Predicting financial markets is a waste of time. We can make far more money reacting to what the market actually does. All my research shows that when the market allows you to buy good companies at bargain valuations, patient-aggressive investors can earn outsized long-term returns. With that in mind, I recommend Granite Ridge Resources (GRNT), suggests Tim Melvin, editor of The MVP Letter.
GRNT is a unique company that invests in oil and gas projects in the US. It is not an activist or hands-on investor by any stretch of the imagination. Instead, it makes small investments in lots of projects, and has minority interests in over 2,500 wells across the country.
The company does not operate wells, either. So, if it wants to abandon a particular project as production declines, it can simply sell its interest and move on to whatever is next. This allows Granite Ridge to stay invested in the country’s most productive regions and invest alongside those companies leading the way in oilfield technology.
Rather than making an all-in bet on any one region, Granite Ridge can be active in all the productive oil and gas regions and adjust our exposure as conditions change. Currently, Granite Ridge has wells in the Permian, Eagle Ford, Haynesville, DJ, and Bakken oil and gas fields.
We are not married to any operator or end-customer with this approach. Granite Ridge has relationships with and owns interests in projects run by all the major players in all the major regions. In all, it has relationships with over 80 oil and gas operators. And as long as these wells are producing, they pay out cash flow to Granite Ridge.
A big part of Granite Ridge’s long-term business plan is paying that cash out to us outside investors. The company pays a fixed dividend of $0.44 a share and a variable dividend based on cash flow on top of that. Granite Ridge also intends to buy back stock when the opportunity makes sense opportunistically. The fixed yield at the recent price was almost 7%.
In addition to what the company calls its “Burgers and Beer” core approach to buying small interest in producing wells, management is also open to larger strategic partnerships with proven operators with drill-ready high-probability projects. Granite Ridge is additionally looking to become an active buyer of existing interests from individual investors and private equity firms who need liquidity now and are open to selling at favorable prices.
Recommended Action: Buy GRNT.
