UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event
reported): February 1, 2018
GRAN TIERRA ENERGY INC.
(Exact Name of Registrant
as Specified in its Charter)
| Delaware |
|
001-34018 |
|
98-0479924 |
(State or Other Jurisdiction
of Incorporation) |
|
(Commission File Number) |
|
(IRS Employer
Identification No.) |
Suite 900, 520-3 Avenue SW
Calgary, Alberta, Canada
T2P 0R3
(Address of Principal Executive Offices)
(Zip Code)
(403) 265-3221
(Registrant’s
Telephone Number, Including Area Code)
Check the appropriate box below if the Form 8-K filing is intended
to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c)
under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging
growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities
Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ¨
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 8.01 | Other Information |
Notes Offering
On February 1, 2018,
Gran Tierra Energy Inc., a Delaware corporation (“Gran Tierra”), issued a press release, a copy of which is attached
hereto as Exhibit 99.1 and incorporated herein by reference, announcing that that its indirect, wholly-owned subsidiary, Gran
Tierra Energy International Holdings Ltd. (“GTEIH”), intends to commence a private offering of senior notes due 2025
(the “Offering”).
This announcement
shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities
in any state in which the offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities
laws of any such state. The notes will not be registered under the Securities Act of 1933 or any state securities law and may
not be offered or sold in the United States absent registration or an applicable exemption from registration under the Securities
Act of 1933 and applicable state securities laws.
In connection with
the Offering, Gran Tierra made the following disclosures:
Commodity Price
Derivatives:
Subsequent to September 30, 2017, Gran Tierra entered into the following commodity price contracts:
| Period and type of instrument |
Volume (bopd) |
Reference |
Swap Price ($/bbl) |
Purchased Call ($/bbl) |
| Swap: Jan. 1, 2018 to Dec. 31, 2018 |
2,500 |
ICE Brent |
55.75 |
n/a |
| Swap: Jan. 1, 2018 to Dec. 31, 2018 |
500 |
ICE Brent |
56.01 |
n/a |
| Swap: Jan. 1, 2018 to Dec. 31, 2018 |
500 |
ICE Brent |
56.05 |
n/a |
| Swap: Jan. 1, 2018 to Dec. 31, 2018 |
1,000 |
ICE Brent |
56.05 |
n/a |
| Swap: Jan. 1, 2018 to Dec. 31, 2018 |
500 |
ICE Brent |
56.11 |
n/a |
| Participating Swap: Jan. 1, 2018 to Dec. 31, 2018 |
2,500 |
ICE Brent |
50.00 |
54.10 |
| Participating Swap: Jan. 1, 2018 to Dec. 31, 2018 |
1,000 |
ICE Brent |
55.00 |
58.05 |
| Participating Swap: Jan. 1, 2018 to Dec. 31, 2018 |
500 |
ICE Brent |
55.00 |
58.07 |
| Participating Swap: Jan. 1, 2018 to Dec. 31, 2018 |
1,000 |
ICE Brent |
55.00 |
58.20 |
Foreign Currency
Derivatives:
Subsequent to September 30, 2017, Gran
Tierra entered into the following foreign currency contracts:
| Period and type of instrument |
Amount
(Millions COP) |
USD Equivalent (US$000) |
Reference |
Purchased Call (COP) |
Sold Put
(COP Avg) |
| Collars: Jan. 1, 2018 to Dec. 31, 2018 |
174,000 |
59,251 |
COP |
3,000 |
3,107 |
Disposition of Peru Business
On December 18, 2017, Gran Tierra announced
the closing of the sale of its Peru business (the “Peru Transactions”). Pursuant to the Peru Transactions, Sterling
Resources Ltd. (“Sterling”) acquired all of the issued and outstanding shares of GTEIH’s wholly owned subsidiary
that indirectly held all of Gran Tierra’s Peruvian assets in exchange for 187,250,000 common shares in the capital of Sterling
(the “Sterling Common Shares”), plus or minus a cash-settled working capital adjustment. Immediately prior to the completion
of Peru Transactions, GTEIH did not own any Sterling Common Shares. After giving effect to the Peru Transactions, GTEIH directly
and indirectly holds 246,100,000 Sterling Common Shares representing approximately 45.77% of the Sterling Common Shares.
The divestiture is expected to allow Gran
Tierra to focus on its core Colombian exploration, development, and production operations. Gran Tierra will evaluate its investment
in Sterling from time to time and may, based on such evaluation, market conditions and other circumstances, increase or, subject
to applicable escrow periods under the rules of the TSX Venture Exchange, decrease shareholdings as circumstances require through
market transactions, private agreements, or otherwise.
In connection with the Peru Transaction,
GTEIH, along with Gran Tierra Resources Limited (“GTRL”), entered into an investor rights agreement with Sterling,
pursuant to which, inter alia, GTEIH and GTRL together have the right to nominate two directors to the board of Sterling, as well
as certain demand and piggy-back registration rights and certain pre-emptive rights, subject to the terms and conditions set forth
in the investor rights agreement. GTEIH and GTRL are prohibited from exercising voting rights over more than 30% of the issued
and outstanding Sterling Common Shares. In addition, GTEIH entered into a carried interest and option agreement with Sterling and
a Peruvian subsidiary, pursuant to which GTEIH has a 20% carried working interest in Block 107, located in the Ucayali basin in
Peru, which interest may, at the option of GTEIH, either be converted to a non-carried working interest or be forfeited following
the drilling of an exploration well in Block 107.
Risk Factors Supplement
As part of the filing of this Current Report
on Form 8-K, Gran Tierra intends to supplement its risk factors, including those contained in its Annual Report on Form 10-K for
the year ended December 31, 2016. The risk factors below should be considered together with the other risk factors described in
Gran Tierra’s Annual Report on Form 10-K for the year ended December 31, 2016 and in its other filings with the Securities
and Exchange Commission.
We hold a minority equity investment
in Sterling and our chief executive officer and chief financial officer serve on the board of directors of Sterling. Our inability,
or limited ability, to control the operations or management of Sterling may result in our receiving or retaining less than the
amount of benefit we expect and could expose us or our executives to reputational harm.
We hold a minority equity investment in
Sterling and our chief executive officer and chief financial officer serve on the board of directors of Sterling. Even though we
are able to exercise influence as a minority equity investor in Sterling, our influence on Sterling is limited to our rights under
the share purchase agreement and its annexes and Sterling’s charter and bylaws. Such limitations include a covenant by us
not to exercise any voting rights associated with our shares in Sterling which exceed 30% of the issued and outstanding common
shares of Sterling.
As a result, we may be unable to implement
or influence Sterling’s business plan, assure quality control, or set the timing and pace of development. Our inability,
or limited ability, to control the operations or management of Sterling may result in our receiving or retaining less than the
amount of benefit we might otherwise expect to receive from such investment. We may also be unable, or limited in our ability,
to cause Sterling to effect significant transactions such as large expenditures or contractual commitments, the development of
properties, the construction or acquisition of assets or the borrowing of money. Service on the board of directors by our two senior
executive officers will require time commitment and could expose them to liability in such role. If Sterling or its board of directors
were to experience events that exposed them to liability or reputational harm, it could have an adverse effect on us or our senior
executives, including a decline in the market price of our equity securities.
The recently enacted tax reform bill
could affect our business and financial condition.
On December 22, 2017, the budget reconciliation
act commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”) significantly revised U.S. federal corporate
income tax law, including the creation of a one-time “transition tax” on untaxed accumulated earnings and profits of
certain non-U.S. corporations. While our analysis of the Tax Act’s impact on our cash tax liability and financial condition
has not identified any overall material adverse effect, we are still evaluating the effects of the Tax Act on us and there are
a number of uncertainties and ambiguities as to the interpretation and application of many of the provisions in the Tax Act. In
the absence of guidance on these issues, we will use what we believe are reasonable interpretations and assumptions in interpreting
and applying the Tax Act for purposes of determining our cash tax liabilities and results of operations, which may change as we
receive additional clarification and implementation guidance and as the interpretation of the Tax Act evolves over time. It is
possible that the Internal Revenue Service could issue subsequent guidance or take positions on audit that differ from the interpretations
and assumptions that we previously made, which could have a material adverse effect on our cash tax liabilities, results of operations
and financial condition.
| Item 9.01 | Financial Statements and Exhibits. |
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.
Dated: February 1, 2018 |
GRAN TIERRA ENERGY INC. |
| |
|
|
|
| |
|
|
|
| |
By: |
/s/ Gary S. Guidry |
|
| |
|
Name: |
Gary S. Guidry |
| |
|
Title: |
President & Chief Executive Officer |
| |
|
|
|
|
