Gran Tierra Energy(US:GTE)2022-08-10 22:32Financial Data and Key Metrics Changes - Gran Tierra generated net income of $53 million, up 275% from the prior quarter and compared to a net loss of $18 million in Q2 2021, resulting in earnings of $0.14 per share, up from $0.04 in the prior quarter [7] - Oil production averaged 30,607 barrels per day, up 4% from the prior quarter and up 33% year-on-year, marking the highest quarterly production since Q4 2019 [8] - Operating net back was $59.62 per barrel, the highest since Q3 2014, up 14% from the prior quarter and up 81% year-on-year [9] - Funds flow from operations increased by 345% to $104 million compared to a year ago, and was up 19% from the prior quarter, with a diluted per share basis of $0.28, up from $0.06 in Q2 2021 [10] Business Line Data and Key Metrics Changes - In the Acordionero field, the average drilling time for development wells decreased from 5 days to 4.5 days, with average per well drilling costs reduced to $1.2 million, 9% lower than budgeted [16] - The Costayaco development program was completed under budget, with all 5 wells completed during the first half of the year [18] Market Data and Key Metrics Changes - As of June 30, 2022, the company had a cash balance of $109 million and net debt of $491 million, with an annualized Q2 net debt-to-EBITDA ratio below one times [13] Company Strategy and Development Direction - The company plans to maintain a cash balance of $75 million to $100 million for liquidity and deploy excess cash to strengthen the balance sheet, buy back shares, and pursue accretive opportunities [14] - The company is closely monitoring regulatory developments in Ecuador and Colombia, with potential reallocation of capital based on the political environment [32] Management's Comments on Operating Environment and Future Outlook - Management is assessing the impact of proposed tax reforms in Colombia, indicating that the tax reform is still a proposal and subject to legislative processes [22][23] - Management expects to see a decrease in per barrel lifting costs as production volumes increase in the second half of the year [28] Other Important Information - Gran Tierra fully repaid its credit facility, demonstrating a commitment to reducing debt with free cash flow [12] - The company is targeting a net debt-to-EBITDA ratio of under one times, assuming a $60 per barrel Brent case [13] Q&A Session Summary Question: Impact of proposed tax reform on EBITDA - Management is still assessing the implications of the tax reform proposal and its potential impact on effective tax rates [22][23] Question: Expectations for lifting costs in the upcoming quarters - Management expects lifting costs to decrease as production volumes increase, maintaining guidance within the targeted range [28] Question: Capital allocation in Ecuador based on exploration success - Management indicated that if regulatory conditions slow down in Colombia, they would reallocate capital to Ecuador, where they have prospective blocks [32] Question: Guidance on exit production for 2022 - Management expects exit production to be in the low 30,000s barrels per day, focusing on developing water floods [56] Question: Hedging arrangements and impact from hedges - Management reported hedging losses in the first half of the year around $26 million to $27 million, and they are currently assessing hedging arrangements going forward [54] Question: Developments regarding credit facility replacement - Management is looking to replace the credit facility with a smaller one in the range of $75 million to $125 million [63]