Riley Permian Q3 2026 Earnings: Production Growth Lifted Revenue, but Derivatives Drove a Net Loss

Riley Permian (NYSE American: REPX) reported Q3 2026 revenue of $201.2 million, up 88% year over year, while diluted EPS swung to a loss of $0.11 from earnings of $0.77. Operating income rose to $106.7 million and operating cash flow reached $111.3 million, but a $99.8 million net derivative loss pushed the GAAP bottom line into a $2.4 million loss. Oil production increased 38% to 25.4 MBbls/d, led by new wells in Texas.

Core Earnings Data

Revenue also increased 21% sequentially as higher volumes and positive natural gas and NGL revenue more than offset a $10.65-per-barrel sequential decline in realized oil prices. The operating margin expanded to approximately 53% from 27% a year earlier, reflecting revenue growth that substantially outpaced the increase in operating costs.

The bottom line moved in the opposite direction because of non-operating derivative losses. On a non-GAAP basis, Riley Permian reported adjusted net income of $56 million, or $2.66 per diluted share.

Adjusted EBITDAX and Total Free Cash Flow are non-GAAP measures.

Business and Production Performance

Total equivalent production increased 30% year over year to 42.0 MBoe/d. Texas accounted for the growth, while New Mexico production remained below the prior-year quarter despite recovering sequentially from second-quarter midstream disruptions.

Texas production benefited from new development wells, with all wells turned to sales during the first nine months of 2026 located in the state. During Q3, Riley Permian turned 11.9 net wells to sales, all in Texas.

New Mexico production improved from Q2 as most areas returned to normal operations following shut-ins caused by third-party midstream constraints. On a year-over-year basis, however, production declined because of natural depletion and the absence of new wells turned to sales since July 2025.

Riley Permian ended the quarter with 17.3 net drilled-but-uncompleted wells and another 5.9 net completed wells awaiting sales. The company plans to bring wells online in both Texas and New Mexico over the coming quarters.

New Mexico Infrastructure and Resource Development

A new third-party water management system entered service on September 15, while Targa’s new gathering and high-pressure trunkline system began operating on October 1. Riley Permian expects the projects to improve natural gas flow assurance and expand water-handling capacity for future New Mexico development.

The company is also evaluating the San Andres formation at its Red Lake asset. Initial development activity is planned for Q2 2027, based on geological, seismic and reservoir analysis as well as recent industry results.

Profitability, Cash Flow and the Balance Sheet

Lease operating expenses were $34.2 million, or $8.84 per Boe, including $11 million of workover expense. Administrative costs declined to $8.8 million from $9.9 million a year earlier, while production and ad valorem taxes increased to $12.8 million from $8.3 million alongside higher revenue and production.

Riley Permian generated $111.3 million of GAAP operating cash flow and $108 million of cash flow from operations before working-capital changes. Against $65.6 million of cash capital expenditures, the company recorded $42.4 million of non-GAAP Total Free Cash Flow.

Total debt declined by $28 million during the quarter to $245 million, consisting of $115 million drawn under the credit facility and $130 million of senior notes. Cash at September 30 was $26.8 million. The company paid an $0.40-per-share quarterly dividend and completed no share repurchases during Q3.

After quarter-end, Riley Permian repaid its $130 million of 10.5% senior notes using borrowings under its revolving credit facility. This changed the debt structure rather than representing an equivalent reduction in total borrowings. The amended facility increased the borrowing base and elected commitments to $450 million and extended maturity to October 2030. The quarterly dividend was subsequently raised 5% to $0.42 per share.

Derivative Losses Turned Operating Profit Into a GAAP Net Loss

The largest disconnect in the quarter was between operating income and net income. Riley Permian generated $106.7 million of operating income but recorded a $99.8 million net derivative loss, including $28.2 million of realized cash settlements and approximately $72 million of non-cash fair-value losses on contracts that will settle in future periods.

After $6.7 million of net interest expense and a $3.3 million loss related to acquisitions and divestitures, pretax results moved to a $3.3 million loss. The resulting GAAP net loss was $2.4 million, even though adjusted net income remained positive at $56 million. Revenue after derivative settlements was $173 million, up 33% sequentially, showing that realized hedge settlements also had a material current-period cash effect.

Q4 2026 Guidance

Riley Permian expects another sequential increase in production during Q4, with the midpoint of total equivalent guidance at 43.0 MBoe/d versus 42.0 MBoe/d in Q3. Planned activity and investment also rise, including infrastructure spending intended to support New Mexico development.

Capital expenditure guidance is accrual-based and excludes acquisitions. Including a planned $2 million Power JV investment, Q4 total investments are expected to be $76 million to $88 million.

Management plans to continue investing significantly in development, citing its undeveloped inventory, improving third-party infrastructure and current commodity-price conditions.

Recent Insider Transactions

The supplied transaction records show three executive sales among the latest 10 reported transactions, along with seven zero-price stock awards issued to executives and directors on May 15, 2026. These transactions are reported objectively and do not by themselves establish management’s outlook for the company.

Risks Investors Should Watch

• Commodity prices and hedging: Higher volumes helped offset a sequential decline in realized oil prices, but realized and unrealized derivative losses materially affected both cash settlements and GAAP earnings.
• New Mexico operating constraints: Production has recovered from Q2 shut-ins, but future output still depends on the performance and availability of third-party gas, water and takeaway infrastructure.
• Capital requirements and debt: Q4 capital expenditures are guided to $74 million–$86 million. The senior-note repayment was funded through the revolving facility, so continued development remains dependent on cash generation and credit capacity.
• Development execution: Q4 production guidance assumes 14–18 net operated wells are turned to sales. Timing changes, working-interest changes or well-performance differences could affect production and spending.
• San Andres uncertainty: The planned Q2 2027 development program is based on ongoing technical evaluation, and its commercial performance has not yet been demonstrated on Riley Permian’s acreage.

Summary

Riley Permian’s Q3 results showed substantial production, revenue and operating cash flow growth, led by new Texas wells and a sequential recovery in New Mexico. Those operating gains did not translate into GAAP profitability because derivative losses overwhelmed operating income. The next points to monitor are execution of the higher Q4 development program, the effect of new New Mexico infrastructure, cash generation relative to capital spending and the company’s progress toward initial San Andres development.