Gran Tierra Energy Inc. ("Gran Tierra" or the
"Company") (NYSE American:GTE) (NYSE MKT:GTE) (TSX:GTE)
today announced the Company's financial and operating results for
the fourth quarter and year ended December 31, 2017. All
dollar amounts are in United States (“U.S.”) dollars unless
otherwise indicated.
Production amounts are on an average working
interest before royalties ("WI") basis unless
otherwise indicated. Per barrel of oil equivalent
("BOE") amounts are on a WI sales basis. For per
BOE amounts based on net after royalty ("NAR")
production, see Gran Tierra's Annual Report on Form 10-K filed
February 27, 2018. Unless otherwise expressly stated, all
reserves and resources values and ancillary information contained
in this press release have been 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 are based on the Company's 2017 year-end estimated reserves and
prospective resources as evaluated by the Company's independent
qualified reserve evaluator McDaniel & Associates Consultants
Ltd. (“McDaniel”) in reports with effective
dates of December 31, 2017 (the “GTE McDaniel Reserves
Report” and the "GTE McDaniel Prospective
Resources Report").
Key Highlights
- Completed the transformation of the Company to a Colombian
focused explorer and producer with the integration of four key
acquisitions, elimination of non-prospective exploration acreage in
frontier basins in Colombia, successful sale of Brazil assets and
spin-off of Peru assets
- Achieved a new Company milestone in average annual Colombia
only production in 2017 of 31,426 BOE per day (“BOEPD”), 20% higher
than 26,216 BOEPD in 2016 and 38% higher than 22,794 BOEPD in 2015;
on a per share basis, Colombia production in 2017 was up 21% from
2016
- Increased average Colombia only production in fourth quarter
2017 to 34,477 BOEPD, 14% higher than 30,258 BOEPD in fourth
quarter 2016 and 6% higher than the third quarter of 2017 (the
"Prior Quarter"); Colombia production in fourth quarter 2017 was
also up 53% from second quarter 2015, when the current senior
management team started at Gran Tierra
- Increased Colombia Proved plus Probable net asset value ("NAV")
per share to $5.69, a 30% increase from 2016 and 49% increase from
2015, based on before tax net present values discounted at 10%
("NPV")
- Increased Colombia unrisked mean prospective resources to 1,462
million barrels of oil equivalent ("MMBOE"), with 822 MMBOE
primarily in the Putumayo regional carbonate play
- Demonstrated ongoing strong financial performance in 2017:
- Fourth quarter 2017 net loss was $41 million, or $0.10 per
share basic and diluted, compared with net income of $3 million, or
$0.01 per share basic and diluted, in the Prior Quarter
- Fourth quarter 2017 funds flow from operations(1) increased by
25% to $69 million compared with $55 million in the Prior
Quarter
- In 2017, net loss was significantly lower at $32 million, or
$0.08 per share basic and diluted, compared with $466 million, or
$1.45 per share basic and diluted, in 2016; net loss in 2017
included loss on sale of the Company's Brazil and Peru business
units of $44 million; impairment losses decreased by $414 million,
net of income tax recovery, compared to 2016
- Funds flow from operations(1) increased by 110% to $220 million
in 2017 compared with $105 million in 2016
- Gran Tierra had an active fourth quarter 2017 with capital
expenditures of $75 million, which exceeded fourth quarter 2017
funds flow from operations by $6 million, primarily as a result of
accelerating the Acordionero production facilities
- Oil and gas sales increased by 46% to $422 million in 2017
compared with $289 million in 2016, and, for the fourth quarter
2017, $127 million compared with $104 million in the Prior
Quarter
- Improved Cost Structure Continues to Positively Impact the
Bottom Line:• Operating Netback(1):
Despite only a 24% increase in Brent crude oil prices from 2016,
operating netback per BOE increased by 47% compared with 2016 to
$24.59 per BOE and increased by 22% to $28.71 per BOE in fourth
quarter 2017 relative to the Prior Quarter; these strong operating
netback increases are indicative of the quality of Gran Tierra's
assets and the Company's focus on cost control and optimized oil
marketing strategies• Combined Operating,
Transportation and General and Administrative ("G&A")
Expenses: in 2017 were $14.05 per BOE, down by 2% from
$14.29 per BOE in 2016 and down by 19% from $17.38 per BOE in
fourth quarter 2015• Operating
Expenses: in 2017 increased to $9.35 per BOE compared with
$8.51 per BOE in 2016 primarily due to power disruptions in the
Putumayo Basin as a result of Mocoa landslide; additionally, 2017
operating expenses included $3 million related to the NaturAmazonas
reforestation and conservation program in the Putumayo Basin, which
is a five year partnership between Gran Tierra and Conservation
International, a non-governmental organization well known for
implementing and managing nature conservation projects around the
world; operating expenses increased to $9.86 per BOE in fourth
quarter 2017 from $9.12 per BOE in the Prior Quarter primarily due
to higher maintenance costs• Transportation
Expenses: decreased by 31% to $2.15 per BOE in 2017 from
$3.12 per BOE in 2016 primarily due to a lower percentage of
volumes sold using pipelines and the use of alternative
transportation routes which had lower costs per BOE than the routes
used in 2016; in the fourth quarter 2017, transportation expenses
decreased by 11% to $1.79 per BOE from $2.02 per BOE in the Prior
Quarter; the decrease on a per BOE basis was primarily a function
of higher volumes compared with the Prior
Quarter• G&A Expenses: per BOE in
2017 decreased to $2.55 per BOE from $2.66 per BOE in 2016,
and for fourth quarter 2017 were up slightly to $2.42 per BOE
compared with $2.33 per BOE in the Prior Quarter
- Subsequent to 2017 year-end, Gran Tierra announced the closing
of its successful $300 million 6.25% senior notes offering on
February 15, 2018; the net proceeds of which Gran Tierra used to
repay the outstanding amount on the revolving credit facility ($148
million at December 31, 2017) with the remainder for general
corporate purposes; this financing gives Gran Tierra the
flexibility to accelerate existing projects, to finance development
of potential future exploration discoveries or pursue other
opportunities
- Increased reserves (in MMBOE), reserves per share, NPV and NAV
per share in all categories including Proved
("1P"), Proved plus Probable
("2P") and Proved plus Probable plus Possible
("3P") (Colombia only):
|
|
Increase |
|
Increase |
|
Increase |
NAV |
Increase |
|
Reserves |
from |
from |
Reserves |
from |
NPV |
from |
10% Discount |
from |
Reserves |
Dec 31, 2017 |
Dec.31 2016 |
Dec.31 2015 |
Per Share(2) |
Dec.31 2016 |
10% Discount |
Dec.31 2016 |
Per Share(2) |
Dec.31 2016 |
Category |
MMBOE |
% |
% |
MMBOE/share |
% |
$ million |
% |
$/share |
% |
1P |
74 |
14 |
75 |
0.19 |
16 |
1,394 |
26 |
2.87 |
29 |
2P |
137 |
18 |
142 |
0.35 |
20 |
2,500 |
27 |
5.69 |
30 |
3P |
203 |
10 |
194 |
0.52 |
12 |
3,625 |
17 |
8.57 |
19 |
- The increases in NPV and NAV per share were achieved despite an
overall 5% decrease in the January 1, 2018 McDaniel price forecast
relative to the January 1, 2017 McDaniel price forecast
- Gran Tierra expects 2018 average production to be 36,500 to
38,500 BOEPD, representing organic growth of 16% to 23% over 2017
average WI Colombia only production before royalties of 31,426
BOEPD. The Company's production guidance only includes forecasted
volumes from existing operations and expected development projects;
no volumes are assumed for any exploration success.
Message to Shareholders
Gary Guidry, President and Chief Executive
Officer of Gran Tierra, commented: "After successfully transforming
our portfolio and the Company in 2015 and 2016, our focus on
execution in 2017 delivered strong financial performance. Our
returns focused strategy with an emphasis on profitable production
growth has generated great results. During 2017, Gran
Tierra's high-quality, operated, diversified suite of assets in
Colombia delivered material year-on-year improvements in several
important metrics, including a 20% increase in production, a 93%
reduction in net loss, a 27% increase in oil and gas sales per BOE,
a 47% improvement in operating netback per BOE and dramatic growth
of 110% in funds flow from operations. Our growth in operating
netback and funds flow from operations both greatly exceeded the
24% increase in the Brent oil price in 2017 and is a strong
indicator of Gran Tierra's sharp focus on controlling operating and
transportation costs and optimizing oil marketing strategies. With
our high netback production, low base production declines, an
expanded drilling inventory and a large resource base, we
demonstrated in 2017 that Gran Tierra has created a sustainable
business model which we expect to be fully funded by forecasted
cash from operating activities in 2018. Since we operate over 90%
of our production, Gran Tierra also has significant control and
flexibility on capital allocation and timing during volatile
periods in oil and capital markets.
Creation of long-term shareholder value is at
the centre of everything we do at Gran Tierra and we believe this
is achieved by focusing on capital efficiency and returns on
invested capital. As we reported on January 30, 2018, our robust
portfolio delivered, during 2017, Colombia 2P growth of 18% in
reserves, 20% in reserves per share, 27% in total NPV to $2.5
billion and 30% in NAV per share to $5.69 per share. This high
quality set of assets is now expected to have visibility to
production of approximately 50,000 BOEPD by 2020, based on the 2P
forecast from the GTE McDaniel Reserves Report. With our large
resource base, we plan to drill 30 to 35 exploration wells over the
next three years, which are all expected to be funded by cash from
operating activities. Our exploration campaign is designed to test
the majority of our large portfolio of unrisked mean prospective
resources of 1.5 billion BOE with these wells, including our
dominant Putumayo Basin position in the A-Limestone, other
carbonates and N Sand oil play fairways.
Subsequent to 2017 year-end, we believe that
markets delivered a strong vote of confidence in our
Colombia-focused, long-term strategy, as evidenced by our
successful offering of $300 million in 6.25% senior notes. After
paying down our revolving credit facility and placing the excess
cash on our balance sheet, we believe our improved financial
flexibility and strong liquidity position leaves Gran Tierra
well-positioned to potentially accelerate current development
projects or future exploration discoveries in the Putumayo and
Middle Magdalena Valley Basins.
On behalf of our Board of Directors and the team
at Gran Tierra, I want to thank all of our stakeholders for their
continued support. We believe that our focused strategy is
delivering results on several fronts and that Gran Tierra is well
positioned for an exciting year of growth in 2018 and beyond as we
continue to efficiently create value in the multi-horizon, proven
hydrocarbon producing basins of Colombia."
Financial and Operational Highlights (all amounts in $000s,
except per share and BOE amounts) |
|
|
Three Months Ended |
|
Year Ended |
|
December 31, |
September 30, |
December 31, |
|
December 31, |
December 31, |
|
2017 |
2017 |
2016 |
|
2017 |
2016 |
Net Income
(Loss) |
$ |
(40,802 |
) |
$ |
3,130 |
|
$ |
(127,355 |
) |
|
$ |
(31,708 |
) |
$ |
(465,565 |
) |
Net Income
(Loss) Per Share - Basic and Diluted |
$ |
(0.10 |
) |
$ |
0.01 |
|
$ |
(0.36 |
) |
|
$ |
(0.08 |
) |
$ |
(1.45 |
) |
|
|
|
|
|
|
|
Oil and Gas
Sales |
$ |
127,179 |
|
$ |
103,768 |
|
$ |
91,614 |
|
|
$ |
421,734 |
|
$ |
289,269 |
|
Operating
Expenses |
(31,403 |
) |
(27,321 |
) |
(24,472 |
) |
|
(109,869 |
) |
(86,925 |
) |
Transportation
Expenses |
(5,635 |
) |
(6,038 |
) |
(7,458 |
) |
|
(25,107 |
) |
(31,776 |
) |
Operating
Netback(1) |
$ |
90,141 |
|
$ |
70,409 |
|
$ |
59,684 |
|
|
$ |
286,758 |
|
$ |
170,568 |
|
|
|
|
|
|
|
|
G&A
Expenses Before Stock-based Compensation |
$ |
7,637 |
|
$ |
6,965 |
|
$ |
10,713 |
|
|
$ |
29,775 |
|
$ |
27,127 |
|
G&A
Expenses Stock-Based Compensation |
4,501 |
|
1,686 |
|
1,891 |
|
|
9,239 |
|
6,091 |
|
G&A
Expenses, Including Stock-Based Compensation |
$ |
12,138 |
|
$ |
8,651 |
|
$ |
12,604 |
|
|
$ |
39,014 |
|
$ |
33,218 |
|
|
|
|
|
|
|
|
Adjusted
EBITDA(1) |
$ |
78,180 |
|
$ |
61,196 |
|
$ |
47,455 |
|
|
$ |
248,005 |
|
$ |
128,414 |
|
|
|
|
|
|
|
|
Funds Flow from
Operations(1) |
$ |
69,123 |
|
$ |
55,128 |
|
$ |
36,186 |
|
|
$ |
220,197 |
|
$ |
104,984 |
|
|
|
|
|
|
|
|
Capital
Expenditures |
$ |
75,322 |
|
$ |
71,694 |
|
$ |
58,219 |
|
|
$ |
251,041 |
|
$ |
127,789 |
|
|
|
|
|
|
|
|
Average Daily Volumes (BOEPD) |
|
|
|
|
|
|
Working
Interest Production Before Royalties |
34,477 |
|
32,570 |
|
31,031 |
|
|
32,105 |
|
27,062 |
|
Royalties |
(6,114 |
) |
(5,055 |
) |
(4,768 |
) |
|
(5,320 |
) |
(3,875 |
) |
Production
NAR |
28,363 |
|
27,515 |
|
26,263 |
|
|
26,785 |
|
23,187 |
|
(Increase)
Decrease in Inventory |
(194 |
) |
(68 |
) |
214 |
|
|
(96 |
) |
767 |
|
Sales |
28,169 |
|
27,447 |
|
26,477 |
|
|
26,689 |
|
23,954 |
|
Royalties, % of
WI Production Before Royalties |
18 |
% |
16 |
% |
15 |
% |
|
17 |
% |
14 |
% |
|
|
|
|
|
|
|
Per BOE (3) |
|
|
|
|
|
|
Brent |
$ |
61.54 |
|
$ |
52.18 |
|
$ |
51.13 |
|
|
$ |
54.82 |
|
$ |
44.33 |
|
Quality and
Transportation Discount |
(12.47 |
) |
(11.08 |
) |
(13.52 |
) |
|
(11.53 |
) |
(11.34 |
) |
Royalties |
(8.71 |
) |
(6.38 |
) |
(5.72 |
) |
|
(7.20 |
) |
(4.61 |
) |
Average
Realized Price |
40.36 |
|
34.72 |
|
31.89 |
|
|
36.09 |
|
28.38 |
|
Transportation
Expenses |
(1.79 |
) |
(2.02 |
) |
(2.60 |
) |
|
(2.15 |
) |
(3.12 |
) |
Average
Realized Price Net of Transportation Expenses |
38.57 |
|
32.70 |
|
29.29 |
|
|
33.94 |
|
25.26 |
|
Operating
Expenses |
(9.86 |
) |
(9.12 |
) |
(8.50 |
) |
|
(9.35 |
) |
(8.51 |
) |
Operating
Netback(1) |
28.71 |
|
23.58 |
|
20.79 |
|
|
24.59 |
|
16.75 |
|
G&A
Expenses |
(2.42 |
) |
(2.33 |
) |
(3.73 |
) |
|
(2.55 |
) |
(2.66 |
) |
Severance
Expenses |
(0.04 |
) |
(0.39 |
) |
(0.01 |
) |
|
(0.11 |
) |
(0.13 |
) |
Transaction
Expenses |
— |
|
— |
|
— |
|
|
— |
|
(0.72 |
) |
Equity
Tax |
— |
|
— |
|
(0.02 |
) |
|
(0.10 |
) |
(0.30 |
) |
Realized
Foreign Exchange (Loss) Gain |
(0.05 |
) |
(0.04 |
) |
(0.47 |
) |
|
(0.11 |
) |
— |
|
Realized
Financial Instruments Gain |
0.01 |
|
0.10 |
|
— |
|
|
0.13 |
|
0.04 |
|
Interest
Expense, Excluding Amortization of Debt Issuance
Costs |
(0.93 |
) |
(1.12 |
) |
(1.19 |
) |
|
(0.98 |
) |
(0.83 |
) |
Interest
Income |
0.08 |
|
0.10 |
|
0.15 |
|
|
0.10 |
|
0.23 |
|
Current Income
Tax Expense |
(3.43 |
) |
(1.45 |
) |
(2.94 |
) |
|
(2.08 |
) |
(1.97 |
) |
Cash
Netback(1) |
$ |
21.93 |
|
$ |
18.45 |
|
$ |
12.58 |
|
|
$ |
18.89 |
|
$ |
10.41 |
|
|
|
|
|
|
|
|
Share Information (000s) |
|
|
|
|
|
|
Common Stock
Outstanding, End of Period |
385,191 |
|
386,873 |
|
390,807 |
|
|
385,191 |
|
390,807 |
|
Exchangeable
Shares Outstanding, End of Period |
6,112 |
|
7,899 |
|
8,200 |
|
|
6,112 |
|
8,200 |
|
Weighted
Average Number of Common and Exchangeable Shares Outstanding -
Basic |
394,442 |
|
394,771 |
|
370,745 |
|
|
396,684 |
|
320,852 |
|
Weighted
Average Number of Common and Exchangeable Shares Outstanding -
Diluted |
394,442 |
|
394,775 |
|
370,745 |
|
|
396,684 |
|
320,852 |
|
|
As at December 31 |
|
2017 |
2016 |
% Change |
Cash, Cash
Equivalents and Current Restricted Cash and Cash
Equivalents |
$ |
24,113 |
|
$ |
33,497 |
|
(28 |
) |
|
|
|
|
Revolving
Credit Facility |
$ |
148,000 |
|
$ |
90,000 |
|
64 |
|
|
|
|
|
Convertible
Senior Notes |
$ |
115,000 |
|
$ |
115,000 |
|
— |
|
(1) Operating netback, adjusted earnings before
interest, taxes, depletion, depreciation, accretion and impairment
(“DD&A”) ("Adjusted EBITDA"),
funds flow from operations and cash netback, are non-GAAP measures
and do not have a standardized meaning under generally accepted
accounting principles in the United States of America
("GAAP"). Refer to "Non-GAAP Measures" in this
press release for descriptions of these non-GAAP measures and
reconciliations to the most directly comparable measures calculated
and presented in accordance with GAAP.
(2) Based on year-end 2017 net debt of $272
million, comprised of working capital deficit of $16 million,
senior convertible notes of $111 million (net of unamortized fees;
$115 million gross) and reserves-based credit facility of $145
million (net of unamortized fees; $148 million gross), excluding
risk management assets and liabilities and investment in Sterling
Resources Ltd. shares, and number of shares of Gran Tierra's common
stock and exchangeable shares issued and outstanding at December
31, 2017 and 2016, of 391 million and 399 million, respectively.
Net working capital and debt at December 31, 2017 and 2016,
prepared in accordance with generally accepted accounting
principles in the United States of America
("GAAP").
(3) Per BOE amounts are based on WI sales before
royalties. For per BOE amounts based on NAR production, see
Gran Tierra's Annual Report Form 10-K filed on February 27,
2018.
Conference Call
Information:
Gran Tierra will host its fourth quarter and
full year 2017 results conference call on Wednesday,
February 28, 2018, at 9:00 a.m. Mountain Time, 11:00 a.m.
Eastern Time. Interested parties may access the conference call by
dialing 1-844-348-3792 or 1-614-999-9309 (North America),
00800-028-8438 or 020-3107-0289 (United Kingdom) or 01-800-913-0176
(Colombia). The call will also be available via webcast at
www.grantierra.com. An archive of the webcast will be available on
Gran Tierra's website until the next earnings call. For interested
parties unable to participate, an audio replay of the call will be
available following the call until March 3, 2018. To access the
replay dial 1-855-859-2056 or 1-404-537-3406 (North America)
and use passcode 71220946.
About Gran Tierra Energy
Inc.
Gran Tierra Energy Inc. is an independent
international energy company focused on oil and natural gas
exploration and production in Colombia. The Company is focused on
its existing portfolio of assets in Colombia and will pursue new
growth opportunities , leveraging our financial strength. The
Company's common shares trade on the NYSE American and the Toronto
Stock Exchange under the ticker symbol GTE. Additional information
concerning Gran Tierra is available at www.grantierra.com. 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 Securities and Exchange Commission
website at http://www.sec.gov, and Gran Tierra’s reports filed with
the Canadian Securities Administrators are available on SEDAR at
http://www.sedar.com.
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"). Such
forward-looking statements include, but are not limited to Gran
Tierra’s strategic focus, growth strategy, and operations including
planned operations and capital program, Gran Tierra’s 2018 expected
average production, production estimates, prospective resources,
the use of proceeds from Gran Tierra’s recent notes offering,
drilling and infrastructure schedules and financing of operations,
Gran Tierra's plans, objectives, expectations and intentions
regarding production, exploration and development; and the
future development of the Company's business. Statements relating
to “reserves” or “resources” are also deemed to be forward-looking
statements, as they involve the implied assessment, based on
certain estimates and assumptions, including that the reserves and
resources described can be profitably produced in the future.
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 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, 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: prices and
markets for oil and natural gas are unpredictable and tend to
fluctuate significantly; Gran Tierra’s operations are located in
Colombia, and unexpected problems can arise due to guerrilla
activity; 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 Gran Tierra's products; the
ability of Gran Tierra to execute its business plan; 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 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; 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,
2017. These filings are available on the SEC web site at
http://www.sec.gov and on SEDAR at www.sedar.com. 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.
All forward-looking statements included in this
press release 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 laws. Gran
Tierra’s forward-looking statements are expressly qualified in
their entirety by this cautionary statement.
The estimates of future production and cash from
operating activities set forth in this press release 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 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 information for 2018. 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. These
projections may also be considered to contain future-oriented
financial information or a financial outlook. The actual results of
Gran Tierra’s operations for any period will likely 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 financial
measures as further described herein. These non-GAAP measures do
not have a standardized meaning under GAAP. Investors are cautioned
that these measures should not be construed as alternatives to net
loss or other measures of financial performance as determined in
accordance with GAAP. Gran Tierra's method of calculating these
measures may differ from other companies and, accordingly, they may
not be comparable to similar measures used by other companies. Each
non-GAAP financial measure is presented along with the
corresponding GAAP measure so as not to imply that more emphasis
should be placed on the non-GAAP measure.
Operating netback as presented is defined
as oil and gas sales less operating and transportation expenses.
Cash netback as presented is net income or loss before DD&A
expenses, asset impairment, deferred income tax expense or
recovery, amortization of debt issuance costs, unrealized foreign
exchange gains and losses, loss on sale of business units and gain
on acquisition, non-cash operating and G&A expenses and
unrealized financial instruments gains and losses. Management
believes that operating netback and cash netback are useful
supplemental measures for investors to analyze financial
performance and provide an indication of the results generated by
Gran Tierra's principal business activities prior to the
consideration of other income and expenses. See the table entitled
Financial and Operational Highlights, above for the components of
operating netback and corresponding reconciliation to net income or
loss. A reconciliation from net income or loss to cash netback is
as follows:
|
|
Three Months Ended |
|
Year Ended |
|
|
December 31, |
|
September 30, |
|
December 31, |
|
December 31, |
|
December 31, |
Cash Netback -
Non-GAAP Measure ($000s) |
|
2017 |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Net income (loss) |
|
$ |
(40,802 |
) |
|
$ |
3,130 |
|
|
$ |
(127,355 |
) |
|
$ |
(31,708 |
) |
|
$ |
(465,565 |
) |
Adjustments to
reconcile net income (loss) to funds flow from operations |
|
|
|
|
|
|
|
|
|
|
DD&A
expenses |
|
38,606 |
|
|
34,492 |
|
|
35,010 |
|
|
131,335 |
|
|
139,535 |
|
Asset
impairment |
|
275 |
|
|
787 |
|
|
146,934 |
|
|
1,514 |
|
|
616,649 |
|
Deferred
income tax expense (recovery) |
|
8,052 |
|
|
13,760 |
|
|
(38,589 |
) |
|
44,716 |
|
|
(204,791 |
) |
Amortization of
debt issuance costs |
|
547 |
|
|
643 |
|
|
2,878 |
|
|
2,415 |
|
|
5,691 |
|
Unrealized
foreign exchange loss (gain) |
|
1,141 |
|
|
(1,380 |
) |
|
(3,865 |
) |
|
837 |
|
|
(1,428 |
) |
Loss on sale of
business units and (gain) on acquisition |
|
35,309 |
|
|
— |
|
|
10,783 |
|
|
44,385 |
|
|
(929 |
) |
Non-cash
operating expenses |
|
339 |
|
|
66 |
|
|
68 |
|
|
536 |
|
|
248 |
|
Non-cash
G&A expenses |
|
4,501 |
|
|
1,686 |
|
|
1,891 |
|
|
9,239 |
|
|
6,091 |
|
Unrealized
financial instruments loss |
|
21,185 |
|
|
1,976 |
|
|
8,455 |
|
|
17,492 |
|
|
10,717 |
|
Cash netback |
|
$ |
69,153 |
|
|
$ |
55,160 |
|
|
$ |
36,210 |
|
|
$ |
220,761 |
|
|
$ |
106,218 |
|
Adjusted EBITDA, as presented, is defined as net income or loss
adjusted for DD&A expenses, asset impairment, interest expense,
income tax recovery or expense, unrealized financial instruments
loss or gain, loss on sale of business units and gain on
acquisition and foreign exchange gains and losses. Management uses
this supplemental measure to analyze performance and income or loss
generated by our principal business activities prior to the
consideration of how non-cash items affect that income or loss, and
believes that these financial measures are also useful supplemental
information for investors to analyze our performance and our
financial results. A reconciliation from net income or loss (GAAP)
to Adjusted EBITDA is as follows:
|
|
Three Months Ended |
|
Year Ended |
|
|
December 31, |
|
September 30, |
|
December 31, |
|
December 31, |
|
December 31, |
Adjusted EBITDA
- Non-GAAP Measure ($000s) |
|
2017 |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Net income (loss) |
|
$ |
(40,802 |
) |
|
$ |
3,130 |
|
|
$ |
(127,355 |
) |
|
$ |
(31,708 |
) |
|
$ |
(465,565 |
) |
Adjustments to
reconcile net income (loss) to funds flow from operations |
|
|
|
|
|
|
|
|
|
|
DD&A
expenses |
|
38,606 |
|
|
34,492 |
|
|
35,010 |
|
|
131,335 |
|
|
139,535 |
|
Asset
Impairment |
|
275 |
|
|
787 |
|
|
146,934 |
|
|
1,514 |
|
|
616,649 |
|
Interest
expense |
|
3,467 |
|
|
3,989 |
|
|
6,303 |
|
|
13,882 |
|
|
14,145 |
|
Income
tax expense (recovery) |
|
18,852 |
|
|
18,093 |
|
|
(30,147 |
) |
|
69,038 |
|
|
(184,669 |
) |
Unrealized financial instruments loss |
|
21,185 |
|
|
1,976 |
|
|
8,455 |
|
|
17,492 |
|
|
10,717 |
|
Loss on
sale of business units and(gain) on acquisition |
|
35,309 |
|
|
— |
|
|
10,783 |
|
|
44,385 |
|
|
(929 |
) |
Foreign
exchange loss (gain) |
|
1,288 |
|
|
(1,271 |
) |
|
(2,528 |
) |
|
2,067 |
|
|
(1,469 |
) |
Adjusted EBITDA |
|
$ |
78,180 |
|
|
$ |
61,196 |
|
|
$ |
47,455 |
|
|
$ |
248,005 |
|
|
$ |
128,414 |
|
Funds flow from operations, as presented, is net
income or loss adjusted for DD&A expenses, asset impairment,
deferred tax expense or recovery, stock-based compensation
expense, amortization of debt issuance costs, cash settlement
of RSUs, unrealized foreign exchange and financial instruments
gains and losses and loss on sale of business units or gain on
acquisition. Management uses this financial measure to analyze
performance and income or loss generated by our principal business
activities prior to the consideration of how non-cash items affect
that income or loss, and believes that this financial measure is
also useful supplemental information for investors to analyze
performance and our financial results. A reconciliation from net
income or loss to funds flow from operations is as follows:
|
|
Three Months Ended |
|
Year Ended |
|
|
December 31, |
|
September 30, |
|
December 31, |
|
December 31, |
|
December 31, |
Funds Flow From
Operations - Non-GAAP Measure ($000s) |
|
2017 |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Net income (loss) |
|
$ |
(40,802 |
) |
|
$ |
3,130 |
|
|
$ |
(127,355 |
) |
|
$ |
(31,708 |
) |
|
$ |
(465,565 |
) |
Adjustments to
reconcile net income (loss) to funds flow from operations |
|
|
|
|
|
|
|
|
|
|
DD&A expenses |
|
38,606 |
|
|
34,492 |
|
|
35,010 |
|
|
131,335 |
|
|
139,535 |
|
Asset impairment |
|
275 |
|
|
787 |
|
|
146,934 |
|
|
1,514 |
|
|
616,649 |
|
Deferred tax expense
(recovery) |
|
8,052 |
|
|
13,760 |
|
|
(38,589 |
) |
|
44,716 |
|
|
(204,791 |
) |
Stock-based
compensation expense |
|
4,840 |
|
|
1,752 |
|
|
1,959 |
|
|
9,775 |
|
|
6,339 |
|
Amortization of debt
issuance costs |
|
547 |
|
|
643 |
|
|
2,878 |
|
|
2,415 |
|
|
5,691 |
|
Cash settlement of
RSUs |
|
(30 |
) |
|
(33 |
) |
|
(24 |
) |
|
(564 |
) |
|
(1,234 |
) |
Unrealized foreign
exchange loss (gain) |
|
1,141 |
|
|
(1,380 |
) |
|
(3,865 |
) |
|
837 |
|
|
(1,428 |
) |
Financial instruments
loss |
|
21,140 |
|
|
1,675 |
|
|
8,455 |
|
|
15,929 |
|
|
10,279 |
|
Cash settlement of
financial instruments |
|
45 |
|
|
302 |
|
|
— |
|
|
1,563 |
|
|
438 |
|
Loss on
sale of business units and (gain) on acquisition |
|
35,309 |
|
|
— |
|
|
10,783 |
|
|
44,385 |
|
|
(929 |
) |
Funds flow from
operations |
|
$ |
69,123 |
|
|
$ |
55,128 |
|
|
$ |
36,186 |
|
|
$ |
220,197 |
|
|
$ |
104,984 |
|
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, 2017 (the "GTE 51-101F1"), which
includes 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, is available on SEDAR at www.sedar.com.
Estimates of net present value contained herein
do not necessarily represent fair market value of reserves or
resources. Estimates of reserves, resources and future net revenue
for individual properties may not reflect the same level of
confidence as estimates of reserves, resources and future net
revenue for all properties, due to the effect of aggregation.
BOEs have been converted on the basis of six
thousand cubic feet (“Mcf”) natural gas to 1
barrel 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.
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.
See the GTE 51-101F1 for additional definitions
regarding terms used in this press release.
This press release contains a number of oil and
gas metrics, including NAV per share, operating netback, cash
netback and reserves per share 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 before tax NPV discounted at 10%
plus estimated net working capital deficit and debt, excluding risk
management assets and liabilities and investment in Sterling
Resources Ltd. shares, and number of shares of Gran Tierra's common
stock and exchangeable shares 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.
- Reserve per share is calculated as reserves in the referenced
category divided by the number of common stock and exchangeable
shares issued and outstanding at December 31. Management uses this
measure to determine the relative change of its reserve base over
its outstanding common stock over a period of time.
Prospective Resources
Prospective resources are those quantities of petroleum
estimated, as of a given date, to be potentially recoverable from
undiscovered accumulations by application of future development
projects. Prospective resources have both an associated chance of
discovery and a chance of development. Not all exploration projects
will result in discoveries. The chance that an exploration project
will result in the discovery of petroleum is referred to as the
"chance of discovery." Thus, for an undiscovered accumulation the
chance of commerciality is the product of two risk components-the
chance of discovery and the chance of development. There is no
certainty that any portion of the prospective resources will be
discovered. If discovered, there is no certainty that it will be
commercially viable to produce any portion of the prospective
resources.
Estimates of the Company's prospective resources are based upon
the GTE McDaniel Prospective Resources Report. The estimates of
prospective resources provided in this press release are estimates
only and there is no guarantee that the estimated prospective
resources will be recovered. Actual resources may be greater than
or less than the estimates provided in this in this press release
and the differences may be material. There is no assurance that the
forecast price and cost assumptions applied by McDaniel in
evaluating Gran Tierra's prospective resources will be attained and
variances could be material. There is no uncertainty that any
portion of the prospective resources will be discovered. If
discovered, there is no certainty that it will be commercially
viable to produce any portion of the prospective resources.
Estimates of prospective resources are by their nature more
speculative than estimates of proved reserves and would require
substantial capital spending over a significant number of years to
implement recovery. Actual locations drilled and quantities that
may be ultimately recovered from our properties will differ
substantially. In addition, we have made no commitment to drill,
and likely will not drill, all of the drilling locations that have
been attributable to these quantities.
The prospective resources in this press release are classified
as “mean” representing the arithmetic average of the expected
recoverable volume. It is the most accurate single point
representation of the volume distribution.
For a discussion of Gran Tierra’s interest in the prospective
resources, the location of the prospective resources, the product
type reasonably expected, the risks and level of uncertainty
associated with recovery of the resources, the significant positive
and negative factors relevant to the estimate of the prospective
resources, a description of the applicable projects maturity sub
-categories and other relevant information regarding the
prospective resources estimates, please see the GTE NI 51-101F1
available on SEDAR at www.sedar.com.
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.
In this press release, the Company uses the term
prospective resources. The SEC guidelines strictly prohibit the
Company from including prospective resources in filings with the
SEC. 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 forms
can also be obtained from the SEC website at www.sec.gov or by
calling 1-800-SEC-0330.
Contact Information
For investor and media inquiries please
contact:
Gary GuidryChief Executive Officer
Ryan EllsonChief Financial Officer
Rodger Trimble, P.Eng.Vice-President Investor
Relations403-265-3221
info@grantierra.com
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