[Ring Energy Q4 and Full Year 2023 Results](index=1&type=section&id=Ring%20Energy%20Q4%20and%20Full%20Year%202023%20Results) [2023 Q4 and Full Year Highlights](index=1&type=section&id=2023%20Q4%20and%20Full%20Year%20Highlights) Ring Energy achieved record Q4 and full-year 2023 results, with significant growth in sales, Adjusted EBITDA, and Free Cash Flow, alongside debt reduction and strong reserves Q4 and Full Year 2023 Performance Highlights | Metric | Q4 2023 | Full Year 2023 | YoY Change (Full Year) | | :--- | :--- | :--- | :--- | | Total Sales Volumes (Boe/d) | 19,397 (Record) | 18,119 (Record) | +47% | | Oil Sales Volumes (Bo/d) | 13,637 (Record) | 12,548 (Record) | +32% | | Net Income ($ million) | $50.9 | $104.9 | -24% | | Adjusted Net Income ($ million) | $21.2 | $100.5 | -7% | | Adjusted EBITDA ($ million) | $65.4 (Record) | $236.0 (Record) | +21% | | Adjusted Free Cash Flow ($ million) | $16.3 (Record) | $45.3 | +30% | - The company paid down **$3.0 million** of debt in Q4 2023 and a total of **$30.0 million** since the Founders Acquisition in August 2023, exiting the year with a Leverage Ratio of **1.62x**[4](index=4&type=chunk) - Year-end 2023 proved reserves were **129.8 million barrels of oil equivalent (MMBoe)** with a **PV-10 value of $1.6 billion**, based on SEC pricing[4](index=4&type=chunk) [Management Commentary](index=2&type=section&id=Management%20Commentary) Management credits 2023 record results to successful acquisitions and drilling, with 2024 focused on disciplined capital, debt reduction, and accretive acquisitions - Management credits the **47% increase in sales volumes** and **21% increase in Adjusted EBITDA** to the successful execution and integration of two acquisitions made over the past 18 months[4](index=4&type=chunk)[5](index=5&type=chunk) - The strategic focus for 2024 includes: disciplined capital spending for oil production, allocating excess cash for debt reduction, and seeking accretive acquisitions[5](index=5&type=chunk) [Financial and Operational Performance](index=3&type=section&id=Financial%20and%20Operational%20Performance) Record Q4 2023 sales volumes boosted revenue to **$99.9 million**, with **$50.9 million** net income and **$174.5 million** year-end liquidity [Summary Results](index=3&type=section&id=Summary%20Results) This section provides a concise overview of key quarterly and full-year financial and operational metrics Quarterly and Full-Year Financial Summary | Metric | Q4 2023 | Q3 2023 | FY 2023 | FY 2022 | | :--- | :--- | :--- | :--- | :--- | | Net Sales (Boe/d) | 19,397 | 17,509 | 18,119 | 12,364 | | Revenues ($MM) | $99.9 | $93.7 | $361.1 | $347.2 | | Net Income/Loss ($MM) | $50.9 | $(7.5) | $104.9 | $138.6 | | Adjusted EBITDA ($MM) | $65.4 | $58.6 | $236.0 | $195.2 | | Capital Expenditures ($MM) | $38.8 | $42.4 | $152.0 | $140.1 | | Adjusted Free Cash Flow ($MM) | $16.3 | $6.1 | $45.3 | $34.8 | [Financial Overview](index=4&type=section&id=Financial%20Overview) This section details Q4 2023 financial performance, highlighting net income, Adjusted Net Income, Adjusted EBITDA, and Adjusted Free Cash Flow - Q4 2023 net income was **$50.9 million**, or **$0.26 per diluted share**, which included a **$32.5 million** pre-tax non-cash unrealized gain on commodity derivatives[7](index=7&type=chunk) - Adjusted Net Income for Q4 2023 was **$21.2 million**, or **$0.11 per diluted share**, after excluding items like unrealized derivative gains and share-based compensation[7](index=7&type=chunk) - Adjusted EBITDA reached a record **$65.4 million** in Q4 2023, a **12% increase** from Q3 2023 and a **16% increase** from Q4 2022[10](index=10&type=chunk) - Adjusted Free Cash Flow was a record **$16.3 million** in Q4 2023, a **165% increase** from Q3 2023, primarily due to higher revenues and lower capital spending[11](index=11&type=chunk) [Sales Volumes, Prices and Revenues](index=5&type=section&id=Sales%20Volumes%2C%20Prices%20and%20Revenues) This section analyzes Q4 2023 sales volumes, average realized prices, and total revenues across product types - Q4 2023 sales volumes were **19,397 Boe/d**, comprised of **70% oil**, **15% natural gas**, and **15% NGLs**[14](index=14&type=chunk) Q4 2023 Average Realized Sales Prices | Product | Realized Price | | :--- | :--- | | Crude Oil | $77.33 per barrel | | Natural Gas | $(0.12) per Mcf | | NGLs | $11.92 per barrel | | **Combined** | **$56.01 per Boe** | - Total revenues for Q4 2023 were **$99.9 million**, a **7% increase** from Q3 2023, driven by higher sales volumes that were partially offset by lower overall realized prices[16](index=16&type=chunk) [Operating Expenses](index=5&type=section&id=Operating%20Expenses) This section details operating expenses, including Lease Operating Expense, production taxes, and General and Administrative expenses - Lease Operating Expense (LOE) was **$10.50 per Boe** in Q4 2023, down from **$11.18 per Boe** in Q3 2023[17](index=17&type=chunk) - Production taxes were **$2.78 per Boe** in Q4 2023, representing approximately **5.0% to 5.2% of revenue**[20](index=20&type=chunk) - Adjusting for transaction costs, G&A (excluding share-based compensation) decreased **5% sequentially** to **$3.00 per Boe** in Q4 2023[22](index=22&type=chunk) [Derivative Instruments](index=6&type=section&id=Derivative%20Instruments) This section outlines commodity derivative activities, including net gains/losses and future hedging positions - In Q4 2023, the company recorded a net gain of **$29.3 million** on commodity derivatives, which included a **$3.3 million** realized cash loss and a **$32.5 million** unrealized non-cash gain[23](index=23&type=chunk) - For full-year 2024, the company has hedged approximately **2.1 million barrels of oil (45% of guidance midpoint)** and **2.6 billion cubic feet of natural gas (43% of guidance midpoint)**[25](index=25&type=chunk) [Balance Sheet and Liquidity](index=7&type=section&id=Balance%20Sheet%20and%20Liquidity) This section reviews the balance sheet and liquidity, including total liquidity, outstanding borrowings, and borrowing base reaffirmation - Total liquidity at the end of Q4 2023 was **$174.5 million**, consisting of **$0.3 million** in cash and **$174.2 million** available under the revolving credit facility[26](index=26&type=chunk) - The company had **$425.0 million** in borrowings outstanding on its revolving credit facility, which has a borrowing base of **$600.0 million**[26](index=26&type=chunk) - The borrowing base of **$600 million** was successfully reaffirmed during Q4 2023, with the next redetermination scheduled for May 2024[27](index=27&type=chunk) [Capital Expenditures](index=7&type=section&id=Capital%20Expenditures) Q4 2023 capital expenditures were **$38.8 million**, with full-year capex of **$152.0 million** funding 31 wells and infrastructure - Q4 2023 capital expenditures were **$38.8 million**, used to drill four horizontal wells and three vertical wells, and complete ten wells[28](index=28&type=chunk) - Full-year 2023 capital expenditures totaled **$152.0 million**[29](index=29&type=chunk) 2023 Drilling and Completions Activity | Period | Wells Drilled | Wells Completed | Recompletions | | :--- | :--- | :--- | :--- | | **Q1 2023** | 7 | 7 | 6 | | **Q2 2023** | 6 | 6 | 3 | | **Q3 2023** | 11 | 8 | 0 | | **Q4 2023** | 7 | 10 | 0 | | **FY 2023 Total** | **31** | **31** | **9** | [Full Year 2023 Summary Financial Review](index=8&type=section&id=Full%20Year%202023%20Summary%20Financial%20Review) Full-year 2023 achieved **$104.9 million** net income, record **$236.0 million** Adjusted EBITDA (up **21%**), and **$361.1 million** revenues (up **4%**) Full Year 2023 vs. 2022 Financial Comparison | Metric | FY 2023 | FY 2022 | % Change | | :--- | :--- | :--- | :--- | | Net Income ($M) | $104.9 | $138.6 | (24)% | | Adjusted Net Income ($M) | $100.5 | $107.5 | (7)% | | Adjusted EBITDA ($M) | $236.0 | $195.2 | +21% | | Adjusted Free Cash Flow ($M) | $45.3 | $34.8 | +30% | | Adjusted Cash Flow from Ops ($M) | $197.0 | $172.9 | +14% | - Full-year 2023 revenues increased **4% to $361.1 million**, driven by a **47% increase in sales volumes**, which was a direct result of acquisitions and the company's capital spending program[33](index=33&type=chunk)[34](index=34&type=chunk) - The average realized sales price for full-year 2023 was **$54.60 per Boe**, a significant decrease from **$76.95 per Boe** in 2022[35](index=35&type=chunk) [2024 Guidance](index=10&type=section&id=2024%20Capital%20Investment%2C%20Sales%20Volumes%2C%20and%20Operating%20Expense%20Guidance) 2024 guidance sets capital spending at **$135-175 million** for maintaining or slightly growing oil volumes, with total production forecast at **18,000-19,000 Boe/d** - The full-year 2024 capital spending budget is set at **$135 million to $175 million**, which includes drilling **18-24 horizontal wells** and **20-30 vertical wells**[39](index=39&type=chunk) - Capital allocation for 2024 is planned as follows: **73% for drilling and completion**, **24% for recompletions and workovers**, and **3% for land and other costs**[40](index=40&type=chunk)[41](index=41&type=chunk) 2024 Full Year and Q1 Guidance | Metric | Q1 2024 Guidance | FY 2024 Guidance | | :--- | :--- | :--- | | Total Sales (Boe/d) | 18,000 - 18,500 | 18,000 - 19,000 | | Oil Sales (Bo/d) | 12,420 - 12,765 | 12,600 - 13,300 | | Capital Spending ($M) | $37 - $42 | $135 - $175 | | LOE (per Boe) | $10.75 - $11.25 | $10.50 - $11.50 | [Year-End 2023 Proved Reserves](index=11&type=section&id=Year-End%202023%20Proved%20Reserves) Year-end 2023 proved reserves decreased to **129.8 MMBoe**, with PV-10 value at **$1.6 billion**, primarily due to lower SEC commodity prices [Proved Reserves Overview](index=11&type=section&id=Proved%20Reserves%20Overview) This section overviews year-end 2023 SEC proved reserves, including total volume, PV-10 value, and reserve mix - Year-end 2023 SEC proved reserves were **129.8 MMBoe**, down from **138.1 MMBoe** at year-end 2022, primarily due to lower SEC pricing, asset sales, and production[43](index=43&type=chunk) - The PV-10 value of proved reserves at year-end 2023 was **$1.6 billion**, compared to **$2.8 billion** at the end of 2022, reflecting lower SEC average prices (**$74.70/bbl oil in 2023 vs. $90.15/bbl in 2022**)[44](index=44&type=chunk)[47](index=47&type=chunk) - The reserve mix at year-end 2023 was approximately **63% crude oil**, **19% natural gas**, and **18% NGLs**, with proved developed reserves accounting for **68% of the total**[45](index=45&type=chunk) [Standardized Measure of Discounted Future Net Cash Flows](index=12&type=section&id=Standardized%20Measure%20of%20Discounted%20Future%20Net%20Cash%20Flows) This section presents the standardized measure of discounted future net cash flows and its reconciliation to PV-10 Standardized Measure of Discounted Future Net Cash Flows | Component | As of Dec 31, 2023 | As of Dec 31, 2022 | | :--- | :--- | :--- | | Future cash inflows | $6,622,410,752 | $9,871,961,000 | | Future production costs | $(2,413,303,488) | $(2,751,896,250) | | Future development costs | $(562,063,424) | $(647,196,750) | | Future income taxes | $(548,664,988) | $(1,142,147,641) | | **Standardized Measure** | **$1,399,185,191** | **$2,272,113,518** | Reconciliation of PV-10 to Standardized Measure (Dec 31, 2023) | Item | Amount | | :--- | :--- | | PV-10 | $1,647,031,127 | | Future Income Taxes, Discounted at 10% | $247,845,936 | | **Standardized Measure** | **$1,399,185,191** | [Financial Statements](index=16&type=section&id=Financial%20Statements) This section presents unaudited Q4 and full-year 2023 financial statements, including operations, balance sheet, and cash flows [Condensed Statements of Operations](index=16&type=section&id=Condensed%20Statements%20of%20Operations) This section summarizes condensed statements of operations for Q4 and full-year 2023 and 2022 Condensed Statements of Operations Summary | (In millions) | Q4 2023 | Q4 2022 | FY 2023 | FY 2022 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $99.9 | $99.7 | $361.1 | $347.2 | | Total Costs & OpEx | $59.0 | $53.9 | $215.3 | $155.5 | | Income from Operations | $40.9 | $45.8 | $145.8 | $191.7 | | Net Income (Loss) | $50.9 | $14.5 | $104.9 | $138.6 | [Condensed Operating Data](index=17&type=section&id=Condensed%20Operating%20Data) This section presents key condensed operating data, including average daily sales, realized prices, and per-Boe expenses Condensed Operating Data Summary | Metric | Q4 2023 | Q4 2022 | FY 2023 | FY 2022 | | :--- | :--- | :--- | :--- | :--- | | Avg Daily Sales (Boe/d) | 19,397 | 17,856 | 18,119 | 12,364 | | Avg Realized Price ($/Boe) | $56.01 | $60.69 | $54.60 | $76.95 | | LOE ($/Boe) | $10.50 | $10.60 | $10.61 | $10.57 | | G&A (excl. SBC) ($/Boe) | $3.20 | $3.74 | $3.08 | $4.42 | [Condensed Balance Sheets](index=18&type=section&id=Condensed%20Balance%20Sheets) This section summarizes condensed balance sheets as of December 31, 2023, and 2022 Condensed Balance Sheet Summary | (In millions) | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Total Current Assets | $55.9 | $63.2 | | Net Properties & Equipment | $1,293.4 | $1,180.1 | | **Total Assets** | **$1,376.5** | **$1,269.0** | | Total Current Liabilities | $113.8 | $141.8 | | Revolving Line of Credit | $425.0 | $415.0 | | **Total Liabilities** | **$589.9** | **$607.9** | | **Total Stockholders' Equity** | **$786.6** | **$661.1** | [Condensed Statements of Cash Flows](index=19&type=section&id=Condensed%20Statements%20of%20Cash%20Flows) This section summarizes condensed statements of cash flows for full-year 2023 and 2022 Condensed Statement of Cash Flows Summary (Full Year) | (In millions) | FY 2023 | FY 2022 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $198.2 | $197.0 | | Net Cash Used in Investing Activities | $(222.6) | $(308.9) | | Net Cash Provided by Financing Activities | $21.0 | $113.2 | | **Net (Decrease) in Cash** | **$(3.4)** | **$1.3** | [Financial Commodity Derivative Positions](index=20&type=section&id=Financial%20Commodity%20Derivative%20Positions) As of December 31, 2023, the company holds commodity derivative contracts, including swaps and collars for WTI crude oil and Henry Hub natural gas, extending into 2025 Summary of Hedged Volumes for 2024 | Quarter | Oil Hedges (Bbl) | Gas Hedges (MMBtu) | | :--- | :--- | :--- | | Q1 2024 | 587,578 | 518,615 | | Q2 2024 | 537,422 | 743,203 | | Q3 2024 | 512,900 | 705,787 | | Q4 2024 | 496,800 | 672,546 | [Non-GAAP Information](index=21&type=section&id=Non-GAAP%20Information) This section provides definitions and reconciliations for key non-GAAP financial measures like Adjusted Net Income, EBITDA, and Free Cash Flow [Reconciliation of Net Income to Adjusted Net Income](index=21&type=section&id=Reconciliation%20of%20Net%20Income%20to%20Adjusted%20Net%20Income) This section reconciles net income to adjusted net income, detailing adjustments for non-recurring and non-cash items Adjusted Net Income Reconciliation | (In millions) | Q4 2023 | Q4 2022 | FY 2023 | FY 2022 | | :--- | :--- | :--- | :--- | :--- | | Net Income (Loss) | $50.9 | $14.5 | $104.9 | $138.6 | | Adjustments (Unrealized derivative gain/loss, SBC, etc.) | $(29.7) | $7.3 | $(5.6) | $(31.2) | | **Adjusted Net Income** | **$21.2** | **$21.8** | **$100.5** | **$107.5** | [Reconciliation of Net Income to Adjusted EBITDA](index=22&type=section&id=Reconciliation%20of%20Net%20Income%20to%20Adjusted%20EBITDA) This section presents the reconciliation of net income to Adjusted EBITDA, highlighting key adjustments for non-operating expenses Adjusted EBITDA Reconciliation | (In millions) | Q4 2023 | Q4 2022 | FY 2023 | FY 2022 | | :--- | :--- | :--- | :--- | :--- | | Net Income (Loss) | $50.9 | $14.5 | $104.9 | $138.6 | | Adjustments (Interest, Taxes, DD&A, etc.) | $14.5 | $41.8 | $131.1 | $56.6 | | **Adjusted EBITDA** | **$65.4** | **$56.3** | **$236.0** | **$195.2** | [Reconciliation to Adjusted Free Cash Flow](index=22&type=section&id=Reconciliation%20to%20Adjusted%20Free%20Cash%20Flow) This section details the reconciliation of net cash provided by operating activities to Adjusted Free Cash Flow Adjusted Free Cash Flow Reconciliation | (In millions) | Q4 2023 | Q4 2022 | FY 2023 | FY 2022 | | :--- | :--- | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $55.7 | $63.6 | $198.2 | $197.0 | | Less: Capital Expenditures | $(38.8) | $(42.6) | $(152.0) | $(140.1) | | Other Adjustments | $(0.6) | $(15.5) | $(0.9) | $(22.1) | | **Adjusted Free Cash Flow** | **$16.3** | **$5.5** | **$45.3** | **$34.8** | [Reconciliation to Adjusted Cash Flow from Operations](index=23&type=section&id=Reconciliation%20to%20Adjusted%20Cash%20Flow%20from%20Operations) This section provides the reconciliation of net cash provided by operating activities to Adjusted Cash Flow from Operations Adjusted Cash Flow from Operations Reconciliation | (In millions) | Q4 2023 | Q4 2022 | FY 2023 | FY 2022 | | :--- | :--- | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $55.7 | $63.6 | $198.2 | $197.0 | | Changes in operating assets and liabilities | $(0.6) | $(16.3) | $(1.2) | $(24.1) | | **Adjusted Cash Flow from Operations** | **$55.1** | **$47.4** | **$197.0** | **$172.9** | [Reconciliation of General and Administrative Expense](index=24&type=section&id=Reconciliation%20of%20General%20and%20Administrative%20Expense) This section reconciles General and Administrative expense, excluding share-based compensation and transaction costs G&A Reconciliation | (In millions) | Q4 2023 | Q4 2022 | FY 2023 | FY 2022 | | :--- | :--- | :--- | :--- | :--- | | General and administrative expense (G&A) | $8.2 | $8.3 | $29.2 | $27.1 | | Less: Share-based compensation | $(2.5) | $(2.2) | $(8.8) | $(7.2) | | Less: Transaction costs | $(0.4) | $(1.0) | $(0.4) | $(2.1) | | **G&A excluding SBC and transaction costs** | **$5.4** | **$5.2** | **$19.9** | **$17.8** | [Calculation of Leverage Ratio](index=24&type=section&id=Calculation%20of%20Leverage%20Ratio) This section presents the calculation of the company's leverage ratio as of December 31, 2023 Leverage Ratio Calculation (as of Dec 31, 2023) | Metric | Value | | :--- | :--- | | Revolving line of credit | $425,000,000 | | Pro Forma Consolidated EBITDAX (LTM) | $262,972,020 | | **Leverage Ratio** | **1.62x** | | Maximum Allowed | ≤ 3.00x | [Calculation of Current Ratio](index=25&type=section&id=Calculation%20of%20Current%20Ratio) This section details the calculation of the company's current ratio as of December 31, 2023 Current Ratio Calculation (as of Dec 31, 2023) | Metric | Value | | :--- | :--- | | Current Assets per Covenant | $223,935,007 | | Current Liabilities per Covenant | $104,763,500 | | **Current Ratio** | **2.14x** | | Minimum Allowed | ≥ 1.00x | [Calculation of Cash Return on Capital Employed (CROCE)](index=26&type=section&id=Calculation%20of%20Cash%20Return%20on%20Capital%20Employed%20(CROCE)) This section outlines the calculation of Cash Return on Capital Employed (CROCE) for 2023 and 2022 CROCE Calculation | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Adjusted Cash Flows From Operations (ACFFO) | $196,989,711 | $172,885,152 | | Average debt and stockholders' equity | $1,143,843,146 | $833,363,799 | | **CROCE** | **17.2%** | **20.7%** | [All-In Cash Operating Costs](index=27&type=section&id=All-In%20Cash%20Operating%20Costs) This section presents the all-in cash operating costs per Boe for recent quarters and full years All-In Cash Operating Costs per Boe | Period | Q4 2023 | Q3 2023 | FY 2023 | FY 2022 | | :--- | :--- | :--- | :--- | :--- | | All-in cash operating costs per Boe | $23.52 | $24.61 | $23.46 | $24.84 |

Value Focused Proven Strategy | March 7, 2024 | NYSE American: REI Acquired Proved Reserves (MMBoe)234.3 66.6 9.2 110.1 Acquisition Price4 ($MM) $300 $465 $75 $840 • Since 2018, Ring has successfully grown production by a ~26% CAGR1 through 4Q 2023 1 CAGR is compounded annualized growth rate. 2 Acquired proved reserves for each of the transactions listed are based on the price forecasts reported as of the time the acquisition was announced. 3 Arithmetic sum, or average, as the case may be, of the three acqu ...

For the fiscal year ended December 31, 2023 Or o Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Table of Contents United States Securities and Exchange Commission Washington, D.C. 20549 Form 10-K (Mark One) x Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ______ to ______ Commission file number 001-36057 Ring Energy, Inc. (Exact name of registrant as specified in its charter) (State or other jurisd ...

Ring Energy, Inc. (NYSE:REI) Q3 2023 Results Conference Call November 3, 2023 11:00 AM ET Company Participants Al Petrie - IR Paul McKinney - Chairman & CEO Travis Thomas - EVP & CFO Alex Dyes - EVP, Engineering & Corporate Strategy Marinos Baghdati - EVP, Operations Steve Brooks - EVP, Land, Legal, Human Resources & Marketing Conference Call Participants Jeff Grampp - Alliance Global Partners Neal Dingmann - Truist Noel Parks - Tuohy Operator Good morning, and welcome to the Ring Energy Third Quarter 2023 ...

Table of Contents United States Securities and Exchange Commission Washington, D.C. 20549 Form 10-Q x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended September 30, 2023 o Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ______ to ______ 1725 Hughes Landing Blvd., Suite 900 The Woodlands, TX 77380 (Address of principal executive offices) (Zip Code) (281) 397-3699 (Regi ...

Ring Energy, Inc. (NYSE:REI) Q2 2023 Earnings Conference Call August 4, 2023 11:00 AM ET Company Participants Al Petrie - IR Paul McKinney - Chairman & CEO Travis Thomas - EVP & CFO Alex Dyes - EVP, Engineering & Corporate Strategy Marinos Baghdati - EVP, Operations Steve Brooks - EVP, Land, Legal, Human Resources & Marketing Conference Call Participants Neal Dingmann - Truist John White - Roth Capital Noel Parks - Tuohy Brothers Operator Good morning, and welcome to the Ring Energy Second Quarter 2023 Earn ...

[PART I — FINANCIAL INFORMATION](index=7&type=section&id=PART%20I%20%E2%80%94%20FINANCIAL%20INFORMATION) This section provides the company's financial statements, management's discussion, market risk disclosures, and controls and procedures for the period [Financial Statements](index=7&type=section&id=Item%201%3A%20Financial%20Statements) This section presents Ring Energy, Inc.'s unaudited condensed financial statements as of June 30, 2023, including balance sheets, statements of operations, stockholders' equity, and cash flows Condensed Balance Sheet Highlights (Unaudited) | Account | June 30, 2023 ($) | December 31, 2022 ($) | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $1,749,975 | $3,712,526 | | Total Current Assets | $55,107,997 | $63,166,464 | | Net Properties and Equipment | $1,199,264,082 | $1,180,069,937 | | **Total Assets** | **$1,282,015,052** | **$1,268,999,797** | | **Liabilities & Equity** | | | | Accounts payable | $90,021,106 | $111,398,268 | | Revolving line of credit | $397,000,000 | $415,000,000 | | **Total Liabilities** | **$543,174,736** | **$607,896,406** | | **Total Stockholders' Equity** | **$738,840,316** | **$661,103,391** | Condensed Statements of Operations Highlights (Unaudited) | Metric | Three Months Ended June 30, 2023 ($) | Three Months Ended June 30, 2022 ($) | Six Months Ended June 30, 2023 ($) | Six Months Ended June 30, 2022 ($) | | :--- | :--- | :--- | :--- | :--- | | **Revenues** | $79,348,573 | $84,961,875 | $167,431,485 | $153,142,907 | | **Income from Operations** | $29,657,211 | $54,152,948 | $65,308,707 | $92,338,245 | | **Net Income** | $28,791,605 | $41,944,422 | $61,507,384 | $49,056,465 | | **Diluted EPS** | $0.15 | $0.32 | $0.32 | $0.39 | Condensed Statements of Cash Flows Highlights (Unaudited) | Cash Flow Activity | For the Six Months Ended June 30, 2023 ($) | For the Six Months Ended June 30, 2022 ($) | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $87,046,277 | $65,162,415 | | Net Cash (Used in) Investing Activities | ($83,587,324) | ($50,330,117) | | Net Cash Provided by (Used in) Financing Activities | ($5,421,504) | ($15,017,325) | | **Net (Decrease) in Cash** | **($1,962,551)** | **($185,027)** | - On May 11, 2023, the Company completed the divestiture of its Delaware Basin assets for approximately **$8.0 million** in cash and was relieved of a **$2.3 million** asset retirement obligation[93](index=93&type=chunk) - On July 10, 2023, the Company entered into an agreement to acquire oil and gas assets in Ector County, Texas, from Founders Oil & Gas IV, LLC for a purchase price of **$75 million** in cash[135](index=135&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202%3A%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's operational strategy, focusing on debt reduction and oil and gas property development, with Q2 2023 revenues decreasing 7% year-over-year despite an 85% production volume increase - The company's primary operational focus is on balancing debt reduction with the development of its oil and gas properties in the Permian Basin, aiming to operate within its generated cash flow[140](index=140&type=chunk) 2023 Drilling and Recompletion Activity (H1 2023) | Quarter | Area | Wells Drilled | Wells Completed | Re-completions | | :--- | :--- | :--- | :--- | :--- | | 1Q 2023 | Northwest Shelf | 4 | 4 | — | | | Central Basin Platform | 3 | 3 | 6 | | 2Q 2023 | Northwest Shelf | 4 | 4 | — | | | Central Basin Platform | 2 | 2 | 3 | | **Total** | | **13** | **13** | **9** | Revenue Analysis - Q2 2023 vs Q2 2022 | Metric | Q2 2023 ($) | Q2 2022 ($) | % Change | | :--- | :--- | :--- | :--- | | Total Sales | $79.3M | $85.0M | (7)% | | Total Production (Boe) | 1,571,668 | 850,017 | 85% | | Avg. Sales Price (per Boe) | $50.49 | $99.95 | (49)% | - The decrease in Q2 2023 revenue was driven by a **34% drop** in realized oil prices and a **110% drop** in realized natural gas prices, which offset a significant **85% increase** in total production volume primarily from the Stronghold Acquisition[150](index=150&type=chunk)[151](index=151&type=chunk) - As of June 30, 2023, the company had **$397 million** outstanding on its Credit Facility, which has a borrowing base of **$600 million** and matures in August 2026, with the company in compliance with all covenants[194](index=194&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=42&type=section&id=Item%203%3A%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risks include commodity price volatility, customer credit risk, and interest rate fluctuations, which are partially mitigated through hedging arrangements - The company's main market risk is the volatile pricing of its oil and natural gas production, which it partially mitigates through derivative hedging arrangements[205](index=205&type=chunk)[206](index=206&type=chunk) - Significant customer credit risk exists, with three customers (Phillips 66, Enterprise Crude Oil LLC, and NGL Crude Partners) accounting for **68%**, **13%**, and **11%** of revenues, respectively, for the first six months of 2023[207](index=207&type=chunk)[208](index=208&type=chunk) - The company is exposed to interest rate risk on its **$397.0 million** of outstanding variable-rate debt, where a **1% change** would result in an estimated **$4.0 million** change in annual interest expense[209](index=209&type=chunk)[210](index=210&type=chunk) [Controls and Procedures](index=43&type=section&id=Item%204%3A%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2023, with no material changes to internal control over financial reporting during the quarter - The Principal Executive Officer and Principal Financial Officer concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by this report[215](index=215&type=chunk) - There were no changes in internal control over financial reporting during the quarter ended June 30, 2023, that have materially affected, or are reasonably likely to materially affect, internal controls[218](index=218&type=chunk) [PART II — OTHER INFORMATION](index=44&type=section&id=PART%20II%20%E2%80%94%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, equity security sales, defaults, mine safety disclosures, and other information for the reporting period [Legal Proceedings](index=44&type=section&id=Item%201%3A%20Legal%20Proceedings) The company is defending a lawsuit seeking the return of a **$5.5 million** deposit from a terminated property sale agreement, believing the claims are without merit - The Company is a defendant in a lawsuit filed by EPUS Permian Assets, LLC, concerning a forfeited deposit of **$5.5 million** related to a proposed property sale that did not close[220](index=220&type=chunk) - Management believes the plaintiff's claims are without merit and is pursuing a vigorous defense and a counterclaim for breach of contract[220](index=220&type=chunk) [Risk Factors](index=44&type=section&id=Item%201A%3A%20Risk%20Factors) No material changes to previously disclosed risk factors are reported, with a comprehensive discussion available in the company's 2022 Annual Report on Form 10-K - There are no new risk factors reported in this quarter, with the company referring to the discussion of risks in its 2022 Form 10-K[221](index=221&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=44&type=section&id=Item%202%3A%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities during the period - None[222](index=222&type=chunk) [Defaults Upon Senior Securities](index=44&type=section&id=Item%203%3A%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities during the period - None[223](index=223&type=chunk) [Mine Safety Disclosures](index=44&type=section&id=Item%204%3A%20Mine%20Safety%20Disclosures) The company reported no mine safety disclosures - None[224](index=224&type=chunk) [Other Information](index=44&type=section&id=Item%205%3A%20Other%20Information) No directors or officers adopted, terminated, or modified Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter - No directors or officers adopted, terminated, or modified a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the quarter ended June 30, 2023[225](index=225&type=chunk) [Exhibits](index=45&type=section&id=Item%206%3A%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL financial data files - The report includes CEO and CFO certifications under Rule 13a-14(a) and Section 1350, as well as Inline XBRL taxonomy documents[226](index=226&type=chunk)

Ring Energy (NYSE:REI) Q1 2023 Earnings Conference Call May 4, 2023 11:00 AM ET Company Participants Al Petrie - Investor Relations Paul McKinney - Chairman and Chief Executive Officer Travis Thomas - Chief Financial Officer Alex Dyes - Executive Vice President, Engineering and Corporate Strategy Marinos Baghdati - Executive Vice President, Operations Steve Brooks - Executive Vice President, Land, Legal, Human Resources and Marketing Conference Call Participants Jeff Grampp - Alliance Global Partners Noel P ...

[PART I — FINANCIAL INFORMATION](index=7&type=section&id=PART%20I%20%E2%80%94%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=7&type=section&id=Item%201.%20Financial%20Statements) Unaudited condensed financial statements, covering balance sheets, operations, equity, cash flows, and significant accounting policies [Condensed Balance Sheets](index=8&type=section&id=Condensed%20Balance%20Sheets) Condensed Balance Sheet Highlights (March 31, 2023 vs. December 31, 2022) | Metric | March 31, 2023 | December 31, 2022 | | :--------------------------------- | :------------- | :---------------- | | Cash and cash equivalents | $1,725,700 | $3,712,526 | | Total Current Assets | $58,462,304 | $63,166,464 | | Oil and natural gas properties, full cost method | $1,502,859,154 | $1,463,838,595 | | Total Assets | $1,281,437,987 | $1,268,999,797 | | Total Current Liabilities | $110,401,497 | $141,794,901 | | Revolving line of credit | $422,000,000 | $415,000,000 | | Total Liabilities | $582,195,561 | $607,896,406 | | Total Stockholders' Equity | $699,242,426 | $661,103,391 | [Condensed Statements of Operations](index=9&type=section&id=Condensed%20Statements%20of%20Operations) Condensed Statements of Operations Highlights (Three Months Ended March 31, 2023 vs. 2022) | Metric | March 31, 2023 | March 31, 2022 | | :--------------------------------- | :------------- | :------------- | | Oil, Natural Gas, and Natural Gas Liquids Revenues | $88,082,912 | $68,181,032 | | Total Costs and Operating Expenses | $52,431,416 | $29,995,735 | | Income from Operations | $35,651,496 | $38,185,297 | | Gain (loss) on derivative contracts | $9,474,905 | $(27,596,141) | | Net Income | $32,715,779 | $7,112,043 | | Basic Earnings per share | $0.18 | $0.07 | | Diluted Earnings per share | $0.17 | $0.06 | [Condensed Statements of Stockholders' Equity](index=10&type=section&id=Condensed%20Statements%20of%20Stockholders'%20Equity) Condensed Statements of Stockholders' Equity Highlights (March 31, 2023 vs. December 31, 2022) | Metric | March 31, 2023 | December 31, 2022 | | :--------------------------------- | :------------- | :---------------- | | Common Stock (Shares) | 180,627,484 | 175,530,212 | | Common Stock (Amount) | $180,627 | $175,530 | | Additional Paid-in Capital | $780,659,273 | $775,241,114 | | Accumulated Deficit | $(81,597,474) | $(114,313,253) | | Total Stockholders' Equity | $699,242,426 | $661,103,391 | | Net income (Q1 2023) | $32,715,779 | N/A | | Exercise of common warrants issued in offering (Q1 2023) | $3,613,941 | N/A | | Share-based compensation (Q1 2023) | $1,943,696 | N/A | [Condensed Statements of Cash Flows](index=11&type=section&id=Condensed%20Statements%20of%20Cash%20Flows) Condensed Statements of Cash Flows Highlights (Three Months Ended March 31, 2023 vs. 2022) | Metric | March 31, 2023 | March 31, 2022 | | :--------------------------------- | :------------- | :------------- | | Net Cash Provided by Operating Activities | $43,680,096 | $24,439,765 | | Net Cash (Used in) Investing Activities | $(55,469,588) | $(14,222,711) | | Net Cash Provided by (Used in) Financing Activities | $9,802,666 | $(10,486,159) | | Net Increase (Decrease) in Cash | $(1,986,826) | $(269,105) | | Cash at End of Period | $1,725,700 | $2,139,211 | | Payments for the Stronghold Acquisition | $(18,511,170) | $— | | Payments to develop oil and natural gas properties | $(36,939,307) | $(13,860,249) | [Notes to Condensed Financial Statements](index=13&type=section&id=Notes%20to%20Condensed%20Financial%20Statements) [NOTE 1 — BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES](index=13&type=section&id=NOTE%201%20%E2%80%94%20BASIS%20OF%20PRESENTATION%20AND%20SIGNIFICANT%20ACCOUNTING%20POLICIES) Details financial statement basis, key accounting policies (full cost, revenue), Permian Basin focus, and liquidity - Ring Energy, Inc. is a growth-oriented independent exploration and production company focused on oil and natural gas development, production, acquisition, and exploration activities primarily in the **Permian Basin of Texas and New Mexico**[33](index=33&type=chunk) - The company uses the **full cost method of accounting** for oil and natural gas properties, capitalizing all costs associated with acquisition, exploration, and development[52](index=52&type=chunk) - Liquidity sources include cash flow from operations, cash on hand, available borrowing capacity under its revolving credit facility, and proceeds from sales of non-strategic assets[34](index=34&type=chunk) Share-Based Compensation Expense | Period | Share-Based Compensation Expense | | :-------------------------- | :----------------------------- | | Three Months Ended March 31, 2023 | $1,943,696 | | Three Months Ended March 31, 2022 | $1,521,910 | [NOTE 2 — REVENUE RECOGNITION](index=18&type=section&id=NOTE%202%20%E2%80%94%20REVENUE%20RECOGNITION) Outlines revenue recognition for oil, gas, and NGLs, focusing on delivery, net royalties, and three-stream reporting - Revenue from crude oil and natural gas sales is recognized when the product is delivered to the customer, net of royalties due to third parties[73](index=73&type=chunk) - The company began reporting volumes and revenues on a three-stream basis (crude oil, natural gas, and natural gas liquids) prospectively from July 1, 2022, due to the Stronghold Acquisition[64](index=64&type=chunk)[142](index=142&type=chunk) Disaggregated Revenue by Product (Three Months Ended March 31, 2023 vs. 2022) | Product | March 31, 2023 | March 31, 2022 | | :-------------------------- | :------------- | :------------- | | Oil | $83,586,327 | $63,430,627 | | Natural gas | $1,064,563 | $4,750,405 | | Natural gas liquids | $3,432,022 | $— | | Total | $88,082,912 | $68,181,032 | [NOTE 3 — LEASES](index=19&type=section&id=NOTE%203%20%E2%80%94%20LEASES) Covers operating and financing leases, short-term lease capitalization election, and lease liability reconciliation - The company has operating leases for offices in Midland and The Woodlands, Texas, and financing leases for vehicles with 36-month terms[79](index=79&type=chunk)[81](index=81&type=chunk) - The company elected not to capitalize short-term leases (12 months or less) for office equipment and compressors[80](index=80&type=chunk) Operating and Financing Lease Liabilities (March 31, 2023 vs. December 31, 2022) | Lease Type | March 31, 2023 | December 31, 2022 | | :--------------------------------- | :------------- | :---------------- | | Operating lease liability, total | $1,774,340 | $1,872,259 | | Financing lease liability, total | $1,668,928 | $1,762,132 | [NOTE 4 — EARNINGS PER SHARE INFORMATION](index=20&type=section&id=NOTE%204%20%E2%80%94%20EARNINGS%20PER%20SHARE%20INFORMATION) Basic and diluted EPS significantly increased in Q1 2023, driven by higher net income and dilutive securities changes Earnings Per Share (Three Months Ended March 31, 2023 vs. 2022) | Metric | March 31, 2023 | March 31, 2022 | | :--------------------------------- | :------------- | :------------- | | Net Income | $32,715,779 | $7,112,043 | | Basic Earnings per Share | $0.18 | $0.07 | | Diluted Earnings per Share | $0.17 | $0.06 | | Diluted Weighted-Average Shares Outstanding | 190,138,969 | 124,004,178 | [NOTE 5 — DERIVATIVE FINANCIAL INSTRUMENTS](index=21&type=section&id=NOTE%205%20%E2%80%94%20DERIVATIVE%20FINANCIAL%20INSTRUMENTS) Details derivative contracts for commodity price risk, fair value accounting, and Q1 2023's significant gain - The company utilizes derivative strategies, including forward contracts, futures contracts, swaps, or options, to manage exposure to commodity price risk for its oil and natural gas production[87](index=87&type=chunk)[88](index=88&type=chunk) - Derivative instruments are recorded at fair value, and any gains or losses from changes in fair value or settlement are recognized in earnings as 'Gain (loss) on derivative contracts'[90](index=90&type=chunk) Gain (Loss) on Derivative Contracts (Three Months Ended March 31, 2023 vs. 2022) | Metric | March 31, 2023 | March 31, 2022 | | :--------------------------------- | :------------- | :------------- | | Realized loss on oil derivatives | $(663,762) | $(14,115,501) | | Unrealized gain (loss) on oil derivatives | $8,107,021 | $(13,480,640) | | Gain (loss) on oil derivatives | $7,443,259 | $(27,596,141) | | Realized gain on natural gas derivatives | $5,237 | $— | | Unrealized gain on natural gas derivatives | $2,026,409 | $— | | Gain on natural gas derivatives | $2,031,646 | $— | | Total Gain (loss) on derivative contracts | $9,474,905 | $(27,596,141) | [NOTE 6 — FAIR VALUE MEASUREMENTS](index=23&type=section&id=NOTE%206%20%E2%80%94%20FAIR%20VALUE%20MEASUREMENTS) Classifies fair value measurements into a three-level hierarchy, valuing derivatives with Level 2 market-based inputs - Fair value measurements are classified into a three-level hierarchy: Level 1 (quoted prices in active markets), Level 2 (observable inputs other than quoted prices), and Level 3 (unobservable inputs)[95](index=95&type=chunk)[96](index=96&type=chunk)[97](index=97&type=chunk) - The fair values of the company's derivative instruments are estimated using a market approach, utilizing commodity futures pricing from a reputable third party, classified as a Level 2 fair value measurement[99](index=99&type=chunk) Commodity Derivatives Fair Value (March 31, 2023 vs. December 31, 2022) | Metric | March 31, 2023 | December 31, 2022 | | :--------------------------------- | :------------- | :---------------- | | Commodity Derivatives - Assets (Level 2) | $13,030,896 | $10,798,572 | | Commodity Derivatives - Liabilities (Level 2) | $(15,930,164) | $(23,831,269) | | Total (Net) | $(2,899,268) | $(13,032,697) | [NOTE 7 — REVOLVING LINE OF CREDIT](index=24&type=section&id=NOTE%207%20%E2%80%94%20REVOLVING%20LINE%20OF%20CREDIT) Details Credit Facility modification, $600 million borrowing base, variable rates, covenants, and Q1 2023 compliance - The Credit Facility's maturity date was extended to August 2026, and a borrowing base of **$600 million** was established, collateralized by newly acquired assets from the Stronghold Acquisition[105](index=105&type=chunk) - As of March 31, 2023, **$422.0 million** was outstanding on the Credit Facility, and the company was in compliance with all covenants[111](index=111&type=chunk)[163](index=163&type=chunk) - The interest rate on SOFR Loans is adjusted term SOFR plus a margin between **3.0% and 4.0%**, while Base Rate Loans have a margin between **2.0% and 3.0%**[108](index=108&type=chunk)[160](index=160&type=chunk) - Covenants require a total Leverage Ratio of not more than **3.0 to 1.0** and a minimum Current Assets to Current Liabilities ratio of **1.0 to 1.0**, along with hedging requirements for at least **50%** of projected production[109](index=109&type=chunk)[110](index=110&type=chunk)[161](index=161&type=chunk)[162](index=162&type=chunk) [NOTE 8 — ASSET RETIREMENT OBLIGATION](index=25&type=section&id=NOTE%208%20%E2%80%94%20ASSET%20RETIREMENT%20OBLIGATION) Asset retirement obligation (ARO) increased in Q1 2023 from incurred liabilities and accretion, offset by settlements Changes in Asset Retirement Obligation (Q1 2023) | Metric | Amount | | :--------------------------------- | :------------- | | Balance, December 31, 2022 | $30,226,306 | | Liabilities incurred | $95,062 | | Liabilities settled | $(428,357) | | Accretion expense | $365,847 | | Balance, March 31, 2023 | $30,258,858 | [NOTE 9 — STOCKHOLDERS' EQUITY](index=26&type=section&id=NOTE%209%20%E2%80%94%20STOCKHOLDERS'%20EQUITY) Q1 2023 saw 4.5 million common warrants exercised for $3.6 million, with 14.6 million remaining exercisable - During the three months ended March 31, 2023, **4,517,427** common warrants were exercised at **$0.80 per warrant**, generating total proceeds of **$3,613,941**[115](index=115&type=chunk) - As of March 31, 2023, **14,590,366** common warrants remained exercisable[115](index=115&type=chunk) [NOTE 10 — EMPLOYEE STOCK OPTIONS AND RESTRICTED STOCK AWARDS](index=26&type=section&id=NOTE%2010%20%E2%80%94%20EMPLOYEE%20STOCK%20OPTIONS%20AND%20RESTRICTED%20STOCK%20AWARDS) Q1 2023 share-based compensation increased, with over $13.8 million in unrecognized costs for stock and performance units Share-Based Compensation Expense | Period | Compensation Expense | | :-------------------------- | :------------------- | | Three Months Ended March 31, 2023 | $1,943,696 | | Three Months Ended March 31, 2022 | $1,521,910 | - As of March 31, 2023, the company had **$6,408,759** of unrecognized compensation cost related to restricted stock grants (weighted average period of **2.25 years**) and **$7,402,107** for performance stock units (weighted average period of **1.95 years**)[120](index=120&type=chunk)[121](index=121&type=chunk) - Outstanding stock options as of March 31, 2023, totaled **265,500** with a weighted average exercise price of **$4.21**[119](index=119&type=chunk) [NOTE 11 — COMMITMENTS AND CONTINGENT LIABILITIES](index=27&type=section&id=NOTE%2011%20%E2%80%94%20COMMITMENTS%20AND%20CONTINGENT%20LIABILITIES) Details standby letters of credit, surety bonds, and a vigorously defended lawsuit for breach of contract and fraudulent inducement - As of March 31, 2023, the company had standby letters of credit totaling **$760,438** and surety bonds totaling **$650,288**[112](index=112&type=chunk)[122](index=122&type=chunk)[124](index=124&type=chunk) - The company is a defendant in a lawsuit filed in July 2021, claiming breach of contract and fraudulent inducement, with the plaintiff requesting a **$5.5 million** forfeited deposit plus related damages and attorneys' fees. The company denies the claims and is conducting a vigorous defense and counterclaim[186](index=186&type=chunk) [NOTE 12 — SUBSEQUENT EVENTS](index=28&type=section&id=NOTE%2012%20%E2%80%94%20SUBSEQUENT%20EVENTS) Post-quarter, 14.5 million common warrants had exercise price reduced, generating $9.0 million, with 78,200 remaining - On April 11 and 12, 2023, the company reduced the exercise price of **14,512,166** common warrants from **$0.80 to $0.62 per share**[126](index=126&type=chunk) - This resulted in aggregate gross proceeds of **$8,997,543** from the full exercise of these warrants[126](index=126&type=chunk) - Approximately **78,200** shares of common warrants remain outstanding after these exercises[126](index=126&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Analyzes Ring Energy's Q1 2023 financial condition and results, covering business, operations, production, revenues, expenses, and liquidity [Overview](index=29&type=section&id=Overview) - Ring Energy is a growth-oriented independent exploration and production company focused on oil and natural gas development, production, acquisition, and exploration activities in the Permian Basin of Texas[129](index=129&type=chunk) - Primary drilling operations target oil and liquids-rich producing formations in the Northwest Shelf, Central Basin Platform, and Delaware Basin[129](index=129&type=chunk) [Business Description and Plan of Operation](index=29&type=section&id=Business%20Description%20and%20Plan%20of%20Operation) - The company's plan is to balance long-term debt reduction with further developing oil and gas properties to maintain or grow annual production[130](index=130&type=chunk) - This will be achieved through proper allocation of cash flow from operations and potentially through the sale of non-core assets[130](index=130&type=chunk) - Ring Energy intends to continue evaluating potential transactions to acquire strategic producing assets with attractive acreage positions[130](index=130&type=chunk) [2023 Developments and Highlights](index=29&type=section&id=2023%20Developments%20and%20Highlights) - Ring Energy aims to grow production and reserves by developing its oil-rich resource base through conventional and horizontal drilling in the Northwest Shelf and Central Basin Platform, operating within generated cash flow[131](index=131&type=chunk) - The company intends to reduce long-term debt using free cash flow from operations and potential non-core asset sales, leveraging attractive field-level margins[131](index=131&type=chunk) Q1 2023 Drilling and Completion Activities | Quarter | Area | Wells Drilled | Wells Completed | Recompletions | | :-------- | :-------------------------- | :------------ | :-------------- | :------------ | | 1Q 2023 | Central Basin Platform (Vertical) | 3 | 3 | 6 | | 1Q 2023 | Northwest Shelf | 4 | 4 | — | - In Q1 2023, **$15 million** in deferred cash consideration and **$3.5 million** in post-close settlement were paid for the Stronghold Acquisition, contributing to an increase in long-term debt[131](index=131&type=chunk) [Market Conditions and Commodity Prices](index=30&type=section&id=Market%20Conditions%20and%20Commodity%20Prices) - The company's financial results are highly dependent on the volatile prices of crude oil and natural gas, which are influenced by domestic and worldwide supply and demand factors beyond its control[135](index=135&type=chunk) - Oil and natural gas prices have demonstrated and are expected to continue to show volatility, making future price predictions uncertain and impacting drilling programs, production volumes, and revenues[135](index=135&type=chunk)[136](index=136&type=chunk) [Results of Operations](index=31&type=section&id=Results%20of%20Operations) Selected Operating Data (Three Months Ended March 31, 2023 vs. 2022) | Metric | March 31, 2023 | March 31, 2022 | | :--------------------------------- | :------------- | :------------- | | Net production (Boe) | 1,646,306 | 798,262 | | Total sales | $88,082,912 | $68,181,032 | | Average sales price (per Boe) | $53.50 | $85.41 | | Lease operating expenses (per Boe) | $10.61 | $11.22 | | Depreciation, depletion and amortization (per Boe) | $12.92 | $12.25 | | Net Income | $32,715,779 | $7,112,043 | | Gain (loss) on derivative contracts | $9,474,905 | $(27,596,141) | | Interest (expense) | $(10,390,279) | $(3,398,361) | - Oil sales increased by approximately **$20.2 million** due to a **68.5% increase in sales volume** (from **676,215 to 1,139,413 barrels**), primarily from the Stronghold Acquisition, despite a decrease in average realized price from **$93.80 to $73.36 per barrel**[139](index=139&type=chunk)[140](index=140&type=chunk) - Natural gas sales decreased by approximately **$3.7 million**, driven by a significant reduction in average realized price from **$6.49 to $0.66 per Mcf**, despite a **118.7% increase in sales volume** (from **732,283 to 1,601,407 Mcf**)[141](index=141&type=chunk) - Interest expense increased from **$3.4 million to $10.4 million** due to higher outstanding debt (weighted average daily debt of **$424.3 million** in Q1 2023 vs. **$293.9 million** in Q1 2022) and higher weighted average interest rates (**8.2%** in Q1 2023 vs. **4.3%** in Q1 2022)[151](index=151&type=chunk) [Liquidity and Capital Resources](index=33&type=section&id=Liquidity%20and%20Capital%20Resources) Cash Flow Summary (Three Months Ended March 31, 2023 vs. 2022) | Metric | March 31, 2023 | March 31, 2022 | | :--------------------------------- | :------------- | :------------- | | Cash on hand | $1,725,700 | $2,139,211 | | Net cash provided by operating activities | $43,680,096 | $24,439,765 | | Net cash used in investing activities | $(55,469,588) | $(14,222,711) | | Net cash provided by financing activities | $9,802,666 | $(10,486,159) | - The company will continue to focus on maximizing free cash flow in 2023 through cost monitoring and prudent capital allocation, prioritizing high-return projects[156](index=156&type=chunk) - Strategic goals for the remainder of 2023 include maximizing free cash flow, reducing debt levels, and maximizing liquidity[157](index=157&type=chunk) [Availability of Capital Resources under Credit Facility](index=33&type=section&id=Availability%20of%20Capital%20Resources%20under%20Credit%20Facility) - The Credit Facility has a borrowing base of **$600 million**, with **$422 million** outstanding as of March 31, 2023[159](index=159&type=chunk)[163](index=163&type=chunk) - The company was in compliance with all covenants of the Second Amended and Restated Credit Agreement as of March 31, 2023[163](index=163&type=chunk) - The unused line of credit was **$177.2 million** as of March 31, 2023, calculated from the **$600 million** borrowing base less the outstanding balance and standby letters of credit[112](index=112&type=chunk) [Derivative Financial Instruments](index=34&type=section&id=Derivative%20Financial%20Instruments) - The company uses derivative contracts, including oil hedges (WTI swaps, deferred premium puts, two-way and three-way collars) and natural gas hedges (Henry Hub NYMEX swaps, two-way collars, Waha basis swaps), to manage commodity price risk[165](index=165&type=chunk) - All derivative instruments are with lenders under the company's Credit Facility, and their fair values are recorded as assets or liabilities on the balance sheet, with gains or losses recognized in earnings[166](index=166&type=chunk)[165](index=165&type=chunk) [Effects of Inflation and Pricing](index=36&type=section&id=Effects%20of%20Inflation%20and%20Pricing) - The oil and natural gas industry is cyclical, and commodity price volatility significantly impacts the company's revenue, estimates of future reserves, borrowing base calculations, property values, and ability to raise capital and retain personnel[167](index=167&type=chunk) - Business costs are anticipated to fluctuate in accordance with commodity prices for oil and natural gas and the associated demand for services[167](index=167&type=chunk) [Off-Balance Sheet Financing Arrangements](index=36&type=section&id=Off-Balance%20Sheet%20Financing%20Arrangements) - As of March 31, 2023, the company had no off-balance sheet financing arrangements[168](index=168&type=chunk) [Capital Resources for Future Acquisition and Development Opportunities](index=36&type=section&id=Capital%20Resources%20for%20Future%20Acquisition%20and%20Development%20Opportunities) - The company continuously evaluates potential acquisitions and development opportunities, prioritizing lower-risk producing properties with undeveloped drilling potential[169](index=169&type=chunk) - Acquiring additional oil and gas properties may require substantially greater capital than currently available, potentially necessitating short-term or long-term debt or equity sales[170](index=170&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=36&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Details the company's exposure to commodity price, customer credit, and interest rate risks, and management strategies [Commodity Price Risk](index=36&type=section&id=Commodity%20Price%20Risk) - The company's major market risk exposure is the volatile pricing of its oil and natural gas production, which can materially adversely affect its financial condition and results of operations[172](index=172&type=chunk) - To reduce commodity price uncertainty and increase cash flow predictability, the company enters into crude oil and natural gas price hedging arrangements for a portion of its expected production[173](index=173&type=chunk) [Customer Credit Risk](index=37&type=section&id=Customer%20Credit%20Risk) - The company has significant credit risk concentration with three major customers (Phillips 66 Company, Enterprise Crude Oil LLC, and NGL Crude Partners) for its oil and natural gas receivables[174](index=174&type=chunk) Customer Concentration (Three Months Ended March 31, 2023) | Customer | % of Total Revenues | % of Accounts Receivable | | :-------------------------- | :------------------ | :----------------------- | | Phillips 66 Company | 66% | 73% | | Enterprise Crude Oil LLC | 13% | 10% | | NGL Crude Partners | 11% | 9% | - The company believes that the loss of any of these customers would not materially impact its business due to the availability of other purchasers for its oil and natural gas[174](index=174&type=chunk) [Interest Rate Risk](index=37&type=section&id=Interest%20Rate%20Risk) - The company is exposed to market risk from changes in interest rates on its variable-rate Credit Facility[175](index=175&type=chunk) - A **1%** change in the interest rate on the **$422.0 million** outstanding Credit Facility would result in an estimated **$4.2 million** change in annual interest expense[176](index=176&type=chunk) - The company does not currently use interest rate derivative instruments to manage this exposure[177](index=177&type=chunk) [Currency Exchange Rate Risk](index=37&type=section&id=Currency%20Exchange%20Rate%20Risk) - The company has no foreign sales and accepts payments only in U.S. dollars, therefore it is not exposed to foreign currency exchange rate risk[178](index=178&type=chunk) [Item 4. Controls and Procedures](index=37&type=section&id=Item%204.%20Controls%20and%20Procedures) Details management's evaluation of disclosure controls, confirming effectiveness and no material changes in internal control [Evaluation of disclosure controls and procedures](index=37&type=section&id=Evaluation%20of%20disclosure%20controls%20and%20procedures) - Management, including the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures as of March 31, 2023[180](index=180&type=chunk) - They concluded that the disclosure controls and procedures were effective in ensuring timely and accurate reporting of information required by the Exchange Act[181](index=181&type=chunk) [Changes in internal control over financial reporting](index=38&type=section&id=Changes%20in%20internal%20control%20over%20financial%20reporting) - There were no changes in internal control over financial reporting during the three months ended March 31, 2023, that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[184](index=184&type=chunk) [PART II — OTHER INFORMATION](index=38&type=section&id=PART%20II%20%E2%80%94%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=38&type=section&id=Item%201.%20Legal%20Proceedings) The company is a defendant in a July 2021 lawsuit claiming breach of contract and fraudulent inducement, seeking $5.5 million - Ring Energy, Inc. is a defendant in a lawsuit (EPUS Permian Assets, LLC, v. Ring Energy, Inc.) filed in July 2021 in Harris County District Court, Houston, Texas[186](index=186&type=chunk) - The plaintiff claims breach of contract, fraudulent inducement, unjust enrichment, and constructive trust, seeking a forfeited deposit of **$5,500,000** plus related damages and attorneys' fees[186](index=186&type=chunk) - The company believes the claims are without merit and is conducting a vigorous defense and counterclaim, asserting breach of contract and requesting a declaratory judgment and attorneys' fees[186](index=186&type=chunk) [Item 1A. Risk Factors](index=38&type=section&id=Item%201A.%20Risk%20Factors) Refers to 2022 Form 10-K for business risk discussion, noting potential future additional or immaterial risks - For a discussion of risks and hazards, readers are referred to 'Item 1A. Risk Factors' in the company's Annual Report on Form 10-K for the year ended December 31, 2022[187](index=187&type=chunk) - The company acknowledges that additional risks and uncertainties not currently known, or conditions currently deemed immaterial, may materially and adversely affect its business, financial condition, cash flows, and results of operations in the future[187](index=187&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=38&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities or use of proceeds were reported for the period - None[188](index=188&type=chunk) [Item 3. Defaults Upon Senior Securities](index=38&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities were reported for the period - None[189](index=189&type=chunk) [Item 4. Mine Safety Disclosures](index=38&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) No mine safety disclosures were reported for the period - None[190](index=190&type=chunk) [Item 5. Other Information](index=38&type=section&id=Item%205.%20Other%20Information) No other information was reported for the period - None[191](index=191&type=chunk) [Item 6. Exhibits](index=39&type=section&id=Item%206.%20Exhibits) Lists exhibits filed with Form 10-Q, including CEO/CFO certifications and XBRL taxonomy documents - Exhibits include Rule 13a-14(a) Certifications by the Chief Executive Officer and Chief Financial Officer[192](index=192&type=chunk) - Section 1350 Certifications by the Chief Executive Officer and Chief Financial Officer are furnished[192](index=192&type=chunk) - Inline XBRL Taxonomy Extension Schema, Calculation, Definition, Label, and Presentation Linkbase Documents, along with the Cover Page Interactive Data File, are filed[192](index=192&type=chunk) [SIGNATURES](index=40&type=section&id=SIGNATURES) The report is signed by Paul D. McKinney, CEO, and Travis T. Thomas, CFO, for Ring Energy, Inc. on May 3, 2023 - The report was signed by Paul D. McKinney, Chief Executive Officer, and Travis T. Thomas, Chief Financial Officer[197](index=197&type=chunk) - The signing date for the report was May 3, 2023[197](index=197&type=chunk)

Ring Energy, Inc. (NYSE:REI) Q4 2022 Earnings Conference Call March 10, 2023 11:00 AM ET Company Participants Al Petrie - IR Paul McKinney - Chairman & CEO Travis Thomas - CFO Marinos Baghdati - EVP of Operations Alex Dyes - EVP of Engineering & Corporate Strategy Steve Brooks - EVP of Land, Legal, Human Resources & Marketing Conference Call Participants Neal Dingmann - Truist Securities Jeff Robertson - Water Tower Research Noel Parks - Tuohy Brothers Operator Good morning, and welcome to Ring Energy's Fou ...