Riley Exploration Permian, Inc. Q4 FY2025 earnings call

Strategic Transformational Activities 2025

• Closed the Silverback acquisition in July 2025, adding high-quality undeveloped inventory and bringing total high cash-on-cash return undeveloped inventory to 7-8 years of drilling opportunity.
• Sold the New Mexico midstream project to Targa in December 2025 for $123 million in cash plus potential future earnouts, eliminating all associated future liabilities and construction costs, while securing flow assurance for New Mexico gas production to support future development. The project is on track to be operational in H2 2026.
• Reduced total debt by $120 million in Q4 2025, resulting in a ending balance of $255 million, a 28% utilization rate on the $400 million credit facility, and a trailing debt-to-EBITDAX leverage ratio of 1.0x (0.9x pro forma for Silverback).
• Authorized a $100 million common stock repurchase program, and repurchased ~152,000 shares at a weighted average price of $26.54 in January 2026.

Operational Safety & Performance

• Achieved a total recordable incident rate of zero for full year 2025, and 95% safe days (no recordable incidents, vehicle accidents, or spills over 10 barrels).
• Reduced drilling and completion (D&C) costs per lateral foot: 25% year-over-year in New Mexico, 15% year-over-year in Texas, driven by pad drilling, higher drilling efficiency, and completion optimization. Cost reductions have been paired with improved well productivity, with most new wells beating internal forecasts.
• Drilled 18 net wells in 2025 (28% fewer than 2024) and turned 16.3 net wells to sales (23% fewer than 2024), after reducing activity mid-year following an oil price decline, delivering strong organic production growth even with limited activity.
• Acquired new land to replace ~two-thirds of 2025's completed drilling locations at an attractive cost of less than $300,000 per net undeveloped location.

2026 Operational Plan

• Plans for a flexible, variable rig schedule: two rigs running through May 2026 (one in Texas, one in New Mexico), one rig in the summer, potentially zero rigs in the fall, and resuming activity later in the year. All rigs have short contract terms to preserve flexibility for changing market conditions.
• Expects to drill 46-53 gross wells, equal to ~37-43 net wells, with new well activity focused on Texas in H1 2026 and transitioning to New Mexico in H2 2026 after the Targa midstream project is completed.
• Secured a new water disposal agreement with Waterbridge for the Red Lake area, effective September 2026, to enable full field development.

Riley Exploration Permian operates two core geographic production segments: Texas (legacy Champions assets) and New Mexico (including the Silverback acquisition closed in July 2025). For full year 2025: Texas produced 11,000 barrels of oil per day, holding production flat year-over-year with only 10 net wells turned to sales, demonstrating high well productivity. New Mexico oil production grew 74% year-over-year to over 2,500 barrels of oil per day, from just 6.3 net wells turned to sales plus Silverback acquisition volumes. New Mexico's revenue contribution to total company oil production increased from 23% in 2024 to 34% in 2025, a trend management expects to continue. Silverback acquisition volumes accounted for only 8% of total 2025 annual volumes, but production at year-end was 65% higher than original expectations due to successful workover optimization. Fourth quarter 2025 oil production increased 9% quarter-over-quarter (to ~20,600 bopd) and 26% year-over-year. Full year 2025 total oil production increased 15% year-over-year, while total equivalent production increased 29%.

• Management guides over 20% year-over-year oil volume growth for full year 2026, with production increasing sequentially each quarter after an expected Q1 2026 production dip driven by weather-related downtime and midstream partner shut-ins.
• 2026 total capital expenditure guidance is set at $200 million, with more than two-thirds of spending expected to occur in H1 2026, concentrated in Q2, with spending declining in Q3 and Q4. Capital allocation will prioritize development over shareholder returns in 2026, while remaining flexible to moderate spending if oil prices decline, with a commitment to protecting the dividend.
• As of March 2, 2026, ~70% of 2026 forecasted midpoint oil volumes are hedged at a weighted average downside price of ~$60 per barrel, with 36% of hedges structured as collars to preserve upside participation. 34% of hedges are swaps, with collars having a weighted average price range of $58 to $72 per barrel.
• Management provided a preliminary two-year outlook, with flat CapEx expected for 2027 and ~10% year-over-year oil production growth expected, driven by lagged effects of 2026 investment, with higher capital efficiency expected in 2027 after 2026 infrastructure is completed.

• Waha natural gas pricing pressure from Permian pipeline egress maintenance negatively impacted Q4 2025 results, leading to negative net natural gas and NGL revenue after basis and fees. Regional infrastructure improvements are not expected until 2027, creating ongoing near-term pressure on gas realizations.
• The 2026 development plan is contingent on the on-time completion of the Targa New Mexico midstream project and Waterbridge water disposal infrastructure in Q3 2026; any delays would shift the H2 2026 New Mexico development ramp.
• Commodity price volatility creates uncertainty for capital planning; while the company has a flexible rig contract structure, sustained low oil prices would require activity reductions to maintain free cash flow and balance sheet health.
• The small-scale merchant power project in ERCOT is unproven for the company, and it remains uncertain whether it will deliver expected improvements to gas netbacks.
• Future service cost inflation could erode D&C cost savings achieved in 2025, reducing capital efficiency.

Q: What is the 2026 production cadence, and will capital efficiency improve in 2027? What completion optimization changes are you implementing? / A: Management expects a Q1 2026 production dip from winter weather and legacy midstream downtime, followed by sequential growth in Q2, Q3, and Q4. Capital efficiency will improve in 2027 after 2026 infrastructure is completed, with the lag from 2026 investment supporting ~10% 2027 production growth with flat CapEx. For completion optimization, the company has reduced sand volumes, adjusted proppant sizing, reduced cluster counts, and cut water and pumping costs, delivering major cost savings while well performance outperforms internal type curves. Further testing of new designs in New Mexico is planned for 2026 that could deliver more than $500,000 in savings per well.

Q: How flexible is the 2026 capital plan, and would you accelerate activity if oil prices stay high? Can you update the merchant power project? / A: Management has no plans to react to short-term oil price moves, as the 2026 plan is already sized for significant growth and positioned for any price environment. The rig program has full flexibility to either shut down rigs if prices fall or keep all rigs running all year if prices stay high, with the ability to drill ~50 wells per year with just one rig due to short well cycle times in the company's plays. For the 10 MW ERCOT merchant power project, the first site is in final commissioning with expected operation soon; it is designed to improve gas netbacks by converting low-priced in-basin gas to power. Management will stay opportunistic on future power projects and will wait to see how the first small-scale project performs before committing to larger developments.

Q: Has the Silverback asset integration been completed, and is there more low-hanging fruit for production optimization in New Mexico? Are similar acquisition opportunities available? / A: Silverback integration is complete, including workforce consolidation and operational streamlining, with all low-hanging workover optimization opportunities already identified. Significant improvements have been delivered, including wellbore cleanouts, artificial lift switches that cut operating costs by up to $20,000 per month per installation, and restoration of many wells to near-initial production rates. There are still remaining optimization opportunities to be implemented in phases. Management acquired Silverback primarily for its large undeveloped drilling inventory, and the production upside from optimization was an unexpected bonus, with similar under-optimized assets rare and limited in scale in the current market.

Q: How does the share repurchase program fit into your overall capital allocation framework? / A: Management views the share repurchase program as an opportunistic tool that adds flexibility to capital allocation. When returns from drilling exceed the implied returns from buying back stock at current prices, capital will be prioritized for development; when the share price is viewed as undervalued, repurchases will be prioritized. Management already repurchased shares at ~$26.54 and is comfortable continuing repurchases when this option delivers higher returns than alternative uses of capital.