GTE - Earnings call transcript Q2 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 Second Quarter 2020. My name is Carmen, and I'll be your coordinator for today. At this time, all participants are in a listen-only mode.

Following their initial remarks, we will conduct a question-and-answer session for securities analyst and institutions. Instructions will be provided at that time for you to queue all for questions. like webcast everyone August and at a.m. would call this X, I XX:XX being is recorded Instructions] to that remind conference XXXX, [Operator today, Wednesday, Eastern time. Standard include as may Today's as forward-looking measures. financial well discussion certain certain non-GAAP information update measures the for issued call. discussed with to on operational disclaimers reconciliations and release this we today's Please refer information and of press to regards earnings yesterday important any non-GAAP amounts are before Per based a barrel or of sale oil working royalties. BOE, equivalent, interest on

the property copying turn is Tierra please Guidry, Gran of Tierra this Finally, is Gary Any call this will ahead. without the go Gran of Energy, Inc. over Officer to Gran consent Guidry, or call Tierra. now earnings call Energy. I of of President Mr. rebroadcasting conference Executive the and expressly forbidden written Chief

Gary Guidry

are Carmen. Executive a you, conference Executive The job cost-saving and G&A expenditures Chief results initiatives. President uneconomic made on done Financial implement release industry first our our My including Tony on Thank have capital outlined Gran operating has We crisis several all managing detailed on our Operating is and to great production, taken and first morning action And welcome Vice conference measures On website. facing quarter results, Officer. significant President deferred quarter quarter with Chief decisive our swiftly team we Ellson, unprecedented information and costs which Good Tierra's and Gary the issued fronts. press the included in that XXXX -- call yesterday XXXX call, second shut-in today volatility available we response and progress lowering, to name Ryan Guidry, our Chief our Berthelet, is call. and Officer. second a our about Officer; me to

enhance and to COVID-XX safety continued our and and of communities stakeholders. employees and our ensure and health monitor protection also measures We

Tierra believe is our Ryan XXXX in Ellson. well-positioned strategy turn remain and in As executing now to above. to Gran we We we move over plan. our I'll thrive and agile forward, call the

Ryan Ellson

everyone. morning, Good

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

volumes Significant renegotiation production waiting to Gran is of were combined global development workovers production PUD Since impacted blockade. mechanical contracts per equipment. wells BOE the approximately of and XX,XXX farmer’s and shut-in that on were to of the lead lower rental has costs offline progress through lowering the and the due initiatives. production by implemented X were During local made wells routine Suroriente XXXX, day. Southern downturn QX, suspended drilling, Tierra in in prices, higher to force blocks and Putumayo region and March been Current deferred rapidly majeure saving personnel optimization response in cost vendor economic of cost

by has reduced majority Gran costs The maintained G&A result by cost As costs even Tierra and we a and these drilling reductions as XX% of structural XX% completion capital the are compared to be operating expected ongoing at expect XX% further. XXXX. also respectively if prices a and since to reduced of are oil and per well cash Costayaco result initiatives, cost quarter. cost recover first at and XX% Acordionero Furthermore, saving structure

the of covenants financial $XXX million company's successfully $XXX to the Gran redetermined relief redetermination base certain During under the until quarter, The XXXX. October X, limit granted the completed also Tierra million. semiannual borrowing was We're also of facility. limit from credit prior

be before is of million to a collected the $XX from million $XX income million forecasted and Tierra expected tax $XX the to government a of collected receivable to further total On in another million of be the in second end the year, in the $XX July, In total million company million VAT VAT front, received Gran quarter. during and the collected Colombian the XXXX. $XX to resulting $XX

lower For from $XX to prices. the oil prior and the to oil only cost prior expenses due costs Operating due the $XXX funds in savings the decrease with a of of significant $X operations $X.XX primarily Tierra this generation a XX% million. of to to Workover with were challenge million Adjusted quarter, in were lower price $X.XX $X strength. as million reduction compared per properties activity expenses lower a million, prior volatility from loss quarter. prior due $X.XX due of rental per activities. in the compared EBITDA and XX% oil quarter, sheet BOE BOE, XX% net was gas result expenses Transportation down levels, up CapEx was the quarter's attributed were to in BOE COVID-XX on reduce activity. million from to higher $XXX quarter, lower company's the $X.XX quarter, power million was sales. significantly per QX from With preserve being Gran prior to net a elected and $XXX noncash loss BOE pipeline down our impairment logistical of year's per liquidity, the quarter balance of equipment

the balance second have a flows protect industry. additional quarter, price our per half provide day hedges total the for taken sheet of further is into cash XXXX During faced to volatility In environment near-term securing of we Brent against downside oil three-way the entered XXXX. collar, XXXXX aggressive actions by in low-price summary, given recent production and we to the now or hedged BOEs

Operating Tony, call operational our operating we're to G&A our I'll over We in in beyond. Chief have thrive positioned significant well discuss highlights. turn XXXX to and achieved costs reductions to Officer and now the

Tony Berthelet

and Thanks, everyone. good morning Ryan,

for are begin fourth quarter of the be rig protocols. by the and our Acordionero first one pandemic oil evolving next. situation the moves to additions. second during the production call per wells approximately well restore throughout the over scheduling of may the to conducted of differentials rig in productive the that, be required rig A year a accordance in sequential oil production prices X total from COVID-XX activities activities of plans note worked several and to and to to priority up of quarter resume tightening with resulting workovers for operations the off-line XXXX. the end. With to start order timing expected recovery of highest wells impact are combined we safely XXXX XX The estimated incremental day. Operations as in XXXX XX portfolio total to strict third capacity planned X,XXX recent barrels and workover I to the is have with the to workover of volumes of in At the want the Colombian operations do initiated COVID-XX

new drilling wells On at the one drilled the line planned of oil field wells Acordionero new the be over XX-day by The of the These of the of expected is XXXX. the throughout pad. new year are oil to capacity end. year. average Southwest during the an drilling in development one to with drilling new XXXX oil fourth course drilling of day quarter from quarter drill to front, forecast expected oil begin through XXX XXXX scheduled first with continue drilled rig to operations initial to productive rig to wells That's to two production wells is XXXX wells restart wells development four in initial have the approximately new is barrels performance next Each of per the last expected rate. these

second estimated the the is start is fourth over block approximately to to to Moving Costayaco/Vonu. Suroriente The half during working this four barrels interest operations be workover quarter capacity oil to of A day. X,XXX Putumayo. work is during expected at per of XXXX. block's rig to restart At two productive XXXX wells expected the of

majority course during prices COVID-XX undertook place. optimization, combined downturn on oil to the the when is half and severe working and our protocols In fields the recovered strict allow estimated interest productive These be resumption short-cycle X,XXX day. fields internal of minor safety XXXX. Lastly, expected oil the restart over safe focused were of summary, deferring initiatives of the the to portfolio of approximately operations projects second were XXXX of per barrels of pacing investments is capacity the in we

and current economic the value we'll assets. to flow are free resume go will based analyzing global the on per any pandemic maximizing focused in day multiple in of free year. that all and remaining and in returns robust including production shutdown recovery scenarios We optimize from believe questions. commodity further base back assumptions, now our please at I'll long-term levels ultimate operator cash average XXXX, cash XX,XXX barrels oil XXXX COVID-XX to to turn current flow excess asset Carmen, We ahead. equivalent call is and answer from happy be on no and the prices of next the there

Operator

with from a question-and-answer conduct first we Thank analysts. RBC. you. ahead. ladies Instructions] is for and And Stanton [Operator Please question Our will now go gentlemen, session securities Al

Al Stanton

morning, Yes. guys. Good

them come then and Just three questions, let if I may. just rattle off back. you I'll

You've given for half and the the given also of much on cost CapEx indication the haven't guidance wells. you second

you. in would So, that if -- burden And also it than QX of be OpEx can higher wondering of workovers, or guidance in really QX how disclosure second the on and the good we that during of QX? about is receivables. just half. on liabilities, can given then, be you've current cost you perhaps, I the a sort well rebates was, see the give Thank was And question the the could helpful. tax be tax cost the final some on might of much how, they so

Tony Berthelet

I'll its take the and Tony take last let Ryan here. one. two Al, I'll the first

million equipment tie. for of $X.X cost drilling estimating in we're Acordionero complete wells drill new So around wells,

reduction that improvement As showing and execute as in field. significant mentioned, repeated just that's we a pretty XXXX continued from programs

million In in in for projecting cost obviously second of fourth $X million terms quarter. the OpEx-related half, And we're workovers quarter workovers. the third the all roughly of of the these and then are $X

to of range, $XXX,XXX scope kind well per each in that for well. depending of the So on work million $X

Ryan Ellson

And to tax rebates. with respect Okay. then,

that So with the coincide was, does how our current question liabilities?

Al Stanton

Well, on current you've bit back way. money liability I mean, us yes, other wondering yes. coming is size? you. a reasonable the going clarity money a was the is just for on clarity the I given to the mean, that's I of

Ryan Ellson

$XX The June June and reduced by with of since, you vendors what up. if all at look current XX liabilities, Yes. million we that's XX, about since had all caught most been

Al Stanton

Right.

guidance starting good I or I of just now, that's if then, that's $XX that do we're million do still final question, CapEx The million. a And mean, you Okay. $XX given a may. think stretch, you number? to August think a just

Ryan Ellson

We reasonable think number. that's a

the I I think, complex that's reality is still with range. But timing. think a COVID-XX protocols and is, it fair

Al Stanton

guys. Thank you,

Ryan Ellson

Thanks, Al.

Operator

you. Thank

with next comes Our Hunt. Werner from question Peel Riding

Werner Riding

reserves was XP have will Good impairments wondering guys. asset your impact you perspective, I on the from a position? quantify if morning, your could reserves

Ryan Ellson

Yes.

see some report you'll trailing impairment our in just XP GAAP, on months. asset Because took a write-downs QX. reserves is and with peers IFRS driver think, who the it's of we're use and the big I the only the impairment U.S. XX we under

since And first really for a the of calculation the so, just months. the it's trailing price XX day

And the I said volumes so, both between typically XP our we unfortunately a a your can that's just and have as value when reserves. use price, spread well especially -- and disconnect XP our XP by especially between reserves. there you reserve is valuators large the your like driven the and as And

Werner Riding

Okay.

So, significant reduction this XP you don't reserves to see expect year? in

Ryan Ellson

No.

Werner Riding

Okay, great. Thanks.

Ryan Ellson

Thanks.

Operator

Please [Indiscernible] ahead. with go MetLife.

Unidentified Analyst

question. Good you from through flow to for cash the would numbers. I help guys my morning. some us Thank taking walk you like

million the that like the but still refund the million some we was hedges $XX figures significant flow that flow I match half. have the and go to cash decline a from with -- the that CapEx of that. Then movement is first million EBITDA to interest EBITDA in to as we we it's $X generation hard cash in that from have don't think a in tax about how the the And $XX was then proceeds out that about $XX $XX cash know, finance the figure CapEx. million million. operation that So, free already from without

us if great. would differences bridge it could these be So, help you

Ryan Ellson

really change our the number the the -- drivers EBITDA then us less point, a essentially receivable was number yes, bit flow the from interest our the difference a fund the second -- biggest the EBIT down, the is is and flow for through walking And EBITDA cash. quite did funds to working go change quoted. adjusted that just that the biggest just but reported -- capital, use adjusted the quarter. we the essentially Yes, And on gets went accounts of two then up that's cash of to

a And our If that's received a then March That lot you the a look prices higher million also change. money significant of we're were fairly $X payable just July. at balance. there's and oil reduction end at in around were was million because at $XX we in And about June.

Unidentified Analyst

And million you have expectations CapEx end. see. on like million Okay. also also operations will is this from to until that cash match would I question guidance to the funds $XX also and $XX to $XX you million in your said the second of position of million. of $XX year that with I

Ryan Ellson

in Yes, fluid is last add and we're just the need comment our And that. the sure doing our we guidance communities cash on and employees to operate guidance. keep don't look my our we is make forecast position COVID-XX. based ground realities safe of that We just the that we on guidance

communities as is and a risk. put so program. be And want we at to program And contractors it's need our cautious last it's we employees thing have a the to I staggered --

Unidentified Analyst

as But say is not and Okay. capital as a [Indiscernible] year define it, there? flow included stable there funds cash as be operations roughly maybe to are long that going it a expect expenditures refunds neutral flow cash any or are the we say let's can is until tax end, you position free to fair

Ryan Ellson

Yes, there. in tax refunds not included are

be everything additive obviously, then, cash equal, and So, else to capital other same, all changes whatever if being And the to working our position. But additive stays our we -- have that position. be else would that whatnot. the they cash would that in are

Unidentified Analyst

Thank perfect. you Okay, much. very

Ryan Ellson

you. Thank

Operator

you. Thank

question Demichelis Our next from with is Alejandro Nau.

Alejandro Demichelis

gentlemen. morning good Yes,

willing remarks every think was you that we that on level. free to dollar follow-up fuel to cash flow basically corporate flow. from his saying level, Tony comes to I operations basically, into you the Just in from But be go question CapEx. for previous to are at the planning then cash cash Because when spend the flow on seem

with you trying this particularly been all work describing. that have to So, uncertainties how the understand

Ryan Ellson

Yes.

of range we $XX is that $XX from a we million. And million to million so guidance have funds really $XX capital and have $XX range the and between a of million flow

So, that's cetera. after G&A, level. the interest, corporate not at that's the fuel that's level, after That's et

Alejandro Demichelis

that's Yes, fine.

Just trying you're operations on the flow from on the so at from level spending these the talking debt basically about have all to the uncertainties understand you the and for when dollar of situation. every ground cash rationale macro also and

Ryan Ellson

entire a what not oil price, Yes. number a ramps. of And uncertainties on to committing there's program. are happens we There Depending It's the we're number what of COVID-XX. off that with ramps with off this happens on have. depending

Alejandro Demichelis

Okay. That’s Thank great. you.

Ryan Ellson

if And year free way we next reason the other at period. XX-month you thing for too maximize the that flow look why an price is the are doing over this we this is strip cash

Alejandro Demichelis

Okay.

trying flow? at next take to you're for strip advantage you see basically, cash what year So price of the maximize your to

Ryan Ellson

Correct. Correct.

year. production maximizes so it a next just free quarter-by-quarter because but of And higher period an flow not this cash over gives by XX-month us starting in much QX profile

Alejandro Demichelis

fantastic. you. That’s Okay. Thank

Operator

Thank you.

Our from next Compass. Ospina question with is Miguel

Miguel Ospina

Good morning. Hello.

previous like a of So questions. the is this follow-up

what royalties understand current be The question $XX average main million cash on next related this high related evolve expecting working quarters? you It accounts is $XX and for $XXX second EBITDA do the you in you. how to real OpEx to to comment at And million continues that is and terms next are to your in the of the you're here is my can the of question capital account Just million. Thank payable. half. wanted start if to production My assumptions question behind to over general levels?

Ryan Ellson

Okay.

press point what's On guidance have release. the in the is we first the all that

done out press then Brent to the the all what And AP is transparent down has the I movements stakeholders give what the is number come want timing Like of far in activities biggest idea we in the balance that's of capacity out on we've be certain capital change release. working from those assets be and substantially of driver the productive is price. tried our as just And do to lay very But activities. on we've the that is our really laid and can to year-end. that all said, on so one as -- and the we there --

if million. we'll end change. which $XXX in down approximately And reduce once to refunds out XXXX, look to results. at used additional significant July of put QX our we have think We the $XXX VAT I the then, I you expect it's receive did had was a payables. now the current balance cash million, we wouldn't But

Miguel Ospina

Thanks. Okay.

Operator

Thank you.

with Energy. Our next Schachter question Josef Schachter is from

Josef Schachter

One or impairment question quarter be seeing states reverting in What Canada are where and rules of $XX, barrel of those you the XX(XXX) under about Ryan the many are able those the for the like would $XX reversal? for we for one GAAP to the impairment what $XXX as start $XX $XX about guys. Gary. rules Good per do the that states? in Canadian back talked morning, they million reversal you Ryan, talk And for $XX, for got the to impairments. reversing Brent what have the companies price need

Ryan Ellson

Yes. It's gone, GAAP there Once is no Under gone. it's a reversal. great question. it's U.S.

Josef Schachter

Okay.

and if on, a in the in can back Colombia vacate this resolve U.S. support Columbia election. Okay. political for almost is out Gary And not and with money more And where And production helping when the farmers? that this a ongoing past the internally? Obama the states? will it's or like in Biden that's gets the is drag policy the and the then is drag from problem political then getting might out up with show Colombia money it Is still thing this comes something of the of farmer U.S. is Colombia to

Gary Guidry

Yes.

are to the has caused because really table the ongoing being from slowdown down issue I There been pandemic. think to the the talk. government a in been in ability across sit program, to crop the we through help farmers, The different programs participate able a even that. discussions, place the open there are and the growers help What's which related is the programs. coca program. discussions move programs. support the with to We farmers it's have to and has substitution eradication the And

I And the that U.S. so election. really, related it's Josef, think don't to

have more are reinitiated. they face-to-face it's been able to being and think ongoing. I discussions They've

has in of And ready the where getting start Tony the a we're occurred. said, to position so this Putumayo that reactivation in as Southern we're most

will be U.S. regardless so it be confident And that in what election. that we're happens the something of managed can

Josef Schachter

Okay.

saying and to to funding still U.S. So that the farmers? the is they funds that Columbia with you're out in place, the have so something work

Gary Guidry

Yes. And just of one numerous source There funding. sources that's funding. are of

Josef Schachter

Thanks very much Super. guys. Okay.

Gary Guidry

Thanks.

Operator

you. Thank

Credit Our from next Nicholson question comes from Suisse. Jamie

Jamie Nicholson

Thanks thanks second those your bit covenants my EBITDAX agreements. have a what if renegotiated detail will your you Hi. call be for ratio Can and any covenants XXXX? quarter leverage XXXX? on in the XXXX little to current more now I that taking And what is of required question for -- and provide on there's just as for and question. a step-downs into in your Thanks. bank

Ryan Ellson

have X. the debt really times our thing covenant in that's October thing main note we've -- main was four was previously and and -- and until The total a Yes. it detail been relief lot of we received is debt-to-EBITDA the

the calculation the end really to So we have do until of year. wouldn't the

the oil we be would and when we're covenant get be constructive covenant can end do more out actually it of a with need exceed that XXXX in So we price that. period. environment would If we we compliant comfortable would of the early the is have to

Jamie Nicholson

Okay.

the little you was that seven quarter. as looks times a second Is of correct? now your over -- it you like debt-to-EBITDA So --

Ryan Ellson

No.

we're times. months adjusted about trailing XX four Our EBITDA

Jamie Nicholson

Trailing XX then… months, okay. And

Ryan Ellson

on a is everything trailing -- basis. Trailing

Jamie Nicholson

Okay.

as based I Is that. EBITDA And -- is a to was I correct? or forecasted more seven you're your like your that around expecting what calculated XXXX on times guess guidance for up EBITDA little so spike that than

Ryan Ellson

and quarters months the Yes. EBITDA -- XXXX Yes price have trailing is falling environment have we have quarters the EBITDA in been replace XXXX. this higher because from XX we lower really some higher off of with would the falling from the off

Jamie Nicholson

correct? leverage covenants have And covenants XXXX. end don't until then of any -- the Is you that

Ryan Ellson

mainly it with facility. credit And Correct. comes

Jamie Nicholson

Thanks. Okay.

Ryan Ellson

current end by And be our so forecast, based side that year. with we'll on on of next the

Jamie Nicholson

very Thanks Okay. much.

Gary Guidry

Thank you.

Operator

turn And thank back session. his Gary call Guidry I to like remarks. would you. our This final to concludes the Q&A for

Gary Guidry

and us very I'd like again, over our everyone Thank with We to much. you progress. on you next to joining you update look ongoing for thank speaking today. once, the quarter forward

Operator

you, today's and in program. gentlemen Thank ladies participating for

now may day. Have You disconnect. a good

Gran Tierra Energy (GTE) 5 Aug 202020 Q2 Earnings call transcript