GRNT Granite Ridge Resources Inc

Granite Ridge Resources Inc. (“Granite Ridge” or the “Company”) (NYSE: GRNT) today reported financial and operating results for the second quarter 2024.

Second Quarter 2024 Highlights

• Increased production by 7% to 23,106 barrels of oil equivalent (“Boe”) per day (47% oil) from the second quarter of 2023.
• Reported net income of $5.1 million, or $0.04 per diluted share, and adjusted net income (non-GAAP) of $17.2 million, or $0.13 adjusted earnings per diluted share.
• Generated $68.3 million of Adjusted EBITDAX (non-GAAP).
• Placed 62 gross (9.10 net) wells online.
• Closed multiple transactions during the quarter adding 16.4 net future drilling locations for a total acquisition cost of $22.4 million (including $5.8 million of expected future drilling carries).
• Paid dividend of $0.11 per share of common stock during the second quarter.
• Ended the second quarter of 2024 with liquidity of $148.2 million.

See “Supplemental Non-GAAP Financial Measures” below for descriptions of the above non-GAAP measures as well as a reconciliation of these measures to the associated GAAP (as defined herein) measures.

Subsequent Events

• Closed additional transactions acquiring 8.7 net future drilling locations for a total acquisition cost of $25 million (inclusive of $3 million of expected future drilling carries).
• The Company’s Board of Directors declared a regular quarterly dividend of $0.11 per share payable on September 13, 2024 to shareholders of record as of August 30, 2024. Future declarations of dividends are subject to approval by the Board of Directors.

Management Commentary

“The second quarter 2024 was workmanlike from a results standpoint, but the deal side was anything but,” commented Granite Ridge President and Chief Executive Officer Luke Brandenberg. “While our Traditional Non-Op business continued to generate high quality locations with near-term development at an attractive cost basis, it is our Controlled Capital strategy that stood out. By nearly doubling our operated location inventory and adding a Midland Basin-focused Strategic Partner, we continue to increase our capital allocation to Controlled Capital projects. Based on the success of our business model and our compelling fixed dividend that is underpinned by hedged cash flow and conservative leverage, we believe Granite Ridge is positioned to drive long-term value for shareholders.”

Second Quarter 2024 Summary

Second quarter 2024 oil production volumes totaled 10,940 barrels (“Bbls”) per day, a 5% increase from the second quarter of 2023. Natural gas production for the second quarter of 2024 totaled 72,997 thousand cubic feet of natural gas (“Mcf”) per day, a 9% increase from the second quarter of 2023. As a result, the Company’s total production for the second quarter of 2024 grew 7% from the second quarter of the prior year to 23,106 Boe per day.

Net income for the second quarter of 2024 was $5.1 million, or $0.04 per diluted share. Excluding non-cash and nonrecurring items, second quarter 2024 Adjusted Net Income (non-GAAP) was $17.2 million, or $0.13 per diluted share. The Company’s average realized price for oil and natural gas for the second quarter of 2024, excluding the effect of commodity derivatives, was $77.84 per Bbl and $1.98 per Mcf, respectively.

Adjusted EBITDAX (non-GAAP) for the second quarter of 2024 totaled $68.3 million, compared to $69.7 million for the second quarter of 2023. Second quarter of 2024 cash flow from operating activities was $64.2 million, including $0.6 million in working capital changes. Operating Cash Flow Before Working Capital Changes (non-GAAP) was $64.8 million. Costs incurred for development activities totaled $67.0 million for the second quarter of 2024.

Operational Update

During the second quarter the Company closed multiple transactions adding 16.4 net future drilling locations for a total acquisition cost of $22.4 million (including $5.8 million of expected future drilling carries).

• Traditional Non-Op or “Burgers & Beer”
  • Acquired 51 gross (4.7 net) future drilling locations for a total acquisition cost of $12.6 million. Estimated future development costs for the acquired properties is $50 million.
  • Acquisitions include assets in the Midland, Delaware, DJ, Williston and Appalachian basins.
• Controlled Capital
  • Midland Basin: Acquired inventory of 8 gross (4.1 net) future drilling locations for a total acquisition cost of $3.4 million and estimated future development costs of $24 million.
  • Delaware Basin: Acquired inventory of 10 gross (7.7 net) locations for a total acquisition cost of $6.4 million and estimated future development costs of $66 million.
  • As the largest interest owner in these locations, Granite Ridge controls development timing.

Subsequent to quarter end, the Company closed additional transactions acquiring 8.7 net future drilling locations for a total acquisition cost of $25 million (inclusive of $3 million of future drilling carries).

Operational Activity

The table below provides a summary of gross and net wells completed and put on production for the three and six months ended June 30, 2024:

 

Three Months Ended June 30, 2024

 

Six Months Ended June 30, 2024

 

Gross

 

Net

 

Gross

 

Net

Permian

42

 

8.80

 

59

 

10.32

Eagle Ford

5

 

0.20

 

13

 

3.10

Bakken

11

 

0.10

 

29

 

0.39

Haynesville

0

 

0.00

 

6

 

0.34

DJ

4

 

0.00

 

13

 

0.02

Total

62

 

9.10

 

120

 

14.17

On June 30, 2024, the Company had 267 gross (9.6 net) wells in process.

Costs Incurred

The tables below provide the costs incurred for oil and natural gas producing activities for the periods indicated:

 

Three Months Ended June 30,

 

Six Months Ended June 30,

(in thousands)

 

2024

 

 

2023

 

 

2024

 

 

2023

Property acquisition costs:

 

 

 

 

 

 

 

Proved

$

1,677

 

$

1,309

 

$

2,824

 

$

19,298

Unproved

 

17,115

 

 

3,161

 

 

18,596

 

 

12,791

Development costs

 

66,951

 

 

58,739

 

 

129,590

 

 

157,345

Total costs incurred for oil and natural gas properties

$

85,743

 

$

63,209

 

$

151,010

 

$

189,434

Commodity Derivatives Update

The Company’s commodity derivatives strategy is intended to manage its exposure to commodity price fluctuations. Please see the table under “Derivatives Information” below for detailed information about Granite Ridge’s current derivatives positions.

2024 Guidance

The following table summarizes the Company’s operational and financial guidance for 2024. The Company is providing updated capital guidance incorporating acquisition costs and 2024 expected development capital for the recently acquired properties.

 

Prior

Current

 

Annual production (Boe per day)

23,250 - 25,250

23,250 - 25,250

 

Oil as a % of sales volumes

47 %

48 %

 

 

 

 

 

Acquisitions ($ in millions)

$35 - $35

$60 - $60

 

Development capital expenditures ($ in millions)

$230 - $250

$295 - $305

 

Total capital expenditures ($ in millions)

$265 - $285

$355 - $365

 

 

 

 

 

Net wells placed on production

22 - 24

22 - 24

 

 

 

 

 

Lease operating expenses (per Boe)

$6.50 - $7.50

$6.50 - $7.50

 

Production and ad valorem taxes (as a % of total sales)

7% - 8%

7% - 8%

 

Cash general and administrative expense ($ in millions)

$23 - $26

$23 - $26

 

Conference Call

Granite Ridge will host a conference call on August 9, 2024, at 10:00 AM CT (11:00 AM ET) to discuss its second quarter 2024 results. A brief Q&A session for security analysts will immediately follow the discussion. The telephone number and passcode to access the conference call are provided below:

Dial-in: (888) 660-6093 Intl. dial-in: (929) 203-0844 Participant Passcode: 4127559

To access the live webcast visit Granite Ridge’s website at www.graniteridge.com. Alternatively, an audio replay will be available through August 23, 2024. To access the audio replay dial (800) 770-2030 and enter confirmation code 4127559.

Upcoming Investor Events

Granite Ridge management will also be participating in the following upcoming investor events:

• Enercom (Denver, CO) - August 19-21, 2024.
• Midwest IDEAS Conference (Chicago, IL) - August 28 - 29, 2024.
• Barclays CEO Energy-Power Conference (New York, NY) - September 3 - 5, 2024.
• Pickering Energy Partners Energy Conference (Austin, TX) - September 16, 2024.
• Minerals & Non-Op Assembly (Houston, TX) - October 15, 2024.
• Bank of America Global Energy Conference (Houston, TX) - November 12 - 13, 2024.
• Stephens Annual Investment Conference (Nashville, TN) - November 21, 2024.
• Capital One Annual Energy Conference (Houston, TX) - December 10, 2024.

Any investor presentations to be used for such events will be posted prior to the respective event on Granite Ridge’s website. Information on Granite Ridge’s website does not constitute a portion of, and is not incorporated by reference into this press release.

About Granite Ridge

Granite Ridge is a scaled, non-operated oil and gas exploration and production company. We own a portfolio of wells and top-tier acreage across the Permian and four other prolific unconventional basins across the United States. Rather than drill wells ourselves, we increase asset diversity and decrease overhead by investing in a smaller piece of a larger number of high-graded wells drilled by proven public and private operators. We create value by generating sustainable full-cycle risk adjusted returns for investors, offering a rewarding experience for our team, and delivering reliable energy solutions to all – safely and responsibly. For more information, visit Granite Ridge’s website at www.graniteridge.com.

Forward-Looking Statements and Cautionary Statements

This press release contains forward-looking statements regarding future events and future results that are subject to the safe harbors created under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. All statements other than statements of historical facts included in this release including, without limitation, Granite Ridge’s 2024 outlook, financial position, operating and financial performance, business strategy, plans and objectives of management for future operations, industry conditions, indebtedness covenant compliance, capital expenditures, production and cash flows, and our intention or ability to pay or increase dividends on our capital are forward-looking statements. When used in this release, forward-looking statements are generally accompanied by terms or phrases such as “estimate,” “project,” “predict,” “believe,” “expect,” “continue,” “anticipate,” “target,” “could,” “plan,” “intend,” “seek,” “goal,” “will,” “should,” “may” or other words and similar expressions that convey the uncertainty of future events or outcomes. Items contemplating or making assumptions about actual or potential future production and sales, market size, collaborations, cash flows, and trends or operating results also constitute such forward-looking statements.

Forward-looking statements involve inherent risks and uncertainties, and important factors (many of which are beyond Granite Ridge’s control) that could cause actual results to differ materially from those set forth in the forward-looking statements, including the following: Granite Ridge’s financial performance following the business combination, changes in Granite Ridge’s strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects and plans, changes in current or future commodity prices and interest rates, supply chain disruptions, infrastructure constraints and related factors affecting our properties, ability to acquire additional development opportunities and potential or pending acquisition transactions, as well as the effects of such acquisitions on the Company’s cash position and levels of indebtedness, changes in our reserves estimates or the value thereof, operational risks including, but not limited to, the pace of drilling and completions activity on our properties, changes in the markets in which Granite Ridge competes, geopolitical risk and changes in applicable laws, legislation, or regulations, including those relating to environmental matters, cyber-related risks, the fact that reserve estimates depend on many assumptions that may turn out to be inaccurate and that any material inaccuracies in reserve estimates or underlying assumptions will materially affect the quantities and present value of Granite Ridge’s reserves, the outcome of any known and unknown litigation and regulatory proceedings, limited liquidity and trading of Granite Ridge’s securities, acts of war, terrorism or uncertainty regarding the effects and duration of global hostilities, including the Israel-Hamas conflict, the Russia-Ukraine war, continued instability in the Middle East, including from the Houthi rebels in Yemen, and any associated armed conflicts or related sanctions which may disrupt commodity prices and create instability in the financial markets, and market conditions and global, regulatory, technical, and economic factors beyond Granite Ridge’s control, including the potential adverse effects of world health events, such as the COVID-19 pandemic, affecting capital markets, general economic conditions, global supply chains and Granite Ridge’s business and operations, and increasing regulatory and investor emphasis on, and attention to, environmental, social and governance matters, our ability to establish and maintain effective internal control over financial reporting, and other factors discussed in our Annual Report on Form 10-K for the year ended December 31, 2023 under “Risk Factors,” as updated by any subsequent Quarterly Reports on Form 10-Q that we file with the United States Securities and Exchange Commission.

Granite Ridge has based these forward-looking statements on its current expectations and assumptions about future events. While management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond Granite Ridge’s control. If one or more of these risks or uncertainties materialize, or if the underlying assumptions prove incorrect, Granite Ridge’s actual results may vary materially from those expected or projected. Forward-looking statements speak only as of the date they are made. Granite Ridge does not undertake, and specifically disclaims, any obligation to update any forward-looking statements to reflect events or circumstances occurring after the date of such statements, other than as may be required by applicable law or regulation.

Use of Non-GAAP Financial Measures

To supplement the presentation of the Company’s financial results prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”), this press release contains certain financial measures that are not prepared in accordance with GAAP, including Adjusted Net Income, Adjusted Earnings Per Share, Adjusted EBITDAX, Operating Cash Flow Before Working Capital Changes and Free Cash Flow.

See “Supplemental Non-GAAP Financial Measures” below for a description and reconciliation of each non-GAAP measure presented in this press release to the most directly comparable financial measure calculated in accordance with GAAP.

Granite Ridge Resources Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

 

(in thousands, except par value and share data)

June 30, 2024

 

December 31, 2023

ASSETS

 

 

 

Current assets:

 

 

 

Cash

$

13,542

 

 

$

10,430

 

Revenue receivable

 

67,249

 

 

 

72,934

 

Advances to operators

 

13,713

 

 

 

4,928

 

Prepaid and other expenses

 

2,481

 

 

 

1,716

 

Derivative assets - commodity derivatives

 

4,181

 

 

 

11,117

 

Equity investments

 

49,432

 

 

 

50,427

 

Total current assets

 

150,598

 

 

 

151,552

 

Property and equipment:

 

 

 

Oil and gas properties, successful efforts method

 

1,384,375

 

 

 

1,236,683

 

Accumulated depletion

 

(549,466

)

 

 

(467,141

)

Total property and equipment, net

 

834,909

 

 

 

769,542

 

Long-term assets:

 

 

 

Derivative assets - commodity derivatives

 

—

 

 

 

1,189

 

Other long-term assets

 

4,983

 

 

 

4,821

 

Total long-term assets

 

4,983

 

 

 

6,010

 

Total assets

$

990,490

 

 

$

927,104

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

Current liabilities:

 

 

 

Accrued expenses

$

62,336

 

 

$

60,875

 

Other liabilities

 

5,000

 

 

 

1,204

 

Total current liabilities

 

67,336

 

 

 

62,079

 

Long-term liabilities:

 

 

 

Long-term debt

 

165,000

 

 

 

110,000

 

Derivative liabilities - commodity derivatives

 

2,480

 

 

 

—

 

Asset retirement obligations

 

9,961

 

 

 

9,391

 

Deferred tax liability

 

80,392

 

 

 

73,989

 

Total long-term liabilities

 

257,833

 

 

 

193,380

 

Total liabilities

 

325,169

 

 

 

255,459

 

Stockholders' Equity:

 

 

 

Common stock, $0.0001 par value, 431,000,000 shares authorized, 136,424,207 and 136,040,777 issued at June 30, 2024 and December 31, 2023, respectively

 

14

 

 

 

14

 

Additional paid-in capital

 

654,269

 

 

 

653,174

 

Retained earnings

 

47,380

 

 

 

54,782

 

Treasury stock, at cost, 5,680,255 and 5,677,627 shares at June 30, 2024 and December 31, 2023, respectively

 

(36,342

)

 

 

(36,325

)

Total stockholders' equity

 

665,321

 

 

 

671,645

 

Total liabilities and stockholders' equity

$

990,490

 

 

$

927,104

 

Granite Ridge Resources Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

(in thousands, except per share data)

 

2024

 

 

 

2023

 

 

 

2024

 

 

 

2023

 

Revenues:

 

 

 

 

 

 

 

Oil and natural gas sales

$

90,652

 

 

$

87,557

 

 

$

179,648

 

 

$

178,867

 

Operating costs and expenses:

 

 

 

 

 

 

 

Lease operating expenses

 

13,669

 

 

 

14,406

 

 

 

29,148

 

 

 

28,178

 

Production and ad valorem taxes

 

6,881

 

 

 

6,303

 

 

 

12,630

 

 

 

12,020

 

Depletion and accretion expense

 

41,592

 

 

 

34,969

 

 

 

82,533

 

 

 

68,821

 

Impairments of unproved properties

 

—

 

 

 

—

 

 

 

732

 

 

 

—

 

General and administrative (including non-cash stock-based compensation of $583 and $1,095 for the three and six months ended June 30, 2024)

 

6,623

 

 

 

8,011

 

 

 

13,115

 

 

 

16,590

 

Total operating costs and expenses

 

68,765

 

 

 

63,689

 

 

 

138,158

 

 

 

125,609

 

Net operating income

 

21,887

 

 

 

23,868

 

 

 

41,490

 

 

 

53,258

 

Other income (expense):

 

 

 

 

 

 

 

Gain (loss) on derivatives - commodity derivatives

 

(785

)

 

 

1,221

 

 

 

(3,946

)

 

 

14,544

 

Interest expense

 

(5,817

)

 

 

(1,211

)

 

 

(8,977

)

 

 

(1,550

)

Loss on derivatives - common stock warrants

 

—

 

 

 

(11,012

)

 

 

—

 

 

 

(5,734

)

Loss on equity investments

 

(8,774

)

 

 

—

 

 

 

(995

)

 

 

—

 

Dividend income

 

269

 

 

 

—

 

 

 

269

 

 

 

—

 

Other

 

(1

)

 

 

—

 

 

 

1

 

 

 

—

 

Total other income (expense)

 

(15,108

)

 

 

(11,002

)

 

 

(13,648

)

 

 

7,260

 

Income before income taxes

 

6,779

 

 

 

12,866

 

 

 

27,842

 

 

 

60,518

 

Income tax expense

 

1,678

 

 

 

4,129

 

 

 

6,515

 

 

 

14,915

 

Net income

$

5,101

 

 

$

8,737

 

 

$

21,327

 

 

$

45,603

 

 

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

 

Basic

$

0.04

 

 

$

0.07

 

 

$

0.16

 

 

$

0.34

 

Diluted

$

0.04

 

 

$

0.07

 

 

$

0.16

 

 

$

0.34

 

Weighted-average number of shares outstanding:

 

 

 

 

 

 

 

Basic

 

130,204

 

 

 

132,866

 

 

 

130,170

 

 

 

132,933

 

Diluted

 

130,251

 

 

 

132,880

 

 

 

130,207

 

 

 

132,941

 

Granite Ridge Resources Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

 

Six Months Ended June 30,

(in thousands)

 

2024

 

 

 

2023

 

Operating activities:

 

 

 

Net income

$

21,327

 

 

$

45,603

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

Depletion and accretion expense

 

82,533

 

 

 

68,821

 

Impairments of unproved properties

 

732

 

 

 

—

 

(Gain) loss on derivatives - commodity derivatives

 

3,946

 

 

 

(14,544

)

Net cash receipts from commodity derivatives

 

6,659

 

 

 

14,411

 

Stock-based compensation

 

1,095

 

 

 

1,434

 

Amortization of deferred financing costs

 

2,811

 

 

 

327

 

Loss on derivatives - common stock warrants

 

—

 

 

 

5,734

 

Loss on equity investments

 

995

 

 

 

—

 

Deferred income taxes

 

6,403

 

 

 

14,662

 

Other

 

(71

)

 

 

(145

)

Increase (decrease) in cash attributable to changes in operating assets and liabilities:

 

 

 

Revenue receivable

 

5,685

 

 

 

16,602

 

Other receivable

 

530

 

 

 

—

 

Accrued expenses

 

(2,398

)

 

 

1,472

 

Prepaid and other expenses

 

(1,294

)

 

 

950

 

Other payable

 

3,889

 

 

 

333

 

Net cash provided by operating activities

 

132,842

 

 

 

155,660

 

Investing activities:

 

 

 

Capital expenditures for oil and natural gas properties

 

(135,874

)

 

 

(182,293

)

Acquisition of oil and natural gas properties

 

(20,868

)

 

 

(29,516

)

Proceeds from sale of oil and natural gas properties

 

2,881

 

 

 

—

 

Refund of advances to operators

 

1,282

 

 

 

—

 

Net cash used in investing activities

 

(152,579

)

 

 

(211,809

)

Financing activities:

 

 

 

Proceeds from borrowing on credit facilities

 

55,000

 

 

 

72,500

 

Repayments of borrowing on credit facilities

 

—

 

 

 

(17,500

)

Deferred financing costs

 

(3,004

)

 

 

(28

)

Payment of expenses related to formation of Granite Ridge Resources, Inc.

 

—

 

 

 

(43

)

Purchase of treasury shares

 

(418

)

 

 

(5,857

)

Payment of dividends

 

(28,729

)

 

 

(29,263

)

Net cash provided by financing activities

 

22,849

 

 

 

19,809

 

Net change in cash and restricted cash

 

3,112

 

 

 

(36,340

)

Cash and restricted cash at beginning of period

 

10,730

 

 

 

51,133

 

Cash and restricted cash at end of period

$

13,842

 

 

$

14,793

 

Supplemental disclosure of non-cash investing activities:

 

 

 

Oil and natural gas property development costs in accrued expenses

$

9,165

 

 

$

(13,903

)

Advances to operators applied to development of oil and natural gas properties

$

50,625

 

 

$

53,379

 

Cash and restricted cash:

 

 

 

Cash

$

13,542

 

 

$

14,493

 

Restricted cash included in other long-term assets

 

300

 

 

 

300

 

Cash and restricted cash

$

13,842

 

 

$

14,793

 

Granite Ridge Resources Inc.

Summary Production and Price Data

 

The following table sets forth summary information concerning production and operating data for the periods indicated:

 

 

Three months ended June 30,

 

Six Months Ended June 30,

 

 

2024

 

 

 

2023

 

 

2024

 

 

 

2023

Net Sales (in thousands):

 

 

 

 

 

 

 

Oil sales

$

77,493

 

 

$

69,070

 

$

153,259

 

 

$

142,545

Natural gas sales

 

13,159

 

 

 

18,487

 

 

26,389

 

 

 

36,322

Total revenues

 

90,652

 

 

 

87,557

 

 

179,648

 

 

 

178,867

 

 

 

 

 

 

 

 

Net Production:

 

 

 

 

 

 

 

Oil (MBbl)

 

996

 

 

 

948

 

 

1,965

 

 

 

1,913

Natural gas (MMcf)

 

6,643

 

 

 

6,082

 

 

13,845

 

 

 

12,802

Total (MBoe)(1)

 

2,103

 

 

 

1,962

 

 

4,273

 

 

 

4,047

Average Daily Production:

 

 

 

 

 

 

 

Oil (Bbl)

 

10,940

 

 

 

10,418

 

 

10,795

 

 

 

10,569

Natural gas (Mcf)

 

72,997

 

 

 

66,835

 

 

76,074

 

 

 

70,729

Total (Boe)(1)

 

23,106

 

 

 

21,557

 

 

23,474

 

 

 

22,357

 

 

 

 

 

 

 

 

Average Sales Prices:

 

 

 

 

 

 

 

Oil (per Bbl)

$

77.84

 

 

$

72.86

 

$

78.01

 

 

$

74.51

Effect of gain (loss) on settled oil derivatives on average price (per Bbl)

 

(0.38

)

 

 

1.94

 

 

(0.14

)

 

 

1.98

Oil net of settled oil derivatives (per Bbl) (2)

 

77.46

 

 

 

74.80

 

 

77.87

 

 

 

76.49

 

 

 

 

 

 

 

 

Natural gas sales (per Mcf)

 

1.98

 

 

 

3.04

 

 

1.91

 

 

 

2.84

Effect of gain (loss) on settled natural gas derivatives on average price (per Mcf)

 

0.65

 

 

 

1.02

 

 

0.50

 

 

 

0.83

Natural gas sales net of settled natural gas derivatives (per Mcf) (2)

 

2.63

 

 

 

4.06

 

 

2.41

 

 

 

3.67

 

 

 

 

 

 

 

 

Realized price on a Boe basis excluding settled commodity derivatives

 

43.12

 

 

 

44.63

 

 

42.05

 

 

 

44.20

Effect of gain (loss) on settled commodity derivatives on average price (per Boe)

 

1.88

 

 

 

4.09

 

 

1.56

 

 

 

3.56

Realized price on a Boe basis including settled commodity derivatives (2)

 

45.00

 

 

 

48.72

 

 

43.61

 

 

 

47.76

 

 

 

 

 

 

 

 

Operating Expenses (in thousands):

 

 

 

 

 

 

 

Lease operating expenses

$

13,669

 

 

$

14,406

 

$

29,148

 

 

$

28,178

Production and ad valorem taxes

 

6,881

 

 

 

6,303

 

 

12,630

 

 

 

12,020

Depletion and accretion expense

 

41,592

 

 

 

34,969

 

 

82,533

 

 

 

68,821

General and administrative

 

6,623

 

 

 

8,011

 

 

13,115

 

 

 

16,590

Costs and Expenses (per Boe):

 

 

 

 

 

 

 

Lease operating expenses

$

6.50

 

 

$

7.34

 

$

6.82

 

 

$

6.96

Production and ad valorem taxes

 

3.27

 

 

 

3.21

 

 

2.96

 

 

 

2.97

Depletion and accretion

 

19.78

 

 

 

17.82

 

 

19.32

 

 

 

17.01

General and administrative

 

3.15

 

 

 

4.08

 

 

3.07

 

 

 

4.10

 

 

 

 

 

 

 

 

Net Producing Wells at Period-End:

 

191.94

 

 

 

157.57

 

 

191.94

 

 

 

157.57

(1) Natural gas is converted to Boe using the ratio of one barrel of oil to six Mcf of natural gas.

(2) The presentation of realized prices including settled commodity derivatives is a result of including the net cash receipts from (payments on) commodity derivatives that are presented in our condensed consolidated statements of cash flows. This presentation of average prices with derivatives is a means by which to reflect the actual cash performance of our commodity derivatives for the respective periods and presents oil and natural gas prices with derivatives in a manner consistent with the presentation generally used by the investment community.

Granite Ridge Resources Inc.

Derivatives Information

 

The table below provides data associated with the Company’s derivatives at August 8, 2024, for the periods indicated:

 

 

Third Quarter

 

Fourth Quarter

 

2024 Total

 

2025

 

2026

Collar (oil)

 

 

 

 

 

 

 

Volume (Bbl)

 

361,552

 

 

311,496

 

 

673,048

 

1,898,739

 

—

Weighted-average floor price ($/Bbl)

$

64.32

 

$

64.13

 

$

64.23

$

60.93

$

—

Weighted-average ceiling price ($/Bbl)

$

85.24

 

$

84.97

 

$

85.11

$

79.86

$

—

Swaps (oil)

 

 

 

 

 

 

 

Volume (Bbl)

 

177,492

 

$

128,277

 

 

305,769

$

—

$

—

Weighted-average price ($/Bbl)

$

79.41

 

$

79.30

 

$

79.36

$

—

$

—

Collar (natural gas)

 

 

 

 

 

 

 

Volume (Mcf)

 

—

 

 

1,615,000

 

 

1,615,000

 

8,728,829

 

7,171,176

Weighted-average floor price ($/Mcf)

$

—

 

$

3.57

 

$

3.57

$

3.14

$

3.25

Weighted-average ceiling price ($/Mcf)

$

—

 

$

5.37

 

$

5.37

$

4.15

$

4.00

Swaps (natural gas)

 

 

 

 

 

 

 

Volume (Mcf)

 

4,119,952

 

 

1,895,588

 

 

6,015,540

 

1,612,050

 

—

Weighted-average price ($/Mcf)

$

3.41

 

$

3.55

 

$

3.45

$

3.20

$

—

Granite Ridge Resources Inc. Supplemental Non-GAAP Financial Measures

The Company reports its financial results in accordance with GAAP. However, the Company believes certain non-GAAP performance measures may provide financial statement users with additional meaningful comparisons between current results, the results of its peers and the results of prior periods. In addition, the Company believes these measures are used by analysts and others in the valuation, rating and investment recommendations of companies within the oil and natural gas exploration and production industry. See the reconciliations throughout this release of GAAP financial measures to non-GAAP financial measures for the periods indicated.

Reconciliation of Net Income to Adjusted EBITDAX

Adjusted EBITDAX is presented herein and reconciled from the GAAP measure of net income because of its wide acceptance by the investment community as a financial indicator.

The Company defines Adjusted EBITDAX as net income, before depletion and accretion expense, (gain) loss on derivatives – commodity derivatives, net cash receipts from (payments on) commodity derivatives, interest expense, (gain) loss on derivatives – common stock warrants, non-cash stock-based compensation, income tax expense, impairment of unproved properties, warrant exchange transaction costs, and loss on equity investments. Adjusted EBITDAX is not a measure of net income or cash flows as determined by GAAP.

The Company’s Adjusted EBITDAX measure provides additional information that may be used to better understand the Company’s operations. Adjusted EBITDAX is one of several metrics that the Company uses as a supplemental financial measurement in the evaluation of its business and should not be considered in isolation or as an alternative to, or more meaningful than, net income as an indicator of operating performance. Certain items excluded from Adjusted EBITDAX are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historic cost of depreciable and depletable assets. Adjusted EBITDAX, as used by the Company, may not be comparable to similarly titled measures reported by other companies. The Company believes that Adjusted EBITDAX is a widely followed measure of operating performance and is one of many metrics used by the Company’s management team and by other users of the Company’s consolidated financial statements. For example, Adjusted EBITDAX can be used to assess the Company’s operating performance and return on capital in comparison to other independent exploration and production companies without regard to financial or capital structure, and to assess the financial performance of the Company’s assets and the Company without regard to capital structure or historical cost basis.

The following table provides a reconciliation of the GAAP measure of net income to Adjusted EBITDAX for the periods indicated:

 

Three Months Ended June 30,

 

Six Months Ended June 30,

(in thousands)

 

2024

 

 

2023

 

 

 

2024

 

 

2023

 

Net income

$

5,101

 

$

8,737

 

 

$

21,327

 

$

45,603

 

Interest expense

 

5,817

 

 

1,211

 

 

 

8,977

 

 

1,550

 

Income tax expense

 

1,678

 

 

4,129

 

 

 

6,515

 

 

14,915

 

Depletion and accretion expense

 

41,592

 

 

34,969

 

 

 

82,533

 

 

68,821

 

Non-cash stock-based compensation

 

583

 

 

375

 

 

 

1,095

 

 

1,434

 

Impairments of unproved properties

 

—

 

 

—

 

 

 

732

 

 

—

 

Warrant exchange transaction costs

 

—

 

 

2,456

 

 

 

—

 

 

2,456

 

(Gain) loss on derivatives - commodity derivatives

 

785

 

 

(1,221

)

 

 

3,946

 

 

(14,544

)

Loss on equity investments

 

8,774

 

 

—

 

 

 

995

 

 

—

 

Net cash receipts from commodity derivatives

 

3,951

 

 

8,025

 

 

 

6,659

 

 

14,411

 

Loss on derivatives - common stock warrants

 

—

 

 

11,012

 

 

 

—

 

 

5,734

 

Adjusted EBITDAX

$

68,281

 

$

69,693

 

 

$

132,779

 

$

140,380

 

Reconciliation of Net Cash Provided by Operating Activities to Operating Cash Flow Before Working Capital Changes and to Free Cash Flow

The Company provides Operating Cash Flow (“OCF”) Before Working Capital Changes, which is a non-GAAP financial measure. The Company defines OCF Before Working Capital Changes as net cash provided by operating activities as determined under GAAP excluding changes in operating assets and liabilities such as: changes in cash due to changes in operating assets and liabilities, revenue receivable, other receivable, accrued expenses, prepaid and other expenses and other payables. The Company believes OCF Before Working Capital Changes is an accepted measure of an oil and natural gas company’s ability to generate cash used to fund development and acquisition activities and service debt or pay dividends.

Additionally, the Company provides Free Cash Flow, which is a non-GAAP financial measure. The Company defines Free Cash Flow as OCF Before Working Capital Changes minus development costs. The Company believes that Free Cash Flow is useful to investors as it provides measures to compare cash from operating activities and exploration and development costs across periods on a consistent basis.

These non-GAAP measures should not be considered as alternatives to, or more meaningful than, net cash provided by operating activities as indicators of operating performance.

The following tables provide a reconciliation from the GAAP measure of net cash provided by operating activities to OCF Before Working Capital Changes and to Free Cash Flow:

 

Three Months Ended June 30,

 

Six Months Ended June 30,

(in thousands)

 

2024

 

 

 

2023

 

 

 

2024

 

 

 

2023

 

Net cash provided by operating activities

$

64,186

 

 

$

74,186

 

 

$

132,842

 

 

$

155,660

 

Changes in cash due to changes in operating assets and liabilities:

 

 

 

 

 

 

 

Revenue receivable

 

2,418

 

 

 

(10,169

)

 

 

(5,685

)

 

 

(16,602

)

Other receivable

 

—

 

 

 

(260

)

 

 

(530

)

 

 

—

 

Accrued expenses

 

(815

)

 

 

3,137

 

 

 

2,398

 

 

 

(1,472

)

Prepaid and other expenses

 

(257

)

 

 

(625

)

 

 

1,294

 

 

 

(950

)

Other payable

 

(702

)

 

 

482

 

 

 

(3,889

)

 

 

(333

)

Total working capital changes

 

644

 

 

 

(7,435

)

 

 

(6,412

)

 

 

(19,357

)

Operating Cash Flow Before Working Capital Changes

 

64,830

 

 

 

66,751

 

 

 

126,430

 

 

 

136,303

 

Development costs

 

66,951

 

 

 

58,739

 

 

 

129,590

 

 

 

157,345

 

Free Cash Flow

$

(2,121

)

 

$

8,012

 

 

$

(3,160

)

 

$

(21,042

)

Reconciliation of Net Income to Adjusted Net Income and Adjusted Earnings per Share

The Company provides Adjusted Net Income and Adjusted Earnings Per Share, which are non-GAAP financial measures. Adjusted Net Income and Adjusted Earnings Per Share represent earnings and diluted earnings per share determined under GAAP without regard to certain non-cash and nonrecurring items. The Company defines Adjusted Net Income as net income as determined under GAAP excluding impairments of proved properties, (gain) loss on derivatives - commodity derivatives, net cash receipts from (payments on) commodity derivatives, gain (loss) on derivatives - common stock warrants, loss on equity investments and tax impact on above adjustments.

The Company defines Adjusted Earnings Per Share as Adjusted Net Income divided by weighted average number of diluted shares of common stock outstanding.

The Company believes these measures provide useful information to analysts and investors for analysis of its operating results on a recurring, comparable basis from period to period. Adjusted Net Income and Adjusted Earnings Per Share should not be considered in isolation or as a substitute for earnings or diluted earnings per share as determined in accordance with GAAP and may not be comparable to other similarly titled measures of other companies.

The following table provides a reconciliation from the GAAP measure of net income to Adjusted Net Income, both in total and on a per diluted share basis, for the periods indicated:

 

Three Months Ended June 30,

 

Six Months Ended June 30,

(in thousands, except share data)

 

2024

 

 

 

2023

 

 

 

2024

 

 

 

2023

 

Net income

$

5,101

 

 

$

8,737

 

 

$

21,327

 

 

$

45,603

 

Impairments of unproved properties

 

—

 

 

 

—

 

 

 

732

 

 

 

—

 

(Gain) loss on derivatives - commodity derivatives

 

785

 

 

 

(1,221

)

 

 

3,946

 

 

 

(14,544

)

Net cash receipts from commodity derivatives

 

3,951

 

 

 

8,025

 

 

 

6,659

 

 

 

14,411

 

Loss on equity investments

 

8,774

 

 

 

—

 

 

 

995

 

 

 

—

 

Deferred financing cost amortization acceleration

 

2,167

 

 

 

—

 

 

 

2,167

 

 

 

—

 

Loss on derivatives - common stock warrants

 

—

 

 

 

11,012

 

 

 

—

 

 

 

5,734

 

Warrant exchange transaction costs

 

—

 

 

 

2,456

 

 

 

—

 

 

 

2,456

 

Tax impact on above adjustments (a)

 

(3,606

)

 

 

(4,602

)

 

 

(3,335

)

 

 

(1,829

)

Changes in deferred taxes and other estimates

 

—

 

 

 

1,191

 

 

 

—

 

 

 

1,191

 

Adjusted net income

$

17,172

 

 

$

25,598

 

 

$

32,491

 

 

$

53,022

 

 

 

 

 

 

 

 

 

Earnings per diluted share - as reported

$

0.04

 

 

$

0.07

 

 

$

0.16

 

 

$

0.34

 

Impairments of unproved properties

 

—

 

 

 

—

 

 

 

0.01

 

 

 

—

 

(Gain) loss on derivatives - commodity derivatives

 

0.01

 

 

 

(0.01

)

 

 

0.03

 

 

 

(0.11

)

Net cash receipts from commodity derivatives

 

0.03

 

 

 

0.06

 

 

 

0.05

 

 

 

0.11

 

Loss on derivatives - common stock warrants

 

—

 

 

 

0.08

 

 

 

—

 

 

 

0.04

 

Loss on equity investments

 

0.07

 

 

 

—

 

 

 

0.01

 

 

 

—

 

Deferred financing cost amortization acceleration

 

0.02

 

 

 

—

 

 

 

0.02

 

 

 

—

 

Warrant exchange transaction costs

 

—

 

 

 

0.02

 

 

 

—

 

 

 

0.02

 

Tax impact on above adjustments (a)

 

(0.04

)

 

 

(0.04

)

 

 

(0.03

)

 

 

(0.01

)

Changes in deferred taxes and other estimates

 

—

 

 

 

0.01

 

 

 

—

 

 

 

0.01

 

Adjusted earnings per diluted share

$

0.13

 

 

$

0.19

 

 

$

0.25

 

 

$

0.40

 

Adjusted earnings per share:

 

 

 

 

 

 

 

Basic earnings

$

0.13

 

 

$

0.19

 

 

$

0.25

 

 

$

0.40

 

Diluted earnings

$

0.13

 

 

$

0.19

 

 

$

0.25

 

 

$

0.40

 

(a) Estimated using statutory tax rate in effect for the period.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240808497378/en/

Investor and Media Contact: IR@GraniteRidge.com – (214) 396-2850