Q4 2019 Earnings Call

Good morning, ladies and gentlemen, and welcome to Gran Tierra Energy's conference call for fourth quarter in year end 2019 results. My name is Jimmy and I'll be your coordinator for today.

At this time, all participants are in listen only mode.

Following the initial remarks, we'll conduct a question and answer session for securities analysts.

And institutions.

Actions will be provided at that time for you to queue up for questions.

Anytime during the call you require audio assistance. Please press star zero and a coordinator we'll be happy to assist you.

I would like to remind everyone that this conference call is being webcast and recorded today Thursday February 27, 2029, 11 am 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 importantly, advisories end disclaimers with regard to this information in for reconciliations of any non-GAAP measures discussed on todays call.

Finally at a certain Nicole its a property of Gran Tierra energy Inc. any comping or Rebroadcasting of this call is expressly forbidden without the written consent of France Your energy.

I'll now turn the conference call over the Cherokee treat President and Chief Executive Officer Gran Tierra Instigate you. Please go ahead.

Thank you operator.

Good morning, and welcome to Gran Tierras fourth quarter.

And year end 2019 results conference call.

My name is Gary Good read I'm, Chief Executive Officer with me today are Ryan Ellson, our executive Vice President and Chief Financial Officer.

And Tony Bartholet, our Chief operating officer.

We issued a press release yesterday that include a detailed information about our fourth quarter and year end 2019 results. In addition rent here as 2019 annual report on form 10-K has been filed on Edgar and is available on our website.

Ryan and Tony will make a few brief comments and then we will open the lines for questions.

Then over to you.

Good morning, everyone.

Production for 2019 was 34817 barrels of oil per day consistent with the revised 2019 Guardians of 34200 to 35000 barrels world right. During 2019, we generated net income of 39 million or 10 cents per share you bid on 364.

<unk> adjusted EBITDA of 326 million and fund from operations of 272 million were 72 cents per share.

And your Q4 capital spend to 69 million, which was down 41% I was expecting from the third quarter 2019 amounted to 116 million. This reduction reflects the completion of the extensive facilities expansion and go to power project out of coordinator, which was acquired fully implement the fields waterflood to have.

Ultimately will recover.

Hi, your end on an 18 million was drawn or credit facility. This increase from Q3 as motorparts mature moving the payables at September Thirtyth Rimrock. This capital program in Q3 and or be a few receivable grew to approximate 130 million free cash flow and then just been Luxembourg current value added tax receivable will be used for.

The amount drawn on our credit facility.

We're pleased with the increase in one of your reserves to 79 million, 100% of it as well represented 200% warranty reserves replacement and growth in one any net present value discounted at 10% to 1.5 billion before tax and 1.3 billion after tax and wouldn't be net asset value to doors and 50 cents per share.

Before tax in the door 83 per share after dark.

On the two P. basis, we're pleased to 100% of our production and maintain the companies to be reserves at 142 million barrels of oil and increased to be NPV to 2.9 billion for ducks, and 2.3 billion after tax and to be net asset value per share do six fold and 23 cents.

For talks and $4.49 after dark.

During the 2020, we will focus on balance sheet strength developments of our core assets under a measure quite high impact exploration program.

Since the beginning of 2020 response to the cone of ours has caused a decrease in the Brent oil price and a widening the crude oil price differentials in Colombia I was a result, we've elected to amend the company's plan 2020 capital budget, where do some capital by approximately 25 million or 2020 revised capital budget is 170.

I'm going to 195 million.

And the for all the councils, primarily in exploration and infrastructure.

Given the headwinds persist in the second half a point 20 further deferrals could be made given the fact, we operate 29 of 32 blocks, we have control over capital allocation timing.

Similar to the events in June 2019, local farmers himself blockade in the southern Stoudemire region to protest against the Colombian National government. The previous blockade in June 2019 lasted approximately three weeks. It's important to note that these protests are not direct oil industry or grants you're in response to the blockade.

We're proactively short enter fields in the southern promo resulted in approximately 4000 barrels of oil per day being shot in the blockades of also prevented the drilling through development wells in Colombia, we have contracted rigs, but when for the blockades to be resolved before mobilizing the rig to the field.

We have placed Brent oil hedges of 6000 views per day of production approximately twice.

20% over net production in the first half a point warning where the floor of $55 in the ceiling of 69 doors. In addition, we have Columbian peso hedges of approximately 40 million U.S. dollar equivalent.

I'll now turn the call over the only Brooklyn, Chief operating officer to discuss some of the highlights of our current operations and key upcoming catalysts.

Thanks, Ryan Good morning, everyone I'll briefly cover a few operational highlights from yesterday's press release and provide some updates on current activity.

We are ahead of schedule on our 2020 development program at Acordionero with four wells of our 12 to 14, well program being released.

We're currently moving the rig at two to continue infill drilling operations.

According to narrow 55 was brought on production January 24th setting a record for spud to on production of 15 days. It has stabilized at 500 barrels of oil per day.

Acordionero 56 was brought on production January 31st is currently producing at 600 barrels of oil per day.

Where do you know 57 was brought on production February 17th is currently producing at 540 barrels of oil per day.

And according to 58 was brought up production. This week and is currently recovering completion fluids.

We continue to actively manage the waterfront at acordionero by sector, allowing for optimum waterflood performance in both last summer a analysts pharmacy intervals on a field level. The current instantaneous accumulate avoided replacement ratios are 1.10 0.3, respectively.

Both of these numbers represent increases of approximately 180% since June of 2019.

Snubbing unit operations that Ibero, two and three successfully recovered the upper completion and both wells have been secured pending further evaluation.

Stepping in it recently completed recovery operations at tree or one where the upper completion has been recovered from the well and well has been turned over to operations. The wells currently flowing to surface then is cleaning up.

In the put Tomorrow basin as Ryan mentioned, we have approximately 4000 barrels suspended due to blockades affecting our southern put a mile operations. We're currently monitoring the situation and will restore production as soon as practical.

We're mobilizing a rig to begin development drilling operations at Costayaco and the Chaza block with expected, but next month.

The corner to exploration well on the put one block is targeting the fractured limestone play trend as well as additional oil zones, which were successfully encountered in the bond to one exploration well.

Going into has been drilled through the target formations to a plan TD of 10603 feet and we have currently suspended well operations do mechanical failure associated with the drilling rig.

We plan to return to this well following development drilling at cost Yacov.

Based on encouraging results in the end stand a limestone and used to and from logging while drilling and cutting its analysis. This well is expected to be put on production test in the first half of 2020 pending rig scheduling.

Finally, I'd like to reiterate our commitment to go beyond compliance on the E.S.G. front.

In 2019, Gran Tierra had its best safety record in terms of lost time injuries or LTR.

And total recordable injuries are 2019 L. T. I ratio is 0.02, which 80% below the industry average for Latin American exploration and production companies in 2019.

On the environmental side, we continue our strong partnership with the international non governmental organization Conservation International.

Where we have committed to re forecasting a thousand hectares of led and securing and maintaining 18000 hectares of forest through the natural Amazon is project in the Putumayo basin.

Tranches total natur Amazon its investment in the Andy's Amazon reinforce corridor through this project is forecast to be $13 million.

We have also pass it over a total of over 560000 trees and have conserved preserved or reforested almost 1400, Hectors Atlanta, you environmental efforts.

For the last four years Gran Tierra has voluntarily released an assessment of its greenhouse gas or GHG emissions.

Gran Tierra is reducing greenhouse gas emissions at its facilities through gas to power projects that convert excess natural gas that would otherwise be flared and uses it instead for power generation and then Acordionero, we're re injecting solution gas for pressure maintenance.

I'm not sure Amazon as project alone is expected to sequester approximately 8.7 million tons of C. O two overage lakes.

I'll now turn the call back to the operator, Gary right 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. If you have a question. Please press the Starkey of followed by the one on your Touchtone phone.

Here are tone acknowledging your request your questions will be pulled in order. Their received please ensure you lift your handset for using a speaker phone before pressing in the keys.

One moment. Please for your first question.

Your first question comes from David round with BMO capital markets. Your line is now open.

Hi, guys I'll start with a pretty predictable one, but obviously a lot of <unk> acordionero at the moment.

Are you able to give us a current production number there and just run through how you're expecting that to trend over the course yeah.

The second one is just on.

Oh, yes, because obviously with the guest apparent better SP reliability should be it in a pretty good position.

I can see Busch gardens down by about 50 cents from last year, but there's a question is could you do better than that or is there anything else offsetting that the savings that.

Thanks, David It's Tony here, all I'll take the first part of that question.

According our production has been averaging around 15 to 16000 barrels a day for the first the first part of the year. So we're on track from that perspective in terms of what we set for budget for Acordionero and forecast for the year is on track, we don't see any any potential hiccups there.

Operating costs.

It was basically operating costs are [noise], our operating costs have come down you know you know part of it is as we inject more water.

You know we aren't power consumption is going up by about 50%. So on a per unit cost per unit pieces is dropping dramatically.

We are encouraged we are increasing amounts of power that we're using so the number that we I've been there is reflective of that forecast.

Okay I can I just a quick follow up to the first question.

I you know obviously you have downtime from from sudden wells nothing that was pretty evident in December but is there anything like that going on at the moment because I suppose Mike My simplistic thinking is assuming you got the well back on in December you know I'm going with the starting point of 16.

They're not in the let's say the 1500 that that you've added through through the new wells. So fall gets me to around 17 17 off today I is not the way I should be thinking about all the wells down at the moment do I need to take into account.

Yeah, I think you inside a inside Acordionero eat we have planned.

Downtime associated with routine SP repairs for the most part for the first part.

Part of the year, we're on track with the expected failure rate and Workovers, but yes, we do have a couple of wells that are down right now and that would be the gap on a year number from 17 to our 15 to 16 number right now.

Great makes sense. Thank you.

You bet.

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

Thank you operator, thanks to everyone for dialing in its a volatile time and ER and the markets than in the world in General we appreciate your support and your patience a we're we're working is diligently as we can we what we'll certainly advise investors wants.

Once the the current blockades in the southern put the mile or resolve the government are working diligently tried to resolve those issues and we're we're we're doing everything we can to support them. So thanks again for your time your patience and we look forward to talking to your next quarter.

Ladies and gentlemen, thank you for your participation on today's conference. This does conclude today's conference call you may now disconnect.

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