Riley Exploration Permian (REPX) Update - May 13

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dan_s
Posts: 34471
Joined: Fri Apr 23, 2010 8:22 am

Riley Exploration Permian (REPX) Update - May 13

Post by dan_s »

Riley has increased their production guidance for FYE 9-30-2022 and should report a significant increase in natural gas production in their fiscal Q4. I am updating my forecast/valuation now with my valuation going up from my pre-release valuation of $42/share. At the time of this post REPX was trading at $24.10, which compares to First Call's price target of $49.00. See highlights below.
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FISCAL THIRD QUARTER AND REVISED FULL YEAR 2022 OUTLOOK AND GUIDANCE
Based on current market conditions, the Company forecasts drilling 5 gross (5 net), completing 4 gross (4 net) and putting on production 6 gross (6 net) horizontal wells during the fiscal third quarter 2022. Additional scheduled activity includes capital workovers, and modest spending for non-operated new wells and midstream infrastructure. Management forecasts accrual basis capital expenditures related to such development activity to total approximately $25 million to $28 million, which also includes estimates for anticipated non-operated drilling and completions, capital workovers, infrastructure, minor additions to land and existing working interests.

Riley Permian forecasts fiscal third quarter 2022 oil production to average 7.6 MBbls per day to 8.1 MBbls per day, with the midpoint average representing 5% quarter-over-quarter growth from the fiscal second quarter. The midstream gas gathering and processing expansion project is expected to be fully commissioned in early June; however, the associated capacity constraint that began in February and will continue into June 2022 will impact sales of natural gas and NGLs during the fiscal third quarter. Following completion of the expansion project, the Company will enjoy a larger volume of contractual, firm capacity, which should lead to increased sales for natural gas and NGLs and reduced flaring. Based on historical averages and adjusting for some curtailment of natural gas and NGL sales volumes during the period, oil production could represent approximately 75% to 76% of total equivalent production, corresponding to an average of 10.0 MBoe per day to 10.8 MBoe per day for the fiscal third quarter.

The Company forecasts third fiscal quarter of 2022 LOE of approximately $8.0 million to $10.0 million. Management forecasts higher LOE than the second quarter due to a combination of increased workover activity (from which we are seeing corresponding production increases) as well as from inflationary forces. We forecast cash G&A expenses(1) for the fiscal third quarter of approximately $3.7 million to $4.7 million (excluding share-based and unit-based compensation expense, shown after the effect of gross profit from contract services derived from management services agreements).

The Company will continue to advance its EOR pilot project in the fiscal third quarter, with plans to complete 5 of 6 remaining injection wells and progress on the CO2 tap installation. Management forecasts approximately $3 million to $5 million of accrual basis capital expenditures for its EOR program during the fiscal third quarter. Based on anticipated delivery timing of compressors needed for CO2 injection, the Company forecasts beginning CO2 injection during late 2022 (calendar fourth quarter 2022). < Riley's EOR Pilot Project (a CO2 flood) is the "Big Kahuna" for this small-cap. If successful, it should significantly increase their production and proved reserves. We should know if it is working about 6 months after they start injecting CO2.

Management forecasts total accrual basis expenditures of $28 million to $33 million for the fiscal third quarter 2022.
Dan Steffens
Energy Prospectus Group
dan_s
Posts: 34471
Joined: Fri Apr 23, 2010 8:22 am

Re: Riley Exploration Permian (REPX) Update - May 13

Post by dan_s »

TipRank: "On 4/21/2022 Truist Securities analyst Neal Dingmann raised the price target on Riley Exploration Permian Inc. (NYSE: REPX) to $56.00 (from $55.00) while maintaining a Buy rating."

Riley had Netherland, Sewell& Associates, Inc., a highly respected engineering firm, prepared a mid-year (3/31/2022) reserve report. It shows Total Proved reserves of 73,364 MBoe (~64% oil) with a PV10 value of $1,089.8 million.
I added Current Assets, subtracted Total Debt and divided by common stock outstanding on March 31 to come up with a PV10 Net Asset Value of $47.00/share for just their P1 reserves.

My forecast/valuation model has been updated and posted to the EPG website.
Based on annualized operating cash flow, my valuation increases to $48.00/share.
Dan Steffens
Energy Prospectus Group
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