Good morning, and welcome everyone to Granite Ridge Resources Fourth Quarter and Full Year 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. I will now turn the call over to Wes Harris, Investor Relations Representative for Granite Ridge.

Thank you, operator, and good morning, everyone. We appreciate your interest in Granite Ridge Resources. We will begin our call with comments from Luke Brandenberg, our President and Chief Executive Officer, who will provide an overview of key matters for the fourth quarter and full year, as well as an outlook for 2024. We'll then turn the call over to Tyler Farquharson, our Chief Financial Officer, who will review our financial results and discuss other matters. Luke will then return to provide some closing comments before we open the call up to questions. Today's conference call will contain certain projections and other forward-looking statements within the meaning of federal securities laws. These statements are subject to risks and uncertainties that may cause actual results to differ from those expressed or implied in these statements. We'd ask that you also review the cautionary statement in our earnings release. Granite Ridge disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Accordingly, you should not place undue reliance on forward-looking statements. These and other risks are described in yesterday's press release and our filings with the Securities and Exchange Commission. This conference call also includes references to certain non-GAAP financial measures. Information reconciling non-GAAP financial measures discussed to the most directly comparable GAAP financial measures is available in our earnings release that is posted on our website. Finally, as a reminder, this conference call is being recorded. A replay and transcript will be made available on our website following today's call. With that, I'll turn it over to Luke.

All right. Thank you, Wes, and thank you to everyone for joining today's call. It's nice to see both familiar and new names on the screen as our call participation climbs quarter-over-quarter. We appreciate each of you sharing your time with us. 2023 was a record year on many fronts for Granite Ridge. My plan for this call is to start high level and zoom in from there. We had three primary objectives going into 2023: strengthen the organization; make the company more investable; and continue our legacy of driving value for investors by generating, evaluating, and investing in opportunities with the best risk-adjusted returns. I'm proud to say that we made great strides on all of the above. On the organizational front, it has been quite the heavy lift transitioning from a private to a public company. This has touched virtually every member of the organization, creating additional work streams. I'd like to thank everyone on our team for stepping up to the challenge to ensure that tasks are not just done but done right. To put some numbers to this, we added seven new team members in the past 12 months, achieved nine corporate SOX milestones, and implemented 140 different controls. On the investor front, it has been a whirlwind of a year. I joke that in my past life in private equity, I used to go to where the oil was, which made Southwest Airlines my airline of choice. But as a public company, I now spend more time going to where the money is. With over 150 meetings from Southern California to the Pacific Northwest and from the Northeast down to Miami and many spots in between, I quickly found my way to status on American Airlines. With roughly 3,700 public companies, it is up to us to give investors a reason to care about Granite Ridge. Between investor meetings, banks that are kind to have us at conferences, and a secondary offering that demonstrated our largest shareholder's willingness to make tough decisions, Granite Ridge continues to become more investable. We maintained our $0.11 per quarter dividend or $0.44 per annum and bought back $36 million of stock. Trading volume is up 10x from last January, research coverage is up from 1 to 4, and the number of reported shareholders is up over 5x from year-end '22 to year-end '23. Another data point I liked comes from a trip to New York for investor meetings earlier this year. We brought 25 pitchbooks with us for ten meetings, and two days later, we brought all 25 books home. Meetings are changing from asking what Granite Ridge is to more rapid-fire Q&A with folks that are generally up to speed on the company. We still have work to do. More than one time, the PM of larger institutions told us they’d like to buy Granite Ridge in their personal accounts, but the trading volume is a challenge for the funds. So, in addition to consistent execution, we will continue to spread the Granite Ridge story. Now, onto the assets. Tyler will provide more details shortly, but I would like to share some highlights. We started 2023 expecting 9% year-over-year production growth and turned in 23%, including over 26,000 barrels of oil equivalent per day for the fourth quarter. While some of that was due to new investments made in 2023, much of it came from acceleration and solid execution from our operating partners. Despite significantly lower hydrocarbon prices in 2023 compared to 2022, we generated $305 million of adjusted EBITDAX and increased proved reserves by 6% year-over-year. At Granite Ridge, we drive value by quickly recycling net cash flow into opportunities with the best risk-adjusted returns. We invested in 308 gross wells in 2023 and expect roughly 20 to 30 deals annually. Cash does not sit on the balance sheet long. In 2023, we had $298 million of operating cash flow before working capital changes. We estimate maintenance CapEx for the year to be $175 million. This left $123 million of discretionary cash flow to drive shareholder returns. Comparatively, our enterprise value reflects a 14% yield. We spent $59 million in dividends, bought back $36 million in shares, and reinvested $29 million in growth projects. Additionally, we spent an incremental $151 million through cash and credit facility borrowings for $180 million invested for growth, finishing the year with leverage of only 0.3x, below our target of 0.5x around $150 million. Looking ahead, we expect production levels to range between 23,250 and 25,250 barrels of oil equivalent per day in 2024, marking a 7% increase at the midpoint from '23 levels, adjusting for the divestiture of assets to Vital. Our production will be somewhat lumpy, likely experiencing a decline from the fourth quarter to the first quarter and ramping up in the third quarter once we expect our first controlled CapEx pad with our strategic partner to come online.

Thanks, Luke, and good morning everyone. 2023 proved to be an exceptional year of performance for Granite Ridge. We delivered company records on multiple fronts and are well-positioned to continue that momentum into 2024. For the full year, we delivered oil production above the high end of our guidance while placing a record number of wells online. Overall, we were able to grow our oil volumes by 14% and our total production by 23% year-over-year. In the fourth quarter, we achieved a company record, exceeding 26,000 barrels of oil equivalent per day, and exited the year with a strong balance sheet and liquidity to continue our capital deployment and shareholder return plans. We are proud of our accomplishments during 2023 and look forward to future performance in 2024 with a record 16 net wells in process at year-end. Diving deeper into our results for the quarter, our average daily production grew 18% from the prior year’s quarter to 26,000 barrels of oil equivalent per day. Our adjusted EBITDA was $81.8 million for the quarter, which was nearly flat with the third quarter, despite a lower pricing environment. Adjusted EPS was $0.20 per diluted share for the fourth quarter, in line with analyst expectations. Per unit lease operating cost stood at $6.43 per Boe, an 8% decrease compared to the third quarter. Full year came in at $6.82 per Boe, well within our guided range of $6.50 to $7.50 per Boe. Production and ad valorem taxes for both the fourth quarter and full year were 7% of sales at the low end of our guidance. G&A expense for the fourth quarter was $2.54 per Boe, which included $349,000 of non-cash stock-based compensation. Adjusting for this, our recurring cash G&A expense was $5.7 million, or $2.39 per Boe. In total, during the quarter, our operating partners completed and placed on production a total of 80 gross or 4.6 net wells, with nearly 60% of the activity occurring in the Permian Basin. Capital spending during the quarter was $78 million, including $28 million of acquisitions. Total capital expenditures for the full year reached $363 million, including $79 million of acquisitions across approximately 30 transactions. In December, we completed the sale of certain Permian assets to Vital Energy, receiving approximately 1.1 million shares of common and preferred stock and we expect to fully monetize these shares later this summer. The divested 9.9 net-producing wells contributed approximately 1,700 barrels of oil equivalent per day to our 2023 results. We also continued our ongoing quarterly cash dividend. During the quarter, the Board declared a $0.11 per share cash dividend, which represents a 7.3% annualized yield based on Wednesday's closing price. Additionally, as of December 31, we have repurchased a total of 5.7 million shares at a cost of approximately $36 million. Over the past few months, we've added a number of defensive hedges, now having approximately 60% of our oil and 50% of our gas PDP hedged for 2024.

Thank you, Tyler. A mentor of mine recently shared with me that as a public company, you have P for Price and E for Earnings. Our job is the E. The market's job is the P. Eventually, the market rewards consistent E with P. So, what does that mean for 2024? Focus on the E, likely not in a flashy way but in a diligent manner. We need to demonstrate the value of our adaptable, resilient business model, continue to strengthen the organization, and make the business more investable, while patiently allocating capital for the best risk-adjusted returns. As we execute quarter-over-quarter, eventually the market will reward our company, which currently yields over 7%, has less than 0.5 turn of debt, and had production growth of over 20%, with a higher share price. But for now, trading at less than 3 times, Granite Ridge is quite a bargain. We had insider buying in every open window in 2023, including myself. So, to our current shareholders, thank you for your support. And to those on the sidelines, we hope that you'll join us. With that, we're happy to answer any questions that folks may have on today's call.

The floor is now open for your questions. Our first question comes from the line of Michael Scialla with Stephens. Please go ahead.

Good morning, guys. I wanted to ask about your '24 guidance. I know you said that's based on your development plan, but you know there'll be some production from things you acquired during the year and you only budget deals that you expect to close, but you know there'll be more. So, as you think about '24 production guidance, I guess, looking back, '23 production came in, I think, 8% above your high end of your last year's guidance. Would it be reasonable to believe you'll have some production contribution from things you acquire this year? And is that incremental production from last year from acquisitions and deals that will close in the future? Is that a reasonable representation of what could happen this year?

Yes, good question, Mike, and good morning. Thanks for asking that. It's something I probably should have clarified. You're right, as we mentioned, we only guide the deals that are closed. Looking back at last year as an example, we guided and ended up hitting the high-end of the range. The incremental 8% that year was largely due to new transactions. So, I wouldn't be surprised if you saw a similar thing this year. Our job, day in and day out, is generating, evaluating, and posing on new opportunities. We hope the opportunity set allows us to continue to deploy capital. That is the goal. The goal is to continue to grow that. But we will continue to provide updates each quarter on acquisition dollars spent so far or identified so far. If they justify an increase in net production, we'll go ahead and increase that guidance too. But we guide as if we went on vacation the rest of the year and do no more deals, which is definitely not the case. That will be the lifeblood of the organization and one of the most rewarding parts of it as well.

That's helpful. A follow-up. Luke, if I heard you right in your prepared remarks, I think you said you did not renew your repurchase program. Just want to see if you had a change in thinking on share buybacks.

That's a great question, too. We implemented the buyback program initially in December '22, and the idea was we'd recently gone public. We had little to no float, trading only in the hundreds of thousands of dollars a day. We wanted to have a buyback to ensure there was a bid out there. As the year went on and we continued to promote the company, spread the word, and executed a secondary to increase trading volume, that program expired at the end of '23 and was not renewed. This is not because we don't find it attractive—I personally bought in every single open window. Insider buying was at $6.25 a share significantly above the current price. We still think it's a good buy; we're putting our personal money where our mouths are. However, having a share buyback is now somewhat counter to the goal of increasing trading volume and liquidity, so there is currently no buyback in place. That said, if there’s a significant dislocation in the market at some point this year, we could always reconsider.

I appreciate the color. Thank you.

Our next question comes from the line of John Abbott with Bank of America. Please go ahead.

Good morning, Luke and Tyler.

Hey, good morning.

Our first question is really a two-part question. First, when you look at your inventory in hand, how many years do you think you have? And the second part relates to the production mix guidance you gave for 2024 for oil, which is roughly around 47%. So, when you look at your inventory and that mix guidance, how do you think about the trajectory of the oil mix over a multi-year period of time?

Great question. When I consider inventory, I would say we're conservatively booked. For instance, if we acquire a leasehold, we only book internal inventory for locations we're underwriting at that moment. I believe we probably have four to five years of inventory based on our current run rate, which is about 23 net wells a year. I think that's a conservative estimate, as our goal is to replenish that through multiple transactions annually. Regarding oil cuts, you bring up a valid point. We'll see fluctuations in oil cut this year. As mentioned, we sold some assets to Vital, which will affect our oil cut. We may see a lower percentage at the year's start, particularly for Q1, but as the year progresses and our strategic partner’s wells come online, we could see that percentage rise. Even though we aim for 47% for the year, I anticipate that the first half will be below that, possibly in the low 40%s, while we could approach 50% by the year's end.

Very, very helpful. And for the follow-up question, Tyler, this is for you. So, with the Vital shares and preferred that Granite owns, in the event that they were sold, is there any tax leakage?

During 2023, we recognized a tax gain from the divestiture of those assets. If we sell those shares later this year and there's a gain from that point, there would be some additional tax implications just on the sale. We would expect to sell these shares at a price above what we received in December 21, so I anticipate a small taxable impact in 2024.

I appreciate it. Thank you very much for taking our questions.

You got it. Thanks, John.

Our next question comes from the line of Michael Scialla with Stephens. Please go ahead.

I wanted to get your thoughts on the recent Haynesville acquisitions you made in the fourth quarter. Luke, you mentioned that some Haynesville wells will be coming online. Given the current gas prices are below $2, what are your thoughts on the Haynesville? Also, do you foresee any future wells being drilled in that area? Is there a risk associated with that considering the commodity prices?

That's a good question. With the current gas price environment, there are two sides to the coin. I don't want to drill many gas wells right now. However, I would love to acquire gas inventory molecules in the ground at these prices, not necessarily at the strip prices. The Haynesville deal in the fourth quarter was unique. We partnered with a great operator, had a clear understanding of their development plan. We are not planning to rush into drilling at sub-$2 gas prices. We do have some wells coming online soon, and they might be developed, as it makes financial sense. Generally speaking, I wouldn't anticipate putting a lot of new drilling capital into that area until gas prices improve. We're keeping an eye out, but investing in gas has been challenging, except for the partnership we previously established as we continue to seek molecules in the ground at attractive prices.

That makes sense. I wanted to ask about the two strategic partnerships you mentioned in the Permian. Is that with the same partner you've had there for a while in the Midland Basin, or are either of those with someone new?

The partnership we referenced is indeed with a group out of Midland. Most of our assets are in the Delaware Basin, particularly in Loving County. We formalized this partnership in early '23, aiming to run a rig full-time. They are a fantastic operator, and we expect significant development from this collaboration. We managed to secure two rigs, and while we are opportunistically drilling right now, we’ve positioned ourselves for full control over the development timing. This is a great opportunity for us to show the market why this strategy is a differentiator. Our first pad involves around 5.5 net wells, and we've completed drilling and expect them to come online late in the second quarter. We’re excited about this venture and look forward to sharing our results.

Sounds good. Thank you.

Thanks, Mike.

There are no further questions at this time. This concludes today's call. You may now disconnect.