Riley Exploration Permian, Inc. (REPX) Q4 2025 Earnings Call Transcript
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Overview
The earnings call presents mixed signals: while there are positive developments like dividend growth, production optimization, and a raised production guidance, there are concerns over decreased EBITDAX, lower free cash flow, and higher costs due to the WaterBridge agreement. The Q&A reveals management's cautious approach to capital allocation and growth, reflecting uncertainty in the oil price environment. These factors suggest a balanced outlook, likely resulting in a neutral stock price movement.
Key Financial Performance
Debt Reduction Reduced debt by $120 million during the fourth quarter, reinforcing financial flexibility and positioning the company to accelerate development in 2026.
Stock Repurchase Authorized a stock repurchase program of up to $100 million and repurchased approximately 152,000 shares at a weighted average price of $26.54.
Oil Production (Quarterly) Increased by more than 1,700 barrels oil per day or 9% quarter-over-quarter, primarily from improving volumes from new wells brought online earlier in 2025 and 3 new wells turned to sales during the fourth quarter. Comparing Q4 2025 to Q4 2024, oil production increased by 26%.
Oil Production (Annual) Full year oil production increased by 15% year-over-year, while total equivalent production increased by 29%. The majority of the production increase was from pre-2025 development, with modest contributions from 2025 new wells and smaller contributions from the Silverback acquisition.
New Mexico Oil Production Grew by 74% or over 2,500 barrels oil per day year-over-year, benefiting from 6.3 net wells turned to sales and the Silverback acquisition. New Mexico's share of total company oil production increased from 23% in 2024 to 34% in 2025.
Cost Reduction (Drilling and Completion) Achieved a 25% reduction in cost per lateral foot in Red Lake year-over-year and a 15% reduction in Texas. Driven by pad drilling, increased time spent drilling, and completion optimization.
Adjusted EBITDAX (Quarterly) Increased 3% quarter-over-quarter to $66 million as $5.8 million of lower costs offset lower hedge revenue, increasing margin from 59% to 63%.
Cash Flow from Operations (Quarterly) Increased 2% quarter-over-quarter. Accrual capital expenditures for the quarter were $50 million compared to $18 million in the third quarter.
Net Income (Quarterly) Increased by $69 million quarter-over-quarter, benefiting from nonrecurring items such as the $72 million gain from the midstream sale and $20 million of higher hedging gains, partially offset by $16 million of higher income tax expense.
Adjusted EBITDAX (Annual) Decreased by 8% year-over-year despite 15% lower oil prices. Total free cash flow was 31% lower year-over-year, driven by lower prices and higher midstream spend.
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Operating Highlights
Silverback acquisition: Enhanced depth and duration of undeveloped inventory, providing 7-8 years of high cash-on-cash return undeveloped inventory.
New Mexico Midstream project sale: Sold to Targa for $123 million in cash plus $60 million in potential earnouts, eliminating liabilities and future construction costs.
Oil production growth: Forecasted over 20% year-over-year oil volume growth for 2026.
New Mexico production growth: Oil production grew by 74% year-over-year in 2025, now representing 34% of total company oil production.
Operational efficiency: Achieved 25% cost reduction per lateral foot in Red Lake and 15% in Texas due to pad drilling and completion optimization.
Safety metrics: Achieved a total recordable incident rate of 0 and 95% safe days in 2025.
Debt reduction: Reduced debt by $120 million in Q4 2025, improving financial flexibility.
Stock repurchase program: Authorized up to $100 million in stock repurchases, with 152,000 shares repurchased at an average price of $26.54.
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Risk or Challenges
Market Conditions: The company acknowledges the potential for oil price deterioration and has stated its readiness to moderate activity and spending accordingly. This indicates a risk of reduced revenue and operational adjustments if market conditions worsen.
Regulatory Hurdles: The completion of New Mexico gas infrastructure and water disposal projects is critical for 2026 plans. Delays or regulatory challenges in these areas could impact production and increase costs.
Supply Chain Disruptions: Pipeline maintenance constrained Permian gas egress, pressuring Waha pricing during the quarter. This highlights a risk of supply chain disruptions affecting revenue and operational efficiency.
Economic Uncertainties: The company has hedged a significant portion of its oil volumes to mitigate price volatility, reflecting concerns about economic uncertainties and potential revenue fluctuations.
Strategic Execution Risks: The company’s ambitious 2026 development plans, including a significant increase in drilling and completions, depend on timely infrastructure readiness and operational efficiency. Any delays or inefficiencies could hinder growth objectives.
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Guidance & Outlook
Silverback acquisition: Enhanced depth and duration of undeveloped inventory, providing 7-8 years of high cash-on-cash return undeveloped inventory.
New Mexico Midstream project sale: Sold to Targa for $123 million in cash plus $60 million in potential earnouts, enabling robust development of New Mexico assets and eliminating liabilities and future construction costs.
Debt reduction: Reduced debt by $120 million during Q4 2025, enhancing financial flexibility for 2026 development.
Stock repurchase program: Authorized up to $100 million in stock repurchases, with 152,000 shares repurchased at an average price of $26.54.
2026 oil volume growth: Forecasted over 20% year-over-year oil volume growth, with flexibility to adjust activity based on oil price environment.
2026 development plans: Significant increases in activity and volume, with a focus on Texas in the first half and New Mexico in the second half of the year.
Drilling and completions: Plan to drill 46-53 gross wells (37-43 net wells) and utilize a 2-rig program for the first half of 2026.
Capital expenditure: Forecasted $200 million capital plan for 2026, with over two-thirds allocated in the first half of the year.
New Mexico gas infrastructure: Completion expected by Q3 2026, enabling further development of New Mexico assets.
Hedging strategy: Approximately 70% of forecasted oil volumes hedged at a weighted average downside price of $60 per barrel.
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Shareholder Return Plan
Dividend Allocation: 41% of total free cash flow was allocated to dividends in 2025, up from 26% in 2024. This increase occurred despite a 31% decline in total free cash flow year-over-year.
Stock Repurchase Program: A stock repurchase program of up to $100 million was authorized. Approximately 152,000 shares were repurchased at a weighted average price of $26.54 in January 2026.
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Key Q&A
Q:Could you help us shape production cadence for 2026 and 2027 under the status quo plan, and would you expect capital efficiency to improve in 2027?
A:Philip Riley explained that production is expected to increase each quarter in 2026, with a dip in Q1 due to downtime and deferred production. Capital efficiency is expected to improve in 2027 due to optimization of D&C designs and reduced DUC impacts. John Suter added that a new pipeline in Q3 2026 will enhance efficiency and support drilling in New Mexico.
Q:Could you elaborate on completion optimization or D&C optimization and what you're seeing in well performance versus past designs?
A:John Suter detailed that they are using zipper fracs, reducing sand usage from 700-800 pounds per foot to 250-300 pounds per foot, and switching to 20/40 sand. These changes have reduced costs and improved efficiency. In New Mexico, they plan to test cross-link fracs in 2026, which could provide significant financial benefits.
Q:How flexible is your plan given the current oil price environment, and would you consider growing quicker to capture oil upside?
A:John Suter explained that their wells are shallow and quick to drill, allowing flexibility to scale up production. Bobby Riley added that while they have flexibility, they are not in a position to react to small oil price increases and prefer to stick to their solid plan for 2026.
Q:Could you provide an update on the second power project and any plans beyond it?
A:Philip Riley stated that the second project involves converting low-cost gas to electricity for the ERCOT grid, with the first site in the final stages of commissioning. They are cautious about expanding further due to the capital intensity and evolving power market dynamics.
Q:Where does the New Mexico side stand in terms of integration and field production optimization?
A:John Suter mentioned that the Silverback acquisition is fully integrated, with significant production optimization achieved through workovers and artificial lift changes. They continue to find opportunities for optimization, which has contributed to strong performance.
Q:Was there any production associated with the non-Yoakum County asset divestiture?
A:Bobby Riley confirmed that the divestiture involved a very small amount of production, a couple of hundred barrels per day.
Q:Is there anything unusual about the bookings this year regarding reserves and costs?
A:Philip Riley clarified that there is nothing unusual, attributing low costs to lower activity in 2025 and cost savings on D&C. They take a conservative approach to booking reserves, focusing on proved developed reserves.
Q:Do you anticipate finding similar low-hanging fruit in other acquisitions like Silverback?
A:John Suter stated that while they focus on drilling opportunities, production optimization is often a bonus. They believe they can find similar opportunities in other assets but prioritize acquisitions with significant drilling potential.
Q:How does the share repurchase program fit into your overall capital allocation strategy?
A:Bobby Riley explained that the share repurchase program is a flexible tool used opportunistically when the share price is undervalued. They balance this with development and other capital allocation priorities.
Q:Can you provide details on the replacement of drilled locations and plans for 2026?
A:Philip Riley mentioned that they replaced 60% of 2025 drilled locations at a cost of less than $300,000 per location. Bobby Riley added that they aim to replace 100% of drilled locations annually through a focused ground game strategy.
Q:Will the agreement with WaterBridge for saltwater disposal lower costs or improve efficiencies?
A:John Suter stated that the agreement will increase costs but enable full-scale development of the Red Lake field. Philip Riley added that efficiencies are expected as a larger percentage of production becomes horizontal.
Q:How are you approaching hedging in the current volatile market?
A:Philip Riley explained that they are well-hedged for 2026 with a mix of swaps and collars, providing flexibility to manage volatility. They aim to balance hedging with the need to react to changing service costs.
Q:Review of Unclear Management Responses
A:Management avoided giving a direct answer to Neal Dingmann's question about whether they would grow quicker to capture oil upside, stating it was too early to say and emphasizing their flexibility without committing to a specific course of action.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Activity level
Champions position
DUCs commentary
Fortune midstream
Full Release
Inc Full
Lake result
Mexico gas
Riley CFO
Riley Permian
Silverback acquisition
base
completion optimization
completion well
contribution
cost reduction
development activity
development plan
expansion
inventory
oil day
oil price
plan increase
portfolio acquisition
positioning
productivity
project Targa
result Riley
rig month
rig program
share
stage
stock
transformation
value creation
volume activity
well sale
REPX Transcript
Riley Exploration Permian, Inc. (REPX) Q4 2025 Earnings Call Transcript
Unknown3-5
The earnings call presents mixed signals: while there are positive developments like dividend growth, production optimization, and a raised production guidance, there are concerns over decreased EBITDAX, lower free cash flow, and higher costs due to the WaterBridge agreement. The Q&A reveals management's cautious approach to capital allocation and growth, reflecting uncertainty in the oil price environment. These factors suggest a balanced outlook, likely resulting in a neutral stock price movement.
Riley Exploration Permian, Inc. (REPX) Q3 2025 Earnings Call Transcript
Positive11-7
The earnings call reveals strong production growth and strategic investments, like the Silverback acquisition and midstream projects, which are expected to enhance flexibility and scalability. Despite a slight increase in LOE and a decrease in EBITDAX margin, the company maintains solid cash flow and debt levels. The Q&A section highlights management's focus on capital allocation and strategic flexibility, with positive analyst sentiment. The overall outlook, including optimistic production and financial strategies, suggests a positive stock price movement.
Riley Exploration Permian, Inc. (REPX) Q2 2025 Earnings Call Transcript
Unknown8-9
The earnings call reveals several concerning factors: a decline in realized oil prices both before and after hedges, a reduced EBITDAX margin, and a higher debt level. The Q&A session highlights management's lack of clarity on funding and economic impacts, raising uncertainty. Despite some positive production growth, the overall sentiment is negative due to financial declines and vague guidance.
Riley Exploration Permian, Inc. (REPX) Q4 2024 Earnings Conference Call Transcript
Positive3-6
The earnings call presents a positive outlook with increased oil production, improved operational efficiency, and significant debt reduction. The commitment to dividends and strategic investments in growth initiatives indicate strong financial health. Although some uncertainties were noted in the Q&A, particularly regarding the ERCOT effort and midstream project, the overall sentiment remains positive due to the company's proactive approach to infrastructure development and cost management. The positive market conditions and expected revenue from gas sales further support a favorable stock price reaction.
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