CALGARY, Alberta, Oct. 10, 2018 — Gran Tierra Energy Inc. (“Gran Tierra” or the “Company”) (NYSE American:GTE) (NYSE MKT:GTE) (TSX:GTE) (LSE:GTE) is pleased to announce that its common stock is expected to be admitted today to the standard listing segment of the Official List of the Financial Conduct Authority and to trading on the main market of the London Stock Exchange (“LSE”) for listed securities under the ticker “GTE”. The Company’s common stock will also continue to trade on the NYSE American and on the Toronto Stock Exchange. All dollar amounts are in United States (“U.S.”) dollars. Production amounts are on an average working interest before royalties (“WI”) basis. Per barrel of oil equivalent (“BOE”) amounts are based on WI sales before royalties. All numbers and values have been previously disclosed by the Company in prior press releases and regulatory filings.
Gary Guidry, President and Chief Executive Officer (“CEO”) of Gran Tierra, commented: “Commencement of trading on the LSE today marks an important milestone for Gran Tierra, as we continue to profitably grow our exploration and production business in Colombia. We are seeking to expand our investor base at a very exciting time for the Company. Our senior management team is very pleased to be returning to the LSE where we previously achieved a supportive shareholder following in the past at Caracal Energy Inc. (“Caracal”). As with previous companies we have managed such as Caracal, we are committed to creating long-term shareholder value through employing capital discipline and focusing on increasing net asset value three to five times over the next five years. With an excellent track record of profitably growing production, reserves and our resource base in Colombia, we look forward to sharing Gran Tierra’s potential future successes with the London and European investment communities.”
About Gran Tierra
Gran Tierra is an independent international exploration and production company focused in onshore Colombia. The Company has built a portfolio that provides significant development inventory to continue to grow production. Following several acquisitions in 2016 and 2017, the Company has successfully consolidated an expansive and dominant land position in the proven yet underdeveloped Putumayo Basin and executed a new basin entry into the highly prolific Middle Magdalena Valley (“MMV”) Basin. The Company has approximately 2.1 million gross acres in onshore Colombia across 34 blocks and is the operator of 29 of the blocks. Gran Tierra has identified numerous exploration opportunities to commence a three to five year continuous exploration program, which it expects will be fully funded through the reinvestment of cash flows from operations. This exploration campaign is designed to test the majority of Gran Tierra’s large portfolio of unrisked mean prospective resources of 1.5 billion BOE1 by drilling 30 to 35 exploration wells in proven hydrocarbon basins in Colombia, including the Putumayo, the MMV and Llanos Basins.
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Since May 2015, Gran Tierra has been led by Gary Guidry. Prior to joining Gran Tierra, Mr. Guidry was the President and CEO of Caracal, a highly successful LSE-listed company with operations in Chad, Africa. He held that position from mid-2011 until Caracal was acquired for $1.8 billion in mid-2014. During his tenure, Caracal’s total shareholder return was 101% compared to the 8% total return of the FTSE 350 Exploration and Production Index. He is supported at Gran Tierra by key members of the former Caracal senior management group. This experienced team has a proven track record of operational success and prudent financial management.
Key Highlights from Gran Tierra’s Second Quarter 2018 (“the Quarter”) Results
Record Company Production
- Achieved a new Company milestone: record average Colombia production of 35,400 BOE per day (“BOEPD”) in the Quarter, which was 100% oil, on track with the Company’s internal forecast and 18% higher than 30,098 BOEPD in second quarter 2017
- Increased the Quarter’s Colombia production by 57% from second quarter 2015 when the current Gran Tierra management team joined the Company and the strategy to refocus Gran Tierra on Colombia began, which represents an annualized growth rate of 16%
- Forecasted to be on target to meet full year 2018 production guidance of 36,500 to 38,500 BOEPD, which would represent annual growth from the 2017 average of 16% to 23%; the Company’s production is expected to exceed 40,000 BOEPD in fourth quarter 2018
Strong Financial Performance2
- Oil and gas sales of $163 million, net income of $20 million, EBITDA of $102 million, funds flow from operations of $95 million, and capital expenditures of $84 million. Net income and EBITDA for the six months ended June 30, 2018 were $38 million and $191 million respectively.
- Operating netback of $38.28 per BOE, an increase of 75% relative to second quarter 2017; the Brent oil price only increased 47% over the same time period
- Exited the Quarter with $126 million of cash and cash equivalents and an undrawn $300 million credit facility, representing 0.8 times net debt to the Quarter’s annualized funds flow from operations and 0.7 times net debt to the Quarter’s annualized EBITDA
Key Upcoming Potential Catalysts
There are multiple potential catalysts for Gran Tierra planned during the second half of 2018 all of which are expected to be funded through cash flow and have the potential to positively impact 2018 year-end reserves, 2018 exit rate & 2019 production volumes, including the drilling of:
- 6 development oil wells & 1 water injector at the Acordionero oil field, Midas Block (Lisama Sands), MMV Basin; the ongoing expansion of this field’s production facilities and waterflood is also planned
- 3 appraisal oil wells at the Ayombero field, Midas Block (La Luna carbonate), MMV Basin
- 4 exploration wells in the Putumayo Basin and one in the MMV Basin
On admission to trading on the LSE, the Company’s common stock will be registered with ISIN US38500T1016 and SEDOL number BZ0WN45. The US SEDOL number is B09R9V5 and the Canadian SEDOL number is B2PPCS5.
Additional information concerning Gran Tierra is available at www.grantierra.com. Neither information on the Company’s website nor information on any website accessible by hyperlinks on the Company’s website is incorporated in or constitutes a part of this press release.
Gran Tierra’s Securities and Exchange Commission (“SEC”) 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.
1 All resources values 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 2017 year-end estimated prospective resources as evaluated by the Company’s independent qualified reserve evaluator McDaniel & Associates Consultants Ltd. (“McDaniel”) in reports with an effective date of December 31, 2017 (the “GTE McDaniel Prospective Resources Report”), unless otherwise expressly stated.
2 Funds flow from operations, earnings before interest, taxes and depletion, depreciation and accretion (“DD&A“) (“ EBITDA“) and operating netback are non-GAAP measures and do not have standardized meanings under generally accepted accounting principles in the United States of America (“GAAP”). Net debt is defined as face value of debt (excluding debt issuance costs), less cash and cash equivalents as of June 30, 2018. Refer to “Non-GAAP Measures” in this press release.
For investor and media inquiries please contact:
Chief Executive Officer
Ryan Ellson Chief Financial Officer
Rodger Trimble Vice President, Investor Relations
+1-403-265-3221 [email protected]
RBC Capital Markets (Financial Advisor to the listing and Corporate Broker)
+44 (0)20 7390 0240
Forward Looking Statements and Legal Advisories:
This press release is neither an offer to sell nor a solicitation of an offer to buy any securities. The Company is not conducting any offering or issuance of securities in connection with the listing of the Company’s common stock on the LSE and the prospectus of the Company, available on the Company’s website, has been issued solely in connection with the listing of the Company’s common stock on the LSE.
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, project, will, believe, target, potential, future and other terms that are forward-looking in nature. Such forward-looking statements include, but are not limited to, the impact on the Company and investors of the listing on the LSE, the nature of future trading of the Company’s common stock and capital markets activity, the Company’s exploration and capital program, including drilling plans, future sources of funding for capital expenditures and guidance, expected production levels and the results of the Company’s strategies.
Statements relating to resources are also deemed to be forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions, including that the resources 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 market conditions will remain stable or improve, that a market will develop in Gran Tierra’s common stock on the LSE, that potential and existing investors in Gran Tierra will react favorably to the additional listing on the LSE, that Gran Tierra will continue to conduct its operations in a manner consistent with its current expectations, the general continuance of current or, where applicable, assumed operational, regulatory and industry conditions and receipt of required approvals, 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: adverse market conditions on the exchanges on which Gran Tierra’s common stock is trading; low liquidity and trading volume or high volatility in trading activity around Gran Tierra common stock; prices and markets for oil and natural gas are unpredictable and tend to fluctuate significantly; the inability of Gran Tierra to execute its business plan; 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; weaknesses or declines in local or global capital markets or investing activity; the ability to replace reserves and production and develop and manage reserves on an economically viable basis; the failure of exploratory drilling to result in commercial wells; unexpected delays due to limited availability of drilling equipment and personnel; and the risk factors detailed from time to time in Gran Tierra’s reports filed with the SEC, including, without limitation, under the caption “Risk Factors” in Gran Tierra’s Annual Report on Form 10-K filed February 27, 2018 and subsequent Quarterly Reports on Form 10-Q. These filings are available on the SEC website at www.sec.gov and on SEDAR at www.sedar.com.
All forward-looking statements included in this press release are made only 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.
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 on a per BOE basis as presented is defined as Brent sales price less quality and transportation discount, royalties, transportation expenses and operating expenses. A reconciliation from Brent sales price to operating netback per BOE is as follows:
|Three Months Ended June 30,|
|Quality and Transportation Discount||(10.52||)||(10.73||)|
|Average Realized Price||51.21||33.69|
|Average Realized Price Net of Transportation Expenses||49.17||31.41|
EBITDA, as presented, is defined as net income or loss adjusted for depletion, depreciation and accretion (“DD&A”) expenses, interest expense and income tax expense or recovery. 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 EBITDA as follows:
|Three Months Ended June 30,||Six Months Ended June 30,||Three Months Ended March 31,|
|EBITDA – Non-GAAP Measure ($000s)||2018||2017||2018||2017||2018|
|Net income (loss)||$||20,300||$||(6,807||)||$||38,161||$||5,964||$||17,861|
|Adjustments to reconcile net income (loss) to EBITDA|
|Income tax expense||27,996||13,297||53,767||32,093||25,771|
Funds flow from operations, as presented, is net income or loss adjusted for DD&A expenses, asset impairment, deferred tax expense, stock-based compensation expense, amortization of debt issuance costs, cash settlement of RSUs, 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 or loss to funds flow from operations is as follows:
|Three Months Ended June 30,||Six Months Ended June 30,||Three Months Ended March 31,|
|Funds Flow From Operations (Non-GAAP) Measure ($000s)||2018||2017||2018||2017||2018|
|Net income (loss)||$||20,300||$||(6,807||)||$||38,161||$||5,964||$||17,861|
|Adjustments to reconcile net income (loss) to funds flow from operations|
|Deferred tax expense||23,169||11,525||36,651||22,904||13,482|
|Stock-based compensation expense||6,893||1,980||10,202||3,183||3,309|
|Amortization of debt issuance costs||843||620||1,513||1,225||670|
|Cash settlement of RSUs||(240||)||(183||)||(360||)||(501||)||(120||)|
|Unrealized foreign exchange loss (gain)||1,583||3,895||539||1,076||(1,044||)|
|Financial instruments loss (gain)||4,768||(1,447||)||11,714||(6,886||)||6,946|
|Cash settlement of financial instruments||(9,666||)||448||(15,483||)||1,216||(5,817||)|
|Loss on sale||292||9,076||292||9,076||—|
|Funds flow from operations||$||94,549||$||50,920||$||169,297||$||95,946||$||74,748|
Prospective Resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from undiscovered accumulations by application of future development projects. Prospective Resources have both an associated chance of discovery and a chance of development. Not all exploration projects will result in discoveries. The chance that an exploration project will result in the discovery of petroleum is referred to as the “chance of discovery.” Thus, for an undiscovered accumulation, the chance of commerciality is the product of two risk components – the chance of discovery and the chance of development. There is no certainty that any portion of the Prospective Resources will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of the Prospective Resources.
Estimates of the Company’s Prospective Resources are based upon the GTE McDaniel Prospective Resources Report dated as at December 31, 2017. The estimates of Prospective Resources provided in this press release are estimates only and there is no guarantee that the estimated Prospective Resources will be recovered. Actual resources may be greater than or less than the estimates provided in this press release and the differences may be material. There is no assurance that the forecast price and cost assumptions applied by McDaniel in evaluating Gran Tierra’s Prospective Resources will be attained and variances could be material. There is no certainty that any portion of the Prospective Resources will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of the Prospective Resources.
Estimates of Prospective Resources are by their nature more speculative than estimates of proved reserves and would require substantial capital spending over a significant number of years to implement recovery. Actual locations drilled and quantities that may be ultimately recovered from our properties will differ substantially. In addition, we have made no commitment to drill, and likely will not drill, all of the drilling locations that have been attributable to these quantities.
The Prospective Resources in this press release are classified as mean representing the arithmetic average of the expected recoverable volume. It is the most accurate single point representation of the volume distribution.
For a discussion of Gran Tierra’s interest in the Prospective Resources, the location of the Prospective Resources, the product type reasonably expected, the risks and level of uncertainty associated with recovery of the resources, the significant positive and negative factors relevant to the estimate of the Prospective Resources, a description of the applicable projects maturity subcategories and other relevant information regarding the Prospective Resources estimates, please see the GTE 51-101F1 available on SEDAR at www.sedar.com.
Disclosure of Resources Information and Cautionary Note to U.S. Investors
In this press release, the Company uses the term Prospective Resources. The SEC guidelines strictly prohibit the Company from including Prospective Resources in filings with the SEC. Investors are urged to consider closely the disclosures and risk factors in the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and in the other reports and filings with the SEC, available from the Company’s offices or website. These forms can also be obtained from the SEC website at www.sec.gov or by calling 1-800-SEC-0330.