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

Thursday, February 28, 2019 4:25 pm CST

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 three months and twelve months ended December 31, 2018. For the three month period ended December 31, 2018, the Company reported oil and gas revenues of $27,561,908, compared to revenues of $23,308,668 for the quarter ended December 31, 2017. For the twelve months ended December 31, 2018, the Company reported oil and gas revenues of $120,065,361, compared to $66,699,700 for the twelve months ended December 31, 2017.

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

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

The Company believes results excluding these items are more comparable to estimates provided by security analysts and, therefore, are useful in evaluating operational trends of the Company and its performance, compared to other similarly situated oil and gas producing companies.

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

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

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

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

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

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

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

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

Oil (Bbl)  

Natural
Gas (Mcf)

  Total (Boe)  

Pre-Tax PV10
Value

 

Standardized
Measure of
Discounted Future
Net Cash Flows

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

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

About Ring Energy, Inc.

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

Safe Harbor Statement

This release contains forward-looking statements within the meaning of the “safe-harbor” provisions of the Private Securities Litigation Reform Act of 1995 that involve a wide variety of risks and uncertainties, including, without limitations, statements with respect to the Company’s strategy and prospects. Such statements are subject to certain risks and uncertainties which are disclosed in the Company’s reports filed with the SEC, including its Form 10-K for the fiscal year ended December 31, 2018. Readers and investors are cautioned that the Company’s actual results may differ materially from those described in the forward-looking statements due to a number of factors, including, but not limited to, the Company’s ability to acquire productive oil and/or gas properties or to successfully drill and complete oil and/or gas wells on such properties, general economic conditions both domestically and abroad, and the conduct of business by the Company, and other factors that may be more fully described in additional documents set forth by the Company.

 
RING ENERGY, INC.
STATEMENTS OF OPERATIONS
         
Three Months Ended Twelve Months Ended
December 31, December 31,
  2018     2017     2018     2017  
 
Oil and Gas Revenues $ 27,561,908     $ 23,308,668   $ 120,065,361     $ 66,699,700  
 
Costs and Operating Expenses .
Oil and gas production costs 8,163,826 5,496,693 27,801,989 15,978,362
Oil and gas production taxes 1,225,119 1,090,347 5,631,093 3,152,562
Depreciation, depletion and amortization 10,448,829 7,084,291 39,024,886 20,517,780
Ceiling test impairment 14,172,309 - 14,172,309 -
Asset retirement obligation accretion 113,236 147,245 606,459 567,968
General and administrative expense   3,425,359       2,939,496     12,867,686       10,515,887  
 
Total Costs and Operating Expenses   37,548,678       16,758,072     100,104,422       50,732,559  
 
Income (Loss) from Operations   (9,986,770 )     6,550,596       19,960,939       15,967,141  
 
Other Income (Expense)
Interest income 0 41,540 97,855 291,083
Interest expense (342,471 ) - (427,898 ) -
Realized loss on derivatives (4,553,476 ) (119,897 ) (11,153,702 ) (119,897 )
Unrealized gain (loss)on change in fair value of derivatives   6,424,910       (4,034,115 )     3,968,287       (3,968,287 )
 
Net Other Income (Expense)   1,528,963       (4,112,472 )     (7,515,458 )     (3,797,101 )
 
Income (Loss) Before Provision for Income Taxes (8,457,807 ) 2,438,124 12,445,481 12,170,040
 
Provision for Income Taxes   1,378,499       (6,948,059 )   (3,445,721 )     (10,416,171 )
 
Net Income (Loss)   ($7,079,308 )     ($4,509,935 ) $ 8,999,760     $ 1,753,869  
 
Basic Earnings (Loss) Per Common Share ($0.12 ) ($0.08 ) $ 0.15 $ 0.03
Diluted Earnings (Loss) Per Common Share ($0.11 ) ($0.08 ) $ 0.15 $ 0.03
 
 
Basic Weighted-Average Common Shares Outstanding 60,857,325 54,177,202 59,531,200 51,383,008
Diluted Weighted-Average Common Shares Outstanding 61,715,829 55,647,451 60,848,177 52,806,712
 
 
COMPARATIVE OPERATING STATISTICS
       
Three Months Ended December 31,
  2018   2017 Change
 
Net Sales - BOE per day 6,450 4,911 31 %
Per BOE:
Average Sales Price $ 46.44 $ 51.59 -10 %
 
Lease Operating Expenses 13.75 12.17 13 %
Production Taxes 2.06 2.41 -14 %
DD&A 17.61 15.68 12 %
Accretion 0.19 0.33 -42 %
General & Administrative Expenses 5.77 6.51 -11 %
 
Twelve Months Ended December 31,
  2018   2017 Change
 
Net Sales - BOE per day 6,117 3,941 55 %
Per BOE:
Average Sales price $ 53.78 $ 46.36 16 %
 
Lease Operating Expenses 12.45 11.11 12 %
Production Taxes 2.52 2.19 15 %
DD&A 17.48 14.26 22 %
Accretion 0.27 0.39 -31 %
General & Administrative Expenses 5.76 7.31 -21 %
 
 
RING ENERGY, INC.
BALANCE SHEET
   
December 31, December 31,
  2018     2017  
 
ASSETS
Current Assets
Cash $ 3,363,726 $ 15,006,581
Accounts receivable 12,643,478 12,833,883
Joint interest billing receivable 578,144 1,054,022
Prepaid expenses and retainers   258,909     229,438  
Total Current Assets   16,844,257     29,123,924  
Property and Equipment
Oil and natural gas properties subject to amortization 641,121,398 433,591,134
Fixed assets subject to depreciation   1,465,551     1,884,818  
Total Property and Equipment 642,586,949 435,475,952
Accumulated depreciation, depletion and amortization   (100,576,087 )   (61,864,932 )
Net Property and Equipment   542,010,862     373,611,020  
Deferred Income Taxes 7,786,479 11,232,200
Deferred Financing Costs   424,061     135,342  
Total Assets $ 567,065,659   $ 414,102,486  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 51,910,432 $ 44,475,163
Derivative liabilities   -     3,968,286  
Total Current Liabilities   51,910,432     48,443,449  
 
Revolving line of credit 39,500,000 -
Asset retirement obligations   13,055,797     9,055,697  
Total Liabilities   104,466,229     57,499,146  
 
Stockholders' Equity
Preferred stock - $0.001 par value; 50,000,000 shares authorized;
no shares issued or outstanding - -
Common stock - $0.001 par value; 150,000,000 shares authorized;
63,229,710 shares and 54,224,029 shares
issued and outstanding, respectively 63,230 54,224
Additional paid-in capital 494,892,093 397,904,769
Accumulated deficit   (32,355,893 )   (41,355,653 )
Total Stockholders' Equity   462,599,430     356,603,340  
Total Liabilities and Stockholders' Equity $ 567,065,659   $ 414,102,486  
 
 
STATEMENTS OF CASH FLOW
 
    Twelve Months Ended
December 31,   December 31,
  2018     2017  
 
Cash Flows From Operating Activities
Net income (loss) $ 8,999,760 $ 1,753,869
Adjustments to reconcile net income (loss) to net cash
Provided by operating activities:
Depreciation, depletion and amortization 39,024,886 20,517,780
Ceiling test impairment 14,172,309 -
Accretion expense 606,459 567,968
Share-based compensation 3,870,934 3,685,079
Deferred income tax expense 2,537,837 3,862,827
Excess tax benefit related to share-based compensation 907,884 (49,896 )
Adjustment to deferred tax asset for change in effective tax rate - 6,603,240
Change in fair value of derivative instruments (3,968,286 ) 3,968,286
Changes in assets and liabilities:
Accounts receivable 666,283 (9,980,206 )
Prepaid expenses (318,190 ) 268,080
Accounts payable 4,435,269 12,375,772
Settlement of asset retirement obligation   (577,824 )   (766,595 )
Net Cash Provided by Operating Activities   70,357,321     42,806,204  
Cash Flows from Investing Activities
Payments to purchase oil and natural gas properties (4,656,484 ) (28,682,298 )
Payments to develop oil and natural gas properties (198,870,366 ) (124,680,469 )
Proceeds from disposal of fixed assets subject to depreciation 105,536 -
Purchase of equipment, vehicles and leasehold improvements - (335,507 )
Purchase of inventory for development     -     (4,214,686 )
Net Cash Used in Investing Activities     (203,421,314 )   (157,912,960 )
Cash Flows From Financing Activities
Proceeds from revolving line of credit 39,500,000 -
Proceeds from issuance of common stock, net of offering costs 81,821,138 59,026,956
Proceeds from option exercise     100,000     -  
Net Cash Provided by Financing Activities   121,421,138     59,026,956  
Net Increase (Decrease) in Cash (11,642,855 ) (56,079,800 )
Cash at Beginning of Period       15,006,581     71,086,381  
Cash at End of Period     $ 3,363,726   $ 15,006,581  
Supplemental Cash flow Information
Cash paid for interest     $ 323,916     -  
 
Noncash Investing and Financing Activities
Asset retirement obligation incurred during development 1,311,956 1,297,289
Asset retirement obligation acquired 2,571,549 -
Asset retirement obligation revision of estimate 87,980 -
Oil and natural gas assets and properties acquired
through stock issuance 11,204,258 -
Capitalized expenditures attributable to drilling projects
financed through current liabilities 25,000,000 23,000,000
Use of inventory in property development - 5,797,113
 
 
RECONCILIATION OF CASH FLOW FROM OPERATIONS
 
Net cash provided by operating activities $ 70,357,321 $ 42,806,204
Change in operating assets and liabilities   4,205,538     1,897,051  
 
Cash flow from operations $ 66,151,783   $ 40,909,153  
 
Management believes that the non-GAAP measure of cash flow from operations is useful information for investors because it is used internally and is accepted by the investment community as a means of measuring the Company's ability to fund its capital program. It is also used by professional research analysts in providing investment recommendations pertaining to companies in the oil and gas exploration and production industry.
 
         
RING ENERGY, INC.
NON-GAAP DISCLOSURE RECONCILIATION
ADJUSTED EBITDA
 
Twelve Months Ended
December 31, December 31,
  2018     2017  
 
NET INCOME $ 8,999,760 $ 1,753,869
 
Net other (income) expense 7,515,458 3,797,101
Realized loss on derivatives (11,153,702 ) (119,897 )
Income tax expense 3,445,721 10,416,171
Depreciation, depletion and amortization 39,024,886 20,517,780
Accretion of discounted liabilities 606,459 567,968
Ceiling test impairment 14,172,309 -
Stock based compensation 3,870,934 3,685,079
 
ADJUSTED EBITDA $ 66,481,825   $ 40,618,071  
 

Contact:

For further information 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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