8-K
Riley Exploration Permian, Inc. (REPX)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8‑K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 12, 2021
Riley Exploration Permian, Inc.
(Exact name of registrant as specified in its charter)
| Delaware | 1-15555 | 87-0267438 |
|---|---|---|
| (State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
29 E. Reno Avenue, Suite 500
Oklahoma City, Oklahoma 73104
Address of Principal Executive Offices, Including Zip Code)
(405) 415-8677
(Registrant’s Telephone Number, Including Area Code)
Check the appropriate box below if the Form 8‑K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a‑12 under the Exchange Act (17 CFR 240.14a‑12) |
| --- | --- |
| ☐ | Pre‑commencement communications pursuant to Rule 14d‑2(b) under the Exchange Act (17 CFR 240.14d‑2(b)) |
| --- | --- |
| ☐ | Pre‑commencement communications pursuant to Rule 13e‑4(c) under the Exchange Act (17 CFR 240.13e‑4(c)) |
| --- | --- |
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, par value $0.001 per share | REPX | NYSE American |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b‑2 of the Securities Exchange Act of 1934 (§240.12b‑2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 2.02 | Results of Operations and Financial Condition. |
|---|
On August 12, 2021, Riley Exploration Permian, Inc. (the “Company”) issued a press release announcing the Company’s financial condition and results of operations for the fiscal third quarter ended June 30, 2021. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K, and is incorporated herein by reference.
The information furnished pursuant to this Item 2.02 (including Exhibit 99.1) shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise be subject to the liabilities of that section, nor shall it be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act.
| Item 7.01. | Regulation FD Disclosure. |
|---|
On August 12, 2021, the Company provided information in an earnings presentation on its website, www.rileypermian.com, regarding its financial and operational results for the fiscal third quarter ended June 30, 2021 (the “Earnings Presentation”). The Earnings Presentation, which is attached hereto as Exhibit 99.2, is being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise be subject to the liabilities of that section, nor shall it be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act.
| Item 9.01. | Financial Statements and Exhibits. |
|---|---|
| (d) | Exhibits |
| --- | --- |
| Exhibit No. | Description |
| --- | --- |
| 99.1 | Press Release dated August 12, 2021 |
| 99.2 | Earnings Presentation dated August 12, 2021 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| RILEY EXPLORATION PERMIAN, INC. | ||
|---|---|---|
| Date: August 12, 2021 | By: | /s/ Bobby D. Riley |
| Bobby D. Riley | ||
| Chairman of the Board and Chief Executive Officer |
Exhibit 99.1
Riley Permian Reports Fiscal Third Quarter 2021 Financial and Operating Results
OKLAHOMA CITY, August 12, 2021 -- Riley Exploration Permian, Inc. (NYSE American: REPX) ("Riley Permian" or the "Company"), today reported financial and operational results for the fiscal third quarter ended June 30, 2021.
HIGHLIGHTS
| • | Increased total net equivalent production by 35% to 9.1 MBoe/d for the three months ended June 30, 2021, as compared to the same period in 2020, or by 10% quarter-over-quarter compared to fiscal second quarter 2021 |
|---|---|
| • | Generated cash flow from continuing operations of $58.8 million for the nine months ended June 30, 2021 |
| --- | --- |
| • | Reported a net loss of $21.5 million for the three months ended June 30, 2021, with Income from Operations of $19.3 million for the same period |
| --- | --- |
| • | Reduced Cash Costs^(1)^ per Boe by 7% quarter-over-quarter; realized a Cash Margin^(1)^ of $35.11/Boe before derivative settlements or $25.80/Boe after derivative settlements |
| --- | --- |
| • | Total cash capital expenditures before acquisitions of $40.1 million for the nine months ended June 30, 2021, which corresponds to 61% of Adjusted EBITDAX^(1)^ |
| --- | --- |
| • | Generated Free Cash Flow^(1)^ of $18.8 million for the nine months ended June 30, 2021 |
| --- | --- |
| • | Completed $47 million net capital raise in July 2021 with issuance of 1.67 million shares: secured funding for acceleration of Enhanced Oil Recovery (“EOR”) program and increased estimated trading float by 77% |
| --- | --- |
| • | Exited the third quarter with $6.9 million in cash and $97.5 million drawn on our credit facility; subsequently reduced credit facility borrowings to $62 million in July 2021 |
| --- | --- |
| • | Paid cash common dividends of $0.28 per share or $5.0 million in total on May 7, 2021 |
| --- | --- |
| • | Announced latest dividend, subsequent to the fiscal third quarter, of $0.28 per share or $5.5 million in total, which was paid August 6, 2021; current dividend^(2)^ implies a 5.8% annualized yield based on the August 6, 2021<br> closing price of $19.27 per share |
| --- | --- |
Commenting on the fiscal third quarter performance, Bobby Riley, Chairman and CEO, said, “Riley Permian continued to perform well in the fiscal third quarterly both operationally and financially. We currently remain on track to achieve our best fiscal year performance in history across numerous operational and financial performance metrics. We were pleased to have completed a material capital raise during July 2021, which is notable given challenges in capital markets for smaller, exploration & production companies. We appreciate the support of investors who participated in the raise and for the support to accelerate our EOR program development, which has already begun. Finally, we were pleased to have paid last week our most recent dividend, continuing a standard of rewarding our shareholders through direct return of capital.”
| (1) | Non-GAAP financial measure, which is defined and reconciled below. |
|---|---|
| (2) | Future dividends subject to approval by the board of directors. |
| --- | --- |
1
Selected Operating and Financial Data
| Nine Months Ended June 30, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 2020 | 2021 | 2020 | |||||||||
| Select Financial Data (in thousands): | |||||||||||
| Oil and natural gas sales, net | 41,549 | $ | 4,969 | $ | 100,622 | $ | 57,824 | ||||
| Net Income (Loss) | (21,501 | ) | (27,984 | ) | (81,320 | ) | 40,228 | ||||
| Adjusted EBITDAX(1) | 22,533 | $ | 14,602 | $ | 65,433 | $ | 54,130 | ||||
| Production Data, net (in thousands): | |||||||||||
| Oil (MBbls) | 612 | 487 | 1,702 | 1,564 | |||||||
| Natural gas (MMcf) | 732 | 400 | 1,795 | 1,162 | |||||||
| Natural gas liquids (MBbls) | 94 | 61 | 272 | 181 | |||||||
| Total (MBoe)(2) | 828 | 615 | 2,273 | 1,939 | |||||||
| Daily combined volumes (BOE/d)(2)(3) | 9,100 | 6,757 | 8,325 | 7,077 | |||||||
| Daily oil volumes (BO/d)(3) | 6,726 | 5,350 | 6,234 | 5,706 | |||||||
| Average Prices:(2)(4) | |||||||||||
| Oil ( per Bbl) | 64.55 | $ | 12.63 | $ | 54.29 | $ | 38.08 | ||||
| Natural gas ( per Mcf) | 1.31 | (1.85 | ) | 3.12 | (0.87 | ) | |||||
| Natural gas liquids ( per Bbl) | 11.57 | (7.31 | ) | 9.70 | (3.94 | ) | |||||
| Combined ( per BOE), before derivative settlements | 50.18 | $ | 8.08 | $ | 44.28 | $ | 29.82 | ||||
| Oil, including derivative settlements ( per Bbl) | 51.84 | $ | 42.76 | $ | 51.16 | $ | 50.98 | ||||
| Natural gas, including derivative settlements ( per MMbtu) | 1.39 | (1.85 | ) | 3.22 | (0.87 | ) | |||||
| Natural gas liquids, including derivative settlements ( per Bbl)(5) | 11.57 | (7.31 | ) | 9.70 | (3.94 | ) | |||||
| Average price, including derivative settlements ( per BOE) | 40.86 | $ | 31.95 | $ | 42.02 | $ | 40.22 | ||||
| Cash Costs per BOE | 15.07 | $ | 10.31 | $ | 14.79 | $ | 14.61 | ||||
| Cash Margin per BOE, before derivative settlements | 35.11 | $ | (2.23 | ) | $ | 29.49 | $ | 15.21 | |||
| Cash Margin per BOE, after derivative settlements | 25.80 | $ | 21.62 | $ | 27.23 | $ | 25.61 |
All values are in US Dollars.
| (1) | Non-GAAP financial measure, which is defined and reconciled below. |
|---|---|
| (2) | One BOE is equal to six Mcf of natural gas or one Bbl of oil or NGL based on the approximate energy equivalency. This is an energy content correlation and does not reflect value or price relationship between the commodities. |
| --- | --- |
| (3) | For the three months ended June 30, 2021 and 2020, respectively average net sales (BOE/d) was derived by dividing the total MBoe by 91 days. For the nine months ended June 30, 2021 and 2020, respectively, average net sales (BOE/d) was<br> derived by dividing the total MBoe by 273 days and 274 days. |
| --- | --- |
| (4) | Average prices shown in table reflect prices both before and after the effects of REPX’s settlements of our commodity derivative contracts. REPX’s calculation of such effects includes both gains or losses on cash settlements for commodity<br> derivatives. The impact of these cash settlements are included in other income and expense on the Company’s Statement of Operations. |
| --- | --- |
| (5) | The Company uses commodity based derivative contracts to reduce exposure to fluctuations in crude oil and natural gas prices. As of June 30, 2021, the Company was not engaged in any natural gas liquids derivative contracts. |
| --- | --- |
2
OPERATIONS UPDATE
Riley Permian brought online 7 gross (4.8 net) horizontal wells and drilled 1 gross (1 net) vertical injection well during the fiscal third quarter of 2021. Fiscal third-quarter oil production averaged 6.7 MBbls per day and total equivalent production averaged 9.1 MBoe per day, in line with our budgeted guidance previously disclosed.
The Company has accelerated development of its EOR project, which will now include 12 vertical injection wells in our 960-acre project area. The drilling rig for the vertical injection wells has been contracted and is scheduled to arrive during September 2021. The Company will conduct drilling, casing and logging operations on the injection wells through end of calendar year 2021. Water and gas line infrastructure has been ordered, and we anticipate installation during the calendar fourth quarter of 2021 and calendar first quarter of 2022. The physical infrastructure connection to the CO2 pipeline source, commonly called a tap, has a turnaround time of six to nine months due to the specialty nature of the product and supply chain constraints. Based on current estimates, we anticipate initiating water injection for the project during the calendar second quarter of 2022, which will continue for several months, such that the slower timing of the CO2 tap may not impact our planned development schedule. After the reservoir is sufficiently re-pressurized and the CO2 tap has been installed, we plan to initiate a combination of CO2 and water injection.
With regard to choice of CO2 and procurement, the EOR project will begin using natural CO2 given ease of availability, reliability and price. The Company is currently finalizing customary agreements with a reputable counterparty for both supply of CO2 product and for the CO2 tap connection. We maintain the optionality to potentially switch to using anthropogenic CO2 with this or subsequent project areas as sources become available at attractive economics. With the CO2 tap installed, Riley Permian will have access to a wider network of CO2 pipelines, creating flexibility for sourcing CO2, including the anthropogenic potential.
The Company continues to investigate numerous anthropogenic source possibilities in conjunction with carbon capture, utilization and sequestration (“CCUS”) efforts, including ongoing discussions with several counterparties. At the same time, we are monitoring potential changes to federal tax incentives and other regulations currently being discussed at the national and Texas state levels. We continue to believe that a possible CCUS project, with Riley Permian participating as a developer, has the potential to be an attractive opportunity by itself, as well as a synergistic opportunity with our core upstream business.
FINANCIALS UPDATE
The Company reported a Net Loss of $21.5 million and $81.3 million and Operating Income of $19.3 million and $33.0 million for the three months and nine months ended June 30, 2021, respectively. The Company generated Adjusted EBITDAX^(1)^ and Adjusted Net Income^(1)^ of $22.5 million and $7.6 million for the three months ended June 30, 2021, with Adjusted EBITDAX^(1)^ of $65.4 million for the nine ended June 30, 2021, respectively.
Fiscal third quarter 2021 average realized prices, before derivative settlements were $64.55 per barrel of oil, $1.31 per Mcf of natural gas and $11.57 per barrel of natural gas liquids, resulting in a total equivalent price, before derivative settlements, of $50.18 per Boe.
Adjusted for derivative settlements, total equivalent price was $40.86 per Boe, corresponding to realized derivative losses of $9.31 per Boe or $7.7 million. The Company also incurred $27.7 million of unrealized derivative losses during the fiscal third quarter, which contributed to the Net Loss. By comparison, Riley Permian had $26.9 million of realized derivative gains and $7.0 million of unrealized derivative gains during fiscal 2020. The Company recognizes the inherent volatility of commodity prices and believes a regular hedging practice reduces fluctuations in its operating cash flows, leading to more efficient management of development activities and the overall business.
Riley Permian's total Cash Costs^(1)^ for the fiscal third quarter of 2021 were $15.07 per Boe, representing a decrease of $1.11 per Boe or 7% compared to the fiscal second quarter. Third quarter Cash Costs^(1)^ included lease operating expense (“LOE”) of $6.95 per Boe (which include ad valorem expenses), cash G&A expenses of $4.25 per Boe (excluding share-based and unit-based compensation expense, shown after the effect of gross profit from contract services derived from management services agreements), production taxes of $2.45 per Boe and interest expense of $1.41 per Boe.
| (1) | Non-GAAP financial measure, which is defined and reconciled below. |
|---|
3
The Company realized a fiscal third quarter Cash Margin^(1)^ of $35.11/Boe before derivative settlements or $25.80/Boe after derivative settlements.
The Company invested $21.8 million in drilling & completions capital expenditures during the fiscal third quarter, or $38.9 million fiscal 2021 year-to-date. Including additions to other property & equipment, the Company invested $40.1 million in total capital expenditures before acquisitions year-to-date for fiscal 2021.
During the fiscal third quarter the Company paid cash common dividends of $0.28 per share or $5.0 million in total. Subsequent to the fiscal third quarter, during August 2021, the Company paid cash common dividends of $0.28 per share or $5.5 million in total.
As of June 30, 2021 Riley Permian had $6.9 million in cash and $97.5 million drawn on our credit facility. Subsequently, in July 2021, the Company completed a public capital raise resulting in approximately $47 million of net proceeds. As of August 6, 2021, the Company had $6.8 million in cash (after funding the August dividend), $62.0 million drawn on our credit facility, with $73.0 million of availability for future borrowing under the facility and approximately $80 million of total liquidity.
FISCAL FOURTH QUARTER 2021 OUTLOOK AND GUIDANCE
Based on current market conditions, the Company forecasts fiscal fourth quarter 2021 capital expenditures before acquisitions to total approximately $20 million to $26 million. Following the successful capital raise in July 2021, the Company accelerated the development of its EOR program with estimated fiscal fourth quarter 2021 capital expenditures before acquisitions related to drilling vertical injection wells, purchase of water and gas line infrastructure, and purchase of the CO2 connection equipment. Separately, certain drilling & completions capital expenditures are now forecasted to be invested during the fiscal fourth quarter 2021.
Riley Permian forecasts fiscal fourth quarter 2021 oil production to average 6.6 MBbls per day to 7.2 MBbls per day, with total equivalent production to average 8.7 MBoe per day to 9.6 MBoe per day. The Company forecasts full-year fiscal 2021 oil production to average 6.3 MBbls per day to 6.5 MBbls per day, with total equivalent production to average 8.4 MBoe per day to 8.6 MBoe per day.
The Company forecasts fourth fiscal quarter of 2021 LOE of approximately $6.90 to $7.80 per Boe (which include ad valorem taxes); cash G&A expenses of approximately $2.80 to $3.40 per Boe (excluding share-based and unit-based compensation expense, shown after the effect of gross profit from contract services derived from management services agreements), production taxes of approximately $2.50 to $2.80 per Boe, and interest expense of approximately $0.80 to 1.00 per Boe.
4
CONFERENCE CALL
Riley Permian management will host a conference call for investors and analysts on August 13, 2021 at 8:00 a.m. CT to discuss the Company's results. Interested parties are invited to participate by calling:
| • | U.S./Canada Toll Free, (844) 965-3268 |
|---|---|
| • | International, +1 (639) 491-2298 |
| --- | --- |
| • | Conference ID number 4234539 |
| --- | --- |
An updated company presentation, which will include certain items to be discussed on the call, will be posted prior to the call on the Company's website (www.rileypermian.com). A replay of the call will be available until August 27, 2021 by calling:
| • | U.S./Canada Toll Free, (800) 585-8367 |
|---|---|
| • | International, +1 (416) 621-4642 |
| --- | --- |
| • | Conference ID number 4234539 |
| --- | --- |
About Riley Exploration Permian, Inc.
Riley Permian is an independent oil and natural gas company focused on steadily growing its reserves, production and cash flow per share through the acquisition, exploration, development and production of oil, natural gas, and natural gas liquids in the Permian Basin. For more information please visit www.rileypermian.com.
CAUTIONARY STATEMENT FOR THE PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This press release contains forward-looking statements within the meaning of federal securities laws. All statements, other than historical facts, that address activities that the Company assumes, plans, expects, believes, intends or anticipates (and other similar expressions) will, should or may occur in the future are forward-looking statements. The forward-looking statements are based on management’s current beliefs, based on currently available information, as to the outcome and timing of future events, including the current adverse industry and macroeconomic conditions, commodity price volatility, production levels, the impact of the recent presidential and congressional elections on energy and environmental policies and regulations, any other potential regulatory actions (including those that may impose production limits in the Permian Basin), the impact and duration of the ongoing COVID-19 pandemic, acquisitions and sales of assets, future dividends, production, drilling and capital expenditure plans, need for financing, competitive position, growth potential, severe weather conditions (including the impact of the recent severe winter storms on production volumes), impact of impairment charges, price and availability of CO2, and effects of hedging arrangements. These forward-looking statements involve certain risks and uncertainties that could cause the results to differ materially from those expected by the management of the Company.
These forward-looking statements involve significant risks and uncertainties that could cause actual results to differ materially from those anticipated, including, but not limited to, the risk that the Company may reduce, suspend or totally eliminate dividend payments in the future, whether variable or fixed, due to insufficient liquidity or other factors, potential adverse reactions or changes to the business or operations of the Company resulting from the recently completed merger, including the Company’s future financial condition, results of operations, strategy and plans; changes in capital markets and the ability of the Company to finance operations in the manner expected; the risk that the Company’s EOR and CCUS projects may not perform as expected or produce the anticipated benefits; the risks of oil and gas activities; and the fact that operating costs and business disruption may be greater than expected following the consummation of the merger.
Additional factors that could cause results to differ materially from those described above can be found in Riley Permian’s Annual Report on Form 10-K for the year ended December 31, 2020 and in its subsequently filed Quarterly Reports on Form 10-Q, as well as in the Registration Statement on Form S-4 filed by the Company with the SEC and declared effective by the SEC on February 2, 2021, each of which is on file with the SEC and available from the Company’s website at www.rileypermian.com under the “Investor” tab, and in other documents the Company files with the SEC.
The forward-looking statements in this press release are made as of the date hereof and are based on information available at that time. The Company does not undertake, and expressly disclaims, any duty to update or revise our forward-looking statements based on new information, future events or otherwise.
Source: Riley Exploration Permian, Inc.
5
RILEY EXPLORATION PERMIAN, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
| September 30, 2020 | ||||
|---|---|---|---|---|
| Assets | ||||
| Current Assets: | ||||
| Cash and cash equivalents | 6,894 | $ | 1,660 | |
| Accounts receivable | 15,673 | 10,128 | ||
| Accounts receivable – related parties | 1,995 | 55 | ||
| Prepaid expenses and other current assets | 2,460 | 1,752 | ||
| Current derivative assets | 226 | 18,819 | ||
| Total Current Assets | 27,248 | 32,414 | ||
| Oil and natural gas properties, net (successful efforts) | 328,882 | 310,726 | ||
| Other property and equipment, net | 2,761 | 1,801 | ||
| Non-current derivative assets | 107 | 3,102 | ||
| Other non-current assets, net | 3,828 | 2,949 | ||
| Total Assets | 362,826 | $ | 350,992 | |
| Liabilities, Series A Preferred Units, and Members'/Shareholders' Equity | ||||
| Current Liabilities: | ||||
| Accounts payable | 8,735 | $ | 4,739 | |
| Income taxes payable | 140 | — | ||
| Accrued liabilities | 17,148 | 8,746 | ||
| Revenue payable | 7,438 | 4,432 | ||
| Advances from joint interest owners | 266 | 254 | ||
| Current derivative liabilities | 36,251 | — | ||
| Other current liabilities | 544 | 392 | ||
| Total Current Liabilities | 70,522 | 18,563 | ||
| Non-current derivative liabilities | 11,236 | — | ||
| Asset retirement obligations | 2,337 | 2,268 | ||
| Revolving credit facility | 97,500 | 101,000 | ||
| Deferred tax liabilities | 16,570 | 1,834 | ||
| Other non-current liabilities | 33 | 418 | ||
| Total Liabilities | 198,198 | 124,083 | ||
| Series A Preferred Units | — | 60,292 | ||
| Commitments and Contingencies | ||||
| Members' Equity | — | 166,617 | ||
| Shareholders' Equity: | ||||
| Preferred stock, 0.0001 par value, 25,000,000 shares designated; 0 shares issued and outstanding | — | — | ||
| Common stock, 0.001 par value, 240,000,000 shares authorized; 18,021,521 and 0 shares issued and outstanding at June 30, 2021 and September 30, 2020, respectively | 18 | — | ||
| Additional paid-in capital | 223,918 | — | ||
| Accumulated deficit | (59,308 | ) | — | |
| Total Shareholders' Equity | 164,628 | — | ||
| Total Liabilities, Series A Preferred Units, and Members'/Shareholders' Equity | 362,826 | $ | 350,992 |
All values are in US Dollars.
6
RILEY EXPLORATION PERMIAN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| Three Months Ended March 31, | Nine Months Ended March 31, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 | |||||||||
| (In thousands, except per share/unit amounts) | ||||||||||||
| Revenues: | ||||||||||||
| Oil and natural gas sales, net | $ | 41,549 | $ | 4,969 | $ | 100,622 | $ | 57,824 | ||||
| Contract services – related parties | 600 | 1,050 | 1,800 | 3,150 | ||||||||
| Total Revenues | 42,149 | 6,019 | 102,422 | 60,974 | ||||||||
| Costs and Expenses: | ||||||||||||
| Lease operating expenses | 5,754 | 3,760 | 17,323 | 15,517 | ||||||||
| Production taxes | 2,029 | 293 | 5,027 | 2,808 | ||||||||
| Exploration costs | 2,785 | 6,757 | 8,682 | 9,231 | ||||||||
| Depletion, depreciation, amortization and accretion | 7,082 | 5,028 | 19,323 | 16,020 | ||||||||
| General and administrative: | ||||||||||||
| Administrative costs | 4,030 | 1,936 | 9,176 | 8,669 | ||||||||
| Unit-based compensation expense | — | 291 | 689 | 650 | ||||||||
| Share-based compensation expense | 779 | — | 5,353 | — | ||||||||
| Cost of contract services - related parties | 91 | 97 | 330 | 403 | ||||||||
| Transaction costs | 321 | 15 | 3,534 | 42 | ||||||||
| Total Costs and Expenses | 22,871 | 18,177 | 69,437 | 53,340 | ||||||||
| Income (Loss) From Operations | 19,278 | (12,158 | ) | 32,985 | 7,634 | |||||||
| Other Income (Expense): | ||||||||||||
| Interest expense | (1,171 | ) | (1,302 | ) | (3,571 | ) | (4,086 | ) | ||||
| Gain (loss) on derivatives | (35,396 | ) | (14,205 | ) | (74,208 | ) | 36,999 | |||||
| Total Other Income (Expense) | (36,567 | ) | (15,507 | ) | (77,779 | ) | 32,913 | |||||
| Net Income (Loss) From Continuing Operations Before Income Taxes | (17,289 | ) | (27,665 | ) | (44,794 | ) | 40,547 | |||||
| Income tax expense | (3,245 | ) | (319 | ) | (16,953 | ) | (319 | ) | ||||
| Net Income (Loss) From Continuing Operations | (20,534 | ) | (27,984 | ) | (61,747 | ) | 40,228 |
7
RILEY EXPLORATION PERMIAN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - (Continued)
(Unaudited)
| Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 | |||||||||
| (In thousands, except per share/unit amounts) | ||||||||||||
| Discontinued Operations: | ||||||||||||
| Loss from discontinued operations | (882 | ) | — | (19,513 | ) | — | ||||||
| Income tax benefit on discontinued operations | (85 | ) | — | (60 | ) | — | ||||||
| Loss on discontinued operations | (967 | ) | — | (19,573 | ) | — | ||||||
| Net Income (Loss) | (21,501 | ) | (27,984 | ) | (81,320 | ) | 40,228 | |||||
| Dividends on preferred units | — | (890 | ) | (1,491 | ) | (2,631 | ) | |||||
| Net Income (Loss) Attributable to Common Shareholders/Unitholders | $ | (21,501 | ) | $ | (28,874 | ) | $ | (82,811 | ) | $ | 37,597 | |
| Net Income (Loss) per Share/Unit from Continuing Operations: | ||||||||||||
| Basic | $ | (1.15 | ) | $ | (2.32 | ) | $ | (4.25 | ) | $ | 3.02 | |
| Diluted | $ | (1.15 | ) | $ | (2.32 | ) | $ | (4.25 | ) | $ | 2.43 | |
| Net Loss per Share/Unit from Discontinued Operations: | ||||||||||||
| Basic | $ | (0.05 | ) | $ | — | $ | (1.32 | ) | $ | — | ||
| Diluted | $ | (0.05 | ) | $ | — | $ | (1.32 | ) | $ | — | ||
| Net Income (Loss) per Share/Unit: | ||||||||||||
| Basic | $ | (1.20 | ) | $ | (2.32 | ) | $ | (5.57 | ) | $ | 3.02 | |
| Diluted | $ | (1.20 | ) | $ | (2.32 | ) | $ | (5.57 | ) | $ | 2.43 | |
| Weighted Average Common Share/Units Outstanding: | ||||||||||||
| Basic | 17,786 | 12,469 | 14,872 | 12,454 | ||||||||
| Diluted | 17,786 | 12,469 | 14,872 | 16,571 |
8
RILEY EXPLORATION PERMIAN, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
| Nine Months Ended June 30, | ||||||
|---|---|---|---|---|---|---|
| 2021 | 2020 | |||||
| (In thousands) | ||||||
| Cash Flows from Operating Activities: | ||||||
| Net income (loss) | $ | (81,320 | ) | $ | 40,228 | |
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||
| Loss from discontinued operations | 19,573 | — | ||||
| Oil and gas lease expirations | 8,615 | 7,288 | ||||
| Depletion, depreciation, amortization and accretion | 19,323 | 16,020 | ||||
| (Gain) Loss on derivatives | 74,208 | (36,999 | ) | |||
| Settlements on derivative contracts | (5,133 | ) | 20,161 | |||
| Amortization of deferred financing costs | 483 | 484 | ||||
| Unit-based compensation expense | 689 | 650 | ||||
| Share-based compensation expense | 5,353 | — | ||||
| Deferred income tax expense | 17,185 | 319 | ||||
| Changes in operating assets and liabilities: | ||||||
| Accounts receivable | (5,545 | ) | 5,643 | |||
| Accounts receivable – related parties | (1,940 | ) | 159 | |||
| Prepaid expenses and other current assets | (534 | ) | (424 | ) | ||
| Other non-current assets | — | 82 | ||||
| Other liabilities | (6 | ) | — | |||
| Accounts payable and accrued liabilities | 5,042 | (2,784 | ) | |||
| Income taxes payable | (170 | ) | — | |||
| Revenue payable | 3,006 | (1,199 | ) | |||
| Advances from joint interest owners | 12 | (119 | ) | |||
| Net Cash Provided By Operating Activities - Continuing Operations | 58,841 | 49,509 | ||||
| Cash Flows From Investing Activities: | ||||||
| Additions to oil and natural gas properties | (38,882 | ) | (41,228 | ) | ||
| Acquisition of oil and natural gas properties | (171 | ) | (4,806 | ) | ||
| Additions to other property and equipment | (1,172 | ) | (168 | ) | ||
| Tengasco acquired cash | 859 | — | ||||
| Net Cash Used In Investing Activities - Continuing Operations | (39,366 | ) | (46,202 | ) | ||
| Cash Flows From Financing Activities: | ||||||
| Deferred financing costs | (135 | ) | (293 | ) | ||
| Proceeds from revolving credit facility | 5,500 | 14,000 | ||||
| Repayment under revolving credit facility | (9,000 | ) | (7,000 | ) | ||
| Payment of common share/unit dividends | (12,834 | ) | (12,500 | ) | ||
| Payment of preferred unit dividends | (1,491 | ) | — | |||
| Purchase of common units under long-term incentive plan | (191 | ) | (322 | ) | ||
| Net Cash Used In Financing Activities - Continuing Operations | (18,151 | ) | (6,115 | ) | ||
| Net Increase (Decrease) in Cash and Cash Equivalents from Continuing Operations | 1,324 | (2,808 | ) |
9
RILEY EXPLORATION PERMIAN, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS – (Continued)
(Unaudited)
| Nine Months Ended June 30, | |||||
|---|---|---|---|---|---|
| 2021 | 2020 | ||||
| (In thousands) | |||||
| Cash Flows from Discontinued Operations: | |||||
| Operating activities | 18 | — | |||
| Investing activities | 3,892 | — | |||
| Net Increase in Cash and Cash Equivalents from Discontinued Operations | 3,910 | — | |||
| Net Increase (Decrease) in Cash and Cash Equivalents | 5,234 | (2,808 | ) | ||
| Cash and Cash Equivalents, Beginning of Period | 1,660 | 3,726 | |||
| Cash and Cash Equivalents, End of Period | $ | 6,894 | $ | 918 | |
| Supplemental Disclosure of Cash Flow Information | |||||
| Cash Paid For: | |||||
| Interest | $ | 2,864 | $ | 3,129 |
10
RILEY EXPLORATION PERMIAN, INC.
Definition of Non-GAAP Financial Measures as Calculated by the Company (Unaudited)
The non-GAAP financial measures of Adjusted Net Income, Adjusted EBITDAX, Cash G&A, Cash Costs and Cash Margin, and Free Cash Flow as defined and presented below, are intended to provide readers with meaningful information that supplements our financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). Further, these non-GAAP measures should only be considered in conjunction with financial statements and disclosures prepared in accordance with GAAP and should not be considered in isolation or as a substitute for GAAP measures, such as net income or loss, operating income or loss or any other GAAP measure of financial position or results of operations. Adjusted Net Income, Adjusted EBITDAX, Cash G&A, Cash Costs and Cash Margin, and Free Cash Flow are presented herein and reconciled from their respective GAAP measures because of its wide acceptance by the investment community as financial indicators.
| I. | Adjusted Net Income: We define “Adjusted Net Income” as Net Loss plus, when applicable, unrealized loss on derivative contracts; impairment expense;<br> transaction costs; the loss of discontinued operations; income tax expense related to a change in tax status; and the associated changes in estimated income tax. |
|---|
Our Adjusted Net Income measure provides additional information that may be used to further understand our operations. Adjusted Net Income is one of several metrics that we use as a supplemental financial measurement in the evaluation of our business and should not be considered as an alternative to, or more meaningful than, net income (loss) as an indicator of operating performance. Certain items excluded from Adjusted Net Income are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historic cost of depreciable and depletable assets. Adjusted Net Income, as used by us, may not be comparable to similarly titled measures reported by other companies. We believe that Adjusted Net Income is a widely followed measure of operating performance and is one of many metrics used by our management team and by other users of our consolidated financial statements. For example, Adjusted Net Income can be used to assess our operating performance and return on capital in comparison to other independent exploration and production companies without regard to financial or capital structure and to assess the financial performance of our assets and our company without regard to capital structure or historical cost basis.
| II. | Adjusted EBITDAX: The non-GAAP financial measure of Adjusted EBITDAX (as defined below), as calculated by us below, is intended to provide readers with<br> meaningful information that supplements our financial statements prepared in accordance with GAAP. Further, these non-GAAP measures should only be considered in conjunction with financial statements and disclosures prepared in accordance with<br> GAAP and should not be considered in isolation or as a substitute for GAAP measures, such as net income or loss, operating income or loss or any other GAAP measure of financial position or results of operations. Adjusted EBITDAX is presented<br> herein and reconciled from the GAAP measure of net income (loss) because of its wide acceptance by the investment community as a financial indicator. |
|---|
Riley Permian defines “Adjusted EBITDAX” as net income (loss) adjusted for certain cash and non-cash items, including depletion, depreciation, amortization and accretion, or DD&A, impairment expense, provision for the carrying value of assets, loss on discontinued operations, exploration expenses, unrealized loss (gain) commodity derivative contracts, premiums paid for derivatives that settled during the period, unit-based and share-based compensation expense, amortization of debt discount and debt issuance costs included in interest expense, interest expense, income taxes, transaction costs and restructuring costs.
We believe Adjusted EBITDAX is useful because it allows us to more effectively evaluate our operating performance and compare the results of our operations from period to period without regard to our financing methods or capital structure. We exclude the items listed above from net income (loss) in arriving at Adjusted EBITDAX because these amounts can vary substantially from company to company within Riley Permian’s industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. Certain items excluded from Adjusted EBITDAX are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital, hedging strategy and tax structure, as well as the historic costs of depreciable assets, none of which are components of Adjusted EBITDAX.
| III. | Cash G&A: Cash G&A is defined as general and administrative expense less share-based and unit-based compensation and contract services–related<br> parties revenue plus cost of contract services–related parties. |
|---|
11
| IV. | Cash Costs and Cash Margin: Cash Costs is a non-GAAP financial measure that we use as an indicator of our total cash-based cost of production and<br> operations. We define “Cash Costs” as lease operating expenses plus production taxes, cash G&A, and interest expense. Management believes that Cash Costs is an important financial measure for use in evaluating the Company’s operating and<br> financial performance. Cash Costs should be considered in addition to, rather than as a substitute for, Total Costs and Expenses. |
|---|
Cash Margin per BOE is a non-GAAP financial measure that we use to evaluate our operating performance on a per BOE basis. We define Cash Margin per BOE as average realized price (before derivative settlements) per BOE less cash costs per BOE.
| V. | Free Cash Flow: Free Cash Flow is a measure that we use as an indicator of our ability to fund our development activities and generate excess cash for<br> other corporate purposes. We define Free Cash Flow as Cash Flow from Continuing Operations, less capital expenditures before acquisitions. |
|---|
Management believes that Free Cash Flow, which measures our ability to generate additional cash from our business operations, is an important financial measure for use in evaluating the Company’s financial performance. Free Cash Flow should be considered in addition to, rather than as a substitute for, consolidated net income as a measure of our performance and net cash provided by operating activities as a measure of our liquidity.
12
RILEY EXPLORATION PERMIAN, INC.
Calculation of Non-GAAP Measures
Adjusted Net Income
The following table provides a reconciliation of Net Loss to Adjusted Net Income for the periods indicated:
| Three Months Ended June 30, 2021 | ||||||
|---|---|---|---|---|---|---|
| Amounts | Amounts per Share | |||||
| (In thousands) | ||||||
| Net Loss | $ | (21,501 | ) | $ | (1.21 | ) |
| Loss on discontinued operations | (967 | ) | (0.05 | ) | ||
| Unrealized loss on derivatives | 27,684 | 1.56 | ||||
| Transaction costs | 321 | 0.02 | ||||
| Income tax expense adjusted for the above adjustments | (1,163 | ) | (0.07 | ) | ||
| Income tax expense | 3,245 | 0.18 | ||||
| Adjusted Net Income | $ | 7,619 | $ | 0.43 | ||
| Weighted average common shares outstanding: | ||||||
| Basic | 17,786 | |||||
| Diluted | 17,786 |
Adjusted EBITDAX
The following table provides a reconciliation from the GAAP measure of Net Income (Loss) to Adjusted EBITDAX.
| Three Months Ended<br><br> <br>June 30, | Nine Months Ended<br><br> <br>June 30, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 | |||||||||
| (In thousands) | ||||||||||||
| Net Income (Loss) | $ | (21,501 | ) | $ | (27,984 | ) | $ | (81,320 | ) | $ | 40,228 | |
| Loss on discontinued operations | 967 | — | 19,573 | — | ||||||||
| Exploration expense | 2,785 | 6,757 | 8,682 | 9,231 | ||||||||
| Depletion, depreciation, amortization and accretion | 7,082 | 5,028 | 19,323 | 16,020 | ||||||||
| Unit-based compensation expense | — | 291 | 689 | 650 | ||||||||
| Share-based compensation expense | 779 | — | 5,353 | — | ||||||||
| Interest expense | 1,171 | 1,302 | 3,571 | 4,086 | ||||||||
| Unrealized (gain)/loss on derivatives | 27,684 | 28,874 | 69,075 | (16,838 | ) | |||||||
| Income tax expense | 3,245 | 319 | 16,953 | 319 | ||||||||
| Transaction costs | 321 | 15 | 3,534 | 42 | ||||||||
| Restructuring costs | — | — | — | 392 | ||||||||
| Adjusted EBITDAX | $ | 22,533 | $ | 14,602 | $ | 65,433 | $ | 54,130 |
13
Cash G&A:
The following table provides a calculation for Cash G&A for the periods indicated:
| Three Months Ended June 30, | Nine Months Ended June 30, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 | |||||
| (In thousands) | ||||||||
| Administrative costs | $ | 4,030 | $ | 1,936 | $ | 9,176 | $ | 8,669 |
| Plus: Costs of contract services - related parties | 91 | 97 | 330 | 403 | ||||
| Less: Contract services revenues - related parties | 600 | 1,050 | 1,800 | 3,150 | ||||
| Total Cash G&A | $ | 3,521 | $ | 983 | $ | 7,706 | $ | 5,922 |
Cash Costs and Cash Margin per BOE:
The following table provides a calculation for Cash Costs and Cash Margin per BOE for the periods indicated:
| Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 | ||||||||
| (In thousands, except per BOE) | |||||||||||
| Cash Costs: | |||||||||||
| Lease Operating Expenses | $ | 5,754 | $ | 3,760 | $ | 17,323 | $ | 15,517 | |||
| Production Taxes | 2,029 | 293 | 5,027 | 2,808 | |||||||
| Cash G&A^(1)^ | 3,521 | 983 | 7,706 | 5,922 | |||||||
| Interest Expense | 1,171 | 1,302 | 3,571 | 4,086 | |||||||
| Total Cash Costs | $ | 12,475 | $ | 6,338 | $ | 33,627 | $ | 28,333 | |||
| Total Production (MBoe)^(2)(3)^ | 828 | 615 | 2,273 | 1,939 | |||||||
| Cash Margin (per BOE): | |||||||||||
| Average Realized Price, before derivative settlements | $ | 50.18 | $ | 8.08 | $ | 44.28 | $ | 29.82 | |||
| Less: | |||||||||||
| Lease Operating Expenses | 6.95 | 6.11 | 7.62 | 8.00 | |||||||
| Production Taxes | 2.45 | 0.48 | 2.21 | 1.45 | |||||||
| Cash G&A | 4.25 | 1.60 | 3.39 | 3.05 | |||||||
| Interest Expense | 1.42 | 2.12 | 1.57 | 2.11 | |||||||
| Total Cash Costs (per BOE) | $ | 15.07 | $ | 10.31 | $ | 14.79 | $ | 14.61 | |||
| Cash Margin per BOE, before derivative settlements | $ | 35.11 | $ | (2.23 | ) | $ | 29.49 | $ | 15.21 | ||
| Realized gain (loss) on derivatives per BOE | $ | (9.31 | ) | $ | 23.85 | $ | (2.26 | ) | $ | 10.40 | |
| Cash Margin per BOE, after derivative settlements | $ | 25.80 | $ | 21.62 | $ | 27.23 | $ | 25.61 |
| (1) | A non-GAAP financial measure which is reconciled above. |
|---|---|
| (2) | Represents reported sales volumes. |
| --- | --- |
| (3) | Barrels of oil equivalent have been calculated on the basis of six thousand cubic feet (Mcf) of natural gas equals one barrel of oil equivalent (BOE). |
| --- | --- |
14
Free Cash Flow
The following table provides a reconciliation of Cash Flow from Operations - Continuing Operations to Free Cash Flow for the periods indicated:
| Three Months Ended | Nine Months Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| June 30, 2021 | June 30, 2020 | June 30, 2021 | June 30, 2020 | |||||||||
| (In thousands) | ||||||||||||
| Cash Flow from Operations - Continuing Operations | $ | 20,695 | $ | 13,257 | $ | 58,841 | $ | 49,509 | ||||
| Additions to Oil & Natural Gas Properties | (21,749 | ) | (7,516 | ) | (38,882 | ) | (41,228 | ) | ||||
| Additions to Other Properties and Equipment | (792 | ) | (115 | ) | (1,172 | ) | (168 | ) | ||||
| Free Cash Flow | $ | (1,846 | ) | $ | 5,626 | $ | 18,787 | $ | 8,113 |
15
Exhibit 99.2
Fiscal Third Quarter 2021 Operating and Financial Update AUGUST 2021
2 Forward-Looking Statements Forward-Looking Statements This presentation contains projections and other forward-looking statements within the meaning of federal securities laws. These projections and statements reflect Riley Exploration Permian, Inc.’s (“Riley Permian”) current views with respect to future events and financial performance. No assurances can be given, however, that these events will occur or that these projections will be achieved, and actual results could differ materially from those projected as a result of certain factors. A discussion of these factors is included in Riley Permian’s periodic reports filed with the U.S. Securities and Exchange Commission (“SEC”). This presentation also contains Riley Permian’s updated capital expenditure and production guidance for 2021 and certain forward-looking information with respect to 2022. The actual levels of production, capital expenditures, expenses and other estimates may be higher or lower than these estimates due to, among other things, uncertainty in drilling schedules, changes in market demand, availability and cost of drilling rigs and other equipment, failure of wells to produce in line with historic performance or our expectations, and unanticipated delays in production. All statements, other than historical facts, that address activities that Riley Permian assumes, plans, expects, believes, intends or anticipates (and other similar expressions) will, should or may occur in the future are forward-looking statements. The forward-looking statements are based on management’s current beliefs, based on currently available information, as to the outcome and timing of future events, including the current adverse industry and macroeconomic conditions, commodity price volatility, production levels, the impact of the recent presidential and congressional elections on energy and environmental policies and regulations, any other potential regulatory actions (including those that may impose production limits in the Permian Basin), the impact and duration of the ongoing COVID-19 pandemic, acquisitions and sales of assets, future dividends, production, drilling and capital expenditure plans, severe weather conditions (including the impact of the recent severe winter storms on production volumes), impact of impairment charges, price and availability of CO2, and effects of hedging arrangements. These forward-looking statements involve certain risks and uncertainties that could cause the results to differ materially from those expected by the management of Riley Permian. These forward-looking statements involve significant risks and uncertainties that could cause actual results to differ materially from those anticipated, including, but not limited to, the risk that Riley Permian may reduce, suspend or totally eliminate dividend payments in the future, whether variable or fixed, due to insufficient liquidity or other factors, potential adverse reactions or changes to the business or operations of Riley Permian resulting from the recently completed merger, including Riley Permian’s future financial condition, results of operations, strategy and plans; changes in capital markets and the ability of Riley Permian to finance operations in the manner expected; the risk that the Company’s EOR and CCUS projects may not perform as expected or produce the anticipated benefits; the risks of oil and gas activities; and the fact that operating costs and business disruption may be greater than expected following the consummation of the merger.Riley Permian encourages readers to consider the risks and uncertainties associated with projections and other forward-looking statements. In addition, Riley Permian assumes no obligation to publicly revise or update any forward-looking statements based on future events or circumstances. For additional discussion of the factors that may cause us not to achieve our financial projections and/or production estimates, see Riley Permian’s filings with the SEC, including its forms 10-K, 10-Q and 8-K and any amendments thereto. We do not undertake any obligation to release publicly the results of any future revisions we may make to this prospective data or to update this prospective data to reflect events or circumstances after the date of this presentation. Therefore, you are cautioned not to place undue reliance on this information. None of the information contained in this presentation has been audited by any independent auditor. This presentation is prepared as a convenience for securities analysts and investors and may be useful as a reference tool. Riley Permian may elect to modify the format or discontinue publication at any time, without notice to securities analysts or investors. Use of non-GAAP Financial Information This presentation includes certain financial measures that are not calculated in accordance with U.S. generally accepted accounting principles (“GAAP”). These measures include (i) EBITDA, (ii) Adjusted EBITDA, (iii) Net Debt, (iv) Free Cash Flow and (v) PV-10. These non-GAAP financial measures are not measures of financial performance prepared or presented in accordance with GAAP and may exclude items that are significant in understanding and assessing our financial results. Therefore, these measures should not be considered in isolation, and users of any such information should not place undue reliance thereon. See the Appendix for the descriptions and reconciliations of these non-GAAP measures presented in this presentation to the most directly comparable financial measures calculated in accordance with GAAP. Riley Permian is unable to provide a reconciliation of non-GAAP financial measures contained in this presentation that are presented on a forward-looking basis because Riley Permian is unable, without unreasonable efforts, to estimate and quantify the most directly comparable GAAP components, largely because predicting future operating results is subject to many factors outside of Riley Permian's control and not readily predictable and that are not part of Riley Permian's routine operating activities, including various domestic and international economic, regulatory, political and legal factors. Oil & Gas Reserves The SEC generally permits oil and natural gas companies, in filings made with the SEC, to disclose proved reserves, which are reserve estimates that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions, and certain probable and possible reserves that meet the SEC’s definitions for such terms. In this presentation, Riley Permian may use the terms “resource potential,” “resource play,” “estimated ultimate recovery,” or “EURs,” “type curve” and “standardized measure,” each of which the SEC guidelines restrict from being included in filings with the SEC without strict compliance with SEC definitions. These terms refer to Riley Permian’s internal estimates of unbooked hydrocarbon quantities that may be potentially discovered through exploratory drilling or recovered with additional drilling or recovery techniques. “Resource potential” is used by Riley Permian to refer to the estimated quantities of hydrocarbons that may be added to proved reserves, largely from a specified resource play potentially supporting numerous drilling locations. A “resource play” is a term used by Riley Permian to describe an accumulation of hydrocarbons known to exist over a large areal expanse and/or thick vertical section potentially supporting numerous drilling locations, which, when compared to a conventional play, typically has a lower geological and/or commercial development risk. “EURs” are based on Riley Permian’s previous operating experience in a given area and publicly available information relating to the operations of producers who are conducting operations in these areas. Unbooked resource potential or “EURs” do not constitute reserves within the meaning of the Society of Petroleum Engineer’s Petroleum Resource Management System or SEC rules and do not include any proved reserves. Actual quantities of reserves that may be ultimately recovered from Riley Permian’s interests may differ substantially from those presented herein. Factors affecting ultimate recovery include the scope of Riley Permian’s ongoing drilling program, which will be directly affected by the availability of capital, decreases in oil, natural gas liquids and natural gas prices, well spacing, drilling and production costs, availability and cost of drilling services and equipment, lease expirations, transportation constraints, regulatory approvals, negative revisions to reserve estimates and other factors, as well as actual drilling results, including geological and mechanical factors affecting recovery rates. “EURs” from reserves may change significantly as development of Riley Permian’s core assets provides additional data. In addition, Riley Permian’s production forecasts and expectations for future periods are dependent upon many assumptions, including estimates of production decline rates from existing wells and the undertaking and outcome of future drilling activity, which may be affected by significant commodity price declines or drilling cost increases. “Type curve” refers to a production profile of a well, or a particular category of wells, for a specific play and/or area. The “standardized measure” of discounted future new cash flows is calculated in accordance with SEC regulations and a discount rate of 10%. Actual results may vary considerably and should not be considered to represent the fair market value of Riley Permian’s proved reserves.
1 Fiscal Third Quarter 2021 (FQ3) Highlights Future dividends are subject to approval by the board of directors. Yield based on share price as of August 6, 2021.. Non-GAAP financial measure, see Appendix for reconciliation.Non-GAAP financial measure. Margin calculated as Adjusted EBITDAX divided by the sum of oil & gas revenues plus realized derivative settlements. Non-GAAP financial measure. Total leverage calculated as gross debt outstanding divided by last twelve months Adjusted EBITDAX, which was $79.8MM for the period ending June 30, 2021. Overall Execution Execution on track for Company’s best fiscal year performance in history across numerous operational and financial performance metrics, including our continued quarterly dividend distribution(1) Production Increased total net production by 35% year-over-year or 10% quarter-over-quarter to 9.1 MBoe/d (6.7MBo/d oil) Cash Margin Reduced Cash Costs(2) per Boe by 7% quarter-over-quarter; realized Cash Margin(2) of $35.11/Boe before derivative settlements or $25.80/Boe after derivative settlements Adjusted EBITDAX Generated $22.5MM of Adjusted EBITDAX(2) in FQ3 and $65.4MM year-to-date (69% margin(3) fiscal YTD) Capex Invested $40.1MM year-to-date of cash capital expenditures before acquisitions, equivalent to 61% of Adjusted EBITDAX(2) Cash Flow Generated fiscal year-to-date free cash flow(2) of $18.8MM Capital Raise / EOR Completed $47MM capital raise in July 2021 with issuance of 1.67 million shares: secured funding for acceleration of Enhanced Oil Recovery (EOR) program and increased estimated trading float by 77% Debt Reduced debt by $35.5MM to $62.0MM during July 2021 to 0.8x total leverage(4); increased undrawn availability by 95% to $73MM Dividends Paid dividend of $0.28/share in August 2021; YTD dividends paid correspond to 20% of Adjusted EBITDAX and 68% of FCF; top-decile industry yield of 5.8%(1)
Total Net ProductionMBoe6/d Estimated Net Proved Reserves(1)MMBoe Adjusted EBITDAX(2)$MM 4 Continued Execution on Growth and Cash Flow Generation 9/30/17 through 9/30/20 reserves as of Netherland Sewell & Associates (NSAI). 6/30/21 reserve estimates per Riley Permian management estimates, subject to change. Non-GAAP financial measure, see Appendix for reconciliation..
Operating Cash Flow(1) Relative to Capex(2), $MM % of Adj. EBITDAX(3) Allocated to Capex(2) and Dividends Total Leverage Ratio(4) 2 Growing within the Limits of Capital Allocation Discipline Cash Flow from Continuing Operations.Total cash capital expenditures before acquisitions.Non-GAAP financial measure, see Appendix for reconciliation.Non-GAAP financial measure. Total leverage calculated as gross debt outstanding divided by last twelve months Adjusted EBITDAX, which was $68.6MM for the period ending December 31, 2021, and $79.8MM for the period ending June 30, 2021 (same amount used for Total Leverage Ratio as of July 2021).
6 Excelling on Full-Cycle Cash Conversion Efficiency Non-GAAP financial measure. Recycle Ratio calculated as Cash Margin divided by Finding & Development (F&D) Costs. Cash Margin defined in Appendix. F&D Costs calculated as total reserve additions divided by capitalized costs of reserve additions. F&D cost utilized is average of 2019-2020. Source public filings and Riley Permian. Calendar year metrics used for Riley Permian to be consistent with comparable companies. Recycle Ratio of Permian E&Ps
Calendar Qtrs. 4Q21 1Q22 2Q22 3Q22 4Q22 Update on Riley’s EOR Pilot Project 7 Execution Status Advancing execution following capital raiseObtained many permits already; remainder expected to be obtained during 2021Drilling / casing / logging of vertical injection wells to begin in Sept-21 and finish near end of year 2021Water and gas line infrastructure has been ordered; installing during calendar 4Q21/1Q22Physical infrastructure connection to CO2 pipeline source has a 6-9 month turnaround time due to its specialty nature and supply chain constraints CO2 Procurement Project will begin using natural CO2 given ease of availability, reliability and priceFinalizing customary agreements for CO2 source supply and physical connection (tap)Potential to switch to anthropogenic CO2 with this or subsequent project areas as sources become available at attractive economics Injection Timing Water injection may begin during 2Q22; combination of CO2 and water injection to begin after reservoir is sufficiently re-pressurized Permits Injection Wells Infrastructure Begin Water Injection Begin C02 + Water Injection
8 Forward Guidance Ne Quarter OnlyFQ4 21 Full YearFY21 Comments Capex $20 - 26MM $60 - 66MM FY21 Capex budget midpoint increased by approximately ~$6-10MM from prior guidanceEstimated incremental spend relates to acceleration of EOR project (injection wells, infrastructure and CO2 tap), as well as cash timing differences of non-EOR D&C Avg. Daily Oil Production, MBbls/d 6.6 - 7.2 6.3 - 6.5 Consistent with prior guidance Avg. Daily Equivalent ProductionYear-over-Year Growth 8.7 - 9.621 - 34% 8.4 - 8.618 - 21% Range narrowed with consistent midpoint Avg. Daily Equivalent Production 8.4 Mboe6/d 8.3-8.7 Mboe6/d LOE (includes ad valorem tax), $/Boe 6.90 - 7.80 7.40 - 7.70 Modestly higher from prior quarter guidance, primarily due to higher ad valorem taxes Production Taxes, $/Boe 2.50 - 2.80 2.30 - 2.50 Function of commodity prices Cash G&A(1), $/Boe 2.80 - 3.40 3.20 - 3.40 Low-end consistent with prior, increased upper by $0.10 Interest Expense, $/Boe 0.80 - 1.00 1.35 - 1.45 Lower following significant debt reduction (1) Excludes share-based compensation expense; includes the effect of gross profit from contract services derived from management services agreements.
Company Overview 9
Riley Permian at a Glance New breed of small-cap E&P outperforming large-caps in operational and financial metricsLow base-decline assets enable less capital-intensive reinvestment for maintenance and growthShareholder-focused capital allocation framework includes growing within moderate reinvestment rate and robust dividend payoutConservative balance sheet and low leverageNew ventures beginning with enhanced oil recovery (EOR) and Carbon Capture Utilization and Sequestration (CCUS) initiativesHeadquartered in Oklahoma City with 50 employeesCore Assets on the Northwest Shelf of the Permian Basin 10 Future dividends are subject to approval by the board of directors.
Company History and Stock Information 3 NYSE American: REPX Shares outstanding includes unvested shares. Future dividends are subject to approval by the board of directors.
Riley’s Dividend Information 12 FY19 and FY20 based on actual dividends paid by private, predecessor entity, and estimated share count to reflect current public company status post merger. Future dividends are subject to approval by the board of directors. The payment of a regular quarterly dividend has long been a priority for Riley Permian, dating back to its predecessor entity as a private company. Going forward, one of Riley Permian’s core priorities is to continue to pay – and grow – a regular quarterly dividend, consistent with our shareholder-focused business model. 10 consecutive quarters of returning material cash to our shareholders
13 Our solid asset base, strong balance sheet and manageable production profile supports our ability to generate free cash flow to maintain our quarterly dividend.” – Bobby Riley, Chairman & CEO “ Future dividends are subject to approval by the board of directors.
Committed to ESG Engagement 14 Energy transition viewed as an opportunity for engagement and new ventures, evidenced by CCUS and ACO2 initiativesOperable gas gathering lines are installed ahead of first production to mitigate flaring – resulting in 62% and 20% year over year reduction in flaring in 2019 and 2020> 99% of liquids production collected via gathering system and the implementation of electronic ticketing aimed at reducing truck traffic and CO2 emissionsActive Leak Detection and Repair (LDAR) program focused on leak identification, repair and operational excellenceAutomated flare metering to allow real time monitoring of upset conditions and respond to flaring incidents which result in a reduction in flaring events and duration Promoting a values-based cultureHiring employees from diverse backgrounds displaced by economic downturn20% female share of workforceZero recordable injuries in 2020 and 2021 YTDCompany-wide electronic learning management system to continuously improve our safety training for all employeesCompany-wide Stop Work Authority Program to provide all employees, contractors, vendors, and visitors with the responsibility and obligation to stop unsafe conditions and acts Actively support local communities in which we operateDedicated EHS / ESG officer Prioritizing long-term corporate sustainability and creating value for shareholdersCommitment to transparent disclosure of corporate-level performance metricsBalanced board of directors: significant shareholder representation (>33%) along with two independentsExecutive alignment with shareholders as 2/3rds of executive incentive compensation is in the form of stockExecutives own ~3% of total company equity Environmental Social Governance
15 Overview of Conventional, Non-Shale Assets Source: U.S. Geological Survey and Riley Permian. Riley Permian’s core focus is on development of horizontal San Andres production on the Northwest Shelf of the Permian BasinThe San Andres is a proven Conventional Reservoir that has been producing since the 1920s The San Andres’ moderate depth generally leads to lower drilling costs compared to many of the Permian shale plays, including the WolfcampThe San Andres reservoirs have excellent natural permeability and porosity, which allows large volumes of fluids to move through the rock to the boreholeThese reservoir properties also allow for less stimulation on well completions (fewer frac stages, less sand and water), leading to lower cost wells The natural permeability in the reservoir also can lead to a shallower production decline as compared to the hyperbolic declines of shale wells San Andres 4,600’
16 Champions Asset is an Extension of a Giant Field Conventional assets provide for low base-decline and low capital intensityAmong the lowest finding & development costs for U.S. oil reservesMulti-year continued development of predictable, low risk undeveloped locationsExtensive, untapped potential reserves Platang Field (“Champions”) Riley’s core asset, “Champions” (part of the Platang Field) is a continuation of a giant, legacy oilfield, primarily in Yoakum County, TXThe Wasson and Brahaney Field Complex, commenced development in the 1930s and have produced over 2.3 billion barrels of oil Source: Drilling Info.
17 Riley Permian wells include 15 operated wells that were drilled and completed during 2018. Source: Riley Permian. Permian Shale wells include wells with initial production in 2018; producing formations limited to Wolfcamp, Wolfbone and Bone Spring; counties limited to Eddy, Glassock, Howard, Lea, Loving, Martin, Midland, Reagan, Reeves, Upton, Ward and Winkler. Cumulative production normalized to 7,200’ lateral length. Source: Public ShaleProfile.com.Equivalent Cost illustration assumes capital cost for an average Permian Shale well is twice cost of an average Riley Permian well. Illustration thus shows cumulative production for two Riley Permian wells compared to a single Permian Shale well. Oil Production and Decline Profiles, Single Well Cumulative Oil Production, Single Well Cumulative Oil Production with Equivalent Cost Illustrative Well Characteristics for Riley Permian vs. Permian Shale > 3x the rateat month 30 ~0.75x total at month 30, with flatter decline 2 Riley Permian wells for the cost of 1 Permian Shale well
SEC Proved Reserves Summary 18 Industry-leading finding & development costs, including 3-year average total F&D of $4.76/Boe and Drill Bit F&D of $4.16/Boe(1)20+ Year proved reserve life provides significant runway for further development(2)Internal estimates for reserves as of 6/30/21 include total proved reserves of approximately 62 MMBoe, which would represent ~7 MMBoe of gross additions from 9/30/21 proved reserves of 57 MMBoe, or 5 MMBoe net additions (net of 2 MMBoe of production through 6/30/21) Estimated Proved Reserve (SEC(3)), MMBoe Source: NSAI reserves and Riley Permian management analysis. Internal estimates for 6/30/21 reserves subject to change. Adjusted to exclude legacy Tengasco reserves and activity, given such assets have been divested. Boe metrics converts gas mcf on a 1:6 basis to oil barrels and NGL barrels on a 1:1 basis with oil barrels, consistent with industry standards, but which does not reflect economic equivalents. Total F&D Costs calculated as Total Capitalized Costs Incurred divided by the Total Net Reserve Additions (Including Extensions & Discoveries, Acquisitions and Revisions). Drill Bit F&D is calculated as Total Exploration and Development Capitalized Costs divided by the reserve additions from Extensions & Discoveries plus Revisions.R/P calculated as fiscal year-end NSAI Proved Reserves (as of 9/30/20) divided by total annual production (FY2020). 2020 NPV used $41.91/Bbl (with differentials). 2021 NPV used $48.16 (with differentials). Estimated NPV10, (SEC)(3) ( <$50 Oil), $MM
Riley’s Champions asset is directly adjacent to several of the largest and most successful EOR projects in the U.S., including the Wasson Field, with individual units operated by some of the largest U.S. operatorsRiley has collected extensive cores, logs and 3-D seismic data over the Champions Field area to evaluate resource potential, including with the assistance of world-class advisors such as Baker Hughes, William M. Cobb and Associates, and othersOur assets possess similar reservoir rock properties to Wasson (porosity, permeability, thickness), and average oil saturations are quite favorable for both waterflooding and CO2 injection Further, the most concentrated area of CO2 infrastructure in the U.S. is directly adjacent to Riley Permian’s core asset, including the CO2 pipeline hub at Denver CityKinder Morgan’s Cortez CO2 pipeline runs directly through our property 19 Core Asset Is an Ideal Candidate for EOR and CCUS Development Brahaney Co2 PipelinesRiley Core Asset AreaSan Andres EOR Fields Wasson Denver City Hub Kinder Morgan Cortez Riley (Champions) Select EOR Fields Adjacent to Riley Permianand CO2 Pipeline Network
Riley’s EOR Pilot Project Design 20 1.5 miles Existing Horizontal wells Proposed Injection wellsSection LinesPilot Area960-Acre Outline Illustrative Design for 960-Acre EOR Project Area Design will include 2 rows of 6 vertical injectors each, in a staggered patternVertical injection wells will apply water and CO2 to horizontal producerRiley’s EOR project will consume significant amounts of CO2, facilitating entry into CCUSRiley aims to use anthropogenic sources of CO2 (ACO2), which leads to the production of low-carbon barrelsCurrently investigating multiple sources for ACO2 with leading industry players; Riley participation in CCUS could be direct or offtake only
Appendix 21 [ insert footnotes here ]
22 Commodity Hedging Position as of June 30, 2021 FQ3 Hedging Updates Include:Oil2022 swaps totaling 360 MBls at $60.36/Bbl2023 swaps totaling 330 MBbls $59.63/Bbl2022 basis swaps at a positive spread of +25¢/BblNatural Gas2021 swaps totaling 210,000 Mcf at $3.30/MMBtu
23 Non-GAAP Reconciliations (Cont’d.) Adjusted Net IncomeThe Company defines “Adjusted Net Income” as Net Loss plus, when applicable, unrealized loss on derivative contracts; impairment expense; transaction costs; the loss of discontinued operations; income tax expense related to a change in tax status; and the associated changes in estimated income tax.Our Adjusted Net Income measure provides additional information that may be used to further understand our operations. Adjusted Net Income is one of several metrics that we use as a supplemental financial measurement in the evaluation of our business and should not be considered as an alternative to, or more meaningful than, net income (loss) as an indicator of operating performance. Certain items excluded from Adjusted Net Income are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historic cost of depreciable and depletable assets. Adjusted Net Income, as used by us, may not be comparable to similarly titled measures reported by other companies. We believe that Adjusted Net Income is a widely followed measure of operating performance and is one of many metrics used by our management team and by other users of our consolidated financial statements. For example, Adjusted Net Income can be used to assess our operating performance and return on capital in comparison to other independent exploration and production companies without regard to financial or capital structure and to assess the financial performance of our assets and our company without regard to capital structure or historical cost basis.The following table provides a reconciliation of Net Loss to Adjusted Net Income for the periods indicated:
24 Non-GAAP Reconciliations Adjusted EBITDAXThe non-GAAP financial measure of Adjusted EBITDAX (as defined below), as calculated by us below, is intended to provide readers with meaningful information that supplements our financial statements prepared in accordance with GAAP. Further, these non-GAAP measures should only be considered in conjunction with financial statements and disclosures prepared in accordance with GAAP and should not be considered in isolation or as a substitute for GAAP measures, such as net income or loss, operating income or loss or any other GAAP measure of financial position or results of operations. Adjusted EBITDAX is presented herein and reconciled from the GAAP measure of net income (loss) because of its wide acceptance by the investment community as a financial indicator.Riley Permian defines “Adjusted EBITDAX” as net income (loss) adjusted for certain cash and non-cash items, including depletion, depreciation, amortization and accretion, or DD&A, impairment expense, provision for the carrying value of assets, loss on discontinued operations, exploration expenses, unrealized loss (gain) commodity derivative contracts, premiums paid for derivatives that settled during the period, unit-based and share-based compensation expense, amortization of debt discount and debt issuance costs included in interest expense, interest expense, income taxes, transaction costs and restructuring costs.We believe Adjusted EBITDAX is useful because it allows us to more effectively evaluate our operating performance and compare the results of our operations from period to period without regard to our financing methods or capital structure. We exclude the items listed above from net income (loss) in arriving at Adjusted EBITDAX because these amounts can vary substantially from company to company within Riley Permian’s industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. Certain items excluded from Adjusted EBITDAX are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital, hedging strategy and tax structure, as well as the historic costs of depreciable assets, none of which are components of Adjusted EBITDAX.The following table provides a reconciliation from the GAAP measure of Net Income (Loss) to Adjusted EBITDAX.
25 Non-GAAP Reconciliations (Cont’d.) Cash G&A, Cash Costs and Cash MarginThe Company defines “Cash G&A” as general and administrative expense less share-based and unit-based compensation and contract services–related parties revenue plus cost of contract services–related parties. The Company defines “Cash Costs” as lease operating expenses plus production taxes, cash G&A, and interest expense. Management believes that Cash Costs is an important financial measure for use in evaluating the Company’s operating and financial performance. Cash Costs should be considered in addition to, rather than as a substitute for, Total Costs and Expenses. Cash Costs is a non-GAAP financial measure that we use as an indicator of our total cash-based cost of production and operations.The Company define “Cash Margin per Boe” as average realized price (before derivative settlements) per BOE less cash costs per BOE. Cash Margin per BOE is a non-GAAP financial measure that we use to evaluate our operating performance on a per BOE basis. The following tables provide a calculation for Cash G&A, Cash Costs and Cash Margin for the periods indicated.
26 Non-GAAP Reconciliations (Cont’d.) Free Cash FlowThe Company defines “Free Cash Flow” as Cash Flow from Continuing Operations, less capital expenditures before acquisitions. Free Cash Flow is a measure that we use as an indicator of our ability to fund our development activities and generate excess cash for other corporate purposes.Management believes that Free Cash Flow, which measures our ability to generate additional cash from our business operations, is an important financial measure for use in evaluating the Company’s financial performance. Free Cash Flow should be considered in addition to, rather than as a substitute for, consolidated net income as a measure of our performance and net cash provided by operating activities as a measure of our liquidity.The following table provides a reconciliation of Cash Flow from Operations - Continuing Operations to Free Cash Flow for the periods indicated: