Granite Ridge Resources, Inc.GRNT
Granite Ridge Resources, Inc. Stock Compensation Disclosure
Stock Incentive Plan
The Granite Ridge Resources, Inc. 2022 Omnibus Incentive Plan (the “Plan”) provides the Company the ability to grant, among other award types, stock options, restricted stock awards, and PSUs to directors, officers, employees and consultants or advisors employed by or providing service to the Company. The maximum number of shares of common stock that may be issued under the Plan is 6.5 million shares. As of December 31, 2024, the Company had 5.0 million shares of common stock remaining available for future awards under the Plan. Shares issued as a result of awards granted under the Plan are generally new common shares.
Stock-based compensation expense is recognized net of forfeitures within general and administrative expenses on the consolidated statements of operations. The Company has elected to account for forfeitures of stock-based compensation awards as they occur in determining compensation expense. The stock-based compensation expense is presented below for the indicated periods:
| Year Ended December 31, | ||||||||
| (in thousands) | 2024 | 2023 | ||||||
| Stock-based compensation expense | ||||||||
| Restricted Stock Awards | $ | 1,872 | $ | 1,081 | ||||
| Performance Stock Units | 210 | 47 | ||||||
| Stock Options | 216 | 234 | ||||||
| Other Awards | — | 800 | ||||||
| Total stock-based compensation expense | $ | 2,298 | $ | 2,162 | ||||
There was no stock-based compensation expense for the year ended December 31, 2022.
Restricted Stock Awards - The Company grants service-based restricted stock awards to certain of its employees and consultants, which vest ratably over a period of three years, and to non-employee directors, which vest in full after one year. Restricted stock awards are valued at the closing price of the Company's common stock on the date of grant. All restricted shares are legally issued and outstanding. If an employee terminates employment prior to the restriction lapse date, the awarded shares are forfeited and canceled and are no longer considered issued and outstanding. The holders of unvested restricted stock awards have voting rights and the right to receive dividends. The Company recognizes compensation expense utilizing graded vesting whereby compensation expense is recognized over the service period for each separately vesting tranche. A summary of the Company's restricted stock award activity for the year ended December 31, 2024 is presented below.
| Restricted Stock Awards | Weighted Average Grant Date Fair Value Per Share | ||||||||||
| Outstanding at December 31, 2023 | 295,990 | $ | 5.75 | ||||||||
| Awards granted | 383,430 | $ | 6.07 | ||||||||
| Awards canceled/forfeited | (6,530) | $ | 5.74 | ||||||||
| Awards vested | (154,842) | $ | 6.47 | ||||||||
| Outstanding at December 31, 2024 | 518,048 | $ | 5.77 | ||||||||
The aggregate fair value of restricted stock awards that vested during the year ended December 31, 2024 was $1.0 million.
PSUs - The Company has granted PSUs to certain of its officers under the Plan. The PSUs cliff vest at the end of three years, generally subject to continued employment through the performance period. The total number of shares eligible to be earned may range from zero to 200% of the target number of PSUs granted, determined based upon achievement of certain “financial performance” and “market performance” criteria for the Company and individual performance criteria for the officers awarded PSUs. Financial performance is based on the Company’s financial performance at the end of the
applicable performance period, while market performance is based on the relative standing of total shareholder return achieved by the Company compared to a predetermined group of peer companies at the end of the applicable performance period. Individual performance criteria is based on the officer's performance relative to individual performance goals at the end of the performance period. The Company utilizes the Monte Carlo simulation method to determine the fair value of the PSUs based on market performance, while PSUs based on financial performance are valued using the closing price of the Company's common stock on the date of grant.
A summary of the Company's PSU activity for the year ended December 31, 2024 is presented below.
| Performance Stock Units | Weighted Average Grant Date Fair Value Per Share | ||||||||||
| Outstanding at December 31, 2023 | 26,574 | $ | 6.01 | ||||||||
| Awards granted | 70,958 | $ | 7.51 | ||||||||
| Outstanding at December 31, 2024 | 97,532 | $ | 7.10 | ||||||||
Stock Options - The Company has granted stock options to certain of its officers under the Plan. The Company’s outstanding stock options expire 10 years following the date of grant. Pursuant to the stock options granted under the Plan, 33% of the options vest immediately with an additional 33% to vest on each of the next anniversaries of the date of the grant, generally subject to continued employment through each such vesting date. A summary of the Company's stock option activity for the year ended December 31, 2024 is presented below.
| Stock Options | Weighted Average Exercise Price Per Share | Aggregate intrinsic value | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Outstanding at December 31, 2023 | 392,108 | $ | 8.45 | ||||||||||||||
| Options granted | 134,375 | $ | 6.06 | ||||||||||||||
| Options canceled/forfeited | — | $ | — | ||||||||||||||
| Options exercised | — | $ | — | ||||||||||||||
| Outstanding at December 31, 2024 | 526,483 | $ | 7.84 | $ | 158 | ||||||||||||
| Options exercisable at December 31, 2024 | 306,195 | $ | 8.10 | $ | 87 | ||||||||||||
The fair value of each stock option award is estimated on the date of grant. For stock options granted at-the-money, grant date fair value is estimated using the Black-Scholes pricing model. As these options represent plain vanilla options and the Company did not have historical exercise detail, the expected term for these options was estimated using the simplified method allowed under Staff Accounting Bulletin Topic 14.D.2, which is the average of the weighted average vesting term and time to expiration as of the grant date. For stock options granted with an exercise price higher than the stock price at the date of grant, grant date fair value is estimated using a lattice-based option valuation model that incorporates a range of assumptions. Expected volatilities were based on historical volatilities of the Company's stock and other factors. The expected term was derived from the output of the option valuation model and represents the period of time that options granted are expected to be outstanding. The weighted average fair value of stock options on the date of the grant during the year ended December 31, 2024 was $1.38 per share. The weighted average remaining terms on the outstanding options and the exercisable options was 8.51 years and 8.4 years, respectively. The Company used the following assumptions to estimate the fair value of stock options granted during the year ended December 31, 2024:
| Risk-free interest rate | 4.0% | ||||
| Volatility | 44.0% | ||||
| Expected term | 5.53 years | ||||
| Dividend yield | 7.3% | ||||
Future stock-based compensation expense - The following table reflects the future stock-based compensation expense to be recorded for all the stock-based compensation awards that were outstanding at December 31, 2024:
| (in thousands) | Restricted Stock Awards | Performance Stock Units | Stock Options | ||||||||||||||
| 2025 | $ | 748 | $ | 245 | $ | 54 | |||||||||||
| 2026 | 269 | 186 | 6 | ||||||||||||||
| 2027 | 34 | — | — | ||||||||||||||
| Total | $ | 1,051 | $ | 431 | $ | 60 | |||||||||||
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.