REPX(US:REPX)2025-08-07 15:00Financial Data and Key Metrics Changes - The company generated significant free cash flow for the first half of the year despite a less favorable oil macro backdrop and regional operating environment [6] - Cash flow from operations for the second quarter was $33.6 million lower quarter over quarter primarily due to changes in working capital [18] - Realized oil prices before hedges fell 11% quarter over quarter and 22% year over year, while prices after hedges fell only 7% quarter over quarter and 14% year over year [18] - Adjusted EBITDAX margin decreased to 60% from 71% one year ago, reflecting the impact of lower oil prices [19] - The company converted 59% of year-to-date operating cash flow into $61 million of upstream free cash flow [20] Business Line Data and Key Metrics Changes - Net production declined marginally from 1.41 million to 1.38 million barrels of oil quarter over quarter but increased 3% compared to the same quarter last year [12] - Average daily net production was 15,200 barrels of oil per day and 24,400 barrels of oil equivalent per day for 2025 [13] - The company drilled 10, completed 2, and turned in line 7 gross operated wells during the quarter [11] Market Data and Key Metrics Changes - The company experienced production impacts from infrastructure challenges, particularly unreliable natural gas processing in Mexico, leading to shut-in wells and deferred production [7] - The acquisition of SilverBack Exploration increased the company's footprint to 30,000 net acres, with 98% held by production [8] Company Strategy and Development Direction - The company is focused on building long-term value through disciplined capital allocation, strategic infrastructure investments, and operational excellence [28] - Midstream projects are being advanced to enhance gas and oil flow assurance and support access to a stable power supply [7] - The company plans to maintain a smaller drawdown of drilled but uncompleted wells (DUCs) to set up for maximum flexibility in 2026 [24] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the fourth quarter exit rate production and indicated a potential budget of around $120 million for the next year to continue growth [32] - The company remains cautious on the macro front and will monitor OPEC's marketed supply and market absorption of increases [26] - Management highlighted the importance of managing power production as a critical component of operations in the Permian Basin [14] Other Important Information - The company achieved a total recordable incident rate of zero in the second quarter, reflecting a commitment to safe operations [10] - The average upstream lease operating expense (LOE) per barrel of oil equivalent (BOE) decreased by 3.7% compared to the 2024 average [14] - The company is exploring opportunities for power solutions in New Mexico due to longer wait times for power delivery [53] Q&A Session Summary Question: Production trajectory into 2026 and capital run rate - Management indicated that the fourth quarter capital run rate is a reasonable starting point for 2026, with a potential budget of around $120 million to continue growth [31][32] Question: Funding development and flexibility in New Mexico - Management is considering various financing options for midstream development and emphasized the flexibility in their plans [35][36] Question: Economic impact from midstream projects - Management anticipates that midstream projects could translate into $10 to $30 million of cash flow in a few years, depending on market rates [49] Question: Water handling opportunities - The company is enhancing its water handling systems to manage high water cuts effectively, which is integral to their operations [56] Question: Service cost trends - Management noted potential reductions in service costs of 5% to 15% due to increased scale and competitive bidding [59]