Riley Exploration Permian, Inc. (REPX) entered into a purchase‑and‑sale agreement on December 4 2025 to sell all membership interests in its wholly‑owned subsidiary, Dovetail Midstream, LLC, to Targa Northern Delaware LLC for an aggregate cash consideration of approximately $111 million, subject to customary adjustments.
The deal includes a contingent earn‑out that allows Riley to receive up to an additional $60 million in cash payments over a five‑year period if volume‑based performance thresholds are met. A separate agreement will see Riley sell certain compressor‑station assets for roughly $10 million, with that transaction expected to close no later than the first quarter of 2026, contingent on the completion of the initial sale.
Riley plans to use the $111 million proceeds to reduce borrowings on its credit facility, pay income taxes, and cover transaction costs, thereby improving liquidity and lowering leverage. The company also intends to redirect freed capital toward upstream development, particularly the integration of its recent $142 million acquisition of Silverback Exploration II, LLC, which expanded its asset base in Eddy County, New Mexico.
In its most recent earnings release, Riley reported Q3 2025 revenue of $107 million and an EPS of $0.77, missing consensus estimates of $1.16. Adjusted EBITDA margin contracted to 59% from 66% in the prior quarter, reflecting pricing pressure and higher operating costs. The divestiture is expected to lift margins by eliminating future midstream capital expenditures and reducing debt‑related interest expense, thereby supporting a more favorable cost structure for upstream operations.
Bobby Riley, Chairman and CEO, said the transaction “fulfills the Company’s goal of achieving flow assurance for its natural gas production, allowing for wider development of our New Mexico assets. By removing future capital spending obligations associated with expanding the midstream system, we can focus our expertise and capital on the development of our upstream assets, including our recent acquisition of Silverback Exploration II, LLC and its subsidiaries.”
Analysts have noted that the sale aligns with a broader trend of midstream consolidation in the Permian Basin, highlighted by Targa’s recent $1.25 billion acquisition of Stakeholder Midstream. The transaction is viewed as a positive step toward deleveraging and operational focus, with analysts citing the company’s undervaluation and efficient operations as key drivers of favorable market sentiment.
The sale positions Riley to capitalize on upstream opportunities while reducing exposure to midstream capital intensity, reinforcing its strategy to grow production in high‑potential New Mexico fields and improve financial flexibility for future acquisitions.
The content on BeyondSPX is for informational purposes only and should not be construed as financial or investment advice. We are not financial advisors. Consult with a qualified professional before making any investment decisions. Any actions you take based on information from this site are solely at your own risk.