Riley Exploration-Permian, LLC, a private equity-backed oil and gas exploration and production company, filed an S-1 registration statement with the SEC earlier this week seeking to raise gross proceeds of $115 million, becoming the latest publicly-traded Permian Basin-focused stock. We recommend that investors accumulate positions in this early stage company as it executes its long-term growth strategy in a bet to be the next Concho Resources (CXO) or Diamondback Energy (FANG) .
Riley Permian is focused on high-growth energy exploration opportunities in the Permian Basin with an emphasis on horizontal development of the San Andres Formation, one of the most prolific reservoir of hydrocarbons in the Permian Basin of West Texas and eastern New Mexico, with a hydrocarbon production that has exceeded 3.9 billion barrels in the Northwest Shelf. Riley's technical expertise, advanced evaluation techniques, and operational experience puts it in a competitive position to focus acquisition, development, and production in the basin.
We're interested in this new up-and-comer because it is a pure play, growth-oriented company solely focused on the acquisition, development and production of oil, natural gas, and natural gas liquid reserves in the Central Basin Platform and the North West Shelf in the Permian Basin. Riley Permian focuses its activities on the San Andres Formation, a shelf margin deposit on the Central Basin Platform and Northwest Shelf, which accounts for approximately 24% of the nearly 30 billion barrels of oil historically produced from the Permian Basin and where horizontal production has increased by more than 425% since January 2014.
For the uninitiated, the CBP separates the prolific Delaware and Midland Basins in West Texas, and is subdivided into several formations including: Leonard, Yates, San Andres, Wolfcamp from the Permian, and Cisco, Canyon, Strawn and Atoka from the deeper Pennsylvanian. What makes the Permian Basin attractive is its extensive production history from a large number of operators, a favorable operating environment, already established infrastructure, multiple producing horizons with long reserve life and significant oil in place.
Riley management has been highly focused on operating efficiencies, having made a strategic decision to construct and operate water disposal and electric infrastructure within its operating project areas which have resulted in significantly cost reductions, or as it's known in the industry: lower lease operating expenses (LOE). LOE have declined from an average of $24.74/BOE in 2016 to $9.50/BOE today, an impressive decline of approximately 62%.
The company has also successfully executed its development plan, expanding its acreage position from 19,893 in 2017 to approximately 65,839 net acres today, a 330% increase in just one year. Riley maintains operational control on approximately 66% of its net undeveloped acreage position which enables the horizontal drilling of long laterals, resulting in significant drilling efficiencies through strong operational and cost controls that in turn improves returns on capital employed and enhance the economic development of their acreage position.
Riley is focused on its to drill long-lateral wells that improves returns by (1) increasing its estimated ultimate recoveries (EUR) per well, (2) Contact more reservoir rock with fewer wellbores thus reducing drilling and completion costs on a per unit basis and, (3) Hold more acreage per well drilled.
Riley's contiguous acreage provides economies of scale by allowing them to better leverage the existing infrastructure. Year-to-date, Riley's average net daily production was 3,136 BOE/d, of which approximately 94% was oil, 2% was natural gas and 4% was NGLs. Riley has around 12 million barrels of oil equivalent (BOE) in proved reserves, of which 86% is crude oil
What we also like is that Riley is backed by a pair of seasoned energy private equity sponsors: Yorktown Partners, LLC and Bluescape Energy Partners, LLC. Yorktown Partners is a New York-based private investment manager founded in 1991 that invests exclusively in the energy industry with an emphasis on North American oil and gas production and midstream businesses. Bluescape Energy Partners, a Dallas-based a private investment manager founded in 2007 that invests exclusively in the energy industry with an emphasis on North American oil and gas production and power businesses.