Granite Ridge Resources, Inc Q2 FY2025 earnings call

• Leadership Transition: Tyler Farquharson became CEO as Luke Brandenberg stepped down; gratitude expressed for Luke's contributions.
• Q2 Performance: Production up 37% y-o-y to 31,576 BOE/day, 4.9 net wells to sales; capital spend $87M in Q2, YTD $149M development and $44M acquisitions.
• Growth Drivers: Diversified portfolio, disciplined capital allocation; operated partnerships in Permian Basin and traditional non-op strategy in Permian and Utica delivering results.
• Guidance Updates: Raised full-year production guidance to 31,000-33,000 BOE/day (midpoint up 10%); raised CapEx guidance to $400-$420M due to new acquisitions.
• Balance Sheet: Strong, leverage ratio 0.8x net debt to adjusted EBITDA; liquidity enhanced with borrowing base increase to $375M.

In the second quarter of 2025, Granite Ridge Resources generated total oil and gas sales revenue of $109.2 million, a 20% increase compared to Q2 2024. Production was 31,576 barrels of oil equivalent per day, a 37% year-over-year increase. Oil revenues rose by $12 million due to a 46% jump in oil production to 16,009 barrels per day, though realized prices for oil declined 21% from $77.84 per barrel in the prior year to $61.41 this quarter. Natural gas revenues increased by $6.6 million, supported by a 28% rise in natural gas production to 93,404 Mcf per day and a 17% increase in realized prices from $1.98 per Mcf to $2.32 per Mcf. Net income for the quarter was $25.1 million or $0.19 per share. Operating cash flow before working capital changes was $69.5 million for Q2. Lease operating expenses were $20.1 million or $7 per BOE in Q2 2025, up from $13.7 million or $6.50 per BOE in Q2 2024 due to increased production from the Delaware Basin. General and administrative expenses rose to $8.5 million or $2.96 per BOE, driven by nonrecurring items including severance and capital markets activities.

• Full-year production guidance raised to 31,000-33,000 BOE/day, midpoint up 10% y-o-y.
• CapEx guidance raised to $400-$420M, driven by new unbudgeted acquisitions expected in 2025.
• Q3 production expected to modestly grow, Q4 further growth as new wells come online; CapEx to peak in Q3, then moderate in Q4.

• Market Volatility: Commodity price fluctuations could impact cash flows and revenues.
• Leverage Risks: Continued outspending of cash flow on acquisitions could affect leverage ratios if not managed properly.
• Execution Risks: Uncertainties related to operator partnership timelines and development project execution.

Q: Phillips Johnston asked about the oil mix and net debt balance.

A: Tyler responded that oil mix might be slightly lower, and the Board is comfortable with leverage in the 1 to 1.25x band, expecting to outspend cash flow on acquisitions to add inventory.

Q: John Annis asked about confidence in growth and acquisitions.

A: Tyler stated the A&D environment is constructive due to lack of private equity focus on smaller deals, expanded operator partner teams, and attractive deal flow.

Q: Michael Scialla asked about rigs and mix for 2026.

A: Tyler said CapEx in 2026 could be similar or higher, with operated partner spend potentially ticking up but non-op still significant, especially in Appalachia.

Q: Noah Hungness asked about growth trajectory and credit markets.

A: Tyler said growth will continue given balance sheet strength, and exploring credit markets in fall for RBL increase and terming out debt.

Q: Phillips Johnston asked about partnership structures.

A: Tyler explained there's a reversion of interest to operator teams after return hurdles are met, with no upfront promote.