REPX

Riley Exploration Permian, Inc. (REPX) - Q1 2026 10-Q Summary

Business Context and Reporting Period

This report covers the quarterly period ended March 31, 2026. Riley Exploration Permian, Inc. is an independent oil and natural gas company focused on horizontal drilling in the Permian Basin, primarily in Yoakum County, Texas (Champions field) and Eddy County, New Mexico (Red Lake field). The company operates as a single reporting segment.

Key Financial Metrics

Material Changes vs. Prior Period

• Net Loss vs. Profit: The company reported a net loss of $70.4 million compared to a net income of $28.6 million in Q1 2025. This reversal was primarily driven by a $127.0 million non-cash loss on derivatives (compared to a $5.9 million loss in Q1 2025) and a $4.1 million unrealized loss on earnout liabilities related to the Silverback Acquisition.
• Revenue Growth: Total revenues increased 11% to $113.9 million, driven by a 29% increase in oil production volumes (1,814 MBbls vs. 1,406 MBbls) following the Silverback Acquisition and new well completions.
• Realized Prices: While oil volumes increased, realized oil prices decreased slightly to $68.89/Bbl. Notably, realized natural gas and NGL prices were negative ($-1.68/Mcf and $-6.22/Bbl, respectively) due to high gathering, processing, and transportation (GP&T) costs exceeding revenue in the New Mexico region.
• Working Capital: The working capital deficit widened significantly by $112.6 million, largely due to a $75 million increase in current derivative liabilities resulting from higher crude oil forward pricing.

Outlook, Risks, and Management Commentary

• Derivative Strategy: The company maintains significant hedging positions. As of March 31, 2026, the fair value of oil and natural gas derivative contracts was a net liability of $91.1 million. A 10% change in forward curves could alter this position by approximately $61 million.
• Midstream Disruption: An unplanned outage at a third-party gas processing facility in New Mexico began on March 28, 2026, requiring a shut-in of a significant portion of New Mexico production. Management does not currently expect this to materially impact full-year 2026 results, citing strong Texas operations and upcoming Targa pipeline capacity.
• Acquisition Integration: The Silverback Acquisition (closed July 2025) contributed $14.2 million in revenues and $8.4 million in earnings for the quarter. However, rising WTI prices increased the fair value of earnout liabilities, resulting in a $4.1 million non-cash charge.
• Liquidity: The company has $293 million available under its $400 million Credit Facility (subsequently increased to $425 million in April 2026). It remains in compliance with all debt covenants.
• Risks: Key risks include sustained negative natural gas pricing at the Waha Hub, widening basis differentials, and the potential for prolonged midstream outages. The company faces exposure to commodity price volatility and interest rate fluctuations.

Investor Verification Checklist

• Derivative Valuation: Verify the magnitude of the $127 million non-cash derivative loss and its impact on the balance sheet, noting that this is a fair value adjustment rather than a cash outflow.
• Negative Realized Prices: Confirm the sustainability of negative realized prices for natural gas and NGLs in New Mexico and the timeline for the new Targa pipeline to alleviate GP&T cost pressures.
• Midstream Outage Duration: Monitor updates on the New Mexico processing facility outage to assess potential impacts on Q2 and full-year production volumes.
• Debt Covenants: Review the leverage ratios and asset coverage ratios to ensure continued compliance, especially given the recent increase in derivative liabilities.
• Capital Allocation: Assess the balance between the $47 million in capital expenditures, $8.6 million in dividends, and $4.0 million in share repurchases against operating cash flow.