Granite Ridge Resources, Inc. (GRNT) Q1 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary and Q&A reveal a generally positive outlook. The company demonstrated strong operational execution with an 18% production increase, plans for continued growth, and a focus on capital efficiency. Despite a net loss due to derivative losses, adjusted net income was positive. The strategic partnerships and acquisition plans indicate growth potential. The company’s flexibility with capital deployment and positive shareholder return plans further support a positive sentiment. However, increased lease operating expenses and derivative losses temper the outlook slightly, leading to a 'Positive' rating rather than 'Strong positive.'
Key Financial Performance
Production Growth 18% year-over-year increase to 34,500 barrels of oil equivalent per day. This growth demonstrates strong operational execution.
Adjusted EBITDAX $71 million for the quarter. This reflects strong operational performance and positions the company for continued growth.
Oil and Natural Gas Sales $128.3 million, a $5.3 million increase over Q1 2025. The increase was driven by an 11% production increase in oil and flat realized pricing, while natural gas revenues declined due to a 36% drop in realized gas prices.
Oil Revenues $103.4 million, up from $91.8 million in Q1 2025, driven by an 11% increase in oil production and stable pricing at $69.94 per barrel.
Natural Gas Revenues $24.8 million, down from $31.1 million in Q1 2025, due to a 36% decline in realized prices to $2.55 per Mcf, partially offset by a 24% increase in production.
Lease Operating Expense (LOE) $9.57 per BOE, a 55% increase from $6.17 per BOE in Q1 2025. The increase was due to higher saltwater disposal costs, flowback operations, contract labor, and fixed costs spread over declining production in certain areas.
Net Loss $47 million or $0.36 per diluted share, primarily due to a $72 million loss on derivatives, of which $60.2 million was an unrealized mark-to-market loss driven by rising oil prices.
Adjusted Net Income $3.1 million or $0.02 per adjusted diluted share, reflecting operational performance excluding derivative losses.
Capital Investment $68.4 million, including $58.3 million in development capital and $10.1 million in acquisitions. This added 3 net undeveloped locations to the inventory.
Debt and Liquidity $400 million in long-term debt, $30.1 million in cash, and total liquidity of $314.8 million. Debt to trailing 12 months adjusted EBITDAX was 1.3x.
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Operating Highlights
Production Growth: Achieved 18% year-over-year production growth in Q1 2026, reaching 34,500 barrels of oil equivalent per day.
Market Expansion in Delaware and Utica Basins: Closed 17 acquisitions in the Delaware and Utica basins, adding 3 net undeveloped locations to inventory.
Lease Operating Expense (LOE): LOE increased to $9.57 per BOE in Q1 2026 due to higher saltwater disposal costs, flowback operations, and fixed costs spread over declining production in DJ and Bakken basins. Full-year LOE guidance raised to $7.75-$8.75 per BOE.
Hedging Program: Implemented Waha basis swaps for Q4 2026 to Q1 2028 at a weighted average basis of approximately negative $1.50, covering 45%-70% of Permian gas production.
Operator Partnership Model: Leveraged partnerships to secure high-return development opportunities, including a Permian Basin project with a major operator, offering a 55% IRR and 2.4 MOI.
Capital Allocation Framework: Focused on achieving high single-digit production growth, more than 10% free cash flow yield, and sustainable dividend coverage by 2027.
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Risk or Challenges
Lease Operating Expense (LOE): Higher LOE at $9.57 per BOE, above prior guidance, driven by increased early life flowback expenses, saltwater disposal costs, and a one-time charge tied to an asset impairment. Structural issues in DJ and Bakken regions due to declining production and fixed costs spread over fewer barrels.
Waha Pricing Weakness: Negative Waha pricing in the Permian Basin led to a 36% decline in realized gas prices, impacting natural gas revenues and cash flow. Although hedging programs are in place, this remains a significant challenge.
Saltwater Disposal Costs: Higher water cuts and flowback operations in the Permian Basin increased saltwater disposal costs, contributing to elevated LOE.
Asset Impairment: A one-time charge tied to asset impairment increased costs, impacting financial performance.
Fixed Costs in Declining Regions: In DJ and Bakken regions, declining production has led to fixed costs being spread over fewer barrels, increasing per-unit costs.
Hedging Losses: A $72 million loss on derivatives, including $60.2 million unrealized, due to rising oil prices, negatively impacted financial results.
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Guidance & Outlook
Production Growth: The company expects continued production growth in the back half of 2026, with a trajectory to achieve free cash flow in 2027. Production guidance for 2026 remains at 34,000 to 36,000 BOE per day, with expectations to meet or exceed the midpoint.
Lease Operating Expense (LOE): Full-year LOE guidance has been raised to $7.75 to $8.75 per BOE. Per unit LOE is expected to trend lower as 2026 volumes come online.
Capital Expenditures: Development capital guidance remains unchanged at $300 million to $330 million, with total capital guidance of $345 million to $385 million. Acquisition capital guidance has been increased by $25 million at the midpoint, reflecting completed transactions and near-term deals.
Free Cash Flow and Dividend: 2026 is expected to be the last year of outspending operating cash flow, with a clear trajectory towards free cash flow in 2027. The company aims for high single-digit production growth, more than 10% free cash flow yield, and approximately 1.25x dividend coverage in 2027.
Hedging Strategy: The company has implemented Waha basis hedges for the fourth quarter of 2026 through the first quarter of 2028, covering 45% of total Permian gas in Q4 2026 and nearly 70% in 2027 on a PDP basis.
Development Opportunities: The company is actively evaluating additional development opportunities for the back half of 2026, including a significant Permian Basin project with a major operator. This project is expected to deliver a 55% IRR and 2.4 MOI at strip pricing.
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Shareholder Return Plan
Dividend as a core component: The dividend remains a core component of the shareholder return framework. As the company approaches free cash flow generation, it expects to have increasing optionality around capital allocation and returns to shareholders.
Dividend coverage: The company is committed to a capital allocation framework that achieves approximately 1.25x dividend coverage.
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Key Q&A
Q:What are the plans to increase acquisition CapEx?
A:The $25 million increase in acquisition CapEx is for transactions expected to close in the second quarter. These transactions are spread across half a dozen to a dozen deals, mainly in the Permian Basin, with some activity in the Utica Shale in Ohio. Most of these transactions were agreed upon before the increase in commodity prices, resulting in great returns. The increase does not include additional A&D that may occur in the back half of the year.
Q:Is the opportunity with Admiral already built into the D&C CapEx?
A:No, the opportunity with Admiral is not yet built into the D&C CapEx. It is being evaluated and would likely result in back-half-of-the-year CapEx spend. Updates will be provided in August during the second-quarter earnings report.
Q:How will the company achieve free cash flow inflection next year while ramping up partnerships?
A:The company anticipates high single-digit to low double-digit production growth starting in 2027. The Admiral operator partnership will become self-sustaining in the back half of this year, reducing startup CapEx. This will help achieve free cash flow inflection in 2027 while allowing the company to ramp up other partnerships.
Q:Can you elaborate on the scale and potential duration of the Permian opportunity with Admiral?
A:The Permian opportunity with Admiral involves large independents and majors seeking partners to expand their capital budgets without increasing their own spending. Admiral has been successful in these transactions, which are neutral to the large operators' budgets but provide incremental production. The scale of this particular opportunity is on the smaller end of $25 million to $50 million.
Q:Are there other operational levers to accelerate oil production in the current environment?
A:Yes, the company has other operator partners with drill-ready inventory that could be slotted into development schedules. In the Utica Shale, some projects scheduled for 2028-2029 have been accelerated to this year. In the Permian, non-operated portfolio activity remains consistent, but elevated prices could lead to increased activity.
Q:Are higher prices negatively impacting the ability of operating partners to source opportunities?
A:No, higher prices are not negatively impacting the ability to source opportunities. The company is underwriting near-term development drilling, with most projects turning online in the next 18 months. The forward strip for 2027 remains stable, so there has been no slowdown in activity.
Q:Review of Unclear Management Responses
A:None of the questions were avoided or lacked clarity. All responses provided sufficient detail and addressed the questions directly.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Delaware Utica
EBITDAX
Granite Resources
LOE BOE
Oil revenue
Utica basin
asset impairment
barrel gas
basin location
basis
capital development
capital midpoint
charge
context
development capital
development opportunity
expense
flowback
gas revenue
gas sale
hedge
increase oil
line sight
liquidity
location inventory
loss derivative
midpoint transaction
opportunity front
portion
position
sale increase
stock compensation
story
unit LOE
volume
GRNT Transcript
Granite Ridge Resources, Inc. (GRNT) Q1 2026 Earnings Call Transcript
Positive5-8
The earnings call summary and Q&A reveal a generally positive outlook. The company demonstrated strong operational execution with an 18% production increase, plans for continued growth, and a focus on capital efficiency. Despite a net loss due to derivative losses, adjusted net income was positive. The strategic partnerships and acquisition plans indicate growth potential. The company’s flexibility with capital deployment and positive shareholder return plans further support a positive sentiment. However, increased lease operating expenses and derivative losses temper the outlook slightly, leading to a 'Positive' rating rather than 'Strong positive.'
Granite Ridge Resources, Inc. (GRNT) Q4 2025 Earnings Call Transcript
Unknown3-6
The earnings call presents a mixed picture: production growth and strategic partnerships are positive, but weak commodity pricing and reduced well plans are concerning. The Q&A highlighted uncertainty in free cash flow utilization and vague partnership economics, which may worry investors. Overall, the sentiment is balanced, leading to a neutral stock price prediction.
Granite Ridge Resources, Inc. (GRNT) Q3 2025 Earnings Call Transcript
Positive11-7
The earnings call reveals strong financial performance with increased revenue and net income, stable leverage ratio, and robust cash flow. Production guidance is raised, and significant capital investments are planned, indicating growth potential. While some concerns arise from increased LOE and vague future guidance, the company's strategic partnerships and acquisition plans in the Permian Basin are promising. The Q&A section confirms flexibility in capital allocation and a focus on high-return projects. Overall, the positive aspects outweigh the negatives, suggesting a likely positive stock price movement.
Granite Ridge Resources, Inc. (GRNT) Q2 2025 Earnings Call Transcript
Unknown8-8
The company shows strong production growth and positive cash flow, but there are concerns about increased debt and costs. The Q&A reveals management's focus on growth and acquisitions, yet lacks clarity on future leverage and credit market strategies. Despite a 20% revenue increase, the lower oil price and rising expenses balance the outlook. The dividend yield remains attractive, but the lack of specific guidance for 2026 and beyond, coupled with increased debt, suggests a cautious market response, leading to a neutral sentiment.
GRNT Report
Frequently Asked Questions
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Why do some answers appear as “Unclear” or “Inaudible”?
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They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
