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Riley Exploration Permian Fiscal First Quarter 2022 Results

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   |    Tuesday,February 15,2022

Riley Exploration Permian, Inc. reported financial and operational results for the fiscal first quarter ended December 31, 2021.

Highlights:

• Increased total production by 31% to 9.9 MBoe per day (73% oil) for the fiscal first quarter 2022, as compared to fiscal first quarter 2021
• Reported net income of $21.4 million with income from operations of $33.4 million
• Generated $27.1 million of Adjusted EBITDAX⁽¹⁾, $21.7 million of operating cash flows and $13.9 million of Adjusted Net Income⁽¹⁾
• Incurred total capital expenditures of $20.7 million
• Realized a Cash Margin⁽¹⁾ of $46.09 per Boe before derivative settlements or $28.58 per Boe after derivative settlements
• Declared dividends of $0.31 per share for a total of $6.1 million

Bobby Riley, Riley Permian's Chairman and CEO, said: "Riley Permian completed another strong fiscal quarter with continued growth across operating and financial metrics. The Company delivered production at the high-end of guidance and improved overall margins from the prior quarter. We made significant progress during the quarter on our EOR pilot project and plan to begin water injection in this fiscal second quarter, with CO2 injected scheduled to begin later in summer 2022. Carbon capture projects remain a priority for our team, where we're having good engagement, navigating the various requirements to make a good project."

Ops Update

Riley Permian increased production by 31% to 9.9 MBoe per day for the three months ended December 31, 2021, as compared to the same period in 2020, or by 4% quarter-over-quarter compared to fiscal fourth quarter 2021. The Company brought online 5 gross (4.1 net) horizontal wells during the fiscal first quarter of 2022. Production increased by 28% to 9.2 MBoe per day for the twelve months ended December 31, 2021, as compared to the same period in 2020.

Financials Update

The Company reported net income (loss) of $21.4 million and $(36.3) million and operating income of $33.4 million and $86.5 million for the three months and twelve months ended December 31, 2021, respectively. The Company generated Adjusted EBITDAX⁽¹⁾ of $27.1 million and $97.3 million for the three months and twelve months ended December 31, 2021, respectively. Additionally, the Company had operating cash flow from continuing operations of $21.7 million and Free Cash Flow⁽¹⁾ of $(7.4) million for the three months ended December 31, 2021.

Fiscal first quarter 2022 average realized prices, before derivative settlements were $75.67 per barrel of oil, $3.20 per Mcf of natural gas and $31.64 per barrel of natural gas liquids, resulting in a total equivalent price, before derivative settlements, of $61.94 per Boe. Adjusted for derivative settlements, total equivalent price was $44.43 per Boe, corresponding to realized derivative losses of $17.51 per Boe or $16.0 million.

Riley Permian's total Cash Costs⁽¹⁾ for the fiscal first quarter of 2022 were $15.85 per Boe, representing an increase of $0.47 per Boe or 3% compared to the fiscal fourth quarter of 2021. Fiscal first quarter Cash Costs⁽¹⁾ included lease operating expense ("LOE") of $8.11 per Boe, production and ad valorem taxes of $3.28 per Boe, cash G&A expenses⁽¹⁾ of $3.48 per Boe and interest expense of $0.98 per Boe. LOE increased by 24% on a per unit basis to $8.11 per Boe for the three months ended December 31, 2021, as compared to the same period in 2020, or by 26% on a per unit basis quarter-over-quarter compared to fiscal fourth quarter 2021. Per unit increases in LOE can be attributed to higher than anticipated workover activity on disposal wells during the fiscal first quarter 2022 as well as increased costs for recurring operating expense components such as chemicals and electricity. Cash G&A expenses⁽¹⁾ decreased by 29% on a per unit basis to $3.48 per Boe for the fiscal first quarter 2022 compared to fiscal fourth quarter 2021, while interest expense decreased by 10% on a per unit basis to $0.98 per Boe for the fiscal first quarter 2022 compared to fiscal fourth quarter 2021.The Company realized a fiscal first quarter 2022 Cash Margin⁽¹⁾ of $46.09 per Boe before derivative settlements or $28.58 per Boe after derivative settlements.

The Company had $20.0 million in accrual basis drilling, completions and facility capital expenditures, $6.3 million of which relates to our EOR project, during the fiscal first quarter 2022. Including additions to leasehold and other property and equipment, the Company had $20.7 million in total accrued capital expenditures for the three months ended December 31, 2021, which compares to the Company's previously released guidance of $26 million to $32 million. The lower than anticipated accrued capital expenditures can be attributed to development activity timing differences falling outside of the quarter. On a cash basis, the Company had total capital expenditures of $29.1 million for the three months ended December 31, 2021.

During the fiscal first quarter 2022, the Company paid common dividends of $0.31 per share or $6.1 million in total. Subsequent to the quarter end, the Company paid common dividends of $0.31 per share during February 2022.

As of February 9, 2022, we had $68 million drawn and $107 million of availability on our credit facility.

Fiscal 2Q Outlook & Guidance

Based on current market conditions, the Company forecasts fiscal second quarter 2022 accrued capital expenditures before acquisitions to total approximately $26 million to $32 million. This total includes estimates of (i) $20 million to $24 million for drilling and completions (operated and anticipated non-operated), capital workovers, infrastructure, minor additions to land and existing working interests, and (ii) $6 million to $8 million for our EOR program. Consistent with the prior quarter, the Company forecasts a larger weighting of capital spending during the first half of fiscal 2022.

Riley Permian forecasts fiscal second quarter 2022 oil production to average 7.25 MBbls per day to 7.50 MBbls per day. Based on historical averages, oil production could represent approximately 73% of total equivalent production. However, during the fiscal second quarter of 2022, the Company's primary midstream gas gathering & processing partner is planning a temporary shutdown of their primary plant as part of an overall capacity expansion project, which will impact sales of natural gas and NGLs. Following completion of such expansion, the Company will enjoy a larger volume of contractual, firm capacity, which should lead to increased sales for gas and NGLs and reduced flaring. However, giving the interim uncertainty as to the exact duration of such shutdown and the impact on Company gas and NGL sales, the Company is providing a wider range of total equivalent production guidance of 9.4 MBoe per day to 10.0 MBoe per day for the fiscal second quarter of 2022.

The Company forecasts second fiscal quarter of 2022 LOE of approximately $6.5 million to $8.0 million and cash G&A expenses⁽¹⁾ of approximately $3.5 million to $4.5 million (excluding share-based and unit-based compensation expense, shown after the effect of gross profit from contract services derived from management services agreements).