Riley Exploration Permian, Inc. (REPX) Q2 2025 Earnings Call Transcript
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Overview
The earnings call reveals several concerning factors: a decline in realized oil prices both before and after hedges, a reduced EBITDAX margin, and a higher debt level. The Q&A session highlights management's lack of clarity on funding and economic impacts, raising uncertainty. Despite some positive production growth, the overall sentiment is negative due to financial declines and vague guidance.
Key Financial Performance
Free Cash Flow Generated significant free cash flow for the first half of the year.
Net Production Declined marginally from 1.41 million to 1.38 million barrels of oil quarter-over-quarter in Q2, but increased 3% compared to the same quarter last year. Barrel of oil equivalent production is up 1% quarter-over-quarter and up 14% compared to same quarter last year from 1.94 million to 2.22 million barrels of oil equivalent.
Average Daily Net Production 15,200 barrels of oil per day and 24,400 barrels of oil equivalent per day for the second quarter of 2025.
Upstream LOE per BOE Down 3.7% over 2024 average for the first 2 quarters of 2025.
Cash Flow from Operations $33.6 million, lower quarter-over-quarter primarily from price and changes in working capital.
Realized Oil Prices Before Hedges Fell 11% quarter-over-quarter or 22% year-over-year.
Realized Oil Prices After Hedges Fell 7% quarter-over-quarter or 14% year-over-year.
Combined LOE and Cash G&A per BOE Decreased by 5% to 7% as compared to the same period 1 and 2 years ago.
Adjusted EBITDAX Margin 66%, down modestly from 71% 1 year ago.
Reinvestment Rate Reinvested 54% of cash flow from operations before working capital into upstream CapEx during the quarter or only 41% for the 6 months year-to-date compared to 47% for the same period in 2024.
Debt $284 million at quarter end, driven primarily by normalized net working capital changes and funding the deposit for the Silverback acquisition.
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Operating Highlights
Midstream and power generation projects: Advancing projects to enhance gas and oil flow assurance and support access to a stable power supply.
Silverback Exploration acquisition: Increased Yeso trend footprint to 30,000 net acres, 98% held by production, offering substantial undeveloped potential for future growth.
Yeso trend expansion: Acquisition of Silverback Exploration increased footprint and potential for future growth.
Safety metrics: Achieved a total recordable incident rate of 0 and 97% safe days in Q2 2025.
Drilling efficiency: Set multiple records in Yoakum County, including longest lateral drilled and fastest spud to TD, reducing total average drilling cost per lateral foot by 15% compared to 2024.
Production: Net production declined marginally quarter-over-quarter but increased 3% year-over-year. Barrel of oil equivalent production rose 14% year-over-year.
Cost management: Average upstream LOE per BOE down 3.7% over 2024 average. Combined LOE and cash G&A per BOE decreased by 5% to 7% compared to prior years.
Capital allocation: Reinvested 54% of cash flow from operations into upstream CapEx, reflecting a disciplined response to lower oil prices.
Growth strategy: Positioning for 21% oil production growth and 27% total equivalent production growth from Q2 to Q4 2025, supported by Silverback acquisition and midstream investments.
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Risk or Challenges
Oil Price Volatility: Lower oil prices have led to reduced development activity and CapEx, impacting cash flow and production volumes.
Infrastructure Challenges: Unreliable natural gas processing in New Mexico caused shut-in wells and deferred oil production, affecting revenue.
Gas Takeaway Constraints: Constraints with the current midstream partner in New Mexico led to deferred oil volumes and production delays.
Tariff Impacts: Higher pipe pricing due to tariffs increased costs during drilling campaigns.
Debt Levels: Increased debt levels due to the Silverback acquisition and working capital needs, raising financial leverage.
Operational Costs: Higher per-unit costs associated with undeveloped Silverback assets and midstream OpEx skewing upstream cost metrics.
Regulatory Environment: New Mexico's zero-flaring policy creates operational risks when gas disruptions occur, impacting oil production.
Economic Uncertainty: Cautious macroeconomic outlook due to potential OPEC supply increases and market absorption challenges.
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Guidance & Outlook
Production Growth: The company expects fourth-quarter midpoint oil production to reach mid 18,000 barrels per day and over 30,000 barrels per day for total equivalent, representing a 21% growth in oil production and 27% growth in total equivalent production from Q2 to Q4 2025.
Capital Expenditure Adjustments: The company has increased its capital budget modestly, adding back drilling and completion activities, including 10 gross new drills and completing an additional 2.5 net wells. This adjustment aims to maintain an inventory of drilled but uncompleted wells (DUCs) for flexibility in 2026.
Midstream and Power Investments: The company is advancing its midstream and power projects, with additional compressors scheduled to arrive in late Q4 2025 and in-service dates for power projects starting in 2026. These investments aim to enhance reliability and scalability.
Silverback Acquisition Synergies: The integration of Silverback assets is expected to yield cost savings of 5% to 15% for regularly used services and improve project economics by leveraging existing infrastructure and increasing net interest in development locations.
Debt and Financial Flexibility: The company forecasts modest debt paydown in the fall of 2025 at $65 WTI, with leverage expected to be in the range of 1.3x to 1.4x adjusted EBITDAX on a pro forma combined basis.
Market Outlook and Hedging: The company remains cautious about macroeconomic conditions, monitoring OPEC supply and market absorption. It has added hedges for the next 18 months to mitigate price volatility.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:With your revised upstream capital plan, your 4Q exit rate is materially above 2026 consensus. Is the second half capital run rate a reasonable place to start for 2026? How does that run rate compare to your maintenance capital case for the pro forma company?
A:Philip Riley explained that the fourth quarter exit rate production is exciting and that the capital is increasing. He mentioned a potential budget of around $120 million next year to continue growth. On maintenance CapEx, he noted it is an abstract concept but estimated a 35%-40% reinvestment rate of cash flow, which is lower as a percentage of EBITDA.
Q:Could you speak to your latest thoughts on what's the most likely outcome for funding this development and the degree of flexibility you have in New Mexico to navigate constraints given your and Silverback's collective arrangements?
A:Philip Riley stated they are still working through funding options and controlling the pace of development. He mentioned commitments like compressors and pipelines while aiming to meet the in-service date. Daniel Doherty added that they are well-positioned to incorporate Silverback into the midstream plan, with plans to bring 5-10 million a day to the high-pressure system and synergies with the Artesia area.
Q:Does the underlying performance of the assets in 2025 suggest similar performance in 2026 with the upcoming capital program?
A:Philip Riley noted that production grew 7% for oil and 17% for total production in 2025, with a reduced reinvestment rate of 41%. He highlighted that most growth was organic and discussed the impact of oil prices on cash flow and reinvestment rates. He expects reinvestment rates to increase slightly and emphasized leveraging acquisitions to add production and fill midstream capacity.
Q:Can you talk about what Riley could realize as an economic impact from the midstream project and being able to move third-party volumes?
A:Philip Riley explained that third-party volumes include operated volumes with working interest splits and truly third-party operated volumes. He mentioned potential cash flow of $10-$30 million in a few years and discussed accounting aspects of gross and net dollars.
Q:Are there opportunities or a need in New Mexico for Riley to undertake any power solutions for your acreage?
A:Philip Riley and Daniel Doherty confirmed the need for power solutions due to long wait times for power in New Mexico. They are planning for contingencies, including building gas compression stations and securing power to support development.
Q:Could you talk about the water handling opportunity and the systems being put together?
A:Daniel Doherty explained that water handling is integral due to high water cuts in production. They manage a large pipeline system tied to saltwater disposal wells and third-party handlers. The Silverback system will be integrated to enhance capacity and control development pace.
Q:Are you seeing anything notable on the service cost side right now?
A:Daniel Doherty mentioned leveraging economies of scale in New Mexico, achieving 5%-15% reductions in service costs, with potential for further reductions through competitive bidding.
Q:On the Silverback acreage, is there significant P&A work required due to legacy vertical production?
A:Daniel Doherty stated that while some reclamation and P&A work is required, the focus is on optimizing production to avoid unnecessary reclamation or plugging. They comply with governing bodies like the BLM and NMOCD.
Q:Review of Unclear Management Responses
A:Management avoided giving a direct answer regarding the most likely outcome for funding the midstream development, stating they are still working through options and asking to 'hang tight' for updates. Additionally, their response on the economic impact of the midstream project included vague language about accounting methods and potential cash flow without concrete details.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
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month
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REPX Transcript
Riley Exploration Permian, Inc. (REPX) Q1 2026 Earnings Call Transcript
Unknown5-7
The earnings call reveals mixed sentiments. Positive aspects include strong oil revenue growth, strategic asset sales, debt reduction, and a solid shareholder return plan. However, negative gas and NGL revenues, unclear management responses, and structural constraints dampen optimism. The Q&A section highlights potential for future growth but also uncertainties. Overall, the combination of positive and negative factors suggests a neutral sentiment, with no clear catalyst for a significant stock price movement.
Riley Exploration Permian, Inc. (REPX) Q4 2025 Earnings Call Transcript
Unknown3-5
The earnings call presents mixed signals: while there are positive developments like dividend growth, production optimization, and a raised production guidance, there are concerns over decreased EBITDAX, lower free cash flow, and higher costs due to the WaterBridge agreement. The Q&A reveals management's cautious approach to capital allocation and growth, reflecting uncertainty in the oil price environment. These factors suggest a balanced outlook, likely resulting in a neutral stock price movement.
Riley Exploration Permian, Inc. (REPX) Q3 2025 Earnings Call Transcript
Positive11-7
The earnings call reveals strong production growth and strategic investments, like the Silverback acquisition and midstream projects, which are expected to enhance flexibility and scalability. Despite a slight increase in LOE and a decrease in EBITDAX margin, the company maintains solid cash flow and debt levels. The Q&A section highlights management's focus on capital allocation and strategic flexibility, with positive analyst sentiment. The overall outlook, including optimistic production and financial strategies, suggests a positive stock price movement.
Riley Exploration Permian, Inc. (REPX) Q2 2025 Earnings Call Transcript
Unknown8-9
The earnings call reveals several concerning factors: a decline in realized oil prices both before and after hedges, a reduced EBITDAX margin, and a higher debt level. The Q&A session highlights management's lack of clarity on funding and economic impacts, raising uncertainty. Despite some positive production growth, the overall sentiment is negative due to financial declines and vague guidance.
REPX Slides
REPX Report
Frequently Asked Questions
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They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
