‘Underexplored’ and
‘undervalued’ are two buzzwords that are music to the ears of savvy investors with a keen interest into the ever-growing and ever-evolving energy space.
Enter
Gran Tierra Energy Inc. (GTE) (
TSX.GTE,
NYSEAMERICAN: GTE,
Forum) – an independent energy company engaged in the acquisition, exploration, development, and production of oil and gas properties in proven, underexplored hydrocarbon basins which have access to established infrastructure. Gran Tierra is currently developing its existing portfolio of assets in Colombia and Ecuador, and will continue to pursue additional growth opportunities that would further strengthen the company’s portfolio.
Stockhouse Media’s Dave Jackson was recently joined by company President & CEO, Gary S. Guidry, to get our investor audience and company shareholders up-to-date on this exciting petro play.
(CLICK IMAGE TO PLAY VIDEO)
TRANSCRIPT BELOW:
SH: To start off with, Gary, can you tell us a little bit about yourself and the history of the company?
GG: Sure, thank you very much. Little bit of background on myself. It is really myself and a team of people that have all worked together for many years, over several companies. Our last outing was in Central Africa, in the country of Chad. We came to Gran Tierra in 2015, just as the company was at a milestone in terms of where they go for the future. Our background as a team is really full cycle. We are not just explorers, we are not just producers, it is all of the above. Being full cycle takes a little bit of risk out of the industry because you are always looking at the long-term.
SH: Can you update our investor audience and your Gran Tierra shareholders on any new company developments?
GG: Really where is Gran Tierra today? We came to the company back in 2015 and we made six acquisitions, which you have to be good at in this industry. Not just an explorer, not just a developer, not just a producer but there is always going to be M&A and you have to be very good at it. We put together a portfolio of very high-quality assets, both on the development side, the Acordionero Field is our biggest field, it is about half of the company's value in production, but it is a great conventional sandstone reservoir that we are in the process of water flooding. Water flooding is one of the things in our industry that requires capital to put infrastructure in. We put that capital in over 2017, 18 and 19.
We are ready to ramp the production up, which we are in the process of doing. We also have some older fields that we are optimizing, adding injection, adding more wells to try to get as much as we can out of each of those reservoirs in Colombia. The other thing that we are doing is, the Putumayo Basin, where we are located in Southwestern Colombia is one of the biggest future operations that we have - also extends into Ecuador and so we picked up three blocks in Ecuador back in 2019, very excited about what is happening there. The countries has really opened up to smaller companies like ourselves to go in on the second and third wave of exploration in a very prolific basin. The Putumayo again, is the same basin extending into Ecuador - The Oriente. There has been over 6 billion barrels of oil produced on the Ecuadorian side of the border and you might think that is mature, hearing those kinds of numbers, but it is really the first way that big fields have been discovered and produced. We see lots of opportunity to expand that.
SH: Gran Tierra recently announced its latest quarterly results. Gary, can you please give an overview of this and what are some of the key points that potential investors should be aware of?
GG: I think the big one is, we have come through a difficult time. The industry as a whole, I will speak for, with COVID, with the price wars that we saw between some of the OPEC members versus the Permian players and it is a resilient industry. We were in an industry that we are used to that volatility, and we try to mitigate that risk, but you also have to think long-term. Some of the things that we do, from exploration to development, putting in infrastructure for example, we did that prior to COVID.
Where we are at now, and what we announced in our quarterly results, is we took advantage of the time during 2020, to optimize our cost structure as a company. That is one of the things that you will see that is permanent as we come into 2021 - resumed operations and ramped our production back up to where it was pre-COVID, pre-price volatility. I think the thing to look at, what to expect from us in the future is, we are still trading at a highly discounted value. When you compare what oil prices today, to the underlying value of the reserves that we have, not reserves that we have on the books, reserves that we have developed. We are in the process of filling up our facilities for those and so we are quite excited about where we are today.
SH: What separates Gran Tierra from the competition and makes your business model unique, especially in this part of the world?
GG: I think the biggest thing is, that there are lots of other companies that are full cycle. What puts us in a very comfortable space that we are in, is having mature assets with infrastructure in place and [what was in your introduction], that is exactly what we look for is, mature basins, access to infrastructure, history of fiscal terms that are workable and that gives us the comfort of investing large amounts of money over long periods of time, and not having to worry about changes in the rules. That is probably the single biggest thing that our industry faces, are changes in the rules after you are halfway through an investment. Colombia is one of those countries, long history, very prolific basin. Ecuador has made great steps forward in terms of opening up the industry, President Lasso attracting capital, we are very excited about that.
We are also looking outside of those areas. In the world that we are in today, we are very comfortable that the oil and gas industry is going to be part of the future solution for decades to come and we are going to apply our skills, our team's skills, at both the exploration for new reserves in mature basins, but also the development production and optimization of reserves. That part is quite exciting to us, we are seeing opportunities that we have not seen in a long time. Some opportunities that we would have not seen without some of the volatility that is going on today.
SH: Your stock has had a very nice bump over the last 12 months. What can you tell our investor audience regarding the current valuation of your stock and why you think it’s still a good buy right now, as you briefly mentioned earlier?
GG: I think part of the volatility that we faced, both prices, COVID, where we as an industry, ended up cutting back on production because of demand. But you also saw that demand dropped from 100 million barrels a day down to about 80. That’s a pretty good test of what the true underlying demand is for the industry. What we have also seen is big companies, Exxon, Chevron, BP, Eni, Total - the big players in the world, are re-examining their portfolios and they are divesting of assets around the world. We are in a different place, we are in a place where we are looking to grow, specifically in the oil and gas industry and in terms of where we are as a company, we are trading at less than what our proven value is. We measure our reserves in terms of proven, probable, and possible.
The number that we are very comfortable with is probable. We are at a highly discounted value to that, and we will grow into that. We will grow into that with our production, we are self sustaining in terms of our cashflow. We have been very clear that at $60 or $70 a barrel, we paid down our short-term debt. We more than cover our long-term debt and it is a very bright picture for our investors, just with the assets that we have. That is before we explore, that is before we look at other opportunities outside the current basins that we are in.
SH: With only a short time left in 2021, what should investors expect from the company for the rest of the year and what are some of the goals and plans for early 2022?
GG: I think the thing to expect is we will do what we said we will do. We are paying down our short-term debt. We have made great strides in doing that. We anticipate our reserve-based lending facility to be $80 million or less, that is coming from about $200 million pre-COVID. That money was money we spent on infrastructure and developing the fields we have, and so the benefits of that debt are still in place, and we are going to benefit from that going forward. I think the other thing to expect is to see continued development of the fields that we have. We are currently at about 30,000 barrels per day. We have the capacity to get to 40-plus thousand barrels a day, but we will do that in a measured fashion using our internal cashflow to both explore and continue developing and optimizing, both in Colombia and Ecuador.
SH: Finally, Gary, if is there anything I’ve missed you’d like to cover, the floor is all yours?
GG: No, I think we have covered everything. I just want to say that we are long-term players in this game. We realize there is volatility in the markets, but we also realize that we are providing a necessary resource for the world, for the globe. When you look at where our production goes and what we are doing both on the environmental side, which is on our website, we take great pride in what we are doing for the environment but an even greater pride in what we are doing socially and in the areas that we operate. We are proud of the character and the culture of our company, and I think you would be proud to be a shareholder and that is really one of our biggest drivers, is not only to create monetary value, but be welcomed wherever we operate.
For regular updates, visit
www.grantierra.com.
FULL DISCLOSURE: This is a paid article produced by Stockhouse Publishing.