RING ENERGY, INC. 10-K

Item 9A: Controls and Procedures Evaluation of disclosure controls and procedures. Under the direction of our Chief Executive Officer and Chief Financial Officer, we have established disclosure controls and procedures, as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. The disclosure controls and procedures are also intended to ensure that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. In designing and evaluating the disclosure controls and procedures, management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs. As of December 31, 2023, an evaluation was performed under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15(b) under the Exchange Act. Based upon our evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of December 31, 2023, our disclosure controls and procedures are effective. Changes in internal control over financial reporting. We regularly review our system of internal control over financial reporting and make changes to our processes and systems to improve controls and increase efficiency, while ensuring that we maintain an effective internal control environment. Changes may include such activities as implementing new, more efficient systems, consolidating activities, and migrating processes. There were no changes in our internal control over financial reporting that occurred during the fourth quarter ended December 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 64 Table of Contents Management’s Annual Report on Internal Control Over Financial Reporting and Report of Independent Accounting Firm Our management is responsible for establishing and maintaining adequate internal controls over financial reporting. Our internal control system is designed to provide reasonable assurance to our management and Board of Directors regarding the preparation and fair presentation of published financial statements. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Furthermore, the effectiveness of a system of internal control over financial reporting in future periods can change as conditions change. In making our assessment of internal control over financial reporting, our management used the criteria issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework (2013) . Based on our assessment, we believe that, as of December 31, 2023, 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 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, 2023. The report, which expresses an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting at December 31, 2023, is set forth below. 65 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors and Stockholders Ring Energy, Inc. Opinion on internal control over financial reporting We have audited the internal control over financial reporting of Ring Energy, Inc. (a Nevada corporation) (the “Company”) as of December 31, 2023, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the financial statements of the Company as of and for the year ended December 31, 2023, and our report dated March 7, 2024 expressed an unqualified opinion on those financial statements. Basis for opinion The Company’s management is responsible 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. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. 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. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and limitations of internal control over financial reporting A company’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 generally accepted accounting principles. A company’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 company; (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 company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’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. /s/ GRANT THORNTON LLP Houston, Texas March 7, 2024 66 Table of Contents Item 9B: Other Information On March 6, 2024, the Board, upon the recommendation of the compensation committee of the Board (the “Compensation Committee”), approved the Ring Energy, Inc. Change in Control and Severance Benefit Plan (the “CIC Plan”) which provides for severance benefits to our named executive officers (and certain other officers and key employees), including: Paul D. McKinney, Chairman of the Board and Chief Executive Officer (the “Tier 1 NEO”), and Marinos Baghdati, Executive Vice President of Operations, Stephen D. Brooks, Executive Vice President of Land, Legal, Human Resources and Marketing, Alexander Dyes, Executive Vice President of Engineering and Corporate Strategy, and Travis T. Thomas Executive Vice President and Chief Financial Officer (collectively, the “Tier 2 NEOs” and with the Tier 1 NEO, collectively, the “NEOs”). The CIC Plan supersedes and replaces all other severance arrangements between the Company and the NEOs, which previously had been governed by separate employment agreements. Pursuant to the CIC Plan, following a Change in Control (as defined in the CIC Plan) and during the “protection period,” which period extends from the date six months prior to a Change in Control until the date 24 months following the occurrence of a Change in Control, if the Tier 1 NEO’s employment is terminated by the Company without Cause (as defined in the CIC Plan) or by him for a CIC Good Reason (as defined in the CIC Plan), he is entitled to (1) 300% of his annual base salary; (2) 300% of his most recent target annual bonus (the “AIP Amount”); (3) 100% of his pro-rated AIP Amount (based on the number of days employed during the year of termination); (4) acceleration and vesting of his outstanding equity awards; and (5) reimbursement of 24 months of health benefits. In addition, following the Tier 1 NEO’s death or disability, he would be entitled to (1) acceleration and vesting of his outstanding equity awards; and (2) reimbursement of 12 months of health benefits. Pursuant to the CIC Plan, if the Tier 1 NEO’s employment with the Company is terminated by the Company without Cause or by him for a Good Reason (as defined in the CIC Plan) and not during the applicable protection period, he is entitled to receive (1) 200% of his annual base salary, (2) 200% of his AIP Amount; (3) 100% of his pro-rated AIP Amount (based on the number of days employed during the year of termination); (4) acceleration and vesting of his outstanding equity awards; and (5) reimbursement of 24 months of health benefits. Pursuant to the CIC Plan, following a Change in Control and during the “protection period,” which period extends from the date six months prior to a Change in Control until the date 24 months following the occurrence of a Change in Control, if the Tier 2 NEO’s employment is terminated by the Company without Cause or by him for a CIC Good Reason, he is entitled to (1) 200% of his annual base salary; (2) 200% of his AIP Amount; (3) 100% of his pro-rated AIP Amount (based on the number of days employed during the year of termination); (4) acceleration and vesting of his outstanding equity awards; and (5) reimbursement of 18 months of health benefits. In addition, following the Tier 2 NEO’s death or disability, he would be entitled to (1) acceleration and vesting of his outstanding equity awards; and (2) reimbursement of 12 months of health benefits. Pursuant to the CIC Plan, if the Tier 2 NEO’s employment with the Company is terminated by the Company without Cause or by him for a Good Reason and not during the applicable protection period, he is entitled to receive (1) 100% of his annual base salary; (2) 100% of his AIP Amount; (3) 100% of his pro-rated AIP Amount (based on the number of days employed during the year of termination); (4) acceleration and vesting of his outstanding equity awards; and (5) reimbursement of 18 months of health benefits. Entitlement to the above benefits is conditioned on the timely execution of a general release in the form and substance approved by the Compensation Committee, and each executive’s compliance with non-competition, non-solicitation and confidentiality covenants set forth in the CIC Plan. In order to be eligible to receive benefits under the CIC Plan, the executives must execute and return to the Company a participation agreement (a “Participation Agreement”) the form of which is attached as Exhibit B to the CIC Plan. Upon the execution of a Participation Agreement, the executive’s prior employment agreement terminates, and the continued employment of such executive will be on an at-will basis. On March 6, 2024, Messrs. McKinney, Baghdati, Brooks, Dyes and Thomas became participants in the CIC Plan upon their delivery to the Company of executed Participation Agreements, pursuant to which the NEOs agreed to terminate the existing employment agreements between them and the Company, effective immediately, and the terms of the CIC Plan and respective Participation Agreements supersede any rights or entitlements to severance benefits under any employment agreement so terminated or other severance arrangements. The CIC Plan does not affect the NEOs’ eligibility to their base salary, subject to increase at the 67 Table of Contents discretion of the Board, or the Compensation Committee, and to participate in any and all other standard benefit plans, programs and policies of the Company. The description of the CIC Plan contained in this Item 9B does not purport to be complete and is qualified in its entirety by reference to the CIC Plan included as Exhibit 10.25 to this Annual Report. Item 9C: Disclosure Regarding Foreign Jurisdictions that Prevent Inspections None. PART III Item 10: Directors, Executive Officers and Corporate Governance The information required by this item is incorporated by reference herein from the Company's 2024 Proxy Statement to be filed with the SEC no later than 120 days after December 31, 2023. 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. Item 11: Executive Compensation The information required by this item is incorporated by reference herein from the Company's 2024 Proxy Statement to be filed with the SEC no later than 120 days after December 31, 2023. 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. Item 12: 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 Company's 2024 Proxy Statement to be filed with the SEC no later than 120 days after December 31, 2023. 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. Item 13: Certain Relationships and Related Transactions, and Director Independence The information required by this item is incorporated by reference herein from the Company's 2024 Proxy Statement to be filed with the SEC no later than 120 days after December 31, 2023. 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. Item 14: Principal Accountant Fees and Services The information required by this item is incorporated by reference herein from the Company's 2024 Proxy Statement to be filed with the SEC no later than 120 days after December 31, 2023. 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. 68 Table of Contents PART IV Item 15: Exhibits and Financial Statement Schedules Incorporated by Reference Exhibit Number Exhibit Description Form File No. Exhibit Filing Date Filed Here-with Furn-ished Here-with 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 2.3 Asset Purchase Agreement dated July 10, 2023 between Ring Energy, Inc. and F ounders Oil & Gas IV, LLC . 8-K 001-36057 2.1 7/14/23 3.1 Articles of Incorporation (as amended) 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 3.1(b) C ertificate of Amendment to the Articles of Incorporation, as amended, of Ring Energy, Inc. 8-K 001-36057 3.1 5/26/23 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 X 4.3 Securities Purchase Agreement, dated October 27, 2020 8-K 001-36057 4.1 10/29/20 69 Table of Contents Incorporated by Reference Exhibit Number Exhibit Description Form File No. Exhibit Filing Date Filed Here-with Furn-ished Here-with 10.1* Executive Employment and Severance Agreement, dated as of September 30, 2020, by and between the Company and Stephen D. Brooks 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. McKinney 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. Baghdati 8-K 001-36057 10.2 12/22/20 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 Amended and Restated Credit Agreement with SunTrust Bank 10-Q 001-36057 10.2 5/8/19 10.8 First Amendment to Amended and Restated Credit Agreement with SunTrust Bank 8-K 001-36057 10.1 12/9/19 10.9 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 10.10 Third Amendment to Amended and Restated Credit Agreement with Truist Bank 8-K 001-36057 10.1 12/29/20 10.11 Fourth Amendment to Amended and Restated Credit Agreement with Truist Bank dated June 10, 2021 8-K 001-36057 10.1 6/16/21 10.12 Fifth Amendment to Amended and Restated Credit Agreement with Truist Bank dated June 25, 2021 8-K 001-36057 10.1 6/25/21 10.13* Executive Employment and Severance Agreement, dated as of October 26, 2020, by and between the Company and Travis T. Thomas 8-K 001-36057 10.1 3/26/21 10.14 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 10.15 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 10.16 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 70 Table of Contents Incorporated by Reference Exhibit Number Exhibit Description Form File No. Exhibit Filing Date Filed Here-with Furn-ished Here-with 10.17 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 10.18* Ring Energy, Inc. 2021 Omnibus Incentive Plan DEF 14A 001-36057 4/22/21 10.19* A mendment No. 1 to the Ring Energy, Inc. 2021 Om nibus Incentive P l an 8-K 001-36057 10.1 5/26/23 10.20* Form of Performance Stock Unit Agreement 8-K 001-36057 10.1 11/30/21 10.21* Form Restricted Stock Unit Agreement (employees) 8-K 001-36057 10.1 2/23/23 10.22* Form of Restricted Stock Unit Agreement (non-employee directors) 8-K 001-36057 10.2 2/23/23 10.23 Form of Warrant Amendment and Exercise Agreement. 8-K 001-36057 10.1 4/12/23 10.24 F irst Amendment to Second Amended and Restated Credit Agreement dated as of February 12, 202 4 , by and among Ring Energy, Inc., Truist Bank, as administrative agent, and the Lenders party thereto. 8-K 001-36057 10.1 2/16/24 10.25 C hange in Control and Severa nce Benefit Plan X 14.1 Code of Ethics 8-K 000-53920 14.1 1/24/13 23.1 Consent of Cawley, Gillespie & Associates, Inc. X 23.2 Consent of Grant Thornton LLP X 24.1 Power of Attorney (included as part of the signature pages of this report) X 31.1 Rule 13a-14(a) Certification by Chief Executive Officer X 31.2 Rule 13a-14(a) Certification by Chief Financial Officer X 32.1 Section 1350 Certification of Chief Executive Officer X 32.2 Section 1350 Certification Chief Financial Officer X 97.1 R ing Energy, Inc. Clawback Policy X 99.1 Reserve Report of Cawley, Gillespie & Associates, Inc. X 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 71 Table of Contents Incorporated by Reference Exhibit Number Exhibit Description Form File No. Exhibit Filing Date Filed Here-with Furn-ished Here-with 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 Item 16: Form 10-K Summary None. 72 Table of Contents SIGNATURES 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. By: /s/ Paul D. McKinney Mr. Paul D. McKinney Chief Executive Officer Date: March 7, 2024 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 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/ Paul D. McKinney /s/ Thomas L. Mitchell Mr. Paul D. McKinney Mr. Thomas L. Mitchell Chief Executive Officer and Director Director (Principal Executive Officer) Date: March 7, 2024 Date: March 7, 2024 /s/ Travis T. Thomas /s/ Anthony B. Petrelli Mr. Travis T. Thomas Mr. Anthony B. Petrelli Chief Financial Officer Director (Principal Financial Officer) Date: March 7, 2024 Date: March 7, 2024 /s/ Regina Roesener /s/ Clayton E. Woodrum Mrs. Regina Roesener Mr. Clayton E. Woodrum Director Director Date: March 7, 2024 Date: March 7, 2024 /s/ Richard E. Harris /s/ John A. Crum Mr. Richard E. Harris Mr. John A. Crum Director Director Date: March 7, 2024 Date: March 7, 2024 /s/ Roy I. Ben-Dor /s/ David S. Habachy Mr. Roy I. Ben-Dor Mr. David S. Habachy Director Director Date: March 7, 2024 Date: March 7, 2024 73 Table of Contents RING ENERGY, INC. INDEX TO FINANCIAL STATEMENTS Page Report of Grant Thornton LLP Independent Registered Public Accounting Firm (PCAOB ID Number 248 ) F- 2 Balance Sheets as of December 31, 202 3 and 202 2 F- 4 Statements of Operations for the years ended December 31, 202 3 , 202 2 , and 202 1 F- 5 Statements of Stockholders’ Equity for the years ended December 31, 202 3 , 202 2 , and 202 1 F- 6 Statements of Cash Flows for the years ended December 31, 202 3 , 202 2 , and 202 1 F- 7 Notes to Financial Statements F- 9 Supplemental Information on Oil and Natural Gas Producing Activities F- 39 F-1 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors and Stockholders Ring Energy, Inc. Opinion on the financial statements We have audited the accompanying balance sheets of Ring Energy, Inc. (a Nevada corporation) (the “Company”) as of December 31, 2023 and 2022, the related statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2023, 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, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, 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, 2023, 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 7, 2024 expressed an unqualified opinion. Basis for opinion 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 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 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 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 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 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 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. 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, F-2 Table of Contents depreciation and amortization expense. 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 crude oil and natural gas 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. In turn, auditing those inputs and assumptions required subjective and complex auditor judgment. 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. • 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: historical pricing differentials, operating costs, estimated capital costs, and ownership interests, we tested management’s process for determining the assumptions, including examining the underlying support on a sample basis. Specifically, our audit procedures involved testing management’s assumptions by performing the following: ◦ 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. ◦ We tested models used to estimate the future operating costs in the reserve report and compared amounts to historical operating costs. ◦ 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. ◦ 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, and ◦ We applied analytical procedures to production forecasts in the reserve report by comparing to historical actual results. /s/ GRANT THORNTON LLP We have served as the Company’s auditor since 2021. Houston, Texas March 7, 2024 F-3 Table of Contents RING ENERGY, INC. BALANCE SHEETS As of December 31, 2023 2022 ASSETS Current Assets Cash and cash equivalents $ 296,384 $ 3,712,526 Accounts receivable 38,965,002 42,448,719 Joint interest billing receivables, net 2,422,274 983,802 Derivative assets 6,215,374 4,669,162 Inventory 6,136,935 9,250,717 Prepaid expenses and other assets 1,874,850 2,101,538 Total Current Assets 55,910,819 63,166,464 Properties and Equipment Oil and natural gas properties, full cost method 1,663,548,249 1,463,838,595 Financing lease asset subject to depreciation 3,896,316 3,019,476 Fixed assets subject to depreciation 3,228,793 3,147,125 Total Properties and Equipment 1,670,673,358 1,470,005,196 Accumulated depreciation, depletion and amortization ( 377,252,572 ) ( 289,935,259 ) Net Properties and Equipment 1,293,420,786 1,180,069,937 Operating lease asset 2,499,592 1,735,013 Derivative assets 11,634,714 6,129,410 Deferred financing costs 13,030,481 17,898,973 Total Assets $ 1,376,496,392 $ 1,268,999,797 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities Accounts payable $ 104,064,124 $ 111,398,268 Financing lease liability 956,254 709,653 Operating lease liability 568,176 398,362 Derivative liabilities 7,520,336 13,345,619 Notes payable 533,734 499,880 Deferred cash payment — 14,807,276 Asset retirement obligations 165,642 635,843 Total Current Liabilities 113,808,266 141,794,901 Non-current Liabilities Deferred income taxes 8,552,045 8,499,016 Revolving line of credit 425,000,000 415,000,000 Financing lease liability, less current portion 906,330 1,052,479 Operating lease liability, less current portion 2,054,041 1,473,897 Derivative liabilities 11,510,368 10,485,650 Asset retirement obligations 28,082,442 29,590,463 Total Liabilities 589,913,492 607,896,406 Commitments and Contingencies - See Note Stockholders' Equity Preferred stock - $ 0.001 par value; 50,000,000 shares authorized; no shares issued or outstanding — — Common stock - $ 0.001 par value; 450,000,000 shares authorized; 196,837,001 shares and 175,530,212 shares issued and outstanding, respectively 196,837 175,530 Additional paid-in capital 795,834,675 775,241,114 Accumulated deficit ( 9,448,612 ) ( 114,313,253 ) Total Stockholders’ Equity 786,582,900 661,103,391 Total Liabilities and Stockholders' Equity $ 1,376,496,392 $ 1,268,999,797 The accompanying notes are an integral part of these financial statements. F-4 Table of Contents RING ENERGY, INC. STATEMENTS OF OPERATIONS For the years ended December 31, 2023 2022 2021 Oil, Natural Gas, and Natural Gas Liquids Revenues $ 361,056,001 $ 347,249,537 $ 196,305,966 Costs and Operating Expenses Lease operating expenses 70,158,227 47,695,351 30,312,399 Gathering, transportation and processing costs 457,573 1,830,024 4,333,232 Ad valorem taxes 6,757,841 4,670,617 2,276,463 Oil and natural gas production taxes 18,135,336 17,125,982 9,123,420 Depreciation, depletion and amortization 88,610,291 55,740,767 37,167,967 Asset retirement obligation accretion 1,425,686 983,432 744,045 Operating lease expense 541,801 363,908 523,487 General and administrative expense 29,188,755 27,095,323 16,068,105 Total Costs and Operating Expenses 215,275,510 155,505,404 100,549,118 Income from Operations 145,780,491 191,744,133 95,756,848 Other Income (Expense) Interest income 257,155 4 1 Interest (expense) ( 43,926,732 ) ( 23,167,729 ) ( 14,490,474 ) Gain (loss) on derivative contracts 2,767,162 ( 21,532,659 ) ( 77,853,141 ) Loss on disposal of assets ( 87,128 ) — — Other income 198,935 — — Net Other Income (Expense) ( 40,790,608 ) ( 44,700,384 ) ( 92,343,614 ) Income Before Provision for Income Taxes 104,989,883 147,043,749 3,413,234 Provision for Income Taxes ( 125,242 ) ( 8,408,724 ) ( 90,342 ) Net Income $ 104,864,641 $ 138,635,025 $ 3,322,892 Basic Earnings per Share $ 0.55 $ 1.14 $ 0.03 Diluted Earnings per Share $ 0.54 $ 0.98 $ 0.03 The accompanying notes are an integral part of these financial statements. F-5 Table of Contents RING ENERGY, INC. STATEMENTS OF STOCKHOLDERS’ EQUITY Common Stock Additional Paid-in Capital Retained Earnings (Accumulated Deficit) Total Stockholders' Equity Shares Amount Balance, December 31, 2020 85,568,287 $ 85,568 $ 550,951,415 $ ( 256,271,170 ) $ 294,765,813 Common stock and warrants issued for cash, net — — ( 65,000 ) — ( 65,000 ) Exercise of pre-funded warrants issued in offering 13,428,500 13,429 — — 13,429 Exercise of common warrants issued in offering 442,600 443 353,637 — 354,080 Options exercised 100,000 100 199,900 — 200,000 Restricted stock vested 785,357 785 ( 785 ) — — Shares to cover tax withholdings for restricted stock vested ( 132,182 ) ( 132 ) 132 — — Payments to cover tax withholdings for restricted stock vested, net — — ( 385,330 ) — ( 385,330 ) Share-based compensation — — 2,418,323 — 2,418,323 Net income — — — 3,322,892 3,322,892 Balance, December 31, 2021 100,192,562 $ 100,193 $ 553,472,292 $ ( 252,948,278 ) $ 300,624,207 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, net — — ( 521,199 ) — ( 521,199 ) Common stock issuance for Stronghold Acquisition 21,339,986 21,340 69,120,215 69,141,555 Conversion of mezzanine preferred shares for Stronghold Acquisition 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 Exercise of common warrants issued in offering 4,517,427 4,517 3,609,424 — 3,613,941 Induced exercise of common warrants issued in offering 14,512,166 14,512 8,673,143 — 8,687,655 Restricted stock vested 1,680,232 1,680 ( 1,680 ) — — Shares to cover tax withholdings for restricted stock vested ( 288,152 ) ( 287 ) 287 — — Payments to cover tax withholdings for restricted stock vested, net ( 520,153 ) ( 520,153 ) Performance stock vested 1,170,024 1,170 ( 1,170 ) — — Shares to cover tax withholdings for performance stock vested ( 284,908 ) ( 285 ) 285 — — Share-based compensation 8,833,425 8,833,425 Net income 104,864,641 104,864,641 Balance, December 31, 2023 196,837,001 $ 196,837 $ 795,834,675 $ ( 9,448,612 ) $ 786,582,900 The accompanying notes are an integral part of these financial statements. F-6 Table of Contents RING ENERGY, INC. STATEMENTS OF CASH FLOWS For the Years Ended December 31, 2023 2022 2021 Cash Flows From Operating Activities Net income $ 104,864,641 $ 138,635,025 $ 3,322,892 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization 88,610,291 55,740,767 37,167,967 Asset retirement obligation accretion 1,425,686 983,432 744,045 Amortization of deferred financing costs 4,920,714 2,706,021 665,882 Share-based compensation 8,833,425 7,162,231 2,418,323 Bad debt expense 134,007 242,247 — Deferred income tax expense (benefit) ( 425,275 ) 8,720,992 265,479 Excess tax expense (benefit) related to share-based compensation 478,304 ( 312,268 ) ( 175,187 ) (Gain) loss on derivative contracts ( 2,767,162 ) 21,532,659 77,853,141 Cash paid for derivative settlements, net ( 9,084,920 ) ( 62,525,954 ) ( 52,768,154 ) Changes in operating assets and liabilities: Accounts receivable 1,154,085 ( 17,214,150 ) ( 9,483,639 ) Inventory 3,113,782 ( 5,597,845 ) — Prepaid expenses and other assets 226,688 ( 1,163,509 ) ( 541,920 ) Accounts payable ( 1,451,422 ) 50,808,461 15,449,215 Settlement of asset retirement obligation ( 1,862,385 ) ( 2,741,380 ) ( 2,186,832 ) Net Cash Provided by Operating Activities 198,170,459 196,976,729 72,731,212 Cash Flows From Investing Activities Payments for the Stronghold Acquisition ( 18,511,170 ) ( 177,823,787 ) — Payments for the Founders Acquisition ( 62,227,145 ) — — Payments to purchase oil and natural gas properties ( 2,162,585 ) ( 1,563,703 ) ( 1,368,437 ) Payments to develop oil and natural gas properties ( 152,559,314 ) ( 129,332,155 ) ( 51,302,131 ) Payments to acquire or improve fixed assets subject to depreciation ( 492,317 ) ( 319,945 ) ( 568,832 ) Sale of fixed assets subject to depreciation 332,229 134,600 — Proceeds from divestiture of oil and natural gas properties 1,554,558 23,700 2,000,000 Proceeds from sale of Delaware properties 7,600,699 — — Proceeds from sale of New Mexico properties 3,891,757 — — Net Cash Used in Investing Activities ( 222,573,288 ) ( 308,881,290 ) ( 51,239,400 ) Cash Flows From Financing Activities Proceeds from revolving line of credit 225,000,000 636,000,000 60,150,000 Payments on revolving line of credit ( 215,000,000 ) ( 511,000,000 ) ( 83,150,000 ) Proceeds from issuance of common stock and warrants 12,301,596 8,203,126 367,509 Proceeds from option exercise — — 200,000 Payments for taxes withheld on vested restricted shares, net ( 520,153 ) ( 521,199 ) ( 385,330 ) Proceeds from notes payable 1,637,513 1,323,354 1,297,718 Payments on notes payable ( 1,603,659 ) ( 1,409,884 ) ( 711,308 ) Payment of deferred financing costs ( 52,222 ) ( 18,891,528 ) ( 104,818 ) Reduction of financing lease liabilities ( 776,388 ) ( 495,098 ) ( 325,901 ) Net Cash Provided by (Used in) Financing Activities 20,986,687 113,208,771 ( 22,662,130 ) Net Increase (Decrease) in Cash ( 3,416,142 ) 1,304,210 ( 1,170,318 ) Cash at Beginning of Period 3,712,526 2,408,316 3,578,634 Cash at End of Period $ 296,384 $ 3,712,526 $ 2,408,316 F-7 Table of Contents RING ENERGY, INC. STATEMENTS OF CASH FLOWS (CONTINUED) For the Years Ended December 31, 2023 2022 2021 Supplemental Cash Flow Information Cash paid for interest $ 38,009,164 $ 19,818,623 $ 14,110,421 Cash paid for income taxes 72,213 — — Noncash Investing and Financing Activities Asset retirement obligation incurred during development $ 439,528 $ 353,008 $ 171,390 Asset retirement obligation acquired 2,090,777 14,538,550 662,705 Asset retirement obligation revision of estimate 53,826 — 435,419 Asset retirement obligation sold ( 5,340,211 ) — ( 2,934,126 ) Operating lease assets obtained in exchange for new operating lease liability 1,713,677 754,894 839,536 Operating lease asset revision — — ( 621,636 ) Financing lease assets obtained in exchange for new financing lease liability 894,996 952,101 — Change in capitalized expenditures attributable to drilling projects financed through current liabilities ( 2,241,192 ) 9,179,003 309,365 Supplemental Schedule for Founders Acquisition Investing Activities - Cash Paid Escrow deposit released at closing $ 7,500,000 $ — $ — Closing amount paid to Founders 42,502,799 — — Interest from escrow deposit 1,747 — — Direct transaction costs 1,361,843 — — Post-close adjustments ( 4,139,244 ) — — Payment of deferred cash payment 15,000,000 — — Payments for the Founders Acquisition $ 62,227,145 $ — $ — Investing Activities - Noncash Assumption of suspense liability $ 677,116 $ — $ — Assumption of asset retirement obligation 2,090,777 — — Assumption of ad valorem tax liability 234,051 — — Deferred cash payment at fair value 14,657,383 — — 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 ) — Payment of deferred cash payment 15,000,000 — — Payment of post-close settlement 3,511,170 — — Payments for the Stronghold Acquisition $ 18,511,170 $ 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. F-8 Table of Contents RING ENERGY, INC. NOTES TO FINANCIAL STATEMENTS Index to the Notes to the Financial Statements Note 1 — Organization, Basis of Presentation and Summary of Significant Accounting Policies Note 10 — Asset Retirement Obligation Note 2 — Revenue Recognition Note 11 — Stockholders' Equity Note 3 — Leases Note 12 — Employee Stock Options, Restricted Stock Award Plan, and 401(k) Note 4 — Earn ings Per Share Information Note 13 — Related Party Transactions Note 5 — Acquisitions & Divestitures Note 14 — Commitments and Contingencies Note 6 — Oil and Natural Gas Producing Activities Note 15 — Income Taxes Note 7 — Derivative Financial Instruments Note 16 — Legal Matters Note 8 — Fair Value Measurements Note 17 — Subsequent Events Note 9 — Revolving Line of Credit Supplemental Information on Oil and N atural Gas Producing Activities (Unaudited) 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 oil and natural gas 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 the Permian Basin of Texas. Our drilling operations target the oil and liquids rich producing formations in the Northwest Shelf and the Central Basin Platform, in the Permian Basin in Texas. Liquidity and Capital Considerations – The Company strives to maintain an adequate liquidity level to address volatility and risk. Sources of liquidity include the Company’s net cash provided by operating activities, cash on hand, available borrowing capacity under its revolving credit facility, and proceeds from sales of non-strategic assets. While changes in oil and natural gas prices affect the Company’s liquidity, the Company has put in place hedges in seeking to protect a substantial portion of its cash flows from price declines; however, if oil or natural gas prices rapidly deteriorate due to unanticipated economic conditions, this could still have a material adverse effect on the Company’s cash flows. The Company expects ongoing oil price volatility over an indeterminate term. Extended depressed oil prices have historically had and could have a material adverse impact on the Company’s oil revenue, which is mitigated to some extent by the Company’s hedge contracts. The Company is always mindful of oil price volatility and its impact on our liquidity. The Company believes that it has the ability to continue to fund its operations and service its debt by using cash flows from operations. Use of Estimates – The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses during the reporting period. The Company's financial statements are based on a number of significant estimates, including estimates of oil and natural gas reserve quantities, which are the basis for the calculation of depletion and impairment of oil and gas properties. Reserve estimates, by their nature, are inherently imprecise. Actual results could differ from those estimates. Changes in the future estimated oil and natural gas reserves or the estimated future cash flows attributable to the reserves that are utilized for impairment analysis could have a significant impact on the Company's future results of operations. Fair Value Measurements - Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Financial Accounting Standards Board (“FASB”) has established a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure F-9 Table of Contents fair value. This hierarchy consists of three broad levels. Level 1 inputs are the highest priority and consist of unadjusted quoted prices in active markets for identical assets and liabilities. Level 2 are inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. Level 3 are unobservable inputs for an asset or liability. Fair Values of Financial Instruments – The carrying amounts reported for our revolving line of credit approximate their fair value because the underlying instruments are at interest rates which approximate current market rates. The carrying amounts of accounts receivable 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. Fair Value of Non-financial Assets and Liabilities – The Company also applies fair value accounting guidance to initially, or as events dictate, measure non-financial assets and liabilities such as those obtained through business acquisitions, property and equipment and asset retirement obligations. These assets and liabilities are subject to fair value adjustments only in certain circumstances and are not subject to recurring revaluations. Fair value may be estimated using comparable market data, a discounted cash flow method, or a combination of the two as considered appropriate based on the circumstances. Under the discounted cash flow method, estimated future cash flows are based on management’s expectations for the future and include estimates of future oil and natural gas production or other applicable sales estimates, operational costs and a risk-adjusted discount rate. The Company may use the present value of estimated future cash inflows and/or outflows or third-party offers or prices of comparable assets with consideration of current market conditions to value its non-financial assets and liabilities when circumstances dictate determining fair value is necessary. Given the significance of the unobservable nature of a number of the inputs, these are considered Level 3 on the fair value hierarchy. Concentration of Credit Risk and Receivables – Financial instruments that potentially subject the Company to a concentration of credit risk consist principally of cash and receivables. Cash and cash equivalents - The Company has cash in excess of federally insured limits of $ 46,384 and $ 3,462,526 as of December 31, 2023 and 2022, respectively. The Company places its cash with a high credit quality financial institution. The Company has not experienced any losses in such accounts and believes it is not exposed to significant credit risk in this area. Accounts receivable - Substantially all of the Company’s accounts receivable is from purchasers of oil and natural gas. Oil and natural gas sales are generally unsecured. Accounts receivable from purchasers outstanding longer than the contractual payment terms are considered past due. The Company has not had any significant credit losses in the past and believes its accounts receivable are fully collectable. Refer to the " Major Purchasers " section below for detail on purchaser activity for the years ended December 31, 2023, 2022, and 2021. Production imbalances - 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, 2023 or 2022. Joint interest billing receivables, net - 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. Receivables from joint interest owners outstanding longer than the contractual payment terms are considered past due. The following table indicates the Company's provisions for bad debt expense associated with its joint interest billing receivables during the years ended December 31, 2023, 2022, and 2021. For the Years Ended December 31, 2023 2022 2021 Bad debt expense $ 134,007 $ 242,247 $ 0 The following table reflects the Company's joint interest billing receivables and allowance for credit losses as of December 31, 2023 and 2022. F-10 Table of Contents 2023 2022 Joint interest billing receivables $ 2,480,843 $ 1,226,049 Allowance for credit losses ( 58,569 ) ( 242,247 ) Joint interest billing receivables, net $ 2,422,274 $ 983,802 The reduction of $ 183,678 in the allowance for credit losses during the year ended December 31, 2023 was primarily due to a clearing of $ 105,620 in allowances that were associated with the Delaware Basin asset sale. 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. At December 31, 2023 and 2022, the Company had no such investments. Inventory - The full balance of the Company's inventory consists of materials and supplies for its operations, with no work in process or finished goods inventory balances. 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. The Company reports the balance of its inventory at the lower of cost or net realizable 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. Under this method, all costs (direct and indirect) associated with acquisition, exploration, and development of oil and natural gas properties are capitalized. Costs capitalized include acquisition costs, geological and geophysical expenditures, lease rentals on undeveloped properties and costs of drilling and equipping productive and non-productive wells. Drilling costs include directly related overhead costs. 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. Thereafter this liability is accreted up to the final retirement cost. An ARO is a future expenditure related to the disposal or other retirement of certain assets. 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. If the results of an assessment indicate that the properties are impaired, the amount of the impairment is offset to the capitalized costs to be amortized. The following table shows total depletion and the depletion per barrel-of-oil-equivalent rate, for the years ended December 31, 2023, 2022, and 2021. For the Years Ended December 31, 2023 2022 2021 Depletion $ 87,442,546 $ 55,029,956 $ 36,735,070 Depletion rate, per barrel-of-oil-equivalent (Boe) $ 13.22 $ 12.19 $ 11.82 In addition, capitalized costs less accumulated depreciation, depletion and amortization and related deferred income taxes are not allowed to exceed an amount (the full cost ceiling) equal to the sum of: 1) the present value of estimated future net revenues discounted at ten percent computed in compliance with SEC guidelines; 2) plus the cost of properties not being amortized; 3) plus the lower of cost or estimated fair value of unproven properties included in the costs being amortized; 4) less income tax effects related to differences between the book and tax basis of the properties. No impairments on oil and natural gas properties as a result of the ceiling test were recorded for the years ended December 31, 2023, 2022 or 2021. F-11 Table of Contents Land, Buildings, Equipment, Software, Leasehold Improvements, Automobiles, Buildings and Structures – Land, buildings, equipment, software, leasehold improvements, automobiles, buildings and structures are carried at historical cost, adjusted for impairment loss and accumulated depreciation (except for land). Historical costs include all direct costs associated with the acquisition of land, buildings, equipment, software, leasehold improvements, automobiles, buildings and structures and placing them in service. Upon sale or abandonment, the cost of the fixed asset(s) and related accumulated depreciation are removed from the accounts and any gain or loss is recognized. Depreciation of buildings, equipment, software, leasehold improvements, automobiles, buildings and structures is calculated using the straight-line method based upon the following estimated useful lives: Leasehold improvements 3 ‑ 5 years Office equipment and software 3 ‑ 7 years Equipment 5 ‑ 10 years Automobiles 4 years Buildings and structures 7 years The following table provides information on the Company's depreciation expense for the years ended December 31, 2023, 2022, and 2021. For the Years Ended December 31, 2023 2022 2021 Depreciation expense $ 364,024 $ 205,600 $ 124,961 During the year ended December 31, 2023, the Company sold some of its automobiles, and recognized a loss on disposal of $ 87,128 . Accounts Payable The following table summarizes the Company's components of its current accounts payable balance presented in its Balance Sheets at December 31, 2023 and 2022: 2023 2022 Trade accounts payable $ 37,626,348 $ 40,480,684 Revenues payable 44,348,938 43,807,208 Accrued expenses 22,088,838 27,110,376 Accounts payable $ 104,064,124 $ 111,398,268 Trade accounts payable – The following table summarizes the Company's current trade accounts payable at December 31, 2023 and 2022: 2023 2022 Accounts payable related to vendors $ 36,944,263 $ 36,586,007 Other 682,085 3,894,677 Trade accounts payable $ 37,626,348 $ 40,480,684 Revenues payable – The following table summarizes the Company's current revenues and royalties payable at December 31, 2023 and 2022: F-12 Table of Contents 2023 2022 Revenue held in suspense $ 31,592,825 $ 30,180,940 Revenues and royalties payable 12,756,113 13,626,268 Revenues payable $ 44,348,938 $ 43,807,208 Accrued expenses – The following table summarizes the Company's current accrued expenses at December 31, 2023 and 2022: 2023 2022 Accrued capital expenditures $ 7,518,603 $ 9,624,985 Accrued lease operating expenses 6,798,548 6,450,356 Accrued interest 3,684,378 3,222,864 Accrued general and administrative expense 4,047,095 4,076,699 Other 40,214 3,735,472 Accrued expenses $ 22,088,838 $ 27,110,376 Notes Payable – At the end of May 2023, the Company renewed its control of well, general liability, pollution, umbrella, property, workers' compensation, auto, and D&O (directors and officers) insurance policies, and funded the premiums with a promissory note with a total face value after down payments of $ 1,565,071 . In November 2023, the Company renewed its cybersecurity insurance policy, and funded the premium with a promissory note with a total face value after down payments of $ 72,442 . The annual percentage rate (APR) for both notes is 7.08 %. As of December 31, 2023, the notes payable balance included within current liabilities on the balance sheet is $ 533,734 . The weighted average notes payable balance during the years ended December 31, 2023 and 2022 were $ 687,456 and $ 593,766 , respectively. The average interest on the weighted average notes payable balance during the years ended December 31, 2023 and 2022 were 7.23 % and 4.31 %, respectively. The following table shows interest paid related to notes payable for the years ended December 31, 2023, 2022, and 2021. This interest is included within "Interest (expense)" in the Statements of Operations. For the Years Ended December 31, 2023 2022 2021 Interest paid for notes payable $ 49,734 $ 25,579 $ 17,824 Revenue Recognition – In January 2018, the Company adopted Accounting Standards Update (“ASU”) 2014-09 Revenues from Contracts with Customers (Topic 606) (“ASU 2014-09”). The timing of recognizing revenue from the sale of produced crude oil and natural gas was not changed as a result of adopting ASU 2014-09. 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 purchaser. 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 transaction price includes variable consideration as product pricing is based on published market prices and reduced for contract specified differentials (quality, transportation and other variables from benchmark prices). The guidance regarding ASU 2014-09 does not require that the transaction price be fixed or stated in the contract. Estimating the variable consideration does not require significant judgment and Ring 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. 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. Deferred income taxes are provided on differences between the tax basis of assets and liabilities and their carrying amounts in the financial statements, and tax carryforwards. Deferred tax assets and liabilities are included in the financial statements at currently enacted income tax rates applicable to the period in which the deferred tax assets and liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. Since December 31, 2020, the Company determined that a full valuation allowance was necessary due to the Company's assessment that it was more likely than not that it would be unable to obtain the benefits of its deferred tax assets due to the Company’s history of taxable losses. The Company determined that certain existing deferred tax assets would not be offset F-13 Table of Contents by existing deferred tax liabilities as a result of the 80% limitation on the utilization of net operating losses incurred after 2017. Since 2021, commodity prices increased and the Company continues to project positive pre-tax book income. As of June 30, 2023, the Company was no longer in a cumulative loss position. As a result, future forecasted pre-tax book income was considered as positive evidence in assessing the valuation allowance. Based on the change in judgment on the realizability of the related federal deferred tax assets in future years, the Company released $ 24.2 million of valuation allowance as a benefit during the year ended December 31, 2023. The Company recorded the following federal and state income tax benefits (provisions) for the years ended December 31, 2023, 2022, and 2021. For the Years Ended December 31, 2023 2022 2021 Deferred federal income tax benefit (provision) $ 901,522 $ ( 6,437,680 ) $ — Current state income tax provision ( 72,213 ) — — Deferred state income tax provision ( 954,551 ) ( 1,971,044 ) ( 90,342 ) Provision for Income Taxes $ ( 125,242 ) $ ( 8,408,724 ) $ ( 90,342 ) The Company’s overall effective tax rates (calculated as Provision for Income Taxes divided by Income Before Provision for Income Taxes) for the years ended December 31, 2023, 2022, and 2021 were as follows. For the Years Ended December 31, 2023 2022 2021 Effective tax rate 0.1 % 5.7 % 2.6 % These rates were primarily impacted by the release of valuation allowance on the Company's federal net deferred tax asset. A tax benefit of $ 24.2 million was recorded in the year ended December 31, 2023. 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. The Company has identified its federal income tax return and its franchise tax return in Texas in which it operates as a “major” tax jurisdiction. The Company’s federal income tax returns for the years ended December 31, 2019 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 2018 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 NGL 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. See Note 5 — ACQUISITIONS & DIVESTITURES for a discussion of the Stronghold Acquisition. 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. F-14 Table of Contents 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 Purchasers – During the year ended December 31, 2023, sales to three purchasers represented 66 %, 12 %, and 10 %, respectively, of total oil, natural gas, and natural gas liquids sales. As of December 31, 2023, sales outstanding from these three purchasers represented 65 %, 11 %, and 8 %, respectively, of accounts receivable. During the year ended December 31, 2022, sales to three purchasers 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 purchasers represented 69 %, 7 %, and 10 %, respectively, of accounts receivable. During the year ended December 31, 2021, sales to three purchasers represented 76 %, 7 %, and 6 %, respectively, of total oil and natural gas sales. As of December 31, 2021, sales outstanding from these three purchasers represented 75 %, 8 %, and 4 %, respectively, of accounts receivable. Share-Based Employee Compensation – The Company has outstanding stock option grants and restricted stock unit awards to directors, officers and employees, which are described more fully below in "Note 12 — 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 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. Share-Based Compensation - The following table summarizes the Company's share-based compensation, included with General and administrative expense within our Statements of Operations, incurred for the years ended December 31, 2023, 2022, and 2021. For the Years Ended December 31, 2023 2022 2021 Share-based compensation $ 8,833,425 $ 7,162,231 $ 2,418,323 Derivative Instruments and Hedging Activities – The Company periodically enters into derivative contracts to manage its exposure to commodity price risk. These derivative contracts, which are generally placed with major financial institutions, may take the form of forward contracts, futures contracts, swaps or options. The oil and gas reference prices upon which the commodity derivative contracts are based reflect various market indices that have a high degree of historical correlation with actual prices received by the Company for its oil and natural gas production. As the Company has not designated its derivative instruments as hedges for accounting purposes, 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) in the Statements of Operations. When applicable, the Company records all derivative instruments, other than those that meet the normal purchases and sales exception, on the balance sheet as either an asset or liability measured at fair value. Changes in fair value are recognized currently in earnings unless specific hedge accounting criteria are met. Refer to "Note 7 — DERIVATIVE FINANCIAL INSTRUMENTS" for additional information. The Company uses the indirect method of reporting operating cash flows within the Statements of Cash Flows. Accordingly, the non-cash, unrealized gains and losses from derivative contracts are reflected as an adjustment to arrive at Net cash provided by operating activities. The total Gain (loss) on derivative contracts less the Cash received (paid) for derivative settlements, net represents the unrealized (mark to market) gain or loss on derivative contracts. Recently Adopted Accounting Pronouncements – In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). ASU F-15 Table of Contents 2018-13 eliminates, adds and modifies certain disclosure requirements for fair value measurement. ASU 2018-13 became effective for annual and interim periods beginning January 1, 2020. ASU 2018-13 requires that the additional disclosure requirements be adopted using a retrospective approach. The adoption of this guidance did not have a material impact on the Company’s financial statements. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, followed by other related ASUs that provided targeted improvements (collectively “ASU 2016-13”). ASU 2016-13 provides financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The guidance is to be applied using a modified retrospective method and became effective for fiscal years beginning after December 15, 2019. 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 financial statements or disclosures. In December 2019, the FASB released ASU No. 2019-12 (“ASU 2019-12”), Income Taxes (Topic 740) – Simplifying the Accounting for Income Taxes, which removes certain exceptions for recognizing deferred taxes for investments, performing intraperiod allocation and calculating income taxes in interim periods. The ASU also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. The amended standard became effective for fiscal years beginning after December 15, 2020. 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 ("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 was 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. ASU 2020-06 became effective for fiscal years beginning after December 15, 2021. 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. 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 became effective for public business entities beginning after December 15, 2022. The Company adopted ASU 2021-08 effective January 1, 2023. The adoption and implementation of this ASU did not have a material impact on the Company’s financial statements, as its revenue is recognized when control transfers to the purchaser at the point of delivery, and no contract liabilities or assets are recognized in accordance with ASC 606. In July 2023, the FASB issued ASU 2023-03, Presentation of Financial Statements (Topic 205), Income Statement - Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation - Stock Compensation (Topic 718): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 120, SEC Staff Announcement at the March 24, 2022 EITF Meeting, and Staff Accounting Bulletin Topic 6.B, Accounting Series Release 280 - General Revision of Regulation S-X: Income or Loss Applicable to Common Stock . The ASU provided updated views from the SEC Staff on employee and non-employee share-based payment accounting, including guidance related to spring-loaded awards. As the ASU did not provide any new ASC guidance, and there was no transition or effective date provided, the Company adopted this standard upon issuance, and the adoption 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): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), which provided optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that referenced LIBOR ("London Inter-Bank Offered Rate") or another rate. ASU 2020-04 was in effect through December 31, 2022. In January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope (“ASU 2021-01”), to provide clarifying guidance regarding the scope of Topic 848. 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 F-16 Table of Contents effects of) reference rate reform on financial reporting. 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 reference rate. At this time, the Company does not plan to enter into additional contracts using LIBOR as a reference rate. In October 2023, the FASB issued ASU 2023-06, " Disclosure Improvements: Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative ." This update modifies the disclosure or presentation requirements of a variety of Topics in the Codification, which should be applied prospectively. For instance, within ASC 230-10 Statement of Cash Flows - Overall, the amendment requires an accounting policy disclosure in annual periods of where cash flows associated with their derivative instruments and their related gains and losses are presented in the statement of cash flows. Additionally, within ASC 260-10 Earnings Per Share - Overall, the amendment requires disclosure of the methods used in the diluted earnings-per-share computation for each dilutive security and clarifies that certain disclosures should be made during interim periods. The Company is currently assessing the impact of this update on its financial statements and related notes. If by June 30, 2027, the SEC has not removed the applicable requirement from Regulation S-X or Regulation S-K, the pending content of the related amendment will be removed from the Codification and will not become effective for any entity. In November 2023, the FASB issued ASU 2023-07 " Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures ." This update requires that a public entity with multiple reportable segments disclose significant segment expenses that are regularly provided to the chief operating decision maker ("CODM"), as well as other segment items that are included in the calculation of segment profit or loss. A public entity will also be required to disclose all annual disclosures about a reportable segment's profit or loss currently required by Topic 280 in interim periods. Although a public entity is permitted to disclose multiple measures of a segment's profit or loss, at least one of the reported segment profit or loss measures should be consistent with the measurement principles used in measuring the corresponding amounts of the public entity's consolidated financial statements. Further, a public entity must disclose the title and position of the CODM as well as how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. Finally, the update requires that a public entity that has a single reportable segment provide all the disclosures required by the amendments in this update and all existing segment disclosures in Topic 280. The Company is currently assessing the impact of adopting this new guidance on its financial disclosures. The amendments in this update are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. In December 2023, the FASB issued ASU 2023-09 " Income Taxes (Topic 740): Improvements to Income Tax Disclosures. " The amendments from this update provide for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. Specifically, public business entities are required to disclose a tabular reconciliation, using both percentages and reporting currency amounts, showing detail from eight specific categories: (a) state and local income tax net of federal (national) income tax effect, (b) foreign tax effects, (c) effect of changes in tax laws or rates enacted in the current period, (d) effect of cross-border tax laws, (e) tax credits, (f) changes in valuation allowances, (g) nontaxable or nondeductible items, and (h) changes in unrecognized tax benefits. In addition, public business entities are required to separately disclose any reconciling item, disaggregated by nature and/or jurisdiction, in which the effect of the reconciling item is equal to or greater than five percent of the amount computed by multiplying the income (or loss) from continuing operations before income taxes by the applicable statutory income tax rate. Also, for the state and local category, a public business entity is required to provide a qualitative description of the states and local jurisdictions that make up the majority (greater than 50 percent) of the category. Further, the amount of income taxes paid (net of refunds received) are required to be disaggregated by (i) federal (national), state, and foreign taxes, and (ii) by individual jurisdictions in which income taxes paid (net of refunds received) is equal to or greater than five percent of total income taxes paid (net of refunds received). Finally, the amendments from this update require that all entities disclose (i) income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign and (ii) income tax expense (or benefit) from continuing operations disaggregated by federal, state, and foreign. The Company is currently assessing the impact of adopting this new guidance on its financial disclosures. For public business entities, the amendments in this update are effective for annual periods beginning after December 15, 2024. NOTE 2 — REVENUE RECOGNITION The Company predominantly derives its revenue from the sale of produced crude oil, natural gas, and NGLs. The contractual performance obligation is satisfied when the product is delivered to the purchaser. Revenue is recorded in the F-17 Table of Contents 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 purchaser 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. Oil sales 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 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 its Central Basin Platform properties and a portion of its 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 and NGLs 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. 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. There remains only one contract with a natural gas processing entity in place where point of control of gas dictates requiring the fees be recorded as an expense. Disaggregation of Revenue. The following table presents revenues disaggregated by product: For the years ended December 31, 2023 2022 2021 Oil, Natural Gas, and Natural Gas Liquids Revenues Oil $ 349,044,863 $ 321,062,672 $ 181,533,093 Natural gas (1) 334,175 18,693,631 14,772,873 Natural gas liquids (1) 11,676,963 7,493,234 — Total oil, natural gas, and natural gas liquids revenues $ 361,056,001 $ 347,249,537 $ 196,305,966 (1) Beginning on July 1, 2022, the Company began reporting volumes and revenues on a three-stream basis, separately reporting crude oil, natural gas, and NGL sales. For periods prior to July 1, 2022, sales revenues for NGLs were presented with natural gas. F-18 Table of Contents NOTE 3 — LEASES The Company has operating leases for its offices in Midland, Texas and The Woodlands, Texas. The Midland office is under a five-year lease which began January 1, 2021. 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; however, effective as of May 31, 2023, The Woodlands office sub-lease was terminated. On May 9, 2023, the Company entered into a 71-month (five years and 11-month) new lease for a larger amount of office space in The Woodlands, Texas. At the time of the new lease commencement, the additional office space that was added was under construction and until completed, the rental obligation for this space had not yet commenced, because the Company did not have control of the additional office space in accordance with ASC 842-40-55-5. On September 27, 2023, the Company provided a certificate of acceptance of premises to the lessor of the additional office space, and accordingly, the future payments for this space are included along with the other operating leases, reflected in the future lease payments schedule below. During the first quarter of 2021, the Company had an operating lease with Arenaco, LLC for its Tulsa, Oklahoma office. The Tulsa lease was terminated as of March 31, 2021, with payments made until the end of February 2021. Refer to "Note 13 — RELATED PARTY TRANSACTIONS" for further details. The Company has month to month leases for office equipment and compressors used in its operations on which the Company has elected to apply ASU 2016-02 (i.e. to not capitalize). The office equipment and compressors are not subject to ASU 2016-02 based on the agreement and nature of use. These leases are for terms that are less than 12 months and the Company does not intend to continue to lease this equipment for more than 12 months. The lease costs associated with these leases is reflected in the short-term lease costs within Lease operating expenses, shown below. 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. These vehicles are generally sold at the end of their term and the proceeds applied to a new vehicle. Future lease payments associated with these operating and financing leases as of December 31, 2023 are as follows: 2024 2025 2026 2027 2028 Thereafter Operating lease payments (1) $ 675,210 $ 727,460 $ 636,649 $ 460,497 $ 250,606 $ 149,628 Financing lease payments (2) 1,052,449 713,501 240,503 — — — (1) The weighted average annual discount rate as of December 31, 2023 for operating leases was 4.50 %. Based on this rate, the future lease payments above include imputed interest of $ 277,833 . The weighted average remaining term of operating leases was 4.32 years. (2) The weighted average annual discount rate as of December 31, 2023 for financing leases was 6.69 %. Based on this rate, the future lease payments above include imputed interest of $ 143,869 . The weighted average remaining term of financing leases was 2.00 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: F-19 Table of Contents As of December 31, 2023 2022 Operating lease liability, current portion 568,176 398,362 Operating lease liability, non-current portion 2,054,041 1,473,897 Operating lease liability, total 2,622,217 1,872,259 Total undiscounted future cash flows (sum of future operating lease payments) 2,900,050 2,065,580 Imputed interest 277,833 193,321 Undiscounted future cash flows less imputed interest 2,622,217 1,872,259 Financing lease liability, current portion 956,254 709,653 Financing lease liability, non-current portion 906,330 1,052,479 Financing lease liability, total 1,862,584 1,762,132 Total undiscounted future cash flows (sum of future financing lease payments) 2,006,453 1,900,595 Imputed interest 143,869 138,463 Undiscounted future cash flows less imputed interest 1,862,584 1,762,132 The following table provides supplemental information regarding lease costs in the Statements of Operations: 2023 Operating lease costs $ 541,801 Short-term lease costs (1) $ 5,096,723 Financing lease costs: Amortization of financing lease assets (2) $ 803,721 Interest on financing lease liabilities (3) $ 101,269 (1) Amount included in Lease operating expenses (2) Amount included in Depreciation, depletion and amortization (3) Amount included in Interest (expense) NOTE 4 — EARNINGS PER SHARE INFORMATION The following table presents the calculation of the Company's basic and diluted earnings per share for the years ended December 31, 2023, 2022 and 2021. For all dilutive securities, the treasury stock method of calculating the incremental shares is applied. For the years ended December 31, 2023 2022 2021 Net Income $ 104,864,641 $ 138,635,025 $ 3,322,892 Basic Weighted-Average Shares Outstanding 190,589,143 121,264,175 99,387,028 Effect of dilutive securities: Stock options — 83,384 75,897 Restricted stock units 1,292,582 2,040,181 1,613,810 Performance stock units 438,818 248,206 — Common warrants 3,044,307 18,118,722 20,116,440 Diluted Weighted-Average Shares Outstanding 195,364,850 141,754,668 121,193,175 Basic Earnings per Share $ 0.55 $ 1.14 $ 0.03 Diluted Earnings per Share $ 0.54 $ 0.98 $ 0.03 The following table presents the securities which were excluded from the Company's computation of diluted earnings (loss) per share for the years ended December 31, 2023, 2022 and 2021, as their effect would have been anti-dilutive. F-20 Table of Contents 2023 2022 2021 Antidilutive securities: Stock options to purchase common stock 264,966 70,500 113,659 Unvested restricted stock units 56,153 13,512 20,610 Unvested performance stock units 1,445,804 814,255 94,270 NOTE 5 — ACQUISITIONS & DIVESTITURES Andrews County Sale and Exchange The Company entered into a Purchase, Sale and Exchange Agreement effective January 1, 2021, with an unrelated party, covering the sale and exchange of certain oil and gas interests in Andrews County, Texas. Upon closing, the Company received 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 was 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 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 11 — 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. The Stronghold Acquisition was 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 required 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 were categorized as level 3 in the fair value hierarchy. The following table represents the final allocation of the total cost of the Stronghold Acquisition to the assets acquired and liabilities assumed as of the Stronghold Acquisition date: F-21 Table of Contents 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 were included in the Company’s Statements of Operations for the period from September 1, 2022 through December 31, 2022. Delaware Basin Divestiture On May 11, 2023, the Company completed the divestiture of its Delaware Basin assets to an unaffiliated party for $ 8.3 million. The sale had an effective date of March 1, 2023. The final cash consideration was approximately $ 7.6 million. As part of the divestiture, the buyer assumed an asset retirement obligation balance of approximately $ 2.3 million. Founders Acquisition F-22 Table of Contents On July 10, 2023, the Company, as buyer, and Founders Oil & Gas IV, LLC (“Founders”), as seller, entered into an Asset Purchase Agreement (the “Founders Purchase Agreement”). Pursuant to the closing of the Purchase Agreement, on August 15, 2023 the Company acquired (the “Founders Acquisition”) interests in oil and gas leases and related property of Founders located in the Central Basin Platform of the Texas Permian Basin in Ector County, Texas, for a purchase price (the “Purchase Price”) of (i) a cash deposit of $ 7.5 million paid on July 11, 2023 into a third-party escrow account as a deposit pursuant to the Founders Purchase Agreement, (ii) approximately $ 42.5 million in cash paid on the closing date, net of approximately $ 10 million of preliminary and customary purchase price adjustments with an effective date of April 1, 2023, and (iii) a deferred cash payment of approximately $ 11.9 million paid on December 18, 2023, net of customary purchase price adjustments. The Founders Acquisition has been accounted for as an asset acquisition in accordance with ASC 805. 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 Founders Acquisition. Additionally, costs directly related to the Founders Acquisition were capitalized as a component of the purchase price. Determining the fair value of the assets and liabilities acquired required judgment and certain assumptions to be made, the most significant of these being related to the valuation of Founder’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 final allocation of the total cost of the Founders Acquisition to the assets acquired and liabilities assumed as of the Founders Acquisition date: Consideration: Cash consideration Escrow deposit released at closing $ 7,500,000 Closing amount paid to Founders 42,502,799 Interest from escrow deposit 1,747 Fair value of deferred payment liability 14,657,383 Post-close adjustments ( 4,139,244 ) Total cash consideration $ 60,522,685 Direct transaction costs 1,361,843 Total consideration $ 61,884,528 Fair value of assets acquired: Oil and natural gas properties $ 64,886,472 Amount attributable to assets acquired $ 64,886,472 Fair value of liabilities assumed: Suspense liability $ 677,116 Asset retirement obligations 2,090,777 Ad valorem tax liability 234,051 Amount attributable to liabilities assumed $ 3,001,944 Net assets acquired $ 61,884,528 Approximately $ 18.0 million of revenues and $ 5.0 million of direct operating expenses attributed to the Founders Acquisition are included in the Company’s Statements of Operations for the period from August 16, 2023 through December 31, 2023. New Mexico Divestiture On September 27, 2023, the Company completed the divestiture of its operated New Mexico assets to an unaffiliated party for $ 4.5 million, resulting in preliminary cash consideration of approximately $ 3.7 million, subject to customary final purchase price adjustments. The sale had an effective date of June 1, 2023. As part of the divestiture, the buyer assumed an asset retirement obligation balance of approximately $ 2.4 million. F-23 Table of Contents Gaines County Texas Sale On December 29, 2023, the Company completed the sale of specified oil and gas properties within Gaines County, Texas to an unaffiliated party for $ 1.5 million, which resulted in cash proceeds of $ 1.4 million, net of $ 0.1 million in commission fees. The sale had an effective date of December 1, 2023. As part of the sale, the buyer assumed an asset retirement obligation balance of approximately $ 0.5 million. NOTE 6 — OIL AND NATURAL GAS PRODUCING ACTIVITIES Set forth below is certain information regarding the aggregate capitalized costs of oil and natural gas properties and costs incurred by the Company for its oil and natural gas property acquisitions, development and exploration activities: Capitalized Costs As of December 31, 2023 2022 Oil and natural gas properties, full cost method Proved properties 1,663,548,249 1,463,838,595 Unproved properties — — Total oil and natural gas properties, full cost method 1,663,548,249 1,463,838,595 Accumulated depletion of oil and natural gas properties ( 373,280,583 ) ( 287,052,595 ) Net oil and natural gas properties capitalized $ 1,290,267,666 $ 1,176,786,000 Costs Incurred in Oil and Gas Producing Activities For the years Ended December 31, 2023 2022 2021 Payments to acquire oil and natural gas properties $ 82,900,900 $ 179,387,490 $ 1,368,437 Payments to explore oil and natural gas properties — — — Payments to develop oil and natural gas properties 152,559,314 129,332,155 51,302,131 Total costs incurred $ 235,460,214 $ 308,719,645 $ 52,670,568 NOTE 7 — DERIVATIVE FINANCIAL INSTRUMENTS The Company is exposed to fluctuations in crude oil and natural gas prices on its production. It utilizes derivative strategies that consist of either a single derivative instrument or a combination of instruments to manage the variability in cash flows associated with the forecasted sale of our future domestic oil and natural gas production. While the use of derivative instruments may limit or partially reduce the downside risk of adverse commodity price movements, their use also may limit future income from favorable commodity price movements. From time to time, the Company enters into derivative contracts to protect the Company’s cash flow from price fluctuation and maintain its capital programs. The Company has historically used costless collars, deferred premium puts, or swaps for this purpose. Oil derivative contracts are based on WTI crude oil prices and natural gas contacts are based on the Henry Hub. A “costless collar” is the combination of two options, a put option (floor) and call option (ceiling) with the options structured so that the premium paid for the put option will be offset by the premium received from selling the call option. Similar to costless collars, there is no cost to enter into the swap contracts. A 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 of our derivative contracts are 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. Although the counterparties hold the right to offset (i.e. netting) the settlement amounts with the Company, in accordance with ASC 815-10-50-4B, the Company classifies the fair value of all its derivative positions on a gross basis in its Balance Sheets. F-24 Table of Contents 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, 2023 2022 Commodity derivative instruments, marked to market: Derivative assets, current 7,768,697 16,193,327 Discounted deferred premiums ( 1,553,323 ) ( 11,524,165 ) Derivatives assets, current, net of premiums $ 6,215,374 $ 4,669,162 Derivative assets, noncurrent 11,634,714 7,606,258 Discounted deferred premiums — ( 1,476,848 ) Derivative assets, noncurrent, net of premiums $ 11,634,714 $ 6,129,410 Derivative liabilities, current $ 7,520,336 $ 13,345,619 Derivative liabilities, noncurrent $ 11,510,368 $ 10,485,650 The components of “Gain (loss) on derivative contracts” from the Statements of Operations are as follows for the respective periods: For the years ended December 31, 2023 2022 2021 Oil derivatives: Realized loss on oil derivatives $ ( 11,364,484 ) $ ( 61,875,870 ) $ ( 53,511,332 ) Unrealized gain (loss) on oil derivatives 9,462,374 40,546,123 ( 24,143,120 ) Loss on oil derivatives $ ( 1,902,110 ) $ ( 21,329,747 ) $ ( 77,654,452 ) Natural gas derivatives: Realized gain (loss) on natural gas derivatives 2,279,564 ( 650,084 ) 743,178 Unrealized gain (loss) on natural gas derivatives 2,389,708 447,172 ( 941,867 ) Gain (loss) on natural gas derivatives $ 4,669,272 $ ( 202,912 ) $ ( 198,689 ) Gain (loss) on derivative contracts $ 2,767,162 $ ( 21,532,659 ) $ ( 77,853,141 ) The components of “Cash (paid) received for derivative settlements, net” within the Statements of Cash Flows are as follows for the respective periods: F-25 Table of Contents For the years ended December 31, 2023 2022 2021 Cash flows from operating activities Cash paid for oil derivatives $ ( 11,364,484 ) $ ( 61,875,870 ) $ ( 53,511,332 ) Cash (paid) received on natural gas derivatives 2,279,564 ( 650,084 ) 743,178 Cash paid for derivative settlements, net $ ( 9,084,920 ) $ ( 62,525,954 ) $ ( 52,768,154 ) The following tables reflect the details of current derivative contracts as of December 31, 2023 (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) Q1 2024 Q2 2024 Q3 2024 Q4 2024 Q1 2025 Q2 2025 Q3 2025 Q4 2025 Swaps: Hedged volume (Bbl) 170,625 156,975 282,900 368,000 — — 184,000 — Weighted average swap price $ 67.40 $ 66.40 $ 65.49 $ 68.43 $ — $ — $ 73.35 $ — Deferred premium puts: Hedged volume (Bbl) 45,500 45,500 — — — — — — Weighted average strike price $ 84.70 $ 82.80 $ — $ — $ — $ — $ — $ — Weighted average deferred premium price $ 17.15 $ 17.49 $ — $ — $ — $ — $ — $ — Two-way collars: Hedged volume (Bbl) 371,453 334,947 230,000 128,800 474,750 464,100 225,400 404,800 Weighted average put price $ 64.27 $ 64.32 $ 64.00 $ 60.00 $ 57.06 $ 60.00 $ 65.00 $ 60.00 Weighted average call price $ 79.92 $ 79.16 $ 76.50 $ 73.24 $ 75.82 $ 69.85 $ 78.91 $ 75.68 Gas Hedges (Henry Hub) Q1 2024 Q2 2024 Q3 2024 Q4 2024 Q1 2025 Q2 2025 Q3 2025 Q4 2025 NYMEX Swaps: Hedged volume (MMBtu) 101,615 138,053 121,587 644,946 616,199 591,725 285,200 — Weighted average swap price $ 3.62 $ 3.61 $ 3.59 $ 4.45 $ 3.78 $ 3.43 $ 3.73 $ — Two-way collars: Hedged volume (MMBtu) 417,000 605,150 584,200 27,600 27,000 27,300 308,200 598,000 Weighted average put price $ 3.94 $ 3.94 $ 3.94 $ 3.00 $ 3.00 $ 3.00 $ 3.00 $ 3.00 Weighted average call price $ 6.15 $ 6.16 $ 6.17 $ 4.15 $ 4.15 $ 4.15 $ 4.75 $ 4.15 Oil Hedges (basis differential) Q1 2024 Q2 2024 Q3 2024 Q4 2024 Q1 2025 Q2 2025 Q3 2025 Q4 2025 Argus basis swaps: Hedged volume (Bbl) 240,000 364,000 368,000 368,000 270,000 273,000 276,000 276,000 Weighted average spread price (1) $ 1.15 $ 1.15 $ 1.15 $ 1.15 $ 1.00 $ 1.00 $ 1.00 $ 1.00 (1) The oil basis swap hedges are calculated as the fixed price (weighted average spread price above) less the difference between WTI Midland and WTI Cushing, in the issue of Argus Americas Crude. F-26 Table of Contents NOTE 8 — FAIR VALUE MEASUREMENTS Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The authoritative guidance requires disclosure of the framework for measuring fair value and requires that fair value measurements be classified and disclosed in one of the following categories: Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. We consider active markets as those in which transactions for the assets or liabilities occur with sufficient frequency and volume to provide pricing information on an ongoing basis. Level 2: Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability. This category includes those derivative instruments that we value using observable market data. Substantially all of these inputs are observable in the marketplace throughout the full term of the derivative instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace. Level 3: Measured based on prices or valuation models that require inputs that are both significant to the fair value measurement and less observable from objective sources (i.e., supported by little or no market activity). Financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy. We continue to evaluate our inputs to ensure the fair value level classification is appropriate. 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. 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 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. F-27 Table of Contents 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 7 — DERIVATIVE FINANCIAL INSTRUMENTS"). Fair Value Measurement Classification Quoted prices in Active Markets for Identical Assets or (Liabilities) (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total As of December 31, 2022 Commodity Derivatives - Assets $ — $ 10,798,572 $ — $ 10,798,572 Commodity Derivatives - Liabilities — ( 23,831,269 ) — ( 23,831,269 ) Total $ — $ ( 13,032,697 ) $ — $ ( 13,032,697 ) As of December 31, 2023 Commodity Derivatives - Assets $ — $ 17,850,088 $ — $ 17,850,088 Commodity Derivatives - Liabilities — ( 19,030,704 ) — ( 19,030,704 ) Total $ — $ ( 1,180,616 ) $ — $ ( 1,180,616 ) 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. 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. NOTE 9 — REVOLVING LINE OF CREDIT 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 (the "Second Credit Agreement"), extending the maturity date of the facility to August 2026 and the syndicate was modified to add five lenders, replacing five lenders. 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. The borrowing base is redetermined semi-annually each May and November. 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. Rather than Eurodollar loans, the reference rate on the Second Credit Agreement is the SOFR. Also, the Second Credit Agreement permits the Company to declare dividends for its equity owners, subject to certain limitations, including (i) no default or event of default has occurred or will occur upon such payments, (ii) the pro forma 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) does not exceed 2.00 to 1.00, (iii) the amount of such payments does not exceed Available Free Cash Flow (as defined in the Second Credit Agreement), and (iv) the Borrowing Base Utilization Percentage (as defined in the Second Credit Agreement) is not greater than 80 %. 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 F-28 Table of Contents 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 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 Credit Agreement contains certain covenants, which, among other things, require the maintenance of (i) a total Leverage Ratio 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 Credit Agreement) of 1.0 to 1.0. The Second Credit Agreement also contains other customary affirmative and negative covenants and events of default. 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. However, 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 will be 0 % from such hedge testing date to the next succeeding hedge testing date and 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 will be 25 % from such hedge testing date to the next succeeding hedge testing date. As of December 31, 2023, $ 425 million was outstanding on the Credit Facility and the Company was in compliance with all covenants contained in the Second Credit Agreement. Under the Second 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, 2023, the Company's unused line of credit was $ 174.2 million, which was calculated by subtracting the outstanding Credit Facility balance of $ 425 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) from the $ 600 million borrowing base. Note 14 — COMMITMENTS AND CONTINGENCIES describes changes in the surety bonds which did not yet affect the letters of credit (collateral) aforementioned. F-29 Table of Contents NOTE 10 — ASSET RETIREMENT OBLIGATION A reconciliation of the asset retirement obligation for the years ended December 31, 2023, 2022 and 2021 is as follows: Balance, December 31, 2020 $ 17,117,135 Liabilities acquired 662,705 Liabilities incurred 171,390 Liabilities sold ( 2,934,126 ) Liabilities settled ( 904,514 ) Revision of estimate (1) 435,419 Accretion expense 744,045 Balance, December 31, 2021 $ 15,292,054 Liabilities acquired 14,538,550 Liabilities incurred 353,008 Liabilities sold — Liabilities settled ( 940,738 ) Revision of estimate (1) — Accretion expense 983,432 Balance, December 31, 2022 $ 30,226,306 Liabilities acquired 2,090,777 Liabilities incurred 439,528 Liabilities sold ( 5,340,211 ) Liabilities settled ( 647,828 ) Revision of estimate (1) 53,826 Accretion expense 1,425,686 Balance, December 31, 2023 $ 28,248,084 (1) Several factors are considered in the annual review process, including current estimates for removal cost and estimated remaining useful life of the assets. The 2021 revision of estimates primarily reflect updated interests for our working interest partners. The following table presents the Company's current and non-current asset retirement obligation balances as of the periods specified. December 31, 2023 December 31, 2022 Asset retirement obligations, current $ 165,642 $ 635,843 Asset retirement obligations, non-current 28,082,442 29,590,463 Asset retirement obligations $ 28,248,084 $ 30,226,306 NOTE 11 — STOCKHOLDERS' EQUITY The Company was authorized to issue 225,000,000 shares of common stock, with a par value of $ 0.001 per share, and 50,000,000 shares of preferred stock with a par value per share of $ 0.001 per share. On May 25, 2023, at the Company's annual meeting of stockholders, the Company's stockholders approved an amendment (the "Charter Amendment") to the Articles of Incorporation of the Company to increase the authorized shares of common stock from 225,000,000 to 450,000,000 . Issuance of equity instruments in public and private offerings – In October 2020, the Company closed on an underwritten public offering of (i) 9,575,800 shares of common stock, (ii) 13,428,500 Pre-Funded Warrants and (iii) 23,004,300 warrants to purchase common stock (the “Common Warrants”) at a combined purchase price of $ 0.70 . This includes a F-30 Table of Contents partial exercise of the over-allotment. The Common Warrants have a term of five years ending in October 2025 and an exercise price of $ 0.80 per share. Gross proceeds totaled $ 16,089,582 . Concurrently with the underwritten public offering, the Company closed on a registered direct offering of (i) 3,500,000 shares of common stock, (ii) 3,300,000 Pre-Funded Warrants and (iii) 6,800,000 Common Warrants at a combined purchase price of $ 0.70 per share of common stock and Pre-Funded Warrants. The Common Warrants have a term of five years ending in October 2025 and an exercise price of $ 0.80 per share. Gross proceeds totaled $ 4,756,700 . Total gross proceeds from the 2020 underwritten public offering and the registered direct offering aggregated $ 20,846,282 . 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. Gross and net proceeds were $ 3,300 . In January 2021, the remaining 13,428,500 Pre-Funded Warrants were exercised. During the year ended December 31, 2021, 442,600 of the Common Warrants were exercised. Accordingly, the number of Common Warrants outstanding as of December 31, 2021 was 29,361,700 . During the year ended December 31, 2022, a total of 10,253,907 Common Warrants were exercised, leaving 19,107,793 Common Warrants outstanding as of December 31, 2022. During February and March 2023, a total of 4,517,427 Common Warrants were exercised, at the exercise price of $ 0.80 per share. On April 11 and 12, 2023, the Company and certain holders of the common warrants (the “Participating Holders”) entered into a form of Warrant Amendment and Exercise Agreement (the “Exercise Agreement”) pursuant to which the Company agreed to reduce the exercise price of an aggregate of 14,512,166 common warrants held by such Participating Holders from $ 0.80 to $ 0.62 per share (the “Reduced Exercise Price”) in consideration for the immediate exercise of the common warrants held by such Participating Holders in full at the Reduced Exercise Price in cash. The Company received aggregate gross proceeds of $ 8,997,543 from the exercise of the common warrants by the Participating Holders pursuant to the Exercise Agreement, which was recognized as an equity issuance cost in accordance with ASC 815-40-35-17(a). In the Statements of Stockholders' Equity, the net impact to Stockholders' Equity is $ 8,687,655 , which is net of $ 309,888 in advisory fees. As of December 31, 2023, a total of 78,200 Common Warrants remained outstanding. 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. F-31 Table of Contents Common stock issued for option exercises – During the years ended December 31, 2022 and 2021, the Company issued 52,494 and 100,000 shares of common stock as a result of stock option exercises, respectively. No stock options were exercised in 2023. The following tables present the details of the exercises: Options exercised Exercise price ($) Shares issued Shares retained Cash paid at exercise ($) Stock price on date of exercise ($) Aggregate value of shares retained ($) 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 Options 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 12 — EMPLOYEE STOCK OPTIONS, RESTRICTED STOCK AWARD PLAN, AND 401(K) Compensation expense charged against income for share-based awards during the years ended December 31, 2023, 2022, and 2021 was $ 8,833,425 , $ 7,162,231 , and $ 2,418,323 , respectively. These amounts are included in General and administrative expense in the Statements of Operations. In 2011, the Board approved and adopted a long-term incentive plan (the “2011 Plan”), which was subsequently approved and amended by the shareholders. There were 536,755 shares eligible for grant, either as stock options or as restricted stock, as of December 31, 2023. In 2021, the Board approved and adopted the Ring Energy, Inc. 2021 Omnibus Incentive Plan (the “2021 Plan”), which was subsequently approved by the shareholders at the 2021 Annual Meeting. The 2021 Plan provides that the Company may grant options, stock appreciation rights, restricted shares, restricted stock units, performance-based awards, other share-based awards, other cash-based awards, or any combination of the foregoing. At the 2023 Annual Meeting, the shareholders approved an amendment to the 2021 Plan to increase the number of shares available under the 2021 Plan by 6.0 million. Accordingly, there were 8,224,394 shares available for grant as of December 31, 2023 under the 2021 Plan. Employee Stock Options – No stock options were granted in the years ended December 31, 2023, 2022, or 2021. All outstanding stock option awards vest at the rate of 20 % each year over five years beginning one year from the date granted F-32 Table of Contents and expire ten years from the grant date. A summary of the status of the stock options as of December 31, 2023, 2022, and 2021 and changes during the years ended December 31, 2023, 2022, and 2021 is as follows: 2023 2022 2021 Options Weighted- Average Exercise Price Options Weighted- Average Exercise Price Options Weighted- Average Exercise Price Outstanding at beginning of year 265,500 $ 4.21 365,500 $ 3.61 465,500 $ 3.26 Granted — — — — — — Forfeited — — — — — — Expired ( 195,000 ) 2.00 — — — — Exercised — — ( 100,000 ) 2.00 ( 100,000 ) 2.00 Outstanding at end of year 70,500 $ 10.33 265,500 $ 4.21 365,500 $ 3.61 Exercisable at end of year 70,500 $ 10.33 265,500 $ 4.21 365,500 $ 3.61 For the years ended December 31, 2023, 2022, and 2021, the Company incurred share-based compensation expense related to stock options of $ 0 , $ 0 , and $ 20,934 , respectively. As of December 31, 2023, the Company had $ 0 of unrecognized compensation cost related to stock options. The aggregate intrinsic value of options vested and expected to vest as of December 31, 2023 was $ 0 . The aggregate intrinsic value of options exercisable at December 31, 2023 was $ 0 . The year-end intrinsic values are based on a December 31, 2023 closing stock price of $ 1.46 . No stock options were exercised during 2023. 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 . The following table summarizes information related to the Company’s stock options outstanding as of December 31, 2023: Options Outstanding Exercise price Number Outstanding Weighted- Average Remaining Contractual Life (in years) Number Exercisable 5.50 5,000 0.21 5,000 14.54 10,000 1.74 10,000 8.00 4,500 1.92 4,500 6.42 15,000 2.34 15,000 11.75 36,000 2.95 36,000 $ 10.33 70,500 2.39 70,500 F-33 Table of Contents Restricted stock unit grants – Following is a table reflecting the restricted stock unit grants during 2023, 2022 and 2021: Grant date # of restricted stock units April 30, 2021 33,950 June 17, 2021 1,162,152 July 6, 2021 11,824 July 12, 2021 4,007 September 1, 2021 10,417 September 8, 2021 3,306 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 February 16, 2023 2,270,842 Restricted stock unit 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 unit 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 2021 restricted stock unit 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 for 2022 restricted stock units. Forfeitures are recognized as a reduction to share-based compensation expense in the period of occurrence. A summary of the status of restricted stock unit grants and changes during the years ended December 31, 2023, 2022 and 2021 is as follows: 2023 2022 2021 Restricted stock units Weighted- Average Grant Date Fair Value Restricted stock units Weighted- Average Grant Date Fair Value Restricted stock units Weighted- Average Grant Date Fair Value Outstanding at beginning of year 2,623,790 $ 2.29 2,572,596 $ 1.75 2,132,297 $ 2.94 Granted 2,270,842 2.22 1,393,273 2.83 1,225,656 2.77 Forfeited or rescinded ( 66,174 ) 2.22 ( 31,185 ) 2.83 — — Vested ( 1,680,232 ) 1.99 ( 1,310,894 ) 1.79 ( 785,357 ) 1.37 Outstanding at end of year 3,148,226 $ 2.40 2,623,790 $ 2.29 2,572,596 $ 1.75 For the years ended December 31, 2023, 2022 and 2021, the Company incurred share-based compensation expense related to restricted stock unit grants of $ 4,537,026 , $ 4,148,639 , and $ 2,225,895 , respectively. As of December 31, 2023, the Company had $ 2,778,549 of unrecognized compensation cost related to restricted stock unit grants that will be recognized over a weighted average period of 1.72 years. During 2023, 2022, and 2021, 1,680,232 , 1,310,894 , and 785,357 restricted stock units vested, respectively. At the dates of vesting those restricted stock units had an aggregate intrinsic value of $ 3,203,568 , $ 3,807,996 , and $ 2,049,603 , respectively. Performance Stock Units - In accordance with the 2021 Plan, as of November 22, 2021, the Company entered into performance stock unit (“PSU”) agreements (the “PSU Agreement”) with certain employees. The PSUs are performance-based restricted stock units subject to the terms of the 2021 Plan and the PSU Agreement. Upon Board approval, a total of F-34 Table of Contents 860,216 PSUs 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 ended on December 31, 2023. Based on the achievement of the performance goals for the 2021 PSU Awards, a total of 1,170,024 PSUs vested on December 31, 2023. On February 9, 2022, the Company granted a total of 860,216 PSUs 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. The PSUs are performance-based restricted stock units subject to the terms of the 2021 Plan and the PSU Agreement. On February 16, 2023, the Company granted a total of 1,162,162 PSUs to the Company's five executive officers (the "2023 PSU Awards"). The performance period for the 2023 PSU Awards began on January 1, 2023, and will end on December 31, 2025. A summary of the status of the PSU awards and changes during the years ended December 31, 2023, 2022 and 2021 are as follows: 2023 2022 2021 Performance Stock Units Weighted- Average Grant Date Fair Value Performance Stock Units Weighted- Average Grant Date Fair Value Performance Stock Units Weighted- Average Grant Date Fair Value Outstanding at beginning of year 1,720,432 $ 3.76 860,216 $ 3.87 — $ — Granted 1,162,162 2.71 860,216 3.65 860,216 3.87 Incremental performance stock units vested 309,808 — — — — — Forfeited or rescinded — — — — — — Vested ( 1,170,024 ) 3.66 — — — — Outstanding at end of year 2,022,378 $ 3.11 1,720,432 $ 3.76 860,216 $ 3.87 No forfeitures for the PSU awards have been recognized as of December 31, 2023, but the Company would recognize any such forfeitures in the period of occurrence as a reduction to share-based compensation expense. For the years ended December 31, 2023, 2022 and 2021, the Company incurred share-based compensation expense related to the PSU Awards of $ 4,296,399 , $ 3,013,592 , and $ 171,494 , respectively. As of December 31, 2023, the Company had $ 4,015,133 of unrecognized compensation cost related to the PSU Awards that will be recognized over a weighted average period of 1.57 years. During 2023, 1,170,024 PSUs vested. At the dates of vesting those PSUs had an aggregate intrinsic value of $ 1,708,235 . 401(k) Plan - In 2019, the Company initiated a sponsored 401(k) plan that is a defined contribution plan for the benefit of all eligible employees. The plan allows eligible employees, after a three-month waiting period, to make pre-tax or after-tax contributions, not to exceed annual limits established by the federal government. The Company makes matching contributions of up to 6 % of any employee’s compensation. Employees are 100 % vested in the employer contribution upon receipt. The following table presents the matching contributions expense recognized for the Company’s 401(k) plan for the years ended December 31, 2023, 2022, and 2021: 2023 2022 2021 Employer safe harbor match $ 346,268 $ 284,094 $ 228,273 NOTE 13 — RELATED PARTY TRANSACTIONS The Company leased office space in Tulsa, Oklahoma, from Arenaco, LLC (“Arenaco”), a company that was owned by two stockholders of the Company, Mr. Rochford, former Chairman of the Board, and Mr. McCabe, a former director of the Company. During the year ended December 31, 2021, the Company paid $ 10,000 to Arenaco. The month-to-month Arenaco lease was terminated as of March 31, 2021. F-35 Table of Contents During June 2021, the Company began using Pro-Ject Chemicals, LLC (“PJ Chemicals”) to perform various chemical services on its wells. As publicly disclosed on the Company’s website, Paul D. 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. Mr. 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 was no longer on the board of directors of Pro-Ject Holdings, LLC. NOTE 14 — COMMITMENTS AND CONTINGENCIES Standby Letters of Credit – A commercial bank issued standby letters of credit on behalf of the Company totaling $ 260,000 to state and federal agencies and $ 500,438 to an insurance company to secure the surety bonds described below. The standby letters of credit are valid until cancelled or matured and are collateralized by the revolving credit facility with the bank. The terms of the letters of credit to the state and federal agencies are extended for a term of one year at a time. The Company intends to renew the standby letters of credit to the state and federal agencies for as long as the Company does business in the State of Texas. The letters of credit to the insurance company will be renewed if the insurance requires them to retain the surety bonds; however, as the Company no longer operates any wells in the State of New Mexico, these standby letters of credit will not be renewed. No amounts have been drawn under the standby letters of credit. Surety Bonds – An insurance company issued surety bonds on behalf of the Company totaling $ 500,438 to various State of New Mexico agencies in order for the Company to do business in the State of New Mexico. The surety bonds are valid until canceled or matured. The terms of the surety bonds are extended for a term of one year at a time. The Company does not intend to renew the surety bonds in the State of New Mexico, as these operated assets have now been sold to a third party. As of December 31, 2023, the Company had remaining surety bonds in total of $ 25,000 . NOTE 15 — INCOME TAXES For the years ended December 31, 2023, 2022, and 2021, components of our provision for income taxes are as follows: Provision for Income Taxes: 2023 2022 2021 Federal deferred tax $ ( 901,522 ) $ 6,437,680 $ — State current tax 72,213 — — State deferred tax 954,551 1,971,044 90,342 Provision for Income Taxes $ 125,242 $ 8,408,724 $ 90,342 The following is a reconciliation of income taxes computed using the U.S. federal statutory rate to the provision for income taxes: Rate Reconciliation: 2023 2022 2021 Pre-tax book income (1) $ 104,917,670 $ 147,043,749 $ 3,413,234 Tax at federal statutory rate $ 22,032,711 $ 30,879,187 $ 716,779 Excess tax benefit from stock option exercises and restricted stock vesting 478,304 ( 312,268 ) ( 175,187 ) Adjust prior estimates to tax return ( 474,617 ) 214,740 2,938,948 States taxes, net of federal benefit 1,122,782 1,443,145 430,654 Valuation allowance ( 24,182,975 ) ( 24,151,242 ) ( 3,827,194 ) Non-deductible expenses and other 1,149,037 335,162 6,342 Provision for Income Taxes $ 125,242 $ 8,408,724 $ 90,342 (1) Amount represents pre-tax book income, net of income taxes paid. F-36 Table of Contents 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, 2023 and 2022: 12/31/2023 Total 12/31/2022 Total Deferred Tax Assets Net operating loss (NOL) carryforward 82,011,212 70,564,004 Equity compensation 1,372,277 1,554,680 Asset retirement obligation 6,165,239 6,635,099 Fair market value of derivatives 224,209 2,827,202 §163(j) business interest expense carryforward 12,854,900 4,917,358 Others 1,638,297 1,173,441 Gross Deferred Tax Assets 104,266,134 87,671,784 Less: valuation allowance — ( 24,182,975 ) Net Deferred Tax Assets 104,266,134 63,488,809 Deferred Tax Liabilities Property and equipment ( 111,872,367 ) ( 71,402,820 ) Other ( 945,812 ) ( 585,005 ) Net Deferred Liabilities ( 112,818,179 ) ( 71,987,825 ) Net Deferred Tax Liabilities ( 8,552,045 ) ( 8,499,016 ) As of December 31, 2023, 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 $ 279.2 million that can be carried forward indefinitely. 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, 2023, we carried a valuation allowance against our federal and state deferred tax assets of $ 0 . 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. As of June 30, 2023, the Company was no longer in a cumulative loss position. As a result, future forecasted pre-tax book income was considered as positive evidence in assessing the valuation allowance. Based on the change in judgment on the realizability of the related federal deferred tax assets in future years, the Company released $ 24.2 million of valuation allowance as a benefit during the year ended December 31, 2023. This resulted in an ending federal net deferred tax liability of $ 5,536,158 . Additionally, the Company reported a net state deferred tax liability at December 31, 2023 of $ 3,015,887 attributable to certain state deferred tax liabilities mainly associated with property and equipment. NOTE 16 — 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. The plaintiff, EPUS Permian Assets, LLC, claims breach of F-37 Table of Contents 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 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. The Company believes that the claims by the plaintiff are entirely without merit and is conducting a vigorous defense and counterclaim. 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 have begun taking depositions and are conducting discovery. NOTE 17 — SUBSEQUENT EVENTS Surety Bonds - On January 10, 2024, two insurance companies issued surety bonds on behalf of the Company, one for $ 250,000 , an RRC required blanket performance bond to operate 100 wells or more in the State of Texas, and one for $ 2,000,000 , an RRC required blanket plugging extension bond, each with zero collateral requirements. The term for these two surety bonds ends on July 1, 2025 and can be renewed at that time. First Amendment to Second Amended and Restated Credit Agreement - On February 12, 2024, the Company, Truist Bank ("Truist") as the Administrative Agent and Issuing Bank, and the lenders party thereto (the "Lenders") entered into an amendment (the "Amendment") to the Second Amended and Restated Credit Agreement dated August 31, 2022, by and among the Company, as Borrower, Truist as Administrative Agent and Issuing Bank, and the Lenders (together with all amendments or other modifications, the "Credit Agreement"). Among other things, the Amendment amends the definition of Free Cash Flow so amounts used by the Company for acquisitions will no longer be subtracted from the calculation of Free Cash Flow. F-38 Table of Contents RING ENERGY, INC. SUPPLEMENTAL INFORMATION ON OIL AND NATURAL GAS PRODUCING ACTIVITIES (Unaudited) Results of Operations from Oil and Natural Gas Producing Activities – The Company’s results of operations from oil and natural gas producing activities exclude interest expense, gain from change in fair value of derivatives, and other financing expense. For the years ended December 31, 2023 2022 2021 Oil, natural gas, and natural gas liquids sales $ 361,056,001 $ 347,249,537 $ 196,305,966 Lease operating expenses (70,158,227) (47,695,351) (30,312,399) Gathering, transportation and processing costs (457,573) (1,830,024) (4,333,232) Ad valorem taxes (6,757,841) (4,670,617) (2,276,463) Production taxes (18,135,336) (17,125,982) (9,123,420) Depreciation, depletion, and amortization (88,610,291) (55,740,767) (37,167,967) General and administrative (exclusive of corporate overhead) (2,839,401) (1,617,095) (2,003,876) Income tax expense (208,917) (12,502,187) (2,943,848) Results of Oil and Natural Gas Producing Operations $ 173,888,415 $ 206,067,514 $ 108,144,761 Costs Incurred in Oil and Gas Producing Activities For the years Ended December 31, 2023 2022 2021 Payments to acquire oil and natural gas properties $ 82,900,900 $ 179,387,490 $ 1,368,437 Payments to explore oil and natural gas properties — — — Payments to develop oil and natural gas properties 152,559,314 129,332,155 51,302,131 Total costs incurred $ 235,460,214 $ 308,719,645 $ 52,670,568 Capitalized Costs As of December 31, 2023 2022 Oil and natural gas properties, full cost method Proved properties 1,663,548,249 1,463,838,595 Unproved properties — — Total oil and natural gas properties, full cost method 1,663,548,249 1,463,838,595 Accumulated depletion of oil and natural gas properties (373,280,583) (287,052,595) Net oil and natural gas properties capitalized $ 1,290,267,666 $ 1,176,786,000 Reserve Quantities Information – The following estimates of proved and proved developed reserve quantities and related standardized measure of discounted future net cash flow are estimates only, and do not purport to reflect realizable values or fair market values of the Company’s reserves. The Company emphasizes that reserve estimates are inherently imprecise and that estimates of new discoveries are more imprecise than those of producing oil and natural gas properties. Accordingly, these estimates are expected to change as future information becomes available. All of the Company’s reserves are located in the United States of America. The proved reserves estimates shown herein for the years ended December 31, 2023, 2022 and 2021 have been prepared by Cawley, Gillespie & Associates, Inc., independent petroleum engineers. 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 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. Reserve engineering is a subjective process of estimating underground accumulations of oil and natural F-39 Table of Contents gas that cannot be measured in an exact manner. The accuracy of any reserve estimate is a function of the quality of available data and engineering and geological interpretation and judgment. As a result, estimates by different engineers may vary. In addition, results of drilling, testing and production subsequent to the date of an estimate may lead to revising the original estimate. 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. 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. The oil prices as of December 31, 2023, 2022 and 2021 are based on the respective 12-month unweighted average of the first of the month prices of the WTI spot prices which equates to $74.70 per barrel, $90.15 per barrel and $63.04 per barrel, respectively. The natural gas prices as of December 31, 2023, 2022 and 2021 are based on the respective 12-month unweighted average of the first of month prices of the Henry Hub spot price which equates to $2.637 per MMBtu, $6.358 per MMBtu and $3.598 per MMBtu, respectively. Prices are adjusted by local field and lease level differentials and are held constant for life of reserves in accordance with SEC guidelines. Proved reserves are estimated reserves of crude oil (including condensate and NGLs) and natural gas that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions. Proved developed reserves are those expected to be recovered through existing wells, equipment and methods. For the Year Ended December 31, 2023 Oil (1) Natural Gas (1) Natural Gas Liquids (1) Boe Proved Developed and Undeveloped Reserves Beginning of year 88,704,743 157,870,449 23,105,658 138,122,143 Purchase of minerals in place 6,543,640 3,372,965 1,089,382 8,195,183 Extensions, discoveries and improved recovery 3,098,845 4,113,480 1,014,343 4,798,768 Sales of minerals in place (4,897,921) (2,674,955) (392,953) (5,736,700) Production (4,579,942) (6,339,158) (976,852) (6,613,320) Revisions of previous quantity estimates (6,728,088) (9,946,459) (621,014) (9,006,845) End of year 82,141,277 146,396,322 23,218,564 129,759,229 Proved Developed at beginning of year 57,012,137 106,399,050 15,332,804 90,078,116 Proved Undeveloped at beginning of year 31,692,606 51,471,399 7,772,854 48,044,027 Proved Developed at end of year 56,029,039 99,896,022 15,449,907 88,128,284 Proved Undeveloped at end of year 26,112,238 46,500,300 7,768,657 41,630,945 F-40 Table of Contents For the Year Ended December 31, 2022 Oil (1) Natural Gas (1) Natural Gas Liquids (1) Boe Proved Developed and Undeveloped Reserves Beginning of year 65,838,609 71,773,789 — 77,800,907 Purchase of minerals in place 28,086,920 108,456,107 16,715,626 62,878,564 Extensions, discoveries and improved recovery 628,978 522,178 52,810 768,818 Sales of minerals in place — — — — Production (3,459,477) (4,088,642) (371,337) (4,512,254) Revisions of previous quantity estimates (2,390,287) (18,792,983) 6,708,559 1,186,108 End of year 88,704,743 157,870,449 23,105,658 138,122,143 Proved Developed at beginning of year 36,820,824 39,748,880 — 43,445,637 Proved Undeveloped at beginning of year 29,017,785 32,024,909 — 34,355,270 Proved Developed at end of year 57,012,137 106,399,050 15,332,804 90,078,116 Proved Undeveloped at end of year 31,692,606 51,471,399 7,772,854 48,044,027 (1) Oil reserves are stated in barrels; natural gas reserves are stated in thousand cubic feet; NGL 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. Notable changes in proved reserves for the year ended December 31, 2023 included the following: • Extensions. In 2023, extensions of 4.8 MMBoe were primarily the result of the successful operated drilling program and non-operated activity in the Northwest Shelf and Central Basin Platform. • Purchase of minerals in place. In 2023, the Company completed the acquisition of Founders oil and gas leases and related property within Ector County that resulted in 8.2 MMBoe in additional reserves. • Sales of minerals in place. In 2023, the Company sold 5.7 MMBoe from the divestiture of the Delaware Basin assets (30%), the New Mexico operated assets (57%), and part of the Company's assets in Gaines County (13%). • Revision of previous estimates. In 2023, the negative revisions of prior reserves of 9.0 MMBoe consisted of 5.3 MMBoe (59%) related to changes in price and 3.7 MMBoe (41%) related to changes in performance and other economic factors. 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. The estimated future net cash flows are then discounted using a rate of 10 percent per year to reflect the estimated timing of the future cash flows. F-41 Table of Contents Standardized Measure of Discounted Future Net Cash Flows December 31, 2023 2022 2021 Future cash inflows $ 6,622,410,752 $ 9,871,961,000 $ 4,853,709,000 Future production costs (2,413,303,488) (2,751,896,250) (1,395,437,250) Future development costs (1) (562,063,424) (647,196,750) (347,757,000) Future income taxes (548,664,988) (1,142,147,641) (501,586,949) Future net cash flows 3,098,378,852 5,330,720,359 2,608,927,801 10% annual discount for estimated timing of cash flows (1,699,193,661) (3,058,606,841) (1,471,562,953) Standardized Measure of Discounted Future Net Cash Flows $ 1,399,185,191 $ 2,272,113,518 $ 1,137,364,848 (1) Future development costs include not only development costs but also future asset retirement costs. 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, 2023: Changes in Standardized Measure of Discounted Future Net Cash Flows 2023 2022 2021 Beginning of the year $ 2,272,113,518 $ 1,137,364,848 $ 555,871,253 Purchase of minerals in place 141,738,066 996,313,882 33,688,718 Extensions, discoveries and improved recovery 57,607,609 20,447,842 79,003,885 Development costs incurred during the year 70,697,664 67,454,522 17,513,180 Sales of oil and gas produced, net of production costs (266,004,598) (283,588,498) (154,615,685) Sales of minerals in place (59,600,128) — (2,523,746) Accretion of discount 277,365,650 133,209,763 63,810,764 Net changes in price and production costs (1,181,594,019) 646,819,172 636,884,944 Net change in estimated future development costs 37,865,811 (53,253,626) (44,357,751) Revisions of previous quantity estimates (187,443,783) 33,583,837 (22,259,508) Changes in estimated timing of cash flows (17,257,348) (119,428,019) 86,845,188 Net change in income taxes 253,696,749 (306,810,205) (112,496,394) End of the Year $ 1,399,185,191 $ 2,272,113,518 $ 1,137,364,848 F-42