Gran Tierra Energy Inc.
(“Gran Tierra” or
the “Company”) (NYSE American:GTE)(TSX:GTE)(LSE:GTE) today
announced a financial update and the Company’s 2021 capital budget
and production guidance. All dollar amounts are in United
States dollars and all production volumes are on a working interest
before royalties basis and are expressed in barrels
(
“bbl”) of oil per day (
“bopd”),
unless otherwise stated.
Key
Highlights:
- Results
of Semi-Annual Credit Facility Redetermination: The
semi-annual redetermination of Gran Tierra’s bank-syndicated
revolving credit facility has been completed, and the syndicate of
lenders party to the facility have agreed to amend the facility as
follows:
- The committed
borrowing base under the credit facility has been redetermined to
$215 million
- $200 million
will be readily available, with $15 million subject to the consent
of the majority of lenders
- The credit
facility matures in November 2022
- The Company
expects the credit facility's balance to be approximately $185
million as of December 31, 2020
- Hedges
In Place Designed To Protect Cash Flows: The Company has
the following Brent oil price hedges in place:
Type of Instrument & Period |
Volume (BOPD) |
Sold Put ($/bbl) |
Purchased Put ($/bbl) |
Sold Call ($/bbl) |
Premium ($/bbl) |
3-Ways: October 1-December 31, 2020 |
11,000 |
27.05 |
35.68 |
43.43 |
0.54 |
3-Ways: January 1-June 30, 2021 |
14,000 |
36.43 |
45.14 |
51.45 |
0.21 |
Collars: January 1-June 30, 2021 |
1,000 |
n/a |
45.00 |
50.40 |
n/a |
- 2021
Guidance:
- Gran Tierra is
forecasting the following ranges for the Company’s 2021
budget:
2021 Budget |
Low Case |
Base Case |
High Case |
Annual Average Brent Oil Price ($/bbl) |
44.00 |
49.00 |
56.00 |
Total Company Production (bopd) |
27,500-29,500 |
28,000-30,000 |
28,000-30,000 |
Operating Netback2 ($ million) |
180-200 |
220-240 |
270-290 |
EBITDA2 ($ million) |
165-185 |
200-220 |
240-260 |
Cash Flow1 ($ million) |
115-135 |
150-170 |
190-210 |
Total Capital ($ million) |
120-140 |
130-150 |
130-150 |
Bank Credit Facility Balance @ December 31, 2021 ($ million) |
155-175 |
125-145 |
75-95 |
2021 Year-End Net Debt3 to Annualized Fourth Quarter 2021
EBITDA2 |
3.6-3.8 |
2.7-2.9 |
2.0-2.2 |
Number of Development Wells (gross) |
12-16 |
14-18 |
14-18 |
° 2021 Capital
Program: Gran Tierra plans to direct approximately 60% of
the 2021 capital program toward continued development of the
Acordionero field in the Middle Magdalena Valley Basin, another 35%
toward development activities in the Putumayo Basin and the
remaining 5% toward exploration-related activities throughout the
Company’s portfolio, in both Colombia and Ecuador
° Fully Funded
Capital Program: the Base Case 2021 capital budget of
$130-150 million is expected to be fully funded from the Base Case
2021 cash flow1 forecast of $150-170 million
° Control of
Capital Program: Gran Tierra has 100% working interest in
and operatorship of the Company's major assets in Colombia and
Ecuador; this full control gives the Company the flexibility to
optimize its development and exploration programs with changes,
either up or down, with oil prices
° Debt
Reduction: with 2021 expected free cash flow4 and changes
in non-cash working capital (primarily related to the ongoing
collection of tax receivables), Gran Tierra expects its credit
facility to be paid down in the Base Case to a balance of $130-150
million by December 31, 2021
° Gran Tierra expects
approximate 2021 expenses and operating netback2 per bbl5 to be in
the following ranges:
2021 Budget |
Low Case |
Base Case |
High Case |
Brent Oil Price ($/bbl) |
44.00 |
49.00 |
56.00 |
Expenses ($/bbl) |
|
|
|
Transportation and Quality Discount |
8.00-10.00 |
8.00-10.00 |
8.00-10.00 |
Royalties |
3.00-4.00 |
5.00-6.00 |
7.00-8.00 |
Oil and Gas Sales Price ($/bbl) |
30.00-32.00 |
34.00-36.00 |
38.00-40.00 |
Operating Costs |
11.00-13.00 |
11.00-13.00 |
11.00-13.00 |
Transportation (Pipeline) |
0.80-1.00 |
0.80-1.00 |
0.80-1.00 |
Operating Netback2
($/bbl)5 |
17.00-19.00 |
21.00-23.00 |
26.00-28.00 |
General and Administrative |
1.50-2.50 |
1.50-2.50 |
1.50-2.50 |
Interest and Financing |
4.50-5.00 |
4.50-5.00 |
4.50-5.00 |
Taxes |
0.00 |
0.00 |
0.00 |
-
Acordionero Oil Field
- Gran Tierra
continues to workover offline oil wells to restore them to
production with two workover rigs
- The Company has
also restarted development drilling at Acordionero by spudding the
AC-64 oil well on November 30, 2020, from the newly constructed
southwest pad; the Company has drilled to the planned total depth
of AC-64, is currently running production casing in the well and
plans to complete this well during December 2020
- The drilling rig
is then expected to drill the AC-65 oil well and the AC-66 water
injection well in sequence during December 2020, Gran Tierra plans
to finish the drilling of AC-65 before 2020 year-end and of AC-66
in January 2021
- The plan is to
begin the completion of AC-65 before 2020 year-end and to finish
this work in January 2021, and to complete AC-66 in January
2021
- The planned
AC-64 and AC-65 oil wells are forecast to be brought on production
during January 2021
- The drilling rig
is forecast to continue drilling new development wells at
Acordionero throughout 2021; the next 10 planned wells (8 oil
producers and 2 water injectors) are scheduled to be drilled from
the new southwest pad
- The planned new
oil wells are each expected to have an initial oil production rate
of approximately 550 BOPD (initial 30-day average rate), in line
with the strong performance of wells drilled in the field during
2019 and first quarter 2020
Message to Shareholders
Gary Guidry, President and Chief Executive
Officer of Gran Tierra, commented: "The safety of our staff,
contractors and the local communities where we operate is always
paramount. Our teams in Colombia, Canada and Ecuador have risen to
meet the many challenges of 2020 through their diligent management
of COVID-19 safety protocols. As a result, Gran Tierra has resumed
development activities throughout our portfolio, including the
ongoing well workover operations and the restart of development
drilling at Acordionero.
Our teams’ excellent work throughout 2020 has
strongly positioned the Company for the resumption of prudent
growth in 2021. We would also like to thank our bank lending
syndicate for their ongoing support during these volatile
times.
Our forecast 2021 capital budget is a balanced,
returns-focused program which prioritizes free cash flow4
generation over the rate of development, exploration and production
growth. With a keen focus of further strengthening our balance
sheet, we plan to direct free cash flow4 to further debt reduction
in 2021.
We see material upside in our exploration
portfolio located in highly prospective geological trends in
Colombia and Ecuador. For 2021, we have budgeted a measured 5% of
our capital program to ongoing exploration-related activities,
mostly directed at our large landholdings in the Putumayo Basin of
Colombia and Oriente Basin of Ecuador.
Our 2021 plans are fully aligned with Gran
Tierra's “Beyond Compliance Policy” which focuses on our
commitments to environmental, social and governance
("ESG") excellence. Gran Tierra looks for
significant opportunities and benefits to the environment or
communities and voluntarily goes beyond what is legally required to
protect the environment and provide social benefits because it is
the right thing to do.
Gran Tierra has benefited from the continued
support of the oil and gas industry by the governments of Colombia
and Ecuador. In particular, the Colombian government has been
supportive through expedited tax refunds, extensions on the timing
to perform contractual commitments and during our resumption of
workover and drilling activities and the reopening of suspended oil
fields.
We believe we are well-positioned to navigate
the current volatile environment with our low base decline,
conventional oil asset base and the operational control for capital
allocation and timing, while maintaining a low cost structure and
the safety of our people."
1 “Cash flow” refers to line item “net cash
provided by operating activities” under generally accepted
accounting principles in the United States of America
("GAAP").2 "Operating netback" and earnings before
interest, taxes and depletion, depreciation and accretion
("EBITDA") are non-GAAP measures and do not have a
standardized meaning under GAAP. Refer to "Non-GAAP Measures" in
this press release.3 "Net debt" is a non-GAAP measure and does not
have a standardized meaning under GAAP. Refer to "Non-GAAP
Measures" in this press release.4 "Free cash flow" is a non-GAAP
measure and does not have a standardized meaning under GAAP. Free
cash flow is defined as “net cash provided by operating activities”
less capital spending. Refer to "Non-GAAP Measures" in this press
release.5 "Operating netback per bbl" is a non-GAAP measure and
does not have a standardized meaning under GAAP. Refer to "Non-GAAP
Measures" in this press release.
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 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, 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”). All statements
other than statements of historical facts included in this press
release regarding our financial position, business strategy, plans
and objectives for future operations, capital spending plans,
leverage, results of operations and those statements preceded by,
followed by or that otherwise include the words “believe”,
“expect”, “intend”, “anticipate”, “forecast”, “budget”, “will”,
“estimate”, “target”, “project”, “goal”, “plan”, “should”,
“guidance” or similar expressions are forward-looking statements.
Such forward-looking statements include, but are not limited to,
the Company’s capital budget amount and uses, funds available under
our credit facility, ability of hedges to protect cash flows,
drilling and capital program, including the changes thereto, along
with the allocation of the Company’s capital budget to development,
exploration and drilling activities, trends, infrastructure
schedules and the expected timing and drilling sequence of certain
projects; the Company’s operations; expected future net cash
provided by operating activities (described in this press release
as “cash flow”), free cash flow, operating netback, EBITDA, net
debt and certain associated metrics; our strategy regarding debt
reduction; expected cost savings; anticipated capital expenditures,
including the location and impact of capital expenditures; timing
and ability to pay down the credit facility; our business
strategies; our ability to grow in both the near and long term and
the funding of our growth opportunities; the plans, objectives,
expectations and intentions of the Company regarding production,
exploration, development; ESG-related efforts and impacts; and the
future development of the Company’s business. 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 extent and
effect of delivery disruptions and the general continuance of
current or, where applicable, assumed operational, regulatory and
industry conditions including in areas of potential expansion, the
receipt of approval from the government authorities 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: sustained or
future declines in commodity prices and potential resulting future
impairments; Gran Tierra’s operations are located in South America,
and unexpected problems can arise due to guerrilla activity;
technical difficulties and operational difficulties may arise which
impact the production, transport or sale of our products; global
health (including the ongoing COVID-19 pandemic), geographic,
political and weather conditions can impact the production,
transport or sale of our products; the risk that current global
economic and credit conditions may impact oil prices and oil
consumption more than Gran Tierra currently predicts; the ability
of Gran Tierra to execute its business plan; the risk that
unexpected delays and difficulties in developing currently -owned
properties may occur; the timely receipt of regulatory or other
required approvals for our operating activities; unexpected delays
due to the limited availability of drilling equipment and
personnel; the risk that oil prices could continue to decline or be
volatile, or current global economic and credit market conditions
may impact current oil prices or expectations regarding future oil
prices and oil consumption or limit access to capital, which could
cause Gran Tierra to further modify its strategy and capital
spending program; 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 September 30, 2020 and Annual Report on Form 10-K for
the year ended December 31, 2019 and its other filings with the
SEC. These filings are available on the SEC website at
http://www.sec.gov and on SEDAR at http://www.sedar.com. Although
the current guidance, capital spending program and long term
strategy of Gran Tierra are 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.
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 the Company believes these forward-looking statements
continue to be true as of any subsequent date. Actual results may
vary materially from the expected results expressed in
forward-looking statements. Gran Tierra disclaims any intention or
obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise,
except as expressly required by applicable securities laws. Gran
Tierra’s forward-looking statements are expressly qualified in
their entirety by this cautionary statement.
The estimates of future production, EBITDA, net
cash provided by operating activities (described in this press
release as “cash flow”), free cash flow, operating netback, net
debt, total capital and certain expenses or costs 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 2021 and development activity expectations for
2022. These projections contain forward-looking statements and are
based on a number of material assumptions and factors, including
those set out above. Actual results may differ significantly from
the projections presented herein. The actual results of Gran
Tierra’s operations for any period could vary from the amounts set
forth in these projections, and such variations may be material.
See above for a discussion of the risks that could cause actual
results to vary. The future-oriented financial information and
financial outlooks contained in this press release have been
approved by management as of the date of this press release.
Readers are cautioned that any such financial outlook and
future-oriented financial and operational information contained
herein should not be used for purposes other than those for which
it is disclosed herein. The Company and its management believe that
the prospective financial information has been prepared on a
reasonable basis, reflecting management’s best estimates and
judgments, and represent, to the best of management’s knowledge and
opinion, the Company’s expected course of action. However, because
this information is highly subjective, it should not be relied on
as necessarily indicative of future results.
Oil and Gas Disclaimer
This press release contains certain oil and gas
metrics, including operating 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
investors. 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.
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.
Non-GAAP
Measures
This press release includes forward-looking
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 an alternative 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, it may not be comparable to similar
measures used by other companies. These non-GAAP financial measures
are presented along with the corresponding GAAP measure so as to
not imply that more emphasis should be placed on the non-GAAP
measure.
Gran Tierra is unable to provide forward-looking
net income and oil and gas sales, the GAAP measures most directly
comparable to the non-GAAP measures EBITDA and operating netback,
respectively, due to the impracticality of quantifying certain
components required by GAAP as a result of the inherent volatility
in the value of certain financial instruments held by the Company
and the inability to quantify the effectiveness of commodity price
derivatives used to manage the variability in cash flows associated
with the forecasted sale of its oil production and changes in
commodity prices.
Operating netback as presented is defined as
projected 2021 oil and gas sales less projected 2021 operating and
transportation expenses. Operating netback per bbl as presented is
defined as projected oil and gas sales price less 2021 forecasts of
transportation and quality discount, royalties, operating costs and
pipeline transportation from the 2021 budget Brent oil price
forecast as outlined in the table above. The most directly
comparable GAAP measures are oil and gas sales and oil and gas
sales price, respectively. Management believes that operating
netback and operating netback per bbl are useful supplemental
measures for management and investors to analyze financial
performance and provides an indication of the results generated by
our principal business activities prior to the consideration of
other income and expenses. Gran Tierra is unable to provide a
quantitative reconciliation of either forward-looking operating
netback or operating netback per bbl to its most directly
comparable forward-looking GAAP measure because management cannot
reliably predict certain of the necessary components of such
forward-looking GAAP measures.
EBITDA as presented is defined as projected 2021
net income adjusted for DD&A expenses, interest expense and
income tax expense or recovery. The most directly comparable GAAP
measure is net income. 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. Gran Tierra is unable to
provide a quantitative reconciliation of forward-looking EBITDA to
its most directly comparable forward-looking GAAP measure because
management cannot reliably predict certain of the necessary
components of such forward-looking GAAP measure.
Free cash flow as presented is defined as GAAP
projected “net cash provided by operating activities” less
projected 2021 capital spending. The most directly comparable GAAP
measure is net cash provided by operating activities. Management
believes that free cash flow is a useful supplemental measure for
management and investors to in order to evaluate the financial
sustainability of the Company’s business. Gran Tierra is unable to
provide a quantitative reconciliation of forward-looking free cash
flow to its most directly comparable forward-looking GAAP measure
because management cannot reliably predict certain of the necessary
components of such forward-looking GAAP measure.
Net Debt as presented is defined as projected
working capital at December 31, 2021, less $600 million in senior
notes and borrowings under the credit facility. Management believes
that net debt is a useful supplemental measure for management and
investors to in order to evaluate the financial sustainability of
the Company’s business and leverage. The most directly comparable
GAAP measure is total debt. Gran Tierra is unable to provide a
quantitative reconciliation of forward-looking net debt to its most
directly comparable forward-looking GAAP measure because management
cannot reliably predict certain of the necessary components of such
forward-looking GAAP measure.
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