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What changed 10-K

Item 9A. Controls and Procedures

2023-03-09 compared with 2022-03-16 · 633 added, 463 removed, 806 unchanged (58% of the section changed)

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Changes may include such activities as implementing new, more efficient systems, consolidating activities, and migrating processes.

During the first quarter of 2021, the Company transitioned its accounting and reporting functions from Tulsa in conjunction with its corporate headquarters relocation.

On March 24, 2021, Travis Thomas was named Chief Financial Officer, replacing William Broaddrick.

Except as described above, there were no changes in our internal control over financial reporting that occurred during the fiscal year ended December 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

There were no changes in our internal control over financial reporting that occurred during the fourth quarter ended December 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Management’s Annual Report on Internal Control Over Financial Reporting and Report of Independent Accounting Firm

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Based on our assessment, we believe that, as of December 31, 2022, our internal control over financial reporting is effective based on those criteria.

The independent registered public accounting firm, Grant Thornton LLP, has audited the financial statements included in this Annual Report on Form 10-K, and has issued their report on the effectiveness of the Company’s internal control over financial reporting at December 31, 2021.

The independent registered public accounting firm, Grant Thornton LLP, has audited the financial statements and internal control over financial reporting included in this Annual Report on Form 10-K, and has issued their report on the effectiveness of the Company’s internal control over financial reporting at December 31, 2022.

The report, which expresses an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting at December 31, 2022, is set forth below.

29 unchanged sentences

Directors, Executive Officers and Corporate Governance

The information required by this item is incorporated by reference herein from the 2022 Proxy Statement to be filed with the SEC no later than 120 days after December 31, 2021.

The information required by this item is incorporated by reference herein from the Company's 2023 Proxy Statement to be filed with the SEC no later than 120 days after December 31, 2022.

If the Proxy Statement is not filed with the SEC by such time, such information will be included in an amendment to this Annual Report by such time.

Executive Compensation

The information required by this item is incorporated by reference herein from the 2022 Proxy Statement to be filed with the SEC no later than 120 days after December 31, 2021.

The information required by this item is incorporated by reference herein from the Company's 2023 Proxy Statement to be filed with the SEC no later than 120 days after December 31, 2022.

If the Proxy Statement is not filed with the SEC by such time, such information will be included in an amendment to this Annual Report by such time.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by this item is incorporated by reference herein from the 2022 Proxy Statement to be filed with the SEC no later than 120 days after December 31, 2021.

The information required by this item is incorporated by reference herein from the Company's 2023 Proxy Statement to be filed with the SEC no later than 120 days after December 31, 2022.

If the Proxy Statement is not filed with the SEC by such time, such information will be included in an amendment to this Annual Report by such time.

Certain Relationships and Related Transactions, and Director Independence

The information required by this item is incorporated by reference herein from the 2022 Proxy Statement to be filed with the SEC no later than 120 days after December 31, 2021.

The information required by this item is incorporated by reference herein from the Company's 2023 Proxy Statement to be filed with the SEC no later than 120 days after December 31, 2022.

If the Proxy Statement is not filed with the SEC by such time, such information will be included in an amendment to this Annual Report by such time.

Principal Accounting Fees and Services

The information required by this item is incorporated by reference herein from the 2022 Proxy Statement to be filed with the SEC no later than 120 days after December 31, 2021.

Principal Accountant Fees and Services

The information required by this item is incorporated by reference herein from the Company's 2023 Proxy Statement to be filed with the SEC no later than 120 days after December 31, 2022.

If the Proxy Statement is not filed with the SEC by such time, such information will be included in an amendment to this Annual Report by such time.

Exhibits, Financial Statement Schedules

(a) Financial Statements

The following financial statements are filed with this Annual Report:

Report of Grant Thornton, LLP, Independent Registered Public Accounting Firm (PCAOB ID Number 248)

Report of Eide Bailly LLP, Independent Registered Public Accounting Firm (PCAOB ID Number 286)

Balance Sheets as of December 31, 2021 and 2020

Statements of Operations for the years ended December 31, 2021, 2020, and 2019

Statements of Stockholders’ Equity for the years ended December 31, 2021, 2020, and 2019

Statements of Cash Flows for the years ended December 31, 2021, 2020, and 2019

Notes to Financial Statements

Supplemental Information on Oil and Gas Producing Activities

Exhibits and Financial Statement Schedules

Incorporated by Reference

Exhibit Description

Number Exhibit Description Form File No.

Exhibit Filing Date Filed

2.1 Purchase and Sale Agreement, dated February 25, 2019 by and among Ring Energy, Inc.

and Wishbone Energy Partners, LLC, Wishbone Texas operating Company LLC and WB WaterWorks, LLC

8-K 001-36057 2.1 2/28/19

2.2 Purchase and Sale Agreement dated July 1, 2022, by and among Ring Energy, Inc., Stronghold Energy II Operating, LLC, a Delaware limited liability company (“Stronghold OpCo”) and Stronghold Energy II Royalties, LP, a Delaware limited partnership, including the following Exhibits thereto:

Exhibit I – Form of Registration Rights Agreement, Exhibit K – Form of Nomination Agreement, Exhibit L – Form of Certificate of Designation and Exhibit M – Form of Lock-Up Agreement

8-K 001-36057 2.1 7/8/22

2.2(a) First Amendment to Purchase and Sale Agreement by and among Stronghold Energy II Operating, LLC, Stronghold Energy II Royalties, LP, and Ring Energy, Inc., dated August 4, 2022

8-K 001-36057 2.1 8/9/22

3.1 Articles of Incorporation (as amended)

Certificate of Amendment to the Articles of Incorporation, as amended, of Ring Energy, Inc.

10-K 000-53920 3.1 4/1/13

3.1(a) Certificate of Amendment to the Articles of Incorporation, as amended, of Ring Energy, Inc.

8-K 001-36057 3.1 12/17/21

3.2 Bylaws of Ring Energy, Inc.

as amended April 13, 2021

8-K 001-36057 3.1 4/15/21

3.3 Certificate of Designation of the Series A Convertible Preferred Stock dated August 30, 2022

8-K 001-36057 3.1 9/6/22

3.4 Certificate of Withdrawal of Certificate of Designation filed with the Secretary of State of Nevada effective October 31, 2022

8-K 001-36057 3.1 10/31/22

4.1 Registration Rights Agreement, dated April 9, 2019 by and between Ring Energy, Inc.

and Wishbone Energy Partners, LLC

10-Q 001-36057 4.1 4/12/19

4.2 Description of Ring Energy, Inc.

equity securities registered under Section 12(b) of the Securities Exchange Act of 1934, as amended

10-K 001-36057 10.16 3/16/21

4.3 Securities Purchase Agreement, dated October 27, 2020

8-K 001-36057 4.1 10/29/20

10.1* Executive Employment and Severance Agreement, dated as of September 30, 2020, by and between the Company and Stephen D.

8-K 001-36957 10.1 12/4/20

10.2* Executive Employment and Severance Agreement, dated as of September 30, 2020, by and between the Company and Paul D.

8-K 001-36957 10.1 10/6/20

10.3* Employment and Severance Agreement, dated as of September 30, 2020, by and between the Company and Alexander Dyes

8-K 001-36057 10.1 12/22/20

10.4* Employment and Severance Agreement, dated as of September 30, 2020, by and between the Company and Marinos C.

8-K 001-36057 10.2 12/22/20

Incorporated by Reference

Number Exhibit Description Form File No.

Exhibit Filing Date Filed

10.5* Ring Energy Inc.

Long Term Incentive Plan, as Amended

8-K 000-53920 99.3 1/24/13

10.6* Form of Option Grant for Long-Term Incentive Plan

10-Q 000-53920 10.2 8/14/12

10.7 Credit Agreement dated July 1, 2014 with SunTrust Bank

8-K 001-36057 10.1 7/3/14

10.8 First Amendment to Credit Agreement with SunTrust Bank

8-K 001-36057 10.1 6/29/15

10.9 Second Amendment to Credit Agreement with SunTrust Bank

8-K 001-36057 10.1 7/29/15

10.10 Third Amendment to Credit Agreement with SunTrust Bank

8-K 001-36057 10.1 5/20/16

10.11 Fourth Amendment to Credit Agreement with SunTrust Bank

10-K 001-36057 10.16 3/16/21

10.12 Fifth Amendment to Credit Agreement with SunTrust

8-K 001-36057 10.1 6/19/18

10.13 Amended and Restated Credit Agreement with SunTrust Bank

10-Q 001-36057 10.2 5/8/19

10.14 First Amendment to Amended and Restated Credit Agreement with SunTrust Bank

8-K 001-36057 10.1 12/9/19

10.15 Second Amendment to Amended and Restated Credit Agreement, dated June 17, 2020, by and among Ring Energy, Inc., the lenders party thereto, and Truist Bank, as administrative agent for the lenders and as issuing bank

8-K 001-36057 10.1 6/19/20

10.16 Third Amendment to Amended and Restated Credit Agreement with Truist Bank

8-K 001-36057 10.1 12/29/20

10.17 Fourth Amendment to Amended and Restated Credit Agreement with Truist Bank dated June 10, 2021

8-K 001-36057 10.1 6/16/21

10.18 Fifth Amendment to Amended and Restated Credit Agreement with Truist Bank dated June 25, 2021

8-K 001-36057 10.1 6/25/21

10.19* Executive Employment and Severance Agreement, dated as of October 26, 2020, by and between the Company and Travis T.

Commitment Letter dated February 24, 2019, between Ring Energy, Inc., SunTrust Bank and SunTrust Robinson Humphrey, Inc.

8-K 001-36057 10.1 3/26/21

10.20 Registration Rights Agreement dated August 31, 2022, by and among Ring Energy, Inc., Stronghold Energy II Operating, LLC, and Stronghold Energy II Royalties, LP.

8-K 001-36057 10.1 9/6/22

10.21 Lock-up Agreement dated August 31, 2022, by and between Ring Energy, Inc.

and Stronghold Energy II Operating, LLC.

8-K 001-36057 10.2 9/6/22

10.22 Director Nomination Agreement dated August 31, 2022, by and among Ring Energy, Inc., Stronghold Energy II Operating, LLC, and Stronghold Energy II Royalties, LP.

8-K 001-36057 10.3 9/6/22

10.23 Second Amended and Restated Credit Agreement dated August 31, 2022, by and among Ring Energy, Inc., Truist Bank, and the Lenders from time to time party thereto

8-K 001-36057 10.4 9/6/22

Incorporated by Reference

Number Exhibit Description Form File No.

Exhibit Filing Date Filed

10.24* Ring Energy, Inc.

2021 Omnibus Incentive Plan

DEF 14A 001-36057 4/22/21

10.25* Form of Performance Stock Unit Agreement

8-K 001-36057 10.1 11/30/21

10.26* Form Restricted Stock Unit Agreement (employees)

8-K 001-36057 10.1 2/23/23

10.27* Form of Restricted Stock Unit Agreement (non-employee directors)

8-K 001-36057 10.2 2/23/23

14.1 Code of Ethics

8-K 000-53920 14.1 1/24/13

23.1 Consent of Cawley, Gillespie & Associates, Inc.

1 unchanged sentence

23.3 Consent of Eide Bailly LLP

24.1 Power of Attorney (included as part of the signature pages of this report)

31.1 Rule 13a-14(a) Certification by Chief Executive Officer

3 unchanged sentences

99.1 Reserve Report of Cawley, Gillespie & Associates, Inc.

Inline XBRL Instance Document

Inline XBRL Taxonomy Extension Schema Document

Inline XBRL Taxonomy Extension Calculation Linkbase Document

Inline XBRL Taxonomy Extension Definition Linkbase Document

Inline XBRL Taxonomy Extension Label Linkbase Document

Inline XBRL Taxonomy Extension Presentation Linkbase Document

101.INS Inline XBRL Instance Document X

101.SCH Inline XBRL Taxonomy Extension Schema Document X

101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document X

101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document X

101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document X

101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document X

104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

* Management contract

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on behalf by the undersigned, thereunto duly authorized.

Form 10-K Summary

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Ring Energy, Inc.

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KNOW ALL PERSONS BY THESE PRESENTS, that each individual whose signature appears below constitutes and appoints Paul D.

McKinney, his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to the annual report on Form 10-K filed with the Securities and Exchange Commission, hereby ratifying and confirming his signature as he may be signed by his or her said attorney to any and all amendments to said Annual Report on Form 10-K.

McKinney, his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K filed with the Securities and Exchange Commission, hereby ratifying and confirming his signature as he may be signed by his or her said attorney to any and all amendments to said Annual Report on Form 10-K.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on the dates indicated.

/s/ Thomas L.

Chief Executive Officer and Director

McKinney /s/ Thomas L.

Chief Executive Officer and Director Director

(Principal Executive Officer)

2 unchanged sentences

/s/ Travis T.

/s/ Anthony B.

Chief Financial Officer

Thomas /s/ Anthony B.

Chief Financial Officer Director

(Principal Financial Officer)

1 unchanged sentence

March 9, 2023

/s/ Regina Roesener

/s/ Clayton E.

Regina Roesener

/s/ Regina Roesener /s/ Clayton E.

Regina Roesener Mr.

Director Director

March 9, 2023

March 9, 2023

/s/ Richard Harris

/s/ John Crum

Richard Harris

/s/ Richard E.

Harris /s/ John A.

Director Director

March 9, 2023

March 9, 2023

Ben-Dor /s/ David S.

Director Director

March 9, 2023

March 9, 2023

RING ENERGY, INC.

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Opinion on the financial statements

We have audited the accompanying balance sheet of Ring Energy, Inc.

(a Nevada corporation) (the “Company”) as of December 31, 2021, the related statements of operations, stockholders’ equity, and cash flows for the year ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021, and the results of its operations and its cash flows for the year ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

We have audited the accompanying balance sheets of Ring Energy, Inc.

(a Nevada corporation) (the “Company”) as of December 31, 2022 and 2021, the related statements of operations, stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated March 9, 2023 expressed an unqualified opinion.

1 unchanged sentence

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audit.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical audit matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

The development of estimated proved reserves used in the calculation of depletion, depreciation and amortization expense and evaluation of full cost ceiling impairment under the full cost method of accounting

As described further in Note 1 to the financial statements, the Company accounts for its oil and gas properties using the full cost method of accounting which requires management to make estimates of proved reserve volumes and future net revenues to record depletion, depreciation and amortization expense and assess its oil and gas properties for potential full cost ceiling impairment.

To estimate the volume of proved reserves and future net revenue, management makes significant estimates and assumptions including forecasting the production decline rate of producing properties and forecasting the timing and volume of production associated with the Company’s development plan for proved undeveloped properties.

In addition, the estimation of proved reserves is also impacted by management’s judgments and estimates regarding the financial performance of wells associated with proved reserves to determine if wells are expected with reasonable certainty to be economical under the appropriate pricing assumptions required in the estimation of depletion,

depreciation and amortization expense and potential full cost ceiling impairment assessment.

We identified the estimation of proved reserves of oil and gas properties as a critical audit matter.

The principal consideration for our determination that the estimation of proved reserves is a critical audit matter is that changes in certain inputs and assumptions, which require a high degree of subjectivity, necessary to estimate the volume and future net revenues of the Company’s proved reserves could have a significant impact on the measurement of depletion, depreciation and amortization expense and potential full cost ceiling impairment.

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

The development of estimated proved crude oil and natural gas reserves used in the calculation of depletion, depreciation and amortization expense under the full cost method of accounting and the valuation of crude oil and natural gas properties in the 2022 Stronghold Acquisition (herein referred to as “the crude oil and natural gas reserves”)

As described further in Note 1 to the financial statements, the Company accounts for its oil and gas properties using the full cost method of accounting, which requires management to make estimates of proved crude oil and natural gas reserve volumes and future net revenues to record depletion, depreciation and amortization expense.

Additionally, as described in Note 5 to the financial statements, the Company acquired significant oil and natural gas properties through an asset acquisition.

Crude oil and natural gas reserves are a significant input to the determination of the acquisition date value of crude oil and natural gas properties acquired by the Company in the asset acquisition.

To estimate the volume of proved crude oil and natural gas reserves and future net revenue, management makes significant estimates and assumptions including forecasting the production decline rate of producing properties and forecasting the timing and volume of production associated with the Company’s development plan for proved undeveloped properties.

In addition, the estimation

of proved crude oil and natural gas reserves is impacted by management’s judgments and estimates regarding the financial performance of wells associated with proved crude oil and natural gas reserves to determine if wells are expected, with reasonable certainty, to be economical under the appropriate pricing assumptions required in the estimation of depletion, depreciation and amortization expense.

We identified the estimation of proved reserves of oil and gas properties as it relates to the recognition of depletion, depreciation and amortization expense and recording the values of properties acquired in the 2022 Stronghold Acquisition as a critical audit matter.

The principal consideration for our determination that the estimation of proved crude oil and natural gas reserves as it relates to the recognition of depletion, depreciation and amortization expense and the recording of oil and natural gas property values in the 2022 Stronghold acquisition is a critical audit matter is that changes in certain inputs and assumptions, which require a high degree of subjectivity, necessary to estimate the volume and future net revenues of the Company’s proved reserves could have a significant impact on the measurement of depletion, depreciation and amortization expense and the acquisition date values of oil and natural gas properties.

In turn, auditing those inputs and assumptions required subjective and complex auditor judgment.

Our audit procedures related to the estimation of proved reserves included the following, among others.

● We tested the design and operating effectiveness of controls relating to management’s estimation of proved reserves for the purpose of estimating depletion, depreciation and amortization expense and assessing the Company’s oil and gas properties for potential full cost ceiling impairment.

● We evaluated the independence, objectivity, and professional qualifications of the Company’s reserve engineers, made inquiries of those specialists regarding the process followed and judgments made to estimate the Company’s proved reserve volumes, and read the reserve report prepared by the Company’s specialists.

Our audit procedures related to the estimation of proved crude oil and natural gas reserves included the following, among others.

• We tested the design and operating effectiveness of controls relating to management’s estimation of proved crude oil and natural gas reserves for the purpose of estimating depletion, depreciation and amortization expense and acquisition date value of crude oil and natural gas properties.

• We evaluated the independence, objectivity, and professional qualifications of the Company’s reserve engineers, made inquiries of those specialists regarding the process followed and judgments made to estimate the Company’s proved crude oil and natural gas reserve volumes, and read the reserve report prepared by the Company’s specialists.

• To the extent key inputs and assumptions used to determine proved reserve volumes and other cash flow inputs and assumptions are derived from the Company’s accounting records, including, but not limited to:

1 unchanged sentence

Specifically, our audit procedures involved testing management’s assumptions by performing the following:

o We compared the estimated pricing differentials used in the reserve report to prices realized by the Company related to revenue transactions recorded in the current year and examined contractual support for the pricing differentials

o We tested models used to estimate the future operating costs in the reserve report and compared amounts to historical operating costs

o We evaluated the method used to determine the estimated future development costs used in the reserve report and compared management’s estimates to amounts expended for recently drilled and completed wells

o We tested the working and net revenue interests used in the reserve report by inspecting land and division order records;

o We evaluated evidence supporting the amount of proved undeveloped properties reflected in the reserve report by examining historical conversion rates and support for the Company’s ability to fund and intent to develop the proved undeveloped properties;

o We applied analytical procedures to production forecasts in the reserve report by comparing to historical actual results.

◦ We compared the estimated pricing differentials used in the reserve report to prices realized by the Company related to revenue transactions recorded in the current year and examined contractual support for the pricing differentials.

◦ As it relates to the recording of the acquisition date values of crude oil and natural gas properties in the asset acquisition we compared the pricing differentials used in the reserve report to the differentials provided by the seller, and performed analytical procedures by comparing the differentials in the reserve report to actual differentials realized subsequent to the acquisition close date.

◦ We tested models used to estimate the future operating costs in the reserve report and compared amounts to historical operating costs.

◦ As it relates to the recording of the acquisition date values of crude oil and natural gas properties in the asset acquisition we recalculated the operating costs in the reserve report based on the model provided by the seller, and performed analytical procedures by comparing the operating costs in the reserve report to operating costs realized subsequent to the acquisition close date.

◦ We evaluated the method used to determine the estimated future development costs used in the reserve report and compared management’s estimates to amounts expended for recently drilled and completed wells.

◦ As it relates to the recording of the acquisition date values of crude oil and natural gas properties in the asset acquisition we compared the estimated future development costs in the reserve report to the model provided by the seller, and we performed analytical procedures by comparing the future

development costs in the reserve report to actual development costs incurred subsequent to the acquisition close date.

◦ We tested the working and net revenue interests used in the reserve report by inspecting land, legal and division order records.

◦ We evaluated evidence supporting the amount of proved undeveloped properties reflected in the reserve report by examining historical conversion rates and support for the Company’s ability to fund and intent to develop the proved undeveloped properties.

◦ We applied analytical procedures to production forecasts in the reserve report by comparing to historical actual results.

◦ As it relates to the recording of the acquisition date values of crude oil and natural gas properties in the asset acquisition we applied analytical procedures to production forecasts by comparing the remaining forecast in 2022 in the reserve report to actual results subsequent to the acquisition close date.

◦ As it relates to the recording of the acquisition date values of crude oil and natural gas properties in the asset acquisition, we utilized internal valuation specialists to assist with evaluating certain assumptions, such as risk-adjustment factors, as compared to industry surveys and publicly available market data.

/s/ GRANT THORNTON LLP

6 unchanged sentences

The Woodlands, Texas

Opinions on the Financial Statements and Internal Control Over Financial Reporting

We have audited the accompanying balance sheet of Ring Energy, Inc.

(Ring Energy) as of December 31, 2020, and the related statements of operations, stockholders’ equity, and cash flows for the years ended December 31, 2020 and 2019, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of Ring Energy as of December 31, 2020, and the results of its operations and its cash flows for the years ended December 31, 2020 and 2019, in conformity with accounting principles generally accepted in the United States of America.

We also have audited Ring Energy’s internal control over financial reporting as of December 31, 2020, based on criteria established in 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, Ring Energy maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in 2013 Internal Control—Integrated Framework issued by COSO.

Opinions on the Financial Statements

We have audited the accompanying statements of operations , stockholders’ equity, and cash flows of Ring Energy, Inc.

(Ring Energy) for the year ended December 31, 2020 and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the results of its operations and its cash flows for the year ended December 31, 2020 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

Ring Energy’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting appearing under Item 9A.

Our responsibility is to express an opinion on the entity’s financial statements and an opinion on the entity’s internal control over financial reporting based on our audits.

These financial statements are the responsibility of the entity’s management.

Our responsibility is to express an opinion on these financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to Ring Energy in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audit included performing procedures to assess the risk of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audits also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control Over Financial Reporting

An entity’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

An entity’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the entity;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the entity are being made only in accordance with authorizations of management and directors of the entity;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the entity’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee that (1) relate to accounts or disclosures that are material to the financial statements and (2) involve our especially challenging, subjective, or complex judgement.

The critical audit matters communicated below are matters arising from the audit of the financial statements that were communicated or required to be communicated to the audit committee that (1) relate to accounts or disclosures that are material to the financial statements and (2) involve our especially challenging, subjective, or complex judgement.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

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Specifically, our audit procedures involved testing management’s assumptions as follows:

o Tested the working and net revenue interest used in the reserve report

o Tested the model used to determine the future capital expenditures by comparing estimated future capital expenditures used in the reserve report to amounts expended for recently drilled and completed wells, where applicable;

o Compared the estimated pricing differentials used in the reserve report to realized prices related to revenue transactions recorded in the current year;

o Tested the model used to estimate the operating costs at year end and compared to historical operating costs;

o Evaluated the Company’s evidence supporting the proved undeveloped properties reflected in the reserve report by examining historical conversion rates and support for the Company’s ability to fund and intent to develop the proved undeveloped properties.

◦ Tested the working and net revenue interest used in the reserve report

◦ Tested the model used to determine the future capital expenditures by comparing estimated future capital expenditures used in the reserve report to amounts expended for recently drilled and completed wells, where applicable;

◦ Compared the estimated pricing differentials used in the reserve report to realized prices related to revenue transactions recorded in the current year;

◦ Tested the model used to estimate the operating costs at year end and compared to historical operating costs;

◦ Evaluated the Company’s evidence supporting the proved undeveloped properties reflected in the reserve report by examining historical conversion rates and support for the Company’s ability to fund and intent to develop the proved undeveloped properties.

Valuation Allowance of Deferred Tax Assets

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• We tested the reasonableness of management’s corporate model used to estimate future taxable income by comparing the estimates to the following:

o Historical taxable income.

o Evidence obtained in other areas of the audit.

o Management’s history of carrying out its stated plans and its ability to carry out its plans.

◦ Historical taxable income.

◦ Evidence obtained in other areas of the audit.

◦ Management’s history of carrying out its stated plans and its ability to carry out its plans.

We have served as Ring Energy’s auditor since 2013.

Hansen, Barnett and Maxwell, P.C., who joined Eide Bailly LLP in 2013, had served as the Company’s auditor since 2012.

Denver, Colorado

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Joint interest billing receivable 983,802 2,433,811

Derivative receivable

Prepaid expenses and retainers

Derivative assets 4,669,162 —

Inventory 9,250,717 —

Prepaid expenses and other assets 2,101,538 938,029

Total Current Assets 63,166,464 29,806,963

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Accumulated depreciation, depletion and amortization ( 289,935,259 ) ( 235,997,307 )

( 235,997,307 )

( 200,111,658 )

Net Properties and Equipment 1,180,069,937 651,359,647

Operating lease asset 1,735,013 1,277,253

Derivative assets 6,129,410 —

Deferred financing costs 17,898,973 1,713,466

Total Assets $ 1,268,999,797 $ 684,157,329

LIABILITIES AND STOCKHOLDERS’ EQUITY

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Notes payable 499,880 586,410

Deferred cash payment 14,807,276 —

Total Current Liabilities 141,159,058 76,668,730

Noncurrent Liabilities

Non-current Liabilities

Deferred income taxes 8,499,016 90,292

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Total Liabilities 607,896,406 383,533,122

Commitments and contingencies

Stockholders' Equity

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175,530,212 shares and 100,192,562 shares issued and outstanding, respectively

175,530 100,193

Additional paid-in capital 775,241,114 553,472,292

Accumulated deficit ( 114,313,253 ) ( 252,948,278 )

( 252,948,278 )

( 256,271,170 )

Total Stockholders’ Equity 661,103,391 300,624,207

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For the years ended December 31, 2022 2021 2020

Oil and Natural Gas Revenues

Oil, Natural Gas, and Natural Gas Liquids Revenues $ 347,249,537 $ 196,305,966 $ 113,025,138

Costs and Operating Expenses

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Income (Loss) from Operations 191,744,133 95,756,848 ( 268,661,466 )

( 268,661,466 )

Other Income (Expense)

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Interest (expense) ( 23,167,729 ) ( 14,490,474 ) ( 17,617,614 )

( 14,490,474 )

( 17,617,614 )

( 13,865,556 )

Gain (loss) on derivative contracts ( 21,532,659 ) ( 77,853,141 ) 21,366,068

( 77,853,141 )

( 3,000,078 )

Deposit forfeiture income — — 5,500,000

Net Other Income (Expense) ( 44,700,384 ) ( 92,343,614 ) 9,248,462

( 92,343,614 )

( 16,852,123 )

Income (Loss) Before Provision for Income Taxes 147,043,749 3,413,234 ( 259,413,004 )

( 259,413,004 )

Benefit from (Provision for) Income Taxes ( 8,408,724 ) ( 90,342 ) 6,001,176

( 13,787,654 )

Net Income (Loss) $ 138,635,025 $ 3,322,892 $ ( 253,411,828 )

( 253,411,828 )

Basic Earnings (Loss) per share $ 1.14 $ 0.03 $ ( 3.48 )

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STATEMENTS OF STOCKHOLDERS’ EQUITY

Retained Earnings

Common Stock Additional

Capital Retained Earnings

Deficit) Total

Stockholders'

Balance, December 31, 2018

( 32,355,893 )

Common stock issued as partial consideration in acquisition

Restricted stock vested

Share-based compensation

Shares Amount

Balance, December 31, 2019 67,993,797 $ 67,994 $ 526,301,281 $ ( 2,859,342 ) $ 523,509,933

( 2,859,342 )

Return of common stock issued as

consideration in asset acquisition

Return of common stock issued as consideration in asset acquisition ( 16,702 ) ( 17 ) ( 103,368 ) — ( 103,385 )

Common stock and warrants issued for cash, net 13,075,800 13,076 19,366,756 — 19,379,832

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Share-based compensation — — 5,364,162 — 5,364,162

( 253,411,828 )

( 253,411,828 )

Net (loss) — — — ( 253,411,828 ) ( 253,411,828 )

Balance, December 31, 2020 85,568,287 $ 85,568 $ 550,951,415 $ ( 256,271,170 ) $ 294,765,813

( 256,271,170 )

Common stock and warrants issued for cash, net — $ — $ ( 65,000 ) $ — $ ( 65,000 )

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Share-based compensation — — 2,418,323 — 2,418,323

Net income (loss)

Net (loss) — — — 3,322,892 3,322,892

Balance, December 31, 2021 100,192,562 $ 100,193 $ 553,472,292 $ ( 252,948,278 ) $ 300,624,207

( 252,948,278 )

Exercise of common warrants issued in offering 10,253,907 10,254 8,192,872 — 8,203,126

Options exercised 100,000 100 ( 100 ) — —

Shares elected to be withheld for options exercised ( 47,506 ) ( 48 ) 48 — —

Restricted stock vested 1,310,894 1,311 ( 1,311 ) — —

Shares to cover tax withholdings for restricted stock vested ( 168,523 ) ( 169 ) 169 — —

Payments to cover tax withholdings for restricted stock vested — — ( 521,199 ) — ( 521,199 )

Common stock issuance for Stronghold 21,339,986 21,340 69,120,215 — 69,141,555

Conversion of mezzanine preferred shares for Stronghold 42,548,892 42,549 137,815,897 — 137,858,446

Share-based compensation — — 7,162,231 — 7,162,231

Net income — — — 138,635,025 138,635,025

Balance, December 31, 2022 175,530,212 $ 175,530 $ 775,241,114 $ ( 114,313,253 ) $ 661,103,391

The accompanying notes are an integral part of these financial statements.

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Net income (loss) $ 138,635,025 $ 3,322,892 $ ( 253,411,828 )

( 253,411,828 )

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

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Share-based compensation 7,162,231 2,418,323 5,364,162

Bad debt expense 242,247 — —

Shares issued for services — — 23,800

Deferred income tax expense (benefit) 8,720,992 265,479 ( 3,975,170 )

( 3,975,170 )

Excess tax expense (benefit) related to share-based compensation ( 312,268 ) ( 175,187 ) ( 2,026,006 )

( 2,026,006 )

Adjustment to deferred tax asset for change in effective tax rate

(Gain) loss on derivative contracts 21,532,659 77,853,141 ( 21,366,068 )

( 21,366,068 )

Cash received (paid) for derivative settlements, net ( 62,525,954 ) ( 52,768,154 ) 22,522,591

( 52,768,154 )

Changes in assets and liabilities:

Accounts receivable ( 17,214,150 ) ( 9,483,639 ) 7,896,517

( 9,483,639 )

( 10,035,648 )

Prepaid expenses and retainers

( 1,878,667 )

Inventory ( 5,597,845 ) — —

Prepaid expenses and other assets ( 1,163,509 ) ( 541,920 ) 3,586,146

Accounts payable 50,808,461 15,449,215 ( 8,380,594 )

( 8,380,594 )

Settlement of asset retirement obligation ( 2,741,380 ) ( 2,186,832 ) ( 683,623 )

( 2,186,832 )

( 1,295,966 )

Net Cash Provided by Operating Activities 196,976,729 72,731,212 72,159,255

Cash Flows From Investing Activities

Payments for the Wishbone Acquisition

( 276,061,594 )

Payments for the Stronghold Acquisition ( 177,823,787 ) — —

Payments to purchase oil and natural gas properties ( 1,563,703 ) ( 1,368,437 ) ( 1,317,313 )

( 1,368,437 )

( 1,317,313 )

( 3,400,411 )

Proceeds from divestiture of oil and natural gas properties

Payments to develop oil and natural gas properties ( 129,332,155 ) ( 51,302,131 ) ( 42,457,745 )

( 51,302,131 )

( 42,457,745 )

( 152,125,320 )

Payments to acquire or improve fixed assets subject to depreciation ( 319,945 ) ( 568,832 ) ( 55,339 )

Sale of fixed assets subject to depreciation 134,600 — —

Proceeds from divestiture of oil and natural gas properties 23,700 2,000,000 —

Net Cash (Used in) Investing Activities ( 308,881,290 ) ( 51,239,400 ) ( 43,830,397 )

( 51,239,400 )

( 43,830,397 )

( 423,040,251 )

Cash Flows From Financing Activities

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Payments on revolving line of credit ( 511,000,000 ) ( 83,150,000 ) ( 80,000,000 )

( 83,150,000 )

( 80,000,000 )

Proceeds from issuance of common stock and warrants 8,203,126 367,509 19,383,131

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Payment of deferred financing costs ( 18,891,528 ) ( 104,818 ) ( 355,049 )

( 3,781,657 )

Reduction of financing lease liabilities ( 495,098 ) ( 325,901 ) ( 282,928 )

Net Cash (Used in) Financing Activities

( 22,662,130 )

( 34,754,846 )

Net Cash Provided by (Used in) Financing Activities 113,208,771 ( 22,662,130 ) ( 34,754,846 )

Net Increase (Decrease) in Cash 1,304,210 ( 1,170,318 ) ( 6,425,988 )

( 1,170,318 )

( 6,425,988 )

Cash at Beginning of Period 2,408,316 3,578,634 10,004,622

Cash at End of Period $ 3,712,526 $ 2,408,316 $ 3,578,634

Supplemental Cash Flow Information

Cash paid for interest

The accompanying notes are an integral part of these financial statements.

RING ENERGY, INC.

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For the Years Ended December 31, 2022 2021 2020

Supplemental Cash Flow Information

Cash paid for interest $ 19,818,623 $ 14,110,421 $ 16,911,344

Noncash Investing and Financing Activities

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Asset retirement obligation sold — ( 2,934,126 ) —

( 2,934,126 )

Operating lease assets obtained in exchange for new operating lease liability 754,894 839,536 823,727

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Financing lease assets obtained in exchange for new financing lease liability 952,101 — —

Prepaid asset settled in divestiture of oil and natural gas properties

Oil and gas assets and properties acquired through stock issuance

Stock issued in property acquisition returned in final settlement — — 103,385

Capitalized expenditures attributable to drilling projects financed through current liabilities 9,179,003 309,365 1,415,073

Supplemental Schedule of Investing Activities Wishbone Acquisition

Assumption of joint interest billing receivable

Assumption of prepaid assets

Assumption of accounts and revenue payables

( 1,234,861 )

Asset retirement obligation incurred through acquisition

( 3,705,941 )

Common stock issued as partial consideration in acquisition

( 28,331,327 )

Oil and gas properties subject to amortization

Supplemental Schedule for Stronghold Acquisition

Investing Activities - Cash Paid

Cash paid by bank to Stronghold on closing $ 121,392,455 $ — $ —

Deposit in escrow 46,500,000 — —

Direct transaction costs 9,162,143 — —

Cash paid for realized August oil derivative losses 1,777,925 — —

Cash paid for inventory and fixed assets acquired 4,527,103 — —

Cash received for post-close adjustments, net ( 5,535,839 ) — —

Payments for the Stronghold Acquisition $ 177,823,787 $ — $ —

Investing Activities - Noncash

Assumption of suspense liability 1,651,596 — —

Assumption of derivative liabilities 24,784,406 — —

Assumption of asset retirement obligation 14,538,550 — —

Deferred cash payment at fair value 14,807,276 — —

Financing Activities - Noncash

Common stock issued for acquisition 69,141,555 — —

Convertible preferred stock issued for acquisition $ 137,858,446 $ — $ —

The accompanying notes are an integral part of these financial statements.

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NOTE 1 – ORGANIZATION, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Nature of Operations – Ring Energy, Inc., a Nevada corporation (“Ring,” “Ring Energy,” the “Company,” “we,” “us,” “our,” or similar terms), is a growth oriented independent exploration and production company based in The Woodlands, Texas and is engaged in oil and natural gas development, production, acquisition, and exploration activities currently focused in Texas and New Mexico.

Organization and Nature of Operations – Ring Energy, Inc., a Nevada corporation (“Ring,” “Ring Energy,” the “Company,” “we,” “us,” “our,” or similar terms), is a growth oriented independent exploration and production company based in The Woodlands, Texas and is engaged in oil and natural gas development, production, acquisition, and exploration activities currently focused in Texas.

Our primary drilling operations target the oil and liquids rich producing formations in the Northwest Shelf, the Central Basin Platform, and the Delaware Basin, all of which are part of the Permian Basin in Texas and New Mexico.

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The Company also has a joint interest billing receivable.

Joint interest billing receivables are collateralized by the pro

rata revenue attributable to the joint interest holders and further by the interest itself.

Accordingly, no material credit losses have been provided as of December 31, 2021 and 2020.

Joint interest billing receivables

are collateralized by the pro rata revenue attributable to the joint interest holders and further by the interest itself.

Accounts receivable from joint interest owners or purchasers outstanding longer than the contractual payment terms are considered past due.

For the years ended December 31, 2022, 2021, and 2020, the Company provided for bad debt expense of $ 242,247 , $ 0 , and $ 0 respectively, associated with its joint interest billing receivable.

As of December 31, 2022 and 2021, the Company's allowance for credit losses was $ 242,247 and $ 0 , respectively, associated with its joint interest billing receivable.

The Company accounts for natural gas production imbalances using the sales method, which recognizes revenue on all natural gas sold even though the natural gas volumes sold may be more or less than the Company's ownership entitles it to sell.

Liabilities are recorded for imbalances greater than the Company’s proportionate share of remaining estimated natural gas reserves.

The Company recorded no imbalances as of December 31, 2022 or 2021.

Cash and Cash Equivalents – The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

Inventory - During 2022, the Company purchased materials and supplies inventories in bulk to lock in prices with certain vendors.

Additionally, as a part of the Stronghold Acquisition (discussed further in "Note 5 - ACQUISITIONS & DIVESTITURES"), the Company acquired an inventory yard with significant amounts of inventory.

Inventory is added to the books upon the purchase of supplies (inclusive of freight and sales tax costs) to use on well sites, and inventory is reduced by material transfers for inventory usage based on the initial invoiced value.

We report the balance of our inventory at the lower of cost or market value.

Inventory balances are excluded from the Company's calculation of depletion.

Oil and Natural Gas Properties – The Company uses the full cost method of accounting for oil and natural gas properties.

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Capitalized costs are categorized either as being subject to amortization or not subject to amortization.

All of the Company’s capitalized costs, excluding inventory, are subject to amortization.

The Company records a liability in the period in which an asset retirement obligation (“ARO”) is incurred, in an amount equal to the discounted estimated fair value of the obligation that is capitalized.

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The Company’s ARO relates to future plugging and abandonment expenses of its oil and natural gas properties and related facilities disposal.

Dispositions of oil and natural gas properties are accounted for as adjustments to capitalized costs.

All capitalized costs of oil and natural gas properties, including the estimated future costs to develop proved reserves and estimated future costs to plug and abandon wells and costs of site restoration, less the estimated salvage value of equipment associated with the oil and natural gas properties, are amortized on the unit-of-production method using estimates of proved reserves as determined by independent petroleum engineers.

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For the Years Ended December 31,

2022 2021 2020

Depletion $ 55,029,956 $ 36,735,070 $ 42,634,294

Depletion rate, per barrel-of-oil-equivalent (Boe) $ 12.19 $ 11.82 $ 13.25

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Depreciation of buildings, equipment , software and leasehold improvements is calculated using the straight-line method based upon the following estimated useful lives:

Leasehold improvements

Office equipment and software

Leasehold improvements 3 ‑ 5 years

Office equipment and software 3 ‑ 7 years

Equipment 5 ‑ 10 years

Automobiles 4 years

Depreciation expense was $ 205,600 , $ 432,897 , and $ 376,366 for the years ended December 31, 2022, 2021, and 2020, respectively.

Notes Payable – During 2021, the Company obtained external insurance for directors and officers, control of well, and cybersecurity through signing three promissory notes.

As of December 31, 2021, our notes payable balance included within current liabilities on our balance sheet is $ 586,410 .

Notes Payable – During 2022, the Company renewed its directors and officers, control of well, and cybersecurity policies, and funded the premiums with three promissory notes with a total face value after down payments of $ 1,323,354 .

As of December 31, 2022, the notes payable balance included within current liabilities on the balance sheet is $ 499,880 .

During 2021, the Company obtained external insurance for the same policies and funded the premiums by signing three promissory notes.

The annual percentage rate (APR) for these notes is 4.08 %.

For the years ended December 31, 2022 and 2021, interest paid related to notes payable was $ 25,579 and $ 17,824 , respectively, included within "Interest (expense)" in the Statements of Operations.

Revenue Recognition – In January 2018, the Company adopted Accounting Standards Update (“ASU”) 2014-09 Revenues from Contracts with Customers (Topic 606) (“ASU 2014-09”).

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Revenue is recognized net of royalties due to third parties in an amount that reflects the consideration the Company expects to receive in exchange for those products.

See Note 2 for additional information.

See "Note 2 - REVENUE RECOGNITION" for additional information.

Income Taxes – Provisions for income taxes are based on taxes payable or refundable for the current year and deferred taxes.

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As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes.

In January 2017, the Company adopted ASU 2016-09, Compensation – Stock Compensation (Topic 718.) The Company used the modified retrospective method to account for unrecognized excess tax benefits from prior periods and uses the prospective method to account for current period and future excess tax benefit.

Accounting for Uncertainty in Income Taxes – In accordance with generally accepted accounting principles, the Company has analyzed its filing positions in all jurisdictions where it is required to file income tax returns for the open tax years in such jurisdictions.

Accounting for Uncertainty in Income Taxes – In accordance with GAAP, the Company has analyzed its filing positions in all jurisdictions where it is required to file income tax returns for the open tax years in such jurisdictions.

The Company has identified its federal income tax return and its franchise tax return in Texas in which it operates as “major” tax jurisdictions.

The Company’s federal income tax returns for the years ended December 31, 2017 through 2021 remain subject to examination.

The Company’s federal income tax returns for the years ended December 31, 2007 through 2021 remain subject to examination to the extent of the net operating loss (NOL) carryforwards.

The Company’s franchise tax returns in Texas remain subject to examination for 2016 through 2021.

The Company currently believes that all significant filing positions are highly certain and that all of its significant income tax filing positions and deductions would be sustained upon audit.

Therefore, the Company has no significant reserves for uncertain tax positions and no adjustments to such reserves were required by generally accepted accounting principles.

The Company’s federal income tax returns for the years ended December 31, 2018 and after remain subject to examination.

The Company’s federal income tax returns for the years ended December 31, 2007 and after remain subject to examination to the extent of the net operating loss (NOL) carryforwards.

The Company’s franchise tax returns in Texas remain subject to examination for 2017 and after.

The Company currently believes that all significant filing positions are

highly certain and that all of its significant income tax filing positions and deductions would be sustained upon audit.

Therefore, the Company has no significant reserves for uncertain tax positions and no adjustments to such reserves were required by GAAP.

No interest or penalties have been levied against the Company and none are anticipated;

therefore, no interest or penalty has been included in our provision for income taxes in the statements of operations.

Three-Stream Reporting - Beginning July 1, 2022, the Company began reporting volumes and revenues on a three-stream basis, separately reporting crude oil, natural gas, and natural gas liquids ("NGLs") sales.

For periods prior to July 1, 2022, sales and reserve volumes, prices, and revenues for NGLs were presented with natural gas.

This represents a change in our accounting and reporting presentation necessitated by a change in the underlying facts and circumstances surrounding the Stronghold Acquisition, as Stronghold has historically reported its revenues on a three-stream basis.

As clarified in the interpretive guidance of ASC 250, such changes should not be applied on a retrospective basis.

Accordingly, we began reporting on a three-stream basis prospectively, beginning July 1, 2022.

Leases - The Company accounts for its leases in accordance with ASU 2016-02, Leases (Topic 842), effective January 1, 2019.

The Company made accounting policy elections to not capitalize leases with a lease term of twelve months or less (i.e., short term leases) and to not separate lease and non-lease components for all asset classes.

The Company also elected to adopt the package of practical expedients within ASU 2016-02 that allows an entity to not reassess prior to the effective date (i) whether any expired or existing contracts are or contain leases, (ii) the lease classification for any expired or existing leases, or (iii) initial direct costs for any existing leases and the practical expedient regarding land easements that exist prior to the adoption of ASU 2016-02.

The Company did not elect the practical expedient of hindsight when determining the lease term of existing contracts at the effective date.

Earnings (Loss) Per Share – Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding during the year.

Diluted earnings (loss) per share are calculated to give effect to potentially issuable dilutive common shares.

Major Customers – During the year ended December 31, 2021, sales to three customers represented 76 %, 7 % and 6 %, respectively, of total oil and natural gas sales.

Major Customers – During the year ended December 31, 2022, sales to three customers represented 68 %, 13 % and 5 %, respectively, of total oil, natural gas, and natural gas liquids sales.

As of December 31, 2022, sales outstanding from these three customers represented 69 %, 7 % and 10 %, respectively, of accounts receivable.

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As of December 31, 2020, sales outstanding from these three customers represented 80 %, 0 % and 5 %, respectively, of accounts receivable.

Share-Based Employee Compensation – The Company has outstanding stock option grants and restricted stock awards to directors, officers and employees, which are described more fully in Note 13.

Share-Based Employee Compensation – The Company has outstanding stock option grants and restricted stock awards to directors, officers and employees, which are described more fully in "Note 13 - EMPLOYEE STOCK OPTIONS, RESTRICTED STOCK AWARD PLAN AND 401(K)".

The Company recognizes the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award and recognizes the related compensation expense over the period during which an employee is required to provide service in exchange for the award, which is generally the vesting period.

Share-Based Compensation to Non-Employees – The Company accounts for share-based compensation issued to non-employees as either the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably

Share-Based Compensation to Non-Employees – The Company accounts for share-based compensation issued to non-employees as either the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable.

The measurement date for these issuances is the earlier of (i) the date at which a commitment for performance by the recipient to earn the equity instruments is reached or (ii) the date at which the recipient’s performance is complete.

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Changes in fair value are recognized currently in earnings unless specific hedge accounting criteria are met.

Refer to Note 8 for further details.

Refer to "Note 8 - DERIVATIVE FINANCIAL INSTRUMENTS" for further details.

Recently Adopted Accounting Pronouncements – In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820):

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The adoption of this guidance did not have a material impact on the Company’s financial statements.

Effective January 1, 2019, the Company adopted ASU 2016-02, Leases (Topic 842).

The purpose of this guidance is to increase transparency and comparability among organizations by recognizing certain lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements.

See Note 3 for a discussion of the impact on the Company’s financial statements.

In June 2016, the FASB issued ASU No.

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The Company adopted ASU 2016-13 on January 1, 2020.

The adoption of ASU 2016-13 did not have a material impact to the Company’s consolidated financial statements or disclosures.

The adoption of ASU 2016-13 did not have a material impact to the Company’s financial statements or disclosures.

In December 2019, the FASB released ASU No.

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The adoption of ASU 2019-12 did not have a material impact to the Company’s financial statements or disclosures.

In October 2020, the FASB issued ASU 2020-10, Codification Improvements , which clarifies or improves disclosure requirements for various topics to align with SEC regulations.

In October 2020, the FASB issued ASU 2020-10, Codification Improvements ("ASU 2020-10"), which clarifies or improves disclosure requirements for various topics to align with SEC regulations.

This update was effective for the Company beginning in the first quarter of 2021 and is being applied retrospectively.

The adoption and implementation of this ASU did not have a material impact on the Company’s financial statements.

In August 2020, the FASB issued ASU No.

2020-06, “Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40)” (“ASU 2020-06”).

ASU 2020-06 was issued to reduce the complexity associated with accounting for certain financial instruments with characteristics of liabilities and equity.

The guidance may be applied using either a modified retrospective or a fully retrospective method.

ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, with early adoption permitted.

The Company adopted ASU 2020-06 effective January 1, 2022.

The adoption and implementation of this ASU did not have a material impact on the Company’s financial statements.

Recent Accounting Pronouncements – In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848):

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ASU 2020-04 was issued to provide optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting.

The Company is currently assessing the impact of adopting this new guidance.

In August 2020, the FASB issued ASU No.

2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”).

ASU 2020-06 was issued to reduce the complexity associated with accounting for certain financial instruments with characteristics of liabilities and equity.

guidance is to be applied using either a modified retrospective or a fully retrospective method.

ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, with early adoption permitted.

The Company will adopt ASU 2020-06 effective January 1, 2022.

The adoption of ASU 2020-06 is not expected to have a material impact on the Company’s consolidated financial statements or disclosures.

In October 2021, the FASB issued ASU 2021-08, "Business Combinations (Topic 805) – Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.” This update requires the acquirer in a business combination to record contract asset and liabilities following Topic 606 – “Revenue from Contracts with Customers” at acquisition as if it had originated the contract, rather than at fair value.

In December 2022, the FASB issued ASU 2022-06, " Reference Rate Reform (Topic 848):

Deferral of the Sunset Date of Topic 848" ("ASU 2022-06"), wh ich defers the sunset date of Topic 848 from December 31, 2022 to December 31, 2024.

Beginning August 31, 2022, under the Company's Second Amended and Restated Credit Agreement, the Company's interest rates were transitioned from the LIBOR to the SOFR (Standard Overnight Financing Rate) reference rate.

At this time, the Company does not plan to enter into additional contracts using LIBOR as a reference rate.

In October 2021, the FASB issued ASU 2021-08, " Business Combinations (Topic 805) – Accounting for Contract Assets and Contract Liabilities from Contracts with Customers” ("ASU 2021-08").

This update requires the acquirer in a business combination to record contract asset and liabilities following Topic 606 – “Revenue from Contracts with Customers” at

acquisition as if it had originated the contract, rather than at fair value.

This update is effective for public business entities beginning after December 15, 2022, with early adoption permitted.

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NOTE 2 – REVENUE RECOGNITION

The Company predominantly derives its revenue from the sale of produced crude oil and natural gas.

The contractual performance obligation is satisfied when the product is delivered to the customer.

Revenue is recorded in the month the product is delivered to the purchaser.

The Company receives payment from one to three months after delivery.

The Company has utilized the practical expedient in Accounting Standards Codification ("ASC") 606-10-50-14, which states an entity is not required to disclose the transaction price allocated to remaining performance obligations if the variable consideration is allocated entirely to a wholly unsatisfied performance obligation.

Under the Company’s sales contracts, each unit of production delivered to a customer represents a separate performance obligation, therefore, future volumes to be delivered are wholly unsatisfied and disclosure of transaction price allocated to remaining performance obligation is not required.

The transaction price includes variable consideration as product pricing is based on published market prices and adjusted for contract specified differentials such as quality, energy content and transportation.

The guidance does not require that the transaction price be fixed or stated in the contract.

Estimating the variable consideration does not require significant judgment and the Company engages third party sources to validate the estimates.

Revenue is recognized net of royalties due to third parties in an amount that reflects the consideration the Company expects to receive in exchange for those products.

Under the Company’s oil sales contracts, the Company sells oil production at the point of delivery and collects an agreed upon index price, net of pricing differentials.

The Company recognizes revenue when control transfers to the purchaser at the point of delivery at the net price received.

Natural gas sales

The Company recognizes revenue at the net price received when control transfers to the purchaser at the point of delivery and it is probable the Company will collect the consideration it is entitled to receive.

Natural gas and NGL sales

Under the Company’s natural gas sales processing contracts for our Central Basin Platform properties, Delaware Basin properties and part of our Northwest Shelf assets, the Company delivers unprocessed natural gas to a midstream processing entity at the wellhead.

The midstream processing entity obtains control of the natural gas at the wellhead.

The midstream processing entity gathers and processes the natural gas and remits proceeds to the Company for the resulting sale of natural gas.

Under these processing agreements, the Company recognizes revenue when control transfers to the purchaser at the point of delivery.

The midstream processing entity obtains control of the natural gas and NGLs (natural gas liquids) at the wellhead.

The midstream processing entity gathers and processes the natural gas and NGLs and remits proceeds to the Company for the resulting sale of natural gas and NGLs.

Under these processing agreements, the Company recognizes revenue when control transfers to the purchaser at the point of delivery and it is probable the Company will collect the consideration it is entitled to receive.

As such, the Company accounts for any fees and deductions as a reduction of the transaction price.

Under the Company natural gas sales processing contracts for the bulk of our Northwest Shelf assets, the Company delivers unprocessed natural gas to a midstream processing entity at the wellhead.

However, the Company maintains ownership of the gas through processing and receives proceeds from the marketing of the resulting products.

Under this processing agreement, the Company recognizes the fees associated with the processing as an expense rather than netting these costs against revenue.

Until April 30, 2022, under the Company's natural gas sales processing contracts for the bulk of our Northwest Shelf assets, the Company delivered unprocessed natural gas to a midstream processing entity at the wellhead.

However, the Company maintained ownership of the gas through processing and received proceeds from the marketing of the resulting products.

Under this processing agreement, the Company recognized the fees associated with the processing as an expense rather than netting these costs against Oil and Natural Gas Revenues in the Statements of Operations.

Beginning May 1, 2022, these contracts were combined into one contract, and it was modified so that the Company no longer maintained ownership of the gas through processing.

Accordingly, the Company from that point on accounts for any such fees and deductions as a reduction of the transaction price.

Disaggregation of Revenue.

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For the years ended December 31,

Operating revenues

Total operating revenues

2022 2021 2020

Oil, Natural Gas, and Natural Gas Liquids Revenues

Oil $ 321,062,672 $ 181,533,093 $ 109,113,557

Natural gas 18,693,631 14,772,873 3,911,581

Natural gas liquids 7,493,234 — —

Total oil, natural gas, and natural gas liquids revenues $ 347,249,537 $ 196,305,966 $ 113,025,138

NOTE 3 – LEASES

Effective January 1, 2019, the Company adopted ASU 2016-02, Leases (Topic 842).

This guidance attempts to increase transparency and comparability among organizations by recognizing certain lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements.

The main difference between previous GAAP methodology and the method in this new guidance is the recognition on the balance sheet of certain lease assets and lease liabilities by lessees for those leases that were classified as operating leases under previous GAAP.

The Company made accounting policy elections to not capitalize leases with a lease term of twelve months or less and to not separate lease and non-lease components for all asset classes.

The Company has also elected to adopt the package of practical expedients within ASU 2016-02 that allows an entity to not reassess prior to the effective date (i) whether any expired or existing contracts are or contain leases, (ii) the lease classification for any expired or existing leases, or (iii) initial direct costs for any existing leases and the practical expedient regarding land easements that exist prior to the adoption of ASU 2016-02.

The Company did not elect the practical expedient of hindsight when determining the lease term of existing contracts at the effective date.

The Company has operating leases for our offices in Midland, Texas and The Woodlands, Texas.

The Midland office is under a five-year lease which began January 1, 2021.

Also beginning January 15, 2021, the Company entered into a five-and-a-half-year sub-lease for office space in The Woodlands, Texas.

The Midland office lease was amended effective October 1, 2022, with the revised five-year lease ending September 30, 2027.

Beginning January 15, 2021, the Company entered into a five-and-a-half-year sub-lease for office space in The Woodlands, Texas.

The future payments associated with these operating leases are reflected below.

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The Tulsa lease was terminated as of March 31, 2021, with payments made until the end of February 2021.

Refer to Note 14 for further details.

The Company also has month to month leases for office equipment and compressors used in our operations on which the Company has elected to apply ASU 2016-02 (i.e not capitalize).

Refer to "Note 14 - RELATED PARTY TRANSACTIONS" for further details.

The Company has month to month leases for office equipment and compressors used in our operations on which the Company has elected to apply ASU 2016-02 (i.e.

not capitalize).

The office equipment and compressors are not subject to ASU 2016-02 based on the agreement and nature of use.

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The lease costs associated with these leases is reflected in the short-term lease costs within Lease operating expenses, shown below.

The Company also has financing leases for vehicles.

The Company has financing leases for vehicles.

These leases have a term of 36 months at the end of which the Company owns the vehicles.

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Future lease payments associated with these operating and financing leases as of December 31, 2022 are as follows:

2023 2024 2025 2026 2027

Operating lease payments (1)

$ 474,464 $ 482,328 $ 494,692 $ 398,096 $ 216,000

Financing lease payments (2)

793,723 727,451 379,421 — —

(1) The weighted average discount rate as of December 31, 2022 for operating leases was 4.50 %.

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The weighted average remaining term of financing leases was 2.41 years.

The following table represents a reconciliation between the undiscounted future cash flows in the table above and the operating and financing lease liabilities disclosed in the Balance Sheets:

As of December 31,

Operating lease liability, current portion 398,362 290,766

Operating lease liability, non-current portion 1,473,897 1,138,319

Operating lease liability, total 1,872,259 1,429,085

Total undiscounted future cash flows (sum of future operating lease payments) 2,065,580 1,577,786

Imputed interest 193,321 148,701

Undiscounted future cash flows less imputed interest 1,872,259 1,429,085

Financing lease liability, current portion 709,653 316,514

Financing lease liability, non-current portion 1,052,479 343,727

Financing lease liability, total 1,762,132 660,241

Total undiscounted future cash flows (sum of future financing lease payments) 1,900,595 692,091

Imputed interest 138,463 31,850

Undiscounted future cash flows less imputed interest 1,762,132 660,241

The following table provides supplemental information regarding cash flows from operations:

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Net Income (Loss) $ 138,635,025 $ 3,322,892 $ ( 253,411,828 )

( 253,411,828 )

Basic Weighted-Average Shares Outstanding 121,264,175 99,387,028 72,891,310

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Stock options 83,384 75,897 —

Restricted stock

Restricted stock units 2,040,181 1,613,810 —

Performance stock units 248,206 — —

Common warrants 18,118,722 20,116,440 —

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Stock options to purchase 70,500 , 113,659 , and 465,500 shares of common stock were excluded from the computation of diluted earnings per share during the years ended December 31, 2022, 2021 and 2020, respectively, as their effect would have been anti-dilutive.

Also excluded from the computation of diluted earnings per share were 114,880 (including 94,270 shares related to the performance stock units further described in Note 13), 2,144,617 , and 704,684 shares of unvested restricted stock during the year ended December 31, 2021, 2020 and 2019, respectively, as their effect would have been anti-dilutive.

Also excluded from the computation of diluted earnings per share were 13,512 , 20,610 , and 2,144,617 shares of unvested restricted stock units during the years ended December 31, 2022, 2021 and 2020, respectively, as their effect would have been anti-dilutive.

Unvested performance stock units of 814,255 , 94,270 , and —

were excluded from the computation of diluted earnings per share during the years ended December 31, 2022, 2021, and 2020, respectively, as their effect would have been anti-dilutive.

Common warrants to purchase 29,804,300 shares of common stock were excluded from the computation of diluted earnings per share during the year ended December 31, 2020, as their effect would have been anti-dilutive.

Pre-funded warrants to purchase 13,428,500 shares of common stock were included in the calculation of the Basic Weighted-Average Shares Outstanding for the year ended December 31, 2020 as they were exercisable for a nominal amount and so were treated as if they were exercised at issuance.

These shares were exercised in January 2021 and have also been included in the beginning shares outstanding for the calculation of Basic Weighted-Average Shares Outstanding for the year ended December 31, 2021 .

These shares were exercised in January 2021 and were included in the beginning shares outstanding for the calculation of Basic Weighted-Average Shares Outstanding for the year ended December 31, 2021.

NOTE 5 – ACQUISITIONS & DIVESTITURES

On April 9, 2019, the Company completed the acquisition of oil and gas properties from Wishbone Energy Partners, LLC, Wishbone Texas Operating Company LLC and WB WaterWorks LLC (collectively, “Wishbone”) on the Northwest Shelf in Gaines, Yoakum, Runnels and Coke Counties, Texas and Lea County, New Mexico (the “Acquisition”) pursuant to a purchase and sale agreement dated as of February 25, 2019 by and among the Company and Wishbone (the “Purchase and Sale Agreement”).

The acquired properties consist of 49,754 gross ( 38,230 net) acres and include a 77 % average working interest and a 58 % average net revenue interest.

Ring executed the Acquisition for the existing production and future development potential.

The Company incurred approximately $ 4.1 million in acquisition related costs, which were recognized in general and administrative expense.

Total consideration after purchase price adjustments included cash payments totaling approximately $ 276.1 million and the issuance of 4,576,951 shares of common stock, of which 2,538,071 shares were placed in escrow to satisfy potential indemnification claims.

The shares held in escrow were released in April of 2020.

The shares were valued at the price on the date of the signing of the Purchase and Sale Agreement, February 25, 2019, of $ 6.19 per share.

The Acquisition was recognized as a business combination whereby Ring recorded the assets acquired and the liabilities assumed at their fair values as of February 1, 2019, which is the date the Company obtained control of the properties and was the acquisition date for financial reporting purposes.

The Company determined that it had effective control of the properties effective February 1, 2019 based on Ring having primary decision making ability regarding the properties beginning at that time.

Revenues and related expenses for the Acquisition are included in our statements of operations beginning February 1, 2019.

The estimated fair value of the acquired properties approximated the consideration paid, which the Company concluded approximated the fair value that would be paid by a typical market participant.

The following table summarizes the fair values of the assets acquired and the liabilities assumed:

Assets acquired:

Proved oil and natural gas properties

Joint interest billing receivable

Prepaid assets

Liabilities assumed

Accounts and revenues payable

( 1,234,861 )

Asset retirement obligations

( 3,705,941 )

Total Identifiable Net Assets

The revenues and direct operating costs associated with the acquired properties included in our financial statements for the year ended December 31, 2019 are as follows:

Oil and natural gas production costs

Oil and natural gas production taxes

Total direct costs (1)

Earnings from the Acquired properties

(1) This includes only oil and natural gas production costs and oil and natural gas production taxes and does not give account to depreciation, depletion and amortization, accretion of asset retirement obligation, general and administrative expense, interest expense or any other cost that cannot be directly correlated to the Acquisition.

Andrews County Acquisition

The Company entered into a Purchase, Sale and Exchange Agreement dated February 1, 2021, effective January 1, 2021, with an unrelated party, covering the sale and exchange of certain oil and gas interests in Andrews County, Texas.

Upon the sale and transfer of wells and leases between the two parties, the Company received a cash consideration of $ 2,000,000 and reduced the Company’s asset retirement obligations by $ 2,934,126 for the properties sold and added $ 662,705 of asset retirement obligations for the wells acquired.

Stronghold Acquisition

On July 1, 2022, Ring, as buyer, and Stronghold Energy II Operating, LLC, a Delaware limited liability company (“Stronghold OpCo”) and Stronghold Energy II Royalties, LP, a Delaware limited partnership (“Stronghold RoyaltyCo”, together with Stronghold OpCo, collectively, “Stronghold”), as seller, entered into a purchase and sale agreement (the “Purchase Agreement”).

Pursuant to the Purchase Agreement, Ring acquired (the “Stronghold Acquisition”) interests in oil and gas leases and related property of Stronghold consisting of approximately 37,000 net acres located in the Central Basin Platform of the Texas Permian Basin.

On August 31, 2022, Ring completed the Stronghold Acquisition.

The fair value of consideration paid to Stronghold was approximately $ 394.0 million, of which $ 165.9 million, net of customary purchase price adjustments, was paid in cash at closing, $ 15.0 million will be payable in cash after the six-month anniversary of the closing date of the Stronghold Acquisition.

Shortly after closing, approximately $ 4.5 million was paid for inventory and vehicles and approximately $ 1.8 million was paid for August oil derivative settlements for certain novated hedges.

The cash portion of the consideration was funded primarily from borrowings under a new fully committed revolving credit facility (the “Credit Facility”) underwritten by Truist Securities, Citizens Bank, N.A., KeyBanc Capital Markets Inc., and Mizuho Bank, Ltd.

The borrowing base of the $ 1.0 billion Credit Facility was increased from $ 350.0 million to $ 600.0 million at the closing of the Stronghold Acquisition.

The remaining consideration consisted of 21,339,986 shares of Ring common stock and 153,176 shares of newly created Series A Convertible Preferred Stock, par value $ 0.001 (“Preferred Stock”) which was converted into 42,548,892 shares of common stock on October 27, 2022.

Please see "Note 12 - STOCKHOLDERS' EQUITY" for further discussion.

In addition, Ring assumed $ 24.8 million of derivative liabilities, $ 1.7 million of items in suspense and $ 14.5 million in asset retirement obligations.

Purchase Price Allocation

The Stronghold Acquisition has been accounted for as an asset acquisition in accordance with ASC Topic 805 - Business Combinations.

The fair value of the consideration paid by Ring and allocation of that amount to the underlying assets acquired, on a relative fair value basis, was recorded on Ring’s books as of the date of the closing of the Stronghold Acquisition.

Additionally, costs directly related to the Stronghold Acquisition were capitalized as a component of the purchase price.

Determining the fair value of the assets and liabilities acquired requires judgment and certain assumptions to be made, the most significant of these being related to the valuation of Stronghold’s oil and gas properties.

The inputs and assumptions related to the oil and gas properties are categorized as level 3 in the fair value hierarchy.

The following table represents the preliminary allocation of the total cost of the Stronghold Acquisition to the assets acquired and liabilities assumed as of the Stronghold Acquisition date:

Consideration:

Shares of Common Stock issued 21,339,986

Common Stock price as of August 31, 2022 $ 3.24

Common Stock Consideration $ 69,141,555

Shares of Preferred Stock issued 153,176

Aggregate Liquidation Preference $ 153,176,000

Conversion Price $ 3.60

As-Converted Shares of Common Stock 42,548,892

Common Stock Price as of August 31, 2022 $ 3.24

Preferred Stock Consideration $ 137,858,446

Cash consideration:

Closing amount paid to Stronghold 121,392,455

Escrow deposit paid 46,500,000

Cash paid for inventory and fixed assets 4,527,103

Cash paid for realized losses on August oil derivatives 1,777,925

Cash received for post-close adjustments, net ( 5,535,839 )

Total cash consideration 168,661,644

Fair value of deferred payment liability 14,807,276

Post-close settlement to be paid to Stronghold 3,511,170

Fair value of consideration paid to seller 393,980,091

Direct transaction costs 9,162,143

Total consideration $ 403,142,234

Fair value of assets acquired:

Oil and natural gas properties 439,589,683

Inventory and fixed assets 4,527,103

Amount attributable to assets acquired $ 444,116,786

Fair value of liabilities assumed:

Suspense liability 1,651,596

Derivative liabilities, marked to market 24,784,406

Asset retirement obligations 14,538,550

Amount attributable to liabilities assumed $ 40,974,552

Net assets acquired $ 403,142,234

Approximately $ 40.4 million of revenues and $ 13.6 million of direct operating expenses attributed to the Stronghold Acquisition are included in the Company’s Statements of Operations for the period from September 1, 2022 through December 31, 2022.

NOTE 6 – DEPOSIT FORFEITURE INCOME

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In October 2020, the agreement was terminated as the buyer was not able to consummate the transaction.

As such, the Company recognized the $ 5,500,000 as income in our Statements of Operations as no divestiture of assets had occurred.

Refer to Note 17 for further details.

As such, the Company recognized the $ 5,500,000 as income in its Statements of Operations as no divestiture of assets had occurred.

Refer to "Note 17 - LEGAL MATTERS" for further details.

NOTE 7 – OIL AND NATURAL GAS PRODUCING ACTIVITIES

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Accumulated depletion, depreciation and amortization ( 289,935,259 ) ( 235,997,307 )

( 235,997,307 )

( 200,111,658 )

Net Properties and Equipment $ 1,180,069,937 $ 651,359,647

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For the years Ended December 31, 2022 2021

Payments for the Stronghold Acquisition $ 177,823,787 $ —

Payments to purchase oil and natural gas properties 1,563,703 1,368,437

Proceeds from divestiture of oil and natural gas properties ( 23,700 ) ( 2,000,000 )

( 2,000,000 )

Payments to develop oil and natural gas properties 129,332,155 51,302,131

Payments to acquire or improve fixed assets subject to depreciation 319,945 568,832

Sale of fixed assets subject to depreciation $ ( 134,600 ) $ —

Total Net Costs Incurred $ 308,881,290 $ 51,239,400

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The Company is exposed to fluctuations in crude oil and natural gas prices on its production.

We can utilize 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.

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 either costless collars or swaps for this purpose.

Oil derivative contracts are based on WTI Crude Oil prices and natural gas contacts are based on Henry Hub.

The Company has historically used either costless collars, deferred premium puts, or swaps for this purpose.

Oil derivative contracts are based on WTI Crude Oil prices and natural gas contacts are based on Henry Hub or Waha 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 paid for the put option will be offset by the premium received from selling the call option.

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On swap contracts, there is no spread and payments will be made or received based on the difference between WTI and the swap contract price.

Throughout 2020 and 2021, the Company entered into additional derivative contracts in the form of oil swaps for 2022.

The following tables reflect the details of those contracts:

Oil derivative contracts

Date entered into

Period covered

Calendar year 2022

Calendar year 2022

Calendar year 2022

Calendar year 2022

Calendar year 2022

Calendar year 2022

Calendar year 2022

(1) The notional quantity per the swap contract entered into on May 11, 2021 is for 26,750 barrels of oil per month.

The 879 represents the daily amount on an annual basis.

We did not designate our derivative instruments as hedges for accounting purposes.

Derivative financial instruments are recorded at fair value and included as either assets or liabilities in the accompanying balance sheets.

Any gains or losses resulting from changes in fair value of outstanding derivative financial instruments and from the settlement of derivative financial instruments are recognized in earnings and included as a component of other income in the accompanying statements of operations.

The deferred premium put contract has the premium established upon entering the contract, and due upon settlement of the contract.

The use of derivative transactions involves the risk that the counterparties, which generally are financial institutions, will be unable to meet the financial terms of such transactions.

All derivative contracts have been with lenders under our credit facility.

Non-performance risk is incorporated in the discount rate by adding the quoted bank (counterparty) credit default swap (CDS) rates to the risk free rate.

Beginning September 1, the Company assumed the derivative liabilities (novated hedges) associated with its acquisition of the Stronghold assets (see "Note 5 - ACQUISITIONS & DIVESTITURES"), which are subject to master netting agreements.

Additional derivative contracts with the same counterparty are also subject to netting.

Still, in accordance with ASC 815-10-50-4B, the Company continues to classify the fair value of all its derivative positions on a gross basis in its corresponding Balance Sheets.

The Company’s derivative financial instruments are recorded at fair value and included as either assets or liabilities in the accompanying Balance Sheets.

The Company has not designated its derivative instruments as hedges for accounting purposes, and, as a result, any gains or losses resulting from changes in fair value of outstanding derivative financial instruments and from the settlement of derivative financial instruments are recognized in earnings and included as a component of "Other Income (Expense)" under the heading "Gain (loss) on derivative contracts" in the accompanying Statements of Operations.

The following presents the impact of the Company’s contracts on its balance sheets for the periods indicated.

As of December 31,

Commodity derivative instruments

Commodity derivative instruments, marked to market:

Derivative assets, current 16,193,327 —

Discounted deferred premiums ( 11,524,165 ) —

Derivatives assets, current, net of premiums $ 4,669,162 $ —

Derivative assets, noncurrent 7,606,258 —

Discounted deferred premiums ( 1,476,848 ) —

Derivative assets, noncurrent, net of premiums $ 6,129,410 $ —

Derivative liabilities, current $ 13,345,619 $ 29,241,558

Commodity derivative instruments

Derivative liabilities, non-current

Derivative liabilities, noncurrent $ 10,485,650 $ —

The components of “Gain (loss) on derivative contracts” are as follows for the respective periods:

For the years ended December 31,

Gain (loss) on oil derivative

2022 2021 2020

( 3,000,078 )

Oil derivatives:

Realized gain (loss) on oil derivatives $ ( 61,875,870 ) $ ( 53,511,332 ) $ 22,522,591

Unrealized gain (loss) on oil derivatives 40,546,123 ( 24,143,120 ) ( 2,164,779 )

Gain (loss) on oil derivatives $ ( 21,329,747 ) $ ( 77,654,452 ) $ 20,357,812

Natural gas derivatives:

Realized gain (loss) on natural gas derivatives ( 650,084 ) 743,178 —

Unrealized gain (loss) on natural gas derivatives 447,172 ( 941,867 ) 1,008,256

Gain (loss) on natural gas derivatives $ ( 202,912 ) $ ( 198,689 ) $ 1,008,256

Gain (loss) on derivative contracts $ ( 21,532,659 ) $ ( 77,853,141 ) $ 21,366,068

( 77,853,141 )

( 3,000,078 )

The components of “Cash (paid) received for derivative settlements, net” are as follows for the respective periods:

For the years ended December 31,

2022 2021 2020

Cash flows from operating activities

Cash (paid) received on oil derivatives $ ( 61,875,870 ) $ ( 53,511,332 ) $ 22,522,591

( 53,511,332 )

Cash (paid) received on natural gas derivatives ( 650,084 ) 743,178 —

Cash (paid) received from derivative settlements $ ( 62,525,954 ) $ ( 52,768,154 ) $ 22,522,591

( 52,768,154 )

The use of derivative transactions involves the risk that the counterparties, which generally are financial institutions, will be unable to meet the financial terms of such transactions.

All derivative contracts have been with lenders under our credit facility.

The following tables reflect the details of current derivative contracts as of December 31, 2022 (Quantities are in barrels (Bbl) for the oil derivative contracts and in million British thermal units (MMBtu) for the natural gas derivative contracts.):

Oil Hedges (WTI)

Hedged volume (Bbl) 389,250 894,000

Weighted average swap price $ 77.55 $ 66.94

Deferred premium puts:

Hedged volume (Bbl) 773,500 91,000

Weighted average strike price $ 90.64 $ 83.75

Weighted average deferred premium price $ 15.25 $ 17.32

Two-way collars:

Hedged volume (Bbl) 487,622 475,350

Weighted average put price $ 52.16 $ 67.88

Weighted average call price $ 62.94 $ 83.32

Three-way collars:

Hedged volume (Bbl) 66,061 —

Weighted average first put price $ 45.00 $ —

Weighted average second put price $ 55.00 $ —

Weighted average call price $ 80.05 $ —

Gas Hedges (Henry Hub)

Hedged volume (MMBtu) 159,890 552,000

Weighted average swap price $ 2.40 $ 4.61

Two-way collars:

Hedged volume (MMBtu) 2,258,317 1,712,250

Weighted average put price $ 3.18 $ 4.00

Call hedged volume (MMBtu) 2,140,317 1,712,250

Weighted average call price $ 4.89 $ 6.29

Gas Hedges (basis differential)

Waha basis swaps:

Hedged volume (MMBtu) 1,339,685 —

Weighted average swap price X ( (2)

(1) The two-way collars for the first quarter of 2023 include 2x1 collars where the put volumes of 236,000 are two times the call volumes of 118,000 .

(2) The WAHA basis swaps in place for the calendar year of 2023 consist of two derivative contracts, each with a fixed price of the Henry Hub natural gas price less a fixed amount (weighted average of $ 0.55 per MMBtu).

NOTE 9 – FAIR VALUE MEASUREMENTS

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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.

As a result of the Acquisition, the Company evaluated the fair value of the assets acquired and the liabilities assumed.

The Company recorded the oil and gas assets acquired in the Acquisition at the price paid.

Prior to doing so, the Company determined that the price paid approximated the fair value of the net assets acquired.

In doing so, the Company compared the price paid per BOE of existing production to comparable companies’ enterprise value per BOE of existing production.

Additionally, the Company did an evaluation of the reserves acquired, based on varying percentages of the present value discounted at 10 percent (“PV-10”) of the different categories (PDP, PDNP and PUD) of the reserves.

Based on these evaluations, we determined that the price paid was a reasonable approximation of the fair value of the oil and gas assets acquired.

Given the significance of the unobservable nature of a number of the inputs, these are considered Level 3 on the fair value hierarchy.

The Company recorded the prepaid expenses, joint interest billing receivables and revenues payable at the carrying value assumed from Wishbone.

The carrying amounts of receivables and accounts payable and other current assets and liabilities approximate fair value because of the short-term maturities and/or liquid nature of these assets and liabilities.

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.

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 8).

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 8 - DERIVATIVE FINANCIAL INSTRUMENTS").

Fair Value Measurement Classification

2 unchanged sentences

for Identical Assets

Significant Other

or (Liabilities)

(Level 1) Significant Other

Observable Inputs

(Level 2) Significant

(Level 3) Total

As of December 31, 2021

Commodity Derivatives - Liabilities $ — $ ( 29,241,588 ) $ — $ ( 29,241,588 )

( 4,156,601 )

( 4,156,601 )

( 4,156,601 )

( 4,156,601 )

Total $ — $ ( 29,241,588 ) $ — $ ( 29,241,588 )

As of December 31, 2022

Commodity Derivatives - Assets $ — $ 10,798,572 $ — $ 10,798,572

Commodity Derivatives - Liabilities $ — $ ( 23,831,269 ) $ — $ ( 23,831,269 )

( 29,241,588 )

( 29,241,588 )

( 29,241,588 )

( 29,241,588 )

Total $ — $ ( 13,032,697 ) $ — $ ( 13,032,697 )

The carrying amounts reported for the revolving line of credit approximates fair value because the underlying instruments are at interest rates which approximate current market rates.

1 unchanged sentence

NOTE 10 – REVOLVING LINE OF CREDIT

On July 1, 2014, the Company entered into a Credit Agreement with SunTrust Bank, as lender, issuing bank and administrative agent for several banks and other financial institutions and lenders (the “Administrative Agent”), which was amended on June 14, 2018, May 18, 2016, July 24, 2015, and June 26, 2015.

In April 2019, the Company amended and restated its Credit Agreement with the Administrative Agent (as amended and restated, the “Credit Facility”).

The amendment and restatement of the Credit Facility, among other things, increased the maximum borrowing amount to $ 1 billion, extended the maturity date through April 2024 and made other modifications to the terms of the Credit Facility.

This Credit Facility was amended on December 23, 2020 and June 17, 2020.

The latest amendment adjusted the borrowing base to $ 350 million and made other modifications to the terms of the Credit Facility.

The Credit Facility is secured by a first lien on substantially all of the Company’s assets.

On July 1, 2014, the Company entered into a Credit Agreement with SunTrust Bank (now Truist), as lender, issuing bank and administrative agent for several banks and other financial institutions and lenders (the “Administrative Agent”), (which was amended several times) that provided for a maximum borrowing base of $ 1 billion with security consisting of substantially all of the assets of the Company.

In April 2019, the Company amended and restated the Credit Agreement with the Administrative Agent (as amended and restated, the “Credit Facility”).

On August 31, 2022, the Company modified its Credit Facility through a Second Amended and Restated Credit Agreement, extending the maturity date of the facility to August 2026.

In conjunction with the Stronghold Acquisition, with the newly acquired assets put up for collateral, the Company established a borrowing base of $ 600 million.

The borrowing base is subject to periodic redeterminations, mandatory reductions and further adjustments from time to time.

1 unchanged sentence

The borrowing base is subject to reduction in certain circumstances such as the sale or disposition of certain oil and gas properties of the Company or its subsidiaries and cancellation of certain hedging positions.

The Credit Facility allows for Eurodollar Loans and Base Rate Loans (as respectively defined in the Credit Facility).

The interest rate on each Eurodollar Loan will be the adjusted LIBOR for the applicable interest period plus a margin between 2.5 % and 3.5 % (depending on the then-current level of Borrowing Base usage).

The annual interest rate on each Base Rate Loan is (a) the greatest of (i) the Administrative Agent’s prime lending rate, (ii) the Federal Funds Rate (as defined in the Credit Facility) plus 0.5 % per annum, (iii) the adjusted LIBOR determined on a daily basis for an interest period of one-month, plus 1.00 % per annum and (iv) 0.00 % per annum, plus (b) a margin between 1.5 % and 2.5 % (depending on the then-current level of Borrowing Base usage).

The Credit Facility contains certain covenants, which, among other things, require the maintenance of (i) a total Leverage Ratio (outstanding debt to adjusted earnings before interest, taxes, depreciation and amortization) of not more than 4.0 to 1.0 and (ii) a minimum ratio of Current Assets to Current Liabilities (as such terms are defined in the Credit Facility) of 1.0 to 1.0.

The amendment to the credit facility in June 2020 allowed for a Leverage Ratio of not greater than 4.75 to 1 as of the last day of the fiscal quarter ending September 30, 2020.

The December 2020 amendment permitted a total Leverage Ratio not greater than 4.25 for the period ending March 31, 2021.

The Credit Facility also contains other customary affirmative and negative covenants and events of default.

The syndicate was modified to add five lenders, replacing five exiting lenders.

Rather than Eurodollar loans, the reference rate on the Second Amended and Restated Credit Agreement is the Standard Overnight Financing Rate (“SOFR”).

Beginning on the June 30, 2023 financial statements and compliance certification delivery date, the Second Amended and Restated Credit Agreement will allow for the Company to declare dividends for its equity owners, subject to certain limitations.

These limitations include (i) no default or event of default has occurred or will occur upon such payments, (ii) the pro forma Leverage Ratio, as defined in the Second Amended and Restated Credit Agreement, does not exceed 2.00 to 1.00, (iii) the amount of such payments does not exceed Available Free Cash Flow, (iv) the Borrowing Base Utilization Percentage is not greater than 80 %, and (v) a Responsible Officer certifies that the other four conditions are satisfied.

The interest rate on each SOFR Loan will be the adjusted term SOFR for the applicable interest period plus a margin between 3.0 % and 4.0 % (depending on the then-current level of borrowing base usage).

The annual interest rate on each base rate Loan is (a) the greatest of (i) the Administrative Agent’s prime lending rate, (ii) the Federal Funds Rate (as

defined in the Second Amended and Restated Credit Agreement) plus 0.5 % per annum, (iii) the adjusted term SOFR determined on a daily basis for an interest period of one month, plus 1.00 % per annum and (iv) 0.00 % per annum, plus (b) a margin between 2.0 % and 3.0 % per annum (depending on the then-current level of borrowing base usage).

The Second Amended and Restated Credit Agreement contains certain covenants, which, among other things, require the maintenance of (i) a total Leverage Ratio (outstanding debt to adjusted earnings before interest, taxes, depreciation and amortization, exploration expenses, and all other non-cash charges acceptable to the Administrative Agent) of not more than 3.0 to 1.0 and (ii) a minimum ratio of Current Assets to Current Liabilities (as such terms are defined in the Second Amended and Restated Credit Agreement) of 1.0 to 1.0.

The Company is required to maintain on a rolling 24 months basis, hedging transactions in respect of crude oil and natural gas, on not less than 50 % of the projected production from its proved, developed, producing oil and gas.

If the borrowing base utilization is less than 25 % at the hedge testing date and the leverage ratio is not greater than 1.25 to 1.00, the required hedging percentage for months 13 through 24 of the rolling 24 month period provided for shall be 0 % from such hedge testing date to the next succeeding hedge testing date.

If the borrowing base utilization percentage is equal to or greater than 25 %, but less than 50 % and the leverage ratio is not greater than 1.25 to 1.00, the required hedging percentage for months 13 through 24 of the rolling 24 month period provided for shall be 25 % from such hedge testing date to the next succeeding hedge testing date.

The Second Amended and Restated Credit Agreement also contains other customary affirmative and negative covenants and events of default.

As of December 31, 2022, $ 415,000,000 was outstanding on the Credit Facility.

We are in compliance with all covenants contained in the Credit Facility.

The Company is in compliance with all covenants contained in the Second Amended and Restated Credit Agreement as of December 31, 2022.

Under the Second Amended and Restated Credit Agreement, the applicable percentage for the unused commitment fee is 0.5 % per annum for all levels of borrowing base utilization.

As of December 31, 2022, the Company's unused line of credit was $ 184,239,562 , representative of a borrowing base of $ 600 million less the outstanding balance of $ 415 million, and standby letters of credit of $ 760,438 in total ($ 260,000 with state and federal agencies and $ 500,438 with an insurance company for New Mexico surety bonds).

Note 15 - COMMITMENTS AND CONTINGENT LIABILITIES describes changes in the surety bonds which did not affect the letters of credit (collateral) aforementioned.

NOTE 11 – ASSET RETIREMENT OBLIGATION

1 unchanged sentence

Balance, December 31, 2019 $ 16,787,219

Liabilities acquired

Liabilities incurred 99,436

Liabilities settled ( 710,577 )

( 1,589,654 )

Revision of estimate (1)

Accretion expense 906,616

Balance, December 31, 2020 $ 17,117,135

Liabilities acquired 662,705

Liabilities incurred 171,390

Liabilities sold ( 2,934,126 )

Liabilities settled ( 904,514 )

4 unchanged sentences

Liabilities incurred 353,008

Liabilities sold

( 2,934,126 )

Liabilities settled ( 940,738 )

Revision of estimate (1)

Accretion expense 983,432

13 unchanged sentences

Total gross proceeds from the 2020 underwritten public offering and the registered direct offering aggregated $ 20,846,282 .

Total net proceeds aggregated $ 19,379,832 .

Total net proceeds for the Common Warrants exercised in 2020 aggregated $ 19,379,832 .

Common stock issued pursuant to warrant exercise - In December 2020, the Company issued 3,300,000 shares of common stock pursuant to the exercise of Pre-Funded Warrants issued in the October 2020 registered direct offering.

3 unchanged sentences

Accordingly, the number of Common Warrants outstanding as of December 31, 2021 was 29,361,700 .

Common stock issued in property acquisition – As discussed in Note 5, in April 2019, the Company completed the acquisition of assets from Wishbone.

As a part of the consideration for the acquisition, the Company issued 4,576,951 shares of common stock.

The shares were valued at February 25, 2019, the date of the signing of the Purchase and Sale Agreement.

The price on February 25, 2019 was $ 6.19 per share.

The aggregate value of the shares issued, based on this price, was $ 28,331,327 .

During the year ended December 31, 2022, a total of 10,253,907 Common Warrants were exercised, leaving the Common Warrants outstanding as of December 31, 2022 to be 19,107,793 .

Common stock returned from property acquisition – As part of the Wishbone asset acquisition in April 2019, the Company issued 4,576,951 shares of common stock.

In April 2020, 16,702 shares of common stock were returned and cancelled as settlement of post-closing adjustments.

2 unchanged sentences

The aggregate value of the shares returned, based on this price, was $ 103,385 .

Common Stock Issued for option exercises – During the year ended December 31, 2021, the Company issued 100,000 shares of common stock as a result of stock option exercises.

No stock options were exercised in 2019 or 2020.

Common stock issued for Stronghold acquisition - As part of the Stronghold Acquisition, 21,339,986 shares of common stock were issued to the sellers.

Also as part of the Stronghold Acquisition, 153,176 shares of Preferred Stock were issued to the sellers.

Each share of Preferred Stock was automatically convertible into 277.7778 shares of common stock upon stockholder approval of the conversion.

On October 27, 2022, the Company’s stockholders approved the issuance of, 42,548,892 shares of common stock upon conversion of the 153,176 shares of our Preferred Stock.

The preferred shares were automatically converted into such common shares as of October 27, 2022.

Refer to "Note 5 - ACQUISITIONS & DIVESTITURES" for the purchase price consideration allocated to the aforementioned stock issuances.

Common stock issued for option exercises – During the year ended December 31, 2022 and 2021, the Company issued a net of 52,494 and 100,000 shares of common stock as a result of stock option exercises, respectively.

No stock options were exercised in 2020.

The following tables present the details of the exercises:

Stock price on

exercised Exercise

price ($) Shares

issued Shares

retained Cash paid at

exercise ($) Stock price

on date of exercise

($) Aggregate value

date of exercise

of shares retained

2021 100,000 $ 2.00 100,000 — $ 200,000 $ 3.14 $ —

2021 Totals 100,000 100,000 — $ 200,000 —

2021 Weighted Averages $ 2.00 $ 3.14

exercised Exercise

price ($) Shares

issued Shares

retained Cash paid at

exercise ($) Stock price

on date of exercise

($) Aggregate value

of shares retained

2022 100,000 $ 2.00 52,494 47,506 $ — $ 4.21 $ 200,000

2022 Totals 100,000 52,494 47,506 $ — 200,000

2022 Weighted Averages $ 2.00 $ 4.21

NOTE 13 – EMPLOYEE STOCK OPTIONS, RESTRICTED STOCK AWARD PLAN AND 401(k)

8 unchanged sentences

There were 341,755 shares eligible for grant, either as stock options or as restricted stock, as of December 31, 2022.

In 2021, the Board approved and adopted The Omnibus Incentive Plan (the “2021 Plan”), which was subsequently approved and amended by the shareholders at the 2021 Annual Meeting.

In 2021, the Board approved and adopted the Ring Energy, Inc.

2021 Omnibus Incentive Plan (the “2021 Plan”), which was subsequently approved and amended by the shareholders at the 2021 Annual Meeting.

There were 5,591,224 shares eligible for grant, either as stock options or as restricted stock, as of December 31, 2022.

Employee Stock Options – No stock options have been granted in the years ended December 31, 2022, 2021, or 2020.

All outstanding stock option awards vest at the rate of 20 % each year over five years beginning one year from the date granted and expire ten years

from the grant date.

All outstanding stock option awards vest at the rate of 20 % each year over five years beginning one year from the date granted

and expire ten years from the grant date.

A summary of the status of the stock options as of December 31, 2022, 2021, and 2020 and changes during the years ended December 31, 2022, 2021, and 2020 is as follows:

Exercise Price

Exercise Price

2022 2021 2020

Options Weighted-

Exercise Price Options Weighted-

Exercise Price Options Weighted-

Exercise Price

Outstanding at beginning of the year

Outstanding at beginning of year 365,500 $ 3.61 465,500 $ 3.26 2,748,500 $ 6.28

Issued — — — — — —

Forfeited or rescinded — — — — ( 2,283,000 ) 6.89

( 2,283,000 )

Exercised ( 100,000 ) 2.00 ( 100,000 ) 2.00 — —

Outstanding at end of year 265,500 $ 4.21 365,500 $ 3.61 465,500 $ 3.26

5 unchanged sentences

The year-end intrinsic values are based on a December 31, 2022 closing stock price of $ 2.46 .

Stock options exercised of 100,000 in 2021 had an aggregate intrinsic value on the date of exercise of $ 114,000 .

No stock options were exercised in 2020 or 2019.

Stock options exercised of 100,000 shares in 2022 had an aggregate intrinsic value on the date of exercise of $ 221,000 .

Stock options exercised of 100,000 shares in 2021 had an aggregate intrinsic value on the date of exercise of $ 114,000 .

No stock options were exercised in 2020.

The following table summarizes information related to the Company’s stock options outstanding as of December 31, 2022:

Options Outstanding

Exercise price Number

Outstanding Weighted-

Contractual Life

Exercise price

(in years) Number

$ 2.00 195,000 1.00 195,000

5.50 5,000 1.21 5,000

14.54 10,000 2.74 10,000

8.00 4,500 2.92 4,500

6.42 15,000 3.34 15,000

11.75 36,000 3.95 36,000

265,500 1.63 265,500

Restricted stock grants – Following is a table reflecting the restricted stock grants during 2022, 2021 and 2020:

# of shares of

Grant date # of shares of

restricted stock

September 13, 2019

December 21, 2019

October 1, 2020 900,000

4 unchanged sentences

July 6, 2021 11,824

July 12, 2021 4,007

September 1, 2021 10,417

September 8, 2021 3,306

Restricted stock grants prior to 2020 vest at the rate of 20 % each year over five years beginning one year from the date granted.

Restricted stock grants in 2020 and 2021 vest at a rate of 33 % each year over three years beginning one year from the date granted for all employees;

for members of the Company’s Board of Directors, the restricted stock grants vest on the earliest of (i) the day before the next shareholder meeting or (ii) the first anniversary of the date of the award.

A summary of the status of restricted stock grants as of December 31, 2021 and 2020 and changes during the years ended December 31, 2021, 2020 and 2019 is as follows:

February 9, 2022 1,247,061

April 13, 2022 7,143

May 10, 2022 10,349

June 16, 2022 2,150

July 14, 2022 8,547

August 29, 2022 30,581

September 1, 2022 37,797

September 19, 2022 49,645

Restricted stock grants issued prior to 2020 vest at the rate of 20 % each year over five years beginning one year from the date granted.

Restricted stock grants issued during 2020 and in following years vest at a rate of 33 % each year over three years beginning one year from the date granted for all employees;

for members of the Board, the restricted stock grants vest on the earliest of (i) the day before the next shareholder meeting or (ii) the first anniversary of the date of the award.

A summary of the status of restricted stock grants and changes during the years ended December 31, 2022, 2021 and 2020 is as follows:

2022 2021 2020

Restricted stock Weighted-

Average Grant

Date Fair Value Restricted stock Weighted-

Average Grant

Restricted stock

Restricted stock

Date Fair Value

Restricted stock

Date Fair Value Restricted stock Weighted-

Average Grant

Date Fair Value

Outstanding at beginning of year 2,572,596 $ 1.75 2,132,297 $ 2.94 1,341,889 $ 4.99

Granted 1,393,273 2.83 1,225,656 2.77 1,980,000 0.71

Forfeited or rescinded ( 31,185 ) 2.83 0 — ( 9,200 ) 3.97

( 1,180,392 )

Vested ( 1,310,894 ) 1.79 ( 785,357 ) 1.37 ( 1,180,392 ) 4.97

Outstanding at end of year 2,623,790 $ 2.29 2,572,596 $ 1.75 2,132,297 $ 2.94

5 unchanged sentences

Upon approval the Board, a total of 860,216 PSU were granted to the Company’s five executive officers (the “2021 PSU Awards”).

The performance period for the 2021 PSU Awards began on January 1, 2021, and will end December 31, 2023, with such awards vesting on the last day of the performance period (the vesting date).

The performance

period for the 2021 PSU Awards began on January 1, 2021, and will end December 31, 2023, with such awards vesting on the last day of the performance period (the vesting date).

The PSUs are performance-based restricted stock units subject to the terms of the 2021 Plan and the PSU Agreement.

A summary of the status of the performance stock grants as of December 31, 2021 and changes during the year ended December 31, 2021 is as follows:

On February 9, 2022, the Company granted additional PSU awards.

A total of 860,216 PSU awards were granted to the Company's five executive officers (the "2022 PSU Awards").

The performance period for the 2022 PSU Awards began on January 1, 2022, and will end on December 31, 2024, with such awards vesting on the last day of the performance period (the vesting date).

The PSUs are performance-based restricted stock units subject to the terms of the 2021 Plan and the PSU Agreement.

A summary of the status of the performance stock grants as of December 31, 2022 and 2021 along with changes during the year ended December 31, 2022 and 2021 are as follows:

Stock Units Weighted-

Fair Value Performance

Stock Units Weighted-

Outstanding at beginning of year 860,216 $ 3.87 — $ —

Granted 860,216 3.65 860,216 3.87

Forfeited or rescinded — — — —

Vested — — — —

Outstanding at end of year 1,720,432 $ 3.76 860,216 $ 3.87

For the year ended December 31, 2021, the Company incurred share-based compensation expense related to the 2021 PSU Awards of $ 171,494 .

For the year ended December 31, 2022 and 2021, the Company incurred share-based compensation expense related to the PSU Awards of $ 3,013,592 and $ 171,494 , respectively.

As of December 31, 2022, the Company had $ 4,037,141 of unrecognized compensation cost related to the PSU Awards that will be recognized over a weighted average period of 1.56 years.

4 unchanged sentences

The following table presents the matching contributions expense recognized for the Company’s 401(k) plan for the years ended December 31, 2022, 2021, and 2020:

2022 2021 2020

Employer safe harbor match 284,094 228,273 138,997

7 unchanged sentences

As publicly disclosed on the Company’s website, Paul D.

McKinney, Chief Executive Officer and Chairman of the Board, is a member of the board of directors of Pro-Ject Holdings, LLC, a privately owned oil field chemical services company and parent of PJ Chemicals.

McKinney owns .

34 % of the shares of Pro-Ject Holdings, LLC.

McKinney, Chief Executive Officer and Chairman of the Board, was a member of the board of directors of Pro-Ject Holdings, LLC, a privately owned oil field chemical services company and parent of PJ Chemicals.

McKinney owned 0.34 % of the shares of Pro-Ject Holdings, LLC.

During the year ended December 31, 2021, the Company paid $ 117,830 to PJ Chemicals.

As of December 31, 2021 the Company had accounts payable of $ 37,641 due to PJ Chemicals.

As of 2022, Mr.

McKinney is no longer on the board of directors of Pro-Ject Holdings, LLC.

NOTE 15 – COMMITMENTS AND CONTINGENT LIABILITIES

9 unchanged sentences

The Company intends to renew the surety bonds on $ 400,000 as long as the Company does business in the State of New Mexico.

The remaining $ 100,438 will require renewal until the two subject wells are plugged.

The remaining $ 100,438 is related to inactive wells and will remain in place until the Company returns those wells to activity or plugs them.

One of those wells has been plugged, and the bond released in the amount of $ 50,150 , leaving the amount related to inactive wells as $ 50,288 .

On December 23, 2022, the Company increased its blanket plugging surety bond by $ 200,000 .

As of December 31, 2022, the Company had surety bonds in total of $ 650,288 .

NOTE 16 – INCOME TAXES

For the years ended December 31, 2021, 2020, and 2019, components of our provision for income taxes are as follows:

For the years ended December 31, 2022, 2021, and 2020, components of our provision for (benefit from) income taxes are as follows:

Provision for Income Taxes 2022 2021 2020

Federal deferred tax $ 6,437,680 $ — $ ( 6,001,176 )

( 6,001,176 )

State deferred tax 1,971,044 90,342 —

Provision for Income Taxes

( 6,001,176 )

Provision for (Benefit From) Income Taxes $ 8,408,724 $ 90,342 $ ( 6,001,176 )

The following is a reconciliation of income taxes computed using the U.S.

federal statutory rate to the provision for income taxes:

federal statutory rate to the provision for (benefit from) income taxes:

Rate Reconciliation 2022 2021 2020

Pre-tax book income

( 259,413,004 )

Pre-tax book income (loss) $ 147,043,749 $ 3,413,234 $ ( 259,413,004 )

Tax at federal statutory rate $ 30,879,187 $ 716,779 $ ( 54,476,731 )

( 54,476,731 )

Excess tax benefit from stock option exercises and restricted stock vesting ( 312,268 ) ( 175,187 ) ( 1,109,379 )

( 1,109,379 )

Adjust prior estimates to tax return 214,740 2,938,948 ( 1,930,994 )

( 1,930,994 )

States taxes, net of federal benefit 1,443,145 430,654 ( 964,393 )

Adjustment for change in future effective tax rate (1)

Valuation allowance ( 24,151,242 ) ( 3,827,194 ) 52,161,412

( 3,827,194 )

Non-deductible expenses and other 335,162 6,342 318,909

Provision for Income Taxes

( 6,001,176 )

(1) The acquisition of the Northwest Shelf assets from Wishbone included properties in the State of New Mexico.

The tax rates associated with the State of New Mexico adjusted our overall tax rate from 21 % to 21.29 % .

This resulted in an additional tax expense during the year ended December 31, 2019 of $ 479,222 .

Provision for (Benefit From) Income Taxes $ 8,408,724 $ 90,342 $ ( 6,001,176 )

The Company's deferred tax position reflects the net tax effects of the temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax reporting.

The net deferred taxes consisted of the following as of December 31, 2022 and 2021:

Total 12/31/2021

Deferred Tax Assets

3 unchanged sentences

Fair market value of derivatives 2,827,202 6,403,745

Accrued expense

§163(j) business interest expense carryforward 4,917,358 —

Others 1,173,441 61,077

Gross Deferred Tax Assets 87,671,784 70,659,885

valuation allowance ( 24,182,975 ) ( 48,334,217 )

( 48,334,217 )

( 52,161,412 )

Net Deferred Tax Assets 63,488,809 22,325,668

Deferred Tax Liabilities

Propety and equipment

( 22,415,959 )

( 10,923,050 )

Net Deferred Liabilties

( 22,415,959 )

( 10,923,050 )

Net Deferred Tax Asset/(Liabilities)

Note that the presentation of the December 31, 2020 income tax, rate reconciliation and deferred tax tables have been adjusted to conform to current year presentation.

The total income tax expense, net deferred tax asset and deferred tax liability balances remain the same as prior year.

Property and equipment ( 71,402,820 ) ( 22,415,959 )

Other ( 585,005 ) —

Net Deferred Liabilities ( 71,987,825 ) ( 22,415,959 )

Net Deferred Tax Liabilities ( 8,499,016 ) ( 90,292 )

As of December 31, 2022, the Company had net operating loss carryforwards for federal income tax reporting purposes of approximately $ 109.3 million which, if unused, will begin to expire in 2027 and fully expire in 2037 and an additional $ 225.1 million that can be carried forward indefinitely.

Because of the change in ownership provisions of the Code, use of a portion of our federal NOLs may be limited in future periods.

The shares issued for the Stronghold Acquisition (further discussed in Note 5 - "ACQUISITIONS & DIVESTITURES) resulted in the Company having an ownership change under Section 382 of the Internal Revenue Code of 1986, as amended.

Section 382 limits the availability of certain tax attributes, including net operating losses and disallowed interest carryforwards, to offset future taxable income of the Company.

In evaluating its need for a valuation allowance against its deferred tax assets, the Company has estimated the amount of tax attributes related to the pre-ownership change period to be available under Section 382 in periods in which it expects deferred tax liabilities to be realized based on currently available information.

Based on its current analysis, the Company does not anticipate any material tax attributes to expire unused as result of the Section 382 ownership change;

however, the ultimate timing in the amount of tax attributes available in future periods may be different than the Company's current estimate and will be determined in each year as new information becomes available.

Changes in expectation in the timing of the availability of the Company's tax attributes could result in adjustments to the valuation allowance in future years as it updates its analysis based on new information.

As of December 31, 2022, we carried a valuation allowance against our federal and state deferred tax assets of $ 24,182,975 .

We have considered both the positive and negative evidence in determining whether it was more likely than not that some portion or all of our deferred tax assets will be realized.

The amount of deferred tax assets considered

realizable could, however, be adjusted if estimates of future taxable income during the carryforward period are reduced or increased or if objective negative evidence is no longer present and additional weight is given to subjective positive evidence, including projections for growth.

The valuation allowance along with $ 22,415,959 of deferred tax liabilities bring our net deferred position to a deferred tax liability of $90,292.

The net deferred tax liability recognized on our balance sheet as of December 31, 2021 is attributable to certain state deferred tax liabilities associated with property and equipment.

The amount of deferred tax assets considered realizable could, however, be adjusted if estimates of future taxable income during the carryforward period are reduced or increased or if objective negative evidence is no longer present and additional weight is given to subjective positive evidence, including projections for growth.

During 2022, the Company determined that certain existing deferred tax assets will not be offset by existing deferred tax liabilities as a result of the 80% limitation on the utilization of net operating losses incurred after 2017.

This results in an ending federal net deferred tax liability after valuation allowance of $ 6,437,680 .

Additionally, the Company reported a net state deferred tax liability at December 31, 2022 of $ 2,061,336 attributable to certain state deferred tax liabilities mainly associated with property and equipment.

NOTE 17 – LEGAL MATTERS

The Company is a defendant in a lawsuit in Harris County District Court, Houston, Texas, styled EPUS Permian Assets, LLC, v.

Ring Energy, Inc.

, that was filed in July 2021.

Ring Energy, Inc., that was filed in July 2021.

The plaintiff, EPUS Permian Assets, LLC, claims breach of contract, money had and received by fraudulent inducement, unjust enrichment and constructive trust.

The plaintiff is requesting its forfeited deposit of $ 5,500,000 in connection with a proposed property sale by the Company plus related damages, and attorneys’ fees and costs.

The plaintiff is

requesting its forfeited deposit of $ 5,500,000 in connection with a proposed property sale by the Company plus related damages, and attorneys’ fees and costs.

The action relates to a proposed property sale by the Company to the plaintiff, which was extended by the Company on several occasions with the plaintiff ultimately failing to perform on the agreement and the Company keeping the deposit.

1 unchanged sentence

The Company has filed an answer and a counterclaim denying the allegations and asserting affirmative defenses that would bar or substantially limit the plaintiff’s claims, asserting breach of contract and requesting a declaratory judgment and attorneys’ fees and costs.

The parties are conducting discovery.

The parties have taken depositions and are conducting discovery.

NOTE 18 – SUBSEQUENT EVENTS

Effective February 1, 2022, the Company entered into a derivative contract with its lender for 1,000 barrels of oil per day for the remainder of 2022 (total notional quantity of 334,000 barrels).

Fixed swap prices range vary by month, ranging from $ 90.78 per barrel in February to $ 80.01 per barrel by the end of the year, with a weighted average swap price of $ 84.61 per barrel.

Stronghold acquisition - On February 28, 2023, as discussed in "Note 5 - ACQUISITIONS & DIVESTITURES," the deferred cash consideration of $ 15.0 million in cash was paid to Stronghold in accordance with terms set forth in the Purchase Agreement for the Stronghold Acquisition.

In addition on March 1, 2023, the holdback amount of approximately $ 8.3 million which was held in escrow in accordance with the terms set forth in the Purchase Agreement for the Stronghold Acquisition was distributed to Stronghold.

Common stock issued pursuant to warrant exercise - On February 2, 2023, the Company issued 2,517,427 shares of common stock pursuant to the exercise of Common Warrants with an exercise price of $ 0.80 .

Gross and net proceeds were $ 2,013,942 .

On March 1, 2023, the Company issued 2,000,000 shares of common stock pursuant to the exercise of Common Warrants with an exercise price of $ 0.80 .

Gross and net proceeds were $ 1,600,000 .

RING ENERGY, INC.

2 unchanged sentences

For the years ended December 31, 2022 2021 2020

Oil and natural gas sales

Oil, natural gas, and natural gas liquids sales $ 347,249,537 $ 196,305,966 $ 113,025,138

Lease operating expenses (47,695,351) (30,312,399) (29,753,413)

2 unchanged sentences

Production taxes (17,125,982) (9,123,420) (5,228,090)

Depreciation, depletion, amortization and accretion

Depreciation, depletion, and amortization (55,740,767) (37,167,967) (43,010,660)

Ceiling test impairment — — (277,501,943)

(277,501,943)

General and administrative (exclusive of corporate overhead) (1,617,095) (2,003,876) (1,454,041)

Results of Oil and Natural Gas Producing Operations

(251,138,469)

Results of Oil, Natural Gas, and Natural Gas Liquids Producing Operations $ 218,569,701 $ 111,088,609 $ (251,138,469)

Net Costs Incurred in Oil and Gas Producing Activities

For the years Ended December 31, 2022 2021

Payments for the Stronghold Acquisition $ 177,823,787 $ —

Payments to purchase oil and natural gas properties 1,563,703 1,368,437

Proceeds from divestiture of oil and natural gas properties

Payments to develop oil and natural gas properties 129,332,155 51,302,131

Payments to acquire or improve fixed assets subject to depreciation 319,945 568,832

Sale of fixed assets subject to depreciation (134,600) —

Proceeds from divestiture of oil and natural gas properties (23,700) (2,000,000)

Total Net Costs Incurred $ 308,881,290 $ 51,239,400

6 unchanged sentences

Accumulated depletion, depreciation and amortization (289,935,259) (235,997,307)

(235,997,307)

(200,111,658)

Net Properties and Equipment $ 1,180,069,937 $ 651,359,647

5 unchanged sentences

Proved reserves were estimated in accordance with guidelines established by the SEC, which require that reserve estimates be prepared under existing economic and operating conditions based upon the 12-month unweighted average of the first-day-of-the-month prices.

The reserve information in these Consolidated Financial Statements represents only estimates.

The reserve information in these Financial Statements represents only estimates.

There are a number of uncertainties inherent in estimating quantities of proved reserves, including many factors beyond the Company’s control, such as commodity pricing.

4 unchanged sentences

Accordingly, initial reserve estimates are often different from the quantities of oil and natural gas that are ultimately recovered.

The meaningfulness of such

estimates depends primarily on the accuracy of the assumptions upon which they were based.

The meaningfulness of such estimates depends primarily on the accuracy of the assumptions upon which they were based.

Except to the extent the Company acquires additional properties containing proved reserves or conducts successful exploration and development activities or both, the Company’s proved reserves will decline as reserves are produced.

6 unchanged sentences

Natural Gas (1)

Natural Gas Liquids (1)

Proved Developed and Undeveloped Reserves

Beginning of year 65,838,609 71,773,789 —

Purchases of minerals in place 28,086,920 108,456,107 16,715,626

Extensions, discoveries and improved recovery 628,978 522,178 52,810

Sale of minerals in place — — —

Production (3,459,477) (4,088,642) (371,337)

Revisions of previous quantity estimates (2,390,287) (18,792,983) 6,708,559

End of year 88,704,743 157,870,449 23,105,658

Proved Developed at beginning of year 36,820,824 39,748,880 —

Proved Undeveloped at beginning of year 29,017,785 32,024,909 —

Proved Developed at end of year 57,012,137 106,399,050 15,332,804

Proved Undeveloped at end of year 31,692,606 51,471,399 7,772,854

For the Year Ended December 31, 2021

Natural Gas (1)

Natural Gas Liquids (1)

Proved Developed and Undeveloped Reserves

3 unchanged sentences

Sale of minerals in place (462,970) (555,879) —

Production (2,686,940) (2,535,188) —

Revisions of previous quantity estimates (3,431,939) 7,562,925 —

End of year 65,838,609 71,773,789 —

Proved Developed at beginning of year 38,260,638 34,335,520 —

4 unchanged sentences

natural gas reserves are stated in thousand cubic feet;

natural gas liquids reserves are stated in barrels.

Revisions represent changes in previous reserves estimates, either upward or downward, resulting from new information normally obtained from development drilling and production history or resulting from a change in economic factors, such as commodity prices, operating costs or development costs.

During the year ended December 31, 2021, the Company’s extensions and discoveries of 4,838 MBOE resulted primarily from new proved undeveloped locations resulting from the 2021 operated drilling program in the Northwest Shelf and Central Basin Platform as well as non-operated activity in the Northwest Shelf.

Negative revisions of 2,172 MBOE were the result of Delaware PUD removal due to the 5 Year Rule, well performance, and increased cost from 2021 industry activity increase partially offset by commodity price increases.

The increase in proved undeveloped reserves was primarily attributable to extensions of 4,110 MBOE resulting primarily from the 2021 operated drilling program in the Northwest Shelf and Central Basin Platform as well as non-operated activity in the Northwest Shelf.

During the year ended December 31, 2022, our extensions and discoveries of 769 MBoe (one thousand Boe) resulted primarily from the 2022 operated drilling program in the Northwest Shelf and Central Basin Platform as well as non-operated activity in the Northwest Shelf.

Revisions of 1,186 MBoe were predominately the result of converting from two-stream to three-stream reserves, the removal of proved undeveloped reserves in our Delaware asset, well performance, increased cost from 2022 industry activity, and increased commodity pricing.

The increase in proved undeveloped reserves was primarily attributable to the Stronghold Acquisition.

Standardized Measure of Discounted Future Net Cash Flows – The standardized measure of discounted future net cash flows is computed by applying the price according to the SEC guidelines for oil and natural gas to the estimated future production of proved oil and natural gas reserves, less estimated future expenditures (based on year-end costs) to be incurred in developing and producing the proved reserves, less estimated future income tax expenses (based on year-end statutory tax rates) to be incurred on pretax net cash flows less tax basis of the properties and available credits, and assuming continuation of existing economic conditions.

1 unchanged sentence

Standardized Measure of Discounted Future Net Cash Flows

December 31, 2022 2021 2020

Future cash inflows $ 9,871,961,000 $ 4,853,709,000 $ 2,682,488,655

4,853,709,000

2,682,488,655

3,825,773,515

Future production costs (2,751,896,250) (1,395,437,250) (821,515,126)

(1,395,437,250)

(821,515,126)

(964,887,856)

Future development costs (647,196,750) (347,757,000) (244,323,270)

(347,757,000)

(244,323,270)

(252,457,833)

Future income taxes (1,142,147,641) (501,586,949) (208,645,934)

(501,586,949)

(208,645,934)

(424,715,966)

Future net cash flows 5,330,720,359 2,608,927,801 1,408,004,325

2,608,927,801

1,408,004,325

2,183,711,860

10% annual discount for estimated timing of cash flows (3,058,606,841) (1,471,562,953) (852,133,072)

(1,471,562,953)

(852,133,072)

(1,260,536,809)

Standardized Measure of Discounted Future Net Cash Flows $ 2,272,113,518 $ 1,137,364,848 $ 555,871,253

1,137,364,848

The following is a summary of the changes in the Standardized Measure for the Company’s proved oil and natural gas reserves during each of the years in the three-year period ended December 31, 2022:

Changes in Standardized Measure of Discounted Future Net Cash Flows

2022 2021 2020

Beginning of the year $ 1,137,364,848 $ 555,871,253 $ 923,175,051

3 unchanged sentences

Sales of oil and gas produced, net of production costs (283,588,498) (154,615,685) (70,634,853)

(154,615,685)

(137,663,314)

Sales of minerals in place — (2,523,746) —

1 unchanged sentence

Net changes in price and production costs 646,819,172 636,884,944 (368,974,767)

(368,974,767)

(219,608,128)

Net change in estimated future development costs (53,253,626) (44,357,751) (3,883,985)

Revisions of previous quantity estimates 33,583,837 (22,259,508) (66,213,586)

(126,143,669)

Changes in estimated timing of cash flows (119,428,019) 86,845,188 (139,039,115)

(139,039,115)

(107,443,484)

Net change in income taxes (306,810,205) (112,496,394) 97,384,365

(112,496,394)

End of the Year $ 2,272,113,518 $ 1,137,364,848 $ 555,871,253

1,137,364,848

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.