8-K/A: Riley Exploration Permian Amends 8-K with Silverback Financials

Riley Exploration Permian, Inc. files an amendment to its 8-K, providing detailed financial statements for its recently acquired subsidiary, Silverback Exploration II, LLC, and pro forma combined financial data.

Summary

• Riley Exploration Permian, Inc. (REPX) filed an amendment to its Current Report on Form 8-K to include the audited consolidated financial statements of Silverback Exploration II, LLC for the year ended December 31, 2024, and unaudited interim consolidated financial statements for the three months ended March 31, 2025.
• The filing also includes unaudited pro forma financial information for REPX, giving effect to the Silverback Acquisition as if it had occurred on January 1, 2024, for the statements of operations and March 31, 2025, for the balance sheet.
• The Silverback Acquisition, completed on July 1, 2025, involved REPX's wholly-owned subsidiary acquiring 100% of Silverback's ownership interests, which include oil and natural gas assets primarily in the Yeso trend of the Permian Basin in Eddy County, New Mexico.
• The aggregate purchase price was approximately $142 million, subject to customary adjustments, plus potential quarterly earnout payments of up to $1,875,000 per fiscal quarter during calendar years 2026 and 2027 if NYMEX WTI quarterly average exceeds $70 to $75 per barrel or higher.
• At closing on July 1, 2025, the fair value of the consideration transferred was adjusted to approximately $129 million, reflecting purchase price adjustments and the fair value of contingent consideration.
• Silverback reported a net loss of $2,977,508 for the year ended December 31, 2024, on sales of $77,825,345.
• For the three months ended March 31, 2025, Silverback reported net income of $3,362,986 on sales of $21,595,097.
• Pro forma combined net income for REPX and Silverback was $31,631,000 for the three months ended March 31, 2025, and $87,335,000 for the year ended December 31, 2024.
• Pro forma total proved reserves for the combined entity as of December 31, 2024, were 150,526 MBoe, with a standardized measure of discounted future net cash flows of $1,491,114,000.

Sentiment

Score: 7

Explanation: The filing provides comprehensive financial details for a significant acquisition, which is a positive strategic move for REPX. Silverback's Q1 2025 performance shows a positive trend, and the pro forma financials indicate a larger, more robust combined entity. While the 2024 net loss for Silverback is a negative, the overall context of the acquisition and the forward-looking earnout suggest a positive outlook for the combined entity's growth potential.

Positives

• Silverback Exploration II, LLC reported a net income of $3,362,986 for the three months ended March 31, 2025, a positive turnaround from its net loss in 2024.
• The acquisition adds significant oil and natural gas assets in the Permian Basin, a key liquids-rich resource play in North America.
• The earnout structure provides potential additional value to the sellers if commodity prices remain strong, aligning interests for future performance.
• Silverback's borrowing base on its revolving credit facility was increased to $30,000,000 on November 19, 2024, and reaffirmed on April 8, 2025, indicating lender confidence.
• Silverback was in compliance with all terms and covenants of its revolving credit facility as of December 31, 2024, and March 31, 2025.

Negatives

• Silverback Exploration II, LLC reported a net loss of $2,977,508 for the year ended December 31, 2024.
• Silverback recorded an impairment expense of $3,091,071 in 2024 related to lower of cost or market adjustments for inventory.
• Silverback experienced downward revisions of 3,770 MBoe in proved reserves for the year ended December 31, 2024, due to revised development spacing and reduced upside locations.

Risks

• The Company's financial condition, results of operations, and capital resources are highly dependent upon the prevailing market prices of, and supply and demand for, crude oil, natural gas, and natural gas liquids, which are subject to wide fluctuations and market uncertainties.
• Silverback has a concentration of credit risk, with one customer accounting for 76% of its oil, natural gas, and liquid sales and 69% of its revenue receivables as of and during the year ended December 31, 2024.
• Estimates of economically recoverable oil, NGLs, and natural gas reserves and future net cash flows are inherently imprecise and subject to revision, which could materially affect future amortization of capitalized costs and result in asset impairment.
• The oil and natural gas business exposes the Company to possible environmental risks, although no significant environmental liability was identified as of December 31, 2024, or March 31, 2025.
• The pro forma financial information is illustrative and does not reflect the costs of any integration activities or potential cost savings or synergies that may be achieved as a result of the Silverback Acquisition.

Future Outlook

The acquisition includes potential quarterly earnout payments to the sellers of up to $1,875,000 per fiscal quarter during calendar years 2026 and 2027, contingent upon the NYMEX WTI quarterly average exceeding specified thresholds ranging from $70 to $75 per barrel or higher. This indicates an expectation of continued strong commodity prices for the acquired assets to maximize value.

Management Comments

• Management of Silverback believes it could readily locate other purchasers if the single major customer (76% of sales) were lost, indicating confidence in market liquidity for their products.

Industry Context

The acquisition of Silverback's assets in the Yeso trend of the Permian Basin aligns with the ongoing trend of consolidation and strategic asset accumulation within the highly active Permian Basin. This region remains a prime target for oil and gas companies seeking to expand their liquids-rich resource plays, driven by favorable geology and infrastructure. The earnout structure tied to WTI prices reflects the industry's sensitivity to commodity price fluctuations and a common mechanism to share future upside potential between buyers and sellers in a volatile market.

Comparison to Industry Standards

• NA

Management Changes

Corporate Governance

Legal Proceedings

• Silverback is not currently involved in any litigation which it believes could have a material adverse effect on its financial condition or results of operations.

Related Party Transactions

• On August 1, 2024, Silverback executed a management services agreement with Novo II HQ, LLC, which provides substantially all personnel and support services. The Company paid $2,700,000 in management fees during 2024 and $1,200,000 during the three months ended March 31, 2025. The monthly fee was $300,000 in 2024 and increased to $400,000 from 2025.

Stakeholder Impact

• Shareholders of Riley Exploration Permian, Inc. will see the company's asset base and revenue streams expand significantly through the acquisition, as reflected in the pro forma financials.
• Employees of Silverback Exploration II, LLC are now part of Riley Exploration Permian, Inc., with management changes having occurred prior to the acquisition.
• Customers of Silverback will now be served by the combined entity, with a potential for broader service offerings or changes in operational focus.
• Creditors of Riley Exploration Permian, Inc. will note the increased debt from funding the acquisition, but also the expanded asset base and cash flow potential of the combined entity.
• The previous members of Silverback Exploration II, LLC received approximately $129 million in consideration and stand to receive additional earnout payments if commodity prices meet specified thresholds.

Next Steps

• Riley Permian expects to complete the final purchase price allocation for the Silverback Acquisition during the 12-month period subsequent to the close date of July 1, 2025.
• Potential quarterly earnout payments to Silverback's sellers will occur during calendar years 2026 and 2027, contingent on NYMEX WTI prices.

Key Dates

Recommendation

This filing is an amendment providing detailed financial information for a previously announced acquisition. While the acquisition itself is a strategic growth move for Riley Exploration Permian, and Silverback's recent performance shows positive trends, this specific filing primarily offers backward-looking and pro forma data rather than new operational catalysts or forward-looking guidance from REPX. Investors would likely have already factored in the acquisition announcement. A 'hold' recommendation reflects the integration of this information into the existing investment thesis without suggesting an immediate change in outlook based solely on these detailed financial disclosures.

Keywords

Riley Exploration Permian, Silverback Exploration, Permian Basin, Oil and Gas Acquisition, SEC Filing, 8-K/A, Financial Statements, Pro Forma, Energy, Exploration and Production, Yeso Trend, Eddy County New Mexico