Granite Ridge Resources Charts Disciplined Growth Path

Granite Ridge Resources, Inc. ((GRNT)) has held its Q4 earnings call. Read on for the main highlights of the call.

Granite Ridge Resources’ latest earnings call struck a cautiously optimistic tone, with management highlighting industry-leading production growth, stronger cash generation and disciplined balance sheet management. While weak commodity prices, rising costs and a slower growth profile weigh on near-term upside, executives emphasized a clear path toward sustainable free cash flow by 2027 while maintaining the dividend.

Robust Production Growth Underpins the Story

Granite Ridge reported roughly 27% year-over-year growth in average daily production in Q4, reaching about 35,100 BOE per day. For the full year 2025, volumes climbed around 28% to roughly 32,000 BOE per day, supported by 67 gross wells brought online in Q4 and 322 gross wells for the year.

Scaled EBITDAX and Cash Flow Despite Pricing Headwinds

Adjusted EBITDAX reached about $69.5 million in Q4 and $315 million for the full year, reflecting the benefit of a larger, more diversified asset base. Operating cash flow came in at $64.5 million for the quarter and $296.4 million for the year, reinforcing the company’s progress toward more durable cash generation.

Capital Deployment Drives Inventory Capture

The company spent $401 million in 2025, with roughly $279 million directed to drilling and completion and $122 million to property acquisitions. Those acquisition dollars were spread across 107 transactions, securing about 20,500 net acres and 331 gross locations, or approximately 77.2 net locations, strengthening future drilling inventory.

Operator Partnerships and Permian Focus Pay Off

Granite Ridge highlighted a strategic pivot toward operator partnerships in the Permian Basin, including Admiral and three additional partners, as a key competitive advantage. This model is generating high-quality, short-cycle projects, with average Permian acquisition costs around $1.4 million per net location and inventory capture running ahead of the company’s two-rig development program.

Balance Sheet Remains within Target Leverage

At year-end, liquidity stood at $339.5 million, supported by $350 million of 2029 senior notes and $50 million drawn on the revolver. Net debt to adjusted EBITDAX was 1.2 times, comfortably within the firm’s stated long-term target range and providing flexibility to navigate commodity volatility.

Path to Free Cash Flow and Steady Dividend

Management plans to moderate growth while aligning development capital with internally generated cash, aiming for sustainable free cash flow in 2027. Even with this shift, the company expects around 9% production growth in 2026 and is holding its quarterly dividend at $0.11 per share, signaling confidence in the underlying asset base.

Gas Realization Strategy Targets Waha Weakness

To combat depressed Permian gas pricing, Granite Ridge joined Diamondback and Conduit Power in a 200 megawatt gas-fired power project set to start up in 2027. Management expects the initiative could improve Permian gas realizations by roughly $1 to $2 per Mcf on volumes covered under the agreement, cushioning future revenue against weak basis.

Soft Commodity Prices Cap Revenue Growth

Despite volume gains, pricing remained a drag, with the Q4 realized oil price at $55.49 per barrel versus $65.53 a year earlier, a drop of about 15%. Natural gas realizations averaged $1.81 per Mcf, roughly 48% of Henry Hub, leaving Q4 oil and gas sales at $105.5 million, essentially flat year over year.

Pricing Pressures Weigh on Margins and Cash Flow

The combination of weaker oil and gas realizations and regional basis differentials trimmed profitability even as volumes expanded. Adjusted EBITDAX of about $69.5 million and operating cash flow of $64.5 million in Q4 were both held back by these pricing dynamics, underlining the sensitivity of margins to Permian basis risk.

Rising Operating Costs Erode Some Productivity Gains

Lease operating expenses rose to $7.72 per BOE in Q4, with the full-year figure at $7.27 per BOE, reflecting higher Permian service costs, especially for saltwater disposal. For 2026, the company is guiding LOE to a range of $6.75 to $7.75 per BOE, suggesting only modest relief from current cost pressures.

Deliberate Growth Moderation May Test Investor Patience

Management is cutting 2026 development capital by about 15% versus 2025 while still targeting around 9% production growth. Oil volumes are expected to decline slightly in the first half of 2026 before recovering, with exit-to-exit oil growth of roughly 12% from Q4 2025 to Q4 2026, a slower pace that could frustrate growth-focused shareholders.

Ongoing Exposure to Basis and Partnership Risks

Granite Ridge remains exposed to Waha and regional differentials, which continue to pose downside risk to revenue and cash flow despite hedging and the power project initiative. The company’s model also leans heavily on its Permian operator partnerships, making continued deal flow, partner performance and local competition critical execution risks.

Guidance Signals Disciplined Growth and 2027 Cash Focus

For 2026, Granite Ridge guided to average production of roughly 34,000 to 36,000 BOE per day, with oil at about 51% of volumes and exit-to-exit oil growth near 12%. Total capital spending is slated at $320 million to $360 million, including $300 million to $330 million of development capital and $20 million to $30 million for acquisitions, with leverage kept around 1.0 to 1.25 times as the company targets sustainable free cash flow in 2027.

Granite Ridge’s earnings call painted the picture of a company shifting gears from rapid expansion to a more balanced, cash-focused model while preserving a steady dividend. Investors will need to weigh strong production growth, improving scale and prudent leverage against commodity price volatility, higher costs and a slower growth tempo over the next couple of years.