
| Ceiling test impairment | - | - | 129,564,000 | - | 277,501,943 | |||||||||||||||
| Asset retirement obligation accretion | 183,383 | 182,905 | 212,503 | 744,045 | 906,616 | |||||||||||||||
| Operating lease expense | 83,591 | 83,589 | 319,483 | 523,487 | 1,196,372 | |||||||||||||||
| General and administrative expense (including share-based compensation) | 4,964,711 | 4,433,251 | 7,164,619 | 16,068,105 | 16,874,050 | |||||||||||||||
| Total Costs and Operating Expenses | 27,797,091 | 24,989,161 | 159,760,321 | 100,549,118 | 381,686,604 | |||||||||||||||
| Income (Loss) from Operations | 31,870,065 | 24,387,015 | (128,408,648 | ) | 95,756,848 | (268,661,466 | ) | |||||||||||||
| Other Income (Expense) | ||||||||||||||||||||
| Interest income | - | - | 1 | 1 | 8 | |||||||||||||||
| Interest (expense) | (3,542,514 | ) | (3,551,462 | ) | (4,658,826 | ) | (14,490,474 | ) | (17,617,614 | ) | ||||||||||
| (Loss) gain on derivative contracts | (4,266,942 | ) | (6,720,320 | ) | (11,534,699 | ) | (77,853,141 | ) | 21,366,068 | |||||||||||
| Deposit forfeiture income | - | - | 5,500,000 | - | 5,500,000 | |||||||||||||||
| Net Other (Expense) Income | (7,809,456 | ) | (10,271,782 | ) | (10,693,524 | ) | (92,343,614 | ) | 9,248,462 | |||||||||||
| Income (Loss) Before Tax Provision | 24,060,609 | 14,115,233 | (139,102,172 | ) | 3,413,234 | (259,413,004 | ) | |||||||||||||
| (Provision for) Benefit From Income Taxes | 51,601 | 48,701 | (21,152,105 | ) | (90,342 | ) | 6,001,176 | |||||||||||||
| Net Income (Loss) | $ | 24,112,210 | $ | 14,163,934 | $ | (160,254,277 | ) | $ | 3,322,892 | $ | (253,411,828 | ) | ||||||||
| Basic (Loss) Earnings per Share | $ | 0.24 | $ | 0.14 | $ | (1.83 | ) | $ | 0.03 | $ | (3.48 | ) | ||||||||
| Diluted (Loss) Earnings per Share | $ | 0.20 | $ | 0.12 | $ | (1.83 | ) | $ | 0.03 | $ | (3.48 | ) | ||||||||
| Basic Weighted-Average Shares Outstanding | 99,789,095 | 99,358,504 | 87,503,079 | 99,387,028 | 72,891,310 | |||||||||||||||
| Diluted Weighted-Average Shares Outstanding | 123,297,240 | 121,220,748 | 87,503,079 | 121,193,175 | 72,891,310 | |||||||||||||||
| RING ENERGY, INC. | ||||||||||||||||||||
| Condensed Operating Data | ||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||
| Three Months Ended | Twelve Months Ended | |||||||||||||||||||
| December 31, | September 30, | December 31, | December 31, | December 31, | ||||||||||||||||
| 2021 | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||
| Net sales volumes: | ||||||||||||||||||||
| Oil (Bbls) | 715,163 | 659,247 | 734,548 | 2,686,939 | 2,801,528 | |||||||||||||||
| Natural gas (Mcf) | 761,682 | 594,841 | 730,337 | 2,535,188 | 2,494,502 | |||||||||||||||
| Total oil and natural gas (Boe) (1) | 842,110 | 758,387 | 856,271 | 3,109,470 | 3,217,278 | |||||||||||||||
| % Oil | 85 | % | 87 | % | 86 | % | 86 | % | 87 | % | ||||||||||
| Average daily equivalent sales (Boe/d) | 9,153 | 8,243 | 9,307 | 8,519 | 8,790 | |||||||||||||||
| Average realized sales prices: | ||||||||||||||||||||
| Oil ($/Bbl) | $ | 76.35 | $ | 69.61 | $ | 40.48 | $ | 67.56 | $ | 38.95 | ||||||||||
| Natural gas ($/Mcf) | 6.65 | 5.86 | 2.21 | 5.83 | 1.57 | |||||||||||||||
| Barrel of oil equivalent ($/Boe) | $ | 70.85 | $ | 65.11 | $ | 36.61 | $ | 63.13 | $ | 35.13 | ||||||||||
| Average costs and expenses per Boe ($/Boe): | ||||||||||||||||||||
| Lease operating expenses | $ | 9.12 | $ | 9.21 | $ | 9.19 | $ | 9.75 | $ | 9.25 | ||||||||||
| Gathering, transportation and processing costs | 1.72 | 1.39 | 1.47 | 1.39 | 1.27 | |||||||||||||||
| Ad valorem taxes | 0.16 | 0.93 | 0.84 | 0.73 | 0.97 | |||||||||||||||
| Oil and natural gas production taxes | 3.36 | 2.95 | 1.75 | 2.93 | 1.63 | |||||||||||||||
| Depreciation, depletion and amortization | 12.44 | 12.28 | 13.04 | 11.95 | 13.37 | |||||||||||||||
| Asset retirement obligation accretion | 0.22 | 0.24 | 0.25 | 0.24 | 0.28 | |||||||||||||||
| Operating lease expense | 0.10 | 0.11 | 0.37 | 0.17 | 0.37 | |||||||||||||||
| General and administrative expense (including share-based compensation) | 5.90 | 5.85 | 8.37 | 5.17 | 5.24 | |||||||||||||||
| General and administrative expense (excluding share-based compensation) | 4.79 | 4.82 | 5.09 | 4.39 | 3.58 | |||||||||||||||
| (1) 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 and natural gas may differ significantly. | ||||||||||||||||||||
| RING ENERGY, INC. | ||||||||
| Condensed Balance Sheets | ||||||||
| December 31, | December 31, | |||||||
| 2021 | 2020 | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | 2,408,316 | $ | 3,578,634 | ||||
| Accounts receivable | 24,026,807 | 14,997,979 | ||||||
| Joint interest billing receivable | 2,433,811 | 1,327,262 | ||||||
| Derivative receivable | - | 499,906 | ||||||
| Prepaid expenses and retainers | 938,029 | 396,109 | ||||||
| Total Current Assets | 29,806,963 | 20,799,890 | ||||||
| Properties and Equipment | ||||||||
| Oil and natural gas properties, full cost method | 883,844,745 | 836,514,815 | ||||||
| Financing lease asset subject to depreciation | 1,422,487 | 858,513 | ||||||
| Fixed assets subject to depreciation | 2,089,722 | 1,520,890 | ||||||
| Total Properties and Equipment | 887,356,954 | 838,894,218 | ||||||
| Accumulated depreciation, depletion and amortization | (235,997,307 | ) | (200,111,658 | ) | ||||
| Net Properties and Equipment | 651,359,647 | 638,782,560 | ||||||
| Operating lease asset | 1,277,253 | 1,494,399 | ||||||
| Deferred financing costs | 1,713,466 | 2,379,348 | ||||||
| TOTAL ASSETS | $ | 684,157,329 | $ | 663,456,197 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ | 46,233,452 | $ | 32,500,081 | ||||
| Financing lease liability | 316,514 | 295,311 | ||||||
| Operating lease liability | 290,766 | 859,017 | ||||||
| Derivative liabilities | 29,241,588 | 3,287,328 | ||||||
| Notes payable | 586,410 | - | ||||||
| Total Current Liabilities | 76,668,730 | 36,941,737 | ||||||
| Deferred income taxes | 90,292 | - | ||||||
| Revolving line of credit | 290,000,000 | 313,000,000 | ||||||
| Financing lease liability, less current portion | 343,727 | 126,857 | ||||||
| Operating lease liability, less current portion | 1,138,319 | 635,382 | ||||||
| Derivative liabilities | - | 869,273 | ||||||
| Asset retirement obligations | 15,292,054 | 17,117,135 | ||||||
| Total Liabilities | 383,533,122 | 368,690,384 | ||||||
| Stockholders' Equity | ||||||||
| Preferred stock - | - | - | ||||||
| Common stock - | 100,193 | 85,568 | ||||||
| Additional paid-in capital | 553,472,292 | 550,951,415 | ||||||
| Accumulated deficit | (252,948,278 | ) | (256,271,170 | ) | ||||
| Total Stockholders' Equity | 300,624,207 | 294,765,813 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 684,157,329 | $ | 663,456,197 | ||||
| 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, | |||||||||||||||||
| 2021 | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||
| Cash Flows From Operating Activities | |||||||||||||||||||||
| Net income (loss) | $ | 24,112,210 | $ | 14,163,934 | $ | (160,254,277 | ) | $ | 3,322,892 | $ | (253,411,828 | ) | |||||||||
| Adjustments to reconcile net (loss) income to net cash provided by operating activities: | |||||||||||||||||||||
| Depreciation, depletion and amortization | 10,474,159 | 9,310,524 | 11,162,567 | 37,167,967 | 43,010,660 | ||||||||||||||||
| Ceiling test impairment | - | - | 129,564,000 | - | 277,501,943 | ||||||||||||||||
| Asset retirement obligation accretion | 183,383 | 182,905 | 212,503 | 744,045 | 906,616 | ||||||||||||||||
| Amortization of deferred financing costs | 169,349 | 166,282 | 622,861 | 665,882 | 1,190,109 | ||||||||||||||||
| Share-based compensation | 933,593 | 777,461 | 2,807,006 | 2,418,323 | 5,364,162 | ||||||||||||||||
| Shares issued for services | - | - | 23,800 | - | 23,800 | ||||||||||||||||
| Deferred income tax (benefit) expense | 123,536 | 1,886,118 | 21,598,750 | 265,479 | (3,975,170 | ) | |||||||||||||||
| Excess tax expense (benefit) related to share-based compensation | (175,187 | ) | (1,934,819 | ) | (446,645 | ) | (175,187 | ) | (2,026,006 | ) | |||||||||||
| (Gain) loss on derivative contracts | 4,266,942 | 6,720,320 | 11,534,699 | 77,853,141 | (21,366,068 | ) | |||||||||||||||
| Cash (paid) received for derivative settlements, net | (19,490,022 | ) | (14,921,008 | ) | 3,708,523 | (52,768,154 | ) | 22,522,591 | |||||||||||||
| Changes in assets and liabilities: | |||||||||||||||||||||
| Accounts receivable | (4,466,561 | ) | 1,656,229 | (1,970,509 | ) | (9,483,639 | ) | 7,896,517 | |||||||||||||
| Prepaid expenses and retainers | 360,772 | 278,870 | 102,501 | (541,920 | ) | 3,586,146 | |||||||||||||||
| Accounts payable | 7,119,652 | (329,555 | ) | 8,845,188 | 15,449,215 | (8,380,594 | ) | ||||||||||||||
| Settlement of asset retirement obligation | (404,053 | ) | (444,502 | ) | (255,018 | ) | (2,186,832 | ) | (683,623 | ) | |||||||||||
| Net Cash Provided by Operating Activities | 23,207,773 | 17,512,759 | 27,255,949 | 72,731,212 | 72,159,255 | ||||||||||||||||
| Cash Flows From Investing Activities | |||||||||||||||||||||
| Payments to purchase oil and natural gas properties | (789,281 | ) | (141,468 | ) | (127,880 | ) | (1,368,437 | ) | (1,317,313 | ) | |||||||||||
| Payments to develop oil and natural gas properties | (16,621,196 | ) | (11,957,917 | ) | (8,871,408 | ) | (51,302,131 | ) | (42,457,745 | ) | |||||||||||
| Payments to acquire or improve fixed assets | 40,801 | (548,730 | ) | (55,339 | ) | (568,832 | ) | (55,339 | ) | ||||||||||||
| Proceeds from divestiture of oil and natural gas properties | - | - | (4,500,000 | ) | 2,000,000 | - | |||||||||||||||
| Net Cash (Used in) Investing Activities | (17,369,676 | ) | (12,648,115 | ) | (13,554,627 | ) | (51,239,400 | ) | (43,830,397 | ) | |||||||||||
| Cash Flows From Financing Activities | |||||||||||||||||||||
| Proceeds from revolving line of credit | 25,750,000 | 14,500,000 | 5,000,000 | 60,150,000 | 26,500,000 | ||||||||||||||||
| Payments on revolving line of credit | (30,750,000 | ) | (20,000,000 | ) | (52,000,000 | ) | (83,150,000 | ) | (80,000,000 | ) | |||||||||||
| Proceeds from issuance of common stock and warrants | 126,240 | - | 19,383,131 | 367,509 | 19,383,131 | ||||||||||||||||
| Proceeds from option exercise | 200,000 | - | - | 200,000 | - | ||||||||||||||||
| Payments for taxes wihheld on vested restricted shares | (385,330 | ) | - | - | (385,330 | ) | - | ||||||||||||||
| Proceeds from notes payable | 64,580 | 323,671 | - | 1,297,718 | - | ||||||||||||||||
| Payments on notes payable | (335,321 | ) | (224,670 | ) | - | (711,308 | ) | - | |||||||||||||
| Payment of deferred financing costs | (27,931 | ) | - | (355,049 | ) | (104,818 | ) | (355,049 | ) | ||||||||||||
| Reduction of financing lease liabilities | (118,965 | ) | (86,941 | ) | (71,587 | ) | (325,901 | ) | (282,928 | ) | |||||||||||
| Net Cash (Used in) Financing Activities | (5,476,727 | ) | (5,487,940 | ) | (28,043,505 | ) | (22,662,130 | ) | (34,754,846 | ) | |||||||||||
| Net Change in Cash | 361,370 | (623,296 | ) | (14,342,183 | ) | (1,170,318 | ) | (6,425,988 | ) | ||||||||||||
| Cash at Beginning of Period | 2,046,946 | 2,670,242 | 17,920,817 | 3,578,634 | 10,004,622 | ||||||||||||||||
| Cash at End of Period | $ | 2,408,316 | $ | 2,046,946 | $ | 3,578,634 | $ | 2,408,316 | $ | 3,578,634 | |||||||||||
| RING ENERGY, INC. | |||||
| Financial Commodity Derivative Positions | |||||
| As of March 16, 2022 | |||||
| Average | Weighted Avg. | ||||
| Date Entered Into | Production Period | Instrument | Daily Volumes | Swap Price | |
| Crude Oil - WTI | (Bbls) | (per Bbl) | |||
| 12/04/2020 | Calendar year 2022 | Swaps | 500 | ||
| 12/07/2020 | Calendar year 2022 | Swaps | 500 | ||
| 12/10/2020 | Calendar year 2022 | Swaps | 500 | ||
| 12/17/2020 | Calendar year 2022 | Swaps | 250 | ||
| 01/04/2021 | Calendar year 2022 | Swaps | 250 | ||
| 02/04/2021 | Calendar year 2022 | Swaps | 250 | ||
| 05/11/2021 | Calendar year 2022 | Swaps | 879(1) | ||
| 02/01/2022 | Balance of calendar year 2022 | Swaps | 1,000 | ||
| (1) The notional quantity per the swap contract entered into on May 11, 2021 is for 26,750 barrels of oil per month. The 879 represents the daily amount on an annual basis. | |||||
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 for All Periods) | |||||||||||||||||||||
| Three Months Ended | Twelve Months Ended | ||||||||||||||||||||
| December 31, | September 30, | December 31, | December 31, | December 31, | |||||||||||||||||
| 2021 | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||
| Net Income (Loss) | $ | 24,112,210 | $ | 14,163,934 | $ | (160,254,277 | ) | $ | 3,322,892 | $ | (253,411,828 | ) | |||||||||
| Share-based compensation | 933,593 | 777,461 | 2,807,006 | 2,418,323 | 5,364,162 | ||||||||||||||||
| Ceiling test impairment | - | - | 129,564,000 | - | 277,501,943 | ||||||||||||||||
| Unrealized loss (gain) on change in fair value of derivatives | (15,223,080 | ) | (8,200,688 | ) | 15,243,222 | 25,084,987 | 1,156,523 | ||||||||||||||
| Tax impact of adjusted items | 30,646 | 25,612 | 19,126,056 | (225,432 | ) | (9,915,293 | ) | ||||||||||||||
| Adjusted Net Income | $ | 9,853,369 | $ | 6,766,319 | $ | 6,486,007 | $ | 30,600,770 | $ | 20,695,507 | |||||||||||
| Weighted-Average Shares Outstanding | 99,789,095 | 99,358,504 | 87,503,079 | 99,387,028 | 72,891,310 | ||||||||||||||||
| Adjusted Net Income per Share | $ | 0.10 | $ | 0.07 | $ | 0.07 | $ | 0.31 | $ | 0.28 | |||||||||||
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, | ||||||||||||||||
| 2021 | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||
| Net Income (Loss) | $ | 24,112,210 | $ | 14,163,934 | $ | (160,254,277 | ) | $ | 3,322,892 | $ | (253,411,828 | ) | ||||||||
| Interest expense, net | 3,542,514 | 3,551,462 | 4,658,825 | 14,490,473 | 17,617,606 | |||||||||||||||
| Unrealized loss (gain) on change in fair value of derivatives | (15,223,080 | ) | (8,200,688 | ) | 15,243,222 | 25,084,987 | 1,156,523 | |||||||||||||
| Ceiling test impairment | - | - | 129,564,000 | - | 277,501,943 | |||||||||||||||
| Income tax (benefit) expense | (51,601 | ) | (48,701 | ) | 21,152,105 | 90,342 | (6,001,176 | ) | ||||||||||||
| Depreciation, depletion and amortization | 10,474,159 | 9,310,524 | 11,162,567 | 37,167,967 | 43,010,660 | |||||||||||||||
| Asset retirement obligation accretion | 183,383 | 182,905 | 212,503 | 744,045 | 906,616 | |||||||||||||||
| Share-based compensation | 933,593 | 777,461 | 2,807,006 | 2,418,323 | 5,364,162 | |||||||||||||||
| Adjusted EBITDA | $ | 23,971,178 | $ | 19,736,897 | $ | 24,545,951 | $ | 83,319,029 | $ | 86,144,506 | ||||||||||
| Adjusted EBITDA Margin | 40 | % | 40 | % | 78 | % | 42 | % | 76 | % | ||||||||||
| Weighted-Average Shares Outstanding | 99,789,095 | 99,358,504 | 87,503,079 | 99,387,028 | 72,891,310 | |||||||||||||||
| Adjusted EBITDA per Boe | $ | 28.47 | $ | 26.02 | $ | 28.67 | $ | 26.80 | $ | 26.78 | ||||||||||
| Adjusted EBITDA per Share | $ | 0.24 | $ | 0.20 | $ | 0.28 | $ | 0.84 | $ | 1.18 | ||||||||||
| (Unaudited for All Periods) | ||||||||||||||||||||
| Three Months Ended | Twelve Months Ended | |||||||||||||||||||
| December 31, | September 30, | December 31, | December 31, | December 31, | ||||||||||||||||
| 2021 | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||
| Adjusted EBITDA | $ | 23,971,178 | $ | 19,736,897 | $ | 24,545,951 | $ | 83,319,029 | $ | 86,144,506 | ||||||||||
| Net interest expense (excluding amortization of deferred financing costs) | (3,373,165 | ) | (3,385,180 | ) | (4,035,964 | ) | (13,824,591 | ) | (16,427,497 | ) | ||||||||||
| Capital expenditures | (11,292,707 | ) | (13,720,336 | ) | (7,814,361 | ) | (50,994,541 | ) | (29,916,746 | ) | ||||||||||
| Proceeds from divestiture of oil and natural gas properties | - | - | - | 2,000,000 | - | |||||||||||||||
| Free Cash Flow | $ | 9,305,306 | $ | 2,631,381 | $ | 12,695,626 | $ | 20,499,897 | $ | 39,800,263 | ||||||||||
| (Unaudited for All Periods) | ||||||||||||||||||||
| Three Months Ended | Twelve Months Ended | |||||||||||||||||||
| December 31, | September 30, | December 31, | December 31, | December 31, | ||||||||||||||||
| 2021 | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||
| Net Cash Provided by Operating Activities | $ | 23,207,773 | $ | 17,512,759 | $ | 27,255,949 | $ | 72,731,212 | $ | 72,159,255 | ||||||||||
| Changes in operating assets and liabilities | (2,609,810 | ) | (1,161,042 | ) | (6,722,162 | ) | (3,236,824 | ) | (2,418,446 | ) | ||||||||||
| Cash Flow from Operations | $ | 20,597,963 | $ | 16,351,717 | $ | 20,533,787 | $ | 69,494,388 | $ | 69,740,809 | ||||||||||
FAQ
What were Ring Energy's sales volumes for Q4 2021?
How much did Ring Energy earn in net income for the full year 2021?
What is Ring Energy's capital spending plan for 2022?
How much debt did Ring Energy reduce in 2021?
What is the production guidance for Ring Energy in 2022?
