Granite Ridge Resources NYSE: GRNT reported higher first-quarter 2026 production and revenue, while management said elevated lease operating expenses and weak Permian Basin natural gas pricing weighed on results.
President and Chief Executive Officer Tyler Farquharson said the company delivered “strong operational execution” in the quarter, with production up 18% year over year to 34,500 barrels of oil equivalent per day. Adjusted EBITDA was $71 million.
Farquharson said Granite Ridge remains positioned for continued growth in the second half of 2026 and reiterated the company’s expectation for a “trajectory to free cash flow in 2027.” He said the company views 2026 as “the last year we expect to outspend operating cash flow.”
Revenue rises, but gas pricing pressures results
Oil and natural gas sales totaled $128.3 million in the first quarter, up $5.3 million from the same period in 2025. The increase was driven by oil revenue, which rose to $103.4 million from $91.8 million a year earlier.
Chief Financial Officer Kyle Kettler said oil production increased 11% to 16,433 barrels per day, while the average realized oil price was $69.94 per barrel, compared with $69.18 per barrel in the first quarter of 2025.
Natural gas revenues fell to $24.8 million from $31.1 million in the prior-year period. Kettler said the decline reflected a 36% drop in realized natural gas prices to $2.55 per Mcf, partially offset by a 24% increase in gas production. He cited “the ongoing impact of negative Waha basis differentials in the Permian” as the primary headwind on revenue and cash flow.
On an equivalent basis, Granite Ridge’s average realized price was $41.35 per BOE, excluding settled commodity derivatives, compared with $46.71 per BOE in the first quarter of 2025. Including settled derivatives, realizations were $37.53 per BOE.
Granite Ridge recorded a GAAP net loss of $47 million, or $0.36 per diluted share. Kettler said the loss was “almost entirely” due to a $72 million loss on derivatives, including $60.2 million of unrealized mark-to-market losses driven by rising oil prices. Adjusted net income was $3.1 million, or $0.02 per adjusted diluted share.
LOE comes in above expectations
Management spent part of the call addressing lease operating expense, which rose to $29.7 million, or $9.57 per BOE, compared with $16 million, or $6.17 per BOE, in the first quarter of 2025.
Farquharson said the increase was largely tied to early-life flowback expenses from wells turned to sales in the fourth quarter of 2025, higher saltwater disposal costs and a one-time charge related to an asset impairment. Kettler added that higher miscellaneous supplies and contract labor, compression rental in newer Admiral operating areas, and fixed costs spread over declining production in the DJ and Bakken also contributed.
Granite Ridge raised its full-year LOE guidance to $7.75 to $8.75 per BOE. Management said it expects per-unit LOE to improve as new wells come online during 2026 and add production volume.
Guidance updated for acquisition spending
Granite Ridge maintained its full-year production guidance of 34,000 to 36,000 BOE per day, with Farquharson saying the company believes it is on track to meet or exceed the midpoint.
The company also left development capital guidance unchanged at $300 million to $330 million. However, it increased acquisition capital by $25 million at the midpoint, resulting in total capital guidance of $345 million to $385 million.
During the first quarter, Granite Ridge invested $68.4 million, including $58.3 million of development capital and $10.1 million of acquisition costs. The company closed 17 transactions in the Delaware and Utica basins, adding three net undeveloped locations to its inventory.
Kettler said first-quarter development spending was below the pace implied by full-year guidance due to project timing, not a reduction in planned activity. He said the company expects second-quarter development capital could exceed $100 million, with another $40 million slated for acquisitions.
Company highlights hedging and Permian opportunity
Farquharson said Granite Ridge has responded to Waha pricing weakness through an active basis hedging program. From February through April, the company added Waha basis swaps from the fourth quarter of 2026 through the first quarter of 2028 at a weighted-average basis of approximately negative $1.50.
He said the hedges cover roughly 45% of total Permian gas in the fourth quarter and increase in 2027 to nearly 70% on a proved developed producing basis when conduit volumes are included.
Management also pointed to an improved opportunity set, particularly through operator partnerships. Farquharson described a Permian Basin opportunity involving a major operator seeking near-term production growth while constrained by its budget. He said Admiral Permian is positioned to secure a rig, drill Bone Spring targets, complete the wells and bring them online before year-end.
Farquharson said the project carries a 55% internal rate of return and 2.4 times multiple on invested capital at strip pricing. He said it demonstrates the advantages of Granite Ridge’s operator partnership model, including access to inventory that would otherwise be difficult for a company of its size to reach.
Analysts ask about acquisitions and 2027 outlook
During the question-and-answer session, Stephens analyst Michael Scialla asked whether the increased acquisition capital was tied to the Admiral opportunity. Farquharson said the Admiral project would fall under potential additional development spending, not the acquisition capital increase.
Farquharson said the $25 million acquisition capital increase reflects transactions expected to close in the second quarter, spread across roughly half a dozen to a dozen deals, mainly in the Permian. He said about 15% relates to additional leasing in the Utica Shale in Ohio.
Scialla also asked how Granite Ridge expects to lower capital spending next year while ramping partnerships. Farquharson said the Admiral partnership has largely absorbed its startup capital and is expected to become “self-sustaining” beginning in the back half of 2026, helping support the company’s 2027 free cash flow inflection.
In response to a question from Texas Capital analyst Derrick Whitfield, Farquharson said Granite Ridge is seeing more opportunities where large Permian operators seek partners to expand production without increasing their own capital budgets. He said the specific opportunity discussed on the call would likely fall on “the smaller end” of a range Whitfield framed as $25 million to $100 million.
Farquharson closed by reiterating the company’s 2027 framework, which targets high single-digit production growth, more than 10% free cash flow yield and approximately 1.25 times dividend coverage. He said the dividend remains a core part of Granite Ridge’s shareholder return framework.
About Granite Ridge Resources NYSE: GRNT
Granite Ridge Resources, Inc operates as a non-operated oil and gas exploration and production company. It owns a portfolio of wells and acreage across the Permian and other unconventional basins in the United States. Granite Ridge Resources, Inc is based in Dallas, Texas.
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