Q4 2024 Gran Tierra Energy Inc Earnings Call
Ryan Ellson: [music].
Ryan Ellson: Yeah.
Speaker Change: Good morning, ladies and gentlemen, and welcome to Gran Tierra Energy's conference call for the fourth quarter and year ended 2024 results.
Shannon: My name is Shannon and I will be your coordinator for today.
Shannon: At this time all participants are in listen only mode. 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.
Shannon: I would like to remind everyone that this conference call is being webcast and recorded today Monday February 24, 2025 at 11 o'clock a M eastern time.
Shannon: Today's discussion may include certain forward looking information.
Shannon: And gas information and non-GAAP financial measures.
Shannon: Please refer to the earnings and operational update press release, we issued yesterday for important advisories and disclaimers with regard to this information and reconciliations of any non-GAAP measures discussed on today's call.
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.
Shannon: I will now turn the conference call over to Gary Guidry, President and Chief Executive Officer of Gran Tierra. Mr. Jeffrey. Please go ahead.
Shannon: Thank you operator.
Shannon: Good morning, and welcome to Gran Tierra is fourth quarter year end 2024 results conference call.
Shannon: My name is Gary Guidry, Gran Tierra is president and Chief Executive Officer, and with me today are Ryan Nelson, Our executive Vice President and Chief Financial Officer.
Speaker Change: Sebastian Morton, our Chief operating officer.
Speaker Change: This morning, we issued a press release that included detailed information about our fourth quarter and year end 2024 results.
Speaker Change: In addition, Gran Tierra Energy's 2024 annual report on Form 10-K has been filed on Edgar.
Speaker Change: And is available on our website.
Speaker Change: Ryan and Sebastian will make a few brief comments and then we will open the line for questions.
Speaker Change: I'll now turn the call over to Ryan to discuss our some of our financial results.
Ryan: Good morning, everyone. We close 2024 with record highs across all reserve categories and delivered our highest ever quarterly production in Q4, setting a solid foundation for future growth. While 2024 was dedicated to investing in resource capture 2025 and beyond we're focused on execution in particular.
Ryan: Unlocking the full potential of our extensive oil weighted portfolio, which holds over 293 million Boe of <unk> reserves were also currently Gran Tierra successfully met its average production guidance targets for 2024.
Ryan: 2020 for Gran Tierra demonstrates confidence in the company's future prospects by repurchasing six 7% of our outstanding shares through our normal course issuer bid program showing our dedication to a long term shareholder value creation compared to our current won't be net asset value of $35 23 per share repurchase.
Ryan: <unk> remains a strategic and efficient way to return capital to our shareholders, while reinforcing our commitment to long term value creation in terms of production Gran Tierra averaged 20 achieved 'twenty 'twenty four average work in production of 34710 Boe per day, representing a 6% increase from 2020.
Ryan: Sorry.
Ryan: Due to positive exploration results in Ecuador, and two months of production from our recently acquired Canadian operations.
Ryan: Partially offset by lower production in the coordinated fuel caused by downtime related to Workovers and deferred production from blockades in psoriatic during the quarter.
Ryan: Building on the company's successful development drilling in 2024.
Ryan: Great and our recently acquired Canadian assets, we expect 2025 production of 47000 to 53000 Boe per day. This.
Ryan: This projected 2025 production increase is expected to result from our 2025 development drilling program of five to seven gross wells in Saudi I think two to three appraisal wells in Ecuador, as well as six gross development wells in Canada.
Ryan: Turning to exploration, we plan to allocate roughly 25% of our total capital program to exploration, which equates to six to eight exploration wells in 2025 with four of those wells, Okay to Ecuador, we expect to fully meet our our Ecuador exploration commitments before the end of the year recall when we entered upward.
Ryan: We do not pay for the land, but rather committed to drill in 14 exploration wells at the end of the year that commitment is fulfilled and will move to the development phase of the contracts.
Ryan: During 2020 for Gran Tierra realized net income of $3 million or <unk> 10 per share.
Ryan: Third to a net loss of $6 $3 million per share in 2023.
Ryan: Gran Tierra is capital expenditures increased slightly by $7 7 million or 3% to 3200 $34 million compared to 2023 due to a higher number of wells drilled during the year, which is fully funded by the company's 2024 net cash provided by operating activities of $239 million.
Ryan: The company realized adjusted EBITDA of $367 million, a decrease of 8% from $399 million in 2023.
Ryan: 2024 funds from operations were 223 billion or $7 <unk> per share compared to $277 million in 2023. Both of these decreases were commensurate with the decrease in the Brent prices.
Ryan: The company had $103 million in cash and cash equivalents as at December 31, 2024, and increased compared to a cash balance of $62 million at the end of 2023.
Ryan: Looking forward Gran Tierra is targeting $600 million gross debt by the end of 2026 and $500 million by the end of 2027, resulting net debt target net debt to EBITDA of less than one times. We originally paid the remaining 2025 bonds outstanding and plan to pay the 2026 amortization through cash on hand and available credit facility.
Ryan: Gran Tierra is net oil sales for the year were 622 million a slight decrease of 2% compared to 2023.
Ryan: Total 2020 for operating costs were $202 million compared to $187 million in 2023, representing an 8% increase while operating expenses per Boe were $16 14.
Ryan: 2% higher when compared to 2023 the increase in 2024 was primarily the result of higher Workovers.
Ryan: Removal diesel subsidies in Columbia, and higher natural gas and electricity costs in 2024.
Ryan: Despite higher operating expenses 2020 for Gran Tierra, effectively manage inflationary pressures showing the resilience and cost control and maintenance activities.
Now I'll turn the call over to Sebastian Mark to discuss some of the highlights of our current operations.
Sebastian Mark: Thanks, Brian Good morning, everyone I'll briefly cover a few operational highlights from the press release as well as discuss the highlights from our 2020 for yearend reserves.
Sebastian Mark: Operationally, we are building off a successful year in 2024 to start off 2025 on a strong note.
Sebastian Mark: As Ryan mentioned 2024 was focused on resource capture in 2025 and beyond will be focused on production growth, while paying off debt. The capital program and its allocation has been formulated with that in mind. We are excited to have commenced drilling in Colombia at disoriented block with the first well on the <unk> north pad spreading on February 10th.
Sebastian Mark: Production is expected by the end of the first quarter of 2025.
Sebastian Mark: In Ecuador, we are currently drilling the first exploration well of our six to eight well program with <unk>, one exploration, well, which spud on February 4th.
Sebastian Mark: In Canada, the development plan with our new joint venture partner Logan Energy has commenced with the first two horizontal wells being drilled at Simon at both.
Sebastian Mark: Both wells are currently being stimulated and expect it to be onstream by the end of the first half of 2025.
Sebastian Mark: In Q4 of 2024, we drilled five new wells in the Clearwater at East Dawson, and Walrus, which has confirmed the quality of our acreage in the Clearwater play all of the wells are now onstream and cleaning up.
Sebastian Mark: In addition, we currently participating in a waterflood pilot at Marten Hills with the drilling of a four led multilateral injector, which split on February 13, and is expected to be online in the first half of 2025.
Sebastian Mark: Moving on to our year end reserves on January 23, 2025, we are pleased to release, our 2024 at year end Reserve report as evaluated by Mcdaniel.
Sebastian Mark: 2024 saw the highest year end reserves in our company's history of 167 million barrel of oil equivalent one Pete 293 million barrel oil equivalent to Pete and 385 million barrel oil equivalent three P and we achieved excellent reserves replacement results.
Sebastian Mark: 702% for one P, 1250% for two P 500% for <unk>.
This also represented the sixth consecutive year that we achieved <unk> reserve growth.
Sebastian Mark: These results are underpinned by multiple exploration discoveries in Ecuador continued success in managing our low decline Columbian assets and our new country entry into Canada.
Sebastian Mark: Gannett and inorganic portfolio growth creates a future runway of highly economic development opportunities in proven plays with access to infrastructure.
Sebastian Mark: Furthermore, with the addition of Canada Gran Tierra is well positioned for long term commodity cycles with approximately 20% of its production, 23% <unk> reserves and 26% <unk> reserves now attributed to natural gas.
Sebastian Mark: Canada now represents 46% of one P, 51% of Tupi reserves compared to Gran Tierra has total reserves.
Sebastian Mark: We also achieved a year end 2024 NAV per share of $35 23, before tax and $19 51 after tax one P M.
Sebastian Mark: And $71 14 for tax and $41 three after tax of <unk>.
Sebastian Mark: Looking at where Gran Tierra is current share price trades. This is a significant discount across all of the company's NAV per share categories and why we are focused on share buybacks as a key pillar of shareholder returns.
Sebastian Mark: Looking at development costs, leading change in future development.
Sebastian Mark: Kurt.
Sebastian Mark: Its equivalent basis.
Sebastian Mark: Came in.
Sebastian Mark: Thank you for one.
Sebastian Mark: 11%.
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Sebastian Mark: Okay.
Sebastian Mark: Yes.
Sebastian Mark: Yes.
Sebastian Mark: Got it.
Sebastian Mark: Okay.
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Sebastian Mark: For color.
Sebastian Mark: Yes.
Sebastian Mark: Thank you.
Sebastian Mark: And while there isn't 10 three peat.
Sebastian Mark: On apparel.
Sebastian Mark: Okay.
Sebastian Mark: Yes.
Sebastian Mark: <unk> shifted the companies.
Sebastian Mark: Cost when it comes to adding barrels to the portfolio.
Sebastian Mark: To close I would like to point out that with a robust and diverse portfolio of assets with 227, one Pete and 441 <unk> identified undeveloped locations Gran Tierra is poised to capitalize on emerging opportunities and deliver value to all our stakeholders as.
Sebastian Mark: As we continue to profitably advance our operational and financial goals, we remain deeply committed to the wellbeing of our employees and the communities, where we operate recognizing their essential role in our success. We are looking forward to 2025 and how it sets Gran Tierra up for success for years to come.
Sebastian Mark: Yeah.
Speaker Change: I will now turn the call back to the operator, and Gary Ryan and I will be happy to take questions. Operator. Please go ahead.
Speaker Change: Thank you, ladies and gentlemen, we will now conduct the question and answer session for Securities analysts. If you have a question. Please press star followed by one one are you touched on the phone.
Speaker Change: You will then hear a lot of meda message advising your hand is phrased your questions will be pulled in the order they are received.
Speaker Change: Please ensure you lift the handset if youre using a speakerphone before pressing any keys one moment. Please for your first question.
Speaker Change: Our first question comes from the line.
Speaker Change: And Melanie with Bank of America. Your line is now open.
Melanie: Hi, good morning.
Gary: Gary Ryan everyone else on the team. Thank you for the call.
Speaker Change: Three very different questions. The first one has to do with your higher cost of sales in 2024.
Gary: You could give us an idea of going forward. If you think that will.
Speaker Change: Go back down to.
Gary: Previous levels.
Speaker Change: In 2025.
Speaker Change: And.
Speaker Change: Also incorporating I guess, the Ecuadorian and the Canadian cost as well.
Speaker Change: That's the first question.
Speaker Change: Second question is.
Speaker Change: If you were to look forward, including these assets for 'twenty.
Speaker Change: From 2007, where do you think you might see production at that point in time, obviously your reserve levels are really strong and you do have a development program, but just looking forward a little bit more.
Speaker Change: And then the third question is I think I've asked you this before but maybe you could just remind me.
Speaker Change: The sale of production.
Speaker Change: All three of your regions Mora from Canada.
Speaker Change: I think most of it is domestic but.
Speaker Change: That may be you could say about that which is not domestic marcos.
Speaker Change: Same question on Ecuador, and Colombia.
Speaker Change: Obviously, having in the back of my mind impact of potentially higher cash. Thank you.
Dan: Hey, Dan.
Speaker Change: Thanks for the questions with respect to the higher costs in 2024 would you expect those to trend down in 2025, we got hit with a number of things in 2024 part of it was the removal of the diesel subsidies in Colombia, but also just the increase of natural gas you were a buyer of natural gas to generate power.
Speaker Change: And so there were and just higher electricity costs in general just across the country. So that impact. We also have about 75% of our costs are fixed so as we ramp up production, especially in Ecuador.
Speaker Change: These are all your satellite fields right now we don't have a ton of wells drilled in Ecuador, but as we move to more permanent facilities, we're starting to generate gas power in Ecuador, as well, we would expect those units actually come down unit costs in a quarter from now and really that will probably lead the pack as far as lower operating costs. So we do expect that to do.
Speaker Change: <unk> in 2025, and then to 2026 as well.
Speaker Change: Looking out to 2026, we have guidance this year for 47 53000 barrels.
Speaker Change: We're quite comfortable that we can grow 5% to 7% with this asset base.
Speaker Change: A lot of that depends on capital allocation of course, we try to get the right balance between.
Speaker Change: Reinvestment in the portfolio and portfolio longevity.
Speaker Change: But also having that production growth, but as you pointed out we have 293 million Boe <unk> reserves. So.
Speaker Change: Thats, a great proxy for the resource potential in the <unk>.
Speaker Change: The company and production profile growth in the company and again with 25% of that being natural gas.
Speaker Change: And on natural gas prices.
Speaker Change: August we expect to increase in 2026 and beyond.
Speaker Change: And with respect to where we sell our production in China. We saw most of our production domestically I think what's happened if you will.
Speaker Change: At the tariff talk.
Speaker Change: So obviously there is tariff docket in Colombia, as well as in Canada.
Speaker Change: We are quite well insulated if you look what happened to all of our oil in Canada is light oil, which is consumed domestically augers diluent.
Speaker Change: If you look what happened to heavy oil or light oil spreads in Canada. They widened by about a dollar with the tariff talks and what was happening.
Speaker Change: America differentials have tightened by $3 two basketball.
Speaker Change: Basketball gains of $5 to $2 right now.
Speaker Change: And we produced 10 times amount more production in South America than in Canada. So.
The diversification does help us and we would actually be a net benefit or of tariffs to the extent that they do come in.
Speaker Change: Okay.
Speaker Change: Hum.
Speaker Change: The higher price because of the lower differentials.
Speaker Change: Would be more than offset the potential.
Speaker Change: Potential tariff increase.
Speaker Change: Exactly exactly and also in Canada.
Speaker Change: We'd expect if tariffs were to come in <unk> should widen a little bit.
Speaker Change: Increase which would offset some of that but also it will be.
Speaker Change: We didn't quite negative we were back on the Canadian dollar, which you've already seen the dollars at 70 cents right now and we get paid in Canadian dollars and of course, you are in Canadian dollars, Okay, and where do you sell in Canada the natural gas.
Speaker Change: Natural gas, where we sell domestically.
Speaker Change: Domestically, we sell it to BP.
Okay.
Speaker Change: If you were to take it all together you expect minimal impact from tariff I would it be.
Speaker Change: Implemented.
Speaker Change: So we think net positive to the company.
Okay. Thank you and welcome to the country, but positive for okay great.
Speaker Change: Thank you. Our next question comes from the line of Harrison Lock with Stifel. Your line is now open.
Speaker Change: Yes.
Harrison Lock: Thank you for taking my question today, just a couple from me Firstly I'm interested in the capital structure I am looking forward ahead of this year can we expect any changes here.
Harrison Lock: And how is the integration Goldman <unk> III asset package has there been any surprises for you guys and do you see any scope for realizing synergies over time with this I appreciate it's a different asset base.
Speaker Change: With the corporate stuff.
Harrison Lock: You can add some color around that please.
Gary: Yeah I'll take the first question Gary I'll take the second question, Yes. When you look at our current capital structure. If you look in 2026.
Gary: We have $186 million maturing so we'd expect to fund that through.
Gary: Cash on hand.
Gary: Some of our available credit facilities required but.
Gary: Keeping the enterprise value constant we should see that value.
Gary: Move over to equity holders. So we would think and Thats why we are targeting reducing our total net debt as well. So we are focused on that and that we think we have a great free cash flow in business to make those changes.
Gary: Adequate it through free cash flow.
Gary: And then on integration with <unk> three.
Gary: We're very pleased Sn.
Gary: Essentially all of the team came across.
Gary: <unk> three.
Gary: We completely integrated not just our Canadian asset team integrated throughout the company that the benefit of that.
Gary: That really we see as a very large benefit this technology transfer.
Gary: Taking things that are happening in the western Canadian basin to Colombia to Ecuador, and vice versa as being able to bring some of our team that are operating in Colombia, and Ecuador to Canada for that training and so.
Gary: We see it as a huge benefit and a step forward for the company and the integration.
Gary: Has gone quite well.
Gary: Okay Fantastic guys. That's all from myself say, thank you very much.
Thank you.
Speaker Change: Our next question comes from the line of Alejandro <unk> with Jpmorgan. Your line is now open.
Speaker Change: Hi, Good morning, Thanks for taking my question I just have two questions first I wanted to ask if we were to separate kind of the Columbia business versus the others. Just if you could talk a little bit about discounts and Colombia specifically.
Speaker Change: And then also I know.
You've discussed in the past the possibility of additional committed lines I just wanted to see kind of where were you in that process of negotiating an additional line. Thanks.
Speaker Change: Yes, thanks for the questions.
Speaker Change: Columbia, Scania discount last year was around $5, it's narrowed to $2 and kristie has gone from eight to $9 two five to $6. So we've seen a significant tightening of those discounts and not to talk of tariff talks are result of tariff talks on Canada, and Mexico, but also.
Speaker Change: So just a drop in production from Mexico as well so you're already seeing some of the the heavy heavier crudes taken up in Colombia. As you know there is lots of ways to get your barrels to tidewater.
Speaker Change: Natural.
Speaker Change: Counterparty to make up for some of the shortfalls in globally on the heavies.
Speaker Change: And then as far as the idea we're still working on that we expect.
Speaker Change: We obviously have more undrawn facility in Canada for $50 million and Thats really capped at our choice is to minimize our standby clusters.
Speaker Change: Growing base is quite a bit higher potential borrowing base were bit higher.
Speaker Change: And then we are still looking at.
Speaker Change: On.
Speaker Change: Working line.
Speaker Change: For Columbia, we expect.
Speaker Change: That closed this quarter or early next.
Speaker Change: Great. Thank you so much.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Rob Mann with RBC capital markets. Your line is now open.
Rob Mann: Hey, good morning team. Thanks for taking my questions. Just two quick ones for me here first being is there any additional information on the <unk> exploration well that you can share at this time and.
Rob Mann: And secondly, although natural gas is a relatively small portion of your portfolio I know you touched on it a bit there Ryan, but just curious if you could give us your expectations for the impact of LNG, Canada Phase one coming online. This year, that's all from me. Thanks.
Rob Mann: Great Rob I'll take the first one on Atlanta.
Rob Mann: We've got the well case and we're just into completion program now so in the next coming weeks testing will be coming next.
Rob Mann: And then with respect to natural gas.
Rob Mann: This year, we still think natural gas will be fairly choppy.
Rob Mann: When we purchased <unk> three it was taking a long term view on natural gas. So I think the <unk>.
Rob Mann: Budget that we're using for this year is $2 50.
Rob Mann: At April pricing and we do have.
Rob Mann: A fairly large hedge position so we're hedged at over that level.
Rob Mann: Longer term, we're very bullish on natural gas short term, we expect 2025 to be a little choppy.
Rob Mann: As you point out Joe LNG, you, obviously have a huge impact take about 10% of the domestic production production to the export markets.
Speaker Change: That's great. Thank you.
Rob Mann: Yeah.
Speaker Change: Thank you. Our next question comes from the line of.
Speaker Change: Josef Schachter with FBR. Your line is now open.
Speaker Change: Good morning.
Speaker Change: Gary Ryan Sebastian first question for Ryan.
Speaker Change: Thank you for the guidance on the debt that goal.
Speaker Change: <unk> 600 million at the end of 'twenty five if there is a free cash flow above that if prices improve.
Speaker Change: What is the goal to knockdown that faster or narrow the discount where given the cheapness on the NCI.
Speaker Change: Do you see more.
Speaker Change: And CIB or more that Oregon or kind of a balance between the two.
Speaker Change: Yes, great question, Yes, a balance between the two years, we plan to put fixed out of our free cash flow additional free cash flow to debt reduction of 50% to share repurchases.
Speaker Change: Okay.
Gary: One for Gary.
Gary: Gathered theres an election in Ecuador coming up.
Speaker Change: Are we looking at issues there between right and left in politics impacting the oil patch are.
Speaker Change: Or is it or is it a central government that we will continue along the same way.
Speaker Change: Which is which has worked out well for you in terms of building a business there.
Speaker Change: Yeah.
Speaker Change: I think the first round, which just occurred a couple of weeks ago, President and Noah did better than expected in the first round.
Speaker Change: Achieved a higher percentage of the boat, it's going to the second round and we fully expect him to win.
Speaker Change: The election going forward and so continue with the.
Speaker Change: The conservative.
Speaker Change: Conservative approach business friendly approach in the country.
Speaker Change: Okay.
Speaker Change: A question for Sebastian.
Speaker Change: In the.
Supporting material.
Speaker Change: For the.
Speaker Change: Annual report.
Speaker Change: You break down the reserves there by country.
Speaker Change: And at the end of 2023, just under $70 million for Columbia.
Speaker Change: Technical revisions.
Speaker Change: <unk>.
Speaker Change: Number of 63 point, let's say $64 million at the end of the year is the program that you have this year able to stabilize that or where should we be modeling in declines there but increases in Ecuador in Canada.
No I think I think you should be able to model that and maintain essentially because we've got our our whole reserve replacement plan outlined for the year, So I feel quite comfortable with maintaining that.
Speaker Change: Okay.
Speaker Change: Last one again this one for Gary.
Speaker Change: The market is not being great.
Speaker Change: The stock.
Speaker Change: Any thoughts there of things that can be done.
Speaker Change: Sell non core assets.
Speaker Change: The stock was down below seven 739, now any thoughts there on market reaction and what you can do to get.
Speaker Change: Get more shareholder support.
Speaker Change: Yes.
Speaker Change: I think the one Ryan just mentioned, we're going to continue buying back our stock trading at a significant discount to the PDP.
Speaker Change: Going forward.
Speaker Change: We always look at it.
Speaker Change: Non core assets too.
Speaker Change: The shore up number one sure up the balance sheet, but also consolidate in some other areas in western Canada.
Speaker Change: We're doing quite well with the drill bit in Colombia, and Ecuador, and we'll continue that going forward.
Speaker Change: But I think the answer to your question is the only.
Speaker Change: The primary tool in our toolbox here.
Speaker Change: As to continue to buy back shares.
Speaker Change: Okay. Thanks, Thanks for the answer thanks, very much guys have a good day.
Speaker Change: Thank you gentlemen, there are no further questions at this time please continue.
Speaker Change: I would like to once again, thank everyone for joining us today.
Speaker Change: I'd like to also take this opportunity to thank Gran Tierra team for their commitment and all of the hard work during 2024 and thanking our shareholders for their continued support we look forward to speaking with you in the next quarter and update you on our ongoing process. Thank you.
Speaker Change: This concludes today's conference call. Thank you for your participation you may now disconnect.
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