Company: REI
Filing Date: 2025-05-07
Form Type: 10-Q
Source: 0001628280-25-023254
Chunk: 119

Company: RING ENERGY, INC.
Filing Date: 2025-05-07
Form: 10-Q
Item: Part I, Item 8
Chunk 119
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 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 (Expense)" 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 ofMarch 31, 2025December 31, 2024Commodity derivative instruments, marked to market:Derivatives assets, current$5,309,892 $5,497,057 Derivative assets, noncurrent$5,020,380 $5,473,375 Derivative liabilities, current$5,426,195 $6,410,547 Derivative liabilities, noncurrent$3,632,133 $2,912,745 The components of “Gain (loss) on derivative contracts” from the Condensed Statements of Operations are as follows for the respective periods:For the Three Months EndedMarch 31, 2025March 31, 2024Oil derivatives:Realized gain (loss) on oil derivatives$(640,267)$(2,738,970)Unrealized gain (loss) on oil derivatives2,341,425