Riley Permian Announces Sale of New Mexico Midstream Project

Rhea-AI Summary

Riley Permian (NYSE American: REPX) sold all membership interests in its midstream subsidiary Dovetail Midstream to Targa Northern Delaware LLC for approximately $111 million in cash, subject to customary adjustments, with closing occurring simultaneously with the purchase agreement on December 4, 2025.

The company may earn up to an additional $60 million tied to volume-based performance over five years. Closing proceeds will be used to reduce borrowings on the credit facility and to pay income taxes and transaction costs. Riley Permian also agreed to sell certain compressor station assets for about $10 million at a subsequent closing anticipated no later than Q1 2026, subject to closing conditions.

Positive

• $111 million cash proceeds at closing
• Right to $60 million additional contingent payments over five years
• Proceeds earmarked to reduce credit facility borrowings
• Removes future midstream capital spending obligations

Negative

• Loss of ownership of midstream assets serving Eddy County, New Mexico
• Contingent $60 million dependent on future volume thresholds
• Compressor asset sale $10 million subject to closing conditions and timing risk

Insights

Midstream Transaction Strategist

Sale of Dovetail secures cash, removes midstream capex, and transfers gathering risk to a specialist.

Riley sold all membership interests in Dovetail Midstream, LLC for approximately $111 million in cash, with closing simultaneous to the Purchase Agreement and a contingent earn‑out of up to $60 million tied to five years of volume performance. The deal also contemplates a subsequent sale of compressor station assets for about $10 million no later than Q1 2026. Proceeds are earmarked to reduce borrowings, pay income taxes, and cover transaction costs.

This transaction shifts midstream execution and throughput risk to Targa Northern Delaware LLC, a third‑party operator, which should improve short‑term liquidity and remove future expansion capex needs from the company's balance sheet. Key dependencies include the realization of the contingent payments tied to production volumes and the timely second closing for compressor assets by Q1 2026. Watch post‑closing gas volumes, any purchase price adjustments, and the company's credit facility borrowings over the next 12 months.

Corporate Finance Analyst

Immediate deleveraging and tax funding, with upside via a performance earn‑out; execution risk centers on volumes and closing conditions.

The company will use closing proceeds to lower borrowings on its credit facility and to pay taxes and transaction expenses, improving liquidity and reducing leverage pressure immediately after closing on Dec. 4, 2025. The contingent $60 million earn‑out creates additional potential cash inflows but depends strictly on achieving specified volume thresholds over five years.

From a financial monitoring standpoint, the most material near‑term items are actual credit‑facility debt reduction, the size of any customary purchase price adjustments, and whether the compressor sale completes by Q1 2026. Track reported reductions in outstanding borrowings and any disclosed mileposts for earn‑out payments across the next five years.

OKLAHOMA CITY, Dec. 4, 2025 /PRNewswire/ -- Riley Exploration Permian, Inc. (NYSE American: REPX) ("Riley Permian") today announced that its wholly-owned subsidiary, Riley Exploration - Permian, LLC, ("REP LLC", together with Riley Permian, hereinafter referred to as the "Company"), entered into a purchase and sale agreement (the "Purchase Agreement") with Targa Northern Delaware LLC ("Buyer" or "Targa"), pursuant to which the Company sold to Buyer all of the membership interests in Dovetail Midstream, LLC ("Dovetail"), a wholly-owned subsidiary of the Company for an aggregate cash purchase price of approximately $111 million, subject to customary purchase price adjustments. Dovetail's assets primarily consist of natural gas gathering infrastructure serving production in Eddy County, New Mexico. Closing proceeds from the transaction will be used to reduce borrowings on the Company's credit facility and to pay income taxes and transaction costs associated with the transaction. The Company also has the right to earn up to an additional $60 million in cash payments contingent on achieving certain volume-based performance thresholds over a five-year period. The closing of the transaction took place simultaneously with execution of the Purchase Agreement. The Purchase Agreement also provides for the sale by the Company to Buyer of certain compressor station assets at a subsequent closing date anticipated to occur no later than the first quarter of 2026 for an aggregate cash purchase price of approximately $10 million, subject to the satisfaction of certain closing conditions.

Bobby Riley, Chairman and CEO for Riley Permian, commented, "We're excited to further our partnership with a best-in-class operator in Targa. This transaction fulfills the Company's goal of achieving flow assurance for its natural gas production, allowing for wider development of our New Mexico assets. By removing future capital spending obligations associated with expanding the midstream system, this transaction allows us to focus our expertise and capital on the development of our upstream assets including our recent acquisition of Silverback Exploration II, LLC and its subsidiaries."

About Riley Exploration Permian, Inc.
Riley Permian is a growth-oriented upstream oil and gas company operating in Texas and New Mexico with infrastructure projects that complement our operations. For more information, please visit www.rileypermian.com.

Forward-Looking Statements
This press release may include certain statements concerning expectations for the future that are forward-looking statements as defined by federal law, including the possibility that the anticipated benefits of the transactions cannot be fully realized. Such forward-looking statements are subject to a variety of known and unknown risks, uncertainties, and other factors that are difficult to predict and many of which are beyond management's control. An extensive list of factors that can affect future results are discussed in Riley Permian's Annual Report on Form 10-K and other documents filed from time to time with the Securities and Exchange Commission. Riley Permian undertakes no obligation to update or revise any forward-looking statement to reflect new information or events.

Investor Contact:
405-438-0126
IR@rileypermian.com

View original content:https://www.prnewswire.com/news-releases/riley-permian-announces-sale-of-new-mexico-midstream-project-302632672.html

SOURCE Riley Exploration Permian, Inc.

FAQ

What did Riley Permian (REPX) announce on December 4, 2025?

Riley Permian announced the sale of all membership interests in Dovetail Midstream to Targa for about $111 million, with closing occurring the same day.

How much additional cash can Riley Permian (REPX) earn from the Dovetail sale?

The company can earn up to an additional $60 million in cash contingent on meeting volume-based performance thresholds over five years.

How will Riley Permian (REPX) use the Dovetail sale proceeds?

Closing proceeds will be used to reduce borrowings on the company credit facility and to pay income taxes and transaction costs.

What is the timeline and price for the compressor station assets sale by Riley Permian (REPX)?

The company agreed to sell certain compressor station assets for approximately $10 million at a subsequent closing expected no later than Q1 2026, subject to closing conditions.

Does the Dovetail sale immediately remove Riley Permian's midstream capital obligations?

Yes; the transaction removes future capital spending obligations associated with expanding the midstream system, per the company statement.