Granite Ridge Stock Just Surged 34%. Is It Still as Cheap as Its CEO Claims?
This post may contain links from our sponsors and affiliates, and Flywheel Publishing may receive compensation for actions taken through them.
On the company’s Nov. 6, 2026 earnings call, Granite Ridge Resources (NYSE:GRNT) President and CEO Tyler Farquharson said the company is “trading at less than 2.5x 2027 consensus”. He also said “2027 should even be north of where consensus currently is.” Since then, the stock has climbed from $4.63 at the earnings filing to $6.20, a gain of 33.9%. So does the math still work at the higher price?
One Number That Cuts Through Hedging Noise
A cash flow multiple takes what the market pays for a company and divides it by the cash the business produces in a year. Oil producers usually measure that cash as EBITDAX: earnings before interest, taxes, depreciation, and exploration costs. At Farquharson’s 2.5x, investors pay $2.50 per dollar of annual cash flow. GAAP earnings tell you little at Granite Ridge because hedge accounting moves reported profit by tens of millions of dollars from one quarter to the next.
Run-Rate Math Already Clears the Bar
With a market cap of $819.4 million, Granite Ridge needs about $327.76 million of 2027 cash flow to hit Farquharson’s 2.5x. Third-quarter Adjusted EBITDAX came in at $107.27 million, the best quarter since the company went public. Annualized, that is $429.08 million. Cash flow before working capital changes was $96.6 million, so the stock trades at about 2.1x that figure annualized.
Management expects 2027 to come in higher. On the call, CFO Kyle Kettler pointed to a target of “just about 10% production growth” along with a growing oil mix and the expiration of lower-priced hedges. Oil made up 54.7% of third-quarter production, up from 51% in the second quarter. Settled derivatives took $6.56 per Boe off third-quarter realized prices.
Debt and Costs Narrow the Discount
An equity multiple leaves out debt. Adding $417 million of net debt and enterprise value works out to about 2.9x annualized third-quarter EBITDAX, above the CEO’s line. Borrowing costs are climbing too: second-quarter net interest expense was $11.1 million, up from $5.9 million a year earlier. Lease operating expense rose 17% to $9.43 per Boe. Hedging losses produced a GAAP net loss of $10.05 million. After development spending, adjusted free cash flow was only $13.7 million. Management has not issued 2027 guidance and plans to provide it with fourth-quarter results.
Signals That Confirm or Break the Thesis
On the bullish side, look for 2027 guidance that supports the growth target and an oil mix that remains near third-quarter levels. Adjusted free cash flow should also cover the $0.11 quarterly dividend, which has been paid every quarter since the IPO, and still leave room for the $35 million buyback that runs through Dec. 31, 2027. On the bearish side, watch for oil falling well below the third quarter’s $84.41 per barrel price, per-unit costs that keep rising, or growth that requires more capital. Farquharson called the buyback “about 5%-ish of current market cap”. After the rally, it covers 4.3%.
Verdict on Farquharson’s 2.5x Claim
Farquharson’s 2.5x math holds up on equity value even at today’s higher price, which makes Granite Ridge look cheap on cash flow, but the discount shrinks once debt is counted and still depends on 2027 production growth and stable oil prices that have yet to show up in reported results.
Contact [email protected] for any questions or corrections.
Chris Lange is a financial and geopolitical writer with more than a decade of experience covering a myriad of topics. He has published thousands of articles for 24/7 Wall St., with past coverage focused heavily on stocks, IPOs, healthcare, defense, global affairs, and technology.
His work has been quoted, or referenced by a number of outlets including Business Insider, USA Today, Yahoo Finance, MSN, The Motley Fool, and many other publications. A graduate of Southwestern University, he studied business with a focus on investments and has previous experience in banking and startups.
When not reading or writing the news, he is following his passion for Lacrosse, playing chess, or building solar projects with his dad.
