GTE - Earnings call transcript Q1 2020 | Gran Tierra Energy Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning, ladies and gentlemen, and welcome to Gran Tierra's Energy's results conference call for the first quarter 2020. My name is Chris, and I'll be your coordinator for today. [Operator Instructions].

I would like to remind everyone that this conference call is being webcast and recorded today, Tuesday, May 12, 2020, at 11:00 a.m. Eastern Standard time.

certain as include non-GAAP as may measures. financial discussion forward-looking well information certain Today's the operational to earnings we to measures refer Please and call. today's for reconciliations any disclaimers discussed and on issued update important with information regards this of non-GAAP yesterday release press barrel equivalent, amounts or Per are working a on of before sale oil interest royalties. BOE, based

Tierra is Finally, Energy. consent or rebroadcasting copying Energy, Inc. this earnings Any written call the is this the expressly call property of without Gran of Gran Tierra forbidden of

turn Gran I conference ahead. over Guidry, now -- will the Chief call go to call and President Executive please Gary Tierra. Guidry, Officer of Mr.

Gary Guidry

And Thank you, Ryan Ellson, me Executive Quarter name First Call. our today Vice Operator. Tierra's our My Financial Officer. Chief Operating President Berthelet, morning Officer. Good is Tony Gary to and Officer; with Gran Results Chief President and Conference welcome are XXXX Guidry, and and Executive Chief

yesterday first website. which and to detailed control. immediate the flexibility. quarter can downturn our a the included through able but environment. We've information we living clearly and are operate price out will you're press issued position update We've appreciate our and you actions are to dynamic of our we The for things We lives. available has few base, have laser-focused release the is that last for come to calling times ourselves well. business the we in I'm respond both we that Since oil we built XX% hope about confident the this in taken We in on even We're this and a today daily volatile industry stronger. asset challenging results, how of first that on industry, been XXXX healthy months quarter unprecedented our for be

program We cost higher our actively barrels. by have XXXX cut managing are our shutting significantly and capital production in

reservoir damage production or these can are shut-in lasting quickly we wells return confident impacts. without to We

G&A We to our reductions. cost our sheet and operating balance guarding also with hedges continue are and drive our

on focused allocation current we very environment capital base competitive conventional to ability believe control timing. are long-term the our low with withstand decline, advantage and our and preserving oil We challenging value. assets a We have to

now he'll I some Ryan? of turn call Ryan, over to will the financial discuss highlights. and our

Ryan Ellson

Good morning, everyone.

was oil first Our of production XXXX. fourth per down in the the XX% barrels quarter from day, XX,XXX quarter

higher wells volumes farmers' a Southern were the QX, to mechanical at that in by remain due Putumayo development X low-price this wells During impacted blockade, off-line production blocks local suspended were awaiting environment. during These and off-line Suroriente cost region production expected shut-in of routine deferred PUD drilling, in to are workovers.

During preserving quickly decline in free shifted significant the and value the quarter, world flow in balance Tierra protecting long-term growth focus to the from generation sheet cash its and prices. to response oil Gran production

date. This costs renegotiation has with shift operating and capital lowering initiatives personnel additional and volumes, of on discounts include rental further in operating focus progress made optimization of to been Significant operating investments optimization. was accomplished deferring material Furthermore, lowering G&A costs. through through adjusted and contracts oil achieved vendor the and equipment production cost

have of All Columbia reduction respectively. Canada Colombian team Gran approximately dollars. denominated costs are in Tierra's XX% costs salary estimate. taken Canadian retainer pesos. In The of the depreciation and Colombian of denominated Board we recent G&A operating dollar from are Colombian Directors addition reducing from Canadian has peso. peso in original Tierra's and within and budget benefiting XX% to company's costs costs, are the the declined The U.S. a G&A is fees, and XX% operating majority versus executive Gran in dollar in

activity costs to levels. number being that the lower anticipated implemented are a will company's consistent measures further efficiency reduce of cost addition, G&A In with optimization and levels

result these XX% to XX% company's a G&A expect in of changes We original in budget. compared to the to costs reduction

to a investments, primarily of of $XX tax unrealized the compared funds in the XXXX $XX was in was valuation million $XXX the income Adjusted net oil the loss of revenues from lower net million loss quarter, derecognition goodwill acquisitions on impairment and and collapse quarter. in our prices, million. million were relating operations For with Due asset. deferred the XXXX to prior and from flow EBITDA a $XX

half near-term additional expenditures low-price XXXX, complement Gran Brent spend. we The totaled XXXX compared to XXXX approximately securing currently Brent of production the hedges quarter, costless million, $XX.X in of protect downside production barrels prior the in oil place, entered price of Tierra's X,XXX collars. have a into our new environment and During hedges hedges to QX further XX% by against we covers decrease XX% first Capital which hedged. of oil

quickly price issued term. oil income touch regulations the the new capital maintenance Given minimal received from Colombian during order Ministry companies on Decree government the planned authorities to tax funds only the recovery tax Finance expedite is the that by of receivables the issued designed remainder low-oil in environment, to by of value-added such was of expenditures ensure like the downturn. the this one by company's also the industry to the are of to in XXX and tax short XXXX and deferred, rest of I'd program support the XXXX. for

million $XX approximately in receive XXXX. to expect We

environment Although markets, competitive prices low decline, base, we our oil believe asset withstand low-cost ability our challenging in structure. to current has conventional to allocation volatile advantage we Gran Tierra with capital facing and low our the control a are

operational capital reducing cash flows cost We have swiftly sheet reductions our through to aggressive actions changes. structural taken balance have protect organizational cash our XXXX targeted program and and by

client We operational and monitor flexibility should price financial environment further our our will necessary. have and the plans leverage and to continue near long-term to become adjust it

of be we the and of to in of redetermination this we Lastly, in May borrowing this the our are expect process completed base, year.

our highlights. over the turn operational Operating call to Chief now Officer, I'll to Tony, discuss

Remi Berthelet

everyone. morning, good and Ryan, Thanks,

We outbreak the majority in for fields workover the defer all to expenditures took has resulting capital oil Gran shut-in rigs. COVID-XX following with mentioned, suspended X and in Tierra and negative swift decrease netbacks the and remainder Ryan looked action stack to the production oil to prices. large at current prices, drilling uneconomic temporarily of of or XXXX the As and demand

restart precautions have all We to of across these taken assets. costs minimize

focused to of on and ultimate at Moqueta, XX, during Acordionero, and production a remain At XX% interest We assets, the and long-term December working proved recovery of Tierra's flooding water quarter, development core of represent all ongoing which drilled maximize XXXX. optimizing program waterflood wells Costayaco of we X total our reserves our directed Gran as Acordionero, value.

placed XX days. completed efficiencies in and with XX well drilled, on Acordionero production We continue to drilling achieve the

at costs and only for this drilled below well $X.X also Acordionero million per Wells Acordionero consistently capital $X capital We drilled total completed a XX cost have million. year. been delivered of at

recovery. XX% contract by drilling price negotiations vendors forecast wells further of XX% a restarts workovers production. the Additional to with oil the are with restore approximately required to drilling X total quarter, infill once end to cost At reduce of

per XX,XXX have at we block, workovers. to defer to the Brent the prior prices low the these Cohembi was due barrel, producing workovers approximately level initiating In field price to consider $XX to elected current per the oil these late The the to water day would underway water positively optimizations. above water farmers a will expand and Suroriente We barrels oil recover of field blockades. February X,XXX Prior expansion environment. If was XXXX, capacity injection pump from program. to in injection the phase continuing blockades activities injection were gross under to combined XX,XXX facilities to increased processing treatment, day. to Cohembi expansion barrels is a water to per respond expected X-phased The and of boost

In a allocation withstand swiftly summary, control ability given current our decline competitive conventional and advantage oil believe to to structure. action our the assets, taken challenging flows XXXX cash environment have protect reducing program. low the we've low-cost capital balance we We decisive and our capital to base sheet in by

back the turn answer now ahead. and Operator, any be questions. operator, call go we'll happy to I'll please to the

Operator

[Operator Capital of David BMO the Markets. with comes from Round line Instructions]. first our And question

David Round

expecting And got question moment. down to because Can I the X you these this a the you've the wells I the reasonable QX. obviously, trending down there's be another quarter, I with please? start in reason is, I workovers, see really at was mentioned cost guess and

quite seen follow-up. any you high. and wondering, power have I'm seen there securing and is So consistent of improvement. before? seems issue any a reliable it have ESP maybe issue improvement you power a look, trips And So a were an source?

think I down previous moment. got a at day That you've from about the was announcement. X,XXX a barrels

Can thinking there. production maybe And day, across or downtime a at lose Part I'm terms day prices. wrong I'll Because just are QX us if you we're additional of So about costs? But what and workover actually which forecasting you add workovers? C. pay doing to in probably could X,XXX you barrels quite correct in a quickly that just X,XXX these wells, production back wells got would if about even quickly remind talking a surely barrels you've what some X me

Remi Berthelet

David. Tony Great. Yes. It's here. Thanks,

we unbudgeted we So in some be primarily ahead manage due forward to wanted move to of artificial however, proactively a to in they to injector able did causing the the just to were with because the related associated voidage of Two first sand sure, lift that workover be -- workovers, quarter, to activity those issues conversions get were equipment. failure replacement.

accelerated with capital did work. associated So come some with that or costs that

weeks how of we're generation. we year that, and power of X the terms with a managing power first ran the stable In

reliability had and a time, we've improved the since February. we those power our unrelated We've them then of were linked been of -- and events. end that two a without two which would recovered been And have power from of being being series generation. Since have our of outages failure that

So down, X additional of to to repair. outage we'll unfortunate the at talked about, power the wells be wells end go has -- looking again, we caused of part some that which quarter as we've that the

next we that ultimately, ESP looking really the about a wells but costs, In flow cash quarter here, and are at. that on budget money. high-volume in terms that's cost an cleanout remove activity, $XXX,XXX yes, of spending rough of just kind the there's we're what terms of and it's would sand Capital repair managing for of some depending to in range, agree

yes, finance we would some So initiate when quick with to pretty of we be activity payout, determine will closely work and that these again.

the that as a X,XXX end in But of X,XXX currently what the per since failures day of QX oil mentioned, of of barrels quarter. we couple that to awaiting in ultimately, oil X,XXX additional had terms we're down per you -- looks barrels are still of have In day. like, workovers.

should of XX,XXX give some barrels day where QX above of based indication we're at. on you oil of that per average a So

Ryan Ellson

ground the the of not that, to price a huge some oil a on current these And just barrels in out workovers, environment, the of hurry but then return on a David, in make can we're we in $XX environment. price get

part difficult it It And are make that rig just to of COVID-XX returns just is the is in maximize restrictions does to -- it within -- more timing there So just restrictions. future. even around. move a workover also, country,

the And X reassess next those workovers. in X so weeks, to we'll

Operator

with question Hubbard And James the from Numis. of comes our next line

James Hubbard

Two questions, please.

a would workovers, of the a directly So your obviously, royalty, than into is costs the you seem when ago can that get lot variable have months et expected variable, your we it, cetera. couple you in discount, more maybe cut

then or I'm so it then workover And less number is your that your of we you the question, I'm much $XX, price ground main the in of as that's second radically think wrong, around, $XX a your oil is cash this my conserving the it, a in may be And that me alluded drivers a so cash more at worth answering I as to you're lot maximize this and in expanding question, thinking but decision if in you de oil wondering, so wondering in environment, current -- because on or that value barrel. netback, if just playing get cash bottom I'm mode seems and minimis, could we'll is a more you philosophy wondering what you're flows? that you you way? terms future, by leave different line, to there. wondering fine if it a the the going where breakeven is can $XX the and think what more if last I'm as have your of on of in just now possible, stay now to to is? I'm of current stay be Or about just

Ryan Ellson

Thanks, take both I'll those. Yes. Jim.

the The is reasonable running is first year. for one, We've been case number. stays for our remainder at yes, of a -- the $XX the this base $XX number Brent oil year

refunds, once just tax hurry et VAT in so huge there, And of you we're with refunds, for know, cetera, the We're that, question, Because comfortable for barrels environment. are sheet. spot going out manage barrels to they're second on. those not in our can get balance you're with the ground as a good. income we this gone the And

And rather keep them so in just now. we'd ground right the

Operator

the comes from NAU Securities. next question of line Demichelis Our Alejandro with

Alejandro Demichelis

couple of refund, kind of just cost, run A and On here. you of the follow-up James' having second press mention also the release, cash do the what question in And you could from situation the be cash the you now if time? kind potential that at would without questions, cost to question the breach VAT the numbers think point the in do is covenant. your this redetermination in of your then and

the indication also on redetermination waiver the on kind some us maybe covenants, how please. going any those on the can So discussions are and of give loan you of

Ryan Ellson

costs, to we've higher anything fields at cost of cost look shut-in Okay. fields. combination, the you -- cash our With -- respect all if higher the relatively

think we're the $X operating now, XP are to assets, that's Acordionero Makena reserves. right on producing a And of in we costs and our Costyaco, from blended So forward range XX% our going is just be our about going basis. X which core

control from those gives are that done driving control Differentials you lot around the of of lots And we in operating we a think basis, down. Obviously, good on And have that, cash so moving Brent an really we've can't a the changes. idea reductions structural But Colombia. those price. can't we job cost and costs. been

conversations the positive Management we'll we'll I very question I the And financial we know think have of the statements. the been But by it we'll clear outcome way in have that On on redetermination, pretty say up come optimistic this and second month. the -- the a would it's constructive. is solution. end have with

Alejandro Demichelis

there, the headroom, headroom confirmed? that the those of liquidity you terms have use been in of And lines, kind have that credit

Ryan Ellson

part of No. No. all process. It's the redetermination

Operator

comes Our Schachter with of from Schachter line next the Josef question Energy.

Josef Schachter

And and thank the having conference call you questions. for my taking

upside, the come got in of you've when is shutdown in terms back. unknown would of In the Suroriente terms that that

start you You XX production QX prices late to the different areas $XX, would see year? you recover per What as of need mentioned Brent looking do prices And recover in, from Are how raising at much increments workovers. USD $XX, those if do Acordionero, looking at QX, you then this to say, $XX? production? could they let's

Ryan Ellson

Josef. Thanks, Yes. It's Yes. Ryan.

think headline oil just I the very on as for been WGI has differentials. -- -- but not volatile, the Brent number also and well,

I some north Acordionero really, be So like see we -- think Suroriente. would $XX then and stability before the order of would to and

think And north so $XX. of I

down job be would in we Tony drilling. cost mentioned, So million. at team $XX the the of getting for look done $XX to -- new we range, $X that great a has will they at program think Acordionero, sub-$X

environment. ground economic. very those are in those again, the accelerate So this of out really not But going barrels we're to

drilling, for So $XXs. low be I $XXs, -- it think to high resume would development

Gary Guidry

still that online Suroriente, a part that's with second That's farmers the the economics. just in to what issue comes on and is Ryan resolved, cocoa not fuel been said that's underway. issues add, addition driving really Josef, when to of

Josef Schachter

And where context? now, right production that to Okay. is just in put

Gary Guidry

Yes. XX,XXX, day. XX,XXX barrels a

Operator

question from our of comes Al And the Stanton RBC. with last line

Al Stanton

Yes.

moment. the to for ask doing average I thunder. quarter? my stolen just second actually to a at decent Would production was what as XX% XX% use was going Somebody's you the

Gary Guidry

Yes.

I good think a that's number.

Al Stanton

all concerns spoken but a of more are preserving you've value, about And some little long-term immediate. my

in leave some it's EBITDA. whilst just to the generate wondering, you for need some I'm days, reserves ground do the good better of So to

Is I as are what I well? bondholders So wondering keep with enough? it I'm is them what that And for interest, the the to the covenants long respect of do RBL? as the should your as just want? covenants? falling mean of foul about worry pitfalls the just paying Or you

Ryan Ellson

Yes.

to mentioned, But the As like work also, question, service as with to far these XXX% a it do. right. rig too, COVID-XX wells, far now, restrictions, on -- move be right over would as the if even we you're complicated I'd as EBITDA, wanted first

and north be then -- to of pricing, look would we those that I expect -- it's out. current at strip if like workovers. doing XX%, And at so X said, little And then weeks to we X a

exactly waiver the it definitely -- that lenders, the are as have on a to is we're incurrence-based event an with point second to not right. disclosed, balance. right on they And working And we're It on So those. that why then the get RBL, that's are covenants. and bonds, finding we're on is we do default, we covenants based then the maintenance if compliant,

Al Stanton

in mean layman's please? What does terms, that

Ryan Ellson

we're No. take We on debt. in just if just additional can't -- violation, we get

Operator

line And our Alexis from the next Stiefel. of comes question Panton with

Unidentified Analyst

of question of I a more here. question bondholder liquidity, a have on sort credit

cash. the million of quarter $XX finished with You about

Your accounts million. to receivable's $XX less down than

your had We had the pay a in of typical -- you is it time you suppliers. payable. which this pay like that type decline You of about in -- I looks suppliers quarter. with way nervous average big XXX-day calculate an suppliers, accounts issue it, the of sort have you And drop cycle during you your when accounts the

down. available line. I have about, $XX as the under looking, they're the you You to backward credit Obviously, ability have to that's incurrence which as imply million far but tests, calculate, subject take still them

of unlikely the it do today, As could seems so you quarter. after second

give the And context in the where on on color, you this, the terms to timing cash in us like loss respect on with XX can relation all of guess, finally, accounts in this coupon facility you looks your further a of fact expected down of during the us of have which $XX stand I think critical a here those? Have big liquidity? you the you you drawn receipts in flow the do as due, to, payment question. something XXXX more think, of and I you days notes, becoming liquidity of puzzle give and of a year, a bit a quarter? sense in So can to VAT I terms for million mentioned obviously in I alluded this payable, is credit

Ryan Ellson

we program, to aware. active a as very respect you're With QX the Yes. payables, had

And unwinding the those just of quarter. so is it payables in really

to more it's that. liquidity, -- be paid. would RBL. it's on drawn million million say next really $XXX nervous quarter. say we had still normal respect And it's this course. suppliers, We And I of payables that will end I we $XXX So have with on normal drawn course the results our wouldn't that at the is

Unidentified Analyst

you are sort make bonds Can with to the of market that coupon? us upcoming sense it? give trading of price the expecting a intentions at you a the Obviously, not your suggests is

Ryan Ellson

We to it. make fully expect

Operator

And comes of with Auctus question our Stephane the from next line Foucaud Advisors.

Stephane Foucaud

a had questions. few I operational

First, you day. of talked barrels about current XX,XXX a production XX,XXX,

situation Suroriente all a is that tax. question change, QX, Assuming the barrel? number assuming QX $XX on don't not change, for does on prices a that that a good Then

$XX So be Or QX. that? -- what that XQ, you you lastly, to that expect recover already you to talked QX, maintenance QX -- minimum million QX, again talked, about Have what in CapEx I or in environments, of some is remains in would more about $XX XXXX. it you less? VAT recovered QX the think, recovered be And

Remi Berthelet

happen as of policy wells relaxation, I'll has a with do until activity on with COVID $XX we Yes. will the already QX, going the right here. are understand At workover environment, -- production. on now. it's the mentioned, Ryan drive terms that better to that I'll take we what's waiting what activity question in price QX Tony take

this to part -- provide second quarter. for was fourth number So that's -- the sorry, difficult of With kind a to what question? respect on that guidance third any and it's of

Stephane Foucaud

that going assuming -- was the was again, as CapEx, around to the barrel... that $XX As VAT, before minimum

Remi Berthelet

Yes.

licensing do we the and for of maintenance So to the infrastructure, we the the projects. facilities to the do also of preparing but and rest minimum plan need capital of are just expenditures maintain a activity combination of for to that that future year some

so reactivate again So perspective. from associated that and we and continue continue get to to that started the spend some maintain just capital flexibility activity a there government to is that, we'll with regulatory

Stephane Foucaud

sub So it's, would what, say? XX, you

Remi Berthelet

me? Pardon

Stephane Foucaud

Just million? $XX for Sub sense to the some number. have of sort

Remi Berthelet

be that no. No, won't high. It

with probably we'll in rest million think of million associated year $X that I for be the those costs. the $X to

Stephane Foucaud

Yes.

Okay. And the talked whether the million lastly, VAT, was $XX around you about.

that QX, the to that's of still of call, QX? QX, on beginning the some have come I received you already think or in

Remi Berthelet

Yes.

We expect to come QX, QX. QX,

expect about X over months. $XX We the next million

Stephane Foucaud

tax Right. the to year, that And there it? in would be balance of be is no offset? cash is the Or corporate made tax,

Ryan Ellson

No cash, taxes. No. just Correct.

Operator

the line. not gentlemen, further questions And showing on any phone I'm

Gary Guidry

to you. like forward Thank look again Operator. progress. would you, next you to Thank on We our with to thank us ongoing Okay. for the quarter over joining once I everyone you speaking today. update

Operator

you call. your conference Ladies this participation. and gentlemen, Thank concludes today's for

You may now disconnect.

Gran Tierra Energy (GTE) 12 May 202020 Q1 Earnings call transcript