Granite Ridge Resources, Inc.

good morning and welcome to granite ridge resources third quarter 2022 results conference call all participants are in a listen only mode as a reminder this conference call is being recorded i would now like to turn the call over to scott espenshade investor relations please go ahead thank you i am scott espenshade investor relations representative for granite ridge welcome to granite ridge resources first conference call as a public company

Today, we will be discussing the combined pro forma third quarter 2022 financial and operation information compiled from Gray Rock's three investment funds being shown as Granite Ridge for the conference call. Participating on today's call is Luke Brandenburg, President and Chief Executive Officer of Granite Ridge, and Tyler Farquharson, Chief Financial Officer. Please note that the third quarter information in our 10-Q reflects only the financial results and operations of Gray Rock's Fund 3 as predecessor in the business combinations. Granite Ridge did not conduct any activity prior to the business combination on October 24, 2022, and the predecessor, Gray Rock Energy Fund III, became a subsidiary of Granite Ridge upon the closing of various formation transactions completed concurrently with the business combination. As a result, Granite Ridge results for the fourth quarter of 2022 will not be comparable to the third quarter displayed in the current 10Q. For the purpose of presenting Granite Ridge's third quarter results in today's call, Granite Ridge is presenting a summary of selected unaudited pro forma condensed combined operating and financial results for the three months ended September 30th, 2022 and 2021 respectively for Grow Rock funds one, two, and three. The assets of which together with the cash remaining in ENPC's trust account following the stockholder redemptions constitute the assets of Granite Ridge following the business combination. Today's call was prerecorded and a playback will be available on Granite Ridge's website Due to the nature and timing of the business combination, we will not be hosting a question and answer session on this call, but intend to enhance disclosure as reporting normalizes for Grant Ridge. Information reconciling non-GAAP financial measures discussed to their most directly comparable GAAP financial measures is available in the investor relations portion of our website and in our earnings release. Today's conference call contains certain projections and other forward-looking statements within the meeting of federal security laws. These statements are subject to risk and uncertainties that may cause actual results to differ from those expressed or implied in these statements. Additional information on factors that could cause results to differ is available in the company's 10-Q, which was filed earlier today. We would ask that you review it and the cautionary statement in our earnings release. A replay and transcript will be made available on our website following today's call and will be available for at least 14 days following the call. I will now turn the call over to Luke.

Thank you, Scott, and thank you to everyone for attending Granite Ridge's inaugural earnings call. I'm honored to have been selected to lead Granite Ridge, and I'm eager to execute our strategy that sees the opportunities created by today's energy environment. We're excited to introduce you to a new public company in the oil and gas sector, Granite Ridge Resources, and its significant value opportunity, which trades under the ticker GRNT on the New York Stock Exchange. Granite Ridge is a premier non-operated oil and gas exploration and production company. We invest in a diversified portfolio of production and top-tier acreage across the Permian, Bakken, Eagleford, DJ, and Haynesville in partnership with proven operators. We create value by generating sustainable, full-cycle, risk-adjusted returns for investors, by offering a rewarding experience for our team, and by playing our part to provide secure, reliable energy safely and responsibly. We are well-positioned to create substantial value for shareholders. As most of you are new to Granite Ridge Resources, let me give an overview of the business combination in a short introduction as we are quite distinct from most of our peers in the sector. Granite Ridge was born out of a business combination with the private equity firm Greyrock Energy Partners, an executive network partnering corporation, a special purpose acquisition entity that traded under the ticker ENPC. Greyrock was formed in 2013 with a goal of bringing institutional capital to the non-op sector and it ultimately accumulated an interest in over 2,500 wells across its first three funds. Red Rock felt that it was an opportune time to enter the public markets and partnered with ENPC to form Granite Ridge. The business combination was successful, and we debuted on the New York Stock Exchange on October 25th. So what is Granite Ridge? In essence, we have two sides to the house. The first is a cash flow generating asset base that is diversified across operator, basin, and hydrocarbon types. The second is similar to a private equity fund, but with daily liquidity, a quarterly dividend, and long-term investor alignment that will allocate the cash flows across an attractive investment opportunities and shareholder return initiatives. Combined, Granite Ridge offers investors a proven business development mousetrap that leverages real-time data and analytics to provide exposure to top-tier, often private operators and high-quality basins underpinned by strong cash flow and attractive dividend yield and a fortress balance sheet. Let me go over some of the basic facts of the business combination. Granite Ridge begins with no debt. We feel this is very important and we'll discuss it more later. We have approximately 133 million shares outstanding and unlike most SPACs, Granite Ridge has a clean structure with only 10.3 million warrants outstanding and limited downside protection for the SPAC sponsors. Kyle will discuss more of this and the details later. Our strategy at Granite Ridge is unique in the upstream space, as only a small number of publics focus exclusively on non-operated properties. We believe Granite Ridge is a differentiated offering by giving the public investor exposure to core areas under the best operators, both public and private, through a vehicle with low leverage that is built for growth. I continue to mention private operators. Across most basins, and particularly the Permian, Some of the best drilling inventory and operators are privately owned, making it difficult for public investors to access these assets. Granite Ridge has and will continue to build our exposure under the premier private operators. Furthermore, we believe the non-op sector is ripe for consolidation, both at the asset level and consolidating the consolidators, which we expect to provide a lot of opportunity to capture value in the coming years. Let me now highlight our capital allocation strategy. We have a sustainable return of capital framework in place at Granite Ridge. Our fortress balance sheet and low-cost operations provide significant cash flow. We've implemented a dividend structure anticipated to be $60 million per annum that provides strong cash returns to shareholders of roughly 5% at current prices, but upside growth potential through our aggregation strategy. This framework will allow Granite Ridge to sustain leverage of less than one times EBITDA, though I am much more comfortable at half a turn of leverage or less in higher price environments like we're experiencing today. As previously noted, we currently have zero debt outstanding. This capital strategy allows us to comfortably prioritize our highest return opportunities and over the longer term, focus excess cash flow on increasing the return of capital to shareholders. In the more immediate future, our cash flow gives us the flexibility to support our existing shareholders as we evaluate opportunities to manage the equity overhang from our controlling stockholder. I'd like to talk a bit more about what the business development mousetrap I mentioned earlier has accomplished this year. In times of relatively higher hydrocarbon prices, we like to reduce market risk by focusing more on near-term drilling opportunities and less on production bias. That means two things. One, we're willing to pay more for wells that we'll be able to put on production sooner, and two, Our asset diversity allows us to deploy capital where the rigs are, and currently most of that is in the Permian. These opportunities are not banker-marketed deals, but rather generated from deep relationships built over nearly a decade of our partner, Greyrock, earning the right to be a trusted counterparty by consistently being in places like Midland and Denver to buy a stake and to make an offer in good times and in bad. One thing that stands out to me about our third quarter is And it may go without saying, but the timing of putting wells on production can be lumpy and does not necessarily tie with CapEx. We added only one half net well during the quarter, but we spent $72 million of CapEx due to our more robust than expected deal pipeline. While most of that $72 million of CapEx went either to entry costs or drilling and completion for our 17.8 net wells in progress at quarter end, 5.5 net of which have since been put on production. That capex spend is not expected to generate production until the fourth quarter or early 2023. That said, production still increased by 29% from the third quarter of last year to over 21,000 barrels per day of oil equivalent, roughly 45% of which is oil. As mentioned in our September press release, we may see a bit of a production pullback in the fourth quarter of potentially a few thousand barrel equivalent per day as some operators, given supply and labor constraints, are delayed in bringing wells online. However, we expect to see those volumes early next year. We are fresh off our first board meeting that mainly focused on many of the administrative and governance tasks of a newly formed company. We feel fortunate to have a diverse and strong board that has a keen focus on ESG metrics that will be meaningful in managing and reducing the business risks of Granite Ridge. We did not have our 2023 capital plans approved at this meeting. We expect that we will release our 2023 guidance along with our fourth quarter results early next year. Currently, it is our belief that our 2022 activity levels should serve as a guide to activity next year, but that may be augmented through our aggregation strategy. At this point, I will hand it off to Granite Ridge CFO Tyler Farquharson to summarize the core elements of our business combination and third quarter results on a pro forma combined basis.