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
year-end reserves as evaluated by the Company’s independent
qualified reserves evaluator McDaniel & Associates Consultants
Ltd. (
“McDaniel”) in a report with an effective
date of December 31, 2023 (the
“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: “During 2023, a combination of
our strong reserves growth, ongoing reductions in debt and share
buybacks allowed Gran Tierra to achieve net asset values per
share** before tax of $44.48 (1P), up 288% from 2020, and $79.13
(2P), up 144% from 2020. With this significant growth in our net
asset values per share** over the last three years, we believe Gran
Tierra is well positioned to offer exceptional long-term
stakeholder value.
Gran Tierra achieved strong 154% (1P), 242% (2P)
and 303% (3P) reserves replacement through our successful results
from our development drilling, waterflooding programs, field
performance and the Suroriente Block Continuation Agreement*. This
multi-faceted success resulted in record highs for the Company’s
year-end 1P, 2P and 3P oil reserves.
We completed our 2023 development plan on-budget
including waterflooding efforts and development drilling in the
Acordionero, Costayaco and Moqueta oil fields. We also continued to
evaluate our successful ongoing production from key 2022
exploration discoveries in Colombia and Ecuador to plan for 2024
follow-up exploration drilling. We believe our success on multiple
fronts during 2023 demonstrates Gran Tierra's ability to be a
full-cycle oil and gas exploration, development and production
company focused on value creation for all our stakeholders.
The success the Company achieved in 2023 also
reflects our ongoing conversion of reserves from the Probable to
the Proved category. With 147 booked Proved plus Probable
Undeveloped future drilling locations, Gran Tierra is well
positioned to continue to grow the Company's production and
reserves in 2024 and beyond.
We have started 2024 strong with two rigs
currently drilling our planned series of development wells in
Acordionero and Costayaco. Both rigs began their development
campaigns in December 2023. Later in 2024, we look forward to our
planned resumption of exploration drilling in Colombia and Ecuador
to build upon our successful exploration results in 2022, and the
first development drilling in the Suroriente Block since 2018.
Through our ongoing focus on the development of our existing
assets, appraisal of our 2022 discoveries and exploration drilling,
we plan to continue to strengthen our balance sheet, profitably
increase production, grow our reserve base and return capital to
shareholders through share buybacks.”
*See the section below titled “Suroriente
Continuation Agreement”.
**See the below tables for the definitions of net asset values
per share.
Highlights
2023 Year-End Reserves
and Values
Before Tax (as of December 31, 2023) |
Units |
1P |
2P |
3P |
Reserves |
MMBOE |
90 |
147 |
207 |
Net Present Value at 10% Discount (“NPV10”) |
$ million |
1,945 |
3,063 |
4,269 |
Net Debt1 |
$ million |
(511) |
(511) |
(511) |
Net Asset Value (NPV10 less Net Debt) (“NAV”) |
$ million |
1,434 |
2,552 |
3,759 |
Outstanding Shares2 |
million |
32.25 |
32.25 |
32.25 |
NAV per Share |
$/share |
44.48 |
79.13 |
116.56 |
After Tax (as of December 31, 2023) |
Units |
1P |
2P |
3P |
Reserves |
MMBOE |
90 |
147 |
207 |
NPV10 |
$ million |
1,287 |
1,888 |
2,552 |
Net Debt1 |
$ million |
(511) |
(511) |
(511) |
NAV |
$ million |
776 |
1,377 |
2,041 |
Outstanding Shares2 |
million |
32.25 |
32.25 |
32.25 |
NAV per Share |
$/share |
24.06 |
42.71 |
63.29 |
1Based on estimated 2023 year-end net debt of
$511 million comprised of Senior Notes of $537 million (gross) plus
the Credit Facility of $36 million (gross) less cash and cash
equivalents of $62 million, prepared in accordance with GAAP.
2Outstanding Shares. Reflects Gran Tierra’s
1-for-10 reverse stock split that became effective May 5,
2023.
-
As of December 31, 2023, Gran Tierra achieved:
-
Before Tax NAV of $1.4 billion (1P), $2.6 billion (2P), and $3.8
billion (3P)
-
After Tax NAV of $0.8 billion (1P), $1.4 billion (2P), and $2.0
billion (3P)
-
Strong reserves replacement ratios of:
-
154% 1P, with 1P reserves additions of 18 MMBOE.
-
242% 2P, with 2P reserves additions of 29 MMBOE.
-
303% 3P, with 3P reserves additions of 36 MMBOE.
-
Meaningful 1P, 2P and 3P reserves additions largely driven by
success with development drilling and waterflooding results in the
Chaza Block (which contains Costayaco and Moqueta fields) and the
Suroriente Continuation Agreement*.
-
Finding and development costs (“F&D”),
including change in future development costs
(“FDC”), on a per boe basis of $20.58 (1P), $16.09
(2P) and $14.67 (3P).
-
F&D costs excluding change in FDC, on a per boe basis of $11.96
(1P), $7.58 (2P) and $6.06 (3P).
-
F&D recycle ratios**, including change in FDC, of 1.8 times
(1P), 2.2 times (2P) and 2.5 times (3P).
-
Gran Tierra’s four major oil assets, Acordionero, Costayaco,
Moqueta and Suroriente (all on waterflood) represent 83% of the
Company’s 1P reserves and 73% of its 2P reserves.
-
The Company’s PDP reserves account for 48% of 1P reserves and 1P
reserves account for 61% 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 $561 million for 1P reserves and $923
million for 2P reserves. Gran Tierra’s 2024 base case mid-point
guidance for cash flow*** of $300 million is equivalent to 54% of
1P FDC and 33% 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 95 Proved Undeveloped future
drilling locations (up from 78 at 2022 year-end) and 147 Proved
plus Probable Undeveloped future drilling locations (up from 115 at
2022 year-end).
*See the section below titled
“Suroriente Continuation Agreement”.
**F&D recycle ratio is defined as fourth
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 2024 base
case guidance is based on a forecast 2024 average Brent oil price
of $80/bbl. This forecast price used in Gran Tierra’s forecast is
higher than the 2024 McDaniel Brent price forecast.
GTE McDaniel Reserves
Report
All reserves values, future net revenue and
ancillary information contained in this press release have been
prepared by McDaniel and calculated in compliance with Canadian
National Instrument 51-101 – Standards of Disclosure for Oil and
Gas Activities (“NI 51-101”) and the Canadian Oil
and Gas Evaluation Handbook (“COGEH”) and derived
from the GTE McDaniel Reserves Report, unless otherwise expressly
stated.
Future Net Revenue
Future net revenue reflects McDaniel’s forecast
of revenue estimated using forecast prices and costs, arising from
the anticipated development and production of reserves, after the
deduction of royalties, operating costs, development costs and
abandonment and reclamation costs but before consideration of
indirect costs such as administrative, overhead and other
miscellaneous expenses. The estimate of future net revenue below
does not necessarily represent fair market value.
Consolidated Properties at December 31, 2023 |
Proved (1P) Total Future Net Revenue ($
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* |
2024-2028(5 Years) |
4,334 |
(858 |
) |
(939 |
) |
(561 |
) |
(7 |
) |
1,969 |
(629 |
) |
1,340 |
Remainder |
2,013 |
(334 |
) |
(845 |
) |
— |
|
(97 |
) |
737 |
(287 |
) |
450 |
Total (Undiscounted) |
6,347 |
(1,192 |
) |
(1,784 |
) |
(561 |
) |
(104 |
) |
2,706 |
(916 |
) |
1,790 |
Total (Discounted @ 10%) |
4,453 |
(854 |
) |
(1,138 |
) |
(475 |
) |
(39 |
) |
1,947 |
(658 |
) |
1,289 |
Consolidated Properties at December 31, 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* |
2024-2028(5 Years) |
5,654 |
(1,159 |
) |
(1,080 |
) |
(865 |
) |
(3 |
) |
2,547 |
(946 |
) |
1,601 |
Remainder |
4,935 |
(870 |
) |
(1,664 |
) |
(57 |
) |
(122 |
) |
2,222 |
(890 |
) |
1,332 |
Total (Undiscounted) |
10,589 |
(2,029 |
) |
(2,744 |
) |
(922 |
) |
(125 |
) |
4,769 |
(1,836 |
) |
2,933 |
Total (Discounted @ 10%) |
6,695 |
(1,316 |
) |
(1,541 |
) |
(736 |
) |
(40 |
) |
3,062 |
(1,175 |
) |
1,887 |
Consolidated Properties at December 31, 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* |
2024-2028(5 Years) |
6,580 |
(1,369 |
) |
(1,150 |
) |
(979 |
) |
(3 |
) |
3,079 |
(1,213 |
) |
1,866 |
Remainder |
8,621 |
(1,654 |
) |
(2,443 |
) |
(186 |
) |
(137 |
) |
4,201 |
(1,723 |
) |
2,478 |
Total (Undiscounted) |
15,201 |
(3,023 |
) |
(3,593 |
) |
(1,165 |
) |
(140 |
) |
7,280 |
(2,936 |
) |
4,344 |
Total (Discounted @ 10%) |
8,799 |
(1,774 |
) |
(1,834 |
) |
(884 |
) |
(38 |
) |
4,269 |
(1,718 |
) |
2,551 |
*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 financial statements, when
available for the year ended December 31, 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 |
2023Year-End |
Reserves Category |
Mbbl* |
Mbbl* |
MMcf** |
Mboe*** |
Proved Developed Producing |
21,308 |
22,372 |
— |
43,680 |
Proved Developed
Non-Producing |
3,130 |
453 |
— |
3,583 |
Proved Undeveloped |
20,150 |
22,691 |
— |
42,841 |
Total
Proved |
44,588 |
45,516 |
— |
90,104 |
Total Probable |
26,271 |
30,731 |
— |
57,002 |
Total Proved plus
Probable |
70,859 |
76,247 |
— |
147,106 |
Total Possible |
24,108 |
35,642 |
— |
59,750 |
Total Proved plus Probable plus Possible |
94,967 |
111,889 |
— |
206,856 |
*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 January 1, 2024 (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 |
|
|
|
|
|
Proved Developed
Producing |
1,362 |
|
1,228 |
|
1,117 |
|
1,025 |
|
948 |
|
Proved Developed
Non-Producing |
135 |
|
115 |
|
99 |
|
87 |
|
77 |
|
Proved Undeveloped |
1,209 |
|
932 |
|
730 |
|
579 |
|
465 |
|
Total Proved |
2,706 |
|
2,275 |
|
1,946 |
|
1,691 |
|
1,490 |
|
Total Probable |
2,062 |
|
1,493 |
|
1,117 |
|
861 |
|
680 |
|
Total Proved plus
Probable |
4,768 |
|
3,768 |
|
3,063 |
|
2,552 |
|
2,170 |
|
Total Possible |
2,513 |
|
1,698 |
|
1,207 |
|
895 |
|
688 |
|
Total
Proved plus Probable plus Possible |
7,281 |
|
5,466 |
|
4,270 |
|
3,447 |
|
2,858 |
|
After Tax |
|
|
|
|
|
Proved Developed
Producing |
1,025 |
|
930 |
|
848 |
|
779 |
|
721 |
|
Proved Developed
Non-Producing |
73 |
|
63 |
|
54 |
|
48 |
|
42 |
|
Proved Undeveloped |
691 |
|
514 |
|
384 |
|
288 |
|
216 |
|
Total Proved |
1,789 |
|
1,507 |
|
1,286 |
|
1,115 |
|
979 |
|
Total Probable |
1,142 |
|
816 |
|
601 |
|
455 |
|
353 |
|
Total Proved plus
Probable |
2,931 |
|
2,323 |
|
1,887 |
|
1,570 |
|
1,332 |
|
Total Possible |
1,413 |
|
945 |
|
664 |
|
486 |
|
370 |
|
Total
Proved plus Probable plus Possible |
4,344 |
|
3,268 |
|
2,551 |
|
2,056 |
|
1,702 |
|
Reserve Life Index (Years)
|
December 31, 2023* |
Total Proved |
8 |
Total Proved plus
Probable |
13 |
Total Proved plus Probable plus Possible |
18 |
* Calculated using Gran Tierra’s average fourth quarter 2023 WI
production of 31,309 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 $923 million at
year-end 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 |
2024 |
127 |
134 |
138 |
2025 |
164 |
189 |
196 |
2026 |
159 |
237 |
246 |
2027 |
102 |
217 |
260 |
2028 |
9 |
89 |
139 |
Remainder |
— |
57 |
186 |
Total (undiscounted) |
561 |
923 |
1,165 |
($ millions) |
Proved |
Proved plus Probable |
Proved plus Probable plus Possible |
Acordionero |
142 |
142 |
142 |
Chaza Block (Costayaco &
Moqueta) |
128 |
161 |
161 |
Suroriente |
125 |
202 |
286 |
Ecuador |
90 |
177 |
232 |
Other |
76 |
241 |
344 |
Total FDC Costs (undiscounted) |
561 |
923 |
1,165 |
Finding and Development
Costs
Reserves (Mboe) |
|
Year Ended December 31, 2023 |
Proved Developed
Producing |
43,680 |
Total Proved |
|
90,104 |
Total Proved plus
Probable |
|
147,106 |
Total
Proved plus Probable plus Possible |
|
206,856 |
Capital
Expenditures ($000s) |
|
-
including and excluding acquired properties |
219,060 |
Operating
Netback* ($/bbl, per WI sales volumes) |
|
Operating Netback* - fourth quarter 2023 |
36.05 |
*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*
Year Ended December 31, 2023 |
Proved Developed
Producing |
|
|
Reserve Additions (Mboe) |
|
8,451 |
F&D Costs ($/boe) |
|
25.92 |
F&D
Recycle Ratio |
|
1.4 |
Finding and Development Costs, Including
FDC*
Year Ended December 31, 2023 |
Proved Developed
Producing |
|
|
Change in FDC ($000s) |
|
(11,389 |
) |
Reserve Additions (Mboe) |
|
8,451 |
|
F&D Costs ($/boe) |
|
24.57 |
|
F&D
Recycle Ratio |
|
1.5 |
|
Finding and Development Costs, Excluding
FDC*
Year Ended December 31, 2023 |
Total
Proved |
|
|
Reserve Additions (Mboe) |
|
18,322 |
F&D Costs ($/boe) |
|
11.96 |
F&D
Recycle Ratio |
|
3.0 |
Finding and Development Costs, Including
FDC*
Year Ended December 31, 2023 |
Total
Proved |
|
|
Change in FDC ($000s) |
|
157,950 |
Reserve Additions (Mboe) |
|
18,322 |
F&D Costs ($/boe) |
|
20.58 |
F&D
Recycle Ratio |
|
1.8 |
Finding and Development Costs, Excluding
FDC*
Year Ended December 31, 2023 |
Total Proved plus
Probable |
|
|
Reserve Additions (Mboe) |
|
28,893 |
F&D Costs ($/boe) |
|
7.58 |
F&D
Recycle Ratio |
|
4.8 |
Finding and Development Costs, Including
FDC*
Year Ended December 31, 2023 |
Total Proved plus
Probable |
|
|
Change in FDC ($000s) |
|
245,746 |
Reserve Additions (Mboe) |
|
28,893 |
F&D Costs ($/boe) |
|
16.09 |
F&D
Recycle Ratio |
|
2.2 |
Finding and Development Costs, Excluding
FDC*
Year Ended December 31, 2023 |
Total
Proved plus Probable plus Possible |
|
Reserve Additions (Mboe) |
|
36,120 |
F&D Costs ($/boe) |
|
6.06 |
F&D
Recycle Ratio |
|
5.9 |
Finding and Development Costs, Including
FDC*
Year Ended December 31, 2023 |
Total
Proved plus Probable plus Possible |
|
Change in FDC ($000s) |
|
310,776 |
Reserve Additions (Mboe) |
|
36,120 |
F&D Costs ($/boe) |
|
14.67 |
F&D
Recycle Ratio |
|
2.5 |
*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 fourth
quarter 2023 operating netback per WI 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 January 1, 2024 (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 |
|
January 1, 2024 |
January 1, 2024 |
2024 |
$78.00 |
$73.67 |
2025 |
$79.18 |
$74.98 |
2026 |
$80.36 |
$76.14 |
2027 |
$81.79 |
$77.66 |
2028 |
$83.41 |
$79.22 |
Suroriente Continuation
Agreement
On April 11, 2023, the Company announced that it
had entered into an agreement with Ecopetrol S.A., the national oil
company of Colombia (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. On August 31, 2023, the
Company announced that it had satisfied all outstanding conditions
precedent to the effectiveness of the Suroriente Continuation
Agreement.
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
About Gran Tierra Energy Inc.
Gran Tierra Energy Inc. together with its
subsidiaries is an independent energy company currently focused on
international 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 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,” “can,” “will,” “should,” “guidance,”
“estimate,” “forecast,” “signal,” “progress” and “believes,”
derivations thereof and similar terms identify forward-looking
statements. 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 2024 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, 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 Colombia and
Ecuador and 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, local blockades or
protests; technical difficulties and operational difficulties may
arise which impact the production, transport or sale of Gran
Tierra’s products; other disruptions to local operations; global
and regional changes in the demand, supply, prices, differentials
or other market conditions affecting oil and gas, including
inflation and changes resulting from a global health crisis,
geopolitical events, including the ongoing conflicts in Ukraine and
the Gaza region, or from the imposition or lifting of crude oil
production quotas or other actions that might be imposed by OPEC
and other producing countries and 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 Gran Tierra’s 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 Gran Tierra’s 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 Gran
Tierra’s 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 SEC, 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 on February 21, 2023 and its
other filings with the SEC. 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 economic downturn
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. 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 2024 and for the next five 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 January 23, 2024 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 of operating netback per boe to the most
directly comparable measure calculated and presented in accordance
with GAAP is as follows:
|
Three months ended December 31, 2023 |
|
(Thousands of U.S Dollars) |
($/bbl, per WI sales volumes) |
Oil sales |
|
154,944 |
|
$ |
54.04 |
|
Operating expenses |
|
(47,637 |
) |
|
(16.61 |
) |
Transportation expenses |
|
(3,947 |
) |
|
(1.38 |
) |
Operating netback |
$ |
103,360 |
|
$ |
36.05 |
|
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 estimated results are subject to change upon completion of
the Company's audited financial statements for the year ended
December 31, 2023, and changes could be material. Gran Tierra
anticipates filing its audited financial statements and related
management's discussion and analysis for the year ended
December 31, 2023 on or before February 20, 2024.
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 December 31, 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
is included in the Company's Annual Report on Form 10-K and in
other reports and materials filed with or furnished to the SEC and,
as applicable, Canadian securities regulatory authorities. The SEC
permits oil and gas companies that are subject to domestic issuer
reporting requirements under U.S. federal securities law, in their
filings with the SEC, to disclose only estimated proved, probable
and possible reserves that meet the SEC's definitions of such
terms. Gran Tierra has disclosed estimated proved, probable and
possible reserves in its filings with the SEC. In addition, Gran
Tierra prepares its financial statements in accordance with United
States generally accepted accounting principles, which require that
the notes to its annual financial statements include supplementary
disclosure in respect of the Company's oil and gas activities,
including estimates of its proved oil and gas reserves and a
standardized measure of discounted future net cash flows relating
to proved oil and gas reserve quantities. This supplementary
financial statement disclosure is presented in accordance with FASB
requirements, which align with corresponding SEC requirements
concerning reserves estimation and reporting.
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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