Riley Exploration Permian Reports Fiscal Q4 Results; IDs 2022 Budget

Riley Exploration Permian Inc. reported financial and operational results for the fiscal fourth quarter and year ended September 30, 2021.

Fiscal 1Q22 and Full Year 2022 Outlook

• 2022 Capex: $85 million to $95 million

• Fiscal Q1 Oil Production Forecast: 7.0 MBbls per day to 7.3 MBbls per day

• Fiscal Q1 Total Production Forecast: 9.5 MBoe per day to 10.0 MBoe per day

The Company forecasts first fiscal quarter of 2022 LOE of approximately $7.25 to $7.75 per Boe and cash G&A expenses⁽¹⁾ of approximately $4.00 to $4.75 per Boe (excluding share-based and unit-based compensation expense, shown after the effect of gross profit from contract services derived from management services agreements).

Based on current market conditions, this level of capital investment may correspond to full-year production growth of approximately 11% to 15% over full-year fiscal 2021 production levels.

Highlights for 2021:

• Increased total production by 22% to 3.15 MMBoe for fiscal year 2021, as compared to fiscal year 2020
• Reported net loss of $65.7 million with income from operations of $59.9 million for the same period
• Generated $89.9 million of Adjusted EBITDAX⁽¹⁾, $86.1 million of operating cash flow from continuing operations and $26.0 million of Free Cash Flow⁽¹⁾
• Invested total cash capital expenditures before acquisitions of $60.0 million, which corresponds to 70% of operating cash flow from continuing operations
• Paid $18.3 million in dividends on common units/shares, which corresponds to 21% of operating cash flow from continuing operations or 70% of Free Cash Flow⁽¹⁾
• Increased total proved developed reserves by 38% year-over-year to 41.5 MMBoe and increased total proved reserves by 27% year-over-year to 72.2 MMBoe

Highlights for Fiscal 4Q:

• Increased production by 35% to 9.6 MBoe per day for the three months ended September 30, 2021, as compared to the same period in 2020, or by 5% quarter-over-quarter compared to fiscal third quarter 2021
• Reported net income of $15.7 million with income from operations of $26.9 million for the same period
• Generated $24.5 million of Adjusted EBITDAX⁽¹⁾, $27.2 million of operating cash flow from continuing operations and $7.2 million of Free Cash Flow⁽¹⁾
• Realized a Cash Margin⁽¹⁾ of $39.08 per Boe before derivative settlements or $26.41 per Boe after derivative settlements
• Declared dividends of $0.28 per share with a record date of July 23, 2021 for a total of $5.5 million

Bobby Riley, Chief Executive Officer and Chairman of the Board of Directors. Mr. Riley continued, "Riley Permian completed another strong fiscal year. We completed our merger with Tengasco in February, had a successful capital raise in July, began and progressed on our EOR project this fall, and met our operational guidance metrics for the fiscal fourth quarter and the fiscal year. We are proud of the organic growth achieved over the past year and believe our reinvestment for growth is warranted to improve our scale, cost structure and cash flow. At the same time, we achieved this growth while allocating significant cash flow from operations back to shareholders in the form of dividends. Finally, we have continued to progress our efforts in developing CCUS projects, including for permanent storage projects on our property, and we're optimistic in initiating our first project during 2022. We are engaging in constructive discussions and diligence efforts with counterparties from CO₂ source hosts, capture equipment providers and regulatory advisors. We are seeking to construct commercial arrangements that provide attractive economic returns in the current regulatory environment, with potential for improvement should regulations change at the federal or state levels."

Ops Update

Riley Permian increased production by 35% to 9.6 MBoe per day for the three months ended September 30, 2021, as compared to the same period in 2020, or by 5% quarter-over-quarter compared to fiscal third quarter 2021. The Company brought online 6 gross (5.7 net) horizontal wells during the fiscal fourth quarter of 2021. The Company increased total production by 22% to 8.6 MBoe per day for fiscal year 2021, as compared to fiscal year 2020, in line with its budgeted guidance previously disclosed.

During the fiscal year 2021, Riley Permian increased total proved developed reserves by 37% year-over-year to 41.5 MMBoe and increased total proved reserves by 27% year-over-year to 72.2 MMBoe.

Since October 1, 2021, the Company has continued to progress on its EOR pilot program. The Company has drilled six of six currently planned vertical injection wells and has commenced installation of water and CO₂ injection lines. Also, the Company executed two agreements in October 2021, including an agreement with the Cortez Pipeline Company relating to the connection and establishment of a delivery point for CO₂ for Riley Permian, as well as an agreement with Kinder Morgan CO₂ Company LLC, relating to the purchase and sale of CO₂.

Financials Update

The Company reported net income (loss) of $15.7 million and $(65.7) million and operating income of $26.9 million and $59.9 million for the three months and year ended September 30, 2021, respectively. The Company generated Adjusted EBITDAX⁽¹⁾ of $24.5 million and $89.9 million for the three months and year ended September 30, 2021, respectively. Additionally, the Company had operating cash flow from continuing operations of $27.2 million and $86.1 million and Free Cash Flow⁽¹⁾ of $7.2 million and $26.0 million for the three months and year ended September 30, 2021, respectively.

Fiscal fourth quarter 2021 average realized prices, before derivative settlements were $68.95 per barrel of oil, $2.36 per Mcf of natural gas and $19.16 per barrel of natural gas liquids, resulting in a total equivalent price, before derivative settlements, of $54.46 per Boe. Adjusted for derivative settlements, total equivalent price was $41.79 per Boe, corresponding to realized derivative losses of $12.67 per Boe or $11.2 million.

Riley Permian's total Cash Costs⁽¹⁾ for the fiscal fourth quarter of 2021 were $15.38 per Boe, representing an increase of $0.31 per Boe or 2% compared to the fiscal third quarter of 2021. Fourth quarter Cash Costs⁽¹⁾ included lease operating expense ("LOE") of $6.45 per Boe, production and ad valorem taxes of $2.92 per Boe, cash G&A expenses⁽¹⁾ of $4.92 per Boe and interest expense of $1.09 per Boe. LOE decreased by 20% on a per unit basis to $6.45 per Boe for the three months ended September 30, 2021, as compared to the same period in 2020, or by 7% on a per unit basis quarter-over-quarter compared to fiscal third quarter 2021. Cash G&A expenses⁽¹⁾ increased by 16% on a per unit basis to $4.92 per Boe for the fiscal fourth quarter 2021 compared to fiscal third quarter 2021, while interest expense decreased by 23% on a per unit basis to $1.09 per Boe for the fiscal fourth quarter 2021 compared to fiscal third quarter 2021.The Company realized a fiscal fourth quarter Cash Margin⁽¹⁾ of $39.08 per Boe before derivative settlements or $26.41 per Boe after derivative settlements.

The Company had $19.5 million in cash drilling and completions capital expenditures during the fiscal fourth quarter, or $57.1 million for fiscal year 2021. Including additions to leasehold and other property and equipment, the Company had $60.0 million in total cash capital expenditures before acquisitions for fiscal year 2021.

During the fiscal fourth quarter 2021, the Company declared common dividends of $0.28 per share or $5.5 million in total. In October 2021, the Company declared common dividends of $0.31 per share or $6.1 million in total.

As of December 8, 2021, we had $65 million drawn and $110 million of availability on our credit facility.