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Granite Ridge Resources(GRNT) - 2024 Q4 - Annual Report
GRNTGranite Ridge Resources(GRNT)2025-03-06 22:15
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Financial Performance and Risks - The borrowing base under the Credit Agreement may be reduced due to commodity price declines, potentially limiting future borrowing capacity[216] - The ongoing military conflicts and geopolitical tensions have led to increased volatility in oil and natural gas prices, impacting the company's financial performance[243] - The company is exposed to market risk due to fluctuations in commodity prices, which may necessitate additional commodity price risk management arrangements[392] - A 10% increase in average commodity prices would have decreased the fair value of commodity derivatives by 19.3millionfortheyearendedDecember31,2024[392]−Thecompanymayincursignificantunrealizedlossesfromderivativefinancialinstrumentsifmarketpricesincreasewhilecontractsremaininplace[392]−Investorconcernsregardingthefinancialsystemscouldleadtolessfavorablecommercialfinancingterms,impactingthecompany′sabilitytoacquirefinancingonacceptableterms[249]CorporateGovernanceandControl−ThecompanyiscontrolledbyGreyRockFundIII,whichholdsamajorityofthevotingcommonstock,exemptingitfromcertaincorporategovernancerequirements[232]−TheBoardofDirectorsdoesnothaveamajorityofindependentdirectors,whichmaylimitprotectionsforstockholderscomparedtocompaniescomplyingwithallNYSEgovernancerequirements[233]−Anti−takeoverprovisionsinthecompany′sorganizationaldocumentscoulddelayorpreventachangeofcontrol,limitingstockholders′abilitytoobtainapremiumfortheirshares[224]ShareIssuanceandDividends−ThemaximumnumberofsharesreservedforfutureissuanceundertheGraniteRidge2022OmnibusIncentivePlanis6.5million,representingapproximately4.919.3 million for the year ended December 31, 2024[392] - The company may incur significant unrealized losses from derivative financial instruments if market prices increase while contracts remain in place[392] - Investor concerns regarding the financial systems could lead to less favorable commercial financing terms, impacting the company's ability to acquire financing on acceptable terms[249] Corporate Governance and Control - The company is controlled by Grey Rock Fund III, which holds a majority of the voting common stock, exempting it from certain corporate governance requirements[232] - The Board of Directors does not have a majority of independent directors, which may limit protections for stockholders compared to companies complying with all NYSE governance requirements[233] - Anti-takeover provisions in the company's organizational documents could delay or prevent a change of control, limiting stockholders' ability to obtain a premium for their shares[224] Share Issuance and Dividends - The maximum number of shares reserved for future issuance under the Granite Ridge 2022 Omnibus Incentive Plan is 6.5 million, representing approximately 4.9% of the outstanding shares post-Business Combination[218] - As of December 31, 2024, there are 5.0 million shares of common stock remaining available for future awards under the Incentive Plan[218] - Future issuances of securities for investments or acquisitions could result in significant dilution to existing stockholders[219] - The company paid dividends of 57.5 million, or 0.44pershare,in2024,and0.44 per share, in 2024, and 58.6 million, or 0.44pershare,in2023,butfuturedividendpaymentsareatthediscretionoftheBoardofDirectors[237]DebtandTaxLiabilities−Thecompanyhadtotalindebtednessof0.44 per share, in 2023, but future dividend payments are at the discretion of the Board of Directors[237] Debt and Tax Liabilities - The company had total indebtedness of 205.0 million outstanding under its Credit Agreement at December 31, 2024, with a one percent increase in interest rates resulting in an additional annual interest expense of approximately $2.1 million[394] - Changes in U.S. tax laws, including a 15% corporate alternative minimum tax and a 1% excise tax on stock repurchases, may increase future tax liabilities and adversely affect operating results and cash flows[234] - The company is subject to various complex and evolving tax laws, which could be interpreted or changed, potentially increasing tax liabilities[236] Growth and Exemptions - The company qualifies as an "emerging growth company," allowing it to take advantage of certain exemptions from disclosure requirements, which may affect investor attractiveness[220] - The company may incur debt and/or issue equity that ranks senior to common stock, potentially diluting existing stockholders[223] - The company may utilize interest rate derivatives to manage interest rate exposure, although it had no outstanding interest rate derivative contracts at December 31, 2024[395]