Gran Tierra Energy Inc (GTE) 2025 Q3 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to Grand Tierra Energy's conference call for third quarter 2025 results. My name is Shannon and I will be your coordinator for today. At this time, all participants are on a listen-only mode. Following the initial remarks, we will conduct a question-and-answer session for securities analysts and institutions. Instructions will be provided at that time for you to queue up for your questions.

I would like to remind everyone that this conference call is being webcast and recorded today, Friday, October 31, 2025 at 11:00 a.m. Eastern time.

Today's discussion may include certain forward-looking information, oil and gas information, and non-GAAP financial measures. Please refer to the earnings and operational update press release we issued yesterday for important advisories and disclaimers with regard to this information and for reconciliations of any non-GAAP measures discussed on today's call.

Finally, this earnings call is the property of Gran Tierra Energy Inc. Any copying or rebroadcasting of this call is expressly forbidden without the written consent of Gran Tierra Energy. I will now turn the conference call over to Gary Guidry, President and CEO of Gran Tierra. Mr. Guidry, please go ahead.

Thank you, Shannon. Good morning and welcome to Gran Tierra's third quarter 2025 results conference call. My name is Gary Guidry. Gran Tierra's President and CEO and with me today are Ryan Ellson , our executive VP and CFO, and Sebastien Morin, our COO.

On Thursday, October 30, 2025, we issued a press release that included detailed information about our third quarter 2025 results, which is available on our website. Ryan and Sebastien will make a few brief comments and then we will open the line for questions. I'll now turn the call over to Ryan to discuss our financial results.

Thanks, Gary. Good morning everyone. First, I would like to highlight an announcement made last week relating to the prepayment agreement we closed, which represents a new prepayment facility backed by our Ecuadorian crude production.

The initial advance will be $150 million with the potential for another $50 million once our Ecuador acquisition closes and we reach 10,000 BOE per day in Ecuador. It's a four-year structure, price of silver plus 3.8% and includes a three month grace period on principal before advertising evenly over the remaining term. Importantly, the commercial terms or sales price are an improvement to our previous crude oil sales contract.

Overall, this agreement strengthens our balance sheet and gives us added financial flexibility at a very competitive cost.

In addition, we increased our current facilities secured by our Canadian assets to $75 million and equally important moved from a 1.1% structure to a two-year structure with maturity in October 2027. Now onto the quarter. During the third quarter of 2025, Gran Tierra averaged 42,685 BOE per day. That's up roughly 30% from a year ago, driven by our Canadian acquisition and continued success from our exploration in Ecuador.

Production during the quarter was temporarily impacted by unusual and externally driven events across our operations, including a landslide in Ecuador, which impacted the main export pipelines in the country, requiring us to shut in production, and trunk line repairs at the McKenna Field Group, which resulted in the fields being shut in for the quarter. The pipeline repairs took longer than anticipated due to ongoing heavy rains through July and August. All pipelines are restored as of October 10.

We want to emphasize that these volumes represent deferred barrels rather than lost production, and we already are seeing a strong recovery with current production averaging 45,200 barrels of oil equivalent per day.

Based on the barrels, we are forecasting the lower end of our production guidance range. The underlying assets continue to perform well, and our teams remain focused on ongoing optimization and maximizing production efficiency and cash flow, with an expected X rate of 47,000 to 50,000 BOE per day.

From a cash perspective, it was a solid quarter where we generate $48 million of operating cash flow, up 39% from Q2. We ended the quarter with $49 million in cash and net deposition of approximately $755 million. In terms of pricing, we saw improving differentials across South America, especially in Ecuador, which helped offset some of the impact from temporary facility downtime and pipeline outages. On the capital side, we invested $57 million that focused mainly on high return projects in Colombia, Ecuador, and Canada.

So overall, despite some temporary production headwinds this quarter, we're expecting a strong finish to the year which sets up for a strong 2026 with production already back above 45,200 barrels a day, and the added liquidity from our new prepayment agreement and increase and extension of our cane crab facility, we're in a great position to finish 2025. The 2025 travel program was primarily focused on fulfilling exploration commitments, which resulted in numerous material discoveries. We also invested in facility expansion Soriente, including gas to power, which provides us with sufficient process capacity to increase production in the field and lower costs. With substantially all commitments behind us, the focus turns to free cash flow and deleveraging from our large diversified resource base. We released our 2026 budget in mid-December, which will include a decrease in capital expenditures and emphasis on free cash flow generation.

I'll now turn the call over to Sebastien to discuss some of the highlights of our current operations.

Good morning everyone and thank you, Ryan. The third quarter highlighted continued operational strength across our entire portfolio with solid execution in Ecuador, Colombia, and Canada, despite some temporary external challenges.

In Ecuador we had another strong quarter achieving record production greater than 5,000 barrels of oil per day in August and greater than 6,000 barrels of oil per day in early October with the delivery of the Conejo A1 exploration well, which was drilled on budget and successfully tested both the Hollin and basal tena, flowing over 1,300 barrels a day of 26.9 degree API oil under normal natural flow conditions.

We plan to re-enter conejo A1 later this quarter and install the final completion and selectively test each zone to optimize long-term production. We also recently cased and cemented the Conejo A2 well targeting multiple perspective reservoirs including the basal tena and Hollin. The well discovered 41 ft of net reservoir with an average porosity of 14% in the Hollin formation, suggesting a well-connected reservoir with high deliverability potential over the full Conejo structural tract.

In addition, we also confirmed a new oil discovery at Chanangue-1, which was a legacy well drilled in 1,990 and suspended in 1,992, that we re-entered to test the bypass basal tena interval. It's currently producing 600 barrels a day on jet pumps and has opened up a new follow-up drilling opportunities on the eastern side of the block.

With the delivery of the Conejo A2 well, Grand Sierra has completed all of the exploration commitments in Ecuador, and we are now well positioned to continue to increase production into the development phase and establish and help sustain stable field output.

At Cohembi, the water flood continues to deliver excellent results. The production from the northern area has more than doubled, up roughly 135% from 2,800 barrels to 55,700 barrels a day. Total field production recently reached over 9,000 barrels a day, the highest since 2014.

We are now executing the final 6 well drilling programs to continue to ramp the field production and extend the Cohembi field boundary, including an exploration well to the north as part of the agreed carry program under our contract extension, which we expect to complete by the end of the first half of 2026.

In Canada, we drilled and brought two additional lower Montney wells on stream in September, both performing at or above expectations. That brings our 2025 activity at Simonette to 4 gross or 2 net wells.

Stepping back, what really stands out this quarter is the progress we've made in advancing our technical capabilities and field execution. From the exploration success we had in Ecuador to optimizing mature water floods in Colombia and efficiently scaling our Canadian program. Our focus remains on disciplined execution and continuous improvement to ensure our assets deliver strong value over time.

As Ryan summarized, we had several unplanned production deferrals. Although our average production for the year will be at the lower end of our annual guidance, we'll finish the year strong with an expected exit rate between 470 and 50,000 barrels of oil produced. I will now turn the call back to the operator, and Gary, Ryan, and I will be happy to take questions. Operator, please go ahead.

Thank you, ladies and gentlemen, we will now conduct a question-and-answer session for securities analysts. (Operator Instructions) David Round, Stifel

Thanks for the, presentation, guys. First one just on Soriente , please, you seem to have seen and experienced a very sudden production response there. I mean, positively, so great to see. Can you just talk about that, please, just sort of what exactly has happened as that program has been going on over the course of this year, what are the new production is due to new wells? What is water flood, and how sustainable is it, please?

Yeah, so I'll take that one. So in a phasing approach, really it was the start of injection on the north pattern where we're injecting essentially 5,000 barrels of water per day in that north pattern on Cohembi 2025. The other catalyst was well upsized, so we had a few really key workovers. The one well just south of the pattern ,Cohembi 20, was upsized, and that went from 500 barrels a day gross to over 2000. So that one's included in the north pattern.

So now as pressure comes up and we continue to increase our injection, we're seeing some really amazing performance from that sand. Just to recall, those are essentially Darcy sands, so the response is very quick.

Okay, and then if I think about the production number you've put out there at the moment, I mean how do we think about that sort of just conceptually going into next year with continual drilling? I mean, is that sort of a base and and we should be looking at high end than that.

I think that's extremely fair what you just described. That's exactly where we're going. So with the extra 6 wells that we're putting into the field, we expect to continue to increment that production from here, production and reserves.

Okay, great, and then just the second one please just on the prepayment facility, how does that work in terms of availability once the repayment starts?

It's so effectively you draw the cash at the beginning of the entire amount, the 150, and then just repay those funds over the course of the four years.

Okay, over the course of 4 years, and is it fairly linear in terms of how it is.

It is effectively every time we do lifting in Ecuador, we'll pay back a portion of the money borrowed.

Perfect, Understood. Thanks guys.

Thank you, Josef Schachter, SER.

Good morning guys. A couple of questions for me, Congratulations on getting, Ecuador up to 6,000 in October. You have on slide 26 of your presentation that the potential could be between 11,000 and 19,000. Does that include the last two wells, which have been very encouraging? So guidance potentially, would be to the higher end and, the question is what timeline were you using to get to that and do you need to put water flood in, do you have enough water, maybe just give me a guidance of how Ecuador grows.

Good morning, Josef. The answer to your question is the guidance on that slide does not include the Conejo, the discovery to the northwest and the guidance is based on water flood of the basal tena. We're in a very good position here that we have a water source in the stacked hays that we have in the hollin and the T-sand, And so everything is in place to do that. We're working through the field development plans with the ministry in Ecuador and now that we've fulfilled all of our commitments this year on exploration in Ecuador, we're moving to the development phase, and so that will start occurring next year during 2026.

Okay, the debt issue, of course, seems to be the overhang market's reaction today, down to a new 52 low disappointingly, if just for the levers maybe Ryan.

Do we need $75 to $80 per barrel? Do we need Ecuador over $10,000-$11,000 BOE day? Do we need some non-core sales of your non-operated assets in Canada? Where do you see getting that debt, is a debt to one, target, something that will happen before the end of the decade? And how do you see the levers to get there?

That's a great question, and I think, one of the things we want to emphasize in the press release and our opening remarks is now with the exploration commitments and a lot of the oriented commitments behind us, it really sets us off the stage for generating free cash flow. We're laser focused on generating free cash flow in 2026 and beyond. I think if you look at this year's capital program, there's about $150 million dollars in there between exploration and facility expansion, and gas to power, etc. So I think with that behind us, when we could come up with our budget in. Mid December you you'll see the focus on free cash flow, we'll continue to look at how to optimize the portfolios as far as asset sales and what not, but that would just be incremental deleveraging our base plan is deleveraging as much as possible through our base operations.

Okay, in some of the cases like the drillers Precision and Ensign, they kind of gave targets to the market and to investors. We're going to knock off $100 million- $150 million, then they brag when they get there. Are you guys going to be willing to start throwing numbers like that so that people can see guideposts and yeah, you're heading in the right direction. Therefore, your valuation, which is, trading less than 1 time cash flow in CAD, and much below your,1P/E reserves that you show in your presentation, the new one at, $1,951 million US, is that the kind of thing where we can show, the debt holders are now giving the equity value to the shareholders, by doing something like that?

Absolutely, when we come out with our budget in 2025 December, yeah, there'll be a clear road map.

Okay, super looking forward to seeing that. Thanks very much for taking my questions.

Okay, thank you.

Gentlemen, there are no further questions at this time. Please continue.

Thank you, Shannon, I'd once again like to thank everyone for joining us today. We look forward to speaking with you next quarter and update you on our ongoing progress. Thank you.

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