Skip to content
    REPX
    Earnings call· Jun 2026(Q2 FY26)

    Riley Exploration Permian Q2 FY26 earnings call REPX

    Aug 6, 2026 Source

    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

    8
    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

    Operational metrics

    26
    Oil production
    20,4805% sequential growth
    Q2 FY26

    Average for the quarter, despite midstream constraints.

    Oil production exit rate
    24,400
    June 2026

    Viewed as a better representation of underlying momentum.

    Oil production impact from midstream constraints
    2,000
    April-May 2026

    Required temporary well shut-ins.

    Wells drilled
    19.9
    Q2 FY26

    Primarily focused in Texas.

    Wells completed
    17.3
    Q2 FY26

    Primarily focused in Texas.

    Wells turned to sales
    13.9
    Q2 FY26

    Primarily focused in Texas.

    Accrual Capital Expenditure
    $87 million
    Q2 FY26

    Total capital spend on an accrual basis.

    Drilling and Completion Capital Expenditure
    $70 millionin line with midpoint of guidance
    Q2 FY26
    Infrastructure and other Capital Expenditure
    $17 millioncompared to guidance midpoint of $12.5 million
    Q2 FY26

    Variance due to accelerated development and bringing forward costs.

    Cash Capital Expenditure and other investments
    $73 million153% quarter-over-quarter increase
    Q2 FY26
    Principal debt balance
    $273 millionincreased by 11% or $26 million
    Q2 FY26 end

    Drew on credit facility to fund cash uses.

    Leverage (Net Debt/EBITDA)
    1.0x
    Q2 FY26 end

    Stated as reasonable.

    Cash used for dividends and buybacks
    $9.5 million
    Q2 FY26
    Texas drilling lateral footage per day improvement
    19%compared with 2025
    Q2 FY26

    Reflects broader improvement in planning and execution.

    Texas drilling cost per lateral foot reduction
    7.5%compared with 2025
    Q2 FY26

    Reflects broader improvement in planning and execution.

    New Mexico drilling lateral feet per day improvement
    67%compared with 2023 and 2024 combined campaigns
    Q2 FY26

    Meaningful step forward after deferring development activity.

    New Mexico drilling cost per lateral foot reduction
    32%compared with 2023 and 2024 combined campaigns
    Q2 FY26

    Meaningful step forward after deferring development activity.

    Total Lease Operating Expense increase
    $5.4 millionquarter-over-quarter
    Q2 FY26

    Despite absorbing pressure from higher water disposal, steel, tubular, diesel, power, and service activity costs.

    Workover expense for production maintenance and optimization
    $2.3 million
    Q2 FY26

    Considered one of the lowest cost sources of production growth.

    Surface acid and chemical treatment savings per intervention
    $210,00075% reduction compared with alternative downhole work
    Q2 FY26

    Successfully trialed 10 treatments in Texas.

    New Mexico chemical program cost reduction
    50%
    Q2 FY26

    Implemented in January, also helping reduce workover expenses.

    Silverback monthly per well workover costs decrease
    59%
    Since acquisition close

    Driven by fewer short runs and improved chemical program surveillance.

    Silverback production vs. buy-side case
    approximately double
    Since acquisition close

    Achieved with no new wells drilled, through strategic workovers and optimization.

    Wells drilled to wells turned to sales ratio
    1.2
    FY26

    Implies carrying drilled but uncompleted wells into next year.

    Full-year CapEx increase breakdown
    1/3 upstream, 2/3 infrastructure
    FY26

    Increase of $26 million to $236 million midpoint.

    Merchant generation site capacity
    10
    Q2 FY26

    First site placed into commercial service midway through Q2.

    Industry KPIs

    4
    MetricValueDetails
    D c efficiency rig activity19.9wells drilled (net)
    Basin level production volume20,480bbl/d
    FCF shareholder distributions$6 millionUSD
    Weather event volume earnings impact2,000bbl/d

    Deals & partnerships

    1
    nullAcquisition of undeveloped locations$2.4 million

    Very small acquisition in the Red Lake area.

    Capital programs

    3
    Targa high-pressure gathering and trunk line systemunderway

    Benefit: alleviate midstream constraints

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

    WaterBridge disposal agreementunderway
    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 sites1st 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

    6
    Midstream constraintsQ2 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 expendituresQ2 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 infrastructureQ2 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 MexicoOngoing 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 pricesSummer 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

    5

    Q3 Oil Production

    Q3 FY26
    Current20,480 bbl/d (Q2 average), 24,400 bbl/d (June exit rate)
    Target25,600 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.

    Q&A highlights

    7

    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 read7 chapters

    Detailed Narrative

    01

    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.

    02

    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.

    03

    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.

    04

    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%.

    05

    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%.

    06

    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.

    07

    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.

    AI-generated summary of the company’s earnings call. Not investment advice.