Business Wire | Aug 10, 2020 05:22PM EDT

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

Aug. 10, 2020

MIDLAND, Texas--(BUSINESS WIRE)--Aug. 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.

RING ENERGY, INC.STATEMENTS OF OPERATIONS Three Months Ended Six Months Ended

June 30, June 30,

2020 2019 2020 2019

(restated)Oil and Gas $ 10,636,593 $ 51,334,225 $ 50,206,921 $ 93,132,540 Revenues Costs andOperating .ExpensesOil and gas 7,072,296 11,569,109 17,450,757 20,977,873 productioncostsOil and gas 433,760 2,412,895 2,304,005 4,495,770 productiontaxesDepreciation, 7,338,108 14,615,270 21,021,104 27,544,324 depletion andamortizationCeiling test 147,937,943 147,937,943 impairmentAssetretirement 231,367 229,234 463,329 445,179 obligationaccretionOperating 292,207 128,175 581,258 256,350 lease expenseGeneral and 4,176,609 4,743,127 7,212,504 11,541,144 administrativeexpense Total Costs and 167,482,290 33,697,810 196,970,900 65,260,640 OperatingExpenses Income (Loss) (156,845,697 ) 17,636,415 (146,763,979 ) 27,871,900 from Operations Other Income(Expense)Interest 1 1,260 6 13,496 incomeInterest (4,253,040 ) (4,259,908 ) (8,501,538 ) (5,032,925 )expenseRealized gain 13,753,567 - 17,087,695 - on derivativesUnrealized gain(loss)on change (26,771,529 ) 1,530,230 20,315,152 1,189,545 in fair value ofderivatives Net Other (17,271,001 ) (2,728,418 ) 28,901,315 (3,829,884 )Income(Expense) Income (Loss) (174,116,698 ) 14,907,997 (117,862,664 ) 24,042,106 Before Provisionfor Income Taxes (Provision for) 39,116,632 (3,565,400 ) 26,666,716 (8,430,159 )Benefit fromIncome Taxes Net Income ($135,000,066 ) $ 11,342,597 ($ 91,195,948 ) $ 15,611,857 (Loss) Basic Earnings ($1.99 ) $ 0.17 ($1.34 ) $ 0.24 (Loss) PerCommon ShareDiluted Earnings ($1.99 ) $ 0.17 ($1.34 ) $ 0.24 (Loss) PerCommon Share BasicWeighted-Average 67,980,794 67,357,645 67,987,295 65,305,081 Common SharesOutstandingDilutedWeighted-Average 67,980,794 67,670,259 67,987,295 65,852,348 Common SharesOutstanding

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

ASSETSCurrent AssetsCash $ 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 EquipmentOil and natural gas properties subject to 953,891,407 1,083,966,135 amortizationFinancing lease asset subject to 858,513 858,513 depreciationFixed 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 (178,095,148 ) (157,074,044 )amortizationNet 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' EQUITYCurrent LiabilitiesAccounts 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 275,998 424,126 portionOperating lease liability, less current 349,516 691,140 portionAsset retirement obligations 16,996,355 16,787,219

Total Liabilities 413,011,450 449,496,215

Stockholders' EquityPreferred 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 sharesissued 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' $ 847,213,387 $ 973,006,148 Equity

RING ENERGYSTATEMENTS OF CASH FLOW Six Months Ended

June 30, June 30,

2020 2019 (restated)

Cash Flows From Operating ActivitiesNet income (loss) ($91,195,948 ) $15,611,857

Adjustments to reconcile net income (loss) tonet cashProvided 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 (1,618,014 ) 3,380,940 compensationChange 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 ActivitiesPayments to purchase oil and natural gas (1,017,434 ) (268,120,579 )propertiesPayments to develop oil and natural gas (30,302,779 ) (81,051,832 )propertiesNet Cash Used in Investing Activities (31,320,213 ) (349,172,411 )

Cash Flows From Financing ActivitiesProceeds 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 InformationCash paid for interest $8,320,562 $932,896

Noncash Investing and Financing ActivitiesAsset retirement obligation incurred during 66,387 441,244 developmentOperating lease assets obtained in exchange for - 539,577 new operating lease liabilityFinancing lease assets obtained in exchange for - 637,757 new financing lease liabilityCapitalized expenditures attributable todrilling projectsfinanced through current liabilities 1,750,000 41,800,000

Acquisition of oil and gas propertiesAssumption 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 - (2,979,645 )acquisitionCommon stock issued as partial consideration in - (28,356,396 )asset acquisitionOil 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 isuseful information for investors because it is used internally and is acceptedby the investment community as a means of measuring the Company's ability tofund its capital program. It is also used by professional research analysts inproviding investment recommendations pertaining to companies in the oil and gasexploration and production industry.

RING ENERGY, INC.NON-GAAP DISCLOSURE RECONCILIATIONADJUSTED 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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CONTACT: Bill Parsons K M Financial, Inc. (702) 489-4447