Granite Ridge Resources(GRNT) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Average daily production increased by 27% year-over-year to 35.1 thousand BOE per day for Q4 2025, with total production for the year at 32 thousand BOE per day [4] - Adjusted EBITDAX for Q4 was approximately $70 million, and $315 million for the full year [5][15] - Capital expenditures for Q4 were $127.5 million, with full-year CapEx totaling $401 million [5][18] - The quarterly dividend was maintained at $0.11 per share, reflecting a commitment to return capital to shareholders [5][20] Business Line Data and Key Metrics Changes - The company transitioned from a diversified investment strategy to focusing on the Permian Basin, which has driven production growth [4][6] - The average realized oil price in Q4 was $55.49 per barrel, down from $65.53 per barrel in the same period last year, while natural gas averaged $1.81 per Mcf [15] - Lease operating expenses in Q4 were $7.72 per barrel equivalent, higher than the previous year due to increased focus on the Permian Basin [16] Market Data and Key Metrics Changes - The company noted a significant impact on revenue and cash flow due to weak realizations in the Permian Basin [15] - The company expects oil volumes to represent approximately 51% of total production in 2026 [10] Company Strategy and Development Direction - The company is shifting from growth to durability, with a focus on sustainable free cash flow generation by 2027 [22] - The strategy includes a deliberate reduction in capital spending while maintaining production growth [19][20] - The company has developed an operative partnership model to capture inventory and enhance deal flow in the Permian Basin [6][7] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the medium-term outlook despite recent geopolitical shocks, indicating a resilient market [11] - The company plans to maintain flexibility with partners to adjust development schedules in response to market conditions [12] - The transition to free cash flow is driven by a desire to lower leverage and ensure long-term business sustainability [41] Other Important Information - The company has partnered with Conduit Power to support the development of natural gas-fired power generation, expected to enhance gas realizations [12] - Kyle Kettler was appointed as the new Chief Financial Officer, bringing significant capital markets expertise [13][14] Q&A Session Summary Question: What drove the lower realized oil and gas prices in Q4? - Management indicated that weak Waha prices impacted natural gas realizations, while oil prices had a slight negative differential compared to benchmarks [26][28] Question: How many net wells are planned for 2026? - The company plans to bring online about 29 net wells in 2026, with a mix that is expected to tilt back towards oil [30] Question: What is the company's strategy for generating free cash flow in 2027? - The transition to free cash flow is based on a desire to lower leverage while still pursuing inventory capture opportunities [41][55] Question: Can you provide details on the operated partnerships? - Management provided insights into the activities and inventory levels across various operated partnerships, highlighting the focus on unit-by-unit inventory capture [44][46]