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Can REPX's Oil Growth Plan Outrun Permian Gas Price Weakness?
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Key Takeaways
REPX lifted 2026 outlook to 22-23 kb/d oil and 37.5-39.5 MBOE/d total production.
REPX posted negative realized natural gas and NGL prices in Q1 after transport and processing costs.
REPX shifts toward Texas and pursues power projects to blunt gas pain.
Riley Exploration Permian (REPX - Free Report) is entering 2026 with a clear growth message: oil production is expected to rise sharply as the company accelerates drilling across its Texas and New Mexico assets. In the first quarter, REPX produced an average of 20.2 thousand barrels per day of oil and 35.6 thousand barrels of oil equivalent per day (MBOE/d) overall. Management also raised its full-year outlook, targeting 22-23 thousand barrels of oil per day and total production of 37.5-39.5 MBOE/d. That implies roughly 30% year-over-year oil growth, supported by strong well results and faster development activity.
The challenge is that not all production contributes equally to profits. While Riley’s oil business remained strong, its natural gas and natural gas liquids (NGL) business faced pressure from weak prices in the Permian Basin. During the first quarter, the company actually received negative realized prices for natural gas, and NGL prices also turned negative after accounting for transportation and processing costs. In simple terms, some of the company’s gas-related production reduced overall revenue instead of adding to it. This was mainly caused by pipeline constraints and weak gas prices around the Waha hub, an issue currently affecting many Permian producers, not just Riley.
Even so, REPX has several ways to handle the pressure. The company is focusing more on Texas operations, where infrastructure is stronger, while carefully timing its New Mexico activity around the upcoming Targa pipeline expansion project. Riley is also developing power-related projects to reduce the impact of weak gas prices. If oil prices remain favorable and new pipeline capacity improves gas pricing, the company’s production growth could lead to stronger cash flow. For investors, the key issue is whether REPX’s oil-driven growth can outweigh the weakness in regional gas markets.
The pressure from weak Permian gas prices is not unique to REPX. Several larger shale producers also faced similar challenges during the first quarter, although some were better protected through hedging and transportation agreements.
Permian Gas Price Pressure: An Industry-Wide Issue
Diamondback Energy (FANG - Free Report) also faced weak gas realizations in the first quarter of 2026, with natural gas realizing just 18 cents per thousand cubic feet (Mcf) despite strong oil production. Management said Waha pricing was “deeply negative,” but Diamondback Energy was protected by financial and physical hedges, lifting hedged gas realizations to $1.90/Mcf. Diamondback Energy expects relief as new pipes come online, and it shifts more volumes toward physical protection.
Permian Resources (PR - Free Report) also dealt with weak regional gas pricing, reporting an unhedged natural gas price of negative 29 cents per Mcf in the March quarter. However, Permian Resources benefited from firm transportation and hedges, improving realized gas prices to $1.33/Mcf. Permian Resources said its Gulf Coast and DFW transportation agreements helped reduce Waha exposure and should provide more upside as capacity expands in 2027.
The Zacks Rundown on REPX
Shares of Riley Exploration Permian have surged 56% over the past six months, breezing past the subindustry's growth.
Image Source: Zacks Investment Research
REPX currently has an average brokerage recommendation (ABR) of 1.00 on a scale of 1 to 5 (Strong Buy to Strong Sell), calculated based on the actual recommendations (Buy, Hold, Sell, etc.) made by six brokerage firms.
Image Source: Zacks Investment Research
The chart below shows Riley Exploration Permian’s earnings over the past four quarters.
View the Zacks #1 Rank List
Image: Bigstock
Can REPX's Oil Growth Plan Outrun Permian Gas Price Weakness?
Key Takeaways
Riley Exploration Permian (REPX - Free Report) is entering 2026 with a clear growth message: oil production is expected to rise sharply as the company accelerates drilling across its Texas and New Mexico assets. In the first quarter, REPX produced an average of 20.2 thousand barrels per day of oil and 35.6 thousand barrels of oil equivalent per day (MBOE/d) overall. Management also raised its full-year outlook, targeting 22-23 thousand barrels of oil per day and total production of 37.5-39.5 MBOE/d. That implies roughly 30% year-over-year oil growth, supported by strong well results and faster development activity.
The challenge is that not all production contributes equally to profits. While Riley’s oil business remained strong, its natural gas and natural gas liquids (NGL) business faced pressure from weak prices in the Permian Basin. During the first quarter, the company actually received negative realized prices for natural gas, and NGL prices also turned negative after accounting for transportation and processing costs. In simple terms, some of the company’s gas-related production reduced overall revenue instead of adding to it. This was mainly caused by pipeline constraints and weak gas prices around the Waha hub, an issue currently affecting many Permian producers, not just Riley.
Even so, REPX has several ways to handle the pressure. The company is focusing more on Texas operations, where infrastructure is stronger, while carefully timing its New Mexico activity around the upcoming Targa pipeline expansion project. Riley is also developing power-related projects to reduce the impact of weak gas prices. If oil prices remain favorable and new pipeline capacity improves gas pricing, the company’s production growth could lead to stronger cash flow. For investors, the key issue is whether REPX’s oil-driven growth can outweigh the weakness in regional gas markets.
The pressure from weak Permian gas prices is not unique to REPX. Several larger shale producers also faced similar challenges during the first quarter, although some were better protected through hedging and transportation agreements.
Permian Gas Price Pressure: An Industry-Wide Issue
Diamondback Energy (FANG - Free Report) also faced weak gas realizations in the first quarter of 2026, with natural gas realizing just 18 cents per thousand cubic feet (Mcf) despite strong oil production. Management said Waha pricing was “deeply negative,” but Diamondback Energy was protected by financial and physical hedges, lifting hedged gas realizations to $1.90/Mcf. Diamondback Energy expects relief as new pipes come online, and it shifts more volumes toward physical protection.
Permian Resources (PR - Free Report) also dealt with weak regional gas pricing, reporting an unhedged natural gas price of negative 29 cents per Mcf in the March quarter. However, Permian Resources benefited from firm transportation and hedges, improving realized gas prices to $1.33/Mcf. Permian Resources said its Gulf Coast and DFW transportation agreements helped reduce Waha exposure and should provide more upside as capacity expands in 2027.
The Zacks Rundown on REPX
Shares of Riley Exploration Permian have surged 56% over the past six months, breezing past the subindustry's growth.
REPX currently has an average brokerage recommendation (ABR) of 1.00 on a scale of 1 to 5 (Strong Buy to Strong Sell), calculated based on the actual recommendations (Buy, Hold, Sell, etc.) made by six brokerage firms.
The chart below shows Riley Exploration Permian’s earnings over the past four quarters.
The stock currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.