Ring Energy(US:REI)2022-11-10 01:58PART I – FINANCIAL INFORMATION Financial Statements 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 Acquisition65 Management's Discussion and Analysis of Financial Condition and Results of Operations 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 facility148149 - 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 acquisitions150155156157 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, 2022165203 - The company actively manages commodity price risk through derivative contracts, with extensive oil and natural gas hedges in place through 2024160161162 Quantitative and Qualitative Disclosures About Market Risk 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 million231 - 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 production233235 - 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, 2022237 Controls and Procedures 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 report240 - 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 controls243 PART II – OTHER INFORMATION Legal Proceedings 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-K246 Risk Factors 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 stock248 - 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 conditions249251 - 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 payments251252 Unregistered Sales of Equity Securities and Use of Proceeds 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 reference253 Defaults Upon Senior Securities The company reports no defaults upon senior securities during the period - None254 Mine Safety Disclosure The company reports no applicable mine safety disclosures for its operations - None255 Other Information The company reports no other information to disclose for the period - None256 Exhibits 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 files257