What changed in this filing

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Item 9A. Controls and Procedures

2024-03-06 compared with 2023-03-08 · 543 added, 633 removed, 837 unchanged (58% of the section changed)

2 unchanged sentences

Our management establishes and maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

Such information is accumulated and communicated to our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow

timely decisions regarding required disclosure.

Such information is accumulated and communicated to our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosure.

We evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2023, with the participation of our CEO and CFO, as well as other key members of our management.

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Based on this assessment, management concluded that, as of December 31, 2023, the Company’s internal control over financial reporting was effective.

The effectiveness of our internal control over financial reporting as of December 31, 2023 has been audited by BDO USA, P.C., an independent registered public accounting firm who audited our consolidated financial statements as of and for the year ended December 31, 2023, as stated in their report.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended December 31, 2023 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Report of the Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm

Shareholders and Board of Directors

4 unchanged sentences

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company as of December 31, 2022 and 2021, the related consolidated statements of operations, changes in members’/shareholders’ equity, and cash flows for the year ended December 31, 2022, the three months ended December 31, 2021, and the year ended September 30, 2021, and the related notes and our report dated March 8, 2023 expressed an unqualified opinion thereon.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company as of December 31, 2023 and 2022, the related consolidated statements of operations, changes in shareholders’ equity, and cash flows for the years then ended, and the related notes and our report dated March 6, 2024 expressed an unqualified opinion thereon.

Basis for Opinion

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Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ BDO USA, LLP

/s/ BDO USA, P.C.

Houston, Texas

1 unchanged sentence

Other Information

During the quarter ended December 31, 2023, none of our directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408 of Regulation S-K.

Directors, Executive Officers and Corporate Governance

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(incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on September 23, 2022).

Description of Registrant's Securities

Note Purchase Agreement, dated as of April 3, 2023, by and among Riley Exploration - Permian, LLC, as Issuer, Riley Exploration Permian, Inc., as Parent, each of the subsidiaries of the Issuer party thereto as guarantors, each of the holders from time to time party thereto, and U.S.

Bank Trust Company, National Association, as agent for the holders (incorporated by reference to Exhibit 4.1 to the Registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on April 4, 2023).

Credit Agreement dated as of September 28, 2017, by and among Riley Exploration – Permian, LLC, as borrower, Truist Bank, as administrative agent, and the lenders party thereto (incorporated by reference from Exhibit 10.1 to the Registrant’s Registration Statement on Form S-4/A, as filed with the Securities and Exchange Commission on December 31, 2020, Registration No.

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Form of Independent Director Agreement (incorporated by reference from Exhibit 10.13 to the Registrant’s Registration Statement on Form S-4/A, as filed with the Securities and Exchange Commission on January 21, 2021, Registration No.

Riley Exploration Permian, Inc.

2021 Long Term Incentive Plan (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on February 25, 2021).

Form of Common Stock Award Agreement (incorporated by reference from Exhibit 10.10 to the Registrant’s Current Report on Form 8-K, as filed with the Securities and Exchange Commission on March 15, 2021).

Form of Restricted Stock Agreement (Time Vesting) (incorporated by reference to Exhibit 4.4 to the Registrant’s Registration Statement on Form S-8, as filed with the Securities and Exchange Commission on March 1, 2021, Registration No.

333- 253750).

Form of Substitute Restricted Stock Agreement (Time Vesting) (incorporated by reference from Exhibit 4.5 to the Registrant’s Registration Statement on Form S-8 filed with the Commission on March 1, 2021, Registration No.

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(incorporated by reference from Exhibit 10.1 to the Registrant's Current Report on Form 8-K, as filed with the Securities and Exchange Commission on February 27, 2023)

Fourteenth Amendment to the Credit Agreement dated as of April 3, 2023, by and among Riley

Exploration Permian, Inc., Riley Exploration - Permian, LLC, as borrower, Truist Bank, as

administrative agent, and the lenders party thereto (incorporated by reference from Exhibit 10.1 to the

Registrant's Current Report on Form 8-K, as filed with the Securities and Exchange Commission on

April 4, 2023).

Riley Exploration Permian, Inc.

2021 Long Term Incentive Plan, as amended and restated as of April 21, 2023 (Incorporated by reference from Exhibit 10.1 to the Registrant's Current Report on Form 8-K, as filed with the Securities and Exchange Commission on April 24, 2023).

Form of Restricted Stock Agreement (Time Vesting - Named Executive Officers), as amended and restated as of April 21, 2023 (Incorporated by reference from Exhibit 10.2 to the Registrant's Current Report on Form 8-K, as filed with the Securities and Exchange Commission on April 24, 2023).

Form of Restricted Stock Agreement (Non-Employee Director), as amended and restated as of April 21, 2023 (Incorporated by reference from Exhibit 10.3 to the Registrant's Current Report on Form 8-K, as filed with the Securities and Exchange Commission on April 24, 2023).

Form of Common Stock Award Agreement, as amended and restated as of April 21, 2023 (Incorporated by reference from Exhibit 10.4 to the Registrant's Current Report on Form 8-K, as filed with the Securities and Exchange Commission on April 24, 2023).

Separation and Release Agreement dated December 21, 2023, by and among Riley Exploration

Permian, Inc., Riley Permian Operating Company, LLC, and Kevin Riley (Incorporated by reference

from Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, as filed with the Securities and

Exchange Commission on December 26, 2023).

Subsidiaries of the Registrant

Consent of BDO USA, LLP

Consent of Netherland, Sewell & Associates, Inc.

Consent of BDO USA, P.C.

Consent of Ryder Scott Company, L.P.

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

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Certification of Chief Financial Officer pursuant to 18 U.S.C., Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Report of Netherland, Sewell & Associates, Inc.

Riley Exploration Permian, Inc.

Clawback Policy Effective December 1, 2023

Report of Ryder Scott Company, L.P.

101.INS* XBRL Instance Document

10 unchanged sentences

March 6, 2024

Chief Executive Officer

Chief Executive Officer and President

/s/ Philip Riley

Chief Financial Officer

Chief Financial Officer and Executive Vice President of Strategy

Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in their capacities and on the dates indicated.

Signature Title Date

Riley Chairman of the Board and Chief Executive Officer

(Principal Executive Officer) March 8, 2023

/s/ Philip Riley Chief Financial Officer

(Principal Financial Officer) March 8, 2023

Riley Chairman of the Board, Chief Executive Officer and President

(Principal Executive Officer)

March 6, 2024

/s/ Philip Riley Chief Financial Officer and Executive Vice President of Strategy

(Principal Financial Officer)

March 6, 2024

/s/ Amber Bonney Chief Accounting Officer

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Report of Independent Registered Public Accounting Firm

( BDO USA, LLP ;

( BDO USA, P.C.

Houston, Texas , PCAOB ID # 243 )

Consolidated Balance Sheets as of December 31, 2023 and 2022

Consolidated Statements of Operations for the Year Ended December 31, 2022, Three Months Ended December 31, 2021 and Year Ended September 30, 2021

Consolidated Statements of Changes in Members'/Shareholders' Equity for the Year Ended December 31, 2022, Three Months Ended December 31, 2021 and Year Ended September 30, 2021

Consolidated Statements of Cash Flows for the Year Ended December 2022, Three Months Ended December 31, 2021 and Year Ended September 30, 2021

Notes to Consolidated Financial Statements

Consolidated Statements of Operations for the Year s Ended December 31, 202 3 and 2022

Consolidated Statements of Changes in Shareholders' Equity for the Year s Ended December 31, 202 3 and 2022

Consolidated Statements of Cash Flows for the Year s Ended December 31, 202 3 and 2022

Notes to the Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

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We have audited the accompanying consolidated balance sheets of Riley Exploration Permian, Inc.

(the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations, changes in members’/shareholders’ equity, and cash flows for the year ended December 31, 2022, the three months ended December 31, 2021, and the year ended September 30, 2021, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for the year ended December 31, 2022, the three months ended December 31, 2021, and the year ended September 30, 2021, in conformity with accounting principles generally accepted in the United States of America.

(the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations, changes in shareholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for the years then ended , in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated March 6, 2024 expressed an unqualified opinion thereon.

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Estimation of Oil and Natural Gas Reserves and Effect on Depreciation, Depletion and Amortization (“DD&A”) Expense and Impairment Expense Related to Proved Oil and Natural Gas Properties

The Company’s oil and natural gas properties, net balance as of December 31, 2022 was $440.1 million, which includes proved oil and natural gas properties of $516.0 million and accumulated DD&A and impairment of $133.8 million.

DD&A expense and impairment expense was $31.5 million and $7.3 million, respectively, for the year ended December 31, 2022.

As described in Note 3 – Summary of Significant Accounting Policies to the consolidated financial statements, the Company accounts for its oil and natural gas activities using the successful efforts method of accounting which involves management’s use of internal and independent petroleum engineers to make estimates of proved oil and natural gas reserves necessary to record DD&A expense and impairment expense.

To estimate the proved oil and natural gas reserves, management and their internal and independent petroleum engineers make significant estimates and assumptions including forecasting of future production volumes of proved oil and natural gas properties.

We have identified the estimation of future production volumes used to estimate proved oil and natural gas reserves and the associated effect on DD&A expense and impairment expense related to proved oil and natural gas properties as a critical audit matter.

Estimating future production volumes involves a high degree of subjectivity from management and their internal and independent petroleum engineers.

Changes in this estimate and assumptions could have a significant effect on the measurement of DD&A expense and impairment expense.

Auditing this estimate and assumptions required subjective and complex auditor judgement.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Estimation of Future Production Volumes Used to Estimate Proved Oil and Natural Gas Reserves and the Associated Effect on Depreciation, Depletion and Amortization (“DD&A”) Expense Related to Proved Oil and Natural Gas Properties

As described in Note 3 to the consolidated financial statements, the Company uses the successful efforts method of accounting for its oil and natural gas producing activities which involves management making significant estimates including forecasting of future production volumes of proved oil and natural gas reserves.

As disclosed in Note 5, the Company’s oil and natural gas properties, net balance as of December 31, 2023 was $846.9 million, which includes proved oil and natural gas properties of $895.7 million and accumulated depletion, amortization and impairment of $206.1 million.

DD&A expense was $62.5 million for the year ended December 31, 2023.

We have identified the estimation of future production volumes used to estimate proved oil and natural gas reserves and the associated effect on DD&A expense related to proved oil and natural gas properties as a critical audit matter.

Estimating future production volumes involves a high degree of subjectivity from management and their internal and independent petroleum

Changes in this estimate could have a significant effect on the measurement of DD&A expense.

Auditing this estimate required subjective and complex auditor judgement.

The primary procedures we performed to address this critical audit matter included:

• Testing the design and operating effectiveness of internal controls relating to management’s estimation of proved oil and natural gas reserves.

• Evaluating the professional qualifications of the internal and independent petroleum engineers, including their relationship to the Company, and evaluating the process and judgments used in estimating the Company’s proved oil and natural gas reserves.

• Comparing estimates of future production volumes and production decline analyses against historical results of production volumes and production decline analyses on a summary basis for all wells, on a detailed basis for certain wells and on a field level for the field that was impaired during the year.

• Evaluating the professional qualifications and objectivity of the internal and independent petroleum engineers, including their relationship to the Company.

• Comparing estimates of future production volumes against historical results of production volumes on a summary basis for all wells and on a detailed basis for certain wells.

• Performing a retrospective review over management estimates of future production volumes made in prior periods as compared to actual results.

/s/ BDO USA, LLP

Estimation of Future Production Volumes Used to Estimate Fair Value of The Acquired Oil & Natural Gas Properties in the New Mexico Acquisition

As described in Note 4 to the consolidated financial statements, the Company completed the New Mexico Acquisition from Pecos for approximately $330 million, before customary purchase price adjustments.

The transaction qualified as a business combination under ASC 805, Business Combinations, and as such, all assets and liabilities associated with the New Mexico Acquisition were recognized at fair value as of the acquisition date.

As a result of the New Mexico Acquisition, the Company recognized oil and natural gas properties of $342.3 million, which are included in oil and natural gas properties, net within the Company’s consolidated balance sheet.

To determine the acquisition date fair value of the oil and natural gas properties, management made significant estimates including forecasting of future production volumes of the acquired oil and natural gas properties.

We have identified the estimation of future production volumes used to estimate the acquisition date fair value of the acquired oil and natural gas properties in the New Mexico Acquisition as a critical audit matter.

Estimating future production volumes involves a high degree of subjectivity from management and their internal and independent petroleum engineers.

Changes in this estimate could have a significant effect on the acquisition date fair value of the acquired oil and natural gas properties.

Auditing this estimate required subjective and complex auditor judgement.

The primary procedures we performed to address this critical audit matter included:

• Evaluating the professional qualifications and objectivity of the internal and independent petroleum engineers, including their relationship to the Company.

• Comparing estimates of future production volumes against historical results of production volumes on a summary basis for all acquired wells and on a detailed basis for certain wells.

• Performing a retrospective review over management estimates of future production volumes made in the acquisition date fair value forecast as compared to actual results.

/s/ BDO USA, P.C.

We have served as the Company's auditor since 2016.

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CONSOLIDATED BALANCE SHEETS

December 31, 2022 December 31, 2021

(In thousands, except share amounts)

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Accounts receivable 35,126 25,551

Prepaid expenses and other current assets 3,236 4,122

Prepaid expenses 1,625 3,236

Inventory 6,177 8,886

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Accounts payable $ 3,855 $ 3,939

Accounts payable - related parties 324 164

Accrued liabilities 33,159 35,582

1 unchanged sentence

Current derivative liabilities 360 16,472

Current portion of long-term debt 20,000 —

Other current liabilities 6,276 2,562

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Asset retirement obligations 19,255 2,724

Revolving credit facility 56,000 65,000

Long-term debt 335,959 56,000

Deferred tax liabilities 73,345 45,756

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Additional paid-in capital 279,112 274,643

Retained earnings (Accumulated deficit) 58,783 ( 33,919 )

Retained earnings

142,463 58,783

Total Shareholders' Equity 421,595 333,446

3 unchanged sentences

CONSOLIDATED STATEMENTS OF OPERATIONS

Year Ended December 31, 2022 Three Months Ended December 31, 2021 Year Ended September 30, 2021

(In thousands, except per share/unit amounts)

Year Ended December 31,

(In thousands, except per share amounts)

Oil and natural gas sales, net $ 372,647 $ 319,343

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Administrative costs 26,569 18,496

Unit-based compensation expense — — 689

Share-based compensation expense 6,833 3,439

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Income From Operations 171,893 203,519

Other Expense:

Other Income (Expense):

Interest expense, net ( 31,816 ) ( 1,090 )

Loss on derivatives ( 51,574 ) ( 5,193 ) ( 89,195 )

Total Other Expense ( 52,664 ) ( 6,089 ) ( 93,729 )

Net Income (Loss) From Continuing Operations Before Income Taxes 150,855 27,267 ( 33,853 )

Gain (loss) on derivatives, net 6,193 ( 51,574 )

Loss from equity method investment

Total Other Income (Expense) ( 25,841 ) ( 52,664 )

Net Income From Operations Before Income Taxes 146,052 150,855

Income tax expense ( 34,461 ) ( 32,844 )

Net Income (Loss) From Continuing Operations 118,011 21,398 ( 46,869 )

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

RILEY EXPLORATION PERMIAN, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS - (Continued)

Year Ended December 31, 2022 Three Months Ended December 31, 2021 Year Ended September 30, 2021

(In thousands, except per share/unit amounts)

Discontinued Operations:

Loss from discontinued operations — — ( 18,738 )

Income tax expense on discontinued operations — — ( 59 )

Loss on Discontinued Operations — — ( 18,797 )

Net Income (Loss) 118,011 21,398 ( 65,666 )

Dividends on preferred units — — ( 1,491 )

Net Income (Loss) Attributable to Common Shareholders/Unitholders $ 118,011 $ 21,398 $ ( 67,157 )

Net Income (Loss) per Share/Unit from Continuing Operations:

Basic $ 6.04 $ 1.10 $ ( 3.02 )

Diluted $ 5.99 $ 1.09 $ ( 3.02 )

Net Loss per Share/Unit from Discontinued Operations:

Basic $ — $ — $ ( 1.17 )

Diluted $ — $ — $ ( 1.17 )

Net Income (Loss) per Share/Unit:

Net Income $ 111,591 $ 118,011

Net Income per Share:

Basic $ 5.66 $ 6.04

Diluted $ 5.58 $ 5.99

Weighted Average Common Shares/Units Outstanding:

Weighted Average Common Shares Outstanding:

Basic 19,705 19,553

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RILEY EXPLORATION PERMIAN, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS'/SHAREHOLDERS' EQUITY

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(In Thousands)

Members' Equity Shareholders' Equity

Units Outstanding Amount Shares Amount Additional Paid-in Capital Retained Earnings (Accumulated Deficit) Total Shareholders' Equity

Balance, September 30, 2020 1,555 $ 166,617 — $ — $ — $ — $ —

Issuance of common units under long-term incentive plan 13 — — — — — —

Purchase of common units under long-term incentive plan ( 3 ) ( 191 ) — — — — —

Dividends on preferred units — ( 1,491 ) — — — — —

Dividends on common units — ( 7,571 ) — — — — —

Unit-based compensation expense — 689 — — — — —

Net loss from October 1, 2020 through February 26, 2021 — ( 27,058 ) — — — — —

Preferred units converted to common units 512 61,196 — — — — —

Restricted common shares issued in exchange for common units issued under long-term incentive plan ( 24 ) — 198 — — — —

Common shares issued in exchange for common units (effected for 1-for-12 reverse stock split) ( 2,053 ) ( 192,191 ) 16,733 17 192,174 — 192,191

Common shares issued for business combination — — 891 1 26,391 — 26,392

Restricted common shares issued — — 3 — — — —

Share-based compensation expense — — — — 1,939 — 1,939

Dividends declared — — — — — ( 10,559 ) ( 10,559 )

Net loss from February 27, 2021 through September 30, 2021 — — — — — ( 38,608 ) ( 38,608 )

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

Common stock sold to public, net of issuance costs — — 1,667 2 46,682 — 46,684

Repurchased shares for tax withholding — — ( 17 ) — ( 514 ) — ( 514 )

Balance, September 30, 2021 — $ — 19,672 $ 20 $ 270,837 $ ( 49,167 ) $ 221,690

Shareholders' Equity

Shares Amount Additional Paid-in Capital Retained Earnings (Accumulated Deficit) Total Shareholders' Equity

Balance, December 31, 2021 19,837 $ 20 $ 271,737 $ ( 33,919 ) $ 237,838

Share-based compensation expense 369 — 3,946 — 3,946

Repurchased shares for tax withholding ( 45 ) — ( 1,040 ) — ( 1,040 )

Issuance of common shares under long-term incentive plan — — 175 — — — —

Dividends declared — — — ( 25,309 ) ( 25,309 )

3 unchanged sentences

Repurchased shares for tax withholding ( 80 ) — ( 2,511 ) — ( 2,511 )

Issuance of common shares under long-term incentive plan — — 369 — — — —

Issuance of common shares under ATM 9 — 2 — 2

Dividends declared — — — ( 27,911 ) ( 27,911 )

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CONSOLIDATED STATEMENTS OF CASH FLOWS

Year Ended December 31, 2022 Three Months Ended December 31, 2021 Year Ended September 30, 2021

Year Ended December 31,

(In thousands)

Cash Flows from Operating Activities:

Net income (loss) $ 118,011 $ 21,398 $ ( 65,666 )

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Loss from discontinued operations — — 18,797

Oil and gas lease expirations 1,953 588 9,347

Net income $ 111,591 $ 118,011

Adjustments to reconcile net income to net cash provided by operating activities:

Exploratory well costs and lease expirations 4,143 1,953

Depletion, depreciation, amortization and accretion 65,055 32,113

Impairment of proved properties 9,760 7,325

Loss on derivatives 51,574 5,193 89,195

(Gain) loss on derivatives, net ( 6,193 ) 51,574

Settlements on derivative contracts ( 17,221 ) ( 75,257 )

Amortization of deferred financing costs 731 282 653

Unit-based compensation expense — — 689

Amortization of deferred financing costs and discount 4,161 731

Share-based compensation expense 6,978 3,946

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Accounts receivable ( 9,575 ) ( 7,549 )

Accounts receivable – related parties — 456 ( 401 )

Prepaid expenses and other current assets ( 717 ) 5,250

Inventory ( 546 ) ( 6,235 )

Other non-current assets ( 1,179 ) ( 12 )

Accounts payable and accrued liabilities 3,200 2,860

Accounts payable - related parties 160 164 —

Revenue payable 11,470 6,380

Other current liabilities ( 1,514 ) 826

Net Cash Provided by Operating Activities - Continuing Operations 170,288 21,727 86,073

Net Cash Provided by Operating Activities 207,195 170,288

Cash Flows from Investing Activities:

Additions to oil and natural gas properties ( 134,796 ) ( 111,662 )

Net assets acquired in business combination ( 324,686 ) —

Acquisitions of oil and natural gas properties ( 5,443 ) —

Acquisitions of land — ( 15,342 )

Contributions to equity method investment ( 3,566 ) —

Additions to other property and equipment ( 1,065 ) ( 1,252 )

Tengasco acquired cash — — 860

Net Cash Used in Investing Activities - Continuing Operations ( 128,256 ) ( 29,128 ) ( 59,628 )

Net Cash Used in Investing Activities ( 469,556 ) ( 128,256 )

Cash Flows from Financing Activities:

Deferred financing costs ( 7,406 ) ( 1,942 )

Proceeds from credit facility

185,000 22,000

Repayments under credit facility

( 56,000 ) ( 31,000 )

Proceeds from senior notes, net of issuance costs 188,000 —

Repayments of senior notes ( 15,000 ) —

Payment of common share dividends ( 27,706 ) ( 25,066 )

Common stock repurchased for tax withholding ( 2,511 ) ( 1,040 )

Net Cash Provided by (Used in) Financing Activities 264,379 ( 37,048 )

Net Increase in Cash and Cash Equivalents 2,018 4,984

Cash and Cash Equivalents, Beginning of Year

Cash and Cash Equivalents, End of Year

$ 15,319 $ 13,301

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

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CONSOLIDATED STATEMENTS OF CASH FLOWS - (Continued)

Year Ended December 31, 2022 Three Months Ended December 31, 2021 Year Ended September 30, 2021

Year Ended December 31,

(In thousands)

Cash Flows from Financing Activities:

Deferred financing costs ( 1,942 ) ( 274 ) ( 139 )

Proceeds from revolving credit facility 22,000 5,000 5,500

Repayments under revolving credit facility ( 31,000 ) — ( 46,500 )

Payment of common share/unit dividends ( 25,066 ) ( 6,056 ) ( 18,286 )

Proceeds from issuance of common stock — — 50,000

Public offering costs — — ( 3,316 )

Payment of preferred unit dividends — — ( 1,491 )

Common stock repurchased for tax withholding ( 1,040 ) ( 19 ) ( 514 )

Purchase of common units under long-term incentive plan — — ( 191 )

Net Cash Used in Financing Activities - Continuing Operations ( 37,048 ) ( 1,349 ) ( 14,937 )

Net Increase (Decrease) in Cash and Cash Equivalents from Continuing Operations 4,984 ( 8,750 ) 11,508

Cash Flows from Discontinued Operations:

Operating activities — — 7

Investing activities — — 3,892

Net Increase in Cash and Cash Equivalents from Discontinued Operations — — 3,899

Net Increase (Decrease) in Cash and Cash Equivalents 4,984 ( 8,750 ) 15,407

Cash and Cash Equivalents, Beginning of Period 8,317 17,067 1,660

Cash and Cash Equivalents, End of Period $ 13,301 $ 8,317 $ 17,067

Supplemental Disclosure of Cash Flow Information

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Income taxes $ 9,949 $ 3,611

Non-cash Investing and Financing Activities - Continuing Operations:

Non-cash Investing and Financing Activities:

Changes in capital expenditures in accounts payable and accrued liabilities $ ( 5,850 ) $ 15,229

Right of use assets obtained in exchange for operating lease liability $ 1,277 $ 1,655

Preferred unit dividends paid in kind $ — $ — $ 904

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

Assets acquired and liabilities assumed in business combination $ — $ — $ 3,695

Common stock issued for business combination $ — $ — $ 26,392

Preferred units converted to common units $ — $ — $ 61,196

Non-cash Investing Activities - Discontinued Operations:

Goodwill incurred in business combination $ — $ — $ 19,013

Assets acquired and liabilities assumed in business combination $ — $ — $ 2,824

Assets contributed to equity method investment $ 2,272 $ —

Asset retirement obligations assumed in acquisitions $ 19,359 $ —

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

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(1) Nature of Business

Riley Exploration Permian, Inc., ("Riley Permian", "REPX", "the Company", "Registrant", "we", "our", or "us"), is a growth-oriented, independent oil and natural gas company focused on the acquisition, exploration, development and production of oil, natural gas and natural gas liquids ("NGL") in Texas and New Mexico.

Our activities primarily include the horizontal development of the San Andres formation, a shelf margin deposit on the Northwest Shelf of the Permian Basin.

Our acreage is primarily located on large, contiguous blocks in Yoakum County, Texas.

On February 26, 2021 (the “Closing Date”), Riley Permian (f/k/a Tengasco, Inc.

(“Tengasco”)), consummated a merger, dated as of October 21, 2020, by and among Tengasco, Antman Sub, LLC, a newly formed Delaware limited liability company and wholly owned subsidiary of Tengasco (“Merger Sub”), and Riley Exploration – Permian, LLC (“REP LLC”).

Merger Sub merged with and into REP LLC, with REP LLC as the surviving company and as a wholly owned subsidiary of Tengasco (collectively, with the other transactions described in the Merger Agreement, the “Merger”).

On the Closing Date, the Registrant changed its name from Tengasco, Inc.

to Riley Exploration Permian, Inc.

Riley Exploration Permian, Inc (the "Company") was formed as a Delaware limited liability company, Riley Exploration – Permian, LLC ("REP LLC"), in 2016.

In February 2021, REP LLC consummated a merger pursuant to which REP LLC became a wholly-owned subsidiary of Tengasco, Inc., a Delaware corporation (“Tengasco”), and Tengasco changed its name to Riley Exploration Permian, Inc.

(the "Merger").

The Company is a growth-oriented, independent oil and natural gas company focused on the acquisition, exploration, development and production of oil, natural gas and NGLs in Texas and New Mexico.

On April 3, 2023 (the “Closing Date”), the Company completed the acquisition of oil and natural gas assets (the “New Mexico Acquisition”) from Pecos Oil & Gas, LLC (“Pecos”), a Delaware limited liability company and an affiliate of Cibolo Energy Partners LLC.

For further information regarding the New Mexico Acquisition, see Note 4 - Acquisitions of Oil and Natural Gas Properties.

Our Properties

Our acreage is primarily located on large contiguous blocks in Yoakum County, Texas, which represents our Champions Field and Eddy County, New Mexico, which represents our Redlake Field acquired in the New Mexico Acquisition.

Our activities primarily include the horizontal development of conventional reservoirs on the Northwest Shelf of the Permian Basin.

Our acreage is primarily located on large, contiguous blocks in Yoakum County, Texas and Eddy County, New Mexico.

Current Commodity Environment

and global markets experienced heightened volatility following impactful geopolitical events, consistent evidence of widespread inflation, as well as increased fears of an economic recession.

However, commodity prices continued to remain high during 2022 due to OPEC+ and other oil and natural gas producers not rapidly increasing production levels, as well as from the recovery in demand related to the COVID-19 pandemic.

The full-scale military invasion of Ukraine by Russian troops has continued unabated since February 2022 coupled with related economic sanctions imposed on Russia further exacerbating supply shortages, leading to disruptions in the credit and capital markets, including significant uncertainty in commodity prices, during 2022.

and global economies and markets have experienced heightened volatility following impactful geopolitical events, the effects of widespread inflation and the impact of significantly higher interest rates.

Prices for oil and natural gas are determined primarily by prevailing market conditions, which have been and could continue to be volatile.

The combination of geopolitical events, inflation and the rising interest rate environment has led to increasing forecasts of a U.S.

or global recession.

Any such recession could prolong market volatility or cause a decline in commodity prices, among other potential impacts.

The Company cannot estimate the length or gravity of the future impact these events will have on the Company's results of operations, financial position, liquidity and the value of oil and natural gas reserves.

(2) Basis of Presentation

On August 16, 2022, the Company's Board of Directors (the "Board") acting by written consent resolved to amend and restate the Company's Second Amended and Restated Bylaws to change the Company's fiscal year period from October 1st through September 30th each year to January 1st through December 31st each year commencing with the 2022 calendar year (the "Bylaws Restatement").

On August 19, 2022, the holders of approximately 75 % of our outstanding Common Stock acting by written consent approved the Bylaws Restatement and adopted the Third Amended and Restated Bylaws.

In accordance with Rule 14c-2 under the Exchange Act, the aforementioned actions taken by written consent became effective on September 23, 2022.

As a result, the Company's 2022 fiscal year is now the period from January 1, 2022 to December 31, 2022.

The accompanying consolidated financial statements 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 accounting principles generally accepted in the United States ("U.S.

Effective by the Company's Board of Directors written consent on September 23, 2022, the Company's fiscal year is now the period from January 1 to December 31, beginning with the year ended December 31, 2022.

The Company's accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("U.S.

All intercompany balances and transactions have been eliminated upon consolidation.

The Merger was accounted for as a reverse merger and, as such, the historical operations of REP LLC are deemed to be those of the Company.

Thus, the consolidated financial statements included in this report reflect (i) the historical operating results of REP LLC prior to the Merger;

(ii) the consolidated results of the Company following the Merger;

(iii) the assets and liabilities of REP LLC at their historical cost;

and (iv) the Company’s equity and earnings per share for all periods presented.

Certain prior period amounts have been reclassified to conform to the current period financial statement presentation.

These reclassifications had an immaterial effect on the previously reported total assets, total liabilities, members'/shareholders' equity, results of operations or cash flows .

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These reclassifications had no effect on the previously reported total assets, total liabilities, shareholders' equity, results of operations or cash flows .

(3) Summary of Significant Accounting Policies

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GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.

These estimates and assumptions may also affect disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

These estimates

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and assumptions may also affect disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

The Company evaluates these estimates on an ongoing basis, using historical experience, consultation with experts and other methods the Company considers reasonable in the particular circumstances.

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Accounts Receivable

Our receivables arise primarily from the sale of oil, natural gas and NGLs and joint interest owner receivables for properties in which we serve as the operator.

Our receivables arise primarily from the sale of oil, natural gas and natural gas liquids ("NGLs") and joint interest owner receivables for properties in which we serve as the operator.

Accounts receivable are stated at amounts due, net of an allowance for credit losses, if necessary.

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Allowances for credit losses are recorded as reductions to the carrying values of the accounts receivables included in the Company’s consolidated balance sheets and are recorded in Administrative costs in the consolidated statements of operations if failure to collect an estimable portion is determined to be probable.

The Company had no allowance for credit losses at December 31, 2022 and December 31, 2021.

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The Company had no allowance for credit losses at December 31, 2023 and 2022.

Accounts receivable is summarized below:

December 31, 2022 December 31, 2021

(In thousands)

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Total accounts receivable $ 35,126 $ 25,551

As of December 31, 2021, the Company had accounts receivables from oil, natural gas and NGL sales of $ 17.6 million.

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The Company's inventory represents tangible assets such as drilling pipe, tubing, casing and operating supplies used in the Company's future drilling or repair operations.

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The costs of development wells are capitalized whether producing or non-producing.

Costs to drill exploratory wells are capitalized pending the determination of whether proved reserves are found.

Costs to drill exploratory wells are capitalized, or suspended, pending the determination of whether proved reserves are found.

If an exploratory well is determined to be unsuccessful, the costs of drilling the unsuccessful exploratory well are charged to exploration costs.

Geological and geophysical costs, including seismic studies, are charged to exploration costs as incurred.

Expenditures incurred to operate and for maintenance, repairs and minor renewals necessary to maintain our oil and natural gas properties in operating condition are charged to lease operating expenses as incurred.

Expenditures incurred to operate and for maintenance, repairs and minor renewals necessary to maintain the oil and natural gas properties in operating condition are charged to lease operating expenses as incurred.

Capitalized costs of proved oil and natural gas properties are amortized using the units-of-production method based on production and estimates of proved reserve quantities.

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If the carrying amount exceeds the estimated undiscounted future cash flows, the carrying amount of the oil and natural gas properties is adjusted to estimated fair value.

Assumptions associated with discounted cash flow models or valuations used in the impairment evaluation include estimates of

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future oil, natural gas and NGL prices, production costs, development expenditures, anticipated production of proved reserves, appropriate risk-adjusted discount rates and other relevant data.

Assumptions associated with discounted cash flow models or valuations used in the impairment evaluation include estimates of future oil, natural gas and NGL prices, production costs, development expenditures, anticipated production of proved reserves, appropriate risk-adjusted discount rates and other relevant data.

Unproved oil and natural gas properties are assessed periodically for impairment on a property-by-property basis based on remaining lease terms, drilling results or future plans to develop acreage.

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Business Combinations

In accordance with ASC 805 - Business Combinations, the Company accounts for its acquisitions that qualify as a business using the acquisition method.

If the set of assets and activities acquired is not considered a business, it is accounted for as an asset acquisition using a cost accumulation model.

The Company accounts for business combinations in accordance with the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 805, Business Combinations.

The Company accounts for its acquisitions that qualify as a business using the acquisition method in which the Company recognizes and measures identifiable assets acquired, liabilities assumed, and any non-controlling interest in the acquired entity at their fair values as of the acquisition date.

If the set of assets and activities acquired is not considered a business, it is accounted for as an asset acquisition using a cost

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accumulation model.

In the cost accumulation model, the cost of the acquisition, including certain transaction costs, is allocated to the assets acquired on the basis of relative fair values.

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In accordance with the acquisition method, the Company allocates the purchase price of an acquired business to its identifiable assets and liabilities based on the estimated fair values.

Transaction costs related to the business combination are expensed as incurred.

The fair values of identifiable assets acquired and liabilities assumed are determined based on various valuation techniques, including market prices, discounted cash flow analysis, and independent appraisals.

This fair value measurement is based on unobservable (Level 3) inputs.

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The excess value of the net identifiable assets and liabilities acquired over the purchase price of an acquired business, if any, is recorded as a bargain purchase gain.

Transaction costs related to the business combination are expensed as incurred.

Other Property and Equipment, Net

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Capitalized costs related to leasehold improvements are depreciated over the life of the lease.

As of December 31, 2022 and 2021, the Company had capitalized property and equipment costs of $ 5.3 million and $ 3.6 million, respectively, with $ 2.0 million and $ 1.7 million, respectively, of accumulated depreciation on the consolidated balance sheet.

As of December 31, 2023 and 2022, the Company had capitalized property and equipment costs of $ 6.6 million and $ 5.3 million, respectively, with $ 2.6 million and $ 2.0 million, respectively, of accumulated depreciation on the consolidated balance sheets.

Components of other property and equipment consists of computer equipment, office furniture, tools and equipment, buildings and improvements, and vehicles.

Land purchases are accounted for at cost and are not depreciated.

As of December 31, 2022 and 2021, the Company had capitalized land costs of $ 16.7 million and $ 1.3 million, respectively, on the consolidated balance sheet.

As of both December 31, 2023 and 2022, the Company had capitalized land costs of $ 16.7 million on the consolidated balance sheets.

Deferred Financing Costs

Deferred financing costs include origination, arrangement, legal and other fees to issue or amend the terms of credit facility agreements.

These deferred financing costs are reported as other non-current assets and recognized on the consolidated statement of operations as interest expense by amortizing the costs over the related financing using the straight-line method, which approximates the effective interest method.

Deferred financing costs include origination, arrangement, legal and other fees to issue or amend the terms of the revolving credit facility ("Credit Facility") and unsecured senior notes ("Senior Notes").

In the consolidated balance sheets, unamortized deferred financing costs related to the Credit Facility are reported as other non-current assets.

For the Senior Notes, such costs are netted against the carrying value of the Senior Notes.

Deferred financing costs are recognized on the consolidated statement of operations as interest expense by amortizing the costs over the related financing using the straight-line method, which approximates the effective interest method.

Equity Issuance Costs

Equity issuance costs include underwriter, legal, accounting, printing and other fees to issue common equity securities.

These issuance costs are netted against offering proceeds at the time of issuance and are reported as other non-current assets when related to the issuance of common equity securities.

These issuance costs are netted against offering proceeds at the time of issuance and are reported as additional paid in capital when related to the issuance of common equity securities.

The issuance costs are expensed to the consolidated statement of operations if the issuance is unsuccessful.

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Other Non-Current Assets, Net

Other non-current assets consisted of the following:

December 31, 2022 December 31, 2021

(In thousands)

Deferred financing costs, net $ 3,844 $ 2,556

Prepayments to outside operators 186 690

Right of use assets 1,890 1,370

Other deposits 63 50

Equity method investment

Total other non-current assets, net $ 12,601 $ 4,175

The Company incurred $ 1.9 million in financing costs related to the amendments of its revolving credit facility in April and October 2022.

The Company extended certain existing leases and entered into a new lease during the year ended December 31, 2022, which resulted in additions to the right of use assets.

The Company incurred $ 2.8 million in financing costs related to the amendments of the Credit Facility in 2023.

The Company extended certain existing office leases and entered into new vehicle leases during the year ended December 31, 2023, which resulted in additions to the right of use assets.

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Equity method investment.

In January 2023, the Company entered into an agreement to form a joint venture created for the purpose of constructing a new power infrastructure for onsite power generation in Yoakum County, Texas using produced natural gas.

RPC Power Holdco LLC, a wholly-owned subsidiary of REPX, has a 30 % investment in the joint venture, RPC Power LLC ("RPC Power").

The Company contributed its portion of capital for construction of the onsite power generation.

As of December 31, 2023, the Company had invested $ 5.8 million to date in the joint venture, comprised of $ 3.6 million in cash and $ 2.3 million of contributed assets, which was reduced by the Company's share of the joint venture's loss during the year ended December 31, 2023.

The Company accounts for its corporate joint ventures under the equity method of accounting in accordance with FASB ASC Topic 323 “Investments — Equity Method and Joint Ventures.” The Company applies the equity method of accounting to investments of less than 50% in an investee over which the Company exercises significant influence but does not have control.

Under the equity method of accounting, the Company’s share of the investee’s earnings or loss is recognized in the consolidated statements of operations.

Judgment regarding the level of influence over each equity method investment includes considering key factors such as ownership interest, representation on the board of directors, participation in policy-making decisions, material intercompany transactions and extent of ownership by an investor in relation to the concentration of other shareholdings.

Accrued Liabilities

Accrued liabilities consisted of the following:

December 31, 2022 December 31, 2021

(In thousands)

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ARO consist of future plugging and abandonment expenses on oil and natural gas properties.

The fair value of the ARO is recorded as a liability in the period in which wells are drilled with a corresponding increase in the carrying amount of oil and natural gas properties.

The fair value of ARO is recorded as a liability in the period in which wells are drilled with a corresponding increase in the carrying amount of oil and natural gas properties.

The liability is accreted for the change in its present value each period and the capitalized cost is depreciated using the units-of-production method.

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Components of the changes in ARO consisted of the following and is shown below:

December 31, 2022 December 31, 2021

(In thousands)

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Liabilities incurred 45 358

Liabilities assumed in acquisitions (1)

Revision of estimated obligations — 326

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_____________________

(1) Primarily relates to ARO assumed in the New Mexico Acquisition.

(2) Current ARO is included within other current liabilities on the accompanying consolidated balance sheets.

Goodwill represents the future economic benefit arising from other assets acquired in a business combination that are not individually identified or separately recognized.

Goodwill is initially recognized as the excess of the purchase price of a business combination over the fair value of the net assets acquired and is tested for impairment annually in accordance with ASC 350 - Intangibles - Goodwill and Other, or more frequently if there is a change in events or circumstances that indicate the carrying value of the goodwill may not be recoverable.

The impairment test should occur at the reporting unit level determined by the Company and an impairment should only exist if the Company has determined the carrying value of the goodwill no longer exceeds the implied fair value.

If the Company determines it is more likely than not the fair value of the reporting unit is less than its carrying value, including goodwill, then a quantitative assessment is necessary.

An impairment loss is recognized if the carrying value of the reporting unit goodwill exceeds the implied fair value of that goodwill.

At the closing of the Merger, the Company determined it had two reporting units, and the entire goodwill balance was included in the reporting unit acquired in the Merger (the "Kansas Reporting Unit").

The Company did not fully integrate the Kansas Reporting Unit in the Company's operations as it was deemed to be held for sale upon acquisition.

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 consolidated statement of operations, of $ 18.5 million for the year ended September 30, 2021.

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

Revenue Recognition

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Under the Company’s natural gas gathering and processing contracts, natural gas is delivered to the purchaser at the inlet of the purchasers' gathering system, at which point title and risk of loss is transferred to the purchaser.

The purchaser gathers and processes the natural gas and remits proceeds to the Company for the resulting sales of natural gas and NGLs in accordance

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with the pricing provisions of the Company's contracts.

The purchaser gathers and processes the natural gas and remits proceeds to the Company for the resulting sales of natural gas and NGLs in accordance with the pricing provisions of the Company's contracts.

As the gathering, processing and transportation activities occur after the transfer of control, these costs are netted against our oil and natural gas sales and represent part of the transaction price of the contract, and may exceed the sales price.

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Revenue is recorded in the month in which production is delivered to the purchaser.

However, certain settlement statements for oil, natural gas and NGLs may not be received for thirty to ninety days after the date production is delivered and, as a result, the Company is required to estimate the amount of production delivered to the purchaser and the price that will be received for the sale of the product.

However, certain settlement statements for oil, natural gas and NGLs may not be received for thirty to ninety days after the date production is delivered and, as a result,

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the Company is required to estimate the amount of production delivered to the purchaser and the price that will be received for the sale of the product.

Differences identified between the Company’s revenue estimates and actual revenue received historically have not been significant.

For the year ended December 31, 2022, the three months ended December 31, 2021, and year ended September 30, 2021, revenue recognized in the reporting period related to performance obligations satisfied in prior reporting periods was not material.

For the years ended December 31, 2023 and 2022, revenue recognized in the reporting period related to performance obligations satisfied in prior reporting periods was not material.

Disaggregation of Revenue

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

Year Ended December 31, 2022 Three Months Ended December 31, 2021 Year Ended September 30, 2021

Year Ended December 31,

(In thousands)

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Natural gas 2,612 10,755

Natural gas liquids 9,865 3,322 4,715

Total oil and natural gas sales, net $ 372,647 $ 319,343

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Production proceeds that the Company has not yet distributed to other revenue and royalty owners are reflected as revenue payable in the consolidated balance sheets.

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Lease Operating Expenses

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Interest and penalties, if any, related to uncertain tax positions are included in current income tax expense.

There are no unrecorded liabilities for uncertain tax positions related to the Company as of December 31, 2022 and December 31, 2021.

There are no unrecorded liabilities for uncertain tax positions related to the Company as of December 31, 2023 and 2022.

See further discussion in Note 11- Income Taxes.

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Interest Expense

We have financed a portion of our working capital requirements, capital expenditures and certain acquisitions with borrowings under our revolving credit facility.

We have financed a portion of our working capital requirements, capital expenditures and certain acquisitions with borrowings under our Credit Facility as well as the issuance of Senior Notes.

We incur interest expense that is affected by both fluctuations in interest rates and our financing decisions.

Interest expense in the consolidated statements of operations reflects interest less amounts allocated to capital expenditures, unused commitment fees paid to our lender, interest rate swap settlements plus the amortization of deferred financing costs (including origination and amendment fees).

Interest expense was $ 1.1 million, $ 0.9 million, and $ 4.5 million for the year ended December 31, 2022, the three months ended December 31, 2021, and the year ended September 30, 2021, respectively.

Interest expense in the consolidated statements of operations reflects interest, unused commitment fees paid to our lender, interest rate swap settlements and the amortization of deferred financing costs (including origination and amendment fees) less amounts allocated to capital expenditures.

Interest expense was $ 31.8 million and $ 1.1 million for the years ended December 31, 2023 and 2022, respectively.

Capitalized interest represents interest expense related to wells in process during the period in which the Company is incurring costs and expending resources to get the properties ready for their intended purpose.

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Our purchaser contracts include marketing provisions with our purchasers to market our production.

For the year ended December 31, 2022, the three months ended December 31, 2021, and the year ended September 30, 2021, one purchaser accounted for 89 %, 87 %, and 87 %, respectively, of our revenue purchased, with two end customers each accounting for more than 10% of the purchased revenue.

During such periods, no other purchaser accounted for 10% or more of our revenues.

The loss of this purchaser could materially and adversely affect our revenues in the short-term.

However, the end customers include companies with lower credit risk.

Further, based on the current demand for oil and natural gas and the availability of other purchasers, we believe that the loss of any of our purchasers would not have a long-term material adverse effect on our financial condition and results of operations because oil, natural gas and NGLs are marketable products with well-established markets.

We manage credit risk related to accounts receivable through credit approvals, escrow accounts and monitoring procedures.

For the years ended December 31, 2023 and 2022, one purchaser accounted for 70 % and 89 %, respectively, of our revenue purchased.

For the year ended December 31, 2023, one other purchaser accounted for 10% or more of our revenues.

During the year ended December 31, 2022, no other purchaser accounted for 10% or more of our revenues.

The loss of either of these purchasers could materially and adversely affect our revenues in the short-term.

However, based on the current demand for oil and natural gas and the availability of other purchasers, we believe that the loss of any of our purchasers would not have a long-term material adverse effect on our financial condition and results of operations because oil and natural gas are fungible products with well-established markets.

Our primary exposure to credit risk is through receivables from the sale of our oil, natural gas, and NGLs (approximately $ 31.1 million at December 31, 2023) and the collection of receivables from joint interest owners for their proportionate share of expenditures made on properties in which we serve as the operator (approximately $ 1.6 million at December 31, 2023).

We manage credit risk related to accounts receivable through netting revenues and expenses on properties in which we serve as the operator, credit approvals, escrow accounts and monitoring procedures.

Accounts receivable are generally not collateralized.

However, we routinely assess the financial strength of our customers and, based upon factors surrounding the credit risk, establish an allowance for uncollectible accounts, if required.

However, we routinely assess the financial strength of our customers and counterparties and, based upon factors surrounding the credit risk, establish an allowance for uncollectible accounts, if required.

As a result, we believe that our accounts receivable credit risk exposure beyond such allowance is limited.

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Environmental and Other Issues

We are engaged in oil and natural gas exploration and production and may become subject to certain liabilities as they relate to environmental cleanup of well sites or other environmental restoration procedures.

In connection with our acquisition of existing or previously drilled well bores, we may not be aware of what environmental safeguards were taken at the time such wells were drilled or during such time the wells were operated.

In connection with acquisitions of existing or previously drilled well bores, we may not be aware of what environmental safeguards were taken at the time such wells were drilled or during such time the wells were operated.

Should it be determined that a liability exists with respect to any environmental cleanup or restoration, we would be responsible for curing such a violation.

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Level 1 inputs are unadjusted quoted prices in active markets for identical assets and liabilities and have the highest priority.

Level 2 inputs are inputs other than quoted prices within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 2 inputs are inputs other than quoted prices within Level 1 that are

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observable for the asset or liability, either directly or indirectly.

Level 3 inputs are unobservable inputs for the asset or liability and have the lowest priority.

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The carrying values of financial instruments comprising cash and cash equivalents, payables, receivables, related party accounts receivable/payable and advances from joint interest owners approximate fair values due to the short-term maturities of these instruments and are classified as Level 1 in the fair value hierarchy.

The carrying value reported for the revolving credit facility approximates fair value because the underlying instruments are at interest rates which approximate current market rates and is considered Level 3 in the fair value hierarchy.

Assets and liabilities accounted for at fair value on a non-recurring basis in accordance with the fair value hierarchy include the initial recognition of asset retirement obligations, the fair value of oil and natural gas properties, and goodwill when acquired in a business combination or assessed for impairment and are considered Level 3 in the fair value hierarchy.

The carrying value of the Senior Notes is based on estimates of current rates available for similar issues with similar maturities and are classified as Level 2 in the fair value hierarchy.

The carrying value reported for the Credit Facility approximates fair value because the underlying instruments are at interest rates which approximate current market rates and is considered Level 2 in the fair value hierarchy.

Assets and liabilities accounted for at fair value on a non-recurring basis in accordance with the fair value hierarchy include the initial recognition of asset retirement obligations and the fair value of oil and natural gas properties when acquired in a business combination or assessed for impairment and are considered Level 3 in the fair value hierarchy.

Derivative Contracts

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Trades that are scheduled to settle in the next twelve months are reported as current.

The Company nets derivative assets and liabilities, in the consolidated balance sheets, whenever it has a legally enforceable master netting agreement with the counterparty to a derivative contract.

For the year ended December 31, 2022, the three months ended December 31, 2021, and year ended September 30, 2021, we have not designated our derivative contracts as hedges for accounting purposes, and therefore changes in the fair value of derivatives are recognized in earnings.

The Company nets derivative assets and liabilities in the consolidated balance sheet whenever it has a legally enforceable master netting agreement with the counterparty to a derivative contract.

For the years ended December 31, 2023 and 2022, we have not designated our derivative contracts as hedges for accounting purposes, and therefore changes in the fair value of derivatives are recognized in earnings.

Cash settlements of contracts are included in cash flows from operating activities in the consolidated statement of cash flows.

Derivative contracts are settled on a monthly basis.

The fair value of the derivatives is established using index prices, volatility curves and discount factors.

The value we report in our consolidated financial statements is as of a point in time and subsequently change as these estimates are revised to reflect actual results, changes in market conditions and other factors.

The fair value of derivatives is established using index prices, volatility curves and discount factors.

The value we report in our consolidated financial statements is as of a point in time and subsequently changes as these estimates are revised to reflect actual results, changes in market conditions and other factors.

The use of derivatives involves the risk that the counterparties to such contracts will be unable to meet their obligations under the terms of the agreement.

To minimize the credit risk with derivative instruments, it is our policy to enter into derivative contracts primarily with counterparties that are financial institutions that are also lenders within our revolving credit facility.

Under the terms of the current counterparties' contracts, only those that are lenders under our revolving credit facility

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are secured by the same collateral as outlined in our revolving credit facility.

Under the terms of the current counterparties' contracts, only those that are lenders under our Credit Facility are secured by the same collateral as outlined in our Credit Facility.

The counterparties are not required to provide credit support to the Company.

See further discussion in Note 6 – Derivative Instruments.

The Company's current leases include office space and information technology equipment, comprised primarily of printers and copiers.

The Company's current leases include office space, office equipment, and field vehicles.

The Company reviews all contracts to determine if a lease exists at contract inception.

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Identified leases are classified as an operating or finance lease, which determines the recognition, measurement and presentation of expenses.

As of December 31, 2022, the Company did not have any finance leases.

Operating leases are capitalized on the consolidated balance sheet at commencement through a lease right-of-use ("ROU") asset and lease liability representing the present value of lease payments over the lease term.

As of December 31, 2023 and 2022, the Company did not have any finance leases.

Operating leases are capitalized on the consolidated balance sheets at commencement through a lease right-of-use ("ROU") asset and lease liability representing the present value of lease payments over the lease term.

In addition to the present value of lease payments, the operating lease ROU asset includes any lease payments made to the lessor prior to lease commencement less any lease incentives and initial direct costs incurred.

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When available, the Company uses the rate implicit in the lease as the discount rate;

however, most of the Company’s leases do not provide a readily determinable implicit rate.

however, some of the Company’s leases do not provide a readily determinable implicit rate.

In such cases, the Company is required to use its incremental borrowing rate ("IBR").

The Company’s IBR reflects the estimated rate of interest that the Company would pay to borrow on a collateralized basis over a similar term and amount equal to the lease payments in a similar economic environment.

The Company’s IBR reflects the estimated rate of interest that the Company would pay to borrow on a collateralized

RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

basis over a similar term and amount equal to the lease payments in a similar economic environment.

The Company is required to reassess the discount rate for any new and modified lease contracts as of the lease effective date.

1 unchanged sentence

The weighted average remaining lease term was 2.3 years and 2.4 years, respectively, at December 31, 2023 and 2022.

Lease expense was $ 0.5 million, $ 0.1 million, and $ 0.4 million, respectively, for the year ended December 31, 2022, the three months ended December 31, 2021, and year ended September 30, 2021.

December 31, 2022 December 31, 2021

Lease expense was $ 0.8 million and $ 0.5 million, respectively, for the years ended December 31, 2023 and 2022.

(In thousands)

2 unchanged sentences

Long-term lease liability $ 938 $ 838

The ROU asset and current lease liability was included in other non-current assets and other current liabilities and non-current lease liabilities , respectively, on the accompanying consolidated balance sheets.

Lease expense for the Company was included in general and administrative costs on the accompanying consolidated statements of operations.

The ROU asset and current lease liability are included in other non-current assets and other current liabilities and non-current lease liabilities , respectively, on the consolidated balance sheets.

Lease expense for the Company is included in general and administrative costs on the consolidated statements of operations.

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In December 2019, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No.

2019-12, "Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes." This update is intended to simplify the accounting for income taxes by removing certain exceptions and by clarifying and amending existing guidance and is effective for public business entities beginning after December 15, 2020 with early adoption permitted.

The Company adopted this ASU effective October 1, 2021.

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

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., London Interbank Offered Rate ("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 for as a continuation of the existing contract.

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 consolidated financial statements.

RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(4) Acquisitions

Business Combination Between REP LLC and Tengasco

Immediately prior to the closing of the Merger on February 26, 2021, REP LLC converted all of its issued and outstanding Series A Preferred Units into common units of REP LLC.

In connection with the Merger, holders of common units of REP LLC were entitled to receive, in exchange for each common unit, shares of common stock of Tengasco (which was renamed Riley Exploration Permian, Inc.), par value $ 0.001 per share (“Tengasco common stock”) based on the exchange ratio set forth in the Merger Agreement (the “Exchange Ratio”), with cash paid in lieu of the issuance of any fractional shares.

The Exchange Ratio was 97.796467 shares of Tengasco common stock for each common unit of REP LLC (as adjusted for the reverse stock split).

Immediately prior to the closing of the Merger, Tengasco effected a one-for-twelve reverse stock split resulting in outstanding common stock of approximately 17.8 million shares including shares of Tengasco common stock issued in the Merger.

The combination between REP LLC and Tengasco qualified as a business combination with REP LLC being treated as the accounting acquirer.

The assets acquired and liabilities assumed were recognized on the consolidated balance sheet at fair value as of the acquisition date.

The consideration paid in the Merger by REP LLC as the accounting acquirer totaled approximately $ 26.4 million and was determined based on the closing price of Tengasco’s common stock on February 26, 2021 and the total number of shares outstanding immediately prior to the Merger.

The Merger was structured as a tax-free reorganization for United States federal income tax purposes.

The following table summarizes the consideration for the Merger (presented in thousands, except stock price):

Tengasco common stock price $ 29.64

Tengasco common stock - issued and outstanding as of February 26, 2021 891

Total consideration $ 26,392

The Company incurred approximately $ 5.0 million of related costs for the Merger, of which $ 3.6 million was expensed for the year ended September 30, 2021 as transaction costs on the consolidated statements of operations.

In December 2023, the FASB issued ASU 2023-09 Income Taxes (Topic 740) Improvements to Income Tax Disclosures which requires disaggregated information about the Company's effective tax rate reconciliation and income taxes paid.

This ASU is effective for the Company's fiscal year 2025.

Early adoption is permitted.

The Company is currently evaluating income tax disclosures related to its annual report for fiscal year 2025.

(4) Acquisitions of Oil and Natural Gas Properties

New Mexico Acquisition

On April 3, 2023, the Company completed the New Mexico Acquisition from Pecos for approximately $ 330 million, before customary purchase price adjustments.

The assets acquired are located in Eddy County, New Mexico, and include approximately 10,600 total contiguous net acres of leasehold.

The acquisition included 18 net horizontal wells and 250 net vertical wells.

Additionally, the assets added significant drilling locations to the Company's inventory.

The Company funded the New Mexico Acquisition through a combination of borrowings under the Credit Facility and proceeds from the issuance of $ 200 million of Senior Notes, including application of a $ 33 million escrow deposit paid during the three months ended March 31, 2023 with borrowings under the Credit Facility.

For further information regarding the financing for the New Mexico Acquisition, see Note 9 - Long-Term Debt.

The New Mexico Acquisition qualified as a business combination using the acquisition method of accounting.

The assets acquired and liabilities assumed were recognized at fair value as of the acquisition date.

The fair value measurements of the oil and natural gas properties acquired and asset retirement obligations assumed were derived utilizing an income approach and based, in part, on significant inputs not observable in the market.

These inputs represent Level 3 measurements in the fair value hierarchy and include, but are not limited to, estimates of future production volumes, future development, future operating costs, future cash flows and the use of weighted average cost of capital.

These inputs required the use of significant judgments and estimates at the date of valuation, and use of different estimates and judgments could yield different results.

RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The Company completed the determination of the fair value attributable to the assets acquired and liabilities assumed as of September 30, 2021.

The following table presents the allocation of the purchase price to the assets acquired and liabilities assumed based on their fair values on February 26, 2021 (in thousands):

Cash and cash equivalents $ 860

Accounts receivable 325

Prepaid and other current assets 759

Total current assets 1,944

Oil and gas properties 4,525

Other property and equipment 91

Right of use assets 42

Other non-current assets 4

Deferred tax assets 2,987

Total assets acquired $ 9,593

Accounts payable $ 130

Accrued liabilities 409

Current lease liabilities, operating 42

Current lease liabilities, financing 68

Total current liabilities 649

The following presents the allocation of the total purchase price of the New Mexico Acquisition to the identified assets acquired and liabilities assumed based on estimated fair value as of the Closing Date:

Purchase price allocation as of December 31, 2023 (in thousands):

Total cash consideration $ 324,686

Assets acquired:

Inventory $ 2,980

Oil and natural gas properties 342,308

Amount attributable to assets acquired $ 345,437

Fair value of liabilities assumed:

Revenue payable $ 1,475

Asset retirement obligations 19,276

Total liabilities assumed 2,214

Net identifiable assets acquired 7,379

Goodwill 19,013

Amount attributable to liabilities assumed $ 20,751

Net assets acquired $ 324,686

The goodwill recognized was primarily attributable to a substantial increase in the stock price of Tengasco on the Closing Date, which increased the amount of the consideration transferred.

The Company does not expect goodwill to be deductible for tax purposes.

The transaction costs of $ 5.8 million for the year ended December 31, 2023 relate to the New Mexico Acquisition.

During the year ended December 31, 2022, the transaction costs of $ 2.6 million relate to a potential business combination and related financing that the Company pursued but ultimately chose not to consummate.

These costs are included in the consolidated statements of operations.

Post-Acquisition Operating Results

The results of operations attributable to the New Mexico Acquisition since the Closing Date have been included in the consolidated statements of operations and include $ 79.3 million of total revenue, net and $ 51.8 million of earnings for the year ended December 31, 2023.

Pro Forma Operating Results (Unaudited)

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

Subsequent to the Merger, the Company changed its fiscal year period from October 1st through September 30th each year to January 1st to December 31st each year commencing with the 2022 calendar year.

The unaudited pro forma information includes adjustments for $ 3.6 million of transaction costs being reclassified to the fourth quarter of calendar year 2019 which were incurred during the year ended September 30, 2021.

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

RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

effected 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.

For the year ended September 30, 2021

(In thousands, except per share/unit amounts)

The following unaudited pro forma combined results for the years ended December 31, 2023 and 2022 reflect the consolidated results of operations of the Company as if the New Mexico Acquisition had occurred on January 1, 2022.

The unaudited pro forma information includes adjustments for (i) transaction costs being reclassified to 2022 instead of being recorded during the year ended December 31, 2023 (ii) amortization for the discount and deferred financing costs related to the Senior Notes and Credit Facility, (iii) depletion, depreciation and amortization expense, and (iv) interest expense related to the financing for the New Mexico Acquisition.

These adjustments remove such costs, as described above, that would not have been recognized had the Company not acquired the assets.

In addition, the pro forma information has been effected for taxes with a 23 % tax rate.

Year Ended December 31,

(In thousands, except per share amounts)

Total revenues

Pro Forma Net Loss before Taxes ( 29,871 )

Pro forma income tax benefit 6,273

Pro Forma Net Loss $ ( 23,598 )

Net Loss per Share/Unit from Continuing Operations:

Basic $ ( 1.88 )

Diluted $ ( 1.88 )

Net Income per Share/Unit from Discontinued Operations:

Diluted $ 0.02

The unaudited pro forma combined financial information is for informational purposes only and was based off of the fiscal year period October 1st through September 30th as this was the fiscal year in effect at the time of the Merger.

The unaudited pro forma financial information was not modified for the change in the Company's fiscal year.

It 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.

The actual results may differ significantly from that reflected in the unaudited pro forma combined financial information for a number of reasons, including, but not limited to, differences in assumptions used to prepare the unaudited pro forma combined financial information and actual results.

On April 2, 2021, the Company closed on the sale of the Kansas Reporting Unit for an agreed upon purchase price of $ 3.5 million, less approximately $ 0.2 million of closing adjustments.

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

Transaction Costs

Transaction costs consist of those costs associated with investment banking, accounting, legal and other diligence costs related to unsuccessful acquisitions or successful acquisitions accounted for as business combinations.

The Company recognized transaction costs for the periods presented below:

Year Ended December 31, 2022 Three Months Ended December 31, 2021 Year Ended September 30, 2021

(In thousands)

Business combination acquisition costs $ 2,638 $ 1,258 $ 3,572

Other — — 160

Total transaction costs $ 2,638 $ 1,258 $ 3,732

The transaction costs of $ 2.6 million and $ 1.3 million for the year ended December 31, 2022 and three months ended December 31, 2021, respectively, primarily related to a potential business combination and related financing that the Company pursued but ultimately chose not to consummate.

During the year ended September 30, 2021, the transaction costs of $ 3.6 million primarily relate to costs incurred on the Merger with Tengasco in February 2021.

$ 405,642 $ 435,157

$ 121,466 $ 129,741

Basic net income per common share

$ 6.16 $ 6.64

Diluted net income per common share

$ 6.07 $ 6.59

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 New Mexico Acquisition been completed as of January 1, 2022 and should not be taken as indicative of the Company's future combined

RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

results of operations.

(5) Oil and Natural Gas Properties

Oil and natural gas properties are summarized below:

December 31, 2022 December 31, 2021

(In thousands)

5 unchanged sentences

Total oil and natural gas properties, net $ 846,901 $ 440,102

At December 31, 2022 and 2021, the Company had one exploratory well drilled but uncompleted that was included in work-in-progress with associated well costs of $ 3.8 million and $ 3.7 million, respectively.

At December 31, 2022, the Company had one exploratory well with costs of $ 3.8 million that has been capitalized for greater than two years .

The Company is in the process of evaluating completion methods for this exploratory well.

Depletion and amortization expense for proved oil and natural gas properties was $ 31.5 million for the year ended December 31, 2022, $ 6.7 million for the three months ended December 31, 2021, and $ 25.2 million for the year ended September 30, 2021.

Exploration expense was $ 2.0 million for the year ended December 31, 2022, $ 0.6 million for the three months ended December 31, 2021, and $ 9.6 million for the year ended September 30, 2021.

Exploration expense was primarily attributable to the expiration of oil and natural gas leases for the year ended December 31, 2022, the three months ended December 31, 2021 and year ended September 30, 2021.

As of December 31, 2023, the Company had no exploratory wells included in work-in-progress.

In 2022, the Company had one exploratory well drilled but uncompleted that was included in work-in-progress with associated well costs of $ 3.8 million.

During the year ended December 31, 2023, the Company determined this exploratory well was not capable of producing commercial quantities and, as such, expensed the associated drilling costs.

Depletion and amortization expense for proved oil and natural gas properties was $ 62.5 million and $ 31.5 million for the years ended December 31, 2023 and 2022, respectively.

Exploration costs were $ 4.2 million and $ 2.0 million for the years ended December 31, 2023 and 2022, respectively, and were primarily attributable to exploratory well expense and the expiration of oil and natural gas leases in 2023 and the expiration of oil and natural gas leases in 2022.

Impairment of Proved Properties

Certain proved oil and natural gas properties were impaired during year ended December 31, 2022.

Certain proved oil and natural gas properties were impaired during the year ended December 31, 2023.

Our impairment test involved a step assessment to determine if the net book value of our proved oil and natural gas properties is expected to be recovered from the estimated undiscounted future net cash flows.

We calculated the expected undiscounted future net cash flows of our long-lived assets using management’s assumptions and expectations.

See further discussion in Note 7 - Fair Value Measurements.

Certain oil and natural gas properties in our New Mexico operating area failed the Step 1 assessment.

Certain oil and natural gas properties in Texas outside of the Company's acreage in the Champions Field failed the initial step assessment, which looks at the carrying value compared to undiscounted cash flows for these properties.

For these assets, we used a discounted cash flow analysis to estimate fair value.

The expected future net cash flows were discounted using a rate of 10.0 %, which we believe represents the estimated weighted average cost of capital of a market participant.

Based on Step 2 of our long-lived assets impairment test, we recognized a $ 7.3 million impairment because the carrying value exceeded the estimated fair market value as of the year ended December 31, 2022.

Based on this assessment of our long-lived assets impairment test, we recognized a $ 9.8 million impairment because the carrying value exceeded the estimated fair market value as of the year ended December 31, 2023.

The Company recognized an impairment of $ 7.3 million on proved properties in New Mexico, outside of the Redlake field, for the year ended December 31, 2022.

See further discussion of our fair value assumptions in Note 7 - Fair Value Measurements.

3 unchanged sentences

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

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 consolidated statement of operations.

As of December 31, 2022, the Company's oil and natural gas derivative instruments consisted of the following types:

• Fixed Price Swaps – the Company receives a fixed price for the contract and pays a floating market price to the counterparty over a specified period for a contracted volume.

RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

As of December 31, 2023, the Company's oil and natural gas derivative instruments consisted of the following types:

• Fixed Price Swaps – the Company receives a fixed price for the contract and pays a floating market price to the counterparty over a specified period for a contracted volume.

• Costless collars – the combination of a put option (fixed floor) and call option (fixed ceiling), with the options structured so that the premium paid to purchase the put option is offset by the premium received from the sale of the call option.

3 unchanged sentences

We receive the fixed price differential and pay the differential between the referenced indexes.

RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The following table summarizes the open financial derivative positions as of December 31, 2023, related to oil and natural gas production:

6 unchanged sentences

Q4 2024 225,000 $ 72.12

2025 330,000 $ 71.86

Natural Gas Swaps (Mcf)

Q1 2024 750,000 $ 3.48

Q2 2024 600,000 $ 3.21

Q3 2024 600,000 $ 3.21

Q4 2024 450,000 $ 3.67

2025 600,000 $ 3.85

Oil Collars (Bbl)

4 unchanged sentences

2025 728,000 $ 62.51 $ 76.90

The Company entered into additional derivative contracts subsequent to December 31, 2022.

See further discussion in Note 15 - Subsequent Events.

Natural Gas Collars (Mcf)

Q1 2024 300,000 $ 3.40 $ 4.50

Q2 2024 405,000 $ 3.01 $ 3.68

Q3 2024 405,000 $ 3.01 $ 3.68

Q4 2024 405,000 $ 3.50 $ 4.45

2025 1,215,000 $ 3.28 $ 4.30

Oil Basis Swaps (Bbl)

Q1 2024 330,000 $ 0.97

Q2 2024 330,000 $ 0.97

Q3 2024 330,000 $ 0.97

Q4 2024 330,000 $ 0.97

Interest Rate Contracts

During the years ended December 31, 2022 and 2021, the Company entered into floating-to-fixed interest rate swaps, in which it received a floating market rate equal to one-month LIBOR or Secured Overnight Financing Rate ("SOFR") and paid a fixed interest rate, to manage interest rate exposure related to the Company's revolving credit facility.

In December 2022, the Company settled the remaining open positions for the interest rate swap which resulted in a $ 1.5 million settlement.

The Company recognizes settlements on interest rate swaps in interest expense on the consolidated statements of operations.

The Company entered into floating-to-fixed interest rate swaps, in which it will receive a floating market rate equal to one-month Chicago Mercantile Exchange Term Secured Overnight Financing Rate ("SOFR") Rate and will pay a fixed interest rate to manage future interest rate exposure related to the Company’s Credit Facility.

RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The following table summarizes the open interest rate derivative positions as of December 31, 2023:

Open Coverage Period Notional Amount Fixed Rate

(In thousands)

April 2024 - April 2026 $ 30,000 3.18 %

April 2024 - April 2026 $ 50,000 3.04 %

Balance Sheet Presentation of Derivatives

16 unchanged sentences

Total $ ( 16,464 ) $ — $ ( 16,464 )

The following table presents the components of the Company's gain (loss) on derivatives for the periods presented below:

Year Ended December 31, 2022 Three Months Ended December 31, 2021 Year Ended September 30, 2021

The following table presents the components of the Company's gain (loss) on derivatives, net for the periods presented below:

Year Ended December 31,

(In thousands)

1 unchanged sentence

$ ( 17,221 ) $ ( 75,257 )

Non-cash gain (loss) on derivatives 23,683 10,821 ( 72,891 )

Loss on derivatives $ ( 51,574 ) $ ( 5,193 ) $ ( 89,195 )

Non-cash gain on derivatives

23,414 23,683

(1) In December 2022, the Company settled a portion of its 2023 open oil fixed price swap contracts which resulted in a $ 1.5 million settlement.

Gain (loss) on derivatives, net

$ 6,193 $ ( 51,574 )

(7) Fair Value Measurements

5 unchanged sentences

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 and are classified as Level 1 in the fair value hierarchy.

The carrying value reported for the revolving credit facility approximates fair value because the underlying instruments are at interest rates which approximate current market rates.

The revolving line of credit is considered Level 3 in the fair value hierarchy.

Assets and Liabilities Measured on a Recurring Basis

The fair value of commodity derivatives and interest rate swaps is estimated using discounted cash flow calculations based upon forward curves and are classified as Level 2 in the fair value hierarchy.

The following table presents the Company’s

The carrying value reported for the revolving line of credit approximates fair value because the underlying instruments are at interest rates which approximate current market rates.

The fair value of the Senior Notes is based on estimates of current rates available for similar issues with similar maturities and is classified as Level 2 in the fair

RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

financial assets and liabilities that were accounted for at fair value on a recurring basis as of December 31, 2022 and 2021, by level within the fair value hierarchy:

value hierarchy.

The oil and natural gas properties acquired and asset retirement obligations assumed in the New Mexico Acquisition are considered Level 3 measurements.

Assets and Liabilities Measured on a Recurring Basis

The following table presents the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of December 31, 2023 and 2022, by level within the fair value hierarchy:

December 31, 2023

3 unchanged sentences

Commodity derivative assets $ — $ 14,766 $ — $ 14,766

Interest rate assets $ — $ 869 $ — $ 869

Financial liabilities:

5 unchanged sentences

Commodity derivative assets $ — $ 73 $ — $ 73

Interest rate assets $ — $ 361 $ — $ 361

Financial liabilities:

Commodity derivative liabilities $ — $ ( 16,537 ) $ — $ ( 16,537 )

Interest rate liabilities $ — $ ( 10 ) $ — $ ( 10 )

The following table summarizes the fair value and carrying amount of the Company's financial instruments.

December 31, 2023 December 31, 2022

Carrying Amount Fair Value Carrying Amount Fair Value

(In thousands)

Credit Facility (Level 2) $ 185,000 $ 185,000 $ 56,000 $ 56,000

Senior Notes (Level 2) (1)

$ 170,959 $ 185,346 $ — $ —

_____________________

(1) The carrying value reported for the Senior Notes is shown net of unamortized discount and unamortized deferred financing costs.

The carrying value reported for the Credit Facility approximates fair value because the underlying instruments are at interest rates which approximate current market rates.

The fair value of the Senior Notes was determined utilizing a discounted cash flow approach.

Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

Assets and liabilities accounted for at fair value on a non-recurring basis in accordance with the fair value hierarchy include the initial recognition of asset retirement obligations and the fair value of oil and natural gas properties when acquired in a business combination or assessed for impairment.

The fair value measurements of assets acquired and liabilities assumed are measured on a nonrecurring basis on the acquisition date using an income valuation technique based on inputs that are not observable in the market and therefore represent Level 3 inputs.

4 unchanged sentences

and (iv) a market-based weighted average cost of capital rate.

The underlying commodity prices embedded in the Company's estimated cash flows are the product of a process that begins with NYMEX forward curve pricing, adjusted for estimated location and quality differentials, as well as other factors that the Company’s management believes will impact realizable prices.

RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Company’s management believes will impact realizable prices.

These inputs require significant judgments and estimates by the Company’s management at the time of the valuation.

The fair value of asset retirement obligations incurred and acquired during the year ended December 31, 2022 and the three months ended December 31, 2021, totaled approximately $ 0.4 million and $ 0.1 million, respectively.

The fair value of asset retirement obligations incurred and acquired during the years ended December 31, 2023 and 2022, totaled approximately $ 19.4 million and $ 0.4 million, respectively.

The fair value of additions to the asset retirement obligation liabilities is measured using valuation techniques consistent with the income approach, which converts future cash flows to a single discounted amount.

8 unchanged sentences

The factors used to determine fair value are subject to management’s judgment and expertise and include, but are not limited to, recent sales prices of comparable properties, the present value of future cash flows, net of estimated operating and development costs using estimates of proved reserves, future commodity pricing, future production estimates, anticipated capital expenditures, and various discount rates commensurate with the risk and current market conditions associated with the expected cash flow projected.

These assumptions represent Level 3 inputs.

RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

For the year ended December 31, 2023, the Company recognized an impairment charge to its oil and natural gas properties of $ 9.8 million related to acreage in Texas outside of its Champions Field.

In preparing this assessment, the Company utilized a discounted cash flow approach to estimate fair value.

The assumptions utilized in the discounted cash flow are considered Level 3, consistent with the discussion above.

Under the discounted cash flow methodology, the expected future net cash flows were discounted using a weighted average cost of capital rate reflective of a market participant rate.

Additionally, the assumptions utilized include the future commodity prices for oil and natural gas based on NYMEX strip pricing for West Texas Intermediate ("WTI") and Henry Hub ("HH"), as adjusted for differentials (using the Company's historical average of differentials, which approximate a market participant's differentials) and operating cost assumptions based on the Company's historical LOE, which are deemed to estimate a market participant's operating costs.

See further discussion of our impairment in Note 5 - Oil and Natural Gas Properties.

(8) Transactions with Related Parties

4 unchanged sentences

("Yorktown XI"), certain managed funds of which have investments in the Company (all deemed to be related parties).

One of our executives held positions with REG and Combo at December 31, 2022.

Our Executive Vice President, Business Intelligence is the President of both REG and Combo, as well as a board member of Combo.

As of December 31, 2023, our Executive Vice President - Business Intelligence was the President of both REG and Combo, as well as a board member of Combo.

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

Year Ended December 31, 2022 Three Months Ended December 31, 2021 Year Ended September 30, 2021

Year Ended December 31,

(In thousands)

3 unchanged sentences

Cost of contract services $ 579 $ 450

The Company had amounts payable to Combo of $ 0.4 million and $ 0.2 million at December 31, 2022 and 2021, respectively, which are reflected in accounts payable - related parties on the accompanying consolidated balance sheets.

Amounts due to 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.

The Company had amounts payable to Combo of $ 0.7 million and $ 0.4 million at December 31, 2023 and 2022, respectively, which are reflected in other current liabilities in the accompanying consolidated balance sheets.

Amounts due to Combo reflect the revenue, net of any expenditures for wells and fees due under the contract services agreement, for Combo's

RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

net working interest in wells that the Company operates on Combo's behalf.

See Note 14 - Subsequent Events for additional information regarding arrangements with Combo occurring after December 31, 2023.

Consulting and Legal Fees

The Company has an engagement agreement with di Santo Law PLLC ("di Santo Law"), a law firm owned by Beth di Santo, a member of our Board of Directors, pursuant to which di Santo Law's attorneys provide legal services to the Company.

For the year ended December 31, 2022, the three months ended December 31, 2021, and year ended September 30, 2021, the Company incurred legal fees from di Santo Law of approximately $ 0.7 million, $ 0.2 million, and $ 1.0 million, respectively.

As of December 31, 2022 there are no accrued amounts for di Santo Law.

For the years ended December 31, 2023 and 2022, the Company incurred legal fees from di Santo Law of approximately $ 1.2 million, and $ 0.7 million, respectively.

As of December 31, 2023, the Company had approximately $ 0.6 million in amounts accrued for di Santo Law, which was included in accrued liabilities in the accompanying consolidated balance sheets.

(9) Revolving Credit Facility

On September 28, 2017, REP LLC entered into a credit agreement (the "Credit Agreement") to establish a senior secured revolving credit facility with a syndicate of banks including SunTrust Bank, now Truist Bank as successor by merger, as administrative agent.

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

In both April and October 2022, the Company amended its Credit Agreement to, among other things, increase the borrowing base to $ 225 million.

(9) Long-Term Debt

The following table summarizes the Company's outstanding debt:

(In thousands)

Credit Facility $ 185,000 $ 56,000

Principal $ 185,000 $ —

Unamortized discount (1)

Unamortized deferred financing costs (2)

Total Senior Notes $ 170,959 $ —

$ 355,959 $ 56,000

Current portion of long-term debt (3)

Total long-term debt $ 335,959 $ 56,000

_____________________

(1) Unamortized discount on long-term debt is amortized over the life of the respective debt.

(2) As of December 31, 2023, unamortized deferred financing costs are attributable to and amortized over the life of the Senior Notes.

(3) As of December 31, 2023, the current portion of long-term debt reflects $ 20 million due on the Senior Notes over the next twelve months.

Debt maturities as of December 31, 2023, excluding unamortized deferred financing costs, are as follows:

Year Ending December 31,

(In thousands)

2024 $ 20,000

Credit Facility

On September 28, 2017, REP LLC entered into a credit agreement (the "Credit Agreement") to establish a senior secured Credit Facility with a syndicate of banks including SunTrust Bank, now Truist Bank as successor by merger, as administrative

RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

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

On February 22, 2023, the Company amended its Credit Facility to, among other things, allow for the issuance of unsecured senior notes of up to $ 200 million.

On April 3, 2023, and concurrent with the closing of the New Mexico Acquisition, the Company entered into the fourteenth amendment (the "Fourteenth Amendment") to the Credit Facility to, among other things, increase the maximum facility amount to $ 1.0 billion and the borrowing base from $ 225 million to $ 325 million, resulting in the addition of new lenders to the lending group.

On November 14, 2023, through the semi-annual redetermination process, the Credit Facility was amended to increase the borrowing base from $ 325 million to $ 375 million.

The Credit Agreement is set to mature in April 2026.

Substantially all of the Company’s assets are pledged to secure the revolving credit facility.

Substantially all of the Company’s assets are pledged to secure the Credit Facility.

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

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 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).

1 unchanged sentence

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

RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The Credit Agreement contains certain covenants, which, among other things, require the maintenance of (i) a total leverage ratio of not more than 3.0 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 quarter.

4 unchanged sentences

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

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 December 31, 2022, the Company's minimum hedging requirement was 0 %.

The Company must maintain a minimum hedging requirement included in the Credit Agreement for oil and natural gas based on its proved developed producing projected volumes on a rolling 24-month basis.

The following table summarizes the Credit Facility balances:

(In thousands)

Outstanding borrowings $ 185,000 $ 56,000

Available under the borrowing base $ 190,000 $ 169,000

On April 3, 2023, and concurrent with the closing of the New Mexico Acquisition, the Company (as “Issuer”) completed its issuance of $ 200 million aggregate principal amount of 10.50 % senior unsecured notes with final maturity April 2028 pursuant to a note purchase agreement (the “Note Purchase Agreement”), with the Senior Notes issued at a 6 % discount.

The net proceeds from the Senior Notes were used to fund a portion of the purchase price and related fees, costs and expenses for the New Mexico Acquisition.

Interest is due and payable at the end of each quarter.

In addition to interest, the Issuer will repay 2.50 % of the original principal amount each quarter resulting in $ 5 million quarterly principal payments until the maturity of the Senior Notes.

As of December 31, 2023, the Company had $ 20 million in current liabilities on the consolidated balance sheet related to the quarterly principal payments due within the next 12 months.

The Issuer may, at its option, redeem, at any time and from time to time on or prior to April 3, 2026, some or all of the Senior Notes at 100 % of the principal amount thereof plus the make-whole amount plus a premium of 5.25 % as set forth in the Note Purchase Agreement plus accrued and unpaid interest, if any.

After April 3, 2026, but on or prior to October 3, 2026, the Issuer may, at its option, redeem, at any time and from time to time some or all of the Senior Notes at 100 % of the principal amount thereof plus a premium of 5.25 % as set forth in the Note Purchase Agreement plus accrued and unpaid interest, if any.

After October 3, 2026, the Issuer may redeem some or all of the Senior Notes at 100 % of the principal amount thereof plus accrued and unpaid interest, if any.

The principal remaining outstanding at the time of maturity is required to be paid in full by

RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Certain note features, including those discussed above, were evaluated and deemed to be remote.

Due to the remote nature, the fair value of these features was estimated to be approximately zero.

The Senior Notes contain certain covenants, which, among other things, require the maintenance of (i) a total leverage ratio of less than 3.0 to 1.0 and (ii) an asset coverage ratio greater than 1.50 to 1.0.

The Senior Notes also contain a total leverage ratio and an asset coverage ratio for Restricted Payments, as defined in the Senior Notes.

The leverage ratio, after giving pro forma effect to such Restricted Payments, cannot exceed 2.0 to 1.0, and the asset coverage ratio, after giving effect to such Restricted Payments, must be greater than or equal to 1.50 to 1.0.

In addition to and after giving effect to such Restricted Payments, the outstanding balance on the Company's Credit Facility must be greater than or equal to 15 % of the lesser of the then effective Borrowing Base and the Aggregate Elected Commitment Amount.

Upon issuance of the Senior Notes, the Company must maintain a minimum hedging requirement included within the Senior Notes for oil and natural gas based on its proved developed producing projected volumes for each commodity on a rolling 18-month basis.

The Senior Notes are general unsecured obligations ranking equally in right of payment with all other senior unsecured indebtedness of the Company and are senior in right of payment to all existing and future subordinated indebtedness of the Company.

The Note Purchase Agreement contains customary terms and covenants, including limitations on the Company’s ability to incur additional secured and unsecured indebtedness.

The following table summarizes the Company's interest expense:

Year Ended December 31, 2022 Three Months Ended December 31, 2021 Year Ended September 30, 2021

Year Ended December 31,

(In thousands)

3 unchanged sentences

Amortization of deferred financing costs

Unused commitment fees 517 102 195

Amortization of discount on Senior Notes

Unused commitment fees on Credit Facility

Total interest expense, net $ 31,816 $ 1,090

_____________________

(1) In December 2022, the Company settled the remaining open positions for the interest rate swap which resulted in a $ 1.5 million settlement.

The Company recognizes settlements on its interest rate swaps in interest expense on the consolidated statements of operations.

As of December 31, 2022 and 2021, the weighted average interest rate on outstanding borrowings under the revolving credit facility was 7.17 % and 3.10 %, respectively.

As of December 31, 2022 and 2021, the Company was in compliance with all covenants contained in the Credit Agreement and had $ 56 million and $ 65 million, respectively, of outstanding borrowings and $ 169 million and $ 110 million, respectively, available under the borrowing base.

(10) Members’/Shareholders' Equity

Public Offering of Common Stock

On June 30, 2021, the Company entered into an Underwriting Agreement (the "Underwriting Agreement") with Truist Securities, Inc., as the representative of the other several underwriters named in the Underwriting Agreement.

On July 2, 2021, the Company issued 1,666,667 shares of common stock at a price to the public of $ 30.00 per share in accordance with the Underwriting Agreement.

Net proceeds from the issuance were approximately $ 46.7 million, after deducting the underwriting fees and other offering costs incurred.

Cash dividends for the periods presented were declared for all issued and outstanding common shares or units, including vested and unvested under the respective Long-Term Incentive Plan in effect during the period of dividend declaration.

The portion of the cash attributable to the unvested restricted shares issued under the 2021 Long-Term Incentive Plan ("2021 LTIP") is included in accrued liabilities on the consolidated balance sheet and will be paid in cash once the unvested restricted shares fully vest.

Any accrued but unpaid cash dividends attributable to the unvested restricted shares issued under the 2018 Long-Term Incentive Plan ("2018 LTIP") was paid in accordance with the Merger Agreement immediately prior to consummation of the Merger.

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

As of December 31, 2023 and 2022, the weighted average interest rate on outstanding borrowings under the Credit Facility was 8.68 % and 7.17 %, respectively.

As of December 31, 2023, the Senior Notes had $ 10.1 million of unamortized discount and $ 3.9 million of unamortized deferred financing costs, resulting in an effective interest rate of 13.38 % during the year ended December 31, 2023.

As of December 31, 2023 and 2022, the Company was in compliance with all covenants contained in the Credit Agreement and the Note Purchase Agreement.

(10) Shareholders' Equity

Cash dividends for the periods presented were declared for all issued and outstanding common shares, including vested and unvested under the respective Long-Term Incentive Plan in effect during the period of dividend declaration.

The portion of the cash attributable to the unvested restricted shares issued under the Amended and Restated 2021 Long-Term Incentive Plan (the "A&R LTIP") is included in accrued liabilities on the consolidated balance sheets and will be paid in cash once the unvested restricted shares fully vest.

See Note 9 - Long-Term Debt for discussion over the Company's restrictions on certain payments, including dividends.

RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The table below summarizes the following cash distributions declared to common shareholders and unitholders during the periods presented below:

Quarter Ended Per Share/Unit Distribution (1)

The table below summarizes the following cash distributions declared to common shareholders during the periods presented below:

Quarter Ended Per Share Distribution

Total Distribution

(In millions)

(In thousands)

December 31, 2023 $ 0.36 $ 7,477

6 unchanged sentences

March 31, 2022 $ 0.31 $ 6,154

December 31, 2020 $ 0.30 $ 3.8

_____________________

(1) Per unit amounts for dividends declared before the Closing Date of the Merger have been effected by giving adjustment to the 1-for-12 reverse stock split and exchange ratio of 97.796467 .

(2) On February 4, 2021, the Board of Managers of REP LLC declared a $ 3.8 million cash dividend, paid on February 5, 2021.

On March 4, 2021, the Board of Directors of the Company declared a cash dividend of $ 0.28 per share or $ 5.0 million total, paid on May 7, 2021.

Share-Based and Unit-Based Compensation

In connection with the Merger, the Company shareholders adopted an omnibus equity incentive plan, the 2021 LTIP, for the employees, consultants and the directors of the Company and its affiliates who perform services for the Company.

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 440,784 shares remained available as of December 31, 2022.

Share-Based Compensation

On April 21, 2023, at the Company's annual meeting of stockholders, the Company's stockholders approved the A&R LTIP that increased the total number of shares of Common Stock, par value $ 0.001 per share, by 950,000 shares that may be utilized for awards pursuant to the Plan from 1,387,022 to 2,337,022 .

The A&R LTIP had 1,075,626 shares available as of December 31, 2023.

2021 Long-Term Incentive Plan

The 2021 LTIP will provide for potential grants of:

The A&R LTIP will provide for potential grants of:

(i) incentive stock options qualified as such under U.S.

3 unchanged sentences

(iv) restricted stock awards;

(v) restricted stock units, or RSUs;

(vi) stock awards;

(v) restricted stock units, or RSUs, (vi) stock awards;

(vii) performance awards;

3 unchanged sentences

and (xi) substitute awards, all of which will collectively be referred to as the "Awards".

The 2021 LTIP authorizes the Compensation Committee to administer the plan and designate eligible persons as participants, determine the type or types of Awards to be granted to an eligible person, determine the number of shares of stock or amount of cash to be covered by the Awards, approve the forms of award agreements for use under the plan, determine the terms and conditions of any Award, modify, waive or adjust any term or condition of an Award that has been granted, among other responsibilities delegated by the Company's Board.

The A&R LTIP authorizes the Compensation Committee to administer the plan and designate eligible persons as participants, determine the type or types of Awards to be granted to an eligible person, determine the number of shares of stock or amount of cash to be covered by the Awards, approve the forms of award agreements for use under the plan, determine the terms and conditions of any Award, modify, waive or adjust any term or condition of an Award that has been granted, among other responsibilities delegated by the Company's Board.

Restricted Shares:

The Company granted 367,420 , 174,575 , and 397,739 restricted shares to executives, employees and independent directors of the Company during the year ended December 31, 2022, three months ended December 31, 2021, and year ended September 30, 2021, respectively.

The holder of these restricted shares receive dividends, in arrears, once the shares vest.

The Company granted 346,869 and 367,420 restricted shares to executives, employees and independent directors of the Company during the years ended December 31, 2023 and 2022, respectively.

The holders of these restricted shares receive dividends, in arrears, once the shares vest.

The Company has accrued for these dividends which are reported in accrued liabilities and other non-current liabilities.

RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

All restricted shares granted have a service period between 3 and 36 months.

The Company estimates the fair values of the restricted shares as the closing price of the Company's common stock on the grant date of the award, with the expense amortized on a straight-line basis and recognized over the vesting period.

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

RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The following table presents the Company's restricted stock activity during the year ended December 31, 2023 under the A&R LTIP:

2021 Long-Term Incentive Plan

2 unchanged sentences

536,209 $ 18.39

Granted 367,420 $ 17.63

Vested ( 192,899 ) $ 19.25

346,869 $ 28.68

( 329,005 ) $ 19.38

Forfeited ( 32,076 ) $ 24.83

2 unchanged sentences

_____________________

(1) For the three months ended December 31, 2021, the Company granted 174,575 restricted shares at a weighted average grant date fair value of $ 23.46 .

For the year ended September 30, 2021, the Company granted 397,739 restricted shares at a weighted average grant date fair value of $ 21.16 .

For the year ended December 31, 2022, the three months ended December 31, 2021, and year ended September 30, 2021, the total equity-based compensation expense is $ 3.9 million, $ 0.9 million, and $ 6.1 million, respectively, for all periods and is included in general and administrative costs on the Company's consolidated statement of operations for the restricted share awards granted under the 2021 LTIP.

(1) For the year ended December 31, 2022, the weighted average fair value of restricted shares granted during the year was $ 17.63 .

(2) For the years ended December 31, 2023 and 2022 , the total fair value of restricted shares vested during the year was $ 6.4 million and $ 3.7 million , respectively.

For the years ended December 31, 2023 and 2022, the total share-based compensation expense is $ 7.0 million and $ 3.9 million, respectively.

For the year ended December 31, 2023, share based compensation expense also includes expense associated with equity awards attributable to a separation agreement with a former Company executive.

Share-based compensation expense is included in general and administrative costs on the Company's consolidated statement of operations for the restricted share awards granted under the A&R LTIP.

At the time of the forfeiture, the Company will recognize any forfeited shares as a reduction to share-based compensation expense on the consolidated statement of operations and a decrease to shareholders' equity on the consolidated balance sheet.

Any unpaid dividends on forfeited shares will be recognized as a decrease to accrued liabilities and an increase to shareholders' equity on the consolidated balance sheet.

Approximately $ 8.3 million of additional equity-based compensation expense will be recognized over the weighted average life of 28 months for the unvested restricted share awards as of December 31, 2022 granted under the 2021 LTIP.

2018 Long-Term Incentive Plan

In connection with the Merger and in accordance with the Merger Agreement, each unvested restricted unit outstanding under the 2018 LTIP was converted into restricted shares of the Company under the 2021 LTIP.

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.

The Company granted 13,309 restricted units to executives and employees of the Company during the year ended September 30, 2021.

Total unit-based compensation expense of $ 0.7 million is for all of the issuances outstanding during the period of January 2021 through the date of the merger, February 26, 2021.

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

(11) Income Taxes

REP LLC was organized as a limited liability company and treated as a flow-through entity for federal income tax purposes.

As such, taxable income and any related tax credits were passed through to its members and included in their tax returns, even though such taxable income or tax credits may not have been distributed.

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.

When push down accounting does not apply as part of a business combination, U.S.

GAAP requires the effect of the change in tax status to be recognized in the financial statements and the effect is included in income (loss) from continuing operations.

Upon consummation of the Merger, the Company established a $ 13.6 million provision for deferred income taxes with the conversion to a C-corporation.

Accordingly, a provision for federal

Approximately $ 11.1 million of additional share-based compensation expense will be recognized over the weighted average life of 27 months for the unvested restricted share awards as of December 31, 2023 granted under the A&R LTIP.

On September 1, 2023, the Company entered into an Equity Distribution Agreement in connection with an at-the-market equity sales program ("ATM") pursuant to which the Company may offer and sell from time to time up to an aggregate $ 50 million in shares of the Company's common stock through its agents.

The offer and sale of the shares has been registered under the Securities Act of 1933, as amended ("Securities Act"), pursuant to the Company’s registration statement on Form S-3, as amended.

A prospectus supplement related to the offering of the shares, as defined in Rule 415(a)(4) promulgated under the Securities Act was filed September 1, 2023.

The Company intends to use the net proceeds from any offering for working capital purposes and other general corporate purposes, including, but not limited to, financing of capital expenditures, repayment or refinancing of outstanding debt, financing acquisitions or investments, financing other business opportunities, and general working capital purposes.

During the year ended December 31, 2023, the Company executed sales under the ATM program of 8,939 shares which generated proceeds of approximately $ 280 thousand, net of approximately $ 278 thousand of fees including expenses associated with establishing the ATM program and filing of the related prospectus supplement.

As of December 31, 2023, the Company had remaining capacity to sell up to an additional $ 49.7 million of common stock under the ATM program.

RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

and state corporate income taxes has been made for the operations of REP LLC only from February 27, 2021 through December 31, 2022 in the accompanying consolidated financial statements.

(11) Income Taxes

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

Year Ended December 31, 2022 Three Months Ended December 31, 2021 Year Ended September 30, 2021

Year Ended December 31,

(In thousands)

3 unchanged sentences

Total current income tax expense $ 6,872 $ 4,472

Deferred income tax expense (benefit):

Deferred income tax expense:

Federal $ 24,305 $ 27,393

State 3,284 979

Total deferred income tax expense (benefit) $ 28,372 $ 5,756 $ 12,962

Total income tax expense (benefit) $ 32,844 $ 5,869 $ 13,016

Total deferred income tax expense

$ 27,589 $ 28,372

Total income tax expense

$ 34,461 $ 32,844

Deferred tax assets and liabilities are the result of temporary differences between the financial statement carrying values and the tax bases of assets and liabilities.

The Company's net deferred tax position is as follows:

Year Ended December 31, 2022 Three Months Ended December 31, 2021 Year Ended September 30, 2021

Year Ended December 31,

(In thousands)

2 unchanged sentences

Intangibles 163 182

Inventory — 23 23

Share-based compensation 772 421

Interest expense limitation 3,861 —

Accruals and other 1,123 484

3 unchanged sentences

Other fixed assets ( 661 ) ( 553 )

Unrealized gain on derivatives ( 1,542 ) —

Total deferred tax liabilities ( 81,964 ) ( 53,218 )

3 unchanged sentences

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

Year Ended December 31, 2022 Three Months Ended December 31, 2021 Year Ended September 30, 2021

Year Ended December 31,

Tax at statutory rate 21.0 % 21.0 %

Nondeductible compensation 0.7 % 0.2 %

Transaction costs — % — % ( 1.5 ) %

Share-based compensation ( 0.5 ) % — %

State income taxes, net of federal benefit 2.4 % 0.7 %

Change in tax status — % — % ( 40.1 ) %

Income subject to taxation by REP LLC's unitholders — % — % ( 17.1 ) %

Other — % ( 0.2 ) %

7 unchanged sentences

The Merger caused a stock ownership change for purposes of Section 382 which is subject to an approximate annual limit.

The Company has federal net operating losses subject to the annual Section 382 limit of $ 13.4 million of which $ 4.6 million will expire beginning in 2022 with the remaining $ 8.8 million of the NOL's not expiring.

Additionally, the Company has no federal net operating losses generated after the Merger that are not limited by Section 382 and are not subject to expiration.

The Company has federal NOLs subject to the annual Section 382 limit of $ 12.9 million of which $ 4.1 million will expire beginning in 2024 with the remaining $ 8.8 million of the NOLs not expiring.

Additionally, the Company has no federal NOLs generated after the Merger that are not limited by Section 382 and are not subject to expiration.

We believe it is more likely than not the tax benefit of these net operating losses will be fully realized, as such no valuation allowance has been recorded.

The deferred tax assets for the net operating losses are presented net with deferred tax liabilities, which primarily consist of book and tax depreciation differences.

(12) Discontinued Operations and Assets Held For Sale

Kansas Reporting Unit

On March 10, 2021, the Company entered into a PSA to divest of the Kansas Reporting Unit for an agreed upon purchase price of $ 3.5 million before certain closing adjustments.

In addition, the Company also agreed to assign to the buyer its lease associated with Tengasco's former corporate office in Greenwood Village, Colorado.

With Tengasco qualifying as a business and the Kansas Reporting Unit making up a significant portion of the assets of Tengasco, the Company concluded that the transaction met the requirements of assets held for sale and discontinued operations upon the acquisition date.

The sale closed on April 2, 2021 for an adjusted purchase price of $ 3.3 million, after customary closing adjustments.

RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

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

September 30, 2021

(In thousands)

Oil and natural gas sales $ —

Total revenues —

Lease operating expenses 115

Goodwill impairment 18,516

Total expenses 18,631

Other expenses ( 107 )

Loss from discontinued operations before income taxes ( 18,738 )

Income tax expense ( 59 )

Loss from discontinued operations, net of tax $ ( 18,797 )

The Company did not have any discontinued operations during the year ended December 31, 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.

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 periods presented below:

Year Ended December 31, 2022 Three Months Ended December 31, 2021 Year Ended September 30, 2021

(In thousands, except per share/unit)

Continuing Operations:

Net income (loss) - Diluted $ 118,011 $ 21,398 $ ( 46,869 )

Dividends on preferred units — — ( 1,491 )

Net income (loss) attributable to common shareholders/unitholders - Basic (1)

The deferred tax assets for the net operating losses, along with the other deferred tax assets as shown in the table above, are presented net with deferred tax liabilities, which primarily consist of book and tax depreciation differences.

(12) Net Income Per Share

The Company calculated net income per share using the treasury stock method.

The table below sets forth the computation of basic and diluted net income per share for the periods presented below:

Year Ended December 31,

(In thousands, except per share amounts)

$ 111,591 $ 118,011

Basic weighted-average common shares/units outstanding 19,553 19,470 16,021

Effecting of dilutive securities:

Restricted shares/units 133 99 —

Diluted weighted-average common shares/units outstanding 19,686 19,569 16,021

Continuing Operations:

Basic net income (loss) per common share/unit $ 6.04 $ 1.10 $ ( 3.02 )

Diluted net income (loss) per common share/unit $ 5.99 $ 1.09 $ ( 3.02 )

Basic weighted-average common shares outstanding

19,705 19,553

(1) Used in the basic and diluted net loss per share/unit calculation when the Company is in a net loss position.

Restricted shares

Diluted weighted-average common shares outstanding

20,000 19,686

Basic net income per common share

$ 5.66 $ 6.04

Diluted net income per common share

$ 5.58 $ 5.99

RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The following shares/units were excluded from the calculation of diluted net income (loss) per share/unit due to their anti-dilutive effect for the periods presented:

Year Ended December 31, 2022 Three Months Ended December 31, 2021 Year Ended September 30, 2021

(In thousands)

Restricted shares/units 405 268 228

The following shares were excluded from the calculation of diluted net income per share due to their anti-dilutive effect for the periods presented:

Year Ended December 31,

Restricted shares

294,817 405,114

(13) Commitments and Contingencies

Legal Matters

The Company was named as a defendant in an adversary proceeding (the "Adversary Proceeding") commenced on October 25, 2021 in United States Bankruptcy Court for the Northern District of Texas, Dallas Division (the "Bankruptcy Court"), by the Trustee of the Chapter 7 bankruptcy of the Hoactzin Partners, L.P.

("Hoactzin").

The complaint in the Adversary Proceeding alleges that in October of 2018, one year prior to the Hoactzin bankruptcy filing in October of 2019, Peter Salas ("Salas"), Chairman of the Board of Tengasco during the period of the purported fraudulent transfers, caused Hoactzin to transfer its working interests in certain wells on its Kansas acreage (the “Kansas Working Interests”) to the Company for an amount the complaint alleges was purportedly less than the reasonable equivalent value of such Kansas Working Interests.

The complaint includes avoidance actions and other causes of action in connection with the transfer of the Kansas Working Interests, as well as other causes of action alleged related to certain transactions to which the Company was not a party.

On October 13, 2022, the Company entered into a Compromise Settlement Agreement and Mutual General Release (the “Settlement Agreement”) with the Trustee for the bankruptcy estate for Hoactzin to resolve certain claims against the Company in the Adversary Proceeding.

Under the terms of the Settlement Agreement, the Company agreed to pay $ 80 thousand to the Trustee in full settlement and satisfaction of (a) all claims, causes of action, and damages that have been asserted against the Company or could be asserted against the Company in the Adversary Proceeding;

and (b) all claims which might arise from or relate to any actions taken by the Company while acting in connection with Debtor.

On November 17, 2022, the Bankruptcy Court approved the Settlement Agreement.

On November 17, 2022, the Company made the settlement payment to the Trustee in accordance with the Settlement Agreement.

On November 22, 2022, the Bankruptcy Court entered an Order Granting the Joint Motion Dismissal resulting in the dismissal of the Adversary Proceeding with prejudice (the "Dismissal Order"), as contemplated by the Settlement Agreement.

Neither the Settlement Agreement nor the Dismissal Order has any effect on the Trustee’s claims against any of the other defendants in the Adversary Proceeding, including without limitation, those claims against Peter Salas, our former Chief Executive Officer.

Due to the nature of the Company's business, the Company may at times be subject to claims and legal actions.

The Company accrues liabilities when it is probable that future costs will be incurred, and such costs can be reasonably estimated.

Such accruals are based on developments to date and the Company’s estimates of the outcomes of these matters.

The Company did not recognize any material liability for legal matters as of December 31, 2023 and December 31, 2022.

Management believes it is remote that the impact of such matters will have a materially adverse effect on the Company’s financial position, results of operations, or cash flows.

Environmental Matters

1 unchanged sentence

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 material environmental liabilities as of December 31, 2022 or 2021.

The Company had no material environmental liabilities as of December 31, 2023 or December 31, 2022.

Contractual Commitments

In October 2021, the Company executed two agreements related to its enhanced oil recovery ("EOR") project.

The first agreement is a CO 2 purchase agreement with Kinder Morgan CO 2 Company, LLC that has a primary term extending through the earlier of the total contract quantity delivered or December 31, 2025.

The agreement also has a daily contract quantity for Kinder Morgan to deliver CO 2 to the Company.

The second agreement is a connection agreement that also established a delivery point for the purchased CO 2 with the Cortez Pipeline Company.

RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

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

Under the agreement, the Company has commitments to purchase an additional approximately $ 2.8 million of pipe by second quarter of 2023 as of December 31, 2022.

In October 2021, the Company executed an agreement related to its EOR project.

This agreement is a CO2 purchase agreement that has a daily contract quantity with Kinder Morgan CO2 Company, LLC that has a primary term extending through the earlier of the total contract quantity delivered or December 31, 2025.

In August 2022, the Company entered into a second amendment on its gas gathering and processing agreement with its primary midstream counterparty, Stakeholder Midstream LLC (“Stakeholder”).

Stakeholder committed to expand their gathering and processing system with a commitment from the Company to deliver an annual minimum volume to Stakeholder’s gathering system for a minimum of seven years beginning on the in-service date of the expanded plant.

In January 2023, the Company entered into an agreement to form a joint venture with Conduit Power LLC.

The Company is committed to contributing its portion of capital expenditures into the joint venture company, RPC Power.

In conjunction with the formation of the joint venture, the Company entered into additional agreements with RPC Power or one of its subsidiaries.

These agreements include RPC Power providing operational expertise on the implementation and management of the power generation for a monthly fee of $ 20 thousand.

In addition, the Company entered into a tolling agreement and committed to provide the natural gas needed to fuel onsite power generators for 10 years following the in-service date, with an automatic yearly extension until terminated by either party, for a fee based on a per MMBtu basis adjusted for contractual usage factors.

In October 2023, the Company entered into a purchase agreement for pipe related to its 2024 drilling program.

Under the agreement, the Company has commitments to purchase approximately $ 13.1 million of pipe by December 2024.

(14) Subsequent Events

1 unchanged sentence

On January 11, 2024, the Board of Directors of the Company declared a cash dividend of $ 0.36 per share of common stock payable on February 8, 2024 to its shareholders of record at the close of business on January 25, 2024.

Entry into Purchase and Sales Agreement

On February 22, 2023, the Company entered into a purchase and sale agreement (the "Purchase Agreement") to acquire interests in oil and natural gas leases and related property with Pecos Oil & Gas, LLC (“Pecos”) for a purchase price of approximately $ 330 million, subject to customary closing adjustments, (the “New Mexico Acquisition”).

The oil and natural gas leases are located in the Yeso trend of the Permian Basin in Eddy County of New Mexico.

On February 22, 2023, in connection with the Purchase Agreement, REP deposited $ 33 million in cash into a third party escrow account, which will be credited against the purchase price upon closing.

The New Mexico Acquisition is expected to close early in the second quarter of 2023, subject to the satisfaction of several closing considerations, including but not limited to, an amendment to the revolving credit facility and a commitment letter dated February 22, 2023 with Truist Bank and the other participating lenders, it is anticipated that up to $ 130 million of the purchase price will be funded by amending REP’s existing credit facility to increase the total borrowing base to $ 475 million from $ 225 million.

The commitment letter and related amendment to the credit facility and increase to the borrowing base are subject to a number of conditions, including the preparation, execution and delivery of loan amendments.

In connection with the Purchase Agreement, the Company entered into a commitment letter dated February 22, 2023 (the "Commitment Letter") with EOC Partners Advisors L.P.

and/or one of its affiliates (collectively, “EOC”) in which EOC and/or one of its affiliates will purchase $ 200 million of unsecured senior notes (“Senior Notes”) from the Company on the closing date of the New Mexico Acquisition.

The proceeds of the Senior Notes will be used to fund a portion of the purchase price of the New Mexico Acquisition and to pay fees, costs and expenses related to the New Mexico Acquisition and the related financing transactions.

The Senior Notes will bear interest at 10.5 % annually and will mature five years after issuance.

The Senior Notes contain certain mandatory and voluntary prepayment conditions.

Additionally, the Senior Notes have various financial covenants.

The funding of the Senior Notes is contingent on the satisfaction or waiver of certain conditions set forth in the Commitment Letter.

Derivative Contracts

As discussed above, the Company entered into the Purchase Agreement to acquire assets in Eddy County New Mexico.

In connection with the Purchase Agreement, the Company entered into the Commitment Letter described above for the issuance of $ 200 million of Senior Notes upon closing of the New Mexico Acquisition, which is subject to the terms and conditions set forth therein.

The Senior Notes contain certain hedging requirements.

The Company has therefore added to its open derivative contracts in anticipation of an early second quarter close on the New Mexico Acquisition and issuance of Senior Notes.

RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

following table summarizes the Company's open derivative positions as of March 3, 2023, related to oil and natural gas production:

Weighted Average Price

Notional Volume Fixed Put Call

Oil Swaps (Bbl)

Q1 2023 225,000 $ 53.65 $ — $ —

Q2 2023 315,000 $ 62.78 $ — $ —

Q3 2023 216,000 $ 63.04 $ — $ —

Q4 2023 189,000 $ 62.51 $ — $ —

2024 240,000 $ 71.60 $ — $ —

Oil Collars (Bbl)

Q1 2023 210,000 $ — $ 70.95 $ 89.96

Q2 2023 300,000 $ — $ 71.50 $ 88.98

Q3 2023 330,000 $ — $ 68.64 $ 88.85

Q4 2023 330,000 $ — $ 68.64 $ 88.85

2024 1,293,000 $ — $ 61.02 $ 86.39

2025 315,000 $ — $ 60.00 $ 77.98

Natural Gas Swaps (MMBtu)

Q1 2023 — $ — $ — $ —

Q2 2023 450,000 $ 2.60 $ — $ —

Q3 2023 450,000 $ 2.60 $ — $ —

Q4 2023 400,000 $ 3.23 $ — $ —

2024 1,500,000 $ 3.43 $ — $ —

2025 375,000 $ 4.05 $ — $ —

Natural Gas Collars (MMBtu)

Q1 2023 — $ — $ — $ —

Q2 2023 300,000 $ — $ 2.55 $ 3.20

Q3 2023 300,000 $ — $ 2.55 $ 3.20

Q4 2023 300,000 $ — $ 3.12 $ 4.07

2024 1,065,000 $ — $ 3.19 $ 4.14

2025 255,000 $ — $ 3.65 $ 4.95

Oil Basis (Bbl)

Q1 2023 240,000 $ 1.28 $ — $ —

Q2 2023 360,000 $ 1.28 $ — $ —

Q3 2023 360,000 $ 1.28 $ — $ —

Q4 2023 360,000 $ 1.28 $ — $ —

2024 960,000 $ 0.87 $ — $ —

___________________

(1) Q1 2023 derivative positions shown include January and February 2023 contracts, some of which have settled as of March 3, 2023.

SUPPLEMENTAL OIL AND GAS INFORMATION - (Continued)

(16) Supplemental Information on Oil and Natural Gas Operations (Unaudited)

Termination of Agreements between Riley and Combo

As discussed in Note 8 - Transactions with Related Parties, the Company has an MSA with Combo to provide certain services, including management of its assets, and overall company accounting, tax filings, and back-office functions.

Each of Combo and Riley desired to terminate such MSA and transitioned the services under the MSA to Combo and its service providers effective as of January 31, 2024.

In addition, certain oil and natural gas properties were developed by Riley and Combo who currently jointly own interests in 6 established units in Lee and Fayette Counties, Texas.

Going forward, Riley will no longer have the right to acquire interest in Combo’s leases or earn an interest in the future units formed within defined areas.

Riley may participate in any wells or units to the extent Riley owns an interest in oil, gas or minerals attributable to such new well or unit.

Further, Riley can continue to participate in wells drilled within each of the established units.

Power Joint Venture

On March 4, 2024, the Company made a capital contribution of $ 5.6 million to its joint venture RPC Power, which increased the total contribution to $ 11.5 million and the total ownership from 30 % to 35 %.

SUPPLEMENTAL OIL AND GAS INFORMATION

(15) Supplemental Oil and Gas Information (Unaudited)

Capitalized Costs

6 unchanged sentences

Amounts reported as costs incurred include both capitalized costs and costs charged to expense when incurred for oil and natural gas property acquisition, exploration and development activities.

Costs incurred also include new ARO established in the current year as well as increases or decreases to ARO resulting from changes to cost estimates during the year.

Costs incurred also include ARO established in the current year as well as increases or decreases to ARO resulting from changes to cost estimates during the year.

Exploration costs presented below include the costs of drilling and equipping successful and unsuccessful exploration wells during the year, geological and geophysical expenses and the costs of retaining undeveloped leaseholds.

1 unchanged sentence

The following summarizes the costs incurred for oil and natural gas property acquisition, exploration and development activities for the periods presented below:

Year Ended December 31, 2022 Three Months Ended December 31, 2021 Year Ended September 30, 2021

Year Ended December 31,

(In thousands)

10 unchanged sentences

Therefore, the following schedule is not necessarily indicative of the contribution of net earnings of the Company's oil and natural gas operations.

Year Ended December 31, 2022 Three Months Ended December 31, 2021 Year Ended September 30, 2021

Year Ended December 31,

(In thousands)

10 unchanged sentences

_____________________

(1) Subsequent to the Closing Date of the Merger, the statutory combined federal and state tax rate of 21.59 % is used for the year ended December 31, 2022, three months ended December 31, 2021, and year ended September 30, 2021.

(1) The statutory combined federal and state tax rate of 21.20 % and 21.59 % is used for the years ended December 31, 2023 and.2022, respectively.

Oil, Natural Gas and NGL Quantities

Our reserve reports, as of the year ended December 31, 2022, three months ended December 31, 2021, and year ended September 30, 2021, were prepared by Netherland, Sewell & Associates, Inc.

and are presented below.

Our reserve report for the year ended December 31, 2023 was prepared by Ryder Scott Company, L.P.

For the year ended December 31, 2022, our reserve report was prepared by Netherland, Sewell & Associates, Inc.

All reserves are located within the continental United States.

7 unchanged sentences

SUPPLEMENTAL OIL AND GAS INFORMATION - (continued)

The following table sets forth information for the periods below with respect to changes in the Company’s proved (i.e.

proved developed and undeveloped) reserves:

The following table sets forth information for the periods below with respect to changes in the Company’s proved (i.e., proved developed and undeveloped) reserves:

Oil Natural Gas NGLs Total

(MBbl) (MMcf) (MBbl) (MBoe)

September 30, 2020 37,158 53,683 10,681 56,787

Extensions and discoveries 9,308 12,089 2,436 13,759

Revisions 2,138 12,850 492 4,772

Production ( 2,341 ) ( 2,603 ) ( 380 ) ( 3,155 )

September 30, 2021 46,263 76,019 13,229 72,163

December 31, 2021 47,021 77,486 13,471 73,407

Extensions and discoveries 9,949 13,178 2,651 14,796

2 unchanged sentences

December 31, 2022 48,882 86,018 14,454 77,673

12,810 39,261 6,711 26,064

Extensions and discoveries 14,822 22,945 4,224 22,870

3 unchanged sentences

Proved Developed Reserves, Included Above

September 30, 2021 26,170 46,173 7,650 41,516

December 31, 2021 27,096 47,974 7,949 43,041

December 31, 2022 29,632 59,314 9,604 49,122

December 31, 2023 36,731 71,671 11,502 60,178

Proved Undeveloped Reserves, Included Above

September 30, 2021 20,093 29,846 5,579 30,647

December 31, 2021 19,925 29,512 5,522 30,366

December 31, 2022 19,250 26,704 4,850 28,551

December 31, 2023 29,577 52,277 9,247 47,537

As of December 31, 2023, reserves were comprised of 61.5 % oil, 19.2 % natural gas and 19.3 % NGL.

2022 proved reserves were estimated based on prices of $ 91.96 per Bbl of oil, $ 3.16 per Mcf of natural gas and $ 25.55 per Bbl of NGL.

Prices used in the 2022 reserve report are based on the twelve month unweighted arithmetic average of the first-day-of-the-month price for each month in the period January 2022 through December 2022.

For oil and NGL volumes, the average West Texas Intermediate ("WTI") spot price of $ 94.14 per Bbl is adjusted for quality, transportation fees, and market differentials.

2023 proved reserves were estimated based on average realized prices of $ 76.02 per Bbl of oil, $ 0.46 per Mcf of natural gas and $ 7.11 per Bbl of NGL.

Prices used in the 2023 reserve report are based on the twelve month unweighted arithmetic average of the first-day-of-the-month price for each month in the period ("SEC price") January 2023 through December 2023.

For oil and NGL volumes, the average West Texas Intermediate ("WTI") SEC price of $ 78.22 per Bbl is adjusted for quality, transportation fees, and market differentials.

The fees associated with the transportation contract are included as a deduction to oil revenue.

For gas volumes, the average Henry Hub spot price of $ 6.36 per MMBtu is adjusted for energy content, transportation fees and market differentials.

For gas volumes, the average Henry Hub SEC price of $ 2.64 per MMBtu is adjusted for energy content, transportation fees and market differentials.

As of December 31, 2022, reserves were comprised of 62.9 % oil, 18.5 % natural gas and 18.6 % NGL.

December 31, 2021 proved reserves were estimated based on prices of $ 64.60 per Bbl of oil, $ 1.65 per Mcf of natural gas and $ 13.75 per Bbl of NGL.

Prices used in the December 31, 2021 reserve report are based on the twelve month unweighted arithmetic average of the first-day-of-the-month price for each month in the period January 2021 through December 2021.

For oil and NGL volumes, the average WTI spot price of $ 66.55 per Bbl is adjusted for quality, transportation fees, and market differentials.

The fees associated with the transportation contract are included as a deduction to oil revenue.

For gas volumes, the average Henry Hub spot price of $ 3.60 per MMBtu is adjusted for energy content, transportation fees and market differentials.

As of September 30, 2021, reserves were comprised of 64.1 % oil, 17.6 % natural gas and 18.3 % NGL.

September 30, 2021 proved reserves were estimated based on prices of $ 55.73 per Bbl of oil, $ 0.99 per Mcf of natural gas and $ 9.83 per Bbl of NGL.

Prices used in the September 30, 2021 reserve report are based on the twelve month unweighted arithmetic average of the first-day-of-the-month price for each month in the period October 2020 through September 2021.

For oil and NGL volumes, the average WTI spot price of $ 57.64 per Bbl is adjusted for quality, transportation fees, and market differentials.

2022 proved reserves were estimated based on prices of $ 91.96 per Bbl of oil, $ 3.16 per Mcf of natural gas and $ 25.55 per Bbl of NGL.

Prices used in the 2022 reserve report are based on the twelve month unweighted arithmetic average of the first-day-of-the-month price for each month in the period January 2022 through December 2022.

For oil and NGL volumes, the average WTI SEC price of $ 94.14 per Bbl is adjusted for quality, transportation fees, and market differentials.

The fees associated with the transportation contract are included as a deduction to oil revenue.

For gas volumes, the average Henry Hub spot price of $ 2.94 per MMBtu is adjusted for energy content, transportation fees and market differentials.

For gas volumes, the average Henry Hub SEC price of $ 6.36 per MMBtu is adjusted for energy content, transportation fees and market differentials.

For the year ended December 31, 2023, the Company added 30.0 MMBoe of proved reserves, with such additions due to acquisitions and extensions and discoveries, partially offset by negative revisions and production.

The Company had acquisitions of 26.1 MMBoe primarily as a result of the New Mexico Acquisition and extensions and discoveries to proved reserves of 22.9 MMBoe, which consisted of 8.3 MMBoe added to PDP as a result of drilling successful wells that were previously classified as unproved locations, and 14.6 MMBoe added to PUDs as a result of drilling successful wells offsetting locations that were previously unproven locations.

The Company had downward revisions of previous estimates of 12.1 MMBoe, which are primarily attributable to the removal of PUDs due to changes in the Company's development schedule.

Consistent with SEC guidelines, PUDs are limited to those locations that are reasonably certain to be developed within five years.

SUPPLEMENTAL OIL AND GAS INFORMATION - (continued)

For the year ended December 31, 2022, the Company had downward revisions of previous estimates of 6,331 MBoe.

These revisions are primarily the result of changes in well level projections in certain undeveloped areas and increases in service costs.

The Company had extensions and discoveries to proved developed and proved non-developed reserves of 14,796 MBoe which consisted of 7,759 MBoe as a result of drilling successful wells that were previously classified as unproved locations, and the addition to proved undeveloped of 7,037 MBoe as a result of drilling successful wells offsetting locations that were previously unproven locations.

During the fiscal year in 2022, the Company did not purchase any additional reserves.

For the three months ended December 31, 2021, the Company had net upward revisions of previous estimates of 133 MBoe.

These revisions are primarily the result of increases in pricing.

The Company had extensions and discoveries to proved developed and proved non-developed reserves of 2,026 MBoe as a result of drilling successful wells that were previously classified as unproved locations.

During the three months ended December 31, 2021, the Company did not purchase any additional reserves.

For the year ended September 30, 2021, the Company had upward revisions of previous estimates of 4,772 MBoe.

These revisions are primarily the result of increases in pricing.

The Company had extensions and discoveries to proved developed and proved non-developed reserves of 13,759 MBoe which consisted of 6,564 MBoe as a result of drilling successful wells that were previously classified as unproved locations, and the addition to proved undeveloped of 7,195 MBoe as a result of drilling successful wells offsetting locations that were previously unproven locations.

During the year ended September 30, 2021, the Company did not purchase any additional reserves.

For the year ended December 31, 2022, the Company had downward revisions of previous estimates of 6.3 MMBoe.

These revisions are primarily the result of changes in certain well level projections and higher projected operating costs.

The Company had extensions and discoveries to proved reserves of 14.8 MMBoe, which consisted of 7.8 MMBoe added to PDP as a result of drilling successful wells that were previously classified as unproved locations, and 7.0 MMBoe added to PUDs as a result of drilling successful wells offsetting locations that were previously unproven locations.

During the year ended December 31, 2022, the Company did not acquire any reserves.

Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil, Natural Gas and NGL Reserves

3 unchanged sentences

(i) estimates are made of quantities of proved reserves and future periods during which they are expected to be produced based on year-end economic conditions;

(ii) estimated future cash flows are compiled by applying the twelve month average of the first of the month prices of crude oil and natural gas relating to the Company’s proved reserves to the year-end quantities of those reserves for reserves;

(ii) estimated future cash flows are compiled by applying the twelve month average of the first of the month prices of oil and natural gas relating to the Company’s proved reserves to the year-end quantities of those reserves;

(iii) future cash flows are reduced by estimated production costs, costs to develop and produce the proved reserves and abandonment costs, all based on year-end economic conditions, plus Company overhead incurred;

1 unchanged sentence

and, (v) future net cash flows are discounted to present value by applying a discount rate of 10%.

The assumptions used to compute the standardized measure are those prescribed by the FASB and the Securities and Exchange Commission.

The assumptions used to compute the standardized measure are those prescribed by the FASB and the SEC.

These assumptions do not necessarily reflect the Company’s expectations of actual revenues to be derived from those reserves, nor their present value.

3 unchanged sentences

An estimate of fair value would also take into account, among other things, the recovery of reserves not presently classified as proved, anticipated future changes in prices and costs and a discount factor more representative of the time value of money and the risks inherent in reserve estimates.

SUPPLEMENTAL OIL AND GAS INFORMATION - (Continued)

The following summary sets forth the Company’s future net cash flows relating to proved oil, natural gas and NGL reserves based on the standardized measure prescribed in ASC Topic 932:

Year Ended December 31, 2022 Three Months Ended December 31, 2021 Year Ended September 30, 2021

Year Ended December 31,

(In thousands)

8 unchanged sentences

_____________________

(1) December 31, 2022 proved reserves were derived based on prices of $ 91.96 per barrel of oil, $ 3.16 per Mcf of natural gas and $ 25.55 per barrel of NGL.

(2) December 31, 2021 proved reserves were derived based on prices of $ 64.60 per barrel of oil, $ 1.65 per Mcf of natural gas and $ 13.75 per barrel of NGL.

(3) September 30, 2021 proved reserves were derived based on prices of $ 55.73 per barrel of oil, $ 0.99 per Mcf of natural gas and $ 9.83 per barrel of NGL.

(1) December 31, 2023 proved reserves were derived based on average realized prices of $ 76.02 per barrel of oil, $ 0.46 per Mcf of natural gas and $ 7.11 per barrel of NGL.

(2) December 31, 2022 proved reserves were derived based on average realized prices of $ 91.96 per barrel of oil, $ 3.16 per Mcf of natural gas and $ 25.55 per barrel of NGL.

SUPPLEMENTAL OIL AND GAS INFORMATION - (continued)

Principal sources of change in the Standardized Measure are shown below:

Year Ended December 31, 2022 Three Months Ended December 31, 2021 Year Ended September 30, 2021

Year Ended December 31,

(In thousands)

4 unchanged sentences

Extensions and discoveries 385,482 321,009

Acquisition of reserves 613,295 —

Revisions of previous quantity estimates ( 188,364 ) ( 83,188 )

5 unchanged sentences

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-K

Item 9A. Controls and Procedures