Company: REI
Filing Date: 2025-05-07
Form Type: 10-Q
Source: 0001628280-25-023254
Chunk: 61

Company: RING ENERGY, INC.
Filing Date: 2025-05-07
Form: 10-Q
Item: Part I, Item 1
Chunk 61
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 Acquisition were capitalized as a component of the purchase price. Determining the fair value of the assets and liabilities acquired required judgment and certain assumptions to be made, the most significant of these being related to the valuation of Lime Rock's oil and gas properties. The inputs and assumptions related to the oil and gas properties were categorized as level 3 in the fair value hierarchy.

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The following table represents the preliminary allocation of the total cost of the Lime Rock Acquisition to the assets acquired and liabilities assumed as of the Lime Rock Acquisition date:Consideration:Common stock considerationShares of common stock issued6,452,879 Common stock price as of March 31, 2025$1.15 Total common stock consideration$7,420,811 Cash considerationEscrow deposit released at closing$5,000,000 Closing amount paid to Lime Rock63,599,939 Fair value of deferred payment liability9,415,066 Total cash consideration$78,015,005 Direct transaction costs2,294,105 Total consideration$87,729,921 Fair value of assets acquired:Oil and natural gas properties$90,844,802 Fixed assets34,275 Amount attributable to assets acquired$90,879,077 Fair value of liabilities assumed:Suspense liability$561,977 Asset retirement obligations2,587,179 Amount attributable to liabilities assumed$3,149,156 Net assets acquired$87,729,921 

NOTE 6 — DERIVATIVE FINANCIAL INSTRUMENTSThe Company is exposed to fluctuations in crude oil and natural gas prices on its production. It utilizes derivative strategies that consist of either a single derivative instrument or a combination of instruments to manage the variability in cash flows associated with the forecasted sale of our future domestic oil and natural gas production. While the use of derivative instruments may limit or partially reduce the downside risk of adverse commodity price movements, their use also may limit future income from favorable commodity price movements.From time to time, the Company enters into derivative contracts to protect the Company’s cash flow from price fluctuation and maintain its capital programs. The Company has historically used costless collars, deferred premium puts, or swaps for this purpose. Oil derivative contracts are based on WTI ("West Texas Intermediate") crude oil prices and natural gas contacts are based on the Henry Hub. A “costless collar” is the combination of two options, a put option (floor) and call option (ceiling) with the options structured so that the premium