Riley Exploration Permian's Q3 2025 Earnings and Strategic Position in the Permian Basin

The Permian Basin continues to dominate U.S. oil production, and Riley Exploration Permian (REPX) has positioned itself as a key player in this critical region. With Q3 2025 results highlighting production growth and operational efficiency, the company faces both opportunities and challenges in a market where oil prices are projected to trend lower in 2026. This analysis evaluates Riley's operational performance, capital allocation strategy, and long-term positioning amid evolving energy dynamics.

Q3 2025 Earnings: Production Growth Outpaces Earnings Performance

Riley Exploration Permian reported third-quarter 2025 production of 32.3 MBoe/d, with oil output rising 21% quarter-over-quarter to 18.4 MBbls/d. This surge was driven by the successful integration of the Silverback acquisition, which pushed production above pre-acquisition levels, according to a Riley Permian press release. However, financial results were mixed: GAAP earnings of $0.77 per share missed the Zacks Consensus Estimate of $0.97 by 20.62%, while revenue of $107 million exceeded expectations by $3.2 million, as noted in a Seeking Alpha report. The earnings shortfall reflects broader industry pressures, including rising operational costs and lower realized oil prices.

Despite the earnings miss, Riley Permian demonstrated disciplined capital allocation, with upstream capital expenditures of $13 million (accrued) and $15 million (cash) in Q3, as reported in the Riley Permian press release. The company also increased its quarterly dividend by 5% to $0.40 per share, signaling confidence in its cash flow resilience, according to the Riley Permian press release.

Operational Efficiency: Cost Control and Margin Resilience

Operational efficiency remains a cornerstone of Riley's strategy. In Q3, the company reported lease operating expenses (LOE) of $9.03 per Boe and administrative costs of $3.34 per Boe, according to the Riley Permian press release. These figures underscore Riley's ability to maintain low per-unit costs, even as it scales production. The average realized oil price of $63.94 per barrel further supported margins, though this remains below the $70+ levels seen earlier in 2025, according to the Riley Permian press release.

The integration of Silverback has amplified Riley's operational leverage. By combining acreage and infrastructure, the company reduced per-well costs and accelerated production timelines, according to the Riley Permian press release. This synergy is critical in a basin where efficiency gains often determine competitive advantage.

Strategic Growth: Midstream Expansion and Permian Basin Dominance

Riley Permian's long-term strategy hinges on expanding beyond upstream operations. Post-Silverback acquisition, the company has reversed 2025 capital expenditure cuts and is prioritizing midstream and power infrastructure, as reported in the Seeking Alpha report. This diversification aims to capture higher-margin opportunities in processing, transportation, and renewable energy integration-sectors that could insulate Riley from volatile oil prices.

The Permian Basin's projected production surge also bodes well for Riley. Industry leaders like Chevron and Diamondback Energy anticipate the basin will account for 70% of U.S. oil output by 2040, driven by efficiency gains and cost reductions, according to a 2026 price forecast. Riley's asset base, concentrated in high-return areas of the Permian, positions it to benefit from this trend. However, the company must navigate near-term headwinds, including EIA forecasts of Brent crude averaging $52 per barrel in 2026, according to the EIA Short-Term Outlook.

Rising Oil Prices: A Double-Edged Sword

While Riley's operational efficiency provides a buffer, the broader oil price outlook introduces uncertainty. The EIA and Goldman Sachs both project a decline in Brent prices to $52 per barrel in 2026, driven by increased OPEC+ production and rising global inventories, according to a Stout commentary and the EIA Short-Term Outlook. For Riley, this means higher production volumes may not translate to proportionate margin expansion.

Yet, the Permian Basin's unique dynamics offer a counterbalance. The region's low breakeven costs-among the lowest in the U.S.-mean companies like Riley can remain profitable even at $50 oil, as noted in the EIA Short-Term Outlook. This resilience is a key differentiator in a market where peers with higher breakevens may struggle.

Investment Implications: Balancing Risks and Rewards

Riley Exploration Permian's Q3 results highlight its operational strengths but also expose vulnerabilities in a slowing price environment. The company's Zacks Rank of #5 (Strong Sell) reflects underperformance relative to peers, as reported in a Yahoo Finance article. Analysts project a one-year price target of $54 for REXP, implying an 108% upside from current levels, according to a Yahoo Finance article, though this assumes a rebound in oil prices or successful execution of its diversification plans.

For investors, the key question is whether Riley can sustain its efficiency gains while navigating 2026's expected price slump. The company's recent dividend hike and capital discipline suggest management is prepared for a lower-price regime, but execution risks remain.

Conclusion

Riley Exploration Permian's Q3 2025 results underscore its ability to grow production and control costs in a challenging market. However, the company's financial performance lags behind its operational achievements, and external factors-namely, the projected decline in oil prices-pose significant risks. While the Permian Basin's long-term potential remains robust, Riley's success will depend on its ability to execute its midstream and power strategies while maintaining fiscal discipline. For now, the stock offers a compelling case for those willing to bet on its strategic reinvention, but patience and a close watch on capital allocation will be essential.