REPX

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

Business Context and Reporting Period

This report covers the quarterly period ended June 30, 2026. Riley Exploration Permian, Inc. is a growth-oriented 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 (Six Months Ended June 30, 2026)

Note: Total Debt includes $138 million on the Credit Facility and $135 million principal on Senior Notes.

Material Changes vs. Prior Period

• Revenue Growth: Total revenues increased by $91.9 million (49%) compared to the six months ended June 30, 2025. This was driven by a 34% increase in daily oil volumes and higher realized oil prices ($81.99/Bbl vs. $66.18/Bbl).
• Net Income Decline: Despite revenue growth, Net Income decreased to $16.9 million from $59.1 million in the prior year. This was primarily due to a $93.7 million non-cash loss on derivatives (compared to a $12.9 million gain in 2025) resulting from higher oil prices exceeding hedged levels.
• Production Volumes: Average daily production increased to 34,928 Boe/d from 24,392 Boe/d, aided by the Silverback Acquisition and new wells.
• Cost Increases: Lease operating expenses (LOE) rose by $16.3 million, largely due to the Silverback Acquisition and increased workover expenses. Depletion, depreciation, and amortization (DD&A) increased by $11.7 million due to higher volumes.
• Working Capital: The company reported a working capital deficit of $127.7 million, an increase of $90 million from the prior year, driven by higher revenue payables and derivative liabilities.

Guidance, Outlook, and Risks

• Midstream Constraints: The company experienced production curtailments in New Mexico due to third-party gas processing constraints and pipeline limitations. These were largely resolved by late May 2026. New infrastructure from Targa is expected to come online in Q4 2026 to mitigate future risks.
• Derivative Strategy: As of June 30, 2026, the company has significant hedging in place for 2026 and 2027, including oil swaps averaging ~$61.50/Bbl and collars with floors ranging from $52.93 to $58.25/Bbl. The fair value of these derivatives resulted in a net liability of $21.7 million.
• Debt Covenants: The company remains in compliance with all covenants. The Credit Facility borrowing base was increased to $425 million in April 2026, with $262 million available. The Senior Notes (10.5% due 2028) require quarterly principal payments of $5 million.
• Legal Matters: A claim was received regarding four wells from the Silverback Acquisition; the company is seeking indemnification from sellers and does not expect a material impact.
• Dividends: A quarterly dividend of $0.40 per share was declared on July 15, 2026, payable August 12, 2026.

Investor Verification Checklist

• Derivative Impact: Verify the sensitivity of future earnings to oil price fluctuations given the significant non-cash derivative loss in H1 2026 and the volume of hedges in place.
• Midstream Reliability: Confirm the timeline and capacity of the new Targa infrastructure in New Mexico to ensure production curtailments do not recur.
• Debt Service: Monitor the company's ability to service the $135 million Senior Notes (10.5% coupon) and maintain the required leverage ratios under the Credit Facility.
• Capital Allocation: Review the sustainability of the current capital expenditure pace ($101.7 million in H1) against operating cash flow and the remaining $95 million stock repurchase authority.
• Acquisition Integration: Assess the performance of the Silverback Acquisition assets, which contributed significantly to volume growth but also to LOE increases.