GRNT - Earnings call transcript Q2 2024 | Granite Ridge Resources, Inc

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Operator

Good morning, and welcome, everyone to Granite Ridge Resources Second Quarter 2024 Earnings Conference Call. [Operator Instructions] I will now turn the call over to Wes Harris, Investor Relations representative for Granite Ridge.

You may begin.

Unknown Executive

Thank you, operator, and good morning, everyone. We appreciate your interest in Granite Ridge Resources.

second call Executive from an Officer, key for our President Brandenberg, overview begin outlook matters Chief an and who the will with Luke comments our of for We XXXX. and quarter will provide

call to some turn Officer, Chief we closing review financial comments over will then will the Farquharson, results. our before We will Luke call up return Tyler then our the for Financial questions. who to open provide

within certain disclaims any risks review implied Today's information, update you ask differ of We and any cautionary forward-looking would may or projections the conference Ridge statements statements also the to or or as meaning expressed in securities forward-looking subject events cause contains and obligation new statements, to of These laws. in a or call result our whether revise statements. from statement those to federal other that that otherwise. intention these future actual are results earnings Granite uncertainties release.

you posted and financial on These is are financial press to also non-GAAP and references yesterday's on reconciling our described earnings Information the website. the in not financial other that release forward-looking statements. release includes place is measures GAAP Accordingly, available filings This conference discussed measures risks with certain SEC. call directly undue non-GAAP to most measures. our reliance should comparable in our

A following will replay Finally, as today's transcript recorded. our conference a and being this made is call. available reminder, be call on website

call Luke. over Luke? to with So I'll turn the that,

Luke Brandenberg

with of been It provide a busy team space here the which for months, drives been sharing increased last and folks at has thank and all to time with my as families people of you to job effort to appreciation one vacation. you, late, another bit deal get everyone and the I'm and Granite begin across a functions morning, organization. joining. like for few to Thank the an truly to frenzy a every done been on workload Ridge. Wes. We've summer each in by one work as for in It spend step of has over grateful our I you. would Good

discussing XX by closed and million we of aggregate, occur $XX strategic or locations XX% to for XX.X deal April of Basin-focused the development carries about capital, which capital total the In about July, locations a of drilling for start of we side. $XXX acquisitions XX% expect program, acquisitions Let's expected fall From our next we into to account were gross the of Permian majority a these of entry weighted, over expect Midland inclusive representing to the years. new that, future These vast X addition including partner. million. net controlled

X.X wells Speaking of our process. now we controlled have and producing capital XX.X including net net locations, program, in wells

expected expect total investments is we capital concentrated XXXX, conviction of compelling we as returns. projects operated represent to for CapEx development exciting will XX% see strategy controlled make high year. It development materialize in For this CapEx with the over our

be on vast on predicted. were rabbit they've tremendous one I of of whatever stood majority in Singleton now, a things, One in look in out we kinds our that hole the throws as legendary the familiar. me adapt March. to value influences but you. plans way Henry of and number the a at worked well, XXXX is the cannot not but all we investor, mentor to was suggested I definite subject mine to my to were strong the and the of people know back qualities "I Singleton. we guided ability lot current recently down of the but shared, to may of Mr. outside non-op have expectations that A comparing Many out know them name I'm market of what you to very quote

idea my So is to stay flexible."

What X consensus easiest The our X%. prices. identify is full pricing outside hydrocarbon the XXXX full about year is year is provided pricing XXXX now, over guidance down and influences consensus months? March Comparing industry to the when have initial past down changed we versus gas oil about in XX%

Granite So shift what the can allocation projects value does that economically for We Ridge? drive most advantaged to capital shareholders. mean our long-term to for

we do how non-op, a do As that?

or maintain value. non-op like-minded that shareholder it make a business, leverage gas partner this, enables to restricting as maintain gas and we operators a production taking our partners to the point In to in wells traditional operating such In DUCing with on we challenging Haynesville our environments value. long-term Eagle focus maximize Ford which them deferring see conservative profiles, gas dry steps, including and

capital. While on we engaged with as not continue flow these we in for projects compete to they currently gas see areas, largely have do not deal near-term development

projects capital oil-weighted we continue capture controlled allocated or returns. additional we've meet target as that our capital our in exceed Further, business, to opportunities to

to quarter-over-quarter quarters, low XX:X, gas the equivalent production will towards closer oil at the push of may while this production the I With trading where to say changing rise end scenario us as X not see continue are there we current prudent in I could can third time, this the to at price over We oil hydrocarbon months a anticipate production of X:X, both We which guidance. are where production comes to oil left low, X our and still next environment. particularly a that we that barrel current at quarter are in adapt but guidance despite in increase. XX% beats equivalent see the guidance will gas the year,

of a the we to XX% decrease quarters. the next each expect over On X% side, gas X

net guidance we at do process Looking not the year a at term, towards contribute the not XXXX end of are number will wells third quarter. near expect wells turn much the good wells that but we XXXX to in turned that to to may to sales sales, changing X our reduction. to time, or late XXXX this of More in about have come expect range in online early we

from are either side, inventory June acquisitions to taking or we on CapEx million On based $XX opportunities XX. $XX post closed close guidance up to the are that expected identified million

Additionally, midpoint we of CapEx million the $XX CapEx our capital a for a development tied are increase. $XX million acquisition at the half by half development drilling million is is CapEx of total by $XXX driven raising the controlled About to schedule the $XXX other range shuffling in guidance to million. and increase

into in a about us excited we but We anticipate XXXX do development production how from XXXX. not CapEx, the will are position increase going $XX million impact it

next split remaining the we expect fourth development results allocation Tyler the our to for and in XX-XX CapEx the couple third acquisitions of that, quarter the quarter. it will will over discuss be over to close identified third quarters, majority quarters. vast With CapEx across roughly the at the turn and of Looking to I

Tyler Farquharson

Average day, Thanks, for quarter. a production up quarter. of compared good morning, the X% production Oil increased and second prior Luke, production daily to XX.XXXX year as BOE for everyone. XX% total per the quarter the was percentage to total

projects. natural year the to drift continue should defer as mix development operators of of the remainder gas-focused throughout continue oil some our to higher Our

a exit the XX% look XX%. result, and mix guidance we for our year oil to to around As XXXX are XXXX production increasing

XX% flat, our to While headed we oil anticipate third by quarter. the we to relatively increase expect into our total production production remain

BOE to of unchanged. remains range guidance production XX,XXX annual day Our XX,XXX per

However, oil guided. than for we production the now expect more year originally

to production offset year for adjusted both and EPS from our which from and due EBITDA the this year EBITDA were year's increase of Adjusted adjusted X.X% $XX.X quarter, in prices the period. the lease of XXXX. the flat prior was share prior were our per Our ad $X.XX and within sales by unit for production taxes per range diluted assets, million and impact gas lower the valorem operating of were divested was $X.XX year guidance was Per quarter. for costs of second natural full BOE

G&A compensation, the for $X.XX excluding BOE noncash expense, stock-based was quarter. per

million Our is million to unchanged. of $XX guidance annual $XX range

a partners all occurring process the At placed Permian placed quarter. net on total, net our or we with quarter, the and activity being X.X the wells to in continue nearly and quarter of production In During in to we Basin. of to X.X placed additional XX an XX completed wells gross net the operating had those production end, expect be total Permian Basin. online XX during third those on be wells with XX% XXXX X about during wells the expect of to nearly in

primarily Total locations, carries we net During drilling that including Basin. acquisition of million. $X Permian added future drilling the million in future second multiple was the quarter, closed $XX expected transactions XX.X costs,

drilling in In acquiring addition, the we X.X to of or closed quarter process transactions, additional closing future are subsequent locations. net end,

be to million Total expected acquisition including $XX $X carries estimated of drilling million. future is costs,

million a recent As quarter front. our $XX line to XXXX on success was we million. second to at capital our the are result, guidance capital reflect Development acquisition this in increasing spending during $XX

We our million development are midpoint. $XX by also CapEx at raising the guide XXXX

about the higher driven schedule. our a As in with balance swap drilling working acquired half a being from outlined, new unit our of increase recently properties, development this on Luke controlled to results by interest capital

about from we we're While very into headed XXXX positions this us production anticipate increase, how impact XXXX. a growth excited for not do it

cash also quarterly we dividend ongoing Finally, continued program. our

XXXX, quarterly Board the per cash cash as end, per Luke? payable it dividend. $X.XX Subsequent will we closing annualized September Luke record comments. yield now share of declared XX, to closing XX, $X.XX against On for price. quarterly an dividend measured to shareholders Wednesday's second of our quarter, paid basis, this an back to I share quarter on dividend During X.X% a XXXX. August represents his an hand

Luke Brandenberg

is each that inherently something. I undervalued. win debt capital I believe is return to concluded making model ways high both Street shared we to statement, have dividend increased are an to out business is allocate grow continue Granite the conservative believe XX quarter volume amount primary X% and three strategically by unlevered missing is Granite The base capitalization that leverage have our I second, with we conservative shareholder as flow. production that I've a underpinned and is we Ridge single believe saying broadens; that to down of missing The capital digits I'm is unlocked drawing value third believe can hedged I to growth. that of the Ridge over with shared months, been There flow; Ridge: that our standpoint, what from invest Granite have Street started which stating cash a our over in I business, and annually mid- as the also value past higher from First, more cash and controlled by trading By of

any arguably models, single do digits is will for The high impact at to we will us If on beyond. at appropriate suggest production credit most continue that or Street growth have annually. you our mid- analyst believe and look in credit production grow I to not the debt this giving XXXX

at too is to year-over-year. growth we XXXX are it early looking double-digit share While production guidance,

of Most built this a we capital at has not recognizing funded time our host sharing that banking our which prudent, that controlled bring will a and debt program, debt the year with this everyone once. We kind new machine the in side thank can Ridge. and Granite in investors the debt until Granite first has grow pad is only this on spent go a or a inventory for to have time cash from building have conservative up roadshows. manner. Thank to on powerful have to out partners flows recycle we you our call disciplined effectively from been the longer What as do their production have a generated that set compounding Ridge office continue lead that June, to no especially business us we to your

and is a We the right nascent are to differentiated us story with still be believe to a incumbent on public heard. company earn it

travel. told Tyler, I will as deck, So have investor

story. to Best the office We a talking our to months to and the hop year call to the schedule forward or on for next share as conference in to fall. over school the outlined at visit the wishes would look new earnings on appreciate Granite the several have the again your release. We meet in quite latest opportunity Ridge conference, the

let's With questions. it over turn that, to Operator?

Operator

with Johnston Your Instructions] Phillips One. first from of [Operator question comes line the Capital

Phillips Johnston

about sounds color only year. of you I quarterly quarter. net the XX% potential into the said of in coming half the I QX oil It your sequential growth year, oil assume decent growth just Permian, regions? X that a out and of Luke, despite just imply, expecting, the guide the increase the in some guess, maybe. terms of tills you for if to lot here QX, you're of talk some that's And would in there's maybe exceed from here that of that back trajectory color appreciate for on the a is but the QX. your think, oil the in I amount various on from I looking like production in Can about of drivers

Luke Brandenberg

question. the for Thanks

So one our pad the cleanup on a little pad thing first brought June, first on I'd controlled to, time X.X June. bit. in That point we all early net early wells, was in capital

that And really, so the Permian. what will as majority to second vast oil of to third quarter. we out the we're anticipate a coming is increase contributor seeing be primary of from Tyler But the mentioned, quarter

clip will anticipate pretty a gas increase the you that of while oil from continue to to year, we lot quarter. of in it throughout less increase second rest of really I hope at expect the a aggressive year the in we end getting we're with decent oil a process, certainly a year. wells So are next to planning benefits that because component the early still weighted, third on but see and of

Phillips Johnston

I until about too I $XX that next your well. of I the guess of of did kind you early next development But of of wells rate of either and increase sort strong growth -- that mentioned directional activity a quarter you you year. set into million won't that online you Tyler would the here? of late next discussion XXXX good early up expect in get guess I And fairly most the think this that coming that a very sets it's to up sort like year budget, fourth sort really year think exit think for job to in just guys be really versus Obviously, QX And note, or explaining Yes. that you year. how guys I on in in

Tyler Farquharson

We're Yes. next Absolutely. in 'XX this growth 'XX. the that that, for growth quarter. year, at We up a you're for really quite we're than is first which at to higher year, will if think set bit looking us double-digit anticipating looking

of about about I into wells capital in So now. with absolutely, big controlled -- go we roughly bang. year next X% this a to that will we're our really is XX% We're amount mentioned, piece that, about that represent. dollar and And A be allocation. a of what But could XX plan too, excited I think will decent right year, development controlled is be the capital. progress

to those And so are going be a bit chunkier.

early big more piece see driver, that year the So only that's of chunkier the I think but not you'll wells, is next wells.

Operator

Our of Scialla with comes from the Stephens. next Michael question line

Michael Scialla

the given first double-digit now? the of half? half moderating right that to you're significant before point, it next just on anticipate up the looking second Would at growth half the that the wells I in follow guess, year? trajectory be, in Is in the the way pretty comes last first it would of growth progress, most with Luke that year growth double-digit you on

Luke Brandenberg

That's a question. great

wait of there. a and there's think see bit a I

the But year. continue see throughout be wells have to that that quarter a end of -- may end have we'll there will the WIPs quarter. just benefit just But year quarter course be the to in anticipate in we're fourth decline growth of real of bump progress going that yes, a I year. won't largest the think I then bring and you'll quarter-over-quarter think due at the the to just the wells first going you number the to on with first that the we're to I to that

Michael Scialla

acquired partnerships? in if locations And much was how in those that Great. versus Okay. new partnership the the quarter, of you capital second after the Midland [indiscernible] so, controlled were your X.X the that And partnership?

Luke Brandenberg

Yes, of question. was new good that A Midland our good with chunk Basin partner.

half over that opportunity we able was partner able probably, capture, on. with was gosh, it to and they them an So were that to were

of really it is big at looking And we Basin allocation, capital chunk capital about. in think fired Midland controlled if up side, on the the the again, you're I most So bucket. is which

Michael Scialla

Basin on what looked the at maybe to It can with you where you're give planning do Midland like color doing you're drilling, you're there? what more little a And partnership, that more per you bit was bit prior? done a expensive a paid those little some X.X versus particular that a more you've on driver why location for what locations, on there basis

Luke Brandenberg

high what record They're Yes. but Midland initially Basin, team that they a really it -- any say the component well is of there. is I'd the focused on all a that time their for very production Northern conviction they long of. a able and have area up this asset we've that an track their it's have first pick to didn't in vehicle. with known it, this long has There's of were that they know was inventory, a success current up,

this of, pay a fruit little for so there that. bit to a say, And lot low-hanging And was opportunity. to get foothold. around bit of there's hey, that let's a a acquire more We're going

I that per as average work location to see they'll down initial continued, bolt-on that that anticipate they you their entry. to So wouldn't dollar above continue but

Operator

Next question Capital. line comes White ROTH the from with John of

John White

is year you the Congratulations of mentioned solid Yes, quarter. on had next capital controlled business into capital a this model. going and year your most

opportunities on an as through forward, source to through decided your Or far new how or going has your that it those opportunistic is As controlled traditional drilling capital? basis? non-op based

Luke Brandenberg

Ultimately, as we do view job. question. great primary our allocation what really a capital a as that's Yes, business. we That's

us. be to to take risk about that needs a set this position we're has spot But program partnerships that dramatically developed, of capital you part in always think to opportunity opportunity increasing to to a wide And been where every in our concentrated and And the controlled available investment so we've you these compete opportunities. a where have very position has neat And allocator, breadth a for I have it conviction. high as you be need capital a capital.

we're that's that really spot And in. the so

we're now. development now, That about, could we continue capital capital we're And excited talking be to maybe more that think the we're compelling gosh, that's hand bucket. about change. right So will in don't we case. on inventory next based that more what year's allocation find traditional XX% more in If that of or there. I maybe side, controlled really, the non-op But opportunities seeing. on have some

will guys opportunities, there. these I allocate think up to attractive to pick we'll capital that continue continue and

Operator

the next Bank Noah America. of line comes Hungness Our question of with from

Noah Hungness

I wanted about the DUCs production wells you back. much production is quantify and do that could ask I'm trying just then to the How with see to minimal DUCs choked in if just an prices. deferred the how increase might net and net be added CapEx be much commodity there? we

Luke Brandenberg

Your got thinking at gas we of we that if deferred had really, wells either well about if to and year. the been you're I'd goodness, we beginning side. X at have the the the on DUC what We've about probably or so then were the been year well several wells probably think X.X on are so just that's And net end looking or at, deferred It's DUCed. of operators. least half that say, have, I to across guess

in the Those Haynesville. are DUCs generally

of completion impact Haynesville side expensive the though, the net So the Haynesville, a gosh, thinking hobby. couple high is production of and on. certainly an the wells, with Real rate that, associated early dollars pretty about that,

you average at looking ability So bring maybe XX% well an on -- and cost, to bring that got going to you've it's a if maybe -- at ability you on I amount, XX%, I we've you, total? to wells our the would be was to what less impactful, least could it's got a the declining but bit yes, if of X.X, be honest say, wouldn't capital gas see allocated especially do it net say I think there. in couple, a Noah, So as you be as with production tremendous maybe quarter-over-quarter Tyler,

Noah Hungness

to on I helpful. Okay. LOE. touch wanted And That's really then just

end drove what lower talk is? at bottom was then sticky about your kind lower? guys' you LOE how of You And guidance. the LOE that Could of that

Luke Brandenberg

absolutely. Yes,

what ties actually about So to chatting gas side. part that on just we're of the

the -- on in Haynesville, the take of we some deferrals kind. with gas particularly in So that

us, those seeing we're maps of gathering move bit our so those take-in-kind as a we're take-in-kind assets -- a are cost -- and volumes And assets. charge, seeing that decline, to And volumes on going to and pretty quite LOE. down there's and that decline those for

go that put expected than originally we're down when those this number So more because out of year we guidance deferrals. seeing just

was The other less component Bakken. workover in expense, particularly

activity our less driver wells up the are Haynesville. had on in that costs taking gathering we down we the primary going kind but So there, was

Operator

question with Robertson our comes from And line Tower we have of Water the do Research. last Jeff

Jeffrey Robertson

XXXX, double-digit Luke, guidance, potentially are to the clarify on production growth talking or BOEs you oils? you're talking in when

Luke Brandenberg

question. Great

really put we're So a that, And of be into We talking oil primary capital anticipate I BOEs, as although a gas dry will of that weighted. just new lot late. driver. that's projects haven't

current the hydrocarbon prices, And so at of be for I the least will talking BOEs, outlook the majority given We're would oil driver but that. anticipate there.

Jeffrey Robertson

you have that you much if the it? and year suggest year-on-year XXXX, production growth, projects than And wouldn't a with XX% at least early at into think, I XX% around up the would teed oil weighting higher end

Luke Brandenberg

yet. and we that that, again, digits, Yes. want double but share do hope hope we're current on, we plans exactly where would that environment. what exceed I I'd spot But that in XX% pricing will based it be say would yes, we're our not think We a current the in XX%. to the exceeds

Jeffrey Robertson

capital longevity more with you the to future protection Ridge? on flows in of future development production controlled with Granite of representing therefore, flow Luke, cash capital and in ultimately, how and XXXX, several that controlled visibility and the capital profile view supporting as the growth, investors your next years the dividend what would cash respect maybe business over the XX% the impacts of part think growing that do

Luke Brandenberg

that of that we Well, component pursue hits it want a Jeff, question, to really key I appreciate because strategy. why

look, world think primarily XX%, going partner that In XX of us be externally us better It internally this will will lot fact, also to a the I predict more insight. even think the guiding. will We give next over XX, strategic like ability get that, but the a driven addition lot look can capital over what more our both there. next we a give by second year, months, to at is we hope controlled

fan of big a could for we're what represent business. this So the

transparent, things couple going to of work to have a that there's To we're through. totally be

for Just example, moved any capital we're controlled around. rig because of in flexibility really capital But the one given the we this great the around move because schedule right? make that is project. we driver that to Half is the maximizing to the increase sure NPV for was year, have development schedule $XX million this

certainly So we'll have more predictability.

that's at especially into is, think we'll our remove of look better that about it business. won't continue the our going can And able dividend demonstrate It excited will we in least but the we're at continue and picture like, I inherent to that a I scale, continue all going what that's be lumpiness can that to to of to to think paint defend XXXX. inventory model, the what really just improve. to grow

of this We 'XX, end in started really 'XX. the picked early rig at a up concept

online came June. wells in First

we're there, perform, really like get really that see point to that continues it's I so expect, we'll where year wheels that next to late we starting And turning singing. this year to and as the inflection hope

Operator

line the another comes of with Stephens. Scialla have from Michael question We

Michael Scialla

on non-op prices? pick to can more while? Do a you wanting in gas opportunities not acquisition see weight to spending an Or toward that standpoint, to wanted be wait afford depressed your interest press. right up given comments the thought up. now. project for really locations the from just oil-driven drilled were follow natural and not interesting Luke, natural you sit to any gas Obviously, I I the on in may

Luke Brandenberg

Mike. gas a afford the the a say pretty driver, it's but sit right side between there's good big sellers buyers but gap well, to just to maybe and not it's and now. I'd question, of is that able less being Well, wait, on

I in you do seller at have the I deal I just gas be. look there. at, wants If thing. hard. a you shoes, struggled But to if is the their embrace. really understand price of have meeting it's would what such was going look if a even same -- just wide you we've it, It's just what of And to because looked it's predictions a several to hard you Any in that gas range years, we've minds out

be there probably And honest looked are There at in struggled. done. getting there. with opportunities To that successful think several, so I be you, gas will deals are people we we

And so dry we're right for just not much allocating gas evaluating reason. time that to now deals

low. had a may that You look be on is rate you're but to really good, able focused at we get able that really success just are XXX where hit to development. the and side are couple so We've better on oil near-term

Michael Scialla

to sense. makes one more. that Yes, ask I wanted

capital controlled of As you're the scaling about business. thinking the part

I You be said it's going this versus, likely most of to greater year. than XX% think, XX% next year's capital plan

versus non-op with much, the production that you said up the look on side does more without or at that How you any, could traditional you -- if business controlled G&A. non-op business? your scaling compare double adding As side capital really

Luke Brandenberg

more great spending it's accretive, teams another each the we're a if are, because fully of more across and of will, pretty these probably question. actually much it's that that's way, same, again, with Yes, all teams, would disciplines. developed you teams these dollars XX-plus I say people

full -- a deals the on So are from neat side, the and scratch. traditional non-op then there sourcing doing we evaluation it's because

are evaluation. then and very opportunities effectively can we're and these you the the more them, long also doing time. On a alongside do They're but controlled have team capturing just evaluation, yes and doing all thank it sophisticated that And they capital with that we're quickly, so doing partnering evaluating this folks the been projects. more have capital-intensive broader side, a

decrease glad further I big for made it. less will, so that's have because overhead is can projects, think a can because controlled is if that you capital on I we selling you it's spend the probably should great. barrel, I'm interest we point per And a point which working time higher

Operator

that joining. for today's concludes call. Thank you gentlemen, all and Ladies

disconnect. You may now

Granite Ridge Resources (GRNT) 9 Aug 242024 Q2 Earnings call transcript