Le Lézard
Classified in: Business, Covid-19 virus
Subjects: EARNINGS, Conference Call, Webcast

Granite Ridge Resources Inc. Reports First Quarter 2024 Results


Granite Ridge Resources Inc. ("Granite Ridge" or the "Company") (NYSE: GRNT) today reported financial and operating results for the first quarter of 2024.

First Quarter 2024 Highlights

See "Supplemental Non-GAAP Financial Measures" below for descriptions of the above non-GAAP measures as well as a reconciliation of these measures to the associated GAAP (as defined herein) measures.

Luke Brandenberg, President and CEO of Granite Ridge, commented, "Our first quarter 2024 performance is how we hope to start every year as we beat internal projections across the board, captured multiple acquisitions, and saw great execution by our Strategic Partners. We look forward to continuing to demonstrate that what we are building at Granite Ridge is different, repeatable, and resilient as we both grow the business and return capital to shareholders while maintaining conservative leverage."

First Quarter 2024 Summary

First quarter 2024 oil production volumes totaled 10,650 barrels ("Bbls") per day, a 0.7% decrease from the first quarter of 2023. Natural gas production for the first quarter of 2024 totaled 79,151 thousand cubic feet of natural gas ("Mcf") per day, a 6% increase from the first quarter of 2023. As a result, the Company's total production for the first quarter of 2024 grew 3% from the first quarter of the prior year to 23,842 Boe per day.

Net income for the first quarter of 2024 was $16.2 million, or $0.12 per diluted share. Excluding non-cash and special items, the first quarter 2024 Adjusted Net Income (non-GAAP) was $15.3 million, or $0.12 per diluted share. The Company's average realized price for oil and natural gas for the first quarter of 2024, excluding the effect of commodity derivatives, was $78.17 per Bbl and $1.84 per Mcf, respectively.

Adjusted EBITDAX (non-GAAP) for the first quarter of 2024 totaled $64.5 million, compared to $70.7 million for the first quarter of 2023. First quarter 2024 cash flow from operating activities was $68.7 million, including $7.1 million in working capital changes. Operating Cash Flow Before Working Capital Changes (non-GAAP) was $61.6 million. Costs incurred for development activities totaled $62.6 million for the first quarter of 2024.

During the quarter, the Company closed four short-cycle oil and gas acquisitions in the Permian Basin with aggregate inventory of 2.5 net locations, acquisition cost of $6.8 million (inclusive of expected future carry), and estimated future development capital expenditures of $23 million. These acquisitions, and the related development capital and production, were included in the Company's original 2024 guidance.

Operational Activity

The table below provides a summary of gross and net wells completed and put on production for the first quarter 2024:

 

 

Three Months Ended March 31, 2024

 

Gross

 

Net

Permian

17

 

1.52

Eagle Ford

8

 

2.90

Bakken

18

 

0.29

Haynesville

6

 

0.34

DJ

9

 

0.02

Total

58

 

5.07

On March 31, 2024, the Company had 264 gross (14.3 net) wells in process.

Costs Incurred

The table below provides the costs incurred for oil and natural gas producing activities for the periods indicated:

 

Three Months Ended March 31,

(in thousands)

2024

 

2023

Property acquisition costs:

 

 

 

Proved

$

1,147

 

$

17,989

Unproved

 

1,481

 

 

9,630

Development costs

 

62,639

 

 

98,606

Total costs incurred for oil and natural gas properties

$

65,267

 

$

126,225

Commodity Derivatives Update

The Company's commodity derivatives strategy is intended to manage its exposure to commodity price fluctuations. Please see the table under "Derivatives Information" below for detailed information about Granite Ridge's current derivatives positions.

2024 Guidance

The following table summarizes the Company's operational and financial guidance for 2024, which is unchanged.

Annual production (Boe per day)

23,250 - 25,250

Oil as a % of sales volumes

47 %

 

 

Acquisitions ($ in millions)

$35 - $35

Development capital expenditures ($ in millions)

$230 - $250

Total capital expenditures ($ in millions)

$265 - $285

 

 

Net wells placed on production

22 - 24

 

 

Lease operating expenses (per Boe)

$6.50 - $7.50

Production and ad valorem taxes (as a % of total sales)

7% - 8%

Cash general and administrative expense ($ in millions)

$23 - $26

Conference Call

Granite Ridge will host a conference call on May 10, 2024, at 10:00 AM Central Time (11:00 AM Eastern Time) to discuss its first quarter 2024 results. A brief Q&A session for security analysts will immediately follow the discussion. The telephone number and passcode to access the conference call are provided below:

Dial-in: (888) 660-6093
International dial-in: (929) 203-0844
Participant Passcode: 4127559

To access the live webcast visit Granite Ridge's website at www.graniteridge.com. Alternatively, an audio replay will be available through May 26, 2024. To access the audio replay dial (800) 770-2030 and enter confirmation code 4127559.

Upcoming Investor Events

Granite Ridge management will also be participating in the following upcoming investor events:

Any investor presentations to be used for such events will be posted prior to the respective event on Granite Ridge's website. Information on Granite Ridge's website does not constitute a portion of, and is not incorporated by reference into this press release.

About Granite Ridge

Granite Ridge is a scaled, non-operated oil and gas exploration and production company. We own a portfolio of wells and top-tier acreage across the Permian and four other prolific unconventional basins across the United States. Rather than drill wells ourselves, we increase asset diversity and decrease overhead by investing in a smaller piece of a larger number of high-graded wells drilled by proven public and private operators. We create value by generating sustainable full-cycle risk adjusted returns for investors, offering a rewarding experience for our team, and delivering reliable energy solutions to all ? safely and responsibly. For more information, visit Granite Ridge's website at www.graniteridge.com.

Forward-Looking Statements and Cautionary Statements

This press release contains forward-looking statements regarding future events and future results that are subject to the safe harbors created under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. All statements other than statements of historical facts included in this release regarding, without limitation, Granite Ridge's 2024 outlook, financial position, operating and financial performance, business strategy, plans and objectives of management for future operations, industry conditions, indebtedness covenant compliance, capital expenditures, production and cash flows are forward-looking statements. When used in this release, forward-looking statements are generally accompanied by terms or phrases such as "estimate," "project," "predict," "believe," "expect," "continue," "anticipate," "target," "could," "plan," "intend," "seek," "goal," "will," "should," "may" or other words and similar expressions that convey the uncertainty of future events or outcomes. Items contemplating or making assumptions about actual or potential future production and sales, market size, collaborations, and trends or operating results also constitute such forward-looking statements.

Forward-looking statements involve inherent risks and uncertainties, and important factors (many of which are beyond Granite Ridge's control) that could cause actual results to differ materially from those set forth in the forward-looking statements, including the following: the ability to recognize the anticipated benefits of the business combination, Granite Ridge's financial performance following the business combination, changes in Granite Ridge's strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects and plans, changes in current or future commodity prices and interest rates, supply chain disruptions, infrastructure constraints and related factors affecting our properties, ability to acquire additional development opportunities and potential or pending acquisition transactions, as well as the effects of such acquisitions on the Company's cash position and levels of indebtedness, changes in reserves estimates or the value thereof, operational risks including, but not limited to, the pace of drilling and completions activity on our properties, changes in the markets in which Granite Ridge competes, geopolitical risk and changes in applicable laws, legislation, or regulations, including those relating to environmental matters, cyber-related risks, the fact that reserve estimates depend on many assumptions that may turn out to be inaccurate and that any material inaccuracies in reserve estimates or underlying assumptions will materially affect the quantities and present value of Granite Ridge's reserves, the outcome of any known and unknown litigation and regulatory proceedings, limited liquidity and trading of Granite Ridge's securities, acts of war, terrorism or uncertainty regarding the effects and duration of global hostilities, including the Israel-Hamas conflict, the Russia-Ukraine war, continued instability in the Middle East, including from the Houthi rebels in Yemen, and any associated armed conflicts or related sanctions which may disrupt commodity prices and create instability in the financial markets, and market conditions and global, regulatory, technical, and economic factors beyond Granite Ridge's control, including the potential adverse effects of world health events, such as the COVID-19 pandemic, affecting capital markets, general economic conditions, global supply chains and Granite Ridge's business and operations, and increasing regulatory and investor emphasis on, and attention to, environmental, social and governance matters.

Granite Ridge has based these forward-looking statements on its current expectations and assumptions about future events. While management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond Granite Ridge's control. Granite Ridge does not undertake any duty to update or revise any forward-looking statements, except as may be required by the federal securities laws, and our ability to establish and maintain effective internal control over financial reporting.

Use of Non-GAAP Financial Measures

To supplement the presentation of the Company's financial results prepared in accordance with U.S. Generally Accepted Accounting Principles ("GAAP"), this press release contains certain financial measures that are not prepared in accordance with GAAP, including Adjusted Net Income, Adjusted Earnings Per Share, Adjusted EBITDAX, Operating Cash Flow Before Working Capital Changes and Free Cash Flow.

See "Supplemental Non-GAAP Financial Measures" below for a description and reconciliation of each non-GAAP measure presented in this press release to the most directly comparable financial measure calculated in accordance with GAAP.

 

Granite Ridge Resources Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

 

(in thousands, except par value and share data)

March 31, 2024

 

December 31, 2023

ASSETS

 

 

 

Current assets:

 

 

 

Cash

$

20,782

 

 

$

10,430

 

Revenue receivable

 

64,831

 

 

 

72,934

 

Advances to operators

 

15,207

 

 

 

4,928

 

Prepaid and other expenses

 

2,737

 

 

 

1,716

 

Derivative assets - commodity derivatives

 

7,094

 

 

 

11,117

 

Equity investments

 

58,207

 

 

 

50,427

 

Total current assets

 

168,858

 

 

 

151,552

 

Property and equipment:

 

 

 

Oil and gas properties, successful efforts method

 

1,301,346

 

 

 

1,236,683

 

Accumulated depletion

 

(508,307

)

 

 

(467,141

)

Total property and equipment, net

 

793,039

 

 

 

769,542

 

Long-term assets:

 

 

 

Derivative assets - commodity derivatives

 

?

 

 

 

1,189

 

Other long-term assets

 

4,785

 

 

 

4,821

 

Total long-term assets

 

4,785

 

 

 

6,010

 

Total assets

$

966,682

 

 

$

927,104

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

Current liabilities:

 

 

 

Accrued expenses

$

62,028

 

 

$

60,875

 

Other liabilities

 

4,081

 

 

 

1,204

 

Total current liabilities

 

66,109

 

 

 

62,079

 

Long-term liabilities:

 

 

 

Long-term debt

 

137,500

 

 

 

110,000

 

Derivative liabilities - commodity derivatives

 

657

 

 

 

?

 

Asset retirement obligations

 

9,589

 

 

 

9,391

 

Deferred tax liability

 

78,809

 

 

 

73,989

 

Total long-term liabilities

 

226,555

 

 

 

193,380

 

Total liabilities

 

292,664

 

 

 

255,459

 

Stockholders' Equity:

 

 

 

Common stock, $0.0001 par value, 431,000,000 shares authorized, 136,424,207 and 136,040,777 issued at March 31, 2024 and December 31, 2023, respectively

 

14

 

 

 

14

 

Additional paid-in capital

 

653,686

 

 

 

653,174

 

Retained earnings

 

56,660

 

 

 

54,782

 

Treasury stock, at cost, 5,680,255 and 5,677,627 shares at March 31, 2024 and December 31, 2023, respectively

 

(36,342

)

 

 

(36,325

)

Total stockholders' equity

 

674,018

 

 

 

671,645

 

Total liabilities and stockholders' equity

$

966,682

 

 

$

927,104

 

 

Granite Ridge Resources Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

 

 

Three Months Ended March 31,

(in thousands, except per share data)

2024

 

2023

Revenues:

 

 

 

Oil and natural gas sales

$

88,996

 

 

$

91,310

 

Operating costs and expenses:

 

 

 

Lease operating expenses

 

15,479

 

 

 

13,772

 

Production and ad valorem taxes

 

5,749

 

 

 

5,717

 

Depletion and accretion expense

 

40,941

 

 

 

33,852

 

Impairments of unproved properties

 

732

 

 

 

?

 

General and administrative (including non-cash stock-based compensation of $512 and $1,059 for the three months ended March 31, 2024 and 2023, respectively)

 

6,492

 

 

 

8,579

 

Total operating costs and expenses

 

69,393

 

 

 

61,920

 

Net operating income

 

19,603

 

 

 

29,390

 

Other income (expense):

 

 

 

Gain (loss) on derivatives - commodity derivatives

 

(3,161

)

 

 

13,323

 

Interest expense

 

(3,159

)

 

 

(339

)

Gain on derivatives - common stock warrants

 

?

 

 

 

5,278

 

Gain on equity investments

 

7,779

 

 

 

?

 

Other

 

2

 

 

 

?

 

Total other income

 

1,461

 

 

 

18,262

 

Income before income taxes

 

21,064

 

 

 

47,652

 

Income tax expense

 

4,837

 

 

 

10,786

 

Net income

$

16,227

 

 

$

36,866

 

 

 

 

 

Net income per share:

 

 

 

Basic

$

0.12

 

 

$

0.28

 

Diluted

$

0.12

 

 

$

0.28

 

Weighted-average number of shares outstanding:

 

 

 

Basic

 

130,136

 

 

 

133,002

 

Diluted

 

130,160

 

 

 

133,002

 

 
 

Granite Ridge Resources Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

 

Three Months Ended March 31,

(in thousands)

2024

 

2023

Operating activities:

 

 

 

Net income

$

16,227

 

 

$

36,866

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

Depletion and accretion expense

 

40,941

 

 

 

33,852

 

Impairments of unproved properties

 

732

 

 

 

?

 

(Gain) loss on derivatives - commodity derivatives

 

3,161

 

 

 

(13,323

)

Net cash receipts from commodity derivatives

 

2,708

 

 

 

6,386

 

Stock-based compensation

 

512

 

 

 

1,059

 

Amortization of deferred financing costs

 

295

 

 

 

163

 

Gain on derivatives - common stock warrants

 

?

 

 

 

(5,278

)

Gain on equity investments

 

(7,779

)

 

 

?

 

Deferred income taxes

 

4,820

 

 

 

9,964

 

Other

 

(17

)

 

 

(137

)

Increase (decrease) in cash attributable to changes in operating assets and liabilities:

 

 

 

Revenue receivable

 

8,103

 

 

 

6,433

 

Accrued expenses

 

(3,213

)

 

 

4,609

 

Other receivable

 

530

 

 

 

(260

)

Prepaid and other expenses

 

(1,551

)

 

 

325

 

Other payable

 

3,187

 

 

 

815

 

Net cash provided by operating activities

 

68,656

 

 

 

81,474

 

Investing activities:

 

 

 

Capital expenditures for oil and natural gas properties

 

(69,660

)

 

 

(105,556

)

Acquisition of oil and natural gas properties

 

(2,627

)

 

 

(24,370

)

Refund of advances to operators

 

1,282

 

 

 

?

 

Net cash used in investing activities

 

(71,005

)

 

 

(129,926

)

Financing activities:

 

 

 

Proceeds from borrowing on credit facilities

 

27,500

 

 

 

25,000

 

Deferred financing costs

 

(32

)

 

 

?

 

Payment of expenses related to formation of Granite Ridge Resources, Inc.

 

?

 

 

 

(43

)

Purchase of treasury shares

 

(418

)

 

 

(1,768

)

Payment of dividends

 

(14,349

)

 

 

(14,640

)

Net cash provided by financing activities

 

12,701

 

 

 

8,549

 

 

 

 

 

Net change in cash and restricted cash

 

10,352

 

 

 

(39,903

)

Cash and restricted cash at beginning of period

 

10,730

 

 

 

51,133

 

Cash and restricted cash at end of period

$

21,082

 

 

$

11,230

 

 

 

 

 

Supplemental disclosure of non-cash investing activities:

 

 

 

Oil and natural gas property development costs in accrued expenses

$

9,168

 

 

$

3,412

 

Advances to operators applied to development of oil and natural gas properties

$

23,294

 

 

$

26,299

 

Cash and restricted cash:

 

 

 

Cash

$

20,782

 

 

$

10,930

 

Restricted cash included in other long-term assets

 

300

 

 

 

300

 

Cash and restricted cash

$

21,082

 

 

$

11,230

 

 

Granite Ridge Resources Inc.

Summary Production and Price Data

 

The following table sets forth summary information concerning production and operating data for the periods indicated:

 

 

Three months ended March 31,

 

2024

 

2023

Net Sales (in thousands):

 

 

 

Oil sales

$

75,766

 

$

73,475

Natural gas and related product sales

 

13,230

 

 

17,835

Total revenues

 

88,996

 

 

91,310

 

 

 

 

Net Production:

 

 

 

Oil (MBbl)

 

969

 

 

965

Natural gas (MMcf)

 

7,203

 

 

6,720

Total (MBoe)(1)

 

2,170

 

 

2,085

Average Daily Production:

 

 

 

Oil (Bbl)

 

10,650

 

 

10,722

Natural gas (Mcf)

 

79,151

 

 

74,667

Total (Boe)(1)

 

23,842

 

 

23,167

 

 

 

 

Average Sales Prices:

 

 

 

Oil (per Bbl)

$

78.17

 

$

76.14

Effect of gain on settled oil derivatives on average price (per Bbl)

 

0.10

 

 

2.02

Oil net of settled oil derivatives (per Bbl) (2)

 

78.27

 

 

78.16

 

 

 

 

Natural gas sales (per Mcf)

 

1.84

 

 

2.65

Effect of gain on settled natural gas derivatives on average price (per Mcf)

 

0.36

 

 

0.66

Natural gas sales net of settled natural gas derivatives (per Mcf) (2)

 

2.20

 

 

3.31

 

 

 

 

Realized price on a Boe basis excluding settled commodity derivatives

 

41.02

 

 

43.79

Effect of gain on settled commodity derivatives on average price (per Boe)

 

1.25

 

 

3.06

Realized price on a Boe basis including settled commodity derivatives (2)

 

42.27

 

 

46.85

 

 

 

 

Operating Expenses (in thousands):

 

 

 

Lease operating expenses

$

15,479

 

$

13,772

Production and ad valorem taxes

 

5,749

 

 

5,717

Depletion and accretion expense

 

40,941

 

 

33,852

General and administrative

 

6,492

 

 

8,579

Costs and Expenses (per Boe):

 

 

 

Lease operating expenses

$

7.13

 

$

6.61

Production and ad valorem taxes

 

2.65

 

 

2.74

Depletion and accretion

 

18.87

 

 

16.24

General and administrative

 

2.99

 

 

4.11

 

 

 

 

Net Producing Wells at Period-End:

 

181.34

 

 

152.18

(1) Natural gas is converted to Boe using the ratio of one barrel of oil to six Mcf of natural gas.

(2) The presentation of realized prices including settled commodity derivatives is a result of including the net cash receipts from (payments on) commodity derivatives that are presented in our condensed consolidated statements of cash flows. This presentation of average prices with derivatives is a means by which to reflect the actual cash performance of our commodity derivatives for the respective periods and presents oil and natural gas prices with derivatives in a manner consistent with the presentation generally used by the investment community.

Granite Ridge Resources Inc.

Derivatives Information

 

The table below provides data associated with the Company's derivatives at May 8, 2024, for the periods indicated:

 

 

2024

 

2025

 

2026

 

 

Second Quarter

 

Third
Quarter

 

Fourth
Quarter

 

Total

 

Total

 

Total

Collars (oil)

 

 

 

 

 

 

 

 

 

 

 

 

Volume (Bbl)

 

 

401,874

 

 

361,552

 

 

311,496

 

 

1,074,922

 

 

716,739

 

 

?

Weighted-average floor price ($/Bbl)

 

$

64.27

 

$

64.32

 

$

64.13

 

$

65.24

 

$

62.46

 

$

?

Weighted-average ceiling price ($/Bbl)

 

$

85.11

 

$

85.24

 

$

84.97

 

$

85.11

 

$

82.02

 

$

?

Swaps (oil)

 

 

 

 

 

 

 

 

 

 

 

 

Volume (Bbl)

 

 

48,000

 

 

39,000

 

 

32,000

 

 

119,000

 

 

?

 

 

?

Weighted-average price ($/Bbl)

 

$

80.00

 

$

80.00

 

$

80.00

 

$

80.00

 

$

?

 

$

?

Collars (natural gas)

 

 

 

 

 

 

 

 

 

 

 

 

Volume (Mcf)

 

 

?

 

 

?

 

 

1,615,000

 

 

1,615,000

 

 

8,728,829

 

 

7,171,176

Weighted-average floor price ($/Mcf)

 

$

?

 

$

?

 

$

3.57

 

$

3.57

 

$

3.15

 

$

3.25

Weighted-average ceiling price ($/Mcf)

 

$

?

 

$

?

 

$

5.37

 

$

5.37

 

$

4.16

 

$

4.00

Swaps (natural gas)

 

 

 

 

 

 

 

 

 

 

 

 

Volume (Mcf)

 

 

3,236,000

 

 

4,119,952

 

 

1,895,588

 

 

9,251,540

 

 

1,612,050

 

 

?

Weighted-average price ($/Mcf)

 

$

3.22

 

$

3.41

 

$

3.55

 

$

3.37

 

$

3.20

 

$

?

 

Granite Ridge Resources Inc.
Supplemental Non-GAAP Financial Measures

The Company reports its financial results in accordance with GAAP. However, the Company believes certain non-GAAP performance measures may provide financial statement users with additional meaningful comparisons between current results, the results of its peers and the results of prior periods. In addition, the Company believes these measures are used by analysts and others in the valuation, rating and investment recommendations of companies within the oil and natural gas exploration and production industry. See the reconciliations throughout this release of GAAP financial measures to non-GAAP financial measures for the periods indicated.

Reconciliation of Net Income to Adjusted EBITDAX

Adjusted EBITDAX is presented herein and reconciled from the GAAP measure of net income because of its wide acceptance by the investment community as a financial indicator.

The Company defines Adjusted EBITDAX as net income before depletion and accretion expense, (gain) loss on derivatives - commodity derivatives, net cash receipts from (payments on) commodity derivatives, interest expense, (gain) loss on derivatives - common stock warrants, non-cash stock-based compensation, income tax expense, impairment of unproved properties, impairment of long-lived assets, gain on equity investments and other. Adjusted EBITDAX is not a measure of net income or cash flows as determined by GAAP.

The Company's Adjusted EBITDAX measure provides additional information that may be used to better understand the Company's operations. Adjusted EBITDAX is one of several metrics that the Company uses as a supplemental financial measurement in the evaluation of its business and should not be considered in isolation or as an alternative to, or more meaningful than, net income as an indicator of operating performance. Certain items excluded from Adjusted EBITDAX are significant components in understanding and assessing a company's financial performance, such as a company's cost of capital and tax structure, as well as the historic cost of depreciable and depletable assets. Adjusted EBITDAX, as used by the Company, may not be comparable to similarly titled measures reported by other companies. The Company believes that Adjusted EBITDAX is a widely followed measure of operating performance and is one of many metrics used by the Company's management team and by other users of the Company's consolidated financial statements. For example, Adjusted EBITDAX can be used to assess the Company's operating performance and return on capital in comparison to other independent exploration and production companies without regard to financial or capital structure, and to assess the financial performance of the Company's assets and the Company without regard to capital structure or historical cost basis.

The following table provides a reconciliation of the GAAP measure of net income to Adjusted EBITDAX for the periods indicated:

 

Three Months Ended March 31,

(in thousands)

2024

 

2023

Net income

$

16,227

 

 

$

36,866

 

Interest expense

 

3,159

 

 

 

339

 

Income tax expense

 

4,837

 

 

 

10,786

 

Depletion and accretion expense

 

40,941

 

 

 

33,852

 

Non-cash stock-based compensation

 

512

 

 

 

1,059

 

Impairments of unproved properties

 

732

 

 

 

?

 

(Gain) loss on derivatives - commodity derivatives

 

3,161

 

 

 

(13,323

)

Gain on equity investments

 

(7,779

)

 

 

?

 

Net cash receipts from commodity derivatives

 

2,708

 

 

 

6,386

 

Gain on derivatives - common stock warrants

 

?

 

 

 

(5,278

)

Adjusted EBITDAX

$

64,498

 

 

$

70,687

 

Reconciliation of Net Cash Provided by Operating Activities to Operating Cash Flow Before Working Capital Changes and to Free Cash Flow

The Company provides Operating Cash Flow ("OCF") Before Working Capital Changes, which is a non-GAAP financial measure. The Company defines OCF Before Working Capital Changes as net cash provided by operating activities as determined under GAAP excluding changes in operating assets and liabilities such as: changes in cash due to changes in operating assets and liabilities, revenue receivable, other receivable, accrued expenses, prepaid and other expenses and other payables. The Company believes OCF Before Working Capital Changes is an accepted measure of an oil and natural gas company's ability to generate cash used to fund development and acquisition activities and service debt or pay dividends.

Additionally, the Company provides Free Cash Flow, which is a non-GAAP financial measure. The Company defines Free Cash Flow as OCF Before Working Capital Changes minus development costs. The Company believes that Free Cash Flow is useful to investors as it provides measures to compare cash from operating activities and exploration and development costs across periods on a consistent basis.

These non-GAAP measures should not be considered in isolation or as alternatives to, or more meaningful than, net cash provided by operating activities as indicators of operating performance.

The following tables provide a reconciliation from the GAAP measure of net cash provided by operating activities to OCF Before Working Capital Changes and to Free Cash Flow:

 

Three Months Ended March 31,

(in thousands)

2024

 

2023

Net cash provided by operating activities

$

68,656

 

 

$

81,474

 

Changes in cash due to changes in operating assets and liabilities:

 

 

 

Revenue receivable

 

(8,103

)

 

 

(6,433

)

Other receivable

 

(530

)

 

 

260

 

Accrued expenses

 

3,213

 

 

 

(4,609

)

Prepaid and other expenses

 

1,551

 

 

 

(325

)

Other payable

 

(3,187

)

 

 

(815

)

Total working capital changes

 

(7,056

)

 

 

(11,922

)

Operating Cash Flow Before Working Capital Changes

 

61,600

 

 

 

69,552

 

Development costs

 

62,639

 

 

 

98,606

 

Free Cash Flow

$

(1,039

)

 

$

(29,054

)

 

Reconciliation of Net Income to Adjusted Net Income and Adjusted Earnings per Share

The Company's provides Adjusted Net Income and Adjusted Earnings Per Share, which are non-GAAP financial measures. Adjusted Net Income and Adjusted Earnings Per Share represent earnings and diluted earnings per share determined under GAAP without regard to certain non-cash and nonrecurring items. The Company defines Adjusted Net Income as net income as determined under GAAP excluding impairments of long-lived assets, impairments of unproved properties, (gain) loss on derivatives - commodity derivatives, net cash receipts from (payments on) commodity derivatives, gain (loss) on derivatives - common stock warrants, gain on equity investments and tax impact on above adjustments.

The Company defines Adjusted Earnings Per Share as Adjusted Net Income divided by weighted average number of diluted shares of common stock outstanding.

The Company believes these measures provide useful information to analysts and investors for analysis of its operating results on a recurring, comparable basis from period to period. Adjusted Net Income and Adjusted Earnings Per Share should not be considered in isolation or as a substitute for earnings or diluted earnings per share as determined in accordance with GAAP and may not be comparable to other similarly titled measures of other companies.

The following table provides a reconciliation from the GAAP measure of net income to Adjusted Net Income, both in total and on a per diluted share basis, for the periods indicated:

 

Three Months Ended March 31,

(in thousands, except per share data)

2024

 

2023

Net income

$

16,227

 

 

$

36,866

 

Impairments of unproved properties

 

732

 

 

 

?

 

(Gain) loss on derivatives - commodity derivatives

 

3,161

 

 

 

(13,323

)

Net cash receipts from commodity derivatives

 

2,708

 

 

 

6,386

 

Gain on equity investments

 

(7,779

)

 

 

?

 

Gain on derivatives - common stock warrants

 

?

 

 

 

(5,278

)

Tax impact on above adjustments (a)

 

270

 

 

 

2,773

 

Adjusted net income

$

15,319

 

 

$

27,424

 

 

 

 

 

Earnings per diluted share - as reported

$

0.12

 

 

$

0.28

 

Impairments of unproved properties

 

0.01

 

 

 

?

 

(Gain) loss on derivatives - commodity derivatives

 

0.03

 

 

 

(0.10

)

Net cash receipts from commodity derivatives

 

0.02

 

 

 

0.05

 

Gain on derivatives - common stock warrants

 

?

 

 

 

(0.04

)

Gain on equity investments

 

(0.06

)

 

 

?

 

Tax impact on above adjustments (a)

 

?

 

 

 

0.02

 

Adjusted earnings per diluted share

$

0.12

 

 

$

0.21

 

Adjusted earnings per share:

 

 

 

Basic earnings

$

0.12

 

 

$

0.21

 

Diluted earnings

$

0.12

 

 

$

0.21

 

(a) Estimated using statutory tax rate in effect for the period.

 


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