Gran Tierra Energy Inc.
("Gran Tierra" or
the "Company") (NYSE American:GTE)(NYSE MKT:GTE)(TSX:GTE)
(LSE:GTE), today announced its 2020 capital budget and
production guidance and an operational update. All dollar amounts
are in United States dollars and all production volumes are on a
working interest before royalties ("
WI") basis and
are expressed in barrels (
"bbl") of oil per day
(
"bopd") or bbl of oil equivalent
(
"boe") per day (
"boepd"), unless
otherwise indicated.
Commenting on Gran Tierra's 2020 guidance and
operational update, Gary Guidry, President and Chief Executive
Officer of Gran Tierra, said: "Since October 2019, we have
increased the Company's total production by approximately 10% or
3,000 boepd, to a current average level of over 35,000 boepd. We
are delivering this resumption of production growth through the
successful implementation of the Acordionero field-wide waterflood
and the ongoing positive results achieved with our infill
development well program at Costayaco. We plan to ramp up
production at Acordionero to over 20,000 bopd during 2020,
resulting in strong and stable free cash flow2.
In addition, we are excited that the development
drilling at Acordionero has extended the field limits to the south.
Also, Costayaco drilling has confirmed our reservoir modeling
predictions of unswept oil pools within the field, and added
immediate production and confidence in future development to
enhance oil recovery.
During 2019, our production was temporarily
impacted in the southern Putumayo region and at the Acordionero oil
field in the Middle Magdalena Valley Basin. We believe we have
mitigated the risks of these types of disruptions in the future.
The 2019 production issues at Acordionero have been addressed
through the expansion of our production facilities, significant
increase in water injection and installation of gas-to-power
turbines which are delivering cheaper and more reliable power. We
continue to see no issues with the long-term reservoir performance
in our main fields at Acordionero, Costayaco, Moqueta and
Cohembi.
Our 2020 capital budget is a balanced,
returns-focused program which prioritizes free cash flow2
generation over the rate of development and production growth. We
plan to direct free cash flow2 to debt reduction and share
buybacks, with priority given to debt reduction. We still see
material upside in our exploration portfolio located in highly
prospective geological trends in Colombia and Ecuador. We have
budgeted a measured, yet robust high-impact exploration campaign,
mostly directed at our large landholdings in the Putumayo Basin of
Colombia and Oriente Basin of Ecuador. Our 2020 plans are also
aligned with Gran Tierra's 'Beyond Compliance Policy' which focuses
on our commitments to environmental, social and governance
excellence. Wherever there are significant opportunities and
benefits to the environment or communities, Gran Tierra voluntarily
goes beyond what is legally required to protect the environment and
provide social benefits because it is the right thing to do."
Highlights
2020 Guidance
- Free Cash Flow:
Gran Tierra's 2020 plan is focused on generating strong free cash
flow2; the Company's midpoint 2020 EBITDA3 guidance of $340 million
is $130 million above the midpoint of 2020 capital expenditures
guidance
- Fully Funded Capital
Program: the 2020 capital budget of $200-220 million is
expected to be fully funded from the 2020 cash flow1 forecast of
$270-290 million, at a $60/bbl Brent oil price
- Debt Reduction:
with 2020 expected free cash flow2 and changes in non-cash working
capital (primarily related to the collection of value-added tax
receivables), Gran Tierra expects its credit facility to be fully
repaid by year-end 2020; the Company forecasts an annualized fourth
quarter 2020 net debt4 to EBITDA3 ratio of 1.4 times
- Free Cash Flow
Uses: during 2020, Gran Tierra plans to direct free cash
flow2 towards debt reduction and share buybacks, with priority
given to debt reduction
- Managed Production
Growth: in 2020, Gran Tierra has elected to reduce capital
expenditures, relative to 2019 levels, in order to emphasize free
cash flow2 generation rather than significant production growth;
the Company expects 2020 average production of 35,500 to 37,500
boepd, which represents growth from the Company's forecasted 2019
average production of 34,800 to 35,000 boepd; Gran Tierra forecasts
that based on its existing Proved plus Probable
("2P") reserves, the Company has the potential
capacity to increase production to 46,000 to 51,000 boepd, over the
next several years, depending on capital spending levels in 2021
and beyond
- 2020 production guidance is:
º Only forecasted volumes from existing operations and
expected development and appraisal projects, with no volumes
assumed for any exploration success º 100% oil,
ranging from medium to light gravity
- Gran Tierra is forecasting the
following ranges for the Company’s 2020 budget:
2020 Budget |
Base Case |
High Case |
Brent Oil Price ($/bbl) |
60.00 |
65.00 |
Total Company Production (boepd) |
35,500-37,500 |
35,500-37,500 |
Operating Netback3 ($ million) |
360-380 |
410-430 |
EBITDA3 ($ million) |
330-350 |
380-400 |
Cash Flow1 ($ million) |
270-290 |
310-330 |
Cash Flow per Share1 ($/share) |
0.74-0.79 |
0.84-0.90 |
Total Capital ($ million) |
200-220 |
200-220 |
Development Capital ($ million) |
150-170 |
150-170 |
Cash Flow1 after Development Capital ($
million) |
110-130 |
150-170 |
Exploration Capital ($ million) |
40-60 |
40-60 |
Free Cash Flow2 ($ million) |
60-80 |
100-120 |
Number of Development Wells (gross) |
16-19 |
16-19 |
Number of Exploration Wells (gross) |
3-5 |
3-5 |
- Based on the midpoint of guidance,
the base case 2020 capital budget is forecasted to be directed
approximately 75% to development and 25% to exploration
- Gran Tierra's 2020 exploration
program is expected to be measured but high-impact; the 3 to 5 well
program is targeting highly prospective geological trends in the
Putumayo and Middle Magdalena Valley ("MMV")
Basins in Colombia and the Oriente Basin in Ecuador
- MMV Basin: in 2020, Gran Tierra
plans to drill 12-14 development and 0-1 exploration wells; if Gran
Tierra drills a MMV exploration well, the plan is to target the
Gaitas prospect on the Midas Block (same block as Acordionero),
which is a prospective structure which may have Lisama reservoir
sands analogous to Acordionero
- Putumayo Basin: in 2020, Gran
Tierra plans to drill 4-5 development and 2 exploration wells
- Ecuador (Oriente Basin): in 2020,
Gran Tierra plans to drill 1-2 exploration wells
- Gran Tierra has significant
flexibility with capital allocation and timing; the Company
operates over 95% of its production and all of its blocks in the
Putumayo, MMV and Oriente Basins
- If oil prices drop significantly
below the Company's forecast, Gran Tierra has the ability to
moderate the rate of spending accordingly due to the Company's high
operated interests across its asset portfolio
- Gran Tierra expects approximate
2020 expenses and operating netback per boe5 to be in the following
ranges:
2020 Budget |
Base Case |
High Case |
Brent Oil Price ($/bbl) |
60.00 |
65.00 |
Expenses ($/boe) |
|
|
Transportation and Quality Discount |
11.00-12.00 |
11.00 - 12.00 |
Royalties |
8.00-9.00 |
9.50-10.50 |
Oil and Gas Sales Price ($/boe) |
39.00 - 41.00 |
42.50-44.50 |
Operating Costs |
8.00-9.00 |
8.00-9.00 |
Workover Costs |
2.00-2.50 |
2.00-2.50 |
Transportation (Pipeline) |
1.00-1.50 |
1.00-1.50 |
Operating Netback5 ($/boe) |
27.00-29.00 |
30.50-32.50 |
General and Administrative |
2.25-2.75 |
2.25-2.75 |
Interest and Financing |
3.25-3.75 |
3.25-3.75 |
Taxes |
0.40-0.50 |
1.40-1.60 |
Credit Facility Update
- The borrowing base of Gran Tierra's credit facility has been
confirmed at $300 million until the next redetermination, scheduled
for May 2020
- Gran Tierra has agreed with its lenders to extend the maturity
of its revolving credit facility by one year, to November 2022, on
materially the same terms, subject to documentation
Operational Update (All Projects
Operated)
Acordionero Production and Positive
Results from Waterflood (100%WI)
- Acordionero production is back on
track and is expected to increase throughout 2020; during the
fourth quarter of 2019, Acordionero production averaged 14,136 bbls
of oil per day ("bopd") in October and 15,513 bopd
in November; since November 21, 2019, the field has averaged
approximately 16,200 bopd; as expected, Acordionero is showing
positive waterflood response across the field in both the Lisama A
and C reservoirs; the replacement of several electric submersible
pumps ("ESP") has also increased production
Acordionero: Expansion of Field (100%
WI)
- AC-54: this
development well is the southernmost well drilled in the
Acordionero field to date and encountered 348 feet
("ft") measured depth ("MD") of
net pay and was completed in the Lisama A and C reservoirs and
placed on production November 20, 2019; during November 20 -
December 8, 2019, the AC-54 produced at average stabilized rates of
488 bopd of 17 degree API oil, a gas-oil ratio
("GOR") of 290 standard cubic feet per stock tank
bbl ("scf/stb") and a watercut of 0% on ESP; this
well is located outside the previously established southern
boundary of the original-oil-place mapping for the field
- Gran Tierra is encouraged that
Acordionero's production has returned to a growth track and the
Company expects incremental reserve additions associated with the
waterflood response and the AC-54 well results
Successful Costayaco Infill Development Well Results
(100% WI)
- Gran Tierra's most recently drilled
Costayaco infill development wells targeted areas of the field
predicted by modeling to be unswept by water injection, with the
potential to optimize oil recovery efficiency; the modeling proved
to be correct and the wells have been successful as demonstrated by
the average production results summarized in the table below:
Costayaco |
2019 Date Range |
Average Daily Production |
|
|
Development |
for Average |
Oil |
GOR |
Watercut |
Producing |
Pump |
Well |
Production |
bopd |
scf/stb |
% |
Zones |
Type |
CYC-39 |
Nov.17 - Dec.07 |
993 |
|
141 |
|
54 |
|
Caballos, T Sand |
ESP |
Dec.08 |
968 |
|
161 |
|
55 |
|
CYC-40 |
Nov.20 - Dec.07 |
614 |
|
280 |
|
89 |
|
Caballos, T Sand |
ESP |
Dec.08 |
572 |
|
320 |
|
89 |
|
CYC-41 |
Nov.29 - Dec.07 |
1,043 |
|
45 |
|
12 |
|
Caballos |
Jet |
Dec.08 |
1,424 |
|
56 |
|
10 |
|
Modeling shows further potential to enhance oil recovery which
the Company plans to pursue over the next few years
Ayombero-Chuira Appraisal (100% WI)
- The Ayombero-Chuira structure is
estimated to contain estimated prospective resources6 in the ranges
outlined in the table below, as evaluated by the Company's
independent qualified reserves evaluator McDaniel & Associates
Consultants Ltd. ("McDaniel") in a report with an
effective date of July 31, 2018 (the "GTE McDaniel
Prospective Resources Report"):
|
Company 100% WI Values |
|
|
|
|
Prospective Resources6 |
|
|
|
|
Unrisked |
|
Risked |
Chance |
|
Chance of |
|
|
|
Low |
Median |
High |
Mean |
|
Mean |
of Discovery |
|
Development |
|
Oil |
Prospect Area |
Mbbl |
Mbbl |
Mbbl |
Mbbl |
|
Mbbl |
% |
% |
% |
Ayombero-Chuira |
21,283 |
|
|
52,358 |
|
|
119,156 |
|
|
63,417 |
|
|
|
28,857 |
|
|
51 |
|
|
90 |
|
100 |
|
This structure's reservoir is highly
over-pressured and therefore requires special equipment called a
snubbing unit, which is now onsite in Colombia, to work on the
three Ayombero wells; the Company believes what is most exciting
about this discovery is that the production so far, from both the
western Chuira and eastern Ayombero sides of the structure,
indicates that these wells could potentially reach the McDaniel
estimated average WI 2P ultimate oil recovery of approximately
420,000 bbls of oil per well for Ayombero-Chuira7
- Ayombero-1: Gran Tierra remains encouraged by
production from this well; since November 7, 2019, the well has
produced via natural flow at an average rate of 180 bopd of 18.5
degree API oil, a GOR of 356 scf/stb, a watercut of 0.1% and
1,469 pounds per square inch of tubing head pressure; the well has
total cumulative oil production to date of 86,545 bbls with no
signs of pressure depletion
- Ayombero-2 and 3: stuck coiled tubing has been
removed from within the Ayombero-3 tubing string; both wells have
been successfully prepared for snubbing operations, which are
expected to begin in the next 10 days; the plan is to re-establish
production testing operations in these wells
Suroriente (52% WI)
- Cohembi Oil Field:
continues to respond positively to increased water injection and
pump optimizations; the Company is planning to increase gross water
injection to 40,000 bbls of water injected per day by the end of
2019
- Since assuming operatorship, the
Company has been able to increase the Suroriente Block's WI
production by approximately 450 bopd without drilling a well to a
current average level of 3,734 bopd (average since December 2,
2019)
Cocona-1 Exploration Well in PUT-1 Block
(100% WI)
- This exploration well was spud on
November 27, 2019 and is currently at 2,015 ft MD; Cocona-1 is
expected to reach its planned total depth of approximately 11,000
ft MD by the end of 2019
- Cocona-1 is a multi-zone prospect
with potential in the N and U Sands and the A-Limestone
- This well is the first follow up
drilled by Gran Tierra on PUT-1 since the Vonu-1 exploration well,
which has been Gran Tierra's most successful A-Limestone well to
date, and tests a potentially significant extension of the fracture
limestone play fairway
- The Vonu-1 well has produced
approximately 857,000 bbls of oil from the A-Limestone (from June
2017 to November 2019) and had initial 30-day average production of
1,758 bopd (30-day average) of 30 degree API oil, a GOR of 407
scf/stb and a watercut of less than 1%; the well is still producing
over 400 bopd, with less than1% water cut and a GOR of 1,214
scf/stb; this well's solution gas production is contributing to the
Costayaco gas to power generation project
- Prior to the Vonu-1 being placed on
production from the A-Limestone, the well was also
production-tested during June 2017 on a jet pump for 24 hours from
the U Sand, at an average rate of 217 bopd of 29 degree API oil, a
water cut of less than 3% (declining) and a GOR of 524 scf/stb
(steady); the U Sand oil production rate was showing signs of
stabilizing
- The Costayaco-19 well in the
adjacent Chaza Block, has produced approximately 763,000 bbls of
oil from the A-Limestone (from May 2016 to November 2019)
- Gran Tierra predicts that the
Cocona-1 well may encounter the same faulted and fractured trend in
the A-Limestone from which the Vonu-1 and Costayaco-19 wells have
produced; natural fracturing of the A-Limestone appears to
significantly enhance its oil productivity and expected ultimate
recovery
- If Cocona-1 is successful in the
A-Limestone, this well may have positive implications for the size
of the A-Limestone's ultimate potential in this region of the
northern Putumayo Basin and the possibility of additional follow-up
drilling locations on the PUT-1 Block and adjacent Chaza
exploitation area
3D Seismic Program Update (100% WI)
- The 341 square kilometer 3D seismic
program was successfully completed across the Alea 1848A,
Nancy-Burdine-Maxine, PUT-4 and PUT-25 Blocks
- This program is the largest seismic
program ever conducted in the Putumayo Basin
- Interpretation is currently
underway which is helping Gran Tierra better define further
development of the Nancy field and multiple exploration prospects
across all four blocks, with very encouraging initial results
- Gran Tierra's exploration team is
also rapidly integrating 3D seismic data from Ecuador and applying
learnings from both sides of the border to optimize the Company's
2020 exploration program in the Putumayo and Oriente Basins of 3 to
4 exploration wells
ANH Bid Round Awards
- Gran Tierra was awarded two blocks
in the recent Agencia Nacional de Hidrocarburos
("ANH") bid round in Colombia, the PUT-21 and
PUT-33 Blocks in the Putumayo Basin; the Company believes these
blocks may be highly prospective
- PUT-21 Block:
covers 76,778 acres contiguous to Gran Tierra's assets in the
Putumayo Basin and is on-trend with the Costayaco and Moqueta oil
fields; this block is close to the Company's facilities and other
existing infrastructure; the Company is committed to undertaking a
55 square kilometer ("km") 3D seismic survey and
one exploration well within a six year exploration period; one of
several prospective horizons in PUT-21 is the M2 Sand, from which
the nearby Miraflor-2 well is testing at average unstimulated
production rates of 167 bopd of 26 degree API oil, a GOR of 10
scf/stb and a watercut of 3% on jet pump over a period of 26 days;
Gran Tierra successfully drilled the Miraflor-2 well during fourth
quarter 2019; other prospective horizons on PUT-21 include the N,
T, U and Caballos Sands and the A and M2 Limestones
- PUT-33 Block:
covers 13,653 acres; the Company is committed to undertaking a 49
square km 3D seismic survey and one exploration well within a six
year exploration period; this block is adjacent to areas with
production from the N, M2, U and T Sands and may contain potential
structural and stratigraphic traps
2020 Capital Markets Day
Gran Tierra is planning a Capital Markets Day in Bogota, with a
trip to the Acordionero field, on January 29, 2020.
Gary Guidry, President and Chief Executive
Officer of Gran Tierra, further commented: "Our 100% working
interest in and operatorship of our major assets gives us the
flexibility to pace our 2020 development program. With no projected
impact on ultimate oil recovery efficiency, we are choosing to slow
the pace of our infill development drilling programs at
Acordionero, Costayaco and Moqueta, while funding exploration and
generating free cash flow2 to strengthen our balance sheet.
This flexibility also allows us to optimize our
programs with changes in oil prices. With our 2020 operating
expense budget, we are targeting decreases in both our unit
operating and workover costs per boe compared to 2019, as we
utilize past investments in Acordionero's expanded production
facilities and the reliable and more cost-effective power we are
now generating from our natural gas production at Acordionero and
Costayaco.
We believe that Gran Tierra has a self-funding
and sustainable business model with an excellent Colombian and
Ecuadorian portfolio to generate ongoing growth on a per share
basis in terms of net asset value, production, reserves and cash
flow1. We are currently evaluating production hedging opportunities
to protect our discretionary exploration plans for 2020.
We would like to thank all of our stakeholders
for their continued support."
1“Cash flow” refers to the GAAP line item “net
cash provided by operating activities”. "Cash flow per share”
refers to the GAAP line item “net cash provided by operating
activities” divided by the common stock outstanding as of September
30, 2019 of 366,982,000 shares.2 "Free cash flow" is a non-GAAP
measure and does not have a standardized meaning under generally
accepted accounting principles in the United States of America
("GAAP"). Free cash flow is defined as “net cash
provided by operating activities” less projected 2020 capital
spending. Refer to "Non-GAAP Measures" in this press
release.3Operating netback and earnings before interest, taxes and
depletion, depreciation and accretion ("EBITDA")
are non-GAAP measures. Refer to "Non-GAAP Measures" in this press
release.4"Net debt" (non-GAAP) is an estimate of 2020 year-end
working capital, less $600 million in senior notes.5 Operating
netback per boe is a non-GAAP measure and does not have a
standardized meaning under GAAP. Refer to "Non-GAAP Measures" in
this press release. The GAAP measure is oil and gas sales
price. Estimated oil and gas sales price is calculated by
subtracting 2020 forecasts of transportation and quality discount
and royalties from the 2020 budget Brent oil price forecast
as outlined in the table above. Estimated 2020 operating netback is
calculated by subtracting 2020 forecasts of transportation and
quality discount, royalties, operating costs and pipeline
transportation from the 2020 budget Brent oil price forecast as
outlined in the table above.6 All Ayombero-Chuira 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 in respect of Prospective Resources
are based on the estimated prospective resources as evaluated by
the Company's independent qualified reserve evaluator McDaniel in
the GTE McDaniel Prospective Resources Report with an effective
date of July 31, 2018. Refer to “Prospective Resources” in
this press release for more information.7 Derived from the
Company's 2018 year-end estimated reserves as evaluated by the
Company's independent qualified reserves evaluator McDaniel in a
report with an effective date of December 31, 2018 (the
"GTE McDaniel Reserves Report"). Also, see Gran
Tierra's Statement of Reserves Data and Other Oil and Gas
Information on Form 51-101F1 dated effective as at December 31,
2018, which includes further disclosure of its oil and gas reserves
and other oil and gas information in accordance with NI 51-101
forming the basis of this press release, available on SEDAR at
www.sedar.com.
Contact Information
For investor and media inquiries please contact:
Gary GuidryChief Executive Officer
Ryan EllsonExecutive Vice President & Chief Financial
Officer
Rodger TrimbleVice President, Investor Relations
+1-403-265-3221info@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’s common shares trade on the NYSE American,
the Toronto Stock Exchange and the London Stock Exchange under the
ticker symbol GTE. Additional information concerning Gran Tierra is
available at www.grantierra.com. Information on the Company's
website does not constitute a part of this press release. Investor
inquiries may be directed to info@grantierra.com or (403)
265-3221.
Gran Tierra's Securities and Exchange Commission
(“SEC”) filings are available on the SEC website
at http://www.sec.gov and on SEDAR at http://www.sedar.com. UK
regulatory filings are available on the National Storage Mechanism
website at www.morningstar.co.uk/uk/nsm.
Forward Looking Information
Advisory
This press release contains opinions, forecasts,
projections, and other statements about future events or results
that constitute forward-looking statements within the meaning of
the United States Private Securities Litigation Reform Act of 1995,
Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended, and
financial outlook and forward looking information within the
meaning of applicable Canadian securities laws (collectively,
“forward-looking statements”). All statements
other than statements of historical facts included in this press
release regarding our financial position, estimated quantities and
net present value of reserves, business strategy, plans and
objectives for future operations, capital spending plans and those
statements preceded by, followed by or that otherwise include the
words “believe”, “expect”, “intend”, “anticipate”, “forecast”,
“budget”, “will”, “estimate”, “target”, “project”, “goal”, “plan”,
“should”, "guidance" or similar expressions are forward-looking
statements. Such forward-looking statements include, but are not
limited to, the Company’s capital budget amount and uses, drilling
and capital program including the changes thereto along with the
expected costs and the allocation of capital and drilling including
trends, infrastructure schedules and the expected timing and
drilling sequence of certain projects; the Company's operations;
future projected or target production and the growth of production
including expectations respecting production growth, expected
future net cash provided by operating activities (described in this
press release as “cash flow”), free cash flow, operating netback,
net debt and certain associated metrics; our strategy regarding
changing oil prices; expected cost savings; anticipated capital
expenditures, including the location and impact of capital
expenditures; the timing and amounts of potential share buybacks;
timing and ability to repay the credit facility; our business
strategies; our ability to grow in both the near and long term and
the funding of our growth opportunities; the plans, objectives,
expectations and intentions of the Company regarding production,
exploration and exploration upside, development; and the future
development of the Company's business. The forward-looking
statements contained in this press release reflect several material
factors and expectations and assumptions of Gran Tierra including,
without limitation, that Gran Tierra will continue to conduct its
operations in a manner consistent with its current expectations,
the accuracy of testing and production results and seismic data,
pricing and cost estimates (including with respect to commodity
pricing and exchange rates), rig availability, the effects of
drilling down-dip, the effects of waterflood and 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, the receipt of approval from the ANH 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: sustained or
future declines in commodity prices and potential resulting future
impairments and reductions in proved and probable reserve
quantities and value; Gran Tierra’s operations are located in South
America, 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 our products; the risk that
current global economic and credit conditions may impact oil prices
and oil consumption more than Gran Tierra currently predicts; 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 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 oil prices could continue to decline or be
volatile, or current global economic and credit market conditions
may impact current oil prices or expectations regarding future oil
prices and oil consumption, 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 filed February 27, 2019
(as amended April 16, 2019) and its other filings with the SEC.
These filings are available on the SEC website at
http://www.sec.gov and on SEDAR at http://www.sedar.com. Although
the current guidance, capital spending program and long term
strategy of Gran Tierra are based upon the current expectations of
the management of Gran Tierra, should any one of a number of issues
arise, Gran Tierra may find it necessary to alter its business
strategy and/or capital spending program and there can be no
assurance as at the date of this press release as to how those
funds may be reallocated or strategy changed and how that would
impact Gran Tierra's results of operations and financing
position.
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.
All forward-looking statements are made as of
the date of this press release and the fact that this press release
remains available does not constitute a representation by Gran
Tierra that Gran Tierra believes these forward-looking statements
continue to be true as of any subsequent date. Actual results may
vary materially from the expected results expressed in
forward-looking statements. Gran Tierra disclaims any intention or
obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise,
except as expressly required by applicable securities laws. Gran
Tierra’s forward-looking statements are expressly qualified in
their entirety by this cautionary statement.
The estimates of future production, EBITDA, net
cash provided by operating activities (described in this press
release as “cash flow"), free cash flow, operating netback, net
debt, total capital and certain expenses may be considered to be
future-oriented financial information or a financial outlook for
the purposes of applicable Canadian securities laws. Financial
outlook and future-oriented financial information contained in this
press release about prospective financial performance, financial
position or cash flows are based on assumptions about future
events, including economic conditions and proposed courses of
action, based on management’s assessment of the relevant
information currently available, and to become available in the
future. In particular, this press release contains projected
operational and financial information for 2020. 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.
Oil and Gas Disclaimer
BOEs have been converted on the basis of 6
thousand cubic feet ("Mcf") of natural gas to 1
bbl of oil. BOEs may be misleading, particularly if used in
isolation. A BOE conversion ratio of 6 Mcf: 1 bbl is based on an
energy equivalency conversion method primarily applicable at the
burner tip and does not represent a value equivalency at the
wellhead. In addition, given that the value ratio based on the
current price of oil as compared with natural gas is significantly
different from the energy equivalent of six to one, utilizing a BOE
conversion ratio of 6 Mcf: 1 bbl would be misleading as an
indication of value.
This press release contains certain oil and gas
metrics, including operating netback, 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.
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. 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.
Non-GAAP Measures
This press release includes forward-looking
non-GAAP financial measures as further described herein. These
non-GAAP measures do not have a standardized meaning under GAAP.
Investors are cautioned that these measures should not be construed
as an alternative to net income or loss or other measures of
financial performance as determined in accordance with GAAP. Gran
Tierra's method of calculating these measures may differ from other
companies and, accordingly, it may not be comparable to similar
measures used by other companies. These non-GAAP financial measures
are presented along with the corresponding GAAP measure so as to
not imply that more emphasis should be placed on the non-GAAP
measure.
Gran Tierra is unable to provide forward-looking
net income and oil and gas sales, the GAAP measures most directly
comparable to the non-GAAP measures EBITDA and operating netback,
respectively, due to the impracticality of quantifying certain
components required by GAAP as a result of the inherent volatility
in the value of certain financial instruments held by the Company
and the inability to quantify the effectiveness of commodity price
derivatives used to manage the variability in cash flows associated
with the forecasted sale of its oil production and changes in
commodity prices.
Operating netback as presented is defined as
2020 oil and gas sales less operating and transportation expenses.
Operating netback per boe as presented is defined as oil and gas
sales price less 2020 forecasts of transportation and quality
discount, royalties, operating costs and pipeline transportation
from the 2020 budget Brent oil price forecast as outlined in the
table above. Management believes that operating netback and
operating netback per boe are useful supplemental measures for
management and investors to analyze financial performance and
provides an indication of the results generated by our principal
business activities prior to the consideration of other income and
expenses. Gran Tierra is unable to provide a quantitative
reconciliation of either forward-looking operating netback or
operating netback per boe to its most directly comparable
forward-looking GAAP measure because management cannot reliably
predict certain of the necessary components of such forward-looking
GAAP measures.
EBITDA as presented is defined as 2020 net
income adjusted for DD&A expenses, interest expense and income
tax expense or recovery. 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
“net cash provided by operating activities” less projected 2020
capital spending. Management believes that free cash flow is a
useful supplemental measure for management and investors to in
order to evaluate the financial sustainability of the Company's
business. Gran Tierra is unable to provide a quantitative
reconciliation of forward-looking free cash flow to its most
directly comparable forward-looking GAAP measure because management
cannot reliably predict certain of the necessary components of such
forward-looking GAAP measure.
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.
Unless otherwise specified, 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 following classification of prospective
resources is used in this press release:
- Low Estimate means there is at
least a 90 percent probability (P90) that the quantities actually
recovered will equal or exceed the low estimate.
- Best Estimate means there is at
least a 50 percent probability (P50) that the quantities actually
recovered will equal or exceed the best estimate.
- High Estimate means there is at
least a 10 percent probability (P10) that the quantities actually
recovered will equal or exceed the high estimate.
- Mean Estimate represents the
arithmetic average of the expected recoverable volume. It is the
most accurate single point representation of the volume
distribution.
Ayombero Prospective
Resources
Estimates of the Company's prospective resources
in the Ayombero Prospect are prepared by McDaniel in accordance
with NI 51-101 and COGEH as of July 31, 2018.
Prospective resources within the Ayombero
prospect are estimated based on 3D seismic and the drilling of the
Ayombero-1 well, as well as production from the Chuira field.
Prospective resources have been assigned to three horizons within
the La Luna formation: the Galembo, the Pujamana and the
Salada.
Positive factors for the Ayombero Prospective
Resources include:
- Thick, good quality reservoir exists within the La Luna
formation, based on testing of the Ayombero-1 well to date. Gran
Tierra is currently producing oil from the Galembo member.
- The Ayombero-1 well is believed to be producing from the same
structure as the wells in the Chuira field, from which Gran Tierra
has existing production.
Negative factors for the Ayombero Prospective Resources
include:
- The structure is complex, with potential seal risks in certain
areas.
- Poor quality of data obtained in 3D seismic shoots to
date.
Chance of Discovery/Development
Through an evaluation of the risks that are
relevant to the Ayombero prospective resources, which are described
herein, McDaniel has determined that the overall chance of
discovery is 51%. The corresponding chance of development is
90%.
Prospect Maturity
The prospective resources associated with the
Ayombero structure have been sub-classified as a “prospect”. COGEH
defines "prospect" as a potential accumulation within a play that
is sufficiently well defined to present a viable drilling
target.
Other Information
Given the uncertainty of discovery associated
with such prospective resources, costs and timelines to production,
as well as recovery technologies, cannot be determined at this
time.
Disclosure of Reserve Information and
Cautionary Note to U.S. Investors
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.
Gran Tierra Energy (AMEX:GTE)
Historical Stock Chart
From Aug 2024 to Sep 2024
Gran Tierra Energy (AMEX:GTE)
Historical Stock Chart
From Sep 2023 to Sep 2024