Gran Tierra Energy Inc. ("
Gran Tierra" or the
"
Company")
(NYSE American:GTE)(NYSE
MKT:GTE)(TSX:GTE)(LSE:GTE), a company focused on
international oil exploration and production with assets currently
in Colombia and Ecuador, today announced the Company's 2021
year-end reserves as evaluated by the Company's independent
qualified reserves evaluator McDaniel & Associates Consultants
Ltd. ("
McDaniel") in a report with an effective
date of December 31, 2021 (the "
GTE McDaniel Reserves
Report").
All dollar amounts are in United States
("U.S.") dollars and all reserves and production
volumes are on a working interest before royalties
("WI") basis. Production is expressed in barrels
("bbl") of oil per day ("bopd"),
while reserves are expressed in bbl, bbl of oil equivalent
("boe") or million boe ("MMBOE"),
unless otherwise indicated. All reserves values, future net revenue
and ancillary information contained in this press release have been
prepared by McDaniel and calculated in compliance with Canadian
National Instrument 51-101 – Standards of Disclosure for Oil and
Gas Activities (“NI 51-101”) and the Canadian Oil
and Gas Evaluation Handbook ("COGEH") and derived
from the GTE McDaniel Reserves Report, unless otherwise expressly
stated. The following reserves categories are discussed in this
press release: Proved Developed Producing ("PDP"),
Proved ("1P"), 1P plus Probable
("2P") and 2P plus Possible
("3P").
Highlights
2021 Year-End Reserves and
Values
Before Tax (as of December 31, 2021) |
Units |
1P |
2P |
3P |
Reserves |
MMBOE |
81 |
125 |
162 |
Net Present Value at 10% Discount ("NPV10") |
$ million |
1,625 |
2,401 |
3,082 |
Debt1 |
$ million |
668 |
668 |
668 |
Net Asset Value (NPV10 less Debt) ("NAV") |
$ million |
957 |
1,733 |
2,414 |
Outstanding Shares |
million |
367 |
367 |
367 |
NAV per Share |
$/share |
2.61 |
4.72 |
6.58 |
NAV per Share Change from December 31, 2020 |
% |
127% |
45% |
31% |
After Tax (as of December 31, 2021) |
Units |
1P |
2P |
3P |
Reserves |
MMBOE |
81 |
125 |
162 |
NPV10 |
$ million |
1,250 |
1,739 |
2,169 |
Debt1 |
$ million |
668 |
668 |
668 |
NAV |
$ million |
582 |
1,071 |
1,501 |
Outstanding Shares |
million |
367 |
367 |
367 |
NAV per Share |
$/share |
1.59 |
2.92 |
4.09 |
NAV per Share Change from December 31, 2020 |
% |
124% |
31% |
18% |
-
During 2021, Gran Tierra achieved:
-
Material growth in its 2021 year-end 1P NPV10 before tax valuation,
which increased by 36% compared to 2020 year-end and 2P NPV10
before tax valuation, which increased by 22% over the same time
period, driven by a successful development program and a strong
recovery in oil prices. The Company's 2021 year-end 1P NPV10 and 2P
NPV10 after tax valuations increased 21% and 9% respectively,
compared to 2020 year-end.
-
Strong PDP reserves replacement of 148%, with PDP reserves
additions of 14.3 MMBOE.
-
Strong 1P reserves replacement of 123%, with 1P reserves additions
of 11.9 MMBOE.
-
The material PDP and 1P reserve additions were largely driven by
successful development drilling results at Acordionero and
Costayaco, where the Company achieved on-budget development
drilling costs and ongoing successful waterflooding
operations.
-
Finding and development costs ("F&D")
including future development costs ("FDC") of
$9.51/boe on a PDP basis and $18.44/boe on a 1P basis.
-
Three-year average F&D including FDC of $17.08/boe on a 1P
basis.
-
Strong F&D recycle ratios including FDC of 4.0 times (PDP) and
2.0 times (1P).
-
Significant reserves additions at Acordionero: 7.4 MMBOE (PDP) and
7.5 MMBOE (1P).
-
Gran Tierra's four major oil assets, Acordionero, Costayaco,
Moqueta and Suroriente (all on waterflood) represent 84% of the
Company's 1P reserves and 78% of its 2P reserves.
-
The Company is benefiting from ongoing material cost reductions for
development drilling, completions and workovers in the Acordionero
oil field, Gran Tierra's largest oil asset:
-
The Company drilled 20 development wells in Acordionero during
2021
-
These new wells were drilled for an average cost of approximately
$1.1 million per well, a 27% reduction from the 2020 average and a
42% reduction from the 2019 average
-
These new wells' completion costs averaged approximately $0.7
million per well, down 14% from the 2020 average and down 41% from
the 2019 average
-
The average 2021 workover cost of an existing well was $0.4 million
per well, down 53% from the 2019 average
-
PDP reserves account for 59% of 1P reserves and 1P reserves account
for 65% of 2P reserves, demonstrating the strength of the Company's
reserves base and the potential future conversion of Probable
reserves into 1P reserves and Proved Undeveloped reserves into PDP
reserves.
-
Gran Tierra's mature waterflood assets, Costayaco and Moqueta,
continued to grow and deliver value, with total reserves additions
of 4.6 MMBOE (PDP) and 4.8 MMBOE (1P), respectively.
-
FDC are forecast to be $382 million for 1P reserves and $578
million for 2P reserves; increases in FDC relative to 2020 reflect
that McDaniel has now recognized 61 Proved Undeveloped future
drilling locations (up from 48 in 2020) and 94 Proved plus Probable
Undeveloped future drilling locations (up from 81 in 2020).
Gary Guidry, President and Chief Executive
Officer of Gran Tierra, commented: “During 2021, Gran Tierra
achieved strong 148% PDP and 123% 1P reserves replacement through
our successful results from our development drilling, waterflooding
programs and field performance. We completed our 2021 development
plan on-budget including waterflooding efforts and development
drilling in the Acordionero and Costayaco oil fields, as well as
workover activities in the Moqueta oil field. The success the
Company achieved in 2021 also reflects our ongoing conversion of
reserves from the Probable to the Proved category. With 94 Proved
plus Probable Undeveloped future drilling locations, Gran Tierra is
well positioned to continue to grow the Company's production in
2022 and beyond.
During 2021, a combination of our ongoing
reductions in per well drilling, completion and workover costs, our
focus on maintaining low operating costs and the strong rebound in
oil prices drove significant increases in our NAV per share after
tax values to $1.59 per share (1P), up 124% from 2020, and $2.92
per share (2P), up 31% from 2020. With this significant growth in
our NAV per share values in 2021, we believe Gran Tierra is well
positioned to potentially offer exceptional long-term stakeholder
value."
Future Net Revenue
Future net revenue reflects McDaniel’s forecast
of revenue estimated using forecast prices and costs, arising from
the anticipated development and production of reserves, after the
deduction of royalties, operating costs, development costs and
abandonment and reclamation costs but before consideration of
indirect costs such as administrative, overhead and other
miscellaneous expenses. The estimate of future net revenue below
does not necessarily represent fair market value.
Consolidated Properties at December 31, 2021 |
Proved (1P) Total Future Net Revenue ($
million) |
Forecast Prices and Costs |
|
Sales Revenue |
Total Royalties |
Operating Costs |
Future Development Capital |
Abandonment and Reclamation Costs |
Future Net Revenue Before Future Taxes |
Future Taxes |
Future Net Revenue After Future Taxes* |
2022-2026 (5 Years) |
3,288 |
(607 |
) |
(706 |
) |
(382 |
) |
(2 |
) |
1,591 |
(330 |
) |
1,261 |
Remainder |
1,684 |
(296 |
) |
(651 |
) |
— |
|
(59 |
) |
678 |
(207 |
) |
471 |
Total (Undiscounted) |
4,972 |
(903 |
) |
(1,357 |
) |
(382 |
) |
(61 |
) |
2,269 |
(537 |
) |
1,732 |
Total (Discounted @ 10%) |
3,483 |
(638 |
) |
(867 |
) |
(335 |
) |
(18 |
) |
1,625 |
(375 |
) |
1,250 |
Consolidated Properties at December 31, 2021 |
Proved Plus Probable (2P) Total Future Net Revenue ($
million) |
Forecast Prices and Costs |
Years |
Sales Revenue |
Total Royalties |
Operating Costs |
Future Development Capital |
Abandonment and Reclamation Costs |
Future Net Revenue Before Future Taxes |
Future Taxes |
Future Net Revenue After Future Taxes* |
2022-2026 (5 Years) |
4,101 |
(755 |
) |
(805 |
) |
(578 |
) |
(2 |
) |
1,961 |
(484 |
) |
1,477 |
Remainder |
3,724 |
(669 |
) |
(1,115 |
) |
— |
|
(73 |
) |
1,867 |
(616 |
) |
1,251 |
Total (Undiscounted) |
7,825 |
(1,424 |
) |
(1,920 |
) |
(578 |
) |
(75 |
) |
3,828 |
(1,100 |
) |
2,728 |
Total (Discounted @ 10%) |
4,902 |
(898 |
) |
(1,101 |
) |
(484 |
) |
(18 |
) |
2,401 |
(662 |
) |
1,739 |
Consolidated Properties at December 31, 2021 |
Proved Plus Probable Plus Possible (3P) Total Future Net
Revenue ($ million) |
Forecast Prices and Costs |
Years |
Sales Revenue |
Total Royalties |
Operating Costs |
Future Development Capital |
Abandonment and Reclamation Costs |
Future Net Revenue Before Future Taxes |
Future Taxes |
Future Net Revenue After Future Taxes* |
2022-2026 (5 Years) |
4,749 |
(875 |
) |
(879 |
) |
(707 |
) |
(1 |
) |
2,287 |
(631 |
) |
1,656 |
Remainder |
5,559 |
(1,068 |
) |
(1,494 |
) |
— |
|
(83 |
) |
2,914 |
(969 |
) |
1,945 |
Total (Undiscounted) |
10,308 |
(1,943 |
) |
(2,373 |
) |
(707 |
) |
(84 |
) |
5,201 |
(1,600 |
) |
3,601 |
Total (Discounted @ 10%) |
6,087 |
(1,136 |
) |
(1,275 |
) |
(577 |
) |
(17 |
) |
3,082 |
(913 |
) |
2,169 |
*The after-tax net present value of the
Company's oil and gas properties reflects the tax burden on the
properties on a stand-alone basis. It does not consider the
corporate tax situation, or tax planning. It does not provide an
estimate of the value at the Company level which may be
significantly different. The Company's financial statements, when
available for the year ended December 31, 2021, should be
consulted for information at the Company level.
Total Company WI Reserves
The following table summarizes Gran Tierra’s NI
51-101 and COGEH compliant reserves in Colombia and Ecuador derived
from the GTE McDaniel Reserves Report calculated using forecast oil
and gas prices and costs. Gran Tierra has determined that Ecuador
reserves, included in Total Probable and Total Possible reserve
categories for Light and Medium Crude Oil, are not material to
present separately on a country basis. Therefore all amounts are
presented on a consolidated basis.
|
Light and Medium Crude Oil |
Heavy Crude Oil |
Conventional Natural Gas |
2021 Year-End |
Reserves Category |
Mbbl* |
Mbbl* |
MMcf** |
Mboe*** |
Proved Developed Producing |
22,320 |
25,195 |
890 |
47,663 |
Proved Developed
Non-Producing |
2,509 |
6 |
— |
2,515 |
Proved Undeveloped |
14,091 |
16,405 |
844 |
30,637 |
Total
Proved |
38,920 |
41,606 |
1,734 |
80,815 |
Total Probable |
19,849 |
23,882 |
872 |
43,876 |
Total Proved plus
Probable |
58,769 |
65,488 |
2,606 |
124,691 |
Total Possible |
22,419 |
15,257 |
703 |
37,794 |
Total Proved plus Probable plus Possible |
81,188 |
80,745 |
3,309 |
162,485 |
*Mbbl (thousand barrels of oil). **MMcf (million cubic
feet).***MBOE (thousand boe).
Net Present Value Summary
Gran Tierra's reserves were evaluated using
McDaniel's commodity price forecasts at January 1, 2022. It should
not be assumed that the net present value of cash flow estimated by
McDaniel represents the fair market value of the reserves.
Total Company |
Discount Rate |
($ millions) |
0% |
|
5% |
|
10% |
|
15% |
|
20% |
|
Before tax |
|
|
|
|
|
Proved Developed
Producing |
1,363 |
|
1,197 |
|
1,069 |
|
968 |
|
887 |
|
Proved Developed
Non-Producing |
71 |
|
55 |
|
44 |
|
36 |
|
30 |
|
Proved Undeveloped |
835 |
|
647 |
|
512 |
|
412 |
|
337 |
|
Total Proved |
2,269 |
|
1,899 |
|
1,625 |
|
1,416 |
|
1,254 |
|
Total Probable |
1,559 |
|
1,076 |
|
776 |
|
582 |
|
450 |
|
Total Proved plus
Probable |
3,828 |
|
2,975 |
|
2,401 |
|
1,998 |
|
1,704 |
|
Total Possible |
1,373 |
|
944 |
|
681 |
|
512 |
|
398 |
|
Total
Proved plus Probable plus Possible |
5,201 |
|
3,919 |
|
3,082 |
|
2,510 |
|
2,102 |
|
After tax |
|
|
|
|
|
Proved Developed
Producing |
1,124 |
|
994 |
|
891 |
|
809 |
|
742 |
|
Proved Developed
Non-Producing |
53 |
|
42 |
|
33 |
|
27 |
|
22 |
|
Proved Undeveloped |
555 |
|
421 |
|
326 |
|
254 |
|
201 |
|
Total Proved |
1,732 |
|
1,457 |
|
1,250 |
|
1,090 |
|
965 |
|
Total Probable |
996 |
|
684 |
|
489 |
|
363 |
|
277 |
|
Total Proved plus
Probable |
2,728 |
|
2,141 |
|
1,739 |
|
1,453 |
|
1,242 |
|
Total Possible |
873 |
|
599 |
|
430 |
|
320 |
|
247 |
|
Total
Proved plus Probable plus Possible |
3,601 |
|
2,740 |
|
2,169 |
|
1,773 |
|
1,489 |
|
Total Company WI Reserves Reconciliation
|
Proved |
Proved plus Probable |
Proved plus Probable plus Possible |
|
MBOE |
MBOE |
MBOE |
December 31, 2020 |
78,631 |
132,558 |
174,450 |
Extensions |
9,374 |
10,484 |
13,252 |
Improved Recoveries |
2,478 |
— |
— |
Technical Revisions |
(1,011) |
(9,463) |
(16,416) |
Discoveries |
— |
— |
— |
Economic Factors |
1,018 |
787 |
874 |
Production |
(9,675) |
(9,675) |
(9,675) |
December 31, 2021 |
80,815 |
124,691 |
162,485 |
Reserve Life Index
|
December 31, 2021* |
Total Proved |
8 |
Total Proved plus
Probable |
12 |
Total Proved plus Probable plus Possible |
15 |
* Calculated using average fourth quarter 2021 WI production of
29,493 bopd.
Future Development Costs
FDC reflects McDaniel's best estimate of what it
will cost to bring the Proved Undeveloped and Probable reserves on
production. Changes in forecast FDC occur annually as a result of
development activities, acquisition and disposition activities, and
changes in capital cost estimates based on improvements in well
design and performance, as well as changes in service costs. FDC
for 2P reserves increased to $578 million at year-end 2021 from
$565 million at year-end 2020. The increase in FDC in 2021 was
predominantly attributed to the increase in the numbers of future
development well locations identified by McDaniel in the
Acordionero field.
($ millions) |
Total Proved |
Total Proved Plus Probable |
2022 |
137 |
140 |
2023 |
132 |
160 |
2024 |
94 |
172 |
2025 |
17 |
76 |
2026 |
2 |
30 |
Remainder |
— |
— |
Total (undiscounted) |
382 |
578 |
($) millions |
Proved |
Proved plus Probable |
Proved plus Probable plus Possible |
Acordionero |
157 |
189 |
189 |
Suroriente |
14 |
14 |
14 |
Chaza Block (Costayaco &
Moqueta) |
95 |
113 |
121 |
Other |
116 |
262 |
383 |
Total FDC Costs (undiscounted) |
382 |
578 |
707 |
Finding and Development
Costs
Reserves (MBOE) |
|
Year Ended December 31, 2021 |
Proved Developed
Producing |
47,663 |
Total Proved |
80,815 |
Capital Expenditures ($000s) |
|
- including and
excluding acquired properties |
148,016 |
Operating Netbacks* ($/bbl, per WI sales
volumes) |
|
Operating Netback* - fourth quarter |
37.76 |
*Operating Netback is a Non-GAAP measure and does not have a
standardized meaning under GAAP. Operating netback as presented is
defined as oil sales less operating and transportation expenses.
See "Non-GAAP Measures" in this press release.
Finding and Development Costs, Excluding
FDC*
Year Ended December 31, 2021 |
Proved Developed
Producing |
|
|
Reserve Additions (MBOE) |
|
14,338 |
F&D Costs ($/BOE) |
|
10.32 |
F&D
Recycle Ratio |
|
3.7 |
Finding and Development Costs, Including
FDC*
Year Ended December 31, 2021 |
Proved Developed
Producing |
|
|
Change in FDC ($000s) |
|
(11,616 |
) |
Reserve Additions (MBOE) |
|
14,338 |
|
F&D Costs ($/BOE) |
|
9.51 |
|
F&D
Recycle Ratio |
|
4.0 |
|
Finding and Development Costs ,
Excluding FDC*
Year Ended December 31, 2021 |
Total
Proved |
|
|
Reserve Additions (MBOE) |
|
11,860 |
F&D Costs ($/BOE) |
|
12.48 |
F&D
Recycle Ratio |
|
3.0 |
Finding and Development Costs ,
Including FDC*
Year Ended December 31, 2021 |
Total
Proved |
|
|
Change in FDC ($000s) |
|
70,697 |
Reserve Additions (MBOE) |
|
11,860 |
F&D Costs ($/BOE) |
|
18.44 |
F&D
Recycle Ratio |
|
2.0 |
*In all cases, the F&D number is calculated
by dividing the identified capital expenditures by the applicable
reserves additions both before and after changes in FDC costs. Both
F&D costs take into account reserves revisions during the year
on a per BOE basis. F&D recycle ratio is defined as fourth
quarter operating netback per working interest sales volume BOE
divided by the appropriate F&D costs on a per BOE basis. The
aggregate of the exploration and development costs incurred in the
financial year and the changes during that year in estimated future
development costs may not reflect the total F&D costs related
to reserves additions for that year.
Forecast prices
The pricing assumptions used in estimating NI
51-101 and COGEH compliant reserves data disclosed above with
respect to net present values of future net revenue are set forth
below. The price forecasts are based on McDaniel’s standard price
forecast effective January 1, 2022. McDaniel is an independent
qualified reserves evaluator and auditor pursuant to NI 51-101.
|
Brent Crude Oil |
WTI Crude Oil |
Year |
$US/bbl |
$US/bbl |
|
January 1, 2022 |
January 1, 2022 |
2022 |
$75.00 |
$72.50 |
2023 |
$69.87 |
$67.32 |
2024 |
$67.63 |
$65.03 |
2025 |
$68.98 |
$66.33 |
2026 |
$70.36 |
$67.65 |
About Gran Tierra Energy Inc.
Gran Tierra Energy Inc. is an international oil
and gas exploration and production company, headquartered in
Calgary, Canada, incorporated in the United States, trading on the
NYSE American (GTE), the Toronto Stock Exchange (GTE) and the
London Stock Exchange (GTE), with assets currently in Colombia and
Ecuador. Gran Tierra holds interests in producing and prospective
properties in Colombia and prospective properties in Ecuador. Gran
Tierra has a strategy that focuses on establishing a portfolio of
producing properties, plus production enhancement and exploration
opportunities to provide a base for future growth.
Gran Tierra's Securities and Exchange Commission filings are
available on the SEC website at www.sec.gov and on SEDAR at
www.sedar.com.
Contact Information
For investor and media inquiries please contact:
Gary Guidry, Chief Executive Officer
Ryan Ellson, Executive Vice President & Chief Financial
Officer
Rodger Trimble, Vice President, Investor RelationsTel:
+1.403.265.3221For more information on Gran Tierra please go to:
www.grantierra.com.
1 Based on estimated year-end 2021 debt of $668
million comprised of Senior Notes of $600 million (gross) and $68
million under our credit facility, prepared in accordance with
GAAP.
FORWARD LOOKING STATEMENTS
ADVISORY
This press release contains opinions, forecasts,
projections, and other statements about future events or results
that constitute forward-looking statements within the meaning of
the United States Private Securities Litigation Reform Act of 1995,
Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended, and
financial outlook and forward looking information within the
meaning of applicable Canadian securities laws (collectively,
"forward-looking statements"), which can be identified by such
terms as “expect,” “plan,” "forecast," “project,” "objective,"
“will,” “believe,” "should," "could," "allow" and other terms that
are forward-looking in nature. Such forward-looking statements
include, but are not limited to, the Company's expectations
regarding its capital program, and ability to fund the Company’s
exploration program over a period of time, 2022 and beyond outlook,
the benefits of reduced capital spending and G&A expenses, well
performance, production, the restart of production and workover
activity, future development costs, infrastructure schedules,
waterflood impacts and plans, growth of referenced reserves,
forecast prices, five-year expected oil sales and cash flow and net
revenue, estimated recovery factors, liquidity and access to
capital, the Company’s strategies and results thereof, the
Company’s operations including planned operations and developments,
the impact of the COVID-19 pandemic and the Company’s response
thereto, disruptions to operations and the decline in industry
conditions, and expectations regarding environmental
commitments.
The forward-looking statements contained in this
press release reflect several material factors and expectations and
assumptions of Gran Tierra including, without limitation, that Gran
Tierra will continue to conduct its operations in a manner
consistent with its current expectations, the accuracy of testing
and production results and seismic data, pricing and cost estimates
(including with respect to commodity pricing and exchange rates),
rig availability, the effects of drilling down-dip, the effects of
waterflood and multi-stage fracture stimulation operations, the
extent and effect of delivery disruptions, and the general
continuance of current or, where applicable, assumed operational,
regulatory and industry conditions including in areas of potential
expansion, and the ability of Gran Tierra to execute its current
business and operational plans in the manner currently planned.
Gran Tierra believes the material factors, expectations and
assumptions reflected in the forward-looking statements are
reasonable at this time but no assurance can be given that these
factors, expectations and assumptions will prove to be correct.
Among the important factors that could cause
actual results to differ materially from those indicated by the
forward-looking statements in this press release are: 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.
Statements relating to “reserves” are also
deemed to be forward-looking statements, as they involve the
implied assessment, based on certain estimates and assumptions,
including that the reserves described can be profitably produced in
the future.
Guidance is uncertain, particularly when given
over extended periods of time, and results may be materially
different. Although the current capital spending program and long
term strategy of Gran Tierra is based upon the current expectations
of the management of Gran Tierra, should any one of a number of
issues arise, Gran Tierra may find it necessary to alter its
business strategy and/or capital spending program and there can be
no assurance as at the date of this press release as to how those
funds may be reallocated or strategy changed and how that would
impact Gran Tierra's results of operations and financing position.
In particular, the unprecedented nature of the current pandemic and
the resulting economic conditions 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 securities laws. Gran Tierra’s
forward-looking statements are expressly qualified in their
entirety by this cautionary statement.
The estimates of cash flow and interest and
certain expenses 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 and for the next five years to allow readers
to assess the Company’s ability to fund its programs. 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.
Non-GAAP Measures
This press release includes non-GAAP measures
which do not have a standardized meaning under GAAP. Investors are
cautioned that these measures should not be construed as
alternatives to net 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.
Operating netback as presented is defined as oil
sales less operating and transportation expenses. Management
believes that operating netback is a useful supplemental measure
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 operating netback per boe to the most
directly comparable measure calculated and presented in accordance
with GAAP is as follows:
|
Three months ended December 31, 2021 |
|
(Thousands of U.S Dollars) |
($/bbl, per WI sales volumes) |
Oil sales |
$ |
146,287 |
|
$ |
53.26 |
|
Operating expenses |
|
(39,708 |
) |
|
(14.46 |
) |
Transportation expenses |
|
(2,867 |
) |
|
(1.04 |
) |
Operating netback |
$ |
103,712 |
|
$ |
37.76 |
|
Unaudited Financial Information
Certain financial and operating results included
in this press release, including debt, capital expenditures, and
production information, are based on unaudited estimated results.
These estimated results are subject to change upon completion of
the Company's audited financial statements for the year ended
December 31, 2021, and changes could be material. Gran Tierra
anticipates filing its audited financial statements and related
management's discussion and analysis for the year ended
December 31, 2021 on or before February 22, 2022.
DISCLOSURE OF OIL AND GAS
INFORMATION
Gran Tierra's Statement of Reserves Data and
Other Oil and Gas Information on Form 51-101F1 dated effective as
at December 31, 2021, which will include further disclosure of
its oil and gas reserves and other oil and gas information in
accordance with NI 51-101 forming the basis of this press release,
will be available on SEDAR at www.sedar.com on or before
February 22, 2022.
All reserves values, future net revenue and
ancillary information contained in this press release as of
December 31, 2020 are derived from a report with an effective date
of December 31, 2020 prepared by McDaniel and calculated in
compliance with NI 51-101 and COGEH.
Estimates of net present value and future net
revenue contained herein do not necessarily represent fair market
value. Estimates of reserves and future net revenue for
individual properties may not reflect the same level of confidence
as estimates of reserves and future net revenue for all properties,
due to the effect of aggregation. There is no assurance that the
forecast price and cost assumptions applied by McDaniel in
evaluating Gran Tierra’s reserves will be attained and variances
could be material. All reserves assigned in the GTE
McDaniel Reserves Report are located in Colombia and Ecuador and
presented on a consolidated basis.
All evaluations of future net revenue contained
in the GTE McDaniel Reserves Report are after the deduction of
royalties, operating costs, development costs, production costs and
abandonment and reclamation costs but before consideration of
indirect costs such as administrative, overhead and other
miscellaneous expenses. It should not be assumed that the estimates
of future net revenues presented in this press release represent
the fair market value of the reserves. There are numerous
uncertainties inherent in estimating quantities of crude oil,
reserves and the future cash flows attributed to such reserves. The
reserve and associated cash flow information set forth in the GTE
McDaniel Reserves Report are estimates only.
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. Drilling locations disclosed herein are derived
from the GTE McDaniel Reserves Report and account for drilling
locations that have associated Proved and/or Probable reserves, as
applicable. 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.
Definitions
Proved reserves are those reserves that can be
estimated with a high degree of certainty to be recoverable. It is
likely that the actual remaining quantities recovered will exceed
the estimated proved reserves.
Probable reserves are those additional reserves
that are less certain to be recovered than proved reserves. It is
equally likely that the actual remaining quantities recovered will
be greater or less than the sum of the estimated proved plus
probable reserves.
Possible reserves are those additional reserves
that are less certain to be recovered than Probable reserves. There
is a 10% probability that the quantities actually recovered will
equal or exceed the sum of Proved plus Probable plus Possible
reserves.
Proved developed producing reserves are those
reserves that are expected to be recovered from completion
intervals open at the time of the estimate. These reserves may be
currently producing or, if shut-in, they must have previously been
on production, and the date of resumption of production must be
known with reasonable certainty.
Undeveloped reserves are those reserves expected
to be recovered from known accumulations where a significant
expenditure (e.g., when compared to the cost of drilling a well) is
required to render them capable of production. They must fully meet
the requirements of the reserves category (proved, probable,
possible) to which they are assigned.
Certain terms used in this press release but not
defined are defined in NI 51-101, CSA Staff Notice 51-324 – Revised
Glossary to NI 51-101, Standards of Disclosure for Oil and Gas
Activities (“CSA Staff Notice 51-324”) and/or the
COGEH and, unless the context otherwise requires, shall have the
same meanings herein as in NI 51-101, CSA Staff Notice 51-324 and
the COGEH, as the case may be.
Oil and Gas Metrics
This press release contains a number of oil and
gas metrics, including NAV per share, F&D costs, F&D
recycle ratio, operating netback, reserve life index and reserves
replacement, which do not have standardized meanings or standard
methods of calculation and therefore such measures may not be
comparable to similar measures used by other companies and should
not be used to make comparisons. Such metrics have been included
herein to provide readers with additional measures to evaluate the
Company's performance; however, such measures are not reliable
indicators of the future performance of the Company and future
performance may not compare to the performance in previous
periods.
- NAV per share is calculated as NPV10
(before or after tax, as applicable) minus estimated debt, divided
by the number of shares of Gran Tierra's common stock issued and
outstanding. Management uses NAV per share as a measure of the
relative change of Gran Tierra's net asset value over its
outstanding common stock over a period of time.
- F&D costs are
calculated as estimated exploration and development capital
expenditures, excluding acquisitions and dispositions, divided by
the applicable reserves additions both before and after changes in
FDC costs. The calculation of F&D costs incorporates the change
in FDC required to bring proved undeveloped and developed reserves
into production. The aggregate of the exploration and development
costs incurred in the financial year and the changes during that
year in estimated FDC may not reflect the total F&D costs
related to reserves additions for that year. Management uses
F&D costs per boe as a measure of its ability to execute its
capital program and of its asset quality.
- F&D recycle
ratio is calculated as fourth quarter operating netback per WI
sales volume divided by the appropriate F&D costs per boe.
Management uses F&D recycle ratio as an indicator of
profitability of its oil and gas activities.
- Operating netback
is calculated as described in this press release. Management
believes that operating netback is a useful supplemental measure
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.
- Reserve life index
is calculated as reserves in the referenced category divided by the
referenced estimated Colombia production. Management uses this
measure to determine how long the booked reserves will last at
current production rates if no further reserves were added.
- Reserves
replacement is calculated as reserves in the referenced category
divided by estimated referenced production. Management uses this
measure to determine the relative change of its reserve base over a
period of time.
Disclosure of Reserve Information and
Cautionary Note to U.S. Investors
Unless expressly stated otherwise, all estimates
of proved, probable and possible reserves and related future net
revenue disclosed in this press release have been prepared in
accordance with NI 51-101. Estimates of reserves and future net
revenue made in accordance with NI 51-101 will differ from
corresponding estimates prepared in accordance with applicable U.S.
Securities and Exchange Commission (“SEC”) rules and disclosure
requirements of the U.S. Financial Accounting Standards Board
(“FASB”), and those differences may be material. NI 51-101, for
example, requires disclosure of reserves and related future net
revenue estimates based on forecast prices and costs, whereas SEC
and FASB standards require that reserves and related future net
revenue be estimated using average prices for the previous 12
months. In addition, NI 51-101 permits the presentation of reserves
estimates on a “company gross” basis, representing Gran Tierra’s
working interest share before deduction of royalties, whereas SEC
and FASB standards require the presentation of net reserve
estimates after the deduction of royalties and similar payments.
There are also differences in the technical reserves estimation
standards applicable under NI 51-101 and, pursuant thereto, the
COGEH, and those applicable under SEC and FASB requirements.
In addition to being a reporting issuer in
certain Canadian jurisdictions, Gran Tierra is a registrant with
the SEC and subject to domestic issuer reporting requirements under
U.S. federal securities law, including with respect to the
disclosure of reserves and other oil and gas information in
accordance with U.S. federal securities law and applicable SEC
rules and regulations (collectively, "SEC requirements").
Disclosure of such information in accordance with SEC requirements
is included in the Company's Annual Report on Form 10-K and in
other reports and materials filed with or furnished to the SEC and,
as applicable, Canadian securities regulatory authorities. The SEC
permits oil and gas companies that are subject to domestic issuer
reporting requirements under U.S. federal securities law, in their
filings with the SEC, to disclose only estimated proved, probable
and possible reserves that meet the SEC's definitions of such
terms. Gran Tierra has disclosed estimated proved, probable and
possible reserves in its filings with the SEC. In addition, Gran
Tierra prepares its financial statements in accordance with United
States generally accepted accounting principles, which require that
the notes to its annual financial statements include supplementary
disclosure in respect of the Company's oil and gas activities,
including estimates of its proved oil and gas reserves and a
standardized measure of discounted future net cash flows relating
to proved oil and gas reserve quantities. This supplementary
financial statement disclosure is presented in accordance with FASB
requirements, which align with corresponding SEC requirements
concerning reserves estimation and reporting.
Investors are urged to consider closely the
disclosures and risk factors in the Company's Annual Report on Form
10-K, Quarterly Reports on Form 10-Q and in the other reports and
filings with the SEC, available from the Company's offices or
website. These reports can also be obtained from the SEC website at
www.sec.gov.
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