Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 7A: Quantitative and Qualitative Disclosures About Market Risk
Commodity Price Risk
Our major market risk exposure is in the pricing applicable to our oil and natural gas production. Market risk refers to the risk of loss from adverse changes in oil and natural gas prices. Realized pricing is primarily driven by the prevailing domestic price for crude oil and spot prices applicable to the region in which we produce oil and natural gas. Historically, prices received for oil and natural gas production have been volatile and unpredictable. We expect pricing volatility to continue.
The prices we receive depend on many factors outside of our control. Oil prices received during 2023 ranged from a monthly average low of $68.72 per barrel to a monthly average high of $89.13 per barrel. Natural gas prices realized during 2023 ranged from a monthly average low of $(0.94) per Mcf to a monthly average high of $1.52 per Mcf. In some months, fees exceeded the pricing, causing a negative net realized price. Gross natural gas prices ranged from a monthly average low of $0.76 per Mcf to a monthly average high of $2.78 per Mcf. Fees ranged from a monthly average low of $(2.07) per Mcf to a monthly average high of $(0.87) per Mcf. NGL prices received during 2023 ranged from a monthly average low of $7.07 per barrel to a monthly average high of $14.71 per barrel. A significant decline in the prices of oil or natural gas would likely have a material adverse effect on our financial condition and results of operations. In order to reduce commodity price uncertainty and increase cash flow predictability relating to the marketing of our crude oil and natural gas, we enter into crude oil and natural gas price hedging arrangements with respect to a portion of our expected production. The following table summarizes the Company's hedges in place on a monthly basis by commodity type. See "Note 7 — DERIVATIVE FINANCIAL INSTRUMENTS" to our financial statements for further information.
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Oil Hedges (WTI) Gas Hedges (Henry Hub)
Month Average BBL/day Average MMBtu/day
January 2024 6,475 —
February 2024 6,457 8,999
March 2024 6,438 8,311
April 2024 5,921 8,383
May 2024 5,906 7,999
June 2024 5,891 8,124
July 2024 5,575 7,704
August 2024 5,575 7,590
September 2024 5,575 7,722
October 2024 5,400 7,336
November 2024 5,400 7,467
December 2024 5,400 7,133
January 2025 5,275 7,023
February 2025 5,275 7,633
March 2025 5,275 6,831
April 2025 5,100 6,961
May 2025 5,100 6,662
June 2025 5,100 6,790
July to September 2025 4,450 6,450
October to December 2025 4,400 6,500
Customer Credit Risk
Our principal exposure to credit risk is through receivables from the sale of our oil and natural gas production (approximately $37.9 million as of December 31, 2023). We are subject to credit risk due to the concentration of our oil and natural gas receivables with our most significant customers, or purchasers. We do not require our purchasers to post collateral, and the inability of our significant purchasers to meet their obligations to us or their insolvency or liquidation may adversely affect our financial results. The following table sets forth certain information regarding the top three purchasers of our oil, natural gas, and NGLs for the year ended December 31, 2023. We believe that the loss of any of these purchasers would not materially impact our business because we could readily find other purchasers for our oil and natural gas.
For the Year Ended
As of
December 31, 2023
December 31, 2023
Percentage of Oil, Natural Gas, and Natural Gas Liquids Revenues
Percentage of accounts receivables from the sale of our oil and natural gas production
Purchaser:
Phillips 66 Company ("Phillips")
66%
65%
Enterprise Crude Oil LLC ("Enterprise")
12%
11%
NGL Crude Partners ("NGL Crude")
10%
8%
Interest Rate Risk
We are subject to market risk exposure related to changes in interest rates on our indebtedness under our Credit Facility, which bears variable interest based upon a prime rate and is therefore susceptible to interest rate fluctuations.
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Changes in interest rates affect the interest earned on the Company’s cash and cash equivalents and the interest rate paid on borrowings under the Credit Facility.
As of December 31, 2023, we had $425.0 million outstanding on our Credit Facility with a weighted average annual interest rate for the year then ended of 8.8%. A 1% change in the interest rate on our Credit Facility would result in an estimated $4.3 million change in our annual interest expense. See "Note 9 — REVOLVING LINE OF CREDIT" in the notes to the financial statements for more information on the Company’s interest rates of our Credit Facility.
Currently, we do not use interest rate derivative instruments to manage exposure to interest rate changes.
Currency Exchange Rate Risk
Foreign sales accounted for none of the Company's sales; the Company accepts payment for its commodity sales only in U.S. dollars. Ring is therefore not exposed to foreign currency exchange rate risk on these sales.
Please also see Item 1A “Risk Factors” above for a discussion of other risks and uncertainties we face in our business.
Item 8: Financial Statements and Supplementary Data
The financial statements and supplementary data required by this item are included beginning at page F-1 of this Annual Report.
Item 9: Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.