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

Financial Data and Key Metrics Changes - Average daily production increased 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][16] - Oil and natural gas sales totaled $105.5 million for Q4, remaining flat compared to the prior year due to commodity pricing [15] - Average realized oil price was $55.49 per barrel in Q4, down from $65.53 per barrel in the same period last year [16] - Full year oil and natural gas sales totaled $450.3 million, with production increasing 28% year-over-year [17] Business Line Data and Key Metrics Changes - Capital expenditures for Q4 were $127.5 million, split approximately evenly between development and inventory acquisitions [5] - Total CapEx for the full year was $401 million, with $279 million allocated to drilling and completion [19] - Lease operating expense in Q4 was $7.72 per barrel equivalent, higher than last year due to increased focus on the Permian Basin [17] 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, particularly for natural gas [16] - Production taxes ran just under 6% of revenue in Q4, with G&A expenses at $8 million [18] Company Strategy and Development Direction - The company is transitioning from a traditional non-operated model to a capital allocator focused on the Permian Basin, aiming for high-quality asset development [4][6] - The strategy includes a focus on short cycle opportunities underwritten at strip pricing, with an average acquisition cost per net location of $1.4 million [9] - The company plans to reduce capital spending while still achieving production growth, with a projected average production of 35,000 barrels of oil equivalent per day in 2026 [11][20] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the medium-term outlook despite recent geopolitical shocks, indicating a commitment to maintaining flexibility in capital deployment [12] - The company anticipates achieving free cash flow from operations in 2027, with a focus on aligning development capital with expected cash flow [10][11] - Management highlighted the importance of their operator partnership model in capturing inventory and driving growth [8][22] Other Important Information - The company announced the appointment of Kyle Kettler as the new Chief Financial Officer, emphasizing the need for expertise in capital markets as they transition towards sustainable free cash flow [14] - The company has partnered with Conduit Power to support the development of natural gas-fired power generation, which is expected to enhance gas realizations [13] Q&A Session Summary Question: What drove the lower realized oil and gas prices in Q4? - Management indicated that weak Waha pricing significantly impacted natural gas realizations, while oil pricing had a slight negative difference from benchmark prices [25][26] 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 as the year progresses [30] Question: What is the company's strategy for transitioning to sustainable free cash flow? - Management clarified that the transition is driven by a desire to lower leverage and maintain a conservative financial position while still pursuing growth opportunities [40][41] Question: Can you provide details on the activity and inventory levels across operated partnerships? - Management provided insights into the progress of various partnerships, highlighting the maturity of Admiral and the potential of other partners in capturing inventory [43][44]