REPX earnings call transcript, November 4, 2026

Welcome to our conference call covering our third quarter 2026 results. I'm Ben McQueen, VP of Strategy and Investor Relations. Joining me today are Bobby Riley, Chairman and CEO, John Suter, COO, and Philip Riley. CFO. Yesterday we published a variety of materials which can be found on our website under the Investors section. These materials in today's conference call contain certain projections and other forward-looking statements within the meeting. of the federal securities laws. These statements are subject to risks and uncertainties that may cause actual results to differ materially from those expressed or implied in these statements. Potential drilling locations that will be discussed are based on management's internal estimates and are not proved reserves. As of today, no proved reserves have been attributed to these locations. Whether and when they are drilled will depend on several factors including commodity prices, capital availability, drilling and completion costs, So, let's do this. regulatory approvals, results of offset and delineation activity, and other factors. Actual drilling activity may differ materially from these estimates. We'll also reference certain non-gap measures. The reconciliations to the appropriate gap measures can be found in the supplemental disclosure on our website. I'll turn it over to Bobby.

The third quarter was an exciting quarter for Riley Permian as we continue to execute on the development program. We have discussed throughout the year. Much of the activity completed earlier in 2026 translated into production during the third quarter, resulting in the significant step up in volume. We had anticipated. Oil production averaged over 25,000 barrels per day, an increase of 20% from the second quarter and 38% from a year ago. Total production increased 23% sequentially to approximately 42,000 BOE per day. Importantly, we delivered that growth despite wells turned to sales coming in below the low end of our guidance range. Those results reinforce our confidence in both the quality of our asset base and our ability to execute our development program efficiently. One area that I want to spend some time on today is an additional resource opportunity we have been evaluating at Red Lake. To date, our development activity at Red Lake has primarily focused on the paddock and blind brief formations. Part of the YASO package. We are now preparing to expand that activity into the San Andres. The San Andres itself is not a new development target for the region and has been productive for many years. What we are evaluating is the opportunity to apply horizontal development across our existing acreage, consistent with how we develop the other formations across our assets. Over the past year, our technical team has been assessing the

potential of the San Andres across our acreage. That work has included extensive geological and reservoir analysis, along with evaluating recent industry activity in the San Andres across and around our position. We believe that combination of internal technical work and encouraging industry results has given us conviction to begin allocating capital to the San Andres with initial development planned for the second quarter of 2020. 27 and initial production results later in the year. The San Andres potentially provides approximately 90 additional net development locations across our acreage. Importantly, these additional locations are within the acreage we already own, adding potential inventory without incremental acquisition cost. Our current plan includes six San Andres wells during 2027, which should allow us to begin evaluating the opportunity through our own development results. Additionally, the infrastructure environment in New Mexico has materially improved the water bridge water handling agreement. went into service in September and the new target gathering and high pressure trunk line system was placed in service in October. Together, these projects provide additional water handling capacity and gas. flow assurance to support increased development in our New Mexico acreage that progress is important as we move into the next phase of our development plan. Over the past several years, we have significantly.

expanded our inventory position while investing in the infrastructure necessary to support a large development program. During 2026, we increased activity and the benefits of that development program became evident in our production results. As we enter 2027, we believe we are positioned to continue that progression. While we are not providing formal 2027 guidance today, I do want to provide an early preview of our plans for next year. We expect to add a second rig during the fourth quarter of 2026 and operate two rigs for a portion of the quarter, positioning us to carry that activity level into 2027. Based on prevailing commodity prices and market conditions, we plan to run two rigs throughout 2027. As always, we will continue to monitor the environment and retain the flexibility to adjust any activity as conditions warrant. Our planned activity includes the development across both of our core assets. at Red Lake, the improved infrastructure backdrop allows us to increase development activity across the paddock and Blindbury while beginning initial development of the San Andres. At Champions, we expect to continue developing the remaining high quality. inventory that has continued to generate strong results. Based on this planned activity, we expect another year of meaningful production growth. While our 2027 planning process. is still ongoing, our current outlook is for oil and total production growth of 30% to 40% year over year. We expect to provide formal 2027 guidance in March of 2027.

We're excited about the progress we made this quarter, and more importantly, the position we have built heading into 2027. I want to thank our employees for their continued hard work and execution. We have asked a lot. of the team this year as we have increased activity and grown the business, and they have continued to deliver. I'll now turn the call over to John.

Despite no new wells being turned to sales during the first nine months of the year. The increase at Red Lake primarily reflects the return to more normal operations following the third part. Already midstream constraints we experienced during the second quarter. Last quarter, we said the June exit rate provided a better indication of our second half starting point than. The second quarter average. Third quarter results support that view as shut in volumes returned and Texas wells completed earlier in the year contributed to production. The growth reflected multiple factors including restored production, new Texas wells, and continued optimization of the existing asset base. Our Yoakam campaign, county asset remain the primary driver of development and production growth during the quarter. We turned 12 gross wells to sales in Texas compared to seven gross wells completed during the period as activity. Completed earlier in the year converted to production. That is an important part of the story. During the first half of the year, we invested in drilling, completions, facilities, and facilities. And take away capacity to support a higher pace of development. In the third quarter, much of that work began translating into production. Champions high working interest. Established operating footprint and more mature infrastructure continue to give us flexibility in how we sequence activity and respond to changing conditions.

During the quarter, we also selected a number of champions wells for targeted chemical treatments. Those treatments had limited impact on third quarter volumes because of their timing, but our current forecast reflects a approximately 15% higher fourth quarter production from the treated wells. This is another example of using lower cost optimization work to create incremental production and improve recovery from the existing asset base. At Red Lake, our focus during the quarter was on preparing the asset for increased completion and development activity. Importantly, oil production also continued to recover from the second quarter midstream constraints, increasing approximately 30 percent sequentially despite no new wells being turned to sales. During the quarter, we drilled eight gross New Mexico wells and completed two, but did not turn any new Red Lake wells to sales. That sequencing was intentional. As discussed last quarter, we've been coordinating completion activity with the availability of gas, water, power, and supporting field infrastructure. We made important progress on those infrastructure needs during the quarter. and shortly thereafter. Water Bridge began supporting the development program in mid-September and Targa began taking volumes on its new high-pressure line in October. With that additional take-away capacity now available, we have secured a full-time frat crew and begun working through the New Mexico duck inventory while continuing to drill new wells.

This is... Increased completion activity will contribute to higher capital spending in the fourth quarter, with the production impact expected to begin toward the end of the quarter and continue into the first quarter of 2027. On water, the water bridge arrangement provides additional disposal capacity to support increased development. While third-party disposal carries a higher cost than our own system, we can reduce the cost of the water bridge. We believe that incremental cost is a favorable trade-off for the additional capacity and development flexibility it provides. We're also continuing to invest in company-operated water infrastructure. Including additional saltwater disposal capacity, gathering lines, pumping capacity, automation, and related field facilities. Our objective is to utilize a combination. Of company operated and third party capacity to provide a flexible and reliable water system as development activity and produce water volumes increase at Red Lake. Head our priorities remain straightforward. First, we will continue to operate safely and maintain the discipline required to manage a higher level of activity. In Texas, we will continue converting the investments already made into production while addressing the oil, gas, and water infrastructure needed to support the current development pace. In New Mexico, we will be begin to see the impact of the DUC inventory as gas and water take-away systems are now operationally ready. The sequencing is deliberate. We began completing our DUCs immediately after Targa and Waterbridge.

commenced initial operations. That production impact will begin to be seen toward the end of Q4-2026 and into Q1-2027 as those wells are turned to sales. Finally, we are preparing for a larger 2027 operating program. The third quarter demonstrated what the business can deliver as operational constraints ease and prior capital begins. Converting into production. Looking forward, we are preparing for a two-rig development program and further infrastructure build-outs that will accommodate meaningful Red Lake growth. Our focus from here is execution. Maintaining safe operations, bringing infrastructure online, converting ducts efficiently, and ensuring that capital trans- translates into production and cash flow as quickly as practical. I'll now turn the call to Philip.

Cash flow from operations was $111 million. 75% higher than in the second quarter, or $222 million year-to-date, 50% higher than the same nine-month period in 2025. Third quarter, accrual capex decreased 39% quarter-over-quarter. $53 million, mostly in tandem with the decline in DNC activity. Cash capex was $66 million as payments for second quarter's higher activity flowed through the third quarter. Year-to-date, accrual capex is $187 million. And cash capex is $165 million. We paid $8.4 million in dividends during the quarter, and we had zero buybacks. With excess cash, we reduced debt by $28 million to $245 million. Quarter-end total shares outstanding, including... ...unvested shares were $22.2 million. Year-over-year, debt is down by 35%, and shares outstanding have increased by less than 1%. Subsequent quarter-end, we drew on a revolver to retire... ...or 10.5% senior notes at par for zero net change in debt balance. We estimated approximately $5 million in annual interest expense savings. Last week, we completed an amendment to our credit facility, upsizing the borrowing base and elected commitments to... ...$450 million, allowing for $205 million of undrawn liquidity. We also extended the maturity to October 2030. Stepping back, we've demonstrated that growth and financial discipline are not... ...mutually exclusive. Over a three-year period, we've increased oil production by more than 80%, while reducing total debt by nearly 40%, and limiting shared account growth to 10%. We're scaling the business while improving...

...balance sheet and managing dilution. Now, a few comments on forward guidance and capital allocation. Bobby and John described the additional activity for the fourth quarter. That drives an increase in capital... ...apex for the full year relative to previous guidance. We forecast a small amount of incremental production volumes in the fourth quarter, while added volumes should materialize more meaningfully in the first and second quarters of 2027. Additionally, while annual results remain an important measure of performance, given the pace and timing of our growth, we're increasingly focused on the progression of the business from quarter to quarter. In periods where capital investment precedes the associated production, calendar year comparison... ...do not fully capture that growth trajectory. We've added several new charts on pages 11 and 12 of our investor presentation. It shows this actual and forecasted progression on a rolling quarterly basis. We think they tell a compelling story. As we think about capital allocation, we're focused on creating long-term value on a per-share basis. We have a deep inventory of attractive... ...element opportunities, and under current market conditions, we believe investing in that inventory is our most compelling use of capital. At the same time, we'll retain flexibility with the pace of investment. As Bobby mentioned, we'll evaluate against commodity prices, the broader market and economic backdrop, full-cycle project returns, and our balance sheet goals.

Our objective is to fund the development program from internally-generated cash flow while maintaining... ...a strong balance sheet. And importantly, F-Flexibility does not necessarily mean giving up the growth already underway. A significant amount of capital has already been invested ahead of the associated production response. Even... ...in a meaningfully lower commodity price environment, we believe we could materially reduce CAPEX while continuing to grow production into the middle of next year, and then moderate activity as needed to maintain a more balanced cash profile.

Thank you all for your attention today and for your interest in our company. Operator, you may now turn it over for questions.

Your first question comes from the line of Derek Whitfield with Texas Capital Bank.

Line is open. Please go ahead.

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Research. Your line is open. Please go ahead.