8-K: Granite Ridge Resources Reports Q1 2024 Results, Reaffirms Guidance

Granite Ridge Resources announced its first quarter 2024 financial and operating results, showing production growth and reaffirming its 2024 guidance.

Summary

• Granite Ridge Resources reported a 3% increase in production to 23,842 barrels of oil equivalent per day in the first quarter of 2024, compared to 23,167 Boe per day in the same period last year.
• Net income for the quarter was $16.2 million, or $0.12 per diluted share, down from $36.9 million, or $0.28 per diluted share, in the first quarter of 2023.
• Adjusted net income was $15.3 million, or $0.12 per diluted share.
• The company generated $64.5 million in Adjusted EBITDAX.
• Granite Ridge placed 5.07 net wells online during the quarter.
• A dividend of $0.11 per share of common stock was declared.
• The company ended the quarter with $123.0 million in liquidity.
• The average realized price for oil was $78.17 per barrel and $1.84 per Mcf for natural gas, excluding the effect of commodity derivatives.
• The company closed four short-cycle oil and gas acquisitions in the Permian Basin with an aggregate cost of $6.8 million and estimated future development capital expenditures of $23 million.
• The company also closed three transactions in the Midland and Delaware Basins with an aggregate cost of $3.6 million and estimated future development capital expenditures of $13 million.
• One transaction in the Delaware Basin was closed with an aggregate cost of $3.2 million and estimated future development capital expenditures of $10 million.
• The company reaffirmed its 2024 guidance, including annual production of 23,250 to 25,250 Boe per day, and total capital expenditures of $265 to $285 million.

Sentiment

Score: 7

Explanation: The document presents a generally positive outlook with production growth and reaffirmed guidance, but there are some concerns about decreased net income and EBITDAX compared to the previous year. The company's strategic approach and liquidity position are positive, but the risks associated with the industry and forward-looking statements temper the overall sentiment.

Positives

• The company exceeded internal projections across the board.
• Granite Ridge successfully captured multiple acquisitions during the quarter.
• The company saw great execution by its Strategic Partners.
• The company is focused on both growing the business and returning capital to shareholders while maintaining conservative leverage.
• The company has a strong liquidity position of $123.0 million.

Negatives

• Net income decreased to $16.2 million from $36.9 million in the same quarter last year.
• Oil production volumes decreased slightly by 0.7% compared to the first quarter of 2023.
• Adjusted EBITDAX decreased to $64.5 million from $70.7 million in the first quarter of 2023.
• Cash flow from operating activities was $68.7 million, including $7.1 million in working capital changes.

Risks

• The company's performance is subject to commodity price fluctuations.
• There are inherent risks and uncertainties in forward-looking statements, including the ability to recognize the anticipated benefits of acquisitions.
• Operational risks include the pace of drilling and completions activity.
• Geopolitical risks and changes in applicable laws and regulations could impact the company.
• The company is exposed to cyber-related risks.
• Reserve estimates depend on many assumptions that may turn out to be inaccurate.
• The company is subject to the outcome of any known and unknown litigation and regulatory proceedings.
• Acts of war, terrorism or uncertainty regarding the effects and duration of global hostilities may disrupt commodity prices and create instability in the financial markets.
• Market conditions and global, regulatory, technical, and economic factors beyond Granite Ridge's control could impact the company.

Future Outlook

The company reaffirmed its 2024 guidance, including annual production of 23,250 to 25,250 Boe per day, oil as a % of sales volumes of 47%, acquisitions of $35 million, development capital expenditures of $230 to $250 million, total capital expenditures of $265 to $285 million, 22 to 24 net wells placed on production, lease operating expenses of $6.50 to $7.50 per Boe, production and ad valorem taxes of 7% to 8% of total sales, and cash general and administrative expense of $23 to $26 million.

Management Comments

• Our first quarter 2024 performance is how we hope to start every year as we beat internal projections across the board, captured multiple acquisitions, and saw great execution by our Strategic Partners.
• We look forward to continuing to demonstrate that what we are building at Granite Ridge is different, repeatable, and resilient as we both grow the business and return capital to shareholders while maintaining conservative leverage.

Industry Context

Granite Ridge operates in the oil and gas exploration and production industry, focusing on non-operated assets across multiple basins. The company's strategy of investing in a smaller piece of a larger number of high-graded wells drilled by proven operators is a common approach in the industry to diversify risk and reduce overhead. The company's focus on acquisitions and development in the Permian Basin aligns with the current industry trend of increased activity in this region.

Comparison to Industry Standards

• Granite Ridge's production growth of 3% is a positive sign, but it is important to compare this to peers such as Diamondback Energy (FANG) or Devon Energy (DVN) who may have higher growth rates due to their operational focus.
• The company's Adjusted EBITDAX of $64.5 million is a key metric, but it should be benchmarked against companies like EOG Resources (EOG) or Pioneer Natural Resources (PXD) to assess its relative profitability.
• The company's focus on non-operated assets is a different strategy than companies like ConocoPhillips (COP) who operate their own wells, so direct comparisons may be difficult.
• The company's liquidity of $123 million is a positive sign, but it should be compared to the debt levels and cash positions of similar sized companies to assess its financial health.
• The company's capital expenditure guidance of $265 to $285 million should be compared to the capital spending plans of other non-operated companies to assess its relative investment levels.

Stakeholder Impact

• Shareholders will receive a dividend of $0.11 per share.
• The company's performance impacts investors through stock price and dividend payouts.
• Employees are impacted by the company's growth and financial stability.
• Customers are impacted by the company's ability to provide reliable energy solutions.
• Suppliers and creditors are impacted by the company's financial health and ability to meet its obligations.

Next Steps

• The company will host a conference call on May 10, 2024, to discuss the results.
• Granite Ridge management will participate in several upcoming investor events.
• The company will continue to execute its strategy of acquiring and developing non-operated oil and gas assets.

Key Dates

Keywords

Oil and Gas, Production, EBITDAX, Acquisitions, Permian Basin, Financial Results, Guidance, Dividends, Liquidity, Commodity Prices