Riley Exploration Permian, Inc. — Form 10-Q Summary
Reporting period: The filing covers the three months ended December 31, 2021, Riley Permian’s fiscal first quarter of 2022, despite the request metadata’s “2022 Q1” label. Financial statements are unaudited. The company is an oil and gas producer focused primarily on the San Andres formation in the Permian Basin.
Key financial results
| Metric | Quarter ended Dec. 31, 2021 | Prior-year quarter |
|---|---|---|
| Total revenue | $57.3 million | $23.0 million |
| Oil and gas sales, net | $56.7 million | $22.4 million |
| Operating income | $33.4 million | $6.7 million |
| Net income (loss) | $21.4 million | $(7.9) million |
| Diluted earnings (loss) per share | $1.09 | $(0.71) |
| Cash provided by operations | $21.7 million | $17.2 million |
| Cash used in investing activities | $29.1 million | $9.7 million |
| Cash used in financing activities | $1.3 million | $7.3 million |
- Revenue rose about 149%; oil and gas sales increased 153%. Production was 9,940 Boe/d, up 31%, and the average realized price before derivative settlements was $61.94/Boe versus $32.12/Boe.
- Operating margin was approximately 58% of total revenue and net margin approximately 37% (calculated from reported figures).
- Cash and cash equivalents were $8.3 million at quarter-end. Capital additions to oil and gas properties were $29.0 million; operating cash flow less reported investing cash outflow was approximately negative $7.4 million.
- Revolver borrowings were $65.0 million, up from $60.0 million at September 30, 2021. The $175 million borrowing base left $110 million available. The company reported compliance with credit covenants.
- Working capital was negative $32.8 million, improving from negative $46.9 million, largely because current derivative liabilities declined to $31.0 million from $42.1 million.
Changes and operating drivers
- Higher commodity prices and increased volumes drove revenue growth. Oil sales increased to $50.6 million; natural gas sales to $2.7 million; and NGL sales to $3.3 million.
- The company brought five gross (4.1 net) horizontal wells online. Higher production and workover activity contributed to increased lease operating expenses, which rose to $7.4 million from $4.6 million.
- Derivative loss was $5.2 million, versus a $13.9 million loss in the prior-year quarter. This included $16.0 million of cash settlements paid, partly offset by non-cash fair-value gains. Derivatives reduced the combined realized price including settlements to $44.43/Boe.
- Investing cash outflow increased with drilling, completion and EOR-project spending. The company paid approximately $6.1 million in common dividends during the quarter.
Outlook, risks and unusual items
- No formal financial or production guidance is provided. Management expected reduced natural gas and NGL sales volumes during February through April 2022 while its primary midstream partner continued a gas-processing capacity expansion; the full impact was not estimable.
- The company has a five-year commitment, beginning January 2022, to drill and connect a minimum number of wells or deliver target volumes to the midstream partner. Financial penalties may apply if targets are missed.
- EOR-related supply commitments were approximately $0.8 million due by January 2022 and $2.6 million by April 2022. CO₂ purchase and pipeline connection agreements were executed in October 2021. Management cautions that EOR performance may not meet expectations.
- Key risks include volatile oil, gas and NGL prices; production and drilling outcomes; derivative exposure; borrowing-base reductions and covenant compliance; midstream capacity and costs; regulation, permitting and environmental requirements; and geographic concentration.
- A Chapter 7 trustee sued the company over a 2018 transfer of Kansas working interests, alleging a transfer for less than reasonable equivalent value and seeking damages. The company denied the allegations; management did not expect a material financial impact and recorded no material liability. No environmental liabilities were reported.
- A $0.31-per-share dividend was declared in January 2022 and paid February 9, 2022. The filing also discloses a January 2022 legal-services agreement with a director-owned law firm, including a $30,000 monthly fee and a restricted-stock grant.
Important facts for investors to verify
- Confirm the period being compared: the filing’s quarter ended December 31, 2021; prior-year results reflect the predecessor business and merger accounting, so comparability may be affected.
- Track actual midstream curtailment effects, gas-processing expansion timing, and the company’s ability to meet minimum activity or delivery commitments.
- Review subsequent production, realized prices, derivative settlements and fair-value changes, and remaining hedge coverage; derivative losses can differ materially from cash settlements.
- Monitor capital spending, EOR execution and returns, cash balances, revolver usage, borrowing-base redeterminations, covenant headroom and dividend capacity.
- Follow developments in the Kansas litigation and related-party legal-services arrangement.