Riley Exploration Permian (REPX) Valuation Update - Mar 14

[dan_s]

At the time of this post REPX was trading at $28.44.
> First Call's Price Target is $51.25
> TipRanks 3/11/2024: "Truist Financial analyst Neal Dingmann maintained a Buy rating on Riley Exploration Permian (REPX) today. His updated price target is $53.00." According to TipRanks, Dingmann is a top 100 analyst with an average return of 13.6% and a 69.88% success rate. Dingmann covers the Energy sector, focusing on stocks such as Civitas Resources, Northern Oil And Gas, and Devon Energy.

I have updated my forecast/valuation model for REPX for their very good Q4 2023 results and updated guidance for 2024.

My current valuation of $50.00 per share compares to the PV10 Net Asset Value of just their 12-31-2023 Proved Reserves of $55.04 per share, based on SEC pricing rules.

My valuation is 4.25 X annualized operating cash flow per share for 2023 to 2025.

Riley's current dividend is $0.36/quarter for annualized yield of ~5% based on the current share price.

Riley's revenues are heavily weighted to crude oil prices. If WTI averages $80/bbl in 2024, the Company should generate ~$120 million of free cash flow, more than enough to raise the dividend.

There is upside above my valuation because Riley is currently running a CO2 flood pilot project that, if successful, could significantly increase their recoverable oil reserves.

Riley and Ring Energy are working in the Central Basin Platform area of the Permian Basin, which is not as "sexy" as the Midland or Delaware basin areas of the Permian. However, well level economic in the CBT are very good with WTI at $80/bbl.
Riley realized oil price in 2023 was $71.61/bbl net of differentals and cash settlements they had to pay on their hedges, and the Company generated over $206 million of operating cash flow in 2023 ($10.10/share).

My updated forecast models for Riley and Ring Energy have been posted to the EPG website.