Ring Energy Announces Financial and Operational Results for Fourth Quarter and Year End 2016
Wednesday, March 15, 2017 4:13:00 PM ET 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.
RING ENERGY, INC.
STATEMENTS OF OPERATIONS
Three Months Ended Twelve Months Ended
December 31, December 31,
------------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------------------
2016 2015 2016 2015
-------------------------------------------------- --------------------------------------------------- ---------------------------------------------------- ---------------------------------------------------
Oil and Gas Revenues $ 9,830,708 $ 7,362,394 $ 30,850,248 $ 31,013,892
-------------------- ---------- -------------------- -------------------- -------------------- ----------- -------------------- -------------------- ------------ -------------------- -------------------- -------------------- ----------- --------------------
Costs and Operating Expenses .
Oil and gas production costs 2,848,029 2,967,232 9,867,800 9,958,380
Oil and gas production taxes 472,285 357,811 1,504,620 1,468,073
Depreciation, depletion and amortization 2,941,333 3,648,107 11,483,314 15,175,791
Ceiling test impairment - 9,312,203 56,513,016 9,312,203
Accretion expense 127,015 168,118 487,182 418,384
General and administrative expense 2,004,039 2,220,040 8,027,077 7,995,395
-------------------- ---------- -------------------- -------------------- -------------------- ----------- -------------------- -------------------- ------------ -------------------- -------------------- -------------------- ----------- --------------------
Total Costs and Operating Expenses 8,392,701 18,673,511 87,883,009 44,328,226
-------------------- ---------- -------------------- -------------------- -------------------- ----------- -------------------- -------------------- ------------ -------------------- -------------------- -------------------- ----------- --------------------
Income (Loss) from Operations 1,438,007 (11,311,117 ) (57,032,761 ) (13,314,334 )
-------------------- ---------- -------------------- -------------------- -------------------- ----------- -------------------- -------------------- ------------ -------------------- -------------------- -------------------- ----------- --------------------
Net Interest expense (78,071 ) (315,021 ) (592,511 ) (742,150 )
-------------------- ---------- -------------------- -------------------- -------------------- ----------- -------------------- -------------------- ------------ -------------------- -------------------- -------------------- ----------- --------------------
Income (Loss) Before Provision for Income Taxes 1,359,936 (11,626,138 ) (57,625,272 ) (14,056,484 )
(Provision for) Benefit From Income Taxes (1,836,942 ) 4,153,092 19,987,585 5,003,713
-------------------- ---------- -------------------- -------------------- -------------------- ----------- -------------------- -------------------- ------------ -------------------- -------------------- -------------------- ----------- --------------------
Net Income (Loss) ($477,006 ) ($7,473,046 ) ($37,637,687 ) ($9,052,771 )
==================== ========== ==================== ==================== ==================== =========== ==================== ==================== ============ ==================== ==================== ==================== =========== ====================
Basic Earnings (Loss) Per Common Share ($0.01 ) ($0.25 ) ($0.97 ) ($0.32 )
Diluted Earnings (Loss) Per Common Share ($0.01 ) ($0.25 ) ($0.97 ) ($0.32 )
Basic Weighted-Average Common Shares Outstanding 43,814,351 30,391,485 38,710,626 28,176,924
Diluted Weighted-Average Common Shares Outstanding 43,814,351 30,391,485 38,710,626 28,176,924
COMPARATIVE OPERATING STATISTICS
Three Months Ended December 31,
----------------------------------------------------------------------------------------
2016 2015 Change
----------- ----------- --------------------------------
Net Sales - BOE per day 2,569 2,312 11 %
Per BOE:
Average Sales Price $ 41.59 $ 34.61 20 %
Lease Operating Expenses 12.05 13.95 -14 %
Production Taxes 2.00 1.68 19 %
DD&A 12.44 17.15 -27 %
Accretion 0.54 0.79 -32 %
General & Administrative Expenses 8.48 10.44 -19 %
Twelve Months Ended December 31,
----------------------------------------------------------------------------------------
2016 2015 Change
----------- ----------- --------------------------------
Net Sales - BOE per day 2,399 2,037 18 %
Per BOE:
Average Sales price $ 35.13 $ 41.72 -16 %
Lease Operating Expenses 11.24 13.40 -16 %
Production Taxes 1.71 1.97 -13 %
DD&A 13.08 20.42 -36 %
Accretion 0.55 0.56 -2 %
General & Administrative Expenses 9.14 10.76 -15 %
RING ENERGY, INC.
BALANCE SHEET
December 31, December 31,
2016 2015
--------------------------------------------------- ---------------------------------------------------
ASSETS
Current Assets
Cash $ 71,086,381 $ 4,431,350
Accounts receivable 3,453,238 2,507,858
Joint interest billing receivable 454,461 1,629,165
Prepaid expenses and retainers 226,835 146,118
==================== =========== ==================== ==================== =========== ====================
Total Current Assets 75,220,915 8,714,491
-------------------- ----------- -------------------- -------------------- ----------- --------------------
Property and Equipment
Oil and natural gas properties subject to amortization 250,133,965 269,590,374
Inventory for property development 1,582,427 -
Fixed assets subject to depreciation 1,549,311 1,539,991
-------------------- ----------- --------------------
Total Property and Equipment 253,265,703 271,130,365
Accumulated depreciation, depletion and amortization (41,347,152 ) (29,863,838 )
Net Property and Equipment 211,918,551 241,266,527
-------------------- ----------- -------------------- -------------------- ----------- --------------------
Deferred Income Taxes 20,051,908 64,323
Deferred Financing Costs 406,025 820,904
-------------------- ----------- -------------------- -------------------- ----------- --------------------
Total Assets $ 307,597,399 $ 250,866,245
==================== =========== ==================== ==================== =========== ====================
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts payable $ 9,099,391 $ 11,023,269
Other accrued liabilities - 309,898
-------------------- ----------- -------------------- -------------------- ----------- --------------------
Total Current Liabilities 9,099,391 11,333,167
==================== =========== ==================== ==================== =========== ====================
Revolving line of credit - 45,900,000
Asset retirement obligations 7,957,035 7,401,950
-------------------- ----------- -------------------- -------------------- ----------- --------------------
Total Liabilities 17,056,426 64,635,117
-------------------- ----------- -------------------- -------------------- ----------- --------------------
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;
49,113,063 shares and 30,391,942 shares issued and outstanding,
respectively
49,113 30,392
Additional paid-in capital 335,197,845 193,269,034
Retained earnings (accumulated deficit) (44,705,985 ) (7,068,298 )
==================== =========== ==================== ==================== =========== ====================
Total Stockholders’ Equity 290,540,973 186,231,128
-------------------- ----------- -------------------- -------------------- ----------- --------------------
Total Liabilities and Stockholders’ Equity $ 307,597,399 $ 250,866,245
-------------------- ----------- -------------------- -------------------- ----------- --------------------
RING ENERGY, INC.
STATEMENTS OF CASH FLOW
December 31, December 31,
2016 2015
---------------------------------------------------- ----------------------------------------------------
Cash Flows From Operating Activities
Net income (loss) ($37,637,687 ) ($9,052,771 )
Adjustments to reconcile net income (loss) to net cash
Provided by operating activities:
Depreciation, depletion and amortization 11,483,314 15,175,791
Ceiling test impairment 56,513,016 9,312,203
Accretion expense 487,182 418,384
Share-based compensation 2,267,053 2,566,716
Deferred income tax expense (benefit) (19,987,585 ) (5,003,713 )
Changes in assets and liabilities:
Accounts receivable 229,324 2,163,440
Prepaid expenses 334,162 (806,422 )
Accounts payable (2,233,776 ) (4,929,884 )
Settlement of asset retirement obligation (240,606 ) (446,192 )
------------------------------------------------------------------ -------------------- ------------ -------------------- -------------------- ------------ --------------------
Net Cash Provided by Operating Activities 11,214,397 9,397,552
------------------------------------------------------------------ -------------------- ------------ -------------------- -------------------- ------------ --------------------
Cash Flows from Investing Activities
Payments to purchase oil and natural gas properties (10,193,927 ) (77,902,553 )
Payments to develop oil and natural gas properties (26,554,171 ) (31,430,355 )
Purchase of inventory for development (1,582,427 ) -
Purchase of equipment, vehicles and leasehold improvements (9,320 ) (330,182 )
-------------------- ------------ -------------------- -------------------- ------------ --------------------
Net Cash Used in Investing Activities (38,339,845 ) (109,663,090 )
================================================================== ==================== ============ ==================== ==================== ============ ====================
Cash Flows From Financing Activities
Proceeds from issuance of notes payable 7,000,000 45,900,000
Proceeds from issuance of common stock 139,567,980 50,039,853
Principal payments on revolving line of credit (52,900,000 ) -
Proceeds from option exercise 112,500 134,800
------------------------------------------------------------------ -------------------- ------------ -------------------- -------------------- ------------ --------------------
Net Cash Provided by Financing Activities 93,780,480 96,074,653
------------------------------------------------------------------ -------------------- ------------ -------------------- -------------------- ------------ --------------------
Net Increase (Decrease) in Cash 66,655,031 (4,190,885 )
Cash at Beginning of Period 4,431,350 8,622,235
------------------------------------------------------------------ -------------------- ------------ -------------------- -------------------- ------------ --------------------
Cash at End of Period $ 71,086,381 $ 4,431,350
================================================================== ==================== ============ ==================== ==================== ============ ====================
Supplemental Cash flow Information
Cash paid for interest $ 649,010 $ 426,742
================================================================== ==================== ============ ==================== ==================== ============ ====================
Noncash Investing and Financing Activities
Asset retirement obligation acquired - 3,361,634
Asset retirement obligation incurred during development 308,509 171,635
RECONCILIATION OF CASH FLOW FROM OPERATIONS
Net cash provided by operating activities $ 11,214,397 $ 9,397,552
Change in operating assets and liabilities (1,910,896 ) (4,019,058 )
-------------------- ------------ -------------------- -------------------- ------------ --------------------
Cash flow from operations $ 13,125,293 $ 13,416,610
==================== ============ ==================== ==================== ============ ====================
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,
2016 2015
------------------------------------ -------------------------------------
NET INCOME ($37,637,687 ) ($9,052,771 )
Net interest expense 592,511 742,150
Income tax expense (benefit) (19,987,585 ) (5,003,713 )
Depreciation, depletion and amortization 11,483,314 15,175,791
Accretion of discounted liabilities 487,182 418,384
Ceiling test impairment 56,513,016 9,312,203
Stock based compensation 2,267,053 2,566,716
ADJUSTED EBITDA $ 13,717,804 $ 14,158,760
==== ============ ==================== ====== =========== ====================
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SOURCE: Ring Energy, Inc.
K M Financial, Inc.
Bill Parsons, 702-489-4447
