Gran Tierra Energy Inc. Announces Third Quarter 2021 Results
Gran Tierra Energy Inc.
("Gran Tierra" or
the "Company") (NYSE American:GTE)(TSX:GTE)(LSE:GTE) today
announced the Company’s financial and operating results for the
quarter ended September 30, 2021 ("
the
Quarter"). All dollar amounts are in United States
dollars and production amounts are on an average working interest
before royalties ("
WI") 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 1, 2021.
Key Highlights:
- Material
funds flow from operations(1) growth in the
Quarter, underpinned by higher production volumes and strong Brent
pricing:
- Funds flow from
operations(1) increased by 758% to $69 million compared to the
third quarter of 2020 and increased 197% from the second quarter of
2021 ("the Prior Quarter").
-
Returning to production growth with the Quarter's
production up 26% from the Prior Quarter:
- The Quarter's
production averaged 28,957 BOPD, up 53% from the third quarter of
2020, and up 26% from the Prior Quarter.
- Gran Tierra's
average production for various time periods is outlined in the
table below:
Average Production (BOPD) |
Acordionero |
Costayaco |
Moqueta |
Suroriente |
Other |
Total Company |
Third Quarter 2020 |
9,696 |
4,949 |
2,051 |
805 |
1,443 |
18,944 |
Fourth Quarter 2020 |
9,732 |
4,363 |
2,530 |
2,851 |
2,431 |
21,907 |
First Quarter 2021 |
12,681 |
4,190 |
2,304 |
2,752 |
2,536 |
24,463 |
Second Quarter 2021 |
14,793 |
3,206 |
1,774 |
1,058 |
2,204 |
23,035 |
Third Quarter 2021 |
14,427 |
6,292 |
2,321 |
3,513 |
2,404 |
28,957 |
October 2021* |
14,979 |
6,748 |
2,206 |
3,393 |
2,102 |
29,416 |
*Approximate average production over the period
from October 1, 2021 to October 30, 2021.
-
Suroriente (Gran Tierra 52% WI) and PUT-7 (Gran Tierra 100%
WI) Blocks: The approximate average WI production of
Suroriente and PUT-7 was approximately 3,750 BOPD during October
2021. Due to a localized farmers' blockade directed at the
Colombian government, not Gran Tierra, the Suroriente and PUT-7
Blocks are temporarily shut-in. The blockade started during the
last week of October 2021. The Colombian government is working
diligently to quickly lift this blockade. Once the blockade ends,
the Company expects to quickly restore Suroriente's and PUT-7's
production levels to their current approximate capacity of
4,400-4,600 BOPD.
- Current
Production: Gran Tierra's total corporate production is
currently approximately 26,000 BOPD. Once the blockade affecting
the Suroriente and PUT-7 Blocks ends, Gran Tierra expects that the
Company can quickly restore total corporate production to
approximately 30,000-31,000 BOPD.
-
Production Guidance: Gran Tierra expects full-year
2021 average production to be 26,500-27,500 BOPD (the previous
forecast was 27,500-28,500 BOPD), due to the impact of the current
blockade. While the Colombian government is focused on quickly
ending this blockade, Gran Tierra believes it is prudent to adjust
the Company's 2021 production guidance.
-
Reaffirmed 2021 Financial Guidance: Despite the
impact of the most recent Suroriente and PUT-7 blockade on the
Company's 2021 production guidance, Gran Tierra believes this
situation can be resolved quickly and expects the currently strong
Brent oil price environment to partially offset the impact on
production. The Brent oil price has averaged $83.75/bbl during
October 1-29, 2021, which is 16% higher than the $72.00/bbl Brent
price that the Company had assumed for budget purposes during the
fourth quarter of 2021. The Company's current financial guidance is
2021 EBITDA(1) of $265-285 million, 2021 cash flow(1) $215-235
million, 2021 free cash flow(1) of $75-95 million and capital
expenditures of $130-150 million.
- Key
Financial Metrics for the Quarter:
- Credit
Facility Paid Down: As of September 30, 2021, the Company
had paid down its credit facility balance by $25 million to $150
million and had a total cash balance(4) of $20 million. These
figures compare to a credit facility balance of $175 million and a
total cash balance(4) of $24 million at the end of the Prior
Quarter. As of November 1, 2021, Gran Tierra has paid down its
credit facility balance by an additional $20 million to $130
million. With expected fourth quarter 2021 free cash flow(1) and
changes in non-cash working capital (primarily related to the
ongoing collection of tax receivables), Gran Tierra expects its
bank credit facility to be paid down to a balance of $80 million by
December 31, 2021.
-
Generated Net Income and Increased EBITDA: During
the Quarter, Gran Tierra generated net income of $35 million, an
increase of 299% from the net loss of $18 million realized in the
Prior Quarter; the Quarter's EBITDA(1) also improved substantially
to $96 million, up 178% from the Prior Quarter's $34 million.
- Funds
Flow: Relative to the Prior Quarter, the Company's funds
flow from operations(1) was up 197% to $69 million, due to
increased sales volumes of 31%, strong Brent pricing, and lower
hedging losses.
- Free
Cash Flow: During the Quarter, the Company generated free
cash flow(1) of $34 million, the highest since the fourth quarter
of 2012, which was deployed to strengthen the Company’s balance
sheet.
-
Increased Oil Sales and Operating Netback: During
the Quarter, the Brent oil price averaged $73.23/bbl and Gran
Tierra generated oil sales of $135 million, up 40% or $39 million
from the Prior Quarter, due to a 6% increase in the Brent oil price
coupled with a 26% increase in production during the Quarter. The
Company’s operating netback(2) of $34.95/bbl was up 5%, an increase
of $1.51/bbl relative to the Prior Quarter. This improvement was
achieved despite an increase in royalties to $11.80/bbl, up from
the Prior Quarter's $10.21/bbl, which was caused by higher oil
prices, and despite increased expenses during the Quarter.
-
Operating Expenses: Compared to the Prior Quarter,
the Company’s operating expenses were up 11% to $13.86/bbl as a
result of increased power generation costs. When compared to the
corresponding period in 2020, year-to-date operating expenses were
consistent at approximately $13.38/bbl.
- Other
Expenses:
- Transportation
expenses were down $0.32/bbl during the Quarter to $1.11/bbl,
compared to the Prior Quarter as a result of favorable pipeline
contracts negotiated during the Quarter.
- Quality and
transportation discounts remained consistent during the Quarter,
despite an increase in Castilla and Vasconia oil price
differentials.
- General and
administrative ("G&A") before stock-based
compensation during the Quarter decreased by 24% versus the Prior
Quarter, due to the timing of certain costs paid and expensed in
the Prior Quarter.
- Capital
Expenditures: The Quarter's expenditures of approximately
$35 million were relatively flat with the Prior Quarter's level of
$37 million.
- Oil Price Hedges In Place
Designed To Protect Cash Flows During Second Half 2021:
The Company has the following Brent oil price hedges in place
covering 10,000 BOPD for the remainder of 2021, with a weighted
average floor price of $57.03/bbl and a weighted average ceiling
price of $65.29/bbl (realized oil price hedging losses totaled $7
million during the Quarter). Currently, the Company does not have
any hedges in place yet for 2022.
Period and type of instrument |
VolumeBOPD |
Reference |
Sold Put ($/bbl,Weighted Average) |
Purchased Put ($/bbl,Weighted Average) |
Sold Call ($/bbl,Weighted Average) |
Swap Price ($/bbl,Weighted Average) |
Three-way Collars: October 1, to December 31, 2021 |
7,000 |
|
ICE Brent |
47.14 |
|
57.14 |
|
68.95 |
|
n/a |
Swaps: October 1, to December 31, 2021 |
3,000 |
|
ICE Brent |
n/a |
n/a |
n/a |
56.75 |
|
Message to Shareholders
Gary Guidry, President and Chief Executive
Officer of Gran Tierra, commented: “Gran Tierra generated $69
million of funds flow from operations(1) during the Quarter by
restoring production levels safely and diligently across our
Colombian portfolio. Despite the temporary setback from the recent
Suroriente and PUT-7 blockade, which we expect to be resolved
quickly, we are targeting further debt reduction in the fourth
quarter of 2021, in line with our previously announced capital
allocation strategy. Looking ahead, with the stronger Brent oil
price environment in tandem with our restored production volumes,
we are on track to generate significant 2021 free cash flow(1).
With a constructive oil price environment, a
successful first half 2021 drilling program and the expiry of our
first half 2021 oil price hedges, we are very excited about the
remainder of 2021 and all of 2022. Next year, we plan to focus on
continued strengthening of our balance sheet, the ongoing
development of our core assets and a measured but high-impact
exploration program."
Operations Update
-
Acordionero Oil Field (100% WI)
- When necessary,
a workover rig was deployed during the Quarter to restore existing
wells to production if they went offline.
- Gran Tierra
believes its prudent reservoir management of Acordionero’s
waterflood has allowed the Company to restore this field’s
production to an average level of 14,427 BOPD in the Quarter, up
49% from one year ago, and the highest quarterly average production
since the fourth quarter of 2019.
- The 2021
drilling program in Acordionero was very successful and based on
the results to date, the Company plans to have an active drilling
program of both oil producers and water injectors during 2022.
- Acordionero’s
approximate average production(3) in October 2021 was 14,979
BOPD.
-
Costayaco Oil Field (100% WI)
- In March 2021,
Gran Tierra commenced its infill development drilling campaign to
drill 3 oil producers; this drilling program was the first in
Costayaco since November 2019.
- The CYC-42 and
CYC-43 infill oil wells were drilled during March and April of 2021
and the CYC-44 infill oil well was drilled in late April 2021.
- All three of
these successful new oil wells started production during the
Quarter and drove a significant increase in Costayaco’s average
production to 6,292 BOPD during the Quarter, up 50% from 4,190 BOPD
in the first quarter of 2021. Based on the results of this year's
program, the Company anticipates drilling additional development
wells in Costayaco in 2022.
- Costayaco’s
approximate average production(3) in October 2021 was 6,748
BOPD.
- Moqueta
Oil Field (100% WI)
- During the
Quarter, Gran Tierra completed a budgeted workover program that was
designed to optimize Moqueta’s waterflood, which may potentially
increase the field’s ultimate oil recovery.
- The workover
program was very successful and we anticipate drilling additional
development wells in Moqueta in the second half of 2022.
- Moqueta’s
approximate average production(3) in October 2021 was 2,206
BOPD.
-
Suroriente Block (52% WI and Operator)
- At the Cohembi
oil field in the Suroriente Block, a facility expansion program is
progressing, which is expected to allow additional production to be
brought online in the fourth quarter of 2021.
- During the
Quarter, a workover rig was deployed to run larger pumps in some
oil wells.
- The Suroriente
Block’s average WI production during the Quarter was 3,513 BOPD,
the highest average WI quarterly rate since the fourth quarter of
2019.
Financial and Operational Highlights
(all amounts in $000s, except per share and bbl
amounts)
|
Three Months EndedSeptember 30, |
|
Three Months EndedJune 30, |
|
Nine Months EndedSeptember 30, |
|
2021 |
2020 |
|
2021 |
|
2021 |
2020 |
|
|
|
|
|
|
|
|
Net Income (Loss) |
$ |
35,007 |
|
|
$ |
(107,821 |
) |
|
|
$ |
(17,627 |
) |
|
|
$ |
(20,042 |
) |
|
$ |
(730,096 |
) |
|
Per Share - Basic and Diluted |
$ |
0.10 |
|
|
$ |
(0.29 |
) |
|
|
$ |
(0.05 |
) |
|
|
$ |
(0.05 |
) |
|
$ |
(1.99 |
) |
|
|
|
|
|
|
|
|
|
Oil
Sales |
$ |
135,319 |
|
|
$ |
53,142 |
|
|
|
$ |
96,623 |
|
|
|
$ |
327,435 |
|
|
$ |
173,045 |
|
|
Operating
Expenses |
(37,567 |
) |
|
(20,721 |
) |
|
|
(25,431 |
) |
|
|
(92,623 |
) |
|
(84,673 |
) |
|
Transportation
Expenses |
(3,021 |
) |
|
(1,286 |
) |
|
|
(2,921 |
) |
|
|
(8,448 |
) |
|
(8,549 |
) |
|
Operating
Netback(1)(2) |
$ |
94,731 |
|
|
$ |
31,135 |
|
|
|
$ |
68,271 |
|
|
|
$ |
226,364 |
|
|
$ |
79,823 |
|
|
|
|
|
|
|
|
|
|
G&A Expenses
Before Stock-Based Compensation |
$ |
5,444 |
|
|
$ |
4,506 |
|
|
|
$ |
7,133 |
|
|
|
$ |
18,475 |
|
|
$ |
17,183 |
|
|
G&A Stock-Based
Compensation Expense (Recovery) |
1,053 |
|
|
56 |
|
|
|
1,873 |
|
|
|
6,597 |
|
|
(707 |
) |
|
G&A Expenses,
Including Stock Based Compensation |
$ |
6,497 |
|
|
$ |
4,562 |
|
|
|
$ |
9,006 |
|
|
|
$ |
25,072 |
|
|
$ |
16,476 |
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA(1) |
$ |
81,804 |
|
|
$ |
21,884 |
|
|
|
$ |
36,299 |
|
|
|
$ |
160,007 |
|
|
$ |
74,247 |
|
|
|
|
|
|
|
|
|
|
EBITDA(1) |
$ |
95,625 |
|
|
$ |
(83,017 |
) |
|
|
$ |
34,424 |
|
|
|
$ |
146,408 |
|
|
$ |
(621,010 |
) |
|
|
|
|
|
|
|
|
|
Funds Flow from
Operations(1) |
$ |
69,103 |
|
|
$ |
8,056 |
|
|
|
$ |
23,272 |
|
|
|
$ |
121,348 |
|
|
$ |
36,257 |
|
|
|
|
|
|
|
|
|
|
Capital
Expenditures |
$ |
34,839 |
|
|
$ |
7,354 |
|
|
|
$ |
37,384 |
|
|
|
$ |
109,650 |
|
|
$ |
56,378 |
|
|
|
|
|
|
|
|
|
|
Free Cash
Flow(1) |
$ |
34,264 |
|
|
$ |
702 |
|
|
|
$ |
(14,112 |
) |
|
|
$ |
11,698 |
|
|
$ |
(20,121 |
) |
|
|
|
|
|
|
|
|
|
Average Daily Volumes (BOPD) |
|
|
|
|
|
|
|
WI Production Before Royalties |
28,957 |
|
|
18,944 |
|
|
|
23,035 |
|
|
|
25,501 |
|
|
22,864 |
|
|
Royalties |
(5,585 |
) |
|
(1,893 |
) |
|
|
(4,059 |
) |
|
|
(4,531 |
) |
|
(2,600 |
) |
|
Production
NAR |
23,372 |
|
|
17,051 |
|
|
|
18,976 |
|
|
|
20,970 |
|
|
20,264 |
|
|
Decrease (Increase) in
Inventory |
461 |
|
|
15 |
|
|
|
(522 |
) |
|
|
(105 |
) |
|
117 |
|
|
Sales |
23,833 |
|
|
17,066 |
|
|
|
18,454 |
|
|
|
20,865 |
|
|
20,381 |
|
|
Royalties, % of WI
Production Before Royalties |
19 |
|
% |
10 |
|
% |
|
18 |
|
% |
|
18 |
|
% |
11 |
|
% |
|
|
|
|
|
|
|
|
Per bbl |
|
|
|
|
|
|
|
Brent |
$ |
73.23 |
|
|
$ |
43.34 |
|
|
|
$ |
69.08 |
|
|
|
$ |
67.97 |
|
|
$ |
42.53 |
|
|
Quality and
Transportation Discount |
(11.51 |
) |
|
(9.49 |
) |
|
|
(11.54 |
) |
|
|
(10.49 |
) |
|
(11.54 |
) |
|
Royalties |
(11.80 |
) |
|
(3.35 |
) |
|
|
(10.21 |
) |
|
|
(10.18 |
) |
|
(3.57 |
) |
|
Average Realized
Price |
49.92 |
|
|
30.50 |
|
|
|
47.33 |
|
|
|
47.30 |
|
|
27.42 |
|
|
Transportation
Expenses |
(1.11 |
) |
|
(0.74 |
) |
|
|
(1.43 |
) |
|
|
(1.22 |
) |
|
(1.35 |
) |
|
Average Realized Price
Net of Transportation Expenses |
48.81 |
|
|
29.76 |
|
|
|
45.90 |
|
|
|
46.08 |
|
|
26.07 |
|
|
Operating
Expenses |
(13.86 |
) |
|
(11.89 |
) |
|
|
(12.46 |
) |
|
|
(13.38 |
) |
|
(13.42 |
) |
|
Operating
Netback(1)(2) |
34.95 |
|
|
17.87 |
|
|
|
33.44 |
|
|
|
32.70 |
|
|
12.65 |
|
|
COVID-19
costs |
(0.37 |
) |
|
(0.64 |
) |
|
|
(0.44 |
) |
|
|
(0.44 |
) |
|
(0.24 |
) |
|
G&A Expenses
Before Stock-Based Compensation |
(2.01 |
) |
|
(2.59 |
) |
|
|
(3.49 |
) |
|
|
(2.67 |
) |
|
(2.72 |
) |
|
Severance
Expenses |
— |
|
|
(0.07 |
) |
|
|
— |
|
|
|
(0.13 |
) |
|
(0.23 |
) |
|
Realized Foreign
Exchange Gain (Loss) |
0.30 |
|
|
(0.69 |
) |
|
|
0.19 |
|
|
|
0.16 |
|
|
0.36 |
|
|
Cash Settlements on
Derivative Instruments |
(2.70 |
) |
|
(2.51 |
) |
|
|
(11.91 |
) |
|
|
(6.51 |
) |
|
1.58 |
|
|
Interest Expense,
Excluding Amortization of Debt Issuance Costs |
(4.69 |
) |
|
(7.57 |
) |
|
|
(6.39 |
) |
|
|
(5.59 |
) |
|
(5.93 |
) |
|
Interest
Income |
— |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
0.05 |
|
|
Other
Loss |
— |
|
|
1.12 |
|
|
|
— |
|
|
|
— |
|
|
0.31 |
|
|
Net Lease
Payments |
0.01 |
|
|
0.05 |
|
|
|
(0.01 |
) |
|
|
— |
|
|
0.01 |
|
|
Current Income Tax
Expense |
— |
|
|
(0.37 |
) |
|
|
0.01 |
|
|
|
— |
|
|
(0.09 |
) |
|
Cash
Netback(2) |
$ |
25.49 |
|
|
$ |
4.60 |
|
|
|
$ |
11.40 |
|
|
|
$ |
17.52 |
|
|
$ |
5.75 |
|
|
|
|
|
|
|
|
|
|
Share Information (000s) |
|
|
|
|
|
|
|
Common Stock Outstanding, End of Period |
367,038 |
366,982 |
|
366,992 |
|
367,038 |
366,982 |
Weighted Average
Number of Common and Outstanding - Basic |
366,993 |
366,982 |
|
366,982 |
|
366,986 |
366,982 |
Weighted Average
Number of Common and Outstanding - Diluted |
367,741 |
366,982 |
|
366,982 |
|
366,986 |
366,982 |
(1) Funds flow from operations, operating
netback, cash netback, earnings before interest, taxes and
depletion, depreciation and accretion
(“DD&A”)
(“EBITDA”)
and EBITDA adjusted for goodwill impairment, asset impairment,
non-cash lease expense, lease payments, unrealized foreign exchange
gains or losses, stock based compensation expense, other non-cash
loss, unrealized derivative instruments gains or losses and other
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.(2) 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.(3) Approximate average production over the period
from October 1, 2021 to October 30, 2021.(4) Total cash balance is
comprised of cash and cash equivalents, plus restricted cash and
cash equivalents.
Conference Call
Information:
Gran Tierra will host its third quarter 2021
results conference call on Tuesday, November 2nd, 2021, at 9:00
a.m. Mountain Time, 11:00 a.m. Eastern Time. Interested parties may
access the conference call by dialing 1-844-348-3792 or
1-614-999-9309 (North America), 0800-028-8438 or 020-3107-0289
(United Kingdom) or 01-800-518-5094 (Colombia). 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
Rodger Trimble Vice President, Investor Relations
+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 Colombia and Ecuador. The Company is currently developing its
existing portfolio of assets in Colombia and Ecuador and will
continue to pursue additional 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. Information on the Company’s website (including
the Sustainability Report) does not constitute a 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
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.sedar.com 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, expectations 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”). The use of the words “believe”,
“expect”, “anticipate”, “intend”, “estimate”, “project” “forecast”,
“guidance”, “target”, “goal”, “plan”, “budget” “objective”,
“could”, “should”, and other terms identify forward-looking
statements. In particular, but without limiting the foregoing, this
press release contains forward-looking statements regarding: the
Company’s 2021 outlook and guidance, including estimates of future
production, EBITDA, funds flow from operations, cash flow, free
cash flow, total capital and certain associated metrics;
expectations regarding its capital program, liquidity, including
the ability to pay down the credit facility, and access to capital;
strategies related to drilling and operational activities and
expectations regarding well performance, production and workover
activities; the benefits of reduced capital spending and G&A
expenses; and the benefits of derivative transactions and
expectations regarding future oil prices.
Among the important factors that could cause
actual results to differ materially from those indicated by the
forward-looking statements in this press release are: the
unprecedented impact of the COVID-19 pandemic and the actions of
OPEC and non-OPEC countries and the procedures imposed by
governments in response thereto; disruptions to local operations;
the decline and volatility in oil and gas industry conditions and
commodity prices; the severe imbalance in supply and demand for oil
and natural gas; prices and markets for oil and natural gas are
unpredictable and volatile; the accuracy of productive capacity of
any particular field; the timing and impact of any resumption of
operations; Gran Tierra’s operations are located in South America
and unexpected problems can arise due to guerilla activity or local
blockades or protests; technical difficulties and operational
difficulties may arise which impact the production, transport or
sale of our products; geographic, political and weather conditions
can impact the production, transport or sale of our products; the
ability of Gran Tierra to execute its business plan and realize
expected benefits from current initiatives (including a reduction
of the capital program); 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; the risk that current global economic and credit market
conditions and the regulatory environment may impact oil prices and
oil consumption more than Gran Tierra currently predicts, which
could cause Gran Tierra to further modify its strategy and capital
spending program; volatility or declines in the trading price of
our common stock or bonds; the risk that Gran Tierra does not
receive the anticipated benefits of government programs, including
government tax refunds; Gran Tierra’s ability to comply with
financial covenants in its credit agreement and indentures and make
borrowings under its 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, 2020,
many of which are beyond the Company’s control. These filings are
available on the SEC website at http://www.sec.gov and on SEDAR at
www.sedar.com.
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 2021 outlook
and guidance are based prove incorrect may increase the later the
period to which the outlook relates. In particular, the
unprecedented nature of the current economic downturn, pandemic and
industry decline may make it particularly difficult to identify
risks or predict the degree to which identified risks will impact
Gran Tierra’s business and financial condition. 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.
The estimates of future production may be
considered to be future-oriented financial information or a
financial outlook for the purposes of applicable Canadian
securities laws. Financial outlook and future-oriented financial
information contained in this press release about prospective
financial performance, financial position or cash flows are
provided to give the reader a better understanding of the potential
future performance of the Company in certain areas and are based on
assumptions about future events, including economic conditions and
proposed courses of action, based on management's assessment of the
relevant information currently available, and to become available
in the future.
In particular, this press release contains
projected production information for the year 2021 and in relation
to the Suroriente and PUT-7 Blocks' production post any blockade
being lifted. These projections contain forward-looking statements
and are based on a number of material assumptions and factors,
including those set out above. Actual results may differ
significantly from the projections presented herein. The actual
results of Gran Tierra’s operations for any period could vary from
the amounts set forth in these projections, and such variations may
be material. See above for a discussion of the risks that could
cause actual results to vary. See press release from the Company
dated October 13, 2021 for additional information in respect of
2021 guidance.
The future-oriented financial information and
financial outlooks contained in this press release have been
approved by management as of the date of this press release.
Readers are cautioned that any such financial outlook and
future-oriented financial and operational information contained
herein should not be used for purposes other than those for which
it is disclosed herein. The Company and its management believe that
the prospective financial information has been prepared on a
reasonable basis, reflecting management's best estimates and
judgments, and represent, to the best of management's knowledge and
opinion, the Company’s expected course of action. However, because
this information is highly subjective, it should not be relied on
as necessarily indicative of future results.
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.
Cash netback as presented is defined as net
income or loss adjusted for depletion, depreciation and accretion
(“DD&A”) expenses, goodwill impairment, asset impairment,
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 gains or
losses, derivative instruments gains or losses, cash settlements on
derivative instruments, other financial instruments gains or losses
and other non-cash losses. 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 loss to cash netback is as
follows:
|
Three Months EndedSeptember 30, |
|
Three Months EndedJune 30, |
|
Nine Months EndedSeptember 30, |
Cash Netback -
(Non-GAAP) Measure ($000s) |
2021 |
2020 |
|
2021 |
|
2021 |
2020 |
Net income (loss) |
$ |
35,007 |
|
|
$ |
(107,821 |
) |
|
|
$ |
(17,627 |
) |
|
|
$ |
(20,042 |
) |
|
$ |
(730,096 |
) |
|
Adjustments to
reconcile net income (loss) to cash netback |
|
|
|
|
|
|
|
DD&A expenses |
38,055 |
|
|
31,340 |
|
|
|
28,927 |
|
|
|
98,300 |
|
|
131,118 |
|
|
Goodwill impairment |
— |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
102,581 |
|
|
Asset impairment |
— |
|
|
104,731 |
|
|
|
— |
|
|
|
— |
|
|
507,093 |
|
|
Deferred tax expense (recovery) |
8,955 |
|
|
(21,202 |
) |
|
|
9,203 |
|
|
|
26,809 |
|
|
(62,796 |
) |
|
Stock-based compensation expense (recovery) |
1,053 |
|
|
56 |
|
|
|
1,873 |
|
|
|
6,597 |
|
|
(707 |
) |
|
Amortization of debt issuance costs |
907 |
|
|
838 |
|
|
|
894 |
|
|
|
2,682 |
|
|
2,774 |
|
|
Non-cash lease expense |
408 |
|
|
523 |
|
|
|
370 |
|
|
|
1,222 |
|
|
1,494 |
|
|
Lease payments |
(384 |
) |
|
(429 |
) |
|
|
(393 |
) |
|
|
(1,239 |
) |
|
(1,404 |
) |
|
Unrealized foreign exchange loss |
3,465 |
|
|
3,080 |
|
|
|
477 |
|
|
|
16,945 |
|
|
22,335 |
|
|
Derivative instruments loss (gain) |
2,603 |
|
|
(2,173 |
) |
|
|
21,239 |
|
|
|
47,540 |
|
|
(9,417 |
) |
|
Cash settlements on derivative instruments |
(7,332 |
) |
|
(4,373 |
) |
|
|
(24,305 |
) |
|
|
(45,041 |
) |
|
9,970 |
|
|
Other financial instruments (gain) loss |
(13,634 |
) |
|
1,460 |
|
|
|
2,614 |
|
|
|
(12,425 |
) |
|
61,286 |
|
|
Other non-cash loss |
— |
|
|
2,026 |
|
|
|
— |
|
|
|
— |
|
|
2,026 |
|
|
Cash
netback |
$ |
69,103 |
|
|
$ |
8,056 |
|
|
|
$ |
23,272 |
|
|
|
$ |
121,348 |
|
|
$ |
36,257 |
|
|
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 goodwill impairment, asset impairment,
non-cash lease expense, lease payments, unrealized foreign exchange
gains or losses, stock based compensation expense or recovery,
other non-cash loss, unrealized derivative instruments gains or
losses and other financial instruments gains or losses. 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 loss to EBITDA and
adjusted EBITDA is as follows:
|
Three Months EndedSeptember 30, |
|
Three Months EndedJune 30, |
|
Nine Months EndedSeptember 30, |
EBITDA - (Non-GAAP)
Measure ($000s) |
2021 |
2020 |
|
2021 |
|
2021 |
2020 |
Net income (loss) |
$ |
35,007 |
|
|
$ |
(107,821 |
) |
|
|
$ |
(17,627 |
) |
|
|
$ |
(20,042 |
) |
|
$ |
(730,096 |
) |
|
Adjustments to
reconcile net income (loss) to EBITDA and Adjusted
EBITDA |
|
|
|
|
|
|
|
DD&A expenses |
38,055 |
|
|
31,340 |
|
|
|
28,927 |
|
|
|
98,300 |
|
|
131,118 |
|
|
Interest expense |
13,608 |
|
|
14,029 |
|
|
|
13,935 |
|
|
|
41,355 |
|
|
40,204 |
|
|
Income tax expense (recovery) |
8,955 |
|
|
(20,565 |
) |
|
|
9,189 |
|
|
|
26,795 |
|
|
(62,236 |
) |
|
EBITDA |
$ |
95,625 |
|
|
$ |
(83,017 |
) |
|
|
$ |
34,424 |
|
|
|
$ |
146,408 |
|
|
$ |
(621,010 |
) |
|
Goodwill impairment |
— |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
102,581 |
|
|
Asset impairment |
— |
|
|
104,731 |
|
|
|
— |
|
|
|
— |
|
|
507,093 |
|
|
Non-cash lease expense |
408 |
|
|
523 |
|
|
|
370 |
|
|
|
1,222 |
|
|
1,494 |
|
|
Lease payments |
(384 |
) |
|
(429 |
) |
|
|
(393 |
) |
|
|
(1,239 |
) |
|
(1,404 |
) |
|
Unrealized foreign exchange loss |
3,465 |
|
|
3,080 |
|
|
|
477 |
|
|
|
16,945 |
|
|
22,335 |
|
|
Stock-based compensation expense (recovery) |
1,053 |
|
|
56 |
|
|
|
1,873 |
|
|
|
6,597 |
|
|
(707 |
) |
|
Other non-cash loss |
— |
|
|
2,026 |
|
|
|
— |
|
|
|
— |
|
|
2,026 |
|
|
Unrealized derivative instruments (gain) loss |
(4,729 |
) |
|
(6,546 |
) |
|
|
(3,066 |
) |
|
|
2,499 |
|
|
553 |
|
|
Other financial
instruments loss (gain) |
(13,634 |
) |
|
1,460 |
|
|
|
2,614 |
|
|
|
(12,425 |
) |
|
61,286 |
|
|
Adjusted
EBITDA |
$ |
81,804 |
|
|
$ |
21,884 |
|
|
|
$ |
36,299 |
|
|
|
$ |
160,007 |
|
|
$ |
74,247 |
|
|
Funds flow from operations, as presented, is
defined as net income or loss adjusted for DD&A expenses,
goodwill impairment, asset impairment, 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 gains or losses, derivative
instruments gains or losses, cash settlements on derivative
instruments, other financial instruments gains or losses and other
non-cash losses. 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
loss to both funds flow from operations and free cash flow is as
follows:
|
Three Months Ended September 30, |
|
Three Months Ended June 30, |
|
Nine Months Ended September 30, |
Funds Flow From
Operations - (Non-GAAP) Measure
($000s) |
2021 |
2020 |
|
2021 |
|
2021 |
2020 |
Net income (loss) |
$ |
35,007 |
|
|
$ |
(107,821 |
) |
|
|
$ |
(17,627 |
) |
|
|
$ |
(20,042 |
) |
|
$ |
(730,096 |
) |
|
Adjustments to
reconcile net income (loss) to funds flow from
operations |
|
|
|
|
|
|
|
DD&A expenses |
38,055 |
|
|
31,340 |
|
|
|
28,927 |
|
|
|
98,300 |
|
|
131,118 |
|
|
Goodwill impairment |
— |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
102,581 |
|
|
Asset impairment |
— |
|
|
104,731 |
|
|
|
— |
|
|
|
— |
|
|
507,093 |
|
|
Deferred tax expense (recovery) |
8,955 |
|
|
(21,202 |
) |
|
|
9,203 |
|
|
|
26,809 |
|
|
(62,796 |
) |
|
Stock-based compensation expense (recovery) |
1,053 |
|
|
56 |
|
|
|
1,873 |
|
|
|
6,597 |
|
|
(707 |
) |
|
Amortization of debt issuance costs |
907 |
|
|
838 |
|
|
|
894 |
|
|
|
2,682 |
|
|
2,774 |
|
|
Non-cash lease expense |
408 |
|
|
523 |
|
|
|
370 |
|
|
|
1,222 |
|
|
1,494 |
|
|
Lease payments |
(384 |
) |
|
(429 |
) |
|
|
(393 |
) |
|
|
(1,239 |
) |
|
(1,404 |
) |
|
Unrealized foreign exchange loss |
3,465 |
|
|
3,080 |
|
|
|
477 |
|
|
|
16,945 |
|
|
22,335 |
|
|
Derivative instruments loss (gain) |
2,603 |
|
|
(2,173 |
) |
|
|
21,239 |
|
|
|
47,540 |
|
|
(9,417 |
) |
|
Cash settlements on derivative instruments |
(7,332 |
) |
|
(4,373 |
) |
|
|
(24,305 |
) |
|
|
(45,041 |
) |
|
9,970 |
|
|
Other financial instruments (gain) loss |
(13,634 |
) |
|
1,460 |
|
|
|
2,614 |
|
|
|
(12,425 |
) |
|
61,286 |
|
|
Other non-cash loss |
— |
|
|
2,026 |
|
|
|
— |
|
|
|
— |
|
|
2,026 |
|
|
Funds flow from
operations |
$ |
69,103 |
|
|
$ |
8,056 |
|
|
|
$ |
23,272 |
|
|
|
$ |
121,348 |
|
|
$ |
36,257 |
|
|
Capital
expenditures |
$ |
34,839 |
|
|
$ |
7,354 |
|
|
|
$ |
37,384 |
|
|
|
$ |
109,650 |
|
|
$ |
56,378 |
|
|
Free cash
flow |
$ |
34,264 |
|
|
$ |
702 |
|
|
|
$ |
(14,112 |
) |
|
|
$ |
11,698 |
|
|
$ |
(20,121 |
) |
|
Gran Tierra is unable to provide neither
forward-looking net income, the GAAP measure most directly
comparable to the non-GAAP measures EBITDA, funds flow from
operations, cash flow and free cash flow, nor forward-looking oil
and gas sales, the GAAP measure most directly comparable to the
non-GAAP measure operating netback, due to the impracticality of
quantifying certain components required by GAAP as a result of the
inherent volatility in the value of certain financial instruments
held by the Company and the inability to quantify the effectiveness
of commodity price derivatives used to manage the variability in
cash flows associated with the forecasted sale of its oil
production and changes in commodity prices.
Presentation of Oil and Gas
Information
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.