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Truist Securities | | | Janney Montgomery Scott | | | Roth Capital Partners |
Truist Securities | | | Janney Montgomery Scott | | | Roth Capital Partners |
• | Steadily growing cash flow from operations through development of our existing assets and continuous improvement of our operating capabilities. We intend to grow our production and reserves through development of our multi-year drilling inventory, which we believe offers economically attractive investment opportunities in the current environment. We believe such growth and corresponding increase in scale can lead to operating cost efficiencies and may further expand margins. Our management, operating and technical teams strive to continually improve our operating capabilities and cost structure, with an objective of reducing per unit costs and enhancing returns. We seek to grow within the limits of conservative capital allocation, often reinvesting less than our operating cash flows. |
• | Identifying attractive new opportunities for capital investment. Our business produces one of the most highly demanded and valuable commodities in the world, which society uses across many fundamental aspects of everyday life. We believe investing in oil and natural gas assets continues to represent an attractive opportunity. Concurrently, we acknowledge a growing discussion for decarbonizing economies and the associated potential impacts on our business. We believe opportunities may arise in the oil and natural gas business as capital availability potentially shifts within the industry and from institutional capital sources. Further, we believe it is prudent to monitor the transitioning energy landscape and identify arising investment opportunities in which the Company may have competitive strengths and opportunities. |
• | Distributing excess returns to stockholders in the form of dividends. We believe we can often grow production and cash flow in excess of required capital and operating costs. We believe that distributing a meaningful portion of our cash generated by operating activities provides stockholders the combination of a current return and increased certainty for a portion of long-term value. Because the oil and natural gas business is capital intensive, and because we recognize many benefits of growth, management will strive to seek an appropriate balance of reinvesting for growth versus other capital allocation choices, such as reducing debt or returning capital back to stockholders. |
(1) | The number of shares to be outstanding after this offering is based on 20,177,363 shares of common stock issued and outstanding as of August 31, 2023, which number includes 498,590 shares of restricted stock issued under our Amended and Restated 2021 Long Term Incentive Plan. |
• | our operating and financial performance and drilling locations, including reserve estimates; |
• | actual or anticipated fluctuations in our quarterly results of operations, and financial indicators, such as net income, cash flow and revenues; |
• | sales of our common stock by the Company or other stockholders, or the perception that such sales may occur; |
• | our failure to meet revenue, reserves or earnings estimates by research analysts or other investors; |
• | the public reaction to our press releases, our other public announcements and our filings with the SEC; |
• | strategic actions by our competitors or competition for, among other things, capital, acquisition of reserves, undeveloped land and skilled personnel; |
• | publication of research reports about us or the oil and natural gas exploration and production industry generally; |
• | changes in revenue or earnings estimates, or changes in recommendations or withdrawal of research coverage, by equity research analysts; |
• | speculation in the press or investment community; |
• | the failure of research analysts to cover our common stock; |
• | increases in market interest rates or funding rates, which may increase our cost of capital; |
• | changes in market valuations of similar companies; |
• | changes in accounting principles, policies, guidance, interpretations or standards; |
• | additions or departures of key management personnel; |
• | actions by our stockholders; |
• | commencement or involvement in litigation; |
• | general market conditions, including fluctuations in commodity prices; |
• | political conditions in oil and natural gas producing regions; |
• | domestic and international political, economic, legal and regulatory factors unrelated to our performance; and |
• | the realization of any risks described under this “Risk Factors” section and the other risk factors incorporated by reference herein. |
• | fluctuations in the price we receive for our oil, gas, and NGL production, including local market price differentials; |
• | cost and availability of gathering, pipeline, refining, transportation and other midstream and downstream activities and our ability to sell oil, gas, and NGLs; |
• | severe weather and other risks and lead to a lack of any available markets; |
• | our ability to successfully complete mergers, acquisitions and divestitures; |
• | 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 from time to time and our ability to repay any excess borrowings as a result of such reduction; |
• | the impact of our derivative instruments and hedging activities; |
• | continuing compliance with the financial covenants contained in our revolving credit facility and in our 10.50% senior unsecured notes due 2028; |
• | 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 maintain production on leases; |
• | the impact of conservation measures, alternative sources of energy and technological advances on the demand for oil, natural gas and NGLs; |
• | risks associated with concentration of operations in one major geographic area; |
• | deviations from our forecasts and budgets; |
• | 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; |
• | the impact of regulatory initiatives relating to hydraulic fracturing, regulation of greenhouse gases, weatherization, or protection of certain species of wildlife; |
• | new or increased taxes or fees on oil and natural gas extraction or production; |
• | negative public perception regarding us and/or our industry; |
• | the ability to receive drilling and other permits or approvals and rights-of-way in a timely manner (or at all); |
• | risks related to litigation; and |
• | cybersecurity threats, technology system failures and data security issues. |
• | general economic and business conditions; |
• | our financial condition and operating results; |
• | our free cash flow and current and anticipated cash needs; |
• | our capital requirements; |
• | legal, tax, regulatory, and contractual (including under our revolving credit facility) restrictions and implications on the payment of dividends by us to our stockholders or by our subsidiaries to us; and |
• | such other factors as our board of directors may deem relevant. |
• | Dividends effectively connected with a trade or business of a Non-U.S. Holder within the U.S. (and, if required by an applicable income tax treaty, are treated as attributable to a permanent establishment maintained by the Non-U.S. Holder in the U.S.) generally will not be subject to withholding if the Non-U.S. Holder complies with applicable IRS certification and disclosure requirements and generally will be subject to U.S. federal income tax on a net income basis at regular U.S. federal income tax rates (in the same manner as a U.S. person) on its U.S. trade or business income. In the case of a Non-U.S. Holder that is a corporation for U.S. federal income tax purposes, such effectively connected income also may be subject to the branch profits tax at a 30% rate (or such lower rate as may be prescribed by an applicable tax treaty) on its effectively connected earnings and profits (as adjusted for certain items), which will include effectively connected dividends. |
• | The withholding tax may not apply, or may apply at a reduced rate, under the terms of an applicable tax treaty. Under Treasury Regulations, to obtain a reduced rate of withholding under a tax treaty, a Non-U.S. Holder generally will be required to satisfy applicable certification and other requirements. Non-U.S. Holders should consult their own tax advisors regarding their entitlement to benefits under any applicable income tax treaty. |
• | the gain is effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the United States and, if subject to an applicable tax treaty, is attributable to a permanent establishment or fixed base maintained by the Non-U.S. Holder in the United States; |
• | in the case of an individual, the Non-U.S. Holder has been present in the United States for at least 183 days or more in the taxable year of disposition (and certain other conditions are satisfied); or |
• | we are or have been a “U.S. real property holding corporation” (“USRPHC”), for U.S. federal income tax purposes (that is, a domestic corporation whose trade or business and real property assets consist primarily of “U.S. real property interests”) at any time during the shorter of the five-year period ending on the date of disposition and the Non-U.S. Holder’s holding period for its shares of our common stock and, if shares of our common stock are “regularly traded on an established securities market,” the Non-U.S. Holder held, directly or indirectly, at any time during such period, more than 5% of the issued and outstanding common stock. |
• | Our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed with the SEC on March 8, 2023; |
• | The information specifically incorporated by reference into our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 from our Definitive Proxy Statement on Schedule 14A, filed with the SEC on March 22, 2023; |
• | Our Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2023 and June 30, 2023, each filed with the SEC on May 10, 2023 and August 7, 2023, respectively; |
• | Current Reports on Form 8-K and 8-K/A, as filed with the SEC on February 28, 2023, April 4, 2023, April 24, 2023 and June 20, 2023 (excluding any information furnished pursuant to Item 2.02 or Item 7.01 and related exhibits furnished under Item 9.01); and |
• | The description of our securities contained in the Registration Statement on Form 10-SB12G filed August 7, 1997 (File No. 000-29386) and any amendment or report filed with the Commission for the purpose of updating such description. |
• | fluctuations in the price we receive for our oil, gas, and NGL production, including local market price differentials; |
• | the impact of the COVID-19 pandemic, including reduced demand for oil and natural gas, economic slowdown, governmental and societal actions taken in response to the COVID-19 pandemic, and stay-at-home orders or illness that may cause interruptions to our operations; |
• | 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; |
• | severe weather and other risks and 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; |
• | 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 from time to time and our ability to repay any excess borrowings as a result of such reduction; |
• | the impact of our derivative instruments and hedging activities; |
• | continuing compliance with the financial covenant contained in our amended and restated credit agreement; |
• | 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 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 or legislatures; |
• | 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 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; |
• | risks related to litigation; and |
• | cybersecurity threats, technology system failures and data security issues. |
1. | The description of Registrant’s securities contained in the Registration Statement on Form 10-SB filed August 8, 1997 (File No. 000-29386) and any amendment or report filed with the Commission for the purpose of updating such description; |
2. | The Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, filed with the SEC on March 29, 2021; |
3. | Current Reports on Form 8-K, as filed with the SEC on January 22, 2021, February 16, 2021, February 18, 2021, February 25, 2021, March 4, 2021, March 4, 2021, March 5, 2021, March 15, 2021 and April 7, 2021; and |
4. | All other reports filed by the Registrant with the Commission pursuant to Section 13(a) or 15(d) of the Exchange Act since the end of the fiscal year covered by the document referred to in 3 above. |
• | funding working capital requirements; |
• | capital expenditures; |
• | repayment or refinancing of indebtedness; |
• | strategic acquisitions; |
• | general corporate purposes; and |
• | repurchases and redemptions of securities. |
| | Shares of Common Stock beneficially owned prior to the offering | | | Shares of Common Stock to Be Offered | | | Shares of Common Stock beneficially owned after the offering | |||||||
Selling Stockholder | | | Number | | | Percentage(2) | | | Number(3) | | | Number | | | Percentage(2) |
Riley Exploration Group, LLC(4) | | | 4,677,410 | | | 25.95% | | | 4,677,410 | | | — | | | — |
Yorktown Energy Partners IX, LP(5) | | | 1,784,113 | | | 9.90% | | | 1,784,113 | | | — | | | — |
Boomer Petroleum, LLC(6) | | | 3,537,404 | | | 19.63% | | | 3,537,404 | | | — | | | — |
Dernick Encore, LLC | | | 634,672 | | | 3.52% | | | 634,672 | | | — | | | — |
Bluescape Riley Exploration Holdings, LLC(7) | | | 5,221,767 | | | 28.98% | | | 5,221,767 | | | — | | | — |
Stephen Harry Dernick Trust | | | 241,977 | | | 1.34% | | | 241,977 | | | — | | | — |
David Dwight Dernick Trust | | | 241,977 | | | 1.34% | | | 241,977 | | | — | | | — |
Bobby D. Riley(1)(8) | | | 287,673 | | | 1.60% | | | 137,247 | | | — | | | — |
Dennis W. Bartoskwitz | | | 33,378 | | | * | | | 33,378 | | | — | | | — |
Alan C. Buckner | | | 18,511 | | | * | | | 18,511 | | | — | | | — |
Robert Gary Dernick Trust | | | 14,079 | | | * | | | 14,079 | | | — | | | — |
Christopher M. Bearrow | | | 688 | | | * | | | 688 | | | — | | | — |
Kevin Riley(1)(9) | | | 167,164 | | | * | | | 77,134 | | | — | | | — |
James J. Doherty, Jr.(1)(10) | | | 85,372 | | | * | | | 65,767 | | | — | | | — |
Jeffrey Gutman(11) | | | 25,443 | | | * | | | 25,443 | | | — | | | — |
Corey Riley(1)(12) | | | 57,380 | | | * | | | 6,941 | | | — | | | — |
Michael Palmer(1)(13) | | | 20,392 | | | * | | | 3,414 | | | — | | | — |
| | 17,049,400 | | | | | 16,721,922 | | | | |
* | Represents less than 1%. |
(1) | Includes shares of restricted common stock issued pursuant to the Riley Exploration Permian, Inc. 2021 Long Term Incentive Plan that are subject to vesting and certain other restrictions. |
(2) | Percentage of beneficial ownership is based upon 18,021,522 shares of common stock outstanding as of April 7, 2021, which includes 239,158 shares of restricted stock. Because the selling stockholders are not obligated to sell any portion of the shares of our common stock shown as offered by them, we cannot estimate the actual number or percentage of shares of our common stock that will be held by the selling stockholders upon completion of this offering. However, for purposes of this table, we have assumed that, after completion of the offering, none of the shares covered by this prospectus will be held by the selling stockholders. |
(3) | Represents the number of shares being registered on behalf of the selling stockholder pursuant to this registration statement, which may be less than the total number of shares beneficially owned by such selling stockholder. |
(4) | Certain investment funds managed by Yorktown Partners own an aggregate of approximately 94% of Riley Exploration Group, LLC. The address of Riley Exploration Group, LLC is 29 E. Reno, Suite 500, Oklahoma City, Oklahoma 73104. |
(5) | Yorktown XI Company LP is the sole general partner of Yorktown Energy Partners XI, L.P. Yorktown XI Associates LLC is the sole general partner of Yorktown XI Company LP. The managers of Yorktown XI Associates LLC, who act by majority approval, are Bryan H. Lawrence, one of the Company’s directors, W. Howard Keenan, Jr., Peter A. Leidel, Tomás R. LaCosta, Robert A. Signorino, Bryan R. Lawrence and James C. Crain. As a result, Yorktown XI Associates LLC may be deemed to share the power to vote or direct the vote or to dispose or direct the disposition of the Company common stock owned by Yorktown Energy Partners XI, L.P. Yorktown XI Company LP and Yorktown XI Associates LLC disclaim beneficial ownership of the Company common stock held by Yorktown Energy Partners XI, L.P. in excess of their pecuniary interest therein. The managers of Yorktown XI Associates LLC disclaim beneficial ownership of the Company common stock to be held by Yorktown Energy Partners XI, L.P. The address of such funds is 410 Park Avenue, 19th Floor, New York, New York 10022. |
(6) | Boomer Petroleum, LLC is a Delaware limited liability company that is owned 50% by Texel Resources Inc., a Canadian corporation, and 50% by Balmon California, Inc., a California corporation. The President of Boomer Petroleum, LLC is Alvin Libin, a former |
(7) | Bluescape Riley Exploration Holdings LLC is a Delaware limited liability company and beneficially owns Company common stock. Philip Riley, currently the Company’s Executive Vice President - Strategy and formerly a director of REP, LLC, was also an investment manager for Bluescape Riley Exploration Holdings LLC. The address Bluescape Riley Exploration Holdings LLC and mailing address of each listed beneficial owner is 200 Crescent Court, Suite 1900, Dallas, Texas 75201. |
(8) | Bobby D. Riley, the Company’s current Chairman of the Board and Chief Executive Officers, has sole voting and investment power over the shares. |
(9) | Kevin Riley, the Company’s current President, has sole voting and investment power over the shares. |
(10) | James J. Doherty, Jr., formerly the Company’s Executive Vice President – Engineering, has sole voting and investment power over the shares. |
(11) | Jeffrey Gutman, formerly the Company’s Chief Financial Officer, has sole voting and investment power over the shares. |
(12) | Corey Riley, the Company’s current Executive Vice President – Business Intelligence, has sole voting and investment power over the shares. |
(13) | Michael Palmer, the Company’s current Executive Vice President – Land, has sole voting and investment power over the shares. |
• | the name of the applicable selling shareholder; |
• | the nature of any position, office or other material relationship that such selling shareholder has had within the last three years with us, our predecessors or any of our affiliates; |
• | the number of shares of common stock owned by such selling shareholder prior to the offering; |
• | the amount of common stock to be offered for such selling unitholder’s account; and |
• | the amount and (if one percent or more) the percentage of common stock to be beneficially owned by such selling shareholder after the completion of the offering. |
• | directly to purchasers; |
• | through agents; |
• | through underwriters; |
• | through dealers; and |
• | through a combination of any of these methods or any other method permitted by applicable law. |
• | 240 million (240,000,000) shares of common stock, par value $.001 per share; and |
• | 25 million (25,000,000) shares of preferred stock, par value $.0001 per share. |
• | the designation of the series of preferred stock; |
• | the number of shares of preferred stock offered, the liquidation preference per share and the offering price of the preferred stock; |
• | the dividend rate or rates of the shares, the method or methods of calculating the dividend rate or rates, the dates on which dividends, if declared, will be payable, and whether or not the dividends are to be cumulative and, if cumulative, the circumstances in which dividends shall be cumulative; |
• | the amounts payable on shares of the preferred stock in the event of our voluntary or involuntary liquidation, dissolution or winding up; |
• | the redemption rights and price or prices, if any, for the shares of preferred stock; |
• | the terms, and the amount, of any sinking fund or analogous fund providing for the purchase or redemption of the shares of preferred stock; |
• | any restrictions on our ability to make payments on any of our capital stock if dividend or other payments are not made on the preferred stock; |
• | any voting rights granted to the holders of the shares of preferred stock in addition to those required by Delaware law or our certificate of incorporation; |
• | whether the shares of preferred stock will be convertible into shares of our common stock or any other class of our capital stock, and, if convertible, the conversion price or prices, and any adjustment or other terms and conditions upon which the conversion shall be made; |
• | any other rights, preferences, restrictions, limitations or conditions relative to the shares of preferred stock permitted by Delaware law or our certificate of incorporation; |
• | any listing of the preferred stock on any securities exchange; and |
• | the federal income tax considerations applicable to the preferred stock. |
• | the transaction is approved by the board of directors before the date the interested stockholder attained that status; |
• | upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced; or |
• | on or after such time the business combination is approved by the board of directors and authorized at a meeting of stockholders by at least two-thirds of the outstanding voting stock that is not owned by the interested stockholder. |
• | establish advance notice procedures with regard to stockholder proposals relating to the nomination of candidates for election as directors or new business to be brought before meetings of our stockholders. |
• | provide our board of directors the ability to authorize undesignated preferred stock. This ability makes it possible for our board of directors to issue, without stockholder approval, preferred stock with voting or other rights or preferences that could impede the success of any attempt to change control of the Company. These and other provisions may have the effect of deferring hostile takeovers or delaying changes in control or management of our company; |
• | provide that the authorized number of directors may be changed only by resolution of the board of directors; |
• | provide that, at any time after (i) certain investment funds managed by Yorktown Partners LLC (“Yorktown”), (ii) Boomer Petroleum, LLC (“Boomer”), (iii) Bluescape Riley Exploration Acquisition, LLC (“BREA”), (iv) Bluescape Riley Exploration Holdings, LLC (“BREH” and together with BREA, “Bluescape”), and their respective affiliates, no longer collectively beneficially own more than 50% of the outstanding shares of our common stock, all vacancies, including newly created directorships, may, except as otherwise required by law or, if applicable, the rights of holders of a series of preferred stock, be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum; |
• | provide for our board of directors to be divided into three classes of directors, with each class as nearly equal in number as possible, serving staggered three year terms, other than directors which may be elected by holders of preferred stock, if any. This system of electing and removing directors may tend to discourage a third party from making a tender offer or otherwise attempting to obtain control of us, because it generally makes it more difficult for stockholders to replace a majority of the directors; |
• | provide that our bylaws can be amended by the board of directors; |
• | provide that, at any time after Yorktown, Boomer, Bluescape and their respective affiliates no longer collectively beneficially own more than 50% of the outstanding shares of our common stock, any action required or permitted to be taken by the stockholders must be effected at a duly called annual or special meeting of stockholders and may not be effected by any consent in writing in lieu of a meeting of such stockholders, subject to the rights of the holders of any series of preferred stock with respect to such series (prior to such time, such actions may be taken without a meeting by written consent of holders of common stock having not less than the minimum number of votes that would be necessary to authorize such action at a meeting); |
• | provide that, at any time after Yorktown, Boomer, Bluescape and their respective affiliates no longer collectively beneficially own more than 50% of the outstanding shares of our common stock, our certificate of incorporation and bylaws may be amended by the affirmative vote of the holders of at least two-thirds of our then outstanding common stock (prior to such time, our certificate of incorporation and bylaws may be amended by the affirmative vote of the holders of a majority of our then outstanding common stock); |
• | provide that we renounce any interest in existing and future investments in other entities by, or the business opportunities of, Yorktown, Boomer, Bluescape, or any of their officers, directors, agents, stockholders, members, partners, affiliates and subsidiaries (other than our directors that are presented business opportunities in their capacity as our directors) and that they have no obligation to offer us those investments or opportunities; |
• | provide that, at any time after Yorktown, Boomer, Bluescape, and their respective affiliates, no longer collectively beneficially own more than 50% of the outstanding shares of our common stock, special meetings of our stockholders may only be called by the board of directors, the chief executive officer, the chairman of the board, or the board (prior to such time, a special meeting may also be called at the request of stockholders holding a majority of the outstanding stock entitled to vote); and |
• | provide that, at any time after Yorktown, Boomer, Bluescape, and their respective affiliates, no longer collectively beneficially own more than 50% of the outstanding shares of our common stock, the affirmative vote of the holders of at least two-thirds of the voting power of all then-outstanding common stock entitled to vote generally in the election of directors, voting together as a single class, shall be required to remove any or all of the directors from office and such removal may only be for cause (prior to such time, directors may be removed either with or without cause by the affirmative vote of holders of a majority of our outstanding stock entitled to vote). |
• | any derivative action or proceeding brought on our behalf; |
• | any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, employees or agents to us or our stockholders; |
• | any action asserting a claim against us arising pursuant to any provision of the DGCL, our certificate of incorporation or our bylaws; or |
• | any action asserting a claim against us that is governed by the internal affairs doctrine, in each such case subject to such Court of Chancery having personal jurisdiction over the indispensable parties named as defendants therein. |
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