Riley Exploration Permian (REPX) risk factors, FY2024 10-K

Risks Related to our Business, Operations, and Strategy

1. 01Recent regulatory restrictions on use of produced water and a moratorium on new produced water disposal wells in certain areas of the Permian Basin to stem rising seismic activity and earthquakes could increase our operating costs and adversely impact our business, results of operations and financial condition
2. 02Enhanced scrutiny on ESG matters could have an adverse effect on the Company’s operations
3. 03We may be unable to quickly adapt to changes in market/investor priorities
4. 04If commodity prices decrease to a level such that our future undiscounted cash flows from our properties are less than their carrying value for a significant period of time, we will be required to take write-downs of the carrying values of our properties
5. 05Our exploration, development and midstream projects require substantial capital expenditures. We may be unable to obtain required capital or financing on satisfactory terms, which could lead to a decline in our reserves
6. 06Our development and exploratory drilling efforts and our well operations may not be profitable or achieve our targeted returns
7. 07Properties that we decide to drill may not yield oil, natural gas or NGLs in commercially viable quantities
8. 08The construction of our planned New Mexico natural gas gathering, compression and pipeline projects are subject to a number of development risks, which could cause cost overruns and delays or prevent completion of one or more of our midstream development projects
9. 09Properties we acquire may not produce as projected, and we may be unable to determine reserve potential, identify liabilities associated with the properties that we acquire, or obtain protection from sellers against such liabilities
10. 10Reserve estimates depend on many assumptions that may turn out to be inaccurate. Any material inaccuracies in reserve estimates or underlying assumptions will materially affect the quantities and present value of our reserves
11. 11per MMBtu for natural gas volumes. Using lower prices in estimating proved reserves would likely result in a reduction in proved reserve volumes due to economic limits
12. 12Part of our strategy involves drilling using the latest available horizontal drilling and completion techniques, which involve risks and uncertainties in their application
13. 13Additionally, certain of the new techniques we are adopting may cause irregularities or interruptions in production due to offset wells being shut in and the time required to drill and complete multiple wells before any such wells begin producing
14. 14In addition, the geographic concentration of our assets, including our total estimated proved reserves as of December 31, 2024, exposes us to additional risks, such as changes in field-wide rules and regulations that could cause us to permanently or temporarily shut-in all of our wells within a field
15. 15The prices we receive for our production may be affected by local and regional factors
16. 16An increase in the differential between NYMEX WTI and the reference or regional index price used to price our oil and natural gas would reduce our cash flows from operations
17. 17The development of our estimated proved undeveloped reserves may take longer and may require higher levels of capital expenditures than we currently anticipate. Therefore, our estimated proved undeveloped reserves may not be ultimately developed or produced
18. 18We participate in oil and natural gas leases with third parties who may not be able to fulfill their commitments to our projects
19. 19We participate in the drilling and completion of wells with third-party operators that exercise exclusive control over such operations. As a participant, we rely on the third-party operators to successfully operate these properties pursuant to joint operating agreements and other similar contractual arrangements
20. 20Unless we replace our reserves with new reserves and develop those reserves, our reserves and production will decline, which would adversely affect our future cash flows and results of operations
21. 21We depend upon a few significant purchasers for the sale of most of our oil and natural gas production. The loss of one or more of these purchasers could, among other factors, limit our access to suitable markets for the oil, natural gas and NGLs we produce
22. 22We may incur substantial losses and be subject to substantial liability claims as a result of our operations. Additionally, we may not be insured for, or our insurance may be inadequate to protect us against, these risks
23. 23We may be unable to make accretive acquisitions or successfully integrate acquired businesses or assets, and any inability to do so may disrupt our business and hinder our ability to grow
24. 24We may incur losses as a result of title defects in the properties in which we invest
25. 25Our operations could be impacted by burdens and encumbrances on title to our properties
26. 26Our use of 2-D and 3-D seismic data is subject to interpretation and may not accurately identify the presence of oil and natural gas, which could adversely affect the results of our drilling operations
27. 27Our acquisition strategy will subject us to certain risks associated with the inherent uncertainty in evaluating properties for which we have limited information
28. 28Our future results will suffer if we do not effectively manage our expanded operations
29. 29Acquisitions of assets or businesses may reduce, rather than increase, our distributable cash flow or may disrupt our business
30. 30We may need to access funding through capital market transactions. Due to our relative smaller public float and low market capitalization, ESG, and climate change policies and restrictions, it may be difficult and expensive for us to raise additional funds
31. 31Our Credit Facility and our Senior Notes have substantial restrictions and financial covenants that may restrict our business and financing activities and our ability to declare dividends
32. 32Our indebtedness could reduce our financial flexibility
33. 33Any significant reduction in our borrowing base under our Credit Facility as a result of the periodic borrowing base redeterminations or otherwise may negatively impact our ability to fund our operations
34. 34We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to satisfy our obligations under our debt arrangements, which may not be successful
35. 35Our derivative activities could result in financial losses or could reduce our earnings
36. 36The regulatory approval process for the construction of new midstream assets is challenging
37. 37We may face opposition to the development or operation of our midstream facilities from various groups
38. 38The midstream infrastructure buildout projects we complete may not perform as anticipated
39. 39We do not own all of the land on which our pipelines and facilities are located or planned, which could result in disruptions to our operations
40. 40Our joint ventures may not perform as expected, and conducting a portion of our operations through joint ventures in which we do not have 100% ownership interest exposes us to risks and uncertainties, many of which are outside of our control

Risks Related to the Oil and Natural Gas Industry

1. 41Drilling for and producing oil and natural gas are high risk activities with many uncertainties that could adversely affect our business, financial condition or results of operations
2. 42Our future financial condition and results of operations will depend on the success of our exploitation, development, and acquisition activities, which are subject to numerous risks beyond our control, including the risk that drilling will not result in commercially viable oil and natural gas production
3. 43Conservation measures and technological advances could reduce demand for oil, natural gas and NGLs
4. 44Limitation or restrictions on our ability to obtain water or dispose of flowback and produced water may have an adverse effect on our operating results
5. 45The unavailability or high cost of equipment, supplies, personnel and oilfield services used to drill and complete wells could adversely affect our ability to execute our development plans within our budget and on a timely basis
6. 46Competition in the oil and natural gas industry is intense, making it more difficult for us to acquire properties and market oil or natural gas
7. 47Declining general economic, business or industry conditions have, and will continue to have, a material adverse effect on our results of operations, liquidity and financial condition, and are expected to continue having a material adverse effect for the foreseeable future
8. 48Inflationary issues and associated changes in monetary policy have resulted in and may in the future result in increases to the cost of our goods, services and personnel, which in turn could cause our capital expenditures and operating costs to rise
9. 49We may not be able to keep pace with technological developments in our industry
10. 50Negative public perception regarding us and/or our industry could have an adverse effect on our operations

Risks Related to Acts of God and Cybersecurity

1. 51Power outages, limited availability of electrical resources, and increased energy costs could have a material adverse effect on us
2. 52Our operations are subject to electrical power outages, regional competition for available power, and increased energy costs. Power outages, which may last beyond our backup and alternative power arrangements, would harm our operations and our business
3. 53Extreme weather conditions could adversely affect our ability to conduct drilling and production activities in the areas where we operate
4. 54Our business could be negatively affected by security threats, including cybersecurity threats, and other disruptions
5. 55Loss of our information and computer systems could adversely affect our business
6. 56A terrorist attack or armed conflict could harm our business

Risks Related to Legal, Regulatory, and Tax Matters

1. 57We are subject to stringent federal, tribal, state and local laws and regulations related to environmental and occupational health and safety issues that could adversely affect the cost, manner or feasibility of conducting our operations or expose us to significant liabilities
2. 58We are subject to complex laws that can affect the cost, manner or feasibility of doing business
3. 59We are responsible for the decommissioning, removal, plugging, abandonment, and reclamation costs for our facilities
4. 60SEC rules could limit our ability to book additional proved undeveloped reserves in the future
5. 61Should we fail to comply with all applicable regulatory agency administered statutes, rules, regulations and orders, we could be subject to substantial penalties and fines
6. 62We may incur significant costs and liabilities as a result of pipeline integrity management program testing and any related pipeline repair or preventative or remedial measures
7. 63We may be involved in legal proceedings that could result in substantial liabilities
8. 64Federal, state and local legislative and regulatory initiatives relating to hydraulic fracturing as well as governmental reviews of such activities could result in increased costs and additional operating restrictions or delays in the completion of oil and natural gas wells and adversely affect our production
9. 65could further restrict or prohibit hydraulic fracturing in certain circumstances, impose more stringent operating standards and/or require the disclosure of the composition of hydraulic fracturing fluids. See “Items 1 and 2 Business and Properties – Regulation of the Oil and Natural Gas Industry”
10. 66Increases in interest rates could adversely affect our business
11. 67Restrictions on drilling or other operational activities intended to protect certain species of wildlife or to conserve natural resources may adversely affect our ability to conduct drilling activities in areas where we operate
12. 68The enactment of derivatives legislation could have an adverse effect on our ability to use derivative instruments to reduce the effect of commodity price, interest rate and other risks associated with our business
13. 69Future federal, state or local legislation also may impose new or increased taxes or fees on oil and natural gas extraction or production
14. 70Anti-indemnity provisions enacted by many states may restrict or prohibit a party’s indemnification of us
15. 71Our effective tax rate may change in the future, which could adversely impact us
16. 72Changes to regulatory agencies could pose risks related to our business operations and financial outlook

Risks Related to Our Common Stock

1. 73The market price of our common stock may be volatile, which could cause the value of your investment to decline
2. 74Future sales or the availability for sale of substantial amounts of our common stock in the public market, or the perception that such sales could occur, could adversely affect the prevailing market price of our common stock and could impair our ability to raise capital through future sales of equity securities
3. 75If we fail to continue to meet the requirements for continued listing on the NYSE American stock exchange, our common stock could be delisted from trading, which would decrease the liquidity of our common stock and ability to raise additional capital
4. 76If securities analysts do not publish research or reports about our business or if they publish negative evaluations of our stock, the price of our stock could decline
5. 77We may not generate sufficient cash to support any dividend to our common stockholders
6. 78Our quarterly cash dividends, if any, may vary significantly both quarterly and annually
7. 79The Board may modify or revoke our dividend policy at any time at its discretion
8. 80The amount of cash we have available for dividends to our common stockholders depends primarily on our cash flow and not solely on our profitability, which may prevent us from paying dividends, even during periods in which we record net income
9. 81Delaware law imposes restrictions on our ability to pay cash dividends on our common stock
10. 82We may issue preferred stock whose terms could adversely affect the voting power or value of our common stock

Risks Related to the Company

1. 83Effective December 31, 2024, we no longer qualify as a “smaller reporting company” which will impose additional reporting requirements that may increase our costs and demands on management time
2. 84Our business and operations could be adversely affected if we lose key personnel
3. 85Our executive officers, directors and principal stockholders have the ability to control or significantly influence all matters submitted to the Company’s stockholders for approval
4. 86Provisions in our corporate charter documents and under Delaware law could make an acquisition of the Company, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove current management