8-K: Riley Exploration Permian Reports Strong 2024 Results and Issues Optimistic 2025 Guidance

Riley Exploration Permian announces impressive 2024 financial and operational results, exceeding initial targets and providing positive guidance for 2025, driven by increased production and strategic investments.

Summary

• Riley Exploration Permian reported its financial and operating results for Q4 and the full year 2024.
• The company averaged 25.0 MBoe/d of total equivalent production in Q4 2024, with oil production of 15.9 MBbls/d.
• Operating cash flow for Q4 was $66 million, or $51 million before changes in working capital, with $18 million of Total Free Cash Flow and $29 million of Upstream Free Cash Flow.
• Total accrual capital expenditures for Q4 were $31 million, with $20 million allocated to upstream activities.
• The company reduced its debt outstanding by $20 million, achieving a debt-to-Adjusted EBITDAX ratio of 1.0x.
• For the full year 2024, the company averaged 22.5 MBoe/d of total equivalent production, including 15.1 MBbls/d of oil production.
• Full-year operating cash flow was $246 million, or $227 million before changes in working capital, with $117 million of Total Free Cash Flow and $128 million of Upstream Free Cash Flow.
• The company completed the New Mexico Asset Acquisition, adding 13,900 net acres.
• Riley Permian began operations at its phase 1 self-generation power joint venture project and announced phase 2, increasing its ownership in the joint venture from 35% to 50%.
• Full-year 2025 production guidance is set at 24.6 25.6 MBoe/d, with oil production expected to be 15.8 16.3 MBbls/d.
• Activity-based investing expenditures for 2025 are projected to be $188 232 million, including $110 130 million for upstream, $60 80 million for midstream, and $18 22 million for the power joint venture.
• Proved reserves at year-end 2024 increased by 16 MMBoe or 15% over year-end 2023 reserves, totaling 124 MMBoe.
• The company intends to construct, own, and operate low and high-pressure gathering lines and compression facilities, with an estimated completion before the end of 2026.

Sentiment

Score: 9

Explanation: The document presents a highly positive outlook, driven by strong financial results, increased production, strategic investments, and optimistic guidance for 2025. The company's focus on capital efficiency and shareholder returns further contributes to the positive sentiment.

Positives

• Riley Permian exceeded its initial 2024 goals for oil production growth and capital expenditure reduction.
• The company demonstrated strong free cash flow generation and efficient capital allocation.
• Debt reduction improved the company's financial position.
• The New Mexico asset acquisition expanded the company's acreage.
• The company is expanding into power generation and midstream projects to enhance operational control and diversify revenue streams.
• The company has a history of paying fixed dividends every quarter as a public company.
• The company has a history of raising dividends annually.
• The company has a 5.3% current dividend yield as of March 3, 2025.
• The company has 3.8x dividend coverage in 2024 from Total FCF.

Negatives

• The company reported a $8 million loss on derivatives for Q4 2024.
• Natural gas prices realized before derivative settlements were very low at $0.02 per Mcf for Q4 2024.
• The company incurred severance and other non-recurring charges within cash G&A expense.
• The company reported a $2 million loss on derivatives for the full year 2024.

Risks

• The company is exposed to the volatility of oil, natural gas, and NGL prices.
• Delays or interruptions of production could impact results.
• The company faces risks related to the cost and availability of midstream and downstream activities.
• The company's ability to obtain capital needed for development and exploration and midstream operations on favorable terms or at all is a risk.
• The company faces risks associated with concentration of operations in one major geographic area.
• The company faces risks related to litigation and cybersecurity threats.
• The company's 2025 guidance is based on assumptions of current and future capital expenditure levels, prices for oil, natural gas and NGLs, available liquidity, indications of supply and demand for oil, well results, and operating costs.
• The company's midstream project could be delayed, which may have corresponding impacts on net production volumes and investing expenditures.

Future Outlook

Riley Permian anticipates continued growth in 2025, with production guidance of 24.6 25.6 MBoe/d and strategic investments in upstream, midstream, and power generation projects. The company plans to fund these investments through a combination of operating cash flow, cash on hand, and borrowings on its credit facility.

Management Comments

• Bobby D. Riley, Chairman of the Board and Chief Executive Officer, stated that the company had an exceptional year and exceeded its initial goals for oil production growth and capital expenditure reduction.
• Management plans to invest strategically across the business in 2025, focusing on securing long-term growth.
• Management is excited to advance the New Mexico gas midstream project, which they believe will afford increased operational control and greater flow assurance.
• Management continues to see attractive market fundamentals in ERCOT for its power projects.

Industry Context

Riley Permian's focus on capital efficiency and strategic investments in midstream and power generation aligns with broader industry trends aimed at optimizing operations and diversifying revenue streams. The company's success in the Permian Basin reflects the ongoing development and application of modern horizontal drilling and completions techniques in the region.

Comparison to Industry Standards

• Riley Permian's well costs on an absolute and relative basis are lower than average Delaware and Midland basin wells.
• Riley Permian's wells to date have experienced lower relative declines versus Delaware and Midland basin wells.
• Riley Permian's wells to date have outperformed Midland and Delaware basin wells on a 5-year basis.

Related Party Transactions

• The company had contract services with related parties, with revenues of $2,400 thousand for the year ended December 31, 2024, and costs of $579 thousand.

Stakeholder Impact

• Shareholders benefit from increased dividends and a strong free cash flow yield.
• Employees benefit from the company's growth and strategic investments.
• Customers benefit from the company's increased production and reliable supply of oil and natural gas.
• Suppliers and creditors benefit from the company's strong financial position and ability to meet its obligations.

Next Steps

• The company will host a conference call on March 6, 2025, to discuss the results and host a Q&A session.
• The company plans to continue investing in upstream development, midstream infrastructure, and power generation projects.
• The company intends to continue paying down debt with excess cash flow.
• The company intends to continue returning capital to shareholders through dividends.

Key Dates