Gran Tierra Energy Inc.
(“Gran Tierra” or
the “Company”) (NYSE American:GTE) (TSX:GTE) (LSE:GTE)
announced the Company’s financial and operating results for the
quarter ended September 30, 2024 (“
the
Quarter”). All dollar amounts are in United States
dollars, and production amounts are on an average working interest
(“
WI”) before royalties basis unless otherwise
indicated. Per barrel (“
bbl”) and bbl per day
(“
BOPD”) amounts are based on WI sales before
royalties. For per bbl amounts based on net after royalty
(“
NAR”) production, see Gran Tierra’s Quarterly
Report on Form 10-Q filed November 4, 2024.
Message to Shareholders
“On October 31, 2024 we were excited to have
announced the close of our acquisition of i3 Energy plc
(“i3 Energy”). We believe the purchase of i3
Energy uniquely positions Gran Tierra as a premier diversified oil
and gas company with assets in Canada, Colombia, and Ecuador. The
i3 Energy acquisition has diversified Gran Tierra into Canada and
has added 253 net booked drilling locations(1), 77% operated
production totaling approximately 18,000 bbls of oil equivalent per
day, almost 1.2 million acres (0.6 million acres net) including 53
gross sections in the Montney and 144 gross sections in the
Clearwater, two of the most prolific plays in North America. The i3
Energy acquisition has increased Gran Tierra’s PDP reserves(1) by
42 million bbls of oil equivalent (“MMBOE”) or
96%, 1P(1) by 88 MMBOE an increase of 97%, and 2P(1) by 174 MMBOE
an increase of 119%. We believe the currently depressed natural gas
pricing we see in Western Canada will be alleviated as major
Liquified Natural Gas projects including LNG Canada are brought
online. In the short term, Gran Tierra will focus on developing the
significant oil weighted assets in its Canadian and South American
portfolio.
We would like to take this opportunity to
welcome our new shareholders in Gran Tierra and look forward to
engaging with, and updating them on the Company's strategy in the
coming months. We look forward to the integration of our teams and
are confident the combined company will have top tier technical and
operational skill sets across a broad portfolio. We are eager to
implement industry leading technology currently used in Canada in
both our Ecuador and Colombia operations, and are equally looking
forward to bringing our reservoir modeling, exploration knowledge
and asset management expertise into Canada. Combined we are a much
stronger company.
Additionally, having our six consecutive
discovery in Ecuador and reaching the milestone of 1 million
cumulative bbls of oil produced from our operations in Ecuador is a
significant achievement for Gran Tierra, highlighting our strong
presence and success in the region. The productivity of the Ecuador
wells is a testament to the geology in the Oriente and Putumayo
Basins, and underpins a key pillar of growth going forward. We
remain excited about the potential of the Arawana-Bocachico play,
and the two remaining Zabaleta wells to be drilled by the end of
the year that will provide essential insights into the size and
scope of this promising opportunity”, commented Gary Guidry,
President and Chief Executive Officer of Gran Tierra.
Operational Update:
-
Acquisition of i3 Energy
- On October 31, 2024,
Gran Tierra completed its acquisition of i3 Energy. Gran Tierra is
integrating the Canadian operations and are forecasting an active
Q4 2024, including drilling 19 gross wells (8.4 net), targeting
each of its core operating areas in Central AB, Simonette,
Clearwater and Wapiti.
- The Company drilled 2 gross (2 net) horizontal Dunvegan oil
wells at Simonette. These high-impact 2-mile wells are currently
being stimulated and are expected to be brought on stream in late
November. With success, Gran Tierra can drill 2 additional Dunvegan
development wells in 2025.
- Clearwater activity commenced in mid-October with the Company’s
first operated Clearwater multilateral well at Dawson (100% working
interest). The 8-leg multilateral horizontal well (11,870 m of
total lateral length) was a follow-up to the Company’s initial
6-leg (7,500 m of total lateral length) discovery at Dawson. The
8-leg well follow-up multilateral was located structurally up-dip
of the discovery well and encountered high quality reservoir
throughout while drilling. The well will be placed on production
imminently as the rig has skidded to and spud the third Clearwater
well from the same pad. The Company has been working to secure
multiple pad sites at East Dawson to facilitate future expansion of
the field, upon further operational success. Following these two
wells the rig will move to Walrus and drill 2 prospective Falher
sands.
- In addition to the
operated capital program, Gran Tierra plans to participate in 10
gross (1.67 net) non-operated partner horizontal wells across its
land base.
- In connection with
i3 Energy acquisition closing on October 31, 2024, the Company
amended and restated the existing revolving credit facility
agreement of i3 Energy Canada Ltd. (“i3 Energy Canada”) with
National Bank of Canada dated March 22, 2024. As a result of the
amendment and restatement, among other things, the borrowing base
was revised to C$100.0 million (US$74.1 million) with available
commitment of a C$50.0 million (US$37.0 million) revolving credit
facility comprised of C$35.0 million (US$25.9 million) syndicated
facility and C$15.0 million (US$11.1 million) of operating
facility. Subject to the next borrowing base redetermination which
will occur on or before June 30, 2025, the revolving credit
facility is available until October 31, 2025 with a repayment
date of October 31, 2026, which may be extended by further
periods of up to 364 days, subject to lender approval. The facility
is undrawn.
-
Exploration
- Gran Tierra has
successfully drilled its sixth consecutive oil discovery in
Ecuador, the Charapa-B7 well. The wells drilled in Ecuador continue
to yield strong results producing over 1 million cumulative bbls of
oil to date which highlights the exceptional potential of the
Oriente and Putumayo basins.
Well |
Zone |
OnstreamDate |
IP30(BOPD)1 |
IP90(BOPD)2 |
IP30BS&W3 |
API |
GOR(scf/stb)4 |
CumulativeProduction toDate
(Mbbl)5 |
Charapa-B5 |
Hollin |
11/9/2022 |
1,092 |
910 |
2% |
28 |
160 |
307 |
Bocachico-J1 |
Basal Tena |
5/30/2023 |
1,296 |
1,146 |
<1% |
20 |
204 |
449 |
Arawana-J1 |
Basal Tena |
5/17/2024 |
1,182 |
970 |
<1% |
20 |
264 |
131 |
Bocachico Norte-J1 |
T-Sand |
8/1/2024 |
833 |
519 |
3% |
35 |
361 |
47 |
Charapa-B6 |
Hollin |
8/7/2024 |
1,645 |
- |
21% |
28 |
49 |
77 |
Charapa-B7 |
Basal Tena |
8/30/2024 |
2,043 |
- |
<1% |
25 |
153 |
112 |
1. Average initial 30-day
production per well. 2. Average initial 90-day
production per well. 3. Percentage of basic sediment
and water in the initial 30-day production. 4. Gas-oil
ratio and standard cubic feet per stock tank barrel.
5. Thousand bbls of oil and based on production up to November 1,
2024.
- The drilling rig
has been moved from the Charapa Block and mobilized to the
Chanangue Block to drill two wells - the Zabaleta-K1 and Zabaleta
Oeste-K1 exploration wells. The Zabaleta-K1 well is located four
kilometers (“km”) to the east of the Arawana-J1
well drilled earlier this year and is 200 feet up structure. The
well spud on October 22 2024, and we have currently drilled to
9,488 feet. Both wells will target the Basal Tena formation as well
as assess potential in the T-Sand, U-Sand and B-Limestone.
- During the
Quarter, the 238 km2 3D seismic program of the Charapa Block was
completed, the data has been processed and is currently being
interpreted. Preliminary interpretations of the high-quality 3D
data confirm potential prospectivity and additional areas of
interest identified on seismic, including better definition over
the Charapa structure. The 3D data will further delineate reserves,
underpin future drilling locations scheduled for 2025 and support
future development planning.
-
Development
- The planning,
civil works, and facility construction at Cohembi in the Suroriente
Block are progressing, paving the way for drilling operations to
commence in late Q4 2024.
- Acordionero
water treatment facilities expansion is expected to be completed
mid-December which will result in an addition of 21,500 bbls of
water handling per day which represents a 35% increase in water
treatment capacity. This will allow for further well optimizations
to increase injection and associated oil production. Gran Tierra
continues to steadily increased total fluid production and water
injection by ~18% per year to continue growing and maintaining oil
production while improving sweep efficiencies and recoveries.
Key Highlights of the
Quarter:
-
Production: Gran Tierra’s total average WI
production, which is before the i3 acquisition that has an
effective date of October 31, 2024, was 32,764 BOPD, which was
consistent with the second quarter 2024 (“the Prior
Quarter”). During the Quarter the Company had lower
volumes in the Acordionero field caused by downtime related to
workovers, partially offset by higher production in the Costayaco
field in Colombia, and increased production from the Chanangue and
Charapa Blocks in Ecuador as a result of a successful exploration
drilling campaign.
- Net Income: Gran
Tierra incurred net income of $1 million, compared to a net income
of $36.4 million in the Prior Quarter and a net income of $7
million in the third quarter of 2023.
- Adjusted
EBITDA(2): Adjusted
EBITDA(2) was $93 million compared to $103 million in the Prior
Quarter and $119 million in the third quarter of 2023. Twelve month
trailing Net Debt(2) to Adjusted EBITDA(2) was 1.3 times and the
Company continues to have a long term target of 1.0 times.
- Funds
Flow from Operations(2):
Funds flow from operations(2) was $60 million ($1.96 per share), up
31% from the Prior Quarter and down 24% from the third quarter of
2023.
- Cash and
Debt: As of September 30, 2024, the Company had a
cash balance of $278 million, total debt of $787 million and net
debt(2) of $509 million. During the Quarter, the Company issued
additional $150 million of 9.50% Senior Notes due October 2029 and
received cash proceeds of $140 million. Of the total amount of
proceeds received, $100 million has been used for financing the
purchase price and transaction costs related to the i3 Energy
acquisition with the remainder to be used for general corporate
purposes.
- Share
Buybacks: As a result of the i3 Energy acquisition
announced on August 19, 2024, Gran Tierra was required to pause its
share buyback program resulting in only 371,130 shares repurchased
during the Quarter. From January 1, 2023 to September 30, 2024, the
Company repurchased approximately 4.0 million shares, or 12% of
shares issued and outstanding at January 1, 2023, from free cash
flow(2).
- Return
on Average Capital
Employed(2): The Company
achieved return on average capital employed(2) of 17% during the
Quarter and 16% over the trailing 12 months.
Additional Key Financial
Metrics:
- Capital
Expenditures: Capital expenditures of $53 million were
lower than the $61 million in the Prior Quarter due to only
operating one drilling rig during the Quarter compared to two in
the Prior Quarter. Capital expenditures were up from $43 million
compared to the third quarter of 2023 as a result of a more active
exploration program in the Quarter when compared to the third
quarter of 2023.
- Oil
Sales: Gran Tierra generated oil sales of $151 million,
down 16% from the third quarter of 2023 as a result of weaker Brent
pricing, higher Castilla, Vasconia and Oriente oil differentials
and 4% lower sales volumes as a result of lower production. Oil
sales decreased 9% from the Prior Quarter primarily due to a 7%
decrease in Brent price and higher Castilla, Oriente, and Vasconia
oil differentials offset by 1% higher sales volumes.
- Quality
and Transportation Discounts: The Company’s quality and
transportation discounts per bbl were higher during the Quarter at
$14.10, compared to $12.79 in the Prior Quarter and $11.83 in the
third quarter of 2023. The Castilla oil differential per bbl
widened to $8.83 from $8.21 in the Prior Quarter and from $6.64 in
the third quarter of 2023 (Castilla is the benchmark for the
Company’s Middle Magdalena Valley Basin oil production). The
Vasconia differential per bbl widened to $5.07 from $4.00 in the
Prior Quarter, and from $3.59 in the third quarter of 2023.
Finally, the Ecuadorian benchmark, Oriente, per bbl was $9.15, up
from $8.38 in the Prior Quarter, and up from $7.69 one year ago.
The current(3) Castilla differential is approximately $8.50 per
bbl, the Vasconia differential is approximately $5.00 per bbl and
the Oriente differential is approximately $9.20 per bbl.
-
Operating Expenses: Gran Tierra’s operating
expenses decreased by 2% to $46 million, compared to the Prior
Quarter primarily due to lower workover costs, offset by higher
lifting costs primarily associated with inventory fluctuations in
Ecuador. Compared to the third quarter of 2023, operating expenses
decreased by 7% from $49 million, primarily due to lower lifting
costs associated with power generation, equipment rental and road
maintenance, partially offset by higher workover activities. On a
per bbl basis, operating expense decreased by 2% when compared to
the third quarter of 2023 and decreased by 4% when compared to the
Prior Quarter.
-
Transportation Expenses: The Company’s
transportation expenses decreased by 31% to $4 million, compared to
the Prior Quarter of $6 million and increased by 2% from the third
quarter of 2023. Transportation expenses were higher than the same
period in 2023 as a result of increases in trucking tariffs for
Acordionero volumes and higher sales volumes transported in Ecuador
during the Quarter. Transportation expenses, when compared to the
Prior Quarter, were lower due to the utilization of shorter
distance delivery points in the Quarter.
-
Operating
Netback(2)(4): The
Company’s operating netback(2)(4) was $34.18 per bbl, down 12% from
the Prior Quarter and down 16% from the third quarter of 2023
commensurate with the decrease in Brent Price and higher
differentials.
- General
and Administrative (“G&A”) Expenses: G&A expenses
before stock-based compensation were $3.20 per bbl, down from $3.77
per bbl in the Prior Quarter due to lower consulting, business
development and travel expenses and up from $2.68 per bbl, when
compared to the third quarter of 2023.
- Cash
Netback(2): Cash netback(2) per bbl was
$20.34, compared to $15.85 in the Prior Quarter primarily as a
result of lower current tax expenses of $5.13 per bbl compared to a
current tax expense of $14.54 per bbl in the Prior Quarter as a
result of a one time tax adjustment incurred in the Prior Quarter.
Compared to one year ago, cash netback(2) per bbl decreased by
$5.14 from $25.48 per bbl as a result of lower operating netback
primarily due to lower Brent pricing and higher differentials.
Financial and Operational Highlights
(all amounts in $000s, except per share and bbl
amounts)
|
Three Months EndedSeptember 30, |
|
ThreeMonthsEndedJune 30, |
|
Nine Months EndedSeptember 30, |
|
2024 |
2023 |
|
2024 |
|
2024 |
2023 |
|
|
|
|
|
|
|
|
Net Income (Loss) |
$1,133 |
$6,527 |
|
$36,371 |
|
$37,426 |
$(13,998) |
Per Share - Basic and
Diluted(5) |
$0.04 |
$0.20 |
|
$1.16 |
|
$1.20 |
$(0.42) |
|
|
|
|
|
|
|
|
Oil Sales |
$151,373 |
$179,921 |
|
$165,609 |
|
$474,559 |
$482,013 |
Operating Expenses |
(46,060) |
(49,367) |
|
(47,035) |
|
(141,561) |
(139,227) |
Transportation Expenses |
(3,911) |
(3,842) |
|
(5,690) |
|
(14,185) |
(10,599) |
Operating Netback(2)(4) |
$101,402 |
$126,712 |
|
$112,884 |
|
$318,813 |
$332,187 |
|
|
|
|
|
|
|
|
G&A Expenses Before Stock-Based
Compensation |
$9,491 |
$8,307 |
|
$10,967 |
|
$31,240 |
$29,052 |
G&A Stock-Based Compensation (Recovery)
Expense |
(3,145) |
1,931 |
|
6,160 |
|
6,376 |
3,748 |
G&A Expenses, Including Stock Based
Compensation |
$6,346 |
$10,238 |
|
$17,127 |
|
$37,616 |
$32,800 |
|
|
|
|
|
|
|
|
Adjusted EBITDA(2) |
$92,794 |
$119,235 |
|
$103,004 |
|
$290,590 |
$306,391 |
|
|
|
|
|
|
|
|
EBITDA(2) |
$97,365 |
$115,382 |
|
$101,187 |
|
$290,443 |
$294,391 |
|
|
|
|
|
|
|
|
Net Cash Provided by Operating Activities |
$78,654 |
$70,381 |
|
$73,233 |
|
$212,714 |
$157,511 |
|
|
|
|
|
|
|
|
Funds Flow from
Operations(2) |
$60,338 |
$79,000 |
|
$46,167 |
|
$180,812 |
$192,122 |
|
|
|
|
|
|
|
|
Capital Expenditures |
$52,921 |
$43,080 |
|
$61,273 |
|
$169,525 |
$179,707 |
|
|
|
|
|
|
|
|
Free Cash Flow(2) |
$7,417 |
$35,920 |
|
$(15,106) |
|
$11,287 |
$12,415 |
|
|
|
|
|
|
|
|
Average Daily Volumes (BOPD) |
|
|
|
|
|
|
|
WI Production Before Royalties |
32,764 |
33,940 |
|
32,776 |
|
32,595 |
33,098 |
Royalties |
(6,776) |
(7,164) |
|
(6,774) |
|
(6,650) |
(6,592) |
Production NAR |
25,988 |
26,776 |
|
26,002 |
|
25,945 |
26,506 |
(Increase) Decrease in Inventory |
(524) |
(380) |
|
(811) |
|
(367) |
(222) |
Sales |
25,464 |
26,396 |
|
25,191 |
|
25,578 |
26,284 |
Royalties, % of WI Production Before
Royalties |
21% |
21% |
|
21% |
|
20% |
20% |
|
|
|
|
|
|
|
|
Per bbl |
|
|
|
|
|
|
|
Brent |
$78.71 |
$85.92 |
|
$85.03 |
|
$81.82 |
$81.94 |
Quality and Transportation Discount |
(14.10) |
(11.83) |
|
(12.79) |
|
(14.11) |
(14.76) |
Royalties |
(13.58) |
(16.06) |
|
(15.31) |
|
(13.97) |
(13.58) |
Average Realized Price |
51.03 |
58.03 |
|
56.93 |
|
53.74 |
53.60 |
Transportation Expenses |
(1.32) |
(1.24) |
|
(1.96) |
|
(1.61) |
(1.18) |
Average Realized Price Net of Transportation
Expenses |
49.71 |
56.79 |
|
54.97 |
|
52.13 |
52.42 |
Operating Expenses |
(15.53) |
(15.92) |
|
(16.17) |
|
(16.03) |
(15.48) |
Operating Netback(2)(4) |
34.18 |
40.87 |
|
38.80 |
|
36.10 |
36.94 |
G&A Expenses Before Stock-Based
Compensation |
(3.20) |
(2.68) |
|
(3.77) |
|
(3.54) |
(3.23) |
Transaction Costs |
(0.49) |
— |
|
— |
|
(0.17) |
— |
Realized Foreign Exchange Gain (Loss) |
0.34 |
(0.64) |
|
0.37 |
|
0.07 |
(1.77) |
Interest Expense, Excluding Amortization of Debt Issuance
Costs |
(5.66) |
(3.84) |
|
(5.38) |
|
(5.38) |
(3.85) |
Interest Income |
0.23 |
0.09 |
|
0.35 |
|
0.27 |
0.19 |
Net Lease Payments |
0.07 |
0.18 |
|
0.02 |
|
0.07 |
0.17 |
Current Income Tax Expense |
(5.13) |
(8.50) |
|
(14.54) |
|
(6.96) |
(7.08) |
Cash Netback(2) |
$20.34 |
$25.48 |
|
$15.85 |
|
$20.46 |
$21.37 |
|
|
|
|
|
|
|
|
Share Information (000s) |
|
|
|
|
|
|
|
Common Stock Outstanding, End of
Period(5) |
30,651 |
33,288 |
|
31,022 |
|
30,651 |
33,288 |
Weighted Average Number of Shares of Common Stock
Outstanding - Basic(5) |
30,733 |
33,287 |
|
31,282 |
|
31,274 |
33,675 |
Weighted Average Number of Shares of Common Stock
Outstanding - Diluted(5) |
30,733 |
33,350 |
|
31,282 |
|
31,274 |
33,675 |
(1) Based on the i3 Energy GLJ Report report
dated July 31, 2024. See “Presentation of Oil and Gas
Information”.(2) Funds flow from operations, operating netback, net
debt, cash netback, return on average capital employed, earnings
before interest, taxes and depletion, depreciation and accretion
(“DD&A”)
(“EBITDA”) and
EBITDA adjusted for non-cash lease expense, lease payments, foreign
exchange gains or losses, stock-based compensation expense, other
gains or losses, transaction costs and financial instruments gains
or losses (“Adjusted EBITDA”), cash flow and free
cash flow are non-GAAP measures and do not have standardized
meanings under generally accepted accounting principles in the
United States of America (“GAAP”). Cash flow
refers to funds flow from operations. Free cash flow refers to
funds flow from operations less capital expenditures. Refer to
“Non-GAAP Measures” in this press release for descriptions of these
non-GAAP measures and, where applicable, reconciliations to the
most directly comparable measures calculated and presented in
accordance with GAAP.(3) Gran Tierra’s fourth quarter-to-date 2024
total average differentials are for the period from October 1 to
October 31, 2024.(4) Operating netback as presented is defined as
oil sales less operating and transportation expenses. See the table
titled Financial and Operational Highlights above for the
components of consolidated operating netback and corresponding
reconciliation.(5) Reflects our 1-for-10 reverse stock split that
became effective May 5, 2023 and not inclusive of shares of
common stock issued in connection with the i3 Energy acquisition on
October 31, 2024.
Conference Call
Information:
Gran Tierra will host its third quarter 2024 results conference
call on Monday, November 4, 2024, at 9:00 a.m. Mountain Time, 11:00
a.m. Eastern Time. Interested parties may access the conference
call by registering at the following link:
https://https://register.vevent.com/register/BIc9cc718f582741cbbf0eb2cfe5a231b1.
The call will also be available via webcast at
www.grantierra.com.
Corporate Presentation:
Gran Tierra’s Corporate Presentation has been
updated and is available on the Company website at
www.grantierra.com.
Contact Information
For investor and media inquiries please
contact:
Gary Guidry President & Chief Executive
Officer
Ryan Ellson Executive Vice President & Chief
Financial Officer
+1-403-265-3221
info@grantierra.com
About Gran Tierra Energy
Inc.Gran Tierra Energy Inc. together with its subsidiaries
is an independent international energy company currently focused on
oil and natural gas exploration and production in Canada, Colombia
and Ecuador. The Company is currently developing its existing
portfolio of assets in Canada, Colombia and Ecuador and will
continue to pursue additional new growth opportunities that would
further strengthen the Company’s portfolio. The Company’s common
stock trades on the NYSE American, the Toronto Stock Exchange and
the London Stock Exchange under the ticker symbol GTE. Additional
information concerning Gran Tierra is available at
www.grantierra.com. Except to the extent expressly stated
otherwise, information on the Company’s website or accessible from
our website or any other website is not incorporated by reference
into and should not be considered part of this press release.
Investor inquiries may be directed to info@grantierra.com or (403)
265-3221.
Gran Tierra’s Securities and Exchange Commission
(the “SEC”) filings are available on the SEC
website at http://www.sec.gov. The Company’s Canadian securities
regulatory filings are available on SEDAR+ at
http://www.sedarplus.ca and UK regulatory filings are available on
the National Storage Mechanism website at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism.
Forward Looking Statements and Legal
Advisories:This press release contains opinions,
forecasts, projections, and other statements about future events or
results that constitute forward-looking statements within the
meaning of the United States Private Securities Litigation Reform
Act of 1995, Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended,
and financial outlook and forward looking information within the
meaning of applicable Canadian securities laws (collectively,
“forward-looking statements”). All statements
other than statements of historical facts included in this press
release regarding our business strategy, plans and objectives of
our management for future operations, capital spending plans and
benefits of the changes in our capital program or expenditures, our
liquidity and financial condition, and those statements preceded
by, followed by or that otherwise include the words “expect,”
“plan,” “can,” “will,” “should,” “guidance,” “forecast,” “budget,”
“estimate,” “signal,” “progress” and “believes,” derivations
thereof and similar terms identify forward-looking statements. In
particular, but without limiting the foregoing, this press release
contains forward-looking statements regarding: the Company’s
leverage ratio target, the Company’s plans regarding strategic
investments, acquisitions, including the anticipated benefits and
operating synergies expected from the acquisition of i3 Energy, and
growth, the Company’s drilling program and capital expenditures and
the Company’s expectations of commodity prices, including future
gas pricing in Canada, exploration and production trends and its
positioning for 2024. The forward-looking statements contained in
this press release reflect several material factors and
expectations and assumptions of Gran Tierra including, without
limitation, that Gran Tierra will continue to conduct its
operations in a manner consistent with its current expectations,
pricing and cost estimates (including with respect to commodity
pricing and exchange rates), the ability of Gran Tierra to
successfully integrate the assets and operations of i3 Energy or
realize the anticipated benefits and operating synergies expected
from the acquisition of i3 Energy, the general continuance of
assumed operational, regulatory and industry conditions in Canada,
Colombia and Ecuador, and the ability of Gran Tierra to execute its
business and operational plans in the manner currently planned.
Among the important factors that could cause our
actual results to differ materially from the forward-looking
statements in this press release include, but are not limited to:
certain of our operations are located in South America and
unexpected problems can arise due to guerilla activity, strikes,
local blockades or protests; technical difficulties and operational
difficulties may arise which impact the production, transport or
sale of our products; other disruptions to local operations; global
health events; global and regional changes in the demand, supply,
prices, differentials or other market conditions affecting oil and
gas, including inflation and changes resulting from a global health
crisis, geopolitical events, including the conflicts in Ukraine and
the Gaza region, or from the imposition or lifting of crude oil
production quotas or other actions that might be imposed by OPEC
and other producing countries and the resulting company or
third-party actions in response to such changes; changes in
commodity prices, including volatility or a prolonged decline in
these prices relative to historical or future expected levels; the
risk that current global economic and credit conditions may impact
oil prices and oil consumption more than we currently predict.
which could cause further modification of our strategy and capital
spending program; prices and markets for oil and natural gas are
unpredictable and volatile; the effect of hedges; the accuracy of
productive capacity of any particular field; geographic, political
and weather conditions can impact the production, transport or sale
of our products; our ability to execute our business plan, which
may include acquisitions, and realize expected benefits from
current or future initiatives; the risk that unexpected delays and
difficulties in developing currently owned properties may occur;
the ability to replace reserves and production and develop and
manage reserves on an economically viable basis; the accuracy of
testing and production results and seismic data, pricing and cost
estimates (including with respect to commodity pricing and exchange
rates); the risk profile of planned exploration activities; the
effects of drilling down-dip; the effects of waterflood and
multi-stage fracture stimulation operations; the extent and effect
of delivery disruptions, equipment performance and costs; actions
by third parties; the timely receipt of regulatory or other
required approvals for our operating activities; the failure of
exploratory drilling to result in commercial wells; unexpected
delays due to the limited availability of drilling equipment and
personnel; volatility or declines in the trading price of our
common stock or bonds; the risk that we do not receive the
anticipated benefits of government programs, including government
tax refunds; our ability to access debt or equity capital markets
from time to time to raise additional capital, increase liquidity,
fund acquisitions or refinance debt; our ability to comply with
financial covenants in our indentures and make borrowings under any
future credit agreement; and the risk factors detailed from time to
time in Gran Tierra’s periodic reports filed with the Securities
and Exchange Commission, including, without limitation, under the
caption “Risk Factors” in Gran Tierra’s Annual Report on Form 10-K
for the year ended December 31, 2023 filed February 20, 2024 and
its other filings with the SEC. These filings are available on the
SEC website at http://www.sec.gov and on SEDAR+ at
www.sedarplus.ca.
The forward-looking statements contained in this
press release are based on certain assumptions made by Gran Tierra
based on management’s experience and other factors believed to be
appropriate. Gran Tierra believes these assumptions to be
reasonable at this time, but the forward-looking statements are
subject to risk and uncertainties, many of which are beyond Gran
Tierra’s control, which may cause actual results to differ
materially from those implied or expressed by the forward looking
statements. The risk that the assumptions on which the 2024 outlook
are based prove incorrect may increase the later the period to
which the outlook relates. All forward-looking statements are made
as of the date of this press release and the fact that this press
release remains available does not constitute a representation by
Gran Tierra that Gran Tierra believes these forward-looking
statements continue to be true as of any subsequent date. Actual
results may vary materially from the expected results expressed in
forward-looking statements. Gran Tierra disclaims any intention or
obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise,
except as expressly required by applicable law. In addition,
historical, current and forward-looking sustainability-related
statements may be based on standards for measuring progress that
are still developing, internal controls and processes that continue
to evolve, and assumptions that are subject to change in the
future.
Following Gran Tierra’s acquisition of i3
Energy, investors should not rely on Gran Tierra’s previously
issued financial and production guidance for 2024, which is no
longer applicable on a combined company basis.
Non-GAAP Measures
This press release includes non-GAAP financial
measures as further described herein. These non-GAAP measures do
not have a standardized meaning under GAAP. Investors are cautioned
that these measures should not be construed as alternatives to net
income or loss, cash flow from operating activities or other
measures of financial performance as determined in accordance with
GAAP. Gran Tierra’s method of calculating these measures may differ
from other companies and, accordingly, they may not be comparable
to similar measures used by other companies. Each non-GAAP
financial measure is presented along with the corresponding GAAP
measure so as to not imply that more emphasis should be placed on
the non-GAAP measure.
Operating netback, as presented, is defined as
oil sales less operating and transportation expenses. See the table
entitled Financial and Operational Highlights above for the
components of consolidated operating netback and corresponding
reconciliation.
Return on average capital employed as presented
is defined as earnings before interest and taxes
("EBIT"; annualized, if the period is other than
one year) divided by average capital employed (total assets minus
cash and current liabilities; average of the opening and closing
balances for the period).
|
|
Three Months EndedSeptember 30, |
|
Twelve Month TrailingSeptember
30, |
|
As at September 30, |
Return on Average Capital Employed - (Non-GAAP) Measure
($000s) |
|
|
2024 |
|
|
|
2024 |
|
|
|
2024 |
|
Net
Income |
|
$ |
1,133 |
|
|
$ |
45,137 |
|
|
|
Adjustments to
reconcile net income to EBIT: |
|
|
|
|
|
|
Interest Expense |
|
|
19,892 |
|
|
|
74,503 |
|
|
|
Income Tax Expense |
|
|
20,767 |
|
|
|
34,589 |
|
|
|
EBIT |
|
$ |
41,792 |
|
|
$ |
154,229 |
|
|
|
|
|
|
|
|
|
|
Total Assets |
|
|
|
|
|
$ |
1,533,378 |
|
Less Current Liabilities |
|
|
|
|
|
|
263,492 |
|
Less Cash and Cash Equivalents |
|
|
|
|
|
|
277,645 |
|
Capital
Employed |
|
|
|
|
|
$ |
992,241 |
|
|
|
|
|
|
|
|
Annualized EBIT* |
|
$ |
167,168 |
|
|
|
|
|
Divided by Average Capital Employed |
|
|
992,241 |
|
|
|
992,241 |
|
|
|
Return on Average
Capital Employed |
|
|
17 |
% |
|
|
16 |
% |
|
|
*Annualized EBIT was calculated for the three
months ended September 30, 2024, by multiplying the quarter-to-date
EBIT by 4.
Cash netback as presented is defined as net
income or loss adjusted for DD&A expenses, deferred tax expense
or recovery, stock-based compensation expense or recovery,
amortization of debt issuance costs, non-cash lease expense, lease
payments, unrealized foreign exchange gain or loss and other gain
or loss. Management believes that operating netback and cash
netback are useful supplemental measures for investors to analyze
financial performance and provide an indication of the results
generated by Gran Tierra’s principal business activities prior to
the consideration of other income and expenses. A reconciliation
from net income or loss to cash netback is as follows:
|
Three Months EndedSeptember 30, |
|
ThreeMonthsEndedJune 30, |
|
Nine Months EndedSeptember 30, |
Cash Netback - (Non-GAAP) Measure ($000s) |
|
2024 |
|
|
2023 |
|
|
|
2024 |
|
|
|
2024 |
|
|
2023 |
|
Net Income
(Loss) |
$ |
1,133 |
|
$ |
6,527 |
|
|
$ |
36,371 |
|
|
$ |
37,426 |
|
$ |
(13,998 |
) |
Adjustments to
reconcile net income (loss) to cash netback |
|
|
|
|
|
|
|
DD&A expenses |
|
55,573 |
|
|
55,019 |
|
|
|
55,490 |
|
|
|
167,213 |
|
|
163,424 |
|
Deferred tax expense (recovery) |
|
5,550 |
|
|
13,990 |
|
|
|
(51,361 |
) |
|
|
(32,332 |
) |
|
43,242 |
|
Stock-based compensation (recovery) expense |
|
(3,145 |
) |
|
1,931 |
|
|
|
6,160 |
|
|
|
6,376 |
|
|
3,748 |
|
Amortization of debt issuance costs |
|
3,109 |
|
|
1,594 |
|
|
|
2,760 |
|
|
|
9,175 |
|
|
3,394 |
|
Non-cash lease expense |
|
1,370 |
|
|
1,235 |
|
|
|
1,381 |
|
|
|
4,164 |
|
|
3,488 |
|
Lease payments |
|
(1,171 |
) |
|
(676 |
) |
|
|
(1,311 |
) |
|
|
(3,540 |
) |
|
(1,918 |
) |
Unrealized foreign exchange gain |
|
(2,081 |
) |
|
(266 |
) |
|
|
(3,323 |
) |
|
|
(7,670 |
) |
|
(7,814 |
) |
Other gain |
|
— |
|
|
(354 |
) |
|
|
— |
|
|
|
— |
|
|
(1,444 |
) |
Cash
netback |
$ |
60,338 |
|
$ |
79,000 |
|
|
$ |
46,167 |
|
|
$ |
180,812 |
|
$ |
192,122 |
|
EBITDA, as presented, is defined as net income
or loss adjusted for DD&A expenses, interest expense and income
tax expense or recovery. Adjusted EBITDA, as presented, is defined
as EBITDA adjusted for non-cash lease expense, lease payments,
foreign exchange gain or loss, stock-based compensation expense,
transaction costs and other gain or loss. Management uses this
supplemental measure to analyze performance and income generated by
our principal business activities prior to the consideration of how
non-cash items affect that income, and believes that this financial
measure is useful supplemental information for investors to analyze
our performance and our financial results. A reconciliation from
net income or loss to EBITDA and adjusted EBITDA is as follows:
|
Three Months EndedSeptember 30, |
|
ThreeMonthsEndedJune 30, |
|
Nine Months EndedSeptember 30, |
EBITDA - (Non-GAAP) Measure ($000s) |
|
2024 |
|
|
2023 |
|
|
|
2024 |
|
|
|
2024 |
|
|
2023 |
|
Net Income
(Loss) |
$ |
1,133 |
|
$ |
6,527 |
|
|
$ |
36,371 |
|
|
$ |
37,426 |
|
$ |
(13,998 |
) |
Adjustments to
reconcile net income (loss) to EBITDA and Adjusted
EBITDA |
|
|
|
|
|
|
|
DD&A expenses |
|
55,573 |
|
|
55,019 |
|
|
|
55,490 |
|
|
|
167,213 |
|
|
163,424 |
|
Interest expense |
|
19,892 |
|
|
13,503 |
|
|
|
18,398 |
|
|
|
56,714 |
|
|
38,017 |
|
Income tax expense (recovery) |
|
20,767 |
|
|
40,333 |
|
|
|
(9,072 |
) |
|
|
29,090 |
|
|
106,948 |
|
EBITDA |
$ |
97,365 |
|
$ |
115,382 |
|
|
$ |
101,187 |
|
|
$ |
290,443 |
|
$ |
294,391 |
|
Non-cash lease expense |
|
1,370 |
|
|
1,235 |
|
|
|
1,381 |
|
|
|
4,164 |
|
|
3,488 |
|
Lease payments |
|
(1,171 |
) |
|
(676 |
) |
|
|
(1,311 |
) |
|
|
(3,540 |
) |
|
(1,918 |
) |
Foreign exchange (gain) loss |
|
(3,084 |
) |
|
1,717 |
|
|
|
(4,413 |
) |
|
|
(8,312 |
) |
|
8,126 |
|
Stock-based compensation expense |
|
(3,145 |
) |
|
1,931 |
|
|
|
6,160 |
|
|
|
6,376 |
|
|
3,748 |
|
Transaction costs |
|
1,459 |
|
|
— |
|
|
|
— |
|
|
|
1,459 |
|
|
— |
|
Other loss (gain) |
|
— |
|
|
(354 |
) |
|
|
— |
|
|
|
— |
|
|
(1,444 |
) |
Adjusted
EBITDA |
$ |
92,794 |
|
$ |
119,235 |
|
|
$ |
103,004 |
|
|
$ |
290,590 |
|
$ |
306,391 |
|
Funds flow from operations, as presented, is
defined as net income or loss adjusted for DD&A expenses,
deferred tax expense or recovery, stock-based compensation expense,
amortization of debt issuance costs, non-cash lease expense, lease
payments, unrealized foreign exchange gain, and other gain or loss.
Management uses this financial measure to analyze performance and
income or loss generated by our principal business activities prior
to the consideration of how non-cash items affect that income or
loss, and believes that this financial measure is also useful
supplemental information for investors to analyze performance and
our financial results. Free cash flow, as presented, is defined as
funds flow from operations adjusted for capital expenditures.
Management uses this financial measure to analyze cash flow
generated by our principal business activities after capital
requirements and believes that this financial measure is also
useful supplemental information for investors to analyze
performance and our financial results. A reconciliation from net
income or loss to both funds flow from operations and free cash
flow is as follows:
|
Three Months EndedSeptember 30, |
|
ThreeMonthsEndedJune 30, |
|
Nine Months EndedSeptember 30, |
Funds Flow From Operations - (Non-GAAP)
Measure ($000s) |
|
2024 |
|
|
2023 |
|
|
|
2024 |
|
|
|
2024 |
|
|
2023 |
|
Net Income
(Loss) |
$ |
1,133 |
|
$ |
6,527 |
|
|
$ |
36,371 |
|
|
$ |
37,426 |
|
$ |
(13,998 |
) |
Adjustments to
reconcile net income (loss) to funds flow from
operations |
|
|
|
|
|
|
|
DD&A expenses |
|
55,573 |
|
|
55,019 |
|
|
|
55,490 |
|
|
|
167,213 |
|
|
163,424 |
|
Deferred tax expense (recovery) |
|
5,550 |
|
|
13,990 |
|
|
|
(51,361 |
) |
|
|
(32,332 |
) |
|
43,242 |
|
Stock-based compensation (recovery) expense |
|
(3,145 |
) |
|
1,931 |
|
|
|
6,160 |
|
|
|
6,376 |
|
|
3,748 |
|
Amortization of debt issuance costs |
|
3,109 |
|
|
1,594 |
|
|
|
2,760 |
|
|
|
9,175 |
|
|
3,394 |
|
Non-cash lease expense |
|
1,370 |
|
|
1,235 |
|
|
|
1,381 |
|
|
|
4,164 |
|
|
3,488 |
|
Lease payments |
|
(1,171 |
) |
|
(676 |
) |
|
|
(1,311 |
) |
|
|
(3,540 |
) |
|
(1,918 |
) |
Unrealized foreign exchange gain |
|
(2,081 |
) |
|
(266 |
) |
|
|
(3,323 |
) |
|
|
(7,670 |
) |
|
(7,814 |
) |
Other loss (gain) |
|
— |
|
|
(354 |
) |
|
|
— |
|
|
|
— |
|
|
(1,444 |
) |
Funds flow from
operations |
$ |
60,338 |
|
$ |
79,000 |
|
|
$ |
46,167 |
|
|
$ |
180,812 |
|
$ |
192,122 |
|
Capital expenditures |
$ |
52,921 |
|
$ |
43,080 |
|
|
$ |
61,273 |
|
|
$ |
169,525 |
|
$ |
179,707 |
|
Free cash
flow |
$ |
7,417 |
|
$ |
35,920 |
|
|
$ |
(15,106 |
) |
|
$ |
11,287 |
|
$ |
12,415 |
|
Net debt as of September 30, 2024, was $509
million, calculated using the sum of the aggregate principal amount
of 6.25% Senior Notes, 7.75% Senior Notes, and 9.50% Senior Notes
outstanding, excluding deferred financing fees, totaling $787
million, less cash and cash equivalents of $278 million.
Presentation of Oil and Gas
Information
All reserves value and ancillary information
contained in this press release regarding Gran Tierra (not
including reserves value and ancillary information regarding i3
Energy) have been prepared by the Company’s independent qualified
reserves evaluator McDaniel & Associates Consultants Ltd.
(“McDaniel”) in a report with an effective date of
December 31, 2023 (the “Gran Tierra McDaniel Reserves
Report”) and calculated in compliance with Canadian
National Instrument 51-101 – Standards of Disclosure for Oil and
Gas Activities (“NI 51-101”) and the Canadian Oil
and Gas Evaluation Handbook (“COGEH”), unless
otherwise expressly stated. All reserves value and ancillary
information contained in this press release regarding i3 Energy
have been prepared by i3 Energy’s independent qualified reserves
evaluator GLJ Ltd. (“GLJ”) in a fair market value
report with an effective date of July 31, 2024 (the “i3
Energy GLJ Report”) and calculated in compliance with NI
51-101 and COGEH, unless otherwise expressly stated.
Barrel of oil equivalents
(“boe”) have been converted on the basis of six
thousand cubic feet (“Mcf”) natural gas to 1 bbl
of oil. Boe’s may be misleading, particularly if used in isolation.
A boe conversion ratio of 6 Mcf: 1 bbl is based on an energy
equivalency conversion method primarily applicable at the burner
tip and does not represent a value equivalency at the wellhead. In
addition, given that the value ratio based on the current price of
oil as compared with natural gas is significantly different from
the energy equivalent of six to one, utilizing a boe conversion
ratio of 6 Mcf: 1 bbl would be misleading as an indication of
value.
The following reserves categories are discussed
in this press release: Proved (“1P”), 1P plus
Probable (“2P”) and 2P plus Possible
(“3P”) and Proved Developed Producing
(“PDP”). Proved reserves are those reserves that
can be estimated with a high degree of certainty to be recoverable.
It is likely that the actual remaining quantities recovered will
exceed the estimated proved reserves. Probable reserves are those
additional reserves that are less certain to be recovered than
proved reserves. It is equally likely that the actual remaining
quantities recovered will be greater or less than the sum of the
estimated proved plus probable reserves. Possible reserves are
those additional reserves that are less certain to be recovered
than probable reserves. There is a 10% probability that the
quantities actually recovered will equal or exceed the sum of
proved plus probable plus possible reserves. Proved developed
producing reserves are those proved reserves that are expected to
be recovered from completion intervals open at the time of the
estimate. These reserves may be currently producing or, if shut-in,
they must have previously been on production, and the date of
resumption of production must be known with reasonable certainty.
Certain terms used in this press release but not defined are
defined in NI 51-101, CSA Staff Notice 51-324 – Revised Glossary to
NI 51-101 Standards of Disclosure for Oil and Gas Activities
(“CSA Staff Notice 51-324”) and/or the COGEH and,
unless the context otherwise requires, shall have the same meanings
herein as in NI 51-101, CSA Staff Notice 51-324 and the COGEH, as
the case may be.
Estimates of reserves for individual properties
may not reflect the same level of confidence as estimates of
reserves for all properties, due to the effect of aggregation.
There is no assurance that the forecast price and cost assumptions
applied by McDaniel or GLJ in evaluating Gran Tierra’s or i3
Energy’s reserves, respectively, will be attained and variances
could be material. There are numerous uncertainties inherent in
estimating quantities of crude oil and natural gas reserves. The
reserves information set forth in the Gran Tierra McDaniel Reserves
Report and the i3 Energy GLJ Report are estimates only and there is
no guarantee that the estimated reserves will be recovered. Actual
reserves may be greater than or less than the estimates provided
therein. All reserves assigned in the Gran Tierra McDaniel Reserves
Report are located in Colombia and Ecuador and presented on a
consolidated basis by foreign geographic area.
Booked drilling locations of i3 Energy disclosed
herein are derived from the i3 Energy GLJ Report and account for
drilling locations that have associated 2P reserves.
References to a formation where evidence of
hydrocarbons has been encountered is not necessarily an indicator
that hydrocarbons will be recoverable in commercial quantities or
in any estimated volume. Gran Tierra’s reported production is a mix
of light crude oil and medium and heavy crude oil for which there
is not a precise breakdown since the Company’s oil sales volumes
typically represent blends of more than one type of crude oil. Well
test results should be considered as preliminary and not
necessarily indicative of long-term performance or of ultimate
recovery. Well log interpretations indicating oil and gas
accumulations are not necessarily indicative of future production
or ultimate recovery. If it is indicated that a pressure transient
analysis or well-test interpretation has not been carried out, any
data disclosed in that respect should be considered preliminary
until such analysis has been completed. References to thickness of
“oil pay” or of a formation where evidence of hydrocarbons has been
encountered is not necessarily an indicator that hydrocarbons will
be recoverable in commercial quantities or in any estimated
volume.
This press release contains certain oil and gas
metrics, including operating netback and cash netback, which do not
have standardized meanings or standard methods of calculation and
therefore such measures may not be comparable to similar measures
used by other companies and should not be used to make comparisons.
These metrics are calculated as described in this press release and
management believes that they are useful supplemental measures for
the reasons described in this press release.
Such metrics have been included herein to
provide readers with additional measures to evaluate the Company’s
performance; however, such measures are not reliable indicators of
the future performance of the Company and future performance may
not compare to the performance in previous periods.
References in this press release to IP30, IP90
and other short-term production rates of Gran Tierra are useful in
confirming the presence of hydrocarbons, however such rates are not
determinative of the rates at which such wells will commence
production and decline thereafter and are not indicative of
long-term performance or of ultimate recovery. While encouraging,
readers are cautioned not to place reliance on such rates in
calculating the aggregate production of Gran Tierra. Gran Tierra
cautions that such results should be considered to be
preliminary.
Disclosure of Reserve Information and Cautionary Note to
U.S. Investors
Unless expressly stated otherwise, all estimates
of proved, probable and possible reserves and related future net
revenue disclosed in this press release have been prepared in
accordance with NI 51-101. Estimates of reserves and future net
revenue made in accordance with NI 51-101 will differ from
corresponding estimates prepared in accordance with applicable SEC
rules and disclosure requirements of the U.S. Financial Accounting
Standards Board (“FASB”), and those differences
may be material. NI 51-101, for example, requires disclosure of
reserves and related future net revenue estimates based on forecast
prices and costs, whereas SEC and FASB standards require that
reserves and related future net revenue be estimated using average
prices for the previous 12 months. In addition, NI 51-101 permits
the presentation of reserves estimates on a “company gross” basis,
representing Gran Tierra's working interest share before deduction
of royalties, whereas SEC and FASB standards require the
presentation of net reserve estimates after the deduction of
royalties and similar payments. There are also differences in the
technical reserves estimation standards applicable under NI 51-101
and, pursuant thereto, the COGEH, and those applicable under SEC
and FASB requirements.
In addition to being a reporting issuer in
certain Canadian jurisdictions, Gran Tierra is a registrant with
the SEC and subject to domestic issuer reporting requirements under
U.S. federal securities law, including with respect to the
disclosure of reserves and other oil and gas information in
accordance with U.S. federal securities law and applicable SEC
rules and regulations (collectively, “SEC
requirements”). Disclosure of such information in
accordance with SEC requirements is included in the Company's
Annual Report on Form 10-K and in other reports and materials filed
with or furnished to the SEC and, as applicable, Canadian
securities regulatory authorities. The SEC permits oil and gas
companies that are subject to domestic issuer reporting
requirements under U.S. federal securities law, in their filings
with the SEC, to disclose only estimated proved, probable and
possible reserves that meet the SEC's definitions of such terms.
Gran Tierra has disclosed estimated proved, probable and possible
reserves in its filings with the SEC. In addition, Gran Tierra
prepares its financial statements in accordance with United States
generally accepted accounting principles, which require that the
notes to its annual financial statements include supplementary
disclosure in respect of the Company's oil and gas activities,
including estimates of its proved oil and gas reserves and a
standardized measure of discounted future net cash flows relating
to proved oil and gas reserve quantities. This supplementary
financial statement disclosure is presented in accordance with FASB
requirements, which align with corresponding SEC requirements
concerning reserves estimation and reporting.
Gran Tierra Energy (LSE:GTE)
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Von Nov 2024 bis Dez 2024
Gran Tierra Energy (LSE:GTE)
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Von Dez 2023 bis Dez 2024