Company: REI
Filing Date: 2025-03-05
Form Type: 10-K
Source: 0001628280-25-010585
Chunk: 121

Company: RING ENERGY, INC.
Filing Date: 2025-03-05
Form: 10-K
Item: Item 16
Chunk 121
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 prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability. This category includes those derivative instruments that we value using observable market data. Substantially all of these inputs are observable in the marketplace throughout the full term of the derivative instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace.Level 3:Measured based on prices or valuation models that require inputs that are both significant to the fair value measurement and less observable from objective sources (i.e., supported by little or no market activity).Financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy. We continue to evaluate our inputs to ensure the fair value level classification is appropriate. When transfers between levels occur, it is our policy to assume that the transfer occurred at the date of the event or change in circumstances that caused the transfer.The fair values of the Company’s derivatives are not actively quoted in the open market. The Company uses a market approach to estimate the fair values of its derivative instruments on a recurring basis, utilizing commodity futures pricing for the underlying commodities provided by a reputable third party, a Level 2 fair value measurement.

F-27

The Company applies the provisions of the fair value measurement standard on a non-recurring basis to its non-financial assets and liabilities. These assets and liabilities are not measured at fair value on an ongoing basis but are subject to fair value adjustments if events or changes in certain circumstances indicate that adjustments may be necessary.The following table summarizes the valuation of our assets and liabilities that are measured at fair value on a recurring basis (further detail in "NOTE 7 — DERIVATIVE FINANCIAL INSTRUMENTS").Fair Value Measurement ClassificationQuoted prices inActive Marketsfor Identical Assetsor (Liabilities)(Level 1)Significant OtherObservable Inputs(Level 2)SignificantUnobservableInputs(Level 3)TotalAs of December 31, 2023Commodity Derivatives - Assets$— $17,850,088 $— $17,850,088 Commodity Derivatives - Liabilities— (19,030,704)— (19,030,704)Total$— $(1,180,616)$