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 March 31, 2022 (“
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”) and bbl per day
(“
BOPD”) 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 May 3, 2022.
Key Highlights of the
Quarter:
- Net
Income: Gran Tierra generated a net income of $14 million
versus a net loss of $37 million in first quarter of 2021.
-
Significant Growth in Net Cash Provided by Operating
Activities: The Company realized net cash provided by
operating activities of $104 million, up 148% from the first
quarter of 2021.
- Material
Growth in Funds Flow from Operations(1):
Funds flow from operations(1) increased to $87 million, up by 34%
from the fourth quarter of 2021 (“the Prior
Quarter”) and up by 201% from the first quarter of
2021.
- Strong
Free Cash Flow(1): Gran
Tierra generated free cash flow(1) of $46 million, the highest
quarterly amount in almost a decade.
- Rapid
Debt Reduction: Gran Tierra has been utilizing its free
cash flow(1) to strengthen the Company's balance sheet by paying
down its credit facility and building its cash position. During the
Quarter, the Company paid down its credit facility balance by $27.5
million to $40 million and had a cash balance of $59 million. These
figures compare to a credit facility balance of $67.5 million and a
cash balance of $26 million at the end of the Prior Quarter. As of
May 3, 2022, Gran Tierra has paid down its credit facility to a
balance of $10 million and expects the facility to be fully repaid
before the end of the second quarter 2022.
- Annual
Production Growth: The Quarter's production was in-line
with management expectations and averaged 29,362 BOPD, up 20% from
the first quarter of 2021 and approximately flat compared to the
Prior Quarter.
- Expects
to Meet 2022 Production Guidance: Gran Tierra believes its
ability to keep production flat compared to the Prior Quarter
demonstrates the ongoing successful results from the Company’s
waterflooding efforts in all major assets. The ongoing infill
development drilling campaigns in the Acordionero and Costayaco oil
fields are expected to increase the Company’s full year 2022
average production into the guidance range of 30,500-32,500 BOPD.
The ramp-up in production from the Quarter’s level is expected to
begin in the latter half of second quarter of 2022 as new
Acordionero and Costayaco oil wells are brought online.
- Revised
2022 Financial Guidance: As previously announced on April
19, 2022, Gran Tierra has updated the Company's 2022 financial
guidance in light of the significant increase in world oil prices
this year. The Company has increased its 2022 Brent price forecast
to $95/bbl. At this higher oil price, the Company would maintain
2022 capital at $220-240 million with a forecast 2022 cash flow(1)
of $410-430 million, free cash flow(1) of $180-200 million,
EBITDA(1) of $550-570 million and a 2022 year-end cash balance of
$210-230 million.
-
Additional Key Financial Metrics:
- Capital
Expenditures: Capital expenditures of approximately $41
million were relatively flat with the Prior Quarter's level of $40
million, as Gran Tierra maintained capital discipline and its focus
on driving down drilling and completion costs.
-
Increased Oil Sales: The Brent oil price averaged
$97.90/bbl, up 23% from the Prior Quarter and up 60% year-on-year.
Gran Tierra generated oil sales of $175 million, up 19% from the
Prior Quarter and up 83% from the first quarter of 2021. The
significant annual increase in oil sales was driven by the
Company's 20% increase in quarterly production year-on-year,
combined with the large rise in the Brent oil price over the same
period.
- Strong
Operating Netback(2):
The Company’s operating netback(2) of $52.45/bbl was up 39% from
the Prior Quarter and up 80% year-on-year. This strong annual
increase was driven by Gran Tierra's 20% increase in quarterly
production year-on-year and increased Brent pricing.
-
Decreased Operating Expenses: Compared to the
Prior Quarter, Gran Tierra’s operating expenses decreased 9% to
$13.14/bbl, down from $14.46/bbl, due to lower workover,
environmental and administration costs, which were only partially
offset by higher expenses for chemicals used in the Company's
waterflood projects. Compared to first quarter 2021, operating
expenses decreased by 4% on a per bbl basis, primarily as a result
of Gran Tierra's higher production.
- Other
Expenses:
- The quality and
transportation discount dropped 2% to $12.57 per bbl, compared to
$12.78 per bbl in the Prior Quarter, because of higher world demand
for Colombian oil.
- General and
administrative (“G&A”) expenses before
stock-based compensation were $2.97 per bbl, down from $3.08 per
bbl in the Prior Quarter and $3.14 per bbl in the first quarter of
2021, due to a lower accrued performance bonus.
- Oil
Price Hedges: The Company continues to have Brent oil
price hedges in place for 9,000 BOPD in the first half of 2022,
with an average ceiling price of $87.62/bbl on 8,000 BOPD.
Therefore, approximately 73% of Gran Tierra’s oil production, which
is unhedged, has fully benefited from the current high oil price
environment.
- 2021
Sustainability Report Highlights:
- Gran Tierra
plans to issue the Company’s “2021 Sustainability Report: Creating
Long-Term Value and Delivering on Our Environmental, Social and
Governance Commitments” tomorrow, May 4, 2022, at which time the
report can be found on the Company’s website at
www.grantierra.com/esg. Highlights from this report are:
- As of 2021, Gran
Tierra has reduced its scope 1 and scope 2 greenhouse gas emissions
by 55% compared to the benchmark year of 2019 through operational
efficiencies such as its natural gas-to-power projects.
- Over the last 5
years, Gran Tierra has reduced its surface water used by 41%. In
addition, the Company has implemented a comprehensive roadmap to
further reduce the use of surface water where possible, with the
goal of achieving zero surface water usage in the coming
years.
- The Company had
a Lost Time Injury Frequency(3) of 0.02 in 2021, which was well
below the 2020 industry averages of 0.08 for Latin American and
0.04 for North American exploration and production companies, as
reported by the International Association of Oil and Gas Producers,
and was in the top quartile in any region globally.
- In 2021, Gran
Tierra invested approximately $60 million into local economies and
created about 3,200 job opportunities.
- Gran Tierra
actively promotes diversity in its workforce of which 39% are
female versus the industry average of 22%.
- In Colombia over
the last 5 years, the Company has planted approximately 1.2 million
trees and conserved, preserved or reforested about 3,100 hectares
of land.
Message to Shareholders
Gary Guidry, President and Chief Executive
Officer of Gran Tierra, commented: “The strong recovery for the
energy industry and Gran Tierra, from the challenges of 2020,
continued into the first quarter of 2022. Our top tier,
low-decline, onshore, conventional asset base continues to prove
its high quality, as shown by the Company’s production growth of
20% over the last year. At the same time, we have significantly
strengthened our balance sheet and expect to completely pay off our
entire credit facility before the end of the second quarter of
2022, which will be a major milestone for Gran Tierra. Looking to
the end of the year, we are forecasting a net debt(1) to EBITDA(1)
ratio of under 0.8 times.
We are pleased with the results so far of our
ongoing development drilling campaigns in the Middle Magdalena
Valley and Putumayo Basins in Colombia with record drilling
performance in both Acordionero and Costayaco. In addition, we plan
to allocate capital to prioritized, high-impact exploration
drilling opportunities as we restart our exploration campaign
during the second half of 2022. We plan to drill our first ever
exploration wells in Ecuador, in addition to our first exploration
wells in Colombia in more than two years.
We believe Gran Tierra is in an excellent
position for continued development and enhanced oil recovery
activities in 2022 to optimize value from each of our assets. Our
waterflood programs across all of our assets continue to perform
well, and we expect another strong year of free cash flow(1) from
these high quality, low decline assets.
As always, our “Beyond Compliance Policy” continues. Where Gran
Tierra identifies significant opportunities and benefits to the
environment and communities, we voluntarily strive to go beyond
what is legally required to protect the environment and provide
social benefits because it is the right thing to do. Through
operational efficiencies, including gas-to-power projects, we have
also been able to reduce our greenhouse gas emissions by 55% for
2021 compared to our 2019 baseline.”
-
Operations Update:
-
Acordionero:
- Since the
Company’s last Corporate Update (press release on April 19, 2022),
Gran Tierra has drilled and completed the ACR-91 infill development
oil well, which was placed on production on April 28, 2022. The
ACR-92 water injection well has been drilled and is forecast to be
completed in early May 2022. In total, Gran Tierra has drilled
seven development wells in Acordionero during 2022 so far, with
another seven to nine new wells planned for the rest of 2022.
-
Costayaco and Moqueta:
- Four Costayaco
infill development oil wells have been drilled so far in 2022 and
all four of these wells are expected to be brought on production
during the second quarter of 2022.
- On initial
production testing after completion, the new CYC-46 infill oil well
yielded the following encouraging results from three different
productive zones (each zone’s test represents the final 12 hours of
stabilized flow via jet pump, before the zone was shut-in for a
pressure build up test):
|
Productive Zone |
Oil Rate (BOPD) |
Water Cut (%) |
Gas Rate (MCFD)(4) |
|
Lower Caballos |
369 |
20 |
26 |
|
Upper Caballos |
493 |
22 |
54 |
|
T Sand |
727 |
28 |
267 |
-
The Moqueta work program of 3 infill development wells is expected
to begin in the fourth quarter of 2022 and is planned to continue
into 2023.
- Ecuador
Exploration:
- Gran Tierra expects to drill 2-3
exploration wells in 2022, targeting multi-zone prospects near
existing fields with access to infrastructure. Gran Tierra’s first
exploration well in Ecuador is scheduled to spud in the third
quarter of 2022 on the Chanangue Block.
- Environmental licenses for
exploration drilling have been granted by Ecuador’s Ministry of the
Environment for both the Chanangue and Charapa Blocks, as well as
for seismic activities in the Charapa Block. Approval of the
environmental license for the Iguana Block is expected during third
quarter 2022.
- Colombia
Exploration:
- The Company is also progressing its
2022 exploration campaign in Colombia with the first exploration
well expected to be spud in the Putumayo Basin in early second half
2022 targeting multiple horizons in a prospect between the
Costayaco and Moqueta fields. Another one to two exploration wells
in the Putumayo are planned for second half 2022, as is one
exploration well in the Middle Magdalena Valley Basin.
Financial and Operational Highlights
(all amounts in $000s, except per share and bbl
amounts)
|
Three Months Ended March 31, |
|
Three Months EndedDecember 31, |
|
|
2022 |
|
|
2021 |
|
|
|
2021 |
|
|
|
|
|
|
Net Income
(Loss) |
$ |
14,119 |
|
$ |
(37,422 |
) |
|
$ |
62,524 |
|
Per Share - Basic and
Diluted |
$ |
0.04 |
|
$ |
(0.10 |
) |
|
$ |
0.17 |
|
|
|
|
|
|
Oil
Sales |
$ |
174,569 |
|
$ |
95,493 |
|
|
$ |
146,287 |
|
Operating
Expenses |
|
(34,400 |
) |
|
(29,625 |
) |
|
|
(39,708 |
) |
Transportation
Expenses |
|
(2,834 |
) |
|
(2,506 |
) |
|
|
(2,867 |
) |
Operating
Netback(1)(2) |
$ |
137,335 |
|
$ |
63,362 |
|
|
$ |
103,712 |
|
|
|
|
|
|
G&A Expenses
Before Stock-Based Compensation |
$ |
7,779 |
|
$ |
6,817 |
|
|
$ |
8,473 |
|
G&A Stock-Based
Compensation Expense (Recovery) |
|
4,557 |
|
|
3,671 |
|
|
|
1,799 |
|
G&A Expenses,
Including Stock Based Compensation |
$ |
12,336 |
|
$ |
10,488 |
|
|
$ |
10,272 |
|
|
|
|
|
|
Adjusted
EBITDA(1) |
$ |
119,378 |
|
$ |
41,904 |
|
|
$ |
81,529 |
|
|
|
|
|
|
EBITDA(1) |
$ |
106,750 |
|
$ |
16,359 |
|
|
$ |
70,983 |
|
|
|
|
|
|
Net Cash Provided by
Operating Activities |
$ |
103,825 |
|
$ |
41,932 |
|
|
$ |
106,013 |
|
|
|
|
|
|
Funds Flow from
Operations(1) |
$ |
87,310 |
|
$ |
28,973 |
|
|
$ |
65,137 |
|
|
|
|
|
|
Capital
Expenditures |
$ |
41,483 |
|
$ |
37,427 |
|
|
$ |
40,229 |
|
|
|
|
|
|
Free Cash
Flow(1) |
$ |
45,827 |
|
$ |
(8,454 |
) |
|
$ |
24,908 |
|
|
|
|
|
|
Average Daily Volumes (BOPD) |
|
|
|
|
WI Production Before Royalties |
|
29,362 |
|
|
24,463 |
|
|
|
29,493 |
|
Royalties |
|
(6,529 |
) |
|
(3,930 |
) |
|
|
(6,070 |
) |
Production
NAR |
|
22,833 |
|
|
20,533 |
|
|
|
23,423 |
|
(Increase) Decrease in
Inventory |
|
(103 |
) |
|
(262 |
) |
|
|
354 |
|
Sales |
|
22,730 |
|
|
20,271 |
|
|
|
23,777 |
|
Royalties, % of WI
Production Before Royalties |
|
22 |
% |
|
16 |
% |
|
|
21 |
% |
|
|
|
|
|
Per bbl |
|
|
|
|
Brent |
$ |
97.90 |
|
$ |
61.32 |
|
|
$ |
79.66 |
|
Quality and
Transportation Discount |
|
(12.57 |
) |
|
(8.98 |
) |
|
|
(12.79 |
) |
Royalties |
|
(18.66 |
) |
|
(8.34 |
) |
|
|
(13.61 |
) |
Average Realized
Price |
|
66.67 |
|
|
44.00 |
|
|
|
53.26 |
|
Transportation
Expenses |
|
(1.08 |
) |
|
(1.15 |
) |
|
|
(1.04 |
) |
Average Realized Price
Net of Transportation Expenses |
|
65.59 |
|
|
42.85 |
|
|
|
52.22 |
|
Operating
Expenses |
|
(13.14 |
) |
|
(13.65 |
) |
|
|
(14.46 |
) |
Operating
Netback(1)(2) |
|
52.45 |
|
|
29.20 |
|
|
|
37.76 |
|
COVID-19
costs |
|
(0.20 |
) |
|
(0.52 |
) |
|
|
(0.24 |
) |
G&A Expenses
Before Stock-Based Compensation |
|
(2.97 |
) |
|
(3.14 |
) |
|
|
(3.08 |
) |
Realized Foreign
Exchange (Loss) Gain |
|
(0.43 |
) |
|
(0.04 |
) |
|
|
0.10 |
|
Cash Settlements on
Derivative Instruments |
|
(3.28 |
) |
|
(6.18 |
) |
|
|
(4.87 |
) |
Interest Expense,
Excluding Amortization of Debt Issuance Costs |
|
(4.29 |
) |
|
(5.96 |
) |
|
|
(4.33 |
) |
Net Lease
Payments |
|
0.03 |
|
|
(0.01 |
) |
|
|
0.02 |
|
Current Income Tax
Expense |
|
(7.95 |
) |
|
— |
|
|
|
(1.64 |
) |
Cash
Netback(1) |
$ |
33.36 |
|
$ |
13.35 |
|
|
$ |
23.72 |
|
|
|
|
|
|
Share Information (000s) |
|
|
|
|
Common Stock Outstanding, End of Period |
|
368,421 |
|
|
366,982 |
|
|
|
367,145 |
|
Weighted Average Number
of Common and Outstanding - Basic |
|
367,387 |
|
|
366,982 |
|
|
|
367,133 |
|
Weighted Average Number
of Common and Outstanding - Diluted |
|
372,375 |
|
|
366,982 |
|
|
|
368,396 |
|
(1) Funds flow from operations, operating
netback, cash netback, earnings before interest, taxes and
depletion, depreciation and accretion (“DD&A”)
(“EBITDA”) and
EBITDA adjusted for non-cash lease expense, lease payments,
unrealized foreign exchange gains or losses, stock based
compensation expense, other non-cash loss, unrealized derivative
instruments gains or losses and other financial instruments gains
or losses (“Adjusted EBITDA”), cash flow, free
cash flow and net debt are non-GAAP measures and do not have
standardized meanings under generally accepted accounting
principles in the United States of America
(“GAAP”). Cash flow refers to funds flow from
operations. Free cash flow refers to funds flow from operations
less capital expenditures. Refer to “Non-GAAP Measures” in this
press release for descriptions of these non-GAAP measures and,
where applicable, 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 and transportation expenses. See the table titled
Financial and Operational Highlights above for the components of
consolidated operating netback and corresponding reconciliation.(3)
Lost Time Incident Frequency = ((Fatality Cases + Lost Time
Incident Cases) / Person-Hours) x 200,000 Person-Hours.(4) Gas rate
in MCFD = thousands of standard cubic feet per day.
Annual Meeting of
Stockholders:Gran Tierra’s 2022 Annual Meeting of
Stockholders will be held on Wednesday, May 4, 2022 at 11:00 a.m.
(Mountain Time). Our Meeting will be held as a virtual only
shareholder meeting with participation occurring electronically as
explained further in the Proxy Statement dated March 25, 2022.
Shareholders can participate electronically at
https://web.lumiagm.com/244491258. We recommend that you log in 15
minutes before the Annual Meeting starts. If you are a registered
stockholder, to attend the Annual Meeting and vote your shares
electronically and submit questions during the meeting, you will
need the control number included on the Voting Instruction Form or
the Form of Proxy that accompanied your proxy materials. If you are
the beneficial owner of shares held in “street name”, you must
request and obtain a valid proxy from your broker or other agent in
order to attend the Annual Meeting and vote your shares
electronically and submit questions during the meeting. Guests may
also view the event at https://web.lumiagm.com/244491258 by
registering as a guest.
Full details on how to vote, change or revoke a
vote, appoint a proxyholder, attend the virtual Annual Meeting, ask
questions and other general proxy matters are available in the
Proxy Statement available on the Company's website at
https://www.grantierra.com/investor-relations/2022-annual-meeting.at
Whether or not you plan to attend the Annual
Meeting, we urge you to vote and submit your proxy in advance of
the Annual Meeting by one of the methods described in the proxy
materials for the Annual Meeting.
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 currently focused on
oil and natural gas exploration and production in Colombia and
Ecuador. The Company is currently developing its existing portfolio
of assets in Colombia and Ecuador and will continue to pursue
additional growth opportunities that would further strengthen the
Company’s portfolio. The Company’s common stock trades on the NYSE
American, the Toronto Stock Exchange and the London Stock Exchange
under the ticker symbol GTE. Additional information concerning Gran
Tierra is available at www.grantierra.com. 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. The
Company’s Canadian securities regulatory filings are available on
SEDAR at http://www.sedar.com and UK regulatory filings are
available on the National Storage Mechanism website at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism.
Forward Looking Statements and Legal
Advisories:This press release contains opinions,
forecasts, projections, and other statements about future events or
results that constitute forward-looking statements within the
meaning of the United States Private Securities Litigation Reform
Act of 1995, Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended,
and financial outlook and forward looking information within the
meaning of applicable Canadian securities laws (collectively,
“forward-looking statements”). The use of the words “expect”,
“plan”, “can,” “will,” “should,” “guidance,” “forecast,” “signal,”
“progress” and “believes”, derivations thereof and similar terms
identify forward-looking statements. In particular, but without
limiting the foregoing, this press release contains forward-looking
statements regarding: the Company's expected future production and
free cash flow, the Company’s drilling program and the Company's
expectations as to debt repayment, the Company’s ESG risks and
opportunities and its positioning for 2022. The forward-looking
statements contained in this press release reflect several material
factors and expectations and assumptions of Gran Tierra including,
without limitation, that Gran Tierra will continue to conduct its
operations in a manner consistent with its current expectations,
pricing and cost estimates (including with respect to commodity
pricing and exchange rates), and the general continuance of assumed
operational, regulatory and industry conditions in Colombia and
Ecuador, and the ability of Gran Tierra to execute its business and
operational plans in the manner currently planned.
Among the important factors that could cause
actual results to differ materially from those indicated by the
forward-looking statements in this press release are: Gran Tierra's
operations are located in South America and unexpected problems can
arise due to guerilla activity, strikes, local blockades or
protests; technical difficulties and operational difficulties may
arise which impact the production, transport or sale of our
products; other disruptions to local operations; global health
events (including the ongoing COVID-19 pandemic); global and
regional changes in the demand, supply, prices, differentials or
other market conditions affecting oil and gas, including changes
resulting from a global health crisis, the Russian invasion of
Ukraine, or from the imposition or lifting of crude oil production
quotas or other actions that might be imposed by OPEC and other
producing countries and the resulting company or third-party
actions in response to such changes; changes in commodity prices,
including a prolonged decline in these prices relative to
historical or future expected levels; the risk that current global
economic and credit conditions may impact oil prices and oil
consumption more than Gran Tierra currently predicts, which could
cause Gran Tierra to further modify its strategy and capital
spending program; prices and markets for oil and natural gas are
unpredictable and volatile; the effect of hedges; the accuracy of
productive capacity of any particular field; geographic, political
and weather conditions can impact the production, transport or sale
of our products; the ability of Gran Tierra to execute its business
plan and realize expected benefits from current initiatives; the
risk that unexpected delays and difficulties in developing
currently owned properties may occur; the ability to replace
reserves and production and develop and manage reserves on an
economically viable basis; the accuracy of testing and production
results and seismic data, pricing and cost estimates (including
with respect to commodity pricing and exchange rates); the risk
profile of planned exploration activities; the effects of drilling
down-dip; the effects of waterflood and multi-stage fracture
stimulation operations; the extent and effect of delivery
disruptions, equipment performance and costs; actions by third
parties; the timely receipt of regulatory or other required
approvals for our operating activities; the failure of exploratory
drilling to result in commercial wells; unexpected delays due to
the limited availability of drilling equipment and personnel;
volatility or declines in the trading price of our common stock or
bonds; the risk that Gran Tierra does not receive the anticipated
benefits of government programs, including government tax refunds;
Gran Tierra's ability to comply with financial covenants in its
credit agreement and indentures and make borrowings under its
credit agreement; and the risk factors detailed from time to time
in Gran Tierra's periodic reports filed with the Securities and
Exchange Commission, including, without limitation, under the
caption “Risk Factors” in Gran Tierra's Annual Report on Form 10-K
for the year ended December 31, 2021 and its other filings with the
Securities and Exchange Commission. These filings are available on
the Securities and Exchange Commission website at
http://www.sec.gov and on SEDAR at www.sedar.com.
The forward-looking statements contained in this
press release are based on certain assumptions made by Gran Tierra
based on management's experience and other factors believed to be
appropriate. Gran Tierra believes these assumptions to be
reasonable at this time, but the forward-looking statements are
subject to risk and uncertainties, many of which are beyond Gran
Tierra's control, which may cause actual results to differ
materially from those implied or expressed by the forward looking
statements. In particular, the unprecedented nature of the current
economic downturn, pandemic and industry decline may make it
particularly difficult to identify risks or predict the degree to
which identified risks will impact Gran Tierra's business and
financial condition. All forward-looking statements are made as of
the date of this press release and the fact that this press release
remains available does not constitute a representation by Gran
Tierra that Gran Tierra believes these forward-looking statements
continue to be true as of any subsequent date. Actual results may
vary materially from the expected results expressed in
forward-looking statements. Gran Tierra disclaims any intention or
obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise,
except as expressly required by applicable law.
The estimates of future production, future cash
flow, free cash flow, EBITDA, net cash provided by operating
activities (described in this press release as "cash flow"), cash
positions, total capital, certain expenses and costs, debt
repayments and debt positions (including “net debt”) may be
considered to be future-oriented financial information or a
financial outlook for the purposes of applicable Canadian
securities laws. Financial outlook and future-oriented financial
information contained in this press release about prospective
financial performance, financial position or cash flows are
provided to give the reader a better understanding of the potential
future performance of the Company in certain areas and are based on
assumptions about future events, including economic conditions and
proposed courses of action, based on management’s assessment of the
relevant information currently available, and to become available
in the future. In particular, this press release contains projected
financial and operational information for 2022. These projections
contain forward-looking statements and are based on a number of
material assumptions and factors set out above. Actual results may
differ significantly from the projections presented herein. The
actual results of Gran Tierra’s operations for any period could
vary from the amounts set forth in these projections, and such
variations may be material. See above for a discussion of the risks
that could cause actual results to vary. The future-oriented
financial information and financial outlooks contained in this
press release have been approved by management as of the date of
this press release. Readers are cautioned that any such financial
outlook and future-oriented financial information contained herein
should not be used for purposes other than those for which it is
disclosed herein. The Company and its management believe that the
prospective financial information has been prepared on a reasonable
basis, reflecting management’s best estimates and judgments, and
represent, to the best of management’s knowledge and opinion, the
Company’s expected course of action. However, because this
information is highly subjective, it should not be relied on as
necessarily indicative of future results. See Gran Tierra's press
releases dated January 18, 2022 and April 19, 2022, respectively,
for additional information regarding the 2022 guidance referred to
herein.
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, cash flow from operating activities 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 or loss adjusted for depletion, depreciation and accretion
(“DD&A”) expenses, 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 or losses, derivative instruments gains or
losses, cash settlements on derivative instruments, other financial
instruments gains or losses and other non-cash losses. Management
believes that operating netback and cash netback are useful
supplemental measures for investors to analyze financial
performance and provide an indication of the results generated by
Gran Tierra’s principal business activities prior to the
consideration of other income and expenses. A reconciliation from
net loss to cash netback is as follows:
|
Three Months Ended March 31, |
|
Three Months Ended December 31, |
Cash Netback - (Non-GAAP) Measure ($000s) |
|
2022 |
|
|
2021 |
|
|
|
2021 |
|
Net income
(loss) |
$ |
14,119 |
|
$ |
(37,422 |
) |
|
$ |
62,524 |
|
Adjustments to
reconcile net income (loss) to cash netback |
|
|
|
|
DD&A expenses |
|
40,963 |
|
|
31,318 |
|
|
|
41,574 |
|
Deferred tax expense (recovery) |
|
18,713 |
|
|
8,651 |
|
|
|
(50,634 |
) |
Stock-based compensation expense |
|
4,557 |
|
|
3,671 |
|
|
|
1,799 |
|
Amortization of debt issuance costs |
|
887 |
|
|
881 |
|
|
|
1,127 |
|
Non-cash lease expense |
|
411 |
|
|
444 |
|
|
|
445 |
|
Lease payments |
|
(344 |
) |
|
(462 |
) |
|
|
(382 |
) |
Unrealized foreign exchange (gain) loss |
|
(4,839 |
) |
|
13,003 |
|
|
|
4,934 |
|
Derivative instruments loss |
|
21,439 |
|
|
23,698 |
|
|
|
1,298 |
|
Cash settlements on derivative instruments |
|
(8,596 |
) |
|
(13,404 |
) |
|
|
(13,386 |
) |
Other financial instruments (gain) loss |
|
— |
|
|
(1,405 |
) |
|
|
15,794 |
|
Other non-cash loss |
|
— |
|
|
— |
|
|
|
44 |
|
Cash
netback |
$ |
87,310 |
|
$ |
28,973 |
|
|
$ |
65,137 |
|
EBITDA, as presented, is defined as net income
or loss adjusted for DD&A expenses, interest expense and income
tax expense or recovery. Adjusted EBITDA, as presented, is defined
as EBITDA adjusted for non-cash lease expense, lease payments,
unrealized foreign exchange gains or losses, stock based
compensation expense or recovery, other non-cash loss, unrealized
derivative instruments gains or losses and other financial
instruments gains or losses. Management uses this supplemental
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 useful supplemental information for investors to analyze
our performance and our financial results. A reconciliation from
net loss to EBITDA and adjusted EBITDA is as follows:
|
Three Months Ended March 31, |
|
Three Months Ended December 31, |
EBITDA - (Non-GAAP) Measure ($000s) |
|
2022 |
|
|
2021 |
|
|
|
2021 |
|
Net income
(loss) |
$ |
14,119 |
|
$ |
(37,422 |
) |
|
$ |
62,524 |
|
Adjustments to
reconcile net income (loss) to EBITDA and Adjusted
EBITDA |
|
|
|
|
DD&A expenses |
|
40,963 |
|
|
31,318 |
|
|
|
41,574 |
|
Interest expense |
|
12,128 |
|
|
13,812 |
|
|
|
13,026 |
|
Income tax expense (recovery) |
|
39,540 |
|
|
8,651 |
|
|
|
(46,141 |
) |
EBITDA |
$ |
106,750 |
|
$ |
16,359 |
|
|
$ |
70,983 |
|
Non-cash lease expense |
|
411 |
|
|
444 |
|
|
|
445 |
|
Lease payments |
|
(344 |
) |
|
(462 |
) |
|
|
(382 |
) |
Unrealized foreign exchange (gain) loss |
|
(4,839 |
) |
|
13,003 |
|
|
|
4,934 |
|
Stock-based compensation expense |
|
4,557 |
|
|
3,671 |
|
|
|
1,799 |
|
Other non-cash loss |
|
— |
|
|
— |
|
|
|
44 |
|
Unrealized derivative instruments loss (gain) |
|
12,843 |
|
|
10,294 |
|
|
|
(12,088 |
) |
Other financial instruments (gain) loss |
|
— |
|
|
(1,405 |
) |
|
|
15,794 |
|
Adjusted
EBITDA |
$ |
119,378 |
|
$ |
41,904 |
|
|
$ |
81,529 |
|
Funds flow from operations, as presented, is
defined as net income or loss adjusted for DD&A expenses,
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 or
losses, derivative instruments gains or losses, cash settlements on
derivative instruments, other financial instruments gains or losses
and other non-cash losses. Management uses this financial measure
to analyze performance and income or loss generated by our
principal business activities prior to the consideration of how
non-cash items affect that income or loss, and believes that this
financial measure is also useful supplemental information for
investors to analyze performance and our financial results. Free
cash flow, as presented, is defined as funds flow from operations
adjusted for capital expenditures. Management uses this financial
measure to analyze cash flow generated by our principal business
activities after capital requirements 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 to both funds flow from operations and
free cash flow is as follows:
|
Three Months Ended March 31, |
|
Three Months Ended December 31, |
Funds Flow From Operations - (Non-GAAP)
Measure ($000s) |
|
2022 |
|
|
2021 |
|
|
|
2021 |
|
Net income
(loss) |
$ |
14,119 |
|
$ |
(37,422 |
) |
|
$ |
62,524 |
|
Adjustments to
reconcile net income (loss) to funds flow from
operations |
|
|
|
|
DD&A expenses |
|
40,963 |
|
|
31,318 |
|
|
|
41,574 |
|
Deferred tax expense (recovery) |
|
18,713 |
|
|
8,651 |
|
|
|
(50,634 |
) |
Stock-based compensation expense |
|
4,557 |
|
|
3,671 |
|
|
|
1,799 |
|
Amortization of debt issuance costs |
|
887 |
|
|
881 |
|
|
|
1,127 |
|
Non-cash lease expense |
|
411 |
|
|
444 |
|
|
|
445 |
|
Lease payments |
|
(344 |
) |
|
(462 |
) |
|
|
(382 |
) |
Unrealized foreign exchange (gain) loss |
|
(4,839 |
) |
|
13,003 |
|
|
|
4,934 |
|
Derivative instruments loss |
|
21,439 |
|
|
23,698 |
|
|
|
1,298 |
|
Cash settlements on derivative instruments |
|
(8,596 |
) |
|
(13,404 |
) |
|
|
(13,386 |
) |
Other financial instruments (gain) loss |
|
— |
|
|
(1,405 |
) |
|
|
15,794 |
|
Other non-cash loss |
|
— |
|
|
— |
|
|
|
44 |
|
Funds flow from
operations |
$ |
87,310 |
|
$ |
28,973 |
|
|
$ |
65,137 |
|
Capital expenditures |
$ |
41,483 |
|
$ |
37,427 |
|
|
$ |
40,229 |
|
Free cash
flow |
$ |
45,827 |
|
$ |
(8,454 |
) |
|
$ |
24,908 |
|
Net debt as presented is defined as GAAP total debt less
cash.
Gran Tierra is unable to provide neither
forward-looking net income, the GAAP measure most directly
comparable to the non-GAAP measures EBITDA, funds flow from
operations, cash flow, free cash flow and net debt, nor
forward-looking oil and gas sales, the GAAP measure most directly
comparable to the non-GAAP measure operating netback, 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.
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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