Gran Tierra Energy, Inc. Gran Tierra Energy Inc. Announces Third Quarter 2019 Results

 
TIDMGTE 
 
   Substantial Completion of Major Capital Investments in Development 
Projects 
 
   Shifting to Free Cash Flow with Sustainable Growth 
 
   Positive Waterflood Response, Encouraging Results at Acordionero 
 
   CALGARY, Alberta, Nov. 05, 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 quarter ended September 30, 2019 ("the 
Quarter"). 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 ("bbl") 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 
November 5, 2019. 
 
   Key Highlights 
 
 
   -- Third Quarter Average Production: Was 32,918 BOE per day ("BOEPD"); 
      approximately 3,000 BOEPD  was impacted by temporary downtime due to 
      electric submersible pump ("ESP") replacements, facility commissioning 
      and water injection ramp up; current production is approximately 34,000 
      BOEPD, with 5 to 6 additional wells expected to be brought on production 
      before the end of 2019 
 
   -- Positive Results from Acordionero Waterflood: Acordionero waterflood 
      accelerated during the Quarter with significant incremental water 
      injection (averaging over 30,000 bbls of water injected per day ("bwipd") 
      and peaking over 40,000 bwipd) and substantially reduced gas production 
      following the commissioning of the upgraded Central Production Facility 
      ("CPF") expansion; the Company plans to be re-injecting excess gas beyond 
      consumption by 2019 year-end; Gran Tierra is encouraged by the waterflood 
      response in terms of increased pressure and production responses; 
      indications look positive for incremental reserve additions associated 
      with the completion of the CPF expansion and waterflood response 
 
   -- Expansion of the Acordionero Field:  The AC-54 development well is the 
      farthest south well drilled in the Acordionero field to date and 
      encountered 348 of net pay (measured depth) and is expected to be on 
      production by November 30, 2019 
 
   -- Continued Optimization of Other Waterfloods: Waterflood optimization 
      continued in the Quarter at Costayaco with an injector conversion and two 
      well stimulations; the CYC-39 well was tested in the Caballos Sand and 
      commingled with the T Sand and, during September 16 - October 28, 2019, 
      produced at stabilized rates of 1,159 bbls of oil per day ("bopd") of 30 
      degree API oil, a gas-oil ratio ("GOR") of 115 standard cubic feet per 
      stock tank bbl ("scf/stb") and a watercut of 45% on ESP; at Cohembi, 
      water injection has increased from 15,000 to over 22,000 bwipd since 
      securing operatorship in March 2019, where the instantaneous voidage 
      replacement ratio ("VRR") is well over 1.0 and reservoir pressure is 
      rising; this result in Cohembi, along with continued waterflood response 
      in Moqueta, further demonstrate the Company's waterflood expertise and 
      the long-term benefit of stable cash flow generation from waterflood 
      projects 
 
   -- Shifting to Free Cash Flow with Sustainable Growth: Gran Tierra has made 
      significant investments to build the foundation for expected free cash 
      flow in 2020 and beyond, investing $211 million at Acordionero from 
      January 2018 to September 2019 in facilities and water injection wells; 
      these investments are expected to allow Gran Tierra to lower operating 
      costs per BOE and increase future production growth 
 
   -- Ayombero Activity Recommences in Fourth Quarter 2019: Remedial work on 
      the three Ayombero wells has commenced in November 2019 
 
   -- Near-Term Potential Exploration Catalysts: Tautaco-1 exploration well on 
      LLA-10 is currently drilling ahead; Cocona-1 well (follow-up appraisal to 
      Vonu-1 A-Limestone well) on PUT-1 is scheduled to spud before 2019 
      year-end 
 
   -- Updated Corporate Presentation: The Company's Corporate  Presentation has 
      been updated, including information about Acordionero's waterflood 
      response, and is available on the Company website at www.grantierra.com 
 
 
   Message to Shareholders 
 
   Gary Guidry, President and Chief Executive Officer of Gran Tierra, 
commented: "Gran Tierra has completed the key investments required to 
underpin expected significant future free cash flow for shareholders. 
We forecast Gran Tierra to generate free cash flow - after development 
and exploration capital - in fourth quarter 2019 and full-year 2020. At 
a forecasted $60 per bbl Brent oil price, we are projecting free cash 
flow(1) of $75 million to $100 million during 2020, which we plan to use 
for net debt reduction and share buybacks. 
 
   With the Acordionero facility expansion capital investment behind us, we 
forecast significantly lower operating costs per BOE ahead.  Despite the 
substantial investment in Acordionero since the acquisition in 2016, the 
field has generated $187 million of free cash flow(1) .  We operate over 
95% of our asset base which provides Gran Tierra tremendous flexibility 
in terms of controlling future capital costs in response to a 
potentially volatile oil price environment. 
 
   While the reduction in production during the Quarter was unfortunate, we 
view this situation as temporary as we are now seeing the waterflood at 
Acordionero responding to the designed injection. The response across 
the field is matching internal reservoir simulation modeling estimates 
and provides better visibility to forecast and optimize production and 
long-term recovery. Our underlying asset value has not changed, and with 
the successful implementation of the waterflood and step-out appraisal 
extensions in Acordionero, we believe it has increased. 
 
   The Company is in an excellent position with low decline, high netback 
and long life conventional assets, which are capable of delivering a 
strong free cash flow profile and visible growth in production and 
reserves. We have grown Proved Plus Probable reserves by 163% over the 
last three years and we expect to continue that trend. We also have two 
near term potential exploration catalysts - we plan to spud the Cocona-1 
well on PUT-1 before the end of the year and look forward to the 
drilling results from Tautaco-1 on LLA-10, which is currently drilling 
ahead." 
 
   Financial Highlights 
 
 
   -- Net loss for the Quarter was $29 million and net income for the nine 
      months of 2019 was $12 million 
 
   -- Adjusted EBITDA(1) was $68 million for the Quarter and $260 million for 
      the nine months of 2019 
 
   -- Funds flow from operations(1) was $59 million ($0.16 per share, basic) 
      for the Quarter and $223 million ($0.59 per share, basic) for the nine 
      months of 2019 
 
   -- At September 30, 2019, net debt(1) to Adjusted EBITDA was 1.8 times on a 
      trailing 12 month basis (on a trailing 12 month basis, net income was $1 
      million and Adjusted EBITDA was $340 million); at $60 per bbl Brent, the 
      Company expects to generate free cash flow(1) in fourth quarter 2019 and 
      full-year 2020 and plans to decrease net debt to Adjusted EBITDA 
 
   -- Oil and gas sales were $132 million for the Quarter and $443 million for 
      the nine months of 2019 
 
   -- Operating netback(1) was $27.34 per BOE for the Quarter and $30.17 per 
      BOE for the nine months of 2019 
 
   -- Operating expenses were $11.77 per BOE for the Quarter, compared to $8.81 
      per BOE in third quarter 2018 as a result of higher power generation, 
      field operations, maintenance and freight logistics costs, coupled with 
      lower production volumes;  a significant portion of the Company's 
      operating expenses are fixed 
 
   -- Workover expenses for the Quarter were $3.63 per BOE, down from to $3.93 
      per BOE in third quarter 2018 as a result of lower frequency of ESP 
      failures 
 
   -- Transportation expenses were $1.05 for the Quarter, down from $2.25 per 
      BOE in third quarter 2018 due to higher volumes sold at the wellhead 
 
   -- As expected, the Quarter was capital intensive due to the substantial 
      completion of the 3D seismic program in the Putumayo, and the completion 
      of facilities and accelerated activity at Acordionero; due to the 
      drilling efficiencies achieved during the Quarter, the Company was able 
      to drill development wells in record time and shift wells scheduled for 
      fourth quarter 2019 into the Quarter 
 
   -- Returned $38 million to stockholders between January 1 and September 30, 
      2019 through buybacks of 20.1 million shares of common stock (5.2% of 
      outstanding shares of common stock as of January 1, 2019) 
 
   Operations Update 
 
   Acordionero (100% WI, Operator) 
 
 
   -- During the Quarter, 10 wells were drilled focusing on an optimized 
      waterflood program to maximize ultimate oil recovery and long-term value 
      (4 producers, 3 water injectors and 3 water source wells) 
 
   -- The AC-54 development well is the farthest south well drilled in the 
      Acordionero field to date and located outside the previously established 
      southern boundary of the Proved plus Probable ("2P") and 2P plus Possible 
      ("3P") original-oil-place mapping for the field; the AC-54 encountered 
      348 feet of oil pay (measured depth) and is expected to be placed on 
      production by the end of November 2019; the AC-54 appears to be similar 
      to the AC-37 well, which is located to the north of AC-54 and is the 
      second farthest south well drilled in Acordionero; the AC-37 well had 
      initial production (averaged over 30 days) of 944 bopd, a GOR of 305 

      scf/stb and water cut of less than 1% on ESP; during October 2019, the 
      AC-37 had average production of 796 bopd, a GOR of 300 scf/stb, water cut 
      of less than 1% and had cumulative oil production of approximately 
      187,000 bbls after 221 days of production 
 
   -- From the acquisition date of August 23, 2016 until September 30, 2019, 
      Acordionero has generated $697 million in oil and natural gas sales and 
      $545 million of operating netback(1), while the Company made capital 
      investments in this field of $358 million, which equals free cash flow(1) 
      from the field of $187 million over this time period; Acordionero has 
      self-funded its active development program, including the major 
      investment in facilities 
 
   -- Drilling efficiencies continue to be achieved, with AC-49 drilled in 
      record drill time of 5 days and AC-47 drilled and completed for a total 
      cost of $2.6 million 
 
   -- Water injection at Acordionero continues to ramp-up, averaging over 
      30,000 bwipd and on-schedule to exceed 40,000 bwipd in the coming months 
 
   -- Gran Tierra is observing a positive impact on reservoir pressure, which 
      would support increased oil production rates from current and future oil 
      producers and ultimate oil recovery efficiency from all of the reservoirs 
 
   -- The CPF expansion, water injection facilities and gas to power turbines 
      continue operating with increasing reliability 
 
   -- The AC-48's Lisama E Sand was tested in the Quarter with good initial 
      rates; pressure build up results showed low permeability and boundaries 
      suggesting potential channel sand deposition; the Lisama E has been 
      commingled with the Lisama C and the well is now on production; Gran 
      Tierra believes Lisama E opportunities exist throughout the field and the 
      learnings from AC-48 will be applied to future development 
 
 
   Suroriente (52% WI and Operator) 
 
 
   -- The Cohembi oil field in the Suroriente Block continues to respond 
      positively to increased water injection and pump optimizations; gross 
      water injection averaged over 21,000 bwipd in the Quarter, up 29% from 
      second quarter 2019, and up from a level of 14,500 bwipd when Gran Tierra 
      assumed operatorship on March 1, 2019; the Company is planning to 
      increase gross water injection to 40,000 bwipd by the end of 2019 
 
   -- Since assuming operatorship we have been able to increase gross 
      production by over 1,000 bopd without drilling a well 
 
   -- As part of an expanded waterflood program, activities have commenced to 
      expand the Cohembi water treatment, injection and processing facilities; 
      this expansion is expected to boost water injection capacity from a 
      current 21,000 bwipd to 60,000 bwipd; targeted completion for the first 
      phase of expansion is scheduled to be in fourth quarter 2019 
 
 
   Chaza Block - Costayaco (100% WI) 
 
 
   -- The CYC-39 and 40 wells encountered unswept oil in the Caballos and T 
      Sands; an ESP is currently being installed in the CYC-40 
 
   -- For the remainder of 2019, the Company intends to complete the drilling 
      of the CYC-41 well 
 
   -- With the success of CYC-39 and CYC-40, along with an updated reservoir 
      simulation model, we have identified a number of additional development 
      well locations to optimize oil recovery and value 
 
 
   Ayombero-Chuira (100% WI) 
 
 
   -- Gran Tierra remains encouraged by early results from Ayombero-1 well: 
      since a workover in July 2019, the well has produced on natural flow at 
      an average rate of 202 bopd of 18.5 degree API oil, a GOR of 198 scf/stb, 
      a watercut of 0.14%  and 1,482 pounds per square inch of tubing head 
      pressure; the well has total cumulative oil production to date of 80,556 
      bbls 
 
   Exploration Update 
 
   Putumayo Basin 
 
 
   -- Cocona-1, PUT-1 (100% WI): This well, which was originally called the 
      Vonu Este-1, is on track to spud in late November 2019 from the Vonu Este 
      pad; one of the well's planned targets is the A-Limestone; Cocona-1 is 
      planned as the first follow-up appraisal well to the Vonu-1 well, which 
      has been Gran Tierra's most successful A-Limestone well to date: the 
      Vonu-1 well has produced approximately 830,000 bbls of oil from the 
      A-Limestone (from June 2017 to September 2019) and is still producing 
      over 400 BOEPD; the Costayaco-19 well in the Chaza Block, has produced 
      approximately 740,000 bbls of oil from the A-Limestone (from May 2016 to 
      September 2019) 
 
   -- 3D Seismic Program Update (341 Square Kilometers): Seismic recording 
      operations on the Alea 1848A, Nancy-Burdine-Maxine, PUT-4 and PUT-25 
      blocks are now complete; this program is the largest seismic program ever 
      conducted in the Putumayo Basin; interpretation is currently underway 
      which is expected to help Gran Tierra better define further development 
      of the Nancy field and multiple exploration prospects across all four 
      blocks 
 
 
   Llanos Basin 
 
 
   -- Tautaco-1, LLA-10 (50% WI): Gran Tierra is participating in this 
      non-operated exploration well which is currently drilling 
 
 
   Financial and Operational Highlights (all amounts in $000s, except per 
share and BOE amounts) 
 
 
 
 
                                                                Three Months Ended          Nine Months Ended 
                                                                   September 30,               September 30, 
 
                                                                2019          2018          2019          2018 
                                                            ------------  ------------  ------------  ------------ 
 
Net (Loss) Income                                           $(28,833)     $ 75,295      $ 11,686      $113,456 
 Per Share - Basic                                          $  (0.08)     $   0.19      $   0.03      $   0.29 
 Per Share - Diluted                                        $  (0.08)     $   0.18      $   0.03      $   0.28 
 
Oil and Gas Sales                                           $132,491      $175,118      $443,049      $476,792 
Operating Expenses                                           (35,603)      (29,511)     (104,119)      (78,019) 
Workover Expenses                                            (10,979)      (13,106)      (30,025)      (25,922) 
Transportation Expenses                                       (3,179)       (7,505)      (16,167)      (21,024) 
                                                            --------      --------      --------      -------- 
Operating Netback(1)                                        $ 82,730      $124,996      $292,738      $351,827 
                                                             =======       =======       =======       ======= 
 
G&A Expenses Before Stock-Based Compensation                $  7,645      $  3,679      $ 24,782      $ 17,254 
G&A Stock-Based Compensation (Recovery) Expense                   (8)       10,132         1,092        19,919 
                                                            --------      --------      --------      -------- 
G&A Expenses, Including Stock Based Compensation            $  7,637      $ 13,811      $ 25,874      $ 37,173 
                                                             =======       =======       =======       ======= 
 
Adjusted EBITDA(1)                                          $ 67,930      $110,340      $260,005      $295,489 
 
Funds Flow from Operations(1)                               $ 59,021      $ 85,015      $222,740      $254,312 
 
Capital Expenditures                                        $116,495      $101,463      $310,579      $258,551 
 
Average Daily Volumes (BOEPD) 
---------------------------------------------------------- 
WI Production Before Royalties                                32,918        36,170        35,454        35,553 
Royalties                                                     (5,155)       (7,571)       (5,929)       (7,222) 
                                                            --------      --------      --------      -------- 
Production NAR                                                27,763        28,599        29,525        28,331 
(Increase) Decrease in Inventory                                 (58)           60            65          (403) 
                                                            --------      --------      --------      -------- 
Sales                                                         27,705        28,659        29,590        27,928 
                                                            ========      ========      ========      ======== 
Royalties, % of WI Production Before Royalties                    16%           21%           17%           20% 
 
Per BOE 
---------------------------------------------------------- 
Brent                                                       $  62.03      $  75.97      $  64.75      $  72.68 
Quality and Transportation Discount                           (10.05)        (9.55)        (9.90)       (10.14) 
Royalties                                                      (8.19)       (13.91)        (9.19)       (12.79) 
                                                            --------      --------      --------      -------- 
Average Realized Price                                         43.79         52.51         45.66         49.75 
Transportation Expenses                                        (1.05)        (2.25)        (1.67)        (2.19) 
                                                            --------      --------      --------      -------- 
Average Realized Price Net of Transportation Expenses          42.74         50.26         43.99         47.56 
Operating Expenses                                            (11.77)        (8.81)       (10.73)        (8.08) 

Workover Expenses                                              (3.63)        (3.93)        (3.09)        (2.70) 
                                                            --------      --------      --------      -------- 
Operating Netback(1)                                           27.34         37.52         30.17         36.78 
G&A Expenses                                                   (2.53)        (1.10)        (2.55)        (1.80) 
Severance Expenses                                             (0.05)        (0.30)        (0.11)        (0.21) 
Realized Foreign Exchange (Loss) Gain                          (0.14)         0.06         (0.03)        (0.02) 
Realized Financial Instruments Loss                            (0.31)        (3.20)        (0.23)        (2.73) 
Interest Expense, Excluding Amortization of Debt Issuance 
 Costs                                                         (3.76)        (1.98)        (2.89)        (1.87) 
Interest Income                                                 0.04          0.22          0.07          0.22 
Current Income Tax Expense                                     (1.01)        (5.73)        (1.44)        (3.78) 
                                                            --------      --------      --------      -------- 
Cash Netback(1)                                             $  19.58      $  25.49      $  22.99      $  26.59 
                                                             =======       =======       =======       ======= 
 
Share Information (000s) 
---------------------------------------------------------- 
Common Stock Outstanding, End of Period                      366,982       391,339       366,982       391,339 
Weighted Average Number of Common and Exchangeable 
 Shares Outstanding - Basic                                  372,195       391,210       379,701       391,186 
Weighted Average Number of Common and Exchangeable 
 Shares Outstanding - Diluted                                372,195       427,948       372,195       427,417 
                                                            --------      --------      --------      -------- 
 
   (1) Net debt is defined as face value of debt, less cash and cash 
equivalents. Net debt, funds flow from operations, operating netback, 
return on average capital employed, free cash flow, cash netback, 
earnings before interest, taxes and depletion, depreciation and 
accretion ("DD&A") and adjusted earnings before interest, taxes and 
depletion, depreciation and accretion ("EBITDA") and EBITDA adjusted for 
loss on redemption of Convertible Notes and loss or gain on investment 
("Adjusted EBITDA") are non-GAAP measures and do not have standardized 
meanings under generally accepted accounting principles in the United 
States of America ("GAAP"). Cash flow refers to the GAAP line item "net 
cash provided by operating activities". Free cash flow refers to the 
GAAP line item "net cash provided by operating activities", less capital 
expenditures. Refer to "Non-GAAP Measures" in this press release. 
 
   (2) 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. 
 
   (3) G&A expense includes stock based compensation expense 
 
   Conference Call Information: 
 
   Gran Tierra will host its third quarter 2019 results conference call on 
Wednesday, November 6, 2019, at 9:00 a.m. Mountain Time, 11:00 a.m. 
Eastern Time. Interested parties may access the conference call by 
dialing [phone] or [phone] (North America), 
0800-028-8438 or 020-3107-0289 (United Kingdom) or 01-800-518-5094 
(Colombia). The call will also be available via webcast at 
www.grantierra.com. 
 
   Corporate Presentation: 
 
   Gran Tierra's Corporate Presentation has been updated and is available 
on the Company website at www.grantierra.com. 
 
   Contact Information 
 
   For investor and media inquiries please contact: 
 
   Gary Guidry 
 
   President & Chief Executive Officer 
 
   Ryan Ellson 
 
   Executive Vice President & Chief Financial Officer 
 
   Rodger Trimble 
 
   Vice President, Investor Relations 
 
   [phone] 
 
   [e-mail] 
 
   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 
does not constitute a part of this press release. Investor inquiries may 
be directed to [e-mail] or [phone]. 
 
   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 www.morningstar.co.uk/uk/nsm. 
 
   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"), which can 
be identified by such terms as "expect," "plan," "guidance," "forecast", 
"project," "will," "believe," and other terms that are forward-looking 
in nature. Such forward-looking statements include, but are not limited 
to, the Company's expectations, budget, capital program, capital 
expenditures and guidance, including for certain future production, net 
cash provided by operating activities (described in this press release 
as cash flow), net debt, total capital, free cash flow in fourth quarter 
2019 (assuming a $65 per bbl Brent oil price) and 2020 (assuming a $60 
per bbl Brent oil price), operating netback and operating and workover 
expense estimates, the Company's strategies and the Company's operations 
including planned operations, oil prices and oil production and 
anticipated benefits from the Acordionero Projects. 
 
   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, equipment performance and costs, actions by 
third parties, 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; volatility or declines 
in the trading price of our common stock; 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 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 2019 future production, net cash provided by operating 
activities (described in this press release as cash flow), net debt, 
total capital, free cash flow in fourth quarter 2019 (assuming a $65 
Brent oil price) and 2020 (assuming a $60 Brent oil price), operating 
netback and operating and workover 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.  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. See the table entitled Financial 
and Operational Highlights above for the components of consolidated 
operating netback and corresponding reconciliation. 
 
   Cash netback as presented is defined as net income before DD&A expenses, 
deferred income tax expense, amortization of debt issuance costs, 
unrealized foreign exchange gains and losses, loss on sale, non-cash 
operating and general and administrative ("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. A 
reconciliation from net income to cash netback is as follows: 
 
 
 
 
                                                        Three Months Ended      Nine Months Ended 
                                                           September 30,           September 30, 
Cash Netback - (Non-GAAP) Measure ($000s)                 2019        2018      2019        2018 
                                                      ------------  --------  ---------  ----------- 
Net (loss) income                                      $  (28,833)  $75,295   $ 11,686   $113,456 
Adjustments to reconcile net (loss) income to cash 
 netback 
  DD&A expenses                                            49,812    51,630    164,430    137,698 
  Deferred income tax expense (recovery)                    8,472   (36,769)    31,752       (118) 
  Amortization of debt issuance costs                         789       816      2,574      2,329 
  Unrealized foreign exchange loss (gain)                   6,412      (672)     5,303        159 
  Loss on redemption of Convertible Notes                  11,305        --     11,305         -- 
  Non-cash operating expenses                                  --       142         --        558 
  Non-cash G&A (recovery) expense                              (8)   10,132      1,092     19,919 
  Unrealized financial instruments loss (gain)             11,355   (15,560)    (5,165)   (19,329) 
                                                      -----------   -------   --------   -------- 
Cash netback                                           $   59,304   $85,014   $222,977   $254,672 
                                                          =======    ======    =======    ======= 
 
 
   EBITDA, as presented, is defined as net income adjusted for DD&A 
expenses, interest expense and income tax expense or recovery. Adjusted 
EBITDA is defined as EBITDA adjusted for loss on redemption on 
convertible notes and loss or gain on investment. 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, 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 
to EBITDA and Adjusted EBITDA as follows: 
 
 
 
 
                                                         Three Months Ended     Nine Months Ended 
                                                            September 30,          September 30, 
EBITDA - (Non-GAAP) Measure ($000s)                       2019       2018       2019        2018 
                                                        ---------  ---------  ---------  ----------- 
Net (loss) income                                       $(28,833)  $ 75,295   $ 11,686   $113,456 
Adjustments to reconcile net (loss) income to EBITDA 
 and Adjusted EBITDA 
  DD&A expenses                                           49,812     51,630    164,430    137,698 
  Interest expense                                        12,153      7,404     30,655     20,274 
  Income tax expense (recovery)                           11,521    (17,661)    45,675     36,106 
                                                        --------   --------   --------   -------- 
EBITDA                                                  $ 44,653   $116,668   $252,446   $307,534 
                                                         =======    =======    =======    ======= 
  Loss on redemption of Convertible Notes                 11,305         --     11,305         -- 
  Investment loss (gain)                                  11,972     (6,328)    (3,746)   (12,045) 
                                                        --------   --------   --------   -------- 
Adjusted EBITDA                                         $ 67,930   $110,340   $260,005   $295,489 
                                                         =======    =======    =======    ======= 
 
 
   Funds flow from operations, as presented, is net income adjusted for 
DD&A expenses, deferred tax expense, stock-based compensation expense, 
amortization of debt issuance costs, cash settlement of RSUs, non-cash 
lease expense, lease payments, unrealized foreign exchange gains and 
losses, financial instruments gains or losses, cash settlement of 
financial instruments and loss on sale. 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 
to funds flow from operations is as follows: 
 
 
 
 
                                                Three Months Ended      Nine Months Ended 
                                                   September 30,           September 30, 
Funds Flow From Operations - 
 (Non-GAAP) Measure ($000s)                       2019        2018      2019        2018 
                                              ------------  --------  ---------  ----------- 
Net (loss) income                              $  (28,833)  $75,295   $ 11,686   $113,456 
Adjustments to reconcile net (loss) income 
 to funds flow from operations 
  DD&A expenses                                    49,812    51,630    164,430    137,698 
  Deferred tax expense (recovery)                   8,472   (36,769)    31,752       (118) 
  Stock-based compensation (recovery) 
   expense                                             (8)   10,275      1,092     20,477 
  Amortization of debt issuance costs                 789       816      2,574      2,329 
  Cash settlement of RSUs                              --        --         --       (360) 
  Non-cash lease expense                              472        --      1,366         -- 
  Lease payments                                     (755)       --     (1,603)        -- 
  Unrealized foreign exchange loss (gain)           6,412      (672)     5,303        159 
  Financial instruments loss (gain)                12,285    (4,874)    (2,890)     6,840 
Cash settlement of financial instruments             (930)  (10,686)    (2,275)   (26,169) 
  Loss on redemption of Convertible Notes          11,305        --     11,305         -- 
                                              ----------- 
Funds flow from operations                     $   59,021   $85,015   $222,740   $254,312 
                                                  =======    ======    =======    ======= 
 
 
   Free cash flow, when presented in the context of targeted 2020 free cash 
flow, is defined as GAAP "net cash provided by operating activities" 
less projected 2020 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. 
 
   Presentation of Oil and Gas Information 
 
   BOEs have been converted on the basis of 6 thousand cubic feet ("Mcf") 
of 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. 
 
   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. 
 
   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. 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. 
 
 
 
 
 
 

(END) Dow Jones Newswires

November 05, 2019 19:15 ET (00:15 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.