Q2 2021 Gran Tierra Energy Inc Earnings Call
Thank you for calling and the conferencing Center, if you did not anticipate and asking a question via the phone you can alternatively access the call audio via the webcast link provided in a press release or on the IR website. Our conference coordinator would be with you momentarily. Thank you.
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Thank you for holding which conference.
Yeah.
And then.
I'd also like Dortmund from Gran Tierra energy.
Thank you.
And last name please.
David Brown, Dav Rd, B R O W N.
Thank you and your company name.
Yeah.
IRA a I E R. A.
And thank you.
Months ago with.
With stronger demonstrate the effectiveness of the waterflood.
Moving to the Putumayo.
A quick update on our infield development, Kevin Joint campaign, 3 oil producers cut Jaco the cutback of 42, well is currently on production and.
The concept of a 42 and cardiac over.
And 44 wells are both expected to start production during August 2021.
Canada, we commenced a 6 well workover program during the quarter.
1 stimulation and 1 injector conversions were completed.
Remaining injected conversions and 2 producer Workovers are expected to be completed by early September.
Lastly, our CRE and our facility expansion program is progressing as planned which is expected to allow additional production to be brought online and the second half of 2021 and.
And Workover rig is also currently running larger pumps and 4 oil wells.
Pump Upsizing program is being done in conjunction with the facility expansion program and.
Summary, we are pleased and we've been able to safe and resume operations after the blockades across our plumbing portfolio.
I'll now turn the call back to the operator, and we'll be happy to answer any questions. Operator. Please go ahead.
And if he would like to ask and audio question. Please press star 1 on your telephone keypad again star 1 to ask and audio question.
To ask and audio question. Please press star 1.
Your first question comes from the line of Josef Schachter with Schachter energy.
Good morning, Gary a.
Couple of questions from me number 1.
And I'm not sure this is probably for potentially for Rai and our Rob.
The asset impairment that you took a year ago $398 million.
Lot of Canadian companies domestically and reversing that some part of that it's probably gone because of your production, but what is the stance in terms of refocusing the impairments and what if theres any conditions what are those conditions before you'll reverse that to the balance sheet.
Alright.
Good morning Joseph.
Because we follow U S GAAP under U S. GAAP once the write off happens it's gone, whereas under <unk>, you get the rate that back up.
Okay.
And for US, we would be right and that backup for sure.
Okay. So that's not going to occur and the future that second the big increase are you looking for in terms of production.
For the second half of 30 to 32000 and the number of 23000 now where he is production and August just to get a feel that the.
The ramp up is occurring where are you now and in terms of your overall production.
Yes, we're at 29000 barrels a day now.
And we've resumed production after the blockades were lifted.
And the remainder to get us above 30.
Comes from bringing on wells that we've drilled.
And Workovers and the pump upsizing that Rob mentioned.
Yes.
Lastly, if I can.
And the economy, and something I can see and they're talking about teacher strikes there and that they are pretty powerful union is that affecting the recovery of the Colombian economy and do you see any any impact on your company.
Rags on for many more months.
Yes.
It's now moved from blockading and protest.
<unk>.
Government discussions with the protesters and the protest committee.
We're back to normal operations both of them.
And the middle Magdalena and the Putumayo.
But we are also actively involved with our community programs and assisting.
The government every everywhere, we can and so I think Joseph.
The bottom line as it did hurt the economy and Colombia, no question about that and the governments are taking it quite serious.
To try to resolve some of the issues that are that have come up over the last 18 months with <unk>.
And with Covid and the.
The economic downturn for that they caused a lot of these these protests and so it is a serious.
The government is taking it seriously, but we see that we're back to normal operations and and.
And back to and assist mode.
Okay, well I'm glad to see a big pickup and production and we'll look forward to much better quarters going forward. Thanks very much Gary.
You bet.
Your next question comes from the line of Al Stanton with RBC.
Yes, good evening guys a couple of questions. If I may I'll, just see them sequentially.
And on taxation and I see this and receivable on the balance sheet and I was wondering what guidance you can give us for a day outlook, maybe for the end of the year old and Wisconsin, and next year and as revenues and starting to go up and spending not.
Should share is the tax line and getting a white cap and then take a bigger slice.
And 2022.
Question.
Okay.
Yes, I'll touch on that 1.
<unk>, we still have the receivable will position and given our and so at the end of last year, we had approximately $90 million, we expect that and then balance to be around $40 million. This year.
Prices, where it's at so really a net cash inflow of about $50 million zone.
And our notes in our 10.
Q.
You'll see the reconciliation from getting balances to any balanced and we do baby ACO and goods as you point out.
Bolt ons and some of the Opex and Capex and there is also withholding tax on some of the revenue, which increases that income tax receivable, but we factor that all in sales were <unk>.
And $50 million cash inflow in 2021 looking out to 2020.2.
And with our existing tax pools and losses, we still expect a minimal taxes in 2022.
And then gradually increase from there depending on spending after point during 2022.
Okay.
And you mentioned spending and also earlier on you mentioned that your.
Shelf filing which looks to the market and I was wondering you gave the impression just now and the cold and it was just paperwork and something you would have done with the expiring of the.
And the previous shelf and he is.
And I think more to it and that should we be expecting.
And something imminent.
I know historically, we've always had like most companies have the shelf in place ours was set to expire in September and just do it's always easy to do it just when you're getting the quarter out. So we did a month earlier than we normally would have.
So I would just put it in the normal force category.
Okay.
Thanks, guys.
Thanks Al.
Your next question comes from the line of Phil Skolnick with 8 capital.
Yeah. Thanks, good morning.
How are you thinking about next year.
With the free cash flow and debt reduction and you have and exploration program also that youre going to be commencing so.
And I'll kind of I guess that and how are you now and then how you kind of get to that path to 40, plus thousand barrels a day that you have.
Reserve report kind of outlines here came from getting too.
Yes, we are.
We are continuing on the exploration side with the permitting.
And I'm trying to.
Compress that time line and getting ready for exploration and then both and Ecuador, we have some quite exciting exploration just across the border with some.
And.
As you know.
Discovery.
Cross the border that we look to appraise.
And across.
Across the rest of our portfolio.
Does the middle Magdalena and the.
Putumayo and so I think the answer to your question Phil is.
And next year.
As you can see from our financial outlook, it's a totally different world and it was a year ago.
And with.
Quite a bit of our debt paid off.
And free cash flow.
And at current prices at strip prices.
We will be directing some of that too to our exploration portfolio and it's quite exciting.
We're ready to go.
But there are things that we're doing this year to get ready for next year.
Okay. Thanks.
Your next question comes from the line of David Herzberg with Stifel.
I. Thank you for the call I was wondering if you could.
Tell us if you have any hedges in place from the first half 'twenty 2 and if not.
Perhaps some corners and 2.
Youre thinking about that in terms of hedging some production in terms of timing and perhaps what price you might be looking to achieve.
Yes, I think the answer to that is we don't have any hedges in 2022.
Well look at that towards the end of this year.
We hedged the first half of this year to bring production back on which we successfully did.
And a.
A modest hedge for the second half we don't have any plans at the moment where 2022.
As we look at our long range plan, our 5 year plan.
And we'll be discussing that over the next couple of months and.
And address it then.
Thank you.
Your next question comes from the line of Patrick O'connell with Alliance Bernstein.
Hi, guys. Thanks, so much for the call, but that's a little bit about the cost side of the equation this quarter.
And a little bit elevated on lower production and from the 1.1 time item.
Can you talk about the confidence of getting into those ranges that you've laid out and the updated budget I think the opex came up just a tad but everything else is kind of in line. So how confident are you and you'll be able to bring those costs down from the second half of the year.
Yes, Thanks Patrick.
We're very confident.
About 70, 65% to 70% of our our operating costs are fixed and so we got hit in this quarter, just with the lower production and the blockades and the team did do a very good job suspending contracts to try to minimize the cost burn during the quarter, but you can only move so quickly and.
Situations like that.
And then.
If you look at our transportation costs, we did have to move some of our barrels through different routes, both a higher a higher quality discount.
Well as higher transportation costs.
And that was just to keep the barrels moving.
Yes.
And the oil prices, where they are out there, we're still high margin barrels to sell at that level.
But it was.
Quite painful using some of those routes were back to normal course operations using all the routes that we normally abuse and the past.
Thanks, Brian very helpful.
Thanks, Patrick.
Your next question comes from the line of Al Cheng with Citi.
Hey, guys. Thanks for the call just a few questions from my and I know at some point you were evaluating alternatives for your remaining Petro toss stake just wondering is that something still being discussed or has there been any movement on that front.
The answer to that is we always look at all of our portfolio.
And we have no immediate plans.
But we on a continuous basis look at debt position long term.
It's.
It's not something that we will keep for the next 5 years.
But we also are very happy and pleased with what the management team and Petro Tal are doing and they're doing a great job.
Good assets, but long term.
And we'll continue to evaluate.
Okay got it that's very helpful and.
And on the Covenant relief period, and when is the first testing date after that expires is that as of October 1st for the end of the fourth quarter.
Yes, good question and at the end.
As of October 1 and so really the first test will be in February.
So I saw.
And where things we look for and we're very comfortable we'll be able to covenant relief effective October 1.
Okay understood and then just wanted to clarify given the balance on the credit facility is currently a 175 million are you still expecting and close out the year and the $60 million to $70 million range.
Correct.
Got it.
Understood. That's super helpful. Thank you guys.
Great. Thanks.
Your next question comes from the line of ROM, and Ross and laborious with Cowen and capital.
And good morning from them from.
And balanced capital. Thank you for taking my question.
And so just to clarify on the.
Production guidance.
It seems that to achieve the midpoint guidance unique to sustain life.
2000 barrels per day.
Can you confirm this.
And.
That's correct, we confirm that yes.
Guidance for the second half year is 30 to 32000.
For the second half.
Awesome.
And I flew up maybe on royalties, we understand that this quarter it was higher due to H BR.
So what can we expect the brand is to have all.
$75 per barrel.
Yes.
Reasonable effective royalty rate is around 16% to 18%.
At that level.
Even if brent stays and $75 per barrel.
Correct, yes.
Okay Awesome. Thank you guys.
Great. Thank you.
Ladies and gentlemen, and we've reached the allotted time for questions I would now like to turn the floor back to management for any additional or closing remarks.
Thank you Angie I would like to thank everyone for joining us today, and we look forward to speaking with you over the next quarter and update as we have progress. Thank you very much.
Thank you for participating in today's conference call. You May now disconnect your lines at this time.
And then.
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Our cash.
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And John.
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Growth.
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