grnt-20230630

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023


o			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to _______

Commission File Number: 001-41537

___________________________________

GRANITE RIDGE RESOURCES, INC.

( Exact Name of Registrant as Specified in Its Charter )

___________________________________


Delaware	1311	88-2227812
(State or other jurisdiction of incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification Number)

5217 McKinney Ave, Suite 400

Dallas, TX 75205

(Address of principal executive offices)

(214) 396-2850

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, par value $0.0001 per share

GRNT

New York Stock Exchange

Warrants to purchase Common Stock, each whole warrant

exercisable for one share of common stock at an exercise

price of $11.50 per share

GRNT WS

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x

At August 7, 2023, there were 134,841,979 shares of our common stock, par value $0.0001, outstanding.

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

We are including the following discussion to inform our existing and potential security holders generally of some of the risks and uncertainties that can affect our company and to take advantage of the “safe harbor” protection for forward-looking statements that applicable federal securities law afford.

From time to time, our management or persons acting on our behalf may make forward-looking statements to inform existing and potential security holders about our company. All statements other than statements of historical facts included in this report, including, without limitation, statements regarding our financial position, business strategy, plans and objectives of management for future operations, industry conditions, indebtedness covenant compliance, capital expenditures, production, cash flow, borrowing base under our Credit Agreement (as defined below), our intention or ability to pay or increase dividends on our capital stock, and impairment, are forward-looking statements. When used in this report, 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, 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 our company’s control) that could cause actual results to differ materially from those set forth in the forward-looking statements, including the following:

•changes in current or future commodity prices and interest rates;

•supply chain disruptions;

•infrastructure constraints and related factors affecting our properties;

•our ability to acquire additional development opportunities and potential or pending acquisition transactions, as well as the effects of such acquisitions on our 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 our reserves;

•the outcome of any known and unknown litigation and regulatory proceedings;

•limited liquidity and trading of Granite Ridge’s securities;

•acts of war or terrorism;

•market conditions and global, regulatory, technical, and economic factors beyond Granite Ridge’s control, including the potential adverse effects of the COVID-19 pandemic, or another major disease, affecting capital markets, general economic conditions, global supply chains and Granite Ridge’s business and operations;

•increasing regulatory and investor emphasis on, and attention to, environmental, social, and governance matters;

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•our ability to establish and maintain effective internal control over financial reporting, including our ability to remediate the existing material weaknesses in our internal controls; and

•other factors discussed in our Annual Report on Form 10-K for the year ended December 31, 2022 under “Risk Factors,” as updated by any subsequent Forms 10-Q, which we file with the United States Securities and Exchange Commission (“SEC”).

We have based any forward-looking statements on our current expectations and assumptions about future events. While our 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 our control. Accordingly, results actually achieved may differ materially from expected results described in these statements. Forward-looking statements speak only as of the date they are made.

You should carefully consider the statements in “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2022 and other sections of this report, which describe factors that could cause our actual results to differ from those set forth in the forward-looking statements. Our company 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.

Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. We assume no obligation to update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this report, other than as may be required by applicable law or regulation. Readers are urged to carefully review and consider the various disclosures made by us in our reports filed with the SEC which attempt to advise interested parties of the risks and factors that may affect our business, financial condition, results of operation and cash flows. If one or more of these risks or uncertainties materialize, or if the underlying assumptions prove incorrect, our actual results may vary materially from those expected or projected.

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TABLE OF CONTENTS


		PAGE
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS		2
PART I – FINANCIAL INFORMATION		5
Item 1.	Financial Statements	5
	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Operations	6
	Condensed Consolidated Statements of Changes in Equity	7
	Condensed Consolidated Statements of Cash Flows	9
	Notes to Condensed Consolidated Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3.	Quantitative and Qualitative Disclosure about Market Risk	38
Item 4.	Controls and Procedures	38
PART II – OTHER INFORMATION		39
Item 1.	Legal Proceedings	39
Item 1A.	Risk Factors	39
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 3.	Defaults Upon Senior Securities	40
Item 4.	Mine Safety Disclosures	40
Item 5.	Other Information	40
Item 6.	Exhibits	40
Signatures		42

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

GRANITE RIDGE RESOURCES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

Unaudited


(in thousands, except par value and share data)	June 30, 2023		December 31, 2022
ASSETS
Current assets:
Cash	$	14,493	$	50,833
Revenue receivable	55,532		72,287
Advances to operators	22,917		8,908
Prepaid costs and other	1,354		4,203
Derivative assets - commodity derivatives	10,104		10,089
Total current assets	104,400		146,320
Property and equipment:
Oil and gas properties, successful efforts method	1,218,096		1,028,662
Accumulated depletion	(452,303)		(383,673)
Total property and equipment, net	765,793		644,989
Long-term assets:

Other long-term assets	3,142		3,468
Total long-term assets	3,142		3,468
Total assets	$	873,335	$	794,777
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accrued expenses	$	51,510	$	62,180
Other liabilities	1,235		1,523
Derivative liabilities - commodity derivatives	157		431

Total current liabilities	52,902		64,134
Long-term liabilities:
Long-term debt	55,000		—
Derivative liabilities - commodity derivatives	156		—
Derivative liabilities - common stock warrants	681		11,902
Asset retirement obligations	6,052		4,745
Deferred tax liability	106,219		91,592
Total long-term liabilities	168,108		108,239
Total liabilities	221,010		172,373
Stockholders' Equity:
Common stock, $0.0001 par value, 431,000,000 shares authorized, 135,949,232 and 133,294,897 issued at June 30, 2023 and December 31, 2022, respectively	14		13
Additional paid-in capital	609,909		590,232
Retained earnings	48,610		32,388
Treasury stock, at cost, 971,701 and 25,920 shares at June 30, 2023 and December 31, 2022, respectively	(6,208)		(229)
Total stockholders' equity	652,325		622,404
Total liabilities and stockholders' equity	$	873,335	$	794,777

The accompanying notes are an integral part to these condensed consolidated financial statements.

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GRANITE RIDGE RESOURCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Unaudited


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands, except per share data)	2023		2022		2023		2022
Revenues:
Oil and natural gas sales	$	87,557	$	150,267	$	178,867	$	244,116
Operating costs and expenses:
Lease operating expenses	14,406		9,515		28,178		17,928
Production and ad valorem taxes	6,303		7,726		12,020		12,900
Depletion and accretion expense	34,969		31,404		68,821		47,529

General and administrative (including non-cash stock-based compensation of $375 and $1,434 for the three and six months ended June 30, 2023)	8,011		2,267		16,590		5,039

Total operating costs and expenses	63,689		50,912		125,609		83,396
Net operating income	23,868		99,355		53,258		160,720
Other income (expense):
Gain (loss) on derivatives - commodity derivatives	1,221		(5,462)		14,544		(33,858)
Interest expense	(1,211)		(609)		(1,550)		(1,134)
Loss on derivatives - common stock warrants	(11,012)		—		(5,734)		—
Total other income (expense)	(11,002)		(6,071)		7,260		(34,992)
Income before income taxes	12,866		93,284		60,518		125,728
Income tax expense	4,129		—		14,915		—
Net income	$	8,737	$	93,284	$	45,603	$	125,728

Net income per share:
Basic	$	0.07	$	0.70	$	0.34	$	0.95
Diluted	$	0.07	$	0.70	$	0.34	$	0.95
Weighted-average number of shares outstanding:
Basic	132,866		132,923		132,933		132,923
Diluted	132,880		132,923		132,941		132,923

The accompanying notes are an integral part to these condensed consolidated financial statements.

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GRANITE RIDGE RESOURCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Unaudited


Three Months Ended June 30, 2023
	Common Stock Issued			Additional Paid-in Capital		Retained Earnings		Treasury Stock			Total Stockholders' Equity
(in thousands)	Shares	Amount						Shares	Amount
As of March 31, 2023	133,477	$	13	$	592,578	$	54,496	(311)	$	(2,030)	$	645,057

SEC Form 10-Q filed by Granite Ridge Resources Inc.