Riley Permian’s Earnings Call: Achievements and Challenges

Riley Exploration Permian Inc ((REPX)) has held its Q3 earnings call. Read on for the main highlights of the call.

Riley Exploration Permian Inc. recently held its earnings call, revealing a mixed sentiment characterized by significant achievements and notable challenges. The company celebrated the successful integration of the Silverback acquisition, which led to impressive production increases and disciplined cost management. However, the call also highlighted challenges such as increased operating expenses, a weak natural gas market, and higher production taxes. Despite these hurdles, Riley Permian’s strategic initiatives and financial discipline resulted in robust free cash flow and an increased dividend.

Successful Silverback Acquisition

Riley Permian’s acquisition of Silverback has proven to be a strategic success. The company realized synergies by reducing costs and boosting production by 50% above the underwriting case for September and October. This acquisition has been a key driver in the company’s recent performance improvements.

Record Production Increase

The earnings call highlighted a record production increase, with total net oil production rising by 22% quarter-over-quarter and 19% compared to the same quarter last year. Total equivalent production saw an even more impressive increase of 34% quarter-over-quarter and 38% year-over-year, underscoring the company’s operational efficiency.

Dividend Increase

Riley Permian announced its 19th consecutive quarterly dividend, increasing it by 5% to $0.40 per share. This move reflects the company’s commitment to returning value to shareholders and confidence in its financial stability.

Cost Management

Despite a significant increase in production, Riley Permian maintained its lease operating expenses (LOE) near $9 per BOE, with only a modest increase of 6% over Q2 and 5% over the same quarter last year. This disciplined cost management has been crucial in maintaining profitability.

Free Cash Flow Generation

The company generated $100 million of upstream free cash flow year-to-date, remaining approximately flat compared to the previous year despite a 14% lower realized oil price. This achievement highlights Riley Permian’s ability to generate cash flow even in challenging market conditions.

Increased Operating Expenses

The acquisition of higher-cost Silverback vertical wells and increased workover activity led to higher lease operating expenses quarter-over-quarter. This increase was a notable challenge discussed during the earnings call.

Weak Natural Gas Market

Riley Permian faced negative natural gas and NGL revenues due to a particularly weak September and October gas market in the Permian. Some operators even voluntarily shut in gas production, highlighting the difficulties in the natural gas sector.

Production Tax Increase

Production taxes rose as a percentage of revenue due to a shift in volume to New Mexico, which has a higher tax rate than Texas. This increase in production taxes was another challenge acknowledged during the call.

Forward-Looking Guidance

Looking ahead, Riley Exploration Permian Inc. provided guidance for significant operational achievements and strategic directions. The company plans to continue its drilling program to support 2026 production, with 8 to 10 gross wells in Q4 2025 and a focus on enhancing midstream infrastructure. Additionally, they anticipate a potential 15% reduction in 2026 upstream CapEx while maintaining oil volume levels, supported by hedging strategies covering over 60% of 2026 oil volumes at a weighted average downside price of $60.

In conclusion, Riley Exploration Permian Inc.’s earnings call painted a picture of a company navigating both achievements and challenges. While the successful Silverback acquisition and record production increases were highlights, increased operating expenses and a weak natural gas market posed challenges. Nonetheless, the company’s strategic initiatives and financial discipline have positioned it well for future growth, as evidenced by its robust free cash flow and increased dividend.