Riley Exploration Permian REPX Form 10-Q filing Q2 FY2026

DEFINITIONS

As used in this Quarterly Report on Form 10-Q (the "Quarterly Report"), unless otherwise noted or the context otherwise requires, we refer to Riley Exploration Permian, Inc., together with its consolidated subsidiaries, as "Riley Permian," "REPX," "the Company," "Registrant," "we," "our," or "us." In addition, this Quarterly Report includes certain terms commonly used in the oil and natural gas industry, and the following are abbreviations and definitions of certain terms used within this Quarterly Report:

• Measurements.
• Bbl One barrel or 42 U.S. gallons liquid volume of oil or other liquid hydrocarbons
• Boe One stock tank barrel equivalent of oil, calculated by converting gas volumes to equivalent oil barrels at a ratio of 6 thousand cubic feet of gas to 1 barrel of oil and by converting NGL volumes to equivalent oil barrels at a ratio of 1 barrel of NGL to 1 barrel of oil
• Boe/d Stock tank barrel equivalent of oil per day
• Btu British thermal unit. One British thermal unit is the amount of heat required to raise the temperature of one pound of water by one degree Fahrenheit
• MBbl One thousand barrels of oil or other liquid hydrocarbons
• MBoe One thousand Boe
• MBoe/d One thousand Boe per day
• Mcf One thousand cubic feet of gas
• MMBtu One million British thermal units
• MMcf One million cubic feet of gas
• Abbreviations.
• ARO Asset Retirement Obligation
• CODM Chief Operating Decision Maker as defined by the FASB under the Accounting Standards Codification 280. Together, the Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, and Chief Accounting Officer form a collaborative team that functions as the CODM.
• Credit Facility A credit agreement among Riley Exploration - Permian, LLC, as borrower, and Riley Exploration Permian, Inc, as parent guarantor, with Truist Bank and certain lenders party thereto, as amended
• ERCOT Electric Reliability Council of Texas
• FASB Financial Accounting Standards Board
• GP&T costs Gathering, processing and transportation costs
• NGL Natural gas liquids
• NMOCD New Mexico Oil Conservation Division
• NYMEX New York Mercantile Exchange
• NYSE New York Stock Exchange
• Oil Crude oil and condensate
• OPEC+ Organization of the Petroleum Exporting Countries ("OPEC") members and non-OPEC allies
• RRC Railroad Commission of Texas
• SEC Securities and Exchange Commission
• Senior Notes The Company's unsecured 10.5% senior notes due April 2028
• U.S. GAAP Accounting principles generally accepted in the United States of America
• WTI West Texas Intermediate

Item 1. Financial Statements

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

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

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

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

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

RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(1) Nature of Business

Riley Permian is a growth-oriented, independent oil and natural gas company focused on horizontal drilling of conventional oil-saturated and liquids-rich formations in the Permian Basin that produce long-term cash flows. The majority of our acreage is located in Yoakum County, Texas, which represents our Champions field and Eddy County, New Mexico, which represents our Red Lake field.

(2) Basis of Presentation

These unaudited condensed consolidated financial statements as of June 30, 2026, and for the three and six months ended June 30, 2026, and 2025, include the accounts of Riley Permian and our consolidated subsidiaries and have been prepared in accordance with U.S. GAAP. All intercompany balances and transactions have been eliminated upon consolidation.

Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements included in the Company's 2025 Annual Report.

These condensed consolidated financial statements have not been audited by an independent registered public accounting firm. In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary for fair presentation of the results of operations for the periods presented, which adjustments were of a normal recurring nature, except as disclosed herein. The results of operations for the three and six months ended June 30, 2026, are not necessarily indicative of the results to be expected for the full-year ending December 31, 2026, for various reasons, including fluctuations in prices received for oil and natural gas, natural production declines, the uncertainty of exploration and development drilling results, fluctuations in the fair value of derivative instruments, unpredictability of new tariffs, the current and future impacts of military conflicts, changes to the political environment under the current administration and other factors.

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

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, ARO, the fair value determination of acquired assets and assumed liabilities, certain tax accruals and the fair value of derivatives.

RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Accounts Receivable, net

Accounts receivable, net is summarized below:

As of December 31, 2024, the Company had accounts receivables, net from oil, natural gas and NGL sales of $33.6 million.

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

Other Property and Equipment, net

Other property and equipment, net is summarized below:

Other Non-Current Assets, net

Other non-current assets, net consisted of the following:

(1) Deferred financing costs, net reflects costs associated with the Company's Credit Facility which are amortized over the term of the Credit Facility.

RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Accrued Liabilities

Accrued liabilities consisted of the following:

Other Current Liabilities

Other current liabilities consisted of the following:

Asset Retirement Obligations

Components of the changes in ARO for the six months ended June 30, 2026, and the year ended December 31, 2025, are shown below:

(1) Current ARO is included within other current liabilities in our accompanying condensed consolidated balance sheets.

RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Revenue Recognition

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

(1) The Company's oil, natural gas and NGL sales are presented net of GP&T costs. These costs, related to natural gas and NGLs, at times exceeded the price received and resulted in negative average realized prices.

Recent Accounting Pronouncements

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 the impact to disclosures related to our annual report for fiscal year 2027.

(4) Acquisitions and Divestitures

Silverback Acquisition

On July 1, 2025, the Company completed the acquisition of 100% of the ownership interests of Silverback Exploration II, LLC and its subsidiaries ("Silverback") which owns oil and natural gas assets and operations located primarily in the Yeso trend of the Permian Basin in Eddy County, New Mexico for approximately $123 million, which included approximately $120 million paid in cash and approximately $3 million of estimated fair value related to potential earnout payments ("Silverback Acquisition"). The purchase price is subject to change pending final purchase price adjustments including the release of $1.2 million remaining in escrow, until one year from the closing date.

The Silverback 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 preliminary purchase price allocation is subject to change for up to one year subsequent to the closing date of the acquisition due to final customary purchase price adjustments. The assets acquired and liabilities assumed were recognized on the consolidated balance sheet 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 reserves, future development, future operating costs, future cash flows and the use of weighted average cost of capital. These inputs required the use of significant judgments and estimates at the date of valuation, and use of different estimates and judgments could yield different results.

RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following presents the allocation of the total purchase price of the Silverback Acquisition to the identified assets acquired and liabilities assumed based on estimated fair value as of the closing date of the acquisition:

Cash consideration included deposits into escrow of $14.2 million at signing and $6.9 million at closing for title defects. As of June 30, 2026, $4.6 million of the closing escrow was returned to the Company, $1.1 million was paid to the sellers and $1.2 million remains in escrow and is reflected as funds held in escrow in our condensed consolidated balance sheets.

The Company funded the acquisition with cash on hand and borrowings under our Credit Facility.

The Company may potentially pay the sellers quarterly earnout payments of up to $1.9 million per fiscal quarter during calendar years 2026 and 2027 if the NYMEX WTI quarterly average exceeds certain stated amounts set forth in the Purchase Agreement, ranging from $70 to $75 per barrel or higher. For the three months ended June 30, 2026, the average WTI was $92.70. The Company remeasured the fair value of its earnout payment liability at June 30, 2026, for the remaining 6 quarters and, as a result of the decrease in the WTI forward strip pricing, a $0.6 million remeasurement gain was reflected in gain (loss) on acquisitions and divestitures, net in our condensed consolidated statements of operations, inclusive of the payout of $1.9 million, which was realized in the second quarter and subsequently paid in July 2026. For the six months ended June 30, 2026, the Company has made $0.9 million in earnout payments and recognized a remeasurement loss of $3.5 million. See additional information on the fair value measurement of the earnout payments in Note 7 - Fair Value Measurements.

RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Gain (loss) on acquisitions and divestitures, net consisted of the following:

(1) Represents sale of interest in non-operated wells.

Post-Acquisition Operating Results

The results of operations attributable to the Silverback Acquisition since the closing date of the acquisition have been included in the condensed consolidated statements of operations and include $12.9 million and $27.0 million of total revenues and $5.2 million and $13.6 million of earnings, which represents total revenues less production taxes and lease operating expenses ("LOE"), for the three and six months ended June 30, 2026, respectively.

Pro Forma Operating Results (Unaudited)

The results of operations of the Silverback Acquisition have been included in the Company's condensed consolidated financial statements since the closing date of the acquisition. The following supplemental, unaudited pro forma combined financial information for the three and six months ended June 30, 2025, reflect the consolidated results of operations of the Company as if the Silverback Acquisition had occurred on January 1, 2024. The information below reflects pro forma adjustments based on available information and certain assumptions that the Company believes are factual and supportable. The unaudited pro forma information includes adjustments for (i) transaction costs being reclassified to the first quarter of 2024 instead of being recorded in the year ended December 31, 2025, (ii) depletion, depreciation and amortization expense and (iii) interest expense related to the financing for the Silverback Acquisition. In addition, the pro forma information has been effected for income taxes with a blended statutory rate of 25.7% for the three and six months ended June 30, 2025.

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 Silverback Acquisition been completed as of January 1, 2024, 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.

RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(5) Oil and Natural Gas Properties

Oil and natural gas properties, net are summarized below:

Depletion expense for proved oil and natural gas properties was $23.3 million and $17.8 million, respectively, for the three months ended June 30, 2026, and 2025 and $48.1 million and $35.3 million, respectively, for the six months ended June 30, 2026, and 2025.

Exploration costs were $1.4 million and $0.1 million for the six months ended June 30, 2026, and 2025, respectively, and were primarily attributable to the expiration of oil and natural gas leases.

(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 accompanying condensed consolidated statements of operations.

RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

As of June 30, 2026, the Company’s oil and natural gas derivative contracts consisted of fixed price swaps, costless collars and basis swaps. The following table summarizes the open financial derivative positions as of June 30, 2026, related to our future oil and natural gas production:

RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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.

The following table summarizes the open interest rate derivative positions as of June 30, 2026:

Balance Sheet Presentation of Derivatives

The following tables present the location and fair value of the Company’s derivative contracts included in our accompanying condensed consolidated balance sheets:

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

(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.

RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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 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 the Silverback Acquisition in addition to the fair value of assets and liabilities when considered for impairment are considered Level 3 measurements.

Assets and Liabilities Measured on a Recurring Basis

The fair values of commodity derivatives and interest rate swaps are estimated using discounted cash flow calculations based on forward curves and are classified as Level 2 within the fair value hierarchy. The following table summarizes the Company's financial assets and liabilities that were accounted for at fair value on a recurring basis by level within the fair value hierarchy:

Silverback Earnout Payments

The earnout payments in connection with the Silverback Acquisition were valued using a Monte Carlo simulation model that incorporated forward strip pricing as of June 30, 2026. The valuation process involved modeling the potential earnout payments over numerous scenarios based on WTI futures prices. The average expected value from the simulations was then discounted using the Company's weighted average cost of debt.

During the three months ended June 30, 2026, the Company paid $0.9 million based on the average WTI price during the first quarter. Based on the forward strip pricing as of June 30, 2026, the earnout payment liability decreased from $7.2 million at March 31, 2026 to $5.6 million at June 30, 2026, which includes $1.9 million realized in the second quarter and subsequently paid in July 2026, and $3.7 million unrealized. The fair value of the unrealized earnout payments is considered a Level 3 measurement due to the unobservable inputs including volatility and the discount rate, as well as the detailed modeling required to estimate fair value. See Note 4 - Acquisitions and Divestitures for additional information on the earnout payments. The following table summarizes the changes in the fair value of our Silverback earnout payments, in addition to the range and arithmetic average of the significant unobservable inputs used in the Level 3 fair value measurement:

RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

As of June 30, 2026, $3.9 million, which includes the realized earnout liability of $1.9 million for the second quarter of 2026, is accrued in other current liabilities and $1.8 million is accrued in other non-current liabilities in our accompanying condensed consolidated balance sheets.

Liabilities Not Measured on a Recurring Basis

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

(1) The carrying value 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.

(8) Equity Method Investment

RPC Power

RPC Power LLC ("RPC Power") is our power-focused joint venture with Conduit Power LLC, in which we have 50% ownership. The Company is currently involved in two projects with RPC Power.

The first project provides a portion of our electric power needs for our field operations in our Champions field. This project consists of two sites located within the Company's operating area. The power generated and delivered by RPC Power is consumed by operating activities and not sold to the electric grid.

The second project is intended to provide power for the sale into ERCOT, the primary electric grid of Texas, with none of the generation consumed by Riley Permian ("Merchant Deal"). This project consists of four sites located outside of the Company's operating area, but in the west Texas region.

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 June 30, 2026, the Company had invested $46.0 million in the joint venture, comprised of $43.7 million in cash and $2.3 million of contributed assets, which was reduced by distributions and the Company's share of losses and increased by our share of income in the joint venture.

During the six months ended June 30, 2026, the Company contributed an additional $6.5 million to RPC Power. The Company has a remaining commitment to invest up to an additional $5.5 million, if required, to fund our portion of the future capital budget for the RPC Power joint venture. On December 31, 2025, RPC Power declared a $3 million dividend, of which $1.5 million was the Company's portion. The dividend was paid in January 2026.

RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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:

(9) Transactions with Related Parties

RPC Power

The Company is party to a 10-year agreement with RPC Toll LLC, a wholly owned subsidiary of RPC Power ("RPC Toll"), which provides for the conversion of specified quantities of natural gas to electricity to power a portion of our oilfield operations in our Champions field ("Second A&R Tolling Agreement") in exchange for fixed and variable payments to RPC Toll for the electricity provided. The Second A&R Tolling Agreement commenced in June 2024 and expires in September 2034 unless extended by the parties. The Company also entered into two ancillary agreements that run concurrently with the Second A&R Tolling Agreement. The Company pays a fixed monthly fee for RPC Power's operational expertise and a designated return for RPC Power's capital invested in electrical connections.

The Company is party to a 10-year natural gas supply agreement ("A&R 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 A&R Supply Agreement is contingent upon project start-up with the first of sites placed in service in May 2026. The price the Company receives for the gas volumes sold is variable which may result in negative sales prices and revenues. The remaining three sites are expected to be placed in service during the second half of 2026.

The Company incurred LOE from RPC Power of approximately $2.1 million for the three months ended June 30, 2026, and 2025 and approximately $4.1 million and $3.7 million for the six months ended June 30, 2026, and 2025, respectively. As of June 30, 2026, and December 31, 2025, the Company had approximately $0.7 million accrued for RPC Power, which was included in accrued liabilities in our accompanying condensed consolidated balance sheets. The Company incurred net payments under the A&R Supply Agreement of less than $0.1 million for the three and six months ended June 30, 2026.

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.

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 $0.3 million for the three months ended June 30, 2026, and 2025 and approximately $0.6 million and $0.7 million for the six months ended June 30, 2026, and 2025, respectively. As of June 30, 2026, and December 31, 2025, the Company had approximately $0.1 million and $1.7 million, respectively, in amounts accrued for di Santo Law, which was included in other current liabilities in our accompanying condensed consolidated balance sheets.

RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(10) Long-Term Debt

The following table summarizes the Company's outstanding debt:

(1) Unamortized discount and unamortized deferred financing costs are attributable to and amortized over the term of the Senior Notes.

(2) As of June 30, 2026, and December 31, 2025, the current portion of long-term debt reflects $20 million due on the Senior Notes over the next twelve months.

Credit Facility

As of June 30, 2026, Riley Exploration - Permian, LLC, as borrower, and the Company, as parent guarantor, are parties to a credit agreement with Truist Bank and certain lenders party thereto, as amended, which provides for a Credit Facility with a borrowing base of $425 million. On April 30, 2026, the Company entered into the eighteenth amendment to the Credit Facility, which increased the Company’s borrowing base from $400 million to $425 million and documented the Company's election to maintain commitments thereunder at $400 million. In addition, the eighteenth amendment shortens the springing maturity of the Credit Facility in advance of the Senior Notes from 181 days to 91 days, effectively extending the maturity date for the Credit Facility to January 2028, given the April 2028 stated maturity of the Senior Notes. Substantially all of the Company’s assets are pledged to secure the Credit Facility.

The Credit Facility contains certain covenants, which, among other things, require the maintenance of (i) a total leverage ratio of not greater than 3.00 to 1.00 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 Facility also contains a total leverage ratio for the regulation of 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 1.00. 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. In addition to and after giving effect to such Restricted Payments, the availability of funds under the Company's Credit Facility must be greater than or equal to 20% of the elected commitments. The Company must maintain a minimum hedging requirement for oil based on our proved developed producing projected volumes on a rolling 24-month basis.

The following table summarizes the Credit Facility balances:

Senior Notes

On April 3, 2023, the Company (as issuer) completed our issuance of $200 million aggregate principal amount of 10.50% senior unsecured notes with final maturity in April 2028 pursuant to a note purchase agreement (the "Note Purchase Agreement"), with the Senior Notes issued at a 6% discount.

RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Interest is due and payable at the end of each quarter. In addition to interest, the Company 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 June 30, 2026, the Company had $20 million in current liabilities in our accompanying condensed consolidated balance sheets related to the quarterly principal payments due within the next 12 months.

After April 3, 2026, but on or prior to October 3, 2026, the Company may, at our 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 Company 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 Company. 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 not greater than 3.00 to 1.00 and (ii) an asset coverage ratio greater than 1.50 to 1.00. The Senior Notes also contain a total leverage ratio and an asset coverage ratio for Restricted Payments, as defined in the Note Purchase Agreement. The leverage ratio, after giving pro forma effect to such Restricted Payments, cannot exceed 2.00 to 1.00, and the asset coverage ratio, after giving effect to such Restricted Payments, must be greater than or equal to 1.50 to 1.00. In addition to and after giving effect to such Restricted Payments, the availability of funds under the Company's Credit Facility must be greater than or equal to 15% of the Aggregate Elected Commitment Amount, as defined in the Note Purchase Agreement. 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 oil and natural gas 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:

During the six months ended June 30, 2026, and 2025, the weighted average interest rate on the Credit Facility was 6.60% and 7.28%, respectively.

As of June 30, 2026, the Senior Notes had $3.9 million of unamortized discount and $1.6 million of unamortized deferred financing costs, resulting in an effective interest rate of 13.4% during the six months ended June 30, 2026. As of December 31, 2025, the Senior Notes had $5.1 million of unamortized discount and $2.1 million of unamortized deferred financing costs, resulting in an effective interest rate of 13.4% during the year ended December 31, 2025.

As of June 30, 2026, the Company was in compliance with all covenants contained in the Credit Agreement and Note Purchase Agreement.

RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(11) Shareholders' Equity

Dividends

For the three months ended June 30, 2026, and 2025, the Company declared quarterly dividends on our common stock totaling approximately $8.7 million and $8.4 million, respectively. For the six months ended June 30, 2026, and 2025, the Company declared quarterly dividends on its common stock totaling approximately $17.3 million and $16.5 million, respectively.

Stock-Based Compensation

In May 2026, at the Company's annual meeting of stockholders, the Company's stockholders approved the Second Amended and Restated 2021 Long Term Incentive Plan (the "A&R LTIP") which increased the total number of authorized shares available for issuance by 2,800,000. As of June 30, 2026, the A&R LTIP had 2,463,326 shares remaining that are available for future awards.

In March 2025, the Company introduced performance-based restricted stock awards to further align the compensation of the Company's executive officers with the long-term growth of the Company and the interests of its shareholders. Performance stock awards may be earned based on the Company’s achievement of total shareholder return ("TSR") relative to its peer group during the applicable three-year calendar year performance period. Performance stock awards granted in 2026 also included a modifier based on the Company's absolute TSR. Payouts for the executive officers can range from 0% to 200% of the target and have cliff-vesting after three years, with dividends paid on the number of shares that vest. As a result, the Company has reduced the remaining shares available to be granted as awards under the A&R LTIP by 168,406 shares for the 2025 awards and 245,642 shares for the 2026 awards (the full 200%), which assumes the highest percentage payout for the performance stock awards. The number of unvested shares of performance restricted stock used to calculate our fully diluted shares based on the Company's relative TSR ranking and absolute TSR as of June 30, 2026, and relative TSR ranking as of December 31, 2025, was 406,470 and 149,039, respectively.

The following table presents the assumptions related to performance shares granted:

2021 Long-Term Incentive Plan

The following table presents the Company's restricted stock activity during the six months ended June 30, 2026, under the A&R LTIP:

For the three months ended June 30, 2026, and 2025, stock-based compensation expense was $3.9 million and $2.7 million, respectively. For the six months ended June 30, 2026, and 2025, stock-based compensation expense was $6.2 million and $4.1 million, respectively. Stock-based compensation expense is included in general and administrative costs in the Company's accompanying condensed consolidated statements of operations for the restricted stock awards granted under the A&R LTIP.

RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table presents unrecognized stock-based compensation expense expected to be recognized and the related weighted average recognition period associated with unvested shares as of June 30, 2026:

Share Repurchases

In December 2025, our Board of Directors approved a stock repurchase program (the “Repurchase Program”) authorizing the repurchase of up to $100 million of our common stock from time to time over a period of 24 months, including through open market purchases, through block trades, in privately negotiated transactions, or by other means, including through the use of trading plans, each in accordance with applicable securities laws and other restrictions. The Repurchase Program does not obligate us to purchase any common stock and may be suspended from time to time, modified, extended or discontinued by the Board at any time. Under the Repurchase Program, 25,000 and 177,408 shares were purchased and subsequently retired during the three and six months ended June 30, 2026, respectively. The remaining repurchase authority under the Repurchase Program at June 30, 2026, was $95 million.

(12) Income Taxes

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

Beginning in the first quarter of 2026, the Company elected to change its interim income tax reporting methodology from the income statement method to the balance sheet method and will apply this method consistently for the remainder of the fiscal year. The change was made because of significant unrealized losses on derivative instruments recognized during the three months ended March 31, 2026, which are expected to reverse in future periods, and use of the income statement method would have caused a disproportionate amount of the related tax benefit to be recognized in the first quarter. Under the balance sheet method, interim income tax expense is based on changes in deferred tax assets and liabilities during the period, which the Company believes more appropriately reflects the allocation of the annual effective tax rate between current and deferred income tax expense. This change affects only the allocation of the interim income tax expense between current and deferred income tax expense and does not affect the Company’s full-year effective tax rate or total quarterly income tax expense.

RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

(1) State taxes in New Mexico and Texas make up the tax effect in this category.

Cash paid for income taxes was as follows:

The Company's federal income tax returns for the years subsequent to December 31, 2021, 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, 2020. 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 reserves for uncertain tax positions.

RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(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:

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

(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.

RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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:

(1) Interest expense is shown gross of, or prior to the effect of interest income.

(2) There are no reconciling items between net income presented in our accompanying condensed consolidated statements of operations and segment net income.

(3) Capital expenditures are accrual (activity-based) before acquisitions.

(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.

During the three months ended June 30, 2026, the Company received a claim from a purported working interest owner asserting rights with regard to four wells drilled on properties acquired as part of the Silverback Acquisition prior to the date of the Silverback Acquisition. The Company is in the process of investigating the claim and has asserted a claim for indemnification from the sellers in the Silverback Acquisition pending final resolution of the claim.

The Company did not recognize any material liability for legal matters as of June 30, 2026, or December 31, 2025. 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.

RILEY EXPLORATION PERMIAN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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 June 30, 2026, or December 31, 2025.

Contractual Commitments

The Company is a party to a gas gathering, treating and processing agreement with Targa Northern Delaware LLC ("Targa") in Texas. Under the terms of the agreement, the Company agreed to deliver an annual minimum volume that expires the earlier of achieving a specified quantity of cumulative volumes delivered or by the contract expiration date in 2031.

The Company is party to several contracts with RPC Power, our power-focused joint venture. See Note 8 - Equity Method Investment and Note 9 - Transactions with Related Parties for additional information related to RPC Power.

The Company is party to a long-term gas purchase agreement for the Company's New Mexico field with Targa, which was amended and restated (the "A&R Gas Purchase Agreement") in connection with the Company's sale to Targa of Dovetail Midstream, LLC, a wholly owned subsidiary of the Company that held certain midstream infrastructure projects in Eddy County, New Mexico. The agreement has a quarterly minimum volume commitment for the first 5 years of the 15-year term from the in-service date, which is expected to commence in the fourth quarter of 2026.

The Company is a party to a 15-year water management services agreement ("Waterbridge Agreement") with Waterbridge Stateline LLC ("Waterbridge") to deliver a portion of its New Mexico produced water for disposal purposes within a specified dedicated area. During the first 7 years of the agreement, the Company has both annual and cumulative volume commitments to deliver minimum quantities of produced water. The in-service date is expected to be in the fourth quarter of 2026.

(16) Subsequent Events

Dividend Declaration

On July 15, 2026, the Board of Directors of the Company declared a cash dividend of $0.40 per share of common stock payable on August 12, 2026 to our shareholders of record at the close of business on July 29, 2026.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the Company's condensed consolidated financial statements and related notes thereto presented in this report as well as the Company's audited consolidated financial statements and related notes included in the Company's Annual Report for the fiscal year ended December 31, 2025. The following discussion contains "forward-looking statements" that reflect the Company’s future plans, estimates, beliefs and expected performance. The Company’s actual results could differ materially from those discussed in these forward-looking statements. See "Cautionary Statement Regarding Forward-Looking Statements" and "Part II, Item 1A. Risk Factors" below and the information set forth in the Risk Factors under Part I, Item 1A of the Company's Annual Report for the fiscal year ended December 31, 2025.

Overview

Riley Permian is a growth-oriented, independent oil and natural gas company focused on horizontal drilling of conventional oil-saturated and liquids-rich formations in the Permian Basin that produce long-term cash flows. The majority of our acreage is located in Yoakum County, Texas and Eddy County, New Mexico.

Our strategic business objectives include enhancing the rate of return on our invested capital, generating sustainable free cash flow, maintaining a strong and flexible balance sheet and maximizing returns to shareholders. We implement this strategy primarily through identification and capture of attractive development opportunities, optimization of our assets and pursuing complementary growth opportunities that increase our scale and meet our strategic and financial objectives.

Recent Developments

Geopolitical and Economic Conditions

Commodity prices remain volatile. General domestic and international economic, market and political conditions, including military conflicts, global economic growth, unpredictability of new tariffs, actions of OPEC+ countries and changes to the current political environment could prolong market volatility and continue to cause a decline in commodity prices.

We monitor the risk of cost pressures in specific areas of our operating expenses and capital expenditures. Our margins may be compressed if costs increase more than commodity prices and our revenues, net of derivatives. Additionally, the current interest rate environment remains sensitive to shifts in macroeconomic factors and central bank policies. Increased interest rates could have the effects of raising our cost of capital and the potential for depressing economic growth, either of which (or the combination thereof) could hurt the financial and operating results of our business.

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.

Midstream Disruption

During the second quarter of 2026, certain portions of our New Mexico operations continued to experience production interruptions and curtailments resulting from third-party midstream and gas processing constraints. Following the unplanned outage at a third-party gas processing facility that began in late March 2026, we continued to experience periodic processing limitations, maintenance-related curtailments, and reduced gas takeaway capacity affecting a portion of our New Mexico production during the quarter. These events resulted in the temporary shut-in of certain wells and reduced production from impacted areas. The temporary shut-in was substantially resolved by the end of May with production resuming to normal levels for June.

The effects of these disruptions were partially mitigated by the limited geographic scope of the affected production, our ability to restore certain wells to production as processing capacity became available, and strong operating performance from our Texas assets. As a result, while the curtailments negatively impacted certain production volumes during the quarter, they did not materially affect our overall financial condition or liquidity.

We continue to monitor the reliability and capacity of third-party midstream infrastructure serving our New Mexico acreage. To mitigate the risk of future processing and takeaway constraints of the nature experienced during the period, Targa is constructing new gathering and high-pressure trunkline infrastructure in Eddy County, New Mexico pursuant to the A&R Gas Purchase Agreement. Upon completion, this infrastructure is expected to provide increased gathering, processing, and takeaway capacity that reduces our reliance on the affected third-party processing facilities. The in-service date of the new Targa pipeline

system is currently expected to occur in the fourth quarter of 2026. See Note 15 – Commitments and Contingencies for additional information.

Results of Operations

Comparison for the three and six months ended June 30, 2026, and 2025:

(1) The Company's oil, natural gas and NGL sales are presented net of GP&T costs. These costs, related to natural gas and NGLs, at times exceeded the price received and resulted in negative average realized prices.

(2) The Company's calculation of the effects of derivative settlements includes gains (losses) on the settlement of our commodity derivative contracts. These gains (losses), along with unrealized gains (losses) from changes in the fair value of derivatives, are included under other income (expense) on the Company’s condensed consolidated statements of operations.

(3) During the periods presented, the Company did not have any NGL derivative contracts in place.

Oil and Natural Gas Revenues

Our revenues are derived from the sale of our oil and natural gas production, including the sale of NGLs that are extracted from our natural gas during processing. Realized prices and revenues from product sales are a function of the volumes produced, product quality, market prices, gas Btu content, as well as GP&T costs. GP&T costs are allocated across natural gas and NGLs based on revenue, which leads to heightened fluctuations in such cost allocations across periods. Our revenues from oil, natural gas and NGL sales do not include the effects of derivatives. Our revenues may vary significantly from period to period as a result of changes in the volume of production sold or changes in commodity prices. The following table presents the Company's oil and natural gas sales prior to and net of GP&T costs:

Three months ended June 30, 2026, compared to three months ended June 30, 2025

The Company’s total oil and natural gas sales, net increased by $80.5 million or 94%. The following tables summarize the effects of price, volume and GP&T costs changes on our revenues from oil, natural gas and NGLs:

Oil revenues

Oil revenues increased by $96.3 million. Our realized oil prices increased by $32.11 per Bbl, which was the result of a $31.08 increase in the average WTI price. Average daily oil volumes increased by 40%, primarily due to new wells turned to sales and the contribution of the Silverback Acquisition.

Natural gas revenues

Natural gas revenues decreased by $12.5 million driven by negative realized natural gas prices that more than offset an increase in production volumes. Our realized natural gas prices before GP&T costs decreased by $4.80 per Mcf, which was the result of an increase in negative Permian basis differentials due to regional pipeline constraints in addition to a $0.24 decrease in the average Henry Hub price.

NGL revenues

NGL revenues decreased by $3.4 million. Our realized NGL prices before GP&T costs increased by $2.98 per Bbl which was the result of an increase in the average Mont Belvieu prices realized. Our realized NGL prices net of GP&T costs decreased by $5.46 primarily due to higher allocated GP&T costs when realized natural gas prices are negative.

Six months ended June 30, 2026, compared to six months ended June 30, 2025

The Company’s total oil and natural gas sales, net increased by $91.9 million or 49%. The following tables summarize the effects of price, volume and GP&T costs changes on our revenues from oil, natural gas and NGLs:

Oil revenues

Oil revenues increased by $122.7 million. Our realized oil prices increased by $15.81 per Bbl, which was the result of a $16.17 increase in the average WTI price. Daily oil volumes increased by 34%, primarily due to new wells turned to sales and the Silverback Acquisition.

Natural gas revenues

Natural gas revenues decreased by $20.4 million driven by negative realized natural gas prices that more than offset an increase in production volumes. Our realized natural gas prices before GP&T costs decreased $3.75 per Mcf, which was the result of an increase in negative Permian basis differentials due to regional pipeline constraints, partially offset by a $0.15 increase in the average Henry Hub price.

NGL revenues

NGL revenues decreased by $10.4 million. Our realized NGL prices before GP&T costs decreased by $2.24, per Bbl which was the result of a decrease in the average Mont Belvieu prices realized. Our realized NGL prices net of GP&T costs decreased by $8.49 primarily due to higher allocated GP&T costs when realized natural gas prices are negative.

Costs and Expenses

The following table presents the Company's operating costs and expenses and other (income) expenses:

Lease Operating Expenses ("LOE")

LOE are the costs incurred in the operation and maintenance of producing properties. Expenses for electricity, compression, direct labor, saltwater disposal and materials and supplies comprise the most significant portion of our lease operating expenses. Certain operating cost components, such as direct labor and materials and supplies, generally remain relatively fixed across broad production volume ranges, but can fluctuate depending on activities performed during a specific period. For instance, repairs to our pumping equipment or surface facilities or subsurface maintenance result in increased production expenses in periods during which they are performed. Certain operating cost components, such as saltwater disposal

associated with produced water, are variable and increase or decrease as hydrocarbon production levels and the volume of water disposal increases or decreases.

The Company’s LOE increased by $10.6 million for the three months ended June 30, 2026, compared to the three months ended June 30, 2025, primarily due to a $6.4 million increase related to the Silverback Acquisition, a $3.0 million increase in workover expenses to return wells to production and a $1.2 million increase in Champions' third-party water disposal costs to align with our increased drilling pace.

The Company’s LOE increased by $16.3 million for the six months ended June 30, 2026, compared to the six months ended June 30, 2025, primarily due to a $10.8 million increase related to the Silverback Acquisition, a $3.1 million increase in workover expenses to return wells to production and a $1.1 million increase in Champions' third-party water disposal costs to align with our increased drilling pace.

Production and Ad Valorem Tax Expense

Production taxes are paid on produced oil, natural gas and NGLs based on a percentage of revenues at fixed rates established by federal, state or local taxing authorities. In general, the production taxes we pay correlate to changes in our oil, natural gas and NGL revenues. We are also subject to ad valorem taxes in the counties where our production is located. Ad valorem taxes are generally based on the valuation of our oil and natural gas properties, which also trend with oil and natural gas prices and vary across the different counties in which we operate.

Production and ad valorem taxes increased by $5.3 million for the three months ended June 30, 2026, compared to the three months ended June 30, 2025, primarily due to higher revenues from increased production volumes, including an increase in volumes from the Silverback Acquisition and higher oil prices.

Production and ad valorem taxes increased by $7.7 million for the six months ended June 30, 2026, compared to the six months ended June 30, 2025, primarily due to higher revenues from increased production volumes, including an increase in volumes from the Silverback Acquisition and higher oil prices, partially offset by the reversal of $0.8 million for a previously accrued liability related to the Environmental Protection Agency’s waste emission charge that was nullified in the first quarter of 2025.

Depletion, Depreciation, Amortization and Accretion ("DD&A") Expense

DD&A expense is the systematic expensing of the capitalized costs incurred to acquire, explore and develop oil, natural gas and NGLs. All costs incurred in the acquisition, exploration and development of properties (excluding costs of surrendered and abandoned leaseholds, delay lease rentals, dry holes and overhead related to exploration activities) are capitalized. Capitalized costs are depleted using the units of production method.

Accretion expense relates to ARO. We record the fair value of the liability for ARO in the period in which the liability is incurred (at the time the wells are drilled or acquired) with the offset to property cost. The liability accretes each period until it is settled or the well is sold, at which time the liability is removed.

The following table presents the components of the Company's DD&A expense:

DD&A expense increased by $5.1 million and $11.7 million, respectively, for the three and six months ended June 30, 2026, compared to the three and six months ended June 30, 2025, primarily due to higher production volumes, including an increase in volumes from the Silverback Acquisition which increased depletion expense by approximately $2.4 million and $6.8 million, respectively.

Impairments of Oil and Natural Gas Properties

There was no impairment loss during the three and six months ended June 30, 2026. There was a non-cash impairment loss on proved properties of $1.2 million during the three and six months ended June 30, 2025, which related to a decrease in fair value of certain properties in New Mexico outside of the Company's core acreage in the Red Lake field.

General and Administrative ("G&A") Expense

G&A expenses consist of administrative costs and stock-based compensation expense. Administrative costs include corporate overhead such as payroll and benefits for our staff, office costs, fees for professional services such as audit and legal services, technology costs, insurance and other. Stock-based compensation expense reflects costs associated with our stock granted to employees and members of our board of directors. G&A expenses are reported net of overhead recoveries.

Total G&A expense increased by $3.8 million and $5.4 million for the three and six months ended June 30, 2026, compared to the three and six months ended June 30, 2025, respectively, primarily due to increased headcount and higher incentive compensation.

Transaction Costs

Transaction costs represent costs incurred on successful or unsuccessful commercial transactions, business combinations or unsuccessful asset acquisitions. There were no transaction costs during the three and six months ended June 30, 2026. During the three and six months ended June 30, 2025, transaction costs of $1.9 million primarily related to the Silverback Acquisition.

Interest Expense, net

Interest expense, net decreased by $0.4 million and $0.7 million, respectively, for the three and six months ended June 30, 2026, compared to the three and six months ended June 30, 2025, respectively, primarily due to lower interest rates on the Credit Facility and a lower principal balance on the Senior Notes.

Gain (Loss) on Derivatives, net

The Company recognizes settlements and changes in the fair value of our derivative contracts as a single component within other income (expense) in our condensed consolidated statements of operations. We have oil and natural gas derivative contracts, including fixed price swaps, basis swaps and collars, that settle against various indices. The following table presents the components of the Company's gain (loss) on derivatives, net:

Cash gains or losses on settled derivative contracts related to contracts that settle during the period and are a function of the difference in settled versus contractual prices and the associated hedged volumes for each underlying commodity. Non-cash gains or losses on derivatives relate to unsettled contracts and are a function of changes in derivative fair values associated with fluctuations in the forward price curves for the commodities relative to contractual pricing and the associated hedged volumes for each underlying commodity for our derivative contracts outstanding.

Income Tax (Benefit) Expense

Current income taxes represent the amount the Company expects to owe to federal and state tax authorities in the current period, based on our taxable income. Deferred income taxes are provided to reflect the future tax consequences or benefits of differences between the tax basis of assets and liabilities and their reported amounts in the financial statements using enacted

tax rates. See Note 12 - Income Taxes for further discussion of income taxes. Total income tax (benefit) expense is summarized below:

The increase in deferred income tax expense during the three months ended June 30, 2026, is primarily due to a higher non-cash benefit on derivatives. The decrease in current income tax expense was primarily attributable to higher capital spending during the six months ended June 30, 2026, compared to the six months ended June 30, 2025.

Liquidity and Capital Resources

The business of exploring for, developing and producing oil and natural gas is capital intensive. Because oil, natural gas and NGL reserves are a depleting resource, like all upstream operators, we must make capital investments to sustain and grow production. The Company’s principal liquidity requirements are to finance our operations, fund capital expenditures, fund acquisitions and joint venture commitments, pay dividends and satisfy any indebtedness obligations. Cash flows are subject to a number of variables, including the level of oil and natural gas production and prices, and the significant capital expenditures required to more fully develop the Company’s oil and natural gas properties. Historically, our primary sources of capital funding and liquidity have been our cash on hand, cash flow from operations, borrowings under our Credit Facility and the issuance of our Senior Notes. At times and as needed, we may also issue debt or equity securities, including through transactions under our shelf registration statement filed with the SEC. We estimate the combination of the sources of capital discussed above will continue to be adequate to meet our short and long-term liquidity needs.

Cash on hand and operating cash flow can be subject to fluctuations due to trends and uncertainties that are beyond our control. Likewise, our ability to issue equity, debt and obtain credit facilities on favorable terms may be impacted by a variety of market factors as well as fluctuations in our results of operations.

For further discussion of risks related to our liquidity and capital resources, see "Item 1A. Risk Factors."

Working Capital

Working capital represents the funds available to meet day-to-day operational needs and is the difference in our current assets and our current liabilities. Working capital is an indication of liquidity and potential need for short-term funding. The change in our working capital requirements is driven generally by changes in accounts receivable, accounts payable, commodity prices, credit extended to, and the timing of collections from customers, the level and timing of spending for expansion activity, and the timing of debt maturities. Our working capital fluctuates as our drilling and completion activity changes with periods of higher and lower activity. We utilize our Credit Facility and cash on hand to manage the timing of cash

flows and fund short-term working capital deficits. At June 30, 2026, we had $262 million of undrawn capacity under our Credit Facility. The following table presents the components of working capital:

Our working capital deficit increased by $90 million primarily due to higher working capital required to fund our drilling program, revenue payable from higher oil prices and changes in our derivative assets and liabilities.

Cash Flows

The following table summarizes the Company’s cash flows:

Operating Activities

Net cash provided by operating activities were $110.7 million for the six months ended June 30, 2026, compared to $84.0 million for the six months ended June 30, 2025, and primarily consisted of the following:

(1) Operating expenses include LOE, production and ad valorem taxes, administrative costs, transaction costs and other miscellaneous operating expenses.

The increase in net cash provided by operating activities was primarily due to higher revenues from increased production and higher oil prices, along with an increase in advances from joint interest owners, partially offset by higher operating expenses associated with increased production and derivative settlement losses resulting from higher oil prices.

Investing Activities

Net cash flows used in investing activities were $101.7 million for the six months ended June 30, 2026, compared to $70.5 million for the six months ended June 30, 2025, and primarily consisted of the following:

(1) These additions and corresponding assets were sold as part of the sale of our midstream assets to Targa in 2025.

Capital expenditures for oil and natural gas properties increased by $55.9 million due to an increase in drilling and completion activity and an increase in infrastructure investments. Funds held in escrow relate to the Silverback Acquisition, which closed on July 1, 2025.

Financing Activities

Net cash flows used in financing activities were $6.2 million for the six months ended June 30, 2026, compared to $12.7 million for the six months ended June 30, 2025, and primarily consisted of the following:

Net borrowings increased by $14 million, partially offset by the repurchase of common shares of $5 million and an increase in repurchases of common shares for tax withholding of 1.5 million.

Credit Facility and Senior Notes

On April 30, 2026, the Company entered into the eighteenth amendment to the Credit Facility, which increased the Company’s borrowing base from $400 million to $425 million and documented the Company's election to maintain commitments thereunder at $400 million. In addition, the eighteenth amendment shortens the springing maturity of the Credit Facility in advance of the Senior Notes from 181 days to 91 days, effectively extending the maturity date for the Credit Facility to January 2028, given the April 2028 stated maturity of the Senior Notes.

The Credit Facility and Senior Notes had a principal balance of $138 million and $135 million, respectively, as of June 30, 2026.

See further discussion in Note 10 - Long-Term Debt for additional information.

Dividends

For the six months ended June 30, 2026, the Company recognized quarterly dividends totaling approximately $17.3 million, with $17.0 million paid in cash and $0.3 million accrued for the holders of unvested restricted stock awards.

Contractual Obligations

As of June 30, 2026, the Company had a remaining volume commitment that expires the earlier of achieving a specified quantity of cumulative volumes delivered or by the contract expiration date in 2031 with Targa, formerly Stakeholder Midstream, LLC, in Texas. The Company also had natural gas delivery commitments under the A&R Tolling Agreement and a remaining equity commitment under the Second Amendment to the A&R LLC Agreement to fund our portion of the capital budget for the RPC Power joint venture. The Company also entered into the A&R Gas Purchase Agreement that required an acreage dedication and a minimum volume commitment to Targa for a significant portion of our natural gas production in New Mexico. This agreement is expected to commence in the fourth quarter of 2026. In addition, the Company entered into the Waterbridge Agreement, which includes minimum produced water volume commitments for a portion of our New Mexico operations and is expected to be in service in the fourth quarter of 2026. See Note 15 - Commitments and Contingencies for additional information.

Critical Accounting Estimates

The Company's critical accounting estimates are described in "Critical Accounting Estimates" within "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note 1 of the Notes to the Consolidated Financial Statements in the 2025 Annual Report. The accounting estimates used in preparing our interim condensed consolidated financial statements for the six months ended June 30, 2026, are the same as those described in the 2025 Annual Report.

See Note 3 - Summary of Significant Accounting Policies in the Company's consolidated financial statements in "Item 15. Exhibits and Financial Statement Schedules" in the 2025 Annual Report for a full discussion of our significant accounting policies.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The primary objective of the following information is to provide both quantitative and qualitative insights into our exposure to market risk. Market risk refers to the potential for financial loss arising from adverse changes in commodity prices and interest rates. These disclosures are not intended to serve as precise forecasts of future losses, but rather to offer a framework for understanding reasonably possible risks. The forward-looking information presented reflects our approach to managing and mitigating market risk exposure within the context of our ongoing operational and financial strategy. All of our market risk sensitive instruments were entered into for purposes other than speculative trading.

Commodity Price Risk

Our results of operations and cash flows are highly sensitive to fluctuations in the prices of crude oil, natural gas and NGLs. The volatility in these prices is influenced by various factors, including market conditions, geopolitical events, supply-demand imbalances, regulatory changes and other external factors outside of the Company's control. To partially reduce the impact of price volatility on our revenues and cash flows, we utilize commodity-based derivative contracts.

See Note 6 - Derivative Instruments and Note 7 - Fair Value Measurements for a full discussion of our commodity-based derivative contracts and the fair value measurements associated with our derivatives, respectively.

For the six months ended June 30, 2026, oil and natural gas sales, net was $279.7 million, excluding any effect of our derivative contracts. Oil and natural gas sales, net would have increased or decreased by approximately $37.0 million if there was a 10% change in index pricing. As of June 30, 2026, the fair value of our oil and natural gas derivative contracts was a net liability of $22 million. A 10% change in the forward curves associated with our oil and natural gas derivative contracts would have changed our net position by approximately $43 million.

Interest Rate Risk

Our business is subject to the effects of market interest rates. These interest rates are influenced by macroeconomic factors such as inflation, consumer spending and federal reserve monetary policy. Interest rate risk could increase our cost of capital and potentially slow economic growth, either of which (or the combination thereof) could hurt the financial and operating results of our business. We are also exposed to market risk related to changes in interest rates on our indebtedness under our Credit Facility. To mitigate this risk, the Company utilizes interest rate derivative contracts to partially reduce exposure to interest rate fluctuations.

See Note 10 - Long-Term Debt and Note 6 - Derivative Instruments for a full discussion of our long-term debt and interest rate derivative contracts, respectively.

Item 4. 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 June 30, 2026, with the participation of our CEO and CFO, as well as other key members of our management. Based on this evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of June 30, 2026.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the three months ended June 30, 2026, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we may be involved in various legal proceedings and claims in the ordinary course of business. The ultimate outcome of any such proceedings or claims, and any resulting impact on us, cannot be predicted with certainty. The Company believes that the amount of the liability, if any, ultimately incurred with respect to any such proceedings or claims will not have a material adverse effect on our financial condition, liquidity, capital resources, results of operations or cash flows.

Refer to "Part I, Item 3 - Legal Proceedings" of the 2025 Annual Report, and "Part I, Item 1. Note 15 - Commitments and Contingencies" in the notes to the unaudited condensed consolidated financial statements set forth in this Quarterly Report (which is incorporated by reference herein) for additional information.

Item 1A. Risk Factors

In addition to the information set forth in this Quarterly Report, the risks that are discussed in the Company's Annual Report on Form 10-K for the year ended December 31, 2025, under the headings "Part I, Item 1 and 2. Business and Properties," "Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Part I, Item 1A. Risk Factors" and in "Part II, Item 1A. Risk Factors" of our subsequently filed Quarterly Report should be carefully considered, as such risks could materially affect the Company's business, financial condition or future results. There have been no material changes in the Company's risk factors from those that were described in the Company's 2025 Annual Report and subsequently filed Quarterly Report.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Repurchases of Equity Securities

In December 2025, our Board of Directors approved the Repurchase Program authorizing the repurchase of up to $100 million of our common stock from time to time over a period of 24 months, including through open market purchases, through block trades, in privately negotiated transactions, or by other means, including through the use of trading plans, each in accordance with applicable securities laws and other restrictions. The Repurchase Program does not obligate us to purchase any common stock and may be suspended, modified, extended or discontinued by the Board at any time. During the three and six months ended June 30, 2026, 25,000 and 177,408 shares were purchased, for $0.9 million and $4.9 million, respectively, at a weighted average price of $34.13 and $27.61 per share under the Repurchase Program. The remaining repurchase authority under the Repurchase Program at June 30, 2026, was $95 million.

We also receive shares from employees for the payment of personal income tax withholding upon vesting of stock-based compensation transactions. The acquisition of the surrendered shares is not part of our Repurchase Program to repurchase shares of our common stock. Any shares repurchased by the Company for personal tax withholdings are immediately retired upon repurchase.

Our common stock repurchase activity during the second quarter of 2026 was as follows:

Item 5. Other Information

During the quarter ended June 30, 2026, 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 6. Exhibits

• Filed herewith.

† Compensatory plan or arrangement.