I have updated my forecast/valuation model for REPX and posted it to the EPG website.
REPX closed on August 9 at $26.13. My current valuation is $51.00.
The company's Q2 results were better than my forecast. I've lowered my valuation by $1 just because of the lower for longer natural gas and NGL prices in West Texas.
Truist Financial and Roth MKM updated their price targets on August 8 to $47.00 and $49.50.
Riley's Q2 production mix was 69% crude oil, 17% NGLs and 14% natural gas, but oil sales were 99.8% of the company's Q2 revenues.
Completion of the Matterhorn Express pipeline should (hopefully) improve Riley's and Ring Energy's realized natural gas prices. I've been told by Riley that improvements to their 3rd party midstream processing facility should improve their NGL volumes and realized prices, which they report net of gathering, processing and transportation expenses.
REPX remains my Top Pick in our Small-Cap Growth Portfolio. It has steady production growth locked in, and it pays a decent dividend (~5.5% yield).
Riley Exploration Permian (REPX) Valuation Update - Aug 10
Riley Exploration Permian (REPX) Valuation Update - Aug 10
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Riley Exploration Permian (REPX) Valuation Update - Aug 10
I had a conference call with Riley today (8/13) and with new information I have adjusted my forecast/valuation model for REPX.
> The lease operating expenses and current income taxes were too high in my model.
> My production mix was too gassy after Q2; I was understating their oil production and overstating natural gas.
> I was using an old number for 2024 E&P capex. Their E&P capex has come down quite a bit, which does not include money spent on the Eddy County acquisitions.
Bottomline: My valuation of REPX increases by $2 to $53/share. TipRanks price target is now $49.50
I did ask them about the CO2 Pilot Project. They still believe that a CO2 flood makes sense because the pilot was "successful" in that zone pressure increased and they saw an uptick in oil production, BUT they think spending capex in Eddy County will be the best investment for the company. I agree. Full field CO2 floods require a lot of capex up-front. Long-term they recover a lot more oil. Spending money in Eddy County should generate more value for shareholders faster.
> The lease operating expenses and current income taxes were too high in my model.
> My production mix was too gassy after Q2; I was understating their oil production and overstating natural gas.
> I was using an old number for 2024 E&P capex. Their E&P capex has come down quite a bit, which does not include money spent on the Eddy County acquisitions.
Bottomline: My valuation of REPX increases by $2 to $53/share. TipRanks price target is now $49.50
I did ask them about the CO2 Pilot Project. They still believe that a CO2 flood makes sense because the pilot was "successful" in that zone pressure increased and they saw an uptick in oil production, BUT they think spending capex in Eddy County will be the best investment for the company. I agree. Full field CO2 floods require a lot of capex up-front. Long-term they recover a lot more oil. Spending money in Eddy County should generate more value for shareholders faster.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group