Ring Energy, Inc. Quarterly report [Sections 13 or 15(d)]

Quarterly report [Sections 13 or 15(d)]

LEASES

LEASES

3 Months Ended

Mar. 31, 2025

NOTE 3 — LEASES

The Company has operating leases for its offices in Midland, Texas and The Woodlands, Texas. The Midland office was originally 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. The future payments for these office spaces are reflected in the future lease payments schedule below.

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 an initial 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 are settled in cash or applied to a new vehicle.

Future lease payments associated with these operating and financing leases as of March 31, 2025 are as follows:


	2025		2026		2027		2028		2029		Other Future Years		Total
Operating lease payments (1)	$	547,077	$	636,649	$	460,497	$	250,606	$	149,628	$	—	$	2,044,457
Financing lease payments (2)	749,113		647,580		262,333		17,609		—		—		1,676,635

(1)The weighted average annual discount rate as of March 31, 2025 for operating leases was 4.50%. Based on this rate, the future lease payments above include imputed interest of $148,280. The weighted average remaining term of operating leases was 3.25 years.

(2)The weighted average annual discount rate as of March 31, 2025 for financing leases was 7.45%. Based on this rate, the future lease payments above include imputed interest of $121,951. The weighted average remaining term of financing leases was 1.87 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 Condensed Balance Sheets:


	As of
	March 31, 2025		December 31, 2024
Operating lease liability, current portion	$	661,487	$	648,204
Operating lease liability, non-current portion	1,234,690		1,405,837
Operating lease liability, total	$	1,896,177	$	2,054,041
Total undiscounted future cash flows (sum of future operating lease payments)	2,044,457		2,224,840
Imputed interest	148,280		170,799
Undiscounted future cash flows less imputed interest	$	1,896,177	$	2,054,041

Financing lease liability, current portion	$	846,380	$	906,119
Financing lease liability, non-current portion	708,304		647,078
Financing lease liability, total	$	1,554,684	$	1,553,197
Total undiscounted future cash flows (sum of future financing lease payments)	1,676,635		1,667,763
Imputed interest	121,951		114,566
Undiscounted future cash flows less imputed interest	$	1,554,684	$	1,553,197

The following table provides supplemental information regarding lease costs in the Condensed Statements of Operations:


	For the Three Months Ended
		March 31, 2025		March 31, 2024
Operating lease costs		$	175,091	$	175,091
Short-term lease costs (1)		1,152,304		981,291
Financing lease costs:
Amortization of financing lease assets (2)		264,787		260,901
Interest on financing lease liabilities (3)		28,741		31,317

(1)Amount included in Lease operating expenses

(2)Amount included in Depreciation, depletion and amortization

(3)Amount included in Interest (expense)