Q3 2025 Gran Tierra Energy Inc Earnings Call
Speaker #1: At this time, all participants are on a listen-only mode. Following the initial remarks, we will conduct a question-and-answer session for securities analysts and institutions.
Speaker #1: Instructions 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, Friday, October 31st, 2025, at 11 o'clock AM Eastern Time.
Speaker #1: Today's discussion may include certain forward-looking information, oil and gas information, and non-GAAP financial measures. Please refer to the earnings and operational update press release we issued yesterday for important advisories and disclaimers regarding this information and forward reconciliations of any non-GAAP measures discussed on today's call.
Speaker #1: Finally, this earnings call is the property of GRAN TIERRA ENERGY Inc., and a copy and/or rebroadcasting of this call is expressly forbidden without the written consent of GRAN TIERRA ENERGY.
[Company Representative]: Finally, this earnings call is the property of Gran Tierra Energy Inc., and the copying or rebroadcasting of this call is expressly forbidden without the written consent of Gran Tierra Energy Inc. I will now turn the conference call over to Gary Guidry, President and Chief Executive Officer of Gran Tierra Energy Inc. Mr. Guidry, please go ahead. Thank you, Shannon. Good morning and welcome to Gran Tierra Energy Inc.'s Q3, 2025 results conference call. My name is Gary Guidry, Gran Tierra Energy Inc.'s 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. On Thursday, October 30, 2025, we issued a press release that included detailed information about our Q3, 2025 results, which is available on our website.
Speaker #1: 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 #2: Thank you, Shannon. Good morning and welcome to GRAN TIERRA's third quarter 2025 results conference call. My name is Gary Guidry, GRAN TIERRA's 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.
Speaker #2: On Thursday, October 30th, 2025, we issued a press release that included detailed information about our third quarter 2025 results which is available on our website.
Speaker #2: Ryan and Sebastien will make a few brief comments and then we will open the line for questions. I'll now turn the call over to Ryan to discuss our financial results.
[Company Representative]: Ryan and Sebastien will make a few brief comments, and then we will open the line for questions. I'll now turn the call over to Ryan to discuss our financial results. Thanks, Gary. Good morning, everyone. First, I would like to highlight an announcement made last week relating to the prepayment agreement we closed, which represents a new prepayment facility backed by our Ecuadorian crude production. The initial advance will be $150 million, with the potential for another $50 million once our Ecuador acquisition closes and we reach 10,000 BOE per day in Ecuador. It's a four-year structure, priced at SOFR plus 3.8%, and includes a three-month grace period on principal before amortizing evenly over the remaining term. Importantly, the commercial terms, or sales price, are an improvement to our previous crude oil sales contract.
Speaker #3: Thanks, Gary. Good morning, everyone. First, I would like to highlight an announcement made last week relating to the prepayment agreement we closed, which represents a new prepayment facility backed by our Ecuadorian crude production.
Speaker #3: The initial events will be 150 million, with the potential for another 50 million once our Ecuador acquisition closes and we reach 10,000 BOE per day in Ecuador.
Speaker #3: It's a four-year structure priced at SOFR plus 3.8% and includes a three-month grace period on principal before amortizing evenly over the remaining term. Importantly, the commercial terms, or sales price, are an improvement to our previous crude oil sales contract.
Speaker #3: Overall, this agreement strengthens our balance sheet and gives us added financial flexibility at a very competitive cost. In addition, we increased our current facility secured by our Canadian assets to 75 million, and equally important, moved from a 1.1 structure to a two-year structure with maturity in October 2027.
[Company Representative]: Overall, this agreement strengthens our balance sheet and gives us added financial flexibility at a very competitive cost. In addition, we increased our current facility secured by our Canadian assets to $75 million, an equally important move from a 1.1 structure to a two-year structure with maturity in October 2027. Now, onto the quarter. During Q3 of 2025, Gran Tierra averaged 42,685 BOE per day. That's up roughly 30% from a year ago, driven by our Canadian acquisition and continued success from our exploration in Ecuador. Production during the quarter was temporarily impacted by unusual and externally driven events across our operations, including a landslide in Ecuador, which impacted the main export pipelines in the country, requiring us to shut in production and trunk line repairs at the Makeda Fuel Group, which resulted in the field being shut in for the quarter.
Speaker #3: Now, on to the quarter. During the third quarter of 2025, GRAN TIERRA averaged 42,685 BOE per day, that's up roughly 30% from a year ago, driven by our Canadian acquisition and continued success from our exploration in Ecuador.
Speaker #3: Production during the quarter was temporarily impacted by unusual and externally driven events across our operations, including a landslide in Ecuador, which impacted the main export pipelines in the country, requiring us to shut in production and trunk line repairs at the Makeda Field Group, which resulted in the field being shut in for the quarter.
Speaker #3: The pipeline repairs took longer than anticipated due to ongoing heavy rains through July and August. All pipelines are restored as of October 10th. We want to emphasize that these volumes represent deferred barrels rather than lost production, and we are already seeing a strong recovery with current production averaging 45,200 barrels of oil equivalent per day.
[Company Representative]: The pipeline repairs took longer than anticipated due to ongoing heavy rains through July and August. All pipelines are restored as of October 10. We want to emphasize that these volumes represent deferred barrels rather than lost production, and we already are seeing a strong recovery, with current production averaging 45,200 barrels of oil equivalent per day. Based on the deferrals, we are forecasting the lower end of our production guidance range. The underlying assets continue to perform well, and our teams remain focused on ongoing optimization and maximizing production efficiency and cash flow, with an expected exit rate to 47,000 to 50,000 BOE per day. From a cash perspective, it was a solid quarter where we generated $48 million of operating cash flow, up 39% from Q2. We ended the quarter with $49 million in cash and net debt position of approximately $755 million.
Speaker #3: Based on the deferrals, we are forecasting the lower end of our production guidance range. The underlying assets continue to perform well, and our teams remain focused on ongoing optimization and maximizing production efficiency and cash flow, with an expected range of 47,000 to 50,000 BOE per day.
Speaker #3: From a cash perspective, it was a solid quarter where we generated 48 million of operating cash flow, up 39% from Q2. We ended the quarter with 49 million in cash and net deposition of approximately 755 million.
Speaker #3: In terms of pricing, we saw improving differentials across South America especially in Ecuador, which helped offset some of the impact from temporary facility downtime and pipeline outages.
[Company Representative]: In terms of pricing, we saw improving differentials across South America, especially in Ecuador, which helped offset some of the impact from temporary facility downtime and pipeline outages. On the capital side, we invested $57 million that focused mainly on high-return projects in Colombia, Ecuador, and Canada. Overall, despite some temporary production headwinds this quarter, we're expecting a strong finish to the year, which sets us up for a strong 2026. With production already back above 45,200 barrels a day and the added liquidity from our new prepayment agreement and increase and extension of our crane and crab facility, we're in a great position to finish 2025. The 2025 capital program was primarily focused on fulfilling exploration commitments, which resulted in numerous material discoveries.
Speaker #3: On the capital side, we invested 57 million, that focused mainly on high return projects in Colombia, Ecuador, and Canada. So overall, despite some temporary production headwinds this quarter, we're expecting a strong finish to the year, which sets up for a strong 2026.
Speaker #3: With production already back above 45,200 barrels a day and the added liquidity from our new prepayment agreement and an increase and extension of our Canadian credit facility, we're in a great position to finish 2025.
[Company Representative]: We also invested in facility expansion in Soriente, including Gas to Power, which provides us with sufficient process capacity to increase production in the field and lower costs. With substantially all commitments behind us, the focus turns to free cash flow and deleveraging from our large, diversified resource base. We released our 2026 budget in mid-December, which will include a decrease in capital expenditures and an emphasis on free cash flow generation. I'll now turn the call over to Sebastien to discuss some of the highlights of our current operations. Good morning, everyone, and thank you, Ryan. The Q3 highlighted continued operational strength across our entire portfolio, with solid execution in Ecuador, Colombia, and Canada despite some temporary external challenges.
[Company Representative]: In Ecuador, we had another strong quarter, achieving record production: greater than 5,000 barrels of oil per day in August and greater than 6,000 barrels of oil per day in early October, with the delivery of the Conejo A1 exploration well, which was drilled on budget and successfully tested both the Hueyén and Basal Tena sands, flowing over 1,300 barrels a day of 26.9-degree API oil under normal natural flow conditions. We plan to re-enter Conejo A1 later this quarter and install the final completion and selectively test each zone to optimize long-term production. We also recently cased and cemented the Conejo A2 well, targeting multiple prospective reservoirs, including the Basal Tena and Hueyén. The well discovered 41 feet of net reservoir with an average porosity of 14% in the Hueyén formation, suggesting a well-connected reservoir with high deliverability potential over the full Conejo structural trap.
[Company Representative]: In addition, we also confirmed a new oil discovery at Chenangue One, which was a legacy well drilled in 1990 and suspended in 1992 that we re-entered to test the bypass Basal Tena interval. It's currently producing 600 barrels a day on jet pumps and has opened up new follow-up drilling opportunities on the eastern side of the block. With the delivery of the Conejo A2 well, Gran Tierra Energy Inc. has completed all of the exploration commitments in Ecuador, and we are now well-positioned to continue to increase production into the development phase and establish established states and help sustain stable field output. At Cohembé, the waterflood continues to deliver excellent results. The production from the northern area has more than doubled, up roughly 135% from 2,800 barrels to 6,700 barrels a day. Total field production recently reached over 9,000 barrels a day, the highest since 2014.
Hindi, the water flood continues to deliver excellent results. The production from the Northern Area has more than doubled up. Roughly 135% from 2,800, barrels to 6,700 barrels a day.
[Company Representative]: We are now executing the final six well drilling programs to continue to ramp the field production and extend the Cohembé field boundary, including an exploration well to the north as part of the agreed carry program under our contract extension, which we expect to complete by the end of the first half of 2026. In Canada, we drilled and brought two additional Lower Montney wells on stream in September, both performing at or above expectations. That brings our 2025 activity at Simonette to four gross or two net wells. Stepping back, what really stands out this quarter is the progress we've made in advancing our technical capabilities and field execution. From the exploration success we had in Ecuador to optimizing mature waterfloods in Colombia and efficiently scaling our Canadian program, our focus remains on disciplined execution and continuous improvement to ensure our assets deliver strong value over time.
Total field production. Recently reached over 9,000 barrels a day, the highest since 2014.
We are now executing the final 6. Well drilling program to continue to ramp the field production and extend the coenie field boundary including an exploration wealth of the north as part of the agreed carry program under our contract extension, which we expect to complete by the end of the first half of 2026,
In Canada we drilled and brought 2 additional lower Monty Wells on stream in September both performing at or above expectations. That brings our 2025 activity at symonne to 4 Grouse or 2. Net wealth.
[Company Representative]: As Ryan summarized, we had several unplanned production deferrals. Although our average production for the year will be at the lower end of our annual guidance, we'll finish the year strong with an expected exit rate between 47,000 to 50,000 barrels of oil per day. 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. Thank you. Ladies and gentlemen, we will now conduct the question-and-answer session for securities analysts. If you have a question, please press the star key followed by 11 on your touch-tone 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 keys. One moment, please, for your first question.
Stepping back. What really stands out? This quarter is the progress. We've made in advancing our technical capabilities and field execution, from the exploration success. We had an Ecuador to optimizing mature water floods in Colombia and efficiently scaling. Our comedian program, our Focus remains on discipline execution and continuous Improvement to ensure our assets deliver strong value over time.
As Ryan. Summarized we had several unplanned production deferrals, Although our average production for the year, will be at the lower end of our annual guidance, we'll finish the year strong with an expected exit rate between 4750, barrels of oil per day. 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.
Thank you, ladies and gentlemen, we will now conduct a question and answer session for Securities analysts.
If you have a question, please press the star key. Followed by 1 1 on your touchtone phone,
You would then hear an automated message advising. Your hand is raised.
Your questions will be pulled in order. They are received
Please ensure you lift the handset of your using a speaker-phone before pressing any Keys 1 moment, please for your first question.
[Company Representative]: Our first question comes from the line of David Round with CFO. Your line is now open. Thanks for the presentation, guys. First one, just on Soriente, please. You seem to have seen and experienced a very sudden production response there, I mean, positively. Great to see. Can you just talk about, though, please, just sort of what exactly has happened as that program has been going on over the course of this year? What of the new production is due to new wells? What is waterflood, and how sustainable is it, please? Yes, I'll take that one. In a phasing approach, really, it was the start of injection on the north pattern, where we're injecting essentially 5,000 barrels of water per day in that north pattern on Cohembé 25. The other catalyst was well upsized, so we had a few really key workovers.
Our first question comes from the line of David round with stipho. Your line is now open.
Reproduction is due the new wells. What is water flood and how sustainable is it? Please.
yes, I think that 1
[Company Representative]: The one well just south of the pattern, Cohembé 20, was upsized, and that went from 500 barrels a day gross to over 2,000. That one's included in the north pattern. Now, as pressure comes up and we continue to increase our injection, we're seeing some really amazing performance from that sand. Just to recall, those are essentially Darcy sands, so the response is very quick. Okay. If I think about the production number you've put out there at the moment, how do we think about that sort of just conceptually going into next year with continual drilling? Is that sort of a base, and we should be looking at higher than that? I think that's extremely fair, what you've just described. That's exactly where we're going. With the extra six wells that we're putting into the field, we expect to continue to increment that production from here.
So in in a phasing approach, um, really it was the start of injection on the North pattern where where we're injecting essentially 5000 barrels of water per day in that North pattern on Columbia 25. The other Catalyst was well, upsized it. So we had a few really key work overs, the 1 well just south of the pattern can be 20 was upside and that went from 500 barrels a day gross to over 2,000. So that 1's included in the north pattern.
So now as pressure comes up and we continue to increase our injection. We're seeing some really amazing performance from that sand just to just to recall. Those are essentially, Darcy Sands. So the response is very quick.
Okay. And then if I think about the production number you've put out there at the moment, I mean, how do we think about that? But sort of just conceptually going into next year with continual drilling. I mean, it is is that sort of a, a base and and we should be looking at high ends and that
[Company Representative]: Production and reserves. Production and reserves. Okay. Great. Just the second one, please. Just on the prepayment facility, how does that work in terms of availability once the repayments start? Yeah. Effectively, you draw the cash at the beginning, the entire amount, the $150 million, and then just repay those funds over the course of the four years. Okay. Over the course of four years. Is it fairly linear in terms of how? It is. It is. Effectively, every time we do a lifting in Ecuador, we'll pay back a portion of the money borrowed. Perfect. Understood. Thanks, guys. Thanks. Thank you. Our next question comes from the line of Joseph Schachter with SER. Your line is now open. Good morning, guys. A couple of questions for me. Congratulations on getting Ecuador up to 6,000 in October.
I think that's extremely fair. What you just described is exactly where we're going. So with the extra 6 wells that we're putting into the field, we expect to continue to increment that production from here—production, production, and reserves.
Okay great. Um and then just a second 1, please just um on the prepayment facility. How does that work in terms of availability once the repayments start?
Yeah, it's so effective. You draw the cash at the beginning of the entire amount, the $150, and then just repay those funds over the course of the 4 years.
Okay. Over the course of 4 years and is it fairly linear in terms of how it is? It is effectively every time we do a lift in Ecuador, we'll we'll pay back a portion of the, the money board.
Perfect understood. Thanks guys.
Thanks.
Thank you. Our next question comes from the line of Joseph Shaker. Your line is now open.
[Company Representative]: You have on slide 26 of your presentation that the potential could be between 11,000 and 19,000. Does that include the last two wells, which have been very encouraging? Guidance potentially would be to the higher end. The question is, what timeline were you using to get to that? Do you need to put waterflood in? Do you have enough water? Maybe just give me a guidance of how Ecuador grows. Good morning, Joseph. The answer to your question is the guidance on that slide does not include the Conejo discovery to the northwest. The guidance is based on waterflood of the Basal Tena.
Good morning, guys. Um, a couple of questions for me. Um, congratulations on getting Ecuador up to 6,000 in October. Um, you have a slide 206 of your presentation that the potential could be between 11,000 and 19,000. Does that include the last two wells, which have been very encouraging? Uh, so guidance potentially would be to the higher end. And, uh, the question is, what timeline were you using to get to that? And do you need to put in water flood? Uh, do you have enough water? Uh, maybe just give me some guidance on how Ecuador grew up.
Yeah. Uh, the
Good morning Joseph. The the answer to your question is the guidance on that slide does not include the Cano, uh, the discovery to the to the northwest
[Company Representative]: We are in a very good position here that we have a water source in the stacked pays that we have in the Hueyén and the T sand, and everything is in place to do that. We are working through the field development plans with the ministry in Ecuador. Now that we have fulfilled all of our commitments this year on exploration in Ecuador, we are moving to the development phase, and that will start occurring next year during 2026. The debt issue, of course, seems to be the overhang. The market's reaction today, down to a new 52-week low, disappointingly. Just for the levers, maybe, Ryan. Do we need $75, $80 Brent? Do we need Ecuador over 10,000, 11,000 BOE per day? Do we need some non-core sales of your non-operated assets in Canada? Where do you see getting that debt?
And the the guidance is based on water flood of the basil tenna, we're in a very good position here that we have a water source.
In the, in the Stacked Pace that we have in the hoyan and the and the tea tends and so everything is in place to do that. We're working through the field development plans with with the ministry and in Ecuador,
and now that we fulfilled all of our commitments this year on exploration, in Ecuador, we're moving to the development phase and so that that will start occurring uh, next year during 2026
Okay, um, the debt issue if for seems to be the overhang, the Market's reaction today, you know, down to a new 52, low low disappointingly. Um, you know, if just for the levers, maybe Ryan, um,
[Company Representative]: Is a debt-to-one target something that will happen before the end of the decade? How do you see the levers to get there? That's a great question. I think one of the things we wanted to emphasize in the press release and our open remarks is now with the exploration commitments and a lot of the Soriente commitments behind us, it really sets us up the stage for generating free cash flow. We are laser-focused on generating free cash flow in 2026 and beyond. If you look at this year's capital program, there is about $150 million in there between exploration and facility expansion and gas to power, etc.
That, you know, is a debt to 1, uh, Target. Something that will happen before the end of the decade. And how do you see the levers to get there?
[Company Representative]: With that behind us, when we come up with our budget in mid-December, you will see the focus on free cash flow. We will continue to look at how to optimize the portfolios as far as asset sales and whatnot, but that will just be incremental deleveraging. Our base plan is deleveraging as much as possible through our base operations. In some of the cases like the drillers, Precision and Ensign, they kind of gave targets to the market and to investors, "We're going to knock off $100, $150 million," and then they brag when they get there. Are you guys going to be willing to start throwing numbers like that so that people can see guideposts and, "Yeah, you're heading in the right direction." Therefore, your valuation, which is traded less than one time's cash flow in Canadian dollars and much below your one P.P.
Yeah, no, that's a great question. And I think, you know, 1 of the things we want to emphasize in in the press release and our open remarks is, none of the exploration commitments and a lot of the story unpaid commitments behind us, you know. It really sets us up the stage for generating free cash flow. You know, we're laser focused on generating free cash flow in 2026 and Beyond, I think, if you, if you look at this year's Capital program, there's about 150, 150 million dollars in there between exploration and facility expansion. Uh and gas to power Etc. So I think with that behind us you when we come up with our budget in, you know, mid December, you you'll see the the focus on free cash flow, you know, we'll continue to look at how to optimize the the portfolio as far as asset sales and whatnot. But that will just be incremental deleveraging. Our base plan is deleveraging as much as possible through our base operations,
Okay? And, and some of the cases, like the trailers precision and Ensign. They kind of gave targets to the market. And to investors, we're going to knock off a 100 150 million, then they brag when they get there. Are you guys going to be willing to start throwing numbers like that? So that people can see guide posts? And yeah, you're heading in the right direction, uh, Therefore your valuation which just, you know, trading at less than 1 times cash.
[Company Representative]: reserves that you show in your presentation, the new one at $1,951 U.S. Is that the kind of thing where we can show the debt holders are now giving the equity value to the shareholders by doing something like that? Absolutely. When we come out with our budget in December, there'll be a clear roadmap. Okay. Super. Looking forward to seeing that. Thanks very much for taking my questions. Thank you. Gentlemen, there are no further questions at this time. Please continue. Thank you. Shannon. I'd once again 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. This concludes today's conference. Thank you for your participation. You may now disconnect.
Cash flow in Canadian dollars, uh, and much below your, you know, 1. PPD, 1 PE reserves that you show in your presentation, the new 1 at 1951 us, um, is, is that the kind of thing where we can show, um, you know, the debt holders are now giving the equity value to the, to the shareholders, um, by doing something like that.
Absolutely. When we come out with our Budget Inn in December, there will be a clear road about.
Okay, so super looking forward to seeing that. Thanks very much for taking my questions.
Thank you.
Gentlemen, there are no further questions at this time. Please continue.
Thank you.
Dannon, I once again would like to thank everyone for joining us today. We look forward to speaking with you next quarter and updating you on our ongoing progress. Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.