Riley Exploration Permian, Inc.

Previous wording

Commodity prices remain volatile. General domestic and international economic, market and political conditions, including military conflicts, global economic growth, unpredictability of new tariffs, actions of OPEC+ countries and changes to the current political environment under the new administration could prolong market volatility and continue to cause a decline in commodity prices.

Current wording

Commodity prices remain volatile. General domestic and international economic, market and political conditions, including military conflicts, global economic growth, unpredictability of tariffs, actions of OPEC+ countries, and changes to the current political environment could prolong market volatility and cause a decline in commodity prices.

Previous wording

Inflation continues to be an ongoing concern. Although inflation has moderated from highs experienced during 2021, inflationary pressures remain elevated or uncertain, which in turn may cause our capital expenditures and operating costs to increase. During inflationary periods, interest rates have historically increased. Increased interest rates could have the effects of raising our cost of capital and the potential for depressing economic growth, either of which (or the combination thereof) could hurt the financial and operating results of our business.

Current wording

We monitor the risk of cost pressures in specific areas of our operating expenses and capital expenditures. Our margins may be compressed if costs increase more than commodity prices and our revenues, net of derivatives. Additionally, the current interest rate environment remains sensitive to shifts in macroeconomic factors and central bank policies. Increased interest rates could have the effects of raising our cost of capital and the potential for depressing economic growth, either of which (or the combination thereof) could hurt the financial and operating results of our business.

Previous wording

The Company cannot estimate the length or gravity of the future impact these events will have on the Company's results of operations, financial position, liquidity and the value of oil and natural gas reserves.

Current wording

The Company cannot estimate the length or gravity of the future impact these conditions will have on the Company's results of operations, financial position, liquidity and the value of the oil and natural gas reserves.

Previous wording

Comparison for the three and nine months ended September 30, 2025, and 2024:

Current wording

Comparison for the three months ended March 31, 2026, and 2025:

Previous wording

(1)The Company's oil, natural gas and NGL sales are presented net of gathering, processing and transportation costs. The costs, related to natural gas and NGLs, at times exceeded the price received and resulted in negative average realized prices.

Current wording

(1)The Company's oil, natural gas and NGL sales are presented net of GP&T costs. These costs, related to natural gas and NGLs, at times exceeded the price received and resulted in negative average realized prices.

Previous wording

(2)The Company's calculation of the effects of derivative settlements includes gains and losses on the settlement of our 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 (losses) on the settlement of our commodity derivative contracts. These realized gains (losses), along with unrealized gains (losses) from changes in the fair value of derivatives, are included under other 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. Realized prices and revenues from product sales are a function of the volumes produced, product quality, market prices, gas Btu content, as well as gathering, processing and transportation costs. Gathering, processing and transportation costs ("GP&T costs") are allocated across natural gas and NGLs based on revenue, which leads to heightened fluctuations in such cost allocations across periods. 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 following table presents the Company's oil and natural gas sales prior to and net of GP&T costs:

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, gas Btu content, as well as GP&T costs. GP&T costs are allocated across natural gas and NGLs based on revenue, which leads to heightened fluctuations in such cost allocations across periods. 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 following table presents the Company's oil and natural gas sales prior to and net of GP&T costs:

Previous wording

The Company’s total oil and natural gas revenues, net increased by $4.5 million. The following tables summarize the effects of price, volume and GP&T costs changes on our revenues from oil, natural gas and NGLs (in thousands):

Current wording

The Company’s total oil and natural gas sales, net increased $11.4 million, or 11%. The following tables summarize the effects of price, volume and GP&T cost changes on our revenues from oil, natural gas and NGLs:

Previous wording

The following table presents the Company's operating costs and expenses and other (income) expenses:

Current wording

The following table presents the Company's operating costs and expenses and other expenses:

Previous wording

LOE are the costs incurred in the operation and maintenance of producing properties. Expenses for electricity, compression, direct labor, saltwater disposal and materials and supplies comprise the most significant portion of our lease operating expenses. Certain operating cost components, such as direct labor and materials and supplies, generally remain relatively fixed across broad production volume ranges, but can fluctuate depending on activities performed during a specific period. For instance, repairs to our pumping equipment or surface facilities or subsurface maintenance result in increased production expenses in periods during which they are performed. Certain operating cost components, such as saltwater disposal associated with produced water, are variable and increase or decrease as hydrocarbon production levels and the volume of completion water disposal increases or decreases.

Current wording

LOE are the costs incurred in the operation and maintenance of producing properties. Expenses for electricity, compression, direct labor, saltwater disposal and materials and supplies comprise the most significant portion of our lease operating expenses. Certain operating cost components, such as direct labor and materials and supplies, generally remain relatively fixed across broad production volume ranges, but can fluctuate depending on activities performed during a specific period. For instance, repairs to our pumping equipment or surface facilities or subsurface maintenance result in increased production expenses in periods during which they are performed. Certain operating cost components, such as saltwater disposal associated with produced water, are variable and increase or decrease as hydrocarbon production levels and the volume of water disposal increases or decreases.

Previous wording

Production and ad valorem taxes decreased by $0.3 million for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024, primarily due to lower oil revenues in addition to the reversal of a previously accrued liability related to the Environmental Protection Agency’s waste emission charge that was nullified in the first quarter of 2025, partially offset by higher natural gas and NGL revenues.

Current wording

Production and ad valorem taxes increased by $2.4 million for the three months ended March 31, 2026, compared to the three months ended March 31, 2025, primarily due to increased production in both our Champions and Red Lake fields, with higher production in Red Lake due to the Silverback Acquisition, and an increase in crude oil prices, as well as the reversal of a previously accrued liability related to the Environmental Protection Agency’s waste emission charge that was nullified in the first quarter of 2025.

Previous wording

G&A expenses consist of administrative costs and share-based compensation expense. Administrative costs include corporate overhead such as payroll and benefits for our staff, office costs, fees for professional services such as audit and legal services, technology costs, insurance and other. Share-based compensation expense reflects costs associated with our stock granted to employees and members of our board of directors. G&A expenses are reported net of overhead recoveries.

Current wording

G&A expenses consist of administrative costs and stock-based compensation expense. Administrative costs include corporate overhead such as payroll and benefits for our staff, office costs, fees for professional services such as audit and legal services, technology costs, insurance and other. Stock-based compensation expense reflects costs associated with our stock granted to employees and members of our board of directors. G&A expenses are reported net of overhead recoveries.

Previous wording

The Company recognizes settlements and changes in the fair value of our derivative contracts as a single component within other income (expense) in our 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:

Current wording

The Company recognizes settlements and changes in the fair value of our derivative contracts as a single component within other expense in our 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 loss on derivatives, net:

Previous wording

Cash gains or losses on settled derivative contracts related to contracts that settle during the period and are a function of the difference in settled versus contractual prices and the associated hedged volumes for each underlying commodity. Non-cash gains or losses on derivatives relate to unsettled contracts and are a function of changes in derivative fair values associated with fluctuations in the forward price curves for the commodities relative to contractual pricing and the associated hedged volumes for each underlying commodity for our derivative contracts outstanding.

Current wording

Cash gains or losses on settled derivative contracts relate to contracts that settle during the period and are a function of the difference in settled versus contractual prices and the associated hedged volumes for each underlying commodity. Non-cash gains or losses on derivatives relate to unsettled contracts and are a function of changes in derivative fair values associated with fluctuations in the forward price curves for the commodities relative to contractual pricing and the associated hedged volumes for each underlying commodity for our derivative contracts outstanding.

Previous wording

Current income taxes represent the amount the Company expects to owe to federal and state tax authorities in the current period, based on our taxable income. 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. Total income tax expense is summarized below:

Current wording

Current income taxes represent the amount the Company expects to owe to federal and state tax authorities in the current period, based on our taxable income. 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. Total income tax (benefit) expense is summarized below:

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 sustain and grow production. The Company’s principal liquidity requirements are to finance our operations, fund capital expenditures, fund acquisitions and joint venture commitments, pay dividends 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.

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, we must make capital investments, like all upstream operators, to sustain and grow production. The Company’s principal liquidity requirements are to finance our operations, fund capital expenditures, fund acquisitions and joint venture commitments, pay dividends 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. 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

Working capital represents the funds available to meet day-to-day operational needs and 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. Our working capital fluctuates as our drilling and completion activity changes with periods of higher and lower activity. As of September 30, 2025, we had a working capital deficit of $47.9 million compared to a deficit of $54.6 million as of December 31, 2024. 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 September 30, 2025, and December 31, 2024. We utilize our Credit Facility and cash on hand to manage the timing of cash flows and fund short-term working capital deficits. At September 30, 2025, we had cash on hand of $16.5 million and $175 million of undrawn capacity under our Credit Facility.

Current wording

Working capital represents the funds available to meet day-to-day operational needs and 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. Our working capital fluctuates as our drilling and completion activity changes with periods of higher and lower activity. We utilize our Credit Facility and cash on hand to manage the timing of cash flows and fund short-term working capital deficits. At March 31, 2026, we had $293 million of undrawn capacity under our Credit Facility. The following table presents the components of working capital:

Previous wording

Net cash provided by operating activities were $147.7 million for the nine months ended September 30, 2025, compared to $179.9 million for the nine months ended September 30, 2024, and primarily consisted of the following:

Current wording

Net cash provided by operating activities were $47.2 million for the three months ended March 31, 2026, compared to $50.4 million for the three months ended March 31, 2025, and primarily consisted of the following:

Previous wording

(1)Operating expenses include LOE, production and ad valorem taxes, administrative costs, transaction costs and other miscellaneous operating expenses.

Current wording

(1)Operating expenses include LOE, production and ad valorem taxes, administrative costs and other minor operating expenses.

Previous wording

Net cash flows used in investing activities were $212.8 million for the nine months ended September 30, 2025, compared to $113.3 million for the nine months ended September 30, 2024, and primarily consisted of the following:

Current wording

Net cash flows used in investing activities were $28.8 million for the three months ended March 31, 2026, compared to $25.4 million for the three months ended March 31, 2025, and primarily consisted of the following:

Previous wording

Net cash flows provided by financing activities were $68.5 million for the nine months ended September 30, 2025, compared to net cash flows used in financing activities of $68.6 million for the nine months ended September 30, 2024, and primarily consisted of the following:

Current wording

Net cash flows used in financing activities were $20.4 million for the three months ended March 31, 2026, compared to $29.2 million for the three months ended March 31, 2025, and primarily consisted of the following:

Previous wording

The borrowing base under the Company's Credit Facility was $400 million with outstanding borrowings of $225 million and $175 million of available borrowing capacity at September 30, 2025.

Current wording

The borrowing base under the Company's Credit Facility was $400 million with outstanding borrowings of $107 million at March 31, 2026, and $293 million of available borrowing capacity.

Previous wording

The Senior Notes had a principal balance of $150 million as of September 30, 2025.

Current wording

The Senior Notes had a principal balance of $140 million as of March 31, 2026.

Previous wording

For the nine months ended September 30, 2025, the Company recognized quarterly dividends totaling approximately $24.9 million, with $24.8 million paid in cash and $0.1 million accrued for the holders of unvested restricted stock awards.

Current wording

For the three months ended March 31, 2026, the Company recognized quarterly dividends totaling approximately $8.6 million, with $8.4 million paid in cash and $0.2 million accrued for the holders of unvested restricted stock awards.

Previous wording

As of September 30, 2025, the Company had a remaining volume commitment of approximately six years with our primary midstream counterparty in Texas. The Company also had natural gas delivery commitments under the A&R Tolling Agreement and the Supply Agreement and a remaining equity commitment under the Second Amendment to the A&R LLC Agreement of $13.0 million to fund our portion of the capital budget for the RPC Power joint venture. Further, the Company entered into a 15-year gas purchase agreement that required an acreage dedication to a midstream counterparty for a significant portion of our oil and gas assets in New Mexico. This agreement is expected to begin before the end of 2026. As a result of entering into the Midstream Gas Purchase Agreement, the Company is committed to spend approximately $130 million in capital expenditures through 2026 to complete the initial projects of our midstream buildout plan. The Company has incurred approximately $26.5 million since beginning the midstream project. See Note 15 - Commitments and Contingencies for additional information.

Current wording

As of March 31, 2026, the Company had a remaining volume commitment of five years with Targa, formerly Stakeholder, in Texas. The Company also had natural gas delivery commitments under the A&R Tolling Agreement and a remaining equity commitment under the Second Amendment to the A&R LLC Agreement to fund our portion of the capital budget for the RPC Power joint venture. The Company also entered into the A&R Gas Purchase Agreement that required an acreage dedication and a minimum volume commitment to Targa for a significant portion of our natural gas production in New Mexico. This agreement is expected to commence before the end of 2026. In addition, the Company entered into the Waterbridge Agreement, which includes minimum produced water volume commitments for a portion of our New Mexico operations and is expected to be in service in September 2026. See Note 15 - Commitments and Contingencies for additional information.

Previous 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 2024 Annual Report. The accounting estimates used in preparing our interim condensed consolidated financial statements for thenine months ended September 30, 2025, are the same as those described in the 2024 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" in the 2025 Annual Report. The accounting estimates used in preparing our interim condensed consolidated financial statements for thethree months ended March 31, 2026, are the same as those described in the 2025 Annual Report.