Riley Exploration Permian (REPX) Valuation Update - Apr 130

[dan_s]

Today I will be updating the valuations for all of the companies in our Small-Cap Growth Portfolio.

REPX continues to be one of my Top Picks.

I have updated my forecast/valuation model for REPX. My stock valuation increases by $5 to $57 per share. The increase is primarily due to rising oil prices, the $100 million stock buyback announced on December 16, 2025, and the expectation of improved prices for their natural gas and NGLs in 2H 2026.

Riley only had 21.719 million shares outstanding at the end of 2025, so I would rather see them increase the dividends. However, the stock is grossly undervalued IMO, so I understand why the BOD went with the stock buyback. Large shareholders prefer capital gains to dividends.

Riley is a "Production Growth Machine" which has delivered strong production growth year-after-year > 61.5% in 2023, 21.4% in 2024 and 29.4% in 2025. The midpoint of their March 3rd production guidance for 2026 is 36,000 Boepd, which will be a 23.4% YOY increase.

Based on my updated forecast, Riley should generate close to $100 million of free cash flow this year.

My valuation of $57 is just 4.5 X annualized operating cash flow per share for 2025 to 2027. Operating CFPS in 2026 s/b $13.86 per my model. TipRanks' consensus CFPS forecasts are $12.14 for 2026 and $16.28 for 2027.

With a solid balance sheet, strong well results, lots of quality "Running Room" in SE New Mexico and paying a decent dividend ($0.40/quarter), this small cap deserves to trade at a much higher multiple than 3X CFPS.

It also deserves more coverage from the Wall Street Gang. Only three energy sector analysts submitted revised price targets after Riley announced outstanding Q4 2025 results. The most recent price target update is from Truist Financial on March 23rd, which rates REPX a BUY with a price target of $47. That price target is based on much lower oil prices than we have today.

[dan_s]

My ten most recently updated forecast/valuation models can be found and downloaded directly from the EPG home page.

[allen46]

What happened today??? Riley down almost 14% on heavy volume. I can't find any news. It's one of my 3 largest holdings so I'd like to know what is going on.

[Petroleum economist]

Alan, I am as baffled as you are on the steep 13.4% drop in the Riley share price yesterday.

Trading on Tuesday was very heavy with 914 K shares changing hands. This equates to 4.3% of the total 21.2 M Riley common shares. With so many shares on offer there may have been just not enough buyers.

I have not been able to find any reason for the steep drop. May be a major shareholder who wanted to lock in his 2026 profits? Note that at the start of the day Riley shares were up 46% YTD. I assume that the 10% lower opening hereafter triggered a series of automatic stop losses which added to the volume and drove the share price even lower. Let us hope that we will see some recovery during the rest of the week.

APA reported today that it realized in Q1 an US negative gas price of -$ 0.34/MM Btu and that it had closed in 88 MM scf/d of gas and 6.2 K bbl/d of liquid production due to the weak Waha gas prices.

I assume this means that Riley will also have seen weak gas prices. I already assumed that Riley is selling its NGL at a loss. Even with this being the case, negative realized gas and NGL prices should have had a limited impact on the total result as the NGL and gas revenues are only a minor part of the total revenues.

I still believe that Riley is one of the best oi and gas investments.

[dan_s]

No news specific to REPX to justify the selloff. MAY26 WTI contract falling $7/bbl caused a lot of stocks to selloff. Sometimes it just takes one large sell order to trigger a selloff of small-caps. Riley only has ~21.5 million shares outstanding.

TipRanks Premium still rates REPX a Strong Buy with a price target of $41.50.

Riley should report solid Q1 results.

[Petroleum economist]

Allen, I found some information which helps to explain the recent Riley share price drop. Riley filed on the 15th of April a form 4 with the SEC with the details on a series of Riley common shares transactions.

REG transactions
• Riley Exploration Group (REG) transferred on the 7th of April on a pro rata in-kind distribution 489.863 + 896,274 = 1,386.137 common Riley shares to Yorktown IX.

Riley SEC1- April 2026.jpg (49.08 KiB) Viewed 263 times

Yorktown IX transactions
• Yorktown IX sold of the 1,386,1327 shares obtained from REG on the open market on the 13th and 14th of April.
• Yorktown IX bought back on the same dates in four separate badges 5,777+ 9,781+7,348 + 81,036 = 103,942 common shares.

Riley SEC2- April 2026.jpg (80.79 KiB) Viewed 263 times

Observations
The above explains to me the high volume and the steep 13.4% share price drop on the 14th of April. I assume that REP wanted to take a quick profit in view of the 46% share price appreciation YTD 2026. Yorktown IX apparently have a different view and added to their Riley holding.

With above transactions completed, I see no reason why the Riley share price should not bounce back.