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Granite Ridge Resources Inc. Reports Fourth-Quarter and Full-Year 2022 Results, Provides 2023 Outlook

Granite Ridge Resources Inc. (“Granite Ridge” or the “Company”) (NYSE: GRNT) today reported financial and operating results for the fourth quarter and full year 2022.

Fourth Quarter 2022 Highlights

  • Produced 22,031 barrels of oil equivalent (“Boe”) per day (52% oil), a 45% increase from the fourth quarter of the prior year.
  • Reported net income of $56.7 million, or $0.43 per share. Adjusted net income (non-GAAP) totaled $50.7 million, or $0.38 per share.
  • Generated $83.2 million of adjusted EBITDAX (non-GAAP).
  • Paid $10.7 million in dividends.
  • Exited 2022 with liquidity of $200.8 million as of December 31, 2022, including $50.8 million of cash.

2023 Outlook

  • Anticipate paying a quarterly dividend of $0.11 per share for each quarter of 2023.
  • Planning $260 million to $270 million of capital expenditures, including $46 million of identified acquisitions.
  • Expecting to generate 9% midpoint annual production volume growth as compared to the full year 2022, based on placing 18 – 20 net new wells on production.

See “Supplemental Non-GAAP Financial Measures” below for descriptions of the above non-GAAP measures as well as a reconciliation of these measures to the associated GAAP (as defined herein) measures.

Luke Brandenberg, President and CEO of Granite Ridge, commented, “We were pleased with our strong fourth quarter results, including a year-over-year increase of almost 60% in Adjusted EBITDAX and growth of more than 70% in Adjusted Net Income. Contributing to our success was the continued execution of our operating partners’ well-designed plans to promote efficient and safe operations and increase value through the drill bit and other field development programs.

“2022 was a transformative year for Granite Ridge, with the most significant highlight being the business combination with Executive Network Partnering Corporation (“ENPC”) and GREP Holdings LLC on October 24, 2022 that created NYSE-listed Granite Ridge Resources. The past five months have been a time of integration as we transitioned to a public company; I am proud of our progress and I want to thank our entire team for their hard work and dedication throughout this process. Our asset base performed extremely well in 2022, which is directly attributable to the deep and talented group of public and private operators with whom we are partnered. Their targeted capital investment programs remain squarely focused on executing high rate-of-return projects located in key prolific producing onshore basins that helped drive net production growth of 22%, a 16% increase in proved reserves, Adjusted EBITDA and Adjusted Net Income growth of 73% and 118%, respectively.

“Looking forward, we plan to leverage the positive momentum generated in 2022 to continue to invest in the business. Our development program for 2023 anticipates capital spending across our asset base of $260 million to $270 million, including approximately $46 million of acquisitions and opportunity capture that has been spent or committed to year to date. We will continue to execute on our proven business plan that focuses on responsible growth, including a targeted year-over-year net production increase of 9% using the mid-point of our 2023 full year guidance. Supporting our efforts is a fortress balance sheet that provides maximum flexibility as we increase our asset diversity beyond the interests we currently own in over 2,350 wells across the Permian, Eagle Ford, Haynesville, DJ and Bakken. Finally, we will continue to support the long-term interests of our shareholders through an ongoing and well-defined shareholder return program highlighted by the payment of a meaningful fixed quarterly cash dividend, as well as the opportunistic repurchase of shares depending on market conditions.”

Fourth Quarter 2022 Summary

For the fourth quarter of 2022 oil production volumes increased 29% from the fourth quarter of the prior year to 11,359 barrels (“Bbls”) per day. Natural gas production for the fourth quarter of 2022 totaled 64,033 thousand cubic feet of natural gas (“Mcf”) per day. The Company’s total production for the fourth quarter of 2022 grew 45% from the fourth quarter of the prior year to 22,031 Boe per day.

Net income for the fourth quarter of 2022 was $56.6 million, or $0.43 per share. Excluding non-cash and special items, the fourth quarter 2022 adjusted net income (non-GAAP) was $50.7 million, or $0.38 per share. The Company’s average realized price for oil and natural gas for the fourth quarter of 2022, excluding the effect of commodity derivatives, was $83.32 per Bbl and $4.97 per Mcf, respectively.

Adjusted EBITDAX (non-GAAP) for the fourth quarter of 2022 totaled $83.2 million, compared to $52.5 million for the fourth quarter of 2021. The fourth quarter of 2022 cash flow from operating activities was $95.0 million, including $12.1 million in working capital changes. Operating cash flow before working capital changes (non-GAAP) was $83.0 million. Costs incurred for development activities totaled $91.7 million for the fourth quarter of 2022.

Full Year 2022 Summary

Total production for 2022 increased 22% to 19,765 Boe per day, including a 7% increase in oil production to 10,016 Bbl per day. Natural gas production for 2022 was 58,496 Mcf per day. For 2022, the Company’s average realized price for oil and natural gas, excluding the effect of commodity derivatives, was $92.50 per Bbl and $7.46 per Mcf, respectively, compared to $63.07 per Bbl and $5.04 per Mcf, respectively, for 2021.

Net income for 2022 was $262.3 million, or $1.97 per share, compared with net income of $108.5 million, or $0.82 per share, in 2021. Excluding non-cash and special items, 2022 adjusted net income (non-GAAP) was $247.2 million, or $1.86 per share, compared with adjusted net income of $113.4 million, or $0.85 per share, for 2021.

Adjusted EBITDAX (non-GAAP) for 2022 totaled $365.5 million, compared with $210.4 million in 2021. For 2022, cash flow from operating activities was $346.4 million, including $17.2 million in working capital changes. Operating cash flow before working capital changes (non-GAAP) was $363.6 million. Costs incurred for development activities totaled $256.7 million for the year.

Operational Activity

The table below provides a summary of gross and net wells completed and put on production for the fourth quarter and full year 2022:

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Year Ended

 

 

December 31, 2022

 

December 31, 2022

 

 

Gross

 

Net

 

Gross

 

Net

 

 

 

 

 

 

 

 

 

Permian

 

54

 

3.59

 

134

 

12.41

Eagle Ford

 

6

 

0.56

 

19

 

3.62

Bakken

 

11

 

0.54

 

27

 

0.79

Haynesville

 

4

 

1.03

 

9

 

2.75

DJ

 

13

 

0.48

 

76

 

1.21

Total

 

88

 

6.20

 

265

 

20.78

2022 Proved Reserves

At December 31, 2022, Granite Ridge’s estimated proved reserves totaled 50,534 MBoe, compared to 43,710 MBoe at December 31, 2021. The Company’s proved reserves are approximately 50% oil and 50% natural gas. Proved developed reserves totaled 30,886 MBoe, or 61% of total proved reserves. The table below provides a summary of changes in total proved reserves for the year ended December 31, 2022, as well as the proved developed reserves balance at the beginning and end of the year.

 

 

 

 

 

 

 

 

 

Oil

 

Natural Gas

 

 

 

 

(MBbl)

 

(MMcf)

 

MBoe

Proved developed and undeveloped reserves at December 31, 2021

 

22,818

 

 

125,347

 

 

43,710

 

 

 

 

 

 

 

 

Revisions of previous estimates

 

(456

)

 

6,225

 

 

581

 

Extensions and discoveries

 

3,690

 

 

27,126

 

 

8,211

 

Divestiture of reserves

 

 

 

 

 

 

Acquisition of reserves

 

3,098

 

 

12,892

 

 

5,247

 

Production

 

(3,656

)

 

(21,351

)

 

(7,215

)

Proved developed and undeveloped reserves at December 31, 2022

 

25,494

 

 

150,239

 

 

50,534

 

 

 

 

 

 

 

 

 

 

Oil

 

Natural Gas

 

 

 

 

(MBbl)

 

(MMcf)

 

MBoe

Proved developed reserves:

 

 

 

 

 

 

December 31, 2021

 

11,658

 

54,257

 

20,702

December 31, 2022

 

15,714

 

91,034

 

30,886

Proved undeveloped reserves:

 

 

 

 

 

 

December 31, 2021

 

11,160

 

71,090

 

23,008

December 31, 2022

 

9,780

 

59,205

 

19,648

Commodity Derivatives Update

The Company’s commodity derivatives strategy is intended to manage its exposure to commodity price fluctuations. Please see the table under “Derivatives Information” below for detailed information about Granite Ridge’s current derivatives positions. The Company has not entered into any additional derivatives subsequent to year end.

2023 Guidance

The following table summarizes the Company’s operational and financial guidance for 2023.

 

 

 

 

 

 

2023 Guidance

 

Annual production (Boe per day)

 

20,500 - 22,500

 

Oil as a % of sales volumes

 

50%

 

Capital expenditures ($ in millions)(1)

 

$260 - $270

 

 

 

 

 

Net wells placed on production

 

18 - 20

 

 

 

 

 

Lease operating expenses (per Boe)

 

$6.50 - $7.50

 

Production and ad valorem taxes (as a % of total sales)

 

7% - 8%

 

Cash general and administrative expense ($ in millions)

 

$20 - $22

 

(1)

Includes $46 million of acquisition capital expenditures.

Conference Call

Granite Ridge will host a conference call on March 28, 2023, at 10:00 AM CT (11:00 AM ET) to discuss the fourth quarter and full year 2022 results. The telephone number and passcode to access the conference call are provided below:

Dial-in: (888) 660‑6093

Intl. dial-in: (929) 203‑0844

Participant Passcode: 4127559

To access the live webcast and view the related earnings presentation, visit Granite Ridge’s website at www.graniteridge.com. Alternatively, an audio replay will be available through April 10, 2023. To access the audio replay dial (800) 770‑2030 and enter confirmation code 4127559.

About Granite Ridge

Granite Ridge is a scaled, non-operated oil and gas exploration and production company. We own a portfolio of wells and top-tier acreage across the Permian and four other prolific unconventional basins across the United States. Rather than drill wells ourselves, we increase asset diversity and decrease overhead by investing in a smaller piece of a larger number of high-graded wells drilled by proven public and private operators. We create value by generating sustainable full-cycle risk adjusted returns for investors, offering a rewarding experience for our team, and delivering reliable energy solutions to all – safely and responsibly. For more information, visit Granite Ridge’s website at www.graniteridge.com.

Forward-Looking Statements and Cautionary Statements

This press release contains forward-looking statements regarding future events and future results that are subject to the safe harbors created under the Securities Act of 1933 (the “Securities Act”) and the Securities Exchange Act of 1934 (the “Exchange Act”). All statements other than statements of historical facts included in this release regarding Granite Ridge’s 2023 outlook, dividend plans and practices, financial position, operating and financial performance, business strategy, plans and objectives of management for future operations, industry conditions, and indebtedness covenant compliance are forward-looking statements. When used in this release, forward-looking statements are generally accompanied by terms or phrases such as “estimate,” “project,” “predict,” “believe,” “expect,” “continue,” “anticipate,” “target,” “could,” “plan,” “intend,” “seek,” “goal,” “will,” “should,” “may” or other words and similar expressions that convey the uncertainty of future events or outcomes. Items contemplating or making assumptions about actual or potential future production and sales, market size, collaborations, and trends or operating results also constitute such forward-looking statements.

Forward-looking statements involve inherent risks and uncertainties, and important factors (many of which are beyond Granite Ridge’s control) that could cause actual results to differ materially from those set forth in the forward-looking statements, including the following: the ability to recognize the anticipated benefits of the business combination, Granite Ridge’s financial performance following the business combination, changes in Granite Ridge’s strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects and plans, changes in current or future commodity prices and interest rates, supply chain disruptions, infrastructure constraints and related factors affecting our properties, ability to acquire additional development opportunities or make acquisitions, changes in reserves estimates or the value thereof, operational risks including, but not limited to, the pace of drilling and completions activity on our properties, changes in the markets in which Granite Ridge competes, geopolitical risk and changes in applicable laws, legislation, or regulations, including those relating to environmental matters, cyber-related risks, the fact that reserve estimates depend on many assumptions that may turn out to be inaccurate and that any material inaccuracies in reserve estimates or underlying assumptions will materially affect the quantities and present value of the Granite Ridge’s reserves, the outcome of any known and unknown litigation and regulatory proceedings, legal and contractual limitations on the payment of dividends, limited liquidity and trading of Granite Ridge’s securities, acts of war or terrorism and market conditions and global, regulatory, technical, and economic factors beyond Granite Ridge’s control, including the potential adverse effects of the COVID‑19 pandemic, or another major disease, affecting capital markets, general economic conditions, global supply chains and Granite Ridge’s business and operations, and increasing regulatory and investor emphasis on environmental, social and governance matters.

Granite Ridge has based these forward-looking statements on its current expectations and assumptions about future events. While management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond Granite Ridge’s control. Granite Ridge does not undertake any duty to update or revise any forward-looking statements, except as may be required by the federal securities laws.

Use of Non-GAAP Financial Measures

To supplement the presentation of the Company’s financial results prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”), this press release contains certain financial measures that are not prepared in accordance with GAAP, including adjusted net income, adjusted earnings per share, adjusted EBITDAX, operating cash flow before working capital changes and free cash flow.

See “Supplemental Non-GAAP Financial Measures” below for a description and reconciliation of each non-GAAP measure presented in this press release to the most directly comparable financial measure calculated in accordance with GAAP.

Granite Ridge Resources Inc.

Consolidated Balance Sheets

(Unaudited)

 

 

 

 

 

 

 

 

 

 

December 31,

(in thousands, except par value and share data)

 

2022

 

2021

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash

 

$

50,833

 

 

$

11,854

 

Revenue receivable

 

 

72,287

 

 

 

47,298

 

Advances to operators

 

 

8,908

 

 

 

37,817

 

Prepaid and other expenses

 

 

4,203

 

 

 

676

 

Derivative assets - commodity derivatives

 

 

10,089

 

 

 

434

 

Total current assets

 

 

146,320

 

 

 

98,079

 

Property and equipment:

 

 

 

 

 

 

Oil and gas properties, successful efforts method

 

 

1,028,662

 

 

 

727,547

 

Accumulated depletion

 

 

(383,673

)

 

 

(278,773

)

Total property and equipment, net

 

 

644,989

 

 

 

448,774

 

Long-term assets:

 

 

 

 

 

 

Derivative assets - commodity derivatives

 

 

 

 

 

31

 

Other long-term assets

 

 

3,468

 

 

 

362

 

Total long-term assets

 

 

3,468

 

 

 

393

 

TOTAL ASSETS

 

$

794,777

 

 

$

547,246

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accrued expenses

 

$

62,180

 

 

$

10,321

 

Other payable

 

 

1,523

 

 

 

13

 

Derivative liabilities - commodity derivatives

 

 

431

 

 

 

7,263

 

Current portion of long-term debt

 

 

 

 

 

50,000

 

Total current liabilities

 

 

64,134

 

 

 

67,597

 

Long-term liabilities:

 

 

 

 

 

 

Long-term debt

 

 

 

 

 

1,100

 

Derivative liabilities - commodity derivatives

 

 

 

 

 

657

 

Derivative liabilities - common stock warrants

 

 

11,902

 

 

 

 

Asset retirement obligations

 

 

4,745

 

 

 

2,962

 

Deferred tax liability

 

 

91,592

 

 

 

 

Total long-term liabilities

 

 

108,239

 

 

 

4,719

 

TOTAL LIABILITIES

 

 

172,373

 

 

 

72,316

 

 

 

 

 

 

 

 

EQUITY

 

 

 

 

 

 

Partnerships' capital

 

 

 

 

 

474,930

 

Common stock, $0.0001 par value, 431,000,000 shares authorized, 133,294,897 issued at December 31, 2022.

 

 

13

 

 

 

 

Additional paid-in capital

 

 

590,232

 

 

 

 

Retained Earnings

 

 

32,388

 

 

 

 

Treasury stock, at cost, 25,920 shares at December 31, 2022

 

 

(229

)

 

 

 

Total equity

 

 

622,404

 

 

 

474,930

 

TOTAL LIABILITIES AND EQUITY

 

$

794,777

��

 

$

547,246

 

Granite Ridge Resources Inc.

Consolidated Statements of Operations

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months ended December 31,

 

Year ended December 31,

(in thousands, except per share data)

 

2022

 

2021

 

2022

 

2021

REVENUES

 

 

 

 

 

 

 

 

 

 

 

 

Oil, natural gas and related product sales

 

$

116,335

 

 

$

79,557

 

 

$

497,417

 

 

$

290,193

 

EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

Lease operating expenses

 

 

14,420

 

 

 

8,559

 

 

 

44,678

 

 

 

26,333

 

Production and ad valorem taxes

 

 

9,848

 

 

 

5,137

 

 

 

30,619

 

 

 

18,066

 

Depletion and accretion expense

 

 

21,656

 

 

 

22,221

 

 

 

105,752

 

 

 

94,661

 

Impairments of long-lived assets

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative

 

 

6,476

 

 

 

1,937

 

 

 

14,223

 

 

 

10,179

 

Gain on disposal of oil and natural gas properties

 

 

 

 

 

(313

)

 

 

 

 

 

(2,279

)

Total operating costs and expenses

 

 

52,400

 

 

 

37,541

 

 

 

195,272

 

 

 

146,960

 

Net operating income

 

 

63,935

 

 

 

42,016

 

 

 

302,145

 

 

 

143,233

 

OTHER INCOME (EXPENSE)

 

 

 

 

 

 

 

 

 

 

 

 

Gain (loss) on derivatives - commodity derivatives

 

 

5,463

 

 

 

1,271

 

 

 

(25,324

)

 

 

(32,389

)

Interest expense

 

 

(285

)

 

 

(732

)

 

 

(1,989

)

 

 

(2,385

)

Gain on derivatives - common stock warrants

 

 

362

 

 

 

 

 

 

362

 

 

 

 

Total other income (expense)

 

 

5,540

 

 

 

539

 

 

 

(26,951

)

 

 

(34,774

)

INCOME BEFORE INCOME TAXES

 

 

69,475

 

 

 

42,555

 

 

 

275,194

 

 

 

108,459

 

Income tax expense

 

 

12,850

 

 

 

 

 

 

12,850

 

 

 

 

NET INCOME

 

$

56,625

 

 

$

42,555

 

 

$

262,344

 

 

$

108,459

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME PER SHARE:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.43

 

 

$

0.32

 

 

$

1.97

 

 

$

0.82

 

Diluted

 

$

0.43

 

 

$

0.32

 

 

$

1.97

 

 

$

0.82

 

WEIGHTED-AVERAGE NUMBER OF SHARES OUTSTANDING:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

132,920

 

 

 

132,923

 

 

 

132,923

 

 

 

132,923

 

Diluted

 

 

133,071

 

 

 

132,923

 

 

 

133,074

 

 

 

132,923

 

Granite Ridge Resources Inc.

Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

 

 

 

 

 

 

 

Year Ended December,

(in thousands)

 

2022

 

2021

Operating activities:

 

 

 

 

 

 

Net income

 

$

262,344

 

 

$

108,459

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

Depletion and accretion expense

 

 

105,752

 

 

 

94,661

 

Impairments of long-lived assets

 

 

 

 

 

 

Loss on derivatives - commodity derivatives

 

 

25,324

 

 

 

32,389

 

Net cash payments on derivatives

 

 

(42,437

)

 

 

(25,219

)

Gain on disposal of oil and gas properties

 

 

 

 

 

(2,279

)

Amortization of loan origination costs

 

 

159

 

 

 

48

 

Gain on derivatives - common stock warrants

 

 

(362

)

 

 

 

Deferred income taxes

 

 

12,850

 

 

 

 

Increase (decrease) in cash attributable to changes in operating assets and liabilities:

 

 

 

 

 

 

Revenue receivable

 

 

(24,989

)

 

 

(28,603

)

Accrued expenses

 

 

9,838

 

 

 

1,840

 

Prepaid and other expenses

 

 

(2,095

)

 

 

(125

)

Other payable

 

 

5

 

 

 

10

 

Net cash provided by operating activities

 

 

346,389

 

 

 

181,181

 

 

 

 

 

 

 

 

Investing activities:

 

 

 

 

 

 

Additions to oil and natural gas properties

 

 

(185,497

)

 

 

(136,077

)

Acquisition of oil and natural gas properties

 

 

(49,191

)

 

 

(83,209

)

Deposit on acquisition

 

 

(1,899

)

 

 

 

Refund of advances to operators

 

 

1,180

 

 

 

3,819

 

Proceeds from the disposal of oil and natural gas properties

 

 

4,845

 

 

 

29,443

 

Net cash used in investing activities

 

 

(230,562

)

 

 

(186,024

)

 

 

 

 

 

 

 

Financing activities:

 

 

 

 

 

 

Proceeds from borrowing on credit facilities

 

 

21,000

 

 

 

62,000

 

Repayments of borrowing on credit facilities

 

 

(72,100

)

 

 

(49,400

)

Cash distributions

 

 

 

 

 

(51,091

)

Cash contributions

 

 

 

 

 

46,980

 

Deferred financing costs

 

 

(3,237

)

 

 

 

Payment of expenses related to formation of Granite Ridge Resources, Inc.

 

 

(18,456

)

 

 

 

Purchase of treasury shares

 

 

(216

)

 

 

 

Payment of dividends

 

 

(10,664

)

 

 

 

Proceeds from issuance of common stock

 

 

6,825

 

 

 

 

Net cash (used in) provided by financing activities

 

 

(76,848

)

 

 

8,489

 

 

 

 

 

 

 

 

Net increase in cash and restricted cash

 

 

38,979

 

 

 

3,646

 

Cash and restricted cash at beginning of year

 

 

12,154

 

 

 

8,508

 

Cash and restricted cash at end of year

 

$

51,133

 

 

$

12,154

 

 

 

 

 

 

 

 

Supplemental disclosure of non-cash investing activities:

 

 

 

 

 

 

Oil and natural gas property development costs in accrued expenses

 

$

48,187

 

 

$

6,251

 

Advances to operators applied to development of oil and natural gas properties

 

$

103,535

 

 

$

48,387

 

 

 

 

 

 

 

 

Cash and Restricted cash:

 

 

 

 

 

 

Cash

 

$

50,833

 

 

$

11,854

 

Restricted cash included in other long-term assets

 

 

300

 

 

 

300

 

Cash and restricted cash

 

$

51,133

 

 

$

12,154

 

Granite Ridge Resources Inc.

Summary Production and Price Data

 

The following table sets forth summary information concerning production and operating data for the periods indicated:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended December 31,

 

Year Ended December 31,

 

2022

 

2021

 

2022

 

2021

 

 

 

 

 

 

 

 

 

 

 

 

Net Sales (in thousands):

 

 

 

 

 

 

 

 

 

 

 

Oil sales

$

87,074

 

 

$

55,879

 

 

$

338,163

 

 

$

215,250

 

Natural gas and related product sales

 

29,261

 

 

 

23,678

 

 

 

159,254

 

 

 

74,943

 

Revenues

 

116,335

 

 

 

79,557

 

 

 

497,417

 

 

 

290,193

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Production:

 

 

 

 

 

 

 

 

 

 

 

Oil (MBbl)

 

1,045

 

 

 

812

 

 

 

3,656

 

 

 

3,413

 

Natural gas (MMcf)

 

5,891

 

 

 

3,511

 

 

 

21,351

 

 

 

14,861

 

Total (MBoe)(1)

 

2,027

 

 

 

1,397

 

 

 

7,215

 

 

 

5,890

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Daily Production:

 

 

 

 

 

 

 

 

 

 

 

Oil (Bbl)

 

11,359

 

 

 

8,826

 

 

 

10,016

 

 

 

9,351

 

Natural gas (Mcf)

 

64,033

 

 

 

38,163

 

 

 

58,496

 

 

 

40,715

 

Total (Boe)(1)

 

22,031

 

 

 

15,187

 

 

 

19,765

 

 

 

16,137

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Sales Prices:

 

 

 

 

 

 

 

 

 

 

 

Oil (per Bbl)

$

83.32

 

 

$

68.82

 

 

$

92.50

 

 

$

63.07

 

Effect of loss on settled oil derivatives on average price (per Bbl)

 

(0.51

)

 

 

(13.39

)

 

 

(6.48

)

 

 

(5.58

)

Oil net of settled oil derivatives (per Bbl)

 

82.81

 

 

 

55.43

 

 

 

86.02

 

 

 

57.49

 

 

 

 

 

 

 

 

 

 

 

 

 

Natural gas and related product sales (per Mcf)

 

4.97

 

 

 

6.74

 

 

 

7.46

 

 

 

5.04

 

Effect of loss on settled natural gas derivatives on average price (per Mcf)

 

(0.32

)

 

 

(0.17

)

 

 

(0.88

)

 

 

(0.42

)

Natural gas and related product sales net of settled natural gas derivatives (per Mcf)

 

4.65

 

 

 

6.57

 

 

 

6.58

 

 

 

4.62

 

 

 

 

 

 

 

 

 

 

 

 

 

Realized price on a Boe basis excluding settled commodity derivatives

 

57.39

 

 

 

56.95

 

 

 

68.94

 

 

 

49.27

 

Effect of loss on settled commodity derivatives on average price (per Boe)

 

(1.20

)

 

 

(8.21

)

 

 

(5.88

)

 

 

(4.28

)

Realized price on a Boe basis including settled commodity derivatives

 

56.19

 

 

 

48.74

 

 

 

63.06

 

 

 

44.99

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Expenses (in thousands):

 

 

 

 

 

 

 

 

 

 

 

Lease operating expenses

$

14,420

 

 

$

8,559

 

 

$

44,678

 

 

$

26,333

 

Production and ad valorem taxes

 

9,848

 

 

 

5,137

 

 

 

30,619

 

 

 

18,066

 

Depletion and accretion expense

 

21,656

 

 

 

22,221

 

 

 

105,752

 

 

 

94,661

 

General and administrative

 

6,476

 

 

 

1,937

 

 

 

14,223

 

 

 

10,179

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and Expenses (per Boe):

 

 

 

 

 

 

 

 

 

 

 

Lease operating expenses

$

7.11

 

 

$

6.13

 

 

$

6.19

 

 

$

4.47

 

Production and ad valorem taxes

 

4.86

 

 

 

3.68

 

 

 

4.24

 

 

 

3.07

 

Depletion and accretion expense

 

10.68

 

 

 

15.91

 

 

 

14.66

 

 

 

16.07

 

General and administrative

 

3.19

 

 

 

1.39

 

 

 

1.97

 

 

 

1.73

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Producing Wells at Period-End:

 

132.88

 

 

 

108.64

 

 

 

132.88

 

 

 

108.64

 

(1)

Natural gas is converted to Boe using the ratio of one barrel of oil to six Mcf of natural gas.

Granite Ridge Resources Inc.

Derivatives Information

 

The table below provides data associated with the Company’s derivatives at December 31, 2022, for the periods indicated:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

First Quarter

 

Second Quarter

 

Third Quarter

 

Fourth Quarter

 

Total

Producer 3-way (oil)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Volume (Bbl)

 

 

431,160

 

 

340,263

 

 

228,659

 

 

208,488

 

 

1,208,570

Weighted-average sub-floor price ($/Bbl)

 

$

57.22

 

$

62.22

 

$

60.42

 

$

60.43

 

$

59.79

Weighted-average floor price ($/Bbl)

 

$

70.62

 

$

77.89

 

$

79.25

 

$

80.00

 

$

75.92

Weighted-average ceiling price ($/Bbl)

 

$

96.04

 

$

99.23

 

$

100.61

 

$

101.92

 

$

98.82

Producer 3-way (natural gas)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Volume (Mcf)

 

 

2,634,993

 

 

 

 

 

 

 

 

2,634,993

Weighted-average sub-floor price ($/Mcf)

 

$

4.41

 

$

 

$

 

$

 

$

4.41

Weighted-average floor price ($/Mcf)

 

$

5.51

 

$

 

$

 

$

 

$

5.51

Weighted-average ceiling price ($/Mcf)

 

$

11.28

 

$

 

$

 

$

 

$

11.28

Collar (natural gas)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Volume (Mcf)

 

 

774,634

 

 

3,051,421

 

 

2,530,000

 

 

2,070,000

 

 

8,426,055

Weighted-average floor price ($/Mcf)

 

$

5.96

 

$

4.12

 

$

4.25

 

$

4.50

 

$

4.42

Weighted-average ceiling price ($/Mcf)

 

$

9.15

 

$

5.63

 

$

5.90

 

$

6.35

 

$

6.21

Granite Ridge Resources Inc.

Supplemental Non-GAAP Financial Measures

The Company reports its financial results in accordance with the GAAP. However, the Company believes certain non-GAAP performance measures may provide financial statement users with additional meaningful comparisons between current results, the results of its peers and the results of prior periods. In addition, the Company believes these measures are used by analysts and others in the valuation, rating and investment recommendations of companies within the oil and natural gas exploration and production industry. See the reconciliations throughout this release of GAAP financial measures to non-GAAP financial measures for the periods indicated.

Reconciliation of Net Income to Adjusted EBITDAX

Adjusted EBITDAX (as defined below) is presented herein and reconciled from the GAAP measure of net income because of its wide acceptance by the investment community as a financial indicator.

The Company defines adjusted EBITDAX as net income, before (1) exploration and abandonments, (2) depletion and accretion expense, (3) (gain) loss on derivatives – commodity derivatives, (4) net cash payments on derivatives, (5) gain on disposal of oil and natural gas properties, (6) interest expense (7) gain on derivatives – common stock warrants and (8) income tax expense. Adjusted EBITDAX is not a measure of net income or cash flows as determined by GAAP.

The Company’s adjusted EBITDAX measure provides additional information that may be used to better understand the Company’s operations. Adjusted EBITDAX is one of several metrics that the Company uses as a supplemental financial measurement in the evaluation of its business and should not be considered as an alternative to, or more meaningful than, net income as an indicator of operating performance. Certain items excluded from adjusted EBITDAX are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historic cost of depreciable and depletable assets. Adjusted EBITDAX, as used by the Company, may not be comparable to similarly titled measures reported by other companies. The Company believes that adjusted EBITDAX is a widely followed measure of operating performance and is one of many metrics used by the Company’s management team and by other users of the Company’s consolidated financial statements. For example, adjusted EBITDAX can be used to assess the Company’s operating performance and return on capital in comparison to other independent exploration and production companies without regard to financial or capital structure, and to assess the financial performance of the Company’s assets and the Company without regard to capital structure or historical cost basis.

The following table provides a reconciliation of the GAAP measure of net income to adjusted EBITDAX for the periods indicated:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended December 31,

 

Year Ended December 31,

(in thousands)

 

2022

 

2021

 

2022

 

2021

Net income

 

$

56,625

 

 

$

42,555

 

 

$

262,344

 

 

$

108,459

 

Interest expense

 

 

285

 

 

 

732

 

 

 

1,989

 

 

 

2,385

 

Income tax expense

 

 

12,850

 

 

 

 

 

 

12,850

 

 

 

 

Exploration and abandonments

 

 

 

 

 

 

 

 

 

 

 

 

Depletion and accretion expense

 

 

21,656

 

 

 

22,221

 

 

 

105,752

 

 

 

94,661

 

Gain on disposal of oil and natural gas properties

 

 

 

 

 

(313

)

 

 

 

 

 

(2,279

)

(Gain) loss on derivatives - commodity derivatives

 

 

(5,463

)

 

 

(1,271

)

 

 

25,324

 

 

 

32,389

 

Net cash payments on derivatives

 

 

(2,431

)

 

 

(11,469

)

 

 

(42,437

)

 

 

(25,219

)

Gain on derivatives - common stock warrants

 

 

(362

)

 

 

 

 

 

(362

)

 

 

 

Adjusted EBITDAX

 

$

83,160

 

 

$

52,455

 

 

$

365,460

 

 

$

210,396

 

Reconciliation of Net Cash Provided by Operating Activities to Operating Cash Flow Before Working Capital Changes and to Free Cash Flow

The Company provides Operating Cash Flow (“OCF”) before working capital changes, which is a non-GAAP financial measure. OCF before working capital changes represents net cash provided by operating activities as determined under GAAP without regard to changes in operating assets and liabilities. The Company believes OCF before working capital changes is an accepted measure of an oil and natural gas company’s ability to generate cash used to fund development and acquisition activities and service debt or pay dividends. Additionally, the Company provides free cash flow, which is a non-GAAP financial measure. Free cash flow is cash flow from operating activities before changes in working capital in excess of exploration and development costs incurred. The Company believes that free cash flow is useful to investors as it provides measures to compare cash from operating activities and exploration and development costs across periods on a consistent basis.

These non-GAAP measures should not be considered as alternatives to, or more meaningful than, net cash provided by operating activities as indicators of operating performance.

The following tables provide a reconciliation from the GAAP measure of net cash provided by operating activities to OCF before working capital changes and to free cash flow:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended December 31,

 

Year Ended December 31,

(in thousands)

 

2022

 

2021

 

2022

 

2021

Net cash provided by operating activities

 

$

95,032

 

 

$

50,528

 

 

$

346,389

 

 

$

181,181

 

Changes in cash due to changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Revenue receivable

 

 

(2,528

)

 

 

1,942

 

 

 

24,989

 

 

 

28,603

 

Accrued expenses

 

 

(4,906

)

 

 

(357

)

 

 

(9,838

)

 

 

(1,840

)

Prepaid and other expenses

 

 

(4,608

)

 

 

(371

)

 

 

2,095

 

 

 

125

 

Other payable

 

 

(18

)

 

 

(9

)

 

 

(5

)

 

 

(10

)

Total working capital changes

 

 

(12,060

)

 

 

1,205

 

 

 

17,241

 

 

 

26,878

 

Operating cash flow before working capital changes

 

 

82,972

 

 

 

51,733

 

 

 

363,630

 

 

 

208,059

 

Development costs

 

 

91,741

 

 

 

37,068

 

 

 

256,664

 

 

 

103,918

 

Free cash flow

 

$

(8,769

)

 

$

14,665

 

 

$

106,966

 

 

$

104,141

 

Reconciliation of Net Income to Adjusted Net Income and Adjusted Earnings per Share

The Company’s presentation of adjusted net income and adjusted earnings per share that exclude the effect of certain items are non-GAAP financial measures. Adjusted net income and adjusted earnings per share represent earnings and diluted earnings per share determined under GAAP without regard to certain non-cash and special items. The Company believes these measures provide useful information to analysts and investors for analysis of its operating results on a recurring, comparable basis from period to period. Adjusted net income and adjusted earnings per share should not be considered in isolation or as a substitute for earnings or diluted earnings per share as determined in accordance with GAAP and may not be comparable to other similarly titled measures of other companies.

The following table provides a reconciliation from the GAAP measure of net income to adjusted net income, both in total and on a per diluted share basis, for the periods indicated:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended December 31,

 

Year Ended December 31,

(in thousands, except share data)

 

2022

 

2021

 

2022

 

2021

Net income

 

$

56,625

 

 

$

42,555

 

 

$

262,344

 

 

$

108,459

 

Gain on disposal of oil and natural gas properties

 

 

 

 

 

(313

)

 

 

 

 

 

(2,279

)

(Gain) loss on derivatives - commodity derivatives

 

 

(5,463

)

 

 

(1,271

)

 

 

25,324

 

 

 

32,389

 

Net cash payments on derivatives

 

 

(2,431

)

 

 

(11,469

)

 

 

(42,437

)

 

 

(25,219

)

Gain on derivatives - common stock warrants

 

 

(362

)

 

 

 

 

 

(362

)

 

 

 

Tax impact on above adjustments

 

 

2,325

 

 

 

 

 

 

2,325

 

 

 

 

Adjusted net income

 

$

50,694

 

 

$

29,502

 

 

$

247,194

 

 

$

113,350

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per diluted share - as reported

 

$

0.43

 

 

$

0.32

 

 

$

1.97

 

 

$

0.82

 

Gain on disposal of oil and natural gas properties

 

 

 

 

 

(0.00

)

 

 

 

 

 

(0.02

)

(Gain) loss on derivatives - commodity derivatives

 

 

(0.05

)

 

 

(0.01

)

 

 

0.19

 

 

 

0.24

 

Net cash payments on derivatives

 

 

(0.02

)

 

 

(0.09

)

 

 

(0.32

)

 

 

(0.19

)

Gain on derivatives - common stock warrants

 

 

 

 

 

 

 

 

 

 

 

 

Tax impact on above adjustments

 

 

0.02

 

 

 

 

 

 

0.02

 

 

 

 

Adjusted earnings per diluted share

 

$

0.38

 

 

$

0.22

 

 

$

1.86

 

 

$

0.85

 

Adjusted earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings

 

$

0.38

 

 

$

0.22

 

 

$

1.86

 

 

$

0.85

 

Diluted earnings

 

 

0.38

 

 

 

0.22

 

 

 

1.86

 

 

 

0.85

 

 

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