UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| | | | | | | | |
☒ | | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2023March 31, 2024
or
| | | | | | | | |
☐ | | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from __________ to __________
Commission file number 001-34018
GRAN TIERRA ENERGY INC.
(Exact name of registrant as specified in its charter)
| | | | | | | | | | | | | | | | | |
Delaware | | 98-0479924 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
500 Centre Street S.E. |
| Calgary, | Alberta | Canada | T2G 1A6 | |
(Address of principal executive offices, including zip code) |
(403) 265-3221
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock, par value $0.01$0.001 per share | GTE | NYSE American |
Toronto Stock Exchange |
London Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of large accelerated filer, accelerated filer, smaller reporting company, and emerging growth company in Rule 12b-2 of the Exchange Act.
| | | | | | | | | | | |
Large accelerated filer | ☐ | Accelerated filer | ☒ |
Non-accelerated filer | ☐ | Smaller reporting company | ☐☒ |
| | Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
On July 26, 2023,April 29, 2024, 33,287,05531,332,184 shares of the registrant’s Common Stock, $0.01$0.001 par value, were issued.issued and outstanding.
Gran Tierra Energy Inc.
Quarterly Report on Form 10-Q
Quarterly Period Ended June 30, 2023March 31, 2024
Table of contents
| | | | | | | | |
| | Page |
PART I | Financial Information | |
Item 1. | Financial Statements | |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | |
Item 4. | Controls and Procedures | |
| | |
PART II | Other Information | |
Item 1. | Legal Proceedings | |
Item 1A. | Risk Factors | |
| | |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | |
Item 5. | Other information | |
Item 6. | Exhibits | |
SIGNATURES | |
| |
CAUTIONARY LANGUAGE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts included in this Quarterly Report on Form 10-Q regarding our financial position, estimated quantities and net present values of reserves, business strategy, plans and objectives of our management for future operations, covenant compliance, capital spending plans and benefits of the changes in our capital program or expenditures, our liquidity the impacts of the coronavirus (COVID-19) pandemicand financial condition and those statements preceded by, followed by or that otherwise include the words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “project,” “target,” “goal,” “plan,” “budget,” “objective,” “could,” “should,”“believe”, “expect”, “anticipate”, “intend”, “estimate”, “project”, “target”, “goal”, “plan”, “budget”, “objective”, “should”, or similar expressions or variations on these expressions are forward-looking statements. We can give no assurances that the assumptions upon which the forward-looking statements are based will prove to be correct or that, even if correct, intervening circumstances will not occur to cause actual results to be different than expected. Because forward-looking statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by the forward-looking statements. There are a number of risks, uncertainties and other important factors that could cause our actual results to differ materially from the forward-looking statements, including, but not limited to, our operations are located in South America and unexpected problems can arise due to guerilla activity, strikes, local blockades or protests; technical difficulties and operational difficulties may arise which impact the production, transport or sale of our products; other disruptions to local operations; global health events (including the ongoing COVID-19 pandemic);events; global and regional changes in the demand, supply, prices, differentials or other market conditions affecting oil and gas, including inflation and changes resulting from a global health crisis, geopolitical events, including the Russian invasion ofconflicts in Ukraine and the Gaza region, or from the imposition or lifting of crude oil production quotas or other actions that might be imposed by OPEC such as its recent decision to cut production and other producing countries and the resulting company or third-party actions in response to such changes; changes in commodity prices, including volatility or a prolonged decline in these prices relative to historical or future expected levels; the risk that current global economic and credit conditions may impact oil prices and oil consumption more than we currently predicts,predict, which could cause further modification of our strategy and capital spending program; prices and markets for oil and natural gas are unpredictable and volatile; the effect of hedges; the accuracy of productive capacity of any particular field; geographic, political and weather conditions can impact the production, transport or sale of our products; our ability to execute itsour business plan and realize expected benefits from current initiatives; 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 accuracy of testing and production results and seismic data, pricing and cost estimates (including with respect to commodity pricing and exchange rates); 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, equipment performance and costs; actions by third parties; 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; volatility or declines in the trading price of our common stock or bonds; the risk that we do not receive the anticipated benefits of government programs, including government tax refunds; our ability to comply with financial covenants in our credit agreement and indentures and make borrowings under any future credit agreement; and those factors set out in Part II, Item 1A “Risk Factors” in this Quarterly Report on Form 10-Q and Part I, Item 1A “Risk Factors” in our 20222023 Annual Report on Form 10-K (the “2022“2023 Annual Report on Form 10-K”), and in our other filings with the Securities and Exchange Commission (“SEC”) during the current fiscal year. The unprecedented nature of the current volatility in the worldwide economy and oil and gas industry makes it more difficult to predict the accuracy of forward-looking statements. The. This information included herein (other than in the context of the financial statements) is given as of the filing date of this Quarterly Report on Form 10-Q with the SECSecurities and Exchange Commission (“SEC”) and, except as otherwise required by the federal securities laws, we disclaim any obligation or undertaking to publicly release any updates or revisions to or to withdraw, any forward-looking statement contained in this Quarterly Report on Form 10-Q to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any forward-looking statement is based.
GLOSSARY OF OIL AND GAS TERMS
In this document, the abbreviations set forth below have the following meanings:
| | | | | |
bbl | barrel |
BOPD | barrels of oil per day |
NAR | net after royalty |
Sales volumes represent production NAR adjusted for inventory changes. Our oil and gas reserves are reported as NAR. Our production is also reported NAR, except as otherwise specifically noted as “working interest production before royalties”.
PART I - Financial Information
Item 1. Financial Statements
Gran Tierra Energy Inc.
Condensed Consolidated Statements of Operations (Unaudited)
(Thousands of U.S. Dollars, Except for Share and Per Share Amounts) | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | | Three Months Ended March 31, | |
| | | Three Months Ended March 31, | |
| | | Three Months Ended March 31, | |
| | 2023 | | 2022 | | 2023 | | 2022 | | | | | | 2024 | | 2023 |
OIL SALES (Note 6) | OIL SALES (Note 6) | $ | 157,902 | | | $ | 205,785 | | | $ | 302,092 | | | $ | 380,354 | |
| | |
EXPENSES | EXPENSES | |
EXPENSES | |
EXPENSES | |
Operating | |
Operating | |
Operating | Operating | 48,491 | | | 39,494 | | | 89,860 | | | 74,429 | |
Transportation | Transportation | 3,691 | | | 2,513 | | | 6,757 | | | 5,347 | |
Depletion, depreciation and accretion (Note 3) | Depletion, depreciation and accretion (Note 3) | 56,209 | | | 42,216 | | | 107,930 | | | 83,179 | |
| General and administrative (Note 9) | General and administrative (Note 9) | 9,866 | | | 9,836 | | | 22,562 | | | 22,172 | |
Foreign exchange loss (gain) | 4,707 | | | 2,722 | | | 6,409 | | | (1,003) | |
Derivative instruments loss (Note 9) | — | | | 5,172 | | | — | | | 26,611 | |
Other gain (Note 4) | — | | | — | | | (615) | | | — | |
General and administrative (Note 9) | |
General and administrative (Note 9) | |
Severance | |
Foreign exchange (gain) loss | |
Other gain | |
Interest expense (Note 4) | Interest expense (Note 4) | 12,678 | | | 12,194 | | | 24,514 | | | 24,322 | |
| | 135,642 | | | 114,147 | | | 257,417 | | | 235,057 | |
| INTEREST INCOME | INTEREST INCOME | 647 | | | — | | | 1,415 | | | — | |
INTEREST INCOME | |
INTEREST INCOME | |
INCOME BEFORE INCOME TAXES | INCOME BEFORE INCOME TAXES | 22,907 | | | 91,638 | | | 46,090 | | | 145,297 | |
| INCOME TAX EXPENSE | INCOME TAX EXPENSE | |
INCOME TAX EXPENSE | |
INCOME TAX EXPENSE | |
Current (Note 7) | |
Current (Note 7) | |
Current (Note 7) | Current (Note 7) | 19,757 | | | 25,425 | | | 37,363 | | | 46,252 | |
Deferred (Note 7) | Deferred (Note 7) | 13,975 | | | 13,241 | | | 29,252 | | | 31,954 | |
| | | | | 17,395 | |
NET AND COMPREHENSIVE LOSS | |
| | 33,732 | | | 38,666 | | | 66,615 | | | 78,206 | |
NET AND COMPREHENSIVE (LOSS) INCOME | $ | (10,825) | | | $ | 52,972 | | | $ | (20,525) | | | $ | 67,091 | |
NET LOSS PER SHARE (1) | |
NET LOSS PER SHARE (1) | |
NET LOSS PER SHARE (1) | |
- BASIC and DILUTED | |
- BASIC and DILUTED | |
- BASIC and DILUTED | |
| NET (LOSS) INCOME PER SHARE (1) | |
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC and DILUTED (Note 5) | |
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC and DILUTED (Note 5) | |
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC and DILUTED (Note 5) | |
| - BASIC | $ | (0.33) | | | $ | 1.44 | | | $ | (0.61) | | | $ | 1.82 | |
- DILUTED | $ | (0.33) | | | $ | 1.42 | | | $ | (0.61) | | | $ | 1.80 | |
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC (Note 5) | 33,299,505 | | | 36,857,138 | | | 33,872,270 | | | 36,798,229 | |
WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED (Note 5) | 33,299,505 | | | 37,423,360 | | | 33,872,270 | | | 37,297,769 | |
(1) Reflects ourCompany’s 1-for-10 reverse stock split that became effective May 5, 2023. See Note 5 in the notes to the condensed financial statements for further discussion.
(See notes to the condensed consolidated financial statements)
Gran Tierra Energy Inc.
Condensed Consolidated Balance Sheets (Unaudited)
(Thousands of U.S. Dollars, Except Share and Perfor Share Amounts)
| | | As at June 30, 2023 | | As at December 31, 2022 | | As at March 31, 2024 | | As at December 31, 2023 |
| ASSETS | ASSETS | | | |
ASSETS | |
ASSETS | | | | |
Current Assets | Current Assets | | | | Current Assets | | | |
Cash and cash equivalents (Note 10) | Cash and cash equivalents (Note 10) | $ | 68,529 | | | $ | 126,873 | |
Restricted cash and cash equivalents (Note 10) | 1,142 | | | 1,142 | |
Accounts receivable | Accounts receivable | 6,753 | | | 10,706 | |
Inventory | Inventory | 22,532 | | | 20,192 | |
Taxes receivable | 82 | | | 54 | |
Other current assets (Note 9) | 9,108 | | | 9,620 | |
Other current assets (Note 9 and 10) | |
Total Current Assets | Total Current Assets | 108,146 | | | 168,587 | |
| Oil and Gas Properties | |
Oil and Gas Properties | |
Oil and Gas Properties | Oil and Gas Properties | | | | | | |
Proved | Proved | 1,045,686 | | | 1,000,424 | |
Unproved | Unproved | 66,091 | | | 74,471 | |
Total Oil and Gas Properties | Total Oil and Gas Properties | 1,111,777 | | | 1,074,895 | |
Other capital assets | Other capital assets | 29,787 | | | 26,007 | |
Total Property, Plant and Equipment (Note 3) | Total Property, Plant and Equipment (Note 3) | 1,141,564 | | | 1,100,902 | |
| Other Long-Term Assets | Other Long-Term Assets | | | |
Other Long-Term Assets | |
Other Long-Term Assets | | | | |
Deferred tax assets | Deferred tax assets | 12,924 | | | 22,990 | |
Taxes receivable | Taxes receivable | 40,014 | | | 27,796 | |
Other long-term assets (Note 9) | 6,717 | | | 15,335 | |
Other long-term assets (Note 9 and 10) | |
Total Other Long-Term Assets | Total Other Long-Term Assets | 59,655 | | | 66,121 | |
Total Assets | Total Assets | $ | 1,309,365 | | | $ | 1,335,610 | |
| LIABILITIES AND SHAREHOLDERS’ EQUITY | LIABILITIES AND SHAREHOLDERS’ EQUITY | | | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | |
Current Liabilities | Current Liabilities | | | | Current Liabilities | | | |
Accounts payable and accrued liabilities | Accounts payable and accrued liabilities | $ | 197,797 | | | $ | 167,579 | |
| Credit facility (Note 4) | |
Current portion of long-term debt (Note 4 and 9) | |
Taxes payable | Taxes payable | 30,442 | | | 58,978 | |
Equity compensation award liability (Note 5) | Equity compensation award liability (Note 5) | 4,976 | | | 15,082 | |
| Total Current Liabilities | Total Current Liabilities | 233,215 | | | 241,639 | |
Total Current Liabilities | |
Total Current Liabilities | |
| Long-Term Liabilities | Long-Term Liabilities | | | |
Long-term debt (Notes 4 and 9) | 585,807 | | | 589,593 | |
Long-Term Liabilities | |
Long-Term Liabilities | | | | |
Long-term debt (Note 4 and 9) | |
Deferred tax liabilities | Deferred tax liabilities | 22,241 | | | 28 | |
Asset retirement obligation | Asset retirement obligation | 66,845 | | | 63,358 | |
Equity compensation award liability (Note 5) | Equity compensation award liability (Note 5) | 5,708 | | | 16,437 | |
| Other long-term liabilities | Other long-term liabilities | 8,131 | | | 6,989 | |
Other long-term liabilities | |
Other long-term liabilities | |
Total Long-Term Liabilities | Total Long-Term Liabilities | 688,732 | | | 676,405 | |
| Contingencies (Note 8) | Contingencies (Note 8) | |
Contingencies (Note 8) | |
Contingencies (Note 8) | | | | |
| Shareholders' Equity (1) | Shareholders' Equity (1) | | | |
Common Stock (Note 5) (33,287,055 and 34,615,116 issued, 33,287,055 and 34,615,116 outstanding shares of Common Stock, par value $0.01 per share, as at June 30, 2023, and December 31, 2022, respectively) | 10,237 | | | 10,272 | |
Shareholders' Equity (1) | |
Shareholders' Equity (1) | | | | |
Common Stock (31,429,826 and 32,275,113 issued, 31,401,214 and 32,246,501 outstanding shares of Common Stock, par value $0.001 per share, as at March 31, 2024 and December 31, 2023, respectively), (Note 5) | |
Additional paid-in capital | Additional paid-in capital | 1,254,449 | | | 1,291,354 | |
Treasury Stock (Note 5) | Treasury Stock (Note 5) | — | | | (27,317) | |
Deficit | Deficit | (877,268) | | | (856,743) | |
Total Shareholders’ Equity | Total Shareholders’ Equity | 387,418 | | | 417,566 | |
Total Liabilities and Shareholders’ Equity | Total Liabilities and Shareholders’ Equity | $ | 1,309,365 | | | $ | 1,335,610 | |
(1) Reflects ourCompany’s 1-for-10 reverse stock split that became effective May 5, 2023. See Note 5 in the notes to the condensed financial statements for further discussion.
(See notes to the condensed consolidated financial statements)
Gran Tierra Energy Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(Thousands of U.S. Dollars)
| | | Six Months Ended June 30, | | Three Months Ended March 31, |
| | 2023 | | 2022 | | 2024 | | 2023 |
Operating Activities | Operating Activities | | | | Operating Activities | | | |
Net (loss) income | $ | (20,525) | | | $ | 67,091 | |
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | | |
Net loss | |
Adjustments to reconcile net loss to net cash provided by operating activities: | | Adjustments to reconcile net loss to net cash provided by operating activities: | | | |
Depletion, depreciation and accretion (Note 3) | Depletion, depreciation and accretion (Note 3) | 107,930 | | | 83,179 | |
| Deferred tax expense (Note 7) | |
Deferred tax expense (Note 7) | |
Deferred tax expense (Note 7) | Deferred tax expense (Note 7) | 29,252 | | | 31,954 | |
Stock-based compensation expense (Note 5) | Stock-based compensation expense (Note 5) | 1,817 | | | 6,546 | |
Amortization of debt issuance costs (Note 4) | Amortization of debt issuance costs (Note 4) | 1,800 | | | 2,018 | |
Unrealized foreign exchange gain | (7,548) | | | (498) | |
Other gain (Note 4) | (615) | | | — | |
Derivative instruments loss (Note 9) | — | | | 26,611 | |
Cash settlements on derivatives instruments | — | | | (26,392) | |
| Unrealized foreign exchange (gain) loss | |
Other gain | |
Cash settlement of asset retirement obligation | Cash settlement of asset retirement obligation | (156) | | | (242) | |
Non-cash lease expenses | Non-cash lease expenses | 2,253 | | | 1,158 | |
Lease payments | Lease payments | (1,242) | | | (732) | |
Net change in assets and liabilities from operating activities (Note 10) | Net change in assets and liabilities from operating activities (Note 10) | (25,836) | | | 56,329 | |
Net cash provided by operating activities | Net cash provided by operating activities | 87,130 | | | 247,022 | |
| Investing Activities | Investing Activities | | | |
Investing Activities | |
Investing Activities | | | | |
Additions to property, plant and equipment | Additions to property, plant and equipment | (136,627) | | | (106,682) | |
| Changes in non-cash investing working capital (Note 10) | Changes in non-cash investing working capital (Note 10) | 9,088 | | | 10,964 | |
Net cash used in investing activities | Net cash used in investing activities | (127,539) | | | (95,718) | |
| Financing Activities | Financing Activities | | | |
Financing Activities | |
Financing Activities | | | | |
Proceeds from issuance of Senior Notes, net of issuance costs (Note 4) | |
Repayment of debt (Note 4) | |
Debt issuance costs (Note 4) | Debt issuance costs (Note 4) | (1,873) | | | — | |
Repayment of debt (Note 4) | — | | | (67,525) | |
Re-purchase of Senior Notes (Note 4) | (6,805) | | | — | |
Purchase of Senior Notes | |
Re-purchase of shares of Common Stock (Note 5) | Re-purchase of shares of Common Stock (Note 5) | (10,825) | | | — | |
Proceeds from exercise of stock options | Proceeds from exercise of stock options | 5 | | | 1,285 | |
Lease payments | Lease payments | (3,035) | | | (1,261) | |
Net cash used in financing activities | (22,533) | | | (67,501) | |
Net cash provided by (used in) financing activities | |
| Foreign exchange gain (loss) on cash, cash equivalents and restricted cash and cash equivalents | 5,759 | | | (680) | |
Foreign exchange (loss) gain on cash, cash equivalents and restricted cash and cash equivalents | |
Foreign exchange (loss) gain on cash, cash equivalents and restricted cash and cash equivalents | |
Foreign exchange (loss) gain on cash, cash equivalents and restricted cash and cash equivalents | |
| Net (decrease) increase in cash, cash equivalents and restricted cash and cash equivalents | (57,183) | | | 83,123 | |
Cash, cash equivalents and restricted cash and cash equivalents, beginning of period (Note 10) | 133,358 | | | 31,404 | |
Cash, cash equivalents and restricted cash and cash equivalents, end of period (Note 10) | $ | 76,175 | | | $ | 114,527 | |
Net increase (decrease) in cash, cash equivalents and restricted cash and cash equivalents | |
Net increase (decrease) in cash, cash equivalents and restricted cash and cash equivalents | |
Net increase (decrease) in cash, cash equivalents and restricted cash and cash equivalents | |
Cash and cash equivalents and restricted cash and cash equivalents, beginning of period (Note 10) | |
Cash and cash equivalents and restricted cash and cash equivalents, end of period (Note 10) | |
| Supplemental cash flow disclosures (Note 10) | Supplemental cash flow disclosures (Note 10) | | | |
Supplemental cash flow disclosures (Note 10) | |
Supplemental cash flow disclosures (Note 10) | | | | |
(See notes to the condensed consolidated financial statements)
Gran Tierra Energy Inc.
Condensed Consolidated Statements of Shareholders’ Equity (Unaudited)
(Thousands of U.S. Dollars)
| | |
| | | Three Months Ended June 30, | | Six Months Ended June 30, | | | Three Months Ended March 31, |
| | 2023 | | 2022 | | 2023 | | 2022 | | | | | | 2024 | | 2023 |
Share Capital (1) | Share Capital (1) | | | | | Share Capital (1) | | | | | | | |
Balance, beginning of period | Balance, beginning of period | $ | 10,272 | | | $ | 10,272 | | | $ | 10,272 | | | $ | 10,270 | |
Issuance of common stock (Note 5) | — | | | — | | | — | | | 2 | |
Re-purchase of shares of common stock | (35) | | | — | | | (35) | | | — | |
| Cancellation of shares of Common Stock (Note 5) | |
Cancellation of shares of Common Stock (Note 5) | |
Cancellation of shares of Common Stock (Note 5) | |
Balance, end of period | Balance, end of period | $ | 10,237 | | | $ | 10,272 | | | $ | 10,237 | | | $ | 10,272 | |
| Additional Paid-in Capital | |
Additional Paid-in Capital | |
Additional Paid-in Capital | Additional Paid-in Capital | | | | | | | | | | | |
Balance, beginning of period | Balance, beginning of period | $ | 1,291,973 | | | $ | 1,289,162 | | | $ | 1,291,354 | | | $ | 1,287,582 | |
| Exercise of stock options | Exercise of stock options | 5 | | | 303 | | | 5 | | | 1,283 | |
Re-purchase of shares of common stock | (38,107) | | | — | | | (38,107) | | | — | |
Exercise of stock options | |
Exercise of stock options | |
Cancellation of shares of Common Stock (Note 5) | |
Stock-based compensation (Note 5) | Stock-based compensation (Note 5) | 578 | | | 610 | | | 1,197 | | | 1,210 | |
Balance, end of period | Balance, end of period | $ | 1,254,449 | | | $ | 1,290,075 | | | $ | 1,254,449 | | | $ | 1,290,075 | |
| Treasury Stock | Treasury Stock | |
Treasury Stock | |
Treasury Stock | |
Balance, beginning of period | Balance, beginning of period | $ | (38,035) | | | $ | — | | | $ | (27,317) | | | $ | — | |
Purchase of treasury shares (Note 5) | (107) | | | — | | | (10,825) | | | — | |
Cancellation of treasury shares | 38,142 | | | — | | | 38,142 | | | — | |
Balance, beginning of period | |
Balance, beginning of period | |
Re-purchase of shares of Common Stock (Note 5) | |
Cancellation of shares of Common Stock (Note 5) | |
Balance, end of period | Balance, end of period | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| Deficit | Deficit | | | | |
Deficit | |
Deficit | | | | | | | | |
Balance, beginning of period | Balance, beginning of period | $ | (866,443) | | | $ | (981,653) | | | $ | (856,743) | | | $ | (995,772) | |
Net (loss) income | (10,825) | | | 52,972 | | | (20,525) | | | 67,091 | |
Net loss | |
Balance, end of period | Balance, end of period | $ | (877,268) | | | $ | (928,681) | | | $ | (877,268) | | | $ | (928,681) | |
| Total Shareholders’ Equity | Total Shareholders’ Equity | $ | 387,418 | | | $ | 371,666 | | | $ | 387,418 | | | $ | 371,666 | |
Total Shareholders’ Equity | |
Total Shareholders’ Equity | |
(1) Reflects ourCompany’s 1-for-10 reverse stock split that became effective May 5, 2023. See Note 5 in the notes to the condensed financial statements for further discussion.
(See notes to the condensed consolidated financial statements)
Gran Tierra Energy Inc.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
(Expressed in U.S. Dollars, unless otherwise indicated)
1. Description of Business
Gran Tierra Energy Inc. a Delaware corporation (the “Company” or “Gran Tierra”), is a publicly traded company focused on international oil and natural gas exploration and production with assets currently in Colombia and Ecuador.
2. Significant Accounting Policies
These interim unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”). The information furnished herein reflects all normal recurring adjustments that are, in the opinion of management, necessary for the fair presentation of results for the interim periods.
The note disclosure requirements of annual audited consolidated financial statements provide additional disclosures required for interim unaudited condensed consolidated financial statements. Accordingly, these interim unaudited condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements as at and for the year ended December 31, 2022,2023, included in the Company’s 20222023 Annual Report on Form 10-K.
The Company’s significant accounting policies are described in Note 2 of the consolidated financial statements, which are included in the Company’s 20222023 Annual Report on Form 10-K and are the same policies followed in these interim unaudited condensed consolidated financial statements. The Company has evaluated all subsequent events to the date these interim unaudited condensed consolidated financial statements were issued.
3. Property, Plant and Equipment
| (Thousands of U.S. Dollars) | (Thousands of U.S. Dollars) | As at June 30, 2023 | | As at December 31, 2022 | (Thousands of U.S. Dollars) | As at March 31, 2024 | | As at December 31, 2023 |
Oil and natural gas properties | Oil and natural gas properties | | | | Oil and natural gas properties | | | |
Proved | Proved | $ | 4,765,640 | | | $ | 4,617,804 | |
Unproved | Unproved | 66,091 | | | 74,471 | |
| | 4,831,731 | | | 4,692,275 | |
Other(1) | Other(1) | 65,816 | | | 61,386 | |
| 4,897,547 | | | 4,753,661 | |
| 5,072,878 | |
Accumulated depletion, depreciation and impairment | Accumulated depletion, depreciation and impairment | (3,755,983) | | | (3,652,759) | |
| $ | 1,141,564 | | | $ | 1,100,902 | |
| $ | |
(1) The “other” category includes right-of-use assets for operating and finance leases of $44.9$60.4 million, which had a net book value of $28.6$36.3 million as at June 30, 2023March 31, 2024 (December 31, 20222023 - $38.9$53.3 million, which had a net book value of $24.6$32.4 million).
During thethree months ended March 31, 2024, the Company entered into new lease contracts related to power generation and safety equipment, and capitalized $6.1 million right-of-use assets related to those contracts.
For the three and six months ended June 30,March 31, 2024 and 2023, and 2022, respectively, the Company had no ceiling test impairment losses. The Company used a 12-month unweighted average of the first-day-of the month Brent price prior to the ending date of the periods June 30,March 31, 2024 and 2023 and 2022 of $88.52$81.58 and $87.88$95.99 per bbl, respectively, for the purpose of the ceiling test calculations.
4. Debt and Debt Issuance Costs
The Company’s debt as at June 30, 2023,March 31, 2024, and December 31, 2022,2023, was as follows:
| | | | | | | | | | | |
(Thousands of U.S. Dollars) | As at June 30, 2023 | | As at December 31, 2022 |
| | | |
| | | |
| | | |
| | | |
| | | |
Long-Term | | | |
6.25% Senior Notes, due February 2025 | $ | 271,909 | | | $ | 279,909 | |
7.75% Senior Notes, due May 2027 | 300,000 | | | 300,000 | |
| | | |
Unamortized debt issuance costs | (10,830) | | | (10,992) | |
| 561,079 | | | 568,917 | |
Long-term lease obligation(1) | 24,728 | | | 20,676 | |
| | | |
Total debt | $ | 585,807 | | | $ | 589,593 | |
| | | | | | | | | | | |
(Thousands of U.S. Dollars) | As at March 31, 2024 | | As at December 31, 2023 |
Current | | | |
Credit facility | $ | — | | | $ | 36,364 | |
6.25% Senior Notes, due February 2025 (“6.25% Senior Notes”) | 24,828 | | | — | |
Unamortized debt issuance costs | (151) | | | (755) | |
| $ | 24,677 | | | $ | 35,609 | |
| | | |
Long-Term | | | |
6.25% Senior Notes, due February 2025 (“6.25% Senior Notes”) | $ | — | | | $ | 24,828 | |
7.75% Senior Notes, due May 2027 (“7.75% Senior Notes”) | 24,201 | | | 24,201 | |
9.50% Senior Notes, due October 2029 (“9.50% Senior Notes”) | 587,590 | | | 487,590 | |
Unamortized Senior Notes discount | (38,164) | | | (27,958) | |
Unamortized Senior Notes issuance costs | (17,465) | | | (15,679) | |
| 556,162 | | | 492,982 | |
Long-term lease obligation (1) | 26,937 | | | 26,550 | |
| $ | 583,099 | | | $ | 519,532 | |
Total Debt | $ | 607,776 | | | $ | 555,141 | |
(1) The current portion of the lease obligation has been included in accounts payable and accrued liabilities on the Company’s balance sheet and totaled $7.8$15.2 million as at June 30, 2023March 31, 2024 (December 31, 20222023 - $4.8$12.1 million).
Credit Facility
As of June 30,at December 31, 2023, the Company had a $36.4 million balance outstanding under the Company’s credit facility with a market lender infacility. On February 6, 2024, the global commodities industry. The credit facility has a borrowing base of up to $150 million, with $100 million as an initial commitment available at June 30, 2023, and an option for an additional $50 million upon mutual agreement by the Company and the lender. The credit facility bears interest based on the secured overnight financing rate posted by the Federal Reserve Bank of New York plus a credit margin of 6.00% and a credit-adjusted spread of 0.26%. Undrawn amountsoutstanding balance under the credit facility bear interest at 2.10% per annum, based on the amount available. The credit facility is secured by the Company’s Colombian assetsof $36.4 million was fully re-paid and economic rights. It has a final maturity date of August 15, 2024, which may be extended to February 18, 2025, upon the satisfaction of certain conditions. The availability period for the draws under the credit facility expires on August 20, 2023. As of June 30, 2023, and December 31, 2022, the credit facility remained undrawn.
Under the terms of the credit facility, the Company is required to maintain compliance with the following financial covenants:
i.Global Coverage Ratio of at least 150%, calculated using the net present value of the consolidated future cash flows of the Company up to the final maturity date discounted at 10% over the outstanding amount on the credit facility at each reporting period. The net present value of the consolidated future cash flows of the Company is required to be based on 80% of the prevailing ICE Brent forward strip.
ii.Prepayment Life Coverage Ratio of at least 150%, calculated using the estimated aggregate value of commodities to be delivered under the commercial contract from the commencement date to the final maturity date based on 80% of the prevailing ICE Brent forward strip and adjusted for quality and transportation discounts over the outstanding amount on the credit facility including interest and all other costs payable to the lender.
i.Liquidity ratio where the Company’s projected sources of cash exceed projected uses of cash by at least 1.15 times in each quarter period included in one year consolidated future cash flows. The future cash flows represent forecasted expected cash flows from operations, less anticipated capital expenditures, and certain other adjustments. The commodity pricing assumption used in this covenant is required to be 90% of the prevailing ICE Brent forward strip for the projected future cash flows.was terminated.
Senior Notes
DuringOn February 6, 2024, the threeCompany issued an additional $100.0 million of 9.50% Senior Notes due October 2029 (the “new 9.50% Senior Notes”), and six months ended June 30,received cash proceeds of $88.0 million. The new 9.50% Senior Notes have the same terms and provisions as the previously issued $487.6 million 9.50% Senior Notes except for the issue price. The new 9.50% Senior Notes accrue interest from October 20, 2023, the date of issuance of previously issued 9.50% Senior Notes. The Company re-purchased inreceived a cash payment of $2.8 million related to the open market nil and $8.0 million, respectively,accrued interest of 6.25%the new 9.50% Senior Notes for cash consideration of $6.8 million. The re-purchase resulted in a $1.1 million gain, which included the write-off of deferred financing fees of $0.1 million. The re-purchase gain was recorded in “other gain” in the Company’s condensed consolidated statements of operations. The re-purchased 6.25% Senior Notes were not canceled and are held by the Company as treasury bonds as of June 30, 2023.Notes.
During thethree months ended March 31, 2024, the Company recorded three new finance leases totaling $6.1 million, which have lease terms ranging from two to three years and weighted average discount rates of 9.6%.
Interest Expense
The following table presents the total interest expense recognized in the accompanying interim unaudited condensed consolidated statements of operations:
| | Three Months Ended June 30, | | Six Months Ended June 30, |
| | | Three Months Ended March 31, | |
| | | Three Months Ended March 31, | |
| | | Three Months Ended March 31, | |
(Thousands of U.S. Dollars) | (Thousands of U.S. Dollars) | 2023 | | 2022 | | 2023 | 2022 | (Thousands of U.S. Dollars) | | | | | 2024 | 2023 |
Contractual interest and other financing expenses | Contractual interest and other financing expenses | $ | 11,659 | | | $ | 11,063 | | | $ | 22,714 | | $ | 22,304 | |
Amortization of debt issuance costs | Amortization of debt issuance costs | 1,019 | | | 1,131 | | | 1,800 | | 2,018 | |
| $ | 12,678 | | | $ | 12,194 | | | $ | 24,514 | | $ | 24,322 | |
| | | | | $ | |
5. Share Capital
| | | | | |
| Shares of Common Stock |
Shares issued at December 31, 20222023 | 36,889,86232,275,113 | |
Shares re-purchasedTreasury shares | (2,274,746)(28,612) | |
Shares issued and outstanding at December 31, 20222023 | 34,615,11632,246,501 |
Shares issued on option exercise | 58941,379 | |
Shares re-purchased and cancelled | (1,328,650)(858,054) | |
Shares issued at March 31, 2024 | 31,429,826 |
Treasury shares | (28,612) | |
Shares issued and outstanding at June 30, 2023March 31, 2024 | 33,287,05531,401,214 | |
On May 5, 2023, the Company completed a 1-for-10 reverse stock split of the Company’s common stock. As a result of the reverse stock split, every ten of the Company’s issued shares of common stock were automatically combined into one issued share of common stock, without any change to the par value per share. All share and per share numbers have been adjusted to reflect the reverse stock split. The Company’s outstanding options were also proportionately adjusted as a result of the reverse stock split to increase the exercise price and reduce the number of shares issuable upon exercise.
During the year ended December 31, 2022,2023, the Company implemented a share re-purchase program (the “2022“2023 Program”) through the facilities of the Toronto Stock Exchange (“TSX”), the NYSE American (the “NYSE”) and eligible alternative trading platforms in Canada.Canada or the United States. Under the 20222023 Program, the Company wasis able to purchase at prevailing market prices up to 3,603,3963,234,914 shares of Common Stock, representing approximately 10% of the issued and outstanding shares of Common Stockpublic float as of August 22, 2022.October 20, 2023. The 20222023 Program expired in May 2023 whenwill expire on November 2, 2024, or earlier if the 10% share maximum wasis reached.
During the three and six months ended June 30, 2023,March 31, 2024, the Company re-purchased 20,439 and 1,328,650886,666 shares at a weighted average price of $5.27 and $8.15$5.58 per share respectively (three and six months ended June 30,March 31, 2023 - 1,308,212 shares under the 2022 - nil)program at a weighted average price of $8.19 per share). As of June 30, 2023, all 3,603,396March 31, 2024, the Company cancelled 28,612 shares held as treasury stock were canceled.shares at December 31, 2023, and cancelled 858,054 shares re-purchased during the three months ended March 31, 2024. During the period from October 20, 2023 to April 29, 2024, the Company has re-purchased 1,997,500 shares under the 2023 Program.
Equity Compensation Awards
The following table provides information about performance stock units (“PSUs”), deferred share units (“DSUs”), restricted share units (“RSUs”) and stock option activity for the sixthree months ended June 30, 2023:March 31, 2024:
| | PSUs | DSUs | | Stock Options |
| Number of Outstanding Share Units | | Number of Outstanding Stock Options | Weighted Average Exercise Price/Stock Option ($) |
Balance, December 31, 2022 | 3,152,823 | | 656,186 | | | 1,730,286 | | 11.52 | |
| PSUs | | | PSUs | DSUs | RSUs | Stock Options |
| Number of Outstanding Share Units | | | Number of Outstanding Share Units | Number of Outstanding Share Units | Number of Outstanding Stock Options | Weighted Average Exercise Price/Stock Option ($) |
Balance, December 31, 2023 | |
Granted | Granted | 1,504,546 | | 46,290 | | | 407,627 | | 8.59 | |
Exercised | Exercised | (1,523,408) | | — | | | (589) | | 7.93 | |
Forfeited | Forfeited | (21,574) | | — | | | (22,336) | | 5.79 | |
Expired | Expired | — | | — | | | (129,943) | | 24.87 | |
Balance, June 30, 2023 | 3,112,387 | | 702,476 | | | 1,985,045 | | 10.11 | |
Balance, at March 31, 2024 | |
For the three and six months ended June 30,March 31, 2024 and 2023, there was $0.3$3.4 million and $1.8$1.5 million of stock-based compensation expense, respectively. For the three and six months ended June 30, 2022, stock-based compensation expense was $2.0 million and $6.5 million, respectively.
As at June 30, 2023,March 31, 2024, there was $10.5$26.8 million (December 31, 20222023 - $10.5$8.6 million) of unrecognized compensation costs related to unvested PSUs, RSUs and stock options, which are expected to be recognized over a weighted-average period of 1.92.3 years. During the sixthree months ended June 30, 2023,March 31, 2024, the Company paid out $10.4 million for PSUs vested on December 31, 2023 (three months ended March 31, 2023 - $15.1 million for PSUs vested on December 31, 2022 (six2022).
During the three months ended June 30, 2022 - $2.4March 31, 2024, the Company awarded 0.5 million for PSUs vested on DecemberRSUs to employees pursuant to the existing 2007 Equity Incentive Plan. Under the 2007 Equity Incentive Plan, RSU units will vest one-third each year over a three-year period. Upon vesting, RSUs entitle the holder to receive either the underlying number of shares of the Company’s Common Stock or a cash payment equal to the value of the underlying shares of the Company’s Common Stock. The Company intends to settle RSUs outstanding as at March 31, 2021).2024, in cash.
Net Income (Loss) Income per Share
Basic net lossincome or incomeloss per share is calculated by dividing net lossincome or incomeloss attributable to common shareholders by the weighted average number of shares of common stockCommon Stock issued and outstanding during each period.
Diluted net lossincome or incomeloss per share is calculated using the treasury stock method for share-based compensation arrangements. The treasury stock method assumes that any proceeds obtained on the exercise of share-based compensation arrangements would be used to purchase common shares of Common Stock at the average market price during the period. The weighted average number of shares is then adjusted by the difference between the number of shares issued from the exercise of share-based compensation arrangements and shares re-purchased from the related proceeds. Anti-dilutive shares represent potentially dilutive securities excluded from the computation of diluted lossincome or incomeloss per share as their impact would be anti-dilutive.
Weighted Average Shares Outstanding
| | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2023 | 2022 | | 2023 | 2022 |
Weighted average number of common shares outstanding | 33,299,505 | | 36,857,138 | | | 33,872,270 | | 36,798,229 |
Shares issuable pursuant to stock options | — | | 1,180,686 | | | — | | 1,235,124 |
Shares assumed to be purchased from proceeds of stock options | — | | (614,464) | | | — | | (735,584) |
Weighted average number of diluted common shares outstanding | 33,299,505 | | 37,423,360 | | | 33,872,270 | | 37,297,769 |
For the three and six months ended June 30,March 31, 2024 and 2023, all options on a weighted average basis (three and six months ended June 30, 2022, 609,291 and 573,843 options, respectively), were excluded from the diluted (loss) incomeloss per share calculation as the options were anti-dilutive.
6. Revenue
The Company’s revenues are generated from oil sales at prices that reflect the blended prices received upon shipment by the purchaser at defined sales points or defined by contract relative to ICE Brent and adjusted for Vasconia or Castilla (Colombia sales) or Oriente (Ecuador sales) crude differentials, quality and transportation discounts and premiums each month. For the three and six months ended June 30, 2023,March 31, 2024, 100% of the Company’s revenue resulted from oil sales (three and six months ended June 30, 2022March 31, 2023 - 100%). During the three and six months ended June 30, 2023,March 31, 2024, quality and transportation discounts were 18% and 20%19% of the average ICE Brent price (three and six months ended June 30, 2022March 31, 2023 - 12%22%), respectively. The increase in quality and transportation discounts were primarily a result of higher Vasconia and Castilla discounts..
During the three months ended June 30,March 31, 2024 and 2023, the Company’s production was sold primarily to one major customer in Colombia and Ecuador, representing 98%100% and 97% of the total sales volumes, (three months ended June 30, 2022 - two customers, representing 55% and 44% of the total sales volumes).
During the six months ended June 30, 2023, the Company’s production was sold primarily to one major customer in Colombia, representing 98% of the total sales volumes (six months ended June 30, 2022 - two customers, representing 56% and 43% of the total sales volumes).respectively.
As at June 30, 2023,March 31, 2024, accounts receivable included nil of accrued sales revenue related to June 2023March 2024 production (December 31, 20222023 - nil related to December 20222023 production).
7. Taxes
The Company’s effective tax rate was 145%100% for the sixthree months ended June 30, 2023,March 31, 2024, compared to 54%142% in the comparative period of 2022. 2023.
Current income tax expense was $37.4$3.9 million for the sixthree months ended June 30, 2023,March 31, 2024, compared to $46.3$17.6 million in the corresponding period of 2022,2023, primarily due to a decrease in taxable income.
The deferred income tax expense for the sixthree months ended June 30,March 31, 2024, was $13.5 million compared to $15.3 million in the corresponding period of 2023 was $29.3 million primarilymainly as a result of tax depreciation being higher than accounting depreciation and the use of tax losses to offset taxable income in Colombia.
TheFor the three months ended March 31, 2023, the deferred income tax expense in the comparative period of 2022 was $32.0$15.3 million mainly as thea result of tax depreciation being higher comparedthan accounting depreciation and the use of tax losses to accounting depreciationoffset taxable income in Colombia.
For the sixthree months ended June 30,March 31, 2024, the difference between the effective tax rate of 100% and the 45% Colombian tax rate was primarily due to an increase in the impact of foreign taxes, increase in the valuation allowance, non-deductible foreign translation adjustments, non-deductible stock-based compensation and other permanent differences.
For the three months ended March 31, 2023, the difference between the effective tax rate of 145%142% and the 50% Colombian tax rate was primarily due to an increase in non-deductible foreign exchangetranslation adjustments, the impact of foreign taxes, non-deductible royaltiesroyalty in Colombia and non-deductible stock-based compensation.increase in the valuation allowance. These were partially offset by a decrease in valuation allowance.other permanent differences.
For the six months ended June 30, 2022, the difference between the effective tax rate of 54% and the 35% Colombian tax rate was primarily due to an increase in the impact of foreign taxes, foreign translation adjustments, increase in the valuation allowance, non-deductible third-party royalties in Colombia and non-deductible stock-based compensation.
8. Contingencies
Legal Proceedings
Gran Tierra has several lawsuits and claims pending. The outcome of the lawsuits and disputes cannot be predicted with certainty; Gran Tierra believes the resolution of these matters would not have a material adverse effect on the Company’s consolidated financial position, results of operations, or cash flows. Gran Tierra records costs as they are incurred or become probable and determinable.
Letters of creditCredit and other credit supportOther Credit Support
At June 30, 2023,March 31, 2024, the Company had provided letters of credit and other credit support totaling $109.4$222.6 million (December 31, 20222023 - $111.1$220.1 million) as a security relating to work commitment guarantees in Colombia and Ecuador contained in exploration contracts, the Suroriente Block extension agreement and other capital or operating requirements. Approximately $123.0 million relates to the Suroriente Block extension agreement.
9. Financial Instruments and Fair Value Measurement
Financial Instruments
Financial instruments are initially recorded at fair value, defined as the price that would be received to sell an asset or paid to market participants to settle liability at the measurement date. For financial instruments carried at fair value, GAAP establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. This hierarchy consists of three broad levels:
•Level 1 - Inputs representing quoted market prices in active markets for identical assets and liabilities
•Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the assets and liabilities, either directly or indirectly
•Level 3 - Unobservable inputs for assets and liabilities
At June 30, 2023,March 31, 2024, the Company’s financial instruments recognized on the balance sheet consist of cash and cash equivalents, restricted cash and cash equivalents, accounts receivable, other long-term assets, accounts payable and accrued liabilities, current portion of long-term debt, long-term debt and other long-term liabilities. The Company uses appropriate valuation techniques based on the available information to measure the fair values of assets and liabilities.
Fair Value Measurement
The following table presents the Company’s fair value measurements of its financial instruments as of June 30, 2023,March 31, 2024, and December 31, 2022:2023:
| (Thousands of U.S. Dollars) | (Thousands of U.S. Dollars) | As at June 30, 2023 | | As at December 31, 2022 | (Thousands of U.S. Dollars) | As at March 31, 2024 | | As at December 31, 2023 |
Level 1 | Level 1 | |
Assets | Assets | |
Assets | |
Assets | |
Prepaid equity forward (“PEF”) - current (1) | Prepaid equity forward (“PEF”) - current (1) | $ | 4,898 | | | $ | 5,981 | |
PEF - long-term(2) | — | | | 9,975 | |
| $ | 4,898 | | | $ | 15,956 | |
Prepaid equity forward (“PEF”) - current (1) | |
Prepaid equity forward (“PEF”) - current (1) | |
| Liabilities | Liabilities | |
Liabilities | |
Liabilities | |
6.25% Senior Notes | |
6.25% Senior Notes | |
6.25% Senior Notes | 6.25% Senior Notes | $ | 233,502 | | | $ | 243,801 | |
7.75% Senior Notes | 7.75% Senior Notes | 227,321 | | | 241,455 | |
| $ | 460,823 | | | $ | 485,256 | |
9.50% Senior Notes | |
| $ | |
Level 2 | Level 2 | |
Assets | Assets | |
| Assets | |
Assets | |
Restricted cash and cash equivalents - long-term (2) | |
Restricted cash and cash equivalents - long-term (2) | |
Restricted cash and cash equivalents - long-term(2) | Restricted cash and cash equivalents - long-term(2) | $ | 6,504 | | | $ | 5,343 | |
| Liabilities | |
Liabilities | |
Liabilities | |
Credit facility | |
Credit facility | |
Credit facility | |
(1) The current portion of PEF is included in the other current assets on the Company’s condensed consolidated balance sheetsheet.
(2) The long-term portion of restricted cash and PEF is included in the other long-term assets on the Company’s condensed consolidated balance sheetsheet.
The fair values of cash and cash equivalents, current restricted cash and cash equivalents, accounts receivable and accounts payable and accrued liabilities approximate their carrying amounts due to the short-term maturity of these instruments.
Restricted cashCash - long-termLong-Term
The fair value of long-term restricted cash and cash equivalents approximated theirapproximate its carrying value because interest rates are variable and reflective of market rates.
PEFPrepaid Equity Forward
To reduce the Company’s exposure to changes in the trading price of the Company’s common shares on outstanding PSUs and DSUs,As at March 31, 2024, the Company entered into a PEF. At the end of the term, the counterparty will pay the Company an amount equivalent to the notional amount of the shares using the price of the Company’s common shareshad no outstanding PEF asset (As at the valuation date. The Company has the discretion to increase or decrease the notional amount of the PEF or terminate the agreement early. As at June 30,December 31, 2023 the Company’s PEF had a notional amount of- 1.0 million notional shares with a fair value of $4.9 million (As at December 31, 2022 - 1.6 million shares with a fair value of $16.0$5.6 million). DuringFor the three and six months ended June 30,March 31, 2024 and 2023, the Company recorded a $4.1$0.3 million and $5.8$1.7 million loss respectively, on the PEF in general and administrative expenses (three and sixrelating to the PEF, respectively.
During the three months ended June 30, 2022 - $5.2March 31, 2024, the Company settled all outstanding notional PEF shares and received net proceeds of $5.1 million resulting in a $0.3 million loss and $2.7 million gain, respectively). The fair value of the PEF asset was estimated using the Company’s share price quoted in active markets at the end of each reporting period.on settlement.
Senior Notes
Financial instruments not recorded at fair valueamortized cost at June 30, 2023,March 31, 2024, were the Senior Notes (Note 4).
At June 30, 2023,March 31, 2024, the carrying amounts of the 6.25% Senior Notes, 7.75% Senior Notes and the 7.75%9.50% Senior Notes were $268.9$24.7 million, $23.8 million, and $293.9$532.4 million, respectively, which represented the aggregate principal amount less unamortized debt issuance costs and discounts, and the fair values were $233.5$23.2 million, $20.7 million, and $227.3$549.6 million, respectively.
During the three and six months ended June 30, 2023, the Company did not incur any gains or losses related to derivatives (three and six months ended June 30, 2022 - $5.2 million and $26.6 million, respective loss related to commodity price derivatives).
10. Supplemental Cash Flow Information
The following table provides a reconciliation of cash and cash equivalents and restricted cash and cash equivalents shown as a sum of these amounts in the interim unaudited condensed consolidated statements of cash flows:
| | | | | | | | | | | | | | | | | |
| As at June 30, | | As at December 31, |
(Thousands of U.S. Dollars) | 2023 | 2022 | | 2022 | 2021 |
Cash and cash equivalents | $ | 68,529 | | $ | 108,558 | | | $ | 126,873 | | $ | 26,109 | |
Restricted cash and cash equivalents - current | 1,142 | | 1,142 | | | 1,142 | | 392 | |
Restricted cash and cash equivalents - long-term (1) | 6,504 | | 4,827 | | | 5,343 | | 4,903 | |
| $ | 76,175 | | $ | 114,527 | | | $ | 133,358 | | $ | 31,404 | |
| | | | | | | | | | | | | | | | | |
| As at March 31, | | As at December 31, |
(Thousands of U.S. Dollars) | 2024 | 2023 | | 2023 | 2022 |
Cash and cash equivalents | $ | 126,618 | | $ | 105,684 | | | $ | 62,146 | | $ | 126,873 | |
Restricted cash and cash equivalents - current (1) | 1,142 | | 1,142 | | | 1,142 | | 1,142 | |
Restricted cash and cash equivalents - long-term (2) | 7,778 | | 5,710 | | | 7,750 | | 5,343 | |
| $ | 135,538 | | $ | 112,536 | | | $ | 71,038 | | $ | 133,358 | |
(1)Included in other current assets on the Company’s condensed consolidated balance sheet.(1)(2) Included in other long-term assets on the Company’s condensed consolidated balance sheetsheet.
Net changes in assets and liabilities from operating activities were as follows:
| | Six Months Ended June 30, |
| Three Months Ended March 31, | | | Three Months Ended March 31, |
(Thousands of U.S. Dollars) | (Thousands of U.S. Dollars) | 2023 | | 2022 | (Thousands of U.S. Dollars) | 2024 | | 2023 |
Accounts receivable and other long-term assets | Accounts receivable and other long-term assets | $ | 3,898 | | | $ | 2,356 | |
Derivatives | — | | | 4,254 | |
PEF | PEF | 11,887 | | | (11,215) | |
| Prepaids & Inventory | (3,035) | | | (3,811) | |
Prepaids and inventory | |
Accounts payable and accrued and other long-term liabilities | Accounts payable and accrued and other long-term liabilities | (3,383) | | | 8,264 | |
Taxes receivable and payable | Taxes receivable and payable | (35,203) | | | 56,481 | |
Net changes in assets and liabilities from operating activities | Net changes in assets and liabilities from operating activities | $ | (25,836) | | | $ | 56,329 | |
Changes in non-cash investing working capital for the sixthree months ended June 30, 2023,March 31, 2024, were comprised of an increase in accounts payable and accrued liabilities of $9.1$16.6 million (sixand an increase in accounts receivable of $0.1 million (three months ended June 30, 2022,March 31, 2023, an increase in accounts payable and accrued liabilities of $11.2 million and an increase in accounts receivable of $0.2$14.9 million).
The following table provides additional supplemental cash flow disclosures: | | Three Months Ended March 31, | | | Three Months Ended March 31, |
(Thousands of U.S. Dollars) | | (Thousands of U.S. Dollars) | 2024 | | 2023 |
| | Six Months Ended June 30, |
(Thousands of U.S. Dollars) | 2023 | | 2022 |
Cash paid for income taxes | $ | 71,457 | | | $ | 20,468 | |
Cash paid for withholding taxes | |
Cash paid for withholding taxes | |
Cash paid for withholding taxes | |
Cash paid for interest | Cash paid for interest | $ | 20,406 | | | $ | 21,975 | |
| Non-cash investing activities: | Non-cash investing activities: | |
Non-cash investing activities: | |
Non-cash investing activities: | |
Net liabilities related to property, plant and equipment, end of period | Net liabilities related to property, plant and equipment, end of period | $ | 64,206 | | | $ | 41,106 | |
Net liabilities related to property, plant and equipment, end of period | |
Net liabilities related to property, plant and equipment, end of period | |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion of our financial condition and results of operations should be read in conjunction with the “Financial Statements” as set out in Part I, Item 1 of this Quarterly Report on Form 10-Q, as well as the “Financial Statements and Supplementary Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Part II, Items 7 and 8, respectively, of our 20222023 Annual Report on Form 10-K. Please see the cautionary language at the beginning of this Quarterly Report on Form 10-Q regarding the identification of and risks relating to forward-looking statements and the risk factors described in Part II, Item 1A “Risk Factors” of this Quarterly Report on Form 10-Q, as well as Part I, Item 1A “Risk Factors” in our 20222023 Annual Report on Form 10-K. On May 5, 2023, the Company completed 1-for-10 reverse stock split of the Company’s common stock.Common Stock. As a result of the reverse stock split, every ten of the Company’s issued shares of common stockCommon Stock were automatically combined into one issued share of common stock, without any change to the par value per share.Common Stock. All share and per share data included in this quarterly report have been retroactively adjusted to reflect the reverse stock split.
Financial and Operational Highlights
Key Highlights for the secondfirst quarter of 20232024
•Net loss in the secondfirst quarter of 20232024 was $10.8$0.1 million, or $(0.33) per share basic and diluted, compared to a net incomeloss of $53.0$9.7 million or $1.44 per share basic and $1.42 per share diluted in the secondfirst quarter of 20222023
•Income before income taxes in the secondfirst quarter of 20232024 was $22.9$17.3 million, compared to an income before income taxes of $91.6$23.2 million in the secondfirst quarter of 20222023
•DuringAdjusted EBITDA(2) increased to $94.8 million, compared to $89.9 million in the secondfirst quarter of 2023 we re-purchased 20,439 of our common shares at a weighted average price of $5.27 per shareand $93.0 million in the prior quarter
•Funds flow from operations(2) decreasedincreased by 49%24% to $53.1$74.3 million, compared to $60.0 million in the secondfirst quarter of 20222023 and decreased by 12% from $60.0$84.7 million in the prior quarter. During quarter
•In the first quarter funds flowof 2024, we re-purchased 0.9 million shares of Common Stock through the 2023 share re-purchase program, representing 3% of outstanding shares as of March 31, 2024
•In the first quarter of 2024, the outstanding balance of $36.4 million under the Company’s credit facility was reduced by $12.8 million of realized foreign exchange loss primarily associated withfully re-paid and the payment of income taxes in the second quartercredit facility was terminated
•NAR production for the secondfirst quarter of 2023 increased by 17%2024 was 25,845, comparable to 27,20425,526 BOPD compared to 23,215 BOPD in the second quarter of 2022 and increased by 7% from the first quarter of 2023 and increased by 4% from 24,892 BOPD in the prior quarter
•Sales volumes for the secondfirst quarter of 20232024 increased by 19%4% to 27,27126,080 BOPD, compared to 22,84725,171 BOPD in the secondfirst quarter of 20222023 and increased by 8%5% from 24,949 BOPD in the firstprior quarter of 2023
•Oil sales for the first quarter of 2024 were $157.9$157.6 million, 23% lower9% higher compared to the secondfirst quarter of 2022,2023, primarily due to a 31% decrease in Brent price, anCastilla, Vasconia and Oriente differentials and a 4% increase of 8% in the quality and transportation discounts and offset by 19% higher sales volumes. Oil sales increased by 10%2% from $144.2$154.9 million in the firstprior quarter, of 2023primarily due to a 8% higher5% increase in sales volumes and lower qualityCastilla differential, partially offset by higher Vasconia and transportation discountsOriente differentials
•Operating expenses increased by 23%17% to $48.5 million or by $0.54$2.16 per bbl to $19.54$20.42 per bbl when compared to the secondfirst quarter of 2022,2023, primarily as a result of higher workovers and higher lifting costs offset by lower workoverassociated with preventative maintenance activities. Operating expenses increased from $41.4$47.6 million or $18.26 per bbl in the prior quarter primarilyas a result of higher workovers, offset by lower lifting costsrelated to power generation optimizations in major fields. On a per bbl basis, operating expenses decreased from $20.75 in the prior quarter due to higher lifting costssales volumes in the current quarter
•Transportation expenses per bbl increased by $0.28 in the second quarter of 2023 due to higher transportation tariffs affecting Acordionero sales, utilization of new transportation routes for new exploration wells$0.58 and Ecuador sales$0.21 when compared to the second quarter of 2022 and increased $0.14 from the first quarter of 2023 and the prior quarter, respectively, due to higher trucking costs resulting from the utilization of longer distance delivery points and depreciation of U.S. dollar against the Colombian pesoin response to lower river levels in Colombia caused by El Niño.
•Operating netback(2) decreasedincreased to $105.7$104.5 million compared to $163.8 million in the second quarter of 2022 and increased from $99.8 million in the priorfirst quarter
•Adjusted EBITDA(2) decreased to $84.5 million compared to $140.1 of 2023 and $103.4 million in the second quarter of 2022 and decreased from $88.7 million in the prior quarter. During the quarter, Adjusted EBITDA was reduced by $12.8 million due to realized foreign exchange loss primarily associated with the payment of income taxes in the second quarter
•Quality and transportation discounts for the secondfirst quarter of 2023 increased2024 decreased to $14.10$15.36 per bbl compared to $13.00$18.45 per bbl in the secondfirst quarter of 2022,2023, primarily as a result of the wideningtightening of the Castilla, Vasconia, and VasconiaOriente differentials, and decreased from $18.45 per bbl inwere comparable to the prior quarter
•General and administrative (“G&A”) expenses before stock-based compensation increased by 22% compared to the second quarter of 2022 due to higher costs attributed to optimization projects and decreased by 15% fromfor the first quarter of 2024 decreased by 15% due to lower legal fees and information technology expenses compared to the first quarter of 2023 and decreased by 14% from the prior quarter due to lower legal fees and lower headcount
•Capital additions for the secondfirst quarter of 20232024 were $65.6$55.3 million an increase of 1% compared to the second quarter of 2022, and decreased 8% from$71.1 million in the first quarter of 2023 due to the accelerationcost optimization of the 20232024 drilling program and $39.2 million in the firstprior quarter of 2023due to lower drilling activity
| (Thousands of U.S. Dollars, unless otherwise indicated) | |
(Thousands of U.S. Dollars, unless otherwise indicated) | |
(Thousands of U.S. Dollars, unless otherwise indicated) | (Thousands of U.S. Dollars, unless otherwise indicated) | Three Months Ended June 30, | | Three Months Ended March 31, | | Six Months Ended June 30, | | | | | Three Months Ended March 31, | Three Months Ended December 31, |
| | 2023 | 2022 | % Change | | 2023 | | 2023 | 2022 | % Change | | | | | | | | 2024 | 2023 | % Change | 2023 |
Average Daily Volumes (BOPD) | Average Daily Volumes (BOPD) | | | | | |
Consolidated | Consolidated | |
Consolidated | |
Consolidated | |
Working Interest (“WI”) Production Before Royalties | |
Working Interest (“WI”) Production Before Royalties | |
Working Interest (“WI”) Production Before Royalties | Working Interest (“WI”) Production Before Royalties | 33,719 | | 30,607 | | 10 | | | 31,611 | | | 32,671 | | 29,988 | | 9 | |
Royalties | Royalties | (6,515) | | (7,392) | | (12) | | | (6,085) | | | (6,301) | | (6,962) | | (9) | |
Production NAR | Production NAR | 27,204 | | 23,215 | | 17 | | | 25,526 | | | 26,370 | | 23,026 | | 15 | |
Decrease (Increase) in Inventory | Decrease (Increase) in Inventory | 67 | | (368) | | (118) | | | (355) | | | (143) | | (236) | | 39 | |
Sales(1) | Sales(1) | 27,271 | | 22,847 | | 19 | | | 25,171 | | | 26,227 | | 22,790 | | 15 | |
| Net (Loss) Income | Net (Loss) Income | $ | (10,825) | | $ | 52,972 | | (120) | | | $ | (9,700) | | | $ | (20,525) | | $ | 67,091 | | (131) | |
Net (Loss) Income | |
Net (Loss) Income | |
| Operating Netback | Operating Netback | |
Operating Netback | |
Operating Netback | |
Oil Sales | |
Oil Sales | |
Oil Sales | Oil Sales | $ | 157,902 | | $ | 205,785 | | (23) | | | $ | 144,190 | | | $ | 302,092 | | $ | 380,354 | | (21) | |
Operating Expenses | Operating Expenses | (48,491) | | (39,494) | | 23 | | | (41,369) | | | (89,860) | | (74,429) | | 21 | |
| Transportation Expenses | Transportation Expenses | (3,691) | | (2,513) | | 47 | | | (3,066) | | | (6,757) | | (5,347) | | 26 | |
Transportation Expenses | |
Transportation Expenses | |
Operating Netback(2) | Operating Netback(2) | $ | 105,720 | | $ | 163,778 | | (35) | | | $ | 99,755 | | | $ | 205,475 | | $ | 300,578 | | (32) | |
| G&A Expenses Before Stock-Based Compensation | |
G&A Expenses Before Stock-Based Compensation | |
G&A Expenses Before Stock-Based Compensation | G&A Expenses Before Stock-Based Compensation | $ | 9,549 | | $ | 7,847 | | 22 | | | $ | 11,196 | | | $ | 20,745 | | $ | 15,626 | | 33 | |
G&A Stock-Based Compensation Expense | G&A Stock-Based Compensation Expense | 317 | | 1,989 | | (84) | | | 1,500 | | | 1,817 | | 6,546 | | (72) | |
G&A Expenses, Including Stock-Based Compensation | G&A Expenses, Including Stock-Based Compensation | $ | 9,866 | | $ | 9,836 | | — | | | $ | 12,696 | | | $ | 22,562 | | $ | 22,172 | | 2 | |
| Adjusted EBITDA(2) | Adjusted EBITDA(2) | $ | 84,522 | | $ | 140,113 | | (40) | | | $ | 88,677 | | | $ | 173,199 | | $ | 259,491 | | (33) | |
Adjusted EBITDA(2) | |
Adjusted EBITDA(2) | |
| Funds Flow From Operations(2) | |
Funds Flow From Operations(2) | |
Funds Flow From Operations(2) | Funds Flow From Operations(2) | $ | 53,106 | | $ | 103,625 | | (49) | | | $ | 60,016 | | | $ | 113,122 | | $ | 190,935 | | (41) | |
| Capital Expenditures | Capital Expenditures | $ | 65,565 | | $ | 65,199 | | 1 | | | $ | 71,062 | | | $ | 136,627 | | $ | 106,682 | | 28 | |
Capital Expenditures | |
Capital Expenditures | |
(1) Sales volumes represent production NAR adjusted for inventory changes.
(2)
(2) Non-GAAP measuresmeasures.
Operating netback, EBITDA, adjusted EBITDA, and funds flow from operations are non-GAAP measures that do not have any standardized meaning prescribed under GAAP. Management views these measures as financial performance measures. Investors are cautioned that these measures should not be construed as alternatives to oil sales, net (loss) income or other measures of financial performance as determined in accordance with GAAP. Our method of calculating these measures may differ from other companies and, accordingly, may not be comparable to similar measures used by other companies. Disclosure of each non-GAAP financial measure is preceded by the corresponding GAAP measure so as not to imply that more emphasis should be placed on the non-GAAP measure.
Operating netback, as presented, is defined as oil sales less operating and transportation expenses. Management believes that operating netback is a useful supplemental measure for management and investors to analyze financial performance and provides an indication of the results generated by our principal business activities prior to the consideration of other income and expenses. A reconciliation from oil sales to operating netback is provided in the table above.
EBITDA, as presented, is defined as net (loss) income adjusted for depletion, depreciation and accretion (“DD&A”) expenses, interest expense and income tax expense. Adjusted EBITDA, as presented, is defined as EBITDA adjusted for non-cash lease expense, lease payments, unrealized foreign exchange gain or loss, stock-based compensation expense, or recovery, unrealized derivative instrumentsother gain or loss and other gain.financial instruments loss. Management uses this supplemental measure to analyze performance and income generated by our principal business activities prior to the consideration of how non-cash items affect that income and believes that this financial measure is useful supplemental information for investors to analyze our performance and our financial results. A reconciliation from net (loss) income to EBITDA and adjusted EBITDA is as follows:
| | |
| | | Three Months Ended June 30, | | Three Months Ended March 31, | | Six Months Ended June 30, | | | | | | Three Months Ended March 31, | | Three Months Ended December 31, |
(Thousands of U.S. Dollars) | (Thousands of U.S. Dollars) | 2023 | 2022 | | 2023 | | 2023 | 2022 | | (Thousands of U.S. Dollars) | | | | | | 2024 | 2023 | | 2023 |
Net (loss) income | Net (loss) income | $ | (10,825) | | $ | 52,972 | | | $ | (9,700) | | | $ | (20,525) | | $ | 67,091 | | |
Adjustments to reconcile net (loss) income to EBITDA and Adjusted EBITDA | Adjustments to reconcile net (loss) income to EBITDA and Adjusted EBITDA | | |
DD&A expenses | DD&A expenses | 56,209 | | 42,216 | | | 51,721 | | | 107,930 | | 83,179 | | |
DD&A expenses | |
DD&A expenses | |
Interest expense | Interest expense | 12,678 | | 12,194 | | | 11,836 | | | 24,514 | | 24,322 | | |
Income tax expense | Income tax expense | 33,732 | | 38,666 | | | 32,883 | | | 66,615 | | 78,206 | | |
EBITDA (non-GAAP) | EBITDA (non-GAAP) | $ | 91,794 | | $ | 146,048 | | | $ | 86,740 | | | $ | 178,534 | | $ | 252,798 | | |
Non-cash lease expense | Non-cash lease expense | 1,109 | | 747 | | | 1,144 | | | 2,253 | | 1,158 | | |
Lease payments | Lease payments | (636) | | (388) | | | (606) | | | (1,242) | | (732) | | |
Unrealized foreign exchange (gain) loss | (8,062) | | 4,341 | | | 514 | | | (7,548) | | (498) | | |
Foreign exchange (gain) loss | |
Stock-based compensation expense | Stock-based compensation expense | 317 | | 1,989 | | | 1,500 | | | 1,817 | | 6,546 | | |
Unrealized derivative instruments (gain) loss | — | | (12,624) | | | — | | | — | | 219 | | |
Other gain | — | | — | | | (615) | | | (615) | | — | | |
Other (gain) loss | |
| Financial instruments loss | |
Financial instruments loss | |
Financial instruments loss | |
Adjusted EBITDA (non-GAAP) | Adjusted EBITDA (non-GAAP) | $ | 84,522 | | $ | 140,113 | | | $ | 88,677 | | | $ | 173,199 | | $ | 259,491 | | |
Funds flow from operations, as presented, is defined as net (loss) income adjusted for DD&A expenses, deferred income tax expense, or recovery, stock-based compensation expense, or recovery, amortization of debt issuance costs, non-cash lease expense, lease payments, unrealized foreign exchange gain or loss, derivative instrumentsother gain or loss cash settlement on derivativeand financial instruments and other gain.loss. Management uses this financial measure to analyze performance and income generated by our principal business activities prior to the consideration of how non-cash items affect that income and believes that this financial measure is also useful supplemental information for investors to analyze performance and our financial results. A reconciliation from net (loss) income to funds flow from operations is as follows:
| | |
| | | Three Months Ended June 30, | | Three Months Ended March 31, | | Six Months Ended June 30, | | | | | Three Months Ended March 31, | | Three Months Ended December 31, |
(Thousands of U.S. Dollars) | (Thousands of U.S. Dollars) | 2023 | 2022 | | 2023 | | 2023 | 2022 | (Thousands of U.S. Dollars) | | | | | | 2024 | 2023 | | 2023 |
Net (loss) income | Net (loss) income | $ | (10,825) | $ | 52,972 | | $ | (9,700) | | $ | (20,525) | | $ | 67,091 | |
Adjustments to reconcile net (loss) income to funds flow from operations | Adjustments to reconcile net (loss) income to funds flow from operations | |
DD&A expenses | DD&A expenses | 56,209 | 42,216 | | 51,721 | | 107,930 | | 83,179 | |
DD&A expenses | |
DD&A expenses | |
| Deferred income tax expense | |
Deferred income tax expense | |
Deferred income tax expense | Deferred income tax expense | 13,975 | 13,241 | | 15,277 | | 29,252 | | 31,954 | |
Stock-based compensation expense | Stock-based compensation expense | 317 | 1,989 | | 1,500 | | 1,817 | | 6,546 | |
Amortization of debt issuance costs | Amortization of debt issuance costs | 1,019 | 1,131 | | 781 | | 1,800 | | 2,018 | |
Non-cash lease expense | Non-cash lease expense | 1,109 | 747 | | 1,144 | | 2,253 | | 1,158 | |
Lease payments | Lease payments | (636) | (388) | | (606) | | (1,242) | | (732) | |
Unrealized foreign exchange (gain) loss | Unrealized foreign exchange (gain) loss | (8,062) | 4,341 | | 514 | | (7,548) | | (498) | |
Derivative instruments loss | — | 5,172 | | — | | — | | 26,611 | |
Cash settlements on derivative instruments | — | (17,796) | | — | | — | | (26,392) | |
Other gain | — | — | | (615) | | (615) | | — | |
| Other (gain) loss | |
Financial instruments loss | |
Funds flow from operations (non-GAAP) | Funds flow from operations (non-GAAP) | $ | 53,106 | $ | 103,625 | | $ | 60,016 | | $ | 113,122 | | $ | 190,935 | | Funds flow from operations (non-GAAP) | | | | | | $ | 74,307 | | $ | 60,016 | | | $ | | $ | 84,663 |
|
Additional Operational Results
| | |
| | | Three Months Ended June 30, | | Three Months Ended March 31, | | Six Months Ended June 30, | | | | | Three Months Ended March 31, | | Three Months Ended December 31, |
(Thousands of U.S. Dollars) | (Thousands of U.S. Dollars) | 2023 | 2022 | % Change | | 2023 | | 2023 | 2022 | % Change | (Thousands of U.S. Dollars) | | | | | | | 2024 | 2023 | % Change | | 2023 |
Oil sales | Oil sales | $ | 157,902 | | $ | 205,785 | | (23) | | | $ | 144,190 | | | $ | 302,092 | | $ | 380,354 | | (21) | |
Operating expenses | Operating expenses | 48,491 | | 39,494 | | 23 | | | 41,369 | | | 89,860 | | 74,429 | | 21 | |
Transportation expenses | Transportation expenses | 3,691 | | 2,513 | | 47 | | | 3,066 | | | 6,757 | | 5,347 | | 26 | |
Operating netback(1) | Operating netback(1) | 105,720 | | 163,778 | | (35) | | | 99,755 | | | 205,475 | | 300,578 | | (32) | |
| DD&A expenses | DD&A expenses | 56,209 | | 42,216 | | 33 | | | 51,721 | | | 107,930 | | 83,179 | | 30 | |
DD&A expenses | |
DD&A expenses | |
| G&A expenses before stock-based compensation | G&A expenses before stock-based compensation | 9,549 | | 7,847 | | 22 | | | 11,196 | | | 20,745 | | 15,626 | | 33 | |
G&A expenses before stock-based compensation | |
G&A expenses before stock-based compensation | |
G&A stock-based compensation expense | G&A stock-based compensation expense | 317 | | 1,989 | | (84) | | | 1,500 | | | 1,817 | | 6,546 | | (72) | |
Foreign exchange loss (gain) | 4,707 | | 2,722 | | 73 | | | 1,702 | | | 6,409 | | (1,003) | | 739 | |
Derivative instruments loss | — | | 5,172 | | (100) | | | — | | | — | | 26,611 | | (100) | |
Other gain | — | | — | | — | | | (615) | | | (615) | | — | | 100 | |
Severance | |
Foreign exchange (gain) loss | |
Other (gain) loss | |
Financial instruments loss | |
Interest expense | Interest expense | 12,678 | | 12,194 | | 4 | | | 11,836 | | | 24,514 | | 24,322 | | 1 | |
| | | | | | | 87,902 | |
| | 83,460 | | 72,140 | | 16 | | | 77,340 | | | 160,800 | | 155,281 | | 4 | |
| Interest income | |
Interest income | |
Interest income | Interest income | 647 | | — | | 100 | | | 768 | | | 1,415 | | — | | 100 | |
| Income before income taxes | Income before income taxes | 22,907 | | 91,638 | | (75) | | | 23,183 | | | 46,090 | | 145,297 | | (68) | |
Income before income taxes | |
Income before income taxes | |
| Current income tax expense | 19,757 | | 25,425 | | (22) | | | 17,606 | | | 37,363 | | 46,252 | | (19) | |
Current income tax expense (recovery) | |
Current income tax expense (recovery) | |
Current income tax expense (recovery) | |
Deferred income tax expense | Deferred income tax expense | 13,975 | | 13,241 | | 6 | | | 15,277 | | | 29,252 | | 31,954 | | (8) | |
| 33,732 | | 38,666 | | (13) | | | 32,883 | | | 66,615 | | 78,206 | | (15) | |
| | | | | | | 17,395 | |
Net (loss) income | Net (loss) income | $ | (10,825) | | $ | 52,972 | | (120) | | | $ | (9,700) | | | $ | (20,525) | | $ | 67,091 | | (131) | |
| Sales Volumes (NAR) | |
Sales Volumes (NAR) | |
Sales Volumes (NAR) | Sales Volumes (NAR) | |
| Total sales volumes, BOPD | Total sales volumes, BOPD | 27,271 | | 22,847 | | 19 | | | 25,171 | | | 26,227 | | 22,790 | | 15 | |
| | Total sales volumes, BOPD | |
| Total sales volumes, BOPD | |
| Brent Price per bbl | |
Brent Price per bbl | |
Brent Price per bbl | Brent Price per bbl | $ | 77.73 | | $ | 111.98 | | (31) | | | $ | 82.10 | | | $ | 79.91 | | $ | 104.94 | | (24) | |
| Consolidated Results of Operations per bbl Sales Volumes NAR | Consolidated Results of Operations per bbl Sales Volumes NAR | |
Consolidated Results of Operations per bbl Sales Volumes NAR | |
Consolidated Results of Operations per bbl Sales Volumes NAR | |
Oil sales | |
Oil sales | |
Oil sales | Oil sales | $ | 63.63 | | $ | 98.98 | | (36) | | | $ | 63.65 | | | $ | 63.64 | | $ | 92.21 | | (31) | |
Operating expenses | Operating expenses | 19.54 | | 19.00 | | 3 | | | 18.26 | | | 18.93 | | 18.04 | | 5 | |
Transportation expenses | Transportation expenses | 1.49 | | 1.21 | | 23 | | | 1.35 | | | 1.42 | | 1.30 | | 9 | |
Operating netback(1) | Operating netback(1) | 42.60 | | 78.77 | | (46) | | | 44.04 | | | 43.29 | | 72.87 | | (41) | |
| DD&A expenses | DD&A expenses | 22.65 | | 20.31 | | 12 | | | 22.83 | | | 22.74 | | 20.17 | | 13 | |
DD&A expenses | |
DD&A expenses | |
| G&A expenses before stock-based compensation | G&A expenses before stock-based compensation | 3.85 | | 3.77 | | 2 | | | 4.94 | | | 4.37 | | 3.79 | | 15 | |
G&A expenses before stock-based compensation | |
G&A expenses before stock-based compensation | |
G&A stock-based compensation expense | G&A stock-based compensation expense | 0.13 | | 0.96 | | (86) | | | 0.66 | | | 0.38 | | 1.59 | | (76) | |
Foreign exchange loss (gain) | 1.90 | | 1.31 | | 45 | | | 0.75 | | | 1.35 | | (0.24) | | 663 | |
Derivative instruments loss | — | | 2.49 | | (100) | | | — | | | — | | 6.45 | | (100) | |
Severance | |
Foreign exchange (gain) loss | |
Other (gain) loss | |
| Other gain | — | | — | | — | | | (0.27) | | | (0.13) | | — | | 100 | |
Financial instruments loss | |
Financial instruments loss | |
Financial instruments loss | |
Interest expense | Interest expense | 5.11 | | 5.87 | | (13) | | | 5.22 | | | 5.16 | | 5.90 | | (13) | |
| | | | | | | 37.04 | |
| | 33.64 | | 34.71 | | (3) | | | 34.13 | | | 33.87 | | 37.66 | | (10) | |
| Interest income | |
Interest income | |
Interest income | Interest income | 0.26 | | — | | 100 | | | 0.34 | | | 0.30 | | — | | 100 | |
| Income before income taxes | Income before income taxes | 9.22 | | 44.06 | | (79) | | | 10.25 | | | 9.72 | | 35.21 | | (72) | |
Income before income taxes | |
Income before income taxes | |
| Current income tax expense | 7.96 | | 12.23 | | (35) | | | 7.77 | | | 7.87 | | 11.21 | | (30) | |
Current income tax expense (recovery) | |
Current income tax expense (recovery) | |
Current income tax expense (recovery) | |
Deferred income tax expense | Deferred income tax expense | 5.63 | | 6.37 | | (12) | | | 6.74 | | | 6.16 | | 7.75 | | (21) | |
| 13.59 | | 18.60 | | (27) | | | 14.51 | | | 14.03 | | 18.96 | | (26) | |
| | | | | | | 7.33 | |
Net (loss) income | Net (loss) income | $ | (4.37) | | $ | 25.46 | | (117) | | | $ | (4.26) | | | $ | (4.31) | | $ | 16.25 | | (127) | |
(1) Operating netback is a non-GAAP measure that does not have any standardized meaning prescribed under GAAP. Refer to “Financial and Operational Highlights—non-GAAP measures” for a definition of this measure.
Oil Production and Sales Volumes, BOPD
| | Three Months Ended June 30, | | Three Months Ended March 31, | | Six Months Ended June 30, |
| 2023 | 2022 | | 2023 | | 2023 | 2022 |
| | | | | Three Months Ended March 31, | |
| | | | | Three Months Ended March 31, | |
| | | | | Three Months Ended March 31, | | | Three Months Ended December 31, |
| | | | | | 2024 | | | | | | | | 2024 | 2023 | | 2023 |
Average Daily Volumes (BOPD) | Average Daily Volumes (BOPD) | | | | | |
WI Production Before Royalties | |
WI Production Before Royalties | |
WI Production Before Royalties | WI Production Before Royalties | 33,719 | | 30,607 | | | 31,611 | | | 32,671 | | 29,988 | |
Royalties | Royalties | (6,515) | | (7,392) | | | (6,085) | | | (6,301) | | (6,962) | |
Production NAR | Production NAR | 27,204 | | 23,215 | | | 25,526 | | | 26,370 | | 23,026 | |
Decrease (Increase) in Inventory | Decrease (Increase) in Inventory | 67 | | (368) | | | (355) | | | (143) | | (236) | |
Sales | Sales | 27,271 | | 22,847 | | | 25,171 | | | 26,227 | | 22,790 | |
| Royalties, % of WI Production Before Royalties | Royalties, % of WI Production Before Royalties | 19 | % | 24 | % | | 19 | % | | 19 | % | 23 | % |
Royalties, % of WI Production Before Royalties | |
Royalties, % of WI Production Before Royalties | | | | | | | 20 | % | 19 | % | | 20 | % |
Oil production NAR for the three and six months ended June 30, 2023, increased by 17% and 15%, respectively, comparedMarch 31, 2024, was comparable to the corresponding periodsperiod of 2022 due to successful drilling and workover campaigns in Acordionero, Costayaco and Moqueta fields in Colombia.2023.
Oil production NAR increased by 7%4% compared to the prior quarter for the same reasons mentioned above.as a result of our successful drilling and workover campaigns in Acordionero and Costayaco fields in Colombia and increased production in Charapa Norte field in Ecuador.
Royalties as a percentage of WI production for the three and six months ended June 30, 2023, decreased by 19% compared toMarch 31, 2024 were comparable with the corresponding periodsperiod of 2022 commensurate with the decrease in benchmark oil prices2023 and the price sensitive royalty regime in Colombia. Royalties as a percentage of WI production were comparable to the prior quarter.
The Midas blockBlock includes the Acordionero Chuira, and Ayombero oil fields,field, the Suroriente Block includes the Cohembi field, and the Chaza blockBlock includes the Costayaco and Moqueta oil fields. Ecuador includes the Charapa and Chanangue Blocks.
Realized price per bbl for the three andsix months ended June 30, 2023, decreasedMarch 31, 2024, increased by 36% and 31%, respectively,4% compared to the corresponding periodsperiod of 2022,2023, primarily as a result of a 31%due to lower quality and 24% decrease in Brent pricetransportation discounts. Castilla, Vasconia and higher differentials. For the threeOriente differentials decreased to $8.82, $5.05, andsix months ended June 30, 2023, Castilla differentials increased to $9.41 and $12.29 $8.02 per bbl from $7.82$15.17, $7.87, and $7.10$13.43 per bbl, respectively, in the corresponding periods of 2022 and Vasconia differentials increased to $5.53 and $6.70 per bbl from $5.09 and $4.35 per bbl, respectively, in the corresponding periods of 2022. respectively.
Compared to the prior quarter, the average realized price per bbl was comparable.decreased by 2%, primarily due to a decrease in Brent price.
Oil sales for the three and six months ended June 30, 2023, decreasedMarch 31, 2024, increased by 23% and 21%9% to $157.9$157.6 million, and $302.1 million, respectively, compared to the corresponding periodsperiod of 20222023, due to a 31% and 24% decrease in Brent priceCastilla, Vasconia, and higher CastillaOriente differentials and Vasconia differentials. Duringa 4% increase in sales volumes resulting from the first quartersale of 2023, we commenced oil salesinventory in Ecuador which contributed $1.8 million and $4.8 millionduring the current quarter compared to oil sales and were subject to a $11.43 and $12.43 per bbl Oriente differential for the three and six months ended June 30, 2023, respectively.corresponding period of 2023.
Compared to the prior quarter, oil sales increased by 10%2%, primarily asdue to a result of an 8%5% increase in sales volumes resulting from the sale of inventory in Ecuador and the narrowing of quality and transportation differentials, partiallya decrease in Castilla differential, offset by a 5% decrease in Brent price.higher Vasconia and Oriente differentials.
The following table shows the effect of changes in realized price and sale volumes on our oil sales for the three and six months ended June 30, 2023,March 31, 2024, compared to the prior quarter and the corresponding periodsperiod of 2022:2023:
| (Thousands of U.S. Dollars) | (Thousands of U.S. Dollars) | Second Quarter 2023 Compared with First Quarter 2023 | | Second Quarter 2023 Compared with Second Quarter 2022 | | Six Months Ended June 30, 2023 Compared with Six Months Ended June 30, 2022 |
(Thousands of U.S. Dollars) | |
(Thousands of U.S. Dollars) | |
Oil sales for the comparative period | Oil sales for the comparative period | $ | 144,190 | | | $ | 205,785 | | | $ | 380,354 | |
Realized sales price decrease effect | (56) | | | (87,731) | | | (135,636) | |
Oil sales for the comparative period | |
Oil sales for the comparative period | |
Realized sales price (decrease) increase effect | |
Realized sales price (decrease) increase effect | |
Realized sales price (decrease) increase effect | |
Sales volumes increase effect | Sales volumes increase effect | 13,768 | | | 39,848 | | | 57,374 | |
Oil sales for the three and six months ended June 30, 2023 | $ | 157,902 | | | $ | 157,902 | | | $ | 302,092 | |
Sales volumes increase effect | |
Sales volumes increase effect | |
Oil sales for the three months ended March 31, 2024 | |
Oil sales for the three months ended March 31, 2024 | |
Oil sales for the three months ended March 31, 2024 | |
| | | | | | | | | | | | | |
(U.S. Dollars per bbl Sales Volumes NAR) | First Quarter 2024 Compared with Fourth Quarter 2023 | | First Quarter 2024 Compared with First Quarter 2023 | | |
| | | | | |
| | | | | |
| | | | | |
Average realized price, net of transportation expenses for the comparative period | $ | 65.79 | | | $ | 62.30 | | | |
Decrease in benchmark prices | (1.09) | | | (0.34) | | | |
(Increase) decrease in quality and transportation discounts | (0.02) | | | 3.09 | | | |
Increase in transportation expenses | (0.21) | | | (0.58) | | | |
Average realized price, net of transportation expenses for the three months ended March 31, 2024 | $ | 64.47 | | | $ | 64.47 | | | |
| | | | | |
Average realized price, net of transportation expenses as a % of Brent | 79 | % | | 79 | % | | |
Operating Netback
| | Three Months Ended June 30, | | Three Months Ended March 31, | | Six Months Ended June 30, |
| | | | | Three Months Ended March 31, | |
| | | | | Three Months Ended March 31, | |
| | | | | Three Months Ended March 31, | | | Three Months Ended December 31, |
(Thousands of U.S. Dollars) | (Thousands of U.S. Dollars) | 2023 | 2022 | | 2023 | | 2023 | 2022 | (Thousands of U.S. Dollars) | | | | | | 2024 | 2023 | | 2023 |
| Oil Sales | Oil Sales | $ | 157,902 | | $ | 205,785 | | | $ | 144,190 | | | $ | 302,092 | | $ | 380,354 | |
Oil Sales | |
Oil Sales | |
Transportation Expenses | Transportation Expenses | (3,691) | | (2,513) | | | (3,066) | | | (6,757) | | (5,347) | |
| 154,211 | | 203,272 | | | 141,124 | | | 295,335 | | 375,007 | |
| | | | | | 152,993 | |
Operating Expenses | Operating Expenses | (48,491) | | (39,494) | | | (41,369) | | | (89,860) | | (74,429) | |
Operating Netback(1) | Operating Netback(1) | $ | 105,720 | | $ | 163,778 | | | $ | 99,755 | | | $ | 205,475 | | $ | 300,578 | |
| (U.S. Dollars Per bbl Sales Volumes NAR) | (U.S. Dollars Per bbl Sales Volumes NAR) | |
(U.S. Dollars Per bbl Sales Volumes NAR) | |
(U.S. Dollars Per bbl Sales Volumes NAR) | |
Brent | |
Brent | |
Brent | Brent | $ | 77.73 | | $ | 111.98 | | | $ | 82.10 | | | $ | 79.91 | | $ | 104.94 | |
Quality and Transportation Discounts | Quality and Transportation Discounts | (14.10) | | (13.00) | | | (18.45) | | | (16.27) | | (12.73) | |
Average Realized Price | Average Realized Price | 63.63 | | 98.98 | | | 63.65 | | | 63.64 | | 92.21 | |
Transportation Expenses | Transportation Expenses | (1.49) | | (1.21) | | | (1.35) | | | (1.42) | | (1.30) | |
Average Realized Price Net of Transportation Expenses | Average Realized Price Net of Transportation Expenses | 62.14 | | 97.77 | | | 62.30 | | | 62.22 | | 90.91 | |
Operating Expenses | Operating Expenses | (19.54) | | (19.00) | | | (18.26) | | | (18.93) | | (18.04) | |
Operating Netback(1) | Operating Netback(1) | $ | 42.60 | | $ | 78.77 | | | $ | 44.04 | | | $ | 43.29 | | $ | 72.87 | |
(1) Operating netback is a non-GAAP measure that does not have any standardized meaning prescribed under GAAP. Refer to “Financial and Operational Highlights—non-GAAP measures” for a definition and reconciliation of this measure.
Operating expenses for the three months ended June 30, 2023,March 31, 2024, increased by 23%17% to $48.5 million or by $0.54$2.16 per bbl to $19.54$20.42 per bbl compared to the corresponding period of 2022,2023. This was primarily as a result of $1.94due to $1.74 per bbl higher workovers and $0.42 per bbl higher lifting costs associated with preventative maintenance activities which were partially offset by lower environmental activities and equipment rental in Ecuador, partially offset by $1.40 per bbl of lower workovers.expenses.
Operating expenses for the six months ended June 30, 2023, increased by 21% to $89.9 million or by $0.89 per bbl to $18.93 per bbl, compared to the corresponding period of 2022, primarily as a result of $1.62 higher lifting costs associated with environmental activities, equipment rental in Ecuador and water injection equipment mobilization, offset by $0.73 per bbl lower workovers.
Compared to the prior quarter, operating expenses increased by 17% or $1.28 per bbl2% from $41.4$47.6 million, or $18.26 per bbl, primarily due to $1.35higher workovers offset by lower lifting costs related to power generation optimizations in Costayaco, Acordionero and Cohembi fields. On a per bbl basis, operating expenses decreased by $0.33 due to higher lifting costs attributed to road maintenance and environmental activities, partially offset by $0.07 per bbl lower workovers.sales volumes in the current quarter.
Transportation expenses
We have options to sell our oil through multiple pipelines and trucking routes. Each option has varying effects on realized sales price and transportation expenses. The following table shows the percentage of oil volumes we sold in Colombia and Ecuador using each option for the three and six months ended June 30,March 31, 2024 and 2023, and 2022, and the prior quarter:
| | Three Months Ended June 30, | | Three Months Ended March 31, | | Six Months Ended June 30, | |
| 2023 | 2022 | | 2023 | | 2023 | 2022 | |
| | | | | Three Months Ended March 31, | |
| | | | | Three Months Ended March 31, | |
| | | | | Three Months Ended March 31, | |
| | | | | | 2024 | |
| | | | | | 2024 | |
| | | | | | 2024 | |
Volume transported through pipeline | |
Volume transported through pipeline | |
Volume transported through pipeline | Volume transported through pipeline | 1 | % | — | % | | 2 | % | | 2 | % | — | % | |
Volume sold at wellhead | Volume sold at wellhead | 46 | % | 48 | % | | 45 | % | | 46 | % | 48 | % | |
Volume sold at wellhead | |
Volume sold at wellhead | |
Volume transported via truck to sales point | Volume transported via truck to sales point | 53 | % | 52 | % | | 53 | % | | 52 | % | 52 | % | |
| 100 | % | 100 | % | | 100 | % | | 100 | % | 100 | % | |
Volume transported via truck to sales point | |
Volume transported via truck to sales point | |
| | | | | | 100 | |
| | | | | | 100 | |
| | | | | | 100 | |
Volumes transported through pipeline or via truck receive a higher realized price, but incur higher transportation expenses. Conversely, volumes sold at the wellhead have the opposite effect of a lower realized price, offset by lower transportation expenses.
Transportation expenses for the three and six months ended June 30, 2023,March 31, 2024, increased by 47%50% and 26%16% or $0.58 and $0.21 per bbl to $3.7$4.6 million and $6.8 million, respectively,or $1.93 per bbl, compared to the corresponding periodsperiod of 20222023 and the prior quarter, respectively, due to higher transportation tariffs affecting Acordionero sales, and the utilization of new transportation routes for new exploration wellslonger distance delivery points in response to low river levels in Colombia and Ecuador sales.
On a per bbl basis, transportation expenses increasedcaused by 23% and 9% to $1.49 and $1.42 for the three and six months ended June 30, 2023, respectively, compared to the corresponding periods of 2022 for the same reason mentioned above.El Niño.
Transportation expenses increased by 20% from $3.1 million in the prior quarter due to increased trucking costs from using longer distance delivery points and depreciation of U.S. dollar against the Colombian peso. On a per bbl basis transportation costs increased by $0.14 from the prior quarter for the same reasons mentioned above.
DD&A Expenses
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Three Months Ended March 31, | | Six Months Ended June 30, | | |
| 2023 | 2022 | | 2023 | | 2023 | 2022 | | |
DD&A Expenses, thousands of U.S. Dollars | $ | 56,209 | | $ | 42,216 | | | $ | 51,721 | | | $ | 107,930 | | $ | 83,179 | | | |
DD&A Expenses, U.S. Dollars per bbl | 22.65 | | 20.31 | | | 22.83 | | | 22.74 | | 20.17 | | | |
DD&A expenses for the three and six months ended June 30, 2023, increased by 33% and 30% or by $2.34 and $2.57 per bbl, respectively, due to increased production and higher costs in the depletable base compared to the corresponding periods of 2022.
DD&A expenses increased 9% compared to the prior quarter and decreased by $0.18 per bbl when compared to the prior quarter, due to higher production. | | | | | | | | | | | | | | | | | | | | | |
| | | | | Three Months Ended March 31, | | Three Months Ended December 31, | | |
| | | | | | 2024 | 2023 | | 2023 | | |
DD&A Expenses, thousands of U.S. Dollars | | | | | | $ | 56,150 | | $ | 52,196 | | | $ | 52,635 | | | |
DD&A Expenses, U.S. Dollars per bbl | | | | | | $ | 23.66 | | $ | 23.04 | | | $ | 22.93 | | | |
GDD&A Expensesexpenses for the three months ended March 31, 2024, increased by 8% or by $0.62 per bbl due to higher costs in the depletable base compared to the corresponding period of 2023.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Three Months Ended March 31, | | Six Months Ended June 30, |
(Thousands of U.S. Dollars) | 2023 | 2022 | % Change | | 2023 | | 2023 | 2022 | % Change |
G&A Expenses Before Stock-Based Compensation | $ | 9,549 | | $ | 7,847 | | 22 | | | $ | 11,196 | | | $ | 20,745 | | $ | 15,626 | | 33 | |
G&A Stock-Based Compensation Expense | 317 | | 1,989 | | (84) | | | 1,500 | | | 1,817 | | 6,546 | | (72) | |
G&A Expenses, Including Stock-Based Compensation | $ | 9,866 | | $ | 9,836 | | — | | | $ | 12,696 | | | $ | 22,562 | | $ | 22,172 | | 2 | |
(U.S. Dollars Per bbl Sales Volumes NAR) | | | | | | | | | |
G&A Expenses Before Stock-Based Compensation | $ | 3.85 | | $ | 3.77 | | 2 | | | $ | 4.94 | | | $ | 4.37 | | $ | 3.79 | | 15 | |
G&A Stock-Based Compensation Expense | 0.13 | | 0.96 | | (86) | | | 0.66 | | | 0.38 | | 1.59 | | (76) | |
G&A Expenses, Including Stock-Based Compensation | $ | 3.98 | | $ | 4.73 | | (16) | | | $ | 5.60 | | | $ | 4.75 | | $ | 5.38 | | (12) | |
DD&A expenses increased by 7% or by $0.73 per bbl when compared to the prior quarter due to higher costs in the depletable base, lower reserves and higher production during the current quarter.
Severance Expenses
For the three and six months ended June 30,March 31, 2024, severance expenses were $1.3 million compared with nil in the corresponding period of 2023 and the prior quarter as a result of headcount optimization. Severance expenses were recorded as incurred based on existing employee contracts, statutory requirements, completed negotiations and company policy.
G&A Expenses
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Three Months Ended March 31, | | Three Months Ended December 31, |
(Thousands of U.S. Dollars) | | | | | | | 2024 | 2023 | % Change | | 2023 |
G&A Expenses Before Stock-Based Compensation | | | | | | | $ | 9,516 | | $ | 11,196 | | (15) | | | $ | 11,072 | |
G&A Stock-Based Compensation Expense | | | | | | | 3,361 | | 1,500 | | 124 | | | 1,974 | |
G&A Expenses, Including Stock-Based Compensation | | | | | | | $ | 12,877 | | $ | 12,696 | | 1 | | | $ | 13,046 | |
(U.S. Dollars Per bbl Sales Volumes NAR) | | | | | | | | | | | |
G&A Expenses Before Stock-Based Compensation | | | | | | | $ | 4.01 | | $ | 4.94 | | (19) | | | $ | 4.82 | |
G&A Stock-Based Compensation Expense | | | | | | | 1.42 | | 0.66 | | 115 | | | 0.86 | |
G&A Expenses, Including Stock-Based Compensation | | | | | | | $ | 5.43 | | $ | 5.60 | | (3) | | | $ | 5.68 | |
G&A expenses before stock-based compensation increased for the three months ended March 31, 2024, decreased by 22% and 33% to $9.5 million and $20.7 million, respectively,15% or $0.93 per bbl primarily due to higher consulting costs andlower legal fees attributed to optimization projects whenand information technology expenses compared to the corresponding periodsperiod of 2022.2023.
G&A expenses after stock-based compensation for the three months ended March 31, 2024, increased by 1% compared to the corresponding period of 2023 due to share price appreciation in the current quarter. On a per bbl basis, G&A expenses before stock-based compensation increased by $0.08 and $0.58 per bbl to $3.85 and $4.37 per bbl, respectively, for the same reason mentioned above.
G&A expenses after stock-based compensation for the three months ended June 30, 2023 were comparable to the corresponding period of 2022 and decreased by $0.75$0.17 per bbl due to a lower share price and higher4% increase in sales volumes in the current quarter.
G&A expenses after stock-based compensation for the six months ended June 30, 2023, increased by 2% per bbl due to higher G&A expenses before stock-based compensation offset by a lower share price and decreased by $0.63 per bbl due to higher sales volumes when compared to the corresponding period of 2022.2023.
Compared to the prior quarter, G&A expenses before stock-based compensation decreased by 15%14% or $1.09 on a$0.81 per bbl basis due to lower legal expenses and information technology costs, partially offset by higher consulting fees attributed to optimization projects.lower headcount.
Compared to the prior quarter, G&A expenses after stock-based compensation decreased by 22%1% or $1.62 on a$0.25 per bbl basis due to lower G&A expenses before stock-based compensation and a lowerfor the same reason mentioned above, offset by share price appreciation in the secondfirst quarter of 2023.2024.
Foreign Exchange Gains and Losses
For the three and six months ended June 30, 2023,March 31, 2024, we had a $4.7$0.8 million and $6.4 million lossgain on foreign exchange compared to a $2.7$1.7 million loss and a $1.0 million gain in the corresponding periodsperiod of 2022, respectively,2023 and a $1.7$3.7 million loss in the prior quarter. Accounts receivable,payable, taxes receivable and payable and deferred income taxes accounts payable, and prepaid equity forward (“PEF”) are considered monetary items and require translation from local currencies to U.S. dollar functional currency at each balance sheet date. This translation was the primary source of the foreign exchange gains and losses in the periods.
The following table presents the change in the U.S. dollar against the Colombian peso and Canadian dollar for the three and six months ended June 30, 2023,March 31, 2024, and 2022:2023:
| | Three Months Ended June 30, | | | Six Months Ended June 30, |
| 2023 | 2022 | | | 2023 | 2022 |
| | | | | | Three Months Ended March 31, | |
| | | | | | Three Months Ended March 31, | |
| | | | | | Three Months Ended March 31, | |
| | | | | | | 2024 | | | | | | | | | 2024 | 2023 |
Change in the U.S. dollar against the Colombian peso | Change in the U.S. dollar against the Colombian peso | weakened by | strengthened by | | | weakened by | strengthened by | Change in the U.S. dollar against the Colombian peso | | | | | | | strengthened by | weakened by |
9% | 10% | | | 13% | 4% | | | | | | | 1% | 4% |
Change in the U.S. dollar against the Canadian dollar | Change in the U.S. dollar against the Canadian dollar | weakened by | strengthened by | | | weakened by | strengthened by | Change in the U.S. dollar against the Canadian dollar | | | | | | | strengthened by | weakened by |
2% | 3% | | | 2% | 2% | | | | | | | 2% | —% |
Income Tax Expense
| | Three Months Ended June 30, | | Six Months Ended June 30, |
| | | Three Months Ended March 31, | |
| | | Three Months Ended March 31, | |
| | | Three Months Ended March 31, | |
(Thousands of U.S. Dollars) | (Thousands of U.S. Dollars) | 2023 | 2022 | | 2023 | 2022 | (Thousands of U.S. Dollars) | | | | 2024 | 2023 |
Income before income tax | Income before income tax | $ | 22,907 | | $ | 91,638 | | | $ | 46,090 | | $ | 145,297 | |
| Current income tax expense | |
Current income tax expense | |
Current income tax expense | Current income tax expense | $ | 19,757 | | $ | 25,425 | | | $ | 37,363 | | $ | 46,252 | |
Deferred income tax expense | Deferred income tax expense | 13,975 | | 13,241 | | | 29,252 | | 31,954 | |
Income tax expense | Income tax expense | $ | 33,732 | | $ | 38,666 | | | $ | 66,615 | | $ | 78,206 | |
| Effective tax rate | Effective tax rate | 147 | % | 42 | % | | 145 | % | 54 | % |
Effective tax rate | |
Effective tax rate | | | | | 100 | % | 142 | % |
|
Current income tax expense was $37.4$3.9 million for the sixthree months ended June 30, 2023,March 31, 2024, compared to $46.3$17.6 million in the corresponding period in 2022,of 2023, primarily due to a decrease in taxable income.
The deferred income tax expense for the sixthree months ended June 30,March 31, 2023, was $29.3$15.3 million mainly as a result of tax depreciation being higher than accounting depreciation and the use of tax losses to offset taxable income in Colombia.
The deferred income tax expense for the three months ended March 31, 2024, was $13.5 million primarily as a result of tax depreciation being higher than accounting depreciation and the use of tax losses to offset taxable income in Colombia.
For the sixthree months ended June 30,March 31, 2024, the difference between the effective tax rate of 100% and the 45% Colombian tax rate was primarily due to an increase in the impact of foreign taxes, increase in the valuation allowance, non-deductible foreign translation adjustments, non-deductible royalty in Colombia, non-deductible stock-based compensation and other permanent differences.
For the three months ended March 31, 2023, the difference between the effective tax rate of 145%142% and the 50% Colombian tax rate was primarily due to an increase in non-deductible foreign exchangetranslation adjustments, the impact of foreign taxes, non-deductible royaltiesroyalty in Colombia and non-deductible stock-based compensation.increase in the valuation allowance. These were partially offset by a decrease in valuation allowance.
For the six months ended June 30, 2022, the difference between the effective tax rate of 54% and the 35% Colombian tax rate was primarily due to $26.6 million of hedging loss, $24.3 million of financing cost related to Senior Notes, and $21.5 million of corporate costs, which were incurred in a jurisdictions where no tax benefit is recognized.other permanent differences.
Net (Loss) Income and Funds Flow from Operations (a Non-GAAP Measure)
| (Thousands of U.S. Dollars) | (Thousands of U.S. Dollars) | Second Quarter 2023 Compared with First Quarter 2023 | % change | Second Quarter 2023 Compared with Second Quarter 2022 | % change | Six Months Ended June 30, 2023 Compared with Six Months Ended June 30, 2022 | % change |
Net (loss) income for the comparative period | $ | (9,700) | | | $ | 52,972 | | | $ | 67,091 | | |
(Thousands of U.S. Dollars) | |
(Thousands of U.S. Dollars) | |
Net income (loss) for the comparative period | |
Net income (loss) for the comparative period | |
Net income (loss) for the comparative period | |
Increase (decrease) due to: | |
Increase (decrease) due to: | |
Increase (decrease) due to: | Increase (decrease) due to: | |
Sales price | Sales price | (56) | | | (87,731) | | | (135,636) | | |
Sales price | |
Sales price | |
Sales volumes | |
Sales volumes | |
Sales volumes | Sales volumes | 13,768 | | | 39,848 | | | 57,374 | | |
Expenses: | Expenses: | |
Expenses: | |
Expenses: | |
Operating | |
Operating | |
Operating | Operating | (7,122) | | | (8,997) | | | (15,431) | | |
Transportation | Transportation | (625) | | | (1,178) | | | (1,410) | | |
Transportation | |
Transportation | |
Cash G&A | |
Cash G&A | |
Cash G&A | Cash G&A | 1,647 | | | (1,702) | | | (5,119) | | |
Net lease payments | Net lease payments | (65) | | | 114 | | | 585 | | |
| Net lease payments | |
Net lease payments | |
Severance | |
Severance | |
Severance | |
Interest, net of amortization of debt issuance costs | |
Interest, net of amortization of debt issuance costs | |
Interest, net of amortization of debt issuance costs | Interest, net of amortization of debt issuance costs | (604) | | | (596) | | | (410) | | |
Realized foreign exchange | Realized foreign exchange | (11,581) | | | (14,388) | | | (14,462) | | |
Cash settlements on derivative instruments | — | | | 17,796 | | | 26,392 | | |
Realized foreign exchange | |
Realized foreign exchange | |
| Current taxes | |
| Current taxes | |
| Current taxes | Current taxes | (2,151) | | | 5,668 | | | 8,889 | | |
Interest income | Interest income | (121) | | | 647 | | | 1,415 | | |
Interest income | |
Interest income | |
Net change in funds flow from operations(1) from comparative period | |
Net change in funds flow from operations(1) from comparative period | |
Net change in funds flow from operations(1) from comparative period | Net change in funds flow from operations(1) from comparative period | (6,910) | | | (50,519) | | | (77,813) | | |
Expenses: | Expenses: | |
Expenses: | |
Expenses: | |
Depletion, depreciation and accretion | |
Depletion, depreciation and accretion | |
Depletion, depreciation and accretion | Depletion, depreciation and accretion | (4,488) | | | (13,993) | | | (24,751) | | |
| Deferred tax | |
| Deferred tax | Deferred tax | 1,302 | | | (734) | | | 2,702 | | |
Amortization of debt issuance costs | (238) | | | 112 | | | 218 | | |
| Deferred tax | |
Amortization of deferred financing fees | |
Amortization of deferred financing fees | |
Amortization of deferred financing fees | |
Stock-based compensation | Stock-based compensation | 1,183 | | | 1,672 | | | 4,729 | | |
Derivative instruments gain or loss, net of settlements on derivative instruments | — | | | (12,624) | | | 219 | | |
Stock-based compensation | |
Stock-based compensation | |
| Other financial instruments | |
| Other financial instruments | |
| Other financial instruments | |
Unrealized foreign exchange | Unrealized foreign exchange | 8,576 | | | 12,403 | | | 7,050 | | |
Other gain | (615) | | | — | | | 615 | | |
Unrealized foreign exchange | |
Unrealized foreign exchange | |
Other loss (gain) | |
Other loss (gain) | |
Other loss (gain) | |
Net lease payments | Net lease payments | 65 | | | (114) | | | (585) | | |
Net change in net (loss) income | (1,125) | | | (63,797) | | | (87,616) | | |
Net lease payments | |
Net lease payments | |
Net change in net income (loss) | |
Net change in net income (loss) | |
Net change in net income (loss) | |
Net loss for the current period | Net loss for the current period | $ | (10,825) | | 12% | $ | (10,825) | | 120% | $ | (20,525) | | 131% |
Net loss for the current period | |
Net loss for the current period | |
(1)Funds flow from operations is a non-GAAP measure that does not have any standardized meaning prescribed under GAAP. Refer to "Financial and Operational Highlights—non-GAAP measures" for a definition and reconciliation of this measure.
Capital expenditures during the three months ended June 30, 2023,March 31, 2024, were $65.6$55.3 million:
| (Millions of U.S. Dollars) | (Millions of U.S. Dollars) | Colombia | Ecuador | Total | (Millions of U.S. Dollars) | Colombia | Ecuador | Total |
Exploration | Exploration | $ | 3.6 | | $ | 7.5 | | $ | 11.1 | |
Development: | Development: | |
Drilling and Completions | Drilling and Completions | 38.9 | | — | | 38.9 | |
Drilling and Completions | |
Drilling and Completions | |
Facilities | Facilities | 9.5 | | 0.8 | | 10.3 | |
Workovers | 2.8 | | — | | 2.8 | |
| Other | Other | 2.5 | | — | | 2.5 | |
| $ | 57.3 | | $ | 8.3 | | $ | 65.6 | |
Other | |
Other | |
| $ | |
During the three months ended June 30, 2023,March 31, 2024, we commenced drilling the following wells in Colombia:
| | | | | |
| Number of wells (Gross and Net) |
Colombia | |
| |
Development | 4.011 | |
Service | 3.02 | |
| 7.013 | |
| |
| |
| |
We spud four11 development and threetwo water injection wells, of which twoeight were in Midas Block and five in Chaza Block. Of the development wells spud during the quarter, threeten were completed, and one was in-progress as of June 30, 2023.March 31, 2024. During the three months ended June 30, 2023,March 31, 2024, we have not spud any wells in Ecuador.
Liquidity and Capital Resources
| | | As at | | As at |
(Thousands of U.S. Dollars) | (Thousands of U.S. Dollars) | June 30, 2023 | | % Change | | December 31, 2022 | (Thousands of U.S. Dollars) | March 31, 2024 | | % Change | | December 31, 2023 |
Cash and Cash Equivalents | Cash and Cash Equivalents | $ | 68,529 | | | (46) | | | $ | 126,873 | |
| | Credit Facility | |
| Credit Facility | |
| Credit Facility | |
| 6.25% Senior Notes | |
6.25% Senior Notes | |
6.25% Senior Notes | 6.25% Senior Notes | $ | 271,909 | | | (3) | | | $ | 279,909 | |
| 7.75% Senior Notes | 7.75% Senior Notes | $ | 300,000 | | | — | | | $ | 300,000 | |
7.75% Senior Notes | |
7.75% Senior Notes | |
| 9.50% Senior Notes | |
9.50% Senior Notes | |
9.50% Senior Notes | |
We believe that our capital resources, including cash on hand and cash generated from operations and available borrowings under the credit facility, will provide us with sufficient liquidity to meet our strategic objectives and planned capital program for the next 12 months, given the current oil price trends and production levels. We may also access capital markets to pursue financing or refinance our Senior Notes.financing. In accordance with our investment policy, available cash balances are held in our primary cash management banks or may be invested in U.S. or Canadian government-backed federal, provincial or state securities or other money market instruments with high credit ratings and short-term liquidity. We believe that our current financial position provides us with the flexibility to respond to both internal growth opportunities and those available through acquisitions. We intend to pursue growth opportunities and acquisitions from time to time, which may require significant capital, be located in basins or countries beyond our current operations, involve joint ventures, or be sizable compared to our current assets and operations.
At June 30,As at December 31, 2023, we had a $36.4 million balance outstanding under the Company’s credit facility with a market lender infacility. On February 6, 2024, the global commodities industry. The credit facility has a borrowing baseoutstanding balance of up to $150$36.4 million with $100 million readily available at June 30, 2023,was fully re-paid and a potential option for an additional $50 million of borrowings upon mutual agreement by the lender and us. The credit facility bears interest based on a risk-free rate posted by the Federal Reserve Bank of New York plus a margin of 6.00% and a credit-adjusted spread of 0.26%. Undrawn amounts under the credit facility bear interest at 2.10% per annum, based on the amount available. The credit facility is secured by our Colombian assets and economic rights. It has a final maturity date of August 15, 2024, which may be extended to February 18, 2025, upon the satisfaction of certain conditions. The availability period for the draws under the credit facility expires on August 20, 2023. As of June 30, 2023, the credit facility remained undrawn.was terminated.
UnderOn February 6, 2024, we issued an additional $100.0 million of 9.50% Senior Notes due October 2029 (the “new 9.50% Senior Notes”), and received cash proceeds of $88.0 million. The new 9.50% Senior Notes have the same terms and provisions as the previously issued $487.6 million 9.50% Senior Notes except for the issue price. The new 9.50% Senior Notes accrue interest from October 20, 2023, the date of issuance of the credit facility, we are requiredpreviously issued 9.50% Senior Notes. The Company received cash payment of $2.8 million related to maintain compliance with the following financial covenants:
i.Coverage ratio of at least 150%, calculated using the net present valueaccrued interest of the consolidated future cash flows of the Company up to the final maturity date discounted at 10% over the outstanding amount on the credit facility at each reporting period. The net present value of the consolidated future cash flows of the Company is required to be based on 80% of the prevailing ICE Brent forward strip.
ii.Prepayment Life Coverage Ratio of at least 150%, calculated using the estimated aggregate value of commodities to be delivered under the commercial contract from the commencement date to the final maturity date based on 80% of the prevailing ICE Brent forward strip, adjusted for quality and transportation discounts over the outstanding amount on the credit facility including interest and all other costs payable to the lender.
iii.Liquidity ratio where the Company’s projected sources of cash exceed projected uses of cash by at least 1.15 times in each quarter period included in one year consolidated future cash flows. The future cash flows represent forecasted expected cash flows from operations, less anticipated capital expenditures and certain other adjustments. The commodity pricing assumption used in this covenant is required to be 90% of the prevailing Brent strip forward for the projected future cash flows.new 9.50% Senior Notes.
At June 30, 2023,March 31, 2024, we had a $271.9$24.8 million aggregate principal amount of 6.25% Senior Notes due 2025 and a $300.0(“6.25% Senior Notes”), $24.2 million aggregate principal amount of 7.75% Senior Notes due 2027, outstanding.
During the three and six months ended June 30, 2023, we re-purchased in the open market nil and $8.0$587.6 million respectively,aggregate principal amount of 6.25%9.50% Senior Notes for cash consideration of $6.8 million. The re-purchase resulted in a $1.1 million gain, which included the write-off of deferred financing fees of $0.1 million. The re-purchased 6.25% Senior Notes were not canceled and held by the Company as treasury bonds as of June 30, 2023.due 2029, outstanding.
During the year ended December 31, 2022,2023, we implemented a share re-purchase program (the “2022“2023 Program”) through the facilities of the Toronto Stock Exchange (“TSX”) and eligible alternative trading platforms in Canada.Canada or United States. Under the 20222023 Program, we wereare able to purchase at prevailing market prices up to 3,603,3963,234,914 shares of Common Stock, representing approximately 10% of the issued and outstanding shares of Common Stockpublic float as of August 22, 2022.October 20, 2023. Re-purchases are subject to prevailing market conditions, the trading price of our Common Stock, our financial performance and other conditions. The 2022 Program has expired when 10% share maximum was reached in May 2023.
During the three and six months ended June 30, 2023,March 31, 2024, we re-purchased 20,439 and 1,328,650886,666 shares at a weighted average price of $5.27 and $8.155.58 per share (three and sixshare. During the three months ended June 30, 2022 - nil). As of June 30, 2023, all 3,603,396 sharesMarch 31, 2024, we cancelled 28,612 held as treasury stock, were cancelled.shares as at December 31, 2023 and cancelled 858,054 shares re-purchased during the three months ended March 31, 2024. During the period from October 20, 2023 to April 29, 2024, we have re-purchased 1,997,500 shares under the 2023 Program.
Cash Flows
The following table presents our primary sources and uses of cash and cash equivalents and restricted cash and cash equivalents for the periods presented:
| | Six Months Ended June 30, |
| Three Months Ended March 31, | | | Three Months Ended March 31, |
(Thousands of U.S. Dollars) | (Thousands of U.S. Dollars) | 2023 | 2022 | (Thousands of U.S. Dollars) | 2024 | 2023 |
Sources of cash and cash equivalents: | Sources of cash and cash equivalents: | |
Net (loss) income | $ | (20,525) | | $ | 67,091 | |
Net loss | |
Net loss | |
Net loss | |
Adjustments to reconcile net loss to Adjusted EBITDA(1) and funds flow from operations(1) | Adjustments to reconcile net loss to Adjusted EBITDA(1) and funds flow from operations(1) | |
DD&A expenses | |
DD&A expenses | |
DD&A expenses | DD&A expenses | 107,930 | | 83,179 | |
| Interest expense | Interest expense | 24,514 | | 24,322 | |
Interest expense | |
Interest expense | |
Income tax expense | Income tax expense | 66,615 | | 78,206 | |
Other loss | — | | — | |
Non-cash lease expenses | Non-cash lease expenses | 2,253 | | 1,158 | |
Lease payments | Lease payments | (1,242) | | (732) | |
Unrealized foreign exchange gain | (7,548) | | (498) | |
Foreign exchange (gain) loss | |
Stock-based compensation expense | Stock-based compensation expense | 1,817 | | 6,546 | |
Unrealized derivative instruments loss | — | | 219 | |
Other gain | Other gain | (615) | | — | |
| Adjusted EBITDA(1) | Adjusted EBITDA(1) | 173,199 | | 259,491 | |
Current income tax expense | Current income tax expense | (37,363) | | (46,252) | |
Contractual interest and other financing expenses | Contractual interest and other financing expenses | (22,714) | | (22,304) | |
Realized foreign exchange loss | |
Funds flow from operations(1) | Funds flow from operations(1) | 113,122 | | 190,935 | |
Proceeds from issuance of Senior Notes, net of issuance costs | |
Proceeds from exercise of stock options | Proceeds from exercise of stock options | 5 | | 1,285 | |
| Net changes in assets and liabilities from operating activities | — | | 56,329 | |
Foreign exchange gain on cash, cash equivalents and restricted cash and cash equivalents | 5,759 | | — | |
Foreign exchange gain on cash and cash equivalents and restricted cash and cash equivalents | |
Foreign exchange gain on cash and cash equivalents and restricted cash and cash equivalents | |
Foreign exchange gain on cash and cash equivalents and restricted cash and cash equivalents | |
Changes in non-cash investing working capital | Changes in non-cash investing working capital | 9,088 | | 10,964 | |
| 127,974 | | 259,513 | |
| 176,637 | |
| Uses of cash and cash equivalents: | Uses of cash and cash equivalents: | |
Uses of cash and cash equivalents: | |
Uses of cash and cash equivalents: | |
Additions to property, plant and equipment | |
Additions to property, plant and equipment | |
Additions to property, plant and equipment | Additions to property, plant and equipment | (136,627) | | (106,682) | |
Net changes in assets and liabilities from operating activities | Net changes in assets and liabilities from operating activities | (25,836) | | — | |
Repayment of debt | Repayment of debt | — | | (67,525) | |
| Re-purchase of Common Stock | (10,825) | | — | |
Re-purchase of Senior Notes | (6,805) | | — | |
Debt issuance costs | Debt issuance costs | (1,873) | | — | |
Purchase of Senior Notes | |
Re-purchase of shares of Common Stock | |
Settlement of asset retirement obligations | Settlement of asset retirement obligations | (156) | | (242) | |
Lease payments | Lease payments | (3,035) | | (1,261) | |
Foreign exchange loss on cash, cash equivalents and restricted cash and cash equivalents | — | | (680) | |
| (185,157) | | (176,390) | |
Net (decrease) increase in cash and cash equivalents and restricted cash and cash equivalents | $ | (57,183) | | $ | 83,123 | |
Foreign exchange loss on cash, and cash equivalents and restricted cash and cash equivalents | |
| (112,137) | |
Net increase (decrease) in cash and cash equivalents and restricted cash and cash equivalents | |
(1) Adjusted EBITDA and funds flow from operations are non-GAAP measures which do not have any standardized meaning prescribed under GAAP. Refer to “Financial and Operational Highlights - non-GAAP measures” for a definition and reconciliation of this measure.
One of the primary sources of variability in our cash flows from operating activities is the fluctuation in oil prices. Sales volume changes, costs related to operations and debt servicetransactions also impact cash flows. Our cash flows from operating activities are
also impacted by foreign currency exchange rate changes. During the three and six months ended June 30, 2023,March 31, 2024, funds flow from operations decreasedincreased by 49% and 41%, respectively,24% compared to the corresponding periodsperiod of 2022,2023, primarily due to an increase in sales volumes, lower transportation and quality discounts, and lower tax expenses. This is partially offset by higher operating costs and a decrease in Brent price, higher quality and transportation discounts, higher operating costs and realized foreign exchange loss.price.
Critical Accounting Policies and Estimates
Our critical accounting policies and estimates are disclosed in Item 7 of our 20222023 Annual Report on Form 10-K and have not changed materially since the filing of that document.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Commodity price risk
Our principal market risk relates to oil prices. Oil prices are volatile and unpredictable and influenced by concerns over world supply and demand imbalance and many other market factors outside of our control. Our revenues are from oil sales at ICE Brent adjusted for quality differentials.
Foreign currency risk
Foreign currency risk is a factor for our Company but is ameliorated to a certain degree by the nature of expenditures and revenues in the countries where we operate. Our reporting currency is U.S. dollars and 100% of our revenues are related to the U.S. dollar price of Brent adjusted for quality differentials. We receive 100% of our revenues in U.S. dollars and the majority of our capital expenditures is in U.S. dollars or is based on U.S. dollar prices. The majority of value added taxes, operating and G&A expenses in Colombia are in the local currency. Certain G&A expenses incurred at our head office in Canada are denominated in Canadian dollars. While we operate in South America exclusively, the majority of our acquisition expenditures have been valued and paid in U.S. dollars.
Additionally, foreign exchange gains and losses result primarily from the fluctuation of the U.S. dollar to the Colombian peso due to our accounts payable, current and deferred tax assets and liabilities which are monetary assets and liabilities denominated in the local currency of the Colombian foreign operations. As a result, a foreign exchange gain or loss must be calculated on conversion to the U.S. dollar functional currency.
Interest Rate Risk
Interest rate risk is the risk that future cash flows will fluctuate as a result of changes in market interest rates. We are exposedAs our Senior Notes bear interest at fixed rates, we have no material exposure to interest rate fluctuations on our credit facility, which bears floating rates of interest. At June 30, 2023, our outstanding balance under the credit facility was nil (December 31, 2022 - nil).fluctuations.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
We have established disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, or Exchange Act). Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by Gran Tierra in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report, as required by Rule l3a-15(b) of the Exchange Act. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that Gran Tierra’s disclosure controls and procedures were effective as of June 30, 2023.March 31, 2024.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the quarter ended June 30, 2023,March 31, 2024, that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.
PART II - Other Information
Item 1. Legal Proceedings
See Note 8 in the Notes to the Condensed Consolidated Financial Statements (Unaudited) in Part I, Item 1 of this Quarterly Report on Form 10-Q, which is incorporated herein by reference, for any material developments with respect to matters previously reported in our Annual Report on Form 10-K for the year ended December 31, 2022,2023, and any material matters that have arisen since the filing of such report.
Item 1A. Risk Factors
There are numerous factors that affect our business and results of operations, many of which are beyond our control. In addition to information set forth in this quarterly report on Form 10-Q, including in Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, you should carefully read and consider the factors set out in Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022.2023. These risk factors could materially affect our business, financial condition and results of operations. The unprecedented nature of ongoing conflicts in several parts of the current pandemic andworld, the volatility in the worldwide economy and oil and gas industry may make it more difficult to identify all the risks to our business, results of operations and financial condition and the ultimate impact of identified risks.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
| | | | | | | | | | | | | | | |
| (a) Total Number of Shares Purchased | (b) Average Price Paid per Share (1) | (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | (d) Maximum Number of Shares that May Yet be Purchased Under the Plans or Programs (2) | |
April 1-30, 2023 | — | | $ | — | | — | | 20,439 | | |
May 1-31, 2023 | 20,439 | | 5.27 | | 20,439 | | — | | |
June 1-30, 2023 | — | | — | | — | | — | | |
Total | 20,439 | | $ | 5.27 | | 20,439 | | — | | |
| | | | | | | | | | | | | | |
| (a) Total Number of Shares Purchased | (b) Average Price Paid per Share (1) | (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | (d) Maximum Number of Shares that May Yet be Purchased Under the Plans or Programs (2) |
January 1-31, 2024 | 314,426 | | $ | 5.27 | | 314,426 | | 1,878,684 | |
February 1-29, 2024 | 286,120 | | $ | 5.28 | | 286,120 | | 1,592,564 | |
March 1-31, 2024 | 286,120 | | $ | 6.22 | | 286,120 | | 1,306,444 | |
Total | 886,666 | | $ | 5.58 | | 886,666 | | 1,306,444 | |
(1) (1)Including commission fees paid to the broker to re-purchase the shares of Common Stock.
(2)On August 29, 2022,October 20, 2023, we announced that we intended to implementimplemented a share re-purchase program (the “2022“2023 Program”) through the facilities of the TSX, the NYSE American and eligible alternative trading platforms in Canada commencing September 1, 2022, and ending on August 31,or United States. Under the 2023 or earlier ifProgram, the 10% share maximumCompany is reached. We were able to purchase for cancellation at prevailing market prices up to 3,603,3963,234,914 shares of Common Stock, representing approximately 10% of our issued and outstanding shares of Common Stockthe public float as of August 22, 2022.October 20, 2023. The 2022 program expired when the2023 Program will expire on November 2, 2024, or earlier if 10% share maximum was reached in May 2023.is reached.
Item 5. Other Information
During the three months ended June 30, 2023,March 31, 2024, no director or Section 16 officer adopted or terminated any Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements (in each case, as defined in Item 408(a) of Regulation S-K).
Item 6. Exhibits
| | | | | | | | | | | |
Exhibit No. | Description | | Reference |
| | | |
3.1 | | | Incorporated by reference to Exhibit 3.3 to the Current Report on Form 8-K, filed with the SEC on November 4, 2016 (SEC File No. 001-34018). |
| | | |
3.2 | | | Incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K, filed with the SEC on May 5, 2023 (SEC File No. 001-34018). |
| | | |
3.3 | | | Incorporated by reference to Exhibit 3.4 to the Current Report on Form 8-K, filed with the SEC on November 4, 2016 (SEC File No. 001-34018). |
| | | |
3.4 | | | Incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed with the SEC on August 4, 2021 (SEC File No. 001-34018). |
| | | |
3.5 | | | Incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed with the SEC on July 9, 2018 (SEC File No. 001-34018). |
| | | |
3.5 | | | Incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed with the SEC on August 4, 2021 (SEC File No. 001-34018). |
| | | |
31.1 | | | Filed herewith. |
| | | |
31.2 | | | Filed herewith. |
| | | |
32.1 | | | Furnished herewith. |
101.INS XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH Inline XBRL Taxonomy Extension Schema Document
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document
104.The cover page from Gran Tierra Energy Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2023,March 31, 2024, formatted in Inline XBRL (included within the Exhibit 101 attachments).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
GRAN TIERRA ENERGY INC.
| | | | | | | | |
Date: AugustMay 1, 20232024 | | /s/ Gary S. Guidry |
| | By: Gary S. Guidry |
| | President and Chief Executive Officer |
| | (Principal Executive Officer) |
| | | | | | | | |
Date: AugustMay 1, 20232024 | | /s/ Ryan Ellson |
| | By: Ryan Ellson |
| | Executive Vice President and Chief Financial Officer |
| | (Principal Financial and Accounting Officer) |