Riley Exploration Permian, Inc.REPX
Riley Exploration Permian, Inc. Income Taxes Disclosure
Income Taxes
The components of the Company's consolidated provision for income taxes are as follows:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (In thousands) | |||||||||||||||||
| Current income tax expense: | |||||||||||||||||
| Federal | $ | 33,039 | $ | 22,814 | $ | 5,852 | |||||||||||
| State | 3,732 | 2,058 | 1,020 | ||||||||||||||
| Total current income tax expense | $ | 36,771 | $ | 24,872 | $ | 6,872 | |||||||||||
Deferred income tax expense: | |||||||||||||||||
| Federal | $ | 8,403 | $ | 1,666 | $ | 24,305 | |||||||||||
| State | 2,949 | 1,536 | 3,284 | ||||||||||||||
Total deferred income tax expense | $ | 11,352 | $ | 3,202 | $ | 27,589 | |||||||||||
Total income tax expense(1) | $ | 48,123 | $ | 28,074 | $ | 34,461 | |||||||||||
_____________________
(1)For the year ended December 31, 2025, a book tax benefit of $1.0 million related to the Viking Sale was recognized in additional paid-in capital. See Note 4 - Acquisitions and Divestitures for additional information on the Viking Sale.
Deferred tax assets and liabilities are the result of temporary differences between the financial statement carrying values and the tax basis of our assets and liabilities. The Company's net deferred tax position is as follows:
| Year Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (In thousands) | |||||||||||
| Intangibles | $ | 129 | $ | 146 | |||||||
Stock-based compensation | 1,709 | 1,129 | |||||||||
| Interest expense limitation | — | 19 | |||||||||
| Accruals and other | 421 | 1,893 | |||||||||
| Net operating loss | 2,578 | 2,639 | |||||||||
| Total deferred tax assets | $ | 4,837 | $ | 5,826 | |||||||
| Oil and natural gas assets | 84,981 | 80,972 | |||||||||
| Other fixed assets | 466 | 628 | |||||||||
| Unrealized gain on derivatives | 5,509 | 773 | |||||||||
| Total deferred tax liabilities | $ | 90,956 | $ | 82,373 | |||||||
| Net deferred tax liabilities | $ | 86,119 | $ | 76,547 | |||||||
A reconciliation of the statutory federal income tax rate to the Company's effective income tax rate is as follows:
| Year Ended December 31, | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||
Amount | Percent | Amount | Percent | Amount | Percent | ||||||||||||||||||||||||||||||
U.S federal statutory tax rate | $ | 43,882 | 21.0 | % | $ | 24,564 | 21.0 | % | $ | 30,671 | 21.0 | % | |||||||||||||||||||||||
State income taxes, net of federal income tax effect(1) | 5,278 | 2.5 | % | 2,839 | 2.4 | % | 3,400 | 2.4 | % | ||||||||||||||||||||||||||
Tax Credits | |||||||||||||||||||||||||||||||||||
Marginal well credit | (1,700) | (0.8) | % | — | — | % | — | — | % | ||||||||||||||||||||||||||
Nondeductible items: | |||||||||||||||||||||||||||||||||||
| Nondeductible compensation | 887 | 0.4 | % | 828 | 0.7 | % | 1,064 | 0.7 | % | ||||||||||||||||||||||||||
Stock-based compensation | (237) | (0.1) | % | (191) | (0.1) | % | (739) | (0.5) | % | ||||||||||||||||||||||||||
| Other | 13 | — | % | 34 | — | % | 65 | — | % | ||||||||||||||||||||||||||
Effective tax rate | $ | 48,123 | 23.0 | % | $ | 28,074 | 24.0 | % | $ | 34,461 | 23.6 | % | |||||||||||||||||||||||
_____________________
(1)State taxes in New Mexico and Texas make up the tax effect in this category.
Cash paid for income taxes, net of refunds, was as follows:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (In thousands) | |||||||||||||||||
Total federal | $ | 17,220 | $ | 17,245 | $ | 8,851 | |||||||||||
State and local: | |||||||||||||||||
New Mexico | $ | 2,550 | $ | 159 | $ | 459 | |||||||||||
Texas | 795 | 680 | 615 | ||||||||||||||
Other | — | — | 24 | ||||||||||||||
Total state and local | $ | 3,345 | $ | 839 | $ | 1,098 | |||||||||||
Total income taxes paid, net of refunds | $ | 20,565 | $ | 18,084 | $ | 9,949 | |||||||||||
The Company's federal income tax returns for the years subsequent to December 31, 2021, remain subject to examination. The Company's income tax returns in major state income tax jurisdictions remain subject to examination for various periods subsequent to December 31, 2020. The Company currently believes that all other significant filing positions are highly certain
and that all of our other significant income tax positions and deductions would be sustained under audit or the final resolution would not have a material effect on our consolidated financial statements. Therefore, the Company has not established any significant reserves for uncertain tax positions.
Section 382 of the Internal Revenue Code limits the utilization of U.S. net operating loss ("NOL") carryforwards following a change in control. The Merger caused a stock ownership change for purposes of Section 382 which is subject to an approximate annual limit. The Company has federal NOLs subject to the annual Section 382 limit of $12.3 million of which $3.5 million will expire beginning in 2026 through 2037 with the remaining $8.8 million of the NOLs not expiring. Additionally, the Company has no federal NOLs generated after the Merger that are not limited by Section 382 and are not subject to expiration. We believe it is more likely than not the tax benefit of these NOLs will be fully realized, as such no valuation allowance has been recorded. The deferred tax assets for the net operating losses, along with the other deferred tax assets as shown in the table above, are presented net with deferred tax liabilities, which primarily consist of book and tax depreciation, depletion and amortization differences.
On July 4, 2025, new tax legislation known as the One Big Beautiful Bill Act ("OBBBA") was signed into law. The legislation, among other things, makes permanent, extends or modifies certain provisions under the 2017 Tax Cuts and Jobs Act, including permanent extension of 100% bonus depreciation for certain capital expenditures and the limitation on interest expense deductions. The enactment of the OBBBA resulted in a $3.7 million reduction in our current income tax expense, with an offsetting increase in deferred income tax expense for the year ended December 31, 2025.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 4, 2026 | Showing above |
| 2024 | Mar 5, 2025 | |
| 2020 | Mar 30, 2021 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.