Gran Tierra Energy Inc.
(“Gran Tierra” or
the “Company”) (NYSE American:GTE)(TSX:GTE)(LSE:GTE) today
announced its 2022 capital budget and production 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:
- 2022
Guidance:
- Gran Tierra is
forecasting the following ranges for the Company’s 2022
budget:
2022 Budget |
Base Case Case |
High Case |
Annual Average Brent Oil Price ($/bbl) |
70.00 |
80.00 |
Total Company Production (BOPD) |
30,500-32,500 |
30,500-32,500 |
Operating Netback4 ($ million) |
390-410 |
470-490 |
EBITDA3 ($ million) |
360-380 |
440-460 |
Cash Flow1 ($ million) |
270-290 |
330-350 |
Total Capital ($ million) |
220-240 |
220-240 |
Free Cash Flow2 ($ million) |
40-60 |
100-120 |
Bank Credit Facility Balance @ December 31, 2022 ($ million) |
0 |
0 |
Number of Development Wells (gross) |
20-25 |
20-25 |
Number of Exploration Wells (gross) |
6-7 |
6-7 |
- 2022
Capital Program – Profitable Production Growth, Debt Reduction
& High Impact Exploration: Gran Tierra has a large,
diversified development and exploration portfolio in Colombia. The
Company’s planned 2022 capital program is a balanced program
between development and optimization of existing assets and
potentially high-impact exploration. Gran Tierra expects to
allocate approximately 70% of its 2022 capital program towards
development activities in its core assets: $70 million for the
Acordionero field (14-16 development wells) in the Middle Magdalena
Valley Basin and $40 million and $30 million respectively to the
Costayaco (4-5 development wells) and Moqueta (3 development wells)
fields in the Putumayo Basin. The Moqueta work program is expected
to commence in the second half of 2022 and is planned to continue
into 2023. The remaining 30% of the capital program is expected to
be allocated toward exploration-related activities throughout the
Company’s portfolio, including up to 6-7 new exploration wells: 4
wells in Colombia and 2-3 wells in Ecuador. The exploration program
is designed to focus on short-cycle time, near-field prospects in
proven basins with access to infrastructure.
- Fully
Funded Capital Program Generating Material Free Cash
Flow2: Gran Tierra’s
Base Case 2022 capital budget of $220-240 million is expected to be
fully funded from the Base Case 2022 cash flow1 forecast of
$270-290 million, based on an assumed $70.00/bbl Brent oil price.
Gran Tierra remains focused on generating strong free cash flow2
and accelerated debt repayment. The Company’s midpoint 2022 EBITDA3
guidance of $370 million is well above the midpoint of 2022 capital
expenditures guidance of $230 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
quickly optimize its development and exploration programs with
changes, either up or down, in oil prices.
- Clear
Path to Debt Reduction: Gran Tierra expects its credit
facility to be paid down to a balance of under $70 million by
December 31, 2021 and, with 2022 expected free cash flow2 and
recovery of taxes receivable, to be fully paid off in the first
half of 2022.
- Recent
Fitch Upgrade: Fitch Ratings recently upgraded Gran Tierra
Energy International Holdings Ltd’s long-term foreign and local
currency issuer default ratings to ‘B-’ from ‘CCC+’ and has also
upgraded the Company’s senior unsecured notes ratings to ‘B-’/‘RR4’
from ‘CCC+’/‘RR4’ with a stable outlook. The upgrades reflect Gran
Tierra’s improved debt profile in 2021.
- Gran Tierra
expects approximate 2022 expenses and operating netback per bbl4 to
be in the following ranges:
2022 Budget |
Base Case |
High Case |
Brent Oil Price ($/bbl) |
70.00 |
80.00 |
Expenses ($/bbl) |
|
|
Transportation and Quality Discount |
11.00-13.00 |
11.00-13.00 |
Royalties |
10.00-11.00 |
14.00-15.00 |
Oil and Gas Sales Price ($/bbl) |
46.00-49.00 |
52.00-55.00 |
Operating Costs |
11.00-13.00 |
11.00-13.00 |
Transportation (Pipeline) |
0.90-1.10 |
0.90-1.10 |
Operating Netback ($/bbl)4 |
34.00-36.00 |
40.00-42.00 |
General and Administrative |
1.50-2.50 |
1.50-2.50 |
Interest and Financing |
3.50-4.00 |
3.50-4.00 |
Current Tax, expected to be paid in the second
quarter of 2023 |
4.00-4.50 |
5.50-6.00 |
- 2022
Hedges In Place Designed To Protect Cash Flows: The
Company currently has the following Brent oil price hedges in
place:
|
|
Strike Prices |
Time Period |
Volume (BOPD) |
Swaps ($/bbl) |
Sold Put ($/bbl) |
Purchased Put ($/bbl) |
Sold Call ($/bbl) |
Premium ($/bbl) |
January 1-June 30, 2022 |
1,000 |
- |
60.00 |
70.00 |
89.40 |
- |
January 1-June 30, 2022 |
1,000 |
78.00 |
- |
- |
- |
- |
January 1-June 30, 2022 |
1,000 |
- |
- |
70.00 |
- |
4.00 |
The Company expects to hedge approximately
25-40% of forecasted production on a rolling basis.
- On Track
to Achieve 2021 Production Guidance: Following the latest
blockades in early fourth quarter 2021, Gran Tierra quickly
restored production volumes from the Suroriente and PUT-7
Blocks.
Message to Shareholders
Gary Guidry, President and Chief Executive
Officer of Gran Tierra, commented: "Our teams’ excellent work
throughout 2021 has strongly positioned the Company for continued
development and enhanced oil recovery activities in 2022 to
optimize the value from each of our assets. In addition, we plan to
allocate modest capital to prioritized exploration drilling
opportunities. Our forecast 2022 capital budget is a balanced,
returns-focused program which is expected to provide free cash
flow2 generation, ongoing strengthening of our balance sheet,
optimization of ultimate oil reserves value and exposure to
exploration upside. We see material potential in our exploration
portfolio located in highly prospective geological trends in
Colombia and Ecuador. We believe Gran Tierra is well-positioned to
navigate the current volatile environment with our low base
decline, conventional oil asset base and the operational control
for capital allocation and timing, while maintaining a low-cost
structure and the safety of our people."
1 “Cash flow” refers to line item “net cash
provided by operating activities” under generally accepted
accounting principles in the United States of America
(“GAAP”).2 “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.3 Earnings before interest, taxes and depletion,
depreciation and accretion (“EBITDA”) is a
non-GAAP measure and does not have a standardized meaning under
GAAP. Refer to "Non-GAAP Measures" in this press release.4
“Operating netback” and “Operating netback per bbl” are non-GAAP
measures and do not have standardized meanings 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
+1-403-265-3221
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 new 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 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. The
Company’s Canadian securities regulatory filings are available 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, 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 “expect”,
“plan”, “can,” “will,” “should,” “guidance,” “forecast,” “signal,”
“measures taken to” and “believes”, derivations thereof and similar
terms identify forward-looking statements. In particular, but
without limiting the foregoing, this press release contains
forward-looking statements regarding: the Company’s capital budget
amount and uses; ability of hedges to protect cash flows, the
Company’s strategies related to drilling and operation activities;
expectations regarding reservoir prospects and production amounts;
future well results (including initial oil production rates and
productive capacity based on past performance); expected future net
cash provided by operating activities (described in this press
release as “cash flow”), free cash flow, operating netback,
operating netback per bbl, EBITDA and certain associated metrics;
anticipated capital expenditures, including the location and impact
of capital expenditures; operating and general and administrative
costs; production guidance for 2021 and 2022; the impact of the
Company’s COVID-19 protocols; and the Company’s expectations as to
debt repayment and its positioning for 2021 and 2022. 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, pricing and cost estimates (including with
respect to commodity pricing and exchange rates), and the general
continuance of assumed operational, regulatory and industry
conditions in Colombia and Ecuador, and the ability of Gran Tierra
to execute its business and operational plans in the manner
currently planned.
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: 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; other
disruptions to local operations; global health (including the
ongoing COVID-19 pandemic); global and regional changes in the
demand, supply, prices, differentials or other market conditions
affecting oil and gas, including changes resulting from a global
health crisis or from the imposition or lifting of crude oil
production quotas or other actions that might be imposed by OPEC
and other producing countries and the resulting company or
third-party actions in response to such changes; changes in
commodity prices, including a prolonged decline in these prices
relative to historical or future expected levels; the risk that
current global economic and credit 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; prices and markets for oil and natural gas are
unpredictable and volatile; the accuracy of productive capacity of
any particular field; 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; 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; 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 and its other filings with the Securities
and Exchange Commission. These filings are available on the
Securities and Exchange Commission 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. 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, total
capital and certain expenses and 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 2022. 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. 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 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.
Presentation of Oil and Gas
Information
Barrels of oil equivalent (“BOE”) have been
converted on the basis of 6 thousand cubic feet ("Mcf") of natural
gas to 1 bbl of oil. BOEs may be misleading, particularly if used
in isolation. A BOE conversion ratio of 6 Mcf: 1 bbl is based on an
energy equivalency conversion method primarily applicable at the
burner tip and does not represent a value equivalency at the
wellhead. In addition, given that the value ratio based on the
current price of oil as compared with natural gas is significantly
different from the energy equivalent of six to one, utilizing a BOE
conversion ratio of 6 Mcf: 1 bbl would be misleading as an
indication of value.
This press release contains certain oil and gas
metrics, including operating netback and operating netback per bbl,
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 are calculated as described in this
press release and have been included herein to provide readers with
additional measures to evaluate the Company’s performance; however,
such measures are not reliable indicators of the future performance
of the Company and future performance may not compare to the
performance in previous periods.
References to 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 no 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.
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, net cash provided by operating activities, and oil and
gas sales, the GAAP measures most directly comparable to the
non-GAAP measures EBITDA, free cash flow 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 2022 oil and gas sales less projected 2022 operating and
transportation expenses. Operating netback per bbl as presented is
defined as projected oil and gas sales price less 2022 forecasts of
transportation and quality discount, royalties, operating costs and
pipeline transportation from the 2022 budget Brent oil price
forecast as outlined in the tables 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 2022
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 2022 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.
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