Riley Exploration Permian, Inc. 10-K

Item 9A. Controls and Procedures Disclosure Controls and Procedures 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. We evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2024, with the participation of our CEO and CFO, as well as other key members of our management. Based on 72 Table of Contents this evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of December 31, 2024. Management's Annual Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external reporting purposes in accordance with accounting principles generally accepted in the United States. Our management assessed the effectiveness of the Company’s internal control over financial reporting, using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control - Integrated Framework (2013). We have evaluated the effectiveness of our internal control over financial reporting as of the end of the period covered by this report, with the participation of our CEO and CFO, as well as other key members of our management. Based on this assessment, management concluded that, as of December 31, 2024, the Company’s internal control over financial reporting was effective. The effectiveness of our internal control over financial reporting as of December 31, 2024, 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, 2024, 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, 2024, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 73 Table of Contents Report of Independent Registered Public Accounting Firm Shareholders and Board of Directors Riley Exploration Permian, Inc. Oklahoma City, Oklahoma Opinion on Internal Control over Financial Reporting We have audited Riley Exploration Permian, Inc.’s (the “Company’s”) internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, 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, 2024 and 2023, 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 5, 2025 expressed an unqualified opinion thereon. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Item 9A, Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit of internal control over financial reporting in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. 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, P.C. Houston, Texas March 5, 2025 74 Table of Contents Item 9B. Other Information On November 13, 2024 , Corey Riley , our Chief Information Officer and Chief Compliance Officer , adopted a trading plan intended to satisfy the affirmative defense of Rule 10b5-1(c) providing for the sale of up to 14,000 shares of Common Stock. The expiration date for Mr. Riley's plan is November 12, 2025 . Except as disclosed above, during the quarter ended December 31, 2024, 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. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections Not applicable. 75 Table of Contents PART III Item 10. Directors, Executive Officers and Corporate Governance Information as to Item 10 will be set forth in our definitive proxy statement, which is to be filed pursuant to Regulation 14A with the SEC within 120 days after the close of the year ended December 31, 2024. Item 11. Executive Compensation Information as to Item 11 will be set forth in our definitive proxy statement, which is to be filed pursuant to Regulation 14A with the SEC within 120 days after the close of the year ended December 31, 2024. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information as to Item 12 will be set forth in our definitive proxy statement, which is to be filed pursuant to Regulation 14A with the SEC within 120 days after the close of the year ended December 31, 2024. Item 13. Certain Relationships and Related Transactions, and Director Independence Information as to Item 13 will be set forth in our definitive proxy statement, which is to be filed pursuant to Regulation 14A with the SEC within 120 days after the close of the year ended December 31, 2024. Item 14. Principal Accountant Fees and Services Information as to Item 14 will be set forth in our definitive proxy statement, which is to be filed pursuant to Regulation 14A with the SEC within 120 days after the close of the year ended December 31, 2024. 76 Table of Contents PART IV Item 15. Exhibits and Financial Statement Schedules The following documents are filed as a part of this report: (1) Consolidated Financial Statements Reference is made to the Index to Consolidated Financial Statements appearing on page F-1. (2) Financial Statement Schedules All financial statement schedules have been omitted because they are not applicable or the required information is presented in the consolidated financial statements or notes thereto. (3) Exhibits Exhibit Number Description 1.1 Underwriting Agreement, dated April 3, 2024, by and among Riley Exploration Permian, Inc., Bluescape Riley Exploration Holdings LLC, Yorktown Energy Partners VIII, L.P. and Riley Exploration Group, LLC, and Truist Securities, Inc. and Roth Capital Partners, LLC, as representatives of the several underwriters listed in Schedule A thereto. (incorporated by reference from Exhibit 1.1 to the Registrant’s Current Report on Form 8-K, as filed with the Securities and Exchange Commission on April 8, 2024). 2.1 Agreement and Plan of Merger, by and among Tengasco, Inc., Antman Sub, LLC, and Riley Exploration - Permian, LLC, dated as of October 21, 2020 (incorporated by reference from Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 22, 2020). 2.2 Amendment No. 1 to Agreement and Plan of Merger, by and among Tengasco, Inc., Antman Sub, LLC, and Riley Exploration - Permian, LLC, dated as of January 20, 2021 (incorporated by reference from Exhibit 2.1 to the Registrant’s Current Report on Form 8-K, as filed with the Securities and Exchange Commission on January 22, 2021). 3.1 First Amended and Restated Certificate of Incorporation of Riley Exploration Permian, Inc. (incorporated by reference to Exhibit 4.1 to the Registrant’s Registration Statement on Form S-8 filed with the Securities and Exchange Commission on March 1, 2021, Registration No. 333-253750). 3.2 Third Amended and Restated Bylaws of Riley Exploration Permian, Inc. (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). 4.1 Description of Registrant's Securities 4.2 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). 4.3 First Amendment to Note Purchase Agreement dated as of December 13, 2024 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 from Exhibit 10.2 to the Registrant’s Current Report on Form 8-K, as filed with the Securities and Exchange Commission on December 18, 2024). 10.1 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. 333-250019). 10.2 First Amendment to Credit Agreement dated as of February 27, 2018, by and among Riley Exploration – Permian, LLC, as borrower, Truist Bank, as administrative agent, and the lenders party thereto (incorporated by reference from Exhibit 10.2 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. 333-250019). 77 Table of Contents 10.3 Second Amendment to Credit Agreement dated as of November 9, 2018, by and among Riley Exploration – Permian, LLC, as borrower, Truist Bank, as administrative agent, and the lenders party thereto (incorporated by reference from Exhibit 10.3 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. 333-250019). 10.4 Third Amendment to Credit Agreement dated as of April 3, 2019, by and among Riley Exploration – Permian, LLC, as borrower, Truist Bank, as administrative agent, and the lenders party thereto (incorporated by reference from Exhibit 10.4 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. 333-250019). 10.5 Fourth Amendment to Credit Agreement dated as of October 15, 2019, by and among Riley Exploration – Permian, LLC, as borrower, Truist Bank, as administrative agent, and the lenders party thereto (incorporated by reference from Exhibit 10.5 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. 333-250019). 10.6 Fifth Amendment to Credit Agreement dated as of May 7, 2020, by and among Riley Exploration – Permian, LLC, as borrower, Truist Bank, as administrative agent, and the lenders party thereto (incorporated by reference from Exhibit 10.6 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. 333-250019). 10.7 Sixth Amendment to Credit Agreement dated as of August 31, 2020, by and among Riley Exploration – Permian, LLC, as borrower, Truist Bank, as administrative agent, and the lenders party thereto (incorporated by reference from Exhibit 10.7 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. 333-250019). 10.8 Seventh Amendment and Consent to Credit Agreement dated as of October 21, 2020, by and among Riley Exploration – Permian, LLC, as borrower, Truist Bank, as administrative agent, and the lenders party thereto (incorporated by reference from Exhibit 10.8 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. 333-250019). 10.9 Eighth Amendment to Credit Agreement dated as of March 5, 2021, 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 10.9 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, as filed with the Securities and Exchange Commission on May 17, 2021). 10.10 Ninth Amendment to Credit Agreement dated as of May 5, 2021, 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 10.10 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, as filed with the Securities and Exchange Commission on May 17, 2021). 10.11 Tenth Amendment to the Credit Agreement dated as of October 12, 2021, 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 October 14, 2021). 10.12 Form of Indemnity Agreement (incorporated by reference from Exhibit 10.14 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. 333-250019). 10.13 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. 333-250019). 10.1 4 † 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. 333-253750). 10.1 5 † Form of Restricted Stock Agreement (Non-Employee Director) (incorporated by reference from Exhibit 4.6 to the Registrant’s Registration Statement on Form S-8 filed with the Commission on March 1, 2021, Registration No. 333-253750). 10.1 6† Employment Agreement dated effective as of March 15, 2021 by and between Riley Exploration Permian, Inc. and Corey 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 March 15, 2021). 78 Table of Contents 10. 1 7† Employment Agreement dated effective as of March 15, 2021 by and between Riley Exploration Permian, Inc. and Philip Riley (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 March 15, 2021). 10.1 8† Employment Agreement dated April 1, 2019 by and between Riley Exploration – Permian, LLC and Bobby D. Riley and assigned by Riley Exploration – Permian, LLC to Riley Permian Operating Company, LLC on June 8, 2019 (incorporated by reference from Exhibit 10.9 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. 333-250019). 10.1 9† Amendment No. 1 to Employment Agreement dated October 1, 2020 by and between Riley Permian Operating Company, LLC and Bobby D. Riley (incorporated by reference from Exhibit 10.10 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. 333-250019). 10.20 † Amendment No. 2 to Employment Agreement dated March 15, 2021 by and between Riley Permian Operating Company, LLC and Bobby D. Riley (incorporated by reference from Exhibit 10.7 to the Registrant’s Current Report on Form 8-K, as filed with the Securities and Exchange Commission on March 15, 2021). 10.2 1 † Employment Agreement, dated as of June 1, 2024, by and between Riley Exploration Permian, Inc. and Jeffrey M. Gutman. (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 June 3, 2024). 10.22 † Employment Agreement, dated as of June 20, 2024, by and between Riley Exploration Permian, Inc. and John Suter. (incorporated by reference from Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q, as filed with the Securities and Exchange Commission on August 7, 2024). 10.2 3 Second Amended and Restated Registration Rights Agreement dated October 7, 2020 by and among Riley Exploration – Permian, LLC, Riley Exploration Group, Inc., Yorktown Energy Partners XI, L.P., Boomer Petroleum, LLC, Bluescape Riley Exploration Holdings LLC, Bluescape Riley Acquisition Company LLC, Bobby D. Riley, Kevin Riley and Corey Riley (incorporated by reference to Exhibit 4.1 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. 333-250019). 10.24 Eleventh Amendment to the Credit Agreement dated as of April 29, 2022, 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 May 2, 2022). 10.25 Twelfth Amendment to the Credit Agreement dated as of October 25, 2022, 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 October 26, 2022). 10.26 Thirteenth Amendment to the Credit Agreement dated as of February 22, 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 10.2 to the Registrant's Current Report on Form 8-K, as filed with the Securities and Exchange Commission on February 27, 2023). 10.27 Purchase and Sale Agreement dated February 22, 2023 by and between Pecos Oil & Gas, LLC, as Seller, and Riley Exploration - Permian, LLC, as Purchaser (incorporated by reference from Exhibit 2.1 to the Registrant's Current Report on Form 8-K, as filed with the Securities and Exchange Commission on February 27, 2023). 10.28 Commitment Letter dated February 22, 2023 by and between Riley Exploration Permian, Inc. and EOC Partners Advisors L.P. (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) 10.29 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). 10.30 † 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). 10.31 † 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). 79 Table of Contents 10.32 † 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). 10.33 † 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). 10.3 4 * Fifteenth Amendment to the Credit Agreement dated as of December 13, 2024, by and among Riley Exploration Permian, Inc., Riley Exploration - Permian, LLC, as borrower, Truist Bank, as administrative agent, and the lenders party thereto. 10.35 Sixteenth Amendment to the Credit Agreement dated as of December 13, 2024, 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 December 18, 2024). 19.1 * Insider Trading Policy 21.1* Subsidiaries of the Registrant 23.1* Consent of BDO USA, P.C. 23.2* Consent of Ryder Scott Company, L.P. 31.1* Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2* Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1* Certification of Chief Executive Officer pursuant to 18 U.S.C., Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2* 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 97.1 Riley Exploration Permian, Inc. Clawback Policy Effective December 1, 2023 99.1* Report of Ryder Scott Company, L.P. 101.INS* XBRL Instance Document 101.SCH* XBRL Taxonomy Extension Schema Document 101.CAL* XBRL Taxonomy Calculation Linkbase Document 101.DEF* XBRL Taxonomy Definition Linkbase Document 101.LAB* XBRL Taxonomy Label Linkbase Document 101.PRE* XBRL Taxonomy Presentation Linkbase Document * Filed herewith. † Compensatory plan or arrangement. Item 16. Form 10-K Summary None. 80 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. RILEY EXPLORATION PERMIAN, INC. Date: March 5, 2025 By: /s/ Bobby D. Riley Bobby D. Riley Chairman of the Board and Chief Executive Officer By: /s/ Philip Riley Philip Riley 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 /s/ Bobby D. Riley Chairman of the Board and Chief Executive Officer (Principal Executive Officer) March 5, 2025 Bobby D. Riley /s/ Philip Riley Chief Financial Officer and Executive Vice President of Strategy (Principal Financial Officer) March 5, 2025 Philip Riley /s/ Jeffrey Gutman Chief Accounting Officer (Principal Accounting Officer) March 5, 2025 Jeffrey Gutman /s/ Brent Arriaga Director March 5, 2025 Brent Arriaga /s/ Bryan H. Lawrence Director March 5, 2025 Bryan H. Lawrence /s/ E. Wayne Nordberg Director March 5, 2025 E. Wayne Nordberg /s/ Beth A. di Santo Director March 5, 2025 Beth A di Santo /s/ Rebecca Bayless Director March 5, 2025 Rebecca Bayless 81 INDEX TO FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm ( BDO USA, P.C. ; Houston, Texas , PCAOB ID # 243 ) F-2 Consolidated Balance Sheets as of December 31, 2024 and 2023 F-4 Consolidated Statements of Operations for the Years Ended December 31, 2024 and 2023 F-5 Consolidated Statements of Changes in Shareholders' Equity for the Years Ended December 31, 2024 and 2023 F-6 Consolidated Statements of Cash Flows for the Years Ended December 31, 2024 and 2023 F-7 Notes to the Consolidated Financial Statements F-9 F-1 Report of Independent Registered Public Accounting Firm Shareholders and Board of Directors Riley Exploration Permian, Inc. Oklahoma City, Oklahoma Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Riley Exploration Permian, Inc. (the “Company”) as of December 31, 2024 and 2023, 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, 2024 and 2023, 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, 2024, 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 5, 2025 expressed an unqualified opinion thereon. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. 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: (1) relate 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 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 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 disclosed by management and described in Notes 3 and 5 to the consolidated financial statements, the Company uses the successful efforts method of accounting for its oil and natural gas producing activities. Management uses internal and independent petroleum engineers to make significant estimates, including estimating the future production volumes of proved oil and natural gas reserves. The Company’s oil and natural gas properties, net balance as of December 31, 2024 was $860.8 million, which includes proved oil and natural gas properties of $1,027.2 million and accumulated depletion, amortization and impairment of $288.7 million. DD&A expense was $71.3 million for the year ended December 31, 2024. 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 F-2 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 measurement of DD&A expense. Auditing the estimation of future production volumes 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. • Assessing the reasonableness of the future production volumes by 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, P.C. We have served as the Company's auditor since 2016. Houston, Texas March 5, 2025 F-3 RILEY EXPLORATION PERMIAN, INC. CONSOLIDATED BALANCE SHEETS December 31, 2024 2023 (In thousands, except share amounts) Assets Current Assets: Cash $ 13,124 $ 15,319 Accounts receivable, net 44,411 35,126 Prepaid expenses 1,592 1,631 Inventory 5,734 6,177 Current derivative assets 3,264 5,013 Total Current Assets 68,125 63,266 Oil and natural gas properties, net (successful efforts) 860,797 846,901 Other property and equipment, net 30,477 20,653 Non-current derivative assets 585 2,296 Equity method investment 22,811 5,620 Other non-current assets, net 10,706 6,975 Total Assets $ 993,501 $ 945,711 Liabilities and Shareholders' Equity Current Liabilities: Accounts payable $ 13,937 $ 3,855 Accrued liabilities 33,918 33,159 Revenue payable 34,786 30,695 Current derivative liabilities — 360 Current portion of long-term debt 20,000 20,000 Other current liabilities 20,123 6,276 Total Current Liabilities 122,764 94,345 Non-current derivative liabilities 414 — Asset retirement obligations 32,706 19,255 Long-term debt 249,494 335,959 Deferred tax liabilities 76,547 73,345 Other non-current liabilities 961 1,212 Total Liabilities 482,886 524,116 Commitments and Contingencies (Note 15) Shareholders' Equity: Preferred stock, $ 0.0001 par value, 25,000,000 shares authorized; 0 shares issued and outstanding — — Common stock, $ 0.001 par value, 240,000,000 shares authorized; 21,482,555 and 20,405,093 shares issued and outstanding at December 31, 2024 and December 31, 2023, respectively 21 20 Additional paid-in capital 310,232 279,112 Retained earnings 200,362 142,463 Total Shareholders' Equity 510,615 421,595 Total Liabilities and Shareholders' Equity $ 993,501 $ 945,711 The accompanying notes are an integral part of these consolidated financial statements. F-4 RILEY EXPLORATION PERMIAN, INC. CONSOLIDATED STATEMENTS OF OPERATIONS Year Ended December 31, 2024 2023 (In thousands, except per share amounts) Revenues: Oil and natural gas sales, net $ 409,801 $ 372,647 Contract services - related parties 380 2,400 Total Revenues 410,181 375,047 Costs and Expenses: Lease operating expenses 71,463 58,817 Production and ad valorem taxes 29,428 25,559 Exploration costs 2,595 4,165 Depletion, depreciation, amortization and accretion 74,900 65,055 Impairment of oil and natural gas properties 11,317 9,760 Other impairments 30,158 — General and administrative: Administrative costs 26,551 26,569 Share-based compensation expense 8,138 6,833 Cost of contract services - related parties 363 579 Transaction costs 1,573 5,817 Total Costs and Expenses 256,486 203,154 Income from Operations 153,695 171,893 Other Income (Expense): Interest expense, net ( 34,338 ) ( 31,816 ) Gain (loss) on derivatives, net ( 1,665 ) 6,193 Loss from equity method investment ( 721 ) ( 218 ) Total Other Income (Expense) ( 36,724 ) ( 25,841 ) Net Income from Operations Before Income Taxes 116,971 146,052 Income tax expense ( 28,074 ) ( 34,461 ) Net Income $ 88,897 $ 111,591 Net Income per Share: Basic $ 4.29 $ 5.66 Diluted $ 4.26 $ 5.58 Weighted Average Common Shares Outstanding: Basic 20,712 19,705 Diluted 20,875 20,000 The accompanying notes are an integral part of these consolidated financial statements. F-5 RILEY EXPLORATION PERMIAN, INC. CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (In thousands) Shareholders' Equity Common Stock Shares Amount Additional Paid-in Capital Retained Earnings Total Shareholders' Equity Balance, December 31, 2022 20,161 $ 20 $ 274,643 $ 58,783 $ 333,446 Share-based compensation expense 315 — 6,978 — 6,978 Repurchased shares for tax withholding ( 80 ) — ( 2,511 ) — ( 2,511 ) Issuance of common shares under ATM 9 — 2 — 2 Dividends declared — — — ( 27,911 ) ( 27,911 ) Net income — — — 111,591 111,591 Balance, December 31, 2023 20,405 $ 20 $ 279,112 $ 142,463 $ 421,595 Share-based compensation expense 155 — 8,138 — 8,138 Repurchased shares for tax withholding ( 92 ) — ( 2,432 ) — ( 2,432 ) Issuance of common shares, net 1,015 1 25,414 — 25,415 Dividends declared — — — ( 30,998 ) ( 30,998 ) Net income — — — 88,897 88,897 Balance, December 31, 2024 21,483 $ 21 $ 310,232 $ 200,362 $ 510,615 The accompanying notes are an integral part of these consolidated financial statements. F-6 RILEY EXPLORATION PERMIAN, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31, 2024 2023 (In thousands) Cash Flows from Operating Activities: Net income $ 88,897 $ 111,591 Adjustments to reconcile net income to net cash provided by operating activities: Exploratory well costs and lease expirations 2,560 4,143 Depletion, depreciation, amortization and accretion 74,900 65,055 Impairment of oil and natural gas properties 11,317 9,760 Other impairments 28,850 — (Gain) loss on derivatives, net 1,665 ( 6,193 ) Settlements on derivative contracts 1,849 ( 17,221 ) Amortization of deferred financing costs and discount 5,299 4,161 Share-based compensation expense 8,138 6,978 Deferred income tax expense 3,202 27,589 Loss from equity method investment 721 218 Other — ( 25 ) Changes in operating assets and liabilities Accounts receivable ( 9,285 ) ( 9,575 ) Prepaid expenses and other current assets ( 53 ) ( 717 ) Inventory 1,512 ( 546 ) Other non-current assets ( 994 ) ( 1,179 ) Accounts payable and accrued liabilities 9,877 3,200 Revenue payable 4,000 11,470 Other current liabilities 13,819 ( 1,514 ) Net Cash Provided by Operating Activities 246,274 207,195 Cash Flows from Investing Activities: Additions to oil and natural gas properties ( 98,490 ) ( 134,796 ) Additions to midstream property and equipment ( 10,964 ) — Additions to other property and equipment ( 875 ) ( 1,065 ) Acquisitions of oil and natural gas properties ( 19,597 ) ( 5,443 ) Net assets acquired in business combination — ( 324,686 ) Contributions to equity method investment ( 17,912 ) ( 3,566 ) Net Cash Used in Investing Activities ( 147,838 ) ( 469,556 ) Cash Flows from Financing Activities: Deferred financing costs ( 2,783 ) ( 7,406 ) Proceeds from Credit Facility 15,000 185,000 Repayments under Credit Facility ( 85,000 ) ( 56,000 ) Proceeds from Senior Notes, net of issuance costs — 188,000 Repayments of Senior Notes ( 20,000 ) ( 15,000 ) Payment of common share dividends ( 30,831 ) ( 27,706 ) Proceeds from issuance of common shares, net 25,415 2 Common stock repurchased for tax withholding ( 2,432 ) ( 2,511 ) Net Cash Provided by (Used in) Financing Activities ( 100,631 ) 264,379 Net Increase (Decrease) in Cash ( 2,195 ) 2,018 Cash, Beginning of Year 15,319 13,301 Cash, End of Year $ 13,124 $ 15,319 The accompanying notes are an integral part of these consolidated financial statements. F-7 RILEY EXPLORATION PERMIAN, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS - (Continued) Year Ended December 31, 2024 2023 (In thousands) Supplemental Disclosure of Cash Flow Information Cash Paid For: Interest, net of capitalized interest $ 31,582 $ 27,140 Income taxes, net of refunds $ 18,084 $ 9,949 Non-cash Investing and Financing Activities: Changes in capital expenditures in accounts payable and accrued liabilities $ 1,058 $ ( 5,850 ) Right-of-use assets obtained in exchange for operating lease liability $ 632 $ 1,277 Assets contributed to equity method investment $ — $ 2,272 Asset retirement obligations assumed in acquisitions $ 9,727 $ 19,359 Revisions in asset retirement obligations $ 1,856 $ — The accompanying notes are an integral part of these consolidated financial statements. F-8 Table of Contents RILEY EXPLORATION PERMIAN, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (1) Nature of Business Organization 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. Our Properties Our acreage is primarily located on large contiguous blocks in Yoakum County, Texas, which represents our Champions field and in Eddy County, New Mexico, which represents our Red Lake field. We are focused on horizontal drilling of conventional oil-saturated and liquids-rich formations that produce long-term stable cash flows in the Permian Basin. On April 3, 2023, the Company completed an acquisition of oil and natural gas properties in the Yeso trend of the Permian Basin in Eddy County, New Mexico ("2023 New Mexico Acquisition") from Pecos Oil & Gas, LLC. This acquisition included approximately 10,600 total contiguous net acres of leasehold, 18 net horizontal wells and 250 net vertical wells, which established our initial position in New Mexico. On May 7, 2024, the Company completed the acquisition of oil and natural gas properties in the Yeso trend of the Permian Basin in Eddy County, New Mexico ("2024 New Mexico Asset Acquisition"), which added 13,900 contiguous net acres to the Company's existing acreage in Eddy County. For further information regarding the 2023 New Mexico Acquisition and the 2024 New Mexico Asset Acquisition (the "2023 and 2024 New Mexico Acquisitions"), see Note 4 - Acquisitions of Oil and Natural Gas Properties. Current Commodity Environment The U.S. 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 crude oil and condensate ("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 a volatile 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 The Company's consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"). All intercompany balances and transactions have been eliminated upon consolidation. Certain prior period amounts have been reclassified to conform to the current period financial statement presentation. 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 Significant Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes. These estimates F-9 Table of Contents RILEY EXPLORATION PERMIAN, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 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. Actual results may differ significantly from the Company’s estimates. Any effects on the Company’s business, financial position or results of operations resulting from revisions to these estimates are recorded in the period in which the facts that give rise to the revision become known. Significant items subject to such estimates and assumptions include, but are not limited to, estimates of proved oil and natural gas reserves and related present value estimates of future net cash flows therefrom, the carrying value of oil and natural gas properties, accounts receivable, accrued capital expenditures and operating expenses, asset retirement obligations ("ARO"), the fair value determination of acquired assets and assumed liabilities, certain tax accruals and the fair value of derivatives. Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. The Company maintains cash at financial institutions which may at times exceed federally insured amounts. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on our cash and cash equivalents. The Company did no t have cash equivalents as of December 31, 2024, and 2023. Accounts Receivable, net 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. Accounts receivable from oil, natural gas and NGL sales are generally due within 30 to 60 days after the last day of each production month. No interest is charged on past-due balances. Payments made on all accounts receivable are applied to the earliest unpaid items. To the extent actual volumes and prices of oil, natural gas and NGLs are unavailable for a given reporting period because of timing or information not received from third parties, the expected sales volume and prices for these properties are estimated and recorded within accounts receivable in our consolidated balance sheets. Oil is priced based upon prevailing prices published by purchasers with certain adjustments related to oil quality and physical location. Natural gas pricing provisions are tied to a market index, with certain adjustments based on, among other factors, quality and heat content of natural gas, and prevailing supply and demand conditions. NGLs are priced based upon a market index with certain adjustments for transportation and fractionation. These market indices are determined on a monthly basis. The Company estimates uncollectible amounts based on the length of time that the accounts receivable has been outstanding, historical collection experience and current and future economic and market conditions, if failure to collect is expected to occur. Allowances for credit losses are recorded as reductions to the carrying values of the accounts receivable included in the Company’s consolidated balance sheets and are recorded in administrative costs in our consolidated statements of operations if failure to collect an estimable portion is determined to be probable. Accounts receivable, net is summarized below: December 31, 2024 2023 (In thousands) Oil, natural gas and NGL sales $ 38,374 $ 31,135 Joint interest accounts receivable 4,884 1,630 Allowance for credit losses ( 62 ) — Other accounts receivable 1,215 2,361 Total accounts receivable, net $ 44,411 $ 35,126 As of December 31, 2022, the Company had accounts receivables, net from oil, natural gas and NGL sales of $ 24.1 million. F-10 Table of Contents RILEY EXPLORATION PERMIAN, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Inventory 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. The Company accounts for our inventory using the first-in, first-out method and valued at the lower of cost or net realizable value. Proved Oil and Natural Gas Properties The Company uses the successful efforts method of accounting for our oil and natural gas producing activities. Under this method, all property acquisition costs and costs of development wells are capitalized as incurred. The costs of development wells are capitalized whether producing or non-producing. 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 the oil and natural gas properties in operating condition are charged to lease operating expenses ("LOE") 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. Leasehold acquisition costs of proved properties are depleted over total estimated proved reserves, and capitalized development costs of wells and related equipment and facilities are depleted over-estimated proved developed reserves. On the sale or retirement of a complete unit of a proved property or field, the cost and related accumulated depletion, depreciation and amortization are eliminated from the oil and natural gas property accounts, and the resulting gain or loss is recognized. On the sale of a partial unit of proved property, the unamortized cost of the property is apportioned to the interest sold and the interest retained is accounted for on the basis of the fair value of the retained interests and a gain or loss is recognized if the divestiture significantly affects the depletion rate. Unproved Oil and Natural Gas Properties Unproved oil and natural gas properties consist of costs incurred to acquire unproved leases. Unproved lease acquisition costs are capitalized until the leases expire or when we specifically identify leases that will revert to the lessor, at which time we charge the associated unproved lease acquisition costs to exploration costs. Lease acquisition costs related to successful drilling are reclassified to proved oil and natural gas properties. Upon the sale of an entire interest in an unproved property for cash or cash equivalents, a gain or loss is recognized to the extent of the difference between the proceeds received and the net carrying value of the property. Proceeds from the sale of partial interests in unproved oil and natural gas properties are accounted for as a recovery of costs unless the proceeds exceed the entire cost of the property. Impairment of Oil and Natural Gas Properties The cost of proved oil and natural gas properties are assessed on a field-by-field basis for impairment at least annually or whenever events and circumstances indicate that a decline in the recoverability of their carrying value may have occurred. The expected undiscounted future cash flows of the oil and natural gas properties are compared to the carrying amount of the oil, natural gas and NGL properties to determine if the carrying amount is recoverable. 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 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. See further discussion in Note 7 - Fair Value Measurements. Business Combinations 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 our acquisitions F-11 Table of Contents RILEY EXPLORATION PERMIAN, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 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 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. The Company includes the results of operations of acquired businesses beginning on the respective acquisition dates. 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. 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. The excess of the purchase price over the amount allocated to the assets and liabilities, if any, is recorded as goodwill. 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 Property and equipment are capitalized and recorded at cost, while maintenance and repairs are expensed. Depreciation of in use property and equipment is computed using the straight-line method over the estimated useful lives of the assets, which range from 5 to 39 years. Capitalized costs related to leasehold improvements are depreciated over the life of the lease. Land costs are accounted for at cost and are not depreciated. Components of other property and equipment consists of midstream property and equipment, computer equipment, computer software, office furniture, tools and equipment, buildings and improvements, and vehicles. Midstream property and equipment was not in service as of December 31, 2024. Other property and equipment, net is summarized below: December 31, 2024 2023 (In thousands) Midstream property and equipment $ 11,297 $ — Furniture, fixtures and other 5,882 6,605 Land 16,673 16,673 $ 33,852 $ 23,278 Accumulated depreciation and amortization ( 3,375 ) ( 2,625 ) Total other property and equipment, net $ 30,477 $ 20,653 Deferred Financing Costs 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 our 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 in our consolidated statements 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 additional paid in capital when related to the issuance of common equity securities. The issuance costs are expensed in our consolidated statements of operations if the issuance is unsuccessful. F-12 Table of Contents RILEY EXPLORATION PERMIAN, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Other Non-Current Assets, net Other non-current assets, net consisted of the following: December 31, 2024 2023 (In thousands) Deferred financing costs, net $ 4,949 $ 3,844 Right-of-use assets 1,398 1,890 Other 4,359 1,241 Total other non-current assets, net $ 10,706 $ 6,975 The Company incurred $ 2.7 million and $ 2.8 million in financing costs related to the amendments of the Credit Facility during the year ended December 31, 2024, and 2023, respectively. Accrued Liabilities Accrued liabilities consisted of the following: December 31, 2024 2023 (In thousands) Accrued capital expenditures $ 10,441 $ 15,851 Accrued lease operating expenses 7,676 6,038 Accrued general and administrative costs 8,123 4,655 Accrued inventory 1,709 — Accrued ad valorem tax 5,396 5,269 Other accrued expenditures 573 1,346 Total accrued liabilities $ 33,918 $ 33,159 Other Current Liabilities Other current liabilities consisted of the following: December 31, 2024 2023 (In thousands) Advances from joint interest owners $ 11,278 $ 259 Income taxes payable 5,233 561 Current ARO liabilities 2,562 3,789 Other 1,050 1,667 Total other current liabilities $ 20,123 $ 6,276 Asset Retirement Obligations ARO consist of future plugging and abandonment expenses on 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. The asset and liability are adjusted for changes resulting from revisions to the timing or the amount of the original estimate when deemed necessary. If the liability is settled for an amount other than the recorded amount, a gain or loss is recognized. F-13 Table of Contents RILEY EXPLORATION PERMIAN, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Components of the changes in ARO consisted of the following and is shown below: December 31, 2024 2023 (In thousands) ARO, beginning balance $ 23,044 $ 3,038 Liabilities incurred 78 45 Liabilities assumed in acquisitions 9,727 19,359 Revision of estimated obligations 1,856 — Liability settlements and disposals ( 2,291 ) ( 1,039 ) Accretion 2,854 1,641 ARO, ending balance $ 35,268 $ 23,044 Less: current ARO (1) ( 2,562 ) ( 3,789 ) ARO, long-term $ 32,706 $ 19,255 _____________________ (1) Current ARO is included within other current liabilities in our consolidated balance sheets. Revenue Recognition Oil Sales Under the Company’s oil sales contracts, oil that is produced by the Company is delivered to the purchaser at a contractually agreed-upon delivery point at which point the purchaser takes custody, title and risk of loss of the product. Once control has been transferred, the purchaser transports the product to a third party and receives market-based prices from the third party. The Company receives a percentage of proceeds received by the purchaser less transportation costs in accordance with the pricing provisions in the Company's contracts. As transportation costs are incurred after the transfer of control, the costs are included in oil and natural gas sales and represent part of the transaction price of the contract. The pricing provisions also provide quantity requirements and grade and quality specifications. The Company recognizes revenue at the net price received when control transfers to the purchaser. Natural Gas and NGL Sales 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 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. The pricing provisions also provide quantity requirements and grade and quality specifications. The Company recognizes revenue on a net basis for amounts expected to be received from third party customers through the marketing process. Transaction Price Allocated to Remaining Performance Obligations Based on the Company’s current product sales contracts, with contract terms ranging from one to ten years , each unit of production is considered a separate performance obligation and therefore future production volumes are wholly unsatisfied and do not require allocation or disclosure of the transaction price to remaining performance obligations. Contract Balances Under the Company’s product sales contracts, the Company has the right to invoice customers once the performance obligations have been satisfied, at which point payment is unconditional. Accordingly, the Company’s product sales contracts do not give rise to contract assets or liabilities under ASC 606. F-14 Table of Contents RILEY EXPLORATION PERMIAN, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Prior-Period Performance Obligations 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. Differences identified between the Company’s revenue estimates and actual revenue received historically have not been significant. For the years ended December 31, 2024, and 2023, 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, 2024 2023 (In thousands) Oil and natural gas sales: Oil $ 408,935 $ 363,125 Natural gas ( 1,412 ) 2,612 NGLs 2,278 6,910 Total oil and natural gas sales, net (1) $ 409,801 $ 372,647 _____________________ (1) The Company's oil, natural gas and NGL sales are presented net of gathering, processing and transportation costs. These costs, related to natural gas and NGLs, at times exceeded the price we received and resulted in negative average realized prices. Contract Services with Related Parties The Company had contracts with related parties to provide certain contract operating, accounting and back-office support services. Revenue related to these contract services was recognized over time as the services were rendered, and the fee was stated within the contract at a fixed monthly rate. Costs directly attributable to performing these services were also recognized as the services were rendered. Refer to Note 9 - Transactions with Related Parties for a more detailed discussion regarding these contracts. Revenue Payable For certain oil and natural gas properties, where the Company serves as operator, the Company receives production proceeds from the purchaser and further distributes such amounts to other working interest and royalty owners. Production proceeds that the Company has not yet distributed to other working interest and royalty owners are reflected as revenue payable in our consolidated balance sheets. Lease Operating Expenses Lease operating costs, including payroll for field personnel, saltwater disposal, electricity, generator rentals, diesel fuel, workovers and other operating expenses are expensed as incurred and included in lease operating expenses in our consolidated statements of operations. Income Taxes The Company uses the asset and liability method of accounting for income taxes, which requires the establishment of deferred tax accounts for all temporary differences between: (i) financial reporting and tax bases of assets and liabilities, using currently enacted federal and state income tax rates, and (ii) operating loss and tax credit carryforwards. In addition, deferred tax accounts must be adjusted to reflect new rates if enacted into law. Realization of deferred tax assets is contingent on the generation of future taxable income. As a result, management considers whether it is more likely than not that all or a portion of such assets will be realized during periods when they are available, and if not, management provides a valuation allowance for amounts not likely to be recognized. F-15 Table of Contents RILEY EXPLORATION PERMIAN, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Management periodically evaluates tax reporting methods to determine if any uncertain tax positions exist that would require the establishment of a loss contingency. A loss contingency would be recognized if it were probable that a liability has been incurred as of the date of the financial statements and the amount of the loss can be reasonably estimated. The amount recognized is subject to estimates and management’s judgment with respect to the likely outcome of each uncertain tax position. The amount that is ultimately incurred for an individual uncertain tax position or for all uncertain tax positions in the aggregate could differ from the amount recognized. 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, 2024, and 2023. See further discussion in Note 12- Income Taxes. Interest Expense, net 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, our debt balances and our financing decisions. Interest expense in our consolidated statements of operations reflects interest, unused commitment fees paid to our lender, interest rate swap settlements, interest income and the amortization of deferred financing costs (including origination and amendment fees) less amounts allocated to capital expenditures, which are capitalized. Interest expense, net was $ 34.3 million and $ 31.8 million for the years ended December 31, 2024, and 2023, respectively. Capitalized interest represents interest expense related to capital projects during the period in which the Company is incurring costs and expending resources to get the properties ready for their intended purpose. Capitalized interest is added to the cost of the underlying asset and is amortized over the useful life of the asset in the same manner as the underlying asset. Concentrations of Credit Risk Our customer concentration may impact our overall credit risk, either positively or negatively, in that these entities may be similarly affected by changes in economic or other conditions affecting the oil and natural gas industry. We sell our production at market prices and to a relatively small number of purchasers, as is customary in the exploration, development and production business. Our purchaser contracts include marketing provisions with our purchasers to market our production. For the years ended December 31, 2024, and 2023, one purchaser accounted for 70 % of our revenue purchased. For the year ended December 31, 2024, and 2023, an additional 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 $ 38.4 million at December 31, 2024) 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 $ 4.9 million at December 31, 2024). 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 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. 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 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. We account for environmental contingencies in accordance with the accounting guidance related to accounting for contingencies. Environmental expenditures that relate to current operations are expensed or capitalized as appropriate. Expenditures that relate to an existing condition caused by past operations, which do not contribute to current or future revenue F-16 Table of Contents RILEY EXPLORATION PERMIAN, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued) generation, are expensed. Liabilities are recorded when environmental assessments and/or clean-ups are probable, and the costs can be reasonably estimated. Fair Value Measurements Certain financial instruments are reported at fair value in our consolidated balance sheets. Under fair value measurement accounting guidance, fair value is defined as the amount that would be received from the sale of an asset or paid for the transfer of a liability in an orderly transaction between market participants (i.e., an exit price). To estimate an exit price, a three-level hierarchy is used. The fair value hierarchy prioritizes the inputs, which refer broadly to assumptions market participants would use in pricing an asset or a liability, into three levels. 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 3 inputs are unobservable inputs for the asset or liability and have the lowest priority. The valuation techniques that may be used to measure fair value include a market approach, an income approach and a cost approach. A market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. An income approach uses valuation techniques to convert future amounts to a single present amount based on current market expectations, including present value techniques, option-pricing models and the excess earnings method. The cost approach is based on the amount that currently would be required to replace the service capacity of an asset (replacement cost). These approaches are considered Level 3 in the fair value hierarchy. 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 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 ARO 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 We report the fair value of derivatives in our consolidated balance sheets in derivative assets and derivative liabilities as either current or non-current based on the timing of the settlement of individual trades. Trades that are scheduled to settle in the next twelve months are reported as current. The Company nets derivative assets and liabilities in our consolidated balance sheets whenever it has a legally enforceable master netting agreement with the counterparty to a derivative contract. For the years ended December 31, 2024, and 2023, 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 our consolidated statements of cash flows. Derivative contracts are settled on a monthly basis. 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 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. Leases The Company's current leases include office space, limited office equipment and field vehicles. The Company reviews all contracts to determine if a lease exists at contract inception. A lease exists when the Company has the right to obtain F-17 Table of Contents RILEY EXPLORATION PERMIAN, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued) substantially all of the economic benefit of a specific asset and to control the use of that asset over the term of the agreement. Identified leases are classified as an operating or finance lease, which determines the recognition, measurement and presentation of expenses. As of December 31, 2024, and 2023, the Company did not have any finance leases. Operating leases are capitalized in our 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. Options to extend or terminate leases are included in the lease term when it is reasonably certain the Company will exercise the option. For operating leases, lease costs are recognized on a straight-line basis over the term of the lease. The present value of operating lease payments and amortization of the lease liability is calculated using a discount rate. When available, the Company uses the rate implicit in the lease as the discount 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 our 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 is required to reassess the discount rate for any new and modified lease contracts as of the lease effective date. The weighted-average discount rate was 7.79 % and 9.56 %, respectively, at December 31, 2024, and 2023. The weighted average remaining lease term was 2.2 years and 2.3 years, respectively, at December 31, 2024, and 2023. Lease expense was $ 1.2 million and $ 0.8 million, respectively, for the years ended December 31, 2024, and 2023. December 31, 2024 2023 (In thousands) ROU asset $ 1,398 $ 1,890 Current lease liability $ 758 $ 985 Long-term lease liability $ 673 $ 938 The ROU asset, current lease liability and non-current lease liability are included in other non-current assets, net, other current liabilities and other non-current liabilities , respectively, in our consolidated balance sheets. Lease expense for the Company is included in general and administrative costs in our consolidated statements of operations. Recent Accounting Pronouncements In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which enhances the disclosures required for operating segments in the Company’s annual and interim consolidated financial statements. This ASU is effective retrospectively for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024. The Company adopted this update effective January 1, 2024, see Note 14 - Segments. The adoption and implementation of this standard did not have a material impact on the Company's disclosures. 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 does not expect this standard to have a material impact on our disclosures. In November 2024, the FASB issued ASU 2024-03, Income Statement (Subtopic 220-40) Reporting Comprehensive Income-Expense Disaggregation Disclosures, which broadens the disclosures required for certain costs and expenses in the Company’s annual and interim consolidated financial statements. This ASU is effective prospectively for fiscal years beginning after December 15, 2026, and interim reporting periods within fiscal years beginning after December 15, 2027. The Company is currently evaluating disclosures related to our annual report for fiscal year 2027. F-18 Table of Contents RILEY EXPLORATION PERMIAN, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (4) Acquisitions of Oil and Natural Gas Properties 2023 New Mexico Acquisition On April 3, 2023, the Company completed an acquisition of oil and natural gas properties (the "2023 New Mexico Acquisition") from Pecos Oil & Gas, LLC, a Delaware limited liability company and an affiliate of Cibolo Energy Partners LLC, for $ 324.7 million, funded through a combination of proceeds from the issuance of $ 200 million of Senior Notes and borrowings under the Company's Credit Facility. The assets acquired are located in Eddy County, New Mexico, and included approximately 10,600 total contiguous net acres of leasehold. The acquisition also included 18 net horizontal wells and 250 net vertical wells. The 2023 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 ARO 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. The following presents the allocation of the total purchase price of the 2023 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 Other 149 Amount attributable to assets acquired $ 345,437 Fair value of liabilities assumed: Revenue payable $ 1,475 Asset retirement obligations 19,276 Amount attributable to liabilities assumed $ 20,751 Net assets acquired $ 324,686 Transaction costs associated with the 2023 New Mexico Acquisition were approximately $ 5.8 million for the year ended December 31, 2023. Pro Forma Operating Results (Unaudited) 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 2023 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 2023 New Mexico Acquisition. These adjustments reflect such costs, as described above, that would have been recognized had the Company acquired the assets on January 1, 2022. In addition, the pro forma information has been effected for taxes with a 23 % tax rate for the years ended December 31, 2023, and 2022. F-19 Table of Contents RILEY EXPLORATION PERMIAN, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Year Ended December 31, 2023 2022 (In thousands, except per share amounts) Total revenues $ 405,642 $ 435,157 Net income $ 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 2023 New Mexico Acquisition been completed as of January 1, 2022, 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. 2024 New Mexico Asset Acquisition On May 7, 2024, the Company completed the acquisition of oil and natural gas properties in Eddy County, New Mexico ("2024 New Mexico Asset Acquisition"), which added 13,900 contiguous net acres to the Company's existing acreage in Eddy County, for a cash purchase price of approximately $ 19.1 million plus $ 0.5 million in transaction costs. The 2024 New Mexico Asset Acquisition was accounted for as an asset acquisition, with the final purchase price and transaction costs being capitalized to oil and natural gas properties. This acquisition was funded through a combination of proceeds from the 2024 equity issuance ("2024 Equity Offering") discussed in Note 11 - Shareholders' Equity and cash on hand. (5) Oil and Natural Gas Properties Oil and natural gas properties are summarized below: December 31, 2024 2023 (In thousands) Proved $ 1,027,183 $ 895,783 Unproved 100,974 100,216 Work-in-progress 21,318 57,004 $ 1,149,475 $ 1,053,003 Accumulated depletion, amortization and impairment ( 288,678 ) ( 206,102 ) Total oil and natural gas properties, net $ 860,797 $ 846,901 As of December 31, 2024, and 2023, the Company had no exploratory wells included in work-in-progress. Depletion and amortization expense for proved oil and natural gas properties was $ 71.3 million and $ 62.5 million for the years ended December 31, 2024, and 2023, respectively. Exploration costs were $ 2.6 million and $ 4.2 million for the years ended December 31, 2024, and 2023, respectively, and were primarily attributable to expiration of oil and natural gas leases in 2024 and exploratory well expense and the expiration of oil and natural gas leases in 2023. Impairment of Proved Properties Certain proved oil and natural gas properties were impaired during the year ended December 31, 2024. 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. F-20 Table of Contents RILEY EXPLORATION PERMIAN, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Certain oil and natural gas properties in Texas and New Mexico outside of the Company's acreage in the Champions and Red Lake fields 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 this assessment of our long-lived assets impairment test, the carrying value exceeded the estimated fair market value, and we recognized an $ 11.3 million non-cash impairment of proved properties comprised of a $ 9.5 million impairment in Texas, outside of the Champions field, and $ 1.8 million impairment in New Mexico, outside of the Red Lake field related to historical properties, for the year ended December 31, 2024. The impairments were primarily driven by a reduction in reserve volume due to lower well performance assessments based on historical trends. The affected areas included nine operated producing wells. The Company recognized an impairment of $ 9.8 million on proved properties in Texas, outside of the Champions field, for the year ended December 31, 2023. These impairments are included in our consolidated statements of operations as impairments of oil and natural gas properties. See further discussion of our fair value assumptions in Note 7 - Fair Value Measurements. Impairment of Enhanced Oil Recovery (EOR) Project The cost of proved and unproved oil and natural gas properties are assessed for impairment at least annually or whenever events and circumstances indicate that a decline in the recoverability of their carrying value may have occurred. We compare the undiscounted future cash flows of the oil, natural gas and NGL properties to the carrying amount of the oil, natural gas and NGL properties to determine if the carrying amount is recoverable. If the carrying amount exceeds the estimated undiscounted future cash flows, we adjust the carrying amount of the oil, natural gas and NGL properties to their estimated fair value which is considered a Level 3 measurement. As part of the impairment review during the third quarter 2024, the Company made the decision to discontinue our EOR Project, which was in work-in-process, in favor of redeploying the required future capital and salvaging the assets for use in our conventional vertical and horizontal development programs. As a result of this decision, the remaining fair value for the EOR Project was determined to be zero and the Company recorded a non-cash impairment loss of $ 28.9 million and a cash impairment loss of $ 1.3 million related to the termination of the Kinder Morgan CO 2 contract. The total $ 30.2 million impairment is included in other impairments in our consolidated statements of operations. (6) Derivative Instruments Oil and Natural Gas Contracts The Company uses commodity based derivative contracts to reduce exposure to fluctuations in oil and natural gas prices. While the use of these contracts partially limits the downside risk for adverse price changes, their use also partially 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 our consolidated statements of operations. As of December 31, 2024, 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. If the market price exceeds the call strike price or falls below the put strike price, we receive the fixed price and pay the market price. If the market price is between the put and the call strike price, no payments are due from either party. F-21 Table of Contents RILEY EXPLORATION PERMIAN, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The following table summarizes the open financial derivative positions as of December 31, 2024, related to oil and natural gas production: Weighted Average Price Calendar Quarter / Year Notional Volume Fixed Put Call ($ per unit) Oil Swaps (Bbl) Q1 2025 375,000 $ 74.31 Q2 2025 345,000 $ 71.32 Q3 2025 165,000 $ 68.53 Q4 2025 120,000 $ 66.99 Natural Gas Swaps (Mcf) Q1 2025 965,000 $ 3.61 Q2 2025 495,000 $ 3.34 Q3 2025 480,000 $ 3.30 Q4 2025 1,165,000 $ 3.82 2026 2,555,000 $ 3.92 2027 600,000 $ 4.19 Oil Collars (Bbl) Q1 2025 468,000 $ 60.48 $ 77.04 Q2 2025 300,000 $ 66.50 $ 78.77 Q3 2025 452,000 $ 64.23 $ 74.19 Q4 2025 480,000 $ 63.10 $ 77.07 2026 1,107,000 $ 58.89 $ 76.99 Natural Gas Collars (Mcf) Q1 2025 555,000 $ 3.46 $ 4.38 Q2 2025 1,080,000 $ 3.04 $ 3.65 Q3 2025 1,110,000 $ 3.12 $ 3.76 Q4 2025 400,000 $ 3.30 $ 4.00 2026 2,675,000 $ 3.15 $ 3.82 Interest Rate Contracts 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. In March 2024, the Company entered into a fixed-to-floating interest rate swap for the period from May 2024 to December 2024, to reduce our interest rate exposure, which resulted in a gain of approximately $ 1 million for the year ended December 31, 2024, on a notional amount of $ 80 million, and is included in our consolidated statements of operations. F-22 Table of Contents 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, 2024: Open Coverage Period Position Notional Amount Fixed Rate (In thousands) January 2025 - April 2026 Long $ 30,000 3.18 % January 2025 - April 2026 Long $ 50,000 3.04 % April 2026 - April 2027 Long $ 45,000 3.90 % Balance Sheet Presentation of Derivatives The following tables present the location and fair value of the Company’s derivative contracts included in our consolidated balance sheets as of December 31, 2024, and 2023: December 31, 2024 Balance Sheet Classification Gross Fair Value Amounts Netted Net Fair Value (In thousands) Current derivative assets $ 9,817 $ ( 6,553 ) $ 3,264 Non-current derivative assets 6,661 ( 6,076 ) 585 Current derivative liabilities ( 6,553 ) 6,553 — Non-current derivative liabilities ( 6,490 ) 6,076 ( 414 ) Total $ 3,435 $ — $ 3,435 December 31, 2023 Balance Sheet Classification Gross Fair Value Amounts Netted Net Fair Value (In thousands) Current derivative assets $ 8,948 $ ( 3,935 ) $ 5,013 Non-current derivative assets 6,687 ( 4,391 ) 2,296 Current derivative liabilities ( 4,295 ) 3,935 ( 360 ) Non-current derivative liabilities ( 4,391 ) 4,391 — Total $ 6,949 $ — $ 6,949 The following table presents the components of the Company's gain (loss) on derivatives, net for the periods presented below: Year Ended December 31, 2024 2023 (In thousands) Settlements on derivative contracts $ 1,849 $ ( 17,221 ) Non-cash gain (loss) on derivatives ( 3,514 ) 23,414 Gain (loss) on derivatives, net $ ( 1,665 ) $ 6,193 (7) Fair Value Measurements The FASB has established a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy consists of three broad levels. Level 1 inputs are the highest priority and consist of unadjusted quoted prices in active markets for identical assets and liabilities. Level 2 are inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. Level 3 are unobservable inputs for an asset or liability. The carrying values of financial instruments comprising cash, 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 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 is based on estimates of current rates F-23 Table of Contents RILEY EXPLORATION PERMIAN, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued) available for similar issuances with similar maturities and is classified as Level 2 in the fair value hierarchy. The oil and natural gas properties acquired and ARO assumed in both the 2023 New Mexico Acquisition and the 2024 New Mexico Asset Acquisition are considered Level 3 measurements. 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 financial assets and liabilities that were accounted for at fair value on a recurring basis as of December 31, 2024, and 2023, by level within the fair value hierarchy: December 31, 2024 Level 1 Level 2 Level 3 Total (In thousands) Financial assets: Commodity derivative assets $ — $ 15,301 $ — $ 15,301 Interest rate assets $ — $ 1,177 $ — $ 1,177 Financial liabilities: Commodity derivative liabilities $ — $ ( 13,043 ) $ — $ ( 13,043 ) December 31, 2023 Level 1 Level 2 Level 3 Total (In thousands) Financial assets: Commodity derivative assets $ — $ 14,766 $ — $ 14,766 Interest rate assets $ — $ 869 $ — $ 869 Financial liabilities: Commodity derivative liabilities $ — $ ( 8,686 ) $ — $ ( 8,686 ) The following table summarizes the fair value and carrying amount of the Company's financial instruments. December 31, 2024 December 31, 2023 Carrying Amount Fair Value Carrying Amount Fair Value (In thousands) Credit Facility (Level 2) $ 115,000 $ 115,000 $ 185,000 $ 185,000 Senior Notes (Level 2) (1) $ 154,494 $ 172,864 $ 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 ARO 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. Significant inputs used to determine the fair value include estimates of: (i) reserves; (ii) future commodity prices; (iii) operating and development costs; 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 F-24 Table of Contents RILEY EXPLORATION PERMIAN, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued) New York Mercantile Exchange ("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. These inputs require significant judgments and estimates by the Company’s management at the time of the valuation. The fair value of ARO incurred and acquired during the years ended December 31, 2024, and 2023, totaled approximately $ 9.8 million and $ 19.4 million, respectively. The fair value of additions and revisions 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. Significant inputs to the valuation include: (i) estimated plugging and abandonment costs per well for all oil and natural gas wells and for all disposal wells; (ii) estimated remaining life per well; (iii) future inflation factors; and (iv) our average credit-adjusted risk-free rate. These assumptions represent Level 3 inputs. If the carrying amount of our oil and natural gas properties exceeds the estimated undiscounted future cash flows, we will adjust the carrying amount of the oil and natural gas properties to fair value. The fair value of our oil and natural gas properties is determined using valuation techniques consistent with the income and market approach. 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. For the year ended December 31, 2024, the Company recognized non-cash impairment losses to our oil and natural gas properties of $ 11.3 million related to acreage in Texas and New Mexico outside of our Champions and Red Lake fields as well as a non-cash impairment loss of $ 28.9 million related to the discontinuation of the EOR project. As of December 31, 2024, the oil and natural gas properties in Texas outside of the Champions field had a net book value of $ 21.1 million and a fair value of $ 11.6 million resulting in an impairment loss of $ 9.5 million and the oil and natural gas properties in New Mexico outside of the Red Lake field had a net book value of $ 3.1 million and a fair value of $ 1.3 million resulting in an impairment loss of $ 1.8 million. The EOR project had a net book value of $ 41.7 million and a fair value of $ 12.8 million for salvageable assets with alternative uses, resulting in an impairment loss of $ 28.9 million. For the year ended December 31, 2023, the Company recognized non-cash impairment losses to our oil and natural gas properties of $ 9.8 million related to acreage in Texas outside of our Champions field. As of December 31, 2023, the oil and natural gas properties in Texas outside of the Champions field had a net book value of $ 33.7 million and a fair value of $ 23.9 million. In preparing these assessments, 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) Equity Method Investment In January 2023, the Company formed a joint venture, RPC Power LLC, a Delaware limited liability company ("RPC Power"), with Conduit Power LLC for the purpose of constructing, owning and operating power generation assets. RPC Power's initial scope and assets use the Company’s produced natural gas to power a portion of our operations in Yoakum County, Texas which became fully operational in September 2024. In May 2024, the Company entered into the Second Amended and Restated Limited Liability Company Agreement (“A&R LLC Agreement”) to expand the scope of our joint venture to include the constructing, owning, and operating of additional new power generation and storage assets, for the sale of energy and ancillary services to the Electric Reliability Council of Texas ("Merchant Deal"). Upon signing the A&R LLC Agreement, the Company invested an additional $ 9.5 million and also increased our equity ownership in RPC Power from 35 % to 50 %. As the Company has significant influence due to our ownership percentage, but lacks control, RPC Power is accounted for as an equity method investment. In November 2024, the Company signed the Second Amendment to the A&R LLC Agreement, which increased the capital commitment for each owner from $ 42.5 million to $ 51.5 million. As of December 31, 2024, the Company had invested $ 23.8 million in the joint venture, comprised of $ 21.5 million in cash and $ 2.3 million of contributed assets, which was reduced by the Company's share of losses and increased by our share of income in the joint F-25 Table of Contents RILEY EXPLORATION PERMIAN, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued) venture. The Company also had a remaining commitment to invest up to an additional $ 27.7 million to fund our portion of the remaining 2025 capital budget for the RPC Power joint venture. On February 28, 2025, the Company contributed an additional $ 6.3 million to RPC Power, which increased our total capital contributions to $ 30 million. See Note 9 - Transactions with Related Parties for further discussion of the contractual agreements between the Company and RPC Power and its affiliates and Note 15 - Commitments and Contingencies for additional information on future commitments. The following table presents the Company's equity method investment activity: Year Ended December 31, 2024 2023 (In thousands) Equity method investment, beginning balance $ 5,620 $ — Contributions 17,912 5,838 Loss from equity method investment ( 721 ) ( 218 ) Equity method investment, ending balance $ 22,811 $ 5,620 (9) Transactions with Related Parties RPC Power In January 2023, the Company entered into a 10-year agreement with RPC Power, which provides for the conversion of specified quantities of the Company’s produced natural gas to electricity to power a portion of our oilfield operations in Yoakum County, Texas ("Tolling Agreement"). The Tolling Agreement was amended and restated in June 2024 ("A&R Tolling Agreement") primarily to reflect the new in-service date of September 2024. The Company also entered into a 10-year agreement (“Asset Optimization Agreement”) in January 2023 that requires RPC Power to provide operational expertise on the implementation and management of the power generating assets subject to the A&R Tolling Agreement for a monthly fee of $ 20 thousand. In May 2024, the Company entered into a 10-year natural gas supply agreement ("Supply Agreement") with RPC Merchant LLC, a wholly owned subsidiary of RPC Power ("RPC Merchant"), to supply natural gas to fuel the natural gas generators under the Merchant Deal. The Company's commitment under the Supply Agreement is contingent upon project start-up which is expected to occur beginning in late 2025 through 2026. The Company incurred LOE from RPC Power of approximately $ 4.3 million and $ 0.2 million for the year ended December 31, 2024, and 2023, respectively. As of December 31, 2024, and December 31, 2023, the Company had approximately $ 1.2 million and zero accrued for RPC Power, which was included in accrued liabilities in our consolidated balance sheets. See additional information related to RPC Power in Note 8 - Equity Method Investment and Note 15 - Commitments and Contingencies for additional information on future commitments. Contract Services The Company and Combo Resources, LLC (“Combo”) own interests in six established units in Lee and Fayette Counties, Texas, which were jointly developed by the parties pursuant to participation agreements (collectively, the "Combo PA") and are currently operated by Riley Permian Operating Company, LLC ("RPOC"). RPOC also provided certain administrative and operational services to Combo pursuant to a management services agreement (the "Combo MSA") for a monthly fee of $ 100 thousand and reimbursement of all third party expenses until the Combo MSA was terminated on January 31, 2024. Separately, the Combo PA was also terminated as of December 31, 2023, and pursuant to a letter agreement effective as of December 31, 2023, the Company agreed to relinquish our right to acquire additional working interests within a specified area. The rights of the Company in the six jointly owned units are not affected by this letter agreement and remain subject to the existing joint operating agreements between the parties. F-26 Table of Contents RILEY EXPLORATION PERMIAN, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The Company also provided certain administrative services pursuant to a services agreement (the "REG MSA") with Riley Exploration Group, LLC (“REG”) for a monthly fee of $ 100 thousand through January 2024 and $ 60 thousand through April 2024, and reimbursement of all third party expenses until the REG MSA was terminated effective May 31, 2024. The $ 60 thousand fee was waived for the month of May 2024. The following table presents revenues from and related cost for contract services for related parties: Year Ended December 31, 2024 2023 (In thousands) Combo $ 100 $ 1,200 REG 280 1,200 Contract services - related parties $ 380 $ 2,400 Cost of contract services $ 363 $ 579 The Company had no amounts payable to Combo at December 31, 2024, and $ 0.7 million payable at December 31, 2023, which is reflected in other current liabilities in our consolidated balance sheets. Amounts due to Combo reflect the revenue, net of any expenditures, for Combo's net working interest in wells that RPOC operates on Combo's behalf. The Company had no amounts receivable from Combo at December 31, 2024, and December 31, 2023. The Company also had no amounts receivable from REG at December 31, 2024, and 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. The Company incurred legal fees from di Santo Law of approximately $ 1.4 million, and $ 1.2 million, for the years ended December 31, 2024, and 2023, respectively. As of December 31, 2024, and 2023, the Company had approximately $ 0.3 million and $ 0.6 million in amounts accrued for di Santo Law, which were included in other current liabilities in our consolidated balance sheets. Other Related Party Transactions In certain instances, business requires our employees to charter privately owned aircraft in furtherance of our business, including accessing remote areas of our field operation. The Company arranges travel through a charter company, which also manages an aircraft in which our Chief Executive Officer holds a time-sharing agreement for a private aircraft. The Company from time to time will use the aircraft in which our Chief Executive Officer has the time-sharing agreement in place as the fees for this aircraft are less than others offered by the charter company. We pay fees incurred for flights directly to the charter company that manages the planes. During the year ended December 31, 2024, we paid the charter company $ 0.1 million for flights chartered by our employees. F-27 Table of Contents RILEY EXPLORATION PERMIAN, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (10) Long-Term Debt The following table summarizes the Company's outstanding debt: December 31, 2024 2023 (In thousands) Credit Facility $ 115,000 $ 185,000 Senior Notes Principal $ 165,000 $ 185,000 Less: Unamortized discount (1) 7,547 10,117 Less: Unamortized deferred financing costs (1) 2,959 3,924 Total Senior Notes $ 154,494 $ 170,959 Total debt $ 269,494 $ 355,959 Less: Current portion of long-term debt (2) 20,000 20,000 Total long-term debt $ 249,494 $ 335,959 _____________________ (1) Unamortized discount and unamortized deferred financing costs are attributable to and amortized over the term of the Senior Notes. (2) As of December 31, 2024, and 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, 2024, excluding unamortized deferred financing costs, are as follows: Year Ending December 31, (In thousands) 2025 $ 20,000 2026 20,000 2027 (1) 135,000 2028 105,000 2029 — Thereafter — Total $ 280,000 _____________________ (1) The credit facility amount outstanding of $ 115 million as of December 31, 2024, has a stated maturity date of December 2028 which is subject to an earlier maturity date of October 2027 if any Senior Notes are still outstanding as of October 2027. For purposes of this table, the Company used the earlier date of October 2027; however, if the Senior Notes are no longer outstanding before this date, the stated maturity would become December 2028. 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 Truist Bank, as administrative agent. 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 our 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 2023 New Mexico Acquisition, the Company entered into 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 and fifteenth amendment, the Credit Facility was amended to increase the borrowing base from $ 325 million to $ 375 million, resulting in the addition of two new lenders and the exit of one lender. On December 13, 2024, the Company entered into the sixteenth amendment to the Credit Facility to, among other things, extend the stated maturity date from April 2026 to December 2028 (or if any Senior Notes are then outstanding, the date that is 181 days prior to the earliest stated maturity date of such Senior Notes, in this case October 2027) and increase the borrowing base from $ 375 million to $ 400 million, resulting in the addition of one new lender to the lending group. Substantially all of the Company’s assets are pledged to secure the Credit Facility. F-28 Table of Contents RILEY EXPLORATION PERMIAN, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 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 Credit Facility allows for SOFR Loans and Base Rate Loans (each as defined in the Credit Agreement). The interest rate on each SOFR Loan will be the adjusted Term SOFR for the applicable interest period plus a margin between 2.75 % and 3.75 % (depending on the borrowing base utilization percentage). The annual interest rate on each Base Rate Loan will be the Base Rate for the applicable interest period plus a margin between 1.75 % and 2.75 % (depending on the borrowing base utilization percentage). The Company is also subject to an unused commitment fee of between 0.375 % and 0.500 % (depending on the borrowing base utilization percentage). The Credit Agreement contains certain covenants, which, among other things, require the maintenance of (i) a total leverage ratio of not more than 3.0 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. The Credit Agreement also contains a total leverage ratio for Restricted Payments, as defined in the Credit Agreement, after giving pro forma effect to such Restricted Payments, which includes payments to any holder of the Company's shares, would not exceed 2.50 to 1.0. If the Company's leverage ratio, after giving pro forma effect to such Restricted Payments (as defined in the Credit Agreement), is above 2.0 to 1.0, then an additional test of free cash flow is applied, and the Company will only be permitted to make such Restricted Payments if such payment does not exceed the Company's free cash flow. The Company is also required to limit our cash balance to less than $ 15 million or 10 % of the borrowing base, whichever is greater. If the Company's cash balance exceeds this limit on the last business day of the month, the Company will be required to apply the excess to reduce our Credit Facility borrowings. The Credit Agreement also contains other customary affirmative and negative covenants and events of default. The Company must maintain a minimum hedging requirement included in the Credit Agreement for oil and natural gas based on our proved developed producing projected volumes on a rolling 24-month basis. The following table summarizes the Credit Facility balances: December 31, 2024 2023 (In thousands) Outstanding borrowings $ 115,000 $ 185,000 Available under the borrowing base $ 285,000 $ 190,000 Senior Notes On April 3, 2023, and concurrent with the closing of the 2023 New Mexico Acquisition, the Company (as “Issuer”) completed our 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 2023 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, 2024, the Company had $ 20 million in current liabilities in our consolidated balance sheets 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 the Issuer. 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 F-29 Table of Contents RILEY EXPLORATION PERMIAN, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 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 our 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, 2024 2023 (In thousands) Interest expense $ 31,411 $ 30,464 Interest income ( 866 ) ( 233 ) Capitalized interest ( 2,350 ) ( 3,187 ) Amortization of deferred financing costs 2,730 2,278 Amortization of discount on Senior Notes 2,569 1,883 Unused commitment fees on Credit Facility 844 611 Total interest expense, net $ 34,338 $ 31,816 As of December 31, 2024, and 2023, the weighted average interest rate on outstanding borrowings under the Credit Facility was 7.79 % and 8.68 %, respectively. As of December 31, 2024, the Senior Notes had $ 7.5 million of unamortized discount and $ 3.0 million of unamortized deferred financing costs, resulting in an effective interest rate of 13.38 % during the year ended December 31, 2024. As of December 31, 2024, and 2023, the Company was in compliance with all covenants contained in the Credit Agreement and the Note Purchase Agreement. (11) Shareholders' Equity Dividends Cash dividends for the periods presented were declared for all issued and outstanding common shares, including vested and unvested shares under the 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 and other non-current liabilities in our consolidated balance sheets and will be paid in cash once the unvested restricted shares fully vest. See Note 10 - Long-Term Debt for discussion over the Company's restrictions on certain payments, including dividends. F-30 Table of Contents RILEY EXPLORATION PERMIAN, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 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 thousands) 2024 December 31, 2024 $ 0.38 $ 7,795 September 30, 2024 $ 0.36 $ 8,104 June 30, 2024 $ 0.36 $ 7,770 March 31, 2024 $ 0.36 $ 7,329 2023 December 31, 2023 $ 0.36 $ 7,477 September 30, 2023 $ 0.34 $ 6,737 June 30, 2023 $ 0.34 $ 6,846 March 31, 2023 $ 0.34 $ 6,851 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 920,951 shares available as of December 31, 2024. 2021 Long-Term Incentive Plan The A&R LTIP will provide for potential grants of: (i) incentive stock options qualified as such under U.S. federal income tax laws ("ISO's"); (ii) stock options that do not qualify as incentive stock options; (iii) stock appreciation rights, or SARs; (iv) restricted stock awards; (v) restricted stock units, or RSUs, (vi) stock awards; (vii) performance awards; (viii) dividend equivalents; (ix) other stock-based awards; (x) cash awards; and (xi) substitute awards, all of which will collectively be referred to as the "Awards". 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 183,605 and 346,869 restricted shares to executives, employees and independent directors of the Company during the years ended December 31, 2024, and 2023, respectively. The holders of these restricted shares receive dividends, in arrears, once the shares vest. The Company has accrued for these dividends which are recorded in accrued liabilities and other non-current liabilities. All current restricted shares granted have a service period between 3 and 36 months. The Company estimates the fair values of the restricted shares as of 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. F-31 Table of Contents 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, 2024, under the A&R LTIP: 2021 Long-Term Incentive Plan Restricted Shares Weighted Average Grant Date Fair Value Unvested at December 31, 2023 521,997 $ 24.37 Granted (1) 183,605 $ 28.75 Vested (2) ( 288,757 ) $ 24.43 Forfeited ( 28,930 ) $ 27.83 Unvested at December 31, 2024 387,915 $ 26.57 _____________________ (1) For the year ended December 31, 2023, the weighted average fair value of restricted shares granted during the year was $ 28.68 . (2) For the years ended December 31, 2024, and 2023 , the total fair value of restricted shares vested during the year was $ 7.1 million and $ 6.4 million , respectively. For the years ended December 31, 2024, and 2023, the total share-based compensation expense was $ 8.1 million and $ 7.0 million, respectively. For the years ended December 31, 2024, and 2023, share based compensation expense also included expense associated with equity awards attributable to separation agreements with former Company executives. Share-based compensation expense is included in general and administrative costs in the Company's consolidated statements of operations for the restricted share awards granted under the A&R LTIP. If shares are subject to forfeiture, the Company will recognize any forfeited shares as a reduction to share-based compensation expense in our consolidated statements of operations and a decrease to shareholders' equity in our consolidated balance sheets. Any unpaid dividends on forfeited shares will be recognized as a decrease to accrued liabilities and other non-current liabilities and an increase to shareholders' equity in our consolidated balance sheets. Approximately $ 7.8 million of additional share-based compensation expense will be recognized over the weighted average life of 22 months for the unvested restricted share awards as of December 31, 2024, granted under the A&R LTIP. At-The-Market Equity Sales Program ("ATM") On September 1, 2023, the Company entered into an Equity Distribution Agreement in connection with an 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 our agents. During the year ended December 31, 2024, the Company did not execute any sales under the ATM program. As of December 31, 2024, the Company had remaining capacity to sell up to an additional $ 49.7 million of common stock under the ATM program. 2024 Equity Offering On April 8, 2024, the Company issued and sold 1,015,000 shares of common stock at a price of $ 27.00 per share. Net proceeds from the 2024 Equity Offering were approximately $ 25.4 million, after deducting underwriting discounts and commissions and expenses. The proceeds were used for financing an acquisition, repayment of outstanding debt and general corporate purposes. F-32 Table of Contents RILEY EXPLORATION PERMIAN, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (12) Income Taxes The components of the Company's consolidated provision for income taxes are as follows: Year Ended December 31, 2024 2023 (In thousands) Current income tax expense: Federal $ 22,814 $ 5,852 State 2,058 1,020 Total current income tax expense $ 24,872 $ 6,872 Deferred income tax expense: Federal $ 1,666 $ 24,305 State 1,536 3,284 Total deferred income tax expense $ 3,202 $ 27,589 Total income tax expense $ 28,074 $ 34,461 Deferred tax assets and liabilities are the result of temporary differences between the financial statement carrying values and the tax basis of our assets and liabilities. The Company's net deferred tax position is as follows: Year Ended December 31, 2024 2023 (In thousands) Intangibles $ 146 $ 163 Share-based compensation 1,129 772 Interest expense limitation 19 3,861 Accruals and other 1,893 1,123 Net operating loss 2,639 2,700 Total deferred tax assets $ 5,826 $ 8,619 Oil and natural gas assets ( 80,972 ) ( 79,761 ) Other fixed assets ( 628 ) ( 661 ) Unrealized gain on derivatives ( 773 ) ( 1,542 ) Total deferred tax liabilities $ ( 82,373 ) $ ( 81,964 ) Net deferred tax liabilities $ ( 76,547 ) $ ( 73,345 ) A reconciliation of the statutory federal income tax rate to the Company's effective income tax rate is as follows: Year Ended December 31, 2024 2023 Tax at statutory rate 21.0 % 21.0 % Nondeductible compensation 0.7 % 0.7 % Share-based compensation ( 0.1 ) % ( 0.5 ) % State income taxes, net of federal benefit 2.4 % 2.4 % Effective income tax rate 24.0 % 23.6 % The Company's federal income tax returns for the years subsequent to December 31, 2020 remain subject to examination. The Company's income tax returns in major state income tax jurisdictions remain subject to examination for various periods subsequent to December 31, 2019. The Company currently believes that all other significant filing positions are highly certain and that all of our other significant income tax positions and deductions would be sustained under audit or the final resolution would not have a material effect on our consolidated financial statements. Therefore, the Company has not established any significant reserves for uncertain tax positions. F-33 Table of Contents RILEY EXPLORATION PERMIAN, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Section 382 of the Internal Revenue Code limits the utilization of U.S. net operating loss ("NOL") carryforwards following a change in control. The Merger caused a stock ownership change for purposes of Section 382 which is subject to an approximate annual limit. The Company has federal NOLs subject to the annual Section 382 limit of $ 12.6 million of which $ 3.8 million will expire beginning in 2025 through 2037 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 NOLs will be fully realized, as such no valuation allowance has been recorded. 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, depletion and amortization differences. (13) 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, 2024 2023 (In thousands, except per share amounts) Net income $ 88,897 $ 111,591 Basic weighted-average common shares outstanding 20,712 19,705 Restricted shares 163 295 Diluted weighted-average common shares outstanding 20,875 20,000 Basic net income per common share $ 4.29 $ 5.66 Diluted net income per common share $ 4.26 $ 5.58 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, 2024 2023 Restricted shares 226,742 294,817 (14) Segments The Company’s oil and gas exploration and production activities are solely focused in the U.S. For financial reporting purposes, the Company aggregates our operating segments into one reporting segment due to the similar nature of these operations. The Chief Operating Decision Maker ("CODM") function is a critical aspect of segment reporting, as defined by the FASB under the Accounting Standards Codification (ASC) 280. The CODM is responsible for making key operating decisions and assessing the performance of the Company. The CODM function at the Company is collectively performed by a committee consisting of the Chief Executive Officer ("CEO"), Chief Financial Officer ("CFO"), Chief Operating Officer ("COO"), and Chief Accounting Officer ("CAO"). The CEO is the highest-ranking executive in the Company and is primarily responsible for the overall strategic direction and operational performance. The CEO's role in the CODM function includes setting long-term goals, making high-level decisions about policy and strategy, and ensuring that the Company's activities align with the overall corporate objectives. The CFO oversees all of the financial activities of the Company, including financial planning, risk management, record-keeping, and financial reporting. In the CODM function, the CFO plays a crucial role in analyzing financial data, assessing financial performance, and making recommendations for resource allocation and investment decisions. F-34 Table of Contents RILEY EXPLORATION PERMIAN, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The COO is responsible for the day-to-day operations of the Company. This includes managing the operational aspects of the business, ensuring efficiency, and implementing the strategies set by the CEO. The COO's involvement in the CODM function includes monitoring performance, optimizing operational processes, and addressing any operational challenges that may arise. The CAO oversees the accounting functions of the Company, ensuring compliance with accounting standards and regulations. In the CODM function, the CAO is responsible for providing accurate and timely financial information for the business, ensuring that the financial data is reliable and consistent and providing insight into the potential accounting complications of transactions. The CAO also plays a key role in internal controls and financial reporting. Together, the CEO, CFO, COO, and CAO form a collaborative team that functions as the CODM. They meet regularly to review performance, discuss strategic and operational issues, and make informed decisions that drive the Company's success. This collective approach ensures that all aspects of the business are considered, from strategic direction and financial health to operational efficiency and regulatory compliance. The CODM uses consolidated net income as a key metric to guide decisions regarding capital allocation. By assessing consolidated net income, the CODM gains insight into the overall financial health of the organization, allowing for more informed decisions on where to direct capital expenditures. Additionally, consolidated net income is used to monitor financial performance by comparing budgeted projections to actual results, helping the CODM identify variances, adjust strategies and ensure that resources are being effectively deployed across various operational areas. F-35 Table of Contents RILEY EXPLORATION PERMIAN, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The following table presents consolidated net income, the significant measure of profit and loss used by the CODM, as well as total assets, capital expenditures, and our equity method investment for the Company's single reportable segment: Year Ended December 31, 2024 2023 (In thousands) Total Revenues $ 410,181 $ 375,047 Less: Lease operating expenses 71,463 58,817 Production and ad valorem taxes 29,428 25,559 Exploration costs 2,595 4,165 Depletion, depreciation, amortization and accretion 74,900 65,055 Impairment of oil and natural gas properties 11,317 9,760 Other impairments 30,158 — Administrative Costs 26,551 26,569 Share-based compensation expense 8,138 6,833 Other segment items (1) 1,936 6,396 Interest expense, net of capitalized interest (2) 35,204 32,049 Interest income ( 866 ) ( 233 ) (Gain) loss on derivatives, net 1,665 ( 6,193 ) Loss from equity method investment 721 218 Income tax expense 28,074 34,461 Segment net income (3) $ 88,897 $ 111,591 Total assets $ 993,501 $ 945,711 Capital expenditures $ 108,320 $ 135,804 Equity method investment $ 22,811 $ 5,620 _____________________ (1) Other segment items include transaction costs and cost of contract services - related parties. (2) Interest expense is shown gross of, or prior to the effect of interest income. (3) There are no reconciling items between net income presented in our consolidated statements of operations and segment net income. (15) Commitments and Contingencies Legal Matters 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, 2024, and December 31, 2023. 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 The Company is subject to various federal, state and local laws and regulations relating to the protection of the environment. 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, 2024, or December 31, 2023. F-36 Table of Contents RILEY EXPLORATION PERMIAN, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Contractual Commitments In August 2022, the Company entered into a second amendment on our gas gathering, treating and processing agreement with our 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 with less than seven years remaining as of December 31, 2024. In January 2023, the Company entered into the Tolling Agreement which uses the Company's produced natural gas to power a portion of our oilfield operations in Yoakum County, Texas. Under the Tolling Agreement, the Company has committed to provide specified quantities of our natural gas for 10 years following the in-service date of September 2024, for a fee based on a per MMBtu basis adjusted for contractual usage factors. In June 2024, the Company entered into the A&R Tolling Agreement which superseded the Tolling Agreement to change the new in-service date to September 2024. The Company also entered into the Asset Optimization Agreement in January 2023 that requires RPC Power to provide operational expertise on the implementation and management of the power generating assets subject to the A&R Tolling Agreement for a monthly fee of $ 20 thousand. In May 2024, the Company entered into a 10-year natural gas supply agreement (“Supply Agreement”) with RPC Merchant LLC to supply natural gas to fuel the natural gas generators under the Merchant Deal. The Company's commitment under the Supply Agreement is contingent upon project start-up which is expected to occur beginning in late 2025 through 2026. In May 2024, the Company increased our ownership interest in RPC Power from 35 % to 50 %. The Company also has a remaining commitment to invest up to an additional $ 27.7 million to fund our portion of the 2025 capital budget for the RPC Power joint venture. See Note 8 - Equity Method Investment and Note 9 - Transactions with Related Parties for additional information related to RPC Power. Gas Purchase Agreement On December 31, 2024, the Company signed a long-term gas purchase agreement for our New Mexico field with a new midstream counterparty, which includes dedicated acreage for a significant portion of the Company’s oil and gas assets in New Mexico, reimbursement by the Company of construction costs incurred by the midstream counterparty to connect to the Company’s pipeline (subject to a monetary cap of $ 18.7 million) and an initial 15 -year term from the in-service date followed by a year-to-year continuation until terminated by either party upon 180 days written notice. In conjunction with the agreement, the Company intends to construct, own and operate low and high-pressure gathering lines and compression facilities that will connect to our new high capacity 20 -inch natural gas pipeline to be constructed by the Company and designed to handle gas volumes of up to 150 MMcf per day. We currently anticipate the in-service date will be before the end of 2026. (16) Subsequent Events Dividend Declaration On January 9, 2025, the Board of Directors of the Company declared a cash dividend of $ 0.38 per share of common stock paid on February 6, 2025, to our shareholders of record at the close of business on January 23, 2025. Equity Contribution to RPC Power On February 28, 2025, the Company contributed an additional $ 6.3 million to RPC Power, which increased our total capital contributions to $ 30 million. F-37 SUPPLEMENTAL OIL AND GAS INFORMATION (Unaudited) (17) Supplemental Oil and Gas Information (Unaudited) Capitalized Costs Capitalized costs include the cost of properties, equipment and facilities for oil and natural gas producing activities. Capitalized costs for proved properties include costs for oil and natural gas leaseholds where proved reserves have been identified, development wells and related equipment and facilities. Capitalized costs for unproved properties include costs for acquiring or extending oil and natural gas leaseholds where no proved reserves have been identified. Work in progress include costs of exploratory and development wells that are in the process of drilling or in active completion, and costs of exploratory and development wells suspended or waiting on completion. For a summary of these costs, please refer to Note 5 – Oil and Natural Gas Properties . Costs Incurred for Property Acquisition, Exploration and Development 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 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. Development costs include the costs of drilling and equipping development wells and construction of related production facilities. 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, 2024 2023 (In thousands) Acquisition of properties Proved $ 4,592 $ 228,147 Unproved 16,641 102,742 Exploration costs — — Development costs 106,773 152,309 Total costs incurred $ 128,006 $ 483,198 F-38 Table of Contents SUPPLEMENTAL OIL AND GAS INFORMATION - (continued) (Unaudited) Results of Operations The following table includes revenues and expenses associated with the Company's oil and natural gas producing activities. They do not include any allocation of the Company's interest costs or general corporate overhead. 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, 2024 2023 (In thousands) Oil, natural gas and NGL sales $ 409,801 $ 372,647 Lease operating expenses 71,463 58,817 Production and ad valorem taxes 29,428 25,559 Exploration costs 2,595 4,165 Depletion, accretion and amortization 74,025 64,471 Impairment of oil and natural gas properties 11,317 9,760 Other impairments 30,158 — Results of operations $ 190,815 $ 209,875 Income tax expense (1) ( 43,105 ) ( 44,493 ) Results of operations, net of income tax expense $ 147,710 $ 165,382 _____________________ (1) The statutory combined federal and state tax rate of 22.59 % and 21.20 % is used for the years ended December 31, 2024, and 2023, respectively. Oil, Natural Gas and NGL Quantities Our reserve report for the year ended December 31, 2024, and 2023 , was prepared by Ryder Scott Company, L.P. All reserves are located within the continental United States. Proved oil, natural gas and NGL reserves are the estimated quantities of oil, natural gas and NGLs that geological and engineering data demonstrate, with reasonable certainty, to be recoverable in future years from known reservoirs under economic and operating conditions existing at the time the estimate is made. Proved developed oil, natural gas and NGL reserves are proved reserves that can be expected to be recovered through existing wells and equipment in place and under operating methods being utilized at the time the estimates were made. A variety of methodologies are used to determine our proved reserve estimates. The principal methodologies employed are decline curve analysis and analogy. Some combination of these methods is used to determine reserve estimates in substantially all of our fields. The Company emphasizes that reserve estimates are inherently imprecise and that estimates of new discoveries and undeveloped locations are more imprecise than estimates of established proved producing oil and natural gas properties. Accordingly, these estimates are expected to change as future information becomes available. F-39 Table of Contents SUPPLEMENTAL OIL AND GAS INFORMATION - (continued) (Unaudited) 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) December 31, 2022 48,882 86,018 14,454 77,673 Acquisitions 12,810 39,261 6,711 26,064 Extensions and discoveries 14,822 22,945 4,224 22,870 Revisions ( 5,403 ) ( 18,411 ) ( 3,634 ) ( 12,106 ) Production ( 4,803 ) ( 5,865 ) ( 1,006 ) ( 6,786 ) December 31, 2023 66,308 123,948 20,749 107,715 Acquisitions 1,989 6,624 1,176 4,269 Extensions and discoveries 8,894 17,218 3,837 15,600 Revisions ( 5,137 ) 21,933 5,751 4,270 Production ( 5,519 ) ( 7,484 ) ( 1,486 ) ( 8,252 ) December 31, 2024 66,535 162,239 30,027 123,602 Proved Developed Reserves, Included Above December 31, 2022 29,632 59,314 9,604 49,122 December 31, 2023 36,731 71,671 11,502 60,178 December 31, 2024 40,111 103,337 19,312 76,646 Proved Undeveloped Reserves, Included Above December 31, 2022 19,250 26,704 4,850 28,551 December 31, 2023 29,577 52,277 9,247 47,537 December 31, 2024 26,424 58,902 10,715 46,956 As of December 31, 2024, proved reserves were comprised of 53.8 % oil, 21.9 % natural gas and 24.3 % NGL. 2024 proved reserves were estimated based on average realized prices of $ 74.27 per Bbl of oil, $( 0.43 ) per Mcf of natural gas and $( 3.56 ) per Bbl of NGL. Prices used in the 2024 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 2024 through December 2024. For oil and NGL volumes, the average WTI SEC price of $ 76.32 per Bbl was adjusted for quality, transportation fees, and market differentials which were included as a deduction to oil revenue. For gas volumes, the average Henry Hub SEC price of $ 2.13 per MMBtu is adjusted for energy content, transportation fees and market differentials which were included as a deduction to natural gas revenue. As of December 31, 2023, proved reserves were comprised of 61.5 % oil, 19.2 % natural gas and 19.3 % NGL. 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 January 2023 through December 2023. For oil and NGL volumes, the average 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 SEC price of $ 2.64 per MMBtu is adjusted for energy content, transportation fees and market differentials. For the year ended December 31, 2024, the Company added 15.9 MMBoe of proved reserves, with such additions due to extensions and discoveries, positive revisions and acquisitions, partially offset by production. The Company had acquisitions of 4.3 MMBoe primarily as a result of acquired reserves in an acreage swap and the 2024 New Mexico Asset Acquisition and extensions and discoveries of proved reserves of 15.6 MMBoe, which consisted of 7.7 MMBoe added to PDPs as a result of drilling successful wells that were previously classified as unproved locations and 7.9 MMoe added to PUDs as a result of drilling activity during the year, which allowed for the booking of adjacent PUDs for locations that were previously booked as unproved reserves or not at all. The Company had upward revisions of previous estimates of 4.3 MMBoe, including 15.3 MMBoe of positive revisions which were partially offset by 11.0 MMBoe of negative revisions. Our positive revisions were primarily due to increased forecasted natural gas sales volumes of 9.2 MMBoe based on improved gas processing capacity in F-40 Table of Contents SUPPLEMENTAL OIL AND GAS INFORMATION - (continued) (Unaudited) addition to a decrease in operating expenses and midstream fees that caused positive revisions of 6.1 MMBoe. These positive revisions were partially offset by negative revisions which included development plan changes driven by shifting focus to more profitable areas of our assets, which resulted in the removal of PUD locations representing 4.2 MMBoe of PUD reserves from our 5-year forecast, 2.6 MMBoe due to type curve updates, 2.0 MMBoe due to interest changes, 1.5 MMBoe due to lower commodity prices and 0.7 MMBoe due to reserve category changes. Consistent with Securities and Exchange Commission ("SEC") guidelines, PUDs are limited to those locations that are reasonably certain to be developed within five years. For the year ended December 31, 2023, the Company had 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 2023 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, including 19.3 MMBoe of negative revisions which were partially offset by 7.2 MMBoe of positive revisions. Our negative revisions included development plan changes, driven by the 2023 New Mexico acquisition, which resulted in the removal of PUD locations representing 6.7 MMBoe of PUD reserves from our 5-year forecast, 6.3 MMBoe from lower forecasted natural gas sales volumes due to estimated limitations on processing capacity, 2.9 MMBoe due to lower commodity prices, 2.4 MMBoe due to increased operating expenses, 0.7 MMBoe due to the removal of uneconomic locations and 0.3 MMBoe from other minor revisions. Positive revisions included 7.2 MMBoe due to changes in well forecasts based on improved well performance from producing wells. Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil, Natural Gas and NGL Reserves The Company follows the guidelines prescribed in ASC Topic 932 Extractive Activities – Oil and Gas for computing a standardized measure of future net cash flows and changes therein relating to estimated proved reserves. The following summarizes the policies used in the preparation of the accompanying oil, natural gas and NGL reserve disclosures, standardized measures of discounted future net cash flows from proved oil, natural gas and NGL reserves and the reconciliations of standardized measures from year to year. The standardized measure of discounted future net cash flows from production of proved reserves was developed as follows: (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 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; (iv) future income tax expenses are based on year-end statutory tax rates giving effect to the remaining tax basis in the oil and natural gas properties, other deductions, credits and allowances relating to the Company’s proved oil and natural gas reserves; 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 SEC. These assumptions do not necessarily reflect the Company’s expectations of actual revenues to be derived from those reserves, nor their present value. The limitations inherent in the reserve quantity estimation process, as discussed previously, are equally applicable to the standardized measure computations since these reserve quantity estimates are the basis for the valuation process. The Company emphasizes that reserve estimates are inherently imprecise and that estimates of new discoveries and undeveloped locations are more imprecise than estimates of established proved producing oil and natural gas properties. The standardized measure of discounted future net cash flows does not purport, nor should it be interpreted, to present the fair value of the Company’s oil and natural gas reserves. 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. F-41 Table of Contents SUPPLEMENTAL OIL AND GAS INFORMATION - (continued) (Unaudited) 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, 2024 2023 (In thousands) Future crude oil, natural gas and NGLs sales (1)(2) $ 4,764,599 $ 5,244,927 Future production costs ( 1,638,032 ) ( 1,896,397 ) Future development costs ( 325,414 ) ( 362,218 ) Future income tax expense ( 524,581 ) ( 538,926 ) Future net cash flows 2,276,572 2,447,386 10% annual discount ( 1,034,771 ) ( 1,186,921 ) Standardized measure of discounted future net cash flows $ 1,241,801 $ 1,260,465 _____________________ (1) December 31, 2024, proved reserves were derived based on average realized prices of $ 74.27 per barrel of oil, $( 0.43 ) per Mcf of natural gas and $( 3.56 ) per barrel of NGL. (2) 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. Principal sources of change in the Standardized Measure are shown below: Year Ended December 31, 2024 2023 (In thousands) Balance, beginning of period $ 1,260,465 $ 1,108,376 Sales of crude oil, natural gas and NGLs, net ( 308,907 ) ( 288,270 ) Net change in prices and production costs ( 238,938 ) ( 618,441 ) Net changes in future development costs 9,976 21,423 Extensions and discoveries 253,381 385,482 Acquisition of reserves 47,020 613,295 Revisions of previous quantity estimates 71,800 ( 188,364 ) Previously estimated development costs incurred 38,858 31,124 Net change in income taxes ( 2,035 ) ( 5,976 ) Accretion of discount 158,406 140,115 Other ( 48,225 ) 61,701 Balance, end of period $ 1,241,801 $ 1,260,465 F-42