Q2 2023 Gran Tierra Energy Inc Earnings Call

August 2, 2023

Yeah.

Good morning, ladies and gentlemen, and welcome to Gran Tierra Energy's results conference call for the second quarter of 2023 my.

My name is Shannon and I'll be your coordinator for today.

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

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

Structure 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 Wednesday August 2nd 2023 at 11 o'clock a M eastern time.

Today's discussion may include certain forward looking statements information as well as certain non-GAAP 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-GAAP measures discussed on today's call.

Any production volumes are based on working interest cells before royalties.

Finally, this earnings call is the property of Gran Tierra Energy, Inc. Any copying or re broadcasting 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 Chief Executive Officer of Gran Tierra. Mr. Guidry. Please go ahead.

Thank you operator.

Good morning, and thank you for joining Gran Tierra <unk> second quarter 2023 results conference call.

My name is Gary Guidry, President and Chief Executive Officer, and with me today are Ryan Nelson, Our executive Vice President and Chief Financial Officer, and Rob will our vice President of asset management.

On Tuesday August two 2023, we issued two press releases that included detailed information on our second quarter 2023 results.

And about our mid year 2023 reserves update both of which are available on our website.

Brian and Rob will make a few brief comments and then we will open the line for questions I will now turn the call over to Ryan.

Thanks Kerry.

Good morning, everyone.

During the first half of 2023 Gran Tierra completed development campaign with the drilling of 41 development wells in three of our major fields, which have been producing oil at rates in line or exceeding our expectations.

Gran Tierra achieved another strong quarter by delivering $53 million of funds flow, while incurring $66 million in capital expenditures, which were both broadly the same as the first quarter of this year.

Adjusted EBITDA was 85 million compared to $89 million in the prior quarter.

Funds flow and adjusted EBITDA were negatively impacted by 13 million unrealized foreign exchange loss during the quarter.

Caused by the strengthening of the Colombian peso versus the U S dollar.

With enrollment campaign now complete we expect capital expenditures to be lower for the second half of the year, while benefiting from the increased production from our new producing wells.

Looking ahead, we are entering an exciting phase of growth.

To drill exploration wells in Ecuador in the fourth quarter of 2023 building on our successful 2022 exploration campaign.

As of June 32023, the company had a cash balance of $69 million net debt of $503 million with a forecasted free cash flow in the second half of 2023, we expect to exit 2023 with over $150 million of cash.

Looking at the pricing during the quarter, the Brent oil price averaged $77 73 per barrel, which was down 31% from one year ago and down 5% from the prior quarter.

The companys quality and transportation discount narrowed to $14 10 per barrel down from $18 45 per barrel in the prior quarter.

Lucas do you invest ghulja oil differentials have continued to narrow throughout 2023.

During the second quarter, the vascular any differential narrowed to $5 53 per barrel down from <unk> 87 per barrel in the prior quarter, while the prestea oil differential narrowed to $9 41 per barrel down $15 17 per barrel over the same time period.

In July 2023, we have continued to see differentials narrowing with Vasco any differential down to $3 96 per barrel and the gas differential down $6 <unk> per barrel.

Gran Tierra is average production for second quarter was 33719 barrels per day up 10% from one year ago, an increase of 7% compared to the prior quarter the company's second quarter.

To date 2023 average person has been approximately 35300.

The company's operating netback was $34.50 per barrel down 42% from one year ago and down 2% from the prior quarter the drop in offering that back over the last year was largely driven by the decrease in oil price and the higher differentials over the time period.

Strong current production base, Brent oil price of about $80 per barrel narrow differentials and the majority of capital expenditures behind US. We're very excited about the second half of the year.

We're also pleased to announce that we plan to invest again in the protection and conservation of Amazon are reinforced in the Putumayo basin of Colombia sooner supported natural ends or this project.

During the first six years of the project Gran Tierra is initial investment of $13 million has already produced impactful results.

Benefited environment, and local communities, including reforestation and restoration of over 14000 hectares of land.

We have over $1 2 million trees.

Look forward to our continued partnership with the NGL Conservation International and are excited to build upon the positive impact we have already made with that and that runs on this project.

I'll now turn the call over to Rob to discuss our mid year.

2023 reserve update and operational highlights from our second quarter results.

Good morning, everyone during.

During second quarter 2023, coronary production averaged approximately 18000 barrels of oil per day.

Another strong quarter performance due to the successful 2023 drilling program and the ongoing prudent management of the enhanced oil recovery waterflood scheme.

As Brian had indicated the company has completed its 2023 development campaign.

During the first half of 2023, the company drilled a total of 21 wells in the core.

Narrow 10 wells were drilled six are on production for our on water injection.

The child the block Gran Tierra has completed its drilling campaign costs yaacov, which consist of seven wells.

And which are producers and three of which are water injectors.

We drilled four production wells.

Of particular note. The <unk> 54, well was drilled that is the most northern well drilled in the cost cycle killed in excess of the well has resulted in the identification of multiple additional drilling opportunities to target on swept regions of oil.

With our 2023 development campaign now complete the company is pleased to provide a mid year reserve update.

Cause results announced in our reserves update are testament to Gran Tierra is operational success and our in country relationships that have allowed the company to secure the series D license continuation.

We invite you to read the reserves update press release in its entirety on our website.

As of June 32023, Gran Tierra now has the highest reserves in the company's history.

<unk> 94 million barrels of oil equivalent or Boe.

At a one P basis $150 million.

On a <unk> basis, and 212 million Boe on a <unk> basis.

In the first six months of 2023, the company added 16 million Boe of <unk> 'twenty.

26 million viewing of Tupi.

At 35 million Boe of three P reserves.

Which allowed us to achieve reserve replacement ratios of 270% on a <unk> basis, 433% on a <unk> basis, and 599% on a <unk> basis.

Despite a decrease in the Brent price forecast used in the midyear 2023 Mcdaniel reserves report relative to the 2022 year end Mcdaniel reserves report for the first two five years of devaluation the combination of our successful.

Drilling campaign, the series antique contract continuation our focus on maintaining low operating cost and our share buyback program allowed Gran tierra to achieve increases relative to 2022 year end and net asset values before tax.

Our <unk> net asset value before tax is now $49 54.

Per share up 7% and our.

<unk> NAV before tax is now $84 39 per share up 15%.

Cost of shows costs associated with finding and developing.

These reserves.

Excluding changes in future development costs on a per BOE basis came in at $8 <unk> for one to $5 33 for <unk>.

$3 86 for <unk>.

These mid year Reserve results are testament to Gran Tierra has ability to operate as a full cycle exploration and production company, which offers value to our stakeholders.

Via the success, we have achieved through the drill bit.

I'll now 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 a question and answer session for Securities analyst.

If you have a question. Please press the star key followed by one one when you touched on phone.

We will then hear an automated message advising your hand is raised.

<unk> will be pulled in the order of the RBC.

Please ensure you lift the handset if youre using a speakerphone before pressing any Keith one moment. Please for your first question.

Yeah.

Our first question.

Comes from the line of Alexandra Simeon needy with William Blair <unk> Company, United Kingdom. Your line is open.

Hi, Thanks for taking my questions I have three if I may I'll go ahead and ask one by one.

<unk> seen higher this quarter I guess this is because with lachman.

Payments for the fiscal 'twenty two.

Ian please feel quite some guidance.

Cash taxes for the second half of the year.

This is my first.

It was higher.

Higher than that.

Yes, it's really net debt decreased further stock space sorry.

So my question was about taxes guidance for cash taxes for the second half.

Yes, good morning, Baxter that we began in the second half are the withholding tax which recently the Colombian government has increase to withholding tax and Thats really just a prepayment for the following your taxes and that's it.

It works out to 8% of revenue.

Okay perfect. Thanks, very much very clear.

Then the operating expenses of $15 86, we're running a bit above guidance do you expect the second half to convert because.

You have vinson about higher production in the second half right.

Yes.

We expect the operating cost per barrel to trend down throughout the year just with the you look at our average for the quarter was around 33, 7% in Q2.

And with 35000, right now so that well and we did.

We are a little bit higher than we had forecast originally and that was just with the strength of the peso.

Right.

Should increase we expect our per unit cost to decrease.

Okay, great. Thank you and.

And my last question is about Capex, so given that the drilling campaign.

Finished for the year.

Do you expect capex to come at the lower end of the guidance for this year.

Yes, our original guidance was $2 10.

$2 50 for the year.

Our last release, we lowered that to 210 to $2 30, So we narrowed the range. So we do expect to hit the lower end of the range.

Okay. Thank you.

Thank you.

Our next question comes from the line of Anne Milne with Bank of America. Your line is open.

Thank you congratulations on the results two questions I have.

One is.

I noticed that you currently do not have any hedges in place so I just wonder at.

Under what conditions are at what prices would you consider reinstating some hedges and the second I think you hinted that a little bit in the last answer a question and answer which was.

The stronger peso.

How has that affected you or I guess to what degree your cost basis.

Is there anything you can do about that to mitigate it.

Yes on the hedging we go through an annual process.

Looking at all of our assets over a five year period, we're just starting that process and you are correct. We are unhedged at the moment. So we'll evaluate that in the third and the fourth quarter here.

Depending on what we allocate for capital for for 2024 and make those decisions depending on the capital program, but also what our outlooks are and let Brian answer the question on the peso.

The peso, obviously started the year younger on 4000 ran up over 5000 now we're back down to around around 4000. So.

It has been a little bit of cost pressure on.

We haven't done our budget at 5000, we've done around 4200, so it was not significantly higher than what we had budgeted.

But it still has a negative impact, especially over 75% of our operating costs, our RMB cells.

<unk> will be in Colombia.

So that's offsetting some of the inflationary pressures.

So one.

It won't have a material impact on our results.

This quarter, we did it.

Predominantly because our payment of taxes in the second quarter. Both in the April and June and that was really the payment of our 2022 taxes and Thats why youll see in our results we booked a large realized gain and that was just the change in DSO. So it was truly a realized gain because we didn't make that payment this quarter.

Okay. Thank you very much.

Hey, guys.

Thank you.

Our next question comes from the line of Robyn <unk> with Canaccord Genuity. Your line is now open.

Good morning, and thanks for taking my questions excellent.

Additions on the server side, so I thought a couple I will go one by one.

The first one you mentioned that the NCI was completed.

I'm wondering if you are expecting to renew it or if you are expecting to check cashing.

Cash in order to deliver.

Eliminates Rachel.

Yeah on the question, we did backfill the CIB and we.

And we can renew it.

Sometimes this month and then we would look to renew its even when we renew we do have lots of flexibility.

And whether we purchase shares on it or not last year, we did repurchased 10% of our shares but we would look to renew it.

Okay Awesome and then adding the Capex question for you can spend at around 88 million. When you take a couple of days after which the midpoint guidance.

I thought you mentioned that the exploration campaign, beginning fourth quarter. So we should have a light capex in third quarter and higher capex in the fourth.

Correct, Yes Q4.

It will be driven by the exploration wells as well as building pads and getting ready for the 2024 development campaign development and exploration campaign.

Perfect. Thanks, and the last question.

Each time disconnect credentials, we've seen that.

<unk> have narrowed significantly.

So what are we expecting for the second Carpathia.

Yeah, I think we budgeted.

The number that we were forecasting it is higher than what they currently have.

But I think <unk> is close to $6 today.

So it's down quite a bit and that's growing is below $4.

We're forecasting around $7 50 <unk>.

$4 for Vasco in here.

For the second half.

But the market is higher than that right now.

Okay, great. Thank you Ryan.

Thank you.

Our next question comes from the line of Josef Schachter with Schachter Energy Research. Your line is now open.

Good morning, guys.

Two questions. The first one for Ryan you mentioned that net debt was 503 and you expected cash by year end to be $150 million, so up $82 million from where you are at June 30.

You are also in the first half did some buying of that 6% quarter Senior notes Fab 2025, do you see using that money for buying back more bonds or do you really have.

A strong need to want to see $150 million in cash on the balance sheet at year end or is there other purposes that you might find to use that for.

Yes, it's a good question I think it's we target to maintain a cash balance of $75 million to $100 million and that will vary by quarter, depending on activity. So we're comfortable with the $75 million to $100 million cash balance. So we would look at where to deploy the called the excess cash in the second half and that could be a combination.

Bond repurchases share repurchases.

I mean, we lost cashew gear up for more active 2024 program.

Okay, where do you see the comfort zone on net debt given your production levels in let's say in an $80. Brent number do you want to see that number at 400, and then you're happy and you can leave it there where do you see the targeted debt number you want to have going forward in 2024.

Yeah, I think we'd like to get our our gross debt down to 500 and our net debt.

Around 400 to 425, we think that's a reasonable number, especially with our production base with low capital requirements of our assets, we think thats a very manageable number.

So far yes, I'd agree with that quest.

Question for Gary.

In past presentations, you've mentioned that you were looking at diversifying into maybe mean or other places around the world Hasnt been much progress on that and did you see 2024 may be adding another leg to the stool of the business.

Yes.

The answer is yes, we continue looking at diversifying.

Value add acquisitions and.

It's a continuous process and will continue into 2024.

So we see we see lots of lots of things that are out there.

That.

Good add value, we're sitting at a.

Trading it.

Half of our PDP.

And you can see the transactions that are happening happening globally.

There are not many transactions outside of Canada.

In North America.

In general, but we are.

I think the answer to your question is we will continue our process of looking for value add.

And mean.

As the main locate mainly main area or are there other areas as well.

Yes, we always looking in the basins that we're in and the countries that we're in.

<unk>, Ecuador, but but the targets for diversified.

<unk> beyond those countries is definitely Mena.

Okay. So just to clarify what you said before thanks very much Gary and good luck for Q3 look we've already seen the results given the stronger commodity prices.

Thanks Joseph.

Thank you.

Next question comes from the line of Oriana Cobalt with balance your line is now open.

Hi, Thanks for taking my question I had.

Two questions. If we go me, let me go one by one that would be great.

First on the operating side.

We noticed a 9% sequential decrease in your question there with volumes. So just wondering if you could provide more insight into how are you seeing production going across.

Or in the port of La Yaqui.

And if you have any color that you could share in terms of what Joe According to NATO.

<unk>.

On a quarter over quarter basis.

Yes, I think part of that was timing on when we brought on wells.

We did it we had some flush production in the first quarter.

And then decreased in the second quarter. We also on some wells down during the quarter, which we saw somewhat we have brought on and as we see our production around that 35000 barrels right now.

Perfect and just.

Going back to the Capex.

Question I, just wanted to confirm whether the exploration program through the remainder of the year of the year.

Only be concentrated in Ecuador.

Looking at the 2023 guidance and the plan of going into four to six wells between Colombia, and Ecuador, just wanted to does that mean.

If we should expect to see any anything anything coming from Colombia as part of this severity integral integration program.

Yes. The answer is yes, we're focused on Ecuador, we've had some really good success, we've drilled two wells two discoveries and we're looking for a critical mass.

Ecuador.

On the development, but we do have some very exciting things to drill in Colombia.

But that will likely occur in our 2024 capital program.

Okay. Thank you very much.

Thank you.

Our next question comes from the line of Garrett silos with J H Lane partners. Your line is now open.

Hey, guys. Thanks for taking the question can we just talk about plans to address the 2025 maturity.

Perhaps some of that excess cash to reduce the overall quantum of debt.

Yes, it's a good question yeah, our baseline is that we repay them as they come due and as you rightly pointed out is that we will have some excess cash and we will look at deploying capital through the 2025.

And targeting.

Maturities.

Okay. Thanks very much.

Thank you.

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

Thank you operator, I'd like to once again, thank everyone for joining US today, we look forward to speaking with you next quarter and update you on ongoing progress. Thank you very much.

This concludes today's conference call. Thank you for participating you may now disconnect.

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Good morning, ladies and gentlemen, and welcome to Gran Tierra Energy's results conference call for the second quarter 2023.

My name is Shannon and I will be your coordinator for today.

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

During the initial remarks, we will conduct a question and answer session for securities analysts and institutions.

<unk> 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 Wednesday August <unk> 2023 at 11 o'clock am eastern time.

Today's discussion may include certain forward looking statements information as well as certain non-GAAP financial measures.

Any production volumes are based on working interest sales before royalties. Finally this earnings call is the property of Gran Tierra Energy, Inc. Any copying or rebroadcast 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 Chief Executive Officer of Gran Tierra. Mr. <unk>. Please go ahead.

Thank you operator.

Good morning, and thank you for joining Gran Tierra <unk> second quarter 2023 results conference call.

On Tuesday August two 2023, we issued two press releases that included detailed information on our second quarter 2023 results.

And about our mid year 2023 reserves update both of which are available on our website.

Brian and Rob will make a few brief comments and then we will open the line for questions I will now turn the call over to Ryan.

Thanks, Gary Good morning, everyone.

During the first half of 2023 Gran Tierra completed development campaign with the drilling of 21 development wells in three of our major fields, which have been producing oil at rates in line or exceeding our expectations.

Adjusted EBITDA was $85 million compared to $89 million in the prior quarter.

Funds flow and adjusted EBITDA were negatively impacted by $13 million and realized foreign exchange loss during the quarter, which was caused by the strengthening of the Colombian peso versus the U S. Dollar.

With enrollment campaign now complete we expect capital expenditures to be lower for the second half of the year, while benefiting from the increased production from our new producing wells.

Looking ahead, we are entering an exciting phase of growth, we're gearing up to drill exploration wells in Ecuador in the fourth quarter of 2023 building on our successful 2022 exploration campaign.

As of June 32023, the company had a cash balance of $69 million and net debt of $503 million with a forecasted free cash flow in the second half of 2023, we expect to exit 2023 with over $150 million of cash.

Looking to pricing during the quarter, the Brent oil price averaged $77 73 per barrel, which was down 31% one year ago and down 5% from the prior quarter.

The companys quality and transportation discount narrowed $14 10 per barrel down from $18 45 per barrel in the prior quarter.

Do you invest Gloria oil differentials have continued to narrow throughout 2023.

During the second quarter, the vascular any differential narrowed to $5 53 per barrel down from 787 program in the prior quarter.

And see the oil differential narrowed to $9 41 per barrel down $15 17 per barrel over the same time period.

In July 2023, we will continue to see differentials narrowing with an escalator differential down to $3 96 per barrel and the gas differential down $6 <unk> per barrel.

Gran Tierra is average production for the second quarter was 33719 barrels per day up 10%, one year ago, an increase of 7% compared to the prior quarter the company's second quarter.

To date 2023 average production has been approximately 35300.

The company's operating netback.

The $4 50 per barrel down, 42% from one year ago and down 2% from the prior quarter the drop in offering that back over the last year was largely driven by the decrease in oil price and the higher differentials over the time period.

Strong growth production base, Brent oil prices above $80 per barrel narrow differentials and the majority of capital expenditures and behind US. We're very excited about the second half of the year.

We're also pleased to announce we plan to invest again protection conservation of the engine Amazon Rain Forest in the Putumayo Basin of Colombia, we're extending your supported natural ends or this project. During the first six years of the project Gran Tierra is initial investment of $13 million has already produced impactful results.

Benefited environment, and local communities, including reforestation and restoration of over 14000 hectares of land.

We have over $1 2 million trees.

Look forward to our continued partnership with the NGL Conservation International and are excited to build upon the positive impact we have already made with natural <unk> project.

I'll now turn the call over to Rob to discuss our mid year 2023 reserve update and operational highlights from our second quarter results.

Good morning, everyone during.

During second quarter 2023, coronary production averaged approximately 18000 barrels of oil per day and another strong quarter performance due to the successful 2023 drilling program and the ongoing prudent management of the enhanced oil recovery waterflood scheme.

Brian had indicated the company has completed its 2023 development campaign during the first half of 2023 the company drilled a total of 21 wells.

And according to Aero 10 wells were drilled six are on production for our on water injection.

And the child the block Gran Tierra has completed its drilling campaign costs Yaacov, which consist of seven wells four of which are producers and three of which are water injectors.

Canada, we drilled four production wells.

Particular note the <unk> 54, well was drilled that is the most northern well drilled in the cost cycle killed in excess of the well has resulted in the identification of multiple additional drilling opportunities to target on swift regions of oil.

With our 2023 development campaign now complete the company is pleased to provide a mid year reserve update pause results announced in our reserves update are testament to Gran Tierra is operational success and our in country relationships that have allowed the company to secure the theory that the license continuation.

We invite you to read the reserves update press release in its entirety on our website.

As of June 32023, Gran Tierra now has the highest reserves in the Companys history.

94 million barrels of oil equivalent or Boe.

On a <unk> basis $150 million.

On a <unk> basis 212 million Boe on a <unk> basis.

In the first six months of 2023, the company added 16 million of <unk> 'twenty.

26 million up two P M.

At $35 million of three P reserves.

Which allowed us to achieve reserve replacement ratios of 270% on a <unk> basis, 433% on a <unk> basis, and 599% on a <unk> basis.

Drilling campaign, the CRT anti contract continuation our focus on maintaining low operating cost and our share buyback program allowed Gran tierra to achieve increases relative to 2022 year, Ed and net asset values before tax.

Our <unk> net asset value before tax is now $49 54.

Per share up 7%.

<unk> NAV.

Before tax is now $84 39 per share up 15%.

Cost of shows costs associated with finding and developing.

These reserves, excluding changes in future development costs on a per Boe basis.

At $8 in Pittsburgh for one to $5 33 for Q3.

$3 86 for <unk>.

These mid year Reserve results are testament to Gran Tierra has ability to operate as a full cycle exploration and production company, which offers value to stay.

Stakeholders via.

Via the success, we have achieved through the drill bit.

I'll now 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 a question and answer session for Securities analyst.

If you have a question. Please press the star key followed by one one more you touched on phone you will then hear an automated message advising your hand is raised.

Questions will be pulled in the order of the RBC.

Please ensure you lift the handset if youre using a speakerphone before pressing any keys one moment. Please for your first question.

Okay.

Our first question.

Comes from the line of Alexandra Simion needy with William Blair <unk> Company, United Kingdom. Your line is open.

Hi, Thanks for taking my questions I have three if I may I'll go ahead and ask one by one.

<unk> seen higher deck for this quarter I guess this is because of <unk> of.

Tax payments for the fiscal 'twenty can you. Please go ahead some guidance.

Cash taxes for the second half of the year.

Yeah.

This is my first question.

No.

Higher debt.

It's really net debt decreased further stock phase sorry.

So my question was about DOCSIS, yeah, so guidance for cash taxes for the second half.

Yes, good morning.

We began the second half are the withholding tax, which youll unreasonable. The Colombian government has increased to withholding tax and Thats really just a prepayment for the fall in your taxes.

That works out to 8% of revenue.

Okay perfect. Thanks, very much very clear.

Then the operating expenses of $15 86, we're running a bit above guidance do you expect the second half to convert because you have been saying about higher production in the second half right.

Yes.

We expect the operating cost per barrel to trend down throughout the year just with the look at our average for the quarter was around 33, 7% in Q2, we're at about 35000 right now so that will help and we did.

We are a little bit higher than we forecast originally and that was just with the strength of the peso.

Right.

Increases you expect our per unit cost to decrease.

Okay, great. Thank you.

And my last question is about Capex, so given that the drilling campaign.

Finish for the year.

Do you expect capex to come at the lower end of the guidance for this year.

Yes, our original guidance was $2 10.

$2 50 for the year.

Our last release, we were lowered that to 210 to $2 30. So we narrowed the range. So we do expect that the lower end of the range.

Okay. Thank you.

Thank you.

Our next question comes from the line of Anne Milne with Bank of America. Your line is open.

Thank you congratulations on the results two questions I have.

One is.

I noticed that you currently do not have any hedges in place so I just wonder at.

Under what conditions are at what prices would you consider reinstating some hedges and the second I think you hinted that a little bit in the last answer a question and answer which was.

The stronger peso.

How has that affected your I guess to what degree your cost basis.

Is there anything you can do about that too to mitigate it.

Yes on the hedging we go through an annual process.

Depending on what we allocate for capital for for 2024 and make those decisions depending on the capital program, but also what our outlooks are and we'll look Brian answer the question on the peso.

The base so obviously.

Your younger on 4000 ran up over 5000, now we're back down to around around 4000. So.

It has been a little bit of cost pressure on.

We haven't done our budget at 5000, we've done around 4200, so it was not significantly higher than what we had budgeted.

But it still has a negative impact, especially over 75% of our operating costs are in pesos.

<unk> has taken in Colombia.

So that's offsetting some of the inflationary pressures.

So one.

It won't have a material impact on our results.

This quarter, we did it.

Predominantly because our payment of taxes in the second quarter. Both in April and June and that was really the payment of our 2022 taxes and Thats why youll see in our results we booked a large realized gain and that was just the change in DSO. So it was truly a realized gain because we didn't make that payment in this quarter.

Okay. Thank you very much.

Hey, guys.

Thank you.

Our next question comes from the line of Robin Rossi with Canaccord Genuity. Your line is now open.

Good morning, and thanks for taking my question with excellence.

This shows on the service side, So I've got a couple I will go one by one.

The first one you mentioned that the NCI was completed I was wondering if you are expecting to win.

Or if you are expecting to check cashing.

Cash in order to be delivered.

The leverage ratio.

On the question, we did backfill the NCI and <unk>.

Can renew it.

Sometime this month and then we would look to renew its even when we renew we have lots of flexibility on whether we purchase shares on it or not last year, we did repurchased 10% of our shares when we would look to renew it.

Okay Awesome, and then adding the Capex question for Ian you could spin around 88 million when you take a couple of days after which the midpoint guidance.

But you mentioned that the exploration campaign, beginning fourth quarter. So we should have stabilised cap 18 third quarter on higher Capex in the fourth.

Correct, Yes in Q4.

It will be driven by the exploration wells as well as building pads and getting ready for the 2024 developments campaign development and exploration campaign.

Perfect. Thanks, and the last question.

The gafisa and disconnect greenhouse we've seen that these have narrowed significantly so.

So what are we expecting projects at both applebee's.

Yes, I think we budgeted.

A number that we were forecasting it is higher than what they currently have.

The test year is close to $6 today.

So it's down quite a bit in Moscow is below $4.

We're forecasting around $7 50 <unk>.

One $4 for Vasco in here.

For the second half.

But the market is saying that right now.

Okay, great. Thank you Ryan.

Thank you.

Yes.

Thank you.

Next question comes from the line of Josef Schachter with Schachter Energy Research. Your line is now open.

Good morning, guys.

Two questions. The first one for Ryan you mentioned that net debt was 503 and you expected cash by year end to be $150 million, so up $82 million from where you are at June 30.

<unk> also in the first half did some buying of the 6% quarter Senior notes Fab 2025, do you see using that money for buying back more bonds or do you really have a.

A strong need to want to see $150 million in cash on the balance sheet at year end or are there other purposes that you might find to use that for.

Yes, it's a good question I think it's we target to maintain a cash balance of $75 million to $100 million and that will vary by quarter, depending on activity. So we're comfortable with the $75 million to $100 million cash balances. So we would look at where to deploy the excess cash in the second half and that could be combination.

Bond repurchases share repurchases.

Or does <unk>.

<unk> casualty gear up for more active 2024 program.

Okay, where do you see the comfort zone on net debt given your production levels in let's say in an $80. Brent number do you want to see that number at 400, and then Youre happy and you can leave it there where do you see the targeted debt number you want to have going forward in 2024.

Yes, I think we'd like to get our our gross debt down to 500 and our net debt.

Around 400 to 445.

We think that's a reasonable number, especially with our production base.

<unk> capital requirements of our assets, we think thats, a very manageable number.

Super Yes, I'd agree with that.

Question for Gary.

In past presentations, you've mentioned that you were looking at diversifying into maybe mean or other places around the world and has there been much progress on that and do you see 2024 may be adding another leg to the stool all of the business.

Yes.

The answer is yes, we continue looking at diversifying.

Value add acquisitions and.

It's a continuous process and will continue into 2024.

So we see we see lots of lots of things that are out there.

That.

Could add value we're sitting at.

Trading it.

Half of our PDP.

And you can see the transactions that are happening happening globally.

There are not many transactions outside of Canada.

In North America and.

In general, but we.

<unk>.

I think the answer to your question is we will continue our process of looking for value add.

And mean.

As the main locate mainly main area or are there other areas as well.

Yes, we always looking in the basins that we're in and the countries that we're in Colombia.

Colombia, Ecuador, but but the targets for diversified.

Diversifying beyond those countries is definitely Mena.

Alright.

So just to clarify what you said before thanks very much Gary and good luck for Q3 look you've already seen the results given the stronger commodity prices.

Thanks Joseph.

Thank you.

Our next question comes from the line of Oriana Cobalt with balance your line is now open.

Hi, Thanks for taking my question I had.

Two questions.

One by one that that would be great.

First on the operating side, we noticed a 9% sequential decrease and a coordinated volumes. So just wondering if you could provide more insight into how are you seeing production going across Ecuador.

And if you have any color that you could share in terms of what Joe.

Lower production.

On a quarter over quarter basis.

Yes, I think part of that was timing on when we brought on wells.

We did it we had some flush production in the first quarter and then decreased in the second quarter. We also had some wells down during the quarter, which we subsequently brought on and as we see our production around that 35000 barrels right now.

Perfect and just.

Going back to the Capex.

Question I, just wanted to confirm whether the exploration program through the remainder of the year of the year, we'd only be concentrated in Ecuador, just looking at the 2023 guidance plan of going into four to six wells between Colombia, and Ecuador, just wanted to go for me.

If we should expect to see any anything anything coming from Colombia part of the severity and the conservation program.

Yes. The answer is yes, we're focused on Ecuador, we've had some really good success, we've drilled two wells two discoveries and we're looking for a critical mass in Ecuador.

On the development, but we do have some very exciting things to drill in Colombia.

But that will likely occur in our 2024 capital program.

Perfect. Thank you very much.

Yes.

Thank you.

Our next question comes from the line of Garik <unk> with J H <unk> partners. Your line is now open.

Hey, guys. Thanks for taking the question can we just talk about plans to address the 2025 maturity. Once you guys, perhaps see some of that excess cash.

To reduce the overall quantum of debt.

Yes. Good question, Yeah, our baseline is that we repay them as we come due and as you rightly point out is that we will have some excess cash and we will look at deploying capital due to the 2025 and targeting.

The maturities.

Okay. Thanks very much.

Thank you.

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

Thank you operator, I'd like to once again, thank everyone for joining US today, we look forward to speaking with you next quarter and update you on ongoing progress. Thank you very much.

This concludes today's conference call. Thank you for participating you may now disconnect.

Q2 2023 Gran Tierra Energy Inc Earnings Call

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