Document_and_Entity_Informatio
Document and Entity Information | 9 Months Ended | |
Sep. 30, 2013 | Nov. 04, 2013 | |
Document and Entity Information | ' | ' |
Entity Registrant Name | 'RING ENERGY, INC. | ' |
Document Type | '10-Q | ' |
Document Period End Date | 30-Sep-13 | ' |
Amendment Flag | 'false | ' |
Entity Central Index Key | '0001384195 | ' |
Current Fiscal Year End Date | '--12-31 | ' |
Entity Common Stock, Shares Outstanding | ' | 17,801,313 |
Entity Filer Category | 'Smaller Reporting Company | ' |
Entity Current Reporting Status | 'Yes | ' |
Entity Voluntary Filers | 'No | ' |
Entity Well-known Seasoned Issuer | 'No | ' |
Document Fiscal Year Focus | '2013 | ' |
Document Fiscal Period Focus | 'Q3 | ' |
CONDENSED_CONSOLIDATED_BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
Current Assets | ' | ' |
Cash | $7,867,616 | $5,404,167 |
Accounts receivable | 1,722,322 | 417,965 |
Prepaid expenses and retainers | 68,567 | 60,398 |
Total Current Assets | 9,658,505 | 5,882,530 |
Properties and Equipment | ' | ' |
Oil and natural gas properties subject to amortization | 45,055,587 | 23,051,904 |
Office equipment | 257,911 | 175,106 |
Total Properties and Equipment | 45,313,498 | 23,227,010 |
Accumulated depreciation, depletion and amortization | -2,253,548 | -596,162 |
Net Properties and Equipment | 43,059,950 | 22,630,848 |
Total Assets | 52,718,455 | 28,513,378 |
Current Liabilities | ' | ' |
Accounts payable | 5,248,034 | 1,191,431 |
Total Current Liabilities | 5,248,034 | 1,191,431 |
Noncurrent Liabilities | ' | ' |
Deferred income taxes | 625,950 | 625,950 |
Asset retirement obligation | 1,054,998 | 496,286 |
Total Noncurrent Liabilities | 1,680,948 | 1,122,236 |
Stockholders' Equity | ' | ' |
Preferred stock - $0.001 par value; 50,000,000 shares authorized; no shares issued or outstanding | 0 | 0 |
Common stock - $0.001 par value; 150,000,000 shares authorized; 17,801,313 shares and 14,166,011 shares outstanding, respectively | 17,801 | 14,166 |
Additional paid-in capital | 53,742,656 | 32,169,363 |
Accumulated deficit | -7,970,984 | -5,983,818 |
Total Stockholders' Equity | 45,789,473 | 26,199,711 |
Total Liabilities and Stockholders' Equity | $52,718,455 | $28,513,378 |
BALANCE_SHEETS_PARENTHETICALS
BALANCE SHEETS PARENTHETICALS (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
Parentheticals | ' | ' |
Preferred Stock, par value | $0.00 | $0.00 |
Preferred Stock, shares authorized | 50,000,000 | 50,000,000 |
Common Stock, par value | $0.00 | $0.00 |
Common Stock, shares authorized | 150,000,000 | 150,000,000 |
Common Stock, shares issued | 17,801,313 | 14,166,011 |
Common Stock, shares outstanding | 17,801,313 | 14,166,011 |
CONDENSED_CONSOLIDATED_STATEME
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (USD $) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | |
Revenues: | ' | ' | ' | ' |
Oil and Gas Revenues | $2,820,731 | $374,739 | $5,264,267 | $1,045,264 |
Oil and gas production costs | 291,182 | 216,908 | 646,905 | 592,163 |
Oil and gas production taxes | 130,944 | 17,296 | 243,620 | 49,921 |
Depreciation, depletion and amortization | 917,116 | 117,267 | 1,657,386 | 293,102 |
Accretion expense | 13,906 | 4,763 | 37,183 | 14,287 |
General and administrative expense | 1,611,318 | 671,438 | 4,678,581 | 1,825,937 |
Total Costs and Operating Expenses | 2,964,466 | 1,027,672 | 7,263,675 | 2,775,410 |
Gain on derivative put options | 0 | 53,224 | 0 | 146,632 |
Interest income | 12,242 | 2,248 | 12,242 | 2,248 |
Interest expense | 0 | -33,992 | 0 | -221,838 |
Net Other Expense | 12,242 | 21,480 | 12,242 | -72,958 |
Net Loss | ($131,493) | ($631,453) | ($1,987,166) | ($1,803,104) |
Basic Loss per Share | ($0.01) | ($0.06) | ($0.13) | ($0.29) |
Diluted Loss per Share | ($0.01) | ($0.06) | ($0.13) | ($0.29) |
CONDENSED_CONSOLIDATED_STATEME1
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (USD $) | 9 Months Ended | |
Sep. 30, 2013 | Sep. 30, 2012 | |
Cash Flows From Operating Activities | ' | ' |
Net Loss | ($1,987,166) | ($1,803,104) |
Adjustments to reconcile net loss to net cash used in operating activities: | ' | ' |
Depreciation, depletion and amortization | 1,657,386 | 293,102 |
Accretion expense | 37,183 | 14,287 |
Share-based compensation | 2,598,046 | 707,090 |
Gain on derivative put options | 0 | -146,632 |
Changes in assets and liabilities: | ' | ' |
Accounts receivable | -1,304,357 | -39,794 |
Prepaid expenses | -8,169 | 27,537 |
Accounts payable | 4,056,603 | 1,558,156 |
Accrued compensation | 0 | -100,000 |
Net Cash Provided by Operating Activities | 5,049,526 | 510,642 |
Cash Flows from Investing Activities | ' | ' |
Payments to purchase oil and natural gas properties | -4,125,676 | -124,050 |
Payments to develop oil and natural gas properties | -17,356,478 | -4,711,752 |
Purchase of office equipment | -82,805 | -179,078 |
Net Cash Used in Investing Activities | -21,564,959 | -5,014,880 |
Cash Flows From Financing Activities | ' | ' |
Proceeds from borrowings from Ring Energy, Inc. | 0 | 1,150,000 |
Proceeds from issuance of common stock | 18,978,882 | 11,545,983 |
Proceeds from issuance of common stock to Ring Energy, Inc. shareholders | 0 | 10,887,561 |
Principal payments on revolving line of credit | 0 | -9,244,428 |
Net Cash Provided by Financing Activities | 18,978,882 | 14,339,116 |
Net Increase in Cash | 2,463,449 | 9,834,878 |
Cash at Beginning of Period | 5,404,167 | 11,372 |
Cash at End of Period | 7,867,616 | 9,846,250 |
Supplemental Cash Flow Information | ' | ' |
Cash paid for interest | 0 | 93,471 |
Noncash Investing and Financing Activities | ' | ' |
Oil and gas properties acquired | 0 | 825,765 |
Revision of asset retirement obligation estimate | 211,691 | 0 |
Asset retirement obligation incurred during development | 309,838 | -14,214 |
Payments with Ring Energy, Inc. shares | 0 | -687,501 |
Issuance of common stock to Ring Energy, Inc. shareholders | 0 | 13,095,369 |
Accounts payable assumed | 0 | 9,893 |
Less: Elimination of note payable to Ring Energy, Inc. | 0 | -2,003,122 |
Less: Prepaid expenses acquired | 0 | -26,942 |
Less: Property and equipment acquired | $0 | ($187,637) |
BASIS_OF_PRESENTATION_AND_SIGN
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Sep. 30, 2013 | |
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES | ' |
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES | ' |
NOTE 1 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES | |
Condensed Financial Statements – The accompanying condensed consolidated financial statements prepared by Ring Energy, Inc. and its subsidiary (the “Company” or “Ring”) have not been audited by an independent registered public accounting firm. In the opinion of the Company’s management, the accompanying unaudited 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 results of operations for the three and nine months ended September 30, 2013 are not necessarily indicative of the results to be expected for the full year ending December 31, 2013. | |
Certain notes and other disclosures have been omitted from these interim financial statements. Therefore, these financial statements should be read in conjunction with the Company’s 2012 Annual Report on Form 10-K. | |
Organization and Nature of Operations – The Company is a Nevada corporation that owns interests in oil and natural gas properties located in Texas and Kansas. The Company’s oil and natural gas sales, profitability and future growth are dependent upon prevailing and future prices for oil and natural gas and the successful acquisition, exploration and development of oil and natural gas properties. Oil and natural gas prices have historically been volatile and may be subject to wide fluctuations in the future. A substantial decline in oil and natural gas prices could have a material adverse effect on the Company’s financial position, results of operations, cash flows and quantities of oil and natural gas reserves that may be economically produced. | |
Use of Estimates – The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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. Actual results could differ from those estimates. Changes in the future 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. | |
Consolidation – The accompanying consolidated financial statements include the accounts, operations and cash flows of Stanford Energy, Inc. (“Stanford”) for all periods presented and the consolidated operations and cash flows of Ring Energy, Inc. from June 28, 2012. All significant intercompany balances and transactions have been eliminated in consolidation. | |
Concentration of Credit Risk and Major Customer – The Company had cash in excess of federally insured limits at September 30, 2013. During the nine months ended September 30, 2013, sales to one customer represented 96% of the Company’s oil and gas revenues. At September 30, 2013, this customer made up 98% of the Company’s accounts receivable. | |
Oil and Gas Properties – The Company uses the full cost method of accounting for oil and gas properties. Under this method, all costs associated with the acquisition, leasing, exploration, and development of oil and gas reserves are capitalized. Costs capitalized include acquisition costs, estimated future costs of abandonment and site restoration, 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 generally categorized either as being subject to amortization or not subject to amortization. All of our costs are subject to amortization. | |
All capitalized costs of oil and gas properties, plus estimated future costs to develop proved reserves, are amortized on the unit-of-production method using estimates of proved reserves as determined by independent engineers.The Company evaluates oil and gas properties for impairment at least annually. Amortization expense for the three and nine months ended September 30, 2013 was $917,116 and $1,657,386, respectively, based on depletion at the rate of $27.43 per barrel of oil equivalent compared to $117,267 and $293,102, respectively, for the three and nine months ended September 30, 2012, based on depletion at the rate of $21.43 per barrel of oil equivalent. These amounts include $17,584 and $42,990, respectively, of depreciation for the three and nine months ended September 30, 2013 compared to $10,501 and $31,502 of depreciation for the three and nine months ended September 30, 2012, respectively. | |
In addition, capitalized costs are subject to a ceiling test which limits such costs to the estimated present value of future net revenues from proved reserves, discounted at a 10% interest rate, based on current economic and operating conditions, plus the lower of cost or fair value of unproved properties. Consideration received from sales or transfers of oil and gas property is accounted for as a reduction of capitalized costs. Revenue is not recognized in connection with contractual services performed on properties in which the Company holds an ownership interest. | |
Office Equipment – Office equipment is valued at historical cost adjusted for impairment loss less accumulated depreciation. Historical costs include all direct costs associated with the acquisition of office equipment and placing such equipment in service. Depreciation is calculated using the straight-line method based upon an estimated useful life of 5 to 7 years. | |
Asset Retirement Obligation – 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 estimated 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. | |
Revenue Recognition – The Company predominantly derives its revenues from the sale of produced oil and natural gas. Revenue is recorded in the month the product is delivered to the purchasers. At the end of each month, the Company recognizes oil and natural gas sales based on estimates of the amount of production delivered to purchasers and the price to be received. Variances between the Company’s estimated oil and natural gas sales and actual receipts are recorded in the month the payments are received. | |
Share-Based Employee Compensation – The Company has outstanding stock option grants to directors and employees, which are described more fully in Note 6. 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. | |
Recent Accounting Pronouncements – The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe the future adoptions of any such pronouncements are expected to cause a material impact on the Company’s financial condition or the results of operations. | |
Basic and Diluted Loss per Share – Basic loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period. Diluted loss per share reflects the potential dilution that could occur if all contracts to issue common stock were converted into common stock, except for those that are anti-dilutive. The dilutive effect of stock options and other share-based compensation is calculated using the treasury method with an offset from expected proceeds upon exercise of the stock options and unrecognized compensation expense. |
EARNINGS_PER_SHARE_INFORMATION
EARNINGS PER SHARE INFORMATION | 9 Months Ended | |||||||||||
Sep. 30, 2013 | ||||||||||||
EARNINGS PER SHARE INFORMATION | ' | |||||||||||
EARNINGS PER SHARE INFORMATION | ' | |||||||||||
NOTE 2 – LOSS PER SHARE INFORMATION | ||||||||||||
For The Three Months | For The Nine Months | |||||||||||
Ended September 30, | Ended September 30, | |||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||
Net Loss | $ | -131,493 | $ | -631,453 | $ | -1,987,166 | $ | -1,803,104 | ||||
Basic Weighted-Average Shares Outstanding | 17,801,313 | 11,433,730 | 15,473,339 | 6,172,504 | ||||||||
Effect of dilutive securities: | ||||||||||||
Stock options | - | - | - | - | ||||||||
Diluted Weighted-Average Shares Outstanding | 17,801,313 | 11,433,730 | 15,473,339 | 6,172,504 | ||||||||
Basic Loss per Share | $ | -0.01 | $ | -0.06 | $ | -0.13 | $ | -0.29 | ||||
Diluted Loss per Share | $ | -0.01 | $ | -0.06 | $ | -0.13 | $ | -0.29 | ||||
Stock options to purchase 2,562,500 shares of common stock were excluded from the computation of diluted loss per share during the three and nine months ended September 30, 2013 as their effect would have been anti-dilutive. Stock options to purchase 1,125,000 shares of common stock were excluded from the computation of diluted loss per share during the three and nine months ended September 30, 2012 as their effect would have been anti-dilutive. |
REVOLVING_LINE_OF_CREDIT
REVOLVING LINE OF CREDIT | 9 Months Ended |
Sep. 30, 2013 | |
REVOLVING LINE OF CREDIT | ' |
REVOLVING LINE OF CREDIT | ' |
NOTE 3 – REVOLVING LINE OF CREDIT | |
In August 2013, the Company extended a credit agreement with a bank that provides for a revolving line of credit of up to $10 million for borrowings and letters of credit. As of September 30, 2013, no amounts were outstanding and $9,855,000 was available to be drawn on the line of credit. The credit agreement includes a non-usage commitment fee of 0.20% per annum and covenants limiting other indebtedness, liens, transfers or sales of assets, distributions or dividends and merger or consolidation activity. The facility has an interest rate of the bank’s prime rate plus 0.75% with the total interest rate to be charged being no less than 4.00%. The maturity date on the note was extended to April 10, 2014. Two of the Company’s stockholders are jointly and severally obligated for outstanding borrowings under the credit facility. |
ASSET_RETIREMENT_OBLIGATION
ASSET RETIREMENT OBLIGATION | 9 Months Ended | ||
Sep. 30, 2013 | |||
ASSET RETIREMENT OBLIGATION | ' | ||
ASSET RETIREMENT OBLIGATION | ' | ||
NOTE 4 – ASSET RETIREMENT OBLIGATION | |||
The Company provides for the obligation to plug and abandon oil and gas wells at the dates properties are either acquired or the wells are drilled. The asset retirement obligation is adjusted each quarter for any liabilities incurred or settled during the period, accretion expense and any revisions made to the estimated cash flows. The asset retirement obligation incurred upon each of the acquisitions or at the time of drilling was computed using the annual credit-adjusted risk-free discount rate at the applicable dates, which rates were from 6.12% to 7.62% per annum. Changes in the asset retirement obligation were as follows: | |||
Balance, December 31, 2012 | $ | 496,286 | |
Revision of estimate | 211,691 | ||
Liabilities incurred | 309,838 | ||
Accretion expense | 37,183 | ||
Balance, September 30, 2013 | $ | 1,054,998 |
STOCKHOLDERS_EQUITY
STOCKHOLDERS' EQUITY | 9 Months Ended |
Sep. 30, 2013 | |
STOCKHOLDERS' EQUITY | ' |
STOCKHOLDERS' EQUITY | ' |
NOTE 5 – STOCKHOLDERS’ EQUITY | |
Common Stock Issued in Offerings – In January 2013, the Company issued 100,000 shares of common stock, for cash of $450,000, or $4.50 per share, in a private placement offering. | |
In June 2013, the Company completed a private placement offering of 3,528,580 shares of common stock, for gross proceeds of $19,407,190, or $5.50 per share. Net proceeds from the offering, after offering costs, totaled approximately $18,537,272. | |
Common Stock Issued in Option Exercise – In January 2013, the Company issued 6,722 shares of common stock pursuant to the cashless exercise of 10,000 options that had an exercise price of $2.00 per share. |
EMPLOYEE_STOCK_OPTIONS_AND_RES
EMPLOYEE STOCK OPTIONS AND RESTRICTED STOCK AWARD PLAN | 9 Months Ended | |||||||||
Sep. 30, 2013 | ||||||||||
EMPLOYEE STOCK OPTIONS AND RESTRICTED STOCK AWARD PLAN | ' | |||||||||
EMPLOYEE STOCK OPTIONS AND RESTRICTED STOCK AWARD PLAN | ' | |||||||||
NOTE 6 – EMPLOYEE STOCK OPTIONS | ||||||||||
Compensation expense charged against income for share-based awards during the three and nine months ended September 30, 2013 was $896,325 and $2,598,046, respectively, as compared to $261,856 and $707,090, respectively, for the three and nine months ended September 30, 2012. These amounts are included in general and administrative expense in the accompanying financial statements. | ||||||||||
In 2011, Stanford’s Board of Directors and stockholders approved and adopted a long-term incentive plan which allows for the issuance of up to 2,500,000 shares of common stock through the grant of qualified stock options, non-qualified stock options and restricted stock. In 2013, the Company’s stockholders approved an amendment to the long-term incentive plan, increasing the number of shares eligible under the plan to 5,000,000 shares. As of September 30, 2013, there were 2,427,500 shares remaining eligible for issuance under the plan | ||||||||||
The fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing model and using certain assumptions. The expected volatility is based on the historical price volatility of the Dow Jones U.S. Oil and Gas Index. The Company uses the simplified method for estimating the expected term for options granted. Under the simplified method, the expected term is equal to the midpoint between the vesting period and the contractual term of the stock option. The risk-free interest rate represents the U.S. Treasury bill rate for the expected life of the related stock options. The dividend yield represents the Company’s anticipated cash dividend over the expected life of the stock options. The following are the assumptions used to determine the fair value of options granted during the nine months ended September 30, 2013: | ||||||||||
Expected volatility | 128% - 138% | |||||||||
Weighted-average volatility | 137% | |||||||||
Expected dividends | 0 | |||||||||
Expected term (in years) | 6.5 | |||||||||
Risk-free interest rate | 0.76% - 1.49% | |||||||||
No options were granted during the nine months ended September 30, 2012. | ||||||||||
A summary of the stock option activity as of September 30, 2013 and changes during the nine months then ended is as follows: | ||||||||||
Weighted- | ||||||||||
Weighted- | Average | |||||||||
Average | Remaining | Aggregate | ||||||||
Exercise | Contractual | Intrinsic | ||||||||
Shares | Price | Term | Value | |||||||
Outstanding, December 31, 2012 | 1,125,000 | $ | 2.37 | |||||||
Granted | 1,585,000 | 4.66 | ||||||||
Forfeited | -137,500 | 2.55 | ||||||||
Exercised | -10,000 | 2 | ||||||||
Outstanding, September 30, 2013 | 2,562,500 | $ | 3.78 | 9.0 Years | $ | 12,283,140 | ||||
Exercisable, September 30, 2013 | 237,500 | $ | 2.37 | 6.7 Years | $ | 2,931,520 | ||||
The weighted-average grant-date fair value of options granted during 2013 was $4.20 per share. As of September 30, 2013, there was approximately $5,155,124 of unrecognized compensation cost related to stock options that is expected be recognized over a weighted-average period of 2.6 years. The aggregate intrinsic values were determined based on the $14.50 market value of the Company’s common stock on September30, 2013. | ||||||||||
The total intrinsic value of options exercised during the nine months ended September 30, 2013 was $41,000. No options were exercised during the nine months ended September 30, 2012. |
COMMITMENTS_AND_CONTINGENT_LIA
COMMITMENTS AND CONTINGENT LIABILITIES | 9 Months Ended |
Sep. 30, 2013 | |
COMMITMENTS AND CONTINGENT LIABILITIES | ' |
COMMITMENTS AND CONTINGENT LIABILITIES | ' |
NOTE 7 – CONTINGENCIES AND COMMITMENTS | |
Standby Letters of Credit – A commercial bank issued standby letters of credit on behalf of the Company to the states of Texas and Kansas totaling $145,000 to allow the Company to do business in those states. The standby letters of credit are valid until cancelled or matured and are collateralized by the revolving credit facility with the bank. The terms of these letters of credit are extended for a term of one year at a time. The Company intends to renew the standby letters of credit for as long as the Company does business in the states of Texas and Kansas. No amounts have been drawn under the standby letters of credit. |
SUBSEQUENT_EVENTS
SUBSEQUENT EVENTS | 9 Months Ended |
Sep. 30, 2013 | |
SUBSEQUENT EVENTS: | ' |
SUBSEQUENT EVENTS | ' |
NOTE 8 – SUBSEQUENT EVENTS | |
Subsequent to September 30, 2013, the Company entered into a Joint Development Agreement, effective immediately, with Torchlight Energy Resources, Inc., to develop the Company’s existing Kansas leasehold, consisting of approximately 17,000 acres in Gray, Haskell and Finney counties. Pursuant to the Agreement, Ring will operate the Kansas leasehold acreage. In consideration of entering into the Agreement, Torchlight will pay 100% of all drilling and completion costs until an amount equal to Ring’s total costs related to the Kansas leases has been met (approximately $6.2 million). After Torchlight has matched Ring’s total costs related to the Kansas leases, Ring and Torchlight will equally share all drilling and development costs related to the continued ongoing development of the leases. Ring and Torchlight will share equally in any production and revenue in connection with the development of the Kansas leasehold acreage from the commencement of the first well pursuant to the terms of the Agreement. |
SIGNIFICANT_ACCOUNTING_POLICIE
SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Sep. 30, 2013 | |
SIGNIFICANT ACCOUNTING POLICIES | ' |
Condensed Financial Statements | ' |
Condensed Financial Statements – The accompanying condensed consolidated financial statements prepared by Ring Energy, Inc. and its subsidiary (the “Company” or “Ring”) have not been audited by an independent registered public accounting firm. In the opinion of the Company’s management, the accompanying unaudited 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 results of operations for the three and nine months ended September 30, 2013 are not necessarily indicative of the results to be expected for the full year ending December 31, 2013. | |
Certain notes and other disclosures have been omitted from these interim financial statements. Therefore, these financial statements should be read in conjunction with the Company’s 2012 Annual Report on Form 10-K. | |
Organanization and Nature of Operations | ' |
Organization and Nature of Operations – The Company is a Nevada corporation that owns interests in oil and natural gas properties located in Texas and Kansas. The Company’s oil and natural gas sales, profitability and future growth are dependent upon prevailing and future prices for oil and natural gas and the successful acquisition, exploration and development of oil and natural gas properties. Oil and natural gas prices have historically been volatile and may be subject to wide fluctuations in the future. A substantial decline in oil and natural gas prices could have a material adverse effect on the Company’s financial position, results of operations, cash flows and quantities of oil and natural gas reserves that may be economically produced. | |
Use of Estimates | ' |
Use of Estimates – The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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. Actual results could differ from those estimates. Changes in the future 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. | |
Consolidation | ' |
Consolidation – The accompanying consolidated financial statements include the accounts, operations and cash flows of Stanford Energy, Inc. (“Stanford”) for all periods presented and the consolidated operations and cash flows of Ring Energy, Inc. from June 28, 2012. All significant intercompany balances and transactions have been eliminated in consolidation. | |
Concentration of Credit Risk and Major Customer | ' |
Concentration of Credit Risk and Major Customer – The Company had cash in excess of federally insured limits at September 30, 2013. During the nine months ended September 30, 2013, sales to one customer represented 96% of the Company’s oil and gas revenues. At September 30, 2013, this customer made up 98% of the Company’s accounts receivable. | |
Oil and Gas Properties Policy | ' |
Oil and Gas Properties – The Company uses the full cost method of accounting for oil and gas properties. Under this method, all costs associated with the acquisition, leasing, exploration, and development of oil and gas reserves are capitalized. Costs capitalized include acquisition costs, estimated future costs of abandonment and site restoration, 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 generally categorized either as being subject to amortization or not subject to amortization. All of our costs are subject to amortization. | |
All capitalized costs of oil and gas properties, plus estimated future costs to develop proved reserves, are amortized on the unit-of-production method using estimates of proved reserves as determined by independent engineers.The Company evaluates oil and gas properties for impairment at least annually. Amortization expense for the three and nine months ended September 30, 2013 was $917,116 and $1,657,386, respectively, based on depletion at the rate of $27.43 per barrel of oil equivalent compared to $117,267 and $293,102, respectively, for the three and nine months ended September 30, 2012, based on depletion at the rate of $21.43 per barrel of oil equivalent. These amounts include $17,584 and $42,990, respectively, of depreciation for the three and nine months ended September 30, 2013 compared to $10,501 and $31,502 of depreciation for the three and nine months ended September 30, 2012, respectively. | |
In addition, capitalized costs are subject to a ceiling test which limits such costs to the estimated present value of future net revenues from proved reserves, discounted at a 10% interest rate, based on current economic and operating conditions, plus the lower of cost or fair value of unproved properties. Consideration received from sales or transfers of oil and gas property is accounted for as a reduction of capitalized costs. Revenue is not recognized in connection with contractual services performed on properties in which the Company holds an ownership interest. | |
Office Equipment Policy | ' |
Office Equipment – Office equipment is valued at historical cost adjusted for impairment loss less accumulated depreciation. Historical costs include all direct costs associated with the acquisition of office equipment and placing such equipment in service. Depreciation is calculated using the straight-line method based upon an estimated useful life of 5 to 7 years. | |
Asset Retirement Obligation | ' |
Asset Retirement Obligation – 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 estimated 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. | |
Revenue Recognition | ' |
Revenue Recognition – The Company predominantly derives its revenues from the sale of produced oil and natural gas. Revenue is recorded in the month the product is delivered to the purchasers. At the end of each month, the Company recognizes oil and natural gas sales based on estimates of the amount of production delivered to purchasers and the price to be received. Variances between the Company’s estimated oil and natural gas sales and actual receipts are recorded in the month the payments are received. | |
Share-Based Compensation | ' |
Share-Based Employee Compensation – The Company has outstanding stock option grants to directors and employees, which are described more fully in Note 6. 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 | ' |
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. | |
Recent Accounting Pronouncements | ' |
Recent Accounting Pronouncements – The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe the future adoptions of any such pronouncements are expected to cause a material impact on the Company’s financial condition or the results of operations. | |
Basic and Diluted Loss per Share Policy | ' |
Basic and Diluted Loss per Share – Basic loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period. Diluted loss per share reflects the potential dilution that could occur if all contracts to issue common stock were converted into common stock, except for those that are anti-dilutive. The dilutive effect of stock options and other share-based compensation is calculated using the treasury method with an offset from expected proceeds upon exercise of the stock options and unrecognized compensation expense. |
EARNINGS_LOSS_PER_SHARE_INFORM
EARNINGS (LOSS) PER SHARE INFORMATION (Tables) | 9 Months Ended | |||||||||||
Sep. 30, 2013 | ||||||||||||
EARNINGS (LOSS) PER SHARE INFORMATION | ' | |||||||||||
EARNINGS (LOSS) PER SHARE INFORMATION | ' | |||||||||||
For The Three Months | For The Nine Months | |||||||||||
Ended September 30, | Ended September 30, | |||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||
Net Loss | $ | -131,493 | $ | -631,453 | $ | -1,987,166 | $ | -1,803,104 | ||||
Basic Weighted-Average Shares Outstanding | 17,801,313 | 11,433,730 | 15,473,339 | 6,172,504 | ||||||||
Effect of dilutive securities: | ||||||||||||
Stock options | - | - | - | - | ||||||||
Diluted Weighted-Average Shares Outstanding | 17,801,313 | 11,433,730 | 15,473,339 | 6,172,504 | ||||||||
Basic Loss per Share | $ | -0.01 | $ | -0.06 | $ | -0.13 | $ | -0.29 | ||||
Diluted Loss per Share | $ | -0.01 | $ | -0.06 | $ | -0.13 | $ | -0.29 |
ASSET_RETIREMENT_OBLIGATION_Ta
ASSET RETIREMENT OBLIGATION (Tables) | 9 Months Ended | ||
Sep. 30, 2013 | |||
ASSET RETIREMENT OBLIGATION (Tables) | ' | ||
Changes in Asset Retirement Obligations | ' | ||
Changes in the asset retirement obligation were as follows: | |||
Balance, December 31, 2012 | $ | 496,286 | |
Revision of estimate | 211,691 | ||
Liabilities incurred | 309,838 | ||
Accretion expense | 37,183 | ||
Balance, September 30, 2013 | $ | 1,054,998 |
EMPLOYEE_STOCK_OPTIONS_Tables
EMPLOYEE STOCK OPTIONS (Tables) | 9 Months Ended | |||||||||
Sep. 30, 2013 | ||||||||||
EMPLOYEE STOCK OPTIONS (Tables) | ' | |||||||||
Assumptions used to determine the fair value of options granted | ' | |||||||||
The following are the assumptions used to determine the fair value of options granted during the nine months ended September 30, 2013: | ||||||||||
Expected volatility | 128% - 138% | |||||||||
Weighted-average volatility | 137% | |||||||||
Expected dividends | 0 | |||||||||
Expected term (in years) | 6.5 | |||||||||
Risk-free interest rate | 0.76% - 1.49% | |||||||||
A summary of the stock option activity | ' | |||||||||
A summary of the stock option activity as of September 30, 2013 and changes during the nine months then ended is as follows: | ||||||||||
Weighted- | ||||||||||
Weighted- | Average | |||||||||
Average | Remaining | Aggregate | ||||||||
Exercise | Contractual | Intrinsic | ||||||||
Shares | Price | Term | Value | |||||||
Outstanding, December 31, 2012 | 1,125,000 | $ | 2.37 | |||||||
Granted | 1,585,000 | 4.66 | ||||||||
Forfeited | -137,500 | 2.55 | ||||||||
Exercised | -10,000 | 2 | ||||||||
Outstanding, September 30, 2013 | 2,562,500 | $ | 3.78 | 9.0 Years | $ | 12,283,140 | ||||
Exercisable, September 30, 2013 | 237,500 | $ | 2.37 | 6.7 Years | $ | 2,931,520 |
Recovered_Sheet1
Basis Of Presentation And Significant Accounting Policies Concentration of Credit Risk and Major Customer (Details) | 9 Months Ended |
Sep. 30, 2013 | |
Basis Of Presentation And Significant Accounting Policies Concentration of Credit Risk and Major Customer | ' |
Percentage of sales to one major customer | 96.00% |
Percentage of Receivable from one major customer | 98.00% |
Basis_Of_Presentation_And_Sign1
Basis Of Presentation And Significant Accounting Policies Oil and Gas Properties (Details) (USD $) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | |
Basis Of Presentation And Significant Accounting Policies Oil and Gas Properties | ' | ' | ' | ' |
Amortization expense on oil & Gas properties | $917,116 | $117,267 | $1,657,386 | $293,102 |
Depletion at the rate per barrel | 27.43 | 21.43 | 27.43 | 21.43 |
Depreciation expenses on oil & Gas properties | $17,584 | $10,501 | $42,990 | $31,502 |
Estimated present value of future net revenues from proved reserves, discounted at a an interest rate % | 10.00% | ' | ' | ' |
Basis_Of_Presentation_And_Sign2
Basis Of Presentation And Significant Accounting Policies Office Equipment (Details) | Sep. 30, 2013 |
Basis Of Presentation And Significant Accounting Policies Office Equipment | ' |
Office equipment minimum useful life | 5 |
Office equipment maximum useful life | 7 |
LOSS_PER_SHARE_INFORMATION_Det
LOSS PER SHARE INFORMATION (Details) (USD $) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | |
LOSS PER SHARE INFORMATION AS FOLLOWS: | ' | ' | ' | ' |
Net Loss | ($131,493) | ($631,453) | ($1,987,166) | ($1,803,104) |
Basic Weighted-Average Shares Outstanding | 17,801,313 | 11,433,730 | 15,473,339 | 6,172,504 |
Stock options | $0 | $0 | $0 | $0 |
Diluted Weighted-Average Shares Outstanding | 17,801,313 | 11,433,730 | 15,473,339 | 6,172,504 |
Basic Loss per Share. | ($0.01) | ($0.06) | ($0.13) | ($0.29) |
Diluted Loss per Share. | ($0.01) | ($0.06) | ($0.13) | ($0.29) |
REVOLVING_LINE_OF_CREDIT_Detai
REVOLVING LINE OF CREDIT (Details) (USD $) | Sep. 30, 2013 |
REVOLVING LINE OF CREDIT {2} | ' |
Company extended a credit agreement with a bank that provides for a revolving line of credit of | $10,000,000 |
Amount availbe to be drawn on line of credit | $9,855,000 |
Non usage commitment fees % p.a. | 0.20% |
Interest rate of the bank's prime rate plus | 0.75% |
Interest being charged to be not less than | 4.00% |
Changes_in_the_asset_retiremen
Changes in the asset retirement obligation as follows (Details) (Asset Retirement obligation, USD $) | Asset Retirement obligation |
USD ($) | |
Balance at Dec. 31, 2012 | $496,286 |
Revision of estimate | 211,691 |
Liabilities incurred | 309,838 |
Accretion expense. | 37,183 |
Balance at Sep. 30, 2013 | $1,054,998 |
ASSET_RETIREMENT_OBLIGATION_De
ASSET RETIREMENT OBLIGATION (Details) | Sep. 30, 2012 |
ASSET RETIREMENT OBLIGATION AS FOLLOWS: | ' |
Annual credit adjusted risk free discount rate Minimum | 6.12% |
Annual credit adjusted risk free discount rate Maximum | 7.62% |
COMMON_STOCK_ISSUED_IN_OFFERIN
COMMON STOCK ISSUED IN OFFERINGS (DETAILS) (USD $) | Jun. 30, 2013 | Jan. 31, 2013 |
COMMON STOCK ISSUED IN OFFERINGS | ' | ' |
Issue of common shares private placement offering | 3,528,580 | 100,000 |
Common shares per share value | $5.50 | $4.50 |
Gross proceeds | $19,407,190 | $450,000 |
Net proceeds after offering costs | $18,537,272 | $450,000 |
Shares of common stock issued pursuant to cashless exercise of options | ' | 6,722 |
Exercise of cashless options (number of options) | ' | 10,000 |
Exercise price per share | ' | $2 |
EMPLOYEE_STOCK_OPTIONS_DETAILS
EMPLOYEE STOCK OPTIONS (DETAILS) (USD $) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | |
EMPLOYEE STOCK OPTIONS | ' | ' | ' | ' |
Compensation expenses charged against income for share based awards included in general and administrative expenses | $896,325 | $261,856 | $2,598,046 | $707,090 |
Weighted_average_grant_date_fa
Weighted average grant date fair value of options granted (Details) (USD $) | Sep. 30, 2013 |
Weighted average grant date fair value of options granted | ' |
Fair value of options per share | $4.20 |
Unrecognized compensation costs related to stock options | $5,155,124 |
Weighted average period in years | 2.6 |
The aggregate intrinsic value was determined based on market value of the Company's common stock on September30, 2013 | $14.50 |
Weightedaverage_assumptions_us
Weighted-average assumptions used to determine the fair value of options granted (Details) (USD $) | 9 Months Ended |
Sep. 30, 2013 | |
Weighted-average assumptions used to determine the fair value of options granted | ' |
Minimum Expected Volatility | 128.00% |
Maximum Expected Volatality | 138.00% |
Weighted average volatality | 137.00% |
Expected dividends | $0 |
Expected term (in years) | 6.5 |
Minimum Risk free interest rate | 0.76% |
Maximum Risk free interest rate | 1.49% |
Longterm_Incentvie_Plan_Detail
Longterm Incentvie Plan (Details) | Sep. 30, 2013 |
Longterm Incentvie Plan | ' |
Issuance of common stock through grant of qualified stock options approved in 2011 | 2,500,000 |
Issuance of common stock through grant of qualified stock options amendment approved in 2013 | 5,000,000 |
Shares remaining eligible for issuance under the said plan | 2,427,500 |
Summary_of_the_stock_option_ac
Summary of the stock option activity and changes during the period (Details) | Shares | Weighted Average Exercise Price | Weighted Average Remaining contractual Term | Aggregate Intrinsic Value |
Outstanding at Dec. 31, 2012 | 1,125,000 | 2.37 | 0 | 0 |
Granted. | 1,585,000 | 4.66 | 0 | 0 |
Forfeited. | -137,500 | 2.55 | 0 | 0 |
Exercised. | -10,000 | 2 | 0 | 0 |
Outstanding at Sep. 30, 2013 | 2,562,500 | 3.78 | 9 | 12,283,140 |
Exercisable. at Sep. 30, 2013 | 237,500 | 2.37 | 6.7 | 2,931,520 |
CONTINGENCIES_AND_COMMITMENTS_
CONTINGENCIES AND COMMITMENTS (Details) (USD $) | Sep. 30, 2013 |
CONTINGENCIES AND COMMITMENTS | ' |
Standby letters of creidt issued by commercial banks in the states of Texas and Kansas | $145,000 |
SUBSEQUENT_EVENTS_DETAILS
SUBSEQUENT EVENTS (DETAILS) (USD $) | Sep. 30, 2013 |
SUBSEQUENT EVENTS AS FOLLOWS: | ' |
Entered into a joint development agreement consisting of approximately acres | 17,000 |
Torchlight will pay in percent | 100.00% |
Ring's total costs related to the Kansas leases has been met approximately in million | $6.20 |