Good morning and welcome to Granite Ridge Resources' first quarter 2024 earnings conference call. Currently, all participants are in the listen-only mode. A question and answer session will follow the form of presentation. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, please press star 1 again. As a reminder, this call is being recorded. I will now turn the call over to Wes Harris, Investor Relations Representative for Granite Ridge. Please go ahead.

Thank you, Operator, and good morning, everyone. We appreciate your interest in Granite Ridge Resources. We will begin our call with comments from Luke Brandenburg, our President and Chief Executive Officer, who will provide an overview of key matters for the first quarter and an outlook for 2024. We will then turn the call over to Tyler Farkerson, our Chief Financial Officer, who will review our financial results. Luke will then return to provide some closing comments before we open the call up for questions. Today's conference call contains 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 would 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 in 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 a transcript will be made available on our website following today's call. So with that, I'll turn the call over to Luke.

Thank you, Wes, and appreciate everyone joining this call. It seems like we just did this, but I'm always glad to have an opportunity to share an update on the Granite Ridge story. The first quarter built on our track record of workmanlike quarters. Nothing flashy, just continued solid execution. Today, I'd like to talk about some of our accomplishments, things to look forward to, and share a bit more about what our strategic partnership initiative looks like as we continue to bridge the gap between operated and non-op. I'll start with the credit side. we announced last month that we successfully expanded our credit facility to both a $300 million borrowing base and elected commitment. The bigger story is that we were successful in fully syndicating a facility, taking it from six to 14 banks. Commitments came in nearly two times our target, and with the financial strength and capacity of our partners, we believe we can triple our credit facility within this group. Now, this expansion does not change our views on leverage. We still target net debt to EBITDA of 0.5x and expect that will bounce between about a third turn and two-thirds of a turn. To put round numbers to that based on about $300 million of trailing EBITDA, I expect we will bounce between $100 million to $200 million of net debt and average around $150 million or less. I want to extend a heartfelt thank you to our existing banking relationships for your support, and I'm excited to welcome our new banking partners. I'll now briefly hit on Vidal. As I mentioned last quarter, we received 1.1 million shares of BTLE, about 50-50 common and preferred, when we sold certain Permian assets to Vidal as part of a tag right we had on Vidal's acquisition of assets from Henry Resources. This was a compelling opportunity to sell production at an operator premium, and we will look to exit this position in an orderly fashion this year and pay down debt to ultimately recycle the proceeds into development opportunities. Now let's talk about results. Tyler will get into the details, but I'd like to hit on the results as compared to our expectations, as well as what we are looking at for the coming quarters. production came in slightly higher than expected at 23.8 000 barrels of oil equivalent per day that was down eight percent from last quarter's reported compared with an expected 10 percent decline now both of those are unadjusted for the sale to vital adjusted numbers or as tyler likes to call it same store sales are down three percent compared to an expected five percent primary drivers for the beat albeit minor are a bit about performance on the oil side offset by deferrals on the gas side. That is a theme we expect more of as some of our operating partners have elected to defer dry gas production in this price environment, specifically in the Hainesville and Dry Gas Eagleford. This may impact our gas production for the year, but we have opportunities in the works to reallocate that capital to oil-rated projects expected to come online this year. We will keep you in the loop on that as the year progresses. We turned in adjusted EBITDAX of $64 million, which was a bit higher than expected due to help on both oil prices and production. On the deal front, we closed four transactions during the quarter. All were in the Permian and the vast majority on the Delaware side. Total entry, including carries, was $6.8 million for two and a half net locations. That equates to $2.7 million per net location, which is a bit higher than our target of closer to $2 million. But note, not all net locations are created equal in terms of both quality and development timing. All two and a half of these net locations have either been turned to sales or are in process, including a 1.4 net wealth pad that we are drilling through our controlled capital strategy. Additionally, we have nine deals that have either closed since quarter end or are fully agreed to and in the documentation stage, with an aggregate entry including carries of $20 million across ten and a half net locations. While each of these transactions are accounted for in our acquisitions guidance number, I would note that not all $20 million will hit in 2024, as some of those carry dollars will go out the door in subsequent years. On the production side, I mentioned in March that we expected to see a ramp beginning in the third quarter. The deferral of some dry gas production that we had expected to come online in the second quarter, which we were happy about, by the way, will likely slow down that timeline. We now expect production to be roughly flat for the next couple of quarters prior to a ramp in the fourth. On the CapEx side, the second quarter should be roughly a quarter of our DNC CapEx for the year, but it is setting up to be our largest quarter of acquisitions for the year. It can be tough to tell if a deal will close on June 30th or July 1st, but based on deals closed quarter to date and those expected to close in the next two months, We are looking at about 75% of 2024 acquisition CapEx hitting in the second quarter. Note, this number includes both cash paid in the quarter and carry dollars that hit in the quarter. I'll wrap up by talking a little more about our strategic partnership strategy. We define a strategic partnership as more than just a deal. In other words, a partnership that gives Granite Ridge access to broader deal flow or more control over development timing. Ideally, it is both, or what we call controlled capital. With controlled capital, our deal flow broadens to include operated opportunities where we have control, specifically development timing. Controlled capital not only represents operated inventory that we can develop with a strategic partner, it opens the door to a broader set of asset buyers as we can sell drilling units to operators looking to add inventory. Operated inventory trades at a premium and will allow us to further build the case that Granite Ridge is undervalued from both a business and some of the parts valued. To put some numbers to this, Granite Ridge controls inventory of 40 gross or 21.9 net operated locations in the Permian. In Loving County, we plan to turn to sales a pad of 5.5 net single-mile wells early next month and a second pad of 1.4 net single-mile wells late in the third quarter. We are currently running one rig through a strategic partner and plan to pick up a second later this year. Traditional non-op is the cornerstone of the Granite Ridge Foundation, but controlled capex is where we are going. While we now expect controlled CapEx to be upwards of 40% of our 2024 D&C, our goal is for a supermajority of our capital to be controlled in the next several years. We're bridging the gap between operated and non-operated by demonstrating that non-op does not mean non-controlled. With that, I'll ask Tyler to dive a bit deeper into the numbers.

Thanks, Luke, and good morning, everyone. Average daily production for the quarter was 23.8,000 BOE per day, up 3% compared to the reported Q1 of 2023, and up nearly 11% after adjusting for divested assets. We expect production to be flat through the end of the third quarter before increasing in the fourth quarter and exiting 2024 at a high for the year. Our annual production guidance range of 23,250 to 25,250 BOE per day remains unchanged and represents 7% midpoint growth for the year after adjusting for divestitures. Oil production mix for the quarter was 45%, lower than our guidance expectation of 47% for the year, but as Luke mentioned, should drift higher throughout the remainder of the year as some of our natural gas focus operators defer development projects. Our adjusted EBITDA was $64.5 million and adjusted EPS was 12 cents per diluted share for the first quarter 2024. Adjusted EBITDA was down 8% from the prior year due to lower natural gas prices and the impact of divested assets. Per-unit lease operating costs were $7.13 per BOE, and production and ad valorem taxes were 6.5% of sales for this year's first quarter, both of which were within our guidance range for the full year 2024. GMA expense, excluding non-cash stock-based compensation, with $2.76 per BOE for the quarter, our annual guidance range of $23 to $26 million is unchanged. During the quarter, our operating partners completed and placed on production a total of 58 gross, or 5.1 net wells, with 57% of the activity occurring in the Eagleford and 30% in the Permian Basin. In total, we continue to expect 22 to 24 net wells to be placed online during 2024, with nearly 80% of those wells being in the Permian Basin. Total capital spending during the first quarter of 2024 was $65 million, including $3 million of acquisitions that closed during the first quarter. For the year, we expect our total capital expenditures to remain in our previously guided range of $265 to $285 million, including 35 million dollars of budgeted acquisitions we also continued our ongoing quarterly cash dividend during the quarter the board declared an 11 cent per share cash dividend that on an annualized basis represents a 6.7 percent dividend yield measured against tuesday's closing price finally subsequent to quarter end we successfully completed our semi-annual borrowing base redetermination increasing both our borrowing base and elected commitments to 300 million and expanding our lender syndicate through the addition of nine new banks. Our balance sheet remains a strength, with pro-forma liquidity over $180 million and leverage of 0.4x net debt to trailing EBITDA, which remains below our half-turn target. I will now hand it back to Luke for his closing comments.

Thank you, Tyler. I'll wrap up by sharing some takeaways from our company-wide town hall that I host each quarter. This quarter's theme was that there may be temporary dislocations, but ultimately the law of supply and demand will determine the price of GRNT. I'll start with the temporary dislocation. I believe GRNT is in a period of temporary dislocation due to demand destruction or a sustained decline in demand in response to limited supply. In our case, this demand destruction is due to our tightly held shareholder base. We chat with investment firms on a regular basis that seem to buy what we are selling as demonstrated by their willingness to continue to share their time and follow the story, but our trading volume is not quite enough to meet their investment mandate. There are plenty of green shoots to point to, but the fact is that time will solve this. We must stay patient and continue to focus on the E, or earnings, and let the market worry about the P, or price. As a management team, we are a bit limited in what we can do on the supply side. Absent issuing shares as part of an acquisition, we do not control the supply of GRNT shares. Practically, issuing shares is unlikely, as it would be tough to find in a CREA stock deal given where we currently trade. But there is a lot we can do on the demand front, primarily in two ways. The first is finding more folks to help us tell the Granite Ridge story. Thanks to Steve and Chris at Evercore for picking up coverage and to all the folks that invite us to their conferences and host us for non-deal roadshows. A list of all our upcoming events can be found in our earnings release. The second is doing the research and pounding the pavement to find investors that we solve a problem for today. As we transition our shareholder base and demonstrate that what we are building is different, repeatable, and resilient, I believe that Granite Ridge will re-rate and drive value for investors that put their trust in us. But today, there's a particular group of investors that I think we immediately solve a problem for, and that is generalists that benchmark to the Russell 2000. The Russell 2000 is now 7.4% energy and has generally been trending up in the past several years. The NAV-driven valuation of small-cap energy can be tough for the generalist investor. Take the recent back and forth with silver Boeing Cambridge. If nothing else, this goes to show that it is difficult to ascribe current value to long-term oil and gas assets. Additionally, with the current reconstitution, according to RBC, several highly traded Russell 2000 energy names may migrate from the Russell 2000 up to the Russell 1000, including Permian Resources, Matador, and Civitas. Granite Ridge can be a part of the reallocation solution by providing the purest asset-level exposure to near-term development in a diversified vehicle with low leverage and a current yield of over 6.5%. We are undervalued now, but one day, we won't be. It likely won't be a transformative event that causes Granite Ridge to re-rate. It will be a series of mini-catalysts, transitioning of the shareholder base, increasing trading volume, additional investors showing up on ownership reports, continued workman-like quarters of consistent performance, more and better information on strategic partnerships and our controlled CapEx strategy. We believe it will happen, and I invite you to be a part of the Granite Ridge story that the great folks across our organization are working hard to write. Please do not hesitate to reach out, and I hope to see many of you over the next several And with that, we are happy to answer any questions folks may have on today's call. Operator?

Thank you. We will now begin our question and answer session. At this time, if you would like to ask a question, please press star followed by the number one on your telephone keypad. If you would like to withdraw your question, simply press star when again. We'll pause for a moment to compile the Q&A roster. The first question comes from the line of Phillips Johnson from Capital One. Please go ahead.

Hey, guys, thanks. I wanted to ask about your oil mix. Tyler, I think you mentioned the 45% mix for the quarters below your guidance for the year. I realize you've got some deferred gas projects going forward that are going to improve that, but can you maybe walk us through some of the drivers that are going to, you know, move your absolute oil production in, I guess, Q4 a little bit higher than that 45% mix?

Hey, good morning, Phyllis. Thanks for joining. Thanks for the question. You know, a couple of pieces I mentioned, we're seeing some, you know, deferrals on the gas side. I think that'll help accelerate the little mix, increasing a little quicker than we thought. On the last call, I mentioned that just, you know, across the year, we start out in the mid-40s and slowly work our way up. If these gas deferrals, some of this is more conversation, but we're having operators saying, hey, we may duck some wells. We may defer some drilling. Instead of drilling eight wells, we'll drill four. We actually have an operator in the Permian that's just simply curtailing gas production in Reeves County due to terrible Waha pricing. So, if that continues, I think you'll see that oil percentage creep up. You may even break 50% as we get later in the year. You know, we anticipate that for the next several years it'll be upwards of 50%, But we just expect a creep from, you know, call it 45 to 50 or so across the next three quarters.

Okay, sounds good. And then I guess your Q1 oil realization was a nice premium to NYMEX. Can you maybe talk about what sort of drove that and how we should sort of think about that relationship?

Yeah, sure, Phyllis and Tyler. You know, we have some lumpiness in our differentials, if you look back, historically over the last handful of quarters. And I think you're seeing some lumpiness again in the first quarter. We did have a small out-of-period adjustment in the first quarter that drove it a little higher. But moving forward, I still think on average over time you should expect to see minus $2 to benchmark price. Sounds very best.

Thank you, Phillips.

The next question comes from the live Michael Schiller from Stephens. Please go ahead.

Morning, guys. I wanted to see if I could get some more detail on the 5.5 pills that you're looking at with the partnership. I think, Luke, you said those are coming online in the second quarter. Have any of those been completed yet? And I guess what needs to happen to bring those online?

Yeah, morning, Mike. Thanks for the call and thanks for the question. So, that is 5.5 net single-mile wells there in Loving County. And so, they actually are completed, got the Christmas trees on. They are ready to go. I just got a picture two days ago of everything fully ready to turn them on. We're really just waiting on pipe. And so, the expected turn-to-sales date is June 1st. I'd love it for it to be earlier, but that's really what we're targeting right now. Again, it's just more piping issues. Everything on the operations side is done. and, frankly, was done in tremendous fashion. We came in 14% under AFD on the drilling, 8.5% about on the completion side. Just a data point to drilling was really more driven by just drilling quickly, not necessarily by material price decreases. The completion side was pretty similar. We just got great crews out there, and they've really done a tremendous job.

That sounds good. You mentioned the partnership CapEx. Now you're thinking 40%. I think you were talking in the 30s, maybe 35% earlier. And you see that going higher. Can you talk about where that may go next year and beyond?

Yeah, that's a good question. So what we've talked about right now, Mike, is we had two rigs we were actually running earlier this year. We laid down one rig or have another group that we're kind of trading it back and forth with. There's a good chance we pick up another rig later this year. That's the plan. And what I'd say is the second rig for us is really more opportunistic. What it's allowing us to do is hit some of these short fuse opportunities. Frankly, the one that we're bringing on, oh, kind of late third quarter, early fourth quarter, the 1.4 net well pad, that was a neat deal where there was a large independent who had an expiry coming up, and they weren't going to be able to hit it. So we were able to say, look, we'll pick up another rig. We were able to get it from an operator, hot rig, crew that we knew. In fact, I think they were using the same drilling consultant, able to pick it up to hit that unit. So I wouldn't assume two rigs running full-time, but I would assume one-and-a-half-ish rigs next year. And so I'd expect that you'd see a relatively similar number, maybe a bit higher, call it mid-125, 130,

would be my guess right now.

Last one for me, I guess given that the partnership activity is probably going to dictate to a large extent your capital spend, it sounds like second quarter is going to be the high watermark for the year. Does that come down in the second half? I guess any, I know you haven't given formal guidance on second quarter, but is something in that $80 million for development capex for second quarter kind of in the ballpark?

That sounds a little bit high to me right out of the gate, largely because we don't have that second rig running the whole second quarter. It's generally down most of the second quarter. We'll pick it up into the third. So I expect something pretty similar to what you're seeing this first quarter, maybe slightly less.

Thank you much. You got it.

The next question comes from the line of Jeff Robertson from Water Tower Research. Please go ahead.

Thanks. Good morning. Luke, on the controlled capital efforts, are you looking at opportunities both to put together organic deals that Granite Ridge assembles and takes to an operator and look at operators who might be looking like a partner where essentially Granite Ridge comes in and works as a capital provider?

Yeah, great question, Jeff. Thanks for the call. The answer is yes to both. And so we really look at it from a few pieces. One, you know, with the controlled capital via strategic partnership, they're the ones generating the opportunities, and really we're the capital provider for that. Another piece is, you know, we've put together a unit just to boost on the ground. And one thing that we did, we did this last year, and we actually are finishing up documents for another unit this year, where we've scurried into an area, we saw EOG putting together a position, and so we'd scurry in there and start picking up leases. We weren't the only ones that had the idea. There was another non-off group that was doing a similar thing. And so between the two of us, we had enough critical mass to get a drillable unit. And so what we did is combined forces, went out and ran an RFP process, if you will, to talk to several different operators and said, hey, we'd like to see these zones drilled, and here's the date that we'd like to get them drilled by. You know, what would it take to get you to come in here and do that? And so that was a really neat opportunity where I'd call it that broader controlled capital budget because we did set the drilling plan. We did set the drilling timeline, and we were able to go out and pick the operator. So we're doing that as well. One thing that we're not really doing right now, not to say that we wouldn't, but is coming in and just being a capital source alongside an operator looking to stretch their dollar. We could do that. I think it's an interesting strategy, but we haven't really done that to date. Most of the opportunities that we've seen along those lines have a heavier production component than our typical opportunity. And so we've generally shied away from them because we've said in the past we're not very good buyers of production because we just end up way off the mark from a valuation perspective. We just see more downside to upside buying production, so we tend to be more conservative, which I appreciate.

Can you characterize how receptive some of the operators are to the terms and conditions and the type of capital that you all bring to bear in the partnership concept?

Yeah, that's a great question because it's one that we're really proud of. We came up with a bit of a new mousetrap on this controlled CAPEX strategy, and I think it's very appealing to the right partners. Really, what it looks like is we're taking the approach that, hey, we're bringing the majority of the capital to the table, so we're going to control the asset. But you, our partner, you're going to control your company. And so it really is more of a partnership just at the asset level to where we have control, but they fully manage their company. They own their assets outright. We don't determine if and when they sell. That's up to them. They really do like that. But another component, I think, that's very attractive is most of these deals are really a unit-by-unit deal. We have an overall structure that we use, but they're on a unit-by-unit deal. And so what that means is it gives the opportunity for the operating company, the folks that are out there sourcing the deals, to earn incentives on a unit-by-unit basis, which is particularly helpful. Given this price environment where you've just seen private equity-backed exits extend, the two- to four-year deal is now five to seven. But when you have a unit-by-unit carry, it really allows operators an opportunity to start realizing the fruits of their labor sooner and continue to incentivize the team and then, frankly, continue to reinvest because that's what they're doing. We're seeing partners that are really putting material dollars back into the business because they believe in it and they want to grow it.

last question on on the controlled capital uh business model your the permeate accounts for uh about almost 50 percent of granite ridge's first quarter 24th production when you think about the different regions that you operate are do you see greater opportunity in some regions

versus others for these types of structures yeah we absolutely do and so what we talk about at the highest level, what this is, it's representing investments where we are taking more concentration, and we feel comfortable taking that higher concentration because we're mitigating that by one control, but also by higher expected returns. But what that means is if you're taking more concentrated investment risk, we want to be very sure that we're in areas that have, let's say, the highest probability of success, or, say another way, the lowest variability. And so, other areas that I think are attractive are places like Eagleford, places like the Bakken, where, you know, in the right areas, you have quite consistent results and just much less variability. I think that's a big piece of the strategy. It doesn't mean that we wouldn't go other places, but those are two basins that are, again, are really known for their consistency and lots of development, such that you've got a lot of data points around you to feel good about what you're underwriting. So, I would think about basins that have low variability, that have plenty of development, and just being able to de-risk the subsurface as much as possible.

Thank you. Appreciate it.

The next question comes from the line of Michael Shuller from Stephens. Please go ahead.

I just want to follow up on the inventory Luke said in the partnership, I think you said 29 net locations at the moment. Are all those in the Delaware and most of those in Loving County, I guess, just looking for a little bit more color on what that inventory looks like?

Hey, good question. I may have been talking too quickly. So, it's 40 gross or 21.9 net locations that we control. Most of it is in the Delaware, but I'd say not all of it. We have some other opportunities we're working on in the middle end, but the vast majority is in the Delaware, And of that, the vast majority is in Lubbock County. We have a couple of deals in Reeves. We have a deal that we're working on in Ward. And so we're covering the broader Delaware base. And frankly, the driver of that is, this is one partner in particular, they're Midland based. They've been there a long time. They know everybody, just have a tremendous reputation in Midland. And so they're getting access to some unique deal flow, which we're excited about. But the Delaware is just far less consolidated than the Midland. You go to the Midland Basin and you look around, it's just much harder to find undrilled units. And frankly, anything that is undrilled, there's generally a story to it. So it's a little bit more difficult. And as a result, just more and more deal flow out of the Delaware relative to the Midland. That's not intentional. We'd love to continue to put capital to work in the Midland Basin as well. Again, just the quantity of deal flow versus hit rate, we're just seeing a lot higher quality, excuse me, higher quantity in the Delaware.

And are most of those that are in the Delaware, are they the one-mile type of the ones similar to what you just drove?

You know, it's a mix. And so the couple that we've talked about are one mile. But we have some wells that are over 10,000. They're going to be, you know, one and a quarter, one and a half, excuse me, two and a quarter, two and a half. So we are looking at some extended laterals as well. But I would tell you, again, everybody's got, you know, drilling info and various these days, and they can look and find a white spot on the map. If there's a white space, you know, 10,000-foot unit, everybody's looking at it. It's the stuff that's got a little bit of hair where you can get scrappy and block and trade. And so I think our average well in that is probably somewhere around 7,000 feet. And so you do have maybe more one-mile versus two-mile, but there's a good number of extended vitals in there as well.

So could you characterize the zones you're talking about? Are these kind of the primary, you know, for Camp Bay of Boat Spring, or are they more kind of secondary targets? Is that the reason that you had the opportunity to get in there and capture them?

Yeah, it bounces around a lot. So some, it's your primary zones. In fact, if I were to say, you know, what's the majority of the targets? The majority of the targets that we're going to drill anyway is in the primary zones, and that's where we've allocated value. But you do have some secondary opportunities as well. We have an opportunity with a large operator where, you know, they went in and they developed the bone springs in the Wolf Camp A. And, you know, fast forward a few years, the B and C are now actively developed around them, but they had not been drilled yet. And so we were able to farm in on them and drill those locations. The neat thing about that is what we're drilling beneath existing wells. There's just a lot of synergies from a cost perspective. We're able to leverage the facilities. In some cases, we've talked about turning over operations once the wells are online, which is great. You know, these folks are really good at what they do on the operations side, and so we don't have to spend the time, energy, or effort managing wells. But if I look at, in the majority of the inventory, it's, you know, Sun Springs, X, Y, and A, but there is a decent number in the B as well and some C.

Thanks for that detail. Just one last one. It looked like your share count went down about $2 million from the prior quarter, your diluted share count. I know your buyback expired at the end of the year. I didn't see anything on repurchases. Is that just some technical difference in the way that shares were counted during the quarter or something else going on there?

It might be the quarterly average. The share repurchase ended at $1231.23, so it could be just average. share counts between the fourth quarter and the first quarter. That could have gone down by $2 million.

Thanks, guys. Appreciate it.

Absolutely. Thanks for the question.

There are no further questions at this time. This concludes today's conference call. Thank you for your participation. You may now disconnect.