What changed in this filing

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Item 1. Financial Statements

2022-08-10 compared with 2022-05-11 · 141 added, 124 removed, 581 unchanged (31% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

March 31, 2022 September 30, 2021

June 30, 2022 September 30, 2021

(In thousands, except share amounts)

31 unchanged sentences

Common stock, $ 0.001 par value, 240,000,000 shares authorized;

19,853,649 and 19,672,050 shares issued and outstanding at March 31, 2022 and September 30, 2021, respectively

19,865,116 and 19,672,050 shares issued and outstanding at June 30, 2022 and September 30, 2021, respectively

Additional paid-in capital 273,035 270,837

5 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended March 31, Six Months Ended March 31,

Three Months Ended June 30, Nine Months Ended June 30,

2022 2021 2022 2021

21 unchanged sentences

Net Income (Loss) From Continuing Operations Before Income Taxes 49,482 ( 17,289 ) 67,467 ( 44,794 )

Income tax benefit (expense) 2,114 ( 14,231 ) ( 3,755 ) ( 13,716 )

Income tax expense ( 10,927 ) ( 3,245 ) ( 14,682 ) ( 16,953 )

Net Income (Loss) From Continuing Operations 38,555 ( 20,534 ) 52,785 ( 61,747 )

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - (Continued)

Three Months Ended March 31, Six Months Ended March 31,

Three Months Ended June 30, Nine Months Ended June 30,

2022 2021 2022 2021

2 unchanged sentences

Loss from discontinued operations — ( 882 ) — ( 19,513 )

Income tax benefit on discontinued operations — 25 — 25

Income tax expense on discontinued operations — ( 85 ) — ( 60 )

Loss on Discontinued Operations — ( 967 ) — ( 19,573 )

18 unchanged sentences

(In Thousands)

Six Months Ended March 31, 2022

Nine Months Ended June 30, 2022

Members' Equity Shareholders' Equity

13 unchanged sentences

Balance, March 31, 2022 — $ — 19,854 $ 20 $ 272,459 $ ( 47,241 ) $ 225,238

Share-based compensation expense — — — — 828 — 828

Repurchased shares for tax withholding — — ( 9 ) — ( 252 ) — ( 252 )

Issuance of common shares under long-term incentive plan — — 20 — — — —

Dividends declared — — — — — ( 6,159 ) ( 6,159 )

Net income — — — — — 38,555 38,555

Balance, June 30, 2022 — $ — 19,865 $ 20 $ 273,035 $ ( 14,845 ) $ 258,210

The accompanying notes are an integral part of these condensed consolidated financial statements.

2 unchanged sentences

(In Thousands)

Six Months Ended March 31, 2021

Nine Months Ended June 30, 2021

Members' Equity Shareholders' Equity

21 unchanged sentences

Balance, March 31, 2021 — $ — 17,825 $ 18 $ 218,974 $ ( 37,752 ) $ 181,240

Dividends paid — — — — — ( 55 ) ( 55 )

Share-based compensation expense — — — — 779 — 779

Issuance of common shares under long-term incentive plan — — 197 — 4,165 — 4,165

Net loss — — — — — ( 21,501 ) ( 21,501 )

Balance, June 30, 2021 — $ — 18,022 $ 18 $ 223,918 $ ( 59,308 ) $ 164,628

The accompanying notes are an integral part of these condensed consolidated financial statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended March 31,

Nine Months Ended June 30,

(In thousands)

35 unchanged sentences

Net Cash Used in Financing Activities - Continuing Operations ( 20,059 ) ( 18,151 )

Net Increase in Cash and Cash Equivalents from Continuing Operations 2,542 8,169

Net Increase (Decrease) in Cash and Cash Equivalents from Continuing Operations ( 267 ) 1,324

The accompanying notes are an integral part of these condensed consolidated financial statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - (Continued)

Six Months Ended March 31,

Nine Months Ended June 30,

(In thousands)

3 unchanged sentences

Net Increase in Cash and Cash Equivalents from Discontinued Operations — 3,910

Net Increase in Cash and Cash Equivalents 2,542 8,402

Net Increase (Decrease) in Cash and Cash Equivalents ( 267 ) 5,234

Cash and Cash Equivalents, Beginning of Period 17,067 1,660

5 unchanged sentences

Changes in capital expenditures in accounts payable and accrued liabilities $ 2,153 $ 7,909

Right-of-use assets obtained in exchange for operating lease liability $ 1,624 $ —

Preferred unit dividends paid in kind $ — $ 904

Dividends declared on common shares $ — $ 4,991

Common stock issued in exchange for common units $ — $ 192,191

18 unchanged sentences

(2) Basis of Presentation

These unaudited condensed consolidated financial statements as of March 31, 2022 and for the three and six months ended March 31, 2022 and 2021 include the accounts of Riley Permian and its wholly owned subsidiaries REP LLC, Riley Permian Operating Company, LLC ("RPOC"), Tengasco Pipeline Corporation, Tennessee Land & Mineral Corporation, and Manufactured Methane Corporation, and have been prepared in accordance with U.S.

These unaudited condensed consolidated financial statements as of June 30, 2022 and for the three and nine months ended June 30, 2022 and 2021 include the accounts of Riley Permian and its wholly owned subsidiaries REP LLC, Riley Permian Operating Company, LLC ("RPOC"), Tengasco Pipeline Corporation, Tennessee Land & Mineral Corporation, and Manufactured Methane Corporation, and have been prepared in accordance with U.S.

All intercompany balances and transactions have been eliminated upon consolidation.

5 unchanged sentences

Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S.

GAAP have been condensed or omitted pursuant to the rules and regulation of the SEC.

GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC.

These condensed consolidated financial statements should be read in conjunction with the Company's most recent Annual Report on Form 10-K for the year ended September 30, 2021.

3 unchanged sentences

In the opinion of the Company’s management, the accompanying unaudited financial statements contain all adjustments necessary for fair presentation of the results of operations for the periods presented, which adjustments were of a normal recurring nature, except as disclosed herein.

The results of operations for the three and six months ended March 31, 2022 are not necessarily indicative of the results to be expected for the full fiscal year ending September 30, 2022, for various reasons, including as a result of the impact of fluctuations in prices received for oil and natural gas, natural production declines, the uncertainty of exploration and development drilling results, fluctuations in the fair value of derivative instruments, the future impacts of COVID-19, the current and future impacts of the military conflict between Russia and Ukraine, the volatile inflationary environment in U.S.

The results of operations for the three and nine months ended June 30, 2022 are not necessarily indicative of the results to be expected for the full fiscal year ending September 30, 2022, for various reasons, including as a result of the impact of fluctuations in prices received for oil and natural gas, natural production declines, the uncertainty of exploration and development drilling results, fluctuations in the fair value of derivative instruments, the future impacts of COVID-19, the current and future impacts of the military conflict between Russia and Ukraine, the volatile inflationary environment in U.S.

markets and other factors.

12 unchanged sentences

Accounts receivable is summarized below:

March 31, 2022 September 30, 2021

June 30, 2022 September 30, 2021

(In thousands)

3 unchanged sentences

Total accounts receivable $ 32,821 $ 17,473

The Company had no allowance for doubtful accounts at March 31, 2022 and September 30, 2021.

The Company had no allowance for credit losses at June 30, 2022 and September 30, 2021.

Other Non-Current Assets, Net

Other non-current assets consisted of the following:

March 31, 2022 September 30, 2021

June 30, 2022 September 30, 2021

(In thousands)

4 unchanged sentences

Total other non-current assets, net $ 4,814 $ 2,419

The Company incurred $ 1.7 million in financing costs related to the amendment of its revolving credit facility in April 2022.

The Company also extended certain existing leases and entered into a new lease during the three months ended June 30, 2022, which resulted in additions to the right of use assets.

Accrued Liabilities

Accrued liabilities consisted of the following:

March 31, 2022 September 30, 2021

June 30, 2022 September 30, 2021

(In thousands)

7 unchanged sentences

Asset Retirement Obligations

Components of the changes in ARO for the six months ended March 31, 2022 and year ended September 30, 2021 are shown below:

March 31, 2022 September 30, 2021

Components of the changes in ARO for the nine months ended June 30, 2022 and year ended September 30, 2021 are shown below:

June 30, 2022 September 30, 2021

(In thousands)

12 unchanged sentences

The Company assessed the goodwill balance for impairment since the Company entered into a purchase and sale agreement ("PSA") in March 2021 for $ 3.5 million before closing adjustments.

As the carrying value exceeded the implied fair value at the time of the closing of the Merger, the Company concluded the goodwill balance associated with the Kansas Reporting Unit was impaired and recognized a goodwill impairment loss, included within loss from discontinued operations on the condensed consolidated statement of operations, of $ 18.5 million for the three and six months ended March 31, 2021.

See further discussion in Note 12 - Discontinued Operations and Assets Held for Sale.

1 unchanged sentence

The following table presents oil and natural gas sales disaggregated by product:

Three Months Ended March 31, Six Months Ended March 31,

Three Months Ended June 30, Nine Months Ended June 30,

2022 2021 2022 2021

11 unchanged sentences

The adoption of this ASU did not have a material impact on the Company's condensed consolidated financial statements.

RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Issued Accounting Standards Not Yet Adopted

In March 2020, the FASB issued ASU No.

2020-04, “Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting” (“ASU 2020-04”), which provides companies with optional guidance to ease the potential accounting burden associated with transitioning away from reference rates (e.g., LIBOR) that are expected to be discontinued.

Facilitation of the Effects of Reference Rate Reform on Financial Reporting” (“ASU 2020-04”), which provides companies with optional guidance to ease

RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

the potential accounting burden associated with transitioning away from reference rates (e.g., LIBOR) that are expected to be discontinued.

ASU 2020-04 allows, among other things, certain contract modifications, such as those within the scope of Topic 470 on debt, to be accounted as a continuation of the existing contract.

This ASU was effective upon the issuance and its optional relief can be applied through December 31, 2022.

The Company adopted this ASU effective concurrent with the amendment of the Company's revolving credit facility in April 2022.

See Note 9 - Revolving Credit Facility for additional information on the amendment of the revolving credit facility.

The adoption of this ASU did not have a material impact on the Company's condensed consolidated financial statements.

(4) Acquisitions

12 unchanged sentences

Total consideration $ 26,392

The Company incurred approximately $ 5.0 million of related costs for the Merger, of which $ 2.2 million and $ 3.1 million was expensed for the three and six months ended March 31, 2021 as transaction costs on the condensed consolidated statement of operations.

The Company incurred approximately $ 5.0 million of related costs for the Merger, of which $ 0.3 million and $ 3.4 million was expensed for the three and nine months ended June 30, 2021 as transaction costs on the condensed consolidated statements of operations.

RILEY EXPLORATION PERMIAN, INC.

24 unchanged sentences

Pro Forma Operating Results (Unaudited)

The following unaudited pro forma combined results for the three and six months ended March 31, 2021 reflect the consolidated results of operations of the Company as if the Merger had occurred on October 1, 2019.

The unaudited pro forma information includes adjustments for $ 3.1 million of transaction costs being reclassified to the first quarter of fiscal year 2020 instead of $ 2.1 million and $ 1.0 million of transaction costs recorded in the three months ended March 31, 2021 and December 31, 2020, respectively.

Additionally, the Company adjusted for $ 0.9 million of oil and natural gas property impairment Tengasco recognized under the full-cost method of accounting, which would not have been recognized under the successful efforts method, during the three months ended December 31, 2020.

Also, the unaudited pro forma information has been tax

The following unaudited pro forma combined results for the three and nine months ended June 30, 2021 reflect the consolidated results of operations of the Company as if the Merger had occurred on October 1, 2019.

The unaudited pro forma information includes adjustments for $ 3.4 million of transaction costs being reclassified to the first quarter of fiscal year 2020 instead of $ 0.3 million and $ 3.4 million of transaction costs recorded in the three and nine months ended June 30, 2021, respectively.

Additionally, the Company adjusted for $ 0.9 million of oil and natural gas property impairment that Tengasco recognized under the full-cost method of accounting, which would not have been recognized under the successful efforts method, during the three months ended December 31, 2020.

Also, the unaudited pro forma information has been tax affected

RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

affected using a 21% tax rate.

using a 21% tax rate.

The common stock was also adjusted for the conversion of the REP LLC preferred units into common units and retroactively adjusted for the Exchange Ratio and one-for-twelve reverse stock split.

Three Months Ended March 31, 2021 Six Months Ended March 31, 2021

Three Months Ended June 30, 2021 Nine Months Ended June 30, 2021

(In thousands, except per share/unit amounts)

6 unchanged sentences

Diluted $ ( 0.95 ) $ ( 2.51 )

Net Loss per Share/Unit from Discontinued Operations:

Basic $ ( 0.05 ) $ ( 0.05 )

Diluted $ ( 0.05 ) $ ( 0.05 )

The unaudited pro forma combined financial information is for informational purposes only and is not intended to represent or to be indicative of the combined results of operations that the Company would have reported had the Merger been completed as of October 1, 2019 and should not be taken as indicative of the Company's future combined results of operations.

2 unchanged sentences

Oil and natural gas properties are summarized below:

March 31, 2022 September 30, 2021

June 30, 2022 September 30, 2021

(In thousands)

5 unchanged sentences

Total oil and natural gas properties, net $ 402,526 $ 345,797

Depletion and amortization expense for proved oil and natural gas properties was $ 6.4 million and $ 6.1 million respectively, for the three months ended March 31, 2022 and 2021.

Depletion and amortization expense for proved oil and natural gas properties was $ 13.1 million and $ 12.0 million, respectively, for the six months ended March 31, 2022 and 2021.

Exploration expense was $ 1.5 million and $ 5.5 million, respectively, for the three months ended March 31, 2022 and 2021, and $ 2.1 million and $ 5.9 million, respectively, for the six months ended March 31, 2022 and 2021.

Exploration expense was primarily attributable to the expiration of oil and natural gas leases for the three and six months ended March 31, 2022 and 2021.

Depletion and amortization expense for proved oil and natural gas properties was $ 7.0 million and $ 6.7 million respectively, for the three months ended June 30, 2022 and 2021.

Depletion and amortization expense for proved oil and natural gas properties was $ 20.1 million and $ 18.7 million, respectively, for the nine months ended June 30, 2022 and 2021.

Exploration expense was $ 22 thousand and $ 2.8 million, respectively, for the three months ended June 30, 2022 and 2021, and $ 2.1 million and $ 8.7 million, respectively, for the nine months ended June 30, 2022 and 2021.

Exploration expense was primarily attributable to the expiration of oil and natural gas leases for the nine months ended June 30, 2022 and three and nine months ended June 30, 2021.

RILEY EXPLORATION PERMIAN, INC.

3 unchanged sentences

The Company uses commodity based derivative contracts to reduce exposure to fluctuations in oil and natural gas prices.

While the use of these contracts limits the downside risk for adverse price changes, their use also limit future revenues from favorable price changes.

For the three and six months ended March 31, 2022 and 2021, we have not designated our derivative contracts as hedges for accounting purposes, and therefore changes in the fair value of derivatives are included and recognized in other income (expenses) in the condensed consolidated statement of operations.

As of March 31, 2022, the Company's oil and natural gas derivative instruments consisted of fixed price swaps, costless collars, and basis protection swaps.

The following table summarizes the open financial derivative positions as of March 31, 2022, related to oil and natural gas production:

While the use of these contracts limits the downside risk for adverse price changes, their use also limits future revenues from favorable price changes.

For the three and nine months ended June 30, 2022 and 2021, we have not designated our derivative contracts as hedges for accounting purposes, and therefore changes in the fair value of derivatives are included and recognized in other income (expense) in the condensed consolidated statement of operations.

As of June 30, 2022, the Company's oil and natural gas derivative instruments consisted of fixed price swaps, costless collars, and basis protection swaps.

The following table summarizes the open financial derivative positions as of June 30, 2022, related to oil and natural gas production:

Weighted Average Price

3 unchanged sentences

Q4 2022 270,000 $ 56.03 $ — $ —

2023 720,000 $ 53.27 $ — $ —

2 unchanged sentences

Q4 2022 540,000 $ 3.26 $ — $ —

Oil Collars (Bbl)

1 unchanged sentence

Q4 2022 90,000 $ — $ 35.00 $ 42.63

2023 — $ — $ — $ —

3 unchanged sentences

Q4 2022 240,000 $ 0.41 $ — $ —

Interest Rate Contracts

The Company has entered into floating-to-fixed interest rate swaps, in which it receives a floating market rate equal to one-month LIBOR and pays a fixed interest rate, to manage interest rate exposure related to the Company's revolving credit facility.

RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The following table summarizes the open interest rate derivative positions as of March 31, 2022:

The following table summarizes the open interest rate derivative positions as of June 30, 2022:

Open Coverage Period Notional Amount Fixed Rate

1 unchanged sentence

Floating-to-Fixed Interest Rate Swaps

April 2022 - September 2023 $ 40,000 0.24 %

July 2022 - September 2023 $ 40,000 0.24 %

RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Balance Sheet Presentation of Derivatives

The following table presents the location and fair value of the Company’s derivative contracts included in the condensed consolidated balance sheets as of March 31, 2022 and September 30, 2021:

March 31, 2022

The following table presents the location and fair value of the Company’s derivative contracts included in the condensed consolidated balance sheets as of June 30, 2022 and September 30, 2021:

June 30, 2022

Balance Sheet Classification Gross Fair Value Amounts Netted Net Fair Value

13 unchanged sentences

Total $ ( 50,970 ) $ — $ ( 50,970 )

The following table presents the Company's derivative activities for the three and six months ended March 31, 2022 and 2021:

Three Months Ended March 31, Six Months Ended March 31,

The following table presents the components of the Company's loss on derivatives for the three and nine months ended June 30, 2022 and 2021:

Three Months Ended June 30, Nine Months Ended June 30,

2022 2021 2022 2021

(In thousands)

Fair value of net asset (liability), beginning of period $ ( 40,149 ) $ 2,839 $ ( 50,970 ) $ 21,921

Settlements on derivative contracts $ ( 25,783 ) $ ( 7,712 ) $ ( 60,172 ) $ ( 5,133 )

Non-cash gain (loss) on derivatives 13,420 ( 27,684 ) ( 7,016 ) ( 69,075 )

Loss on derivatives $ ( 12,363 ) $ ( 35,396 ) $ ( 67,188 ) $ ( 74,208 )

Settlements on derivatives 18,375 2,594 34,389 ( 2,579 )

Fair value of net liability, end of period $ ( 71,406 ) $ ( 19,470 ) $ ( 71,406 ) $ ( 19,470 )

(7) Fair Value Measurements

4 unchanged sentences

Level 3 are unobservable inputs for an asset or liability.

RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The carrying values of financial instruments comprising cash and cash equivalents, payables, receivables, and advances from joint interest owners approximate fair values due to the short-term maturities of these instruments.

3 unchanged sentences

The fair value of commodity derivatives and interest rate swaps is estimated using internal discounted cash flow calculations based upon forward curves.

The following table presents the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of March 31, 2022 and September 30, 2021, by level within the fair value hierarchy:

March 31, 2022

The following table presents the Company’s financial assets and liabilities that were

RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

accounted for at fair value on a recurring basis as of June 30, 2022 and September 30, 2021, by level within the fair value hierarchy:

June 30, 2022

Level 1 Level 2 Level 3 Total

19 unchanged sentences

Additionally, RPOC provides certain administrative and operational services to Riley Exploration Group, LLC ("REG") in exchange for a monthly fee of $ 100 thousand pursuant to a contract services agreement.

RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The following table presents revenues from contract services for related parties:

Three Months Ended March 31, Six Months Ended March 31,

Three Months Ended June 30, Nine Months Ended June 30,

2022 2021 2022 2021

4 unchanged sentences

Cost of contract services $ 89 $ 91 $ 324 $ 330

The Company had amounts due from Combo of $ 1.1 million and $ 0.5 million at March 31, 2022 and September 30, 2021, respectively, which are reflected in accounts receivable - related parties on the accompanying condensed consolidated balance sheets.

There were no amounts due to the Company from REG as of March 31, 2022 and September 30, 2021.

The Company had amounts due (to) from Combo of $( 0.4 ) million and $ 0.5 million at June 30, 2022 and September 30, 2021, respectively, which are reflected in accounts payable - related parties and accounts receivable - related parties on the accompanying condensed consolidated balance sheets.

Amounts due (to) from Combo reflect the revenue, net of any expenditures for wells and fees due under the contract services agreement, for Combo's net working interest in wells that the Company operates on Combo's behalf.

RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Consulting and Legal Fees

On January 25, 2022, the Company and di Santo Law PLLC ("di Santo Law"), a law firm owned by a member of our Board of Directors, entered into an engagement letter that provides a monthly fixed fee in exchange for general corporate legal services.

The agreement has an initial term of one year and provides for a monthly cash payment of $ 30,000 and an aggregate one-time grant of 10,500 shares of restricted stock that will vest in four equal installments at the end of each quarter in calendar year 2022.

The agreement has an initial term of one year and provides for a monthly cash payment of $ 30 thousand and an aggregate one-time grant of 10,500 shares of restricted stock that will vest in four equal installments at the end of each quarter in calendar year 2022.

Prior to entry into this agreement, di Santo Law's attorneys provided legal services to the Company based on hourly rates.

The Company incurred legal fees from di Santo Law of approximately $ 0.2 million for both of the three month periods ended March 31, 2022 and 2021.The Company incurred legal fees from di Santo Law of approximately $ 0.4 million for both of the six month periods ended March 31, 2022 and 2021.

As of March 31, 2022 and September 30, 2021, the Company had approximately $ 0.4 million and $ 0.8 million accrued for di Santo Law.

The Company incurred legal fees from di Santo Law of approximately $ 0.1 million and $ 0.6 million for the three months ended June 30, 2022 and 2021, respectively.

The Company incurred legal fees from di Santo Law of approximately $ 0.6 million and $ 1.0 million for the nine months ended June 30, 2022 and 2021.

As of June 30, 2022 and September 30, 2021, the Company had approximately $ 30 thousand and $ 0.8 million, respectively, accrued for di Santo Law.

Such amounts were included in accounts payable - related parties in the accompanying condensed consolidated balance sheets.

3 unchanged sentences

The revolving credit facility had an initial borrowing base of $ 25 million with a maximum facility amount of $ 500 million.

On April 29, 2022, the Company amended its Credit Agreement to, among other things, increase the borrowing base from $ 175 million to $ 200 million, extend the maturing date to April 2026, replace LIBOR with SOFR and changed the requirements for hedging to be based on utilization of the borrowing base and the Company's leverage ratio.

On April 29, 2022, the Company amended its Credit Agreement to, among other things, increase the borrowing base from $ 175 million to $ 200 million, extend the maturity date to April 2026, replace LIBOR with SOFR and change the requirements for hedging to be based on utilization of the borrowing base and the Company's leverage ratio.

The borrowing base is subject to periodic redeterminations, mandatory reductions and further adjustments from time to time.

The facility currently requires semi-annual redeterminations on February 1 and August 1.

During these redetermination periods, the Company’s borrowing base may be increased and may also be reduced in certain circumstances.

The revolving credit facility allows for Eurodollar Loans and Base Rate Loans (each as defined in the Credit Agreement).

The interest rate on each Eurodollar Loan will be the adjusted LIBOR for the applicable interest period plus a margin between 2.75 % and 3.75 % (depending on the borrowing base utilization percentage).

The annual interest rate on each Base Rate Loan is (i) the greatest of (a) the administrative agent’s prime lending rate, (b) the federal funds rate plus 0.5 % per annum or (c) the adjusted LIBOR determined on a daily basis for an interest period of one-month, plus 1.00 % per annum, plus (ii) a margin between 1.75 % and 2.75 % (depending on the borrowing base utilization percentage).

During these redetermination periods, the Company’s borrowing base may be increased or may be reduced in certain circumstances.

The revolving credit facility allows for SOFR Loans and Base Rate Loans (each as defined in the Credit Agreement).

The interest rate on each SOFR Loan will be the adjusted Term SOFR for the applicable interest period plus a margin between 2.75 % and 3.75 % (depending on the borrowing base utilization percentage).

The annual interest rate on each Base Rate Loan will be the Base Rate for the applicable interest period plus a margin between 1.75 % and 2.75 % (depending on the borrowing base utilization percentage).

The Company is also subject to an unused commitment fee of between 0.375 % and 0.500 % (depending on the borrowing base utilization percentage).

The Credit Agreement contains certain covenants, which, among other things, require the maintenance of (i) a total leverage ratio of not more than 3.25 to 1.0 and (ii) a minimum current ratio of not less than 1.0 to 1.0 as of the last day of any fiscal quarter.

The Credit Agreement also contains a total leverage ratio for Restricted Payments after giving pro forma effect to

RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

such Restricted Payments, which includes payments to any holder of the Company's shares, would not exceed 2.50 to 1.0.

The Credit Agreement also contains a total leverage ratio for Restricted Payments, as defined in the Credit Agreement, after giving pro forma effect to such Restricted Payments, which includes payments to any holder of the Company's shares, would not exceed 2.50 to 1.0.

If the Company's leverage ratio, after giving pro forma effect to such Restricted Payments (as defined in the Credit Agreement), is above 2.0 to 1.0, then an additional test of free cash flow is applied, and the Company will only be permitted to make such Restricted Payments if such payment does not exceed the Company's free cash flow.

The Company is also required to limit its cash balance to less than $ 15 million or 10 % of the borrowing base, whichever is greater.

If the Company's cash balance exceeds this limit for five consecutive business days, the Company will be required to apply the excess to reduce its credit facility borrowings.

If the Company's cash balance exceeds this limit on the last business day of the month, the Company will be required to apply the excess to reduce its credit facility borrowings.

The Credit Agreement also contains other customary affirmative and negative covenants and events of default.

As of March 31, 2022, the Company's minimum hedging requirement was 50 % of its proved developed producing ("PDP") volumes on a rolling 24 month basis.

The Company's minimum hedging requirement is between 0 % and 50 % (depending on the borrowing base utilization percentage and leverage ratio as of the hedge evaluation date) of its proved developed producing ("PDP") volumes on a rolling 24-month basis.

As of June 30, 2022, the Company was required to have at least 25 % of its PDP volumes hedged on a rolling 24-month basis.

RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The following table summarizes the Company's interest expense:

Three Months Ended March 31, Six Months Ended March 31,

Three Months Ended June 30, Nine Months Ended June 30,

2022 2021 2022 2021

6 unchanged sentences

_____________________

(1) Includes $ 0.1 million of unamortized deferred financing costs written off during the three months ended December 31, 2021 in conjunction with the amendment of the Credit Agreement in October 2021.

As of March 31, 2022 and September 30, 2021, the weighted average interest rate on outstanding borrowings under the revolving credit facility was 3.46 % and 2.83 %, respectively.

As of March 31, 2022, the Company was in compliance with all covenants contained in the Credit Agreement and had $ 63 million of outstanding borrowings and an additional $ 112 million available under the borrowing base.

(1) Includes $ 0.1 million of unamortized deferred financing costs written off during the nine months ended June 30, 2022 in conjunction with the amendment of the Credit Agreement in October 2021.

As of June 30, 2022 and September 30, 2021, the weighted average interest rate on outstanding borrowings under the revolving credit facility was 4.52 % and 2.83 %, respectively.

As of June 30, 2022, the Company was in compliance with all covenants contained in the Credit Agreement and had $ 61 million of outstanding borrowings and $ 139 million available under the borrowing base.

(10) Members’/Shareholders' Equity

For the three months ended March 31, 2022 and 2021, the Company declared quarterly dividends on its common stock and common units totaling approximately $ 6.2 million and $ 8.8 million, respectively.

For the three months ended June 30, 2022, the Company declared quarterly dividends on its common stock totaling approximately $ 6.2 million.

No dividends were declared during the three months ended June 30, 2021.

See Note 9 - Revolving Credit Facility for discussion over the Company's restrictions on certain payments, including dividends.

2 unchanged sentences

The holders of unvested restricted units issued under the 2018 LTIP were issued substitute awards under the 2021 LTIP at the closing of the Merger.

Upon the closing of the Merger and after giving effect to the adjustment resulting from the one-for-twelve reverse stock split, the 2021 LTIP had 1,387,022 shares of common stock available for issuance, of which 782,529 shares remained available as of March 31, 2022.

RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Upon the closing of the Merger and after giving effect to the adjustment resulting from the one-for-twelve reverse stock split, the 2021 LTIP had 1,387,022 shares of common stock available for issuance, of which 761,635 shares remained available as of June 30, 2022.

2021 Long-Term Incentive Plan

The following table presents the Company's restricted stock activity during the six months ended March 31, 2022 under the 2021 LTIP:

The following table presents the Company's restricted stock activity during the nine months ended June 30, 2022 under the 2021 LTIP:

2021 Long-Term Incentive Plan

4 unchanged sentences

Forfeited ( 3,625 ) $ 23.46

Unvested at March 31, 2022

Unvested at June 30, 2022

319,682 $ 20.50

For the three months ended March 31, 2022 and 2021, the total share-based compensation expense of $ 1.0 million and $ 4.6 million, respectively, is included in general and administrative costs on the Company's condensed consolidated statement of operations for the restricted share awards granted under the 2021 LTIP.

For the six months ended March 31, 2022 and 2021, the total share-based compensation expense of $ 2.0 million and $ 4.6 million, respectively, is included in general and administrative costs on the Company's condensed consolidated statement of operations for the restricted share awards granted under the 2021 LTIP.

Approximately $ 5.3 million of additional share-based compensation expense will be recognized over the weighted average life of 25 months for the restricted share awards granted under the 2021 LTIP.

RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

For the three months ended June 30, 2022 and 2021, the total equity-based compensation expense of $ 0.8 million and $ 0.8 million, respectively, is included in general and administrative costs on the Company's condensed consolidated statement of operations for the restricted share awards granted under the 2021 LTIP.

For the nine months ended June 30, 2022 and 2021, the total equity-based compensation expense of $ 2.8 million and $ 5.4 million, respectively, is included in general and administrative costs on the Company's condensed consolidated statement of operations for the restricted share awards granted under the 2021 LTIP.

Approximately $ 5.0 million of additional equity-based compensation expense will be recognized over the weighted average life of 23 months for the unvested restricted share awards as of June 30, 2022 granted under the 2021 LTIP.

2018 Long-Term Incentive Plan

2 unchanged sentences

Restricted Units:

The Company granted 13,309 restricted units to executives and employees of the Company during the six months ended March 31, 2021 under the 2018 LTIP.

These restricted units vest over a period of 36 months with a fair value price of $ 112.47 .

The Company granted 13,309 restricted units to executives and employees of the Company during the nine months ended June 30, 2021 under the 2018 LTIP.

These restricted units had a vesting period of 36-months with a fair value price of $ 112.47 .

The Company determined the fair value of the common units in accordance with ASC 718 using an options pricing model.

Immediately prior to the consummation of the Merger and in accordance with the Merger Agreement, any accrued but unpaid cash dividends on the unvested restricted units issued under the 2018 LTIP was paid.

Total unit-based compensation expense of $ 0.3 million and $ 0.7 million, respectively, is for all of the issuances outstanding for the three and six months ended March 31, 2021.

Total unit-based compensation expense of $ 0.7 million is for all of the issuances outstanding during the nine months ended June 30, 2021.

Unit-based compensation expense is included in general and administrative costs on the Company's condensed consolidated statement of operations.

3 unchanged sentences

In connection with the closing of the Merger, the Company's tax status changed from a limited liability company to a C-corporation.

As a result, the Company is responsible for federal and state income taxes and must record deferred tax assets and liabilities for the tax effects of any temporary differences that exist on the date of the change.

RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

As a result, the Company is responsible for federal and state income taxes and must record deferred tax assets and liabilities for the tax effects of any temporary differences that exist.

The components of the Company's consolidated provision for income taxes from continuing operations are as follows:

Three Months Ended March 31, Six Months Ended March 31,

Three Months Ended June 30, Nine Months Ended June 30,

2022 2021 2022 2021

(In thousands)

Current income tax expense:

Current income tax expense (benefit):

Federal $ 531 $ ( 780 ) $ 1,300 $ —

State 184 ( 229 ) 308 ( 232 )

Total current income tax expense 779 1,143 892 778

Total current income tax expense (benefit) $ 715 $ ( 1,009 ) $ 1,608 $ ( 232 )

Deferred income tax expense (benefit):

1 unchanged sentence

State 337 ( 2,375 ) 426 ( 3,444 )

Total deferred income tax expense (benefit) ( 2,893 ) 13,088 2,863 12,938

Total income tax expense (benefit) $ ( 2,114 ) $ 14,231 $ 3,755 $ 13,716

Total deferred income tax expense 10,212 4,254 13,074 17,185

Total income tax expense $ 10,927 $ 3,245 $ 14,682 $ 16,953

RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

A reconciliation of the statutory federal income tax rate to the Company's effective income tax rate is as follows:

Three Months Ended March 31, Six Months Ended March 31,

Three Months Ended June 30, Nine Months Ended June 30,

2022 2021 2022 2021

19 unchanged sentences

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The following table presents the components of the loss on discontinued operations reported in the condensed consolidated statement of operations for the three months ended March 31, 2021 (in thousands):

The following table presents the components of the loss on discontinued operations reported in the condensed consolidated statements of operations for the periods ended June 30, 2021:

Three Months Ended Nine Months Ended

June 30, 2021 June 30, 2021

(In thousands)

Oil and natural gas sales $ — $ —

3 unchanged sentences

Total expenses — 18,631

Other expenses 882 882

Loss from discontinued operations before income taxes ( 882 ) ( 19,513 )

Income tax benefit 25

Income tax expense ( 85 ) ( 60 )

Net loss from discontinued operations, net of tax $ ( 967 ) $ ( 19,573 )

The Company did not have any discontinued operations during the three months ended December 31, 2020 or for the three and six months ended March 31, 2022.

The Company did not have any discontinued operations during the three and nine months ended June 30, 2022.

(13) Net Income (Loss) Per Share/Unit

Net income (loss) per share/unit is calculated using a retroactive application of the Exchange Ratio and the one-for-twelve reverse stock split that occurred in conjunction with the Merger.

Certain restricted shares of the Company met the criteria of a participating security.

The Company calculated net income or loss per share/unit using the two-class method for those shares.

The table below sets forth the computation of basic and diluted net income (loss) per share/unit for the three and six months ended March 31, 2022 and 2021:

Three Months Ended March 31, Six Months Ended March 31,

The Company calculated net income or loss per share/unit using the treasury stock method.

The table below sets forth the computation of basic and diluted net income (loss) per share/unit for the three and nine months ended June 30, 2022 and 2021:

Three Months Ended June 30, Nine Months Ended June 30,

2022 2021 2022 2021

16 unchanged sentences

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

For the three and six months ended March 31, 2022 and 2021, the following shares/units were excluded from the calculation of diluted net income (loss) per share/unit due to their anti-dilutive effect:

Three Months Ended March 31, Six Months Ended March 31,

For the three and nine months ended June 30, 2022 and 2021, the following shares/units were excluded from the calculation of diluted net income (loss) per share/unit due to their anti-dilutive effect:

Three Months Ended June 30, Nine Months Ended June 30,

2022 2021 2022 2021

(In thousands)

Restricted shares/units 202 236 204 236

12 unchanged sentences

The parties are conducting discovery.

The Company did not recognize any material liability as of March 31, 2022 and September 30, 2021.

The Company did not recognize any material liability as of June 30, 2022 and September 30, 2021.

The Company's assessment of probability and/or estimates of liabilities are based on information known about the pending legal matters and its experience in contesting, litigating, and settling similar matters.

4 unchanged sentences

These laws, which are often changing, regulate the discharge of materials into the environment and may require the Company to remove or mitigate the environmental effects of the disposal or release of petroleum or chemical substances at various sites.

The Company had no environmental liabilities as of March 31, 2022 or September 30, 2021.

The Company had no environmental liabilities as of June 30, 2022 or September 30, 2021.

Contractual Commitments

3 unchanged sentences

The additional capacity from the gas processing plant expansion is expected to lead to increased natural gas sales and decreased gas flaring for the Company.

In August 2021, the Company entered into a purchase agreement for supplies for its EOR project.

Under the agreement, the Company has remaining commitments totaling approximately $ 2.6 million to purchase supplies by April 2022.

RILEY EXPLORATION PERMIAN, INC.

4 unchanged sentences

Under the order, the Company has remaining commitments totaling approximately $ 2.0 million, and the equipment will be delivered within 29 weeks of executing the purchase order.

(15) Subsequent Events

On April 11, 2022, the Board of Directors of the Company declared a cash dividend of $ 0.31 per share of common stock, payable on May 5, 2022 to its shareholders of record at the close of business on April 21, 2022.

On April 22, 2022, the Company entered into a purchase agreement for pipe related to its fiscal 2023 drilling program.

Under the agreement, the Company has commitments to purchase approximately $ 10.6 million of pipe by December 2022.

On April 29, 2022, the Company amended its Credit Agreement to, among other things, increase the borrowing base from $ 175 million to $ 200 million, extend the maturing date to April 2026, replace LIBOR with the SOFR and changed the requirements for hedging to be based on utilization of the borrowing base and the Company's leverage ratio.

(15) Subsequent Events

On July 11, 2022, the Board of Directors of the Company declared a cash dividend of $ 0.31 per share of common stock, payable on August 8, 2022 to its shareholders of record at the close of business on July 25, 2022.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements