Gran Tierra Energy Inc.
("Gran Tierra" or
the "Company") (NYSE American:GTE)(NYSE MKT:GTE)(TSX:GTE)
today announced the Company's financial and operating results for
the second quarter ended June 30, 2018 ("
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 August 2, 2018.
Key Highlights
- Achieved record production of 35,400 BOE per day
("BOEPD") in the Quarter with an average
production rate of 36,426 BOEPD in June 2018; the Company remains
on track to meet full year 2018 production guidance of 36,500 to
38,500 BOEPD, with fourth quarter 2018 production expected to
exceed 40,000 BOEPD
- Strong financial performance in the Quarter: net income of $20
million ($0.05 per share, basic), funds flow from operations1 of
$95 million ($0.24 per share, basic) and capital expenditures of
$84 million
- Exited the Quarter with $126 million of cash and cash
equivalents and an undrawn $300 million credit facility,
representing 0.8 times net debt to the Quarter's annualized funds
flow from operations and 0.7 times net debt to the Quarter's
annualized EBITDA1
- Acordionero production facility expansion and additional
development drilling on track and on budget, with an active second
half 2018 planned
- In mid-July 2018, Gran Tierra reached an important safety
milestone with no lost time injury for 5 million person-hours; the
Company achieved this milestone while increasing activity levels in
all of its assets
- Expanded 2018 capital program to range of $305 million to $325
million to:
- appraise and develop the Ayombero/Chuira field
- drill additional development wells in Costayaco and
Acordionero
- potential to positively impact 2018 year-end reserves, 2018
exit rate and 2019 production
- Gran Tierra expects the increased 2018 capital program to be
fully funded by cash from operating activities in 2018 of $330 to
$340 million, based on first half 2018 results and a forecast Brent
oil price of $73/bbl in the second half of 2018
- Successful development drilling in Costayaco with the CYC-30
well producing from U Sand and Caballos Formation at a stable
average rate of 1,491 barrels of oil per day
("bopd") with a water cut of 7% and gas-oil ratio
("GOR") of 82 standard cubic feet per bbl
("scf/bbl") during June 2018; the Company is
updating its mapping and reservoir model for the legacy sandstone
reservoirs based on these excellent results
- Cumplidor-2 was drilled on prognosis using the new
three-dimensional ("3D") seismic and has been
producing from the N Sand at a stable average oil rate of 300 bopd
with a water cut of 0.3% and GOR of 77 scf/bbl since June 19, 2018;
this well is expected to produce greater than 500 bopd when a
larger pump is installed
- 10 gross development wells (10 net) are planned for the second
half of 2018
- Exciting second half 2018 exploration well drilling program has
commenced:
- Juglar Deep: spud on July 7, 2018, in the Middle Magdalena
Valley ("MMV") Basin targeting the deeper La Luna
conventional carbonate resource oil play; in shallower formations
already drilled, log analysis indicates that 40 feet
("ft") of potential net oil in the La Paz and 12
ft of potential gas pay in the Mugrosa may exist
- Chilanguita-1: planned spud in August 2018 on the Putumayo Alea
1848A block, where Gran Tierra recently increased its WI to 100%,
to target the A-Limestone, M2-Limestone, U and T Sands and the
Caballos Formation
- Exploration drilling pad is complete in the PUT-7 block where
the Company plans to drill the Pomorroso, Pecari and Northwest
multi-zone prospects over the next 6 months to target the
A-Limestone and the U and N Sands
1 Net debt is defined as face value of debt
(excluding debt issuance costs), less cash and cash equivalents.
Funds flow from operations and earnings before interest, taxes and
depletion, depreciation and accretion ("DD&A")
("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.
Message to Shareholders
Gary Guidry, President and Chief Executive
Officer of Gran Tierra, commented: "During the second quarter of
2018, our high quality, operated, diversified suite of assets in
Colombia continued to deliver strong operational and financial
performance with record high oil production. Gran Tierra’s strategy
is focused on economic returns with an emphasis on profitable
production and reserves growth to create long term shareholder
value. With our large resource base and drilling inventory, low
base declines and high netback production, we continued to
demonstrate this Quarter that Gran Tierra has created a sustainable
business model, and we expect the revised 2018 capital program to
be fully funded by forecasted cash from operating activities in
2018.
Acordionero continues to be Gran Tierra's
self-funding growth engine in terms of material economic production
increases. During the first half of 2018, our MMV drilling
program also delivered exciting results at the Ayombero-1 well,
which we believe may have opened up an exciting new front for
appraisal and development in the La Luna conventional carbonate
play. In the Putumayo Basin, we are also highly encouraged by
recent development drilling in the sandstone reservoirs of Gran
Tierra's legacy Costayaco field.
After our successful first half of 2018, there
are multiple catalysts in the second half of 2018:
- Forecasted ramp up in Acordionero production with 2 rigs
scheduled to drill 6 development oil wells and 1 water injection
well, in tandem with the ongoing expansion of the production
facilities and waterflood
- Planned drilling of:
- 3 appraisal wells at Ayombero, which could convert La Luna
carbonate prospective oil resources into reserves
- 1 exploration well in MMV La Paloma Block, targeting La Luna
carbonate oil play
- 3 exploration wells in PUT-7 block, targeting A-Limestone and
N-Sand
- 1 exploration well in Alea 1848A block, targeting A and
M2-Limestones, U and T Sands and Caballos Formation
Our exploration campaign is designed to test the
majority of our large portfolio of unrisked mean prospective
resources of 1.5 billion BOE1, including our dominant Putumayo
Basin position in the A-Limestone, other carbonates and the N Sand
oil play fairways, as well as the La Luna carbonate oil play in the
MMV Basin.
On behalf of our Board of Directors and the team
at Gran Tierra, I want to thank all of our stakeholders for their
continued support. We believe that our focused strategy continues
to deliver results on several fronts in the multi-horizon, proven
hydrocarbon producing basins of Colombia. Gran Tierra is
well-positioned for an exciting year of ongoing profitable growth
through the rest of 2018."
1 Based on the Company's 2017 year-end estimated
reserves and prospective resources as evaluated by the Company's
independent qualified reserve engineer McDaniel & Associates
Consultants Ltd. in reports with effective dates of
December 31, 2017.
Record Company Production
- Achieved a new Company milestone: record average Colombia
production of 35,400 BOEPD in the Quarter, on track with the
Company's internal forecast and 18% higher than 30,098 BOEPD in
second quarter 2017
- Increased the Quarter's Colombia production by 57% from second
quarter 2015 when the strategy to refocus Gran Tierra on Colombia
began, which represents an annualized growth rate of 16%
- Forecasted to be on target to meet full year 2018 production
guidance of 36,500 to 38,500 BOEPD, which would represent annual
growth from the 2017 average of 16% to 23%, with continuing
increases in Acordionero oil production expected during third and
fourth quarter 2018; the Company's production is expected to exceed
40,000 BOEPD in fourth quarter 2018
- Brought 4 gross wells (4 net) on production during the
Quarter
Operational Update
- MMV Development and New Drilling
- Continued Strong Performance at Acordionero, 100%
WI
- Record Production: Since acquiring the
Acordionero field in the MMV in August 2016, Gran Tierra has
increased its production 274% to a record high average rate during
the Quarter of 17,710 bopd
- Free Cash Flow1: From the
acquisition date of August 23, 2016 until June 30, 2018, the MMV
assets have generated $327 million in oil and natural gas sales and
$252 million of operating netback1, while the Company made capital
investments in these assets of $164 million; the MMV assets have
self-funded the active Acordionero development program
- Active 2018 Development Program:
- During the Quarter, the AC-22 development oil well was brought
on stream and produced at an average rate of 737 bopd with 0.2%
water cut during June 2018
- One water injection well and one water source well were also
drilled during the Quarter as Gran Tierra continued the expansion
of the Acordionero waterflood
- During third and fourth quarter 2018, we expect a high level of
development activity with 2 drilling rigs forecasted to drill 6
development oil wells and 1 water injection well
- To date, the AC-25 development oil well was spud July 7, 2018
and drilled in a record 9.2 days at one of the lowest costs
achieved to date of $2.5 million; the AC-26 development oil well
was spud July 21, 2018 and drilled in 10.4 days for the lowest cost
Gran Tierra has achieved yet at $1.8 million
- Central processing facilities expansion: on track with total
potential capacity of 30,000 bopd expected by December 2018; new
gas-to-power facility forecasted to be operational by second
quarter 2019
- Enhanced Oil Recovery: water injection
capacity is expected to reach 10,000 bbl per day during third
quarter 2018, with a further increase to 40,000 bbl per day
forecasted during second quarter 2019
- Planned Follow-up Appraisal Drilling at Ayombero, Midas
Block, 100% WIProgress in La Luna Formation, conventional,
naturally fractured carbonate oil resource play:
- The Ayombero-1 well has continued to produce on natural flow,
with no stimulation or pumping, at an average rate of 247 bopd
since May 1, 2018, 19 degree API oil with no formation water and
steady flowing tubing head pressure of approximately 1,500 psi,
from 70 ft of perforations within 200 to 275 ft of potential net
oil pay in the Galembo member
- Gran Tierra is planning to drill 3 Ayombero follow up appraisal
wells during the second half of 2018, with 2 additional appraisal
wells in the first half of 2019
- The planned objectives of the 3 appraisal wells in 2018 are to:
- Appraise the La Luna formation in two prospective reservoirs
(Galembo and Pujamana); the Pujamana is not yet tested but appeared
prospective in Ayombero-1
- Potentially add production by 2018 year end
- Potentially convert some of Ayombero's gross WI best estimate
prospective oil resources of 66 million bbl unrisked2 into reserves
by 2018 year end
- Juglar Deep Exploration Well, La Paloma Block, 100%
WI
- Based on the Ayombero-1 results, Gran Tierra spud the Juglar
Deep exploration well to test the La Luna Formation on July 7,
2018, at a location 50 kilometers ("km")
west-southwest of the Ayombero-1 well and 30 km west-southwest of
the Acordionero field; the Company will be assessing the La Luna
carbonate play at both the northern and southern ends of Gran
Tierra's extensive MMV land base
- In shallower formations already drilled in the Juglar Deep
well, log analysis indicates that 40 ft of potential net oil in the
La Paz and 12 ft of potential gas pay in the Mugrosa may exist
- Totumillo-1 Exploration Well, Midas Block, 100%
WI
- Demonstrated that the lowest known oil within the Lisama play
area may be at approximately 10,850 ft subsea, more than 1,000 ft
deeper than currently interpreted at the Acordionero field, which
may indicate that the Lisama play fairway has a much larger
prospective area in the region
- Updated geological interpretation indicates that a more
prospective well location (Totumillo-2) with better Lisama
reservoir sand development may exist to the east of
Totumillo-1
- Putumayo Basin Development and Exploration
- Development in Costayaco, Chaza Block, 100% WI
- We continue to develop the Costayaco field and have had
positive results from recent infill drilling, including lower than
expected water cuts in the legacy sandstone reservoirs, which
demonstrate that areas of high oil saturation still exist despite
these reservoirs being on waterflood for more than 8 years; the
Company is updating the reservoir model and assessing future
opportunities to further optimize the field and to potentially
increase oil reserves; the results are summarized below:
|
Well |
Timeframe |
Production (bopd) |
Water
Cut |
|
GOR (scf/bbl) |
Producing
Sands |
|
CYC-30 |
June
2018 |
1,491 |
7 |
% |
82 |
U,
Caballos |
|
CYC-31 |
June
2018 |
210 |
88 |
% |
31 |
U, T,
Caballos |
|
CYC-32 |
July
2018 |
382 |
89 |
% |
530 |
U, T,
Caballos |
|
CYC-33 |
June
2018 |
740 |
62 |
% |
228 |
N, U, T,
Caballos |
|
CYC-35i |
July
16-25, 2018 |
296 |
13 |
% |
31 |
Caballos |
- Following the Quarter's successes in the legacy reservoirs, the
CYC-36 development oil well is planned to commence drilling in
third quarter 2018 to target potentially higher oil saturation
regions of the U and T Sands and the Caballos Formation in the
northern part of the field; and to evaluate the potential in the
shallower M2 and A-Limestones
- Development and Exploration in Putumayo 7 ("PUT-7")
Block, 100% WI
- Development/Appraisal: Cumplidor-2: this successful development
oil well from the Quarter has been producing at a stable average
oil rate of 300 bopd with a water cut of 0.3% and GOR of 77 scf/bbl
since June 19, 2018
- Exploration: Gran Tierra plans to drill the Pomorroso, Pecari
and Northwest multi-zone exploration prospects in sequence from the
same drilling pad starting in third quarter 2018; these 3
exploration wells are planned to target the A-Limestone and the U
and N Sands using the 3D seismic acquired in 2017; a fourth
location has also been identified in the same area
- Strong A-Limestone Production from Vonu-1 Well,
Putumayo 1 ("PUT-1") Block, 55% WI
- This important discovery well in the A-Limestone is currently
producing 1,281 bopd (100% gross) from the A-Limestone, or 705 bopd
WI, with less than 1% water cut (the Quarter average)
- Vonu-1 remains Gran Tierra's strongest A-Limestone well to date
in terms of oil production performance and has already produced
just over 600,000 bbls of oil (100% gross cumulative) as of June
30, 2018
- Chilanguita-1 Exploration Well, Alea 1848A Block, 100%
WI
- This multi-zone exploration well is expected to spud in August
2018; primary targets are the U and T Sands and A-Limestone
- Planned 3D Seismic Program
- Gran Tierra plans to acquire a large 3D seismic survey starting
in second half 2018 which would cover 341 square km across the Alea
1848A, Nancy-Burdine-Maxine, Putumayo-4 ("PUT-4")
and Putumayo-25 blocks
- This 3D seismic program is designed to assist with planning
future multi-zone exploration drilling on these blocks, in
particular to target the A-Limestone and the N Sand
- Siriri-1 Exploration Well, PUT-4 Block, 100%
WI
- After non-commercial oil volumes were produced from the A and
B-Limestones, the N Sand was tested during the Quarter but
connectivity to the formation could not be established; the well
was subsequently plugged and abandoned
- However, Siriri-1 successfully proved that the A Limestone is
oil-charged in the deepest part of the Putumayo Basin; after the 3D
seismic program described above is completed, the Carana-1
exploration well is planned to be drilled in 2019 from the same pad
in PUT-4 to evaluate the A-Limestone in a more prospective
structural setting and to target the N Sand based on the 3D
seismic
- Future Planning for A-Limestone Exploration
Drilling
- Starting in the first quarter of 2018, Gran Tierra began to
scout areas for targeting the A-Limestone conventional resource
play across all of the Company's Putumayo blocks
- Out of the 62 regions identified to date, 22 have been
effectively scouted so far
- This scouting project is planned to continue through the
remainder of 2018 and into 2019
- Sinu Basin: Tonga-1 Exploration Well, Sinu-3 Block, 51%
WI
- This frontier exploration commitment well was drilled in the
Quarter, did not encounter commercial hydrocarbon quantities and
was thus plugged and abandoned; all block commitments have been
fulfilled and Gran Tierra plans to relinquish this block
1 Operating netback and free cash flow are
non-GAAP measures and do not have a standardized meaning under
generally accepted accounting principles in the United States of
America ("GAAP"). Refer to "Non-GAAP Measures" in this press
release.2 Assigned by the Company's independent
qualified reserve evaluator McDaniel & Associates Consultants
Ltd. as of April 30, 2018.
Strong Financial Performance in the
Quarter
- The Company exited the Quarter with $126 million of cash and
cash equivalents and an undrawn $300 million credit facility
- Continued significant exposure to oil price strength with oil
representing 100% of total Company production in the Quarter
- Net income of $20 million compared with net income of $18
million in the first quarter 2018 (the "Prior
Quarter")
- Funds flow from operations1 increased by 26% to $95 million
compared with the Prior Quarter and 86% from the second quarter
2017, while the Brent price increased only 47% from second quarter
2017
- Active quarter with capital expenditures of $84 million; funds
flow from operations in the Quarter were $11 million higher than
capital expenditures
- Oil and gas sales increased by 18% compared with the Prior
Quarter to $163 million and were up 70% compared with second
quarter 2017
- Operating netback1 increased by 11% compared with the Prior
Quarter to $38.28 per BOE and increased by 75% relative to second
quarter 2017; whereas, Brent increased only 47% since second
quarter 2017
- Operating expenses increased to $10.89 per BOE partially due to
increased workover expenses of $1.14 per BOE; excluding workover
expenses, operating expenses increased by $1.20 per BOE compared
with the Prior Quarter primarily as a result of payments triggered
by renegotiating the Company's field operating agreements, higher
power generation costs and accelerated maintenance costs, mainly in
the Acordionero field in the Quarter
- Quality and transportation discount was $10.52 per BOE compared
with $10.72 per BOE in the Prior Quarter; this $0.20 per BOE
reduction resulted from optimization of transportation routes and
narrowing of differentials
- Transportation expenses decreased to $2.04 per BOE compared
with $2.29 per BOE in the Prior Quarter due to the use of
alternative transportation routes which had lower costs per
BOE
- Cash G&A expenses decreased to $2.07 per BOE compared with
$2.61 per BOE in the Prior Quarter
- Increased the 2018 development capital program by an additional
$15 to $30 million for:
- Ayombero appraisal drilling of 3 wells based on the success of
the Ayombero-1 well; expected positive production impact would be
realized in 2019
- Costayaco development drilling and 1 additional water injection
well in legacy reservoirs to follow up on first half 2018
successful development drilling
- 2 Acordionero development wells accelerated from 2019 into
fourth quarter 2018
1 Funds flow from operations and operating netback 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.
Financial and Operational Highlights
(all amounts in $000s, except per share and BOE
amounts)
|
|
|
|
|
Three Months EndedJune 30, |
|
Six Months EndedJune 30, |
|
ThreeMonthsEndedMarch 31 |
|
2018 |
2017 |
|
2018 |
2017 |
|
2018 |
|
|
|
|
|
|
|
|
Net Income
(Loss) |
$ |
20,300 |
|
$ |
(6,807 |
) |
|
$ |
38,161 |
|
$ |
5,964 |
|
|
$ |
17,861 |
|
Per
Share - Basic and Diluted |
$ |
0.05 |
|
$ |
(0.02 |
) |
|
$ |
0.10 |
|
$ |
0.01 |
|
|
$ |
0.05 |
|
|
|
|
|
|
|
|
|
Oil and Gas
Sales |
$ |
163,446 |
|
$ |
96,128 |
|
|
$ |
301,674 |
|
$ |
190,787 |
|
|
$ |
138,228 |
|
Operating
Expenses |
(35,059 |
) |
(27,208 |
) |
|
(61,324 |
) |
(51,145 |
) |
|
(26,265 |
) |
Transportation
Expenses |
(6,522 |
) |
(6,492 |
) |
|
(13,519 |
) |
(13,434 |
) |
|
(6,997 |
) |
Operating
Netback(1) |
$ |
121,865 |
|
$ |
62,428 |
|
|
$ |
226,831 |
|
$ |
126,208 |
|
|
$ |
104,966 |
|
|
|
|
|
|
|
|
|
G&A
Expenses Before Stock-Based Compensation |
$ |
6,604 |
|
$ |
7,610 |
|
|
$ |
14,586 |
|
$ |
15,173 |
|
|
$ |
7,982 |
|
G&A
Stock-Based Compensation |
6,609 |
|
1,903 |
|
|
9,787 |
|
3,052 |
|
|
3,178 |
|
G&A
Expenses, Including Stock Based Compensation |
$ |
13,213 |
|
$ |
9,513 |
|
|
$ |
24,373 |
|
$ |
18,225 |
|
|
$ |
11,160 |
|
|
|
|
|
|
|
|
|
EBITDA(1) |
$ |
102,278 |
|
$ |
41,634 |
|
|
$ |
190,866 |
|
$ |
103,172 |
|
|
$ |
88,588 |
|
|
|
|
|
|
|
|
|
Funds Flow from
Operations(1) |
$ |
94,549 |
|
$ |
50,920 |
|
|
$ |
169,297 |
|
$ |
95,946 |
|
|
$ |
74,748 |
|
|
|
|
|
|
|
|
|
Capital
Expenditures |
$ |
84,394 |
|
$ |
57,865 |
|
|
$ |
157,088 |
|
$ |
104,025 |
|
|
$ |
72,694 |
|
|
|
|
|
|
|
|
|
Average Daily Volumes (BOEPD) |
|
|
|
|
|
|
|
WI Production
Before Royalties |
35,400 |
|
31,437 |
|
|
35,239 |
|
30,663 |
|
|
35,075 |
|
Royalties |
(7,202 |
) |
(5,014 |
) |
|
(7,045 |
) |
(5,051 |
) |
|
(6,886 |
) |
Production
NAR |
28,198 |
|
26,423 |
|
|
28,194 |
|
25,612 |
|
|
28,189 |
|
Increase in
Inventory |
(296 |
) |
(140 |
) |
|
(639 |
) |
(61 |
) |
|
(986 |
) |
Sales |
27,902 |
|
26,283 |
|
|
27,555 |
|
25,551 |
|
|
27,203 |
|
Royalties, % of
WI Production Before Royalties |
20 |
% |
16 |
% |
|
20 |
% |
16 |
% |
|
20 |
% |
|
|
|
|
|
|
|
|
Per BOE |
|
|
|
|
|
|
|
Brent |
$ |
74.90 |
|
$ |
50.92 |
|
|
$ |
71.04 |
|
$ |
52.79 |
|
|
$ |
67.18 |
|
Quality and
Transportation Discount |
(10.52 |
) |
(10.73 |
) |
|
(10.55 |
) |
(11.53 |
) |
|
(10.72 |
) |
Royalties |
(13.17 |
) |
(6.50 |
) |
|
(12.21 |
) |
(6.85 |
) |
|
(11.25 |
) |
Average
Realized Price |
51.21 |
|
33.69 |
|
|
48.28 |
|
34.41 |
|
|
45.21 |
|
Transportation
Expenses |
(2.04 |
) |
(2.28 |
) |
|
(2.16 |
) |
(2.42 |
) |
|
(2.29 |
) |
Average
Realized Price Net of Transportation Expenses |
49.17 |
|
31.41 |
|
|
46.12 |
|
31.99 |
|
|
42.92 |
|
Operating
Expenses |
(10.89 |
) |
(9.50 |
) |
|
(9.74 |
) |
(9.20 |
) |
|
(8.55 |
) |
Operating
Netback(1) |
38.28 |
|
21.91 |
|
|
36.38 |
|
22.79 |
|
|
34.37 |
|
G&A
Expenses |
(2.07 |
) |
(2.67 |
) |
|
(2.33 |
) |
(2.74 |
) |
|
(2.61 |
) |
Equity
Tax |
— |
|
— |
|
|
— |
|
(0.22 |
) |
|
— |
|
Realized
Foreign Exchange Loss |
(0.11 |
) |
— |
|
|
(0.07 |
) |
(0.18 |
) |
|
(0.03 |
) |
Realized
Financial Instruments (Loss) Gain |
(3.03 |
) |
0.16 |
|
|
(2.48 |
) |
0.22 |
|
|
(1.90 |
) |
Interest
Expense, Excluding Amortization of Debt Issuance
Costs |
(2.05 |
) |
(0.95 |
) |
|
(1.82 |
) |
(0.94 |
) |
|
(1.58 |
) |
Interest
Income |
0.19 |
|
0.09 |
|
|
0.22 |
|
0.12 |
|
|
0.26 |
|
Current Income
Tax Expense |
(1.51 |
) |
(0.62 |
) |
|
(2.74 |
) |
(1.66 |
) |
|
(4.02 |
) |
Cash
Netback(1) |
$ |
29.70 |
|
$ |
17.92 |
|
|
$ |
27.16 |
|
$ |
17.39 |
|
|
$ |
24.49 |
|
|
|
|
|
|
|
|
|
Share Information (000s) |
|
|
|
|
|
|
|
Common Stock
Outstanding, End of Period |
390,018 |
|
386,742 |
|
|
390,018 |
|
386,742 |
|
|
384,960 |
|
Exchangeable
Shares Outstanding, End of Period |
1,135 |
|
8,030 |
|
|
1,135 |
|
8,030 |
|
|
5,908 |
|
Weighted
Average Number of Common and Exchangeable Shares Outstanding -
Basic |
391,054 |
|
398,585 |
|
|
391,173 |
|
398,795 |
|
|
391,294 |
|
1 Operating netback, EBITDA, , funds flow
from operations and cash netback are non-GAAP measures and do not
have a standardized meaning 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.
Corporate Presentation:
Gran Tierra's Corporate Presentation has been
updated and is available on the Company website at
www.grantierra.com.
Conference Call
Information:
Gran Tierra Energy Inc. will host its results
conference call for the Quarter on Friday, August 3,
2018. Details of the conference call are as follows:
Date: |
Friday, August 3, 2018 |
Time: |
11:00 a.m. Eastern Time (9:00 a.m. Mountain Time) |
North American participants call: |
1-844-348-3792 (Toll-Free) |
Outside of Canada & USA call: |
1-614-999-9309 |
Interested parties may also access the live
webcast on the investor relations page of Gran Tierra’s website at
www.grantierra.com. An archive of the webcast will be available on
Gran Tierra’s website until August 10, 2018. In addition, an audio
replay of the conference call will be available on Gran Tierra's
website following the call until August 7, 2018. To access
the replay, dial toll-free 1-855-859-2056 (North America), or
1-404-537-3406 (outside of Canada and USA), conference ID:
6399184.
Contact Information
For investor and media inquiries please contact:
Gary GuidryChief Executive Officer
Ryan EllsonChief Financial Officer
Rodger TrimbleVice President, Investor Relations
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. The
Company is focused on its existing portfolio of assets in Colombia
and will pursue new growth opportunities throughout Colombia,
leveraging our financial strength. The Company’s common shares
trade on the NYSE American and the Toronto 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.
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,” “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, capital program, future sources of funding
for capital expenditures and guidance, including for certain future
well results, production and reserves estimates, the Company’s
strategies, the Company’s operations including planned operations,
oil production, and the completion of certain infrastructure such
as its gas to power projects and cost savings associated
therewith.
Statements relating to “resources” are also
deemed to be forward-looking statements, as they involve the
implied assessment, based on certain estimates and assumptions,
including that the resources described can be profitably produced
in the future.
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, 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; 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 filed February 27, 2018 and its
Quarterly Reports. 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 future production 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. A reconciliation from oil and gas sales to
operating netback for the MMV assets is as follows:
|
|
|
|
|
MMV assets - acquisitiondate until June 30,
2018 |
|
(Thousands of
U.S. Dollars) |
|
|
Oil and natural gas
sales |
$ |
326,797 |
|
|
Operating expenses |
(41,386 |
) |
|
Transportation
expenses |
(33,102 |
) |
|
Operating netback |
$ |
252,309 |
|
Cash netback as presented is defined as net
income or loss before DD&A expenses, asset impairment, deferred
income tax expense, amortization of debt issuance costs, unrealized
foreign exchange gains and losses, loss on sale, non-cash operating
and 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 or loss to cash netback is as follows:
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
Three MonthsEnded March 31, |
Cash Netback
(Non-GAAP)Measure ($000s) |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
2018 |
Net income
(loss) |
|
$ |
20,300 |
|
|
$ |
(6,807 |
) |
|
$ |
38,161 |
|
|
$ |
5,964 |
|
|
$ |
17,861 |
|
Adjustments to
reconcile netincome (loss) income to cashnetback |
|
|
|
|
|
|
|
|
|
|
DD&A expenses |
|
46,607 |
|
|
31,813 |
|
|
86,068 |
|
|
58,689 |
|
|
39,461 |
|
Deferred income tax expense |
|
23,169 |
|
|
11,525 |
|
|
36,651 |
|
|
22,904 |
|
|
13,482 |
|
Amortization of debt issuancecosts |
|
843 |
|
|
620 |
|
|
1,513 |
|
|
1,225 |
|
|
670 |
|
Unrealized foreign exchangeloss (gain) |
|
1,583 |
|
|
3,895 |
|
|
539 |
|
|
1,076 |
|
|
(1,044 |
) |
Loss on sale |
|
292 |
|
|
9,076 |
|
|
292 |
|
|
9,076 |
|
|
— |
|
Non-cash
operating expenses |
|
284 |
|
|
77 |
|
|
415 |
|
|
131 |
|
|
131 |
|
Non-cash
G&A expenses |
|
6,609 |
|
|
1,903 |
|
|
9,787 |
|
|
3,052 |
|
|
3,178 |
|
Unrealized financialinstruments (gain) loss |
|
(4,898 |
) |
|
(999 |
) |
|
(3,769 |
) |
|
(5,670 |
) |
|
1,129 |
|
Cash
netback |
|
$ |
94,789 |
|
|
$ |
51,103 |
|
|
$ |
169,657 |
|
|
$ |
96,447 |
|
|
$ |
74,868 |
|
EBITDA, as presented, is defined as net income
or loss adjusted for depletion, depreciation and accretion
(“DD&A”) expenses, interest expense and income tax expense or
recovery. 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 or loss to EBITDA as follows:
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
Three MonthsEnded March 31, |
EBITDA -
Non-GAAP Measure($000s) |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
2018 |
Net income
(loss) |
|
$ |
20,300 |
|
|
$ |
(6,807 |
) |
|
$ |
38,161 |
|
|
$ |
5,964 |
|
|
$ |
17,861 |
|
Adjustments to
reconcile netincome (loss) to EBITDA |
|
|
|
|
|
|
|
|
|
|
DD&A expenses |
|
46,607 |
|
|
31,813 |
|
|
86,068 |
|
|
58,689 |
|
|
39,461 |
|
Interest expense |
|
7,375 |
|
|
3,331 |
|
|
12,870 |
|
|
6,426 |
|
|
5,495 |
|
Income tax expense |
|
27,996 |
|
|
13,297 |
|
|
53,767 |
|
|
32,093 |
|
|
25,771 |
|
EBITDA
(non-GAAP) |
|
102,278 |
|
|
41,634 |
|
|
190,866 |
|
|
103,172 |
|
|
88,588 |
|
Funds flow from operations, as presented, is net
income or loss adjusted for DD&A expenses, asset impairment,
deferred tax expense, stock-based compensation
expense, amortization of debt issuance costs, cash settlement
of RSUs, 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 or loss to funds flow from
operations is as follows:
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
Three MonthsEnded March 31, |
Funds Flow From
Operations(Non-GAAP) Measure ($000s) |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
2018 |
Net income
(loss) |
|
$ |
20,300 |
|
|
$ |
(6,807 |
) |
|
$ |
38,161 |
|
|
$ |
5,964 |
|
|
$ |
17,861 |
|
Adjustments to
reconcile netincome (loss) to funds flowfrom
operations |
|
|
|
|
|
|
|
|
|
|
DD&A expenses |
|
46,607 |
|
|
31,813 |
|
|
86,068 |
|
|
58,689 |
|
|
39,461 |
|
Deferred tax expense |
|
23,169 |
|
|
11,525 |
|
|
36,651 |
|
|
22,904 |
|
|
13,482 |
|
Stock-based compensation expense |
|
6,893 |
|
|
1,980 |
|
|
10,202 |
|
|
3,183 |
|
|
3,309 |
|
Amortization of debt issuance costs |
|
843 |
|
|
620 |
|
|
1,513 |
|
|
1,225 |
|
|
670 |
|
Cash settlement of RSUs |
|
(240 |
) |
|
(183 |
) |
|
(360 |
) |
|
(501 |
) |
|
(120 |
) |
Unrealized foreign exchange loss (gain) |
|
1,583 |
|
|
3,895 |
|
|
539 |
|
|
1,076 |
|
|
(1,044 |
) |
Financial instruments loss (gain) |
|
4,768 |
|
|
(1,447 |
) |
|
11,714 |
|
|
(6,886 |
) |
|
6,946 |
|
Cash settlement of financial instruments |
|
(9,666 |
) |
|
448 |
|
|
(15,483 |
) |
|
1,216 |
|
|
(5,817 |
) |
Loss on sale |
|
292 |
|
|
9,076 |
|
|
292 |
|
|
9,076 |
|
|
— |
|
Funds flow from
operations |
|
$ |
94,549 |
|
|
$ |
50,920 |
|
|
$ |
169,297 |
|
|
$ |
95,946 |
|
|
$ |
74,748 |
|
Presentation of Oil and Gas Information
BOEs have been converted on the basis of 6
thousand cubic feet ("Mcf") of natural gas to 1
barrel of oil. BOEs may be misleading, particularly if used in
isolation. A BOE conversion ratio of 6 Mcf: 1 barrel 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 barrel would be misleading as an
indication of value.
This press release contains well-flow test results. Readers are
cautioned that well-flow test results are not necessarily
indicative of long-term performance or ultimate recovery.
Gran Tierra's Statement of Reserves Data and
Other Oil and Gas Information on Form 51-101F1 dated effective as
at December 31, 2017 (the "GTE 51-101F1"), which includes
disclosure of its oil and gas reserves and other oil and gas
information in accordance with NI 51-101 forming the basis of this
press release, is available on SEDAR at www.sedar.com. See the GTE
51-101F1 for additional definitions regarding terms used in this
press release.
Estimates of net present value contained herein
do not necessarily represent fair market value of resources.
Estimates of resources and future net revenue for individual
properties may not reflect the same level of confidence as
estimates of resources and future net revenue for all properties,
due to the effect of aggregation.
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.
Prospective Resources
Prospective Resources are those quantities of
petroleum estimated, as of a given date, to be potentially
recoverable from undiscovered accumulations by application of
future development projects. Prospective Resources have both an
associated chance of discovery and a chance of development. Not all
exploration projects will result in discoveries. The chance that an
exploration project will result in the discovery of petroleum is
referred to as the "chance of discovery." Thus, for an undiscovered
accumulation the chance of commerciality is the product of two risk
components-the chance of discovery and the chance of development.
There is no certainty that any portion of the Prospective Resources
will be discovered. If discovered, there is no certainty that it
will be commercially viable to produce any portion of the
Prospective Resources.
Estimates of the Company's Prospective Resources
are based upon the GTE McDaniel Prospective Resources Report dated
as at December 31, 2017. The estimates of Prospective Resources
provided in this press release are estimates only and there is no
guarantee that the estimated Prospective Resources will be
recovered. Actual resources may be greater than or less than the
estimates provided in this press release and the differences may be
material. There is no assurance that the forecast price and cost
assumptions applied by McDaniel in evaluating Gran Tierra's
Prospective Resources will be attained and variances could be
material. There is no certainty that any portion of the Prospective
Resources will be discovered. If discovered, there is no certainty
that it will be commercially viable to produce any portion of the
Prospective Resources.
Estimates of Prospective Resources are by their
nature more speculative than estimates of proved reserves and would
require substantial capital spending over a significant number of
years to implement recovery. Actual locations drilled and
quantities that may be ultimately recovered from our properties
will differ substantially. In addition, we have made no commitment
to drill, and likely will not drill, all of the drilling locations
that have been attributable to these quantities.
The Prospective Resources in this press release
are classified as “mean” representing the arithmetic average of the
expected recoverable volume. It is the most accurate single point
representation of the volume distribution.
For a discussion of Gran Tierra’s interest in
the Prospective Resources, the location of the Prospective
Resources, the product type reasonably expected, the risks and
level of uncertainty associated with recovery of the resources, the
significant positive and negative factors relevant to the estimate
of the Prospective Resources, a description of the applicable
projects maturity subcategories and other relevant information
regarding the Prospective Resources estimates, please see the GTE
51-101F1 available on SEDAR at www.sedar.com.
Estimates of the Company's prospective resources
in the Ayombero Prospect are prepared by McDaniel in accordance
with NI 51-101 and COGEH as of April 30, 2018.
Prospective resources within the Ayombero
prospect are estimated based on 3D seismic and the drilling of the
Ayombero-1 well, as well as production from the Chuira field.
Prospective resources have been assigned to three horizons within
the La Luna formation: the Galembo, the Pujamana and the
Salada.
Positive factors for the Ayombero Prospective
Resources include:
- Thick, good quality reservoir exists within the La Luna
formation, based on testing of the Ayombero-1 well to date. Gran
Tierra is currently producing oil from the Galembo member.
- The Ayombero-1 well is believed to be producing from the same
structure as the wells in the Chuira field, from which Gran Tierra
has existing production.
Negative factors for the Ayombero Prospective
Resources include:
- The structure is complex, with potential seal risks in certain
areas.
- Poor quality of data obtained in 3D seismic shoots to
date.
Chance of Discovery/Development
Through an evaluation of the risks that are
relevant to the Ayombero prospective resources, which are described
herein, McDaniel has determined that the chance of discovery is 67%
(area with lower seal risks) and 37% (area with higher seal risks),
with the chance of development at 90%. The corresponding chance of
commerciality is 60% (lower seal risks) and 33% (higher seal
risks).
Prospect Maturity
The prospective resources associated with the
Ayombero structure have been sub-classified as a “prospect”. COGEH
defines "prospect" as a potential accumulation within a play that
is sufficiently well defined to present a viable drilling
target.
Other Information
Given the uncertainty of discovery associated
with such prospective resources, costs and timelines to production,
as well as recovery technologies, cannot be determined at this
time.
Disclosure of Resources Information and
Cautionary Note to U.S. Investors
In this press release, the Company uses the term
Prospective Resources. The SEC guidelines strictly prohibit the
Company from including Prospective Resources in filings with the
SEC. Investors are urged to consider closely the disclosures and
risk factors in the Company's Annual Report on Form 10-K, Quarterly
Reports on Form 10-Q and in the other reports and filings with the
SEC, available from the Company's offices or website. These forms
can also be obtained from the SEC website at www.sec.gov or by
calling 1-800-SEC-0330.
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