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| Share Name | Share Symbol | Market | Type |
|---|---|---|---|
| Granite Ridge Resources Inc | NYSE:GRNT | NYSE | Common Stock |
| Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|
| -0.04 | -0.58% | 6.83 | 6.93 | 6.805 | 6.89 | 436,564 | 01:00:00 |
From Oct 2024 to Jan 2025
Granite Ridge Resources, Inc. (“Granite Ridge” or the “Company”) (NYSE: GRNT) today reported financial and operating results for the third quarter 2024.
Third Quarter 2024 Highlights
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.
Subsequent Events
Management Commentary
"Granite Ridge has once again delivered a strong quarter of operational and financial performance," said President and CEO Luke Brandenberg. "We exceeded our expectations in production, adjusted EBITDA, LOE, and G&A, thanks to the quality of our assets, superior underwriting, dedicated staff, and the outstanding performance of our operating partners. Our significant cash flow generation allows us to reinvest in high-return projects and provide shareholders with a current dividend yield of nearly 7%. This quarter’s results underscore our ability to grow production, maintain a strong balance sheet, and prioritize total shareholder returns."
"Controlled Capital is increasingly central to our strategy, and we are thrilled with its progress. Early results from our Delaware Basin partnership have been encouraging. In 2024, we plan to spud nine net Controlled Capital wells, with significant production impacts expected starting in Q1 2025. Our Midland Basin partner is also actively expanding its inventory, positioning us to advance that asset base in 2025. Unlike the traditional non-operated model, Controlled Capital gives us control over capital expenditure timing and cash flows while adhering to our rigorous underwriting standards. We believe our disciplined approach to capital allocation, leverage, and hedging will drive significant value for our shareholders."
Third Quarter 2024 Summary
Third quarter 2024 oil production volumes totaled 12,655 barrels (“Bbls”) per day, a 3% increase from the third quarter of 2023. Natural gas production for the third quarter of 2024 totaled 75,133 thousand cubic feet of natural gas (“Mcf”) per day, a 12% decrease from the third quarter of 2023. As a result, the Company’s total production for the third quarter of 2024 decreased 5% from the third quarter of the prior year to 25,177 Boe per day.
Net income for the third quarter of 2024 was $9.1 million, or $0.07 per diluted share. Excluding non-cash and nonrecurring items, third quarter 2024 Adjusted Net Income (non-GAAP) was $18.5 million, or $0.14 per diluted share. The Company’s average realized price for oil and natural gas for the third quarter of 2024, excluding the effect of commodity derivatives, was $73.44 per Bbl and $1.24 per Mcf, respectively.
Adjusted EBITDAX (non-GAAP) for the third quarter of 2024 totaled $75.4 million, compared to $83.2 million for the third quarter of 2023. Third quarter of 2024 cash flow from operating activities was $74.7 million, including $4.0 million in working capital changes. Operating Cash Flow Before Working Capital Changes (non-GAAP) was $70.7 million. Costs incurred for development activities totaled $77.2 million for the third quarter of 2024.
Operational Update
During the third quarter the Company closed multiple transactions adding 15.9 net future drilling locations for a total acquisition cost of $30.9 million (including $0.6 million of expected future drilling carries).
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, 2024:
Three Months Ended September 30,
2024
Nine Months Ended September 30,
2024
Gross
Net
Gross
Net
Permian
43
3.25
102
13.57
Eagle Ford
0
0.00
13
3.10
Bakken
8
0.21
37
0.60
Haynesville
0
0.00
6
0.34
DJ
42
1.72
55
1.74
Total
93
5.18
213
19.35
On September 30, 2024, the Company had 255 gross (16.2 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)
2024
2023
2024
2023
Property acquisition costs:
Proved
$ —
$ 8,161
$ 2,824
$ 27,459
Unproved
32,919
11,262
51,515
24,053
Development costs
77,171
75,726
206,761
233,071
Total costs incurred for oil and natural gas properties
$ 110,090
$ 95,149
$ 261,100
$ 284,583
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.
2024 Guidance
The following table summarizes the Company’s operational and financial guidance for 2024, which is unchanged from the prior quarter.
2024
Annual production (Boe per day)
23,250 - 25,250
Oil as a % of sales volumes
48 %
Acquisitions ($ in millions)
$60 - $60
Development capital expenditures ($ in millions)
$295 - $305
Total capital expenditures ($ in millions)
$355 - $365
Net wells placed on production
22 - 24
Lease operating expenses (per Boe)
$6.50 - $7.50
Production and ad valorem taxes (as a % of total sales)
7% - 8%
Cash general and administrative expense ($ in millions)
$23 - $26
Conference Call
Granite Ridge will host a conference call on November 8, 2024, at 10:00 AM CT (11:00 AM ET) to discuss its third quarter 2024 results. A brief Q&A session for security analysts will immediately follow the discussion. 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 22, 2024. To access the audio replay dial (800) 770-2030 and enter confirmation code 4127559.
Upcoming Investor Events
Granite Ridge management will also be participating in the following upcoming investor events:
Any investor presentations to be used for such events will be posted prior to the respective event on Granite Ridge’s website. Information on Granite Ridge’s website does not constitute a portion of, and is not incorporated by reference into this press release.
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, as amended, and the Securities Exchange Act of 1934, as amended. All statements other than statements of historical facts included in this release including, without limitation, Granite Ridge’s 2024 outlook, financial position, operating and financial performance, business strategy, plans and objectives of management for future operations, industry conditions, indebtedness covenant compliance, capital expenditures, production and cash flows, and our intention or ability to pay or increase dividends on our capital 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, cash flows, 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: 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 and potential or pending acquisition transactions, as well as the effects of such acquisitions on the Company’s cash position and levels of indebtedness, changes in our 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 Granite Ridge’s reserves, the outcome of any known and unknown litigation and regulatory proceedings, 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-Hamas conflict, the Russia-Ukraine war, continued instability in the Middle East, including from the Houthi rebels in Yemen, 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 world health events, such as the COVID-19 pandemic, affecting capital markets, general economic conditions, global supply chains and Granite Ridge’s business and operations, and increasing regulatory and investor emphasis on, and attention to, environmental, social and governance matters, our ability to establish and maintain effective internal control over financial reporting, and other factors discussed in our Annual Report on Form 10-K for the year ended December 31, 2023 under “Risk Factors,” as updated by any subsequent Quarterly Reports on Form 10-Q that we file with the United States Securities and Exchange Commission.
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. If one or more of these risks or uncertainties materialize, or if the underlying assumptions prove incorrect, Granite Ridge’s actual results may vary materially from those expected or projected. Forward-looking statements speak only as of the date they are made. Granite Ridge does not undertake, and specifically disclaims, any obligation to update any forward-looking statements to reflect events or circumstances occurring after the date of such statements, other than as may be required by applicable law or regulation.
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 and Free Cash Flow.
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, 2024
December 31, 2023
ASSETS
Current assets:
Cash
$
23,102
$
10,430
Revenue receivable
58,504
72,934
Advances to operators
11,756
4,928
Prepaid and other current assets
2,592
1,716
Derivative assets - commodity derivatives
8,489
11,117
Equity investments
27,651
50,427
Total current assets
132,094
151,552
Property and equipment:
Oil and gas properties, successful efforts method
1,492,861
1,236,683
Accumulated depletion
(593,411
)
(467,141
)
Total property and equipment, net
899,450
769,542
Long-term assets:
Derivative assets - commodity derivatives
—
1,189
Other long-term assets
4,331
4,821
Total long-term assets
4,331
6,010
Total assets
$
1,035,875
$
927,104
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities
$
83,231
$
60,875
Other liabilities
1,233
1,204
Total current liabilities
84,464
62,079
Long-term liabilities:
Long-term debt
195,000
110,000
Derivative liabilities - commodity derivatives
676
—
Asset retirement obligations
10,433
9,391
Deferred tax liability
84,722
73,989
Total long-term liabilities
290,831
193,380
Total liabilities
375,295
255,459
Stockholders' Equity:
Common stock, $0.0001 par value, 431,000,000 shares authorized, 136,424,207 and 136,040,777 issued at September 30, 2024 and December 31, 2023, respectively
14
14
Additional paid-in capital
654,857
653,174
Retained earnings
42,051
54,782
Treasury stock, at cost, 5,680,255 and 5,677,627 shares at September 30, 2024 and December 31, 2023, respectively
(36,342
)
(36,325
)
Total stockholders' equity
660,580
671,645
Total liabilities and stockholders' equity
$
1,035,875
$
927,104
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)
2024
2023
2024
2023
Revenues:
Oil and natural gas sales
$
94,075
$
108,404
$
273,723
$
287,271
Operating costs and expenses:
Lease operating expenses
13,026
16,935
42,174
45,113
Production and ad valorem taxes
6,345
7,790
18,975
19,810
Depletion and accretion expense
44,149
44,267
126,682
113,088
Impairments of unproved properties
—
—
732
—
Exploration expense
283
1,560
283
1,560
General and administrative (including non-cash stock-based compensation of $588 and $1,683 for the three and nine months ended September 30, 2024)
5,590
5,249
18,705
21,839
Total operating costs and expenses
69,393
75,801
207,551
201,410
Net operating income
24,682
32,603
66,172
85,861
Other income (expense):
Gain (loss) on derivatives - commodity derivatives
11,841
(8,129
)
7,895
6,415
Interest expense
(4,820
)
(1,356
)
(13,797
)
(2,906
)
Loss on derivatives - common stock warrants
—
(8
)
—
(5,742
)
Loss on equity investments
(18,320
)
—
(19,315
)
—
Dividend income
—
—
269
—
Other
1
—
2
—
Total other income (expense)
(11,298
)
(9,493
)
(24,946
)
(2,233
)
Income before income taxes
13,384
23,110
41,226
83,628
Income tax expense
4,330
5,153
10,845
20,068
Net income
$
9,054
$
17,957
$
30,381
$
63,560
Net income per share:
Basic
$
0.07
$
0.13
$
0.23
$
0.48
Diluted
$
0.07
$
0.13
$
0.23
$
0.48
Weighted-average number of shares outstanding:
Basic
130,204
134,396
130,182
133,426
Diluted
130,242
134,421
130,219
133,440
Granite Ridge Resources, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended September 30,
(in thousands)
2024
2023
Operating activities:
Net income
$
30,381
$
63,560
Adjustments to reconcile net income to net cash provided by operating activities:
Depletion and accretion expense
126,682
113,088
Abandonments expense
—
1,560
Impairments of unproved properties
732
—
(Gain) loss on derivatives - commodity derivatives
(7,895
)
(6,415
)
Net cash receipts from commodity derivatives
12,389
18,830
Stock-based compensation
1,683
1,813
Amortization of deferred financing costs
3,162
490
Loss on derivatives - common stock warrants
—
5,742
Unrealized loss on equity investments
19,415
—
Deferred income taxes
10,733
17,069
Other
(145
)
(146
)
Increase (decrease) in cash attributable to changes in operating assets and liabilities:
Revenue receivable
14,429
(10,545
)
Accrued expenses
(3,240
)
2,627
Prepaid and other current assets
(877
)
1,854
Other payable
87
3,165
Net cash provided by operating activities
207,536
212,692
Investing activities:
Capital expenditures for oil and natural gas properties
(193,376
)
(237,138
)
Acquisition of oil and natural gas properties
(51,994
)
(49,427
)
Proceeds from sale of oil and natural gas properties
3,064
60
Proceeds from sale of equity investments
3,362
—
Refund of advances to operators
5,314
—
Net cash used in investing activities
(233,630
)
(286,505
)
Financing activities:
Proceeds from borrowing on credit facilities
85,000
117,500
Repayments of borrowing on credit facilities
—
(32,500
)
Deferred financing costs
(3,004
)
(28
)
Payment of expenses related to formation of Granite Ridge Resources, Inc.
—
(43
)
Purchase of treasury shares
(418
)
(11,765
)
Proceeds from issuance of common stock
—
5
Payment of dividends
(43,112
)
(44,072
)
Net cash provided by financing activities
38,466
29,097
Net change in cash and restricted cash
12,372
(44,716
)
Cash and restricted cash at beginning of period
10,730
51,133
Cash and restricted cash at end of period
$
23,102
$
6,417
Supplemental disclosure of non-cash investing activities:
Oil and natural gas property development costs in accrued expenses
$
40,003
$
(13,068
)
Advances to operators applied to development of oil and natural gas properties
$
80,320
$
88,463
Cash and restricted cash:
Cash
$
23,102
$
6,117
Restricted cash included in other long-term assets
—
300
Cash and restricted cash
$
23,102
$
6,417
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,
2024
2023
2024
2023
Net Sales (in thousands):
Oil sales
$
85,503
$
88,210
$
238,761
$
230,755
Natural gas sales
8,572
20,194
34,962
56,516
Total revenues
94,075
108,404
273,723
287,271
Net Production:
Oil (MBbl)
1,164
1,125
3,129
3,038
Natural gas (MMcf)
6,912
7,841
20,758
20,643
Total (MBoe)(1)
2,316
2,432
6,589
6,479
Average Daily Production:
Oil (Bbl)
12,655
12,228
11,420
11,128
Natural gas (Mcf)
75,133
85,228
75,758
75,615
Total (Boe)(1)
25,177
26,433
24,046
23,731
Average Sales Prices:
Oil (per Bbl)
$
73.44
$
78.41
$
76.31
$
75.96
Effect of gain (loss) on settled oil derivatives on average price (per Bbl)
0.55
0.11
0.11
1.29
Oil net of settled oil derivatives (per Bbl) (2)
73.99
78.52
76.42
77.25
Natural gas sales (per Mcf)
1.24
2.58
1.68
2.74
Effect of gain (loss) on settled natural gas derivatives on average price (per Mcf)
0.74
0.55
0.58
0.72
Natural gas sales net of settled natural gas derivatives (per Mcf) (2)
1.98
3.13
2.26
3.46
Realized price on a Boe basis excluding settled commodity derivatives
40.61
44.57
41.54
44.34
Effect of gain (loss) on settled commodity derivatives on average price (per Boe)
2.47
1.82
1.88
2.91
Realized price on a Boe basis including settled commodity derivatives (2)
43.08
46.39
43.42
47.25
Operating Expenses (in thousands):
Lease operating expenses
$
13,026
$
16,935
$
42,174
$
45,113
Production and ad valorem taxes
6,345
7,790
18,975
19,810
Depletion and accretion expense
44,149
44,267
126,682
113,088
General and administrative
5,590
5,249
18,705
21,839
Costs and Expenses (per Boe):
Lease operating expenses
$
5.62
$
6.96
$
6.40
$
6.96
Production and ad valorem taxes
2.74
3.20
2.88
3.06
Depletion and accretion
19.06
18.20
19.23
17.45
General and administrative
2.41
2.16
2.84
3.37
Net Producing Wells at Period-End:
195.88
175.24
195.88
175.24
(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 September 30, 2024, for the periods indicated. No additional derivatives have been entered into subsequent to the end of the quarter.
Q4 2024
2025
2026
Collar (oil)
Volume (Bbl)
311,496
1,898,739
—
Weighted-average floor price ($/Bbl)
$
64.13
$
60.93
$
—
Weighted-average ceiling price ($/Bbl)
$
84.97
$
79.86
$
—
Swaps (oil)
Volume (Bbl)
128,277
—
—
Weighted-average price ($/Bbl)
$
79.30
$
—
$
—
Collar (natural gas)
Volume (Mcf)
1,899,000
9,439,829
7,650,176
Weighted-average floor price ($/Mcf)
$
3.50
$
3.15
$
3.28
Weighted-average ceiling price ($/Mcf)
$
5.12
$
4.13
$
4.01
Swaps (natural gas)
Volume (Mcf)
1,895,588
2,585,050
656,000
Weighted-average price ($/Mcf)
$
3.55
$
3.18
$
3.31
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 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 depletion and accretion expense, (gain) loss on derivatives – commodity derivatives, net cash receipts from (payments on) commodity derivatives, interest expense, (gain) loss on derivatives – common stock warrants, non-cash stock-based compensation, income tax expense, impairments of unproved properties, warrant exchange transaction costs, loss on equity investments, and exploration 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 in isolation or 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)
2024
2023
2024
2023
Net income
$
9,054
$
17,957
$
30,381
$
63,560
Interest expense
4,820
1,356
13,797
2,906
Income tax expense
4,330
5,153
10,845
20,068
Exploration expense
283
1,560
283
1,560
Depletion and accretion expense
44,149
44,267
126,682
113,088
Non-cash stock-based compensation
588
379
1,683
1,813
Impairments of unproved properties
—
—
732
—
Warrant exchange transaction costs
—
—
—
2,456
(Gain) loss on derivatives - commodity derivatives
(11,841
)
8,129
(7,895
)
(6,415
)
Loss on equity investments
18,320
—
19,315
—
Net cash receipts from commodity derivatives
5,729
4,419
12,389
18,830
Loss on derivatives - common stock warrants
—
8
—
5,742
Adjusted EBITDAX
$
75,432
$
83,228
$
208,212
$
223,608
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. The Company defines OCF Before Working Capital Changes as net cash provided by operating activities as determined under GAAP excluding changes in operating assets and liabilities such as: changes in cash due to changes in operating assets and liabilities, revenue receivable, accrued expenses, prepaid and other current assets and other payables. 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. The Company defines Free Cash Flow as OCF Before Working Capital Changes minus development costs. 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)
2024
2023
2024
2023
Net cash provided by operating activities
$
74,694
$
57,032
$
207,536
$
212,692
Changes in cash due to changes in operating assets and liabilities:
Revenue receivable
(8,744
)
27,147
(14,429
)
10,545
Accrued expenses
842
(1,155
)
3,240
(2,627
)
Prepaid and other current assets
113
(904
)
877
(1,854
)
Other payable
3,802
(2,832
)
(87
)
(3,165
)
Total working capital changes
(3,987
)
22,256
(10,399
)
2,899
Operating Cash Flow Before Working Capital Changes
70,707
79,288
197,137
215,591
Development costs
77,171
75,726
206,761
233,071
Free Cash Flow
$
(6,464
)
$
3,562
$
(9,624
)
$
(17,480
)
Reconciliation of Net Income to Adjusted Net Income and Adjusted Earnings per Share
The Company provides Adjusted Net Income and Adjusted Earnings Per Share, which 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 defines Adjusted Net Income as net income as determined under GAAP excluding impairments of proved properties, (gain) loss on derivatives - commodity derivatives, net cash receipts from (payments on) commodity derivatives, gain (loss) on derivatives - common stock warrants, loss on equity investments and tax impact on above adjustments.
The Company defines Adjusted Earnings Per Share as Adjusted Net Income divided by weighted average number of diluted shares of common stock outstanding.
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)
2024
2023
2024
2023
Net income
$
9,054
$
17,957
$
30,381
$
63,560
Impairments of unproved properties
—
—
732
—
(Gain) loss on derivatives - commodity derivatives
(11,841
)
8,129
(7,895
)
(6,415
)
Net cash receipts from commodity derivatives
5,729
4,419
12,389
18,830
Loss on equity investments
18,320
—
19,315
—
Deferred financing cost amortization acceleration
—
—
2,167
—
Loss on derivatives - common stock warrants
—
8
—
5,742
Warrant exchange transaction costs
—
—
—
2,456
Tax impact on above adjustments (a)
(2,808
)
(2,850
)
(6,143
)
(4,679
)
Changes in deferred taxes and other estimates
—
32
—
1,223
Adjusted net income
$
18,454
$
27,695
$
50,946
$
80,717
Earnings per diluted share - as reported
$
0.07
$
0.13
$
0.23
$
0.48
Impairments of unproved properties
—
—
0.01
—
(Gain) loss on derivatives - commodity derivatives
(0.09
)
0.06
(0.06
)
(0.05
)
Net cash receipts from commodity derivatives
0.04
0.03
0.10
0.14
Loss on derivatives - common stock warrants
—
—
—
0.04
Loss on equity investments
0.14
—
0.15
—
Deferred financing cost amortization acceleration
—
—
0.02
—
Warrant exchange transaction costs
—
—
—
0.02
Tax impact on above adjustments (a)
(0.02
)
(0.01
)
(0.06
)
(0.04
)
Changes in deferred taxes and other estimates
—
—
—
0.01
Adjusted earnings per diluted share
$
0.14
$
0.21
$
0.39
$
0.60
Adjusted earnings per share:
Basic earnings
$
0.14
$
0.21
$
0.39
$
0.60
Diluted earnings
$
0.14
$
0.21
$
0.39
$
0.60
(a) Estimated using statutory tax rate in effect for the period.
View source version on businesswire.com: https://www.businesswire.com/news/home/20241107839663/en/
Investor and Media Contact: IR@GraniteRidge.com – (214) 396-2850
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