Gran Tierra Energy Inc (GTE) 2025 Q1 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to Gran Tierra Energy's Results conference call for the first quarter of 2025. My name is Shannon, and I will be your coordinator for today. At this time, all participants are in listen-only mode. Following the initial remarks, we will conduct a question-and-answer session for security analysts and institutions. Instructions will be provided at that time for you to queue up for questions. I would like to remind everyone that this conference call is being webcast and recorded today. May 2, 2025, at 11:00 a.m. Eastern time. Today's discussion may include certain forward-looking information as well as certain non-gap financial measures. Please refer to the earnings and operational update press release we issued yesterday for important disclaimers with regard to this information and reconciliations of any non-gap measures discussed in today's call. Any production volumes are based on working interest sales before royalties.

Finally, this earnings call is the property of Gran Tierra Energy Inc. And a copy and a rebroadcasting of this call is expressly forbidden without the written consent of Grantier Energy. I will now turn the conference call over to Gary Guidry, President and Chief Executive Officer of Gran Tierra. Mr. Guidry, please go ahead.

Thank you, operator. Good morning and thanks for joining us for Gran Tierra's first quarter 2025 results conference call. My name is Gary Guidry, President and Chief Executive Officer, and with me today are Ryan Ellson, our Executive Vice President and Chief Financial Officer, and Sebastien Morin, our Chief Operating Officer. On Thursday, May 1st, 2025, we issued a press release that included detailed information about our first quarter of 2025 results, which is available on our website. Ryan and Sebastian will now make a few brief comments and then we will open the line for questions. Immediately following the earnings call at 10 a.m. Mountain Time, 12 noon Eastern Time. We will be holding our annual general meeting of shareholders. During the meeting, I will give a brief overview of Grand Sierra, where the company is heading. We invite you to join us after this call. Dialing instructions can be found on our website. I will now turn the call over to Ryan. We will discuss key financial results from our first quarter results.

Good morning, everyone. Our first quarter performance reflects strong operational execution and disciplined financial management. Our front loaded 2025 capital program, which had up to 5 rigs active during the quarter, delivered record drilling times and significant cost efficiency across all our key assets that Sebastian will discuss. Gran Tierra achieved first quarter of 2025, the average working interest production of approximately 46,650 BOE per day, which was 14% higher than fourth quarter 2024 and 45% higher year-over-year due to the recognition of three full months of production from Canada and positive exploration well results in Ecuador. During the first quarter of 2025, Gran Tierra incurred a net loss of $19 million compared to a net loss of $34 million in the prior quarter.

The company generated a just an EBITDA of about $85 million versus $76 million in the prior quarter and $95 million in the first quarter of 2024. 12 months trailing net debt net debt to adjust EBITDA is 1.9 times. However, this only counts for 5 months of Canadian adjusted EBITDA, and we continue to have long-term target of 1-times. Fund flow from operations was $55 million or $1.55 per share, up 25% from Q4 2024 and down 26% from the first quarter of 2024 because of lower oil prices. Gran Tierra's capital expenditures of $95 million were higher than the $79 million in the prior quarter and $55 million in the first quarter of 2024 as a result of the addition of the Canadian Development Program, an active exploration Ecuador exploration program, and development activities in the Cohembi field during the quarter.

During the quarter, the company had 3 rigs active in Canada, one in Ecuador and one in Colombia. Currently, the company has 1 rig active. A quarter end, Grand Tierra had cash balance of $77 million total debt of $60 million and net debt of $683 million. During the quarter, we repaid at maturity the remaining principal of our 6.25% senior notes due in 2025 in amount of $25 million and repurchase $2 million of our 9.5% senior notes due in 2029, reducing gross debt by $27 million. In addition to the $77 million cash on hand as of March 30, 2025, Grantier currently has approximately $110 million in undrawn credit facilities. This includes a revolving credit facility in Canada with a borrowing base of $100 million with available commitment of $50 million.

On April 16, 2025, the company announced an additional $75 million reserve-based lending facility in Colombia with a final maturity in 36 months from the closing date. In terms of share buybacks, Grantier purchased approximately 450,000 shares during the quarter. From January 1st, 2023, to April 29, 2025, the company repurchased approximately 5.2 million shares, or 15% of shares issue outstanding on January 1, 2025, from free cash flow. Gran Tierra generated oil sales of $171 million which was up 8% from the first quarter of 2024 and up 16% from the prior quarter, primarily due to higher sales volumes.

On a per BOE basis, operating expenses decreased by 3% when compared to the first quarter of 2024 and the prior quarter. We continue to make significant gains to reduce operating costs through efficiency and scale. Financially and operationally, Grantier delivered a strong start to 2025, demonstrating record production, enhanced capital efficiency, meaningful debt reduction, increased financial flexibility through new credit facilities, and continued focus on share returns through share repurchases. I'll now turn the call over to Sebastian to discuss our operational highlights of our first quarter results.

Thanks, Ryan. Good morning, everyone. Operationally, Gran Tierra is off to a strong start for 2025. As Ryan mentioned, Grand Tierra front loaded its capital program during the 1st quarter, operating up to 5 rigs across the portfolio while delivering record times and cost efficiencies across our key assets. In Ecuador, we successfully drilled two additional oil discoveries in Ecuador, the Iguana B1 and the Iguana B2 wells on the Iguana block. The combined wells have an average oil production rate over 30 days of approximately 1,684 barrels of oil per day from the U-Sand formation. These two additional wells mark our 10th discoveries in countries since we entered Ecuador in 2019.

The Iguana B1 weld was drilled and completed in record time and under budget, establishing a new pacesetter well in Grand Tierra's Ecuador exploration campaign. The drilling rig has been stacked on the iguana pad pending mobilization to the new Conejo pad on the Charapa block to resume exploration drilling during the 3rd quarter of 2025. The drilling of the final two Conejo wells will mark the fulfillment of all of Grand Kierra's exploration commitments in Ecuador.

In Colombia, we successfully drilled the 1st 3 of 5 wells from the Ghimbe North pad during the quarter, and all the wells were delivered under budget and 60% faster than most recent well program executed by the previous operator. We are currently in the process of drilling the remaining two wells of the program. Once we complete the Cohembi wells, the rig will move to the Costayaco pad to commence a 3 well development program during the 2nd quarter. By the end of the first quarter, the civil electrical and mechanical field works at Cohembi reached 100% mechanical completion. This project was initiated to facilitate the processing of new production from the Cohembi North pad at the Cohembi Central Processing Facility.

At Acordionero, the optimization of the field continues through ongoing water flood expansion, which includes facility enhancements, electrical submersible pump upsizing, injector conversions, and upgrades to the gas to power generation system. These initiatives are focused on reducing unit costs, offsetting natural declines, and improving overall recovery factors. In terms of production, the field continues to strongly perform with average production of 13,824 barrels of oil per day in the first quarter of 2025. This represents a 2% increase from the fourth quarter of 2024, despite no wells being drilled since the first quarter of 2024.

Current production is approximately 14,500 barrels of oil per day, up 5% from Q1, reflecting the strong reservoir response to the execution of our first quarter water flood management optimization program. With these encouraging results, the company continues to see significant development potential at Acordionero and is planning another drilling program of 8 to 10 wells in 2026 targeting high oil saturation un-swept infill locations.

Finally, moving to Canada with our JV partner Logan Energy, we successfully drilled and completed two lower Montney wells at Simonette. These two wells were brought on stream and completed with a similar optimized lower Montney completion design as an offset well drilled in 2022. After 21 days since being placed on production, the average gross production per well was 674 barrels of oil per day, 13 barrels per day of NGLs, and 767,000 cubic feet of gas per day. Totaling 814 barrels of oil equivalent per day at 84% liquids, Gran Tierra holds 50% working interest in the wells as they continue to clean up. This early production performance surpasses the prior offset by 80% for the same period and are exceeding their budget type curves.

The company also successfully acquired 21 sections of prospective land in central Alberta along the Nisku Fairway in early March, which adds over 50 high quality opportunities to our drilling inventory.

At Clearwater, we participated in a successful drilling of two gross 0.5 net wells during the quarter, and both wells are estimated to be on stream imminently. The first well drilled was a four-legged injector to support a water flood pilot in the Martin Hills block, potentially increasing reserves based off area offsetting water flood results. The second well, non op with 14 legs, was drilled in sealed block to test the productivity of heavy oil in the blue-sky formation.

Grand Tierra is well positioned to generate sustainable value while remaining resilient amid commodity price volatility. I'll now turn back, turn the call back to the operator, and we will be happy to answer any questions. Operator, please go ahead.

Thank you, ladies and gentlemen. We will now conduct the question-and-answer session for securities analysts. If you have a question, please press the star key followed by 11 on your touchtone phone. You will then hear an automated message advising your hand is raised. Your questions will be pulled in the order they are received. Please ensure you lift the handset if you're using a speakerphone before pressing any keys. One moment please for your first question. Our first question comes from the line of Rob Mann with RBC Capital Markets. Your line is now open.

Hi there. Good morning and thanks for taking my question. The first one for me just around Acordionero and your water flood optimization program. You have a number of initiatives underway, and it seems like the production response has been strong so far, so just curious if you could frame the remaining work to be done there and expectations after the initial results.

Rob, I think it's more of continuing the same, the daily surveillance going back and looking and really optimizing each well and each sector. We've got the field broken into five sectors and so as we see opportunities, we've got quick cycle times on taking the work over rate and slick line units over to manage that.

Great, thanks. That's helpful. And then just the last one here quickly, just wondering if you could discuss your acquisition of the 21 sections to land in Central Alberta, what you like there following your entrance into Canada with I three acquisitions?

Yeah, we, it's an ISKU play. We drilled a 3-mile horizontal, 4th quarter and 1st quarter of this year. Fracked it is currently on production cleaning up. We're quite excited about the play and we believe that with some appraisal that that it has great potential. We will be talking to other operators in the area to look at joint venturing because it is quite a large play, but early days and quite exciting.

That's great. That's all for me. Thanks guys.

Thank you. Our next question comes from the line of Alejandra Andrade with JPM. Your line is open.

Hi, thank you so much for taking my question. I had a couple of questions. First, just wondering on working capital because I see a big inflow this quarter. Just wondering if we should see any reversal in the coming quarters or if that should stay stable throughout the rest of the year.

Then also, second question, I just wanted to see in terms of gas prices in Canada, how are those behaving and if anything had changed from your previous outlook.

Yeah, great. With respect to work capital, there was a build in work capital, and that was just a function of a heavy capital program, so you will see some of that unwind in the second quarter, obviously we do everything on an accrual basis and so we just haven't paid all the vendors up to that point. So, you will see some of that unwind in the 2nd quarter and respect the gas prices, we, we're pretty comfortable with our base case budget for gas prices. They hold it in there, quite well, and we do have the strong hedge program so we're quite comfortable with the guidance on can gas prices.

Thank you. Our next question comes from the line of Joseph Schachter with Searcy. Your line is now open. Joseph Schachter with Cersei, your line is now open.

Thanks very much. First, congratulations on the great first quarter compared to 4th and further improvement to 48 to 400. So, that's terrific. I have two areas I wanted to talk about. First was on slide 27 of your presentation. You talk about the opportunities in Ecuador, current production from 11,500 to 2000, the other 120 to 25, and you talk about upside 20 to 30 and 10 to 15. Are we talking 2 years, 5 years, how many wells? This probably is one for Sebastian. How many years are we looking out for this upside potential?

I'll start with the timing, Joseph, and then let Sebastian add to that timing because we have 100% and we operate, we control the pace. We are submitting field development plans with the government and the intention would be over the next 2 to 3 years to get to that plateau production. Depending on volatility, depending on oil prices, these are great reservoirs, and for us it's really a regional development as you've seen certainly across the Tarampa and Chenange block, we have numerous discoveries and when we finish our exploration at the end of this year with the Conejo, we'll have a good sense of what that regional development looks like so that we can put in power, put in infrastructure. And rat production.

Yeah, and just to follow up on that in terms of flexibility on timing, our exploration environmental impact assessment license gives us full flexibility, and we're kicking off the development TIAs as well. So those two kinds of overlap and allow us flexibility to really move ahead with the development as needed.

Okay, super. Next question, with you at $48,400, your guidance is 47 to 53 in your base case. Well, all three cases. Can you give us some guidance or a little more illumination on, given you knew you were 48.4, what could happen to get you to the lower end of 47, and what are you looking at for the upside? What scenarios need to develop to give you those ranges?

Yeah, prices is the main thing that we watch because we have operating control, watching what prices are doing here and the earlier question to Ryan about natural gas, we're very bullish on the long-term outlook for natural gas.

With realistic expectations of pricing, the $3 to $5 range, and we have a tremendous inventory and so we will be watching that closely this year and next over the next 3 years on how we manage that. And so we're very comfortable with our guidance out there and we'll adjust accordingly with what global prices do.

Super. Well, thanks very much for taking my questions and congratulations on the growth profile that you're exhibiting.

Thank you. Our next question comes from the line of Isabella Pacheco with Bank of America. Your line is now open.

Hi Jean, thank you for taking my question. Could you please give us an update on your current oil price hedging strategy? Thanks.

Yeah, we continue to have the same strategy, we're looking our objective is to hedge, 30% to 50% out, 6 months out, and then 20% to 30% out the remaining 6-months. We have a pretty good hedge position in place right now and we are looking at increase the hedge position to meet those targets.

Okay, thank you very much.

Thank you. Our next question comes from the line of Diego Espinoza with BTG pactual. Your line is now open. Diego, your line is open. Please check your mute button.

Our next question comes from the line of Rodrigo Sanweza with Santander Asset Management. Your line is not open.

Hi, thank you for taking my question. So, I have a couple. First, CapEx and I believe you addressed this question when you were talking about the working capital reversal, but there's a $27 million GAAP between the reported CapEx in the MDandA and the one in the cash from investing activities. It's this different book in accounts payable.

Yeah, in one of the notes in the financial statements, we have the breakdown on that. It really is if you take our capital expenditures, left the positive change in working capital or non-cash working capital, that will get you to the 69% compared to the 100%.

Okay, perfect. And the second question is on capital allocation. So, you continue share buybacks and also repurchase some bonds this quarter. While I understand you view the shares as undervalued, could part of the recent stock performance reflect maybe market concerns about around solvency and in that context, how do you we preserving cash versus additional server purchases?

Yeah, it's a good question. I think if you look at the quarter, we reduced our gross debt by $27 million. So, the vast majority of cash flow did go to debt reduction, and so we're laser focused on continuing to reduce debt with a modest share buyback program. So, we're very dynamic and so we're always cap consistently looking at our capital allocation and then we're in the process of doing that right now with the recent volatility.

Okay, maybe is any portion of the buyback program intended to offset the delusion from equity-based compensation, maybe specifically performance-based awards?

No, it's really just we believe, if you look at where we trade on a one fee basis, we have a one fee nav of around $20 US and $240 million. So, it's just part of our capital allocation. We think that's a great investment for the company for all our stakeholders.

Yes, thank you. That's very helpful. That's all from me.

Thank you, gentlemen, there are no further questions at this time. Please continue.

I would like to once again thank everyone for joining us today. We look forward to speaking with you over the next quarter and update you on our ongoing progress. Please join us for our annual general meeting of stockholders, which will commence at 10 a.m. Mountain Time, 12 noon Eastern Time. I will give a brief overview of Gran Tierra and where the company is heading. Dial-in instructions can be found on our website. Thank you.

This concludes today's conference call. Thank you for your participation. You may now disconnect.