Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Riley Exploration Permian Inc (REPX, Financial) reported significant free cash flow generation, with $38 million in the second quarter and $62 million year-to-date.
- The company successfully closed an asset acquisition in Eddy County, New Mexico, for $18.1 million, adding producing properties and development locations.
- Riley Exploration Permian Inc (REPX) expanded its Power joint venture, increasing ownership to 50% and planning to generate and sell electricity to ERCOT.
- The company achieved a 5% quarter-over-quarter increase in total equivalent production and a 4% increase in oil production.
- Riley Exploration Permian Inc (REPX) reported well cost savings as a major driver of free cash flow improvement, with drilling times down by 20% year-over-year.
Negative Points
- Natural gas and NGL realized prices turned slightly negative for the quarter, driven by weaker market fundamentals.
- Midstream counterparty fees led to slightly negative revenue for natural gas and NGLs.
- The company experienced a modest 1% decline in operating cash flow quarter-over-quarter.
- Despite higher oil prices, total oil and gas hedge negative settlements were a concern, although they improved by 77% year-over-year.
- The credit facility utilization remains at 43%, indicating a need for continued debt management.
Q & A Highlights
Q: How should we think about the incremental volumes throughout the year given the recent acquisition in May? And can you provide more color on the revised Power JV?
A: The acquisition contributes about 200 to 300 barrels a day on an annual basis. We forecast a 13% growth in oil production for the year, excluding the acquisition, which still results in 11% growth. Regarding the Power JV, we increased our ownership to 50% and expanded its scope to sell power and ancillary services to ERCOT. This involves a mix of thermal and battery solutions, with plans to come online by the second or third quarter of next year.
Q: Can you provide details on the savings from drilling and completion activities and their geographic impact?
A: The savings are primarily from our operations in Texas. We anticipate carrying these savings over to New Mexico as well. The well completions differ slightly, but we expect to maintain cost efficiencies.
Q: On the New Mexico bolt-on acquisition, do you plan to embark on a well workover program there in the second half?
A: Yes, we have a larger workover program in New Mexico, which includes integrating wells into the power system, saving approximately $35,000 a month. This is part of our ongoing efforts to optimize production.
Q: Is the workover program in New Mexico adding barrels that were not factored into the acquisition economics?
A: Yes, although it's a smaller segment of our production, we've increased volumes by about 50% through workovers and improved artificial lift. It's a smaller impact compared to horizontal wells.
Q: How do you view the service capacity and pricing trends in your part of the basin as you look ahead into next year?
A: We are able to secure rig services at reasonable prices, with a mix of large and small companies providing good value. The market has stabilized, and we are receiving quality service at favorable prices.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
