Gran Tierra Energy Inc.
("Gran Tierra" or
the "Company") (NYSE American:GTE)(TSX:GTE)(LSE:GTE) today
announced the Company’s financial and operating results for the
quarter ended June 30, 2021 ("
the
Quarter"). All dollar amounts are in United States
dollars and production amounts are on an average working interest
before royalties ("
WI") basis unless otherwise
indicated. Per barrel ("
bbl") and bbl per day
(
"BOPD") amounts are based on WI sales before
royalties. For per bbl amounts based on net after royalty
("
NAR") production, see Gran Tierra’s Quarterly
Report on Form 10-Q filed August 3, 2021.
Key Highlights:
- End of
Colombian Blockades Affecting Gran Tierra:
- As previously
announced by Gran Tierra on May 17, 2021, a number of protests and
blockades across Colombia impacted several key transportation
routes throughout the country, resulting in the temporary shut-in
of some of Gran Tierra’s wells and oil fields.
- Though these
blockades were not directed at Gran Tierra, these events caused the
Company to implement temporary production curtailments during May
and June 2021. As a result of the blockades, approximately 597,000
bbl of oil production were deferred during the Quarter and Gran
Tierra does not expect any negative impact on the Company's oil
reserves.
- As the Company
previously announced on July 12, 2021, the Colombian government
successfully negotiated the end to all of the blockades in the
areas that were affecting Gran Tierra’s operations, which has
allowed the Company to restore its oil production throughout its
entire Colombian portfolio.
- Second
Quarter 2021 Production:
- The Quarter's
production averaged 23,035 BOPD, up 14% from the second quarter of
2020, but down 6% from the first quarter of 2021 ("the
Prior Quarter").
- The
quarter-over-quarter production drop was due solely to the
temporary impact of the blockades during the Quarter, all of which
have since been lifted.
- Strong
Second Half 2021 Production: Gran Tierra forecasts second
half 2021 total production to average approximately 30,000-32,000
BOPD.
- Full
Year 2021 Production Guidance: Based on the Company’s
significant progress in restoring production subsequent to the
Quarter, Gran Tierra reaffirms its 2021 full-year production
guidance of 27,500-28,500 BOPD.
- Key
Financial Metrics for the Quarter:
- Credit
Facility Paid Down: Despite the reduction in the Quarter's
production, as of June 30, 2021, the Company had paid down its
credit facility balance by $5 million to $175 million and had a
cash and cash equivalents balance of $20 million. These figures
compare to a credit facility balance of $180 million and cash and
cash equivalents balance of $22 million at the end of the Prior
Quarter. With 2021 expected free cash flow2 and changes in non-cash
working capital (primarily related to the ongoing collection of tax
receivables), Gran Tierra expects its bank credit facility to be
paid down to a balance of $60-80 million by December 31, 2021.
-
Significant Reduction in Operating Expenses:
Compared to the Prior Quarter, the Company’s operating expenses
were down 9% to $12.46/bbl, despite the reduction in the Quarter's
production. This decrease in operating expenses was achieved mainly
by lower power generation costs in Acordionero.
-
Increases in Other Expenses:
- Due to the
temporary impact of the blockades during the Quarter, Gran Tierra
rerouted some of its production to higher-cost transportation
alternatives.
- As a result of
these temporary alternative marketing arrangements with higher
costs, the quality and transportation discount was up $2.56/bbl
during the Quarter to $11.54/bbl, relative to the Prior Quarter.
Transportation expenses were up $0.28/bbl during the Quarter to
$1.43/bbl, compared to the Prior Quarter.
- With the
resolution of the blockade situation, Gran Tierra has restored its
normal, lower cost transportation routes and reaffirms its 2021
full year forecasts for quality and transportation discount of
$8.00-10.00/bbl and transportation expenses of $0.90-1.10/bbl.
- General and
administrative ("G&A") expenses before
stock-based compensation increased by $0.77/bbl during the Quarter
to $3.49/bbl compared to the Prior Quarter due to the timing of
certain corporate costs. Gran Tierra reaffirms its 2021 full year
forecast for G&A expenses of $1.50-2.50/bbl.
- Narrowed
Net Loss and Increased EBITDA: Relative to the Prior
Quarter, Gran Tierra significantly narrowed its realized net loss
by 53% to $18 million from $37 million in the Prior Quarter;
EBITDA1 also substantially improved to $34 million, up from $16
million in the Prior Quarter.
- Funds
Flow: Relative to the Prior Quarter, the Company's funds
flow from operations1 was down 20% to $23 million, due to the
Quarter's blockade-driven drop in production and temporary increase
in expenses, but was up 290% from second quarter 2020.
-
Increased Oil Sales and Operating Netback: The
Brent oil price averaged $69.08/bbl and Gran Tierra generated oil
sales of $97 million, up 1% or $1 million from the Prior Quarter,
as the 13% increase in the Brent oil price more than offset the 6%
decrease in production during the Quarter. The Company’s operating
netback3 of $33.44/bbl was up 15%, an increase of $4.24/bbl
relative to the Prior Quarter. This improvement was achieved
despite an increase in royalties to $10.21/bbl, up from the Prior
Quarter's $8.34/bbl, which was caused by higher oil prices and
despite increased expenses during the Quarter.
- Capital
Expenditures: The Quarter's expenditures of approximately
$37 million were flat with the Prior Quarter's level of $37
million, as Gran Tierra pressed ahead with development drilling
operations, completions and workovers at the Acordionero and
Costayaco oil fields. The Company estimates that approximately
50-60% of its 2021 capital program of $130-150 million has been
spent during the first half of 2021.
- Oil
Price Hedges In Place Designed To Protect Cash Flows During Second
Half 2021: The Company has the following Brent oil price
hedges in place covering 10,000 BOPD in second half 2021, with a
weighted average floor price of $57.03/bbl and a weighted average
ceiling price of $65.29/bbl (realized oil price hedging losses
totaled $24 million during the Quarter, but the Company's first
half 2021 hedges have now rolled off, replaced by the following
hedges with much higher floor and ceiling prices):
Period and type of instrument |
Volume,BOPD |
Reference |
Sold Put($/bbl,WeightedAverage) |
PurchasedPut ($/bbl,WeightedAverage) |
Sold Call($/bbl,WeightedAverage) |
Swap Price($/bbl,WeightedAverage) |
Three-way Collars: July 1, to December 31, 2021 |
7,000 |
|
ICE Brent |
47.14 |
|
57.14 |
|
68.95 |
|
n/a |
Swaps: July 1, to December 31, 2021 |
3,000 |
|
ICE Brent |
n/a |
n/a |
n/a |
56.75 |
|
Message to Shareholders
Gary Guidry, President and Chief Executive
Officer of Gran Tierra, commented: “Despite the challenges with
blockades during the Quarter, we are very pleased that we have now
safely and diligently ramped operations back up throughout our
Colombia portfolio. Although the blockades temporarily impacted
Gran Tierra's production volumes, the stronger Brent oil price
environment more than offset the effect of lower production
volumes, as demonstrated by our higher oil sales and EBITDA1
figures. With production restored, we expect Gran Tierra to
generate second half 2021 free cash flow2 of $100-120 million. With
a constructive oil price environment, a successful first half 2021
drilling program and the expiry of our first half 2021 oil price
hedges, we are very excited about the second half of 2021 and all
of 2022."
Operations Update
-
Acordionero Oil Field (100% WI)
- Gran Tierra
completed a total of 13 workovers during the Quarter to restore
wells to production which had gone offline. During the current
workover campaign, the average electric submersible pump
replacement cost has decreased 57% from fourth quarter 2019.
- The development
drilling rig was active from November 30, 2020, to May 13, 2021,
drilling both producers and water injectors. The average cost per
well has decreased 38% since 2019. Five wells were drilled from
Pad-6, with a pacesetter well from spud to rig release of 10.9
days, at a total cost of $1.9 million.
- From January 1
to June 30, 2021, Gran Tierra drilled 11 new oil wells and 2 new
water injection wells.
- Gran Tierra
believes its prudent reservoir management of Acordionero’s
waterflood has allowed the Company to restore this field’s
production to a level last achieved 20 months ago, which strongly
demonstrates the effectiveness of the waterflood.
-
Costayaco Oil Field (100% WI)
- In March 2021,
Gran Tierra commenced its infill development drilling campaign to
drill 3 oil producers; this drilling program is the first in
Costayaco since November 2019.
- The CYC-42 and
CYC-43 infill oil wells were drilled during March and April of
2021; and the CYC-44 infill well was drilled in late April,
2021.
- The CYC-43 well
is currently on production and the CYC-42 and CYC-44 wells are both
expected to start production during August 2021.
- Moqueta
Oil Field (100% WI)
- During the
Quarter, Gran Tierra initiated a 6-well workover program. One
stimulation (MQT-12) and one injector conversion (MQT-2) were
completed.
- Two remaining
injector conversions (MQT-6 and MQT-16) and two producer workovers
(MQT-15 and MQT-8) are expected to be completed by early September
2021.
- The workover
program is designed to optimize the field's waterflood and
potentially increase ultimate oil recovery.
-
Suroriente Block (52% WI and Operator)
- At the Cohembi
oil field in the Suroriente Block, a facility expansion program is
progressing as planned, which is expected to allow additional
production to be brought online in the second half of 2021.
- A workover rig
in the Suroriente Block is currently running larger pumps in four
oil wells. This pump upsizing program is being done in conjunction
with the new facility expansion program.
Financial and Operational Highlights
(all amounts in $000s, except per share and bbl
amounts)
|
Three Months EndedJune 30, |
|
Three Months EndedMarch 31, |
|
Six Months EndedJune 30, |
|
2021 |
2020 |
|
2021 |
|
2021 |
2020 |
|
|
|
|
|
|
|
|
Net Loss |
$ |
(17,627 |
) |
|
$ |
(370,649 |
) |
|
|
$ |
(37,422 |
) |
|
|
$ |
(55,049 |
) |
|
$ |
(622,275 |
) |
|
Per Share -
Basic and Diluted |
$ |
(0.05 |
) |
|
$ |
(1.01 |
) |
|
|
$ |
(0.10 |
) |
|
|
$ |
(0.15 |
) |
|
$ |
(1.70 |
) |
|
|
|
|
|
|
|
|
|
Oil
Sales |
$ |
96,623 |
|
|
$ |
33,824 |
|
|
|
$ |
95,493 |
|
|
|
$ |
192,116 |
|
|
$ |
119,903 |
|
|
Operating
Expenses |
(25,431 |
) |
|
(19,364 |
) |
|
|
(29,625 |
) |
|
|
(55,056 |
) |
|
(63,952 |
) |
|
Transportation
Expenses |
(2,921 |
) |
|
(3,226 |
) |
|
|
(2,506 |
) |
|
|
(5,427 |
) |
|
(7,263 |
) |
|
Operating
Netback(1)(3) |
$ |
68,271 |
|
|
$ |
11,234 |
|
|
|
$ |
63,362 |
|
|
|
$ |
131,633 |
|
|
$ |
48,688 |
|
|
|
|
|
|
|
|
|
|
G&A Expenses
Before Stock-Based Compensation |
$ |
7,133 |
|
|
$ |
5,237 |
|
|
|
$ |
5,898 |
|
|
|
$ |
13,031 |
|
|
$ |
12,677 |
|
|
G&A Stock-Based
Compensation Expense (Recovery) |
1,873 |
|
|
1,292 |
|
|
|
3,671 |
|
|
|
5,544 |
|
|
(763 |
) |
|
G&A Expenses,
Including Stock Based Compensation |
$ |
9,006 |
|
|
$ |
6,529 |
|
|
|
$ |
9,569 |
|
|
|
$ |
18,575 |
|
|
$ |
11,914 |
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA(1) |
$ |
36,299 |
|
|
$ |
17,872 |
|
|
|
$ |
41,904 |
|
|
|
$ |
78,203 |
|
|
$ |
52,363 |
|
|
|
|
|
|
|
|
|
|
EBITDA(1) |
$ |
34,424 |
|
|
$ |
(391,375 |
) |
|
|
$ |
16,359 |
|
|
|
$ |
50,783 |
|
|
$ |
(537,993 |
) |
|
|
|
|
|
|
|
|
|
Funds Flow from
Operations(1) |
$ |
23,272 |
|
|
$ |
5,974 |
|
|
|
$ |
28,973 |
|
|
|
$ |
52,245 |
|
|
$ |
28,201 |
|
|
|
|
|
|
|
|
|
|
Capital
Expenditures |
$ |
37,384 |
|
|
$ |
4,747 |
|
|
|
$ |
37,427 |
|
|
|
$ |
74,811 |
|
|
$ |
49,024 |
|
|
|
|
|
|
|
|
|
|
Average Daily Volumes (BOPD) |
|
|
|
|
|
|
|
WI Production Before
Royalties |
23,035 |
|
|
20,165 |
|
|
|
24,463 |
|
|
|
23,745 |
|
|
24,846 |
|
|
Royalties |
(4,059 |
) |
|
(1,757 |
) |
|
|
(3,930 |
) |
|
|
(3,995 |
) |
|
(2,957 |
) |
|
Production
NAR |
18,976 |
|
|
18,408 |
|
|
|
20,533 |
|
|
|
19,750 |
|
|
21,889 |
|
|
Decrease (Increase) in
Inventory |
(522 |
) |
|
858 |
|
|
|
(262 |
) |
|
|
(393 |
) |
|
169 |
|
|
Sales |
18,454 |
|
|
19,266 |
|
|
|
20,271 |
|
|
|
19,357 |
|
|
22,058 |
|
|
Royalties, % of WI
Production Before Royalties |
18 |
|
% |
9 |
|
% |
|
16 |
|
% |
|
17 |
|
% |
12 |
|
% |
|
|
|
|
|
|
|
|
Per bbl |
|
|
|
|
|
|
|
Brent |
$ |
69.08 |
|
|
$ |
33.39 |
|
|
|
$ |
61.32 |
|
|
|
$ |
65.23 |
|
|
$ |
42.10 |
|
|
Quality and
Transportation Discount |
(11.54 |
) |
|
(14.10 |
) |
|
|
(8.98 |
) |
|
|
(10.40 |
) |
|
(12.23 |
) |
|
Royalties |
(10.21 |
) |
|
(1.63 |
) |
|
|
(8.34 |
) |
|
|
(9.21 |
) |
|
(3.62 |
) |
|
Average Realized
Price |
47.33 |
|
|
17.66 |
|
|
|
44.00 |
|
|
|
45.62 |
|
|
26.25 |
|
|
Transportation
Expenses |
(1.43 |
) |
|
(1.68 |
) |
|
|
(1.15 |
) |
|
|
(1.29 |
) |
|
(1.59 |
) |
|
Average Realized Price
Net of Transportation Expenses |
45.90 |
|
|
15.98 |
|
|
|
42.85 |
|
|
|
44.33 |
|
|
24.66 |
|
|
Operating
Expenses |
(12.46 |
) |
|
(10.11 |
) |
|
|
(13.65 |
) |
|
|
(13.07 |
) |
|
(14.00 |
) |
|
Operating
Netback(1)(3) |
33.44 |
|
|
5.87 |
|
|
|
29.20 |
|
|
|
31.26 |
|
|
10.66 |
|
|
COVID-19
costs |
(0.44 |
) |
|
(0.22 |
) |
|
|
(0.52 |
) |
|
|
(0.48 |
) |
|
(0.09 |
) |
|
G&A Expenses
Before Stock-Based Compensation |
(3.49 |
) |
|
(2.73 |
) |
|
|
(2.72 |
) |
|
|
(3.09 |
) |
|
(2.78 |
) |
|
Severance
Expenses |
— |
|
|
(0.01 |
) |
|
|
(0.42 |
) |
|
|
(0.22 |
) |
|
(0.29 |
) |
|
Realized Foreign
Exchange Gain (Loss) |
0.19 |
|
|
0.75 |
|
|
|
(0.04 |
) |
|
|
0.07 |
|
|
0.75 |
|
|
Cash Settlements on
Derivative Instruments |
(11.91 |
) |
|
5.67 |
|
|
|
(6.18 |
) |
|
|
(8.95 |
) |
|
3.14 |
|
|
Interest Expense,
Excluding Amortization of Debt Issuance Costs |
(6.39 |
) |
|
(6.41 |
) |
|
|
(5.96 |
) |
|
|
(6.17 |
) |
|
(5.31 |
) |
|
Interest
Income |
— |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
0.08 |
|
|
Net Lease
Payments |
(0.01 |
) |
|
0.01 |
|
|
|
(0.01 |
) |
|
|
(0.01 |
) |
|
— |
|
|
Current Income Tax
Expense |
0.01 |
|
|
0.20 |
|
|
|
— |
|
|
|
— |
|
|
0.02 |
|
|
Cash
Netback(1) |
$ |
11.40 |
|
|
$ |
3.13 |
|
|
|
$ |
13.35 |
|
|
|
$ |
12.41 |
|
|
$ |
6.18 |
|
|
|
|
|
|
|
|
|
|
Share Information (000s) |
|
|
|
|
|
|
|
Common Stock
Outstanding, End of Period |
366,992 |
366,982 |
|
366,982 |
|
366,992 |
366,982 |
Weighted Average
Number of Common and Exchangeable Shares Outstanding - Basic and
Diluted |
366,982 |
366,982 |
|
366,982 |
|
366,982 |
366,982 |
(1) Funds flow from operations, operating
netback, cash netback, earnings before interest, taxes and
depletion, depreciation and accretion
(“DD&A”)
(“EBITDA”)
and EBITDA adjusted for goodwill impairment, asset impairment,
non-cash lease expense, lease payments, unrealized foreign exchange
gains or losses, stock based compensation expense, unrealized
derivative instruments gains or losses and other financial
instruments gains or losses (“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) Cash flow refers to the GAAP line item “net cash provided
by operating activities”. Free cash flow is a non-GAAP measure and
does not have a standardized meaning under GAAP and is defined as
the midpoint of projected 2021 cash flow less the midpoint of
projected 2021 capital spending. Refer to “Non-GAAP Measures” in
this press release.(3) Operating netback as presented is defined as
oil sales less operating and transportation expenses. See the table
titled Financial and Operational Highlights above for the
components of consolidated operating netback and corresponding
reconciliation.
Conference Call
Information:
Gran Tierra will host its second quarter 2021
results conference call on Wednesday, August 4, 2021, 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 Guidry President & Chief Executive Officer
Ryan Ellson Executive Vice President & Chief Financial
Officer
Rodger Trimble Vice President, Investor Relations
+1-403-265-3221
info@grantierra.com
About Gran Tierra Energy
Inc.
Gran Tierra Energy Inc. together with its
subsidiaries is an independent international energy company
currently focused on oil and natural gas exploration and production
in Colombia and Ecuador. The Company is currently developing its
existing portfolio of assets in Colombia and Ecuador and will
continue to pursue additional 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 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”). The use of the words “believe”,
“expect”, “anticipate”, “intend”, “estimate”, “project” “forecast”,
“guidance”, “target”, “goal”, “plan”, “budget” “objective”,
“could”, “should”, and other terms identify forward-looking
statements. In particular, but without limiting the foregoing, this
press release contains forward-looking statements regarding: the
Company’s 2021 outlook and guidance, including estimates of future
production, EBITDA, net cash provided by operating activities
(described in this press release as “cash flow”), free cash flow,
total capital and certain associated metrics; expectations
regarding its capital program, liquidity, including the ability to
pay down the credit facility, and access to capital; strategies
related to drilling and operational activities and expectations
regarding well performance, production and workover activities; the
benefits of reduced capital spending and G&A expenses; and the
benefits of derivative transactions and expectations regarding
future oil prices.
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 and volatility 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 a reduction
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 and the regulatory environment 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; the risk that Gran Tierra does not
receive the anticipated benefits of government programs, including
government tax refunds; Gran Tierra’s ability to comply with
financial covenants in its credit agreement and indentures and make
borrowings under its credit agreement; and the risk factors
detailed from time to time in Gran Tierra’s periodic reports filed
with the Securities and Exchange Commission, including, without
limitation, under the caption "Risk Factors" in Gran Tierra’s
Annual Report on Form 10-K for the year ended December 31, 2020,
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 forward-looking statements contained in this
press release are based on certain assumptions made by Gran Tierra
based on management's experience and other factors believed to be
appropriate. Gran Tierra believes these assumptions to be
reasonable at this time, but the forward-looking statements are
subject to risk and uncertainties, many of which are beyond Gran
Tierra’s control, which may cause actual results to differ
materially from those implied or expressed by the forward looking
statements. The risk that the assumptions on which the 2021 outlook
and guidance are based prove incorrect may increase the later the
period to which the outlook relates. 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.
The estimates of future production, EBITDA, net
cash provided by operating activities (described in this press
release as “cash flow”), free cash flow, total capital and certain
expenses, discounts 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 the
second half of 2021. 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. See press release from the Company
dated July 12, 2021 for additional information.
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.
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
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
adjusted for depletion, depreciation and accretion (“DD&A”)
expenses, goodwill impairment, asset impairment, deferred tax
expense or recovery, stock-based compensation expense or recovery,
amortization of debt issuance costs, non-cash lease expense, lease
payments, unrealized foreign exchange gains or losses, derivative
instruments gains or losses, cash settlements on derivative
instruments and other financial instruments gains or losses.
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 to cash netback is as follows:
|
Three Months EndedJune 30, |
|
ThreeMonthsEndedMarch 31, |
|
Six Months EndedJune 30, |
Cash Netback -
(Non-GAAP) Measure ($000s) |
2021 |
2020 |
|
2021 |
|
2021 |
2020 |
Net loss |
$ |
(17,627 |
) |
$ |
(370,649 |
) |
|
$ |
(37,422 |
) |
|
$ |
(55,049 |
) |
$ |
(622,275 |
) |
Adjustments to
reconcile net loss to cash netback |
|
|
|
|
|
|
|
DD&A expenses |
28,927 |
|
42,484 |
|
|
31,318 |
|
|
60,245 |
|
99,778 |
|
Goodwill impairment |
— |
|
— |
|
|
— |
|
|
— |
|
102,581 |
|
Asset impairment |
— |
|
398,458 |
|
|
— |
|
|
— |
|
402,362 |
|
Deferred tax expense (recovery) |
9,203 |
|
(76,200 |
) |
|
8,651 |
|
|
17,854 |
|
(41,594 |
) |
Stock-based compensation expense (recovery) |
1,873 |
|
1,292 |
|
|
3,671 |
|
|
5,544 |
|
(763 |
) |
Amortization of debt issuance costs |
894 |
|
1,092 |
|
|
881 |
|
|
1,775 |
|
1,936 |
|
Non-cash lease expense |
370 |
|
481 |
|
|
444 |
|
|
814 |
|
971 |
|
Lease payments |
(393 |
) |
(460 |
) |
|
(462 |
) |
|
(855 |
) |
(975 |
) |
Unrealized foreign exchange loss (gain) |
477 |
|
(1,544 |
) |
|
13,003 |
|
|
13,480 |
|
19,255 |
|
Derivative instruments loss (gain) |
21,239 |
|
6,380 |
|
|
23,698 |
|
|
44,937 |
|
(6,487 |
) |
Cash settlements on derivative instruments |
(24,305 |
) |
10,856 |
|
|
(13,404 |
) |
|
(37,709 |
) |
14,343 |
|
Other financial instruments loss (gain) |
2,614 |
|
(6,216 |
) |
|
(1,405 |
) |
|
1,209 |
|
59,069 |
|
Cash
netback |
$ |
23,272 |
|
$ |
5,974 |
|
|
$ |
28,973 |
|
|
$ |
52,245 |
|
$ |
28,201 |
|
EBITDA, as presented, is defined as net loss
adjusted for DD&A expenses, interest expense and income tax
expense or recovery. Adjusted EBITDA, as presented, is defined as
EBITDA adjusted for goodwill impairment, asset impairment, non-cash
lease expense, lease payments, unrealized foreign exchange gains or
losses, stock based compensation expense or recovery, unrealized
derivative instruments gains or losses and other financial
instruments gains or losses. Management uses this supplemental
measure to analyze performance and income generated by our
principal business activities prior to the consideration of how
non-cash items affect that income, and believes that this financial
measure is useful supplemental information for investors to analyze
our performance and our financial results. A reconciliation from
net loss to EBITDA and adjusted EBITDA is as follows:
|
Three Months EndedJune 30, |
|
ThreeMonthsEndedMarch 31, |
|
Six Months EndedJune 30, |
EBITDA - (Non-GAAP)
Measure ($000s) |
2021 |
2020 |
|
2021 |
|
2021 |
2020 |
Net loss |
$ |
(17,627 |
) |
|
$ |
(370,649 |
) |
|
|
$ |
(37,422 |
) |
|
|
$ |
(55,049 |
) |
|
$ |
(622,275 |
) |
|
Adjustments to
reconcile net loss to EBITDA and Adjusted EBITDA |
|
|
|
|
|
|
|
DD&A expenses |
28,927 |
|
|
42,484 |
|
|
|
31,318 |
|
|
|
60,245 |
|
|
99,778 |
|
|
Interest expense |
13,935 |
|
|
13,365 |
|
|
|
13,812 |
|
|
|
27,747 |
|
|
26,175 |
|
|
Income tax expense (recovery) |
9,189 |
|
|
(76,575 |
) |
|
|
8,651 |
|
|
|
17,840 |
|
|
(41,671 |
) |
|
EBITDA |
$ |
34,424 |
|
|
$ |
(391,375 |
) |
|
|
$ |
16,359 |
|
|
|
$ |
50,783 |
|
|
$ |
(537,993 |
) |
|
Goodwill impairment |
— |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
102,581 |
|
|
Asset impairment |
— |
|
|
398,458 |
|
|
|
— |
|
|
|
— |
|
|
402,362 |
|
|
Non-cash lease expense |
370 |
|
|
481 |
|
|
|
444 |
|
|
|
814 |
|
|
971 |
|
|
Lease payments |
(393 |
) |
|
(460 |
) |
|
|
(462 |
) |
|
|
(855 |
) |
|
(975 |
) |
|
Unrealized foreign exchange loss (gain) |
477 |
|
|
(1,544 |
) |
|
|
13,003 |
|
|
|
13,480 |
|
|
19,255 |
|
|
Stock-based compensation expense (recovery) |
1,873 |
|
|
1,292 |
|
|
|
3,671 |
|
|
|
5,544 |
|
|
(763 |
) |
|
Unrealized derivative instruments (gain) loss |
(3,066 |
) |
|
17,236 |
|
|
|
10,294 |
|
|
|
7,228 |
|
|
7,856 |
|
|
Other financial
instruments loss (gain) |
2,614 |
|
|
(6,216 |
) |
|
|
(1,405 |
) |
|
|
1,209 |
|
|
59,069 |
|
|
Adjusted
EBITDA |
$ |
36,299 |
|
|
$ |
17,872 |
|
|
|
$ |
41,904 |
|
|
|
$ |
78,203 |
|
|
$ |
52,363 |
|
|
Funds flow from operations, as presented, is
defined as net loss adjusted for DD&A expenses, goodwill
impairment, asset impairment, deferred tax expense or recovery,
stock-based compensation expense or recovery, amortization of debt
issuance costs, non-cash lease expense, lease payments, unrealized
foreign exchange gains or losses, derivative instruments gains or
losses, cash settlements on derivative instruments and other
financial instruments gains or losses. 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 to funds flow from
operations is as follows:
|
Three Months EndedJune 30, |
|
ThreeMonthsEndedMarch 31, |
|
Six Months EndedJune 30, |
Funds Flow From
Operations - (Non-GAAP) Measure
($000s) |
2021 |
2020 |
|
2021 |
|
2021 |
2020 |
Net loss |
$ |
(17,627 |
) |
|
$ |
(370,649 |
) |
|
|
$ |
(37,422 |
) |
|
|
$ |
(55,049 |
) |
|
$ |
(622,275 |
) |
|
Adjustments to
reconcile net loss to funds flow from operations |
|
|
|
|
|
|
|
DD&A expenses |
28,927 |
|
|
42,484 |
|
|
|
31,318 |
|
|
|
60,245 |
|
|
99,778 |
|
|
Goodwill impairment |
— |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
102,581 |
|
|
Asset impairment |
— |
|
|
398,458 |
|
|
|
— |
|
|
|
— |
|
|
402,362 |
|
|
Deferred tax expense (recovery) |
9,203 |
|
|
(76,200 |
) |
|
|
8,651 |
|
|
|
17,854 |
|
|
(41,594 |
) |
|
Stock-based compensation expense (recovery) |
1,873 |
|
|
1,292 |
|
|
|
3,671 |
|
|
|
5,544 |
|
|
(763 |
) |
|
Amortization of debt issuance costs |
894 |
|
|
1,092 |
|
|
|
881 |
|
|
|
1,775 |
|
|
1,936 |
|
|
Non-cash lease expense |
370 |
|
|
481 |
|
|
|
444 |
|
|
|
814 |
|
|
971 |
|
|
Lease payments |
(393 |
) |
|
(460 |
) |
|
|
(462 |
) |
|
|
(855 |
) |
|
(975 |
) |
|
Unrealized foreign exchange loss (gain) |
477 |
|
|
(1,544 |
) |
|
|
13,003 |
|
|
|
13,480 |
|
|
19,255 |
|
|
Derivative instruments loss (gain) |
21,239 |
|
|
6,380 |
|
|
|
23,698 |
|
|
|
44,937 |
|
|
(6,487 |
) |
|
Cash settlements on derivative instruments |
(24,305 |
) |
|
10,856 |
|
|
|
(13,404 |
) |
|
|
(37,709 |
) |
|
14,343 |
|
|
Other financial instruments loss (gain) |
2,614 |
|
|
(6,216 |
) |
|
|
(1,405 |
) |
|
|
1,209 |
|
|
59,069 |
|
|
Funds flow from
operations |
$ |
23,272 |
|
|
$ |
5,974 |
|
|
|
$ |
28,973 |
|
|
|
$ |
52,245 |
|
|
$ |
28,201 |
|
|
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. 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. 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 the
midpoint of GAAP projected 2021 “net cash provided by operating
activities” less the midpoint of 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.
Presentation of Oil and Gas
Information
References to a formation where evidence of
hydrocarbons has been encountered is not necessarily an indicator
that hydrocarbons will be recoverable in commercial quantities or
in any estimated volume. Gran Tierra’s reported production is a mix
of light crude oil and medium and heavy crude oil for which there
is not a precise breakdown since the Company’s oil sales volumes
typically represent blends of more than one type of crude oil. Well
test results should be considered as preliminary and not
necessarily indicative of long-term performance or of ultimate
recovery. Well log interpretations indicating oil and gas
accumulations are not necessarily indicative of future production
or ultimate recovery. If it is indicated that a pressure transient
analysis or well-test interpretation has not been carried out, any
data disclosed in that respect should be considered preliminary
until such analysis has been completed. References to thickness of
“oil pay” or of a formation where evidence of hydrocarbons has been
encountered is not necessarily an indicator that hydrocarbons will
be recoverable in commercial quantities or in any estimated
volume.
This press release contains certain oil and gas
metrics, including operating netback and cash netback, which do not
have standardized meanings or standard methods of calculation and
therefore such measures may not be comparable to similar measures
used by other companies and should not be used to make comparisons.
These metrics are calculated as described in this press release and
management believes that they are useful supplemental measures for
the reasons described in this press release.
Such metrics have been included herein to
provide readers with additional measures to evaluate the Company’s
performance; however, such measures are not reliable indicators of
the future performance of the Company and future performance may
not compare to the performance in previous periods.
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