Riley Exploration Permian (REPX) Valuation Update - May 9

[dan_s]

At the time of this post REPX was trading at $27.17, which is just 2.44 X my 2024 operating cash flow per share forecast of $11.13.
TipRanks' current CFPS forecasts are $11.81 for 2024 and $13.04 for 2025.
There is nothing that I can see that justifies this stock trading at such a low multiple. < It just needs more of the Wall Street Gang to cover it.

I have updated my forecast/valuation model for excellent Q1 results and updated guidance.
My valuation increases by $2 to $52/share, which is just 4.75 X operating CFPS; which IMO is still a conservative valuation.

In addition to strong Q1 results, here are some additional positives.
> The Eddy County, NM "Bolt-On Acquisition" closed on April 3, several weeks earlier than expected. < Raising my Q2 and full-year production estimates.
> Eddy County is now a "Core Area" for Riley. They are continuing to add leasehold in the area. "Running Room" is one of the reasons that it deserves a higher valuation multiple.
> The midstream company that has been processing their gas production will complete some facility upgrades in a few weeks that should increase Riley's NGL production volumes AND THE REALIZED PRICE FOR THEIR NGLS IN 2H 2024. < Should improve the Company's production mix (more liquids) and push production to the high end of their 2024 production guidance.
> The investments in RRC Power LLC should lower the Company's operating expenses and significantly lower their exposure to power outages in West Texas. Eventually, I expect Riley to spin-out RRC Power into a separate company. There is a big market for using produced natural gas in West Texas for power since there is not enough pipeline takeaway capacity and weather related power outage are common in West Texas. Lots of upstream companies are looking at this.

Near Dingmann at Truist Financial was on this morning's conference call. He has adjusted his price target to $48 per share.

[dan_s]

My forecast/valuation has been posted to the EPG website.

Take a look at Riley's year-end 2023 3rd party reserve report in their 10-K. It shows a PV10 Net Asset Value of $55.04/share based only on the Company's proved reserves. This year's acquisitions and drilling program should push that valuation even higher by 12/31/2024.

No profitable upstream company that is free cash flow and funding double digit annual production growth entirely with operating cash flow should be trading at half of their PV10 NAV.