REPX(REPX) - 2022 Q3 - Quarterly Report

Part I Financial Statements The financial statements reflect significant revenue growth, a net income turnaround, increased assets, and strong operating cash flow for the period Condensed Consolidated Balance Sheets Total assets and shareholders' equity significantly increased, driven by oil and gas properties and strong earnings, while the revolving credit facility was reduced Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2022 | Dec 31, 2021 | Change | | :--- | :--- | :--- | :--- | | Total Assets | $490,551 | $396,169 | $94,382 | | Cash and cash equivalents | $17,908 | $8,317 | $9,591 | | Oil and natural gas properties, net | $431,067 | $359,131 | $71,936 | | Total Liabilities | $177,897 | $158,331 | $19,566 | | Revolving credit facility | $48,000 | $65,000 | ($17,000) | | Current derivative liabilities | $22,529 | $30,984 | ($8,455) | | Total Shareholders' Equity | $312,654 | $237,838 | $74,816 | Condensed Consolidated Statements of Operations The company achieved significant net income for the nine months ended September 30, 2022, driven by strong oil and gas revenue growth Statement of Operations Summary (Nine Months Ended Sep 30, in thousands) | Metric | 2022 | 2021 | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenues | $243,697 | $128,022 | 90.4% | | Income From Operations | $162,689 | $53,196 | 205.8% | | Loss on derivatives | ($44,395) | ($75,286) | (41.0%) | | Net Income (Loss) From Continuing Operations | $91,204 | ($38,928) | N/A | | Net Income (Loss) | $91,204 | ($57,725) | N/A | | Diluted EPS from Continuing Operations | $4.65 | ($2.29) | N/A | Condensed Consolidated Statements of Changes in Members'/Shareholders' Equity Shareholders' equity significantly increased, primarily driven by net income, partially offset by dividends declared - Shareholders' equity increased by $74.8 million in the first nine months of 2022, primarily due to net income of $91.2 million, offset by $18.5 million in dividends declared ($6.154 million in Q1, $6.159 million in Q2, $6.159 million in Q3)[22] Condensed Consolidated Statements of Cash Flows Net cash from operating activities significantly increased, funding capital expenditures and debt repayment, resulting in a positive cash balance Cash Flow Summary (Nine Months Ended Sep 30, in thousands) | Category | 2022 | 2021 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $130,352 | $70,186 | | Net Cash Used in Investing Activities | ($83,182) | ($51,229) | | Net Cash Used in Financing Activities | ($37,579) | ($7,666) | | Net Increase in Cash | $9,591 | $15,190 | | Cash and Cash Equivalents, End of Period | $17,908 | $17,067 | Notes to the Condensed Consolidated Financial Statements The notes detail fiscal year change, derivative instruments, credit facility terms, and other key disclosures including a legal settlement - The company changed its fiscal year from an October 1 - September 30 cycle to a calendar year (January 1 - December 31) basis, commencing with the 2022 calendar year[32] - The company uses commodity derivative contracts (fixed price swaps, costless collars, basis swaps) to manage price risk. As of September 30, 2022, these contracts covered significant portions of future oil and natural gas production through 2023[61][62] - The revolving credit facility borrowing base was increased to $200 million in April 2022 and further to $225 million in October 2022. The maturity was extended to April 2026, and the benchmark interest rate was changed from LIBOR to SOFR[73][101] - A settlement was reached in a legal proceeding for $80,000, contingent on Bankruptcy Court approval, to resolve claims related to a 2018 asset transfer by a predecessor company[94] Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes strong performance to increased production and higher commodity prices, highlighting robust cash flow and strong liquidity - Total net equivalent production increased by 33% to 12.7 MBoe/d for Q3 2022 compared to Q3 2021[105] - Generated $130.4 million in cash flow from operations and incurred $96.5 million in accrued capital expenditures for the nine months ended September 30, 2022[105] - The company ended Q3 with $17.9 million in cash and $48.0 million drawn on its revolving credit facility, which had its borrowing base increased to $225 million subsequent to quarter-end[105][151] Results of Operations Total oil and gas revenues significantly increased due to higher prices and production, with rising operating expenses and a net gain on derivatives Production and Realized Prices (Nine Months Ended Sep 30) | Metric | 2022 | 2021 | Change (%) | | :--- | :--- | :--- | :--- | | Total Production (MBoe) | 2,977 | 2,456 | 21.2% | | Daily Production (Boe/d) | 10,903 | 8,997 | 21.2% | | Avg. Realized Oil Price ($/Bbl) | $97.74 | $63.76 | 53.3% | | Avg. Realized Combined Price ($/Boe) | $81.26 | $51.39 | 58.1% | - For the nine months ended Sep 30, 2022, oil revenues increased 97% to $224.9 million, with $78.2 million of the increase from higher prices and $32.4 million from higher volumes[118] - Transaction costs of $2.6 million were incurred in the first nine months of 2022 related to a potential business combination that was not consummated[136] Liquidity and Capital Resources The company's liquidity relies on operations and its revolving credit facility, which increased its borrowing base, despite a working capital deficit - The company had a working capital deficit of $32.7 million as of September 30, 2022, compared to a deficit of $32.8 million at year-end 2021. The deficit includes $22.5 million in current derivative liabilities[144] - Net cash from operating activities increased 86% to $130.4 million for the nine months ended Sep 30, 2022, primarily due to a $115.7 million increase in revenues[145][146] - The borrowing base under the revolving credit facility was increased to $200 million in April 2022 and again to $225 million in October 2022. As of September 30, 2022, borrowings were $48 million, with $152 million of available capacity[149][150][151] Quantitative and Qualitative Disclosures About Market Risk This section is not applicable for the current reporting period - The company states that this item is not applicable[156] Controls and Procedures Management concluded disclosure controls were effective, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation, the CEO and CFO concluded that the company's disclosure controls and procedures were effective as of September 30, 2022[157] - No material changes to internal control over financial reporting occurred during the quarter ended September 30, 2022[158] Part II. OTHER INFORMATION Legal Proceedings The company is not involved in material legal proceedings, with a previously disclosed adversary proceeding resolved via settlement - The company does not believe any current legal actions will have a material effect on its consolidated financial position or results of operations[160] - Details regarding a material legal proceeding and its settlement are incorporated by reference from Note 14 of the financial statements[161] Risk Factors The company highlights business risks including regulatory restrictions, critical infrastructure designation, and enhanced ESG scrutiny impacting operations - Regulatory actions by the Railroad Commission of Texas (RRC) to curtail produced water injection in the Permian Basin to control seismic activity could increase operating costs[164] - Designation as a "critical gas supplier" under new Texas rules could subject the company to additional regulation and compliance costs, including potential weatherization measures[165][167] - Enhanced scrutiny on ESG matters and the adoption of climate change legislation restricting greenhouse gas (GHG) emissions could result in increased operating costs and reduced demand for the company's products[168][170] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered equity sales, repurchasing shares to satisfy employee tax withholding on restricted stock vesting Issuer Repurchases of Equity Securities (Nine Months Ended Sep 30, 2022) | Quarter Ending | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Q1 | 12,640 | $26.81 | | Q2 | 8,576 | $25.08 | | Q3 | 341 | $25.02 | - Shares were repurchased from employees for the payment of personal income tax withholding on vesting transactions and were not part of a publicly announced program[172] Defaults Upon Senior Securities This section is not applicable - The company reports this item as not applicable[173] Mine Safety Disclosures This section is not applicable - The company reports this item as not applicable[174] Other Information This section is not applicable - The company reports this item as not applicable[175] Exhibits This section lists all exhibits filed with the Form 10-Q, including various corporate agreements and executive certifications