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Riley Exploration Permian (REPX) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Energy· Aug 6, 2026

Source: earnings call transcript

Executive summary

Riley Exploration Permian Q2 FY26 — Production Growth and Operational Efficiency

Riley Exploration Permian delivered strong Q2 FY26 results, driven by accelerated development and significant operational efficiency gains in both Texas and New Mexico. Despite temporary midstream constraints, the company raised its full-year oil production guidance, signaling robust growth into 2027. Management remains focused on capital discipline, debt reduction, and consistent shareholder returns, leveraging its substantial inventory of undeveloped locations.

Highlights

5

  • Increased full-year oil production guidance to 23,000 barrels per day at the midpoint, representing over 30% year-over-year growth.

  • Achieved a June oil production exit rate of 24,400 barrels per day, indicating strong momentum for H2 2026.

  • Improved drilling efficiency in Texas with 19% increase in lateral footage per day and 7.5% reduction in drilling cost per lateral foot compared to 2025.

  • New Mexico drilling efficiency significantly improved with 67% increase in lateral feet per day and 32% reduction in drilling cost per lateral foot compared to 2023-2024 campaigns.

  • Silverback acquisition properties materially outperformed expectations, with production approximately double the buy-side case and per-well workover costs decreased by 59%.

Concerns

4

  • Experienced midstream constraints in April and May, resulting in temporary well shut-ins and a reduction of approximately 2,000 barrels per day in oil production.

  • Infrastructure and other capital expenditures were $17 million, exceeding the guidance midpoint of $12.5 million due to accelerated development and bringing forward costs.

  • Total Lease Operating Expenses (LOE) increased $5.4 million quarter-over-quarter, driven by recurring LOE and workover expenses.

  • Turn-in-lines came in below guidance due to delays in third-party infrastructure for gas, oil, and water takeaway in Texas.

Guidance & targets

CategoryTargetConfidence
Full-year oil production growth
approximately 30% year-over-year
high materiality
High
Q3 sequential oil production increase
more than 20% sequentially
medium materiality
High
Targa pipeline in-service date
early in the fourth quarter of 2026
high materiality
High
Q3 accrual CapEx
$59 million
medium materiality
High
Q3 oil production
25,600 barrels per day
high materiality
High
Full-year CapEx
$236 million
high materiality
High
Full-year oil production volume
23,000 barrels per day
high materiality
High
Free cash flow
higher in the second half of the year compared to the first
high materiality
High

Deals & partnerships

null Acquisition of undeveloped locations $2.4 million

Very small acquisition in the Red Lake area.

Capital programs

Targa high-pressure gathering and trunk line system underway

Benefit:alleviate midstream constraints

Construction well underway, completed key river crossing, trenching, stringing pipe, and welding.

WaterBridge disposal agreement underway
Start: September 2026

Benefit:additional water takeaway capacity and flexibility for Red Lake development

Initial commitment period begins in September. Comes at a higher per barrel cost but enables accelerated development.

Power Joint Venture merchant generation sites 1st site commercial, 2nd commissioning, 3rd beginning commissioning

Benefit:3 sites, 10MW each

First 10MW site placed into commercial service midway through Q2. Small scale relative to core business.

Risks & headwinds

Midstream constraints Q2 FY26

Reduced oil production by approximately 2,000 barrels per day during April and May.

Mitigation:New Targa high-pressure gathering and trunk line system expected in service early Q4 2026.

Higher infrastructure and other capital expenditures Q2 FY26

$17 million in Q2 FY26, compared to guidance midpoint of $12.5 million.

Mitigation:Attributed to accelerated development and bringing forward costs; expected to support future growth.

Increased Lease Operating Expenses (LOE) Q2 FY26

Total LOE increased $5.4 million quarter-over-quarter, with $1.9 million recurring and $3.5 million from workover expense.

Mitigation:$2.3 million of workover spend was intentional, adding 700 bbl/d production; field-level efficiency gains, vendor optimization, chemical program improvements, and lower cost workover execution.

Delays in third-party infrastructure Q2 FY26

Turn-in lines came in below guidance due to delays in gas, oil, and water takeaway projects in Texas.

Mitigation:Projects have since been turned in line; production contribution expected in Q3 FY26.

Higher water disposal costs in New Mexico Ongoing from September 2026

WaterBridge disposal agreement comes at a higher per barrel cost than own disposal system.

Mitigation:Trade-off for increased capacity and flexibility to accelerate development and unlock long-term value in Red Lake.

Low summer power prices Summer 2026

Summer power prices are at multiyear lows following a surge in solar supply and new large load interconnections are stuck in the queue.

Mitigation:Long-term thesis for power JV remains an interesting option to monetize undervalued Permian gas.

What to watch in Q3 FY26

Q3 Oil Production

Q3 FY26
Current 20,480 bbl/d (Q2 average), 24,400 bbl/d (June exit rate)
Target 25,600 bbl/d (midpoint)

Why it matters

Verifies the expected significant sequential production growth and underlying momentum from H1 activity.

Third quarter guidance at the midpoint for oil production is 25,600 barrels per day, 5% above June's level and more than 20% above the full second quarter level.

Find out whether REPX delivers this. Inve re-checks your case every morning.

Q&A highlights

How does the heightened 2026 activity and workover potential set up the 2027 trajectory, and what is the depth of workover opportunities at Champions?

Management expects a steady pace of development, aiming for year-over-year production growth within cash flow, debt reduction, and dividends. The surface acid/chemical treatments trialed at Champions have a couple of years of inventory potential across the asset base, offering low-decline production additions.

“I mean I see us having a pretty steady pace of development. We have 1 rig running now continuously. So without any unforeseen hiccups in the current markets, I just think that we're steady as she goes is we're a growth company. We intend to grow production year-over-year, spend within our cash flow, reduce debt, pay dividends.”

asked by Derrick Whitfield · answered by Bobby Riley

2 min read 7 chapters

Detailed narrative

Accelerated Development and Production Growth

Riley Permian executed its most active development program in Q2 FY26, primarily in Texas, drilling 19.9 wells, completing 17.3, and turning 13.9 wells to sales. This activity, combined with production enhancement projects, led to oil production near the high end of guidance and a June exit rate of 24,400 bbl/d, setting the stage for significant growth in H2 2026 and into 2027.

Operational Efficiency Gains

The company achieved notable efficiency improvements, with Texas drilling teams increasing lateral footage per day by 19% and reducing drilling cost per lateral foot by 7.5% compared to 2025. New Mexico drilling saw even greater gains, with a 67% increase in lateral feet per day and a 32% reduction in drilling cost per lateral foot compared to 2023-2024 campaigns, demonstrating improved planning and execution.

Strategic Infrastructure Development

Despite midstream constraints impacting Q2 production by 2,000 bbl/d, the construction of Targa's new high-pressure gathering and trunk line system is on track for early Q4 2026 in-service. Additionally, a third-party disposal agreement with WaterBridge will support Red Lake development from September, providing crucial water takeaway capacity to accelerate New Mexico well completions.

Cost Management and Value Creation

Total LOE increased by $5.4 million QoQ, but a significant portion ($2.3 million) was intentionally spent on workover projects that added approximately 700 bbl/d of incremental oil production, viewed as a low-cost source of growth. The company also trialed surface acid and chemical treatments in Texas, saving $210,000 per intervention, and implemented chemical program changes in New Mexico reducing costs by 50%.

Silverback Acquisition Outperformance

The Silverback acquisition has proven highly successful, with production approximately double the initial buy-side case without drilling new wells. This was achieved through strategic workovers, artificial lift optimization, and improved chemical program surveillance, which also reduced per-well workover costs by 59%.

Capital Allocation Strategy

Management reiterated its commitment to a flexible capital allocation strategy, prioritizing organic growth within cash flow, debt reduction, and consistent dividend increases. Share buybacks are considered opportunistically, with the goal of growing free cash flow faster than the dividend and allocating excess FCF between debt paydown and buybacks.

Power Joint Venture Update

The first 10-megawatt merchant generation site was placed into commercial service mid-Q2, selling into ERCOT markets, with two more sites progressing. While small relative to the core business, the JV represents an interesting long-term option to monetize undervalued Permian gas, despite current low summer power prices.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.