Gran Tierra Energy(US:GTE)2023-02-22 22:17Financial Data and Key Metrics Changes - Gran Tierra achieved year-over-year production growth of 16% and recorded the highest annual figures in net income, funds flow from operations, and free cash flow in the company's history [7][39] - Funds flow from operations reached $366 million, resulting in free cash flow of $129 million, both records for the company [8] - Net income for 2022 was $139 million, with earnings per share at $0.38 [39] - Adjusted EBITDA was $490 million, equating to $1.34 on a basic per share basis [39] - The company reduced its debt by $88 million, finishing the year with $127 million in cash and a net debt to adjusted EBITDA ratio of 0.9 times [40] Business Line Data and Key Metrics Changes - Gran Tierra's capital spend totaled $237 million for the year, balanced between exploration and development activities, leading to reserves and profitable production growth [15] - The operating netback was $48.43 per barrel, up 43% from $33.75 in 2021 [16] - Significant growth in year-end reserves was achieved, with 1P NPV10 before tax increasing by 26% compared to 2021 [26] Market Data and Key Metrics Changes - The company reported a strong recovery in oil prices, which contributed to the increase in net asset values per share [52] - The Vasconia and Castilla pricing discounts widened at the end of last year but began to tighten in February 2023, driven by a lack of heavy oil demand, particularly from China [33][60] Company Strategy and Development Direction - Gran Tierra is focused on being a full-cycle oil and gas exploration, development, and production company, emphasizing value creation for stakeholders [29] - The company plans to continue its appraisal of new discoveries and exploration drilling while generating free cash flow to strengthen its balance sheet and potentially return capital to shareholders through share buybacks [51] - Gran Tierra is exploring opportunities in other basins globally, including Africa and the Middle East, to diversify and mitigate risk [132] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's geological understanding of the basins, supported by successful exploration discoveries in 2022 [38] - The company anticipates a steady ramp-up in production volumes throughout 2023, with expectations to exit the year around 34,000 barrels per day [104] - Management is optimistic about the potential for contract renewals and ongoing discussions with Ecopetrol regarding the Suroriente asset [57][92] Other Important Information - Gran Tierra invested over $4.6 million in local projects in Colombia and Ecuador in 2022, focusing on community needs [19] - The company has created approximately 26,000 labor opportunities in Colombia since 2015 [43] Q&A Session Summary Question: What is the outlook on operating costs for 2023? - Management believes operating costs will be similar in 2023 compared to 2022, but per unit costs will decrease due to higher production [30] Question: What is driving the wider discounts in pricing? - The discounts are primarily due to a lack of heavy oil demand, especially from China, but are expected to narrow as the year progresses [60] Question: What is the target debt level going forward? - The company aims for a net debt-to-EBITDA ratio of between 0.8 to 1.0 times, with a gross debt target of between $500 million and $550 million [85] Question: How does the company view potential restrictions on exploration? - Management is confident in their current exploration portfolio and is actively looking for opportunities in other basins, including Ecuador [131] Question: What is the company's approach to share buybacks? - Gran Tierra plans to maximize its share buyback program, especially when trading at a substantial discount to NAV, and is looking to renew the program once the current limit is reached [95][124]