ACQUISITIONS AND DIVESTITURES |
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| Business Combination and Asset Acquisition [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ACQUISITIONS AND DIVESTITURES |
NOTE 5 — ACQUISITIONS AND DIVESTITURES
Stronghold Acquisition
On July 1, 2022, Ring, as buyer, and Stronghold Energy II Operating, LLC, a Delaware limited liability company (“Stronghold OpCo”) and Stronghold Energy II Royalties, LP, a Delaware limited partnership (“Stronghold RoyaltyCo”, together with Stronghold OpCo, collectively, “Stronghold”), as seller, entered into a purchase and sale agreement (the “Stronghold Purchase Agreement”). Pursuant to the Stronghold Purchase Agreement, Ring acquired (the “Stronghold Acquisition”) interests in oil and gas leases and related property of Stronghold consisting of approximately 37,000 net acres located in the Central Basin Platform of the Texas Permian Basin. On August 31, 2022, Ring completed the Stronghold Acquisition.
The fair value of consideration paid to Stronghold was approximately $394.0 million, of which $165.9 million, net of customary purchase price adjustments, was paid in cash at closing, and $15.0 million was paid in cash six months after the closing. Also, shortly after closing, approximately $4.5 million was paid for inventory and vehicles and approximately $1.8 million was paid for August oil derivative settlements for certain novated hedges. The cash portion of the consideration was funded primarily from borrowings under our revolving Credit Facility, which was increased from $350.0 million to $600.0 million at the closing. The remaining consideration consisted of 21,339,986 shares of Ring common stock and 153,176 shares of newly created Series A Convertible Preferred Stock, par value $0.001 (“Preferred Stock”) which were converted into 42,548,892 shares of common stock on October 27, 2022. In addition, Ring assumed $24.8 million of derivative liabilities, $1.7 million of items in suspense, and $14.5 million in asset retirement obligations.
Delaware Basin Sale
On May 11, 2023, the Company completed the divestiture of its Delaware Basin assets to an unaffiliated party for $8.3 million. The sale had an effective date of March 1, 2023. The final cash consideration was approximately $7.6 million, subject to customary final purchase price adjustments. As part of the divestiture, the buyer assumed an asset retirement obligation balance of approximately $2.3 million.
Founders Acquisition
On July 10, 2023, the Company, as buyer, and Founders Oil & Gas IV, LLC (“Founders”), as seller, entered into an Asset Purchase Agreement (the “Founders Purchase Agreement”). Pursuant to the closing of the Purchase Agreement, on August 15, 2023 the Company acquired (the “Founders Acquisition”) interests in oil and gas leases and related property of Founders located in the Central Basin Platform of the Texas Permian Basin in Ector County, Texas, for a purchase price (the “Purchase Price”) of (i) a cash deposit of $7.5 million paid on July 11, 2023 into a third-party escrow account as a deposit pursuant to the Founders Purchase Agreement, (ii) approximately $42.5 million in cash paid on the closing date, net of approximately $10 million of preliminary and customary purchase price adjustments with an effective date of April 1, 2023, and (iii) a deferred cash payment of $15.0 million due 4 months after closing, or December 15, 2023, subject to final post-closing settlement between the Company and Founders.
The Founders Acquisition has been accounted for as an asset acquisition in accordance with ASC 805. The fair value of the consideration paid by Ring and allocation of that amount to the underlying assets acquired, on a relative fair value basis, was recorded on Ring’s books as of the date of the closing of the Founders Acquisition. Additionally, costs directly related to the Founders Acquisition were capitalized as a component of the purchase price. Determining the fair value of the assets and liabilities acquired requires judgment and certain assumptions to be made, the most significant of these being related to the valuation of Founder’s oil and gas properties. The inputs and assumptions related to the oil and gas properties are categorized as level 3 in the fair value hierarchy.
The following table represents the preliminary allocation of the total cost of the Founders Acquisition to the assets acquired and liabilities assumed as of the Founders Acquisition date:
Approximately $6.3 million of revenues and $1.7 million of direct operating expenses attributed to the Founders Acquisition are included in the Company’s Statements of Operations for the period from August 16, 2023 through September 30, 2023.
New Mexico Divestiture
On September 27, 2023, the Company completed the divestiture of its operated New Mexico assets to an unaffiliated party for $4.5 million, resulting in preliminary cash consideration of approximately $3.8 million, subject to customary final purchase price adjustments. The sale had an effective date of June 1, 2023. As part of the divestiture, the buyer assumed an asset retirement obligation balance of approximately $2.3 million.
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