Granite Ridge Resources Inc. Reports Third-Quarter 2023 Results and Provides Updated Outlook for 2023

Granite Ridge Resources Inc. (“Granite Ridge” or the “Company”) (NYSE: GRNT) today reported financial and operating results for the third quarter 2023 and provided an updated outlook for 2023.

Third Quarter 2023 Highlights

  • Grew production 20% to 26,433 barrels of oil equivalent (“Boe”) per day (46% oil), from 22,015 Boe per day (49% oil) for the third quarter of 2022.
  • Reported net income of $18.0 million, or $0.13 per share, versus $80.0 million, or $0.60 per share, for the prior year period. Third quarter adjusted net income (non-GAAP) totaled $27.7 million, or $0.21 per share. Non-cash depletion and accretion expense for the third quarter totaled $44.3 million, impacting net income by $0.33 per share.
  • Generated $83.2 million of adjusted EBITDAX (non-GAAP).
  • Deployed $95.1 million of capital during the quarter, including $11.9 million of inventory acquisitions (non-GAAP).
  • Placed 77 gross (8.58 net) wells online.
  • Declared dividend of $0.11 per share of common stock.
  • Ended the third quarter of 2023 with liquidity of $70.8 million.

2023 Outlook Updates

  • Increased full year 2023 midpoint production guidance to 23,250 Boe per day; now expecting to generate 18% midpoint annual production volume growth as compared to the full year 2022.
  • Increased the midpoint of total capital expenditures for full year 2023 by $55 million to $350 million primarily to reflect additional acquisitions.
  • Increased the midpoint of number of net well placed on production to 22.

See “Supplemental Non-GAAP Financial Measures” below for descriptions of the above non-GAAP measures as well as a reconciliation of these measures to the associated GAAP (as defined herein) measures.

Luke Brandenberg, President and CEO of Granite Ridge, commented, “Our third quarter operational and financial results are another clear indicator that our well-honed strategy of building close and long-standing relationships provides a strong platform for continued success. This was evidenced by the more than 23% increase in growth in daily production levels from the second quarter of 2023, as well as the 11% increase in the sequential quarterly period end net producing well count. This growth is a direct result of our operator partners’ targeted spending campaigns to capitalize on the strong underlying fundamentals supporting the oil and gas industry. In addition, our positive third quarter of 2023 results reflect our unrelenting pursuit in identifying, evaluating and – most importantly – executing targeted opportunities that fit our very selective criteria.”

Third Quarter 2023 Summary

Third quarter 2023 oil production volumes totaled 12,228 barrels (“Bbls”) per day, a 13% increase from the third quarter of 2022. Natural gas production for the third quarter of 2023 totaled 85,228 thousand cubic feet of natural gas (“Mcf”) per day, a 27% increase from the third quarter of 2022. As a result, the Company’s total production for the third quarter of 2023 grew 20% from the third quarter of the prior year to 26,433 Boe per day.

Net income for the third quarter of 2023 was $18.0 million, or $0.13 per diluted share. Excluding non-cash and nonrecurring items, the third quarter 2023 adjusted net income (non-GAAP) was $27.7 million, or $0.21 per diluted share. The Company’s average realized price for oil and natural gas for the third quarter of 2023, excluding the effect of commodity derivatives, was $78.41 per Bbl and $2.58 per Mcf, respectively.

Adjusted EBITDAX (non-GAAP) for the third quarter of 2023 totaled $83.2 million, compared to $99.0 million for the third quarter of 2022. Third quarter of 2023 cash flow from operating activities was $57.0 million, including $22.3 million in working capital changes. Operating cash flow before working capital changes (non-GAAP) was $79.3 million. Costs incurred for development activities totaled $75.7 million for the third quarter of 2023.

Granite Ridge Credit Agreement Amendment

On November 7, 2023, Granite Ridge amended the senior secured revolving credit agreement (the “Credit Agreement”) which, among other things, established a borrowing base of $275.0 million, increased the Company’s aggregate elected commitments from $150.0 million to $240.0 million, and amended the applicable margin charged on the loans and other obligations under the Credit Agreement.

Operational Activity

The table below provides a summary of gross and net wells completed and put on production for the three and nine months ended September 30, 2023:

 

Three Months Ended September 30, 2023

 

Nine Months Ended September 30, 2023

 

Gross

 

Net

 

Gross

 

Net

Permian

23

 

5.46

 

85

 

10.59

Eagle Ford

6

 

1.77

 

18

 

4.27

Bakken

12

 

0.34

 

29

 

1.43

Haynesville

4

 

0.94

 

4

 

0.94

DJ

32

 

0.07

 

98

 

2.80

Total

77

 

8.58

 

234

 

20.03

On September 30, 2023, the Company had 196 gross (10.6 net) wells in process.

Costs Incurred

The tables below provide the costs incurred for oil and natural gas producing activities for the periods indicated:

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

(in thousands)

2023

 

2022

 

2023

 

2022

Property acquisition costs:

 

 

 

 

 

 

 

Proved

$

8,161

 

$

4,251

 

$

27,459

 

$

12,206

Unproved

 

11,262

 

 

7,864

 

 

24,053

 

 

20,653

Development costs

 

75,726

 

 

59,898

 

 

233,071

 

 

164,923

Total costs incurred for oil and natural gas properties

$

95,149

 

$

72,013

 

$

284,583

 

$

197,782

   

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

(in thousands)

2023

 

2022

 

2023

 

2022

Inventory acquisitions (non-GAAP) (1)

$

11,939

 

$

25,619

 

$

36,203

 

$

57,253

Production acquisitions

 

8,161

 

 

 

 

26,150

 

 

560

Development costs (excluding drilling carry)

 

75,049

 

 

46,394

 

 

222,230

 

 

139,969

Total costs incurred for oil and natural gas properties

$

95,149

 

$

72,013

 

$

284,583

 

$

197,782

 

 

 

 

 

 

 

 

(1) Includes costs to acquire additional development opportunities and undeveloped acreage acquisition.

Commodity Derivatives Update

The Company’s commodity derivatives strategy is intended to manage its exposure to commodity price fluctuations. Please see the table under “Derivatives Information” below for detailed information about Granite Ridge’s current derivatives positions.

Updated 2023 Guidance

The following table summarizes the Company’s updated operational and financial guidance for 2023.

 

2023 Guidance

 

Updated 2023 Guidance

Annual production (Boe per day)

21,500 - 23,000

 

22,500 - 24,000

Oil as a % of sales volumes

49 %

 

47 %

 

 

 

 

Inventory acquisitions and production acquisitions ($ in millions)

$50 - $50

 

$90 - $90

Development capital expenditures ($ in millions)

$230 - $260

 

$255 - $265

Total capital expenditures ($ in millions)

$280 - $310

 

$345 - $355

 

 

 

 

Net wells placed on production

19 - 21

 

21 - 23

 

 

 

 

Lease operating expenses (per Boe)

$6.50 - $7.50

 

$6.50 - $7.50

Production and ad valorem taxes (as a % of total sales)

7% - 8%

 

7% - 8%

Cash general and administrative expense ($ in millions)

$20 - $22

 

$20 - $22

Conference Call

Granite Ridge will host a conference call on November 10, 2023, at 10:00 AM CT (11:00 AM ET) to discuss its third quarter 2023 results. The telephone number and passcode to access the conference call are provided below:

Dial-in: (888) 660-6093

Intl. dial-in: (929) 203-0844

Participant Passcode: 4127559

To access the live webcast visit Granite Ridge’s website at www.graniteridge.com. Alternatively, an audio replay will be available through November 24, 2023. To access the audio replay dial (800) 770-2030 and enter confirmation code 4127559.

Upcoming Investor Events

Granite Ridge management will be participating in the following upcoming investor events:

  • Stephens Annual Investment Conference - November 14, 2023.
  • Bank of America Global Energy Conference - November 15, 2023.
  • Capital One Securities Energy Conference - December 5, 2023.

Any investor presentations to be used for such events will be posted prior to the events on Granite Ridge’s website.

About Granite Ridge

Granite Ridge is a scaled, non-operated oil and gas exploration and production company. We own a portfolio of wells and top-tier acreage across the Permian and four other prolific unconventional basins across the United States. Rather than drill wells ourselves, we increase asset diversity and decrease overhead by investing in a smaller piece of a larger number of high-graded wells drilled by proven public and private operators. We create value by generating sustainable full-cycle risk adjusted returns for investors, offering a rewarding experience for our team, and delivering reliable energy solutions to all – safely and responsibly. For more information, visit Granite Ridge’s website at www.graniteridge.com.

Forward-Looking Statements and Cautionary Statements

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 (the “Securities Act”) and the Securities Exchange Act of 1934 (the “Exchange Act”). All statements other than statements of historical facts included in this release regarding Granite Ridge’s 2023 outlook, dividend plans and practices, financial position, operating and financial performance, business strategy, plans and objectives of management for future operations, industry conditions, and indebtedness covenant compliance are forward-looking statements. When used in this release, forward-looking statements are generally accompanied by terms or phrases such as “estimate,” “project,” “predict,” “believe,” “expect,” “continue,” “anticipate,” “target,” “could,” “plan,” “intend,” “seek,” “goal,” “will,” “should,” “may” or other words and similar expressions that convey the uncertainty of future events or outcomes. Items contemplating or making assumptions about actual or potential future production and sales, market size, collaborations, and trends or operating results also constitute such forward-looking statements.

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 from those set forth in the forward-looking statements, including the following: the ability to recognize the anticipated benefits of the business combination, Granite Ridge’s financial performance following the business combination, changes in Granite Ridge’s strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects and plans, changes in current or future commodity prices and interest rates, supply chain disruptions, infrastructure constraints and related factors affecting our properties, ability to acquire additional development opportunities or make acquisitions, changes in reserves estimates or the value thereof, operational risks including, but not limited to, the pace of drilling and completions activity on our properties, changes in the markets in which Granite Ridge competes, geopolitical risk and changes in applicable laws, legislation, or regulations, including those relating to environmental matters, cyber-related risks, the fact that reserve estimates depend on many assumptions that may turn out to be inaccurate and that any material inaccuracies in reserve estimates or underlying assumptions will materially affect the quantities and present value of the Granite Ridge’s reserves, the outcome of any known and unknown litigation and regulatory proceedings, legal and contractual limitations on the payment of dividends, limited liquidity and trading of Granite Ridge’s securities, acts of war, terrorism or uncertainty regarding the effects and duration of global hostilities, including the Israel-Gaza conflict, the Russia-Ukraine war, and any associated armed conflicts or related sanctions which may disrupt commodity prices and create instability in the financial markets, and market conditions and global, regulatory, technical, and economic factors beyond Granite Ridge’s control, including the potential adverse effects of the COVID-19 pandemic, or another major disease, affecting capital markets, general economic conditions, global supply chains and Granite Ridge’s business and operations, and increasing regulatory and investor emphasis on environmental, social and governance matters.

Granite Ridge has based these forward-looking statements on its current expectations and assumptions about future events. While management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond Granite Ridge’s control. 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.

Use of Non-GAAP Financial Measures

To supplement the presentation of the Company’s financial results prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”), this press release contains certain financial measures that are not prepared in accordance with GAAP, including adjusted net income, adjusted earnings per share, adjusted EBITDAX, operating cash flow before working capital changes, free cash flow and inventory acquisitions.

See “Supplemental Non-GAAP Financial Measures” below for a description and reconciliation of each non-GAAP measure presented in this press release to the most directly comparable financial measure calculated in accordance with GAAP.

Granite Ridge Resources Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

   

(in thousands, except par value and share data)

September 30, 2023

 

December 31, 2022

ASSETS

 

 

 

Current assets:

 

 

 

Cash

$

6,117

 

 

$

50,833

 

Revenue receivable

 

82,680

 

 

 

72,287

 

Advances to operators

 

11,104

 

 

 

8,908

 

Prepaid costs and other

 

450

 

 

 

4,203

 

Derivative assets - commodity derivatives

 

2,112

 

 

 

10,089

 

Total current assets

 

102,463

 

 

 

146,320

 

Property and equipment:

 

 

 

Oil and gas properties, successful efforts method

 

1,311,625

 

 

 

1,028,662

 

Accumulated depletion

 

(496,452

)

 

 

(383,673

)

Total property and equipment, net

 

815,173

 

 

 

644,989

 

Long-term assets:

 

 

 

Other long-term assets

 

2,978

 

 

 

3,468

 

Total long-term assets

 

2,978

 

 

 

3,468

 

Total assets

$

920,614

 

 

$

794,777

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

Current liabilities:

 

 

 

Accrued expenses

$

61,985

 

 

$

62,180

 

Other liabilities

 

3,454

 

 

 

1,523

 

Derivative liabilities - commodity derivatives

 

4,391

 

 

 

431

 

Total current liabilities

 

69,830

 

 

 

64,134

 

Long-term liabilities:

 

 

 

Long-term debt

 

85,000

 

 

 

 

Derivative liabilities - commodity derivatives

 

479

 

 

 

 

Derivative liabilities - common stock warrants

 

 

 

 

11,902

 

Asset retirement obligations

 

6,498

 

 

 

4,745

 

Deferred tax liability

 

108,627

 

 

 

91,592

 

Total long-term liabilities

 

200,604

 

 

 

108,239

 

Total liabilities

 

270,434

 

 

 

172,373

 

Stockholders' Equity:

 

 

 

Common stock, $0.0001 par value, 431,000,000 shares authorized, 136,053,725 and 133,294,897 issued at September 30, 2023 and December 31, 2022, respectively

 

14

 

 

 

13

 

Additional paid-in capital

 

610,982

 

 

 

590,232

 

Retained earnings

 

51,758

 

 

 

32,388

 

Treasury stock, at cost, 1,840,427 and 25,920 shares at September 30, 2023 and December 31, 2022, respectively

 

(12,574

)

 

 

(229

)

Total stockholders' equity

 

650,180

 

 

 

622,404

 

Total liabilities and stockholders' equity

$

920,614

 

 

$

794,777

 

Granite Ridge Resources Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

   

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

(in thousands, except per share data)

2023

 

2022

 

2023

 

2022

Revenues:

 

 

 

 

 

 

 

Oil and natural gas sales

$

108,404

 

 

$

136,966

 

 

$

287,271

 

 

$

381,082

 

Operating costs and expenses:

 

 

 

 

 

 

 

Lease operating expenses

 

16,935

 

 

 

12,330

 

 

 

45,113

 

 

 

30,258

 

Production and ad valorem taxes

 

7,790

 

 

 

7,871

 

 

 

19,810

 

 

 

20,771

 

Depletion and accretion expense

 

44,267

 

 

 

36,567

 

 

 

113,088

 

 

 

84,096

 

Abandonments expense

 

1,560

 

 

 

 

 

 

1,560

 

 

 

 

General and administrative (including non-cash stock-based compensation of $379 and $1,813 for the three and nine months ended September 30, 2023)

 

5,249

 

 

 

2,708

 

 

 

21,839

 

 

 

7,747

 

Total operating costs and expenses

 

75,801

 

 

 

59,476

 

 

 

201,410

 

 

 

142,872

 

Net operating income

 

32,603

 

 

 

77,490

 

 

 

85,861

 

 

 

238,210

 

Other income (expense):

 

 

 

 

 

 

 

Gain (loss) on derivatives - commodity derivatives

 

(8,129

)

 

 

3,071

 

 

 

6,415

 

 

 

(30,787

)

Interest expense

 

(1,356

)

 

 

(570

)

 

 

(2,906

)

 

 

(1,704

)

Loss on derivatives - common stock warrants

 

(8

)

 

 

 

 

 

(5,742

)

 

 

 

Total other income (expense)

 

(9,493

)

 

 

2,501

 

 

 

(2,233

)

 

 

(32,491

)

Income before income taxes

 

23,110

 

 

 

79,991

 

 

 

83,628

 

 

 

205,719

 

Income tax expense

 

5,153

 

 

 

 

 

 

20,068

 

 

 

 

Net income

$

17,957

 

 

$

79,991

 

 

$

63,560

 

 

$

205,719

 

  

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

 

Basic

$

0.13

 

 

$

0.60

 

 

$

0.48

 

 

$

1.55

 

Diluted

$

0.13

 

 

$

0.60

 

 

$

0.48

 

 

$

1.55

 

Weighted-average number of shares outstanding:

 

 

 

 

 

 

 

Basic

 

134,396

 

 

 

132,923

 

 

 

133,426

 

 

 

132,923

 

Diluted

 

134,421

 

 

 

132,923

 

 

 

133,440

 

 

 

132,923

 

Granite Ridge Resources Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

   

 

Nine Months Ended September 30,

(in thousands)

2023

 

2022

Operating activities:

 

 

 

Net income

$

63,560

 

 

$

205,719

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

Depletion and accretion expense

 

113,088

 

 

 

84,096

 

Abandonments expense

 

1,560

 

 

 

 

(Gain) loss on derivatives - commodity derivatives

 

(6,415

)

 

 

30,787

 

Net cash receipts from (payments on) commodity derivatives

 

18,830

 

 

 

(40,006

)

Stock-based compensation

 

1,813

 

 

 

 

Amortization of deferred financing costs

 

490

 

 

 

62

 

Loss on derivatives - common stock warrants

 

5,742

 

 

 

 

Deferred income taxes

 

17,069

 

 

 

 

Other

 

(146

)

 

 

 

Increase (decrease) in cash attributable to changes in operating assets and liabilities:

 

 

 

Revenue receivable

 

(10,545

)

 

 

(27,517

)

Accrued expenses

 

2,627

 

 

 

4,932

 

Prepaid and other expenses

 

1,854

 

 

 

(6,703

)

Other payable

 

3,165

 

 

 

(14

)

Net cash provided by operating activities

 

212,692

 

 

 

251,356

 

Investing activities:

 

 

 

Capital expenditures for oil and natural gas properties

 

(237,138

)

 

 

(143,923

)

Acquisition of oil and natural gas properties

 

(49,427

)

 

 

(32,858

)

Refund of advances to operators

 

 

 

 

971

 

Proceeds from the disposal of oil and natural gas properties

 

60

 

 

 

747

 

Net cash used in investing activities

 

(286,505

)

 

 

(175,063

)

Financing activities:

 

 

 

Proceeds from borrowing on credit facilities

 

117,500

 

 

 

16,000

 

Repayments of borrowing on credit facilities

 

(32,500

)

 

 

(67,100

)

Cash contributions

 

 

 

 

84

 

Deferred financing costs

 

(28

)

 

 

 

Payment of expenses related to formation of Granite Ridge Resources, Inc.

 

(43

)

 

 

 

Purchase of treasury shares

 

(11,765

)

 

 

 

Payment of dividends

 

(44,072

)

 

 

 

Proceeds from issuance of common stock

 

5

 

 

 

 

Net cash provided by (used in) financing activities

 

29,097

 

 

 

(51,016

)

 

 

 

 

Net change in cash and restricted cash

 

(44,716

)

 

 

25,277

 

Cash and restricted cash at beginning of period

 

51,133

 

 

 

12,154

 

Cash and restricted cash at end of period

$

6,417

 

 

$

37,431

 

 

 

 

 

Supplemental disclosure of non-cash investing activities:

 

 

 

Oil and natural gas property development costs in accrued expenses

$

(13,068

)

 

$

17,326

 

Advances to operators applied to development of oil and natural gas properties

$

88,463

 

 

$

55,775

 

Cash and restricted cash:

 

 

 

Cash

$

6,117

 

 

$

37,131

 

Restricted cash included in other long-term assets

 

300

 

 

 

300

 

Cash and restricted cash

$

6,417

 

 

$

37,431

 

Granite Ridge Resources Inc.

Summary Production and Price Data

 

The following table sets forth summary information concerning production and operating data for the periods indicated:

   

 

Three months ended September 30,

 

Nine Months Ended September 30,

 

2023

 

2022

 

2023

 

2022

Net Sales (in thousands):

 

 

 

 

 

 

 

Oil sales

$

88,210

 

 

$

79,051

 

 

$

230,755

 

 

$

251,088

 

Natural gas sales

 

20,194

 

 

 

57,915

 

 

 

56,516

 

 

 

129,994

 

Total revenues

 

108,404

 

 

 

136,966

 

 

 

287,271

 

 

 

381,082

 

 

 

 

 

 

 

 

 

Net Production:

 

 

 

 

 

 

 

Oil (MBbl)

 

1,125

 

 

 

999

 

 

 

3,038

 

 

 

2,610

 

Natural gas (MMcf)

 

7,841

 

 

 

6,158

 

 

 

20,643

 

 

 

15,461

 

Total (MBoe)(1)

 

2,432

 

 

 

2,025

 

 

 

6,479

 

 

 

5,187

 

Average Daily Production:

 

 

 

 

 

 

 

Oil (Bbl)

 

12,228

 

 

 

10,859

 

 

 

11,128

 

 

 

9,560

 

Natural gas (Mcf)

 

85,228

 

 

 

66,935

 

 

 

75,615

 

 

 

56,634

 

Total (Boe)(1)

 

26,433

 

 

 

22,015

 

 

 

23,731

 

 

 

18,999

 

 

 

 

 

 

 

 

 

Average Sales Prices:

 

 

 

 

 

 

 

Oil (per Bbl)

$

78.41

 

 

$

79.13

 

 

$

75.96

 

 

$

96.20

 

Effect of gain (loss) on settled oil derivatives on average price (per Bbl)

 

0.11

 

 

 

(6.95

)

 

 

1.29

 

 

 

(8.88

)

Oil net of settled oil derivatives (per Bbl) (2)

 

78.52

 

 

 

72.18

 

 

 

77.25

 

 

 

87.32

 

  

 

 

 

 

 

 

 

Natural gas sales (per Mcf)

 

2.58

 

 

 

9.40

 

 

 

2.74

 

 

 

8.41

 

Effect of gain (loss) on settled natural gas derivatives on average price (per Mcf)

 

0.55

 

 

 

(1.32

)

 

 

0.72

 

 

 

(1.09

)

Natural gas sales net of settled natural gas derivatives (per Mcf) (2)

 

3.13

 

 

 

8.08

 

 

 

3.46

 

 

 

7.32

 

  

 

 

 

 

 

 

 

Realized price on a Boe basis excluding settled commodity derivatives

 

44.57

 

 

 

67.64

 

 

 

44.34

 

 

 

73.47

 

Effect of gain (loss) on settled commodity derivatives on average price (per Boe)

 

1.82

 

 

 

(7.46

)

 

 

2.91

 

 

 

(7.71

)

Realized price on a Boe basis including settled commodity derivatives (2)

 

46.39

 

 

 

60.18

 

 

 

47.25

 

 

 

65.76

 

  

 

 

 

 

 

 

 

Operating Expenses (in thousands):

 

 

 

 

 

 

 

Lease operating expenses

$

16,935

 

 

$

12,330

 

 

$

45,113

 

 

$

30,258

 

Production and ad valorem taxes

 

7,790

 

 

 

7,871

 

 

 

19,810

 

 

 

20,771

 

Depletion and accretion expense

 

44,267

 

 

 

36,567

 

 

 

113,088

 

 

 

84,096

 

General and administrative

 

5,249

 

 

 

2,708

 

 

 

21,839

 

 

 

7,747

 

Costs and Expenses (per Boe):

 

 

 

 

 

 

 

Lease operating expenses

$

6.96

 

 

$

6.09

 

 

$

6.96

 

 

$

5.83

 

Production and ad valorem taxes

 

3.20

 

 

 

3.89

 

 

 

3.06

 

 

 

4.00

 

Depletion and accretion

 

18.20

 

 

 

18.06

 

 

 

17.45

 

 

 

16.21

 

General and administrative

 

2.16

 

 

 

1.34

 

 

 

3.37

 

 

 

1.49

 

  

 

 

 

 

 

 

 

Net Producing Wells at Period-End:

 

175.24

 

 

123.84

 

 

 

175.24

 

 

123.84

 

(1)

Natural gas is converted to Boe using the ratio of one barrel of oil to six Mcf of natural gas.

(2)

The presentation of realized prices including settled commodity derivatives is a result of including the net cash receipts from (payments on) commodity derivatives that are presented in our condensed consolidated statements of cash flows. This presentation of average prices with derivatives is a means by which to reflect the actual cash performance of our commodity derivatives for the respective periods and presents oil and natural gas prices with derivatives in a manner consistent with the presentation generally used by the investment community.

Granite Ridge Resources Inc.

Derivatives Information

 

The table below provides data associated with the Company’s derivatives at November 9, 2023, for the periods indicated:

   

 

2023

 

2024

 

2025

 

Total

 

Total

 

Total

Producer 3-way (oil)

 

 

 

 

 

Volume (Bbl)

 

208,488

 

 

 

 

Weighted-average sub-floor price ($/Bbl)

$

60.43

 

$

 

$

Weighted-average floor price ($/Bbl)

$

80.00

 

$

 

$

Weighted-average ceiling price ($/Bbl)

$

101.92

 

$

 

$

Collar (oil)

 

 

 

 

 

Volume (Bbl)

 

371,304

 

 

1,536,446

 

 

273,000

Weighted-average floor price ($/Bbl)

$

67.49

 

$

64.24

 

$

63.00

Weighted-average ceiling price ($/Bbl)

$

88.14

 

$

85.07

 

$

82.70

Swaps (oil)

 

 

 

 

 

Volume (Bbl)

 

 

 

181,000

 

 

Weighted-average price ($/Bbl)

$

 

$

80.00

 

$

Collar (natural gas)

 

 

 

 

 

Volume (Mcf)

 

3,746,650

 

 

5,471,000

 

 

2,156,000

Weighted-average floor price ($/Mcf)

$

3.72

 

$

3.14

 

$

3.59

Weighted-average ceiling price ($/Mcf)

$

5.37

 

$

4.71

 

$

5.39

Swaps (natural gas)

 

 

 

 

 

Volume (Mcf)

 

 

 

6,903,000

 

 

450,000

Weighted-average price ($/Mcf)

$

 

$

3.22

 

$

3.68

Granite Ridge Resources Inc.

Supplemental Non-GAAP Financial Measures

The Company reports its financial results in accordance with GAAP. However, 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. In addition, the Company believes 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. See the reconciliations throughout this release of GAAP financial measures to non-GAAP financial measures for the periods indicated.

Reconciliation of Net Income to Adjusted EBITDAX

Adjusted EBITDAX (as defined below) is presented herein and reconciled from the GAAP measure of net income because of its wide acceptance by the investment community as a financial indicator.

The Company defines adjusted EBITDAX as net income, before (1) abandonments expense, (2) depletion and accretion expense, (3) (gain) loss on derivatives – commodity derivatives, (4) net cash receipts from (payments on) commodity derivatives, (5) interest expense (6) (gain) loss on derivatives – common stock warrants (7) non-cash stock-based compensation (8) warrant exchange transaction costs and (9) income tax expense. Adjusted EBITDAX is not a measure of net income or cash flows as determined by GAAP.

The Company’s adjusted EBITDAX measure provides additional information that may be used to better understand the Company’s operations. Adjusted EBITDAX is one of several metrics that the Company uses as a supplemental financial measurement in the evaluation of its business and should not be considered as an alternative to, or more meaningful than, net income as an indicator of operating performance. Certain items excluded from adjusted EBITDAX are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historic cost of depreciable and depletable assets. Adjusted EBITDAX, as used by the Company, may not be comparable to similarly titled measures reported by other companies. The Company believes that adjusted EBITDAX is a widely followed measure of operating performance and is one of many metrics used by the Company’s management team and by other users of the Company’s consolidated financial statements. For example, adjusted EBITDAX can be used to assess the Company’s operating performance and return on capital in comparison to other independent exploration and production companies without regard to financial or capital structure, and to assess the financial performance of the Company’s assets and the Company without regard to capital structure or historical cost basis.

The following table provides a reconciliation of the GAAP measure of net income to adjusted EBITDAX for the periods indicated:

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

(in thousands)

2023

 

2022

 

2023

 

2022

Net income

$

17,957

 

 

$

79,991

 

 

$

63,560

 

 

$

205,719

 

Interest expense

 

1,356

 

 

 

570

 

 

 

2,906

 

 

 

1,704

 

Income tax expense

 

5,153

 

 

 

 

 

 

20,068

 

 

 

 

Abandonments expense

 

1,560

 

 

 

 

 

 

1,560

 

 

 

 

Depletion and accretion expense

 

44,267

 

 

 

36,567

 

 

 

113,088

 

 

 

84,096

 

Non-cash stock-based compensation

 

379

 

 

 

 

 

 

1,813

 

 

 

 

Warrant exchange transaction costs

 

 

 

 

 

 

 

2,456

 

 

 

 

(Gain) loss on derivatives - commodity derivatives

 

8,129

 

 

 

(3,071

)

 

 

(6,415

)

 

 

30,787

 

Net cash receipts from (payments on) commodity derivatives

 

4,419

 

 

 

(15,099

)

 

 

18,830

 

 

 

(40,006

)

Loss on derivatives - common stock warrants

 

8

 

 

 

 

 

 

5,742

 

 

 

 

Adjusted EBITDAX

$

83,228

 

$

98,958

 

 

$

223,608

 

 

$

282,300

 

Reconciliation of Net Cash Provided by Operating Activities to Operating Cash Flow Before Working Capital Changes and to Free Cash Flow

The Company provides Operating Cash Flow (“OCF”) before working capital changes, which is a non-GAAP financial measure. OCF before working capital changes represents net cash provided by operating activities as determined under GAAP without regard to changes in operating assets and liabilities. 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. Additionally, the Company provides free cash flow, which is a non-GAAP financial measure. Free cash flow is cash flow from operating activities before changes in working capital in excess of exploration and development costs incurred. The Company believes that free cash flow is useful to investors as it provides measures to compare cash from operating activities and exploration and development costs across periods on a consistent basis.

These non-GAAP measures should not be considered as alternatives to, or more meaningful than, net cash provided by operating activities as indicators of operating performance.

The following tables provide a reconciliation from the GAAP measure of net cash provided by operating activities to OCF before working capital changes and to free cash flow:

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

(in thousands)

2023

 

2022

 

2023

 

2022

Net cash provided by operating activities

$

57,032

 

 

$

114,046

 

 

$

212,692

 

 

$

251,356

 

Changes in cash due to changes in operating assets and liabilities:

 

 

 

 

 

 

 

Revenue receivable

 

27,147

 

 

 

(19,738

)

 

 

10,545

 

 

 

27,517

 

Accrued expenses

 

(1,155

)

 

 

(1,220

)

 

 

(2,627

)

 

 

(4,932

)

Prepaid and other expenses

 

(904

)

 

 

5,174

 

 

 

(1,854

)

 

 

6,703

 

Other payable

 

(2,832

)

 

 

167

 

 

 

(3,165

)

 

 

14

 

Total working capital changes

 

22,256

 

 

 

(15,617

)

 

 

2,899

 

 

 

29,302

 

Operating cash flow before working capital changes

 

79,288

 

 

 

98,429

 

 

 

215,591

 

 

 

280,658

 

Development costs

 

75,726

 

 

 

59,898

 

 

 

233,071

 

 

 

164,923

 

Free cash flow

$

3,562

 

 

$

38,531

 

 

$

(17,480

)

 

$

115,735

 

Reconciliation of Net Income to Adjusted Net Income and Adjusted Earnings per Share

The Company’s presentation of adjusted net income and adjusted earnings per share that exclude the effect of certain items are non-GAAP financial measures. Adjusted net income and adjusted earnings per share represent earnings and diluted earnings per share determined under GAAP without regard to certain non-cash and nonrecurring items. The Company believes these measures provide useful information to analysts and investors for analysis of its operating results on a recurring, comparable basis from period to period. Adjusted net income and adjusted earnings per share should not be considered in isolation or as a substitute for earnings or diluted earnings per share as determined in accordance with GAAP and may not be comparable to other similarly titled measures of other companies.

The following table provides a reconciliation from the GAAP measure of net income to adjusted net income, both in total and on a per diluted share basis, for the periods indicated:

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

(in thousands, except share data)

2023

 

2022

 

2023

 

2022

Net income

$

17,957

 

 

$

79,991

 

 

$

63,560

 

 

$

205,719

 

(Gain) loss on derivatives - commodity derivatives

 

8,129

 

 

 

(3,071

)

 

 

(6,415

)

 

 

30,787

 

Net cash receipts from (payments on) commodity derivatives

 

4,419

 

 

 

(15,099

)

 

 

18,830

 

 

 

(40,006

)

Loss on derivatives - common stock warrants

 

8

 

 

 

 

 

 

5,742

 

 

 

 

Warrant exchange transaction costs

 

 

 

 

 

 

 

2,456

 

 

 

 

Tax impact on above adjustments (a)

 

(2,850

)

 

 

 

 

 

(4,679

)

 

 

 

Changes in deferred taxes and other estimates

 

32

 

 

 

 

 

 

1,223

 

 

 

 

Adjusted net income

$

27,695

 

 

$

61,821

 

 

$

80,717

 

 

$

196,500

 

  

 

 

 

 

 

 

 

Earnings per diluted share - as reported

$

0.13

 

 

$

0.60

 

 

$

0.48

 

 

$

1.55

 

(Gain) loss on derivatives - commodity derivatives

 

0.06

 

 

 

(0.02

)

 

 

(0.05

)

 

 

0.23

 

Net cash receipts from (payments on) commodity derivatives

 

0.03

 

 

 

(0.11

)

 

 

0.14

 

 

 

(0.30

)

Loss on derivatives - common stock warrants

 

 

 

 

 

 

 

0.04

 

 

 

 

Warrant exchange transaction costs

 

 

 

 

 

 

 

0.02

 

 

 

 

Tax impact on above adjustments (a)

 

(0.01

)

 

 

 

 

 

(0.04

)

 

 

 

Changes in deferred taxes and other estimates

 

 

 

 

 

 

 

0.01

 

 

 

 

Adjusted earnings per diluted share

$

0.21

 

 

$

0.47

 

 

$

0.60

 

 

$

1.48

 

Adjusted earnings per share:

 

 

 

 

 

 

 

Basic earnings

$

0.21

 

 

$

0.47

 

 

$

0.60

 

 

$

1.48

 

Diluted earnings

$

0.21

 

 

$

0.47

 

 

$

0.60

 

 

$

1.48

 

(a) Estimated using statutory tax rate in effect for the period.

Reconciliation of Total Costs Incurred for Oil and Natural Gas Properties to Inventory Acquisitions

The Company defines inventory acquisitions as costs incurred to acquire additional development opportunities and undeveloped acreage acquisitions and excludes producing property acquisition costs. The Company believes that inventory acquisitions are useful to investors as they provide a measure of Company’s costs incurred for current and future drilling opportunities on a consistent basis.

The following table provides a reconciliation from the GAAP measure of total costs incurred for oil and natural gas properties to inventory acquisitions:

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

(in thousands)

2023

 

2022

 

2023

 

2022

Property acquisition costs:

 

 

 

 

 

 

 

Proved

$

8,161

 

 

$

4,251

 

 

$

27,459

 

 

$

12,206

 

Unproved

 

11,262

 

 

 

7,864

 

 

 

24,053

 

 

 

20,653

 

Development costs

 

75,726

 

 

 

59,898

 

 

 

233,071

 

 

 

164,923

 

Total costs incurred for oil and natural gas properties

 

95,149

 

 

 

72,013

 

 

 

284,583

 

 

 

197,782

 

Less: Development costs (excluding drilling carry)

 

(75,049

)

 

 

(46,394

)

 

 

(222,230

)

 

 

(139,969

)

Less: Production acquisitions

 

(8,161

)

 

 

 

 

 

(26,150

)

 

 

(560

)

Inventory acquisitions (non-GAAP)

$

11,939

 

 

$

25,619

 

 

$

36,203

 

 

$

57,253

 

 

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