Company: REI
Filing Date: 2025-03-05
Form Type: 10-K
Source: 0001628280-25-010585
Chunk: 83

Company: RING ENERGY, INC.
Filing Date: 2025-03-05
Form: 10-K
Item: Item 16
Chunk 83
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 judgments and estimates regarding the financial performance of wells associated with proved crude oil and natural gas reserves to 

F-2

determine if wells are expected, with reasonable certainty, to be economical under the appropriate pricing assumptions required in the estimation of depletion, depreciation and amortization expense. We identified the estimation of proved reserves of oil and gas properties as a critical audit matter. 

The principal consideration for our determination that the estimation of proved crude oil and natural gas reserves is a critical audit matter is that changes in certain inputs and assumptions, which require a high degree of subjectivity, necessary to estimate the volume and future development costs of the Company’s proved reserves could have a significant impact on the measurement of depletion, depreciation and amortization expense. In turn, auditing those inputs and assumptions required subjective and complex auditor judgment.

Our audit procedures related to the estimation of proved crude oil and natural gas reserves included the following, among others.

•We tested the design and operating effectiveness of controls relating to management’s estimation of proved crude oil and natural gas reserves for the purpose of estimating depletion, depreciation and amortization expense. 

•We evaluated the independence, objectivity, and professional qualifications of the Company’s reserve engineers, made inquiries of those specialists regarding the process followed and judgments made to estimate the Company’s proved crude oil and natural gas reserve volumes, and read the reserve report prepared by the Company’s reserve engineers.

•To the extent key inputs and assumptions used to determine proved reserve volumes and other cash flow inputs and assumptions are derived from the Company’s accounting records, including, but not limited to: historical pricing differentials, operating costs, estimated future development costs, and ownership interests, we tested management’s process for determining the assumptions, including examining the underlying support on a sample basis. Specifically, our audit procedures involved testing management’s assumptions by performing the following:

◦We compared the estimated pricing differentials used in the reserve report to prices realized by the Company related to revenue transactions recorded in the current year and examined contractual support for the pricing differentials;

◦We tested models used to estimate the future operating costs in the reserve report and compared amounts to historical operating costs;

◦We evaluated the method used to determine the estimated future development costs used in the reserve report and compared management’s estimates to amounts expended for recently drilled and completed wells;

◦We tested, on a sample basis, the working and net revenue interests used in the reserve report by inspecting land, legal and division order records;

◦We evaluated evidence supporting the amount of proved undeveloped properties reflected