Q4 2024 Granite Ridge Resources Inc Earnings Call

I'll now turn the call over to James Masters Investor Relations representative for granite Ridge.

James Masters: Thank you, operator. 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 review company strategy, discuss 2024 results, and provide an outlook for 2025. We will then turn the call over to Tyler Farquharson, our Chief Financial Officer, who will review our financial results in greater detail. Luke will 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.

Speaker Change: Thank you operator, good morning, everyone. We appreciate your interest in granite Ridge resources.

Speaker Change: We'll begin our call with comments from Luke Brandenburg are President and Chief Executive Officer will review the company's strategy discuss 2024 results and provide an outlook for 2025.

Speaker Change: We will then turn the call over to Tyler Parkerson, Our Chief Financial Officer, who will review our financial results in greater detail.

Luke Brandenburg: Luke will then return to provide some closing comments before we open the call up for questions.

Luke Brandenburg: Today's conference call contains certain projections and other forward looking statements within the meaning of federal Securities laws.

Luke Brandenburg: Statements are subject to risks and uncertainties that may cause actual results to differ from those expressed or implied in these statements.

Luke Brandenburg: We would ask that you also review the cautionary statements in our earnings release.

James Masters: 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 now turn the call over to Luke.

Speaker Change: Granite ridge disclaims any intention or obligation to update or revise any forward looking statements.

Speaker Change: As a result of new information future events or otherwise.

Speaker Change: Accordingly, you should not place undue reliance on forward looking statements.

Speaker Change: These and other risks are described in yesterday's press release, and our filings with the Securities and Exchange Commission.

Speaker Change: This conference call also includes references to certain non-GAAP financial measures.

Speaker Change: Information reconciling non-GAAP financial measures to the most directly comparable GAAP financial measures is available in our earnings release that is posted on our website.

Speaker Change: Finally, as a reminder, this conference call is being recorded.

Luke Brandenburg: Replay and transcript will be made available on our website following todays call with that I'll now turn the call over to Luke.

Luke Brandenberg: Thank you, James, and good morning, everyone. I appreciate you joining us today. This is an exciting call for us at Granite Ridge. Our Q4 2024 results exceeded our expectations and contributed to a strong full year 2024. I look forward to discussing that in more detail shortly. Even more exciting than our accomplishments in 2024 are our plans for 2025. Since going public, we have been laying the groundwork for the significant progress we anticipate this year. We have an exceptional team of professionals and partners in place. Now is the time to execute. As this is a year-end call, I will begin with an update on the Granite Ridge business and why we believe it offers a unique value proposition within the oil and gas sector.

Luke Brandenburg: Thank you James and good morning, everyone. I appreciate you joining us today.

Luke Brandenburg: This is an exciting call for us at granite Ridge, our fourth quarter 2024 results exceeded our expectations and contributed to our strong full year 2024, I look forward to discussing that in more detail shortly.

Luke Brandenburg: Even more exciting and our accomplishments in 2024 are our plans for 2025 since going public we've been laying the groundwork for the significant progress. We anticipate this year, we have an exceptional team of professionals and partners in place now is the time to execute.

Luke Brandenburg: As this is a year end call I will begin with an update on the granite ridge business and why we believe it offers a unique value proposition within the oil and gas sector.

Luke Brandenberg: Next, I will share the results of the capital we've invested in operated partnerships, which is rapidly transforming the company into one that controls its capital expenditures and cash flow timing, similar to an operator. Finally, I will highlight the results we have achieved this year and outline what you can expect from us in 2025 before turning the call over to Tyler for the details. Since going public in 2022, we have been viewed as a non-operated oil and gas company. However, our roots go back to 2014 as an oil and gas private equity firm, and our business model has always represented a blend of both non-control and controlled investments. We are less an oil and gas company than we are a publicly traded private equity firm with career oil and gas investors and a technical team applying an investment-driven approach to oil and gas development.

Next I will share the results of the capital we've invested in operated partnerships, which is rapidly transforming the company into one that controls its capital expenditures and cash flow timing similar to an operator.

Luke Brandenburg: Finally, I will highlight the results we have achieved this year and outline what you can expect from us in 2025 before turning the call over to Tyler for the details.

Luke Brandenburg: Since going public in 2022, we have been viewed as a non operated oil and gas company. However, our roots go back to 2014, as an oil and gas private equity firm and our business model has always represented a blend of both non control and controlled investments.

Luke Brandenburg: Our lesson oil and gas company and we are a publicly traded private equity firm with career oil and gas investors and the technical team applying an investment driven approach to oil and gas development.

Luke Brandenberg: Over the past decade, we have built interests in over 3,100 wells across 6 of the premier unconventional basins in the United States. We offer our investors a diversified portfolio targeting best-in-class, full-cycle returns by investing in oil and gas projects with proven public and private operators. The opportunity set has evolved in the past few years. Granite Ridge is doing what we do best, identifying dislocations in the market. In 2014, non-operated inventory with near-term development traded at a substantial discount to operated inventory, roughly 50%. By 2023, the volume of non-operated oil and gas deals had surged. The discount began to compress as mineral buyers expanded into non-operated interests and family offices increased their allocations, often seeking the tax benefits associated with oil and gas development. As the non-operated space became more competitive, smaller operated deals offered higher returns.

Luke Brandenburg: Over the past decade rebuilt interests in over 3100 wells across six of the premier unconventional basins in the United States.

Luke Brandenburg: Offer our investors a diversified portfolio targeting best in class full cycle returns by investing in oil and gas projects with proven public and private operators.

Speaker Change: The opportunity set has evolved in the past few years and granite Ridge is doing what we do best identifying dislocations in the market and.

Speaker Change: In 2014, non operated inventory with near term development traded at a substantial discount to operated inventory roughly 50% by.

Speaker Change: By 2023, the volume of non operated oil and gas deals had surged, but the discount begin to compress as mineral buyers expanded into non operated interests and family offices increase their allocations often seeking the tax benefits associated with oil and gas.

As the non operated space became more competitive smaller operated deals offered higher returns.

Luke Brandenberg: This shift occurred due to an exodus of private capital, leaving a void in the market. From 2018 to 2023, private equity fundraising for US natural resources plummeted by nearly 90%. Although more robust lately, those firms that have been successful in raising capital are generally allocating larger commitments to fewer teams. Recognizing this evolution, we're once again partnering with highly talented, proven value creators who have successfully built companies for private equity. In 2024, we invested approximately $120 million in what we've previously referred to as strategic partnerships and controlled capital. By partnering with proven operators as the majority working interest owner, we gain control over capital and development timing, leading to higher returns and enhancing our ability to generate shareholder value. As our controlled investments have grown in scale and importance, we are simplifying how we describe our opportunity set to better reflect our forward-looking strategy.

Speaker Change: The shift occurred due to an exodus of private capital, leaving a void in the market.

Speaker Change: From 2018 to 2023 private equity fund raising for U S natural resources plummeted by nearly 90%.

Speaker Change: Although more robust lately those firms that have been successful in raising capital are generally allocating larger commitments to fewer teams.

Speaker Change: with highly talented proven value creators who have successfully built companies for private equity.

Speaker Change: In 2024, we invested approximately $120 million in what we previously referred to as strategic partnerships and control capital.

Speaker Change: By partnering with proven operators as the majority working interest owner, we gained control over capital and development timing, leading to higher returns and enhancing our ability to generate shareholder value.

Speaker Change: As our controlled investments have grown in scale and importance, we are simplifying how we describe our opportunity set to better reflect our forward-looking strategy.

Luke Brandenberg: Going forward, our investments will fall into 2 categories: operated partnerships and traditional non-op. Operated partnerships are controlled investments with proven value creators in their areas of expertise where we hold the majority working interest. These deals give us full control over capital allocation, development timing, and well design, allowing us to optimize returns. Traditional non-op remains an important part of our strategy where we own minority interests in core areas managed by experienced operators. This provides exposure to high-quality assets without the need for direct operational control. This shift is not just about terminology. It is about how we're positioning Granite Ridge for the future. In 2024, just under half our capital was allocated to operated partnerships. The success of our early investments gives us confidence to lean in further. In 2025, the strategy will account for nearly 60% of our CapEx.

Speaker Change: of going forward, our investments will fall into two categories, Operative Partnerships and Traditional Monop. Operative partnerships are controlled investments with prune value creators in their areas of expertise, where we hold the majority working interest.

Speaker Change: These deals give us full control of a capital allocation, development timing and well design, allowing for us to optimize returns.

Speaker Change: Traditional non-op remains an important part of our strategy where we own minority interests in core areas managed by experienced operators. This provides exposure to high quality assets without the need for direct operational control.

Speaker Change: This shift is not just about terminology, but it's about how we're positioning Granite Ridge for the future in 2024, just under half our capital was allocated to Operative Partnerships.

Speaker Change: But the success of our early investments give us confidence to lean in further. In 2025, the strategy will account for nearly 60% of our capots.

Luke Brandenberg: For our investors, this means more control, higher returns, and increased optionality in a competitive market. We are targeting full-cycle returns of greater than 25% and have been pleased with our results to date. To add some color, our first six projects in our operated partnership program included 38 wells, all in the Delaware Basin. We invested $148 million and based on realized and projected cash flows at current strip pricing, we estimate a full-cycle internal rate of return of 24%, fully accounting for inventory costs as well as drilling and completion expenses. We are currently running two rigs and have 92 gross or 42.9 net locations in hand or under definitive agreements across two operating partners in the Permian Basin. The operated partnership strategy continues to gain momentum, and we are in active discussions with several additional management teams.

Speaker Change: For our investors, this means more control, higher returns, and increased optionality in a competitive market. We are targeting full cycle returns of greater than 25% and have been pleased with our results today.

Speaker Change: At some color, our first six projects and our operated partnership program included 38 Wells, all in the Delaware Basin.

Speaker Change: We invested $148 million and based on realized and projected cash flows at current strip pricing we estimate a full cycle internal rate of return of 24% fully accounting for inventory costs as well as drilling and completion expenses.

Speaker Change: We are currently running two rigs and have 92 gross or 42.9 net locations in hand or under definitive agreements across two operating partners in the Permian Basin. The operative partnership strategy continues to gain momentum and we are in active discussions with several additional management teams.

Luke Brandenberg: We have built a great mousetrap that provides public investors with private equity-like exposure, offers proven value creators a differentiated capital structure that does not rely on an exit, but offers the flexibility to build a company rather than an asset to flip. As I mentioned on the last call, it is different and is working. As usual, Tyler will provide a detailed overview of Q4, but I would like to highlight a few key points. In our last call, I mentioned we expected roughly a 10% decline in gas production, offset by a modest increase in oil production. I was pleasantly surprised to be wrong, but for the right reasons. In Q4 2024, compared to Q3, gas production actually increased by 4%, complemented by a 16% increase in oil production.

Speaker Change: We had built a great mouse trap that provides public investors with private equity like exposure.

Speaker Change: Now, for its proven value creators, a differentiated capital structure that does not rely on an exit but offers the flexibility to build a company rather than an asset to flip. As I mentioned on my last call, it is different and is working.

Speaker Change: As usual, Tyler will provide a detailed overview of the fourth quarter, but I would like to highlight a few key points. In our last call, I mentioned we expected roughly a 10% decline in gas production, offset by a modest increase in oil production. I was pleasantly surprised to be wrong, but for the right reasons.

Speaker Change: In the fourth quarter of 2024, compared to the third, gas production actually increased by 4%, complemented by a 16% increase in oil production.

Luke Brandenberg: The primary driver of this outperformance was acceleration in our traditional non-op business, specifically chunky interests in wells operated by Mewbourne, EOG, and Silver Hill that came online earlier than expected. Early outperformance in a couple of our operated partnership units contributed to the beat. We are looking ahead to an exciting year for Granite Ridge, with robust production growth of 16% or 29,000 BOE per day at the midpoint with an oil weighting of 52%. This is largely driven by our Permian operated partnerships and a few high working interest Permian units in our traditional non-op business. We expect gas production to remain steady through the first three quarters, followed by an increase in Q4 as about 12 wells come online across the Haynesville, Dry Gas Eagle Ford, and traditional non-op Permian.

Speaker Change: The primary driver of this outperformance was acceleration in our traditional monop business. Specifically, chunky interests and wells operated by Newburn, EOG, and Silverhill that came online earlier than expected.

Speaker Change: Additionally, early outperformance and a couple of our operative partnership units contributed to the beat.

Speaker Change: We are looking ahead to an exciting year for Granite Ridge, with robust production growth of 16% or 29,000 barrels of oil equivalent per day at the midpoint with an oil weighting of 52%.

Speaker Change: We expect gas production to remain steady through the first three quarters, followed by an increase in the fourth quarter as about a dozen wells come online across the Haynesville, Dragass Eagleford, and traditional Monopermian.

Luke Brandenberg: Oil production is expected to decline by about 5% in Q1, increase slightly in Q2, and accelerate in H2 of the year as our second Delaware-focused operated partnership rig, stood up this mid-February, begins to contribute in earnest. We are guiding to a total CapEx range of $300 million to $320 million, with 56% allocated to operated partnerships and the remainder to traditional non-op. As is our norm, this range only includes deals and developments that are either in hand or under contract. Absent a significant negative change in hydrocarbon prices, we're confident that we can fund this capital plan as well as our fixed dividend from internally generated cash flow and existing liquidity. We have a substantial amount of oil-weighted inventory in our operated partnership program, and current economics are incentivizing us to drill sooner rather than later.

Speaker Change: Well, production is expected to decline by about 5% in the first quarter, increase slightly in the second quarter, and accelerate in the second half of the year, as our second Delaware-focused operative partnership rig, stood up this mid-February, begins to contribute to the youth and artists.

Speaker Change: We are guiding to a total CAPEX range of 300 million to 320 million, with 56% allocated operated partnerships and the remainder to traditional Monop. As is our norm, this range only includes deals and development that are either in hand or under contract.

Speaker Change: Absent a significant negative change in hydrocarbon prices. We're confident that we can fund this capital plan as well as our fixed dividend from internally generated cash flow and existing

Speaker Change: We have a substantial amount of oil-weighted inventory and our operated partnership program and current economics are incentivizing us to drill sooner rather than later.

Luke Brandenberg: While honoring the conservatism towards leverage that is in our DNA, I could see a path towards an additional $60 million to $80 million in development CapEx this year. This additional CapEx would be weighted towards the Q4 and would likely have a negligible impact on 2025 production, but would significantly contribute to early 2026. We continue to evaluate various debt financing opportunities, which we believe offer attractive options for our capital plans. We plan to continue to monitor market conditions, and our strategy remains focused on non-dilutive capital to expedite the development of our existing inventory. On that note, I'll hand it over to Tyler to provide more insights into our results.

Speaker Change: While honoring the conservatism towards leverage that is in our DNA, I could see a path towards an additional $60 million to $80 million in development capex this year.

Speaker Change: The additional cat-backs would be weighted towards the fourth quarter and would likely have a negligible impact on 2025 production but would significantly contribute to early 2026.

Speaker Change: We continue to evaluate various debt financing opportunities, which we believe offer attractive options for our capital plants.

Speaker Change: We plan to continue to monitor market conditions and our strategy remains focused on non-delutive capital to expedite the development of our existing inventory. On that note, I'll hand it over to Tyler to provide more insights into our results.

Tyler Farquharson: Thanks, Luke. Good morning, everyone. As Luke mentioned, we are happy to report Q4 results that exceeded expectations. Production for the Q4 was a record 27.7 thousand BOE per day and up 10% sequentially with an increase in oil cut from 50% to 53%. For the year, total production increased to 25,000 BOE per day and finished near the high end of our guidance range. For 2025, we expect our growth trend to continue with the midpoint of our production guidance range representing a 16% annual increase. Our net loss for the Q4 was $11.6 million or $0.09 per diluted share. Excluding non-cash and non-recurring items, adjusted net income for the Q4 was $22.7 million or $0.17 per diluted share.

Tyler Parkerson: Thanks Luke, and good morning everyone. As Luke mentioned, we are happy to report fourth-quarter results that exceeded expectations.

Tyler Parkerson: Production for the Quarter was a record 27.7,000 BUE per day and up 10% sequentially with an increase in oil cut from 50% to 53%.

Tyler Parkerson: For the year, total production increased to 25,000 BUE per day and finished near the high end of our guidance range.

Tyler Parkerson: for 2025 we expect our growth trend to continue with the midpoint of our production guidance range representing a 16% annual increase.

Tyler Parkerson: Our net loss for the fourth quarter was 11.6 million or 9 cents per diluted share, excluding non-cash and non-recurring items, adjusted net income for the quarter was 22.7 million or 17 cents per diluted share.

Tyler Farquharson: Adjusted EBITDAX in Q4 was $82.6 million, which was a slight increase year-over-year from $81.8 million and a 10% increase from the prior quarter. In 2024, we achieved Adjusted EBITDAX of $290.8 million, down from $305.4 million in 2023 due to lower realized commodity prices and the impact of divested assets in December 2023. Moving on to cost, I want to highlight our per-unit lease operating expenses, which has continued a trend of year-over-year improvement. In Q4, we reported per-unit lease operating expense of $5.99 per BOE, which is 7% lower than Q4 a year ago. We reported full-year LOE of $6.29 per BOE, an 8% improvement over 2023. The decrease in lease operating expenses is primarily due to lower gathering and transportation expenses and decreased workover, repair, and maintenance costs versus 2023.

Tyler Parkerson: Ajusted EBITDAX in the fourth quarter was 82.6 million, which was a slight increase year-over-year from 81.8 million and a 10% increase from the prior quarter.

Tyler Parkerson: In 2024, we achieved adjusted EBITDAX of $290.8 million, down from $305.4 million in 2023, due to lower realized commodity prices and the impact of the vested assets in December 2023.

Tyler Parkerson: Moving on to cost, I want to highlight our per-unit lease operating expenses, which has continued the trend of year-over-year improvement.

Tyler Parkerson: and the fourth quarter we reported per unit lease operating expense of $5.99 per BLE, which is 7% lower than the fourth quarter a year ago.

Tyler Parkerson: We reported full-year LOE of $6.29 per DOE and 8% improvement over 2023. The decrease in lease operating expenses is primarily due to lower gathering and transportation expenses and decrease workover, repair, and maintenance costs for 2023.

Tyler Farquharson: Production and ad valorem taxes for 2024 were 6.8% of sales, a slight reduction from the prior year. Both our LOE and production tax metrics ended below the low end of our 2024 annual cost guidance ranges. We've lowered our 2025 initial cost guidance ranges to reflect our continued strong performance. Our per-unit cash G&A expense was $2.09 per BOE for the quarter, down 14% from the same quarter last year. For the full year, $2.45 per BOE was 16% lower than the year before. This metric continues to improve as our business grows and highlights the scalability of our business model. Our operating partners completed and placed on production a total of 86 gross, or 4.1 net wells for the quarter, and 299 gross, or 23.4 net wells for the year, with activity primarily focused in the Permian Basin.

Tyler Parkerson: Production and Advalorem Taxes for 2024 were 6.8% of sales, flight reduction from the prior year. Both our LOE and production tax metrics ended below the low end of our 2024 annual cost guidance ranges, and we've lowered our 2025 initial cost guidance ranges to reflect our continued strong performance.

Tyler Parkerson: Our per-unit cash DNA expense was $2.09 per B.O.E. for the quarter, down 14% from the same quarter last year.

Tyler Parkerson: for the full year $2.45 per BOE was 16% lower than the year before. This metric continues to improve as our business grows and highlights the scalability of our business model.

Tyler Parkerson: Cooperating partners completed and placed on production a total of 86 gross or 4.1 net wells for the quarter and 299 gross or 23.4 net wells for the year with activity primarily focused in the Permian Basin.

Tyler Farquharson: As of year-end, we had an additional 202 gross or 14.9 net wells in process. In Q4, we successfully closed nearly 2 dozen transactions, primarily involving Utica condensate window leasing and consolidating existing operated partnerships units in the Permian Basin. We invested approximately $9 million, including future drilling carries. Excluding Utica leases that are not yet unitized, we added 1.2 net locations at a cost of $2.9 million per net location. Most of these 1.2 net locations are either in the drilling phase or already online, including an in-process three and a half mile Utica condensate unit. We anticipate $12 million in future development capital for these acquired locations, aligning with our typical ratio of $1 of entry capital to roughly $3 to $4 in the ground.

Tyler Parkerson: As of year end, we have an additional 202 gross or 14.9 net wells in process.

Tyler Parkerson: In the fourth quarter, we successfully closed nearly 2,000 transactions, primarily involving Utica Condensate window leasing and consolidating existing operative partnership units in the Permian Basin.

We invested approximately $9 million, including future grilling cherries.

Tyler Parkerson: Excluding Utica leases that are not yet unitized, we added 1.2 net locations at a cost of 2.9 million dollars per net location. Most of these 1.2 net locations are either in the drilling phase or already online, including an in-process 3.5 mile Utica condensate unit.

Tyler Parkerson: We anticipate $12 million in future development capital for these acquired locations, aligning with our typical ratio of $1 of entry capital to roughly $3 to $4 in the ground.

Tyler Farquharson: Finally, we have consistently returned capital to shareholders, and the Q4 was no exception, as we paid out our regular quarterly dividend of $0.11 per share. Subsequent to quarter end, our board declared another $0.11 per share cash dividend, payable on 14 March 2025, to shareholders of record as of 28 February 2025. I will now hand it back to Luke to discuss our outlook for 2025.

Tyler Parkerson: Finally, we have consistently returned capital to shareholders, and the fourth quarter was no exception.

Luke Brandenburg: as we paid out our regular quarterly dividend of $0.11 per share. Subsequent to quarter end, our board declared another $0.11 per share cash dividend, payable on March 14, 2025, to shareholders of record as of February 28, 2025. I'll now hand it back to Luke to discuss our outlet for 2025.

Luke Brandenberg: Thank you, Tyler. Granite Ridge combines the control of an experienced operator with the investment acumen of a private equity firm. We provide access to a diversified portfolio of oil and natural gas interests situated in some of the world's most productive basins. Our extensive proprietary data set gives us a competitive edge in selecting high return projects, partnering with some of the industry's most successful operators. We maintain a target leverage of less than 1.25x net debt to Adjusted EBITDAX and continuously optimize our portfolio with near-term development opportunities. Additionally, we actively manage risk through a systematic hedging strategy, protecting our investments with 90% of our current production hedged through 2026. For 2025, we project a 15% growth in production per share, coupled with robust cash returns to shareholders through our fixed dividend, which implies a current yield of over 7.5%.

Thank you, Tyler.

Luke Brandenburg: Granite Ridge combines the control of an experienced operator with the investment acumen of a private equity firm. We provide access to a diversified portfolio of oil and natural gas interests, situated in some of the world's most productive basins.

Luke Brandenburg: Our extensive proprietary data set gives us a competitive edge in selecting high-return projects, partnering with some of the industry's most successful operators.

Luke Brandenburg: We maintain a target leverage of less than 1.25 times net debt to Adjusted EBIT tax and continuously optimize our portfolio with near-term development opportunities.

Luke Brandenburg: Additionally, we actively manage risk through a systematic hedging strategy, protecting our investments with 90% of our current production hedge through 2026.

Luke Brandenburg: For 2025, we project a 15% growth in production per share, coupled with robust cash returns to shareholders through our fixed dividend, which implies a current yield of over 7.5%.

Luke Brandenberg: Since 2023, our fixed dividend has consistently yielded between 5% and 9%, while production growth per share was over 20% in 2023 and 13% in 2024. As a management team and board, we find this performance highly compelling, as our Form 4s show that we continue to put our money where our mouth is by investing alongside our shareholders. Thank you again for joining us this morning. We are excited about the year ahead and appreciate your interest in Granite Ridge. For that, I will turn the call back over to the operator for questions. Operator, please open the floor for questions.

Luke Brandenburg: Since 2023, our fixed dividend has consistently yielded between five and nine percent, while the reduction growth per share was over 20 percent in 2023 and 13 percent in 2024.

Luke Brandenburg: As a management team and board, we find this performance highly compelling as our form forced show that we continue to put our money where our amount is by investing alongside our shareholders.

Luke Brandenburg: Thank you again for joining us this morning. We are excited about the year ahead and appreciate your interest in Granite Ridge. For that, I'll turn the call back over to the Operator for Questions. Operator, please open the floor for questions.

Operator 1: At this time, I would like to remind everyone in order to ask a question, please press star then the number one on your telephone keypad. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Michael Scialla with Stephens. Please go ahead.

Speaker Change: At this time, I would like to remind everyone in order to ask a question, please press star then the number one on your telephone keypad. We will pause for just a moment to compile the Q&A roster.

Your first question comes from the line of Michael Scialla with Stephens. Please go ahead.

Michael Scialla: Hi. Good morning, guys. I want to see if I can get a little bit more color on the contingent, $60 to 80 million that Luke, you mentioned you could spend, weighted toward the Q4. I guess, what factors will really determine whether or not that gets spent? Is it strictly market conditions or something beyond that? Maybe if you could address how that might impact the H1 of 2026 if that does get spent and if it doesn't.

[inaudible]

Speaker Change: Hi, good morning guys. I want to see if I could get a little bit more color on the contingent 60 to 80 million that Luke mentioned and he could spend with toward the fourth quarter. I guess what factors will really determine whether or not that could spend as it's strictly market conditions or some beyond that.

Speaker Change: Maybe if you could address how that might impact the first half of 26 if that does get spent and if it doesn't

Luke Brandenberg: Yeah, you got it. Thanks for the question, Mike, and good morning. The way that we look at the world right now, our CapEx is pretty weighted towards H1 2025. Probably about two-thirds of the CapEx for the year we're currently modeling in H1. Really, that's Q1 weighted. We're looking at Q1 CapEx, that's probably a third higher than what we saw in Q4. That's currently what we're modeling out, but you hit the nail on the head. It's really market driven. We look at our inventory on the operated partnerships side, and we're excited about what the economics look like of those projects. If the market conditions hang in there, you know, we've certainly seen some volatility on pricing lately, and I'll hit on that in a second.

Speaker Change: Yeah, you got it. Thanks for the question, Mike, and good morning.

Speaker Change: The way that we look at the world right now, our CAPEX is pretty weighted towards the first half of 25.

Speaker Change: I'm probably about two-thirds of the CAPEX for the year we're currently modeling in the first half and really that's first quarter-weighted we're looking at first quarter CAPEX it's probably

Speaker Change: 3rd, higher than what we saw in the 4th quarter. So that's currently what we're modeling out, the hit the nail in the head, it's really market-driven.

Speaker Change: We look at our inventory on the Operative Partnership side and we're excited about what the economics look like in those projects and so if the market conditions hang in there.

Luke Brandenberg: If the market conditions hang in from a higher oil price perspective, that could be pretty darn interesting. The other piece I mentioned, you know, our current capital budget, we're certain or I'd say highly confident, again, absent material market condition change, that we can fund that out of cash flow and existing liquidity. We're always looking at ways to better capitalize this business for the long term. You know, we're specifically focused on anti-dilutive ways. We're always canvassing the market. We're always talking and looking at different opportunities. If we were to have an opportunity to access additional liquidity in a way that was not dilutive, then we would seriously consider that. That's the high level. I would say pricing is one on the market conditions that I would like to hit on.

Speaker Change: You know, it certainly seems involatility on pricing lightly, and I'll hit on that in a second, but if the market conditions hang in from a hydro-grown price perspective

Speaker Change: That could be pretty darn interesting. The other piece I mentioned...

Speaker Change: you know, our current capital budget, we're certain that's a highly confident, again, that's something.

Speaker Change: and material market condition change that we can fund that out of cash flow and existing liquidity. But we're always looking at ways to better capitalize this business for the long term.

Speaker Change: and we're specifically focused on anti-deluded ways. We're always campus in the market, we're always talking and looking at different opportunities, and so if we were to have an opportunity to access additional liquidity in a way that was not deluded.

Speaker Change: then we would seriously consider that. So that's the high level. I would say pricing is one on the market condition, but I would like to hit on that, so I really appreciate it opening that door for me. The oil's been a bit volatile lately, but we've certainly seen that in the past few months.

Luke Brandenberg: I really appreciate you opening that door for me. You know, oil's been a bit volatile lately. We've certainly seen that in the past few months.

Luke Brandenberg: The reason I want to hit that is it's a great example of why our diversification is really a strength for us. Oil, being a more international commodity, has gotten a lot of international attention. It's really only down about 6% year-to-date, but you see a lot of volatility. What gets less attention is the gas side, given that it's just a more localized market. Gas is up about 24% year-to-date. We really want to hit that as a highlight, because that's really going to benefit us. We have a significant amount of gas production. Approximately half our reserves are gas, and we feel good that we have alignment with our partners on the traditional non-ops side in the gas basins that are going to put some of those wells to sales this year. That's a real long-winded way of answering your question.

Speaker Change: The reason I want to hit that is it's a great

Speaker Change: The example of wire diversification is really a strength for us. You know, oil, the end of more international commodities got a lot of international attention. It's really only down about 6% year-to-date, but you see a lot of volatility. What gets less attention is the gas side, given that it's just a more localized market, but gas is up, you know, about 24% year-to-date.

We really want to hit that as a highlight.

Um.

Speaker Change: because that's really going to benefit us. We have significant amount of gas production approximately half all reserves your gas.

Speaker Change: and we feel good that we have alignment with our partners on the traditional monoxide in the gas basins that are going to put some of those wells to sales this year. So that's a real long-winded way of answering your question, but the net net is that 60 to 80 million, that would be inventory in hand on our operated partnership side.

Luke Brandenberg: The net net is that $60 to 80 million, that would be inventory in hand on our Operated Partnership side. We see it, we're excited about the economics, and if market conditions are there, both on the hydrocarbon pricing side, the capitalization side, we would really look to accelerate that from what's currently modeled in 2025 to be developed and have that CapEx hit in 2025. The production would really start to show up in 2026.

Speaker Change: We see it, we're excited about the economics and if market conditions are there, both on the hydrocarbon pricing side, but then also the capitalization side, then we would really look to

Speaker Change: Accelerate that from what's currently modeled in 2025 to be developed and have that cab exit in 25, but the production would really start to show up in 26.

Michael Scialla: I appreciate that detail. If that does get spent, is it fair to assume that the momentum continues to grow in H1 2026?

Speaker Change: I appreciate that detail. And if that does get spent, it's fair to assume that the momentum continues. You continue to grow in the first half of 2006.

Luke Brandenberg: Yes, sir. You nailed it. I don't think that would have a lot of impact on 2025 production. It may have a little bit, but it would be negligible. It would really help to continue the growth profile that we're showing into 2026.

Speaker Change: Yes, sir, you nailed it. I don't think that would have a lot of impact on 25 production It may have a little bit, but it would be negligible, but it would really help to continue the growth profile that we're showing into 26.

Michael Scialla: Got it. One more, if I could. You mentioned the 2 rigs that you're running inside the partnerships. I think you had said those are both in the Delaware. Is that correct? If so, your thoughts on adding a rig in the Midland, what needs to be done before you could do that?

Speaker Change: Got it and then one more if I could up on you mentioned the two rigs that you're running inside the partnerships I think you'd said those are both in the Delaware is that correct and if so your thoughts on adding a rig in the midland what needs to be done before you could do that.

Luke Brandenberg: Yeah, that's right. They're both in the Delaware Basin right now, primarily Loving County. That's where most of the development has been to date and what's projected right now. We do look forward to starting to drill in the Midland Basin probably middle of this year. We've got an asset in hand. We have another deal that we're working on getting closed that we're excited about. There's a few ducks that we have to get in a row just from an operations perspective and getting some other interest owners lined up. We do hope to spud those wells middle of this year in the Northern Midland Basin as well.

Speaker Change: Yeah, that's right. So, they're both in the Delaware Basin right now, primarily Loving County. That's where most of the development has been to date and was projected right now.

Speaker Change: We do look forward to starting a drill in the Midland Basin. Probably middle of this year we've got an asset in hand, we have another deal that we're working on getting clothes that we're excited about. There's a few ducks that we have to get in a road just from.

Speaker Change: and Operations Perspective and getting some other interest owners lined up. But we do hope to spud those wells middle this year in the Northern Midland Basin as well.

Michael Scialla: Sounds good. Thanks, Luke.

Luke Brandenberg: Thank you, Mike.

Sounds good. Thanks, Wolpe. Thank you, Mike.

Operator 1: Your next question comes from the line of Derrick Whitfield with Texas Capital. Please go ahead.

Speaker Change: Your next question comes from the line of Derrick Quitfield with Texas Capital. Please go ahead.

Derrick Whitfield: Good morning, all, and thanks for taking my questions. Congrats on a strong close to 2024.

Derek Whitfield: Good morning all and thanks for taking my questions. I'll fit congrats on a strong close to 2024.

Luke Brandenberg: Awesome. Thanks, Derrick. Appreciate you reaching out and thanks for picking us up. Means a lot.

Derrick Whitfield: Absolutely. Well, Luke, I'll step into the door that you opened on natural gas. When you look at the environment, it's arguably the most supportive macro environment we've seen in well over a decade, but very few are seemingly leaning into it. How are you thinking about the opportunity from both a controlled capital and traditional non-op basis?

Speaker Change: Awesome. Thanks, Derek. Appreciate you reaching out and thanks for picking us up. It means a lot.

Speaker Change: Absolutely. Well Luke, I'll step into the door that you up in on natural gas. When you look at the environment, I mean it's arguably the most supportive macro environment we've seen all over a decade.

The very few are seemingly leaning into it.

Speaker Change: How are you thinking about the opportunity from both a controlled capital and traditional non-out basis?

Luke Brandenberg: Yeah. Thanks for asking that. We don't currently have any just pure natural gas-focused partners on the operated partnership side. We've explored some opportunities there, and we will continue to. We don't have any right now. A couple points, though, I would say that we do look forward to benefiting from a lot of our Delaware production is pretty darn gassy, and so we are seeing a benefit there. It's nice to get some positive realizations at Waha after some rough periods last year. On the traditional non-ops side, we do have some compelling inventory. Right now, we're looking at at least a 1 net well in process in the Haynesville, and we expect that to come online. That's across several gross wells, but they come online probably late Q3 or early Q4.

Speaker Change: Yeah, thanks for asking that. You know, we don't currently have any just pure natural gas-focused partners on the operated partnerships side. We've explored some opportunities there and we will continue to. We don't have any right now. A couple of points though, I would say that we do look forward to benefiting.

Love you.

Speaker Change: from a lot of our Delaware production is pretty darn gassy and so we are seeing a benefit there. It's nice to get some positive realizations at Waha after some rough periods last year. But on the traditional monopsides, we do have some compelling inventory right now. We're

Speaker Change: and we expect that to come online, that's across several gross wells, but they come online probably late third quarter or early fourth quarter. And we also have some immature in the dry gas eaglether that we expect to come online probably in the third quarter. What I'm optimistic of, we're real careful when we pick our partners on the traditional non-offsite. We want to make sure that we're, if we're going to be in the non-off position, we want to be under folks that we have real alignment with.

Luke Brandenberg: We also have some inventory in the dry gas Eagle Ford that we expect to come online probably in Q3. What I'm optimistic of, we're real careful when we pick our partners on the traditional non-op side. We want to make sure that if we're going to be in the non-op position, we want to be under folks that we have real alignment with. There's one group in particular that's been a great partner to us. We know them well. They've got a wonderful position in the Haynesville that we were able to get a little piece of. I'm optimistic that if these prices hang in there, they'll accelerate development there. There's a scenario where we do have additional CapEx and development going to the dry gas Haynesville this year with some of these traditional non-op groups that are, let's say, quick to adapt.

Speaker Change: and there's one group in particular that's been a great partner to us. We know them well.

Speaker Change: They've got a wonderful position in the hand still that we were able to get a little piece of.

Speaker Change: I'm optimistic that at these prices hang in there. They'll accelerate development there. And so there's a scenario where we do have additional capex and development going to the dry gas handsel this year with some of these traditional monopter groups that are

Luke Brandenberg: We're excited about that. If I look at the Haynesville, we have probably 16, a little more than that, net locations that could be developed. Again, we're only looking at a little over 1 on the back half of this year, but I would love to see that number accelerate.

Speaker Change: Let's say quick do it that. So we're excited about that. You know, if I look at the hands bowl, we have, you know, probably 16 little more than that, net locations that could be developed. Again, we're only looking at little over one on the back half of this year, but I would love to see that number accelerate.

Derrick Whitfield: Terrific. Referencing your deal sourcing funnel on slide 9, are there any generalizations you can offer on the deals won or lost other than price? If you could also add maybe where you're seeing the greatest opportunities in the marketplace.

Speaker Change: Terrific. And then referencing your deal-sourcing funnel in Slide 9, are there any generalizations you can offer on the deal's one or lost other than price? And if you could also add maybe where you're seeing the greatest opportunities in the marketplace.

Luke Brandenberg: Yeah. It's funny on gas, just to stay on that topic. Gas deals we've seen a lot of. If you look at 2014, we saw a lot of gas-weighted deals. We weren't really competitive on them in 2014 because the fact is, a lot of folks were wanting you to pay, then strip pricing, or at least 2024 pricing. Excuse me, 2025 pricing that was in the 4s when gas was trading more on the high 2s. We struggled to get there. We lost the vast majority of the gas deals that we looked at in 2024. That was definitely a driver. Where we've continued to see most opportunity, it's in the Permian, and a lot of that's just driven by non-op deals that are generated where the rigs are. That's where we see most of the opportunity.

Speaker Change: Yeah, so it's funny on gas. Just to stay on that topic.

John Abbot, Wes Harris, Tyler Farquharson, Luke Brandenberg,

Speaker Change: Gas Deals. We've seen a lot of, but if you look at 2014, we saw a lot of gas-related deals.

Speaker Change: We weren't really competitive on them in 2014 because the fact is

A lot of folks were wanting you to pay.

Speaker Change: You know, then strip pricing. I was kind of point four pricing to receive me 25 pricing that was in the fours when gas was trading.

Speaker Change: and then we struggled to get there, so we lost the vast majority of the gas deals that we looked at.

Speaker Change: in 2024. So that was definitely a driver where we continue to see most opportunity. It's in the Permian and a lot of that's just driven by.

Luke Brandenberg: Yeah, we struggled to win gas deals because we weren't willing to pay for $4 gas when it was trading in the high 2s or low 3s. In hindsight, maybe I wish I had some of those, that's all right. Another place that we have actually had some success, it's small, but it's in the condensate window of the Utica. Tyler mentioned that we've done a few deals there. It's not necessarily large in dollar quantity, although we anticipate additional drilling that'll make that more impactful. It's actually pretty high in just count. We've been excited about what we've seen there. We've got a great partner that we're working up there in the Dale Resources, Dale Operating. That's been a neat area for us.

Speaker Change: You know, non-op deals are generated where the rigs are and so that's where we see most of the opportunity because I was struggling to win gas deals because we weren't willing to now pay for four dollar gas when it was trading, you know, in the high tooth or low threes.

Speaker Change: and hindsight, maybe I wish I had some of those, but that's all right. Another place that we...

Tyler Parkerson: Has actually had some success. It's small, but it's in the, you know, condensate window of the Utica Tyler mentioned that we've done a few deals here. It's not necessarily large in dollar quantity, although we anticipate additional drilling that'll make that more impactful, but it's actually pretty high in.

Tyler Parkerson: just count. We've been excited about what we've seen there. We've got a great partner that we're working out there in the Dale Resources Guides Dale operating. So that's been a neat area for us.

Luke Brandenberg: I'll tell you, the one neat thing is we talk about diversification, and if you look at our portfolio, I think we do have a neat diversification. That's an output. Whenever we set our budget for 2025, we don't say, Hey, I want to allocate 50% of the Permian and 10% of the Haynesville. That's not the case. We just let every deal compete on economics. Where we are intentional is we are intentional to make sure that our deal flow, so the 650 plus deals, that those are diversified because we want to make sure that if you see any themes in basins, that we're quick to recognize them and that we have a quick ability to move. Again, a long-winded way, I think, of answering your question, but hopefully it gave you a little more color as to what we're seeing.

Tyler Parkerson: But I'll say the one neat thing is, we talk about diversification and if you look at our portfolio, I think we do have a neat diversification.

That's...

Tyler Parkerson: That's an output. You know, whenever we set our budget for 25, we don't say...

Tyler Parkerson: I want to allocate 50% of the Permian and 10% of the Hainesville. That's not the case. We just let every deal compete on economics, but where we are intentional is we're intentional to make sure that our deal flows, so the 650 plus deals, that those are diversified because we want to make sure that you see any themes and basins that we're quick to recognize them and that we have a quick ability to move so.

Tyler Parkerson: Again, along with the way, I think I'm answering your question but hopefully give you a little more color to what we're seeing.

Derrick Whitfield: Terrific. Great update.

Luke Brandenberg: Great. Thank you, Derrick.

Terrific, great update.

Operator 1: Your next question comes from the line of Noah Hungness with Bank of America. Please go ahead.

All right. Thank you, Derek.

Your next question comes from the line of Noel Hunges, with Bank of America, please go ahead.

Noah Hungness: Morning, guys. For my first question, I wanted to ask on your CapEx guide, is that all D&C spend, or is there any deal or acquisition CapEx in there?

Speaker Change: Morning guys, um, from my first question, I was just, I was, I wanted to ask on your topic's guide, um, is that all DNC spend, or is there any, um, deal or acquisition topics in there?

Luke Brandenberg: There's deal and acquisition CapEx in there as well. Thanks for asking. That's a good point. There is a combination of those two things. It's certainly D&C heavy, I would say, but it's primarily D&C. If I had to break it out, Tyler, what would you say? Because there's a little acquisition we did earlier this year that had some PDP. What would you think? Maybe if I had to guess, probably three-quarters is development. If I think about it, Noah, we typically say that a dollar of inventory drives 3 to 4 dollars of development. Any quarter, that number may change. If you look at it over the long term, I think you're generally going to be 20% to 25% inventory and 75% to 80% development.

Noah Hungness: Got you. For my second question, I did notice there was an impairment that you guys had for Q2 2024. Could you just add any color around that?

Tyler Farquharson: Thanks, Noah. This is Tyler. That was in our Williston Bakken assets. We haven't invested a lot of capital up there over the past handful of years. That's been one of our areas that we've seen less deal flow and less investment opportunity. That's really a maturing asset, PDP-heavy asset. I think we've had a lot of little things on some cost and other items that have just gone up as those properties mature. That's really what was driving that impairment, is just the lack of additional CapEx investment up there, and then the maturing of those assets.

Speaker Change: That impairment is just the lack of additional capex investment up there.

Speaker Change: And then the maturing of those assets I know if I can add something there too and this may be a little handwavy, but it's the truth.

Luke Brandenberg: Noah, if I can add something there, too, and this may be a little hand-wavy, but it's the truth. One thing I want to point out there, nobody likes to see these write-downs, but that was actually a really good deal for us. That was a deal that we bought several years back, but we basically bought it for PDP value. That deal's worked out for us, but it's one of those few deals where you actually buy it for PDP and you get the inventory for, I'll use air quotes, "free." What a lot that we wrote down in that specific instance was inventory that we booked, but we didn't necessarily pay for, but we booked it. It was honestly marginal, which is why we didn't have to pay a lot for it.

One thing I want to point out there.

Speaker Change: Nobody likes to see these write downs, but that was actually a really good deal for us. So that was a deal that we bought.

Speaker Change: Several years back, but we basically bought it for PDP value and so that deals worked out for us, but it's one of those few deals where you actually buy it for PDP and you get the inventory for all use air quotes free and so a lot that we wrote down in that specific instance was inventory that we booked but we didn't necessarily pay.

Speaker Change: For what we booked it and then it was honestly marginal so which is why we didn't have to pay a lot for it but.

Luke Brandenberg: That's what ultimately drove the write-down, to Tyler's point. Again, we don't like to see write-downs, but I would say that write-down was not the result of a bad investment decision. It was just the result of, we were able to book some inventory that was probably marginal, but we got for nothing, and then ultimately had to write that down. In a higher price environment, that could come back.

Speaker Change: But thats, what ultimately drove the write down to Tyler's point so.

Speaker Change: Again.

I'd like to see write downs, but I would say that write down was not the result of a bad investment decision. It was just the result of we were able to book some.

Speaker Change: Inventory that was probably marginal but we got for nothing.

Speaker Change: And then ultimately have to write that down but at a higher price environment that could come back.

Noah Hungness: Yeah. That was going to be, I think, my follow-up question, if I could. Just as we've seen the Bakken, I feel like people would consider the boundaries of the Bakken expand, and laterals have continued to extend, and guys have gotten more creative with their development. Do you see a pathway potentially where those locations that have been written off could come back into the money?

Speaker Change: Yes, I mean that was going to be I think my follow up question. If I could just as we've seen the Bakken Ics people would consider the boundaries of the Bakken expand.

Speaker Change: And he laterals and continuing to extend and you guys have gotten more creative with their development I mean, do you see a pathway potentially where those locations that have been written off could come back into the money.

Luke Brandenberg: I do. I would say it's probably more price driven than it is CapEx driven, in the areas that we're at anyways. That's a bigger piece for us. If hydrocarbon prices increase, and if you're looking at $80 oil, I bet some of that does come back. The CapEx piece certainly matters, but the bigger driver for us in those areas, again, it was stuff that primarily we got without paying a lot of value for. It was more of a production buy. Yes, I think it could come back. I don't know that it's ever going, never say never. In the near term, I don't see it being a big growth area for us, though. The land side up there, we're just seeing fewer opportunities. Other people may be on a real small scale, but it's been tougher for us to capture opportunities up there to compelling price lately.

Speaker Change: I do.

Speaker Change: I would say, it's probably more price driven than it is capex driven in the areas that were at anyways.

Speaker Change: That's the bigger piece for US is hydrocarbon price increase and if you look at $80 oil at that some of that does come back the capex piece, certainly matters, but the bigger driver for us in those areas again. It was stuff that primarily we got without paying a lot of value for it was more of a production by.

Speaker Change: But yes, I think it could come back I don't know that it's ever going to never say never in the near term I don't see it being a big growth area for us so.

Speaker Change: On the land side up there.

Speaker Change: We're just seeing fewer opportunities other people may be monitor real small scale, but it's been tougher for us to capture opportunities out there at a compelling price lately. So I don't think can be a growth area, but I do think there is a scenario where that comes back.

Luke Brandenberg: I don't think it'll be a growth area. I do think there's a scenario where that comes back, if prices get a little better for us.

Speaker Change: Rises.

Speaker Change: Still a better for us.

Noah Hungness: Appreciate the color, guys. Thanks.

Speaker Change: Appreciate the color guys. Thanks.

Luke Brandenberg: Yeah. Thanks, Dylan.

Speaker Change: Yes, Thanks, Tom.

Operator 1: Your next question comes from the line of John White with ROTH Capital. Please go ahead.

Speaker Change: Your next question comes from the line of John White with Roth Capital. Please go ahead.

John White: Good morning, congratulations on the nice results all the way around.

John White: Good morning, and congratulations on the nice results all the way around.

Luke Brandenberg: Appreciate it. Thanks, John.

Speaker Change: I appreciate it thanks John.

John White: You were pretty confident in talking about 2025's guidance. As also mentioned, crude has been volatile, primarily to the downside this year. In preparing your guidance, did you get the impression from any of your partners that some of their planned wells might be, on the bubble or subject to being rescheduled or canceled?

Speaker Change: Yes, you were pretty confident in talking about 2025.

Speaker Change: Guidance.

Speaker Change: And as also mentioned crude has been volatile primarily to the downside this year.

Speaker Change: In preparing your guidance did you get the impression for many of your partners.

Speaker Change: Some of their planned wells might be.

Speaker Change: On the bubble or or subject to being rescheduled or canceled.

Luke Brandenberg: Yeah, that's a great question, John, and so I'll hit that from two approaches. Right now, if we look at our expected turn to sales for the year 2025, probably 60% of that is through the operated partnership program. On that side of the equation, we control that. Right? Where we are right now and where prices are right now, I think that's an attractive economic decision to develop that. Again, this is, call it, 60% of the turn to sale wells. If prices do continue to degrade, particularly on the oil side, then we could change that. That's a neat thing about these operated partnerships. We do have control over that. Right now, it's still good, but we are keeping a close eye on it.

Jonathan: Yes, that's a great question, Jonathan So I'll hit that from two approaches.

Speaker Change: Right now if we look at our expected turned to sales for the year 25.

Speaker Change: 60% of that is through the operated partnership program. So.

Speaker Change: That side of the equation.

Speaker Change: We.

Speaker Change: We control that right and so where we are right now and where prices are right now we still are.

Speaker Change: I think thats attractive economic decision to develop that again this is call it 60% of the turned to sale wells.

Speaker Change: If prices do continue to degrade, particularly on the oil side.

Speaker Change: And we could change that that's the neat thing about these operated partnerships. We do have control over that right now so good but we're keeping a close eye on it we're keeping a close eye on the economics and when it makes sense to drill or if it makes sense just a slowdown the pace.

Luke Brandenberg: We're keeping a close eye on the economics and when it makes sense to drill, or if it makes sense just to slow down the pace. That's a big piece. On the traditional non-op side, call it 40% of the wells that we expect to turn to sales this year, one thing we're always pretty careful to do is only guide to wells where we see a real line of sight to those wells happening. For most of those, some maybe you've got a permit on, but a decent number of those already, frankly, have either been spudded, or at least you've got some capital being spent building pads, et cetera. Those that could always change, but it's harder to stop a moving train, and a lot of those are already in process. I don't anticipate a big change.

Speaker Change: That's a big piece on the traditional non op side, so call it 40% of the wells that we expect to turn to sales this year.

Speaker Change: One thing we're always pretty careful to do is only guide the wells, where we see a real line of sight to those wells happening.

Speaker Change: So for most of those.

Speaker Change: So maybe you've got a permit on but a decent number of those already frankly are.

Speaker Change: Either been spud or at least you have got some capital being spent building pads et cetera. So those that could always change, but it's harder to move it hard to stop and move and trained and a lot of those are already in process.

Speaker Change: So I don't anticipate a big change, but again, if there was a significant move that could happen.

Luke Brandenberg: Again, if there was a significant move, that could happen. Right now, we feel pretty good about that 310. Certainly, the traditional non-op side, again, a lot of it's moving. The operated side, we're going to adapt quickly, if the market does continue to degrade.

Speaker Change: Right now we feel pretty good about that 310, certainly the traditional non op side again, a lot of it's moving but the operated side, we're going to adapt quickly if the market does continue to degrade.

John White: Well, thanks very much for the additional detail. I'll turn it back to the operator.

Speaker Change: Thanks, very much for the additional detail.

Speaker Change: I'll turn it back to the operator.

Luke Brandenberg: Great. Thank you, John. Have a good weekend.

Speaker Change: Thank you John I have a good weekend.

Operator 1: Before going to the next question, again, if you would like to ask a question, press star one on your telephone keypad. Your next question comes from the line of Chris Baker with Evercore ISI. Please go ahead.

Speaker Change: Before going to the next question again, if you'd like to ask a question.

Speaker Change: Star one on your telephone keypad. Your next question comes from the line of Chris Baker with Evercore ISI. Please go ahead.

Chris Baker: Hey, guys.

Chris Baker: Hey, guys.

Luke Brandenberg: Hey, morning, Chris.

Chris Baker: I wanted to go back to the operated partnerships. I think as we kind of frame up the next few years, it seems like there's a coming free cash flow inflection as those stabilize, an inflection that you're arguably not getting much, if any, credit for in the market. Could you just kind of frame up in the scenario where that maybe continues? How should we think about the longer-term strategic direction? Are there levers to pull in terms of forcing the market's hand a little bit? Just any sort of thoughts around that longer-term outlook and what we're likely to see as some of these initial partnerships kind of start to stabilize would be great. Thanks.

Chris Baker: Hi, Good morning, I wanted to go back to the.

Chris Baker: I wanted to go back to the operator partnerships.

Chris Baker: I think as we kind of frame up the next few years.

Chris Baker: It seems like Theres accounting free cash flow inflection in those.

Chris Baker: The stabilized.

Speaker Change: An inflection that you are arguably not getting much if any credit for in the market could you just kind of frame up in a scenario where that may be continues how should we think about the longer term strategic direction are there levers to call. It in terms of forcing.

Speaker Change: The markets and a little bit or just any sort of thoughts around around that longer term outlook.

Speaker Change: And what we're likely to see some of these initial partnerships kind of starts to stabilize would be great. Thanks.

Luke Brandenberg: Thanks for the question, Chris. I appreciate it. Thanks for picking up the rebranding to operated partnerships so quickly, too. On that side, what we really like about the operated partnerships is, as you mentioned, if you just pick up a rig, you're going to have this big cash flow outspend, then eventually you get to a cash flow positive place. You're really hitting the nail on the head. We anticipate that, especially with our first partnership that's running 2 rigs, we're still in a cash flow outspend, but that'll start to resolve itself in the next year or so, I anticipate. We do think that's a big delta. One thing that just in the market, this is just a fight that we've had to fight since going public. I think I've said it before.

Yes. Thanks for the question, Chris I appreciate it and thanks for taking up the rebranding to operated partnership so quickly to.

Speaker Change: On that side.

Chris Baker: What we really liked about the operating partnerships as you mentioned.

Chris Baker: Pick up a rig youre going to have this big cash flow outspend and then eventually you get to a cash flow positive place since you really hit the nail on the head and we anticipate that especially with our first partnership with run the two rigs.

Chris Baker: We're still in a cash flow outspend, but that will start to resolve itself.

Chris Baker: And the next year or so I anticipate.

Chris Baker: We do think Thats, a big Delta one thing that just in the market.

Chris Baker: This is just.

Chris Baker: We've had to fight since going public I think I've said, it before but I know I had but we went public on October 22 with no debt.

Luke Brandenberg: In fact, I know I have, but we went public in October of 2022 with no debt, and we were hoping the market would reward us and cheer us for our financial discipline, and we were just met with a resounding yawn, as we say. It seems that the market is more focused on leverage than it was in the pre-COVID era, certainly. It seems like if you're less than 1.5x levered, the market gives you a pass. That's not really a risk factor. In a weird way, because the opportunity set's there and we're excited about it, we've just continued to grow, continued to add rigs. We've continued to add partners. In fact, I mentioned that we're in advanced discussions with a couple other teams. We're real close with another one that's pretty exciting.

Chris Baker: And we were hoping the market would reward us <unk> for our financial discipline and we were just net with the resounding you honestly say it seems that.

Chris Baker: The market is more focused on.

Chris Baker: Leverage than it was pre Covid era, certainly, but it seems like if you're less than one five times levered. The market is it gives you a pass thats not really a risk factor so in a weird way.

Chris Baker: Because the opportunity set there and we're excited about it. We've just continued to grow continue to add rigs will continue to add partners.

Chris Baker: I mentioned that.

Chris Baker: We're in advanced discussions with a couple of other teams.

Chris Baker: We're real close out with another one that's pretty exciting but your point is spot on as we have accelerated development based on the opportunity set and based on inventory habit. We're excited about we've gone to that cash flow negative piece, but.

Luke Brandenberg: Your point is spot on, as we have accelerated development based on the opportunity set and based on the inventory we have that we're excited about. We've gone to that cash flow negative piece. That's not going to happen forever. We actually added a slide in the investor deck that I wanted to put in there because some investor could say, All right. You guys have an increase in debt. When does it stop? Just to show that if you look over the company's history, at least over the past 7, 8 years, we've never been above 1 times levered. Part of that is just conservatism in our DNA, but as we look forward, a big part is exactly what you hit.

Chris Baker: That's not going to happen forever, we actually added a slide in the investor deck.

Chris Baker: To put in there because from the Investor I could say all right you guys had an increase in debt when do we stop but just to show that if you look over the company's history at least over the past seven eight years.

Chris Baker: We've never been above one times levered.

Chris Baker: And.

Chris Baker: Part of that is just conservatism in our DNA, but as we look forward a big part is exactly the way to hit these.

Luke Brandenberg: These guys are going to outspend cash flow when you pick up a rig, and then eventually that becomes a self-sustaining program that we're excited about. Our first partnership is running 2 rigs. Hopefully sometimes next year, that gets to being about cash flow positive. To be totally transparent, though, we're going to pick up a rig, hopefully middle of this year with our second partner. We have a third partner we're really fired up about. They wouldn't be drilling anytime soon, maybe late this year, but they'll be in that cash flow outspend as well. The goal is to get those guys cash flow positive. You're living in within cash flow. We can actually put a positive print on a free cash flow basis. It's coming. It's definitely coming. Anything else we can hit there for you, Chris? I really appreciate the question and you dialing in.

Chris Baker: These guys are going to outspend cash flow and you pick up a rig and then eventually that becomes a self sustaining program that we're excited about so.

Chris Baker: Our first partnership was running two rigs hopefully sometimes next year that gets to being.

What about cash flow positive.

Chris Baker: To be totally transparent, though we are going to pick up a rig.

Chris Baker: In the middle of this year with our second partner, we have a third partner, we're really fired up about.

Chris Baker: They wouldn't be drilling any time soon maybe late this year, but there'll be in that cash flow outspend as well, but the goal is to get those guys cash flow positive you're living within cash flow, we can actually put a positive trend on that.

Chris Baker: Free cash flow basis.

Kevin: It's Kevin.

Kevin: It's definitely talent.

Kevin: Okay.

Chris Baker: Anything else, we can hit therefore, you Chris I really appreciate the question and Youre dialing in.

Chris Baker: Oh, sorry, guys. I was on mute. Thanks for the answer. Super helpful. Congrats on the quarter.

Speaker Change: Sorry, guys I was on mute thanks for the answer Super helpful. Congrats on the quarter.

Luke Brandenberg: Hey, thank you, Chris. Have a great weekend.

Chris Baker: Chris have a great weekend.

Chris Baker: You, too.

Speaker Change: You too.

Operator 1: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

Speaker Change: Ladies and gentlemen that concludes today's call. Thank you all for joining you may now disconnect.

Speaker Change: [music].

Speaker Change: Yeah.

Speaker Change: [music].

Speaker Change: Yeah.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Yes.