Granite Ridge Resources (GRNT) Update - Feb 7

[dan_s]

Select Preliminary Fourth-Quarter 2023 Results

The Company’s fourth-quarter 2023 total production averaged approximately 26,000 barrels of oil equivalent per day. < Beat my forecast of 24,500 Boepd.
Oil production for the quarter averaged approximately 12 thousand barrels of oil per day. < Beat my forecast of 11,500 Bopd.
Estimated oil price differential to benchmark WTI was approximately $(2.50) per barrel. Estimated natural gas price realization for the fourth-quarter 2023 was approximately 100% of Henry Hub benchmark price.

Weighted-Average Shares Outstanding < Share Buybacks continue to improve per share results.

The weighted-average basic common share count for the fourth quarter and full year is 132.1 million and 133.1 million, respectively. As of December 31, 2023, total shares of common stock outstanding was 130.4 million. The Company repurchased 3.8 million shares of common stock at an average price of $6.13 per share during the fourth quarter. The $50 million stock repurchase program, announced on December 15, 2022, expired under its own terms on December 31, 2023.

Year-End 2023 Balance Sheet Items

On December 31, 2023, the Company had total debt of $110 million, cash of $10 million, $26 million of Vital Energy common stock, and $25 million of Vital Energy 2.0% cumulative mandatorily convertible preferred securities. < Vital Energy securities are "liquid assets".

Asset Sale to Vital Energy (VTLE)

On December 21, 2023, Granite Ridge closed on the sale of certain of its Permian Basin assets to Vital Energy, Inc. (NYSE: VTLE) ("Vital Energy") for consideration of 561,752 shares of Vital Energy’s common stock and 541,155 shares of Vital Energy’s 2.0% cumulative mandatorily convertible preferred securities. The assets sold consisted of approximately 1,658 net acres and 45 gross (9.9 net) producing wells in the Permian Basin.

The transaction is associated with Granite Ridge exercising its right to tag-along with the sale of certain assets in the Permian Basin by affiliates of Henry Energy LP, Henry Resources, LLC, and Moriah Henry Partners LLC (collectively, "Henry") to Vital Energy on the same terms as the purchase and sale agreement between Vital Energy and Henry.

"This transaction demonstrates one of the many ways to win in the non-op model, in this case selling at an operator premium due to a long-term Strategic Partnership with the Henry family," stated Luke Brandenberg, Granite Ridge President and Chief Executive Officer. "While we are not typically a seller, the consideration offered was attractive, and the acceleration of cash flow from these producing assets will allow us to compound returns for our investors by recycling capital into development opportunities with higher rates of return."

[dan_s]

At the time of this post GRNT was trading at $5.49. Current dividend is $0.11/quarter for annualized yield of ~8%.
First Calls target price is $7.67

I have updated my current valuation to $9.50 (a $0.50 increase over what was in Monday's newsletter), which is 4X annualized operating cash flow per share for 2023-2025, based on my forecast model.

My SWAG (Scientific Wild Ass Guess) is that the PV10 net asset value of just their Proved Reserves is approximately $11.75/share.

Annual Production Growth looks very good: 22.4% in 2022, 22.9% in 2023 and my 2024 forecast based on 11.7% YOY production growth.