Riley Exploration Permian, Inc. (REPX) stock intrinsic value fair value estimate & owner earnings analysis

Riley Exploration Permian is an independent oil and gas producer focused on the Yeso trend of the Permian Basin in New Mexico. The company in its current form dates to a February 2021 merger; the four full calendar years since then (2022 through 2025) are what we used to judge normal earning power, since the years before the merger describe a much smaller, unrelated business. Owner earnings - cash actually generated for shareholders after the spending needed to keep production roughly steady - averaged about $6.70 per share in 2022, 2023 and 2024, then fell to about $4.40 per share in 2025 as realized oil prices softened (from roughly $75/bbl in 2023-2024 to about $64/bbl in 2025) and drilling spending came in close to the full depletion charge for the year. We used the median of the four years, about $6.72 per share, as the starting point for the value, rather than the depressed 2025 figure alone - a single soft year is not the level a normal year should be measured from, particularly for a commodity business. Because oil and gas wells decline in output over time, we did not treat all drilling spending as a permanent cost of doing business. We separated spending needed just to replace the barrels produced each year (a real, ongoing cost, deducted from the value) from spending that grows production (optional, funded from the wells it produces). In 2025 the company's drilling spending was actually a bit below what would be needed to fully replace what came out of the ground that year, which is one reason profitability compressed. Production has grown quickly - from about 22,500 barrels of oil equivalent a day in 2024 to about 29,200 in 2025 - largely from wells tied to an accretive 2023 acquisition and the company's own drilling program, and the growth continued into the first half of 2026 based on the most recent quarterly filing. Our base case assumes that growth continues for a few more years as the company drills through reserves it has already identified, then levels off, because the company's own year-end reserve report shows only about 14 years of production at the current rate from reserves already booked, and we found no disclosure of a much larger inventory of future drilling locations beyond that. Because oil and gas fields are wasting assets by nature, we did not assume the cash flow continues forever at a flat or growing rate. Instead we modeled roughly a decade of steady production, then a gradual decline over the following decade to a much lower, sustained level - reflecting a maturing field with only partial reinvestment, not a hard cutoff to zero (operators in productive basins like the Permian typically keep finding and leasing new locations), but also not indefinite growth, since we have no specific evidence of decades of remaining drilling inventory here. This later period is a meaningful share of the total value, so we checked it against the company's own year-end reserve report: even valuing only the reserves currently booked, using the more conservative discount rate the SEC requires for that disclosure, implies a per-share figure in the same range as what our estimate for the later years contributes - which gives some confidence the assumption isn't unreasonably generous. Our bear case (roughly a one-in-ten downside) assumes oil prices settle around $50 a barrel for a sustained period, and that natural gas and natural gas liquids continue to net close to zero or negative in this part of the Permian because of pipeline and processing constraints that already show up in the company's own reserve pricing. At those prices, periodic reviews of the company's credit facility would likely force a smaller drilling program, so production would flatten rather than keep growing, and cash generated for shareholders would fall to roughly a third of the normal level for an extended period. The company's $250-270 million of debt does not shrink in a downturn, so a weak-price scenario falls disproportionately on the equity - the main reason our estimate of what the shares are worth has such a wide range. Our bull case (roughly a one-in-ten upside) does not assume higher oil prices - we don't try to forecast where oil goes - but assumes the company keeps doing what it has done well: converting undeveloped locations into producing wells at attractive returns, as its reserve reports show it has been doing, and periodically recycling capital the way it did in 2025 when it built out and then sold a water and gas-gathering system for a sizeable gain. Under that case, production keeps growing for several years before leveling off at a materially higher run rate. Putting these cases together, we get a range of roughly $22 to $134 per share, with a central estimate near $72. Given how much of that range is exposed to a single commodity price and to a fixed debt load that magnifies the downside, the margin-of-safety price sits at a large discount to that central estimate, at around $36 per share. Two things we could not fully reconcile from the filings: net income swung from a sizeable loss in the first quarter of 2026 to a sizeable gain in the second quarter, which appears to be the timing of unrealized derivative (hedging) markups rather than anything operational; and while the company discusses its drilling locations qualitatively, it does not give a specific count of years of remaining drilling inventory, so our view of how long the current growth phase lasts is our own judgment based on the reserve life disclosed in the filings.