Ring Energy, Inc. Announces Financial and Operating Results for First Quarter 2019

Financial and Operating Results Include Assets Acquired From Wishbone Energy Partners As Of 2/1/19

Wednesday, May 8, 2019 3:17 pm CDT

Dateline:

MIDLAND, Texas

Public Company Information:

NYSEAM:
REI

MIDLAND, Texas--(BUSINESS WIRE)--Ring Energy, Inc. (NYSE American: REI) (“Ring”)(“Company”) announced today financial results for the first quarter ended March 31, 2019. For the three month period ended March 31, 2019, Ring, including the acquired assets from Wishbone Energy Partners (“Wishbone”) as of February 1, 2019, had oil and gas revenues of $41,798,315 compared to $29,891,391 for the quarter ended March 31, 2018, and net income of $11,089,443, or $0.17 per diluted share, compared to net income of $5,665,634, or $0.10 per diluted share.

For the three months ended March 31, 2019, the net income included a pre-tax “Unrealized Loss on Derivatives” of $340,685 and a non-cash charge for stock-based compensation of $834,465. Excluding these items, the net income per diluted share would have been $0.19. 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 March 31, 2019, oil sales volume, including the Wishbone assets as of February 1, 2019, increased to 812,565 barrels, compared to 479,864 barrels for the same period in 2018, an 69.3% increase, and gas sales volume increased to 357,542 MCF (thousand cubic feet), compared to 210,031 MCF for the same period in 2018, a 70.2% increase. For the three months ended March 31, 2019, natural gas liquids volume was 271,059 gallons with an average price of $0.51 per gallon. There were no natural gas liquids sales during the three months ended March 31, 2018. On a barrel of oil equivalent (“BOE”) basis for the three months ended March 31, 2019, production sales increased to 878,609 BOEs, compared to 514,869 BOEs for the same period in 2018, a 70.6% increase. The average commodity prices received by Ring were $50.30 per barrel of oil and $2.19 per MCF of natural gas for the quarter ended March 31, 2019, compared to $60.73 per barrel of oil and $3.58 per MCF of natural gas for the quarter ended March 31, 2018.

Lease operating expenses, including production taxes, for the three months ended March 31, 2019 were $13.08 per BOE, a 6.6% decrease from the prior year. Depreciation, depletion and amortization costs, including accretion, decreased 11.1% to $14.96 per BOE. General and administrative costs, which included a $834,465 charge for stock-based compensation and approximately $3.5 million of non-recurring acquisition related costs, were $7.74 per BOE, a 29.2% increase.

Cash provided by operating activities, before changes in working capital, for the three months ended March 31, 2019 was $23,454,168 or $0.37 per fully diluted share, compared to $19,168,262, or $0.33 per fully diluted share for the same period in 2018. Earnings before interest, taxes, depletion and other non-cash items (“Adjusted EBITDA”) for the three months ended March 31, 2019 was $24,214,949, or $0.38 per fully diluted share, compared to $19,203,791, or $0.33 per fully diluted share for the same period in 2018.

(See accompanying table for a reconciliation of net income to adjusted EBITDA).

In February 2019, the Company announced it had signed a definitive agreement to acquire Northwest Shelf assets from Wishbone Energy Partners (“Wishbone”). Subsequent to March 31, 2019, the Company completed the Wishbone acquisition through a cash payment of $264,062,999 and issuance of 4,581,001 shares of common stock. As the Company had effective control of the assets beginning February 1, 2019, this acquisition was recorded effective that date and the financial statements as of March 31, 2019 include the results of operations beginning that date.

During March 2019, the Company entered into new derivative contracts in the form of costless collars of WTI Crude Oil prices in order to protect the Company’s cash flow from price fluctuation and maintain its capital programs. “Costless collars” are the combination of two options, a put option (floor) and call option (ceiling) with the options structured so that the premium paid for the put option will be offset by the premium received from selling the call option. The trades were for a total of 3,500 barrels of oil per day (“BOPD”) and were for the period of April 2019 through December 2019. Subsequent to March 31, 2019, the Company entered into two additional “costless collar” contracts, each for an additional 1,000 BOPD and are for the period of April 2019 through December 2019. In addition, the Company entered into two “costless collar” contracts, each for 1,000 BOPD and are for the period of January 2020 through December 2020. The average prices for the 5,500 BOPD under contract for 2019 are: Floor = $50.00 Ceiling = $68.19. The average prices for the 2,000 BOPD under contract for 2020 are: Floor = $50.00 Ceiling = $65.61.

As of March 31, 2019, outstanding debt on the Company’s senior secured credit facility was $84.5 million. Subsequent to March 31, 2019, the Company amended and restated its Existing Senior Credit Facility with SunTrust Bank, as lender, issuing bank and administrative agent for several banks and other financial institutions and lenders. The Amended and Restated Senior Credit Facility increases the maximum facility amount to $1 billion and increases the borrowing base to $425 million.

Ring’s Chief Executive Officer, Mr. Kelly Hoffman, stated, “The first quarter of 2019 has been an extremely exciting, as well as, transitional time for Ring. With the Carlyle acquisition at year end 2018 and now the Wishbone acquisition we have essentially doubled our current daily production, future EBITDA, proved reserves and PV-10. We now have acreage with over 1,400 new horizontal drilling sites, 440 we consider to be premier (Tier 1 and 2), as evidenced by the wells drilled and completed in the 1st quarter, over 460 that we have categorized as “commercial” (Tier 3) because they may have net reserves slightly below the Tier 1 and 2 sites, and an additional 530 (Tier 4) that have upside potential but will require additional work. We have years of development ahead of us on what we believe to be outstanding assets. Our goals have remained the same, superior execution while controlling cost, meaningful annualized production growth and cash flow neutrality by the end of the year.”

About Ring Energy, Inc.

Ring Energy, Inc. is an oil and gas exploration, development and production company with current operations in Texas and New Mexico.
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, 2018, its Form 10Q for the quarter ended march 31, 2019 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.

RING ENERGY, INC.
STATEMENTS OF OPERATIONS
     
Three Months Ended
March 31,
2019   2018  
(Unaudited) (Unaudited)
 
Oil and Gas Revenues $41,798,315     $29,891,391  
 
Costs and Operating Expenses
Oil and gas production costs 9,408,764 5,781,910
Oil and gas production taxes 2,082,875 1,425,882
Depreciation, depletion and amortization 12,929,054 8,501,379
Asset retirement obligation accretion 215,945 161,120
Operating lease payments and amortization 128,175 -
General and administrative expense 6,798,017     3,085,980  
 
Total Costs and Operating Expenses 31,562,830     18,956,271  
 
Income from Operations 10,235,485     10,935,120  
 
Other Income (Expense)
Interest income 12,236 8,953
Interest expense (773,017 ) (44,483 )
Realized loss on derivatives - (1,475,026 )
Unrealized loss on change in fair value of derivatives (340,685 )   (790,701 )
 
Net Other Income (Expense) (1,101,466 )   (2,301,257 )
 
Income before tax provision 9,134,019 8,633,863
 
Benefit from (Provision for) Income Taxes 1,955,424     (2,968,229 )
 
Net Income $11,089,443     $5,665,634  
 
Basic Income Per Common Share $0.18 $0.10
Diluted Income Per Common Share $0.17 $0.10
 
 
Basic Weighted-Average Common Shares Outstanding 63,229,710 56,415,673
Diluted Weighted-Average Common Shares Outstanding 63,992,549 57,949,389
 
       
COMPARATIVE OPERATING STATISTICS
 
Three Months Ended March 31,
2019 2018 Change
 
Net Production - BOE per day 9,762 5,721 70.6%
Per BOE:
Average Sales Price $47.57 $58.06 -17.4%
 
Lease Operating Expenses 10.71 11.23 -4.6%
Production Taxes 2.37 2.77 -14.4%
DD&A 14.72 16.51 -10.8%
Accretion 0.25 0.31 -19.3%
General & Administrative Expenses 7.74 5.99 29.2%
 
 
RING ENERGY, INC.
CONSOLIDATED BALANCE SHEET
 
March 31,

 

December 31,

2019   2018  
 
ASSETS
Current Assets
Cash $2,606,769 $3,363,726
Accounts receivable 27,941,378 12,643,478
Joint interest billing receivable 2,553,377 578,144
Operating lease asset 417,567 -
Prepaid expenses and retainers 3,013,688   258,909  
Total Current Assets 36,532,779   16,844,257  
Properties and Equipment
Oil and natural gas properties subject to depletion and amortization 990,608,164 641,121,398
Fixed assets subject to depreciation 1,465,551   1,465,551  
Total Property and Equipment 992,073,715 642,586,949
Accumulated depreciation, depletion and amortization (113,505,141 ) (100,576,087 )
Net Property and Equipment 878,568,574   542,010,862  
Deferred Income Taxes 9,741,903 7,786,479
Deferred Financing Costs 353,384   424,061  
Total Assets $925,196,640   $567,065,659  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $63,862,098 $51,910,432
Acquisition liability to be settled through equity 28,356,396 -
Operating lease liability 417,567 -
Derivative Liabilities 340,685   -  
Total Current Liabilities 92,976,746   51,910,432  
 
Revolving line of credit 84,500,000 39,500,000
Acquisition liability to be settled through refinancing into credit facility 256,877,766 -
Asset retirement obligations 16,318,790   13,055,797  
Total Liabilities 450,673,302   104,466,229  
 
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 63,229,710 shares outstanding, respectively 63,230 63,230
Additional paid-in capital 495,726,558 494,892,093
Accumulated deficit (21,266,450 ) (32,355,893 )
Total Stockholders' Equity 474,523,338   462,599,430  
Total Liabilities and Stockholders' Equity $925,196,640   $567,065,659  
 
RING ENERGY, INC.
STATEMENTS OF CASH FLOW
   
Three Months Ended
March 31,
2019 2018
 
Cash Flows From Operating Activities
Net income $11,089,443 $5,665,634
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation, depletion and amortization 12,929,054 8,501,379
Accretion expense 215,945 161,120
Share-based compensation 834,465 1,081,199
Deferred income tax provision 1,918,144 1,809,625
Excess tax deficiency related to share-based compensation (3,873,568) 1,158,604
Change in fair value of derivative instruments 340,685 790,701
Changes in assets and liabilities:
Accounts receivable (15,808,739) (195,642)
Prepaid expenses and retainers 180,452 166,082
Accounts payable 2,111,804 (32,653,094)
Settlement of asset retirement obligation (107,770)   (149,772)
Net Cash Provided by (Used in) Operating Activities 9,829,915   (13,664,164)
Cash Flows from Investing Activities
Payments to purchase oil and natural gas properties (13,358,132) (1,061,195)
Payments to develop oil and natural gas properties (42,228,740) (35,081,925)
Proceeds from disposal of fixed assets subject to depreciation -   14,738
Net Cash Used in Investing Activities (55,586,872)   (36,128,382)
Cash Flows From Financing Activities
Proceeds from revolving line of credit 45,000,000 -
Proceeds from issuance of common stock, net of offering costs -   81,822,066
Net Cash Provided by Financing Activities 45,000,000   81,822,066
Net Change in Cash (756,957) 32,029,520
Cash at Beginning of Period 3,363,726   15,006,581
Cash at End of Period $2,606,769   $47,036,101
Supplemental Cash Flow Information
Cash paid for interest 708,951   44,483
Noncash Investing and Financing Activities
Asset retirement obligation incurred during development $175,173 $380,807
Capitalized expenditures attributable to drilling projects
financed through current liabilities 34,605,000 13,000,000
Acquisition of oil and gas properties
Assumption of joint interest billing receivable 1,464,394 -
Assumption of prepaid assets 2,864,554 -
Assumption of accounts and revenue payables (1,234,862) -
Asset retirement obligation incurred through acquisition (2,979,645) -
Acquisition payable to be settled through equity (28,356,396) -
Acquisition payable to be settled through cash payment (256,877,766) -
Oil and gas properties subject to amortization 285,119,721 -
 
RECONCILIATION OF CASH FLOW FROM OPERATIONS
 
Net cash provided by operating activities $9,829,915 ($13,664,164)
Change in operating assets and liabilities 13,624,253   32,832,426
 
Cash flow from operations $23,454,168   $19,168,262

 

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
     
March 31, March 31,
2019   2018  
 
NET INCOME (LOSS) $11,089,443 $5,665,634
 
Interest (income) (12,236 ) (8,953 )
Interest expense 773,017 44,483
Income tax expense (benefit) 1,918,144 1,809,625
Excess tax benefits related to share-based compensation (3,873,568 ) 1,158,604
Depreciation, depletion and amortization 12,929,054 8,501,379
Accretion of discounted liabilities 215,945 161,120
Share-based compensation 834,465 1,081,199
Change in fair value of derivative instruments 340,685   790,701  
 
ADJUSTED EBITDA $24,214,949   $19,203,792  

Contact:

Bill Parsons
K M Financial, Inc.
(702) 489-4447

Stock Information

NYSE American: REI Change: 
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Investor Contact

Bill Parsons
901 W. Wall St. Suite 300
Midland, TX 79701
Phone: 702.489.4447
k-m-financial@msn.com

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