Gran Tierra Energy Inc.
("Gran Tierra" or
the "Company") (NYSE American:GTE) (NYSE MKT:GTE)
(TSX:GTE), today announced the Company's financial and operating
results for the quarter ended March 31, 2018. All dollar
amounts are in United States ("
U.S.") dollars
unless otherwise indicated. Production amounts are on an average
working interest before royalties ("
WI") basis
unless otherwise indicated. Per barrel of oil equivalent
("
BOE") amounts are based on WI sales before
royalties. For per BOE amounts based on net after royalty
("
NAR") production, see Gran Tierra's Quarterly
Report on Form 10-Q filed May 1, 2018.
Key Highlights
- Achieved a new Company milestone: record high average quarterly
Colombia production of 35,075 BOE per day ('BOEPD") in first
quarter 2018 ("the Quarter"), 23% higher than
28,481 BOEPD in first quarter 2017 and 2% higher than fourth
quarter 2017 (the "Prior Quarter")
- The Company brought 5 gross wells (4.2 net) on production
during the quarter with the first one onstream on February 26,
2018.
- The Company exited the Quarter with $160 million of cash and
cash equivalents.
- Continued significant exposure to oil price strength with oil
representing 100% of total Company production in the Quarter.
- Demonstrated ongoing strong financial performance in
the Quarter:
- Net income of $18 million compared with net loss of $41 million
in the Prior Quarter; net loss in the Prior Quarter included loss
on sale of the Company's Peru business unit of $34 million
- Funds flow from operations1 increased by 8% to $75 million
compared with the Prior Quarter and 66% from first quarter 2017,
while the Brent price only increased 23% from first quarter
2017
- Active quarter with capital expenditures of $73 million;
funds flow from operations in the Quarter were $2 million higher
than capital expenditures; capital expenditures in the Quarter were
as follows:
|
|
(Millions of
U.S. Dollars) |
|
Colombia |
|
Exploration |
$ |
19.2 |
Development: |
|
Facilities |
11.0 |
Drilling and
Completions |
35.5 |
Other |
6.8 |
|
72.5 |
Corporate |
0.1 |
|
$ |
72.6 |
-
- Oil and gas sales volumes in Colombia decreased by 3% compared
with the Prior Quarter to 27,203 BOEPD and increased by 15%
relative to the first quarter of 2017; the Quarter's slight
decrease in oil and gas sales volumes was driven by an
increase in inventories (792 bopd) and higher royalties (772 bopd)
due to higher oil prices. The additional inventory was sold in
April 2018,Oil and gas sales increased by 9% compared with the
Prior Quarter to $138 million and were up 46% relative to first
quarter 2017
- Improved cost structure continues to positively impact
the bottom line:
- Combined Operating, Transportation and General and
Administrative ("G&A") Expenses: in the Quarter were
$13.45 per BOE, down by 4% from $14.07 per BOE in the Prior Quarter
and down by 6% from $14.26 per BOE in first quarter of 2017
- Operating Netback: despite only a 9% increase
in Brent price from the Prior Quarter, operating netback1 increased
by 20% compared with the Prior Quarter to $34.37 per BOE and
increased by 45% relative to first quarter of 2017
- Operating Expenses: decreased by 13% compared
with the Prior Quarter to $8.55 per BOE due to decreases in
slickline services and maintenance costs
- Quality and Transportation Discount: decreased
by 14% to $10.72 per BOE compared with $12.47 per BOE in the Prior
Quarter; this $1.75 per BOE reduction resulted from optimization of
transportation routes and narrowing of differentials.
- Transportation Expenses: increased to $2.29
per BOE compared with $1.79 per BOE in the Prior Quarter; this
$0.50 per BOE increase was more than offset by the $1.75 per BOE
reduction in quality and transportation discount during the
Quarter
- Cash General and Administrative ("G&A")
Expenses: increased to $2.61 per BOE compared with $2.42
per BOE in the Prior Quarter due to lower WI sales volumes
- Enhanced financial flexibility and liquidity:
- Gran Tierra announced the closing of its successful $300
million 6.25% senior unsecured notes offering on February 15, 2018,
the net proceeds of which Gran Tierra used to repay the outstanding
amount on the revolving credit facility with the remainder for
general corporate purposes. This financing gives Gran Tierra the
flexibility to accelerate existing projects, to finance development
of potential future exploration discoveries or pursue other
opportunities
- The Company exited the Quarter with approximately $460 million
of liquidity, comprising $300 million of undrawn capacity on its
$300 million credit facility and $160 million of cash and cash
equivalents.
- During the Quarter the Company repurchased 464,912 shares at a
total cost of $1.2 million.
- Updated 2018 capital budget: Gran Tierra is forecasting the
following updated ranges for the Company's 2018 capital budget, to
account for a $25 million increase in the 2018 facilities capital
program, all to be invested in Colombia:
|
|
Total Capital
($ million) |
275-295 |
Development (19-21
gross wells) |
100-105 |
Exploration (8-11
gross wells) |
80-90 |
Facilities |
75-80 |
Seismic &
Studies |
20 |
|
|
- Increased the 2018 facilities capital program by $25 million:
- $5 million related to the acceleration of facilities expansion
in Acordionero to support the better than expected production
results to date
- $20 million allocated to Gran Tierra-owned gas-to-power
projects; the gas to power projects include:
- $17 million for the construction of a 22 megawatt gas-to-power
facility in Acordionero
- $3 million for remote power generation capacity in the Putumayo
Basin
- These Gran Tierra-owned power projects are designed to improve
the reliability of power generation and thereby support production
consistency, water injection reliability and reduce costly
artificial lift integrity failures caused by power
interruptions
- Gran Tierra expects:
- To save $8 to $10 million per year in operating costs in
Acordionero as a result of these projects
- The revised 2018 capital program to be fully funded by cash
flows from operations
- 2018 production to average 36,500 to 38,500 BOEPD, which would
represent annual growth from the 2017 average of 16% to 23%
Message to Shareholders
Gary Guidry, President and Chief Executive
Officer of Gran Tierra, commented: "During the first quarter of
2018, our high quality, operated, diversified suite of assets in
Colombia continued to deliver strong financial performance. Gran
Tierra’s returns-focused strategy with an emphasis on profitable
production growth has generated material year-on-year improvements
during the Quarter in several important metrics, including a 23%
increase in Colombia production, a 40% increase in net income,
significant growth of 66% in funds flow from operations, and a 45%
improvement in operating netback per BOE. Our growth in operating
netback and funds flow from operations both exceeded the 23%
year-on-year increase in the Brent oil price and reflects Gran
Tierra's high quality assets, sharp focus on controlling operating
and transportation costs and optimizing oil marketing strategies.
As a result, the Company has consistently delivered top quartile
operating netbacks.
"With our large resource base and drilling
inventory, low base declines and high netback production, we
continued to demonstrate this Quarter that Gran Tierra has created
a sustainable business model, which we expect to be fully funded by
forecasted cash from operating activities in 2018. During a very
active first quarter 2018, our funds flow from operations of $75
million more than covered our capital investments of $73 million.
Since assembling a world class asset base, we have now profitably
and consistently grown production, which is further evidence of the
strength of our model.
"Our high quality set of assets is forecasted to
have ongoing production growth, reaching a level of approximately
50,000 BOEPD by 20201. With our large resource base, we plan to
drill 30 to 35 exploration wells over the next three years, which
are all expected to be funded by cash from operating activities.
Our exploration campaign is designed to test the majority of our
large portfolio of unrisked mean prospective resources of 1.5
billion BOE1, including our dominant Putumayo Basin position in the
A-Limestone, other carbonates and the N Sand oil play fairways, as
well as the exciting potential new conventional oil resource play
in the La Luna carbonate in the Middle Magdalena Valley Basin.
"During the Quarter, we believe that the markets
delivered a strong vote of confidence in our long-term strategy of
focusing on capital efficiency and returns on invested capital in
Colombia, as evidenced by our successful offering of $300 million
in 6.25% senior unsecured notes. After paying down our revolving
credit facility and placing the excess cash on our balance sheet,
we believe our improved financial flexibility and strong liquidity
of approximately $460 million leave Gran Tierra well-positioned to
potentially accelerate current development projects such as
Acordionero, Costayaco and Cumplidor or our exciting carbonate
conventional resource plays in the Putumayo and Middle Magdalena
Valley Basins. Since we operate over 90% of our production, Gran
Tierra also has significant control and flexibility on capital
allocation and timing as we continually high-grade the best
development and exploration investment opportunities within our
large, diversified portfolio.
"On behalf of our Board of Directors and the
team at Gran Tierra, I want to thank all of our stakeholders for
their continued support. We believe that our focused strategy is
delivering results on several fronts in the multi-horizon, proven
hydrocarbon producing basins of Colombia. Gran Tierra is
well-positioned for an exciting year of profitable growth through
the rest of 2018 and beyond, as we continue to create long-term
shareholder value."
1 Based on the Company's 2017 year-end estimated
reserves and prospective resources as evaluated by the Company's
independent qualified reserve evaluator McDaniel & Associates
Consultants Ltd. in reports with effective dates of
December 31, 2017.
|
|
Financial and Operational Highlights (all amounts in $000s,
except per share and BOE amounts) |
|
|
|
Three Months Ended |
|
March 31, |
December 31, |
March 31, |
|
2018 |
2017 |
2017 |
Net Income
(Loss) |
$ |
17,861 |
|
$ |
(40,802 |
) |
$ |
12,771 |
|
Per Share -
Basic and Diluted |
$ |
0.05 |
|
$ |
(0.10 |
) |
$ |
0.03 |
|
|
|
|
|
Oil and Gas
Sales |
$ |
138,228 |
|
$ |
127,179 |
|
$ |
94,659 |
|
Operating
Expenses |
(26,265 |
) |
(31,403 |
) |
(23,937 |
) |
Transportation
Expenses |
(6,997 |
) |
(5,635 |
) |
(6,942 |
) |
Operating
Netback(1) |
$ |
104,966 |
|
$ |
90,141 |
|
$ |
63,780 |
|
|
|
|
|
G&A
Expenses Before Stock-Based Compensation |
$ |
7,982 |
|
$ |
7,637 |
|
$ |
7,563 |
|
G&A
Stock-Based Compensation |
3,178 |
|
4,501 |
|
1,149 |
|
G&A
Expenses, Including Stock Based Compensation |
$ |
11,160 |
|
$ |
12,138 |
|
$ |
8,712 |
|
|
|
|
|
EBITDA(1) |
$ |
88,588 |
|
$ |
20,123 |
|
$ |
61,255 |
|
|
|
|
|
Adjusted
EBITDA(1) |
$ |
88,775 |
|
$ |
78,180 |
|
$ |
55,020 |
|
|
|
|
|
Funds Flow from
Operations(1) |
$ |
74,748 |
|
$ |
69,123 |
|
$ |
45,026 |
|
|
|
|
|
Capital
Expenditures |
$ |
72,694 |
|
$ |
75,322 |
|
$ |
46,160 |
|
|
|
|
|
Average Daily Volumes (BOEPD) |
|
|
|
WI Production
Before Royalties |
35,075 |
|
34,477 |
|
29,879 |
|
Royalties |
(6,886 |
) |
(6,114 |
) |
(5,089 |
) |
Production
NAR |
28,189 |
|
28,363 |
|
24,790 |
|
(Increase)
Decrease in Inventory |
(986 |
) |
(194 |
) |
18 |
|
Sales |
27,203 |
|
28,169 |
|
24,808 |
|
Royalties, % of
WI Production Before Royalties |
20 |
% |
18 |
% |
17 |
% |
|
|
|
|
Per BOE(2) |
|
|
|
Brent |
$ |
67.18 |
|
$ |
61.54 |
|
$ |
54.66 |
|
Quality and
Transportation Discount |
(10.72 |
) |
(12.47 |
) |
(12.27 |
) |
Royalties |
(11.25 |
) |
(8.71 |
) |
(7.22 |
) |
Average
Realized Price |
45.21 |
|
40.36 |
|
35.17 |
|
Transportation
Expenses |
(2.29 |
) |
(1.79 |
) |
(2.58 |
) |
Average
Realized Price Net of Transportation Expenses |
42.92 |
|
38.57 |
|
32.59 |
|
Operating
Expenses |
(8.55 |
) |
(9.86 |
) |
(8.87 |
) |
Operating
Netback(1) |
34.37 |
|
28.71 |
|
23.72 |
|
G&A
Expenses |
(2.61 |
) |
(2.42 |
) |
(2.81 |
) |
Severance
Expenses |
— |
|
(0.04 |
) |
— |
|
Equity
Tax |
— |
|
— |
|
(0.45 |
) |
Realized
Foreign Exchange Loss |
(0.03 |
) |
(0.05 |
) |
(0.36 |
) |
Realized
Financial Instruments (Loss) Gain |
(1.90 |
) |
0.01 |
|
0.29 |
|
Interest
Expense, Excluding Amortization of Debt Issuance
Costs |
(1.58 |
) |
(0.93 |
) |
(0.93 |
) |
Interest
Income |
0.26 |
|
0.08 |
|
0.15 |
|
Current Income
Tax Expense |
(4.02 |
) |
(3.43 |
) |
(2.76 |
) |
Cash
Netback(1) |
$ |
24.49 |
|
$ |
21.93 |
|
$ |
16.85 |
|
|
|
|
|
Share Information (000s) |
|
|
|
Common Stock
Outstanding, End of Period |
384,960 |
|
385,191 |
|
390,815 |
|
Exchangeable
Shares Outstanding, End of Period |
5,908 |
|
6,112 |
|
8,192 |
|
Weighted
Average Number of Common and Exchangeable Shares Outstanding -
Basic |
391,294 |
|
394,442 |
|
399,007 |
|
Weighted
Average Number of Common and Exchangeable Shares Outstanding -
Diluted |
391,379 |
|
394,442 |
|
399,046 |
|
|
|
|
|
|
|
|
|
|
|
As at |
(Thousands of
U.S. Dollars) |
March 31, 2018 |
December 31, 2017 |
% Change |
Cash and Cash
Equivalents |
$ |
160,474 |
|
$ |
12,326 |
|
— |
|
Revolving
Credit Facility |
$ |
— |
|
$ |
148,000 |
|
(100 |
) |
Senior
Notes |
$ |
300,000 |
|
$ |
— |
|
— |
|
Convertible
Notes |
$ |
115,000 |
|
$ |
115,000 |
|
— |
|
(1) Operating netbacks, earnings before
interest, taxes and depletion, depreciation and accretion
("DD&A") (" EBITDA"),
adjusted EBITDA, funds flow from operations and cash netbacks are
non-GAAP measures and do not have a standardized meaning under
generally accepted accounting principles in the United States of
America ("GAAP"). Refer to "Non-GAAP Measures" in
this press release for descriptions of these non-GAAP measures and
reconciliations to the most directly comparable measures calculated
and presented in accordance with GAAP.
(2) Per BOE amounts are based on WI sales before
royalties. For per BOE amounts based on NAR production, see Gran
Tierra's Quarterly Report on Form 10-Q filed May 1, 2018.
Conference Call
Information:
Gran Tierra Energy Inc. will host its first
quarter 2018 results conference call on Wednesday, May 2,
2018. Details of the conference call are as follows:
|
|
Date: |
Wednesday, May 2, 2018 |
Time: |
11:00 a.m. Eastern Time (9:00 a.m. Mountain Time) |
North American participants call: |
1-844-348-3792 (Toll-Free) |
Outside of Canada & USA call: |
1-614-999-9309 |
|
|
Interested parties may also access the live
webcast on the investor relations page of Gran Tierra’s website at
www.grantierra.com. An archive of the webcast will be available on
Gran Tierra’s website until May 9, 2018. In addition, an audio
replay of the conference call will be available following the call
until May 4, 2018. To access the replay, dial toll-free
1-855-859-2056 (North America), or 1-404-537-3406 (outside of
Canada and USA), conference ID: 3258519.
Contact Information
For investor and media inquiries please contact:
Gary GuidryChief Executive Officer
Ryan EllsonChief Financial Officer
Rodger TrimbleVice President, Investor Relations
403-265-3221
info@grantierra.com
About Gran Tierra Energy
Inc.
Gran Tierra Energy Inc. together with its
subsidiaries is an independent international energy company focused
on oil and natural gas exploration and production in Colombia. The
Company is focused on its existing portfolio of assets in Colombia
and will pursue new growth opportunities throughout Colombia,
leveraging our financial strength. The Company’s common shares
trade on the NYSE American and the Toronto Stock Exchange under the
ticker symbol GTE. Additional information concerning Gran Tierra is
available at www.grantierra.com. 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
filings are available on the SEC website at http://www.sec.gov and
on SEDAR at http://www.sedar.com.
Forward Looking Statements and Legal
Advisories:
This press release contains opinions, forecasts,
projections, and other statements about future events or results
that constitute forward-looking statements within the meaning of
the United States Private Securities Litigation Reform Act of 1995,
Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended, and
financial outlook and forward looking information within the
meaning of applicable Canadian securities laws (collectively,
"forward-looking statements"). Such forward-looking statements
include, but are not limited to, the Company's expectations,
capital program and guidance, the Company’s strategies, the
Company’s operations including planned operations, oil production,
and the completion of certain infrastructure such as its gas to
power projects and cost savings associated therewith.
Statements relating to “resources” are also
deemed to be forward-looking statements, as they involve the
implied assessment, based on certain estimates and assumptions,
including that the resources described can be profitably produced
in the future.
The forward-looking statements contained in this
press release reflect several material factors and expectations and
assumptions of Gran Tierra including, without limitation, that Gran
Tierra will continue to conduct its operations in a manner
consistent with its current expectations, the accuracy of testing
and production results and seismic data, pricing and cost estimates
(including with respect to commodity pricing and exchange rates),
rig availability, the risk profile of planned exploration
activities, the effects of drilling down-dip, the effects of
waterflood and multi-stage fracture stimulation operations, the
extent and effect of delivery disruptions, and the general
continuance of current or, where applicable, assumed operational,
regulatory and industry conditions including in areas of potential
expansion, and the ability of Gran Tierra to execute its current
business and operational plans in the manner currently planned.
Gran Tierra believes the material factors, expectations and
assumptions reflected in the forward-looking statements are
reasonable at this time but no assurance can be given that these
factors, expectations and assumptions will prove to be correct.
Among the important factors that could cause
actual results to differ materially from those indicated by the
forward-looking statements in this press release are: prices and
markets for oil and natural gas are unpredictable and tend to
fluctuate significantly; Gran Tierra’s operations are located in
South America and unexpected problems can arise due to guerilla
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 ability to replace reserves and
production and develop and manage reserves on an economically
viable basis; the timely receipt of regulatory or other required
approvals for our operating activities; the failure of exploratory
drilling to result in commercial wells; unexpected delays due to
the limited availability of drilling equipment and personnel; the
risk that current global economic and credit market conditions may
impact oil prices and oil consumption more than Gran Tierra
currently predicts, which could cause Gran Tierra to further modify
its strategy and capital spending program; and the risk factors
detailed from time to time in Gran Tierra’s periodic reports filed
with the Securities and Exchange Commission, including, without
limitation, under the caption " Risk Factors" in Gran Tierra's
Annual Report on Form 10-K filed February 27, 2018 and its
Quarterly Reports. These filings are available on the SEC website
at http://www.sec.gov and on SEDAR at www.sedar.com. Although the
current capital spending program and long term strategy of Gran
Tierra is based upon the current expectations of the management of
Gran Tierra, should any one of a number of issues arise, Gran
Tierra may find it necessary to alter its business strategy and/or
capital spending program and there can be no assurance as at the
date of this press release as to how those funds may be reallocated
or strategy changed.
All forward-looking statements included in this
press release are made as of the date of this press release and the
fact that this press release remains available does not constitute
a representation by Gran Tierra that Gran Tierra believes these
forward-looking statements continue to be true as of any subsequent
date. Actual results may vary materially from the expected results
expressed in forward-looking statements. Gran Tierra disclaims any
intention or obligation to update or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise, except as expressly required by applicable securities
laws. Gran Tierra’s forward-looking statements are expressly
qualified in their entirety by this cautionary statement.
The estimates of future production set forth in
this press release may be considered to be future-oriented
financial information or a financial outlook for the purposes of
applicable Canadian securities laws. Financial outlook and
future-oriented financial information contained in this press
release about prospective financial performance, financial position
or cash flows are based on assumptions about future events,
including economic conditions and proposed courses of action, based
on management’s assessment of the relevant information currently
available, and to become available in the future. These
projections contain forward-looking statements and are based on a
number of material assumptions and factors set out above. Actual
results may differ significantly from the projections presented
herein. These projections may also be considered to contain
future-oriented financial information or a financial outlook. The
actual results of Gran Tierra’s operations for any period will
likely vary from the amounts set forth in these projections, and
such variations may be material. See above for a discussion of the
risks that could cause actual results to vary. The future-oriented
financial information and financial outlooks contained in this
press release have been approved by management as of the date of
this press release. Readers are cautioned that any such financial
outlook and future-oriented financial information contained herein
should not be used for purposes other than those for which it is
disclosed herein. The Company and its management believe that the
prospective financial information has been prepared on a reasonable
basis, reflecting management’s best estimates and judgments, and
represent, to the best of management’s knowledge and opinion, the
Company’s expected course of action. However, because this
information is highly subjective, it should not be relied on as
necessarily indicative of future results.
Non-GAAP Measures
This press release includes non-GAAP financial
measures as further described herein. These non-GAAP measures do
not have a standardized meaning under GAAP. Investors are cautioned
that these measures should not be construed as alternatives to net
income or loss or other measures of financial performance as
determined in accordance with GAAP. Gran Tierra's method of
calculating these measures may differ from other companies and,
accordingly, they may not be comparable to similar measures used by
other companies. Each non-GAAP financial measure is presented along
with the corresponding GAAP measure so as to not imply that more
emphasis should be placed on the non-GAAP measure.
Operating netback as presented is defined as oil
and gas sales less operating and transportation expenses. Cash
netback as presented is defined as net income or loss before
DD&A expenses, asset impairment, deferred income tax recovery,
amortization of debt issuance costs, unrealized foreign exchange
gains and losses, loss on sale of business units, non-cash
operating and G&A expenses and unrealized financial instruments
gains and losses. Management believes that operating netback and
cash netback are useful supplemental measures for investors to
analyze financial performance and provide an indication of the
results generated by Gran Tierra's principal business activities
prior to the consideration of other income and expenses. See the
table entitled Financial and Operational Highlights above for the
components of operating netback and corresponding reconciliation. A
reconciliation from net income or loss to cash netback is as
follows:
|
|
|
|
|
Three Months Ended |
|
|
March 31, |
|
December 31, |
|
March 31, |
Cash Netback -
Non-GAAP Measure ($000s) |
|
2018 |
|
2017 |
|
2017 |
Net income
(loss) |
|
$ |
17,861 |
|
|
$ |
(40,802 |
) |
|
$ |
12,771 |
|
Adjustments to
reconcile net income (loss) income to cash netback |
|
|
|
|
|
|
DD&A expenses |
|
39,461 |
|
|
38,606 |
|
|
26,593 |
|
Asset impairment |
|
— |
|
|
275 |
|
|
283 |
|
Deferred income tax expense |
|
13,482 |
|
|
8,052 |
|
|
11,379 |
|
Amortization of debt issuance costs |
|
670 |
|
|
547 |
|
|
605 |
|
Unrealized foreign exchange (gain) loss |
|
(1,044 |
) |
|
1,141 |
|
|
(2,819 |
) |
Loss on sale of business units |
|
— |
|
|
35,309 |
|
|
— |
|
Non-cash operating expenses |
|
130 |
|
|
339 |
|
|
54 |
|
Non-cash G&A expenses |
|
3,178 |
|
|
4,501 |
|
|
1,149 |
|
Unrealized financial instruments loss (gain) |
|
1,129 |
|
|
21,185 |
|
|
(4,671 |
) |
Cash
netback |
|
$ |
74,867 |
|
|
$ |
69,153 |
|
|
$ |
45,344 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA, as presented, is defined as net income
or loss adjusted for depletion, depreciation and accretion
(“DD&A”) expenses, interest expense and income tax expense or
recovery. Adjusted EBITDA, as presented, is defined as EBITDA
adjusted for asset impairment, unrealized financial instruments
gain or loss, loss on sale of business units and foreign exchange
gain or loss. Management uses these financial measures to analyze
performance and income or loss generated by our principal business
activities prior to the consideration of how non-cash items affect
that income or loss, and believes that these financial measures is
also useful supplemental information for investors to analyze
performance and our financial results. A reconciliation from net
income or loss to EBITDA and adjusted EBITDA is as follows:
|
|
|
|
|
Three Months Ended |
|
|
March 31, |
|
December 31, |
|
March 31, |
(Thousands of
U.S. Dollars) |
|
2018 |
|
2017 |
|
2017 |
Net income
(loss) |
|
$ |
17,861 |
|
|
$ |
(40,802 |
) |
|
$ |
12,771 |
|
Adjustments to
reconcile net income (loss) to EBITDA and adjusted
EBITDA |
|
|
|
|
|
|
DD&A expenses |
|
39,461 |
|
|
38,606 |
|
|
26,593 |
|
Interest expense |
|
5,495 |
|
|
3,467 |
|
|
3,095 |
|
Income tax expense |
|
25,771 |
|
|
18,852 |
|
|
18,796 |
|
EBITDA
(non-GAAP) |
|
88,588 |
|
|
20,123 |
|
|
61,255 |
|
Asset impairment |
|
— |
|
|
275 |
|
|
283 |
|
Unrealized financial instruments loss (gain) |
|
1,129 |
|
|
21,185 |
|
|
(4,671 |
) |
Loss on sale of business units |
|
— |
|
|
35,309 |
|
|
— |
|
Foreign exchange loss (gain) |
|
(942 |
) |
|
1,288 |
|
|
(1,847 |
) |
Adjusted EBITDA
(non-GAAP) |
|
$ |
88,775 |
|
|
$ |
78,180 |
|
|
$ |
55,020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funds flow from operations, as presented, is net
income or loss adjusted for DD&A expenses, asset impairment,
deferred tax expense or recovery, stock-based compensation
expense, amortization of debt issuance costs, cash settlement
of RSUs, unrealized foreign exchange gains and losses, financial
instruments gains or losses, cash settlement of financial
instruments and loss on sale of business units. Management uses
this financial measure to analyze performance and income or loss
generated by our principal business activities prior to the
consideration of how non-cash items affect that income or loss, and
believes that this financial measure is also useful supplemental
information for investors to analyze performance and our financial
results. A reconciliation from net income or loss to funds flow
from operations is as follows:
|
|
|
|
|
Three Months Ended |
|
|
March 31, |
|
December 31, |
|
March 31, |
Funds Flow From
Operations - Non-GAAP Measure ($000s) |
|
2018 |
|
2017 |
|
2017 |
Net income
(loss) |
|
$ |
17,861 |
|
|
$ |
(40,802 |
) |
|
$ |
12,771 |
|
Adjustments to
reconcile net income (loss) to funds flow from
operations |
|
|
|
|
|
|
DD&A expenses |
|
39,461 |
|
|
38,606 |
|
|
26,593 |
|
Asset impairment |
|
— |
|
|
275 |
|
|
283 |
|
Deferred tax expense |
|
13,482 |
|
|
8,052 |
|
|
11,379 |
|
Stock-based compensation expense |
|
3,309 |
|
|
4,840 |
|
|
1,203 |
|
Amortization of debt issuance costs |
|
670 |
|
|
547 |
|
|
605 |
|
Cash settlement of RSUs |
|
(120 |
) |
|
(30 |
) |
|
(318 |
) |
Unrealized foreign exchange (gain) loss |
|
(1,044 |
) |
|
1,141 |
|
|
(2,819 |
) |
Financial instruments loss (gain) |
|
6,946 |
|
|
21,140 |
|
|
(5,439 |
) |
Cash settlement of financial instruments |
|
(5,817 |
) |
|
45 |
|
|
768 |
|
Loss on sale of business units |
|
— |
|
|
35,309 |
|
|
— |
|
Funds flow from
operations |
|
$ |
74,748 |
|
|
$ |
69,123 |
|
|
$ |
45,026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Presentation of Oil and Gas Information
BOEs have been converted on the basis of 6
thousand cubic feet ("Mcf") of natural gas to 1
barrel of oil. BOEs may be misleading, particularly if used in
isolation. A BOE conversion ratio of 6 Mcf: 1 barrel 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 barrel would be misleading as an
indication of value.
Gran Tierra's Statement of Reserves Data and
Other Oil and Gas Information on Form 51-101F1 dated effective as
at December 31, 2017 (the "GTE 51-101F1"), which includes
disclosure of its oil and gas reserves and other oil and gas
information in accordance with NI 51-101 forming the basis of this
press release, is available on SEDAR at www.sedar.com. See the GTE
51-101F1 for additional definitions regarding terms used in this
press release.
Estimates of net present value contained herein
do not necessarily represent fair market value of resources.
Estimates of resources and future net revenue for individual
properties may not reflect the same level of confidence as
estimates of resources and future net revenue for all properties,
due to the effect of aggregation.
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.
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.
Prospective Resources
Prospective Resources are those quantities of
petroleum estimated, as of a given date, to be potentially
recoverable from undiscovered accumulations by application of
future development projects. Prospective Resources have both an
associated chance of discovery and a chance of development. Not all
exploration projects will result in discoveries. The chance that an
exploration project will result in the discovery of petroleum is
referred to as the "chance of discovery." Thus, for an undiscovered
accumulation the chance of commerciality is the product of two risk
components-the chance of discovery and the chance of development.
There is no certainty that any portion of the Prospective Resources
will be discovered. If discovered, there is no certainty that it
will be commercially viable to produce any portion of the
Prospective Resources.
Estimates of the Company's Prospective Resources
are based upon the GTE McDaniel Prospective Resources Report. The
estimates of Prospective Resources provided in this press release
are estimates only and there is no guarantee that the estimated
Prospective Resources will be recovered. Actual resources may be
greater than or less than the estimates provided in this in this
press release and the differences may be material. There is no
assurance that the forecast price and cost assumptions applied by
McDaniel in evaluating Gran Tierra's Prospective Resources will be
attained and variances could be material. There is no certainty
that any portion of the Prospective Resources will be discovered.
If discovered, there is no certainty that it will be commercially
viable to produce any portion of the Prospective Resources.
Estimates of Prospective Resources are by their
nature more speculative than estimates of proved reserves and would
require substantial capital spending over a significant number of
years to implement recovery. Actual locations drilled and
quantities that may be ultimately recovered from our properties
will differ substantially. In addition, we have made no commitment
to drill, and likely will not drill, all of the drilling locations
that have been attributable to these quantities.
The Prospective Resources in this press release
are classified as “mean” representing the arithmetic average of the
expected recoverable volume. It is the most accurate single point
representation of the volume distribution.
For a discussion of Gran Tierra’s interest in
the Prospective Resources, the location of the Prospective
Resources, the product type reasonably expected, the risks and
level of uncertainty associated with recovery of the resources, the
significant positive and negative factors relevant to the estimate
of the Prospective Resources, a description of the applicable
projects maturity subcategories and other relevant information
regarding the Prospective Resources estimates, please see the GTE
51-101F1 available on SEDAR at www.sedar.com.
Disclosure of Resources 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.
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