Gran Tierra Energy Inc.
("Gran Tierra" or
the "Company") (NYSE American:GTE)(TSX:GTE)(LSE:GTE) today
announced the Company's financial and operating results for the
quarter ended September 30, 2020 ("
the
Quarter"). All dollar amounts are in United States
dollars and production amounts are on an average working interest
before royalties ("
WI") basis unless otherwise
indicated. Per barrel ("
bbl") amounts are based on
WI sales before royalties. For per bbl amounts based on net after
royalty ("
NAR") production, see Gran Tierra's
Quarterly Report on Form 10-Q filed November 2, 2020.
Key Highlights:
- Production: The
Quarter's production averaged 18,944 bbl per day
("BOPD"), down 6% from second quarter 2020
("the Prior Quarter"); production during October
2020 averaged approximately 22,000 BOPD
- Collection of VAT &
Income Tax Receivables: Through both direct refunds and
value-added tax ("VAT") on the Company's oil
sales, Gran Tierra has collected total VAT and income tax
receivables of $97 million during 2020
- Credit Facility Paid Down
and Cash Balance Increased: By the end of the Quarter, the
Company paid down its credit facility balance to $200 million and
had $21 million in cash and cash equivalents, compared to a balance
on the credit facility of $207 million and cash and cash
equivalents of $17 million at the end of the Prior Quarter
- Significant Reductions in
Operating & G&A Costs: During the Quarter, Gran
Tierra's combined operating, workover and transportation expenses
($12.63/bbl) were down 31% relative to first quarter 2020
($18.33/bbl); the Company's cash general and administrative
("G&A") costs were down 8% on a per bbl basis
over the same timeframe; on an aggregate basis, these expenses
decreased from $56 million in first quarter 2020 to $27 million in
this Quarter, a 53% reduction; the majority of the cost reductions
represent structural improvements in the Company's operations,
which are expected to be maintained even if oil prices recover
further; as a result of ongoing cost saving initiatives, the
Company also expects future per well drilling and completion
capital costs to be reduced by approximately 27% at Acordionero and
18% at Costayaco compared to 2019
- Capital Expenditures and
Net Loss: With the significant oil price volatility and
logistical challenges due to COVID-19, Gran Tierra elected to keep
the Quarter's capital expenditures at a relatively low $7 million;
the Quarter's net loss was $108 million (including a non-cash
ceiling test impairment of $105 million), as compared to the Prior
Quarter's net loss of $371 million (including a non-cash ceiling
test impairment of $398 million)
- Increase in Adjusted EBITDA
and Funds Flow from Operations: Adjusted EBITDA(1) during
the Quarter was $22 million, up from the Prior Quarter's $18
million; this Quarter's funds flow from operations(1) was $8
million (up from the Prior Quarter's $6 million), and completely
covered the Quarter's capital expenditures
- Hedges In Place Designed To
Protect Cash Flows: Realized oil price hedging losses
totaled $3 million during the Quarter; the Company has the
following oil price hedges in place:
Type of Instrument & Period |
Volume(BOPD) |
Sold Put($/bbl) |
PurchasedPut ($/bbl) |
Sold Call($/bbl) |
Premium($/bbl) |
Collars: October 1, to December 31, 2020 |
11,000 |
|
27.05 |
|
35.68 |
|
43.43 |
|
0.54 |
|
Collars: January 1, to June 30, 2021 |
9,000 |
|
35.56 |
|
45.22 |
|
52.48 |
|
n/a |
Swaptions: July 1, to December 31, 2021 |
3,000 |
|
n/a |
n/a |
56.75 |
|
n/a |
- Setting Up For A Strong
2021: The Company is analyzing multiple scenarios focused
on maximizing returns and free cash flow in 2021, which will be
used for debt reduction, and to optimize the ultimate oil recovery,
free cash flow and long-term value from all assets
Message to Shareholders
Gary Guidry, President and Chief Executive
Officer of Gran Tierra, commented: "We are pleased with the
progress that Gran Tierra has achieved with the safe restart of
operations throughout our extensive Colombian portfolio. The safety
of our staff, contractors and the local communities where we
operate is always paramount. We commend our teams in Colombia,
Canada and Ecuador for their excellent work during the many
challenges of 2020 and their diligent management of COVID-19 safety
protocols, which has allowed an earlier recommencement of
development activities than originally forecast.
We also greatly appreciate the ongoing support
that the Colombian government continues to provide the local oil
industry, as evidenced by the ongoing payments of VAT and income
tax refunds. These refunds have helped Gran Tierra to strengthen
the Company's financial position and liquidity profile.
One of our key objectives is to finish 2020
strong to set up Gran Tierra for an exciting 2021. We believe we
are well-positioned to withstand the current volatile environment
with our low base decline, conventional oil asset base and the
operational control for capital allocation and timing, while
maintaining a low cost structure and the safety of our people."
Key Financial Metrics for the
Quarter:
- Net loss was $108 million compared
with a net loss of $371 million in the Prior Quarter, primarily due
to a non-cash ceiling test impairment of $105 million on the
Company's oil and gas properties during the Quarter compared to a
non-cash ceiling test impairment of $398 million in the Prior
Quarter; these non-cash ceiling test impairments resulted from the
significantly lower prescribed 12-month trailing average oil
prices
- Adjusted EBITDA(1) was $22 million,
compared with $18 million in the Prior Quarter
- Funds flow from operations(1) of $8
million ($0.02 per share, basic) increased by 35% compared with the
Prior Quarter, as lower production was offset by a 30% increase in
the Brent oil price, as well as a narrowing of differentials;
capital expenditures totaled $7 million, an increase of 55%
compared to the Prior Quarter, but down 83% from first quarter
2020
- Oil sales were $53 million, up 57%
from $34 million in the Prior Quarter, as higher Brent prices
offset lower production volumes
- Operating netback(1)(2) increased
204% from the prior quarter to $17.87 per bbl, largely driven by
the 30% increase in Brent oil price; this improvement was partially
offset by an increase in royalties to $3.35 per bbl, up from the
Prior Quarter's $1.63 per bbl, which was driven by higher oil
prices
- Operating expenses of $11.27 per
bbl were up 20% from $9.40 per bbl in the Prior Quarter due to
one-time costs associated with the reactivation of the Suroriente
Block and most minor fields during the Quarter; the Quarter's
operating expenses were still down 7% from first quarter 2020
despite a reduction in volumes
- Workover expenses were $0.62 per
bbl, down 13% from $0.71 per bbl in the Prior Quarter, due to lower
workover activity, and down 87% from first quarter 2020
- Transportation expenses were $0.74
per bbl, down from $1.68 per bbl in the Prior Quarter due to no
volumes being shipped through the OTA pipeline during the Quarter,
and an adjustment relating to tariffs previously paid on the OTA
pipeline
Operations Update
Acordionero (100% WI and
Operator)
- Gran Tierra forecasts the following activities during the
fourth quarter 2020 and into 2021; the evolving situation with the
COVID-19 pandemic, and the Company's strict adherence to COVID-19
safety protocols, may result in changes to the cost and timing of
these planned activities and their potential incremental production
additions:
- The first workover rig restarted
operations on September 1, 2020 and is currently on its fourth
workover; this first workover rig is forecast to continue
operations in the field through the end of 2020 and into first
quarter 2021
- A second workover rig up has
started up at Acordionero to accelerate workover activity; a total
of 8 to 10 offline oil wells are expected to be worked over by 2020
year-end to restore production; the total combined productive
capacity of the 10 highest priority wells for workover is estimated
to be approximately 3,500 BOPD, with weighted averages for water
cut of 13%, gas-oil ratio of 639 standard cubic feet per bbl and
API oil gravity of 17 degrees (based on 30-day averages prior to
each well going offline earlier this year)
- Development drilling is scheduled
to commence during the fourth quarter; a drilling rig is expected
to restart operations during fourth quarter 2020 to drill 1 to 2
new oil wells by 2020 year-end; these new wells are expected to
begin production during first quarter 2021; the drilling rig is
forecast to continue drilling new development oil wells at
Acordionero throughout 2021; the next 10 planned wells (8 oil
producers and 2 water injectors) are scheduled to be drilled from
the new southwest pad currently under construction; each of these
new wells is expected to have an initial oil production rate of
approximately 550 BOPD (initial 30-day average rate), in line with
the strong performance of wells drilled in the field during 2019
and first quarter 2020
Suroriente (52% WI and
Operator)
- Restart of production on this block
commenced on August 28, 2020 and the Company is steadily ramping up
production; the block's WI productive capacity is estimated to be
approximately 3,600 BOPD (based on the 30-day average prior to the
block being shut-in earlier this year)
- Prior to the blockades in late
February 2020, activities were underway to expand the Cohembi water
treatment, injection and processing facilities under a two-phased
expansion program; the combined phased expansion would be expected
to boost gross water injection capacity significantly to
potentially increase ultimate oil recovery
Majority of Minor Fields Resuming
Production
- The restart of the majority of
minor fields has commenced and the fields are coming back online at
rates higher than recorded just prior to the shut-ins; current
production from these restarted minor fields is approximately 1,800
BOPD
Moqueta (100% WI and
Operator)
- During the Quarter, Gran Tierra
continued to optimize the waterflood at Moqueta, where oil
production and water injection were in-line with expectations
- As previously announced in Gran
Tierra's August 4, 2020 press release, on June 21, 2020, Moqueta
was shut-in immediately after a leak was detected in the pipeline
that transports the field's production to Costayaco; repairs were
made during July 2020 and the field was brought back on production
on July 27, 2020; the temporary shut-in of Moqueta impacted the
Quarter's production by approximately 850 BOPD; Moqueta is
currently producing approximately 2,600 BOPD
Financial and Operational Highlights
(all amounts in $000s, except per share and bbl
amounts)
|
Three Months EndedSeptember 30, |
|
Three MonthsEndedJune 30, |
|
Nine Months EndedSeptember 30, |
|
2020 |
2019 |
|
2020 |
|
2020 |
2019 |
|
|
|
|
|
|
|
|
Net (Loss) Income |
$ |
(107,821 |
) |
|
$ |
(28,833 |
) |
|
|
$ |
(370,649 |
) |
|
|
$ |
(730,096 |
) |
|
$ |
11,686 |
|
|
Per Share - Basic and Diluted |
$ |
(0.29 |
) |
|
$ |
(0.08 |
) |
|
|
$ |
(1.01 |
) |
|
|
$ |
(1.99 |
) |
|
$ |
0.03 |
|
|
|
|
|
|
|
|
|
|
Oil
Sales |
$ |
53,142 |
|
|
$ |
132,491 |
|
|
|
$ |
33,824 |
|
|
|
$ |
173,045 |
|
|
$ |
443,049 |
|
|
Operating
Expenses |
(19,645 |
) |
|
(35,603 |
) |
|
|
(18,003 |
) |
|
|
(69,933 |
) |
|
(104,119 |
) |
|
Workover
Expenses |
(1,076 |
) |
|
(10,979 |
) |
|
|
(1,361 |
) |
|
|
(14,740 |
) |
|
(30,025 |
) |
|
Transportation
Expenses |
(1,286 |
) |
|
(3,179 |
) |
|
|
(3,226 |
) |
|
|
(8,549 |
) |
|
(16,167 |
) |
|
Operating
Netback(1)(2) |
$ |
31,135 |
|
|
$ |
82,730 |
|
|
|
$ |
11,234 |
|
|
|
$ |
79,823 |
|
|
$ |
292,738 |
|
|
|
|
|
|
|
|
|
|
G&A Expenses
Before Stock-Based Compensation |
$ |
4,506 |
|
|
$ |
7,645 |
|
|
|
$ |
5,237 |
|
|
|
$ |
17,183 |
|
|
$ |
24,782 |
|
|
G&A Stock-Based
Compensation Expense (Recovery) |
56 |
|
|
(8 |
) |
|
|
1,292 |
|
|
|
(707 |
) |
|
1,092 |
|
|
G&A Expenses,
Including Stock Based Compensation |
$ |
4,562 |
|
|
$ |
7,637 |
|
|
|
$ |
6,529 |
|
|
|
$ |
16,476 |
|
|
$ |
25,874 |
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA(1) |
$ |
21,790 |
|
|
$ |
73,717 |
|
|
|
$ |
17,851 |
|
|
|
$ |
74,157 |
|
|
$ |
264,981 |
|
|
|
|
|
|
|
|
|
|
Funds Flow from
Operations(1) |
$ |
8,056 |
|
|
$ |
59,021 |
|
|
|
$ |
5,974 |
|
|
|
$ |
36,257 |
|
|
$ |
222,740 |
|
|
|
|
|
|
|
|
|
|
Capital
Expenditures |
$ |
7,354 |
|
|
$ |
116,495 |
|
|
|
$ |
4,747 |
|
|
|
$ |
56,378 |
|
|
$ |
310,579 |
|
|
|
|
|
|
|
|
|
|
Average Daily Volumes (BOPD) |
|
|
|
|
|
|
|
WI Production Before
Royalties |
18,944 |
|
|
32,918 |
|
|
|
20,165 |
|
|
|
22,864 |
|
|
35,454 |
|
|
Royalties |
(1,893 |
) |
|
(5,155 |
) |
|
|
(1,757 |
) |
|
|
(2,600 |
) |
|
(5,929 |
) |
|
Production
NAR |
17,051 |
|
|
27,763 |
|
|
|
18,408 |
|
|
|
20,264 |
|
|
29,525 |
|
|
Decrease (Increase) in
Inventory |
15 |
|
|
(58 |
) |
|
|
858 |
|
|
|
117 |
|
|
65 |
|
|
Sales |
17,066 |
|
|
27,705 |
|
|
|
19,266 |
|
|
|
20,381 |
|
|
29,590 |
|
|
Royalties, % of WI
Production Before Royalties |
10 |
|
% |
16 |
|
% |
|
9 |
|
% |
|
11 |
|
% |
17 |
|
% |
|
|
|
|
|
|
|
|
Per bbl |
|
|
|
|
|
|
|
Brent |
$ |
43.34 |
|
|
$ |
62.03 |
|
|
|
$ |
33.39 |
|
|
|
$ |
42.53 |
|
|
$ |
64.75 |
|
|
Quality and
Transportation Discount |
(9.49 |
) |
|
(10.05 |
) |
|
|
(14.10 |
) |
|
|
(11.54 |
) |
|
(9.90 |
) |
|
Royalties |
(3.35 |
) |
|
(8.19 |
) |
|
|
(1.63 |
) |
|
|
(3.57 |
) |
|
(9.19 |
) |
|
Average Realized
Price |
30.50 |
|
|
43.79 |
|
|
|
17.66 |
|
|
|
27.42 |
|
|
45.66 |
|
|
Transportation
Expenses |
(0.74 |
) |
|
(1.05 |
) |
|
|
(1.68 |
) |
|
|
(1.35 |
) |
|
(1.67 |
) |
|
Average Realized Price
Net of Transportation Expenses |
29.76 |
|
|
42.74 |
|
|
|
15.98 |
|
|
|
26.07 |
|
|
43.99 |
|
|
Operating
Expenses |
(11.27 |
) |
|
(11.77 |
) |
|
|
(9.40 |
) |
|
|
(11.08 |
) |
|
(10.73 |
) |
|
Workover
Expenses |
(0.62 |
) |
|
(3.63 |
) |
|
|
(0.71 |
) |
|
|
(2.34 |
) |
|
(3.09 |
) |
|
Operating
Netback(1)(2) |
17.87 |
|
|
27.34 |
|
|
|
5.87 |
|
|
|
12.65 |
|
|
30.17 |
|
|
COVID-19
costs |
(0.64 |
) |
|
— |
|
|
|
(0.22 |
) |
|
|
(0.24 |
) |
|
— |
|
|
G&A Expenses
Before Stock-Based Compensation |
(2.59 |
) |
|
(2.53 |
) |
|
|
(2.73 |
) |
|
|
(2.72 |
) |
|
(2.55 |
) |
|
Severance
Expenses |
(0.07 |
) |
|
(0.05 |
) |
|
|
(0.01 |
) |
|
|
(0.23 |
) |
|
(0.11 |
) |
|
Realized Foreign
Exchange (Loss) Gain |
(0.69 |
) |
|
(0.14 |
) |
|
|
0.75 |
|
|
|
0.36 |
|
|
(0.03 |
) |
|
Realized Financial
Instruments (Loss) Gain |
(2.51 |
) |
|
(0.31 |
) |
|
|
5.67 |
|
|
|
1.58 |
|
|
(0.23 |
) |
|
Interest Expense,
Excluding Amortization of Debt Issuance Costs |
(7.57 |
) |
|
(3.76 |
) |
|
|
(6.41 |
) |
|
|
(5.93 |
) |
|
(2.89 |
) |
|
Interest
Income |
— |
|
|
0.04 |
|
|
|
— |
|
|
|
0.05 |
|
|
0.07 |
|
|
Other
Income |
1.12 |
|
|
— |
|
|
|
— |
|
|
|
0.31 |
|
|
— |
|
|
Net Lease
Payments |
0.05 |
|
|
(0.09 |
) |
|
|
0.01 |
|
|
|
0.01 |
|
|
(0.02 |
) |
|
Current Income Tax
Expense |
(0.37 |
) |
|
(1.01 |
) |
|
|
0.20 |
|
|
|
(0.09 |
) |
|
(1.44 |
) |
|
Cash
Netback(1) |
$ |
4.60 |
|
|
$ |
19.49 |
|
|
|
$ |
3.13 |
|
|
|
$ |
5.75 |
|
|
$ |
22.97 |
|
|
|
|
|
|
|
|
|
|
Share Information (000s) |
|
|
|
|
|
|
|
Common Stock
Outstanding, End of Period |
366,982 |
|
|
366,982 |
|
|
|
366,982 |
|
|
|
366,982 |
|
|
366,982 |
|
|
Weighted Average
Number of Common and Exchangeable Shares Outstanding -
Basic |
366,982 |
|
|
372,195 |
|
|
|
366,982 |
|
|
|
366,982 |
|
|
379,701 |
|
|
Weighted Average
Number of Common and Exchangeable Shares Outstanding -
Diluted |
366,982 |
|
|
372,195 |
|
|
|
366,982 |
|
|
|
366,982 |
|
|
379,702 |
|
|
(1) Funds flow from operations, operating
netback, return on average capital employed, cash netback, earnings
before interest, taxes and depletion, depreciation and accretion
("DD&A") ("EBITDA") and
EBITDA adjusted for goodwill and asset impairment, unrealized
foreign exchange gain or loss, stock based compensation expense or
recovery, other loss and unrealized financial instruments gain or
loss ("Adjusted EBITDA") are non-GAAP measures and
do not have standardized meanings 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) Operating netback as
presented is defined as oil sales less operating, workover and
transportation expenses. See the table entitled Financial and
Operational Highlights above for the components of consolidated
operating netback and corresponding reconciliation.
Conference Call
Information:
Gran Tierra will host its third quarter 2020
results conference call on Tuesday, November 3, 2020, 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), 020-3107-0289 (United Kingdom) or
01-800-518-5094 (Colombia). The call will also be available via
webcast at www.grantierra.com.
Corporate Presentation:
Gran Tierra's Corporate Presentation has been
updated and is available on the Company website at
www.grantierra.com.
Contact Information
For investor and media inquiries please contact:
Gary Guidry President & Chief Executive Officer
Ryan Ellson Executive Vice President & Chief Financial
Officer
Rodger Trimble Vice President, Investor Relations
+1-403-265-3221
info@grantierra.com
About Gran Tierra Energy
Inc.
Gran Tierra Energy Inc. together with its
subsidiaries is an independent international energy company focused
on oil and natural gas exploration and production in Colombia and
Ecuador. The Company is focused on its existing portfolio of assets
in Colombia and Ecuador and will pursue new growth opportunities
throughout Colombia and Latin America, leveraging our financial
strength. The Company’s common stock trades on the NYSE American,
the Toronto Stock Exchange and the London Stock Exchange under the
ticker symbol GTE. Additional information concerning Gran Tierra is
available at www.grantierra.com. Information on the Company's
website (including the Sustainability Report) does not constitute a
part of this press release. Investor inquiries may be directed to
info@grantierra.com or (403) 265-3221.
Gran Tierra's Securities and Exchange Commission
filings are available on the SEC website at http://www.sec.gov and
on SEDAR at http://www.sedar.com and UK regulatory filings are
available on the National Storage Mechanism website at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism.
Forward-Looking Statements and Legal
Advisories:
This press release contains opinions, forecasts,
projections, expectations and other statements about future events
or results that constitute forward-looking statements within the
meaning of the United States Private Securities Litigation Reform
Act of 1995, Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended,
and financial outlook and forward-looking information within the
meaning of applicable Canadian securities laws (collectively,
"forward-looking statements"), 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, 2020 and 2021 outlook, the benefits
of reduced capital spending and G&A expenses, the benefits of
derivative transactions, well performance, production, the restart
of production and workover activity, future development costs,
liquidity and access to capital, future plans when oil prices
increase, the Company’s strategies and results thereof, the
Company’s operations including planned operations, the use and the
availability of certain tax refunds and credits, and the impact of
the COVID-19 pandemic, disruptions to operations and the decline in
industry conditions.
Among the important factors that could cause
actual results to differ materially from those indicated by the
forward-looking statements in this press release are: the
unprecedented impact of the COVID-19 pandemic and the actions of
OPEC and non-OPEC countries and the procedures imposed by
governments in response thereto; disruptions to local operations;
the decline and volatility in oil and gas industry conditions and
commodity prices; the severe imbalance in supply and demand for oil
and natural gas; prices and markets for oil and natural gas are
unpredictable and volatile; the accuracy of productive capacity of
any particular field; the timing and impact of any resumption of
operations; Gran Tierra’s operations are located in South America
and unexpected problems can arise due to guerilla activity or local
blockades or protests; technical difficulties and operational
difficulties may arise which impact the production, transport or
sale of our products; geographic, political and weather conditions
can impact the production, transport or sale of our products; the
ability of Gran Tierra to execute its business plan and realize
expected benefits from current initiatives (including a reduction
of the capital program); the risk that unexpected delays and
difficulties in developing currently owned properties may occur;
the ability to replace reserves and production and develop and
manage reserves on an economically viable basis; the accuracy of
testing and production results and seismic data, pricing and cost
estimates (including with respect to commodity pricing and exchange
rates); the risk profile of planned exploration activities; the
effects of drilling down-dip; the effects of waterflood and
multi-stage fracture stimulation operations; the extent and effect
of delivery disruptions, equipment performance and costs; actions
by third parties; the timely receipt of regulatory or other
required approvals for our operating activities; the failure of
exploratory drilling to result in commercial wells; unexpected
delays due to the limited availability of drilling equipment and
personnel; the risk that current global economic and credit market
conditions may impact oil prices and oil consumption more than Gran
Tierra currently predicts, which could cause Gran Tierra to further
modify its strategy and capital spending program; volatility or
declines in the trading price of our common stock or bonds; the
risk that Gran Tierra does not receive the anticipated benefits of
government programs, including government tax refunds; Gran
Tierra’s ability to comply with financial covenants in its credit
agreement and indentures and make borrowings under its credit
agreement; and the risk factors detailed from time to time in Gran
Tierra’s periodic reports filed with the Securities and Exchange
Commission, including, without limitation, under the caption "Risk
Factors" in Gran Tierra's Quarterly Report for the quarter ended
September 30, 2020 and Annual Report on Form 10-K for the year
ended December 31, 2019, many of which are beyond the Company's
control. These filings are available on the SEC website at
http://www.sec.gov and on SEDAR at www.sedar.com. The unprecedented
decline in oil prices and related reduction in the Company's
capital program has significantly reduced the Company’s forecasted
Covenant EBITDAX.
The forward-looking statements contained in this
press release are based on certain assumptions made by Gran Tierra
based on management's experience and other factors believed to be
appropriate. Gran Tierra believes these assumptions to be
reasonable at this time, but the forward-looking statements are
subject to risk and uncertainties, many of which are beyond Gran
Tierra's control, which may cause actual results to differ
materially from those implied or expressed by the forward looking
statements. The risk that the assumptions on which the 2020 and
2021 outlook are based prove incorrect may increase the later the
period to which the outlook relates. In particular, the
unprecedented nature of the current economic downturn, pandemic and
industry decline may make it particularly difficult to identify
risks or predict the degree to which identified risks will impact
Gran Tierra's business and financial condition. All forward-looking
statements are made as of the date of this press release and the
fact that this press release remains available does not constitute
a representation by Gran Tierra that Gran Tierra believes these
forward-looking statements continue to be true as of any subsequent
date. Actual results may vary materially from the expected results
expressed in forward-looking statements. Gran Tierra disclaims any
intention or obligation to update or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise, except as expressly required by applicable law.
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
income or loss or other measures of financial performance as
determined in accordance with GAAP. Gran Tierra's method of
calculating these measures may differ from other companies and,
accordingly, 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 to not imply that more
emphasis should be placed on the non-GAAP measure.
Operating netback as presented is defined as oil
sales less operating and transportation expenses. See the table
entitled Financial and Operational Highlights above for the
components of consolidated operating netback and corresponding
reconciliation.
Cash netback as presented is defined as net
income before DD&A expenses, goodwill and asset impairment,
deferred income tax expense or recovery, stock-based compensation
expense or recovery, amortization of debt issuance costs, non-cash
lease expense, lease payments, unrealized foreign exchange gains
and losses, financial instrument gains or losses, loss on
redemption of convertible notes, other non-cash losses and cash
settlement of financial instruments. 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. A reconciliation from net (loss) income to cash netback
is as follows:
|
|
Three Months EndedSeptember 30, |
|
Nine Months EndedSeptember 30, |
|
Three MonthsEndedJune 30, |
Cash Netback -
(Non-GAAP) Measure ($000s) |
|
2020 |
2019 |
|
2020 |
2019 |
|
2020 |
Net (loss) income |
|
$ |
(107,821 |
) |
|
$ |
(28,833 |
) |
|
|
$ |
(730,096 |
) |
|
$ |
11,686 |
|
|
|
$ |
(370,649 |
) |
|
Adjustments to
reconcile net (loss) income to cash netback |
|
|
|
|
|
|
|
|
DD&A expenses |
|
31,340 |
|
|
49,812 |
|
|
|
131,118 |
|
|
164,430 |
|
|
|
42,484 |
|
|
Goodwill impairment |
|
— |
|
|
— |
|
|
|
102,581 |
|
|
— |
|
|
|
— |
|
|
Asset impairment |
|
104,731 |
|
|
— |
|
|
|
507,093 |
|
|
— |
|
|
|
398,458 |
|
|
Deferred tax (recovery) expense |
|
(21,202 |
) |
|
8,472 |
|
|
|
(62,796 |
) |
|
31,752 |
|
|
|
(76,200 |
) |
|
Stock-based compensation expense (recovery) |
|
56 |
|
|
(8 |
) |
|
|
(707 |
) |
|
1,092 |
|
|
|
1,292 |
|
|
Amortization of debt issuance costs |
|
838 |
|
|
789 |
|
|
|
2,774 |
|
|
2,574 |
|
|
|
1,092 |
|
|
Non-cash lease expense |
|
523 |
|
|
472 |
|
|
|
1,494 |
|
|
1,366 |
|
|
|
481 |
|
|
Lease payments |
|
(429 |
) |
|
(755 |
) |
|
|
(1,404 |
) |
|
(1,603 |
) |
|
|
(460 |
) |
|
Unrealized foreign exchange loss (gain) |
|
3,080 |
|
|
6,412 |
|
|
|
22,335 |
|
|
5,303 |
|
|
|
(1,544 |
) |
|
Financial instruments (gain) loss |
|
(713 |
) |
|
12,285 |
|
|
|
51,869 |
|
|
(2,890 |
) |
|
|
164 |
|
|
Loss on redemption of convertible notes |
|
— |
|
|
11,305 |
|
|
|
— |
|
|
11,305 |
|
|
|
— |
|
|
Other non-cash loss |
|
2,026 |
|
|
— |
|
|
|
2,026 |
|
|
— |
|
|
|
— |
|
|
Cash settlement of financial instruments |
|
(4,373 |
) |
|
(930 |
) |
|
|
9,970 |
|
|
(2,275 |
) |
|
|
10,856 |
|
|
Cash
netback |
|
$ |
8,056 |
|
|
$ |
59,021 |
|
|
|
$ |
36,257 |
|
|
$ |
222,740 |
|
|
|
$ |
5,974 |
|
|
EBITDA, as presented, is defined as net (loss)
income adjusted for DD&A expenses, interest expense and income
tax expense or recovery. Adjusted EBITDA is defined as EBITDA
adjusted for goodwill and asset impairment, unrealized foreign
exchange gains or losses, stock based compensation expense or
recovery, loss on redemption of Convertible Notes, other non-cash
losses and unrealized financial instruments gains or losses.
Management uses this financial measure to analyze performance and
(loss) income 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. A reconciliation from net (loss) income to EBITDA and
Adjusted EBITDA as follows:
|
Three Months EndedSeptember 30, |
|
Nine Months EndedSeptember 30, |
|
Three MonthsEndedJune 30, |
|
TwelveMonthTrailingSeptember30, |
EBITDA - (Non-GAAP)
Measure ($000s) |
2020 |
2019 |
|
2020 |
2019 |
|
2020 |
|
2020 |
Net (loss) income |
$ |
(107,821 |
) |
|
$ |
(28,833 |
) |
|
|
$ |
(730,096 |
) |
|
$ |
11,686 |
|
|
|
$ |
(370,649 |
) |
|
|
$ |
(703,092 |
) |
|
Adjustments to
reconcile net (loss) income to EBITDA and Adjusted
EBITDA |
|
|
|
|
|
|
|
|
|
DD&A expenses |
31,340 |
|
|
49,812 |
|
|
|
131,118 |
|
|
164,430 |
|
|
|
42,484 |
|
|
|
191,721 |
|
|
Interest expense |
14,029 |
|
|
12,153 |
|
|
|
40,204 |
|
|
30,655 |
|
|
|
13,365 |
|
|
|
52,817 |
|
|
Income tax (recovery) expense |
(20,565 |
) |
|
11,521 |
|
|
|
(62,236 |
) |
|
45,675 |
|
|
|
(76,575 |
) |
|
|
(50,626 |
) |
|
EBITDA |
$ |
(83,017 |
) |
|
$ |
44,653 |
|
|
|
$ |
(621,010 |
) |
|
$ |
252,446 |
|
|
|
$ |
(391,375 |
) |
|
|
$ |
(509,180 |
) |
|
Goodwill impairment |
— |
|
|
— |
|
|
|
102,581 |
|
|
— |
|
|
|
— |
|
|
|
102,581 |
|
|
Asset impairment |
104,731 |
|
|
— |
|
|
|
507,093 |
|
|
— |
|
|
|
398,458 |
|
|
|
507,093 |
|
|
Unrealized foreign exchange loss (gain) |
3,080 |
|
|
6,412 |
|
|
|
22,335 |
|
|
5,303 |
|
|
|
(1,544 |
) |
|
|
18,835 |
|
|
Stock-based compensation expense (recovery) |
56 |
|
|
(8 |
) |
|
|
(707 |
) |
|
1,092 |
|
|
|
1,292 |
|
|
|
(369 |
) |
|
Loss on redemption of Convertible Notes |
— |
|
|
11,305 |
|
|
|
— |
|
|
11,305 |
|
|
|
— |
|
|
|
196 |
|
|
Other non-cash loss |
2,026 |
|
|
— |
|
|
|
2,026 |
|
|
— |
|
|
|
— |
|
|
|
2,026 |
|
|
Unrealized financial instruments (gain) loss |
(5,086 |
) |
|
11,355 |
|
|
|
61,839 |
|
|
(5,165 |
) |
|
|
11,020 |
|
|
|
17,516 |
|
|
Adjusted
EBITDA |
$ |
21,790 |
|
|
$ |
73,717 |
|
|
|
$ |
74,157 |
|
|
$ |
264,981 |
|
|
|
$ |
17,851 |
|
|
|
$ |
138,698 |
|
|
Funds flow from operations, as presented, is net
(loss) income adjusted for DD&A expenses, goodwill and asset
impairment, deferred tax expense or recovery, stock-based
compensation expense or recovery, amortization of debt
issuance costs, non-cash lease expense, lease payments, unrealized
foreign exchange gains and losses, financial instruments gains or
losses, loss on redemption of Convertible Notes, other non-cash
losses and cash settlement of financial instruments. Management
uses this financial measure to analyze performance and income
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. A reconciliation from net (loss) income to funds flow from
operations is as follows:
|
Three Months EndedSeptember 30, |
|
Nine Months EndedSeptember 30, |
|
Three MonthsEndedJune 30, |
Funds Flow From
Operations - (Non-GAAP) Measure ($000s) |
2020 |
2019 |
|
2020 |
2019 |
|
2020 |
Net (loss) income |
$ |
(107,821 |
) |
|
$ |
(28,833 |
) |
|
|
$ |
(730,096 |
) |
|
$ |
11,686 |
|
|
|
$ |
(370,649 |
) |
|
Adjustments to
reconcile net (loss) income to funds flow from
operations |
|
|
|
|
|
|
|
DD&A expenses |
31,340 |
|
|
49,812 |
|
|
|
131,118 |
|
|
164,430 |
|
|
|
42,484 |
|
|
Goodwill impairment |
— |
|
|
— |
|
|
|
102,581 |
|
|
— |
|
|
|
— |
|
|
Asset impairment |
104,731 |
|
|
— |
|
|
|
507,093 |
|
|
— |
|
|
|
398,458 |
|
|
Deferred tax (recovery) expense |
(21,202 |
) |
|
8,472 |
|
|
|
(62,796 |
) |
|
31,752 |
|
|
|
(76,200 |
) |
|
Stock-based compensation expense (recovery) |
56 |
|
|
(8 |
) |
|
|
(707 |
) |
|
1,092 |
|
|
|
1,292 |
|
|
Amortization of debt issuance costs |
838 |
|
|
789 |
|
|
|
2,774 |
|
|
2,574 |
|
|
|
1,092 |
|
|
Non-cash lease expense |
523 |
|
|
472 |
|
|
|
1,494 |
|
|
1,366 |
|
|
|
481 |
|
|
Lease payments |
(429 |
) |
|
(755 |
) |
|
|
(1,404 |
) |
|
(1,603 |
) |
|
|
(460 |
) |
|
Unrealized foreign exchange loss (gain) |
3,080 |
|
|
6,412 |
|
|
|
22,335 |
|
|
5,303 |
|
|
|
(1,544 |
) |
|
Financial instruments (gain) loss |
(713 |
) |
|
12,285 |
|
|
|
51,869 |
|
|
(2,890 |
) |
|
|
164 |
|
|
Loss on redemption of Convertible Notes |
— |
|
|
11,305 |
|
|
|
— |
|
|
11,305 |
|
|
|
— |
|
|
Other non-cash loss |
2,026 |
|
|
— |
|
|
|
2,026 |
|
|
— |
|
|
|
— |
|
|
Cash settlement of financial instruments |
(4,373 |
) |
|
(930 |
) |
|
|
9,970 |
|
|
(2,275 |
) |
|
|
10,856 |
|
|
Funds flow from
operations |
$ |
8,056 |
|
|
$ |
59,021 |
|
|
|
$ |
36,257 |
|
|
$ |
222,740 |
|
|
|
$ |
5,974 |
|
|
Presentation of Oil and Gas
Information
References to a formation where evidence of
hydrocarbons has been encountered is not necessarily an indicator
that hydrocarbons will be recoverable in commercial quantities or
in any estimated volume. Gran Tierra's reported production is a mix
of light crude oil and medium and heavy crude oil for which there
is not a precise breakdown since the Company's oil sales volumes
typically represent blends of more than one type of crude oil. Well
test results should be considered as preliminary and not
necessarily indicative of long-term performance or of ultimate
recovery. Well log interpretations indicating oil and gas
accumulations are not necessarily indicative of future production
or ultimate recovery. If it is indicated that a pressure transient
analysis or well-test interpretation has not been carried out, any
data disclosed in that respect should be considered preliminary
until such analysis has been completed. References to thickness of
“oil pay” or of a formation where evidence of hydrocarbons has been
encountered is not necessarily an indicator that hydrocarbons will
be recoverable in commercial quantities or in any estimated
volume.
This press release contains certain oil and gas
metrics, including operating netback and cash netback, which do not
have standardized meanings or standard methods of calculation and
therefore such measures may not be comparable to similar measures
used by other companies and should not be used to make comparisons.
These metrics are calculated as described in this press release and
management believes that they are useful supplemental measures for
the reasons described in this press release.
Such metrics have been included herein to
provide readers with additional measures to evaluate the Company's
performance; however, such measures are not reliable indicators of
the future performance of the Company and future performance may
not compare to the performance in previous periods.
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