Gran Tierra Energy Inc. (
"Gran Tierra" or
the "Company") (NYSE American:GTE)(TSX:GTE)(LSE:GTE) today
announced the Company's financial and operating results for the
fourth quarter and year ended December 31, 2019. All
dollar amounts are in United States (“
U.S.”)
dollars unless otherwise indicated.
Production and reserves amounts are on an
average working interest before royalties ("WI")
basis unless otherwise indicated. Per barrel
("bbl") of oil equivalent ("BOE")
amounts are on a WI sales basis. Production is expressed in bbl of
oil per day ("bopd") or BOE per day
("boepd"), while reserves are expressed in bbl,
BOE or million BOE ("MMBOE"), unless otherwise
indicated. For per BOE amounts based on net after royalty
("NAR") production, see Gran Tierra's Annual
Report on Form 10-K filed February 26, 2020. Unless otherwise
expressly stated, all reserves, future net revenue and ancillary
information contained in this press release have been calculated in
compliance with Canadian National Instrument 51-101 - Standards of
Disclosure for Oil and Gas Activities ("NI
51-101") and the Canadian Oil and Gas Evaluation Handbook
("COGEH") and are based on the Company's 2019
year-end estimated reserves as evaluated by the Company's
independent qualified reserve evaluator McDaniel & Associates
Consultants Ltd. ("McDaniel") in a report with an
effective date of December 31, 2019 (the "GTE McDaniel
Reserves Report"). The following reserves categories are
discussed in this press release: Proved ("1P"), 1P
plus Probable ("2P") and 2P plus Possible
("3P").
2019 Key Highlights
- Increased the Company's 1P reserves
to 79 MMBOE (100% oil), representing 200% 1P reserves replacement,
and grew 1P net present value ("NPV") discounted at 10%
("NPV10") to $1.5 billion before tax ($1.3 billion
after tax) and 1P net asset value ("NAV") to $2.50
per share before tax(1) ($1.83 per share after tax(2))
- Maintained the Company's 2P
reserves at 142 MMBOE (100% oil) and increased 2P NPV10 to $2.9
billion before tax ($2.3 billion after tax) and 2P NAV to $6.23 per
share before tax(1) ($4.49 per share after tax(2))
- Gran Tierra's existing producing
assets are forecast to generate free cash flow(3) after
development expenditures and taxes over the next five years of
approximately $1.4 billion for 1P reserves, $2.1 billion for 2P
reserves and $2.5 billion for 3P reserves; after adjusting for
internally forecast general and administrative
("G&A") costs and interest(4), the free cash
flow(3) potential over the next five years is approximately
$1.1 billion for 1P reserves and $1.8 billion for 2P reserves
- Generated 2019 net income of $39
million ($0.10 per share basic and diluted), EBITDA(5) of $364
million, adjusted EBITDA(5) of $326 million, and funds flow from
operations(5) of $272 million ($0.72 per share basic and
diluted)
- Fourth quarter 2019 capital
expenditures of approximately $69 million were down 41% as expected
from third quarter 2019's level of $116 million; this reduction
reflects the completion of the extensive facilities expansion at
Acordionero, which was required to fully implement that field's
waterflood to enhance ultimate oil recovery
- Generated 2019 oil and gas sales of
$571 million and $44.77 per BOE
- Achieved 2019 operating netback(5)
of $28.81 per BOE
- 2019 average production was 34,817 boepd (100% oil), in line
with the revised 2019 guidance of 34,800 to 35,000 boepd
- Production was negatively impacted
in 2019 by downtime from electric submersible pump
("ESP") failures in Acordionero and the temporary
shut-in of several wells in Acordionero with high gas-oil
ratios
- The ESP failure rate has significantly declined:
- Following the completion of the
Acordionero central processing facility expansion in second half
2019, the water injection facilities and gas-to-power turbines
continue operating with increasing reliability
- In fourth quarter 2019, there were
3 ESP failures in October, 3 in November and only 1 in
December
- This significant improvement in ESP
performance is a result of increased power reliability and
increased reservoir pressure due to the substantial ramp up in
water injection at Acordionero starting in mid-2019
- The increase in water injection in
mid-2019 has significantly reduced gas production in Acordionero
from a high of 18 million cubic feet per day
("mmcfd") down to the current 8 mmcfd, all of
which is either consumed to generate power or re-injected into the
reservoir for pressure maintenance
- Returned $38 million to shareholders during 2019 through the
repurchase of 20 million common shares
2020 Guidance Update
- Since the beginning of 2020,
response to the coronavirus has caused a decrease in the Brent oil
price and a widening of crude oil price differentials in Colombia;
as a result, Gran Tierra has elected to amend the Company's planned
2020 capital budget by reducing capital by $25 million; Gran
Tierra's 2020 revised capital budget is $175 to $195 million; the
deferral of capital is primarily in exploration and infrastructure;
if the economic headwinds persist into the second half of 2020,
further deferrals of capital could be made; Gran Tierra operates 29
of its 32 blocks and has control over capital allocation
timing
- Suroriente and
PUT-7: Similar to the events of June 2019, local farmers
have set up blockades in the southern Putumayo region to protest
against the Colombian national government; the previous blockade in
June 2019 lasted approximately three weeks; these protests are not
directed at the oil industry or Gran Tierra; Gran Tierra has
pro-actively shut-in its fields resulting in approximately 4,000
boepd being shut-in; the blockades have also prevented the drilling
of two development wells in Cohembi; a rig is contracted but the
Company is waiting for the blockades to be resolved before
mobilizing the rig to the field
- 2020 expected free cash
flow(6) and the anticipated collection of approximately $100
million of value-added tax receivables will be used to reduce the
amount drawn on the Company's credit facility
Message to Shareholders
Gary Guidry, President and Chief Executive
Officer of Gran Tierra, commented: "2019 was both an exciting and
challenging year for Gran Tierra. Throughout the course of the
second half of 2019, we accomplished the full implementation and
growth of our waterflood in the Acordionero field, which is
forecast to generate approximately $1.2 billion of free cash
flow(3) over the next five years and has a December 31, 2019,
before tax 2P NPV10 of $1.8 billion. Our four core assets are all
under waterflood at different stages of maturity and are forecast
to generate significant free cash flow(3) for the next several
years.
Our main challenge was a delay in the expansion
of the production facilities in Acordionero which temporarily
impacted this field's oil production rate. We have learned a number
of operational lessons that will be applied to future projects.
During 2020, we are deploying an integrated plan
for free cash flow(6) growth from our key producing areas,
including a disciplined approach to leveraging our world class
exploration portfolio. We are reducing our 2020 capital program to
a new range of $175 to $195 million as a prudent response to the
drop in world oil prices and widening differentials during 2020 to
date.
Our 2020 capital budget is a balanced,
returns-focused program which prioritizes free cash
flow(6) generation and returns over the rate of development
and production growth. We plan to prioritize debt reduction with
our free cash flow(6). We see material potential in our world class
exploration portfolio located in highly prospective geological
basins in Colombia and Ecuador. We have budgeted a measured, yet
robust high-impact exploration campaign, mostly directed at our
large landholdings in the Putumayo Basin of Colombia and Oriente
Basin of Ecuador. Our 2020 plans are also aligned with Gran
Tierra's 'Beyond Compliance Policy' which focuses on our
commitments to environmental, social and governance excellence.
When there are significant opportunities and potential benefits to
the environment or communities, Gran Tierra voluntarily strives to
go beyond what is legally required to protect the environment and
provide social benefits, because it is the right thing to do."
Operations Update
- Acordionero: Gran
Tierra's 2020 development drilling program of 12 to 14 wells is
underway; the AC-55, -56,-57 and -58 oil wells have been drilled
and cased:
- AC-55 was brought on production
January 24, 2020, setting a record time (from spud date to on
production date) of 15 days; from January 24 to February 25, 2020,
the well has produced at approximately 500 boepd
- AC-56 was brought on production
January 31, 2020; from January 31 to February 25, 2020, the well
has produced at approximately 600 boepd
- AC-57 was brought on production
February 17, 2020; from February 17 to February 25, 2020, the well
has produced at approximately 540 boepd
- AC-58 was brought on production
this week and is currently recovering completion fluids
- Voidage Replacement Ratio
("VRR"): Gran Tierra continues to actively manage the
waterflood of the Acordionero field by sector, allowing for optimum
water placement and field performance; the Acordionero field’s
current instantaneous and cumulative VRR's are 1.11 and 0.28,
respectively, both representing increases of approximately 180%
since June 2019
-
Ayombero-Chuira: Snubbing unit operations at
the Ayombero-2 and -3 wells have made significant progress in
setting up the two wells for future operations; wellbore strings in
the cased portions of the wells were both recovered successfully;
the snubbing unit is currently at the Chuira-1 well, where the
upper completion has been recovered; the well is currently flowing
to surface and is cleaning up
- Putumayo Drilling
Program: The five-well Putumayo development drilling
program (3 in Costayaco, 2 in Cohembi) is projected to commence in
March 2020 at Costayaco and later at Cohembi (Suroriente); four of
the wells are targeting well-developed waterflooded horizons; the
fifth well will be a horizontal producer targeting the less
developed M2 Limestone at Costayaco; the drilling of the Cohembi
wells and related spend will be deferred until the blockades are
resolved
- Cocona-2 Exploration Well,
PUT-1 Block: this well is targeting the fractured
A-Limestone play trend, and the additional oil zones which were
successfully encountered in the Vonu-1 exploration well; Cocona-2
has been drilled through the target formations to a planned total
depth of 10,603 feet; currently well operations have been suspended
due to mechanical failure associated with the drilling rig; a new
rig has been sourced; based on encouraging results in the N Sand,
A-Limestone and U Sand from logging while drilling and cuttings
analysis, this well is expected to be put on production test in the
first half of 2020, depending on rig scheduling
- Oil Hedging: Gran
Tierra has ICE Brent oil hedges in place covering 6,000 bopd of
production in first half 2020 with a floor price of $55 per bbl and
a weighted average ceiling price of $69.05 per bbl
- Foreign Exchange
Hedging: Gran Tierra has Colombian peso
("COP") hedges in place for 2020 of approximately
$40 million equivalent, with a weighted average floor price of
3,305 COP per U.S. dollar and a weighted average cap price of 3,423
COP per U.S. dollar
Gran Tierra's Commitment to Go "Beyond
Compliance" in Environmental, Social and Governance
Safety
- In 2019, Gran Tierra had its best
safety record in terms of Lost Time Injuries
("LTI") and Total Recordable Injuries; the
Company's 2019 LTI ratio of 0.02 was 80% below the industry average
for Latin American exploration and production companies in 2019, as
reported by the International Association of Oil and Gas
Producers
Environment
- In partnership with the
international non-governmental organization Conservation
International, Gran Tierra has committed to reforesting 1,000
hectares of land and securing and maintaining 18,000 hectares of
forest through the NaturAmazonas project in the Putumayo Basin;
Gran Tierra's total NaturAmazonas investment in the Andes-Amazon
rainforest corridor through this project is forecast to be $13
million over 5 years
- Gran Tierra has planted a total of
560,112 trees and has conserved, preserved or reforested 1,367
hectares of land through all of its environmental efforts
Reducing Green House Gas
Emissions
- For the last 4 years, Gran Tierra
has voluntarily released an assessment of its greenhouse gas
("GHG") emissions
- Gran Tierra is reducing GHG
emissions at its facilities through gas-to-power projects that
conserve excess natural gas, that would otherwise be flared, and
uses it instead for power generation; in 2019, Gran Tierra
completed a $25 million gas-to-power project at the Acordionero
field, the company’s single biggest producing
asset; previously, gas-to-power projects were completed at the
Moqueta field in 2018 and the Costayaco field in 2017
- The NaturAmazonas project alone is
expected to sequester approximately 8.7 million tonnes of CO2 over
its lifetime
Economic Opportunities
- Almost 16,000 local labor
opportunities have been created by Gran Tierra over the past 3
years
Human Rights
- In 2019, Gran Tierra released an
updated and comprehensive Human Rights policy that applies to both
our employees and contractors and adopted the United Nations'
Guiding Principles on Business and Human Rights
Financial and Operational Highlights
(all amounts in $000s, except per share and BOE
amounts)
|
Year Ended |
Three Months Ended |
|
December 31, |
December 31, |
December 31, |
December 31, |
|
2019 |
2018 |
2019 |
2018 |
Net Income (Loss) |
$ |
38,690 |
|
$ |
102,616 |
|
$ |
27,004 |
|
$ |
(10,840 |
) |
Net Income (Loss) Per
Share - Basic & Diluted |
$ |
0.10 |
|
$ |
0.26 |
|
$ |
0.07 |
|
$ |
(0.03 |
) |
|
|
|
|
|
Oil and Gas
Sales |
$ |
570,983 |
|
$ |
613,431 |
|
$ |
127,934 |
|
$ |
136,639 |
|
Operating
Expenses |
(142,086 |
) |
(111,272 |
) |
(37,967 |
) |
(33,253 |
) |
Workover
Expenses |
(41,118 |
) |
(34,437 |
) |
(11,093 |
) |
(8,515 |
) |
Transportation
Expenses |
(20,400 |
) |
(28,993 |
) |
(4,233 |
) |
(7,969 |
) |
Operating
Netback(5) |
$ |
367,379 |
|
$ |
438,729 |
|
$ |
74,641 |
|
$ |
86,902 |
|
|
|
|
|
|
G&A Expenses
Before Stock-based Compensation |
$ |
33,300 |
|
$ |
31,369 |
|
$ |
8,518 |
|
$ |
14,115 |
|
G&A Expenses
Stock-Based Compensation |
1,430 |
|
8,114 |
|
338 |
|
(11,805 |
) |
G&A Expenses,
Including Stock-Based Compensation |
$ |
34,730 |
|
$ |
39,483 |
|
$ |
8,856 |
|
$ |
2,310 |
|
|
|
|
|
|
EBITDA(5) |
$ |
364,276 |
|
$ |
376,718 |
|
$ |
111,830 |
|
69,184 |
|
|
|
|
|
|
Adjusted
EBITDA(5) |
$ |
325,893 |
|
$ |
375,932 |
|
$ |
65,888 |
|
80,443 |
|
|
|
|
|
|
Funds Flow from
Operations(5) |
$ |
272,409 |
|
$ |
306,449 |
|
$ |
49,669 |
|
$ |
52,137 |
|
Funds Flow from
Operations(5) Per Share - Basic & Diluted |
$ |
0.72 |
|
$ |
0.78 |
|
$ |
0.14 |
|
$ |
0.13 |
|
|
|
|
|
|
Capital
Expenditures |
$ |
379,314 |
|
$ |
347,093 |
|
$ |
68,735 |
|
$ |
88,542 |
|
|
|
|
|
|
Average Daily Volumes (boepd) |
|
|
|
|
Working Interest
Production Before Royalties |
34,817 |
|
36,209 |
|
32,924 |
|
38,156 |
|
Royalties |
(5,802 |
) |
(7,156 |
) |
(5,428 |
) |
(6,960 |
) |
Production
NAR |
29,015 |
|
29,053 |
|
27,496 |
|
31,196 |
|
Decrease (Increase) in
Inventory |
125 |
|
(336 |
) |
306 |
|
(137 |
) |
Sales |
29,140 |
|
28,717 |
|
27,802 |
|
31,059 |
|
Royalties, % of WI
Production Before Royalties |
17 |
% |
20 |
% |
16 |
% |
18 |
% |
|
|
|
|
|
Per BOE (7) |
|
|
|
|
Brent |
$ |
64.16 |
|
$ |
71.69 |
|
$ |
62.42 |
|
$ |
68.08 |
|
Quality and
Transportation Discount |
(10.48 |
) |
$ |
(13.16 |
) |
(12.40 |
) |
$ |
(20.26 |
) |
Royalties |
(8.91 |
) |
(11.69 |
) |
(8.11 |
) |
(8.92 |
) |
Average Realized
Price |
44.77 |
|
46.84 |
|
41.91 |
|
38.90 |
|
Transportation
Expenses |
(1.60 |
) |
(2.21 |
) |
(1.39 |
) |
(2.27 |
) |
Average Realized Price
Net of Transportation Expenses |
43.17 |
|
44.63 |
|
40.52 |
|
36.63 |
|
Operating
Expenses |
(11.14 |
) |
(8.49 |
) |
(12.44 |
) |
(9.58 |
) |
Workover
Expenses |
(3.22 |
) |
(2.63 |
) |
(3.63 |
) |
(2.42 |
) |
Operating
Netback(5) |
28.81 |
|
33.51 |
|
24.45 |
|
24.63 |
|
Cash G&A
Expenses |
(2.61 |
) |
(2.40 |
) |
(2.79 |
) |
(4.02 |
) |
Severance
Expenses |
(0.14 |
) |
(0.18 |
) |
(0.23 |
) |
(0.10 |
) |
Realized Foreign
Exchange Gain |
0.09 |
|
0.12 |
|
0.48 |
|
0.51 |
|
Realized Financial
Instruments Loss |
(0.26 |
) |
(2.59 |
) |
(0.33 |
) |
(2.21 |
) |
Interest Expense,
Excluding Amortization of Debt Issuance Costs |
(3.13 |
) |
(1.85 |
) |
(3.87 |
) |
(1.78 |
) |
Interest Income
(Expense) |
0.05 |
|
0.16 |
|
0.01 |
|
(0.01 |
) |
Other
loss |
(0.11 |
) |
— |
|
(0.45 |
) |
— |
|
Net lease
payments |
(0.01 |
) |
— |
|
0.02 |
|
— |
|
Current Income Tax
Expense |
(1.34 |
) |
(3.35 |
) |
(1.03 |
) |
(2.19 |
) |
Cash
Netback(5) |
$ |
21.35 |
|
$ |
23.42 |
|
$ |
16.26 |
|
$ |
14.83 |
|
|
|
|
|
|
Share Information (000s) |
|
|
|
|
Common Stock
Outstanding, End of Period |
366,982 |
|
387,079 |
|
366,982 |
|
387,079 |
|
Weighted Average
Number of Common and Exchangeable Shares Outstanding -
Basic |
376,495 |
|
390,930 |
|
366,982 |
|
390,173 |
|
Weighted Average
Number of Common and Exchangeable Shares Outstanding -
Diluted |
376,508 |
|
427,120 |
|
366,982 |
|
390,173 |
|
|
As at December 31 |
|
2019 |
2018 |
% Change |
Cash, Cash Equivalents and Current Restricted Cash and Cash
Equivalents |
$ |
8,817 |
|
$ |
52,309 |
|
(83 |
) |
|
|
|
|
Working Capital
(Deficiency) Surplus, Including Cash and Cash
Equivalents |
$ |
91,347 |
|
$ |
33,145 |
|
176 |
|
|
|
|
|
Revolving Credit
Facility |
$ |
118,000 |
|
$ |
— |
|
— |
|
|
|
|
|
Senior
Notes |
$ |
600,000 |
|
$ |
300,000 |
|
100 |
|
|
|
|
|
Convertible
Notes |
$ |
— |
|
$ |
115,000 |
|
(100 |
) |
Additional information on 2019 expenses:
- Quality and Transportation
Discount: decreased in 2019 to $10.48 per BOE compared to $13.16 in
2018; the decrease was due to renegotiation of certain sales
contracts which had lower quality and transportation discount
compared to the sales contracts used for 2018
- Operating Expenses: increased to
$11.14 per BOE compared with $8.49 per BOE in 2018, primarily as a
result of higher power generation and rental costs; with the
commissioning of the expanded production facilities and the
gas-to-power project in Acordionero, both total operating costs and
per BOE operating costs are expected to decrease in 2020
- Workover Expenses: increased to
$3.22 per BOE compared with $2.63 per BOE in 2018, primarily as a
result of the higher frequency of ESP failures during 2019; with
the commissioning of the gas-to-power project, which has resulted
in more reliable power
- Transportation Expenses: decreased
by 28% to $1.60 per BOE in 2019 from $2.21 per BOE in 2018 due to a
higher percentage of volumes being sold at the wellhead, where
transportation is netted against sales price
- G&A Expenses: increased to
$2.61 per BOE in 2018 from $2.40 per BOE in 2018
(1) Based on December 31, 2019 before tax NPV10
of $1.5 billion for 1P reserves and $2.9 billion for 2P reserves,
minus year-end 2019 net debt of $627 million, comprised of gross
amount of senior notes of $600 million, gross amount of
reserves-based credit facility of $118 million and working capital
surplus of $91 million, divided by the number of shares of Gran
Tierra's common stock issued and outstanding at December 31, 2019
of 367.0 million, respectively. Net working capital and debt at
December 31, 2019, prepared in accordance with GAAP.(2) Based on
December 31, 2019 after tax NPV10 of $1.3 billion for 1P reserves
and $2.3 billion for 2P reserves, minus year-end 2019 net debt of
$627 million, comprised of gross amount of senior notes of
$600 million, gross amount of reserves-based credit facility of
$118 million and working capital surplus of $91 million, divided by
the number of shares of Gran Tierra's common stock issued and
outstanding at December 31, 2019 of 367.0 million, respectively.
Net working capital and debt at December 31, 2019, prepared in
accordance with GAAP.(3) Free cash flow in this context is not a
defined term under GAAP and is called future net revenue in the GTE
McDaniel Reserves Report. The non-GAAP term of free cash flow,
after development expenditures and taxes over the next five years,
reconciles to the nearest GAAP term of oil and gas sales, which is
called sales revenue in the GTE McDaniel Reserves Report. Refer to
"Future Net Revenue" in this press release for the reconciliations
between sales revenue and future net revenue. Gran Tierra is unable
to provide a quantitative reconciliation of free cash flow after
development expenditures, taxes, interest and G&A costs over
the next five years to its most directly comparable forward-looking
GAAP measure because management cannot reliably predict certain of
the necessary components of such forward-looking GAAP measure.
Refer to "Non-GAAP Measures" in this press release.(4) Internally
forecast G&A costs are $170 million and interest is $126
million.(5) Operating netback, earnings before interest, taxes,
depletion, depreciation, accretion and impairment, EBITDA adjusted
for loss on redemption on convertible notes and loss or gain on
investment (“DD&A”)
("EBITDA") ("Adjusted EBITDA"),
funds flow from operations and cash netback, are non-GAAP measures
and do not have a standardized meaning under GAAP. Refer to
"Non-GAAP Measures" in this press release for descriptions of these
non-GAAP measures and reconciliations to the most directly
comparable measures calculated and presented in accordance with
GAAP.(6) Cash flow refers to the GAAP line item “net cash provided
by operating activities”. Free cash flow is a non-GAAP measure and
does not have a standardized meaning under GAAP and is defined as
cash flow less projected 2020 capital spending. Refer to "Non-GAAP
Measures" in this press release.(7) Per BOE amounts are based on WI
sales before royalties. For per BOE amounts based on NAR
production, see Gran Tierra's Annual Report on Form 10-K filed on
February 26, 2020.
Conference Call Information:
Gran Tierra will host its fourth quarter and
full year 2019 results conference call on Thursday,
February 27, 2020, at 9:00 a.m. Mountain Time, 11:00 a.m.
Eastern Time. Interested parties may access the conference call by
dialing 1-844-348-3792 or 1-614-999-9309 (North America),
0800-028-8438 or 020-3107-0289 (United Kingdom) or 01-800-518-5094
(Colombia). The call will also be available via webcast at
www.grantierra.com.
About Gran Tierra Energy
Inc.
Gran Tierra Energy Inc. is an international oil
and gas exploration and production company, headquartered in
Calgary, Canada, incorporated in the United States, trading on the
NYSE American (GTE), the Toronto Stock Exchange (GTE) and the
London Stock Exchange (GTE), and operating in South America. Gran
Tierra holds interests in producing and prospective properties in
Colombia and prospective properties in Ecuador. Gran Tierra has a
strategy that focuses on establishing a portfolio of producing
properties, plus production enhancement and exploration
opportunities to provide a base for future growth.
Gran Tierra's Securities and Exchange Commission
filings are available on the Securities and Exchange Commission
website at http://www.sec.gov, and Gran Tierra’s reports filed with
the Canadian Securities Administrators are available on SEDAR at
http://www.sedar.com.
Contact Information
For investor and media inquiries please
contact:
Gary Guidry, President & Chief Executive
Officer
Ryan Ellson, Executive Vice President &
Chief Financial Officer
Rodger Trimble, Vice President, Investor
Relations
Tel: +1.403.265.3221
For more information on Gran Tierra please go
to: www.grantierra.com.
Forward Looking Statements and Legal
Advisories:
This press release contains opinions, forecasts,
projections, and other statements about future events or results
that constitute forward-looking statements within the meaning of
the United States Private Securities Litigation Reform Act of 1995,
Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended, and
financial outlook and forward looking information within the
meaning of applicable Canadian securities laws (collectively,
"forward-looking statements"). All statements
other than statements of historical facts included in this press
release regarding our financial position, estimated quantities and
net present value of reserves, business strategy, plans and
objectives for future operations, capital spending plans and those
statements preceded by, followed by or that otherwise include the
words “believe,” “expect,” “anticipate,” “forecast,” “budget,”
“will,” “estimate,” “target,” “project,” “plan,” “should,”
“guidance”, "strives" or similar expressions are forward-looking
statements. Such forward-looking statements include, but are not
limited to, the Company’s expectations, capital program, repayment
of borrowings under the credit facility, future sources of funding
for capital expenditures and guidance, including for certain future
production estimates, forecast prices, five-year expected free cash
flow, expected future net cash provided by operating activities ,
net debt, capital expenditures and certain associated metrics, the
Company’s strategies, the Company’s goals on reforestation and
flaring, the Company's plans to benefit the environment or
communities in which it operates and the Company's operations
including planned operations and oil production. Statements
relating to “reserves” are also deemed to be forward-looking
statements, as they involve the implied assessment, based on
certain estimates and assumptions, including that the reserves
described can be profitably produced in the future.
The forward-looking statements contained in this
press release reflect several material factors and expectations and
assumptions of Gran Tierra including, without limitation, that Gran
Tierra will continue to conduct its operations in a manner
consistent with its current expectations, the accuracy of testing
and production results and seismic data, pricing and cost estimates
(including with respect to commodity pricing and exchange rates),
rig availability, the risk profile of planned exploration
activities, the effects of drilling down-dip, the effects of
waterflood and multi-stage fracture stimulation operations, the
extent and effect of delivery disruptions, and the general
continuance of current or, where applicable, assumed operational,
regulatory and industry conditions including in areas of potential
expansion, and the ability of Gran Tierra to execute its current
business and operational plans in the manner currently planned.
Gran Tierra believes the material factors, expectations and
assumptions reflected in the forward-looking statements are
reasonable at this time but no assurance can be given that these
factors, expectations and assumptions will prove to be correct.
Among the important factors that could cause
actual results to differ materially from those indicated by the
forward-looking statements in this press release are: prices and
markets for oil and natural gas are unpredictable and tend to
fluctuate significantly; Gran Tierra’s operations are located in
South America, and unexpected problems can arise due to guerrilla
activity or local blockades; technical difficulties and operational
difficulties may arise which impact the production, transport or
sale of our products; geographic, political and weather conditions
can impact the production, transport or sale of Gran Tierra's
products; the ability of Gran Tierra to execute its business plan;
the risk that unexpected delays and difficulties in developing
currently owned properties may occur; the ability to replace
reserves and production, and develop and manage reserves on an
economically viable basis; the timely receipt of regulatory or
other required approvals for our operating activities; the failure
of exploratory drilling to result in commercial wells; unexpected
delays due to the limited availability of drilling equipment and
personnel; the risk that current global economic, health and credit
market conditions may impact oil prices and oil consumption more
than Gran Tierra currently predicts, which could cause Gran Tierra
to further modify its strategy and capital spending program; and
the risk factors detailed from time to time in Gran Tierra’s
periodic reports filed with the Securities and Exchange Commission,
including, without limitation, under the caption "Risk Factors" in
Gran Tierra's Annual Report on Form 10-K for the year ended
December 31, 2019 filed February 26, 2020 and its other
filings with the SEC. These filings are available on the SEC
website at http://www.sec.gov and on SEDAR at www.sedar.com.
Although the current guidance, capital spending program and long
term strategy of Gran Tierra are based upon the current
expectations of the management of Gran Tierra, should any one of a
number of issues arise, Gran Tierra may find it necessary to alter
its business strategy and/or capital spending program and there can
be no assurance as at the date of this press release as to how
those funds may be reallocated or strategy changed and how that
would impact Gran Tierra's results of operations and financial
position. Forecasts and expectations that cover multi-year time
horizons or are associated with 2P reserves inherently involve
increased risks and actual results may differ materially.
All forward-looking statements included in this
press release are made as of the date of this press release and the
fact that this press release remains available does not constitute
a representation by Gran Tierra that Gran Tierra believes these
forward-looking statements continue to be true as of any subsequent
date. Actual results may vary materially from the expected results
expressed in forward-looking statements. Gran Tierra disclaims any
intention or obligation to update or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise, except as expressly required by applicable securities
laws. Gran Tierra’s forward-looking statements are expressly
qualified in their entirety by this cautionary statement.
The estimates of future production, free cash
flow, free cash flow after adjusting for internally forecast
G&A and interest, total capital expenditures and certain
expenses set forth in this press release may be considered to be
future-oriented financial information or a financial outlook for
the purposes of applicable Canadian securities laws. Financial
outlook and future-oriented financial information contained in this
press release about prospective financial performance, financial
position or cash flows are based on assumptions about future
events, including economic conditions and proposed courses of
action, based on management’s assessment of the relevant
information currently available, and to become available in the
future. In particular, this press release contains projected
operational and financial information for 2020 and the next five
years. These projections contain forward-looking statements and are
based on a number of material assumptions and factors set out
above. Actual results may differ significantly from the projections
presented herein. These projections may also be considered to
contain future-oriented financial information or a financial
outlook. The actual results of Gran Tierra’s operations for any
period will likely vary from the amounts set forth in these
projections, and such variations may be material. See above for a
discussion of the risks that could cause actual results to vary.
The future-oriented financial information and financial outlooks
contained in this press release have been approved by management as
of the date of this press release. Readers are cautioned that any
such financial outlook and future-oriented financial information
contained herein should not be used for purposes other than those
for which it is disclosed herein. The Company and its management
believe that the prospective operational and financial information
has been prepared on a reasonable basis, reflecting management’s
best estimates and judgments, and represent, to the best of
management’s knowledge and opinion, the Company’s expected course
of action. However, because this information is highly subjective,
it should not be relied on as necessarily indicative of future
results.
Non-GAAP Measures
This press release includes non-GAAP financial
measures as further described herein. These non-GAAP measures do
not have a standardized meaning under GAAP. Investors are cautioned
that these measures should not be construed as alternatives to net
loss or other measures of financial performance as determined in
accordance with GAAP. Gran Tierra's method of calculating these
measures may differ from other companies and, accordingly, they may
not be comparable to similar measures used by other companies. Each
non-GAAP financial measure is presented along with the
corresponding GAAP measure so as not to imply that more emphasis
should be placed on the non-GAAP measure.
Before tax and after tax free cash flow are
non-GAAP terms and are called before tax and after tax net revenue
in the GTE McDaniel Reserves Report, respectively. The non-GAAP
term of before tax free cash flow, and free cash flow after
development expenditures and taxes over the next five years,
reconciles to the nearest GAAP term of oil and gas sales, which is
called sales revenue in the GTE McDaniel Reserves Report. Before
tax net revenue is calculated by McDaniel by subtracting total
royalties, operating costs, future development capital and
abandonment and reclamation costs from sales revenue. After tax
free cash flow is calculated by McDaniel by subtracting future
taxes from before tax net revenue. Refer to "Future Net Revenue" in
this press release for the applicable reconciliation. Gran Tierra
is unable to provide a quantitative reconciliation of free cash
flow after development expenditures, taxes, interest and G&A
costs over the next five years to its most directly comparable
forward-looking GAAP measure because management cannot reliably
predict certain of the necessary components of such forward-looking
GAAP measure. Gran Tierra is also unable to provide forward-looking
oil and gas sales, the GAAP measures most directly comparable to
such measures of free cash flow, due to the impracticality of
quantifying certain components required by GAAP as a result of the
inherent volatility in the value of certain financial instruments
held by the Company and the inability to quantify the effectiveness
of commodity price derivatives used to manage the variability in
cash flows associated with the forecast sale of its oil production
and changes in commodity prices. Refer to "Oil and Gas Metrics" in
this press release for a description of how this non-GAAP measure
is calculated. Management uses free cash flow as a measure of the
Company's ability to fund its exploration program.
Operating netback as presented is defined as oil
and gas sales less operating, workover and transportation expenses
and operating netback per BOE as presented is defined as average
realized price per BOE less operating, workover and transportation
expenses per BOE. Cash netback, as presented is defined as net
income or loss adjusted for DD&A expenses, deferred income tax
expense, amortization of debt issuance costs, non-cash lease
expense, lease payments, unrealized foreign exchange loss or gain,
loss on redemption of Convertible Notes, non-cash operating
expenses or recoveries, non-cash G&A expenses and unrealized
financial instruments gains and losses. Cash netback per BOE, as
presented is defined as cash netback over WI sales volumes.
Management believes that operating netback and cash netback are
useful supplemental measures for investors to analyze financial
performance and provide an indication of the results generated by
Gran Tierra's principal business activities prior to the
consideration of other income and expenses. See the table entitled
Financial and Operational Highlights, above for the components of
operating netback and operating netback per BOE. A reconciliation
from net income or loss to cash netback is as follows:
|
|
Year Ended |
|
Three Months Ended |
|
|
December
31, |
|
December 31, |
Cash Netback -
Non-GAAP Measure ($000s) |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Net Income (loss) |
|
$ |
38,690 |
|
|
$ |
102,616 |
|
|
$ |
27,004 |
|
|
$ |
(10,840 |
) |
Adjustments to reconcile net
income (loss) to cash netback |
|
|
|
|
|
|
|
|
DD&A expenses |
|
225,033 |
|
|
197,867 |
|
|
60,603 |
|
|
60,169 |
|
Deferred income tax expense |
|
40,227 |
|
|
4,968 |
|
|
8,475 |
|
|
5,086 |
|
Amortization of debt issuance costs |
|
3,376 |
|
|
3,183 |
|
|
802 |
|
|
854 |
|
Non-cash lease expense |
|
1,806 |
|
|
— |
|
|
440 |
|
|
— |
|
Lease payments |
|
(1,969 |
) |
|
— |
|
|
(366 |
) |
|
— |
|
Unrealized foreign exchange loss (gain) |
|
1,803 |
|
|
11,511 |
|
|
(3,500 |
) |
|
11,352 |
|
Loss on redemption of Convertible Notes |
|
11,501 |
|
|
— |
|
|
196 |
|
|
— |
|
Non-cash operating expenses (recovery) |
|
— |
|
|
185 |
|
|
— |
|
|
(373 |
) |
Non-cash G&A expenses |
|
1,430 |
|
|
8,114 |
|
|
338 |
|
|
(11,805 |
) |
Unrealized financial instruments gain |
|
(49,488 |
) |
|
(21,635 |
) |
|
(44,323 |
) |
|
(2,306 |
) |
Cash
netback |
|
$ |
272,409 |
|
|
$ |
306,809 |
|
|
$ |
49,669 |
|
|
$ |
52,137 |
|
EBITDA, as presented, is defined as net income
or loss adjusted for DD&A expenses, interest expense and income
tax expense. Adjusted EBITDA, as presented, is defined as EBITDA
adjusted for loss on redemption of Convertible Notes and investment
gains or losses. Management uses this supplemental measure to
analyze performance and income or loss generated by our principal
business activities prior to the consideration of how non-cash
items affect that income or loss, and believes that these financial
measures are also useful supplemental information for investors to
analyze our performance and our financial results. A reconciliation
from net income or loss (GAAP) to EBITDA and Adjusted EBITDA is as
follows:
|
|
Year Ended |
|
Three Months Ended |
|
|
December 31, |
|
December 31, |
EBITDA - Non-GAAP
Measure ($000s) |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Net Income (loss) |
|
$ |
38,690 |
|
|
$ |
102,616 |
|
|
$ |
27,004 |
|
|
$ |
(10,840 |
) |
Adjustments to reconcile net
income (loss) to EBITDA and Adjusted EBITDA |
|
|
|
|
|
|
|
|
DD&A expenses |
|
225,033 |
|
|
197,867 |
|
|
60,603 |
|
|
60,169 |
|
Interest expense |
|
43,268 |
|
|
27,364 |
|
|
12,613 |
|
|
12,765 |
|
Income tax expense |
|
57,285 |
|
|
48,871 |
|
|
11,610 |
|
|
7,090 |
|
EBITDA |
|
364,276 |
|
|
376,718 |
|
|
111,830 |
|
|
69,184 |
|
Loss on redemption of Convertible Notes |
|
11,501 |
|
|
— |
|
|
196 |
|
|
— |
|
Investment (gain) loss |
|
(49,884 |
) |
|
(786 |
) |
|
(46,138 |
) |
|
11,259 |
|
Adjusted
EBITDA |
|
$ |
325,893 |
|
|
$ |
375,932 |
|
|
$ |
65,888 |
|
|
$ |
80,443 |
|
Funds flow from operations, as presented, is net
income or loss adjusted for DD&A expenses, deferred tax expense
or recovery, stock-based compensation expense, amortization of
debt issuance costs, non-cash lease expense, lease payments, cash
settlement of RSUs, unrealized foreign exchange, financial
instruments gains or losses, cash settlement of financial
instruments and other loss. Management uses this financial measure
to analyze performance and income or loss generated by our
principal business activities prior to the consideration of how
non-cash items affect that income or loss, and believes that this
financial measure is also useful supplemental information for
investors to analyze performance and our financial results. A
reconciliation from net income or loss to funds flow from
operations is as follows:
|
|
Year Ended |
Three Months Ended |
|
|
December
31, |
|
December 31, |
Funds Flow From
Operations - Non-GAAP Measure ($000s) |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Net Income (loss) |
|
$ |
38,690 |
|
|
$ |
102,616 |
|
|
$ |
27,004 |
|
|
$ |
(10,840 |
) |
Adjustments to reconcile net
income (loss) to funds flow from operations |
|
|
|
|
|
|
|
|
DD&A expenses |
|
225,033 |
|
|
197,867 |
|
|
60,603 |
|
|
60,169 |
|
Deferred tax expense |
|
40,227 |
|
|
4,968 |
|
|
8,475 |
|
|
5,086 |
|
Stock-based compensation
expense |
|
1,430 |
|
|
8,299 |
|
|
338 |
|
|
(12,178 |
) |
Amortization of debt issuance
costs |
|
3,376 |
|
|
3,183 |
|
|
802 |
|
|
854 |
|
Non-cash lease
expense |
|
1,806 |
|
|
— |
|
|
440 |
|
|
— |
|
Lease payments |
|
(1,969 |
) |
|
— |
|
|
(366 |
) |
|
— |
|
Cash settlement of RSUs |
|
— |
|
|
(360 |
) |
|
— |
|
|
— |
|
Unrealized foreign exchange
loss (gain) |
|
1,803 |
|
|
11,511 |
|
|
(3,500 |
) |
|
11,352 |
|
Financial instruments (gain)
loss |
|
(46,215 |
) |
|
12,296 |
|
|
(43,325 |
) |
|
5,456 |
|
Cash settlement of financial
instruments |
|
(3,273 |
) |
|
(33,931 |
) |
|
(998 |
) |
|
(7,762 |
) |
Loss on redemption of
Convertible Notes |
|
11,501 |
|
|
— |
|
|
196 |
|
|
— |
|
Funds flow from
operations |
|
$ |
272,409 |
|
|
$ |
306,449 |
|
|
$ |
49,669 |
|
|
$ |
52,137 |
|
DISCLOSURE OF OIL AND GAS
INFORMATION
Gran Tierra's Statement of Reserves Data and
Other Oil and Gas Information on Form 51-101F1 dated effective as
at December 31, 2019 , which includes disclosure of its oil and gas
reserves and other oil and gas information in accordance with NI
51-101 forming the basis of this press release, is available on
SEDAR at www.sedar.com.
Estimates of net present value and future net
revenue contained herein do not necessarily represent fair market
value of reserves. Estimates of reserves, and future net revenue
for individual properties may not reflect the same level of
confidence as estimates of reserves and future net revenue for all
properties, due to the effect of aggregation. There is no assurance
that the forecast price and cost assumptions applied by McDaniel in
evaluating Gran Tierra's reserves and future net revenue will be
attained and variances could be material. See Gran Tierra's press
release dated January 28, 2020 for a summary of the price forecasts
employed by McDaniel in the GTE McDaniel Reserves Report and other
information regarding the disclosed future net revenue.
All evaluations of future net revenue contained
in the GTE McDaniel Reserves Report are after the deduction of
royalties, operating costs, development costs, production costs and
abandonment and reclamation costs but before consideration of
indirect costs such as administrative, overhead and other
miscellaneous expenses. It should not be assumed that the estimates
of future net revenues presented in this press release represent
the fair market value of the reserves. There are numerous
uncertainties inherent in estimating quantities of crude oil and
natural gas reserves and the future cash flows attributed to such
reserves. The reserve and associated cash flow information set
forth in the GTE McDaniel Reserves Report are estimates only and
there is no guarantee that the estimated reserves will be
recovered. Actual reserves may be greater than or less than the
estimates provided therein.
BOEs have been converted on the basis of six
thousand cubic feet (“Mcf”) natural gas to 1 bbl
of oil. BOEs may be misleading, particularly if used in isolation.
A BOE conversion ratio of 6 Mcf: 1 bbl is based on an energy
equivalency conversion method primarily applicable at the burner
tip and does not represent a value equivalency at the wellhead. In
addition, given that the value ratio based on the current price of
oil as compared with natural gas is significantly different from
the energy equivalent of six to one, utilizing a BOE conversion
ratio of 6 Mcf: 1 bbl would be misleading as an indication of
value.
References to a formation where evidence of
hydrocarbons has been encountered is not necessarily an indicator
that hydrocarbons will be recoverable in commercial quantities or
in any estimated volume. Gran Tierra's reported production is a mix
of light crude oil and medium and heavy crude oil for which there
is not a precise breakdown since the Company's oil sales volumes
typically represent blends of more than one type of crude oil. Well
test results should be considered as preliminary and not
necessarily indicative of long-term performance or of ultimate
recovery. Well log interpretations indicating oil and gas
accumulations are not necessarily indicative of future production
or ultimate recovery. If it is indicated that a pressure transient
analysis or well-test interpretation has not been carried out, any
data disclosed in that respect should be considered preliminary
until such analysis has been completed. References to thickness of
“oil pay” or of a formation where evidence of hydrocarbons has been
encountered is not necessarily an indicator that hydrocarbons will
be recoverable in commercial quantities or in any estimated
volume.
Future Net Revenue
Future net revenue reflects McDaniel’s forecast
of revenue estimated using forecast prices and costs, arising from
the anticipated development and production of resources, after the
deduction of royalties, operating costs, development costs and
abandonment and reclamation costs but before consideration of
indirect costs such as administrative, overhead and other
miscellaneous expenses. The estimate of future net revenue below
does not necessarily represent fair market value.
|
Consolidated Properties at December 31, 2019 |
|
Proved (1P) Total Future Net Revenue ($
million) |
|
Forecast Prices and Costs |
|
|
Years |
Sales Revenue |
Total Royalties |
Operating Costs |
Future Development Capital |
Abandonment and Reclamation Costs |
Future Net Revenue Before Future Taxes |
Future Taxes |
Future Net Revenue After Future Taxes* |
2020-2024 (5 Years) |
3,391 |
|
(486 |
) |
(914 |
) |
(385 |
) |
(2 |
) |
1,604 |
|
(210 |
) |
1,394 |
|
Remainder |
1,419 |
|
(163 |
) |
(688 |
) |
(1 |
) |
(60 |
) |
507 |
|
(143 |
) |
364 |
|
Total
(Undiscounted) |
4,810 |
|
(649 |
) |
(1,602 |
) |
(386 |
) |
(62 |
) |
2,111 |
|
(353 |
) |
1,758 |
|
Total
(Discounted @ 10%) |
3,446 |
|
(481 |
) |
(1,051 |
) |
(346 |
) |
(23 |
) |
1,545 |
|
(247 |
) |
1,298 |
|
|
Consolidated Properties at December 31, 2019 |
|
Proved Plus Probable (2P) Total Future Net Revenue ($
million) |
|
Forecast Prices and Costs |
|
|
Years |
Sales Revenue |
Total Royalties |
Operating Costs |
Future Development Capital |
Abandonment and Reclamation Costs |
Future Net Revenue Before Future Taxes |
Future Taxes |
Future Net Revenue After Future Taxes* |
2020-2024 (5 Years) |
4,844 |
|
(686 |
) |
(1,056 |
) |
(566 |
) |
(1 |
) |
2,535 |
|
(472 |
) |
2,063 |
|
Remainder |
4,168 |
|
(562 |
) |
(1,299 |
) |
(1 |
) |
(75 |
) |
2,231 |
|
(59 |
) |
2,172 |
|
Total
(Undiscounted) |
9,012 |
|
(1,248 |
) |
(2,355 |
) |
(567 |
) |
(76 |
) |
4,766 |
|
(531 |
) |
4,235 |
|
Total
(Discounted @ 10%) |
5,580 |
|
(780 |
) |
(1,371 |
) |
(496 |
) |
(19 |
) |
2,914 |
|
(638 |
) |
2,276 |
|
*The after-tax net present value of the
Company's oil and gas properties reflects the tax burden on the
properties on a stand-alone basis. It does not consider the
corporate tax situation, or tax planning. It does not provide an
estimate of the value at the Company level which may be
significantly different. The Company's financial statements should
be consulted for information at the Company level.
Definitions
Proved reserves are those reserves that can be
estimated with a high degree of certainty to be recoverable. It is
likely that the actual remaining quantities recovered will exceed
the estimated proved reserves.
Probable reserves are those additional reserves
that are less certain to be recovered than proved reserves. It is
equally likely that the actual remaining quantities recovered will
be greater or less than the sum of the estimated proved plus
probable reserves.
Possible reserves are those additional reserves
that are less certain to be recovered than Probable reserves. There
is a 10% probability that the quantities actually recovered will
equal or exceed the sum of Proved plus Probable plus Possible
reserves.
Certain terms used in this press release but not
defined are defined in NI 51-101, CSA Staff Notice 51-324 - Revised
Glossary to NI 51-101 Standards of Disclosure for Oil and Gas
Activities ("CSA Staff Notice 51-324") and/or the
COGEH and, unless the context otherwise requires, shall have the
same meanings herein as in NI 51-101, CSA Staff Notice 51-324 and
the COGEH, as the case may be.
Oil and Gas Metrics
This press release contains a number of oil and
gas metrics, including free cash flow, NAV per share, operating
netback, cash netback, reserves per share and reserves replacement
which do not have standardized meanings or standard methods of
calculation and therefore such measures may not be comparable to
similar measures used by other companies and should not be used to
make comparisons. Such metrics have been included herein to provide
readers with additional measures to evaluate the Company's
performance; however, such measures are not reliable indicators of
the future performance of the Company and future performance may
not compare to the performance in previous periods.
- Before tax and after tax free cash
flow are non-GAAP terms and are called before tax and after tax net
revenue in the GTE McDaniel Reserves Report, respectively. The
non-GAAP term of before tax free cash flow reconciles to the
nearest GAAP term of oil and gas sales, which is called sales
revenue in the GTE McDaniel Reserves Report. Before tax net revenue
is calculated by McDaniel by subtracting total royalties, operating
costs, future development capital, abandonment and reclamation
costs from sales revenue. After tax free cash flow is calculated by
McDaniel by subtracting future taxes from before tax net revenue.
Refer to "Future Net Revenue" in this press release for the
applicable reconciliation. Management uses free cash flow as a
measure of the Company's ability to fund its exploration
program.
- NAV per share is calculated as NPV
discounted at 10% (before or after tax, as applicable) minus
estimated net debt, divided by the number of shares of Gran
Tierra's common stock issued and outstanding. Management uses NAV
per share as a measure of the relative change of Gran Tierra's net
asset value over its outstanding common stock over a period of
time.
- Operating netback and cash netback
are calculated as described in this press release. Management
believes that operating netback and cash netback are useful
supplemental measures for the reasons described in this press
release.
- Reserves per share is calculated as
reserves in the referenced category divided by the number of shares
of Gran Tierra's common stock issued and outstanding as at December
31. Management uses this measure to determine the relative change
of its reserve base over its outstanding common stock over a period
of time.
- Reserves replacement is calculated
as reserves in the referenced category divided by estimated
referenced production. Management uses this measure to determine
the relative change of its reserves base over a period of
time.
Disclosure of Reserve Information and
Cautionary Note to U.S. Investors
Unless expressly stated otherwise, all estimates
of proved, probable and possible reserves and related future net
revenue disclosed in this press release have been prepared in
accordance with NI 51-101. Estimates of reserves and future net
revenue made in accordance with NI 51-101 will differ from
corresponding estimates prepared in accordance with applicable U.S.
Securities and Exchange Commission ("SEC") rules and disclosure
requirements of the U.S. Financial Accounting Standards Board
("FASB"), and those differences may be material. NI 51-101, for
example, requires disclosure of reserves and related future net
revenue estimates based on forecast prices and costs, whereas SEC
and FASB standards require that reserves and related future net
revenue be estimated using average prices for the previous 12
months. In addition, NI 51-101 permits the presentation of reserves
estimates on a "company gross" basis, representing Gran Tierra's
working interest share before deduction of royalties, whereas SEC
and FASB standards require the presentation of net reserve
estimates after the deduction of royalties and similar payments.
There are also differences in the technical reserves estimation
standards applicable under NI 51-101 and, pursuant thereto, the
COGEH, and those applicable under SEC and FASB requirements.
In addition to being a reporting issuer in
certain Canadian jurisdictions, Gran Tierra is a registrant with
the SEC and subject to domestic issuer reporting requirements under
U.S. federal securities law, including with respect to the
disclosure of reserves and other oil and gas information in
accordance with U.S. federal securities law and applicable SEC
rules and regulations (collectively, "SEC requirements").
Disclosure of such information in accordance with SEC requirements
is included in the Company's Annual Report on Form 10-K and in
other reports and materials filed with or furnished to the SEC and,
as applicable, Canadian securities regulatory authorities. The SEC
permits oil and gas companies that are subject to domestic issuer
reporting requirements under U.S. federal securities law, in their
filings with the SEC, to disclose only estimated proved, probable
and possible reserves that meet the SEC's definitions of such
terms. Gran Tierra has disclosed estimated proved, probable and
possible reserves in its filings with the SEC. In addition, Gran
Tierra prepares its financial statements in accordance with United
States generally accepted accounting principles, which require that
the notes to its annual financial statements include supplementary
disclosure in respect of the Company's oil and gas activities,
including estimates of its proved oil and gas reserves and a
standardized measure of discounted future net cash flows relating
to proved oil and gas reserve quantities. This supplementary
financial statement disclosure is presented in accordance with FASB
requirements, which align with corresponding SEC requirements
concerning reserves estimation and reporting.
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