TIDMGTE
Substantial Completion of Major Capital Investments in Development
Projects
Shifting to Free Cash Flow with Sustainable Growth
Positive Waterflood Response, Encouraging Results at Acordionero
CALGARY, Alberta, Nov. 05, 2019 (GLOBE NEWSWIRE) -- 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 September 30, 2019 ("the
Quarter"). All dollar amounts are in United States ("U.S.") dollars
unless otherwise indicated. 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
November 5, 2019.
Key Highlights
-- Third Quarter Average Production: Was 32,918 BOE per day ("BOEPD");
approximately 3,000 BOEPD was impacted by temporary downtime due to
electric submersible pump ("ESP") replacements, facility commissioning
and water injection ramp up; current production is approximately 34,000
BOEPD, with 5 to 6 additional wells expected to be brought on production
before the end of 2019
-- Positive Results from Acordionero Waterflood: Acordionero waterflood
accelerated during the Quarter with significant incremental water
injection (averaging over 30,000 bbls of water injected per day ("bwipd")
and peaking over 40,000 bwipd) and substantially reduced gas production
following the commissioning of the upgraded Central Production Facility
("CPF") expansion; the Company plans to be re-injecting excess gas beyond
consumption by 2019 year-end; Gran Tierra is encouraged by the waterflood
response in terms of increased pressure and production responses;
indications look positive for incremental reserve additions associated
with the completion of the CPF expansion and waterflood response
-- Expansion of the Acordionero Field: The AC-54 development well is the
farthest south well drilled in the Acordionero field to date and
encountered 348 of net pay (measured depth) and is expected to be on
production by November 30, 2019
-- Continued Optimization of Other Waterfloods: Waterflood optimization
continued in the Quarter at Costayaco with an injector conversion and two
well stimulations; the CYC-39 well was tested in the Caballos Sand and
commingled with the T Sand and, during September 16 - October 28, 2019,
produced at stabilized rates of 1,159 bbls of oil per day ("bopd") of 30
degree API oil, a gas-oil ratio ("GOR") of 115 standard cubic feet per
stock tank bbl ("scf/stb") and a watercut of 45% on ESP; at Cohembi,
water injection has increased from 15,000 to over 22,000 bwipd since
securing operatorship in March 2019, where the instantaneous voidage
replacement ratio ("VRR") is well over 1.0 and reservoir pressure is
rising; this result in Cohembi, along with continued waterflood response
in Moqueta, further demonstrate the Company's waterflood expertise and
the long-term benefit of stable cash flow generation from waterflood
projects
-- Shifting to Free Cash Flow with Sustainable Growth: Gran Tierra has made
significant investments to build the foundation for expected free cash
flow in 2020 and beyond, investing $211 million at Acordionero from
January 2018 to September 2019 in facilities and water injection wells;
these investments are expected to allow Gran Tierra to lower operating
costs per BOE and increase future production growth
-- Ayombero Activity Recommences in Fourth Quarter 2019: Remedial work on
the three Ayombero wells has commenced in November 2019
-- Near-Term Potential Exploration Catalysts: Tautaco-1 exploration well on
LLA-10 is currently drilling ahead; Cocona-1 well (follow-up appraisal to
Vonu-1 A-Limestone well) on PUT-1 is scheduled to spud before 2019
year-end
-- Updated Corporate Presentation: The Company's Corporate Presentation has
been updated, including information about Acordionero's waterflood
response, and is available on the Company website at www.grantierra.com
Message to Shareholders
Gary Guidry, President and Chief Executive Officer of Gran Tierra,
commented: "Gran Tierra has completed the key investments required to
underpin expected significant future free cash flow for shareholders.
We forecast Gran Tierra to generate free cash flow - after development
and exploration capital - in fourth quarter 2019 and full-year 2020. At
a forecasted $60 per bbl Brent oil price, we are projecting free cash
flow(1) of $75 million to $100 million during 2020, which we plan to use
for net debt reduction and share buybacks.
With the Acordionero facility expansion capital investment behind us, we
forecast significantly lower operating costs per BOE ahead. Despite the
substantial investment in Acordionero since the acquisition in 2016, the
field has generated $187 million of free cash flow(1) . We operate over
95% of our asset base which provides Gran Tierra tremendous flexibility
in terms of controlling future capital costs in response to a
potentially volatile oil price environment.
While the reduction in production during the Quarter was unfortunate, we
view this situation as temporary as we are now seeing the waterflood at
Acordionero responding to the designed injection. The response across
the field is matching internal reservoir simulation modeling estimates
and provides better visibility to forecast and optimize production and
long-term recovery. Our underlying asset value has not changed, and with
the successful implementation of the waterflood and step-out appraisal
extensions in Acordionero, we believe it has increased.
The Company is in an excellent position with low decline, high netback
and long life conventional assets, which are capable of delivering a
strong free cash flow profile and visible growth in production and
reserves. We have grown Proved Plus Probable reserves by 163% over the
last three years and we expect to continue that trend. We also have two
near term potential exploration catalysts - we plan to spud the Cocona-1
well on PUT-1 before the end of the year and look forward to the
drilling results from Tautaco-1 on LLA-10, which is currently drilling
ahead."
Financial Highlights
-- Net loss for the Quarter was $29 million and net income for the nine
months of 2019 was $12 million
-- Adjusted EBITDA(1) was $68 million for the Quarter and $260 million for
the nine months of 2019
-- Funds flow from operations(1) was $59 million ($0.16 per share, basic)
for the Quarter and $223 million ($0.59 per share, basic) for the nine
months of 2019
-- At September 30, 2019, net debt(1) to Adjusted EBITDA was 1.8 times on a
trailing 12 month basis (on a trailing 12 month basis, net income was $1
million and Adjusted EBITDA was $340 million); at $60 per bbl Brent, the
Company expects to generate free cash flow(1) in fourth quarter 2019 and
full-year 2020 and plans to decrease net debt to Adjusted EBITDA
-- Oil and gas sales were $132 million for the Quarter and $443 million for
the nine months of 2019
-- Operating netback(1) was $27.34 per BOE for the Quarter and $30.17 per
BOE for the nine months of 2019
-- Operating expenses were $11.77 per BOE for the Quarter, compared to $8.81
per BOE in third quarter 2018 as a result of higher power generation,
field operations, maintenance and freight logistics costs, coupled with
lower production volumes; a significant portion of the Company's
operating expenses are fixed
-- Workover expenses for the Quarter were $3.63 per BOE, down from to $3.93
per BOE in third quarter 2018 as a result of lower frequency of ESP
failures
-- Transportation expenses were $1.05 for the Quarter, down from $2.25 per
BOE in third quarter 2018 due to higher volumes sold at the wellhead
-- As expected, the Quarter was capital intensive due to the substantial
completion of the 3D seismic program in the Putumayo, and the completion
of facilities and accelerated activity at Acordionero; due to the
drilling efficiencies achieved during the Quarter, the Company was able
to drill development wells in record time and shift wells scheduled for
fourth quarter 2019 into the Quarter
-- Returned $38 million to stockholders between January 1 and September 30,
2019 through buybacks of 20.1 million shares of common stock (5.2% of
outstanding shares of common stock as of January 1, 2019)
Operations Update
Acordionero (100% WI, Operator)
-- During the Quarter, 10 wells were drilled focusing on an optimized
waterflood program to maximize ultimate oil recovery and long-term value
(4 producers, 3 water injectors and 3 water source wells)
-- The AC-54 development well is the farthest south well drilled in the
Acordionero field to date and located outside the previously established
southern boundary of the Proved plus Probable ("2P") and 2P plus Possible
("3P") original-oil-place mapping for the field; the AC-54 encountered
348 feet of oil pay (measured depth) and is expected to be placed on
production by the end of November 2019; the AC-54 appears to be similar
to the AC-37 well, which is located to the north of AC-54 and is the
second farthest south well drilled in Acordionero; the AC-37 well had
initial production (averaged over 30 days) of 944 bopd, a GOR of 305
scf/stb and water cut of less than 1% on ESP; during October 2019, the
AC-37 had average production of 796 bopd, a GOR of 300 scf/stb, water cut
of less than 1% and had cumulative oil production of approximately
187,000 bbls after 221 days of production
-- From the acquisition date of August 23, 2016 until September 30, 2019,
Acordionero has generated $697 million in oil and natural gas sales and
$545 million of operating netback(1), while the Company made capital
investments in this field of $358 million, which equals free cash flow(1)
from the field of $187 million over this time period; Acordionero has
self-funded its active development program, including the major
investment in facilities
-- Drilling efficiencies continue to be achieved, with AC-49 drilled in
record drill time of 5 days and AC-47 drilled and completed for a total
cost of $2.6 million
-- Water injection at Acordionero continues to ramp-up, averaging over
30,000 bwipd and on-schedule to exceed 40,000 bwipd in the coming months
-- Gran Tierra is observing a positive impact on reservoir pressure, which
would support increased oil production rates from current and future oil
producers and ultimate oil recovery efficiency from all of the reservoirs
-- The CPF expansion, water injection facilities and gas to power turbines
continue operating with increasing reliability
-- The AC-48's Lisama E Sand was tested in the Quarter with good initial
rates; pressure build up results showed low permeability and boundaries
suggesting potential channel sand deposition; the Lisama E has been
commingled with the Lisama C and the well is now on production; Gran
Tierra believes Lisama E opportunities exist throughout the field and the
learnings from AC-48 will be applied to future development
Suroriente (52% WI and Operator)
-- The Cohembi oil field in the Suroriente Block continues to respond
positively to increased water injection and pump optimizations; gross
water injection averaged over 21,000 bwipd in the Quarter, up 29% from
second quarter 2019, and up from a level of 14,500 bwipd when Gran Tierra
assumed operatorship on March 1, 2019; the Company is planning to
increase gross water injection to 40,000 bwipd by the end of 2019
-- Since assuming operatorship we have been able to increase gross
production by over 1,000 bopd without drilling a well
-- As part of an expanded waterflood program, activities have commenced to
expand the Cohembi water treatment, injection and processing facilities;
this expansion is expected to boost water injection capacity from a
current 21,000 bwipd to 60,000 bwipd; targeted completion for the first
phase of expansion is scheduled to be in fourth quarter 2019
Chaza Block - Costayaco (100% WI)
-- The CYC-39 and 40 wells encountered unswept oil in the Caballos and T
Sands; an ESP is currently being installed in the CYC-40
-- For the remainder of 2019, the Company intends to complete the drilling
of the CYC-41 well
-- With the success of CYC-39 and CYC-40, along with an updated reservoir
simulation model, we have identified a number of additional development
well locations to optimize oil recovery and value
Ayombero-Chuira (100% WI)
-- Gran Tierra remains encouraged by early results from Ayombero-1 well:
since a workover in July 2019, the well has produced on natural flow at
an average rate of 202 bopd of 18.5 degree API oil, a GOR of 198 scf/stb,
a watercut of 0.14% and 1,482 pounds per square inch of tubing head
pressure; the well has total cumulative oil production to date of 80,556
bbls
Exploration Update
Putumayo Basin
-- Cocona-1, PUT-1 (100% WI): This well, which was originally called the
Vonu Este-1, is on track to spud in late November 2019 from the Vonu Este
pad; one of the well's planned targets is the A-Limestone; Cocona-1 is
planned as the first follow-up appraisal well to the Vonu-1 well, which
has been Gran Tierra's most successful A-Limestone well to date: the
Vonu-1 well has produced approximately 830,000 bbls of oil from the
A-Limestone (from June 2017 to September 2019) and is still producing
over 400 BOEPD; the Costayaco-19 well in the Chaza Block, has produced
approximately 740,000 bbls of oil from the A-Limestone (from May 2016 to
September 2019)
-- 3D Seismic Program Update (341 Square Kilometers): Seismic recording
operations on the Alea 1848A, Nancy-Burdine-Maxine, PUT-4 and PUT-25
blocks are now complete; this program is the largest seismic program ever
conducted in the Putumayo Basin; interpretation is currently underway
which is expected to help Gran Tierra better define further development
of the Nancy field and multiple exploration prospects across all four
blocks
Llanos Basin
-- Tautaco-1, LLA-10 (50% WI): Gran Tierra is participating in this
non-operated exploration well which is currently drilling
Financial and Operational Highlights (all amounts in $000s, except per
share and BOE amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
2019 2018 2019 2018
------------ ------------ ------------ ------------
Net (Loss) Income $(28,833) $ 75,295 $ 11,686 $113,456
Per Share - Basic $ (0.08) $ 0.19 $ 0.03 $ 0.29
Per Share - Diluted $ (0.08) $ 0.18 $ 0.03 $ 0.28
Oil and Gas Sales $132,491 $175,118 $443,049 $476,792
Operating Expenses (35,603) (29,511) (104,119) (78,019)
Workover Expenses (10,979) (13,106) (30,025) (25,922)
Transportation Expenses (3,179) (7,505) (16,167) (21,024)
-------- -------- -------- --------
Operating Netback(1) $ 82,730 $124,996 $292,738 $351,827
======= ======= ======= =======
G&A Expenses Before Stock-Based Compensation $ 7,645 $ 3,679 $ 24,782 $ 17,254
G&A Stock-Based Compensation (Recovery) Expense (8) 10,132 1,092 19,919
-------- -------- -------- --------
G&A Expenses, Including Stock Based Compensation $ 7,637 $ 13,811 $ 25,874 $ 37,173
======= ======= ======= =======
Adjusted EBITDA(1) $ 67,930 $110,340 $260,005 $295,489
Funds Flow from Operations(1) $ 59,021 $ 85,015 $222,740 $254,312
Capital Expenditures $116,495 $101,463 $310,579 $258,551
Average Daily Volumes (BOEPD)
----------------------------------------------------------
WI Production Before Royalties 32,918 36,170 35,454 35,553
Royalties (5,155) (7,571) (5,929) (7,222)
-------- -------- -------- --------
Production NAR 27,763 28,599 29,525 28,331
(Increase) Decrease in Inventory (58) 60 65 (403)
-------- -------- -------- --------
Sales 27,705 28,659 29,590 27,928
======== ======== ======== ========
Royalties, % of WI Production Before Royalties 16% 21% 17% 20%
Per BOE
----------------------------------------------------------
Brent $ 62.03 $ 75.97 $ 64.75 $ 72.68
Quality and Transportation Discount (10.05) (9.55) (9.90) (10.14)
Royalties (8.19) (13.91) (9.19) (12.79)
-------- -------- -------- --------
Average Realized Price 43.79 52.51 45.66 49.75
Transportation Expenses (1.05) (2.25) (1.67) (2.19)
-------- -------- -------- --------
Average Realized Price Net of Transportation Expenses 42.74 50.26 43.99 47.56
Operating Expenses (11.77) (8.81) (10.73) (8.08)
Workover Expenses (3.63) (3.93) (3.09) (2.70)
-------- -------- -------- --------
Operating Netback(1) 27.34 37.52 30.17 36.78
G&A Expenses (2.53) (1.10) (2.55) (1.80)
Severance Expenses (0.05) (0.30) (0.11) (0.21)
Realized Foreign Exchange (Loss) Gain (0.14) 0.06 (0.03) (0.02)
Realized Financial Instruments Loss (0.31) (3.20) (0.23) (2.73)
Interest Expense, Excluding Amortization of Debt Issuance
Costs (3.76) (1.98) (2.89) (1.87)
Interest Income 0.04 0.22 0.07 0.22
Current Income Tax Expense (1.01) (5.73) (1.44) (3.78)
-------- -------- -------- --------
Cash Netback(1) $ 19.58 $ 25.49 $ 22.99 $ 26.59
======= ======= ======= =======
Share Information (000s)
----------------------------------------------------------
Common Stock Outstanding, End of Period 366,982 391,339 366,982 391,339
Weighted Average Number of Common and Exchangeable
Shares Outstanding - Basic 372,195 391,210 379,701 391,186
Weighted Average Number of Common and Exchangeable
Shares Outstanding - Diluted 372,195 427,948 372,195 427,417
-------- -------- -------- --------
(1) Net debt is defined as face value of debt, less cash and cash
equivalents. Net debt, funds flow from operations, operating netback,
return on average capital employed, free cash flow, 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"). Cash flow refers to the GAAP line item "net
cash provided by operating activities". Free cash flow refers to the
GAAP line item "net cash provided by operating activities", less capital
expenditures. Refer to "Non-GAAP Measures" in this press release.
(2) Operating netback in the context of updated 2019 guidance 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 GAAP measure is oil and gas sales price. Estimated oil and gas sales
price is calculated by subtracting 2019 forecasts of transportation and
quality discount and royalties from the 2019 budget Brent oil price
forecast as outlined in the relevant table above. Estimated 2019
operating netback is calculated by subtracting 2019 forecasts of
transportation and quality discount, royalties, operating costs and
pipeline transportation from the 2019 budget Brent oil price forecast as
outlined in the relevant table above.
(3) G&A expense includes stock based compensation expense
Conference Call Information:
Gran Tierra will host its third quarter 2019 results conference call on
Wednesday, November 6, 2019, 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 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 www.morningstar.co.uk/uk/nsm.
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"), which can
be identified by such terms as "expect," "plan," "guidance," "forecast",
"project," "will," "believe," and other terms that are forward-looking
in nature. Such forward-looking statements include, but are not limited
to, the Company's expectations, budget, capital program, capital
expenditures and guidance, including for certain future production, net
cash provided by operating activities (described in this press release
as cash flow), net debt, total capital, free cash flow in fourth quarter
2019 (assuming a $65 per bbl Brent oil price) and 2020 (assuming a $60
per bbl Brent oil price), operating netback and operating and workover
expense estimates, the Company's strategies and the Company's operations
including planned operations, oil prices and oil production and
anticipated benefits from the Acordionero Projects.
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 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, and the general continuance of current or, where
applicable, assumed operational, regulatory and industry conditions
including in areas of potential expansion, and the ability of Gran
Tierra to execute its current business and operational plans in the
manner currently planned. Gran Tierra believes the material factors,
expectations and assumptions reflected in the forward-looking statements
are reasonable at this time but no assurance can be given that these
factors, expectations and assumptions will prove to be correct.
Among the important factors that could cause actual results to differ
materially from those indicated by the forward-looking statements in
this press release are: prices and markets for oil and natural gas are
unpredictable and tend to fluctuate significantly; Gran Tierra's
operations are located in South America and unexpected problems can
arise due to guerilla activity; 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 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 ability to replace reserves and production and develop and
manage reserves on an economically viable basis; 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; 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, 2018 filed February 27, 2019 and its
Quarterly Reports on Form 10-Q. These filings are available on the SEC
website at http://www.sec.gov and on SEDAR at www.sedar.com. Although
the current capital spending program and long term strategy of Gran
Tierra is based upon the current expectations of the management of Gran
Tierra, should any one of a number of issues arise, Gran Tierra may find
it necessary to alter its business strategy and/or capital spending
program and there can be no assurance as at the date of this press
release as to how those funds may be reallocated or strategy changed.
All forward-looking statements included in this press release 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 securities laws. Gran Tierra's forward-looking statements are
expressly qualified in their entirety by this cautionary statement.
The estimates of 2019 future production, net cash provided by operating
activities (described in this press release as cash flow), net debt,
total capital, free cash flow in fourth quarter 2019 (assuming a $65
Brent oil price) and 2020 (assuming a $60 Brent oil price), operating
netback and operating and workover expenses set forth in this press
release 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 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. These projections
contain forward-looking statements and are based on a number of material
assumptions and factors set out above. Actual results may differ
significantly from the projections presented herein. These projections
may also be considered to contain future-oriented financial information
or a financial outlook. The actual results of Gran Tierra's operations
for any period will likely vary from the amounts set forth in these
projections, and such variations may be material. See above for a
discussion of the risks that could cause actual results to vary. The
future-oriented financial information and financial outlooks contained
in this press release have been approved by management as of the date of
this press release. Readers are cautioned that any such financial
outlook and future-oriented financial information contained herein
should not be used for purposes other than those for which it is
disclosed herein. The Company and its management believe that the
prospective financial information has been prepared on a reasonable
basis, reflecting management's best estimates and judgments, and
represent, to the best of management's knowledge and opinion, the
Company's expected course of action. However, because this information
is highly subjective, it should not be relied on as necessarily
indicative of future results.
Non-GAAP Measures
This press release includes non-GAAP financial measures as further
described herein. These non-GAAP measures do not have a standardized
meaning under GAAP. Investors are cautioned that these measures should
not be construed as alternatives to net income or loss 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 income before DD&A expenses,
deferred income tax expense, amortization of debt issuance costs,
unrealized foreign exchange gains and losses, loss on sale, non-cash
operating and general and administrative ("G&A") expenses and unrealized
financial instruments gains and 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 income to cash netback is as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
Cash Netback - (Non-GAAP) Measure ($000s) 2019 2018 2019 2018
------------ -------- --------- -----------
Net (loss) income $ (28,833) $75,295 $ 11,686 $113,456
Adjustments to reconcile net (loss) income to cash
netback
DD&A expenses 49,812 51,630 164,430 137,698
Deferred income tax expense (recovery) 8,472 (36,769) 31,752 (118)
Amortization of debt issuance costs 789 816 2,574 2,329
Unrealized foreign exchange loss (gain) 6,412 (672) 5,303 159
Loss on redemption of Convertible Notes 11,305 -- 11,305 --
Non-cash operating expenses -- 142 -- 558
Non-cash G&A (recovery) expense (8) 10,132 1,092 19,919
Unrealized financial instruments loss (gain) 11,355 (15,560) (5,165) (19,329)
----------- ------- -------- --------
Cash netback $ 59,304 $85,014 $222,977 $254,672
======= ====== ======= =======
EBITDA, as presented, is defined as net income adjusted for DD&A
expenses, interest expense and income tax expense or recovery. Adjusted
EBITDA is defined as EBITDA adjusted for loss on redemption on
convertible notes and loss or gain on investment. 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 income
to EBITDA and Adjusted EBITDA as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
EBITDA - (Non-GAAP) Measure ($000s) 2019 2018 2019 2018
--------- --------- --------- -----------
Net (loss) income $(28,833) $ 75,295 $ 11,686 $113,456
Adjustments to reconcile net (loss) income to EBITDA
and Adjusted EBITDA
DD&A expenses 49,812 51,630 164,430 137,698
Interest expense 12,153 7,404 30,655 20,274
Income tax expense (recovery) 11,521 (17,661) 45,675 36,106
-------- -------- -------- --------
EBITDA $ 44,653 $116,668 $252,446 $307,534
======= ======= ======= =======
Loss on redemption of Convertible Notes 11,305 -- 11,305 --
Investment loss (gain) 11,972 (6,328) (3,746) (12,045)
-------- -------- -------- --------
Adjusted EBITDA $ 67,930 $110,340 $260,005 $295,489
======= ======= ======= =======
Funds flow from operations, as presented, is net income adjusted for
DD&A expenses, deferred tax expense, stock-based compensation expense,
amortization of debt issuance costs, cash settlement of RSUs, non-cash
lease expense, lease payments, unrealized foreign exchange gains and
losses, financial instruments gains or losses, cash settlement of
financial instruments and loss on sale. 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 income
to funds flow from operations is as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
Funds Flow From Operations -
(Non-GAAP) Measure ($000s) 2019 2018 2019 2018
------------ -------- --------- -----------
Net (loss) income $ (28,833) $75,295 $ 11,686 $113,456
Adjustments to reconcile net (loss) income
to funds flow from operations
DD&A expenses 49,812 51,630 164,430 137,698
Deferred tax expense (recovery) 8,472 (36,769) 31,752 (118)
Stock-based compensation (recovery)
expense (8) 10,275 1,092 20,477
Amortization of debt issuance costs 789 816 2,574 2,329
Cash settlement of RSUs -- -- -- (360)
Non-cash lease expense 472 -- 1,366 --
Lease payments (755) -- (1,603) --
Unrealized foreign exchange loss (gain) 6,412 (672) 5,303 159
Financial instruments loss (gain) 12,285 (4,874) (2,890) 6,840
Cash settlement of financial instruments (930) (10,686) (2,275) (26,169)
Loss on redemption of Convertible Notes 11,305 -- 11,305 --
-----------
Funds flow from operations $ 59,021 $85,015 $222,740 $254,312
======= ====== ======= =======
Free cash flow, when presented in the context of targeted 2020 free cash
flow, is defined as GAAP "net cash provided by operating activities"
less projected 2020 capital spending. 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
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.
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. 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 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. 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.
(END) Dow Jones Newswires
November 05, 2019 19:15 ET (00:15 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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