CALGARY, Alberta, Aug. 02, 2018 (GLOBE NEWSWIRE) -- Gran Tierra Energy Inc. ("Gran Tierra" or the "Company") (NYSE American:GTE)(NYSE MKT:GTE)(TSX:GTE) today announced the Company's financial and operating results for the second quarter ended June 30, 2018 ("the Quarter"). All dollar amounts are in United States ("U.S.") dollars unless otherwise indicated. Production amounts are on an average working interest before royalties ("WI") basis unless otherwise indicated. Per barrel ("bbl") of oil equivalent ("BOE") amounts are based on WI sales before royalties. For per BOE amounts based on net after royalty ("NAR") production, see Gran Tierra's Quarterly Report on Form 10-Q filed August 2, 2018.
Key Highlights
1 Net debt is defined as face value of debt (excluding debt issuance costs), less cash and cash equivalents. Funds flow from operations and earnings before interest, taxes and depletion, depreciation and accretion ("DD&A") ("EBITDA") are non-GAAP measures and do not have standardized meanings under generally accepted accounting principles in the United States of America ("GAAP"). Refer to "Non-GAAP Measures" in this press release.
Message to Shareholders
Gary Guidry, President and Chief Executive Officer of Gran Tierra, commented: "During the second quarter of 2018, our high quality, operated, diversified suite of assets in Colombia continued to deliver strong operational and financial performance with record high oil production. Gran Tierra’s strategy is focused on economic returns with an emphasis on profitable production and reserves growth to create long term shareholder value. With our large resource base and drilling inventory, low base declines and high netback production, we continued to demonstrate this Quarter that Gran Tierra has created a sustainable business model, and we expect the revised 2018 capital program to be fully funded by forecasted cash from operating activities in 2018.
Acordionero continues to be Gran Tierra's self-funding growth engine in terms of material economic production increases. During the first half of 2018, our MMV drilling program also delivered exciting results at the Ayombero-1 well, which we believe may have opened up an exciting new front for appraisal and development in the La Luna conventional carbonate play. In the Putumayo Basin, we are also highly encouraged by recent development drilling in the sandstone reservoirs of Gran Tierra's legacy Costayaco field.
After our successful first half of 2018, there are multiple catalysts in the second half of 2018:
Our exploration campaign is designed to test the majority of our large portfolio of unrisked mean prospective resources of 1.5 billion BOE1, including our dominant Putumayo Basin position in the A-Limestone, other carbonates and the N Sand oil play fairways, as well as the La Luna carbonate oil play in the MMV Basin.
On behalf of our Board of Directors and the team at Gran Tierra, I want to thank all of our stakeholders for their continued support. We believe that our focused strategy continues to deliver results on several fronts in the multi-horizon, proven hydrocarbon producing basins of Colombia. Gran Tierra is well-positioned for an exciting year of ongoing profitable growth through the rest of 2018."
1 Based on the Company's 2017 year-end estimated reserves and prospective resources as evaluated by the Company's independent qualified reserve engineer McDaniel & Associates Consultants Ltd. in reports with effective dates of December 31, 2017.
Record Company Production
Operational Update
Well | Timeframe | Production (bopd) | Water Cut | GOR (scf/bbl) | Producing Sands | ||||
CYC-30 | June 2018 | 1,491 | 7 | % | 82 | U, Caballos | |||
CYC-31 | June 2018 | 210 | 88 | % | 31 | U, T, Caballos | |||
CYC-32 | July 2018 | 382 | 89 | % | 530 | U, T, Caballos | |||
CYC-33 | June 2018 | 740 | 62 | % | 228 | N, U, T, Caballos | |||
CYC-35i | July 16-25, 2018 | 296 | 13 | % | 31 | Caballos |
1 Operating netback and free cash flow are non-GAAP measures and do not have a standardized meaning under generally accepted accounting principles in the United States of America ("GAAP"). Refer to "Non-GAAP Measures" in this press release.
2 Assigned by the Company's independent qualified reserve evaluator McDaniel & Associates Consultants Ltd. as of April 30, 2018.
Strong Financial Performance in the Quarter
1 Funds flow from operations and operating netback are non-GAAP measures and do not have standardized meanings under generally accepted accounting principles in the United States of America ("GAAP"). Refer to "Non-GAAP Measures" in this press release.
Financial and Operational Highlights (all amounts in $000s, except per share and BOE amounts)
Three Months Ended June 30, | Six Months Ended June 30, | Three Months Ended March 31 | |||||||||||||||
2018 | 2017 | 2018 | 2017 | 2018 | |||||||||||||
Net Income (Loss) | $ | 20,300 | $ | (6,807 | ) | $ | 38,161 | $ | 5,964 | $ | 17,861 | ||||||
Per Share - Basic and Diluted | $ | 0.05 | $ | (0.02 | ) | $ | 0.10 | $ | 0.01 | $ | 0.05 | ||||||
Oil and Gas Sales | $ | 163,446 | $ | 96,128 | $ | 301,674 | $ | 190,787 | $ | 138,228 | |||||||
Operating Expenses | (35,059 | ) | (27,208 | ) | (61,324 | ) | (51,145 | ) | (26,265 | ) | |||||||
Transportation Expenses | (6,522 | ) | (6,492 | ) | (13,519 | ) | (13,434 | ) | (6,997 | ) | |||||||
Operating Netback(1) | $ | 121,865 | $ | 62,428 | $ | 226,831 | $ | 126,208 | $ | 104,966 | |||||||
G&A Expenses Before Stock-Based Compensation | $ | 6,604 | $ | 7,610 | $ | 14,586 | $ | 15,173 | $ | 7,982 | |||||||
G&A Stock-Based Compensation | 6,609 | 1,903 | 9,787 | 3,052 | 3,178 | ||||||||||||
G&A Expenses, Including Stock Based Compensation | $ | 13,213 | $ | 9,513 | $ | 24,373 | $ | 18,225 | $ | 11,160 | |||||||
EBITDA(1) | $ | 102,278 | $ | 41,634 | $ | 190,866 | $ | 103,172 | $ | 88,588 | |||||||
Funds Flow from Operations(1) | $ | 94,549 | $ | 50,920 | $ | 169,297 | $ | 95,946 | $ | 74,748 | |||||||
Capital Expenditures | $ | 84,394 | $ | 57,865 | $ | 157,088 | $ | 104,025 | $ | 72,694 | |||||||
Average Daily Volumes (BOEPD) | |||||||||||||||||
WI Production Before Royalties | 35,400 | 31,437 | 35,239 | 30,663 | 35,075 | ||||||||||||
Royalties | (7,202 | ) | (5,014 | ) | (7,045 | ) | (5,051 | ) | (6,886 | ) | |||||||
Production NAR | 28,198 | 26,423 | 28,194 | 25,612 | 28,189 | ||||||||||||
Increase in Inventory | (296 | ) | (140 | ) | (639 | ) | (61 | ) | (986 | ) | |||||||
Sales | 27,902 | 26,283 | 27,555 | 25,551 | 27,203 | ||||||||||||
Royalties, % of WI Production Before Royalties | 20 | % | 16 | % | 20 | % | 16 | % | 20 | % | |||||||
Per BOE | |||||||||||||||||
Brent | $ | 74.90 | $ | 50.92 | $ | 71.04 | $ | 52.79 | $ | 67.18 | |||||||
Quality and Transportation Discount | (10.52 | ) | (10.73 | ) | (10.55 | ) | (11.53 | ) | (10.72 | ) | |||||||
Royalties | (13.17 | ) | (6.50 | ) | (12.21 | ) | (6.85 | ) | (11.25 | ) | |||||||
Average Realized Price | 51.21 | 33.69 | 48.28 | 34.41 | 45.21 | ||||||||||||
Transportation Expenses | (2.04 | ) | (2.28 | ) | (2.16 | ) | (2.42 | ) | (2.29 | ) | |||||||
Average Realized Price Net of Transportation Expenses | 49.17 | 31.41 | 46.12 | 31.99 | 42.92 | ||||||||||||
Operating Expenses | (10.89 | ) | (9.50 | ) | (9.74 | ) | (9.20 | ) | (8.55 | ) | |||||||
Operating Netback(1) | 38.28 | 21.91 | 36.38 | 22.79 | 34.37 | ||||||||||||
G&A Expenses | (2.07 | ) | (2.67 | ) | (2.33 | ) | (2.74 | ) | (2.61 | ) | |||||||
Equity Tax | — | — | — | (0.22 | ) | — | |||||||||||
Realized Foreign Exchange Loss | (0.11 | ) | — | (0.07 | ) | (0.18 | ) | (0.03 | ) | ||||||||
Realized Financial Instruments (Loss) Gain | (3.03 | ) | 0.16 | (2.48 | ) | 0.22 | (1.90 | ) | |||||||||
Interest Expense, Excluding Amortization of Debt Issuance Costs | (2.05 | ) | (0.95 | ) | (1.82 | ) | (0.94 | ) | (1.58 | ) | |||||||
Interest Income | 0.19 | 0.09 | 0.22 | 0.12 | 0.26 | ||||||||||||
Current Income Tax Expense | (1.51 | ) | (0.62 | ) | (2.74 | ) | (1.66 | ) | (4.02 | ) | |||||||
Cash Netback(1) | $ | 29.70 | $ | 17.92 | $ | 27.16 | $ | 17.39 | $ | 24.49 | |||||||
Share Information (000s) | |||||||||||||||||
Common Stock Outstanding, End of Period | 390,018 | 386,742 | 390,018 | 386,742 | 384,960 | ||||||||||||
Exchangeable Shares Outstanding, End of Period | 1,135 | 8,030 | 1,135 | 8,030 | 5,908 | ||||||||||||
Weighted Average Number of Common and Exchangeable Shares Outstanding - Basic | 391,054 | 398,585 | 391,173 | 398,795 | 391,294 |
1 Operating netback, EBITDA, , funds flow from operations and cash netback are non-GAAP measures and do not have a standardized meaning under generally accepted accounting principles in the United States of America ("GAAP"). Refer to "Non-GAAP Measures" in this press release for descriptions of these non-GAAP measures and reconciliations to the most directly comparable measures calculated and presented in accordance with GAAP.
Corporate Presentation:
Gran Tierra's Corporate Presentation has been updated and is available on the Company website at www.grantierra.com.
Conference Call Information:
Gran Tierra Energy Inc. will host its results conference call for the Quarter on Friday, August 3, 2018. Details of the conference call are as follows:
Date: | Friday, August 3, 2018 |
Time: | 11:00 a.m. Eastern Time (9:00 a.m. Mountain Time) |
North American participants call: | 1-844-348-3792 (Toll-Free) |
Outside of Canada & USA call: | 1-614-999-9309 |
Interested parties may also access the live webcast on the investor relations page of Gran Tierra’s website at www.grantierra.com. An archive of the webcast will be available on Gran Tierra’s website until August 10, 2018. In addition, an audio replay of the conference call will be available on Gran Tierra's website following the call until August 7, 2018. To access the replay, dial toll-free 1-855-859-2056 (North America), or 1-404-537-3406 (outside of Canada and USA), conference ID: 6399184.
Contact Information
For investor and media inquiries please contact:
Gary Guidry
Chief Executive Officer
Ryan Ellson
Chief Financial Officer
Rodger Trimble
Vice President, Investor Relations
403-265-3221
About Gran Tierra Energy Inc.
Gran Tierra Energy Inc. together with its subsidiaries is an independent international energy company focused on oil and natural gas exploration and production in Colombia. The Company is focused on its existing portfolio of assets in Colombia and will pursue new growth opportunities throughout Colombia, leveraging our financial strength. The Company’s common shares trade on the NYSE American and the Toronto Stock Exchange under the ticker symbol GTE. Additional information concerning Gran Tierra is available at www.grantierra.com. Information on the Company's website does not constitute a part of this press release. Investor inquiries may be directed to [email protected] or (403) 265-3221.
Gran Tierra's Securities and Exchange Commission filings are available on the SEC website at http://www.sec.gov and on SEDAR at http://www.sedar.com.
Forward-Looking Statements and Legal Advisories:
This press release contains opinions, forecasts, projections, and other statements about future events or results that constitute forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and financial outlook and forward-looking information within the meaning of applicable Canadian securities laws (collectively, "forward-looking statements"), which can be identified by such terms as “expect,” “plan,” “guidance,” “project,” “will,” “believe,” and other terms that are forward-looking in nature. Such forward-looking statements include, but are not limited to, the Company's expectations, capital program, future sources of funding for capital expenditures and guidance, including for certain future well results, production and reserves estimates, the Company’s strategies, the Company’s operations including planned operations, oil production, and the completion of certain infrastructure such as its gas to power projects and cost savings associated therewith.
Statements relating to “resources” are also deemed to be forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions, including that the resources described can be profitably produced in the future.
The forward-looking statements contained in this press release reflect several material factors and expectations and assumptions of Gran Tierra including, without limitation, that Gran Tierra will continue to conduct its operations in a manner consistent with its current expectations, the accuracy of testing and production results and seismic data, pricing and cost estimates (including with respect to commodity pricing and exchange rates), rig availability, the risk profile of planned exploration activities, the effects of drilling down-dip, the effects of waterflood and multi-stage fracture stimulation operations, the extent and effect of delivery disruptions, and the general continuance of current or, where applicable, assumed operational, regulatory and industry conditions including in areas of potential expansion, and the ability of Gran Tierra to execute its current business and operational plans in the manner currently planned. Gran Tierra believes the material factors, expectations and assumptions reflected in the forward-looking statements are reasonable at this time but no assurance can be given that these factors, expectations and assumptions will prove to be correct.
Among the important factors that could cause actual results to differ materially from those indicated by the forward-looking statements in this press release are: prices and markets for oil and natural gas are unpredictable and tend to fluctuate significantly; Gran Tierra’s operations are located in South America and unexpected problems can arise due to guerilla activity; technical difficulties and operational difficulties may arise which impact the production, transport or sale of our products; geographic, political and weather conditions can impact the production, transport or sale of our products; the risk that current global economic and credit conditions may impact oil prices and oil consumption more than Gran Tierra currently predicts; the ability of Gran Tierra to execute its business plan; the risk that unexpected delays and difficulties in developing currently owned properties may occur; the ability to replace reserves and production and develop and manage reserves on an economically viable basis; the timely receipt of regulatory or other required approvals for our operating activities; the failure of exploratory drilling to result in commercial wells; unexpected delays due to the limited availability of drilling equipment and personnel; the risk that current global economic and credit market conditions may impact oil prices and oil consumption more than Gran Tierra currently predicts, which could cause Gran Tierra to further modify its strategy and capital spending program; and the risk factors detailed from time to time in Gran Tierra’s periodic reports filed with the Securities and Exchange Commission, including, without limitation, under the caption "Risk Factors" in Gran Tierra's Annual Report on Form 10-K filed February 27, 2018 and its Quarterly Reports. These filings are available on the SEC website at http://www.sec.gov and on SEDAR at www.sedar.com. Although the current capital spending program and long term strategy of Gran Tierra is based upon the current expectations of the management of Gran Tierra, should any one of a number of issues arise, Gran Tierra may find it necessary to alter its business strategy and/or capital spending program and there can be no assurance as at the date of this press release as to how those funds may be reallocated or strategy changed.
All forward-looking statements included in this press release are made as of the date of this press release and the fact that this press release remains available does not constitute a representation by Gran Tierra that Gran Tierra believes these forward-looking statements continue to be true as of any subsequent date. Actual results may vary materially from the expected results expressed in forward-looking statements. Gran Tierra disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as expressly required by applicable securities laws. Gran Tierra’s forward-looking statements are expressly qualified in their entirety by this cautionary statement.
The estimates of future production set forth in this press release may be considered to be future-oriented financial information or a financial outlook for the purposes of applicable Canadian securities laws. Financial outlook and future-oriented financial information contained in this press release about prospective financial performance, financial position or cash flows are based on assumptions about future events, including economic conditions and proposed courses of action, based on management’s assessment of the relevant information currently available, and to become available in the future. These projections contain forward-looking statements and are based on a number of material assumptions and factors set out above. Actual results may differ significantly from the projections presented herein. These projections may also be considered to contain future-oriented financial information or a financial outlook. The actual results of Gran Tierra’s operations for any period will likely vary from the amounts set forth in these projections, and such variations may be material. See above for a discussion of the risks that could cause actual results to vary. The future-oriented financial information and financial outlooks contained in this press release have been approved by management as of the date of this press release. Readers are cautioned that any such financial outlook and future-oriented financial information contained herein should not be used for purposes other than those for which it is disclosed herein. The Company and its management believe that the prospective financial information has been prepared on a reasonable basis, reflecting management’s best estimates and judgments, and represent, to the best of management’s knowledge and opinion, the Company’s expected course of action. However, because this information is highly subjective, it should not be relied on as necessarily indicative of future results.
Non-GAAP Measures
This press release includes non-GAAP financial measures as further described herein. These non-GAAP measures do not have a standardized meaning under GAAP. Investors are cautioned that these measures should not be construed as alternatives to net income or loss or other measures of financial performance as determined in accordance with GAAP. Gran Tierra's method of calculating these measures may differ from other companies and, accordingly, they may not be comparable to similar measures used by other companies. Each non-GAAP financial measure is presented along with the corresponding GAAP measure so as to not imply that more emphasis should be placed on the non-GAAP measure.
Operating netback as presented is defined as oil and gas sales less operating and transportation expenses. See the table entitled Financial and Operational Highlights above for the components of consolidated operating netback and corresponding reconciliation. A reconciliation from oil and gas sales to operating netback for the MMV assets is as follows:
MMV assets - acquisition date until June 30, 2018 | ||||
(Thousands of U.S. Dollars) | ||||
Oil and natural gas sales | $ | 326,797 | ||
Operating expenses | (41,386 | ) | ||
Transportation expenses | (33,102 | ) | ||
Operating netback | $ | 252,309 |
Cash netback as presented is defined as net income or loss before DD&A expenses, asset impairment, deferred income tax expense, amortization of debt issuance costs, unrealized foreign exchange gains and losses, loss on sale, non-cash operating and G&A expenses and unrealized financial instruments gains and losses. Management believes that operating netback and cash netback are useful supplemental measures for investors to analyze financial performance and provide an indication of the results generated by Gran Tierra's principal business activities prior to the consideration of other income and expenses. A reconciliation from net income or loss to cash netback is as follows:
Three Months Ended June 30, | Six Months Ended June 30, | Three Months Ended March 31, | ||||||||||||||||||
Cash Netback (Non-GAAP) Measure ($000s) | 2018 | 2017 | 2018 | 2017 | 2018 | |||||||||||||||
Net income (loss) | $ | 20,300 | $ | (6,807 | ) | $ | 38,161 | $ | 5,964 | $ | 17,861 | |||||||||
Adjustments to reconcile net income (loss) income to cash netback | ||||||||||||||||||||
DD&A expenses | 46,607 | 31,813 | 86,068 | 58,689 | 39,461 | |||||||||||||||
Deferred income tax expense | 23,169 | 11,525 | 36,651 | 22,904 | 13,482 | |||||||||||||||
Amortization of debt issuance costs | 843 | 620 | 1,513 | 1,225 | 670 | |||||||||||||||
Unrealized foreign exchange loss (gain) | 1,583 | 3,895 | 539 | 1,076 | (1,044 | ) | ||||||||||||||
Loss on sale | 292 | 9,076 | 292 | 9,076 | — | |||||||||||||||
Non-cash operating expenses | 284 | 77 | 415 | 131 | 131 | |||||||||||||||
Non-cash G&A expenses | 6,609 | 1,903 | 9,787 | 3,052 | 3,178 | |||||||||||||||
Unrealized financial instruments (gain) loss | (4,898 | ) | (999 | ) | (3,769 | ) | (5,670 | ) | 1,129 | |||||||||||
Cash netback | $ | 94,789 | $ | 51,103 | $ | 169,657 | $ | 96,447 | $ | 74,868 |
EBITDA, as presented, is defined as net income or loss adjusted for depletion, depreciation and accretion (“DD&A”) expenses, interest expense and income tax expense or recovery. Management uses this financial measure to analyze performance and income or loss generated by our principal business activities prior to the consideration of how non-cash items affect that income or loss, and believes that this financial measure is also useful supplemental information for investors to analyze performance and our financial results. A reconciliation from net income or loss to EBITDA as follows:
Three Months Ended June 30, | Six Months Ended June 30, | Three Months Ended March 31, | ||||||||||||||||||
EBITDA - Non-GAAP Measure ($000s) | 2018 | 2017 | 2018 | 2017 | 2018 | |||||||||||||||
Net income (loss) | $ | 20,300 | $ | (6,807 | ) | $ | 38,161 | $ | 5,964 | $ | 17,861 | |||||||||
Adjustments to reconcile net income (loss) to EBITDA | ||||||||||||||||||||
DD&A expenses | 46,607 | 31,813 | 86,068 | 58,689 | 39,461 | |||||||||||||||
Interest expense | 7,375 | 3,331 | 12,870 | 6,426 | 5,495 | |||||||||||||||
Income tax expense | 27,996 | 13,297 | 53,767 | 32,093 | 25,771 | |||||||||||||||
EBITDA (non-GAAP) | 102,278 | 41,634 | 190,866 | 103,172 | 88,588 |
Funds flow from operations, as presented, is net income or loss adjusted for DD&A expenses, asset impairment, deferred tax expense, stock-based compensation expense, amortization of debt issuance costs, cash settlement of RSUs, unrealized foreign exchange gains and losses, financial instruments gains or losses, cash settlement of financial instruments and loss on sale. Management uses this financial measure to analyze performance and income or loss generated by our principal business activities prior to the consideration of how non-cash items affect that income or loss, and believes that this financial measure is also useful supplemental information for investors to analyze performance and our financial results. A reconciliation from net income or loss to funds flow from operations is as follows:
Three Months Ended June 30, | Six Months Ended June 30, | Three Months Ended March 31, | ||||||||||||||||||
Funds Flow From Operations (Non-GAAP) Measure ($000s) | 2018 | 2017 | 2018 | 2017 | 2018 | |||||||||||||||
Net income (loss) | $ | 20,300 | $ | (6,807 | ) | $ | 38,161 | $ | 5,964 | $ | 17,861 | |||||||||
Adjustments to reconcile net income (loss) to funds flow from operations | ||||||||||||||||||||
DD&A expenses | 46,607 | 31,813 | 86,068 | 58,689 | 39,461 | |||||||||||||||
Deferred tax expense | 23,169 | 11,525 | 36,651 | 22,904 | 13,482 | |||||||||||||||
Stock-based compensation expense | 6,893 | 1,980 | 10,202 | 3,183 | 3,309 | |||||||||||||||
Amortization of debt issuance costs | 843 | 620 | 1,513 | 1,225 | 670 | |||||||||||||||
Cash settlement of RSUs | (240 | ) | (183 | ) | (360 | ) | (501 | ) | (120 | ) | ||||||||||
Unrealized foreign exchange loss (gain) | 1,583 | 3,895 | 539 | 1,076 | (1,044 | ) | ||||||||||||||
Financial instruments loss (gain) | 4,768 | (1,447 | ) | 11,714 | (6,886 | ) | 6,946 | |||||||||||||
Cash settlement of financial instruments | (9,666 | ) | 448 | (15,483 | ) | 1,216 | (5,817 | ) | ||||||||||||
Loss on sale | 292 | 9,076 | 292 | 9,076 | — | |||||||||||||||
Funds flow from operations | $ | 94,549 | $ | 50,920 | $ | 169,297 | $ | 95,946 | $ | 74,748 |
Presentation of Oil and Gas Information
BOEs have been converted on the basis of 6 thousand cubic feet ("Mcf") of natural gas to 1 barrel of oil. BOEs may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 Mcf: 1 barrel is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. In addition, given that the value ratio based on the current price of oil as compared with natural gas is significantly different from the energy equivalent of six to one, utilizing a BOE conversion ratio of 6 Mcf: 1 barrel would be misleading as an indication of value.
This press release contains well-flow test results. Readers are cautioned that well-flow test results are not necessarily indicative of long-term performance or ultimate recovery.
Gran Tierra's Statement of Reserves Data and Other Oil and Gas Information on Form 51-101F1 dated effective as at December 31, 2017 (the "GTE 51-101F1"), which includes disclosure of its oil and gas reserves and other oil and gas information in accordance with NI 51-101 forming the basis of this press release, is available on SEDAR at www.sedar.com. See the GTE 51-101F1 for additional definitions regarding terms used in this press release.
Estimates of net present value contained herein do not necessarily represent fair market value of resources. Estimates of resources and future net revenue for individual properties may not reflect the same level of confidence as estimates of resources and future net revenue for all properties, due to the effect of aggregation.
This press release contains certain oil and gas metrics, including operating netback and cash netback, which do not have standardized meanings or standard methods of calculation and therefore such measures may not be comparable to similar measures used by other companies and should not be used to make comparisons. Such metrics have been included herein to provide readers with additional measures to evaluate the Company's performance; however, such measures are not reliable indicators of the future performance of the Company and future performance may not compare to the performance in previous periods.
Prospective Resources
Prospective Resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from undiscovered accumulations by application of future development projects. Prospective Resources have both an associated chance of discovery and a chance of development. Not all exploration projects will result in discoveries. The chance that an exploration project will result in the discovery of petroleum is referred to as the "chance of discovery." Thus, for an undiscovered accumulation the chance of commerciality is the product of two risk components-the chance of discovery and the chance of development. There is no certainty that any portion of the Prospective Resources will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of the Prospective Resources.
Estimates of the Company's Prospective Resources are based upon the GTE McDaniel Prospective Resources Report dated as at December 31, 2017. The estimates of Prospective Resources provided in this press release are estimates only and there is no guarantee that the estimated Prospective Resources will be recovered. Actual resources may be greater than or less than the estimates provided in this press release and the differences may be material. There is no assurance that the forecast price and cost assumptions applied by McDaniel in evaluating Gran Tierra's Prospective Resources will be attained and variances could be material. There is no certainty that any portion of the Prospective Resources will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of the Prospective Resources.
Estimates of Prospective Resources are by their nature more speculative than estimates of proved reserves and would require substantial capital spending over a significant number of years to implement recovery. Actual locations drilled and quantities that may be ultimately recovered from our properties will differ substantially. In addition, we have made no commitment to drill, and likely will not drill, all of the drilling locations that have been attributable to these quantities.
The Prospective Resources in this press release are classified as “mean” representing the arithmetic average of the expected recoverable volume. It is the most accurate single point representation of the volume distribution.
For a discussion of Gran Tierra’s interest in the Prospective Resources, the location of the Prospective Resources, the product type reasonably expected, the risks and level of uncertainty associated with recovery of the resources, the significant positive and negative factors relevant to the estimate of the Prospective Resources, a description of the applicable projects maturity subcategories and other relevant information regarding the Prospective Resources estimates, please see the GTE 51-101F1 available on SEDAR at www.sedar.com.
Estimates of the Company's prospective resources in the Ayombero Prospect are prepared by McDaniel in accordance with NI 51-101 and COGEH as of April 30, 2018.
Prospective resources within the Ayombero prospect are estimated based on 3D seismic and the drilling of the Ayombero-1 well, as well as production from the Chuira field. Prospective resources have been assigned to three horizons within the La Luna formation: the Galembo, the Pujamana and the Salada.
Positive factors for the Ayombero Prospective Resources include:
Negative factors for the Ayombero Prospective Resources include:
Chance of Discovery/Development
Through an evaluation of the risks that are relevant to the Ayombero prospective resources, which are described herein, McDaniel has determined that the chance of discovery is 67% (area with lower seal risks) and 37% (area with higher seal risks), with the chance of development at 90%. The corresponding chance of commerciality is 60% (lower seal risks) and 33% (higher seal risks).
Prospect Maturity
The prospective resources associated with the Ayombero structure have been sub-classified as a “prospect”. COGEH defines "prospect" as a potential accumulation within a play that is sufficiently well defined to present a viable drilling target.
Other Information
Given the uncertainty of discovery associated with such prospective resources, costs and timelines to production, as well as recovery technologies, cannot be determined at this time.
Disclosure of Resources Information and Cautionary Note to U.S. Investors
In this press release, the Company uses the term Prospective Resources. The SEC guidelines strictly prohibit the Company from including Prospective Resources in filings with the SEC. Investors are urged to consider closely the disclosures and risk factors in the Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and in the other reports and filings with the SEC, available from the Company's offices or website. These forms can also be obtained from the SEC website at www.sec.gov or by calling 1-800-SEC-0330.