Exhibit 99.1
FOR IMMEDIATE RELEASE
August 10, 2020 | NYSE American – REI |
RING ENERGY ANNOUNCES SECOND QUARTER AND SIX MONTH 2020 FINANCIAL AND OPERATIONAL RESULTS
Three Consecutive Quarters Cash Flow Positive
Midland, TX. August 10, 2020 - 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.
For further information contact:
Bill Parsons
K M Financial, Inc.
(702) 489-4447
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 earninngs (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 |
OPERATIONSRING ENERGY, INC.
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 | ||||||
Acquistion 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 |