Riley Exploration Permian, Inc. (Form: 8-K/A, Received: 06/20/2023 16:03:22)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K/A

(Amendment No. 1)

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): June 20, 2023 (April 3, 2023)

Riley Exploration Permian, Inc.

(Exact name of registrant as specified in its charter)


Delaware	1-15555	87-0267438
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

29 E. Reno Avenue, Suite 500

Oklahoma City, Oklahoma 73104

Address of Principal Executive Offices, Including Zip Code)

405-415-8699

(Registrant’s Telephone Number, Including Area Code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):


o			Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o			Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o			Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o			Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.001 per share

REPX

NYSE American

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Introductory Note

As previously disclosed in the Current Report on Form 8-K filed on April 4, 2023 (the “Prior 8-K”) with the Securities and Exchange Commission, on April 3, 2023 (the “Closing Date”), Riley Exploration - Permian, LLC (“REP LLC”), a wholly-owned subsidiary of Riley Exploration Permian, Inc. (“REPX,” together with REP LLC, the “Company”), completed its acquisition of oil and natural gas assets (the “New Mexico Acquisition”) from Pecos Oil & Gas, LLC (“Pecos”), a Delaware limited liability company, and an affiliate of Cibolo Energy Partners LLC. The acquired assets are located in Eddy County, New Mexico and primarily target the Yeso trend.

This Form 8-K/A amends and supplements the Prior 8-K to include the financial information required by Item 9.01 of Form 8-K, including: (i) the audited consolidated financial statements of Pecos as of and for the years ended December 31, 2022 and 2021, (ii) the unaudited interim consolidated financial statements of Pecos as of and for the three months ended March 31, 2023 and 2022, and (iii) the unaudited pro forma financial information of the Company giving effect to the New Mexico Acquisition, as described below.

Item 9.01 Financial Statements and Exhibits

(a) Financial Statements of Business Acquired

Audited consolidated financial statements of Pecos for the years ended December 31, 2022 and 2021 are attached hereto as Exhibit 99.1 and incorporated herein by reference.

Unaudited interim consolidated financial statements of Pecos as of and for the three months ended March 31, 2023 and 2022 are attached hereto as Exhibit 99.2 and incorporated herein by reference.

(b) Pro Forma Financial Information

Unaudited pro forma condensed combined balance sheet of the Company as of March 31, 2023 and the unaudited pro forma condensed combined statements of operations for the three months ended March 31, 2023 and year ended December 31, 2022 are attached hereto as Exhibit 99.3 and incorporated herein by reference. These unaudited pro forma financial statements give effect to the New Mexico Acquisition on the basis, and subject to the assumptions, set forth in accordance with Article 11 of Regulation S-X.

(d) Exhibits


Exhibit No.			Description

23.1			Consent of BDO USA, LLP
99.1			Audited consolidated financial statements of Pecos Oil and Gas, LLC for the years ended December 31, 2022 and 2021.
99.2			Unaudited interim consolidated financial statements of Pecos Oil and Gas LLC as of March 31, 2023 and December 31, 2022 and for the three months ended March 31, 2023 and 2022.
99.3			Unaudited pro forma condensed combined balance sheet of Riley Exploration Permian, Inc. as of March 31, 2023 and the unaudited pro forma condensed combined statements of operations for the three months ended March 31, 2023 and the year ended December 31, 2022.
104			Cover Page Interactive Data File (embedded within the Inline XBRL document).

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


		RILEY EXPLORATION PERMIAN, INC.

Date:	June 20, 2023	By:	/s/ Philip Riley
			Philip Riley
			Chief Financial Officer

Exhibit 23.1

Consent of Independent Auditor

Riley Exploration Permian, Inc.

Oklahoma City, Oklahoma

We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-255104) and Form S-8 (No. 333-253750) of Riley Exploration Permian, Inc. (“Riley”) of our report dated June 20, 2023, relating to the financial statements of Pecos Oil & Gas, LLC which appears in Riley’s Current Report on Form 8-K/A.

/s/ BDO USA, LLP

Houston, Texas

June 20, 2023

Exhibit 99.1

Pecos Oil & Gas, LLC

Financial Statements

As of December 31, 2022 and 2021 and for the Years Ended December 31, 2022 and 2021

Exhibit 99.1

TABLE OF CONTENTS


			Page
Independent Auditor's Report			3
Balance Sheets as of December 31, 2022 and 2021			5
Statements of Operations for the Years Ended December 31, 2022 and 2021			6
Statements of Changes in Member's Equity for the Years Ended December 31, 2022 and 2021			7
Statements of Cash Flows for the Years Ended December 31, 2022 and 2021			8
Notes to Financial Statements			9

Exhibit 99.1

Independent Auditor’s Report

Board of Member

Pecos Oil & Gas, LLC

Houston, Texas

Opinion

We have audited the financial statements of Pecos Oil & Gas, LLC (the “Company”), which comprise the balance sheets as of December 31, 2022 and 2021, and the related statements of operations, changes in member’s equity, and cash flows for the years then ended, and the related notes to the financial statements.

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

Basis for Opinion

We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Company and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Responsibilities of Management for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued or available to be issued.

Auditor’s Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in

Exhibit 99.1

accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

In performing an audit in accordance with GAAS, we:

a.Exercise professional judgment and maintain professional skepticism throughout the audit.

b.Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

c.Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Accordingly, no such opinion is expressed.

d.Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.

e.Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for a reasonable period of time.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.

/s/ BDO USA, LLP

Houston, Texas

June 20, 2023

Exhibit 99.1

Pecos Oil & Gas, LLC

Balance Sheets


	As of December 31, 2022	As of December 31, 2021
Assets	(in thousands)
Current assets:
Cash and cash equivalents	$ 12,785	$ 13,630
Accounts receivable	15,938	10,989
Inventory	1,322	—
Prepaids and other current assets	1,695	985
Derivative instruments	506	—
Total current assets	32,246	25,604
Oil and natural gas properties, successful efforts method:
Proved properties	192,051	150,516
Unproved properties	12,747	13,535
Less: Accumulated depreciation, depletion and amortization	(37,334)	(19,460)
Total oil and natural gas properties, net	167,464	144,591
Total assets	$ 199,710	$ 170,195

Liabilities and Member’s Equity
Current liabilities:
Accounts payable	$ 7,882	$ 1,892
Revenue payable	8,352	7,891
Accrued and other liabilities	1,793	952
Earnout liability	15,251	12,594
Derivative instruments	887	5,403
Asset retirement obligations	3,300	1,350
Total current liabilities	37,465	30,082
Related party note payable	100,609	94,122
Derivative instruments	—	20
Asset retirement obligations	7,869	11,446
Total liabilities	145,943	135,670
Commitment and contingencies (Note 8)
Member’s equity	53,767	34,525
Total liabilities and member’s equity	$ 199,710	$ 170,195

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

Exhibit 99.1

Pecos Oil & Gas, LLC

Statements of Operations


	For the Year Ended December 31, 2022	For the Year Ended December 31, 2021
	(in thousands)
Revenues:
Oil and natural gas sales, net	$ 113,414	$ 62,374
Total revenues	113,414	62,374
Operating expenses:
Lease operating	17,915	12,947
Production and ad valorem taxes	9,465	5,214
Depletion and accretion	23,470	15,245
General and administrative	5,189	4,966
Total operating expenses	56,039	38,372
Operating income	57,375	24,002
Other (expense) income:
Loss on derivative instruments	(13,117)	(18,602)
Loss on earnout liability	(3,804)	(12,097)
Gain on settlement of asset retirement obligations	226	265
Related party interest expense	(15,387)	(14,295)
Total other (expense) income, net	(32,082)	(44,729)
Net income (loss)	$ 25,293	$ (20,727)

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

Exhibit 99.1

Pecos Oil & Gas, LLC

Statements of Changes in Member’s Equity


			Member’s Equity
			(in thousands)
Balance – January 1, 2021			$ 53,370
Unit-based compensation			1,882
Net loss			(20,727)
Balance - December 31, 2021			34,525
Distribution of nonmonetary assets (Note 9)			(7,430)
Unit-based compensation			1,379
Net income			25,293
Balance - December 31, 2022			$ 53,767

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

Exhibit 99.1

Pecos Oil & Gas, LLC

Statements of Cash Flows


	For the Year Ended December 31, 2022	For the Year Ended December 31, 2021
	(in thousands)
Cash flows from operating activities:
Net income (loss)	$ 25,293	$ (20,727)
Adjustments to reconcile net income to net cash provided by operating activities:
Depletion and accretion	23,470	15,245
Gain on settlement of asset retirement obligations	(226)	(265)
Non-cash interest	6,487	14,295
Unit-based compensation expense	1,379	1,882
Loss on earnout liability	3,804	12,097
Loss on derivative instruments	13,117	18,602
Settlements on derivative instruments	(17,957)	(10,526)
Changes in operating assets and liabilities:
Accounts receivable	(4,949)	(7,613)
Inventory	(1,322)	—
Prepaids and other current assets	(912)	(852)
Accounts payable	2,948	490
Accrued and other liabilities	841	941
Revenues payable	461	4,856
Net cash provided by operating activities	52,434	28,425
Cash flows from investing activities:
Additions to oil and natural gas properties	(53,279)	(26,271)
Net cash used in investing activities	(53,279)	(26,271)
Cash flows from financing activities:
Borrowings under related party note payable	—	8,500
Net cash provided by financing activities	—	8,500
Net increase (decrease) in cash	(845)	10,654
Cash - Beginning of year	13,630	2,976
Cash - End of year	$ 12,785	$ 13,630

Supplemental disclosure of cash activity:
Cash paid for interest	$ (8,957)	$ —
Supplemental disclosure of noncash activity:
Changes in accrued capital expenditures	$ 505	$ —
Changes in asset retirement obligations	$ 12	$ (4,388)
Distribution of nonmonetary assets (Note 9)	$ (7,430)	$ —

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

Pecos Oil & Gas, LLC

Notes to the Financial Statements

1.Organization and Nature of Business

Pecos Oil & Gas LLC (the "Company") was formed pursuant to the laws of the State of Delaware on May 19, 2020. The Company is engaged in the acquisition and development of oil and natural gas producing properties in onshore areas of the continental United States. Pecos WI LLC (the "Member") is the sole member. The Member is ultimately owned by Cibolo Energy LRR, LLC. (“Cibolo Energy”), a private equity firm.

2.Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

The Company’s financial statements are presented based on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America ("GAAP").

Use of Estimates

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates and judgments are based on information available at the time such estimates and judgments are made.

Making accurate estimates and assumptions is particularly difficult in the oil and natural gas industry, given the challenges resulting from volatility in oil and oil and natural gas prices. The most significant estimates pertain to proved oil and natural gas reserves and related cash flow estimates used in impairment tests of long-lived assets, estimates of future development, dismantlement and abandonment costs, valuation of derivative instruments and, valuation of the earnout liability. Certain of these estimates require assumptions regarding the Company’s enterprise value, future commodity prices, future costs and expenses and future production rates.

The Company evaluates these estimates on an ongoing basis, using historical experience, 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.

Proved Oil and Natural Gas Properties

The Company uses the successful efforts method of accounting for its oil and natural gas producing activities. Under this method, all property acquisition costs and costs of development wells are capitalized as incurred. The costs of development wells are capitalized whether producing or non-producing. Costs to drill exploratory wells are capitalized pending the determination of whether proved reserves are found. If an exploratory well is determined to be unsuccessful, the costs of drilling the unsuccessful exploratory well are charged to exploration costs.

Geological and geophysical costs, including seismic studies, are charged to exploration costs as incurred. Expenditures incurred to operate and for maintenance, repairs and minor renewals necessary to maintain our oil and natural gas properties in operating condition are charged to lease operating expenses as incurred.

On the sale or retirement of a complete unit of a proved property or field, the cost and related accumulated depletion, depreciation and amortization are eliminated from the oil and natural gas property accounts, and the resulting gain or loss is recognized. On the sale of a partial unit of proved property, the unamortized cost of the property is apportioned to the interest sold and the interest retained is accounted for on the basis of the fair value of the retained interests and a gain or loss is recognized if the divestiture significantly affects the depletion rate.

Unproved Oil and Natural Gas Properties

Unproved properties and the related costs are transferred to proved properties when reserves are discovered on, or otherwise attributed, to the property.

Pecos Oil & Gas, LLC

Notes to the Financial Statements

Proceeds from sales of all or a partial interest in individual unproved properties assessed for impairment on a group basis are accounted for as a recovery of costs. No gain or loss is recognized unless the sales proceeds exceed the original cost of the entire interest in the property, in which a gain will be recognized for the excess.

Impairment of Oil and Natural Gas Properties

The cost of proved oil and natural gas properties are assessed on a field-by-field basis for impairment at least annually or whenever events and circumstances indicate that a decline in the recoverability of their carrying value may have occurred. The expected undiscounted future cash flows of the oil and natural gas properties are compared to the carrying amount of the oil and natural gas properties to determine if the carrying amount is recoverable. If the carrying amount exceeds the estimated undiscounted future cash flows, the carrying amount of the oil and natural gas properties is adjusted to estimated fair value. Assumptions associated with discounted cash flow models or valuations used in the impairment evaluation include estimates of future oil and natural gas prices, production costs, development expenditures, anticipated production of proved reserves, appropriate risk-adjusted discount rates and other relevant data. Unproved oil and natural gas properties are assessed periodically for impairment on a property-by-property basis based on remaining lease terms, drilling results or future plans to develop acreage.

Depletion

Capitalized costs of proved oil and natural gas properties are amortized using the units-of-production method based on production and estimates of proved reserve quantities. Leasehold acquisition costs of proved properties are depleted over total estimated proved reserves, and capitalized development costs of wells and related equipment and facilities are depleted over total estimated proved developed reserves. During the years ended December 31, 2022 and 2021, the Company recognized depletion expense of $22.3 million and $13.8 million, respectively.

Asset Retirement Obligations

The Company is obligated to fund the costs of disposing of long-lived assets upon their abandonment. The Company’s asset retirement obligations (“ARO”) relate to the plugging of wells and the related abandonment of oil and natural gas properties. The Company records a liability for the present value of all legal obligations associated with the retirement of tangible long-lived assets with an offsetting increase in the carrying value of the associated asset when the assets are placed into service. The liability is accreted to its future value each period and capitalized costs are depleted over the estimated useful life of the related asset. Upon settlement of the liability, any gain or loss, if applicable, is recognized in income. The computation of ARO requires the Company to make assumptions about the ultimate amount and timing of settlements, discount rates and changes in legal and regulatory requirements.

The following represents the changes to the asset retirement obligations for the periods indicated:


	Year Ended December 31, 2022			Year Ended December 31, 2021
	(in thousands)
ARO, beginning balance	$	12,796		$	16,694
Liabilities incurred and acquired			12			8
Liabilities relinquished			—			(4,396	)
Liabilities settled			(2,764)			(929)
Accretion expense			1,125			1,419
ARO, ending balance			11,169			12,796
Less: current ARO			(3,300)			(1,350)
ARO, long-term	$	7,869		$	11,446

Pecos Oil & Gas, LLC

Notes to the Financial Statements

Revenue Recognition

Oil Sales

Under the Company’s oil contract, oil production is sold at the wellhead or central facilities. The Company collects an agreed-upon index price adjusted for location differentials and product quality. Revenue is recognized when control transfers to the purchaser at the wellhead or central facilities at the net price received by the Company.

Natural Gas and NGL Sales

Under the Company’s natural gas contracts, the Company delivers natural gas to a midstream processing company at the wellhead or the inlet of the midstream processing company’s gathering system. The midstream processing company gathers and processes the natural gas and remits the associated proceeds to the Company. For contracts where control is transferred to the processor at the plant inlet or wellhead, the Company recognizes volumes and revenue on a net basis with transportation and processing fees recorded as a contra-revenue amount.

Transaction Price Allocated to Remaining Performance Obligations

Based on the Company’s current product sales contracts, each unit of production is considered a separate performance obligation and therefore future production volumes are wholly unsatisfied and do not require allocation or disclosure of the transaction price to remaining performance obligations.

Contract Balances

Under the Company’s product sales contracts, the Company has the right to invoice customers once the performance obligations have been satisfied, at which point payment is unconditional. Accordingly, the Company’s product sales contracts do not give rise to contract assets or liabilities under ASC 606.

Disaggregation of revenue

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


	Year Ended December 31, 2022	Year Ended December 31, 2021
	(in thousands)

Oil	$ 88,993		$ 47,720
Natural gas	11,280		5,919
Natural gas liquids	13,141		8,735
Oil and natural gas sales, net	$ 113,414		$ 62,374

Fair Value of Financial Instruments

Certain financial instruments are reported at fair value on our balance sheets. Fair value is defined as the amount that would be received from the sale of an asset or paid for the transfer of a liability in an orderly transaction between market participants (i.e., an exit price). To estimate an exit price, a three-level hierarchy is used. The fair value hierarchy prioritizes the inputs, which refer broadly to assumptions market participants would use in pricing an asset or a liability, into three levels:

•Level 1: Measured based on unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

•Level 2: Measured based on quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability.

•Level 3: Measured based on prices or valuation models that require inputs that are both significant to the fair value measurement and less observable from objective sources (i.e., supported by little or no market activity).

Pecos Oil & Gas, LLC

Notes to the Financial Statements

The valuation techniques that may be used to measure fair value include a market approach, an income approach and a cost approach. A market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. An income approach uses valuation techniques to convert future amounts to a single present amount based on current market expectations, including present value techniques, option-pricing models and the excess earnings method. The cost approach is based on the amount that currently would be required to replace the service capacity of an asset (replacement cost). These approaches are considered Level 3 in the fair value hierarchy.

The carrying values of financial instruments comprising cash and cash equivalents, payables, receivables, related party accounts receivable/payable and advances from joint interest owners approximate fair values due to the short-term maturities of these instruments and are considered Level 1 in the fair value hierarchy. Assets and liabilities accounted for at fair value on a non-recurring basis in accordance with the fair value hierarchy include the initial recognition of asset retirement obligations, the fair value of oil and natural gas properties when acquired in a business combination and impairment assessments are considered Level 3 in the fair value hierarchy.

Financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. Management’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels. See Note 6 – Fair Value Measurements for further information.

Earnout Liability

On July 10, 2020, the Company closed on its initial acquisition of oil and natural gas properties located in Eddy County, New Mexico (the Acquisition). As part of the total consideration transferred, the purchase and sale agreement included a provision for potential contingent consideration to the seller, which is based on qualified distributions, as defined in the agreement, in future quarters. As the contingent consideration would be settled in cash, the Company considers the contingent consideration to be a liability, which is revalued at each reporting period (“Earnout Liability”). See further discussion in Note 6 - Fair Value Measurements for further information. Any subsequent changes in the fair value of the Earnout Liability are recognized in other (expense) income within the Company’s statements of operations. The Company recognized a loss of $3.8 million and $12.1 million for the years ended December 31, 2022 and 2021, respectively, as a result of changes in the fair value of the Earnout Liability.

Business Combinations

The Company accounts for all business combinations using the acquisition method, under which the assets acquired and liabilities assumed are measured and recorded at their acquisition date fair values. The difference between the fair value of assets acquired and liabilities assumed and the purchase price, if any, is recorded as either goodwill or a bargain purchase gain.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. The Company places its cash with financial institutions that are insured by the Federal Deposit Insurance Corporation. The Company maintains deposits in banks which from time-to-time exceed the amount of deposit insurance available. The Company had cash deposits in excess of federally insured amounts of approximately $12.5 million and $13.4 million at December 31, 2022 and 2021, respectively. Management assesses the financial condition of the institutions and believes that any possible credit loss would be minimal.

Accounts Receivable

Accounts receivable consist primarily of amounts due from purchasers of oil and natural gas and from outside working interest owners. Accounts receivable from oil, natural gas and natural gas liquids sales are recorded at the invoiced amount and do not bear interest. The Company routinely assesses the financial strength of its customers and bad debts are recorded based on an account-by-account evaluation. As of December 31, 2022 and 2021, the Company had no reserves for doubtful accounts.

Pecos Oil & Gas, LLC

Notes to the Financial Statements

Components of accounts receivable as of December 31, 2022 and 2021, include the following:


	As of December 31, 2022		As of December 31, 2021
	(in thousands)

Oil, natural gas and NGL	$ 14,628	$ 10,298
Joint interest accounts receivable	1,310	691
Accounts receivable	$ 15,938	$ 10,989

Inventory

All inventories are stated at the lower of cost or market. Inventories as of December 31, 2022, entirely relate to materials and supplies consisting of tubular goods and production equipment for future transfer to wells.

Leases

The Company established right-of-use assets and lease liabilities on the balance sheet for all leases with a term longer than 12 months. Typical right-of-use operating lease assets of the Company are for certain leases related to drilling rigs and other equipment related to the exploration, development and production of oil and natural gas.

Unit-Based Compensation

In August 2020, the Company’s Member issued unit-based compensation awards in the form of Series B Profits Interest Awards (“Class B Unit”) to a participant under its Limited Liability Company Agreement (“LLC Agreement”) in connection with the Management Services Agreement (“MSA”) for services to be rendered to the Company. The Company evaluated the Class B Unit awards and determined they are a substantive class of equity subject to ASC 718, Compensation – Stock Compensation (“ASC 718”), which requires compensation expense related to all awards to be recognized in the financial statements. For the Class B Unit awards granted, the associated expenses are being recognized in the Company’s financial statements on a straight-line basis over the awards’ vesting periods of five years based on their fair values on the dates of grant. The amount of Class B unit awards expense recognized at any date is approximately equal to the ratable portion of the grant date value of the award that is vested at that date with a corresponding increase to equity. Class B Unit awards compensation expense is included in the general and administrative expense in the statement of operations. See Note 7 – Unit-Based Compensation for further information.

Derivative Instruments

The objective of the Company’s use of commodity derivative instruments is to achieve more predictable cash flows in an environment of volatile oil and natural gas prices and to manage its exposure to commodity price risk. While the use of these commodity derivative instruments limits the downside risk of adverse price movements, such use may also limit the Company’s ability to benefit from favorable price movements. The Company may, from time to time, add incremental derivatives to hedge additional production, restructure existing derivative contracts or enter into new transactions to modify the terms of current contracts in order to realize the current value of the Company’s existing positions.

All derivative instruments are recorded on the Company’s balance sheets as either assets or liabilities, measured at fair value. The Company has not designated any derivative instruments as hedges for accounting purposes and does not enter into such instruments for speculative trading purposes. Gains and losses on commodity derivative contracts are presented in the other (expense) income section of the Company’s statements of operations as a net gain or loss on commodity derivatives. The Company’s cash flow is only impacted when the actual settlements under the derivative contracts result in the Company making a payment to or receiving a payment from the counterparty.

Concentration of Credit Risk

Financial instruments that potentially expose the Company to credit risk consist primarily of accounts receivable and derivative financial instruments. Refer to Note 4 – Derivative Instruments for a discussion

Pecos Oil & Gas, LLC

Notes to the Financial Statements

of credit risk related to derivative financial instruments. The Company operates, per a Management Services Agreement with Redwood Operating LLC, a substantial portion of its oil and natural gas properties. As the operator of a property, the Company makes full payments for costs associated with the property and seeks reimbursement from the other working interest owners in the property for their respective share of those costs.

The Company’s joint interest partners consist primarily of independent oil and natural gas producers, and the purchasers of the Company’s oil and natural gas production consist primarily of independent marketers, major oil and natural gas companies, and natural gas pipeline companies. While the Company has not experienced any significant losses from uncollectible accounts, if the oil and natural gas exploration and production industry in general was adversely affected, the ability of the Company’s joint interest partners to reimburse the Company and of the Company’s customers to make payments for oil and natural gas purchases could be adversely affected. To minimize risk, ongoing credit evaluations of customers’ and joint interest partners’ financial condition are performed, although collateral generally is not required.

For the year ended December 31, 2022, three individual customers accounted for 78%, 19%, and 2%, respectively, of the Company’s sales. For the year ended December 31, 2021, three individual customers accounted for 76%, 19%, and 5%, respectively, of the Company’s sales. The Company does not believe the loss of any one of its purchasers would materially affect the Company’s ability to sell the oil and natural gas it produces as it believes other purchasers are available in the Company’s areas of operations.

Income Taxes

The Company is not a taxpaying entity for federal income tax purposes. The Company’s income or losses are reflected in the members’ income tax returns in accordance with their ownership percentages. Accordingly, no provision for federal income taxes is included in the accompanying financial statements.

Recently Adopted Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASC 842, “Leases.” This Accounting Standards Update (“ASU”) replaced previous lease accounting guidance in GAAP. The new guidance requires the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases. It also retains a distinction between finance leases and operating leases. For lessors, the new accounting model remains largely the same, although some changes have been made to align it with the new lessee model and the ASC 606 revenue recognition guidance. We adopted ASC 842 on January 1, 2022, using the modified retrospective method, with no adjustment to comparative period information, which remains reported under ASC 840, and no cumulative effect adjustment to equity. The adoption of this lease accounting guidance did not have any material impact on the financial statements as of or for the year ended December 31, 2022.

Recent Accounting Pronouncements Issued But Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses. In May 2019, ASU 2016-13 was subsequently amended by ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments – Credit Losses and ASU 2019-05, Financial Instruments – Credit Losses (Topic 326: Targeted Transition Relief). ASU 2016-13, as amended, affects trade receivables, financial assets and certain other instruments that are not measured at fair value. The amended guidance will be effective for the Company for annual periods beginning after December 15, 2022. The Company is evaluating the effect of these ASUs on its consolidated financial statements and related disclosures and has not yet determined the effect.

3.Dispositions

On September 1, 2021, Pecos Oil & Gas, LLC entered into an agreement with Tyton Energy LLC of Colorado (“Tyton”) to relinquish certain assets in Eddy County New Mexico. These properties were known as the Atoka San Andres Unit (ASAU) properties. Also, on October 1, 2021, Pecos Oil & Gas, LLC entered into another agreement with Tyton to relinquish certain assets in Eddy County New Mexico. These properties were known as the West Red Lake Unit (WRLU) properties. The disposal of the ASAU and WRLU properties resulted in the disposition of related asset retirement obligations of $4.4 million. The disposition of the ASAU and WRLU properties did not significantly affect the depletion rate, and accordingly, no gain or loss was recognized on these transactions.

Pecos Oil & Gas, LLC

Notes to the Financial Statements

4.Derivative Instruments

Objective and Strategy

The Company is exposed to commodity price risk and considers it prudent to periodically reduce the Company’s exposure to cash flow variability resulting from commodity price changes. Accordingly, the Company may enter into derivative instruments to manage its exposure to commodity price fluctuations. The following table summarizes the open financial derivative positions as of December 31, 2022, related to oil and natural gas production:

Period of Production

Instrument Type

Notional Volume

Swap Price

Floor Price

Ceiling Price

NYMEX HH Natural Gas (MMBTUs):

Jan - Feb 2023

Swap

29,500

$ 3.36

N/A

Jan - Mar 2023

Collar

312,218

N/A

$ 5.25

$ 15.75

NYMEX WTI Crude Oil (MBBLs):

Jan - Mar 2023

Collar

134,541

N/A

$ 70.00

$ 88.52

Apr - Jun 2023

Collar

125,765

N/A

$ 70.00

$ 83.01

Jul - Sep 2023

Collar

113,995

N/A

$ 70.00

$ 79.00

Balance Sheet Presentation of Derivatives

The following tables present the location and fair value of the Company’s derivative contracts included in the balance sheets as of December 31, 2022 and 2021:


	As of December 31, 2022
	Gross Amount			Netting Adjustments		Net Amount
	(in thousands)
Derivative assets:
Current assets	$	506		$	—	$	506
Long-term assets			—		—			—
Total derivative assets	$	506		$	—	$	506
Derivative liabilities:
Current liabilities	$	(887)		$	—	$	(887)
Long-term liabilities			—		—			—
Total derivative liabilities	$	(887)		$	—	$	(887)

Pecos Oil & Gas, LLC

Notes to the Financial Statements


	As of December 31, 2021
	Gross Amount			Netting Adjustments			Net Value
	(in thousands)
Derivative assets:
Current assets	$	9		$	(9)		$		—
Long-term assets			—			—			—
Total derivative assets	$	9		$	(9)		$		—
Derivative liabilities:
Current liabilities	$	(5,412)		$	9		$	(5,403)
Long-term liabilities			(20)			—			(20)
Total derivative liabilities	$	(5,432)		$	9		$	(5,423)

Credit and Counterparty Risk

All of the Company’s derivative transactions have been carried out in the over-the-counter market. The use of derivative instruments involves the risk that either counterparty may be unable to meet the financial terms of the transactions. The Company monitors the creditworthiness of itself and of each of its counterparties and assesses the possibility of whether each counterparty to the derivative contract would default by failing to make any contractually required payments as scheduled in the derivative instrument in determining the fair value. The derivative transactions are placed with major financial institutions that present minimal credit risks to the Company.

5.Related Party Note Payable

On July 10, 2020 the Company entered into a Note Purchase Agreement (“Note Payable”) with Cibolo Energy (“Holder”) and Cibolo Energy Partners LLC (“Administrative Agent”) with a maturity date of July 10, 2025. The Holder and Administrative Agent are affiliated entities of Cibolo Energy, who is the owner of the Member, and thus, the Notes Payable are held with related parties of the Member.

The Note Payable is collateralized by a first priority security interest in 100% of the oil and natural gas properties acquired by the Company. The Note Payable contains certain restrictive covenants, including a Proved Asset Coverage Ratio. The Proved Asset Coverage Ratio must be less than 1.50 to 1.00 as of the last day of any fiscal quarter. As of December 31, 2022 and 2021, the Company was in compliance with its covenants.

The Note Payable bears interest at a rate equal to thirteen and one half percent (13.5%) per annum. Interest expense is payable in both cash and interest paid-in-kind. Interest expense for the years ended December 31, 2022 and 2021 was $15.4 million and $14.3 million, respectively.

6.Fair Value Measurements

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table presents, by level within the fair value hierarchy, the Company’s assets and liabilities that are measured at fair value on a recurring basis. The carrying values of cash and cash equivalents,

Pecos Oil & Gas, LLC

Notes to the Financial Statements

payables, receivables, related party accounts receivable/payable and advances from joint interest owners approximate fair value because of the short-term nature of these instruments.


	Fair Value Measurement at the End of Reporting Period
	Level 1	Level 2	Level 3	Total
As of December 31, 2022
Assets:
Commodity derivative instruments	$ —	$ 506	$ —	$ 506
Liabilities:
Commodity derivative instruments	$ —	$ (887)	$ —	$ (887)
Earnout liability	$ —	$ —	$ (15,251)	$ (15,251)

As of December 31, 2021
Assets:
Commodity derivative instruments	$ —	$ —	$ —	$ —
Liabilities:
Commodity derivative instruments	$ —	$ (5,423)	$ —	$ (5,423)
Earnout liability	$ —	$ —	$ (12,594)	$ (12,594)

Fair value of our commodity derivatives is determined using industry-standard models that consider various assumptions including current market and contractual prices for the underlying instruments, time value, implied volatilities, as well as other relevant economic measures. Substantially all of these inputs are observable in the marketplace throughout the full term of the instrument and can be supported by observable data.

As of December 31, 2021, the fair value of our Earnout Liability was estimated using a Monte Carlo Simulation model which simulated enterprise value of the Company using the assumptions noted below. Expected volatility was estimated by observing the equity volatilities of comparable public guideline companies, un-levering to arrive at an asset volatility estimate and re-levering using the Company’s capital structure as of the valuation date. The volatilities of the public guideline companies were based on the average of their historical volatilities and the implied volatilities, where available, from their traded stock. The look-back period for the historical volatility was equal to the expected term of the Earnout Liability. The risk-free interest rate is based on the U.S. Department of the Treasury daily treasury yield curve rate with a term matching the expected term of the Earnout Liability. Below is a summary of the inputs:


						As of December 31, 2021
Expected term (in years)						1.0
Expected volatility						51.0%
Risk-free interest rate						0.4%

As of December 31, 2022, the fair value of our Earnout Liability was estimated using a discounted cash flows model where future cash flows were based on the expected proceeds received from the sale of the Company’s oil and natural gas properties, which closed in April 2023. In April 2023, the Company made payments of approximately $12.5 million related to the partial payment of the earnout liability. See Note 10 – Subsequent Events for further discussion of the sale.

There were no transfers in or out of Levels 1, 2 or 3 during the year ended December 31, 2022.

Pecos Oil & Gas, LLC

Notes to the Financial Statements

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Nonfinancial assets and liabilities that are measured at fair value on a nonrecurring basis are comprised primarily of assets acquired in business combinations, asset retirement obligations, and assets evaluated for impairment. These assets and liabilities are recorded at fair value when acquired/incurred but not re-measured at fair value in subsequent periods. These initial measurements are classified as Level 3 since certain significant unobservable inputs are utilized in their determination.

7.Unit-Based Compensation

In August 2020, the Class B Unit awards were issued by the Company’s Member under the LLC Agreement in connection with the MSA for services to be rendered to the Company. These Class B Unit awards were issued as a class of membership interests that entitles its holders to receive a portion of the proceeds of any distributions from the Member which are in excess of certain target investment return thresholds that must be first paid to Cibolo Energy. After Cibolo Energy has received their equity contributions from the Company’s Member, the holders of Class B Units are entitled to participate in all amounts distributed thereafter, at increasing percentages, based on various thresholds.

The Company accounts for its Class B Unit awards in accordance with ASC 718 for equity classified awards. The awards vest equally on each of the first five anniversaries of the grant date. Compensation expense is recognized over the five-year requisite service period on a straight-line basis based on the $6.9 million fair value of the awards at the date of grant. There have been no issuances of additional Class B Unit awards since the initial issuance in August 2020.

The Company recognized $1.4 million and $1.9 million of equity-based compensation related to these Class B Unit awards in for the years ended December 31, 2022 and 2021, respectively. Total unrecognized compensation expense as of December 31, 2022 was $3.6 million which will be recognized over the remaining 2.6 year vesting period.

8.Commitments and Contingencies

Legal Matters

From time to time, the Company is subject to other lawsuits and claims arising in the ordinary course of business. Management does not believe any matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows.

Environmental Matters

Various federal, state and local laws and regulations covering, among other things, the release of waste materials into the environment and state and local taxes affect the Company’s operations and costs. Management believes the Company is in substantial compliance with applicable federal, state and local laws, and the ultimate resolution of any claims or legal proceedings instituted against the Company will not have a material effect on its financial position or results of operations.

9.Distributions of Nonmonetary Assets

In March 2022, the Company conveyed certain overriding royalty interest (“ORRI”) across the Company’s existing operated oil and natural gas properties to Pecos Royalty, LLC (“Pecos Royalty”), a newly formed affiliate. The ORRI entitles Pecos Royalty to a percentage of production revenues, as calculated in the conveyance agreement, associated with certain leases held by the Company. The ORRIs include an average of overriding royalty interest of approximately 5.3% across 281 operated wells. The conveyance of the ORRIs from the Company to Pecos Royalty was accounted for as a transaction between entities under common control. As a result, the distributed ORRIs have been recorded at their carrying balance at the date of the ORRI conveyance and no gain or loss being recorded by the Company. Additionally, a portion of the Earnout Liability was attributable to the ORRI that was conveyed. As such, the Company included the fair value of this portion of the Earnout Liability in determining the amount of the nonmonetary distribution. Below is a summary:


Carrying value of ORRI			$ 8,578
Fair value of Earnout Liability attributable to ORRI			(1,148)
Distribution of net assets			$ 7,430

Pecos Oil & Gas, LLC

Notes to the Financial Statements

10.Subsequent Events

Riley Permian Divestiture

On February 28, 2023, the Company entered into a definite purchase and sales agreement to sell substantially all of the Company’s oil and natural gas properties to Riley Exploration Permian, Inc. (NYSE American: REPX) for cash consideration of $330 million, subject to customary purchase closing adjustments. The divestiture closed on April 3, 2023.

11.Supplemental Information on Oil and Natural Gas Operations (Unaudited)

Capitalized Costs

Capitalized costs include the cost of properties, equipment and facilities for oil and natural gas producing activities. Capitalized costs for proved properties include costs for oil and natural gas leaseholds where proved reserves have been identified, development wells and related equipment and facilities.

Capitalized costs for unproved properties include costs for acquiring or extending oil and natural gas leaseholds where no proved reserves have been identified. Work in progress include costs of exploratory and development wells that are in the process of drilling or in active completion, and costs of exploratory and development wells suspended or waiting on completion.

The aggregate amounts of costs capitalized for oil and natural gas exploration and development activities and the related amounts of accumulated depletion, depreciation, amortization and impairment are shown below:


	As of December 31, 2022		As of December 31, 2021
	(in thousands)

Oil and natural gas properties:
Proved properties	$ 192,051	$ 150,516
Unproved properties	12,747	13,535
Total oil and natural gas properties	204,798	164,051
Less: accumulated depreciation, depletion and impairment	(37,334)	(19,460)
Oil and natural gas properties, net	$ 167,464	$ 144,591

Costs Incurred for Property Acquisition, Exploration and Development

Amounts reported as costs incurred include both capitalized costs and costs charged to expense when incurred for oil and natural gas property acquisition, exploration and development activities. Costs incurred also include new ARO established in the current year as well as increases or decreases to ARO resulting from changes to cost estimates during the year. Exploration costs presented below include the costs of drilling and equipping successful and unsuccessful exploration wells during the year, geological and geophysical expenses and the costs of retaining undeveloped leaseholds. Development costs include the costs of drilling and equipping development wells and construction of related production facilities.

Pecos Oil & Gas, LLC

Notes to the Financial Statements

The following summarizes the costs incurred for oil and natural gas property acquisition, exploration and development activities for the periods presented below:


	December 31, 2022		December 31, 2021
	(in thousands)

Acquisition costs of oil and natural gas properties	$ —	$ —
Development costs	53,796	21,883
Exploratory (includes seismic)	—	—
Total costs incurred	$ 53,796	$ 21,883

Estimated Quantities of Proved Oil and Natural Gas Reserves

Oil and natural gas reserve quantity estimates are subject to numerous uncertainties inherent in the estimation of quantities of proved reserves and in the projection of future rates of production and the timing of development expenditures. The accuracy of such estimates is a function of the quality of available data and of engineering and geological interpretation and judgment. Results of subsequent drilling, testing and production may cause either upward or downward revision of previous estimates. Further, the volumes considered to be commercially recoverable fluctuate with the changes in prices and operating costs. Management emphasizes that reserve estimates are inherently imprecise and that estimates of new discoveries are more imprecise than those of currently producing oil and natural gas properties. Accordingly, these estimates are expected to change as additional information becomes available in the future.

As of December 31, 2022, all of the Company’s oil and natural gas reserves are attributable to properties within the United States. A summary of the Company’s change in quantities of proved crude oil, natural gas and natural gas liquids reserves for the years ended December 31, 2022 and 2021 are as follows:


	Oil (MBbls)	Natural Gas (MMcf)	NGLs (MBbls)	Total (MBoe)
Proved reserves at December 31, 2020	9,200	19,941	4,180	16,704
Revisions	911	(400)	(95)	749
Extensions	6,492	8,536	1,790	9,705
Divestiture of Reserves	(3)	(12)	(3)	(8)
Production	(694)	(1,975)	(412)	(1,435)
Proved reserves at December 31, 2021	15,906	26,090	5,460	25,715
Revisions	(5,899)	(6,097)	(1,425)	(8,340)
Extensions	350	486	99	530
Divestiture of Reserves	(660)	(1,285)	(269)	(1,143)
Production	(939)	(2,443)	(498)	(1,844)
Proved reserves at December 31, 2022	8,758	16,751	3,367	14,918

Revisions represent changes in previous reserves estimates, either upward or downward, resulting from new information normally obtained from development drilling and production history or resulting from a change in economic factors, such as commodity prices, operating costs or development costs.

During the year ended December 31, 2022, the Company’s downward revisions of previous estimates of 8,340 MBoe were the result of negative revisions due primarily to 21 PUD locations being downgraded related to changes in the corporate development plan.

Pecos Oil & Gas, LLC

Notes to the Financial Statements

During the year ended December 31, 2021, the Company’s extensions of 9,705 MBoe resulted primarily from adding 20 new PUD locations.

Standardized Measure of Discounted Future Net Cash Flows

The guidelines prescribed in FASB Codification Topic 932, Extractive Activities – Oil and Gas, were followed in computing the standardized measure of net cash flows and changes therein relating to estimated quantities of proved reserves. Prices are based on the unweighted arithmetic average first-day-of-the-month for the preceding 12-month period, unless prices are defined by contractual agreements. All prices are then further adjusted for transportation, quality and basis differentials and are set forth in the following table:


	December 31, 2022		December 31, 2021

Crude oil (WTI Cushing price per MBbl)	$ 91.80	$ 65.23
Natural gas (Henry Hub price per MMBtu)	$ 4.51	$ 2.95
Natural gas liquids (WTI Cushing price per MBbl)	$ 31.85	$ 25.29

The projections should not be viewed as realistic estimates of future cash flows, nor should the “standardized measure” be interpreted as representing current value of the properties. Material revisions to estimates of proved reserves may occur in the future; development and production of the reserves may not occur in the periods assumed; actual prices realized are expected to vary significantly from those used; and actual costs may vary.

The standardized measure of discounted future net cash flows relating to proved reserves is presented in the table below:


	As of December 31, 2022		As of December 31, 2021
	(in thousands)

Future cash inflows	$ 986,723	$ 1,252,605
Future production costs	(269,098)	(342,139)
Future development costs	(36,614)	(160,632)
Future income tax expense (1)	—	—
Future net cash flows	681,011	749,834
10% annual discount for estimated timing of cash flows	(298,015)	(397,741)
Standardized measure of discounted future net cash flows	$ 382,996	$ 352,093

(1) – The Company is not a taxpaying entity for Federal income tax purposes due to its LLC corporate structure.

Pecos Oil & Gas, LLC

Notes to the Financial Statements

The changes in standardized measure of future net cash flows related to estimated proved oil and natural gas reserves for the years ended December 31, 2022 and 2021 is as follows:


	As of December 31, 2022		As of December 31, 2021
	(in thousands)

Balance, beginning of period	$ 352,093	$ 82,860
Net change in prices and production costs	107,237	181,118
Net change in future development costs	9,683	(14,906)
Oil & Gas net revenue	(83,213)	(51,087)
Extensions	12,743	114,178
Divestiture of reserves	(5,281)	(67)
Revisions of previous quantity estimates	(72,549)	15,816
Previously estimated development costs incurred	26,373	20,309
Net change in taxes	—	—
Accretion of discount	35,209	8,286
Changes in timing and other	701	(4,414)
Standardized measure of discounted future net cash flows	$ 382,996	$ 352,093

Exhibit 99.2

Pecos Oil & Gas, LLC

Condensed Financial Statements

For the Quarterly Periods Ended

March 31, 2023 and 2022

Exhibit 99.2

Table of Contents


			Page
Unaudited Condensed Balance Sheets as of March 31, 2023 and December 31, 2022			3
Unaudited Condensed Statements of Operations for the Three Months Ended March 31, 2023 and 2022			4
Unaudited Condensed Statements of Changes in Member's Equity for the Three Months Ended March 31, 2023 and 2022			5
Unaudited Condensed Statements of Cash Flows for the Three Months Ended March 31, 2023 and 2022			6
Notes to Unaudited Condensed Financial Statements			7

Exhibit 99.2

Pecos Oil & Gas, LLC

Unaudited Condensed Balance Sheets


	As of March 31, 2023	As of December 31, 2022
Assets	(in thousands)
Current assets:
Cash and cash equivalents	$ 25,446	$ 12,785
Accounts receivable	14,743	15,938
Inventory	2,980	—
Prepaids and other current assets	1,882	3,017
Derivative instruments	—	506
Total current assets	45,051	32,246
Oil and natural gas properties, successful efforts method:
Proved properties	197,746	192,051
Unproved properties	12,747	12,747
Less: Accumulated depreciation, depletion and amortization	(45,025)	(37,334)
Total oil and natural gas properties, net	165,468	167,464
Total assets	$ 210,519	$ 199,710

Liabilities and Member’s Equity
Current liabilities:
Accounts payable	$ 5,925	$ 7,882
Revenue payable	9,601	8,352
Accrued and other liabilities	1,647	1,793
Earnout liability	15,637	15,251
Derivative instruments	—	887
Asset retirement obligations	2,615	3,300
Total current liabilities	35,425	37,465
Related party note payable	102,371	100,609
Asset retirement obligations	8,149	7,869
Total liabilities	145,945	145,943
Commitment and contingencies (Note 7)
Member’s equity	64,574	53,767
Total liabilities and member’s equity	$ 210,519	$ 199,710

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

Exhibit 99.2

Pecos Oil & Gas, LLC

Unaudited Condensed Statements of Operations


	For the Three Months March 31, 2023	For the Three Months March 31, 2022
	(in thousands)
Revenues:
Oil and natural gas sales, net	$ 30,595	$ 31,531
Total revenues	30,595	31,531
Operating expenses:
Lease operating	4,877	4,190
Production and ad valorem taxes	2,520	2,632
Depletion and accretion	7,995	5,380
General and administrative	1,241	1,248
Total operating expenses	16,633	13,450
Operating income	13,962	18,081
Other (expense) income:
Gain (loss) on derivative instruments	1,226	(11,706)
Loss on earnout liability	(386)	(7,136)
Loss on settlement of asset retirement obligations	(378)	—
Related party interest expense	(3,957)	(3,702)
Total other (expense) income, net	(3,495)	(22,544)
Net income (loss)	$ 10,467	$ (4,463)

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

Exhibit 99.2

Pecos Oil & Gas, LLC

Unaudited Condensed Statements of Changes in Member’s Equity


			Member’s Equity
			(in thousands)
Balance – January 1, 2022			$ 34,525
Distribution of nonmonetary assets (Note 8)			(7,430)
Unit-based compensation			340
Net loss			(4,463)
Balance - March 31, 2022			$ 22,972


			Member’s Equity
			(in thousands)
Balance – January 1, 2023			$ 53,767
Unit-based compensation			340
Net income			10,467
Balance - March 31, 2023			$ 64,574

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

Exhibit 99.2

Pecos Oil & Gas, LLC

Unaudited Condensed Statements of Cash Flows


	For the Three Months March 31, 2023	For the Three Months March 31, 2022
	(in thousands)
Cash flows from operating activities:
Net income (loss)	$ 10,467	$ (4,463)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depletion and accretion	7,995	5,380
Loss on settlement of asset retirement obligations	378	—
Non-cash interest	1,762	1,507
Unit-based compensation expense	340	340
Loss on earnout liability	386	7,136
(Gain)/loss on derivative instruments	(1,226)	11,706
Settlements on derivative instruments	643	(6,597)
Changes in operating assets and liabilities:
Accounts receivable	1,194	(4,637)
Inventory	(1,658)	—
Prepaids and other current assets	16	(233)
Accounts payable	(2,965)	3,297
Accrued and other liabilities	360	1,778
Revenues payable	1,249	1,919
Net cash provided by operating activities	18,941	17,133
Cash flows from investing activities:
Additions to oil and natural gas properties	(6,280)	(7,827)
Net cash used in investing activities	(6,280)	(7,827)
Cash flows from financing activities:
Net cash provided by financing activities	—	—
Net increase in cash	12,661	9,306
Cash - Beginning of period	12,785	13,630
Cash - End of period	$ 25,446	$ 22,936

Supplemental disclosure of cash activity:
Cash paid for interest	$ (2,225)	$ (2,473)
Supplemental disclosure of noncash activity:
Changes in accrued capital expenditures	$ (505)	$ —
Distribution of nonmonetary assets (Note 8)	$ —	$ (7,430)

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

Pecos Oil & Gas, LLC

Notes to the Unaudited Condensed Financial Statements

1.Organization and Nature of Business

2.Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

The Company’s condensed financial statements are presented based in conformity with accounting principles generally accepted in the United States of America ("GAAP"). These condensed financial statements as of March 31, 2023 and for the three months ended March 31, 2023 and 2022 are unaudited. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments, consisting of normal recurring adjustments, necessary to fairly present the financial position as of, and the results of operations for, all periods presented. In preparing the accompanying unaudited condensed financial statements, management has made certain estimates and assumptions that affect reported amounts in the unaudited condensed financial statements and disclosures of contingencies. Actual results may differ from those estimates. The results for interim periods are not necessarily indicative of annual results. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). These unaudited condensed financial statements should be read in conjunction with the Company’s annual financial statements for the year ended December 31, 2022.

Accounts Receivable

Accounts receivable consist primarily of amounts due from purchasers of oil and natural gas and from outside working interest owners. Accounts receivable from oil, natural gas and natural gas liquids sales are recorded at the invoiced amount and do not bear interest. The Company routinely assesses the financial strength of its customers and bad debts are recorded based on an account-by-account evaluation. As of March 31, 2023, and December 31, 2022, the Company had no reserves for doubtful accounts.

Components of accounts receivable as of March 31, 2023 and December 31, 2022, include the following:


	As of March 31, 2023		As of December 31, 2022
	(in thousands)

Oil, natural gas and NGL	$ 13,974	$ 14,628
Joint interest accounts receivable	769	1,310
Accounts receivable	$ 14,743	$ 15,938

Pecos Oil & Gas, LLC

Notes to the Unaudited Condensed Financial Statements

Asset Retirement Obligations

The following represents the changes to the asset retirement obligations for the periods indicated:


	Three Months Ended March 31, 2023			Year Ended December 31, 2022
	(in thousands)
ARO, beginning balance	$	11,169			$	12,796
Liabilities incurred and acquired			—				12
Liabilities settled			(630)				(2,764)
Accretion expense			225				1,125
ARO, ending balance			10,764				11,169
Less: current ARO			(2,615)				(3,300)
ARO, long-term	$	8,149			$	7,869

Disaggregation of Revenue

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


	Three Months Ended March 31, 2023	Three Months Ended March 31, 2022
	(in thousands)

Oil	$ 26,679		$ 25,306
Natural gas	1,661		2,351
Natural gas liquids	2,255		3,874
Oil and natural gas sales, net	$ 30,595		$ 31,531

Earnout Liability

On July 10, 2020, the Company closed on its initial acquisition of oil and natural gas properties located in Eddy County, New Mexico (the Acquisition). As part of the total consideration transferred, the purchase and sale agreement included a provision for potential contingent consideration to the seller, which is based on qualified distributions, as defined in the agreement, in future quarters. As the contingent consideration would be settled in cash, the Company considers the contingent consideration to be a liability, which will be revalued at each reporting period (“Earnout Liability”). See further discussion in Note 5 - Fair Value Measurements for further information. Any subsequent changes in the fair value of the Earnout Liability are recognized in other (expense) income within the Company’s statements of operations. The Company recognized a loss of $0.4 million and $7.1 million for the three months ended March 31, 2023 and 2022, respectively, as a result of changes in the fair value of the Earnout Liability. In April 2023, the Company made payments of approximately $12.5 million related to the partial payment of the earnout liability.

3.Derivative Instruments

Objective and Strategy

The Company is exposed to commodity price risk and considers it prudent to periodically reduce the Company’s exposure to cash flow variability resulting from commodity price changes. Accordingly, the Company may enter into derivative instruments to manage its exposure to commodity price fluctuations. During the three months ended March 31, 2023, the Company unwound its remaining open derivative

Pecos Oil & Gas, LLC

Notes to the Unaudited Condensed Financial Statements

position and, as of March 31, 2023, the Company did not have any open financial derivative position related to its oil and natural gas production.

Balance Sheet Presentation of Derivatives

As of March 31, 2023, all derivative contracts have been realized and, consequently, there were no derivative contracts presented on the balance sheet as of March 31, 2023. The following table presents the location and fair value of the Company’s derivative contracts included in the balance sheets as of December 31, 2022:


	As of December 31, 2022
	Gross Amount			Netting Adjustments		Net Amount
	(in thousands)
Derivative assets:
Current assets	$	506		$	—	$	506
Long-term assets			—		—			—
Total derivative assets	$	506		$	—	$	506
Derivative liabilities:
Current liabilities	$	(887)		$	—	$	(887)
Long-term liabilities			—		—			—
Total derivative liabilities	$	(887)		$	—	$	(887)

4.Related Party Note Payable

On July 10, 2020 the Company entered into a Note Purchase Agreement (“Note Payable”) with Cibolo Energy (“Holder”) and Cibolo Energy Partners LLC (“Administrative Agent”) with a maturity date of July 10, 2025. The Holder and Administrative Agent are affiliated entities of Cibolo Energy, who is the owner of the Member, and thus, the Note Payable is held with related parties of the Member.

The Note Payable is collateralized by a first priority security interest in 100% of the oil and natural gas properties acquired by the Company. The Note Payable contains certain restrictive covenants, including a Proved Asset Coverage Ratio. The Proved Asset Coverage Ratio must be less than 1.50 to 1.00 as of the last day of any fiscal quarter. As of March 31, 2023 and December 31, 2022, the Company was in compliance with its covenants.

The Note Payable bears interest at a rate equal to thirteen and one half percent (13.5%) per annum. Interest expense is payable in both cash and interest paid-in-kind. Interest expense for the three months ended March 31, 2023 and 2022 was $4.0 million and $3.7 million, respectively.

5.Fair Value Measurements

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Pecos Oil & Gas, LLC

Notes to the Unaudited Condensed Financial Statements

accounts receivable, and accounts payable approximate fair value because of the short-term nature of these instruments.


	Fair Value Measurement at the End of Reporting Period
	Level 1	Level 2	Level 3	Total
As of March 31, 2023
Liabilities:
Earnout liability	$ —	$ —	$ (15,637)	$ (15,637)

As of December 31, 2022
Assets:
Commodity derivative instruments	$ —	$ 506	$ —	$ 506
Liabilities:
Commodity derivative instruments	$ —	$ (887)	$ —	$ (887)
Earnout liability	$ —	$ —	$ (15,251)	$ (15,251)

Fair value of the Earnout Liability was estimated based on the proceeds received from the sale of the Company’s oil and natural gas properties, which closed in April 2023. See Note 9 – Subsequent Events for further discussion of the sale.

There were no transfers in or out of Levels 1, 2 or 3 during the three months ended March 31, 2023.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

6.Unit-Based Compensation

In August 2020, the Company’s Member issued unit-based compensation awards in a form of Series B Profits Interest Awards (“Class B Unit”) to a participant under its Limited Liability Company Agreement (“LLC Agreement”) in connection with the Management Services Agreement (“MSA”) for services to be rendered to the Company. These Class B Unit awards were issued as a class of membership interests that entitles its holders to receive a portion of the proceeds of any distributions from the Member which are in excess of certain target investment return thresholds that must be first paid to Cibolo Energy. After Cibolo Energy has received their equity contributions from the Company’s Member, the holders of Class B Units are entitled to participate in all amounts distributed thereafter, at increasing percentages, based on various thresholds.

The Company accounts for its Class B Unit awards in accordance with Accounting Standards Codification 718 for equity classified awards. The awards vest equally on each of the first five anniversaries of the grant date. Compensation expense is recognized over the five-year requisite service period on a straight-line basis based on the $6.9 million fair value of the awards at the date of grant. There have been no issuances of additional Class B Unit awards since the initial issuance in August 2020.

The Company recognized $0.3 million of equity-based compensation related to these Class B Unit awards in each of the three months ended March 31, 2023 and 2022. Total unrecognized compensation expense as of March 31, 2023 was $3.3 million which will be recognized over the remaining 2.4-year vesting period.

Pecos Oil & Gas, LLC

Notes to the Unaudited Condensed Financial Statements

7.Commitments and Contingencies

Legal Matters

Environmental Matters

8.Distributions of Nonmonetary Assets

In March 2022, the Company conveyed certain overriding royalty interest (“ORRI”) across the Company’s existing operated oil and natural gas properties to Pecos Royalty, LLC (“Pecos Royalty”), a newly formed affiliate. The ORRI entitles Pecos Royalty to a percentage of production revenues, as calculated in the conveyance agreement, associated with certain leases held by the Company. The ORRI include an average of overriding royalty interest of approximately 5.3% across 281 operated wells. The conveyance of the ORRI from the Company to Pecos Royalty was accounted for as a transaction between entities under common control. As a result, the distributed ORRI was recorded at its carrying balance at the date of the ORRI conveyance and no gain or loss being recorded by the Company. Additionally, a portion of the Earnout Liability was attributable to the ORRI that was conveyed. As such, the Company included the fair value of this portion of the Earnout Liability in determining the amount of the nonmonetary distribution.

Below the summary of the distribution of nonmonetary assets:


Carrying value of ORRI			$ 8,578
Fair value of Earnout Liability attributable to ORRI			(1,148)
Distribution of net assets			$ 7,430

9.Subsequent Events

Riley Permian Divestiture

Exhibit 99.3

Riley Exploration Permian, Inc.

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

On April 3, 2023 (the “Closing Date”), Riley Exploration - Permian, LLC (“REP LLC”), a wholly-owned subsidiary of Riley Exploration Permian, Inc. (“REPX,” together with REP LLC, the “Company”), completed its acquisition of oil and natural gas assets (the “New Mexico Acquisition”) from Pecos Oil & Gas, LLC (“Pecos”), a Delaware limited liability company and an affiliate of Cibolo Energy Partners LLC. The acquired assets are located in Eddy County, New Mexico and primarily target the Yeso trend.

On April 3, 2023, concurrent with the closing of the New Mexico Acquisition, the Company issued $200 million aggregate principal amount of 10.5% senior unsecured notes due 2028 (the “Senior Notes”). The Senior Notes were issued at a 6% discount. The net proceeds from the Senior Notes were used to fund a portion of the purchase price and related fees and expenses for the New Mexico Acquisition.

Also on April 3, 2023, and concurrent with the closing of the New Mexico Acquisition, the Company entered into the fourteenth amendment to its revolving credit facility (the “Credit Facility Amendment”) to, among other things, (i) permit the New Mexico Acquisition, (ii) increase the maximum facility amount to $1.0 billion, and (iii) increase the borrowing base to $325 million from $225 million. The Company used borrowings from its revolving credit facility to fund the remainder of the purchase price and related fees and expenses for the New Mexico Acquisition.

The following unaudited pro forma condensed combined financial statements have been prepared from the respective historical financial statements of the Company and Pecos and have been adjusted to give effect to i) the closing of the New Mexico Acquisition, ii) the issuance of the Senior Notes, and iii) the Credit Facility Amendment (collectively, referred to as the “April Transactions”). The unaudited pro forma condensed combined balance sheet gives effect to the April Transactions as if they had been completed on March 31, 2023. The unaudited pro forma condensed combined statements of operations give effect to the April Transactions as if they had been completed on January 1, 2022. The pro forma financial statements contain certain reclassification adjustments to conform the historical Pecos financial statement presentation to the Company’s financial statement presentation.

These summary unaudited pro forma condensed combined financial statements have been prepared for illustrative purposes only and are not necessarily indicative of what the combined company’s financial position or results of operations actually would have been had the April Transactions occurred as of the dates indicated. In addition, the unaudited pro forma condensed combined financial statements do not purport to project the future financial position or operating results of the combined company. Future results may vary significantly from the results reflected due to various factors.

The following unaudited pro forma condensed combined financial information gives effect to the New Mexico Acquisition, which will be accounted for using the acquisition method of accounting in accordance with Accounting Standards Codification 805 - Business Combinations (“ASC 805”), with the Company identified as the acquirer. The acquisition method of accounting requires fair values be estimated and determined for the consideration, as well as the assets acquired and liabilities assumed by the Company upon completing the New Mexico Acquisition.

The Company used currently available information to determine preliminary fair value estimates for the consideration and its allocation to the Pecos assets acquired and liabilities assumed. The estimates of fair value of Pecos’s assets and liabilities are based on review of Pecos’s internally generated financial

Exhibit 99.3

statements, preliminary valuation studies, and other due diligence procedures. Assumptions and estimates underlying the pro forma adjustments are described in the notes accompanying the unaudited pro forma condensed combined financial statements.

As a result of the foregoing, the transaction adjustments with respect to the New Mexico Acquisition are preliminary. The final determination of fair market value will be based on the identifiable assets acquired and liabilities assumed from Pecos as of the Closing Date. The final purchase price allocation for the New Mexico Acquisition will be performed subsequent to closing and adjustments to estimated amounts or recognition of additional assets acquired or liabilities assumed may occur as more detailed analyses are completed and additional information is obtained about the facts and circumstances that existed as of the Closing Date of the New Mexico Acquisition. Any increases or decreases in the fair value of assets acquired and liabilities assumed upon completion of the final valuation will result in adjustments to the pro forma balance sheet and, if applicable, the pro forma statements of operations.

The unaudited pro forma condensed combined financial information does not reflect the benefits of any potential cost savings or the costs that may be necessary to achieve such savings, opportunities to increase revenue generation or other factors that may result from the New Mexico Acquisition and, accordingly, does not attempt to predict or suggest future results. Additionally, the Company has incurred, or will incur, certain non-recurring charges in connection with the acquisition, the substantial majority of which consist of fees paid to financial, legal and accounting advisors. Any such charges could affect the future results of the combined company in the period in which such charges are incurred.

The unaudited pro forma financial statements have been developed from and should be read in conjunction with:

•The audited financial statements and accompanying notes of the Company contained in REPX’s Annual Report on Form 10-K for the year ended December 31, 2022;

•The unaudited condensed financial statements and accompanying notes contained in REPX’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2023;

•The audited financial statements and related notes of Pecos for the year ended December 31, 2022, which are included elsewhere in this filing; and

•The unaudited financial statements and related notes of Pecos for the three-month period ended March 31, 2023, which are included elsewhere in this filing.

Exhibit 99.3


RILEY EXPLORATION PERMIAN, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
As of March 31, 2023
	Historical				Transaction Accounting Adjustments
	REPX		Pecos		NM Acquisition			Financing			REPX Pro Forma Combined
	(In thousands, except share amounts)
Assets
Current Assets:
Cash and cash equivalents	$	2,275	$	25,446	$	(25,446)	(a)	$	307,804	(b)	$	17,981
					(292,098)		(c)
Accounts receivable	24,640		14,743		(13,345)		(d)	—			26,038
Prepaid expenses and other current assets	2,242		1,882		(1,882)		(a)	(729)		(e)	1,513

Inventory	7,892		2,980		—			—			10,872
Current derivative assets	1,637		—		—			—			1,637
Total current assets	38,686		45,051		(332,771)			307,075			58,041
Oil and natural gas properties, net (successful efforts)	472,722		—		165,468		(f)	—			802,945
					164,755		(g)
Proved properties	—		197,746		(197,746)		(f)	—			—
Unproved properties	—		12,747		(12,747)		(f)	—			—

Accumulated depreciation, depletion and amortization	—		(45,025)		45,025		(f)	—			—
Total oil and natural gas properties, net	—		165,468		(165,468)		(f)	—			—
Other property and equipment, net	20,012		—		—			—			20,012
Goodwill	—		—		9,806		(h)	—			9,806
Non-current derivative assets	939		—		—			—			939
Funds held in escrow	33,000		—		(33,000)		(i)	—			—
Other non-current assets, net	9,784		—		—			1,547		(j)	11,331
Total Assets	$	575,143	$	210,519	$	(191,210)		$	308,622		$	903,074

Exhibit 99.3


RILEY EXPLORATION PERMIAN, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET, Continued
As of March 31, 2023
	Historical				Transaction Accounting Adjustments
	REPX		Pecos		NM Acquisition			Financing			REPX Pro Forma Combined
	(In thousands, except share amounts)
Liabilities and Shareholders' / Member's Equity
Current Liabilities:
Accounts payable	$	17,002	$	5,925	$	(5,925)	(a)	$	—		$	17,002
Accounts payable - related parties	348		—		—			—			348
Accrued liabilities	21,518		1,647		(1,647)		(a)	25		(j)	22,624
					1,021		(k)	60		(l)
Revenue payable	19,361		9,601		(8,215)		(m)	—			20,747

Earnout liability	—		15,637		(15,637)		(a)	—			—
Asset retirement obligations	—		2,615		(2,615)		(f)	—			—
Current derivative liabilities	8,019		—		—			—			8,019
Other current liabilities	5,382		—		2,615		(f)	—			8,470
					753		(n)
					652		(o)	(932)		(o)
Total Current Liabilities	71,630		35,425		(28,998)			(847)			77,210
Non-current derivative liabilities	178		—		—			—			178
Asset retirement obligations	2,860		8,149		6,406		(n)	—			17,415
Revolving credit facility	89,000		—		—			128,000		(p)	217,000
Senior Notes, net	—		—		—			183,307		(e) (q)	183,307
Related party note payable	—		102,371		(102,371)		(a)	—			—

Deferred tax liabilities	51,039		—		1,735		(o)	(238)		(o)	52,536
Other non-current liabilities	964		—		—			—			964
Total Liabilities	215,671		145,945		(123,228)			310,222			548,610
Member's Equity	—		64,574		(64,574)		(a)	—			—
Shareholders' Equity:
Preferred stock, $0.0001 par value, 25,000,000 shares authorized; 0 shares issued and outstanding	—		—		—			—			—
Common stock, $0.001 par value, 240,000,000 shares authorized; 20,169,434 issued and outstanding at March 31, 2023	20		—		—			—			20
Additional paid-in capital	275,669		—		—			—			275,669
Retained earnings	83,783		—		(1,021)		(k)	(2,770)		(r)	78,775
					(2,387)		(o)	1,170		(o)
Total Shareholders' Equity	359,472		—		(3,408)			(1,600)			354,464
Total Liabilities and Shareholders' / Member's Equity	$	575,143	$	210,519	$	(191,210)		$	308,622		$	903,074

Exhibit 99.3


RILEY EXPLORATION PERMIAN, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
For the Three Months Ended March 31, 2023

	Historical				Transaction Accounting Adjustments						REPX Pro Forma Combined
	REPX		Pecos		NM Acquisition			Financing
	(In thousands, except per share amounts)
Revenues:
Oil and natural gas sales, net	$	66,412	$	30,595	$	—		$	—		$	97,007
Contract services - related parties	600		—		—			—			600

Total Revenues	67,012		30,595		—			—			97,607
Costs and Expenses:
Lease operating expenses	8,875		4,877		—			—			13,752
Production and ad valorem taxes	4,110		2,520		—			—			6,630
Exploration costs	332		—		—			—			332
Depletion, depreciation, amortization and accretion	9,083		7,995		378		(a)	—			20,564
					3,108		(b)

General and administrative:								—
Administrative costs	5,467		1,241		(340)		(c)	—			6,368
Share-based compensation expense	1,114		—		—			—			1,114

Cost of contract services - related parties	110		—		—			—			110
Transaction costs	1,887		—		—			—			1,887
Total Costs and Expenses	30,978		16,633		3,146			—			50,757
Income From Operations	36,034		13,962		(3,146)			—			46,850
Other Income (Expense):
Interest expense, net	(1,016)		—		—			(8,287)		(f)	(9,303)
Related party interest expense	—		(3,957)		3,957		(e)	—			—
Gain on derivatives	5,755		1,226		(1,226)		(e)	—			5,755


Loss from equity method investment	(232)		—		—			—			(232)
Loss on earnout liability	—		(386)		386		(e)	—			—
Loss on settlement of asset retirement obligations	—		(378)		378		(a)	—			—
Total Other Income (Expense)	4,507		(3,495)		3,495			(8,287)			(3,780)
Net Income From Operations Before Income Taxes	40,541		10,467		349			(8,287)			43,070
Income tax expense	(8,690)		—		(2,488)		(h)	1,906		(h)	(9,272)
Net Income	$	31,851	$	10,467	$	(2,139)		$	(6,381)		$	33,798

Net Income per Share:
Basic	$	1.62									$	1.72
Diluted	$	1.60									$	1.70
Weighted Average Common Shares Outstanding:
Basic	19,649										19,649
Diluted	19,910										19,910

Exhibit 99.3


RILEY EXPLORATION PERMIAN, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
For the Year Ended December 31, 2022

	Historical				Transaction Accounting Adjustments						REPX Pro Forma Combined
	REPX		Pecos		NM Acquisition			Financing
	(In thousands, except per share amounts)
Revenues:
Oil and natural gas sales, net	$	319,343	$	113,414	$	—		$	—		$	432,757
Contract services - related parties	2,400		—		—			—			2,400

Total Revenues	321,743		113,414		—			—			435,157
Costs and Expenses:
Lease operating expenses	32,458		17,915		—			—			50,373
Production and ad valorem taxes	19,273		9,465		—			—			28,738
Exploration costs	2,032		—		—			—			2,032
Depletion, depreciation, amortization and accretion	32,113		23,470		(226)		(a)	—			61,723
					6,366		(b)

Impairment of oil and natural gas properties	7,325		—		—			—			7,325
General and administrative:
Administrative costs	18,496		5,189		(1,379)		(c)	—			22,306
Share-based compensation expense	3,439		—		—			—			3,439


Cost of contract services - related parties	450		—		—			—			450
Transaction costs	2,638		—		3,791		(d)	—			6,429
Total Costs and Expenses	118,224		56,039		8,552			—			182,815
Income From Operations	203,519		57,375		(8,552)			—			252,342
Other Income (Expense):
Interest expense, net	(1,090)		—		—			(31,183)		(g)	(32,273)
Related party interest expense	—		(15,387)		15,387		(e)				—
Loss on derivatives	(51,574)		(13,117)		13,117		(e)	—			(51,574)


Loss on earnout liability	—		(3,804)		3,804		(e)	—			—
Gain on settlement of asset retirement obligations	—		226		(226)		(a)	—			—
Total Other Income (Expense)	(52,664)		(32,082)		32,082			(31,183)			(83,847)
Net Income From Operations Before Income Taxes	150,855		25,293		23,530			(31,183)			168,495
Income tax expense	(32,844)		—		(11,229)		(h)	7,172		(h)	(36,901)
Net Income	$	118,011	$	25,293	$	12,301		$	(24,011)		$	131,594

Net Income per Share:
Basic	$	6.04									$	6.73
Diluted	$	5.99									$	6.68
Weighted Average Common Shares Outstanding:
Basic	19,553										19,553
Diluted	19,686										19,686

Exhibit 99.3

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

Note 1. Basis of Presentation

The Company’s historical financial information has been derived from its audited financial statements contained in REPX’s Annual Report on Form 10-K for the year ended December 31, 2022 and its unaudited condensed financial statements contained in REPX’s Quarterly Report on Form 10-Q for the three months ended March 31, 2023. The Pecos’s historical financial information has been derived from the audited financial statements of Pecos as of and for the year ended December 31, 2022 and the unaudited financial statements of Pecos as of and for the three months ended March 31, 2023. Certain of Pecos’s historical amounts have been reclassified to conform to the Company’s financial statement presentation, as discussed further in Note 3. The pro forma financial statements should be read in conjunction with the Company’s and Pecos’s historical financial statements and the notes thereto. The pro forma balance sheet gives effect to the April Transactions as if they had been completed on March 31, 2023. The pro forma statements of operations give effect to the April Transactions as if they had been completed on January 1, 2022.

In the opinion of the Company’s management, all material adjustments have been made that are necessary to present fairly, in accordance with Article 11 of Regulation S-X, the pro forma financial statements. The pro forma financial statements do not purport to be indicative of what the combined company’s financial position or results of operations would have been if the April Transactions had occurred on the dates indicated, nor are they indicative of the Company’s future financial position or results of operations.

Note 2. Preliminary Acquisition Accounting

The Company has determined it is the accounting acquirer in the New Mexico Acquisition, which will be accounted for under the acquisition method of accounting for business combinations in accordance with ASC 805. The allocation of the preliminary estimated purchase price with respect to the New Mexico Acquisition is based upon management’s estimates of, and assumptions related to, the fair values of assets to be acquired and liabilities to be assumed as of the Closing Date of the New Mexico Acquisition.

Due to the fact that the pro forma financial statements have been prepared based on these preliminary estimates, the final purchase price allocation and the resulting effect on the Company’s financial position and results of operations may differ significantly from the pro forma amounts included herein. The final purchase price allocation for the New Mexico Acquisition will be performed subsequent to closing and adjustments to estimated amounts or recognition of additional assets acquired or liabilities assumed may occur as more detailed analyses are completed and additional information is obtained about the facts and circumstances that existed as of the Closing Date.

The preliminary purchase price allocation is subject to change due to changes in the estimated fair value of Pecos’s assets acquired and liabilities assumed as of the Closing Date, which could result from the Company’s additional valuation analysis, reserve estimates, discount rates and other factors.

The following table presents the preliminary estimate of consideration and preliminary purchase price allocation of the assets acquired and the liabilities assumed (in thousands):

Exhibit 99.3


	Preliminary Purchase Price Allocation




Total cash consideration	$	325,098



Fair value of assets acquired:
Accounts receivable	$	1,398
Inventory	2,980
Oil and natural gas properties	330,223
Goodwill	9,806
Amount attributable to assets acquired	$	344,407

Fair value of liabilities assumed:


Revenue payable	1,386
Asset retirement obligations	17,923

Amount attributable to liabilities assumed	$	19,309
Net assets acquired	$	325,098

The fair value measurements of assets acquired and liabilities assumed are based on inputs that are not observable in the market and therefore represent Level 3 inputs. The fair value of oil and natural gas properties and asset retirement obligations were measured using the discounted cash flow technique of valuation. Significant unobservable inputs included future commodity prices adjusted for differentials, projections of estimated quantities of recoverable reserves, forecasted production based on decline curve analysis, estimated timing and amount of future operating and development costs, and a weighted average cost of capital.

Note 3. Transaction Accounting Adjustments

The pro forma financial statements reflect adjustments, which are further described below:

Pro Forma Balance Sheet as of March 31, 2023

(a) Adjustments to remove assets not acquired and liabilities not assumed as part of the New Mexico Acquisition and to eliminate the historical member’s equity of Pecos.

(b) Reflects cash inflows of $188 million net of a 6% discount, or $12 million, from the issuance of $200 million of Senior Notes, borrowings of $128 million under the Company’s revolving credit facility reduced by financing and transaction costs of $8.2 million.

(c) Reflects cash consideration, including certain estimated post-closing adjustments, for the New Mexico Acquisition. The $292.2 million reflects the total cash consideration of $325.2 million less the $33 million cash deposit previously paid and included in Funds held in escrow, as discussed in (i) below.

(d) Adjustment to eliminate the portion of historical Pecos accounts receivable not acquired by the Company. The Company only acquired the accounts receivable related to oil in tanks as of the Closing Date.

(e) Reflects the reclass of certain financing costs related to the Senior Notes that were included as prepaid costs in the Company’s historical financials to deferred financing costs.

Exhibit 99.3

(f) Reflects reclassifications to the Pecos historical financials to conform to the Company’s financial statement presentation.

(g) Reflects the adjustment to the preliminary fair value of oil and natural gas properties acquired in the New Mexico Acquisition, which was calculated using a discounted cash flow technique of valuation, reclassifications to conform to the Company’s financial statement presentation, and elimination of accumulated depletion. Inputs to the valuation of oil and natural gas properties include estimates of (i) reserves, (ii) future operation and development costs, (iii) future commodity prices, (iv) future plugging and abandonment costs, (v) estimated cash flows and (vi) a market-based weighted average cost of capital rate. These estimates require significant judgement and may vary due to many factors, such as, but not limited to, the inputs to the fair value measure described above.

(h) Reflects goodwill resulting from the New Mexico Acquisition.

(i) Adjustment to reflect the application of the $33 million cash deposit in Funds held in escrow to the purchase price for the New Mexico Acquisition.

(j) Reflects the deferred financing costs associated with the Credit Facility Amendment executed in conjunction with the New Mexico Acquisition, including $25 thousand of an adjustment to Accrued liabilities as costs were incurred subsequent to March 31, 2023.

(k) Reflects the accrual of transaction costs related to the New Mexico Acquisition incurred subsequent to March 31, 2023.

(l) Adjustment to accrue additional financing costs related to the Senior Notes that were incurred subsequent to March 31, 2023.

(m) Adjustment to eliminate the portion of historical Pecos revenue payable not assumed by the Company. The Company only assumed revenue payable associated with certain suspense accounts.

(n) Represents adjustments to record asset retirement obligations assumed in the New Mexico Acquisition at fair value.

(o) Adjustment to reflect deferred income taxes associated with the New Mexico Acquisition. As the tax rates used for this unaudited pro forma condensed combined balance sheet are an estimate, the blended rate may vary from the actual effective rate in periods subsequent to completion of the New Mexico Acquisition.

(p) Reflects the borrowings under the Company’s revolving credit facility to fund a portion of the cash consideration for the New Mexico Acquisition.

(q) Reflects the issuance of debt in conjunction with the New Mexico Acquisition:

•$200 million of Senior Notes issued, net of a 6%, or $12 million discount; and

•$4.7 million of debt issuance costs associated with the Senior Notes, including costs reclassed from prepaid costs as discussed in (e) above.

(r) Reflects adjustment for the transaction costs paid directly from borrowings and included in the transaction costs discussed above in (b).

Exhibit 99.3

Pro Forma Statements of Operations for the quarter ended March 31, 2023 and year ended December 31, 2022

(a) Adjustment to reclass Gain (loss) on settlement of asset retirement obligation to Depreciation, depletion, amortization and accretion expense

(b) Adjustment for depletion expense calculated with respect to the allocated fair values attributable to proved oil and natural gas properties from the New Mexico Acquisition in accordance with the successful efforts method of accounting. The pro forma depletion rates for the three months ended March 31, 2023 and year ended December 31, 2022 were estimated using the proved property amounts based on the preliminary purchase price allocation and estimates of reserves at March 31, 2023 and December 31, 2022. The pro forma depletion rates were applied to the combined production volumes for the Company and Pecos for the respective periods.

(c) Adjustment to eliminate the historical expense related to Pecos’s unit-based compensation as these awards were not assumed by the Company.

(d) Adjustments to reflect $2.8 million of transaction costs paid directly from borrowings at the Closing Date and to accrue $1.0 million for transaction costs incurred subsequent to March 31, 2023.

(e) Adjustment to eliminate the historical contingent consideration related to Pecos’s earn-out liability, interest expense associated with Pecos’s related party note payable and gain on derivatives. These liabilities were not assumed by the Company in the New Mexico Acquisition.

(f) Adjustment to reflect:

•The estimated interest expense of $2.4 million and $4.7 million, respectively, related to the Company’s revolving credit facility and Senior Notes for the financing related to the New Mexico Acquisition. The interest rate used to estimate the interest expense adjustment on the revolving credit facility was based on LIBOR or SOFR plus a spread, as defined within the credit agreement. which is variable depending upon the percent utilization of the borrowing base in effect. The spread in effect during that time ranged from 2.75% to 3.00% and was adjusted up to 3.25% for the increase in the borrowing base and amount outstanding related to the New Mexico Acquisition;

•The estimated amortization of deferred financing costs of $0.1 million and $0.3 million, respectively, related to the Company’s revolving credit facility and Senior Notes for the incremental financing related to the New Mexico Acquisition. Deferred financing costs are amortized straight-line over the length of the instrument; and

•The amortization of the discount on the Senior Notes of $0.8 million.

(g) Adjustment to reflect:

•The estimated interest expense of $6.1 million and $20.0 million, respectively, related to the Company’s revolving credit facility and Senior Notes for the financing related to the New Mexico Acquisition. The interest rate used to estimate the interest expense adjustment on the revolving credit facility was based on LIBOR or SOFR plus a spread, as defined within the credit agreement, which is variable depending upon the percent utilization of the borrowing base in effect. The spread in effect during that time ranged from 2.75% to 3.00% and was adjusted up to 3.25% for the increase in the borrowing base and amount outstanding related to the New Mexico Acquisition;

•The estimated amortization of deferred financing costs of $0.5 million and $1.3 million, respectively, related to the Company’s revolving credit facility and Senior Notes for the incremental financing related to the New Mexico Acquisition. Deferred financing costs are amortized straight-line over the length of the instrument; and

Exhibit 99.3

•The amortization of the discount on the Senior Notes of $3.3 million.

(h) Adjustment to reflect the income tax effects of the transaction pro forma adjustments presented using the statutory tax rate in effect during the period. Because the tax rates used for these unaudited pro forma condensed combined statements of operations are an estimate, the blended rate will vary from the actual effective rate in periods subsequent to completion of the New Mexico Acquisition.

Note 4. Supplemental Pro Forma Oil and Natural Gas Reserves Information

The following tables present estimated pro forma combined oil and natural gas reserves information as of and for the year ended December 31, 2022 for the Company and Pecos. The reserve information for the Company has been prepared by Netherland, Sewell & Associates, Inc., independent petroleum engineers. Pecos’s reserve information has been prepared by Pecos’s internal reservoir engineers. An explanation of the underlying methodology applied to the Company’s reserve information, as required by SEC regulations, can be found within the Annual Report on Form 10-K as of and for the year ended December 31, 2022. The Pecos reserve information is provided and discussed in the footnotes to their financial statements for the year ended December 31, 2022, included elsewhere in this filing; and, this Pecos reserve information is reflective of the historical assumptions and development plans of Pecos at that time. The following estimated pro forma combined oil and natural gas reserves information is not necessarily indicative of the results that might have occurred had the acquisition been completed on December 31, 2022 and is not intended to be a projection of future results. Future results may vary significantly from the results presented. The accuracy of any reserve estimate is a function of the quality of available data and of engineering and geological interpretation and judgment. Periodic revisions or removals of estimated reserves and future cash flows may be necessary as a result of a number of factors, including reservoir performance, new drilling, oil and natural gas prices, changes in costs, technological advances, new geological or geophysical data, changes in business strategies, or other economic factors. Accordingly, proved reserve estimates may differ significantly from the quantities of oil and natural gas ultimately recovered.

Exhibit 99.3

Oil and Natural Gas Reserves

The following tables present the estimated pro forma combined net proved developed and undeveloped oil and natural gas reserves information as of December 31, 2022, along with a summary of changes in quantities of net remaining proved reserves during the year ended December 31, 2022:


	Oil (MBbls)
			REPX
	Historical	Historical	Pro Forma
	REPX	Pecos	Combined

December 31, 2021	47,021	15,906	62,927
Extensions and discoveries	9,949	350	10,299
Divestiture of reserves	—	(660)	(660)

Revisions	(4,871)	(5,899)	(10,770)
Production	(3,217)	(939)	(4,156)
December 31, 2022	48,882	8,758	57,640

Proved Developed Reserves, Included Above
December 31, 2021	27,096	6,135	33,231
December 31, 2022	29,632	7,491	37,123

Proved Undeveloped Reserves, Included Above
December 31, 2021	19,925	9,771	29,696
December 31, 2022	19,250	1,267	20,517


	Natural Gas (MMcf)
			REPX
	Historical	Historical	Pro Forma
	REPX	Pecos	Combined

December 31, 2021	77,486	26,090	103,576
Extensions and discoveries	13,178	486	13,664
Divestiture of reserves	—	(1,285)	(1,285)

Revisions	(1,417)	(6,097)	(7,514)
Production	(3,229)	(2,443)	(5,672)
December 31, 2022	86,018	16,751	102,769

Proved Developed Reserves, Included Above
December 31, 2021	47,974	13,255	61,229
December 31, 2022	59,314	15,021	74,335

Proved Undeveloped Reserves, Included Above
December 31, 2021	29,512	12,835	42,347
December 31, 2022	26,704	1,730	28,434

Exhibit 99.3


	NGLs (MBbls)
			REPX
	Historical	Historical	Pro Forma
	REPX	Pecos	Combined

December 31, 2021	13,471	5,460	18,931
Extensions and discoveries	2,651	99	2,750
Divestiture of reserves	—	(269)	(269)

Revisions	(1,224)	(1,425)	(2,649)
Production	(444)	(498)	(942)
December 31, 2022	14,454	3,367	17,821

Proved Developed Reserves, Included Above
December 31, 2021	7,949	2,769	10,718
December 31, 2022	9,604	3,019	12,623

Proved Undeveloped Reserves, Included Above
December 31, 2021	5,522	2,691	8,213
December 31, 2022	4,850	348	5,198


	Total Reserves Equivalent (MBoe)
			REPX
	Historical	Historical	Pro Forma
	REPX	Pecos	Combined

December 31, 2021	73,407	25,715	99,122
Extensions and discoveries	14,796	530	15,326
Divestiture of reserves	—	(1,143)	(1,143)

Revisions	(6,331)	(8,340)	(14,671)
Production	(4,199)	(1,844)	(6,043)
December 31, 2022	77,673	14,918	92,591

Proved Developed Reserves, Included Above
December 31, 2021	43,041	11,114	54,155
December 31, 2022	49,122	13,014	62,136

Proved Undeveloped Reserves, Included Above
December 31, 2021	30,366	14,601	44,967
December 31, 2022	28,551	1,904	30,455

Exhibit 99.3

Standardized Measure of Discounted Future Net Cash Flows

The following table presents the pro forma combined standardized measure of discounted future net cash flows relating to proved oil and natural gas reserves as of December 31, 2022:


	As of December 31, 2022
	Historical REPX		Historical Pecos		Pro Forma Adjustments(1)		REPX Pro Forma Combined
	(In thousands)
Future crude oil, natural gas and NGLs sales	$	5,135,650	$	986,723	$	—	$	6,122,373
Future production costs	(1,559,266)		(269,098)		—		(1,828,364)
Future development costs	(341,481)		(36,614)		—		(378,095)
Future income tax expense	(658,340)		—		(100,271)		(758,611)
Future net cash flows	2,576,563		681,011		(100,271)		3,157,303
10% annual discount	(1,468,187)		(298,015)		43,210		(1,722,992)
Standardized measure of discounted future net cash flows	$	1,108,376	$	382,996	$	(57,061)	$	1,434,311

_____________________

(1)Pro forma adjustments represent effects of income tax on the undiscounted and discounted future net cash flows associated with the NM Asset Acquisition. Corporate income taxes were not allocated to the NM Asset Acquisition on a historical basis.

Sources of Change in Discounted Future Net Cash Flows

The principal changes in the pro forma combined standardized measure of discounted future net cash flows relating to proved reserves for the year ended December 31, 2022 are as follows:


	For the Year Ended December 31, 2022
	Historical REPX		Historical Pecos		Pro Forma Adjustments(1)		REPX Pro Forma Combined
	(In thousands)
Balance, beginning of period	$	703,469	$	352,093	$	—	$	1,055,562
Sales of oil, natural gas and NGLs, net	(267,612)		(83,213)		—		(350,825)
Net change in prices and production costs	406,803		107,237		—		514,040
Net change in future development costs	(40,226)		9,683		—		(30,543)
Extension, discoveries and other additions	321,009		12,743		—		333,752

Divestiture of reserves	—		(5,281)		—		(5,281)
Revisions of previous quantities	(83,188)		(72,549)		—		(155,737)
Previously estimated development costs incurred	8,775		26,373		—		35,148
Net change in income taxes	(117,098)		—		(57,061)		(174,159)
Accretion of discount	87,914		35,209		—		123,123
Other	88,530		701		—		89,231
Balance, end of period	$	1,108,376	$	382,996	$	(57,061)	$	1,434,311

_____________________