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Highest Year-End Total Company Reserves in Company History - 90 MMBOE 1P, 147 MMBOE 2P and 207 MMBOE 3P
• Added Total Company Reserves of 18 MMBOE 1P, 29 MMBOE 2P and 36 MMBOE 3P
• Achieved 154% 1P, 242% 2P and 303% 3P Reserves Replacement
• Fifth Consecutive Year of 1P Total Company Reserves Growth
• Incurred F&D Costs, Excluding Change in FDC, of $11.96 (1P), $7.58 (2P) and $6.06 (3P) per boe
• Net Present Value Before Tax Discounted at 10% of $1.9 Billion (1P), $3.1 Billion (2P), and $4.3 Billion (3P)
• Net Asset Value per Share of $18.79 Before Tax and $10.46 After Tax (PDP), $44.48 Before Tax and $24.06 After Tax (1P), and $79.13 Before Tax and $42.71 After Tax (2P)
Gran Tierra Energy Inc., a company focused on international oil exploration and production with assets currently in Colombia and Ecuador, announced the Company’s 2023 year-end reserves as evaluated by the Company’s independent qualified reserves evaluator McDaniel & Associates Consultants Ltd. (“McDaniel”) in a report with an effective date of December 31, 2023 (the “GTE McDaniel Reserves Report”).
All dollar amounts are in United States (“U.S.”) dollars and all reserves and production volumes are on a working interest before royalties (“WI”) basis. Production is expressed in barrels (“bbl”) of oil per day (“bopd”), while reserves are expressed in bbl, bbl of oil equivalent (“boe”) or million boe (“MMBOE”), unless otherwise indicated. The following reserves categories are discussed in this press release: Proved Developed Producing (“PDP”), Proved (“1P”), 1P plus Probable (“2P”) and 2P plus Possible (“3P”).
Gary Guidry, President and Chief Executive Officer of Gran Tierra, commented: “During 2023, a combination of our strong reserves growth, ongoing reductions in debt and share buybacks allowed Gran Tierra to achieve net asset values per share** before tax of $44.48 (1P), up 288% from 2020, and $79.13 (2P), up 144% from 2020. With this significant growth in our net asset values per share** over the last three years, we believe Gran Tierra is well positioned to offer exceptional long-term stakeholder value.
Gran Tierra achieved strong 154% (1P), 242% (2P) and 303% (3P) reserves replacement through our successful results from our development drilling, waterflooding programs, field performance and the Suroriente Block Continuation Agreement*. This multi-faceted success resulted in record highs for the Company’s year-end 1P, 2P and 3P oil reserves.
We completed our 2023 development plan on-budget including waterflooding efforts and development drilling in the Acordionero, Costayaco and Moqueta oil fields. We also continued to evaluate our successful ongoing production from key 2022 exploration discoveries in Colombia and Ecuador to plan for 2024 follow-up exploration drilling. We believe our success on multiple fronts during 2023 demonstrates Gran Tierra's ability to be a full-cycle oil and gas exploration, development and production company focused on value creation for all our stakeholders.
The success the Company achieved in 2023 also reflects our ongoing conversion of reserves from the Probable to the Proved category. With 147 booked Proved plus Probable Undeveloped future drilling locations, Gran Tierra is well positioned to continue to grow the Company's production and reserves in 2024 and beyond.
We have started 2024 strong with two rigs currently drilling our planned series of development wells in Acordionero and Costayaco. Both rigs began their development campaigns in December 2023. Later in 2024, we look forward to our planned resumption of exploration drilling in Colombia and Ecuador to build upon our successful exploration results in 2022, and the first development drilling in the Suroriente Block since 2018. Through our ongoing focus on the development of our existing assets, appraisal of our 2022 discoveries and exploration drilling, we plan to continue to strengthen our balance sheet, profitably increase production, grow our reserve base and return capital to shareholders through share buybacks.”
Highlights
2023 Year-End Reserves and Values
1Based on estimated 2023 year-end net debt of $511 million comprised of Senior Notes of $537 million (gross) plus the Credit Facility of $36 million (gross) less cash and cash equivalents of $62 million, prepared in accordance with GAAP.
2Outstanding Shares. Reflects Gran Tierra’s 1-for-10 reverse stock split that became effective May 5, 2023.
• As of December 31, 2023, Gran Tierra achieved:
o Before Tax NAV of $1.4 billion (1P), $2.6 billion (2P), and $3.8 billion (3P)
o After Tax NAV of $0.8 billion (1P), $1.4 billion (2P), and $2.0 billion (3P)
o Strong reserves replacement ratios of:
- 154% 1P, with 1P reserves additions of 18 MMBOE.
- 242% 2P, with 2P reserves additions of 29 MMBOE.
- 303% 3P, with 3P reserves additions of 36 MMBOE.
o Meaningful 1P, 2P and 3P reserves additions largely driven by success with development drilling and waterflooding results in the Chaza Block (which contains Costayaco and Moqueta fields) and the Suroriente Continuation Agreement*.
o Finding and development costs (“F&D”), including change in future development costs (“FDC”), on a per boe basis of $20.58 (1P), $16.09 (2P) and $14.67 (3P).
o F&D costs excluding change in FDC, on a per boe basis of $11.96 (1P), $7.58 (2P) and $6.06 (3P).
o F&D recycle ratios**, including change in FDC, of 1.8 times (1P), 2.2 times (2P) and 2.5 times (3P).
• Gran Tierra’s four major oil assets, Acordionero, Costayaco, Moqueta and Suroriente (all on waterflood) represent 83% of the Company’s 1P reserves and 73% of its 2P reserves.
• The Company’s PDP reserves account for 48% of 1P reserves and 1P reserves account for 61% of 2P reserves, which demonstrate the strength of Gran Tierra’s reserves base via the potential future conversion of Probable reserves into 1P reserves and Proved Undeveloped reserves into PDP reserves.
• FDC are forecast to be $561 million for 1P reserves and $923 million for 2P reserves. Gran Tierra’s 2024 base case mid-point guidance for cash flow*** of $300 million is equivalent to 54% of 1P FDC and 33% of 2P FDC, which highlights the Company’s potential ability to fund future development capital. Increases in FDC relative to 2022 year-end reflect that the GTE McDaniel Reserves Report now assigns Gran Tierra 95 Proved Undeveloped future drilling locations (up from 78 at 2022 year-end) and 147 Proved plus Probable Undeveloped future drilling locations (up from 115 at 2022 year-end).
GTE McDaniel Reserves Report
All reserves values, future net revenue and ancillary information contained in this press release have been prepared by McDaniel and 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 derived from the GTE McDaniel Reserves Report, unless otherwise expressly stated.
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 reserves, 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.
Total Company WI Reserves
The following table summarizes Gran Tierra’s NI 51-101 and COGEH compliant reserves in Colombia and Ecuador derived from the GTE McDaniel Reserves Report calculated using forecast oil and gas prices and costs. Gran Tierra has determined that Ecuador reserves, included in the Total Proved, Total Probable and Total Possible reserve categories for Light and Medium Crude Oil, are not material enough to present separately on a country basis. Therefore all amounts are presented on a consolidated basis by foreign geographic area.
Net Present Value Summary
Gran Tierra’s reserves were evaluated using the average of 3 independent qualified reserves evaluators’ commodity price forecasts at January 1, 2024 (McDaniel, Sproule and GLJ). See “Forecast Prices” for more information. It should not be assumed that the net present value of cash flow estimated by McDaniel represents the fair market value of Gran Tierra’s reserves.
Future Development Costs
FDC reflects McDaniel's best estimate of what it will cost to bring the Proved Undeveloped and Probable Undeveloped reserves on production. Changes in forecast FDC occur annually as a result of development activities, acquisition and disposition activities, and changes in capital cost estimates based on improvements in well design and performance, as well as changes in service costs. FDC for 2P reserves increased to $923 million at year-end 2023 from $677 million at year-end 2022. The increase in FDC in 2023 was predominantly attributed to the increase in the numbers of future development well locations identified by McDaniel in the Suroriente Continuation Agreement.
Forecast Prices
The pricing assumptions used in estimating NI 51-101 and COGEH compliant reserves data disclosed above with respect to net present values of future net revenue are set forth below. The price forecasts are based on an average of three independent qualified reserves evaluators’ commodity price forecasts at January 1, 2024 (McDaniel, Sproule and GLJ). All three of these companies are independent qualified reserves evaluators and auditors pursuant to NI 51-101.
Suroriente Continuation Agreement
On April 11, 2023, the Company announced that it had entered into an agreement with Ecopetrol S.A., the national oil company of Colombia (the “Suroriente Continuation Agreement”), by which the parties renegotiated the terms and the duration of the contract for the Suroriente Block in the Department of Putumayo, which was scheduled to end in mid-2024. The Suroriente Continuation Agreement provides an opportunity to add significant value, as well as economic life, to the Suroriente Block by continuing its duration for 20 years from the Suroriente Continuation Agreement's effective date. On August 31, 2023, the Company announced that it had satisfied all outstanding conditions precedent to the effectiveness of the Suroriente Continuation Agreement.
