Riley Exploration Permian, Inc. (REPX) Q1 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reveals mixed sentiments. Positive aspects include strong oil revenue growth, strategic asset sales, debt reduction, and a solid shareholder return plan. However, negative gas and NGL revenues, unclear management responses, and structural constraints dampen optimism. The Q&A section highlights potential for future growth but also uncertainties. Overall, the combination of positive and negative factors suggests a neutral sentiment, with no clear catalyst for a significant stock price movement.
Key Financial Performance
Debt Reduction Reduced debt by $8 million in Q1 2026. This was achieved using excess capital generated from operations.
Shareholder Returns Returned $12 million to shareholders through dividends and share repurchases in Q1 2026. This was part of the capital allocation strategy.
Capital Expenditure (CapEx) Total capital spend was $47 million in Q1 2026, below the guidance range due to timing dynamics, selective deferrals, and infrastructure timing.
Net Oil Production Net oil production averaged 20.2 M barrels per day in Q1 2026, exceeding the high end of guidance. This was driven by strong development well contributions.
Total Equivalent Production Total equivalent production averaged 35.6 MBOE per day in Q1 2026, exceeding the high end of guidance. This was due to strong development well contributions and minimal downtime from Winter Storm Fern.
Operating Cash Flow Operating cash flow was $47 million in Q1 2026, or $55 million before changes in working capital. This reflects the company's ability to generate meaningful cash flow.
Adjusted EBITDAX Adjusted EBITDAX declined by $5 million (8%) quarter-over-quarter to $61 million in Q1 2026. This was driven by $3 million of lower gas and NGL hedge revenue and $2 million of higher operating costs and production taxes.
Net Loss Reported a net loss of $70 million in Q1 2026, driven by a $127 million loss on derivatives (91% unrealized). This reflects the impact of hedging strategies.
Lease Operating Expenses (LOE) LOE increased slightly quarter-over-quarter in Q1 2026 but showed a 10% reduction year-over-year compared to Q1 2025. This was due to elective workovers and efficiency improvements.
Chemical Costs Chemical costs in New Mexico nearly halved on a per barrel basis compared to the 2025 monthly average, following a program change in January 2026. However, costs are starting to rise again due to increased petrochemical costs.
Revenue Unhedged revenue increased by $17 million (17%) quarter-over-quarter in Q1 2026, driven by 18% higher oil revenue but offset by weaker natural gas and NGL revenues.
Gas and NGL Revenues Gas and NGL revenues after fees were negative $11 million in Q1 2026, reducing total net revenue by 9%. This was due to structural gas egress constraints and seasonal midstream maintenance programs.
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Operating Highlights
ERCOT Power Project: The first site, a 10-megawatt facility in Ward County, Texas, is in the final commissioning stage and generating power into the real-time market. The second site is fully constructed and in early commissioning, with two additional sites scheduled for late summer.
Production Growth: Forecasted production growth of 30% for 2026, with a 10% year-over-year growth potential in 2027 with only a 5% increase in CapEx.
New Mexico Gas Pipeline: Targa's high-pressure trunk line project is on track for Q3 2026, enabling immediate upstream activity and potential value unlocking.
Operational Efficiency: Achieved record drilling speeds and reduced costs through multi-well pads and zipper fracs. Chemical costs in New Mexico have been halved due to program changes.
Capital Discipline: Delivered production exceeding guidance while spending below the capital guidance range. Reduced debt by $8 million and returned $12 million to shareholders.
Capital Allocation Flexibility: Maintaining flexibility to adjust development pace based on macroeconomic and industry conditions.
Focus on High-Return Investments: Prioritizing investments in high-return assets in Texas and New Mexico, with a focus on infrastructure readiness and operational efficiency.
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Risk or Challenges
Oil price volatility: The company's 2026 development plan was based on a WTI spot price and 1-year forward price in the $60 range. However, the oil supply picture and price outlook have changed, introducing potential risks if prices fluctuate unfavorably.
Gas and NGL revenue challenges: Gas and NGL revenues were negative $11 million, reducing total net revenue by 9%. Structural gas egress constraints and seasonal midstream maintenance programs negatively affected gas pricing for producers across the Permian.
Hedging losses: The company reported a $127 million loss on derivatives, 91% of which was unrealized. This introduces significant period-to-period volatility and impacts reported financials.
Service cost inflation: Diesel costs and inflationary pressures on service prices have increased, potentially impacting operational costs despite efficiency gains.
Regulatory and infrastructure delays: The Targa high-pressure trunk line project in New Mexico is awaiting final regulatory approval. Delays could impact the company's ability to turn wells online and achieve planned production growth.
Economic uncertainties: The company plans to monitor macroeconomic conditions and maintain flexibility to adjust its accelerated growth plan if conditions deteriorate materially.
Gas takeaway constraints in New Mexico: Gas takeaway sequencing issues in New Mexico require careful alignment with infrastructure readiness, potentially delaying production ramp-up.
Operational risks: While the company reported minimal downtime during Winter Storm Fern, such events pose risks to operational continuity.
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Guidance & Outlook
Production Growth: The company forecasts production growth for each quarter in 2026, culminating in a full-year growth of 30% at the new midpoint guidance levels. For 2027, the company sees potential for 10% year-over-year production growth with only a 5% increase in CapEx.
Capital Expenditures (CapEx): The full-year CapEx guidance has been increased by $10 million to a midpoint of $210 million, representing a 5% increase. The company anticipates a 60-40 split between the first and second halves of the year. For 2027, a 5% increase in CapEx is being considered to support production growth.
New Mexico Gas Pipeline Project: The Targa high-pressure trunk line project in New Mexico is on track for a Q3 2026 commercial operations date. Wells will be ready to turn in line immediately following the pipeline's completion, contributing to production growth.
Texas and New Mexico Asset Development: Texas will drive the bulk of volume growth in 2026 due to mature infrastructure, while New Mexico is expected to contribute more growth thereafter. Activity in New Mexico will align with the Targa pipeline readiness.
Power Projects: The first ERCOT power project site in Texas is in the final commissioning stage, with commercial operations expected later this month. The second site is in early commissioning, and two additional sites are scheduled for late summer 2026.
Free Cash Flow and Debt Reduction: The company plans to allocate the majority of excess free cash flow after dividends to debt reduction, with a smaller portion potentially allocated to stock buybacks depending on market conditions.
Market Conditions and Flexibility: The company will monitor macroeconomic and industry conditions throughout the year and maintain flexibility to adjust its pace of operations based on market dynamics.
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Shareholder Return Plan
Dividend Payments: $8.4 million of dividends were paid in the first quarter of 2026.
Share Repurchases: $4 million worth of stock was bought back in the first quarter of 2026.
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Key Q&A
Q:How would you characterize your desire to further lean into the favorable environment from a workover perspective, and is the current activity level a good run rate for 2027?
A:Bobby Riley stated that the company is developing at the current pace due to a $60 price outlook and has significant long-term drilling inventory. They could add 5-10 wells in the next 3 months if prices remain stable. John Suter added that the company can efficiently maintain operations into 2027 with their current setup, drilling 50+ wells per year with one rig and fracking up to 90-100 wells annually.
Q:How should we think about the potential earnout of contingent payments from your midstream sales agreement, and when could you start to recognize that benefit?
A:Philip Riley mentioned that they expect to hit the first earnout of $30 million in the first half of 2027, with subsequent earnouts likely a year apart. This is based on wells in New Mexico coming online and meeting production thresholds.
Q:How much is the decision to increase production influenced by negative natural gas and NGL prices, and are there any physical constraints affecting growth?
A:Philip Riley explained that while gas prices are frustrating, they are improving. Structural constraints and seasonality affected Q1, but upcoming projects like GCX and Blackcomb should help. There are no significant physical constraints, and power availability is not an issue.
Q:Are there active M&A deals in the current environment, and what is the current inventory depth?
A:Philip Riley stated that M&A is challenging in volatile markets, but the company has flexibility due to a strong balance sheet. They are focused on organic development and have significant inventory from previous acquisitions.
Q:What is the guidance on production uplift, and how much of the increase is due to timing versus performance-related issues?
A:Bobby Riley and John Suter explained that the acceleration is partly due to timing, with two rigs running and wells exceeding predrill forecasts. They also noted that 2-mile laterals and child wells are contributing to superior early-time performance.
Q:Is there much risk or cushion built into the production outlook for the second half of 2026?
A:Philip Riley and John Suter stated that they have optionality built into the plan, with high-interest Champions wells and infrastructure in place to solidify the second half. Delays in Targa's high-pressure line construction are not expected to significantly impact production.
Q:How is the ground game working to replace inventory, and what are the plans for drilling in New Mexico?
A:John Suter mentioned that they are drilling wells on the east side of Champions and adding PUD reserves in New Mexico. They are also testing various edges of the fairway and leveraging New Mexico's forced pooling laws to pick up additional interest.
Q:What drove the lower LOE per BOE in the first quarter, and can this performance be sustained?
A:John Suter attributed the lower LOE per BOE to rebidding vendors, cutting chemical costs in half, and improved well productivity. He expressed confidence in continued improvement due to these efficiencies.
Q:What are the cost differences between Champions and Red Lake, and how is the rig cadence being managed?
A:John Suter explained that New Mexico wells are about $1 million more expensive per lateral due to slickwater fracs, but costs are expected to decrease with ongoing testing. They plan to have 20+ wells ready for completion by late Q3, aligning with the Targa plant startup.
Q:How many operators are actively drilling in the vicinity of Champions and Red Lake?
A:John Suter stated that there are about two operators in New Mexico and one or two in Champions, but they do not directly compete with the company's operations.
Q:Is there considerable extra inventory in Champions or New Mexico, and what are the prospects for adding inventory?
A:Philip Riley and John Suter noted that Champions is mostly blocked up, but there is potential for additional inventory through land work and acquisitions in New Mexico. They are also analyzing different benches to add inventory.
Q:Review of Unclear Management Responses
A:Management avoided directly addressing the specific impact of negative natural gas and NGL prices on production decisions, using vague language about improving conditions and structural constraints. Additionally, they did not provide detailed timelines or specifics on how M&A opportunities are being evaluated in the current environment.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Andres Champions
Champions day
Champions month
Completions Texas
County San
County Texas
Development activity
Diesel couple
ERCOT power
ERCOT stage
Fern disruption
Mexico ERCOT
Mexico Targa
Mexico activity
Mexico change
activity production
combination
condition
confidence
creation potential
date
day production
design
discipline
downtime
foot day
infrastructure readiness
inventory
level activity
mile
picture
power project
program
return
sale
site
spud
timing
value creation
workovers
REPX Transcript
Riley Exploration Permian, Inc. (REPX) Q1 2026 Earnings Call Transcript
Unknown5-7
The earnings call reveals mixed sentiments. Positive aspects include strong oil revenue growth, strategic asset sales, debt reduction, and a solid shareholder return plan. However, negative gas and NGL revenues, unclear management responses, and structural constraints dampen optimism. The Q&A section highlights potential for future growth but also uncertainties. Overall, the combination of positive and negative factors suggests a neutral sentiment, with no clear catalyst for a significant stock price movement.
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.
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REPX Report
Frequently Asked Questions
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