Granite Ridge Q3 2026 Earnings: Revenue Rises 57% as Derivatives Drive a GAAP Loss

Granite Ridge Resources (NYSE: GRNT) reported Q3 2026 oil and natural gas sales of $177.2 million, up approximately 57% from $112.7 million, while diluted EPS swung to a loss of $0.08 from income of $0.11 a year earlier. Higher realized commodity prices and 9% production growth lifted operating income, but a $52.7 million commodity-derivative loss and increased interest expense drove a $10.1 million GAAP net loss. Adjusted EBITDAX reached $107.3 million, while adjusted free cash flow totaled $13.7 million.

Core Financial Results

Revenue benefited from both higher production and stronger realized prices. Net operating income more than tripled, but expenses below the operating line reversed that improvement at the GAAP net-income level.

Excluding non-cash and special items, Granite Ridge reported adjusted net income of $22.6 million and adjusted diluted EPS of $0.17. These are non-GAAP measures, and prior-year comparisons were not provided for either figure.

Production and Operating Performance

Average daily production increased to 34,641 Boe per day, with oil representing 55% of total output. Oil production rose 17%, while natural gas production was essentially unchanged, making oil the main volume contributor to the overall 9% production increase.

Realized prices excluding settled derivatives also improved substantially. Oil and natural gas sales reached $147.2 million and $30.0 million, respectively, compared with $92.0 million and $20.7 million a year earlier.

Granite Ridge placed 9.2 net wells online, compared with 9.3 in the prior-year quarter. It also completed 20 acquisitions, primarily in the Permian and Appalachian basins, adding 8.0 net undeveloped locations. At quarter-end, 190 gross, or 14.6 net, wells were in process.

Derivative Losses Overwhelmed Improved Operating Profit

The central issue in the quarter was the divergence between stronger operations and the GAAP net loss. Net operating income increased to $59.3 million, but Granite Ridge recorded a $52.7 million loss on commodity derivatives, compared with a $5.2 million gain a year earlier. Interest expense also increased to $11.9 million from $6.1 million.

On a settled basis, derivatives reduced realized pricing by $6.56 per Boe, taking the realized price from $55.60 per Boe before settlements to $49.04 after settlements. In Q3 2025, settled derivatives added $0.60 per Boe. This hedge effect helps explain why adjusted net income remained positive even though the company reported a GAAP loss.

Profitability, Cash Flow, and the Balance Sheet

Lease operating expense increased to $30.1 million, or $9.43 per Boe. The per-unit figure was 17% higher year over year because of increased saltwater disposal costs associated with higher water cuts and flowback operations, along with surface-equipment rentals and contract labor. General and administrative expense rose to $10.2 million from $7.0 million and included $1.5 million of stock-based compensation.

Operating cash flow was $87.7 million, with working-capital movements reducing the result by $8.9 million. Operating cash flow before working-capital changes was $96.6 million, and adjusted free cash flow was $13.7 million.

Granite Ridge incurred $109.9 million of quarterly capital expenditures, consisting of $90.8 million for drilling and completions and $19.0 million for property acquisitions. At September 30, 2026, the company held $42.7 million of cash and had $471.3 million of principal debt outstanding, including $341.3 million of senior unsecured notes and $130.0 million under its revolving credit agreement. Total liquidity was $287.4 million, and net debt to trailing-12-month adjusted EBITDAX was 1.3 times.

The company paid a $0.11-per-share dividend during the quarter and subsequently declared another $0.11 quarterly dividend, payable December 14, 2026, to shareholders of record on November 27. The board also authorized up to $35.0 million of share repurchases through December 31, 2027, although the authorization does not require Granite Ridge to purchase any shares.

2026 Guidance

Granite Ridge updated its full-year 2026 operating and financial guidance. Prior guidance ranges were not included in the supplied results, so the direction and size of any revisions cannot be determined.

Management’s View

President and CEO Tyler Farquharson characterized Q3 adjusted EBITDAX as Granite Ridge’s highest since becoming a public company. For 2027, management expects the expiration of lower-priced 2026 hedges, anticipated production growth, and a higher oil weighting to support results. At current strip prices, the company expects adjusted free cash flow to cover the dividend while funding business growth.

Granite Ridge also added Arete Creek Resources as a partner in its operated-partnership platform. Arete Creek spudded its first partnership well in October and is expected to operate one rig in 2027. Granite Ridge will provide most of the capital while controlling drilling timing and project selection.

Recent Insider Transactions

The detailed transaction log lists nine direct purchases totaling approximately 48,600 shares and $243,630, plus one stock award, among the 10 most recent entries. However, the separate six-month summary reports zero purchases and zero sale transactions, creating a data inconsistency that should be checked against the underlying filings; the transactions alone do not establish insiders’ outlook for the company.

All 10 entries were reported as direct holdings.

Risks Investors Should Watch

• Commodity and hedge exposure: Higher oil and natural gas prices supported revenue, but derivative losses were large enough to turn improved operating results into a GAAP net loss. Future results remain sensitive to commodity prices and hedge settlements.
• Rising operating costs: Lease operating expense per Boe increased 17% because of saltwater disposal, flowback activity, equipment rentals, and contract labor. Continued pressure could limit the benefit from production growth.
• Capital intensity and debt costs: Quarterly capital spending totaled $109.9 million, while principal debt was $471.3 million and interest expense nearly doubled year over year. Funding development while maintaining liquidity and shareholder distributions remains an important balance.
• Development execution: Future production depends on the timing and performance of wells in process, acquired drilling locations, and operated partnerships such as Arete Creek.
• Discretionary capital returns: Future dividends require board approval, and the company is not obligated to use any portion of its $35.0 million repurchase authorization.

Summary

Granite Ridge’s Q3 2026 operations improved as higher production and commodity prices drove substantial revenue and operating-income growth. The quarter nevertheless ended with a GAAP loss because commodity derivatives and higher interest expense outweighed those gains, while adjusted earnings and cash flow remained positive. The main items to monitor are hedge effects, lease operating costs, execution against production and capital-spending guidance, and the company’s ability to balance development activity with dividends, debt, and potential repurchases.