Q3 2023 Riley Exploration Permian Inc Earnings Call
Welcome to the Conference Center, please wait for the next available operator.
[music].
No.
[music]. Thank you for your patience.
Okay.
Next available operator.
Okay.
Nadir.
[music].
Thank you for your patience. Please stay on the line for the next available operator.
[music].
Thank you for your patience. Please stay on the line for the next available operator.
[music].
Thank you for your patience. Please stay on the line for the next available operator.
[music].
Yeah.
Thank you for holding May have the day of the conference your joining.
Okay.
Hello caller.
Please check if airlines on yet.
Okay.
Carl I cannot hear you are allowed to disconnect.
Welcome to the Conference Center, please wait for the next available operator.
[music].
No.
[music].
Thank you for your patience. Please stay on the line for the next available operator.
[music].
Stay on the line for the next available operator.
[music].
Thank you for your patience. Please stay on the line for the next available operator.
[music].
Thank you for holding them for Aegon, France.
Okay.
Things are holding them the animals are gone firms.
Okay.
Yeah.
Winter please wait for the next available.
Thank you for holding which conference would you like to join.
I am sorry color, which conference would you like to join.
I'm, sorry caller I can hear you. Please check if your line yet.
Thank you Matt.
Ladies.
Go ahead Mitch conference.
So you have your conference I DVT.
Thank you so much Mackie fab your first and last name.
Thank you and from which company.
Great. Thank you so much I'll join you in now Goodbye.
Free cash flow next year. So I just wasn't sure is that strategy.
Maybe going to carry into 'twenty four or do you think you would reevaluate and maybe pivot to more dividend or share repurchases even next year.
Yes sure. Thanks, Bert this is phillippe.
I would say that we want to get the dividend in line with overall allocation I think we have one of the highest allocation rates for our base dividend.
Frankly in the industry, especially among small caps.
We put out some materials, you'll see in our presentation.
<unk> suggested this is it's been more than 50% year to date.
I think that will decline for the full year as well.
We get additional free cash flow and allocate more to debt Paydown I think next year, you shouldnt be surprised if that.
The decrease is a bit we're still increasing on an absolute basis, but we're just talking about percentage allocation.
We want to remain flexible.
Right.
Recognize that paying down debt.
<unk> equity value to shareholders indirectly.
You can forecast, what we're going to be doing for free cash flow will be paying roughly $27 million to $30 million in the dividend assuming that's approved next year, you've got the balance to the debt that's worth.
Two to three to $4 there by itself.
Yeah.
That's very helpful. Thanks, guys.
Your next question is from Noel Parks of Tuohy Brothers. Please go ahead. Your line is open.
Alright, good morning.
Good morning.
So just had a couple.
I was just interested in your your thoughts on that.
Hedging environment right now.
We certainly havent been volatility on the on the oil side and.
And some people may be getting a little more opportunistic overall in <unk>.
So I guess as you.
Look ahead.
All out to the curve are you sort of more.
I'm more concerned with protecting downside or or more about sort of preserving preserving upside.
Good morning.
Yeah sure no it is.
Bit of both and to be honest, we've got a pretty systematic hedging process, where we're not trying to be too speculative.
We put on new volumes in the spring at.
At the time of closing the acquisition and taking on the financing.
Uh huh.
That was a mix of collars and swaps.
I would say generally is that as cash flows development gets near term, we're going to want to protect those a bit more with some swaps for certainty of the cash flow and given commitments rigs pipe so forth.
As you go out and especially with the backward dated curve, we're using more collars.
That has been helpful to us.
Given this past quarter. It gives you a range you know youre not settling there necessarily for cash we had a quite a bit of cashless settles even this past quarter.
So I think we'll continue that strategy.
We're in a good place right now we want to have a program that protects that downside.
And then retain some of the upside as well, we're certainly not giving away the upside I think that can be a misconception. We did use leverage for this asset and so.
When you.
<unk> got a small.
Change in the price of oil, yes, you've got some negative settlements, but the asset value and the cash flow.
More than offsets any of those any of those settlements and especially on a hedge basis on a levered basis excuse me.
You can recognize that and increase small increase in asset value.
When you are 35% levered or so has a disproportionately large impact on equity value.
Sure absolutely.
And then just.
Thinking about the infrastructure gas infrastructure third party.
Issues that cropped up.
I guess as you as you look ahead.
Any changes in your thoughts as far as what what sort of spending you might be doing looking to.
I don't know.
Head more towards trying to either shift vendors or.
You consider contributing some capital of your own towards.
Okay.
Improving infrastructure any any changes in your thinking on that recently.
Our view on that is somewhat stay consistent and as we've always been looking for opportunities to better optimize the field production and long term takeaway in both assets both the legacy and the new we do see opportunity to continue and invest alongside current midstream providers.
In addition to opportunities that will take on on our own.
But I don't think that that will materially sway.
Capital allocation or the amount of capital we spend going forward relative to what we have in the past.
Sure and I mean in in a perfect world.
I guess for.
For Riley and then the other producers.
That offset <unk> in a perfect world would it just be sort of.
You know just unlimited capital to get out and fix an upgrade of a bunch of different.
Your facilities or or or.
Our pipelines are or is it.
Is this one of those things that there's only so much you can do.
So fast just given you're trying to keep your current.
The structure up and running and so we're making changes incrementally.
I think there's a combination of both.
<unk> assets are challenged with different midstream constraints or issues.
Mexico is more of a legacy system, so older pipe looking too.
Helped build and put some more integrity into that system for for sustainable gathering.
In addition to plant capacity expansions both of which are currently ongoing in new Mexico, and Texas. So we do have line of sight into 2024 for some more capacity.
In addition to that we have our own internal projects such as the onsite power generation, which as I mentioned that will be coming online shortly which will utilize some infield gas along with other initiatives we're working on.
Great. Okay, it's not a lot more thing no.
We do see we do see this as an opportunity.
For capital investment.
Some of it might be remediation, but some of it is is absolutely an opportunity for investment. This goes back to <unk> question on capital allocation, ensuring we have liquidity to capitalize on these opportunities. So what's interesting about this it can be capital intensive, but we're finding smaller more modular type of opportunities. An example is the power of <unk>.
Evan mentioned and other things that could be analogous to that what's what's interesting for that when you mix. It within E&P is the type of decline profile that has which is typically flat or even an incline.
So.
These are things that we're excited about we're.
We're working on now and you know we're earmarking some capital potentially for next year.
Okay, great. Thanks, a lot.
Your next question is from David <unk> of the <unk> Company. Please go ahead. Your line is open.
Hi, Good morning, gentlemen, Mike question for you today is more operational.
Can you give us any insights into.
The ongoing re pressurization.
C O two waterflood that you have going on on the Texas side and are there any plans to.
Expand that and then.
Secondly.
Are there any updates on any movement for the potential sequestering the Cotwo project.
David This is Bobby I'll start that.
Hmm.
Where you're continuing the pilot program on what we call our brochure beliefs, we have.
What we believe is obtained miscibility pressure over the last.
So 30% to 45 days and.
We're at the point now where as we're injecting gas we see production response as we shut the gas off the production dropped so we knew though that we are an unmissable states. So it's still a long term project for us to evaluate what the ultimate impact could be in a field wide application.
But but so far we're we're encouraged with what we're seeing in the field.
All right.
I don't know exactly how to discuss the carbon sequestration.
Sequestration.
We continually look for opportunities out there because that would obviously have a tremendous impact on the viability of a wide wider spread.
Tertiary project using C O two.
But you know at the current time.
What we're seeing out there doesn't really compete for capital.
And it's a little early for us to take on tremendous volumes of C O two but.
It's on our radar, David and we're looking for that opportunity as they evolve.
Okay. Thank you gentlemen.
Yeah.
There are no further questions at this time. This concludes today's conference call. Thank you for your participation you may now disconnect.
[music].