Financial Performance (Q3 2021) - Ring Energy reported a net income of $142 million[11] - The company's Adjusted EBITDA was $1971 million[12] - Free Cash Flow (FCF) reached $261 million[14] - Debt was reduced by $55 million utilizing a portion of Free Cash Flow[13, 15] Operational Highlights (Q3 2021) - Net sales averaged 8243 Boe/d, with 87% being oil[17] - Lifting cost per Boe was $1060[18] - The company completed and placed on production 4 Phase III wells (2 NWS & 2 CBP) within budget[15] - 10 CTRs (7 NWS & 3 CBP) were performed, reducing future overall operating costs[16] Reserves and Assets - 2020 SEC Proved Reserves were 765 MMBoe with a PV10 of $638 million, 87% oil[7] - Northwest Shelf asset had 2020 average sales of 5399 Boe/d (85% Oil)[27] - Central Basin Platform asset had 2020 average sales of 2742 Boe/d (96% Oil)[34] Q4 2021 Guidance - Total sales volumes are expected to be between 8800 and 9200 Boe/d[75] - Oil sales volumes are expected to be between 7500 and 7900 Bo/d[76] - Lifting cost is projected to be between $1050 and $1150 per Boe[79] - Capital spending is estimated to be between $11 million and $15 million[86]

[Forward-Looking Statements](index=3&type=section&id=Forward-Looking%20Statements) The report contains forward-looking statements based on management's beliefs and assumptions, involving risks and uncertainties that could cause actual results to differ materially - The report contains forward-looking statements based on management's beliefs and assumptions, which involve risks and uncertainties that could cause actual results to differ materially[8](index=8&type=chunk) - Key risk factors include declines or volatility in oil and natural gas prices, ability to raise capital, general economic conditions, drilling risks, uncertainties in reserve estimates, environmental regulations, cybersecurity incidents, and the ongoing COVID-19 pandemic[9](index=9&type=chunk)[13](index=13&type=chunk) [PART I – FINANCIAL INFORMATION](index=6&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) This section presents the unaudited condensed financial statements and management's discussion and analysis of Ring Energy, Inc.'s financial performance and condition [Item 1. Financial Statements](index=6&type=section&id=Item%201.%20Financial%20Statements.) This section presents Ring Energy, Inc.'s unaudited condensed financial statements, including balance sheets, statements of operations, stockholders' equity, and cash flows, with detailed notes [Condensed Balance Sheets](index=7&type=section&id=Condensed%20Balance%20Sheets) This section provides a snapshot of the company's financial position at specific dates, detailing assets, liabilities, and stockholders' equity | Metric | Sep 30, 2021 ($) | Dec 31, 2020 ($) | Change ($) | % Change | | :-------------------------------- | :----------- | :----------- | :------- | :------- | | Total Assets | $678,618,843 | $663,456,197 | +$15,162,646 | +2.28% | | Total Liabilities | $402,981,349 | $368,690,384 | +$34,290,965 | +9.30% | | Total Stockholders' Equity | $275,637,494 | $294,765,813 | -$19,128,319 | -6.49% | | Cash and cash equivalents | $2,046,946 | $3,578,634 | -$1,531,688 | -42.80% | | Accounts receivable | $20,306,264 | $14,997,979 | +$5,308,285 | +35.39% | | Derivative liabilities (current) | $38,402,944 | $3,287,328 | +$35,115,616 | +1068.10% | | Revolving line of credit | $295,000,000 | $313,000,000 | -$18,000,000 | -5.75% | [Condensed Statements of Operations](index=8&type=section&id=Condensed%20Statements%20of%20Operations) This section outlines the company's revenues, expenses, and net income or loss over specific periods, reflecting operational performance | Metric | 3 Months Ended Sep 30, 2021 ($) | 3 Months Ended Sep 30, 2020 ($) | Change ($) | % Change | | :-------------------------------- | :-------------------------- | :-------------------------- | :------- | :------- | | Oil and Natural Gas Revenues | $49,376,176 | $31,466,544 | +$17,909,632 | +56.92% | | Total Costs and Operating Expenses | $24,989,161 | $24,955,383 | +$33,778 | +0.14% | | Income (Loss) from Operations | $24,387,015 | $6,511,161 | +$17,875,854 | +274.54% | | Net Income (Loss) | $14,163,934 | $(1,961,603) | +$16,125,537 | N/A | | Basic Earnings (Loss) per share | $0.14 | $(0.03) | +$0.17 | N/A | | Metric | 9 Months Ended Sep 30, 2021 ($) | 9 Months Ended Sep 30, 2020 ($) | Change ($) | % Change | | :-------------------------------- | :-------------------------- | :-------------------------- | :------- | :------- | | Oil and Natural Gas Revenues | $136,638,810 | $81,673,465 | +$54,965,345 | +67.30% | | Total Costs and Operating Expenses | $72,752,027 | $221,926,283 | -$149,174,256 | -67.22% | | Income (Loss) from Operations | $63,886,783 | $(140,252,818) | +$204,139,601 | N/A | | Net Income (Loss) | $(20,789,318) | $(93,157,551) | +$72,368,233 | N/A | | Basic Earnings (Loss) per share | $(0.21) | $(1.37) | +$1.16 | N/A | - The significant decrease in Total Costs and Operating Expenses for the nine months ended September 30, 2021, compared to 2020, is primarily due to the absence of a **$147.9 million ceiling test impairment** recorded in 2020[20](index=20&type=chunk) - Gain (loss) on derivative contracts swung from a **$32.9 million gain in 9M 2020** to a **$73.6 million loss in 9M 2021**, significantly impacting net income[20](index=20&type=chunk) [Condensed Statements of Stockholders' Equity](index=9&type=section&id=Condensed%20Statements%20of%20Stockholders%27%20Equity) This section details changes in the company's equity accounts, including common stock, additional paid-in capital, and accumulated deficit | Metric | Dec 31, 2020 (shares) | Sep 30, 2021 (shares) | Change (shares) | | :-------------------------------- | :----------- | :----------- | :------- | | Common Stock (shares) | 85,568,287 | 99,359,938 | +13,791,651 | | Common Stock (amount) ($) | $85,568 | $99,360 | +$13,792 | | Additional Paid-in Capital ($) | $550,951,415 | $552,598,622 | +$1,647,207 | | Accumulated Deficit ($) | $(256,271,170) | $(277,060,488) | -$20,789,318 | | Total Stockholders' Equity ($) | $294,765,813 | $275,637,494 | -$19,128,319 | - During the nine months ended September 30, 2021, the company issued **13,428,500 shares** from pre-funded warrant exercises and **284,800 shares** from common warrant exercises, generating **$241,269** in gross proceeds[22](index=22&type=chunk)[108](index=108&type=chunk) [Statements of Cash Flows](index=10&type=section&id=Statements%20of%20Cash%20Flows) This section reports the cash generated and used by the company's operating, investing, and financing activities over specific periods | Metric | 9 Months Ended Sep 30, 2021 ($) | 9 Months Ended Sep 30, 2020 ($) | Change ($) | | :-------------------------------- | :-------------------------- | :-------------------------- | :------- | | Net Cash Provided by (Used In) Operating Activities | $49,523,439 | $44,903,306 | +$4,620,133 | | Net Cash Provided by (Used in) Investing Activities | $(33,869,724) | $(30,275,770) | -$3,593,954 | | Net Cash Provided by (Used in) Financing Activities | $(17,185,403) | $(6,711,341) | -$10,474,062 | | Net Change in Cash | $(1,531,688) | $7,916,195 | -$9,447,883 | | Cash at End of Period | $2,046,946 | $17,920,817 | -$15,873,871 | - Cash flows from operating activities increased primarily due to **higher cash received from customers in 2021**[161](index=161&type=chunk) - Increased cash used in investing activities was driven by **higher payments to develop oil and natural gas properties**[161](index=161&type=chunk) - Net cash used in financing activities increased significantly, including **$18 million paid on the credit facility** during the nine months ended September 30, 2021[161](index=161&type=chunk) [Notes to Condensed Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Financial%20Statements) This section provides detailed explanations and additional information supporting the condensed financial statements, clarifying accounting policies and specific line items [NOTE 1 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES](index=11&type=section&id=NOTE%201%20%E2%80%93%20BASIS%20OF%20PRESENTATION%20AND%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines the preparation basis for interim financial statements and the company's key accounting policies, including revenue recognition and derivatives - The unaudited condensed financial statements are prepared in accordance with GAAP for interim information and should be read with the **2020 Form 10-K**[28](index=28&type=chunk)[29](index=29&type=chunk) - The Company is an independent E&P company focused on oil and natural gas properties in Texas and New Mexico, with profitability dependent on **volatile commodity prices**[31](index=31&type=chunk) - COVID-19 caused significant oil price declines in early 2020, which have since recovered, but continued volatility or new variants could still adversely impact operations[32](index=32&type=chunk) - Liquidity is maintained through cash flow from operations, cash on hand, available borrowing capacity, and non-strategic asset sales, with hedges in place to mitigate price declines[33](index=33&type=chunk)[34](index=34&type=chunk) - Derivative instruments are recorded at fair value, with changes recognized in earnings; for 9M 2021, an **unrealized loss of $40.3 million** and **realized losses of $33.3 million** were recognized on derivatives[43](index=43&type=chunk)[44](index=44&type=chunk) - The Company uses the full cost method for oil and gas properties and did not incur a ceiling test impairment for 3M/9M 2021, unlike the **$147.9 million impairment in 2020**[48](index=48&type=chunk)[49](index=49&type=chunk) - For 9M 2021, the Company recorded state deferred income tax expense of **$141,943** but no federal income tax expense or benefit due to a full valuation allowance against net federal deferred tax assets[58](index=58&type=chunk) [NOTE 2 – REVENUE RECOGNITION](index=19&type=section&id=NOTE%202%20%E2%80%93%20REVENUE%20RECOGNITION) This note details the company's policy for recognizing revenue from crude oil and natural gas sales, including product and geographical breakdowns - Revenue is primarily derived from crude oil and natural gas sales, recognized when control transfers to the purchaser at delivery, net of royalties[67](index=67&type=chunk) | Product | 3 Months Ended Sep 30, 2021 ($) | 3 Months Ended Sep 30, 2020 ($) | 9 Months Ended Sep 30, 2021 ($) | 9 Months Ended Sep 30, 2020 ($) | | :-------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Oil | $45,889,548 | $30,327,668 | $126,927,318 | $79,379,242 | | Natural gas | $3,486,628 | $1,138,876 | $9,711,492 | $2,294,223 | | Total | $49,376,176 | $31,466,544 | $136,638,810 | $81,673,465 | - All revenues are generated from production in the **Permian Basin in Texas and New Mexico**[71](index=71&type=chunk) [NOTE 3 – LEASES](index=21&type=section&id=NOTE%203%20%E2%80%93%20LEASES) This note describes the company's lease accounting policies, including the recognition of operating and financing lease assets and liabilities - The Company adopted ASU 2016-02 (Leases) effective January 1, 2019, recognizing certain lease assets and liabilities on the balance sheet[73](index=73&type=chunk) - Operating leases include office spaces in The Woodlands and Midland, Texas, with the Tulsa office lease terminated in **March 2021**[75](index=75&type=chunk) - Financing leases are primarily for vehicles with a **36-month term**, after which the Company owns and typically sells them for new vehicle proceeds[78](index=78&type=chunk) | Lease Type | 2021 (remaining $) | 2022 ($) | 2023 ($) | 2024 ($) | 2025 ($) | | :----------------------- | :--------------- | :----- | :----- | :----- | :----- | | Operating lease payments | $68,132 | $349,127 | $356,991 | $376,855 | $384,719 | | Financing lease payments | $126,889 | $336,206 | $215,530 | $142,354 | $0 | [NOTE 4 – EARNINGS (LOSS) PER SHARE INFORMATION](index=22&type=section&id=NOTE%204%20%E2%80%93%20EARNINGS%20(LOSS)%20PER%20SHARE%20INFORMATION) This note provides a breakdown of basic and diluted earnings per share calculations, including the impact of potentially dilutive securities | Metric | 3 Months Ended Sep 30, 2021 ($) | 3 Months Ended Sep 30, 2020 ($) | 9 Months Ended Sep 30, 2021 ($) | 9 Months Ended Sep 30, 2020 ($) | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net Income (Loss) | $14,163,934 | $(1,961,603) | $(20,789,318) | $(93,157,551) | | Basic Weighted-Average Shares Outstanding | 99,358,504 | 67,980,961 | 99,251,532 | 67,985,168 | | Diluted Weighted-Average Shares Outstanding | 121,220,748 | 67,980,961 | 99,251,532 | 67,985,168 | | Basic Earnings (Loss) per Share | $0.14 | $(0.03) | $(0.21) | $(1.37) | | Diluted Earnings (Loss) per Share | $0.12 | $(0.03) | $(0.21) | $(1.37) | - Certain stock options, restricted stock, and common warrants were excluded from diluted EPS calculation for various periods as their effect would have been anti-dilutive[83](index=83&type=chunk) [NOTE 5 – ACQUISITIONS & DIVESTITURES](index=22&type=section&id=NOTE%205%20%E2%80%93%20ACQUISITIONS%20%26%20DIVESTITURES) This note details the company's acquisition and divestiture activities, including the sale and exchange of oil and gas interests - In February 2021, the Company completed a sale and exchange of oil and gas interests in Andrews County, Texas, receiving **$2,000,000 in cash**[84](index=84&type=chunk) - This transaction reduced the Company's asset retirement obligations by **$2,934,126** for properties sold and added **$662,705** for properties acquired[84](index=84&type=chunk) [NOTE 6 – DERIVATIVE FINANCIAL INSTRUMENTS](index=22&type=section&id=NOTE%206%20%E2%80%93%20DERIVATIVE%20FINANCIAL%20INSTRUMENTS) This note describes the company's use of derivative contracts to manage commodity price risk and their impact on financial statements - The Company uses derivative contracts (costless collars, puts, swaps) to manage exposure to crude oil and natural gas price fluctuations, but does not designate them as hedges for accounting purposes[85](index=85&type=chunk)[88](index=88&type=chunk) | Metric | Sep 30, 2021 ($) | Dec 31, 2020 ($) | | :-------------------------------- | :----------- | :----------- | | Derivative liabilities, current | $(38,402,944) | $(3,287,328) | | Derivative liabilities, non-current | $(6,061,724) | $(869,273) | | Total Derivative Liabilities | $(44,464,668) | $(4,156,601) | | Metric | 3 Months Ended Sep 30, 2021 ($) | 3 Months Ended Sep 30, 2020 ($) | 9 Months Ended Sep 30, 2021 ($) | 9 Months Ended Sep 30, 2020 ($) | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Gain (loss) on oil derivative | $(6,720,320) | $(4,502,080) | $(73,387,510) | $32,900,767 | | Gain (loss) on natural gas derivatives | $0 | $0 | $(198,689) | $0 | | Cash (paid) received on oil derivatives | $(14,921,008) | $1,726,373 | $(34,030,310) | $18,814,068 | | Cash (paid) received on natural gas derivatives | $0 | $0 | $743,178 | $0 | - As of September 30, 2021, the Company had various oil derivative contracts for **2021 (costless collars and swaps)** and **2022 (swaps)** to manage price risk[92](index=92&type=chunk) [NOTE 7 – FAIR VALUE MEASUREMENTS](index=26&type=section&id=NOTE%207%20%E2%80%93%20FAIR%20VALUE%20MEASUREMENTS) This note explains the company's fair value measurement hierarchy and the valuation techniques used for financial instruments, particularly derivatives - Fair value measurements are classified into a three-level hierarchy, with **Level 1** being unadjusted quoted prices in active markets and **Level 3** being unobservable inputs[95](index=95&type=chunk)[99](index=99&type=chunk) - The fair values of the Company's derivative instruments are estimated using a market approach with commodity futures pricing from a third party, classified as **Level 2 fair value measurements**[96](index=96&type=chunk) | Asset/Liability | As of Dec 31, 2020 (Level 2, $) | As of Sep 30, 2021 (Level 2, $) | | :-------------------------- | :--------------------------- | :--------------------------- | | Commodity Derivatives - Liabilities | $(4,156,601) | $(44,464,668) | - No triggering events for impairment assessment of oil and natural gas properties or goodwill were observed during the nine months ended September 30, 2021, unlike in 2020[98](index=98&type=chunk) [NOTE 8 – REVOLVING LINE OF CREDIT](index=27&type=section&id=NOTE%208%20%E2%80%93%20REVOLVING%20LINE%20OF%20CREDIT) This note details the terms and conditions of the company's credit facility, including borrowing base, outstanding amounts, and covenants - The Credit Facility, amended in April 2019 and further in June 2021, has a maximum borrowing amount of **$1 billion** and matures in **April 2024**[103](index=103&type=chunk) - The borrowing base was reaffirmed at **$350 million** in June 2021 and is subject to semi-annual redeterminations[103](index=103&type=chunk) - As of September 30, 2021, **$295,000,000** was outstanding on the Credit Facility, and the Company was in compliance with all covenants, including a total Leverage Ratio not exceeding **4.0 to 1.0** and a minimum Current Assets to Current Liabilities ratio of **1.0 to 1.0**[105](index=105&type=chunk) [NOTE 9 – ASSET RETIREMENT OBLIGATION](index=29&type=section&id=NOTE%209%20%E2%80%93%20ASSET%20RETIREMENT%20OBLIGATION) This note outlines the changes in the company's asset retirement obligations, including liabilities incurred, acquired, and settled | Item | Amount ($) | | :-------------------------------- | :----------- | | Balance, December 31, 2020 | $17,117,135 | | Liabilities incurred | $160,285 | | Liabilities acquired | $662,704 | | Liabilities sold | $(2,934,126) | | Revision of previous estimates | $153,475 | | Liabilities settled | $(722,005) | | Accretion expense | $560,662 | | Balance, September 30, 2021 | $14,998,130 | [NOTE 10 – STOCKHOLDERS' EQUITY](index=29&type=section&id=NOTE%2010%20%E2%80%93%20STOCKHOLDERS%27%20EQUITY) This note provides details on changes in stockholders' equity, including warrant exercises and their impact on common stock - During the nine months ended September 30, 2021, **13,428,500 pre-funded warrants** and **284,800 common warrants** were exercised, generating gross proceeds of **$241,269**[108](index=108&type=chunk) - As of September 30, 2021, **29,519,500 unexercised common warrants** remained outstanding[108](index=108&type=chunk) [NOTE 11 – EMPLOYEE STOCK OPTIONS AND RESTRICTED STOCK AWARD PLAN](index=29&type=section&id=NOTE%2011%20%E2%80%93%20EMPLOYEE%20STOCK%20OPTIONS%20AND%20RESTRICTED%20STOCK%20AWARD%20PLAN) This note describes the company's share-based compensation plans, including stock options and restricted stock awards, and related expenses | Metric | 3 Months Ended Sep 30, 2021 ($) | 3 Months Ended Sep 30, 2020 ($) | 9 Months Ended Sep 30, 2021 ($) | 9 Months Ended Sep 30, 2020 ($) | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Share-based compensation expense | $777,461 | $565,819 | $1,484,730 | $2,557,156 | - In May 2021, a new long-term incentive plan was approved, allowing for the issuance of up to **9,900,000 shares of common stock**[112](index=112&type=chunk) | Stock Options | Sep 30, 2021 | Sep 30, 2020 | | :-------------------------- | :----------- | :----------- | | Outstanding Shares (shares) | 465,500 | 483,500 | | Weighted-Average Exercise Price ($) | $3.26 | $3.52 | | Weighted-Average Remaining Contractual Term (Years) | 2.61 Years | 1.9 Years | | Aggregate Intrinsic Value ($) | $375,250 | $0 | | Restricted Stock | Sep 30, 2021 | Sep 30, 2020 | | :-------------------------- | :----------- | :----------- | | Outstanding Shares (shares) | 3,247,623 | 1,326,709 | | Weighted Average Grant Date Fair Value ($) | $1.56 | $4.99 | - As of September 30, 2021, there was **$3,481,966** of unrecognized compensation cost related to restricted stock grants, to be recognized over a weighted average period of **2.21 years**[116](index=116&type=chunk) [NOTE 12 – CONTINGENCIES AND COMMITMENTS](index=31&type=section&id=NOTE%2012%20%E2%80%93%20CONTINGENCIES%20AND%20COMMITMENTS) This note outlines the company's contingent liabilities and commitments, including standby letters of credit and surety bonds - The Company has standby letters of credit totaling **$760,438** issued by a commercial bank to state and federal agencies and an insurance company, collateralized by the Credit Facility[118](index=118&type=chunk) - Surety bonds totaling **$500,438** have been issued to various New Mexico agencies, with **$400,000** intended for annual renewal and **$100,438** related to inactive wells[119](index=119&type=chunk)[121](index=121&type=chunk) [NOTE 13 – SUBSEQUENT EVENTS](index=33&type=section&id=NOTE%2013%20%E2%80%93%20SUBSEQUENT%20EVENTS) This note reports on events occurring after the balance sheet date that may require disclosure or adjustment to the financial statements - The Company evaluated all events subsequent to September 30, 2021, and determined there were no material subsequent events requiring reporting[122](index=122&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=34&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial condition, operational results, business strategy, and performance drivers for the three and nine months ended September 30, 2021 [Overview](index=34&type=section&id=Overview) This section provides a high-level introduction to Ring Energy, Inc. as an independent exploration and production company focused on the Permian Basin - Ring Energy, Inc. is a growth-oriented independent exploration and production company focused on oil and natural gas development, production, acquisition, and exploration in the **Permian Basin (Texas and New Mexico)**[125](index=125&type=chunk) [Business Description and Plan of Operation](index=34&type=section&id=Business%20Description%20and%20Plan%20of%20Operation) This section outlines the company's strategic objectives, including optimizing properties, pursuing acquisitions, generating free cash flow, and reducing debt - The Company's strategy focuses on optimizing existing properties, pursuing accretive acquisitions, generating free cash flow by lowering operating costs, and maintaining disciplined capital spending to reduce debt[126](index=126&type=chunk) - Key initiatives include growing production and reserves through conventional and horizontal drilling (e.g., **13 horizontal wells** and **24 rod pump conversions** expected in 2021), reducing long-term debt (paid down **$5.5 million in Q3 2021**), and employing industry-leading drilling and completion techniques[127](index=127&type=chunk) - The Company also aims to pursue strategic acquisitions with exceptional upside potential, leveraging management's experience in the Permian Basin[128](index=128&type=chunk) [Executive Summary - 2021 Developments and Highlights](index=36&type=section&id=Executive%20Summary%20-%202021%20Developments%20and%20Highlights) This section summarizes key developments and achievements in 2021, including oil price recovery, drilling activities, hedging, and corporate changes - The economy's recovery and increased demand for oil and gas led to strengthened oil prices in 2021, exceeding pre-pandemic levels, though volatility remains due to OPEC actions and other factors[129](index=129&type=chunk) - Rising crude prices supported a targeted drilling program, with **two 1-mile horizontal Northwest Shelf San Andres wells** and **two 1.5-mile horizontal Central Basin Platform San Andres wells** completed in Q3 2021[130](index=130&type=chunk) - A severe winter storm in Texas in February 2021 shut in over **60% of production**, negatively impacting sales volumes and increasing lease operating expenses, partially offset by higher gas prices[131](index=131&type=chunk) - The Company entered into swaps for **879 barrels of oil per day** for calendar year 2022 at an average price of **$49.03**, and unwound gas swaps for 2021 and 2022 for a realized value of **$581,424**[133](index=133&type=chunk) - The corporate headquarters relocated to The Woodlands, Texas, effective January 1, 2021, and Travis Thomas was appointed Chief Financial Officer on **March 24, 2021**[134](index=134&type=chunk)[135](index=135&type=chunk) - The borrowing base was reaffirmed at **$350 million** in June 2021, and the Company paid down **$5.5 million of debt** in Q3 2021, reducing the principal outstanding on the Credit Facility to **$295 million**[136](index=136&type=chunk) [Results of Operations – For the Three Months Ended September 30, 2021 and 2020](index=37&type=section&id=Results%20of%20Operations%20%E2%80%93%20For%20the%20Three%20Months%20Ended%20September%2030%2C%202021%20and%202020) This section analyzes the company's financial performance for the three months ended September 30, 2021, compared to the prior year, focusing on revenue and expenses | Metric | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | Change | % Change | | :-------------------------------- | :-------------------------- | :-------------------------- | :------- | :------- | | Oil and Natural Gas Sales Revenue ($) | $49,376,176 | $31,466,544 | +$17,909,632 | +56.92% | | Oil Sales Volume (Bbls) | 659,247 | 781,626 | -122,379 | -15.66% | | Average Realized Oil Price (per Bbl) ($) | $69.61 | $38.80 | +$30.81 | +79.41% | | Natural Gas Sales Volume (Mcf) | 594,841 | 581,123 | +13,718 | +2.36% | | Average Realized Natural Gas Price (per Mcf) ($) | $5.86 | $1.96 | +$3.90 | +198.98% | | Total Lease Operating Expenses ($) | $6,983,196 | $7,819,639 | -$836,443 | -10.70% | | LOE per Boe ($) | $9.21 | $8.90 | +$0.31 | +3.48% | | General and Administrative Expense ($) | $4,433,251 | $2,496,927 | +$1,936,324 | +77.56% | | Interest Expense ($) | $3,551,462 | $4,457,250 | -$905,788 | -20.32% | | Net Income (Loss) ($) | $14,163,934 | $(1,961,603) | +$16,125,537 | N/A | - Oil and natural gas sales revenue increased significantly due to **higher commodity prices**, despite a decrease in oil sales volume[137](index=137&type=chunk) - Lease operating expenses decreased in total but increased on a per Boe basis due to **lower production volumes**[138](index=138&type=chunk) - General and administrative expenses increased due to higher insurance, legal costs, additional personnel, and relocation expenses[143](index=143&type=chunk) - The Company reported a net income of **$14.2 million**, a significant improvement from a net loss of **$2.0 million** in the prior year, driven by higher revenues and lower LOE[147](index=147&type=chunk) [Results of Operations – For the Nine Months Ended September 30, 2021 and 2020](index=40&type=section&id=Results%20of%20Operations%20%E2%80%93%20For%20the%20Nine%20Months%20Ended%20September%2030%2C%202021%20and%202020) This section analyzes the company's financial performance for the nine months ended September 30, 2021, compared to the prior year, focusing on revenue and expenses | Metric | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | Change | % Change | | :-------------------------------- | :-------------------------- | :-------------------------- | :------- | :------- | | Oil and Natural Gas Sales Revenue ($) | $136,638,810 | $81,673,465 | +$54,965,345 | +67.30% | | Oil Sales Volume (Bbls) | 1,971,776 | 2,066,980 | -95,204 | -4.61% | | Average Realized Oil Price (per Bbl) ($) | $64.37 | $38.40 | +$25.97 | +67.63% | | Natural Gas Sales Volume (Mcf) | 1,773,506 | 1,764,165 | +9,341 | +0.53% | | Average Realized Natural Gas Price (per Mcf) ($) | $5.48 | $1.30 | +$4.18 | +321.54% | | Total Lease Operating Expenses ($) | $22,634,259 | $21,887,356 | +$746,903 | +3.41% | | LOE per Boe ($) | $9.98 | $9.36 | +$0.62 | +6.62% | | General and Administrative Expense ($) | $11,103,394 | $9,709,431 | +$1,393,963 | +14.36% | | Interest Expense ($) | $10,947,960 | $12,958,788 | -$2,010,828 | -15.52% | | Net Income (Loss) ($) | $(20,789,318) | $(93,157,551) | +$72,368,233 | N/A | - Net loss significantly reduced from **$93.2 million in 2020** to **$20.8 million in 2021**, primarily due to the absence of the **$148 million impairment charge in 2020**, offset by a substantial loss on derivative contracts in 2021[158](index=158&type=chunk) - Higher commodity prices drove a **67.3% increase in oil and natural gas sales revenue**, despite a slight decrease in oil sales volume[149](index=149&type=chunk) - LOE per Boe increased due to freeze-related repair expenses and reduced production from the winter storm in Texas[150](index=150&type=chunk) [Capital Resources and Liquidity](index=44&type=section&id=Capital%20Resources%20and%20Liquidity) This section discusses the company's sources of capital and its ability to meet short-term and long-term financial obligations, including cash flow and capital expenditures | Metric | 9 Months Ended Sep 30, 2021 ($) | 9 Months Ended Sep 30, 2020 ($) | | :-------------------------------- | :-------------------------- | :-------------------------- | | Cash on hand (period end) | $2,046,946 | $17,920,817 | | Net cash provided by operating activities | $49,523,439 | $44,903,306 | | Net cash used in investing activities | $(33,869,724) | $(30,275,770) | | Net cash used in financing activities | $(17,185,403) | $(6,711,341) | - The Company aims to maximize free cash flow through cost control, financial discipline, and prudent capital allocation, limiting projects to those with high rates of return[162](index=162&type=chunk) - Planned capital expenditures for 2021 are significantly higher than 2020 levels, expected to improve oil and natural gas production[162](index=162&type=chunk) [Availability of Capital Resources under Credit Facility](index=44&type=section&id=Availability%20of%20Capital%20Resources%20under%20Credit%20Facility) This section details the company's access to capital through its credit facility, including borrowing base, interest rates, and compliance with covenants - The Credit Facility's borrowing base was reaffirmed at **$350 million** in June 2021 and is subject to semi-annual redeterminations[164](index=164&type=chunk)[165](index=165&type=chunk) - Interest rates on Eurodollar Loans range from adjusted LIBOR plus **2.5% to 3.5%**, and on Base Rate Loans from prime rate plus **1.5% to 2.5%**[166](index=166&type=chunk) - The Credit Facility includes covenants requiring a total Leverage Ratio not exceeding **4.0 to 1.0 (4.25 for Q1 2021)** and a minimum Current Assets to Current Liabilities ratio of **1.0 to 1.0**[167](index=167&type=chunk)[168](index=168&type=chunk) - As of September 30, 2021, **$295 million** was outstanding on the Credit Facility, and the Company was in compliance with all covenants[169](index=169&type=chunk) [Derivative Financial Instruments](index=46&type=section&id=Derivative%20Financial%20Instruments%20(MD%26A%20section)) This section describes the company's use of derivative contracts to manage exposure to commodity price fluctuations and their impact on cash flow - The Company uses costless collars, puts, and swap contracts to protect cash flow from oil price fluctuations[170](index=170&type=chunk)[171](index=171&type=chunk) - In November and December 2020, the Company entered into oil swap contracts for **4,500 bbls/day for 2021** and **1,750 bbls/day for 2022**, with additional swaps in early 2021[171](index=171&type=chunk) - All remaining natural gas swap contracts for 2021 and 2022 were unwound on March 30, 2021, for a realized value of **$581,424**[172](index=172&type=chunk) - In May 2021, the Company bought back a **1,500 bbls/day oil call option** and entered into an approximate **879 bbls/day calendar 2022 swap contract** at no net cost to unlock additional upside[173](index=173&type=chunk) [Capital Resources for Future Acquisition and Development Opportunities](index=47&type=section&id=Capital%20Resources%20for%20Future%20Acquisition%20and%20Development%20Opportunities) This section discusses the company's approach to funding potential acquisitions and development projects, including the need for additional capital - The Company continuously evaluates potential acquisitions and development opportunities, prioritizing producing properties with lower-risk undeveloped drilled properties[179](index=179&type=chunk) - Acquisitions may require substantial additional capital through debt or equity, and there is no assurance that transactions will be consummated despite incurring associated costs[180](index=180&type=chunk)[181](index=181&type=chunk) [Effects of Inflation and Pricing](index=48&type=section&id=Effects%20of%20Inflation%20and%20Pricing) This section examines how inflation and volatile commodity prices impact the company's revenue, costs, reserve estimates, and overall financial condition - The oil and natural gas industry is cyclical, with commodity price changes impacting revenue, reserve estimates, borrowing base calculations, and property values[182](index=182&type=chunk) - Business costs are expected to vary with commodity prices and demand for related services, with potential increases due to government spending and regulations[182](index=182&type=chunk) [Off-Balance Sheet Arrangements](index=48&type=section&id=Off-Balance%20Sheet%20Arrangements) This section confirms the absence of any off-balance sheet arrangements that could materially affect the company's financial position - The Company does not have any off-balance sheet arrangements and does not anticipate entering into any[183](index=183&type=chunk) [Disclosures About Market Risks](index=48&type=section&id=Disclosures%20About%20Market%20Risks) This section outlines the company's exposure to various market risks, including commodity price volatility, transportation, competition, personnel, and environmental regulations [Oil and Gas Prices](index=48&type=section&id=Oil%20and%20Gas%20Prices) This section highlights the significant impact of volatile oil and natural gas prices on the company's financial performance and asset values - Oil and natural gas prices are highly volatile and influenced by numerous factors beyond the Company's control, including global economic conditions, supply/demand, and governmental regulations[185](index=185&type=chunk) - A substantial or extended decline in prices could materially and adversely affect the Company's business, financial condition, cash flows, and results of operations, potentially leading to asset impairments[186](index=186&type=chunk) [Transportation of Oil and Natural Gas](index=48&type=section&id=Transportation%20of%20Oil%20and%20Natural%20Gas) This section discusses the company's reliance on existing gatherers for transportation, which may lead to monopolistic pricing power - The Company is committed to existing gatherers, which may result in short-term monopolistic power over gathering and transportation costs, as alternatives would require substantial additional costs[187](index=187&type=chunk) [Competition in the Oil and Natural Gas Industry](index=50&type=section&id=Competition%20in%20the%20Oil%20and%20Natural%20Gas%20Industry) This section addresses the highly competitive nature of the oil and natural gas industry, where the company faces larger, better-resourced competitors - The Company operates in a highly competitive environment for property development, acquisitions, marketing, and securing personnel, facing larger producers with greater resources[188](index=188&type=chunk) - As a smaller company, Ring may face a price disadvantage compared to larger producers who can negotiate more favorable terms for larger quantities of oil/gas[188](index=188&type=chunk) [Retention of Key Personnel](index=50&type=section&id=Retention%20of%20Key%20Personnel) This section emphasizes the company's dependence on its experienced officers and the potential adverse impact of losing key personnel - The Company's success is highly dependent on its officers' extensive experience and expertise in the energy industry, and the loss of these individuals could materially affect operations[189](index=189&type=chunk) [Environmental and Regulatory Risks](index=50&type=section&id=Environmental%20and%20Regulatory%20Risks) This section highlights the extensive environmental and safety regulations governing operations, with compliance costs and potential penalties for violations - Business operations are subject to extensive federal, state, and local environmental and safety laws and regulations, compliance with which can be a significant cost[190](index=190&type=chunk)[191](index=191&type=chunk) - Violations of environmental regulations could lead to cleanup orders, fines, or injunctions on drilling and production activities[192](index=192&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=50&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section details the Company's exposure to various market risks, including interest rate, commodity price, customer credit, and currency exchange rate risks, and outlines strategies for managing these exposures [Interest Rate Risk](index=50&type=section&id=Interest%20Rate%20Risk) This section assesses the company's exposure to fluctuations in interest rates, particularly on its variable-interest credit facility - The Company is exposed to interest rate risk on its variable-interest Credit Facility; a **1% increase or decrease** in the interest rate would result in an approximate **$3 million change in annualized interest expense** based on the **$295 million** outstanding as of September 30, 2021[193](index=193&type=chunk) - Currently, the Company does not use interest rate derivative instruments to manage this exposure[194](index=194&type=chunk) [Commodity Price Risk](index=51&type=section&id=Commodity%20Price%20Risk) This section discusses the company's primary market risk from volatile oil and natural gas prices and its use of hedging strategies - The Company's major market risk is the volatile pricing of oil and natural gas, which significantly influences revenue, profitability, and access to capital[195](index=195&type=chunk)[197](index=197&type=chunk) - To reduce price uncertainty, the Company enters into crude oil and natural gas price hedging arrangements for a portion of its expected production[196](index=196&type=chunk) [Customer Credit Risk](index=51&type=section&id=Customer%20Credit%20Risk) This section identifies the company's credit exposure from receivables related to oil and natural gas sales and joint interest partners - Principal credit risks are receivables from oil and natural gas sales (**$20.3 million**) and joint interest partners (**$1.7 million**) as of September 30, 2021[198](index=198&type=chunk) - Sales to three customers (Phillips 66, NGL Crude, BP) represented **78%, 6%, and 6%** of oil and gas revenues, respectively, for the three months ended September 30, 2021[198](index=198&type=chunk) - Despite customer concentration, the Company believes the loss of any single oil or natural gas customer would not have a material adverse effect due to the availability of other purchasers[198](index=198&type=chunk) [Currency Exchange Rate Risk](index=51&type=section&id=Currency%20Exchange%20Rate%20Risk) This section confirms the company's lack of exposure to foreign currency exchange rate risk due to domestic sales and U.S. dollar payments - The Company has no foreign sales and accepts payments only in U.S. dollars, thus it is not exposed to foreign currency exchange rate risk[199](index=199&type=chunk) [Item 4. Controls and Procedures](index=51&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details management's evaluation of the Company's disclosure controls and procedures and reports on any changes in internal control over financial reporting during the period [Evaluation of disclosure controls and procedures](index=51&type=section&id=Evaluation%20of%20disclosure%20controls%20and%20procedures) Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2021 - Management, including the CEO and CFO, concluded that the Company's disclosure controls and procedures were effective as of September 30, 2021, providing reasonable assurance of achieving control objectives[200](index=200&type=chunk)[201](index=201&type=chunk) [Changes in internal control over financial reporting](index=53&type=section&id=Changes%20in%20internal%20control%20over%20financial%20reporting) This section reports on changes in internal control over financial reporting, including accounting function relocation and CFO appointment - During Q1 2021, the Company transitioned its accounting and reporting functions from Tulsa due to corporate headquarters relocation[204](index=204&type=chunk) - Travis Thomas was named Chief Financial Officer on **March 24, 2021**, replacing William Broaddrick[204](index=204&type=chunk) - Except for the aforementioned, there were no other material changes in internal control over financial reporting during the three months ended September 30, 2021[205](index=205&type=chunk) [PART II – OTHER INFORMATION](index=54&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) This section covers additional information not included in the financial statements, such as legal proceedings, risk factors, equity sales, and exhibits [Item 1. Legal Proceedings](index=54&type=section&id=Item%201.%20Legal%20Proceedings) This section addresses potential legal actions and contingencies that the Company may face in the normal course of business, noting that costs are provided when a loss is probable and estimable - The Company may be subject to threatened or pending legal actions and contingencies in the normal course of business[208](index=208&type=chunk) - Insurance coverage is maintained for personal injury, property damage, and other liabilities, but there is no assurance of applicability or adequacy for all adverse outcomes[208](index=208&type=chunk) [Item 1A. Risk Factors](index=54&type=section&id=Item%201A.%20Risk%20Factors) This section refers to the comprehensive discussion of risks and hazards detailed in the Company's 2020 Form 10-K, stating that no material changes have occurred - The Company is subject to risks and hazards inherent to its business activities, as discussed in 'Item 1A. Risk Factors' of its **2020 Form 10-K**[209](index=209&type=chunk) - There have been no material changes to the risks described in the 2020 Form 10-K, but additional unknown risks or future developments could still adversely affect the Company[209](index=209&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=54&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This item reports that there were no unregistered sales of equity securities or use of proceeds from registered securities during the period - No unregistered sales of equity securities or use of proceeds from registered securities occurred[210](index=210&type=chunk) [Item 3. Defaults Upon Senior Securities](index=54&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item indicates that there were no defaults upon senior securities during the reporting period - No defaults upon senior securities were reported[211](index=211&type=chunk) [Item 4. Mine Safety Disclosure](index=54&type=section&id=Item%204.%20Mine%20Safety%20Disclosure) This item states that there are no mine safety disclosures to report - No mine safety disclosures are applicable or reported[213](index=213&type=chunk) [Item 5. Other Information](index=54&type=section&id=Item%205.%20Other%20Information) This item indicates that there is no other information to disclose - No other information is reported under this item[215](index=215&type=chunk) [Item 6. Exhibits](index=55&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the Form 10-Q, including certifications, XBRL taxonomy documents, and the cover page interactive data file | Exhibit Number | Exhibit Description | Filing Status | | :------------- | :------------------------------------------ | :------------ | | 3.1 | Articles of Incorporation (as amended) | Incorporated by Reference | | 3.2 | Amended and Restated Bylaws | Incorporated by Reference | | 31.1 | Rule 13a-14(a) Certification by Chief Executive Officer | Filed Herewith | | 31.2 | Rule 13a-14(a) Certification by Chief Financial Officer | Filed Herewith | | 32.1 | Section 1350 Certification by Chief Executive Officer | Filed Herewith | | 32.2 | Section 1350 Certification by Chief Financial Officer | Filed Herewith | | 101.SCH | XBRL Taxonomy Extension Schema Document | Filed Herewith | | 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | Filed Herewith | | 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | Filed Herewith | | 101.LAB | XBRL Taxonomy Extension Label Linkbase Document | Filed Herewith | | 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | Filed Herewith | | 104 | Cover Page Interactive Data File | Contained in Exhibit 101 | [SIGNATURES](index=56&type=section&id=SIGNATURES) This section contains the official signatures of the company's Chief Executive Officer and Chief Financial Officer, certifying the report's contents - The report is duly signed on **November 9, 2021**, by Paul D. McKinney, Chief Executive Officer and Director, and Travis T. Thomas, Chief Financial Officer[221](index=221&type=chunk)

Company Overview - Ring Energy has a market capitalization of $259 million as of August 6, 2021[9] - The company's 2020 SEC proved reserves were 765 million barrels of oil equivalent (MMBoe) with a PV10 value of $638 million, with 87% being oil[9] - Ring Energy's Q2 2021 average net sales were 8,709 Boe/d, with 89% being oil[10] Financial Performance - Ring Energy's Q2 2021 Adjusted EBITDA was $206 million and Free Cash Flow (FCF) was $56 million[10] - The company's Q2 2021 net loss was $159 million[35] - Ring Energy reduced long-term debt by $125 million in the first half of 2021[33] Operational Highlights - Ring Energy's Q2 2021 D&C Capex was approximately $60 million, including 5 CTR's and 13 capital workovers & capital maintenance[10,12] - The company completed and placed on production 3 NWS Phase II wells in Q2 2021[33] - Ring Energy's lifting cost per Boe was $1050 in Q2 2021[38] Strategy and Outlook - Ring Energy is focused on generating FCF and strengthening its balance sheet[27] - The company plans to drill 6-8 new wells and complete 6-8 new wells in the second half of 2021, with a capital spending of $30-$35 million[98,101,102] - Ring Energy is evaluating accretive acquisition opportunities and has a sales process underway for its Delaware Asset[87]

Ring Energy, Inc. (NYSE:REI) Q2 2021 Earnings Conference Call August 11, 2021 10:00 AM ET Company Participants Al Petrie - Senior Partner, Al Petrie Advisors Paul McKinney - Chairman and Chief Executive Officer Travis Thomas - Chief Financial Officer Alex Dyes - Executive Vice President of Engineering and Corporate Strategy Marinos Baghdati - Executive Vice President of Operations Conference Call Participants Jeffrey Campbell - Alliance Global Partners Neal Dingmann - Truist Noel Parks - Tuohy Brothers Oper ...

FRESH PERSPECTIVE 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, the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. All statements, other than statements of strictly historical facts included in this Presentation constitut ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: June 30, 2021 ☐ 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) (State or other jurisdiction of incorporation or Nevada 90-0406406 (IRS Employ ...

Ring Energy, Inc. (NYSE:REI) Q1 2021 Earnings Conference Call May 11, 2021 11:00 AM ET Company Participants David Fowler - IR Paul McKinney - Chairman & CEO Travis Thomas - CFO Marinos Baghdati - EVP of Operations Alex Dyes - EVP of Engineering and Corporate Strategy Conference Call Participants Jeffrey Campbell - Alliance Global Partners Neal Dingmann - Truist Securities Noel Parks - Touhy Brothers Operator Good day, and welcome to the Ring Energy First Quarter 2021 Earnings Conference Call. All participan ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: March 31, 2021 ☐ 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) (State or other jurisdiction of incorporation or organization) Nevada 90-0406 ...

Financial Data and Key Metrics Changes - In Q4 2020, the company reported sales volumes of 9,307 barrels of oil equivalent per day, exceeding guidance, with 86% being oil [8] - Adjusted EBITDA for Q4 2020 was $25 million, contributing to $13 million of free cash flow, marking the fifth consecutive quarter of free cash flow [9] - For the full year 2020, revenues were $113 million, with a net loss of $253.4 million or a loss per diluted share of $3.48 [17][18] - The company ended Q4 2020 with $41 million in liquidity, a 25% increase from Q3 2020 [9] Business Line Data and Key Metrics Changes - The company performed 8 CTRs in Q4 2020, converting wells to rod pumps, which reduced future operating costs [8] - The average lifting cost for 2020 was $10.52 per BOE, an 8% decrease year-over-year [11] - The company plans to drill 6 to 8 wells and complete 8 to 10 wells in 2021, with capital spending targeted at $44 million to $48 million [23] Market Data and Key Metrics Changes - Year-end 2020 proved reserves were reported at 76.5 million barrels of oil equivalent, down from 81.1 million barrels at the end of 2019 [12] - The PV10 of year-end 2020 SEC proved reserves was $556 million, down 40% from $923 million at the end of 2019 due to lower prices [12] Company Strategy and Development Direction - The company is focused on generating free cash flow, improving margins, and reducing debt through disciplined capital allocation [29][34] - A strategic objective includes pursuing operational excellence and investing in high-return projects [33] - The company plans to divest noncore assets, including Delaware Basin assets, to strengthen its balance sheet [34] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the impact of a severe winter storm on production but remains optimistic about generating free cash flow for a sixth consecutive quarter [27][28] - The company is committed to a strategic vision focused on health, safety, environmental excellence, and financial sustainability [29] - Management expressed confidence in a better year for 2021, with expectations for production growth and improved financial performance [13][22] Other Important Information - The company plans to file a 10-K/A to correct a typo regarding earnings per share [15] - The company relocated its headquarters to reduce costs and improve communication [32] Q&A Session Summary Question: Regarding the Delaware Basin asset sale - Management believes 2021 is a better year for asset sales compared to 2020, with expectations for good value due to improved prices and stabilized production [40][41] Question: Insights on M&A strategy - Management indicated a preference for using equity in M&A transactions to strengthen the balance sheet and focus on high-margin, low-breakeven cost assets [42][44] Question: Details on the 2021 drilling program - Management confirmed that the drilling program may accelerate due to higher product prices, with potential drilling starting in Q2 2021 [48] Question: Production history and well economics - Management provided insights on the benefits of 1.5-mile laterals, indicating they have demonstrated better economics compared to 1-mile laterals [52][56] Question: Focus on balance sheet and debt reduction - Management aims for a debt-to-EBITDA ratio of 1x or below, with plans to utilize excess cash for debt reduction while considering growth opportunities [61][62]

Form 10-K General Information [Registrant Information](index=1&type=section&id=Registrant%20Information) Ring Energy, Inc is an accelerated filer with 99,181,587 common shares outstanding as of March 16, 2021 - Ring Energy, Inc. is an **accelerated filer**, not a well-known seasoned issuer[1](index=1&type=chunk)[2](index=2&type=chunk) - As of March 16, 2021, the company had **99,181,587 shares** of common stock outstanding[4](index=4&type=chunk) - The aggregate market value of common voting stock held by non-affiliates was **$74,553,881** as of June 30, 2020, based on a closing price of $1.16 per share[3](index=3&type=chunk) [Forward Looking Statements](index=5&type=section&id=Forward%20Looking%20Statements) The report contains forward-looking statements subject to risks like commodity price volatility and regulatory changes - All statements regarding strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans, and objectives are **forward-looking**[8](index=8&type=chunk) - Key factors that could cause actual results to differ materially include **declines in oil and natural gas prices**, ability to raise capital, operational risks, and environmental regulations[8](index=8&type=chunk) - The company undertakes **no obligation** to publicly update or revise any forward-looking statements after their date of issuance[9](index=9&type=chunk) PART I [Item 1: Business](index=6&type=section&id=Item%201%3A%20Business) Ring Energy is an independent oil and gas company focused on the Permian Basin, emphasizing debt reduction and strategic growth - Ring Energy, Inc. is a growth-oriented independent exploration and production company focused on oil and natural gas development in the **Permian Basin**[12](index=12&type=chunk) Company Metrics (as of Dec 31, 2020) | Metric | Value (as of Dec 31, 2020) | | :-------------------------------- | :------------------------- | | Leasehold Acreage (Gross) | 104,455 acres | | Leasehold Acreage (Net) | 76,745 acres | | Producing Wells (Gross) | 610 | | Producing Wells (Net) | 441 | | Proved Reserves (BOE) | 76.5 million | | Oil-weighted Reserves | 87% Oil, 13% Natural Gas | | Proved Developed (PD) Reserves | 57.5% | | Proved Undeveloped (PUD) Reserves | 42.5% | - The company's strategic vision includes operational excellence, generating free cash flow, and pursuing **accretive strategic acquisitions**[15](index=15&type=chunk)[16](index=16&type=chunk)[17](index=17&type=chunk)[18](index=18&type=chunk)[19](index=19&type=chunk)[21](index=21&type=chunk)[22](index=22&type=chunk) - In 2020, due to the drop in oil prices, Ring re-evaluated its capital expenditure budget, shifting focus to **reducing costs and paying down debt**[31](index=31&type=chunk) - The company drilled **6 new horizontal San Andres wells** in the Northwest Shelf in 2020[31](index=31&type=chunk) - **Significant management changes** occurred in late 2020, including the appointment of a new CEO and Chairman, Paul D. McKinney[24](index=24&type=chunk)[25](index=25&type=chunk)[26](index=26&type=chunk)[27](index=27&type=chunk)[28](index=28&type=chunk) - Operations are subject to extensive governmental regulations which can **increase costs and affect profitability**[44](index=44&type=chunk)[47](index=47&type=chunk)[58](index=58&type=chunk)[74](index=74&type=chunk)[79](index=79&type=chunk) - As of December 31, 2020, Ring Energy had **41 full-time employees**[91](index=91&type=chunk)[92](index=92&type=chunk)[93](index=93&type=chunk)[96](index=96&type=chunk) - In response to COVID-19, the company implemented **work-from-home provisions** and safe working protocols for production teams[97](index=97&type=chunk)[100](index=100&type=chunk) [Item 1A: Risk Factors](index=28&type=section&id=Item%201A%3A%20Risk%20Factors) The company faces significant risks from commodity price volatility, drilling uncertainties, hedging limitations, and regulatory changes - Horizontal drilling and completion techniques involve **additional operational risks** such as landing in the desired zone and successful fracture stimulation[101](index=101&type=chunk) - A substantial percentage (**43%**) of proved reserves are undeveloped, requiring significant capital and carrying a higher risk[104](index=104&type=chunk) - Hedging transactions may **limit potential gains** from price increases and expose the company to counterparty default risk[106](index=106&type=chunk)[107](index=107&type=chunk) - The **COVID-19 pandemic** significantly impacted global oil demand and prices, leading to production curtailments and a weaker industry outlook[111](index=111&type=chunk)[112](index=112&type=chunk) - A substantial or extended decline in oil and natural gas prices can **adversely affect revenues**, profitability, and the value of proved reserves[114](index=114&type=chunk)[115](index=115&type=chunk)[118](index=118&type=chunk)[119](index=119&type=chunk) - New governmental regulations, such as the moratorium on new federal leasing, could **materially affect operations**[116](index=116&type=chunk)[134](index=134&type=chunk) - The company's credit facility, with **$313 million outstanding**, contains covenants that limit financial flexibility[142](index=142&type=chunk)[274](index=274&type=chunk) - The market price of common stock may be **volatile** due to operating performance, commodity prices, and general economic conditions[145](index=145&type=chunk) [Item 1B: Unresolved Staff Comments](index=43&type=section&id=Item%201B%3A%20Unresolved%20Staff%20Comments) The company reported no unresolved staff comments from the SEC - There are **no unresolved staff comments**[152](index=152&type=chunk) [Item 2: Properties](index=43&type=section&id=Item%202%3A%20Properties) The company's properties are concentrated in the Permian Basin, with 76.5 million BOE of proved reserves as of year-end 2020 - The company's business strategy focuses on increasing stockholder value by **exploiting and developing existing properties** and pursuing strategic acquisitions[154](index=154&type=chunk) Proved Reserves Summary (as of December 31, 2020) | Metric | Value | | :----------------------------------- | :------------------- | | Oil (Bbl) | 66,264,286 | | Natural Gas (Mcf) | 61,305,027 | | Total (Boe) | 76,481,791 | | Pre-Tax PV10 Value | $638,107,637 | | Standardized Measure of Discounted Future Net Cash Flows | $555,871,253 | - Proved reserves are **87% oil** and 13% natural gas, with 57.5% classified as proved developed (PD)[13](index=13&type=chunk)[180](index=180&type=chunk) Proved Reserves by Type (2019 vs. 2020) | Reserve Type | 2020 (BOE) | 2019 (BOE) | | :----------------- | :----------- | :----------- | | Developed | 43,983,225 | 46,986,709 | | Undeveloped | 32,498,566 | 34,084,285 | | Total | 76,481,791 | 81,070,994 | - Reserve estimates for 2020 were based on significantly lower SEC average prices of **$36.04 per Bbl for oil** and **$1.99 per MMBtu for gas**[171](index=171&type=chunk) Changes in Proved Reserves (2019-2020) | Category | Oil (Bbl) Change | Gas (Mcf) Change | | :------------------------------------------ | :----------------- | :----------------- | | Improved recovery | +3,495,210 | +1,824,310 | | Production | (2,801,528) | (2,494,501) | | Upward revisions of estimates | +2,591,965 | +6,158,076 | | Downward revision (well performance) | (4,484,425) | +44,370 | | Downward revision (commodity prices) | (2,313,890) | (2,303,700) | | Downward revision (undeveloped locations removal) | (1,582,060) | (195,410) | - The company plans to convert **32.5 million BOE of PUD reserves** to PD by 2024 with estimated costs of $219.2 million[182](index=182&type=chunk)[186](index=186&type=chunk) Acreage Summary (as of December 31, 2020) | Region | Developed Gross (Net) | Undeveloped Gross (Net) | Total Gross (Net) | | :------------------- | :-------------------- | :---------------------- | :------------------ | | Central Basin Platform | 23,668 (18,712) | 15,046 (6,650) | 38,714 (25,362) | | Delaware Basin | 18,521 (18,256) | 248 (212) | 18,769 (18,468) | | Northwest Shelf | 11,723 (8,085) | 35,249 (24,830) | 46,972 (32,915) | | **Total** | **53,912 (45,053)** | **50,543 (31,692)** | **104,455 (76,745)** | Production History (2018-2020) | Metric | 2020 | 2019 | 2018 | | :-------------------- | :----------- | :----------- | :----------- | | Oil (Bbls) | 2,801,528 | 3,536,126 | 2,047,295 | | Gas (Mcf) | 2,494,502 | 2,476,472 | 1,112,177 | | Total production (BOE) | 3,217,278 | 3,948,871 | 2,232,658 | | Daily production (Boe/d) | 8,790 | 10,819 | 6,117 | Average Sales Price and Production Cost (2018-2020) | Metric | 2020 | 2019 | 2018 | | :------------------------------------ | :------- | :------- | :------- | | Average oil sales price (per Bbl) | $38.95 | $54.27 | $56.99 | | Average natural gas sales price (per Mcf) | $1.57 | $1.54 | $3.05 | | Total average sales price (per Boe) | $35.13 | $49.56 | $53.78 | | Average production cost (per Boe) | $11.49 | $12.28 | $12.45 | | Average production taxes (per Boe) | $1.63 | $2.31 | $2.52 | - In 2020, the company drilled **6 gross (5.61 net) productive development wells** in the Northwest Shelf, with no dry wells[205](index=205&type=chunk)[207](index=207&type=chunk) Costs Incurred for Property Acquisition, Exploration and Development (2019-2020) | Category | 2020 | 2019 | | :------------------------------------ | :----------- | :------------- | | Wishbone Acquisition | $0 | $304,392,921 | | Acquisition of proved properties | $1,317,313 | $3,400,411 | | Divestiture of proved properties | $0 | $(8,547,074) | | Development costs | $42,457,745 | $152,125,320 | | **Total Costs Incurred** | **$43,775,058** | **$451,371,578** | [Item 3: Legal Proceedings](index=57&type=section&id=Item%203%3A%20Legal%20Proceedings) The company is not currently involved in any material litigation or legal proceedings - The company does not have any **material litigation** pending or threatened[214](index=214&type=chunk) [Item 4: Mine Safety Disclosures](index=57&type=section&id=Item%204%3A%20Mine%20Safety%20Disclosures) This item is not applicable to Ring Energy, Inc - Mine safety disclosures are **not applicable** to the company[215](index=215&type=chunk) PART II [Item 5: Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=58&type=section&id=Item%205%3A%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on the NYSE American under 'REI' and it does not currently pay cash dividends - Ring Energy's common stock is listed on the **NYSE American** under the trading symbol 'REI'[218](index=218&type=chunk) - As of March 1, 2021, there were approximately **21,632 holders of record** of the company's common stock[220](index=220&type=chunk) - The company does not currently anticipate paying **cash dividends**, intending to retain earnings to pay down debt and finance expansion[221](index=221&type=chunk) - The company did not make any **repurchases of its equity securities** during the year ending December 31, 2020[222](index=222&type=chunk) [Item 6: Selected Financial Data](index=59&type=section&id=Item%206%3A%20Selected%20Financial%20Data) The company reported a significant net loss in 2020 due to a ceiling test impairment, contrasting with net income in prior years Selected Statement of Operations Data (2018-2020) | Metric | 2020 | 2019 | 2018 | | :------------------------------------ | :------------- | :------------- | :------------- | | Revenues | $113,025,138 | $195,702,831 | $120,065,361 | | Cost of revenues | $42,196,963 | $57,626,604 | $33,433,082 | | Depreciation, depletion and amortization | $43,010,660 | $56,204,269 | $39,024,886 | | Ceiling test impairment | $277,501,943 | $0 | $14,172,309 | | Net income (loss) | $(253,411,828) | $29,496,551 | $8,999,760 | | Basic income (loss) per common share | $(3.48) | $0.44 | $0.15 | | Diluted income (loss) per common share | $(3.48) | $0.44 | $0.15 | Selected Balance Sheet Data (2019-2020) | Metric | 2020 | 2019 | | :------------------------------------ | :------------- | :------------- | | Current assets | $20,799,890 | $38,708,541 | | Oil and gas properties subject to amortization | $836,514,815 | $1,083,966,135 | | Total assets | $663,456,197 | $973,006,148 | | Total current liabilities | $36,941,737 | $59,092,554 | | Total long-term liabilities | $331,748,647 | $390,403,661 | | Total Stockholders Equity | $294,765,813 | $523,509,933 | [Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations](index=60&type=section&id=Item%207%3A%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the adverse impact of low 2020 oil prices, which led to a $277.5 million impairment and a focus on debt reduction - The COVID-19 pandemic and OPEC+ price war caused a **sharp drop in oil prices** in 2020, leading to a strategic shift to cost reduction[228](index=228&type=chunk)[229](index=229&type=chunk)[233](index=233&type=chunk)[234](index=234&type=chunk) - Oil sales represented approximately **96.5% of total revenue** in 2020, making the company highly sensitive to oil price fluctuations[236](index=236&type=chunk) Derivative Contracts (as of December 31, 2020) | Commodity | Year | Type | Volume (per day) | Price Range/Average | | :---------- | :--- | :----------- | :--------------- | :------------------ | | Oil | 2021 | Costless Collars | 4,500 Bbl | Floor: $40.00-$45.00 (Avg $42.22); Ceiling: $52.71-$55.35 (Avg $54.57) | | Oil | 2021 | Swaps | 4,500 Bbl | Avg $45.42 | | Oil | 2022 | Swaps | 1,750 Bbl | Avg $44.84 | | Natural Gas | 2021 | Swaps | 6,000 MMBTU | $2.991 | | Natural Gas | 2022 | Swaps | 5,000 MMBTU | $2.7255 | - The company recorded a **realized gain on derivatives of $22.5 million** in 2020, with an unrealized loss of $1.2 million[236](index=236&type=chunk)[252](index=252&type=chunk)[253](index=253&type=chunk) - The borrowing base of the Credit Facility was **reduced twice in 2020**, from $425 million to $350 million[239](index=239&type=chunk)[271](index=271&type=chunk)[274](index=274&type=chunk) Key Financial Performance (2019 vs. 2020) | Metric | 2020 | 2019 | Change (YoY) | | :------------------------------------ | :------------- | :------------- | :------------- | | Oil and Natural Gas Sales | $113.0 million | $195.7 million | $(82.7) million | | Oil Sales | $109.1 million | $191.9 million | $(82.8) million | | Natural Gas Sales | $3.9 million | $3.8 million | $0.1 million | | Average Oil Price (per Bbl) | $38.95 | $54.27 | $(15.32) | | Average Natural Gas Price (per Mcf) | $1.57 | $1.54 | $0.03 | | Production Costs (incl. ad valorem) | $37.0 million | $48.5 million | $(11.5) million | | Production Costs (per BOE) | $11.49 | $12.28 | $(0.79) | | Depreciation, Depletion & Amortization | $43.0 million | $56.2 million | $(13.2) million | | Ceiling Test Impairment | $277.5 million | $0 | $277.5 million | | Realized Gain (Loss) on Derivatives | $22.5 million | $0 | $22.5 million | | Net Income (Loss) | $(253.4) million | $29.5 million | $(282.9) million | | Basic EPS | $(3.48) | $0.44 | $(3.92) | | Interest Expense | $17.6 million | $13.9 million | $3.7 million | | Deposit Forfeiture Income | $5.5 million | $0 | $5.5 million | - The company closed two equity offerings in October 2020, raising total **net proceeds of $19.4 million**[277](index=277&type=chunk) Cash Flows from Operating Activities (2018-2020) | Year | Net Cash Provided by Operating Activities | | :--- | :---------------------------------------- | | 2020 | $72,159,255 | | 2019 | $106,616,221 | | 2018 | $70,357,321 | - The company's critical accounting policies include revenue recognition, the **full cost method**, and the write-down of properties (ceiling test)[291](index=291&type=chunk)[292](index=292&type=chunk)[293](index=293&type=chunk)[294](index=294&type=chunk)[297](index=297&type=chunk) [Item 7A: Quantitative and Qualitative Disclosures About Market Risk](index=77&type=section&id=Item%207A%3A%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks from commodity price volatility, which it mitigates with derivative contracts - The company's major market risk exposure is the **volatile pricing of oil and natural gas**[303](index=303&type=chunk) - To reduce price uncertainty, the company uses **crude oil and natural gas hedging arrangements**, including costless collars and swaps[304](index=304&type=chunk) Major Customers and Accounts Receivable (as of December 31, 2020) | Customer | % of Oil and Natural Gas Revenues (2020) | % of Accounts Receivable (2020) | | :--------- | :--------------------------------------- | :------------------------------ | | Phillips 66 | 68% | 80% | | Occidental Energy Marketing | 10% | 0% | | NGL Crude Partners | 8% | 5% | - The company is subject to **interest rate risk** on its $313 million outstanding Credit Facility, which bears variable interest[309](index=309&type=chunk)[310](index=310&type=chunk) [Item 8: Financial Statements and Supplementary Data](index=79&type=section&id=Item%208%3A%20Financial%20Statements%20and%20Supplementary%20Data) This item refers to the location of the company's audited financial statements within the Annual Report - The financial statements and supplementary data are included starting at **page F-1** of this Annual Report[312](index=312&type=chunk) [Item 9: Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=79&type=section&id=Item%209%3A%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reported no changes in or disagreements with its accountants - There are **no changes in or disagreements with accountants** on accounting and financial disclosure[313](index=313&type=chunk) [Item 9A: Controls and Procedures](index=79&type=section&id=Item%209A%3A%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2020 - Management concluded that the company's disclosure controls and procedures were **effective** as of December 31, 2020[314](index=314&type=chunk) - The company **remediated a material weakness** identified in 2019 by incorporating additional review into its quarterly process[315](index=315&type=chunk) - Management assessed that the company's internal control over financial reporting was **effective** as of December 31, 2020[319](index=319&type=chunk) - Eide Bailly LLP issued an **attestation report** on the effectiveness of internal control over financial reporting[320](index=320&type=chunk)[342](index=342&type=chunk) [Item 9B: Other Information](index=81&type=section&id=Item%209B%3A%20Other%20Information) The company reported no other information requiring disclosure under this item - There is **no other information** to report under this item[321](index=321&type=chunk) PART III [Item 10: Directors, Executive Officers and Corporate Governance](index=81&type=section&id=Item%2010%3A%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information regarding directors and corporate governance is incorporated by reference from the 2021 Proxy Statement - Information for this item is **incorporated by reference** from the 2021 Proxy Statement[323](index=323&type=chunk) [Item 11: Executive Compensation](index=81&type=section&id=Item%2011%3A%20Executive%20Compensation) Information regarding executive compensation is incorporated by reference from the 2021 Proxy Statement - Information for this item is **incorporated by reference** from the 2021 Proxy Statement[324](index=324&type=chunk) [Item 12: Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=82&type=section&id=Item%2012%3A%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information regarding security ownership is incorporated by reference from the 2021 Proxy Statement - Information for this item is **incorporated by reference** from the 2021 Proxy Statement[325](index=325&type=chunk) [Item 13: Certain Relationships and Related Transactions, and Director Independence](index=82&type=section&id=Item%2013%3A%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information regarding related transactions and director independence is incorporated by reference from the 2021 Proxy Statement - Information for this item is **incorporated by reference** from the 2021 Proxy Statement[326](index=326&type=chunk) [Item 14: Principal Accounting Fees and Services](index=82&type=section&id=Item%2014%3A%20Principal%20Accounting%20Fees%20and%20Services) Information regarding accounting fees is incorporated by reference from the 2021 Proxy Statement - Information for this item is **incorporated by reference** from the 2021 Proxy Statement[327](index=327&type=chunk) PART IV [Item 15: Exhibits, Financial Statement Schedules](index=82&type=section&id=Item%2015%3A%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists the financial statements, supplementary data, and various exhibits filed with the Annual Report - The financial statements filed with this Annual Report include the Report of Independent Registered Public Accounting Firm, Balance Sheets, and Statements of Operations[329](index=329&type=chunk)[330](index=330&type=chunk) - A comprehensive list of exhibits, including agreements, charters, and certifications, is provided[331](index=331&type=chunk)[333](index=333&type=chunk) Financial Statements [Report of Independent Registered Public Accounting Firm](index=89&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Eide Bailly LLP issued an unqualified opinion on the financial statements and internal controls as of December 31, 2020 - Eide Bailly LLP provided an **unqualified opinion** on the financial statements and the effectiveness of internal control over financial reporting[341](index=341&type=chunk)[342](index=342&type=chunk) - Critical audit matters identified include the **estimation of proved oil and natural gas reserves** and the valuation allowance of deferred tax assets[349](index=349&type=chunk)[350](index=350&type=chunk)[356](index=356&type=chunk)[357](index=357&type=chunk) [Balance Sheets](index=94&type=section&id=Balance%20Sheets) Total assets decreased to $663.5 million in 2020 from $973.0 million in 2019, driven by a property impairment Balance Sheet Summary (as of December 31, 2019 and 2020) | Metric | 2020 | 2019 | | :------------------------------------------ | :------------- | :------------- | | Cash and cash equivalents | $3,578,634 | $10,004,622 | | Total Current Assets | $20,799,890 | $38,708,541 | | Oil and natural gas properties subject to amortization | $836,514,815 | $1,083,966,135 | | Net Properties and Equipment | $638,782,560 | $929,216,155 | | Total Assets | $663,456,197 | $973,006,148 | | Total Current Liabilities | $36,941,737 | $59,092,554 | | Revolving line of credit | $313,000,000 | $366,500,000 | | Total Liabilities | $368,690,384 | $449,496,215 | | Total Stockholders' Equity | $294,765,813 | $523,509,933 | [Statements of Operations](index=95&type=section&id=Statements%20of%20Operations) The company reported a net loss of $253.4 million in 2020, driven by a $277.5 million ceiling test impairment Statements of Operations Summary (2018-2020) | Metric | 2020 | 2019 | 2018 | | :------------------------------------------ | :------------- | :------------- | :------------- | | Oil and Natural Gas Revenues | $113,025,138 | $195,702,831 | $120,065,361 | | Oil and natural gas production costs | $36,968,873 | $48,496,225 | $27,801,989 | | Depreciation, depletion and amortization | $43,010,660 | $56,204,269 | $39,024,886 | | Ceiling test impairment | $277,501,943 | $0 | $14,172,309 | | General and administrative expense | $16,874,050 | $19,866,706 | $12,867,686 | | Realized gain (loss) on derivatives | $22,522,591 | $0 | $(11,153,701) | | Deposit forfeiture income | $5,500,000 | $0 | $0 | | Net Income (Loss) | $(253,411,828) | $29,496,551 | $8,999,760 | | Basic Earnings (Loss) per share | $(3.48) | $0.44 | $0.15 | | Diluted Earnings (Loss) per share | $(3.48) | $0.44 | $0.15 | [Statements of Stockholders' Equity](index=96&type=section&id=Statements%20of%20Stockholders'%20Equity) Stockholders' equity decreased to $294.8 million in 2020 from $523.5 million in 2019, primarily due to the net loss Statements of Stockholders' Equity Summary (2018-2020) | Metric | 2020 | 2019 | 2018 | | :------------------------------------------ | :------------- | :------------- | :------------- | | Balance, December 31 | $294,765,813 | $523,509,933 | $462,599,430 | | Common stock shares outstanding | 85,568,287 | 67,993,797 | 63,229,710 | | Additional paid-in capital | $550,951,415 | $526,301,281 | $494,892,093 | | Accumulated deficit | $(256,271,170) | $(2,859,342) | $(32,355,893) | | Net (loss) / income | $(253,411,828) | $29,496,551 | $8,999,760 | | Common stock and warrants issued for cash, net | $19,379,832 | $0 | $81,821,138 | | Share-based compensation | $5,364,162 | $3,082,625 | $3,870,934 | [Statements of Cash Flows](index=97&type=section&id=Statements%20of%20Cash%20Flows) Cash from operations decreased to $72.2 million in 2020, while investing activities saw a significant reduction in spending Statements of Cash Flows Summary (2018-2020) | Metric | 2020 | 2019 | 2018 | | :------------------------------------------ | :------------- | :------------- | :------------- | | Net Cash Provided by Operating Activities | $72,159,255 | $106,616,221 | $70,357,321 | | Net Cash Used in Investing Activities | $(43,830,397) | $(423,040,251) | $(203,421,314) | | Net Cash Provided by (Used in) Financing Activities | $(34,754,846) | $323,064,926 | $121,421,138 | | Net Increase (Decrease) in Cash | $(6,425,988) | $6,640,896 | $(11,642,855) | | Cash at End of Period | $3,578,634 | $10,004,622 | $3,363,726 | | Cash paid for interest | $16,911,344 | $10,364,313 | $323,916 | - In 2020, the company made payments of **$42.5 million** to develop oil and natural gas properties, a significant decrease from $152.1 million in 2019[370](index=370&type=chunk) - The company repaid **$80 million** on its revolving line of credit in 2020, compared to no repayments in 2019 or 2018[370](index=370&type=chunk) [Notes to Financial Statements](index=98&type=section&id=Notes%20to%20Financial%20Statements) The notes detail accounting policies, including the full cost method and the $277.5 million ceiling test impairment in 2020 - The company uses the **full cost method** of accounting for oil and natural gas properties, capitalizing all related costs[380](index=380&type=chunk) - A quarterly ceiling test is performed, which resulted in a **$277.5 million impairment** in 2020[294](index=294&type=chunk)[295](index=295&type=chunk)[384](index=384&type=chunk) - Revenue from oil and natural gas sales is recognized when **control transfers to the purchaser** at the point of delivery[389](index=389&type=chunk) - In 2020, the company recorded a full **valuation allowance of $50.6 million** against its deferred tax asset[393](index=393&type=chunk)[478](index=478&type=chunk) - The company recorded **$5.5 million in deposit forfeiture income** in 2020 from a terminated asset sale agreement[254](index=254&type=chunk)[425](index=425&type=chunk) - Derivative financial instruments are recorded at **fair value** on the balance sheet, with changes recognized in earnings[401](index=401&type=chunk)[440](index=440&type=chunk) - In 2020, officers and directors voluntarily returned **2,265,000 stock options**, resulting in an additional compensation expense of $768,379[460](index=460&type=chunk) - The company **accelerated the vesting** of 1,131,955 shares of restricted stock in 2020, incurring an additional compensation expense of $2.4 million[461](index=461&type=chunk) Asset Retirement Obligation Reconciliation (2018-2020) | Metric | 2020 | 2019 | 2018 | | :------------------------------------ | :------------- | :------------- | :------------- | | Balance, December 31 | $17,117,135 | $16,787,219 | $13,055,797 | | Liabilities acquired | $0 | $3,745,642 | $2,571,549 | | Liabilities incurred | $99,436 | $631,727 | $1,311,956 | | Liabilities settled | $(710,577) | $(1,589,654) | $(577,824) | | Accretion expense | $906,616 | $943,707 | $606,459 | - Subsequent to year-end, the company entered into a **new office sublease** and completed an asset sale for $2 million cash[285](index=285&type=chunk)[286](index=286&type=chunk)[483](index=483&type=chunk)[484](index=484&type=chunk) [Supplemental Information on Oil and Natural Gas Producing Activities](index=131&type=section&id=Supplemental%20Information%20on%20Oil%20and%20Natural%20Gas%20Producing%20Activities) This section provides supplemental unaudited data on oil and gas operations, highlighting the 2020 net loss and reserve changes Results of Oil and Natural Gas Producing Operations (2018-2020) | Metric | 2020 | 2019 | 2018 | | :------------------------------------------ | :------------- | :------------- | :------------- | | Oil and natural gas sales | $113,025,138 | $195,702,831 | $120,065,361 | | Production costs | $(36,968,873) | $(48,496,225) | $(27,801,989) | | Production taxes | $(5,228,090) | $(9,130,379) | $(5,631,093) | | Depreciation, depletion, amortization and accretion | $(43,010,660) | $(56,204,269) | $(39,024,886) | | Ceiling test impairment | $(277,501,943) | $0 | $(14,172,309) | | General and administrative (exclusive of corporate overhead) | $(1,454,041) | $(5,696,189) | $(1,404,635) | | **Results of Oil and Natural Gas Producing Operations** | **$(251,138,469)** | **$76,175,769** | **$32,030,449** | - The standardized measure of discounted future net cash flows for proved reserves **decreased from $923.2 million to $555.9 million** in 2020[493](index=493&type=chunk)[495](index=495&type=chunk) Changes in Standardized Measure of Discounted Future Net Cash Flows (2019-2020) | Category | 2020 | 2019 | | :------------------------------------------ | :------------- | :------------- | | Beginning of the year | $923,175,051 | $455,944,641 | | Net changes in price and production costs | $(368,974,767) | $(219,608,128) | | Revision of previous quantity estimates as a result of commodity prices | $(26,590,142) | $(71,545,320) | | Revision of estimated timing of cash flows | $(139,039,115) | $(107,443,484) | | Net change in income taxes | $97,384,365 | $(92,073,360) | | End of the Year | $555,871,553 | $923,175,051 |