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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Gran Tierra Energy Inc. | LSE:GTE | London | Ordinary Share | COM STK USD0.001 (CDI) |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 5.00 | 0.81% | 620.00 | 590.00 | 650.00 | 620.00 | 620.00 | 620.00 | 0.00 | 08:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Crude Petroleum & Natural Gs | 636.96M | -6.29M | -0.1950 | -43.03 | 270.55M |
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TIDMGTE
CALGARY, Alberta, Feb. 27, 2019 (GLOBE NEWSWIRE) -- 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 fourth quarter and year ended December 31,
2018. All dollar amounts are in United States ("U.S.") dollars unless
otherwise indicated.
Production and reserves amounts are on an average working interest
before royalties ("WI") basis unless otherwise indicated. Per barrel
("bbl") of oil equivalent ("BOE") amounts are on a WI sales basis. For
per BOE amounts based on net after royalty ("NAR") production, see Gran
Tierra's Annual Report on Form 10-K filed February 27, 2019. Unless
otherwise expressly stated, all reserves, future net revenue 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 are based on the
Company's 2018 year-end estimated reserves as evaluated by the Company's
independent qualified reserve evaluator McDaniel & Associates
Consultants Ltd. ("McDaniel") in a report with an effective date of
December 31, 2018 (the "GTE McDaniel Reserves Report").
Key Highlights
-- Achieved a new Company milestone with record high average annual
production in 2018 of 36,209 BOE per day ("BOEPD"), 15% higher than
31,426 BOEPD(1) in 2017 and 38% higher than 26,216 BOEPD(1) in 2016; on a
per share basis, production in 2018 was up 17% from 2017
-- Increased the Company's WI Proved plus Probable ("2P") reserves to 142
million BOE (99 percent oil), before tax 2P net present value discounted
at 10% ("NPV10") to $2.7 billion and before tax 2P net asset value
("NAV") to $5.96 per share(2)
-- Gran Tierra's existing producing assets are forecasted to generate 2P oil
and gas sales of $5.2 billion and before tax free cash flow(3) of $2.5
billion and after tax free cash flow(3) of $1.9 billion over the five
year time period of 2019 to 2023
-- Increased average production in fourth quarter 2018 to a record high of
38,156 BOEPD, 11% higher than 34,477 BOEPD in fourth quarter 2017
-- Demonstrated ongoing strong annual financial performance in 2018:
-- Net income was $103 million, or $0.26 per share basic and diluted,
compared with a net loss of $32 million, or $0.08 per share basic
and diluted, in 2017
-- Return on capital employed increased to 12% from 8% in 2017
-- EBITDA(4) more than doubled, increasing 106% to $377 million,
compared with $183 million in 2017, net debt(2) to EBITDA was 1.0
times at December 31, 2018
-- Funds flow from operations(4) increased by 39% to $306 million
compared with $220 million in 2017, and funds flow from
operations(4) per share increased by 41% to $0.79 per share in
2018 from $0.56 per share in 2017
-- Oil and gas sales increased by 45% to $613 million in 2018
compared with $422 million in 2017
-- Operating netback(4) per BOE increased by 36% compared with 2017
to $33.51 per BOE
-- Additional information on 2018 expenses:
-- Operating Expenses: increased to $8.49 per BOE compared
with $7.47 per BOE in 2017, primarily due to higher power
generation and equipment rental costs required to manage
the facility capacity limitations in Acordionero field as a
result of rapid production growth
-- Workover Expenses: increased to $2.63 per BOE compared with
$1.88 per BOE in 2017, primarily as a result of pump
failures due to unreliable power
-- Gran Tierra expects combined average operating and
workover expenses in 2019 to trend lower to a range
of $9.00 - $10.00 per BOE as the forecasted full
ramp up of gas to power facilities at the
Acordionero, Costayaco and Moqueta fields has an
expected positive impact on power reliability,
thereby reducing pump failure rates and the
resultant expenses and diesel costs
-- Transportation Expenses: increased by 3% to $2.21 per BOE
in 2018 from $2.15 per BOE in 2017
-- General and Administrative ("G&A") Expenses: decreased to
$2.40 per BOE in 2018 from $2.55 per BOE in 2017
Updated 2019 Guidance
As a result of the recently announced acquisitions of an additional
36.2% WI and operatorship in the Suroriente Block, 50%WI and
operatorship in the PUT-8 Block and 100% WI in the LLA-5 Block, Gran
Tierra is revising its 2019 guidance as follows:
2019 Budget Original Revised
------------------------------------------------ ------------- -------------
Production (BOEPD) 40,000-42,000 41,000-43,000
------------------------------------------------ ------------- -------------
Average Annual Production Growth (%) 10-16 13-19
------------------------------------------------ ------------- -------------
Brent Oil Price ($/bbl) 65.00 65.00
-------------
Cash Flow(5) ($ million) 365-375 375-395
------------- -------------
Total Capital ($ million), Excluding Acquisition 350-370 320-340
------------------------------------------------ ------------- -------------
Development Capital ($ million) 235-245 215-225
------------------------------------------------ ------------- -------------
Exploration Capital ($ million) 115-125 105-115
------------------------------------------------ ------------- -------------
Free Cash Flow(6) ($ million) 5-15 50-60
------------------------------------------------ ------------- -------------
Share Buyback ($ million) 20 20-40
------------------------------------------------ ------------- -------------
Year-End Net Debt(7) /Cash Flow(5) (times) 0.8-1.0 1.0-1.2
------------------------------------------------ ------------- -------------
Number of Development Wells (gross) 31-32 26-30
------------------------------------------------ ------------- -------------
Number of Exploration Wells (gross) 7-8 6-8
------------------------------------------------ ------------- -------------
Gran Tierra also updates its expected approximate 2019 expenses and
operating netback(8) as follows:
2019 Budget Original Revised
--------------------------------- ------------ -------
Brent Oil Price ($/bbl) 65.00 65.00
-------
Expenses ($/boe)
--------------------------------- ------------ -------
Transportation and Quality 11.00 - 11.00 -
Discount 13.00 13.00
--------------------------------- ------------ -------
Royalties 9.00 - 10.00 9.00 -
10.00
--------------------------------- ------------ -------
Oil and Gas Sales Price ($/boe) 42.00 - 42.00 -
45.00 45.00
--------------------------------- ------------ -------
Operating Costs 8.50 - 9.50 9.00 -
10.00
--------------------------------- ------------ -------
Transportation (Pipeline) 1.50 - 2.50 1.50 -
2.00
--------------------------------- ------------ -------
Operating Netback(8) ($/boe) 30.00 - 30.00 -
35.00 34.50
--------------------------------- ------------ -------
General and Administrative 1.50 - 2.00 1.25 -
1.75
--------------------------------- ------------ -------
Cash-Settled Stock-Based 0.90 - 1.00 0.50 -
Compensation 0.75
--------------------------------- ------------ -------
Interest and Financing 1.50 - 2.00 1.50 -
2.00
--------------------------------- ------------ -------
Taxes 3.50 - 4.50 3.00 -
4.00
--------------------------------- ------------ -------
Message to Shareholders
Gary Guidry, President and Chief Executive Officer of Gran Tierra,
commented: "In 2018, our returns-focused strategy with an emphasis on
profitable production growth generated strong financial results. Gran
Tierra's high-quality, operated, diversified suite of assets in Colombia
delivered material year-on-year improvements in several important
metrics, including a 15% increase in production, a 424% increase in net
income, a 45% increase in oil and gas sales per BOE, a 36% improvement
in operating netback per BOE and an increase of 41% in funds flow from
operations per share.
With our high netback production, low declines and large resource base
and drilling inventory, we demonstrated in 2018 that Gran Tierra has
created a sustainable business model which we expect to be fully funded
by forecasted cash from operating activities in 2019. Since we operate
over 90% of our production and have a 100% WI in 18 out of 27 of our
blocks, including 16 out of 16 in the Putumayo, Gran Tierra also has
significant control and flexibility on capital allocation and timing
during volatile periods in oil price and capital markets. Our 1,100,000
net acres in the Putumayo, 715,000 net acres in the Llanos and 87,000
net acres in the Middle Magdalena Valley give Gran Tierra a significant
amount of exploration, appraisal and development opportunities for years
to come.
We have a strong position in the three major producing basins in
Colombia. As we look to 2019 and beyond, we remain focused on creating
long-term shareholder value, which we believe is achieved by focusing on
capital efficiency and returns on invested capital. We believe that our
focused strategy is delivering results on several fronts and that Gran
Tierra is well positioned for an exciting year of growth in 2019 and
beyond as we continue to create value in multi-horizon, proven
hydrocarbon basins that have access to infrastructure."
Operations Update
Continued Strong Performance at Acordionero (100% WI)
-- During fourth quarter 2018, three wells were drilled on the South Pad,
which were focused on delineating the southern reservoir extent within
the area that the Company has mapped on 3D seismic data
-- The Company drilled and completed the AC-32 and AC-33 development wells
from the South Pad; these wells have further proved the southern extent
of Acordionero's Lisama A and C reservoirs
-- The AC-34 development well, which was drilled up-dip of AC-32, penetrated
high quality Lisama A and C reservoir; the AC-34 was placed on production
January 10, 2019 and performed above original expectations with a 30-day
average oil rate of 2,071 bbl of oil per day ("bopd")
-- Planned activity in first quarter 2019 is focused on drilling and
completing the AC-35, AC-36 and AC-37 development wells, in addition to
drilling several water injectors
-- The AC-37 development well is planned to be the furthest south in the
field and is expected to further verify Acordionero's southern extent
-- The Acordionero facilities expansion is designed for enhanced oil
recovery and value by increasing capacities for fluid handling and water
injection with project completion expected by end of second quarter 2019;
this expansion is expected to allow water injection to be ramped up to a
maximum rate of 40,000 bbl water injected per day ("bwipd") during second
half 2019
Progress at Ayombero (100% WI)
-- The Ayombero-3 appraisal well was spud on January 7, 2019 and is now in
the completion phase; initial indications from drilling, prior to logs,
are that a potential gross reservoir interval of approximately 600 feet
("ft") has been penetrated
-- The three Ayombero wells drilled to date have confirmed similar
lithologies, oil saturations and over-pressure in the Galembo Member of
the La Luna Carbonate reservoir, suggesting reservoir and structural
continuity
-- After completion and stimulation of Ayombero-3, workovers and
stimulations of the Ayombero-1 and 2 wells are planned to follow using
the drilling rig for pressure control
Exploration Update (All Projects 100% WI)
-- Pomorroso-1 Well, PUT-7 Block: has been successfully drilled and cased;
log evaluation indicates that up to seven zones may be prospective; after
stimulation of the first Villeta carbonate zone, the well stabilized on
natural flow at average rates of 288 bopd of 34-degree API oil, 1 bbl of
water per day and a gas-oil ratio of 175 standard cubic feet per bbl,
over a 120 hour period during January 5 to 9, 2019, at which point the
packer failed; a production logging tool confirmed only 3 ft out of 71 ft
of perforated reservoir have been effectively stimulated; a second
stimulation using a diverter is being planned for March 2019; the Company
expects to test other prospective uphole zones in this well, including
the N Sands
-- Almendrillo-1 Well, PUT-7 Block: has been cased and testing with the
drilling rig is ongoing; the same drilling rig is then expected to drill
in sequence the Pecari-1, Tajinos-1 and Northwest-1 exploration wells
from the same pad; these exploration wells are designed to test the same
multi-zone potential as Pomorroso-1
-- Chilanguita-1 Well, Alea-1848 Block: testing is still ongoing; 30-degree
API oil was recovered from the A Limestone while the N Sand remains under
evaluation where 17-degree API oil has been recovered, however commercial
oil rates have not yet been achieved
-- Prosperidad-1 Well, El Porton Block (Llanos Basin): the well was spud
February 10, 2019; surface casing has been set and the well has been
drilled to the intermediate casing setting depth of 9,819 ft; the well is
expected to reach planned total depth of 16,300 ft during second quarter
2019 to test the Mirador, Gacheta and Une Formations
-- Planned 3D Seismic Program (341 Square Kilometers, Putumayo Basin): field
operations have commenced with the initiation of surveying on the Alea
1848A Block; this 3D seismic survey is planned to cover all of the
Nancy-Burdine-Maxine Block and portions of the Alea 1848A, PUT-4 and
PUT-25 Blocks and would be the largest seismic program ever conducted in
the Putumayo Basin
Suroriente Block Activity to Accelerate (52% WI and Operator)
-- Following the recently announced acquisition of an additional 36.2% WI
and operatorship in this block, Gran Tierra is focused on enhanced oil
recovery and value via planned increases in water injection and fluid
production volumes in the Cohembi and Quinde fields; the Company expects
to begin seeing positive production impacts from these plans during
second half 2019
PUT-7 Block (100% WI)
-- At the Cumplidor field, appraisal work continues to assess potential
waterflood development, in line with the Cohembi development;
reprocessing and merging of the 3D seismic surveys covering the Cumplidor
and Quinde (Suroriente Block) fields has commenced
-- Workovers are planned at the Cumplidor 1 and 2 wells to enhance
production performance
Chaza Block (100% WI)
-- At Costayaco and Moqueta, several water treatment projects have been
completed and the focus at these fields is enhanced oil recovery by
waterflooding; current water injection in both fields is approximately
57,000 bwipd with a planned increase to 75,000 bwipd by the end of 2019
Financial and Operational Highlights (all amounts in $000s, except per
share and BOE amounts)
Year Ended Three Months Ended
December 31, December 31, December 31, December 31,
------------ ------------ ------------ ------------
2018 2017 2018 2017
------------ ------------
Net Income (Loss) $102,616 $(31,708) $(10,840) $(40,802)
Net Income (Loss) Per Share -
Basic $ 0.26 $ (0.08) $ (0.03) $ (0.10)
Net Income (Loss) Per Share -
Diluted $ 0.26 $ (0.08) $ (0.03) $ (0.10)
Oil and Gas Sales $613,431 $421,734 $136,639 $127,179
Operating Expenses (111,272) (87,855) (33,253) (27,309)
Workover Expenses (34,437) (22,014) (8,515) (4,094)
Transportation Expenses (28,993) (25,107) (7,969) (5,635)
Operating Netback(4) $438,729 $286,758 $ 86,902 $ 90,141
G&A Expenses Before Stock-based
Compensation $ 31,369 $ 29,775 $ 14,114 $ 7,637
G&A Expenses Stock-Based Compensation 8,114 9,239 (11,805) 4,501
G&A Expenses, Including Stock-Based
Compensation $ 39,483 $ 39,014 $ 2,310 $ 12,138
EBITDA(4) $376,718 $182,547 $ 69,184 $ 20,123
Funds Flow from Operations(4) $306,449 $220,197 $ 52,137 $ 69,123
Capital Expenditures $347,093 $251,041 $ 88,542 $ 75,322
Average Daily Volumes (BOEPD)
Working Interest Production Before
Royalties 36,209 32,105 38,156 34,477
Royalties (7,156) (5,320) (6,960) (6,114)
Production NAR 29,053 26,785 31,196 28,363
(Increase) Decrease in Inventory (336) (96) (137) (194)
Sales 28,717 26,689 31,059 28,169
Royalties, % of WI Production
Before Royalties 20% 17% 18% 18%
Per BOE (9)
Average Realized Price (10) 46.84 36.09 38.90 40.36
Transportation Expenses (2.21) (2.15) (2.27) (1.79)
Average Realized Price Net of
Transportation Expenses 44.63 33.94 36.63 38.57
Operating Expenses (8.49) (7.47) (9.58) (8.56)
Workover Expenses (2.63) (1.88) (2.42) (1.30)
Operating Netback(4) 33.51 24.59 24.63 28.71
G&A Expenses (2.40) (2.55) (4.02) (2.42)
Severance Expenses (0.18) (0.11) (0.10) (0.04)
Equity Tax -- (0.10) -- --
Realized Foreign Exchange Gain
(Loss) 0.12 (0.11) 0.51 (0.05)
Realized Financial Instruments
(Loss) Gain (2.59) 0.13 (2.21) 0.01
Interest Expense, Excluding Amortization
of Debt Issuance Costs (1.85) (0.98) (1.78) (0.93)
Interest Income (Expense) 0.16 0.10 (0.01) 0.08
Current Income Tax Expense (3.35) (2.08) (2.19) (3.43)
Cash Netback(4) $ 23.42 $ 18.89 $ 14.83 $ 21.93
=======
Share Information (000s)
Common Stock Outstanding, End
of Period 387,079 385,191 387,079 385,191
Exchangeable Shares Outstanding,
End of Period -- 6,112 -- 6,112
Weighted Average Number of Common
and Exchangeable Shares Outstanding
- Basic 390,930 396,684 390,173 394,442
Weighted Average Number of Common
and Exchangeable Shares Outstanding
- Diluted 427,120 396,684 390,173 394,442
As at December 31
2018 2017 % Change
-------- -------- ----------
Cash, Cash Equivalents and Current
Restricted Cash and Cash Equivalents $ 52,309 $ 24,113 117
Revolving Credit Facility $ -- $148,000 --
Senior Notes $300,000 $ -- --
Convertible Notes $115,000 $115,000 --
(1) These balances are Colombia production only and do not include
Brazil production of 679 and 846 BOEPD for 2017 and 2016, respectively.
(2) Based on December 31, 2018 before tax NPV10 of $2.7 billion, minus
year-end 2018 net debt of $366 million, comprised of working capital
surplus of $33 million, convertible notes of $112 million (net of
unamortized fees; $115 million gross) and senior notes of $289 million
(net of unamortized fees; $300 million gross), unamortized
reserves-based revolving credit facility fees of $2 million (net of
unamortized fees; $0 million gross), and number of shares of Gran
Tierra's common stock and exchangeable shares issued and outstanding at
December 31, 2018 and 2017 of 387 million and 391 million, respectively.
Net working capital and debt at December 31, 2018 and 2017 were prepared
in accordance with generally accepted accounting principles in the
United States of America ("GAAP").
(3) Free cash flow is not a defined term under GAAP and is called net
revenue in the GTE McDaniel Reserves Report and is derived therefrom.
The non-GAAP term of free cash flow reconciles to the nearest GAAP term
of oil and gas sales, which is called sales revenue in the GTE McDaniel
Reserves Report. Refer to "Future Net Revenue" in this press release for
the applicable reconciliation. Refer to "Non-GAAP Measures" in this
press release for a description of how this non-GAAP measure is
calculated.
(4) Operating netback, earnings before interest, taxes, depletion,
depreciation, accretion and impairment ("DD&A") ("EBITDA"), funds flow
from operations and cash netback, are non-GAAP measures and do not have
a standardized meaning under 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.
(5) Cash flow in the context of updated 2019 guidance refers to the GAAP
line item "net cash provided by operating activities".
(6) Free cash flow in the context of updated 2019 guidance is a non-GAAP
measure and does not have a standardized meaning under GAAP. Free cash
flow is defined as "net cash provided by operating activities" less
projected 2019 capital spending. Refer to "Non-GAAP Measures" in this
press release for a description.
(7) Net debt (non-GAAP) in the context of updated 2019 guidance is a
non-GAAP measure and is an estimate of 2019 year-end working capital,
less $115 million in senior convertible notes and $300 million in senior
notes.
(8) Operating netback in the context of updated 2019 guidance is a
non-GAAP measure and does not have a standardized meaning under GAAP.
Refer to "Non-GAAP Measures" in this press release for a description.
The GAAP measure is oil and gas sales price. Estimated oil and gas sales
price is calculated by subtracting 2019 forecasts of transportation and
quality discount and royalties from the 2019 budget Brent oil price
forecast as outlined in the relevant table above. Estimated 2019
operating netback is calculated by subtracting 2019 forecasts of
transportation and quality discount, royalties, operating costs and
pipeline transportation from the 2019 budget Brent oil price forecast as
outlined in the relevant table above.
(9) Per BOE amounts are based on WI sales before royalties. For per BOE
amounts based on NAR production, see Gran Tierra's Annual Report Form
10-K filed on February 27, 2019.
(10) The decrease in average realized price is attributable to the
Company pricing its revenue at M+1 ("month plus one") and the widening
of the Brent-Vasconia differential. In 2018, Gran Tierra sold its oil at
the following month average Brent price. The Company benefited from
this structure up to the fourth quarter of 2018. However, with the sharp
decrease in the Brent oil price in fourth quarter 2018, this structure
impacted the average realized oil price during the quarter as M+1 Brent
was $60.37 per bbl versus the average monthly Brent oil price ("M") of
$68.08 per bbl. This marketing structure ended in December 2018. In
2019, the Company plans to price its oil sales based on M less
appropriate quality and transportation discounts. The Company is
forecasting a return to historical levels of quality and transportation
discount in the average range of $11 to $13 per BOE for 2019, which is
consistent with $13.16 per BOE realized in 2018.
Conference Call Information:
Gran Tierra will host its fourth quarter and full year 2018 results
conference call on Wednesday, February 27, 2019, at 11:00 a.m. Mountain
Time, 1:00 p.m. Eastern Time. Interested parties may access the
conference call by dialing 1-844-348-3792 or 1-614-999-9309 (North
America), 00800-028-8438 or 020-3107-0289 (United Kingdom) or
01-800-518-5094 (Colombia). The call will also be available via webcast
at www.grantierra.com.
About Gran Tierra Energy Inc.
Gran Tierra Energy Inc. is an international oil and gas exploration and
production company, headquartered in Calgary, Canada, incorporated in
the United States, trading on the NYSE American (GTE), the Toronto Stock
Exchange (GTE) and the London Stock Exchange (GTE) and operating in
South America. Gran Tierra holds interests in producing and prospective
properties in Colombia. Gran Tierra has a strategy that focuses on
establishing a portfolio of producing properties, plus production
enhancement and exploration opportunities to provide a base for future
growth. Additional information concerning Gran Tierra is available at
www.grantierra.com. Investor inquiries may be directed to
info@grantierra.com or +1(403) 265-3221.
Gran Tierra's Securities and Exchange Commission filings are available
on the Securities and Exchange Commission website at http://www.sec.gov,
and Gran Tierra's reports filed with the Canadian Securities
Administrators are available 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 expected 2P oil and gas and
free cash flow from 2019 to 2023, expected workover expenses and
transportation discount for 2019, expected average production for 2019,
Gran Tierra's financial position, estimated quantities and net present
value of reserves, business strategy, plans and objectives for future
operations, capital spending plans and those statements preceded by,
followed by or that otherwise include the words "believe," "expect,"
"anticipate," "forecast," "budget," "will," "estimate," "target,"
"project," "plan," "should," "guidance" or similar expressions are
forward-looking statements. Such forward-looking statements include, but
are not limited to, the Company's expectations, capital program, future
sources of funding for capital expenditures and guidance, including for
certain future production estimates, forecast prices, five-year expected
oil and gas sales, free cash flow, expected future net cash provided by
operating activities (described in this press release as cash flow), net
debt and certain associated metrics, the Company's strategies and the
Company's operations including planned operations, oil prices and oil
production. Statements relating to "reserves" are also deemed to be
forward-looking statements, as they involve the implied assessment,
based on certain estimates and assumptions, including that the reserves
described can be profitably produced in the future.
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 Colombia, and unexpected problems can arise
due to guerrilla activity; technical difficulties and operational
difficulties may arise which impact the production, transport or sale of
our products; geographic, political and weather conditions can impact
the production, transport or sale of Gran Tierra's 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 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; the risk that
previously announced acquisitions do not receive required approvals or
do not close on time or as anticipated, 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, 2018 filed February 27, 2019 and its
Quarterly Reports on Form 10-Q.These filings are available on the SEC
website at http://www.sec.gov and on SEDAR at www.sedar.com. Although
the current guidance, capital spending program and long term strategy of
Gran Tierra are based upon the current expectations of the management of
Gran Tierra, should any one of a number of issues arise, Gran Tierra may
find it necessary to alter its business strategy and/or capital spending
program and there can be no assurance as at the date of this press
release as to how those funds may be reallocated or strategy changed.
Statements relating to "reserves" are also deemed to be forward-looking
statements, as they involve the implied assessment, based on certain
estimates and assumptions, including that the reserves described can be
profitably produced in the future.
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, net cash provided by operating
activities (described in this press release as cash flow), free cash
flow, net debt, working capital and certain expenses 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. In particular, this press release contains projected operational
and financial information for 2019. 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.
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 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 not to imply
that more emphasis should be placed on the non-GAAP measure.
Before tax and after tax free cash flow are non-GAAP terms and are
called before tax and after tax net revenue in the GTE McDaniel Reserves
Report, respectively. The non-GAAP term of before tax free cash flow
reconciles to the nearest GAAP term of oil and gas sales, which is
called sales revenue in the GTE McDaniel Reserves Report. Before tax net
revenue is calculated by McDaniel by subtracting total royalties,
operating costs, future development capital, abandonment and reclamation
costs from sales revenue. After tax free cash flow is calculated by
McDaniel by subtracting future taxes from before tax net revenue. Refer
to "Future Net Revenue" in this press release for the applicable
reconciliation. Management uses free cash flow as a measure of the
Company's ability to fund its exploration program.
Operating netback as presented is defined as oil and gas sales less
operating and transportation expenses. Cash netback as presented is net
income or loss before DD&A expenses, asset impairment, deferred income
tax expense or recovery, amortization of debt issuance costs, unrealized
foreign exchange gains and losses, loss on sale of business units and
gain on acquisition, 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 to net income or
loss. A reconciliation from net income or loss to cash netback is as
follows:
Year Ended Three Months Ended
December December December December
31, 31, 31, 31,
--------- --------- --------- -----------
Cash Netback - Non-GAAP Measure ($000s) 2018 2017 2018 2017
--------- --------- --------- -----------
Net Income (loss) $102,616 $(31,708) $(10,840) $(40,802)
Adjustments to reconcile net income (loss) to cash
netback
DD&A expenses 197,867 131,335 60,169 38,606
Asset impairment -- 1,514 -- 275
Deferred income tax expense 4,968 44,716 5,086 8,052
Amortization of debt issuance costs 3,183 2,415 854 547
Unrealized foreign exchange loss 11,511 837 11,352 1,141
Loss on sale -- 44,385 -- 35,309
Non-cash operating expenses 185 536 (370) 339
Non-cash G&A expenses 8,114 9,239 (11,807) 4,501
Unrealized financial instruments (loss) gain (21,635) 17,492 (2,306) 21,185
-------- -------- -------- --------
Cash netback $306,809 $220,761 $ 52,138 $ 69,153
======= ======= ======= =======
EBITDA, as presented, is defined as net income or loss adjusted for DD&A
expenses, interest expense, income tax recovery or expenses. Management
uses this supplemental 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 these financial measures are also useful supplemental
information for investors to analyze our performance and our financial
results. A reconciliation from net income or loss (GAAP) to EBITDA is as
follows:
Year Ended Three Months Ended
December December December December
31, 31, 31, 31,
-------- --------- --------- -----------
EBITDA -
Non-GAAP
Measure
($000s) 2018 2017 2018 2017
-------- --------- --------- -----------
Net Income
(loss) $102,616 $(31,708) $(10,840) $(40,802)
Adjustments
to reconcile
net income
to EBITDA
DD&A expenses 197,867 131,335 60,169 38,606
Interest
expense 27,364 13,882 7,090 3,467
Income tax
expense 48,871 69,038 12,765 18,852
EBITDA $376,718 $182,547 $ 69,184 $ 20,123
======= ======= ======= =======
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 and financial
instruments gains and losses, cash settlement of financial instruments,
and loss on sale of business units or gain on acquisition. 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:
Year Ended Three Months Ended
December December December December
31, 31, 31, 31,
--------- --------- --------- -----------
Funds Flow From Operations - Non-GAAP Measure
($000s) 2018 2017 2018 2017
--------- --------- --------- -----------
Net Income (loss) $102,616 $(31,708) $(10,840) $(40,802)
Adjustments to reconcile net income (loss) to funds
flow from operations
DD&A expenses 197,867 131,335 60,169 38,606
Asset impairment -- 1,514 -- 275
Deferred tax expense 4,968 44,716 5,086 8,052
Stock-based compensation expense 8,299 9,775 (12,178) 4,840
Amortization of debt issuance costs 3,183 2,415 854 547
Cash settlement of RSUs (360) (564) -- (30)
Unrealized foreign exchange loss 11,511 837 11,352 1,141
Financial instruments loss 12,296 15,929 5,456 21,140
Cash settlement of financial instruments (33,931) 1,563 (7,762) 45
Loss on sale -- 44,385 -- 35,309
-------- -------- -------- --------
Funds flow from operations $306,449 $220,197 $ 52,137 $ 69,123
======= ======= ======= =======
Operating netback, when presented in the context of updated 2019
guidance, is defined as oil and gas sales less operating and
transportation expenses. Management believes that operating netback is a
useful supplemental measure for management and investors to analyze
financial performance and provides an indication of the results
generated by our principal business activities prior to the
consideration of other income and expenses. Gran Tierra is unable to
provide a quantitative reconciliation of forward-looking operating
netback to its most directly comparable forward-looking GAAP measure
because management cannot reliably predict certain of the necessary
components of such forward-looking GAAP measure.
Free cash flow, when presented in the context of updated 2019 guidance,
is defined as GAAP "net cash provided by operating activities" less
projected 2019 capital spending. Management believes that free cash flow
is a useful supplemental measure for management and investors to in
order to evaluate the financial sustainability of the Company's
business. Gran Tierra is unable to provide a quantitative reconciliation
of forward-looking free cash flow to its most directly comparable
forward-looking GAAP measure because management cannot reliably predict
certain of the necessary components of such forward-looking GAAP
measure.
DISCLOSURE OF OIL AND GAS INFORMATION
Gran Tierra's Statement of Reserves Data and Other Oil and Gas
Information on Form 51-101F1 dated effective as at December 31, 2018
(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.
Estimates of net present value and future net revenue contained herein
do not necessarily represent fair market value of reserves. Estimates of
reserves and future net revenue for individual properties may not
reflect the same level of confidence as estimates of reserves and future
net revenue for all properties, due to the effect of aggregation. There
is no assurance that the forecast price and cost assumptions applied by
McDaniel in evaluating Gran Tierra's reserves and future net revenue
will be attained and variances could be material.
All evaluations of future net revenue contained in the GTE McDaniel
Reserves Report are after the deduction of royalties, operating costs,
development costs, production costs and abandonment and reclamation
costs but before consideration of indirect costs such as administrative,
overhead and other miscellaneous expenses. It should not be assumed that
the estimates of future net revenues presented in this press release
represent the fair market value of the reserves. There are numerous
uncertainties inherent in estimating quantities of crude oil and natural
gas reserves and the future cash flows attributed to such reserves. The
reserve and associated cash flow information set forth in the GTE
McDaniel Reserves Report are estimates only and there is no guarantee
that the estimated reserves will be recovered. Actual reserves may be
greater than or less than the estimates provided therein.
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.
Future Net Revenue
Future net revenue reflects McDaniel's forecast of revenue estimated
using forecast prices and costs, arising from the anticipated
development and production of resources, after the deduction of
royalties, operating costs, development costs and abandonment and
reclamation costs but before consideration of indirect costs such as
administrative, overhead and other miscellaneous expenses. The estimate
of future net revenue below does not necessarily represent fair market
value.
Consolidated Properties at December 31, 2018
Proved Plus Probable (2P) Total Future Net Revenue
($ million)
Forecast Prices and Costs
Future Abandonment and Future Net Future Net
Sales Total Operating Development Reclamation Revenue Before Future Revenue After
Years Revenue Royalties Costs Capital Costs Future Taxes Taxes Future Taxes*
-------------------- -------- ------------ ----------- -------------- ----------------- --------------- ------ ----------------
2019-2023
(5 Years) 5,154 (989) (1,117) (574) (1) 2,473 (537) 1,936
Remainder 3,909 (703) (1,525) (1) (72) 1,607 (440) 1,167
-------------------- -------- ------- ------- ------- ---- ------- ------- --------------- ----- --------------
Total (Undiscounted) 9,063 (1,693) (2,642) (575) (73) 4,080 (977) 3,103
-------------------- -------- ------- ------- ------- ---- ------- ------- --------------- ----- --------------
Total
(Discounted @ 10%) 5,806 (1,107) (1,494) (510) (22) 2,672 (635) 2,037
-------------------- -------- ------- ------- ------- ---- ------- ------- --------------- ----- --------------
*The after-tax net present value of the Company's oil and gas properties
reflects the tax burden on the properties on a stand-alone basis. It
does not consider the corporate tax situation, or tax planning. It does
not provide an estimate of the value at the Company level which may be
significantly different. The Company's financial statements should be
consulted for information at the Company level.
Definitions
Proved reserves are those reserves that can be estimated with a high
degree of certainty to be recoverable. It is likely that the actual
remaining quantities recovered will exceed the estimated proved
reserves.
Probable reserves are those additional reserves that are less certain to
be recovered than proved reserves. It is equally likely that the actual
remaining quantities recovered will be greater or less than the sum of
the estimated proved plus probable reserves.
Possible reserves are those additional reserves that are less certain to
be recovered than Probable reserves. There is a 10% probability that the
quantities actually recovered will equal or exceed the sum of Proved
plus Probable plus Possible reserves.
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.
This press release contains a number of oil and gas metrics, including
free cash flow, NAV per share, operating netback, cash netback and
reserves per share which do not have standardized meanings or standard
methods of calculation and therefore such measures may not be comparable
to similar measures used by other companies and should not be used to
make comparisons. Such metrics have been included herein to provide
readers with additional measures to evaluate the Company's performance;
however, such measures are not reliable indicators of the future
performance of the Company and future performance may not compare to the
performance in previous periods.
-- Before tax and after tax free cash flow are non-GAAP terms and are called
before tax and after tax net revenue in the GTE McDaniel Reserves Report,
respectively. The non-GAAP term of before tax free cash flow reconciles
to the nearest GAAP term of oil and gas sales, which is called sales
revenue in the GTE McDaniel Reserves Report. Before tax net revenue is
calculated by McDaniel by subtracting total royalties, operating costs,
future development capital, abandonment and reclamation costs from sales
revenue. After tax free cash flow is calculated by McDaniel by
subtracting future taxes from before tax net revenue. Refer to "Future
Net Revenue" in this press release for the applicable reconciliation.
Management uses free cash flow as a measure of the Company's ability to
fund its exploration program.
-- NAV per share is calculated as before tax NPV discounted at 10% plus
estimated net working capital deficit and debt, excluding risk management
assets and liabilities and investment in Sterling Resources Ltd. shares,
and number of shares of Gran Tierra's common stock and exchangeable
shares issued and outstanding. Management uses NAV per share as a measure
of the relative change of Gran Tierra's net asset value over its
outstanding common stock over a period of time.
-- Operating netback and cash netback are calculated as described in this
press release. Management believes that operating netback and cash
netback are useful supplemental measures for the reasons described in
this press release.
-- Reserve per share is calculated as reserves in the referenced category
divided by the number of common stock and exchangeable shares issued and
outstanding at December 31. Management uses this measure to determine the
relative change of its reserve base over its outstanding common stock
over a period of time.
Disclosure of Reserve Information and Cautionary Note to U.S. Investors
Unless expressly stated otherwise, all estimates of proved, probable and
possible reserves and related future net revenue disclosed in this press
release have been prepared in accordance with NI 51-101. Estimates of
reserves and future net revenue made in accordance with NI 51-101 will
differ from corresponding estimates prepared in accordance with
applicable U.S. Securities and Exchange Commission ("SEC") rules and
disclosure requirements of the U.S. Financial Accounting Standards Board
("FASB"), and those differences may be material. NI 51-101, for example,
requires disclosure of reserves and related future net revenue estimates
based on forecast prices and costs, whereas SEC and FASB standards
require that reserves and related future net revenue be estimated using
average prices for the previous 12 months. In addition, NI 51-101
permits the presentation of reserves estimates on a "company gross"
basis, representing Gran Tierra's working interest share before
deduction of royalties, whereas SEC and FASB standards require the
presentation of net reserve estimates after the deduction of royalties
and similar payments. There are also differences in the technical
reserves estimation standards applicable under NI 51-101 and, pursuant
thereto, the COGEH, and those applicable under SEC and FASB
requirements.
In addition to being a reporting issuer in certain Canadian
jurisdictions, Gran Tierra is a registrant with the SEC and subject to
domestic issuer reporting requirements under U.S. federal securities law,
including with respect to the disclosure of reserves and other oil and
gas information in accordance with U.S. federal securities law and
applicable SEC rules and regulations (collectively, "SEC requirements").
Disclosure of such information in accordance with SEC requirements is
included in the Company's Annual Report on Form 10-K and in other
reports and materials filed with or furnished to the SEC and, as
applicable, Canadian securities regulatory authorities. The SEC permits
oil and gas companies that are subject to domestic issuer reporting
requirements under U.S. federal securities law, in their filings with
the SEC, to disclose only estimated proved, probable and possible
reserves that meet the SEC's definitions of such terms. Gran Tierra has
disclosed estimated proved, probable and possible reserves in its
filings with the SEC. In addition, Gran Tierra prepares its financial
statements in accordance with United States generally accepted
accounting principles, which require that the notes to its annual
financial statements include supplementary disclosure in respect of the
Company's oil and gas activities, including estimates of its proved oil
and gas reserves and a standardized measure of discounted future net
cash flows relating to proved oil and gas reserve quantities. This
supplementary financial statement disclosure is presented in accordance
with FASB requirements, which align with corresponding SEC requirements
concerning reserves estimation and reporting.
Contact Information
For investor and media inquiries please contact:
Gary Guidry
Chief Executive Officer
Ryan Ellson
Chief Financial Officer
Rodger Trimble, P.Eng.
Vice-President Investor Relations
403-265-3221
info@grantierra.com
(END) Dow Jones Newswires
February 27, 2019 06:00 ET (11:00 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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