UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM			10-Q


x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021
or2022


o			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 001-15555

Riley Exploration Permian, Inc.

(Exact name of registrant as specified in its charter)


Delaware									87-0267438
(State or other jurisdiction of incorporation or organization)									(I.R.S. Employer Identification No.)

29 E. Reno Avenue, Suite 500 Oklahoma City, Oklahoma									73104
(Address of Principal Executive Offices)									(Zip Code)

Registrant's telephone number, including area code: (405) ~~415-8677~~415-8699

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $0.001	REPX	NYSE American

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	x	Smaller reporting company	x
		Emerging growth company	o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x

The total number of shares of common stock, par value $0.001 per share, outstanding as of August ~~9, 2021~~2, 2022 was ~~19,449,030.~~19,545,444.


RILEY EXPLORATION PERMIAN, INC.

QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, ~~2021~~2022
TABLE OF CONTENTS
		Page
Part I. FINANCIAL INFORMATION
Item 1.	Financial ~~Information~~Statements	56
	Condensed Consolidated Balance Sheets	56
	Condensed Consolidated Statements of Operations	67
	Condensed Consolidated Statements of Changes in Members'/Shareholders' Equity	89
	Condensed Consolidated Statements of Cash Flows	1011
	Notes to the Condensed Consolidated Financial Statements	1213
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	3329
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4238
Item 4.	Controls and Procedures	4338
Part II. OTHER INFORMATION
Item 1.	Legal Proceedings	4440
Item 1A.	Risk Factors	4440
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4442
Item 3.	Defaults Upon Senior Securities	4442
Item 4.	Mine Safety Disclosures	4442
Item 5.	Other Information	4442
Item 6.	Exhibits	4542

Signatures

Unless the context requires otherwise or unless otherwise noted, all references in this Quarterly Report on Form 10-Q to the ~~“Company”, “Riley Permian”, “we”, “us”~~"Company," "Riley Permian," "REPX," "we," "us," or ~~“our”~~"our" are to Riley Exploration Permian, Inc. ~~and~~, together with its consolidated subsidiaries.

Table of Contents

DEFINITIONS

The following are abbreviations and definitions of certain terms used within this Quarterly Report on Form 10-Q:


Measurements.
Bbl			One barrel or 42 U.S. gallons liquid volume of oil or other liquid hydrocarbons



Boe			One stock tank barrel equivalent of oil, calculated by converting gas volumes to equivalent oil barrels at a ratio of 6 thousand cubic feet of gas to 1 barrel of oil and by converting NGL volumes to equivalent oil barrels at a ratio of 1 barrel of NGL to 1 barrel of oil
Boe/d			Stock tank barrel equivalent of oil per day
Btu			British thermal unit. One British thermal unit is the amount of heat required to raise the temperature of one pound of water by one degree Fahrenheit
MBbl			One thousand barrels of oil or other liquid hydrocarbons

MBoe			One thousand Boe
MBoe/d			One thousand Boe per day
Mcf			One thousand cubic feet of gas

MMBtu			One million British thermal units
Abbreviations.
ARO			Asset Retirement Obligation
ASU			Accounting Standards Update

CO2			Carbon Dioxide

EOR			Enhanced Oil Recovery

ESG			Environmental, social, and governance


GHG			Greenhouse Gas

LIBOR			London Interbank Offered Rate
LTIP			Long-Term Incentive Plan

NGL			Natural gas liquids



NYSE			New York Stock Exchange
Oil			Crude oil and condensate
RRC			Railroad Commission of Texas
SEC			Securities and Exchange Commission
SOFR			Secured Overnight Financing Rate

U.S. GAAP			Accounting principles generally accepted in the United States of America
WTI			West Texas Intermediate

Table of Contents

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

~~This~~Various statements contained in this Quarterly Report on Form 10-Q ~~contains forward-looking~~("Quarterly Report") are "forward-looking statements" as defined by the SEC. All statements, ~~within the meaning~~other than statements of ~~Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The statements~~historical fact, contained in this ~~report~~Quarterly Report that ~~are not historical facts are forward-looking statements that represent management’s beliefs and assumptions based on currently available information. Forward-looking statements~~ include information concerning our possible or assumed future results of operations, business strategies, need for financing, competitive position and potential growth ~~opportunities. Our forward-looking statements~~opportunities represent management's beliefs and assumptions based on currently available information and they do not consider the effects of future legislation or regulations. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words “believes,” “intends,” “may,” “should,” “anticipates,” “expects,” “could,” “plans,” “estimates,” “projects,” “targets” or comparable terminology or by discussions of strategy or trends. ~~Although we believe that the expectations reflected in such forward-looking statements are reasonable, we cannot give any assurances that these expectations will prove to be correct.~~ Such statements by their nature involve risks and uncertainties that could significantly affect expected results, and actual future results could differ materially from those described in such forward-looking statements.

Among the factors that could cause actual future results to differ materially are the risks and uncertainties discussed under “Item 1A. Risk Factors” in this ~~report,~~Quarterly Report and in our Annual Report on Form 10-K for the year ended ~~December 31, 2020 and our quarterly report on Form 10-Q for the quarter ended March 31,~~September 30, 2021. ~~While it is not possible to identify all factors, we~~We continue to face many risks and uncertainties including, but not limited to:

•~~fluctuations in the price we receive for our oil, gas, and NGL production, including local market price differentials;~~

•the ~~impact~~volatility of oil, natural gas and NGL prices;

•the scope, duration, and reoccurrence of any epidemics or pandemics (including, specifically, the coronavirus disease 2019 (“COVID-19”) pandemic and any related variants), including reactive or proactive measures taken by governments, regulatory agencies and businesses related to the pandemic, and the effects of COVID-19 ~~pandemic, including reduced~~on the oil and natural gas industry, pricing and demand for oil and natural gas ~~economic slowdown,~~and supply chain logistics;

•regional supply and demand factors, any delays, curtailment delays or interruptions of production, and any governmental ~~and societal actions taken in response to the COVID-19 pandemic, and stay-at-home orders~~order, rule or ~~illness~~regulation that may ~~cause interruptions to our operations;~~impose production limits;

•cost and availability of gathering, pipeline, refining, transportation and other midstream and downstream ~~activities and our ability to sell oil, gas, and NGLs, which may be negatively impacted by the COVID-19 pandemic;~~activities;

•severe weather and other risks ~~and~~that lead to a lack of any available markets;

•~~risks related to our recently completed Merger, including challenges associated with integrating operations and diversion of management’s attention to Merger-related issues;~~

•our ability to successfully complete mergers, acquisitions and divestitures;

•the risk that the Company's EOR project may not perform as expected or produce the anticipated benefits;

•risks relating to our operations, including development drilling and testing results and performance of acquired properties and newly drilled wells;

•any reduction in our borrowing base on our revolving credit facility from time to time and our ability to repay any excess borrowings as a result of such reduction;

•the impact of our derivative ~~instruments~~strategy and ~~hedging activities;~~the results of future settlement;

•~~continuing compliance~~our ability to comply with the financial covenants contained in our revolving credit ~~agreement;~~facility;

•changes in general economic, business or industry conditions, including changes in inflation rates, interest rates, and foreign currency exchange rates;

•conditions in the capital, financial and credit markets and our ability to obtain capital needed for development and exploration operations on favorable terms or at all;

•the loss of certain ~~federal income~~ tax deductions;

•risks associated with executing our business strategy, including any changes in our strategy;

•inability to prove up undeveloped acreage and ~~maintaining~~maintain production on leases;

•risks associated with concentration of operations in one major geographic area;

•~~deviations from our forecasts and budgets, including our 2021 capital expenditure budget;~~

•~~the ability of the members of the Organization of Petroleum Exporting Countries (“OPEC”) and other oil exporting nations to agree to, adhere to and maintain oil price and production controls;~~

•legislative or regulatory changes, including initiatives related to hydraulic fracturing, emissions and disposal of produced water, which may be negatively impacted by ~~the recent change in Presidential administration~~regulation or ~~legislatures;~~legislation;

•the ability to receive drilling and other permits or approvals and rights-of-way in a timely manner (or at all), which may be ~~negatively impacted~~restricted by governmental regulation and legislation;

•restrictions on the use of water, including limits on the use of produced water and a moratorium on new produced water well permits recently imposed by the impact of COVID-19 restrictions on regulatory employees who process and approve permits, other approvals and rights-of-way and which may be restricted by new Presidential and Secretarial orders and regulation and legislation;RRC in an effort to control induced seismicity in the Permian Basin;

•risks related to litigation;

•actions taken by the members of OPEC and Russia affecting the production and pricing of oil, as well as other domestic and global political, economic, or diplomatic developments; and

•cybersecurity threats, technology system failures and data security issues.

Table of Contents

All forward-looking statements speak only as of the date of this Quarterly Report. You should not place undue reliance on these forward-looking statements. These forward-looking statements are subject to a number of risks, uncertainties and assumptions. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. Although we believe that our plans, intentions and expectations reflected in or suggested by the forward-looking statements we make in this Quarterly Report are reasonable, we can give no assurance that these plans, intentions or expectations will be achieved or occur, and actual results could differ materially and adversely from those anticipated or implied by the forward-looking statements.

Reserve engineering is a process of estimating underground accumulations of oil and natural gas that cannot be measured in an exact way. The accuracy of any reserve estimate depends on the quality of available data, the interpretation of such data and the price and cost assumptions made by our reserve engineers. In addition, the results of drilling, testing and production activities may justify revisions of estimates that were made previously. If significant, such revisions would change the schedule of any further production and development drilling. Accordingly, reserve estimates may differ from the quantities of oil and natural gas that are ultimately recovered.

Table of Contents

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

RILEY EXPLORATION PERMIAN, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, 2021 September 30, 2020
(In thousands, except share amounts)
Assets
Current Assets:
Cash and cash equivalents $ 6,894 $ 1,660
Accounts receivable 15,673 10,128
Accounts receivable – related parties 1,995 55
Prepaid expenses and other current assets 2,460 1,752
Current derivative assets 226 18,819
Total Current Assets 27,248 32,414
Oil and natural gas properties, net (successful efforts) 328,882 310,726
Other property and equipment, net 2,761 1,801
Non-current derivative assets 107 3,102
Other non-current assets, net 3,828 2,949
Total Assets $ 362,826 $ 350,992
Liabilities, Series A Preferred Units, and Members'/Shareholders' Equity
Current Liabilities:
Accounts payable $ 8,735 $ 4,739
Income taxes payable 140 0
Accrued liabilities 17,148 8,746
Revenue payable 7,438 4,432
Advances from joint interest owners 266 254
Current derivative liabilities 36,251 0
Other current liabilities 544 392
Total Current Liabilities 70,522 18,563
Non-current derivative liabilities 11,236 0
Asset retirement obligations 2,337 2,268
Revolving credit facility 97,500 101,000
Deferred tax liabilities 16,570 1,834
Other non-current liabilities 33 418
Total Liabilities 198,198 124,083
Series A Preferred Units 0 60,292
Commitments and Contingencies (Note 15) 0 0
Members' Equity 0 166,617
Shareholders' Equity:
Preferred stock, $0.0001 par value, 25,000,000 shares authorized; 0 shares issued and outstanding 0 0
Common stock, $0.001 par value, 240,000,000 shares authorized; 18,021,521 and 0 shares issued and outstanding at June 30, 2021 and September 30, 2020, respectively 18 0
Additional paid-in capital 223,918 0
Accumulated deficit (59,308) 0
Total Shareholders' Equity 164,628 0
Total Liabilities, Series A Preferred Units, and Members'/Shareholders' Equity $ 362,826 $ 350,992

~~The accompanying notes are an integral part of these condensed consolidated financial statements.~~

=
RILEY EXPLORATION PERMIAN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended June 30, Nine Months Ended June 30,
2021 2020 2021 2020
(In thousands, except per share/unit amounts)
Revenues:
Oil and natural gas sales, net $ 41,549 $ 4,969 $ 100,622 $ 57,824
Contract services – related parties 600 1,050 1,800 3,150
Total Revenues 42,149 6,019 102,422 60,974
Costs and Expenses:
Lease operating expenses 5,754 3,760 17,323 15,517
Production taxes 2,029 293 5,027 2,808
Exploration costs 2,785 6,757 8,682 9,231
Depletion, depreciation, amortization and accretion 7,082 5,028 19,323 16,020
General and administrative:
Administrative costs 4,030 1,936 9,176 8,669
Unit-based compensation expense 0 291 689 650
Share-based compensation expense 779 0 5,353 0
Cost of contract services - related parties 91 97 330 403
Transaction costs 321 15 3,534 42
Total Costs and Expenses 22,871 18,177 69,437 53,340
Income (Loss) From Operations 19,278 (12,158) 32,985 7,634
Other Income (Expense):
Interest expense (1,171) (1,302) (3,571) (4,086)
Gain (loss) on derivatives (35,396) (14,205) (74,208) 36,999
Total Other Income (Expense) (36,567) (15,507) (77,779) 32,913
Net Income (Loss) From Continuing Operations Before Income Taxes (17,289) (27,665) (44,794) 40,547
Income tax expense (3,245) (319) (16,953) (319)
Net Income (Loss) From Continuing Operations (20,534) (27,984) (61,747) 40,228


RILEY EXPLORATION PERMIAN, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
	(Unaudited)
	June 30, 2022		September 30, 2021
	(In thousands, except share amounts)
Assets
Current Assets:
Cash and cash equivalents	$	16,800	$	17,067
Accounts receivable	32,821		17,473
Accounts receivable - related parties	—		456
Prepaid expenses and other current assets	3,029		1,730
Current derivative assets	1,134		—
Total current assets	53,784		36,726
Oil and natural gas properties, net (successful efforts)	402,526		345,797
Other property and equipment, net	4,407		3,183
Non-current derivative assets	300		106
Other non-current assets, net	4,814		2,419
Total Assets	$	465,831	$	388,231
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable	$	20,244	$	12,234
Accounts payable - related parties	457		800
Accrued liabilities	18,616		18,555
Revenue payable	17,164		9,008


Current derivative liabilities	50,298		42,144
Other current liabilities	2,584		874
Total Current Liabilities	109,363		83,615
Non-current derivative liabilities	9,122		8,932
Asset retirement obligations	2,211		2,306
Revolving credit facility	61,000		60,000
Deferred tax liabilities	24,702		11,628
Other non-current liabilities	1,223		60
Total Liabilities	207,621		166,541
Commitments and Contingencies (Note 14)	0		0


Shareholders' Equity:
Preferred stock, $0.0001 par value, 25,000,000 shares authorized; 0 shares issued and outstanding	—		—
Common stock, $0.001 par value, 240,000,000 shares authorized; 19,865,116 and 19,672,050 shares issued and outstanding at June 30, 2022 and September 30, 2021, respectively	20		20
Additional paid-in capital	273,035		270,837
Accumulated deficit	(14,845)		(49,167)
Total Shareholders' Equity	258,210		221,690
Total Liabilities and Shareholders' Equity	$	465,831	$	388,231

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

RILEY EXPLORATION PERMIAN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - (Continued)
(Unaudited)
Three Months Ended June 30, Nine Months Ended June 30,
2021 2020 2021 2020
(In thousands, except per share/unit amounts)
Discontinued Operations:
Loss from discontinued operations (882) 0 (19,513) 0
Income tax expense on discontinued operations (85) 0 (60) 0
Loss on discontinued operations (967) 0 (19,573) 0
Net Income (Loss) (21,501) (27,984) (81,320) 40,228
Dividends on preferred units 0 (890) (1,491) (2,631)
Net Income (Loss) Attributable to Common Shareholders/Unitholders $ (21,501) $ (28,874) $ (82,811) $ 37,597
Net Income (Loss) per Share/Unit from Continuing
Operations:
Basic $ (1.15) $ (2.32) $ (4.25) $ 3.02
Diluted $ (1.15) $ (2.32) $ (4.25) $ 2.43
Net Loss per Share/Unit from Discontinued
Operations:
Basic $ (0.05) $ 0 $ (1.32) $ 0
Diluted $ (0.05) $ 0 $ (1.32) $ 0
Net Income (Loss) per Share/Unit:
Basic $ (1.20) $ (2.32) $ (5.57) $ 3.02
Diluted $ (1.20) $ (2.32) $ (5.57) $ 2.43
Weighted Average Common Share/Units Outstanding:
Basic 17,786 12,469 14,872 12,454
Diluted 17,786 12,469 14,872 16,571


RILEY EXPLORATION PERMIAN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
	Three Months Ended June 30,				Nine Months Ended June 30,
	2022		2021		2022		2021
	(In thousands, except per share/unit amounts)
Revenues:
Oil and natural gas sales, net	$	87,781	$	41,549	$	211,076	$	100,622
Contract services - related parties	600		600		1,800		1,800
Total Revenues	88,381		42,149		212,876		102,422
Costs and Expenses:
Lease operating expenses	8,062		5,766		22,311		16,289
Production and ad valorem taxes	5,526		2,017		12,033		6,061
Exploration costs	22		2,785		2,131		8,682
Depletion, depreciation, amortization and accretion	7,188		7,082		20,688		19,323
General and administrative:
Administrative costs	4,399		4,030		12,046		9,176
Unit-based compensation expense	—		—		—		689
Share-based compensation expense	553		779		2,521		5,353
Cost of contract services - related parties	89		91		324		330
Transaction costs	—		321		3,896		3,534
Total Costs and Expenses	25,839		22,871		75,950		69,437
Income From Operations	62,542		19,278		136,926		32,985
Other Income (Expense):
Interest expense, net	(697)		(1,171)		(2,271)		(3,571)
Loss on derivatives	(12,363)		(35,396)		(67,188)		(74,208)
Total Other Expense	(13,060)		(36,567)		(69,459)		(77,779)
Net Income (Loss) From Continuing Operations Before Income Taxes	49,482		(17,289)		67,467		(44,794)
Income tax expense	(10,927)		(3,245)		(14,682)		(16,953)
Net Income (Loss) From Continuing Operations	38,555		(20,534)		52,785		(61,747)

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents


RILEY EXPLORATION PERMIAN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - (Continued)
(Unaudited)
	Three Months Ended June 30,				Nine Months Ended June 30,
	2022		2021		2022		2021
	(In thousands, except per share/unit amounts)
Discontinued Operations:
Loss from discontinued operations	—		(882)		—		(19,513)
Income tax expense on discontinued operations	—		(85)		—		(60)
Loss on Discontinued Operations	—		(967)		—		(19,573)
Net Income (Loss)	38,555		(21,501)		52,785		(81,320)
Dividends on preferred units	—		—		—		(1,491)
Net Income (Loss) Attributable to Common Shareholders/Unitholders	$	38,555	$	(21,501)	$	52,785	$	(82,811)
Net Income (Loss) per Share/Unit from Continuing Operations:
Basic	$	1.97	$	(1.15)	$	2.71	$	(4.25)
Diluted	$	1.96	$	(1.15)	$	2.69	$	(4.25)
Net Loss per Share/Unit from Discontinued Operations:
Basic	$	—	$	(0.05)	$	—	$	(1.32)
Diluted	$	—	$	(0.05)	$	—	$	(1.32)
Net Income (Loss) per Share/Unit:
Basic	$	1.97	$	(1.20)	$	2.71	$	(5.57)
Diluted	$	1.96	$	(1.20)	$	2.69	$	(5.57)
Weighted Average Common Shares/Units Outstanding:
Basic	19,542		17,786		19,504		14,872
Diluted	19,660		17,786		19,620		14,872

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

RILEY EXPLORATION PERMIAN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS'/SHAREHOLDERS' EQUITY
(Unaudited)
Nine Months Ended June 30, 2021
Members' Equity Shareholders' Equity
Common Stock
Units Outstanding Amount Shares Amount Additional Paid-in Capital Accumulated Deficit Total Shareholders' Equity
(In thousands)
Balance, September 30, 2020 1,555 $ 166,617 0 $ 0 $ 0 $ 0 $ 0
Issuance of common units under long-term incentive plan 13 — — — — — —
Dividends on preferred units — (917) — — — — 0
Dividends on common units — (3,801) — — — — 0
Unit-based compensation expense — 413 — — — — 0
Net loss — (7,941) — — — — 0
Balance, December 31, 2020 1,568 $ 154,371 0 $ 0 $ 0 $ 0 $ 0
Purchase of common units under long-term incentive plan (3) (191) — — — — 0
Dividends on preferred units — (574) — — — — 0
Preferred units converted to common units 512 61,196 — — — — 0
Dividends on common units — (3,770) — — — — 0
Unit-based compensation expense — 276 — — — — 0
Net loss from January 1, 2021 through February 26, 2021 — (19,117) — — — — 0
Restricted common shares issued in exchange for common units issued under long-term incentive plan (24) — 198 — — — —
Common shares issued in exchange for common units (effected for 1-for-12 reverse stock split) (2,053) (192,191) 16,733 17 192,174 — 192,191
Common shares issued for business combination — — 891 1 26,391 — 26,392
Restricted common shares issued — — 3 — — — —
Share-based compensation expense — — — — 409 — 409
Dividends declared ($0.28 per share) — — — — — (4,991) (4,991)
Net loss from February 27, 2021 through March 31, 2021 — — — — — (32,761) (32,761)
Balance, March 31, 2021 0 $ 0 17,825 $ 18 $ 218,974 $ (37,752) $ 181,240
Dividends paid ($0.28 per share) — — — — — (55) (55)
Share-based compensation expense — — — — 779 — 779
Issuance of common shares under long-term incentive plan — — 197 — 4,165 — 4,165
Net loss — — — — — (21,501) (21,501)
Balance, June 30, 2021 0 $ 0 18,022 $ 18 $ 223,918 $ (59,308) $ 164,628

~~The accompanying notes are an integral part of these condensed consolidated financial statements.~~

RILEY EXPLORATION PERMIAN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS'/SHAREHOLDERS' EQUITY - (Continued)
(Unaudited)
Nine Months Ended June 30, 2020
Members' Equity Shareholders' Equity
Common Stock
Units Outstanding Amount Shares Amount Additional Paid-in Capital Accumulated Deficit Total Shareholders' Equity
(In thousands)
Balance, September 30, 2019 1,527 $ 149,383 — $ — $ — $ — $ —
Issuance of common units under long-term incentive plan 15 — — — — — —
Purchase of common units under long-term incentive plan (2) (194) — — — — —
Dividends on preferred units — (864) — — — — —
Dividends on common units — (4,997) — — — — —
Unit-based compensation expense — 153 — — — — —
Net loss — (6,841) — — — — —
Balance, December 31, 2019 1,540 $ 136,640 — $ — $ — $ — $ —
Issuance of common units under long-term incentive plan 16 — — — — — —
Purchase of common units under long-term incentive plan (1) (124) — — — — —
Dividends on preferred units — (877) — — — — —
Dividends on common units — (4,988) — — — — —
Unit-based compensation expense — 206 — — — — —
Net income — 75,053 — — — — —
Balance, March 31, 2020 1,555 $ 205,910 — $ — $ — $ — $ —
Purchase of common units under long-term incentive plan 0 (4) — — — — —
Dividends on preferred units — (890) — — — — —
Dividends on common units — (2,515) — — — — —
Unit-based compensation expense — 291 — — — — —
Net loss — (27,984) — — — — —
Balance, June 30, 2020 1,555 $ 174,808 — $ — $ — $ — $ —


RILEY EXPLORATION PERMIAN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS'/SHAREHOLDERS' EQUITY
(Unaudited)
(In Thousands)
	Nine Months Ended June 30, 2022
	Members' Equity			Shareholders' Equity
				Common Stock
	Units Outstanding	Amount		Shares	Amount		Additional Paid-in Capital		Accumulated Deficit		Total Shareholders' Equity
Balance, September 30, 2021	—	$	—	19,672	$	20	$	270,837	$	(49,167)	$	221,690
Share-based compensation expense	—	—		—	—		919		—		919
Repurchased shares for tax withholding	—	—		(10)	—		(19)		—		(19)
Issuance of common shares under long-term incentive plan	—	—		175	—		—		—		—
Dividends declared	—	—		—	—		—		(6,150)		(6,150)
Net income	—	—		—	—		—		21,398		21,398
Balance, December 31, 2021	—	$	—	19,837	$	20	$	271,737	$	(33,919)	$	237,838
Share-based compensation expense	—	—		—	—		1,061		—		1,061
Repurchased shares for tax withholding	—	—		(13)	—		(339)		—		(339)
Issuance of common shares under long-term incentive plan, net	—	—		30	—		—		—		—
Dividends declared	—	—		—	—		—		(6,154)		(6,154)
Net loss	—	—		—	—		—		(7,168)		(7,168)
Balance, March 31, 2022	—	$	—	19,854	$	20	$	272,459	$	(47,241)	$	225,238
Share-based compensation expense	—	—		—	—		828		—		828
Repurchased shares for tax withholding	—	—		(9)	—		(252)		—		(252)
Issuance of common shares under long-term incentive plan	—	—		20	—		—		—		—
Dividends declared	—	—		—	—		—		(6,159)		(6,159)

Net income	—	—		—	—		—		38,555		38,555
Balance, June 30, 2022	—	$	—	19,865	$	20	$	273,035	$	(14,845)	$	258,210

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

RILEY EXPLORATION PERMIAN, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Nine Months Ended June 30,
2021 2020
(In thousands)
Cash Flows from Operating Activities:
Net income (loss) $ (81,320) $ 40,228
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Loss from discontinued operations 19,573 0
Oil and gas lease expirations 8,615 7,288
Depletion, depreciation, amortization and accretion 19,323 16,020
(Gain) Loss on derivatives 74,208 (36,999)
Settlements on derivative contracts (5,133) 20,161
Amortization of deferred financing costs 483 484
Unit-based compensation expense 689 650
Share-based compensation expense 5,353 0
Deferred income tax expense 17,185 319
Changes in operating assets and liabilities:
Accounts receivable (5,545) 5,643
Accounts receivable – related parties (1,940) 159
Prepaid expenses and other current assets (534) (424)
Other non-current assets 0 82
Other liabilities (6) 0
Accounts payable and accrued liabilities 5,042 (2,784)
Income taxes payable (170) 0
Revenue payable 3,006 (1,199)
Advances from joint interest owners 12 (119)
Net Cash Provided By Operating Activities - Continuing Operations 58,841 49,509
Cash Flows From Investing Activities:
Additions to oil and natural gas properties (38,882) (41,228)
Acquisition of oil and natural gas properties (171) (4,806)
Additions to other property and equipment (1,172) (168)
Tengasco acquired cash 859 0
Net Cash Used In Investing Activities - Continuing Operations (39,366) (46,202)
Cash Flows From Financing Activities:
Deferred financing costs (135) (293)
Proceeds from revolving credit facility 5,500 14,000
Repayment under revolving credit facility (9,000) (7,000)
Payment of common share/unit dividends (12,834) (12,500)
Payment of preferred unit dividends (1,491) 0
Purchase of common units under long-term incentive plan (191) (322)
Net Cash Used In Financing Activities - Continuing Operations (18,151) (6,115)
Net Increase (Decrease) in Cash and Cash Equivalents from Continuing Operations 1,324 (2,808)


RILEY EXPLORATION PERMIAN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS'/SHAREHOLDERS' EQUITY- (Continued)
(Unaudited)
(In Thousands)
	Nine Months Ended June 30, 2021
	Members' Equity			Shareholders' Equity
				Common Stock
	Units Outstanding	Amount		Shares	Amount		Additional Paid-in Capital		Accumulated Deficit		Total Shareholders' Equity
Balance, September 30, 2020	1,555	$	166,617	—	$	—	$	—	$	—	$	—
Issuance of common units under long-term incentive plan	13	—		—	—		—		—		—
Dividends on preferred units	—	(917)		—	—		—		—		—
Dividends on common units	—	(3,801)		—	—		—		—		—
Unit-based compensation expense	—	413		—	—		—		—		—
Net loss	—	(7,941)		—	—		—		—		—
Balance, December 31, 2020	1,568	$	154,371	—	$	—	$	—	$	—	$	—
Purchase of common units under long-term incentive plan	(3)	(191)		—	—		—		—		—
Dividends on preferred units	—	(574)		—	—		—		—		—
Preferred units converted to common units	512	61,196		—	—		—		—		—
Dividends on common units	—	(3,770)		—	—		—		—		—
Unit-based compensation expense	—	276		—	—		—		—		—
Net loss from January 1, 2021 through February 26, 2021	—	(19,117)		—	—		—		—		—
Restricted common shares issued in exchange for common units issued under long-term incentive plan	(24)	—		198	—		—		—		—
Common shares issued in exchange for common units (effected for 1-for-12 reverse stock split)	(2,053)	(192,191)		16,733	17		192,174		—		192,191
Common shares issued for business combination	—	—		891	1		26,391		—		26,392
Restricted common shares issued	—	—		3	—		—		—		—
Share-based compensation expense	—	—		—	—		409		—		409
Dividends declared	—	—		—	—		—		(4,991)		(4,991)
Net loss from February 27, 2021 through March 31, 2021	—	—		—	—		—		(32,761)		(32,761)
Balance, March 31, 2021	—	$	—	17,825	$	18	$	218,974	$	(37,752)	$	181,240
Dividends paid	—	—		—	—		—		(55)		(55)
Share-based compensation expense	—	—		—	—		779		—		779
Issuance of common shares under long-term incentive plan	—	—		197	—		4,165		—		4,165
Net loss	—	—		—	—		—		(21,501)		(21,501)
Balance, June 30, 2021	—	$	—	18,022	$	18	$	223,918	$	(59,308)	$	164,628

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

RILEY EXPLORATION PERMIAN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - (Continued)
(Unaudited)
Nine Months Ended June 30,
2021 2020
(In thousands)
Cash Flows from Discontinued Operations:
Operating activities 18 0
Investing activities 3,892 0
Net Increase in Cash and Cash Equivalents from Discontinued Operations 3,910 0
Net Increase (Decrease) in Cash and Cash Equivalents 5,234 (2,808)
Cash and Cash Equivalents, Beginning of Period 1,660 3,726
Cash and Cash Equivalents, End of Period $ 6,894 $ 918
Supplemental Disclosure of Cash Flow Information
Cash Paid For:
Interest $ 2,864 $ 3,129
Non-cash Investing and Financing Activities - Continuing Operations:
Changes in capital expenditures in accounts payable and accrued liabilities 7,909 (3,838)
Common share/unit dividends incurred but not paid (235) 0
Asset retirement obligations 98 924
Preferred unit dividends paid in kind 904 2,592
Preferred unit dividends 0 2,631
Common stock issued in exchange for common units 192,191 0
Assets acquired and liabilities assumed in business combination 3,497 0
Common stock issued for business combination 26,392 0
Preferred units converted to common units 61,196 0
Non-cash Investing - Discontinued Operations:
Goodwill incurred in business combination 19,057 0
Assets acquired and liabilities assumed in business combination 2,978 0


RILEY EXPLORATION PERMIAN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
	Nine Months Ended June 30,
	2022		2021
	(In thousands)
Cash Flows from Operating Activities:
Net income (loss)	$	52,785	$	(81,320)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Loss from discontinued operations	—		19,573
Oil and gas lease expirations	2,053		8,615
Depletion, depreciation, amortization and accretion	20,688		19,323

Loss on derivatives	67,188		74,208
Settlements on derivative contracts	(60,172)		(5,133)
Amortization of deferred financing costs	655		483

Unit-based compensation expense	—		689
Share-based compensation expense	2,808		5,353
Deferred income tax expense	13,074		17,185
Changes in operating assets and liabilities:
Accounts receivable	(15,348)		(5,545)
Accounts receivable – related parties	456		(1,940)
Prepaid expenses and other current assets	(1,311)		(534)

Accounts payable and accrued liabilities	5,101		5,042
Accounts payable - related parties	(343)		—

Revenue payable	8,156		3,006


Other current liabilities	1,197		(164)
Net Cash Provided by Operating Activities - Continuing Operations	96,987		58,841
Cash Flows from Investing Activities:
Additions to oil and natural gas properties	(76,058)		(38,882)
Acquisitions of oil and natural gas properties	—		(171)
Additions to other property and equipment	(1,137)		(1,172)
Tengasco acquired cash	—		859
Net Cash Used in Investing Activities - Continuing Operations	(77,195)		(39,366)
Cash Flows from Financing Activities:
Deferred financing costs	(1,989)		(135)
Proceeds from revolving credit facility	9,000		5,500
Repayment under revolving credit facility	(8,000)		(9,000)
Payment of common share/unit dividends	(18,254)		(12,834)


Payment of preferred unit dividends	—		(1,491)
Common stock repurchased for tax withholding	(816)		—
Purchase of common units under long-term incentive plan	—		(191)
Net Cash Used in Financing Activities - Continuing Operations	(20,059)		(18,151)
Net Increase (Decrease) in Cash and Cash Equivalents from Continuing Operations	(267)		1,324

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents


RILEY EXPLORATION PERMIAN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - (Continued)
(Unaudited)
	Nine Months Ended June 30,
	2022		2021
	(In thousands)
Cash Flows from Discontinued Operations:
Operating activities	—		18
Investing activities	—		3,892
Net Increase in Cash and Cash Equivalents from Discontinued Operations	—		3,910
Net Increase (Decrease) in Cash and Cash Equivalents	(267)		5,234
Cash and Cash Equivalents, Beginning of Period	17,067		1,660
Cash and Cash Equivalents, End of Period	$	16,800	$	6,894







Supplemental Disclosure of Cash Flow Information
Cash Paid For:
Interest, net of capitalized interest	$	1,288	$	2,864
Non-cash Investing and Financing Activities - Continuing Operations:
Changes in capital expenditures in accounts payable and accrued liabilities	$	2,153	$	7,909



Right-of-use assets obtained in exchange for operating lease liability	$	1,624	$	—
Preferred unit dividends paid in kind	$	—	$	904


Common stock issued in exchange for common units	$	—	$	192,191
Assets acquired and liabilities assumed in business combination	$	—	$	3,497
Common stock issued for business combination	$	—	$	26,392
Preferred units converted to common units	$	—	$	61,196
Non-cash Investing - Discontinued Operations:
Goodwill incurred in business combination	$	—	$	19,057
Assets acquired and liabilities assumed in business combination	$	—	$	2,978

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(1)Nature of Business

Organization

Riley ~~Exploration~~ Permian ~~Inc. ("Riley Permian", "REPX", "the Company", "Registrant", "we", "our", or "us")~~ is a growth-oriented, independent oil and natural gas company focused on ~~growing our conventional reserves, production and cash flow per share through~~ the acquisition, exploration, development and production of oil, natural gas and ~~natural gas liquids ("NGLs")~~NGLs in ~~the Permian Basin.~~Texas and New Mexico. Our activities ~~are~~ primarily ~~focused on~~include the horizontal development of the San Andres ~~Formation,~~formation, a shelf margin deposit on the Northwest Shelf. The Company was formed to focus on opportunities (i) with favorable reservoir and geological characteristics primarily for oil development, (ii) that offer large contiguous acreage positions with significant untapped potential in termsShelf of ~~ultimate recoverable reserves and (iii) with a high degree of operational control.~~the Permian Basin. Our acreage is primarily located on large, contiguous blocks in Yoakum County, ~~Texas with additional acreage located in Lea and Roosevelt Counties, New Mexico.~~Texas.

On February 26, 2021 (the “Closing Date”), Riley ~~Exploration~~ Permian ~~Inc., a Delaware corporation~~ (f/k/a Tengasco, Inc. (“Tengasco”)), consummated ~~the previously announced Merger pursuant to that certain Agreement and Plan of Merger (“Merger Agreement”),~~a merger, dated as of October 21, 2020, by and among Tengasco, Antman Sub, LLC, a newly formed Delaware limited liability company and wholly owned subsidiary of Tengasco (“Merger Sub”), and Riley Exploration – Permian, LLC (“REP LLC”)~~, as amended by Amendment No. 1 to Agreement and Plan of Merger, dated as of January 20, 2021, by and among Tengasco, Merger Sub and REP LLC. Pursuant to the terms of the Merger Agreement,~~. Merger Sub merged with and into REP LLC, with REP LLC ~~surviving~~ as the surviving company and as a wholly-owned subsidiary of Tengasco (collectively, with the other transactions described in the Merger Agreement, the “Merger”). On the Closing Date, the Registrant changed its name from Tengasco, Inc. to Riley Exploration Permian, Inc. Our organizational structure includes wholly-owned consolidated subsidiaries through which our operations are conducted. In addition, REP LLC elected 2 of the Board seats of REPX, which are our Chief Executive Officer and a representative of Yorktown Energy Partners ("Yorktown"), along with also appointing 2 independent directors to the board. TGC elected their Chief Executive Officer, who is now our Chief Financial Officer, as the final board seat.

~~Current Commodity Environment~~

During 2020, a novel strain of coronavirus, SARS-CoV-2, causing a disease referred to as COVID-19, spread quickly across the globe. Federal, state and local governments mobilized to implement containment mechanisms and minimize impacts to their populations and economies. Various containment measures, which included the quarantining of cities, regions and countries, resulted in a severe drop in general economic activity with a decrease in energy demand.

~~Currently, oil and natural gas operations are considered essential in the State of Texas and New Mexico, and the Company has not had any significant disruptions in operations.~~

This outbreak and the related responses of governmental authorities and others to limit the spread of the virus significantly reduced global economic activity, resulting in a significant decline in the demand for oil and other commodities. These factors caused a swift and material deterioration in commodity prices for a majority of 2020, which significantly impacted our revenues for the three and nine months ended June 30, 2020. However, near the end of 2020 and the beginning of 2021, oil prices steadily increased but are expected to continue to be volatile as these events evolve. The Company cannot estimate the full length or gravity of the future impacts at this time and if there is another significant decline in oil price, it could have a material adverse effect on the Company’s results of operations, financial position, liquidity and the value of oil and natural gas reserves.

~~CARES Act and Consolidated Appropriations Act~~

On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief and Economic Security Act ("CARES Act"), and on December 27, 2020, President Trump signed into law the Consolidated Appropriations Act. These Acts are meant to provide fast and direct economic assistance for American workers, families, and small businesses, and preserve jobs for American industries. The Company evaluated the outlook of its future operations, current financial position and liquidity and determined not to take the relief provided by the CARES Act and the Consolidated Appropriations Act.

(2)Basis of Presentation

These unaudited condensed consolidated financial statements as of June 30, ~~2021~~2022 and for the three and nine months ended June 30, ~~2021~~2022 and ~~2020~~2021 include the accounts of Riley Permian and its ~~wholly-owned~~wholly owned subsidiaries REP LLC, Riley Permian Operating Company, LLC ("RPOC"), ~~Riley Employee Member, LLC ("REM"),~~ Tengasco Pipeline Corporation, ~~("TPC"),~~

~~RILEY EXPLORATION PERMIAN, INC.~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

~~(Unaudited)~~

Tennessee Land & Mineral Corporation, ~~("TLMC"),~~ and Manufactured Methane Corporation, ~~("MMC").~~and have been prepared in accordance with U.S. GAAP. All intercompany balances and transactions have been eliminated upon consolidation. The Merger was accounted for as a reverse ~~merger. The~~merger and, as such, the historical operations of REP LLC are deemed to be those of the Company. Thus, the condensed consolidated financial statements included in this report reflect (i) the historical operating results of REP LLC prior to the Merger; (ii) the consolidated results of the Company following the Merger; (iii) the assets and liabilities of REP LLC at their historical cost; and (iv) the Company’s equity and earnings per share for all periods presented. ~~As of June 22, 2021, REM and REP LLC consummated an Agreement and Plan of Merger whereby REM was merged into REP LLC with REP LLC as the surviving entity.~~

Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with ~~accounting principles generally accepted in the United States ("~~U.S. ~~GAAP")~~GAAP have been condensed or omitted pursuant to the rules and ~~regulation~~regulations of the ~~Securities and Exchange Commission.~~SEC. These condensed consolidated financial statements should be read in conjunction with ~~REP LLC's audited consolidated financial statements and related notes~~the Company's most recent Annual Report on Form 10-K for the year ended September 30, ~~2020, included in~~2021.

Certain prior period amounts have been reclassified to conform to the ~~Company's~~ current ~~report~~period financial statement presentation. These reclassifications had an immaterial effect on ~~Form 8-K/A filed on April 22, 2021.~~the previously reported balance sheets and results of operations or cash flows.

These condensed consolidated financial statements have not been audited by an independent registered public accounting firm. In the opinion of the Company’s management, the accompanying unaudited financial statements contain all adjustments necessary for fair presentation of the results of operations for the periods presented, which adjustments were of a normal recurring nature, except as disclosed herein. The results of operations for the three and nine months ended June 30, ~~2021,~~2022 are not necessarily indicative of the results to be expected for the full fiscal year ending September 30, ~~2021,~~2022, for various reasons, including as a result of the impact of fluctuations in prices received for oil and natural gas, natural production declines, the uncertainty of exploration and development drilling results, fluctuations in the fair value of derivative instruments, the future impacts of COVID-19, the current and future impacts of the military conflict between Russia and Ukraine, the volatile inflationary environment in U.S. markets and other factors.

(3)Summary of Significant Accounting Policies

Significant Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying ~~condensed~~ notes.

Table of Contents

RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

These estimates and assumptions may also affect disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

The Company evaluates these estimates on an ongoing basis, using historical experience, consultation with experts and other methods the Company considers reasonable in the particular circumstances. Actual results may differ significantly from the Company’s estimates. Any effects on the Company’s business, financial position or results of operations resulting from revisions to these estimates are recorded in the period in which the facts that give rise to the revision become known. Significant items subject to such estimates and assumptions include, but are not limited to, estimates of proved oil and natural gas reserves and related present value estimates of future net cash flows therefrom, the carrying value of oil and natural gas properties, accounts receivable, accrued capital expenditures and ~~accrued~~ operating expenses, ARO, the fair value determination of acquired assets and assumed liabilities, certain tax accruals and the fair value of derivatives.

Accounts Receivable

~~The Company had 0 allowance for doubtful accounts at June 30, 2021 and September 30, 2020.~~

Accounts receivable is summarized below:


							June 30, 2022		September 30, 2021
		June 30, 2021		September 30, 2020

		(In thousands)					(In thousands)
Oil, natural gas and NGL sales	Oil, natural gas and NGL sales	$	15,105	$	6,919	Oil, natural gas and NGL sales	$	31,783	$	17,008
Joint interest accounts receivable	Joint interest accounts receivable	494		1,022		Joint interest accounts receivable	470		413
Realized derivative receivable		33		2,187

Other accounts receivable	Other accounts receivable	41		0		Other accounts receivable	568		52
Total accounts receivable	Total accounts receivable	$	15,673	$	10,128	Total accounts receivable	$	32,821	$	17,473

The Company had no allowance for credit losses at June 30, 2022 and September 30, 2021.

Other Non-Current Assets, Net

Other non-current assets consisted of the following:


	June 30, 2022		September 30, 2021


	(In thousands)
Deferred financing costs, net	$	2,687	$	1,353
Prepayments to outside operators	450		707
Right of use assets	1,614		309
Other deposits	63		50

Total other non-current assets, net	$	4,814	$	2,419

The Company incurred $1.7 million in financing costs related to the amendment of its revolving credit facility in April 2022. The Company also extended certain existing leases and entered into a new lease during the three months ended June 30, 2022, which resulted in additions to the right of use assets.

Accrued Liabilities

Accrued liabilities consisted of the following:


	June 30, 2022		September 30, 2021


	(In thousands)
Accrued capital expenditures	$	9,079	$	9,718
Accrued lease operating expenses	3,207		2,428

Accrued general and administrative costs	3,262		3,575




Other accrued expenditures	3,068		2,834
Total accrued liabilities	$	18,616	$	18,555

1314

Table of Contents

RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

~~Business Combinations~~

In accordance with ASC 805 - Business Combinations (“ASC 805”), the Company accounts for its acquisitions that qualify as a business using the acquisition method under ASC 805. If the set of assets and activities is not considered a business, it is accounted for as an asset acquisition using a cost accumulation model. In the cost accumulation model, the cost of the acquisition, including certain transaction costs, is allocated to the assets acquired on the basis of relative fair values.

The Company includes the results of operations of acquired businesses beginning on the respective acquisition dates. In accordance with the acquisition method under ASC 805, the Company allocates the purchase price of an acquired business to its identifiable assets and liabilities based on the estimated fair values. This fair value measurement is based on unobservable (Level 3) inputs. The excess of the purchase price over the amount allocated to the assets and liabilities, if any, is recorded as goodwill. The excess value of the net identifiable assets and liabilities acquired over the purchase price of an acquired business is recorded as a bargain purchase gain.

~~Other Non-Current Assets~~

~~Other non-current assets consisted of the following:~~
June 30,
2021 September 30,
2020
(In thousands)
Debt issuance costs, net $ 1,519 $ 1,867
Prepayments to outside operators 1,845 284
Right of use assets 409 700
Other deposits 55 98
Total other non-current assets, net $ 3,828 $ 2,949

~~Accrued Liabilities~~

~~Accrued liabilities consisted of the following:~~
June 30,
2021 September 30,
2020
(In thousands)
Accrued capital expenditures $ 9,271 $ 2,964
Accrued lease operating expenses 2,815 1,617
Accrued ad valorem tax 352 680
Accrued general and administrative costs 2,619 2,125
Accrued interest expense 24 63
Accrued dividends on preferred units 0 903
Accrued dividends on common units and shares 38 95
Other accrued expenditures 2,029 299
Total accrued liabilities $ 17,148 $ 8,746

~~RILEY EXPLORATION PERMIAN, INC.~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

~~(Unaudited)~~

Asset Retirement Obligations

Components of the changes in ~~asset retirement obligations ("ARO")~~ARO for the nine months ended June 30, ~~2021~~2022 and year ended September 30, ~~2020~~2021 are shown below:


							June 30, 2022		September 30, 2021
		June 30, 2021		September 30, 2020
		(In thousands)					(In thousands)
ARO, beginning balance	ARO, beginning balance	$	2,326	$	1,203	ARO, beginning balance	$	2,434	$	2,326
Liabilities incurred	Liabilities incurred	98		68		Liabilities incurred	136		113
Liabilities acquired		0		1,161
Revision of estimated obligations		0		(45)

Liability settlements and disposals	Liability settlements and disposals	(20)		(131)		Liability settlements and disposals	(174)		(92)
Accretion	Accretion	65		70		Accretion	60		87
ARO, ending balance	ARO, ending balance	2,469		2,326		ARO, ending balance	2,456		2,434
Less: current ARO(1)	Less: current ARO(1)	(132)		(58)		Less: current ARO(1)	(245)		(128)
ARO, long-term	ARO, long-term	$	2,337	$	2,268	ARO, long-term	$	2,211	$	2,306

_____________________

(1)Current ARO is included within other current liabilities on the accompanying condensed consolidated balance sheets.

Goodwill

~~Goodwill represents~~At the ~~future economic benefit arising from other assets~~closing of the Merger, the Company determined it had 2 reporting units, and the entire goodwill balance was included in the reporting unit acquired in a business combination that are not individually identified or separately recognized. Goodwill is initially recognized as the excess of the purchase price of a business combination over the fair value of the net assets acquired and is tested for impairment annually in accordance with ASC 350 - Intangibles - Goodwill and Other ("ASC 350"), or more frequently if there is a change in events or circumstances that indicate the carrying value of the goodwill may not be recoverable.

~~The Company recognized goodwill of $19.1 million from the Merger. The Company assessed the oil and natural gas properties acquired through~~ the Merger ~~as a separate reporting unit~~ (the "Kansas Reporting Unit") and therefore allocated the full goodwill amount to the Kansas Reporting Unit. In March 2021, the Company entered into an agreement to divest the Kansas Reporting Unit which is made up primarily of the oil and natural gas properties acquired, which includes producing oil wells, shut-in wells, temporarily abandoned wells, and active disposal wells (the "Kansas Properties"). The Company did not fully integrate the Kansas Reporting Unit ~~into~~in the Company's operations ~~since~~as it was deemed to be held for sale upon acquisition. ~~See further discussion in Note 4 - Acquisitions and Divestitures.~~

In accordance with ASC 350, the impairment test should occur at the reporting unit level determined by the Company and an impairment should only exist if the Company has determined the carrying value of the goodwill no longer exceeds the implied fair value. A two-step goodwill impairment test should be used to identify potential goodwill impairment and measure such impairment, if any. The first step is a qualitative assessment which the Company will determine whether it is more likely than not (greater than 50 percent likelihood) that the fair value of the reporting unit is less than its carrying value, including goodwill. If the Company determines it is more likely than not the fair value of the reporting unit is less than its carrying value, including goodwill, then step two is a quantitative assessment. The quantitative assessment compares the implied fair value of the reporting unit goodwill with the carrying value of the goodwill. An impairment loss is recognized if the carrying value of the reporting unit goodwill exceeds the implied fair value of that goodwill.

The Company assessed the goodwill balance ~~as of March 31, 2021~~ for impairment since the Company entered into a ~~Purchase~~purchase and ~~Sale Agreement~~sale agreement ("PSA") onin March ~~10,~~ 2021 for $3.5 million before closing adjustments. ~~See further discussion in Note 13 - Discontinued Operations and Assets Held for Sale. At~~As the closing of the Merger, the Kansas Reporting Unit was initially recorded at fair value using a discounted cash flow method of valuation in accordance with ASC 805. The carrying value of the Kansas Reporting Unit was $22.0 million, which included allocated goodwill of $19.1 million. The Company concluded the implied fair value of the Kansas Reporting Unit was $3.5 million in accordance with ASC 350 since the Company entered into a PSA shortly after the Kansas Reporting Unit was deemed held for sale. The carrying value exceeded the implied fair value at the time of the closing of the ~~Merger. As such,~~Merger, the Company concluded the goodwill balance associated with the Kansas Reporting Unit was impaired and recognized a goodwill impairment loss, included within loss from discontinued operations on the condensed consolidated statement of operations, of $18.5 million for the nine months ~~ending~~ended June 30, 2021.

~~RILEY EXPLORATION PERMIAN, INC.~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

~~(Unaudited)~~

See further discussion in Note 12 - Discontinued Operations and Assets Held for Sale.

Revenue Recognition

The following table presents oil and natural gas sales ~~from continuing operations~~ disaggregated by product:

Three Months Ended June 30, Nine Months Ended June 30,
2021 2020 2021 2020
(In thousands)
Oil and natural gas sales:
Oil $ 39,504 $ 6,153 $ 92,395 $ 59,548
Natural gas 957 (738) 5,592 (1,009)
Natural gas liquids 1,088 (446) 2,635 (715)
Total oil and natural gas sales, net $ 41,549 $ 4,969 $ 100,622 $ 57,824

~~Transaction Costs~~

Three Months Ended June 30, Nine Months Ended June 30,
2021 2020 2021 2020
(In thousands)
Business combination acquisition costs $ 321 $ 15 $ 3,374 $ 42
Other 0 0 160 0
Total transaction costs $ 321 $ 15 $ 3,534 $ 42

The Company recognized transaction costs of $0.3 million and $3.4 million for the three and nine months ended June 30, 2021. These costs relate to the fees incurred for the Merger. See further discussion in Note 4 - Acquisitions and Divestitures.

~~Income Taxes~~

Upon closing of the Merger on February 26, 2021, Tengasco was renamed to Riley Exploration Permian, Inc. and REP LLC became a wholly-owned subsidiary of Riley Exploration Permian, Inc., the consolidated company. In addition, Riley Permian became a C-corporation which is subject to current federal and state income taxes, including Texas Margin Tax. See further discussion in Note 4 - Acquisitions and Divestitures. The Company recorded a provision for federal and state income taxes as of June 30, 2021. See further discussion in Note 12 - Income Taxes.

Riley Permian uses the asset and liability method of accounting for income taxes, which requires the establishment of deferred tax accounts for all temporary differences between: (i) financial reporting and tax bases of assets and liabilities, using currently enacted federal and state income tax rates, and (ii) operating loss and tax credit carryforwards. In addition, deferred tax accounts must be adjusted to reflect new rates if enacted into law.

Realization of deferred tax assets is contingent on the generation of future taxable income. As a result, management considers whether it is more likely than not that all or a portion of such assets will be realized during periods when they are available, and if not, management provides a valuation allowance for amounts not likely to be recognized.

Management periodically evaluates tax reporting methods to determine if any uncertain tax positions exist that would require the establishment of a loss contingency. A loss contingency would be recognized if it were probable that a liability has been incurred as of the date of the financial statements and the amount of the loss can be reasonably estimated. The amount recognized is subject to estimates and management’s judgment with respect to the likely outcome of each uncertain tax position. The amount that is ultimately incurred for an individual uncertain tax position or for all uncertain tax positions in the aggregate could differ from the amount recognized. There are 0 unrecorded liabilities for uncertain tax positions related to the Company as of the periods ended June 30, 2021 and September 30, 2020.

~~RILEY EXPLORATION PERMIAN, INC.~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

~~(Unaudited)~~


	Three Months Ended June 30,				Nine Months Ended June 30,
	2022		2021		2022		2021
	(In thousands)
Oil and natural gas sales:
Oil	$	82,501	$	39,504	$	195,500	$	92,395
Natural gas	2,850		957		7,344		5,592
Natural gas liquids	2,430		1,088		8,232		2,635
Total oil and natural gas sales, net	$	87,781	$	41,549	$	211,076	$	100,622

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In ~~June 2016,~~December 2019, the ~~Financial Accounting Standards Board~~FASB issued ASU ~~2016-13, Financial Instruments~~No. 2019-12, "Income Taxes (Topic 740) - ~~Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which changes~~Simplifying the Accounting for Income Taxes." This update is intended to simplify the accounting ~~requirements~~ for the recognition of credit losses from an incurred or probable impairment methodology to a Current Expected Credit Losses (“CECL”) methodology. The CECL model is applicable to the measurement of credit losses on financial assets measured at amortized cost, including but not limited to trade receivables. The standardincome taxes by removing certain exceptions and by clarifying and amending existing guidance and is effective for ~~fiscal years~~public business entities beginning after December 15, ~~2019, including interim periods within those fiscal years.~~2020 with early adoption permitted. The Company adopted this ASU effective October 1, ~~2020 using a modified retrospective approach. The adoption of this guidance did not have a material effect on the Company’s condensed consolidated financial statements or related disclosures.~~

The Company is exposed to credit losses primarily through receivables that result from oil and natural gas sales. Estimates of expected credit losses for accounts receivables consider factors such as historical collection experience, credit quality of our customers and current and future economic and market conditions.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. The purpose of this amendment is to improve the effectiveness of disclosures in the notes of the financial statements. This ASU removes certain disclosure requirements around transfers between levels of the fair value hierarchy and the valuation processes for Level 3 fair value measurements, modifies certain reporting requirements around Level 3 fair value measurements and investments in certain entities that calculate net asset value, and adds certain disclosure requirements for Level 3 fair value measurements. The standard is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company adopted this ASU effective October 1, 2020.2021. The adoption of this ASU did not have a material impact on the Company's condensed consolidated financial statements.

~~Issued Accounting Standards Not Yet Adopted~~

In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic ~~840)~~848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” (“ASU 2020-04”), which provides companies with optional guidance to ease

Table of Contents

RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

the potential accounting burden associated with transitioning away from reference rates (e.g., ~~London Interbank Offered Rate (“LIBOR”))~~LIBOR) that are expected to be discontinued. ASU 2020-04 allows, among other things, certain contract modifications, such as those within the scope of Topic 470 on debt, to be accounted as a continuation of the existing contract. ~~This~~The Company adopted this ASU ~~was~~ effective ~~upon issuance and its optional relief can be applied through December 31,~~concurrent with the amendment of the Company's revolving credit facility in April 2022. ~~This standard~~See Note 9 - Revolving Credit Facility for additional information on the amendment of the revolving credit facility. The adoption of this ASU did not have ~~any effect~~a material impact on the Company's condensed consolidated financial ~~statements as of June 30, 2021. The Company will continue to evaluate the effect of this standard on future reporting periods through December 31, 2022.~~statements.

(4)Acquisitions ~~and Divestitures~~

Business Combination Between REP LLC and Tengasco

Immediately prior to the closing of the Merger on February 26, 2021, REP LLC converted all of ~~the~~its issued and outstanding Series A Preferred Units into common units of REP LLC. In connection with the Merger, holders of common units of REP LLC were entitled to receive, in exchange for each common unit, shares of common stock of Tengasco (which was renamed Riley Exploration Permian, Inc.), par value $0.001 per share (“Tengasco common stock”) based on the exchange ratio set forth in the Merger Agreement (the “Exchange Ratio”), with cash paid in lieu of the issuance of any fractional shares. The Exchange Ratio was 97.796467 shares of Tengasco common stock for each common unit of REP LLC (as adjusted for the reverse stock split). Immediately prior to the closing of the Merger, Tengasco effected a ~~1-for-12~~one-for-twelve reverse stock split resulting in outstanding common stock of approximately 17.8 million shares including shares of Tengasco common stock issued in the Merger. ~~See further discussion in Note 10 – Members'/Shareholders' Equity.~~

Pursuant to the Merger Agreement and on the Closing Date, each restricted share of common stock issued to holders of restricted common units in REP LLC in the Merger were issued under the 2021 Long Term Incentive Plan (the "2021 LTIP"). See further discussion in Note 10 – Members'/Shareholders' Equity.

The combination between REP LLC and Tengasco qualified as a business combination with REP LLC being treated as the accounting acquirer. The assets acquired and liabilities assumed were recognized on the condensed consolidated balance sheet at fair value as of the acquisition date. The Company acquired approximately 11,000 net acres (unaudited) located in central Kansas. The acquisition included the Kansas Properties which included 153 producing oil wells, 19 shut-in wells, 6 temporarily abandoned

~~RILEY EXPLORATION PERMIAN, INC.~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

~~(Unaudited)~~

wells, and 36 active disposal wells. The Company also acquired all onsite production management and field personnel as a result of the Merger. See further discussion in Note 13 - Discontinued Operations and Assets Held for Sale. The fair value measurements of the oil and natural gas properties acquired and asset retirement obligations assumed were derived utilizing an income approach and based, in part, on significant inputs not observable in the market. These inputs represent Level 3 measurements in the fair value hierarchy and include, but are not limited to, estimates of reserves, future commodity prices, future development, future operating costs, future cash flows and the use of weighted average cost of capital. These inputs required the use of significant judgments and estimates at the date of valuation.

The consideration paid in the Merger by REP LLC as the accounting acquirer totaled approximately $26.4 million and was determined based on the closing price of Tengasco’s common stock on February 26, 2021 and the total number of shares outstanding immediately prior to the Merger. The Merger was structured as a tax-free reorganization for United States federal income tax purposes.

The following table summarizes the ~~purchase price or~~ consideration for the Merger (presented in thousands, except ~~per share amounts).~~stock price):


			~~Consideration~~
Tengasco common stock price			$	29.64
Tengasco common stock - issued and outstanding as of February 26, 2021		891
Total consideration	$	26,392

The Company incurred approximately ~~$4.8~~$5.0 million of related costs ~~to date~~ for the Merger, of which $0.3 million and $3.4 million was expensed for the three and nine months ended June 30, 2021 as transaction costs on the condensed consolidated ~~statement~~statements of operations. Included in the above costs, the Company incurred success fees of $1.75 million upon closing of the Merger which is included within transaction costs on the condensed consolidated statement of operations. The majority of these fees were paid at closing with approximately $0.3 million being paid 30 days after closing.

1816

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RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

The Company ~~believes it has~~ completed the determination of the fair value attributable to the assets acquired and liabilities ~~assumed.~~assumed as of September 30, 2021. The following table presents the allocation of the purchase price to the assets acquired and liabilities assumed based on their fair values on February 26, ~~2021:~~2021 (in thousands):


				February 26, 2021
Assets
Cash and cash equivalents				$	860
Account receivable				325
Prepaid and other current assets			759
Total current assets	1,944		~~1,944~~

Oil and gas properties ~~net~~				4,525
Other property and equipment ~~net~~				91
Right of use assets			42
Other non-current assets				4
Deferred tax assets			~~2,943~~2,987


Total assets acquired			$	~~9,549~~9,593

Liabilities
Accounts payable				130
Accrued liabilities				409
Current lease liabilities, operating			42
Current lease liabilities, financing			68
Total current liabilities			649

Asset retirement obligations			1,565


Total liabilities assumed			2,214

Net identifiable assets acquired			~~7,335~~7,379
Goodwill			~~19,057~~19,013
Net assets acquired		$	26,392

The goodwill recognized was primarily attributable to a substantial increase in the stock price of Tengasco ~~as of~~on the ~~date the Merger closed,~~Closing Date, which increased the amount of the consideration transferred. The Company did not integrate the acquisition and the acquisition met the assets held for sale criteria on the Closing Date. See further discussion in Note 13 - Discontinued Operations and Assets Held for Sale.

~~Post-Acquisition Operating Results~~

Net loss attributable to the operations of the assets and liabilities acquired in the Merger of $115 thousand was included in discontinued operations on the condensed consolidated statement of operations for the nine months ended June 30, 2021. On April 2, 2021, the Company closed on the sale of the Kansas Reporting Unit with an effective date of March 1, 2021. A net loss of $1.0 million and $19.6 million on discontinued operations, net of taxes, was included in the net loss attributable to discontinued operations for the three and nine months ended June 30, 2021.

Pro Forma Operating Results (Unaudited)

The following unaudited pro forma combined results for the three and nine months ended June 30, 2021 ~~and 2020~~ reflect the consolidated results of operations of the Company as if the Merger had occurred on October 1, 2019. The unaudited pro forma information includes adjustments for $3.4 million of transaction costs being reclassified to the first quarter of fiscal year 2020 instead of ~~$0.2 million, $2.2~~$0.3 million and ~~$1.0~~$3.4 million of transaction costs recorded in the three and nine months ended June 30, 2021, ~~March 31, 2021 and December 31, 2020.~~respectively. Additionally, the Company adjusted for $0.9 million of oil and natural gas property impairment that Tengasco recognized under the full-cost method of accounting, which would not have been recognized under the successful efforts method, during the three months ended December 31, 2020. Also, the unaudited pro forma information has been tax affected

1917

Table of Contents

RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

~~effected for taxes with~~using a 21% tax rate. The common stock was also adjusted for the conversion of the REP LLC preferred units into common units and retroactively adjusted for the Exchange Ratio and ~~1-for-12~~one-for-twelve reverse stock split.

Three Months Ended June 30, Nine Months Ended June 30,
2021 2020 2021 2020
(In thousands, except per share/unit amounts)
Total Revenues $ 42,149 $ 6,019 $ 102,422 $ 60,974
Pro Forma Net Income (Loss) from Continuing Operations (16,968) (27,650) (40,500) 40,589
Pro Forma Net Income (Loss) from Discontinued Operations (882) (106) (873) (18,239)
Pro Forma Net Income (Loss) before Taxes (17,850) (27,756) (41,373) 22,350
Pro forma income tax benefit (expense) 3,749 5,829 8,688 (4,694)
Pro Forma Net Income (Loss) $ (14,101) $ (21,927) $ (32,685) $ 17,656
Net Income (Loss) per Share/Unit from Continuing Operations:
Basic $ (0.95) $ (1.94) $ (2.51) $ 2.59
Diluted $ (0.95) $ (1.94) $ (2.51) $ 2.16
Net Income (Loss) per Share/Unit from Discontinued Operations:
Basic $ (0.05) $ (0.01) $ (0.05) $ (1.24)
Diluted $ (0.05) $ (0.01) $ (0.05) $ (1.24)


	Three Months Ended June 30, 2021		Nine Months Ended June 30, 2021

	(In thousands, except per share/unit amounts)

Total Revenues	$	42,149	$	102,422


Pro Forma Net Loss before Taxes	(17,850)		(41,373)
Pro forma income tax benefit	3,749		8,688
Pro Forma Net Loss	$	(14,101)	$	(32,685)
Net Loss per Share/Unit from Continuing Operations:
Basic	$	(0.95)	$	(2.51)
Diluted	$	(0.95)	$	(2.51)

Net Loss per Share/Unit from Discontinued Operations:
Basic	$	(0.05)	$	(0.05)
Diluted	$	(0.05)	$	(0.05)

The unaudited pro forma combined financial information is for informational purposes only and is not intended to represent or to be indicative of the combined results of operations that the Company would have reported had the Merger been completed as of October 1, 2019 and should not be taken as indicative of the Company's future combined results of operations. The actual results may differ significantly from that reflected in the unaudited pro forma combined financial information for a number of reasons, including, but not limited to, differences in assumptions used to prepare the unaudited pro forma combined financial information and actual results.

~~Acquisitions~~

~~On December 20, 2019, the Company acquired 1,237 net acres (unaudited) in Yoakum County, Texas. The acquisition included 17 total wells, with 11 producing~~

(5)Oil and ~~6 salt water disposals,~~Natural Gas Properties

Oil and natural gas properties are summarized below:


	June 30, 2022		September 30, 2021


	(In thousands)
Proved	$	469,968	$	402,165
Unproved	13,655		20,557
Work-in-progress	27,384		11,411
	511,007		434,133
Accumulated depletion and amortization	(108,481)		(88,336)
Total oil and natural gas properties, net	$	402,526	$	345,797

Depletion and amortization expense for a total purchase price of $3.3 million, as adjusted in accordance with the terms of a PSA with J. Cleo Thompson and James Cleo Thompson, Jr., L.P. The effective date of the transaction was August 1, 2019. The transaction was accounted for as an asset acquisition in accordance with ASU 2017-01 and was therefore recorded based on the total consideration paid, with value assigned to unprovedproved oil and natural gas properties ~~capitalized asset retirement cost~~was $7.0 million and ~~ARO.~~$6.7 million respectively, for the three months ended June 30, 2022 and 2021. Depletion and amortization expense for proved oil and natural gas properties was $20.1 million and $18.7 million, respectively, for the nine months ended June 30, 2022 and 2021.

~~Divestitures~~Exploration expense was $22 thousand and $2.8 million, respectively, for the three months ended June 30, 2022 and 2021, and $2.1 million and $8.7 million, respectively, for the nine months ended June 30, 2022 and 2021. Exploration expense was primarily attributable to the expiration of oil and natural gas leases for the nine months ended June 30, 2022 and three and nine months ended June 30, 2021.

On March 10, 2021, the Company entered into a PSA to sell the Kansas Reporting Unit for an agreed upon purchase price of $3.5 million (subject to certain adjustments), contingent upon certain conditions to closing. The effective date of the sale was March 1, 2021. On April 2, 2021, the Company closed on the sale of the Kansas Reporting Unit for an agreed upon purchase price of $3.5 million, plus approximately $0.2 million of closing adjustments. See further discussion in Note 13 - Discontinued Operations and Assets Held for Sale.

2018

Table of Contents

RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

~~(5)~~ ~~Oil and Natural Gas Properties~~

~~Oil and natural gas properties are summarized below:~~
June 30,
2021 September 30,
2020
(In thousands)
Proved $ 373,367 $ 326,420
Unproved 22,294 32,084
Work-in-progress 15,008 15,398
410,669 373,902
Accumulated depletion and amortization (81,787) (63,176)
Total oil and natural gas properties, net $ 328,882 $ 310,726

Depletion and amortization expense for proved oil and natural gas properties was $6.7 million and $4.8 million, respectively, for the three months ended June 30, 2021 and 2020. Depletion and amortization expense for proved oil and natural gas properties was $18.7 million and $15.5 million, respectively, for the nine months ended June 30, 2021 and 2020.

~~The following table summarizes the components of exploration expenses:~~

Three Months Ended June 30, Nine Months Ended June 30,
2021 2020 2021 2020
(In thousands)
Expiration of oil and natural gas leases $ 2,785 $ 6,757 $ 8,615 $ 7,288
Geological and geophysical costs 0 0 67 1,943
Total exploration costs $ 2,785 $ 6,757 $ 8,682 $ 9,231

(6)Derivative Instruments

~~Crude~~ Oil and Natural Gas Contracts

The Company uses commodity based derivative contracts to reduce exposure to fluctuations in ~~crude~~ oil and natural gas prices. While the use of these contracts limits the downside risk for adverse price changes, their use ~~may~~ also ~~limit~~limits future revenues from favorable price changes. For the three and nine months ended June 30, ~~2021~~2022 and ~~2020,~~2021, we have not designated our derivative contracts as hedges for accounting purposes, and therefore changes in the fair value of derivatives are included and recognized in ~~earnings.~~other income (expense) in the condensed consolidated statement of operations.

As of June 30, ~~2021,~~2022, the Company's oil and natural gas derivative instruments consisted of ~~the following types:~~

•~~Fixed Price Swaps – the Company receives a~~ fixed price ~~for the contract~~swaps, costless collars, and ~~pays a floating market price to the counterparty over a specified period for a contracted volume.~~

•Costless collars – the combination of a put option (fixed floor) and call option (fixed ceiling), with the options structured so that the premium paid to purchase the put option is offset by the premium received from the sale of the call option. If the market price exceeds the call strike price or falls below the put strike price, we receive the fixed price and pay the market price. If the market price is between the put and the call strike price, no payments are due from either party.

•Basis Protection Swaps – Basis swaps are settled based on differences between a fixed price differential and the differential between the settlement prices of two referenced indexes. We receive the fixed price differential and pay the differential between the referenced indexes.

~~RILEY EXPLORATION PERMIAN, INC.~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

~~(Unaudited)~~

basis protection swaps. The following table summarizes the open financial derivative positions as of June 30, ~~2021,~~2022, related to ~~crude~~ oil and natural gas ~~production.~~
Weighted Average Price
Calendar Quarter Notional Volume Fixed Put Call
($ per unit)
Crude Oil Swaps (Bbl)
Q3 2021 564,278 $ 51.57 $ — $ —
Q4 2021 558,116 $ 51.65 $ — $ —
2022 1,320,000 $ 53.59 $ — $ —
2023 360,000 $ 59.01 $ — $ —
Natural Gas Swaps (Mcf)
Q3 2021 555,000 $ 3.03 $ — $ —
Q4 2021 555,000 $ 3.03 $ — $ —
Crude Oil Collars (Bbl)
2022 360,000 $ — $ 35.00 $ 42.63
Crude Oil Basis (Bbl)
Q3 2021 435,000 $ 0.40 $ — $ —
Q4 2021 435,000 $ 0.40 $ — $ —
2022 720,000 $ 0.40 $ — $ —
production:


		Weighted Average Price
Calendar Quarter / Year	Notional Volume	Fixed		Put		Call
		($ per unit)
Oil Swaps (Bbl)


Q3 2022	270,000	$	56.03	$	—	$	—
Q4 2022	270,000	$	56.03	$	—	$	—
2023	720,000	$	53.27	$	—	$	—

Natural Gas Swaps (Mcf)


Q3 2022	540,000	$	3.26	$	—	$	—
Q4 2022	540,000	$	3.26	$	—	$	—

Oil Collars (Bbl)


Q3 2022	117,000	$	—	$	37.31	$	59.43
Q4 2022	90,000	$	—	$	35.00	$	42.63
2023	—	$	—	$	—	$	—
2024	3,000	$	—	$	50.00	$	88.00

Oil Basis (Bbl)


Q3 2022	240,000	$	0.41	$	—	$	—
Q4 2022	240,000	$	0.41	$	—	$	—

Interest Rate Contracts

The Company has entered into floating-to-fixed interest rate swaps, ~~(we receive~~in which it receives a floating market rate equal to one-month LIBOR and ~~pay~~pays a fixed interest ~~rate)~~rate, to manage interest rate exposure related to the Company's revolving credit facility.

The following table summarizes the open interest rate derivative positions as of June 30, ~~2021:~~2022:

Open Coverage Period Notional Amount Fixed Rate
(In thousands)
Floating-to-Fixed Interest Rate Swaps
July 2021 - September 2021 $ 40,000 1.77 %
July 2021 - September 2021 $ 15,000 0.71 %
September 2021 - September 2023 $ 40,000 0.24 %


Open Coverage Period	Notional Amount		Fixed Rate
	(In thousands)
Floating-to-Fixed Interest Rate Swaps


July 2022 - September 2023	$	40,000	0.24	%

Table of Contents

RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

Balance Sheet Presentation of Derivatives

The following table presents the location and fair value of the Company’s derivative contracts included in the ~~accompanying~~condensed consolidated balance sheets as of June 30, ~~2021~~2022 and September 30, ~~2020.~~2021:

June 30, 2021
Balance Sheet Classification Gross Fair Value Amounts Netted Net Fair Value
(In thousands)
Current derivative assets $ 533 $ (307) $ 226
Non-current derivative assets 402 (295) 107
Current derivative liabilities (36,558) 307 (36,251)
Non-current derivative liabilities (11,531) 295 (11,236)
Total $ (47,154) $ — $ (47,154)

~~RILEY EXPLORATION PERMIAN, INC.~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

~~(Unaudited)~~


		September 30, 2020							June 30, 2022
Balance Sheet Classification	Balance Sheet Classification	Gross Fair Value		Amounts Netted		Net Fair Value		Balance Sheet Classification	Gross Fair Value		Amounts Netted		Net Fair Value
		(In thousands)							(In thousands)
Current derivative assets	Current derivative assets	$	19,690	$	(871)	$	18,819	Current derivative assets	$	1,161	$	(27)	$	1,134
Non-current derivative assets	Non-current derivative assets	4,651		(1,549)		3,102		Non-current derivative assets	313		(13)		300
Current derivative liabilities	Current derivative liabilities	(871)		871		0		Current derivative liabilities	(50,325)		27		(50,298)
Non-current derivative liabilities	Non-current derivative liabilities	(1,549)		1,549		0		Non-current derivative liabilities	(9,135)		13		(9,122)
Total	Total	$	21,921	$	—	$	21,921	Total	$	(57,986)	$	—	$	(57,986)

									September 30, 2021
Balance Sheet Classification								Balance Sheet Classification	Gross Fair Value		Amounts Netted		Net Fair Value
									(In thousands)
Current derivative assets								Current derivative assets	$	186	$	(186)	$	—
Non-current derivative assets								Non-current derivative assets	228		(122)		106
Current derivative liabilities								Current derivative liabilities	(42,330)		186		(42,144)
Non-current derivative liabilities								Non-current derivative liabilities	(9,054)		122		(8,932)
Total								Total	$	(50,970)	$	—	$	(50,970)

The following table presents the components of the Company's ~~derivative activities~~loss on derivatives for the three and nine months ended June 30, ~~2021~~2022 and ~~2020:~~2021:

Three Months Ended June 30, Nine Months Ended June 30,
2021 2020 2021 2020
(In thousands)
Fair value of net asset (liability),
beginning of period $ (19,470) $ 60,671 $ 21,921 $ 14,959
Gain (loss) on derivatives (35,396) (14,205) (74,208) 36,999
Settlements on derivative contracts 7,712 (14,669) 5,133 (20,161)
Fair value of net asset (liability),
end of period $ (47,154) $ 31,797 $ (47,154) $ 31,797


	Three Months Ended June 30,				Nine Months Ended June 30,
	2022		2021		2022		2021
	(In thousands)
Settlements on derivative contracts	$	(25,783)	$	(7,712)	$	(60,172)	$	(5,133)
Non-cash gain (loss) on derivatives	13,420		(27,684)		(7,016)		(69,075)
Loss on derivatives	$	(12,363)	$	(35,396)	$	(67,188)	$	(74,208)

(7)Fair Value Measurements

The FASB has established a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy consists of three broad levels. Level 1 inputs are the highest priority and consist of unadjusted quoted prices in active markets for identical assets and liabilities. Level 2 are inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. Level 3 are unobservable inputs for an asset or liability.

The carrying values of financial instruments comprising cash and cash equivalents, ~~accounts payable, accounts receivable~~payables, receivables, and ~~related party accounts receivable~~advances from joint interest owners approximate fair values due to the short-term maturities of these instruments. The carrying value reported for the revolving line of credit approximates fair value because the underlying instruments are at interest rates which approximate current market rates. The revolving line of credit is considered a Level 3 measurement.

Assets and Liabilities Measured on a Recurring Basis

The fair value of commodity derivatives and interest rate swaps is estimated using internal discounted cash flow calculations based upon forward curves. The following table presents the Company’s financial assets and liabilities that were ~~accounted for at fair value on a recurring basis as of June 30, 2021 and September 30, 2020, by level within the fair value hierarchy:~~

June 30, 2021
Level 1 Level 2 Level 3 Total
(In thousands)
Financial assets:
Commodity derivative assets $ 0 $ 828 $ 0 $ 828
Interest rate assets $ 0 $ 107 $ 0 $ 107
Financial liabilities:
Commodity derivative liabilities $ 0 $ (47,864) $ 0 $ (47,864)
Interest rate liabilities $ 0 $ (225) $ 0 $ (225)

2320

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RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

September 30, 2020
Level 1 Level 2 Level 3 Total
(In thousands)
Financial assets:
Commodity derivative assets $ 0 $ 24,341 $ 0 $ 24,341
Financial liabilities:
Commodity derivative liabilities $ 0 $ (1,672) $ 0 $ (1,672)
Interest rate liabilities $ 0 $ (748) $ 0 $ (748)

~~Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis~~

~~Assets and liabilities~~ accounted for at fair value on a ~~non-recurring~~recurring basis ~~in accordance with~~as of June 30, 2022 and September 30, 2021, by level within the fair value hierarchy include the initial recognition of asset retirement obligations, the fair value of oil and natural gas properties, and goodwill when acquired in a business combination or assessed for impairment.hierarchy:

The fair value measurements of assets acquired and liabilities assumed are measured on a nonrecurring basis on the acquisition date using an income valuation technique based on inputs that are not observable in the market and therefore represent Level 3 inputs. Significant inputs used to determine the fair value include estimates of: (i) reserves; (ii) future commodity prices; (iii) operating and development costs; and (iv) a market-based weighted average cost of capital rate. The underlying commodity prices embedded in the Company's estimated cash flows are the product of a process that begins with NYMEX forward curve pricing, adjusted for estimated location and quality differentials, as well as other factors that the Company’s management believes will impact realizable prices. These inputs require significant judgments and estimates by the Company’s management at the time of the valuation.


	June 30, 2022
	Level 1		Level 2		Level 3		Total
	(In thousands)
Financial assets:
Commodity derivative assets	$	—	$	40	$	—	$	40
Interest rate assets	$	—	$	1,434	$	—	$	1,434
Financial liabilities:
Commodity derivative liabilities	$	—	$	(59,460)	$	—	$	(59,460)
Interest rate liabilities	$	—	$	—	$	—	$	—

	September 30, 2021
	Level 1		Level 2		Level 3		Total
	(In thousands)
Financial assets:
Commodity derivative assets	$	—	$	308	$	—	$	308
Interest rate assets	$	—	$	106	$	—	$	106
Financial liabilities:
Commodity derivative liabilities	$	—	$	(51,336)	$	—	$	(51,336)
Interest rate liabilities	$	—	$	(48)	$	—	$	(48)

The fair value of asset retirement obligations incurred and acquired during the nine months ended June 30, 2021 and 2020, totaled approximately $0.1 million and $1.2 million, respectively. The fair value of additions to the asset retirement obligation liabilities is measured using valuation techniques consistent with the income approach, which converts future cash flows to a single discounted amount. Significant inputs to the valuation include: (i) $50 thousand estimated plug and abandonment cost per well for all oil and natural gas wells and $52 thousand for estimated plug and abandonment cost per well for all disposal wells for the nine months ended June 30, 2021 and 2020; (ii) a 28 year and 27 year weighted average by fair value of the estimated remaining life per well for the nine months ended June 30, 2021 and 2020; (iii) future inflation factors; and (iv) our average credit-adjusted risk-free rate of 5.17% for the nine months ended June 30, 2021 and 2020. These assumptions represent Level 3 inputs.

If the carrying amount of our oil and natural gas properties exceeds the estimated undiscounted future cash flows, we will adjust the carrying amount of the oil and natural gas properties to fair value. The fair value of our oil and natural gas properties is determined using valuation techniques consistent with the income and market approach. The factors used to determine fair value are subject to management’s judgment and expertise and include, but are not limited to, recent sales prices of comparable oil and natural gas properties, the present value of future cash flows, net of estimated operating and development costs using estimates of proved reserves, future commodity pricing, future production estimates, anticipated capital expenditures, and various discount rates commensurate with the risk and current market conditions associated with the expected cash flow projected. These assumptions represent Level 3 inputs.

(8)Transactions with Related Parties

Contract Services

RPOC provides certain administrative services to Combo Resources, LLC ("Combo") and is also the contract operator on behalf of Combo in exchange for ~~payment~~a monthly fee of ~~a fee equal to~~ $100 thousand ~~per month~~ and reimbursement of all third party expenses pursuant to a contract services agreement. ~~This fee was $250 thousand per month as of June 30, 2020, which was subsequently decreased to $150 thousand per month effective July 1, 2020~~Additionally, RPOC provides certain administrative and further decreased to $100 thousand per month effective August 1, 2020. Combo was previously owned by Oakspring Energy Holdings, LLC ("Oakspring") and by a wholly-owned subsidiary of Riley Exploration Group, Inc. ("REG"). On December 31, 2020, Oakspring contributed its interest in Combo to certain investment funds of Yorktown Partners, LLC, and the wholly-owned subsidiary of REG contributed its' interest in Combooperational services to Riley Exploration Group, ~~LLC.~~LLC ("REG") in exchange for a monthly fee of $100 thousand pursuant to a contract services agreement.

The following table presents revenues from contract services for related parties:


	Three Months Ended June 30,				Nine Months Ended June 30,
	2022		2021		2022		2021
	(In thousands)
Combo	$	300	$	300	$	900	$	900
REG	300		300		900		900
Contract services - related parties	$	600	$	600	$	1,800	$	1,800

Cost of contract services	$	89	$	91	$	324	$	330

The Company had amounts due (to) from Combo of $(0.4) million and $0.5 million at June 30, 2022 and September 30, 2021, respectively, which are reflected in accounts payable - related parties and accounts receivable - related parties on the accompanying condensed consolidated balance sheets. Amounts due (to) from Combo reflect the revenue, net of any expenditures for wells and fees due under the contract services agreement, for Combo's net working interest in wells that the Company operates on Combo's behalf.

2421

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RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

Consulting and Legal Fees

~~Additionally, RPOC~~On January 25, 2022, the Company and di Santo Law PLLC ("di Santo Law"), a law firm owned by a member of our Board of Directors, entered into an engagement letter that provides ~~certain administrative and operational services to REG~~a monthly fixed fee in exchange for general corporate legal services. The agreement has an initial term of one year and provides for a monthly cash payment of ~~a fee~~$30 thousand and an aggregate one-time grant of 10,500 shares of restricted stock that will vest in 4 equal installments at the end of each quarter in calendar year 2022. Prior to ~~$100 thousand per month pursuant~~entry into this agreement, di Santo Law's attorneys provided legal services to ~~a contract services agreement.~~

the Company based on hourly rates. The ~~following table presents revenues~~Company incurred legal fees from ~~contract services for related parties:~~

Three Months Ended June 30, Nine Months Ended June 30,
2021 2020 2021 2020
(In thousands)
Combo $ 300 $ 750 $ 900 $ 2,250
REG 300 300 900 900
Contract services - related parties $ 600 $ 1,050 $ 1,800 $ 3,150
Cost of contract services $ 91 $ 97 $ 330 $ 403

~~The company recognized $0.4~~di Santo Law of approximately $0.1 million and ~~$0.1~~$0.6 million ~~accounts receivable~~for the three months ended June 30, 2022 and 2021, respectively. The Company incurred legal fees from ~~Combo as~~di Santo Law of approximately $0.6 million and $1.0 million for the nine months ended June 30, 2022 and 2021. As of June 30, ~~2021~~2022 and September ~~30, 2020, under the contract services agreement. The Company did 0t recognize an accounts receivable under the contract services agreement for REG as of June 30, 2021 and September 30, 2020.~~

~~Income Tax Withholding on Employee Awards~~

~~At June~~ 30, 2021, the Company ~~recorded a receivable of $1.6~~had approximately $30 thousand and $0.8 million, ~~and an associated liability~~respectively, accrued for ~~outstanding tax withholding payments that was~~di Santo Law. Such amounts were included in accounts payable ~~by the Company for equity awards that vested in the second and third fiscal quarters. The receivable is included within accounts receivable~~ - related parties in the ~~Company's~~accompanying condensed consolidated balance ~~sheet. See further discussion over the Company's awards in Note 10 – Members'/Shareholders' Equity.~~sheets.

(9)Revolving Credit Facility

On September 28, 2017, REP LLC ~~and~~entered into a credit agreement (the "Credit Agreement") to establish a senior secured revolving credit facility with a syndicate of banks including SunTrust Bank, now Truist Bank as successor by ~~the Merger,~~merger, as administrative ~~agent, entered into a credit agreement~~agent. Substantially all of the Company’s assets are pledged to ~~establish a senior secured~~secure the revolving credit facility. The revolving credit facility had an initial borrowing base of $25 million with a maximum facility amount of $500 million. On April 29, 2022, the Company amended its Credit Agreement to, among other things, increase the borrowing base from $175 million to $200 million, extend the maturity date to April 2026, replace LIBOR with SOFR and change the requirements for hedging to be based on utilization of the borrowing base and the Company's leverage ratio.

~~On October 21, 2020, REP LLC entered into~~The borrowing base is subject to periodic redeterminations, mandatory reductions and further adjustments from time to time. The facility currently requires semi-annual redeterminations on February 1 and August 1. During these redetermination periods, the ~~Seventh Amendment~~Company’s borrowing base may be increased or may be reduced in certain circumstances. The revolving credit facility allows for SOFR Loans and ~~Consent~~Base Rate Loans (each as defined in the Credit Agreement). The interest rate on each SOFR Loan will be the adjusted Term SOFR for the applicable interest period plus a margin between 2.75% and 3.75% (depending on the borrowing base utilization percentage). The annual interest rate on each Base Rate Loan will be the Base Rate for the applicable interest period plus a margin between 1.75% and 2.75% (depending on the borrowing base utilization percentage). The Company is also subject to an unused commitment fee of between 0.375% and 0.500% (depending on the borrowing base utilization percentage).

The Credit Agreement contains certain covenants, which, among other things, require the maintenance of (i) a total leverage ratio of not more than 3.25 to 1.0 and (ii) a minimum current ratio of not less than 1.0 to 1.0 as of the last day of any fiscal quarter. The Credit Agreement also contains a total leverage ratio for Restricted Payments, as defined in the Credit Agreement, after giving pro forma effect to such Restricted Payments, which includes payments to any holder of the Company's shares, would not exceed 2.50 to 1.0. If the Company's leverage ratio, after giving pro forma effect to such Restricted Payments (as defined in the Credit Agreement), is above 2.0 to 1.0, then an additional test of free cash flow is applied, and the Company will only be permitted to make such Restricted Payments if such payment does not exceed the Company's free cash flow. The Company is also required to limit its cash balance to less than $15 million or 10% of the borrowing base, whichever is greater. If the Company's cash balance exceeds this limit on the last business day of the month, the Company will be required to apply the excess to reduce its credit facility ~~to incorporate the changes in the legal structure~~borrowings. The Credit Agreement also contains other customary affirmative and negative covenants and events of ~~REP LLC upon consummation of the Merger, including the joinder of the Company as the parent guarantor thereto.~~default. The ~~Seventh Amendment was effective upon closing of the Merger. Effective March 5, 2021, the Company~~Company's minimum hedging requirement is between 0% and ~~REP LLC entered into the Eighth Amendment to the credit facility pursuant to which the parties thereto reaffirmed~~50% (depending on the borrowing base ~~at $135 million with total commitments increasing to $135 million.~~

~~The credit facility maturity date is set to occur on September 28, 2023 in accordance with the Sixth Amendment. Substantially all~~utilization percentage and leverage ratio as of the ~~Company’s assets are pledged to secure the credit facility.~~

~~The following table summarizes the Company's interest expense:~~

Three Months Ended June 30, Nine Months Ended June 30,
2021 2020 2021 2020
(In thousands)
Interest expense $ 956 $ 1,084 $ 2,958 $ 3,403
Amortization of debt issuance costs 168 166 484 484
Unused commitment fees 47 52 129 199
Total interest expense $ 1,171 $ 1,302 $ 3,571 $ 4,086

hedge evaluation date) of its proved developed producing ("PDP") volumes on a rolling 24-month basis. As of June 30, ~~2021 and September 30, 2020, the weighted average interest rate on outstanding borrowings under the credit facility was 3.10% and 3.17%, respectively.~~

~~As of June 30, 2021 and September 30, 2020,~~2022, the Company was ~~in compliance with all covenants contained in the credit agreement and had $97.5 million and $101 million, respectively,~~required to have at least 25% of ~~outstanding borrowings and an additional $37.5 million and~~its PDP volumes hedged on a rolling 24-month basis.

2522

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RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

The following table summarizes the Company's interest expense:


	Three Months Ended June 30,				Nine Months Ended June 30,
	2022		2021		2022		2021
	(In thousands)
Interest expense, net of capitalized interest	$	393	$	956	$	1,289	$	2,958
Amortization of deferred financing costs(1)	182		168		655		483
Unused commitment fees	122		47		327		130
Total interest expense, net	$	697	$	1,171	$	2,271	$	3,571

_____________________

(1)Includes $0.1 million of unamortized deferred financing costs written off during the nine months ended June 30, 2022 in conjunction with the amendment of the Credit Agreement in October 2021.

As of June 30, 2022 and September 30, 2021, the weighted average interest rate on outstanding borrowings under the revolving credit facility was 4.52% and 2.83%, respectively.

~~$31.5~~As of June 30, 2022, the Company was in compliance with all covenants contained in the Credit Agreement and had $61 million ~~respectively,~~of outstanding borrowings and $139 million available under the borrowing base.

(10) Members’/Shareholders' Equity

On October 7, 2020, the Board of Managers of REP LLC declared a $3.8 million cash dividend, paid on November 6, 2020. The cash dividend was declared for all issued and outstanding common units, including vested and unvested under the Riley Exploration - Permian, LLC 2018 Long Term Incentive Plan (the "2018 LTIP") of REP LLC. The portion of the cash dividend attributable to the unvested restricted units was accrued and will be paid in cash once the unvested restricted units fully vest.Dividends

On February 4, 2021, the Board of Managers of REP LLC declared a $3.8 million cash dividend, paid on February 5, 2021. The cash dividend was declared for all issued and outstanding common units, including vested and unvested under the 2018 LTIP of REP LLC. The portion of the cash dividend attributable to the unvested restricted units was accrued and will be paid in cash once the unvested restricted units fully vest.

~~Pursuant to the Merger Agreement and on February 26, 2021, the Company granted 198,024 restricted shares to certain executives under the 2021 LTIP.~~

On March 1, 2021, the Company granted 3,374 restricted shares, which vest over a 1-year period, under the 2021 LTIP to the newly-added, independent directors that joined the Board of Directors in conjunction with the Merger.

On March 4, 2021, the Board of Directors of the Company declared a cash dividend of $0.28 per share payable on all issued and outstanding common shares of the Company as of April 16, 2021, and was paid on May 7, 2021. The portion of the cash dividend attributable to the unvested restricted common shares was accrued and will be paid once the unvested restricted units fully vest. Cash dividends are approved at the sole discretion of the Board of Directors.

~~On March 15, 2021, the Company granted 196,341 restricted shares and stock awards to certain employees and executives under the 2021 LTIP effective April 1, 2021.~~

~~Share-Based and Unit-Based Compensation~~

Upon the closing of the Merger and after giving effect to the adjustment resulting from the 1-for-12 reverse stock split, the 2021 LTIP had 1,387,022 shares of common stock available for issuance, of which 989,283 shares remained available as of June 30, 2021.

~~2021 Long-Term Incentive Plan~~

The 2021 LTIP provides for potential grants of: (i) incentive stock options qualified as such under U.S. federal income tax laws ("ISO's"); (ii) stock options that do not qualify as incentive stock options; (iii) stock appreciation rights, or SARs; (iv) restricted stock awards; (v) restricted stock units, or RSUs; (vi) stock awards; (vii) performance awards; (viii) dividend equivalents; (ix) other share-based awards; (x) cash awards; and (xi) substitute awards, all of which are collectively referred to as the "Awards".

The 2021 LTIP authorizes the Compensation Committee to administer the plan and designate eligible persons as participants, determine the type or types of Awards to be granted to an eligible person, determine the number of shares of stock or amount of cash to be covered by the Awards, approve the forms of award agreements for use under the plan, determine the terms and conditions of any Award, modify, waive or adjust any term or condition of an Award that has been granted, among other responsibilities delegated by the Company's Board.

~~Restricted Shares~~

The Company granted 198,024 restricted shares to certain executives under the 2021 LTIP in connection with the Merger. These grants substituted restricted common shares issued under the 2021 LTIP for the unvested restricted units granted under the 2018 LTIP. These restricted shares vest over a period of 8- to 33-months and the holder receives dividends, in arrears, once the shares vest. The Company has accrued for these dividends which are reported in accrued liabilities and other non-current liabilities. The total expense is amortized on a straight-line basis, over the vesting period. The Company recorded $425 thousand and $0 of share-based compensation expense for the nine months ended June 30, 2021 and 2020, respectively, related to this issuance. Approximately $2.0 million of additional share-based compensation expense will be recognized with this grant over the next 27 months.

~~RILEY EXPLORATION PERMIAN, INC.~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

~~(Unaudited)~~

On March 1, 2021, the Company granted 3,374 restricted shares to certain directors under the 2021 LTIP, which vest over a 1-year period. The holder receives dividends, in arrears, once the shares vest. The Company has accrued for these dividends which are reported in accrued liabilities and other non-current liabilities. The total expense is amortized on a straight-line basis, over the vesting period. The Company recorded $25 thousand and $0 of share-based compensation expense for the nine months ended June 30, 2021 and 2020, respectively, related to this issuance. Approximately $57 thousand of additional share-based compensation expense will be recognized with this grant over the next 9 months.

On March 15, 2021, the Company approved the grant of restricted shares and stock awards with a fixed dollar amount of $4.6 million that was settled in 196,341 restricted shares that were issued on April 1, 2021 based on the 10-day weighted average share price prior to April 1, 2021. Approximately 158,582 restricted shares fully vested on April 1, 2021. The remaining 37,759 restricted shares will vest on April 1, 2022. As the number of shares were variable on the grant date, the Company accounted for the awards that immediately vested on April 1, 2021 as a liability at March 31, 2021 with a value of $4.2 million. On April 1, 2021, the awards no longer met the classification of liability awards which the Company recognized the awards as equity and remeasured the fair value of the awards to be $4.6 million in accordance with ASC 718. The Company recorded $4.9 million and $0 of share-based compensation expense for the nine months ended June 30, 2021 and 2020, respectively, related to this issuance. Approximately $793 thousand of additional share-based compensation expense will be recognized with this grant over the next 9 months.

~~Total share-based compensation expense of $0.8 million and $0, respectively, is for all of the share-based issuances outstanding for~~For the three months ended June 30, ~~2021 and 2020. Total share-based compensation expense of $5.4 million and $0, respectively, is for all of~~2022, the ~~share-based issuances outstanding for~~Company declared quarterly dividends on its common stock totaling approximately $6.2 million. No dividends were declared during the ~~nine~~three months ended June 30, ~~2021~~2021. See Note 9 - Revolving Credit Facility for discussion over the Company's restrictions on certain payments, including dividends.

Share-Based and 2020. As of June 30, 2021, the Company had 239,158 restricted shares unvested. The Company will recognize any forfeited shares, and any unpaid dividends for those shares, as they occur as an increase to accrued liabilities and a reduction from shareholders' equity on the consolidated balance sheet.

~~2018 Long-Term Incentive Plan~~Unit-Based Compensation

In connection with the Merger, the Company shareholders adopted an omnibus equity incentive plan, the 2021 LTIP, for the employees, consultants and the directors of the Company and its affiliates who perform services for the Company. The holders of unvested restricted units issued under the 2018 LTIP were issued substitute awards under the 2021 LTIP at the closing of the Merger.

~~Restricted Units~~ Upon the closing of the Merger and after giving effect to the adjustment resulting from the one-for-twelve reverse stock split, the 2021 LTIP had 1,387,022 shares of common stock available for issuance, of which 761,635 shares remained available as of June 30, 2022.

2021 Long-Term Incentive Plan

The following table presents the Company's restricted stock activity during the nine months ended June 30, 2022 under the 2021 LTIP:


2021 Long-Term Incentive Plan
	Restricted Shares	Weighted Average Grant Date Fair Value
Unvested at September 30, 2021	228,369	$	15.35
Granted	224,158	$	23.94
Vested	(129,220)	$	17.31
Forfeited	(3,625)	$	23.46
Unvested at June 30, 2022	319,682	$	20.50

Table of Contents

RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

For the three months ended June 30, 2022 and 2021, the total equity-based compensation expense of $0.8 million and $0.8 million, respectively, is included in general and administrative costs on the Company's condensed consolidated statement of operations for the restricted share awards granted under the 2021 LTIP. For the nine months ended June 30, 2022 and 2021, the total equity-based compensation expense of $2.8 million and $5.4 million, respectively, is included in general and administrative costs on the Company's condensed consolidated statement of operations for the restricted share awards granted under the 2021 LTIP. Approximately $5.0 million of additional equity-based compensation expense will be recognized over the weighted average life of 23 months for the unvested restricted share awards as of June 30, 2022 granted under the 2021 LTIP.

2018 Long-Term Incentive Plan

In connection with the Merger and in accordance with the Merger Agreement, each unvested restricted unit outstanding under the 2018 LTIP was converted into restricted shares of the Company under the 2021 LTIP. The holders of unvested restricted units issued under the 2018 LTIP were issued substitute awards under the 2021 LTIP at the closing of the Merger.

Restricted Units:The Company granted ~~14,766~~13,309 restricted units to ~~certain~~ executives ~~on April 29, 2019. Restricted units vest over a~~ ~~two- to three-year period~~ and employees of the ~~holder receives dividends, in arrears, once the units vest. The~~ Company has accrued for these dividends and are reported in accrued liabilities and other non-current liabilities. The total expense is amortized on a straight-line basis, over the vesting period. The Company recorded $278 thousand and $484 thousand of unit-based compensation expense forduring the nine months ended June 30, 2021 ~~and 2020 related to this issuance.~~

under the 2018 LTIP. These restricted units had a vesting period of 36-months with a fair value price of $112.47. The Company ~~granted 15,767~~determined the fair value of the common units in accordance with ASC 718 using an options pricing model. Immediately prior to the consummation of the Merger and in accordance with the Merger Agreement, any accrued but unpaid cash dividends on the unvested restricted units ~~to certain executives effective February 1, 2020 which vest over a three-year period and~~issued under the Company simultaneously repurchased 1,229 shares from these executives for payment of their employee tax withholding obligations, resulting in a net issuance of 14,538. The total expense is amortized on a straight-line basis, over the vesting period. The Company recorded $203 thousand and $166 thousand of2018 LTIP was paid.

Total unit-based compensation expense of $0.7 million is for all of the issuances outstanding during the nine months ended June 30, ~~2021 and 2020 related to this issuance.~~

On October 1, 2020, the Company granted 13,309 restricted units to certain executives which vest over a three-year period. The total expense is amortized on a straight-line basis, over the vesting period. The Company recorded $208 thousand and $0 of unit-based compensation expense for the nine months ended June 30, 2021 and 2020 related to this issuance.

On October 5, 2020, an executive of the Company forfeited 904 restricted units from the grant dated April 29, 2019 and 1,802 restricted units from the grant dated February 1, 2020 totaling a total forfeiture of 2,706 restricted units.

Total unit-based compensation expense of $0 and $291 thousand, respectively, is for all of the unit-based issuances outstanding for the three months ended June 30, 2021 and 2020. Total unit-based compensation expense of $689 thousand and $650 thousand, respectively, is for all of the unit-based issuances outstanding for the nine months ended June 30, 2021 and 2020.2021. Unit-based compensation expense is included in general and administrative costs on the Company's condensed consolidated statement of operations. ~~The Company will recognize any forfeited units, and any unpaid dividends for those units, as they occur as a reduction to accrued liabilities and members' equity on the consolidated balance sheet.~~

~~RILEY EXPLORATION PERMIAN, INC.~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

~~(Unaudited)~~

(11) ~~Preferred Units~~

As of August 13, 2020, REP LLC entered into the Fourth Amended and Restated Limited Liability Company Agreement (the "Fourth LLC Agreement") which declared the mandatory redemption date for all Series A Preferred Units in cash to one year following the expiration of the credit agreement (as may be further amended, restated, supplemented, modified or replaced from time to time) which was set to mature on September 28, 2023.

Immediately prior to the closing of the Merger on February 26, 2021 and in accordance with the Merger Agreement, REP LLC converted each issued and outstanding Series A Preferred Unit into one common unit and paid the holders of REP LLC Series A Preferred Units a cash payment equal to the amount of any unpaid dividends accruing between October 1, 2020 and February 26, 2021 in accordance with its Fourth LLC Agreement. The Company converted 511,695 Series A Preferred Units with a value of $61.2 million to common units in accordance with the Fourth LLC Agreement and Merger Agreement. Additionally, the cash payment of any unpaid dividends accrued between October 1, 2020 and February 26, 2021 was $1.5 million on 511,695 Series A Preferred Units.

~~The tables below summarize the changes in preferred units during the three and nine months ended June 30, 2021 and 2020:~~

Units Amount
(In thousands)
Balance, September 30, 2020 504,168 $ 60,292
Dividends paid in kind 7,527 904
Balance, December 31, 2020 511,695 61,196
Units converted to common units(1)
(511,695) (61,196)
Balance, March 31, 2021 0 0
Balance, June 30, 2021 0 $ 0
~~_____________________~~

~~(1)On February 26, 2021, the Company converted 511,695 Series A Preferred Units with a value of $61.2 million to common units in accordance with the Fourth LLC Agreement and Merger Agreement.~~

Units Amount
(In thousands)
Balance, September 30, 2019 475,152 $ 56,810
Dividends paid in kind 7,094 851
Balance, December 31, 2019 482,246 57,661
Dividends paid in kind 7,199 864
Balance, March 31, 2020 489,445 58,525
Dividends paid in kind 7,307 877
Balance, June 30, 2020 496,752 $ 59,402

After the closing of the Merger, the Company's authorized capital stock includes 25 million shares of preferred stock with a par value of $0.0001 per share, of which 0 shares were issued and outstanding as of June 30, 2021.

In accordance with ASC 480-10-S99 Distinguishing Liabilities from Equity, equity securities are required to be classified outside of permanent equity in temporary equity if they are redeemable or may become redeemable for cash or other assets. As the Company was not considered to have sole control over the contractually mandated redemption during the year ended September 30, 2020 since the Series A Preferred Units were set for redemption in 2024 prior to the conversion of the Series A Preferred Units into common units and exchange of common units for common stock in the Merger, the Series A Preferred Units were classified as mezzanine equity prior to their conversion for the period in which they were outstanding.

~~RILEY EXPLORATION PERMIAN, INC.~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

~~(Unaudited)~~

~~(12)~~Income Taxes

REP LLC was organized as a limited liability company and treated as a flow-through entity for federal income tax purposes. As such, taxable income and any related tax credits were passed through to its members and ~~are~~ included in their tax returns, even though such taxable income or tax credits may not have been distributed. In connection with the closing of the Merger, the ~~Company’s~~Company's tax status changed from a limited liability company to a C-corporation. As a result, the Company is responsible for ~~Federal~~federal and ~~State~~state income taxes and must record deferred tax assets and liabilities for the tax effects of any temporary differences that exist on the date of the change. See further discussion in Note 4 - Acquisitions and Divestitures. When push down accounting does not apply as part of a business combination, GAAP requires the effect of the change in tax status to be recognized in the financial statements and the effect is included in income (loss) from continuing operations. Accordingly, a provision for federal and state corporate income taxes has been made only for the operations of REP LLC from February 27, 2021 through March 31, 2021 in the accompanying consolidated financial statements. Upon consummation of the Merger, the Company established a $13.6 million provision for deferred income taxes with the conversion to a C-corporation.exist.

The components of the Company's consolidated provision for income taxes from continuing operations are as follows:


		Three Months Ended June 30,				Nine Months Ended June 30,					Three Months Ended June 30,				Nine Months Ended June 30,
		2021		2020		2021		2020			2022		2021		2022		2021
		(In thousands)									(In thousands)
Current income tax expense:

Current income tax expense (benefit):										Current income tax expense (benefit):
Federal	Federal	$	(780)	$	0	$	0	$	0	Federal	$	531	$	(780)	$	1,300	$	—
State	State	(229)		0		(232)		0		State	184		(229)		308		(232)
Total current income tax expense		$	(1,009)	$	0	$	(232)	$	0
Deferred income tax expense:
Total current income tax expense (benefit)										Total current income tax expense (benefit)	$	715	$	(1,009)	$	1,608	$	(232)
Deferred income tax expense (benefit):										Deferred income tax expense (benefit):
Federal	Federal	$	6,629	$	0	$	20,629	$	0	Federal	$	9,875	$	6,629	$	12,648	$	20,629
State	State	(2,375)		319		(3,444)		319		State	337		(2,375)		426		(3,444)
Total deferred income tax expense	Total deferred income tax expense	4,254		319		17,185		319		Total deferred income tax expense	10,212		4,254		13,074		17,185
Total income tax expense	Total income tax expense	$	3,245	$	319	$	16,953	$	319	Total income tax expense	$	10,927	$	3,245	$	14,682	$	16,953

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RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

A reconciliation of the statutory federal income tax rate to the Company's effective income tax rate is as follows:


		Three Months Ended June 30,				Nine Months Ended June 30,					Three Months Ended June 30,				Nine Months Ended June 30,
		2021		2020		2021		2020			2022		2021		2022		2021
		(In thousands)

Tax at statutory rate	Tax at statutory rate	21.0	%	21.0	%	21.0	%	21.0	%	Tax at statutory rate	21.0	%	21.0	%	21.0	%	21.0	%
Nondeductible compensation	Nondeductible compensation	(21.8)	%	0	%	(8.5)	%	0	%	Nondeductible compensation	0.2	%	(21.8)	%	0.2	%	(8.5)	%
Transaction costs	Transaction costs	(32.6)	%	0	%	(12.8)	%	0	%	Transaction costs	—	%	(32.6)	%	—	%	(12.8)	%
Other		(0.1)	%	0	%	(0.1)	%	0	%
Stock compensation										Stock compensation	—	%	(0.1)	%	(0.3)	%	(0.1)	%
State income taxes, net of federal benefit	State income taxes, net of federal benefit	14.9	%	0	%	5.8	%	0	%	State income taxes, net of federal benefit	0.8	%	14.9	%	0.9	%	5.8	%
Change in Tax Status		0	%	0	%	(30.5)	%	0	%
Income Subject to Taxation by REP LLC's Unitholders		(0.2)	%	(21.0)	%	(12.9)	%	(21.0)	%
Change in tax status										Change in tax status	—	%	—	%	—	%	(30.5)	%
Income subject to taxation by REP LLC's unitholders										Income subject to taxation by REP LLC's unitholders	—	%	(0.2)	%	—	%	(12.9)	%
Effective income tax rate	Effective income tax rate	(18.8)	%	0	%	(38.0)	%	0	%	Effective income tax rate	22.0	%	(18.8)	%	21.8	%	(38.0)	%

The Company's federal income tax returns for the years subsequent to September 30, ~~2017~~2018 remain subject to examination. The Company's income tax returns in major state income tax jurisdictions remain subject to examination for various periods subsequent to September 30, ~~2017.~~2018. The Company currently believes that all other significant filing positions are highly certain and that all of its other significant income tax positions and deductions would be sustained under audit or the final resolution would not have a material effect on the consolidated financial statements. Therefore, the Company has not established any significant reserves for uncertain tax positions.

~~RILEY EXPLORATION PERMIAN, INC.~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

~~(Unaudited)~~

Section 382 of the Internal Revenue Code limits the utilization of U.S. net operating loss ("NOL") carryforwards following a change in control. The Merger caused a stock ownership change for purposes of Section 382. Subject to an approximate annual limit, the Company has federal net operating losses of $10.2 million of which $4.7 million will expire beginning in 2022 with $5.5 million of the NOL's do not expire. We believe it is more likely than not the tax benefit of these net operating losses will be fully realized, as such no valuation allowance has been recorded. The deferred tax assets for the net operating losses are presented net with deferred tax liabilities, which primarily consist of book and tax depreciation differences.

~~(13)~~(12)Discontinued Operations and Assets Held ~~for~~For Sale

Kansas Reporting Unit

On March 10, 2021, the Company entered into a PSA to divest of the Kansas Reporting Unit for an agreed upon purchase price of $3.5 million before certain closing adjustments. In addition, the Company also agreed to assign to the buyer its lease associated with Tengasco's former corporate office in Greenwood Village, Colorado. With Tengasco qualifying as a business and the Kansas Reporting Unit making up a significant portion of the assets of Tengasco, the Company concluded that the transaction met the requirements of assets held for sale and discontinued operations upon the acquisition date. The ~~effective date of the sale was March 1, 2021 and the~~ sale closed on April 2, 2021 for ~~the agreed upon~~an adjusted purchase price ~~plus approximately $0.2~~of $3.3 million, ~~in net~~after customary closing adjustments.

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RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

The following table presents the ~~amounts~~components of the loss on discontinued operations reported in the condensed consolidated ~~statement~~statements of operations asfor the periods ended June 30, 2021:


	Three Months Ended		Nine Months Ended
	June 30, 2021		June 30, 2021
	(In thousands)
Oil and natural gas sales	$	—	$	—
Total revenues	—		—
Lease operating expenses	—		115
Goodwill impairment	—		18,516
Total expenses	—		18,631
Other expenses	882		882
Loss from discontinued operations before income taxes	(882)		(19,513)
Income tax expense	(85)		(60)
Net loss from discontinued operations, net of tax	$	(967)	$	(19,573)

The Company did not have any discontinued operations ~~as of~~during the three and nine months ended June 30, ~~2021:~~2022.

Tengasco
Three Months Ended
June 30, 2021 Nine Months Ended
June 30, 2021
(In thousands)
Oil and natural gas sales $ 0 $ 0
Total revenues 0 0
Lease operating expenses 0 115
Goodwill impairment 0 18,516
Total expenses 0 18,631
Other expense 882 882
Loss from discontinued operations before income taxes (882) (19,513)
Income tax expense (85) (60)
Net loss from discontinued operations, net of tax $ (967) $ (19,573)

~~For further discussion of revenues and expenses included in discontinued operations, see further discussion in Note 4 - Acquisitions and Divestitures.~~

~~(14)~~(13)Net Income (Loss) Per Share/Unit

Net income (loss) per share/unit is calculated using a retroactive application of the Exchange Ratio and the ~~1-for-12~~one-for-twelve reverse stock ~~split. Certain restricted shares of~~split that occurred in conjunction with the ~~Company met the criteria of a participating security.~~Merger. The Company calculated net income or loss per share/unit using the ~~two-class~~treasury stock method.

~~RILEY EXPLORATION PERMIAN, INC.~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

~~(Unaudited)~~

The table below sets forth the computation of basic and diluted net income (loss) per share/unit for the three and nine months ended June 30, ~~2021~~2022 and ~~2020:~~2021:


	Three Months Ended June 30,			Nine Months Ended June 30,
		2022		2021		2022		2021
		(In thousands, except per share/unit)
Continuing Operations:
Net income (loss) - Diluted		$	38,555	$	(20,534)	$	52,785	$	(61,747)
Less: Dividends on preferred units		—		—		—		(1,491)
Net income (loss) attributable to common shareholders/unitholders - Basic(1)		$	38,555	$	(20,534)	$	52,785	$	(63,238)

Basic weighted-average common shares/units outstanding		19,542		17,786		19,504		14,872
Effecting of dilutive securities:

Restricted shares/units		118		—		116		—
Diluted weighted-average common shares/units outstanding		19,660		17,786		19,620		14,872
Continuing Operations:
Basic net income (loss) per common share/unit		$	1.97	$	(1.15)	$	2.71	$	(4.25)
Diluted net income (loss) per common share/unit		$	1.96	$	(1.15)	$	2.69	$	(4.25)

_____________________________________________________

Three Months Ended June 30, Nine Months Ended June 30,
2021 2020 2021 2020
(In thousands, except per share/unit)
Continuing Operations:
Net income (loss) - Diluted $ (20,534) $ (27,984) $ (61,747) $ 40,228
Less: Dividends on preferred units 0 (890) (1,491) (2,631)
Net income (loss) attributable to common shareholders/unitholders - Basic $ (20,534) $ (28,874) $ (63,238) $ 37,597
Basic weighted-average
    common shares/units outstanding 17,786 12,469 14,872 12,454
Effecting of dilutive securities:
   Series A preferred units 0 0 0 3,969
   Restricted units 0 0 0 148
Diluted weighted-average
    common shares/units outstanding 17,786 12,469 14,872 16,571
Continuing Operations:
Basic net income (loss)
    per common share/unit $ (1.15) $ (2.32) $ (4.25) $ 3.02
Diluted net income (loss)
    per common unit $ (1.15) $ (2.32) $ (4.25) $ 2.43
(1)Used in basic and diluted net loss per share calculation when the Company is in a net loss position.

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RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

For the three and nine months ended June 30, ~~2021~~2022 and ~~2020,~~2021, the following shares/units were excluded from the calculation of diluted net income (loss) per share/unit due to their anti-dilutive effect:

Three Months Ended June 30, Nine Months Ended June 30,
2021 2020 2021 2020
(In thousands)
Series A preferred units 0 4,029 0 0
Restricted units 0 205 0 57
Restricted shares 236 0 236 0


	Three Months Ended June 30,		Nine Months Ended June 30,
	2022	2021	2022	2021
	(In thousands)

Restricted shares/units	202	236	204	236

~~(15)~~(14)Commitments and Contingencies

Legal Matters

~~On May 14, 2020 the~~The Company associated with the predecessor Tengasco entity, received notice of 3 orders (the “Orders”) issued by the Regional Director of the Bureau of Safety and Environmental Enforcement (“BSEE”) of the Department of the Interior dated May 13, 2020, stating that the Company, together withhas been named as a ~~group of several other named parties, were being looked to by the BSEE to perform the decommissioning of facilities~~defendant in an action commenced on ~~three Gulf of Mexico leases owned by Hoactzin Partners, L. P. ("Hoactzin") and other lessees due to Hoactzin’s default~~October 25, 2021 in its lease obligations to decommission such facilities. No monetary amount was sought or described in the Orders. Hoactzin is controlled by Peter E. Salas, the chairman of Tengasco’s Board of Directors prior to the Merger. Management’s assessment of the likelihood of a loss is remote as the Company believes it has available defenses to the Orders. On August 21, 2020, the bankruptcy court inUnited States Bankruptcy Court for the Northern District of Texas, Dallas Division, by the Chapter 7 Trustee for the Hoactzin Bankruptcy. The Company was served with this lawsuit on or about December 7, 2021. The complaint alleges that in Dallas entered an agreed order requiring Hoactzin, the surety on Hoactzin’s bonds, and seven other working interest owners (a group not including the Company) to complete all the necessary decommissioning on allOctober of Hoactzin’s facilities and to prepay all anticipated expenses, including insurance premiums and a contingency reserve, estimated to be necessary to do so. The bankruptcy trustee has reported that all funds to be paid have been received from all parties2018, one year prior to the ~~agreed order.~~

~~RILEY EXPLORATION PERMIAN, INC.~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

~~(Unaudited)~~

~~Decommissioning is proceeding under the direction~~Hoactzin bankruptcy filing in October of 2019, Peter Salas ("Salas"), Chairman of the ~~bankruptcy trustee and approved contractors under~~Board of Tengasco during the ~~control~~period of the ~~bankruptcy court. Accordingly, it is anticipated~~purported fraudulent transfers, caused Hoactzin to transfer its working interests in certain wells on its Kansas acreage (the “Kansas Working Interests”) to the Company for an amount the complaint alleges was purportedly less than the reasonable equivalent value of such Kansas Working Interests. The complaint includes avoidance actions and other causes of action in connection with the transfer of the Kansas Working Interests, as well as other causes of action alleged related to certain transactions to which the Company was not a party.

The complaint also alleges that ~~all work contemplated~~Salas, Dolphin Direct Equity Partners, L.P. ("DDEP"), an entity substantially owned by ~~the Orders will be completed by, and at the expense of, other persons~~Salas, and the ~~relief sought in the Orders~~Company are jointly and severally liable for the ~~Company to perform~~damages incurred by Hoactzin. In connection with the ~~work will at that time have~~Company’s merger in February 2021, Salas resigned his position from the Company’s Board and no ~~impact to~~longer holds any position as an officer or director of the Company. On ~~May 13,~~April 2, 2021, ~~a notice of default was sent by BSEE to~~ the Company ~~relating~~closed on the sale of all the assets it held in Kansas (of which the Kansas Working Interests were a small part) to ~~Hoactzin’s failure to complete its decommissioning obligations~~a third party for ~~certain~~an agreed upon purchase price of the terminated leases and wells that are subject to the Orders. On May 21, 2021, the bankruptcy trustee requested an extension to the decommissioning deadline relating to several wells referenced in the subject Orders. Included with the BSEE extension request was a project status update for the decommissioning obligations, which indicated that several obligations had either already been completed or were well underway and proceeding to completion. On June 7, 2021, BSEE granted an extension to complete the remaining decommissioning obligations for the subject leases no later than August 31, 2021. No other enforcement actions have been taken by BSEE. $3.3 million.

The Company ~~will continue to monitor~~believes that the ~~ongoing completion of the decommissioning obligations.~~

~~Due to the nature of the Company's business, the Company may at times be subject to~~ claims are without merit and ~~legal actions.~~is asserting a vigorous defense. The Company ~~accrues liabilities when it is probable that future costs will be incurred, and such costs can be reasonably estimated. Such accruals~~has filed an answer denying the allegations. The parties are ~~based on developments to date and the Company’s estimates of the outcomes of these matters.~~ conducting discovery.

The Company did not recognize any material liability as of June 30, ~~2021~~2022 and September 30, ~~2020.~~2021. The Company's assessment of probability and/or estimates of liabilities are based on information known about the pending legal matters and its experience in contesting, litigating, and settling similar matters. Although actual amounts could differ from management's estimates, none of the actions are believed by management to involve future amounts that would be material to the Company's financial position or results of operations, or liquidity after consideration of recorded accruals. Management ~~believes it is remote~~does not expect that the ~~impact of such~~losses from any litigation matters or claims that are reasonably possible to occur will have a ~~materially~~material adverse effect on the ~~Company’s~~Company's financial position, results of operations, or ~~cash flows.~~liquidity.

Environmental Matters

The Company is subject to various federal, state and local laws and regulations relating to the protection of the environment. These laws, which are often changing, regulate the discharge of materials into the environment and may require the Company to remove or mitigate the environmental effects of the disposal or release of petroleum or chemical substances at various sites. The Company ~~recorded 0~~had no environmental liabilities as of June 30, ~~2021 and~~2022 or September 30, ~~2020.~~2021.

Contractual Commitments

In July 2021, as part of a planned expansion of the primary gas processing plant owned by the Company's primary midstream counterparty, Stakeholder Midstream LLC ("Stakeholder"), the Company committed to annually drill, complete and connect a minimum number of wells or deliver an annual target volume to Stakeholder's gathering system. While the minimum number of wells is below our planned development activity, there are financial penalties if the minimum activity levels are not met. The annual well or volume target is for each of five years beginning January 2022. The additional capacity from the gas processing plant expansion is expected to lead to increased natural gas sales and decreased gas flaring for the Company.

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RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

On October 7, 2021, the Company executed 2 agreements related to its EOR project. The first agreement is a CO2 purchase agreement with Kinder Morgan CO2 Company, LLC and the second agreement is a connection agreement that also established a delivery point for the purchased CO2 with the Cortez Pipeline Company.

On March 25, 2022, the Company executed a purchase order for facility and support equipment for its EOR project. Under the order, the Company has remaining commitments totaling approximately $2.0 million, and the equipment will be delivered within 29 weeks of executing the purchase order.

On April 22, 2022, the Company entered into a purchase agreement for pipe related to its fiscal 2023 drilling program. Under the agreement, the Company has commitments to purchase approximately $10.6 million of pipe by December 2022.

~~(16)~~(15)Subsequent Events

On June 30, 2021, the Company entered into an Underwriting Agreement (the "Underwriting Agreement") with Truist Securities, Inc., as the representative of the other several underwriters named in the Underwriting Agreement. On July 2, 2021, the Company issued 1,666,667 shares of common stock at a price to the public of $30.00 per share in accordance with the Underwriting Agreement. Net proceeds from the issuance were approximately $46.7 million, after deducting the underwriting discounts and commissions and estimated offering expenses paid by the Company.

~~On July 9, 2021,~~11, 2022, the Board of Directors of the Company declared a cash dividend ~~for the third quarter~~ of ~~2021 of $0.28~~$0.31 per share of common stock, payable on August ~~6, 2021~~8, 2022 to its ~~stockholders~~shareholders of record at the close of business on July ~~23, 2021.~~

~~On July 14, 2021 and July 30, 2021, the Company utilized $11.5 million and $24 million, respectively, to pay down the revolving credit facility to $62 million.~~25, 2022.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the Company’s ~~unaudited~~ condensed consolidated financial statements and related notes thereto presented in this report as well as the ~~Company’s~~Company's audited consolidated financial statements and related notes included in the Company's ~~current report on Form 8-K/A filed on April 22, 2021 and unaudited condensed consolidated financial statements and related notes included in~~Annual Report for the ~~Company's quarterly report on Form 10-Q filed on May 17,~~fiscal year ended September 30, 2021. The following discussion contains “forward-looking statements” that reflect the Company’s future plans, estimates, beliefs and expected performance. The Company’s actual results could differ materially from those discussed in these forward-looking statements. See "Cautionary ~~Statements~~Statement Regarding Forward-Looking Statements"~~, “—Forward-Looking Statements~~ and ~~Risk” and “Part~~"Part II. Item 1A. Risk ~~Factors”~~Factors" below and the information set forth in the Risk Factors under Part I, Item 1A of the Company's Annual Report for the fiscal year ended September 30, 2021.

Overview

We operate in the upstream segment of the oil and natural gas industry and are focused on steadily growing conventional reserves, production and cash flow through the acquisition, exploration, development and production of oil, natural gas and ~~natural gas liquids (“NGLs”)~~NGLs primarily in the Permian ~~Basin.~~Basin in West Texas. The Company’s activities are primarily focused on the San Andres Formation, a shelf margin deposit on the Central Basin Platform and Northwest Shelf. We intend to continue to develop our reserves and increase production through development drilling and exploration activities and through acquisitions that meet our strategic and financial objectives.

Financial and Operating Highlights

Financial and operating results reflect the following:

•Increased total net equivalent production by ~~35%~~12% to ~~9.1~~10.2 MBoe/d for the three months ended June 30, ~~2021,~~2022, as compared to the same period in ~~2020~~2021 and 20% to 10.0 MBoe/d for the nine months ended June 30, 2022, as compared to the same period in 2021

•During the ~~fiscal third quarter of 2021, drilled 7~~three and nine months ended June 30, 2022, 5 gross ~~(4.8~~(5.0 net) and 12 gross (10.8 net) horizontal wells ~~and 1 gross (1 net) vertical injection well; completed 5 gross (2.8 net) horizontal wells~~brought online to production, respectively

•Realized average ~~composite~~combined price on ~~commodities~~production sold of ~~$50.18~~$94.80 per Boe, before derivative settlements, during the ~~fiscal third quarter of 2021,~~three months ended June 30, 2022, including ~~$64.55~~$108.41 per barrel for oil

•~~Realized average composite price on commodities of $40.86 per Boe, including derivative settlements, during the fiscal third quarter of 2021~~

•Generated cash flow from ~~continuing~~ operations of ~~$58.8~~$97.0 million for the nine months ended June 30, ~~2021~~2022

•Total ~~cash~~accrued capital expenditures ~~before acquisitions~~ of ~~$40.1~~$34.4 million and $80.5 million for the three and nine months ended June 30, ~~2021~~2022, respectively

•Paid cash dividends on common ~~dividends~~shares of ~~$5.0~~$6.1 million ~~on May 7, 2021;~~during the three months ended June 30, 2022, and announced latest dividend of ~~$0.28~~$0.31 per share with a record date of July ~~23, 2021,~~25, 2022, which was paid on August ~~6, 2021,~~8, 2022, for a total of ~~$5.5~~$6.1 million

•Exited the fiscal third quarter with ~~$6.9~~$16.8 million in cash and ~~$97.5~~$61.0 million drawn on our ~~credit facility; subsequently reduced~~revolving credit facility ~~borrowings to $62 million in July 2021~~

Recent Developments

Market Conditions and Commodity Prices

U.S. and global markets are experiencing heightened volatility following impactful geopolitical events, consistent evidence of widespread inflation, as well as increased fears of an economic recession. Though less impactful than during 2021, cases of COVID-19 continue to affect global activity and demand for commodity products. Additionally, the full-scale military invasion of Ukraine by Russian troops has continued unabated since February 2022. Although the length and impact of the ongoing military conflict is highly unpredictable, the conflict in Ukraine has led to market disruptions, including significant volatility in commodity prices, credit and capital markets, as well as supply chain interruptions.

In addition, global markets are experiencing significant inflation attributable to a number of factors. Certain of our capital expenditures and expenses are affected by general inflation and we expect costs for the remainder of 2022 to continue to be a

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function of supply and demand. Specifically, costs for oilfield equipment and services continue to experience significant inflation, which we expect to continue for the foreseeable future.

In response to inflation concerns, the U.S. Federal Reserve initiated a monetary tightening policy in 2022, sharply increasing interest rates in June and July 2022 with public estimates of further increases in the future. The ~~COVID-19 pandemic~~Company's floating-rate credit facility will be impacted by such rate increases.

The combination of geopolitical events, inflation and the ~~measures being taken~~rising rate environment has led to ~~address and limit the spread~~increasing forecasts of ~~the virus significantly reduced~~a U.S. or global ~~economic activity, resulting in~~recession. Any such recession could prolong market volatility or cause a ~~significant~~ decline in ~~the demand for and~~commodity prices, ~~of crude oil and condensate, natural gas liquids (NGLs) and natural gas.~~among other potential impacts.

The Company cannot estimate the ~~full~~ length or gravity of the future ~~impacts at this time and if there is another significant decline in oil price, it could~~impact these events will have ~~a material adverse effect~~ on the ~~Company’s~~Company's results of operations, financial position, liquidity and the value of oil and natural gas reserves.

The Company has developed and implemented a number of safety measures, which have successfully kept our workforce healthy and safe. The Company has established an informational campaign to provide employees an understanding of the virus risk factors and safety measures, as well as timely updates from governmental stay-at-home regulations. Expectations have also

been set for employees to communicate immediately if they, or someone they have been in contact with, has experienced symptoms or tested positive for COVID-19. Additional measures include distribution of educational material regarding health and safety guidance, limiting access to common areas within the office, ensuring social distancing guidance by relocating personnel, and other guidelines as recommended by the Center for Disease Control and Prevention (CDC) and local authorities.

~~EOR Project~~

The Company began initial operations during May 2021 on its enhanced oil recovery (“EOR”) project, which will utilize a combination of water and CO2 injection, applied to horizontal producing wells at its core asset in Yoakum County, Texas (“EOR Project”). This asset is directly adjacent to several of the largest EOR projects in the U.S., which have employed EOR techniques for many decades.

~~Recent Transactions~~

On April 7, 2021, the Company filed a registration statement on Form S-3 (the “Registration Statement”) with the Securities and Exchange Commission that was declared effective on May 12, 2021, in connection with the offer and sale from time to time (each, an “Offering” and, collectively, the “Offerings”) as set forth in the Registration Statement, the form of prospectus contained therein and one or more preliminary or final supplements to the Prospectus (each, a “Prospectus Supplement”), of the following securities with an aggregate offering price of up to $250,000,000: (i) by the Company of an indeterminate aggregate amount of securities consisting of shares of the Company’s common stock, par value $0.001 per share, or shares of the Company’s preferred stock, par value $0.001, which may be issued in one or more series (any such shares being offered by the Company are hereinafter referred to as the “Primary Shares”); or (ii) by the selling stockholders named in the Registration Statement or any other selling stockholders to be identified in one or more Prospectus Supplements of up to 16,721,922 shares of Common Stock on the terms to be determined at the time of each Offering. On July 2, 2021, the Company issued 1,666,667 shares of common stock at a price to the public of $30.00 per share. Net proceeds from the Offering were approximately $46.7 million, after deducting the underwriting discounts and commissions and estimated offering expenses paid by the Company.

~~2021 Capital and Operating Plan~~

We expect our fiscal 2021 capital budget to be approximately $60 million to $66 million, which we believe is consistent with our capital allocation framework, and which we believe will be funded entirely by operating cash flow and proceeds of the stock offering.

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Results of Operations

Comparison for the ~~Three~~three and ~~Nine Months Ended~~nine months ended June 30, ~~2021~~2022 and ~~2020~~

2021

The following table sets forth selected operating data for the three and nine months ended June 30, ~~2021~~2022 and ~~2020:~~2021:

Three Months Ended June 30, Nine Months Ended June 30,
2021 2020 2021 2020
Revenues (in thousands):
Oil sales $ 39,504 $ 6,153 $ 92,395 $ 59,548
Natural gas sales 957 (738) 5,592 (1,009)
Natural gas liquids sales 1,088 (446) 2,635 (715)
Oil and natural gas sales, net $ 41,549 $ 4,969 $ 100,622 $ 57,824
Production Data, net (in thousands):
Oil (MBbls) 612 487 1,702 1,564
Natural gas (MMcf) 732 400 1,795 1,162
Natural gas liquids (MBbls) 94 61 272 181
Total (MBoe)(1)
828 615 2,273 1,939
Daily combined volumes (BOE/d)(1)(2)
9,100 6,757 8,325 7,077
Daily oil volumes (BO/d) 6,726 5,350 6,234 5,706
Average Prices:(1)(3)
Oil ($ per Bbl) $ 64.55 $ 12.63 $ 54.29 $ 38.08
Natural gas ($ per Mcf) 1.31 (1.85) 3.12 (0.87)
Natural gas liquids ($ per Bbl) 11.57 (7.31) 9.70 (3.94)
Combined ($ per BOE) $ 50.18 $ 8.08 $ 44.28 $ 29.82
Oil, including derivative settlements ($ per Bbl) $ 51.84 $ 42.76 $ 51.16 $ 50.98
Natural gas, including derivative settlements ($ per MMbtu) 1.39 (1.85) 3.22 (0.87)
Natural gas liquids, including derivative settlements ($ per Bbl)(4)
11.57 (7.31) 9.70 (3.94)
Average price, including derivative settlements ($ per BOE) $ 40.86 $ 31.95 $ 42.02 $ 40.22


	Three Months Ended June 30,				Nine Months Ended June 30,
	2022		2021		2022		2021
Revenues (in thousands):
Oil sales	$	82,501	$	39,504	$	195,500	$	92,395
Natural gas sales	2,850		957		7,344		5,592
Natural gas liquids sales	2,430		1,088		8,232		2,635
Oil and natural gas sales, net	$	87,781	$	41,549	$	211,076	$	100,622

Production Data, net:
Oil (MBbls)	761		612		2,104		1,702
Natural gas (MMcf)	572		732		2,098		1,795
Natural gas liquids (MBbls)	70		94		268		272
Total (MBoe)	926		828		2,722		2,273

Daily combined volumes (Boe/d)	10,176		9,100		9,969		8,325
Daily oil volumes (Bbls/d)	8,363		6,726		7,707		6,234

Average Realized Prices:
Oil ($ per Bbl)	$	108.41	$	64.55	$	92.91	$	54.29
Natural gas ($ per Mcf)	4.98		1.31		3.50		3.12
Natural gas liquids ($ per Bbl)	34.71		11.57		30.72		9.70
Combined ($ per Boe)	$	94.80	$	50.18	$	77.55	$	44.28

Average Realized Prices, including derivative settlements:(1)
Oil ($ per Bbl)	$	77.31	$	51.84	$	66.50	$	51.16
Natural gas ($ per MMBtu)	1.29		1.39		1.31		3.22
Natural gas liquids ($ per Bbl)	34.71		11.57		30.72		9.70
Combined ($ per Boe)	$	66.97	$	40.86	$	55.44	$	42.02

_____________________

(1)~~One BOE is equal to six Mcf~~The Company's calculation of ~~natural gas or one Bbl of oil or NGL based on the approximate energy equivalency. This is an energy content correlation and does not reflect value or price relationship between the commodities.~~

~~(2)~~Average net sales (BOE/d) was derived by dividing the total MBoe by 91 days for the three months ended June 2021 and 2020, respectively. Average net sales (BOE/d) was derived by dividing the total MBoe by 273 days and 274 days for the nine months ended June 2021 and 2020, respectively.

~~(3)Average prices shown in table reflect prices both before and after~~ the effects of ~~REPX’s~~derivative settlements includes losses on the settlement of ~~our~~its commodity derivative contracts. ~~REPX’s calculation of such effects includes both gains or~~These losses ~~on cash settlements for commodity derivatives. The impact of these cash settlements~~ are included under other income and expense on the Company’s ~~Statement~~condensed consolidated statements of ~~Operations~~

~~(4)~~The Company uses commodity based derivative contracts to reduce exposure to fluctuations in crude oil and natural gas prices. As of June 30, 2021, the Company was not engaged in any natural gas liquids derivative contracts.operations.

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Oil and Natural Gas Revenues

Our revenues are derived from the sale of our oil and natural gas production, including the sale of NGLs that are extracted from our natural gas during processing. Revenues from product sales are a function of the volumes produced, product quality, market prices, and gas Btu content. Our revenues from oil, natural gas and NGL sales do not include the effects of derivatives. Our revenues may vary significantly from period to period as a result of changes in volumes of production sold or changes in commodity prices. The Company’s total oil and natural gas revenue, net increased ~~$36.6~~$46.2 million and $110.5 million, or ~~736%,~~111% and ~~$42.8 million, or 74%~~110%, for the three and nine months ended June 30, ~~2021 and June 30, 2020, respectively.~~2022 compared to the same periods in 2021. The Company’s realized average ~~composite~~combined price on ~~commodities~~its production for the three and nine months ended June 30, ~~2021~~2022 increased by ~~$42.10~~$44.62 and ~~$14.44 per Boe,~~$33.27, or ~~521%~~89% and ~~48%~~75%, respectively, compared to the same ~~period of 2020. The Company’s oil and natural gas sales, net~~periods in ~~its financial statements do not include the effects of derivatives as those effects are included within other income.~~2021.

Oil revenues

•For the three months ended June 30, ~~2021,~~2022, oil revenues increased by ~~$33.4~~$43.0 million, or ~~542%~~109%, compared to the same period in ~~2020.~~2021. Of the increase, ~~$31.8~~$33.4 million was attributable to an increase in our realized price and ~~$1.6~~$9.6 million was attributable to an increase in volume. ~~Volume~~Volumes increased by ~~26%~~24%, while realized prices increased by ~~over 400%~~68% compared to the same period in ~~2020.~~2021.

•For the nine months ended June 30, ~~2021,~~2022, oil revenues increased by ~~$32.8~~$103.1 million, or ~~55%~~112%, compared to the same period in ~~2020.~~2021. Of the increase, ~~$27.6~~$81.3 million was attributable to an increase in our realized price and ~~$5.2~~$21.8 million was attributable to an increase in volume. Volumes increased by 9%24%, while realized prices increased by ~~43%~~71% compared to the same period in ~~2020.~~2021.

•Oil volumes increased during the three and nine months ended June 30, ~~2021~~2022 due to ~~increased~~ production ~~as a result of~~from new wells and ~~workovers.~~workovers performed on existing wells. During the three and nine months ended June 30, 2022, we brought online 5 gross (5.0 net) and 12 gross (10.8 net) horizontal wells, respectively.

•The average WTI price increased by $42.65 and $38.12 per Bbl during the three and nine months ended June 30, 2022, respectively, compared to the same periods in 2021.

Natural gas revenues

•For the three months ended June 30, ~~2021,~~2022, natural gas revenues increased by ~~$1.7~~$1.9 million, compared to the same period in ~~2020,~~2021, to ~~$1.0~~$2.9 million from ~~($0.7)~~$1.0 million. Volumes ~~increased~~decreased by ~~83% and~~22%, while realized prices increased by ~~$3.16/~~$3.67 per Mcf ~~from negative effective prices experienced~~compared to the same period in ~~2020.~~2021.

•For the nine months ended June 30, ~~2021,~~2022, natural gas revenues increased by ~~$6.6~~$1.8 million, compared to the same period in ~~2020,~~2021, to ~~$5.6~~$7.3 million from ~~($1.0)~~$5.6 million. Volumes increased by ~~54% and~~17%, while realized prices increased by ~~$3.99/~~$0.38 per Mcf ~~from negative effective prices experienced~~compared to the same period in ~~2020.~~2021.

•Natural gas sales volumes decreased during the three months ended June 30, 2022 compared to the same period in 2021 due to curtailed volume capacity by our midstream gas gathering and processing counterparty as a result of their capacity expansion project. For the nine months ended June 30, 2022, natural gas sales volumes increased compared to the same period in 2021 due to increased production from new wells and workovers performed on existing wells, partially offset by curtailed volume capacity as seen in during the period.

•The average Henry Hub price increased by $4.55 and $2.65 per Mcf during the three and nine months ended June 30, ~~2021 due~~2022, respectively, compared to ~~increased production and increased gas processing capacity available from~~ the ~~Company's midstream gathering and processing partner.~~

same periods in 2021.

Natural gas liquids revenues

•For the three months ended June 30, ~~2021, natural gas liquids~~2022, NGL revenues increased by ~~$1.5~~$1.3 million, compared to the same period in ~~2020,~~2021, to ~~$1.1~~$2.4 million from ~~($0.4)~~$1.1 million. Volumes ~~increased~~decreased by ~~54% and~~26%, while realized prices increased ~~by $18.88/~~$23.14 per Bbl ~~from negative effective prices experienced~~compared to the same period in ~~2020.~~2021.

•For the nine months ended June 30, ~~2021, natural gas liquids~~2022, NGL revenues increased by ~~$3.4~~$5.6 million, compared to the same period in ~~2020,~~2021, to ~~$2.6~~$8.2 million from ~~($0.7)~~$2.6 million. Volumes ~~increased by 50% and~~remained flat, while realized prices increased ~~by $13.65/~~$21.02 per Bbl ~~from negative effective prices experienced~~compared to the same period in ~~2020.~~2021.

•~~Natural gas liquids~~NGL sales volumes ~~increased~~decreased during the three ~~and nine~~ months ended June 30, 2022 compared to the same period in 2021 due to ~~increased production and increased~~curtailed volume capacity by our midstream gas ~~processing capacity available from the Company's midstream~~ gathering and processing ~~partner.~~counterparty as a result of their capacity expansion project.

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Contract Services - Related Party Revenue

The following ~~tables present~~table presents the Company's ~~gross profit for~~revenue and costs associated with its related party transactions:


		Three Months Ended June 30,						Nine Months Ended June 30,							Three Months Ended June 30,				Nine Months Ended June 30,
		2021			2020			2021			2020				2022		2021		2022		2021
		(In thousands)													(In thousands)
Contract services – related parties(1)		$	600		$	1,050		$	1,800		$	3,150
Contract services - related parties(1)														Contract services - related parties(1)	$	600	$	600	$	1,800	$	1,800
Cost of contract services - related parties(2)	Cost of contract services - related parties(2)	91			97			330			403			Cost of contract services - related parties(2)	89		91		324		330
Gross profit - related parties	Gross profit - related parties	$	509		$	953		$	1,470		$	2,747		Gross profit - related parties	$	511	$	509	$	1,476	$	1,470
Gross profit percentage - related parties		85		%	91		%	82		%	87		%

_____________________

(1)The Company’s contract services –- related parties revenue is derived from master services agreements with related parties to provide certain administrative support services.

(2)

The Company's cost of contract services - related parties ~~gross profit decreased for the three and nine months ended June 30, 2021 primarily due~~represents costs specifically attributable to the ~~restructuring of~~master service agreements the ~~monthly fee~~Company has in place with the ~~fourth quarter of fiscal 2020.~~ respective related parties.

The ~~monthly fee decreased by $150 thousand per month. See Note 8 – Transactions with Related Parties to~~following table presents the Company's ~~unaudited condensed consolidated financial statement included herein for more information.~~operating costs and expenses and other (income) expenses:

~~Costs and Expenses~~

Three Months Ended June 30, Nine Months Ended June 30,
2021 2020 2021 2020
Costs and Expenses: (in thousands)
Lease operating expenses $ 5,754 $ 3,760 $ 17,323 $ 15,517
Production taxes $ 2,029 $ 293 $ 5,027 $ 2,808
Exploration expenses $ 2,785 $ 6,757 $ 8,682 $ 9,231
Depletion, depreciation, amortization, and accretion $ 7,082 $ 5,028 $ 19,323 $ 16,020
Administrative costs $ 4,030 $ 1,936 $ 9,176 $ 8,669
Share-based and unit-based compensation 779 291 6,042 650
General and administrative expense $ 4,809 $ 2,227 $ 15,218 $ 9,319
Transaction costs $ 321 $ 15 $ 3,534 $ 42
Interest expense $ 1,171 $ 1,302 $ 3,571 $ 4,086
(Gain) loss on derivatives, net $ 35,396 $ 14,205 $ 74,208 $ (36,999)
Income tax expense $ 3,245 $ 319 $ 16,953 $ 319


	Three Months Ended June 30,				Nine Months Ended June 30,
	2022		2021		2022		2021
Costs and Expenses:	(In thousands)
Lease operating expenses	$	8,062	$	5,766	$	22,311	$	16,289
Production and ad valorem taxes	$	5,526	$	2,017	$	12,033	$	6,061
Exploration costs	$	22	$	2,785	$	2,131	$	8,682
Depletion, depreciation, amortization and accretion	$	7,188	$	7,082	$	20,688	$	19,323

Administrative costs	$	4,399	$	4,030	$	12,046	$	9,176
Equity-based compensation	553		779		2,521		6,042
General and administrative expense	$	4,952	$	4,809	$	14,567	$	15,218





Transaction costs	$	—	$	321	$	3,896	$	3,534
Interest expense, net	$	697	$	1,171	$	2,271	$	3,571
Loss on derivatives	$	12,363	$	35,396	$	67,188	$	74,208
Income tax expense	$	10,927	$	3,245	$	14,682	$	16,953

Lease Operating Expenses

~~The Company’s lease~~Lease operating expenses ("LOE"), are the costs incurred in the operation and maintenance of producing properties. Expenses for compression, direct labor, saltwater disposal and materials and supplies comprise the most significant portion of our lease operating expenses. Certain operating cost components, such as direct labor and materials and supplies, generally remain relatively fixed across broad production volume ranges, but can fluctuate depending on activities performed during a specific period. For instance, repairs to our pumping equipment or surface facilities or subsurface maintenance result in increased production expenses in periods during which ~~include~~they are performed. Certain operating cost components, such as compression and saltwater disposal associated with completion water, are variable and increase or decrease as hydrocarbon production levels and the volume of completion water disposal increases or decreases.

The Company’s LOE increased by $2.3 million for the three months ended June 30, 2022 compared to the same period in 2021. For the three months ended June 30, 2022, $2.1 million of the increase was due to higher workover expense as additional workovers were performed in the 2022 period and $1.6 million of the increase was attributable to costs associated with new wells and additional production volumes, partially offset by a $1.4 million decrease attributable to efficiencies on existing wells.

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The Company’s LOE increased by $6.0 million for the nine months ended June 30, 2022 compared to the same period in 2021. For the nine months ended June 30, 2022, $4.7 million of the increase was attributable to costs associated with new wells and additional production volume and $3.4 million of the increase was due to higher workover expense as additional workovers were performed in the 2022 period, partially offset by a $2.1 million decrease attributable to efficiencies on existing wells.

Production and Ad Valorem Tax Expense

Production taxes are paid on produced oil, natural gas and NGLs based on a percentage of revenues at fixed rates established by federal, state or local taxing authorities. In general, the production taxes we pay correlate to changes in our oil, natural gas and NGL revenues. We are also subject to ad valorem taxes in the counties where our production is located. Ad valorem taxes are generally based on the valuation of our oil and natural gas properties, which also trend with oil and natural gas prices and vary across the different counties in which we operate.

Production and ad valorem taxes increased by ~~$2.0~~$3.5 million and ~~$1.8~~$6.0 million for the three and nine months ended June 30, ~~2021,~~2022, respectively, compared to the same periods in ~~2020. For~~2021. Production taxes increased primarily due to increases in our oil and natural gas sales, net, as discussed above. Ad valorem taxes increased for the three and nine months ended June 30, ~~2021, $0.9 million of the increase was attributable to an increase in production volume and $1.1 million was attributable to~~2022 based on higher ~~cost on a unit basis. LOE~~estimated property values for the ~~fiscal third quarter~~current taxable period.

Exploration Expense

Exploration expense consists of ~~2020 was low on account~~expiration of ~~reduced activity~~unproved leasehold and geological and geophysical costs which include seismic survey costs. The following table presents exploration expense by area for the ~~sharp downturn in commodity prices at the time, while LOE incurred during the fiscal third quarter of 2021 is more representative of normalized activity.~~ three and nine months ended June 30, 2022 and 2021:


	Three Months Ended June 30,				Nine Months Ended June 30,
	2022		2021		2022		2021
	(In thousands, except acreage data)

Exploration expense(1)	$	—	$	2,785	$	2,053	$	8,615
Geological and geophysical costs	22		—		78		67
Total exploration expense	$	22	$	2,785	$	2,131	$	8,682

Expired net acres - Texas	—		159		717		1,626
Expired net acres - New Mexico	—		6,867		1,664		14,068
Net acres renewed after expiration(2)	9		—		106		486

_____________________

(1)For the nine months ended June 30, ~~2021, $2.7~~2022, exploration expense includes $1.5 million and $0.6 million related to expiration of unproved leasehold costs in Texas and New Mexico, respectively.

(2)The Company did not renew any net acreage after expiration in New Mexico during the three and nine months ended June 30, 2022 and 2021.

Depletion, Depreciation, Amortization and Accretion Expense

Depletion, depreciation and amortization is the systematic expensing of the ~~increase was attributable~~capitalized costs incurred to ~~an increase~~acquire, explore and develop oil, natural gas and NGLs. All costs incurred in the acquisition, exploration and development of properties (excluding costs of surrendered and abandoned leaseholds, delay lease rentals, dry holes and overhead related to exploration activities) are capitalized. Capitalized costs are depleted using the units of production ~~volume, partially~~method.

Accretion expense relates to ARO. We record the fair value of the liability for ARO in the period in which the liability is incurred (at the time the wells are drilled or acquired) with the offset ~~by $0.5 million of savings from lower costs on a unit basis.~~to property cost. The liability accretes each period until it is settled or the well is sold, at which time the liability is removed.

~~Production Tax Expense~~

~~Production taxes~~Depletion, depreciation, amortization and accretion expense increased by ~~$1.7~~$0.1 million and ~~$2.2~~$1.4 million for the three and nine months ended June 30, ~~2021,~~2022, respectively, compared to the same periods ~~in 2020,~~for 2021. The increase for the three and nine months ended June 30, 2022 was primarily due to ~~increases~~higher production, partially offset by a lower depletion rate. The depletion rate is a function of capitalized cost and related underlying reserves. The lower depletion rate was primarily driven by an increase in reserves as a result of the Company's drilling activity and improved commodity ~~sales.~~prices.

~~Exploration~~

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General and Administrative Expense ("G&A")

~~Exploration~~G&A expenses include corporate overhead such as payroll and benefits for our corporate staff, equity-based compensation expense, office rent for our headquarters, audit and other fees for professional services and legal compliance. G&A expenses are reported net of overhead recoveries from other owners in properties operated by us.

Total G&A expense increased by $0.1 million and decreased by ~~$4.0~~$0.7 million for the three and nine months ended June 30, 2022, respectively, compared to the same periods for 2021. Administrative costs, which includes payroll, benefits and non-payroll costs, increased by $0.4 million and ~~$0.5~~$2.9 million, ~~or 59% and 6%~~ respectively, for the three and nine months ended June 30, ~~2021, as~~2022, compared to the same periods for 2021. The increase in administrative costs was primarily attributable to increased professional services, insurance, technology and investor relations costs. Equity-based compensation expense decreased by $3.5 million for the nine months ended June 30, 2022, respectively, compared to the same periods in ~~2020. For the three months ended June 30, 2021, the Company incurred lower expiration of oil and natural gas lease expense in the Montaña field compared to the same period in 2020. For~~2021. The higher equity-based compensation during the nine months ended June 30, 2021 ~~geological~~relates to restricted shares awarded to certain employees following completion of the Merger that immediately vested.

Transaction Costs

Transaction costs represent costs incurred on successful or unsuccessful business combinations or unsuccessful property acquisitions. During the three and ~~geophysical~~nine months ended June 30, 2021, the transaction costs ~~decreased~~of $0.3 million and $3.5 million, respectively, primarily relates to costs incurred on the Merger with Tengasco in February 2021. The Company did not incur any transaction costs during the three months ended June 30, 2022. The transaction costs of $3.9 million for the nine months ended June 30, 2022 primarily relate to a potential business combination and related financing that the Company ~~incurred~~pursued but ultimately chose not to consummate due to changing market conditions.

Interest Expense

Interest expense decreased by $0.5 million and $1.3 million during the three and nine months ended June 30, 2022, respectively, when compared to the same periods for 2021. Interest expense decreased due to a lower ~~expiration~~outstanding average balance on the Company's revolving credit facility as well as the capitalized interest related to the Company's EOR project during the three and nine months ended June 30, 2022, respectively, when compared to the same periods for 2021.

Gain/Loss on Derivatives

The Company recognizes settlements and changes in the fair value of its derivative contracts as a single component within other income (expense) on its condensed consolidated statements of operations. We have oil and natural gas ~~lease expense in the Montaña field, partially offset by an increase in expiration of oil~~derivative contracts, including fixed price swaps, basis swaps and ~~natural gas lease expense in the Champions field compared to the same period in 2020.~~

collars, that settle against various indices. The following table ~~summarizes exploration expense by field below:~~

Champions Montaña
(In thousands, except acreage data)
Three Months Ended June 30, 2021
Exploration expense(1)
$ 340 $ 2,445
Expired net acres 159 6,867
Net acres renewed after expiration — —
Nine Months Ended June 30, 2021
Exploration expense(1)
$ 3,465 $ 5,150
Expired net acres 1,626 14,068
Net acres renewed after expiration 486 —
Three Months Ended June 30, 2020
Exploration expense(1)
$ 179 $ 6,578
Expired net acres 77 18,678
Net acres renewed after expiration 64 —
Nine Months Ended June 30, 2020
Exploration expense(1)
$ 592 $ 6,696
Expired net acres 251 19,281
Net acres renewed after expiration 73 —
~~_____________________~~

~~(1)Excludes geological and geophysical costs.~~

~~Depletion, Depreciation, and Accretion Expense~~

~~Depletion, depreciation, and accretion expense increased by $2.1 million and $3.3 million~~presents the components of the Company's loss on derivatives for the three and nine months ended June 30, ~~2021, respectively, compared to~~2022 and 2021:


	Three Months Ended June 30,				Nine Months Ended June 30,
	2022		2021		2022		2021
	(In thousands)
Settlements on derivative contracts	$	(25,783)	$	(7,712)	$	(60,172)	$	(5,133)
Non-cash gain (loss) on derivatives	13,420		(27,684)		(7,016)		(69,075)
Loss on derivatives	$	(12,363)	$	(35,396)	$	(67,188)	$	(74,208)

Our earnings are affected by the ~~same~~changes in value of our derivative portfolio between periods ~~for 2020.~~and the related cash received or paid upon settlement of our derivatives. To the extent the future commodity price outlook declines between periods, we will have mark-to-market gains; while future commodity price increases between measurement periods result in mark-to-market losses.

~~Depletion and amortization expense for proved oil and natural gas properties increased by $1.9 million and $3.2 million~~

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The decrease in the loss on derivatives for the three and nine months ended June 30, ~~2021, respectively,~~2022 compared to the same periods in ~~2020. For~~2021 is due to the ~~three and nine months ended June 30, 2021, $1.1~~change in non-cash gain (loss) on derivatives of $41.1 million and ~~$1.2~~$62.1 million, ~~was attributable to higher production and $0.8~~partially offset by the increase in the loss on settlements of $18.1 million and ~~$2.0 million was attributable to higher capitalized costs.~~

~~General and Administrative Costs~~

~~Total G&A costs increased by $2.6 million and $5.9 million,~~$55.0 million. The change in non-cash gain (loss) on derivatives for the three and nine months ended June 30, ~~2021, respectively,~~2022 is due to the decrease in total contract volumes for our open derivative contracts with volumes on our fixed price oil swaps decreasing by 55% as of June 30, 2022 when compared to the same ~~periods for 2020. Administrative costs, which include payroll, benefits~~period in 2021. Additionally, the change in the non-cash gain (loss) on derivatives was impacted by the change in the estimated forward-looking oil and ~~non-payroll costs, increased by $2.1 million~~natural gas prices used at the end of the period to calculate the fair value of the open derivative contracts. The increase in the loss on settlements on derivatives was due to the increase in oil and ~~$0.5 million,~~natural gas prices for the three and nine months ended June 30, ~~2021, respectively,~~2022 compared to the same periods ~~for 2020. The increase~~ in ~~administrative costs~~2021. For example, the average WTI price was ~~primarily attributable to public company costs following completion of the Merger. Share-based/unit-based compensation expense increased by $0.5 million and $5.4 million~~$108.83 per Bbl for the three ~~and nine~~ months ended June 30, ~~2021, respectively,~~2022 compared to $66.19 per Bbl for the same ~~periods for 2020. The increase is primarily attributable to restricted shares awarded to certain executives and employees following completion of the Merger.~~period in 2021.

~~Transaction Costs~~

Transaction costs were $0.3 million and $3.5 million for the three and nine months ended June 30, 2021, respectively. The transaction costs are predominately related to various costs incurred for the Merger. See Note 4 - Acquisitions and Divestitures to the Company's unaudited condensed consolidated financial statements included herein for further discussion of the Merger.

Income Tax ~~Provision~~Expense

~~REP LLC~~The Company became a taxable entity as a result of its Merger with Tengasco on February 26, 2021. See further discussion in Note 4 - Acquisitions ~~and Divestitures.~~to the Company's condensed consolidated financial statements included herein. While REP LLC was organized as a limited liability company, taxable income passed through to its unit holders. Accordingly, a provision for federal and state corporate income taxes has been made ~~only~~ for the operations of ~~REP LLC~~the Company only from February 27, 2021 through June 30, 2022 in the accompanying condensed consolidated financial statements. Deferred income taxes are provided to reflect the future tax consequences or benefits of differences between the tax basis of assets and liabilities and their reported amounts in the financial statements using enacted tax rates. Upon consummation of the Merger ~~into a corporation on~~in February ~~26,~~ 2021, the Company established a $13.6 million provision for deferred income taxes ~~of which $1.0 million and $0.2 million is currently~~with the conversion to a ~~tax benefit for the three and nine months ended June 30, 2021.~~C-corporation. The majority of this deferred tax liability was established by a change in tax status which primarily was attributable to the oil and natural gas properties. See Note 1211 - Income Taxes to the Company's ~~unaudited~~ condensed consolidated financial statements included herein for further discussion of income taxes.

Three Months Ended June 30, Nine Months Ended June 30,
2021 2020 2021 2020
(In thousands)
Current benefit $ (1,009) $ — $ (232) $ —
Deferred expense 4,254 (319) 17,185 (319)
Total expense $ 3,245 $ (319) $ 16,953 $ (319)
Effective income tax rate (18.8) % — % (38.0) % — %


	Three Months Ended June 30,						Nine Months Ended June 30,
	2022			2021			2022			2021
	(In thousands)
Current income tax expense (benefit)	$	715		$	(1,009)		$	1,608		$	(232)
Deferred income tax expense	10,212			4,254			13,074			17,185
Total income tax expense	$	10,927		$	3,245		$	14,682		$	16,953

Effective income tax rate	22.0		%	(18.8)		%	21.8		%	(38.0)		%

~~Gain/Loss on Derivatives~~

The Company recognizes settlements and changes in the fair value of its derivative contracts as a single component of other income (expenses). We have multiple crude oil and natural gas derivative contracts that settle against various indices. We record commodity derivative gains/losses as the index pricing and forward curves change each period. The following table disaggregates the Company's gain (loss) on derivatives presented in the condensed consolidated statement of operations for the three and nine months ended June 30, 2021 and 2020:

Three Months Ended June 30, Nine Months Ended June 30,
2021 2020 2021 2020
(In thousands)
Realized gain (loss) on derivatives $ (7,712) $ 14,669 $ (5,133) $ 20,161
Unrealized gain (loss) on derivatives (27,684) (28,874) (69,075) 16,838
Gain (loss) on derivatives $ (35,396) $ (14,205) $ (74,208) $ 36,999

Liquidity and Capital Resources

The business of exploring for, developing and producing oil and natural gas is capital intensive. Because oil, natural gas and NGL reserves are a depleting resource, like all upstream operators, we must make capital investments to grow and even sustain production. The Company’s principal liquidity requirements are to finance its operations, fund capital expenditures and acquisitions, make cash distributions and satisfy any indebtedness obligations. Cash flows are subject to a number of variables, including the level of oil and natural gas production and prices, and the significant capital expenditures required to more fully develop the Company’s oil and natural gas properties. ~~We expect that~~Historically, our ~~liquidity and capital resource needs will be met by our~~primary sources of capital funding and liquidity ~~which as of June 30, 2021, included~~have been our cash on hand, ~~operating~~ cash flow from operations and borrowings under our revolving credit ~~facility,~~facility. At times and ~~subsequent~~as needed, we may also issue debt or equity securities, including through transactions under our shelf registration statement filed with the SEC. We estimate the combination of the sources of capital discussed above will continue to ~~June 30, 2021, included the issuance of equity. For more information on~~be adequate to meet our ~~revolving credit agreement please see Note 9 – Revolving Credit Facility in the Notes to the Unaudited Condensed Consolidated Financial Statements under Item 1. Financial Statements.~~short and long-term liquidity needs.

Cash on hand and operating cash flow can be subject to fluctuations due to trends and uncertainties that are beyond our control. Likewise, our ability to issue equity and ~~our ability to~~ obtain credit facilities on favorable terms may be impacted by a variety of market factors as well as fluctuations in our results of operations. ~~For more information~~During the fiscal third quarter of 2022, the Company's natural gas and NGL sales were negatively impacted due to its primary midstream gas gathering and processing counterparty curtailing volume capacity as work continued on ~~conditions impacting~~their overall capacity expansion project. With the expansion project being fully commissioned in July, the Company expects to benefit from an increase in production capacity. The Company is not currently aware of additional scheduled curtailments; however, the Company may continue to experience periodic curtailments on natural

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gas produced in excess of our ~~liquidity and capital resources, see “Recent Developments.”~~contractual processing capacity. For further discussion of risks related to our liquidity and capital resources, see ~~Item~~"Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020 filed on March 30, 2021 and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2021 filed on May 17, 2021.

On July 2, 2021 the Company completed the offering of 1,666,667 shares of common stock at a price to the public of $30.00 per common share. The Company received net proceeds of $46.7 million from the sale of the common stock, after deducting underwriting discounts and commissions, and offering expenses paid by the Company. The Company intends to use a significant portion of the net proceeds from this offering to fund drilling and infrastructure for the Company’s EOR Project. In addition, the Company intends to use the remaining net proceeds from this offering for working capital purposes and other general corporate purposes, which may include financing of capital expenditures, financing acquisitions or investments, repayment or refinancing of outstanding debt, financing other business opportunities, and working capital purposes. Subsequent to June 30, 2021, the Company utilized $35.5 million to pay down the Revolving Credit Facility to $62 million. The Company intends to draw on the Revolving Credit Facility in order to fund the initial phases of the EOR Project.

Risk Factors."

Working Capital

Working capital is the difference in our current assets and our current liabilities. Working capital is an indication of liquidity and potential need for short-term funding. The change in our working capital requirements ~~are~~is driven generally by changes in accounts receivable, accounts payable, commodity prices, credit extended to, and the timing of collections from customers, the level and timing of spending for expansion activity, and the timing of debt maturities. As of June 30, ~~2021,~~2022, we had a working capital deficit of ~~$43.3 million. This~~$55.6 million compared to a deficit ~~is primarily attributable to $36.3~~of $46.9 million as of September 30, 2021. The working capital deficit at June 30, 2022 reflects $50.3 million in current derivative liabilities ~~and $17.1~~compared to $42.1 million ~~of accrued liabilities.~~in current derivative liabilities at September 30, 2021. Additionally, we had $8.8 million payable to our counterparties for June 2022 derivative contract settlements, which is included in accounts payable at June 30, 2022. We utilize our ~~Revolving Credit Facility~~revolving credit facility and cash on hand to manage the timing of cash flows and fund short-term working capital deficits.

Our current derivative assets and liabilities represent the mark-to-market value as of June 30, 2022 of future commodity production which will settle on a monthly basis through the end of their contractual terms. This aligns with the receipt of oil and natural gas revenues on a monthly basis.

Cash Flows

The following table summarizes the Company’s cash flows from continuing operations:

Nine Months Ended June 30,
2021 2020
(In thousands)
Statement of Cash Flows Data from Continuing Operations:
Net cash provided by operating activities $ 58,841 $ 49,509
Net cash used in investing activities (39,366) (46,202)
Net cash used in financing activities (18,151) (6,115)
Net Increase (Decrease) in Cash and Cash Equivalents $ 1,324 $ (2,808)


	Nine Months Ended June 30,
	2022		2021
	(In thousands)
Statement of Cash Flows Data from Continuing Operations:
Net cash provided by operating activities	$	96,987	$	58,841
Net cash used in investing activities	$	(77,195)	$	(39,366)
Net cash used in financing activities	$	(20,059)	$	(18,151)

Operating Activities

The Company’s net cash provided by operating activities increased by ~~$9.3~~$38.1 million or ~~19%~~65% to ~~$58.8~~$97.0 million for the nine months ended June 30, ~~2021~~2022 from ~~$49.5~~$58.8 million for the same ~~periods~~period in ~~2020.~~2021. The increase was primarily driven by an increase in revenues of ~~$41.1~~$110.5 million, ~~and~~partially offset by an increase of ~~$1.5~~$55.0 million ~~in changes in working capital, partially offset by a $25.3 million decrease in net cash received~~on settlements for ~~settlements of~~ commodity derivative contracts and an increase in ~~cash~~ operating expenses of ~~$8.0 million.~~$15.2 million, which excludes non-cash expenses such as equity-based compensation, expiration of unproved leasehold costs, and depreciation, depletion, accretion, and amortization expense.

Investing Activities

The Company's cash flows used in investing activities ~~decreased~~increased by ~~$6.8~~$37.8 million or ~~15%~~96% to ~~$39.4~~$77.2 million for the nine months ended June 30, ~~2021~~2022 from ~~$46.2~~$39.4 million for the same period in ~~2020.~~2021. The ~~decrease~~increase was primarily due to ~~lower~~higher capital spending of $37.2 million related to the ~~acquisition of oil~~Company's increased drilling and ~~natural gas properties by $4.6 million~~completion activity and ~~lower additions~~EOR project during the nine months ended June 30, 2022 compared to ~~oil and natural gas properties by $2.3 million.~~the same period in 2021.

Financing Activities

Net cash flow used in financing activities ~~was~~increased by $1.9 million or 11% to $20.1 million for the nine months ended June 30, 2022 from $18.2 million for the same period in 2021. During the nine months ended June 30, 2022, the Company utilized $1.0 million net proceeds from its revolving credit facility to fund capital expenditures and working capital. For the same period in 2021, the Company had a net paydown on its revolving credit facility of $3.5 million based on decreased drilling and completion activity during this period. In addition, the Company distributed an additional $5.4 million of dividends on common stock during the nine months ~~ending~~ended June 30, ~~2021, or an increase of $12.0 million, as~~2022 compared to the same period in 2020. The largest use of cash, at $12.8 million, was the payment of dividends on common stock and units. The second largest use of cash flow was the net repayment of $3.5 million on the credit facility, as compared to net proceeds of $7.0 million in the same period in 2020. The Company also paid $1.5 million of dividends on the preferred units, which were paid in conjunction with the conversion of such units to common stock as part of the Merger compared to $0 in the same period in 2020 – see Note 11 – Preferred Units to the Company's unaudited condensed consolidated financial statements included herein for further discussion of the preferred units.

2021.

Revolving Credit Facility

The Company's borrowing base was ~~$135~~$200 million with outstanding borrowings of ~~$97.5~~$61 million aton June 30, ~~2021. Additionally, the Company has an~~2022, representing available borrowing capacity of ~~$37.5 million as of June 30, 2021.~~$139 million. See further discussion in Note 9 —- Revolving Credit Facility to the Company's ~~unaudited~~ condensed consolidated financial statements included herein.

~~Distributions~~

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On ~~October 7, 2020,~~April 29, 2022, the ~~Board~~Company amended its Credit Agreement to, among other things, increase the borrowing base from $175 million to $200 million, extend the maturing date to April 2026, replace LIBOR with the SOFR and change the requirements for hedging to be based on utilization of ~~Managers of REP LLC declared a $3.8 million cash dividend, paid on November 6, 2020. The cash dividend was declared for all issued~~the borrowing base and ~~outstanding common units, including vested~~the Company's leverage ratio.

Distributions

For the three months ended June 30, 2022, the Company authorized and ~~unvested under the 2018 LTIP of REP LLC.~~

~~On March 4, 2021, the Board of Directors~~ declared a quarterly dividend totaling approximately $6.2 million, with $6.1 million paid in cash ~~dividend of $0.28 per common share on all of~~and $0.1 million payable to restricted shareholders upon vesting.

Contractual Obligations

The Company has commitments with its primary midstream counterparty and has entered into purchase commitments throughout the ~~Company's issued and outstanding common shares to stockholders of record at the close of business on April 16, 2021. The dividend was paid on May 7, 2021 for a total of $5.0 million.~~

~~Subsequent to~~nine months ended June 30, ~~2021,~~2022. See Note 14 - Commitments and Contingencies in our notes to the Board of Directors declared on July 9, 2021 a quarterly cash dividend of $0.28 per common share on all of the Company’s issued and outstanding common shares to stockholders of record at the close of business on July 23, 2021. The dividend was paid August 6, 2021 for a total of $5.5 million.condensed consolidated financial statements.

Critical Accounting Estimates

The discussion and analysis of the Company’s financial condition and results of operations are based upon the Company’s unaudited condensed consolidated financial statements and accompanying notes included herein, which have been prepared in accordance with U.S. GAAP. The preparation of financial statements requires the Company to make estimates and assumptions that affect the amounts reported in the unaudited condensed consolidated financial statements and accompanying notes. These estimates and assumptions may also affect disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The unaudited condensed consolidated financial statements are based on a number of significant estimates, including estimates of proved oil and natural gas reserves and related present value estimates of future net cash flows therefrom, the carrying value of oil and natural gas properties, accounts receivable and accrued operating expenses, the fair value determination of acquired assets and liabilities, income tax provisions and the fair value of derivatives.

Changes in facts and assumptions or the discovery of new information may result in revised estimates. Actual results could differ from these estimates and assumptions used in preparation of the Company’s unaudited condensed consolidated financial statements and it is at least reasonably possible these estimates could be revised in the near term and these revisions could be material.

The preparation of the Company’s financial statements requires the Company to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. Certain accounting policies involve judgments and uncertainties to such an extent that there is reasonable likelihood that materially different amounts could have been reported under different conditions, or if different assumptions had been used. The Company evaluates its estimates and assumptions on a regular basis. The Company bases its estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Significant areas requiring the use of assumptions, judgments and estimates include ~~(1)~~(i) oil and natural gas reserves; ~~(2)~~(ii) cash flow estimates used in impairment testing of oil and natural gas properties; ~~(3)~~(iii) depreciation, depletion, amortization and accretion, or DD&A; ~~(4) asset retirement obligations; (5)~~(iv) ARO; (v) assigning fair value and allocating purchase price in connection with business combinations; ~~(6) accounts receivable; (7)~~(vi) valuation of commodity derivative instruments; ~~(8) accrued liabilities; and (9)~~(vii) income tax ~~provisions.~~provisions; (viii) carrying value of goodwill; and (ix) accrued amounts. Actual results may differ from these estimates and assumptions used in preparation of the Company’s unaudited condensed consolidated financial statements included herein.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

The Company is exposed to market risk, including the effects of adverse changes in commodity prices and interest rates as described below. The primary objective of the following information is to provide quantitative and qualitative information about the Company's potential exposure to market risks. The term “market risk” refers to the risk of loss arising from adverse changes in oil, natural gas and NGL prices and interest rates. The disclosures are not meant to be precise indicators of expected future losses, but rather indicators of reasonably possible losses. All of the Company’s market risk sensitive instruments were entered into for purposes other than speculative trading.

~~Commodity Price Risk~~

The Company’s major market risk exposure is in the pricing that we receive for our oil, natural gas and NGL production, and primarily our oil production. Pricing for crude oil, natural gas and NGLs have been volatile and unpredictable for several years, and this volatility is expected to continue in the future. The prices we receive for our oil, natural gas and NGLs depend on many factors outside of our control, such as the strength of the global economy and global supply and demand for the commodities we produce.

The Company’s minimum hedging requirement was 50% of PDP volume over the next 24 month period as of June 30, 2021. At June 30, 2021 and September 30, 2020, we had a net liability derivative position of $47.2 million and a net asset derivative position $21.9 million, respectively, related to our price swaps and collars, to reduce price volatility associated with certain of our oil and natural gas sales. These instruments provide only partial price protection against declines in oil and natural gas prices and may partially limit our potential gains from future increases in prices. With respect to these fixed price swap contracts, the counterparty is required to make payment to the Company if the settlement price for any settlement period is less than the swap price, and we are required to make a payment to the counterparty if the settlement price for any settlement period is greater than the swap price. Our derivative contracts are based upon reported settlement prices on commodity exchanges, with crude oil derivative settlements based on NYMEX West Texas Intermediate pricing and with natural gas derivative settlements based on NYMEX Henry Hub pricing.

Due to this volatility, we have historically used, and we expect to continue to use, commodity derivative instruments, such as swaps and collars, to hedge price risk associated with a portion of our anticipated production. Our hedging instruments reduce, but do not eliminate, the potential effects of the variability in cash flow from operations due to fluctuations in oil and natural gas prices and provide increased certainty of cash flows for our drilling program and debt service requirements. See Note 9 - Revolving Credit Facility to the Company's unaudited condensed consolidated financial statements included herein~~for more information regarding the Company's revolving credit facility.~~

~~Counterparty and Customer Credit Risk~~

Our cash and cash equivalents are exposed to concentrations of credit risk. We manage and control this risk by investing these funds with major financial institutions. We often have balances in excess of the federally insured limits.

Our derivative contracts expose us to credit risk in the event of nonperformance by counterparties. While we do not require counterparties to our derivative contracts to post collateral, we do evaluate the credit standing of such counterparties as we deem appropriate. Certain counterparties are financial institutions that participate as lenders in our revolving credit facility. The counterparties to our derivative contracts currently in place have investment grade ratings.

Our principal exposures to credit risk are through receivables resulting from joint interest receivables and receivables from the sale of our oil and natural gas production due to the concentration of our oil and natural gas receivables with very few significant customers. The inability or failure of our significant customers to meet their obligations to us or their insolvency or liquidation may adversely affect our financial results.

Joint operations receivables arise from billings to entities that own partial interests in the wells we operate. These entities participate in our wells primarily based on their ownership in leases on which we intend to drill. We have little ability to control whether these entities will participate in our wells.

~~Interest Rate Risk~~

As of June 30, 2021, we had $97.5 million of outstanding borrowings and an additional $37.5 million available under our revolving credit facility. We have entered into floating-to-fixed interest rate swaps to manage interest rate exposure related to our revolving credit facility.

~~Cyber Security Risk~~

The Company's reliance on information technology, including those hosted by third parties, exposes us to cyber security risks that could affect our business, financial condition or reputation and increase compliance challenges.

The Company relies on information technology systems, including internet sites, computer software, data hosting facilities and other hardware and platforms, some of which are hosted by third parties, to assist in conducting our business. Our information technology systems, as well as those of third parties we use in our operations, may be vulnerable to a variety of evolving cybersecurity risks, such as those involving unauthorized access or control, denial-of-service attacks, malicious software, data privacy breaches by employees, insiders or others with authorized access, cyber or phishing-attacks, ransomware, malware, social engineering, physical breaches or other actions.

Although we have implemented information technology controls and systems that are designed to protect information and mitigate the risk of data loss and other cybersecurity risks, such measures cannot entirely eliminate cybersecurity threats, and the enhanced controls we have installed may be breached. If our information technology systems cease to function properly or our cybersecurity is breached, we could suffer disruptions to our normal operations.

Item 4. Controls and Procedures

~~Evaluation of disclosure controls~~Disclosure Controls and ~~procedures~~Procedures

Our management establishes and maintains disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the ~~Securities and Exchange Commission’s~~SEC’s rules and forms. Such information is accumulated and communicated to our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate to allow timely decisions regarding required disclosure. We have evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this ~~report,~~Quarterly Report, with the participation of our CEO and CFO, as well as other key members of our management. Based on this evaluation, our CEO and CFO concluded that our disclosure controls and procedures were ~~not~~ effective as of June 30, ~~2021 because~~2022.

.Table of ~~the material weakness in our internal control over financial reporting.~~Contents

As of March 31, 2021, we identified material weaknesses in our internal control over financial reporting. A “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. In particular, we had not yet designed an effective financial reporting process and did not complete thorough reviews of financial reports in a timely manner to allow for an appropriate level of analysis that would have identified these errors. These errors principally related to (i) accounting for share-based compensation and our failure to record compensation expense for certain vested share-based compensation grants in the correct reporting period, (ii) accounting for dividend distributions and our failure to record a declared dividend in the reporting period in which the dividend was declared, (iii) accounting for derivative settlements, and (iv) controls over preparation and review of the Company’s statement of cash flows were not effective. As of June 30, 2021, we have not fully re-designed, implemented and tested internal controls to remediate the material weaknesses.

Each of the material weaknesses could result in a misstatement of our financial statements or disclosures that would result in a material misstatement of our annual or interim consolidated financial statements that would not be prevented or detected.

Our management is in the process of remediating deficiencies to address the material weaknesses identified in the second quarter. The material weaknesses identified above will not be considered remediated until our remediation efforts have been fully implemented and we have concluded that these controls are operating effectively. Consequently, if these or another material weakness or significant deficiencies occur in the future, it could affect the financial results that we report which could result in a restatement of our financial statements or cause us to fail to meet our reporting obligations.

Changes in internal control over financial reporting

~~The internal controls over financial reporting after the Merger are now the controls which REP LLC had in place prior to the Merger.~~ There have been no ~~other~~ changes in our internal control over financial reporting that occurred for the quarter ending June 30, ~~2021~~2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. ~~As noted above, the Company is in the process of developing a remediation plan to address the material weaknesses described above.~~

4339

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we may be involved in various legal proceedings and claims in the ordinary course of business. As of June 30, ~~2021,~~2022, and through the filing date of this ~~quarterly report,~~Quarterly Report, we do not believe the ultimate resolution of any such actions or potential actions of which we are currently aware will have a material effect on our consolidated financial position or results of operations.

~~See Note 15 – Commitments and Contingencies~~Refer to ~~the Company’s unaudited condensed consolidated financial statements included herein for a further discussion~~Part I, Item 3 - Legal Proceedings of ~~legal proceedings for disclosure of or updates to material matters that have occurred since the filing of our~~Riley Permian's Annual Report on Form 10-K for the fiscal year ended ~~December 31, 2020.~~September 30, 2021, and Note 14 - Commitments and Contingencies in the notes to the unaudited condensed consolidated financial statements set forth in Part I, Item 1 of this Quarterly Report on Form 10-Q (which is hereby incorporated by reference herein), for a description of material legal proceedings.

Item 1A. Risk Factors

We are subject to certain risks and hazards due to the nature of the business activities we conduct. Other than any risks described in this quarterly report, there have been no material changes to the risk factors described in our Annual Report on Form 10-K for the year ended December 31, 2020 and our Quarterly Report on Form 10-Q for the period ended March 31, 2021. We may experience additional risks and uncertainties not currently known to us. Furthermore, as a result of developments occurring in the future, conditions that we currently deem to be immaterial may also materially and adversely affect us. Any such risk may materially and adversely affect our business, financial condition, cash flows and results of operations. Other than any risks described in this Quarterly Report, there have been no material changes to the risk factors described in our Annual Report on Form 10-K for the year ended September 30, 2021.

Risks Related to our Business

A Terrorist attack or armed conflict could harm our business.

Terrorist activities, anti-terrorist efforts and other armed conflicts involving the United States or other countries may adversely affect the United States and global economies and could prevent us from meeting our financial and other obligations. If any of these events occur, the resulting political instability and societal disruption could reduce overall demand for oil and natural gas causing a reduction in our revenues. Oil and natural gas related facilities could be direct targets of terrorist attacks, and our operations could be adversely impacted if infrastructure integral to our customers’ operations is destroyed or damaged. Costs for insurance and other security may increase as a result of these threats, and some insurance coverage may become more difficult to obtain, if available at all

Recent regulatory restrictions on use of produced water and a moratorium on new produced water disposal wells in the Permian Basin to stem rising seismic activity and earthquakes could increase our operating costs and adversely impact our business, results of operations and financial condition.

In September 2021, the Texas Railroad Commission curtailed the amount of produced water companies were permitted to inject into some wells near Midland and Odessa in the Permian Basin, and has since indefinitely suspended some permits there and expanded the restrictions to other areas. These actions were taken in an effort to control induced seismic activity and recent increases in earthquakes in the Permian Basin, which have been linked by the U.S. and local seismologists to wastewater disposal in oil fields. These restrictions on the disposal of produced water and a moratorium on new produced water disposal wells could result in increased operating costs, requiring us or our service providers to truck produced water, recycle it or dispose of it by other means, all of which could be costly. We or our service providers may also need to limit disposal well volumes, disposal rates and pressures or locations, or require us or our service providers to shut down or curtail the injection of produced water into disposal wells. These factors may make drilling activity in the affected parts of the Permian Basin less economical and adversely impact our business, results of operations and financial condition.

Designation as “critical infrastructure” could subject us to additional regulation, including potential weatherization requirements.

In response to Winter Storm Uri, the February 2021 winter weather event that caused widespread power failure to Texas’ power grid for several days, the Texas legislature drafted new legislation designed to prepare for, prevent and respond to weather emergencies and power outages. On November 30, 2021, the RRC adopted rules to designate certain natural gas facilities as critical infrastructure. While the Commission did not adopt rules related to other sections of the legislation requiring such designees to implement weatherization measures, it is expected that the Commission will initiate a rulemaking at a later date for such purposes.

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Under the new rules, “critical gas suppliers” include, but are not limited to, gas wells, oil leases that produce gas, natural gas pipeline facilities, underground natural gas storage facilities and saltwater disposal facilities. “Critical customers,” which are a subset of critical gas suppliers, are facilities that require electricity to operate. The rules allow for certain facilities to apply for an exception to critical designation, but exclude certain types of highly critical facilities from eligibility for such exception.

If we are designated as a “critical gas supplier” or “critical customer,” we would become subject to additional regulation and compliance costs, including potential future operating and capital costs required to weatherize our assets.

Enhanced scrutiny on ESG matters could have an adverse effect on the Company’s operations.

Enhanced scrutiny on ESG matters related to, among other things, concerns raised by advocacy groups about climate change, hydraulic fracturing, natural gas flaring, GHG emissions, waste disposal, oil spills, and explosions of natural gas transmission pipelines may lead to increased regulatory scrutiny, which may, in turn, lead to new state and federal safety and environmental laws, regulations, guidelines, and enforcement interpretations. These actions may cause operational delays or restrictions, increased operating costs, additional regulatory burdens, increased risk of litigation, and adverse impacts on the Company’s access to capital. Moreover, governmental authorities exercise considerable discretion in the timing and scope of permit issuance, and the public may engage in the permitting process, including through intervention in the courts. Negative public perception could cause the permits the Company requires to conduct its operations to be withheld, delayed, or burdened by requirements that restrict the Company’s ability to profitably conduct its business.

We may be unable to quickly adapt to changes in market/investor priorities.

Historically, one of the key drivers in the unconventional resource industry has been growth in production and reserves. With historical volatility in oil and natural gas prices and the likelihood that rising interest rates will increase the cost of borrowing, capital efficiency and free cash flow from earnings have become the key drivers for energy companies, particularly shale producers. Such shifts in focus sometimes require changes in planning and resource management, which may not occur instantaneously. Any delay in responding to such changes in market sentiment or perception may result in the investment community having a negative sentiment regarding our business plan, potential profitability and our ability to operate in a manner deemed "efficient," which may have a negative impact on the price of our common stock.

The adoption of climate change legislation or regulations restricting emissions of "greenhouse gases" could result in increased operating costs and reduced demand for the oil, NGL and natural gas we produce, while potential physical effects of climate change could disrupt our operations and cause us to incur significant costs in preparing for or responding to those effects.

Restrictions on GHG emissions that may be imposed could adversely affect the oil and gas industry. The adoption of legislation or regulatory programs to reduce GHG emissions could require us to incur increased operating costs, such as costs to purchase and operate emissions control systems, acquire emissions allowances or comply with new regulatory requirements. Any GHG emissions legislation or regulatory programs applicable to power plants or refineries could also increase the cost of consuming, and thereby reduce demand for, the oil, NGL and natural gas we produce. Consequently, legislation and regulatory programs to reduce GHG emissions could have an adverse effect on our business, financial condition and results of operations.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

~~Not applicable.~~Unregistered Sales of Equity Securities

None.

Issuer Repurchases of Equity Securities

Our common stock repurchase activity for the nine months ended June 30, 2022 was as follows:


Fiscal Quarter Ending	Total Number of Shares Purchased(1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plan or Programs	Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plan or Programs
Q1	9,740	$	23.48	—	—
Q2	12,640	$	26.81	—	—
Q3	8,576	$	25.08	—	—

_____________________

(1)These amounts reflect the shares received by us from employees for the payment of personal income tax withholding on vesting transactions. The acquisition of the surrendered shares was not part of a publicly announced program to repurchase shares of our Common Stock. Any shares repurchased by the Company for personal tax withholdings are immediately retired upon repurchase.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

~~PART II. OTHER INFORMATION~~

Item 6. Exhibits


Exhibit Number			Description

2.1			Agreement and Plan of Merger, by and among Tengasco, Inc., Antman Sub, LLC, and Riley Exploration - Permian, LLC, dated as of October 21, 2020 (incorporated by reference from Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 22, 2020).
2.2			Amendment No. 1 to Agreement and Plan of Merger, by and among Tengasco, Inc., Antman Sub, LLC, and Riley Exploration - Permian, LLC, dated as of January 20, 2021 (incorporated by reference from Exhibit 2.1 to the Registrant’s Current Report on Form 8-K, as filed with the Securities and Exchange Commission on January 22, 2021).
3.1			First Amended and Restated Certificate of Incorporation of Riley Exploration Permian, Inc. (incorporated by reference to Exhibit 4.1 to the Registrant’s Registration Statement on Form S-8 filed with the Securities and Exchange Commission on March 1, 2021, Registration No. 333-253750).
3.2			Second Amended and Restated Bylaws of Riley Exploration Permian, Inc. (incorporated by reference to Exhibit 4.2 to the Registrant’s Registration Statement on Form S-8 filed with the Securities and Exchange Commission on March 1, 2021, Registration No. 333-253750).

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10.1			~~Underwriting~~Credit Agreement dated ~~June 30,~~as of September 28, 2017, by and among Riley Exploration – Permian, LLC, as borrower, Truist Bank, as administrative agent, and the lenders party thereto (incorporated by reference from Exhibit 10.1 to the Registrant’s Registration Statement on Form S-4/A, as filed with the Securities and Exchange Commission on December 31, 2020, Registration No. 333-250019).
10.2			First Amendment to Credit Agreement dated as of February 27, 2018, by and among Riley Exploration – Permian, LLC, as borrower, Truist Bank, as administrative agent, and the lenders party thereto (incorporated by reference from Exhibit 10.2 to the Registrant’s Registration Statement on Form S-4/A, as filed with the Securities and Exchange Commission on December 31, 2020, Registration No. 333-250019).
10.3			Second Amendment to Credit Agreement dated as of November 9, 2018, by and among Riley Exploration – Permian, LLC, as borrower, Truist Bank, as administrative agent, and the lenders party thereto (incorporated by reference from Exhibit 10.3 to the Registrant’s Registration Statement on Form S-4/A, as filed with the Securities and Exchange Commission on December 31, 2020, Registration No. 333-250019).
10.4			Third Amendment to Credit Agreement dated as of April 3, 2019, by and among Riley Exploration – Permian, LLC, as borrower, Truist Bank, as administrative agent, and the lenders party thereto (incorporated by reference from Exhibit 10.4 to the Registrant’s Registration Statement on Form S-4/A, as filed with the Securities and Exchange Commission on December 31, 2020, Registration No. 333-250019).
10.5			Fourth Amendment to Credit Agreement dated as of October 15, 2019, by and among Riley Exploration – Permian, LLC, as borrower, Truist Bank, as administrative agent, and the lenders party thereto (incorporated by reference from Exhibit 10.5 to the Registrant’s Registration Statement on Form S-4/A, as filed with the Securities and Exchange Commission on December 31, 2020, Registration No. 333-250019).
10.6			Fifth Amendment to Credit Agreement dated as of May 7, 2020, by and among Riley Exploration – Permian, LLC, as borrower, Truist Bank, as administrative agent, and the lenders party thereto (incorporated by reference from Exhibit 10.6 to the Registrant’s Registration Statement on Form S-4/A, as filed with the Securities and Exchange Commission on December 31, 2020, Registration No. 333-250019).
10.7			Sixth Amendment to Credit Agreement dated as of August 31, 2020, by and among Riley Exploration – Permian, LLC, as borrower, Truist Bank, as administrative agent, and the lenders party thereto (incorporated by reference from Exhibit 10.7 to the Registrant’s Registration Statement on Form S-4/A, as filed with the Securities and Exchange Commission on December 31, 2020, Registration No. 333-250019).
10.8			Seventh Amendment and Consent to Credit Agreement dated as of October 21, 2020, by and among Riley Exploration – Permian, LLC, as borrower, Truist Bank, as administrative agent, and the lenders party thereto (incorporated by reference from Exhibit 10.8 to the Registrant’s Registration Statement on Form S-4/A, as filed with the Securities and Exchange Commission on December 31, 2020, Registration No. 333-250019).
10.9			Eighth Amendment to Credit Agreement dated as of March 5, 2021, ~~between~~by and among Riley Exploration Permian, Inc., Riley Exploration - Permian, LLC, as borrower, Truist Bank, as administrative agent, and ~~Truist~~the lenders party thereto (incorporated by reference from Exhibit 10.9 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, as filed with the Securities and Exchange Commission on May 17, 2021).
10.10			Ninth Amendment to Credit Agreement dated as of May 5, 2021, by and among Riley Exploration Permian, Inc., Riley Exploration - Permian, LLC, as ~~representative~~borrower, Truist Bank, as administrative agent, and the lenders party thereto (incorporated by reference from Exhibit 10.10 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, as filed with the Securities and Exchange Commission on May 17, 2021).
10.11			Tenth Amendment to the Credit Agreement dated as of October 12, 2021, by and among Riley Exploration Permian, Inc., Riley Exploration - Permian, LLC, as borrower, Truist Bank, as administrative agent, and the ~~several underwriters listed in~~lenders party thereto (incorporated by reference from Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, as filed with the Securities and Exchange Commission on October 14, 2021).
10.12			Form of Indemnity Agreement (incorporated by reference from Exhibit 10.14 to the Registrant’s Registration Statement on Form S-4/A, ~~thereto~~as filed with the Securities and Exchange Commission on January 21, 2021, Registration No. 333-250019).
10.13			Form of Independent Director Agreement (incorporated by reference from Exhibit 10.13 to the Registrant’s Registration Statement on Form S-4/A, as filed with the Securities and Exchange Commission on January 21, 2021, Registration No. 333-250019).

.Table of Contents


10.14†			Riley Exploration Permian, Inc. 2021 Long Term Incentive Plan (incorporated by reference to Exhibit ~~1.1~~10.1 to the ~~Registrant's~~Registrant’s Current Report on Form 8-K filed with the Commission on ~~July 2,~~February 25, 2021).
10.15†			Form of Common Stock Award Agreement (incorporated by reference from Exhibit 10.10 to the Registrant’s Current Report on Form 8-K, as filed with the Securities and Exchange Commission on March 15, 2021).
10.16†			Form of Restricted Stock Agreement (Time Vesting) (incorporated by reference to Exhibit 4.4 to the Registrant’s Registration Statement on Form S-8, as filed with the Securities and Exchange Commission on March 1, 2021, Registration No. 333- 253750).
10.17†			Form of Substitute Restricted Stock Agreement (Time Vesting) (incorporated by reference from Exhibit 4.5 to the Registrant’s Registration Statement on Form S-8 filed with the Commission on March 1, 2021, Registration No. 333-253750).
10.18†			Form of Restricted Stock Agreement (Non-Employee Director) (incorporated by reference from Exhibit 4.6 to the Registrant’s Registration Statement on Form S-8 filed with the Commission on March 1, 2021, Registration No. 333-253750).
10.19†			Employment Agreement dated effective as of March 15, 2021 by and between Riley Exploration Permian, Inc. and Corey Riley (incorporated by reference from Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, as filed with the Securities and Exchange Commission on March 15, 2021).
10.20†			Employment Agreement dated effective as of March 15, 2021 by and between Riley Exploration Permian, Inc. and Philip Riley (incorporated by reference from Exhibit 10.2 to the Registrant’s Current Report on Form 8-K, as filed with the Securities and Exchange Commission on March 15, 2021).
10.21†			Employment Agreement dated April 1, 2019 by and between Riley Exploration – Permian, LLC and Bobby D. Riley and assigned by Riley Exploration – Permian, LLC to Riley Permian Operating Company, LLC on June 8, 2019 (incorporated by reference from Exhibit 10.9 to the Registrant’s Registration Statement on Form S-4/A, as filed with the Securities and Exchange Commission on December 31, 2020, Registration No. 333-250019).
10.22†			Amendment No. 1 to Employment Agreement dated October 1, 2020 by and between Riley Permian Operating Company, LLC and Bobby D. Riley (incorporated by reference from Exhibit 10.10 to the Registrant’s Registration Statement on Form S-4/A, as filed with the Securities and Exchange Commission on December 31, 2020, Registration No. 333-250019).
10.23†			Amendment No. 2 to Employment Agreement dated March 15, 2021 by and between Riley Permian Operating Company, LLC and Bobby D. Riley (incorporated by reference from Exhibit 10.7 to the Registrant’s Current Report on Form 8-K, as filed with the Securities and Exchange Commission on March 15, 2021).
10.24†			Employment Agreement dated April 1, 2019 by and between Riley Exploration – Permian, LLC and Kevin Riley and assigned by Riley Exploration – Permian, LLC to Riley Permian Operating Company, LLC on June 8, 2019 (incorporated by reference from Exhibit 10.11 to the Registrant’s Registration Statement on Form S-4/A, as filed with the Securities and Exchange Commission on December 31, 2020, Registration No. 333-250019)
10.25†			Amendment No. 1 to Employment Agreement dated March 15, 2021 by and between Riley Permian Operating Company, LLC and Kevin Riley (incorporated by reference from Exhibit 10.8 to the Registrant’s Current Report on Form 8-K, as filed with the Securities and Exchange Commission on March 15, 2021).
10.26			Second Amended and Restated Registration Rights Agreement dated October 7, 2020 by and among Riley Exploration – Permian, LLC, Riley Exploration Group, Inc., Yorktown Energy Partners XI, L.P., Boomer Petroleum, LLC, Bluescape Riley Exploration Holdings LLC, Bluescape Riley Acquisition Company LLC, Bobby D. Riley, Kevin Riley and Corey Riley (incorporated by reference to Exhibit 4.1 to the Registrant’s Registration Statement on Form S-4/A, as filed with the Securities and Exchange Commission on December 31, 2020, Registration No. 333-250019).
10.27†









			Employment Agreement dated effective as of January 25, 2022 by and between Riley Exploration Permian, Inc. and Amber Bonney (incorporated by reference from Exhibit 10.2 to the Registrant’s Current Report on Form 8-K, as filed with the Securities and Exchange Commission on January 27, 2022).



10.28			Eleventh Amendment to the Credit Agreement dated as of April 29, 2022, by and among Riley Exploration Permian, Inc., Riley Exploration - Permian, LLC, as borrower, Truist Bank, as administrative agent, and the lenders party thereto (incorporated by reference from Exhibit 10.1 to the Registrant's Current Report on Form 8-K, as filed with the Securities and Exchange Commission on May 2, 2022).
31.1*			Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

.Table of Contents


31.2*			Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*			Certification of Chief Executive Officer pursuant to 18 U.S.C., Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*			Certification of Chief Financial Officer pursuant to 18 U.S.C., Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS*			XBRL Instance Document
101.SCH*			XBRL Taxonomy Extension Schema Document
101.CAL*			XBRL Taxonomy Calculation Linkbase Document
101.DEF*			XBRL Taxonomy Definition Linkbase Document
101.LAB*			XBRL Taxonomy Label Linkbase Document
101.PRE*			XBRL Taxonomy Presentation Linkbase Document

* Filed herewith.

† Compensatory plan or arrangement.

~~PART II. OTHER INFORMATION~~.Table of Contents

~~SIGNATURES~~

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


		RILEY EXPLORATION PERMIAN, INC.

Date: August ~~13, 2021~~10, 2022		By: ~~/s/~~	/s/ Bobby D. Riley
		Bobby D. Riley
		Chief Executive Officer

	By:	~~By: /s/ Michael J. Rugen~~/s/ Philip Riley
		~~Michael J. Rugen~~Philip Riley
		Chief Financial Officer


RILEY EXPLORATION PERMIAN, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
	Nine Months Ended June 30,
	2021		2020
	(In thousands)
Cash Flows from Operating Activities:
Net income (loss)	$	(81,320)	$	40,228
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Loss from discontinued operations	19,573		0
Oil and gas lease expirations	8,615		7,288
Depletion, depreciation, amortization and accretion	19,323		16,020



(Gain) Loss on derivatives	74,208		(36,999)
Settlements on derivative contracts	(5,133)		20,161
Amortization of deferred financing costs	483		484

Unit-based compensation expense	689		650
Share-based compensation expense	5,353		0
Deferred income tax expense	17,185		319
Changes in operating assets and liabilities:
Accounts receivable	(5,545)		5,643
Accounts receivable – related parties	(1,940)		159
Prepaid expenses and other current assets	(534)		(424)
Other non-current assets	0		82
Other liabilities	(6)		0
Accounts payable and accrued liabilities	5,042		(2,784)

Income taxes payable	(170)		0
Revenue payable	3,006		(1,199)
Advances from joint interest owners	12		(119)

Net Cash Provided By Operating Activities - Continuing Operations	58,841		49,509
Cash Flows From Investing Activities:
Additions to oil and natural gas properties	(38,882)		(41,228)
Acquisition of oil and natural gas properties	(171)		(4,806)

Additions to other property and equipment	(1,172)		(168)
Tengasco acquired cash	859		0
Net Cash Used In Investing Activities - Continuing Operations	(39,366)		(46,202)
Cash Flows From Financing Activities:

Deferred financing costs	(135)		(293)

Proceeds from revolving credit facility	5,500		14,000
Repayment under revolving credit facility	(9,000)		(7,000)

Payment of common share/unit dividends	(12,834)		(12,500)
Payment of preferred unit dividends	(1,491)		0
Purchase of common units under long-term incentive plan	(191)		(322)
Net Cash Used In Financing Activities - Continuing Operations	(18,151)		(6,115)
Net Increase (Decrease) in Cash and Cash Equivalents from Continuing Operations	1,324		(2,808)


		Weighted Average Price
Calendar Quarter	Notional Volume	Fixed		Put		Call
		($ per unit)
Crude Oil Swaps (Bbl)

Q3 2021	564,278	$	51.57	$	—	$	—
Q4 2021	558,116	$	51.65	$	—	$	—
2022	1,320,000	$	53.59	$	—	$	—
2023	360,000	$	59.01	$	—	$	—

Natural Gas Swaps (Mcf)

Q3 2021	555,000	$	3.03	$	—	$	—
Q4 2021	555,000	$	3.03	$	—	$	—

Crude Oil Collars (Bbl)
2022	360,000	$	—	$	35.00	$	42.63

Crude Oil Basis (Bbl)

Q3 2021	435,000	$	0.40	$	—	$	—
Q4 2021	435,000	$	0.40	$	—	$	—
2022	720,000	$	0.40	$	—	$	—


	Units	Amount
		(In thousands)
Balance, September 30, 2020	504,168	$	60,292
Dividends paid in kind	7,527	904
Balance, December 31, 2020	511,695	61,196
Units converted to common units(1)	(511,695)	(61,196)
Balance, March 31, 2021	0	0
Balance, June 30, 2021	0	$	0


	Tengasco
	Three Months Ended June 30, 2021		Nine Months Ended June 30, 2021
	(In thousands)
Oil and natural gas sales	$	0	$	0
Total revenues	0		0
Lease operating expenses	0		115
Goodwill impairment	0		18,516
Total expenses	0		18,631
Other expense	882		882
Loss from discontinued operations before income taxes	(882)		(19,513)
Income tax expense	(85)		(60)
Net loss from discontinued operations, net of tax	$	(967)	$	(19,573)


	Champions		Montaña
	(In thousands, except acreage data)
Three Months Ended June 30, 2021
Exploration expense(1)	$	340	$	2,445
Expired net acres	159		6,867
Net acres renewed after expiration	—		—

Nine Months Ended June 30, 2021
Exploration expense(1)	$	3,465	$	5,150
Expired net acres	1,626		14,068
Net acres renewed after expiration	486		—

Three Months Ended June 30, 2020
Exploration expense(1)	$	179	$	6,578
Expired net acres	77		18,678
Net acres renewed after expiration	64		—

Nine Months Ended June 30, 2020
Exploration expense(1)	$	592	$	6,696
Expired net acres	251		19,281
Net acres renewed after expiration	73		—