Granite Ridge Resources (GRNT) 2024 Southwest IDEAS Conference summary

Current business overview

• Operates as a publicly traded oil and gas private equity firm with a market cap of $850 million and enterprise value over $1 billion, focusing on major U.S. basins, especially the Permian.

• Maintains a diversified asset base across oil and gas, regions, and operators, with a roughly 50/50 oil-gas split and partnerships with both large and small operators.

• Generates nearly $300 million in trailing cash flow, offers a dividend yield just under 7%, and is lightly levered at about 0.6x.

• Prioritizes nimble capital allocation, shifting between oil and gas based on market conditions and project-level returns.

• Combines oil and gas engineering, land, and investment professionals in a hybrid structure to source, evaluate, and allocate capital to high-return opportunities.

Strategic evolution and capital allocation

• Historically focused on non-operated (non-op) interests, but is pivoting toward a controlled capital program to gain more control over development timing and returns.

• Controlled capital program involves partnering at the asset level, allowing for majority ownership and direct influence over drilling schedules.

• In 2024, 40-50% of capital is allocated to controlled deals, expected to rise to 60% in 2025, aiming for higher returns and reduced timing risk.

• Data-driven approach to deal evaluation, with engineering forecasts for 1,000 wells showing 99% accuracy compared to actual production.

• Plans to increase transparency and reporting on controlled capital program performance in the coming months.

Growth, shareholder dynamics, and market positioning

• Achieved significant asset growth in 2023 and targets 7% growth in 2024, with mid-teens growth projected for 2025.

• Faces challenges from a tightly held shareholder base, limiting trading volume and institutional investor participation, but sees this as an opportunity as liquidity improves.

• Trades at a discount to comparable companies due to industry skepticism, but aims to shift perception by demonstrating control and consistent results.

• Seeks to be valued more like an operator than a non-op company as controlled capital becomes the majority of new investment.

• Conservative leverage strategy (targeting 0.5-1x) to maintain flexibility and capitalize on market downturns.