Ring Energy Announces Results For Second Quarter of 2022
Ring Energy reported record operational and financial results for Q2 2022, with sales revenue hitting $85.0 million, up 25% from Q1 2022. The company produced 9,341 Boe/d, exceeding guidance and achieving a net income of $41.9 million, up from $7.1 million in Q1. Adjusted EBITDA rose 33% to $47.4 million. Additionally, liquidity increased by 32% to $81.5 million, while debt was reduced by $10 million. Ring also provided upbeat guidance for Q3 and full-year sales volumes, anticipating 9,300 to 9,700 Boe/d for 2022.
- Sales revenue increased to $85.0 million, highest in company history.
- Net income rose to $41.9 million, a six-fold increase from Q1 2022.
- Adjusted EBITDA grew 33% to $47.4 million, highest quarterly figure to date.
- Liquidity increased by 32% to $81.5 million.
- Debt reduced by $10 million, lowering leverage ratio to 2.1x.
- Free cash flow decreased to $2.5 million from $12.6 million in Q1 2022.
- Overall capital expenditures were $41.8 million, potentially impacting cash reserves.
Sales Volumes at Higher End of Guidance Driving Increased Guidance for the Full Year
THE WOODLANDS, Texas, Aug. 04, 2022 (GLOBE NEWSWIRE) -- Ring Energy, Inc. (NYSE American: REI) (“Ring” or the “Company”) today reported operational and financial results for the second quarter of 2022. In addition, Ring provided third quarter guidance and increased its full year 2022 sales volumes outlook.
Second Quarter 2022 Highlights
- Recorded quarterly sales revenue of
$85.0 million , which was the highest in the Company’s history; - Produced sales volumes of 9,341 barrels of oil equivalent per day (“Boe/d”) (
86% oil) were5% higher than the first quarter of 2022 and at the higher end of Ring’s guidance range of 9,000 to 9,400 Boe/d (86% oil); - Increased Net Income nearly six-fold to
$41.9 million , or$0.32 per diluted share, from$7.1 million , or$0.06 per diluted share, for the first quarter of 2022; - Reported Adjusted Net Income1 of
$31.3 million , or$0.29 per share, which was a40% increase from$22.3 million , or$0.22 per share, in the first quarter of 2022; - Increased Adjusted EBITDA1 by
33% to$47.4 million from$35.6 million for the first quarter of 2022;- Represents the highest level of quarterly Adjusted EBITDA in the Company’s history:
- Adjusted EBITDA was
$82.9 million in first half of 2022, which was nearly equal to the$83.3 million generated in full year 2021;
- Generated Cash Flow from Operations1 of
$44.3 million and Free Cash Flow1 of$2.5 million ; - Paid down
$10.0 million of debt on the Company’s revolving credit facility;- Reduced the debt to trailing 12-month Adjusted EBITDA (”Leverage”) ratio to 2.1x compared to 3.5x at year end 2021;
- Increased liquidity to
$81.5 million , a32% increase from year-end 2021;
- Drilled nine wells, placed on production seven wells (two of which were drilled in first quarter), and began the completion process on four wells – all on the Company’s Northwest Shelf (“NWS”) acreage;
- Converted four wells (three in the NWS and one in the Central Basin Platform (“CBP”)) from downhole electrical submersible pumps to rod pumps (“CTRs”), thereby reducing costly workovers and long-term operating costs; and
- Provided third quarter guidance and an improved outlook for full year sales volumes and operating costs, while leaving capital spending guidance unchanged.
Subsequent Events
On July 5, 2022, the Company announced it had entered into an agreement to acquire (the “Transaction”) the assets of privately-held Stronghold Energy II Operating, LLC and Stronghold Energy II Royalties, LP (collectively, “Stronghold”). Stronghold’s operations are focused on the development of approximately 37,000 net acres in the Permian Basin’s CBP, where Ring also conducts operations. The effective date of the Transaction is June 1, 2022 and closing is anticipated during the third quarter. As a result, the impact from the Transaction will not be included in Ring’s financial and operational results until following the closing of the transaction.
Management Commentary
Mr. Paul D. McKinney, Chairman of the Board and Chief Executive Officer, commented, “The continued strong performance of our drilling and completions program, bolstered by significantly higher commodity prices, enhanced our second quarter results and led to record quarterly revenue and Adjusted EBITDA. Adjusted EBITDA increased
Mr. McKinney continued, “During the second quarter, our development program was focused on our NWS acreage on which we drilled nine wells, completed and placed on production seven wells, and initiated the completion of four additional wells. I am pleased to report that our production results from the wells brought online in the second quarter have met or exceeded our expectations, and we will continue to leverage industry-leading drilling and completion technologies that best exploit the unique geologic opportunities afforded by our attractive acreage. We intend to drill seven to nine wells and complete eight to ten wells during the third quarter and have increased our full year sales volumes guidance to reflect the enhanced performance of our capital spending program.”
Mr. McKinney concluded, “In the coming weeks, we look forward to completing the Stronghold acquisition and providing additional details regarding our combined outlook. The Transaction strategically enhances our size and scale, complements our existing operations, materially grows our long-term inventory of high rate-of-return projects, and is immediately accretive on all key metrics. The credit facility will provide new benefits to our stockholders, including the ability to pay dividends and buy back stock in the future under certain conditions. The Ring team has extensive experience operating these types of stacked-pay, multi-zone assets and consider this opportunity as ‘going home to our roots’. Through the acquisition, we expect to nearly double production, reserves and projected Free Cash Flow, lower our lifting costs, and optimize our future capital spending program. The result will be an enhanced financial position that accelerates our ability to pay down debt, which will benefit our stockholders and allow Ring to more effectively and profitably grow our business.”
Financial Overview: For the second quarter of 2022, the Company reported net income of
Adjusted EBITDA grew by
Free Cash Flow was
Adjusted Net Income, Adjusted EBITDA, Cash Flow from Operations, 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 second quarter of 2022 were 9,341 Boe/d (
For the second quarter of 2022, 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 second quarter of 2022, Ring recorded a net loss of
The Company does not have any hedges in place on its natural gas production. To date in 2022, the Company added the following crude oil derivative positions (through August 4, 2022):
| Average | Weighted Avg. | Strike | Deferred | Put | Call | ||||||||
| Date Entered Into | Production Period | Instrument | Daily Volumes | Swap Price | Price | Premium | Price | Price | |||||
| Crude Oil - WTI | (Bbls) | (per Bbl) | |||||||||||
| 02/01/2022 | 02/01/2022 - 12/31/2022 | Swaps | 1,000 | ||||||||||
| 06/28/2022 | 07/01/2022 - 09/30/2022 | Put Options | 1,000 | ||||||||||
| 06/28/2022 | 10/01/2022 - 12/31/2022 | Put Options | 1,000 | ||||||||||
| 06/28/2022 | 01/01/2023 - 03/31/2023 | Put Options | 1,000 | ||||||||||
| 06/28/2022 | 04/01/2023 - 06/30/2023 | Put Options | 1,000 | ||||||||||
| 06/28/2022 | 07/01/2023 - 09/30/2023 | Put Options | 1,000 | ||||||||||
| 06/28/2022 | 10/01/2023 - 12/31/2023 | Put Options | 1,000 | ||||||||||
| 06/29/2022 | 01/01/2023 - 03/31/2023 | Put Options | 500 | ||||||||||
| 06/29/2022 | 04/01/2023 - 06/30/2023 | Put Options | 500 | ||||||||||
| 06/29/2022 | 07/01/2023 - 09/30/2023 | Put Options | 500 | ||||||||||
| 06/29/2022 | 10/01/2023 - 12/31/2023 | Put Options | 500 | ||||||||||
| 06/29/2022 | 01/01/2024 - 03/31/2024 | Put Options | 500 | ||||||||||
| 06/29/2022 | 04/01/2024 - 06/30/2024 | Put Options | 500 | ||||||||||
| 07/01/2022 | 01/01/2023 - 03/31/2023 | Put Options | 1,000 | ||||||||||
| 07/01/2022 | 04/01/2023 - 06/30/2023 | Put Options | 1,000 | ||||||||||
| 07/08/2022 | 07/01/2022 - 09/30/2022 | Put Options | 500 | ||||||||||
| 07/08/2022 | 10/01/2022 - 12/31/2022 | Put Options | 500 | ||||||||||
| 07/08/2022 | 01/01/2023 - 03/31/2023 | Put Options | 500 | ||||||||||
| 07/25/2022 | 01/01/2024 - 03/31/2024 | Collars | 1,000 | ||||||||||
| 07/25/2022 | 04/01/2024 - 06/30/2024 | Collars | 1,000 | ||||||||||
| 07/25/2022 | 07/01/2024 - 09/30/2024 | Collars | 1,000 | ||||||||||
A full listing of the Company’s current outstanding crude oil derivative positions is included in the tables shown later in this release.
Income Tax: The Company recorded a non-cash income tax provision of
Balance Sheet and Liquidity: Total liquidity at the end of the second quarter of 2022 was
In early April 2022, a total of 6.5 million of the Company’s common warrants were exercised at a price of
Capital Expenditures: During the second quarter of 2022, capital expenditures on an accrual basis were
2022 Capital Investment, Sales Volumes, and Operating Expense Guidance
For full year 2022, excluding the impact of the pending Stronghold acquisition, Ring reiterates its previous standalone outlook of total capital spending in the range of
82% for drilling, completion, and related equipment and facilities;13% for CTRs, recompletions and capital workovers; and5% 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. All 2022 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. The combination of anticipated growth in Adjusted EBITDA resulting from higher prices and growth in sales volumes, along with planned further debt reduction, is expected to significantly reduce Ring’s leverage ratio by year-end 2022.
Supported by the success of its targeted development program and continued focus on operational excellence, the Company has increased its full year 2022 sales volumes forecast to 9,300 to 9,700 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 third quarter of 2022. Guidance could be affected by the factors discussed below in the "Safe Harbor Statement" section.
| Full Year | Q3 | ||
| 2022 | 2022 | ||
| Sales Volumes: | |||
| Total (Boe/d) | 9,300 - 9,700 | 9,500 - 9,900 | |
| Oil (Bo/d) | 8,000 - 8,400 | 8,200 - 8,600 | |
| Capital Program: | |||
| Capital spending(1) (millions) | |||
| Number of new wells drilled | 25 - 33 | 7 - 9 | |
| Number of new wells completed and online | 25 - 30 | 8 - 10 | |
| Operating Expenses: | |||
| LOE (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, contractural drilling obligations and non-operated drilling, completion and capital workovers. | |||
Investor Conference Participation
The Company will be participating in EnerCom Denver in Denver, Colorado where Chairman and Chief Executive Officer Paul McKinney is scheduled to make a presentation on Monday, August 8, 2022 at 1:55 pm Mountain Time.
Senior management will also host one-on-one meetings with investors. The presentation will be webcast live and archived on Ring’s website, www.ringenergy.com, in the “Investors” section. An updated investor slide deck will be posted in the “Investors” section of Ring’s website under “Presentations” by Monday, August 8, 2022.
Conference Call Information
Ring will hold a conference call on Friday, August 5, 2022 at 11:00 a.m. Eastern Time to discuss its second quarter 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 Second Quarter 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, 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 | Six Months Ended | |||||||||||||||||||
| June 30, | March 31, | June 30, | June 30, | |||||||||||||||||
| 2022 | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||
| Oil and Natural Gas Revenues | $ | 84,961,875 | $ | 68,181,032 | $ | 47,760,102 | $ | 153,142,907 | $ | 87,262,634 | ||||||||||
| Costs and Operating Expenses | ||||||||||||||||||||
| Lease operating expenses | 8,301,443 | 8,953,165 | 7,424,488 | 17,254,608 | 15,651,063 | |||||||||||||||
| Gathering, transportation and processing costs | 549,389 | 1,296,858 | 897,166 | 1,846,247 | 1,832,185 | |||||||||||||||
| Ad valorem taxes | 949,239 | 951,954 | 703,775 | 1,901,193 | 1,441,026 | |||||||||||||||
| Oil and natural gas production taxes | 4,157,457 | 3,218,362 | 2,198,339 | 7,375,819 | 4,051,101 | |||||||||||||||
| Depreciation, depletion and amortization | 10,749,204 | 9,781,287 | 9,275,126 | 20,530,491 | 17,383,284 | |||||||||||||||
| Asset retirement obligation accretion | 186,303 | 188,242 | 184,013 | 374,545 | 377,757 | |||||||||||||||
| Operating lease expense | 83,590 | 83,590 | 84,790 | 167,180 | 356,307 | |||||||||||||||
| General and administrative expense (including share-based compensation) | 5,832,302 | 5,522,277 | 3,757,152 | 11,354,579 | 6,670,143 | |||||||||||||||
| Total Costs and Operating Expenses | 30,808,927 | 29,995,735 | 24,524,849 | 60,804,662 | 47,762,866 | |||||||||||||||
| Income from Operations | 54,152,948 | 38,185,297 | 23,235,253 | 92,338,245 | 39,499,768 | |||||||||||||||
| Other Income (Expense) | ||||||||||||||||||||
| Interest income | - | - | 1 | - | 1 | |||||||||||||||
| Interest expense | (3,279,299 | ) | (3,398,361 | ) | (3,654,529 | ) | (6,677,660 | ) | (7,396,498 | ) | ||||||||||
| Loss on derivative contracts | (7,457,018 | ) | (27,596,141 | ) | (35,277,240 | ) | (35,053,159 | ) | (66,865,879 | ) | ||||||||||
| Net Other Expense | (10,736,317 | ) | (30,994,502 | ) | (38,931,768 | ) | (41,730,819 | ) | (74,262,376 | ) | ||||||||||
| Income (Loss) Before Provision for Income Taxes | 43,416,631 | 7,190,795 | (15,696,515 | ) | 50,607,426 | (34,762,608 | ) | |||||||||||||
| (Provision For) Benefit From Income Taxes | (1,472,209 | ) | (78,752 | ) | (190,644 | ) | (1,550,961 | ) | (190,644 | ) | ||||||||||
| Net Income (Loss) | $ | 41,944,422 | $ | 7,112,043 | $ | (15,887,159 | ) | $ | 49,056,465 | $ | (34,953,252 | ) | ||||||||
| Basic Earnings (Loss) per Share | $ | 0.39 | $ | 0.07 | $ | (0.16 | ) | $ | 0.47 | $ | (0.35 | ) | ||||||||
| Diluted Earnings (Loss) per Share | $ | 0.32 | $ | 0.06 | $ | (0.16 | ) | $ | 0.39 | $ | (0.35 | ) | ||||||||
| Basic Weighted-Average Shares Outstanding | 106,390,776 | 100,192,562 | 99,300,458 | 103,291,669 | 99,197,160 | |||||||||||||||
| Diluted Weighted-Average Shares Outstanding | 130,597,589 | 124,004,178 | 99,300,458 | 126,251,705 | 99,197,160 | |||||||||||||||
| RING ENERGY, INC. | ||||||||||||||||||||
| Condensed Operating Data | ||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||||||
| June 30, | March 31, | June 30, | June 30, | |||||||||||||||||
| 2022 | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||
| Net sales volumes: | ||||||||||||||||||||
| Oil (Bbls) | 729,484 | 676,215 | 702,408 | 1,405,699 | 1,312,529 (2) | |||||||||||||||
| Natural gas (Mcf) | 723,196 | 732,283 | 540,857 | 1,455,479 | 1,178,666 | |||||||||||||||
| Total oil and natural gas (Boe) (1) | 850,017 | 798,262 | 792,551 | 1,648,279 | 1,508,973 | |||||||||||||||
| % Oil | 86 | % | 85 | % | 89 | % | 85 | % | 87 | % | ||||||||||
| Average daily equivalent sales (Boe/d) | 9,341 | 8,870 | 8,709 | 9,107 | 8,337 | |||||||||||||||
| Average realized sales prices: | ||||||||||||||||||||
| Oil ($/Bbl) | $ | 109.24 | $ | 93.80 | $ | 65.00 | $ | 101.81 | $ | 61.74 | ||||||||||
| Natural gas ($/Mcf) | 7.29 | 6.49 | 3.90 | 6.89 | 5.28 | |||||||||||||||
| Barrel of oil equivalent ($/Boe) | $ | 99.95 | $ | 85.41 | $ | 60.26 | $ | 92.91 | $ | 57.83 | ||||||||||
| Average costs and expenses per Boe ($/Boe): | ||||||||||||||||||||
| Lease operating expenses | $ | 9.77 | $ | 11.22 | $ | 9.37 | $ | 10.47 | $ | 10.37 | ||||||||||
| Gathering, transportation and processing costs | 0.65 | 1.62 | 1.13 | 1.12 | 1.21 | |||||||||||||||
| Ad valorem taxes | 1.12 | 1.19 | 0.89 | 1.15 | 0.95 | |||||||||||||||
| Oil and natural gas production taxes | 4.89 | 4.03 | 2.77 | 4.47 | 2.68 | |||||||||||||||
| Depreciation, depletion and amortization | 12.65 | 12.25 | 11.70 | 12.46 | 11.52 | |||||||||||||||
| Asset retirement obligation accretion | 0.22 | 0.24 | 0.23 | 0.23 | 0.25 | |||||||||||||||
| Operating lease expense | 0.10 | 0.10 | 0.11 | 0.10 | 0.24 | |||||||||||||||
| General and administrative expense (including share-based compensation) | 6.86 | 6.92 | 4.74 | 6.89 | 4.42 | |||||||||||||||
| General and administrative expense (excluding share-based compensation) | 4.63 | 5.01 | 4.30 | 4.81 | 3.95 | |||||||||||||||
| (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. | ||||||||||||||||||||
| (2) Includes 379 barrels of skim oil. | ||||||||||||||||||||
| RING ENERGY, INC. | ||||||||
| Balance Sheets | ||||||||
| (Unaudited) | ||||||||
| June 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | 2,223,289 | $ | 2,408,316 | ||||
| Accounts receivable | 39,496,928 | 24,026,807 | ||||||
| Joint interest billing receivable | 1,350,134 | 2,433,811 | ||||||
| Derivative assets | 1,353,196 | - | ||||||
| Prepaid expenses and other assets | 3,205,746 | 938,029 | ||||||
| Total Current Assets | 47,629,293 | 29,806,963 | ||||||
| Properties and Equipment | ||||||||
| Oil and natural gas properties subject to amortization | 945,521,085 | 883,844,745 | ||||||
| Financing lease asset subject to depreciation | 2,067,375 | 1,422,487 | ||||||
| Fixed assets subject to depreciation | 2,044,709 | 2,089,722 | ||||||
| Total Properties and Equipment | 949,633,169 | 887,356,954 | ||||||
| Accumulated depreciation, depletion and amortization | (255,274,309 | ) | (235,997,307 | ) | ||||
| Net Properties and Equipment | 694,358,860 | 651,359,647 | ||||||
| Operating lease asset | 1,140,886 | 1,277,253 | ||||||
| Derivative assets | 785,389 | - | ||||||
| Deferred financing costs | 1,324,918 | 1,713,466 | ||||||
| TOTAL ASSETS | $ | 745,239,346 | $ | 684,157,329 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ | 64,262,609 | $ | 46,233,452 | ||||
| Financing lease liability | 407,031 | 316,514 | ||||||
| Operating lease liability | 301,339 | 290,766 | ||||||
| Derivative liabilities | 32,700,566 | 29,241,588 | ||||||
| Notes payable | 894,295 | 586,410 | ||||||
| Total Current Liabilities | 98,565,840 | 76,668,730 | ||||||
| Non-Current Liabilities | ||||||||
| Deferred income taxes | 1,641,253 | 90,292 | ||||||
| Revolving line of credit | 270,000,000 | 290,000,000 | ||||||
| Financing lease liability, less current portion | 667,456 | 343,727 | ||||||
| Operating lease liability, less current portion | 983,995 | 1,138,319 | ||||||
| Asset retirement obligations | 15,373,543 | 15,292,054 | ||||||
| Total Non-Current Liabilities | 288,666,247 | 306,864,392 | ||||||
| Total Liabilities | 387,232,087 | 383,533,122 | ||||||
| Stockholders' Equity | ||||||||
| Preferred stock - | - | - | ||||||
| Common stock - | 107,236 | 100,193 | ||||||
| Additional paid-in capital | 561,791,836 | 553,472,292 | ||||||
| Accumulated deficit | (203,891,813 | ) | (252,948,278 | ) | ||||
| Total Stockholders' Equity | 358,007,259 | 300,624,207 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 745,239,346 | $ | 684,157,329 | ||||
| RING ENERGY, INC. | |||||||||||||||||||||
| Statements of Cash Flows | |||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||
| Three Months Ended | Six Months Ended | ||||||||||||||||||||
| June 30, | March 31, | June 30, | June 30, | ||||||||||||||||||
| 2022 | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||
| Cash Flows From Operating Activities | |||||||||||||||||||||
| Net income (loss) | $ | 41,944,422 | $ | 7,112,043 | $ | (15,887,159 | ) | $ | 49,056,465 | $ | (34,953,252 | ) | |||||||||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||||||||||||||||
| Depreciation, depletion and amortization | 10,749,203 | 9,781,287 | 9,275,126 | 20,530,490 | 17,383,284 | ||||||||||||||||
| Asset retirement obligation accretion | 186,303 | 188,242 | 184,013 | 374,545 | 377,757 | ||||||||||||||||
| Amortization of deferred financing costs | 189,274 | 199,274 | 147,224 | 388,548 | 330,251 | ||||||||||||||||
| Share-based compensation | 1,899,245 | 1,521,910 | 351,775 | 3,421,155 | 707,269 | ||||||||||||||||
| Deferred income tax (benefit) expense | 1,485,022 | 65,939 | 47,967 | 1,550,961 | (1,744,175 | ) | |||||||||||||||
| Excess tax (benefit) expense related to share-based compensation | - | - | 142,677 | - | 1,934,819 | ||||||||||||||||
| Loss on derivative contracts | 7,457,018 | 27,596,141 | 35,277,240 | 35,053,159 | 66,865,879 | ||||||||||||||||
| Cash paid for derivative settlements, net | (19,617,265 | ) | (14,115,501 | ) | (12,436,333 | ) | (33,732,766 | ) | (18,357,124 | ) | |||||||||||
| Changes in assets and liabilities: | |||||||||||||||||||||
| Accounts receivable | (4,315,730 | ) | (10,078,098 | ) | (704,568 | ) | (14,393,828 | ) | (6,673,307 | ) | |||||||||||
| Prepaid expenses and other assets | (2,470,602 | ) | 202,885 | (1,346,762 | ) | (2,267,717 | ) | (1,181,562 | ) | ||||||||||||
| Accounts payable | 4,328,968 | 2,519,011 | 2,365,612 | 6,847,979 | 8,659,118 | ||||||||||||||||
| Settlement of asset retirement obligation | (1,113,208 | ) | (553,368 | ) | (1,093,816 | ) | (1,666,576 | ) | (1,338,277 | ) | |||||||||||
| Net Cash Provided by Operating Activities | 40,722,650 | 24,439,765 | 16,322,996 | 65,162,415 | 32,010,680 | ||||||||||||||||
| Cash Flows From Investing Activities | |||||||||||||||||||||
| Payments to purchase oil and natural gas properties | (383,003 | ) | (360,848 | ) | (178,718 | ) | (743,851 | ) | (437,688 | ) | |||||||||||
| Payments to develop oil and natural gas properties | (35,793,923 | ) | (13,860,249 | ) | (10,824,079 | ) | (49,654,172 | ) | (22,723,018 | ) | |||||||||||
| Purchase of fixed assets subject to depreciation | (81,646 | ) | (10,114 | ) | (41,442 | ) | (91,760 | ) | (60,903 | ) | |||||||||||
| Sale of fixed assets subject to depreciation | 126,100 | 8,500 | - | 134,600 | - | ||||||||||||||||
| Proceeds from divestiture of oil and natural gas properties | 25,066 | - | - | 25,066 | 2,000,000 | ||||||||||||||||
| Net Cash Used in Investing Activities | (36,107,406 | ) | (14,222,711 | ) | (11,044,239 | ) | (50,330,117 | ) | (21,221,609 | ) | |||||||||||
| Cash Flows From Financing Activities | |||||||||||||||||||||
| Proceeds from revolving line of credit | 40,500,000 | 10,000,000 | 6,900,000 | 50,500,000 | 19,900,000 | ||||||||||||||||
| Payments on revolving line of credit | (50,500,000 | ) | (20,000,000 | ) | (11,900,000 | ) | (70,500,000 | ) | (32,400,000 | ) | |||||||||||
| Proceeds from issuance of common stock and warrants | 5,163,126 | - | 80,000 | 5,163,126 | 241,269 | ||||||||||||||||
| Payments to cover tax withholdings | (257,694 | ) | - | - | (257,694 | ) | - | ||||||||||||||
| Proceeds from notes payable | 928,626 | - | 909,467 | 928,626 | 909,467 | ||||||||||||||||
| Payments on notes payable | (253,360 | ) | (367,381 | ) | (151,317 | ) | (620,741 | ) | (151,317 | ) | |||||||||||
| Payment of deferred financing costs | - | - | (76,887 | ) | - | (76,887 | ) | ||||||||||||||
| Reduction of financing lease liabilities | (111,864 | ) | (118,778 | ) | (70,288 | ) | (230,642 | ) | (119,995 | ) | |||||||||||
| Net Cash Used in Investing Activities | (4,531,166 | ) | (10,486,159 | ) | (4,309,025 | ) | (15,017,325 | ) | (11,697,463 | ) | |||||||||||
| Net (Decrease) Increase in Cash | 84,078 | (269,105 | ) | 969,732 | (185,027 | ) | (908,392 | ) | |||||||||||||
| Cash at Beginning of Period | 2,139,211 | 2,408,316 | 1,700,510 | 2,408,316 | 3,578,634 | ||||||||||||||||
| Cash at End of Period | $ | 2,223,289 | $ | 2,139,211 | $ | 2,670,242 | $ | 2,223,289 | $ | 2,670,242 | |||||||||||
| RING ENERGY, INC. | |||||||||||||
| Financial Commodity Derivative Positions | |||||||||||||
| As of August 4, 2022 | |||||||||||||
| Average | Weighted Avg. | Strike | Deferred | Put | Call | ||||||||
| Date Entered Into | Production Period | Instrument | Daily Volumes | Swap Price | Price | Premium | Price | 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 | 02/01/2022 - 12/31/2022 | Swaps | 1,000 | ||||||||||
| 06/28/2022 | 07/01/2022 - 09/30/2022 | Put Options | 1,000 | ||||||||||
| 06/28/2022 | 10/01/2022 - 12/31/2022 | Put Options | 1,000 | ||||||||||
| 06/28/2022 | 01/01/2023 - 03/31/2023 | Put Options | 1,000 | ||||||||||
| 06/28/2022 | 04/01/2023 - 06/30/2023 | Put Options | 1,000 | ||||||||||
| 06/28/2022 | 07/01/2023 - 09/30/2023 | Put Options | 1,000 | ||||||||||
| 06/28/2022 | 10/01/2023 - 12/31/2023 | Put Options | 1,000 | ||||||||||
| 06/29/2022 | 01/01/2023 - 03/31/2023 | Put Options | 500 | ||||||||||
| 06/29/2022 | 04/01/2023 - 06/30/2023 | Put Options | 500 | ||||||||||
| 06/29/2022 | 07/01/2023 - 09/30/2023 | Put Options | 500 | ||||||||||
| 06/29/2022 | 10/01/2023 - 12/31/2023 | Put Options | 500 | ||||||||||
| 06/29/2022 | 01/01/2024 - 03/31/2024 | Put Options | 500 | ||||||||||
| 06/29/2022 | 04/01/2024 - 06/30/2024 | Put Options | 500 | ||||||||||
| 07/01/2022 | 01/01/2023 - 03/31/2023 | Put Options | 1,000 | ||||||||||
| 07/01/2022 | 04/01/2023 - 06/30/2023 | Put Options | 1,000 | ||||||||||
| 07/08/2022 | 07/01/2022 - 09/30/2022 | Put Options | 500 | ||||||||||
| 07/08/2022 | 10/01/2022 - 12/31/2022 | Put Options | 500 | ||||||||||
| 07/08/2022 | 01/01/2023 - 03/31/2023 | Put Options | 500 | ||||||||||
| 07/25/2022 | 01/01/2024 - 03/31/2024 | Collars | 1,000 | ||||||||||
| 07/25/2022 | 04/01/2024 - 06/30/2024 | Collars | 1,000 | ||||||||||
| 07/25/2022 | 07/01/2024 - 09/30/2024 | Collars | 1,000 | ||||||||||
| (1) The notional quantity per the swap contract entered into 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.
| Three Months Ended | Six Months Ended | ||||||||||||||||||||
| June 30, | March 31, | June 30, | June 30, | ||||||||||||||||||
| 2022 | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||
| (Unaudited for All Periods) | |||||||||||||||||||||
| Net Income (Loss) | $ | 41,944,422 | $ | 7,112,043 | $ | (15,887,159 | ) | $ | 49,056,465 | $ | (34,953,252 | ) | |||||||||
| Share-based compensation | 1,899,245 | 1,521,910 | 351,775 | 3,421,155 | 707,269 | ||||||||||||||||
| Unrealized loss (gain) on change in fair value of derivatives | (12,160,246 | ) | 13,480,640 | 22,840,907 | 1,320,393 | 48,508,755 | |||||||||||||||
| Tax impact of adjusted items | (347,939 | ) | 164,305 | - | 145,314 | - | |||||||||||||||
| Adjusted Net Income | $ | 31,335,482 | $ | 22,278,898 | $ | 7,305,523 | $ | 53,943,327 | $ | 14,262,772 | |||||||||||
| Basic Weighted-Average Shares Outstanding | 106,390,776 | 100,192,562 | 99,300,458 | 103,291,669 | 99,197,160 | ||||||||||||||||
| Adjusted Net Income per Share | $ | 0.29 | $ | 0.22 | $ | 0.07 | $ | 0.52 | $ | 0.14 | |||||||||||
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.
| Three Months Ended | Six Months Ended | ||||||||||||||||||||
| June 30, | March 31, | June 30, | June 30, | ||||||||||||||||||
| 2022 | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||
| (Unaudited for All Periods) | |||||||||||||||||||||
| Net Income (Loss) | $ | 41,944,422 | $ | 7,112,043 | $ | (15,887,159 | ) | $ | 49,056,465 | $ | (34,953,252 | ) | |||||||||
| Interest expense, net | 3,279,299 | 3,398,361 | 3,654,528 | 6,677,660 | 7,396,497 | ||||||||||||||||
| Unrealized loss (gain) on change in fair value of derivatives | (12,160,246 | ) | 13,480,640 | 22,840,907 | 1,320,393 | 48,508,755 | |||||||||||||||
| Income tax provision (benefit) | 1,472,209 | 78,752 | 190,644 | 1,550,961 | 190,644 | ||||||||||||||||
| Depreciation, depletion and amortization | 10,749,204 | 9,781,287 | 9,275,126 | 20,530,491 | 17,383,284 | ||||||||||||||||
| Asset retirement obligation accretion | 186,303 | 188,242 | 184,013 | 374,545 | 377,757 | ||||||||||||||||
| Share-based compensation | 1,899,245 | 1,521,910 | 351,775 | 3,421,155 | 707,269 | ||||||||||||||||
| Adjusted EBITDA | $ | 47,370,436 | $ | 35,561,235 | $ | 20,609,834 | $ | 82,931,670 | $ | 39,610,954 | |||||||||||
| Adjusted EBITDA Margin | 56 | % | 52 | % | 43 | % | 54 | % | 45 | % | |||||||||||
| Basic Weighted-Average Shares Outstanding | 106,390,776 | 100,192,562 | 99,300,458 | 103,291,669 | 99,197,160 | ||||||||||||||||
| Adjusted EBITDA per Share | $ | 0.45 | $ | 0.35 | $ | 0.21 | $ | 0.80 | $ | 0.40 | |||||||||||
| Three Months Ended | Six Months Ended | ||||||||||||||||||||
| June 30, | March 31, | June 30, | June 30, | ||||||||||||||||||
| 2022 | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||
| (Unaudited for All Periods) | |||||||||||||||||||||
| Adjusted EBITDA | $ | 47,370,436 | $ | 35,561,235 | $ | 20,609,834 | $ | 82,931,670 | $ | 39,610,954 | |||||||||||
| Net interest expense (excluding amortization of deferred financing costs) | (3,090,025 | ) | (3,199,087 | ) | (3,507,304 | ) | (6,289,112 | ) | (7,066,246 | ) | |||||||||||
| Capital expenditures | (41,810,442 | ) | (19,743,693 | ) | (11,456,062 | ) | (61,554,135 | ) | (25,981,498 | ) | |||||||||||
| Proceeds from divestiture of oil and natural gas properties | 25,066 | - | - | 25,066 | 2,000,000 | ||||||||||||||||
| Free Cash Flow | $ | 2,495,035 | $ | 12,618,455 | $ | 5,646,468 | $ | 15,113,489 | $ | 8,563,210 | |||||||||||
| Three Months Ended | Six Months Ended | ||||||||||||||||||||
| June 30, | March 31, | June 30, | June 30, | ||||||||||||||||||
| 2022 | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||
| (Unaudited for All Periods) | |||||||||||||||||||||
| Net Cash Provided by Operating Activities | $ | 40,722,650 | $ | 24,439,765 | $ | 16,322,996 | $ | 65,162,415 | $ | 32,010,680 | |||||||||||
| Changes in operating assets and liabilities | 3,570,572 | 7,909,570 | 779,534 | 11,480,142 | 534,028 | ||||||||||||||||
| Cash Flow from Operations | $ | 44,293,222 | $ | 32,349,335 | $ | 17,102,530 | $ | 76,642,557 | $ | 32,544,708 | |||||||||||
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.
FAQ
What were Ring Energy's Q2 2022 sales revenue figures?
How much did Ring Energy's net income increase in Q2 2022?
What is the sales volume guidance for Ring Energy for the full year 2022?
How did Ring Energy's Adjusted EBITDA perform in Q2 2022?
What is the current liquidity status of Ring Energy?
