Gran Tierra Energy Inc.
(“Gran Tierra” or the
“Company”) (NYSE American:GTE) (TSX:GTE)
(LSE: GTE) is pleased to announce a corporate update. All
dollar amounts are in United States (
“U.S.”)
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.
Highlights
- First Quarter 2022
Production: Gran Tierra’s total average production was
29,362 BOPD during the first quarter of 2022, which was
approximately flat when compared with fourth quarter 2021
production and up 20% from first quarter 2021’s level. The
Company’s first quarter 2022 production was in-line with management
expectations.
- Expect to Meet 2022
Production Guidance: Gran Tierra believes its ability to
keep production flat quarter-on-quarter demonstrates the ongoing
successful results from the Company’s waterflooding efforts in all
major assets. The ongoing infill development drilling campaigns in
the Acordionero and Costayaco oil fields are expected to increase
the Company’s full year 2022 average production into the guidance
range of 30,500-32,500 BOPD. The ramp up in production from first
quarter 2022’s level is expected to begin in the latter half of
second quarter 2022 as new Acordionero and Costayaco oil wells are
brought online.
- Significant Debt
Reduction:
- Gran Tierra’s credit facility has
been reduced to a remaining balance of $40 million as of March 31,
2022, down $27.5 million or 41% from a balance of $67.5 million as
of December 31, 2021, and down $164 million from March 31,
2020.
- With a cash balance of $59 million
as of March 31, 2022, forecasted 2022 free cash flow¹ and
recovery of tax receivables, Gran Tierra expects to fully pay off
the remaining balance of its credit facility in the second quarter
2022.
- 2022 Financial Forecasts
and Plans:
- At an $80/bbl Brent price (The
Company’s previously announced high budget case), Gran Tierra’s
2022 capital program of $220-240 million is forecast to generate
2022 cash flow¹ of $330-350 million, free cash flow¹ of
$100-120 million, EBITDA¹ of $440-460 million and a 2022
year-end cash balance of $120-140 million.
- With Brent currently at
significantly higher levels than $80/bbl, the Company has increased
its 2022 Brent price forecast to $95/bbl. At this higher oil price,
the Company would maintain 2022 capital at $220-240 million with
forecast 2022 cash flow¹ of $410-430 million, free cash
flow¹ of $180-200 million, EBITDA¹ of $550-570 million
and a 2022 year-end cash balance of $210-230 million.
- The Company’s 20 to 25 well
development program continues to focus on asset optimization,
maintaining a low operating cost structure and increasing oil
recovery factors across its extensive portfolio.
- Gran Tierra’s 2022 exploration
campaign of up to 6-7 wells is expected to be fully funded from
forecasted internally generated cash flow¹ and is designed to
focus on near-field prospects in proven basins with access to
infrastructure, providing short cycle times from discovery to
bringing production on-stream.
- The Company continues to have Brent
oil price hedges in place for 9,000 BOPD in first half 2022, with
an average ceiling price of $87.62/bbl on 8,000 BOPD. Therefore,
approximately 73% of Gran Tierra’s oil production, which is
unhedged, has been able to fully benefit from the current high oil
price environment.
- Operations Update:
- Acordionero:
- Gran Tierra has allocated capital
of $70 million towards 2022 development activities for the
Acordionero field (14-16 development wells) in the Middle Magdalena
Valley Basin.
- Drilling began on February 15,
2022, with one rig on the Southwest Pad. Three infill producers and
two water injection wells were drilled before the end of first
quarter 2022. All producing wells will be on production in April
2022.
- Gran Tierra was successful in its
ongoing focus on quick-cycle times, drilling these five wells for
an average per well cost of $1.3 million. Completion costs for the
three infill oil wells were on budget at an average cost per well
of $0.6 million. The first water injector’s completion cost was on
budget at $0.8 million. The second water injector completion is
planned during April 2022.
- The drilling rig is being moved to
Central Pad with recommencement of development drilling of the next
9-11 wells expected before the end of April 2022.
- The results of the development
drilling campaign have met expectations and the benefits to the
Acordionero field’s oil production are expected to be realized
through the course of second and third quarter 2022 with increased
production.
- A polymer injection project is
expected to begin early in the third quarter of 2022, where the
Company plans to inject polymer into one or two waterflood
patterns. The main objective of the polymer is to determine whether
this widely practiced enhanced oil recovery process would be
successful at increasing Acordionero’s ultimate oil recovery
factors and remaining oil reserves.
- Costayaco and
Moqueta:
- Gran Tierra has allocated capital
of $40 million and $30 million respectively to the Costayaco (4-5
development wells) and Moqueta (3 development wells) fields in the
Putumayo Basin in 2022.
- The first Costayaco well was spud
in late February 2022, and as of early April 2022, three infill
development oil wells have been drilled. Two of these wells were
the fastest and lowest cost wells ever drilled in the field
(average per well cost of $1.8 million). The three wells are
expected to be completed and brought on production during second
quarter 2022.
- The Moqueta work program is
expected to commence in the fourth quarter of 2022 and is planned
to continue into 2023.
- Ecuador
Exploration:
- Gran Tierra expects to drill 2-3
exploration wells in 2022, targeting multi-zone prospects near
existing fields with access to infrastructure. Gran Tierra’s first
exploration well in Ecuador is scheduled to spud in the third
quarter of 2022 on the Chanangue Block.
- Environmental licenses for
exploration drilling have been granted by Ecuador’s Ministry of the
Environment for both the Chanangue and Charapa Blocks, as well as
for seismic activities in the Charapa Block. Approval of the
environmental license for the Iguana Block is expected during third
quarter 2022.
- Colombia
Exploration:
- The Company is also progressing its
2022 exploration campaign in Colombia with the first exploration
well expected to be spud in the Putumayo Basin in early second half
2022 targeting multiple horizons in a prospect between the
Costayaco and Moqueta fields. Another one to two exploration wells
in the Putumayo are planned for second half 2022, as is one
exploration well in the Middle Magdalena Valley Basin.
Message to Shareholders
Gary Guidry, President and Chief Executive
Officer of Gran Tierra, commented: "Gran Tierra is in a strong
position for the continued development and enhanced oil recovery
activities in 2022 to optimize value from each of our assets. Gran
Tierra’s balance sheet has significantly strengthened since 2020
and paying off the entire credit facility will be a major milestone
for the Company. Looking to the end of the year, we are forecasting
a net debt¹ to EBITDA¹ ratio of under 0.8 times. In
addition, we plan to allocate capital to prioritized, high-impact
exploration drilling opportunities. Our waterflood programs across
all of our assets continue to perform well and we expect another
strong year of free cash flow¹ from these high quality, low
decline assets."
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
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”). “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. Earnings before interest, taxes and depletion,
depreciation and accretion (“EBITDA”) is a
non-GAAP measure and does not have a standardized meaning under
GAAP. “Net debt” as presented is defined as projected senior notes
and borrowings under the credit facility less projected cash. Refer
to "Non-GAAP Measures" in this press release.
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. Except to the extent expressly stated
otherwise, information on the Company's website or accessible from
our website or any other website is not incorporated by reference
into and should not be considered 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,"
"progress" 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 expected future production and
free cash flow, the Company’s drilling program and the Company's
expectations as to debt repayment, the Company’s ESG risks and
opportunities and its positioning for 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, strikes, 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
events (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, the Russian invasion of
Ukraine, 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 effects of hedges; 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, 2021 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 cash flow, net income,
free cash flow, recovery of taxes receivable, EBITDA, net cash
provided by operating activities (described in this press release
as "cash flow"), total capital, certain expenses and costs, debt
repayments and debt positions (including “net debt”) 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
financial and operational 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. See Gran Tierra's press
release dated January 8, 2022 for additional information regarding
the 2022 guidance referred to herein.
Non-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. A quantitative
reconciliation of forward-looking free cash flow to its most
directly comparable forward-looking GAAP measure is available under
“2022 Financial Forecasts and Plans” in this release.
Net debt as presented is defined as GAAP total
debt less cash. 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 no precise breakdown since the Company's oil sales volumes
typically represent blends of more than one type of crude oil. It
is likely that the actual remaining quantities recovered will
exceed the estimated proved reserves. 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.
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