Company: REI
Filing Date: 2025-11-06
Form Type: 10-Q
Source: 0001384195-25-000018
Chunk: 153

Company: RING ENERGY, INC.
Filing Date: 2025-11-06
Form: 10-Q
Item: Part I, Item 2
Chunk 153
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 the net book value of properties, less related deferred income taxes, may not exceed a calculated “ceiling,” which is defined as the estimated after-tax future net revenues from proved oil and natural gas properties, discounted at an annual rate of 10%. The discounted future net revenues are estimated using spot prices for oil and natural gas, based on the average price during the preceding twelve months. This average is calculated as an unweighted arithmetic mean of the first-day-of-the-month prices for each month within that period, except when changes are fixed and determinable by existing contracts. As a result of the ceiling test, driven by a decrease in the twelve month average commodity price over the past few months, the Company recognized a non-cash impairment charge of $72.9 million during the three months ended September 30, 2025. If this downward trend continues, the Company's discounted future net revenues could continue to decline, which may trigger additional non-cash impairments recognized in future periods. Estimating potential future non-cash impairments is complex due to numerous factors affecting the ceiling test calculation, including but not limited to future prices, operating costs, upward or downward reserve revisions, reserve additions, and tax attributes.  The amount of any additional non-cash impairment, if any, is not estimable at this time given the uncertainty of these factors. 

Natural Gas Takeaway Capacity

The Permian Basin has been experiencing a lack of sufficient pipeline transportation that is connected to markets that are purchasing the natural gas produced. This has resulted in negative natural gas prices at times, whereby the seller is actually paying the purchaser to take the gas. We have experienced negative realized gas prices at times and conditions are continuing. If these depressed or inverted natural gas prices continue in the region, our natural gas revenues will continue to be negatively impacted.

Inflation

Inflation has increased costs associated with our capital program and production operations. We have experienced increases in the costs of many of the materials, supplies, equipment and services used in our operations and we expect inflation to continue based on current economic circumstances, including tariffs, trade wars, and supply chain disruptions. We continue to closely monitor costs and take all reasonable steps to mitigate the inflationary effect on our cost structure and also work to enhance our efficiency to minimize additional cost increases where possible.

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Results of Operations

Oil, Natural Gas, and Natural Gas Liquids Revenues for the Three Months Ended September 30, 2025 and 2024

For the Three Months EndedSeptember 30, 2025