Granite Ridge Resources Shines Amid Market Challenges

Granite Ridge Resources, Inc. ((GRNT)) has held its Q1 earnings call. Read on for the main highlights of the call.

Granite Ridge Resources, Inc. recently held its earnings call, revealing a robust performance in the first quarter despite facing some market challenges. The sentiment during the call was largely positive, with significant production increases and improved financial metrics. However, the company acknowledged the hurdles posed by market volatility and declining oil prices, which could affect capital expenditure decisions and potentially lead to increased debt. Nonetheless, Granite Ridge’s strong hedging position and favorable leverage ratio offer some protection against these market fluctuations.

Significant Increase in Production

Granite Ridge Resources reported a remarkable production rate, exceeding 29,000 barrels of oil equivalent per day, marking a 23% increase compared to the same period last year. This substantial growth underscores the company’s operational efficiency and strategic focus on enhancing production capabilities.

Strong Financial Performance

The company achieved an impressive $91 million in adjusted EBITDAX, surpassing its internal projections. Total revenue for the quarter reached $122.9 million, reflecting an increase of nearly $34 million from the previous year. This financial success highlights Granite Ridge’s ability to capitalize on its production growth and cost management strategies.

Improved Cost Structure

Granite Ridge Resources reported a lower Lease Operating Expense (LOE) of $6.17 per BOE, a 13% decrease from last year. The operating margin also improved from 83% to 87% year-over-year, demonstrating the company’s commitment to cost efficiency and operational excellence.

Natural Gas Revenue Growth

Revenue from natural gas more than doubled, reaching $31 million, with realized prices significantly increasing to $3.97 per Mcf compared to $1.84 per Mcf a year ago. This growth in natural gas revenue is a testament to the company’s strategic diversification and market adaptability.

Strong Leverage Position and Hedging

Granite Ridge maintains a healthy leverage ratio of 0.7x net debt to adjusted EBITDA and has hedged 75% of its production through 2026. This strong financial positioning provides a buffer against market volatility and supports the company’s long-term stability.

Market Volatility Impacting CapEx Plans

Due to recent market volatility, Granite Ridge decided to proceed with a base case CapEx of $310 million instead of an accelerated scenario of $380 million. This cautious approach reflects the company’s focus on maintaining financial flexibility and prioritizing full cycle returns.

Oil Price Decline

The decline in oil prices, falling below $60 per barrel, poses challenges to Granite Ridge’s financial outlook and flexibility. The company is closely monitoring the situation and adjusting its strategies to mitigate potential impacts.

Potential Increase in Debt

Given the current hydrocarbon price environment, Granite Ridge anticipates an incremental debt increase of $60 million. This potential rise in debt underscores the challenges posed by fluctuating market conditions.

Forward-Looking Guidance

Looking ahead, Granite Ridge Resources provided significant guidance for 2025. The company aims for a production growth target of 16% for the year, with expected production of up to 58,000 BOE per day. They plan to maintain a 9% dividend yield and direct 60% of their capital towards operated partnerships. Despite market volatility, the company remains committed to efficient cost management and maintaining flexibility to adapt to changing market conditions.

In conclusion, Granite Ridge Resources, Inc. demonstrated a strong performance in the first quarter, marked by increased production and improved financial metrics. While challenges such as market volatility and declining oil prices persist, the company’s robust hedging strategy and leverage position provide a degree of resilience. Investors and stakeholders can take confidence in Granite Ridge’s strategic focus on growth and cost efficiency, as outlined in their forward-looking guidance.