Gran Tierra Energy Inc. (
“Gran Tierra” or the
“Company”)
(NYSE
American:GTE)(TSX:GTE)(LSE:GTE), a company focused on
international oil exploration and production with assets currently
in Colombia and Ecuador, today announced the Company’s 2023
mid-year reserves as evaluated by the Company’s independent
qualified reserves evaluator McDaniel & Associates Consultants
Ltd. (
“McDaniel”) in a report with an effective
date of June 30, 2023 (the
“GTE McDaniel Reserves
Report”).
All dollar amounts are in United States
(“U.S.”) dollars and all reserves and production
volumes are on a working interest before royalties
(“WI”) basis. Production is expressed in barrels
(“bbl”) of oil per day (“bopd”),
while reserves are expressed in bbl, bbl of oil equivalent
(“boe”) or million boe (“MMBOE”),
unless otherwise indicated. The following reserves categories are
discussed in this press release: Proved Developed Producing
(“PDP”), Proved (“1P”), 1P plus
Probable (“2P”) and 2P plus Possible
(“3P”).
Gary Guidry, President and Chief Executive
Officer of Gran Tierra, commented: “Gran Tierra continues to build
on its five year track record of adding reserves through its
successful development campaigns and enhanced oil recovery
optimization programs. Our 2023 mid-year reserves update
illustrates how the Company has achieved meaningful oil reserves
additions through the strong results of its 2023 development
drilling campaign and the Suroriente Block Continuation Agreement*.
Furthermore, the reserves update is a testament to Gran Tierra’s
ability to operate as a full-cycle exploration and production
company which offers value to our stakeholders via the success we
have achieved through the drill bit.
Gran Tierra’s first half 2023 development
drilling program at the Costayaco field in the Chaza Block has
resulted in the identification of new future potential well
locations due to the success of the CYC-54 well, which was the most
northern well drilled to date. In Acordionero, the enhanced oil
recovery program via waterflood continues to produce as expected.
Looking forward to the second half of 2023, we plan to build upon
our successful exploration results in 2022 in Ecuador with further
exploration drilling planned in both the Chanangue and Charapa
Blocks in the Oriente Basin.
Despite a decrease in the Brent price forecast
used in the mid-year 2023 McDaniel Reserves Report relative to the
2022 year-end McDaniel Reserves Report for the first 2.5 years of
the evaluation, the combination of our successful development
drilling campaign, the Suroriente Continuation Agreement*, our
focus on maintaining low operating costs and our share buyback
program that expired in May 2023 allowed Gran Tierra to achieve
increases relative to 2022 year-end in net asset values per share**
before tax of $49.54 (1P) (up 7%), and $84.39 (2P) (up 15%). With
this significant growth in our net asset values per share** in the
first six months of 2023, we look forward to finishing off 2023
strongly.”
*See the section below titled “GTE McDaniel Reserves Report” for
a description of the Suroriente Continuation Agreement.**See the
below tables for the definitions of net asset values per share.
Highlights
2023 Mid-Year Reserves
and Values
Before Tax (as of June 30, 2023) |
Units |
1P |
2P |
3P |
Reserves |
MMBOE |
94 |
|
150 |
|
212 |
|
Net Present Value at 10% Discount (“NPV10”) |
$ million |
2,152 |
|
3,312 |
|
4,491 |
|
Net Debt1 |
$ million |
(503) |
|
(503) |
|
(503) |
|
Net Asset Value (NPV10 less Net Debt) (“NAV”) |
$ million |
1,649 |
|
2,809 |
|
3,988 |
|
Outstanding Shares2 |
million |
33.29 |
|
33.29 |
|
33.29 |
|
NAV per Share |
$/share |
49.54 |
|
84.39 |
|
119.81 |
|
NAV per Share Change from December 31, 2022 |
% |
7% |
|
15% |
|
14% |
|
After Tax (as of June 30, 2023) |
Units |
1P |
2P |
3P |
Reserves |
MMBOE |
94 |
|
150 |
|
212 |
|
NPV10 |
$ million |
1,411 |
|
2,019 |
|
2,651 |
|
Net Debt1 |
$ million |
(503) |
|
(503) |
|
(503) |
|
NAV |
$ million |
908 |
|
1,516 |
|
2,148 |
|
Outstanding Shares2 |
million |
33.29 |
|
33.29 |
|
33.29 |
|
NAV per Share |
$/share |
27.28 |
|
45.55 |
|
64.53 |
|
NAV per Share Change from December 31, 2022 |
% |
8% |
|
14% |
|
14% |
|
-
During the first half of 2023, Gran Tierra achieved:
-
Increases in Before Tax NAV to $1.6 billion (1P), $2.8 billion
(2P), and $4.0 billion (3P)
-
Increases in After Tax NAV to $0.9 billion (1P), $1.5 billion (2P),
and $2.1 billion (3P)
-
Strong reserves replacement ratios of:
-
270% 1P, with 1P reserves additions of 16 MMBOE.
-
433% 2P, with 2P reserves additions of 26 MMBOE.
-
599% 3P, with 3P reserves additions of 35 MMBOE.
-
Meaningful 1P, 2P and 3P reserves additions largely driven by
success with development drilling and waterflooding results in the
Chaza Block and the Suroriente Continuation Agreement*.
-
Finding and development costs (“F&D”),
including change in future development costs
(“FDC”), on a per boe basis of $15.39 (1P), $12.65
(2P) and $11.18 (3P).
-
F&D costs excluding change in FDC, on a per boe basis of $8.55
(1P), $5.33 (2P) and $3.86 (3P).
-
F&D recycle ratios**, including change in FDC, of 2.2 times
(1P), 2.7 times (2P) and 3.1 times (3P).
-
Gran Tierra’s four major oil assets, Acordionero, Costayaco,
Moqueta and Suroriente (all on waterflood) represent 84% of the
Company’s 1P reserves and 74% of its 2P reserves.
-
The Company’s PDP reserves account for 53% of 1P reserves and 1P
reserves account for 63% of 2P reserves, which demonstrate the
strength of Gran Tierra’s reserves base via the potential future
conversion of Probable reserves into 1P reserves and Proved
Undeveloped reserves into PDP reserves.
-
FDC are forecast to be $512 million for 1P reserves and $864
million for 2P reserves. Gran Tierra’s 2023 base case mid-point
guidance for cash flow*** of $295 million is equivalent to 58% of
1P FDC and 34% of 2P FDC, which highlights the Company’s potential
ability to fund future development capital. Increases in FDC
relative to 2022 year-end reflect that the GTE McDaniel Reserves
Report now assigns Gran Tierra 90 Proved Undeveloped future
drilling locations (up from 78 at 2022 year-end and 61 at 2021
year-end) and 141 Proved plus Probable Undeveloped future drilling
locations (up from 115 at 2022 year-end and 94 at 2021
year-end).
*See the section below titled
“GTE McDaniel Reserves Report” for a description of the Suroriente
Continuation Agreement.
**F&D recycle ratio is defined as second
quarter 2023 operating netback per WI sales volume boe divided by
the appropriate F&D costs on a per boe basis. Operating netback
does not have a standardized meaning under generally accepted
accounting principles in the United States of America
(“GAAP”) and is a non-GAAP measure. Operating
netback is defined as oil sales less operating and transportation
expenses. See “Non-GAAP Measures” in this press release.
*** “Cash flow” refers to GAAP line item “net
cash provided by operating activities”. Gran Tierra’s 2023 base
case guidance is based on a forecast 2023 average Brent oil price
of $85/bbl. This forecast price used in Gran Tierra’s forecast is
higher than the 2023 McDaniel Brent price forecast.
GTE McDaniel Reserves
Report
All reserves values, future net revenue and
ancillary information contained in this press release have been
prepared by McDaniel and calculated in compliance with Canadian
National Instrument 51-101 – Standards of Disclosure for Oil and
Gas Activities (“NI 51-101”) and the Canadian Oil
and Gas Evaluation Handbook (“COGEH”) and derived
from the GTE McDaniel Reserves Report, unless otherwise expressly
stated. The GTE McDaniel Reserves Report has been prepared assuming
that all outstanding conditions precedent to the effectiveness of
the previously announced agreement between Ecopetrol S.A.
(“Ecopetrol”), the national oil company of
Colombia, and Gran Tierra (the “Suroriente Continuation
Agreement”), by which the parties renegotiated the terms
and the duration of the contract for the Suroriente Block in the
Department of Putumayo, have been satisfied and that the Suroriente
Continuation Agreement is effective. The Suroriente Continuation
Agreement is not yet effective as certain conditions precedent have
yet to be satisfied. See “Conditions Precedent to Suroriente
Continuation Agreement” in this press release for additional
information.
Future Net Revenue
Future net revenue reflects McDaniel’s forecast
of revenue estimated using forecast prices and costs, arising from
the anticipated development and production of reserves, after the
deduction of royalties, operating costs, development costs and
abandonment and reclamation costs but before consideration of
indirect costs such as administrative, overhead and other
miscellaneous expenses. The estimate of future net revenue below
does not necessarily represent fair market value.
Consolidated Properties at June 30, 2023 |
Proved (1P) Total Future Net Revenue ($
million) |
Forecast Prices and Costs |
|
Sales Revenue |
Total Royalties |
Operating Costs |
Future Development Capital |
Abandonment and Reclamation Costs |
Future Net Revenue Before Future Taxes |
Future Taxes |
Future Net Revenue After Future Taxes* |
2023-2027 (4.5 Years) |
4,169 |
(849 |
) |
(834 |
) |
(512 |
) |
(3 |
) |
1,971 |
(633 |
) |
1,338 |
Remainder |
2,427 |
(417 |
) |
(888 |
) |
— |
|
(94 |
) |
1,028 |
(425 |
) |
603 |
Total (Undiscounted) |
6,596 |
(1,266 |
) |
(1,722 |
) |
(512 |
) |
(97 |
) |
2,999 |
(1,058 |
) |
1,941 |
Total (Discounted @ 10%) |
4,640 |
(911 |
) |
(1,105 |
) |
(438 |
) |
(34 |
) |
2,152 |
(741 |
) |
1,411 |
Consolidated Properties at June 30, 2023 |
Proved Plus Probable (2P) Total Future Net Revenue ($
million) |
Forecast Prices and Costs |
Years |
Sales Revenue |
Total Royalties |
Operating Costs |
Future Development Capital |
Abandonment and Reclamation Costs |
Future Net Revenue Before Future Taxes |
Future Taxes |
Future Net Revenue After Future Taxes* |
2023-2027 (4.5 Years) |
5,324 |
(1,123 |
) |
(966 |
) |
(806 |
) |
(3 |
) |
2,426 |
(908 |
) |
1,518 |
Remainder |
5,471 |
(972 |
) |
(1,573 |
) |
(58 |
) |
(115 |
) |
2,753 |
(1,159 |
) |
1,594 |
Total (Undiscounted) |
10,795 |
(2,095 |
) |
(2,539 |
) |
(864 |
) |
(118 |
) |
5,179 |
(2,067 |
) |
3,112 |
Total (Discounted @ 10%) |
6,890 |
(1,376 |
) |
(1,467 |
) |
(701 |
) |
(34 |
) |
3,312 |
(1,293 |
) |
2,019 |
Consolidated Properties at June 30, 2023 |
Proved Plus Probable Plus Possible (3P) Total Future Net
Revenue ($ million) |
Forecast Prices and Costs |
Years |
Sales Revenue |
Total Royalties |
Operating Costs |
Future Development Capital |
Abandonment and Reclamation Costs |
Future Net Revenue Before Future Taxes |
Future Taxes |
Future Net Revenue After Future Taxes* |
2023-2027 (4.5 Years) |
6,231 |
(1,345 |
) |
(1,098 |
) |
(941 |
) |
(3 |
) |
2,844 |
(1,129 |
) |
1,715 |
Remainder |
9,467 |
(1,815 |
) |
(2,510 |
) |
(172 |
) |
(132 |
) |
4,838 |
(2,075 |
) |
2,763 |
Total (Undiscounted) |
15,698 |
(3,160 |
) |
(3,608 |
) |
(1,113 |
) |
(135 |
) |
7,682 |
(3,204 |
) |
4,478 |
Total (Discounted @ 10%) |
9,128 |
(1,873 |
) |
(1,869 |
) |
(863 |
) |
(32 |
) |
4,491 |
(1,840 |
) |
2,651 |
*The after-tax future net revenue of the
Company’s oil and gas properties reflects the tax burden on the
properties on a stand-alone basis. It does not consider the
corporate tax situation, or tax planning. It does not provide an
estimate of the value at the Company level which may be
significantly different. The Company’s unaudited financial
statements, when available for the three and six month periods
ended June 30, 2023, should be consulted for information at
the Company level.
Total Company WI Reserves
The following table summarizes Gran Tierra’s NI
51-101 and COGEH compliant reserves in Colombia and Ecuador derived
from the GTE McDaniel Reserves Report calculated using forecast oil
and gas prices and costs. Gran Tierra has determined that Ecuador
reserves, included in the Total Proved, Total Probable and Total
Possible reserve categories for Light and Medium Crude Oil, are not
material enough to present separately on a country basis. Therefore
all amounts are presented on a consolidated basis by foreign
geographic area.
|
Light and Medium Crude Oil |
Heavy Crude Oil |
Conventional Natural Gas |
June 30, 2023 |
Reserves Category |
Mbbl* |
Mbbl* |
MMcf** |
Mboe*** |
Proved Developed Producing |
25,286 |
24,740 |
733 |
50,148 |
Proved Developed
Non-Producing |
1,567 |
1,184 |
— |
2,751 |
Proved Undeveloped |
18,547 |
22,316 |
— |
40,863 |
Total
Proved |
45,400 |
48,240 |
733 |
93,762 |
Total Probable |
25,158 |
30,897 |
88 |
56,069 |
Total Proved plus
Probable |
70,558 |
79,137 |
821 |
149,831 |
Total Possible |
26,693 |
35,602 |
51 |
62,303 |
Total Proved plus Probable plus Possible |
97,251 |
114,739 |
872 |
212,134 |
*Mbbl (thousand bbl of oil). **MMcf (million cubic feet).***Mboe
(thousand boe).
Net Present Value Summary
Gran Tierra’s reserves were evaluated using the
average of 3 independent qualified reserves evaluators’ commodity
price forecasts at July 1, 2023 (McDaniel, Sproule and GLJ). See
“Forecast Prices” for more information. It should not be assumed
that the net present value of cash flow estimated by McDaniel
represents the fair market value of Gran Tierra’s reserves.
Total Company |
Discount Rate |
($ millions) |
0% |
|
5% |
|
10% |
|
15% |
|
20% |
|
Before Tax at Jun.30/2023 |
|
|
|
|
|
Proved Developed
Producing |
1,685 |
|
1,498 |
|
1,350 |
|
1,230 |
|
1,132 |
|
Proved Developed
Non-Producing |
97 |
|
84 |
|
72 |
|
63 |
|
56 |
|
Proved Undeveloped |
1,217 |
|
935 |
|
730 |
|
577 |
|
461 |
|
Total Proved |
2,999 |
|
2,517 |
|
2,152 |
|
1,870 |
|
1,649 |
|
Total Probable |
2,180 |
|
1,565 |
|
1,160 |
|
884 |
|
689 |
|
Total Proved plus
Probable |
5,179 |
|
4,082 |
|
3,312 |
|
2,754 |
|
2,338 |
|
Total Possible |
2,503 |
|
1,675 |
|
1,179 |
|
866 |
|
659 |
|
Total
Proved plus Probable plus Possible |
7,682 |
|
5,757 |
|
4,491 |
|
3,620 |
|
2,997 |
|
After Tax at Jun.30/2023 |
|
|
|
|
|
Proved Developed
Producing |
1,223 |
|
1,101 |
|
1,000 |
|
917 |
|
847 |
|
Proved Developed
Non-Producing |
52 |
|
44 |
|
39 |
|
34 |
|
30 |
|
Proved Undeveloped |
666 |
|
497 |
|
372 |
|
279 |
|
209 |
|
Total Proved |
1,941 |
|
1,642 |
|
1,411 |
|
1,230 |
|
1,086 |
|
Total Probable |
1,171 |
|
832 |
|
608 |
|
454 |
|
347 |
|
Total Proved plus
Probable |
3,112 |
|
2,474 |
|
2,019 |
|
1,684 |
|
1,433 |
|
Total Possible |
1,366 |
|
908 |
|
632 |
|
459 |
|
344 |
|
Total
Proved plus Probable plus Possible |
4,478 |
|
3,382 |
|
2,651 |
|
2,143 |
|
1,777 |
|
Reserve Life Index (Years)
|
June 30, 2023* |
Total Proved |
8 |
Total Proved plus
Probable |
12 |
Total Proved plus Probable plus Possible |
17 |
* Calculated using Gran Tierra’s average second quarter 2023 WI
production of 33,719 bopd.
Future Development Costs
FDC reflects McDaniel's best estimate of what it
will cost to bring the Proved Undeveloped and Probable Undeveloped
reserves on production. Changes in forecast FDC occur annually as a
result of development activities, acquisition and disposition
activities, and changes in capital cost estimates based on
improvements in well design and performance, as well as changes in
service costs. FDC for 2P reserves increased to $864 million at
mid-year 2023 from $677 million at year-end 2022. The increase in
FDC in 2023 was predominantly attributed to the increase in the
numbers of future development well locations identified by McDaniel
in the Suroriente Continuation Agreement.
($ millions) |
Total Proved |
Total Proved Plus Probable |
Total Proved Plus Probable Plus Possible |
2023 (second half) |
62 |
68 |
73 |
2024 |
128 |
151 |
162 |
2025 |
215 |
269 |
292 |
2026 |
95 |
220 |
259 |
2027 |
12 |
98 |
156 |
Remainder |
— |
58 |
171 |
Total (undiscounted) |
512 |
864 |
1,113 |
($ millions) |
Proved |
Proved plus Probable |
Proved plus Probable plus Possible |
Acordionero |
118 |
118 |
118 |
Chaza Block (Costayaco &
Moqueta) |
105 |
131 |
131 |
Suroriente |
136 |
214 |
300 |
Other |
153 |
401 |
564 |
Total FDC Costs (undiscounted) |
512 |
864 |
1,113 |
Finding and Development
Costs
Reserves (Mboe) |
|
Six Months Ended June 30, 2023 |
Proved Developed
Producing |
50,148 |
Total Proved |
|
93,762 |
Total Proved plus
Probable |
|
149,831 |
Total
Proved plus Probable plus Possible |
|
212,134 |
Capital
Expenditures ($000s) |
|
-
including and excluding acquired properties |
136,627 |
Operating
Netback* ($/bbl, per WI sales volumes) |
|
Operating Netback* - second quarter 2023 |
34.58 |
*Operating Netback is a Non-GAAP measure and does not have a
standardized meaning under GAAP. Operating netback as presented is
defined as oil sales less operating and transportation expenses.
See "Non-GAAP Measures" in this press release.
Finding and Development Costs, Excluding
FDC*
Six Months Ended June 30, 2023 |
Proved Developed Producing |
|
|
Reserve Additions (Mboe) |
|
8,916 |
F&D Costs ($/boe) |
|
15.32 |
F&D
Recycle Ratio |
|
2.3 |
Finding and Development Costs, Including
FDC*
Six Months Ended June 30, 2023 |
Proved Developed
Producing |
|
|
Change in FDC ($000s) |
|
(9,901 |
) |
Reserve Additions (Mboe) |
|
8,916 |
|
F&D Costs ($/boe) |
|
14.21 |
|
F&D
Recycle Ratio |
|
2.4 |
|
Finding and Development Costs, Excluding
FDC*
Six Months Ended June 30, 2023 |
Total Proved |
|
|
Reserve Additions (Mboe) |
|
15,978 |
F&D Costs ($/boe) |
|
8.55 |
F&D
Recycle Ratio |
|
4.0 |
Finding and Development Costs, Including
FDC*
Six Months Ended June 30, 2023 |
Total Proved |
|
|
Change in FDC ($000s) |
|
109,260 |
Reserve Additions (Mboe) |
|
15,978 |
F&D Costs ($/boe) |
|
15.39 |
F&D
Recycle Ratio |
|
2.2 |
Finding and Development Costs, Excluding
FDC*
Six Months Ended June 30, 2023 |
Total Proved plus Probable |
|
|
Reserve Additions (Mboe) |
|
25,617 |
F&D Costs ($/boe) |
|
5.33 |
F&D
Recycle Ratio |
|
6.5 |
Finding and Development Costs, Including
FDC*
Six Months Ended June 30, 2023 |
Total Proved plus Probable |
|
|
Change in FDC ($000s) |
|
187,389 |
Reserve Additions (Mboe) |
|
25,617 |
F&D Costs ($/boe) |
|
12.65 |
F&D
Recycle Ratio |
|
2.7 |
Finding and Development Costs, Excluding
FDC*
Six Months Ended June 30, 2023 |
Total
Proved plus Probable plus Possible |
|
Reserve Additions (Mboe) |
|
35,395 |
F&D Costs ($/boe) |
|
3.86 |
F&D
Recycle Ratio |
|
9.0 |
Finding and Development Costs, Including
FDC*
Six Months Ended June 30, 2023 |
Total
Proved plus Probable plus Possible |
|
Change in FDC ($000s) |
|
259,247 |
Reserve Additions (Mboe) |
|
35,395 |
F&D Costs ($/boe) |
|
11.18 |
F&D
Recycle Ratio |
|
3.1 |
*In all cases, the F&D number is calculated
by dividing the identified capital expenditures by the applicable
reserves additions both before and after changes in FDC costs. Both
F&D costs take into account reserves revisions during the year
on a per boe basis. F&D recycle ratio is defined as second
quarter 2023 operating netback per working interest sales volume
boe divided by the appropriate F&D costs on a per boe basis.
The aggregate of the exploration and development costs incurred in
the financial year and the changes during that year in estimated
future development costs may not reflect the total F&D costs
related to reserves additions for that year. Operating Netback is a
Non-GAAP measure and does not have a standardized meaning under
GAAP. Operating netback is defined as oil sales less operating and
transportation expenses. See “Non-GAAP Measures” in this press
release.
Forecast Prices
The pricing assumptions used in estimating NI
51-101 and COGEH compliant reserves data disclosed above with
respect to net present values of future net revenue are set forth
below. The price forecasts are based on an average of three
independent qualified reserves evaluators’ commodity price
forecasts at July 1, 2023 (McDaniel, Sproule and GLJ). All three of
these companies are independent qualified reserves evaluators and
auditors pursuant to NI 51-101.
|
Brent Crude Oil |
WTI Crude Oil |
Year |
$US/bbl |
$US/bbl |
|
July 1, 2023 |
July 1, 2023 |
2023 (six months) |
$77.00 |
$72.67 |
2024 |
$77.72 |
$73.63 |
2025 |
$79.00 |
$74.75 |
2026 |
$80.71 |
$76.25 |
2027 |
$81.95 |
$77.77 |
1Based on estimated 2023 mid-year net debt of
$503 million comprised of Senior Notes of $572 million (gross) less
cash and cash equivalents of $69 million, prepared in accordance
with GAAP.
2Outstanding Shares. Reflects Gran Tierra’s
1-for-10 reverse stock split that became effective May 5,
2023.
Conditions Precedent to Suroriente
Continuation Agreement
On April 11, 2023, the Company announced that it
had entered into the Suroriente Continuation Agreement, by which
the parties renegotiated the terms and the duration of the contract
for the Suroriente Block in the Department of Putumayo, which was
scheduled to end in mid-2024. The Suroriente Continuation Agreement
provides an opportunity to add significant value, as well as
economic life, to the Suroriente Block by continuing its duration
for 20 years from the Suroriente Continuation Agreement's effective
date. The effectiveness of the Suroriente Continuation Agreement is
subject to certain conditions precedent including regulatory
approval by the Superintendence of Industry and Commerce of
Colombia ("SIC"). The satisfaction of such
conditions precedent will determine the Suroriente Continuation
Agreement's effective date. The following is a general description
of such conditions precedent together with their status as of the
date of this press release: (a) approval from the SIC, granted in
June 2023 with no objections or conditions; (b) establish and agree
to an inactive well action plan (reactivation or abandonment of 5
specific wells), Ecopetrol has agreed to the proposed action plan
which is expected to be formalized in the coming weeks; (c) the
posting of letters of credit amounting to approximately $123
million to guarantee the execution of the capital program
stipulated by the Suroriente Continuation Agreement, to be issued
and delivered once the condition precedent related to the inactive
well action plan is satisfied; and (d) the payment of an agreed
settlement relating to a minor amount of past production volumes to
Ecopetrol on or before August 31, 2023.
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, Chief Executive Officer
Ryan Ellson, Executive Vice President & Chief Financial
Officer
Rodger Trimble, Vice President, Investor RelationsTel:
+1.403.265.3221
For more information on Gran Tierra please go
to: www.grantierra.com.
About Gran Tierra Energy Inc.
Gran Tierra Energy Inc. together with its
subsidiaries is an independent international energy company
currently focused on international oil and natural gas exploration
and production with assets currently in 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 Corporate Presentation referenced
above) 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 U.S. Securities and Exchange
Commission ("SEC") filings are available on the
SEC website at www.sec.gov. The Company's Canadian securities
regulatory filings are available on SEDAR at www.sedar.com and UK
regulatory filings are available on the National Storage Mechanism
(the "NSM") website at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism. Gran
Tierra's filings on the SEC, SEDAR and the NSM websites are not
incorporated by reference into this press release.
FORWARD LOOKING STATEMENTS
ADVISORY
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"), which can be identified by such
terms as "expect," "plan," "forecast," "project," "objective,"
"will," "believe," "should," "could," "allow" and other terms that
are forward-looking in nature. Such forward-looking statements
include, but are not limited to, the Company's expectations
regarding its estimated quantities and net present values of
reserves, capital program, and ability to fund the Company's
exploration program over a period of time, statements about the
Company’s financial and performance targets and other forecasts or
expectations regarding, or dependent on, the Company’s business
outlook for 2023 and beyond, capital spending plans and any
benefits of the changes in our capital program or expenditures,
well performance, production, the restart of production and
workover activity, future development costs, infrastructure
schedules, waterflood impacts and plans, growth of referenced
reserves, forecast prices, five-year expected oil sales and cash
flow and net revenue, estimated recovery factors, liquidity and
access to capital, the Company's strategies and results thereof,
the Company's operations including planned operations and
developments, global health events, disruptions to operations and
the decline in industry conditions, and expectations regarding
environmental commitments.
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, the accuracy of testing
and production results and seismic data, pricing and cost estimates
(including with respect to commodity pricing and exchange rates),
rig availability, the effects of drilling down-dip, the effects of
waterflood and multi-stage fracture stimulation operations, the
extent and effect of delivery disruptions, and the general
continuance of current or, where applicable, assumed operational,
regulatory and industry conditions including in areas of potential
expansion, and the ability of Gran Tierra to execute its current
business and operational plans in the manner currently planned.
Gran Tierra believes the material factors, expectations and
assumptions reflected in the forward-looking statements are
reasonable at this time but no assurance can be given that these
factors, expectations and assumptions will prove to be correct.
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: Gran Tierra's
operations are located in South America and unexpected problems can
arise due to guerilla activity, strikes, or 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, the Russian invasion of Ukraine, 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 Gran Tierra currently
predicts, which could cause Gran Tierra to further modify its
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; the ability of Gran
Tierra to execute its business plan and realize expected benefits
from current 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 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, 2022 and
its other filings with the Securities and Exchange Commission.
These filings are available on the Securities and Exchange
Commission website at http://www.sec.gov and on SEDAR at
www.sedar.com.
Statements relating to "reserves" are also
deemed to be forward-looking statements, as they involve the
implied assessment, based on certain estimates and assumptions,
including that the reserves described can be profitably produced in
the future.
Guidance is uncertain, particularly when given
over extended periods of time, and results may be materially
different. Although the current capital spending program and long
term strategy of Gran Tierra is based upon the current expectations
of the management of Gran Tierra, should any one of a number of
issues arise, Gran Tierra may find it necessary to alter its
business strategy and/or capital spending program and there can be
no assurance as at the date of this press release as to how those
funds may be reallocated or strategy changed and how that would
impact Gran Tierra's results of operations and financing position.
In particular, the unprecedented nature of the current pandemic and
the resulting economic conditions 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 securities laws. Gran Tierra's
forward-looking statements are expressly qualified in their
entirety by this cautionary statement.
The estimates of future net revenue, cash flow
and certain expenses 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 operational and financial information for 2023
and for the next 4.5 years to allow readers to assess the Company's
ability to fund its programs. These projections contain
forward-looking statements and are based on a number of material
assumptions and factors 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. 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 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. See Gran Tierra's press
release dated December 7, 2022 for additional information regarding
cash flow guidance referred to herein.
Non-GAAP Measures
This press release includes non-GAAP measures
which do not have a standardized meaning under GAAP. Investors are
cautioned that these measures should not be construed as
alternatives to oil sales, net income or loss 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.
Operating netback as presented is defined as oil
sales less operating and transportation expenses. Management
believes that operating netback is a useful supplemental measure
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 operating netback per boe to the most
directly comparable measure calculated and presented in accordance
with GAAP is as follows:
|
Three months ended June 30, 2023 |
|
(Thousands of U.S Dollars) |
($/bbl, per WI sales volumes) |
Oil sales |
$ |
157,902 |
|
$ |
51.65 |
|
Operating expenses |
|
(48,491 |
) |
|
(15.86 |
) |
Transportation expenses |
|
(3,691 |
) |
|
(1.21 |
) |
Operating netback |
$ |
105,720 |
|
$ |
34.58 |
|
Unaudited Financial Information
Certain financial and operating results included
in this press release, including debt, capital expenditures, and
production information, are based on unaudited estimated results.
These unaudited estimated results are subject to change upon
completion of the Company's unaudited interim financial statements
and related management’s discussion and analysis for the three and
six month periods ended June 30, 2023, and changes could be
material. Gran Tierra anticipates filing its unaudited interim
financial statements and related management's discussion and
analysis for the three and six month periods ended June 30,
2023 on or before August 1, 2023.
DISCLOSURE OF OIL AND GAS
INFORMATION
Boe's 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.
All reserves values, future net revenue and
ancillary information contained in this press release have been
prepared by McDaniel and are derived from the GTE McDaniel Reserves
Report, unless otherwise expressly stated. Any reserves values or
related information contained in this press release as of a date
other than June 30, 2023 has an effective date of December 31 of
the applicable year and is derived from a report prepared by Gran
Tierra's independent qualified reserves evaluator as of such date,
and additional information regarding such estimate or information
can be found in Gran Tierra's applicable Statement of Reserves Data
and Other Oil and Gas Information on Form 51-101F1 filed on SEDAR
at www.sedar.com.
Estimates of net present value and future net
revenue contained herein do not necessarily represent fair market
value. Estimates of reserves and future net revenue for individual
properties may not reflect the same level of confidence as
estimates of reserves and future net revenue for all properties,
due to the effect of aggregation. There is no assurance that the
forecast price and cost assumptions applied by McDaniel in
evaluating Gran Tierra's reserves will be attained and variances
could be material. All reserves assigned in the GTE McDaniel
Reserves Report are located in Colombia and Ecuador and presented
on a consolidated basis by foreign geographic area.
All evaluations of future net revenue contained
in the GTE McDaniel Reserves Report are after the deduction of
royalties, operating costs, development costs, production costs and
abandonment and reclamation costs but before consideration of
indirect costs such as administrative, overhead and other
miscellaneous expenses. It should not be assumed that the estimates
of future net revenues presented in this press release represent
the fair market value of the reserves. There are numerous
uncertainties inherent in estimating quantities of crude oil
reserves and the future cash flows attributed to such reserves. The
reserve and associated cash flow information set forth in the GTE
McDaniel Reserves 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.
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 no precise breakdown since the Company's oil sales volumes
typically represent blends of more than one type of crude oil.
Drilling locations disclosed herein are derived from the GTE
McDaniel Reserves Report and account for drilling locations that
have associated Proved Undeveloped and Proved plus Probable
Undeveloped reserves, as applicable. 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.
Definitions
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
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.
Developed non-producing reserves are those
reserves that either have not been on production, or have
previously been on production but are shut-in and the date of
resumption of production is unknown.
Undeveloped reserves are those reserves expected
to be recovered from known accumulations where a significant
expenditure (e.g., when compared to the cost of drilling a well) is
required to render them capable of production. They must fully meet
the requirements of the reserves category (proved, probable,
possible) to which they are assigned.
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.
Oil and Gas Metrics
This press release contains a number of oil and
gas metrics, including NAV per share, F&D costs, F&D
recycle ratio, operating netback, reserve life index and reserves
replacement, 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. 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.
-
NAV per share is calculated as NPV10 (before or after tax, as
applicable) of the applicable reserves category minus estimated net
debt, divided by the number of shares of Gran Tierra's common stock
issued and outstanding. Management uses NAV per share as a measure
of the relative change of Gran Tierra's net asset value over its
outstanding common stock over a period of time.
-
F&D costs are calculated as estimated exploration and
development capital expenditures, excluding acquisitions and
dispositions, divided by the applicable reserves additions both
before and after changes in FDC costs. The calculation of F&D
costs incorporates the change in FDC required to bring proved
undeveloped and developed reserves into production. The aggregate
of the exploration and development costs incurred in the financial
year and the changes during that year in estimated FDC may not
reflect the total F&D costs related to reserves additions for
that year. Management uses F&D costs per boe as a measure of
its ability to execute its capital program and of its asset
quality.
-
F&D recycle ratio is calculated as described in this press
release. Management uses F&D recycle ratio as an indicator of
profitability of its oil and gas activities.
-
Operating netback is calculated as described in this press release.
Management believes that operating netback is a useful supplemental
measure 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.
-
Reserve life index is calculated as reserves in the referenced
category divided by the referenced estimated production. Management
uses this measure to determine how long the booked reserves will
last at current production rates if no further reserves were
added.
-
Reserves replacement is calculated as reserves in the referenced
category divided by estimated referenced production. Management
uses this measure to determine the relative change of its reserve
base over a period of time.
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 U.S.
Securities and Exchange Commission ("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
as of December 31, 2022 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. Gran Tierra has not provided disclosure of
oil and gas reserves in accordance with SEC requirements as of June
30, 2023, and US investors are referred to the Company’s SEC
filings. 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.
Proved reserves are reserves which, by analysis
of geoscience and engineering data, can be estimated with
reasonable certainty to be economically producible from a given
date forward from known reservoirs under existing economic
conditions, operating methods, and government regulations prior to
the time at which contracts providing the right to operate expires,
unless evidence indicates that renewal is reasonably certain.
Probable reserves are reserves that are less certain to be
recovered than proved reserves but which, together with proved
reserves, are as likely as not to be recovered. Estimates of
probable reserves which may potentially be recoverable through
additional drilling or recovery techniques are by nature more
uncertain than estimates of proved reserves and accordingly are
subject to substantially greater risk of not actually being
realized by us. Possible reserves are reserves that are less
certain to be recovered than probable reserves. Estimates of
possible reserves are also inherently imprecise. Estimates of
probable and possible reserves are also continually subject to
revisions based on production history, results of additional
exploration and development, price changes, and other factors.
The Company believes that the presentation of
NPV10 is useful to investors because it presents (i) relative
monetary significance of its oil and natural gas properties
regardless of tax structure and (ii) relative size and value of its
reserves to other companies. The Company also uses this measure
when assessing the potential return on investment related to its
oil and natural gas properties. NPV10 and the standardized measure
of discounted future net cash flows do not purport to present the
fair value of the Company's oil and gas reserves. The Company has
not provided a reconciliation of NPV10 to the standardized measure
of discounted future net cash flows because it is impracticable to
do so.
Investors are urged to consider closely the
disclosures and risk factors in the Company's Annual Report on Form
10-K, Quarterly Reports on Form 10-Q and in the other reports and
filings with the SEC, available from the Company's offices or
website. These reports can also be obtained from the SEC website at
www.sec.gov.
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