Granite Ridge Resources, Inc.

Hello, everyone. Thank you for joining us. And welcome to the Granite Ridge Resources first quarter 2026 earnings conference call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to James Masters, Vice President of Investor Relations. Please go ahead.

Thank you, operator, and good morning, everyone. We appreciate your interest in Granite Ridge Resources. We will begin our call with comments from Tyler Parkerson, our president and chief executive officer, who will review the quarter's results and company strategy. He will then turn the call over to Kyle Kettler, our chief financial officer, to review our financial results in greater detail. Tyler will then return to provide closing comments before we open the call 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. We ask that you review the cautionary statement in our earnings release. Granite Ridge disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Accordingly, you should not place undue reliance on these statements. These and other risks are described in our press release and our filings with the Securities and Exchange Commission. This call also includes references to certain non-GAAP financial measures. Information reconciling these measures to the most directly comparable GAAP measures is available in our earnings release on our website. Finally, this call is being recorded, and a replay and transcript will be available on our website following today's call. With that, I'll turn the call over to Tyler.

Thank you, James, and good morning, everyone. We delivered strong operational execution in the first quarter. 18% production growth year-over-year to 34,500 barrels of oil equivalent per day, and adjusted EBITDA of $71 million, and are positioned well for continued growth in the back half of 2026 with a trajectory to free cash flow in 2027. Two items in the quarter require additional discussion, lease operating expense and continued WHAA weakness, which I will address both before turning to what is, in my view, The more important story, the opportunity set in front of us has improved materially since we set guidance in March and we are positioning the platform to capture it. Starting with the financials, oil and natural gas sales totaled $128.3 million, a $5.3 million increase over the first quarter of 2025. Oil revenues drove the improvement with an 11% production increase and essentially flat realized pricing of $69.94 per barrel. Natural gas revenues declined by 6.3 million year over year, driven by a 36% decline in realized gas prices to $2.55 per MCF, reflecting the ongoing impact of negative Waha pricing in the Permian. We've addressed this through an active basis hedging program. From February through April, We layered in Waha basis swaps across the fourth quarter of 2026 through the first quarter of 2028 at a weighted average basis of approximately negative $1.50, covering roughly 45% of total Permian gas in the fourth quarter and stepping into 2027 with coverage rising to nearly 70% on a PDP basis when our conduit volumes are included. Turning to lease operating expense, LOE came in at $9.57 per VOE, above our prior guide, and was largely the result of a combination of increased early life flowback expense from an elevated level of wells turned to sales at Q4 2025, saltwater disposal costs, and a one-time charge tied to an asset impairment. A smaller structural piece comes from the DJ at Bakken, where production is naturally declining and fixed costs are spread over fewer barrels. We view the quarter as a near-term outlier rather than a change in our cost trajectory. As 2026 volumes come online, per unit LOE should trend lower, and Kyle will walk through our updated full-year range. Let me now turn to the important part of the story. As capital allocators invest through cycles, our full cycle 25% underwriting threshold is always anchored to the long-dated script. Spot prices have increased dramatically, and the forward curve has come up meaningfully as well, which has bolstered economics on near-term development opportunities. On the non-op side of the portfolio, we have seen some acceleration in ASEs, particularly in the Utica, adding to an already attractive set of opportunities in that basin. Additionally, on the operator partnership side, we're actively evaluating additions to the 2026 capital program, will reflect our ability to access high quality inventory that would otherwise be inaccessible to companies of our size the most significant of these is a permian basin opportunity with a major operator who is seeking to grow near-term production but is budget constrained this operator needed someone who can quickly secure a rig fill the bone springs targets complete the wells and bring them online before you're it our admiral permian team is the right fit for this project At a 55% IRR and 2.4 MOI at Strip, this is another opportunity that demonstrates the structural advantages of the Operator Partnership Model, where relationships and local connections are not easily replicated and where a proven, reliable operator like Admiral can secure highly attractive projects in the heart of the Delaware Basin. On capital, we invested $68.4 million during the first quarter. 58.3 million of development capital and 10.1 million in acquisitions, closing 17 transactions in the Delaware and Utica basins that added three net undeveloped locations to our inventory. Total capital was below the pace implied by our four-year guidance, reflecting the timing of projects, and as a result, first half development capital is weighted towards the second quarter, likely exceeding 100 million, with another 40 million slated for acquisitions. On guidance, we are making two changes today. We are raising the full year LOE guidance range to 775 to 875 per BOE. And we are increasing acquisition capital by 25 million at the midpoint, reflecting transactions we have completed and deals we have clear line of sight to close. Importantly, the majority of these acquisitions were agreed to before the significant shift in oil prices. Reflection of our deal flow and underwriting process rather than a response to the current price environment. And I look even more attractive today. Development capital guidance is unchanged at 300 to 330 million, resulting in total capital guidance of 345 to 385 million. Production guidance remains 34,000 to 36,000 per day, and we believe we are on track to meet or exceed the midpoint. The capital we are deploying in 2026 including the incremental opportunities in front of us, is building the production base that will drive the 2027 inflection. This is the last year we expect to outspend operating cash flow, and we have clear line of sight to that destination in a framework that delivers durable growth, a double digit free cash flow yield, and a sustainable dividend.