Riley Exploration Per (REPX) Update - Dec 23

[dan_s]

Note from Neal Dingmann at Truist Financial this morning:

Riley Exploration Permian, Inc. (REPX, $31.36, Buy) - Little
Change Likely or Needed to Stable Activity and Payout Plans
- During a time when most E&Ps are debating cutting back
activity along with dropping variable dividends due to commodity
pullbacks, we continue to favor REPX’s strong fixed >4% payout
and stable plan. While we do not expect Riley to be immune
to near-term gas differential pressure and potential midstream
bottlenecks, we anticipate the company’s low cost inventory, EOR
production, and CCUS activity to allow it to maintain a higher
trading multiple than its vanilla E&P peers. After adjusting our
estimates, we are raising our price target to $39 from $34. - Neal
Dingmann​

[ChuckGeb]

Odd that he would be putting this out ahead of earnings release coming soon. I know he's busy, I hear his questions on most of the calls I listen in on. Absent from Vital however. I get the price issue as I believe there were 3 analysts on the call and the call lasted less than 30 minutes. I was impressed however to learn that they (Vital) are tweaking their production operations with the assistance of AI and apparently they are a pioneer in this application. I am still scratching my head on why they (Vital) are doing share buybacks with so little public float.

[dan_s]

The response that I get from the small-caps when I ask them about stock buybacks is that their major shareholders want capital gains vs dividends.

IMO Vital should be using free cash flow to payoff as much debt as possible, which I believe would increase the share price faster. The low share count and incredible per share numbers, makes VTLE a "Screaming Takeover Target". Maybe that is what they want.

Neal Dingmann has a lot of smart staff helping him. He is one of the best energy sector analysts. Truist is one of the Wall Street Gang that sends me all of their reports. I literally get 20 to 40 market reports per day. It takes me an hour per day just to scan them looking for updates on our three model portfolio companies.

[SergioSays]

I think another reason for the stock buybacks is it helps offset dilution from stock based compensation (SBC).

[ChuckGeb]

Re Vital again. They are issuing more shares on their pending acquisition than they bought back but I think adding to share count is a good thing for a thinly traded company. One of the reasons I like SBOW's acquisitions with stock last year was to get more shares in circulation. I agree with Dan that debt paydown would be better or more in the way of cash dividends to shareholders. They did address the stock price issue a bit on their abbreviated call indicating that growing the critical mass to the point of drilling and completing more wells would take some of the issues with trying to make quarterly numbers drilling limited number as a week or two delay could cause a miss that really for most companies smoothes out when they are drilling more wells.