$1.45
$3.98
bear $1.45
base $3.49
bull $3.98
margin of safety $1.85
market price* $5.45
Granite Ridge Resources owns minority, non-operated working interests in oil and natural gas wells drilled by other companies, mainly in the Permian Basin (about two-thirds of reserves), Haynesville, Eagle Ford, DJ, Bakken and Appalachian regions. It pays its share of drilling and completion costs and receives its share of production. In 2025 it produced 11.7 million barrels of oil equivalent, up 28% from 2024, on revenue of $450 million, and reported proved reserves of 62.3 million barrels of oil equivalent (about 5.3 years of 2025 production), 24% of them undeveloped. HOW WE VALUED IT. The company spends nearly everything it earns, and then some, on new wells and acquisitions. Cash from operations was $276M to $303M a year in 2023 to 2025, while capital spending (drilling plus acquisitions) was $359M, $347M and $419M. After setting aside the part of that spending that bought extra production (measured in barrels, because commodity revenue moves with price and is a poor guide to growth), the cash left for owners was roughly zero in 2023 and negative in 2024 (about -$0.50 per share) and 2025 (about -$0.31 per share). Debt went from nothing at the end of 2022 to $400M at the end of 2025 ($462M carrying value by June 30, 2026). Look at the trend: owner earnings were still negative in the most recent year (-$0.31) and year 1 of every case assumes no growth in them. Nothing in the filings shows a secured, self-funded growth path, and the 2026 budget of $320M to $360M is again above what operations have been generating, so we give the ongoing reinvestment engine no value. Two strong years (2021 and 2022) were driven by a commodity price surge and production growing from a very small base, before the October 2022 merger, so they do not represent today's business and were excluded from the window. What we do value is what is already in the ground and has been audited by independent engineers (NSAI). The 2025 reserve report shows a standardized measure of $790M at 10% (after tax) with about $404M of that discount, or about $1.19B of undiscounted after-tax future cash flows. Re-discounted at our 6% rate this is about $930M. We deduct about $75M for the cost of running the company through the life of those reserves (G&A about $23M a year, including the $11.75M annual management fee), and add $18M for the commodity hedges held at year-end. That gives a business worth about $870M ($6.67 per share). This is valued as of December 31, 2025, the date of the reserve report; spending in the first half of 2026 (financed with about $77M of net new borrowings) will have added reserves that are not counted here, and the debt is measured on the same date to stay consistent. DEBT. At year-end the company owed $350M of 8.875% senior notes due November 2029 (issued at 96% of face), which must be paid down at 2.5% of face value each quarter starting September 30, 2026 ($8.75M a quarter). Missing a payment raises the coupon to 11.875% and blocks dividends. It also owed $50M on a bank credit line (borrowing base $375M, redetermined twice a year, maturing November 2029). Cash was $14.8M. Net debt was therefore about $385M, and because the notes cost roughly 10.4% including the discount versus our 6%, we add about $30M for the extra interest, giving about $415M owed. Both the notes and the credit line are safely serviceable from the cash the reserves produce in every case below. BASE CASE, $3.49 per share. Business worth about $870M, owes about $415M, leaving about $455M for shareholders. The reserves are produced and developed as reported, including the $225M of undeveloped drilling planned over five years. The ongoing drilling-and-acquisition program is worth $0 (see above). Growth credited: none. Left out: further production growth, because it has been debt-funded and has not yet produced positive owner earnings, and any higher oil or gas prices. BEAR CASE, $1.45 per share. Business worth about $614M, owes about $425M, leaving about $189M. Three named, already-observed problems occur together. First, reserve estimates are cut again by 13%, as happened in 2023 (revisions were also negative in 2024 and 2025). Second, undeveloped wells cost a third more than the year-end plan: 2025 wells converted from undeveloped to producing cost about $20 per barrel of oil equivalent against $15 per barrel in the plan. Third, the company keeps spending above its cash flow and books further write-downs at the pace of 2023 to 2025 ($107M in total, about $85M after tax more over the life of the case), and refinancing costs about $10M more than in the base case. The company appears to be worth well above its debt in this case, but with much less of a cushion. BULL CASE, $3.98 per share. Business worth about $935M, owes about $415M, leaving about $520M. This adds the value of new undeveloped locations at the 2025 pace (3.25 million barrels added in the Permian Basin, valued at roughly $8 per barrel net of development cost over three years, about $65M). It is a modest step up because the record does not show anything larger that we can name and evidence. CHECK ON THE CASE. We tried to break the base case by checking whether the 2025 drilling program created or destroyed value against the reserve report. Reserves rose by 20.5 million barrels from drilling and acquisitions on $419M of spending; at the year-end value of roughly $12.70 a barrel this is worth about $260M to $310M, less than the cost. That supports valuing the program at zero rather than at a positive amount, and it is why the bear case charges for continued spending. What would make this estimate wrong: reserve values at year-end were based on the 12-month average price that then applied, and a large change in oil or natural gas prices would move all three cases. The tax deduction, the hedge book and the reserve life beyond the five-year window were not separately reconciled from the filings and are approximations.