Riley Exploration Per (REPX) Valuation Update - Mar 11

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Riley Exploration Per (REPX) Valuation Update - Mar 11

Post by dan_s »

I spend several hours working on my forecast model for REPX today.
REPX closed at $33.16 on Friday, March 10.

I am increasing my valuation by $8 to $53/share.
> Riley reported strong 2022 results: 32.2% YOY production growth, $5.85 EPS, $8.37 operating CFPS, free cash flow over $50 million.
> They provided detailed guidance for 2023, raising the confidence that I have in my forecast model.
> They expect to close the Pecos Acquisition in April. It is a "Transformative" deal for this small-cap, giving them a lot more "running room".
> At closing, the acquisition will push Riley's production over 20,000 Boepd and puts them on a clear path to 22,000 Boepd by year-end 2023.
>> Year-over-year production growth in 2023 will be 60% to 70%.

Neal Dingmann at Truist Financial is the only highly respected analyst that is covering the company. It deserves a lot more of Wall Street's attention.
> Neal's price target is $43. < Which happens to be the PV10 Net Asset Value per share at 12-31-2022 (not including Pecos)
> My 2023 forecast is actually a bit lower than Neal's forecast. My forecast is $7.70 EPS with $11.41 operating CFPS. FCF should be ~$70 million.
> My valuation has nothing in it for the significant upside potential of their CO2 flood, which could double their proven reserves.
> It pays a nice dividend for a company of this size, $0.34/quarter for annual yield of ~4.1%
> Revenues are heavily weighted to oil prices, so keys to share price growth are rising oil prices, getting the Pecos deal closed, good well results and positive results on the CO2 flood pilot project.

Small-caps with a low number of outstanding shares (just 20.2 million) can make big moves up and down. This one has a lot more upside potential.

REPX hosted a Houston luncheon for us last year and I will get them back this summer.
Dan Steffens
Energy Prospectus Group
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