Gran Tierra Energy Inc. Announces Restoration of Production and
Revised Guidance
Gran Tierra Energy Inc.
(“Gran Tierra” or
the “Company”) (NYSE American:GTE)(TSX:GTE)(LSE:GTE) today
announced an operations and financial update and updated 2021
guidance. All dollar amounts are in United States dollars and all
production volumes are on a working interest before royalties basis
and are expressed in barrels (
“bbl”) of oil per
day (
“BOPD”), unless otherwise stated.
Key Highlights:
- End of
Colombian Blockades Affecting Gran Tierra: As previously
announced by Gran Tierra on May 17, 2021, a number of protests and
blockades across Colombia impacted several key transportation
routes throughout the country, resulting in the temporary shut-in
of some of Gran Tierra’s wells and oil fields. Though these
blockades were not directed at Gran Tierra, these events caused the
Company to implement temporary production curtailments during May
and June 2021. The Colombian government has now successfully
negotiated ends to all of the blockades in the areas that were
affecting Gran Tierra’s operations, which has allowed the Company
to commence restoring its oil production throughout its entire
Colombian portfolio.
- Current
Production Ramping Back Up: Gran Tierra’s current average
total production1 is approximately 29,000 BOPD and is back to
levels achieved earlier in 2021, prior to the disruptions caused by
the blockades.
- Second
Quarter 2021 Production: Gran Tierra’s actual second
quarter 2021 total production averaged approximately 23,400 BOPD,
down about 4% from first quarter average production of 24,463 BOPD.
This reduction was due solely to the temporary impact of the
blockades during second quarter 2021, all of which have since been
lifted. Prior to the negative effects of the blockades, Gran Tierra
had forecast second quarter 2021 production of about 28,000-30,000
BOPD.
- Strong
Second Half 2021 Production: Gran Tierra forecasts second
half 2021 total production to average approximately 30,000-32,000
BOPD.
-
Acordionero Production: This field’s
current average production1 is approximately 16,000 BOPD with clear
indications that the waterflood is performing as expected.
Financial Highlights:
- Updated
2021 Guidance – Higher Brent Pricing Underpins Stronger 2021
EBITDA2 and Cash
Flow2: Gran Tierra now
forecasts full-year 2021 average production to come in at or
slightly below the low end of its previous guidance range and
average 27,500-28,500 BOPD (previously 28,000-30,000 BOPD), due to
the impact of blockades on production in second quarter 2021.
However, due to the Company’s forecast second half 2021 production
and currently strong Brent oil price environment, Gran Tierra now
forecasts increased full-year 2021 EBITDA2 and cash flow2 with no
change to the capital guidance range ($130-150 million). The
Company now expects 2021 EBITDA2 of $265-285 million (previously
$255-275 million) and 2021 cash flow2 of $215-235 million
(previously $205-225 million).
- Credit
Facility Paid Down: Despite the reduction in second
quarter 2021 production, as of June 30, 2021, Gran Tierra had paid
down its credit facility balance by $5 million (relative to March
31, 2021) to $175 million and had a cash balance of $19
million.
Message to Shareholders
Gary Guidry, President and Chief Executive
Officer of Gran Tierra, commented: "We are very pleased that we
have safely and diligently ramped operations back up throughout our
extensive Colombian portfolio. The Colombian government has been
very supportive in resolving blockades and disruptions in areas
where we have operations. Although the blockades impacted Gran
Tierra’s second quarter 2021 production volumes, we believe that
barrels not produced that quarter were simply deferred to future
quarters, with no expected impact on reserves. The stronger Brent
oil price environment more than offset the effect of lower
production volumes in second quarter 2021. As a result, we now
forecast higher EBITDA2 and cash flow2 in 2021, which is the second
time that we have increased our financial forecast this year. We
are very proud of our team for safely and efficiently restoring the
Company’s total average production1 to its current level of
approximately 29,000 BOPD, close to the highest levels achieved so
far in 2021. With a constructive oil price, a successful drilling
program in the first of 2021 and our first half 2021 oil price
hedges rolling off, we are very excited about the second half of
2021 and all of 2022."
2021 Guidance |
Previous Budget |
Updated Budget |
Annual Average Brent Oil Price ($/bbl) |
61.00 |
69.00 |
Total Company Production (BOPD) |
28,000-30,000 |
27,500-28,500 |
Operating Netback2 ($ million) |
310-330 |
340-360 |
EBITDA2 ($ million) |
255-275 |
265-285 |
Cash Flow2 ($ million) |
205-225 |
215-235 |
Total Capital ($ million) |
130-150 |
130-150 |
Free Cash Flow3 ($ million) |
65-85 |
75-95 |
Bank Credit Facility Balance @ December 31, 2021 ($ million) |
70-90 |
60-80 |
2021 Year-End Net Debt5 to Annualized Fourth Quarter 2021
EBITDA2 |
1.9-2.1 |
1.6-1.8 |
Number of Development Wells (gross) |
14-18 |
14-18 |
- Fully
Funded Capital Program: The 2021 capital budget of
$130-150 million is expected to be more than fully funded from the
updated 2021 cash flow2 forecast of $215-235 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 flow3 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 to a balance of $60-80 million by
December 31, 2021.
• Gran Tierra is also revising the Company’s forecast 2021
ranges for operating netback5 per bbl and certain expenses:
2021 Guidance |
Previous Budget |
Updated Budget |
Brent Oil Price ($/bbl) |
61.00 |
69.00 |
Expenses ($/bbl) |
|
|
Transportation and Quality Discount |
8.00-10.00 |
8.00-10.00 |
Royalties |
8.00-9.00 |
11.00-13.00 |
Oil and Gas Sales Price ($/bbl) |
42.00-44.00 |
47.00-49.00 |
Operating Costs |
11.00-13.00 |
12.00-14.00 |
Transportation (Pipeline) |
0.90-1.10 |
0.90-1.10 |
Operating Netback5
($/bbl) |
29.00-31.00 |
33.00-35.00 |
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 |
1 Approximate average production over the 11 day
period from July 1 to July 11, 2021.2 “Cash flow” refers to line
item “net cash provided by operating activities” under generally
accepted accounting principles in the United States of America
(“GAAP”).
"Operating netback" and earnings before interest, taxes and
depletion, depreciation and accretion
(“EBITDA”) are
non-GAAP measures and do not have a standardized meaning under
GAAP. Refer to "Non-GAAP Measures" in this press release.3 "Free
cash flow" is a non-GAAP measure and does not have a standardized
meaning under GAAP. Free cash flow is defined as “net cash provided
by operating activities” less capital spending. Refer to "Non-GAAP
Measures" in this press release.4 "Operating netback per bbl" is a
non-GAAP measure and does not have a standardized meaning under
GAAP. Refer to "Non-GAAP Measures" in this press release.5 "Net
debt" is a non-GAAP measure and does not have a standardized
meaning under GAAP. Refer to "Non-GAAP Measures" in this press
release.
Contact Information
For investor and media inquiries please contact:
Gary GuidryPresident & Chief Executive Officer
Ryan EllsonExecutive Vice President & Chief Financial
Officer
Rodger TrimbleVice President, Investor
Relations+1-403-265-3221info@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; the Company’s operations
including planned operations, 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 forward-looking
non-GAAP financial measures as further described herein. These
non-GAAP measures do not have a standardized meaning under GAAP.
Investors are cautioned that these measures should not be construed
as an alternative to net income or loss or other measures of
financial performance as determined in accordance with GAAP. Gran
Tierra's method of calculating these measures may differ from other
companies and, accordingly, it may not be comparable to similar
measures used by other companies. These non-GAAP financial measures
are presented along with the corresponding GAAP measure so as to
not imply that more emphasis should be placed on the non-GAAP
measure.
Gran Tierra is unable to provide forward-looking
net income and oil and gas sales, the GAAP measures most directly
comparable to the non-GAAP measures EBITDA and operating netback,
respectively, due to the impracticality of quantifying certain
components required by GAAP as a result of the inherent volatility
in the value of certain financial instruments held by the Company
and the inability to quantify the effectiveness of commodity price
derivatives used to manage the variability in cash flows associated
with the forecasted sale of its oil production and changes in
commodity prices.
Operating netback as presented is defined as
projected 2021 oil and gas sales less projected 2021 operating and
transportation expenses. Operating netback per bbl as presented is
defined as projected oil and gas sales price less 2021 forecasts of
transportation and quality discount, royalties, operating costs and
pipeline transportation from the 2021 budget Brent oil price
forecast as outlined in the table above. The most directly
comparable GAAP measures are oil and gas sales and oil and gas
sales price, respectively. Management believes that operating
netback and operating netback per bbl are useful supplemental
measures for management and investors to analyze financial
performance and provides an indication of the results generated by
our principal business activities prior to the consideration of
other income and expenses. Gran Tierra is unable to provide a
quantitative reconciliation of either forward-looking operating
netback or operating netback per bbl to its most directly
comparable forward-looking GAAP measure because management cannot
reliably predict certain of the necessary components of such
forward-looking GAAP measures.
EBITDA as presented is defined as projected 2021
net income adjusted for DD&A expenses, interest expense and
income tax expense or recovery. The most directly comparable GAAP
measure is net income. Management uses this financial measure to
analyze performance and income or loss generated by our principal
business activities prior to the consideration of how non-cash
items affect that income, and believes that this financial measure
is also useful supplemental information for investors to analyze
performance and our financial results. Gran Tierra is unable to
provide a quantitative reconciliation of forward-looking EBITDA to
its most directly comparable forward-looking GAAP measure because
management cannot reliably predict certain of the necessary
components of such forward-looking GAAP measure.
Free cash flow as presented is defined as GAAP
projected "net cash provided by operating activities" less
projected 2021 capital spending. The most directly comparable GAAP
measure is net cash provided by operating activities. Management
believes that free cash flow is a useful supplemental measure for
management and investors to in order to evaluate the financial
sustainability of the Company's business. Gran Tierra is unable to
provide a quantitative reconciliation of forward-looking free cash
flow to its most directly comparable forward-looking GAAP measure
because management cannot reliably predict certain of the necessary
components of such forward-looking GAAP measure.
Net Debt as presented is defined as projected
working capital at December 31, 2021, less $600 million in senior
notes and borrowings under the credit facility. Management believes
that net debt is a useful supplemental measure for management and
investors to in order to evaluate the financial sustainability of
the Company's business and leverage. The most directly comparable
GAAP measure is total debt. Gran Tierra is unable to provide a
quantitative reconciliation of forward-looking net debt to its most
directly comparable forward-looking GAAP measure because management
cannot reliably predict certain of the necessary components of such
forward-looking GAAP measure.
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.