Riley Exploration Permian (REPX): P/E Under 5, 43% NAV Discount

Company Overview

Riley Exploration Permian, Inc. (NYSE American: REPX) is an independent oil and natural gas company focused on the acquisition, exploration, development, and production of oil and gas properties in the Permian Basin. The company operates in Yoakum County, Texas, and Eddy and Lea Counties, New Mexico, targeting conventional and unconventional reservoirs across the San Andres, Yeso, and Wolfcamp formations. With FY2025 average production of 29,205 Boe/d and a Q4 exit rate of 35,500 Boe/d, Riley has established itself as one of the fastest-growing small-cap E&P operators in the Permian Basin. The company's market capitalisation of $771 million positions it well below institutional radar, which is precisely where the opportunity lies.

Financial Performance: 81% Net Income Growth

Riley's FY2025 financial results demonstrate the earnings power that the current valuation fails to reflect. Revenue reached $392 million, with net income of $161 million, an 81% year-over-year increase. Earnings per share came in at $7.59, placing the stock at a P/E of just 4.7x at current prices. EBITDAX of $261 million and free cash flow of $81 million underscore the company's ability to generate substantial cash while funding an aggressive growth programme.

The EV/EBITDA multiple of 3.6x is particularly noteworthy. Permian Basin peers typically trade at 6-8x EV/EBITDA, implying that Riley would need to roughly double in enterprise value just to reach sector median valuations. The 43% NAV discount (PV-10 of $1.39 billion versus $771 million market cap) provides a quantifiable measure of the gap between asset value and market pricing.

Production Growth and 2026 Guidance

Riley's production trajectory is one of the strongest in the small-cap E&P universe. Average FY2025 production of 29,205 Boe/d grew to a Q4 exit rate of 35,500 Boe/d, and management guides for 35,000-37,000 Boe/d in total production for 2026, with 21,000-22,000 bbl/d in oil production. This represents over 20% growth from the full-year 2025 average, a remarkable pace for a company already generating significant free cash flow.

Much of this growth stems from the Silverback acquisition, which added approximately 40,000 acres of contiguous acreage to Riley's existing Permian position. The integration has proceeded smoothly, with the Silverback assets contributing immediately to production volumes. The subsequent sale of Dovetail Midstream to Targa Resources for $123 million demonstrated management's capital discipline — monetising non-core midstream assets to fund upstream development and shareholder returns.

Shareholder Returns: Dividend + Buyback

Riley returns capital to shareholders through two channels. The annual dividend of $1.60 per share yields approximately 4.5% at current prices, with a conservative payout ratio of just 21% of earnings. This low payout ratio provides substantial headroom for dividend growth or maintenance through commodity price downturns. Additionally, the company has authorised a $100 million share buyback programme, which at the current market capitalisation represents a potential reduction of approximately 13% of outstanding shares.

The combination of a 4.5% dividend yield, a 13% potential buyback, and 20%+ production growth creates a total return profile that is difficult to find elsewhere in the E&P space. Management is effectively returning cash while growing the underlying business, a combination that typically resolves through share price appreciation as the market recognises the disconnect.

Valuation Context

The numbers speak for themselves. At $7.59 EPS and a $35.50 stock price (approximate), the P/E of 4.7x implies the market expects a sharp earnings decline. At 3.6x EV/EBITDA, Riley trades at roughly half the Permian Basin peer group average. The PV-10 NAV of $1.39 billion versus the $771 million market cap means investors are buying proven and probable reserves at 55 cents on the dollar. Analyst consensus reflects this disconnect: the Strong Buy rating carries price targets of $44-45, implying approximately 25% upside from current levels. While analyst targets should always be viewed with scepticism, the directional message is clear — the market is mispricing this asset.

Key Risks

Investment Thesis

Riley Exploration Permian is a textbook example of small-cap value in the energy sector. The numbers are unambiguous: P/E 4.7x, EV/EBITDA 3.6x, 43% NAV discount, 81% net income growth, 20%+ production growth guidance, a 4.5% dividend yield at a 21% payout ratio, and a $100 million buyback programme. The Silverback acquisition has transformed Riley from a single-county operator into a meaningful Permian Basin producer with a clear growth runway. The Dovetail Midstream sale to Targa demonstrated capital allocation discipline. Analyst consensus points to $44-45 with a Strong Buy rating. The risks are concentrated in small-cap illiquidity and geographic concentration, which is precisely why the stock is cheap. For investors comfortable with Permian Basin exposure who can tolerate small-cap volatility and limited liquidity, REPX offers one of the most compelling risk-reward profiles in the upstream space today. Position sizing should remain disciplined at 2-3% of portfolio maximum.

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