Gran Tierra Energy Inc. (GTE) Q3 2026 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen, and welcome to Gran Tierra Conference Call for Third Quarter 26. My name is Michelle, and I will be your coordinator for today. At this time, all participants are in a listen-only mode. Following the initial remarks, we will conduct a question-and-answer session. For securities analysts and institutions. Instructions will be provided at that time for you to queue up for questions. I would like to remind everyone that this conference call is being webcast and recorded today. Friday, 11/06/2026 at 10AM Eastern Time. Today's discussion may include certain forward-looking information oil and gas information, and non GAAP financial measures. Please refer to the earnings and operational update press release we issued yesterday for important advisories and disclaimers with regards to this information and for reconciliations of any non GAAP measures discussed on today's call. Finally, this earnings call is the property of Gran Tierra Energy Inc, and any copying or rebroadcasting of this call is expressly forbidden without the written consent of Gran Tierra Energy. I will now turn the conference over to Gary Guidry, President and Chief Executive Officer of Gran Tierra. Mister Guidry, please go ahead.

Thank you, operator. Good morning and welcome to Gran Tierra's Third Quarter 26 Results Conference Call. My name is Gary Stephen Guidry. Gran Tierra's president and chief executive officer. And with me today are Ryan Ellson, our executive vice president and chief financial officer and Sebastien Morin, our chief operating officer. On Thursday, 11/05/2026, we issued a press release that included detailed information about our third quarter 26 results which is available on our website. Ryan and Sebastien will make a few brief comments and then we will open the line for questions. I will now turn the call over to Ryan to discuss our financial results.

Thanks, Gary, and good morning, everyone. Our third quarter results come at an important time for Gran Tierra. During the quarter, we announced the proposed sale of our Colombian Ecuadorian business to Maurel & Prom for total consideration of approximately 1.33 billion including the assumption of our 2029 and 2031 notes and oil prepayment. Since the announcement, we received the requisite consent from holders of our 2031 notes in September followed by stockholder approval on October 9. We continue to target closing before year end subject to remaining consents, regulatory approvals in Colombia and Ecuador, and other closing conditions. We also achieved an important milestone in Azerbaijan. On October 5, Azerbaijan's parliament formally ratified our exploration, development, and production sharing agreement with SOCAR for the onshore Guba region. This represents a significant step forward as we continue our technical evaluation of the area and prepare for drilling in the first half of next year. With 141 million in cash at quarter end, we are well positioned to complete the remaining transaction requirements while continuing to manage existing operations. Subject to the completion of the sale, we expect to return a portion of the net cash proceeds to stockholders through a share repurchase with structure, size, and terms determined by our board of directors. Turning now to our financial results for the third quarter. Gran Tierra incurred a net loss of 42 million compared to net income of $25 million in the prior quarter and a net loss of $20 million in the third quarter of 25. The net loss incurred during the quarter was primarily driven by $30 million of noncash stock based compensation expense and 29 million of derivative instrument losses partially offset by a deferred income tax recovery of 30 million. The company generated adjusted EBITDA of 68 million down from 85 million in the prior quarter and 69 million in the third quarter of 25. Funds flow from operations were 32 million or $0.89 per share, down 48% from the prior quarter and down 24% from the third quarter 25. The decline in funds flow were partially offset by lower capital expenditures resulting in positive free cash flow of approximately $1 million compared to $6 million in the prior quarter and negative free cash flow of $16 million in the third quarter of 25. Pricing was a primary driver of the decline. Compared to the prior quarter, lower realized prices in South America reduced cash flow by approximately 17 million net lower royalties. Rent decreased by approximately $5.40, and our South American quality and transportation discounts widened by $5.52 per barrel, reflecting wider differentials and the cost of alternative transportation routes while the Colombian Ecuador border remained closed. We incurred transaction costs of $5 million and realized FX loss of $10 million from the strengthening of the Colombian peso. Gran Tierra's capital expenditures totaled 31 million, down from 54 million in the prior quarter and 57 million in the third quarter of 25. As no new wells were drilled during the quarter. Spend was primarily focused on development activities in Columbia, which accounted for approximately 25 million of the total. Gran Tierra generated oil sales of $168 million down 10% from the prior quarter, but up 13% from the third quarter of 25. The sequential decrease largely reflects lower Brent pricing and wider quality and transport discounts in South America, including the shift from a premium to a discount in Ecuador. Lower royalties associated with reduced benchmark oil prices helped partially offset these impacts. Total operating expenses increased by 24% to $64 million compared to the prior quarter, but remained 6% below the third quarter of 25. The sequential increase was primarily driven by a stronger Colombian peso and higher lifting costs associated with the sale of oil inventory accumulated in the prior quarter in Ecuador and increased power cost. At quarter end, Gran Tierra had a cash balance of 141 million total gross debt of 591 million, and net debt of 450 million. Alongside our quarter end cash balance, company currently has approximately 50 million in undrawn availability under its Canadian revolving credit facility. Subsequent to the quarter end, we added 3-ways. 5 thousand barrels of oil per day, First quarter of 27, at a price of $80 by $95 by $111. This provides additional price protection as we look ahead to 2027. Overall, while lower realized prices and higher operating costs impacted our third quarter financial performance, we continue to generate positive free cash flow and maintain a solid liquidity position. As we move forward towards year end, our priorities remain focused on maintaining financial flexibility disciplined capital allocation, and supporting our existing operations to ensure a smooth transition as we work toward completing the proposed sale. I will now turn the call over to Sebastien to discuss some of the operational highlights.

Thanks, Ryan, and good morning, everyone. From a production perspective, Gran Tierra delivered third quarter 26 average working interest production 39.9 thousand barrels of oil per day. Approximately 4% lower than the prior quarter and 7% lower than the third quarter of 25. The decline versus the prior quarter reflects the impact of the Lodgepole disposition and lower production at Cohembi, which was affected by a negative 10% high price participation adjustment under our Suroriente joint venture with Ecopetrol. These impacts were partially offset by higher production at Acordionero, and better forecasted performance in Ecuador. Year over year, lower production in Colombia in our Canadian asset dispositions were partially offset by stronger contributions from Acordionero and Ecuador. Across our South American portfolio, Colombia and Ecuador average working interest production of 19.3 thousand and 7.75 thousand barrels of oil per day, respectively. Acordionero continues to perform well with average production for the quarter of 10.4 thousand barrels of oil per day. Currently, the field is producing consistently above this level with ongoing waterflood optimizations, which continue to improve field performance. Ecuador continues to outperform, demonstrating the high value, low decline, and waterflood-able nature of these assets. As the proposed sale progresses, our teams remain focused on safely, efficiently, and reliably operating these assets. In Colombia, the border with Ecuador remained closed throughout the quarter. We continued to move our Putumayo production to market through alternative transportation routes. This kept our barrels flowing, but it widened discounts with an impact of approximately 3.7 million in the quarter. In Canada, following the Simonette and Lodgepole dispositions completed earlier this year, our focus remains on the optimization of our base operations and the meaningful long term exploration and development potential of the Dawson Clearwater and Mount Head. We continue to evaluate these opportunities with the initial Dawson Clearwater development program field work currently underway and drilling operations planned to start very early in Q1 27. Our Canadian operations also delivered lower costs. Operating expenses were $8.31 per barrel, down 16% from the prior quarter and 15% from the third quarter of 25 due to the logical and Simonette divestments as well as ongoing field cost optimizations and timing of maintenance activities. In Azerbaijan, as Ryan noted, the formal ratification of our agreement with Socar marks an important milestone. We have now completed flying our airborne digital full-tensor gradiometer survey covering approximately 4.8 thousand square kilometers. Once processed and integrated with existing seismic and well data, the survey is expected to help identify additional prospective areas guide future seismic acquisition, and potential drilling locations. In addition, we are actively preparing for the 2027 drilling and well testing operations, with initial drilling locations screened, permitting progressing, and equipment procurement in progress. With all these pieces in place, we are now well positioned to spud our first exploration well. Overall, we are encouraged by the progress made across our portfolio and excited about the opportunities ahead. With meaningful exploration and development potential in Canada, continued progress in Azerbaijan, we believe Gran Tierra is well positioned for future growth subject to the completion of the proposed sale. In the meantime, our teams remain focused on safe and reliable operations, as we continue to build on the progress made throughout the year. I will now turn the call back to the operator and Gary, Ryan, and I will be happy to take questions. Operator, please go ahead.

Thank you. Ladies and gentlemen, we will now conduct a question-and-answer session for securities analysts. press star 1 on your touch tone phone. You will then hear an automated message advising your hand is raised. Questions will be pulled in the order they are received. Please ensure you lift the handset if you are using a speakerphone before pressing any keys. 1 moment for our first question. Our first question comes from David Matthew Round with Stifel. Your line is open.

Ryan, you mentioned the timing and structure of shareholder returns is going to be decided by the board. I mean, fully appreciate that. Are you able to share some sort of early thinking around some of the considerations that you think might go into that discussion. And, obviously, I am talking about sort of capital allocation elsewhere and anything else that you think might sort of dictate what that number and timing might be? The second 1 from me, please, just the on Canada. In Canada, the cost reduction. That you talked about. Is it is it possible to just split that into what is sustainable and what is down to things like workover timing? Thank you.

Yeah. On the first question, yeah, you know, we are working through that right now, David. I think if you look on the guidance that we have out there is on close, we will have you know, approximately 250 million of cash, and a $65 million note due, you know, in 364 days. So cash of around $315 million. We are still working through our budget for next year. As, obviously, we will have reduced free cash flow, and we will start the exploration program in Azerbaijan. But I think it is. You know, when we are looking at today's share price of $9.09 50 US, whatever the range is, when we have a cash plus PDP value of well over $12.50. We have to take that into consideration as far as the quantum and the timing. But, again, we are going to renew our normal course issuer bid as well as look at you know, the timing of the substantive issuer bid Upon closing, there will be guidance out very shortly after.

Okay.

Your question, David, on cost reductions and rightsizing, we will come out with our budget for 2027 and incorporate all of that Once we get closed here in early to mid December.

Okay.

Fine. I mean, I presume. I was gonna ask about the sort of the level of G&A going forward. Presumably that is going to be wrapped up in that process as well. Okay. Thank you. Thanks.

Gentlemen, there are no further questions at this time. Please continue.

I would once again like to thank everyone for joining us today. We look forward to speaking with you next quarter and updating you on our ongoing progress. Thank you very much.

Thank you for your participation. You may now disconnect. Good day.