Ring Energy Announces Financial and Operational Results for Fourth Quarter and Year End 2016

MIDLAND, Texas--(BUSINESS WIRE)-- Ring Energy, Inc. (NYSE MKT: REI) (“Ring”)(“Company”) announced today financial results for the three months and twelve months ended December 31, 2016. For the three month period ended December 31, 2016, Ring reported oil and gas revenues of $9,830,708, compared to revenues of $7,362,394 for the quarter ended December 31, 2015. For the twelve months ended December 31, 2016, the Company reported oil and gas revenues of $30,850,248, compared to $31,013,892 for the twelve months ended December 31, 2015. For the fourth quarter of 2016, Ring reported a net loss of $477,006, or $0.01 per diluted share. This information compares to a net loss of $7,473,046, or $0.25 per diluted share, which included a pre-tax non-cash impairment of $9,312,203, for the fourth quarter of 2015. Excluding the impairment, the net loss per diluted would have been $0.05. For the year ended December 31, 2016, the Company reported a net loss of $37,637,687, or $0.97 per diluted share, which included a pre-tax non-cash impairment of $56,513,016. Excluding the impairment, the net loss per diluted share would have been $0.02. This information compares to a net loss of $9,052,771, or $0.32 per diluted share, which included a pre-tax non-cash impairment of $9,312,203 for the year ended December 31, 2015. Excluding the impairment, the net loss per diluted share would have been $0.11.

For the three months ended December 31, 2016, oil sales volume increased to 201,041 barrels, compared to 180,694 barrels for the same period in 2015, an 11% increase, and gas sales volume increased to 211,893 MCF (thousand cubic feet), compared to 192,202 MCF for the same period in 2015, a 10% increase. On a barrel of oil equivalent (“BOE”) basis for the three months ended December 31, 2016, production sales increased to 236,357 BOEs, compared to 212,728 BOEs for the same period in 2015, an 11% increase. For the twelve months ended December 31, 2016, oil sales volume increased to 728,051 barrels, compared to 664,612 barrels for the same period in 2015, a 10% increase, and gas sales volume increased to 900,089 MCF, compared to 472,509 MCF for the same period in 2015, a 90% increase. On a BOE basis for the twelve months ended December 31, 2016, production sales increased to 878,066 BOEs, compared to 743,363 BOEs for the same period in 2015, an 18% increase.

The average commodity prices received by the Company were $45.99 per barrel of oil and $2.76 per MCF of natural gas for the quarter ended December 31, 2016, compared to $38.43 per barrel of oil and $2.18 per MCF of natural gas for the quarter ended December 31, 2015. The average prices received for the twelve months ended December 31, 2016 were $39.28 per barrel of oil and $2.50 per MCF of natural gas, compared to $44.90 per barrel of oil and $2.48 per MCF of natural gas for the twelve month period ended December 31, 2015.

Lease operating expenses, including production taxes, for the three months ended December 31, 2016 were $14.05 per BOE, a 10% decrease from the prior year. Depreciation, depletion and amortization costs, including accretion, decreased 28% to $12.98 per BOE. General and administrative costs, which included a $619,499 charge for stock based compensation, were $8.48 per BOE, a 19% decrease. For the twelve months ended December 30, 2016, lease operating expenses, including production taxes, were $12.95 per BOE, a 16% decrease. Depreciation, depletion and amortization costs, including accretion, were $13.63 per BOE, a 35% decrease, and general and administrative costs, which included a $2,267,053 charge for stock based compensation, were $9.14 per BOE, a 15% decrease.

Cash provided by operating activities, before changes in working capital, for the three and twelve months ended December 31, 2016 was $5,047,782, or $0.12 per fully diluted share, and $13,125,293, or $0.34 per fully diluted share, compared to $2,106,864 and $13,416,610, or $0.07 and $0.48 per fully diluted share for the same periods in 2015. Earnings before interest, taxes, depletion and other non-cash items (“Adjusted EBITDA”) for the three and twelve months ended December 31, 2016 was $5,125,854, or $0.12 per fully diluted share, and $13,717,804, or $0.35 per fully diluted share, compared to $2,421,885 and $14,158,760, or $0.08 and $0.50 in 2015. (See accompanying table for a reconciliation of net income to adjusted EBITDA).

There was no outstanding debt on the Company’s $500 million senior secured credit facility at December 31, 2016.

Proved reserves, as determined by Cawley, Gillespie and Associates, Inc., and Williamson Petroleum Consultants, Inc., totaled 27,741,575 barrel of oil equivalents (BOE), a 14% increase over the 24,402,383 BOE for the previous year. Future net revenues before income taxes, discounted at 10% (“PV-10”), based on $39.17 per barrel of oil and $2.43 per MCF of gas, were $217.3 million at year-end 2016. This compared to $240.2 million, using average prices of $48.17 per barrel of oil and $2.51 per MCF of gas, for year-end 2015. Approximately 32% of the proved reserves are classified as proved developed producing (“PDP”), 5% proved developed non-producing (“PDNP”), and 63% proved undeveloped (“PUD”). The proved reserves consist of approximately 90% oil and 10% natural gas. Internal engineering has estimated an additional 14.3 million BOE of probable reserves with a PV-10 of $73.5 million using average prices of $39.17 per barrel of oil and $2.47 per MCF of natural gas. The estimated combined totals for proved and probable reserves (2P) are 42.04 million BOE and $290.8 million PV-10.

Mr. Kelly Hoffman, the Company’s Chief Executive Officer, commented, “2016 started slowly as a year of patience and perseverance, and finished as one of pursuit and productivity. With low commodity prices continuing in early 2016, our staff did an excellent job of improving efficiencies by lowering operating costs while increasing production. We focused on improving and upgrading our infrastructure. In the first six months of 2016, we drilled four new development wells, three on our Central Basin Platform (“CBP”) and one on our Delaware Basin (“DB”) asset. We completed an internal study started in late 2015 of horizontal drilling operations and techniques in the CBP, specifically in the San Andres formation, and continued to monitor the results of surrounding operators using such techniques. In April 2016, we completed a public stock offering which allowed us to pay off the entire outstanding balance of our senior credit facility and put together a capital expenditure budget for the remainder of the year. In addition to the four vertical wells drilled in the first six months of 2016, we budgeted the drilling of four more new vertical development wells and the first three horizontal wells on our CBP. We initiated the drilling of the horizontal wells in the third quarter and announced the results in the fourth quarter. Based on those results, our staff has been busy building our “horizontal” footprint in the CBP. By year end, their efforts resulted in over 53,000 gross acres (32,000 net), of which we believe over 43,000 gross acres (26,000 net) represent horizontal acreage, with over 400 gross horizontal drilling locations. In November, we announced a preliminary capital expenditure budget of $70 million for 2017, which includes the drilling of twenty-two new horizontal wells, six new vertical development wells and continued upgrading of existing infrastructure on our CBP. In addition, it includes drilling eight new vertical wells, remedial work on twelve existing wells and upgrading current infrastructure on our Delaware Basin asset. In December 2016, we completed a second public stock offering with the proceeds from the offering being used to fund the 2017 expenditure budget. We are very pleased with the initial results we are seeing from our 2017 horizontal well drilling program, as they are meeting and/or exceeding the results we received on our pilot three-well horizontal drilling program at the end of 2016. Although we didn’t allocate funds in the preliminary 2017 budget for a horizontal development program on our Delaware Basin asset, we are very excited about the prospects of such a program based on the information and core samples we retrieved by drilling two vertical wells to the base of the Brushy Canyon shale. We enter 2017 focusing on the exceptional opportunities within our current asset base. We are positioned for sustained growth and continue to aggressively look for opportunities that would complement our core assets and fuel that growth.”

Non-GAAP Financial Measures:

Net loss for the three months ended December 31, 2016 includes a non-cash charge for stock based compensation of $619,499. Net loss for the twelve months ended December 31, 2016 includes a non-cash charge for stock based compensation of $2,267,053, and a ceiling test impairment charge of $56,513,016. Excluding such items, the Company’s net loss would have been $0.00 per diluted share for the three months ended December 31, 2016, and net earnings of $0.02 for the twelve months ended December 31, 2016. 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.

About Ring Energy, Inc.

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

www.ringenergy.com

Safe Harbor Statement

This release contains forward-looking statements within the meaning of the “safe-harbor” provisions of the Private Securities Litigation Reform Act of 1995 that involve a wide variety of risks and uncertainties, including, 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, 2016. 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.

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K M Financial, Inc.
Bill Parsons, 702-489-4447

Source: Ring Energy, Inc.

Released March 15, 2017