REPX

Riley Exploration Permian ($REPX): Management Sells While Major Shareholder Buys...Undervalued Opportunity After 30% Decline?

07/16/2025 20:57

Riley Exploration Permian ($REPX) is an independent energy company specializing in oil and natural gas exploration and production in the Permian Basin region of the United States. With core assets in Yoakum County, Texas, and Eddy County, New Mexico, this small-cap company with a market capitalization of $560.86 million has been attracting investor attention due to conflicting signals from recent insider trading patterns. The most notable activity has been CEO Bobby Riley's persistent stock selling. Over a 13-month period from June 2024 to June 2025, Riley executed 17 separate transactions, with individual sale amounts ranging from $266,000 to $546,000. Particularly significant was his May 12, 2025 transaction, where he sold $418,000 worth of shares in a single trade. While most of these sales were conducted under pre-planned 10b5-1 arrangements, their frequency and scale have raised market concerns. In stark contrast, major shareholder Alvin Libin's actions tell a completely different story. Following a $351,000 purchase on April 1, 2025, he recently added another $409,000 worth of shares on July 14, acquiring 15,000 shares at $27.27 per share. This purchase price suggests significant value recognition at current market levels. Importantly, these purchases were made through indirect ownership via 2624063 Alberta Ltd., indicating strategic long-term investment intent. The stock chart provides clearer context for these insider trading patterns. $REPX traded around $26-28 in October 2024 before surging to a January 2025 peak of $36, but has since declined steadily to $25.42 as of July 15. This represents approximately a 30% decline from the peak, suggesting management captured selling opportunities during the upturn. Despite this, the company's fundamentals remain solid. For the first half of 2025, it reported revenue of $412.89 million, a net profit margin of 23.92%, and an operating margin of 42.61%, demonstrating superior profitability compared to industry peers. EBITDA of $284.42 million and earnings per share of $4.68 suggest significant undervaluation at current price levels. The current P/E ratio of 5.43x and forward P/E of 4.01x are substantially below energy sector averages. Riley Permian's competitive advantage stems from its geographic positioning in the Permian Basin, one of the most productive oil and gas regions in the United States. The company maintains production of 24.5-24.9 MBOE/d (thousand barrels of oil equivalent per day) in this region. The completion of its New Mexico asset acquisition announced on July 2, 2025, is expected to further expand this production base. The dividend policy is also noteworthy. With an annual dividend rate of $1.52 providing a 5.79% yield at current prices, the company increased its dividend by 6% in late 2024, demonstrating shareholder-friendly policies. This is supported by annual operating cash flow of $240 million and free cash flow of $130 million, ensuring sustainability. Investors should carefully consider liquidity metrics. The current ratio of 0.44 indicates short-term liquidity constraints, and cash holdings of just $8.86 million compared to total debt of $249.34 million suggest limited financial flexibility. However, the debt-to-equity ratio of 46.83% is considered appropriate for the capital-intensive energy sector. The key inflection point to watch is the Q2 earnings release scheduled for mid-August. How recent oil price increases and production growth will be reflected in results, and the contribution from the New Mexico acquisition assets, will be critical observation points. Additionally, any further buying activity by Alvin Libin and changes in management selling patterns will provide important signals. In summary, $REPX presents solid fundamentals and attractive valuation, but with mixed insider trading signals. While management's persistent selling is concerning, most were pre-planned transactions, and the major shareholder's recent purchases provide positive signals. Considering the undervalued state and dividend yield, this could present an attractive opportunity for investors with appropriate risk tolerance.