Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 7A: Quantitative and Qualitative Disclosures About Market Risk
Commodity Price Risk
Our major market risk exposure is in the pricing applicable to our oil and natural gas production. Market risk refers to the risk of loss from adverse changes in oil and natural gas prices. Realized pricing is primarily driven by the prevailing domestic price for crude oil and spot prices applicable to the region in which we produce oil and natural gas. Historically, prices received for oil and natural gas production have been volatile and unpredictable. We expect pricing volatility to continue.
The prices we receive depend on many factors outside of our control. Oil prices received during 2024 ranged from a monthly average low of $67.84 per barrel to a monthly average high of $84.43 per barrel. Natural gas prices realized during 2024 ranged from a monthly average low of $(2.38) per Mcf to a monthly average high of $0.91 per Mcf. In some months, fees exceeded the pricing, causing a negative net realized price. Gross natural gas prices ranged from a monthly average low of $(0.82) per Mcf to a monthly average high of $2.43 per Mcf. Fees ranged from a monthly average low of $(1.88) per Mcf to a monthly average high of $(1.44) per Mcf. NGL prices received during 2024 ranged from a monthly average low of $7.04 per barrel to a monthly average high of $12.43 per barrel. A significant decline in the prices of oil or natural gas would likely have a material adverse effect on our financial condition and results of operations. In order to reduce commodity price uncertainty and increase cash flow predictability relating to the marketing of our crude oil and natural gas, we enter into crude oil and natural gas price hedging arrangements with respect to a portion of our expected production. The following table summarizes the Company's hedges in place on a monthly basis by commodity type. See "NOTE 7 — DERIVATIVE FINANCIAL INSTRUMENTS" to our financial statements for further information.
60
Table of Contents
Oil Hedges (WTI) Gas Hedges (Henry Hub)
Month Average BBL/day Average MMBtu/day
January 2025 7,420 —
February 2025 10,939 8,557
March 2025 9,963 7,558
April 2025 10,008 7,643
May 2025 9,616 7,248
June 2025 9,684 7,350
July 2025 9,333 6,987
August 2025 9,203 6,863
September 2025 9,290 6,970
October 2025 8,977 6,632
November 2025 9,071 6,743
December 2025 8,779 6,500
January 2026 5,211 6,327
February 2026 5,681 6,904
March 2026 5,056 6,150
April 2026 5,150 6,257
May 2026 4,914 5,971
June 2026 5,010 6,083
July 2026 4,781 5,809
August 2026 4,721 5,732
September 2026 4,817 5,846
October 2026 4,603 5,584
November 2026 4,700 5,703
December 2026 4,494 5,455
Customer Credit Risk
Our principal exposure to credit risk is through receivables from the sale of our oil and natural gas production (approximately $33.8 million as of December 31, 2024). We are subject to credit risk due to the concentration of our oil and natural gas receivables with our most significant customers, or purchasers. We do not require our purchasers to post collateral, and the inability of our significant purchasers to meet their obligations to us or their insolvency or liquidation may adversely affect our financial results. The following table sets forth certain information regarding the top three purchasers of our oil, natural gas, and NGLs for the year ended December 31, 2024. We believe that the loss of any of these purchasers would not materially impact our business because we could readily find other purchasers for our oil and natural gas.
61
Table of Contents
For the Year Ended
As of
December 31, 2024
December 31, 2024
Percentage of Oil, Natural Gas, and Natural Gas Liquids Revenues
Percentage of accounts receivables from the sale of our oil and natural gas production
Purchaser:
Phillips 66 Company ("Phillips")
61%
64%
Concord Energy LLC ("Concord") 14% 11%
LPC Crude III, LLC ("LPC") 13% 11%
Interest Rate Risk
We are subject to market risk exposure related to changes in interest rates on our indebtedness under our Credit Facility, which bears variable interest based upon a prime rate and is therefore susceptible to interest rate fluctuations. Changes in interest rates affect the interest earned on the Company’s cash and cash equivalents and the interest rate paid on borrowings under the Credit Facility.
As of December 31, 2024, we had $385 million outstanding on our Credit Facility with a weighted average annual interest rate for the year then ended of 9.2%. A 1% change in the interest rate on our Credit Facility would result in an estimated $3.9 million change in our annual interest expense. See "NOTE 9 — REVOLVING LINE OF CREDIT" in the notes to the financial statements for more information on the Company’s interest rates of our Credit Facility.
Currently, we do not use interest rate derivative instruments to manage exposure to interest rate changes.
Currency Exchange Rate Risk
Foreign sales accounted for none of the Company's sales; the Company accepts payment for its commodity sales only in U.S. dollars. Ring is therefore not exposed to foreign currency exchange rate risk on these sales.
Please also see Item 1A “Risk Factors” above for a discussion of other risks and uncertainties we face in our business.
Item 8: Financial Statements and Supplementary Data
The financial statements and supplementary data required by this item are included beginning at page F-1 of this Annual Report.
Item 9: Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.