Company: REI
Filing Date: 2025-03-05
Form Type: 10-K
Source: 0001628280-25-010585
Chunk: 171

Company: RING ENERGY, INC.
Filing Date: 2025-03-05
Form: 10-K
Item: Item 1A
Chunk 171
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 on many assumptions that may turn out to be inaccurate.” (below) for a discussion of the uncertainty involved in these processes. Our cost of drilling, completing, and operating wells is often uncertain before drilling commences. Overruns in budgeted expenditures are common risks that can make a particular well or project uneconomical. Further, many factors may curtail, delay, or cancel drilling, including delays imposed by or resulting from compliance with regulatory requirements; pressure or irregularities in geological formations; shortages of or delays in obtaining equipment and qualified personnel; equipment failures or accidents; adverse weather conditions; reductions in oil and natural gas prices; title problems; and limitations in the market for oil and natural gas.

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Decreases in oil and natural gas prices may require us to incur write-downs of the financial carrying values of our oil and natural gas properties which could negatively impact the price of our common stock. 

Accounting rules require that we review periodically the financial carrying value of our oil and natural gas properties for possible impairment. Based on specific market factors and circumstances at the time of prospective impairment reviews, and the continuing evaluation of development plans, production data, economics, and other factors, we may be required to write-down the financial carrying value of our oil and natural gas properties. A write-down would likely constitute a non-cash charge. The cumulative effect of one or more write-downs could also negatively impact the trading price of our common stock. 

We follow the full cost method of accounting for our oil and natural gas properties. Under the full cost method, the net book value of properties, less related deferred income taxes, may not exceed a calculated “ceiling.” The ceiling is the estimated after tax future net revenues from proved oil and natural gas properties, discounted at 10% per year. Discounted future net revenues are estimated using oil and natural gas spot prices based on the average price during the preceding 12-month period determined as an unweighted arithmetic average of the first-day-of-the-month price for each month within such period, except for changes which are fixed and determinable by existing contracts. The net book value is compared to the ceiling on a quarterly basis. The excess, if any, of the net book value above the ceiling is required to be written off as an impairment expense. During the years ended December 31, 2024, 2023, and 2022 we did not incur any write-downs. Under SEC full cost accounting rules, any write-off recorded may not be reversed even if higher oil and natural gas