Think of GRNT as a "baby NOG", but on steroids. They are growing production at double-digits, all while keeping debt at a mere 0.2X last quarter's annualized EBITDA.
They just did a secondary offering for their large shareholder and at the price of the offering the stock is trading at nearly a 9% yield. It would not be a huge surprise if you are able to pick up shares at a similar price as this today.
Granite Ridge Energy (GRNT) -- Another Non-Op Play With Solid Yield & Growth
Re: Granite Ridge Energy (GRNT) -- Another Non-Op Play With Solid Yield & Growth
For those of you new to the EPG Forum, Mr. Ajootian is an "EPG Founding Member". His stock tips are definitely worth looking into.
We've added 22 new members in Q3 so far.
We've added 22 new members in Q3 so far.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Granite Ridge Energy (GRNT) -- Another Non-Op Play With Solid Yield & Growth
Thank you for the tip ajootian! It's also expiration week so this is a great price point to starting a position.ajootian wrote: ↑Wed Sep 13, 2023 7:14 am Think of GRNT as a "baby NOG", but on steroids. They are growing production at double-digits, all while keeping debt at a mere 0.2X last quarter's annualized EBITDA.
They just did a secondary offering for their large shareholder and at the price of the offering the stock is trading at nearly a 9% yield. It would not be a huge surprise if you are able to pick up shares at a similar price as this today.
Re: Granite Ridge Energy (GRNT) -- Another Non-Op Play With Solid Yield & Growth
what kind of upside do you see on grnt? why would Shareholder bail out at such a low price? thanks for info.
Re: Granite Ridge Energy (GRNT) -- Another Non-Op Play With Solid Yield & Growth
Based on watching this sector closely for decades, I believe that selloffs in reaction to equity offerings are wrong 90% of the time. This is especially true when the proceeds of the stock offering are going to be used for an accretive acquisition (i.e. SilverBow).
Funding an acquisition with 100% debt, especially at high interest rates, is much higher risk than using equity. Plus, it equity used for acquisitions keeps the balance sheet "in balance". Using equity+debt for several large acquisitions is why we recently make a killing on ESTE.
I've seen lots of small-caps become "addicted to debt". When oil & gas prices have an unexpected decline they are forced into Chapter 11.
GRNT has generated over $1.00 operating cash flow in 1H 2023 and its cash flow should increase in 2H 2023.
It also uses the Successful Efforts method of accounting, which is more conservative than the Full Cost method. Successful Efforts companies are less likely to have overstated book values.
I have added GRNT to my Watchlist. I will build a model for it when I have time.
FWIW First Call's price target is $9.00.
Annualized dividends are $0.44 for current yield of ~7.7%.
Funding an acquisition with 100% debt, especially at high interest rates, is much higher risk than using equity. Plus, it equity used for acquisitions keeps the balance sheet "in balance". Using equity+debt for several large acquisitions is why we recently make a killing on ESTE.
I've seen lots of small-caps become "addicted to debt". When oil & gas prices have an unexpected decline they are forced into Chapter 11.
GRNT has generated over $1.00 operating cash flow in 1H 2023 and its cash flow should increase in 2H 2023.
It also uses the Successful Efforts method of accounting, which is more conservative than the Full Cost method. Successful Efforts companies are less likely to have overstated book values.
I have added GRNT to my Watchlist. I will build a model for it when I have time.
FWIW First Call's price target is $9.00.
Annualized dividends are $0.44 for current yield of ~7.7%.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Granite Ridge Energy (GRNT) -- Another Non-Op Play With Solid Yield & Growth
Thanks for the information. I've started a position.
Re: Granite Ridge Energy (GRNT) -- Another Non-Op Play With Solid Yield & Growth
Really great to see the interest in GRNT here, and great to see that you've added it to your watchlist Dan. This stock would make a great addition to either your Small Cap or your High Yield portfolio.
In response to the question on what the upside here is, you need only to look at the 3 year price chart of GRNT's big brother, NOG. Granted, a big reason that NOG is a 10-bagger over that time span is because of the pandemic causing all E&P stocks to take massive hits, but even if you discount that it is very clear that their non-op strategy has paid off handsomely. GRNT is basically just copying NOG's playbook. Due to the fact that GRNT is so much smaller than NOG, they are not in competition for deals -- NOG would not bother to even look at the size deals that GRNT is looking for at this point.
I'm pleasantly surprised that the stock price did not find its way down to the offering price in the last few days. This is a clue that either the offering was oversubscribed, or the investors in that offering were not the usual flippers looking for a short-term gain, or a little of both. Either of these are positive for the stock.
At the current price the stock is selling at a mouth-watering EV/EBITDA multiple of about 2.8X. This is an absurdly low multiple given the company's growth prospects. Tipranks does not show any analysts following GRNT but something tells me that that is going to change in the coming months.
In response to the question on what the upside here is, you need only to look at the 3 year price chart of GRNT's big brother, NOG. Granted, a big reason that NOG is a 10-bagger over that time span is because of the pandemic causing all E&P stocks to take massive hits, but even if you discount that it is very clear that their non-op strategy has paid off handsomely. GRNT is basically just copying NOG's playbook. Due to the fact that GRNT is so much smaller than NOG, they are not in competition for deals -- NOG would not bother to even look at the size deals that GRNT is looking for at this point.
I'm pleasantly surprised that the stock price did not find its way down to the offering price in the last few days. This is a clue that either the offering was oversubscribed, or the investors in that offering were not the usual flippers looking for a short-term gain, or a little of both. Either of these are positive for the stock.
At the current price the stock is selling at a mouth-watering EV/EBITDA multiple of about 2.8X. This is an absurdly low multiple given the company's growth prospects. Tipranks does not show any analysts following GRNT but something tells me that that is going to change in the coming months.
Re: Granite Ridge Energy (GRNT) -- Another Non-Op Play With Solid Yield & Growth
Thanks for posting the idea and opportunity and providing the inside baseball thesis on this one. I'm in it now at what looks like a fantastic entry point.
Re: Granite Ridge Energy (GRNT) -- Another Non-Op Play With Solid Yield & Growth
I love this! When I founded EPG in the current form (previously it was a newsletter founded by Kevin Hopson in 2001), I wanted to create a networking group primarily for oil & gas industry people. Sharing good ideas on small-caps that were off the radar screen of the Wall Street Gang made us a lot of money in the early days (pre-2008 financial crisis). BTW, Kevin moved on to become a scout for the Pittsburg Penguins in the NHL.
In today's podcast I will be discussing why I believe we are just at the beginning of an extended period of high oil prices similar to 2011 thru 2014. During those four years, WTI traded in the $85 to $105 range and our Sweet 16 companies were extremely profitable. Add a bit of inflation and I can see WTI in a $90 to $110 range for several years, with a spike to $120 first. Marshall Atkins at Raymond James forecast back in June that WTI would spike to $120 by year-end due to the significant decline on OECD petroleum inventories, which is happening exactly as he predicted.
The global oil market is under-supplied thanks to lack of investment. There is no Quick Fix for this problem.
In today's podcast I will be discussing why I believe we are just at the beginning of an extended period of high oil prices similar to 2011 thru 2014. During those four years, WTI traded in the $85 to $105 range and our Sweet 16 companies were extremely profitable. Add a bit of inflation and I can see WTI in a $90 to $110 range for several years, with a spike to $120 first. Marshall Atkins at Raymond James forecast back in June that WTI would spike to $120 by year-end due to the significant decline on OECD petroleum inventories, which is happening exactly as he predicted.
The global oil market is under-supplied thanks to lack of investment. There is no Quick Fix for this problem.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Granite Ridge Energy (GRNT) -- Another Non-Op Play With Solid Yield & Growth
I agree. We are all better off with the collective wisdom of the members. Keep the good ideas flowing.