Gran Tierra Energy(US:GTE)2023-08-02 19:40Financial Data and Key Metrics Changes - Adjusted EBITDA for Q2 2023 was $85 million, down from $89 million in the previous quarter, impacted by a $13 million realized foreign exchange loss due to the strengthening of the Colombian peso against the U.S. dollar [5][30] - Average production for Q2 2023 was 33,719 barrels per day, a 10% increase year-over-year and a 7% increase from the prior quarter [6][30] - Operating netback decreased to $34.58 per barrel, down 42% year-over-year and down 2% from the prior quarter [6][30] - Cash balance as of June 30, 2023, was $69 million, with net debt at $503 million, and expected to exit 2023 with over $150 million in cash [30][42] Business Line Data and Key Metrics Changes - The company completed its 2023 development campaign, drilling 21 development wells across major fields, with significant contributions from Acordionero and Costayaco [29][32] - Acordionero's production averaged approximately 18,000 barrels of oil per day, attributed to the successful drilling program and enhanced oil recovery management [81] Market Data and Key Metrics Changes - Brent oil price averaged $77.73 per barrel during the quarter, down 31% year-over-year and down 5% from the prior quarter [30] - The quality and transportation discount narrowed to $14.10 per barrel from $18.45 in the previous quarter, with Vasconia and Castilla differentials also narrowing significantly [70] Company Strategy and Development Direction - The company plans to focus on exploration wells in Ecuador in Q4 2023, building on the successful 2022 exploration campaign [79] - Gran Tierra aims to maintain low operating costs and continue its share buyback program while exploring value-add acquisitions [26][30] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for the second half of 2023, citing strong production, narrowing differentials, and a favorable Brent oil price above $80 per barrel [80] - The company acknowledged the impact of the Colombian peso on operating costs but indicated that inflationary pressures would not have a material impact on results [93] Other Important Information - The company achieved record reserves, with 94 million barrels of oil equivalent on a 1P basis, 150 million boe on a 2P basis, and 212 million boe on a 3P basis [82] - Gran Tierra is committed to environmental initiatives, including the NaturAmazonas project, which focuses on reforestation and community benefits [31] Q&A Session Summary Question: Guidance for cash taxes for the second half of the year - Management indicated that cash taxes would primarily consist of withholding tax, which is about 8% of revenue, and original guidance for total cash taxes was $210 million to $250 million for the year [86][89] Question: Conditions for reinstating hedges - Management stated that they are currently unhedged and will evaluate hedging options in Q4 based on capital allocation for 2024 [92] Question: Plans to address the 2025 maturity and use of excess cash - Management confirmed that they plan to repay debts as they come due and will consider using excess cash for bond repurchases or share repurchases [61][100] Question: Insight into Acordionero's lower production - Management explained that the decrease in Acordionero production was due to timing of well completions and some wells being down during the quarter [56]