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Ring Energy Begins HZ Well Project at Central Basin Property

Share Print Bookmark    |    Monday,August 08,2016

Ring Energy, Inc. reported financial results for the three months and six months ended June 30, 2016. 

Key Points:

• We have budgeted the drilling of eight vertical wells, one in the first quarter, three in the second quarter, three more in the third quarter and one in the fourth quarter.

• Along with the new vertical wells, we are excited to announce we have commenced drilling the first of three horizontal wells to be drilled in 2016 on our Central Basin property.

Ring’s Chief Executive Officer, Mr. Kelly Hoffman, stated, “In the second quarter we continued to work extremely hard at reducing our operating costs and general overhead while maximizing our production. We drilled three new developmental wells, two on our Central Basin Platform and one on our Delaware Basin asset, and refraced two existing wells operating on the Central Basin properties. All of these were done toward the end of the quarter and unfortunately had no impact on the quarter’s production.

"We have continued to improve and upgrade our infrastructures on both the Central Basin Platform and the Delaware Basin assets. In April, we completed a public stock offering which allowed us to pay off the entire outstanding balance on our senior credit facility and put together a capital expenditure budget for the remainder of 2016. We have budgeted the drilling of eight vertical wells, one in the first quarter, three in the second quarter, three more in the third quarter and one in the fourth quarter. Along with the new vertical wells, we are excited to announce we have commenced drilling the first of three horizontal wells to be drilled in 2016 on our Central Basin property. We are hopeful commodity prices will improve. In the event that prices remain low, we have no long term debt and have positioned the Company to be able to take advantage of any acquisition opportunities that meet our requirements and compliment our existing acreage.”

Financial Results

For the three month period ended June 30, 2016, Ring had oil and gas revenues of $7,104,609, compared to $8,976,790 for the quarter ended June 30, 2015. For the six month period ended June 30, 2016, the Company reported oil and gas revenues of $13,196,997, compared to oil and gas revenues of $15,022,491 for the six month period ended June 30, 2015. For the second quarter of 2016, Ring reported a net loss of $15,941,500, or $0.41 per diluted share, which included a pre-tax non-cash impairment of $25,451,988. Excluding the impairment, the net loss per diluted share would have been $0.00. For the six months ended June 30, 2016, the Company reported a net loss of $31,216,544, or $0.90 per diluted share, which included a pre-tax non-cash impairment of $46,864,074. Excluding the impairment, the net loss per diluted share would have been $0.05. This information compares to net income of $534,167, or $0.02 per fully diluted share, for the three months ended June 30, 2015, and a net loss for the six month period ended June 30, 2015 of $441,457, or $0.02 per fully diluted share.

For the three months ended June 30, 2016, oil sales volume decreased to 160,925 barrels, compared to 165,759 barrels for the same period in 2015, a 3% decrease, and gas sales volume increased to 201,992 MCF (thousand cubic feet), compared to 94,517 MCF for the same period in 2015, a 114% increase. For the six months ended June 30, 2016, oil sales volume increased to 352,303 barrels, compared to 302,848 barrels for the same period in 2015, a 16% increase and gas sales volume increased to 458,740 MCF, compared to 114,364 MCF for the same period in 2015, a 301% increase.

The average commodity prices received by Ring were $41.22 per barrel of oil and $2.33 per MCF of natural gas for the quarter ended June 30, 2016, compared to $52.52 per barrel of oil and $2.87 per MCF of natural gas for the quarter ended June 30, 2015. The average prices received for the six months ended June 30, 2016 were $34.69 per barrel of oil and $2.13 per MCF of natural gas, compared to $48.55 per barrel of oil and $2.78 per MCF of natural gas for the six month period ended June 30, 2015.

Lease operating expenses, including production taxes, for the three months ended June 30, 2016 were $13.07 per barrel of oil equivalent (“BOE”), a 10% decrease from the prior year. Depreciation, depletion and amortization costs, including accretion, decreased 23% to $13.90 per BOE. General and administrative costs, which included a $507,642 charge for stock based compensation, were $9.87 per BOE, a 12% decrease. For the six months ended June 30, 2016, lease operating expenses, including production taxes, were $12.44 per BOE, a 16% decrease. Depreciation, depletion and amortization costs, including accretion, were $14.48 per BOE, a 33% decrease, and general and administrative costs, which included a $1,091,967 charge for stock based compensation, were $9.66 per BOE, an 18% decrease from 2015.

Cash provided by operating activities, before changes in working capital, for the three and six months ended June 30, 2016 was $3,135,349, or $0.08 per fully diluted share, and $4,389,664, or $0.13 per fully diluted share, compared to $4,881,602 and $7,708,958, or $0.18 and $0.30 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 six months ended June 30, 2016 was $3,147,720, or $0.08 per fully diluted share, and $4,814,656, or $0.14 per fully diluted share, compared to $4,960,605 and $7,787,181, or $0.18 and $0.30 in 2015. (See accompanying table for a reconciliation of net income to adjusted EBITDA).

In April 2016, the Company received approximately $61 million in net proceeds from the public sale of 11,500,000 shares of the Company’s registered common stock. In May, the immediate borrowing base on the Company’s $500 million senior credit facility was reduced from $100 million to $60 million. There was no outstanding debt on the Company’s $500 million senior secured credit facility at June 30, 2016.

Internal estimates of net 3P reserves (Proved, Probable and Possible) were 25.796 million barrel of oil equivalents (BOE) Proved, 11.831 million BOE Probable, and 2.655 million BOE Possible for a 3P total of 40.282 million BOE. Future net revenues before income taxes, discounted at 10% (“PV-10”), based on NYMEX strip prices as of July 1, 2016, were $300.03 million Proved, $109.471 million Probable and $32.956 million Possible for a 3P total of $442.457 million.