Earnings call transcript: Granite Ridge Q2 2025 sees stock rise 4.92%

Granite Ridge Resources Inc (NASDAQ:GRNT) reported a strong performance in its Q2 2025 earnings call, with notable increases in revenue and production. The company’s stock rose by 4.92%, reflecting investor optimism fueled by a 20% year-over-year increase in total oil and gas sales revenue and a significant rise in production levels. According to InvestingPro data, the company maintains a healthy 83.7% gross profit margin and offers an attractive 9% dividend yield. The company also raised its full-year production guidance, further boosting market confidence. InvestingPro analysis suggests the stock is currently in oversold territory, potentially presenting an opportunity for value investors.

Key Takeaways

• Granite Ridge’s Q2 2025 revenue increased by 20% year-over-year to $109.2 million.
• The company reported net income of $25.1 million, or $0.19 per share.
• Production increased by 37% year-over-year, with oil production up 46%.
• The stock price rose by 4.92% following the earnings announcement.
• Full-year production guidance was raised, indicating strong future prospects.

Company Performance

Granite Ridge Resources demonstrated robust performance in Q2 2025, with significant gains in both revenue and production. The company reported a 20% increase in total oil and gas sales revenue compared to the same quarter last year. This growth was supported by a 37% increase in production, driven by substantial gains in both oil and natural gas outputs. The company has effectively capitalized on its strategic partnerships and operational efficiencies in the Permian Basin.

Financial Highlights

• Revenue: $109.2 million (+20% YoY)
• Net income: $25.1 million or $0.19 per share
• Operating cash flow: $69.5 million
• Net cash from operating activities: $154.1 million (+16% YoY)
• Lease operating expenses: $20.1 million ($7/BOE)
• G&A expenses: $8.5 million ($2.96/BOE)

Market Reaction

The market reacted positively to Granite Ridge’s earnings announcement, with the stock price increasing by 4.92% to $5.08. This movement is a reflection of investor confidence in the company’s growth trajectory and its ability to deliver strong financial results. The stock’s performance is particularly noteworthy given the broader market volatility in the oil and gas sector.

Outlook & Guidance

Granite Ridge raised its full-year production guidance to between 31,033 and 33,000 BOE per day, marking a 28% year-over-year increase. The company plans to allocate $400-420 million in capital expenditures and anticipates deploying $120 million in acquisition capital. Looking forward, Granite Ridge expects mid-teens growth in 2026, with potential expansion to four rigs in the Permian Basin.

Executive Commentary

CEO Tyler Parkinson highlighted the company’s unique position in the market, stating, "We occupy a unique niche in the public energy market, looking like an energy company but acting like an investment firm." He also expressed optimism about the current market environment, saying, "This is the most constructive environment that we’ve seen on the A&D front, in quite some time."

Risks and Challenges

• Volatility in oil and natural gas prices could impact revenue.
• The decline in upstream private equity fundraising may limit capital availability.
• Potential operational risks associated with expanding production and acquisitions.
• Market competition and regulatory changes could affect future performance.

Q&A

During the earnings call, analysts inquired about the company’s approach to growth, leverage, and inventory addition. Management discussed exploring credit market options in fall 2025 and the potential for increasing the revolving credit facility. The company emphasized a balanced approach to capital allocation, prioritizing growth while maintaining financial flexibility.

Full transcript - Granite Ridge Resources Inc (GRNT) Q2 2025:

Conference Call Operator: Good morning, and welcome, everyone, to Granite Ridge Resources Second Quarter twenty twenty five Earnings Conference Call. Currently, all participants are in a listen only mode. A question and answer session will follow the formal presentation.

: I

Conference Call Operator: will now turn the call over to James Masters, Investor Relations representative for Granite Ridge.

James Masters, Investor Relations Representative, Granite Ridge Resources: Thank you, operator, and good morning, everyone. We appreciate your interest in Granite Ridge Resources. We will begin our call with comments from Tyler Parkinson, our President and Chief Executive Officer, who will review the quarter’s results and company strategy. We will then turn the call over to Kim Weimer, our Interim Chief Financial Officer and Chief Accounting Officer, who will review our financial results in greater detail. Tyler will then return to provide closing comments before we open the call for questions.

Today’s conference call contains certain projections and other forward looking statements within the meaning of federal securities laws. These statements are subject to risks and uncertainties that may cause actual results to differ from those expressed or implied. We ask that you review the cautionary statement in our earnings release. Granite Ridge disclaims any intention or obligation to update or revise any forward looking statements, whether as a result of new information, future events or otherwise. Accordingly, you should not place undue reliance on these statements.

These and other risks are described in yesterday’s press release and our filings with the Securities and Exchange Commission. This call also includes references to certain non GAAP financial measures. Information reconciling these measures to the most directly comparable GAAP measures is available in our earnings release on our website. Finally, this call is being recorded and a replay and transcript will be available on our website following today’s call. With that, I’ll turn the call over to Tyler.

Tyler Parkinson, President and Chief Executive Officer, Granite Ridge Resources: Thank you, James, and good morning, everyone. I’m excited to address you today as Granite Ridge’s new CEO. Before diving into our second quarter results, I want to acknowledge the leadership transition that occurred during the quarter. Luke Brandenburg stepped down as CEO, and I’m honored to have been appointed to lead the company forward. Luke played a pivotal role in shaping Granite Ridge into the successful business it is today.

And on behalf of the team, I want to express our gratitude for his significant contributions. We wish him all the best in his next chapter. Turning to our Q2 performance. Our quarterly results continue to validate our business model with production and cash flow once again exceeding expectations. In the second quarter, we turned 4.9 net wells to sales and increased production by 37% year over year to 31,576 barrels of oil equivalent per day, driven by a 46% rise in oil production and a 28% rise in natural gas production.

This growth reflects the strength of our diversified portfolio of oil and natural gas assets and our disciplined approach to capital allocation, which prioritizes the highest risk adjusted returns. Our operative partnership and traditional non op investment strategies remain the driver of this success. We’ve partnered with four top tier operators to unlock substantial value in the Permian Basin and are thrilled with the progress achieved to date. Meanwhile, our traditional non op strategy continues to deliver consistent results with wells coming online ahead of schedule in the Permian and wells outperforming forecast in the Utica. On the capital front, we spent approximately $77,000,000 on development and $10,000,000 on acquisitions for a total CapEx spend of $87,000,000 Year to date, we have invested approximately $149,000,000 of capital on development activities, which is higher than forecast based on the accelerated time activities and $44,000,000 in acquisition capital expenditures.

These acquisitions, located in the Permian And Appalachian Basins, added high quality inventory to our portfolio, enhancing our growth runway. Given our first half performance, driven by stronger than modeled production and unexpected acceleration of new production, we are raising our full year production guidance by 10% at the midpoint to between 31,033 barrels of oil equivalent per day, which will result in year over year growth of 28%. We are also raising our capital expenditure guidance to an all in range of 400,000,000 to $420,000,000 driven mainly by new unbudgeted acquisitions expected to close in 2025. Our deal team’s tenacity and strategic approach have led to every transaction we sourced being off market. For 2025, we anticipate deploying approximately $120,000,000 in acquisition capital, adding 74 net locations.

80% of this capital targets the Permian Basin through our operator partnership strategy, the remaining allocated to our Appalachia leasing strategy, which has delivered exceptional results to date. Our business development engine is operating at peak performance, securing three additional years of inventory at an attractive entry cost of $1,700,000 per location. Our operator partners are doing exactly what we expect them to do: capture attractive development opportunities at below market value. They are doing an excellent job, and we’re excited opportunity to fund these projects for the long term benefit of our shareholders. Moving forward, our guidance will identify both development and acquisition capital expenditures separately, which we hope will offer more transparency for our investors.

We occupy a unique niche in the public energy market, looking like an energy company but acting like an investment firm. Our vision is to become the leading public investment platform for energy development, and we will continue to invest alongside proven, high quality operating teams to capitalize on undervalued opportunities. Since commodity prices declined in early 2Q, we have moved aggressively to scale our operated platform and secure long dated, low risk inventory at highly attractive entry prices. We have identified nearly 60,000,000 of new inventory acquisitions, dollars 40,000,000 of which are located in the Permian Basin through our operated partners and $20,000,000 of which are driven by organic acreage leasing in the Utica Shale. Our strategy remains unchanged.

We continue to underwrite development projects targeting full cycle returns exceeding 25%, deliver top quartile growth and return capital to shareholders through our quarterly dividend. This disciplined approach allows us to remain resilient in any market environment. We may not look like your typical E and P, but we are creating a ton of value. Our investment strategy centers on operating partnerships, with two gaining significant momentum. Our longest standing partner is Midland based Admiral Permian Resources.

After selling their prior firm, Reliance Energy, to Concho Resources for $1,600,000,000 members of the management team founded the first iteration of Admiral Permian backed by Ares management. Over a three year period, Admiral scaled its asset base in the Western Delaware Basin to 20,000 BOE per day before divesting to Petrohunt with a trailing EBITDA of nearly $300,000,000 I give you their impressive resume to highlight the value of our operative partnership program. We fund proven, highly talented teams to do what they do best: create significant value through finding and developing oil and gas. We are proud to partner with Admiral Permian Resources in their newest iteration. After just two years of partnership, Admiral produces over 7,000 BOE per day net to Granite Ridge or 22% of our total production and, as of June 30, boast over 40 net locations of high quality inventory.

Petrolegacy is our second partner, focused on growing an asset position in the Midland Basin. Three years ago, the management team sold Petro Legacy two, then backed by in cat investments, to Oventive after growing production in the same area to 35,000 BOE per day. Our third and fourth partners, signed in just the last couple of months, are still confidential as they are just starting on their asset acquisition phase. Each partner has their own story, strategy. But taken together, they’ve set a very specific investment thesis for Granite Ridge, which is that there now exists a void of private capital in the oil and gas space after a 70% decline in upstream private equity fundraising since 2018.

The private capital that remains is focused on mega deals with concentrated portfolios. This altered supply and demand dynamic has lowered the entry costs and increased the resulting economic returns on smaller development projects. Add to this that the core of the Delaware Basin, for example, is largely held by seven operators overseeing massive asset packages, and it sets up remarkable opportunities for nimble and aggressive teams to piece together smaller deals at attractive prices. And that suits the traditional Granite Ridge model to a tee. For over a decade, our team’s daily pursuit has been uncovering value in oil and gas through smart value add investments, small deal after small deal, utilizing a huge proprietary data set to accurately underwrite, hitting singles and doubles in the premier basins across The United States.

We’ve done this successfully, enjoying the compounding effect of consistently investing to full cycle returns that comfortably exceed our cost of capital. The operative partnership strategy is not all that different. We still evaluate every deal with our partners and underwrite those with the highest risk adjusted returns. From a macro perspective, volatility persists with oil and natural gas prices softening. Our diversified production mix, roughly balanced between oil and gas, provides a natural balance, and our hedging program, covering approximately 75% of current production, protects our cash flows.

Looking ahead, our priorities for the rest of 2025 are clear. First, we’ll advance our operator partnership program, which will account for approximately 65 of our development capital spend this year. With three rigs currently running in the Permian, we have the flexibility to adjust activity based on market conditions. Second, we’ll maintain a balance between growth and returns, supporting our 10% production increase while preserving our $0.11 per share quarterly dividend, which offers an attractive yield at current prices. Finally, we’ll safeguard our financial flexibility.

Our balance sheet remains strong with a leverage ratio of 0.8x net debt to adjusted EBITDA. We enhanced liquidity following our borrowing base increase to $375,000,000 in the second quarter, and we’ll continue to bolster our liquidity by exploring the credit markets in the fall. Before I hand it over to Kim, I want to underscore my confidence in Granite Ridge’s future. We have a proven strategy, a high quality asset base and a talented team ready to execute. I’m excited to lead us through this next phase of growth and deliver value for our shareholders.

: Thank you, Tyler, and good morning, everyone. I’ll provide a detailed overview of our Q2 twenty twenty five financial results, which highlights our operational strength and disciplined financial management. In Q2, we generated total oil and gas sales revenue of $109,200,000 an increase of 20% compared to Q2 twenty twenty four. This growth was driven by a 37% increase in production to 31,576 BOE per day. Oil revenues rose by $12,000,000 reflecting a 46% jump in oil production to 16,009 barrels per day, though partially offset by a 21% decline in realized prices from $77.84 per barrel in the prior year period to $61.41 this quarter.

Natural gas revenues increased by $6,600,000 supported by a 28% rise in production to 93,404 Mcf per day and a 17% incline in realized prices from 1.98 per Mcf to $2.32 per Mcf. Net income for the quarter was $25,100,000 or $0.19 per share, reflecting our strong operational performance. Operating cash flow before working capital changes was $69,500,000 providing robust liquidity to fund our capital program and dividend. For the 2025, net cash from operating activities totaled $154,100,000 up from $132,800,000 in the prior year. On the cost side, lease operating expenses were $20,100,000 or $7 per BOE compared to $13,700,000 or $6.5 per BOE in Q2 twenty twenty four.

The increase reflects elevated service costs and higher saltwater disposal costs as the percentage of our production from the Delaware Basin has increased. So we continue to optimize efficiency as we scale. General and administrative expenses rose by $1,900,000 year over year to $8,500,000 or $2.96 per BOE, driven by certain nonrecurring general and administrative expenses, including $1,700,000 in severance expense tied to the leadership transition and $1,100,000 related to capital markets activities. Excluding these nonrecurring items, G and A remains well controlled. Capital allocation remains opportunistic.

Development capital expenditures for the six months ended June 30 totaled $148,600,000 in line with our base case, while acquisition CapEx was $44,400,000 adding 17.5 net locations in the Permian And Appalachian Basins. These deals enhance our inventory and position us for sustained growth. Total capital for the first half, including acquisitions, was 193,000,000 Our balance sheet continues to be a strength. While long term debt increased by $25,000,000 this quarter to $275,000,000 reflecting opportunistic investments in inventory, our leverage ratio remains conservative at 0.8 times net debt to adjusted EBITDA. We recorded a $23,900,000 gain on derivatives primarily unrealized due primarily to the decline in oil prices during the period.

We also incurred a net loss on equity investments from the sale of Vital shares. Looking forward, we’re raising our full year production guidance to 31,000 to 33,000 BOE per day and our capital expenditure guidance to $400,000,000 to $420,000,000 For Q3, we expect production to modestly grow above Q2 levels with further growth in Q4 as new wells come online. Capital spending will peak for the year in Q3 with a significant component of acquisition capital before moderating in the fourth quarter in both D and C and acquisitions. Back to you, Tyler.

Tyler Parkinson, President and Chief Executive Officer, Granite Ridge Resources: Thank you, Kim. In closing, I want to thank our team for their hard work and dedication, which have been critical to delivering these strong results. I also appreciate the continued support of our shareholders. As we move forward, I’m confident that Granite Ridge is well positioned to navigate market volatility and create long term value. Our strategy is proven, our assets are exceptional, and our team is best in class.

We remain committed to executing our plan, driving growth and returning capital to shareholders. With that, operator, please open the line for questions.

Conference Call Operator: Your first question comes from the line of Phillips Johnston with Capital One. Your line is open.

Phillips Johnston, Analyst, Capital One: Hey, thanks for the time. Appreciate the color on the quarterly cadence and production. It sounds like three up a little bit and then the significant growth really occurs in Q4. If you look at your guidance, implies the oil mix is going to tick up around 53% in the back half of the year versus around 51% in the first half of the year. I just kind of wanted to get a sense of what’s driving that oil mix higher.

Tyler Parkinson, President and Chief Executive Officer, Granite Ridge Resources: Yeah. Thanks, Philip. Good morning. On oil cut, we actually were we think we’ll be more like 52%. So we’re slightly lower than what you have.

So, you you know, we are seeing some gas acceleration on some new projects from folks that are, you know, Haynesville that are are focused, but predominantly where the growth is coming from is in the Permian, which is obviously an oilier mix than the existing asset.

Phillips Johnston, Analyst, Capital One: Okay. That makes sense. And then the company’s net debt increased to $270,000,000 from around $195,000,000 at the 2024. The updated guidance suggests that the outspend of cash flow this year is going be a little bit wider than it would have been based on prior guidance. You have a strong balance sheet.

You mentioned the leverage ratio is solid You’ve got plenty of liquidity. So I guess with that backdrop, just wanted to get a sense of the board’s appetite to continue adding to the net debt balance as we sort of look out beyond this year into 2026 and beyond.

Tyler Parkinson, President and Chief Executive Officer, Granite Ridge Resources: Yeah. So nothing’s changed there on that front. So we’ve we’ve, you know, repeatedly said that we’re comfortable in a a one to one and a quarter time span. We ended the quarter, 2Q at 0.8 times. So we still have some capacity there.

With what we’re seeing in the acquisition market right now, we’re really focused on leaning in on adding inventory, adding duration to the business. We think that’s a really attractive investment at this point. So I think you’ll continue to see us outspend cash flow until we get to where we’re comfortable with leverage. And I think you could see us outspend again next year, particularly in an acquisition environment such as we’re in now.

Conference Call Operator: Okay. Sounds good. Thanks, Tyler. Thanks. And your next question comes from

Conference Call Operator: the line of John Annes with Texas Capital. Your line is open.

John Annes, Analyst, Texas Capital: Hey, good morning all and thanks for taking my questions. For my first one, I just wanted to get your thoughts on what you’re seeing that has given you the confidence to lean into growth and acquisitions at this time, whether it’s the macro current dynamics with PE funding that you highlighted in the slides or something else? Just some more color on that would be great.

Tyler Parkinson, President and Chief Executive Officer, Granite Ridge Resources: Sure. Yes. Great question. So this is the most constructive environment that we’ve seen on the a and d front, in quite some time. And I think a big component of that is just the lack of private equity capital, in the space, and and the private equity capital that is left in the space is focused on much larger format transactions.

So that’s really left a pretty attractive space for us that fits our model well where we’re able to just continue to aggregate smaller transactions at really attractive prices. You know, the other thing that’s helping us now is is we’re adding operator partner teams. So we have, you know, four teams now that tremendously expands our opportunity set, our deal flow. You know, this year, we’re seeing, a and d activity that we’ve evaluated up 15% versus where we were last year. So I think, you know, this this this setup really fits our model well.

And then I think from a macro perspective, with the weakness on on oil prices recently, we’ve seen a lot of the larger operators looking to rationalize their development capital spend, that really leaves us an opportunity to to help folks solve those those issues that they have on on CapEx efficiency.

John Annes, Analyst, Texas Capital: Makes sense. And for my follow-up, maybe for you, Tyler, I I wanted to get your views on how you see balancing, adding inventory, adding growth, and managing leverage. You’ve clearly been successful balancing the three, but I just wanted to get a sense of how you’re viewing these priorities in your

Tyler Parkinson, President and Chief Executive Officer, Granite Ridge Resources: new role. Yep. That that’s exactly what we’re thinking about every day, those three things. So I think right now, you know, we’re we’re leaning into growth. We’re leaning into scale.

We we think that, you know, added duration to our our inventory, is gonna pay dividends down the road, and we’re finding that a and d market very attractive right now to allow us to do that. So so the balance sheet is still in great shape right now, we’re we’re choosing to lean in there. You know, that comes at the expense of free cash flow. But we believe over time, you know, we’ll get to a point where we will be more free cash flow neutral. But this market environment is really conducive to us adding scale and increasing our inventory.

John Annes, Analyst, Texas Capital: Thanks guys. I’ll leave it there.

Conference Call Operator: And your next question comes from the line of Michael Schulla with Stephens. Your line is open.

Conference Call Operator: Good morning. Tyler, you mentioned you could outspend again next year, sounds like probably will. If you did all the acreage you anticipate with these acquisitions and the macro holds together, I guess trying to get your sense of where the 26 program could go with the operated partnerships. Would four rigs be possible, or what are you thinking at this point?

Tyler Parkinson, President and Chief Executive Officer, Granite Ridge Resources: Absolutely. Yeah. Four rigs. We’re running three now. I could see a scenario definitely where we’re with the fourth rig.

We just added two new partners. They’re aggregating inventory now. That’ll take them a little bit of time. But at some point in 2026, I do expect that we’d be running at least one rig on one of those two new partners that we added. So from a from a phasing standpoint, from an outlook standpoint, you know, I I think that CapEx spend, in 2026 will look pretty similar, if not more compared to what we’re doing this year, especially if the A and D environment remains strong.

Conference Call Operator: And would the mix change if you go to at least four rigs, kind of 65% operated, 35% non operated. Do you see that operated piece going higher next year?

Tyler Parkinson, President and Chief Executive Officer, Granite Ridge Resources: Yes. It might tick up, but we’re still seeing a ton of opportunity on the non op front, particularly in Appalachia. Most of the non op deals that we’ve done this year have been in the Utica windows. So we still expect to see a pretty good clip of non op opportunities even as we move into 2027 and 2028. So yes, I think that the percent of capital going to operator partners might tick up, but we’ll still have a pretty healthy component from non op.

Conference Call Operator: Great. Thanks Tyler.

Conference Call Operator: And your next question comes from the line of Noah Hungness with Bank of America. Your line is open.

Noah Hungness, Analyst, Bank of America: Morning, Tim. For my first question here, you guys are growing over 24% this year. I mean, how can we think about the growth trajectory of the company moving forward? That a level that you like a level of growth that you like to see? Or would you maybe wanna moderate that kind of back to the original plan of what was mid teens growth?

Tyler Parkinson, President and Chief Executive Officer, Granite Ridge Resources: Yeah. So, you know, production growth isn’t isn’t a target. We don’t set a target and then try to achieve the target. And again, it’s driven by where we are on leverage, where we are on scale, what’s free cash flow look like. So I think right now, given this environment and where the balance sheet is, I would expect, you know, quite a bit of growth into 02/1926.

You know, it’s it’s a bit early for us to to talk about what that looks like. But, you know, I think it might not be as strong as this year, but would be, you know, mid teens type growth, given, you know, what we’re buying now. A lot of that inventory is, you know, 26, 27. So, you know, right now, we’re prioritizing growth. I would expect, you know, that to continue with where we are with our balance sheet.

Noah Hungness, Analyst, Bank of America: That’s helpful. And then for my second question here, you guys mentioned exploring the credit markets or looking to explore the credit markets in 2025. How can we like, could you just add some color around around what you’re thinking there is? Are you thinking about increasing your RBL size, potentially going to the high yield market to term out some debt? Just thoughts there.

Tyler Parkinson, President and Chief Executive Officer, Granite Ridge Resources: Yeah. You know, it’s kinda all of the above. Right? So the we we increased the RBL by 50,000,000 in the the spring. Given this level of activity, here in 02/2025, I’d expect us to be able to get a pretty healthy increase again in the fall.

So that’s that’s certainly on the table, and something that we’re pursuing now. And then, yeah, I I think we’re also looking at options that would help us term out, some of that, RBL balance. So that could either be, you know, traditional high yield market, or, you know, some sort of private credit option as well. So those are all on the table, and those are, you know, things that we’ll evaluate here as we head into the fall.

Conference Call Operator: Makes sense. Thanks for the time. Your next question comes from

Conference Call Operator: the line of Phillips Johnston with Capital One. Your line is open.

Phillips Johnston, Analyst, Capital One: Hey, sorry for the follow-up. Just wanted to ask if any these partnerships are structured like earn outs to where your working interest is reduced after you know, certain payout targets are met, or are are they generally more more of like a heads up type of arrangement?

Tyler Parkinson, President and Chief Executive Officer, Granite Ridge Resources: So there is a there is a after a return hurdle is achieved, there is a reversion of some of our interests, to the operator partnership teams. There is no upfront promote, in any way. So, you know, there’s nothing on the front end, but there is, after the return thresholds are met, a back end part of our interest.

Conference Call Operator: Okay. Makes sense. Thanks, Tyler.

Tyler Parkinson, President and Chief Executive Officer, Granite Ridge Resources: No problem. Thank you.

Conference Call Operator: And there are no further questions at this time. Thank you all for attending. This does conclude today’s conference call. You may now disconnect.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.