Riley Exploration Permian Inc. Earnings Call Highlights Growth Amid Challenges

Riley Exploration Permian Inc ((REPX)) has held its Q2 earnings call. Read on for the main highlights of the call.

Riley Exploration Permian Inc. recently held its earnings call, revealing a mixed sentiment marked by solid operational performance and strategic growth initiatives. The company celebrated achievements such as the successful Silverback acquisition and record safety metrics, yet acknowledged challenges like production constraints due to infrastructure issues, decreased oil prices, and increased debt. Despite these hurdles, Riley demonstrated cost reduction achievements and highlighted its continued growth potential.

Solid Overall Performance

Riley Permian showcased a robust performance in the second quarter, even amidst a challenging oil macro backdrop and regional operating environment. The company strategically adjusted its development activities and capital expenditures downward in response to lower oil prices, resulting in significant free cash flow generation for the first half of the year.

Successful Silverback Acquisition

The acquisition of Silverback Exploration was a key highlight, expanding Riley’s Yeso trend footprint to 30,000 net acres. This strategic move offers substantial undeveloped potential, positioning the company for future growth and increased operational efficiencies.

Record Safety Metrics

Riley Permian achieved remarkable safety performance, with a total recordable incident rate of zero in the second quarter. The company maintained 97% safe days for the second consecutive quarter, underscoring its commitment to safety.

Cost Reduction Achievements

Despite facing higher pipe pricing due to tariffs, Riley successfully reduced its total average drilling cost per lateral foot by 15% over the previous program in 2024. This achievement highlights the company’s focus on operational efficiency and cost management.

Production and Growth

The company reported a 14% increase in barrel of oil equivalent production compared to the same quarter last year. Riley maintained low operating costs and continued to find significant synergies from the recent Silverback acquisition, reinforcing its growth trajectory.

Production Decline Due to Infrastructure Challenges

Riley faced a marginal decline in net production from 1.41 million to 1.38 million barrels of oil quarter-over-quarter in Q2. This was primarily attributed to gas takeaway constraints with its current midstream partner in New Mexico.

Lower Realized Oil Prices

The company experienced a decline in realized oil prices, which fell 11% quarter-over-quarter and 22% year-over-year. This decrease impacted cash flow from operations, presenting a challenge in the current market environment.

Noncash Impairment

Riley reported a $1 million noncash impairment on a small asset outside of its core areas, driven by lower prices. This reflects the company’s proactive approach in managing its asset portfolio.

Debt Increase

The company’s debt increased to $401 million as of August 1, primarily due to the funding for the Silverback acquisition and working capital needs. This increase highlights the financial commitments associated with strategic growth initiatives.

Forward-Looking Guidance

Looking ahead, Riley Exploration Permian Inc. outlined strategic responses to current market conditions. The company plans to optimize free cash flow generation by adjusting development activities and CapEx downward. Despite a net production decline, Riley anticipates a fourth-quarter midpoint oil production rate of 18,000 barrels per day, reflecting a 21% growth from the second quarter. The strategic acquisition of Silverback is expected to yield cost synergies and operational efficiencies, with projected savings of 5% to 15% for services. Riley remains cautious of macroeconomic uncertainties but is positioned for resilience with strategic infrastructure projects and disciplined capital allocation.

In summary, Riley Exploration Permian Inc.’s earnings call presented a balanced view of its current standing and future prospects. While challenges such as decreased oil prices and increased debt were acknowledged, the company’s strategic initiatives, including the Silverback acquisition and cost reduction achievements, underscore its potential for continued growth and resilience in a fluctuating market environment.