- Achieved Average Total Production of 28,957 BOPD, Up 53% Year-Over-Year and Up 26% from Prior Quarter
- Generated Net Income of $35 Million
- Increased Funds Flow from Operations(1) to $69 Million, Up 197% from Prior Quarter
- Generated Free Cash Flow(1)of $34 Million, Highest Since Fourth Quarter 2012
- Credit Facility Balance Paid Down to $150 Million at September 30, 2021; Current Balance of $130 Million
Gran Tierra Energy Inc. ("Gran Tierra") (GTE) announced the Company's financial and operating results for the quarter ended September 30, 2021 ("the Quarter"). All dollar amounts are in United States dollars and production amounts are on an average working interest before royalties ("WI") basis unless otherwise indicated. Per barrel ("bbl") and bbl per day ("BOPD") amounts are based on WI sales before royalties. For per bbl amounts based on net after royalty ("NAR") production, see Gran Tierra's Quarterly Report on Form 10-Q filed November 1, 2021.
- Material funds flow from operations growth in the Quarter, underpinned by higher production volumes and strong Brent pricing:
- Funds flow from operations(1) increased by 758% to $69 million compared to the third quarter of 2020 and increased 197% from the second quarter of 2021 ("the Prior Quarter").
- Returning to production growth with the Quarter's production up 26% from the Prior Quarter:
- The Quarter's production averaged 28,957 BOPD, up 53% from the third quarter of 2020, and up 26% from the Prior Quarter.
- Suroriente (Gran Tierra 52% WI) and PUT-7 (Gran Tierra 100% WI) Blocks: The approximate average WI production of Suroriente and PUT-7 was approximately 3,750 BOPD during October 2021. Due to a localized farmers' blockade directed at the Colombian government, not Gran Tierra, the Suroriente and PUT-7 Blocks are temporarily shut-in. The blockade started during the last week of October 2021. The Colombian government is working diligently to quickly lift this blockade. Once the blockade ends, the Company expects to quickly restore Suroriente's and PUT-7's production levels to their current approximate capacity of 4,400-4,600 BOPD.
- Current Production: Gran Tierra's total corporate production is currently approximately 26,000 BOPD. Once the blockade affecting the Suroriente and PUT-7 Blocks ends, Gran Tierra expects that the Company can quickly restore total corporate production to approximately 30,000-31,000 BOPD.
- Production Guidance: Gran Tierra expects full-year 2021 average production to be 26,500-27,500 BOPD (the previous forecast was 27,500-28,500 BOPD), due to the impact of the current blockade. While the Colombian government is focused on quickly ending this blockade, Gran Tierra believes it is prudent to adjust the Company's 2021 production guidance.
- Reaffirmed 2021 Financial Guidance: Despite the impact of the most recent Suroriente and PUT-7 blockade on the Company's 2021 production guidance, Gran Tierra believes this situation can be resolved quickly and expects the currently strong Brent oil price environment to partially offset the impact on production. The Brent oil price has averaged $83.75/bbl during October 1-29, 2021, which is 16% higher than the $72.00/bbl Brent price that the Company had assumed for budget purposes during the fourth quarter of 2021. The Company's current financial guidance is 2021 EBITDA(1) of $265-285 million, 2021 cash flow(1) $215-235 million, 2021 free cash flow(1) of $75-95 million and capital expenditures of $130-150 million.
- Key Financial Metrics for the Quarter:
- Credit Facility Paid Down: As of September 30, 2021, the Company had paid down its credit facility balance by $25 million to $150 million and had a total cash balance(4) of $20 million. These figures compare to a credit facility balance of $175 million and a total cash balance(4) of $24 million at the end of the Prior Quarter. As of November 1, 2021, Gran Tierra has paid down its credit facility balance by an additional $20 million to $130 million. With expected fourth quarter 2021 free cash flow(1) and changes in non-cash working capital (primarily related to the ongoing collection of tax receivables), Gran Tierra expects its bank credit facility to be paid down to a balance of $80 million by December 31, 2021.
- Generated Net Income and Increased EBITDA: During the Quarter, Gran Tierra generated net income of $35 million, an increase of 299% from the net loss of $18 million realized in the Prior Quarter; the Quarter's EBITDA(1) also improved substantially to $96 million, up 178% from the Prior Quarter's $34 million.
- Funds Flow: Relative to the Prior Quarter, the Company's funds flow from operations(1) was up 197% to $69 million, due to increased sales volumes of 31%, strong Brent pricing, and lower hedging losses.
- Free Cash Flow: During the Quarter, the Company generated free cash flow(1) of $34 million, the highest since the fourth quarter of 2012, which was deployed to strengthen the Company's balance sheet.
- Increased Oil Sales and Operating Netback: During the Quarter, the Brent oil price averaged $73.23/bbl and Gran Tierra generated oil sales of $135 million, up 40% or $39 million from the Prior Quarter, due to a 6% increase in the Brent oil price coupled with a 26% increase in production during the Quarter. The Company's operating netback(2) of $34.95/bbl was up 5%, an increase of $1.51/bbl relative to the Prior Quarter. This improvement was achieved despite an increase in royalties to $11.80/bbl, up from the Prior Quarter's $10.21/bbl, which was caused by higher oil prices, and despite increased expenses during the Quarter.
- Operating Expenses: Compared to the Prior Quarter, the Company's operating expenses were up 11% to $13.86/bbl as a result of increased power generation costs. When compared to the corresponding period in 2020, year-to-date operating expenses were consistent at approximately $13.38/bbl.
- Other Expenses:
- Transportation expenses were down $0.32/bbl during the Quarter to $1.11/bbl, compared to the Prior Quarter as a result of favorable pipeline contracts negotiated during the Quarter.
- Quality and transportation discounts remained consistent during the Quarter, despite an increase in Castilla and Vasconia oil price differentials.
- General and administrative ("G&A") before stock-based compensation during the Quarter decreased by 24% versus the Prior Quarter, due to the timing of certain costs paid and expensed in the Prior Quarter.
- Capital Expenditures: The Quarter's expenditures of approximately $35 million were relatively flat with the Prior Quarter's level of $37 million.
- Oil Price Hedges In Place Designed To Protect Cash Flows During Second Half 2021: The Company has the following Brent oil price hedges in place covering 10,000 BOPD for the remainder of 2021, with a weighted average floor price of $57.03/bbl and a weighted average ceiling price of $65.29/bbl (realized oil price hedging losses totaled $7 million during the Quarter). Currently, the Company does not have any hedges in place yet for 2022.v
Message to Shareholders
Gary Guidry, President and Chief Executive Officer of Gran Tierra, commented: "Gran Tierra generated $69 million of funds flow from operations(1) during the Quarter by restoring production levels safely and diligently across our Colombian portfolio. Despite the temporary setback from the recent Suroriente and PUT-7 blockade, which we expect to be resolved quickly, we are targeting further debt reduction in the fourth quarter of 2021, in line with our previously announced capital allocation strategy. Looking ahead, with the stronger Brent oil price environment in tandem with our restored production volumes, we are on track to generate significant 2021 free cash flow(1).
With a constructive oil price environment, a successful first half 2021 drilling program and the expiry of our first half 2021 oil price hedges, we are very excited about the remainder of 2021 and all of 2022. Next year, we plan to focus on continued strengthening of our balance sheet, the ongoing development of our core assets and a measured but high-impact exploration program."
- Acordionero Oil Field (100% WI)
- When necessary, a workover rig was deployed during the Quarter to restore existing wells to production if they went offline.
- Gran Tierra believes its prudent reservoir management of Acordionero's waterflood has allowed the Company to restore this field's production to an average level of 14,427 BOPD in the
Quarter, up 49% from one year ago, and the highest quarterly average production since the fourth quarter of 2019.
- The 2021 drilling program in Acordionero was very successful and based on the results to date, the Company plans to have an active drilling program of both oil producers and water injectors during 2022.
- Acordionero's approximate average production(3) in October 2021 was 14,979 BOPD.
- Costayaco Oil Field (100% WI)
- In March 2021, Gran Tierra commenced its infill development drilling campaign to drill 3 oil producers; this drilling program was the first in Costayaco since November 2019.
- The CYC-42 and CYC-43 infill oil wells were drilled during March and April of 2021 and the CYC-44 infill oil well was drilled in late April 2021.
- All three of these successful new oil wells started production during the Quarter and drove a significant increase in Costayaco's average production to 6,292 BOPD during the Quarter, up 50% from 4,190 BOPD in the first quarter of 2021. Based on the results of this year's program, the Company anticipates drilling additional development wells in Costayaco in 2022.
- Costayaco's approximate average production(3) in October 2021 was 6,748 BOPD.
- Moqueta Oil Field (100% WI)
- During the Quarter, Gran Tierra completed a budgeted workover program that was designed to optimize Moqueta's waterflood, which may potentially increase the field's ultimate oil recovery.
- The workover program was very successful and we anticipate drilling additional development wells in Moqueta in the second half of 2022.
- Moqueta's approximate average production(3) in October 2021 was 2,206 BOPD.
- Suroriente Block (52% WI and Operator)
- At the Cohembi oil field in the Suroriente Block, a facility expansion program is progressing, which is expected to allow additional production to be brought online in the fourth quarter of 2021.
- During the Quarter, a workover rig was deployed to run larger pumps in some oil wells.
- The Suroriente Block's average WI production during the Quarter was 3,513 BOPD, the highest average WI quarterly rate since the fourth quarter of 2019.