Granite Ridge Resources(GRNT) - 2024 Q2 - Quarterly Results

Second-Quarter 2024 Results Overview Granite Ridge reported strong Q2 2024 results with increased production, strategic acquisitions, and updated capital expenditure guidance Second Quarter 2024 Highlights Granite Ridge achieved a 7% production increase to 23,106 Boe/day, reporting $5.1 million net income and $17.2 million adjusted net income Q2 2024 Key Metrics | Metric | Value | | :--- | :--- | | Production | 23,106 Boe/day (7% YoY increase) | | Net Income | $5.1 million ($0.04/diluted share) | | Adjusted Net Income (non-GAAP) | $17.2 million ($0.13/diluted share) | | Adjusted EBITDAX (non-GAAP) | $68.3 million | | Wells Placed Online | 62 gross (9.10 net) | | Acquisition Cost | $22.4 million | | Quarterly Dividend Paid | $0.11 per share | | Quarter-End Liquidity | $148.2 million | Management Commentary and Q2 Summary Management emphasized the success of its "Controlled Capital" strategy, contributing to a 7% year-over-year production increase and a stable business model - Management emphasized the success of its "Controlled Capital" strategy, which increased capital allocation to projects where Granite Ridge has more control over development timing[4] Q2 2024 Production and Financial Summary | Metric | Q2 2024 | Q2 2023 | % Change | | :--- | :--- | :--- | :--- | | Total Production (Boe/day) | 23,106 | 21,557 | +7% | | Oil Production (Bbls/day) | 10,940 | 10,418 | +5% | | Gas Production (Mcf/day) | 72,997 | 66,835 | +9% | | Net Income | $5.1 million | $8.7 million | -41% | | Adjusted Net Income (non-GAAP) | $17.2 million | $25.6 million | -33% | | Adjusted EBITDAX (non-GAAP) | $68.3 million | $69.7 million | -2% | Q2 2024 Realized Prices (Ex-Derivatives) | Commodity | Realized Price | | :--- | :--- | | Oil | $77.84 per Bbl | | Natural Gas | $1.98 per Mcf | Subsequent Events Following the end of the second quarter, Granite Ridge closed additional acquisitions totaling $25 million for 8.7 net future drilling locations, and declared a quarterly dividend - Closed additional transactions acquiring 8.7 net future drilling locations for a total cost of $25 million, which includes $3 million of expected future drilling carries[3] - The Board of Directors declared a quarterly dividend of $0.11 per share, payable on September 13, 2024[3] Operational Performance The company significantly expanded its drilling inventory through strategic acquisitions and maintained active well development in key basins Operational Update & Acquisitions During Q2, the company acquired 16.4 net future drilling locations for $22.4 million, with an additional 8.7 net locations acquired post-quarter for $25 million - Acquisitions in Q2 2024 added 16.4 net future drilling locations for $22.4 million, with a significant focus on "Controlled Capital" projects in the Midland and Delaware Basins[6] - Subsequent to quarter end, the company acquired an additional 8.7 net future drilling locations for $25 million[7] Well Activity In Q2 2024, the company brought 62 gross (9.10 net) wells online, primarily in the Permian Basin, with 267 gross (9.6 net) wells in process as of June 30, 2024 Wells Completed and Put on Production (Net) | Basin | Q2 2024 Net Wells | YTD 2024 Net Wells | | :--- | :--- | :--- | | Permian | 8.80 | 10.32 | | Eagle Ford | 0.20 | 3.10 | | Bakken | 0.10 | 0.39 | | Haynesville | 0.00 | 0.34 | | DJ | 0.00 | 0.02 | | Total | 9.10 | 14.17 | - As of June 30, 2024, the company had 267 gross (9.6 net) wells in process[8] Costs Incurred Total costs incurred for oil and natural gas properties were $85.7 million in Q2 2024, a significant increase from $63.2 million in Q2 2023, driven by higher acquisition and development costs Costs Incurred for Oil and Natural Gas Properties (in thousands) | Cost Category | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Property acquisition costs: Proved | $1,677 | $1,309 | | Property acquisition costs: Unproved | $17,115 | $3,161 | | Development costs | $66,951 | $58,739 | | Total costs incurred | $85,743 | $63,209 | 2024 Guidance Granite Ridge updated its 2024 guidance, maintaining production targets while significantly increasing capital expenditure due to higher acquisition and development costs Updated 2024 Guidance | Metric | Prior Guidance | Current Guidance | | :--- | :--- | :--- | | Annual production (Boe per day) | 23,250 - 25,250 | 23,250 - 25,250 | | Oil as a % of sales volumes | 47% | 48% | | Acquisitions ($ in millions) | $35 - $35 | $60 - $60 | | Development capital ($ in millions) | $230 - $250 | $295 - $305 | | Total capital expenditures ($ in millions) | $265 - $285 | $355 - $365 | - Operating expense guidance, including lease operating expenses, taxes, and G&A, remains unchanged[12] Financial Statements The company's financial position reflects increased assets and liabilities, with a decline in net income despite higher revenues, and a decrease in operating cash flow Condensed Consolidated Balance Sheets As of June 30, 2024, total assets increased to $990.5 million, driven by property and equipment, while total liabilities grew to $325.2 million due to higher long-term debt Balance Sheet Summary (in thousands) | Account | June 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total Current Assets | $150,598 | $151,552 | | Total Property and Equipment, net | $834,909 | $769,542 | | Total Assets | $990,490 | $927,104 | | Total Current Liabilities | $67,336 | $62,079 | | Long-term Debt | $165,000 | $110,000 | | Total Liabilities | $325,169 | $255,459 | | Total Stockholders' Equity | $665,321 | $671,645 | Condensed Consolidated Statements of Operations For Q2 2024, revenues slightly increased to $90.7 million, but higher operating costs and derivative losses led to a decrease in net income to $5.1 million Statement of Operations Summary (in thousands, except per share data) | Line Item | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Oil and natural gas sales | $90,652 | $87,557 | | Total operating costs and expenses | $68,765 | $63,689 | | Net operating income | $21,887 | $23,868 | | Net income | $5,101 | $8,737 | | Diluted net income per share | $0.04 | $0.07 | Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2024, net cash from operating activities decreased to $132.8 million, while investing activities used $152.6 million, primarily for capital expenditures Cash Flow Summary - Six Months Ended June 30 (in thousands) | Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $132,842 | $155,660 | | Net cash used in investing activities | ($152,579) | ($211,809) | | Net cash provided by financing activities | $22,849 | $19,809 | | Net change in cash | $3,112 | ($36,340) | Summary Production and Price Data In Q2 2024, average daily production increased to 23,106 Boe/day, with oil prices rising and natural gas prices falling, while lease operating expenses per Boe decreased Q2 Production and Price Comparison | Metric | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Average Daily Production | | | | Oil (Bbl/day) | 10,940 | 10,418 | | Natural Gas (Mcf/day) | 72,997 | 66,835 | | Total (Boe/day) | 23,106 | 21,557 | | Average Sales Prices (Ex-Derivatives) | | | | Oil (per Bbl) | $77.84 | $72.86 | | Natural Gas (per Mcf) | $1.98 | $3.04 | | Costs per Boe | | | | Lease operating expenses | $6.50 | $7.34 | Derivatives Information The company actively manages commodity price risk through extensive oil and natural gas derivative positions, including collars and swaps, extending through 2026 2024 Oil Derivative Positions (as of Aug 8, 2024) | Type | Volume (Bbl) | Avg. Floor Price | Avg. Ceiling Price | Avg. Swap Price | | :--- | :--- | :--- | :--- | :--- | | Collar | 673,048 | $64.23 | $85.11 | N/A | | Swap | 305,769 | N/A | N/A | $79.36 | 2024 Natural Gas Derivative Positions (as of Aug 8, 2024) | Type | Volume (Mcf) | Avg. Floor Price | Avg. Ceiling Price | Avg. Swap Price | | :--- | :--- | :--- | :--- | :--- | | Collar | 1,615,000 | $3.57 | $5.37 | N/A | | Swap | 6,015,540 | N/A | N/A | $3.45 | Supplemental Non-GAAP Financial Measures This section provides reconciliations of GAAP net income and cash flow to non-GAAP measures such as Adjusted EBITDAX, Operating Cash Flow, and Free Cash Flow Reconciliation of Net Income to Adjusted EBITDAX Adjusted EBITDAX for Q2 2024 was $68.3 million, a slight decrease from Q2 2023, primarily due to adjustments for non-cash items like depletion and equity investment losses Net Income to Adjusted EBITDAX Reconciliation (in thousands) | Description | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Net income | $5,101 | $8,737 | | Adjustments (Depletion, Interest, Taxes, etc.) | $63,180 | $60,956 | | Adjusted EBITDAX | $68,281 | $69,693 | Reconciliation of Net Cash Provided by Operating Activities to OCF and Free Cash Flow In Q2 2024, Operating Cash Flow Before Working Capital Changes was $64.8 million, resulting in a negative Free Cash Flow of ($2.1 million) after development costs Free Cash Flow Reconciliation (in thousands) | Description | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $64,186 | $74,186 | | Total working capital changes | $644 | ($7,435) | | Operating Cash Flow Before Working Capital Changes | $64,830 | $66,751 | | Development costs | ($66,951) | ($58,739) | | Free Cash Flow | ($2,121) | $8,012 | Reconciliation of Net Income to Adjusted Net Income and Adjusted EPS Adjusted Net Income for Q2 2024 was $17.2 million ($0.13 per diluted share), reflecting adjustments for non-recurring items like equity investment losses and derivative impacts Adjusted Net Income Reconciliation (in thousands, except per share data) | Description | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Net income (GAAP) | $5,101 | $8,737 | | Adjustments | $12,071 | $16,861 | | Adjusted net income (Non-GAAP) | $17,172 | $25,598 | | Earnings per diluted share (GAAP) | $0.04 | $0.07 | | Adjusted earnings per diluted share (Non-GAAP) | $0.13 | $0.19 | Company Information & Events Granite Ridge will host a conference call to discuss Q2 results and plans to participate in multiple investor conferences through year-end Conference Call and Investor Events Granite Ridge will host a conference call on August 9, 2024, to discuss Q2 results and is scheduled to participate in eight investor conferences through December 2024 - A conference call to discuss Q2 2024 results is scheduled for August 9, 2024, at 10:00 AM CT[13] - The company will participate in eight upcoming investor events from August to December 2024[14]