Granite Ridge Resources(GRNT) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported average daily production of 25,200 Boe per day, marking a 9% increase over the second quarter and 5% from the third quarter last year [13] - Net income for the quarter was $9.1 million or$ 0.07 per share, with adjusted net income at $18.5 million or$ 0.14 per share [15] - Adjusted EBITDAX for the quarter was $75.4 million, representing a 10% increase from the prior quarter despite a 6% decline in realized pricing on a Boe basis [15][16] - Per unit lease operating cost improved significantly to$ 5.62 per Boe, a 14% improvement from the previous quarter [16] - The company reaffirmed its annual production guidance range of 23.3 Boe to 25.3 Boe per day [14] Business Line Data and Key Metrics Changes - The Controlled Capital program has exceeded production targets by approximately 15% and CapEx has come in about 15% under budget [7] - The company plans to allocate nearly 50% of its CapEx to Controlled Capital in 2024, increasing to approximately 60% in 2025 [8] - The company closed over a dozen transactions this quarter, adding nearly 16 net locations at a total cost of $31 million [8] Market Data and Key Metrics Changes - The company expects a quarter-over-quarter gas production decline of up to 10% in the fourth quarter, partially offset by a modest increase in oil production [10] - The oil production percentage increased to 50% in the third quarter, up from 47% in the prior quarter [13] Company Strategy and Development Direction - The company aims to reshape its narrative as a publicly traded private equity firm, blending control over development with private equity's agility [22][24] - The focus is on capital allocation strategy, with a significant portion of capital directed towards Controlled Capital development programs [19][24] Management's Comments on Operating Environment and Future Outlook - Management anticipates double-digit production growth in 2025 compared to 2024, with year-over-year production growth expected to be in the mid-teens [12][45] - The company is optimistic about the future, highlighting the potential for significant production and cash flow growth in early 2025 due to investments made in 2024 [20][24] Other Important Information - The company continued its quarterly cash dividend program, paying$ 0.11 per share in the third quarter, with another dividend declared for December 2024 [21] - The company expects to provide formal 2025 guidance during the Q4 call [20] Q&A Session Summary Question: What drove the lower LOE costs and expectations for Q4? - Management indicated that lower LOE costs were primarily due to less workover expense, expecting Q4 costs to come in towards the lower end of the guidance range [26] Question: Can you provide details on the new leasehold in Appalachia? - The company is focused on the Utica condensate window, particularly in Guernsey and Harrison, and is excited about the partnership opportunities in that area [27][28] Question: Can you elaborate on the Controlled CapEx partnerships and inventory? - The company has two partners, with five or six net locations in the Midland Basin and plans to pick up a rig in late 2024 or early 2025 [33][34] Question: How does the production performance compare to underwriting? - The production performance chart does not incorporate timing but shows actual performance against projections, highlighting the strength of the company's underwriting capabilities [38][39] Question: What is the expected decline rate for PDP? - The company indicated that the PDP decline rate has increased to around 40%, influenced by the Controlled Capital program [47] Question: Are there opportunities for Controlled Capital in other basins? - The company is exploring opportunities in the Bakken and Eagle Ford basins, although gas-weighted areas are currently challenging due to economics [52][54]