Riley Exploration Permian (REPX) Valuation Update - Nov 9

[dan_s]

REPX closed at $33.39 on Friday, November 18

I have updated my forecast/valuation model for the Company's solid Q3 results and their increased production guidance.
My valuation increases by $2.00 to $53.00 per share. TipRanks' price target stays at $48.25.
> Q3 production was 23,424 Boepd compared to 21,319 Boepd in Q2.
> I have raised my production forecast for 2025 by 1,000 Boepd to 25,000 Boepd (65.7% crude oil) < This is conservative.
> Riley's natural gas and NGL prices were negative as they report them net of gathering, transportation & processing. Riley is now using produced gas to generate electricity in West Texas, a trend that I expect a lot more companies to do rather than give their gas away.
> The Matterhorn Express pipeline is ramping up, so it should improve ngas prices in 2025.
> In my 2025 forecast ~96% of Riley's revenues will come from crude oil sales.
> Based on their updated guidance, Riley's production will be up ~20% year-over-year in 2024. At the pace of their current drilling program, fully funded by operating cash flow, Riley's production should be up another 12% to 15% in 2025.

Q3 included a $30.2 million impairment charge as the Company has decided to write off the previously capitalized costs related to their CO2 Flood Pilot Project in West Texas. They did get positive results from the pilot, but they have decided to focus growth capex on development of their recently acquired assets in Eddy County, NM. They have not abandoned the properties in West Texas, from which most of their production comes from.

Riley recently raised their quarterly dividend to $0.38/share or $1.52 per year. They are generating free cash flow over the dividends, but they are currently focused on paying down debt. They already have good balance sheet ratios, so they can make more bolt-on acquisitions if opportunities to do so make sense.

Riley is a nice "Growth + Income" stock.