UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
| Item 2.02. | Results of Operations and Financial Condition. |
The disclosures set forth in Item 8.01 are incorporated by reference into this Item 2.02.
| Item 8.01. | Other Events. |
Gran Tierra Energy Inc., a Delaware corporation (“Gran Tierra” or the “Company”) is hereby presenting information regarding its oil and natural gas reserves at December 31, 2023 and certain operational updates regarding the fourth quarter and the year ended December 31, 2023.
Reserves Information
Gran Tierra’s 2023 reserves were independently prepared by McDaniel & Associates Consultants Ltd. (“McDaniel”).
See “Glossary” for definitions of industry terms and abbreviations. All dollar amounts are presented in U.S. dollars.
The following table sets forth Gran Tierra’s estimated reserves NAR as of December 31, 2023.
| Oil | Natural Gas | Oil and Natural Gas | ||||||||||
Reserves Category | (Mbbl) | (MMcf) | (MBOE) | |||||||||
| Proved | ||||||||||||
| Total proved developed reserves | 39,599 | — | 39,599 | |||||||||
| Total proved undeveloped reserves | 34,697 | — | 34,697 | |||||||||
| Total proved reserves | 74,296 | — | 74,296 | |||||||||
| Probable | ||||||||||||
| Total probable developed reserves | 12,139 | — | 12,139 | |||||||||
| Total probable undeveloped reserves | 34,109 | — | 34,109 | |||||||||
| Total probable reserves | 46,248 | — | 46,248 | |||||||||
| Possible | ||||||||||||
| Total possible developed reserves | 11,362 | — | 11,362 | |||||||||
| Total possible undeveloped reserves | 37,144 | — | 37,144 | |||||||||
| Total possible reserves | 48,506 | — | 48,506 | |||||||||
The product prices that were used to determine the future gross revenue for each property reflect adjustments to the benchmark prices for gravity, quality, local conditions and/or distance from market. The average realized prices for reserves in the report are:
| Oil (USD/bbl) – Colombia | $ | 69.91 | ||
| Oil (USD/bbl) – Ecuador | $ | 77.44 |
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Operations Update
The following table sets forth select estimated operational data for Gran Tierra for the year ended December 31, 2023.
| Year Ended December 31, | ||||||||||||||||||||
| 2023 | % Change | 2022 | % Change | 2021 | ||||||||||||||||
| SEC Compliant Reserves, NAR (MMBOE) | ||||||||||||||||||||
| Estimated proved oil and gas reserves | 74 | 12 | 66 | (1 | ) | 67 | ||||||||||||||
| Estimated probable oil and gas reserves | 46 | 28 | 36 | — | 36 | |||||||||||||||
| Estimated possible oil and gas reserves | 49 | 26 | 39 | 26 | 31 | |||||||||||||||
| Average Consolidated Daily Volumes (BOPD) | ||||||||||||||||||||
| Working interest production before royalties | 32,647 | 6 | 30,746 | 16 | 26,507 | |||||||||||||||
| Royalties | (6,548 | ) | (6 | ) | (6,931 | ) | 41 | (4,919 | ) | |||||||||||
| Production NAR | 26,099 | 10 | 23,815 | 10 | 21,588 | |||||||||||||||
| (Increase) decrease in inventory | (152 | ) | (28 | ) | (119 | ) | (1,290 | ) | 10 | |||||||||||
| Sales(1) | 25,947 | 9 | 23,696 | 10 | 21,598 | |||||||||||||||
| (1) | Sales volumes represent production NAR adjusted for inventory changes. |
The net present value (“NPV”) discounted at 10% (“NPV10”) after tax of Gran Tierra’s estimated proved oil and gas reserves is as follows:
| (US$ thousands) | Colombia | Ecuador | Total Company | |||||||||
| December 31, 2023 | ||||||||||||
| Net present value after tax | $ | 1,843,425 | $ | 64,987 | $ | 1,908,412 | ||||||
| 10% discount | (516,451 | ) | (22,924 | ) | (539,375 | ) | ||||||
| Net present value at 10% discount after tax | $ | 1,326,974 | $ | 42,063 | $ | 1,369,037 | ||||||
Gran Tierra provides the following additional financial and production information as part of this update:
| · | Gran Tierra achieved total company average production of approximately 31,309 BOPD for the fourth quarter of 2023, and approximately 32,647 BOPD for the year ended December 31, 2023, an increase of 6% from 2022 and 23% from 2021. | |
| · | Estimated capital expenditures, including and excluding acquired properties, for the year ended December 31, 2023 were approximately $218.9 million. | |
| · | Estimated net debt(*) at December 31, 2023 was approximately US$510.8 million, comprised of senior notes outstanding of $536.6 million (gross) plus $36.4 million (gross) of borrowings outstanding under the Company’s credit facility less cash and cash equivalents of $62.2 million. | |
| · | Oil sales for the fourth quarter of 2023 is estimated to be $154.9 million, or $54.04 per bbl, per WI sales volume. | |
| · | Operating netback(*) for the fourth quarter of 2023 is estimated to be $103.4 million, or $36.05 per bbl, per working interest production before royalties (“WI”) sales volume. | |
| · | During 2023, the Company repurchased 2,370,454 shares of common stock, or approximately 7.1% of its outstanding shares. | |
| · | Revenue for the year ended December 31, 2023 is estimated to be $637.0 million. | |
| · | Operating expenses for the year ended December 31, 2023 is estimated to be $186.9 million. | |
| · | Transportation expenses for the year ended December 31, 2023 is estimated to be $14.6 million. | |
| · | Operating netback(*) for the year ended December 31, 2023 is estimated to be $435.5 million. | |
| · | Adjusted EBITDA(*) for the year ended December 31, 2023 is estimated to be between $390 million to $410 million. | |
| (*) | Each of net debt, Operating netback and Adjusted EBITDA is a non-GAAP measure which does not have any standardized meaning prescribed under generally accepted accounting principles in the United States of America (“GAAP”). Refer to “Non-GAAP Measures” for a description of these non-GAAP measures. |
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Non-GAAP Measures
This Current Report on Form 8-K includes non-GAAP measures which do not have a standardized meaning under GAAP. Investors are cautioned that these measures should not be construed as alternatives to oil sales, net income or loss or other measures of financial performance as determined in accordance with GAAP. Gran Tierra’s method of calculating these measures may differ from other companies and, accordingly, they may not be comparable to similar measures used by other companies.
Net debt as presented is defined as Gran Tierra’s senior notes and borrowings under Gran Tierra’s credit facility, less cash and cash equivalents.
Operating netback as presented is defined as oil sales less operating and transportation expenses. Management believes that operating netback is a useful supplemental measure for investors to analyze financial performance and provide an indication of the results generated by Gran Tierra’s principal business activities prior to the consideration of other income and expenses. A reconciliation of operating netback per boe to the most directly comparable measure calculated and presented in accordance with GAAP is as follows:
| Three months ended December 31, 2023 | Year Ended December 31, 2023 | |||||||||||||||||||||||
| (Thousands of U.S. dollars) | ($/bbl, per NAR sales volume) | ($/bbl, per WI sales volume) | (Thousands of U.S. dollars) | ($/bbl, per NAR sales volume) | ($/bbl, per WI sales volume) | |||||||||||||||||||
| Oil sales | $ | 154,944 | $ | 67.51 | $ | 54.04 | $ | 636,957 | $ | 62.26 | $ | 53.70 | ||||||||||||
| Operating expenses | (47,637 | ) | (20.75 | ) | (16.61 | ) | (186,864 | ) | (19.73 | ) | (15.75 | ) | ||||||||||||
| Transportation expenses | (3,947 | ) | (1.72 | ) | (1.38 | ) | (14,546 | ) | (1.54 | ) | (1.23 | ) | ||||||||||||
| Operating netback | $ | 103,360 | $ | 45.04 | $ | 36.05 | $ | 435,547 | $ | 45.99 | $ | 36.72 | ||||||||||||
Adjusted EBITDA is defined as EBITDA (defined as net income or loss adjusted for depletion, depreciation and accretion expenses, interest expense and income tax expense or recovery) adjusted for inventory impairment, non-cash lease expense, lease payments, foreign exchange gain or loss, stock-based compensation expense, unrealized derivative instruments gain or loss, other non-cash gain or loss, and other financial instruments gain or loss. Management uses this supplemental measure to analyze performance and income generated by our principal business activities prior to the consideration of how non-cash items affect that income, and believes that this financial measure is useful supplemental information for investors to analyze our performance and our financial results. A reconciliation from net income to Adjusted EBITDA is not available due to certain components of net income, including taxes and gain on debt securities, not being reasonably estimable at this time.
Cautionary Statement - Unaudited Financial Information
The following results reflect the Company’s preliminary expectations of results for the year ended December 31, 2023, based on currently available information. The preliminary financial and operational results included in this report reflect management’s estimates based solely upon information available to the Company as of the date of this report and are the responsibility of management. The preliminary consolidated financial results presented above are not a comprehensive statement of the Company’s financial results for the year ended December 31, 2023 and have not been audited, reviewed or compiled by the Company’s independent registered public accounting firm. The preliminary results presented above are subject to the completion of the Company’s financial closing procedures, which have not yet been completed. The Company’s actual results for the year ended December 31, 2023 will not be available until completion of the Company’s audited financial statements for the year ended December 31, 2023 and may differ materially from these estimates. Estimates are subject to risks and uncertainties, many of which are not within the Company’s control. See “Cautionary Statement Regarding Forward-looking Statements.” Gran Tierra anticipates filing its audited financial statements and related management’s discussion and analysis for the year ended December 31, 2023 on or before February 20, 2024.
| Item 9.01. | Financial Statements and Exhibits. |
| (d) | Exhibits. |
|
Exhibit Number |
Description | |
| 23.1 | Consent of McDaniel & Associates Consultants Ltd. | |
| 99.1 | Gran Tierra Energy Inc. Reserves Assessment and Evaluation of Oil and Gas Properties Corporate Summary, effective December 31, 2023. | |
| 104 | Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document. |
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Current Report on Form 8-K contains opinions, forecasts, projections, plans, and other statements about future events or results that constitute forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and financial outlook and forward looking information within the meaning of applicable Canadian securities laws (collectively, “forward-looking statements”), which can be identified by such terms as “expect,” “plan,” “can,” “will,” “should,” “guidance,” “estimate,” “forecast,” “signal,” “progress,” “anticipate,” and “believes,” derivations thereof and similar terms identify forward-looking statements.
The forward-looking statements contained in this Current Report on Form 8-K reflect several material factors and expectations and assumptions of Gran Tierra including, without limitation, that Gran Tierra will continue to conduct its operations in a manner consistent with its current expectations, the accuracy of testing and production results and seismic data, pricing and cost estimates (including with respect to commodity pricing and exchange rates), rig availability, the effects of drilling down-dip, the effects of waterflood and multi-stage fracture stimulation operations, the extent and effect of delivery disruptions, and the general continuance of current or, where applicable, assumed operational, regulatory and industry conditions including in Colombia and Ecuador and areas of potential expansion, and the ability of Gran Tierra to execute its current business and operational plans in the manner currently planned. Gran Tierra 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.
Among the important factors that could cause actual results to differ materially from those indicated by the forward-looking statements in this Current Report on Form 8-K are: Gran Tierra’s operations are located in South America and unexpected problems can arise due to guerilla activity, strikes, local blockades or protests; technical difficulties and operational difficulties may arise which impact the production, transport or sale of Gran Tierra’s products; other disruptions to local operations; global and regional changes in the demand, supply, prices, differentials or other market conditions affecting oil and gas, including inflation and changes resulting from a global health crisis, geopolitical events, including the ongoing conflicts in Ukraine and the Gaza region, or from the imposition or lifting of crude oil production quotas or other actions that might be imposed by OPEC and other producing countries and resulting company or third-party actions in response to such changes; changes in commodity prices, including volatility or a prolonged decline in these prices relative to historical or future expected levels; the risk that current global economic and credit conditions may impact oil prices and oil consumption more than Gran Tierra currently predicts, which could cause Gran Tierra to further modify its strategy and capital spending program; prices and markets for oil and natural gas are unpredictable and volatile; the effect of hedges, the accuracy of productive capacity of any particular field; geographic, political and weather conditions can impact the production, transport or sale of Gran Tierra’s products; the ability of Gran Tierra to execute its business plan and realize expected benefits from current initiatives; the risk that unexpected delays and difficulties in developing currently owned properties may occur; the ability to replace reserves and production and develop and manage reserves on an economically viable basis; the accuracy of testing and production results and seismic data, pricing and cost estimates (including with respect to commodity pricing and exchange rates); the risk profile of planned exploration activities; the effects of drilling down-dip; the effects of waterflood and multi-stage fracture stimulation operations; the extent and effect of delivery disruptions, equipment performance and costs; actions by third parties; the timely receipt of regulatory or other required approvals for Gran Tierra’s operating activities; the failure of exploratory drilling to result in commercial wells; unexpected delays due to the limited availability of drilling equipment and personnel; volatility or declines in the trading price of Gran Tierra’s common stock or bonds; the risk that Gran Tierra does not receive the anticipated benefits of government programs, including government tax refunds; Gran Tierra’s ability to comply with financial covenants in its credit agreement and indentures and make borrowings under its credit agreement; and the risk factors detailed from time to time in Gran Tierra’s periodic reports filed with the Securities and Exchange Commission (the “SEC”), including, without limitation, under the caption “Risk Factors” in Gran Tierra’s Annual Report on Form 10-K for the year ended December 31, 2022 filed on February 21, 2023 and its subsequent quarterly reports on Form 10-Q and other filings with the SEC. These filings are available on the SEC’s website at www.sec.gov and on the System for Electronic Data Analysis and Retrieval (“SEDAR”) at www.sedarplus.ca. Statements relating to “reserves” are also deemed to be forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions, including that the reserves described can be profitably produced in the future. Should any one of a number of issues arise, Gran Tierra may find it necessary to alter its business strategy and/or capital spending program and there can be no assurance as at the date of this Current Report on Form 8-K as to how those funds may be reallocated or strategy changed and how that would impact Gran Tierra’s results of operations and financing position.
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All forward-looking statements are made as of the date of this Current Report on Form 8-K and the fact that this Current Report on Form 8-K remains available does not constitute a representation by Gran Tierra that Gran Tierra believes these forward-looking statements continue to be true as of any subsequent date. Actual results may vary materially from the expected results expressed in forward-looking statements. Gran Tierra 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 law. Gran Tierra’s forward-looking statements are expressly qualified in their entirety by this cautionary statement.
DISCLOSURE OF OIL AND GAS INFORMATION
Boe’s have been converted on the basis of six thousand cubic feet (“Mcf”) of natural gas to 1 bbl of oil. 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. In addition, given that the value ratio based on the current price of oil as compared with natural gas is significantly different from the energy equivalent of six to one, utilizing a boe conversion ratio of 6 Mcf: 1 bbl would be misleading as an indication of value.
All reserves values and ancillary information contained in this Current Report on Form 8-K have been prepared by McDaniel and are derived from the GTE McDaniel Reserves Report, unless otherwise expressly stated. Any reserves values or related information contained in this Current Report on Form 8-K as of a date other than December 31, 2023 has an effective date of December 31 of the applicable year. Estimates of net present value contained herein do not necessarily represent fair market value. Estimates of reserves for individual properties may not reflect the same level of confidence as estimates of reserves for all properties, due to the effect of aggregation. There is no assurance that the forecast price and cost assumptions applied by McDaniel in evaluating Gran Tierra’s reserves will be attained and variances could be material. All reserves assigned in the GTE McDaniel Reserves Report are located in Colombia and Ecuador and presented on a consolidated basis by foreign geographic area. There are numerous uncertainties inherent in estimating quantities of crude oil reserves. The reserve information set forth in the GTE McDaniel Reserves Report are estimates only, and there is no guarantee that the estimated reserves will be recovered. Actual reserves may be greater than or less than the estimates provided therein.
The Company believes that the presentation of NPV10 is useful to investors because it presents (i) relative monetary significance of its oil and natural gas properties regardless of tax structure and (ii) relative size and value of its reserves to other companies. The Company also uses this measure when assessing the potential return on investment related to its oil and natural gas properties. NPV10 does not purport to present the fair value of the Company’s oil and gas reserves. The Company has not provided a reconciliation of NPV10 to the standardized measure of discounted future net cash flows because it is impracticable to do so.
Investors are urged to consider closely the disclosures and risk factors in the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and in the other reports and filings with the SEC, available from the Company’s offices or website. These reports can also be obtained from the SEC website at www.sec.gov.
Glossary of Oil and Gas Terms:
In this document, the abbreviations set forth below have the following meanings:
| bbl | barrel | Mcf | thousand cubic feet |
| Mbbl | thousand barrels | MMcf | million cubic feet |
| MMbbl | million barrels | Bcf | billion cubic feet |
| BOE | barrels of oil equivalent | bopd | barrels of oil per day |
| MMBOE | million barrels of oil equivalent | NGL | natural gas liquids |
| BOEPD | barrels of oil equivalent per day | NAR | net after royalty |
NAR sales volumes represent production NAR adjusted for inventory changes and losses. Our oil and gas reserves are reported NAR. Our production is also reported NAR, except as otherwise specifically noted as “working interest production before royalties.” NGL volumes are converted to BOE on a one-to-one basis with oil. Gas volumes are converted to BOE at the rate of 6 Mcf of gas per bbl of oil, based upon the approximate relative energy content of gas and oil. The rate is not necessarily indicative of the relationship between oil and gas prices. BOEs 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.
Below are explanations of some commonly used terms in the oil and gas business and in this report.
| · | Field. An area consisting of a single reservoir or multiple reservoirs all grouped on or related to the same individual geological structural feature and/or stratigraphic condition. | |
| · | Possible reserves. Possible reserves are those additional reserves that are less certain to be recovered than probable reserves. The SEC provides a complete definition of possible reserves in Rule 4-10(a)(17) of Regulation S-X. |
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| · | Probable reserves. Probable reserves are those additional reserves that are less certain to be recovered than proved reserves but that, together with proved reserves, are as likely as not to be recovered. The SEC provides a complete definition of probable reserves in Rule 4-10(a)(18) of Regulation S-X. | |
| · | Proved developed reserves. In general, reserves that can be expected to be recovered from existing wells with existing equipment and operating methods. The SEC provides a complete definition of developed oil and gas reserves in Rule 4-10(a)(6) of Regulation S-X. | |
| · | Proved reserves. Those quantities of oil and natural gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible from a given date forward, from known reservoirs and under existing economic conditions, operating methods and government regulations prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation. The project to extract the hydrocarbons must have commenced or the operator must be reasonably certain that it will commence the project within a reasonable time. |
| (i) | The area of the reservoir considered as proved includes: |
| (A) | The area identified by drilling and limited by fluid contacts, if any, and |
| (B) | Adjacent undrilled portions of the reservoir that can, with reasonable certainty, be judged to be continuous with it and to contain economically producible oil or gas on the basis of available geoscience and engineering data. |
| (ii) | In the absence of data on fluid contacts, proved quantities in a reservoir are limited by the lowest known hydrocarbons (LKH) as seen in a well penetration unless geoscience, engineering, or performance data and reliable technology establishes a lower contact with reasonable certainty. |
| (iii) | Where direct observation from well penetrations has defined a highest known oil (HKO) elevation and the potential exists for an associated gas cap, proved oil reserves may be assigned in the structurally higher portions of the reservoir only if geoscience, engineering, or performance data and reliable technology establish the higher contact with reasonable certainty. |
| (iv) | Reserves which can be produced economically through application of improved recovery techniques (including, but not limited to, fluid injection) are included in the proved classification when: |
| (A) | Successful testing by a pilot project in an area of the reservoir with properties no more favorable than in the reservoir as a whole, the operation of an installed program in the reservoir or an analogous reservoir, or other evidence using reliable technology establishes the reasonable certainty of the engineering analysis on which the project or program was based; and |
| (B) | The project has been approved for development by all necessary parties and entities, including governmental entities. |
| (v) | Existing economic conditions include prices and costs at which economic producibility from a reservoir is to be determined. The price shall be the average price during the 12-month period prior to the ending date of the period covered by the report, determined as an unweighted arithmetic average of the first-day-of-the-month price for each month within such period, unless prices are defined by contractual arrangements, excluding escalations based upon future conditions. |
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| · | Proved undeveloped reserves. In general, reserves that are expected to be recovered from new wells on undrilled acreage or from existing wells where a relatively major expenditure is required for recompletion. The SEC provides a complete definition of undeveloped oil and gas reserves in Rule 4-10(a)(31) of Regulation S-X. | |
| · | Reserves. Reserves are estimated remaining quantities of oil and gas and related substances anticipated to be economically producible, as of a given date, by application of development projects to known accumulations. In addition, there must exist, or there must be a reasonable expectation that there will exist, the legal right to produce or a revenue interest in the production, installed means of delivering oil and gas or related substances to market, and all permits and financing required to implement the project. | |
| · | Working interest. The operating interest that gives the owner the right to drill, produce and conduct operating activities on the property and a share of production and requires the owner to pay a share of the costs of drilling and production operations. |
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Date: February 1, 2024 | GRAN TIERRA ENERGY INC. |
| By: | /s/ Gary S. Guidry | |
| Name: Gary S. Guidry | ||
| Title: President and Chief Executive Officer |
Exhibit 23.1
Consent of Independent Reserve Engineers
Mr. Ryan Ellson
Chief Financial Officer
Gran Tierra Energy Inc. (“Gran Tierra”)
500 Centre Street S.E.,
Calgary, Alberta, Canada T2G 1A6
| Re: | Gran Tierra Registration Statement: |
Form S-8 (Reg. Nos. 333-146815, 333-156994, 333-171122 and 333-183029)
Form S-3 (Reg. No. 333-258433)
Filed with the United States Securities Exchange Commission
Dear Mr. Ellson:
As the independent reserve engineers for Gran Tierra, McDaniel & Associates Consultants Ltd. (“McDaniel”) hereby confirms that it has granted and not withdrawn its consent to the filing of McDaniel reserve report and to the reference to McDaniel’s evaluation of Gran Tierra’s reserves as of December 31, 2023, in the form and context disclosed by Gran Tierra in its Current Report on Form 8-K submission filed with the U.S. Securities and Exchange Commission on February 1, 2024, and to the incorporation by reference thereof in the registration statements listed above.
Please do not hesitate to contact us if you have any questions.
McDaniel & Associates Consultants Ltd.
| /s/ Cam Boulton | |
| Cam Boulton | |
| Executive Vice President |
Dated: February 1, 2024
Calgary, Alberta
CANADA
Exhibit 99.1
THIRD PARTY REPORT ON RESERVES
By McDaniel & Associates Consultants Ltd. (“McDaniel”) - (Independent Qualified Reserves Evaluator)
This report is provided to satisfy the requirements contained in Item 1202(a)(8) of Regulation S-K (“Regulation S-K”) of the U.S. Securities and Exchange Commission (the “SEC”) with respect to Gran Tierra Energy Inc.’s (“Gran Tierra”) oil and gas reserves as of December 31, 2023, and to provide the qualifications of the technical person primarily responsible for overseeing the reserve estimation process.
The numbering of items below corresponds to the requirements set out in Item 1202(a)(8) of Regulation S-K. Terms to which a meaning is ascribed in Regulation S-K and Regulation S-X have the same meaning in this report.
| i. | We have prepared an independent estimate of the oil and gas reserves of Gran Tierra for the management and the board of directors of Gran Tierra. The primary purpose of our evaluation report was to provide estimates of reserves information in support of Gran Tierra’s year-end reserves reporting requirements under Regulation S-K and for other internal business and financial needs of Gran Tierra. |
| ii. | We estimated the reserves of Gran Tierra as at December 31, 2023. The completion date of our report is January 23, 2024. |
| iii. | McDaniel evaluated 100% of the reserves of Gran Tierra. |
The following table sets forth the net after royalty reserves of Gran Tierra:
| Category | Crude Oil Mbbl | Natural Gas MMcf | Oil Equivalent | Portion of Reserves Evaluated, % | ||||||||||||
| Proved | ||||||||||||||||
| Developed | ||||||||||||||||
| Colombia | 38,942 | 0 | 38,942 | 100 | ||||||||||||
| Ecuador | 657 | — | 657 | 100 | ||||||||||||
| Undeveloped | ||||||||||||||||
| Colombia | 30,725 | — | 30,725 | 100 | ||||||||||||
| Ecuador | 3,972 | — | 3,972 | 100 | ||||||||||||
| Total Proved | 74,296 | 0 | 74,296 | 100 | ||||||||||||
| Probable | ||||||||||||||||
| Developed | ||||||||||||||||
| Colombia | 12,000 | 0 | 12,000 | 100 | ||||||||||||
| Ecuador | 138 | — | 138 | 100 | ||||||||||||
| Undeveloped | ||||||||||||||||
| Colombia | 28,243 | 0 | 28,243 | 100 | ||||||||||||
| Ecuador | 5,866 | — | 5,866 | 100 | ||||||||||||
| Total Probable | 46,247 | 0 | 46,247 | 100 | ||||||||||||
| Possible | ||||||||||||||||
| Developed | ||||||||||||||||
| Colombia | 11,211 | 0 | 11,211 | 100 | ||||||||||||
| Ecuador | 151 | — | 151 | 100 | ||||||||||||
| Undeveloped | ||||||||||||||||
| Colombia | 30,292 | 0 | 30,292 | 100 | ||||||||||||
| Ecuador | 6,852 | — | 6,852 | 100 | ||||||||||||
| Total Possible | 48,506 | 0 | 48,506 | 100 | ||||||||||||
| (1) | Oil equivalence factors: Crude Oil 1 bbl/bbl, Natural Gas 6 Mcf/bbl. |
| iv. | As noted in item iii., our evaluation covered 100% of the reserves of Gran Tierra. The assumptions, methods, and procedures followed in the evaluation reflect the standards set out in the Canadian Oil and Gas Evaluation Handbook (the “COGE Handbook”) modified as necessary to conform to the standards under the U.S. Financial Accounting Standards Board policies (the “FASB Standards”) and the U.S. Securities and Exchange Commission Regulations (“SEC requirements”). |
Data used in our evaluation of Gran Tierra’s reserves was obtained from regulatory agencies, public sources, and Gran Tierra personnel and Gran Tierra files. In the preparation of our report, we have accepted as presented, and have relied, without independent verification, upon a variety of information furnished by Gran Tierra such as interests and burdens on properties, recent production volumes, product transportation, and marketing and sales agreements, historical revenue, capital costs, operating expense data, budget forecasts and capital cost estimates and well data for recently drilled wells. If in the course of our evaluation, the validity or sufficiency of any material information was brought into question; we did not rely on such information until such concerns were resolved to our satisfaction.
Gran Tierra warranted in a representation letter to us that, to the best of its knowledge and belief, all data furnished to us was accurate in all material respects, and no material data relevant to our evaluation was omitted.
A field examination of the evaluated properties was not performed, nor was it considered necessary for our report.
In our opinion, estimates provided in our report have, in all material respects, been determined in accordance with the applicable industry standards, and results provided in our report and summarized herein are appropriate for inclusion in filings under Regulation S-K.
| v. | As required under Regulation S-X, reserves are those quantities of oil and gas that are estimated to be economically producible under existing economic conditions. The primary economic assumptions relate to pricing, capital and operating costs, recoverable volumes and production forecasts. |
As specified, in determining economic production, constant product benchmark prices are to be based on a 12-month average price, calculated as the unweighted arithmetic average of the first-day-of-the-month price for each month within the 12-month period prior to the effective date of our report unless prices are defined by contractual or other regulatory arrangements. The relevant benchmark price for Gran Tierra’s reserves is Brent Blend Crude Oil FOB North Sea at $82.51 USD/bbl.
The product prices that were used to determine the future gross revenue for each property reflect adjustments to the benchmark prices for gravity, quality, local conditions, and/or distance from market, referred to herein as “differentials.” The differentials used in the preparation of this report estimated from received price information provided by Gran Tierra.
The average realized prices for Gran Tierra’s reserves in the report are:
| Oil (USD/bbl) – Colombia | $ | 69.91 | ||
| Oil (USD/bbl) – Ecuador | $ | 77.44 |
2
In our economic analysis, operating and capital costs are those costs estimated as applicable at the effective date of our report, with no future escalation. Where deemed appropriate, the capital costs and revised operating costs associated with the implementation of committed projects designed to modify specific field operations in the future may be included in economic projections. Capital costs used in this report were provided by Gran Tierra and actual costs from recent activity. Capital costs are included as required for workovers, new development wells, and production equipment. Based on our understanding of future development plans, a review of the records provided to us, and our knowledge of similar properties, we regard these estimated capital costs to be reasonable. Abandonment costs were assigned to the abandonment of wells assigned reserves, including future wells.
Reserves were assigned by volumetric, material balance, decline analysis or analogy where considered appropriate. In many cases, where sufficient data were available, a combination of the methods were applied.
Test data and other related information were used to estimate the anticipated initial production rates for those wells or analogous locations. For reserves not yet on production, forecast sales were estimated to commence at an anticipated date furnished by Gran Tierra. Wells or locations that are not currently producing may start producing earlier or later than anticipated in our estimates due to unforeseen factors causing a change in the timing to initiate production. Such factors may include delays due to weather, the availability of rigs, the sequence of drilling, completing and/or recompleting wells and/or constraints set by regulatory bodies.
The future production rates from wells currently on production or wells or locations that are not currently producing may be more or less than estimated because of changes including, but not limited to, reservoir performance, operating conditions related to surface facilities, compression and artificial lift, pipeline capacity and/or operating conditions, producing market demand and/or allowables or other constraints set by regulatory bodies.
| vi. | Our report has been prepared assuming the continuation of existing regulatory and fiscal conditions subject to the guidance in the COGE Handbook and SEC regulations. Notwithstanding that Gran Tierra currently has regulatory approval to produce the reserves identified in our report, there is no assurance that changes in regulation will not occur; such changes, which cannot reliably be predicted, could impact Gran Tierra’s ability to recover the estimated reserves. |
| vii. | Oil and gas reserves estimates have an inherent degree of associated uncertainty the extent of which is affected by many factors. Reserves estimates will vary due to the limited and imprecise nature of data upon which the estimates of reserves are predicated. Moreover, the methods and data used in estimating reserves are often necessarily indirect or analogical in character rather than direct or deductive. Furthermore, the persons involved in the preparation of reserves estimates and associated information are required, in applying geosciences, petroleum engineering and evaluation principles, to make numerous unbiased judgments based upon their educational background, professional training, and professional experience. The extent and significance of the judgments to be made are, in themselves, sufficient to render reserves estimates inherently imprecise. Reserves estimates may change substantially as additional data becomes available and as economic conditions impacting oil and gas prices and costs change. Reserves estimates will also change over time due to other factors such as knowledge and technology, fiscal and economic conditions, contractual, statutory and regulatory provisions. |
| viii. | In our opinion, the reserves information evaluated by us have, in all material respects, been determined in accordance with all appropriate data, assumptions, methods and procedures applicable for the filing of reserves information under Regulation S-K. All methods and procedures we considered necessary under the circumstances to prepare the report were used. |
| ix. | A summary of Gran Tierra’s reserves evaluated by us is provided in item iii. |
3
McDaniel is a private firm established in 1955 whose business is the provision of independent geological and engineering services to the petroleum industry. McDaniel is among the largest evaluation firms in North America with over 60 professional and technical support personnel. Mr. Boulton coordinated the evaluation and is a qualified, independent reserves evaluator as defined in COGE Handbook, and a registered Practicing Professional Engineer in the Province of Alberta. Mr. Boulton has over 10 years of experience in the evaluation of oil and gas reserves and resources and has been employed at McDaniel as an evaluator/auditor since 2006.
McDaniel & Associates Consultants Ltd.
2000, Eighth Avenue Place, East Tower,
525 – 8 Avenue SW,
Calgary, Alberta, Canada T2P 1G1
Dated: February 1, 2024
| /s/ Cam Boulton | |
| Cam Boulton | |
| Executive Vice President |
4
Cover |
Feb. 01, 2024 |
|---|---|
| Cover [Abstract] | |
| Document Type | 8-K |
| Amendment Flag | false |
| Document Period End Date | Feb. 01, 2024 |
| Entity File Number | 001-34018 |
| Entity Registrant Name | GRAN TIERRA ENERGY INC. |
| Entity Central Index Key | 0001273441 |
| Entity Tax Identification Number | 98-0479924 |
| Entity Incorporation, State or Country Code | DE |
| Entity Address, Address Line One | 500 Centre Street S.E. |
| Entity Address, City or Town | Calgary |
| Entity Address, State or Province | AB |
| Entity Address, Country | CA |
| Entity Address, Postal Zip Code | T2G 1A6 |
| City Area Code | 403 |
| Local Phone Number | 265-3221 |
| Written Communications | false |
| Soliciting Material | false |
| Pre-commencement Tender Offer | false |
| Pre-commencement Issuer Tender Offer | false |
| Title of 12(b) Security | Common Stock, par value $0.001 per share |
| Trading Symbol | GTE |
| Security Exchange Name | NYSEAMER |
| Entity Emerging Growth Company | false |
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