Riley Exploration Permian (NASDAQ: REPX) highlighted a notable operating efficiency achievement during its first quarter 2026 earnings call, reporting that a new chemical treatment program implemented in New Mexico has reduced chemical costs by nearly 50% on a per-barrel basis.
While management did not disclose the specific chemistry or technical changes behind the initiative, executives emphasized that the program is already delivering measurable cost savings and improving field operations.
New Chemical Program Delivering Immediate Results
During prepared remarks, Chief Operating Officer John Suter discussed the company’s efforts to reduce lease operating expenses and improve well performance across its New Mexico assets.
“We’ve also mentioned in past calls, our expectation of chemical costs coming down in New Mexico as part of a change in program we implemented in January. I’m happy to report that in just a few months, we’ve seen costs nearly cut in half on a per barrel basis compared to our 2025 monthly average spend,” said Suter.
The reduction comes at a time when many operators are facing inflationary pressure across the oilfield services sector, making operating cost improvements increasingly valuable.
Benefits Extend Beyond Chemical Spending
Management indicated that the initiative is delivering more than direct chemical savings. During the question-and-answer portion of the call, Suter explained that the new program has also improved equipment reliability.
“In New Mexico, I think we’ve cut our per barrel chemical cost in half with this new change,” Suter stated.
He continued by highlighting the operational impact of the program:
“This chemical program has also helped us from — it’s actually working. That’s less tubing strings you have to replace, less ESPs to replace when you have to replace the tubing. So that really starts having a cumulative effect.”
The comments suggest the company is experiencing fewer equipment-related interventions, reducing maintenance requirements and lowering ongoing operating expenses.
Why Chemical Programs Can Reduce Tubing and ESP Failures
While Riley Exploration Permian did not disclose the specific chemical formulation or technical changes implemented in New Mexico, management indicated the program is delivering benefits beyond lower chemical costs.
According to COO John Suter, the new program has reduced the need for tubing and ESP replacements, creating a cumulative operating benefit across the asset base.
“This chemical program has also helped us from — it’s actually working. That’s less tubing strings you have to replace, less ESPs to replace when you have to replace the tubing. So that really starts having a cumulative effect.”
In oil and gas operations, chemical treatment programs are commonly used to address issues such as corrosion, mineral scale buildup, paraffin deposition, and other production-related challenges that can damage downhole equipment. When these problems are effectively controlled, operators often experience longer tubing life, improved ESP reliability, fewer workovers, and reduced maintenance costs.
An important aspect of these savings is that tubing and ESP replacements are often linked. When tubing failures occur, operators frequently must pull the entire completion, including the ESP, resulting in additional repair costs, service expenses, and production downtime. By reducing the frequency of these interventions, a successful chemical program can generate benefits that extend well beyond the direct reduction in chemical spending.
Although management did not specify the exact mechanism behind the improvement, the company’s comments suggest the program is helping improve equipment reliability while lowering operating expenses across its New Mexico operations.
Vendor Optimization Also Contributed
In addition to the chemical program changes, Riley Exploration Permian reported broader efforts to improve operating efficiency through vendor management.
According to Suter, the company capitalized on vendor rebidding and vendor realignment efforts during the first quarter.
These initiatives, combined with the new chemical treatment program, contributed to lower lease operating expenses and helped the company maintain cost discipline while increasing development activity.
Focus on Operating Efficiency
The chemical cost reductions are part of a broader operational improvement strategy underway at Riley Exploration Permian. The company reported continued gains in drilling and completion efficiency, including faster drilling times, lower per-well costs, and strong well productivity.
Management noted that despite inflationary pressures affecting many service providers, operational efficiencies have helped offset rising costs and support strong production growth plans for 2026.
While the company has not disclosed additional details regarding the specific chemical products or treatment methodology used, management’s comments indicate that the program is already generating meaningful savings and creating additional value through reduced maintenance requirements and improved equipment performance.
For operators across the Permian Basin, the results demonstrate how incremental operational improvements can translate into meaningful cost reductions and enhanced field performance, particularly in mature producing assets where operating efficiency remains a key driver of returns.
Author: phinds