Company Reports Record Increase in Year over Year Reserves, Production Volumes, and Revenues - Cash Balance Grows to $177 Million
CALGARY, Alberta,February26, 2009, Gran Tierra Energy Inc. (NYSE Alternext: GTE, TSX: GTE), a company focused on oil exploration and production in South America, today announced financial and operating results for the quarter and year ended December 31, 2008. Highlights for the year include:
- 145% increase in average daily oil production over the prior year with a current production rate of approximately 12,000 barrels of oil per day (BOPD), net after royalty.
- Record revenue and other income for the year of $114.0 million, an increase of 253% from $32.3 million for 2007.
- Net income of $23.5 million or $0.19 per share basic and $0.16 per share diluted, compared to a net loss of $8.5 million or ($0.09) per share basic and diluted in 2007.
- Cash and cash equivalents of $176.8 million compared to $57.8 million at September 30, 2008 and $18.2 million at December 31, 2007. Gran Tierra Energy continues to be debt free.
Full Year 2008 Financial Highlights:
The company recognized revenue and other income of $114.0 million, an increase of 253% from $32.3 million for 2007. Net income for 2008 was $23.5 million or $0.19 per share basic and $0.16 per share diluted, compared to a net loss of $8.5 million or ($0.09) per share in 2007 basic and diluted. The 2008 results reflect increased production from the successful exploration and development programs in both Colombia and Argentina, higher oil prices based on a higher average West Texas Intermediate (WTI) oil price and the results of Solana Resources Limited from the November 14, 2008 acquisition date.
The average price received per barrel of oil in 2008 increased 44% to $84.89 per barrel from $58.79 per barrel in 2007.
Cash provided by operations for 2008 was $109.7 million compared to $8.8 million in 2007.
Fourth Quarter 2008 Financial Highlights:
Revenue and other income for the fourth quarter ended December 31, 2008 was $19.7 million, a 24% increase from $16.0 million for the same period of 2007. The company reported a net loss for the quarter of $12.7 million or $(0.07) per share diluted as compared to net income of $2.2 million, or $0.02 per share for the same period in 2007.
Included in the 2008 fourth quarter results are non-cash expenses resulting from the inclusion of Solana, comprised of a $7.3 million unrealized foreign exchange loss related to translation of a deferred tax liability, and additional depletion expense of $6.9 million.
A general strike in Colombia, which caused the suspension of production operations in southern Colombia from November 20, 2008 through to year end, also impacted the results of the quarter. Operating expenses during this period remained relatively unchanged from the third quarter as the company retained its employees and continued to maintain its facilities.
Realized prices in the fourth quarter of 2008 averaged $50.38 per barrel compared to $72.95 per barrel for the fourth quarter of 2007, reflecting the recent decline in WTI price.
Balance Sheet Highlights:
The company reported cash and equivalents of $176.8 million at 2008 year end as compared to $57.8 million at September 30, 2008 and $18.2 million at December 31, 2007. Working capital was $132.8 million at 2008 year end, as compared to $43.5 million at September 30, 2008 and $8.1 million at the end of 2007. Shareholders' equity increased to $791.9 million at December 31, 2008 from $76.8 million at December 31, 2007, and the company had no outstanding long-term debt as of year end. The increase in equity is primarily a result of the issuance of shares to acquire Solana. Cash included in the assets acquired from Solana was $81.9 million, net of acquisition costs.
Production Highlights:
Average oil production for the year ended December 31, 2008, net of royalties, increased 145% to 3,629 BOPD from 1,482 BOPD in 2007. The increase in production is due primarily to increased production from the continued development of the Costayaco field in the Chaza Block in Colombia and the successful drilling of the Proa -1 well in the Surubi Block in Argentina.
Average oil production for the fourth quarter of 2008, net after royalties, was4,074 BOPD. Production was impacted by the strike at the Ecopetrol operated Orito facilities which resulted in a suspension of crude oil transportation in southern Colombia from November 20, 2008 through year end 2008. Crude oil transportation resumed on January 12, 2009.
Current production is approximately 12,000 BOPD, net after royalty, and the company anticipates that production will be 15,000 BOPD, net after royalty, at the end of the first quarter of 2009.
2008 Reserve Review:
Externally audited proved oil reserves (as per SEC Reserves Definitions) net after royalty to Gran Tierra Energy as of December 31, 2008 tripled to 19.2 million barrels of oil (BO) proved compared to 6.4 million BO proved as of December 31, 2007.
As per Canadian NI 51-101 and the Reserves definitions in the COGE Handbook, reserves net after royalty to Gran Tierra Energy as of December 31, 2008 increased significantly from 2007 to18.8million BO proved, 8.7 million BO probable, and 18.6 million BO possible. This compares to reserves as of December 31, 2007 of 6.4million BO proved, 5.0 million BO probable and 4.9 million BO possible.
Commenting on the results, Dana Coffield, President and Chief Executive Officer of Gran Tierra Energy Inc., stated, "2008 was a milestone year for Gran Tierra Energy. Associated with the acquisition of Solana Resources, the high-point was the consolidation of a 100% working interest in the Costayaco field, one of the largest oil discoveries in Colombia in recent years. With this and with additional drilling success, Gran Tierra Energy was able to triple proved reserves during the year. In parallel, our net after royalty production volumes have increased dramatically and we are on track to reach 20,000 barrels of oil per day, net to the company, in the second half of this year."
Coffield continued, "The fourth quarter of the year proved to be challenging as a result of falling oil prices and a significant deferral of production in Colombia in December. In spite of this, our balance sheet is stronger than it has ever been. Our capital program for 2009 will be fully funded from cash flow and cash on hand. This includes a development drilling program to grow production, an exploration drilling program to continue exploring for new reserves, and diverse seismic programs in Colombia, Peru, and Argentina to prepare for continued exploration drilling in 2010."
Related News – Costayaco 6 and 7 Update:
The company reported the recent completion of production testing at Costayaco-6 in Colombia. Only water was recovered in this testing. Additional testing will be undertaken to optimize the use of this wellbore for water disposal or for reservoir pressure support. In addition, the drilling of Costayaco-7 has been initiated. This development well is being drilled in the north central portion of the Costayaco field and will take approximately 45 days to drill and complete.
Conference Call Information:
Gran Tierra Energy Inc. will hold a conference call to review its fourth quarter and full year 2008 results on Thursday, February 26, 2009 at 11:00 a.m. Eastern Time. The call will be hosted by Dana Coffield, President and Chief Executive Officer. Interested parties may access the conference call by dialing (888) 713-4218 (domestic) or (617) 213-4870 (international), pass code # 43836235. The call will also be available via web cast at www.grantierra.com, or http://www.streetevents.com, http://www.fulldisclosure.com. The web cast will be available on Gran Tierra Energy's website until the next earnings call.
If you are unable to participate, an audio replay of the call will be available beginning two hours after the call and will be available until 11:59 p.m. on February 26, 2009, by dialing (888) 286-8010 (domestic) or (617) 801-6888 (international) using confirmation pass code 72426646.
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 Alternext exchange (GTE) and the Toronto Stock Exchange (GTE), and operating in South America. The company holds interests in producing and prospective properties in Argentina, Colombia and Peru. The company 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 [email protected] or (866) 973-4873
Cautionary Statement:
Possible reserves are those additional reserves that are less certain to be recovered than probable reserves. There is a 10% probability that the quantities actually recovered will equal or exceed the sum of proved plus probable plus possible reserves. The estimate of reserves for individual properties may not reflect the same confidence level as estimates of reserves for all properties, due to the effects of aggregation.
Estimates of total net proved oil reserves at December 31, 2008 have been prepared in accordance with the definitions for proved reserves set out in Rule 4-10 of Regulation S-X of the U.S. Securities and Exchange Commission. Reserves were estimated for proved, proved plus probable and proved plus probable plus possible cases under the reserve definitions of National Instrument 51-101 (NI 51-101) of Canada and for the proved case under the definitions of the Securities Exchange Commission (SEC) of the United States. The evaluation was conducted in accordance with standard industry practice and reserves definitions, procedures and guidance contained in the Canadian Oil and Gas Evaluation Handbook (COGE Handbook).
Forward Looking Statements:
The statements in this news release regarding Gran Tierra Energy's belief that the company's production will be 15,000 BOPD, net after royalty at the end of the first quarter of 2009, that it is on track for achieving 20,000 BOPD this year, that its 2009 capital program will be fully funded from cash flow and cash on hand, that it is positioned to thrive in the current business environment, and its 2009 testing and drilling plans for Costayaco 6 and 7, are forward looking statements or 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. These statements 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. There are a number of important factors that could cause the results or outcomes discussed herein to differ materially from that indicated by the forward-looking statements, including, among others: 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 impact the production, transport or sale of its products; geographic, political and weather conditions can impact the production, transport or sale of its products; and the risk that the current global economic and credit crisis may impact oil prices and oil consumption more than Gran Tierra Energy currently predicts. 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 November 6, 2008. 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 Gran Tierra Energy does not undertake an obligation to update forward-looking or other statements in this release.
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.
Financial Tables to Follow
Gran Tierra Energy Inc.
Consolidated Statements of Operations and Retained Earnings (Accumulated Deficit)
For the Years and Quarters ended December 31, 2008, 2007
Prepared in accordance with generally accepted accounting principles in the United States
(Thousands of U.S. Dollars, Except Share and Per Share Amounts)
| | Year Ended December 31, | Quarter Ended December 31, | ||||||
| | 2008 | 2007 | 2008 | 2007 | ||||
| | | | | |||||
| REVENUE AND OTHER INCOME | | | (Unaudited) | (Unaudited) | ||||
| Oil and natural gas sales | $ | 112,805 | $ | 31,853 | $ | 18,932 | $ | 15,925 |
| Interest | | 1,224 | | 425 | | 795 | | 48 |
| | | 114,029 | | 32,278 | | 19,727 | | 15,973 |
| EXPENSES | | | | | | | | |
| Operating | | 19,218 | | 10,474 | | 8,452 | | 3,755 |
| Depletion, depreciation and accretion | | 25,737 | | 9,415 | | 10,516 | | 2,865 |
| General and administrative | | 18,593 | | 10,232 | | 5,783 | | 2,648 |
| Liquidated damages | | - | | 7,367 | | - | | - |
| Derivative financial instruments (gain) loss | | (193) | | 3,040 | | (3,180) | | 2,247 |
| Foreign exchange (gain) loss | | 6,235 | | (78) | | 7,969 | | 15 |
| | | 69,590 | | 40,450 | | 29,540 | | 11,530 |
| | | | | | | | | |
| INCOME (LOSS) BEFORE INCOME TAXES | | 44,439 | | (8,172) | | (9,813) | | 4,443 |
| Income tax expense (recovery) | | (20,944) | | (295) | | 2,881 | | 2,280 |
| NET INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS) | $ | 23,495 | $ | (8,467) | $ | (12,694) | $ | 2,163 |
| ACCUMULATED DEFICIT, BEGINNING OF PERIOD | | (16,511) | | (8,044) | | 19,678 | | (18,674) |
| RETAINED EARNINGS (ACCUMULATED DEFICIT), END OF PERIOD | $ | 6,984 | $ | (16,511) | $ | 6,984 | $ | (16,511) |
| | | | | | | | | |
| NET INCOME (LOSS) PER SHARE — BASIC | | 0.19 | | (0.09) | | (0.07) | | 0.02 |
| NET INCOME (LOSS) PER SHARE —DILUTED | | 0.16 | | (0.09) | | (0.07) | | 0.02 |
| WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC | | 123,421,898 | | 95,096,311 | | 176,768,596 | | 95,049,083 |
| WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED | | 143,194,590 | | 95,096,311 | | 185,847,980 | | 110,577,835 |
Gran Tierra Energy Inc.
Consolidated Balance Sheets
As at December 31, 2008, 2007
Prepared in accordance with generally accepted accounting principles in the United States
(Thousands of U.S. Dollars, Except Share and Per Share Amounts)
| As at December 31, | ||||
| | 2008 | 2007 | ||
| | | |||
| ASSETS | | | ||
| Current Assets | | | ||
| Cash and cash equivalents | $ | 176,754 | $ | 18,189 |
| Accounts receivable | | 7,905 | | 10,695 |
| Inventory | | 999 | | 787 |
| Taxes receivable | | 5,789 | | 1,177 |
| Prepaids | | 1,103 | | 442 |
| Derivative financial instruments | | 233 | | - |
| Deferred tax asset | | 2,262 | | 220 |
| | | | | |
| Total Current Assets | | 195,045 | | 31,510 |
| | | | | |
| Oil and Gas Properties (using the full cost method of accounting) | | | | |
| Proved | | 380,855 | | 44,292 |
| Unproved | | 384,195 | | 18,910 |
| | | | | |
| Total Oil and Gas Properties | | 765,050 | | 63,202 |
| | | | | |
| Other Assets | | 2,502 | | 716 |
| | | | | |
| Total Property, Plant and Equipment | | 767,552 | | 63,918 |
| | | | | |
| Long Term Assets | | | | |
| Deferred tax asset | | 10,131 | | 1,839 |
| Taxes receivable | | - | | 525 |
| Other long-term assets | | 1,315 | | - |
| Goodwill | | 98,582 | | 15,005 |
| | | | | |
| Total Long Term Assets | | 110,028 | | 17,369 |
| | | | | |
| Total Assets | $ | 1,072,625 | $ | 112,797 |
| | | | | |
| LIABILITIES AND SHAREHOLDERS' EQUITY | | | | |
| Current Liabilities | | | | |
| Accounts payable | $ | 21,134 | $ | 11,327 |
| Accrued liabilities | | 12,841 | | 6,139 |
| Derivative financial instruments | | - | | 1,594 |
| Current taxes payable | | 28,163 | | 3,284 |
| Deferred tax liability | | 100 | | 1,108 |
| | | | | |
| Total Current Liabilities | | 62,238 | | 23,452 |
| | | | | |
| Long term liabilities | | 40 | | 132 |
| Deferred tax liability | | 213,093 | | 9,235 |
| Deferred remittance tax | | 1,077 | | 1,332 |
| Derivative financial instruments | | - | | 1,055 |
| Asset retirement obligation | | 4,251 | | 799 |
| | | | | |
| Total Long Term Liabilities | | 218,461 | | 12,553 |
| | | | | |
| Shareholders' Equity | | | | |
| Common shares | | 226 | | 95 |
| (190,248,384 and 80,389,676 common shares and 48,238,269 and 14,787,303 exchangeable shares, par value $0.001 per share, issued and outstanding as at December 31, 2008 and 2007, respectively) | | | | |
| Additional paid in capital | | 753,236 | | 72,458 |
| Warrants | | 31,480 | | 20,750 |
| Retained earnings (accumulated deficit) | | 6,984 | | (16,511) |
| | | | | |
| Total Shareholders' Equity | | 791,926 | | 76,792 |
| | | | | |
| Total Liabilities and Shareholders' Equity | $ | 1,072,625 | $ | 112,797 |
Gran Tierra Energy Inc.
Consolidated Statements of Cash Flow
For the Years ended December 31, 2008, 2007
Prepared in accordance with generally accepted accounting principles in the United States
(Thousands of U.S. Dollars, Except Share and Per Share Amounts)
| | Year Ended December 31, | |||
| | 2008 | 2007 | ||
| | | |||
| Operating Activities | | | ||
| Net income (loss) | $ | 23,495 | $ | (8,467) |
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | | | | |
| Depletion, depreciation and accretion | | 25,737 | | 9,415 |
| Deferred taxes | | (6,418) | | 185 |
| Stock based compensation | | 2,520 | | 810 |
| Liquidated damages | | - | | 5,839 |
| Unrealized foreign exchange loss | | 6,985 | | - |
| Unrealized (gain) loss on financial instruments | | (2,882) | | 2,648 |
| Net changes in non-cash working capital | | | | |
| Accounts receivable | | 34,943 | | (5,604) |
| Inventory | | (107) | | 25 |
| Prepaids | | 261 | | 234 |
| Accounts payable and accrued liabilities | | 10,697 | | 2,808 |
| Taxes receivable and payable | | 14,840 | | 869 |
| Settlement of asset retirement obligations | | (334) | | - |
| | ||||
| Net cash provided by operating activities | | 109,737 | | 8,762 |
| | ||||
| Investing Activities | | | | |
| Restricted cash | | - | | 1,010 |
| Oil and gas property expenditures | | (55,217) | | (15,976) |
| Cash acquired on acquisition net of acquisition costs | | 81,912 | | - |
| Long term assets and liabilities | | 446 | | (427) |
| | ||||
| Net cash provided by (used in) investing activities | | 27,141 | | (15,393) |
| | ||||
| Financing Activities | | | | |
| Restricted cash | | - | | - |
| Proceeds from issuance of common stock | | 21,687 | | 719 |
| | ||||
| Net cash provided by financing activities | | 21,687 | | 719 |
| | ||||
| Net (decrease) increase in cash and cash equivalents | | 158,565 | | (5,912) |
| Cash and cash equivalents, beginning of year | | 18,189 | | 24,101 |
| | ||||
| Cash and cash equivalents, end of year | $ | 176,754 | $ | 18,189 |
| | | | | |
| Cash | | 110,688 | | 18,189 |
| Term deposits | | 66,066 | | - |
| Cash and cash equivalents, end of year | $ | 176,754 | $ | 18,189 |
| | | | | |
| Supplemental cash flow disclosures: | | | | |
| Cash paid for interest | $ | - | $ | 80 |
| Cash paid for taxes | $ | 11,587 | $ | 116 |
| Non-cash investing activities: | | | | |
| Non-cash working capital related to capital additions | $ | 11,096 | $ | 8,259 |