Gran Tierra Energy(GTE) - 2019 Q3 - Quarterly Report

PART I - Financial Information Item 1. Financial Statements The company presents unaudited condensed consolidated financial statements for the nine months ended September 30, 2019 Condensed Consolidated Statements of Operations Highlights (Unaudited) | Indicator (Thousands of U.S. Dollars) | Three Months Ended Sep 30, 2019 | Three Months Ended Sep 30, 2018 | Nine Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2018 | | :--- | :--- | :--- | :--- | :--- | | Oil and Natural Gas Sales | $132,491 | $175,118 | $443,049 | $476,792 | | (Loss) Income Before Income Taxes | $(17,312) | $57,634 | $57,361 | $149,562 | | Net and Comprehensive (Loss) Income | $(28,833) | $75,295 | $11,686 | $113,456 | | Net (Loss) Income Per Share - Basic | $(0.08) | $0.19 | $0.03 | $0.29 | | Net (Loss) Income Per Share - Diluted | $(0.08) | $0.18 | $0.03 | $0.28 | Condensed Consolidated Balance Sheet Highlights (Unaudited) | Indicator (Thousands of U.S. Dollars) | As at Sep 30, 2019 | As at Dec 31, 2018 | | :--- | :--- | :--- | | Total Current Assets | $200,977 | $202,525 | | Total Assets | $1,959,861 | $1,676,584 | | Total Current Liabilities | $205,977 | $169,380 | | Long-term debt | $637,601 | $399,415 | | Total Liabilities | $954,809 | $646,834 | | Total Shareholders' Equity | $1,005,052 | $1,029,750 | Condensed Consolidated Statements of Cash Flows Highlights (Unaudited) | Indicator (Thousands of U.S. Dollars) | Nine Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2018 | | :--- | :--- | :--- | | Net cash provided by operating activities | $138,427 | $213,204 | | Net cash used in investing activities | $(368,213) | $(246,013) | | Net cash provided by financing activities | $193,738 | $140,169 | | Net (decrease) increase in cash | $(37,554) | $106,958 | - On February 20, 2019, the Company acquired working interests in the Suroriente and Llanos-5 Blocks for $79.1 million cash and a $1.5 million promissory note[29] - In May 2019, the company issued $300.0 million of 7.75% Senior Notes and redeemed its Convertible Notes, resulting in an $11.3 million loss[31][32][35] - The company faces a potential royalty payment of up to $56.2 million to the Agencia Nacional de Hidrocarburos (ANH), which has not been accrued[51] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a challenging Q3 2019 with a net loss of $28.8 million, driven by non-cash items and lower production Financial and Operational Highlights Q3 2019 saw a 3% production decrease, a net loss of $28.8 million, and a 31% drop in funds flow from operations Q3 2019 vs Q3 2018 Performance | Metric | Q3 2019 | Q3 2018 | % Change | | :--- | :--- | :--- | :--- | | Production NAR (BOEPD) | 27,763 | 28,599 | -3% | | Net (Loss) Income (Millions) | $(28.8) | $75.3 | -138% | | Funds Flow from Operations (Millions) | $59.0 | $85.0 | -31% | | Adjusted EBITDA (Millions) | $67.9 | $110.3 | -38% | | Operating Netback per BOE | $32.45 | $47.41 | -32% | - Production decrease was attributed to unplanned downtime from electrical submersible pump (ESP) failures and operational suspensions[71] - Operating expenses per BOE rose 25% YoY to $13.97 due to higher power generation costs and lower production volumes[71] Results of Operations Results were impacted by lower oil prices, with Q3 2019 oil and gas sales falling 24% YoY to $132.5 million Operating Netback per BOE | U.S. Dollars Per BOE | Three Months Ended Sep 30, 2019 | Three Months Ended Sep 30, 2018 | | :--- | :--- | :--- | | Average Realized Price | $51.98 | $66.42 | | Operating Expenses | ($13.97) | ($11.19) | | Workover Expenses | ($4.31) | ($4.97) | | Transportation Expenses | ($1.25) | ($2.85) | | Operating Netback | $32.45 | $47.41 | - For the nine months ended September 30, 2019, oil and gas production NAR increased by 4% compared to 2018, driven by a successful drilling campaign[79] - The company's effective tax rate for the first nine months of 2019 was 79%, significantly higher than the 24% in the same period of 2018[47][98][99] Liquidity and Capital Resources The company reported a working capital deficiency of $5.0 million and total debt of $657 million as of September 30, 2019 Liquidity Position | (Thousands of U.S. Dollars) | Sep 30, 2019 | Dec 31, 2018 | | :--- | :--- | :--- | | Cash and Cash Equivalents | $13,959 | $51,040 | | Working Capital (Deficiency) | $(5,000) | $33,145 | | Total Debt (Principal) | $657,000 | $415,000 | - The company has $243.0 million available on its $300.0 million revolving credit facility as of September 30, 2019[105][107] - The company utilizes commodity price and foreign currency derivatives to mitigate cash flow variability[111][112] - Capital expenditures for Q3 2019 totaled $116.5 million, with the majority focused on development in Colombia[102] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's principal market risks include volatile oil prices, foreign currency fluctuations, and interest rate changes - The principal market risk is from volatile oil prices, which the company partially manages through commodity price derivative contracts[124][125] - Foreign currency risk exists due to Colombian peso and Canadian dollar denominated expenses, which is partially managed with derivatives[126][127] - The company is exposed to interest rate risk on its revolving credit facility, which had an outstanding balance of $57 million at September 30, 2019[129] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of September 30, 2019 - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of September 30, 2019[131] - There were no material changes to the company's internal control over financial reporting during the third quarter of 2019[132] PART II - Other Information Item 1. Legal Proceedings The company details an ongoing royalty dispute with Colombia's ANH with a potential liability of up to $56.2 million - The company is in ongoing discussions with the Colombian National Hydrocarbons Agency (ANH) regarding a high-price royalty calculation[51][134] - The estimated potential liability could be up to $56.2 million as of September 30, 2019, though no amount has been accrued[51] Item 1A. Risk Factors The company reports no material changes to its previously disclosed risk factors - There have been no material changes to the company's risk factors since previous filings[135] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 9.7 million shares in Q3 2019, completing its authorized share repurchase program Issuer Purchases of Equity Securities (Q3 2019) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | July 2019 | 1,842,750 | $1.60 | | August 2019 | 6,401,675 | $1.35 | | September 2019 | 1,410,326 | $1.41 | | Total | 9,654,751 | $1.41 | - The 2019 share repurchase program was completed during the quarter after reaching its maximum authorized limit of 19,353,951 shares[138][139] Item 6. Exhibits This section lists filed exhibits, including required CEO and CFO certifications under the Sarbanes-Oxley Act - The filing includes CEO and CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act[140]