Granite Ridge Resources (NYSE: GRNT) reported Q2 2026 oil and natural gas sales of $149.3 million, up 36.7% from $109.2 million a year earlier, while diluted EPS increased to $0.23 from $0.19. Higher oil pricing drove the revenue gain, but production grew only 1%, lease operating expense rose 47% per Boe, and adjusted EBITDAX increased by a more modest 5.6%.
Core earnings data
For the quarter ended June 30, 2026, GAAP net income rose 19.6% to $30.0 million, and net operating income nearly doubled. Adjusted net income, which excludes non-cash and special items, was $11.1 million, or $0.09 per diluted share.
Operating cash flow totaled $55.6 million, compared with $69.5 million before working-capital changes. The approximately $14.0 million difference indicates that working capital reduced reported quarterly cash generation.
| Metric | Q2 2026 | Q2 2025 | Year-over-year change |
|---|---|---|---|
| Oil and natural gas sales | $149.3 million | $109.2 million | +36.7% |
| Net operating income | $39.0 million | $20.7 million | +88.2% |
| GAAP net income | $30.0 million | $25.1 million | +19.6% |
| Diluted EPS | $0.23 | $0.19 | +21.1% |
| Adjusted EBITDAX | $79.6 million | $75.4 million | +5.6% |
| Average daily production | 32,044 Boe/day | 31,576 Boe/day | +1% |
| Lease operating expense per Boe | $10.27 | $7.00 | +47% |
Adjusted EBITDAX and adjusted net income are non-GAAP measures.
Production and commodity performance
Oil was the main source of growth. Average oil production increased 2% to 16,341 barrels per day, while oil sales rose to $139.7 million from $89.5 million. The average oil sales price excluding derivatives increased about 53% to $93.93 per barrel.
Natural gas moved in the opposite direction. Production increased approximately 1% to 94.2 MMcf per day, but natural gas and related product sales fell to $9.6 million from $19.8 million because the average sales price declined to $1.12 per Mcf from $2.32.
Granite Ridge placed 7.2 net wells online, up from 4.9 net wells in the prior-year quarter. The Permian accounted for 6.5 of those net wells. The company also closed 27 acquisitions, primarily in the Permian and Appalachian basins, adding 21.9 net undeveloped locations. It ended the quarter with 175 gross, or 14.0 net, wells in process.
Higher oil prices lifted GAAP profit, but costs and investment limited cash conversion
The 36.7% sales increase substantially exceeded the 1% production gain, showing that commodity pricing—particularly oil—was the principal revenue driver. However, adjusted EBITDAX rose only 5.6%, reflecting increased operating costs and the effect of hedging on realized pricing.
Lease operating expense climbed to $30.0 million from $20.1 million. On a unit basis, it increased 47% to $10.27 per Boe because of higher saltwater disposal costs associated with increased water cuts and flowback operations, along with surface equipment rentals and contract labor. The quarter also included a $9.1 million impairment of long-lived assets, while net interest expense rose to $11.1 million from $5.9 million.
Commodity derivatives reduced realized pricing by $7.80 per Boe, compared with a positive contribution of $0.34 per Boe a year earlier. As a result, realized pricing including settled derivatives was $43.39 per Boe, below the $51.19 realized before derivatives.
Granite Ridge spent $95.2 million during the quarter, including $78.5 million on drilling and completions and $16.7 million on acquisitions. That exceeded operating cash flow by approximately $39.6 million, consistent with management’s statement that the company is still investing ahead of cash flow in 2026.
Liquidity and capital allocation
Granite Ridge ended June with $44.1 million of cash and $293.8 million of total liquidity. Principal debt consisted of $350.0 million of senior unsecured notes and $125.0 million outstanding under its revolving credit agreement. Net debt to trailing-12-month adjusted EBITDAX was 1.4 times.
The company paid a quarterly dividend of $0.11 per share and subsequently declared another $0.11 dividend, payable September 14, 2026, to shareholders of record on August 28. Future dividends remain subject to board approval.
2026 guidance
Granite Ridge provided the following full-year ranges. Its first-half average production of 33,249 Boe per day was below the annual production range, while first-half lease operating expense of $9.91 per Boe was above the annual cost range, making second-half production and cost execution important.
| Metric | 2026 guidance |
|---|---|
| Annual production | 34,000–36,000 Boe/day |
| Oil as a percentage of sales volumes | 50%–52% |
| Acquisition spending | $45–$55 million |
| Development capital expenditures | $300–$330 million |
| Total capital expenditures | $345–$385 million |
| Lease operating expense | $8.25–$9.25 per Boe |
| Production and ad valorem taxes | 6%–7% of sales |
| Cash general and administrative expense | $25–$27 million |
The company did not provide a prior guidance table in the supplied release, so no change in the ranges can be assessed.
Management’s perspective
Management described 2026 as the final year in which Granite Ridge expects to invest ahead of cash flow, with a targeted free-cash-flow inflection in 2027. The company is using its Operated Partnership platform and acquisitions to expand drilling inventory while retaining control over capital allocation.
Granite Ridge said it underwrites opportunities to a full-cycle return above 25% at strip pricing and replaced inventory faster than it developed that inventory during the first half of 2026. Its stated 2027 framework calls for durable growth, a double-digit free-cash-flow yield, and a well-covered dividend, although these remain forward-looking objectives rather than reported results.
Recent insider transactions
The supplied detailed insider report lists nine purchases and one stock grant among the latest 10 transactions. However, a separate six-month aggregate summary reports zero purchases and zero net shares purchased while showing 11.11 million total insider shares held; because those two datasets conflict, the figures should be interpreted cautiously.
| Insider | Position | Transaction | Price per share | Reported value | Date |
|---|---|---|---|---|---|
| Matthew Reade Miller | Director | Stock award | $0.00 | $0 | Jun. 30, 2026 |
| John F. McCartney | Director | Purchase | $4.96 | $19,840 | Jun. 10, 2026 |
| Matthew Reade Miller | Director | Purchase | $4.75 | $50,350 | Jun. 9, 2026 |
| Ronald Kyle Kettler | CFO | Purchase | $5.08 | $30,480 | May 27, 2026 |
| John F. McCartney | Director | Purchase | $5.54 | $22,160 | May 21, 2026 |
| John F. McCartney | Director | Purchase | $5.81 | $17,430 | May 19, 2026 |
| Griffin Perry | Director | Purchase | $5.49 | $549,000 | May 18, 2026 |
| Michele J. Everard | Director | Purchase | $5.28 | $5,280 | May 14, 2026 |
| Matthew Reade Miller | Director | Purchase | $5.21 | $94,718 | May 13, 2026 |
| Tyler S. Farquharson | CEO | Purchase | $5.15 | $51,500 | May 13, 2026 |
These transactions are presented objectively and do not, by themselves, establish insiders’ expectations for the business.
Risks investors need to watch
- Operating-cost pressure: Lease operating expense per Boe was above the full-year guidance range, with water disposal, flowback activity, rentals, and contract labor identified as the main causes.
- Commodity and hedging exposure: Natural gas prices fell sharply, while settled derivatives reduced realized pricing despite the increase in unhedged oil prices.
- Cash-flow funding requirements: Quarterly capital spending exceeded operating cash flow, and Granite Ridge continued to use debt while investing toward its 2027 objectives.
- Production execution: Q2 and first-half production were below the low end of the full-year average guidance range, requiring stronger subsequent performance to reach the annual target.
- Ownership and governance transition: Grey Rock, which owns approximately 50% of Granite Ridge, plans an in-kind distribution of some existing shares. Falling below 50% of voting power would require Granite Ridge to transition to non-controlled-company governance under NYSE standards.
Summary
Granite Ridge’s Q2 2026 revenue and GAAP earnings increased primarily because higher oil prices outweighed weak natural gas pricing. The more restrained adjusted EBITDAX growth, elevated lease operating expense, negative hedge effect, and capital spending above operating cash flow show why management still characterizes 2026 as an investment year. The main issues ahead are whether production rises into the annual guidance range, unit costs decline, and the company converts its expanded drilling inventory into the targeted 2027 free-cash-flow improvement.
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