Gran Tierra Energy Inc. Announces First Quarter 2021 Results
Gran Tierra Energy Inc.
(“
Gran Tierra”
or
the “
Company”
) (NYSE
American:GTE)(TSX:GTE)(LSE:GTE) today announced the
Company’s financial and operating results for the quarter ended
March 31, 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”) 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 May 4, 2021.
Message to Shareholders
Gary Guidry, President and Chief Executive
Officer of Gran Tierra, commented: “During 2021, we have
significantly increased Gran Tierra’s total production. Our ability
to ramp up Gran Tierra’s production to the highest level in over a
year clearly demonstrates our team’s success at optimizing our core
oil fields under waterflood, while preserving and maximizing the
long-term value of all of our assets.
Based on our significant progress in increasing
production during the first quarter of 2021, we reaffirm Gran
Tierra’s 2021 full-year production guidance of 28,000-30,000
bbl/day (‘BOPD’). With the strong recovery in the
Brent oil price, we are also significantly revising upwards our
2021 forecasts for cash flow2 to $205-225 million, free cash flow2
of $75 million and adjusted EBITDA1 of $255-275 million. Our 2021
capital budget of $130-150 million remains a balanced,
returns-focused program which prioritizes free cash flow2
generation and debt reduction. The significant free cash flow2 that
we now forecast for 2021 is expected to allow us to further
accelerate debt reduction through the remainder of 2021, with our
projected bank credit facility balance decreasing to $70-90 million
by December 31, 2021. We also continue to advance
exploration-related activities for our prioritized, high impact
exploration program and we expect to increase activity in 2022.
In the second half of 2021, funds flow from
operations1 and free cash flow2 is expected to accelerate as
production increases and our first half 2021 hedges roll off and
are replaced with hedges with much higher prices. Our first half
2021 Brent hedges on 15,000 BOPD had an average floor of $45.13/bbl
and ceiling of $51.38/bbl, whereas our second half 2021 hedges on
10,000 BOPD have an average floor of $57.03/bbl and ceiling of
$65.29/bbl. During the second half of 2021, we expect the Company
to generate funds flow from operations1 of $130-150 million and
adjusted EBITDA1 of $155-175 million.
Our teams in Colombia, Canada and Ecuador have
done an excellent job by safely and effectively executing our
development program during the many challenges faced by Gran Tierra
and our industry in 2020 and 2021. The health and safety of our
people and all of our stakeholders where we operate will continue
to be a focus in 2021 through our industry-leading COVID-19 safety
practices and protocols.
Gran Tierra has been moving at a rapid pace over
the last five years, integrating multiple acquisitions into our
organization, building a portfolio of high-quality assets and
strengthening our team. Throughout 2020 and into 2021, our
sustainability guiding principle of going ‘Beyond Compliance’ has
been a top priority for our team which was focused on maximizing
the Company’s environmental and social contributions even during
challenging times. We also continued to make progress on our
signature programs and to focus not only on being an excellent
partner to communities, but also on leaving a permanent legacy of
environmental protection in the regions where we work. We are
pleased to share with you Gran Tierra’s many accomplishments from
the past year in our 2020 Sustainability Report here:
www.grantierra.com/ESG2020. We are excited to keep
building for tomorrow by creating long-term value and delivering on
our Environmental, Social and Governance commitments today.”
Key Highlights:
-
Production: The Quarter’s production averaged
24,463 BOPD, up 12% from fourth quarter 2020 (“the
Prior Quarter”); Gran Tierra’s average
production for various time periods is outlined in the table
below:
Average Production |
Acordionero(BOPD) |
Costayaco(BOPD) |
Moqueta(BOPD) |
Other(BOPD) |
Total Company(BOPD) |
Second Quarter 2020 |
10,744 |
6,021 |
2,468 |
932 |
20,165 |
Third Quarter 2020 |
9,696 |
4,949 |
2,051 |
2,248 |
18,944 |
Fourth Quarter 2020 |
9,732 |
4,363 |
2,530 |
5,282 |
21,907 |
First Quarter 2021 |
12,681 |
4,190 |
2,304 |
5,288 |
24,463 |
Current Average Production* |
16,000 |
4,700 |
2,400 |
5,100 |
28,200 |
*Approximate average production over the 5-week
period from March 30, 2021 to May 3, 2021.
- 2021
Production Guidance: Based on the Company’s significant
progress in increasing production during and subsequent to the
Quarter, Gran Tierra reaffirms its 2021 full-year production
guidance of 28,000-30,000 BOPD
- 2020
Sustainability Report:
- Gran Tierra is
pleased to share its ESG accomplishments from the past year,
including a 60% reduction in the Company’s greenhouse gas emissions
from 2019, in its “2020 Sustainability Report: Creating
long-term value and delivering on our Environmental, Social and
Governance commitments”; please read the report here:
www.grantierra.com/ESG2020
- The public
health crisis of 2020 created critical challenges around the world
and as soon as the extent of the COVID-19 pandemic became clear,
Gran Tierra’s foremost concerns were protecting the health and
safety of the Company’s workers and the communities near its
operations
- Gran Tierra
implemented a comprehensive set of health and safety protocols
which allowed the Company to continue operations, as well as make
progress on its signature ESG programs in Colombia, including
strengthening the cacao sector, rainforest reforestation and
conservation, removing land mines and protecting vulnerable
children
- Key
Financial Metrics for the Quarter:
-
Significant Cost Reductions: Compared to the first
quarter of 2020, the Company’s operating expenses were down 19% to
$13.65/bbl, quality and transportation discount was down 30% to
$8.98/bbl and transportation expenses were down 24% to $1.15/bbl;
the majority of these cost reductions represent structural
improvements in the Company’s operations, which are expected to be
maintained as oil prices recover further; general and
administrative (“G&A”) expenses before
stock-based compensation decreased by 21% compared to the first
quarter of 2020 as a result of continued cost savings measures
primarily relating to lower consulting, legal, general office and
travel expenses
- Credit
Facility Paid Down and Cash Balance Increased: At March
31, 2021, the Company had paid down its credit facility balance by
$10 million to $180 million and increased its cash and cash
equivalents balance to $22 million, compared to a credit facility
balance of $190 million and cash and cash equivalents balance of
$14 million at the end of the Prior Quarter
- Narrowed
Net Loss and Increased EBITDA: Relative to the Prior
Quarter, Gran Tierra significantly narrowed its realized net loss
by 22% to $37 million; EBITDA1 also substantially improved to $16
million, up from $(14) million in the Prior Quarter
-
Increased Adjusted EBITDA and Funds Flow: Relative
to the Prior Quarter, the Company substantially improved both its
Adjusted EBITDA1, which was up 88% to $42 million, and its funds
flow from operations1, which was up 224% to $29 million
-
Substantial Increases in Oil Sales and Operating
Netback: The Brent oil price averaged $61.32/bbl and Gran
Tierra generated oil sales of $95 million, up 47% or $31 million
from the Prior Quarter, driven by a combination of the 12% increase
in production and the 35% increase in the Brent oil price; the
Company’s operating netback1 of $29.20/bbl was up 65%, an increase
of $11.53/bbl relative to the Prior Quarter; this improvement was
achieved despite an increase in royalties to $8.34/bbl, up from the
Prior Quarter’s $3.92/bbl, as a result of higher oil prices
- Capital
Expenditures: The Quarter’s expenditures of approximately
$37 million were down modestly from the Prior Quarter’s level of
$40 million, as Gran Tierra pressed ahead with development drilling
operations at the Acordionero and Costayaco oil fields; the Company
expects approximately 65-75% of its 2021 capital program of
$130-150 million to be spent during the first half of 2021
- Closing
of Sale of PetroTal Shares: As previously announced, Gran
Tierra Resources Limited (“GTRL”), a wholly owned subsidiary of
Gran Tierra, sold an aggregate of 109,006,250 common shares of
PetroTal Corp. (“PetroTal”) for an aggregate purchase price of
approximately $15 million; as of market close on May 3, 2021, the
remaining 137,093,750 shares of PetroTal owned by GTRL had a market
value of approximately $29 million.
- Oil
Price Hedges In Place Designed To Protect Cash Flows During Second
Half 2021: The Company has the following oil price hedges
in place, including hedges 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 $13 million during the Quarter):
Period and type of instrument |
Volume,BOPD |
Reference |
Sold Put($/bbl, Weighted Average) |
Purchased Put($/bbl, Weighted Average) |
Sold Call($/bbl, Weighted Average) |
Premium($/bbl, Weighted Average) |
Three-way Collars: April 1, to June 30, 2021 |
14,000 |
ICE Brent |
36.43 |
45.14 |
51.45 |
0.21 |
Collars: April 1, to June 30, 2021 |
1,000 |
ICE Brent |
n/a |
45.00 |
50.40 |
n/a |
Three-way Collars: July 1, to December 31, 2021 |
4,000 |
ICE Brent |
45.00 |
55.00 |
68.00 |
n/a |
Three-way Collars: July 1, to December 31, 2021# |
3,000 |
ICE Brent |
50.00 |
60.00 |
70.21 |
n/a |
Swaptions: July 1, to December 31, 2021 |
3,000 |
ICE Brent |
n/a |
n/a |
56.75 |
n/a |
# Entered into subsequent to the end of the Quarter.
2021 Revised Guidance
- Due to the
strong rebound in the Brent oil price during 2021, Gran Tierra is
revising some of the Company’s forecast ranges for its 2021
budget:
2021 Guidance |
Original Budget (Base Case) |
Revised Budget |
Annual Average Brent Oil Price ($/bbl) |
49.00 |
61.00 |
Total Company Production (BOPD) |
28,000-30,000 |
28,000-30,000 |
Operating Netback1 ($ million) |
220-240 |
310-330 |
EBITDA1 ($ million) |
200-220 |
255-275 |
Cash Flow2 ($ million) |
150-170 |
205-225 |
Total Capital ($ million) |
130-150 |
130-150 |
Free Cash Flow2 ($ million) |
20^ |
75^ |
Bank Credit Facility Balance @ December 31, 2021 ($ million) |
125-145 |
70-90 |
2021 Year-End Net Debt4 to Annualized Fourth Quarter 2021
EBITDA1 |
2.7-2.9 |
1.9-2.1 |
Number of Development Wells (gross) |
14-18 |
14-18 |
^ Calculated by subtracting midpoint of total
capital from midpoint of cash flow. Free cash flow forecast for
Original Budget (Base Case) was not previously disclosed.
- 2021
Capital Program: Gran Tierra plans to direct approximately
60% of the 2021 capital program toward continued development of the
Acordionero field in the Middle Magdalena Valley Basin, another 35%
toward development activities in the Putumayo Basin and the
remaining 5% toward exploration-related activities throughout the
Company’s portfolio, in both Colombia and Ecuador
- Fully
Funded Capital Program: the 2021 capital budget of
$130-150 million is expected to be more than fully funded from the
revised 2021 cash flow2 forecast of $205-225 million
- Control
of Capital Program: Gran Tierra has 100% working interest
in and operatorship of the Company’s major assets in Colombia and
Ecuador; this full control gives the Company the flexibility to
optimize its development and exploration programs with changes,
either up or down, in oil prices
- Debt
Reduction: with 2021 expected free cash flow2 and changes
in non-cash working capital (primarily related to the ongoing
collection of tax receivables), Gran Tierra now expects its bank
credit facility to be paid down in the Revised Budget to a balance
of $70-90 million by December 31, 2021
- Gran Tierra is
also revising the Company’s forecast 2021 ranges for operating
netback3 per bbl and some expenses:
2021 Guidance |
Original Budget(Base Case) |
Revised Budget |
Brent Oil Price ($/bbl) |
49.00 |
61.00 |
Expenses ($/bbl) |
|
|
Transportation and Quality Discount |
8.00-10.00 |
8.00-10.00 |
Royalties |
5.00-6.00 |
8.00-9.00 |
Oil and Gas Sales Price ($/bbl) |
34.00-36.00 |
42.00-44.00 |
Operating Costs |
11.00-13.00 |
11.00-13.00 |
Transportation (Pipeline) |
0.80-1.00 |
0.90-1.10 |
Operating Netback3
($/bbl) |
21.00-23.00 |
29.00-31.00 |
General and Administrative |
1.50-2.50 |
1.50-2.50 |
Interest and Financing |
4.50-5.00 |
4.50-5.00 |
Taxes |
0.00 |
0.00 |
Operations Update
-
Acordionero Oil Field (100% WI)
- Utilizing 2
workover rigs, Gran Tierra continues to workover wells that went
offline in 2020, which the Company decided not to workover at that
time due to low oil prices; during the current workover campaign,
the average workover cost has decreased 28% from 2019
- The development
drilling rig has also remained active since starting on November
30, 2020, drilling both producers and injectors; the average cost
per well has decreased 36% since 2019; the AC-75 well achieved a
new record cycle time from spud to on-production of 10.6 days, at a
total cost of $1.9 million
- From January 1
to May 3, 2021, Gran Tierra has drilled 11 new oil wells and 2 new
water injection wells
- The combination
of the workover and drilling programs has resulted in Acordionero’s
approximate current average production5 of 16,000 BOPD
- Acordionero’s
current average production is the highest level achieved since June
20195; 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 22 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
with indications of high quality reservoir in the U, T, and
Caballos Sands based on well logs, with potential prospectivity in
the M2 Carbonate; the 2 wells were drilled in an average of 12 days
at a cost of $1.9 million per well, a 30% decrease from the last 4
wells drilled in Costayaco
- Drilling
commenced on the CYC-44 infill well on April 26, 2021
- All 3 wells are
expected to be on production by the end of the second quarter of
2021; currently none of the wells are on production
- Moqueta
Oil Field (100% WI)
- During the
second quarter of 2021, Gran Tierra plans a 6-well workover
program, which is expected to consist of 2 workovers and 1
stimulation to restore production, and also 3 injector conversions
to further optimize the waterflood and increase production in the
second half of 2021
-
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
is scheduled to arrive in the Suroriente Block during May 2021,
where it is expected to accelerate the running of larger pumps in 2
oil wells and to restore production in 3 oil wells which are
currently offline
Financial and Operational Highlights
(all amounts in $000s, except per share and bbl
amounts)
|
Three Months Ended March 31, |
|
Three Months Ended December 31, |
|
2021 |
2020 |
|
2020 |
|
|
|
|
|
Net Loss |
$ |
(37,422 |
) |
$ |
(251,626 |
) |
|
$ |
(47,871 |
) |
Per Share - Basic and Diluted |
$ |
(0.10 |
) |
$ |
(0.69 |
) |
|
$ |
(0.13 |
) |
|
|
|
|
|
Oil
Sales |
$ |
95,493 |
|
$ |
86,079 |
|
|
$ |
64,793 |
|
Operating
Expenses |
(29,625 |
) |
(44,588 |
) |
|
(27,215 |
) |
Transportation
Expenses |
(2,506 |
) |
(4,037 |
) |
|
(1,994 |
) |
Operating
Netback(1)(3) |
$ |
63,362 |
|
$ |
37,454 |
|
|
$ |
35,584 |
|
|
|
|
|
|
G&A Expenses
Before Stock-Based Compensation |
$ |
5,898 |
|
$ |
7,440 |
|
|
$ |
5,323 |
|
G&A Stock-Based
Compensation Expense (Recovery) |
3,671 |
|
(2,055 |
) |
|
1,923 |
|
G&A Expenses,
Including Stock Based Compensation |
$ |
9,569 |
|
$ |
5,385 |
|
|
$ |
7,246 |
|
|
|
|
|
|
Adjusted
EBITDA(1) |
$ |
41,904 |
|
$ |
34,491 |
|
|
$ |
22,235 |
|
|
|
|
|
|
Funds Flow from
Operations(1) |
$ |
28,973 |
|
$ |
22,227 |
|
|
$ |
8,956 |
|
|
|
|
|
|
Capital
Expenditures |
$ |
37,427 |
|
$ |
44,277 |
|
|
$ |
39,903 |
|
|
|
|
|
|
Average Daily Volumes (BOPD) |
|
|
|
|
WI Production Before Royalties |
24,463 |
|
29,527 |
|
|
21,907 |
|
Royalties |
(3,930 |
) |
(4,156 |
) |
|
(2,411 |
) |
Production
NAR |
20,533 |
|
25,371 |
|
|
19,496 |
|
Decrease (Increase) in
Inventory |
(262 |
) |
(521 |
) |
|
15 |
|
Sales |
20,271 |
|
24,850 |
|
|
19,511 |
|
Royalties, % of WI
Production Before Royalties |
16 |
% |
14 |
% |
|
11 |
% |
|
|
|
|
|
Per bbl |
|
|
|
|
Brent |
$ |
61.32 |
|
$ |
50.82 |
|
|
$ |
45.26 |
|
Quality and
Transportation Discount |
(8.98 |
) |
(12.75 |
) |
|
(9.17 |
) |
Royalties |
(8.34 |
) |
(5.61 |
) |
|
(3.92 |
) |
Average Realized
Price |
44.00 |
|
32.46 |
|
|
32.17 |
|
Transportation
Expenses |
(1.15 |
) |
(1.52 |
) |
|
(0.99 |
) |
Average Realized Price
Net of Transportation Expenses |
42.85 |
|
30.94 |
|
|
31.18 |
|
Operating
Expenses |
(13.65 |
) |
(16.81 |
) |
|
(13.51 |
) |
Operating
Netback(1)(3) |
29.20 |
|
14.13 |
|
|
17.67 |
|
COVID-19
costs |
(0.52 |
) |
— |
|
|
(0.57 |
) |
G&A Expenses
Before Stock-Based Compensation |
(2.72 |
) |
(2.81 |
) |
|
(2.64 |
) |
Severance
Expenses |
(0.42 |
) |
(0.50 |
) |
|
(0.08 |
) |
Realized Foreign
Exchange (Loss) Gain |
(0.04 |
) |
0.75 |
|
|
(0.57 |
) |
Cash Settlements on
Derivative Instruments |
(6.18 |
) |
1.31 |
|
|
(2.53 |
) |
Interest Expense,
Excluding Amortization of Debt Issuance Costs |
(5.96 |
) |
(4.51 |
) |
|
(6.50 |
) |
Interest
Income |
— |
|
0.13 |
|
|
— |
|
Other
Loss |
— |
|
— |
|
|
(0.20 |
) |
Net Lease
Payments |
(0.01 |
) |
(0.01 |
) |
|
(0.03 |
) |
Current Income Tax
Expense |
— |
|
(0.11 |
) |
|
(0.10 |
) |
Cash
Netback(1) |
$ |
13.35 |
|
$ |
8.38 |
|
|
$ |
4.45 |
|
|
|
|
|
|
Share Information (000s) |
|
|
|
|
Common Stock Outstanding, End of Period |
366,982 |
366,982 |
|
366,982 |
Weighted Average Number
of Common and Exchangeable Shares Outstanding - Basic and
Diluted |
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.(4) Net Debt as
presented in the context of 2021 guidance is defined as projected
working capital at December 31, 2021, less $600 million in senior
notes and borrowings under the credit facility. Management believes
that net debt is a useful supplemental measure for management and
investors to in order to evaluate the financial sustainability of
the Company’s business and leverage. The most directly comparable
GAAP measure is total debt. Gran Tierra is unable to provide a
quantitative reconciliation of forward-looking net debt to its most
directly comparable forward-looking GAAP measure because management
cannot reliably predict certain of the necessary components of such
forward-looking GAAP measure.(5) Approximate average production
over the 5-week period from March 30 to May 3, 2021, which is the
highest 5-week average rate for Acordionero since June 2019.
Virtual Annual Meeting of
Stockholders:
Gran Tierra’s 2021 Annual Meeting of
Stockholders will be held virtually on Wednesday, May 5, 2021 at
1:30 p.m. (Mountain Time). In light of the COVID-19 pandemic and to
mitigate the risks to the health and safety of our community,
stockholders and employees, Gran Tierra will be holding its annual
meeting in a virtual-only format by way of webcast and no physical
or in-person meeting will be held.
How to Participate in the Virtual Annual
Meeting
To access the virtual meeting, please go to
www.meetingcenter.io/296994452. We recommend that you log in 15
minutes before the Annual Meeting starts. To log into the Annual
Meeting you will have the option to join as a “Guest” or join as a
“Shareholder”. If you join as a “Shareholder”, you will be able to
vote your shares and ask questions during the Annual Meeting. In
order to join as a “Shareholder,” you are required to have the
password and your control number. The password for the meeting is
GTRE2021 and the control number can be found on the form of proxy
or notice. Guests and non-registered (beneficial) shareholders who
have not duly appointed themselves as proxyholder will be able to
attend the Annual Meeting at the link above by providing the guest
login information but will not be able to vote or ask questions at
the meeting.
Full details on how to vote, change or revoke a
vote, appoint a proxyholder, attend the virtual Annual Meeting, ask
questions and other general proxy matters are available in the
proxy statement dated March 25, 2021 available on the Company’s
website or the sec.gov website.
Whether or not you plan to attend the Annual
Meeting, we urge you to vote and submit your proxy in advance of
the Annual Meeting by one of the methods described in the proxy
materials for the Annual Meeting.
Please note that since the Gran Tierra’s Annual
Meeting is scheduled for the day after the Company releases its
2021 first quarter financial and operating results, Gran Tierra
will not have a quarterly conference call since the same material
will be discussed at the Annual Meeting.
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,
operating netback, net debt, 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; the benefits of derivative transactions and
expectations regarding future oil prices; ESG-related efforts and
impacts; the Company’s operations including planned operations, the
use and the availability of certain tax refunds and credits, and
the impact of the COVID-19 pandemic, disruptions to operations and
the decline in industry conditions.
Among the important factors that could cause
actual results to differ materially from those indicated by the
forward-looking statements in this press release are: the
unprecedented impact of the COVID-19 pandemic and the actions of
OPEC and non-OPEC countries and the procedures imposed by
governments in response thereto; disruptions to local operations;
the decline 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 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, operating netback, net
debt, total capital and certain expenses or costs may be considered
to be future-oriented financial information or a financial outlook
for the purposes of applicable Canadian securities laws. Financial
outlook and future-oriented financial information contained in this
press release about prospective financial performance, financial
position or cash flows are provided to give the reader a better
understanding of the potential future performance of the Company in
certain areas and are based on assumptions about future events,
including economic conditions and proposed courses of action, based
on management’s assessment of the relevant information currently
available, and to become available in the future.
In particular, this press release contains
projected operational and financial information for 2021. These
projections contain forward-looking statements and are based on a
number of material assumptions and factors, including those set out
above. Actual results may differ significantly from the projections
presented herein. The actual results of Gran Tierra’s operations
for any period could vary from the amounts set forth in these
projections, and such variations may be material. See above for a
discussion of the risks that could cause actual results to
vary.
The future-oriented financial information and
financial outlooks contained in this press release have been
approved by management as of the date of this press release.
Readers are cautioned that any such financial outlook and
future-oriented financial and operational information contained
herein should not be used for purposes other than those for which
it is disclosed herein. The Company and its management believe that
the prospective financial information has been prepared on a
reasonable basis, reflecting management’s best estimates and
judgments, and represent, to the best of management’s knowledge and
opinion, the Company’s expected course of action. However, because
this information is highly subjective, it should not be relied on
as necessarily indicative of future results.
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 Ended March 31, |
|
Three Months Ended December 31, |
Cash Netback -
(Non-GAAP) Measure ($000s) |
2021 |
2020 |
|
2020 |
Net loss |
$ |
(37,422 |
) |
$ |
(251,626 |
) |
|
$ |
(47,871 |
) |
Adjustments to
reconcile net loss to cash netback |
|
|
|
|
DD&A expenses |
31,318 |
|
57,294 |
|
|
33,115 |
|
Goodwill impairment |
— |
|
102,581 |
|
|
— |
|
Asset impairment |
— |
|
3,904 |
|
|
57,402 |
|
Deferred tax expense (recovery) |
8,651 |
|
34,606 |
|
|
(13,352 |
) |
Stock-based compensation expense (recovery) |
3,671 |
|
(2,055 |
) |
|
1,923 |
|
Amortization of debt issuance costs |
881 |
|
844 |
|
|
851 |
|
Non-cash lease expense |
444 |
|
490 |
|
|
457 |
|
Lease payments |
(462 |
) |
(515 |
) |
|
(522 |
) |
Unrealized foreign exchange loss (gain) |
13,003 |
|
20,799 |
|
|
(17,064 |
) |
Derivative instruments loss (gain) |
23,698 |
|
(12,867 |
) |
|
12,354 |
|
Cash settlements on derivative instruments |
(13,404 |
) |
3,487 |
|
|
(5,096 |
) |
Other financial instruments (gain) loss |
(1,405 |
) |
65,285 |
|
|
(13,241 |
) |
Cash
netback |
$ |
28,973 |
|
$ |
22,227 |
|
|
$ |
8,956 |
|
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 income or loss to EBITDA and adjusted EBITDA is as follows:
|
Three Months Ended March 31, |
|
Three Months Ended December 31, |
EBITDA - (Non-GAAP)
Measure ($000s) |
2021 |
2020 |
|
2020 |
Net loss |
$ |
(37,422 |
) |
$ |
(251,626 |
) |
|
$ |
(47,871 |
) |
Adjustments to
reconcile net loss to EBITDA and Adjusted EBITDA |
|
|
|
|
DD&A expenses |
31,318 |
|
57,294 |
|
|
33,115 |
|
Interest expense |
13,812 |
|
12,810 |
|
|
13,936 |
|
Income tax expense (recovery) |
8,651 |
|
34,904 |
|
|
(13,158 |
) |
EBITDA |
$ |
16,359 |
|
$ |
(146,618 |
) |
|
$ |
(13,978 |
) |
Goodwill impairment |
— |
|
102,581 |
|
|
— |
|
Asset impairment |
— |
|
3,904 |
|
|
57,402 |
|
Non-cash lease expense |
444 |
|
490 |
|
|
457 |
|
Lease payments |
(462 |
) |
(515 |
) |
|
(522 |
) |
Unrealized foreign exchange loss (gain) |
13,003 |
|
20,799 |
|
|
(17,064 |
) |
Stock-based compensation expense (recovery) |
3,671 |
|
(2,055 |
) |
|
1,923 |
|
Unrealized derivative instruments loss (gain) |
10,294 |
|
(9,380 |
) |
|
7,258 |
|
Other financial instruments (gain) loss |
$ |
(1,405 |
) |
$ |
65,285 |
|
|
$ |
(13,241 |
) |
Adjusted
EBITDA |
$ |
41,904 |
|
$ |
34,491 |
|
|
$ |
22,235 |
|
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 income or loss to funds flow
from operations is as follows:
|
Three Months Ended March 31, |
|
Three Months Ended December 31, |
Funds Flow From
Operations - (Non-GAAP) Measure
($000s) |
2021 |
2020 |
|
2020 |
Net loss |
$ |
(37,422 |
) |
$ |
(251,626 |
) |
|
$ |
(47,871 |
) |
Adjustments to
reconcile net loss to funds flow from operations |
|
|
|
|
DD&A expenses |
31,318 |
|
57,294 |
|
|
33,115 |
|
Goodwill impairment |
— |
|
102,581 |
|
|
— |
|
Asset impairment |
— |
|
3,904 |
|
|
57,402 |
|
Deferred tax expense (recovery) |
8,651 |
|
34,606 |
|
|
(13,352 |
) |
Stock-based compensation expense (recovery) |
3,671 |
|
(2,055 |
) |
|
1,923 |
|
Amortization of debt issuance costs |
881 |
|
844 |
|
|
851 |
|
Non-cash lease expense |
444 |
|
490 |
|
|
457 |
|
Lease payments |
(462 |
) |
(515 |
) |
|
(522 |
) |
Unrealized foreign exchange loss (gain) |
13,003 |
|
20,799 |
|
|
(17,064 |
) |
Derivative instruments loss (gain) |
23,698 |
|
(12,867 |
) |
|
12,354 |
|
Cash settlements on derivative instruments |
(13,404 |
) |
3,487 |
|
|
(5,096 |
) |
Other financial instruments (gain) loss |
(1,405 |
) |
65,285 |
|
|
(13,241 |
) |
Funds flow from
operations |
$ |
28,973 |
|
$ |
22,227 |
|
|
$ |
8,956 |
|
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.