Granite Ridge Resources, Inc.

Good morning and welcome everyone to Granite Ridge Resources' fourth quarter and full year 2023 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. To ask a question at that time, simply press the star followed by the number one on your telephone keypad. I will now turn the call over to Wes Harris, Investor Relations Representative for Granite Ridge.

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

Thank you, Wes, and thank you to everyone for joining today's call. It's fun to see both familiar and new names on the screen as our call participation climbs quarter over quarter. We appreciate each of you sharing your time with us. 2023 was a record year on many fronts for Granite Ridge. My plan for this call is to start high level and to zoom in from there. So for those of you that are fully up to speed and just looking to fine tune your model, I'll ask that you bear with me. We have three primary objectives going into 2023. strengthen the organization, make the company more investable, and continue our legacy of driving value for investors by generating, evaluating, and investing in opportunities with the best risk-adjusted returns. And I'm proud to say that we made great strides on all the above. On the organizational front, it has been quite the heavy lift transitioning from a private to a public company. This has touched virtually every member of the organization. And by touched, I really mean created additional work streams. I'd like to start by thanking everyone on our team for stepping up to the challenge to make sure that things are not just done, but that they are done right. To put some numbers to this, we added seven new team members in the past 12 months, and from a standing start, achieved nine corporate SOX milestones and implemented 140 different controls. On the investor front, it has been a whirlwind of a year. I joke that in my past life in private equity, I used to go to where the oil was, which made Southwest Airlines my airline of choice. But as a public company, I now spend more time going to where the money is. With over 150 meetings from Southern California to the Pacific Northwest and from the Northeast down to Miami and many spots in between, I quickly found my way to status on American Airlines. With roughly 3,700 public companies, it is on us to give investors like you a reason to care about Granite Ridge. So between investor meetings, banks that are kind to have us at the conferences, and a secondary offering that demonstrated that our largest shareholder continues to be willing to make the hard decisions, Granite Ridge continues to become more investable. We maintained our $0.11 per quarter dividend, or $0.44 per annum, and bought back $36 million of stock. And I would note that we do not have a repurchase program in place currently. Trading volume is up 10x from last January. Research coverage is up from 1 to 4. And the number of reported shareholders is up over 5x from year end 22 to year end 23. Another data point I like is from a trip to New York for investor meetings earlier this year. We brought 25 pitch books with us for 10 meetings, and two days later, we brought all 25 books home. Meetings are changing from the what is Granite Ridge to more rapid-fire Q&A with folks that are generally up to speed on the company. We still have wood to chop. On more than one occasion, the PM of larger institutions told us that they'd like to buy Granite Ridge in their personal account, but the trading volume is a challenge for the fund to take a position. So, in addition to consistent execution, we will continue to pound the pavement to spread the Granite Ridge story, and I hope to see many of you this year. Now onto the assets. Tyler will get into more of the details in a moment, but I would like to share some of the highlights. We started 2023 expecting 9% year-over-year production growth, and turned in 23%, including over 26,000 barrels of oil equivalent per day for the fourth quarter. While some of that beat was from new investments made in 2023, most of it came from acceleration and solid execution from our operating partners. Despite significantly lower hydrocarbon prices in 2023 over 2022, we generated $305 million of adjusted EBITDAX, and increased proves reserves by 6% year over year. At Granite Ridge, we drive value by quickly recycling that cash flow into opportunities with the best risk-adjusted returns. With investments in 308 gross wells in 2023 and roughly 20 to 30 deals a year, cash flow does not sit on the balance sheet long. As in the past, I want to thank everyone involved, including our amazing internal folks, outstanding operating partners, and solid team of supporting external professionals for their continued hard work and dedication. Now, I'd like to talk a bit about what we did with that cash flow. In 2023, we had $298 million of operating cash flow before working capital changes. We estimate that maintenance CapEx for the year, or drilling and completion dollars necessary to keep production flat from 22 to 23, was $175 million. That left $123 million of discretionary cash flow to drive shareholder returns. If you compare that to our enterprise value, it is a 14% yield. Now, what we did with $123 million in 23 was to pay $59 million in dividends, spend $36 million repurchasing shares, and reinvest $29 million in growth projects. Additionally, we spent an incremental $151 million of cash and credit facility borrowings for $180 million invested for growth and ended the year with leverage of only 0.3X below our target of 0.5X or around $150 million. In 2024, so long as the opportunity set justifies, I'll expect that we will continue to draw on our credit facility until we hit that 0.5X target and then we'll bounce around the $150 million level. Diving into the fourth quarter now, we put out a press release in early February outlining our A&D activity including three acquisitions, two in the Haynesville and one in the Eagleford, five opportunities developed through our traditional non-op or what we call our burgers and beer strategy, including three in the Delaware and two in the Eagleford, and two deals with a strategic partner in the Delaware Basin that we call controlled CapEx, where we are the largest interest owner and have full control over development timing. The fourth quarter also benefited from another great period of execution by our operating partners, which they turned 80 gross or 4.6 net wells to sales which contributed to the production beat a recent significant development was our closing in late december on the sale of certain permian basin assets to vital energy for consideration of about 1.1 million shares of vital stock worth about 54 million dollars today the assets we sold consisted of approximately 1 658 net acres and 45 gross or 9.9 net producing wells that contributed about 1,700 barrels of oil equivalent per day of production for the full year of 23 and approximately 1,500 barrels per day for the fourth quarter of 23. Now, while we are typically not a seller of assets, we are always open to evaluating compelling rate of return transactions that enhance shareholder value. This deal did exactly that. Simply put, Our long-term partnership with the Henry family allowed us to buy in at a non-op discount and tag along to sell at an operator premium. We will see how Vital Stock performs. We're certainly rooting for them. And I expect that we exit that position this year and recycle the capital into development opportunities with higher rates of return than the production that we sold. We made a point to mention strategic partnerships on just about every call as this is a real differentiator for our company. As a reminder, we group our opportunity set into three buckets. The first is traditional non-op, or what we call burgers and beer. These are typically smaller deals under good operators in good areas with line of sight to development in the next year or two. The second is acquisitions, or consolidating the consolidators. These come in different shapes and sizes, but are typically either packages of non-op or buying alongside an operating partner. The third bucket is strategic partnerships. I would broadly describe this as more than just a deal. While our burgers and beer deals are generated based on relationships, they're typically one transaction at a time. Our strategic partnerships, on the other hand, are of a larger scale where we benefit from our partners' future business development efforts through ROFR, AMI, or joint venture type structures. The strategic partnership we talk about most is with a private operator out of Midlands, where our partnership gives us control of the assets such that we control development timing. After spending almost a year building inventory, we picked up two rigs in November to initially develop five and a half net wells in the Delaware Basin. Those wells were drilled through the end of January, and our partner absolutely nailed it, coming in roughly 15% under AFE. We expect completions will begin late this month or early next with a turn to sales late in the second quarter. So turning to our outlook for 2024. We currently expect production levels to range between 23,250 and 25,250 barrels of oil equivalent per day, an approximate 7% increase at the midpoint from the 23 levels adjusted for the divestiture of the assets to vital. As usual, our production will be lumpy. We expect a bit of decline from the fourth quarter to the first quarter, maybe 5% if you adjust for the vital sale, though that may look more like 10% if comparing fourth quarter reported to first quarter reported. We expect production will begin to ramp in the third quarter as we anticipate our first controlled CapEx pad with our strategic partner that I mentioned earlier to come online late in the second quarter. On the acquisition side, and I'll note that this number includes both inventory and production acquisitions, as we have in the past, we only guide the deals that are closed or that are agreed to and have a high probability of close. Right now, that number sits at $35 million. but we expect that will increase as our business development efforts continue to generate attractive opportunities. On the development CapEx side, we currently see line of sight to between $230 million and $250 million of drilling and completion, and expect to turn 22 to 24 net wells to sales for the year. That brings us to total CapEx of $265 to $285 million. We expect that to be slightly front half loaded, with just over 50% of the CapEx in the first half of the year and just over half of that in the first quarter. We also look forward to keeping a continued close eye on controlling costs. Our current outlook for LOE is $650 to $750 per barrel of oil equivalent. Production and ad valorem taxes range from 7% to 8%, and cash G&A of $23 million to $26 million. A couple other data points that may be relevant for the year are that we believe 2024 maintenance CapEx to be $175 to $200 million, And we expect our production-based corporate annual decline to be in the low 40%. So with that, I'll turn it over to Tyler to discuss our financial results in more detail. Tyler?