Q1 2024 Riley Exploration Permian Inc Earnings Call

May 9, 2024

Please standby.

Operator: Good day everyone, and welcome to the Riley Exploration Permian, Inc. First Quarter 2024 Earnings Conference Call. At this time, I would like to hand the call over to Mr. Philip Riley. Please go ahead, sir.

Good day, everyone and welcome to the Riley Exploration Permian, Inc. First quarter 2024 earnings conference call. At this time I would like to hand, the call over to Mr. Philip Riley. Please go ahead Sir.

Philip A. Riley: Good morning. Welcome to our conference call covering the first quarter 2024 results. I'm Philip Riley, CFO. Joining me today is Bobby Riley, Chairman and CEO.

Philip A. Riley: Good morning, welcome to our conference call covering the first quarter 2024 results.

Philip A. Riley: I'm Philip Reilly CFO, joining me today is Bobby Reilly, Chairman and CEO.

Philip A. Riley: Yesterday, we published a variety of materials which can be found on our website under the investors section. These materials and today's conference call contain certain projections and other forward-looking statements within the meaning 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. We'll also reference certain non-GAAP measures. The reconciliations to the appropriate GAAP measures can be found in our supplemental disclosure on our website. I'll now turn the call over to Bobby.

Philip A. Riley: Yesterday, we published a variety of materials, which can be found on our website under the investors section.

Bobby: These materials in todays conference call contains certain projections and other forward looking statements within the meaning of the federal Securities laws.

Bobby: These statements are subject to risks and uncertainties that may cause actual results to differ materially from those expressed or implied in these statements.

Bobby: We will also reference certain non-GAAP measures reconciliations to the appropriate GAAP measures can be found in our supplemental disclosure on our website.

Philip A. Riley: Now I'll turn the call over to Bobby.

Bobby D. Riley: Thank you, Philip, and thank you again to everyone for joining us on today's call. Yesterday, at the close of the market, we announced the results of our first quarter in 2024. I'm pleased to report that Q1 was another outstanding quarter for Riley Permian, and we are on track to deliver our previously disclosed 2024 operating plan targeting year-over-year oil growth with a reduction in capex. Our net oil production saw a 4% increase compared to the previous quarter, reaching an average of 14.2 thousand barrels per day.

Bobby: Thank you Philip and thank you again to everyone for joining us on today's call yesterday at the close of the market, we announced the results of our first quarter in 2024 I'm pleased to report that Q1 was another outstanding quarter for Riley Permian and we are on track to deliver our previously disclosed two.

Bobby D. Riley: 24 operating plan targeting year over year oil growth with a reduction in capex.

Bobby D. Riley: Our net oil production saw a 4% increase compared to the previous quarter, reaching an average of 14.2 thousand barrels per day.

Bobby D. Riley: Looking ahead to our Q2 guidance, we are forecasting a range of 14.4 to 14.8 thousand barrels per day, and we expect the majority of our incremental growth to occur in this period and stabilize for the remaining quarters as we work towards achieving our year-over-year target. From an operational standpoint, we drilled 7 net wells, which represents approximately one-third of our projected total for the year. We released the rig in March and plan to resume drilling operations in June.

Bobby D. Riley: Looking ahead to our Q2 guidance, we're forecasting a range of 14.4 to 14.8 thousand barrels per day, and we expect the majority of our incremental growth to occur in this period and stabilized for the remaining quarters as we work towards achieving our year over year targets.

Bobby D. Riley: From an operational standpoint, we drilled seven net wells, which represents approximately one third of our projected total for the year.

Bobby D. Riley: We released the rig in March and plan to resume drilling operations in June our team has achieved significant advancements and drilling efficiency by adopting cutting edge technologies and streamline processes. These.

Bobby D. Riley: Our team has achieved significant advancements in drilling efficiency by adopting cutting-edge technologies and streamlined processes. These improvements have allowed us to rely on a single rig for a portion of the year while still delivering double-digit volume growth. We completed four wells and brought six wells online during the period, benefiting from two drill but uncompleted wells or docks from late 2023. On Tuesday of this week, we closed our previously announced bolt-on acquisition in Eddy County, New Mexico. This will expand our existing operating footprint in New Mexico by adding 13,900 contiguous net acres. The acreage is largely underdeveloped, but it is 99% held by production through legacy vertical wells.

Bobby D. Riley: These improvements have allowed us to rely on a single rig for a portion of the year, while still delivering double digit volume growth.

Bobby D. Riley: We completed four wells and brought six wells online during the period benefiting from two drilled but uncompleted wells our dogs from late 2023.

Bobby D. Riley: This acquisition enhances the optionality of our total development inventory by providing high-quality, horizontal drilling locations primarily in the Yatho trend, including the Blindberry, Glorietta, and Paddock formations. Furthermore, the acquisition includes valuable infrastructure, such as saltwater disposal wells, which will optimize operations across our existing New Mexico footprint. We remain focused on creating long-term value for our shareholders and delivering predictable and sustainable growth for years to come. To achieve this, our capital strategy prioritizes discipline to allocate resources to support our growth objectives while also delivering on our commitment to strengthen the balance sheet and return capital to shareholders in the form of dividends.

Bobby D. Riley: On Tuesday of this week, we closed our previously announced bolt on acquisition in Eddy County, New Mexico.

Bobby D. Riley: This will expand our existing operating footprint in new Mexico by adding 13900 contiguous net acres. The acreage is largely underdeveloped, but is 99% held by production through legacy Virtu vertical wells.

Bobby D. Riley: This acquisition enhances the Optionality of our total development inventory by providing high quality horizontal drilling locations, primarily in the ISO trend, including the blind Berry Glorietta and Patrick formations.

Bobby D. Riley: Furthermore, the acquisition includes valuable infrastructure, such as saltwater disposal wells, which will optimize operations across our existing new Mexico footprint.

Bobby D. Riley: We remain focused on creating long term value for our shareholders and delivering predictable and sustainable growth for years to come.

Bobby D. Riley: To achieve this our capital strategy prioritizes discipline to allocate resources to support our growth objectives, while also delivering on our commitment to strengthen the balance sheet and return capital to shareholders in the form of dividends.

Bobby D. Riley: Looking ahead, we remain excited about the opportunities in front of us, and we are well positioned to execute our 2024 plan and beyond. We will continue to focus on operational excellence, cost control, and capital efficiency to drive long-term value creation for our shareholders. With that, I'll now turn the call over to Philip to provide more details on our financial results. Thank you, Bobby. First quarter operating cash flow before working capital increased by 7% quarter over quarter despite 2% lower oil prices. The largest driver of quarter-over-quarter improvement was our settled hedges, as lower-priced legacy swaps rolled off in December, and despite some generally strong prices during the quarter.

Bobby D. Riley: Looking ahead, we remain excited about the opportunities in front of us and we are well positioned to execute our 'twenty 'twenty four planned and beyond.

Philip: We will continue to focus on operational excellence cost control and capital efficiency to drive long term value creation for our shareholders.

Bobby D. Riley: With that I'll now turn the call over to Philip to provide more details on our financial results.

Philip A. Riley: Thank you, Bobby. First quarter operating cash flow before working capital increased by 7% quarter over quarter despite 2% lower oil prices. The largest driver of quarter-over-quarter improvement was our settled hedges, as lower-priced legacy swaps rolled off in December and despite some generally strong prices during the quarter. In production, volume increases and cost reductions contributed to a combined $5.5 million of cash flow improvement. Oil prices ended the quarter about $11 higher than at year end, which in turn led us to book the non-cash derivatives loss and which drives the lower net income this quarter. As of today, that dynamic is already partially reversed with lower oil prices.

Philip: Thank you Bobby.

Philip: First quarter operating cash flow before working capital increased by 7% quarter over quarter, despite 2% lower oil prices.

Philip A. Riley: The largest driver of quarter over quarter improvement was our settled hedges is lower priced legacy swaps rolled off in December and.

Philip A. Riley: And despite some generally strong prices during the quarter.

Philip A. Riley: Then production volume increases and cost reductions contributed to a combined $5 $5 million of cash flow improvement.

Philip A. Riley: Oil price ended the quarter about $11 higher than at year end, which in turn led us to book, the noncash derivatives loss and which drives the lower net income this quarter.

Philip A. Riley: As of today that dynamic has already partially reversed with lower oil prices.

Philip A. Riley: The non-cash derivatives values flip-flop frequently by quarter, yet correspond infrequently with ultimate settled amounts, and this is one of the reasons we focus less on net income. The reinvestment rate of operating cash flow into upstream CapEx was 45% on an accrual basis and 60% on a cash basis. The larger ratio of cash to accrual CapEx this quarter was driven by some larger prepayments, including on infrastructure for work that had not yet occurred and that will drive success for the full-year development plan.

Philip A. Riley: The noncash derivative values flip flop frequently by quarter correspond infrequently with ultimate settled amounts as one of the reasons, we focus less on net income.

Philip A. Riley: Reinvestment rate of operating cash flow into upstream Capex was 45% on an accrual basis and 60% on a cash capex basis.

Philip A. Riley: The larger ratio of cash to accrual Capex. This quarter was driven by some larger prepayments, including infrastructure for work that had not yet occurred and that will drive success for the full year development plan.

Philip A. Riley: We converted 40% of operating cash flow to free cash flow in the first quarter, representing continued improvement with this metric from prior years. Free cash flow declined quarter over quarter, but there's no concern there. First, we used cash capex for our free cash flow calculation, while many companies use accrual capex. If we had used accrual capex, then free cash flow would have increased by 11% quarter over quarter, and the fourth quarter of 23 had especially light cash CapEx, opposite of this quarter's dynamic. Second, we regularly encourage observers to focus on a four-quarter measure of free cash flow over a single quarter. We'll now turn it back to the operator for questions.

Philip A. Riley: We converted 40% of operating cash flow to free cash flow in the first quarter, representing continued improvement with this metric from prior years.

Philip A. Riley: Free cash flow declined quarter over quarter, but theres no concern there first we used cash capex for our free cash flow calculation, while many companies use accrual capex, if we'd use accrual capex and free cash flow would have increased by 11% quarter over quarter and.

Philip A. Riley: In the fourth quarter of 'twenty, three had especially light cash capex opposite of this quarter's dynamic.

Philip A. Riley: Second we regularly encourage observers to folks on a four quarter measure of free cash flow over a single quarter.

Philip A. Riley: I will now turn it back to the operator for questions. Thank you.

Philip A. Riley: Okay.

Operator: Thank you, Philip. We will now take a question from Neal Dingmann from Cruise Capital. Morning, guys. Nice quarter.

Philip A. Riley: Thank you Bill we will now take a question from Neal Dingmann from tourists capital.

Neal David Dingmann: Good morning, guys nice quarter.

Neal David Dingmann: Um, uh, Phil, if you could talk maybe a little bit more about the acquisition, which seemed pretty positive, maybe in terms of, you know, what it added in terms of production, maybe how we should think about the incremental volumes throughout the year on this and, you know, uh, impact on guidance and, and, you know, maybe even on the oil cut throughout the year. Just wondering how this might impact things.

Neal David Dingmann: Built for IDT.

Neal David Dingmann: If you could talk maybe a little bit more about the acquisition with a pretty positive maybe it turns out.

Neal David Dingmann: What it added in terms of production and maybe how we should think about the incremental volumes throughout the year on this end.

Neal David Dingmann: Impact on guidance and maybe even on the oil cut throughout the year just wondering how this might impact. Thanks.

Philip A. Riley: Yeah, sure, I can start with that, Neal. This is Philip.

Neal David Dingmann: Yes, sure I can start with that Neal this is phillippe.

Philip A. Riley: You know, the acquisition, it's producing about 400 barrels a day. It closed a couple days ago. So you really only get the benefit for about two-thirds of the year. So when you divide that by a full year, it adds maybe 260 barrels a day average over there. So some of what we're dealing with is, you know, the dynamic of averages over a year. So the guidance range we gave, 14.4 to 14.8, if you use the midpoint there and if we held it flat as Bobby was describing, that gets you to 14.5 for the year, right kind of smack in the middle of the previously disclosed guidance range. You know, to reach that high end, we'd have to get to 15.3 on average for the remaining, you know, for all three quarters here.

Philip: You know the acquisition, it's producing about 400 barrels a day.

Philip A. Riley: That closed a couple of days ago. So you really only get the benefit for about two thirds of the year.

Philip A. Riley: So when you divide that by a full year.

Philip A. Riley: It adds maybe 260 barrels a day average of video says so some of what we're dealing with is is that it did.

Philip A. Riley: Dan and make the averages every year. So the guidance range. We gave 14 four to 14 eight if you use the midpoint there and if we held it flat as Bobby was describing that gets you to 14 five for the year.

Philip A. Riley: Right smack in the middle of the previously disclosed guidance range.

Philip A. Riley: To reach that high end, we'd have to get to 15 three on average for the remaining for all three quarters here. So we think it's pretty representative of our full year that the existing inventory of existing production is.

Philip A. Riley: So we think it's, you know, pretty representative of a full year. The existing production is mostly, it's kind of a mix of a few small non-horizontal contributors there and then some older verticals. We do like it for that underdeveloped horizontal inventory, which we don't plan to drill this year. So that's, I guess, the color on how it affects our production ranges. You know, in general, we're excited about it. We like the idea of maintaining, you know, roughly a decade of inventory, and we think that this gets us there. It's also got some valuable infrastructure that we need both for our operations and, then frankly, we can, you know, even charge partners, neighbors, and such fees as they use our saltwater disposal wells.

Philip A. Riley: Mostly it's kind of a mix of some very.

Philip A. Riley: A few small non op horizontal.

Philip A. Riley: Contributors there and then some smaller vertical we do like it for that underdeveloped horizontal inventory, which we.

Philip A. Riley: We don't plan to drill this year. So that's that's the I.

Philip A. Riley: I guess the color on how it affects our production ranges.

Philip A. Riley: In general we're excited about it we like the idea of maintaining roughly a decade of inventory and we think that this gets us there.

Philip A. Riley: It's also got some.

Philip A. Riley: <unk> infrastructure that we need both for our operations and then frankly, we can even charge non op partners nabors and such the fees as they use our saltwater disposal wells and such.

Speaker Change: It answered the ocean grid does it certainly does great to hear and then just to follow up he Betty.

Neal David Dingmann: Does that answer the question? It certainly does. Great to hear. And then just to follow up, you and Bobby just talked a bit about oil field services. It seems that both maybe just talked about cost and availability. It seems like if you're able to let the rig go, bring the rig back when you choose, it seems like you have, number one, just a lot of flexibility on the availability side. So I was wondering, is that the case? And then, secondly, on the OFS cost side, where do you all see it? Thank you.

Neal David Dingmann: On the oilfield services it seems that bulk, but maybe just talk about cost availability it seems like.

Neal David Dingmann: You're able to let the rig go bring the rig back when you choose.

Neal David Dingmann: Do you have number Walton just a lot of <unk>.

Neal David Dingmann: <unk> on availability side.

Neal David Dingmann: So I was wondering just is that the case and then secondly, just on the oil first cost side, what do you all see it. Thank you.

Bobby D. Riley: Yeah, Neal, this is Bobby. I'll take that.

Neal David Dingmann: Yes, Neal this is Bobby I'll take that so yeah, we have a great relationship with the drilling contractor. That's in the area that we're able to bring in and drill a batch of wells and then releasing to some of our offset partners. There that are drilled that keeps them in the same area.

Bobby D. Riley: So, yeah, we have a great relationship with the drilling contractor that's in the area that we're able to bring in and drill a batch of wells, but then release them to some of our offset partners there to drill, but keeps them in the same area. As we go to more pad drilling type applications, we have lower costs on rig moves and more efficiency on days from spud to TD, et cetera. So, those costs are really falling in line with where we want them to be.

Bobby: As we go to more pad drilling type applications that heads, we had lower cost on rig moves and more efficiencies on our days from spud to TD et cetera. So those costs are are really falling in where we want them to be otherwise on the pressure pumping side, we're seeing.

Bobby D. Riley: Otherwise, on the pressure pumping side, we're seeing a softer market so that we're getting more competitive bids and prices. I think we talked about that dynamic as some of these larger mergers and acquisitions have occurred. It's freed up a lot of frac teams and services, and as they want to maintain their market share, they're more aggressively pricing services for us. So, we're taking advantage of that as much as we can right now in that market. Yeah,

Bobby D. Riley: Our softer markets. So that we're getting more competitive bids in pricing I think we talked about that dynamic as some of these larger mergers and.

Bobby D. Riley: Acquisitions have occurred side.

Bobby D. Riley: S freed up a lot of thought off frac.

Bobby D. Riley: Frac teams and services that they want to maintain their market share they're more aggressively pricing services for so we're taking advantage of that as we as we can right now in that market.

Neal David Dingmann: Yeah, I love the flexibility. Thanks, guys.

Speaker Change: Yes, a lot of flexibility thanks, guys.

Operator: Again, for those who would like to ask questions, please press star 1 on your telephone keypad and wait for a noun or name to be announced. Our next question comes from the line of John White from Roth Capital. Please go ahead. Good morning.

Neal David Dingmann: Again for Adobe she would like to ask a question. Please press star one yard telephone keypad and wait for now we need to be announce our next question comes from the line of John White from Roth Capital. Please go ahead.

John Marshall White: Good morning, and congratulations on closing your New Mexico acquisition. Thank you, John.

John Marshall White: Good morning, and congratulations on closing here in New Mexico acquisition.

John Marshall White: Yeah.

John Marshall White: Thank you John.

John Marshall White: I wanted to ask about the RPC power project. In the press release, you said you put in another 5.6 million and that that completes the funding for the current project. So that's the funding. How would you describe the work out in the field on the actual infrastructure?

John Marshall White: Okay.

John Marshall White: Wanted to ask about the RPC power.

John Marshall White: Project in the press release, you said you are putting in another $5 6 million and.

John Marshall White: That completes the funding for the current project. So that's the funding how would you describe the work out in the field on the actual infrastructure.

Bobby D. Riley: Yeah, I would say we're kind of right on schedule where we thought we'd be. We're installing 20 megawatts of power out there. We've had 10 megawatts delivered for some time, and we're just now receiving the second package of generators to get us up to our total design. We're currently getting all of that stuff tied into our private use network, which basically allows us to self-distribute power to all of our wells. So, I think operationally, that should be 100% operational probably by the end of summer. And so far, I think we're really excited about that opportunity, at least for producing our baseload and then looking at other opportunities that we might see coming our way with power.

Speaker Change: Yes, I would say yeah, we're kind of right on schedule, where we thought we'd be we were installing 20 megawatts of power out there. We've had 10 megawatts alert for some time that we're just now receiving the second.

John Marshall White: Thanks for that. And when it's fully up and running, how much of your electricity or your power needs will this project satisfy?

John Marshall White: Package of generators to get us up to our.

John Marshall White: Sure.

John Marshall White: Total design.

John Marshall White: We're currently getting all of that stuff tied into our private use network, which basically allows us to self distribute power to all of our wells. So I think operationally that should be 100% operational probably by the end of summer.

John Marshall White: And so far I think we're really excited about that opportunity at least for producing our baseload.

John Marshall White: And then looking at other opportunities that we might see coming our way with power.

Speaker Change: Thanks for that and what.

John Marshall White: When it's fully up and running.

John Marshall White: How much of your electricity every year power needs.

John Marshall White: Will this project satisfy.

Bobby D. Riley: Yeah, so it's basically almost 100% of our power demand in Yoakum County on what we call our champions. When we first designed the infrastructure out there, we laid that network in place, and now that's, we're able to utilize that, and we'll be, will be self-providing, practically 100%. There might be one or two wells that's still on an isolated meter, but The majority of it will be self-generated.

John Marshall White: Yes.

John Marshall White: So it's basically almost 100% of our.

Bobby D. Riley: Our power demand in Yoakum County.

Bobby D. Riley: What we call our champions.

Bobby D. Riley: Well we are.

Bobby D. Riley: First design the infrastructure out there we laid that network in place and now that we're able to utilize that it will be.

Bobby D. Riley: We'll be self providing.

Bobby D. Riley: Practically 100% there might be one or two wells that still on an isolated meter but the majority.

Bobby D. Riley: Aarti or it will be self generating.

Bobby D. Riley: That's great, and does a similar opportunity exist on your New Mexico property?

Speaker Change: That's great and this is a similar opportunity exist on your new Mexico properties.

Bobby D. Riley: It does. As we're building out and looking at our infrastructure requirements in New Mexico going forward, instead of tying individual meters back into the grid, we are installing, I don't know if the term is a private use network or primary point of take from the provider out there so that, eventually, we can tie our own gen systems into that as well. But that's a little bit long term. We probably won't get there this year, but we're still in the planning stage.

Speaker Change: It does is as we're building out and looking at our infrastructure requirements in new Mexico going forward we are.

Bobby D. Riley: Instead of tying individual meters back into the grid, we are installing.

Bobby D. Riley: I don't know if its the terms of private use network or our primary point of uptake from the.

Bobby D. Riley: Provider out there so that eventually we can tier one gen systems into that as well, but that's a little bit long term, we probably won't get there this year, but we're still under laying out it has to do with establishing drilling schedules timed into water infrastructure and all of that at the same time, but it's definitely what we do on our operation and we will be doing that going forward.

Bobby D. Riley: It has to do with establishing drilling schedules and tying them to water infrastructure and all of that at the same time. But it's definitely what we do in our operation, and we will be doing that going forward.

John Marshall White: Okay, thanks for the additional detail. I appreciate it.

Speaker Change: Okay. Thanks for the additional detail I appreciate it.

John Marshall White: Yes.

Operator: For those who would like to ask questions, please press star 1 on your telephone keypad and wait for your name to be announced. Our next question comes from Jeff Robertson from Water Towers Research. Please go ahead.

John Marshall White: Are those who would like to ask a question. Please press star one on your telephone keypad and wait training to begin. Our next question comes from the line of Robert Zhang from Walker Warburg Research. Please go ahead.

Jeffrey Woolf Robertson: Thank you. To follow up on the power venture, Bobby or Philip, can you try to quantify the economic impact of You know, just applying your own power to the Champion's anchorage compared to the alternative, which might have been selling the prudence natural gas into the grid at a relatively low price? Yeah, so that's what we're trying to do is basically increase the margins on the hydrocarbons that we produce in the area.

Jeffrey Woolf Robertson: Thank you to follow up on the power adventure.

Jeffrey Woolf Robertson: Bob.

Jeffrey Woolf Robertson: Philip can you try to quantify the economic impact of.

Jeffrey Woolf Robertson: Supply in your own power to the champions acreage compared to the alternative which might've been selling the proofs natural gas just into the grid at a at a relatively low price.

Jeffrey Woolf Robertson: Yes. So that's what we're trying to do is basically increase the margins on the on the hydrocarbons that we produce in areas. So.

Jeffrey Woolf Robertson: So, you know, as you know, as WAHA goes negative, sometimes the residue gas has little or no value to us. And because we're able to take that residue gas in kind and power our gen sets, offset our baseload production, our baseload operations. So from an individual well lease operating cost, it's probably somewhat neutral, but since we're a JV partner in the, and the Power Company, you know, roughly will benefit from 50% of the revenues from generating power.

Speaker Change: As you know is what goes negative sometimes their residue gas has little or no value to us.

Jeffrey Woolf Robertson: And because we're able to take that residue gas in kind and power. Our gen sets the offset our baseload production, our baseload operations. So from a individual well lease operating cost is probably somewhat neutral.

Jeffrey Woolf Robertson: But since we're a JV partner and the.

Jeffrey Woolf Robertson: And the power company, you know roughly will will get it.

Jeffrey Woolf Robertson: From 50% of of the revenues from generating power.

Bobby D. Riley: 35% ownership right now that we're set to benefit from, and we think it's kind of a high-teen type of return, Jeff, but that's a nice, stable return, right? This isn't an oil well that's declining, so it's something that we're excited about.

Jeffrey Woolf Robertson: 35% ownership right now that were set to benefit from and we think it is kind of a high teen.

Bobby D. Riley: Type of return Jeff.

Bobby D. Riley: But that's a nice stable return right. This isn't an oil well that is declining so that's.

Bobby D. Riley: That's something that we're excited about.

Jeffrey Woolf Robertson: Is it fair that the other part of the return just comes from having a reliable source of power, which might lead to fewer unscheduled meetings? Absolutely.

Bobby D. Riley: Is it fair that the other part of the return is just comes from having a more reliable source of power, which might lead to perhaps ever.

Jeffrey Woolf Robertson: Italy.

Jeffrey Woolf Robertson: I mean, that was one of the primary reasons there because we're kind of at the end of the grid there, and we were experiencing some brownouts or frequent power disruptions that cost an extensive amount of money to bring some of those wells back on. So that's... Again, one of the main reasons for doing this is for more reliable power. In New Mexico, you talked about the saltwater disposal, excuse me, the wells you acquired in the most recent acquisition of your... SWG assets that serve that area. Do you need to spend much capital to either upgrade or enhance those to be able to handle Riley's activity plus be able to maybe take third-party volumes?

Speaker Change: Absolutely I mean that was one of the primary reasons theres, because we're kind of at the end of the grid, there and we were <unk>.

Speaker Change: Thanks, Adam.

Jeffrey Woolf Robertson: Brown outs are frequent.

Jeffrey Woolf Robertson: Power disruptions that caustic extensive amount of money to bring some of those wells back on.

Speaker Change: So that's okay.

Jeffrey Woolf Robertson: Again, it's one of the main.

Jeffrey Woolf Robertson: Reasons for doing this is more reliable power.

Jeffrey Woolf Robertson: In New Mexico, you talked about the saltwater disposal or excuse me. The wells you acquired in the most recent acquisition in your <unk>.

Jeffrey Woolf Robertson: <unk> assets that serve that area.

Jeffrey Woolf Robertson: Do you need to spend much capital too.

Jeffrey Woolf Robertson: Either upgrade or enhance those to be able to handle riley's activity plus be able to maybe take third party volumes.

Bobby D. Riley: I think we're going to focus on just tying those wells in with some flowlines to loop them into our system to give us excess capacity. Primarily, we want to make sure that 100% of our disposal requirements are met with some spare capacity for emergencies and stuff like that. But as we continue to look at opportunities there, I think there would be some co-mingling where you could be charging some third parties. But for the most part, right now, we're 100% focused on our own. Disposal Requirements. Bobby, will you ultimately get some LOE benefit as you work through that process?

Jeffrey Woolf Robertson: I think we're going to focus on just tying those wells and with some stuff flow lines to loop them into our system to give us excess capacity.

Bobby D. Riley: Primarily we want to make sure that our.

Bobby D. Riley: 100% of our disposal requirements are met with some spare capacity for for emergencies and stuff like that.

Bobby D. Riley: As we continue to look at opportunities there I think there would be some commingling and where you could be charging some third party, but for the most part right now we're 100% focused on our own.

Bobby D. Riley: Disposal requirements.

Bobby D. Riley: By the way you get some will you ultimately get some low.

Bobby D. Riley: <unk> from <unk>.

Bobby D. Riley: <unk> worked through that process.

Bobby D. Riley: Yeah, we should. I mean, basically, the more wells that we have, you know, the less... the amount of water each well has to take, which means less energy it takes to push it down the hole, etc. like that.

Bobby: Yes, we should I mean, basically the more wells that we have you nonetheless.

Bobby D. Riley: The amount of water each one has to take which means less energy it takes to push it downhole et cetera like that so that gives us some savings there.

Bobby D. Riley: So that gives us some savings there. It just gives us some redundancy, some fallback, spare capacity, and then the ability to, you know, bring in some third-party water if we see that we have the excess capacity. Moving water is important to us out there, and that's one of our main focuses to make sure we stay on top of that.

Bobby D. Riley: And this gives us some redundancy some fallback.

Bobby D. Riley: Spare capacity and then the ability to bring.

Bobby D. Riley: Bring in some third party water if we if we see that we got the excess capacity.

Bobby D. Riley: Moving water is important for us out there and that's one of our main focus is to make sure we stay on top of that.

Speaker Change: Thank you.

Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining us. You may now disconnect.

Speaker Change: Ladies and gentlemen that concludes today's call. Thank you all for Chinese you may now disconnect.

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Q1 2024 Riley Exploration Permian Inc Earnings Call

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