Riley Exploration Permian, Inc. (REPX)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the Company's condensed consolidated financial statements and related notes thereto presented in this report as well as the Company's audited consolidated financial statements and related notes included in the Company's Annual Report for the fiscal year ended December 31, 2025. The following discussion contains "forward-looking statements" that reflect the Company’s future plans, estimates, beliefs and expected performance. The Company’s actual results could differ materially from those discussed in these forward-looking statements. See "Cautionary Statement Regarding Forward-Looking Statements" and "Part II, Item 1A. Risk Factors" below and the information set forth in the Risk Factors under Part I, Item 1A of the Company's Annual Report for the fiscal year ended December 31, 2025.

Overview

Riley Permian is a growth-oriented, independent oil and natural gas company focused on horizontal drilling of conventional oil-saturated and liquids-rich formations in the Permian Basin that produce long-term cash flows. The majority of our acreage is located in Yoakum County, Texas and Eddy County, New Mexico.

Our strategic business objectives include enhancing the rate of return on our invested capital, generating sustainable free cash flow, maintaining a strong and flexible balance sheet and maximizing returns to shareholders. We implement this strategy primarily through identification and capture of attractive development opportunities, optimization of our assets and pursuing complementary growth opportunities that increase our scale and meet our strategic and financial objectives.

Recent Developments

Geopolitical and Economic Conditions

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 could prolong market volatility and continue to cause a decline in commodity prices.

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.

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.

Midstream Disruption

During the second quarter of 2026, certain portions of our New Mexico operations continued to experience production interruptions and curtailments resulting from third-party midstream and gas processing constraints. Following the unplanned outage at a third-party gas processing facility that began in late March 2026, we continued to experience periodic processing limitations, maintenance-related curtailments, and reduced gas takeaway capacity affecting a portion of our New Mexico production during the quarter. These events resulted in the temporary shut-in of certain wells and reduced production from impacted areas. The temporary shut-in was substantially resolved by the end of May with production resuming to normal levels for June.

The effects of these disruptions were partially mitigated by the limited geographic scope of the affected production, our ability to restore certain wells to production as processing capacity became available, and strong operating performance from our Texas assets. As a result, while the curtailments negatively impacted certain production volumes during the quarter, they did not materially affect our overall financial condition or liquidity.

We continue to monitor the reliability and capacity of third-party midstream infrastructure serving our New Mexico acreage. To mitigate the risk of future processing and takeaway constraints of the nature experienced during the period, Targa is constructing new gathering and high-pressure trunkline infrastructure in Eddy County, New Mexico pursuant to the A&R Gas Purchase Agreement. Upon completion, this infrastructure is expected to provide increased gathering, processing, and takeaway capacity that reduces our reliance on the affected third-party processing facilities. The in-service date of the new Targa pipeline

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system is currently expected to occur in the fourth quarter of 2026. See Note 15 – Commitments and Contingencies for additional information.

Results of Operations

Comparison for the three and six months ended June 30, 2026, and 2025:

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(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.

(2)The Company's calculation of the effects of derivative settlements includes gains (losses) on the settlement of our commodity derivative contracts. These gains (losses), along with unrealized gains (losses) from changes in the fair value of derivatives, are included under other income (expense) on the Company’s condensed consolidated statements of operations.

(3)During the periods presented, the Company did not have any NGL derivative contracts in place.

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Oil and Natural Gas Revenues

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:

Three months ended June 30, 2026, compared to three months ended June 30, 2025

The Company’s total oil and natural gas sales, net increased by $80.5 million or 94%. The following tables summarize the effects of price, volume and GP&T costs changes on our revenues from oil, natural gas and NGLs:

Oil revenues

Oil revenues increased by $96.3 million. Our realized oil prices increased by $32.11 per Bbl, which was the result of a $31.08 increase in the average WTI price. Average daily oil volumes increased by 40%, primarily due to new wells turned to sales and the contribution of the Silverback Acquisition.

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Natural gas revenues

Natural gas revenues decreased by $12.5 million driven by negative realized natural gas prices that more than offset an increase in production volumes. Our realized natural gas prices before GP&T costs decreased by $4.80 per Mcf, which was the result of an increase in negative Permian basis differentials due to regional pipeline constraints in addition to a $0.24 decrease in the average Henry Hub price.

NGL revenues

NGL revenues decreased by $3.4 million. Our realized NGL prices before GP&T costs increased by $2.98 per Bbl which was the result of an increase in the average Mont Belvieu prices realized. Our realized NGL prices net of GP&T costs decreased by $5.46 primarily due to higher allocated GP&T costs when realized natural gas prices are negative.

Six months ended June 30, 2026, compared to six months ended June 30, 2025

The Company’s total oil and natural gas sales, net increased by $91.9 million or 49%. The following tables summarize the effects of price, volume and

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Overview

Riley Permian is a growth-oriented, independent oil and natural gas company focused on horizontal drilling of conventional oil-saturated and liquids-rich formations in the Permian Basin that produce long-term cash flows. The majority of our acreage is located in Yoakum County, Texas and Eddy County, New Mexico.

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Our strategic business objectives include enhancing the rate of return on our invested capital, generating sustainable free cash flow, maintaining a strong and flexible balance sheet and maximizing our returns to shareholders. We implement this strategy primarily through identification and capture of attractive development opportunities, optimization of our assets and pursuing complementary growth opportunities that increase our scale and meet our strategic and financial objectives.

Recent Developments

Geopolitical and Economic Conditions

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.

Although the broader rate of inflation has moderated, we continue to monitor the risk of persistent cost pressures in specific areas of our operating expenses and capital expenditures. Our margins may be compressed if costs increase more than commodity prices. 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.

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.

Midstream Sale

On December 3, 2025, the Company sold all of our membership interests in Dovetail Midstream, LLC, a wholly owned subsidiary of the Company that holds certain midstream infrastructure projects in Eddy County, New Mexico, to Targa for an aggregate cash purchase price of approximately $111 million, subject to customary purchase price adjustments. The Midstream Sale also provided for the subsequent sale by the Company of certain compressor station assets for an aggregate cash purchase price of approximately $10 million plus reimbursement of $1.4 million of capital improvements; this second transaction closed on December 24, 2025. In connection with the Midstream Sale, the Company recognized a pre-tax gain of $71.7 million, net of $2.6 million of transaction costs, which was recorded in our consolidated statement of operations. The Company also has the right to earn up to an additional $60 million in cash payments contingent upon achieving certain volumetric performance thresholds over a five-year period.

Viking Sale

On November 21, 2025, the Company sold its interest in oil and natural gas properties in Texas outside of the Company's acreage in the Champions field, which had a net carrying value of $10.4 million to an affiliate of Combo. The properties consisted of six established units in Lee and Fayette Counties, Texas, which were jointly developed by the Company and Combo. In exchange for the Company's interest in these assets, we received and subsequently retired 250,000 shares of the Company's common stock. The net carrying value of the assets plus cash paid of $0.8 million less the tax impact of the sale resulted in a reduction to additional paid-in capital of $10.2 million.

Silverback Acquisition

On July 1, 2025, the Company closed on the acquisition of 100% of the ownership interests of Silverback for approximately $123 million, which included approximately $120 million paid in cash and approximately $3 million of estimated fair value related to potential earnout payments. The Silverback Acquisition added approximately 40,000 net acres directly adjacent to and overlapping with the Company's existing core acreage primarily in Eddy County, New Mexico. The Company funded the acquisition with cash on hand and borrowings under our Credit Facility.

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RPC Power Joint Venture

During the year ended December 31, 2025, the Company contributed an additional $15.8 million to RPC Power which increased our total capital contributions to $39.5 million. As of December 31, 2025, the Company owned 50% of the joint venture. On December 31, 2025, RPC Power declared a $3 million dividend of which $1.5 million was the Company's portion. The dividend was paid in January 2026.

Credit Facility Amendment

On December 13, 2024, the Company entered into the sixteenth amendment to the Credit Facility to, among other things, extend the stated maturity date from April 2026 to December 2028 (or if any Senior Notes are then outstanding, the date that is 181 days prior to the earliest stated maturity date of such Senior Notes, in this case October 2027), increase the borrowing base from $375 million to $400 million, and add one new lender to the lending group. In December 2025, through the semi-annual redetermination process, the Company's borrowing base was reaffirmed at $400 million and the requirement for natural gas hedging was removed.

Results of Operations

Comparison for the years ended December 31, 2025, and 2024.

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(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 we received and resulted in negative average realized prices.

(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) in the Company’s consolidated statements of operations.

(3)During the periods presented, the Company did not have any NGL derivative contracts in place.

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Oil and Natural Gas Revenues

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:

The Company’s total oil and natural gas sales, net decreased $17.8 million, or 4%, for the year ended December 31, 2025, compared to the year ended December 31, 2024. The following tables summarize the effects of price, volume and GP&T cost changes on our revenues from oil, natural gas and NGLs:

Oil revenues

Oil revenues decreased by $10.6 million.

Our realized oil prices decreased by $11.15 per Bbl, which was the result of an $11.24 per Bbl decrease in the average WTI price. Daily oil volumes increased by 15% due to increased production from new wells turned to sales in our Red Lake field as well as the partial year contribution from the Silverback Acquisition.

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Natural gas revenues

Natural gas revenues decreased by $1.9 million.

Our realized natural gas prices before GP&T costs increased by $0.29 per Mcf, which was the result of a $1.33 per Mcf increase in the average Henry Hub price, offset by higher allocated GP&T costs due to increased volumes in our Champions field resulting from a full year contribution of additional third party processing capacity that came online in mid-2024, higher volumes in our Red Lake field from new wells turned to sales as well as the partial year contribution from the Silverback Acquisition.

NGL revenues

NGL revenues decreased by $5.3 million.

Our realized NGL prices before GP&T costs decreased by $2.76 per Bbl, or 13%, which was the result of an $11.24 per Bbl or 15% decrease in the average WTI price. GP&T costs increased due to increased volumes in our Champions field resulting from a full year contribution of additional third party processing capacity that came online in mid-2024, higher volumes in our Red Lake field from new wells turned to sales as well as the partial year contribution from the Silverback Acquisition.

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Costs and Expenses

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

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