Earnings call transcript Q4 2022

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Operator

Hello, and thank you for standing by. My name is Regina and I will be your conference operator today. At this time, I would like to welcome everyone to the Riley Exploration Permian Incorporated Fourth Quarter 2022 Earnings Conference Call.

I would now like to turn the conference over to Philip Riley, CFO. Please go ahead.

Philip Riley

morning good and you, to everyone. Thank our full year to conference call and quarter fourth the XXXX covering Welcome results. the earnings Yesterday, the and found under be items non-GAAP which section, company published presentations. a on number measures and our supplemental a XX-K, release, of two can Investors info an website fourth an company's year story. and results, overview with One presentation quarter an our provides the of update for full second providing

Riley, within laws. materially to cause subject and the in Chairman myself, those the meaning Participating of that and results actual of Kevin on implied federal are from These statements the call may statements. uncertainties and CFO and call Riley, securities expressed are differ and to statements or conference risks Philip these Today's Bobby Riley, projections other EVP today Strategy. President, certain CEO; contains forward-looking

will be our We measures GAAP the reference disclosure measures, on supplemental non-GAAP also the website. reconciliations appropriate to certain found our and can

turn the over now Bobby. to I'll call

Bobby Riley

to call. be year you, everyone through we results Thank you quarter outstanding the us of report the XXXX. pleased Permian that our another after performance and announced with to close Yesterday, quarter. on was XXXX market, the I'm fourth Riley Philip, to of joining for year the full for and continuing thank again fourth today's strong

role accounting financially value member our and our success. work, of and we cost, and on reporting entire financial tirelessly hard worked team. that expertise focused the and on we critical efforts to REPX team are results, operational we today. every and to remain their team to the to I'd disciplined From who the ensured recognize like is that Before operations our achieve results outstanding move able shareholders, the the a dedication to moment and finance who to take production we played a reduce teams It strong of to are that through delivering optimize our

business is such what and passion to for great to company honored and excellence our I'm a Permian makes you. commitment Your your Riley alongside work

the for year. to turn the let's Now results

We and purchase variety have acquire and announced growth Yeso we year sell have throughout gas a into optimize agreement to a significantly, initiatives. on recently to trend core Most New business tirelessly oil entered of and the that assets Mexico. worked our of and we execute

As these we continue developing closing work acquisition, a these maximizes already plans assets that at achieve can the that to into confident to underdeveloped integrate work operations, assets. existing team our seamless towards our we transition potential of hard are we the and is

updating by day cash XX% per per to of $XXX MBoe equivalent net towards $XX XX.X total to year production few million a results. production financial oil and progress operations free of shareholders to look strong year-over- early and XXXX, day. we X.X adjusted of year from million generated million EBITDAX, Riley In net year XX% of $XXX continuing cash delivered we flow. flow full and the our increased forward on as transaction our Permian items, move To highlight in operating our second We operating closing the the year by MBbl over quarter. just We

returning cash XXXX. to We to down dividends $XX shareholders continue of corresponding of committed paying a expenditures value million, during free million reinvestment total of acquisitions operations our We corresponding $XXX of XX% XX% flow. business XX% in capital in in from to with invest cash year, before cash operating rate from the our remain to flow to continuing

to come. of strength We sustainable value creating and quarters. shareholders for on years and Overall, dividends our XX our long-term the of assets they remain proud our delivering team. and consecutive paid have we financial dedication are and of believe XXXX operating the for results We now in growth reflect our for focused

call I discuss on results acquisition. to give now and to turn will over details the the operational more Kevin

Kevin Riley

everyone. Thank and results. Bobby, of shortages our equipment are as and labor of sentiment deliver which material, Bobby's team's proud pressures and dedication to to we to I enabled echo good outstanding inflationary us morning overcome you, and resilience,

we dive I of to our take Before initiatives, during accomplishments few into achieved want exciting executing the to a our plan highlight new moment a we in XXXX.

XX basis, First, X% through production MBoe XX.X we day fourth brought production a year. increase. wells increase XX.X quarter to MBoe full fourth from a was we the quarter-over-quarter. which momentum organically from day, maintained This X.X our representing On XX% with quarter, XX.X per gross, the the per average year-over-year online is net during growing the in our a XX.X achieved to year grew with growth all

$X.XX lease our X% decrease XX quarter-over-quarter per or ended year XX. or for were BOE $X.XX December December BOE expenses for a addition, months This three operating a $XX.X the million and per $X.X increase represents ended year-over-year. million X% the In and

in repressurizing in but of still COX process Regarding early reservoir. continue our water inject the we are the pilot, EOR to

Pecos announced Permian's some our the the Eddy Now let's planned agreement February the turn Mexico. into to on are of trend gas assets of ASO and Northwest oil existing Andrews. Yeso beyond. trend assets for to Oil Riley XX, exciting new entered St. Shelf. core & and focused have focused assets purchase LLC of On on in Yeso we County, a initiatives the The we we and acquire the New of XXXX These Gas, sell have the attention and development

with potential this the drill similarities and Riley Though production extensive is boost bid. completion There this drilling are techniques. geology, for type in production near-term, development through underdeveloped we allowing creation believe several and Permian's asset value will reservoir an asset

to the adds reducing and company's acquiring area risk. operating concentration area assets footprint, portfolio single Riley's a new diversifying addition, In the

March assets. generation less for and no joint on a important have power own formed that'll Lastly, County, we announced but X, operate Texas Yoakum on-site we venture

cost, initiatives power operations. from more XXXX. this energy provide The reliability, also long-term with otherwise to and first peers on-site of by like us believe of but expected differentiate June provide to flared operational utilizing only XX may and We power us project power over the that by carbon phase is control megawatts help reduce gas generation will be further be not of emissions supply it'll as us our

point, this over Philip to financial now At the our I'll review to results. call turn

Philip Riley

you, Thank Kevin.

For and derivative revenue million lower losses was $X approximately million XX% net settlement the derivative lower the of and $XX quarter, total production driven prices below higher to by primarily quarter, by realized third oil and partially settlements. offset XX%

$XX changes you which capital in lower costs costs quarter X flow $XX per from on drove turn from these were $X see combination million, quarter, in Slide The working XX% a of million higher factors despite before to a XX% decrease basis, lower quarter-over-quarter in a results volumes. and million of cash cash were BOE quarter-over-quarter. can Cash quarter-over- On approximately or visually a fourth chart operations our presentation. the XX%

capital from For a before driven $XX million. $XXX million XX% price. of the full combination by year-over-year from year, to This higher our working increased operations cash flow is and volumes

comments referencing Now I’ll allocation, deck. and some same X, the offer Slide capital

grew XXXX of we XXXX than volumes in materially reinvesting amount First, in more while cash a flow. lower

XX% us two- XXXX, reinvestment by out to and more CapEx balance In flow Very to we grew allocate to grew XX%. there sheet. few lower than materially low allowed of cash and the thirds cash dividends from allocated down more we double-digits, The in XXXX. companies

small surface for XXXX increases than XX% flow more with more increased positions year-over-year. we Total paid debt cash CapEx six Operating in and flow down offset free growth we large up several increase by versus than of net dividends benefit, a fourth paid were the quarter acquired. land for cash XX%

guidance. both forward about and In talk presentation. let's Okay, update earnings the the results release

for both the You'll and find full including summary the guidance, first our tables year. of quarter

Our flows. represents legacy scheduled to so New and Mexico cash at is the the quarter, beginning acquisition second first the production close quarter standalone of

And January and with between effective flow effectively is then a quarter and of adjustment full the cash to the the for downward fourth a quarter closing X purchase will have date the acquisition production We the second through captured so XX% forecasted year. Jan cash for X represent acquisition, flows price.

forma a XX,XXX a quarter. X. production, you This run of illustrative day if closed metrics, quarter at far idea offers the guiding for right roughly the included see an hypothetically flat January rate fourth for first XXX% oil with contribution starting column We've we're acquisition as so with barrels pro you'll production at the

online We the well brought one on quarter. fourth only

day amount quarter, so large XX% second year, occurring into now, a XX,XXX than day average, which bump barrels in in a it's the represent declining from we the of have quarters. activity with We but legacy year-over-year the third a barrels and now production But wells X,XXX modestly for or to would on bit fourth second a bigger quarter the maybe coming a growth the XXXX. over in

we looking production quarter decline just over won't delay get for accounting until the good there New some So asset growth started, Mexico modest could production, acquisition. at and then the organic quarter second acquisition the development second And a with the to a Then barrels just before would at something closer over bit. third hopefully a the fourth and a in rate, quarters a growth mid-year the bit but the year, level higher year overall the a development, to exiting following for averaging current come of day. X,XXX take

each growth combining than timing or BOE XX%. So could the run production, XXXX full pro see more acquisition, comparing profiles to the basis nearly forma legacy but in other XX% development year and we growing complement XXXX, on by two illustrative the total rate by well,

free year very cash and it’s year, weighted commitments function something some those words for XX% Now, you the total honoring investing, we offerings. first amount the much investment of combined This the first the flow the a made occurring of is a to lead for first assets, of to quarter, of in beyond quarter This full basis the in legacy the a even on service to quarter. other a on could first outspend we’ve modest encourage rig half look with roughly secure few view. for to but XXXX

JV E&P fourth from ramping and million the CapEx infrastructure, forecasting could For in amount to our delayed into investing based third speed pilot, power fair flex allocated the to power separate and CapEx which quarter. approximately acquisition JV, and on then forecast and starting were in $XX development second related investment not million We which the there. $XX a got directly year, quarters, of from was the for EOR the gas power the we’ve

EBITDAX while decline compared adjusted last further rate For the overall achieving even from least year, growth. volume year, full seeing still this when we’re impressive reinvestment our to at

year and for Lastly, pursuing. our to the various been our our team continued for huge performance to and Thank we’ve acquisitions thank your ventures and strong across new efforts shareholders for a you Board another your of support. you

I’ll for Bobby turn it closing comments. back to

Bobby Riley

for focused for the business support. our you joining investing it Philip. us again, on you, now in driving profitable thank for all up long-term. And Thank Thank open your today. We you for growth questions. Operator, you and remain may

Operator

first [Operator question line go from Our Instructions] with Neal the Truist Securities. Please Dingmann ahead. of will come

Neal Dingmann

morning, How assets for better Good about this, question the My quarter first good would of immediately your might talked early you? others what from all. that against little year, in just talked wells Thanks operations. looks sort wondering just to assets Philip, wanted going this some to compete close. look there? the a the potential half like is them include know but it to new just you on for of for time. ask first you quite here about those wondering, cadence part and quickly competing I’m does I I’m forward the for assets thoughts us. Pecos be like second early It in

Kevin Riley

Yes, this is Neal. Kevin,

operations starting So anticipate we mid-April. do in

are to bringing currently to prepare hopefully with agreement and by transition for start, early the mid-summer. will services We we and new operations a with that anticipate to those on production with have working we operator

Neal Dingmann

Got it.

And seeing maybe, Kevin, you Philip, hear. maybe vein or just on same on the that what doing upside, prices which side? Okay. inflation That’s to today? I’m on Are mitigating what then just a sorry, hit you the are there – you’re like things just on costs, could I’d bit inflation for

Kevin Riley

we maybe costs outside can We adding us yet, we bring of will this down bit. drive to economies that but started give of start increases. too to other hopefully see acquisition efficiencies and scale start come prices costs more believe to Nothing some material do down inflationary that little a

Neal Dingmann

color, anything know to Okay, think one some just are potential I if going could quarter on give last And then a did little the have just hear. conversation CCUS. good say last last – guess, I I didn’t call you anything side. little that you on you continuing to one, you – on, to just Philip, a bit just

Philip Riley

Yes, sure.

scaled for So storage a we hub a project presentation there working put both what and released earnings advancing in we region. comment a in with partners the consider the in we large are that our

down with We’re something we’re in using that. capital is, mix, and that’s both not people’s about other people obviously area And working too and but do up details the then of frankly, spectrum shareholders’ our on is working storage I most with the efficient giving to money. what expertise storage. the be say we’re core the looking part, many the going includes capture But can that to our

on, things something near So to and hopefully you there. had that’s forward that’s we’ve a keep on hearts going can going but priorities, and and we’re it to few on understand our working we’re other some dear pushing

Neal Dingmann

progressing along. you Thank No, just glad hear all. to it’s

Operator

will the with White line next from Your Please ahead. come ROTH John question go Capital. of MKM

John White

as of any question point parties? negotiations the the closing with several I Good a COX and on you for timeframe project. you strong congratulations on where a morning deal a on follow-up could to to somebody in Neal’s Are at potential results. the point or wanted

Bobby Riley

appreciate question. I the John, Well,

of a balance organization with too away without is dealing giving moving that large a there. much slow very counterparties we’re large One the sheet has

so cognizant move And we’re they pace of at. the that

The or such. other closing definition do a consider you the what thing an scoping versus of project FID is,

mid-year. least how can that to you done I those all I asset and of share here better on certain for moves there. are we applications with you so philosophies forth, There’s kind we’ll the and different as think hoping different needs we permits certain positioning. further, to to I’m the far but position with those, of the and more steps in sequence taken as then So be getting share something We’ve guess ready. different certain We’ve at

John White

the you. a of and appreciate in detail. understand I additional you’re position little bit Thank

that’s detailed you’ve looks the do CapEx program it’s deal. On on designed the I and to be work Mexico do – in for Mexico will assets. first the time New it the correct? have closing New date like work, Texas, County, account to some of to to But all to Mexico your split course between Yoakum in further drilling New team and the quarter give think also technical that Is carefully of all subsurface

Philip Riley

it, to Yes, that’s way fair a John. put

I that The it let when and bit more of other a kind As those color of it’s overlap – we compliments tie little into there. I description And me said, each how there. way extended why give in there. they went just

legacy or of look actually but to giving companies down. we’re to it, flat are not being little down at or year-over-year to with level we’re disaggregated we explicit So, totally basically down. bit a CapEx CapEx, the challenge if And you a at grow growing on basis, the forecasting you are I find many that

EOR EBITDAX gave can of that asset. data see the we back got in including Now, we was with acquisition of half because And that’s there, basically either is there’s pilot higher you But way from that the for project that’s amount reinvesting little you decent year bit we’ve press a a then a some couple ways last into more the release. a bit But from lower. spend. about CapEx that, the there

flow I we exciting the our went that then remarks CapEx the got summer. year Kevin with Like in lower, of the on the But been rates year middle rate guidance how even then yet and We for the for little really to opening we our see Bobby that’ll being overall we on see even I of with dual described way in year, those be down that more of acquisition. the components down reinvestment coming hard slides by pretty the coming XX% cash efficient reinvestment it’s there declining an we’ve exciting. forecast XX%. and new see getting But and acquisition. that’s again. described his said, the recognize the overall, that legacy so confusion. to gave There’s CapEx a bit maybe on think I before from

John White

because accept for your on I additional decline last cost great refresh completed your That’s Mexico one to time the know well numbers. thank New challenge, me Can the asset? respectfully and I’ll you for detail and you know you it

Philip Riley

[Technical Difficulty]

John White

the line’s sorry, breaking I’m up.

Philip Riley

mostly $X.XX, and completed $X.X is between are which by costs driven that cost the on the asset. Currently

John White

to I’ll All it very back right. much operator. the Thanks and pass

Operator

come Jeff Robertson Our Please [Operator will Tower Instructions] Research. from Water go question next line with of ahead. the

Jeff Robertson

Thank you. morning. Good

Yeso can bit issues the little on a to any you with have that talk deal assets, as Is infrastructure you On Riley’s still about plan? you’ll start? a

Kevin Riley

natural [Technical got line. infrastructure gathering XX have plenty disposals. they’ve Difficulty] XX and miles approximately of They so currently horizontally, oil put have place. in of wells, they in that’s multiple gas There’s

sites, So pad foreseeable outside CapEx lines to the infrastructure future. large of facilities that new lane, anticipate new in or don’t just we any small connect

Jeff Robertson

any Kevin or there anything the the is first of take that any that couldn’t takeaway there there part assets hear area? your are Are area or response. – that affects – of those I like – that constraints

Kevin Riley

we about takeaway constraints at in there are sorry area. I’m No, not. do any but this the that connection, point not have

Jeff Robertson

Okay. Are there…

Philip Riley

less incremental Jeff, to than are just is County as interrupt. this sorry excited. add that, It’s to area Philip. we’re in remote this surely we area, actually – a I’m where I Eddy Yoakum. know we

have what options of one a there bit options. and we a see different actually with lots that few provides out quite of provider, more little so And than so like we we competition midstream

Jeff Robertson

anything inherit with to were what have some be economics midstream the you that to maximize will maximize might you flexibility the doing? contracts operators do to to Philip, Okay. able prior try versus do –

Philip Riley

do gate. Yes the of term, the we medium not the think answer. over is I immediately short out

Jeff Robertson

have your might middle operating due year, second impact this Can operating June, the Yoakum this power you next. the your in, in what either talk that is costs? just year project County efficiency in about on and/or the that first in early late phase Question phase on I of think

Philip Riley

Yes.

behind. and see may this we you improve not may of foremost high can visible, fluctuating – operational and to you an What but pump. got So point outage and line we quality. from an got quite view power quality, level, everything at are just dirty power a pressures you’ve you’ve submersible to affects the public meaningful first is that electric from so it be something we’ve got ESP, to Power doing us assure that

workover. it, ends drops, it lose costly being up you a If it

can the oil it else, there. we operations So produce of the our end overall improves more business. the than And barrel the makes just really throughout more anything day, that to hope production, we which at ripples biggest impact every

very same guess we’re Clearly, cost tenant, the know cost it’s controlling – of don’t as the I environment would we – we gas going then And costs. prices see year. increases now forward. see going time, is second so At drop we lower in But or last we environment I gate natural certainly be be controlling again. for say much what the time high a the is volatile we’re hopefully that been gas were out costs vastly to the pricing. could lower on continuing. volatility a margin, And increasing certainly prices, than

intermittent have but region. price grid, with power influencing in often increasingly gas We prices obviously our an

So control of kind those increasing an costs. load there compressors. continued with to got We’ve on growth hoping some the whole, we’re out our with

in project going here starting power that increases the the EOR be We’re load. to with spring

very exciting lastly, control important midstream we opportunity. flaring that our for And based control so capacity. And that’s on us overall of to out it’s and part the to most saw the as then

that, Flare otherwise be we way liked and able an to is this Gas it. to that something and where useful create with to take could, control we So exciting

Unidentified Analyst

to standpoint? in project So positive compressors from power will a the ultimately be of field, kind which let cost displace allow the you

Philip Riley

clarify provide project electricity. will electrical No, to compressors will the power that on the to run there, power

it of instead grid, generation. the power our pulling it just from necessarily so onsite from And pulling you’re

from operational pull capacity from grid the we overall can we backup have Now that redundancy. and will for to

Unidentified Analyst

Having operations of reliable is of a move the on as greater the there you premium into project? more source power, that aspect EOR

Philip Riley

and lots way in pilot the section most for put of increasing part part, a general, that use I of power. places the and a different load we need it. But it to is I in that’s fair. field, think we small think Yes, large that’s a is and have fair overall one the

Unidentified Analyst

you. Thank

Operator

the Companies. Your David go from next line question [ph] Dernick come with of will ahead. Please Dernick

Unidentified Analyst

positions I the COX unrelated Good coming – three on far some And any year injection? congratulations interesting is do morning excess wonderful real and elaborate questions. kind if you I’ve sell back your on how a on And the grid? guys, quite like a really up. hedge and on think look going forward? water your projects then it. on could One capacity so on response the you’re that’s if thirdly, having project. secondly, addresses to wondering have That’s into little got seeing a and Congratulations then that. generation, what I’m oil electric you’ll the productive

Philip Riley

you, rip All can Yes, sure. right. these. Thank David. We through

the we’d EOR, what is So the the in repressurizing first question of reservoir. life say we’re on the early

As lot are term those. you long be familiar, EOR in nature. repressurize to a It projects may very takes

from producing We’re this this section, including adjacent field or sections. from

be And of the got will you sure and competition a and there. when longer-term bit update But de-pressuring something a that’s to have we a so to repressing for different say we you’ve there. deal little

Let’s see.

The have gas the degree to power power. there we I back We the grid. take and involves to back excess selling the second some grid have believe sell question, do non-dedicated flexibility to to

there some about. consideration happy and So a flexibility that we’re certainly that’s

see. Let’s

question, remind The me there. third

Unidentified Analyst

On your hedge forward? positions for oil going

Philip Riley

the cash flows. price this that that release. more The positions protect to show as in purchase the increase we difference. a a we Hedging. of a that some capital And recently. structure. is and those want some financing of acquisition. note XX/XX, hedging some agreed I’d given on thus a and are both Both as choosing of of We to hedge in we’ve in to result presentation and appendix then We earnings short that there’s answer slight disclose our XX-K the

will We have further hedging.

in We in prices higher. a of general just That did fair we’re the amount more with earlier were a hedging. when made to load, larger so trades the amenable January tell we’ve be can to you I going so, And year. debt with we’re happy some far in said, much pretty

bit higher, and Got of the below of for protection a that where collars little nice a some but then quite bit lot are, including such. we a allow $XX range

just Just levered. gates, may down a But bit to out kind then neighborhood, we in hope be X.X, the Coming quite pay a there here of the with this see profile to back David, that bit on de-leveraging the of of we little times the half the year. we elaborate more debt in of X.X asset.

As second to start that a we described then quite may first quarter increasing of outspend but have And pay you’re we bit slight a come going the with quarter same roughly CapEx, have that down. really then EBITDA, see back to half leverage down.

We’re hoping year. end to about times the get it the to one down by of

a can but So flexibility hedging, little more hedged bit gives that that we’ll going potentially be with forward. expect us you

Unidentified Analyst

Great. my That Thanks answers questions. guys.

Operator

the question ROTH ahead. Please line go John follow-up MKM a of White have We with from Capital.

John White

you, to I was Thank to Thank about by operator. you. answered which sales ask asked power David. and going was third parties just

Operator

the from line Tower Jeff Robertson a Please go question Water with Research. have follow-up of ahead. also We

Jeff Robertson

of in think Texas Neal Mexico capital assets talk legacy your I and was Kevin, now you competition flexibility about about asking think New assets in the to Thanks. that back area? for provide capital between and allocation up operating the you the part what new how can terms of earlier,

Kevin Riley

does wells very we similar. press see a than really a releases see tier-one capital, Yoakum. as so the good of the in think while even Sure. going better I compete asset allocation in fact that or We’ve best the competing Happy whole lot got mix there. our for I ways to to. of many and this the over we’re But concept in The some And for I that that there. competitors and we’re recognize capital, lot term thrilled is

activity the really away part, from most the in really legacy. disclosed. the the just we’ve the It’s spend much and guided It the just too budget taking added both Jeff. in stray For we’ve way doesn’t

we’ve level the of effective type and investing got less reinvesting lower EBITDAX. legacy. total so hence amount of spend wells year-over-year Yoakum new slightly we’re kind legacy the spend the and EOR half DNC of the roughly a And similar over Whereas, the of on properties on frankly asset and

And it’s think amount so, there. of a really proportionate I allocation

of think we cost kind half of are, acquisition, of proportionate the it’s there. If where as roughly you such and really

Jeff Robertson

So is you way fit? to cash generate can pretty see think a new right asset allocate diversity planned as the that still Then it. geographic you about capital have you you substantial initially excess Philip more that’s released and flow way the will

Philip Riley

diversity constraints Yes, do we differentials are appreciate power say operational of We control. control, described. in time note the The of guidance industry, part certain the most on but quick it’s from and as we your I’d time we for absolutely. is our geographic to for face those not are our such region. in midstream And those just for out our benefit, mainly our we right? give there something volatile

So lower confidence on those.

we function diversity the fees, prices area to last the and ability the gas the in constraints. run there have lower NGL. later the of really into at least. on The the appearance to fixed throttle of And helps applying index at least index higher lower we should if one year any other throttle up a us or kind differentials Jeff is there, of back guess geographic differentials just or I versus But versus always year, the to

Jeff Robertson

of that I important? is guess, most to between in terms the competing really between the the makes capital what’s ability that area flex sense most,

Philip Riley

have that benefit to boy we’re what That’s companies other going now. I something some big it’s from exactly. and really think Yes,

Jeff Robertson

you Thank much. very

Philip Riley

you. Thank

Operator

meeting. have Thank today’s joining. Ladies for conclude all gentlemen time. further that will questions at We you and no this

disconnect. now may You

Riley Exploration Permian (REPX) 9 Mar 232022 Q4 Earnings call transcript