Gran Tierra Energy Q3 2026 Earnings Call Transcript

Gran Tierra Energy (AMEX:GTE) reported third-quarter financial results on Friday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

Gran Tierra Energy Inc. announced the proposed sale of its Colombian and Ecuadorian business to Maurel & Prom for approximately $1.33 billion, targeting closing by year-end 2026.

The company reported a net loss of $42 million in Q3 2026, primarily due to non-cash stock-based compensation expense and derivative instrument losses, offset by deferred income tax recovery.

Gran Tierra generated adjusted EBITDA of $68 million, a decline from the previous quarter, and achieved positive free cash flow of $1 million.

Production averaged 39,904 barrels of oil per day, a decline compared to previous periods, with notable performance from the Acordionero field and Ecuador assets.

The company maintains a solid liquidity position with $141 million in cash and $50 million undrawn under its Canadian revolving credit facility.

Gran Tierra is progressing with exploration and development in Azerbaijan, following the ratification of an agreement with SOCAR, and plans to commence drilling in early 2027.

Future capital allocation and shareholder returns will be decided post-sale, with potential share repurchases under consideration.

Full Transcript

OPERATOR

Good morning, ladies and gentlemen, and welcome to Gran Tierra Energy’s conference call for the third quarter 2026. My name is Michelle and I’ll be your coordinator for today. At this time, all participants are in 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, November 6, 2026 at 10:00 a.m. 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 Energy. Mr. Guidry, please go ahead.

Gary Guidry (President and Chief Executive Officer)

Thank you, operator. Good morning and welcome to Gran Tierra’s third quarter 2026 results conference call. My name is Gary 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, November 5, 2026, we issued a press release that included detailed information about our third quarter 2026 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’ll now turn the call over to Ryan to discuss our financial results.

Ryan Ellson (Chief Financial Officer)

Thanks, Gary, and good morning, everyone. Our third quarter results come at an important time for Gran Tierra. During the quarter, we announced a proposed sale of our Colombian and 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 9th.

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 Gouverne 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 believe we are well positioned to complete the remaining transaction requirements while continuing to manage our 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 to be 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 2025. The net loss incurred during the quarter was primarily driven by approximately $30 million of non-cash 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 2025. 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 of 2025. The decline in funds flow was 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 2025.

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 of lower royalties. Brent decreased by approximately $5.40 per barrel 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 Colombia–Ecuador border remained closed.

We incurred transaction costs of $5 million and a 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 2025, as no new wells were drilled during the quarter. Spending was primarily focused on development activities in Colombia, 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 2025. The sequential decrease largely reflected lower Brent pricing, wider quality and transportation 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 2025. 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 costs. 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, the company currently has approximately $50 million in undrawn availability under its Canadian revolving credit facility. Subsequent to quarter-end, we hedged via three-way structures 5,000 barrels of oil per day for the first quarter of 2027 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’ll now turn the call over to Sebastien to discuss some of the operational highlights.

Sebastien Morin (Chief Operating Officer)

Thanks, Ryan, and good morning, everyone. From a production perspective, Gran Tierra delivered third quarter 2026 average working interest production of 39,904 barrels of oil per day, approximately 4% lower than the prior quarter and 7% lower than the third quarter of 2025. The decline versus the prior quarter reflects the impact of the Lodgepole disposition and lower production at Glhimbe, 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 and our Canadian asset dispositions were partially offset by stronger contributions from Acordionero and Ecuador. Across our South American portfolio, Colombia and Ecuador averaged working interest production of 19,305 and 7,747 barrels of oil per day, respectively. Acordionero continues to perform well with average production for the quarter of 10,440 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 waterfloodable 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 Montney. 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 2027. 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 2025 due to the Lodgepole 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 Gradiometry survey covering approximately 4,800 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 location screening and 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 and 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.

OPERATOR

Thank you. Ladies and gentlemen, we will now conduct a question-and-answer session for securities analysts. If you have a question, please press the star key followed by 11 on your touchtone phone. You will then hear an automated message advising your hand is raised. Your questions will be polled in the order they are received. Please ensure you lift the handset if you’re using a speakerphone before pressing any keys. One moment for our first question.

Our first question comes from David Round with Stifel. Your line is open.

David Round (Analyst)

Great. Thanks, guys. Ryan, you mentioned that 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’m 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 one from me, please, just on Canada, the cost reduction that you talked about, is it possible to just split that into what’s sustainable and what is down to things like workover timing? Thank you.

Ryan Ellson (Chief Financial Officer)

Yeah, on the first question, yeah, we’re working through that right now, David. If you looked on the guidance that we have out there is on close, we’ll have, you know, approximately $250 million of cash and a $65 million note due in 364 days. So cash of around $315 million. We’re still working through our budget for next year as obviously we’ll have reduced free cash flow and we’ll start the exploration program in Azerbaijan. But I think it’s, you know, when we’re looking at today’s share price of $9 or $9.50 US, wherever that range is, when we plus PDP value of well over $12.50, you know, we have to take that into consideration as far as the quantum and the timing. But again we’re going to renew our normal course issuer bid as well as look at, you know, the timing of the substantive issuer bid. But upon closing there will be guidance out very shortly after.

Your question, David, on cost reductions and right-sizing, we’ll come out with our budget for 2027 and incorporate all of that once we get closed here in early to mid-December.

David Round (Analyst)

Okay, fine. I mean, I presume I was going to ask about the sort of the level of G&A going forward. Presumably that’s going to be wrapped up in that process as well. Okay, thank you.

OPERATOR

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

Gary Guidry (President and Chief Executive Officer)

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

OPERATOR

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

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.