Granite Ridge Resources (GRNT) Valuation Update - Jan 31

[dan_s]

I spent several hours updating my forecast model for GRNT yesterday afternoon.
My updated valuation is $9.00, which is the same as TipRanks' price target. < My valuation is 4X 2023 to 2025 annualized operating CFPS.

This morning GRNT was trading at $5.59. It pays quarterly dividends of $0.11, so dividend yield is ~7.9%.

This is a "Non-Op" company, similar to Northern Oil & Gas (NOG) in our Sweet 16, but it is much smaller.
> The Non-Op model allows the company to keep G&A expenses very low thanks to a much lower number of employees. No field workers.
> GRNT has small percentage working interests in a large number of wells.
> Due to the large number of wells and the fact that they do not operate them, production guidance is basically a Wild Ass Guess. In the short time that I've been following the Company, they have "Under-Promised and Over-Delivered" on production guidance. Q3 2023 actual production of 26,433 Boepd came in way above their guidance, and they raised their full-year 2023 production guidance.
> Their guidance for Q4 is ~2,000 Boepd below Q3 production. I cannot see anything that would justify a production drop that large, so my Q4 forecast is based on the high end of their production guidance.
> Current production mix is 47% oil and 53% natural gas and NGLs which they report on a combined basis, making it harder for me to guess at their realized ngas + NGLs prices going forward.
> The Company's production growth was 22.4% in 2022 and ~21% in 2023. My 2024 production forecast is 26,500 Boepd, which would be ~11% YOY production growth. Not that it is just slightly higher than their actual Q3 2023 production, so I think it is a conservative estimate.

This small-cap looks like a very good "Growth + Income" stock to me.

My updated forecast model has been posted to the EPG website.