Gran Tierra Energy Inc. , a company focused on oil exploration and production in Colombia and Ecuador, today announced the Company’s 2020 year-end reserves as evaluated by the Company’s independent qualified reserves evaluator McDaniel & Associates Consultants Ltd. (“McDaniel”) in a report with an effective date of December 31, 2020 (the “GTE McDaniel Reserves Report”) and an operational update.
All dollar amounts are in United States (“U.S.“) dollars and all reserves and production volumes are on a working interest before royalties (“WI”) basis. Production is expressed in barrels (“bbl”) of oil per day (“bopd”) or bbl of oil equivalent (“boe”) per day (“boepd”), while reserves are expressed in bbl, boe or million boe (“MMBOE”), unless otherwise indicated. All reserves values, future net revenue and ancillary information contained in this press release have been prepared by McDaniel and calculated in compliance with Canadian National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities (“NI 51-101”) and the Canadian Oil and Gas Evaluation Handbook (“COGEH”) and derived from the GTE McDaniel Reserves Report, unless otherwise expressly stated. The following reserves categories are discussed in this press release: Proved Developed Producing (“PDP”), Proved (“1P”), 1P plus Probable (“2P”) and 2P plus Possible (“3P”).
Commenting on Gran Tierra’s 2020 year-end reserves, operational update and future plans, Gary Guidry, President and Chief Executive Officer of Gran Tierra, said: “Our teams in Colombia, Ecuador and Canada rose to meet the many challenges of 2020 through their diligent management of COVID-19 safety protocols and sharp focus on maintaining and increasing the value of our assets. As a result, we are pleased to announce significant reserve additions in both the PDP and 1P categories, despite our large reductions in capital investment during 2020. This achievement demonstrates that the Company’s core conventional oil assets continue to show positive waterflood responses and low base decline rates.
The advancement of our waterflooding efforts in the Acordionero, Costayaco and Moqueta oil fields has clearly allowed Gran Tierra to continue to convert Probable and Possible reserves into the Proved reserves categories. Even though we decided during 2020 to reduce capital spending, we believe the Company’s excellent performance in terms of PDP and 1P reserves additions is a testament to the quality of our assets.
With our strategy, we believe Gran Tierra is well-positioned for the resumption of prudent growth in 2021 and strong potential free cash flow1 generation. We have already increased production approximately 24% from our third quarter 2020 average, which we believe reflects the strength of our Proved reserves. Our 2021 capital budget of $130 to $150 million is a balanced, returns-focused program which prioritizes free cash flow generation over the rate of development, exploration and production growth, with investment primarily directed to the Acordionero and Costayaco oil fields. With a keen focus on further strengthening our balance sheet, we plan to direct free cash flow to ongoing debt reduction in 2021 and beyond.
During fourth quarter 2020, Gran Tierra resumed development activities throughout our portfolio, including the ongoing well workover operations and the restart of development drilling at Acordionero. We also restarted workover operations at Costayaco and look forward to a planned initiation of development drilling in that field during second quarter 2021. We forecast 2021 average production of 28,000 to 30,000 bopd for the Company.
Our 2021 plans are fully aligned with Gran Tierra’s “Beyond Compliance Policy” which focuses on our commitments to environmental, social and governance (“ESG”) excellence. Gran Tierra looks for significant opportunities and benefits to the environment and communities by voluntarily and proactively taking steps to protect the environment and provide social benefits because it is the right thing to do. In 2020, we also had our best safety year in the history of the Company.
We believe that Gran Tierra successfully navigated the exceptional challenges of 2020 and are excited to return to an economically sound growth trajectory in 2021 and beyond, with a focus on free cash flow generation and debt reduction.”
Highlights
2020 Year-End Reserves and Values
Net Present Value at 10% Discount (“NPV10”) | Net Asset Value (“NAV”) Per Share at 10% Discount | ||||
Reserves | Reserves | Before Tax | After Tax | Before Tax | After Tax |
Category | MMBOE | $ million | $ million | $/share2,4 | $/share3,4 |
1P | 79 | 1,191 | 1,029 | 1.15 | 0.71 |
2P | 133 | 1,962 | 1,590 | 3.25 | 2.23 |
3P | 174 | 2,612 | 2,045 | 5.02 | 3.47 |
* Calculations of operating cost reductions made in respect of 2019 figures, as provided in the McDaniel report with an effective date of December 31, 2019, prepared for Gran Tierra in their capacity as independent qualified reserves evaluator in accordance with NI 51-101 and COGEH
Operational Update
Future Net Revenue
Future net revenue reflects McDaniel’s forecast of revenue estimated using forecast prices and costs, arising from the anticipated development and production of reserves, after the deduction of royalties, operating costs, development costs and abandonment and reclamation costs but before consideration of indirect costs such as administrative, overhead and other miscellaneous expenses. The estimate of future net revenue below does not necessarily represent fair market value.
Consolidated Properties at December 31, 2020 | ||||||||||||||||
Proved (1P) Total Future Net Revenue ($ million) | ||||||||||||||||
Forecast Prices and Costs | ||||||||||||||||
Sales Revenue |
Total Royalties |
Operating Costs |
Future Development Capital |
Abandonment and Reclamation Costs |
Future Net Revenue Before Future Taxes |
Future Taxes |
Future Net Revenue After Future Taxes* |
|||||||||
2021-2025 (5 Years) |
2,362 | (328 | ) | (587 | ) | (311 | ) | (1 | ) | 1,135 | (102 | ) | 1,033 | |||
Remainder | 1,452 | (196 | ) | (591 | ) | (1 | ) | (60 | ) | 604 | (174 | ) | 430 | |||
Total (Undiscounted) | 3,814 | (524 | ) | (1,178 | ) | (312 | ) | (61 | ) | 1,739 | (276 | ) | 1,463 | |||
Total (Discounted @ 10%) | 2,569 | (354 | ) | (730 | ) | (276 | ) | (18 | ) | 1,191 | (162 | ) | 1,029 |
Consolidated Properties at December 31, 2020 | ||||||||||||||||
Proved Plus Probable (2P) Total Future Net Revenue ($ million) | ||||||||||||||||
Forecast Prices and Costs | ||||||||||||||||
Years | Sales Revenue |
Total Royalties |
Operating Costs |
Future Development Capital |
Abandonment and Reclamation Costs |
Future Net Revenue Before Future Taxes |
Future Taxes |
Future Net Revenue After Future Taxes* |
||||||||
2021-2025 (5 Years) |
3,245 | (459 | ) | (693 | ) | (564 | ) | — | 1,529 | (217 | ) | 1,312 | ||||
Remainder | 3,407 | (480 | ) | (1,012 | ) | (1 | ) | (75 | ) | 1,839 | (506 | ) | 1,333 | |||
Total (Undiscounted) | 6,652 | (939 | ) | (1,705 | ) | (565 | ) | (75 | ) | 3,368 | (723 | ) | 2,645 | |||
Total (Discounted @ 10%) | 3,978 | (564 | ) | (954 | ) | (481 | ) | (17 | ) | 1,962 | (372 | ) | 1,590 |
Consolidated Properties at December 31, 2020 | ||||||||||||||||
Proved Plus Probable Plus Possible (3P) Total Future Net Revenue ($ million) | ||||||||||||||||
Forecast Prices and Costs | ||||||||||||||||
Years | Sales Revenue |
Total Royalties |
Operating Costs |
Future Development Capital |
Abandonment and Reclamation Costs |
Future Net Revenue Before Future Taxes |
Future Taxes |
Future Net Revenue After Future Taxes* |
||||||||
2021-2025 (5 Years) |
3,856 | (551 | ) | (755 | ) | (696 | ) | (1 | ) | 1,853 | (332 | ) | 1,521 | |||
Remainder | 5,012 | (759 | ) | (1,332 | ) | (1 | ) | (85 | ) | 2,835 | (784 | ) | 2,051 | |||
Total (Undiscounted) | 8,868 | (1,310 | ) | (2,087 | ) | (697 | ) | (86 | ) | 4,688 | (1,116 | ) | 3,572 | |||
Total (Discounted @ 10%) | 5,040 | (736 | ) | (1,098 | ) | (577 | ) | (17 | ) | 2,612 | (567 | ) | 2,045 |
*The after-tax net present value of the Company’s oil and gas properties reflects the tax burden on the properties on a stand-alone basis. It does not consider the corporate tax situation, or tax planning. It does not provide an estimate of the value at the Company level which may be significantly different. The Company’s financial statements, when available for the year ended December 31, 2020, should be consulted for information at the Company level.
Total Company WI Reserves
The following table summarizes Gran Tierra’s NI 51-101 and COGEH compliant reserves in Colombia and Ecuador derived from the GTE McDaniel Reserves Report calculated using forecast oil and gas prices and costs. Gran Tierra has determined that Ecuador reserves, included in Total Probable and Total Possible reserve categories for Light and Medium Crude Oil, are not material to present separately on a country basis. Therefore all amounts are presented on a consolidated basis.
Light and Medium Crude Oil |
Heavy Crude Oil |
Conventional Natural Gas |
2020 Year- End |
|
Reserves Category | Mbbl* | Mbbl* | MMcf** | Mboe*** |
Proved Developed Producing | 20,759 | 22,109 | 790 | 43,000 |
Proved Developed Non-Producing | 3,797 | 178 | — | 3,975 |
Proved Undeveloped | 12,992 | 18,485 | 1,070 | 31,655 |
Total Proved | 37,548 | 40,772 | 1,860 | 78,630 |
Total Probable | 21,740 | 32,000 | 1,126 | 53,928 |
Total Proved plus Probable | 59,288 | 72,772 | 2,986 | 132,558 |
Total Possible | 23,851 | 17,790 | 1,507 | 41,892 |
Total Proved plus Probable plus Possible | 83,139 | 90,562 | 4,493 | 174,450 |
*Mbbl (thousand barrels of oil).
**MMcf (million cubic feet).
***MBOE (thousand boe).
NPV Summary
Gran Tierra’s reserves were evaluated using McDaniel’s commodity price forecasts at January 1, 2021. It should not be assumed that the NPV of cash flow estimated by McDaniel represents the fair market value of the reserves.
Total Company | Discount Rate | ||||
($ millions) | 0% | 5% | 10% | 15% | 20% |
Before tax | |||||
Proved Developed Producing | 925 | 804 | 711 | 637 | 578 |
Proved Developed Non-Producing | 84 | 65 | 51 | 42 | 34 |
Proved Undeveloped | 730 | 551 | 429 | 342 | 278 |
Total Proved | 1,739 | 1,420 | 1,191 | 1,021 | 890 |
Total Probable | 1,629 | 1,091 | 771 | 570 | 436 |
Total Proved plus Probable | 3,368 | 2,511 | 1,962 | 1,591 | 1,326 |
Total Possible | 1,320 | 901 | 650 | 490 | 384 |
Total Proved plus Probable plus Possible | 4,688 | 3,412 | 2,612 | 2,081 | 1,710 |
After tax | |||||
Proved Developed Producing | 867 | 762 | 678 | 611 | 557 |
Proved Developed Non-Producing | 64 | 50 | 39 | 32 | 27 |
Proved Undeveloped | 532 | 402 | 312 | 247 | 199 |
Total Proved | 1,463 | 1,214 | 1,029 | 890 | 783 |
Total Probable | 1,182 | 794 | 561 | 412 | 314 |
Total Proved plus Probable | 2,645 | 2,008 | 1,590 | 1,302 | 1,097 |
Total Possible | 927 | 634 | 455 | 342 | 266 |
Total Proved plus Probable plus Possible | 3,572 | 2,642 | 2,045 | 1,644 | 1,363 |
Total Company WI Reserves Reconciliation
Proved | Proved plus Probable | Proved plus Probable plus Possible |
|
MBOE | MBOE | MBOE | |
December 31, 2019 | 78,611 | 142,408 | 186,025 |
Extensions | 1,060 | 1,356 | 1,703 |
Improved Recoveries | 1,056 | — | — |
Technical Revisions | 11,424 | 220 | (6,076) |
Discoveries | — | 2,135 | 5,578 |
Economic Factors | (5,242) | (5,282) | (4,501) |
Production | (8,279) | (8,279) | (8,279) |
December 31, 2020 | 78,630 | 132,558 | 174,450 |
Reserve Life Index
December 31, 2020 | * | |
Total Proved | 10 | |
Total Proved plus Probable | 17 | |
Total Proved plus Probable plus Possible | 22 |
* Calculated using average fourth quarter 2020 WI production of 21,907 bopd.
Future Development Costs
FDC reflects McDaniel’s best estimate of what it will cost to bring the proved undeveloped and probable reserves on production. Changes in forecast FDC occur annually as a result of development activities, acquisition and disposition activities, and changes in capital cost estimates based on improvements in well design and performance, as well as changes in service costs. FDC for total 1P Colombia reserves decreased to $312 million at year-end 2020 from $386 million at year-end 2019. The decrease in FDC in 2020 was predominantly attributed to costs incurred in 2020 to develop the Acordionero field as well as reduced 1P FDC costs for the PUT-7 and VMM-2 blocks.
($ millions) | Total Proved | Total Proved Plus Probable |
2021 | 99 | 109 |
2022 | 146 | 251 |
2023 | 48 | 128 |
2024 | 16 | 74 |
2025 | 2 | 2 |
Remainder | 1 | 1 |
Total (undiscounted) | 312 | 565 |
($) millions | Proved | Proved plus Probable |
Proved plus Probable plus Possible |
Acordionero | 92 | 140 | 140 |
Suroriente | 47 | 76 | 81 |
Chaza Block (Costayaco & Moqueta) | 78 | 103 | 110 |
Other | 95 | 246 | 366 |
Total FDC Costs (undiscounted) | 312 | 565 | 697 |
Finding and Development Costs
Reserves (MBOE) | Year Ended December 31, 2020 | |
Proved Developed Producing | 43,000 | |
Total Proved | 78,630 | |
Capital Expenditures ($000s) | ||
– including and excluding acquired properties | 96,335 | |
Operating Netbacks* ($/Bbl, per WI sales volumes) | ||
Operating Netback* – fourth quarter | 17.67 |
*Operating Netback is a Non-GAAP measure and does not have a standardized meaning under GAAP.
Finding and Development Costs, Excluding FDC*
Year Ended December 31, 2020 | ||
Proved Developed Producing | ||
Reserve Additions (MBOE) | 11,036 | |
F&D Costs ($/BOE) | 8.73 | |
F&D Recycle Ratio | 2.0 |
Finding and Development Costs, Including FDC*
Year Ended December 31, 2020 | ||
Proved Developed Producing | ||
Change in FDC ($000s) | (40,504 | ) |
Reserve Additions (MBOE) | 11,036 | |
F&D Costs ($/BOE) | 5.06 | |
F&D Recycle Ratio | 3.5 |
Finding and Development Costs , Excluding FDC*
Year Ended December 31, 2020 | ||
Total Proved | ||
Reserve Additions (MBOE) | 8,298 | |
F&D Costs ($/BOE) | 11.61 | |
F&D Recycle Ratio | 1.5 |
Finding and Development Costs , Including FDC*
Year Ended December 31, 2020 | ||
Total Proved | ||
Change in FDC ($000s) | (74,338 | ) |
Reserve Additions (MBOE) | 8,298 | |
F&D Costs ($/BOE) | 2.65 | |
F&D Recycle Ratio | 6.7 |
*In all cases, the F&D number is calculated by dividing the identified capital expenditures by the applicable reserves additions both before and after changes in FDC costs. Both F&D costs take into account reserves revisions during the year on a per BOE basis. Recycle ratio is defined as fourth quarter operating netback per working interest sales volume BOE divided by the appropriate F&D costs on a per BOE basis. The aggregate of the exploration and development costs incurred in the financial year and the changes during that year in estimated future development costs may not reflect the total F&D costs related to reserves additions for that year.
Forecast prices
The pricing assumptions used in estimating NI 51-101 and COGEH compliant reserves data disclosed above with respect to net present values of future net revenue are set forth below. The price forecasts are based on McDaniel’s standard price forecast effective January 1, 2021. McDaniel is an independent qualified reserves evaluator and auditor pursuant to NI 51-101.
Brent Crude Oil | WTI Crude Oil | |||
Year | $US/bbl | $US/bbl | ||
January 1, 2021 | January 1, 2021 | |||
2021 | $49.50 | $47.50 | ||
2022 | $53.55 | $51.00 | ||
2023 | $54.62 | $52.02 | ||
2024 | $55.71 | $53.06 | ||
2025 | $56.83 | $54.12 |
About Gran Tierra Energy Inc.
Gran Tierra Energy Inc. is an international oil and gas exploration and production company, headquartered in Calgary, Canada, incorporated in the United States, trading on the NYSE American (GTE), the Toronto Stock Exchange (GTE) and the London Stock Exchange (GTE), and operating in South America. Gran Tierra holds interests in producing and prospective properties in Colombia and prospective properties in Ecuador. Gran Tierra has a strategy that focuses on establishing a portfolio of producing properties, plus production enhancement and exploration opportunities to provide a base for future growth.
Gran Tierra’s Securities and Exchange Commission filings are available on the SEC website at www.sec.gov and on SEDAR at www.sedar.com.
Contact Information
For investor and media inquiries please contact:
Gary Guidry, Chief Executive Officer
Ryan Ellson, Executive Vice President & Chief Financial Officer
Rodger Trimble, Vice President, Investor Relations
Tel: +1.403.265.3221
For more information on Gran Tierra please go to: www.grantierra.com.