10-K: Riley Permian Boosts Reserves, Production Amid Strategic Shifts

Riley Exploration Permian, Inc. reports increased proved reserves and production for 2025, driven by strategic acquisitions and development, despite volatile commodity prices.

Summary

• Total proved reserves increased by 19.3% to 147,415 MBoe as of December 31, 2025, from 123,602 MBoe in 2024.
• Proved undeveloped reserves (PUDs) increased by a net 13.7 MMBoe for the year ended December 31, 2025, reaching 60,705 MBoe.
• Average net daily production rose by 29.5% to 29,205 Boe/d for the year ended December 31, 2025, compared to 22,546 Boe/d in 2024.
• Net income for 2025 was $160.8 million, a significant increase from $88.9 million in 2024.
• Total revenues, net, decreased by 4% to $391.98 million in 2025 from $409.80 million in 2024, primarily due to lower realized commodity prices.
• The company realized a pre-tax gain of $71.7 million from the sale of its Dovetail Midstream, LLC subsidiary in December 2025 for approximately $111 million cash.
• The Silverback Acquisition, completed July 1, 2025, added approximately 40,000 net acres in Eddy County, New Mexico, for about $123 million.
• The company sold its interest in Texas properties (Viking Sale) on November 21, 2025, and subsequently retired 250,000 shares of common stock.
• Capital expenditures for oil and natural gas properties decreased to $89.6 million in 2025 from $98.5 million in 2024.
• Quarterly dividends totaling $33.6 million were declared in 2025.
• A stock repurchase program authorizing up to $100 million of common stock repurchases over 24 months was approved in December 2025, with $100 million remaining at year-end.
• The Credit Facility borrowing base was reaffirmed at $400 million in December 2025, with $290 million of undrawn capacity.
• The principal balance of Senior Notes was $145 million as of December 31, 2025.

Sentiment

Score: 7

Explanation: StockSavvy.ai views this as a positive report, driven by significant reserve and production growth, a substantial gain from a strategic divestiture, and a strong liquidity position. However, the decline in realized commodity prices and negative net natural gas/NGL sales temper the overall sentiment.

Positives

• Total proved reserves increased by 19.3% to 147,415 MBoe as of December 31, 2025, indicating successful reserve replacement and growth.
• Average net daily production grew by 29.5% to 29,205 Boe/d in 2025, demonstrating strong operational output.
• Net income significantly increased to $160.8 million in 2025 from $88.9 million in 2024.
• A pre-tax gain of $71.7 million was recognized from the strategic Midstream Sale, enhancing financial flexibility.
• The Silverback Acquisition added 40,000 net acres adjacent to core operations, expanding the company's footprint in the prolific Yeso trend.
• The Credit Facility borrowing base was reaffirmed at $400 million, and the natural gas hedging requirement was removed, reflecting lender confidence.
• The initiation of a $100 million stock repurchase program signals a commitment to returning capital to shareholders.
• Cash gains on derivative settlements amounted to $16.6 million in 2025, partially offsetting lower realized commodity prices.
• Lease operating expenses per Boe decreased to $8.21 in 2025 from $8.66 in 2024, indicating improved cost efficiency.
• Production and ad valorem taxes per Boe decreased to $2.73 in 2025 from $3.57 in 2024.

Negatives

• Total revenues, net, decreased by 4% to $391.98 million in 2025, primarily due to lower realized commodity prices.
• Average realized oil price decreased by $11.15 per Bbl to $62.95 in 2025.
• Average realized natural gas price was negative at $(0.28) per Mcf in 2025, and NGLs were negative at $(1.27) per Bbl, indicating that gathering, processing, and transportation costs exceeded sales prices for these commodities.
• Working capital deficit increased by $8.1 million, from $(54.6) million in 2024 to $(62.7) million in 2025.
• The company recognized an impairment loss of $1.2 million on proved properties in New Mexico and $1.6 million on EOR project equipment in 2025.
• Cash provided by operating activities decreased to $212.5 million in 2025 from $246.3 million in 2024.
• Increased absolute lease operating expenses by $16.0 million and general and administrative expenses by $5.9 million in 2025.
• High dependence on a few significant purchasers, with one accounting for 60% of revenue and another for 30% in 2025, posing a concentration risk.

Risks

• Recent regulatory restrictions on produced water use and a moratorium on new disposal wells in the Permian Basin could increase operating costs and adversely impact business.
• Enhanced scrutiny on ESG matters may lead to increased regulatory scrutiny, operational delays, higher costs, and adverse impacts on access to capital.
• Inability to quickly adapt to changes in market/investor priorities, such as the shift from production growth to capital efficiency and free cash flow, could negatively impact stock price.
• Volatility in oil, natural gas, and NGL prices heavily influences revenue, profitability, access to capital, and future growth rate.
• Inability to obtain required capital or financing on satisfactory terms could lead to a decline in reserves and development capacity.
• Exploration and development efforts may not be profitable or achieve targeted returns, and acquired properties may not produce as projected.
• Reserve estimates depend on many assumptions that may turn out to be inaccurate, materially affecting quantities and present value.
• Operating in one major geographic area (Permian Basin) makes the company vulnerable to regional supply/demand factors, infrastructure constraints, and competition for resources.
• Inability to access commercially reasonable terms for transportation, gathering, transmission, storage, and processing facilities could force production curtailment or delay drilling.
• Development of estimated proved undeveloped reserves may take longer and require higher capital expenditures than anticipated, potentially leading to reclassification as unproved reserves.
• Failure to replace reserves with new reserves will lead to declining reserves and production, adversely affecting future cash flows.
• Undeveloped acreage must be drilled before lease expirations to hold the acreage, risking substantial lease renewal costs or loss of drilling opportunities.
• Funding through capital market transactions may be difficult and expensive due to the company's smaller public float and low market capitalization.
• Covenants in the Credit Facility and Senior Notes restrict business and financing activities, including the ability to pay dividends or execute stock buybacks.
• Inability to generate sufficient cash to service all indebtedness could lead to liquidity problems or asset dispositions.
• Derivative activities could result in financial losses or reduce earnings due to production less than hedged volumes, counterparty default, or increased price differentials.
• Joint ventures expose the company to risks outside its control, including partners' inability to fulfill commitments or conflicting interests.
• Energy conservation measures and technological advances could reduce demand for oil, natural gas, and NGLs.
• Shortages or cost increases related to equipment, supplies, or qualified personnel could delay development plans or increase expenditures.
• Negative public perception regarding the company and/or the industry could lead to increased regulatory scrutiny and operational restrictions.
• Power outages, limited electrical resources, and increased energy costs could adversely affect operations.
• Extreme weather conditions could disrupt drilling and production activities.
• Security threats, including cybersecurity threats, could lead to unauthorized data release, operational disruptions, and financial losses.
• Stringent federal, tribal, state, and local environmental and occupational health and safety laws could increase costs or expose the company to significant liabilities.
• Decommissioning, plugging, abandonment, and reclamation costs for facilities could exceed estimates, with potential for increased financial assurance requirements.
• SEC rules could limit the company's ability to book additional proved undeveloped reserves in the future.
• Changes in the jurisdictional characterization of natural gas assets by regulatory agencies may result in increased regulation, declining revenues, and increased operating expenses.
• Involvement in legal proceedings could result in substantial liabilities, legal costs, and diversion of management attention.
• Enactment of derivatives legislation could adversely affect the ability to use derivative instruments for risk reduction.
• Future federal, state, or local legislation may impose new or increased taxes or fees on oil and natural gas extraction or production.
• Anti-indemnity provisions enacted by many states may restrict or prohibit a party's indemnification of the company.
• Changes in the effective tax rate could adversely impact the company.
• The market price of common stock may be volatile, causing investment value to decline.
• Failure to meet NYSE American listing requirements could lead to delisting, decreasing liquidity and ability to raise capital.
• Future sales or repurchases of common stock may depress the stock price.
• The Board of Directors may modify or revoke dividend or stock buyback policies at any time.
• The amount of cash available for dividends or stock buybacks depends primarily on cash flow, not solely profitability.
• Delaware law and other laws impose restrictions on the ability to pay cash dividends or execute buybacks.
• Issuance of preferred stock could adversely affect the voting power or value of common stock.
• Loss of key personnel could adversely affect business and operations.
• Executive officers, directors, and principal stockholders have the ability to control or significantly influence all matters submitted to stockholders for approval.
• Conflicts of interest could arise between the company and certain stockholders/affiliates concerning competitive business activities or opportunities.
• Provisions in corporate charter documents and Delaware law could make an acquisition of the company more difficult and may prevent attempts by stockholders to replace or remove current management.

Future Outlook

The company expects to fund its growth primarily through cash flow from operations, availability under its Credit Facility, and subsequent equity or debt offerings. The A&R Gas Purchase Agreement for the New Mexico field with Targa is expected to commence before the end of 2026, and the Waterbridge Agreement for produced water disposal is expected to be in-service by September 2026. The company has the right to earn up to an additional $60 million in cash payments contingent upon achieving certain volumetric performance thresholds over a five-year period from the Midstream Sale. There is a remaining commitment to invest up to an additional $12.0 million in the RPC Power joint venture. The company expects to renew or extend approximately $3.4 million of unproved leasehold scheduled to expire in 2026. The ultimate scope of EPA regulations on methane and VOC emissions and proposed rules impacting the Endangered Species Act on energy development remain uncertain, potentially leading to increased compliance costs or operational delays. The outcome of BLM's potential revisions to the Waste Prevention Rule and related litigation is also uncertain. New Mexico's proposed Clear Horizons Act could require significant investment in pollution control or gas capture equipment.

Management Comments

• "Our strategic business objectives include enhancing the rate of return on our invested capital, generating sustainable free cash flow, maintaining a strong and flexible balance sheet and maximizing our returns to shareholders."
• "We implement this strategy primarily through identification and capture of attractive development opportunities, optimization of our assets and pursuing complementary growth opportunities that increase our scale and meet our strategic and financial objectives."
• "We believe our relations with our employees to be satisfactory."
• "We believe that diverse backgrounds, experience and perspectives contributes to an innovative workforce and an enriching environment for our employees."
• "We are committed to fostering an inclusive, respectful environment and providing equal opportunity to all qualified persons in our hiring, development, and compensation practices."
• "Protecting our employees, contractors, the public and the environment is a key focus."
• "We maintain a culture of continuous improvement in safety and environmental practices, supports its workforce and inspires teamwork to drive innovation."
• "We identify and mitigate safety risks and integrate a culture of safety by operating according to OSHA standards, processes, and procedures."
• "We also strive to comply with all applicable health, safety and environmental standards, laws and regulations."
• "We currently do not expect that the risks from cybersecurity threats are reasonably likely to materially affect us, including our business, strategy, results of operations or financial condition."

Industry Context

StockSavvy.ai notes that Riley Permian's strategic focus on horizontal drilling in conventional oil-saturated and liquids-rich formations in the Permian Basin aligns with broader industry trends emphasizing efficient resource extraction in prolific basins. The company's acquisitions in New Mexico's Yeso trend reflect the ongoing consolidation and pursuit of contiguous acreage positions for optimized development in the Permian. The Midstream Sale and subsequent long-term gas purchase agreement with Targa indicate a trend towards divesting non-core midstream assets to focus on upstream activities and secure long-term takeaway capacity, a common strategy among E&P companies to de-risk operations and enhance liquidity. The challenges with negative realized natural gas and NGL prices, net of GP&T costs, highlight the persistent issue of infrastructure constraints and basis differentials in the Permian, which many producers face.

Comparison to Industry Standards

• The 19.3% increase in total proved reserves (147,415 MBoe) and 29.5% increase in daily production (29,205 Boe/d) for 2025 demonstrate strong operational growth, potentially outperforming some peers who may struggle with reserve replacement or production declines.
• The negative realized prices for natural gas and NGLs, net of GP&T costs, suggest that Riley Permian, like many Permian producers, faces significant basis differentials and transportation costs, which can be higher than those experienced by companies with more integrated midstream operations or access to premium markets (e.g., Gulf Coast pricing for oil).
• The $285 million estimated future development costs for 60,705 MBoe of PUDs implies a development cost of approximately $4.69/Boe, which can be benchmarked against similar PUD development costs reported by other Permian operators like Pioneer Natural Resources or EOG Resources to assess capital efficiency.
• The company's average working interest of 85% in operated wells is higher than many non-operated positions, providing greater control over capital allocation and operational efficiency compared to companies with a larger proportion of non-operated assets.
• The reaffirmation of the $400 million borrowing base and removal of the natural gas hedging requirement indicates a favorable credit assessment by lenders, potentially reflecting stronger asset quality or financial health compared to some smaller, more leveraged E&P firms.

Management Changes

Corporate Governance

Legal Proceedings

• The company may be a claimant or defendant in various legal proceedings, disputes, and claims arising in the course of business, including those related to federal and state laws, personal injury, title disputes, royalty disputes, contract claims, contamination claims, and environmental claims.
• Management believes that none of these matters, if ultimately decided adversely, will have a material adverse effect on the company's financial condition, cash flows, or results of operations.
• No material liability for legal matters was recognized as of December 31, 2025, or December 31, 2024.

Related Party Transactions

• The company holds a 50% ownership interest in RPC Power LLC, a joint venture focused on power generation for field operations and sale into ERCOT.
• The company incurred approximately $7.7 million in Lease Operating Expenses from RPC Power for the year ended December 31, 2025.
• As of December 31, 2025, approximately $0.7 million was accrued for RPC Power, included in accrued liabilities.
• The company has a remaining commitment to invest up to an additional $12.0 million in the RPC Power joint venture.
• RPC Power declared a $3 million dividend on December 31, 2025, with the company's portion of $1.5 million paid in January 2026.
• The company sold its interest in Texas oil and natural gas properties (Viking Sale) to an affiliate of Combo Resources, LLC on November 21, 2025, and subsequently retired 250,000 shares of common stock received as consideration.
• The company previously provided administrative and operational services to Combo Resources, LLC and Riley Exploration Group, LLC, but these agreements were terminated prior to January 31, 2024, and effective May 31, 2024, respectively.
• The company incurred legal fees of approximately $2.2 million from di Santo Law PLLC, a law firm owned by Beth di Santo, a member of the Board of Directors, for the year ended December 31, 2025.
• The company paid $0.2 million to a charter company in 2025 for flights chartered by employees, which included the use of an aircraft in which the Chief Executive Officer holds a time-sharing agreement, as these fees were less than other options.

Stakeholder Impact

• Shareholders: Benefited from increased net income, significant reserve and production growth, a substantial gain from the Midstream Sale, and the initiation of a stock repurchase program. However, they face risks from commodity price volatility, potential dilution from future equity issuances, and the concentration of voting power with executive officers and principal stockholders.
• Employees: Experienced increased headcount, including from the Silverback Acquisition, leading to higher compensation expenses. The company emphasizes fostering an inclusive environment and providing equal opportunity, but also depends on retaining key personnel.
• Customers: Face concentration risk due to the company's reliance on a few significant purchasers for most of its oil and natural gas production. The loss of a major purchaser could materially and adversely affect short-term revenues.
• Suppliers/Service Providers: Increased activity in the Permian Basin may lead to higher demand for drilling rigs, equipment, services, and qualified personnel, potentially causing shortages or cost increases for the company and its suppliers.
• Creditors: The company's Credit Facility and Senior Notes contain covenants that restrict business and financing activities, and the ability to generate sufficient cash flow is critical for servicing indebtedness. Substantially all assets are pledged to secure the Credit Facility.

Next Steps

• Develop proved undeveloped reserves within five years, with estimated costs of $285 million.
• Fund future growth through cash flow from operations, Credit Facility, and potential equity or debt offerings.
• Commence the A&R Gas Purchase Agreement with Targa for the New Mexico field before the end of 2026.
• Commence the Waterbridge Agreement for produced water disposal by September 2026.
• Supply natural gas to RPC Merchant LLC under the Supply Agreement, contingent upon project start-up in 2026.
• Invest up to an additional $12.0 million in the RPC Power joint venture.
• Renew or extend approximately $3.4 million of unproved leasehold scheduled to expire in 2026.
• Continue stock repurchases under the $100 million program.
• Monitor and adapt to evolving environmental regulations, particularly regarding methane emissions and produced water disposal.

Key Dates

Recommendation

The company demonstrated strong operational performance with significant increases in proved reserves and production, alongside a substantial gain from the midstream asset sale. The initiation of a stock repurchase program signals confidence and a commitment to shareholder returns. However, the decline in overall net revenues due to lower realized commodity prices, particularly negative net prices for natural gas and NGLs, and the inherent volatility of the oil and gas market, present ongoing challenges. The concentration of assets in one basin and reliance on a few purchasers also introduce specific risks. While the growth trajectory is positive, the commodity price environment and operational cost pressures warrant a cautious 'Hold' stance, advising investors to monitor commodity price trends and the company's ability to manage differentials and integrate new assets effectively.

Keywords

Oil and Gas, Permian Basin, Exploration and Production, Proved Reserves, Production Volumes, Acquisitions, Divestitures, Midstream Assets, SEC Filing, 10-K, Financial Results, Commodity Prices, Risk Management, Corporate Governance, Shareholder Returns, Eddy County, New Mexico, Yoakum County, Texas, Yeso Trend, San Andres Formation, Natural Gas Liquids, Derivatives, Capital Expenditures, Stock Repurchase, Dividends, Credit Facility, Senior Notes, ESG, Cybersecurity, Water Management