Gran Tierra Vitality Inc. (NYSE:) reported reaching its manufacturing, funds circulate, and free money circulate targets for the fiscal 12 months 2023. The corporate additionally introduced a internet lack of $6 million however highlighted a 15% return on capital employed. In efforts to strengthen its steadiness sheet, Gran Tierra repurchased 6.8% of its excellent shares and issued $488 million in new notes. The year-end reserves reached the very best within the firm’s historical past, and plans are underway to drill six to 9 exploration wells in Colombia and Ecuador in 2024.

Key Takeaways

• Gran Tierra Vitality achieved its 2023 manufacturing, funds circulate, and free money circulate targets.
• The corporate reported a internet lack of $6 million however secured a 15% return on capital employed.
• Repurchased 6.8% of excellent shares and issued $488 million of recent notes.
• Yr-end reserves had been at an all-time excessive, with important will increase in 1P, 2P, and 3P reserves.
• Plans to drill six to 9 exploration wells in Colombia and Ecuador in 2024.
• Suroriente continuation settlement accomplished, aiming to optimize oil restoration.
• High quality differentials for Vasconia and Castilla crude remained constant.
• Gross working prices anticipated to stay steady or lower in 2024 with elevated manufacturing.
• Firm goals to hedge 30-50% of manufacturing and preserve a wholesome internet debt-to-EBITDA ratio.

Firm Outlook

• Drilling of six to 9 exploration wells in Colombia and Ecuador deliberate for 2024.
• Concentrate on reservoir modeling and focusing on unswept areas for higher efficiency.
• Contemplating a working capital facility to enhance the prevailing credit score facility.

Bearish Highlights

• A internet lack of $6 million was reported, regardless of reaching different monetary targets.

Bullish Highlights

• Achieved the very best year-end reserves within the firm’s historical past.
• Profitable completion of the Suroriente continuation settlement.
• Constant high quality differentials for Vasconia and Castilla crude.

Misses

• No particular new alternatives are at present in sight for the corporate.

Q&A Highlights

• Gran Tierra is snug with its drilling areas in Putumayo, with quite a few websites for Costayaco, Moqueta, and Suroriente.
• The corporate has used $35 million of a $100 million credit score facility.
• No additional questions had been raised right now, and the corporate anticipates updating shareholders within the subsequent quarter.

Gran Tierra Vitality has demonstrated resilience and strategic planning in its operations, specializing in optimizing its property and monetary well being. With a sturdy plan for exploration and a dedication to sustaining a powerful steadiness sheet, the corporate is positioning itself for future progress and shareholder worth creation. Traders and stakeholders can be trying ahead to the subsequent replace within the following quarter to gauge the progress of the deliberate exploration wells and the corporate’s ongoing monetary methods.

InvestingPro Insights

Gran Tierra Vitality Inc. (GTE) has displayed a notable monetary efficiency with key metrics reflecting an organization that’s navigating the complexities of the power sector with strategic focus. Listed below are some insights from InvestingPro that present additional context to the corporate’s monetary well being and inventory efficiency:

InvestingPro Knowledge:

• The P/E Ratio (Adjusted) for the final twelve months as of Q3 2023 stands at 8.34, suggesting that the corporate could also be undervalued in comparison with trade friends.

• A PEG Ratio of -0.1 signifies that the market will not be factoring in future progress adequately, given {that a} PEG ratio under 1 can signify undervaluation.

• With a Value / Ebook ratio of 0.42 as of the final twelve months ending Q3 2023, the corporate’s market worth is lower than half of its e-book worth, which may entice buyers searching for potential worth shares.

InvestingPro Suggestions:

• Gran Tierra’s income noticed a quarterly improve of 6.84% in Q3 2023, which aligns with the corporate’s report of reaching its monetary targets for the 12 months. This income progress is a constructive sign for buyers contemplating the corporate’s future money flows.

• Regardless of a yearly worth complete return lower of -37.95% as of Y2024.D51, the corporate’s latest share repurchase program may point out administration’s confidence within the intrinsic worth of the inventory and should function a possible catalyst for future worth appreciation.

For buyers looking for a deeper evaluation, InvestingPro affords extra recommendations on Gran Tierra Vitality Inc. There are 15 extra ideas accessible which may present extra complete insights into the corporate’s financials and inventory efficiency. Use the coupon code PRONEWS24 to get an extra 10% off a yearly or biyearly Professional and Professional+ subscription, and discover these tricks to make extra knowledgeable funding selections.

Full transcript – Gran Tierra Vitality (GTE) This fall 2023:

Operator: Good morning, girls and gents. Welcome to Gran Tierra Vitality’s Convention Name for Fourth Quarter and Yr-Finish 2023 Outcomes. My title is Olivia, and I’ll be your coordinator for immediately. Right now, all contributors are on a listen-only mode. Following the preliminary remarks, we’ll conduct a question-and-answer session for securities analysts and establishments. Directions can be supplied at the moment so that you can queue to your questions. I wish to remind everybody that this convention name is being webcast and recorded immediately, Tuesday, February 20, 2024, at 11:00 a.m. Jap Time. Right now’s dialogue could embody sure forward-looking info, oil and gasoline info and non-GAAP monetary measures. Please confer with the earnings and operational replace press launch we issued yesterday for essential advisories and disclaimers with regard to this info and for reconciliations of any non-GAAP measures mentioned on immediately’s name. Lastly, this earnings name is the property of Gran Tierra Vitality, Inc. Any copying or rebroadcasting of this name is expressly forbidden with out the written consent of Gran Tierra Vitality. I’ll now flip the convention name over to Gary Guidry, President and Chief Government Officer of Gran Tierra. Mr. Guidry, please go forward.

Gary Guidry: Thanks, operator. Good morning and welcome to Gran Tierra’s fourth quarter and year-end 2023 outcomes convention name. My title is Gary Guidry, Gran Tierra’s President and Chief Government Officer; and with me immediately are Ryan Ellson, our Government Vice President and Chief Monetary Officer; and Sebastien Morin, our Chief Working Officer. This morning, we issued a press launch that included detailed details about our fourth quarter and year-end 2023 outcomes. As well as, Gran Tierra’s 2023 annual report on Type 10-Ok has been filed on EDGAR and is obtainable on our web site. Ryan and Sebastien will make a couple of temporary feedback, after which we’ll open the road for questions. I’ll now flip the decision over to Ryan to debate our monetary outcomes. Ryan, please go forward.

Ryan Ellson: Good morning, everybody. We’re delighted to announce that Gran Tierra efficiently achieved its targets for 2023 by way of manufacturing, funds circulate from operations and free money circulate. These milestones underscore the standard of our property and our unwavering dedication to operational excellence. Our targeted efforts on asset improvement have yielded robust efficiency throughout varied key metrics. Moreover, in 2023, we showcased our confidence in Gran Tierra’s future prospects by our buying 6.8% of our excellent shares by our regular course issuer bid or NCIB program, demonstrating our dedication to create long-term shareholder worth. We’re at present buying and selling at a reduction to our proved developed producing or PDP internet asset worth per share by about 46%. Our common value per every share buy was $7 per share. Our many achievements throughout the 12 months lead to year-over-year manufacturing progress of 6%, robust reserves alternative ratios properly above 100%, and the very best 1P, 2P and 3P year-end reserves within the firm’s historical past. In one other main milestone in 2023, Gran Tierra issued $488 million of recent 9.5% senior secured amortizing notes due 2029 in change for its current notes to enhance our steadiness sheet, scale back total leverage and supply extra monetary flexibility by extending the maturity schedule to higher align with anticipated future money flows. Roughly 92% of holders’ bonds had been exchanged, highlighting the help from bondholders. Subsequent to year-end, Gran Tierra issued an extra $100 million of 9.5% senior secured amortizing notes due 2029. The corporate used a portion of those proceeds to repay $50 million of borrowings excellent below our credit score facility, which subsequently was terminated. Regardless of a internet lack of $6 million in 2023, Gran Tierra achieved return on common capital employed of 15%, showcasing stable efficiency in capital utilization. Gran Tierra’s capital expenditures had been on the low finish of our steerage at $219 million, absolutely funded by funds circulate from operations of $277 million or $8.27 per share, leading to free money circulate of $58 million or $1.73 per share, demonstrating efficient monetary administration and constructive money technology. Though 2023 adjusted EBITDA decreased by 17%, the corporate realized adjusted EBITDA of near $400 million, indicating substantial operational resilience amid challenges with unstable oil costs. Gran Tierra’s internet gross sales for the 12 months had been $637 million in comparison with $711 million in 2022. This lower was primarily pushed by a 17% lower in worth at increased Castilla and Vasconia differentials, partially offset by 7% increased gross sales volumes and decrease transportation reductions in 2023. Regardless of the next working bills in 2023, Gran Tierra successfully managed inflationary pressures, showcasing resilience in value management and upkeep actions. One ultimate merchandise I wish to spotlight was the profitable completion of the Suroriente continuation settlement. By securing the continuation, Gran Tierra is dedicated to long-term capital tasks and improvement packages with plans of optimizing oil restoration and worth for the Suroriente Block. We imagine the mixture of Gran Tierra’s strong operational experience within the Putumayo Basin and Ecopetrol’s technical data will proceed our joint success within the improvement of our Suroriente Block. I’ll now flip the decision over to Sebastien Morin to debate a few of the highlights of our present operations.

Sebastien Morin: Thanks, Ryan. Good morning, everybody. I’ll briefly cowl a couple of operational highlights from immediately’s press launch in addition to our latest press launch concerning 2023 year-end reserves. Operationally, we’re constructing off a profitable 12 months in 2023 to start out off 2024 on a powerful notice. Since December 2023, Gran Tierra has drilled 4 oil wells within the Costayaco area during which we’re seeing glorious preliminary manufacturing outcomes. The primary properly Costayaco-56 has been on manufacturing since early January and has been producing a steady common fee of round 1,900 barrels of oil per day and a 2% water minimize. A second properly, Costayaco-57 was spud on January sixth and introduced on manufacturing in late January. It has been producing at a steady common fee of round 1,100 barrels of oil per day and a ten% water minimize. The third properly [Technical Difficulty]

Operator: Women and gents, pardon the interruption, speaker has been disconnected. Please maintain whereas we reconnect the speaker.

Sebastien Morin: Being drilled and can be adopted by the ultimate properly, Acordionero-128. All wells from this improvement program are anticipated to be drilled, accomplished and on manufacturing earlier than the top of the primary quarter of the 12 months. Again down within the Southern Putumayo Basin, Gran Tierra intends to start improvement drilling within the Cohembi oil area situated within the Suroriente Block throughout the later half of the 12 months. We plan to develop the block’s manufacturing services, elevated gasoline energy technology, assemble new improvement properly pads and make social investments within the space, all with the objective of considerable manufacturing progress in 2025 and 2026. From an exploration perspective, round 40% to 45% of Gran Tierra’s 2024 capital program will goal high-impact, close to area and low-risk exploration actions, together with the drilling of six to 9 exploration wells in Colombia and Ecuador, signifying our dedication to unlocking potential new reserves and fostering sustainable manufacturing progress. Constructing on promising outcomes from the 2022 exploration program, we plan to deal with brief cycle time prospects in confirmed basins with established transportation infrastructure. As well as, as a part of our 2024 capital program, we’re at present within the early phases of execution to amass 238 kilometers sq. of 3D seismic over the Charapa block in Ecuador and to pre-invest in advancing drilling licenses constructing pads for the 2025 exploration program in Colombia and Ecuador, which is able to set the stage for future progress alternatives for the corporate. On January twenty third, 2024, we had been happy to launch our 2023 year-end reserve report as evaluated by McDaniel. 2023 noticed the very best year-end reserves in our firm’s historical past. 90 million barrels of oil equal 1P, 147 million of barrel oil equal 2P and 207 million barrels of oil equal 3P, and we achieved glorious reserve alternative of 154% 1P, 242% 2P and 303% 3P. This additionally represented the fifth consecutive 12 months that we achieved the 1P reserve progress. These outcomes had been pushed by success with improvement drilling and waterflooding leads to the Chaza Block, which accommodates the Costayaco and Moqueta fields and the Suroriente continuation settlement as outlined by Ryan. Throughout ‘23, a mixture of our robust reserves progress, ongoing reductions in debt and share buybacks allowed Gran Tierra to realize internet asset values per share earlier than tax of $44.48 1P, up 288% from 2020 and $79.13 2P, up 144% from 2020. With this important progress in our internet asset values per share over the past three years, we imagine Gran Tierra is properly positioned to supply distinctive long-term stakeholder worth. The success we achieved in 2023 additionally displays our ongoing conversion of reserves from the possible permitted class. With 147 booked, proved plus possible undeveloped future drilling areas, Gran Tierra is properly positioned to proceed to develop the corporate’s manufacturing and reserves in 2024 and past. I’ll now flip the decision again to the operator, and Gary and Ryan and I can be completely satisfied to take questions. Operator, please go forward.

Operator: Thanks. Women and gents, we’ll now conduct a question-and-answer session for securities analysts. [Operator Instructions] First query coming from Roman Rossi with Canaccord Genuity. Your line is open.

Roman Rossi: Good morning. And thanks for taking my questions. I’ve a pair, if I can go one after the other. The primary one is concerning the standard and transportation low cost within the fourth quarter. So we noticed a 30% within the quarter-over-quarter. I simply wished to know what’s the rationale behind its improve and the place [indiscernible] for 2024?

Ryan Ellson: Yeah. I feel the room — do you hear me okay?

Roman Rossi: Yep.

Ryan Ellson: Do you hear me now?

Roman Rossi: I can hear you, however there’s a little bit of echo.

Ryan Ellson: Okay. Yeah, with the standard differentials that principally is simply from the standard Vasconia and Castilla did widen throughout the fourth quarter. And so we now have seen that pretty constant into Q1. There hasn’t been a considerable change from Q1 to This fall. At the moment, the Castilla differential is round $9, and Vasconia is round $5, which is efficient what we’ve budgeted for this 12 months.

Roman Rossi: Okay. And do you assume that the widening was associated to the [Technical Difficulty] enter available in the market? And do you assume that’s a change even [Technical Difficulty] in April?

Ryan Ellson: Sorry, Roman are you able to hear me? I feel the query was, is the results of Venezuela. Sure, that’s a part of I feel there’s two points, is Venezuela, extra potential crude in Venezuela in addition to — really three, in addition to OPEC begins releasing a few of their cuts. We anticipate extra of the heavy sours come to the market in addition to the startup of the TMX line in Canada, which is able to get extra Canadian heavy crude to [indiscernible]. So it’s a mixture of these three elements. Nevertheless it’s — there’s actually no shock to us, and it’s proper round in our finances numbers.

Roman Rossi: Okay, thanks. And one final query concerning OpEx, there was a goal improve in [Technical Difficulty] that due to the decrease manufacturing in [indiscernible] quarter or there have been extra inflation ID or [Technical Difficulty]?

Ryan Ellson: Sure, it was simply pushed by the decrease manufacturing. And so we anticipate our gross working value can be flat to return down barely in 2024, coupled with elevated manufacturing. So we anticipate the per unit value drop.

Roman Rossi: Okay. Thanks very a lot, Ryan.

Ryan Ellson: Thanks.

Operator: Thanks. And our subsequent query coming from the road of Oriana Covault [Technical Difficulty]. Your line is open.

Oriana Covault: Hello, that is Oriana Covault with Balanz. I imagine that there’s a little bit of a echo there, however I’m going to attempt to put — I’ve two questions. So the primary one is concerning your [Technical Difficulty] what wouldn’t it take for [Technical Difficulty] 12 months?

Ryan Ellson: Sure. With respect to hedging, we did have 15,000 barrels hedged with a flooring — we do nonetheless really till the top of Q1. Now we have 15,000 barrels hedged with a flooring of $80 with the put premiums round $3, which is absolutely a part of our bodily contract with the offtake. We’re including extra places in for the rest of the 12 months. We’re simply within the strategy of doing that proper now.

Oriana Covault: Glorious. So that might take how are you pondering in [Technical Difficulty] manufacturing?

Ryan Ellson: Yeah. Sorry, I missed the query. It broke up somewhat bit on the facet.

Oriana Covault: Yeah. Like in sum what are your [Technical Difficulty] manufacturing hedged for the 12 months?

Ryan Ellson: Yeah. We’d prefer to have — looking six to 9 months, we’d prefer to have 30% to 50% hedged. After which after six to 9 months, 25% hedged on a rolling foundation, utilizing places and actually simply trying additional draw back manufacturing. And also you’ll recall, too, is among the issues we now have is a really robust operational hedge on condition that we function all of our manufacturing. So we now have numerous flexibility on our capital expenditures to the extent that costs had been decreased considerably, we in a short time minimize our capital program. In order that’s a method — one other method we defend the enterprise.

Oriana Covault: Obtained it. Effectively, only one final one from my facet. You possibly can remark in your internet debt market or you may have [Technical Difficulty] minimal money worth [Technical Difficulty] 2024?

Ryan Ellson: Yeah, I feel our steerage on the market, we’re focusing on year-end internet debt-to-EBITDA of 0.8 to 1.2 instances. So if we take the one-time, which is pretty constant what we’ve had previously as a goal. We proceed to focus on that. And we’d prefer to have money on the steadiness sheet of anyplace between $50 million and $100 million. And that may fluctuate all year long, simply with funds to governments, capital program, et cetera. However over the course of the 12 months, we anticipate to common in that $50 million to $100 million vary.

Oriana Covault: Obtained it. Thanks very a lot.

Ryan Ellson: Thanks.

Operator: Thanks. [Operator Instructions] And our subsequent query is coming from the road of Josef Schachter with [Technical Difficulty]. Your line is open.

Josef Schachter: Good morning, everybody. That is going to be a difficult name — if it breaks up, Ryan, you possibly can name me later.

Ryan Ellson: Completely.

Josef Schachter: First query. You will have in your steerage [Technical Difficulty] and also you had an excellent [Technical Difficulty]. You add within the [Technical Difficulty] success in Q1 [Technical Difficulty]. Are you anticipating depletion [Technical Difficulty] of the 12 months regardless of [Technical Difficulty]?

Ryan Ellson: Yeah on that, I feel it’s — the manufacturing is, the price accruals have achieved — exceeded our expectations. And that’s one of many cause why we give a spread. And so it’s nonetheless early days on the wells. So we’ll see how these wells progress over the subsequent couple of quarters earlier than offering extra steerage. However we’re nonetheless snug with the vary proper now.

Josef Schachter: Okay. What number of areas do you continue to have an space for drilling?

Sebastien Morin: Sorry, simply to make clear that query, during which space?

Josef Schachter: We’re speaking about Putumayo [Technical Difficulty] the CYC discovery?

Sebastien Morin: Yeah. So out of the 147 2P areas that we now have, there’s nonetheless 26 areas recognized for Costayaco, Moqueta, for instance. After which at Suroriente we’ve obtained an extra 30.

Josef Schachter: Okay. That’s good [Technical Difficulty].

Ryan Ellson: Effectively one different issues, Josef. One different issues that Sebastien and the workforce are on Costayaco, we’ve obtained some superb outcomes with our reservoir modeling and focusing on unswept areas. That’s what’s outperforming at Costayaco within the north. Now we have one other space within the southern a part of the reservoir alongside strike that we’re going to attempt to goal this 12 months. So we’re — that’s why we’re enthusiastic about Costayaco.

Josef Schachter: Okay, good. One final one for me. With the circulate within the reasonable [Technical Difficulty] previously you’ve talked about possibly you talked about possibly new space in Minot [Technical Difficulty] analyze the whole lot and get it proper briefing. Have you ever had any thought for right here that you simply had the brand new app [Technical Difficulty] firm?

Gary Guidry: Yeah. The reply to that’s that we’re at all times searching for alternative. We don’t see something particular in the meanwhile, however our enterprise improvement initiatives are all long-term. And so we’re trying at all times for tactics to extend worth of the corporate, however we don’t have something particular on the horizon.

Josef Schachter: Okay. That’s it for me. Thanks very a lot and [Technical Difficulty] with the success within the drilling [Technical Difficulty].

Ryan Ellson: Thanks.

Operator: Thanks. [Operator Instructions] Now we have [indiscernible]. Your line is open.

Unidentified Analyst: Hello, thanks for taking my query. So that you talked about that $36 million of the $100 million that was used for the credit score facility. The place would be the steadiness used?

Ryan Ellson: Yeah. On the — so out of the $100 million, the web proceeds had been round $88 million, $35 million went to repay the ability, as you identified. And the rest wouldn’t it be money on the steadiness sheet proper now.

Unidentified Analyst: Okay, thanks.

Ryan Ellson: Thanks.

Operator: And our subsequent query coming from the road of Alejandra Andrade with JPM. Your line is open.

Alejandra Andrade: Hello, thanks for taking the query. Only a fast one for me, confirming that after you repaid the dedicated line, you don’t have any accessible traces in the meanwhile, right?

Ryan Ellson: Right. Right. We repaid it after which terminated. We’re a working capital facility which coincided higher with the enterprise and a few of the ebbs and flows of our money outflows and inflows. However proper now, we now have nothing in place and we’re snug simply with our free money circulate and money on the steadiness sheet.

Alejandra Andrade: Nice. Thanks.

Ryan Ellson: Thanks.

Operator: Thanks. And gents, there aren’t any additional questions right now. Please proceed.

Gary Guidry: Thanks, everybody, for becoming a member of us immediately. We look ahead to talking with you over the subsequent quarter and replace you on our ongoing progress. I wish to thank your complete Gran Tierra workforce for his or her exhausting work in 2023, the improbable outcomes and to our shareholders for his or her continued help. Thanks.

Operator: Thanks. Women and gents, that does conclude our convention for immediately. Thanks to your participation. You could now disconnect.

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