Riley Exploration Permian Inc

Previous wording

Comparison for the three months ended March 31, 2024 and 2023.

Current wording

Comparison for the three and six months ended June 30, 2024 and 2023.

Previous wording

The following table sets forth selected operating data for the three months ended March 31, 2024 and 2023:

Current wording

The following table sets forth selected operating data for the three and six months ended June 30, 2024 and 2023:

Previous wording

(1)The Company's calculation of the effects of derivative settlements includes gains and losses on the settlement of its commodity derivative contracts. These gains and losses are included under other income (expense) on the Company’s condensed consolidated statements of operations.

Current wording

(2)The Company's calculation of the effects of derivative settlements includes gains and losses on the settlement of its commodity derivative contracts. These gains and losses are included under other income (expense) on the Company’s condensed consolidated statements of operations.

Previous wording

Our revenues are derived from the sale of our oil and natural gas production, including the sale of NGLs that are extracted from our natural gas during processing. Revenues from product sales are a function of the volumes produced, product quality, market prices, and gas Btu content as well as midstream counterparty fees and deducts. Our revenues from oil, natural gas and NGL sales do not include the effects of derivatives. Our revenues may vary significantly from period to period as a result of changes in the volume of production sold or changes in commodity prices. The Company’s total oil and natural gas revenue, net increased $33.0 million, or 50%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023.

Current wording

Our revenues are derived from the sale of our oil and natural gas production, including the sale of NGLs that are extracted from our natural gas during processing. Realized prices and revenues from product sales are a function of the volumes produced, product quality, market prices, and gas Btu content as well as gathering and processing costs. Our revenues from oil, natural gas and NGL sales do not include the effects of derivatives. Our revenues may vary significantly from period to period as a result of changes in the volumes of production sold or changes in commodity prices.

Previous wording

•The average WTI price increased by $1.57 per Bbl during the three months ended March 31, 2024 when compared to the three months ended March 31, 2023.

Current wording

•The average WTI price increased by $8.27 per Bbl during the three months ended June 30, 2024 when compared to the three months ended June 30, 2023.

Previous wording

•For the three months ended March 31, 2024, oil revenues increased by $32.0 million, or 49%, compared to the three months ended March 31, 2023. Of the increase, $28.8 million was attributable to an increase in volume and $3.2 million to an increase in our realized price. Volumes increased by 44%, while realized prices increased by 3% compared to the three months ended March 31, 2023. The oil and natural gas properties acquired in the New Mexico Acquisition contributed $26.4 million to the Company's revenues for the three months ended March 31, 2024.

Current wording

•For the six months ended June 30, 2024, oil revenues increased by $40.5 million, or 25%, compared to the six months ended June 30, 2023. Of the increase, $26.5 million was attributable to an increase in volume and $14.0 million to an increase in realized price. Volumes increased by 16%, while realized prices increased by 7% compared to the six months ended June 30, 2023.

Previous wording

•For the three months ended March 31, 2024, NGL revenues increased by $0.8 million compared to the three months ended March 31, 2023. Of the increase, $1.1 million was attributable to an increase in volume, partially offset by a $0.3 million decrease attributable to lower realized price. Volumes increased by 119%, while realized prices decreased by 13%.

Current wording

•For the six months ended June 30, 2024, NGL revenues decreased by $0.6 million compared to the six months ended June 30, 2023. Of the decrease, $1.8 million was attributable to a decrease in realized price, partially offset by $1.2 million attributable to an increase in volume. Realized prices decreased by 51%, while volumes increased by 49%. The lower realized price was due to higher allocated gathering and processing costs to the Company's NGLs due to weak Permian Basin natural gas prices while the volume increase was due to higher production from properties acquired in the 2023 New Mexico Acquisition.

Previous wording

(1)The Company’s contract services - related parties revenue is derived from master service agreements with related parties to provide certain administrative support services.

Current wording

(1)The Company’s contract services - related parties revenue was derived from master service agreements with related parties to provide certain administrative support services.

Previous wording

(2)The Company's cost of contract services - related parties represents costs specifically attributable to the master service agreements the Company has in place with the respective related parties.

Current wording

(2)The Company's cost of contract services - related parties represented costs specifically attributable to the master service agreements the Company had in place with the respective related parties.

Previous wording

The MSA with Combo was terminated as of January 31, 2024. See Note 8 - Transactions with Related Parties for more information.

Current wording

The REG MSA was terminated effective May 31, 2024, and the Combo MSA was terminated effective January 31, 2024. See Note 9 - Transactions with Related Parties for more information.

Previous wording

Production and ad valorem taxes increased by $3.1 million for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. Production taxes increased primarily due to increases in our oil and natural gas sales, including revenues from production associated with the oil and natural gas properties acquired in the New Mexico Acquisition. Ad valorem taxes increased for the three months ended March 31, 2024 based on higher estimated property values for the current taxable period and higher tax rates for the current taxable period.

Current wording

Production and ad valorem taxes remained flat for the three months ended June 30, 2024 compared to the three months ended June 30, 2023, and increased $3.1 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. For the six months ended June 30, 2024, production taxes increased primarily due to higher oil revenues for the period.

Previous wording

Depletion, depreciation, amortization and accretion expense increased by $8.7 million for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The increase for the three months ended March 31, 2024 was primarily due to depletion associated with the oil and natural gas properties acquired in the New Mexico Acquisition and a higher depletion rate on the historical properties.

Current wording

Depletion, depreciation, amortization and accretion expense decreased by $1.1 million for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. This decrease was primarily due to lower volumes produced from fields with higher depletion rates in the current period. Depletion, depreciation, amortization and accretion expense increased $7.6 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023, which was primarily due to a full six months of DD&A contributed from the properties acquired in the 2023 New Mexico Acquisition.

Previous wording

Total G&A expense increased by $0.5 million for the three months ended March 31, 2024 compared to the three months ended March 31, 2023, primarily driven by higher share-based compensation expense.

Current wording

Total G&A expense increased by $2.2 million for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 and $2.7 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 primarily due to an increase in share-based compensation due to accelerated vestings.

Previous wording

Transaction costs represent costs incurred on successful or unsuccessful business combinations or unsuccessful property acquisitions. There were no transaction costs for the three months ended March 31, 2024. During the three months ended March 31, 2023, the transaction costs of $1.9 million primarily related to the New Mexico Acquisition that closed April 3, 2023.

Current wording

Transaction costs represent costs incurred on successful or unsuccessful business combinations or unsuccessful acquisitions. The transaction costs of $0.7 million for the three and six months ended June 30, 2024 primarily related to the RPC Power Joint Venture. During the six months ended June 30, 2023, the transaction costs of $5.5 million primarily related to the 2023 New Mexico Acquisition.

Previous wording

The Company recognizes settlements and changes in the fair value of its derivative contracts as a single component within other income (expense) on its condensed consolidated statements of operations. We have oil and natural gas derivative contracts, including fixed price swaps, basis swaps and collars, that settle against various indices. The following table presents the components of the Company's gain (loss) on derivatives, net for the three months ended March 31, 2024 and 2023:

Current wording

The Company recognizes settlements and changes in the fair value of its derivative contracts as a single component within other income (expense) on its condensed consolidated statements of operations. We have oil and natural gas derivative contracts, including fixed price swaps, basis swaps and collars, that settle against various indices. The following table presents the components of the Company's gain (loss) on derivatives, net for the three and six months ended June 30, 2024 and 2023:

Previous wording

Deferred income taxes are provided to reflect the future tax consequences or benefits of differences between the tax basis of assets and liabilities and their reported amounts in the financial statements using enacted tax rates. See Note 11 - Income Taxes to the Company's accompanying condensed consolidated financial statements included herein for further discussion of income taxes.

Current wording

Deferred income taxes are provided to reflect the future tax consequences or benefits of differences between the tax basis of assets and liabilities and their reported amounts in the financial statements using enacted tax rates. See Note 12 - Income Taxes for further discussion of income taxes.

Previous wording

The business of exploring for, developing and producing oil and natural gas is capital intensive. Because oil, natural gas and NGL reserves are a depleting resource, like all upstream operators, we must make capital investments to grow and even sustain production. The Company’s principal liquidity requirements are to finance its operations, fund capital expenditures and acquisitions, make cash distributions and satisfy any indebtedness obligations. Cash flows are subject to a number of variables, including the level of oil and natural gas production and prices, and the significant capital expenditures required to more fully develop the Company’s oil and natural gas properties. Historically, our primary sources of capital funding and liquidity have been our cash on hand, cash flow from operations and borrowings under our Credit Facility. At times and as needed, we may also issue debt or equity securities, including through transactions under our shelf registration statement filed with the SEC. In April 2023, the Company amended its Credit Facility to increase the borrowing base and issued Senior Notes to fund the New Mexico Acquisition. We estimate the combination of the sources of capital discussed above will continue to be adequate to meet our short and long-term liquidity needs.

Current wording

The business of exploring for, developing and producing oil and natural gas is capital intensive. Because oil, natural gas and NGL reserves are a depleting resource, like all upstream operators, we must make capital investments to grow and even sustain production. The Company’s principal liquidity requirements are to finance its operations, fund capital expenditures and acquisitions, make cash distributions and satisfy any indebtedness obligations. Cash flows are subject to a number of variables, including the level of oil and natural gas production and prices, and the significant capital expenditures required to more fully develop the Company’s oil and natural gas properties. Historically, our primary sources of capital funding and liquidity have been our cash on hand, cash flow from operations, borrowings under our Credit Facility, and the issuance of our Senior Notes. At times and as needed, we may also issue debt or equity securities, including through transactions under our shelf registration statement filed with the SEC. In April 2024, the Company issued equity securities and used the proceeds to finance an acquisition, repay outstanding debt and for general corporate purposes. We estimate the combination of the sources of capital discussed above will continue to be adequate to meet our short and long-term liquidity needs.

Previous wording

Cash on hand and operating cash flow can be subject to fluctuations due to trends and uncertainties that are beyond our control. Likewise, our ability to issue equity and obtain credit facilities on favorable terms may be impacted by a variety of market factors as well as fluctuations in our results of operations. For further discussion of risks related to our liquidity and capital resources, see "Item 1A. Risk Factors."

Current wording

Cash on hand and operating cash flow can be subject to fluctuations due to trends and uncertainties that are beyond our control. Likewise, our ability to issue equity and obtain debt financing on favorable terms may be impacted by a variety of market factors as well as fluctuations in our results of operations.

Previous wording

Working capital is the difference in our current assets and our current liabilities. Working capital is an indication of liquidity and potential need for short-term funding. The change in our working capital requirements is driven generally by changes in accounts receivable, accounts payable, commodity prices, credit extended to, and the timing of collections from customers, the level and timing of spending for expansion activity, and the timing of debt maturities. As of March 31, 2024, we had a working capital deficit of $40.9 million compared to a deficit of $31.1 million as of December 31, 2023. The current portion of our Senior Notes, which includes our regularly scheduled principal payments of $5 million per quarter, accounts for $20 million of our working capital deficit as of March 31, 2024 and December 31, 2023. The working capital deficit at March 31, 2024 reflects $9.8 million in current derivative liabilities compared to $0.4 million in current derivative liabilities at December 31, 2023. We utilize our Credit Facility and cash on hand to manage the timing of cash flows and fund short-term working capital deficits. Our current derivative assets and liabilities represent the mark-to-market value as of March 31, 2024 of future commodity production which will settle on a monthly basis through the end of their contractual terms. This aligns with the receipt of oil and natural gas revenues on a monthly basis.

Current wording

Working capital is the difference in our current assets and our current liabilities. Working capital is an indication of liquidity and potential need for short-term funding. The change in our working capital requirements is driven generally by changes in accounts receivable, accounts payable, commodity prices, credit extended to, and the timing of collections from customers, the level and timing of spending for expansion activity, and the timing of debt maturities. As of June 30, 2024, we had a working capital deficit of $35.8 million compared to a deficit of $31.1 million as of December 31, 2023. The current portion of our Senior Notes, which includes our regularly scheduled principal payments of $5 million per quarter, accounts for $20 million of our working capital deficit as of June 30, 2024 and December 31, 2023. The working capital deficit at June 30, 2024 reflects $8.3 million in current derivative liabilities compared to $0.4 million at December 31, 2023 and $1.4 million in current derivative assets at June 30, 2024 compared to $5.0 million at December 31, 2023. We utilize our Credit Facility and cash on hand to manage the timing of cash flows and fund short-term working capital deficits. Our current derivative assets and liabilities represent the mark-to-market value as of June 30, 2024 of future commodity production which will settle on a monthly basis through the end of their contractual terms. This aligns with the receipt of oil and natural gas revenues on a monthly basis.

Previous wording

The Company’s net cash provided by operating activities increased by $23.1 million, or 70%, to $56.1 million for the three months ended March 31, 2024 from $33.0 million for the three months ended March 31, 2023. The increase was primarily driven by a $32.7 million increase in revenues and a $5.2 million decrease in payments to settle commodity derivative contracts, partially offset by a $9.3 million increase in certain expenses, including LOE and production and ad valorem taxes and a $7.1 million increase in interest paid.

Current wording

The Company’s net cash provided by operating activities increased by $19.1 million, or 22%, to $107.8 million for the six months ended June 30, 2024 from $88.7 million for the six months ended June 30, 2023. The increase was primarily driven by a $38.2 million increase in revenues and a $5.7 million decrease in payments to settle commodity derivative contracts, partially offset by a $7.3 million increase in interest paid, a $7.1 million increase in tax liabilities paid, and a $5.2 million increase in certain expenses, including LOE and production and ad valorem taxes.

Previous wording

The Company's cash flows used in investing activities decreased by $27.3 million to $42.6 million for the three months ended March 31, 2024 from $69.9 million for the three months ended March 31, 2023. The decrease was primarily due to funds held in escrow associated with the Company's New Mexico Acquisition of $33.0 million for the three months ended March 31, 2023, partially offset by a $1.9 million deposit for the 2024 NM Asset Acquisition and an increase of $3.8 million in contributions to the equity method investment in RPC Power for the three months ended March 31, 2024.

Current wording

The Company's cash flows used in investing activities decreased by $329.7 million to $87.7 million for the six months ended June 30, 2024 from $417.4 million for the six months ended June 30, 2023. The decrease was primarily due to the Company's 2023 New Mexico Acquisition of $325.1 million, prior to post-closing adjustments, for the six months ended June 30, 2023, compared to the Company's 2024 New Mexico Asset Acquisition of $18.1 million for the six months ended June 30, 2024. Additionally, the Company incurred lower capital spending of $29.1 million, partially offset by an $11.6 million increase in contributions to the Company's equity investment.

Previous wording

The borrowing base under the Company's Credit Facility was $375 million with outstanding borrowings of $175 million on March 31, 2024, representing available borrowing capacity of $200 million.

Current wording

The borrowing base under the Company's Credit Facility was $375 million with outstanding borrowings of $160 million on June 30, 2024, representing available borrowing capacity of $215 million.

Previous wording

During 2023, the Company issued $200 million in principal amount of Senior Notes with a maturity date of April 2028. The proceeds from the Senior Notes were used to finance the New Mexico Acquisition. The principal balance of the Senior Notes as of March 31, 2024 was $180 million.

Current wording

During 2023, the Company issued $200 million in principal amount of Senior Notes with a maturity date of April 2028. The proceeds from the Senior Notes were used to finance the 2023 New Mexico Acquisition. The principal balance of the Senior Notes as of June 30, 2024 was $175 million.

Previous wording

See further discussion in Note 9 - Long-Term Debt to the Company's condensed consolidated financial statements included herein.

Current wording

See further discussion in Note 10 - Long-Term Debt for additional information.

Previous wording

For the three months ended March 31, 2024, the Company authorized and declared a quarterly dividend totaling approximately $7.3 million, with $7.2 million paid in cash and $0.1 million payable to restricted shareholders upon vesting.

Current wording

For the six months ended June 30, 2024, the Company recognized quarterly dividends totaling approximately $15.1 million, with $14.7 million paid in cash and $0.4 million payable to restricted shareholders upon vesting.

Previous wording

The Company's critical accounting policies and estimates are described in "Critical Accounting Estimates" within "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note 1 of the Notes to the Consolidated Financial Statements in Riley Permian's Annual Report on Form 10-K for the year ended December 31, 2023. The accounting estimates used in preparing our interim condensed consolidated financial statements for thethree months ended March 31, 2024 are the same as those described in Riley Permian's Annual Report.

Current wording

The Company's critical accounting estimates are described in "Critical Accounting Estimates" within "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note 1 of the Notes to the Consolidated Financial Statements in the 2023 Annual Report. The accounting estimates used in preparing our interim condensed consolidated financial statements for the three andsix months ended June 30, 2024 are the same as those described in the 2023 Annual Report.

Previous wording

See Note 3 - Summary of Significant Accounting Policies in the Company's consolidated financial statements in "Item 15. Exhibits and Financial Statement Schedules" for a full discussion of our significant accounting policies.

Current wording

See Note 3 - Summary of Significant Accounting Policies in the Company's consolidated financial statements in "Item 15. Exhibits and Financial Statement Schedules" in the 2023 Annual Report for a full discussion of our significant accounting policies.