Release Date: November 07, 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) achieved significant free cash flow, allowing for debt reduction and increased dividends.
- The company reported a 6% increase in net production and an 11% increase in equivalent production quarter over quarter.
- Riley Exploration Permian Inc (REPX) successfully reduced drilling and completion costs through operational efficiencies.
- The company has been able to maintain a total recordable incident rate of zero, highlighting strong safety practices.
- Riley Exploration Permian Inc (REPX) is advancing infrastructure projects to enhance gas takeaway and support future growth.
Negative Points
- The company experienced a 12% decline in average realized prices, impacting financial results.
- Net income decreased by 24% quarter over quarter due to impairment and lower commodity prices.
- Operating income was affected by a non-cash impairment related to project discontinuation.
- Despite increased production, the company faced challenges with lower realized gas prices.
- Riley Exploration Permian Inc (REPX) is still exposed to market volatility, which could impact future growth plans.
Q & A Highlights
Q: Can you discuss the capital efficiency in your upcoming drilling and completion plans and how a $60 versus $80 oil price environment might affect your plans?
A: Philip Riley, CFO: We haven't provided 2025 guidance yet, but our strategy remains consistent. This year, we aimed for 10% growth and may achieve more. Price volatility might affect us less due to our hedging strategy, with about 40% of total oil production hedged next year. At $60, we might see less growth, but our capital-efficient assets allow us to do more with less, maintaining production levels.
Q: Could you describe any potential upside for the power joint venture in the next few quarters and significant data points to watch?
A: Philip Riley, CFO: The first phase powers our operations and should yield mid-teens capital returns. The second phase involves selling to ERCOT, with progress in permitting and agreements. We expect higher returns here, though it's harder to forecast due to power price volatility. We're positioned to benefit from low gas prices in the Permian, providing an implicit hedge.
Q: Can you provide more detail on the infrastructure investment in your Q4 guidance?
A: Philip Riley, CFO: We're investing in a compressor station and gathering system at Red Lake to support our 2025 development program. This will improve gas sales reliability and provide future optionality for gas processing, ensuring optimal conditions for significant development drilling over the next 5-7 years.
Q: Will the new compression system at Red Lake benefit both gas takeaway and oil production?
A: Philip Riley, CFO: Yes, it will allow for more continuous operation, benefiting both gas takeaway and oil production. It should also be a net positive from an operating cost standpoint, reducing fees we would otherwise pay.
Q: How would higher natural gas prices affect your power projects?
A: Philip Riley, CFO: Higher gas prices would impact our projects differently. For the baseload project, we take gas in kind, providing a material discount to market prices. The merchant project buys and sells at market prices, with strong historical correlation between gas and power prices. We're positioned to benefit from the dynamics of gas and power markets.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
