Gran Tierra Energy Inc. Announces Second Quarter 2011 Results
CALGARY, Aug. 8, 2011 /CNW/ --
Quarter highlighted by record production and cash flow, and initial test
production from the Moqueta field through new Moqueta-Costayaco
pipeline
CALGARY, Aug. 8, 2011 /CNW/ - Gran Tierra Energy Inc. ('Gran Tierra Energy' or the 'Company') (NYSE Amex: GTE) (TSX: GTE), a company focused on oil and gas exploration and production in South
America, today announced its financial and operating results for the
quarter ended June 30, 2011. All dollar amounts are in United States
dollars unless otherwise indicated.
Highlights for the quarter include:
-- Quarterly production of 18,141 barrels of oil equivalent per
day ('BOEPD') net after royalty ('NAR'), a 36% increase in
average daily production from the same period in 2010 of 13,376
BOEPD due to additional production from existing field
developments, new production from recent field discoveries, and
production growth from the recently acquired assets of
Petrolifera Petroleum Ltd. ('Petrolifera');
-- Quarterly oil production of 17,525 barrels of oil per day
('BOPD') NAR, a 32% increase in average daily production from
the same period in 2010 of 13,234 BOPD NAR;
-- Quarterly gas production of 3.7 million cubic feet per day
('MMCFD') NAR, a 334% increase in average daily production from
the same period in 2010 of 0.8 MMCFD NAR;
-- Revenue and other income for the quarter of $162.1 million, a
93% increase over the same period in 2010;
-- Net income of $31.6 million or $0.11 per share basic and
diluted compared to net income of $17.4 million or $0.07 per
share basic and diluted in the same period in 2010;
-- Funds flow from operations of $88.6 million compared to $44.3
million for the same period in 2010;
-- Cash and cash equivalents were $211.4 million at June 30, 2011
compared to $355.4 million at December 31, 2010 and working
capital decreased to $215.4 million at June 30, 2011 compared
to $265.8 million at December 31, 2010;
-- Moqueta-5 delineation well testing was initiated from a single
zone at production rates of approximately 730 BOPD over 10 days
with a jet pump, with additional testing ongoing;
-- Major infrastructure projects were completed including the
construction and commissioning of the Moqueta to Costayaco
flow-line with first short-term test production commencing in
June, and the connection of the Costayaco field into Colombia's
national electrical system;
-- First production contribution from Gran Tierra Energy's Brazil
assets in the Recôncavo Basin was recorded in the quarter;
-- Continued to mature plans for robust exploration, delineation
and development drilling campaigns in Colombia, Brazil, Peru
and Argentina through 2011 and into 2012.
'Several significant milestones were achieved in the second quarter of
2011, positioning the Company to achieve continued growth into the
future. The completion of the Moqueta to Costayaco flow-line and
initiation of production was a major achievement. This is the first
time that an oil field in Colombia has been discovered and test
production initiated with operations entirely supported by helicopter
and without access by road minimizing the environmental footprint of
Gran Tierra Energy's operations at this early stage of development,'
said Dana Coffield, President and Chief Executive Officer of Gran
Tierra Energy. 'We achieved record production in the quarter due to
effective management of existing producing fields in Colombia and
Argentina and new production from recent discoveries in Colombia and
Brazil. Record cash flow, and progress in permitting and contracting,
are supporting the execution of our planned exploration and drilling
program scheduled for the balance of 2011 and into 2012,' concluded
Coffield.
Production
Review
Three Months Ended June 30, 2011 Three Months Ended June 30, 2010
(Barrels of
Oil
Equivalent) Colombia Argentina Brazil Total Colombia Argentina Brazil Total
Gross
Production 1,931,951 295,025 5,143 2,232,119 1,654,290 74,074 - 1,728,364
Royalties (558,795) (34,331) (566) (593,692) (433,378) (8,647) - (442,025)
Inventory
Adjustment 17,107 (4,095) (564) 12,448 (69,139) (20) - (69,159)
Production
Net After
Royalties
(NAR) 1,390,263 256,599 4,013 1,650,875 1,151,773 65,407 - 1,217,180
Barrels of
Oil
Equivalent
Per Day
(BOEPD)
(NAR) 15,277 2,820 44 18,141 12,657 719 - 13,376
Six Months Ended June 30, 2011 Six Months Ended June 30, 2010
(Barrels of
Oil
Equivalent) Colombia Argentina Brazil Total Colombia Argentina Brazil Total
Gross
Production 3,649,647 404,967 5,143 4,059,757 3,367,729 160,529 - 3,528,258
Royalties (1,042,007) (47,833) (566) (1,090,406) (898,511) (18,744) - (917,255)
Inventory
Adjustment (4,553) (4,187) (564) (9,304) (48,121) (265) - (48,386)
Production
Net After
Royalties
(NAR) 2,603,087 352,947 4,013 2,960,047 2,421,097 141,520 - 2,562,617
Barrels of
Oil
Equivalent
Per Day
(BOEPD)
(NAR) 14,382 1,950 22 16,354 13,376 782 - 14,158
Financial
Review
Three Months Ended June 30, Six Months Ended June 30,
2011 2010 % 2011 2010 %
Change Change
(Thousands
of U.S.
Dollars)
Revenue $ 162,120 $ 84,114 93 $ 284,639 $ 177,224 61
and
Interest
Net income $ 31,567 $ 17,371 82 $ 45,280 $ 27,331 66
(US
Dollars
per Share)
Net Income $ 0.11 $ 0.07 57 $ 0.17 $ 0.11 55
Per Share
- Basic
Net Income $ 0.11 $ 0.07 57 $ 0.16 $ 0.10 60
Per Share
- Diluted
Funds flow from operations((1)) reconciled to net income is as follows:
Funds flow From Three Months Ended June 30, Six Months Ended June 30,
Operations -
Non-GAAP
Measure
2011 2010 2011 2010
(Thousands of
U.S. Dollars)
Net income $ 31,567 17,371 $ 45,280 27,331
Adjustments to
reconcile net
income to funds
flow from
operations
Depletion, 46,965 31,641 110,322 71,984
depreciation,
accretion and
impairment
Deferred (5,219) (7,977) (5,406) (18,031)
taxes
Stock-based 2,492 1,998 5,945 3,360
compensation
Unrealized (1,292) - (1,354) (44)
gain on
financial
instruments
Unrealized 11,644 1,290 16,102 13,997
foreign
exchange loss
Settlement of (305) - (309) -
asset
retirement
obligation
Equity taxes 119 - 6,251 -
payable
long-term
Loss (gain) 2,601 - (21,699) -
on acquisition
Funds flows $ 88,572 $ 44,323 $ 155,132 $ 98,597
from operations
(1) Funds flow from operations is a non-GAAP measure which does not
have any standardized meaning prescribed under GAAP. Management
uses this financial measure to analyze operating performance
and the income (loss) generated by Gran Tierra Energy's
principal business activities prior to the consideration of how
non-cash items affect that income (loss), and believes that
this financial measure is also useful supplemental information
for investors to analyze operating performance and Gran Tierra
Energy's financial results. Investors should be cautioned that
this measure should not be construed as an alternative to net
income (loss) or other measures of financial performance as
determined in accordance with GAAP. Gran Tierra Energy's method
of calculating this measure may differ from other companies and
therefore, it may not be comparable to similar measures used by
other companies or appropriate for other purposes. Funds flow
from operations, as presented, is net income (loss) adjusted
for depletion, depreciation and accretion, deferred taxes,
stock based compensation, unrealized loss (gain) on financial
instruments, unrealized foreign exchange losses (gains),
settlement of asset retirement obligations, equity taxes
payable long-term and gain on acquisition.
Second Quarter 2011 Financial Highlights:
Revenue and interest increased 93% to $162.1 million for the three
months ended June 30, 2011 compared to $84.1 million in the same
quarter in 2010 due to increased production and an increase of 45% in
realized crude oil prices. For the six months ended June 30, 2011,
revenue and interest increased 61% to $284.6 million compared to $177.2
million in the same period in 2010 due to increased production and an
increase of 41% in realized crude oil prices.
Operating expenses for the second quarter of 2011 amounted to $23.2
million compared to $9.5 million recorded in the second quarter of
2010. The increase in operating expenses was primarily due to higher
workover, fuel and power, water injection and trucking costs as well as
the inclusion of Petrolifera operating costs. Operating expenses for
the first six months of 2011, increased to $39.6 million from $19.7
million in the first six months of 2010 due to the same factors. On a
barrel of oil equivalent ('BOE') basis, operating costs per BOE increased to $14.03 from $7.83 for the
second quarter and to $13.36 from $7.69 for the first half of the year
compared to the prior year periods.
Depletion, depreciation, accretion and impairment expense ('DD&A') for the current quarter increased to $47.0 million compared to $31.6 million for the same quarter in 2010. The
increase was attributable to higher production levels as the depletion
rate of $28.45 per BOE remained comparable to the same quarter last
year. Increased costs in the depletable pools were offset by higher
reserves. DD&A expense for the second quarter of 2011 also included
$4.2 million representing DD&A related to properties acquired from
Petrolifera. For the six months ended June 30, 2011, DD&A expense
increased to $110.3 million from $72.0 million recorded in the same
period last year due to increased production and a $33.4 million
ceiling test impairment recorded in Gran Tierra Energy's Peru cost
center in the first quarter of 2011 which also resulted in an increase
in the effective depletion rate to $37.27 per BOE in the current six
month period compared to $28.09 per BOE recorded in the same period
last year.
General and administrative expense ('G&A') of $16.4 million and $30.0 million for the three and six months ended
June 30, 2011, respectively, were higher than comparable periods in
2010 reflecting expanded operations and the acquisition of
Petrolifera. G&A expenses per BOE increased 26% to $9.94 per BOE for
the current quarter, compared to $7.88 per BOE for the second quarter
of 2010, and increased by 55% to $10.15 per BOE for the first six
months ended June 30, 2011 compared to $6.55 per BOE for the six months
ended June 30, 2010 due to the same factors.
Equity tax for the first half of 2011 of $8.3 million represents a
Colombian tax of 6.2% on the balance sheet equity recorded in our
Colombia branches at January 1, 2011. The equity tax is assessed every
four years. The tax for the four-year period from 2011 to 2014 is
payable in eight semi-annual installments over the four-year period but
was expensed in the first quarter of 2011 at the commencement of the
four-year period. Accordingly, the equity tax expense for the previous
four-year period was recorded prior to 2010 and no expense was recorded
in 2010.
A foreign exchange loss of $14.5 million was recorded in the second
quarter of 2011, of which $11.6 million is an unrealized non-cash
foreign exchange loss. This compares to the $3.1 million foreign
exchange loss recorded in the same quarter of 2010, of which $1.3
million was an unrealized non-cash foreign exchange loss. For the six
months ended June 30, 2011, a foreign exchange loss of $19.7 million
was recorded, of which $16.1 million is an unrealized non-cash foreign
exchange loss, compared to a foreign exchange loss of $17.4 million, of
which $14.0 million was an unrealized non-cash foreign exchange loss in
the same period in 2010. The unrealized foreign exchange losses arose
primarily as a result of the translation of a deferred tax liability.
The deferred tax liability is denominated in Colombian pesos and the
decline in the U.S. dollar against the Colombian peso of 5% in the
current quarter (7% for the six months ended June 30, 2011) and 1% for
the three months ended June 30, 2010 (6% for the six months ended June
30, 2010) resulted in the foreign exchange losses.
The results for the second quarter of 2011 include a non-cash loss of
$2.6 million ($21.7 million gain for the six months ended June 30,
2011) on the acquisition of Petrolifera.
Net income of $31.6 million or $0.11 per share basic and diluted was
recorded for the second quarter of 2011, compared to net income of
$17.4 million, or $0.07 per share basic and diluted, for the same
period in 2010. For the first half of the year, net income increased to
$45.3 million or $0.17 per share basic and $0.16 per share diluted
compared to net income of $27.3 million or $0.11 per share basic and
$0.10 per share diluted recorded in the first half of 2010.
Balance Sheet Highlights:
The Company reported cash and cash equivalents of $211.4 million at June
30, 2011 compared to $355.4 million at December 31, 2010. The decline
in cash is due to capital spending and an increase of $113.3 million in
accounts receivable primarily due to the timing of payments from
Ecopetrol. Working capital decreased to $215.4 million at June 30,
2011, as compared to $265.8 million at December 31, 2010 due mainly to
lower cash and cash equivalents and the short-term bank debt, offset
partially by the increase in accounts receivable. Shareholders' equity
increased to $1,082.6 million at June 30, 2011 from $886.9 million at
December 31, 2010, and the Company had $31.3 million short-term bank
debt as of June 30, 2011 related to the reserve-backed credit facility
held by Petrolifera. Gran Tierra Energy repaid this debt on August 5,
2011 after the Argentine restriction preventing its repayment expired.
The Company is again debt free.
Production Highlights:
Average daily consolidated light and medium crude oil and natural gas
production for the three months ended June 30, 2011 increased 36% to
18,141 BOEPD NAR compared to 13,376 BOEPD NAR for the same period in
2010. Second quarter production was impacted by additional production
from existing field developments, new production from recent field
discoveries, and production growth from the recently acquired
Petrolifera assets. Light and medium crude oil represented
approximately 97% of the production for the three months ended June 30,
2011.
Average daily Colombian production of light and medium crude oil and
natural gas for the three months ended June 30, 2011 increased 21% to
15,277 BOEPD NAR compared to 12,657 BOEPD NAR for the same period in 2010. The
production is primarily from the Costayaco field in the Chaza Block in
Colombia where Gran Tierra Energy has a 100% working interest. Light
and medium crude oil represented approximately 99% of the Colombia
production for the three months ended June 30, 2011.
Average daily Argentine production of light and medium crude oil and
natural gas for the quarter ended June 30, 2011 increased 292% to 2,820
BOEPD NAR compared to 719 BOEPD NAR for the same period in 2010 as a
result of the inclusion of Petrolifera production beginning March 19,
2011. Light and medium crude oil represented approximately 82% of the
Argentine production for the three months ended June 30, 2011.
Average daily Brazil production of light and medium oil for the 16-day
period ended June 30, 2011 averaged 44 BOPD NAR over the quarter.
Production has been averaging approximately 250 BOPD NAR since approval
of the assignment of interests to Gran Tierra Energy.
Average daily consolidated production in July, 2011 averaged
approximately 18,250 BOEPD NAR. This included approximately 14,900
BOPD NAR of crude oil in Colombia, approximately 250 BOPD NAR of crude
oil in Brazil, and approximately 2,400 BOPD NAR of crude oil and
approximately 4.3 MMCFD NAR of natural gas (or approximately 700 BOEPD
NAR) in Argentina.
Production for the six months ended June 30, 2011 averaged 16,354 BOEPD
NAR.
Capital Program and Operations Update
Gran Tierra Energy's 2011 capital program outlook for 2011 of $357
million includes $196 million for Colombia, $49 million for Peru, $50
million for Argentina, and $62 million for Brazil. Of this, $190 million is for drilling, $79 million for infrastructure, $87 million for
seismic acquisition and $1 million for other activities. Of the $190
million allocated to drilling, approximately $87 million is for
exploration and the balance is for delineation and development
drilling.
Gran Tierra Energy continues to anticipate 2011 production following the
acquisition of Petrolifera to average between 17,500 BOEPD to 19,000
BOEPD.
Upcoming Exploration Wells
Environmental permitting for the Rumiyaco-1 oil exploration well in the
Rumiyaco Block of the Putumayo Basin has been approved. Civil
construction work began in May, 2011 and the well is expected to start
drilling in the third quarter of 2011.
The Pacayaco-1 ST1 oil exploration well on the Chaza block of the
Putumayo basin is expected to be drilled in the fourth quarter of 2011
The Turpial-1 oil exploration well in the Turpial Block in the Middle
Magdelena Basin is expected to begin drilling in the fourth quarter of
2011.
La Vega Este-1 oil exploration well in the Azar Block is on schedule to
be drilled in the fourth quarter of 2011.
The Brillante SE-2x well is expected to begin drilling late in the third
quarter of 2011.
COLOMBIA
Moqueta Field, Chaza Block
During the second quarter of 2011, Gran Tierra Energy completed the
6-inch diameter, 8-km flowline connecting the Moqueta oil discovery to
existing Costayaco infrastructure. In addition, a parallel 4-inch gas
line was completed that will be used to transport gas from Costayaco to
Moqueta for anticipated gas injection for pressure support. First
short-term test production occurred in June, 2011 and will continue
throughout 2011 as we test the reservoir productivity and pressure
response. Average production from the Moqueta field is expected to be
modest, at approximately 500 BOPD for the second half of 2011 until gas
compression facilities are installed. Production is expected to begin
ramping up in 2012 to levels that will be determined once reservoir
performance data has been acquired, the full aerial extent of the field
has been determined, and the final development concept decided. New 3D
seismic acquisition is expected to start in the third quarter to assist
in refining the mapping of the Moqueta field and planning further
delineation and development drilling.
The Moqueta-5 delineation well was drilled from the same well pad as the
Moqueta-4 delineation well and reached total measured depth of 5,309
feet in April. Based on mud and electric logs and Repeat Formation
Tester ('RFT') pressure data, the Caballos, T Sandstone and U Sandstone reservoirs
appear to be saturated with oil with a total interpreted net pay of 167
feet. No water is evident on the logs. The reservoirs were penetrated
approximately 50 feet deeper than in Moqueta-4, increasing the reserve
potential of the field. Initial production tests at Moqueta-5 were
conducted on the T Sandstone reservoir and will eventually be performed
on all zones. Testing over 10 days resulted in production rates of 730
BOPD with a jet pump.
Moqueta-6, expected to spud in third quarter of 2011, will also be
drilled as a deviated well from the Moqueta-4 surface location to
further investigate the aerial extent of the oil columns encountered in
the Villeta U, Villeta T and Caballos formation reservoirs. Subject to
further drilling engineering work, the bottom hole location is
approximately 600 meters northwest of Moqueta-4.
Planning is underway for Moqueta-7 which is expected to be drilled in
the first quarter of 2012 at a new surface location approximately 1,750
meters west of Moqueta-4. This location will allow additional
appraisal of the down dip extent of the field. Moqueta-7 could be used
as an oil producer or water injector depending on the well results.
Costayaco Field, Chaza Block, Putumayo Basin
The Costyaco-14 development well is currently being drilled. This well
is planned to be used as a water injector for pressure support of the
Costayaco field. The field was connected to the national electrical
system during the quarter, which is expected to marginally improve
operating costs in the area going forward.
Brillante Field, Sierra Nevada Block, Lower Magdalena Basin
Development of the Brillante gas field is advancing, with first gas
sales expected to be initiated in the third quarter of 2011 through
compressed natural gas trucking at approximately two to three MMCFD. A
new 275 square kilometer 3D seismic program is expected to be acquired
in the third quarter of 2011, of which 222 square kilometers will be in
the Sierra Nevada License and 53 kilometers will be in the Magdalena
license. The Brillante SE-2x delineation well is expected to evaluate
the significant potential gas resource discovered by Brillante SE-1x
and is expected to spud late in the third quarter of 2011.
Juanambu Field, Guayuyaco Block
The Juanambu-3 development well drilling operations were completed in
April, 2011 and production tests are ongoing.
Garibay Block
The Melero-1 exploration well reached total depth of 9,748 feet on July
16, 2011. Oil shows in the Mirador formation were encountered during
drilling and oil is interpreted from logs. RFT data over the zone was
inconclusive. A testing program is currently being prepared.
BRAZIL
On June 15, 2011, Gran Tierra Energy received final approvals from
Agência Nacional de Petróleo Gás Natural e Biocombustíveis for a 70%
working interest and operatorship of Blocks -129, -142 and -224 and
-155 in the onshore Recôncavo Basin. Gran Tierra Energy anticipates
drilling two development wells in the second half of 2011 to grow
production from this discovery, which is currently producing
approximately 500 BOPD gross from one zone without the assistance of
pumps.
In addition, two exploration wells are planned to be drilled on this
acreage in 2011, with drilling rigs currently being tendered and
locations currently being permitted. Additional drilling is scheduled
to continue into 2012. The first exploration well is expected to start
drilling on Block 142 at the end of third quarter 2011.
PERU
Block 95, Marañon Basin
A drilling location has been identified for the first exploration well
on Block 95, with civil construction expected to begin in the third
quarter of 2011. Drilling is expected to begin in second quarter 2012. An oil field
has already been discovered on Block 95, with the discovery well
drilled in 1974 flowing 807 BOPD naturally without pumps. The new
exploration well is expected to further delineate this field and
explore deeper reservoir horizons not penetrated by the discovery well.
Block 107 and 133, Marañon Basin
Permitting for drilling on Block 107 is advancing, with drilling
expected to begin in the second half of 2012. The prospects on Block
107 are on trend with the world class gas-condensate discoveries that
have been made around the Camisea region in southern Peru. Both oil
and gas seeps are present on Block 107. Geologic studies are ongoing
on the adjacent Block 133 in preparation for seismic acquisition in
2012.
Blocks 122 and 128, Marañon Basin
The prospectivity of Blocks 122 and 128 is under review as a result of
the Kanatari-1 drilling. No additional wells will be drilled on the
blocks in 2011.
Blocks 123, 124 and 129, Marañon Basin
Government approval for Gran Tierra Energy's 20% non-operated working
interest in ConocoPhillips operated Blocks 123, 124 and 129 was granted
on March 19, 2011 with final assignment completed April 26, 2011. Gran
Tierra Energy is evaluating the prospectivity of blocks 123 and 129
based on recently acquired 2D seismic data together with its partners
on the block. Additional infill 2D seismic data will be acquired in
late 2011 in those two blocks.
ARGENTINA
Santa Victoria Block, Noroeste Basin
Gran Tierra Energy announced it has successfully farmed out a 50%
interest in its Santa Victoria block in the Noroeste Basin of
northwestern Argentina to Apache. The joint venture, with Gran Tierra
Energy as operator, is evaluating the gas potential of the acreage,
with gas-condensate reserves and production proven in the region. Gran
Tierra Energy has agreed to proceed with Apache into the second
exploration phase, which has a work commitment to be fulfilled with one
exploration well expected to be drilled before the end of 2012.
Puesto Morales / Puesto Morales Este Blocks, Neuquen Basin
Gran Tierra Energy has initiated its workover program on 16 wells and
completed 10 at the end of the quarter. Geological and geophysical
studies are ongoing to optimize the location of the planned 6
development wells in the fourth quarter. The goal of the 6 development
wells is to improve recovery in the remaining reserves and grow
production. Since taking over operatorship in March, the production
decline of the last several years has been halted with the workover
program. Production has subsequently grown to approximately 2,530
BOEPD from 2,360 BOEPD.
Conference Call Information:
Gran Tierra Energy Inc. will host its second quarter 2011 results
conference call on Tuesday, August 9, 2011 at 8:00 a.m. Mountain Time
(MT).
President and Chief Executive Officer Dana Coffield is in Brazil and
Colombia attending meetings with Canadian Prime Minister Stephen Harper
and will be unable to make the scheduled conference call. Chief
Financial Officer Martin Eden and Chief Operating Officer Shane O'Leary
will discuss Gran Tierra Energy's financial and operating results for
the quarter and then take questions from securities analysts and
institutional shareholders.
Interested parties may access the conference call by dialing
1-866-804-6928 (domestic) or 1-857-350-1674 (international), pass code
75075915. The call will also be available via web cast at www.grantierra.com, www.streetevents.com, or www.fulldisclosure.com. The web cast will be available on Gran Tierra Energy's website until
the next earnings call.
For interested parties unable to participate, an audio replay of the
call will be available beginning two hours after the call until 1:00
p.m. on August 23, 2011. To access the replay dial 1-888-286-8010
(domestic) or 617-801-6888 (international) pass code 21135132.
Please connect at least 15 minutes prior to the conference call to
ensure adequate time for any software download that may be required to
join the webcast.
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 Amex Exchange (GTE) and the
Toronto Stock Exchange (GTE), and operating in South America. Gran
Tierra Energy holds interests in producing and prospective properties
in Argentina, Colombia Peru, and Brazil. Gran Tierra Energy 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. Additional information concerning
Gran Tierra Energy is available at www.grantierra.com. Investor inquiries may be directed to info@grantierra.com or (403) 265-3221.
Gran Tierra Energy's Securities and Exchange Commission filings are
available on a web site maintained by the Securities and Exchange
Commission at http://www.sec.gov and on SEDAR at http://www.sedar.com.
Forward Looking Statements:
This news release contains certain forward-looking information,
forward-looking statements and forward-looking financial outlook
(collectively, 'forward-looking statements') under the meaning of
applicable securities laws, including Canadian Securities
Administrators' National Instrument 51-102 - Continuous Disclosure Obligations and the United States Private Securities Litigation Reform Act of 1995.
The use of the words 'expect', 'project', 'plan', 'outlook',
'anticipate', 'schedule', 'intend', 'will', 'target' and similar
expressions are intended to identify forward-looking statements. In
particular, but without limiting the foregoing, this news release
contains forward-looking statements regarding: the reserves potential
of the Moqueta oil field; drilling, testing and production
expectations; Gran Tierra Energy's planned capital program and the
allocation of capital; including under the caption 'Capital Program and
Operations Update' production projections; Gran Tierra Energy's planned
operations and expected results from those operations, including as
described under the captions 'Colombia', 'Peru', 'Brazil' and
'Argentina' together with all other statements regarding expected or
planned development, testing, drilling, production, expenditures or
exploration, or that otherwise reflect expected future results or
events.
The forward-looking statements contained in this news release reflect
several material factors and expectations and assumptions of Gran
Tierra Energy including, without limitation, assumptions relating to
log evaluations, that Gran Tierra Energy will continue to conduct its
operations in a manner consistent with past operations, the accuracy of
testing and production results and seismic data, the effects of
drilling down-dip and the general continuance of current or, where
applicable, assumed operational, regulatory and industry conditions.
Gran Tierra Energy believes the material factors, expectations and
assumptions reflected in the forward-looking statements are reasonable
at this time but no assurance can be given that these factors,
expectations and assumptions will prove to be correct.
The forward-looking statements contained in this news release are
subject to risks, uncertainties and other factors that could cause
actual results or outcomes to differ materially from those contemplated
by the forward-looking statements, including, among others: Gran Tierra
Energy's capital program requires a tremendous amount of capital, a
portion of which is expected to come from operating cash flows which,
if not sufficient to fund the capital program, may require Gran Tierra
Energy to curtail or delay its capital spending program, which would
curtail or delay its exploration and development activities; Gran
Tierra Energy's operations are located in South America, and unexpected
problems can arise due to guerilla activity, technical difficulties and
operational difficulties which may impact its testing and drilling
operations, the integration of the assets acquired in the acquisition
of Petrolifera and the production, transport or sale of its products;
geographic, political, regulatory and weather conditions can impact
testing and drilling operations and the production, transport or sale
of its products; and the risk that current global economic and credit
market conditions may impact oil prices and oil consumption more than
Gran Tierra Energy currently predicts, which could cause Gran Tierra
Energy to modify its exploration, drilling and/or construction
activities. Although the current capital spending program of Gran
Tierra Energy is based upon the current expectations of the management
of Gran Tierra Energy, there may be circumstances where, for unforeseen
reasons, a reallocation of funds may be necessary as may be determined
at the discretion of Gran Tierra Energy and there can be no assurance
as at the date of this press release as to how those funds may be
reallocated. Should any one of a number of issues arise, Gran Tierra
Energy may find it necessary to alter its current business strategy
and/or capital spending program. Accordingly, readers should not place
undue reliance on the forward-looking statements contained herein.
Further information on potential factors that could affect Gran Tierra
Energy are included in risks detailed from time to time in Gran Tierra
Energy's Securities and Exchange Commission filings, including, without
limitation, under the caption 'Risk Factors' in Gran Tierra Energy's
Quarterly Report on Form 10-Q filed May 10, 2011. These filings are
available on a Web site maintained by the Securities and Exchange
Commission at http://www.sec.gov and on SEDAR at www.sedar.com. The forward-looking statements contained herein are expressly
qualified in their entirety by this cautionary statement. The
forward-looking statements included in this press release are made as
of the date of this press release and Gran Tierra Energy disclaims any
intention or obligation to update or revise any forward-looking
statements, whether as a result of new information, future events or
otherwise, except as expressly required by applicable securities
legislation.
BOE's may be misleading, particularly if used in isolation. A BOE
conversion ratio of 6 Mcf : 1 bbl is based on an energy equivalency
conversion method primarily applicable at the burner tip and does not
represent a value equivalency at the wellhead.
Basis of Presentation of Financial Results:
Gran Tierra Energy's financial results are reported in United States
dollars and prepared in accordance with generally accepted accounting
principles in the United States.
Gran Tierra Energy Inc.
Condensed Consolidated Statements of Operations and Retained Earnings
(Accumulated Deficit) (Unaudited)
(Thousands of U.S. Dollars, Except Share and Per Share Amounts)
Three Months Ended June 30, Six Months Ended June 30,
2011 2010 2011 2010
REVENUE AND
OTHER INCOME
Oil and $ 161,664 $ 83,717 $ 283,960 $ 176,649
natural gas
sales
Interest 456 397 679 575
162,120 84,114 284,639 177,224
EXPENSES
Operating 23,160 9,529 39,556 19,714
Depletion, 46,965 31,641 110,322 71,984
depreciation,
accretion, and
impairment
General and 16,410 9,594 30,048 16,784
administrative
Equity tax 221 - 8,271 -
Financial (1,292) - (1,522) (44)
instruments
gain
Loss (gain) 2,601 - (21,699) -
on acquisition
Foreign 14,495 3,126 19,694 17,420
exchange loss
102,560 53,890 184,670 125,858
INCOME BEFORE 59,560 30,224 99,969 51,366
INCOME TAXES
Income tax (27,993) (12,853) (54,689) (24,035)
expense
NET INCOME AND 31,567 17,371 45,280 27,331
COMPREHENSIVE
INCOME
RETAINED 71,810 30,885 58,097 20,925
EARNINGS,
BEGINNING OF
PERIOD
RETAINED $ 103,377 $ 48,256 $ 103,377 $ 48,256
EARNINGS, END
OF PERIOD
NET INCOME PER $ 0.11 $ 0.07 $ 0.17 $ 0.11
SHARE —
BASIC
NET INCOME PER $ 0.11 $ 0.07 $ 0.16 $ 0.10
SHARE —
DILUTED
WEIGHTED 277,297,728 254,344,474 269,159,453 251,234,950
AVERAGE SHARES
OUTSTANDING -
BASIC
WEIGHTED 284,451,536 263,853,024 277,530,126 260,922,669
AVERAGE SHARES
OUTSTANDING -
DILUTED
Gran Tierra Energy Inc.
Condensed Consolidated Balance Sheets (Unaudited)
(Thousands of U.S. Dollars, Except Share and Per Share Amounts)
June 30, December 31,
2011 2010
ASSETS
Current Assets
Cash and cash equivalents $ 211,355 $ 355,428
Restricted cash 11,465 250
Accounts receivable 156,350 43,035
Inventory 7,109 5,669
Taxes receivable 20,274 6,974
Prepaids 2,486 1,940
Deferred tax assets 2,643 4,852
Total Current Assets 411,682 418,148
Oil and Gas Properties (using the full cost
method of accounting)
Proved 567,422 442,404
Unproved 434,254 278,753
Total Oil and Gas Properties 1,001,676 721,157
Other capital assets 7,379 5,867
Total Property, Plant and Equipment 1,009,055 727,024
Other Long Term Assets
Restricted cash 1,359 1,190
Deferred tax assets 12,082 -
Other long term assets 297 311
Goodwill 102,581 102,581
Total Other Long Term Assets 116,319 104,082
Total Assets $ 1,537,056 $ 1,249,254
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 49,727 $ 76,023
Accrued liabilities 74,300 32,120
Bank debt 31,250 -
Taxes payable 40,723 43,832
Asset retirement obligations 322 338
Total Current Liabilities 196,322 152,313
Long Term Liabilities
Deferred tax liabilities 231,558 204,570
Equity tax payable 10,293 -
Asset retirement obligations 10,468 4,469
Other long term liabilities 5,811 1,036
Total Long Term Liabilities 258,130 210,075
Shareholders' Equity
Common shares 5,846 4,797
(260,977,461 and 240,440,830 common
shares and 16,726,430 and 17,681,123
exchangeable shares, par value $0.001 per
share, issued and outstanding as at June 30,
2011 and December 31, 2010 respectively)
Additional paid in capital 971,601 821,781
Warrants 1,780 2,191
Retained earnings 103,377 58,097
Total Shareholders' Equity 1,082,604 886,866
Total Liabilities and Shareholders' Equity $ 1,537,056 $ 1,249,254
Gran Tierra Energy Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(Thousands of U.S. Dollars)
Three Months Ended June 30 Six Months Ended June 30
2011 2010 2011 2010
Operating
Activities
Net income $ 31,567 $ 17,371 $ 45,280 $ 27,331
Adjustments
to reconcile
net income
(loss) to net
cash provided
by operating
activities:
Depletion,
depreciation
and accretion 46,965 31,641 110,322 71,984
Deferred
taxes (5,219) (7,977) (5,406) (18,031)
Stock
based
compensation 2,492 1,998 5,945 3,360
Unrealized
gain on
financial
instruments (1,292) - (1,354) (44)
Unrealized
foreign
exchange loss 11,644 1,290 16,102 13,997
Settlement
of asset
retirement
obligations (305) - (309) -
Equity
taxes payable
long-term 119 - 6,251 -
Loss
(gain) on
acquisition 2,601 - (21,699) -
Net changes
in non-cash
working
capital - -
Accounts
receivable (17,919) 10,773 (100,955) (35,435)
Inventory (949) (584) (213) (487)
Prepaids 620 292 (211) (377)
Accounts
payable and
accrued
liabilities 20,235 3,580 (2,521) (14,216)
Taxes
receivable
and payable (26,221) (7,860) (18,120) 4,887
Net cash
provided by
operating
activities 64,338 50,524 33,112 52,969
Investing
Activities
Restricted
cash (2,539) (51) (8,139) 661
Additions
to property,
plant and
equipment (104,889) (23,842) (179,155) (50,914)
Proceeds
from
disposition
of oil and
gas property - 600 - 1,200
Cash
acquired on
acquisition - - 7,747 -
Proceeds
on sale of
asset backed
commercial
paper - - 22,679 -
Long term
assets and
liabilities 10 (12) 13 20
Net cash used
in investing
activities (107,418) (23,305) (156,855) (49,033)
Financing
Activities
Settlement of
bank debt - - (22,853) -
Proceeds
from issuance
of common
stock 534 331 2,523 18,504
Net cash
(used in)
provided by
financing
activities 534 331 (20,330) 18,504
Net decrease
in cash and
cash
equivalents (42,546) 27,550 (144,073) 22,440
Cash and cash
equivalents,
beginning of
period 253,901 270,786 355,428 270,786
Cash and cash
equivalents,
end of period $ 211,355 $ 298,336 $ 211,355 $ 293,226
Cash $ 135,142 $ 194,465 $ 135,142 $ 194,465
Term deposits 76,213 98,761 76,213 98,761
Cash and cash
equivalents,
end of period $ 211,355 $ 293,226 $ 211,355 $ 293,226
Supplemental
cash flow
disclosures:
Cash
paid for
interest $ 676 $ - $ 1,344 $ -
Cash paid
for taxes $ 54,512 $ 22,365 $ 64,205 $ 32,512
Non-cash
investing
activities:
Non-cash
working
capital
related to
property,
plant and
equipment $ 39,118 $ 21,220 $ 39,118 $ 21,220
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Contact Information
For investor and media inquiries please contact:
Jason Crumley
Director, Investor Relations
403-265-3221
info@grantierra.com
www.grantierra.com
