Non-ops take control amid underwhelming returns

Non-operated oil and gas companies, despite consistency and conservatism, have traditionally traded at a considerable discount to their operated counterparts. This valuation gap persists even as these companies offer attractive yields and return cash to shareholders. For instance, Granite Ridge Resources trades at a 1.5x to 2.0x discount compared to operated E&P peers, despite offering a yield of about 7%.

In response to this undervaluation, some non-ops are evolving their business models, Hart Energy reports. Granite Ridge, for example, is transitioning towards a "controlled capital program," effectively creating a hybrid operated segment within its non-op structure. This strategy involves partnering with experienced private teams left on the sidelines due to slowed private equity fundraising. By doing so, Granite Ridge aims to gain more control over development timing, capital allocation, and investment underwriting, bridging the gap between non-op and operated investment models.

Meanwhile, other non-ops are pursuing different strategies to enhance their market appeal. Northern Oil & Gas (NOG) has successfully attracted investor attention through headline-grabbing deals, positioning itself as a reliable partner for high-quality property purchases and development. Conversely, companies like Vitesse Energy maintain a focused approach, leveraging deep expertise in specific basins such as the Williston. As the sector evolves, these strategic shifts reflect non-ops' efforts to improve predictability, provide clearer guidance, and ultimately close the valuation gap with their operated peers.