Release Date: November 04, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Gran Tierra Energy Inc (GTE, Financial) completed its acquisition of I Three Energy, diversifying its assets into Canada and increasing its reserves significantly.
- The acquisition added 253 net booked drilling locations and increased production by 18,000 barrels of oil equivalent per day.
- Gran Tierra's operating expenses decreased by 2% compared to the prior quarter, primarily due to lower workover costs.
- The company achieved a major milestone of over 1 million barrels of cumulative oil production in Ecuador, marking significant exploration success.
- Gran Tierra announced the renewal of its normal course issuer bid, reinforcing its commitment to share buybacks as a key component of shareholder returns.
Negative Points
- Gran Tierra's oil sales decreased by 9% from the prior quarter due to lower prices and wider oil differentials.
- The company's transportation expenses decreased by 31% due to shorter distance delivery points, but this was offset by higher lifting costs in Ecuador.
- Gran Tierra's net income for the quarter was only $1 million, indicating limited profitability.
- The company's cash balance is expected to decrease by approximately $170 million due to funding the I Three acquisition.
- Gran Tierra had to pause its share buyback program due to the acquisition, resulting in only 370,000 shares repurchased during the quarter.
Q & A Highlights
Q: With the recent acquisition of I Three Energy, what is Gran Tierra's tax position as we head into 2025?
A: Ryan Ellson, CFO, explained that cash taxes were higher due to oil prices in Colombia, but they expect a decrease in the fourth quarter. In Canada, the tax regime is favorable, and they anticipate a lower overall tax rate in 2025 compared to 2024.
Q: How does the company view its share buyback program in light of the recent acquisition?
A: Ryan Ellson stated that the buyback program is funded through free cash flow, and they plan to continue it, especially when trading at a discount to PDP, as it is a good way to return capital to shareholders.
Q: What was the motivation behind the acquisition of I Three Energy, and how will it affect capital allocation moving forward?
A: Gary Guidry, CEO, noted that the acquisition provides a platform for growth in Western Canada, diversifying both oil and gas assets. The focus will be on developing new discoveries in Ecuador, mature water floods in Colombia, and oil opportunities in Canada.
Q: Can you provide insights into the 2024 guidance and expectations for 2025?
A: Ryan Ellson confirmed they are comfortable with the 2024 guidance range and plan to release 2025 guidance in early January. They expect Canada to be cash flow neutral, with capital allocation leading to increased production.
Q: How does Gran Tierra plan to manage its capital allocation given the high yield on its 2029 bonds?
A: Ryan Ellson mentioned they are comfortable with their bond amortization plans, focusing on asset longevity and investing in the ground. They plan to fund upcoming maturities with cash on hand and free cash flow.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
