Gran Tierra Energy Inc. ("
Gran Tierra" or the
"
Company")
(NYSE American:GTE) (TSX:GTE)
(LSE: GTE), a company focused on oil exploration and
production in Colombia and Ecuador, today announced the Company's
2020 year-end reserves as evaluated by the Company's independent
qualified reserves evaluator McDaniel & Associates Consultants
Ltd. ("
McDaniel") in a report with an effective
date of December 31, 2020 (the "
GTE McDaniel Reserves
Report") and an operational update.
All dollar amounts are in United States
("U.S.") dollars and all reserves and production
volumes are on a working interest before royalties
("WI") basis. Production is expressed in barrels
("bbl") of oil per day ("bopd")
or bbl of oil equivalent ("boe") per day
("boepd"), while reserves are expressed in bbl,
boe or million boe ("MMBOE"), unless otherwise
indicated. All reserves values, future net revenue and ancillary
information contained in this press release have been prepared by
McDaniel and calculated in compliance with Canadian National
Instrument 51-101 – Standards of Disclosure for Oil and Gas
Activities (“NI 51-101”) and the Canadian Oil and
Gas Evaluation Handbook ("COGEH") and derived from
the GTE McDaniel Reserves Report, unless otherwise expressly
stated. The following reserves categories are discussed in this
press release: Proved Developed Producing ("PDP"),
Proved ("1P"), 1P plus Probable
("2P") and 2P plus Possible
("3P").
Commenting on Gran Tierra's 2020 year-end
reserves, operational update and future plans, Gary Guidry,
President and Chief Executive Officer of Gran Tierra, said: “Our
teams in Colombia, Ecuador and Canada rose to meet the many
challenges of 2020 through their diligent management of COVID-19
safety protocols and sharp focus on maintaining and increasing the
value of our assets. As a result, we are pleased to announce
significant reserve additions in both the PDP and 1P categories,
despite our large reductions in capital investment during 2020.
This achievement demonstrates that the Company's core conventional
oil assets continue to show positive waterflood responses and low
base decline rates.
The advancement of our waterflooding efforts in
the Acordionero, Costayaco and Moqueta oil fields has clearly
allowed Gran Tierra to continue to convert Probable and Possible
reserves into the Proved reserves categories. Even though we
decided during 2020 to reduce capital spending, we believe the
Company's excellent performance in terms of PDP and 1P reserves
additions is a testament to the quality of our assets.
With our strategy, we believe Gran Tierra is
well-positioned for the resumption of prudent growth in 2021 and
strong potential free cash flow1 generation. We have already
increased production approximately 24% from our third quarter 2020
average, which we believe reflects the strength of our Proved
reserves. Our 2021 capital budget of $130 to $150 million is a
balanced, returns-focused program which prioritizes free cash flow
generation over the rate of development, exploration and production
growth, with investment primarily directed to the Acordionero and
Costayaco oil fields. With a keen focus on further strengthening
our balance sheet, we plan to direct free cash flow to ongoing debt
reduction in 2021 and beyond.
During fourth quarter 2020, Gran Tierra resumed
development activities throughout our portfolio, including the
ongoing well workover operations and the restart of development
drilling at Acordionero. We also restarted workover operations at
Costayaco and look forward to a planned initiation of development
drilling in that field during second quarter 2021. We forecast 2021
average production of 28,000 to 30,000 bopd for the Company.
Our 2021 plans are fully aligned with Gran
Tierra's "Beyond Compliance Policy" which focuses on our
commitments to environmental, social and governance
("ESG") excellence. Gran Tierra looks for
significant opportunities and benefits to the environment and
communities by voluntarily and proactively taking steps to protect
the environment and provide social benefits because it is the right
thing to do. In 2020, we also had our best safety year in the
history of the Company.
We believe that Gran Tierra successfully
navigated the exceptional challenges of 2020 and are excited to
return to an economically sound growth trajectory in 2021 and
beyond, with a focus on free cash flow generation and debt
reduction."
Highlights
2020 Year-End Reserves and Values
|
|
Net Present Value at 10% Discount ("NPV10") |
Net Asset Value ("NAV") Per Share at 10%
Discount |
Reserves |
Reserves |
Before Tax |
After Tax |
Before Tax |
After Tax |
Category |
MMBOE |
$ million |
$ million |
$/share2,4 |
$/share3,4 |
1P |
79 |
1,191 |
1,029 |
1.15 |
0.71 |
2P |
133 |
1,962 |
1,590 |
3.25 |
2.23 |
3P |
174 |
2,612 |
2,045 |
5.02 |
3.47 |
-
During 2020, Gran Tierra achieved:
-
Material PDP and 1P reserves additions, in particular at
Acordionero, Costayaco and Moqueta, as a result of ongoing
successful waterflooding operations
-
PDP reserves replacement of 133% with PDP reserves additions of
11.0 MMBOE
-
1P reserves replacement of 100% with 1P reserves additions of 8.3
MMBOE
-
Finding and development costs ("F&D")
including future development costs ("FDC") of
$5.06/boe on a PDP basis and $2.65/boe on a 1P basis
-
F&D recycle ratios including FDC of 3.5 times (PDP) and 6.7
times (1P)
-
Significant reserves additions at Acordionero: 7.1 MMBOE (PDP) and
2.6 MMBOE (1P)
-
Despite a material reduction in the McDaniel's forecast oil price
assumptions relative to one year ago (the average Brent oil price
over the next 5 years in the GTE McDaniel Reserves Report is
$54.04/bbl):
-
Gran Tierra's 2020 year-end 1P NPV10 after tax decreased only 21%
compared to 2019 year-end
-
This performance was achieved in part due to large reductions in
forecast operating costs based on the actual savings achieved by
the Company in 2020
-
As of December 31, 2020, McDaniel estimates that Gran Tierra's
total 1P undiscounted operating costs over the remaining life of
the Company's fields are approximately 26% less than the McDaniel
estimate as of December 31, 2019*
-
Acordionero, Costayaco, Moqueta and Suroriente now represent 83% of
Gran Tierra's 1P reserves and 78% of 2P reserves
-
PDP reserves account for 55% of 1P reserves and 1P reserves account
for 59% of 2P reserves, demonstrating the strength of the Company's
reserves base and the potential future conversion of Probable
reserves into 1P reserves and Proved Undeveloped reserves into PDP
reserves
-
Gran Tierra's mature waterflood assets, Costayaco and Moqueta,
continued to grow and deliver value, with total reserves additions
of 3.8 MMBOE (PDP) and 5.5 MMBOE (1P)
-
FDC are forecast to be $312 million for 1P reserves and $565
million for 2P reserves
-
Realized a 39% increase in 2P reserve life index to 17 years and a
51% increase in 1P reserve life index to 10 years
* Calculations of operating cost reductions made
in respect of 2019 figures, as provided in the McDaniel report with
an effective date of December 31, 2019, prepared for Gran Tierra in
their capacity as independent qualified reserves evaluator in
accordance with NI 51-101 and COGEH
Operational Update
-
2020 Safety
- Gran Tierra's teams are proud of
their excellent safety performance during the many challenges of
2020, including the proactive implementation of COVID-19 protocols
that enabled continuity of the Company's operations
-
The Company achieved its first year with a Lost Time Incident
Frequency of zero, during which the Company logged close to 4
million man-hours
-
The Company's Total Recordable Case Frequency decreased 33%
compared with 2019, falling to a rate of 0.08 cases per 1 million
man-hours versus 0.12 cases per 1 million man-hours in 2019
-
Average Production
-
2020: 22,624 bopd
-
Third quarter 2020: 18,944 bopd
-
Fourth quarter 2020: 21,907 bopd
-
During January 1-25, 2021: 23,428 bopd
-
Closing of Sale of PetroTal Shares
-
As previously announced, Gran Tierra Resources Limited
("GTRL"), a wholly owned subsidiary of Gran
Tierra, sold an aggregate of 109,006,250 common shares of PetroTal
Corp. ("PetroTal") for an aggregate purchase price
of approximately $15 million
-
As of market close on January 26, 2021, the remaining 137,093,750
shares of PetroTal owned by GTRL had a market value of
approximately $26 million
-
Acordionero Oil Field
-
Gran Tierra continues to workover offline oil wells to restore them
to production with two workover rigs
-
As of January 25, 2021, approximately 3,500 bopd of production has
been restored as a result of this workover program
-
The Company restarted development drilling at Acordionero on
November 30, 2020 and has since drilled the AC-64 and AC-65 oil
wells and the AC-66i water injection well in fourth quarter 2020,
and the AC-67i water injection well in early January 2021; the team
is currently performing open hole logging operations on the AC-68
oil well
-
The AC-64 and AC-65 oil wells were brought on production ahead of
schedule in late December 2020
-
The drilling rig is forecast to continue drilling new development
wells at Acordionero throughout 2021; there are 5 oil wells
remaining to be drilled from the new southwest pad, which are
expected to be finished by the end of first quarter 2021, prior to
moving the rig to the next pad to drill 5 additional oil wells, for
a total of 10 new oil wells
-
Costayaco Oil Field
-
Gran Tierra initiated workover operations in late November 2020 and
completed 3 workovers during fourth quarter 2020; the workover rig
remains active with 5 jobs planned to be completed prior to the end
of first quarter 2021
- Efforts are
underway to restart development drilling during early second
quarter 2021, with a 3 well program; the rig is currently stacked
on location over the planned CYC-42 infill oil well location
- Personnel
Announcement
- Effective
immediately, Tony Berthelet, Chief Operating Officer, is no longer
with Gran Tierra
Future Net Revenue
Future net revenue reflects McDaniel’s forecast
of revenue estimated using forecast prices and costs, arising from
the anticipated development and production of reserves, after the
deduction of royalties, operating costs, development costs and
abandonment and reclamation costs but before consideration of
indirect costs such as administrative, overhead and other
miscellaneous expenses. The estimate of future net revenue below
does not necessarily represent fair market value.
|
Consolidated Properties at December 31, 2020 |
|
Proved (1P) Total Future Net Revenue ($
million) |
|
Forecast Prices and Costs |
|
SalesRevenue |
TotalRoyalties |
OperatingCosts |
FutureDevelopmentCapital |
AbandonmentandReclamationCosts |
Future NetRevenueBeforeFutureTaxes |
FutureTaxes |
FutureNetRevenueAfterFutureTaxes* |
2021-2025 (5 Years) |
2,362 |
|
(328 |
) |
(587 |
) |
(311 |
) |
(1 |
) |
1,135 |
|
(102 |
) |
1,033 |
|
Remainder |
1,452 |
|
(196 |
) |
(591 |
) |
(1 |
) |
(60 |
) |
604 |
|
(174 |
) |
430 |
|
Total (Undiscounted) |
3,814 |
|
(524 |
) |
(1,178 |
) |
(312 |
) |
(61 |
) |
1,739 |
|
(276 |
) |
1,463 |
|
Total (Discounted @ 10%) |
2,569 |
|
(354 |
) |
(730 |
) |
(276 |
) |
(18 |
) |
1,191 |
|
(162 |
) |
1,029 |
|
|
Consolidated Properties at December 31, 2020 |
|
Proved Plus Probable (2P) Total Future Net Revenue ($
million) |
|
Forecast Prices and Costs |
Years |
SalesRevenue |
TotalRoyalties |
OperatingCosts |
FutureDevelopmentCapital |
AbandonmentandReclamationCosts |
Future NetRevenueBeforeFutureTaxes |
FutureTaxes |
FutureNetRevenueAfterFutureTaxes* |
2021-2025 (5 Years) |
3,245 |
|
(459 |
) |
(693 |
) |
(564 |
) |
— |
|
1,529 |
|
(217 |
) |
1,312 |
|
Remainder |
3,407 |
|
(480 |
) |
(1,012 |
) |
(1 |
) |
(75 |
) |
1,839 |
|
(506 |
) |
1,333 |
|
Total (Undiscounted) |
6,652 |
|
(939 |
) |
(1,705 |
) |
(565 |
) |
(75 |
) |
3,368 |
|
(723 |
) |
2,645 |
|
Total (Discounted @ 10%) |
3,978 |
|
(564 |
) |
(954 |
) |
(481 |
) |
(17 |
) |
1,962 |
|
(372 |
) |
1,590 |
|
|
Consolidated Properties at December 31, 2020 |
|
Proved Plus Probable Plus Possible (3P) Total Future Net
Revenue ($ million) |
|
Forecast Prices and Costs |
Years |
SalesRevenue |
TotalRoyalties |
OperatingCosts |
FutureDevelopmentCapital |
AbandonmentandReclamationCosts |
Future NetRevenueBeforeFutureTaxes |
FutureTaxes |
FutureNetRevenueAfterFutureTaxes* |
2021-2025 (5 Years) |
3,856 |
|
(551 |
) |
(755 |
) |
(696 |
) |
(1 |
) |
1,853 |
|
(332 |
) |
1,521 |
|
Remainder |
5,012 |
|
(759 |
) |
(1,332 |
) |
(1 |
) |
(85 |
) |
2,835 |
|
(784 |
) |
2,051 |
|
Total (Undiscounted) |
8,868 |
|
(1,310 |
) |
(2,087 |
) |
(697 |
) |
(86 |
) |
4,688 |
|
(1,116 |
) |
3,572 |
|
Total (Discounted @ 10%) |
5,040 |
|
(736 |
) |
(1,098 |
) |
(577 |
) |
(17 |
) |
2,612 |
|
(567 |
) |
2,045 |
|
*The after-tax net present value of the
Company's oil and gas properties reflects the tax burden on the
properties on a stand-alone basis. It does not consider the
corporate tax situation, or tax planning. It does not provide an
estimate of the value at the Company level which may be
significantly different. The Company's financial statements, when
available for the year ended December 31, 2020, should be
consulted for information at the Company level.
Total Company WI Reserves
The following table summarizes Gran Tierra’s NI
51-101 and COGEH compliant reserves in Colombia and Ecuador derived
from the GTE McDaniel Reserves Report calculated using forecast oil
and gas prices and costs. Gran Tierra has determined that Ecuador
reserves, included in Total Probable and Total Possible reserve
categories for Light and Medium Crude Oil, are not material to
present separately on a country basis. Therefore all amounts are
presented on a consolidated basis.
|
Light andMediumCrude Oil |
Heavy CrudeOil |
ConventionalNatural Gas |
2020 Year-End |
Reserves Category |
Mbbl* |
Mbbl* |
MMcf** |
Mboe*** |
Proved Developed Producing |
20,759 |
22,109 |
790 |
43,000 |
Proved Developed
Non-Producing |
3,797 |
178 |
— |
3,975 |
Proved Undeveloped |
12,992 |
18,485 |
1,070 |
31,655 |
Total
Proved |
37,548 |
40,772 |
1,860 |
78,630 |
Total Probable |
21,740 |
32,000 |
1,126 |
53,928 |
Total Proved plus
Probable |
59,288 |
72,772 |
2,986 |
132,558 |
Total Possible |
23,851 |
17,790 |
1,507 |
41,892 |
Total Proved plus Probable plus Possible |
83,139 |
90,562 |
4,493 |
174,450 |
*Mbbl (thousand barrels of oil). **MMcf (million cubic
feet).***MBOE (thousand boe).
NPV Summary
Gran Tierra's reserves were evaluated using
McDaniel's commodity price forecasts at January 1, 2021. It should
not be assumed that the NPV of cash flow estimated by McDaniel
represents the fair market value of the reserves.
Total Company |
Discount Rate |
($ millions) |
0% |
5% |
10% |
15% |
20% |
Before tax |
|
|
|
|
|
Proved Developed
Producing |
925 |
804 |
711 |
637 |
578 |
Proved Developed
Non-Producing |
84 |
65 |
51 |
42 |
34 |
Proved Undeveloped |
730 |
551 |
429 |
342 |
278 |
Total Proved |
1,739 |
1,420 |
1,191 |
1,021 |
890 |
Total Probable |
1,629 |
1,091 |
771 |
570 |
436 |
Total Proved plus
Probable |
3,368 |
2,511 |
1,962 |
1,591 |
1,326 |
Total Possible |
1,320 |
901 |
650 |
490 |
384 |
Total
Proved plus Probable plus Possible |
4,688 |
3,412 |
2,612 |
2,081 |
1,710 |
After tax |
|
|
|
|
|
Proved Developed
Producing |
867 |
762 |
678 |
611 |
557 |
Proved Developed
Non-Producing |
64 |
50 |
39 |
32 |
27 |
Proved Undeveloped |
532 |
402 |
312 |
247 |
199 |
Total Proved |
1,463 |
1,214 |
1,029 |
890 |
783 |
Total Probable |
1,182 |
794 |
561 |
412 |
314 |
Total Proved plus
Probable |
2,645 |
2,008 |
1,590 |
1,302 |
1,097 |
Total Possible |
927 |
634 |
455 |
342 |
266 |
Total
Proved plus Probable plus Possible |
3,572 |
2,642 |
2,045 |
1,644 |
1,363 |
Total Company WI Reserves Reconciliation
|
Proved |
Proved plus Probable |
Proved plus Probable plusPossible |
|
MBOE |
MBOE |
MBOE |
December 31, 2019 |
78,611 |
142,408 |
186,025 |
Extensions |
1,060 |
1,356 |
1,703 |
Improved Recoveries |
1,056 |
— |
— |
Technical Revisions |
11,424 |
220 |
(6,076) |
Discoveries |
— |
2,135 |
5,578 |
Economic Factors |
(5,242) |
(5,282) |
(4,501) |
Production |
(8,279) |
(8,279) |
(8,279) |
December 31, 2020 |
78,630 |
132,558 |
174,450 |
Reserve Life Index
|
December 31, 2020 |
* |
Total Proved |
10 |
|
Total Proved plus
Probable |
17 |
|
Total Proved plus Probable plus Possible |
22 |
|
* Calculated using average fourth quarter 2020 WI production of
21,907 bopd.
Future Development Costs
FDC reflects McDaniel's best estimate of what it
will cost to bring the proved undeveloped and probable reserves on
production. Changes in forecast FDC occur annually as a result of
development activities, acquisition and disposition activities, and
changes in capital cost estimates based on improvements in well
design and performance, as well as changes in service costs. FDC
for total 1P Colombia reserves decreased to $312 million at
year-end 2020 from $386 million at year-end 2019. The decrease in
FDC in 2020 was predominantly attributed to costs incurred in 2020
to develop the Acordionero field as well as reduced 1P FDC costs
for the PUT-7 and VMM-2 blocks.
($ millions) |
Total Proved |
Total Proved Plus Probable |
2021 |
99 |
109 |
2022 |
146 |
251 |
2023 |
48 |
128 |
2024 |
16 |
74 |
2025 |
2 |
2 |
Remainder |
1 |
1 |
Total (undiscounted) |
312 |
565 |
($) millions |
Proved |
Proved plusProbable |
Proved plusProbable plusPossible |
Acordionero |
92 |
140 |
140 |
Suroriente |
47 |
76 |
81 |
Chaza Block (Costayaco &
Moqueta) |
78 |
103 |
110 |
Other |
95 |
246 |
366 |
Total FDC Costs (undiscounted) |
312 |
565 |
697 |
Finding and Development
Costs
Reserves (MBOE) |
Year Ended December 31, 2020 |
Proved Developed Producing |
43,000 |
|
Total
Proved |
78,630 |
|
Capital Expenditures
($000s) |
|
- including and excluding acquired properties |
96,335 |
|
Operating Netbacks* ($/Bbl, per WI sales
volumes) |
|
Operating Netback* - fourth quarter |
17.67 |
|
*Operating Netback is a Non-GAAP measure and
does not have a standardized meaning under GAAP.
Finding and Development Costs, Excluding
FDC*
Year Ended December 31, 2020 |
Proved Developed
Producing |
|
Reserve Additions (MBOE) |
11,036 |
|
F&D Costs ($/BOE) |
8.73 |
|
F&D
Recycle Ratio |
2.0 |
|
Finding and Development Costs, Including
FDC*
Year Ended December 31, 2020 |
Proved Developed
Producing |
|
Change in FDC ($000s) |
(40,504 |
) |
Reserve Additions (MBOE) |
11,036 |
|
F&D Costs ($/BOE) |
5.06 |
|
F&D
Recycle Ratio |
3.5 |
|
Finding and Development Costs ,
Excluding FDC*
Year Ended December 31, 2020 |
Total
Proved |
|
Reserve Additions (MBOE) |
8,298 |
|
F&D Costs ($/BOE) |
11.61 |
|
F&D
Recycle Ratio |
1.5 |
|
Finding and Development Costs ,
Including FDC*
Year Ended December 31, 2020 |
Total
Proved |
|
Change in FDC ($000s) |
(74,338 |
) |
Reserve Additions (MBOE) |
8,298 |
|
F&D Costs ($/BOE) |
2.65 |
|
F&D
Recycle Ratio |
6.7 |
|
*In all cases, the F&D number is calculated
by dividing the identified capital expenditures by the applicable
reserves additions both before and after changes in FDC costs. Both
F&D costs take into account reserves revisions during the year
on a per BOE basis. Recycle ratio is defined as fourth quarter
operating netback per working interest sales volume BOE divided by
the appropriate F&D costs on a per BOE basis. The aggregate of
the exploration and development costs incurred in the financial
year and the changes during that year in estimated future
development costs may not reflect the total F&D costs related
to reserves additions for that year.
Forecast prices
The pricing assumptions used in estimating NI
51-101 and COGEH compliant reserves data disclosed above with
respect to net present values of future net revenue are set forth
below. The price forecasts are based on McDaniel’s standard price
forecast effective January 1, 2021. McDaniel is an independent
qualified reserves evaluator and auditor pursuant to NI 51-101.
|
Brent Crude Oil |
WTI Crude Oil |
Year |
$US/bbl |
$US/bbl |
|
January 1, 2021 |
January 1, 2021 |
2021 |
$49.50 |
$47.50 |
2022 |
$53.55 |
$51.00 |
2023 |
$54.62 |
$52.02 |
2024 |
$55.71 |
$53.06 |
2025 |
$56.83 |
$54.12 |
About Gran Tierra Energy Inc.
Gran Tierra Energy Inc. is an international oil
and gas exploration and production company, headquartered in
Calgary, Canada, incorporated in the United States, trading on the
NYSE American (GTE), the Toronto Stock Exchange (GTE) and the
London Stock Exchange (GTE), and operating in South America. Gran
Tierra holds interests in producing and prospective properties in
Colombia and prospective properties in Ecuador. Gran Tierra has a
strategy that focuses on establishing a portfolio of producing
properties, plus production enhancement and exploration
opportunities to provide a base for future growth.
Gran Tierra's Securities and Exchange Commission filings are
available on the SEC website at www.sec.gov and on SEDAR at
www.sedar.com.
Contact Information
For investor and media inquiries please contact:
Gary Guidry, Chief Executive Officer
Ryan Ellson, Executive Vice President & Chief Financial
Officer
Rodger Trimble, Vice President, Investor RelationsTel:
+1.403.265.3221
For more information on Gran Tierra please go
to: www.grantierra.com.
1 Free cash flow is not a defined term under
generally accepted accounting principles in the United States of
America ("GAAP") and is called future net revenue
in the GTE McDaniel Reserves Report. The non-GAAP term of free cash
flow, after development expenditures and taxes reconciles to the
nearest GAAP term of oil and gas sales, which is called sales
revenue in the GTE McDaniel Reserves Report. Refer to "Future Net
Revenue" in this press release for the reconciliations between
sales revenue and future net revenue. Gran Tierra is unable to
provide a quantitative reconciliation of free cash flow after
development expenditures and taxes, as adjusted for forecast
general and administrative ("G&A") costs, a quantitative
reconciliation of free cash flow after development expenditures,
taxes, interest and G&A costs or a quantitative reconciliation
of free cash flow generated from each of Acordionero and Suroriente
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. Gran Tierra is
also unable to provide forward-looking oil and gas sales, the GAAP
measures most directly comparable to such measures of free cash
flow, 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 forecast sale of its oil production and changes in
commodity prices. Refer to "Oil and Gas Metrics" in this press
release for a description of how this non-GAAP measure is
calculated.2 Based on December 31, 2020 before tax NPV10 of
$1.2 billion for 1P reserves, $2.0 billion for 2P reserves, and
$2.6 billion for 3P reserves, minus estimated year-end 2020 net
debt of $770 million, [comprised of Senior Notes of $600 million
(gross) plus reserves-based credit facility of $190 million (gross)
and less working capital surplus of $20 million], divided by the
number of shares of Gran Tierra's common stock issued and
outstanding at December 31, 2020 of 367.0 million, respectively.
Estimated net working capital and debt at December 31, 2020,
prepared in accordance with GAAP.3 Based on December 31, 2020
after tax NPV10 of $1.0 billion for 1P reserves, $1.6 billion for
2P reserves, and $2.0 billion for 3P reserves, minus estimated
year-end 2020 net debt of $770 million, [Senior Notes of $600
million (gross) plus reserves-based credit facility of $190 million
(gross) and less working capital surplus of $20 million], divided
by the number of shares of Gran Tierra's common stock issued and
outstanding at December 31, 2020 of 367.0 million,
respectively. Estimated net working capital and debt at
December 31, 2020, prepared in accordance with GAAP.4
Internally forecast G&A costs of $99.3 million and interest of
$200.7 million in each case.
FORWARD LOOKING STATEMENTS
ADVISORY
This press release contains opinions, forecasts,
projections, and other statements about future events or results
that constitute forward-looking statements within the meaning of
the United States Private Securities Litigation Reform Act of 1995,
Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended, and
financial outlook and forward looking information within the
meaning of applicable Canadian securities laws (collectively,
"forward-looking statements"), which can be identified by such
terms as “expect,” “plan,” "forecast," “project,” "objective,"
“will,” “believe,” "should," "could," "allow" and other terms that
are forward-looking in nature. Such forward-looking statements
include, but are not limited to, the Company's expectations
regarding its capital program, and ability to fund the Company’s
exploration program over a period of time, 2021 and beyond outlook,
the benefits of reduced capital spending and G&A expenses, well
performance, production, the restart of production and workover
activity, future development costs, infrastructure schedules,
waterflood impacts and plans, growth of referenced reserves,
forecast prices, five-year expected oil and gas sales and free cash
flow and net revenue, estimated recovery factors, liquidity and
access to capital, the Company’s strategies and results thereof,
the Company’s operations including planned operations and
developments, the impact of the COVID-19 pandemic and the Company’s
response thereto, disruptions to operations and the decline in
industry conditions, and expectations regarding environmental
commitments.
The forward-looking statements contained in this
press release reflect several material factors and expectations and
assumptions of Gran Tierra including, without limitation, that Gran
Tierra will continue to conduct its operations in a manner
consistent with its current expectations, the accuracy of testing
and production results and seismic data, pricing and cost estimates
(including with respect to commodity pricing and exchange rates),
rig availability, the effects of drilling down-dip, the effects of
waterflood and multi-stage fracture stimulation operations, the
extent and effect of delivery disruptions, and the general
continuance of current or, where applicable, assumed operational,
regulatory and industry conditions including in areas of potential
expansion, and the ability of Gran Tierra to execute its current
business and operational plans in the manner currently planned.
Gran Tierra believes the material factors, expectations and
assumptions reflected in the forward-looking statements are
reasonable at this time but no assurance can be given that these
factors, expectations and assumptions will prove to be correct.
Among the important factors that could cause
actual results to differ materially from those indicated by the
forward-looking statements in this press release are: 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.
Statements relating to “reserves” are also
deemed to be forward-looking statements, as they involve the
implied assessment, based on certain estimates and assumptions,
including that the reserves described can be profitably produced in
the future.
Guidance is uncertain, particularly when given
over extended periods of time, and results may be materially
different. Although the current capital spending program and long
term strategy of Gran Tierra is based upon the current expectations
of the management of Gran Tierra, should any one of a number of
issues arise, Gran Tierra may find it necessary to alter its
business strategy and/or capital spending program and there can be
no assurance as at the date of this press release as to how those
funds may be reallocated or strategy changed and how that would
impact Gran Tierra's results of operations and financing position.
In particular, the unprecedented nature of the current 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 securities laws. Gran Tierra’s
forward-looking statements are expressly qualified in their
entirety by this cautionary statement.
The estimates of future production, free cash
flow and interest and certain expenses may be considered to be
future-oriented financial information or a financial outlook for
the purposes of applicable Canadian securities laws. Financial
outlook and future oriented financial information contained in this
press release about prospective financial performance, financial
position or cash flows are provided to give the reader a better
understanding of the potential future performance of the Company in
certain areas and are based on assumptions about future events,
including economic conditions and proposed courses of action, based
on management’s assessment of the relevant information currently
available, and to become available in the future. In particular,
this press release contains projected operational and financial
information for 2021 and for the next five years to allow readers
to assess the Company’s ability to fund its programs. These
projections contain forward-looking statements and are based on a
number of material assumptions and factors set out above. Actual
results may differ significantly from the projections presented
herein. The actual results of Gran Tierra’s operations for any
period could vary from the amounts set forth in these projections,
and such variations may be material. See above for a discussion of
the risks that could cause actual results to vary. The
future-oriented financial information and financial outlooks
contained in this press release have been approved by management as
of the date of this press release. Readers are cautioned that any
such financial outlook and future-oriented financial information
contained herein should not be used for purposes other than those
for which it is disclosed herein. The Company and its management
believe that the prospective financial information has been
prepared on a reasonable basis, reflecting management’s best
estimates and judgments, and represent, to the best of management’s
knowledge and opinion, the Company’s expected course of action.
However, because this information is highly subjective, it should
not be relied on as necessarily indicative of future results.
Non-GAAP Measures
This press release includes non-GAAP measures
which do not have a standardized meaning under GAAP. Investors are
cautioned that these measures should not be construed as
alternatives to net loss or other measures of financial performance
as determined in accordance with GAAP. Gran Tierra's method of
calculating these measures may differ from other companies and,
accordingly, they may not be comparable to similar measures used by
other companies.
Operating netback as presented is defined as oil
sales less operating and transportation expenses. Management
believes that operating netback is a useful supplemental measure
for investors to analyze financial performance and provide an
indication of the results generated by Gran Tierra's principal
business activities prior to the consideration of other income and
expenses. A reconciliation operating netback per boe to the most
directly comparable measure calculated and presented in accordance
with GAAP is as follows:
|
Three months ended December 31, 2020 |
|
(Thousands of U.S Dollars) |
($/bbl, per WI salesvolumes) |
Oil sales |
$ |
64,793 |
|
$ |
32.17 |
|
Operating expenses |
(27,215 |
) |
(13.51 |
) |
Transportation expenses |
(1,994 |
) |
(0.99 |
) |
Operating netback |
$ |
35,584 |
|
$ |
17.67 |
|
Unaudited Financial Information
Certain financial and operating results included
in this press release, including debt, net debt, working capital,
capital expenditures, and production information, are based on
unaudited estimated results. These estimated results are subject to
change upon completion of the Company's audited financial
statements for the year ended December 31, 2020, and changes
could be material. Gran Tierra anticipates filing its audited
financial statements and related management's discussion and
analysis for the year ended December 31, 2020 on or before
February 24, 2021.
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, 2020, which will include further disclosure of
its oil and gas reserves and other oil and gas information in
accordance with NI 51-101 forming the basis of this press release,
will be available on SEDAR at www.sedar.com on or before
February 24, 2021.
Estimates of net present value and future net
revenue contained herein do not necessarily represent fair market
value. Estimates of reserves and future net revenue for individual
properties may not reflect the same level of confidence as
estimates of reserves and future net revenue for all properties,
due to the effect of aggregation. There is no assurance that the
forecast price and cost assumptions applied by McDaniel in
evaluating Gran Tierra’s reserves will be attained and variances
could be material. All reserves assigned in the GTE McDaniel
Reserves Report are located in Colombia and Ecuador and presented
on a consolidated basis.
All evaluations of future net revenue contained
in the GTE McDaniel Reserves Report are after the deduction of
royalties, operating costs, development costs, production costs and
abandonment and reclamation costs but before consideration of
indirect costs such as administrative, overhead and other
miscellaneous expenses. It should not be assumed that the estimates
of future net revenues presented in the in this press release
represent the fair market value of the reserves. There are numerous
uncertainties inherent in estimating quantities of crude oil,
reserves and the future cash flows attributed to such reserves. The
reserve and associated cash flow information set forth in the GTE
McDaniel Reserves Report are estimates only.
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.
References to a formation where evidence of
hydrocarbons has been encountered is not necessarily an indicator
that hydrocarbons will be recoverable in commercial quantities or
in any estimated volume. Gran Tierra's reported production is a mix
of light crude oil and medium and heavy crude oil for which there
is no precise breakdown since the Company's oil sales volumes
typically represent blends of more than one type of crude oil. Well
test results should be considered as preliminary and not
necessarily indicative of long-term performance or of ultimate
recovery. Well log interpretations indicating oil and gas
accumulations are not necessarily indicative of future production
or ultimate recovery. If it is indicated that a pressure transient
analysis or well-test interpretation has not been carried out, any
data disclosed in that respect should be considered preliminary
until such analysis has been completed. References to thickness of
"oil pay" or of a formation where evidence of hydrocarbons has been
encountered is not necessarily an indicator that hydrocarbons will
be recoverable in commercial quantities or in any estimated
volume.
Definitions
Proved reserves are those reserves that can be
estimated with a high degree of certainty to be recoverable. It is
likely that the actual remaining quantities recovered will exceed
the estimated proved reserves.
Probable reserves are those additional reserves
that are less certain to be recovered than proved reserves. It is
equally likely that the actual remaining quantities recovered will
be greater or less than the sum of the estimated proved plus
probable reserves.
Possible reserves are those additional reserves
that are less certain to be recovered than Probable reserves. There
is a 10% probability that the quantities actually recovered will
equal or exceed the sum of Proved plus Probable plus Possible
reserves.
Proved developed producing reserves are those
reserves that are expected to be recovered from completion
intervals open at the time of the estimate. These reserves may be
currently producing or, if shut-in, they must have previously been
on production, and the date of resumption of production must be
known with reasonable certainty.
Undeveloped reserves are those reserves expected
to be recovered from known accumulations where a significant
expenditure (e.g., when compared to the cost of drilling a well) is
required to render them capable of production. They must fully meet
the requirements of the reserves category (proved, probable,
possible) to which they are assigned.
Certain terms used in this press release but not
defined are defined in NI 51-101, CSA Staff Notice 51-324 -
Glossary to NI 51-101 Standards of Disclosure for Oil and Gas
Activities (“CSA Staff Notice 51-324”) and/or the
COGEH and, unless the context otherwise requires, shall have the
same meanings herein as in NI 51-101, CSA Staff Notice 51-324 and
the COGEH, as the case may be.
Oil and Gas Metrics
This press release contains a number of oil and
gas metrics, including free cash flow, NAV per share, F&D
costs, F&D recycle ratio, operating netback, reserve life index
and reserves replacement, which do not have standardized meanings
or standard methods of calculation and therefore such measures may
not be comparable to similar measures used by other companies and
should not be used to make comparisons. Such metrics have been
included herein to provide readers with additional measures to
evaluate the Company's performance; however, such measures are not
reliable indicators of the future performance of the Company and
future performance may not compare to the performance in previous
periods.
- Before tax and after tax free cash
flow are non-GAAP terms and are called before tax and after tax
future net revenue, respectively, in the GTE McDaniel Reserves
Report. The non-GAAP term of before tax free cash flow reconciles
to the nearest GAAP term of oil and gas sales, which is called
sales revenue in the GTE McDaniel Reserves Report. Before tax
future net revenue is calculated by McDaniel by subtracting total
royalties, operating costs, future development capital, abandonment
and reclamation costs from sales revenue. After tax free cash flow
is calculated by McDaniel by subtracting future taxes from before
tax future net revenue. Refer to "Future Net Revenue" in this press
release for the applicable reconciliation. Management uses free
cash flow as a measure of the Company's ability to fund its
exploration program.
- NAV per share is calculated as
NPV10 (before or after tax, as applicable) minus estimated net
debt, divided by the number of shares of Gran Tierra's common stock
issued and outstanding. Management uses NAV per share as a measure
of the relative change of Gran Tierra's net asset value over its
outstanding common stock over a period of time.
- Reserve life index is calculated as
reserves in the referenced category divided by the referenced
estimated Colombia production. Management uses this measure to
determine how long the booked reserves will last at current
production rates if no further reserves were added.
- F&D costs are calculated as
estimated exploration and development capital expenditures,
excluding acquisitions and dispositions, divided by the applicable
reserves additions both before and after changes in FDC costs. The
calculation of F&D costs incorporates the change in FDC
required to bring proved undeveloped and developed reserves into
production. The aggregate of the exploration and development costs
incurred in the financial year and the changes during that year in
estimated FDC may not reflect the total F&D costs related to
reserves additions for that year. Management uses F&D costs per
boe as a measure of its ability to execute its capital program and
of its asset quality.
- F&D recycle ratio is calculated
as fourth quarter operating netback per WI sales volume divided by
the appropriate F&D costs per boe. Management uses F&D
recycle ratio as an indicator of profitability of its oil and gas
activities.
- Operating netback is calculated as
described in this press release. Management believes that operating
netback is a useful supplemental measure for investors to analyze
financial performance and provide an indication of the results
generated by Gran Tierra's principal business activities prior to
the consideration of other income and expenses.
- Reserve per share is calculated as
reserves in the referenced category divided by number of shares of
Gran Tierra's common stock issued and outstanding as at December
31, 2020. Management uses this measure to determine the relative
change of its reserve base over its outstanding common stock over a
period of time.
- Reserves replacement is calculated
as reserves in the referenced category divided by estimated
referenced production. Management uses this measure to determine
the relative change of its reserve base over a period of time.
Disclosure of Reserve Information and
Cautionary Note to U.S. Investors
Unless expressly stated otherwise, all estimates
of proved, probable and possible reserves and related future net
revenue disclosed in this press release have been prepared in
accordance with NI 51-101. Estimates of reserves and future net
revenue made in accordance with NI 51-101 will differ from
corresponding estimates prepared in accordance with applicable U.S.
Securities and Exchange Commission (“SEC”) rules and disclosure
requirements of the U.S. Financial Accounting Standards Board
(“FASB”), and those differences may be material. NI 51-101, for
example, requires disclosure of reserves and related future net
revenue estimates based on forecast prices and costs, whereas SEC
and FASB standards require that reserves and related future net
revenue be estimated using average prices for the previous 12
months. In addition, NI 51-101 permits the presentation of reserves
estimates on a “company gross” basis, representing Gran Tierra’s
working interest share before deduction of royalties, whereas SEC
and FASB standards require the presentation of net reserve
estimates after the deduction of royalties and similar payments.
There are also differences in the technical reserves estimation
standards applicable under NI 51-101 and, pursuant thereto, the
COGEH, and those applicable under SEC and FASB requirements.
In addition to being a reporting issuer in
certain Canadian jurisdictions, Gran Tierra is a registrant with
the SEC and subject to domestic issuer reporting requirements under
U.S. federal securities law, including with respect to the
disclosure of reserves and other oil and gas information in
accordance with U.S. federal securities law and applicable SEC
rules and regulations (collectively, "SEC requirements").
Disclosure of such information in accordance with SEC requirements
is included in the Company's Annual Report on Form 10-K and in
other reports and materials filed with or furnished to the SEC and,
as applicable, Canadian securities regulatory authorities. The SEC
permits oil and gas companies that are subject to domestic issuer
reporting requirements under U.S. federal securities law, in their
filings with the SEC, to disclose only estimated proved, probable
and possible reserves that meet the SEC's definitions of such
terms. Gran Tierra has disclosed estimated proved, probable and
possible reserves in its filings with the SEC. In addition, Gran
Tierra prepares its financial statements in accordance with United
States generally accepted accounting principles, which require that
the notes to its annual financial statements include supplementary
disclosure in respect of the Company's oil and gas activities,
including estimates of its proved oil and gas reserves and a
standardized measure of discounted future net cash flows relating
to proved oil and gas reserve quantities. This supplementary
financial statement disclosure is presented in accordance with FASB
requirements, which align with corresponding SEC requirements
concerning reserves estimation and reporting.
Investors are urged to consider closely the
disclosures and risk factors in the Company's Annual Report on Form
10-K, Quarterly Reports on Form 10-Q and in the other reports and
filings with the SEC, available from the Company's offices or
website. These reports can also be obtained from the SEC website at
www.sec.gov.
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