[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 ...

Financial Performance & Strategy - The company delivered record results in 2022, with year-over-year increases of 45% in net sales, 149% in cash flow from operations, and 134% in Adjusted EBITDA[49] - The company has consistently generated free cash flow for 13 consecutive quarters, with a 70% year-over-year increase in 2022[49] - The company reduced its leverage ratio to approximately 1.56x by year-end 2022 and increased liquidity by 205% year-over-year[49] - The company's strategy is focused on maintaining production levels, generating free cash flow, and reducing debt[33] - The company is pursuing accretive acquisitions to increase scale and lower break-even costs[33] Reserves & Production - The company increased its proved reserves to 138.1 million barrels of oil equivalent in 2022, a 78% year-over-year increase[49] - Q4 2022 net production was 17,856 Boe/d, with approximately 68% oil, 17% gas and 15% NGL[66] - The company's YE22 PD Reserves PV10 is $1,907 million[21] ESG Initiatives - The company created an ESG Task Force to monitor adherence to ESG standards[3] - The company established the Target Zero 365 (TZ-365) Safety & Environmental Initiative[3] - The company's 2023 Capital Program includes Fugitive Emission Reduction plans[8] Assets and Operations - The company has 400+ proved locations[66] - The company has ~102 thousand net acreage[21]

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 fiscal year ended December 31, 2022 Or o Transition 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 ...

Financial Data and Key Metrics Changes - The third quarter of 2022 marked a transformational period for the company, with record quarterly production, revenue, net income, and adjusted EBITDA [11][13] - Sales volumes for the quarter were 13,278 barrels of oil equivalent per day, a 42% increase from the second quarter [14] - The company posted net income of $75.1 million or $0.49 per diluted share, with adjusted net income of $32.5 million or $0.28 per share [32][33] - The leverage ratio improved to 1.4x, down 33% from 2.1x at the end of the second quarter [20][22] Business Line Data and Key Metrics Changes - The company sold 933,000 barrels of oil, 953,000 Mcf of natural gas, and 130,000 barrels of NGLs for a total of 1.2 million BOE in Q3 2022, compared to 850,000 BOE in Q2 2022 [24] - The average realized pricing for crude oil was $92.64 per barrel, while natural gas was $4.89 per Mcf, and NGLs were $25.68 per barrel [25] - The company drilled eight horizontal wells in Q3, bringing the total for the year to 23 [15] Market Data and Key Metrics Changes - The average oil price differential from NYMEX WTI was a positive $2.28 per barrel in Q3, compared to $0.81 in Q2 [26] - The average natural gas differential from Henry Hub was a negative $3.15 per Mcf in Q3, worsening from a negative $0.23 in Q2 [27] Company Strategy and Development Direction - The company plans to maintain or slightly grow production in 2023, with capital expenditures projected between $150 million to $175 million [38] - The strategy includes a balanced capital-efficient combination of drilling horizontal wells on legacy assets and vertical wells on newly acquired properties [38] - The company is focused on maximizing the value of existing infrastructure and targeting the highest rates of return for capital allocation [49][52] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's strong financial position and flexibility to react to market changes [42] - The company anticipates a strong finish to the year, with expectations of sales volumes between 18,000 and 19,000 BOE per day in Q4 2022 [36] - Management highlighted the importance of maintaining low breakeven costs and high margins across its portfolio [81] Other Important Information - The company ended the quarter with over $165 million in liquidity, including $900,000 in cash [33] - The borrowing base on the credit facility was increased by more than 70% to $600 million due to the acquisition [22] Q&A Session Summary Question: Comparison of new drilling production data in target areas - Management discussed the allocation of drilling based on maximizing existing infrastructure and production efficiency [46][49] Question: Potential for Delaware Basin assets - Management indicated that while there are economic opportunities in the Delaware Basin, current investments in other areas provide better returns [52][54] Question: Refrac opportunities and infrastructure issues - Management noted ongoing infrastructure improvements that would enhance operational efficiency and allow for increased activity in the future [56][58] Question: Performance of recompletions on Stronghold assets - Management provided insights into the competitive rates of return between Northwest Shelf and Stronghold assets, emphasizing the efficiency of capital allocation [64][66]

PART I – FINANCIAL INFORMATION [Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements.) This section presents Ring Energy's unaudited condensed financial statements, including balance sheets, operations, and cash flows, reflecting significant increases in assets, liabilities, revenue, and net income Condensed Balance Sheet Highlights (Unaudited) | Account | September 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | **Total Current Assets** | $65,220,674 | $29,806,963 | | **Net Properties and Equipment** | $1,154,442,848 | $651,359,647 | | **Total Assets** | **$1,251,310,893** | **$684,157,329** | | **Total Current Liabilities** | $126,730,345 | $76,668,730 | | **Revolving line of credit** | $435,000,000 | $290,000,000 | | **Total Liabilities** | $607,281,499 | $383,533,122 | | **Total Stockholders' Equity** | $506,170,948 | $300,624,207 | Condensed Statements of Operations Highlights (Unaudited) | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | **Revenues** | $94,408,948 | $49,376,176 | $247,551,855 | $136,638,810 | | **Income from Operations** | $53,571,866 | $24,387,015 | $145,910,111 | $63,886,783 | | **Net Income (Loss)** | $75,085,891 | $14,163,934 | $124,142,356 | $(20,789,318) | | **Diluted Earnings (Loss) per share** | $0.49 | $0.12 | $0.92 | $(0.21) | Condensed Statements of Cash Flows Highlights (Unaudited) | Cash Flow Activity | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | **Net Cash Provided by Operating Activities** | $133,335,223 | $49,523,439 | | **Net Cash Used in Investing Activities** | $(268,346,299) | $(33,869,724) | | **Net Cash Provided by (Used in) Financing Activities** | $133,493,327 | $(17,185,403) | | **Net Change in Cash** | $(1,517,749) | $(1,531,688) | - Beginning July 1, 2022, the Company began reporting on a three-stream basis (crude oil, natural gas, and NGLs), a change from its previous two-stream (oil and natural gas) reporting, necessitated by the Stronghold Acquisition[65](index=65&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=31&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the significant impact of the Stronghold acquisition, the company's strategy for growth and debt reduction, and the substantial revenue growth driven by higher commodity prices and increased production volumes - On August 31, 2022, the company completed the acquisition of Stronghold assets for approximately **$395.7 million**, funded by borrowings under an expanded credit facility[148](index=148&type=chunk)[149](index=149&type=chunk) - The company's business strategy focuses on growing production and reserves, reducing long-term debt using free cash flow, employing industry-leading drilling techniques, and pursuing strategic acquisitions[150](index=150&type=chunk)[155](index=155&type=chunk)[156](index=156&type=chunk)[157](index=157&type=chunk) Q3 2022 vs. Q3 2021 Operational and Financial Comparison | Metric | Q3 2022 | Q3 2021 | Change | | :--- | :--- | :--- | :--- | | **Total Revenue** | $94.4M | $49.4M | +91% | | **Net Income** | $75.1M | $14.2M | +430% | | **Total Production (Boe)** | 1,221,616 | 758,387 | +61% | | **Average Oil Price (/Bbl)** | $92.64 | $69.61 | +33% | | **Lease Operating Expense (/Boe)** | $10.67 | $9.21 | +18% | | **G&A Expense** | $7.4M | $4.4M | +68% | - The company's borrowing base under its credit facility increased from **$350 million to $600 million** in conjunction with the Stronghold acquisition, with **$435 million** outstanding as of September 30, 2022[165](index=165&type=chunk)[203](index=203&type=chunk) - The company actively manages commodity price risk through derivative contracts, with extensive oil and natural gas hedges in place through 2024[160](index=160&type=chunk)[161](index=161&type=chunk)[162](index=162&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=43&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section outlines the company's primary market risks, including commodity price volatility, interest rate fluctuations, and customer credit risk, and how they are managed - The company is exposed to interest rate risk on its **$435 million** of outstanding variable-rate debt, where a **1% change** would impact annualized interest expense by approximately **$4.4 million**[231](index=231&type=chunk) - Commodity price volatility is the company's major market risk exposure, managed through crude oil and natural gas price hedging arrangements for a portion of expected production[233](index=233&type=chunk)[235](index=235&type=chunk) - Significant customer credit risk exists, with Phillips 66 and NGL Crude accounting for **69% and 14%** of oil and gas revenues, respectively, for the nine months ended September 30, 2022[237](index=237&type=chunk) [Controls and Procedures](index=44&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2022, 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 the report[240](index=240&type=chunk) - There were no changes in internal control over financial reporting during the nine months ended September 30, 2022, that have materially affected, or are reasonably likely to materially affect, internal controls[243](index=243&type=chunk) PART II – OTHER INFORMATION [Legal Proceedings](index=45&type=section&id=Item%201.%20Legal%20Proceedings) The company may be subject to legal actions in the normal course of business and maintains insurance coverage, with no specific ongoing proceedings detailed - The company may be subject to legal actions in the normal course of business and maintains insurance coverage it believes is prudent, incorporating by reference information from its 2021 Form 10-K[246](index=246&type=chunk) [Risk Factors](index=45&type=section&id=Item%201A.%20Risk%20Factors) This section updates risk factors, highlighting new risks from the Stronghold acquisition, including potential stock price depression from share sales, significant indebtedness, and restrictions on dividend payments - A new risk is the potential for a large sale of the **63,888,878 shares** (approximately **37%** of outstanding stock) registered for resale by former Stronghold stockholders, which could depress the market price of the company's common stock[248](index=248&type=chunk) - The company has significant indebtedness, with **$435 million** outstanding on its **$600 million** credit facility as of September 30, 2022, which could limit future financing and increase vulnerability to adverse conditions[249](index=249&type=chunk)[251](index=251&type=chunk) - The company does not currently pay cash dividends on its common stock and intends to retain future earnings, with its credit agreement also containing restrictions on dividend payments[251](index=251&type=chunk)[252](index=252&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=46&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section incorporates by reference the disclosure from a Form 8-K regarding unregistered sales of equity securities related to the Stronghold acquisition - Information regarding unregistered sales of equity securities was previously reported in a Form 8-K dated August 30, 2022, and is incorporated by reference[253](index=253&type=chunk) [Defaults Upon Senior Securities](index=46&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reports no defaults upon senior securities during the period - None[254](index=254&type=chunk) [Mine Safety Disclosure](index=46&type=section&id=Item%204.%20Mine%20Safety%20Disclosure) The company reports no applicable mine safety disclosures for its operations - None[255](index=255&type=chunk) [Other Information](index=46&type=section&id=Item%205.%20Other%20Information) The company reports no other information to disclose for the period - None[256](index=256&type=chunk) [Exhibits](index=46&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including CEO/CFO certifications and XBRL interactive data files - The report includes certifications from the CEO and CFO under Rule 13a-14(a) and Section 1350, as well as XBRL data files[257](index=257&type=chunk)

Financial Data and Key Metrics Changes - The company reported record-setting sales revenue and adjusted EBITDA, with adjusted EBITDA increasing by 33% compared to the first quarter of 2022 [12] - Free cash flow generation continued for the eleventh consecutive quarter, with an additional $10 million in debt reduction [12] - Net income for the second quarter was $41.9 million, or $0.32 per diluted share, compared to $7.1 million, or $0.06 per diluted share in the first quarter [33] Business Line Data and Key Metrics Changes - Sales volumes for the quarter were 9,341 barrels of oil equivalent per day, over 5% higher than the first quarter [13] - The company drilled nine wells and completed seven wells during the second quarter, focusing on the Northwest shelf acreage [14][15] - Lease operating expenses per BOE were 13% lower than the first quarter due to lower costs and higher production [17] Market Data and Key Metrics Changes - Realized pricing for the second quarter was $109.24 per barrel and $7.29 per MCF, compared to $93.80 per barrel and $6.49 per MCF in the first quarter [25] - The average oil price differential from NYMEX WTI was a positive $0.81 per barrel in the second quarter, compared to a negative $0.90 per barrel in the first quarter [26] - Natural gas price differential from Henry Hub was a negative $0.23 per MCF in the second quarter, compared to a positive differential of $1.81 per MCF in the first quarter [27] Company Strategy and Development Direction - The company plans to close the acquisition of Stronghold Energy, which is expected to nearly double production and diversify the commodity mix [10][44] - The acquisition is anticipated to improve leverage ratios and cash flow per share, allowing for faster debt repayment and potential returns to shareholders [45][46] - The company aims to optimize capital efficiency, achieving production growth for fewer dollars, thus allowing excess cash to be allocated to debt repayment and shareholder returns [45][46] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in continued production and operating cash flow growth throughout 2022, assuming stable commodity prices [42] - The company has factored in rising costs into its forecasts and has been accurate in its projections thus far [54] - Future capital spending is expected to be less than previous estimates, with a focus on optimizing capital allocation while meeting growth expectations [82] Other Important Information - The company ended the second quarter with $81.5 million in liquidity, a 33% increase from the end of 2021 [21] - The full-year capital spending guidance remains unchanged at $120 million to $140 million [20] Q&A Session Summary Question: Overview on services and materials cost for the second half of 2022 - Management indicated that they have factored in rising prices into their forecasts and have been fairly accurate in their projections [54] Question: Productivity expectations between Stronghold new well inventory versus recompletion inventory - New wells are expected to bring more production, while recompletions are targeted more for managing decline rates [55][56] Question: Status of rig outlook with Stronghold properties combined - No changes to the existing program have been decided yet, and further evaluation will occur post-acquisition [60] Question: GTP costs and their future accounting treatment - GTP costs will no longer be an expense line item but will be reflected as a reduction to the natural gas sales price [62] Question: Warburg Pincus ownership stake and future value creation - Management believes Warburg Pincus sees potential for greater value creation through the combined assets [65] Question: Leverage ratio before considering shareholder returns - The new credit facility will allow for potential dividends or stock buybacks, with the earliest possibility being 12 months post-acquisition [68][69] Question: Capital allocation for Stronghold assets - Management confirmed that some capital will be allocated to Stronghold assets, as they are considered strong opportunities [75][76]

ABING Q2 2022 Earnings VALUE FOCUSED PROVEN STRATEGY www.ringenergy.com NYSE American: REI Forward-Looking Statements and Cautionary Note Regarding Hydrocarbon Disclosures Forward –Looking Statements This Presentation includes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of strictly histori ...

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: June 30, 2022 Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 001-36057 RING ENERGY, INC. (Exact Name of registrant as specified in its charter) Nevada 90-0406406 (State or other jurisdiction of incorporation or organizatio ...

VALUE FOCUSED PROVEN STRATEGY May 11, 2022 www.ringenergy.com NYSE American: REI Forward-Looking Statements and Cautionary Note Regarding Hydrocarbon Disclosures Forward –Looking Statements This Presentation includes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of strictly historical facts ...