Earnings call transcript: Gran Tierra Energy reports Q1 2025 performance boost

Gran Tierra Energy Inc. reported a significant increase in production and improved financial metrics for the first quarter of 2025. The company experienced a 14% rise in average working interest production compared to the previous quarter, alongside a notable reduction in net loss. Despite these improvements, the company’s stock saw a slight dip of 0.23% in recent trading. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value calculation, though it has declined over 50% in the past year.

Key Takeaways

• Production surged by 14% from the previous quarter.
• Net loss narrowed from $34 million to $19 million.
• Adjusted EBITDA increased to $85 million.
• Stock price decreased by 0.23% in recent trading.

Company Performance

Gran Tierra Energy’s Q1 2025 results show a strong operational performance, with a 14% increase in production from Q4 2024 and a 45% increase year-over-year. The company continues to focus on expanding its production capabilities across Ecuador, Colombia, and Canada, while maintaining disciplined financial management.

Financial Highlights

• Revenue from oil sales: $171 million, an 8% increase year-over-year.
• Net loss: $19 million, improved from $34 million in the prior quarter.
• Adjusted EBITDA: $85 million, up from $76 million in Q4 2024.
• Funds flow from operations: $55 million ($1.55 per share).
• Cash balance: $77 million.
• Total debt: $760 million; Net debt: $683 million.

Outlook & Guidance

Gran Tierra Energy is optimistic about its future, with production guidance set between 47,000 and 53,000 barrels of oil equivalent per day. InvestingPro subscribers have access to 10+ additional exclusive insights about Gran Tierra, including detailed analysis of its financial health, profitability metrics, and growth potential. The Pro Research Report offers comprehensive analysis of what really matters for investors considering this energy stock. The company plans to continue its drilling program in Acordionero and focus on regional development in Ecuador over the next two to three years. Debt reduction and a modest share buyback program remain priorities.

Executive Commentary

• Sebastian Moran, COO: "Gran Tierra is well positioned to generate sustainable value while remaining resilient amid commodity price volatility."
• Gary Guidry, CEO: "We are submitting field development plans with the government and the intention would be over the next two to three years to get to that plateau production."
• Ryan Elson, CFO: "We reduced our gross debt by $27 million. So the vast majority of cash flow did go to debt reduction."

Risks and Challenges

• Commodity Price Volatility: Fluctuations in oil and gas prices could impact revenue.
• Debt Levels: While reduced, the company’s debt remains significant.
• Operational Risks: Delays or failures in drilling and production could affect output.
• Regulatory Changes: New regulations in key markets could impact operations.

Gran Tierra Energy’s Q1 2025 performance highlights its operational efficiency and strategic focus on growth and debt management. However, market reactions and future commodity price movements are critical factors to watch.

Full transcript - Gran Tierra Energy Inc (GTE) Q1 2025:

Shannon, Conference Call Coordinator, Gran Tierra Energy: Good morning, ladies and gentlemen, and welcome to Gran Tierra Energy’s Results Conference Call for the First Quarter twenty twenty five. 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 questions.

I would like to remind everyone that this conference call is being webcast and recorded today, 05/02/2025 at 11:00AM Eastern Time. Today’s discussion may include certain forward looking information as well as certain non GAAP financial measures. Please refer to the earnings and operational update press release we issued yesterday for important disclaimers with regard to this information and reconciliations of any non GAAP measures discussed on today’s call. Any production volumes are based on working interest sales before royalties. Finally, this earnings call is the property of Gran Tierra Energy Inc.

Any 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. Mr. Guidry, please go ahead.

Gary Guidry, President and Chief Executive Officer, Gran Tierra Energy: Thank you, operator. Good morning, and thanks for joining us for Gran Tierra’s first quarter twenty twenty five results conference call. My name is Gary Guidry, President and Chief Executive Officer, and with me today are Ryan Elson, our executive vice president and chief financial officer, and Sebastian Moran, our chief operating officer. On Thursday, 05/01/2025, we issued a press release that included detailed information about our first quarter twenty twenty five results, which is available on our website. Ryan and Sebastian will now make a few brief comments, and then we will open the line for questions.

Immediately following the earnings call at 10AM Mountain Time, twelve noon Eastern Time, we will be holding our Annual General Meeting of of Shareholders. During the meeting, I will give a brief overview of Gran Tierra, where the company is heading. I we invite you to join us after this call. Dial in instructions can be found on our website. I will now turn the call over to Ryan, who will discuss key financial highlights from our first quarter results.

Ryan Elson, Executive Vice President and Chief Financial Officer, Gran Tierra Energy: Good morning everyone. Our first quarter performance reflects strong operational execution and disciplined financial management. Our front loaded 2025 capital program, which had up to five rigs active during the quarter, delivered record drilling times and significant cost efficiency across all our key assets that Sebastian will discuss. Gran Tierra achieved first quarter twenty twenty five average working interest production of approximately 46,650 BOE per day, which is 14% higher than fourth quarter twenty twenty four and forty five percent higher year over year due to the recognition of three full months of production from Canada and positive exploration well results in Ecuador. During the first quarter of twenty twenty five, Gran Tier incurred a net loss of $19,000,000 compared to a net loss of $34,000,000 in the prior quarter.

The company generated adjusted EBITDA of 85,000,000 versus $76,000,000 in the prior quarter and 95,000,000 in the first quarter of twenty twenty four. ’12 month trailing net debt net debt to adjusted EBITDA was 1.9 times. However, this only accounts for five months of Canadian adjusted EBITDA, and we continue to have long term target of one times. Funds flow from operations was 55,000,000 or a dollar 55 per share, up 25% from Q4 twenty twenty four and down 26% from the first quarter of twenty twenty four because of lower oil prices. Gran Tierra capital expenditures of $95,000,000 were higher than the $79,000,000 in the prior quarter and $55,000,000 in the first quarter of twenty twenty four as a result of the addition of the Canadian Development Program, an active exploration, Ecuador exploration program and development activities in the Cohembi field during the quarter.

During the quarter, the company had three rigs active in Canada, One in Ecuador and one in Colombia. Currently the company has one rig active. At quarter end, Gran Tierra had cash balance of 77,000,000, total debt of $760,000,000 and net debt of $683,000,000. During the quarter, we repaid at maturity the remaining principal of our 6.25% senior notes due in 2025 in the amount of $25,000,000 and repurchased 2,000,000 of our 9.5% senior notes due in 2029, reducing gross debt by $27,000,000. In addition to the $77,000,000 cash on hand as at 03/31/2025, GranTier currently has approximately 110,000,000 in undrawn credit facilities.

This includes revolving credit facility in Canada with a borrowing base of 100,000,000 with available commitment of 50,000,000. On 04/16/2025, the company announced an additional 75,000,000 reserve based lending facility in Colombia with a final maturity in thirty six months from the closing date. In terms of share buybacks, GranTier repurchased approximately 450,000 shares during the quarter. From 01/01/2023 to 04/29/2025, the company repurchased approximately 5,200,000.0 shares or 15 percent of shares issue outstanding at 01/01/2025 from free cash flow. Gran Tier generated oil sales of $171,000,000 which is up 8% from the first quarter of twenty twenty four and up 16% from the prior quarter primarily due to higher sales volumes.

On a per BOE basis, operating expenses decreased by 3% when compared to the first quarter of twenty twenty four and the prior quarter. We continue to make significant gains to reduce operating costs through efficiencies and scale. Financial and operationally, Gran Tierra delivered a strong start to 2025, demonstrating record production, enhanced capital efficiency, meaningful debt reduction, increased financial flexibility through new credit facilities, and continued focus on shareholder returns through share repurchases. I’ll now turn the call over to Sebastien to discuss our operational highlights from our first quarter results.

Sebastian Moran, Chief Operating Officer, Gran Tierra Energy: Thanks Ryan. Good morning everyone. Operationally, Gran Tierra is off to a strong start for 2025. As Ryan mentioned, Gran Tierra front loaded its capital program during the first quarter, operating up to five rigs across the portfolio while delivering record times and cost efficiencies across our key assets. In Ecuador, we successfully drilled two additional oil discoveries in Ecuador, the Iguana B 1 and the Iguana B 2 wells on the Iguana block.

The combined wells have an average oil production rate over thirty days of approximately 1,684 barrels of oil per day from the Usan formation. These two additional wells mark our tenth discoveries in country since we entered Ecuador in 2019. The Iguana V1 weld was drilled and completed in record time and under budget, establishing a new pacesetter well in Gran Tierra’s Ecuador exploration campaign. The drilling rig has been stacked on the Iguana Pad pending mobilization to the new Conejo pad on the Tirapa block to resume exploration drilling during the third quarter of twenty twenty five. The drilling of the final two Conejo wells will mark the fulfillment of all of Gran Tierra’s exploration commitments in Ecuador.

In Colombia, we successfully drilled the first three of five wells from the Guilhime North pad during the quarter, and all the wells were delivered under budget and 60% faster than most recent well program executed by the previous operator. We are currently in the process of drilling the remaining two wells of the program. Once we complete the Cohembi wells, the rig will move to the Costayaco pad to commence a three well development program during the second quarter. By the end of the first quarter, the civil electrical and mechanical field works at Cohembi reached 100 mechanical completion. This project was initiated to facilitate the processing of new production from the Cohembi North Pad at the Cohembi Central Processing Facility.

At Acordionero, the optimization of the field continues through ongoing waterflood expansion, which includes facility enhancements, electrical submersible pump upsizing, injector conversions, and upgrades to the gas to power generation system. These initiatives are focused on reducing unit costs, offsetting natural declines and improving overall recovery factors. In terms of production, the field continues to strongly perform with average production of 13,824 barrels of oil per day in the first quarter of twenty twenty five. This represents a 2% increase from the fourth quarter of twenty twenty four despite no wells being drilled since the first quarter of twenty twenty four. Current production is approximately 14,500 barrels of oil per day, up 5% from Q1, reflecting the strong reservoir response to the execution of our first quarter waterflood management optimization program.

With these encouraging results, the company continues to see significant development potential at Acordionero and is planning another drilling program of eight to 10 wells in 2026 targeting high oil saturation, unswept infill locations. Finally, moving to Canada with our JV partner Logan Energy, we successfully drilled and completed two lower Montney wells at Simonette. These two wells were brought on stream and completed with a similar optimized Lower Montney completion design as an offset well drilled in 2022. After twenty one days since being placed on production, the average gross production per well was 674 barrels of oil per day, thirteen barrels per day of NGLs, and 767,000 cubic feet of gas per day, totaling 814 barrels of oil equivalent per day at 84% liquids. Grand Tierra holds 50% working interest in the wells as they continue to clean up.

This early production performance surpasses the prior offset well by 80% for the same period and are exceeding their budget type curves. The company also successfully acquired 21 secondtions of prospective land in Central Alberta along the Nisku Fairway in early March, which adds over 50 high quality opportunities to our drilling inventory. At Clearwater, we participated in a successful drilling of two gross 0.5 net wells during the quarter, and both wells are estimated to be on stream imminently. The first well drilled was a four legged injector to support a waterflood pilot in the Martin Hills block, potentially increasing reserves based off area offsetting waterflood results. The second well, non op, with 14 legs, was drilled in sealed block to test the productivity of heavy oil in the Blue Sky formation.

Gran Tierra is well positioned to generate sustainable value while remaining resilient amid commodity price volatility. I’ll now turn the call back to the operator and we will be happy to answer any 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 If you have a question, please press the star key followed by one one on your touch tone phone. You will then hear an automated message advising your hand is raised. Your questions will be pulled in the order they are received. Our first question comes from the line of Rob Mann with RBC Capital Markets.

Your line is now open.

Rob Mann, Analyst, RBC Capital Markets: Hi there. Good morning and thanks for taking my question. The first one for me just around Acordionero and your waterflood optimization program. You have a number of initiatives underway and it seems like the production response has been strong so far. Just curious if you could frame the remaining work to be done there and expectations after these initial results.

Sebastian Moran, Chief Operating Officer, Gran Tierra Energy: Rob, I think it’s more continuing the same, the daily surveillance going back and looking and and really optimizing each well in each sector. We’ve got the field broken into five sectors. And so as as we see opportunities, we’ve got quick cycle times on taking the workover rig and slick line units over to manage that.

Rob Mann, Analyst, RBC Capital Markets: Great. Thanks. That’s that’s helpful. And then just the last one here quickly. Just wondering if you could discuss your acquisition of the twenty one secondtions of land in in Central Alberta.

What you like there following your interest in the Canada with the I three acquisition?

Unidentified Speaker: Yeah. We

Gary Guidry, President and Chief Executive Officer, Gran Tierra Energy: it’s an ISKU play. We drilled a three mile horizontal fourth quarter and first quarter of this year. Fracked it is currently on production cleaning up. We’re quite quite excited about the play and we believe that with with some appraisal that that it has great potential. We we will be talking to other operators in the area to to look at joint venturing because it is quite a large play, but but early days and quite exciting.

Rob Mann, Analyst, RBC Capital Markets: That’s great. That’s all for me. Thanks, guys.

Shannon, Conference Call Coordinator, Gran Tierra Energy: Thank you. Our next question comes from the line of Alejandra Andrade with JPM. Your line is now open.

Alejandra Andrade, Analyst, JPM: Hi. Thank you so much for taking my question. I had a couple of questions. First, just wondering on working capital because I see a big inflow this quarter. Just wondering if we should see any reversal in the coming quarters or that should stay stable throughout the rest of the year.

Then also, second question, I just wanted to see in terms of gas prices in Canada, how are those behaving and if anything had changed from your previous outlook? Thank you.

Ryan Elson, Executive Vice President and Chief Financial Officer, Gran Tierra Energy: Yes, great. With respect to working capital, there was a build in working capital, and that was just a function of a heavy capital program, so you will see some of that unwind in the second quarter. Obviously, we’re doing it on accrual basis and so we just haven’t paid all the vendors up to that point. So you will see some of that unwind in the second quarter. And with respect to gas prices, we’re pretty comfortable with our base case budget for gas prices.

They’re holding in there quite well and we do have the strong hedge program. We’re quite comfortable with the guidance on Canadian gas prices.

Alejandra Andrade, Analyst, JPM: Thank you.

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

Unidentified Speaker: Thanks very much. First, congratulations on the great first quarter compared to fourth and further improvement to 48,400, so that’s terrific. I have two areas I wanted to talk about. First was on slide 27 of your presentation, you talk about the opportunities in Ecuador, current production from 1,500 to February, the other one two to 02/2005, and you talk about upside 20 to thirty and ten to 15. Are we talking two years, five years?

How many wells? This probably is one for Sebastian. How many years are we looking out for this upside potential?

Gary Guidry, President and Chief Executive Officer, Gran Tierra Energy: I’ll start with the timing, Joseph, and then let Sebastian, add to that. Timing, because we have a % and we operate, we control the pace. We are submitting field development plans with the government and the intention would be over the next two to three years to get to that plateau production. Depending on volatility, depending on oil prices, these great reservoirs and for us it’s really a regional development. As you’ve seen certainly across the Tarampa and Chenange block, we have numerous discoveries and when we finish our exploration at the end of this year with the Conejo, we’ll we’ll have a good sense of what that regional development looks like so that we can put in power, put in infrastructure, and ramp production.

Sebastian Moran, Chief Operating Officer, Gran Tierra Energy: Yeah. And just to follow-up on that in terms of flexibility on timing, our exploration environmental impact assessment license gives us full flexibility, and we’re kicking off the development DIAs as well. So those two kind of overlap and allow us flexibility to really move ahead with the development as needed.

Unidentified Speaker: Okay, super. Next question, with you at $48,400 your guidance is 47,000 to $53,000 in your base case, well, all three cases. Can you give us some guidance or a little more illumination on, given you knew you were at 48.4, what could happen to get you to the lower end of 47, And what are you looking at for the upside? What scenarios need to develop to give you those ranges?

Gary Guidry, President and Chief Executive Officer, Gran Tierra Energy: Yeah. Prices is the main thing that we watch because we have operating control. Watching what what prices are doing here. And and the the earlier question to to Ryan about natural gas, we’re we’re very bullish on the long term outlook for natural gas with realistic expectations of of of pricing, you know, the 3 to $5 type range. And we have a tremendous inventory.

And so we we will be watching that closely this year and next over the next three years on on how we how we manage that. And so we’re we’re very comfortable with our guidances out there, and we’ll adjust accordingly with with what what global prices do.

Unidentified Speaker: Super. Well, thanks very much for taking my questions and congratulations on the growth profile that you’re exhibiting.

Ryan Elson, Executive Vice President and Chief Financial Officer, Gran Tierra Energy: Our

Shannon, Conference Call Coordinator, Gran Tierra Energy: next question comes from the line of Isabella Pacheco with Bank of America. Your line is now open.

Alejandra Andrade, Analyst, JPM: Hi team, thank you for taking my question. Could you please give us an update on your current oil price hedging strategy? Thanks.

Ryan Elson, Executive Vice President and Chief Financial Officer, Gran Tierra Energy: Yeah, we continue to have the same strategy. Looking our objective is to hedge 30% to 50% out six months out and then 20% to 30% out the remaining six months. We have a pretty good hedge position in place right now, and we are looking at increasing our hedge position to meet those targets.

Alejandra Andrade, Analyst, JPM: Okay. Thank you very much.

Rob Mann, Analyst, RBC Capital Markets: Thank

Shannon, Conference Call Coordinator, Gran Tierra Energy: Thank you. Our next question comes from the line of Diego Espinosa with BTG Pactual. Your line is now open. Diego, your line is open. Please check your mute button.

Our next question comes from the line of Rodrigo Sanguzza with Santander Asset Management. Your line is now open.

Joseph Schachter, Analyst, Searcy: Hi. Thank you for taking my questions. So I have a couple. First, on CapEx. And I believe you addressed this question when you were talking about the working capital reversal.

But there’s a €27,000,000 gap between the reported CapEx in the MD and A and the one in the cash from investing activities. Is this difference booked in accounts payable?

Ryan Elson, Executive Vice President and Chief Financial Officer, Gran Tierra Energy: Yeah. In one of the notes in the financial statements, have the breakdown on that. It really is if you take our capital expenditures left the positive change in working capital, non cash working capital, that will get you to the 69 compared to the 100.

Joseph Schachter, Analyst, Searcy: Okay, perfect. And the second question is on capital allocation. So you continue share buybacks and also repurchase some bonds this quarter. While I understand you view the shares as undervalued, could part of the recent stock performance reflect maybe market concerns about solvency? And in that context, how do you weigh preserving cash versus additional services?

Ryan Elson, Executive Vice President and Chief Financial Officer, Gran Tierra Energy: Yeah, it’s a good question. I think if you look at the quarter, we reduced our gross debt by 27,000,000. So the vast majority of cash flow did go to debt reduction and so we’re laser focused on continuing to reduce debt with a modest share buyback program. So we’re very dynamic and so we’re always consistently looking at our capital allocation and then we’re in the process of doing that right now with the recent volatility.

Joseph Schachter, Analyst, Searcy: Okay. Maybe is any portion of the buyback program intended to offset dilution from equity based compensation and maybe specifically performance based awards?

Ryan Elson, Executive Vice President and Chief Financial Officer, Gran Tierra Energy: No, no, it’s really just we believe, you know, if you look at where we trade on a 1P basis, we have a 1P NAV of around $20 US and 2P 40,000,000. So it’s just part of our capital allocation. We think that’s a great investment for the company, for all our stakeholders.

Joseph Schachter, Analyst, Searcy: Thank you. That’s very helpful. That’s all for me.

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

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

Gary Guidry, President and Chief Executive Officer, Gran Tierra Energy: I would like to once again thank everyone for joining us today. We look forward to speaking with you over the next quarter and update you on our ongoing progress. Please join us for our annual general meeting of stockholders, which will commence at 10AM Mountain Time, twelve noon Eastern Time. I will give a brief overview of Gran Tierra and where the company is heading. Dial in instructions can be found on our website.

Thank you.

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

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