Riley Permian’s Earnings Call: Strategic Growth Amid Challenges

Riley Exploration Permian Inc ((REPX)) has held its Q1 earnings call. Read on for the main highlights of the call.

Riley Exploration Permian Inc’s recent earnings call showcased a blend of strategic growth and operational efficiency, despite facing challenges such as market volatility and production declines. The acquisition of Silverback Exploration was highlighted as a significant strategic move, reflecting the company’s commitment to expanding its upstream development potential. Concerns were raised about market volatility and capital expenditure cuts, yet the company’s focus on safety metrics and strategic growth indicates a balanced approach to navigating these challenges.

Strategic Acquisition of Silverback Exploration

Riley Exploration Permian announced the acquisition of Silverback Exploration for $142 million, which includes 47,000 net working interest acres in New Mexico. This acquisition is poised to enhance Riley Permian’s long-term upstream development potential, adding over 300 gross incremental undeveloped horizontal locations to its inventory. This move underscores the company’s strategic focus on expanding its asset base and increasing its development opportunities.

Record Safety Metrics

The company achieved a total recordable incident rate of 0 for the first quarter of 2025, with 93% safe days, marking a record percentage of safe days in a quarter for Riley Permian. This achievement highlights the company’s commitment to maintaining high safety standards and ensuring a safe working environment for its employees.

Operational Efficiency and Cost Reduction

Despite not adding new wells, Riley Permian managed to maintain relatively flat production levels while successfully reducing operating costs. The lease operating expense (LOE) per barrel of oil equivalent (BOE) for Q1 2025 was $8.34, representing a 2% reduction from Q4 2024 and an 8% reduction from the same quarter last year. This demonstrates the company’s focus on operational efficiency and cost management.

Strong Financial Management

Riley Permian reported generating $54 million of operating cash flow, which translated into $39 million of upstream free cash flow. The company also reduced its debt by $21 million quarter-over-quarter, achieving a leverage ratio of 0.9x. These figures reflect the company’s strong financial management and its ability to generate cash flow while reducing debt.

Quarter-over-Quarter Production Decline

The company’s net production experienced a slight decline from 1.46 million to 1.41 million barrels of oil quarter-over-quarter in Q1. However, it is worth noting that production increased by 9% compared to the same quarter last year, indicating a positive year-over-year trend.

Market Volatility and Reduced CapEx

In response to lower realized prices and forward strip, Riley Permian decided to adjust its 2025 capital expenditures (CapEx) by 50%, including a 41% reduction in upstream CapEx and a 71% reduction in midstream CapEx. This decision reflects the company’s proactive approach to managing market volatility and aligning its investments with current market conditions.

Challenges in Infrastructure Development

Riley Permian is facing challenges related to service costs and inflation, although they report some average cost compression. The company is closely monitoring tariffs and expects potential cost impacts, indicating a cautious approach to infrastructure development.

Forward-Looking Guidance

Riley Exploration Permian’s forward-looking guidance emphasizes strong capital efficiency and strategic growth. The acquisition of Silverback Exploration is expected to significantly enhance their development inventory. Despite a slight decline in net production, the company maintains a robust hedging profile, with 70% of forecasted PDP volumes hedged at a $67 downside price for 2025. The reduction in capital investments by 50% is expected to have a modest impact on production, with oil guidance down only 4%.

In summary, Riley Exploration Permian Inc’s earnings call highlighted a strategic focus on growth and operational efficiency, despite challenges such as market volatility and production declines. The acquisition of Silverback Exploration and the company’s strong financial management were key highlights. Moving forward, Riley Permian’s emphasis on safety, cost reduction, and strategic acquisitions positions it well for continued success in the evolving energy market.