Le Lézard
Classified in: Business
Subject: EARNINGS

Ring Energy Announces Second Quarter and Six Month 2020 Financial and Operational Results


Ring Energy, Inc. (NYSE American: REI) ("Ring") ("Company") announced today financial results for the three months and six months ended June 30, 2020. For the three-month period ended June 30, 2020, the Company reported oil and gas revenues of $10,636,593. For the six months ended June 30, 2020, the Company reported oil and gas revenues of $50,206,921.

For the three months ended June 30, 2020, Ring reported a net loss of $135,000,066 or $1.99 per diluted share. For the six months ended June 30, 2020, the Company reported a net loss of $91,195,948 or $1.34 per diluted share.

For the three months ended June 30, 2020, the net income included a pre-tax unrealized loss on derivatives of $26,771,529, a pre-tax ceiling test impairment of $147,937,943 and a non-cash charge for stock-based compensation of $1,317,542. Excluding these items, the net income per diluted share would have been $0.02. For the six months ended June 30, 2020, the net income included a pre-tax unrealized gain on derivatives of $20,315,152, a pre-tax ceiling test impairment of $147,937,943 and a non-cash charge for stock-based compensation of $1,991,337. Excluding these items, the net income per diluted share would have been $0.14. The Company believes results excluding these items are more comparable to estimates provided by security analysts and, therefore, are useful in evaluating operational trends of the Company and its performance, compared to other similarly situated oil and gas producing companies.

For the three months ended June 30, 2020, oil sales volume was 429,751 barrels, and gas sales volume was 417,491 MCF (thousand cubic feet). On a barrel of oil equivalent ("BOE") basis for the three months ended June 30, 2020, production sales were 499,333 BOEs. For the six months ended June 30, 2020, oil sales volume was 1,285,354 barrels, and gas sales volume was 1,183,042 MCF. On a BOE basis for the six months ended June 30, 2020, production sales were 1,482,528 BOEs.

The average commodity prices received by the Company were $24.23 per barrel of oil and $0.53 per MCF of natural gas for the quarter ended June 30, 2020. On a BOE basis for the three-month period ended June 30, 2020, the average price received was $21.30. The average prices received for the six months ended June 30, 2020 were $38.16 per barrel of oil and $0.98 per MCF of natural gas. On a BOE basis for the six month period ended June 30, 2020, the average price received was $33.86.

The average price differential the Company experienced from WTI pricing in the second quarter 2020 was approximately $2.50.

During May 2020, the Company unwound the costless collars for June 2020 and July 2020, resulting in the receipt of a cash payment of $5,435,136. Concurrently, the Company entered into Swap contracts at $33.24 for 5,500 barrels per day for June and July 2020, equal to the barrels for which the costless collars were unwound. Similar to costless collars, there is no cost to enter into the Swap contracts. On Swap contracts, there is no spread and payments will be made or received based on the difference between WTI and the Swap contract price. The costless collar and Swap pricing does not take into account any pricing differentials between NYMEX WTI pricing and the price received by the Company.

Lease operating expenses ("LOE"), including production taxes, for the three months ended June 30, 2020 were $15.03 per BOE. Depreciation, depletion and amortization costs, including accretion, were $15.16 per BOE, and general and administrative costs, which included a $1,317,542 charge for stock-based compensation and $292,207 for an operating lease expense, were $8.95 per BOE. For the six months ended June 30, 2020, lease operating expenses, including production taxes, were $13.33 per BOE. Depreciation, depletion and amortization costs, including accretion, were $14.49 per BOE, and general and administrative costs, which included a $1,991,337 charge for stock-based compensation and $581,258 for operating lease expenses, were $5.26 per BOE.

Cash provided by operating activities, before changes in working capital, for the three and six months ended June 30, 2020 was $9,668,873, or $0.14 per fully diluted share, and $33,614,062, or $0.49 per fully diluted share. Earnings before interest, taxes, depletion and other non-cash items ("Adjusted EBITDA") for the three and six months ended June 30, 2020 were $13,732,830, or $0.20 per fully diluted share, and $41,737,429, or $0.61 per fully diluted share. (See accompanying table for a reconciliation of net income to adjusted EBITDA).

Total capital expenditures for the three and six months ended June 30, 2020 were approximately $1.8 million and $17.9 million.

On June 17, 2020, the Company announced it had completed the spring 2020 redetermination of its senior credit facility. The Company entered into a new amendment which reduced the immediate borrowing base from $425 million to $375 million. As of June 30, 2020, the outstanding balance on the Company's $1 billion senior credit facility was $375 million. The weighted average interest rate on borrowings under the senior credit facility was 4.5%. The next redetermination evaluation is scheduled for November 2020.

The Company's Chief Executive Officer, Mr. Kelly Hoffman, stated, "While volatility continued in the energy space in the second quarter, we began to see some improvement and stability in the commodity price itself. We had essentially shut-in all of our production and in early June began bringing the wells back on line. Currently we are producing approximately 9,000 net BOEs per day. With production curtailed in the 2nd quarter, we made the necessary decisions to reduce costs and improve efficiencies wherever possible. Operationally, in combination with the revenue derived from the hedges we had in place, not only did we operate profitably, but we continued to be cash flow positive for the third consecutive quarter. In June, we completed the spring redetermination on the Company's senior credit facility. The immediate borrowing base was reduced to $375 million and the current outstanding balance on our facility is $375 million. We will continue to operate within cash flow and pay down our debt through a combination of excess cash flow and strategic asset sales. Commodity prices are continuing to strengthen and the economy is showing signs of improvement. We are anxious to resume our drilling and development program once we see sustainable received prices in the low to mid $40's per BOE. We are confident that Ring will continue to grow and prosper in this extremely challenging environment."

About Ring Energy, Inc.

Ring Energy, Inc. is an oil and gas exploration, development and production company with current operations in Texas and New Mexico.

www.ringenergy.com

Safe Harbor Statement

This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements involve a wide variety of risks and uncertainties, and include, without limitations, statements with respect to the Company's strategy and prospects. Such statements are subject to certain risks and uncertainties which are disclosed in the Company's reports filed with the SEC, including its Form 10-K for the fiscal year ended December 31, 2019, its Form 10Q for the quarter ended June 30, 2020 and its other filings with the SEC. Readers and investors are cautioned that the Company's actual results may differ materially from those described in the forward-looking statements due to a number of factors, including, but not limited to, the Company's ability to acquire productive oil and/or gas properties or to successfully drill and complete oil and/or gas wells on such properties, general economic conditions both domestically and abroad, and the conduct of business by the Company, and other factors that may be more fully described in additional documents set forth by the Company.

RING ENERGY, INC.
STATEMENTS OF OPERATIONS
 

Three Months Ended

 

Six Months Ended

June 30,

 

June 30,

 

2020

 

 

 

2019

 

 

 

2020

 

 

 

2019

 

(restated)
Oil and Gas Revenues

$

10,636,593

 

$

51,334,225

 

$

50,206,921

 

$

93,132,540

 

 
Costs and Operating Expenses .
Oil and gas production costs

 

7,072,296

 

 

11,569,109

 

 

17,450,757

 

 

20,977,873

 

Oil and gas production taxes

 

433,760

 

 

2,412,895

 

 

2,304,005

 

 

4,495,770

 

Depreciation, depletion and amortization

 

7,338,108

 

 

14,615,270

 

 

21,021,104

 

 

27,544,324

 

Ceiling test impairment

 

147,937,943

 

 

147,937,943

 

Asset retirement obligation accretion

 

231,367

 

 

229,234

 

 

463,329

 

 

445,179

 

Operating lease expense

 

292,207

 

 

128,175

 

 

581,258

 

 

256,350

 

General and administrative expense

 

4,176,609

 

 

4,743,127

 

 

7,212,504

 

 

11,541,144

 

 
Total Costs and Operating Expenses

 

167,482,290

 

 

33,697,810

 

 

196,970,900

 

 

65,260,640

 

 
Income (Loss) from Operations

 

(156,845,697

)

 

17,636,415

 

 

(146,763,979

)

 

27,871,900

 

 
Other Income (Expense)
Interest income

 

1

 

 

1,260

 

 

6

 

 

13,496

 

Interest expense

 

(4,253,040

)

 

(4,259,908

)

 

(8,501,538

)

 

(5,032,925

)

Realized gain on derivatives

 

13,753,567

 

 

-

 

 

17,087,695

 

 

-

 

Unrealized gain (loss)on change in fair value of derivatives

 

(26,771,529

)

 

1,530,230

 

 

20,315,152

 

 

1,189,545

 

 
Net Other Income (Expense)

 

(17,271,001

)

 

(2,728,418

)

 

28,901,315

 

 

(3,829,884

)

 
Income (Loss) Before Provision for Income Taxes

 

(174,116,698

)

 

14,907,997

 

 

(117,862,664

)

 

24,042,106

 

 
(Provision for) Benefit from Income Taxes

 

39,116,632

 

 

(3,565,400

)

 

26,666,716

 

 

(8,430,159

)

 
Net Income (Loss)

($135,000,066

)

$

11,342,597

 

($

91,195,948

)

$

15,611,857

 

 
Basic Earnings (Loss) Per Common Share

($1.99

)

$

0.17

 

($1.34

)

$

0.24

 

Diluted Earnings (Loss) Per Common Share

($1.99

)

$

0.17

 

($1.34

)

$

0.24

 

 
 
Basic Weighted-Average Common Shares Outstanding

 

67,980,794

 

 

67,357,645

 

 

67,987,295

 

 

65,305,081

 

Diluted Weighted-Average Common Shares Outstanding

 

67,980,794

 

 

67,670,259

 

 

67,987,295

 

 

65,852,348

 

 
COMPARATIVE OPERATING STATISTICS

Three Months Ended June 30,

 

 

2020

 

2019

Change

 
Net Sales - BOE per day

 

5,487

 

10,859

-49.5

%

Per BOE:
Average Sales Price

$

21.30

$

51.94

-58.9

%

 
Lease Operating Expenses

 

14.16

 

11.71

20.9

%

Production Taxes

 

0.87

 

2.44

-64.3

%

DD&A

 

14.70

 

14.79

-0.6

%

Accretion

 

0.46

 

0.23

100.0

%

General & Administrative Expenses

 

8.36

 

4.80

74.2

%

Operating Lease Expense

 

0.59

 

Six Months Ended June 30,

 

2020

 

2019

Change

 
Net Sales - BOE per day

 

8,145

 

10,314

-21.0

%

Per BOE:
Average Sales price

$

33.87

$

49.89

-32.1

%

 
Lease Operating Expenses

 

11.77

 

11.24

4.7

%

Production Taxes

 

1.55

 

2.41

-35.7

%

DD&A

 

14.18

 

14.75

-3.8

%

Accretion

 

0.31

 

0.24

29.1

%

General & Administrative Expenses

 

4.86

 

6.18

-21.3

%

Operating Lease Expense

 

0.39

 
RING ENERGY, INC.
BALANCE SHEET

 

June 30,

December 31,

 

2020

 

 

2019

 

 
ASSETS
Current Assets
Cash

$

17,229,780

 

$

10,004,622

 

Accounts receivable

 

8,652,807

 

 

22,909,195

 

Joint interest billing receivable

 

523,439

 

 

1,812,469

 

Derivative asset

 

12,770,803

 

Prepaid expenses and retainers

 

584,395

 

 

3,982,255

 

Total Current Assets

 

39,761,224

 

 

38,708,541

 

Property and Equipment
Oil and natural gas properties subject to amortization

 

953,891,407

 

 

1,083,966,135

 

Financing lease asset subject to depreciation

 

858,513

 

 

858,513

 

Fixed assets subject to depreciation

 

1,465,551

 

 

1,465,551

 

Total Property and Equipment

 

956,215,471

 

 

1,086,290,199

 

Accumulated depreciation, depletion and amortization

 

(178,095,148

)

 

(157,074,044

)

Net Property and Equipment

 

778,120,323

 

 

929,216,155

 

Operating lease asset

 

1,285,786

 

 

1,867,044

 

Derivative asset

 

4,544,271

 

Deferred Income Taxes

 

20,665,540

 

 

-

 

Deferred Financing Costs

 

2,836,243

 

 

3,214,408

 

Total Assets

$

847,213,387

 

$

973,006,148

 

 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable

$

19,164,925

 

$

54,635,602

 

Financing lease liability

 

288,386

 

$

280,970

 

Operating lease liability

$

936,270

 

$

1,175,904

 

Derivative liabilities

 

-

 

 

3,000,078

 

Total Current Liabilities

 

20,389,581

 

 

59,092,554

 

 
Deferred income taxes

 

-

 

 

6,001,176

 

Revolving line of credit

 

375,000,000

 

 

366,500,000

 

Financing lease liability, less current portion

 

275,998

 

 

424,126

 

Operating lease liability, less current portion

 

349,516

 

 

691,140

 

Asset retirement obligations

 

16,996,355

 

 

16,787,219

 

Total Liabilities

 

413,011,450

 

 

449,496,215

 

 
Stockholders' Equity
Preferred stock - $0.001 par value; 50,000,000 shares authorized;
no shares issued or outstanding

 

-

 

 

-

 

Common stock - $0.001 par value; 150,000,000 shares authorized;
67,980,575 shares and 67,993,797 shares
issued and outstanding, respectively

 

67,981

 

 

67,994

 

Additional paid-in capital

 

528,189,246

 

 

526,301,281

 

Retained earnings (accumulated deficit)

 

(94,055,290

)

 

(2,859,342

)

Total Stockholders' Equity

 

434,201,937

 

 

523,509,933

 

Total Liabilities and Stockholders' Equity

$

847,213,387

 

$

973,006,148

 

 
RING ENERGY
STATEMENTS OF CASH FLOW

Six Months Ended

June 30,

June 30,

2020

 

2019 (restated)

 
Cash Flows From Operating Activities
Net income (loss)

($91,195,948

)

$15,611,857

 

Adjustments to reconcile net income (loss) to net cash
Provided by operating activities:
Depreciation, depletion and amortization

21,021,104

 

27,544,324

 

Ceiling test impairment

147,937,943

 

-

 

Accretion expense

463,329

 

445,179

 

Amortization of deferred financing costs

378,165

 

-

 

Share-based compensation

1,991,337

 

1,643,199

 

Deferred income tax provision

(25,048,702

)

5,049,219

 

Excess tax deficiency related to share-based compensation

(1,618,014

)

3,380,940

 

Change in fair value of derivative instruments

(20,315,152

)

(1,189,545

)

Changes in assets and liabilities:
Accounts receivable

15,545,418

 

(9,847,686

)

Prepaid expenses and retainers

3,397,860

 

(6,388,823

)

Accounts payable

(22,050,677

)

(451,965

)

Settlement of asset retirement obligation

(320,580

)

(384,956

)

Net Cash Provided by Operating Activities

30,186,083

 

35,411,743

 

Cash Flows from Investing Activities
Payments to purchase oil and natural gas properties

(1,017,434

)

(268,120,579

)

Payments to develop oil and natural gas properties

(30,302,779

)

(81,051,832

)

Net Cash Used in Investing Activities

(31,320,213

)

(349,172,411

)

Cash Flows From Financing Activities
Proceeds from revolving line of credit

21,500,000

 

321,000,000

 

Payments on revolving line of credit

(13,000,000

)

-

 

Reduction of financing lease liabilities

(140,712

)

(24,076

)

Net Cash Provided by Financing Activities

8,359,288

 

320,975,924

 

Net Change in Cash

7,225,158

 

7,215,256

 

Cash at Beginning of Period

10,004,622

 

3,363,726

 

Cash at End of Period

$17,229,780

 

$10,578,982

 

Supplemental Cash flow Information
Cash paid for interest

$8,320,562

 

$932,896

 

 
Noncash Investing and Financing Activities
Asset retirement obligation incurred during development

66,387

 

441,244

 

Operating lease assets obtained in exchange for new operating lease liability

-

 

539,577

 

Financing lease assets obtained in exchange for new financing lease liability

-

 

637,757

 

Capitalized expenditures attributable to drilling projects
financed through current liabilities

1,750,000

 

41,800,000

 

Acquisition of oil and gas properties
Assumption of joint interest billing receivable

-

 

1,464,394

 

Assumption of prepaid assets

-

 

2,864,554

 

Assumption of accounts and revenue payables

-

 

(1,234,862

)

Asset retirement obligation incurred through acquisition

-

 

(2,979,645

)

Common stock issued as partial consideration in asset acquisition

-

 

(28,356,396

)

Oil and gas properties subject to amortization

-

 

296,910,774

 

 
RECONCILIATION OF CASH FLOW FROM OPERATIONS
 
Net cash provided by operating activities

$30,186,083

 

$35,411,743

 

Change in operating assets and liabilities

3,427,979

 

17,073,430

 

 
Cash flow from operations

$33,614,062

 

$52,485,173

 

Management believes that the non-GAAP measure of cash flow from operations is useful information for investors because it is used internally and is accepted by the investment community as a means of measuring the Company's ability to fund its capital program. It is also used by professional research analysts in providing investment recommendations pertaining to companies in the oil and gas exploration and production industry.
RING ENERGY, INC.
NON-GAAP DISCLOSURE RECONCILIATION
ADJUSTED EBITDA
 
Six Months Ended
June 30, June 30,

2020

 

2019 (restated)

 
NET INCOME (LOSS)

($91,195,948

)

$15,611,857

 
Net other (income) expense

(28,901,315

)

3,829,884

Realized gain on derivatives

17,087,695

 

-

Ceiling test impairment

147,937,943

 

-

Income tax expense (benefit)

(26,666,716

)

8,430,159

Depreciation, depletion and amortization

21,021,104

 

27,544,324

Accretion of discounted liabilities

463,329

 

445,179

Stock based compensation

1,991,337

 

1,643,199

 
ADJUSTED EBITDA

$41,737,429

 

$57,504,602

 

 


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