Ring Energy(REI) - 2023 Q2 - Quarterly Report

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