Gran Tierra Energy(GTE) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Gran Tierra generated $60 million of funds flow from operations, or$1.96 per share, which was up 31% from the prior quarter [8] - Adjusted EBITDA was $93 million compared to$103 million in the prior quarter [8] - The company generated net income of $1 million [8] - As of September 30, 2024, the company had a cash balance of$278 million and net debt of $509 million, with expectations for the cash balance to decrease by approximately$170 million due to the i3 acquisition [8] - Oil sales were $151 million, down 9$34.18 per barrel, down 12% from the prior quarter [10] Business Line Data and Key Metrics Changes - Total average working interest production was 32,764 barrels of oil per day, consistent with the prior quarter [12] - Capital expenditures were $53 million, lower than the$61 million in the prior quarter [12] - Operating expenses decreased by 2% to $46 million compared to the prior quarter [13] - Transportation expenses decreased by 31$3.9 million due to shorter delivery distances [13] Market Data and Key Metrics Changes - Brent averaged $78.71 per barrel, down 7$14.10, higher than the $12.79 in the prior quarter [9] Company Strategy and Development Direction - The acquisition of i3 Energy diversifies Gran Tierra into Canada and adds significant drilling locations and production capacity [5][6] - The company plans to focus on oil-weighted opportunities in Canada while continuing to develop high-impact oil opportunities in South America [7] - Gran Tierra aims to optimize waterflood performance and increase production through ongoing projects in Colombia and Ecuador [14][15] Management's Comments on Operating Environment and Future Outlook - Management expects cash taxes to decrease in the fourth quarter due to oil price fluctuations [22] - The company anticipates a lower overall tax rate in 2025 compared to 2024 [23] - Management is optimistic about the integration of i3 Energy and the growth potential in both Canadian and South American markets [27][28] Other Important Information - Gran Tierra has paused its share buyback program due to the i3 acquisition, with only 370,000 shares repurchased during the quarter [10] - The company has a long-term net debt-to-EBITDA target of 1x or less [8] Q&A Session Summary Question: What will the tax position look like post-acquisition? - Management expects cash taxes to decrease, with a move to a 10% surtax in the fourth quarter due to oil prices [22][23] Question: How is the buyback program connected to the company? - The buyback is funded through free cash flow, and the company has an automatic share purchase plan in place [24] Question: What drove the acquisition of i3 Energy? - The acquisition provides a platform for growth in Western Canada and diversification of oil and gas assets [27] Question: What is the outlook for 2025 guidance? - Management expects to provide 2025 guidance in early January [33] Question: How will capital expenditures change in 2025? - Capital expenditures are expected to increase due to opportunities in Canadian assets, with a focus on oil-weighted projects [34] Question: What is the expectation for the discount rate to Brent? - The discount rate is expected to continue due to wider differentials influenced by increased crude supply [36] Question: How will production and cash flow be divided between Canada and South America? - South America is expected to remain the majority contributor to adjusted EBITDA, but Canada is anticipated to grow significantly [39]