Oil and gas producer Riley Exploration Permian (NYSE: REPX) reported Q3 2026 results exceeding the market’s revenue expectations, with sales up 88.3% year on year to $201.2 million. Its non-GAAP profit of $2.66 per share was 7.3% above analysts’ consensus estimates.

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StockStory’s take

Riley Exploration Permian delivered a quarter marked by substantial production gains, supported by investments in its development program and expanded infrastructure at Red Lake and Champions. Management credited the conversion of earlier drilling activity into higher volumes and the restoration of previously constrained production as critical to the results. CEO Bobby Riley emphasized the significance of bringing online new wells and optimizing existing assets, noting, “Much of the activity completed earlier in 2026 translated into production during the third quarter, resulting in the significant step-up in volumes we had anticipated.”

Looking forward, management outlined plans to accelerate development in both its core regions, with particular focus on the new San Andres opportunity at Red Lake and a shift to a two-rig program. The company expects these initiatives, alongside improved water and gas infrastructure, to drive meaningful production growth in 2027. COO John Suter highlighted the deliberate sequencing of well completions and the readiness of new infrastructure, stating, “The sequencing is deliberate. We began completing our DUCs immediately after Targa and WaterBridge commenced initial operations. That production impact will begin to be seen toward the end of Q4 2026 and into Q1 2027 as those wells are turned to sales.”

Key insights from management’s remarks

Management attributed the quarter’s performance to increased production from earlier investments, infrastructure upgrades in New Mexico, and expanded development planning for new resource zones.

• Production ramp from prior investment: The company benefited from converting previous drilling and completions activity into higher oil and total production, notably in Texas, where newly brought online wells contributed to sequential growth.
• Infrastructure upgrades support growth: The startup of the WaterBridge water handling system and the Targa high-pressure gas line in New Mexico provided additional capacity and flow assurance, enabling higher development activity and reducing operational bottlenecks.
• Red Lake resource expansion: Management is preparing to develop the San Andres formation at Red Lake, adding approximately 90 potential well locations to the company’s inventory. This expansion leverages existing acreage and infrastructure, minimizing incremental acquisition cost.
• Flexible capital deployment: The company underscored its ability to adjust activity based on commodity prices and market conditions, with only a modest portion of 2027’s drilling and completions already contracted. This flexibility allows for rapid response to changing market dynamics.
• Disciplined balance sheet management: CFO Philip Riley highlighted ongoing debt reduction, limited share dilution, and a strong liquidity position following an amended credit facility. Excess cash was used to retire debt and maintain the company’s ability to fund development internally.

Drivers of future performance

Riley Exploration Permian’s outlook is shaped by accelerated development plans, infrastructure readiness, and disciplined capital allocation under varying commodity price scenarios.

• Accelerated two-rig development: Management plans to operate two rigs in 2027, increasing drilling and completion activity across both core assets. This is expected to drive 30%-40% year-over-year production growth if current market conditions persist.
• San Andres development impact: Initial development of the San Andres formation at Red Lake is anticipated to expand the company’s drilling inventory and diversify production sources. Management expects six San Andres wells in 2027, with production results to inform future activity levels.
• Cost and inflation management: The company is modeling moderate inflation in cost forecasts (around 10%) but aims to offset these pressures through operational efficiencies and flexibility in contracting, maintaining the ability to scale investment up or down as needed.

Catalysts in upcoming quarters

In the coming quarters, the StockStory analyst team will be monitoring (1) the impact of completing drilled but uncompleted wells (DUCs) in New Mexico as new water and gas infrastructure comes online, (2) early San Andres well results to gauge the potential for resource expansion, and (3) ongoing progress toward operating a consistent two-rig program. Continued discipline in capital allocation and cost management will also be key markers of execution.

Riley Exploration Permian currently trades at $41.91, down from $42.88 just before the earnings. Is there an opportunity in the stock? Find out in our full research report (it’s free).

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