Gran Tierra Energy Inc. (AMEX:GTE) Q1 2024 Earnings Call Transcript

Gran Tierra Energy Inc. (AMEX:GTE) Q1 2024 Earnings Call Transcript May 2, 2024

Gran Tierra Energy Inc. isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good morning, ladies and gentlemen. Welcome to Gran Tierra Energy’s Conference Call for First Quarter 2024. My name is Shannon, and I’ll be your coordinator for today. At this time, all participants are on a listen-only mode. Following the initial remarks, we will conduct a question-and-answer session for securities analysts and institutions. Instructions will be provided at that time for you to queue for your questions. I would like to remind everyone that this conference call is being webcast and recorded today, Thursday, May 2, 2024 at 11:00 a.m. Eastern Time. Today’s discussion may include certain forward-looking information, as well as certain non-GAAP financial measures. Please refer to the earnings and operational update press release we issued yesterday for important advisories and disclaimers with regard to this information and for reconciliations of any non-GAAP measures discussed on today’s call.

Any production volumes are based on working interest sales before royalties. Finally, this earnings call is the property of Gran Tierra Energy, Inc. Any copying or rebroadcasting of this call is expressly forbidden without the written consent of Gran Tierra Energy. I will now turn the conference call over to Gary Guidry, President and Chief Executive Officer of Gran Tierra. Mr. Guidry, please go ahead.

Gary Guidry: Thank you, operator; good morning and thanks for joining Gran Tierra’s first quarter 2024 results conference call. My name is Gary Guidry, President and Chief Executive Officer, and with me today are Ryan Elson, our executive Vice President and Chief Financial Officer, and Sebastian Moran, our Chief Operating Officer. On Wednesday, May 1, 2024, we issued three press releases that included detailed information about our first quarter 2024 results, which are available on our website. Ryan and Sebastian will now make a few brief comments and we'll open the line for questions immediately following this earnings call at 10:00 a.m. Mountain time, noon eastern time, we will be holding our annual general meeting of shareholders.

During that meeting, I will give a brief overview of Granterra and where the company is heading. I invite you to join us for this call. Dial in instructions can be found on our website. I'll now turn the call over to Ryan to discuss key financial highlights from our first quarter results.

Ryan Ellson: Thank you Gary. Good morning everyone. Grant Tierra had a great start to 2024 during the first quarter. We have completed a substantial portion of our development plan and are now focused on our 2024 exploration campaign along with the development of the Soriente block. During the quarter, Grand Tierra delivered $74 million of funds flow, up 24% from the first quarter of 2023, which resulted in $2.34 of funds flow per share. After incurring approximately $55 million in capital expenditures, the company generated free cash flow of approximately $19 million. Adjusted EBITDA was $95 million for the quarter, up from $93 million in the prior quarter. As at March 31, 2024, the company had a cash balance of $127 million and net debt of $510 million.

The twelve month trailing net debt to adjusted EBITDA was 1.3 times and is expected to be less than one times by year end from a combination of increased adjusted EBITDA and lower net debt. During the quarter, the company issued an additional $100 million of 9.5% senior notes and received cash proceeds of $88 million. With a portion of the funds, we fully repaid the outstanding balance on the company's credit facility of $36 million and the facility was terminated. Grand Tierra generated oil sales of $158 million, up 9% from the first quarter of 2023 due to higher sales volumes and lower Castilla, Vasconia and Oriente differentials. Looking at pricing during the quarter, Brent averaged $81.76 per barrel, up 1% from the prior quarter. The company's quality and transportation discounts per barrel during the quarter were $15.36, which significantly narrowed from $18.45 from the first quarter of 2023.

The company's operating netback was $35.37 per barrel, up 1% from the first quarter of 2023. Grand Tierra has repurchased approximately a million shares during the quarter. Since January 1, 2023, the Company has repurchased approximately 3.3 million shares, or 10% of the shares issued outstanding as at January 1, 2023 from free cash flow. We are very pleased how we have started 2024 and we are having excellent results in our core assets under water flood. The balance sheet is in excellent shape and we are very excited about the Eraone exploration well which Sebastian will highlight. I'll now turn the call over to Sebastian to discuss our operational highlights from our first quarter results.

Sebastien Morin: Thanks Ryan. Good morning everyone. As Ryan mentioned, capital expenditures of $55 million were higher than the prior quarter of $39 million and down from $71 million compared to the first quarter of 2023. During the quarter, we completed our accordion aero drilling program and the majority of our Kosciusko program, achieving approximately a 16% reduction in drilling costs, a savings of approximately $3.8 million between both programs. Total average working interest production during the quarter was 32,242 barrels of oil per day, an increased of 3% over the prior quarter. Despite deferred production of approximately 1000 barrels of oil per day as a result of social disruptions at the accordion Arrow field post disruption, the field was rapidly ramped back up without issue and is now back producing over 17,000 barrels of oil per day per expectations.

In particular, we are very pleased about the successful drilling program in Kosciusko that confirmed the company's reservoir interpretation and extended the field significantly to the north and to the south. The four wells drilled in the north had a combined initial 30 day production rate of 5707 barrels of oil per day un-stimulated and on jet pump. Currently, work has commenced to install the final selective completions, conduct zonal testing and stimulation as well as installation of the final optimized artificial lift which we expect will increase production further. To note, Kosciusko was originally discovered in 2007. Our 2024 program has increased production to the highest level since 2017. As highlighted in the press release, we initiated our high impact exploration program with the Arowana one well which was spud on the Chenangay block in early April.

We are very excited about the initial open hole logging results of the well which is drilling to a bottom hole location 1.5 km away across the fault from the Boca Chica one well. Boca Chica one had an initial 90 day production rate in the basal tenna of greater than 1100 barrels of oil per day and continues to produce at approximately 850 barrels of oil per day, 20 degree API oil at less than 1% water cut and has recovered over 330 thousandths of barrel of oil since June 2023. The basal tenna is the geologic equivalent to the Ensen in Kohimbe located 20 north. Our map area of closure and rock properties observed in Arowana one compares well to the Kohimbe field at the end of 2023. The Kohembe field has produced 28 million barrels of oil and has remaining reserves of 25,000,001 p, 54,000,002 p and 95,000,003 p.

Given these observations, we are very excited to finalize drilling operations at Arowana one run casing and start testing in the next few weeks. Looking to financial metrics, Gran Tierra operating expenses increased by 2% to 48 million compared to the prior quarter, primarily due to higher workovers offset by lower lifting costs, primarily related to power generation optimizations. In Casiaco, accordionero and Cohimbe fields, the company's transportation expenses increased by 16% to 4.6 million when compared to the prior quarter. During the quarter, Gran Tierra utilized longer distance delivery points due to low river levels in Colombia caused by dry El Nino conditions resulting in higher transportation costs. Today, we are excited to also announce the release of our 2023 sustainability report.

I will go through some key highlights below. However, I invite you to visit our website and go through the report in its entirety. 2023 was the safest year in company history with over 17 million work hours without any incidents causing lost time. Since June 9, 2022, through Gran Tierra's reforestation efforts, the company has planted over 1.6 million trees and has conserved, preserved or reforested approximately 4500 land since 2018. This is equivalent to sequestering 20 years of our current greenhouse gas emissions. Gran Tierra is reducing greenhouse gas emissions at its facilities through gas to power projects that conserve excess natural gas that would otherwise be flared. Using the gas instead to power generation. In 2023, Granterra's gas to power projects generated approximately 70% of the total energy used in all of the company's operations.

Gran Tierra has started 2024 on a strong footing and we look forward to continuing to ramp production through our ongoing water flood optimization initiatives, new well completions and exciting near field exploration program. I'll now turn the call back to the operator and we will be happy to answer any questions. Operator please go ahead.

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