Granite Ridge Resources (GRNT -0.92%), an energy producer with diversified assets in major U.S. oil and gas basins, reported results for Q2 2025 on August 7, 2025. The company reported GAAP revenue of $109.2 million, topping the analyst estimate of $107.3 million (GAAP), while non-GAAP earnings per share (EPS) missed expectations at $0.11 versus the $0.12 forecast. The quarter showed strong year-over-year growth in key operating and financial metrics, but increased operating costs and a lower well count weighed on adjusted profitability. Management upgraded its full-year 2025 production guidance to 31,000-33,000 barrels of oil equivalent per day and maintained its quarterly dividend of $0.11 per share, highlighting continued expansion in the Permian Basin alongside a focus on disciplined capital allocation.
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.
Granite Ridge Resources is an upstream oil and gas company with holdings in six major U.S. basins: the Permian, Eagle Ford, Bakken, Haynesville, DJ, and Appalachian regions. Its asset portfolio includes both operated partnerships, where Granite Ridge works directly with select partners, and non-operated interests where it participates alongside other producers. The company's strategy centers on geographic and product mix diversification, providing stability across changing commodity cycles.
Recent focus has prioritized expanding inventory in the Permian Basin, now accounting for approximately 69% of total proved reserves as of December 31, 2024. Granite Ridge's approach also emphasizes risk management through commodity price hedging and conservative leverage. This strategy aims to control volatility in cash flows and maintain flexibility for opportunistic acquisitions or capital investments. Its ability to maintain financial discipline while adding high-quality drilling inventory is considered a key factor in its ongoing performance.
The quarter saw record production growth and robust revenue, with output rising to 31,576 barrels of oil equivalent per day, up 37% from the prior-year period. Oil production grew 46%, reaching 16,009 barrels per day, and natural gas production increased 28%. These gains were supported by new wells primarily in the Permian Basin, along with incremental volumes from Appalachia and Bakken. The company placed 4.9 net wells online during the quarter, with 44 gross wells in the Permian (4.4 net). Asset acquisitions in the Permian and Utica basins during the quarter added 5.5 net undeveloped locations, extending Granite Ridge's drilling runway by an estimated three years at $1.7 million per location.
Financially, GAAP revenue climbed 1.8%, exceeding analyst projections by $1.93 million. Adjusted EBITDAX (non-GAAP) rose 10.4% year-over-year. However, non-GAAP EPS fell 15.4% year-over-year and missed consensus by 8.3% on a non-GAAP basis, reflecting higher lease operating expenses. The company noted an increase in these expenses to $7.00 per barrel of oil equivalent, compared to $6.50 in Q2 2024, mainly due to rising service costs. Lease operating expense (LOE) is a key cost metric in oil and gas, reflecting direct costs required to operate and maintain producing wells.
GAAP net income increased sharply to $25.1 million, up 392% from the prior year, but adjusted net income (non-GAAP, excluding certain non-cash and special items) actually declined. The company maintained a low leverage approach, ending the quarter with $275 million in debt and net debt at 0.8 times trailing-twelve-month adjusted EBITDAX (non-GAAP) as of June 30, 2025. Liquidity stood at $103.4 million as of June 30, 2025.
The well count turned in-line (TIL) dropped to 4.9 net wells, compared to 9.1 in Q2 2024. Management highlighted exceptional results from new wells in the Permian, which partially offset the lower overall count. Development and acquisition capital expenditures totaled $87.3 million, just above prior year levels.
Granite Ridge's diversified asset portfolio provides important insulation against regional disruptions and commodity price swings. Strategic partnerships -- both operated and non-operated -- continue to play a central role in accessing new drilling locations, optimizing project returns, and sharing operating knowledge with experienced basin operators. Its non-operated investments allow it to benefit from projects led by larger partners, while operated partnerships provide more control over well timing and capital deployment.
Risk management remains a core focus with an active hedging program in place. For the second half of 2025, Granite Ridge hedged 1,500,210 barrels of oil at a floor of $61.04 and a ceiling of $77.87 per barrel. For natural gas, 6.26 billion cubic feet are hedged with collars and swaps locking in a price range as of August 7, 2025, as realized oil prices fell to $61.41 per barrel, compared to $77.84 in Q2 2024. Lower oil prices were partially offset by higher realized prices for natural gas.
Operating costs rose on a per-unit basis, with lease operating expenses driven higher by factors such as increased service and saltwater disposal costs. General and administrative (G&A) expenses were also impacted by $2.8 million of nonrecurring costs. The company's higher capital expenditures were partly attributed to inventory-accretive deals in the Permian and Utica, which were expected to drive future production growth.
The company maintained its quarterly dividend at $0.11 per share, keeping its payout unchanged for the period, and signaled a continued focus on returning capital to shareholders. Dividend continuity is a key consideration for some energy investors, as it signals financial health and balance between growth and shareholder returns.
For the remainder of 2025, management raised production guidance to 31,000-33,000 barrels of oil equivalent per day, up 10% at the midpoint from the previous outlook. The updated capital expenditure plan is $400-$420 million for 2025, reflecting both development and acquisition spending. Oil is projected to comprise 51-53% of volume for 2025. Management notes that capital flexibility and a disciplined approach to project selection will remain core themes.
In the coming quarters, observers should watch Granite Ridge's ability to integrate recently acquired assets, control unit costs, and manage operating margins despite inflationary pressures in service costs. The company's exposure to fluctuating oil and gas prices will continue to be tempered by its hedging strategy. Management did not change the dividend policy and left open the potential for further inventory growth through targeted acquisitions. With performance now increasingly dependent on operational efficiency and the pace of new well completions, the alignment with strong partners in the Permian and other core regions remains a strategic differentiator.
The quarterly dividend was maintained at $0.11 per share.