Gran Tierra Energy Inc.
(“Gran Tierra” or
the “Company”) (NYSE American:GTE)(TSX:GTE)(LSE:GTE) today
is pleased to announce the completion of the semi-annual
redetermination of the Company’s bank-syndicated credit facility.
All dollar amounts are in United States (
“U.S.”)
dollars, unless otherwise indicated. The Company and the syndicate
of lenders party to the credit facility have agreed to amend the
credit facility (the
“Amendment”) effective as of
June 1, 2020, as follows:
(i) |
Redetermination of borrowing base limit to $225 million from the
prior limit of $300 million; |
(ii) |
Grant of
relief under financial covenants until October 1, 2021 (the
“Covenant Relief Period”), including relief from
compliance with the ratio of Total Debt1 to EBITDAX1 during
the Covenant Relief Period; and |
(iii) |
Amendment
of the interest rate to either, at the borrower’s option, the
London Inter-Bank Offered Rate (LIBOR) plus a spread ranging from
2.9% to 4.9%, or base rate plus a spread ranging from 1.9% to 3.9%,
with such spread, in each case, dependent upon the Company’s Senior
Secured Leverage Ratio1. Based on the Company’s current Senior
Secured Leverage Ratio, the interest rate would equal 3.2% under
the first option and 2.2% under the second option. |
The credit facility matures in November 2022. The Amendment does
not impact the Company’s current bonds outstanding.
Additional Hedges Secured, Strong Hedge
Position In-Place: The Company has entered into additional
oil price hedges and now has 11,000 barrels
(“bbl”) of oil per day (“bopd”)
hedged for the second quarter of 2020 and 9,000 bopd hedged for the
second half of 2020. Gran Tierra’s current hedges are summarized in
the following table:
Type of Instrument &
Period |
Volume (bopd) |
Sold Put ($/bbl)* |
Purchased Put ($/bbl)* |
Sold Call ($/bbl)* |
Collar: April 1 to June 30,
2020 |
6,000 |
n/a |
$55.00 |
$69.05 |
3-Way: April 1 to June 30,
2020 |
5,000 |
$25.00 |
$35.00 |
$38.93 |
3-Way:
July 1 to December 31, 2020 |
9,000 |
$25.28 |
$34.72 |
$41.46 |
*Weighted Average
Operations Update
Current Production
Gran Tierra remains focused on the ongoing
production and waterflooding of the Company's core assets at
Acordionero, Costayaco and Moqueta. Consistent with management’s
expectation, during the second quarter of 2020 to-date, Gran
Tierra’s total working interest production has averaged
approximately 21,000 bopd.
Acordionero (100% Working Interest,
Operator)
- Currently, wells awaiting workovers
represent productive capacity of over 5,000 bopd; these wells are
expected to remain off-line during the low-price environment; if
oil markets stabilize at current levels or higher during the second
half of 2020, Gran Tierra plans to commence workover operations to
restore these wells to production.
- Production from the remaining wells
has stabilized at 11,000 bopd during the second quarter of 2020
to-date, with downtime of only approximately 3%; the low downtime
reflects excellent reliability from the field’s gas-to-power
generation so far during the second quarter of 2020 to-date; the
stabilization of production, with little to no natural decline, is
indicative of positive reservoir response to the ongoing waterflood
at Acordionero; this production provides an excellent base to grow
production and cash flow from future workovers and development
drilling; looking forward, Gran Tierra forecasts that future
development wells in Acordionero will cost less than $2 million
dollars to drill, complete and tie-in.
Ayombero (100% Working Interest,
Operator)
- During the second quarter of 2020,
the Company completed a pressure build up test
(“PBU”) on the Ayombero-1 well, with positive
results; the Ayombero-1 well first started producing on March 5,
2018, has produced a cumulative 117,000 bbl of oil to date and has
been producing at an average rate of 175 bopd with no water; the
estimated initial reservoir pressure was 7,772 pounds per square
inch (“psi”) when Ayombero-1 first started
producing and, based on the PBU, current reservoir pressure is
estimated at 7,330 psi; the minimal decrease of only 6% in
estimated reservoir pressure supports management’s estimate that
Ayombero-1 is connected to a potentially large field.
- The Ayombero-Chuira structure is
estimated to contain gross working interest mean prospective oil
resources2 of 63 million bbl unrisked and 29 million bbl risked, as
evaluated by the Company's independent qualified reserves evaluator
McDaniel & Associates Consultants Ltd.
(“McDaniel”) in a report with an effective date of
July 31, 2018.
Message to Stakeholders
Gary Guidry, President and Chief Executive
Officer of Gran Tierra, commented: “We are very pleased that our
bank syndicate continues to be supportive of Gran Tierra during
these volatile times. We expect the Company to have sufficient
liquidity for the remainder of 2020, since we plan to spend less
than anticipated funds flow from operations and have a strong hedge
position. The credit facility was drawn to $204 million as at March
31, 2020 and, due to the low forecasted expenditures, the expected
positive funds flow from operations at current pricing and the
recovery of tax receivables in the range of $50 million to $80
million over the next six months, the Company expects the amount
drawn on the credit facility to decrease by the end of 2020.
Furthermore, the waiver of the Total Debt1 to
EBITDAX1 covenant until the fourth quarter of 2021 allows the
Company greater flexibility to focus on value creation for all
stakeholders. Ongoing tax refunds from the Colombian government are
expected to further strengthen our balance sheet through the course
of 2020.
We forecast that the Company currently has the
productive capacity to produce over 30,000 bopd with the future
completion of workovers in Acordionero, resumption of production in
the Suroriente Block and restart of production from our minor
fields for an expected cost of less than $10 million. We expect all
shut-in fields and facilities to return to prior production levels
once Brent oil prices stabilize and return to a range of $35 to
$40/bbl. We continue to prioritize financial strength, liquidity
and long-term value creation and believe we will exit strongly from
this current period of economic turmoil.”
1 These non-GAAP measures are defined in the
Credit Agreement, dated as of September 18, 2015, by and among Gran
Tierra Energy Inc., Gran Tierra Energy International Holdings Ltd.,
the Bank of Nova Scotia, Societe Generale and the lenders party
thereto, as amended (the “Credit Agreement”). The
Credit Agreement and all amendments thereto are available as
exhibits to Gran Tierra’s SEC filings. Total Debt means all debt of
Gran Tierra and its subsidiaries party to the credit facility on a
consolidated basis. EBITDAX means the sum of consolidated net
income plus the following expenses or charges to the extent
deducted from consolidated net income: interest, income taxes,
depreciation, depletion, amortization, exploration expenses and
other similar noncash charges, minus all noncash income added to
consolidated net income. Senior Secured Leverage Ratio means the
ratio of secured total date to EBITDAX.
2 All Ayombero-Chuira resources values and
ancillary information contained in this press release have been
calculated in compliance with Canadian National Instrument 51-101 -
Standards of Disclosure for Oil and Gas Activities (“NI
51-101”) and the Canadian Oil and Gas Evaluation Handbook
(“COGEH”) and in respect of prospective resources
are based on the estimated prospective resources as evaluated by
the Company’s independent qualified reserve evaluator McDaniel in a
report with an effective date of July 31, 2018 (the “GTE
McDaniel Prospective Resources Report”). Refer to
“Prospective Resources” in this press release for more
information.
Contact Information
For investor and media inquiries please contact:
Gary GuidryPresident & Chief Executive Officer
Ryan EllsonExecutive Vice President & Chief Financial
Officer
Rodger TrimbleVice President, Investor Relations
+1-403-265-3221
info@grantierra.com
About Gran Tierra Energy
Inc.
Gran Tierra Energy Inc. together with its
subsidiaries is an independent international energy company focused
on oil and natural gas exploration and production in Colombia and
Ecuador. The Company is focused on its existing portfolio of assets
in Colombia and Ecuador and will pursue new growth opportunities
throughout Colombia and Latin America, leveraging our financial
strength. The Company’s common stock trades on the NYSE American,
the Toronto Stock Exchange and the London Stock Exchange under the
ticker symbol GTE. Additional information concerning Gran Tierra is
available at www.grantierra.com. Information on the Company's
website (including the Sustainability Report) does not constitute a
part of this press release. Investor inquiries may be directed to
info@grantierra.com or (403) 265-3221.
Gran Tierra's Securities and Exchange Commission
filings are available on the SEC website at http://www.sec.gov and
on SEDAR at http://www.sedar.com and UK regulatory filings are
available on the National Storage Mechanism website at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism.
Forward-Looking Statements and Legal
Advisories:
This press release contains opinions, forecasts,
projections, expectations and other statements about future events
or results that constitute forward-looking statements within the
meaning of the United States Private Securities Litigation Reform
Act of 1995, Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended,
and financial outlook and forward-looking information within the
meaning of applicable Canadian securities laws (collectively,
“forward-looking statements”), which can be
identified by such terms as “expect,” “plan,” “guidance,”
“forecast,” “project,” “will,” “forward,” “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, credit facility, the recommencement of production and
development activity, certain operational matters, the future cost
to drill, complete and tie-in certain wells, liquidity and access
to capital, future plans when oil prices increase, the state of the
Company following the current period of economic turmoil, the
Company’s strategies and the Company’s operations including planned
operations, benefits of government programs, including government
tax refunds, the impact of the COVID-19 pandemic, and the impact of
disruptions to operations and the decline in industry
conditions.
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. Please read “Prospective Resources” later in this
press release.
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; disruptions to local
operations; the decline in oil and gas industry conditions and
commodity prices; the severe imbalance in supply and demand for oil
and natural gas; the unpredictability and volatility of prices and
markets for oil and natural gas; the accuracy of productive
capacity of any particular field; the timing and impact of any
resumption of operations; unexpected problems arising due to
guerilla activity or local blockades or protests in South America,
where Gran Tierra’s operations are located; technical difficulties
and operational difficulties, which could impact the production,
transport or sale of our products; geographic, political and
weather conditions, which could impact the production, transport or
sale of our products; 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 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 under its credit facility once
the Covenant Relief Period expires; Gran Tierra’s ability to reduce
the amount drawn on the credit facility; 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 on Form 10-Q for the quarter ended March 31, 2020
and Annual Report on Form 10-K for the year ended December 31,
2019, many of which are beyond the Company's control. These filings
are available on the SEC website at http://www.sec.gov and on SEDAR
at www.sedar.com.
The 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 funds flow from operations and
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 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. 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
operational and 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.
Disclosure of Oil and Gas
Information:
BOEs have been converted on the basis of six
thousand cubic feet (“Mcf”) natural gas to 1 bbl
of oil. BOEs may be misleading, particularly if used in isolation.
A BOE conversion ratio of 6 Mcf: 1 bbl is based on an energy
equivalency conversion method primarily applicable at the burner
tip and does not represent a value equivalency at the wellhead. In
addition, given that the value ratio based on the current price of
oil as compared with natural gas is significantly different from
the energy equivalent of six to one, utilizing a BOE conversion
ratio of 6 Mcf: 1 bbl would be misleading as an indication of
value.
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.
Certain terms used in this press release but not
defined are defined in NI 51-101, CSA Staff Notice 51-324 -Revised
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.
Prospective Resources
Prospective resources are those quantities of
petroleum estimated, as of a given date, to be potentially
recoverable from undiscovered accumulations by application of
future development projects. Prospective resources have both an
associated chance of discovery and a chance of development. Not all
exploration projects will result in discoveries. The chance that an
exploration project will result in the discovery of petroleum is
referred to as the “chance of discovery.” Thus, for an undiscovered
accumulation the chance of commerciality is the product of two risk
components-the chance of discovery and the chance of development.
There is no certainty that any portion of the prospective resources
will be discovered. If discovered, there is no certainty that it
will be commercially viable to produce any portion of the
prospective resources.
Unless otherwise specified, estimates of the
Company's prospective resources are based upon the GTE McDaniel
Prospective Resources Report. The estimates of prospective
resources provided in this press release are estimates only and
there is no guarantee that the estimated prospective resources will
be recovered. Actual resources may be greater than or less than the
estimates provided in this in this press release and the
differences may be material. There is no assurance that the
forecast price and cost assumptions applied by McDaniel in
evaluating Gran Tierra's prospective resources will be attained and
variances could be material. There is no 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.
Ayombero-Chuira Structure Prospective
Resources
Estimates of the Company’s prospective resources
in the Ayombero-Chuira structure are prepared by McDaniel in
accordance with NI 51-101 and COGEH as of July 31, 2018. For a
discussion of Gran Tierra’s interest in the Ayombero-Chuira
structure, the location of the Ayombero-Chuira structure, the
product type reasonably expected, and other relevant information
regarding the Ayombero-Chuira structure please see Gran Tierra’s
Statement of Reserves Data and Other Oil and Gas Information on
Form 51-101F1 dated effective as at December 31, 2019 and the
Annual Report on Form 10-K for the year ended December 31, 2019,
each available on SEDAR at www.sedar.com.
Prospective resources within the Ayombero-Chuira
structure are estimated based on 3D seismic and the drilling of the
Ayombero-1 well, as well as production from the Chuira field.
Prospective resources have been assigned to three horizons within
the La Luna formation: the Galembo, the Pujamana and the
Salada.
Positive factors for the Ayombero-Chuira
Structure Prospective Resources include:
- Thick, good quality reservoir
exists within the La Luna formation, based on testing of the
Ayombero-1 well to date. Gran Tierra is currently producing oil
from the Galembo member.
- The Ayombero-1 well is believed to
be producing from the same structure as the wells in the Chuira
field, from which Gran Tierra has existing production.
Negative factors for the Ayombero-Chuira
Structure Prospective Resources include:
- The structure is complex, with potential seal risks in certain
areas.
- Poor quality of data obtained in 3D seismic shoots to
date.
Chance of Discovery/Development
Through an evaluation of the risks that are
relevant to the Ayombero-Chuira structure prospective resources,
which are described herein, McDaniel has determined that the
overall chance of discovery is 51%. The corresponding chance of
development is 90%.
Prospect Maturity
The prospective resources associated with the
Ayombero-Chuira structure have been sub-classified as a “prospect”.
COGEH defines “prospect” as a potential accumulation within a play
that is sufficiently well defined to present a viable drilling
target.
Other Information
Given the uncertainty of discovery associated
with such prospective resources, costs and timelines to production,
as well as recovery technologies, cannot be determined at this
time.
Disclosure of Reserve Information and
Cautionary Note to U.S. Investors
In this press release, the Company uses the term
prospective resources. The SEC guidelines strictly prohibit the
Company from including prospective resources in filings with the
SEC. Investors are urged to consider closely the disclosures and
risk factors in the Company's Annual Report on Form 10-K, Quarterly
Reports on Form 10-Q and in the other reports and filings with the
SEC, available from the Company's offices or website. These forms
can also be obtained from the SEC website at www.sec.gov or by
calling 1-800-SEC-0330.
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