Q3 2024 Gran Tierra Energy Inc Earnings Call
Okay.
Operator: Good morning, ladies and gentlemen, and welcome to the Gran Tierra Energy Results Comfort Call for the third quarter of 2024.
Speaker Change: Good morning, ladies and gentlemen, and welcome to the Gran Tierra Energy's results conference call for the third quarter 2024.
Shannon: My name is Shannon, and I will be your coordinator for today.
Shannon: My name is Shannon and I will be your coordinator for today.
Operator: 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. Instructions will be provided at the time for you to queue up for questions.
At this time all participants are in a listen only mode.
Shannon: Following the initial remarks, we will conduct a question and answer session for securities analysts and institutions.
Shannon: Instructions will be provided at that time for you to queue up for questions.
Operator: I would like to remind everyone that this conference is being webcast and recorded today, Monday, November 4th, 2024, at 11 o'clock a.m. Eastern Time.
Shannon: I would like to remind everyone that this conference is being webcast and recorded today Monday November four 'twenty 'twenty four at 11 o'clock a M eastern time.
Operator: Today's discussion may include certain forward-looking 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 disinformation and reconciliations of any non-GAAP measures discussed on today's call. Any production volumes are based on working interest sales before royalty.
Shannon: Today's discussion may include certain forward looking information as well as certain non-GAAP financial measures.
Shannon: 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.
Shannon: Any production volumes are based on working interest sales before royalties.
Operator: Finally, this earnings call is the property of Gran Tierra Energy Inc.
Shannon: 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.
Operator: Any copying or rebroadcasting of this call is expressly forbidden without the written consent of Gran Tierra Energy.
Operator: I will now turn the conference call over to Gary Guidry, President and Chief Executive Officer of Gran Tierra. Mr. Guidry, please go ahead.
Speaker Change: I will now turn the conference call over to Gary Guidry, President and Chief Executive Officer of Gran Tierra is it gives me. Please go ahead.
Gary Guidry: Thank you, operator.
Gary Guidry: Good morning, and thanks for joining Gran Tierra's third quarter 2024 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.
Gary Guidry: Thank you operator.
Gary Guidry: Good morning, and thanks for joining Gran Tierra is third quarter 2024 results conference call.
Shannon: 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 Sebastian Morin.
Chief operating officer.
Gary Guidry: On Monday, November 4th, 2024, we issued a press release that included detailed information about our third quarter 2024 results, which is available on our website. Ryan and Sebastien will now make a few brief comments, and then we will open the line for questions.
Shannon: On Monday November four 2024, we issued a press release that included detailed information about our third quarter 2024 results, which is available on our website.
Ryan is Sebastian will now make a few brief comments and then we will open the line for questions.
Gary Guidry: I'll now turn the call over to Ryan to discuss some of the key financial highlights from our third quarter results. Ryan?
Gary Guidry: Now I'll turn the call over to Ryan to discuss some of the key financial highlights from our third quarter results right.
Ryan Ellson: Thanks, Gary.
Ryan Ellson: Good morning, everyone. I want to start off by saying how excited we are that on October 31st, 2024, Gran Tierra completed its acquisition of I3 Energy. We believe the purchase of I3 Energy uniquely positions Gran Tierra as a premier diversified oil and gas company with assets in Canada, Colombia, and Ecuador. The I3 acquisition has diversified Gran Tierra into Canada, while adding 253 net booked drilling locations, with an average 77% operatorship and production totaling 18,000 barrels of oil equivalent per day. Canadian land holdings equal almost 1.2 million gross acres and include 53 gross sections in the Montigny and 144 gross sections in the Clearwater, two of the most prolific plays in North America.
Ryan Sebastian: Thanks, Gary.
Ryan Sebastian: Everyone I wanted to start off by saying how excited we are their October 31, 2020 for Gran Tierra completed its acquisition of <unk> energy. We believe the purchase of three energy uniquely positions Gran Tierra has a premier diversified oil and gas company with assets in Canada, Colombia and Ecuador.
Ryan Sebastian: <unk> acquisition is diversified Gran Tierra into Canada, well, adding 253 net book to grow in locations with an average 77% of operator ship in production totaling 18000 barrels of oil equivalent per day.
Canadian landholdings equal almost $1 2 million gross acres and includes 53 gross sections in the Montney at 144 gross sections. The Clearwater two of the most prolific plays in North America.
Ryan Ellson: The I3 acquisition has increased Gran Tierra's PDP reserves by 42 million barrels of oil equivalent, or 96 percent, 1P by 88 million barrels of oil equivalent, an increase of 97 percent, and 2P by 174 barrels of oil equivalent, an increase of 119 percent. Gran Tierra now has approximately 178 million BOE of 1P and 322 million BOE of 2P reserves, with a 1P reserve life index of 10 years and a 2P reserve index of 18 years. We believe the currently depressed natural gas price we see in Western Canada will be alleviated as major LMG projects, including LMG Canada, are brought online, along with increased electricity demand in North America.
Gary Guidry: <unk> acquisition is increased Gran Tierra is PDP reserves by 42 million barrels of oil equivalent or 96% one P. By 88 million barrels of oil equivalent an increase of 97% and <unk> by 174 barrels of oil equivalents, an increase of 119%.
Gary Guidry: Gran Tierra now has approximately 178 million Boe <unk> and 322 million Boe of <unk> reserves with a one P Reserve life index of 10 years and a two P Reserve index of 18 years.
Ryan Sebastian: We believe the currently depressed natural gas prices, we see in Western Canada will be alleviated as major LNG projects include LNG, Canada are brought online along with increased electricity demand in North America.
Ryan Ellson: In the short term, Gran Tierra will focus on developing the significant oil-weighted opportunities in its Canadian portfolio while still developing and appraising our high-impact oil opportunities in South America. We look forward to the integration of our teams and are confident the combined company will have top-tier technical and operational skill sets.
Gary Guidry: In the short term Gran Tierra will focus on developing a significant oil weighted opportunities and its Canadian per oil was still developing in appraising, our high impact oil opportunities in South America.
We look forward to the integration of our teams are confident the combined company will have top tier technical and operational skill sets now onto the quarterly results Gran Tierra generated $60 million of funds flow from operations were $1 96 per share, which was up 31% from the prior quarter, mainly as a result of the one time tax adjustment.
Ryan Ellson: Now on to the quarterly results. Gran Tierra generated $60 million of funds flow from operations, or $1.96 per share, which was up 31% from the prior quarter, mainly as a result of the one-time tax adjustment that impacted the prior quarter. Adjusted EBITDA was $93 million compared to $103 million in the prior quarter, and during the quarter, Gran Tierra generated an income of $1 million. As of September 30th, 2024, the company had a cash balance of $278 million and net debt of $509 million. We do expect the cash balance to come down by approximately $170 million as a result of funding the I3 acquisition.
<unk> the prior quarter adjusted.
Gary Guidry: Adjusted EBITDA was $93 million compared to 103 million in the prior quarter and during the quarter Gran Tierra <unk> generated net income of $1 million.
Gary Guidry: As of September 32024, the company had a cash balance of $278 million and net debt of $509 million. We do expect the cash balance come down by approximately $170 million as a result of funding. The <unk> acquisition. We continue to have long term net debt to EBITDA target of one times or less growth.
Ryan Ellson: We continue to have long-term net debt even a target of one times or less. Gran Tierra generated oil sales of $151 million, down 9% from the prior quarter due to lower price and wider oil difference. Speaking of pricing, during the quarter, Brent averaged $78.71 per barrel, down 7% from the prior quarter. The company's quality and transportation discounts per barrel during the quarter were $14.10, which were higher than the $12.79 in the prior quarter. This is the result of the widening differentials from all three of our benchmarks, Basconia, Castilla and Oriente. Finally, the company's offering net back was $34.18 per barrel, down 12% from the prior quarter, as mentioned previously due to the combined lower Brent pricing and higher differential.
Ryan Sebastian: Tiara generated oil sales of $151 million down 9% from the prior quarter due to lower price and wider oil differentials speaker pricing during the quarter, Brent averaged $78 71 per barrel down 7% from the prior quarter.
Ryan Sebastian: The companys quality and transportation discounts per barrel during the quarter were $14 10, which were higher than the $12.79 in the prior quarter. This is a result of the widening differentials from all three of our benchmarks Vasco here just year end oriented.
Ryan Sebastian: Finally, the company's operating netback was $34.18 per barrel down 12% from the prior quarter as mentioned previously due to the combined lower Brent pricing and higher differentials.
Ryan Ellson: As a result of the I3 acquisition announced on August 19, 2024, Gran Tierra was required to pause its share buyback program, resulting in only 370,000 shares repurchased during the quarter. From January 1st, 2023 to September 30th, 2024, the company repurchased approximately 4 million shares, or 12% of the shares issued and outstanding, at January 1st, 2023 from Free Cash Flow. As some of you may have seen this morning, along with the results announcements, Gran Tierra also announced the TSX approval of the renewal of its normal course issuer bid. The renewal reinforces Gran Tierra's commitment to continue to focus on share buybacks as a key component of our shareholders' returns.
Ryan Sebastian: As a result of the <unk> acquisition announced on August 19, 2020 for Gran Tierra was required to pause its share buyback program resulted only 370000 shares repurchased during the quarter.
Gary Guidry: From January one 2023 to September 32024, the company repurchased approximately 4 million shares or 12% of the shares issued and outstanding at January one 2023 from free cash flow.
Gary Guidry: Some of you may have seen this morning, along with the results announcements.
Speaker Change: <unk> also announced the <unk> approval of the renewal of its normal course issuer bid.
Gary Guidry: Renewal reinforces Gran Tierra is commitment to continue to focus on share buybacks as a key component of our shareholders' returns I will now turn the call over to Sebastian discuss our operational highlights from our third quarter results.
Sebastien Morin: I'll now turn the call over to Sebastien to discuss our operational highlights from our third quarter results. Good morning, everyone, and thank you, Ryan. From a capital perspective, during the quarter, we incurred capital expenditures of $53 million, which were lower than the $61 million when compared to the prior quarter. This was primarily due to timing of our rig program, where we only operated one drilling rig during the quarter compared to two in the prior quarter. Total average working interest production during the quarter was 32,764 barrels of oil per day, which was consistent with the prior quarter.
Sebastian Morin: Good morning, everyone and thank you Ryan from a capital perspective during the quarter, we incurred capital expenditures of $53 million, which were lower than the 61 million when compared to the prior quarter.
Gary Guidry: This was primarily due to timing of our rig program, where we only operated one drilling rig during the quarter compared to two in the prior quarter.
Gary Guidry: Total average working interest production during the quarter was 32764 barrels of oil per day.
Gary Guidry: Consistent with the prior quarter.
Sebastien Morin: During the quarter, the company had lower volumes in the Accordion Aero field, which were caused by increased downtime related to work overs. The decrease was partially offset by higher production in the Casiaco field in Colombia and increased production from the Chinangay and Chirapa blocks in Ecuador. As a result of the successful exploration, drilling campaign, which I will touch upon later. Gran Tierra's operating expenses decreased by 2% to $46 million compared to the prior quarter, primarily as a result of lower overall workover costs, which were offset by higher lifting costs primarily associated with inventory fluctuations in Ecuador.
Gary Guidry: During the quarter.
Gary Guidry: Company had lower volume and the accordion Arrowhead, which were caused by increased downtime related to Workovers. The decrease was partially offset by higher production in the <unk> field in Colombia and increased production from the <unk> and drop of blocks in Ecuador, as a result of the successful exploration drilling campaign, which I will touch upon later.
Gary Guidry: Gran Tierra is operating expenses decreased by 2% to $46 million compared to the prior quarter, primarily as a result of lower overall workover costs, which were offset by higher lifting costs, primarily associated with inventory fluctuations in Ecuador.
Sebastien Morin: The company's transportation expenses decreased by 31% to $3.9 million, compared to the prior quarter of $5.7 million due to the utilization of shorter distance delivery points. As reported in Q2, barging restrictions on the Magnoleta River have now been resolved with increased water levels which have returned to sufficient levels for barging operations.
Gary Guidry: Company's transportation expenses decreased by 31% to $3 9 million compared to the prior quarter of $5 7 million due to the utilization of shorter distance delivery points as reported in Q2 margin restrictions on the Magdalena River have now been resolved with increased water levels, which have returned to sufficient levels for barging opera.
Sebastien Morin: Operationally, we continue to progress the Colhambie Field Development Plan in the Soriente block, with civil works and facility construction progressing smoothly in preparation to commence our drilling program in the later part of the fourth quarter of 2024. We are also currently working on increasing our fluid handling capacity at Acoria Narrowfield with the Water Treatment Facilities Expansion Project expected to be completed in mid-December. The expansion will result in an addition of 21,500 barrels of water handling per day, which represents a 35% increase in water treatment capacity. This is consistent with our long-term approach to optimizing our water flood performance.
Speaker Change: Operationally, we continue to progress the <unk> field development plan and this oriented block with civil works and facility construction progressing smoothly and preparation to commence our drilling program and later part of the fourth quarter 2024.
Speaker Change: We are also currently working on increasing our fluid handling capacity at accordion arrow healed and water treatment facilities expansion project expected to be completed in mid December.
Speaker Change: Expansion will result in an addition of 21500 barrels of water handling per day, which represents a 35% increase in water treatment capacity.
Speaker Change: This is consistent with our long term approach to optimizing our waterflood performance Gran Tierra has steadily increased total crude production and water injection at accordion arrow by 18% per year to continue growing and maintaining oil production, while improving sweep efficiencies and recoveries.
Sebastien Morin: Gran Tierra has steadily increased total fluid production and water injection at Accordion Arrow by 18% per year to continue growing and maintaining oil production while improving sweep efficiencies and recovery.
Sebastien Morin: Looking to exploration, the Chirrapa B7 well marks our sixth consecutive discovery in Ecuador. Spud on August 30, 2024, the Chirrapa B7 well had an impressive initial 30-day production rate of 2,043 barrels of oil per day, the highest of any of our Ecuador wells to date with less than 1% water cut and 25 API oil from the basal tenon. All the exploration success we have had in Ecuador has allowed us to achieve a major milestone of over 1 million barrels of cumulative oil production, and this is only the beginning. The drilling rig has now been moved from the Tarapa block and mobilized to the Chinangue block to drill two wells, the Zabaleta K-1 and Zabaleta Oeste K-1 exploration wells.
Speaker Change: Looking to exploration its rapid <unk> seven well marks our sixth consecutive discovery in Ecuador Spud on August 32020 for the <unk> well had an impressive initial 30 day production rate of 2043 barrels of oil per day, the highest of any of our Ecuador wells to date with less than one <unk>.
Speaker Change: <unk> water cut and 25 API oil from the Batesville Turner.
Gary Guidry: All the exploration success, we have had in Ecuador has allowed us to achieve a major milestone of over 1 million barrels of cumulative oil production and this is only the beginning.
Gary Guidry: The drilling rig has now been moved from niche rapid block and mobilized to the <unk> block to drill two wells. This athletic K, one and double that at OFC 8-K, one exploration wells.
Sebastien Morin: The Zabaleta K-1 well is located 4 kilometres to the east of the Arowana J-1 well, drilled earlier this year, and is 200 feet up structure. Both wells will target the basal tena formation, as well as assess potential in the T-sand, U-sand, and D-line. We have also now completed the initial processing of our newly acquired seismic data over the Tarapa block, which is currently being interpreted. Preliminary interpretations of the high-quality 3D data confirm potential prospectivity and additional areas of interest, including better definition over the Tarapa structure. The 3D data will further delineate reserves, underpin future drilling locations scheduled for 2025, and further support future development planning.
Gary Guidry: <unk> is located four kilometers to the east of <unk>, one well drilled earlier this year and as 200 feet up structure.
Gary Guidry: Both wells will target the basal Turner formation as well as assess potential in the <unk> limestone.
Gary Guidry: We have also now completed the initial processing of our newly acquired seismic data over the trap of block, which is currently being interpreted.
Gary Guidry: Preliminary interpretations of the high quality <unk> data confirm potential prospects <unk> and additional areas of interest, including better definition over the throughout the structure.
Gary Guidry: The three D data will further delineate reserves underpin future drilling location scheduled for 2025 and further support future development planning.
Sebastien Morin: Switching gears to Canada, the team is currently managing an active drilling and completion campaign in its core areas, including the Clearwater, where there are only two locations currently booked. The expectation is with further delineation, we will continue to book drilling locations and increase reserves. Other areas of drilling include the Simonette-Dunvegan, the Rimby-Niskiu, the Lodgepool Cardium and Wapiti Cardium Plays.
Gary Guidry: Switching gears to Canada. The team is currently managing an active drilling and completion campaign in its core areas, including the Clearwater, where there are only two locations currently but the expectation is with further delineation drilling we will continue to book drilling locations and increase reserves.
Gary Guidry: Are there areas of drilling include Simon has done vegan the AMB NICU, the logical kind of Cardium and Wapiti Cardium plays.
Sebastien Morin: Overall, the company is following through on its goal of driving long-term value with a diversified portfolio of high-quality assets, and we look forward to finishing 2024 on a high note. With the newly acquired assets in Canada, exploration successes in Ecuador, waterflood optimization and expansions in our core Colombian fields, we are well positioned for growth in 2025 and beyond.
Gary Guidry: The company is following through on its goal on driving long term value with a diversified portfolio of high quality assets and we look forward to finishing 2024 on a high note with the newly acquired assets in Canada exploration successes in Ecuador, waterflood optimization and expansions in our core Colombian fields, we are well positioned for growth.
Gary Guidry: In 2025 and beyond.
Operator: I'll now turn the call back to the operator and we will be happy to answer any questions. Operator, please go ahead.
Gary Guidry: I'll now turn the call back to the operator, and we will be happy to answer any questions. Operator. Please go ahead.
Operator: Thank you.
Operator: Ladies and gentlemen, we will now conduct a questioning 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 polled in the order they are received. Please ensure you lift the handset if you're using a speakerphone before pressing any key. One moment, please, for your first question.
Speaker Change: Thank you, ladies and gentlemen, we will now conduct a question and answer session for securities analysts.
Speaker Change: I have a question. Please press the star key followed by one one oriented Tom Tom You will then hear an automated message advising your hands raised.
Gary Guidry: Questions will be pulled in the order. They are received please ensure you lift the handset if youre using a speakerphone before pressing any keys.
Speaker Change: One moment. Please for your first question.
Greg Pardy: Our first question comes from the line of Greg Pardy with RBC Capital Markets. Your line is now open.
Speaker Change: Our first question comes from the line of Greg Pardy with RBC capital markets. Your line is now open.
Greg Pardy: Thanks, good morning, and thanks for the for the rundown. Really, I had a couple of different sets of types of questions. But the first part is cash tax and cash tax came in higher than we were expecting.
Greg Pardy: Thanks, Thanks, good morning, and thanks for the for the rundown really.
Greg Pardy: Had a couple of different sets of types of questions, but the first part is.
Greg Pardy: Cash taxes cash tax came in higher than we were expecting now with the acquisition on your belt I'm just wondering what your tax position will look like particularly as we head into 2025.
Greg Pardy: Now with the acquisition under your belt, I'm just wondering, you know, what your tax position will look like, particularly as you head into 2025?
Ryan Ellson: Yeah, thanks, Greg. Yeah, I think the cash taxes came in just to oil prices, you know, continues in Colombia, still continues to hover, you know, above the threshold of the 15% surtax. So with oil prices currently where that we'd expect that to come down in the fourth quarter, actually, we think we'll move down to 10% surtax.
Speaker Change: Yeah. Thanks, Greg I think the cash taxes came in just oil prices continues in Colombia still confused over above the threshold of the 15% surtax, so with oil prices grow over that we'd expect that to come down in the fourth quarter actually we think we will move down to 10% Surtax I'm looking at Ken.
Ryan Ellson: And looking at Canada, as you know, Canada actually, Alberta in particular, is a very favorable tax regime with only 23%. And so we would expect that to continue to decrease on an overall basis. We expect our tax rate to be lower in 2025 than in 2024.
Greg Pardy: And as you know Canada.
Greg Pardy: Albert in particular has a very favorable tax regime with only 23%.
Gary Guidry: So we would expect that to continue to decrease on an overall basis.
Gary Guidry: We would expect our tax rate to be lower in 2025, then 2024.
Greg Pardy: Okay, that's helpful. And then just related to the buyback, yeah, I did see that you renewed the NCID.
Greg Pardy: Okay. That's helpful and then.
Speaker Change: Just related to the buyback, yes I did.
Gary Guidry: Keith.
Ryan Ellson: Is that, Ryan, how is that connected to the company? I mean, is that a function of pre-cash generation, opportunistic? How should we think about buyback?
Gary Guidry: <unk> CIB.
Keith: Brian how is that connected to the company I mean is that a function of free cash flow generation opportunistic how should we think about the buyback.
Ryan Ellson: Yeah, I think on the buyback is, you know, we did put an automatic share purchase plan in it. So we'll continue to buy back stock. So even if we are in blackout, we can continue to buy. But I think if you look at since 2023, we really have funded that buyback through free cash flow. And so we expect that to continue in the future. And for us when we're trading that, you know, a discount to PDP, we think it's a great way to, you know, return capital to shareholders and increase long term net asset value.
Keith: Yes, I think on the buyback is we did put our automatic share purchase plan. So we'll continue to buy back stock. So even if we are in blackout, we can continue to buy.
Keith: If you look at it in 2023, we really have funded the buyback through free cash flow.
Keith: We'd expect that to continue in the future and for us when we're trading.
Keith: A discount the Pvp, we think it's a great way to do it.
Keith: Return capital to shareholders and increase long term net asset value.
Greg Pardy: Okay, thanks. And it still oblige me just with the last one, really comes back to the motivation and outlook for the company now with I3 under your belt.
Speaker Change: Okay. Thanks, and that's all obliged me just with the last one really comes back to the motivation.
Speaker Change: And outlook for the company now with <unk> III engineered Bell can you just remind us.
Ryan Ellson: Can you just remind us, you know, your thinking going into consummating that deal, maybe from a reserve, reserve life perspective, diversification, really just want to understand what drove you to do it, number one. And then number two is, is how we should maybe think even about an allocation of capital or focus as you go through, you know, 25 and beyond. Thanks very much.
Keith: Were thinking going into <unk>.
Keith: Consummating that deal maybe from a reserve reserve life perspective diversification really just wanted to understand what drove you to do it number one and then number two is is how we should maybe think even about an allocation of capital our focus as you go through 'twenty and beyond thanks very much.
Ryan Ellson: Yeah, thanks. I think the the overall strategy of the company, we've been trying to find the right set of assets to enter Canada for a couple of years. I3 provided that for us, the platform, as well as the team. And we really entered Western Canada to continue growing in the basin. It really should be considered an entry into the basin. We see lots of opportunity on conventional and unconventional assets, but with a real emphasis on conventional for ourselves as a company. We also see diversification of both oil and gas, and that's one of the attractions that we see for this particular set of assets.
Speaker Change: Yes. Thanks.
Speaker Change: The overall strategy of the company, we've been trying to find the right set of assets to enter Canada for a couple of years <unk> three.
Speaker Change: Provided that for us the platform as well as the team.
Keith: And we really entered western Canada.
Keith: To continue growing in the basin, it's really should be considered an entry into the basin.
Keith: We see lots of opportunity on conventional and unconventional assets, but with a real emphasis on unconventional for ourselves.
Keith: As a company.
Keith: We also see diversification of both oil and gas.
Keith: And Thats one of the attractions that we see for this particular set of assets in terms of capital allocation.
Ryan Ellson: In terms of capital allocation, we're in a very unique position. We have some recent discoveries which we think are material in Ecuador, as well as some underdeveloped assets here in both the Clearwater, the Simonette-Montney, and several other areas within the Canadian portfolio. What you'll see from us in 2025 is allocating to the new oil discoveries in Ecuador, continued development of our mature water floods in Colombia, as well as some very interesting things here, oil opportunities here in Western Canada. That would be our allocation near term, but we're quite excited. As Ryan mentioned, we're quite excited about the underdevelopment of the assets here in Western Canada, and we'll be pursuing those quite vigorously.
Keith: We're in a very unique position we have some recent discoveries, which we think are material in Ecuador.
Keith: As well as some underdeveloped assets here in both the Clearwater the Montney the Simon at Montney and several other areas within the Canadian portfolio and so what Youll see from US in 2025 is allocating to the new discount oil discoveries in Ecuador continued.
Keith: Continued development of our mature waterflood in Colombia, as well as some some very interesting things here oil opportunities here in western Canada that would be our our allocation near term, but we're quite excited as Ryan mentioned, we're quite excited about.
Keith: The underdevelopment of the assets here in Western Canada, and we will be pursuing those.
Keith: Vigorously.
Speaker Change: Understood Thanks very much.
Operator: Thank you.
Anne Milne: Our next question comes from the line of Anne Milne of Bank of America. Your line is now open.
Speaker Change: Thank you. Our next question comes from the line of Anne Melanie of Bank of America. Your line is now open.
Anne Milne: Good morning and congratulations on the closing of the I3 acquisition. I have a couple of questions this morning. One, on your 2024 guidance, it looks like you right now are on the EBITDA level anyway, right sort of in the middle, maybe slightly on the lower end for EBITDA for the year on a last 12-month basis. You think you'll end up in the middle of your sort of lower case guidance for 2024?
Anne Melanie: Good morning, and congratulations on the closing of the ITG acquisition.
Anne Melanie: I have a couple of questions. This morning, one on your 'twenty 'twenty four.
Anne Melanie: Guidance it looks like you right now are on the EBITDA level anyway right.
Anne Melanie: In the middle maybe slightly on the lower end for EBITDA for the year on a last 12 month basis, you think youll end up in the middle of your stock is.
Anne Melanie: Lower case.
Anne Milne: And then just when will you have your – any indications for 2025 guidance? I assume that's maybe towards the beginning of the year. That would be my first question.
Anne Melanie: Guidance for 2024, and then just when will you have.
Anne Melanie: Your any indications for 2025 guidance I assume that's maybe towards the beginning of the year that would be my first question.
Ryan Ellson: Great. Thanks, Anne. Yeah, we're comfortable that we'll end up with it within the guidance. You know, obviously, oil price has been a little choppy the last little while. So, you know, that will have an impact in the last couple months of the year. But we're quite comfortable we'll be in that range.
Speaker Change: Yes, Thanks Ed.
Speaker Change: We're comfortable that we will end up with it within the guidance you, obviously oil prices Bill choppy last little while so that lever.
Speaker Change: The impact in the last couple of months of the year.
Speaker Change: We're very comfortable will be in that range and then we expect to come out with Guy.
Ryan Ellson: And then we expect to come out with guidance 2025 guidance in early January.
Speaker Change: Guidance 2025 guidance.
Speaker Change: In early January.
Anne Milne: Okay.
Ryan Ellson: And could you talk to us a little bit about how your CapEx plan will change for 2025? I assume you'll be increasing because of the Canada acquisition. How much higher do you think you'll be for the year?
Speaker Change: Okay and could you talk to us a little bit about how your Capex plan will change for 2025.
Speaker Change: Assume you'll be increasing because of the Canada acquisition, how much higher do you think you'll be for the year.
Ryan Ellson: Yeah, I think we're still working through our five-year plan right now, but I think the way to look at Canada, as Gary mentioned, there's lots of opportunities in the Canadian assets, and the beauty of Canada, which is different than Columbia and Ecuador, a lot of it's half-cycle economics. Most of the capital is drilling wells, and so as we allocate capital, we expect to see commensurate increase in production. As Gary mentioned, we're targeting the oil-weighted assets in 2025. So I would expect, you know, Canada to be essentially cash flow neutral as far as capex and cash flow.
Speaker Change: Yes, I think we're still working through our five year plan right now, but I think the way to look at Canada as Gary mentioned, there is lots of opportunities in the Canadian assets.
Speaker Change: The beauty of Canada, which is different than Colombia and Ecuador.
Speaker Change: A lot of it is half cycle economics, most of the capital is drilling wells and <unk>.
Speaker Change: So as we.
Speaker Change: Allocate capital, we expect to see commensurate increase in production as Gary mentioned, we're targeting the oil weighted assets in 2025, So I would expect Canada to be essentially cash flow neutral as far as the capex and cash flow.
Ryan Ellson: Okay, thank you. Also, for this quarter, you had a slightly higher discount rate to Brent. Do you expect that to continue? Is there anything that could change that in the fourth quarter of the year? Yeah, and that discount is really just Vasconia, Castilla and Oriente all widened a little bit.
Speaker Change: Thank you.
Speaker Change: Also for this quarter, you had slightly higher discount rate to Brent.
Speaker Change: Do you expect that to continue or is there anything that could change that in the in the fourth quarter of the year.
Speaker Change: Yes, and that discount is really just <unk> oriented they all widened a little bit part of the widening differentials actually is because of the Trans mountain pipeline in Canada, which is somewhat ironic.
Ryan Ellson: Part of the widening of differentials actually is because of the Trans Mountain Pipeline in Canada, which is somewhat ironic. But that's one of the drivers of that, an extra 580,000 barrels of crude coming on the market, which is a natural competitor for the Colombian-Ecuadorian crudes. That's interesting, something so far away.
Speaker Change: But that's one of the drivers of that an extra 580000 barrels of crude cover on the market, which is a natural competitor for their Colombia, Ecuador and crudes.
Speaker Change: That's interesting have something.
Ryan Ellson: And then my last question, I know it's sort of a really big picture, but given the attractive fields that you've acquired in Canada and the strong reserve base, do you have any idea of down the road how you see a breakdown between let's say production and cash flow in Canada versus South America? I mean, right now it's still going to be relatively small on the EBITDA level, but I imagine that proportion will increase over time. Yeah, I guess there's two conflicting things there in the sense that, you know, we expect with all the discoveries that we've had in Ecuador, we expect Ecuador to grow quite a bit as well.
Speaker Change: Yes.
Speaker Change: And then my last question I know its sort of really big picture, but.
Speaker Change: Given the attractive yields that you've acquired in Canada strong reserve base do.
Speaker Change: Do you have any idea of down the road, how you see a breakdown between let's say production and cash flow in Canada versus South America.
Speaker Change: Now, it's still going to be relatively small on the EBITDA level, but I imagine that proportion will increase over time.
Speaker Change: Yes, there is two I guess theres two conflicting things are in the sense that we expect with all of the discoveries that we've had and therefore, we expected Ecuador to grow quite a bit as well and with the oil weighting there.
Ryan Ellson: And with the oil weight in there, I would still expect, you know, South America to make up, you know, the majority of our adjusted EBITDA. You know, we kind of continue to grow, especially in the future, in a more robust gas price environment. So I think that will evolve. But, you know, it's important for everyone to remember is that we're not going to stop developing in South America. Ecuador and Colombia are still core areas for us and we expect them to continue to grow as well. Okay, and so South America will continue to be a majority going forward, for the time being?
Speaker Change: Still expect South America to make up.
Speaker Change: The majority of our adjusted EBITDA.
Speaker Change: Kind of continuing to grow, especially in the future in a more robust gas price environment. So I think that will will evolve but.
Speaker Change: It is always important but I want to remember is that we're not going to stop developing in South America, Ecuador, and Colombia, So core areas for us and we expect them to continue to grow as well.
Speaker Change: Okay, and so South America will continue to be a majority farmer, yes for the time being.
Ryan Ellson: For the time being, yeah, definitely.
Ryan Ellson: Okay, great.
Speaker Change: Definitely okay, great. Thank you very much thank you.
Operator: Thank you very much.
Operator: Thank you.
Peter Boley: Our next question comes from the line of Peter Boley with Jeffries, LLC. Your line is now open.
Speaker Change: Our next.
Speaker Change: <unk> comes from the line of Peter <unk> with Jefferies. LLC. Your line is now open.
Peter Boley: Thank you for the call. Thank you for taking my questions. First, in the context of low 70s Brent in 2025, do you still expect to pay your bond amortization in 2026 from free cash flow? And second, regarding capital allocation, how are you thinking about with your 2029 bonds trading above the 12% yield?
Peter: Thank you for the call. Thank you for taking my questions first in the context of low Seventy's. Brent in 2025 do you still expect to pay your bond amortization in 2026 from free cash flow and second rig.
Peter: Regarding capital allocation, how are you thinking about.
Peter: With your 2029 bonds trading above the 2012% yield how are you thinking about capital allocation and what bond buybacks ever be considered as part of your plan. Thank you.
Peter Boley: How are you thinking about capital allocation and would bond buybacks ever be considered as part of your plan?
Ryan Ellson: Thank you.
Ryan Ellson: Yeah, I think on the 2026 amortization, we're quite comfortable between cash on hand that will exit this year and then free cash flow in 2025 and 2026.
Speaker Change: Yes, I think on the <unk> amortization and we're quite comfortable between cash on hand that we'll exit this year and then free cash flow in 2020.
Ryan Ellson: Remember, there's an amortization until the end of October. We're quite comfortable with that amortization. So we don't have a concern there.
Speaker Change: <unk> related amortization until the end of October we're quite comfortable with that amortization. So we don't have a concern there and then on the capital allocation.
Ryan Ellson: And then on the capital allocation, we think right now we'll continue to focus on longevity of the assets and invest in the ground. And then we do have obviously the $25 million dollars maturing in February of this year, which obviously we will pay. And then also the maturing 2026 and then the slight $25 million in 2027. And we expect to fund all three of those with just cash on hand and free cash flow.
Speaker Change: We think right now we'll continue to.
Speaker Change: Focus on longevity of the assets and invested in the ground.
Speaker Change: And then we do have obviously the 25 maturity.
Speaker Change: $25 million maturing in February of this year, which obviously, we will pay and then also the maturing towards <unk>, and then slide $20 million to $25 million in 2027, and we expect to fund all three of those.
Speaker Change: With cash on hand, and free cash flow.
Ryan Ellson: Keep in mind, remember, we do have a lot of flexibility on our capital allocation, given that in South America, we have all of our assets, we operate all of our assets. And in fact, all of our blocks, with the exception of one, we have 100%. So that gives us a lot of flexibility. And in Canada, we operate with 78%, 77%. So again, still have some flexibility in capital allocation in Canada.
Speaker Change: Keep in mind remember, we do have a lot of flexibility on our capital allocation given that in South America, we have all of our asset we operate all of our assets.
Speaker Change: And in fact, all of our blocks with the exception of one we have 100%. So that gives us a lot of flexibility and then Canada. We operate was 78%, 77%. So again solve some flexibility on capital allocation in Canada.
Alejandra Andrade: Thank you. Our next question comes from the line of Alejandra Andrade with JPM. Your line is now open.
Speaker Change: Great. Thank you thank.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Alexandra <unk> with J P. M. Your line is now open.
Alejandra Andrade: Hi, thanks so much for the call. I just had two quick questions. First, I mean, I saw that you changed a little bit the terms of the committed facility in Canada, 74 million maturing next year, was wondering if there's any expectation to do something in Colombia as well in terms of committed lines?
Speaker Change: Hi, Thanks, so much for the call I just had two quick questions first on the I saw that you.
Alexandra: Change a little bit the terms of the committed facility in Canada 74 million maturing next year was wondering if there is any expectation to do something in Colombia as well in terms of credit line and then also how are you thinking about your hedging program for next year.
Alejandra Andrade: And then also how are you thinking about your hedging program for next? And that's it.
Speaker Change: Thanks.
Ryan Ellson: The reason why we reduced the Canadian facility, the borrowing-based support is quite a bit higher.
Speaker Change: Thanks.
Speaker Change: And the reason why we reduced the Canadian facility.
Speaker Change: <unk> based support square a bit higher.
Ryan Ellson: We just don't have really a use of proceeds for those funds right now. So we treat it as more of a working capital facility and instead of paying additional standby fees, we reduced the committed amount. So that was a conscious decision by Gran Tierra.
Speaker Change: We just don't have really a use of proceeds for those funds right now so.
Speaker Change: Treated as more of a working capital facility and service paying additional standby fees, we reduced the committed amount.
Speaker Change: That was a conscious decision by Gran Tierra.
Ryan Ellson: And we will continue to look at putting a similar facility on the Colombian assets as well and stay tuned for that. And then our hedging program, we are looking at, as we finalize our five-year plan and capital allocation, we are looking at increasing our hedging program. You'll see we do have a new corporate deck on our website that outlays the hedges that we acquired with I3, particularly the gas hedges that they had in place were quite interesting for 2025. We'll continue looking at hedging, you know, 30-50% for the next six months and then 20-30% for the following six months on more of a systematic basis.
Speaker Change: And we will continue to look at putting a similar facility on the Colombian assets as well.
Speaker Change: In.
Speaker Change: Stay tuned for that and then our hedging program. We are looking at as we finalize our five year plan and capital allocation. We are looking at increase our hedging program you will see we do have a new corporate deck on our website that outweighs OLED.
Speaker Change: The hedges that we acquired with <unk> III particular gas hedges that they have.
Speaker Change: Employers quite interesting for 2025, we will continue looking at hedging your 30% to 50% for the next six months and then 20% 30% for the following six months or more of a systematic basis.
Alejandra Andrade: Great.
Alejandra Andrade: You're welcome.
Speaker Change: Great. Thank you.
Operator: Ladies and gentlemen, there are no further questions at this time.
Speaker Change: Youre welcome.
Speaker Change: Gentlemen, there are no further questions at this time please continue.
Operator: Please continue.
Gary Guidry: I would like to thank everyone for joining us today. We look forward to speaking with you next quarter and update you on our ongoing progress.
Speaker Change: I would 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 very much.
Operator: Thank you very much.
Operator: This concludes today's conference. Thank you for your participation. You may now disconnect.
Speaker Change: This concludes today's conference. Thank you for your participation you may now disconnect.
Speaker Change: Okay.
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