Riley Exploration Permian, Inc. reported financial and operating results for the second quarter ended June 30, 2023.
SECOND QUARTER 2023 HIGHLIGHTS
Closed on the acquisition of oil and natural gas assets in New Mexico and successfully transitioned operations to the Company
Averaged oil production of 15.1 MBbls/d (21.2 MBoe/d total equivalent production), representing an increase of 80% as compared year-over-year to the second quarter 2022 and an increase of 52% as compared quarter-over-quarter to the first quarter of 2023
Reported net income of $33 million, or $1.65 per diluted share, which includes $11 million of non-cash gain on derivative contracts and income from operations of $45 million
Generated $66 million of Adjusted EBITDAX(1) and $56 million of operating cash flow
Incurred total accrual (activity-based) capital expenditures before acquisitions of $39 million and total cash capital expenditures before acquisitions of $48 million
Paid dividends of $0.34 per share in the second quarter for a total of $7 million
Bobby Riley, Chairman and CEO of Riley Permian, stated, "We're pleased to report another successful quarter with record-high metrics across production and cash flow from operations. Production results exceeded the high-end of guidance while capital expenditures were materially below guidance. Results were driven by a combination of the closing of the New Mexico acquisition early in the quarter as well as continued execution with our legacy assets. Transition and integration efforts for the new assets have proceeded as planned, including initial drilling activity beginning in April."
Mr. Riley continued, "Looking ahead to the second half of 2023, and based on the strength of production in the first half of 2023, we see the opportunity to reduce activity and capital expenditures from our previously released guidance levels, while maintaining full-year average production levels per previous guidance. We're optimistic that this combination of factors may lead to materially increased Free Cash Flow(1) for the year, as compared to what we forecasted following the first quarter of 2023".
OPERATIONS AND DEVELOPMENT ACTIVITY UPDATE
Riley Permian averaged oil production of 15.1 MBbls per day for the three months ended June 30, 2023, representing an increase of 80% as compared year-over-year to the second quarter 2022 and 52% increase compared to the first quarter of 2023. The Company averaged total equivalent production of 21.2 MBoe per day for the second quarter, an increase of 109% as compared to the same period in 2022 and 61% increase compared to the first quarter of 2023. The increase in production is attributable to the impact of the acquired assets as well as organic growth. The Company experienced some disruptions on gas processing which led to modestly lower gas sales and equivalent Boe production figures.
Consistent with prior guidance, the Company drilled 8 gross (6.9 net) horizontal wells during the second quarter, including 4 gross (3.6 net) wells in Texas and 4 gross (3.3 net) in New Mexico. The Company completed 5 gross (4.2 net) horizontal wells during the quarter, including 4 gross (3.2 net) wells in Texas and 1 gross (1 net) well in New Mexico. The Company turned to sales 6 gross (5.2 net) horizontal wells during the second quarter 2023. The Company incurred $39 million in total accrued capital expenditures before acquisitions for the second quarter, lower than the Company's previously released guidance due primarily to deferred completion activity. On a cash basis, the Company had total capital expenditures before acquisitions of $48 million for the quarter.
The Company progressed with construction of its onsite power generation joint venture during the second quarter of 2023. The Company contributed its share of capital which corresponds to approximately $2 million during the second quarter of 2023. The onsite power generation facility is expected to be placed in service late in the third quarter or during the fourth quarter of 2023.
FINANCIAL RESULTS
For the three months ended June 30, 2023, the Company reported net income of $33 million, or $1.65 per diluted share, and Adjusted Net Income(1) of $27 million, or $1.37 per diluted share. The Company generated Adjusted EBITDAX(1) of $66 million, operating cash flow of $56 million and Free Cash Flow(1) of $3 million.
Second quarter 2023 average realized prices, before derivative settlements, were $71.41 per barrel of oil, $0.02 per Mcf of natural gas and $5.10 per barrel of natural gas liquids. Quarter-over-quarter, realized prices declined by 2% for oil, 96% for natural gas, and 25% for natural gas liquids. Oil represented 99% of second quarter revenue. Total oil and natural gas sales revenue, net of derivative settlements, was $97 million, an increase of $36 million or 58% over the first quarter of 2023. The Company reported a $9 million gain on derivatives, which includes a $2 million loss on settlements and a $11 million non-cash gain due to changes in the fair value of derivatives.
Riley Permian's total Cash Costs(1) for the second quarter of 2023 were $41 million, or $21.17 per Boe. Lease operating expense ("LOE") was $18 million, or $9.06 per Boe, which is at the upper end of our guidance range and 21% above the first quarter 2023. On a per unit basis, certain increases in LOE costs were expected and were reflected in higher guidance ranges as compared to past results, while additional costs were incurred related to higher than anticipated workover activity on the newly acquired assets. Cash G&A expense(1) was $6 million, or $3.11 per Boe, near the low end of our guidance range and 26% below the first quarter 2023. Interest expense was $10 million or $5.26 per Boe, which reflects increased debt related to the financing for the New Mexico Acquisition.
During the second quarter 2023, the Company paid a cash dividend of $0.34 per share, or $7 million in total. Subsequent to the quarter end, the Company declared a cash dividend of $0.34 per share, payable in August 2023.
In April 2023 and in conjunction with the closing of the New Mexico Acquisition, the Company amended its credit facility to, among other things, increase the borrowing base to $325 million. The Company also issued $200 million of senior unsecured notes upon closing, whose net proceeds along with borrowings under the credit facility, were used to fund the closing of the New Mexico Acquisition and related expenses.
As of June 30, 2023, the Company had $394 million of total debt, including $215 million drawn on its credit facility and $179 million of senior unsecured notes; on a principal basis, the Company had $410 million of total debt, including $195 million principal value of senior unsecured notes.
OUTLOOK AND GUIDANCE
Riley Permian is providing third quarter 2023 and updated full-year 2023 guidance based on currently scheduled development activity and current market conditions. The average working interest on gross operated wells drilled is subject to change and may have corresponding impacts on investing expenditures.
