本季度10-Q表格中包含了根據1933年修正案第27A條《證券法》和1934年修正案第21E條《證券交易法》的含義而進行的前瞻性聲明。本季度10-Q報告中包含的除歷史事實聲明外的所有內容，包括我們的財務狀況、儲量的估計數量和淨現值、業務策略、管理層對未來運營的計劃和目標、合規性、資本支出計劃、以及資本計劃或支出變化的好處、我們的流動性和財務狀況，以及那些以「相信」、「期待」、「預計」、「打算」、「估計」、「項目」、「目標」、「目標」、「計劃」、「預算」、「目標」或類似表達或這些表達的變體開頭、跟隨或包含的前瞻性聲明。我們無法保證前瞻性聲明所依據的假設將被證明正確，即使假設正確，也可能會發生干預性情況，導致實際結果與預期不同。由於前瞻性聲明可能受到風險和不確定性的影響，實際結果可能會與前瞻性聲明所表達或暗示的結果有所不同。有許多風險、不確定性和其他重要因素可能導致我們的實際結果與前瞻性聲明有所不同，包括但不限於，我們成功整合i3 Energy Plc（"i3Energy"）的資產和業務，並實現從收購i3 Energy中預期的益處和操作協同效應；我們的業務位於南美，由於遊擊活動、罷工、當地封鎖或抗議等意外問題可能會產生；可能會出現技術困難和運營困難，影響產品的生產、運輸或銷售；其他對當地運營的干擾；全球健康事件；全球和地區對石油和天然氣的需求、供應、價格、差價或其他市場條件的變化，包括通貨膨脹和由全球健康危機、地緣政治事件以及烏克蘭和加沙地區的衝突或由歐佩克和其他產油國實施或取消原油產量配額等行動以及由此引起的公司或第三方對這些變化的反應；大宗商品價格的變化，包括這些價格相對於歷史或未來預期水平的波動或長期下降的風險；目前全球經濟和信貸狀況可能對我們目前的預測產生更大的影響，這可能導致進一步修改我們的策略和資本支出計劃；石油和天然氣的價格和市場是不可預測和波動的；對沖的影響；任何特定領域的生產能力的準確性；地理、政治和氣候條件可能會影響產品的生產、運輸或銷售；我們執行業務計劃的能力，其中可能包括收購，並實現當前或未來舉措預期的益處；不太可能在目前擁有的資產上開發出意外延遲和困難可能發生；以經濟可行的方式替換儲量和生產並開發和管理儲量的能力；生產能力測試和生產結果以及地震數據、定價和成本估計（包括與商品定價和匯率有關的方面）的準確性；計劃探索活動的風險概況；下傾鑽井的影響；注水和多級壓裂操作的影響；交付中斷、設備性能和成本的程度和影響；第三方的行動；我們的經營活動所需的監管或其他必要批准的及時獲得；探險鑽井未導致商業井的風險；由於鑽井設備和人員的有限供應而導致的意外延遲；我們普通股或債券的交易價格的波動或下降的風險；我們未能獲得政府計劃包括政府退稅的預期益處的風險；我們隨時能夠訪問債務或股本市場以籌集額外資本、增加流動性、資助收購或再融資債務的能力；我們能夠遵守債券條款中的財務契約並根據未來的任何信貸協議進行借款的能力；以及本季度10-Q表格中部分II，項目1A「風險因素」和我們2023年年度報告10-K表格中部分I，項目1A「風險因素」中列出的那些因素。此處包含的信息截至本季度10-Q表格向證券交易委員會（「SEC」）提交的日期，並且除非證券法另有規定，否則我們不承諾或保證會公開發布任何對這份季度10-Q報告中包含的任何前瞻性聲明的更新或修訂，或撤回這些前瞻性聲明，以反映我們的期望變化或任何基於任何前瞻性聲明的事件、情況或環境的變化。
Notes to the Condensed Consolidated Financial Statements (Unaudited)
(Expressed in U.S. Dollars, unless otherwise indicated)
1. Description of Business
Gran Tierra Energy Inc. a Delaware corporation (the “Company” or “Gran Tierra”), is a publicly traded company focused on international oil and natural gas exploration and production with assets currently in Colombia and Ecuador.
2. Significant Accounting Policies
These interim unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”). The information furnished herein reflects all normal recurring adjustments that are, in the opinion of management, necessary for the fair presentation of results for the interim periods.
The note disclosure requirements of annual audited consolidated financial statements provide additional disclosures required for interim unaudited condensed consolidated financial statements. Accordingly, these interim unaudited condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements as at and for the year ended December 31, 2023, included in the Company’s 2023 Annual Report on Form 10-K.
The Company’s significant accounting policies are described in Note 2 of the consolidated financial statements, which are included in the Company’s 2023 Annual Report on Form 10-K and are the same policies followed in these interim unaudited condensed consolidated financial statements. The Company has evaluated all subsequent events to the date these interim unaudited condensed consolidated financial statements were issued.
3. Taxes Receivable
The table below shows the break-down of taxes receivable, which are comprised of value added tax (“VAT”) and income tax receivables and payables:
(Thousands of U.S. Dollars)
As at September 30, 2024
As at December 31, 2023
Taxes Receivable
Current
VAT Receivable
$
141
$
105
Income Tax Receivable
16,374
333
$
16,515
$
438
Long-Term
Income Tax Receivable
$
1,725
$
52,089
Taxes Payable
Current
VAT Payable
$
(5,877)
$
(11,438)
Income Tax Payable
(10,137)
(15,781)
$
(16,014)
$
(27,219)
Total Net Taxes Receivable
$
2,226
$
25,308
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The following table shows the movement of VAT and income tax receivables and payables for the period identified below:
(Thousands of U.S. Dollars)
VAT Payable
Income Tax Receivable
Total Net Taxes Receivable
Balance, as at December 31, 2023
$
(11,333)
$
36,641
$
25,308
Collected through direct government refunds
(580)
(13,603)
(14,183)
Collected through sales contracts
(82,041)
—
(82,041)
Taxes paid (1)
88,085
20,665
108,750
Withholding taxes paid
—
27,878
27,878
Current tax expense
—
(61,422)
(61,422)
Foreign exchange loss (gain)
133
(2,197)
(2,064)
Balance, as at September 30, 2024
$
(5,736)
$
7,962
$
2,226
(1) VAT is paid on certain goods and services and collected on sales in Colombia at a rate of 19%
4. Property, Plant and Equipment
(Thousands of U.S. Dollars)
As at September 30, 2024
As at December 31, 2023
Oil and natural gas properties
Proved
$
5,027,344
$
4,876,185
Unproved
74,690
54,116
5,102,034
4,930,301
Other (1)
86,529
73,505
5,188,563
5,003,806
Accumulated depletion, depreciation and impairment
(4,026,047)
(3,860,956)
$
1,162,516
$
1,142,850
(1)The “other” category includes right-of-use assets for operating and finance leases of $62.9 million, which had a net book value of $32.0 million as at September 30, 2024 (December 31, 2023 - $53.3 million, which had a net book value of $32.4 million).
During the three months ended September 30, 2024, the Company entered into two operating lease contracts related to motor vehicles and one finance lease contract related to power generation equipment and capitalized $0.1 million and $0.8 million, respectively, right-of-use assets in relation to these contracts.
During the nine months ended September 30, 2024, the Company entered into three operating lease contracts related to the office lease in Ecuador and motor vehicles and six finance lease contracts related to power generation and safety equipment and capitalized $0.6 million and $8.1 million, respectively, right-of-use assets in relation to these contracts.
For the three and nine months ended September 30, 2024 and 2023, the Company had no ceiling test impairment losses. The Company used a 12-month unweighted average of the first-day-of the month Brent price prior to the ending date of the periods September 30, 2024 and 2023 of $82.10 and $83.86per bbl, respectively, for the purpose of the ceiling test calculations.
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5. Debt and Debt Issuance Costs
The Company’s debt as at September 30, 2024, and December 31, 2023, was as follows:
(Thousands of U.S. Dollars)
As at September 30, 2024
As at December 31, 2023
Current
Credit facility
$
—
$
36,364
6.25% Senior Notes, due February 2025 (“6.25% Senior Notes”)
24,828
—
Unamortized debt issuance costs
(65)
(755)
$
24,763
$
35,609
Long-Term
6.25% Senior Notes
$
—
$
24,828
7.75% Senior Notes, due May 2027 (“7.75% Senior Notes”)
24,201
24,201
9.50% Senior Notes, due October 2029 (“9.50% Senior Notes”)
737,590
487,590
Unamortized Senior Notes discount
(44,436)
(27,958)
Unamortized Senior Notes issuance costs
(19,209)
(15,679)
698,146
492,982
Long-term lease obligation (1)
20,234
26,550
$
718,380
$
519,532
Total Debt
$
743,143
$
555,141
(1) The current portion of the lease obligation has been included in accounts payable and accrued liabilities on the Company’s balance sheet and totaled $14.7 million as at September 30, 2024 (December 31, 2023 - $12.1 million).
Credit Facility
As at December 31, 2023, the Company had a $36.4 million balance outstanding under the Company’s credit facility. On February 6, 2024, the outstanding balance under the credit facility of $36.4 million was fully re-paid and the credit facility was terminated.
On August 19, 2024, the Company entered into a credit facility agreement (“Loan Facility”) with a market leader in the global commodities industry to fund the cash consideration payable to i3 Energy’s shareholders in connection with the acquisition of i3 Energy and associated costs (Note 12). The Loan Facility has a borrowing base of £80.0 million (US$107.0 million) and bears interest based on a three-month secured overnight financing rate posted by the Federal Reserve Bank of New York plus a margin of 3.00% per annum for the first three months after the initial drawdown and 6.00% per annum thereafter. The Loan Facility is subject to a commitment fee equal to the higher of $0.5 million and 0.5% of the borrowing base converted to U.S. dollars using the agreed upon GBP to USD foreign exchange rate at the time of initial drawdown date. The commitment fee is payable on the earlier of the date of the initial drawdown and three months after signing date of the Loan Facility. The undrawn amounts under the Loan Facility bear interest at 0.5% per annum, based on the available amount. The Loan Facility was terminated on October 31, 2024.
As of September 30, 2024, there was no outstanding balance under the Loan Facility.
Senior Notes
On February 6, 2024 and September 18, 2024, the Company issued additional $100.0 million and $150.0 million of 9.50% Senior Notes due October 2029 (the “new 9.50% Senior Notes”), and received cash proceeds of $88.0 million and $139.8 million, respectively. The new 9.50% Senior Notes have the same terms and provisions as the previously issued $487.6 million 9.50% Senior Notes except for the issue price. $100.0 million of new 9.50% Senior Notes accrue interest from October 20, 2023, the date of issuance of the previously issued 9.50% Senior Notes and $150.0 million of new 9.50% Senior Notes accrue interest from April 15, 2024, the date of the last interest payment. The Company received a cash payment of $2.8 million and $6.1 million related to the accrued interest of the $100.0 million and $150.0 million of new 9.50% Senior Notes, respectively.
9
Leases
During the three months ended September 30, 2024, the Company recorded two operating leases of $0.1 million and one finance lease of $0.8 million. The operating leases have a three-year term and the weighted average discount rate of 9.6%. The finance lease has a one-year term and a discount rate of 9.6%.
During the nine months ended September 30, 2024, the Company recorded three operating leases of $0.6 million and six finance leases of $8.1 million. The operating leases have a lease term ranging from three to five years and a weighted average discount rate of 11.1%. The finance leases have a lease term ranging from one to three years and a weighted average discount rate of 9.6%.
Interest Expense
The following table presents the total interest expense recognized in the accompanying interim unaudited condensed consolidated statements of operations:
Three Months Ended September 30,
Nine Months Ended September 30,
(Thousands of U.S. Dollars)
2024
2023
2024
2023
Contractual interest and other financing expenses
$
16,783
$
11,909
$
47,539
$
34,623
Amortization of debt issuance costs
3,109
1,594
9,175
3,394
$
19,892
$
13,503
$
56,714
$
38,017
6. Share Capital
Shares of Common Stock
Shares issued at December 31, 2023
32,275,113
Treasury shares
(28,612)
Shares issued and outstanding at December 31, 2023
32,246,501
Shares issued on option exercise
66,825
Shares re-purchased and cancelled
(1,662,110)
Shares issued and outstanding at September 30, 2024
30,651,216
During the year ended December 31, 2023, the Company implemented a share re-purchase program (the “2023 Program”) through the facilities of the Toronto Stock Exchange (“TSX”), the NYSE American and eligible alternative trading platforms in Canada or the United States. Under the 2023 Program, the Company is able to purchase at prevailing market prices up to 3,234,914 shares of Common Stock, par value of $0.001 per share (“Common Stock”) representing approximately 10% of the public float as of October 20, 2023. The 2023 Program expired on November 2, 2024.
During the three and nine months ended September 30, 2024, the Company re-purchased 371,130 and 1,662,110 shares at a weighted average price of $9.37 and $7.31 per share (three and nine months ended September 30, 2023 - nil and 1,328,650 shares at a weighted average price of nil and $8.15 per share), respectively. As of September 30, 2024, the Company cancelled 28,612 shares held as treasury shares at December 31, 2023, and cancelled 371,130 and 1,662,110 shares re-purchased during the three and nine months ended September 30, 2024, respectively. During the period from November 3, 2023 to September 30, 2024, the Company has re-purchased2,703,914 shares out of a maximum of 3,234,914 under the 2023 Program.
Equity Compensation Awards
The following table provides information about performance stock units (“PSUs”), deferred share units (“DSUs”), restricted share units (“RSUs”) and stock option activity for the nine months ended September 30, 2024:
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PSUs
DSUs
RSUs
Stock Options
Number of Outstanding Share Units
Number of Outstanding Share Units
Number of Outstanding Share Units
Number of Outstanding Stock Options
Weighted Average Exercise Price/Stock Option ($)
Balance, December 31, 2023
3,896,356
776,610
—
2,027,807
9.93
Granted
2,249,299
94,304
531,120
4,596
7.12
Exercised
(1,847,322)
—
—
(211,249)
7.00
Forfeited
(176,927)
—
(6,860)
(50,127)
9.67
Expired
—
—
—
(201,774)
(21.40)
Balance, September 30, 2024
4,121,406
870,914
524,260
1,569,253
8.85
On May 1, 2024, the Company amended the settlement terms of all outstanding stock option awards. As of this date, all outstanding stock options are to be net settled in cash resulting in a change in classification of stock options from equity to liability. On May 1, 2024, the Company recorded a liability of $4.4 million and an additional stock-based compensation costs of $0.4 million related to the modification of the stock option plan. As at September 30, 2024, the equity compensation award liability on the Company’s balance sheet included $1.7 million of current liability and $0.2 million of long-term liability related to the Company’s outstanding stock options.
The fair value of each stock option award was estimated on the modification date using the Black-Scholes-Merton option-pricing model based on the assumptions noted in the following table:
Fair value of option modification
$0.00 - $6.11
Dividend yield (per share)
Nil
Expected volatility
43% to 87%
Risk-free interest rate
4.6% to 5.1%
Expected term
0.1 - 4.9 years
Expected forfeiture rate
0% to 5%
For the three and nine months ended September 30, 2024, there was $3.1 million of stock-based compensation recovery and $6.4 million of stock-based compensation expense, respectively (three and nine months ended September 30, 2023, $1.9 million and $3.7 million of stock-based compensation expense, respectively).
As at September 30, 2024, there was $17.3 million (December 31, 2023 - $8.6 million) of unrecognized compensation costs related to unvested PSUs, RSUs and stock options, which are expected to be recognized over a weighted-average period of 1.9 years. During the nine months ended September 30, 2024, the Company paid out $10.4 million for PSUs vested on December 31, 2023 (nine months ended September 30, 2023 - $15.1 million for PSUs vested on December 31, 2022).
During the three and nine months ended September 30, 2024, the Company awarded nil and 0.5 million RSUs to employees pursuant to the existing 2007 Equity Incentive Plan, respectively. Under the 2007 Equity Incentive Plan, RSUs will vest one-third each year over a three-year period. Upon vesting, RSUs entitle the holder to receive either the underlying number of shares of the Company’s Common Stock or a cash payment equal to the value of the underlying shares of the Company’s Common Stock. The Company intends to settle RSUs outstanding as at September 30, 2024, in cash.
Net Income (Loss) per Share
Basic net income or loss per share is calculated by dividing net income or loss attributable to common shareholders by the weighted average number of shares of Common Stock issued and outstanding during each period.
Diluted net income or loss per share is calculated using the treasury stock method for share-based compensation arrangements. The treasury stock method assumes that any proceeds obtained on the exercise of share-based compensation arrangements would be used to purchase shares of Common Stock at the average market price during the period. The weighted average number of shares is then adjusted by the difference between the number of shares issued from the exercise of share-based
11
compensation arrangements and shares re-purchased from the related proceeds. Anti-dilutive shares represent potentially dilutive securities excluded from the computation of diluted income or loss per share as their impact would be anti-dilutive.
Weighted Average Shares Outstanding
Three Months Ended September 30,
Nine Months Ended September 30,
2024
2023
2024
2023
Weighted average number of shares of Common Stock outstanding
30,732,807
33,287,368
31,273,861
33,675,160
Shares issuable pursuant to stock options
—
129,299
—
—
Shares assumed to be purchased from proceeds of stock options
—
(66,617)
—
—
Weighted average number of diluted shares of Common Stock outstanding
30,732,807
33,350,050
31,273,861
33,675,160
For the three and nine months ended September 30, 2024 all options, on a weighted average basis (three and nine months ended September 30, 2023, 1,854,307 and all options, respectively) were excluded from the diluted income (loss) per share calculation as the options were anti-dilutive.
7. Revenue
The Company’s revenues are generated from oil sales at prices that reflect the blended prices received upon shipment by the purchaser at defined sales points or defined by contract relative to ICE Brent and adjusted for Vasconia or Castilla (Colombia sales) or Oriente (Ecuador sales) crude differentials, quality and transportation discounts and premiums each month. For the three and nine months ended September 30, 2024, 100% of the Company’s revenue resulted from oil sales (three and nine months ended September 30, 2023 - 100%). During the three and nine months ended September 30, 2024, quality and transportation discounts were 18% and 17% of the average ICE Brent price (three and nine months ended September 30, 2023 - 14% and 18%), respectively.
During the three and nine months ended September 30, 2024, the Company’s production was sold to one major customer in Colombia and Ecuador, representing 100% of the total sales volumes (three and nine months ended September 30, 2023 - one major customer representing 96% and 97% of the total sales volumes, respectively).
As at September 30, 2024, accounts receivable included $0.1 million of accrued sales revenue related to September 2024 production (December 31, 2023 - nil related to December 2023 production).
8. Taxes
The Company’s effective tax rate was 44% for the nine months ended September 30, 2024, compared to 115% in the corresponding period of 2023.
Current income tax expense was $61.4 million for the nine months ended September 30, 2024, compared to $63.7 million in the corresponding period of 2023, due to lower taxable income in Colombia, partially offset by additional current tax expense related to a tax planning strategy.
For the nine months ended September 30, 2024, the deferred income tax was a recovery of $32.3 million, primarily as a result of the recognition of additional tax losses resulting from a tax planning strategy, which were partially offset by tax depreciation being higher than accounting depreciation and the use of tax losses to offset taxable income in Colombia.
For the nine months ended September 30, 2023, the deferred income tax expense was $43.2 million compared to $36.9 million in the corresponding period of 2022. In each case, primarily attributable to higher tax depreciation compared to accounting depreciation and the utilization of tax losses to offset taxable income in Colombia.
For the nine months ended September 30, 2024, the difference between the effective tax rate of 44% and the 50% Colombian tax rate was primarily due to a lower impact of foreign taxes, 2022 true-up related to tax planning strategy and non-taxable foreign exchange adjustments. These were partially offset by an increase in valuation allowance, other permanent differences, non-deductible stock-based compensation and non-deductible royalties in Colombia.
12
The Company strategically revised its 2022 tax return to use its tax receivable balance to offset current tax liabilities, rather than applying net operating loss carryforwards. This decision was driven by the expectation of higher future income tax rates and increased profitability. As a result, there was an increase in current tax expense which was offset by long-term tax receivable, ensuring no impact on cash flows. This approach preserved the Company’s net operating loss carryforward for future periods, providing greater tax benefits and flexibility in recovering tax receivables, while strengthening our equity position.
For the nine months ended September 30, 2023, the difference between the effective tax rate of 115% and the 50% Colombian tax rate was primarily due to an increase in non-deductible foreign exchange adjustments, the impact of foreign taxes, non-deductible royalties in Colombia and non-deductible stock-based compensation. These were partially offset by a decrease in valuation allowance.
9. Contingencies
Legal Proceedings
The Company has several lawsuits and claims pending. The outcome of the lawsuits and disputes cannot be predicted with certainty; the Company believes the resolution of these matters would not have a material adverse effect on the Company’s consolidated financial position, results of operations, or cash flows. The Company records costs as they are incurred or become probable and determinable.
Letters of Credit and Other Credit Support
At September 30, 2024, the Company had provided letters of credit and other credit support totaling $234.3 million (December 31, 2023 - $220.1 million) relating to work commitment guarantees in Colombia and Ecuador contained in exploration contracts, the Suroriente Block extension agreement and other capital or operating requirements. Approximately $122.0 million relates to the Suroriente Block extension agreement.
10. Financial Instruments and Fair Value Measurement
Financial Instruments
Financial instruments are initially recorded at fair value, defined as the price that would be received to sell an asset or paid to market participants to settle liability at the measurement date. For financial instruments carried at fair value, GAAP establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. This hierarchy consists of three broad levels:
•Level 1 - Inputs representing quoted market prices in active markets for identical assets and liabilities
•Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the assets and liabilities, either directly or indirectly
•Level 3 - Unobservable inputs for assets and liabilities
At September 30, 2024, the Company’s financial instruments recognized on the balance sheet consist of cash and cash equivalents, restricted cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, current portion of long-term debt, long-term debt and other long-term liabilities. The Company uses appropriate valuation techniques based on the available information to measure the fair values of assets and liabilities.
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Fair Value Measurement
The following table presents the Company’s fair value measurements of its financial instruments as of September 30, 2024, and December 31, 2023:
(Thousands of U.S. Dollars)
As at September 30, 2024
As at December 31, 2023
Level 1
Assets
Prepaid equity forward (“PEF”) - current (1)
$
—
$
5,630
Liabilities
6.25% Senior Notes
$
23,804
$
22,994
7.75% Senior Notes
21,388
20,744
9.50% Senior Notes
701,632
429,018
$
746,824
$
472,756
Level 2
Assets
Restricted cash and cash equivalents - long-term (2)
$
7,093
$
7,750
Liabilities
Credit facility
$
—
$
35,609
(1) The current portion of PEF is included in the other current assets on the Company’s condensed consolidated balance sheet.
(2) The long-term portion of restricted cash and cash equivalents is included in the other long-term assets on the Company’s condensed consolidated balance sheet.
The fair values of cash and cash equivalents, current restricted cash and cash equivalents, accounts receivable and accounts payable and accrued liabilities approximate their carrying amounts due to the short-term maturity of these instruments.
Restricted Cash and Cash Equivalents - Long-Term
The fair value of long-term restricted cash and cash equivalents approximate its carrying value because interest rates are variable and reflective of market rates.
Prepaid Equity Forward
As at September 30, 2024, the Company had no outstanding PEF asset (As at December 31, 2023 - 1.0 million notional shares with a fair value of $5.6 million). For the three and nine months ended September 30, 2024, the Company recorded nil and a $0.3 million loss, respectively, in general and administrative expenses relating to the PEF (three and nine months ended September 30, 2023 - $2.2 million gain and $3.6 million loss, respectively).
During the nine months ended September 30, 2024, the Company settled all outstanding notional PEF shares and received net proceeds of $5.1 million resulting in a $0.3 million loss on settlement.
Senior Notes
Financial instruments recorded at amortized cost at September 30, 2024, were the Senior Notes (Note 5).
At September 30, 2024, the carrying amounts of the 6.25% Senior Notes, 7.75% Senior Notes and 9.50% Senior Notes were $24.8 million, $23.8 million, and $674.3 million, respectively, which represented the aggregate principal amounts less unamortized debt issuance costs and discounts, and the fair values were $23.8 million, $21.4 million, and $701.6 million, respectively.
14
11. Supplemental Cash Flow Information
The following table provides a reconciliation of cash and cash equivalents and restricted cash and cash equivalents shown as a sum of these amounts in the interim unaudited condensed consolidated statements of cash flows:
As at September 30,
As at December 31,
(Thousands of U.S. Dollars)
2024
2023
2023
2022
Cash and cash equivalents
$
277,645
$
123,216
$
62,146
$
126,873
Restricted cash and cash equivalents - current (1)
1,142
1,142
1,142
1,142
Restricted cash and cash equivalents - long-term (2)
7,093
7,052
7,750
5,343
$
285,880
$
131,410
$
71,038
$
133,358
(1)Included in other current assets on the Company’s condensed consolidated balance sheet.
(2)Included in other long-term assets on the Company’s condensed consolidated balance sheet.
Net changes in assets and liabilities from operating activities were as follows:
Nine Months Ended September 30,
(Thousands of U.S. Dollars)
2024
2023
Accounts receivable and other long-term assets
$
(1,531)
$
(8,484)
PEF
6,218
9,664
Prepaids and inventory
(3,984)
(6,809)
Accounts payable and accrued liabilities, and other long-term liabilities
10,442
(3,040)
Taxes receivable and payable
21,019
(25,566)
Net changes in assets and liabilities from operating activities
$
32,164
$
(34,235)
Changes in non-cash investing working capital for the nine months ended September 30, 2024, were comprised of an increase in accounts payable and accrued liabilities of $6.6 million and an increase in accounts receivable of $0.9 million (nine months ended September 30, 2023, a decrease in accounts payable and accrued liabilities of $11.0 million and an increase in accounts receivable of $0.1 million).
The following table provides additional supplemental cash flow disclosures:
Nine Months Ended September 30,
(Thousands of U.S. Dollars)
2024
2023
Cash paid for income taxes
$
20,665
$
48,241
Cash paid for withholding taxes
$
27,878
$
36,962
Cash paid for interest
$
30,073
$
29,446
Non-cash investing activities:
Net liabilities related to property, plant and equipment, end of period
$
53,117
$
44,067
12.Subsequent Events
On October 31, 2024, the Company acquired all of the issued and outstanding common shares of i3 Energy for $225.4 million, consisting of cash consideration of $168.9 million, a cash dividend of $4.2 million and approximately 6.0 million shares of Gran Tierra’s Common Stock, the fair value of which was determined to be $52.3 million based on the closing price of the Company’s shares on the acquisition date. i3 Energy is an oil and gas exploration and production company, incorporated in England and Wales with production assets located in the Western Canadian Sedimentary basin. The acquisition was accounted for as a business combination using the acquisition method. During the three and nine months ended September 30, 2024, the Company incurred approximately $1.5 million in transaction costs associated with the acquisition of i3 Energy.
In connection with i3 Energy acquisition closing on October 31, 2024, the Company amended and restated the existing revolving credit facility agreement of i3 Energy Canada Ltd. (“i3 Energy Canada”) with National Bank of Canada dated March
15
22, 2024. As a result of the amendment and restatement, among other things, the borrowing base was revised to C$100.0 million (US$74.1 million) with available commitment of a C$50.0 million (US$37.0 million) revolving credit facility comprised of C$35.0 million (US$25.9 million) syndicated facility and C$15.0 million (US$11.1 million) of operating facility. Subject to the next borrowing base redetermination which will occur on or before June 30, 2025, the revolving credit facility is available until October 31, 2025 with a repayment date of October 31, 2026, which may be extended by further periods of up to 364 days, subject to lender approval. The drawn down amounts under the revolving credit facility can either be in Canadian or U.S. dollars and bear interest rates equal to either the Canadian prime rate or U.S. Base Rate plus a margin ranging from 2.00% to 4.00% per annum or for CORRA loans and SOFR loans plus a margin ranging from 3.00% to 5.00% per annum. Undrawn amounts under the revolving credit facility bear standby fee ranging from 0.75% to 1.25% per annum. In each case, the margin or standby fee, as applicable is based on Net Debt to EBITDA ratio of Gran Tierra Canada Ltd.
16
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion of our financial condition and results of operations should be read in conjunction with the “Financial Statements” as set out in Part I, Item 1 of this Quarterly Report on Form 10-Q, as well as “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the “Financial Statements and Supplementary Data” included in Part II, Items 7 and 8, respectively, of our 2023 Annual Report on Form 10-K. Please see the cautionary language at the beginning of this Quarterly Report on Form 10-Q regarding the identification of and risks relating to forward-looking statements and the risk factors described in Part II, Item 1A “Risk Factors” of this Quarterly Report on Form 10-Q, as well as Part I, Item 1A “Risk Factors” in our 2023 Annual Report on Form 10-K. On May 5, 2023, the Company completed 1-for-10 reverse stock split of the Company’s Common Stock. As a result of the reverse stock split, every ten of the Company’s issued shares of Common Stock were automatically combined into one issued share of Common Stock. All share and per share data included in this quarterly report have been retroactively adjusted to reflect the reverse stock split.
Financial and Operational Highlights
Key Highlights for the third quarter of 2024
•On August 19, 2024, we entered into an agreement to acquire all of the issued and outstanding common shares of i3 Energy for $225.4 million, consisting of a cash consideration of $168.9 million, a cash dividend of $4.2 million and the issuance of approximately 6.0 million shares of our Common Stock. The acquisition closed on October 31, 2024.
•Net income for the third quarter of 2024 was $1.1 million or $0.04 per share basic and diluted, compared to a net income of $6.5 million or $0.20 per share basic and diluted for the third quarter of 2023 and a net income of $36.4 million for the prior quarter
•Brent oil price averaged $78.71 during the quarter, a decrease of 8% from comparable period of 2023 and 7% decrease from the prior quarter. Castilla, Vasconia and Oriente differentials averaged to $8.83, $5.07 and $9.15 during the quarter, an increase of 33%, 41% and 19% from the comparable period of 2023, and an increase of 8%, 27% and 9%, respectively, from the prior quarter
•Income before income taxes for the third quarter of 2024 was $21.9 million, compared to income before income taxes of $46.9 million for the third quarter of 2023 and income before income taxes of $27.3 million for the prior quarter.
•Adjusted EBITDA(2) decreased to $92.8 million, compared to $119.2 million in the third quarter of 2023 and $103.0 million in the prior quarter
•Funds flow from operations(2) decreased to $60.3 million, compared to $79.0 million in the third quarter of 2023 and increased from $46.2 million in the prior quarter
•In the third quarter of 2024, we re-purchased 0.4 million shares of Common Stock through the 2023 share re-purchase program. During the period from November 3, 2023 to September 30, 2024, we have re-purchased a total of 2.7 million shares or 9% of the outstanding shares as of September 30, 2024
•NAR production for the third quarter of 2024 decreased by 3% to 25,988 BOPD, compared to 26,776 BOPD in the third quarter of 2023 and was comparable to 26,002 BOPD in the prior quarter
•Sales volumes for the third quarter of 2024 decreased by 4% to 25,464 BOPD, compared to 26,396 BOPD in the third quarter of 2023 and increased by 1% from 25,191 BOPD in the prior quarter
•Oil sales for the third quarter of 2024 decreased by 16% to $151.4 million, compared to the third quarter of 2023, primarily due to a lower Brent price, lower sales volumes, and higher differentials. Oil sales decreased by 9% from $165.6 million in the prior quarter due to a lower Brent price and higher differentials, partially offset by an increase in sales volumes
•Operating expenses decreased by 7% or $0.67 per bbl to $46.1 million or $19.66 per bbl when compared to the third quarter of 2023, primarily as a result of lower lifting costs, partially offset by higher workover activities. Operating expenses decreased by 2% or $0.86 per bbl from $47.0 million or $20.52 per bbl in the prior quarter as a result of lower workover activities
•Transportation expenses increased by 2% or $0.09 per bbl when compared to the third quarter of 2023 due to an increase in trucking tariffs for Acordionero volumes and higher sales volumes transported in Ecuador. Transportation expenses decreased by 31% or $0.81 per bbl compared to the prior quarter due to the utilization of shorter distance delivery points during the current quarter
•Operating netback(2) decreased to $101.4 million compared to $126.7 million in the third quarter of 2023 and $112.9 million in the prior quarter
•Quality and transportation discounts for the third quarter of 2024 increased to $14.10 per bbl compared to $11.83 per bbl in the third quarter of 2023 and $12.79 per bbl in the prior quarter
17
•General and administrative (“G&A”) expenses before stock-based compensation for the third quarter of 2024 increased to $9.5 million compared to $8.3 million in the third quarter of 2023 due to higher travel and general office expenses and decreased from $11.0 million in the prior quarter due to lower consulting, business development and travel expenses during the current quarter
•Capital additions for the third quarter of 2024 were $52.9 million compared to $43.1 million in the third quarter of 2023 due to a more active exploration program in the third quarter of 2024, and compared to $61.3 million in the prior quarter due to operating one drilling rig during the current quarter compared to two in the prior quarter
(Thousands of U.S. Dollars, unless otherwise indicated)
Three Months Ended September 30,
Three Months Ended June 30,
Nine Months Ended September 30,
2024
2023
% Change
2024
2024
2023
% Change
Average Daily Volumes (BOPD)
Consolidated
Working Interest (“WI”) Production Before Royalties
32,764
33,940
(3)
32,776
32,595
33,098
(2)
Royalties
(6,776)
(7,164)
(5)
(6,774)
(6,650)
(6,592)
1
Production NAR
25,988
26,776
(3)
26,002
25,945
26,506
(2)
Increase in Inventory
(524)
(380)
38
(811)
(367)
(222)
(65)
Sales(1)
25,464
26,396
(4)
25,191
25,578
26,284
(3)
Net Income (Loss)
$
1,133
$
6,527
(83)
$
36,371
$
37,426
$
(13,998)
367
Operating Netback
Oil Sales
$
151,373
$
179,921
(16)
$
165,609
$
474,559
$
482,013
(2)
Operating Expenses
(46,060)
(49,367)
(7)
(47,035)
(141,561)
(139,227)
2
Transportation Expenses
(3,911)
(3,842)
2
(5,690)
(14,185)
(10,599)
34
Operating Netback(2)
$
101,402
$
126,712
(20)
$
112,884
$
318,813
$
332,187
(4)
G&A Expenses before Stock-Based Compensation
$
9,491
$
8,307
14
$
10,967
$
31,240
$
29,052
8
G&A Stock-Based Compensation (Recovery) Expense
(3,145)
1,931
(263)
6,160
6,376
3,748
70
G&A Expenses, including Stock-Based Compensation
$
6,346
$
10,238
(38)
$
17,127
$
37,616
$
32,800
15
Adjusted EBITDA(2)
$
92,794
$
119,235
(22)
$
103,004
$
290,590
$
306,391
(5)
Funds Flow from Operations(2)
$
60,338
$
79,000
(24)
$
46,167
$
180,812
$
192,122
(6)
Capital Expenditures
$
52,921
$
43,080
23
$
61,273
$
169,525
$
179,707
(6)
(1) Sales volumes represent production NAR adjusted for inventory changes.
(2)Non-GAAP measures.
Operating netback, EBITDA, adjusted EBITDA, and funds flow from operations are non-GAAP measures that do not have any standardized meaning prescribed under GAAP. Management views these measures as financial performance measures. Investors are cautioned that these measures should not be construed as alternatives to oil sales, net income (loss) or other measures of financial performance as determined in accordance with GAAP. Our method of calculating these measures may differ from other companies and, accordingly, may not be comparable to similar measures used by other companies. Disclosure of each non-GAAP financial measure is preceded by the corresponding GAAP measure so as not to imply that more emphasis should be placed on the non-GAAP measure.
18
Operating netback, as presented, is defined as oil sales less operating and transportation expenses. Management believes that operating netback is a useful supplemental measure for management and investors to analyze financial performance and provides an indication of the results generated by our principal business activities prior to the consideration of other income and expenses. A reconciliation from oil sales to operating netback is provided in the table above.
EBITDA, as presented, is defined as net income (loss) adjusted for depletion, depreciation and accretion (“DD&A”) expenses, interest expense and income tax expense or recovery. Adjusted EBITDA, as presented, is defined as EBITDA adjusted for non-cash lease expense, lease payments, foreign exchange gain or loss, stock-based compensation expense or recovery, transaction costs related to the acquisition of i3 Energy and other gain or loss. Management uses this supplemental measure to analyze performance and income generated by our principal business activities prior to the consideration of how non-cash items affect that income and believes that this financial measure is useful supplemental information for investors to analyze our performance and our financial results. A reconciliation from net (loss) income to EBITDA and adjusted EBITDA is as follows:
Three Months Ended September 30,
Three Months Ended June 30,
Nine Months Ended September 30,
(Thousands of U.S. Dollars)
2024
2023
2024
2024
2023
Net income (loss)
$
1,133
$
6,527
$
36,371
$
37,426
$
(13,998)
Adjustments to reconcile net income (loss) to EBITDA and Adjusted EBITDA
DD&A expenses
55,573
55,019
55,490
167,213
163,424
Interest expense
19,892
13,503
18,398
56,714
38,017
Income tax expense (recovery)
20,767
40,333
(9,072)
29,090
106,948
EBITDA (non-GAAP)
$
97,365
$
115,382
$
101,187
$
290,443
$
294,391
Non-cash lease expense
1,370
1,235
1,381
4,164
3,488
Lease payments
(1,171)
(676)
(1,311)
(3,540)
(1,918)
Foreign exchange (gain) loss
(3,084)
1,717
(4,413)
(8,312)
8,126
Stock-based compensation (recovery) expense
(3,145)
1,931
6,160
6,376
3,748
Transaction costs
1,459
—
—
1,459
—
Other gain
—
(354)
—
—
(1,444)
Adjusted EBITDA (non-GAAP)
$
92,794
$
119,235
$
103,004
$
290,590
$
306,391
Funds flow from operations, as presented, is defined as net income (loss) adjusted for DD&A expenses, deferred income tax expense or recovery, stock-based compensation expense or recovery, amortization of debt issuance costs, non-cash lease expense, lease payments, unrealized foreign exchange gain and other gain or loss. Management uses this financial measure to analyze performance and income generated by our principal business activities prior to the consideration of how non-cash items affect that income 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 (loss) to funds flow from operations is as follows:
Three Months Ended September 30,
Three Months Ended June 30,
Nine Months Ended September 30,
(Thousands of U.S. Dollars)
2024
2023
2024
2024
2023
Net income (loss)
$
1,133
$
6,527
$
36,371
$
37,426
$
(13,998)
Adjustments to reconcile net income (loss) to funds flow from operations
DD&A expenses
55,573
55,019
55,490
167,213
163,424
Deferred income tax expense (recovery)
5,550
13,990
(51,361)
(32,332)
43,242
Stock-based compensation (recovery) expense
(3,145)
1,931
6,160
6,376
3,748
Amortization of debt issuance costs
3,109
1,594
2,760
9,175
3,394
Non-cash lease expense
1,370
1,235
1,381
4,164
3,488
Lease payments
(1,171)
(676)
(1,311)
(3,540)
(1,918)
Unrealized foreign exchange gain
(2,081)
(266)
(3,323)
(7,670)
(7,814)
Other gain
—
(354)
—
—
(1,444)
Funds flow from operations (non-GAAP)
$
60,338
$
79,000
$
46,167
$
180,812
$
192,122
19
Additional Operational Results
Three Months Ended September 30,
Three Months Ended June 30,
Nine Months Ended September 30,
(Thousands of U.S. Dollars)
2024
2023
% Change
2024
2024
2023
% Change
Oil sales
$
151,373
$
179,921
(16)
$
165,609
$
474,559
$
482,013
(2)
Operating expenses
46,060
49,367
(7)
47,035
141,561
139,227
2
Transportation expenses
3,911
3,842
2
5,690
14,185
10,599
34
Operating netback(1)
101,402
126,712
(20)
112,884
318,813
332,187
(4)
DD&A expenses
55,573
55,019
1
55,490
167,213
163,424
2
G&A expenses before stock-based compensation
9,491
8,307
14
10,967
31,240
29,052
8
G&A stock-based compensation (recovery) expense
(3,145)
1,931
(263)
6,160
6,376
3,748
70
Foreign exchange (gain) loss
(3,084)
1,717
(280)
(4,413)
(8,312)
8,126
(202)
Other gain
—
(354)
(100)
—
—
(1,444)
(100)
Interest expense
19,892
13,503
47
18,398
56,714
38,017
49
Transaction costs
1,459
—
100
—
1,459
—
100
80,186
80,123
—
86,602
254,690
240,923
6
Interest income
684
271
152
1,017
2,393
1,686
42
Income before income taxes
21,900
46,860
(53)
27,299
66,516
92,950
(28)
Current income tax expense
15,217
26,343
(42)
42,289
61,422
63,706
(4)
Deferred income tax expense (recovery)
5,550
13,990
(60)
(51,361)
(32,332)
43,242
(175)
20,767
40,333
(49)
(9,072)
29,090
106,948
(73)
Net income (loss)
$
1,133
$
6,527
(83)
$
36,371
$
37,426
$
(13,998)
367
Sales Volumes (NAR)
Total sales volumes, BOPD
25,464
26,396
(4)
25,191
25,578
26,284
(3)
Brent Price per bbl
$
78.71
$
85.92
(8)
$
85.03
$
81.82
$
81.94
—
Consolidated Results of Operations per bbl Sales Volumes NAR
Oil sales
$
64.61
$
74.09
(13)
$
72.24
$
67.71
$
67.18
1
Operating expenses
19.66
20.33
(3)
20.52
20.20
19.40
4
Transportation expenses
1.67
1.58
6
2.48
2.02
1.48
36
Operating netback(1)
43.28
52.18
(17)
49.24
45.49
46.30
(2)
DD&A expenses
23.72
22.66
5
24.21
23.86
22.77
5
G&A expenses before stock-based compensation
4.05
3.42
18
4.78
4.46
4.05
10
20
G&A stock-based compensation (recovery) expense
(1.34)
0.80
(268)
2.69
0.91
0.52
75
Foreign exchange (gain) loss
(1.32)
0.71
(286)
(1.93)
(1.19)
1.13
(205)
Other gain
—
(0.15)
(100)
—
—
(0.20)
(100)
Interest expense
8.49
5.56
53
8.03
8.09
5.30
53
Transaction costs
0.62
—
100
—
0.21
—
100
34.22
33.00
4
37.78
36.34
33.57
8
Interest income
0.29
0.11
164
0.44
0.34
0.23
48
Income before income taxes
9.35
19.29
(52)
11.90
9.49
12.96
(27)
Current income tax expense
6.50
10.85
(40)
18.45
8.76
8.88
(1)
Deferred income tax expense (recovery)
2.37
5.76
(59)
(22.41)
(4.61)
6.03
(176)
8.87
16.61
(47)
(3.96)
4.15
14.91
(72)
Net income (loss)
$
0.48
$
2.68
(82)
$
15.86
$
5.34
$
(1.95)
374
(1)Operating netback is a non-GAAP measure that does not have any standardized meaning prescribed under GAAP. Refer to note 2 “Non-GAAP measures” in “Financial and Operational Highlights” for a definition of this measure.
Oil Production and Sales Volumes, BOPD
Three Months Ended September 30,
Three Months Ended June 30,
Nine Months Ended September 30,
Average Daily Volumes (BOPD)
2024
2023
2024
2024
2023
WI Production Before Royalties
32,764
33,940
32,776
32,595
33,098
Royalties
(6,776)
(7,164)
(6,774)
(6,650)
(6,592)
Production NAR
25,988
26,776
26,002
25,945
26,506
Increase in Inventory
(524)
(380)
(811)
(367)
(222)
Sales
25,464
26,396
25,191
25,578
26,284
Royalties, % of WI Production Before Royalties
21
%
21
%
21
%
20
%
20
%
Oil production NARfor the three and nine months ended September 30, 2024, decreased by 3% and 2%, respectively, compared to the corresponding periods of 2023 due to lower volumes in the Acordionero field caused by downtime related to workovers, partially offset by higher production in the Costayaco field in Colombia and increased production from the Chanangue and Charapa Blocks in Ecuador related to positive exploration well drilling results. Oil production NAR was comparable to the prior quarter.
Royalties as a percentage of WI production for the three and nine months ended September 30, 2024 were comparable to corresponding periods of 2023 and the prior quarter.
21
22
The Midas Block includes the Acordionero field, the Suroriente Block includes the Cohembi field, and the Chaza Block includes the Costayaco and Moqueta fields. Ecuador includes the Charapa and Chanangue Blocks.
Realized price per bbl for the three months ended September 30, 2024, decreased by 13% compared to the corresponding period of 2023, primarily as a result of a 8% decrease in Brent price and higher differentials. For the three months ended September 30, 2024, Castilla, Vasconia and Oriente differentials per bbl increased to $8.83, $5.07 and $9.15 compared to $6.64, $3.59 and $7.69, respectively, in the corresponding period of 2023.
Realized price per bbl for the nine months ended September 30, 2024, increased by 1%, compared to the corresponding period of 2023, as a result of lower differentials. For the nine months ended September 30, 2024, Castilla Vasconia and Oriente differentials per bbl decreased to $8.62, $4.70 and $8.52 from $10.41, $5.66 and $10.85, respectively, in the corresponding period of 2023.
Compared to the prior quarter, the average realized price per bbl decreased by 11%, primarily due to a 7% decrease in Brent price and higher differentials in the current quarter.
23
Oil sales for the three months ended September 30, 2024, decreased by 16% to $151.4 million compared to the corresponding period of 2023 due to a 8% decrease in Brent price, 4% lower sales volumes and higher differentials.
Oil sales for the nine months ended September 30, 2024, decreased by 2% to $474.6 million, compared to the corresponding period of 2023 due to 3% lower sales volumes, partially offset by lower differentials.
Compared to the prior quarter, oil sales decreased by 9%, primarily due to a 7% decrease in Brent price and higher differentials, partially offset by a 1% increase in sales volumes.
The following table shows the effect of changes in realized price and sale volumes on our oil sales for the three and nine months ended September 30, 2024, compared to the prior quarter and the corresponding periods of 2023:
(Thousands of U.S. Dollars)
Three Months Ended September 30, 2024, Compared with Three Months Ended June 30, 2024
Three Months Ended September 30, 2024, Compared with Three Months Ended September 30, 2023
Nine Months Ended September 30, 2024 Compared with Nine Months Ended September 30, 2023
Oil sales for the comparative period
$
165,609
$
179,921
$
482,013
Realized sales price (decrease) increase effect
(17,872)
(22,199)
3,770
Sales volumes increase (decrease) effect
3,636
(6,349)
(11,224)
Oil sales for the three and nine months ended September 30, 2024
$
151,373
$
151,373
$
474,559
24
(U.S. Dollars per bbl Sales Volumes NAR)
Three Months Ended September 30, 2024, Compared with Three Months Ended June 30, 2024
Three Months Ended September 30, 2024, Compared with Three Months Ended September 30, 2023
Nine Months Ended September 30, 2024 Compared with Nine Months Ended September 30, 2023
Average realized price, net of transportation expenses for the comparative period
$
69.76
$
72.51
$
65.70
Decrease in benchmark oil prices
(6.32)
(7.21)
(0.12)
(Increase) decrease in quality and transportation discounts
(1.31)
(2.27)
0.65
Decrease (increase) in transportation expenses
0.81
(0.09)
(0.54)
Average realized price, net of transportation expenses,
for the three and nine months ended September 30, 2024
$
62.94
$
62.94
$
65.69
Average realized price, net of transportation expenses as a % of Brent
80
%
80
%
80
%
Operating Netback
Three Months Ended September 30,
Three Months Ended June 30,
Nine Months Ended September 30,
(Thousands of U.S. Dollars)
2024
2023
2024
2024
2023
Oil sales
$
151,373
$
179,921
$
165,609
$
474,559
$
482,013
Transportation expenses
(3,911)
(3,842)
(5,690)
(14,185)
(10,599)
147,462
176,079
159,919
460,374
471,414
Operating expenses
(46,060)
(49,367)
(47,035)
(141,561)
(139,227)
Operating netback(1)
$
101,402
$
126,712
$
112,884
$
318,813
$
332,187
(U.S. Dollars Per bbl Sales Volumes NAR)
Brent
$
78.71
$
85.92
$
85.03
$
81.82
$
81.94
Quality and transportation discounts
(14.10)
(11.83)
(12.79)
(14.11)
(14.76)
Average realized price
64.61
74.09
72.24
67.71
67.18
Transportation expenses
(1.67)
(1.58)
(2.48)
(2.02)
(1.48)
Average realized price net of transportation expenses
62.94
72.51
69.76
65.69
65.70
Operating expenses
(19.66)
(20.33)
(20.52)
(20.20)
(19.40)
Operating netback(1)
$
43.28
$
52.18
$
49.24
$
45.49
$
46.30
(1)Operating netback is a non-GAAP measure that does not have any standardized meaning prescribed under GAAP. Refer to note 2 “Non-GAAP measures” in “Financial and Operational Highlights” for a definition and reconciliation of this measure.
25
26
Operating expenses for the three months ended September 30, 2024, decreased by 7% to $46.1 million or by $0.67 per bbl to $19.66 compared to the corresponding period of 2023, primarily due to $0.96 per bbl lower lifting costs associated with power generation, equipment rental and road maintenance which were partially offset by $0.29 per bbl higher workover activities.
Operating expenses for the nine months ended September 30, 2024, increased by 2% to $141.6 million or by $0.80 per bbl to $20.20 per bbl compared to the corresponding period of 2023, primarily as a result of $1.02 per bbl higher workover costs which were partially offset by $0.22 per bbl lower power generation costs.
Compared to the prior quarter, operating expenses decreased by 2% from $47.0 million, or by $0.86 per bbl from $20.52 per bbl primarily due to $1.41 per bbl lower workover costs which were partially offset by $0.55 per bbl higher lifting costs primarily associated with inventory fluctuation in Ecuador and community aid initiatives in Colombia.
Transportation expenses
We have options to sell our oil through multiple pipelines and trucking routes. Each option has varying effects on realized sales price and transportation expenses. The following table shows the percentage of oil volumes we sold in Colombia and Ecuador using each option for the three and nine months ended September 30, 2024 and 2023, and the prior quarter:
Three Months Ended September 30,
Three Months Ended June 30,
Nine Months Ended September 30,
2024
2023
2024
2024
2023
Volume transported through pipeline
5
%
3
%
2
%
4
%
2
%
Volume sold at wellhead
46
%
47
%
45
%
47
%
46
%
Volume transported via truck to sales point
49
%
50
%
53
%
49
%
52
%
100
%
100
%
100
%
100
%
100
%
Volumes transported through pipeline or via truck receive a higher realized price but incur higher transportation expenses. Conversely, volumes sold at the wellhead have the opposite effect of a lower realized price, offset by lower transportation expenses.
Transportation expenses for the three and nine months ended September 30, 2024, increased by 2% and 34% to $3.9 million and $14.2 million, respectively, compared to the corresponding periods of 2023, due to an increase in trucking tariffs for Acordionero volumes and higher sales volumes transported in Ecuador during the current quarter.
27
On a per bbl basis, transportation expenses for the three and nine months ended September 30, 2024, increased by $0.09 and $0.54 to $1.67 and $2.02, respectively, compared to the corresponding periods of 2023 due to higher sales volumes transported in Ecuador, an increase in trucking tariffs and the utilization of the longer distance delivery points for the first half of 2024 in response to lower water levels in the Magdalena river.
Transportation expenses decreased by 31% or $0.81 per bbl from $5.7 million or $2.48 per bbl in the prior quarter due to the utilization of shorter distance delivery points during the current quarter.
DD&A Expenses
Three Months Ended September 30,
Three Months Ended June 30,
Nine Months Ended September 30,
2024
2023
2024
2024
2023
DD&A Expenses, thousands of U.S. Dollars
$
55,573
$
55,019
$
55,490
$
167,213
$
163,424
DD&A Expenses, U.S. Dollars per bbl
23.72
22.66
24.21
23.86
22.77
DD&A expenses for the three and nine months ended September 30, 2024, increased by 1% and 2% or by $1.06 and $1.08 per bbl, respectively, due to higher costs in the depletable base compared to the corresponding periods of 2023.
DD&A expenses were comparable to prior quarter. On a per bbl basis, DD&A expenses decreased by $0.49 per bbl compared to the prior quarter, due to higher sales volumes in the current quarter.
28
G&A Expenses
Three Months Ended September 30,
Three Months Ended June 30,
Nine Months Ended September 30,
(Thousands of U.S. Dollars)
2024
2023
% Change
2024
2024
2023
% Change
G&A Expenses before Stock-Based Compensation
$
9,491
$
8,307
14
$
10,967
$
31,240
$
29,052
8
G&A Stock-Based Compensation (Recovery) Expense
(3,145)
1,931
(263)
6,160
6,376
3,748
70
G&A Expenses, including Stock-Based Compensation
$
6,346
$
10,238
(38)
$
17,127
$
37,616
$
32,800
15
(U.S. Dollars Per bbl Sales Volumes NAR)
G&A Expenses before Stock-Based Compensation
$
4.05
$
3.42
18
$
4.78
$
4.46
$
4.05
10
G&A Stock-Based Compensation (Recovery) Expense
(1.34)
0.80
(268)
2.69
0.91
0.52
75
G&A Expenses, including Stock-Based Compensation
$
2.71
$
4.22
(36)
$
7.47
$
5.37
$
4.57
18
G&A expenses before stock-based compensation for the three and nine months ended September 30, 2024, increased by 14% and 8% or $0.63 and $0.41 per bbl, respectively, compared to the corresponding periods of 2023, primarily due to higher travel and general office expenses.
Compared to the prior quarter, G&A expenses before stock-based compensation decreased by 13% or $0.73 per bbl due to lower consulting, business development and travel expenses.
G&A expenses after stock-based compensation for the three months ended September 30, 2024, decreased by 38% or $1.51 per bbl, compared to the corresponding period of 2023, due to stock-based compensation recovery attributed to a lower share price during the current quarter.
G&A expenses after stock-based compensation for the nine months ended September 30, 2024, increased by 15%, or $0.80 per bbl, compared to the corresponding period of 2023 due to higher travel and general office expenses and higher stock-based compensation expense attributed to higher share price during current period.
Compared to the prior quarter, G&A expenses after stock-based compensation decreased by 63% or $4.76 per bbl due to stock-based compensation recovery attributed to a lower share price during the current quarter.
29
Foreign Exchange Gains and Losses
For the three and nine months ended September 30, 2024, we had a $3.1 million and $8.3 million gain on foreign exchange compared to a $1.7 million and $8.1 million loss on foreign exchange in the corresponding periods of 2023, respectively, and a $4.4 million gain on foreign exchange in the prior quarter. Accounts payable, taxes receivable and payable and deferred income taxes are considered monetary items and require translation from local currencies to U.S. dollar functional currency at each balance sheet date. This translation was the primary source of the foreign exchange gains and losses in the periods.
30
The following table presents the change in the U.S. dollar against the Colombian peso and Canadian dollar for the three and nine months ended September 30, 2024 and 2023:
Three Months Ended September 30,
Nine Months Ended September 30,
2024
2023
2024
2023
Change in the U.S. dollar against the Colombian peso
comparable
weakened by
strengthened by
weakened by
—%
3%
9%
16%
Change in the U.S. dollar against the Canadian dollar
weakened by
strengthened by
strengthened by
comparable
1%
2%
2%
—%
Income Tax Expense
Three Months Ended September 30,
Nine Months Ended September 30,
(Thousands of U.S. Dollars)
2024
2023
2024
2023
Income before income tax
$
21,900
$
46,860
$
66,516
$
92,950
Current income tax expense
$
15,217
$
26,343
$
61,422
$
63,706
Deferred income tax (recovery) expense
5,550
13,990
(32,332)
43,242
Income tax expense
$
20,767
$
40,333
$
29,090
$
106,948
Effective tax rate
95
%
86
%
44
%
115
%
Current income tax expense was $61.4 million for the nine months ended September 30, 2024, compared to $63.7 million in the corresponding period of 2023, due to lower taxable income in Colombia, partially offset by additional current tax expense related to a tax planning strategy.
The deferred income tax for the nine months ended September 30, 2024, was a recovery of $32.3 million primarily as a result of the recognition of additional tax losses resulting from a tax planning strategy, which were partially offset by depreciation being higher than accounting depreciation and the use of tax losses to offset taxable income in Colombia.
For the nine months ended September 30, 2024, the difference between the effective tax rate of 44% and the 50% Colombian tax rate was primarily due to a lower impact of foreign taxes, 2022 true-up related to tax planning strategy and non-taxable foreign exchange adjustments. These were partially offset by an increase in valuation allowance, other permanent differences, non-deductible stock-based compensation and non-deductible royalties in Colombia.
We strategically revised our 2022 tax return to use our tax receivables balance to offset current tax liabilities, rather than applying net operating loss carryforwards. This decision was driven by the expectation of higher future tax rates and increased profitability. As a result, there was an increase in current tax expense, which was offset by long-term tax receivables, ensuring no impact on cash flows. This approach preserved our net operating loss carryforwards for future periods, providing greater tax benefits and flexibility in recovering tax receivables, while strengthening our equity position.
For the nine months ended September 30, 2023, the difference between the effective tax rate of 115% and the 50% Colombian tax rate was primarily due to an increase in non-deductible foreign exchange adjustments, the impact of foreign taxes, non-deductible royalties in Colombia and non-deductible stock-based compensation. These were partially offset by a decrease in valuation allowance.
The deferred income tax expense for the nine months ended September 30, 2023, was $43.2 million, primarily as a result of tax depreciation being higher than accounting depreciation and the use of tax losses to offset taxable income in Colombia.
31
Net (Loss) Income and Funds Flow from Operations (a Non-GAAP Measure)
(Thousands of U.S. Dollars)
Three Months Ended September 30, 2024, Compared with Three Months Ended June 30, 2024
% change
Three Months Ended September 30, 2024, Compared with Three Months Ended September 30, 2023
% change
Nine Months Ended September 30, 2024 Compared with Nine Months Ended September 30, 2023
% change
Net income (loss) for the comparative period
$
36,371
$
6,527
$
(13,998)
Increase (decrease) due to:
Sales price
(17,872)
(22,199)
3,770
Sales volumes
3,636
(6,349)
(11,224)
Expenses:
Operating
975
3,307
(2,334)
Transportation
1,779
(69)
(3,586)
Cash G&A
1,476
(1,184)
(2,188)
Net lease payments
129
(360)
(946)
Interest, excluding amortization of deferred financing fees
(1,145)
(4,874)
(12,916)
Realized foreign exchange
(87)
2,986
16,582
Transaction costs
(1,459)
(1,459)
(1,459)
Current taxes
27,072
11,126
2,284
Interest income
(333)
413
707
Net change in funds flow from operations(1) from comparative period
14,171
(18,662)
(11,310)
Expenses:
Depletion, depreciation and accretion
(83)
(554)
(3,789)
Deferred tax
(56,911)
8,440
75,574
Amortization of deferred financing fees
(349)
(1,515)
(5,781)
Stock-based compensation
9,305
5,076
(2,628)
Unrealized foreign exchange
(1,242)
1,815
(144)
Other gain
—
(354)
(1,444)
Net lease payments
(129)
360
946
Net change in net income (loss)
(35,238)
(5,394)
51,424
Net income for the current period
$
1,133
97%
$
1,133
83%
$
37,426
367%
(1) Funds flow from operations is a non-GAAP measure that does not have any standardized meaning prescribed under GAAP. Refer to note 2 “Non-GAAP measures” in "Financial and Operational Highlights" for a definition and reconciliation of this measure.
32
Capital expenditures during the three months ended September 30, 2024, were $52.9 million.
(Millions of U.S. Dollars)
Colombia
Ecuador
Total
Exploration:
Drilling and Completions
$
—
$
21.5
$
21.5
Civil Works
—
4.5
4.5
Other
3.0
3.5
6.5
Total Exploration
$
3.0
$
29.5
$
32.5
Development:
Drilling and Completions
$
1.3
$
—
$
1.3
Facilities
4.0
4.1
8.1
Civil Works
2.4
—
2.4
Other
8.6
—
8.6
Total Development
$
16.3
$
4.1
$
20.4
Total Company
$
19.3
$
33.6
$
52.9
During the three months ended September 30, 2024, we commenced drilling the following wells in Colombia and Ecuador:
Number of wells (Gross and Net)
Ecuador
Exploration
3
Total Company
3
During the three months ended September 30, 2024, we spud three exploration wells in Ecuador, two of which were producing and one was in-progress as at September 30, 2024. No wells were drilled in Colombia.
Liquidity and Capital Resources
As at
(Thousands of U.S. Dollars)
September 30, 2024
% Change
December 31, 2023
Cash and Cash Equivalents
$
277,645
347
$
62,146
Credit Facility
$
—
(100)
$
36,364
6.25% Senior Notes due 2025
$
24,828
—
$
24,828
7.75% Senior Notes due 2027
$
24,201
—
$
24,201
9.50% Senior Notes due 2029
$
737,590
51
$
487,590
We believe that our capital resources, including cash on hand and cash generated from operations, will provide us with sufficient liquidity to meet our strategic objectives and planned capital program for the next 12 months, given the current oil price trends and production levels. We may also access capital markets to pursue financing, including for repayment of debt in the future. In accordance with our investment policy, available cash balances are held in our primary cash management banks or may be invested in U.S. or Canadian government-backed federal, provincial or state securities or other money market instruments with high credit ratings and short-term liquidity. We believe that our current financial position provides us with the flexibility to respond to both internal growth opportunities and those available through acquisitions. We intend to pursue growth opportunities and acquisitions from time to time, which may require significant capital to be located in basins or countries beyond our current operations, involve joint ventures, or be sizable compared to our current assets and operations.
33
As at December 31, 2023, we had a $36.4 million balance outstanding under the Company’s credit facility. On February 6, 2024, the outstanding balance of $36.4 million was fully re-paid and the credit facility was terminated.
On August 19, 2024, we entered into a credit facility agreement (“Loan Facility”) with a market leader in the global commodities industry to fund the cash consideration payable to i3 Energy’s shareholders in connection with the acquisition of i3 Energy and associated costs (Note 12). The Loan Facility has a borrowing base of £80.0 million (US$107.0 million) and bears interest based on a three-month secured overnight financing rate posted by the Federal Reserve Bank of New York plus a margin of 3.00% per annum for the first three months after the initial drawdown and 6.00% per annum thereafter. The Loan Facility is subject to a commitment fee equal to the higher of $0.5 million and 0.5% of the borrowing base converted to US dollars using the agreed upon GBP to USD foreign exchange rate at the time of initial drawdown date. The commitment fee is payable on the earlier of the date of the initial drawdown and the three months after signing date of the Loan Facility. The undrawn amounts under the Loan Facility bear interest at 0.5% per annum, based on the available amount. The Loan Facility was terminated on October 31, 2024.
As of September 30, 2024, there was no outstanding balance under the Loan Facility.
On February 6, 2024 and September 18, 2024, we issued additional $100.0 million and $150.0 million of 9.50% Senior Notes due October 2029 (the “new 9.50% Senior Notes”), and received cash proceeds of $88.0 million and $139.8 million, respectively. The new 9.50% Senior Notes have the same terms and provisions as the previously issued $487.6 million 9.50% Senior Notes except for the issue price. $100.0 million of new 9.50% Senior Notes accrue interest from October 20, 2023, the date of issuance of previously issued 9.50% Senior Notes and $150.0 million of new 9.50% Senior Notes accrue interest from April 15, 2024, the date of last interest payment. We received a cash payment of $2.8 million and $6.1 million related to the accrued interest of the $100.0 million and $150.0 million of new 9.50% Senior Notes, respectively.
At September 30, 2024, we had a $24.8 million aggregate principal amount of 6.25% Senior Notes due 2025, $24.2 million aggregate principal amount of 7.75% Senior Notes due 2027, and $737.6 million aggregate principal amount of 9.50% Senior Notes due 2029, outstanding.
During the year ended December 31, 2023, we implemented a share re-purchase program (the “2023 Program”), which expired on November 2, 2024, through the facilities of the Toronto Stock Exchange (“TSX”), the NYSE American and eligible alternative trading platforms in Canada or United States. Under the 2023 Program, we were able to re-purchase at prevailing market prices up to 3,234,914 shares of Common Stock, representing approximately 10% of the public float as of October 20, 2023. Re-purchases are subject to prevailing market conditions, the trading price of our Common Stock, our financial performance and other conditions.
During the three and nine months ended September 30, 2024, we re-purchased 371,130 and 1,662,110 shares at a weighted average price of $9.37 and $7.31 per share (three and nine months ended September 30, 2023 - nil and 1,328,650 shares under the 2022 program at a weighted average price of nil and $8.15 per share), respectively. We cancelled 28,612 held as treasury shares as at December 31, 2023 and cancelled 371,130 and 1,662,110 shares re-purchased during the three and nine months ended September 30, 2024, respectively. During the period from November 3, 2023 to September 30, 2024, we have re-purchased 2,703,914 shares under the 2023 Program.
On October 31, 2024, we acquired all of the issued and outstanding common shares of i3 Energy for $225.4 million, consisting of cash consideration of $168.9 million, a cash dividend of $4.2 million and approximately 6.0 million shares of Gran Tierra’s Common Stock, the fair value of which was determined to be $52.3 million based on the closing price of the Company’s shares on the acquisition date. i3 Energy is an oil and gas exploration and production company, incorporated in England and Wales with production assets located in the Western Canadian Sedimentary basin. The acquisition was accounted for as a business combination using the acquisition method. During the three and nine months ended September 30, 2024, we incurred approximately $1.5 million in transaction costs associated with the acquisition of i3 Energy.
In connection with i3 Energy acquisition closing on October 31, 2024, we amended and restated the existing revolving credit facility agreement of i3 Energy Canada Ltd. (“i3 Energy Canada”) with National Bank of Canada dated March 22, 2024. As a result of the amendment and restatement, among other things, the borrowing base was revised to C$100.0 million (US$74.1 million) with available commitment of a C$50.0 million (US$37.0 million) revolving credit facility comprised of C$35.0 million (US$25.9 million) syndicated facility and C$15.0 million (US$11.1 million) of operating facility. Subject to the next borrowing base redetermination which will occur on or before June 30, 2025, the revolving credit facility is available until October 31, 2025 with a repayment date of October 31, 2026, which may be extended by further periods of up to 364 days, subject to lender approval. The drawn down amounts under the revolving credit facility can either be in Canadian or U.S. dollars and bear interest rates equal to either the Canadian prime rate or U.S. Base Rate plus a margin ranging from 2.00% to 4.00% per annum or for CORRA loans and SOFR loans plus a margin ranging from 3.00% to 5.00% per annum. Undrawn
34
amounts under the revolving credit facility bear standby fee ranging from 0.75% to 1.25% per annum. In each case, the margin or standby fee, as applicable is based on Net Debt to EBITDA ratio of Gran Tierra Canada Ltd.
Cash Flows
The following table presents our primary sources and uses of cash and cash equivalents and restricted cash and cash equivalents for the periods presented:
Nine Months Ended September 30,
(Thousands of U.S. Dollars)
2024
2023
Sources of cash and cash equivalents:
Net income (loss)
$
37,426
$
(13,998)
Adjustments to reconcile net income (loss) to Adjusted EBITDA(1) and funds flow from operations(1)
DD&A expenses
167,213
163,424
Interest expense
56,714
38,017
Income tax expense
29,090
106,948
Non-cash lease expenses
4,164
3,488
Lease payments
(3,540)
(1,918)
Foreign exchange (gain) loss
(8,312)
8,126
Stock-based compensation expense
6,376
3,748
Transaction costs
1,459
—
Other gain
—
(1,444)
Adjusted EBITDA(1)
290,590
306,391
Current income tax expense
(61,422)
(63,706)
Contractual interest and other financing expenses
(47,539)
(34,623)
Transaction costs
(1,459)
—
Realized foreign exchange gain (loss)
642
(15,940)
Funds flow from operations(1)
180,812
192,122
Proceeds from issuance of Senior Notes, net of issuance costs
222,528
—
Proceeds from exercise of stock options
367
8
Proceeds from debt, net of issuance costs
—
48,125
Foreign exchange gain on cash and cash equivalents and restricted cash and cash equivalents
986
5,897
Net changes in assets and liabilities from operating activities
32,164
—
Changes in non-cash investing working capital
5,702
—
442,559
246,152
Uses of cash and cash equivalents:
Additions to property, plant and equipment
(169,525)
(179,707)
Net changes in assets and liabilities from operating activities
—
(34,235)
Changes in non-cash investing working capital
—
(11,051)
Repayment of debt
(36,364)
—
Purchase of Senior Notes
—
(6,805)
Re-purchase of shares of Common Stock
(12,144)
(10,825)
Settlement of asset retirement obligations
(262)
(376)
Lease payments
(9,422)
(5,101)
(227,717)
(248,100)
Net increase (decrease) in cash and cash equivalents and restricted cash and cash equivalents
$
214,842
$
(1,948)
35
(1) Adjusted EBITDA and funds flow from operations are non-GAAP measures which do not have any standardized meaning prescribed under GAAP. Refer to note 2 “Non-GAAP measures” in “Financial and Operational Highlights” for a definition and reconciliation of this measure.
One of the primary sources of variability in our cash flows from operating activities is the fluctuation in oil prices. Sales volume changes, costs related to operations and debt transactions also impact cash flows. Our cash flows from operating activities are also impacted by foreign currency exchange rate changes. During the three months ended September 30, 2024, funds flow from operations decreased by 24% compared to the corresponding period of 2023, due to a decrease in Brent price, higher quality and transportation discounts, lower sales volumes and higher interest expense, partially offset by lower operating expenses and lower current income tax expense. Funds flow from operations for the nine months ended September 30, 2024, decreased by 6%, compared to the corresponding period of 2023, primarily due to lower sales volumes, higher operating costs and higher interest expense, partially offset by lower quality and transportation discounts and lower current income tax expense.
Critical Accounting Policies and Estimates
Our critical accounting policies and estimates are disclosed in Item 7 of our 2023 Annual Report on Form 10-K and have not changed materially since the filing of that document.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Commodity price risk
Our principal market risk relates to oil prices. Oil prices are volatile and unpredictable and influenced by concerns over world supply and demand imbalance and many other market factors outside of our control. Our revenues are from oil sales at ICE Brent adjusted for quality differentials.
Foreign currency risk
Foreign currency risk is a factor for our Company but is ameliorated to a certain degree by the nature of expenditures and revenues in the countries where we operate. Our reporting currency is U.S. dollars and 100% of our revenues are related to the U.S. dollar price of Brent adjusted for quality differentials. We receive 100% of our revenues in U.S. dollars and the majority of our capital expenditures is in U.S. dollars or is based on U.S. dollar prices. The majority of value added taxes, operating and G&A expenses in Colombia are in the local currency. Certain G&A expenses incurred at our head office in Canada are denominated in Canadian dollars. While we operate in South America exclusively, the majority of our acquisition expenditures have been valued and paid in U.S. dollars.
Additionally, foreign exchange gains and losses result primarily from the fluctuation of the U.S. dollar to the Colombian peso due to our accounts payable, current and deferred tax assets and liabilities which are monetary assets and liabilities denominated in the local currency of the Colombian foreign operations. As a result, a foreign exchange gain or loss must be calculated on conversion to the U.S. dollar reporting currency.
Interest Rate Risk
Interest rate risk is the risk that future cash flows will fluctuate as a result of changes in market interest rates. As our Senior Notes bear interest at fixed rates, we have no material exposure to interest rate fluctuations.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
We have established disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, or Exchange Act). Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by Gran Tierra in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report, as required by Rule l3a-15(b) of the Exchange Act. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that Gran Tierra’s disclosure controls and procedures were effective as of September 30, 2024.
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Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended September 30, 2024, that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
PART II - Other Information
Item 1. Legal Proceedings
See Note 9 in the Notes to the Condensed Consolidated Financial Statements (Unaudited) in Part I, Item 1 of this Quarterly Report on Form 10-Q, which is incorporated herein by reference, for any material developments with respect to matters previously reported in our Annual Report on Form 10-K for the year ended December 31, 2023, and any material matters that have arisen since the filing of such report.
Item 1A. Risk Factors
There are numerous factors that affect our business and results of operations, many of which are beyond our control. In addition to information set forth in this quarterly report on Form 10-Q, including in Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, you should carefully read and consider the factors set out in Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023. These risk factors could materially affect our business, financial condition and results of operations. The unprecedented nature of ongoing conflicts in several parts of the world, along with volatility in the worldwide economy and oil and gas industry may make it more difficult to identify all the risks to our business, results of operations and financial condition and the ultimate impact of identified risks.
We may fail to successfully integrate the assets and operations of i3 Energy or realize the anticipated benefits and operating synergies expected from the acquisition of i3 Energy, which could adversely affect our business, financial condition and operating results.
The success of our acquisition of i3 Energy will depend, in significant part, on our ability to successfully integrate i3 Energy and realize the anticipated strategic benefits and synergies from the acquisition. The combination of independent businesses is complex, costly and time consuming, and we have devoted, and will continue to devote, significant management attention and resources to integrating the respective business practices and operations of the companies. Further, the anticipated benefits of the acquisition may not be realized fully or at all, or may take longer to realize than we expect. Actual operating, technological, strategic and revenue opportunities, if achieved at all, may be less significant than we expect or may take longer to achieve than anticipated. If we are not able to achieve these objectives and realize the anticipated benefits and synergies expected from the acquisition within a reasonable time, our business, financial condition and operating results may be adversely affected.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
(a) Total Number of Shares Purchased
(b) Average Price Paid per Share (1)
(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
(d)
Maximum Number of Shares that May Yet be Purchased Under the Plans or Programs (2)
July 1-31, 2024
300,418
$
9.71
300,418
601,712
August 1-31, 2024
70,712
$
7.93
70,712
531,000
September 1-30, 2024
—
$
—
—
531,000
Total
371,130
$
9.37
371,130
531,000
(1) Including commission fees paid to the broker to re-purchase the shares of Common Stock.
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(2) On October 20, 2023, we implemented a share re-purchase program (the “2023 Program”) through the facilities of the TSX, the NYSE American and eligible alternative trading platforms in Canada or United States. Under the 2023 Program, the Company is able to purchase at prevailing market prices up to 3,234,914 shares of Common Stock, representing approximately 10% of the public float as of October 20, 2023. The 2023 Program expired on November 2, 2024.
Item 5. Other Information
a) On October 31, 2024, we acquired all of the issued and outstanding common shares of i3 Energy for $225.4 million, consisting of cash consideration of $168.9 million, a cash dividend of $4.2 million and approximately 6.0 million shares of Gran Tierra’s Common Stock, the fair value of which was determined to be $52.3 million based on the closing price of the Company’s shares on the acquisition date. i3 Energy is an oil and gas exploration and production company, incorporated in England and Wales with production assets located in the Western Canadian Sedimentary basin. The acquisition was accounted for as a business combination using the acquisition method. During the three and nine months ended September 30, 2024, we incurred approximately $1.5 million in transaction costs associated with the acquisition of i3 Energy.
b) In connection with i3 Energy acquisition closing on October 31, 2024, we amended and restated the existing revolving credit facility agreement of i3 Energy Canada Ltd. (“i3 Energy Canada”) with National Bank of Canada dated March 22, 2024. As a result of the amendment and restatement, among other things, the borrowing base was revised to C$100.0 million (US$74.1 million) with available commitment of a C$50.0 million (US$37.0 million) revolving credit facility comprised of C$35.0 million (US$25.9 million) syndicated facility and C$15.0 million (US$11.1 million) of operating facility. Subject to the next borrowing base redetermination which will occur on or before June 30, 2025, the revolving credit facility is available until October 31, 2025 with a repayment date of October 31, 2026, which may be extended by further periods of up to 364 days, subject to lender approval. The drawn down amounts under the revolving credit facility can either be in Canadian or U.S. dollars and bear interest rates equal to either the Canadian prime rate or U.S. Base Rate plus a margin ranging from 2.00% to 4.00% per annum or for CORRA loans and SOFR loans plus a margin ranging from 3.00% to 5.00% per annum. Undrawn amounts under the revolving credit facility bear standby fee ranging from 0.75% to 1.25% per annum. In each case, the margin or standby fee, as applicable is based on Net Debt to EBITDA ratio of Gran Tierra Canada Ltd.
The foregoing description of the Credit Agreement is not complete and is qualified in its entirety by reference to the Credit Agreement, a copy of which is filed as Exhibit 10.3 to this Quarterly Report on Form 10-Q.
c) During the three months ended September 30, 2024, no director or Section 16 officer adopted or terminated any Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements (in each case, as defined in Item 408(a) of Regulation S-K).
101.INS XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
104.The cover page from Gran Tierra Energy Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2024, formatted in Inline XBRL (included within the Exhibit 101 attachments).
* Certain schedules or appendices to this agreement or form have been omitted pursuant to Item 601(a)(5) of Regulation S-K. A copy of any omitted schedule or appendix will be furnished supplementally to the SEC upon request.
† Certain confidential information contained in this agreement has been omitted because it is both (i) not material and (ii) the type of information that the Company treats as private or confidential.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
GRAN TIERRA ENERGY INC.
Date: November 4, 2024
/s/ Gary S. Guidry
By: Gary S. Guidry
President and Chief Executive Officer
(Principal Executive Officer)
Date: November 4, 2024
/s/ Ryan Ellson
By: Ryan Ellson
Executive Vice President and Chief Financial Officer
