Granite Ridge at Sidoti’s: Strategic Growth and Shareholder Focus

On Wednesday, 11 June 2025, Granite Ridge Resources (NYSE:GRNT) presented at Sidoti’s Small-Cap Virtual Conference, outlining its strategic plan to offer public investors private equity-like exposure in the oil and gas sector. CEO Luke Brandenburg highlighted both the company’s disciplined financial strategies and its challenges in a competitive market.

Key Takeaways

• Granite Ridge aims for a 16% production growth year-over-year, focusing on the Permian Basin.
• The company generated approximately $291 million in EBITDA in 2024.
• Granite Ridge is about 75% hedged through the end of 2026 to mitigate risk.
• The company targets a 25% return on operated partnerships and 20% on traditional non-operated investments.
• A disciplined capital allocation approach is central to Granite Ridge’s strategy, with a strong emphasis on shareholder returns through dividends.

Financial Results

• 2024 EBITDA: Approximately $291 million.
• Production Growth: Targeted 16% year-over-year.
• Leverage Ratio: Approximately 0.7x debt to trailing EBITDA, lower than the mid-cap average of 1.2x.
• Dividend Yield: Approximately 9% at the time of the presentation, adjusted to closer to 7% due to stock price increase.
• Trading Multiple: Approximately 3x earnings, considered a discount to peers.
• Capital Budget: Aiming for a cash flow neutral position, with cash flow roughly equal to CapEx.
• Dividend Payments: Just under $60 million annually.

Operational Updates

• Diversified Asset Base: Assets across six major US basins, primarily focused on the Permian Basin.
• Deal Flow: Evaluated over 650 unique transactions in 2024, closing on less than 10%.
• Operated Partnerships: Strategy involves controlled investments with experienced operators, targeting a 25% full cycle return.
• Traditional Non-Op: Remains a core part of the business, focusing on information gathering and disciplined capital allocation.
• Hedging Program: Approximately 75% of current production is hedged through the end of next year, focusing on risk mitigation.

Future Outlook

• Focus on Operated Partnerships: Expected to continue driving growth.
• Production Target: Aiming for 7,000 barrels a day from the operated partnership program in 2025.
• Capital Allocation: Maintaining a disciplined approach, prioritizing high-return opportunities and defending the balance sheet.
• Growth Strategy: Willing to take on conservative leverage to grow at an accelerated pace, primarily through the operated partnership strategy.
• Dividend Sustainability: Goal to pay maintenance CapEx and the dividend for at least eighteen months in challenging price environments.

Q&A Highlights

• Deal Evaluation: Prioritizes a 25% rate of return on operated partnerships and over 20% on traditional non-op.
• Commodity Price Views: Considers strip pricing and long-term price expectations based on production costs and demand.
• Hedging Program: Used as a risk mitigant, not for betting on prices.
• Operated Model: Leverages expertise from the company’s oil and gas engineers, landmen, and accountants.
• Market Misunderstanding: Believes the market needs to see proven results from Granite Ridge’s strategy.

Granite Ridge Resources continues to focus on strategic growth and shareholder returns. Readers can refer to the full transcript for more detailed insights.

Full transcript - Sidoti’s Small-Cap Virtual Conference:

Steve Ferrizani, Analyst, Sidoti: Good morning, everyone. I’m Steve Ferrizani, an analyst at Sidoti. I see the room is still filling in, so I’ll give it a few seconds before I start the presentation and turn it over to our next presenter. But just to remind everyone before we get started, we should have a few minutes for q and a afterward. I think it’ll be a very informative presentation.

If you have any questions, you just press that q and a button at the bottom of your screen. Type type in the question, and we’ll get to absolutely as many as we can, time permitting. And with that, pleased to welcome Granite Ridge Resources. The ticker is g r n t. So happy to have CEO Luke Brandenburg with us this afternoon this morning.

Sorry. Trying to speed through the day. Welcome, Luke, and thanks so much for being here. Let me turn it over to you for the presentation.

Luke Brandenburg, CEO, Granite Ridge Resources: Great. Thank you, Steve, and thanks to the whole Sidoti team. Really appreciate you having us here, and then thanks to everyone, for joining us. Look forward to sharing a bit about the Granite Ridge story. I thought the way I’d take this this morning is, you know, maybe flip through the deck in about fifteen, twenty minutes and leave some time for q and a.

Let me just start with what what are we doing? What are we doing here? What’s our goal? Our objective as Granite Ridge is to provide public investors with private equity like exposure but with daily liquidity enhanced alignment. So I’m gonna talk about how we do that.

But let me just give you Granite Ridge as a glance. We’re a publicly traded company. Fortunately, this slide’s a bit out of date. We’ve, performed a bit better since then, but, you know, call it a approaching $900,000,000 market cap, about a billion dollar enterprise value company. And we are a diversified US oil and gas company.

We’ve got assets across six major basins in The US, primarily Permian focused, as you’ll see. That’s where most of our production and most of our reserves are. But, really, we we like to talk about diversification as being an output. We don’t start the year with a budget of, hey. We wanna be 60% Permian, 15% Bakken.

We are economic animals, as we like to say. Our our real job is to find compelling opportunities. We have got assets that generates cash flow. Let’s use that cash flow to find compelling opportunities and allocate them to the best deals. We’ll talk more about that in a but let me just give you a bit of granular about the numbers.

So the date of this presentation, we were 9% stock. Unfortunately, we’ve stock price has gone up, the the yield is closer to seven now. But a yielding stock, that’s important to us. We really value that dividend, and we are committed to defending it. But we also offer production growth.

We’re looking at 16% production growth year over year, which is something that I don’t think you’ll see as much in a lot of companies. We do all that while underpinning this dividend and production growth with a strong balance sheet. Our leverage ratio is about point seven x, debt to trailing EBITDA. If you looked at the whole list of capital and gas companies, the average is closer to 1.2. So we’re very conservative by that metric.

But we trade at a discount. We trade at a discount, to our peers. So we’re trading around three times earnings, which, again, if I were to tell you a company’s got a 9% dividend, strong asset growth, and a good balance sheet is trading at sub three, you think it’s a steal, and and I do too. Let me tell you about our opportunity set. We really group this opportunity set in a couple primary buckets.

We’ve got our operated partnerships and our traditional non op. I’ll hit those at a high level, and I’ll double click on them here in a But let’s start with traditional non op. This has taken minority oil and gas investments, real property interest in in core areas managed by experienced operators. What does that mean? That means taking 5%, 10% under a well drilled by EOG in the Permian.

That’s what that means. That’s a core piece of our business. It’s really how we started the business and continues to be important to us today. Operative partnerships is one where, we take the same underwriting approach, which is let’s look at the subsurface What’s a well going to produce? Then what’s it gonna cost?

Then when do we think that well gets drilled? Same underwriting and operator partnerships, but instead of a minority interest, these are controlled investments. For the majority investor in these assets with partners that we’ve selected that have demonstrated an ability to drive value, We partner with these folks. We control everything about these operations from what gets drilled, when it gets drilled. And so it’s, I’d say, more concentrated capital investments in areas that we have high conviction.

And this has really been a growth area for us lately, and we’ll talk about that in a I wanna hit real quick before we get under this. Talked about leverage early, and you’re gonna see me talk about this throughout the presentation about this theme of conservative DNA. So I mentioned the average mid cap company has about 1.2 times leverage. For us, we’ve at 1.25. That’s kind of a red line test.

Do not cross. Our ceiling is the average. That just goes to show the conservative DNA we’ve had, but this isn’t a a new, you know, come to Jesus moment for us. If you look back over the, really, the history of our business, both public and private, we’ve we’ve never gone above one times. In fact, during COVID, we paid down our debt fully.

So we really have a conservative DNA in this business and have a demonstrated ability to grow the asset. That’s what the dark green is, the light green, rather, growing the asset, growing production across different hydrocarbon price cycles while not getting over levered. Again, what do we do here? We we have this neat asset that generates cash flow. You know, we did about $291,000,000 in EBITDA in 2024.

And our job day in and day out is to source and evaluate opportunities and then to allocate capital to the most compelling risk adjusted returns. We do all of that while defending the balance sheet and prioritizing shareholders through our dividend. So our business model, ultimately, it it’s kinda different. We’re a lot of ways as publicly traded private equity firm, but it’s also pretty simple at the end of the day. We’re just looking for the best deals, and that’s where we’re gonna put our money.

I mentioned diversification. I’ll I’ll talk about that again because diversification is not only, is a risk mitigant. It certainly is that, but it also helps to drive opportunity. I said earlier, we don’t start out the year saying, I wanna allocate 60% of the Permian. But what we do is make every single deal compete challenge our land and business development team to bring us opportunities across all these basins.

And then we’re gonna allocate capital to whatever rises to the top. We’re agnostic to oil and gas. We’re agnostic to basin. We’re just looking for the best risk adjusted returns, primarily underwritten at strip pricing. So let’s talk about that.

If we’re a deal shop, when you got any deals, we do. We’ve got a lot of deals. We looked at over 650 unique transactions in ’24. That’s a lot. You’re talking about multiple new deals coming in the door every business day.

That keeps us busy. How do we source these? Here’s a neat thing about our business. We’ve been doing this for over a decade, and through that, we’ve just built a lot of relationship. We like to talk about from the mail room to the c suite.

A good deal can come from anywhere, especially if you’re thinking about places like West Texas. Right? You know, there’s old old adage that, you know, good deal don’t leave Midland. You gotta go to Midland to get it, and that’s what we do. You build relationships there.

We actually jokingly refer to our business development strategy as burgers and beers. The best deals are done over burgers and beers where deals are in Midland, Oklahoma City, Tulsa, Denver, Houston. But this is a high deal flow business, and it is a low hit rate business. It’s a kiss on a lot of frogs. We close on less than 10% of the deals that we see.

Why is that? We’re very disciplined. We’re disciplined in what we’re willing to allocate our capital to. Capital is precious. We’re privileged that investors entrust us with their capital, and so we are very disciplined in how we do this.

We’ve we’ve got a phrase. There’s always another deal. So we do not get married to any one of these deals. So all these deals we passed on, even if it was your baby, That’s alright. We’re we’re quick to bounce back and get over it and look at the next deal.

How do we process all these deals? You know, this is the slide where I should probably talk about AI and this new whiz bang tool that we have, but that’s not us. But we are we call ourselves tech enabled, meaning that we don’t ask tech to give us the answers. But what we do is leverage technology to help us make better decisions more quickly. We wanna empower our engineering team.

We wanna empower our finance team, to be able to evaluate these opportunities as quickly as possible and have the best information available to them at their fingertips. One of the cool things is we’re in over 3,100 wells. That’s a lot. And you get daily production from a lot of these wells. You’re talking about an immense number of data points, but those data points are critical when we’re underwriting the next opportunity.

We talked about the beak you know, the core of our underwriting is what’s a well here gonna produce? Well, we wanna look around the area. Because we’re in these wells and we have real daily data, we have a significant information advantage over most folks who aren’t in wells proximate to what we’re looking at. We always wanna make sure that we’re getting better every day to better equip our team to make better decisions, more quickly. For underwriting process, maybe I’ll give you a peek under the hood of what does a a week in the of Granite Ridge look like.

It starts out on Monday with a a weekly deal meeting. So with any deal that comes in the door that my work came from, it all goes up on the deal board. Now some of them, we have a little moniker, QK, quick kill, that we know we put it up there, but it’s just not gonna be a fit for us. But this is one where we get in the room, and we triage all these opportunities that have come across the desk. Let’s triage them, identify what makes the most sense, and decide what we’re gonna spend time on this week.

We then dive in. Engineering, land, accounting, finance, all dive in together, to evaluate an opportunity to decide what’s this worth to us. And then once we actually own that asset, anytime there’s a a well proposal, so often you’ll buy an acre. Well, what you bought is really an option. So that option is whenever, you know, EOG comes to drill, they ask you if you wanna participate.

So you get a opportunity, another bite at the apple to say, yes. I want to participate or, no. I don’t. Every single one of those, we hand engineer. So we hand engineer.

We our engineers actually look at it. It’s not a computer, but they are using computers. And we are just very frankly, we’re good at what we do. I asked the team to put this little bar at the bottom. I said, okay.

If we’re how do we show the investors that if our job is, you know, capturing deals, well, it’s easy to show or at least to capture opportunities. But evaluating, how do we show we’re any good? We looked at a thousand wells that we participated in. We looked at what our engineers underwrote. What do they think that well is gonna produce and what did it actually produce?

And we were 99%. That’s pretty darn good. Really proud of the team that we’ve built. And we’re very consistent, and very, very high quality. I wanna talk about capital allocation.

That’s that’s ultimately what we do is, again, we allocate capital. And our capital allocation will shift as the market environment, as the opportunity set shifts. Ten years ago, we started this business, and non op, so, again, that five to 10% under EOG, was trading at a tremendous discount to operate it. You know, maybe 50% discount to buy a non op asset versus operated. When that well gets drilled, the single well returns are the same.

It’s just what are you willing to pay for that inventory, and the inventory was at a big discount. So we spent most of our capital there. As time has gone on, you’ve seen a couple things happen. One, the non op space has gotten a lot more competitive. A lot of folks that are doing minerals have started doing non op.

A lot of family offices have gotten to non op investing. A big driver is some of the tax benefits, from accelerated depreciation, and so the returns have been driven down in that traditional non op space. At the same time, private equity, there was a big funder of operated partnerships. One, they’ve had significant decline in fundraising, but two, the firms have started allocating more dollars to fewer teams such that the the small operated assets, are left with a a dearth of capital. The competition is way less.

Now it’s fierce. Don’t mistake me, but it’s way less. And so we’ve started allocating more capital recently, to these operated partnerships. We talked about that at a high level. This is control investments with partners that we’ve selected, that have proven experience in their area of expertise.

Right now, this is all in the Permian. We’ve got two teams. We have a that we’re about to sign up. It will also be Permian focused. Fortunately, Permian’s big basin.

We’re very cognizant to not have our folks stepping on each other that can erode trust, and eroding trust is the death knell in this business. But we we love this business. We we target a full cycle return of 25% or better. So that’s what’s it cost to buy the inventory, what’s it cost to drill the well. We looked at our you know, 38 wells, six projects, about 24%.

Not there, but pretty darn close. This has been a big growth area. I want you to look in the bottom right. So this strategy started at at nothing. Right?

We started it out at nothing two and a half years ago. Now it’s this year, it’s gonna be about 25% of our production. Slightly more than that would be my guess, so slightly less. That’s big. From zero to 25% in a couple years.

And next year, we anticipate that to continue to increase. This this is the growth engine given where the current opportunity set is. This is one team that’s done this. Our team is gonna pick up a rig this year. one, likely later this year as well, maybe early next year.

If we stack up deals like this, this is where the growth comes from, and we believe that this is the highest return growth that we can generate. We really like this. We believe that we’re getting better returns. You know? No offense to any bankers on the phone, but if you’re an investment banker and you’re selling an asset, those guys are really good at what they do.

They find folks that are willing to pay the highest price or effectively take the lowest rate of return. We like this. We think this is a better rate of return, and this is really our our growth engine. That’s not to say we’re abandoning traditional non op. The traditional non op market is immense.

You know, we spend about $105,000,000,000 a year drilling oil and gas shale wells. You know, of that, about a quarter is is not. It’s not the operator. Publicly traded firms may account for about $2,000,000,000 of CapEx, but there’s a $24,000,000,000 sandbox. That’s the sandbox in traditional non op.

Right now, the prices, the competition has made it less competitive for us, because the returns have been driven down, but we continue to allocate capital here. This is a core piece of the business. We also get a lot of information from that, so we love this space. I’ll hit strategy real quick for us. And, actually, you know what?

I’m gonna skip to I’ll I’ll hit strategy in a I wanna talk about hedging for a because hedging is a big piece, particularly in this volatile environment. We came into this year 90% hedged of our current production. We think that’s important. Hedging for us is not a tool to bet on prices. It’s a risk mitigant.

And, you know, as a company that’s actively growing, it’s asset based, growing production, we like to to some not aggressively, but but lean into hedging to defend those cash flows to make sure we have the capital to grow. So if we hedge 90% of our production at the beginning of the year, that probably ends up being 60% of what we think our total production will be, but you’re gonna see us continue to be constructive on hedging. We’re currently about 75% of current production is hedged through the end of next year, of both oil and gas. Can’t have a slide deck without some some comps. Right?

How do we compare it to our our competitors? And this is something else that we’re really proud of. We have strong yield. We have strong production growth. We do all that while we’re being conservatively levered.

We think that’s important. That’s what we focus on. Those three things are really our our guiding star. But let’s talk about our strategic plan. How are we allocating capital this year?

So we had did we did about $291,000,000 of EBITDA last year. So I’ll say, let’s assume we’re we’re talking about a 16% production increase year over year. And so let’s assume for a that production and cash flows are are linear. They’re they’re not necessarily, but in this case, gas prices are up. Oil prices are down a bit, but we’re highly hedged, so let’s say they are.

That puts us at around $330,000,000 of cash flow for this year. Take out maybe $20,000,000 interest, that puts us about 310. That 310 is our capital budget. So we think this year, we’re roughly cash flow neutral. We think about the cash flow that comes in is equal to the capital we spend on CapEx.

That changes every as commodity prices change, but that’s roughly what we’re targeting. Incremental of that, we have a dividend that’s just under $60,000,000. So we we’ve actually started this year with two plans. We had the base case, which looked like this, and we had an accelerated case. That accelerated case was, you know, maybe another 60 and $80,000,000 of capital, called a $380,000,000 plan, with that was early March.

With the volatility that we saw from from Liberation Day and and others, we’ve decided to to remove that accelerated case from the plan but maintain our base case. So what are we doing? We’re not hitting the brakes. Use a car example. We’re not hitting the brakes.

We’re just not accelerating, or we’re on cruise control. We’re gonna maintain this business where we believe that we can take our cash flow. We could pay our dividend. We can maintain production and grow mid to high single digits within cash flow. But given the opportunity set in front of us, we’re willing to take on conservative leverage to grow at a more accelerated pace.

And so that’s the 16% production growth you’re seeing this year, primarily coming from that operator partnership strategy. So I talked at you real fast. Normally, I try to have more than twenty minutes, but I wanna leave time for questions because that’s a fun part of these. So, Steve, I’ll turn it over to you to double click on anything I could do a better job of describing.

Steve Ferrizani, Analyst, Sidoti: Thanks so much, Luke. Covered a lot of ground in the in the twenty minutes. We do have quite a few questions, but do have about ten minutes remaining. So if you do have a question, we should be able to get to them. Press that q and a button at the bottom of your screen.

Type them in, and and and and I’ll and I’ll start asking. Let me get started with probably the most obvious question given given the presentation, which is when you look at deals, how you weight importance in terms of, say, how you’re deciding on a basin versus a top operator that you might like a lot? How are you considering the various factors? Or is it big or or is it just a math problem?

Luke Brandenburg, CEO, Granite Ridge Resources: Yeah. I’d say that the simple answer is it’s a math problem, but let’s take this for an example. So we we say that we’re agnostic. Agnostic. That doesn’t mean that we don’t take every single one of those factors into account.

And so whenever we’re trying to figure out what the best risk adjusted return, you know, one neat thing is we have real time data on costs from different operators. So one operator is gonna have a different cost structure than the other. We can factor all of that in. But, ultimately, it’s a rate of return target. We’re really trying to achieve that 25% rate of return on our operated partnership on a full cycle basis over 20 on the traditional non op side.

And so we primarily look at strip pricing when we’re underwriting, but we also look to see, hey. Where would I not drill this? I really want to know that. Where does it break? It’s gonna know where it sings.

In a $100 oil, it’s gonna sink, but I wanna know where it breaks to where I would not actually develop that location, so I’m not willing to allocate capital. So we take all those things into account. Some operators are significantly better than others. They’re cheaper. Some are better partners for us.

That comes into play as well. But, ultimately, we are agnostic, that the diversification is just an output, but we do want to see deals from all over. Some basins are hotter or colder based on cash, but it’ll inflows or outflows that aren’t necessarily tied to returns. And so we like to capitalize on that arbitrage.

Steve Ferrizani, Analyst, Sidoti: Makes sense. You talked about being hydrocarbon agnostic as well. A lot of folks are getting more bullish around gas right now given given LNG export capacity, you know, data centers, Do you take a a a view on long term commodity prices, or you’re just looking at the strip?

Luke Brandenburg, CEO, Granite Ridge Resources: Great point. Great question. That’s it’s a key question of underwriting the business. Right? Here’s what I’d say.

We primarily look at strip. We do look where it sings and where it breaks, but we also wanna be practical, what we view to be practical, how we look at this. And what does practical mean? Look. To me, the long term price of a hydrocarbon should be what’s the cost or what’s the price at which the operator can make money, oil field service company can make money, can service their equipment, but you don’t have demand destruction.

That is the important dynamic. So for oil and gas, what is that? You know, for us, I think oil, that’s probably somewhere 70 to 75 where you have those things. Gas, that’s probably somewhere around $3.50. And so we we do keep that in mind.

And so I’ll tell you right now, I’m not buying gas inventory that doesn’t work below $3.50. Even though Strip tells me I can get that three years from now, I’m not gonna hedge that inventory in the ground. And so I am a bit more conservative on the gas side. On the counter, I’m a bit more constructive on the oil side. I’m not underwriting to $70 oil, especially in this price environment, but I I do look at that as a potential opportunity as we try to really evaluate all all the different levers we could pull on a deal.

Steve Ferrizani, Analyst, Sidoti: K. You mentioned Liberation Day and a lot everything was shaken a little bit by by that, and maybe we’re settling a little bit here. But can you talk about what deal flow looks like post Liberation Day? Has it changed sharply?

Luke Brandenburg, CEO, Granite Ridge Resources: So it has not changed practically at all, which is interesting. But what what I will say is the the character of the deal of the the deal flow, the volume has been higher than ever, but I don’t know that I’d say the quality has been higher than ever. That traditional non op side, especially when prices get challenged, you do start to see some maybe lower quality stuff come out there. They were gonna drill it because it worked at 70. Now that didn’t make as much sense.

Their cash flow is down. That’s not a focus area for us. We’ve really been leaning into the operated partnerships there because they’re in core areas of the Permian, where we know we feel comfortable, and we know we could control timing and costs.

Steve Ferrizani, Analyst, Sidoti: Okay. That makes sense. When we think about switching over to this operated model

Luke Brandenburg, CEO, Granite Ridge Resources: Yeah.

Steve Ferrizani, Analyst, Sidoti: I would think it requires more expertise, more experience level to tackle that side. Is that true? And and can you talk about, you know, what you guys bring to the table on the operator side?

Luke Brandenburg, CEO, Granite Ridge Resources: Great question. So a couple things. Whether I’m underwriting a a traditional nonoper and operated deal, again, it’s the same underwriting. Looking at the subsurface, looking at the cost, and then the operator that control the timing. But but here’s why this is a great fit for us.

We are publicly traded private equity. We were a private equity firm. If you look across our halls, we look like an oil and gas company. It’s oil and gas engineers, oil and gas land man, oil and gas accounts that have come from oil and gas companies that are now more on the investing side. And so we are really perfectly designed.

My whole career was investing back in teams on the energy side. So we really have a cool group of folks that have come together that are have the perfect backgrounds to do just this because we’ve got the engineers to make sure that we actually understand all the risks that we’re undertaking. We have the finance folks that have made careers in risk management capital allocation. So we’re we’re pretty unique in this, by the way. I don’t know that you have another public company and outside of a few private equity firms, even private equity firms that have the balance of technical expertise and financial capital allocation experience that really makes this a perfect opportunity for us and one that, I’m personally fired up about because I I love this business model.

I think this is a great growth platform, and I truly think we’re generating better returns, than what we’re seeing in just the, you know, asset level acquisition market.

Steve Ferrizani, Analyst, Sidoti: Is there a benefit to having more control? You can make the decision when to drill?

Luke Brandenburg, CEO, Granite Ridge Resources: Yes. Absolutely. It helps not only in just managing capital from a public perspective, but we try to view this company like it’s private. Let’s let’s not go to the whims of quarter to quarter. Let’s make the best decision for this asset.

But, yes, having control is good. For example, there are times where, take volatility around Liberation Day, you know, another company may have had wells that are in process that it’s hard to slow down that machine. For us, with the wells that we’re working on with one of our operated partners, you know, we call and said, hey. Does it make sense to to drill these wells but not complete them? Let’s have this conversation

Steve Ferrizani, Analyst, Sidoti: Yeah.

Luke Brandenburg, CEO, Granite Ridge Resources: Right now and and come up with contingency plans based on what happens. And so you do have a lot more control over that. We think that’s been a tremendous positive. And, again, it allows us to accelerate when it makes sense to, but also to slow down. If we were to see sub $60 oil for a while, we can very quickly slow down without losing inventory.

Steve Ferrizani, Analyst, Sidoti: That that that raised an interesting question. Obviously, it’s coming up a lot. Does it make sense given that drilling expenses are are almost certainly going lower as we see some rigs come out for where you have a very small operating base to just build up the docks, drill them at a lower cost right now, or can you do that within your and and then complete them later? Can you do that within the current capital structure?

Luke Brandenburg, CEO, Granite Ridge Resources: We can, and we’re running that exact analysis kinda real time. In fact, that analysis is changing. This week, we’ve had a increase in prices. I’m not trying to live week to week by any means, but we do want to know what our options are. And so to date, we didn’t have any wells come online in the past month, at least not anything of substance.

And so we we weren’t necessarily ducking wells. But, really, later this year, we have a lot of wells coming online in this process in this program.

Steve Ferrizani, Analyst, Sidoti: Okay.

Luke Brandenburg, CEO, Granite Ridge Resources: That’s where we talked about that. And so the good thing is you can make that decision pretty quickly in advance. These frac companies right now, we don’t have long term contracts on drilling or completing, which is great. And so while they may not like to get the call, hey. We’re gonna duck these wells.

You have that flexibility, and that’s something that we really enjoy, and we’re going to make the decision that needs to be made at the right time. It’s important to maintain your relationships with the service companies in the good times too, so they’re less frustrated if you do that.

Steve Ferrizani, Analyst, Sidoti: Very fair. We do have a couple questions about how your hedging programs work, how sensitive you are to pricing. And could you just talk about the tools you use?

Luke Brandenburg, CEO, Granite Ridge Resources: Yeah. You got it. So I’ll hit the hedging real quick. This is a summary of our current hedges. Again, we’re about 75%, as you can see here, of current PDP as of the date of this deck.

On gas, so you’ll see a couple of things. I talked about gas prices. You know? For me, that kind of 3 to $3.50 is where you start to make some money in oil and gas. So if I can put floors in at that price, I like that.

It means I’m gonna make money with those. So that’s what you’re gonna see on the gas side. In the summers, we’re often swapping Yeah. When the price is compelling, and we’ll do more callers in the winter. Try to get some of the upside there.

Or I guess summers and winters and the shoulder season, you’re doing more more swapping. On the oil side, that has been well, oil prices you’re seeing here below what we think makes sense for oil, so we view this as much more of a risk mitigant. Again, 75% of our current production is probably closer to 50% of our production for the year Yeah. If you look at the new wells that are coming online. And so we’d like to maintain exposure to that upside while defending the balance sheet and defending the ability to to pay the dividend and maintenance CapEx.

My goal is to be able to pay maintenance CapEx, so to to drill, to not shrink production, and to pay the dividend for at least eighteen months in a challenging price environment. That’s what we’re back solving for. This is kinda the output of that back solving.

Steve Ferrizani, Analyst, Sidoti: Understood. Perfect. I know we don’t have a ton of time left. I just wanna ask about because because because you noted the really high dividend yield despite the fact you have a really clean balance sheet, a pretty conservative approach. Do you think the market’s just not doesn’t know the story yet?

Are they just comparing you to to to non ops and just need to get their hands around what you’re doing? Or what do you think what do you think the hurdle for you is on the investor side?

Luke Brandenburg, CEO, Granite Ridge Resources: Yeah. Great question. We spend a a good amount of time talking to investors. One, love it. I really enjoy it.

And but two, we are a nascent company. We’re only a couple years old. We gotta tell the story. We’re we’re small cap, which has less eyes often generally. But what I would say is I don’t know that it’s as much as the market doesn’t understand it.

I would say that energy has lost the benefit of the doubt broadly. Yeah. And so whenever you’re trying a new strategy, it’s proven. But you know what? That’s great.

Like, that is great for us. I mean, again, you you look at the the operated partnership. We’re we’re still in between ’24 and ’25. Right? This isn’t material yet if you’re an investor looking at actual results.

But when you see at ’25, if we’re able to achieve the 7,000 barrels a day just from that program, if we are able to grow that, you know, nearly double it again next year, we’re proving it. And I love that because we’ve we’ve built up, I believe, we’ve built up folks that are in the wings, if you will, that are that are watching the story. I think they say what we’re doing is different, but they want it they want us to prove it. And that’s a great spot to be, because so long as we prove it, which we believe we can, and you can look at four and four filings. We’re personally putting our money where our mouth is.

We’re out there buying shares as well, that that we believe in this. And I believe that once we prove it, that we will, really start to see the benefits of that, from shareholders actually buying, converting them from from interest to to buyers and owners.

Steve Ferrizani, Analyst, Sidoti: Perfect. Probably the right way to end it, and we are a little little over time. I’d like to thank everyone for joining us for the presentation. Luke, any any closing comments before we wrap this up?

Luke Brandenburg, CEO, Granite Ridge Resources: I just wanted to reiterate, thank you so much for joining again. For a small cap company that’s still nascent in the public space, there’s nothing more meaningful than getting an opportunity to chat with investors. So thank you to Sidoti. Thanks, Steve, for putting us on, and thanks to everyone for your time. It’s valuable to us, and please don’t ever hesitate to reach out if we could share more about what we’re building over here at Granite Ridge.

Steve Ferrizani, Analyst, Sidoti: Fantastic. CEO Luke Brandenburg of of Granite Ridge Resources. Hope everyone found the half hour as informative as I did. Hope everyone enjoys the remainder of the conference. Thanks, Luke.

Luke Brandenburg, CEO, Granite Ridge Resources: Great. Thanks, Steve.

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