Riley Exploration Permian, Inc. — 2022 Form 10-K
Business and period. Riley Permian is an independent oil and gas producer focused mainly on horizontal development of the San Andres formation in the Permian Basin, particularly Yoakum County, Texas. This report covers the calendar year ended December 31, 2022. The fiscal year changed from an October–September year to a calendar year; comparisons below are against the year ended September 30, 2021, so the periods are not directly aligned.
Financial and operating highlights
| Metric | 2022 | Prior comparable period |
|---|---|---|
| Total revenue | $321.7 million | $151.0 million |
| Oil and gas sales | $319.3 million | $148.6 million |
| Income from operations | $203.5 million | $59.9 million |
| Net income (loss) | $118.0 million | $(65.7) million |
| Net cash from operating activities | $170.3 million | $86.1 million |
| Net cash used in investing activities | $(128.3) million | $(59.6) million |
| Net cash used in financing activities | $(37.0) million | $(14.9) million |
Average daily production rose 33% to 11,505 Boe/d; total production was 4.199 million Boe, approximately 77% oil. Realized combined price before derivative settlements was $76.05/Boe, up from $47.12/Boe. Oil averaged $92.86/Bbl. The filing does not state a headline operating or net margin.
At year-end, cash was $13.3 million, revolving-credit borrowings were $56.0 million, and reported available borrowing capacity was $169 million against a $225 million borrowing base. Working capital was negative $25.3 million. The credit facility matures in April 2026, is secured by substantially all company assets, and had a 7.17% weighted-average borrowing rate at year-end. The company reported compliance with its covenants.
Accrual-based capital expenditures before acquisitions were $123.1 million. The company declared approximately $25.3 million in 2022 dividends; $24.7 million was paid in cash during the year. The board retains discretion over future dividends, which are subject to credit-agreement restrictions.
Material changes and unusual items
- Revenue more than doubled, reflecting both higher production and higher realized commodity prices. Operating cash flow nearly doubled, while investing outflows rose with increased drilling, completion and EOR spending and a $15.3 million land purchase.
- Derivative loss was $51.6 million, comprising $75.3 million of settlement losses and a $23.7 million non-cash gain. Higher commodity prices increased settlement losses; derivative effects reduced the average combined realized price including settlements to $58.13/Boe.
- The company recorded a $7.3 million impairment on New Mexico proved properties, citing its focus on Yoakum County drilling. Proved reserves increased to 77.7 million Boe, but 2022 downward revisions totaled 6.3 million Boe, primarily reflecting higher service costs and changed well-level projections in certain undeveloped areas.
- Proved undeveloped reserves were 28.6 million Boe, about 37% of total proved reserves, with estimated future development costs of $324.4 million. Management expects development within five years and expects to use operating cash flow, credit-facility borrowings and other capital sources.
- The company settled a bankruptcy-trustee adversary proceeding for $80,000; the court dismissed the claims against the company with prejudice. Management said other pending legal matters were not expected to have a material adverse effect. No material environmental liabilities were reported at year-end.
Outlook, risks and subsequent events
Management’s strategy is to develop existing assets, pursue selective acquisitions, maintain financial flexibility and distribute excess cash through dividends. The company continued its enhanced oil recovery project in Yoakum County, drilled and completed six injector wells in 2022, and began CO₂ injection. EOR results depend in part on access to economically viable CO₂ supplies. Management expected oilfield equipment and service costs to remain inflation-sensitive in 2023. The filing provides no formal production, revenue or capital-spending guidance for 2023.
Key risks include volatile oil and gas prices and differentials, inflation and higher interest rates, concentrated operations in one Permian sub-basin, produced-water disposal limits and induced seismicity, dependence on third-party infrastructure, and dependence on a major purchaser (89% of 2022 revenue). Environmental and emissions rules, reserve-estimation uncertainty, lease expirations, derivative exposure and access to capital are also material risks.
After year-end, Riley Permian agreed to acquire Yeso-trend properties in Eddy County, New Mexico, for approximately $330 million, subject to adjustments and closing conditions. It deposited $33 million in escrow. Proposed financing includes up to $130 million from an anticipated credit-facility borrowing-base increase and $200 million of unsecured senior notes at 10.5% interest, maturing five years after issuance. The acquisition was expected to close early in the second quarter of 2023; funding and closing were conditional.
Key investor verification points
- Compare 2022 results with a calendar-aligned prior period; the filing’s main comparison uses a different fiscal-year window.
- Assess realized prices and cash flow after derivative settlements, hedge volumes and the effect of hedges on future upside and downside.
- Verify the New Mexico acquisition’s closing, final purchase price, credit-facility increase, senior-note terms and resulting leverage and liquidity.
- Track production-cost inflation, produced-water disposal capacity, midstream minimum-volume commitments and the major-customer concentration.
- Review reserve revisions, PUD development spending and performance of the EOR project, including CO₂ availability and economics.