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United States
Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q

x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2024

o Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from ______ to ______

Commission file number 001-36057

Ring Energy, Inc.
(Exact name of registrant as specified in its charter)
Nevada90-0406406
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
1725 Hughes Landing Blvd., Suite 900
The Woodlands, TX
77380
(Address of principal executive offices)(Zip Code)
(281) 397-3699
(Registrant’s telephone number, including area code)
Securities registered under Section 12(b) of the Exchange Act:
Title of Each ClassTrading SymbolName of Each Exchange on Which Registered
Common Stock, par value $0.001REINYSE American
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated fileroAccelerated filerx
Non-accelerated filero(Do not check if a smaller reporting company)Smaller reporting companyo
Emerging growth companyo

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is shell company (as defined in Rule 12b-2 of the Act). Yes o No x

As of November 6, 2024, the registrant had outstanding 198,196,034 shares of common stock ($0.001 par value).



TABLE OF CONTENTS
2

Forward Looking Statements
This Quarterly Report on Form 10-Q (herein, “Quarterly Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements, other than statements of historical fact included in this Quarterly Report regarding our strategy, future operations, financial position, estimated revenues and expenses, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this Quarterly Report, the words “may,” “will,” “could,” “would,” “should,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “plan,” “pursue,” “target,” “continue,” “potential,” “guidance,” “project” or other similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. All forward-looking statements speak only as of the date of this Quarterly Report. Although we believe that our plans, intentions and expectations reflected in or suggested by the forward-looking statements we make in this Quarterly Report are reasonable, we can give no assurance that these plans, intentions or expectations will be achieved. We are making investors aware that such forward-looking statements, because they relate to future events, are by their very nature subject to many important factors that could cause actual results to differ materially from those contemplated. Such factors include:
declines or volatility in the prices we receive for our oil and natural gas;
our ability to raise additional capital to fund future capital expenditures;
our ability to generate sufficient net cash provided by operating activities, borrowings or other sources to enable us to fully develop and produce our oil and natural gas properties;
general economic conditions, whether internationally, nationally or in the regional and local market areas in which we do business;
risks associated with drilling of wells, including completion risks, cost overruns, mechanical failures and the drilling of non-economic wells or dry holes;
uncertainties associated with estimates of proved oil and natural gas reserves;
the presence or recoverability of estimated oil and natural gas reserves and the actual future production rates and associated costs;
the effects of inflation on our cost structure;
substantial declines in the estimated values of our proved oil and natural gas reserves;
our ability to replace our oil and natural gas reserves;
the effects of rising interest rates on our cost of capital and the actions that central banks around the world undertake to control inflation, including the impacts such actions have on general economic conditions;
unanticipated reductions in the borrowing base under our credit agreement;
the potential for production decline rates and associated production costs for our wells to be greater than we forecast;
risks and liabilities associated with the acquisition and integration of companies and properties;
cost and availability of drilling rigs, and related equipment, supplies, personnel, and oilfield services;
geological concentration of our oil and natural gas reserves;
3

the timing and extent of our success in acquiring, discovering, developing, and producing oil and natural gas reserves;
our dependence on the availability, use and disposal of water in our drilling, completion and production operations;
significant competition for oil and natural gas acreage and acquisitions;
environmental or other governmental regulations, including legislation related to hydraulic fracture stimulation and climate change measures;
our ability to secure reliable transportation for oil and natural gas we produce and to sell the oil and natural gas at market prices;
future environmental, social and governance ("ESG") compliance developments and increased attention to such matters which could adversely affect our ability to raise equity and debt capital;
management’s ability to execute our plans to meet our optimal goals;
the occurrence of cybersecurity incidents, attacks or other breaches to our information technology systems or on
systems and infrastructure used by the oil and gas industry;
our ability to find and retain highly skilled personnel and our ability to retain key members of our management team on commercially reasonable terms;
adverse weather conditions;
costs and liabilities associated with environmental, health, and safety laws;
the effect of our oil and natural gas derivative activities;
social unrest, political instability, or armed conflict in major oil and natural gas producing regions outside the United States, including evolving geopolitical and military hostilities in the Middle East, Russia, and Ukraine and acts of terrorism or sabotage;
our insurance coverage may not adequately cover all losses that may be sustained in connection with our business activities;
possible adverse results from litigation and the use of financial resources to defend ourselves; and
the other factors discussed in Part I, Item 1A-- “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023, as well as in our condensed financial statements, related notes, and the other financial information appearing elsewhere in this Quarterly Report and our other reports filed from time to time with the Securities and Exchange Commission (the “SEC”).
Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date that such statements are made. We undertake no obligation to publicly update or revise any forward-looking statements after the date they are made, whether as a result of new information, future events or otherwise.
Unless the context otherwise requires, references in this Quarterly Report to “Ring,” “Ring Energy,” the “Company,” “we,” “us,” “our” or “ours” refer to Ring Energy, Inc.
4

PART I — FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
The following (a) condensed balance sheet as of December 31, 2023 which has been derived from our audited financial statements, and (b) the unaudited condensed financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). Accordingly, certain disclosures by accounting principles generally accepted in the United States ("GAAP") and normally included in Annual Reports on Form 10-K have been omitted. Although management believes that our disclosures are adequate to make the information presented not misleading, these unaudited interim condensed financial statements should be read in conjunction with the Company's audited financial statements and related notes included in its most recent Annual Report on Form 10-K.
5

RING ENERGY, INC.
CONDENSED BALANCE SHEETS
(Unaudited)

September 30, 2024December 31, 2023
ASSETS
Current Assets
Cash and cash equivalents$ $296,384 
Accounts receivable36,394,451 38,965,002 
Joint interest billing receivables, net1,343,801 2,422,274 
Derivative assets8,375,984 6,215,374 
Inventory4,627,980 6,136,935 
Prepaid expenses and other assets2,076,896 1,874,850 
Total Current Assets52,819,112 55,910,819 
Properties and Equipment
Oil and natural gas properties, full cost method1,770,078,718 1,663,548,249 
Financing lease asset subject to depreciation4,192,099 3,896,316 
Fixed assets subject to depreciation3,389,907 3,228,793 
Total Properties and Equipment1,777,660,724 1,670,673,358 
Accumulated depreciation, depletion and amortization(450,913,685)(377,252,572)
Net Properties and Equipment1,326,747,039 1,293,420,786 
Operating lease asset2,057,096 2,499,592 
Derivative assets8,735,674 11,634,714 
Deferred financing costs9,406,089 13,030,481 
Total Assets$1,399,765,010 $1,376,496,392 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts payable$90,143,131 $104,064,124 
Income tax liability257,704  
Financing lease liability879,598 956,254 
Operating lease liability633,132 568,176 
Derivative liabilities3,929,188 7,520,336 
Notes payable912,819 533,734 
Asset retirement obligations836,421 165,642 
Total Current Liabilities97,591,993 113,808,266 
Non-current Liabilities
Deferred income taxes26,859,453 8,552,045 
Revolving line of credit392,000,000 425,000,000 
Financing lease liability, less current portion496,954 906,330 
Operating lease liability, less current portion1,574,117 2,054,041 
Derivative liabilities4,535,777 11,510,368 
Asset retirement obligations25,396,573 28,082,442 
Total Liabilities548,454,867 589,913,492 
Commitments and contingencies (See Note 12)
Stockholders' Equity
Preferred stock - $0.001 par value; 50,000,000 shares authorized; no shares issued or outstanding
  
Common stock - $0.001 par value; 450,000,000 shares authorized; 198,196,034 shares and 196,837,001 shares issued and outstanding, respectively
198,196 196,837 
Additional paid-in capital798,747,764 795,834,675 
Retained earnings (Accumulated deficit)52,364,183 (9,448,612)
Total Stockholders’ Equity851,310,143 786,582,900 
Total Liabilities and Stockholders' Equity$1,399,765,010 $1,376,496,392 
The accompanying notes are an integral part of these unaudited condensed financial statements.
6

RING ENERGY, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months Ended
For the Nine Months Ended
September 30, 2024September 30, 2023September 30, 2024September 30, 2023
Oil, Natural Gas, and Natural Gas Liquids Revenues$89,244,383 $93,681,798 $282,886,868 $261,113,283 
Costs and Operating Expenses
Lease operating expenses20,315,282 18,015,348 57,984,733 51,426,145 
Gathering, transportation and processing costs102,420 (4,530)376,103 (6,985)
Ad valorem taxes2,164,562 1,779,163 5,647,469 5,120,119 
Oil and natural gas production taxes4,203,851 4,753,289 12,259,418 13,173,568 
Depreciation, depletion and amortization25,662,123 21,989,034 74,153,994 64,053,637 
Asset retirement obligation accretion354,195 354,175 1,057,213 1,073,900 
Operating lease expense175,091 138,220 525,272 366,711 
General and administrative expense6,421,567 7,083,574 21,604,323 21,023,956 
Total Costs and Operating Expenses59,399,091 54,108,273 173,608,525 156,231,051 
Income from Operations29,845,292 39,573,525 109,278,343 104,882,232 
Other Income (Expense)
Interest income143,704 80,426 367,181 160,171 
Interest (expense)(10,754,243)(11,381,754)(33,199,314)(32,322,840)
Gain (loss) on derivative contracts24,731,625 (39,222,755)3,888,531 (26,483,190)
Gain (loss) on disposal of assets  89,693 (132,109)
Other income  25,686 126,210 
Net Other Income (Expense)14,121,086 (50,524,083)(28,828,223)(58,651,758)
Income (Loss) Before Benefit from (Provision for) Income Taxes43,966,378 (10,950,558)80,450,120 46,230,474 
Benefit from (Provision for) Income Taxes(10,087,954)3,411,336 (18,637,325)7,737,688 
Net Income (Loss)$33,878,424 $(7,539,222)$61,812,795 $53,968,162 
Basic Earnings (Loss) per Share$0.17 $(0.04)$0.31 $0.29 
Diluted Earnings (Loss) per Share$0.17 $(0.04)$0.31 $0.28 
The accompanying notes are an integral part of these unaudited condensed financial statements.
7

RING ENERGY, INC.
CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
Common StockAdditional
Paid-in
Capital
Retained Earnings
(Accumulated Deficit)
Total
Stockholders'
Equity
For the Nine Months Ended September 30, 2024
SharesAmount
Balance, December 31, 2023196,837,001$196,837 $795,834,675 $(9,448,612)$786,582,900 
Restricted stock vested1,342,1121,342 (1,342)—  
Shares to cover tax withholdings for restricted stock vested(244,911)(245)245 —  
Payments to cover tax withholdings for restricted stock vested, net— (814,985)— (814,985)
Share-based compensation— 1,723,832 — 1,723,832 
Net income— — 5,515,377 5,515,377 
Balance, March 31, 2024197,934,202 $197,934 $796,742,425 $(3,933,235)$793,007,124 
Restricted stock vested303,797304 (304)—  
Shares to cover tax withholdings for restricted stock vested(71,702)(72)72 —  
Payments to cover tax withholdings for restricted stock vested, net— (86,991)— (86,991)
Share-based compensation— 2,077,778 — 2,077,778 
Net income— — 22,418,994 22,418,994 
Balance, June 30, 2024198,166,297 $198,166 $798,732,980 $18,485,759 $817,416,905 
Restricted stock vested39,44239 (39)—  
Shares to cover tax withholdings for restricted stock vested(9,705)(9)9 —  
Payments to cover tax withholdings for restricted stock vested, net— (17,273)— (17,273)
Share-based compensation— 32,087 — 32,087 
Net income— — 33,878,424 33,878,424 
Balance, September 30, 2024198,196,034 $198,196 $798,747,764 $52,364,183 $851,310,143 
For the Nine Months Ended September 30, 2023
Balance, December 31, 2022175,530,212$175,530 $775,241,114 $(114,313,253)$661,103,391 
Exercise of common warrants issued in offering4,517,4274,5173,609,424 — 3,613,941 
Restricted stock vested659,479659 (659)—  
Shares to cover tax withholdings for restricted stock vested(79,634)(79)79 —  
Payments to cover tax withholdings for restricted stock vested, net— (134,381)— (134,381)
Share-based compensation— 1,943,696 — 1,943,696 
Net income— — 32,715,779 32,715,779 
Balance, March 31, 2023180,627,484$180,627 $780,659,273 $(81,597,474)$699,242,426 
Induced exercise of common warrants issued in offering14,512,166 14,512 8,673,143 — 8,687,655 
Restricted stock vested288,709 289 (289)—  
Shares to cover tax withholdings for restricted stock vested(77,687)(78)78 —  
Payments to cover tax withholdings for restricted stock vested, net— — (141,682)— (141,682)
Share-based compensation— — 2,260,312 — 2,260,312 
Net income— — — 28,791,605 28,791,605 
Balance, June 30, 2023195,350,672 $195,350 $791,450,835 $(52,805,869)$738,840,316 
Restricted stock vested39,443 39 (39)—  
Shares to cover tax withholdings for restricted stock vested(9,588)(9)9 —  
Payments to cover tax withholdings for restricted stock vested, net— — (18,302)— (18,302)
Share-based compensation— — 2,170,735 — 2,170,735 
Net loss
— — — (7,539,222)(7,539,222)
Balance, September 30, 2023195,380,527 $195,380 $793,603,238 $(60,345,091)$733,453,527 
    The accompanying notes are an integral part of these unaudited condensed financial statements.
8

RING ENERGY, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Nine Months Ended
September 30, 2024September 30, 2023
Cash Flows From Operating Activities
Net income$61,812,795 $53,968,162 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization74,153,994 64,053,637 
Asset retirement obligation accretion1,057,213 1,073,900 
Amortization of deferred financing costs3,670,096 3,699,235 
Share-based compensation3,833,697 6,374,743 
Bad debt expense187,594 41,865 
(Gain) loss on disposal of assets(89,693) 
Deferred income tax expense (benefit)18,212,075 (8,160,712)
Excess tax expense (benefit) related to share-based compensation95,333 158,763 
(Gain) loss on derivative contracts(3,888,531)26,483,190 
Cash received (paid) for derivative settlements, net(5,938,777)(5,829,728)
Changes in operating assets and liabilities:
Accounts receivable3,245,030 (5,671,516)
Inventory1,508,955 3,701,882 
Prepaid expenses and other assets(202,046)68,525 
Accounts payable(9,538,827)3,500,913 
Settlement of asset retirement obligation(974,877)(1,025,607)
Net Cash Provided by Operating Activities147,144,031 142,437,252 
Cash Flows From Investing Activities
Payments for the Stronghold Acquisition (18,511,170)
Payments for the Founders Acquisition (49,902,757)
Payments to purchase oil and natural gas properties(787,343)(1,605,262)
Payments to develop oil and natural gas properties(117,559,401)(112,996,032)
Payments to acquire or improve fixed assets subject to depreciation(185,524)(209,798)
Proceeds from sale of fixed assets subject to depreciation10,605 332,230 
Proceeds from divestiture of equipment for oil and natural gas properties 54,558 
Proceeds from sale of Delaware properties
 7,608,692 
Proceeds from sale of New Mexico properties
(144,398)4,312,502 
Proceeds from sale of CBP vertical wells5,500,000  
Net Cash Used in Investing Activities(113,166,061)(170,917,037)
Cash Flows From Financing Activities
Proceeds from revolving line of credit108,000,000 179,000,000 
Payments on revolving line of credit(141,000,000)(166,000,000)
Proceeds from issuance of common stock from warrant exercises 12,301,596 
Payments for taxes withheld on vested restricted shares, net(919,249)(294,365)
Proceeds from notes payable1,501,507 1,565,071 
Payments on notes payable(1,122,422)(1,114,883)
Payment of deferred financing costs(45,704) 
Reduction of financing lease liabilities(688,486)(551,579)
Net Cash Used in Financing Activities
(34,274,354)24,905,840 
Net Increase (Decrease) in Cash(296,384)(3,573,945)
Cash at Beginning of Period296,384 3,712,526 
Cash at End of Period$ $138,581 
9

RING ENERGY, INC.
CONDENSED STATEMENTS OF CASH FLOWS (CONTINUED)
(Unaudited)
For the Nine Months Ended
September 30, 2024September 30, 2023
Supplemental Cash Flow Information
Cash paid for interest$30,208,974 $27,804,707 
Cash paid for income taxes72,213  
Noncash Investing and Financing Activities
Asset retirement obligation incurred during development$505,721 $261,786 
Asset retirement obligation acquired 2,090,777 
Asset retirement obligation revision of estimate133,794 53,824 
Asset retirement obligation sold(3,219,651)(4,717,507)
Operating lease assets obtained in exchange for new operating lease liability 1,713,677 
Financing lease assets obtained in exchange for new financing lease liability341,218 305,052 
Change in capitalized expenditures attributable to drilling projects financed through current liabilities(4,034,975)(1,394,081)
Supplemental Schedule for Founders Acquisition
Investing Activities - Cash Paid
Escrow deposit released at closing
$ $7,500,000 
Closing amount paid to Founders
 42,502,799 
Interest from escrow deposit
 1,747 
Direct transaction costs
 1,361,843 
Post-close adjustments
 (1,463,632)
Payments for the Founders Acquisition$ $49,902,757 
Investing Activities - Noncash
Assumption of suspense liability$ $677,116 
Assumption of asset retirement obligation 2,090,777 
Assumption of ad valorem tax liability
 234,051 
Deferred cash payment at fair value 14,657,383 
Supplemental Schedule for Stronghold Acquisition
Investing Activities - Cash Paid
Payment of deferred cash payment 15,000,000 
Payment of post-close settlement 3,511,170 
Payments for the Stronghold Acquisition$ $18,511,170 
The accompanying notes are an integral part of these unaudited condensed financial statements.
10

RING ENERGY, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 — BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Condensed Financial Statements – The accompanying condensed financial statements prepared by Ring Energy, Inc., a Nevada corporation (the “Company,” "Ring Energy," “Ring,” "we," "us," or "our"), have not been audited by an independent registered public accounting firm. In the opinion of the Company’s management, the accompanying unaudited condensed financial statements contain all adjustments necessary for fair presentation of the results of operations for the periods presented, which adjustments were of a normal recurring nature, except as disclosed herein. The condensed results of operations for the three and nine months ended September 30, 2024 are not necessarily indicative of the results to be expected for the full year ending December 31, 2024, for various reasons, including the impact of fluctuations in prices received for oil and natural gas, natural production declines, the uncertainty of exploration and development drilling results, fluctuations in the fair value of derivative instruments, and other factors.

These unaudited condensed financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) applicable to interim financial information, and, accordingly, do not include all of the information and notes required by GAAP for complete financial statements. Therefore, these condensed financial statements should be read in conjunction with the financial statements and notes included in the Company’s annual report on Form 10-K for the year ended December 31, 2023.
Organization and Nature of Operations – Ring Energy is a growth oriented independent exploration and production company based in The Woodlands, Texas engaged in oil and natural gas development, production, acquisition, and exploration activities currently focused in the Permian Basin of Texas. Our drilling operations target the oil and liquids rich producing formations in the Northwest Shelf and the Central Basin Platform in the Permian Basin of Texas.
Liquidity and Capital Considerations – The Company strives to maintain an adequate liquidity level to address volatility and risk. Sources of liquidity include the Company’s net cash provided by operating activities, cash on hand, available borrowing capacity under its revolving credit facility, and proceeds from sales of non-strategic assets.

While changes in oil and natural gas prices affect the Company’s liquidity, the Company has put in place hedges in seeking to protect a substantial portion of its cash flows from price declines; however, if oil or natural gas prices rapidly deteriorate due to unanticipated economic conditions, this could still have a material adverse effect on the Company’s cash flows.

The Company expects ongoing oil price volatility over an indeterminate term. Extended depressed oil prices have historically had and could have a material adverse impact on the Company’s oil revenue, which is mitigated to some extent by the Company’s hedge contracts.

The Company believes that it has the ability to continue to fund its operations and service its debt by using cash flows from operations.
Use of Estimates – The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses during the reporting period. The Company’s unaudited condensed financial statements are based on a number of significant estimates, including estimates of oil and natural gas reserve quantities, which are the basis for the calculation of depletion and impairment of oil and gas properties. Reserve estimates, by their nature, are inherently imprecise. Actual results could differ from those estimates. Changes in the future
11

estimated oil and natural gas reserves or the estimated future cash flows attributable to the reserves that are utilized for impairment analysis could have a significant impact on the Company’s future results of operations.
Fair Value Measurements - Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Financial Accounting Standards Board (“FASB”) has established a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. This hierarchy consists of three broad levels. Level 1 inputs are the highest priority and consist of unadjusted quoted prices in active markets for identical assets and liabilities. Level 2 are inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. Level 3 are unobservable inputs for an asset or liability.
Fair Values of Financial Instruments – The carrying amounts reported for our revolving line of credit approximate their fair value because the underlying instruments are at interest rates which approximate current market rates. The carrying amounts of accounts receivable and accounts payable and other current assets and liabilities approximate fair value because of the short-term maturities and/or liquid nature of these assets and liabilities.
Fair Value of Non-financial Assets and Liabilities – The Company also applies fair value accounting guidance to initially, or as events dictate, measure non-financial assets and liabilities such as those obtained through business acquisitions, property and equipment and asset retirement obligations. These assets and liabilities are subject to fair value adjustments only in certain circumstances and are not subject to recurring revaluations. Fair value may be estimated using comparable market data, a discounted cash flow method, or a combination of the two as considered appropriate based on the circumstances. Under the discounted cash flow method, estimated future cash flows are based on management’s expectations for the future and include estimates of future oil and natural gas production or other applicable sales estimates, operational costs and a risk-adjusted discount rate. The Company may use the present value of estimated future cash inflows and/or outflows or third-party offers or prices of comparable assets with consideration of current market conditions to value its non-financial assets and liabilities when circumstances dictate determining fair value is necessary. Given the significance of the unobservable nature of a number of the inputs, these are considered Level 3 on the fair value hierarchy.
Derivative Instruments and Hedging Activities – The Company periodically enters into derivative contracts to manage its exposure to commodity price risk. These derivative contracts, which are generally placed with major financial institutions, may take the form of forward contracts, futures contracts, swaps or options. The oil and gas reference prices upon which the commodity derivative contracts are based reflect various market indices that have a high degree of historical correlation with actual prices received by the Company for its oil and gas production.
As the Company has not designated its derivative instruments as hedges for accounting purposes, any gains or losses resulting from changes in fair value of outstanding derivative financial instruments and from the settlement of derivative financial instruments are recognized in earnings and included as a component of other income (expense) in the Condensed Statements of Operations.
When applicable, the Company records all derivative instruments, other than those that meet the normal purchases and sales exception, on the balance sheet as either an asset or liability measured at fair value. Changes in fair value are recognized currently in earnings unless specific hedge accounting criteria are met. See "NOTE 6 — DERIVATIVE FINANCIAL INSTRUMENTS" below for additional information.
The Company uses the indirect method of reporting operating cash flows within the Condensed Statements of Cash Flows. Accordingly, the non-cash, unrealized gains and losses from derivative contracts are reflected as an adjustment to arrive at Net cash provided by operating activities. The total Gain (loss) on derivative contracts less the Cash received (paid) for derivative settlements, net represents the unrealized (mark to market) gain or loss on derivative contracts.
Concentration of Credit Risk and Receivables – Financial instruments that potentially subject the Company to a concentration of credit risk consist principally of cash and receivables.
Cash and cash equivalents - The Company had cash in excess of federally insured limits of $0 and $46,384 as of September 30, 2024 and December 31, 2023, respectively. The Company places its cash with a high credit quality financial institution. The Company has not experienced any losses in such accounts and believes it is not exposed to significant credit risk in this area.
Accounts receivable - Substantially all of the Company’s accounts receivable is from purchasers of oil and natural gas. Oil and natural gas sales are generally unsecured. Accounts receivable from purchasers outstanding longer than the contractual
12

payment terms are considered past due. The Company has not had any significant credit losses in the past and believes its accounts receivable are fully collectable. During the nine months ended September 30, 2024, sales to three purchasers represented 61%, 14% and 13%, respectively, of total oil, natural gas, and natural gas liquids sales. As of September 30, 2024, receivables outstanding from these three purchasers represented 69%, 11% and 13%, respectively, of accounts receivable.
Production imbalances - The Company accounts for natural gas production imbalances using the sales method, which recognizes revenue on all natural gas sold even though the natural gas volumes sold may be more or less than the Company's ownership entitles it to sell. Liabilities are recorded for imbalances greater than the Company’s proportionate share of remaining estimated natural gas reserves. The Company recorded no imbalances as of September 30, 2024 or December 31, 2023.
Joint interest billing receivables, net - The Company also has joint interest billing receivables. Joint interest billing receivables are collateralized by the pro rata revenue attributable to the joint interest holders and further by the interest itself. Receivables from joint interest owners outstanding longer than the contractual payment terms are considered past due. The following table indicates the Company's provisions for bad debt expense associated with its joint interest billing receivables during the three and nine months ended September 30, 2024 and September 30, 2023.
For the Three Months Ended
For the Nine Months Ended
September 30, 2024September 30, 2023September 30, 2024September 30, 2023
Bad debt expense$8,817 $19,656 $187,594 $41,865 
The following table reflects the Company's joint interest billing receivables and allowance for credit losses as of September 30, 2024 and December 31, 2023.
September 30, 2024December 31, 2023
Joint interest billing receivables$1,552,281 $2,480,843 
Allowance for credit losses(208,480)(58,569)
Joint interest billing receivables, net$1,343,801 $2,422,274 
The increase of $149,911 in the allowance for credit losses during the nine months ended September 30, 2024 was primarily due to property sales and owner settlements.
Cash and Cash Equivalents – The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. At September 30, 2024 and December 31, 2023, the Company had no such investments.
Inventory - The full balance of the Company's inventory consists of materials and supplies for its operations, with no work in process or finished goods inventory balances. Inventory is added to the books upon the purchase of supplies (inclusive of freight and sales tax costs) to use on well sites, and inventory is reduced by material transfers for inventory usage based on the initial invoiced value. The Company reports the balance of its inventory at the lower of cost or net realizable value. Inventory balances are excluded from the Company's calculation of depletion.
Oil and Natural Gas Properties – The Company uses the full cost method of accounting for oil and natural gas properties. Under this method, all costs (direct and indirect) associated with acquisition, exploration, and development of oil and natural gas properties are capitalized. Costs capitalized include acquisition costs, geological and geophysical expenditures, lease rentals on undeveloped properties and costs of drilling and equipping productive and non-productive wells. Drilling costs include directly related overhead costs. Capitalized costs are categorized either as being subject to amortization or not subject to amortization. All of the Company’s capitalized costs, excluding inventory, are subject to amortization.
The Company records a liability in the period in which an asset retirement obligation (“ARO”) is incurred, in an amount equal to the discounted estimated fair value of the obligation that is capitalized. Thereafter this liability is accreted up to the final retirement cost. An ARO is a future expenditure related to the disposal or other retirement of certain assets. The Company’s ARO relates to future plugging and abandonment expenses of its oil and natural gas properties and related facilities disposal. Dispositions of oil and natural gas properties are accounted for as adjustments to capitalized costs.
13

All capitalized costs of oil and natural gas properties, including the estimated future costs to develop proved reserves and estimated future costs to plug and abandon wells and costs of site restoration, less the estimated salvage value of equipment associated with the oil and natural gas properties, are amortized on the unit-of-production method using estimates of proved reserves as determined by independent petroleum engineers. If the results of an assessment indicate that the properties are impaired, the amount of the impairment is offset to the capitalized costs to be amortized. The following table shows total depletion and the depletion per barrel-of-oil-equivalent rate, for the three and nine months ended September 30, 2024 and 2023.
For the Three Months Ended
For the Nine Months Ended
September 30, 2024September 30, 2023September 30, 2024September 30, 2023
Depletion$25,302,058 $21,711,123 $73,056,856 $63,203,473 
Depletion rate, per barrel-of-oil-equivalent (Boe)$13.68 $13.48 $13.57 $13.09 
In addition, capitalized costs less accumulated depletion and related deferred income taxes are not allowed to exceed an amount (the full cost ceiling) equal to the sum of:
1)the present value of estimated future net revenues discounted at ten percent computed in compliance with SEC guidelines;
2)plus the cost of properties not being amortized;
3)plus the lower of cost or estimated fair value of unproven properties included in the costs being amortized;
4)less income tax effects related to differences between the book and tax basis of the properties.
No impairments on oil and natural gas properties as a result of the ceiling test were recorded for the three and nine months ended September 30, 2024 and 2023.
Land, Buildings, Equipment, Software, Leasehold Improvements, Automobiles, Buildings and Structures – Land, buildings, equipment, software, leasehold improvements, automobiles, buildings and structures are carried at historical cost, adjusted for impairment loss and accumulated depreciation (except for land). Historical costs include all direct costs associated with the acquisition of land, buildings, equipment, software, leasehold improvements, automobiles, buildings and structures and placing them in service. Upon sale or abandonment, the cost of the fixed asset(s) and related accumulated depreciation are removed from the accounts and any gain or loss is recognized.
Depreciation of buildings, equipment, software, leasehold improvements, automobiles, buildings and structures is calculated using the straight-line method based upon the following estimated useful lives:
Leasehold improvements
35 years
Office equipment and software
37 years
Equipment
510 years
Automobiles4 years
Buildings and structures7 years
The following table provides information on the Company's depreciation expense for the three and nine months ended September 30, 2024 and 2023.
For the Three Months Ended
For the Nine Months Ended
September 30, 2024September 30, 2023September 30, 2024September 30, 2023
Depreciation$102,043 $80,690 $306,752 $277,420 
Notes Payable – At the end of May 2023, the Company renewed its control of well, general liability, pollution, umbrella, property, workers' compensation, auto, and D&O (directors and officers) insurance policies, and funded the premiums with a promissory note with a total face value after down payments of $1,565,071. In November 2023, the Company renewed its cybersecurity insurance policy, and funded the premium with a promissory note with a total face value after down
14

payments of $72,442. The annual percentage rate (APR) for both notes was 7.08%. At the end of May 2024, the Company renewed its control of well, general liability, pollution, umbrella, property, workers' compensation, auto, and D&O insurance policies, funding the premiums with a promissory note with a face value after down payments of $1,501,507. The APR for this note is 7.98%. As of September 30, 2024 and December 31, 2023, the notes payable balances included in current liabilities on the Condensed Balance Sheet were $912,819 and $533,734, respectively.
The following table reflects the weighted average notes payable balances and the weighted average interest rate on the weighted average notes payable outstanding during the period as of and for the three and nine months ended September 30, 2024 and 2023.
Three Months EndedNine Months Ended
September 30, 2024September 30, 2023September 30, 2024September 30, 2023
Weighted average notes payable balance
$1,181,511 $1,228,923 $616,090 $651,564 
Weighted average interest rate on weighted average notes payable8.16 %7.25 %8.76 %7.21 %
The following table shows interest paid related to notes payable for the three and nine months ended September 30, 2024 and 2023. This interest is included within "Interest (expense)" in the Condensed Statements of Operations.
Three Months Ended
Nine Months Ended
September 30, 2024September 30, 2023September 30, 2024September 30, 2023
Interest paid for notes payable$24,115 $22,286 $40,481 $35,211 
Revenue Recognition – In January 2018, the Company adopted Accounting Standards Update (“ASU”) 2014-09 Revenues from Contracts with Customers (Topic 606) (“ASU 2014-09”). The timing of recognizing revenue from the sale of produced crude oil and natural gas was not changed as a result of adopting ASU 2014-09. The Company predominantly derives its revenue from the sale of produced crude oil and natural gas. The contractual performance obligation is satisfied when the product is delivered to the purchaser. Revenue is recorded in the month the product is delivered to the purchaser. The Company receives payment from one to three months after delivery. The transaction price includes variable consideration as product pricing is based on published market prices and reduced for contract specified differentials (quality, transportation and other variables from benchmark prices). The guidance regarding ASU 2014-09 does not require that the transaction price be fixed or stated in the contract. Estimating the variable consideration does not require significant judgment and Ring engages third party sources to validate the estimates. Revenue is recognized net of royalties due to third parties in an amount that reflects the consideration the Company expects to receive in exchange for those products. See "NOTE 2 — REVENUE RECOGNITION" for additional information.
Income Taxes – Provisions for income taxes are based on taxes payable or refundable for the current year and deferred taxes. Deferred income taxes are provided on differences between the tax basis of assets and liabilities and their carrying amounts in the condensed financial statements, and tax carryforwards. Deferred tax assets and liabilities are included in the condensed financial statements at currently enacted income tax rates applicable to the period in which the deferred tax assets and liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes.
In assessing the Company’s deferred tax assets, we consider whether a valuation allowance should be recorded for some or all of the deferred tax assets which may not be realized. The ultimate realization of deferred tax assets is assessed at each reporting period and is dependent upon the generation of future taxable income and the Company’s ability to utilize operation loss carryforwards during the periods in which the temporary differences become deductible. We also consider the reversal of deferred tax liabilities and available tax planning strategies. As of September 30, 2024 and December 31, 2023, the Company did not carry a valuation allowance against its federal and state deferred tax assets.
The Company recorded the following federal and state income tax benefits (provisions) for the three and nine months ended September 30, 2024 and 2023.
15

For the Three Months Ended
For the Nine Months Ended
September 30, 2024September 30, 2023September 30, 2024September 30, 2023
Deferred federal income tax benefit (provision)$(9,637,849)$3,381,104 $(17,617,436)$8,492,595 
Current state income tax benefit (provision)(74,899)(165,780)(329,917)(264,261)
Deferred state income tax benefit (provision)(375,206)196,012 (689,972)(490,646)
Benefit from (Provision for) Income Taxes$(10,087,954)$3,411,336 $(18,637,325)$7,737,688 
Effective tax rate (1)
22.94%
31.15%
23.17%
16.74%

(1) The Company’s overall effective tax rate is calculated as Benefit from (Provision for) Income Taxes divided by Income Before Benefit from (Provision for) Income Taxes. The effective tax rate for the three and nine months ended September 30, 2024 was higher than the federal statutory corporate tax rate primarily due to nondeductible expenses and state income taxes. For the three and nine months ended September 30, 2023, the Company's overall effective tax rates were primarily impacted by the release of valuation allowance on its federal net deferred tax asset. A tax benefit of $10.5 million was recorded as a discrete item in the nine months ended September 30, 2023.
Accounting for Uncertainty in Income Taxes – In accordance with GAAP, the Company has analyzed its filing positions in all jurisdictions where it is required to file income tax returns for the open tax years. The Company has identified its federal income tax return and its franchise tax return in Texas in which it operates as a “major” tax jurisdiction. The Company’s federal income tax returns for the years ended December 31, 2019 and after remain subject to examination. The Company’s federal income tax returns for the years ended December 31, 2007 and after remain subject to examination to the extent of the net operating loss (NOL) carryforwards. The Company’s franchise tax returns in Texas remain subject to examination for 2018 and after. The Company currently believes that all significant filing positions are highly certain and that all of its significant income tax filing positions and deductions would be sustained upon audit. Therefore, the Company has no significant reserves for uncertain tax positions and no adjustments to such reserves were required by GAAP. No interest or penalties have been levied against the Company and none are anticipated; therefore, no interest or penalty has been included in our provision for income taxes in the Condensed Statements of Operations.
Leases - The Company accounts for its leases in accordance with ASU 2016-02, Leases (Topic 842), effective January 1, 2019. The Company made accounting policy elections to not capitalize leases with a lease term of twelve months or less (i.e. short term leases) and to not separate lease and non-lease components for all asset classes. The Company also elected to adopt the package of practical expedients within ASU 2016-02 that allows an entity to not reassess prior to the effective date (i) whether any expired or existing contracts are or contain leases, (ii) the lease classification for any expired or existing leases, or (iii) initial direct costs for any existing leases, and the practical expedient regarding land easements that exist prior to the adoption of ASU 2016-02. The Company did not elect the practical expedient of hindsight when determining the lease term of existing contracts at the effective date.
Earnings (Loss) Per Share – Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding during the applicable period. Diluted earnings (loss) per share are calculated to give effect to potentially issuable dilutive common shares.
Share-Based Employee Compensation – The Company has outstanding stock option grants, restricted stock unit awards, and performance stock unit awards to directors, officers and employees, which are described more fully below in "NOTE 11 — EMPLOYEE STOCK OPTIONS AND RESTRICTED STOCK UNITS". The Company recognizes the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award and recognizes the related compensation expense over the period during which an employee is required to provide service in exchange for the award, which is generally the vesting period.
Share-Based Compensation to Non-Employees – The Company accounts for share-based compensation issued to non-employees as either the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The measurement date for these issuances is the earlier of (i) the date at which a commitment for performance by the recipient to earn the equity instruments is reached or (ii) the date at which the recipient’s performance is complete.
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Share-Based Compensation - The following table summarizes the Company's share-based compensation, included with General and administrative expense within our Condensed Statements of Operations, incurred for the three and nine months ended September 30, 2024 and 2023.
Three Months Ended
Nine Months Ended
September 30, 2024September 30, 2023September 30, 2024September 30, 2023
Share-based compensation$32,087 $2,170,735 $3,833,697 $6,374,743 

Recently Adopted Accounting PronouncementsIn October 2021, the FASB issued ASU 2021-08, "Business Combinations (Topic 805) – Accounting for Contract Assets and Contract Liabilities from Contracts with Customers” ("ASU 2021-08"). This update requires the acquirer in a business combination to record contract asset and liabilities following Topic 606 – “Revenue from Contracts with Customers” at acquisition as if it had originated the contract, rather than at fair value. This update became effective for public business entities beginning after December 15, 2022. The Company adopted ASU 2021-08 effective January 1, 2023. The adoption and implementation of this ASU did not have a material impact on the Company’s financial statements, as its revenue is recognized when control transfers to the purchaser at the point of delivery, and no contract liabilities or assets are recognized in accordance with Accounting Standards Codification ("ASC") 606.
In July 2023, the FASB issued ASU 2023-03, Presentation of Financial Statements (Topic 205), Income Statement - Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation - Stock Compensation (Topic 718): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 120, SEC Staff Announcement at the March 24, 2022 EITF Meeting, and Staff Accounting Bulletin Topic 6.B, Accounting Series Release 280 - General Revision of Regulation S-X: Income or Loss Applicable to Common Stock. The ASU provided updated views from the SEC Staff on employee and non-employee share-based payment accounting, including guidance related to spring-loaded awards. As the ASU did not provide any new ASC guidance, and there was no transition or effective date provided, the Company adopted this standard upon issuance, and the adoption did not have a material impact on the Company's condensed financial statements.
Recent Accounting PronouncementsIn March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), which provided optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that referenced LIBOR ("London Inter-Bank Offered Rate") or another rate. ASU 2020-04 was in effect through December 31, 2022. In January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope (“ASU 2021-01”), to provide clarifying guidance regarding the scope of Topic 848. ASU 2020-04 was issued to provide optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. In December 2022, the FASB issued ASU 2022-06, "Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848" ("ASU 2022-06"), which defers the sunset date of Topic 848 from December 31, 2022 to December 31, 2024. Beginning August 31, 2022, under the Company's Second Credit Agreement, the Company's interest rates were transitioned from the LIBOR to the SOFR ("Standard Overnight Financing Rate") reference rate. At this time, the Company does not plan to enter into additional contracts using LIBOR as a reference rate.
In October 2023, the FASB issued ASU 2023-06, "Disclosure Improvements: Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative." This update modifies the disclosure or presentation requirements of a variety of Topics in the Codification, which should be applied prospectively. For instance, within ASC 230-10 Statement of Cash Flows - Overall, the amendment requires an accounting policy disclosure in annual periods of where cash flows associated with their derivative instruments and their related gains and losses are presented in the statement of cash flows. Additionally, within ASC 260-10 Earnings Per Share - Overall, the amendment requires disclosure of the methods used in the diluted earnings-per-share computation for each dilutive security and clarifies that certain disclosures should be made during interim periods. The Company is currently assessing the impact of this update on its financial statements and related notes. If by June 30, 2027, the SEC has not removed the applicable requirement from Regulation S-X or Regulation S-K, the pending content of the related amendment will be removed from the Codification and will not become effective for any entity.
In November 2023, the FASB issued ASU 2023-07 "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures." This update requires that a public entity with multiple reportable segments disclose significant segment expenses that are regularly provided to the chief operating decision maker ("CODM"), as well as other segment
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items that are included in the calculation of segment profit or loss. A public entity will also be required to disclose all annual disclosures about a reportable segment's profit or loss currently required by Topic 280 in interim periods. Although a public entity is permitted to disclose multiple measures of a segment's profit or loss, at least one of the reported segment profit or loss measures should be consistent with the measurement principles used in measuring the corresponding amounts of the public entity's consolidated financial statements. Further, a public entity must disclose the title and position of the CODM as well as how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. Finally, the update requires that a public entity that has a single reportable segment provide all the disclosures required by the amendments in this update and all existing segment disclosures in Topic 280. The Company is currently assessing the impact of adopting this new guidance on its financial disclosures. The amendments in this update are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.
In December 2023, the FASB issued ASU 2023-09 "Income Taxes (Topic 740): Improvements to Income Tax Disclosures." The amendments from this update provide for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. Specifically, public business entities are required to disclose a tabular reconciliation, using both percentages and reporting currency amounts, showing detail from eight specific categories: (a) state and local income tax net of federal (national) income tax effect, (b) foreign tax effects, (c) effect of changes in tax laws or rates enacted in the current period, (d) effect of cross-border tax laws, (e) tax credits, (f) changes in valuation allowances, (g) nontaxable or nondeductible items, and (h) changes in unrecognized tax benefits. In addition, public business entities are required to separately disclose any reconciling item, disaggregated by nature and/or jurisdiction, in which the effect of the reconciling item is equal to or greater than five percent of the amount computed by multiplying the income (or loss) from continuing operations before income taxes by the applicable statutory income tax rate. Also, for the state and local category, a public business entity is required to provide a qualitative description of the states and local jurisdictions that make up the majority (greater than 50 percent) of the category. Further, the amount of income taxes paid (net of refunds received) are required to be disaggregated by (i) federal (national), state, and foreign taxes, and (ii) by individual jurisdictions in which income taxes paid (net of refunds received) is equal to or greater than five percent of total income taxes paid (net of refunds received). Finally, the amendments from this update require that all entities disclose (i) income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign and (ii) income tax expense (or benefit) from continuing operations disaggregated by federal, state, and foreign. The Company is currently assessing the impact of adopting this new guidance on its financial disclosures. For public business entities, the amendments in this update are effective for annual periods beginning after December 15, 2024.
In March 2024, the FASB issued ASU 2024-02 "Codification Improvements - Amendments to Remove References to the Concepts Statements" ("ASU 2024-02"), which contains amendments to the Codification to remove references to various FASB Concepts Statements. In most instances, the references are extraneous and not required to understand or apply the guidance. Generally, ASU 2024-02 is not intended to result in significant accounting changes for most entities. ASU 2024-02 is effective for the Company for fiscal years beginning after December 15, 2024. The Company does not expect this update to have a material impact on its condensed financial statements.

NOTE 2 — REVENUE RECOGNITION
The Company predominantly derives its revenue from the sale of produced crude oil, natural gas, and NGLs. The contractual performance obligation is satisfied when the product is delivered to the purchaser. Revenue is recorded in the month the product is delivered to the purchaser. The Company receives payment from one to three months after delivery. The Company has utilized the practical expedient in ASC 606-10-50-14, which states an entity is not required to disclose the transaction price allocated to remaining performance obligations if the variable consideration is allocated entirely to a wholly unsatisfied performance obligation. Under the Company’s sales contracts, each unit of production delivered to a purchaser represents a separate performance obligation, therefore, future volumes to be delivered are wholly unsatisfied and disclosure of transaction price allocated to remaining performance obligation is not required. The transaction price includes variable consideration, as product pricing is based on published market prices and adjusted for contract specified differentials such as quality, energy content and transportation. The guidance does not require that the transaction price be fixed or stated in the contract. Estimating the variable consideration does not require significant judgment and the
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Company engages third party sources to validate the estimates. Revenue is recognized net of royalties due to third parties in an amount that reflects the consideration the Company expects to receive in exchange for those products.
Oil sales
Under the Company’s oil sales contracts, the Company sells oil production at the point of delivery and collects an agreed upon index price, net of pricing differentials. The Company recognizes revenue at the net price received when control transfers to the purchaser at the point of delivery and it is probable the Company will collect the consideration it is entitled to receive.
Natural gas and NGL sales
Under the Company’s natural gas sales processing contracts for its Central Basin Platform properties and a portion of its Northwest Shelf assets, the Company delivers unprocessed natural gas to a midstream processing entity at the wellhead. The midstream processing entity obtains control of the natural gas and NGLs at the wellhead. The midstream processing entity gathers and processes the natural gas and NGLs and remits proceeds to the Company for the resulting sale of natural gas and NGLs. Under these processing agreements, the Company recognizes revenue when control transfers to the purchaser at the point of delivery and it is probable the Company will collect the consideration it is entitled to receive. As such, the Company accounts for any fees and deductions as a reduction of the transaction price.
Until April 30, 2022, under the Company's natural gas sales processing contracts for the bulk of our Northwest Shelf assets, the Company delivered unprocessed natural gas to a midstream processing entity at the wellhead. However, the Company maintained ownership of the gas through processing and received proceeds from the marketing of the resulting products. Under this processing agreement, the Company recognized the fees associated with the processing as an expense rather than netting these costs against Oil, Natural Gas, and Natural Gas Liquids Revenues in the Condensed Statements of Operations. Beginning May 1, 2022, these contracts were combined into one contract, and it was modified so that the Company no longer maintained ownership of the gas through processing. Accordingly, the Company from that point on accounts for any such fees and deductions as a reduction of the transaction price. There remains only one contract with a natural gas processing entity in place where point of control of gas dictates requiring the fees be recorded as an expense.
Disaggregation of Revenue. The following table presents revenues disaggregated by product:
For the Three Months Ended
For the Nine Months Ended
September 30, 2024September 30, 2023September 30, 2024September 30, 2023
Oil, Natural Gas, and Natural Gas Liquids Revenues
Oil$90,416,363 $90,392,004 $282,000,446 $252,020,403 
Natural gas(3,859,603)562,374 (7,650,645)526,161 
Natural gas liquids2,687,623 2,727,420 8,537,067 8,566,719 
Total oil, natural gas, and natural gas liquids revenues$89,244,383 $93,681,798 $282,886,868 $261,113,283 

NOTE 3 — LEASES
The Company has operating leases for its offices in Midland, Texas and The Woodlands, Texas. The Midland office is under a five-year lease which began January 1, 2021. The Midland office lease was amended effective October 1, 2022, with the revised five-year lease ending September 30, 2027. Beginning January 15, 2021, the Company entered into a five-and-a-half-year sub-lease for office space in The Woodlands, Texas; however, effective as of May 31, 2023, The Woodlands office sub-lease was terminated. On May 9, 2023, the Company entered into a 71-month (five years and 11-month) new lease for a larger amount of office space in The Woodlands, Texas. At the time of the new lease commencement, the additional office space that was added was under construction and until completed, the rental obligation for this space had not yet commenced, because the Company did not have control of the additional office space in accordance with ASC 842-40-55-5. On September 27, 2023, the Company provided a certificate of acceptance of premises to the lessor of the additional office space, and accordingly, the future payments for this space are included along with the other operating leases, reflected in the future lease payments schedule below.
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The Company has month to month leases for office equipment and compressors used in its operations on which the Company has elected to apply ASU 2016-02 (i.e. to not capitalize). The office equipment and compressors are not subject to ASU 2016-02 based on the agreement and nature of use. These leases are for terms that are less than 12 months and the Company does not intend to continue to lease this equipment for more than 12 months. The lease costs associated with these leases is reflected in the short-term lease costs within Lease operating expenses, shown below.
The Company has financing leases for vehicles. These leases have a term of 36 months at the end of which the Company owns the vehicles. These vehicles are generally sold at the end of their term and the proceeds applied to a new vehicle.
Future lease payments associated with these operating and financing leases as of September 30, 2024 are as follows:
20242025202620272028Other Future Years
Operating lease payments (1)
$177,466 $727,460 $636,649 $460,497 $250,606 $149,628 
Financing lease payments (2)
255,854 821,792 367,872 23,914   

(1)The weighted average annual discount rate as of September 30, 2024 for operating leases was 4.50%. Based on this rate, the future lease payments above include imputed interest of $195,057. The weighted average remaining term of operating leases was 3.66 years.

(2)The weighted average annual discount rate as of September 30, 2024 for financing leases was 7.15%. Based on this rate, the future lease payments above include imputed interest of $92,880. The weighted average remaining term of financing leases was 1.75 years.

The following table represents a reconciliation between the undiscounted future cash flows in the table above and the operating and financing lease liabilities disclosed in the Condensed Balance Sheets:

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As of
September 30, 2024December 31, 2023
Operating lease liability, current portion$633,132 $568,176 
Operating lease liability, non-current portion1,574,117 2,054,041 
Operating lease liability, total$2,207,249 $2,622,217 
Total undiscounted future cash flows (sum of future operating lease payments)2,402,306 2,900,050 
Imputed interest195,057 277,833 
Undiscounted future cash flows less imputed interest$2,207,249 $2,622,217 
Financing lease liability, current portion$879,598 $956,254 
Financing lease liability, non-current portion496,954 906,330 
Financing lease liability, total$1,376,552 $1,862,584 
Total undiscounted future cash flows (sum of future financing lease payments)1,469,432 2,006,453 
Imputed interest92,880 143,869 
Undiscounted future cash flows less imputed interest$1,376,552 $1,862,584 
The following table provides supplemental information regarding lease costs in the Condensed Statements of Operations:
For the Three Months Ended
For the Nine Months Ended
September 30, 2024September 30, 2023September 30, 2024September 30, 2023
Operating lease costs$175,091 $138,220 $525,272 $366,711 
Short-term lease costs (1)
1,225,729 1,012,525 3,311,077 4,042,160 
Financing lease costs:
Amortization of financing lease assets (2)
258,022 197,221 790,386 572,744 
Interest on financing lease liabilities (3)
27,224 23,416 89,963 73,115 

(1)Amount included in Lease operating expenses
(2)Amount included in Depreciation, depletion and amortization
(3)Amount included in Interest (expense)
NOTE 4 — EARNINGS PER SHARE INFORMATION
The following table presents the calculation of the Company's basic and diluted earnings per share for the three and nine months ended September 30, 2024 and 2023. For all dilutive securities, the treasury stock method of calculating the incremental shares is applied.
For the Three Months Ended
For the Nine Months Ended
September 30, 2024September 30, 2023September 30, 2024September 30, 2023
Net Income (Loss)$33,878,424 $(7,539,222)$61,812,795 $53,968,162 
Basic Weighted-Average Shares Outstanding198,177,046 195,361,476 197,850,538 188,865,752 
Effect of dilutive securities:
Stock options    
Restricted stock units1,905,628  1,628,164 1,310,409 
Performance stock units597,939  619,555 361,406 
Common warrants43,250  41,221 4,045,648 
Diluted Weighted-Average Shares Outstanding200,723,863 195,361,476 200,139,478 194,583,215 
Basic Earnings (Loss) per Share$0.17 $(0.04)$0.31 $0.29 
Diluted Earnings (Loss) per Share$0.17 $(0.04)$0.31 $0.28 
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The following table presents the securities which were excluded from the Company's computation of diluted earnings per share for the three and nine months ended September 30, 2024 and 2023, as their effect would have been anti-dilutive.
For the Three Months Ended
For the Nine Months Ended
September 30, 2024September 30, 2023September 30, 2024September 30, 2023
Antidilutive securities:
Stock options to purchase common stock65,500 265,50066,850265,500
Unvested restricted stock units51,622 3,866,02356,530 61,212
Unvested performance stock units516,450 2,882,5941,198,3611,396,446

NOTE 5 — ACQUISITIONS AND DIVESTITURES

Stronghold Acquisition

On July 1, 2022, Ring, as buyer, and Stronghold Energy II Operating, LLC, a Delaware limited liability company (“Stronghold OpCo”) and Stronghold Energy II Royalties, LP, a Delaware limited partnership (“Stronghold RoyaltyCo”, together with Stronghold OpCo, collectively, “Stronghold”), as seller, entered into a purchase and sale agreement (the “Stronghold Purchase Agreement”). Pursuant to the Stronghold Purchase Agreement, Ring acquired (the “Stronghold Acquisition”) interests in oil and gas leases and related property of Stronghold consisting of approximately 37,000 net acres located in the Central Basin Platform of the Texas Permian Basin. On August 31, 2022, Ring completed the Stronghold Acquisition.

The fair value of consideration paid to Stronghold was approximately $394.0 million, of which $165.9 million, net of customary purchase price adjustments, was paid in cash at closing, $15.0 million was paid in cash on the sixth-month anniversary of the closing date. Shortly after closing, approximately $4.5 million was paid for inventory and vehicles and approximately $1.8 million was paid for August oil derivative settlements for certain novated hedges. The cash portion of the consideration was funded primarily from borrowings under a new fully committed revolving credit facility (the "Credit Facility,") underwritten by Truist Securities, Citizens Bank, N.A., KeyBanc Capital Markets, Inc., and Mizuho Bank, Ltd. The borrowing base of the $1.0 billion Credit Facility was increased from $350 million to $600 million at the closing of the Stronghold Acquisition. The remaining consideration consisted of 21,339,986 shares of common stock and 153,176 shares of newly created Series A Convertible Preferred Stock, par value $0.001 (“Preferred Stock”), which was converted into 42,548,892 shares of common stock on October 27, 2022. In addition, Ring assumed $24.8 million of derivative liabilities, $1.7 million of items in suspense, and $14.5 million in asset retirement obligations.

Delaware Basin Divestiture

On May 11, 2023, the Company completed the divestiture of its Delaware Basin assets to an unaffiliated party for $8.3 million. The sale had an effective date of March 1, 2023. The final cash consideration was approximately $7.6 million. As part of the divestiture, the buyer assumed an asset retirement obligation balance of approximately $2.3 million.

Founders Acquisition
On July 10, 2023, the Company, as buyer, and Founders Oil & Gas IV, LLC (“Founders”), as seller, entered into an Asset Purchase Agreement (the “Founders Purchase Agreement”). Pursuant to the closing of the Purchase Agreement, on August 15, 2023 the Company acquired (the “Founders Acquisition”) interests in oil and gas leases and related property of Founders located in the Central Basin Platform of the Texas Permian Basin in Ector County, Texas, for a purchase price (the “Purchase Price”) of (i) a cash deposit of $7.5 million paid on July 11, 2023 into a third-party escrow account as a deposit pursuant to the Founders Purchase Agreement, (ii) approximately $42.5 million in cash paid on the closing date, net of approximately $10 million of preliminary and customary purchase price adjustments with an effective date of April 1, 2023, and (iii) a deferred cash payment of $11.9 million paid on December 18, 2023, net of customary purchase price adjustments.
The Founders Acquisition was accounted for as an asset acquisition in accordance with ASC 805. The fair value of the consideration paid by Ring and allocation of that amount to the underlying assets acquired, on a relative fair value basis, was recorded on Ring’s books as of the date of the closing of the Founders Acquisition. Additionally, costs directly related to the Founders Acquisition were capitalized as a component of the purchase price. Determining the fair value of the assets and liabilities acquired required judgment and certain assumptions to be made, the most significant of these being related to
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the valuation of Founder’s oil and gas properties. The inputs and assumptions related to the oil and gas properties were categorized as level 3 in the fair value hierarchy.
The following table represents the final allocation of the total cost of the Founders Acquisition to the assets acquired and liabilities assumed as of the Founders Acquisition date:
Consideration:
Cash consideration
Escrow deposit released at closing
$7,500,000 
Closing amount paid to Founders42,502,799 
Interest from escrow deposit
1,747 
Fair value of deferred payment liability14,657,383 
Post-close adjustments
(4,139,244)
Total cash consideration$60,522,685 
Direct transaction costs1,361,843 
Total consideration$61,884,528 
Fair value of assets acquired:
Oil and natural gas properties$64,886,472 
Amount attributable to assets acquired$64,886,472 
Fair value of liabilities assumed:
Suspense liability$677,116 
Asset retirement obligations2,090,777 
Ad valorem tax liability
234,051 
Amount attributable to liabilities assumed$3,001,944 
Net assets acquired$61,884,528 

New Mexico Divestiture

On September 27, 2023, the Company completed the divestiture of its operated New Mexico assets to an unaffiliated party for $4.5 million, resulting in cash consideration of approximately $3.6 million. The sale had an effective date of June 1, 2023. As part of the divestiture, the buyer assumed an asset retirement obligation balance of approximately $2.4 million.

Gaines County Texas Sale

On December 29, 2023, the Company completed the sale of certain oil and gas properties in Gaines County, Texas to an unaffiliated party for $1.5 million, which resulted in cash proceeds of $1.4 million, net of $0.1 million in sales fees. The sale had an effective date of December 1, 2023. As part of the sale, the buyer assumed an asset retirement obligation balance of approximately $0.5 million.

CBP Vertical Well Sale

On September 30, 2024, the Company completed the sale of certain oil and gas properties, including vertical wells and associated facilities, within Andrews County, Texas and Gaines County, Texas to an unaffiliated party for $5.5 million. As part of the sale, the buyer assumed an asset retirement obligation balance of approximately $2.7 million.
NOTE 6 — DERIVATIVE FINANCIAL INSTRUMENTS
The Company is exposed to fluctuations in crude oil and natural gas prices on its production. It utilizes derivative strategies that consist of either a single derivative instrument or a combination of instruments to manage the variability in cash flows associated with the forecasted sale of our future domestic oil and natural gas production. While the use of derivative instruments may limit or partially reduce the downside risk of adverse commodity price movements, their use also may limit future income from favorable commodity price movements.
From time to time, the Company enters into derivative contracts to protect the Company’s cash flow from price fluctuation and maintain its capital programs. The Company has historically used costless collars, deferred premium puts, or swaps for this purpose. Oil derivative contracts are based on WTI ("West Texas Intermediate") crude oil prices and natural gas contacts are based on the Henry Hub. A “costless collar” is the combination of two options, a put option (floor) and call option (ceiling) with the options structured so that the premium paid for the put option will be offset by the premium received from selling the call option. Similar to costless collars, there is no cost to enter into the swap contracts. A deferred premium put contract has the premium established upon entering the contract, and due upon settlement of the contract.
The use of derivative transactions involves the risk that the counterparties, which generally are financial institutions, will be unable to meet the financial terms of such transactions. All of our derivative contracts are with lenders under our Credit Facility. Non-performance risk is incorporated in the discount rate by adding the quoted bank (counterparty) credit default swap (CDS) rates to the risk free rate. Although the counterparties hold the right to offset (i.e. netting) the settlement amounts with the Company, in accordance with ASC 815-10-50-4B, the Company classifies the fair value of all its derivative positions on a gross basis in the Company's Condensed Balance Sheets.
The Company’s derivative financial instruments are recorded at fair value and included as either assets or liabilities in the accompanying Condensed Balance Sheets. The Company has not designated its derivative instruments as hedges for accounting purposes, and, as a result, any gains or losses resulting from changes in fair value of outstanding derivative financial instruments and from the settlement of derivative financial instruments are recognized in earnings and included as a component of "Other Income" under the heading "Gain (loss) on derivative contracts" in the accompanying Condensed Statements of Operations.
The following presents the impact of the Company’s contracts on its Condensed Balance Sheets for the periods indicated.
As of
September 30, 2024December 31, 2023
Commodity derivative instruments, marked to market:
Derivative assets, current$8,605,087 $7,768,697 
Discounted deferred premiums(229,103)(1,553,323)
Derivatives assets, current, net of premiums$8,375,984 $6,215,374 
Derivative assets, noncurrent
$8,735,674 $11,634,714 
Derivative liabilities, current$3,929,188 $7,520,336 
Derivative liabilities, noncurrent$4,535,777 $11,510,368 
The components of “Gain (loss) on derivative contracts” from the Condensed Statements of Operations are as follows for the respective periods:

For the Three Months Ended
For the Nine Months Ended
September 30, 2024September 30, 2023September 30, 2024September 30, 2023
Oil derivatives:
Realized gain (loss) on oil derivatives$(3,109,660)$(5,825,427)$(9,921,757)$(7,323,030)
Unrealized gain (loss) on oil derivatives27,238,245 (34,077,473)12,552,517 (21,425,316)
Gain (loss) on oil derivatives$24,128,585 $(39,902,900)$2,630,760 $(28,748,346)
Natural gas derivatives:
Realized gain (loss) on natural gas derivatives1,226,895 474,629 $3,982,980 $1,493,302 
Unrealized gain (loss) on natural gas derivatives(623,855)205,516 (2,725,209)771,854 
Gain (loss) on natural gas derivatives$603,040 $