RING ENERGY, INC.REI

RING ENERGY, INC. Leases Disclosure

10-KFiled Mar 4, 20263 min read
NOTE 3 — LEASES
The Company has operating leases for its offices in Midland, Texas and The Woodlands, Texas. The current Midland office is under a five-year lease, effective October 1, 2022 and ending September 30, 2027. The Woodlands office is currently under a 71-month (five years and 11-month) lease, effective May 9, 2023. 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 December 31, 2025 are as follows:
20262027202820292030
Thereafter
Total
Operating lease payments$636,649 $460,497 $250,606 $149,628 $— $— $1,497,380 
Financing lease payments803,745 465,880 159,374 — — — 1,428,999 
The following table shows the weighted average remaining lease term and the weighted average discount rate for the Company's leases as of the dates indicated.
As of December 31,
20252024
Operating leases
Weighted average remaining lease term (in years)
2.713.45
Weighted average discount rate
4.50 %4.50 %
Finance leases
Weighted average remaining lease term (in years)
1.991.85
Weighted average discount rate
7.50 %7.31 %
The following table represents a reconciliation between the undiscounted future cash flows in the table above and the operating and financing lease liabilities disclosed in the Balance Sheets:
As of December 31,
20252024
Operating lease liability, current portion$586,614 $648,204 
Operating lease liability, non-current portion819,223 1,405,837 
Operating lease liability, total$1,405,837 $2,054,041 
Total undiscounted future cash flows (sum of future operating lease payments)$1,497,380 $2,224,840 
Imputed interest91,543 170,799 
Undiscounted future cash flows less imputed interest$1,405,837 $2,054,041 
Financing lease liability, current portion$730,564 $906,119 
Financing lease liability, non-current portion593,146 647,078 
Financing lease liability, total$1,323,710 $1,553,197 
Total undiscounted future cash flows (sum of future financing lease payments)$1,428,999 $1,667,763 
Imputed interest105,289 114,566 
Undiscounted future cash flows less imputed interest$1,323,710 $1,553,197 
The following table provides supplemental information regarding lease costs in the Statements of Operations for the years ended December 31, 2025, 2024, and 2023.
202520242023
Operating lease costs$700,362 $700,362 $541,801 
Short-term lease costs (1)
$4,714,675 $4,083,088 $5,096,723 
Financing lease costs:
Amortization of financing lease assets (2)
$925,619 $1,058,398 $803,721 
Interest on financing lease liabilities (3)
$107,754 $121,293 $101,269 
(1)Amount included in Lease operating expenses
(2)Amount included in Depreciation, depletion and amortization
(3)Amount included in Interest (expense)
During the years ended December 31, 2025, 2024, and 2023, the Company recorded a gain (loss) on disposal of assets, which was impacted by the sale of leased vehicles, as follows:
For the years ended December 31,
202520242023
Sale of owned vehicles
$(6,974)$(14,239)$(132,109)
Sale of leased vehicles
453,374 103,932 44,981 
Gain (loss) on disposal of assets
$446,400 $89,693 $(87,128)

Historical Timeline

Fiscal YearFiled
2025Mar 4, 2026Showing above
2024Mar 5, 2025
2023Mar 7, 2024
2022Mar 9, 2023
2021Mar 16, 2022
2020Mar 16, 2021

About Leases Disclosures

Lease disclosures under ASC 842 provide a comprehensive view of a company's leased asset portfolio, including the split between operating and finance leases, discount rates used to present-value future payments, and the maturity schedule of lease obligations. This section reveals a significant source of off-balance-sheet commitments that were largely hidden before the current standard.

Key signals: the weighted-average discount rate affects the size of recorded lease liabilities — a higher rate reduces the reported obligation, so compare the chosen rate against the company's incremental borrowing rate. The operating versus finance lease mix affects both EBITDA and operating income presentation. Watch the maturity table for concentration risk: large payment cliffs in specific years may create cash flow pressure. Variable lease payments excluded from the liability measurement represent real obligations that do not appear on the balance sheet. Compare total lease costs against prior-year operating lease expense to assess the true economic burden.

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