Granite Ridge Resources Inc. (“Granite Ridge” or the
“Company”) (NYSE: GRNT) today reported financial and operating
results for the third quarter 2023 and provided an updated outlook
for 2023.
Third Quarter 2023 Highlights
- Grew production 20% to 26,433 barrels of oil equivalent (“Boe”)
per day (46% oil), from 22,015 Boe per day (49% oil) for the third
quarter of 2022.
- Reported net income of $18.0 million, or $0.13 per share,
versus $80.0 million, or $0.60 per share, for the prior year
period. Third quarter adjusted net income (non-GAAP) totaled $27.7
million, or $0.21 per share. Non-cash depletion and accretion
expense for the third quarter totaled $44.3 million, impacting net
income by $0.33 per share.
- Generated $83.2 million of adjusted EBITDAX (non-GAAP).
- Deployed $95.1 million of capital during the quarter, including
$11.9 million of inventory acquisitions (non-GAAP).
- Placed 77 gross (8.58 net) wells online.
- Declared dividend of $0.11 per share of common stock.
- Ended the third quarter of 2023 with liquidity of $70.8
million.
2023 Outlook Updates
- Increased full year 2023 midpoint production guidance to 23,250
Boe per day; now expecting to generate 18% midpoint annual
production volume growth as compared to the full year 2022.
- Increased the midpoint of total capital expenditures for full
year 2023 by $55 million to $350 million primarily to reflect
additional acquisitions.
- Increased the midpoint of number of net well placed on
production to 22.
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,
“Our third quarter operational and financial results are another
clear indicator that our well-honed strategy of building close and
long-standing relationships provides a strong platform for
continued success. This was evidenced by the more than 23% increase
in growth in daily production levels from the second quarter of
2023, as well as the 11% increase in the sequential quarterly
period end net producing well count. This growth is a direct result
of our operator partners’ targeted spending campaigns to capitalize
on the strong underlying fundamentals supporting the oil and gas
industry. In addition, our positive third quarter of 2023 results
reflect our unrelenting pursuit in identifying, evaluating and –
most importantly – executing targeted opportunities that fit our
very selective criteria.”
Third Quarter 2023 Summary
Third quarter 2023 oil production volumes totaled 12,228 barrels
(“Bbls”) per day, a 13% increase from the third quarter of 2022.
Natural gas production for the third quarter of 2023 totaled 85,228
thousand cubic feet of natural gas (“Mcf”) per day, a 27% increase
from the third quarter of 2022. As a result, the Company’s total
production for the third quarter of 2023 grew 20% from the third
quarter of the prior year to 26,433 Boe per day.
Net income for the third quarter of 2023 was $18.0 million, or
$0.13 per diluted share. Excluding non-cash and nonrecurring items,
the third quarter 2023 adjusted net income (non-GAAP) was $27.7
million, or $0.21 per diluted share. The Company’s average realized
price for oil and natural gas for the third quarter of 2023,
excluding the effect of commodity derivatives, was $78.41 per Bbl
and $2.58 per Mcf, respectively.
Adjusted EBITDAX (non-GAAP) for the third quarter of 2023
totaled $83.2 million, compared to $99.0 million for the third
quarter of 2022. Third quarter of 2023 cash flow from operating
activities was $57.0 million, including $22.3 million in working
capital changes. Operating cash flow before working capital changes
(non-GAAP) was $79.3 million. Costs incurred for development
activities totaled $75.7 million for the third quarter of 2023.
Granite Ridge Credit Agreement Amendment
On November 7, 2023, Granite Ridge amended the senior secured
revolving credit agreement (the “Credit Agreement”) which, among
other things, established a borrowing base of $275.0 million,
increased the Company’s aggregate elected commitments from $150.0
million to $240.0 million, and amended the applicable margin
charged on the loans and other obligations under the Credit
Agreement.
Operational Activity
The table below provides a summary of gross and net wells
completed and put on production for the three and nine months ended
September 30, 2023:
Three Months Ended September
30, 2023
Nine Months Ended September
30, 2023
Gross
Net
Gross
Net
Permian
23
5.46
85
10.59
Eagle Ford
6
1.77
18
4.27
Bakken
12
0.34
29
1.43
Haynesville
4
0.94
4
0.94
DJ
32
0.07
98
2.80
Total
77
8.58
234
20.03
On September 30, 2023, the Company had 196 gross (10.6 net)
wells in process.
Costs Incurred
The tables below provide the costs incurred for oil and natural
gas producing activities for the periods indicated:
Three Months Ended September
30,
Nine Months Ended September
30,
(in thousands)
2023
2022
2023
2022
Property acquisition costs:
Proved
$
8,161
$
4,251
$
27,459
$
12,206
Unproved
11,262
7,864
24,053
20,653
Development costs
75,726
59,898
233,071
164,923
Total costs incurred for oil and natural
gas properties
$
95,149
$
72,013
$
284,583
$
197,782
Three Months Ended September
30,
Nine Months Ended September
30,
(in thousands)
2023
2022
2023
2022
Inventory acquisitions (non-GAAP) (1)
$
11,939
$
25,619
$
36,203
$
57,253
Production acquisitions
8,161
—
26,150
560
Development costs (excluding drilling
carry)
75,049
46,394
222,230
139,969
Total costs incurred for oil and natural
gas properties
$
95,149
$
72,013
$
284,583
$
197,782
(1) Includes costs to acquire additional
development opportunities and undeveloped acreage acquisition.
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.
Updated 2023 Guidance
The following table summarizes the Company’s updated operational
and financial guidance for 2023.
2023 Guidance
Updated 2023 Guidance
Annual production (Boe per day)
21,500 - 23,000
22,500 - 24,000
Oil as a % of sales volumes
49 %
47 %
Inventory acquisitions and production
acquisitions ($ in millions)
$50 - $50
$90 - $90
Development capital expenditures ($ in
millions)
$230 - $260
$255 - $265
Total capital expenditures ($ in
millions)
$280 - $310
$345 - $355
Net wells placed on production
19 - 21
21 - 23
Lease operating expenses (per Boe)
$6.50 - $7.50
$6.50 - $7.50
Production and ad valorem taxes (as a % of
total sales)
7% - 8%
7% - 8%
Cash general and administrative expense ($
in millions)
$20 - $22
$20 - $22
Conference Call
Granite Ridge will host a conference call on November 10, 2023,
at 10:00 AM CT (11:00 AM ET) to discuss its third quarter 2023
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 visit Granite Ridge’s website at
www.graniteridge.com. Alternatively, an audio replay will be
available through November 24, 2023. To access the audio replay
dial (800) 770-2030 and enter confirmation code 4127559.
Upcoming Investor Events
Granite Ridge management will be participating in the following
upcoming investor events:
- Stephens Annual Investment Conference - November 14, 2023.
- Bank of America Global Energy Conference - November 15,
2023.
- Capital One Securities Energy Conference - December 5,
2023.
Any investor presentations to be used for such events will be
posted prior to the events on Granite Ridge’s website.
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,
terrorism or uncertainty regarding the effects and duration of
global hostilities, including the Israel-Gaza conflict, the
Russia-Ukraine war, and any associated armed conflicts or related
sanctions which may disrupt commodity prices and create instability
in the financial markets, 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, free cash flow and inventory acquisitions.
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.
Condensed Consolidated Balance
Sheets
(Unaudited)
(in thousands, except par value and
share data)
September 30, 2023
December 31, 2022
ASSETS
Current assets:
Cash
$
6,117
$
50,833
Revenue receivable
82,680
72,287
Advances to operators
11,104
8,908
Prepaid costs and other
450
4,203
Derivative assets - commodity
derivatives
2,112
10,089
Total current assets
102,463
146,320
Property and equipment:
Oil and gas properties, successful efforts
method
1,311,625
1,028,662
Accumulated depletion
(496,452
)
(383,673
)
Total property and equipment, net
815,173
644,989
Long-term assets:
Other long-term assets
2,978
3,468
Total long-term assets
2,978
3,468
Total assets
$
920,614
$
794,777
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accrued expenses
$
61,985
$
62,180
Other liabilities
3,454
1,523
Derivative liabilities - commodity
derivatives
4,391
431
Total current liabilities
69,830
64,134
Long-term liabilities:
Long-term debt
85,000
—
Derivative liabilities - commodity
derivatives
479
—
Derivative liabilities - common stock
warrants
—
11,902
Asset retirement obligations
6,498
4,745
Deferred tax liability
108,627
91,592
Total long-term liabilities
200,604
108,239
Total liabilities
270,434
172,373
Stockholders' Equity:
Common stock, $0.0001 par value,
431,000,000 shares authorized, 136,053,725 and 133,294,897 issued
at September 30, 2023 and December 31, 2022, respectively
14
13
Additional paid-in capital
610,982
590,232
Retained earnings
51,758
32,388
Treasury stock, at cost, 1,840,427 and
25,920 shares at September 30, 2023 and December 31, 2022,
respectively
(12,574
)
(229
)
Total stockholders' equity
650,180
622,404
Total liabilities and stockholders'
equity
$
920,614
$
794,777
Granite Ridge Resources
Inc.
Condensed Consolidated
Statements of Operations
(Unaudited)
Three Months Ended September
30,
Nine Months Ended September
30,
(in thousands, except per share
data)
2023
2022
2023
2022
Revenues:
Oil and natural gas sales
$
108,404
$
136,966
$
287,271
$
381,082
Operating costs and expenses:
Lease operating expenses
16,935
12,330
45,113
30,258
Production and ad valorem taxes
7,790
7,871
19,810
20,771
Depletion and accretion expense
44,267
36,567
113,088
84,096
Abandonments expense
1,560
—
1,560
—
General and administrative (including
non-cash stock-based compensation of $379 and $1,813 for the three
and nine months ended September 30, 2023)
5,249
2,708
21,839
7,747
Total operating costs and expenses
75,801
59,476
201,410
142,872
Net operating income
32,603
77,490
85,861
238,210
Other income (expense):
Gain (loss) on derivatives - commodity
derivatives
(8,129
)
3,071
6,415
(30,787
)
Interest expense
(1,356
)
(570
)
(2,906
)
(1,704
)
Loss on derivatives - common stock
warrants
(8
)
—
(5,742
)
—
Total other income (expense)
(9,493
)
2,501
(2,233
)
(32,491
)
Income before income taxes
23,110
79,991
83,628
205,719
Income tax expense
5,153
—
20,068
—
Net income
$
17,957
$
79,991
$
63,560
$
205,719
Net income per share:
Basic
$
0.13
$
0.60
$
0.48
$
1.55
Diluted
$
0.13
$
0.60
$
0.48
$
1.55
Weighted-average number of shares
outstanding:
Basic
134,396
132,923
133,426
132,923
Diluted
134,421
132,923
133,440
132,923
Granite Ridge Resources
Inc.
Condensed Consolidated
Statements of Cash Flows
(Unaudited)
Nine Months Ended September
30,
(in thousands)
2023
2022
Operating activities:
Net income
$
63,560
$
205,719
Adjustments to reconcile net income to net
cash provided by operating activities:
Depletion and accretion expense
113,088
84,096
Abandonments expense
1,560
—
(Gain) loss on derivatives - commodity
derivatives
(6,415
)
30,787
Net cash receipts from (payments on)
commodity derivatives
18,830
(40,006
)
Stock-based compensation
1,813
—
Amortization of deferred financing
costs
490
62
Loss on derivatives - common stock
warrants
5,742
—
Deferred income taxes
17,069
—
Other
(146
)
—
Increase (decrease) in cash attributable
to changes in operating assets and liabilities:
Revenue receivable
(10,545
)
(27,517
)
Accrued expenses
2,627
4,932
Prepaid and other expenses
1,854
(6,703
)
Other payable
3,165
(14
)
Net cash provided by operating
activities
212,692
251,356
Investing activities:
Capital expenditures for oil and natural
gas properties
(237,138
)
(143,923
)
Acquisition of oil and natural gas
properties
(49,427
)
(32,858
)
Refund of advances to operators
—
971
Proceeds from the disposal of oil and
natural gas properties
60
747
Net cash used in investing activities
(286,505
)
(175,063
)
Financing activities:
Proceeds from borrowing on credit
facilities
117,500
16,000
Repayments of borrowing on credit
facilities
(32,500
)
(67,100
)
Cash contributions
—
84
Deferred financing costs
(28
)
—
Payment of expenses related to formation
of Granite Ridge Resources, Inc.
(43
)
—
Purchase of treasury shares
(11,765
)
—
Payment of dividends
(44,072
)
—
Proceeds from issuance of common stock
5
—
Net cash provided by (used in) financing
activities
29,097
(51,016
)
Net change in cash and restricted
cash
(44,716
)
25,277
Cash and restricted cash at beginning of
period
51,133
12,154
Cash and restricted cash at end of
period
$
6,417
$
37,431
Supplemental disclosure of non-cash
investing activities:
Oil and natural gas property development
costs in accrued expenses
$
(13,068
)
$
17,326
Advances to operators applied to
development of oil and natural gas properties
$
88,463
$
55,775
Cash and restricted cash:
Cash
$
6,117
$
37,131
Restricted cash included in other
long-term assets
300
300
Cash and restricted cash
$
6,417
$
37,431
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 September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
Net Sales (in thousands):
Oil sales
$
88,210
$
79,051
$
230,755
$
251,088
Natural gas sales
20,194
57,915
56,516
129,994
Total revenues
108,404
136,966
287,271
381,082
Net Production:
Oil (MBbl)
1,125
999
3,038
2,610
Natural gas (MMcf)
7,841
6,158
20,643
15,461
Total (MBoe)(1)
2,432
2,025
6,479
5,187
Average Daily Production:
Oil (Bbl)
12,228
10,859
11,128
9,560
Natural gas (Mcf)
85,228
66,935
75,615
56,634
Total (Boe)(1)
26,433
22,015
23,731
18,999
Average Sales Prices:
Oil (per Bbl)
$
78.41
$
79.13
$
75.96
$
96.20
Effect of gain (loss) on settled oil
derivatives on average price (per Bbl)
0.11
(6.95
)
1.29
(8.88
)
Oil net of settled oil derivatives (per
Bbl) (2)
78.52
72.18
77.25
87.32
Natural gas sales (per Mcf)
2.58
9.40
2.74
8.41
Effect of gain (loss) on settled natural
gas derivatives on average price (per Mcf)
0.55
(1.32
)
0.72
(1.09
)
Natural gas sales net of settled natural
gas derivatives (per Mcf) (2)
3.13
8.08
3.46
7.32
Realized price on a Boe basis excluding
settled commodity derivatives
44.57
67.64
44.34
73.47
Effect of gain (loss) on settled commodity
derivatives on average price (per Boe)
1.82
(7.46
)
2.91
(7.71
)
Realized price on a Boe basis including
settled commodity derivatives (2)
46.39
60.18
47.25
65.76
Operating Expenses (in
thousands):
Lease operating expenses
$
16,935
$
12,330
$
45,113
$
30,258
Production and ad valorem taxes
7,790
7,871
19,810
20,771
Depletion and accretion expense
44,267
36,567
113,088
84,096
General and administrative
5,249
2,708
21,839
7,747
Costs and Expenses (per Boe):
Lease operating expenses
$
6.96
$
6.09
$
6.96
$
5.83
Production and ad valorem taxes
3.20
3.89
3.06
4.00
Depletion and accretion
18.20
18.06
17.45
16.21
General and administrative
2.16
1.34
3.37
1.49
Net Producing Wells at
Period-End:
175.24
123.84
175.24
123.84
(1)
Natural gas is converted to Boe using the
ratio of one barrel of oil to six Mcf of natural gas.
(2)
The presentation of realized prices
including settled commodity derivatives is a result of including
the net cash receipts from (payments on) commodity derivatives that
are presented in our condensed consolidated statements of cash
flows. This presentation of average prices with derivatives is a
means by which to reflect the actual cash performance of our
commodity derivatives for the respective periods and presents oil
and natural gas prices with derivatives in a manner consistent with
the presentation generally used by the investment community.
Granite Ridge Resources
Inc.
Derivatives
Information
The table below provides data associated
with the Company’s derivatives at November 9, 2023, for the periods
indicated:
2023
2024
2025
Total
Total
Total
Producer 3-way (oil)
Volume (Bbl)
208,488
—
—
Weighted-average sub-floor price
($/Bbl)
$
60.43
$
—
$
—
Weighted-average floor price ($/Bbl)
$
80.00
$
—
$
—
Weighted-average ceiling price ($/Bbl)
$
101.92
$
—
$
—
Collar (oil)
Volume (Bbl)
371,304
1,536,446
273,000
Weighted-average floor price ($/Bbl)
$
67.49
$
64.24
$
63.00
Weighted-average ceiling price ($/Bbl)
$
88.14
$
85.07
$
82.70
Swaps (oil)
Volume (Bbl)
—
181,000
—
Weighted-average price ($/Bbl)
$
—
$
80.00
$
—
Collar (natural gas)
Volume (Mcf)
3,746,650
5,471,000
2,156,000
Weighted-average floor price ($/Mcf)
$
3.72
$
3.14
$
3.59
Weighted-average ceiling price ($/Mcf)
$
5.37
$
4.71
$
5.39
Swaps (natural gas)
Volume (Mcf)
—
6,903,000
450,000
Weighted-average price ($/Mcf)
$
—
$
3.22
$
3.68
Granite Ridge Resources Inc.
Supplemental Non-GAAP Financial Measures
The Company reports its financial results in accordance with
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)
abandonments expense, (2) depletion and accretion expense, (3)
(gain) loss on derivatives – commodity derivatives, (4) net cash
receipts from (payments on) commodity derivatives, (5) interest
expense (6) (gain) loss on derivatives – common stock warrants (7)
non-cash stock-based compensation (8) warrant exchange transaction
costs and (9) 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 September
30,
Nine Months Ended September
30,
(in thousands)
2023
2022
2023
2022
Net income
$
17,957
$
79,991
$
63,560
$
205,719
Interest expense
1,356
570
2,906
1,704
Income tax expense
5,153
—
20,068
—
Abandonments expense
1,560
—
1,560
—
Depletion and accretion expense
44,267
36,567
113,088
84,096
Non-cash stock-based compensation
379
—
1,813
—
Warrant exchange transaction costs
—
—
2,456
—
(Gain) loss on derivatives - commodity
derivatives
8,129
(3,071
)
(6,415
)
30,787
Net cash receipts from (payments on)
commodity derivatives
4,419
(15,099
)
18,830
(40,006
)
Loss on derivatives - common stock
warrants
8
—
5,742
—
Adjusted EBITDAX
$
83,228
$
98,958
$
223,608
$
282,300
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 September
30,
Nine Months Ended September
30,
(in thousands)
2023
2022
2023
2022
Net cash provided by operating
activities
$
57,032
$
114,046
$
212,692
$
251,356
Changes in cash due to changes in
operating assets and liabilities:
Revenue receivable
27,147
(19,738
)
10,545
27,517
Accrued expenses
(1,155
)
(1,220
)
(2,627
)
(4,932
)
Prepaid and other expenses
(904
)
5,174
(1,854
)
6,703
Other payable
(2,832
)
167
(3,165
)
14
Total working capital changes
22,256
(15,617
)
2,899
29,302
Operating cash flow before working
capital changes
79,288
98,429
215,591
280,658
Development costs
75,726
59,898
233,071
164,923
Free cash flow
$
3,562
$
38,531
$
(17,480
)
$
115,735
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
nonrecurring 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 September
30,
Nine Months Ended September
30,
(in thousands, except share
data)
2023
2022
2023
2022
Net income
$
17,957
$
79,991
$
63,560
$
205,719
(Gain) loss on derivatives - commodity
derivatives
8,129
(3,071
)
(6,415
)
30,787
Net cash receipts from (payments on)
commodity derivatives
4,419
(15,099
)
18,830
(40,006
)
Loss on derivatives - common stock
warrants
8
—
5,742
—
Warrant exchange transaction costs
—
—
2,456
—
Tax impact on above adjustments (a)
(2,850
)
—
(4,679
)
—
Changes in deferred taxes and other
estimates
32
—
1,223
—
Adjusted net income
$
27,695
$
61,821
$
80,717
$
196,500
Earnings per diluted share - as
reported
$
0.13
$
0.60
$
0.48
$
1.55
(Gain) loss on derivatives - commodity
derivatives
0.06
(0.02
)
(0.05
)
0.23
Net cash receipts from (payments on)
commodity derivatives
0.03
(0.11
)
0.14
(0.30
)
Loss on derivatives - common stock
warrants
—
—
0.04
—
Warrant exchange transaction costs
—
—
0.02
—
Tax impact on above adjustments (a)
(0.01
)
—
(0.04
)
—
Changes in deferred taxes and other
estimates
—
—
0.01
—
Adjusted earnings per diluted
share
$
0.21
$
0.47
$
0.60
$
1.48
Adjusted earnings per share:
Basic earnings
$
0.21
$
0.47
$
0.60
$
1.48
Diluted earnings
$
0.21
$
0.47
$
0.60
$
1.48
(a) Estimated using statutory tax rate in
effect for the period.
Reconciliation of Total Costs Incurred for Oil and Natural
Gas Properties to Inventory Acquisitions
The Company defines inventory acquisitions as costs incurred to
acquire additional development opportunities and undeveloped
acreage acquisitions and excludes producing property acquisition
costs. The Company believes that inventory acquisitions are useful
to investors as they provide a measure of Company’s costs incurred
for current and future drilling opportunities on a consistent
basis.
The following table provides a reconciliation from the GAAP
measure of total costs incurred for oil and natural gas properties
to inventory acquisitions:
Three Months Ended September
30,
Nine Months Ended September
30,
(in thousands)
2023
2022
2023
2022
Property acquisition costs:
Proved
$
8,161
$
4,251
$
27,459
$
12,206
Unproved
11,262
7,864
24,053
20,653
Development costs
75,726
59,898
233,071
164,923
Total costs incurred for oil and natural
gas properties
95,149
72,013
284,583
197,782
Less: Development costs (excluding
drilling carry)
(75,049
)
(46,394
)
(222,230
)
(139,969
)
Less: Production acquisitions
(8,161
)
—
(26,150
)
(560
)
Inventory acquisitions (non-GAAP)
$
11,939
$
25,619
$
36,203
$
57,253
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231109908388/en/
INVESTOR RELATIONS AND MEDIA CONTACT: IR@GraniteRidge.com
– (214) 396-2850
Granite Ridge Resources (NYSE:GRNT)
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