United States securities and exchange commission logo
May 16, 2023
Travis T. Thomas
Chief Financial Officer
Ring Energy, Inc.
1725 Hughes Landing Blvd., Suite 900
The Woodlands, TX 77380
Re: Ring Energy, Inc.
Form 10-K for
Fiscal Year Ended December 31, 2022
Form 8-K filed May
4, 2023
File No. 001-36057
Dear Travis T. Thomas:
We have limited our review of your filing to the financial
statements and related
disclosures and have the following comments. In some of our comments, we
may ask you to
provide us with information so we may better understand your disclosure.
Please respond to these comments within ten business days by
providing the requested
information or advise us as soon as possible when you will respond. If
you do not believe our
comments apply to your facts and circumstances, please tell us why in
your response.
After reviewing your
response to these comments, we may have additional comments.
Form 10-K for Fiscal Year Ended December 31, 2022
Proved Undeveloped Reserves, page 38
1. Your disclosure of the
changes in proved undeveloped reserves during 2022, other than
volumes converted,
states the increase was primarily attributable to the Stronghold
Acquisition. Your
explanation does not appear to address the additional factors identified
in the change in your
total proved reserves, including but not limited to removal of the
Company s Delaware
basin proved undeveloped reserves, which may also have an effect
on proved undeveloped
reserves. Please expand your disclosure to identify and quantify
the volumes of proved
undeveloped reserves associated with each contributing change
factor separately,
including offsetting factors, so the entire change volume is fully
explained. This comment
also applies to the explanation of the changes in proved
undeveloped reserves
provided on page F-39 to the extent that you include an explanation
under the section
Supplemental Information on Oil and Natural Gas Producing
Activities." Refer to
the disclosure requirements in Item 1203(b) of Regulation S-K.
Travis T. Thomas
FirstName LastNameTravis T. Thomas
Ring Energy, Inc.
Comapany
May NameRing Energy, Inc.
16, 2023
May 16,
Page 2 2023 Page 2
FirstName LastName
2. We note the disclosure on page 39 indicating that you expect all
currently scheduled PUD
locations to be drilled over the next five years beginning in 2023.
Please expand your
disclosure to clarify, if true, that the proved undeveloped reserves
as of December 31,
2022 are part of a development plan adopted by management including
approval by the
Board, if approval is required, that results in converting your proved
undeveloped reserves
to developed status within five years of initial disclosure as proved
reserves. Refer to Rule
4-10(a)(31)(ii) of Regulation S-X and the question 131.04 in the
Compliance and
Disclosure Interpretations (C&DIs) regarding Oil and Gas Rules.
3. If there are material amounts of proved undeveloped reserves that are
not scheduled to be
developed within five years of your initial disclosure of these
reserves, please expand your
disclosure to explain the reasons for the delay. Refer to Item 1203(d)
of Regulation S-K
and question 131.03 in the Compliance and Disclosure Interpretations
(C&DIs).
Acreage, page 40
4. Please expand your disclosure of developed and undeveloped acreage to
additionally
include the figures relating to acreage in which you hold royalty and
overriding royalty
interests. Refer to Items 1208(a) and 1208(b) of Regulation S-K.
Exhibits and Financial Statement Schedules
Exhibit Number 99.1 Reserve Report of Cawley, Gillespie & Associates, Inc.,
page 66
5. We note the reserves report incorporates an as of date of
January 1, 2023 rather than an
as of date of December 31, 2022 as utilized throughout your
filing on Form 10-K.
Please note SEC reserve evaluations, based on historical average
prices and costs, provide
an estimate of reserves using an effective date as of the end of a
time period or "as of
fiscal year-end," e.g. as of December 31, 2022. Please revise the
disclosures throughout
reserves report to use an appropriate "as of date. Refer to the
disclosure requirements in
Items 1202(a)(8)(ii) and 1202(a) of Regulation S-K.
Supplemental Information on Oil and Natural Gas Producing Activities
(Unaudited)
Reserves Quantities Informaton, page F-37
6. We note your explanation of the change in total proved reserves due to
Revisions of
Previous Quantity Estimates appears to combine changes from
separate and unrelated
causes, e.g., the result of converting from reporting reserves in
two-streams (oil and gas)
to three-streams (oil, NGLs, and gas), the removal of the Company s
Delaware basin
proved undeveloped reserves, well performance, increased cost from
2022 industry
activity, and increased commodity pricing. Expand your disclosure to
identify and
quantify the volumes of total proved reserves associated with each
contributing change
factor separately, including offsetting factors, so the entire change
volume is fully
explained. This comment also applies to the explanation of the change
in total proved
reserves due to revisions provided on page 35 to the extent that you
include an explanation
under the Properties section and to the disclosure of significant
changes in total proved
Travis T. Thomas
FirstName LastNameTravis T. Thomas
Ring Energy, Inc.
Comapany
May NameRing Energy, Inc.
16, 2023
May 16,
Page 3 2023 Page 3
FirstName LastName
reserves for each line item shown in the reserves reconciliation,
other than production, and
for each of the periods presented, e.g. the periods ending December
31, 2022 and 2021, as
applicable. Refer to the disclosure requirements in FASB ASC
932-235-50-5 and
Instruction 1 to Item 302(b) of Regulation S-K.
7. We note the proved reserves reconciliations for 2022 and 2021
disclosed on pages F-38
and F-39 do not include a column for total barrel of oil equivalent
(Boe); however, the
explanations of the individual line item volumes are provided in Boe
amounts. For better
correlation, expand these reconciliations to include a Boe column
similar to those
disclosed on page 35, or revise the volume amounts provided in the
explanations.
Standardized Measure of Discounted Future Net Cash Flows, page F-39
8. Please expand the discussion accompanying the presentation of the
standardized measure
to clarify, if true, that future cash flows take into account the
estimated abandonment costs
for your proved properties. Refer to FASB ASC 932-235-50-36.
If the abandonment costs, including such costs related to your proved
undeveloped
locations, have not been included for each of the periods presented,
e.g. as of December
31, 2022, 2021 and 2020, respectively, please explain to us your
rationale for excluding
these costs from your calculation of the standardized measure.
Form 8-K filed May 4, 2023
Exhibit 99.1
First Quarter 2023 Highlights and Recent Key Items, page 1
9. We note your disclosure of a Leverage Ratio and footnote 2 indicating
that the amount is
based on annualized third and fourth quarter 2022 and first quarter
2023 EBITDA
adjusted for the pro-forma effects of the Stronghold Transaction.
Based on the manner in
which this ratio is calculated, please tell us how you considered
whether this Leverage
Ratio is a non-GAAP measure. If this is a non-GAAP measure, it appears
necessary to
provide disclosure consistent with Item 10(e) of Regulation S-K. In
addition, please
consider Question 102.10 of the Non-GAAP Compliance and Disclosure
Interpretations
and the example regarding the presentation of a ratio without also
presenting the ratio
calculated using the most directly comparable GAAP measure with equal
or greater
prominence.
Financial Overview
General and Administrative Expenses ("G&A"), page 5
10. We note your discussion of G&A, excluding non-cash share-based
compensation and
G&A, excluding transaction costs and non-cash share-based
compensation, in narrative
form, without a quantification of the amount excluded for non-cash
share-based
compensation. Please tell us how you considered Question 102.10 of the
Non-GAAP
Compliance and Disclosure Interpretations. To this end, an example of
disclosure
Travis T. Thomas
Ring Energy, Inc.
May 16, 2023
Page 4
that would cause undue prominence of the non-GAAP measure includes:
Providing
discussion and analysis of a non-GAAP measure without a similar
discussion and analysis
of the comparable GAAP measure in a location with equal or greater
prominence.
Non-GAAP Information
Reconciliation of Net Income (Loss) to Adjusted Net Income, page 17
11. Please disclose how Adjusted Net Income is useful to investors and the
additional
purposes, if any, that management uses this non-GAAP measure. Refer to
Item
10(e)(1)(i)(C) and (D) of Regulation S-K.
12. Please provide a reconciliation of the per share Adjusted Net Income
to per share GAAP
Net Income. Refer to Item 10(e)(1)(i)(B) of Regulation S-K and
Question 102.05 of the
Compliance and Disclosure Interpretations on Non-GAAP Financial
Measures. This
comment also applies to your reconciliation of Adjusted EBITDA per
share as presented
on page 19.
Reconciliation of Free Cash Flow and Cash Flow from Operations, page 19
13. Please revise to reconcile Free Cash Flow to Net Cash Provided by
Operating Activities as
the most directly comparable GAAP measure. In addition, this non-GAAP
measure should
be renamed as you do not calculate it in the typical manner. Further,
revise the conflicting
statement on page 18: "There is no commonly accepted definition of
Free Cash Flow
within the industry." See Question 102.07 of the Compliance &
Disclosure Interpretations
regarding Non-GAAP Financial Measures.
14. We note you have labeled Cash Flow from Operations as a non-GAAP
measure.
However, we note that this label is commonly used interchangeably with
Cash Flow from
Operating Activities. Please tell us why you believe you have
appropriately labeled this
non-GAAP measure based on the guidance in Question 100.05 of the
Compliance
FirstName LastNameTravis T. Thomas
& Disclosure Interpretations on Non-GAAP Financial Measures. In
addition, please revise
Comapany
yourNameRing
disclosure Energy, Inc.
to explain why this non-GAAP measure provides useful
information to
May 16,investors per 4Item 10(e)(1)(i)(C) of Regulation S-K.
2023 Page
FirstName LastName
Travis T. Thomas
FirstName LastNameTravis T. Thomas
Ring Energy, Inc.
Comapany
May NameRing Energy, Inc.
16, 2023
May 16,
Page 5 2023 Page 5
FirstName LastName
In closing, we remind you that the company and its management are
responsible for the
accuracy and adequacy of their disclosures, notwithstanding any review,
comments, action or
absence of action by the staff.
You may contact Jennifer O'Brien, Staff Accountant, at 202-551-3721 or
Shannon
Buskirk, Staff Accountant, at 202-551-3717 if you have questions regarding
comments on the
financial statements and related matters. Please contact Sandra Wall, Petroleum
Engineer,
at 202-551-4727, or John Hodgin, Petroleum Engineer, at 202-551-3699 if you
have questions
regarding the engineering comments.
Sincerely,
Division of
Corporation Finance
Office of Energy &
Transportation