Summary of Significant Accounting Policies (Policies)

6 Months Ended

Mar. 31, 2021

Accounting Policies [Abstract]

Consolidation

These unaudited condensed consolidated financial statements as of March 31, 2021 and for the three and six months ended March 31, 2021 and 2020 include the accounts of Riley Permian and its wholly-owned subsidiaries REP LLC, Riley Permian Operating Company, LLC ("RPOC"), Riley Employee Member, LLC ("REM"), Tengasco Pipeline Corporation ("TPC"), Tennessee Land & Mineral Corporation ("TLMC"), and Manufactured Methane Corporation ("MMC"). All intercompany balances and transactions have been eliminated upon consolidation. The Merger was accounted for as a reverse merger. The historical operations of REP LLC are deemed to be those of the Company. Thus, the consolidated financial statements included in this report reflect (i) the historical operating results of REP LLC prior to the Transaction; (ii) the consolidated results of the Company following the Merger; (iii) the assets and liabilities of REP LLC at their historical cost; and (iv) the Company’s equity and earnings per share for all periods presented.

Basis of Presentation

Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP") have been condensed or omitted pursuant to the rules and regulation of the Securities and Exchange Commission. These condensed consolidated financial statements should be read in conjunction with REP LLC's audited consolidated financial statements and related notes for the year ended September 30, 2020, included in the Company's current report on Form 8-K/A filed on April 22, 2021.

These condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, that are, in the opinion of the Company's management, necessary for a fair presentation of the results for the interim periods. These condensed consolidated financial statements are not necessarily indicative of the results for the entire fiscal year.

Significant Estimates

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.

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.

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.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.

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 March 31, 2021 and September 30, 2020.

Recently Adopted Accounting Pronouncements And Issued Accounting Standards Not Yet Adopted

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 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 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 the 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 March 31, 2021. The Company will continue to evaluate the effect of this standard on future reporting periods through December 31, 2022.