Riley Exploration Permian, Inc. (REP) Annual Report: A Comprehensive Review for Investors

Dive into the latest SEC 10-K filing for Riley Exploration Permian, Inc. This summary offers retail investors a clear, detailed, and engaging overview of REP's performance and strategic direction over the past year, highlighting key financial and operational insights.

Business Overview

Riley Exploration Permian, Inc. (REP) is an independent oil and natural gas company. It acquires, explores for, develops, and produces oil and natural gas assets, primarily focusing its operations on the Permian Basin. This highly productive region in West Texas and New Mexico offers REP high-growth opportunities rich in oil and natural gas liquids (NGLs).

Financial Highlights: A Snapshot of Performance (Management Discussion & Analysis Highlights)

For the fiscal year ended December 31, 2025, Riley Exploration Permian (REP) delivered strong financial performance, driven by strategic growth and active portfolio management. This section highlights key financial and operational insights from management's discussion and analysis.

• Revenue: REP reported $450 million in total revenue for 2025, up from $400 million in 2024. This increase was primarily due to higher production volumes and favorable commodity prices.
• Net Income: REP achieved net income of $75 million in 2025, compared to $60 million in 2024, reflecting improved operational efficiency and strategic acquisitions.
• Adjusted EBITDA: Adjusted EBITDA, a key measure of operational profitability, reached $220 million for 2025, up from $190 million in 2024.
• Cash Flow from Operations: The company generated robust cash flow from operations of $180 million in 2025, providing capital for reinvestment and debt management.
• Capital Expenditures (CAPEX): Total CAPEX for 2025 was $150 million, mainly allocated to drilling, completion activities, and the Enhanced Oil Recovery (EOR) project.

Operational Performance and Strategic Initiatives

REP actively managed its assets to boost production and optimize its portfolio.

• Production Volumes: Total average daily production for 2025 reached 25,000 barrels of oil equivalent per day (BOEPD), up from 22,000 BOEPD in 2024. This comprised approximately 60% oil, 20% natural gas, and 20% natural gas liquids (NGLs).
• Realized Prices: REP's average realized prices in 2025 were $78 per barrel for oil, $3.50 per thousand cubic feet (Mcf) for natural gas, and $28 per barrel for NGLs, supported by its hedging strategy.
• Proved Reserves: As of December 31, 2025, REP reported 55 million barrels of oil equivalent (MMBOE) in proved reserves, a 10% increase from 2024, achieving a 150% reserve replacement ratio. The estimated present value of future net cash flows (PV-10) from these reserves was $750 million.
• Strategic Portfolio Management:
  • Acquisitions: In July 2025, REP successfully acquired Silverback Resources for $120 million (financed through a mix of cash and debt). This acquisition added approximately 5,000 BOEPD of current production and 20,000 net acres in the Delaware Basin. This built on earlier strategic purchases in New Mexico (2023 and 2024), which collectively added 15,000 net acres and 3,000 BOEPD, reinforcing REP's focus on high-growth Permian assets.
  • Divestitures: Late in 2025, REP completed two key divestitures totaling $80 million. The "Midstream Sale" in November generated $50 million from non-core gathering and processing assets, allowing REP to focus on upstream activities. The "Viking Sale" in December divested non-strategic assets outside its core Permian focus for $30 million, further streamlining its portfolio and reducing operational complexity. Proceeds from these sales primarily went towards debt reduction and general corporate purposes.
• Enhanced Oil Recovery (EOR) Project: REP initiated its EOR project in 2024, expanding it in 2025 within its core Texas Permian acreage. This $30 million investment in CO2 injection infrastructure is expected to boost recovery rates by an additional 10-15% from existing wells, contributing an incremental 1,500 BOEPD by late 2026.

Financial Health and Capital Management

REP balances financing with managing shareholder value.

• Debt Structure & Liquidity: As of December 31, 2025, REP's total outstanding debt was $480 million. This comprised $200 million drawn on its Revolving Credit Facility (a flexible credit line with a $350 million borrowing base) and $280 million in Senior Unsecured Notes due in 2028, carrying a 10.50% interest rate. Its debt-to-EBITDA ratio stood at a manageable 2.1x, reflecting a prudent leverage strategy.
• Hedging Strategy: To mitigate commodity price volatility, REP actively hedges a significant portion of its expected production. For 2026, REP hedged approximately 60% of projected oil production at an average floor price of $70/barrel using financial instruments like swaps and collars. Similarly, REP hedged 50% of natural gas production at an average price of $3.00/Mcf. This includes specific hedges for Waha Basis (the price difference for natural gas at the Waha hub in West Texas) to protect against regional price disruptions. These hedges extend into 2027, offering revenue predictability.
• Shareholder Capital Programs:
  • Equity Offering: In 2024, REP raised $75 million through an equity offering, issuing 2.5 million new shares primarily to fund acquisitions and reduce debt.
  • Share Repurchase Program: The company's active share repurchase program bought back 1 million shares in 2025 for $25 million, aiming to enhance shareholder value and offset dilution.
  • At-The-Market (ATM) Equity Program: REP maintains an ATM program, which allows it to issue shares opportunistically into the market to raise capital efficiently, though no significant issuances occurred in 2025.
  • Performance Shares & Restricted Stock: These are key components of REP's executive and employee compensation plans, aligning management incentives with long-term shareholder value.

Key Risks and Considerations

Several factors could impact REP's future performance, and investors should be aware of these key risks.

• Commodity Price Volatility: Despite hedging, REP remains exposed to global oil and natural gas price fluctuations, which directly impact revenue and profitability.
• Customer Concentration: Its top two purchasers generated approximately 35% of REP's total revenue in 2025. A significant reduction in purchases by these key customers could materially impact the company's financial results.
• Debt Profile: While manageable, the 10.50% interest rate on its Senior Unsecured Notes represents a higher cost of capital. Rising interest rates could also increase the cost of its Revolving Credit Facility.
• Related Party Transactions: REP conducts various transactions with related parties, including RPC Power LLC (power services), Combo Resources LLC (drilling services), Riley Exploration Group Inc. (administrative support), and DiSanto Law PLLC (legal services). These transactions, totaling approximately $15 million in 2025, are reviewed by the audit committee to ensure they are fair and in the best interest of the company and its shareholders. The company also leases a private aircraft from a related party for executive travel.
• Environmental and Regulatory Risks: As an energy producer, REP faces evolving environmental regulations and potential liabilities from climate change policies, operational incidents, and compliance costs.
• Operational Risks: The company faces inherent operational risks in drilling, completion, and production activities. These include geological uncertainties, equipment failures, unexpected well conditions, and environmental hazards, which could lead to delays, cost overruns, or reduced production.
• Regulatory and Political Risks: Changes in government regulations (environmental protection, taxation, energy policy) and geopolitical developments could adversely affect REP's operations, financial condition, and prospects.
• Market and Demand Risks: Competition for acreage, equipment, and personnel, alongside fluctuations in global oil and natural gas demand, could impact the company's ability to execute its strategy and achieve its financial objectives.
• Access to Capital: Future capital needs for drilling, acquisitions, and other operations may require additional financing, which might not be available on favorable terms or at all, especially during market volatility.

Competitive Position

The oil and natural gas industry, especially within the Permian Basin, is highly competitive. Riley Exploration Permian, Inc. (REP) competes with numerous independent and major oil and natural gas companies to acquire properties, explore and develop reserves, and market production. Key competitive factors include access to capital, technical expertise, drilling and completion technology, and the ability to attract and retain skilled personnel. REP's competitive advantages stem from its focused Permian asset base, operational efficiency, and strategic portfolio management. However, larger competitors may have greater financial and technical resources, potentially impacting REP's ability to compete effectively for new opportunities or during commodity price volatility.

Future Outlook

For the upcoming fiscal year, Riley Exploration Permian, Inc. (REP) plans to continue its disciplined capital allocation strategy. It will focus on optimizing production from existing assets, pursuing high-return development opportunities, and evaluating strategic acquisitions that align with its core Permian focus. The company aims to maintain a strong balance sheet while generating sustainable free cash flow to support shareholder returns.

• Subsequent Events: In early 2026 (January and February), REP announced a new $50 million drilling program. This program targets high-return infill wells (wells drilled between existing ones to increase recovery) in its core Permian acreage, expected to add 2,000 BOEPD by year-end. Additionally, the company successfully renegotiated its Revolving Credit Facility, extending its maturity to 2028 and increasing its borrowing base (the maximum amount it can borrow) to $400 million.

In summary, Riley Exploration Permian, Inc. (REP) concluded 2025 with strong financial results. These were driven by strategic acquisitions, effective portfolio optimization through divestitures, and enhanced operational efficiency. Its proactive hedging strategy and disciplined capital management aim to provide stability amid market volatility. While growth initiatives and a robust balance sheet position REP favorably, investors should monitor commodity price trends, customer concentration, and related party transactions.