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 March 31, 2020 ("
the
Quarter"). All dollar amounts are in United States
("
U.S.") dollars and production amounts are on an
average working interest before royalties ("
WI")
basis unless otherwise indicated. Per barrel
("
bbl") of oil equivalent ("
BOE")
amounts are based on WI sales before royalties. For per BOE amounts
based on net after royalty ("
NAR") production, see
Gran Tierra's Quarterly Report on Form 10-Q filed May 11,
2020.
Key Highlights
- Average Production During the Quarter: Was
29,527 BOE per day ("BOEPD"), down 10% from fourth
quarter 2019 ("the Prior Quarter"); during the
Quarter, volumes were impacted by suspended production at the
Suroriente and PUT-7 Blocks in the southern Putumayo region due to
a local farmers' blockade, deferred development drilling, shut-in
of higher cost production and wells that were off-line awaiting
routine mechanical workovers; these wells are expected to remain
off-line during the low-price environment
- Decisive Action To Swiftly Shut-In Uneconomic
Production: Gran Tierra has temporarily suspended fields
with zero or negative netbacks at current oil prices and taken
precautions to minimize restart costs across all assets; Gran
Tierra remains focused on the ongoing production and waterflooding
of the Company's core assets at Acordionero, Costayaco and Moqueta,
which represent 81% of Gran Tierra's WI Total Proved Reserves as of
December 31, 2019*
- Deferral of Capital Expenditures: The
Quarter's capital expenditures totaled $44.3 million; following the
advent of the COVID-19 outbreak and the resulting large decrease in
oil demand and prices, the Company has elected to defer the
majority of capital expenditures for the remainder of 2020, by
stacking all drilling and workover rigs and suspending development
activities
- Proactive Measures Taken During Downturn: Gran
Tierra has rapidly implemented cost saving initiatives throughout
the Company; furthermore, internal initiatives during this downturn
are focused on portfolio optimization, deferring short-cycle
investments, and pacing projects to allow the Company to properly
resume operations when oil prices recover
- Colombian Government Initiatives to Assist the Oil
Industry: Gran Tierra plans to make use of new regulations
that the Colombian government has issued to support the oil
industry in response to the recent drop in oil prices:
- On April 10, 2020, the Ministry of Finance issued Decree 535
which is designed to expedite the recovery of value-added and
income tax receivables from the tax authorities, to ensure that
such funds are received by companies in the short-term
- On March 27, 2020, the National Hydrocarbons Agency
("ANH") issued Agreement 01, which grants
companies the option to transfer certain commitments among
exploration, evaluation or development acreage, providing that
certain criteria are met
- On April 7, 2020, the ANH also issued Agreement 02, which
allows oil companies to reduce substantially the amounts covered by
letters of credit for block commitments; this new agreement also
grants oil companies the option to request 12 months of additional
time for the execution of exploration, evaluation and certain
exploitation commitments
- Focus on Balance Sheet Protection and Long-Term Value
Preservation: During the Quarter, Gran Tierra quickly
shifted its focus from production growth and free cash flow
generation to protecting the Company's balance sheet and long-term
value; this shift in focus was accomplished through adjusting oil
production volumes, deferring capital investments and further
optimizing and lowering operating and general and
administrative ("G&A") costs:
- Significant progress has been made on lowering operating costs
through the renegotiation of vendor contracts, with significant
discounts achieved to date; additional operating cost initiatives
include personnel and rental equipment optimization; in addition to
reducing operating costs, the Company is also benefiting from the
recent depreciation of the Canadian dollar and Colombian peso; the
Colombian peso has declined 18% versus the U.S. dollar from the
Company's original budget estimate; the majority of Gran Tierra's
operating costs (approximately 80%) and G&A costs within
Colombia are denominated in Colombian pesos; all G&A costs in
Canada are denominated in Canadian dollars
- Gran Tierra's Executive Team and Board of Directors have taken
20 percent reductions in salaries and retainer fees, respectively;
in addition, a number of cost optimization and efficiency measures
are being implemented that will further reduce the Company's
G&A costs to levels consistent with lower anticipated activity
levels; Gran Tierra expects these changes to result in a reduction
of 30 to 35 percent in G&A costs compared to the Company's
original budget
- Due to the uncertainty of the financial and operational impact
of COVID-19 and the significant decline in world oil prices, the
Company is not providing any fiscal or operational outlook at this
time
- 2019 Sustainability Report Published: Gran
Tierra's Environmental, Social and Governance
("ESG") report for 2019 is now available on the
Company's website; the Company recognizes the importance that many
stakeholders attach to its approach to managing the ESG factors
that relate to its business; Gran Tierra's 2019
Sustainability Report uses data, stories, and images to show how
responsible management of these factors is fundamental to the
Company's corporate values
- Key Financial Metrics for the Quarter:
- Net loss was $252 million compared with net income of $27
million in the Prior Quarter, due to lower revenues primarily from
the collapse in oil price and significant non-cash items including
unrealized loss on valuation of investments ($65 million) and
goodwill impairment ($103 million)
- Adjusted EBITDA(1) was $35 million, compared with $66 million
in the Prior Quarter
- Funds flow from operations(1) of $22 million ($0.06 per share,
basic) decreased by 55% compared with the Prior Quarter, as a
result of lower production and a 19% decrease in the Brent oil
price
- At March 31, 2020, net debt(1) to Adjusted EBITDA(1) was
2.75 times on a trailing 12 month basis (on a trailing 12 month
basis, net loss was $215 million and Adjusted EBITDA(1) was $272
million)
- Entered into additional 2020 oil price hedges during the
Quarter to provide further downside protection against a near-term,
low price environment; currently, approximately 50 percent of
production is hedged for the remainder of the second quarter of
2020, with 7,000 bbl of oil per day ("bopd")
hedged for the second half of 2020
- Oil and gas sales were $86 million, down 33% from $128 million
in the Prior Quarter due to the decreases in production and the
Brent oil price
- Operating netback(1) decreased to $14.13 per BOE, which was
caused mostly by the drop in the Brent oil price, while other cost
components such as operating and transportation expenses and the
quality and transportation discount remained relatively unchanged;
the drop in the Quarter's royalties to $5.61 per BOE, down from the
Prior Quarter's $8.11 per BOE, partially offset the negative impact
of the crash in oil prices
- Operating expenses of $12.17 per BOE were down slightly from
$12.44 per BOE in the Prior Quarter due to lower power generation
costs, reduction in rental equipment and cost savings attributed to
the lower operating activities during the Quarter
- Workover expenses were $4.64 per BOE, up from $3.63 per BOE in
the Prior Quarter as a result of fishing and recompletion work at
the Chuira field and three workovers at the Costayaco field
- Transportation expenses were $1.52 per BOE, down from $2.35 per
BOE in the Prior Quarter, due to higher wellhead sales
- Capital expenditures totaled $44.3 million, a decrease of 36%
compared to the Prior Quarter; the remainder of the Company's 2020
capital program is deferred, with only minimal maintenance
expenditures planned for the rest of 2020
Operations Update
Acordionero (100% WI,
Operator)
- During the Quarter, five development wells oil (AC-55, AC-56,
AC-57, AC-58 and AC-59) were drilled, focusing on an optimized
waterflood program to maximize ultimate oil recovery and long-term
value
- Drilling efficiencies continue to be achieved, with AC-59
drilled in record low cycle time (drilled, completed and on
production) of 15 days and AC-57 drilled and completed for a total
capital cost of $1.8 million; wells drilled at Acordionero have
been consistently delivered with per well capital costs below $2
million; further price negotiations with vendors are forecast to
further lower infill drilling costs by approximately 20% to 30%,
with revised contract terms once drilling recommences after future
oil price recovery
- At the end of the Quarter, a total of 9 oil wells require
workovers to restore production; Gran Tierra has elected to defer
the workovers of these wells due to the current low oil price
environment; if the Brent oil price were to recover to a level
above $30 per bbl, the Company would consider initiating these
workovers
- From January 1, 2020 until mid-March 2020, the instantaneous
voidage replace ratio in the waterflood at Acordionero was steady
at a level of 1.0 for the Lisama A and 1.8 for the Lisama C
reservoirs, indicating continued prudent waterflood management
Suroriente (52% WI and
Operator)
- The Cohembi oil field in the Suroriente Block was producing at
approximately 4,000 bopd (WI) prior to the blockades as the field
was continuing to positively respond to increased water injection
and pump optimizations
- Since assuming operatorship, Gran Tierra had been able to
increase production by over 1,000 bopd without drilling any
development wells
- Prior to the blockades in late February 2020, activities were
underway to expand the Cohembi water treatment, injection and
processing facilities under a two-phased expansion program; the
combined phased expansion would be expected to boost gross water
injection capacity from 19,000 to 60,000 bbl of water per day
Ayombero-Chuira (100% WI)
- Gran Tierra remains encouraged by early results from the
Ayombero-1 well, which continues to show stable production which
averaged 177 bopd for the Quarter on natural flow and has total
cumulative oil production to date of 108,000 bbl
- Ayombero-2 and -3 remain suspended and ready for the next phase
of operations to recover the wellbores; Gran Tierra continues
detailed planning for the next phase of operations but plans to
await a recovery in oil prices before restarting development
activities
Message to Shareholders
Gary Guidry, President and Chief Executive
Officer of Gran Tierra, commented: "Gran Tierra has taken decisive
action to protect our balance sheet and cash flows by swiftly
reducing our 2020 capital program. We believe we have a competitive
advantage to withstand the current challenging environment in light
of our low base decline, conventional oil asset base, ability to
control capital allocation and low cost structure. We forecast that
the Company currently has the productive capacity to produce over
30,000 bopd with the future completion of workovers in Acordionero,
resumption of production in the Suroriente Block and restart of
production from our minor fields, although we have prudently
suspended these workovers and restarts at the present time. We
continue to prioritize financial strength and liquidity and
currently believe we will exit strongly from this period of
economic turmoil."
Financial and Operational Highlights
(all amounts in $000s, except per share and BOE
amounts)
|
Three Months Ended March 31, |
|
Three Months Ended December 31, |
|
2020 |
2019 |
|
2019 |
|
|
|
|
|
Net (Loss)
Income |
$ |
(251,626 |
) |
$ |
1,979 |
|
|
$ |
27,004 |
|
Per Share -
Basic and Diluted |
$ |
(0.69 |
) |
$ |
0.01 |
|
|
$ |
0.07 |
|
|
|
|
|
|
Oil and Gas
Sales |
$ |
86,079 |
|
$ |
152,565 |
|
|
$ |
127,934 |
|
Operating
Expenses |
(32,285 |
) |
(34,783 |
) |
|
(37,967 |
) |
Workover Expenses |
(12,303 |
) |
(6,289 |
) |
|
(11,093 |
) |
Transportation
Expenses |
(4,037 |
) |
(8,103 |
) |
|
(4,233 |
) |
Operating
Netback(1)(2) |
$ |
37,454 |
|
$ |
103,390 |
|
|
$ |
74,641 |
|
|
|
|
|
|
G&A Expenses
Before Stock-Based Compensation |
$ |
7,440 |
|
$ |
7,869 |
|
|
$ |
8,518 |
|
G&A Stock-Based
Compensation (Recovery) Expense |
(2,055 |
) |
1,727 |
|
|
338 |
|
G&A Expenses,
Including Stock Based Compensation |
$ |
5,385 |
|
$ |
9,596 |
|
|
$ |
8,856 |
|
|
|
|
|
|
Adjusted
EBITDA(1) |
$ |
34,516 |
|
$ |
93,913 |
|
|
$ |
65,926 |
|
|
|
|
|
|
Funds Flow from
Operations(1) |
$ |
22,227 |
|
$ |
75,450 |
|
|
$ |
49,669 |
|
|
|
|
|
|
Capital
Expenditures |
$ |
44,277 |
|
$ |
94,489 |
|
|
$ |
68,735 |
|
|
|
|
|
|
Average Daily Volumes (BOEPD) |
|
|
|
|
WI Production Before
Royalties |
29,527 |
|
38,163 |
|
|
32,924 |
|
Royalties |
(4,156 |
) |
(6,499 |
) |
|
(5,428 |
) |
Production
NAR |
25,371 |
|
31,664 |
|
|
27,496 |
|
(Increase) Decrease in
Inventory |
(521 |
) |
169 |
|
|
306 |
|
Sales |
24,850 |
|
31,833 |
|
|
27,802 |
|
Royalties, % of WI
Production Before Royalties |
14 |
% |
17 |
% |
|
16 |
% |
|
|
|
|
|
Per BOE |
|
|
|
|
Brent |
$ |
50.82 |
|
$ |
63.90 |
|
|
$ |
62.42 |
|
Quality and
Transportation Discount |
(12.75 |
) |
(10.65 |
) |
|
(12.40 |
) |
Royalties |
(5.61 |
) |
(8.99 |
) |
|
(8.11 |
) |
Average Realized
Price |
32.46 |
|
44.26 |
|
|
41.91 |
|
Transportation
Expenses |
(1.52 |
) |
(2.35 |
) |
|
(1.39 |
) |
Average Realized Price
Net of Transportation Expenses |
30.94 |
|
41.91 |
|
|
40.52 |
|
Operating
Expenses |
(12.17 |
) |
(10.09 |
) |
|
(12.44 |
) |
Workover
Expenses |
(4.64 |
) |
(1.82 |
) |
|
(3.63 |
) |
Operating
Netback(1)(2) |
14.13 |
|
30.00 |
|
|
24.45 |
|
G&A Expenses
Before Stock-Based Compensation |
(2.81 |
) |
(2.28 |
) |
|
(2.79 |
) |
Severance
Expenses |
(0.50 |
) |
(0.19 |
) |
|
(0.23 |
) |
Realized Foreign
Exchange Gain (Loss) |
0.75 |
|
(0.25 |
) |
|
0.48 |
|
Realized Financial
Instruments Gain (Loss) |
1.31 |
|
(0.06 |
) |
|
(0.33 |
) |
Interest Expense,
Excluding Amortization of Debt Issuance Costs |
(4.51 |
) |
(2.06 |
) |
|
(3.87 |
) |
Interest
Income |
0.13 |
|
0.04 |
|
|
0.01 |
|
Other
Loss |
— |
|
— |
|
|
(0.45 |
) |
Net Lease
Payments |
(0.01 |
) |
— |
|
|
0.02 |
|
Current Income Tax
Expense |
(0.11 |
) |
(3.30 |
) |
|
(1.03 |
) |
Cash
Netback(1) |
$ |
8.38 |
|
$ |
21.90 |
|
|
$ |
16.26 |
|
|
|
|
|
|
Share Information (000s) |
|
|
|
|
Common Stock Outstanding,
End of Period |
366,982 |
|
384,493 |
|
|
366,982 |
|
Weighted Average Number
of Common and Exchangeable Shares Outstanding - Basic |
366,982 |
|
386,930 |
|
|
366,982 |
|
Weighted Average Number
of Common and Exchangeable Shares Outstanding -
Diluted |
366,982 |
|
386,946 |
|
|
366,982 |
|
* Gran Tierra’s 2019 year-end reserves were
evaluated, in compliance with Canadian National Instrument 51-101 -
Standards of Disclosure for Oil and Gas Activities and the
Canadian Oil and Gas Evaluation Handbook, by the Company's
independent qualified reserves evaluator McDaniel & Associates
Consultants Ltd. in a report with an effective date of
December 31, 2019 (the "GTE McDaniel Reserves
Report").
(1) Net debt is defined as face value of debt
($787 million), less cash and cash equivalents ($39 million). Net
debt, funds flow from operations, operating netback, return on
average capital employed, cash netback, earnings before interest,
taxes and depletion, depreciation and accretion
("DD&A") and adjusted earnings before
interest, taxes and depletion, depreciation and accretion
("EBITDA") and EBITDA adjusted for loss on
redemption of Convertible Notes and loss or gain on investment
("Adjusted EBITDA") are non-GAAP measures and do
not have standardized meanings under generally accepted accounting
principles in the United States of America
("GAAP"). Refer to "Non-GAAP Measures" in this
press release for descriptions of these non-GAAP measures and
reconciliations to the most directly comparable measures calculated
and presented in accordance with GAAP.
(2) Operating netback is a non-GAAP measure and
does not have a standardized meaning under GAAP. Refer to "Non-GAAP
Measures" in this press release for a description. The closest
related GAAP measure is oil and gas sales price. Operating netback
as presented is defined as oil and gas sales less operating,
workover and transportation expenses. See the table entitled
Financial and Operational Highlights above for the components of
consolidated operating netback and corresponding
reconciliation.
Conference Call
Information:
Gran Tierra will host its first quarter 2020
results conference call on Tuesday, May 12, 2020, at 9:00 a.m.
Mountain Time, 11:00 a.m. Eastern Time. Interested parties may
access the conference call by dialing +1-844-348-3792 or
+1-614-999-9309 (North America), 0800-028-8438 or 020-3107-0289
(United Kingdom) or 01-800-518-5094 (Colombia). The call will also
be available via webcast at www.grantierra.com.
Corporate Presentation:
Gran Tierra's Corporate Presentation has been
updated and is available on the Company website at
www.grantierra.com.
Contact Information
For investor and media inquiries please contact:
Gary GuidryPresident & Chief Executive Officer
Ryan EllsonExecutive Vice President & Chief Financial
Officer
Rodger TrimbleVice 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 focused
on oil and natural gas exploration and production in Colombia and
Ecuador. The Company is focused on its existing portfolio of assets
in Colombia and Ecuador and will pursue new growth opportunities
throughout Colombia and Latin America, leveraging our financial
strength. The Company’s common stock trades on the NYSE American,
the Toronto Stock Exchange and the London Stock Exchange under the
ticker symbol GTE. Additional information concerning Gran Tierra is
available at www.grantierra.com. Information on the Company's
website (including the Sustainability Report) does not constitute a
part of this press release. Investor inquiries may be directed to
info@grantierra.com or (403) 265-3221.
Gran Tierra's Securities and Exchange Commission
filings are available on the SEC website at http://www.sec.gov and
on SEDAR at http://www.sedar.com and UK regulatory filings are
available on the National Storage Mechanism website at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism.
Forward-Looking Statements and Legal
Advisories:
This press release contains opinions, forecasts,
projections, expectations and other statements about future events
or results that constitute forward-looking statements within the
meaning of the United States Private Securities Litigation Reform
Act of 1995, Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended,
and financial outlook and forward-looking information within the
meaning of applicable Canadian securities laws (collectively,
"forward-looking statements"), which can be identified by such
terms as “expect,” “plan,” “guidance,” "forecast," “project,”
“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 capital program, the benefits of reduced capital
spending and G&A expenses, the benefits of derivative
transactions, well performance and production, liquidity and access
to capital, future plans when oil prices increase, the Company’s
strategies and results thereof, the Company’s operations including
planned operations, the use and the benefits of government
programs, and the impact of the COVID-19 pandemic, disruptions to
operations and the decline in industry conditions.
Among the important factors that could cause
actual results to differ materially from those indicated by the
forward-looking statements in this press release are: the
unprecedented impact of the COVID-19 pandemic and the actions of
OPEC and non-OPEC countries and the procedures imposed by
governments in response thereto; disruptions to local operations;
the decline in oil and gas industry conditions and commodity
prices; the severe imbalance in supply and demand for oil and
natural gas; prices and markets for oil and natural gas are
unpredictable and volatile; the accuracy of productive capacity of
any particular field; the timing and impact of any resumption of
operations; Gran Tierra’s operations are located in South America
and unexpected problems can arise due to guerilla activity or local
blockades or protests; technical difficulties and operational
difficulties may arise which impact the production, transport or
sale of our products; geographic, political and weather conditions
can impact the production, transport or sale of our products;
the ability of Gran Tierra to execute its business plan and realize
expected benefits from current initiatives (including suspension of
the capital program); the risk that unexpected delays and
difficulties in developing currently owned properties may occur;
the ability to replace reserves and production and develop and
manage reserves on an economically viable basis; the accuracy of
testing and production results and seismic data, pricing and cost
estimates (including with respect to commodity pricing and exchange
rates); the risk profile of planned exploration activities; the
effects of drilling down-dip; the effects of waterflood and
multi-stage fracture stimulation operations; the extent and effect
of delivery disruptions, equipment performance and costs; actions
by third parties; the timely receipt of regulatory or other
required approvals for our operating activities; the failure of
exploratory drilling to result in commercial wells; unexpected
delays due to the limited availability of drilling equipment and
personnel; the risk that current global economic and credit market
conditions may impact oil prices and oil consumption more than Gran
Tierra currently predicts, which could cause Gran Tierra to further
modify its strategy and capital spending program; volatility or
declines in the trading price of our common stock or bonds; Gran
Tierra’s ability to comply with financial covenants in its credit
agreement; Gran Tierra’s ability to amend, or receive a waiver of
compliance with, financial covenants in its credit agreement; any
reduction in the borrowing base under the Company's credit
facility, which will next be redetermined in May 2020, and any
related requirement to repay excess borrowings; 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 Quarterly Report for the quarter ended March 31, 2020
and Annual Report on Form 10-K for the year ended December 31,
2019, many of which are beyond the Company's control. These filings
are available on the SEC website at http://www.sec.gov and on SEDAR
at www.sedar.com. The unprecedented decline in oil prices and
related reduction in the Company's capital program has
significantly reduced the Company’s forecasted Covenant EBITDAX.
Based on current forward pricing, and forecasted production, costs
and total debt, which can change materially in short time frames,
especially in the current environment, the Company is not currently
forecasted to be able to comply with certain financial covenants
related to EBITDAX contained in the Company’s credit agreement in
the next 12 months. As noted in the Company’s financial statements
for the quarter ended March 31, 2020, pursuant to accounting
principles generally accepted in the United States, these
conditions raise substantial doubt about the Company's ability to
continue as a going concern within the 12 months post issuance of
the consolidated financial statements. For more information, please
read the Company’s Quarterly Report on Form 10-Q filed on May 11,
2020.
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. In particular, the unprecedented nature of the current
economic downturn, pandemic and industry decline may make it
particularly difficult to identify risks or predict the degree to
which identified risks will impact Gran Tierra's business and
financial condition. All forward-looking statements are made as of
the date of this press release and the fact that this press release
remains available does not constitute a representation by Gran
Tierra that Gran Tierra believes these forward-looking statements
continue to be true as of any subsequent date. Actual results may
vary materially from the expected results expressed in
forward-looking statements. Gran Tierra disclaims any intention or
obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise,
except as expressly required by applicable law.
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 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
and gas 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
(loss) income before DD&A expenses, goodwill and asset
impairment, deferred income tax expense or recovery, stock-based
compensation expense or recovery, amortization of debt issuance
costs, non-cash lease expense, lease payments, unrealized foreign
exchange gains and losses, financial instrument gains or losses,
loss on redemption of Convertible Notes and cash settlement of
financial instruments. Management believes that operating netback
and cash netback are useful supplemental measures for investors to
analyze financial performance and provide an indication of the
results generated by Gran Tierra's principal business activities
prior to the consideration of other income and expenses. A
reconciliation from net (loss) income to cash netback is as
follows:
|
|
Three Months Ended March 31, |
|
Three Months Ended December 31, |
Cash Netback -
(Non-GAAP) Measure ($000s) |
|
2020 |
|
2019 |
|
2019 |
Net (loss)
income |
|
$ |
(251,626 |
) |
|
$ |
1,979 |
|
|
$ |
27,004 |
|
Adjustments to
reconcile net (loss) income to cash netback |
|
|
|
|
|
|
DD&A expenses |
|
57,294 |
|
|
62,921 |
|
|
60,603 |
|
Goodwill impairment |
|
102,581 |
|
|
— |
|
|
— |
|
Inventory Impairment |
|
3,904 |
|
|
— |
|
|
— |
|
Deferred tax expense |
|
34,606 |
|
|
8,323 |
|
|
8,475 |
|
Stock-based compensation (recovery) expense |
|
(2,055 |
) |
|
1,727 |
|
|
338 |
|
Amortization of debt issuance costs |
|
844 |
|
|
838 |
|
|
802 |
|
Non-cash lease expense |
|
490 |
|
|
— |
|
|
440 |
|
Lease payments |
|
(515 |
) |
|
— |
|
|
(366 |
) |
Unrealized foreign exchange loss (gain) |
|
20,799 |
|
|
(3,283 |
) |
|
(3,500 |
) |
Financial instruments loss (gain) |
|
52,418 |
|
|
3,165 |
|
|
(43,325 |
) |
Loss on redemption of Convertible Notes |
|
— |
|
|
— |
|
|
196 |
|
Cash settlement of financial instruments |
|
3,487 |
|
|
(220 |
) |
|
(998 |
) |
Cash
netback |
|
22,227 |
|
|
75,450 |
|
|
49,669 |
|
EBITDA, as presented, is defined as net income
adjusted for DD&A expenses, interest expense and income tax
expense. Adjusted EBITDA is defined as EBITDA adjusted for goodwill
and inventory impairment, unrealized foreign exchange gain or loss,
stock based compensation expense or recovery, other loss and
unrealized 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, and
believes that this financial measure is also useful supplemental
information for investors to analyze performance and our financial
results. A reconciliation from net (loss) income to EBITDA and
Adjusted EBITDA as follows:
|
|
Three Months Ended March 31, |
|
Three Months Ended December 31, |
|
Twelve Month Trailing March 31, |
EBITDA - (Non-GAAP)
Measure ($000s) |
|
2020 |
|
2019 |
|
2019 |
|
2020 |
Net (loss)
income |
|
$ |
(251,626 |
) |
|
$ |
1,979 |
|
|
$ |
27,004 |
|
|
$ |
(214,915 |
) |
Adjustments to
reconcile net (loss) income to EBITDA and Adjusted
EBITDA |
|
|
|
|
|
|
|
|
DD&A expenses |
|
57,294 |
|
|
62,921 |
|
|
60,603 |
|
|
219,406 |
|
Interest expense |
|
12,810 |
|
|
7,938 |
|
|
12,613 |
|
|
48,140 |
|
Income tax expense |
|
34,904 |
|
|
19,686 |
|
|
11,610 |
|
|
72,503 |
|
EBITDA |
|
$ |
(146,618 |
) |
|
$ |
92,524 |
|
|
$ |
111,830 |
|
|
$ |
125,134 |
|
Goodwill impairment |
|
102,581 |
|
|
— |
|
|
— |
|
|
102,581 |
|
Inventory impairment |
|
3,904 |
|
|
— |
|
|
— |
|
|
3,904 |
|
Unrealized foreign exchange loss (gain) |
|
20,799 |
|
|
(3,283 |
) |
|
(3,500 |
) |
|
25,885 |
|
Stock-based compensation (recovery) expense |
|
(2,055 |
) |
|
1,727 |
|
|
338 |
|
|
(2,352 |
) |
Other loss |
|
— |
|
|
|
— |
|
|
1,581 |
|
|
12,886 |
|
Unrealized financial instruments loss (gain) |
|
55,905 |
|
|
|
2,945 |
|
|
(44,323 |
) |
|
3,472 |
|
Adjusted
EBITDA |
|
$ |
34,516 |
|
|
$ |
93,913 |
|
|
$ |
65,926 |
|
|
$ |
271,510 |
|
Funds flow from operations, as presented, is net
income adjusted for DD&A expenses, goodwill and inventory
impairment, deferred tax expense, stock-based compensation expense
or recovery, amortization of debt issuance costs, non-cash
lease expense, lease payments, unrealized foreign exchange gains
and losses, financial instruments gains or losses, loss on
redemption of Convertible Notes and cash settlement of financial
instruments. 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. A reconciliation from net
(loss) income to funds flow from operations is as follows:
|
|
Three Months Ended March 31, |
|
Three Months Ended December 31, |
Funds Flow From
Operations -(Non-GAAP) Measure
($000s) |
|
2020 |
|
2019 |
|
2019 |
Net (loss)
income |
|
$ |
(251,626 |
) |
|
$ |
1,979 |
|
|
$ |
27,004 |
|
Adjustments to
reconcile net (loss) income to funds flow from
operations |
|
|
|
|
|
|
DD&A expenses |
|
57,294 |
|
|
62,921 |
|
|
60,603 |
|
Goodwill impairment |
|
102,581 |
|
|
— |
|
|
— |
|
Inventory impairment |
|
3,904 |
|
|
— |
|
|
— |
|
Deferred tax expense |
|
34,606 |
|
|
8,323 |
|
|
8,475 |
|
Stock-based compensation (recovery) expense |
|
(2,055 |
) |
|
1,727 |
|
|
338 |
|
Amortization of debt issuance costs |
|
844 |
|
|
838 |
|
|
802 |
|
Non-cash lease expense |
|
490 |
|
|
— |
|
|
440 |
|
Lease payments |
|
(515 |
) |
|
— |
|
|
(366 |
) |
Unrealized foreign exchange loss (gain) |
|
20,799 |
|
|
(3,283 |
) |
|
(3,500 |
) |
Financial instruments loss (gain) |
|
52,418 |
|
|
3,165 |
|
|
(43,325 |
) |
Loss on redemption of Convertible Notes |
|
— |
|
|
— |
|
|
196 |
|
Cash settlement of financial instruments |
|
3,487 |
|
|
(220 |
) |
|
(998 |
) |
Funds flow from
operations |
|
$ |
22,227 |
|
|
$ |
75,450 |
|
|
$ |
49,669 |
|
Presentation of Oil and Gas Information
BOEs have been converted on the basis of 6
thousand cubic feet ("Mcf") of natural gas to 1
bbl of oil. BOEs 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.
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. 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.
Gran Tierra Energy (AMEX:GTE)
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