On August 6, Granite Ridge Resources (NYSE:GRNT) reported second quarter results that showed a company growing production, raising its dividend payout schedule, and still working through a costlier operating environment underneath the headline numbers. Net income climbed to $30 million, or $0.23 per diluted share, up from $25.1 million a year earlier, while the board tacked on a new quarterly dividend declaration on top of the results. For a small oil and gas operator that says it is still investing ahead of cash flow, the quarter offers a useful test of whether that strategy is paying off yet.
Drilling, Deals, And A Steady Payout
Production rose 1% to 32,044 barrels of oil equivalent per day, and the company kept that growth coming from more than just existing wells. Granite Ridge turned 7.2 net wells online during the quarter, up from 4.9 net wells a year earlier, and closed 27 acquisitions across the Permian and Appalachian Basins that added 21.9 net undeveloped locations to its inventory. CEO Tyler Farquharson said the company replaced that inventory faster than it developed it in the first half of 2026, using its Operated Partnership platform, including Admiral Permian Resources, to source deals directly through partner relationships rather than through broadly marketed packages.
Every deal is underwritten to a full-cycle return above 25% at strip pricing, according to Farquharson. Adjusted EBITDAX rose to $79.6 million from $75.4 million a year ago, and the balance sheet stayed conservative, with net debt sitting at just 1.4 times trailing twelve-month Adjusted EBITDAX and $293.8 million of total liquidity on hand. The board declared a regular quarterly dividend of $0.11 per share, payable September 14 to shareholders of record as of August 28, matching the payout made during the quarter itself.
Costs Rise As Ownership Shifts
The gap between Granite Ridge’s headline and adjusted numbers is worth sitting with. Net income of $30 million compares with Adjusted Net Income of just $11.1 million, or $0.09 per diluted share, once non-cash and special items are stripped out. Lease operating expenses told a similar story, climbing 47% on a per-barrel basis to $10.27 per Boe, driven by higher saltwater disposal costs, increased water cuts, flowback operations, surface equipment rentals, and contract labor. Commodity pricing cut in different directions too. The average realized oil price jumped to $93.93 per barrel from $61.41 a year earlier, but natural gas fell to $1.12 per Mcf from $2.32.
Meanwhile, capital spending of $95.2 million for the quarter outpaced the $55.6 million generated from operating activities, a gap the company says will close once it reaches a free cash flow inflection in 2027. There is also a structural question hanging over the stock. Grey Rock Investment Partners, which owns roughly 50% of Granite Ridge, plans to distribute a portion of its shares to its fund’s limited partners starting in the third quarter of 2026, the first of several expected tranches, and any drop below 50% ownership would trigger a shift to non-controlled company governance under NYSE rules.
Wall Street Warms Up
Hedge fund ownership climbed from 19 to 27 funds, a meaningful jump in institutional interest. Short interest sits at 8.59% of float, a level that suggests a real bear camp has formed even as those funds were adding positions. The stock’s forward price-to-earnings ratio of 8.16, as of September 4, remains low for an energy producer, which means the market is not pricing in much of the growth Granite Ridge has been delivering. That combination points to a stock where opinions are still sharply divided.
What Comes Next
Granite Ridge is trying to grow production, add inventory, and pay a dividend while still spending more than it takes in, betting that 2027 brings the free cash flow inflection management has promised. The bull case rests on the Operated Partnership platform continuing to source cheap inventory and on oil prices holding up enough to offset the LOE increases. The bear case rests on those same costs staying elevated and on the Grey Rock share distribution adding real supply to the market.
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