Granite Ridge Resources(GRNT) - 2025 Q2 - Quarterly Results

Executive Summary & Business Outlook Second Quarter 2025 Highlights Granite Ridge Resources, Inc. reported strong second quarter 2025 results, with daily production increasing 37% year-over-year to 31,576 Boe per day, net income significantly rose to $25.1 million, and the company declared a quarterly cash dividend of $0.11 per share - Grew daily production 37% to 31,576 barrels of oil equivalent ("Boe") per day (51% oil), from 23,106 Boe per day for the second quarter of 2024[6] - Reported net income of $25.1 million, or $0.19 per diluted share, versus $5.1 million, or $0.04 per diluted share, for the prior year period[6] - Generated $75.4 million of Adjusted EBITDAX (non-GAAP)[6] - Invested $77.2 million in development capital expenditures and $10.1 million in acquisition capital[6] - Declared dividend of $0.11 per share of common stock[6] - Net Debt to Trailing Twelve Months Adjusted EBITDAX (non-GAAP) of 0.8x[6] CEO Commentary Tyler Farquharson, President and CEO, affirmed the validation of Granite Ridge's business model through strong Q2 production and cash flow, maintaining its strategy of allocating capital to high risk-adjusted returns, driving consistent growth, and returning capital to shareholders - Quarterly results continue to validate the business model, with production and cash flow again exceeding expectations[3] - Increased production by 37% year-over-year to 31,576 Boe per day, driven by a 46% rise in oil production and a 28% rise in natural gas production[4] - Strategy remains unchanged: underwrite development projects with full-cycle returns exceeding 25%, deliver consistent growth, and return capital to shareholders through a quarterly dividend[4] Guidance Update Granite Ridge raised its full-year production guidance by 10% at the midpoint to 31,000–33,000 Boe per day, reflecting strong well performance, and increased capital expenditure guidance to $400–$420 million, primarily to fund approximately $120 million in acquisitions that will add 74 net locations - Raised full-year production guidance by 10% at the midpoint to 31,000–33,000 barrels of oil equivalent per day, achieving 28% year-over-year growth[4][5] - Increased capital expenditure guidance to $400–$420 million, primarily to fund acquisitions expected to close in 2025[4][5] - Plans to deploy approximately $120 million in acquisition capital, adding 74 net locations, with a significant portion allocated to the Permian Basin and Appalachia[6][7] - These acquisitions have secured three additional years of inventory at an entry cost of approximately $1.7 million per location[7] Financial & Operational Review Financial Results Granite Ridge reported Q2 2025 oil and natural gas sales of $109.2 million, with net income surging to $25.1 million, or $0.19 per diluted share, from $5.1 million in the prior year, and Adjusted EBITDAX increasing to $75.4 million - Oil and natural gas sales for the second quarter of 2025 were $109.2 million[8] - Net income was $25.1 million, or $0.19 per diluted share, compared to $5.1 million, or $0.04 per diluted share, for the prior year period[6][8] - Adjusted Net Income (non-GAAP) was $14.0 million, or $0.11 per diluted share[6][8] - Adjusted EBITDAX (non-GAAP) for Q2 2025 totaled $75.4 million compared to $68.3 million for Q2 2024[9] - Cash flow from operating activities was $78.0 million, including $8.6 million in working capital changes[9] Production Results Second quarter 2025 saw significant production growth, with oil production increasing 46% to 16,009 Bbls per day and natural gas production rising 28% to 93,404 Mcf per day, resulting in total daily production growth of 37% year-over-year to 31,576 Boe per day - Oil production volumes totaled 16,009 barrels ("Bbls") per day, a 46% increase from the second quarter of 2024[10] - Natural gas production totaled 93,404 thousand cubic feet of natural gas ("Mcf") per day, a 28% increase from the second quarter of 2024[10] - The Company's daily production for the second quarter of 2025 grew 37% from the second quarter of the prior year to 31,576 Boe per day[10] Oil, Natural Gas and Related Product Sales In Q2 2025, Granite Ridge's average realized price for oil, excluding derivatives, was $61.41 per Bbl, a decrease from $77.84 per Bbl in Q2 2024, while the average realized price for natural gas increased to $2.32 per Mcf from $1.98 per Mcf year-over-year - Average realized price for oil, excluding commodity derivatives, was $61.41 per Bbl in Q2 2025, compared to $77.84 per Bbl in Q2 2024[11] - Average realized price for natural gas, excluding commodity derivatives, was $2.32 per Mcf in Q2 2025, compared to $1.98 per Mcf in Q2 2024[11] Operating Costs Lease operating expenses increased to $20.1 million ($7.00 per Boe) in Q2 2025, up from $13.7 million ($6.50 per Boe) in Q2 2024, primarily due to higher service and saltwater disposal costs, while general and administrative expenses totaled $8.5 million, including $2.8 million in nonrecurring severance and capital markets expenses - Lease operating expenses were $20.1 million ($7.00 per Boe) for Q2 2025, compared to $13.7 million ($6.50 per Boe) in Q2 2024, primarily due to an overall increase in service costs, particularly saltwater disposal costs[12] - Production and ad valorem taxes were $6.4 million for the quarter, or 6% of oil and natural gas sales[12] - General and administrative expenses totaled $8.5 million, or $2.96 per Boe, inclusive of $2.8 million of nonrecurring severance and capital markets expenses[12] Capital Expenditures and Operational Activity Total capital expenditures for Q2 2025 amounted to $87.3 million, with $77.2 million allocated to development and $10.1 million to property acquisitions, resulting in 4.9 net wells turned in-line, a decrease from 9.1 net wells in Q2 2024 - Capital expenditures for the quarter were $87.3 million, comprised of $77.2 million of development capital and $10.1 million of property acquisition costs[13] - The Company closed nine acquisitions in the Permian and Utica Basins, adding an aggregate inventory of 5.5 net undeveloped locations[13] - The Company had 4.9 net wells turned in-line ("TIL") during the second quarter of 2025, compared to 9.1 net wells TIL in the second quarter of 2024[13] | (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Property acquisition costs: Proved | $ — | $ 1,677 | $ 13,341 | $ 2,824 | | Property acquisition costs: Unproved | 10,069 | 17,115 | 31,090 | 18,596 | | Development costs | 77,185 | 66,951 | 148,587 | 129,590 | | Total costs incurred for oil and natural gas properties | $ 87,254 | $ 85,743 | $ 193,018 | $ 151,010 | - At June 30, 2025, the Company had 125 gross (16.0 net) wells in process[14] Liquidity and Capital Resources As of June 30, 2025, Granite Ridge maintained $103.4 million in liquidity, comprising $99.7 million of committed borrowing availability and $3.7 million of cash on hand, with $275.0 million of debt outstanding under its Credit Agreement - As of June 30, 2025, Granite Ridge had $275.0 million of debt outstanding under its Credit Agreement[15] - The Company had $103.4 million of liquidity, consisting of $99.7 million of committed borrowing availability and $3.7 million of cash on hand[15] Commodity Derivatives Update Granite Ridge employs a commodity derivatives strategy to manage its exposure to fluctuations in commodity prices, with detailed information on current derivative positions provided in the 'Derivatives Information' section of the report - The Company's commodity derivatives strategy is intended to manage its exposure to commodity price fluctuations[16] 2025 Updated Guidance Granite Ridge updated its 2025 operational and financial guidance, raising annual production to 31,000-33,000 Boe per day and increasing total capital expenditures to $400-$420 million, which includes $120 million for acquisitions | Annual production (Boe per day) | 31,000 - 33,000 | | :--- | :--- | | Oil as a % of sales volumes | 51% - 53% | | Acquisitions ($ in millions) | $120 - $120 | | Development capital expenditures ($ in millions) | $280 - $300 | | Total capital expenditures ($ in millions) | $400 - $420 | | Lease operating expenses (per Boe) | $6.25 - $7.25 | | Production and ad valorem taxes (as a % of total sales) | 6% - 7% | | Cash general and administrative expense ($ in millions) | $25 - $27 | Corporate Information & Disclosures Conference Call Granite Ridge will host a conference call on August 8, 2025, at 10:00 AM CT to discuss its second quarter 2025 results, followed by a Q&A session, with dial-in and webcast details provided for access - Granite Ridge will host a conference call on August 8, 2025, at 10:00 AM CT (11:00 AM ET) to discuss its second quarter 2025 results[19] - Dial-in: (888) 660-6093, Intl. dial-in: (929) 203-0844, Participant Passcode: 4127559. Live webcast available at www.graniteridge.com[19](index=19&type=chunk) Upcoming Investor Events Granite Ridge management is scheduled to participate in three investor events in August and September 2025: Enercom The Energy Investment Conference, Three Part Advisors Midwest IDEAS Conference, and Pickering Energy Conference - Enercom The Energy Investment Conference (Denver, CO) - August 19, 2025[23] - Three Part Advisors Midwest IDEAS Conference (Chicago, IL) - August 26, 2025[23] - Pickering Energy Conference (Austin, TX) - September 30, 2025[23] About Granite Ridge Granite Ridge is a scaled energy company that offers shareholders exposure similar to energy private equity through operated partnerships and traditional non-operated assets across six prolific unconventional basins in the United States, aiming for diversified portfolios with best-in-class full-cycle returns and a low leverage profile - Granite Ridge is a scaled energy company which aims to provide shareholders with exposure similar to energy private equity through operated partnerships and traditional non-operated assets[21] - Owns assets in six prolific unconventional basins across the United States[21] - Aims to deliver a diversified portfolio with best-in-class full cycle returns by investing in a large number of high-graded deals developed by proven public and private operators, balancing with a low leverage profile[21] Forward-Looking Statements and Cautionary Statements This press release contains forward-looking statements subject to inherent risks and uncertainties, including changes in commodity prices, operational risks, geopolitical factors, and regulatory changes, which could cause actual results to differ materially, and Granite Ridge does not undertake to update these statements unless required by federal securities laws - 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 and the Securities Exchange Act of 1934[22] - 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[24] - Key risks include changes in strategy, commodity prices, interest rates, supply chain disruptions, infrastructure constraints, ability to acquire development opportunities, changes in reserves estimates, operational risks, geopolitical risk, and changes in applicable laws or regulations[24] - Granite Ridge does not undertake any duty to update or revise any forward-looking statements, except as may be required by the federal securities laws[25] Financial Statements (Unaudited) Condensed Consolidated Balance Sheets As of June 30, 2025, Granite Ridge's total assets increased to $1,104.96 million from $1,036.48 million at December 31, 2024, primarily driven by an increase in oil and gas properties, while total liabilities also increased to $462.50 million, with long-term debt rising to $275.0 million | (in thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | ASSETS | | | | Total current assets | $ 108,964 | $ 135,221 | | Total property and equipment, net | 989,218 | 896,970 | | Total long-term assets | 6,781 | 4,288 | | Total assets | $ 1,104,963 | $ 1,036,479 | | LIABILITIES AND STOCKHOLDERS' EQUITY | | | | Total current liabilities | $ 82,474 | $ 101,808 | | Total long-term liabilities | 380,023 | 299,318 | | Total liabilities | $ 462,497 | $ 401,126 | | Total stockholders' equity | 642,466 | 635,353 | | Total liabilities and stockholders' equity | $ 1,104,963 | $ 1,036,479 | Condensed Consolidated Statements of Operations For Q2 2025, oil and natural gas sales increased to $109.2 million from $90.7 million in Q2 2024, and net income significantly rose to $25.1 million ($0.19 per diluted share) from $5.1 million ($0.04 per diluted share) in the prior year, largely due to a substantial gain on commodity derivatives | (in thousands, except per share data) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Oil and natural gas sales | $ 109,219 | $ 90,652 | $ 232,150 | $ 179,648 | | Total operating costs and expenses | 88,484 | 68,765 | 168,880 | 138,158 | | Net operating income | 20,735 | 21,887 | 63,270 | 41,490 | | Gain (loss) on derivatives - commodity derivatives | 23,925 | (785) | 9,068 | (3,946) | | Income before income taxes | 32,858 | 6,779 | 45,550 | 27,842 | | Income tax expense | 7,777 | 1,678 | 10,657 | 6,515 | | Net income | $ 25,081 | $ 5,101 | $ 34,893 | $ 21,327 | | Net income per diluted share | $ 0.19 | $ 0.04 | $ 0.27 | $ 0.16 | Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2025, net cash provided by operating activities increased to $154.1 million from $132.8 million in the prior year, net cash used in investing activities rose to $200.5 million, primarily due to increased capital expenditures and acquisitions, while net cash provided by financing activities also increased to $40.7 million | (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $ 154,134 | $ 132,842 | | Net cash used in investing activities | (200,533) | (152,579) | | Net cash provided by financing activities | 40,723 | 22,849 | | Net change in cash and restricted cash | (5,676) | 3,112 | | Cash and restricted cash at end of period | $ 3,743 | $ 13,842 | Supplemental Data Summary Production and Price Data In Q2 2025, total revenues reached $109.2 million, with oil sales at $89.5 million and natural gas sales at $19.8 million, average daily production was 31,576 Boe, comprising 16,009 Bbl/day of oil and 93,404 Mcf/day of natural gas, with average realized oil prices decreasing year-over-year, while natural gas prices increased | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net Sales (in thousands): | | | | Oil sales | $ 89,462 | $ 77,493 | | Natural gas and related product sales | $ 19,757 | $ 13,159 | | Total revenues | $ 109,219 | $ 90,652 | | Average Daily Production: | | | | Oil (Bbl) | 16,009 | 10,940 | | Natural gas (Mcf) | 93,404 | 72,997 | | Total (Boe) | 31,576 | 23,106 | | Average Sales Prices (excluding derivatives): | | | | Oil (per Bbl) | $ 61.41 | $ 77.84 | | Natural gas sales (per Mcf) | $ 2.32 | $ 1.98 | | Realized price on a Boe basis excluding settled commodity derivatives | $ 38.01 | $ 43.12 | | Operating Expenses (per Boe): | | | | Lease operating expenses | $ 7.00 | $ 6.50 | | Production and ad valorem taxes | $ 2.24 | $ 3.27 | | Depletion and accretion | $ 18.59 | $ 19.78 | | General and administrative | $ 2.96 | $ 3.15 | Derivatives Information As of August 7, 2025, Granite Ridge has various commodity derivatives in place for Q3, Q4 2025, and 2026, including oil collars, natural gas collars, and natural gas swaps, to manage price exposure and mitigate market fluctuations | | Third Quarter | Fourth Quarter | Total 2025 | 2026 | | :--- | :--- | :--- | :--- | :--- | | Collar (oil) | | | | | | Volume (Bbl) | 802,210 | 698,000 | 1,500,210 | 2,104,980 | | Weighted-average floor price ($/Bbl) | $ 61.95 | $ 60.00 | $ 61.04 | $ 60.00 | | Weighted-average ceiling price ($/Bbl) | $ 78.51 | $ 77.13 | $ 77.87 | $ 70.44 | | Collar (natural gas) | | | | | | Volume (Mcf) | 2,441,757 | 3,820,615 | 6,262,372 | 10,506,446 | | Weighted-average floor price ($/Mcf) | $ 3.00 | $ 3.43 | $ 3.26 | $ 3.48 | | Weighted-average ceiling price ($/Mcf) | $ 3.75 | $ 4.23 | $ 4.04 | $ 4.25 | | Swaps (natural gas) | | | | | | Volume (Mcf) | 2,762,450 | 831,350 | 3,593,800 | 4,351,400 | | Weighted-average price ($/Mcf) | $ 3.67 | $ 3.67 | $ 3.67 | $ 3.68 | Supplemental Non-GAAP Financial Measures Use of Non-GAAP Financial Measures Granite Ridge utilizes non-GAAP financial measures, including Adjusted Net Income, Adjusted EPS, Adjusted EBITDAX, and Operating Cash Flow Before Working Capital Changes, to provide additional meaningful comparisons for financial statement users and analysts, supplementing GAAP results and aiding in valuation and investment recommendations - 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[40] - 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[40] - Non-GAAP measures include Adjusted Net Income, Adjusted Earnings Per Share, Adjusted EBITDAX, Trailing Twelve Months Adjusted EBITDAX, Operating Cash Flow Before Working Capital Changes, and Net Debt[26] Reconciliation of Net Income to Adjusted EBITDAX Adjusted EBITDAX, a non-GAAP measure, is defined as net income before depletion, unrealized derivative gains/losses, interest, taxes, stock-based compensation, impairments, and equity investment losses, with Q2 2025 Adjusted EBITDAX at $75.4 million, up from $68.3 million in Q2 2024, and Trailing Twelve Months Adjusted EBITDAX at $324.9 million - Adjusted EBITDAX is defined as net income before depletion and accretion expense, unrealized (gain) loss on derivatives – commodity derivatives, interest expense, net, non-cash stock-based compensation, income tax expense, impairment of unproved properties, impairment of long-lived assets, loss on equity investments, and other, net[42] | (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net income | $ 25,081 | $ 5,101 | $ 34,893 | $ 21,327 | | Interest expense, net | 5,914 | 5,817 | 10,929 | 8,977 | | Income tax expense | 7,777 | 1,678 | 10,657 | 6,515 | | Depletion and accretion expense | 53,412 | 41,592 | 101,857 | 82,533 | | Non-cash stock-based compensation | 395 | 583 | 1,048 | 1,095 | | Unrealized (gain) loss on derivatives - commodity derivatives | (22,954) | 4,736 | (8,210) | 10,605 | | Loss on equity investments | 5,795 | 8,774 | 15,766 | 995 | | Adjusted EBITDAX | $ 75,420 | $ 68,281 | $ 166,820 | $ 132,779 | - Trailing Twelve Months Adjusted EBITDAX was $324,885 thousand for the period ended June 30, 2025[45] Reconciliation of Debt to Net Debt Net Debt, a non-GAAP financial measure, is calculated as long-term debt less cash, and as of June 30, 2025, Net Debt was $271.3 million, resulting in a Net Debt to Trailing Twelve Months Adjusted EBITDAX ratio of 0.8x, providing insight into the Company's leverage - Net Debt is defined as long-term debt less cash as of the balance sheet date[46] | (in thousands except for ratio) | June 30, 2025 | | :--- | :--- | | Long-term debt | $ 275,000 | | Cash | 3,743 | | Net Debt | $ 271,257 | | Net Debt to Trailing Twelve Months Adjusted EBITDAX Ratio | 0.8 | Reconciliation of Net Income to Adjusted Net Income and Adjusted Earnings Per Share Adjusted Net Income and Adjusted Earnings Per Share are non-GAAP measures that exclude certain non-cash and nonrecurring items from GAAP net income, with Q2 2025 Adjusted Net Income at $14.0 million, or $0.11 per diluted share, compared to $17.2 million ($0.13 per diluted share) in Q2 2024 - Adjusted Net Income represents earnings determined under GAAP without regard to certain non-cash and nonrecurring items, including impairments, unrealized derivative gains/losses, loss on equity investments, deferred financing cost amortization acceleration, and certain nonrecurring general and administrative expenses and tax impact on above adjustments[47] - Adjusted Earnings Per Share is defined as Adjusted Net Income divided by weighted average number of diluted shares of common stock outstanding[48] | (in thousands, except share data) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net income | $ 25,081 | $ 5,101 | $ 34,893 | $ 21,327 | | Unrealized (gain) loss on derivatives - commodity derivatives | (22,954) | 4,736 | (8,210) | 10,605 | | Loss on equity investments | 5,795 | 8,774 | 15,766 | 995 | | Deferred financing cost amortization acceleration | — | 2,167 | — | 2,167 | | Nonrecurring general and administrative expenses - severance costs | 1,732 | — | 1,732 | — | | Nonrecurring general and administrative expenses - capital markets transaction costs | 1,112 | — | 1,112 | — | | Tax impact on above adjustments (a) | 3,235 | (3,606) | (2,350) | (3,335) | | Adjusted Net Income | $ 14,001 | $ 17,172 | $ 42,943 | $ 32,491 | | Earnings per diluted share - as reported | $ 0.19 | $ 0.04 | $ 0.27 | $ 0.16 | | Adjusted Earnings Per Diluted Share | $ 0.11 | $ 0.13 | $ 0.33 | $ 0.25 | Reconciliation of Net Cash Provided by Operating Activities to Operating Cash Flow Before Working Capital Changes Operating Cash Flow (OCF) Before Working Capital Changes is a non-GAAP measure that excludes the impact of changes in operating assets and liabilities from net cash provided by operating activities, with Q2 2025 OCF Before Working Capital Changes at $69.5 million, compared to $64.8 million in Q2 2024 - OCF Before Working Capital Changes is defined as net cash provided by operating activities as determined under GAAP excluding changes in operating assets and liabilities[51] - 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[51] | (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $ 78,043 | $ 64,186 | $ 154,134 | $ 132,842 | | Total working capital changes | (8,584) | 644 | 2,037 | (6,412) | | Operating Cash Flow Before Working Capital Changes | $ 69,459 | $ 64,830 | $ 156,171 | $ 126,430 |