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Ring Energy Announces Financial and Operational Results for Fourth Quarter and Year End 2017
MIDLAND, Texas–(BUSINESS WIRE)–Ring Energy, Inc. (NYSE American: REI) (“Ring”)(“Company”) announced
today financial results for the three months and twelve months ended
December 31, 2017. For the three month period ended December 31, 2017,
Ring reported oil and gas revenues of $23,308,668, compared to revenues
of $9,830,708 for the quarter ended December 31, 2016. For the twelve
months ended December 31, 2017, the Company reported oil and gas
revenues of $66,699,700, compared to $30,850,248 for the twelve months
ended December 31, 2016.
For the three months ended December 31, 2017, Ring reported a net loss
of $4,509,935, or $0.08 per diluted share. For the twelve months ended
December 31, 2017, the Company reported net income of $1,753,869, or
$0.03 per diluted share. This information compares to a net loss of
$477,006, or $0.01 per fully diluted share for the three months ended
December 31, 2016. For the twelve month period ended December 31, 2016,
the Company reported a net loss of $37,637,687, or $0.97 per fully
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.
For the three months ended December 31, 2017, the net loss included a
pre-tax “Unrealized Loss on Derivatives” of $4,034,115 and an additional
income tax provision of $6,953,299 as a result of revaluing the
Company’s deferred tax assets to account for a reduction in its future
income tax rate under the Tax Cuts and Jobs Act of 2017. Excluding these
two items, the net income per diluted share would have been $0.09. For
the twelve months ended December 31, 2017, the net income included a
pre-tax “Unrealized Loss on Derivatives” of $3,968,287 and an additional
income tax provision of $6,953,299 as a result of revaluing the
Company’s deferred tax assets to account for a reduction in its future
income tax rate under the Tax Cuts and Jobs Act of 2017. Excluding these
two items, the net income per diluted share would have been $0.21.
For the three months ended December 31, 2017, oil sales volume increased
to 418,165 barrels, compared to 201,041 barrels for the same period in
2016, an 108% increase, and gas sales volume decreased to 201,966 MCF
(thousand cubic feet), compared to 211,893 MCF for the same period in
2016, a 5% decrease. On a barrel of oil equivalent (“BOE”) basis for the
three months ended December 31, 2017, production sales increased to
451,826 BOEs, compared to 236,357 BOEs for the same period in 2016, a
91% increase, and 380,426 BOEs for the third quarter of 2017, a 19%
increase. For the twelve months ended December 31, 2017, oil sales
volume increased to 1,311,727 barrels, compared to 728,051 barrels for
the same period in 2016, an 80% increase, and gas sales volume decreased
to 761,517 MCF, compared to 900,089 MCF for the same period in 2016, a
15% decrease. On a BOE basis for the twelve months ended December 31,
2017, production sales increased to 1,438,647 BOEs, compared to 878,066
BOEs for the same period in 2016, a 64% increase.
The average commodity prices received by the Company were $53.16 per
barrel of oil and $3.35 per MCF of natural gas for the quarter ended
December 31, 2017, compared to $45.99 per barrel of oil and $2.76 per
MCF of natural gas for the quarter ended December 31, 2016. The average
prices received for the twelve months ended December 31, 2017 were
$48.97 per barrel of oil and $3.23 per MCF of natural gas, compared to
$39.28 per barrel of oil and $2.50 per MCF of natural gas for the twelve
month period ended December 31, 2016.
Lease operating expenses, including production taxes, for the three
months ended December 31, 2017 were $14.58 per BOE, a 4% increase from
the prior year. Depreciation, depletion and amortization costs,
including accretion, increased 23% to $16.01 per BOE. General and
administrative costs, which included a $922,072 charge for stock based
compensation, were $6.51 per BOE, a 23% decrease. For the twelve months
ended December 30, 2017, lease operating expenses, including production
taxes, were $13.30 per BOE, a 3% increase. Depreciation, depletion and
amortization costs, including accretion, were $14.65 per BOE, a 7%
increase, and general and administrative costs, which included a
$3,685,079 charge for stock based compensation, were $7.31 per BOE, a
20% decrease.
Cash provided by operating activities, before changes in working
capital, for the three and twelve months ended December 31, 2017 was
$14,625,846, or $0.26 per fully diluted share, and $40,909,153, or $0.77
per fully diluted share, compared to $5,047,782 and $13,125,293, or
$0.12 and $0.34 per fully diluted share for the same periods in 2016.
Earnings before interest, taxes, depletion and other non-cash items
(“Adjusted EBITDA”) for the three and twelve months ended December 31,
2017 was $14,584,307, or $0.26 per fully diluted share, and $40,618,071,
or $0.77 per fully diluted share, compared to $5,125,854 and
$13,717,804, or $0.12 and $0.35 in 2016. (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, 2017.
Proved reserves, as determined by Cawley, Gillespie and Associates,
Inc., and Williamson Petroleum Consultants, Inc., totaled 31,949,990
barrel of oil equivalents (BOE), a 15% increase over the 27,741,575 BOE
for the previous year. Future net revenues before income taxes,
discounted at 10% (“PV-10”), based on $47.93 per barrel of oil and $3.61
per MCF of gas, were $382.1 million at year-end 2017. This compared to
$217.3 million, using average prices of $39.17 per barrel of oil and
$2.43 per MCF of gas, for year-end 2016. Approximately 45% of the proved
reserves are classified as proved developed producing (“PDP”), 10%
proved developed non-producing (“PDNP”), and 45% proved undeveloped
(“PUD”). The proved reserves consist of approximately 91% oil and 9%
natural gas. Internal engineering has estimated an additional 15.95
million BOE of probable reserves with a PV-10 of $126.06 million using
average prices of $47.93 per barrel of oil and $3.61 per MCF of natural
gas. The estimated combined totals for proved and probable reserves (2P)
are 47.899 million BOE and $508.16 million PV-10.
Mr. Kelly Hoffman, the Company’s Chief Executive Officer, commented,
“2017 was a year of transition and growth for our Company. Based on the
results of our pilot three well horizontal drilling program in late
2016, we began 2017 with great anticipation and excitement. In the first
quarter of 2017 we drilled seven new horizontal wells on our Central
Basin Platform (“CBP”) property. The results far exceeded our initial
expectations. In the second quarter of 2017 we drilled eight more new
horizontal wells on our CBP. Again, the results were exceptional. We
extended the contract on the first rig through the end of the year,
completed a public stock offering in July, and added a second horizontal
drilling rig on our CBP in mid-August. As a result, we drilled 47 new
horizontal wells on our CBP in 2017. Our net production grew quarter
over quarter resulting in an aggregate increase of 59% for the year. Our
quarterly revenues, thanks to the increased production and much improved
commodity prices, grew over 90% for the year, and our quarterly cash
flow grew over 100% for the year. In 2017, our land staff did a
fantastic job of increasing our Company’s total acreage, and more
importantly, adding to our “horizontal” footprint on our CBP property.
We began 2017 with over 53,000 gross acres (32,600 net) and finished the
year with approximately 102,000 gross acres (70,600 net) on our CBP. Our
staff has continued to not only add, but fill in areas where we have
identified horizontal potential. They continue to work extremely hard to
increase both the working and net revenue interests on our existing
properties, while at the same time continuing to look for and evaluate
new leasing and acquisition opportunities that complement our existing
assets. We estimate over 70,000 net acres represents our “horizontal”
footprint on our CBP asset, with over 800 potential horizontal drilling
locations. We continued to upgrade and improve our infrastructures on
both our CBP and Delaware Basin assets in preparation for the ongoing
and future development. We have a strong foundation with a proven
management team, clean balance sheet and excellent properties. We look
forward to the challenges 2018 may bring and are committed to continuing
the growth we experienced in 2017.”
Non-GAAP Financial Measures:
Net loss for the three months ended December 31, 2017 includes a
non-cash charge for stock based compensation of $922,072. Net income for
the twelve months ended December 31, 2017 includes a non-cash charge for
stock based compensation of $3,685,079. Excluding such items, the
Company’s net loss would have been $0.07 per diluted share for the three
months ended December 31, 2017, and net earnings of $0.08 for the twelve
months ended December 31, 2017. 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.
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,
2017. 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, |
|||||||
|
2017 |
2016 |
2017 |
2016 |
|||||
| Oil and Gas Revenues | $ | 23,308,668 | $ | 9,830,708 | $ | 66,699,700 | $ | 30,850,248 |
| Costs and Operating Expenses | . | |||||||
| Oil and gas production costs | 5,496,693 | 2,848,029 | 15,978,362 | 9,867,800 | ||||
| Oil and gas production taxes | 1,090,347 | 472,285 | 3,152,562 | 1,504,620 | ||||
| Depreciation, depletion and amortization | 7,084,291 | 2,941,333 | 20,517,780 | 11,483,314 | ||||
| Ceiling test impairment | – | – | – | 56,513,016 | ||||
| Accretion expense | 147,245 | 127,015 | 567,968 | 487,182 | ||||
| General and administrative expense | 2,939,496 | 2,004,039 | 10,515,887 | 8,027,077 | ||||
| Total Costs and Operating Expenses | 16,758,072 | 8,392,701 | 50,732,559 | 87,883,009 | ||||
| Income (Loss) from Operations | 6,550,596 | 1,438,007 | 15,967,141 | (57,032,761 | ) | |||
| Other Income (Expense) | ||||||||
| Interest Income | 41,540 | – | 291,083 | 56,498 | ||||
| Interest Expense | – | (78,071 | ) | – | (649,009 | ) | ||
| Realized loss on derivatives | (119,897 | ) | – | (119,897 | ) | – | ||
| Unrealized loss on change in fair value of derivatives | (4,034,115 | ) | – | (3,968,287 | ) | – | ||
| Net Other Income (Expense) | (4,112,472 | ) | (78,071 | ) | (3,797,101 | ) | (592,511 | ) |
| Income (Loss) Before Provision for Income Taxes | 2,438,124 | 1,359,936 | 12,170,040 | (57,625,272 | ) | |||
| (Provision for) Benefit From Income Taxes | (6,948,059 | ) | (1,836,942 | ) | (10,416,171 | ) | 19,987,585 | |
| Net Income (Loss) | ($4,509,935 | ) | ($477,006 | ) | $ | 1,753,869 | ($37,637,687 | ) |
| Basic Earnings (Loss) Per Common Share | ($0.08 | ) | ($0.01 | ) | $ | 0.03 | ($0.97 | ) |
| Diluted Earnings (Loss) Per Common Share | ($0.08 | ) | ($0.01 | ) | $ | 0.03 | ($0.97 | ) |
| Basic Weighted-Average Common Shares Outstanding | 54,177,202 | 43,814,351 | 51,383,008 | 38,710,626 | ||||
| Diluted Weighted-Average Common Shares Outstanding | 55,647,451 | 43,814,351 | 52,806,712 | 38,710,626 | ||||
| COMPARATIVE OPERATING STATISTICS | ||||||
| Three Months Ended December 31, | ||||||
| 2017 | 2016 | Change | ||||
| Net Sales – BOE per day | 4,911 | 2,569 | 91 | % | ||
| Per BOE: | ||||||
| Average Sales Price | $ | 51.59 | $ | 41.59 | 24 | % |
| Lease Operating Expenses | 12.17 | 12.05 | 1 | % | ||
| Production Taxes | 2.41 | 2.00 | 21 | % | ||
| DD&A | 15.68 | 12.44 | 26 | % | ||
| Accretion | 0.33 | 0.54 | -39 | % | ||
| General & Administrative Expenses | 6.51 | 8.48 | -23 | % | ||
| Twelve Months Ended December 31, | ||||||
| 2017 | 2016 | Change | ||||
| Net Sales – BOE per day | 3,941 | 2,399 | 64 | % | ||
| Per BOE: | ||||||
| Average Sales price | $ | 46.36 | $ | 35.13 | 32 | % |
| Lease Operating Expenses | 11.11 | 11.24 | -1 | % | ||
| Production Taxes | 2.19 | 1.71 | 28 | % | ||
| DD&A | 14.26 | 13.08 | 9 | % | ||
| Accretion | 0.39 | 0.55 | -29 | % | ||
| General & Administrative Expenses | 7.31 | 9.14 | -20 | % | ||
| RING ENERGY, INC. | ||||
| BALANCE SHEET | ||||
|
December 31, |
December 31, |
|||
|
2017 |
2016 |
|||
| ASSETS | ||||
| Current Assets | ||||
| Cash | $ | 15,006,581 | $ | 71,086,381 |
| Accounts receivable | 12,833,883 | 3,453,238 | ||
| Joint interest billing receivable | 1,054,022 | 454,461 | ||
| Prepaid expenses and retainers | 229,438 | 226,835 | ||
| Total Current Assets | 29,123,924 | 75,220,915 | ||
| Property and Equipment | ||||
| Oil and natural gas properties subject to amortization | 433,591,134 | 250,133,965 | ||
| Inventory for property development | – | 1,582,427 | ||
| Fixed assets subject to depreciation | 1,884,818 | 1,549,311 | ||
| Total Property and Equipment | 435,475,952 | 253,265,703 | ||
| Accumulated depreciation, depletion and amortization | (61,864,932 | ) | (41,347,152 | ) |
| Net Property and Equipment | 373,611,020 | 211,918,551 | ||
| Deferred Income Taxes | 11,232,200 | 20,051,908 | ||
| Deferred Financing Costs | 135,342 | 406,025 | ||
| Total Assets | $ | 414,102,486 | $ | 307,597,399 |
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||
| Current Liabilities | ||||
| Accounts payable | $ | 44,475,163 | $ | 9,099,391 |
| Derivative liabilities | 3,968,286 | – | ||
| Total Current Liabilities | 48,443,449 | 9,099,391 | ||
| Asset retirement obligations | 9,055,697 | 7,957,035 | ||
| Total Liabilities | 57,499,146 | 17,056,426 | ||
| Stockholders' Equity | ||||
|
Preferred stock – $0.001 par value; 50,000,000 shares authorized; |
– | – | ||
|
Common stock – $0.001 par value; 150,000,000 shares authorized; |
54,224 | 49,113 | ||
| Additional paid-in capital | 397,904,769 | 335,197,845 | ||
| Retained earnings (accumulated deficit) | (41,355,653 | ) | (44,705,985 | ) |
| Total Stockholders' Equity | 356,603,340 | 290,540,973 | ||
| Total Liabilities and Stockholders' Equity | $ | 414,102,486 | $ | 307,597,399 |
| RING ENERGY, INC. | ||||
| STATEMENTS OF CASH FLOW | ||||
|
December 31, |
December 31, |
|||
|
2017 |
2016 |
|||
| Cash Flows From Operating Activities | ||||
| Net income (loss) | $ | 1,753,869 | ($37,637,687 | ) |
| Adjustments to reconcile net income (loss) to net cash | ||||
| Provided by operating activities: | ||||
| Depreciation, depletion and amortization | 20,517,780 | 11,483,314 | ||
| Ceiling test impairment | – | 56,513,016 | ||
| Accretion expense | 567,968 | 487,182 | ||
| Share-based compensation | 3,685,079 | 2,267,053 | ||
| Deferred income tax expense (benefit) | 3,862,827 | (19,987,585 | ) | |
| Excess tax benefit related to share-based compensation | (49,896 | ) | – | |
| Adjustment to deferred tax asset for change in effective tax rate | 6,603,240 | – | ||
| Change in fair value of derivative instruments | 3,968,286 | – | ||
| Changes in assets and liabilities: | ||||
| Accounts receivable | (9,980,206 | ) | 229,324 | |
| Prepaid expenses | 268,080 | 334,162 | ||
| Accounts payable | 12,375,772 | (2,233,776 | ) | |
| Settlement of asset retirement obligation | (766,595 | ) | (240,606 | ) |
| Net Cash Provided by Operating Activities | 42,806,204 | 11,214,397 | ||
| Cash Flows from Investing Activities | ||||
| Payments to purchase oil and natural gas properties | (28,682,298 | ) | (10,193,927 | ) |
| Payments to develop oil and natural gas properties | (124,680,469 | ) | (26,554,171 | ) |
| Purchase of inventory for development | (4,214,686 | ) | (1,582,427 | ) |
| Purchase of equipment, vehicles and leasehold improvements | (335,507 | ) | (9,320 | ) |
| Net Cash Used in Investing Activities | (157,912,960 | ) | (38,339,845 | ) |
| Cash Flows From Financing Activities | ||||
| Proceeds from issuance of notes payable | – | 7,000,000 | ||
| Proceeds from issuance of common stock | 59,026,956 | 139,567,980 | ||
| Principal payments on revolving line of credit | – | (52,900,000 | ) | |
| Proceeds from option exercise | – | 112,500 | ||
| Net Cash Provided by Financing Activities | 59,026,956 | 93,780,480 | ||
| Net Increase (Decrease) in Cash | (56,079,800 | ) | 66,655,031 | |
| Cash at Beginning of Period | 71,086,381 | 4,431,350 | ||
| Cash at End of Period | $ | 15,006,581 | $ | 71,086,381 |
| Supplemental Cash flow Information | ||||
| Cash paid for interest | – | $ | 649,010 | |
| Noncash Investing and Financing Activities | ||||
| Asset retirement obligation incurred during development | 1,297,289 | 308,509 | ||
| Use of inventory in property development | 5,797,113 | – | ||
|
Capitalized expenditures attributable to drilling projects |
23,000,000 | – | ||
| RECONCILIATION OF CASH FLOW FROM OPERATIONS | ||||
| Net cash provided by operating activities | $ | 42,806,204 | $ | 11,214,397 |
| Change in operating assets and liabilities | 1,897,051 | (1,910,896 | ) | |
| Cash flow from operations | $ | 40,909,153 | $ | 13,125,293 |
|
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, | |||
|
2017 |
2016 |
|||
| NET INCOME | $ | 1,753,869 | ($37,637,687 | ) |
| Net other income expense | 3,677,204 | 592,511 | ||
| Income tax expense (benefit) | 10,416,171 | (19,987,585 | ) | |
| Depreciation, depletion and amortization | 20,517,780 | 11,483,314 | ||
| Accretion of discounted liabilities | 567,968 | 487,182 | ||
| Ceiling test impairment | – | 56,513,016 | ||
| Stock based compensation | 3,685,079 | 2,267,053 | ||
| ADJUSTED EBITDA | $ | 40,618,071 | $ | 13,717,804 |
Contacts
K M Financial, Inc.
Bill Parsons, 702-489-4447
