Granite Ridge Resources (NYSE:GRNT) reported higher production and a 35% sequential increase in adjusted EBITDAX in the third quarter of 2026, as oil volumes grew and natural gas price realizations recovered. The company also authorized a share repurchase program and outlined how it plans to use future cash flow.
President and CEO Tyler Farquharson said the results showed progress toward the company’s expectation that 2026 would be its final year of investing ahead of cash flow. Granite Ridge expects adjusted free cash flow to fund its dividend and other capital allocation priorities in 2027, he said, while leverage falls as cash flow grows.
The company has not issued formal 2027 guidance and expects to do so with its fourth-quarter results. In response to an analyst’s question, CFO Kyle Kettler said Granite Ridge is targeting approximately 10% production growth next year, with oil representing a greater share of that growth.
Production Growth and Gas Prices Lift Results
Third-quarter production averaged 34,641 barrels of oil equivalent per day, up 8% from the second quarter. Oil volumes rose 16% sequentially and accounted for approximately 55% of production. Granite Ridge placed 9.2 net wells online during the quarter and ended the period with 14.6 net wells in process.
Adjusted EBITDAX rose to $107.3 million from $79.6 million in the second quarter and $78.6 million a year earlier. Kettler called it the company’s strongest quarter for the measure since going public.
Oil and natural gas sales totaled $177.2 million. Granite Ridge reported a net loss of $10.1 million, or $0.08 per share, which Kettler said was driven by a $52.7 million loss on commodity derivatives, including $31.8 million in unrealized losses. Adjusted net income was $22.6 million, or $0.17 per diluted share.
Natural gas sales increased to $30 million from $9.6 million in the second quarter as the Waha price basis recovered following the addition of Permian takeaway capacity. The company’s realized gas price rose to $3.46 per thousand cubic feet from $1.12. Kettler noted that Granite Ridge uses two-stream reporting, under which natural gas liquids revenue is included in its natural gas revenue line.
For the full year, the company narrowed its production outlook to 34,000 to 35,000 barrels of oil equivalent per day and raised its expected oil mix to 51.5% to 52.5%. Kettler said gas volumes would be lower because of gas shut-ins associated with earlier low Waha prices and the September sale of gas-weighted D.J. Basin properties.
Granite Ridge also raised its lease operating expense guidance to $9.25 to $9.75 per barrel of oil equivalent. Third-quarter costs fell to $9.43 per barrel from $10.27 in the second quarter, though Kettler said they remained high, partly because of saltwater disposal and related expenses. He expects fourth-quarter oil volumes to exceed third-quarter levels and development capital spending to be modestly higher.
Buyback and Cash Flow Priorities
The board authorized up to $35 million in share repurchases through the end of 2027. Kettler said the program does not obligate the company to buy shares and may be suspended or discontinued at any time.
Granite Ridge defined adjusted free cash flow as operating cash flow before working capital changes, less development capital expenditures; acquisitions are excluded. Kettler said the company generated $13.7 million under that definition in the third quarter.
The company intends to use adjusted free cash flow first for its dividend, followed by acquisitions that meet its return threshold and then opportunistic share repurchases. Granite Ridge has paid a quarterly dividend of $0.11 per share since becoming public, Kettler said.
Cash flow from operations was $87.7 million in the quarter, or $96.6 million before working capital changes. The company invested $90.8 million in drilling and completion and $19 million in acquisitions. It ended the quarter with net debt of $416.6 million and leverage of 1.3 times, down from 1.4 times in the prior quarter.
Partnership Expansion and Asset Sales
Granite Ridge introduced Arete Creek Resources as an operating partner focused on the Midland Basin. Farquharson said the Midland-based team had secured more than 40 gross locations and that Granite Ridge expects to run a rig with the partner full-time in 2027. Arete spud its first well under the partnership in October.
The company also closed 20 acquisitions for $19 million during the third quarter, adding eight net locations at an average entry cost of about $2.4 million per net location. Farquharson said a higher proportion of the quarter’s transactions were in the Utica, where wells have longer average laterals than the Permian locations used for comparison.
Granite Ridge sold more than $20 million of D.J. Basin oil and gas properties at 3.8 times forward 12-month EBITDA. Farquharson said the company will continue to evaluate opportunistic sales but is not pursuing a broader strategy of systematically disposing of assets.
Separately, Farquharson said affiliates of Grey Rock distributed 14 million Granite Ridge shares to limited partners in August, reducing Grey Rock’s ownership to approximately 39%. Granite Ridge is no longer a controlled company and is transitioning to a majority-independent board and fully independent committees, he said.
About Granite Ridge Resources (NYSE:GRNT)
Granite Ridge Resources, Inc (NYSE:GRNT) is an independent oil and natural gas exploration and production company. The company primarily owns interests in upstream properties and focuses on developing and producing crude oil, natural gas and natural gas liquids.
Granite Ridge operates primarily through a non-operated business model, partnering with other exploration and production companies that manage drilling and field operations. Its portfolio includes assets across several major U.S.
