Earnings call transcript: Riley Exploration Permian beats EPS in Q2 2025

Riley Exploration Permian reported a strong second quarter for 2025, surpassing earnings per share (EPS) expectations with an actual EPS of $1.44 compared to the forecasted $1.16, marking a 24.14% surprise. Despite missing revenue expectations slightly, reporting $85.39 million against a forecast of $87.25 million, the market reacted positively. The company’s stock price rose by 2.12% to $25.74, reflecting investor confidence bolstered by strategic operational improvements and acquisition benefits. According to InvestingPro analysis, the company appears undervalued based on its Fair Value calculation, with analysts setting price targets between $49.50 and $55.00 per share.

Key Takeaways

• Riley Exploration Permian exceeded EPS expectations by 24.14%.
• Revenue fell short of forecasts, coming in at $85.39 million.
• Stock price increased by 2.12% following the earnings announcement.
• Strategic acquisition and operational efficiencies drive positive sentiment.
• Fourth quarter oil production guidance suggests significant growth.

Company Performance

Riley Exploration Permian demonstrated resilience in a challenging market, with a focus on operational efficiencies and strategic acquisitions. The acquisition of SilverBack Exploration expanded their footprint in the Yaso Trend area, enhancing their competitive position. Despite a decrease in realized oil prices, the company maintained robust cash flows and reinvested significantly into capital expenditures, reflecting a commitment to long-term growth.

Financial Highlights

• Revenue: $85.39 million, slightly below expectations.
• Earnings per share: $1.44, exceeding forecasts by 24.14%.
• Cash flow from operations: $33.6 million, lower quarter-over-quarter.
• Total debt: $381 million, with $20 million in cash reserves.

Earnings vs. Forecast

Riley Exploration Permian’s actual EPS of $1.44 surpassed the forecasted $1.16, resulting in a 24.14% positive surprise. However, revenue fell short by 2.13%, coming in at $85.39 million against a forecast of $87.25 million. The EPS outperformance highlights effective cost management and operational efficiencies, while the revenue miss suggests challenges in market conditions.

Market Reaction

Following the earnings announcement, Riley Exploration Permian’s stock price rose by 2.12% to $25.74. This increase indicates investor confidence in the company’s strategic direction and operational improvements. The stock’s current price is closer to its 52-week low of $21.98, suggesting room for potential growth as the company implements its strategic initiatives.

Outlook & Guidance

Looking ahead, Riley Exploration Permian projects significant growth in oil production, with guidance for the fourth quarter indicating mid-18,000 barrels per day. Total equivalent production is expected to exceed 30,000 barrels per day, driven by strategic investments and operational efficiencies. The company anticipates a 21% increase in oil production and a 27% rise in total equivalent production from Q2 to Q4.

Executive Commentary

CEO Bobby Riley emphasized the company’s focus on long-term value creation through disciplined capital allocation and strategic infrastructure investments. CFO Philip Riley highlighted the company’s flexibility and potential for further updates, while SVP of Operations Dan Dougherty underscored the importance of water handling infrastructure in their operations.

Risks and Challenges

• Infrastructure challenges in the Permian Basin could impact operations.
• Gas takeaway constraints in New Mexico pose potential bottlenecks.
• Fluctuating oil prices and OPEC supply dynamics remain a concern.
• Power supply issues in the region could affect production costs.
• Market volatility and macroeconomic pressures may impact future performance.

Q&A

During the earnings call, analysts inquired about midstream development funding options, water handling infrastructure opportunities, and potential power solutions in New Mexico. The discussion also highlighted potential service cost reductions, reflecting the company’s strategic focus on operational efficiencies and cost management.

Full transcript - Riley Exploration Permian Inc (REPX) Q2 2025:

Bailey, Conference Operator: Thank you for standing by. My name is Bailey, and I will be your conference operator today. At this time, I would like to welcome everyone to the Riley Exploration Permian Inc. Second Quarter twenty twenty five earnings conference call.

Bobby Riley, Chairman and CEO, Riley Exploration Permian: Great.

Bailey, Conference Operator: All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star and 1. I’ll now turn the call over to Philip Riley, CEO.

You may begin.

Philip Riley, CFO, Riley Exploration Permian: Good morning. Welcome to our conference call covering our second quarter twenty twenty five results. I’m Philip Riley, CFO. Joining me today are Bobby Riley, Chairman and CEO and Dan Dougherty, SVP of Operations. Yesterday, we published a variety of materials, which can be found on our website under the Investors section.

These materials and today’s conference call contain certain projections and other forward looking statements within the meaning of the federal securities laws. These statements are subject to risks and uncertainties that may cause actual results to differ materially from those expressed or implied in these statements. We’ll also reference certain non GAAP measures. Reconciliations to the appropriate GAAP measures can be found in our supplemental disclosure on our website. I’ll now turn the call over to Bobby.

Bobby Riley, Chairman and CEO, Riley Exploration Permian: Thank you, Philip. Good morning, and welcome to our earnings Riley Permian demonstrated solid overall performance in the second quarter despite a less favorable oil macro backdrop and regional operating environment. We adjusted our development activity and CapEx downward in response to lower oil prices, and we generated significant free cash flow for the first half of the year. Our development activity was moderated but demonstrated good execution overall with positive momentum continuing on drilling, completion times and cost. We experienced some production impacts from infrastructure challenges common to many companies in the Permian Basin.

Most notably was unreliable natural gas processing Mexico, which leads to shut in wells and deferred production. As a courtesy reminder for our investors, the larger value driver at hand is not the deferred gas revenue, which is immaterial, but rather the oil revenue. New Mexico is a zero flaring state, so disruptions on gas locally or downstream can result in disruptions to oil production. While disruptions in the second quarter are frustrating, fortunately, this is a timing issue versus fundamental well performance issues. Also, these types of hurdles present opportunities that underpin several of our initiatives, including midstream projects, which we continue to advance.

These projects are designed to enhance gas and oil flow assurance and support access to a stable power supply. Together, these efforts strengthen our ability operations through acquisitions, providing a competitive edge to our peers in a dynamic energy environment. We closed our acquisition of SilverBack Exploration in July. With this deal, we’ve increased our Yaso Trend footprint to 30,000 net acres, 98% of which is held by production. This region today represents only a quarter of the company’s total production, yet offers substantial undeveloped potential for future growth.

I will now turn the

Philip Riley, CFO, Riley Exploration Permian: call over to Dan Dougherty, who is sitting in today for John Suter, our COO, to discuss operational results for the quarter, followed by Philip Riley, our CFO, who will discuss the company’s financial performance and forward looking guidance. Thank you, Bobby, and good morning. Riley Permian has once again shown excellence in safe operations, achieving a total recordable incident rate of zero in the second quarter. We achieved 97% safe days, a metric requiring no recordable incidents, vehicle accidents or spills over 10 barrels. This is a record number of safe days for the second quarter in a row, a testament to our commitment to safe operating.

As for activity, for the 2025, we drilled 10, completed two and turned in line seven gross operated wells. Five of those wells turned in line were completed at the end of the first quarter. We mentioned on the previous call that we picked up a rig in Q1, spudding the first well in that campaign in Texas in late March. That rig completed its 10 well program in the second quarter, replenishing our DUC inventory that will carry completions into 2026. During this drilling campaign, Riley set multiple Yoakum County records in the San Andres, including longest lateral drilled at 10,375 feet as well as fastest spud to TD and fastest spud to rig release for both one and two mile wells.

We did see some impact from tariffs during the campaign, most significantly in the form of higher pipe pricing. Due to the added drilling efficiencies, however, we were able to keep total costs down compared to our previous drilling efforts, reducing our total average drilling cost per lateral foot by 15% over our previous program in 2024 despite the added tariff costs. Overall, this campaign was our most efficient and cost effective to date. Net production declined marginally from 1.41 to 1,380,000 barrels of oil quarter over quarter in q two, but increased 3% compared to the same quarter last year. Barrel of oil equivalent production is up 1% quarter over quarter and up 14% compared to same quarter last year from 1,940,000 to 2,220,000 barrels of oil equivalent.

Our average daily net production was 15,200 barrels of oil per day and 24,400 barrels of oil equivalent per day for the 2025. The slight decline in oil production within the quarter was due primarily to gas takeaway constraints with our current midstream partner in New Mexico. These gas takeaway constraint events result in us deferring oil volumes to future quarters and are the foundational reason for our investing in gathering and compression in the asset. Last quarter, we announced that we had completed our first phase of this gathering and compression. Since then, this initial phase has allowed us to sell up to 15,000,000 cubic feet in high pressure gas to our current midstream partner, mitigating some of the gathering constraints that we’ve experienced and allowing us to bring on new production.

During the second quarter, we continued to make progress on the subsequent phases of the project as we work towards planned 2026 in service date for deliveries to our new midstream partner. An expansion of the initial Birdie compressor station to 55,000,000 cubic feet a day is already underway with the additional compression scheduled to arrive in late Q4. Maintaining low operating costs remains the primary focus for our operations team. Our average upstream LOE per BOE in the 2025 is down 3.7% over our 2024 average. As power becomes an increasingly precious commodity in the Permian Basin, managing our own power production will be an integral piece to our unconstrained development.

In the second quarter, we added an additional 9% to our self generated power in Texas. The continued efficiency and reliability of this power project has led to the initial planning phases installation of our New Mexico asset. With the Silverback acquisition closing, the Riley Permian operations team has already identified numerous opportunities, synergies and cost savings that underscore the intrinsic value of the acquisition. Managing water handling cost is integral to our business and leveraging our expertise in the matter will decrease operating expenditures within the new asset. Combining water infrastructures between our legacy assets and SilverBac will also drive efficiencies and opportunities as we continue to develop Mexico.

Due to significant overlap of the legacy and Silverback acreage, we’re able to increase the expected net interest of many of our development locations. This will allow us to produce more net barrels for the same amount of gas, water and power infrastructure investments. Nearly doubling the scale of our operations in the region will also give us a strategic advantage when going to quote services. We believe this could lead to savings of 5% to 15% for many regularly used services. Finally, with minimal build outs, existing gas production in the Silver Back wells can be brought to our compressor station allowing for quicker scale and improving project economics.

To summarize, in the second quarter, the Riley Permian team had our most successful drilling program to date. We maintained low operating costs. Our midstream and power projects are continuing to prove their value in the form of reliability and increased optionality, and we continue to find significant synergies in our recent SilverBack acquisition. And all of this was done while achieving record safety metrics. Congratulations to the team on a job well done.

Philip, I’ll now turn the call back to you. Thank you, Dan. Second quarter cash flow from operations was $33,600,000 lower quarter over quarter primarily and changes in working capital. Realized oil prices before hedges fell 11% quarter over quarter or 22% year over year, while prices after hedges by only 7% quarter over quarter or 14% year over year, demonstrating the benefit of that risk management program. We had $1,000,000 non cash impairment on a small asset far outside either of our two core areas driven by lower prices which shows up on the income statement.

Combined LOE and cash G and A per BOE decreased by 5% to 7% as compared to the same period one and two years ago. Adjusted EBITDAX margin was 60 modestly from seventy one percent one year ago in spite of the lower oil prices. We believe this demonstrates the resiliency of our business and the positive impacts of structural cost improvements. We reinvested 54% of cash flow from operations before working capital into upstream CapEx during the quarter or only 41% for the six months year to date compared to 47% for the same period in 2024. This lower reinvestment rate reflects our response to lower oil prices, which we discussed on our prior quarterly call and which corresponds with our production volumes.

Also, 40% of the year to date CapEx spend relates to drilling 10 net wells, which will only turn to sales 5.8 net wells, highlighting an inventory build of uncompleted wells. We converted 59% of year to date operating cash flow before working capital to $61,000,000 of upstream free cash flow or $54,000,000 of total free cash flow after midstream CapEx. The quarterly increase in debt, $284,000,000 at quarter end, was driven primarily a combination of normalized net working capital changes as well as funding the deposit for our SilverBack acquisition. Subsequent to quarter end, we closed the SilverBack acquisition, which was funded with our credit facility. As of August 1, we had $4.00 $1,000,000 in total debt, including $246,000,000 on the credit facility and $155,000,000 of notes or $381,000,000 excluding $20,000,000 of cash.

That level is an increase of $131,000,000 of net debt from the end of the first quarter consisting of $125,500,000 for SilverBack, which reflects a preliminary purchase price benefit of $16,500,000 as well as $5,000,000 related to some working capital needs. Now let’s discuss our latest guidance. First, on the format and periods disclosed, we’re providing activity, production and CapEx guidance for the third and fourth quarters. We’ve updated the full year figure. I’ll remind our listeners that this reflects six months of standalone for the first half of the year with six months combined with SilverBack for the second half of the year, hence a blended average relative to what you’ll see for the third and fourth quarter levels.

We provided cost guidance for the current quarter. A couple of items may drive LOE higher in the near term. First, I’ll note that Silverback is a primarily undeveloped asset base with a large number of low volume vertical wells holding the acreage, but which also correspond with higher per unit costs. This will come down over time as we develop the asset. Second, we’ve got a modest amount of midstream OpEx flowing through this LOE category for now, skewing the appearance of higher upstream costs.

We might choose to break this out at a later date. To recap our capital budget guidance for the year, in March, we announced a $210,000,000 budget across upstream, midstream and power. Following the significant price declines in April, we announced on our Q one earnings call an approximate 110,000,000 budget or a very significant 47% cut from the original. We’re now adding back a modest amount of drilling and completion activity and further midstream and power investments. We’re bringing back the rig with 10 gross new drills accounting for approximately 60% of the increased spend as compared to prior guidance.

We also plan on completing an additional 2.5 net wells as compared to our prior guidance, accounting for the balance of the incremental spend. Overall, this should result in a smaller drawdown of drilled but uncompleted wells or DUCs, maintaining an inventory to draw from and setting up twenty twenty six for maximum flexibility. We also see additional growth as compared to prior guidance with fourth quarter midpoint oil production in the mid 18,000 barrels per day level for oil and over 30,000 barrels per day for total equivalent. That suggests 21% growth from second quarter to fourth quarter for oil and 27% for total equivalent. The oil growth represents a combination of organic growth and the impact of adding Silverback accounting for full year base decline of about 25% at Silverback from the beginning of year levels cited upon deal announcements.

We see the total equivalent production growing faster than oil because our Texas Midstream partner completed some upgrades, which leads to more processed gas and less flaring combined with some tighter potential basis differentials. Hopefully, this leads to positive gas and NGL revenue in the second half of the year. From a broader perspective, this oil growth represents a 26% average annual growth rate from the same period in 2021 or 23% on an oil production per share basis. While encouraging, we’re staying disciplined and I’ll emphasize this represents a modest increase in capital allocation corresponding with an approximate 45% upstream reinvestment rate of cash flow from operations before working capital. On our New Mexico Midstream project, we’re bringing forward some CapEx into this year, which primarily relates to the additional compressors Dan mentioned earlier this year as well as the cost for the steel pipe.

On the pipe, we had an opportunity to commit to a purchase at an attractive price and in advance of any tariff impact. On Power, the increased forward investment as compared to last quarter just represents a small acceleration of some project spend and overall timing is looking like in service dates starting in 2026. We remain cautious on the macro front and we’ll watch closely during the second half of this year to see how OPEC’s actual marketed supply compares to the planned unwind of costs and for how the market absorbs such increases. So while we’re positioning ambitious growth projects and acquisitions, we’re also positioning our company for resilience and flexibility in the face of uncertainty. We added hedges over the past quarter primarily for the next eighteen months to mitigate the impact of price swings.

On debt leverage, we forecast modest pay down this fall at $65 WTI, partially contingent on the pace of our midstream build out. If we were to look at that on a pro form a combined basis, we could have several quarters beginning being in the range of 1.3 times adjusted EBITDAX or slightly higher 1.4 times on a stand alone basis. I’ll turn it back to Bobby for closing.

Bobby Riley, Chairman and CEO, Riley Exploration Permian: Thank you. Thank you, Philip. Once again, we appreciate your time and interest in Riley Permian. While we’re pleased with our Q2 twenty twenty five results, our focus remains firmly on the future. We are committed to building long term value through disciplined capital allocation, strategic infrastructure investments and operational excellence.

We believe these initiatives will position us for sustained growth, and this long term strategy will continue to drive shareholder value. Thank you for your continued support. Operator, you may now turn the call over for questions.

Bailey, Conference Operator: Your first question comes from the line of Gary Whitfield. Your line is open.

Bobby Riley, Chairman and CEO, Riley Exploration Permian: Good morning, guys, and thanks for your time. For my first question, I wanted to focus on your production trajectory into 2026. With your revised upstream capital plan, your 4Q extra rate is materially above 2026 consensus. While I realize you’re not offering 2026 guidance today, is the second half capital run rate a reasonable place to start for 2026? And how does that run rate compare to your maintenance capital case for the pro form a company?

Philip Riley, CFO, Riley Exploration Permian: Yeah. Good morning, Derek. This is Philip. I’ll I’ll start with that. Yes.

We’re excited about the fourth quarter exit rate production you see there. We are increasing that capital. Think which if you look at the year, we like to break out the upstream from the midstream in total. You can see we’re still under a $100,000,000 at the midpoint for the year. Now compare that to some years past, and we’re quite a bit higher even in several years.

We’ve got more assets now. So I I think you could imagine a budget and maybe call it a $120,000,000 next year if we wanted to continue the growth that we are. You know, on maintenance CapEx, it’s a little bit of an abstract concept, but I think you can look and see what we’ve done over the last quarter or two. We kept things pretty flat with very little investment. It always gets a little skewed when you’re drilling and creating ducts or possibly using them.

But, directionally, you can see that there, maybe that’s in the the 35 to 40% reinvestment rate of of cash flow. And which I’ll remind our listeners, when we say cash flow, we mean after interest, after tax, not EBITDA. So that’d be an even lower percent of of EBITDA. Does that answer some of your question? Anything more we can clarify there, Derek?

Bobby Riley, Chairman and CEO, Riley Exploration Permian: I think that’s great, Philip. And maybe shifting over to midstream for my follow-up. Could you speak to your latest thoughts on what’s the most likely outcome for funding this development and the degree of flexibility you guys have in New Mexico to navigate the constraints given your and Siliback’s collective arrangements?

Philip Riley, CFO, Riley Exploration Permian: Sure. So, yeah, I I think what Derek alluded to, we we hinted last quarter, we were we’re considering different ways to finance this. We started the year thinking we just keep this flowing on the balance sheet, use the credit facility, Obviously, made some adjustments after the big macro events and then finding this nice acquisition. You know, the latest is we’re we’re still working through it. We’ve got a few options with ideas we we like.

At the same time, we’re controlling the pace. That’s great thing about building it yourself. We are making commitments like we’ve disclosed in our 10 q and as we discussed discussed, that’s some compressors coming. We got that pipe we’re excited about. We’re doing a little work like some right away.

That’s some of that spending that you you’ll see there, all while kinda trying to meet our our in service date of a few quarters from now. But we’ve got some flexibility, I’d say, hang tight for a little bit longer, and we’ve got some, hopefully, some more updates to give you. As for the operational aspect of the midstream, I think we’ve got some flexibility. There’s a difference between low pressure and high pressure, but maybe I turn this to Dan. I think he could probably explain it.

Yes. Thank you, Philip. A couple of things on this. One, you mentioned SilverBack. I think we’re pretty well positioned to incorporate SilverBack into this existing midstream plan.

We’ve already got plans to bring on between 5,000,000 and $10,000,000 a day over to our high pressure system from the SilverBack system with our initial Birdie compressor. You know, there’s also a lot of overlap, as I mentioned, with the existing Artesia area, which will will focus on our our development in the 2026 time frame. You know, midstream is really gonna be focused on servicing those initial wells that would be drawn in 2026. So a lot of synergies there, a lot of opportunity with the SilverBac acquisition, and and everything just kind of really works well together.

Bobby Riley, Chairman and CEO, Riley Exploration Permian: That’s great, guys. I’ll turn it back to the operator.

Bailey, Conference Operator: Thank you. Your next question comes from the line of Kelly Robertson. Your line is open.

Philip Riley, CFO, Riley Exploration Permian: Good morning.

Bobby Riley, Chairman and CEO, Riley Exploration Permian: So at twenty twenty five, you invested about 41% of your capital, I think, compared to 7% in personal debt.

Philip Riley, CFO, Riley Exploration Permian: Production still grew, I think, on the well list. Potential production was up about 17%. Does that tell you something about the underlying performance of the assets that we could see carry into 2026 with the upcoming capital program? Yes. Thank you, Jeff.

I’m gonna repeat what you said because I I think I could hear it. Maybe some people couldn’t. So, yes, year over year, our our total production oil was 77% higher for oil and 17 higher for total. Meanwhile, our reinvestment rate dropped from 47% last year to 41% here for the first half of the year. So, yeah, that’s encouraging.

Most of that was done for the period captured organically. Again, with for the listeners, we hadn’t done the the acquisition yet for the results we’ve published. Last year, we had the benefit of a very small acquisition. It was mostly land, a few 100 barrels a day. But, yes, mostly organic there.

Looking ahead, of to build on what I was talking about with Derek, we you know, when you talk about reinvestment rate, denominator’s cash flow, of course, that’s impacted by your oil prices. On the trailing twelve months, we benefit from some higher prices. And last year, had some higher prices. This first half of the year is kind of a blend of lower. So the 41% is, you know, really cutting it back.

Looking ahead, cash flow can be a little bit lower because you’re gonna have lower oil prices, and the hedges locked in for the next year won’t be as high as they were for this year. I would see reinvestment rate going up a bit. I think we are leaning into the asset to try to we’ve got a few or several asset acquisitions or even this latest with an entity acquisition that have been more undeveloped, and and we wanna add some production to that. We wanna fill up the midstream when it’s ready and demonstrate what these New Mexico assets can do. Can you can you talk a little bit about capital spend on midstream?

Can you talk about what Riley could realize as the economic impact from the midstream project and being able to move third party volumes? Yeah. So when we say third party volumes, I think it’s important to distinguish a couple different ways there. So as you know, there’s a we have our operated volumes that we control the molecule. And for each each of those molecules, there’s a working interest ownership split.

We, very often in New Mexico, will not own a 100% of that just by the nature of forced pooling, and it’s a little more chopped up than what we have in Texas. So on average, we might only have 50% working interest, 55, 60%, which is frankly quite a bit higher than a lot of the lot of the peers you’ll see out there. And so the balance, though, represents something from somebody else that you control, but it’s somebody else’s. So you’re actually able to build that out and collect some effective third party revenue there even though it’s operated by us. And then in addition, you’ve got some loyalty when it’s not the feds that you can pick up some of that.

There’s another category that’s truly third party operated. There’s potential for that. We have to weigh the trade off of whether we wanna maintain capacity for ourselves, and that’s that’s changed after Silverback. We’ve got a big footprint out there. We’re gonna wanna maintain some of that, But that’s that’s part of the calculus.

And then as far as this translates to cash flow, you know, I think it’ll it’ll take a little while to ramp, but then we do plan to charge some market rates out there, and we’re optimistic that this could translate into $10.20, you know, $30,000,000 of cash flow a few years down the road. This so, you know, on an accounting basis yeah. Let me just say one more thing. On an accounting basis, this remains to be seen how we’ll do this, but, you know, there’s there’s effectively the aspect of the gross dollars and then the netting on elimination if we’re to consolidate some of that. It’s eliminated, net down effectively if if we, the operator, are paying ourselves with the with the midstream operator as well.

So that’s just kind of a preview of what could come, and there’s just a few ways to do it. Excellent. And lastly, on the on the power projects, are there opportunities or is there a need in New Mexico for for Riley to undertake any power solutions for your acreage? Yeah. I’ll say a couple of things and turn it to Dan.

There absolutely are. We’ve kinda hinted at it. We’ve we haven’t formalized anything yet, but as as Bobby said, it it’s crucial for operations out there. There’s a there’s frankly a much longer wait for power in New Mexico. So it’s something we’re looking at real hard.

Yeah. Just to tack on to that. I mean, we we’re looking at, gas compression stations and and in coordination with building those, putting power, you know, very close by, to support that as well as the development that we have out there. You know, with with all the locations that we have to drill, there is an abundance of power that we’re gonna need, and, you know, we just wanna secure our future here, where we’re not so sure that we’re gonna be able to be delivered that power by the local co ops. So we’re we’re doing our best to to plan for the contingency that we’re just gonna have to do this all ourselves.

Bobby Riley, Chairman and CEO, Riley Exploration Permian: Thank you.

Bailey, Conference Operator: Your next question comes from the line of Noel Parks. I

Bobby Riley, Chairman and CEO, Riley Exploration Permian: just have a couple of things. And one is, I wonder, could could you maybe pivot back a little bit to talking about the water handling opportunity? Just would like to get a little more sense of the the moving parts of the the different systems you’re putting together?

Philip Riley, CFO, Riley Exploration Permian: Yeah. This is Dan. I’ll I’ll take that, Noel. Yeah. So moving water out here is is pretty integral to everything that we do.

You know, everything that we produce is produced at a pretty high water cut and being able to handle that waste product is is really what drives a lot of our OpEx on the production side of things. So we do a very good job of managing a very large pipeline system that goes into numerous saltwater disposal wells as well as third party water handlers. Silverback had a system that is somewhat similar. It is gonna be tied into our existing system, offering a little bit more robust, overall system that we’ll be able to dispose of even more water. So as far as being able to control our destiny when it comes to development pace and, you know, how how we wanna build out this this infrastructure, water water is definitely a integral part of that that thought process.

I’ll I’ll say one more thing. You’re probably watching, Noel, which is, you know, take a look at ARRIS, and you recognize the importance of or what ARRIS is getting bought today, so you recognize the importance of it.

Bobby Riley, Chairman and CEO, Riley Exploration Permian: Right. Right. Thanks. And I just wondered in general, as you’re looking at your activity plan going forward, Anything notable you’re seeing on the service cost side right now?

Philip Riley, CFO, Riley Exploration Permian: Yeah. No. You know, we’ve already gone out to a handful of our vendors now that we’ve increased our scale out there in New Mexico and, trying to leverage our economies of scale there. And we believe that there’s definitely an opportunity now that we’ve got more assets to an opportunity to offer service companies. We we’ve seen anywhere between 515% reductions in cost and and believe that could go even higher as as we get into the competitive bidding process.

Bobby Riley, Chairman and CEO, Riley Exploration Permian: Oh, wow. Great. Five to 15%. Okay. That’s great.

And just a last thing sort of a just background or housekeeping thing. On the floor back acreage, is there anything significant on the horizon to do as far as PMA work since they do have, you know, legacy vertical production stuff there? Just wanted to see much cleanup you have to do out there for that.

Philip Riley, CFO, Riley Exploration Permian: Yes. This is Dan. I’ll take that one as well. There is always gonna be some reclamation and P and A work when you’re working in New Mexico when you’re dealing with these old vertical wells. That said, we do our very best to maintain the economic status of these vertical wells and keep them producing as long as we can.

As long as you’ve got a producing well, there’s no need to reclaim or plug anything. So I’d say our first and foremost goal is to optimize production and make sure that everything’s producing economically. And and then we, you know, do what we have to do as required by the BLM or the NMOSD and and the other governing bodies out there.

Bobby Riley, Chairman and CEO, Riley Exploration Permian: Got it. Thanks a lot. You’re welcome.

Bailey, Conference Operator: And there are there are no further questions at this time. Thank you everyone for attending. This does conclude today’s conference call. You may now disconnect.

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