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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