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Ring Energy Announces Financial and Operational Results for Fourth Quarter and Year End 2015

March, 15, 2016

MIDLAND, Texas--(BUSINESS WIRE)--Ring Energy, Inc. (NYSE MKT: REI) (“Ring”)(“Company”) announced today financial results for the fourth quarter and year ended December 31, 2015.

For the fourth quarter of 2015, Ring reported revenues of $7,362,394, as compared to revenues of $9,984,982 for the fourth quarter of 2014. For the year ended December 31, 2015, the Company reported revenues of $31,013,892, as compared to $38,089,443 for the year ended December 31, 2014. For the fourth quarter of 2015, Ring reported 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. Excluding the impairment, the net loss per diluted share would have been $0.05. For the year ended December 31, 2015, the Company reported 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. Excluding the impairment, the net loss per diluted share would have been $0.11. This information compares to net income of $2,708,604, or $0.10 per diluted share for the fourth quarter of 2014, and $8,420,500, or $0.33 per diluted share for the year ended December 31, 2014.

The decrease in revenue is primarily attributed to lower commodity prices received. For the three months ended December 31, 2015, oil sales volume increased to 180,694 barrels, compared to 150,036 barrels for the same period in 2014, and gas sales volume increased to 192,202 MCF (thousand cubic feet), compared to 14,784 MCF for the same period in 2014. For the twelve months ended December 31, 2015, oil sales volume increased to 664,612 barrels, compared to 457,039 barrels for the same period in 2014, and gas sales volume increased to 472,509 MCF, compared to 38,735 MCF for the same period in 2014. The average commodity prices received by Ring were $38.43 per barrel of oil and $2.18 per MCF of natural gas for the quarter ended December 31, 2015, compared to $66.32 per barrel of oil and $2.36 per MCF of natural gas for the quarter ended December 31, 2014. The average prices received for the twelve months ended December 31, 2015 were $44.90 per barrel of oil and $2.48 per MCF of natural gas, compared to $83.04 per barrel of oil and $3.53 per MCF of natural gas for the twelve month period ended December 31, 2014.

Lease operating expenses, including production taxes, for the three months ended December 31, 2015 were $15.63 per barrel of oil equivalent (“BOE”), a 5% increase from the prior year. Depreciation, depletion and amortization costs, including accretion, increased 16% to $17.94 per BOE. General and administrative costs, which included a $604,574 charge for stock based compensation, were $10.44 per BOE, an 11% decrease. For the twelve months ended December 30, 2015, lease operating expenses, including production taxes, were $15.37 per BOE, a 5% increase. Depreciation, depletion and amortization costs, including accretion, were $20.98 per BOE, a 19% decrease, and general and administrative costs, which included a $2,566,716 charge for stock based compensation, were $10.76 per BOE, a 27% decrease from 2014.

Cash provided by operating activities, before changes in working capital, for the three and twelve months ended December 31, 2015 was $2,106,864, or $0.07 per fully diluted share, and $13,416,610, or $0.48 per fully diluted share, compared to $6,532,258 and $27,223,267, or $0.24 and $1.05 per fully diluted share for the same periods in 2014. Earnings before interest, taxes, depletion and other non-cash items (“Adjusted EBITDA”) for the three and twelve months ended December 31, 2015 was $2,421,885, or $0.08 per fully diluted share, and $14,158,760, or $0.50 per fully diluted share, compared to $6,611,916 and $27,137,303, or $0.25 and $1.05 in 2014. (See accompanying table for a reconciliation of net income to adjusted EBITDA).

There was outstanding debt of $45,900,000 on the Company’s $500 million senior secured credit facility at December 31, 2015.

Proved reserves, as determined by Cawley, Gillespie and Associates, Inc., and Williamson Petroleum Consultants, Inc., totaled 24,402,383 barrel of oil equivalents (BOE), a 134% increase over the 10,407,009 BOE for the previous year. Future net revenues before income taxes, discounted at 10% (“PV-10”), based on $48.17 per barrel of oil and $2.51 per MCF of gas, were $240.2 million at year-end 2015. This compared to $281.7 million, using average prices of $85.10 per barrel of oil and $3.95 per MCF of gas, for year-end 2014. Approximately 33% of the proved reserves are classified as proved developed producing (“PDP”), 2% proved developed non-producing (“PDNP”), and 65% proved undeveloped (“PUD”). The proved reserves consist of approximately 91% oil and 9% natural gas. Internal engineering has estimated an additional 11.1 million BOE of probable reserves with a PV-10 of $61.1 million using average prices of $47.59 per barrel of oil and $1.99 per MCF of natural gas.

Mr. Kelly Hoffman, the Company’s Chief Executive Officer, commented, “I am very pleased with our 2015 operating and financial results. We continue to increase production and reserves during a period in which we have virtually halted any new drilling activity. Our operations team has not only done an excellent job maximizing current operating efficiencies, but also in evaluating and identifying future development opportunities within our core assets which are in addition to those stated above. The results of that internal study, combining both the Central Basin Platform and Delaware Basin assets, identified over 1,500 additional potential vertical drilling locations on 10 and 20 acre spacing. Also, in addition, the study, using actual results from surrounding operators, identified over 225 potential horizontal locations. We are cautiously optimistic that commodity prices will start to firm up before year end and are anxious to restart our development drilling. We continue to look at opportunities that would complement our core assets, but regardless of any future acquisitions, the Company is well postured for sustained growth.”

Non-GAAP Financial Measures:

Net loss for the three months ended December 31, 2015 includes a non-cash charge for stock based compensation of $604,574, and a ceiling test impairment charge of $9,312,203. Net loss for the twelve months ended December 31, 2015 includes a non-cash charge for stock based compensation of $2,566,716, and a ceiling test impairment charge of $9,312,203. Excluding such items, the Company’s net loss would have been $0.04 per diluted share for the three months ended December 31, 2015, and $0.05 for the twelve months ended December 31, 2015. 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, 2015. 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 Twelve Months Ended

December 31,

December 31,

2015

2014

2015

2014

 
Oil and Gas Revenues $ 7,362,394     $ 9,984,982   $ 31,013,892     $ 38,089,443  
 
Costs and Operating Expenses
Oil and gas production costs 2,967,232 1,796,259 9,958,380 4,993,166
Oil and gas production taxes 357,811 463,102 1,468,073 1,760,206
Depreciation, depletion and amortization 3,648,107 2,304,914 15,175,791 11,807,794
Ceiling test impairment 9,312,203

-

9,312,203 -
Asset retirement obligation accretion 168,118 50,731 418,384 154,973
General and administrative expense   2,220,040       1,787,630     7,995,395       6,803,029  
 
Total Costs and Operating Expenses   18,673,511       6,402,636     44,328,226       25,519,168  
 
Income (Loss) from Operations (11,311,117 ) 3,582,346 (13,314,334 ) 12,570,275
 
Other Income (Expense)
Interest income 4,371 7,391 6,984 85,964
Interest expense   (319,392 )     -     (749,134 )     -  
 
Net Other Income   (315,021 )     7,391     (742,150 )     85,964  
 
Income (Loss) Before Provision for Income Taxes (11,626,138 ) 3,589,737 (14,056,484 ) 12,656,239
 
(Provision for) Benefit From Income Taxes   4,153,092       (881,133 )   5,003,713       (4,235,739 )
 
Net Income (Loss)   ($7,473,046 )   $ 2,708,604     ($9,052,771 )   $ 8,420,500  
 
Basic Earnings (Loss) Per Common Share ($0.25 ) $ 0.11 ($0.32 ) $ 0.34
Diluted Earnings (Loss) Per Common Share ($0.25 ) $ 0.10 ($0.32 ) $ 0.33
 
 
Basic Weighted-Average Common Shares Outstanding 30,391,485 25,728,571 28,176,924 24,739,795
Diluted Weighted-Average Common Shares Outstanding 30,391,485 26,769,999 28,176,924 25,890,285
 
       
COMPARATIVE OPERATING STATISTICS
     

Three Months Ended December 31,

2015 2014 Change
 
Net Production - BOE per day 2,312 1,658 39 %
Per BOE:
Average Sales Price $ 34.61 $ 65.48 -47 %
 
Lease Operating Expenses 13.95 11.78 18 %
Production Taxes 1.68 3.04 -45 %
DD&A 17.15 15.11 14 %
Accretion 0.79 0.33 139 %
General & Administrative Expenses 10.44 11.72 -11 %
 

Twelve Months Ended December 31,

2015 2014 Change
 
Net Production - BOE per day 2,037 1,270 60 %
Per BOE:
Average Sales price $ 41.72 $ 82.18 -49 %
 
Lease Operating Expenses 13.40 10.77 24 %
Production Taxes 1.97 3.80 -48 %
DD&A 20.42 25.48 -20 %
Accretion 0.56 0.33 70 %
General & Administrative Expenses 10.76 14.68 -27 %
 
                                                                                                                                         
RING ENERGY, INC.
CONSOLIDATED BALANCE SHEET
   

 

December 31,

 

December 31,

2015

2014

 
ASSETS
Current Assets
Cash $ 4,431,350 $ 8,622,235
Accounts receivable 2,507,858 3,616,676
Joint interest billing receivable 1,629,165 2,683,787
Prepaid expenses and retainers   146,118     160,600  
Total Current Assets   8,714,491     15,083,298  
Property and Equipment
Oil and natural gas properties subject to amortization 269,590,374 166,036,400
Fixed assets subject to depreciation   1,539,991     1,209,809  
Total Property and Equipment   271,130,365     167,246,209  
Accumulated depreciation, depletion and amortization (29,863,838 ) (14,688,047 )
Net Property and Equipment   241,266,527     152,558,162  
Deferred Income Taxes 64,323 -
Deferred Financing Costs   820,904     -  
Total Assets $ 250,866,245   $ 167,641,460  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 11,023,269 $ 16,241,022
Other accrued liabilities   309,898     22,029  
Total Current Liabilities   11,333,167     16,263,051  
Deferred income taxes - 4,939,390
Long term debt 45,900,000 -
Asset retirement obligation   7,401,950     3,896,489  
Total Liabilities   64,635,117     25,098,930  
 
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; 30,391,942 shares and 25,734,467 shares issued and outstanding, respectively

30,392

25,734

Additional paid-in capital 193,269,034 140,532,323
Retained earnings (accumulated deficit)   (7,068,298 )   1,984,473  
Total Stockholders' Equity   186,231,128     142,542,530  
Total Liabilities and Stockholders' Equity $ 250,866,245   $ 167,641,460  
 
           
RING ENERGY, INC.
STATEMENTS OF CASH FLOW
 

 

December 31,

 

December 31,

2015

2014

 
Cash Flows From Operating Activities
Net income (loss) ($9,052,771 ) $ 8,420,500
Adjustments to reconcile net income (loss) to net cash
Provided by operating activities:
Depreciation, depletion and amortization 15,175,791 11,807,794
Ceiling test impairment 9,312,203

-

Accretion expense 418,384 154,973
Share-based compensation 2,566,716 2,517,211
Stock issued for services - 87,050
Deferred income tax expense (benefit) (5,003,713 ) 4,235,739
Changes in assets and liabilities:
Accounts receivable 2,163,440 (2,412,061 )
Prepaid expenses (806,422 ) (94,549 )
Accounts payable   (4,929,884 )   9,031,408  
Net Cash Provided by Operating Activities   9,843,744     33,748,065  
Cash Flows from Investing Activities
Payments to purchase oil and natural gas properties (77,902,553 ) (15,054,649 )
Payments to develop oil and natural gas properties (31,430,355 ) (90,160,236 )
Purchase of equipment, vehicles and leasehold improvements (330,182 ) (951,898 )
Plugging and abandonment cost incurred   (446,192 )   (39,316 )
Net Cash Used in Investing Activities   (110,109,282 )   (106,206,099 )
Cash Flows From Financing Activities
Proceeds from issuance of notes payable 45,900,000 -
Proceeds from issuance of common stock 50,039,853 28,514,686
Proceeds from option exercise   134,800     215,000  
Net Cash Provided by Financing Activities   96,074,653     28,729,686  
Net Increase (Decrease) in Cash (4,190,885 ) (43,728,348 )
Cash at Beginning of Period   8,622,235     52,350,583  
Cash at End of Period $ 4,431,350   $ 8,622,235  
 
Supplemental Cash flow Information
Cash paid for interest $ 429,742     -  
 
Noncash Investing and Financing Activities
Stock issued as consideration in property acquisition $ - $ 182,369
Asset retirement obligation acquired 3,361,634 575,977
Asset retirement obligation incurred during development 171,635 2,022,445
 
 
 
RECONCILIATION OF CASH FLOW FROM OPERATIONS
 
Net cash provided by operating activities $ 9,843,744 $ 33,748,065
Change in operating assets and liabilities   (3,572,866 )   6,524,798  
 
Cash flow from operations $ 13,416,610   $ 27,223,267  
 

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

 
 
December 31, December 31,

2015

2014

 
NET INCOME ($9,052,771 ) $ 8,420,500
 
Interest (income) (6,984 ) (85,964 )
Interest expense 749,134 -
Income tax expense (benefit) (5,003,713 ) 4,235,739
Depreciation, depletion and amortization 15,175,791 11,807,794
Accretion of discounted liabilities 418,384 154,973
Ceiling test impairment 9,312,203 -
Stock based compensation 2,566,716 2,517,211
Stock issued as finders fee   -     87,050  
 
ADJUSTED EBITDA $ 14,158,760   $ 27,137,303  
 

Contact:

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

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