Ring Energy, Inc. 10-Q Summary
Business Context and Reporting Period
This is a Quarterly Report (Form 10-Q) for Ring Energy, Inc., a Nevada corporation and smaller reporting company, for the period ended June 30, 2009. The Company is a development-stage entity focused on oil and gas exploration. It holds a 25% non-operating working interest (18.75% net revenue interest) in a 440-acre lease in Howard County, Texas. As of the reporting date, the Company is completing a test well on this prospect but has not yet generated revenue from operations.
Key Financial Metrics
| Metric | Value (Nine Months Ended June 30, 2009) | Value (Three Months Ended June 30, 2009) |
|---|---|---|
| Revenue | $0 | $0 |
| Net Loss | $111,449 (Operating Loss) | $1,100 (Net Loss) |
| Cash and Cash Equivalents | $1,116,719 | $1,116,719 |
| Total Assets | $1,335,420 | $1,335,420 |
| Current Liabilities | $24,481 | $24,481 |
| Accumulated Deficit | $364,350 | $364,350 |
| Capitalized Oil & Gas Costs | $209,030 | $209,030 |
Note: The filing text does not provide a clear value for operating margins or debt-to-equity ratios due to the absence of operating revenue and senior debt.
Material Changes vs. Prior Period
- Asset Composition: Total assets decreased slightly from $1,394,138 (Sept 30, 2008) to $1,335,420 (June 30, 2009). This shift reflects the liquidation of available-for-sale securities ($1,249,614 in prior period) into cash and the capitalization of $209,030 in oil and gas interest costs.
- Liabilities: Current liabilities increased significantly from $941 to $24,481, primarily due to accrued costs related to the Texas prospect drilling.
- Operating Results: For the three months ended June 30, 2009, the Company reported a net loss of $1,100, a significant improvement over the $45,632 loss in the same period in 2008. This improvement was driven by $15,312 in dividend and interest income and reduced general and administrative expenses (specifically the elimination of $17,143 in consulting fees incurred in the prior year).
- Consulting Fees: For the nine-month period, consulting fees increased to $51,428 compared to $17,143 in the prior year, though management expects these to cease in future periods.
Outlook, Risks, and Management Commentary
- Capital Resources: Management estimates approximately $1,000,000 in cash will remain after the completion of the current test well. This capital is intended for acquiring additional properties or drilling further exploratory wells.
- Future Expenses: General and administrative expenses are estimated at $5,000 per month, excluding oil and gas activities. Quarterly expenses are expected to rise due to audit, legal, and potential petroleum engineering fees.
- Key Risks:
- Commercial Viability: There is no assurance the current test well will be commercially productive. If it is a dry hole, the capitalized costs may be impaired.
- Market Volatility: Future results are highly dependent on oil and natural gas prices, which have been volatile.
- Development Stage: The Company has no operating revenue and relies on cash reserves and potential equity financing.
- Subsequent Events: On August 10, 2009, Denny W. Nestripke, a CPA, was appointed to the Board of Directors and Audit Committee, serving as the Audit Committee Financial Expert.
Investor Verification Checklist
- Verify the commercial status and production results of the test well in Howard County, Texas.
- Confirm the accuracy of the $209,030 capitalized costs and the remaining $28,456 accrued liability.
- Monitor the Company's cash burn rate against the estimated $5,000 monthly G&A expense and potential drilling costs.
- Review the status of the 25% working interest agreement with Big Star Oil and Gas, LLC.
- Assess the impact of the recent appointment of a CPA to the Audit Committee on financial reporting quality.