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Summary of Significant Accounting Policies | 9 Months Ended
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Jun. 30, 2021
Accounting Policies [Abstract] |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Significant Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying condensed notes. These estimates and assumptions may also affect disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company evaluates these estimates on an ongoing basis, using historical experience, consultation with experts and other methods the Company considers reasonable in the particular circumstances. Actual results may differ significantly from the Company’s estimates. Any effects on the Company’s business, financial position or results of operations resulting from revisions to these estimates are recorded in the period in which the facts that give rise to the revision become known. Significant items subject to such estimates and assumptions include, but are not limited to, estimates of proved oil and natural gas reserves and related present value estimates of future net cash flows therefrom, the carrying value of oil and natural gas properties, accounts receivable and accrued operating expenses, the fair value determination of acquired assets and assumed liabilities, certain tax accruals and the fair value of derivatives. Accounts Receivable The Company had no allowance for doubtful accounts at June 30, 2021 and September 30, 2020. Accounts receivable is summarized below:
|  | June 30, 2021 |  | September 30, 2020
|  | (In thousands)
Oil, natural gas and NGL sales |  | $ | 15,105 |  |  | $ | 6,919 |
Joint interest accounts receivable |  | 494 |  |  | 1,022 |
Realized derivative receivable |  | 33 |  |  | 2,187 |
Other accounts receivable |  | 41 |  |  | — |
Total accounts receivable |  | $ | 15,673 |  |  | $ | 10,128 |
Business Combinations In accordance with ASC 805 - Business Combinations (“ASC 805”), the Company accounts for its acquisitions that qualify as a business using the acquisition method under ASC 805. If the set of assets and activities is not considered a business, it is accounted for as an asset acquisition using a cost accumulation model. In the cost accumulation model, the cost of the acquisition, including certain transaction costs, is allocated to the assets acquired on the basis of relative fair values. The Company includes the results of operations of acquired businesses beginning on the respective acquisition dates. In accordance with the acquisition method under ASC 805, the Company allocates the purchase price of an acquired business to its identifiable assets and liabilities based on the estimated fair values. This fair value measurement is based on unobservable (Level 3) inputs. The excess of the purchase price over the amount allocated to the assets and liabilities, if any, is recorded as goodwill. The excess value of the net identifiable assets and liabilities acquired over the purchase price of an acquired business is recorded as a bargain purchase gain. Other Non-Current Assets Other non-current assets consisted of the following:
|  | June 30, 2021 |  | September 30, 2020
|  | (In thousands)
Debt issuance costs, net |  | $ | 1,519 |  |  | $ | 1,867 |
Prepayments to outside operators |  | 1,845 |  |  | 284 |
Right of use assets |  | 409 |  |  | 700 |
Other deposits |  | 55 |  |  | 98 |
Total other non-current assets, net |  | $ | 3,828 |  |  | $ | 2,949 |
Accrued Liabilities Accrued liabilities consisted of the following:
|  | June 30, 2021 |  | September 30, 2020
|  | (In thousands)
Accrued capital expenditures |  | $ | 9,271 |  |  | $ | 2,964 |
Accrued lease operating expenses |  | 2,815 |  |  | 1,617 |
Accrued ad valorem tax |  | 352 |  |  | 680 |
Accrued general and administrative costs |  | 2,619 |  |  | 2,125 |
Accrued interest expense |  | 24 |  |  | 63 |
Accrued dividends on preferred units |  | — |  |  | 903 |
Accrued dividends on common units and shares |  | 38 |  |  | 95 |
Other accrued expenditures |  | 2,029 |  |  | 299 |
Total accrued liabilities |  | $ | 17,148 |  |  | $ | 8,746 |
Asset Retirement Obligations Components of the changes in asset retirement obligations ("ARO") for the nine months ended June 30, 2021 and year ended September 30, 2020 are shown below:
|  | June 30, 2021 |  | September 30, 2020
|  | (In thousands)
ARO, beginning balance |  | $ | 2,326 |  |  | $ | 1,203 |
Liabilities incurred |  | 98 |  |  | 68 |
Liabilities acquired |  | — |  |  | 1,161 |
Revision of estimated obligations |  | — |  |  | (45) |
Liability settlements and disposals |  | (20) |  |  | (131) |
Accretion |  | 65 |  |  | 70 |
ARO, ending balance |  | 2,469 |  |  | 2,326 |
Less: current ARO(1) |  | (132) |  |  | (58) |
ARO, long-term |  | $ | 2,337 |  |  | $ | 2,268 |
_____________________ (1)Current ARO is included within other current liabilities on the condensed consolidated balance sheets. Goodwill Goodwill represents the future economic benefit arising from other assets acquired in a business combination that are not individually identified or separately recognized. Goodwill is initially recognized as the excess of the purchase price of a business combination over the fair value of the net assets acquired and is tested for impairment annually in accordance with ASC 350 - Intangibles - Goodwill and Other ("ASC 350"), or more frequently if there is a change in events or circumstances that indicate the carrying value of the goodwill may not be recoverable. The Company recognized goodwill of $19.1 million from the Merger. The Company assessed the oil and natural gas properties acquired through the Merger as a separate reporting unit (the "Kansas Reporting Unit") and therefore allocated the full goodwill amount to the Kansas Reporting Unit. In March 2021, the Company entered into an agreement to divest the Kansas Reporting Unit which is made up primarily of the oil and natural gas properties acquired, which includes producing oil wells, shut-in wells, temporarily abandoned wells, and active disposal wells (the "Kansas Properties"). The Company did not fully integrate the Kansas Reporting Unit into the Company's operations since it was deemed to be held for sale upon acquisition. See further discussion in Note 4 - Acquisitions and Divestitures. In accordance with ASC 350, the impairment test should occur at the reporting unit level determined by the Company and an impairment should only exist if the Company has determined the carrying value of the goodwill no longer exceeds the implied fair value. A two-step goodwill impairment test should be used to identify potential goodwill impairment and measure such impairment, if any. The first step is a qualitative assessment which the Company will determine whether it is more likely than not (greater than 50 percent likelihood) that the fair value of the reporting unit is less than its carrying value, including goodwill. If the Company determines it is more likely than not the fair value of the reporting unit is less than its carrying value, including goodwill, then step two is a quantitative assessment. The quantitative assessment compares the implied fair value of the reporting unit goodwill with the carrying value of the goodwill. An impairment loss is recognized if the carrying value of the reporting unit goodwill exceeds the implied fair value of that goodwill. The Company assessed the goodwill balance as of March 31, 2021 for impairment since the Company entered into a Purchase and Sale Agreement ("PSA") on March 10, 2021 for $3.5 million before closing adjustments. See further discussion in Note 13 - Discontinued Operations and Assets Held for Sale. At the closing of the Merger, the Kansas Reporting Unit was initially recorded at fair value using a discounted cash flow method of valuation in accordance with ASC 805. The carrying value of the Kansas Reporting Unit was $22.0 million, which included allocated goodwill of $19.1 million. The Company concluded the implied fair value of the Kansas Reporting Unit was $3.5 million in accordance with ASC 350 since the Company entered into a PSA shortly after the Kansas Reporting Unit was deemed held for sale. The carrying value exceeded the implied fair value at the time of the closing of the Merger. As such, the Company concluded the goodwill balance associated with the Kansas Reporting Unit was impaired and recognized a goodwill impairment loss, included within loss from discontinued operations, of $18.5 million for the nine months ending June 30, 2021. Revenue Recognition The following table presents oil and natural gas sales from continuing operations disaggregated by product:
|  | Three Months Ended June 30, |  | Nine Months Ended June 30,
|  | 2021 |  | 2020 |  | 2021 |  | 2020
|  | (In thousands)
Oil and natural gas sales: |  |  |  |  |  |  |  |
Oil |  | $ | 39,504 |  |  | $ | 6,153 |  |  | $ | 92,395 |  |  | $ | 59,548 |
Natural gas |  | 957 |  |  | (738) |  |  | 5,592 |  |  | (1,009) |
Natural gas liquids |  | 1,088 |  |  | (446) |  |  | 2,635 |  |  | (715) |
Total oil and natural gas sales, net |  | $ | 41,549 |  |  | $ | 4,969 |  |  | $ | 100,622 |  |  | $ | 57,824 |
Transaction Costs
|  | Three Months Ended June 30, |  | Nine Months Ended June 30,
|  | 2021 |  | 2020 |  | 2021 |  | 2020
|  | (In thousands)
Business combination acquisition costs |  | $ | 321 |  |  | $ | 15 |  |  | $ | 3,374 |  |  | $ | 42 |
Other |  | — |  |  | — |  |  | 160 |  |  | — |
Total transaction costs |  | $ | 321 |  |  | $ | 15 |  |  | $ | 3,534 |  |  | $ | 42 |
The Company recognized transaction costs of $0.3 million and $3.4 million for the three and nine months ended June 30, 2021. These costs relate to the fees incurred for the Merger. See further discussion in Note 4 - Acquisitions and Divestitures. Income Taxes Upon closing of the Merger on February 26, 2021, Tengasco was renamed to Riley Exploration Permian, Inc. and REP LLC became a wholly-owned subsidiary of Riley Exploration Permian, Inc., the consolidated company. In addition, Riley Permian became a C-corporation which is subject to current federal and state income taxes, including Texas Margin Tax. See further discussion in Note 4 - Acquisitions and Divestitures. The Company recorded a provision for federal and state income taxes as of June 30, 2021. See further discussion in Note 12 - Income Taxes. Riley Permian uses the asset and liability method of accounting for income taxes, which requires the establishment of deferred tax accounts for all temporary differences between: (i) financial reporting and tax bases of assets and liabilities, using currently enacted federal and state income tax rates, and (ii) operating loss and tax credit carryforwards. In addition, deferred tax accounts must be adjusted to reflect new rates if enacted into law. Realization of deferred tax assets is contingent on the generation of future taxable income. As a result, management considers whether it is more likely than not that all or a portion of such assets will be realized during periods when they are available, and if not, management provides a valuation allowance for amounts not likely to be recognized. Management periodically evaluates tax reporting methods to determine if any uncertain tax positions exist that would require the establishment of a loss contingency. A loss contingency would be recognized if it were probable that a liability has been incurred as of the date of the financial statements and the amount of the loss can be reasonably estimated. The amount recognized is subject to estimates and management’s judgment with respect to the likely outcome of each uncertain tax position. The amount that is ultimately incurred for an individual uncertain tax position or for all uncertain tax positions in the aggregate could differ from the amount recognized. There are no unrecorded liabilities for uncertain tax positions related to the Company as of the periods ended June 30, 2021 and September 30, 2020. Recent Accounting Pronouncements Recently Adopted Accounting Pronouncements In June 2016, the Financial Accounting Standards Board issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which changes accounting requirements for the recognition of credit losses from an incurred or probable impairment methodology to a Current Expected Credit Losses (“CECL”) methodology. The CECL model is applicable to the measurement of credit losses on financial assets measured at amortized cost, including but not limited to trade receivables. The standard is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company adopted this ASU effective October 1, 2020 using a modified retrospective approach. The adoption of this guidance did not have a material effect on the Company’s condensed consolidated financial statements or related disclosures. The Company is exposed to credit losses primarily through receivables that result from oil and natural gas sales. Estimates of expected credit losses for accounts receivables consider factors such as historical collection experience, credit quality of our customers and current and future economic and market conditions. In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. The purpose of this amendment is to improve the effectiveness of disclosures in the notes of the financial statements. This ASU removes certain disclosure requirements around transfers between levels of the fair value hierarchy and the valuation processes for Level 3 fair value measurements, modifies certain reporting requirements around Level 3 fair value measurements and investments in certain entities that calculate net asset value, and adds certain disclosure requirements for Level 3 fair value measurements. The standard is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company adopted this ASU effective October 1, 2020. The adoption of this ASU did not have a material impact on the Company's financial statements. Issued Accounting Standards Not Yet Adopted In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 840): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” (“ASU 2020-04”), which provides companies with optional guidance to ease the potential accounting burden associated with transitioning away from reference rates (e.g., London Interbank Offered Rate (“LIBOR”)) that are expected to be discontinued. ASU 2020-04 allows, among other things, certain contract modifications, such as those within the scope of Topic 470 on debt, to be accounted as a continuation of the existing contract. This ASU was effective upon issuance and its optional relief can be applied through December 31, 2022. This standard did not have any effect on the Company's financial statements as of June 30, 2021. The Company will continue to evaluate the effect of this standard on future reporting periods through December 31, 2022.

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- Definition The entire disclosure for all significant accounting policies of the reporting entity. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -URI http://asc.fasb.org/topic&trid=2122369 + Details
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