- Average Total Production of 30,607 BOPD, Highest since Fourth Quarter 2019
- Total Average Production Up 4% from First Quarter 2022 and 33% from Second Quarter 2021
- Generated Net Income of $53 Million
- Increased Adjusted EBITDA(1) to $140 Million, Up 286% Year-on-Year
- Grew Net Cash Provided by Operating Activities to $143 Million, Up 285% Year-on-Year
- Increased Funds Flow from Operations(1) to $104 Million, Up 345% Year-on-Year, Highest since First Quarter 2013
- Generated Free Cash Flow(1)of $38 Million
- Credit Facility Repaid in Full
- As of June 30, 2022, Cash Balance of $109 Million and Net Debt(1) of $491 Million
Gran Tierra Energy Inc. (“Gran Tierra”) (GTE) announced the Company’s financial and operating results for the quarter ended June 30, 2022 (“the Quarter”). All dollar amounts are in United States dollars, and production amounts are on an average working interest (“WI”) before royalties 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 August 8, 2022.
Key Highlights of the Quarter:
- Net Income: Gran Tierra generated net income of $53 million, up 275% from first quarter 2022 (“the Prior Quarter”), and versus a net loss of $18 million in second quarter 2021.
- Diluted Earnings Per Share: Gran Tierra generated earnings of $0.14 per share, up from $0.04 per share in the Prior Quarter and compared to a net loss of $0.05 per share in second quarter 2021.
- Significant Growth in Net Cash Provided by Operating Activities: The Company realized net cash provided by operating activities of $143 million, up 285% from second quarter 2021.
- Highest Funds Flow from Operations(1) since First Quarter 2013: Funds flow from operations(1) increased to $104 million, the highest since first quarter 2013, which was up 19% from the Prior Quarter and up 345% from second quarter 2021. On a diluted per share basis funds flow from operations was $0.28, which was up from $0.06 per share in second quarter 2021 and up from $0.23 per share in the Prior Quarter.
- Strong Free Cash Flow(1): Gran Tierra generated free cash flow(1) of $38 million while completing the majority of the Company’s development programs in Acordionero and Costayaco.
- Rapid Debt Reduction: Gran Tierra has repaid its credit facility. In only two years, Gran Tierra fully paid down its credit facility balance from $207 million to zero, which demonstrates the Company’s commitment to rapidly reduce debt with its free cash flow(1). As of June 30, 2022, the Company had a cash balance of $109 million and net debt(1) of $491 million. The Quarter’s net debt to annualized EBITDA(1) ratio was below 1.0 times and the Company is targeting a long-term net debt to EBITDA ratio of under 1.0 times at an assumed $60/bbl Brent oil price.
- Annual Production Growth: Production was in-line with the budget and averaged 30,607 BOPD, up 4% compared to the Prior Quarter and 33% from second quarter 2021.
- Additional Key Financial Metrics:
- Capital Expenditures: Capital expenditures of approximately $65 million were higher than the Prior Quarter’s level of $41 million, as the majority of Gran Tierra’s capital programs in both Costayaco and Acordionero were completed during the Quarter.
- Increased Oil Sales: The Brent oil price averaged $111.98/bbl, up 14% from the Prior Quarter and up 62% year-on-year. Gran Tierra generated oil sales of $206 million, up 18% from the Prior Quarter and 113% from the second quarter of 2021. The significant annual increase in oil sales was driven by the Company’s 33% increase in quarterly production year-on-year, combined with the increase in the Brent oil price over the same period.
- Strong Operating Netback(1)(2): The Company’s operating netback(1)(2) of $59.62/bbl was the highest netback since third quarter 2014, and was up 14% from the Prior Quarter and up 81% year-on-year. This strong annual increase was driven by Gran Tierra’s 33% rise in quarterly production year-on-year and the strong growth in the Brent oil price.
- Operating Expenses: Compared to the Prior Quarter, Gran Tierra’s operating expenses increased 8% to $14.38/bbl, up from $13.34/bbl, due to higher workover and power generation costs. Compared to the second quarter of 2021, operating expenses increased by 12% on a per bbl basis, primarily as a result of workover costs.
- Other Expenses:
- The quality and transportation discount increased 3% to $13.00 per bbl, compared to $12.57 per bbl in the Prior Quarter, because of widening Castilla and Vasconia oil price differentials to Brent.
- General and administrative (“G&A”) expenses before stock-based compensation were $2.86 per bbl, down from $2.97 per bbl in the Prior Quarter and $3.49 per bbl in second quarter 2021. This decrease was driven by the Company’s higher sales volumes in the Quarter.
Message to Shareholders
“Gran Tierra has had another strong quarter where we were able to deliver on our development campaigns in both the Acordionero and Costayaco fields, while continuing to make progress on drilling exploration wells in both Ecuador and Colombia,” commented Gary Guidry, President and Chief Executive Officer of Gran Tierra. “In this high oil price environment and with our high-quality asset base, we were able to reduce net debt(1) by $298 million or 38% over the past two years. We also generated our highest quarterly funds flow from operations(1) since the first quarter of 2013.
With our credit facility now paid off, we plan to maintain a cash balance in excess of $75 to $100 million in order to maintain liquidity. We plan to deploy excess cash over and above our targeted cash balance to strengthen our balance sheet, buy back shares and pursue accretive opportunities to continue to strengthen our portfolio.
As we look forward to the third quarter of 2022, we are excited about spudding exploration wells in Colombia and Ecuador and increasing production in our core assets.”
- During the Quarter, a new pacesetter well was delivered in Acordionero, which took only 3.9 days to drill. Drilling activities have been completed on the Central Pad with the delivery of the sixteenth well in the 2022 development program.
- Overall, the time to drill a development well in Acordionero has decreased by a further 10% on the Central Pad, with the average time reduced from 5 days to 4.5 days. As a result of the reduction in drilling times, the average per well drilling costs decreased to $1.2 million, 9% lower than budgeted.
- Costayaco and Moqueta:
- During the Quarter, the drilling and completion program in Costayaco was completed and was under budget as a result of cost reductions through optimization and the successful application of techniques utilized in our Acordionero development program. All five wells were completed during the first half of the year.
- Ecuador Exploration:
- Gran Tierra is currently mobilizing a drilling rig to the wellsite pad for the planned Bocachico-1 exploration well in the Chanangue Block in Ecuador’s Oriente Basin. The Company expects to start drilling this well before the end of August 2022.
- Construction continues on the Charapa-B drilling pad in the Charapa Block.
- In the Putumayo Basin, Gran Tierra continues progressing its exploration activities. The wellsite construction has started for the planned Rose-1 exploration well in the ALEA-1848A Block, which has a planned spud date in the third quarter of 2022.