Riley Exploration Permian (REPX) Valuation Update - Apr 4

[dan_s]

I have updated my forecast model for Riley based on my new oil & gas price deck and for the 700,000 shares of common stock that they are selling this week. The stock sale increases the Company's outstanding stock by ~3.43%, so it only has a minor impact on my valuation. Proceeds from the offering of $18.9 million are being used to make an acquisition in Eddy County, New Mexico. MY FORECAST DOES NOT INCLUDE A PRODUCTION INCREASE FROM THE LEASEHOLD BEING ACQUIRED. Eddy County does contain a high percentage of the Tier One leasehold in the Delaware Basin (a sub-basin of the Permian Basin).

My adjusted valuation for REPX is $50.00, based on 4.25X annualized operating cash flow for 2023 through 2025. < Double count 2024's CFPS

Riley's actual operating cash flow was $10.10/share in 2023.

Here is how my operating cash flow forecasts now compare to what TipRanks shows
2024: My forecast is $11.65 and TipRanks' forecast is $11.57 (based on lower oil prices than my forecast)
2025: My forecast is $13.66 and TipRanks' forecast is $14.00

My valuation calculation is [($10.10 + $11.65 + $11.65 + $13.66) / 4] x 4.25 = ~$50.00

[dan_s]

My updated forecast model has been posted to the EPG website.

To answer your question of why is the stock offering price so low?: The shares being sold had to have an attractive price since REPX average trading volume is just ~85,000 share per day. Deals like this are "pre-sold" at a negotiated price, so it will close.

Neal Dingmann at Truist Financial will publish an updated report and my guess is that his new price target will be higher than my valuation of $50. Neal is a highly respected energy sector analyst.

From time-to-time the stock market gives investors a very good buying opportunity. Riley is a very profitable company (EPS of $5.85 in 2022 and EPS of $5.47 in 2023). There is nothing that I can see which justifies the stock to be trading at less than 2.5 X operating cash flow per share.

[Lbark]

sounds like this could be a good buy, nice dividend and stock beaten down. glad i didnt own. would you wait to see any further fallout?

[allen46]

I loaded up at $27.50. I doubt you will get much better as they have already sold more than half of the shares.

[dan_s]

Posted to TipRanks today: "On 4-5-2024 Truist Securities analyst Neal Dingmann lowered the price target on Riley Exploration Permian Inc. (NYSE: REPX) to $51.00 (from $53.00) while maintaining a Buy rating."

My current valuation is $50.00.

[Fraser921]

I don't follow Riley closely but I like Allen's timing of his buy. There is always a decline on an offering that recovers over time, closed at 28.57..Nice buy Allen!

[dan_s]

I expect John White at Roth MKM (based in Houston) to update his price target and submit it to TipRanks very soon. On 2/12 he rated it a BUY with a price target of $49.50.
Roth MKM and Truist Financial were both involved in the recent stock sale.