Contradictions Unveiled: Analyzing Midstream Infrastructure Funding and Capital Strategies in 2025 Q2 Earnings Call

Midstream infrastructure and funding, capital investment strategy, midstream project timing and benefits, capital expenditure



Production and Revenue Trends:
- Riley Exploration Permian reported oil production of 15,200 barrels per day for Q2 2025, with a slight decline from the previous quarter, but up 3% compared to the same quarter last year.
- Revenue was impacted by oil price fluctuations, with realized oil prices falling by 11% quarter-over-quarter, though cash flow was supported by strong operating margins and working capital management.
- The decline in oil production was primarily due to gas takeaway constraints in New Mexico, which affected overall revenue and cash flow for the quarter.

Capital Expenditure and Acquisition:
- The company announced a revised upstream capital budget of $110 million for 2025, compared to an initial budget of $210 million, reflecting a 47% cut due to lower oil prices.
- Riley Permian completed the acquisition of Silverback Exploration, increasing its Yeso trend footprint to 30,000 net acres, which is expected to contribute to future growth.
- The acquisition was funded through the company's credit facility, reflecting an increased debt level at the end of Q2.

Operational Efficiency and Cost Management:
- Riley Permian achieved a recordable incident rate of 0 for the second quarter, with 97% safe days, highlighting a strong commitment to safety and operational efficiency.
- The company reduced its average drilling cost per lateral foot by 15% compared to the previous year's program, despite tariff-related cost increases, due to improved drilling efficiencies.
- The focus on maintaining low operating costs and leveraging economies of scale in water handling and service companies is expected to drive future cost efficiencies.

Midstream and Power Projects:
- Riley Permian is investing in gathering and compression projects to enhance gas and oil flow assurance, with a planned in-service date of late 2026 for new midstream partner deliveries.
- The company is also focusing on power generation projects to support operations, with plans to increase self-generated power in Texas by 9% and explore similar projects in New Mexico.
- These initiatives are designed to reduce reliance on third-party services and enhance operational flexibility in a dynamic energy environment.