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 June 30, 2023 (“
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 August 1, 2023.
Message to Shareholders
Gary Guidry, President and Chief Executive
Officer of Gran Tierra, commented: “During the first half of 2023,
Gran Tierra completed its development campaign with the drilling of
21 development wells in three of our major fields which have been
producing oil at rates in line with and at times exceeding our
expectations. Currently, our third quarter-to-date 2023 total
average production levels stands at an impressive ~35,300 BOPD. Now
that our development campaign has been completed, capital
expenditures are expected to decrease significantly in the second
half of 2023, which should allow the Company to focus on the
generation of free cash flow.
Gran Tierra is pleased to provide a mid-year
reserves update that we announced today in a separate press
release. The positive results announced in the reserves update are
a testament to the Company’s operational success and our in-country
relationships that have allowed the Company to secure the
Suroriente Block continuation agreement. We invite you to read the
reserves update press release in its entirety.
Looking ahead, we are entering an exciting phase
of growth. With the 2023 development campaign now completed, we are
gearing up to drill exploration wells in Ecuador. This represents a
promising opportunity for Gran Tierra to follow-up on existing
exploration success achieved in Ecuador during 2022. Our Company's
financial position remains robust, which gives us the flexibility
to make strategic investments and seize opportunities that drive
long-term value creation for our shareholders as they arise. We
continue to focus on maximizing operational efficiency and managing
costs effectively to ensure sustainable growth and
profitability.
We are also pleased to announce that we plan to
continue our investment in the protection and conservation of the
Andean-Amazon rainforest in the Putumayo Basin of Colombia by
extending our support to the NaturAmazonas project. The project,
founded by Gran Tierra and world renowned non-governmental
organization Conservation International, has grown into an alliance
of public and private institutions working together to address the
root causes of deforestation. We began our reforestation work
nearly a decade ago because one of our longstanding goals is to
leave the environment in a better condition than when we arrived.
During the first 6 years of the project, Gran Tierra’s initial
investment of $13 million has already produced impactful results
that have benefited the environment and local communities,
including the reforestation and restoration of over 1,400 hectares
of land and the planting of over 1.2 million trees.”
Key Highlights of the
Quarter:
-
Production:
- Gran Tierra’s
total average production was 33,719 BOPD, an increase of 7%
compared to first quarter 2023 (“the Prior
Quarter”) and up 10% from second quarter 2022
(“one year ago”). Gran Tierra’s production in the
Quarter was the Company’s highest quarterly average total
production since the second quarter of 2019.
- The Company’s
third quarter-to-date 2023 total average production (1) has been
approximately 35,300 BOPD.
- Quality
and Transportation Discounts: The Company’s quality and
transportation discount narrowed to $14.10 per bbl, down from
$18.45 per bbl in the Prior Quarter and up from $13.00 per bbl one
year ago. The Castilla oil differential narrowed to $9.41 per bbl,
down from $15.17 per bbl in the Prior Quarter and up from $7.82 per
bbl one year ago (Castilla is the benchmark for the Company’s
Middle Magdalena Valley Basin oil production). The Vasconia
differential narrowed to $5.53 per bbl, down from $7.87 per bbl in
the Prior Quarter and up from $5.09 per bbl one year ago (Vasconia
is the benchmark for the Company’s Putumayo Basin oil production).
Differentials to Brent pricing have continued to narrow as 2023 has
progressed. The current(1) Castilla differential is approximately
$6.64 per bbl and the Vasconia differential is approximately $3.96
per bbl.
- Net
Income: Gran Tierra incurred a net loss of $11 million,
compared to a net loss of $10 million in the Prior Quarter and net
income of $53 million one year ago, which was primarily due to the
$13 million of realized foreign exchange loss mainly associated
with the strengthening of the Colombian peso by 9% in the Quarter
and the payment of the Company’s 2022 income taxes in the Quarter,
which are paid in Colombian pesos. The Company’s net income over
the last 12 months was $51 million.
- Oil
Price: The Brent oil price averaged $77.73 per bbl, down
5% from the Prior Quarter and down 31% from one year ago.
- Realized
Foreign Exchange Loss: During the Quarter, a $13 million
realized foreign exchange loss was recognized primarily as a result
of the strengthening of the Colombian peso by 9% in the Quarter and
the payment of the 2022 income taxes in the Quarter, which are paid
in Colombian pesos.
- Basic
Earnings Per Share: Gran Tierra incurred a net loss of
$0.33 per share, compared to a net loss of $0.28 per share in the
Prior Quarter and net earnings of $1.44 per share one year
ago.
- Diluted
Earnings Per Share: Gran Tierra incurred a net loss of
$0.33 per share, compared to a net loss of $0.28 per share in the
Prior Quarter and net earnings of $1.42 per share one year
ago.
- Adjusted
EBITDA(2): Adjusted EBITDA(2) was $85
million compared to $89 million in the Prior Quarter and $140
million one year ago. Adjusted EBITDA(2) was negatively impacted by
the $13 million realized foreign exchange loss. Twelve month
trailing Adjusted EBITDA(2) to Net Debt(2) was 1.2 times.
- Funds
Flow from Operations(2):
Funds flow from operations(2) was $53 million, down 12% from the
Prior Quarter and down 49% from one year ago. Funds flow from
operations(2) was negatively impacted by the $13 million realized
foreign exchange loss. Over the last 12 months, Gran Tierra’s funds
flow from operations(2) was $288 million.
- Free
Cash Flow(2): During the
Quarter, the Company’s capital expenditures exceeded funds flow
from operations by approximately $12 million as a result of the
Company’s front-end loaded 2023 development program which saw the
drilling of 7 development wells in the Quarter, which completed the
development program for 2023, which consisted of a total of 21
wells. The majority of the Company’s capital expenditures were
incurred in the first half of 2023 and with the current Brent oil
price, narrowing of differentials and current production levels, we
expect to meet our free cash flow(2) targets for 2023.
- Share
Buybacks:
- During the
Quarter, pursuant to Gran Tierra’s current normal course issuer bid
(“NCIB”), Gran Tierra purchased 20,439 shares, for
a total purchase price of $107,810, at a weighted average price of
approximately $5.27 per share. Since the commencement of the NCIB
on September 1, 2022, Gran Tierra has purchased 3.6 million shares,
representing approximately 9.8% of Gran Tierra’s outstanding shares
as of June 30, 2022. The NCIB was completed and expired when the
10% share maximum of Gran Tierra’s public float as of August 22,
2022, was reached in May 2023.
-
Cash: As of June 30, 2023, the Company had a cash
balance of $69 million and net debt(2) of $503 million. With the
forecasted free cash flow in the second half of 2023, we expect to
exit 2023 with over $150 million of cash.
- Undrawn
Credit Facility: Gran Tierra’s credit facility, with a
capacity of up to $150 million, remains undrawn.
- Oil
Price Hedges: Gran Tierra does not currently have any oil
price hedges in place and expects to fully benefit from any
increases in oil prices.
-
Additional Key Financial Metrics:
- Capital
Expenditures: Capital expenditures of $66 million were
lower than the Prior Quarter’s level of $71 million and slightly up
from $65 million compared to one year ago. During the Quarter, Gran
Tierra drilled 7 development wells in Colombia.
- Oil
Sales: Gran Tierra generated oil sales of $158 million, up
10% from the Prior Quarter and down 23% from one year ago. Oil
sales increased compared to the Prior Quarter primarily as a result
of an 8% increase in sales volumes, partially offset by a 5%
decrease in Brent price. Lower oil sales relative to one year ago
were driven primarily by the decrease in Brent oil price and the
widening of quality and transportation discounts compared to the
same period, which were partially offset by the increase in the
Company’s oil production over the same timeframe.
-
Operating
Netback(2)(3): The
Company’s operating netback(2)(3) was $34.58 per bbl, down 2% from
the Prior Quarter and down 42% from one year ago. As with oil
sales, changes in operating netback relative to the Prior Quarter
were driven by a decrease in Brent oil price. Compared to one year
ago the change in operating netback were largely driven by the
decrease in Brent oil price and higher quality and transportation
discounts over the same time period.
-
Operating Expenses: Gran Tierra’s operating
expenses increased 9% to $15.86 per bbl, up from $14.59 per bbl in
the Prior Quarter, primarily due to higher road maintenance and
environmental activities, partially offset by a lower number of
workovers. Compared to one year ago, operating expenses increased
by 10% on a per bbl basis, due primarily to increased Ecuador
operations, higher environmental costs and partially offset by a
lower number of workovers.
- General
and Administrative (“G&A”) Expenses: G&A expenses
before stock-based compensation were $3.12 per bbl, down from $3.95
per bbl in the Prior Quarter due to lower legal and information
technology costs, partially offset by higher consulting fees
attributed to optimization projects and up from $2.86 when compared
to one year ago.
- Cash
Netback: Cash netback per bbl was $17.37, compared to
$21.16 in the Prior Quarter as a result of a decrease in Brent
price of $4.37 per bbl and a $4.18 per bbl realized foreign
exchange loss in the Quarter due to the strengthening Colombian
peso and payment of the 2022 income taxes paid in the Quarter. In
the Prior Quarter, the realized foreign exchange loss was of $0.42
per bbl. Compared to one year ago, cash netback per bbl decreased
by $20.34 from $37.71, despite a $34.25 per bbl decrease in the
Brent oil price over the same period.
Exploration Campaign:
- Gran Tierra has
secured a drilling rig to begin the Ecuador exploration campaign
that is expected to now start in the fourth quarter of 2023. Gran
Tierra expects to drill two to three exploration wells in
2023.
Financial and Operational Highlights
(all amounts in $000s, except per share and bbl
amounts)
|
Three Months Ended June 30, |
|
Three Months Ended March 31, |
|
Six Months Ended June 30, |
|
|
2023 |
|
|
2022 |
|
|
|
2023 |
|
|
|
2023 |
|
|
2022 |
|
|
|
|
|
|
|
|
|
Net (Loss)
Income |
$ |
(10,825 |
) |
$ |
52,972 |
|
|
$ |
(9,700 |
) |
|
$ |
(20,525 |
) |
$ |
67,091 |
|
Per Share - Basic(4) |
$ |
(0.33 |
) |
$ |
1.44 |
|
|
$ |
(0.28 |
) |
|
$ |
(0.61 |
) |
$ |
1.82 |
|
Per Share - Diluted(4) |
$ |
(0.33 |
) |
$ |
1.42 |
|
|
$ |
(0.28 |
) |
|
$ |
(0.61 |
) |
$ |
1.80 |
|
|
|
|
|
|
|
|
|
Oil
Sales |
$ |
157,902 |
|
$ |
205,785 |
|
|
$ |
144,190 |
|
|
$ |
302,092 |
|
$ |
380,354 |
|
Operating
Expenses |
|
(48,491 |
) |
|
(39,494 |
) |
|
|
(41,369 |
) |
|
|
(89,860 |
) |
|
(74,429 |
) |
Transportation
Expenses |
|
(3,691 |
) |
|
(2,513 |
) |
|
|
(3,066 |
) |
|
|
(6,757 |
) |
|
(5,347 |
) |
Operating
Netback(2)(3) |
$ |
105,720 |
|
$ |
163,778 |
|
|
$ |
99,755 |
|
|
$ |
205,475 |
|
$ |
300,578 |
|
|
|
|
|
|
|
|
|
G&A Expenses
Before Stock-Based Compensation |
$ |
9,549 |
|
$ |
7,847 |
|
|
$ |
11,196 |
|
|
$ |
20,745 |
|
$ |
15,626 |
|
G&A Stock-Based
Compensation Expense |
|
317 |
|
|
1,989 |
|
|
|
1,500 |
|
|
|
1,817 |
|
|
6,546 |
|
G&A Expenses,
Including Stock Based Compensation |
$ |
9,866 |
|
$ |
9,836 |
|
|
$ |
12,696 |
|
|
$ |
22,562 |
|
$ |
22,172 |
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA(2) |
$ |
84,522 |
|
$ |
140,113 |
|
|
$ |
88,677 |
|
|
$ |
173,199 |
|
$ |
259,491 |
|
|
|
|
|
|
|
|
|
EBITDA(2) |
$ |
91,794 |
|
$ |
146,048 |
|
|
$ |
86,740 |
|
|
$ |
178,534 |
|
$ |
252,798 |
|
|
|
|
|
|
|
|
|
Net Cash Provided by
Operating Activities |
$ |
37,877 |
|
$ |
143,197 |
|
|
$ |
49,253 |
|
|
$ |
87,130 |
|
$ |
247,022 |
|
|
|
|
|
|
|
|
|
Funds Flow from
Operations(2) |
$ |
53,106 |
|
$ |
103,625 |
|
|
$ |
60,016 |
|
|
$ |
113,122 |
|
$ |
190,935 |
|
|
|
|
|
|
|
|
|
Capital
Expenditures |
$ |
65,565 |
|
$ |
65,199 |
|
|
$ |
71,062 |
|
|
$ |
136,627 |
|
$ |
106,682 |
|
|
|
|
|
|
|
|
|
Free Cash
Flow(2) |
$ |
(12,459 |
) |
$ |
38,426 |
|
|
$ |
(11,046 |
) |
|
$ |
(23,505 |
) |
$ |
84,253 |
|
|
|
|
|
|
|
|
|
Average Daily Volumes (BOPD) |
|
|
|
|
|
|
|
WI Production Before Royalties |
|
33,719 |
|
|
30,607 |
|
|
|
31,611 |
|
|
|
32,671 |
|
|
29,988 |
|
Royalties |
|
(6,515 |
) |
|
(7,392 |
) |
|
|
(6,085 |
) |
|
|
(6,301 |
) |
|
(6,962 |
) |
Production
NAR |
|
27,204 |
|
|
23,215 |
|
|
|
25,526 |
|
|
|
26,370 |
|
|
23,026 |
|
Decrease (Increase) in
Inventory |
|
67 |
|
|
(368 |
) |
|
|
(355 |
) |
|
|
(143 |
) |
|
(236 |
) |
Sales |
|
27,271 |
|
|
22,847 |
|
|
|
25,171 |
|
|
|
26,227 |
|
|
22,790 |
|
Royalties, % of WI
Production Before Royalties |
|
19 |
% |
|
24 |
% |
|
|
19 |
% |
|
|
19 |
% |
|
23 |
% |
|
|
|
|
|
|
|
|
Per bbl |
|
|
|
|
|
|
|
Brent |
$ |
77.73 |
|
$ |
111.98 |
|
|
$ |
82.10 |
|
|
$ |
79.91 |
|
$ |
104.94 |
|
Quality and
Transportation Discount |
|
(14.10 |
) |
|
(13.00 |
) |
|
|
(18.45 |
) |
|
|
(16.27 |
) |
|
(12.73 |
) |
Royalties |
|
(11.98 |
) |
|
(24.07 |
) |
|
|
(12.80 |
) |
|
|
(12.38 |
) |
|
(21.32 |
) |
Average Realized
Price |
|
51.65 |
|
|
74.91 |
|
|
|
50.85 |
|
|
|
51.26 |
|
|
70.89 |
|
Transportation
Expenses |
|
(1.21 |
) |
|
(0.91 |
) |
|
|
(1.08 |
) |
|
|
(1.15 |
) |
|
(1.00 |
) |
Average Realized Price
Net of Transportation Expenses |
|
50.44 |
|
|
74.00 |
|
|
|
49.77 |
|
|
|
50.11 |
|
|
69.89 |
|
Operating
Expenses |
|
(15.86 |
) |
|
(14.38 |
) |
|
|
(14.59 |
) |
|
|
(15.25 |
) |
|
(13.87 |
) |
Operating
Netback(2)(3) |
|
34.58 |
|
|
59.62 |
|
|
|
35.18 |
|
|
|
34.86 |
|
|
56.02 |
|
G&A Expenses
Before Stock-Based Compensation |
|
(3.12 |
) |
|
(2.86 |
) |
|
|
(3.95 |
) |
|
|
(3.52 |
) |
|
(2.91 |
) |
Realized Foreign
Exchange (Loss) / Gain |
|
(4.18 |
) |
|
0.59 |
|
|
|
(0.42 |
) |
|
|
(2.37 |
) |
|
0.09 |
|
Cash Settlements on
Derivative Instruments |
|
— |
|
|
(6.48 |
) |
|
|
— |
|
|
|
— |
|
|
(4.92 |
) |
Interest Expense,
Excluding Amortization of Debt Issuance Costs |
|
(3.81 |
) |
|
(4.03 |
) |
|
|
(3.90 |
) |
|
|
(3.85 |
) |
|
(4.16 |
) |
Interest
Income |
|
0.21 |
|
|
— |
|
|
|
0.27 |
|
|
|
0.24 |
|
|
— |
|
Net Lease
Payments |
|
0.15 |
|
|
0.13 |
|
|
|
0.19 |
|
|
|
0.17 |
|
|
0.08 |
|
Current Income Tax
Expense |
|
(6.46 |
) |
|
(9.26 |
) |
|
|
(6.21 |
) |
|
|
(6.34 |
) |
|
(8.62 |
) |
Cash
Netback(2) |
$ |
17.37 |
|
$ |
37.71 |
|
|
$ |
21.16 |
|
|
$ |
19.19 |
|
$ |
35.58 |
|
|
|
|
|
|
|
|
|
Share Information (000s) |
|
|
|
|
|
|
|
Common Stock Outstanding, End of
Period(4) |
|
33,287 |
|
|
36,887 |
|
|
|
33,307 |
|
|
|
33,287 |
|
|
36,887 |
|
Weighted Average Number
of Common and Outstanding Stock -
Basic(4) |
|
33,300 |
|
|
36,857 |
|
|
|
34,451 |
|
|
|
33,872 |
|
|
36,798 |
|
Weighted Average Number
of Common and Outstanding Stock -
Diluted(4) |
|
33,300 |
|
|
37,423 |
|
|
|
34,451 |
|
|
|
33,872 |
|
|
37,298 |
|
(1) Gran Tierra’s third quarter-to-date 2023
total average production is for the time period from July 1 to July
31, 2023.(2) Funds flow from operations, operating netback, net
debt, cash netback, earnings before interest, taxes and depletion,
depreciation and accretion (“DD&A”)
(“EBITDA”) and
EBITDA adjusted for non-cash lease expense, lease payments,
unrealized foreign exchange gains or losses, stock-based
compensation expense, unrealized derivative instruments gains or
losses, inventory impairment, gain on re-purchase of Senior Notes
and other financial instruments gains or losses (“Adjusted
EBITDA”), cash flow, free cash flow and net debt 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) 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.(4)
Reflects our 1-for-10 reverse stock split that became effective
May 5, 2023.
Conference Call
Information:
Gran Tierra will host its second quarter 2023
results conference call on Wednesday, August 2, 2023, 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://register.vevent.com/register/BIc965d6f578624020a8fd58c5cac2b6e1.
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 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.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, 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 “expect”,
“plan”, “can,” “will,” “should,” “guidance,” “forecast,” “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 expected future production,
capital expenditures and free cash flow, the Company’s targeted
cash balance and uses of excess free cash flow, the Company’s plans
regarding strategic investments and growth, the Company’s drilling
program and the Company’s expectations of commodity prices and its
positioning for the remainder of 2023. 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), and the general continuance of assumed
operational, regulatory and industry conditions in 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
actual results to differ materially from those indicated by the
forward-looking statements in this press release are: 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, 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, such as its recent decision to cut production
and other producing countries and 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 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 we do not receive the anticipated benefits of government
programs, including government tax refunds; our ability to comply
with financial covenants in its credit agreement and indentures and
make borrowings under any 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
filed February 21, 2023 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.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 2023 outlook
are based prove incorrect may increase the later the period to
which the outlook relates. In particular, the unprecedented nature
of industry volatility 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. 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.
The estimates of future cash and free cash flow
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 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.
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, 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, derivative instruments gain or loss,
cash settlement on derivative instruments and other gain.
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 Ended June 30, |
|
Three Months Ended March 31, |
|
Six Months Ended June 30, |
Cash Netback - (Non-GAAP) Measure ($000s) |
|
2023 |
|
|
2022 |
|
|
|
2023 |
|
|
|
2023 |
|
|
2022 |
|
Net (loss)
income |
$ |
(10,825 |
) |
$ |
52,972 |
|
|
$ |
(9,700 |
) |
|
$ |
(20,525 |
) |
$ |
67,091 |
|
Adjustments to
reconcile net income (loss) to cash netback |
|
|
|
|
|
|
|
DD&A expenses |
|
56,209 |
|
|
42,216 |
|
|
|
51,721 |
|
|
|
107,930 |
|
|
83,179 |
|
Deferred tax expense |
|
13,975 |
|
|
13,241 |
|
|
|
15,277 |
|
|
|
29,252 |
|
|
31,954 |
|
Stock-based compensation expense |
|
317 |
|
|
1,989 |
|
|
|
1,500 |
|
|
|
1,817 |
|
|
6,546 |
|
Amortization of debt issuance costs |
|
1,019 |
|
|
1,131 |
|
|
|
781 |
|
|
|
1,800 |
|
|
2,018 |
|
Non-cash lease expense |
|
1,109 |
|
|
747 |
|
|
|
1,144 |
|
|
|
2,253 |
|
|
1,158 |
|
Lease payments |
|
(636 |
) |
|
(388 |
) |
|
|
(606 |
) |
|
|
(1,242 |
) |
|
(732 |
) |
Unrealized foreign exchange (gain) loss |
|
(8,062 |
) |
|
4,341 |
|
|
|
514 |
|
|
|
(7,548 |
) |
|
(498 |
) |
Derivative instruments loss |
|
— |
|
|
5,172 |
|
|
|
— |
|
|
|
— |
|
|
26,611 |
|
Cash settlements on derivative instruments |
|
— |
|
|
(17,796 |
) |
|
|
— |
|
|
|
— |
|
|
(26,392 |
) |
Other gain |
|
— |
|
|
— |
|
|
|
(615 |
) |
|
|
(615 |
) |
|
— |
|
Cash
netback |
$ |
53,106 |
|
$ |
103,625 |
|
|
$ |
60,016 |
|
|
$ |
113,122 |
|
$ |
190,935 |
|
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,
unrealized foreign exchange gain or loss, stock-based compensation
expense or recovery, unrealized derivative instruments gain or
loss, other gain or loss, and other financial instruments 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 Ended June 30, |
|
Three Months Ended March 31, |
|
Six Months Ended June 30, |
|
Twelve Month Trailing June
30, |
EBITDA - (Non-GAAP) Measure ($000s) |
|
2023 |
|
|
2022 |
|
|
|
2023 |
|
|
|
2023 |
|
|
2022 |
|
|
|
2023 |
|
Net (loss)
income |
$ |
(10,825 |
) |
$ |
52,972 |
|
|
$ |
(9,700 |
) |
|
$ |
(20,525 |
) |
$ |
67,091 |
|
|
$ |
51,413 |
|
Adjustments to
reconcile net income (loss) to EBITDA and Adjusted
EBITDA |
|
|
|
|
|
|
|
|
|
DD&A expenses |
|
56,209 |
|
|
42,216 |
|
|
|
51,721 |
|
|
|
107,930 |
|
|
83,179 |
|
|
|
205,031 |
|
Interest expense |
|
12,678 |
|
|
12,194 |
|
|
|
11,836 |
|
|
|
24,514 |
|
|
24,322 |
|
|
|
46,685 |
|
Income tax expense |
|
33,732 |
|
|
38,666 |
|
|
|
32,883 |
|
|
|
66,615 |
|
|
78,206 |
|
|
|
94,315 |
|
EBITDA |
$ |
91,794 |
|
$ |
146,048 |
|
|
$ |
86,740 |
|
|
$ |
178,534 |
|
$ |
252,798 |
|
|
$ |
397,444 |
|
Non-cash lease expense |
|
1,109 |
|
|
747 |
|
|
|
1,144 |
|
|
|
2,253 |
|
|
1,158 |
|
|
|
3,913 |
|
Lease payments |
|
(636 |
) |
|
(388 |
) |
|
|
(606 |
) |
|
|
(1,242 |
) |
|
(732 |
) |
|
|
(2,176 |
) |
Unrealized foreign exchange (gain) loss |
|
(8,062 |
) |
|
4,341 |
|
|
|
514 |
|
|
|
(7,548 |
) |
|
(498 |
) |
|
|
3,201 |
|
Stock-based compensation expense |
|
317 |
|
|
1,989 |
|
|
|
1,500 |
|
|
|
1,817 |
|
|
6,546 |
|
|
|
4,320 |
|
Unrealized derivative instruments loss |
|
— |
|
|
(12,624 |
) |
|
|
— |
|
|
|
— |
|
|
219 |
|
|
|
(219 |
) |
Other gain |
|
— |
|
|
— |
|
|
|
(615 |
) |
|
|
(615 |
) |
|
— |
|
|
|
(3,213 |
) |
Other financial instruments gain |
|
— |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
— |
|
|
|
(7 |
) |
Adjusted
EBITDA |
$ |
84,522 |
|
$ |
140,113 |
|
|
$ |
88,677 |
|
|
$ |
173,199 |
|
$ |
259,491 |
|
|
$ |
403,263 |
|
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
or recovery, amortization of debt issuance costs, non-cash lease
expense, lease payments, unrealized foreign exchange gain or loss,
derivative instruments gain or loss, cash settlement on derivative
instruments, other gain, and other financial instruments 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 Ended June 30, |
|
Three Months Ended March 31, |
|
Six Months Ended June 30, |
|
Twelve Month Trailing June 30, |
Funds Flow From Operations - (Non-GAAP)
Measure ($000s) |
|
2023 |
|
|
2022 |
|
|
|
2023 |
|
|
|
2023 |
|
|
2022 |
|
|
|
2023 |
|
Net (loss)
income |
$ |
(10,825 |
) |
$ |
52,972 |
|
|
$ |
(9,700 |
) |
|
$ |
(20,525 |
) |
$ |
67,091 |
|
|
$ |
51,413 |
|
Adjustments to
reconcile net income (loss) to funds flow from
operations |
|
|
|
|
|
|
|
|
|
DD&A expenses |
|
56,209 |
|
|
42,216 |
|
|
|
51,721 |
|
|
|
107,930 |
|
|
83,179 |
|
|
|
205,031 |
|
Deferred tax expense |
|
13,975 |
|
|
13,241 |
|
|
|
15,277 |
|
|
|
29,252 |
|
|
31,954 |
|
|
|
22,638 |
|
Stock-based compensation expense |
|
317 |
|
|
1,989 |
|
|
|
1,500 |
|
|
|
1,817 |
|
|
6,546 |
|
|
|
4,320 |
|
Amortization of debt issuance costs |
|
1,019 |
|
|
1,131 |
|
|
|
781 |
|
|
|
1,800 |
|
|
2,018 |
|
|
|
3,310 |
|
Non-cash lease expense |
|
1,109 |
|
|
747 |
|
|
|
1,144 |
|
|
|
2,253 |
|
|
1,158 |
|
|
|
3,913 |
|
Lease payments |
|
(636 |
) |
|
(388 |
) |
|
|
(606 |
) |
|
|
(1,242 |
) |
|
(732 |
) |
|
|
(2,176 |
) |
Unrealized foreign exchange (gain) loss |
|
(8,062 |
) |
|
4,341 |
|
|
|
514 |
|
|
|
(7,548 |
) |
|
(498 |
) |
|
|
3,201 |
|
Derivative instruments loss |
|
— |
|
|
5,172 |
|
|
|
— |
|
|
|
— |
|
|
26,611 |
|
|
|
— |
|
Cash settlements on derivative instruments |
|
— |
|
|
(17,796 |
) |
|
|
— |
|
|
|
— |
|
|
(26,392 |
) |
|
|
(219 |
) |
Other gain |
|
— |
|
|
— |
|
|
|
(615 |
) |
|
|
(615 |
) |
|
— |
|
|
|
(3,213 |
) |
Other financial instruments gain |
|
— |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
— |
|
|
|
(7 |
) |
Funds flow from
operations |
$ |
53,106 |
|
$ |
103,625 |
|
|
$ |
60,016 |
|
|
$ |
113,122 |
|
$ |
190,935 |
|
|
$ |
288,211 |
|
Capital expenditures |
$ |
65,565 |
|
$ |
65,199 |
|
|
$ |
71,062 |
|
|
$ |
136,627 |
|
$ |
106,682 |
|
|
$ |
266,549 |
|
Free cash
flow |
$ |
(12,459 |
) |
$ |
38,426 |
|
|
$ |
(11,046 |
) |
|
$ |
(23,505 |
) |
$ |
84,253 |
|
|
$ |
21,662 |
|
Net debt as of June 30, 2023, was $503
million, calculated using the sum of 6.25% Senior Notes and 7.75%
Senior Notes, excluding deferred financing fees of $572 million,
less cash and cash equivalents of $69 million.
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.
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