Earnings call transcript: Gran Tierra Energy Q3 2025 sees stock dip amid operational updates

Gran Tierra Energy Inc. (GTE) reported its Q3 2025 earnings, highlighting significant operational achievements in Ecuador and an improved cash flow position. However, the company’s stock fell by 9.08% following the announcement, reflecting investor concerns over debt levels and production challenges. The stock’s premarket trading showed a further decline of 8.98%, settling at $3.36.

Key Takeaways

• Gran Tierra’s Q3 operating cash flow increased by 39% from the previous quarter.
• The company reported a cash position of $49 million against a net debt of approximately $755 million.
• Successful exploration activities in Ecuador contributed to production growth.
• The stock dropped by 9.08% post-announcement, with further premarket declines.
• Production challenges include a landslide in Ecuador and trunk line repairs.

Company Performance

Gran Tierra Energy demonstrated strong operational performance in Q3 2025, with significant contributions from its exploration activities in Ecuador. The company reported an average production of 42,685 barrels of oil equivalent (BOE) per day, marking a 30% increase year-over-year. Current production stands at 45,200 BOE per day, with an expected exit rate between 47,000 and 50,000 BOE per day. Despite these achievements, the company faces production hurdles due to a landslide in Ecuador and necessary trunk line repairs.

Financial Highlights

• Operating cash flow: $48 million, up 39% from Q2 2025.
• Cash position: $49 million.
• Net debt: Approximately $755 million.
• New prepayment facility: $150 million initial advance.
• Secured facility for Canadian assets increased to $75 million.

Outlook & Guidance

Gran Tierra is focusing on generating free cash flow in 2026 and beyond, with plans to release its 2026 budget in mid-December. The company anticipates a decrease in capital expenditures and aims to enhance its free cash flow generation and deleverage efforts. Potential production in Ecuador is projected to reach between 11,000 and 19,000 BOE per day, with continued field development plans in the region.

Executive Commentary

CFO Ryan Ellson emphasized the company’s commitment to free cash flow generation, stating, "We’re laser-focused on generating free cash flow in 2026 and beyond." COO Sebastien Morin highlighted the quarter’s achievements, noting, "What really stands out this quarter is the progress we’ve made in advancing our technical capabilities and field execution."

Risks and Challenges

• High net debt levels could impact financial flexibility.
• Production challenges due to environmental factors, such as the landslide in Ecuador.
• Dependence on successful exploration and development in Ecuador.
• Fluctuating oil prices affecting revenue and profitability.
• Potential delays in infrastructure repairs impacting production targets.

Q&A

During the earnings call, analysts inquired about the company’s production response in the Soriente region and details regarding the prepayment facility. Discussions also covered Ecuador’s production potential and strategies for debt reduction, reflecting investor interest in the company’s operational and financial strategies.

Gran Tierra’s Q3 2025 performance highlights both significant achievements and ongoing challenges, with the market’s reaction underscoring investor caution amid operational uncertainties.

Full transcript - Gran Tierra Energy Inc (GTE) Q3 2025:

Shannon, Conference Call Coordinator, Gran Tierra Energy: Good morning, ladies and gentlemen, and welcome to Gran Tierra Energy’s conference call for third quarter 2025 results. My name is Shannon, and I will be your coordinator for today. At this time, all participants are in a listen-only mode. Following the initial remarks, we will conduct a question-and-answer session for securities analysts and institutions. Instructions will be provided at that time for you to queue up for your questions. I would like to remind everyone that this conference call is being webcast and recorded today, Friday, October 31, 2025, at 11:00 A.M. Eastern Time. Today’s discussion may include certain forward-looking information, oil and gas information, and non-GAAP financial measures. Please refer to the earnings and operational update press release we issued yesterday for important advisories and disclaimers with regard to this information and forward reconciliations of any non-GAAP measures discussed on today’s call.

Finally, this earnings call is the property of Gran Tierra Energy, Inc., and the copying or rebroadcasting of this call is expressly forbidden without the written consent of Gran Tierra Energy. I will now turn the conference call over to Gary Guidry, President and Chief Executive Officer of Gran Tierra Energy. Mr. Guidry, please go ahead.

Gary Guidry, President and Chief Executive Officer, Gran Tierra Energy: Thank you, Shannon. Good morning and welcome to Gran Tierra Energy’s third quarter 2025 results conference call. My name is Gary Guidry, Gran Tierra Energy’s President and Chief Executive Officer, and with me today are Ryan Ellson, our Executive Vice President and Chief Financial Officer, and Sebastien Morin, our Chief Operating Officer. On Thursday, October 30, 2025, we issued a press release that included detailed information about our third quarter 2025 results, which is available on our website. Ryan and Sebastien will make a few brief comments, and then we will open the line for questions. I’ll now turn the call over to Ryan to discuss our financial results.

Ryan Ellson, Executive Vice President and Chief Financial Officer, Gran Tierra Energy: Thanks, Gary. Good morning, everyone. First, I would like to highlight an announcement made last week relating to the prepayment agreement we closed, which represents a new prepayment facility backed by our Ecuadorian crude production. The initial advance will be $150 million, with the potential for another $50 million once our Ecuador acquisition closes and we reach 10,000 BOE per day in Ecuador. It’s a four-year structure, priced at SOFR plus 3.8%, and includes a three-month grace period on principal before amortizing evenly over the remaining term. Importantly, the commercial terms, or sales price, are an improvement to our previous crude oil sales contract. Overall, this agreement strengthens our balance sheet and gives us added financial flexibility at a very competitive cost.

In addition, we increased our current facility secured by our Canadian assets to $75 million, an equally important move from a 1.1 structure to a two-year structure with maturity in October 2027. Now, on to the quarter. During the third quarter of 2025, Gran Tierra Energy averaged 42,685 BOE per day. That’s up roughly 30% from a year ago, driven by our Canadian acquisition and continued success from our exploration in Ecuador. Production during the quarter was temporarily impacted by unusual and externally driven events across our operations, including a landslide in Ecuador, which impacted the main export pipelines in the country, requiring us to shut in production, and trunk line repairs at the Makeda Fuel Group, which resulted in the field being shut in for the quarter. The pipeline repairs took longer than anticipated due to ongoing heavy rains through July and August.

All pipelines are restored as of October 10. We want to emphasize that these volumes represent deferred barrels rather than lost production, and we are ready to see a strong recovery with current production averaging 45,200 BOE per day. Based on the deferrals, we are forecasting the lower end of our production guidance range. The underlying assets continue to perform well, and our teams remain focused on ongoing optimization and maximizing production efficiency and cash flow, with an expected exit rate to 47,000 to 50,000 BOE per day. From a cash perspective, it was a solid quarter where we generated $48 million of operating cash flow, up 39% from Q2. We ended the quarter with $49 million in cash and net debt position of approximately $755 million.

In terms of pricing, we saw improving differentials across South America, especially in Ecuador, which helped offset some of the impact from temporary facility downtime and pipeline outages. On the capital side, we invested $57 million that focused mainly on high-return projects in Colombia, Ecuador, and Canada. Overall, despite some temporary production headwinds this quarter, we’re expecting a strong finish to the year, which sets us up for a strong 2026, with production already back above 45,200 barrels a day and the added liquidity from our new prepayment facility and increase and extension of our Canadian asset-backed facility. We’re in a great position to finish 2025. The 2025 capital program was primarily focused on fulfilling exploration commitments, which resulted in numerous material discoveries.

We also invested in facility expansion in Soriente, including Gas to Power, which provides us with sufficient process capacity to increase production in the field and lower costs. With substantially all commitments behind us, the focus turns to free cash flow and deleveraging from our large, diversified resource base. We release our 2026 budget in mid-December, which will include a decrease in capital expenditures and an emphasis on free cash flow generation. I’ll now turn the call over to Sebastien to discuss some of the highlights of our current operations.

Sebastien Morin, Chief Operating Officer, Gran Tierra Energy: Good morning, everyone, and thank you, Ryan. The third quarter highlighted continued operational strength across our entire portfolio, with solid execution in Ecuador, Colombia, and Canada despite contemporary external challenges. In Ecuador, we had another strong quarter, achieving record production: greater than 5,000 barrels of oil per day in August and greater than 6,000 barrels of oil per day in early October, with the delivery of the Conejo A1 exploration well, which was drilled on budget and successfully tested both the Hueyén and Basal Tena sands, flowing over 1,300 barrels a day of 26.9-degree API oil under normal natural flow conditions. We plan to re-enter Conejo A1 later this quarter and install the final completion and selectively test each zone to optimize long-term production. We also recently cased and cemented the Conejo A2 well, targeting multiple prospective reservoirs, including the Basal Tena and Hueyén.

The well discovered 41 feet of net reservoir with an average porosity of 14% in the Hueyén formation, suggesting a well-connected reservoir with high deliverability potential over the full Conejo structural trap. In addition, we also confirmed a new oil discovery at Chenangue One, which was a legacy well drilled in 1990 and suspended in 1992 that we re-entered to test the bypassed Basal Tena interval. It’s currently producing 600 barrels a day on jet pumps and has opened up new follow-up drilling opportunities on the eastern side of the block. With the delivery of the Conejo A2 well, Gran Tierra Energy has completed all of the exploration commitments in Ecuador, and we are now well-positioned to continue to increase production into the development phase and help sustain stable field output. At Cohembé, the waterflood program continues to deliver excellent results.

The production from the northern area has more than doubled, up roughly 135% from 2,800 barrels to 6,700 barrels a day. Total field production recently reached over 9,000 barrels a day, the highest since 2014. We are now executing the final six-well drilling program to continue to ramp the field production and extend the Cohembé field boundary, including an exploration well to the north as part of the agreed carry program under our contract extension, which we expect to complete by the end of the first half of 2026. In Canada, we drilled and brought two additional Lower Montney wells on stream in September, both performing at or above expectations. That brings our 2025 activity at Simonet to four gross or two net wells. Stepping back, what really stands out this quarter is the progress we’ve made in advancing our technical capabilities and field execution.

From the exploration success we had in Ecuador to optimizing mature waterfloods in Colombia and efficiently scaling our Canadian program, our focus remains on disciplined execution and continuous improvement to ensure our assets deliver strong value over time. As Ryan summarized, we had several unplanned production deferrals. Although our average production for the year will be at the lower end of our annual guidance, we’ll finish the year strong with an expected exit rate between 47,000 to 50,000 barrels of oil per day. I will now turn the call back to the operator, and Gary, Ryan, and I will be happy to take questions. Operator, please go ahead.

Shannon, Conference Call Coordinator, Gran Tierra Energy: Thank you. Ladies and gentlemen, we will now conduct a question-and-answer session for securities analysts. If you have a question, please press the star key followed by 11 on your touch-tone phone. You will then hear an automated message advising your hand is raised. Your questions will be polled in the order they are received. Please ensure you lift the handset if you’re using a speakerphone before pressing any keys. One moment, please, for your first question. Our first question comes from the line of David Round with Jefferies. Your line is now open.

David Round, Analyst, Jefferies: Thanks for the presentation, guys. First one, just on Soriente, please. You seem to have seen and experienced a very sudden production response there, I mean, positively. Great to see. Can you just talk about, though, please, just sort of what exactly has happened as that program has been going on over the course of this year? What are the new production? Is it due to new wells? What is waterflood? How sustainable is it, please?

Sebastien Morin, Chief Operating Officer, Gran Tierra Energy: Yes, I’ll take that one. In a phasing approach, really, it was the start of injection on the north pattern where we’re injecting essentially 5,000 barrels of water per day in that north pattern on Cohembé 25. The other catalyst was well upsized, so we had a few really key workovers. The one well just south of the pattern, Cohembé 20, was upsized, and that went from 500 barrels a day gross to over 2,000. That one’s included in the north pattern. Now, as pressure comes up and we continue to increase our injection, we’re seeing some really amazing performance from that sand. Just to recall, those are essentially Darcy sands, so the response is very quick.

David Round, Analyst, Jefferies: Okay. If I think about the production number you’ve put out there at the moment, how do we think about that just conceptually going into next year with continual drilling? Is that sort of a base, and we should be looking at higher than that?

Sebastien Morin, Chief Operating Officer, Gran Tierra Energy: I think that’s extremely fair, what you’ve just described. That’s exactly where we’re going. With the extra six wells that we’re putting into the field, we expect to continue to increment that production from here.

Ryan Ellson, Executive Vice President and Chief Financial Officer, Gran Tierra Energy: Production and reserves.

Sebastien Morin, Chief Operating Officer, Gran Tierra Energy: Production and reserves.

David Round, Analyst, Jefferies: Okay. Great. Just the second one, please. Just on the prepayment facility, how does that work in terms of availability once the repayments start?

Ryan Ellson, Executive Vice President and Chief Financial Officer, Gran Tierra Energy: Effectively, you draw the cash at the beginning, the entire amount, the $150 million, and then just repay those funds over the course of the four years.

David Round, Analyst, Jefferies: Okay, over the course of four years, is it fairly linear in terms of how?

Ryan Ellson, Executive Vice President and Chief Financial Officer, Gran Tierra Energy: It is. It is. Effectively, every time we do a lift in Ecuador, we’ll pay back a portion of the money borrowed.

David Round, Analyst, Jefferies: Perfect. Understood. Thanks, guys.

Ryan Ellson, Executive Vice President and Chief Financial Officer, Gran Tierra Energy: Thanks.

Shannon, Conference Call Coordinator, Gran Tierra Energy: Thank you. Our next question comes from the line of Josef Schachter with Schachter Energy Research Services. Your line is now open.

Josef Schachter, Analyst, Schachter Energy Research Services: Good morning, guys. A couple of questions for me. Congratulations on getting Ecuador up to 6,000 in October. You have on slide 26 of your presentation that the potential could be between 11,000 and 19,000. Does that include the last two wells, which have been very encouraging? Guidance potentially would be to the higher end. The question is, what timeline were you using to get to that? Do you need to put waterflood in? Do you have enough water? Maybe just give me a guidance of how Ecuador grows.

Ryan Ellson, Executive Vice President and Chief Financial Officer, Gran Tierra Energy: Yeah. Good morning, Josef. The answer to your question is the guidance on that slide does not include the Conejo discovery to the northwest. The guidance is based on waterflood of the Basal Tenan. We’re in a very good position here that we have a water source in the stacked pays that we have in the Hueyen and the T sand, and everything is in place to do that. We’re working through the field development plans with the ministry in Ecuador. Now that we’ve fulfilled all of our commitments this year on exploration in Ecuador, we’re moving to the development phase. That will start occurring next year during 2026.

Josef Schachter, Analyst, Schachter Energy Research Services: Okay. The debt issue, it seems to be the overhang. The market’s reaction today, down to a new 52-week low, disappointingly. Just for the levers, maybe, Ryan. Do we need $75, $80 Brent? Do we need Ecuador over 10,000, 11,000 BOE a day? Do we need some non-core sales of your non-operated assets in Canada? Where do you see getting that debt? Is a debt-to-one target something that will happen before the end of the decade? How do you see the levers to get there?

Ryan Ellson, Executive Vice President and Chief Financial Officer, Gran Tierra Energy: Yeah. No, that’s a great question. I think one of the things we wanted to emphasize in the press release and our open remarks is now that the exploration commitments and a lot of the Soriente commitments are behind us. It really sets us up the stage for generating free cash flow. We’re laser-focused on generating free cash flow in 2026 and beyond. I think if you look at this year’s capital program, there’s about $150 million in there between exploration and facility expansion and gas to power, etc. I think with that behind us, when we come up with our budget in mid-December, you’ll see the focus on free cash flow. We’ll continue to look at how to optimize the portfolios as far as asset sales and whatnot, but that will just be incremental deleveraging. Our base plan is deleveraging as much as possible through our base operations.

David Round, Analyst, Jefferies: Okay. In some of the cases like the drillers, Precision and Ensign, they kind of gave targets to the market and to investors, "We’re going to knock off $100 million, $150 million," and then they brag when they get there. Are you guys going to be willing to start throwing numbers like that so that people can see guideposts and, "Yeah, you’re heading in the right direction. Therefore, your valuation," which is trading at less than one time’s cash flow in Canadian dollars and much below your 1PP reserves that you show in your presentation, the new one at $1,951 U.S. Is that the kind of thing where we can show. The debt holders are now giving the equity value to the shareholders by doing something like that?

Ryan Ellson, Executive Vice President and Chief Financial Officer, Gran Tierra Energy: Absolutely. When we come out with our budget in December, there’ll be a clear roadmap.

David Round, Analyst, Jefferies: Okay. Super. Looking forward to seeing that. Thanks very much for taking my questions.

Ryan Ellson, Executive Vice President and Chief Financial Officer, Gran Tierra Energy: Great. Thank you.

Shannon, Conference Call Coordinator, Gran Tierra Energy: Gentlemen, there are no further questions at this time. Please continue.

Ryan Ellson, Executive Vice President and Chief Financial Officer, Gran Tierra Energy: Thank you, Dana. I’d once again like to thank everyone for joining us today. We look forward to speaking with you next quarter and updating you on our ongoing progress. Thank you.

Shannon, Conference Call Coordinator, Gran Tierra Energy: This concludes today’s conference. Thank you for your participation. You may now disconnect.

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