Gran Tierra Energy (GTE) Q2 2026 earnings call transcript

Thank you, Operator. Good morning, and welcome to GRAN TIERRA's second quarter 2026 results conference call. Hello. My name is Gary Guidry, GRAN TIERRA's President and Chief Executive Officer, and with me today are Ryan Elson, our Executive Vice President and Chief Financial Officer, and Sebastian Morin, our Chief Operating Officer. On Tuesday, August 4, 2026, we issued two press releases. The first included detailed information about our second quarter, 2026 results, and second release highlighted we entered into a share purchase agreement to sell all our Columbia and Ecuador businesses, which are available on our website. Before we begin our discussion of quarterly results, I want to address the announcement we made yesterday regarding the definitive agreement to sell our oil businesses in Colombia and Ecuador.

The definitive agreement governing this transaction contains restrictions on what we and MORAL and PROM may publicly disclose about it beyond what is included in our respective announcements and public filings. Because of those contractual restrictions, we are not in a position to answer questions about the transaction on today's call. We recognize this is an important topic for many of you, and we will provide additional information consistent with our disclosure obligations as it becomes appropriate to do so, including in the proxy statement for the special stockholder meeting to be held to consider approval of the transaction. For now, we would like to focus on today's discussion on our quarterly financial results and business performance, and we appreciate your understanding.

Ryan and Sebastian 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 second quarter performance reflects another active period for GRAN TIERRA. Stronger commodity prices and lower total operating costs supported improved margins and positive free cash flow, while the strategic actions completed during and after the quarter further refined our portfolio and enhanced our financial flexibility. An important milestone we achieved during the quarter was the completion of our $123 million capital carry commitment in The post-carry period commenced on July 18th, and the economics and overall profitability of future activity on the block have improved, which will contribute to additional future cash generation and higher returns. In Tiskerama, we satisfied all outstanding conditions present to be effectiveness of our agreement with Equipatrol. This advances our opportunity to earn a 49% working interest in the Tiskerama block and further expands our operating position in Columbia's Middle Magdalena Valley.

and we will now turn the call over to management for the middle Magdalena Valley Basin Additionally we completed the disposition of a 54 work interest and associated title rights in the lodgepole area for million US This transaction further contributed to our liquidity and removed the associated asset retirement obligations of million from our balance sheet Together with the assignment at disposition completed in the first quarter of 2026, the lodgepole sale further optimizes our Canadian portfolio around the opportunities where we see the highest long-term potential and returns, including the Dawson, Clearwater area, and Mount Head. Combined with the completion of the story, N. T. Cary, these actions improved the quality of our portfolio. Turning now to our financial results for the second quarter of 2026, GRAN TIERRA generated a net income of $25 million compared to a net loss of $119 million in the prior quarter and a net loss of $13 million in the second quarter of 2025.

The net income position was primarily the result of stronger commodity prices, improved margins, and lower total operating costs during the quarter. In Ecuador, our M-1 pricing structure benefited our second quarter results. The realized M-1 benchmark price of $101.89 per barrel increased revenue by approximately $4 million compared with the average rent price for the quarter of $96.68 per barrel. The company generated adjusted EBITDA of $85 million, up from $74 million in the prior quarter and $77 million in the second quarter of 2025. Funds full of operations were $60 million, or $1.70 per share, up 41% from the prior quarter, and up 12% from the second quarter of 2025. During the quarter, the company generated free cash flow of approximately $6 million, an increase when compared to the $2.7 million generated in the second quarter of 2025.

GRAN TIER's capital expenditures of $54 million were higher than the $45 million in the prior quarter, and $51 million in the second quarter of 2025. During the quarter, the company completed the Soriente Carry and the six-well development drilling program at the Cohenby Field, with the final two wells drilled and brought on production during the quarter. The company's 2026 capital program was intentionally weighted to the first half of the year and will continue to expect capital expenditures to remain within our previously stated guidance. At quarter end, GRAN TIERRA had a cash balance of $127 million, total gross debt of $606 million, and net debt of $479 million. During the first six months In the months of 2026, we repurchased $6 million face value of our 9.75% senior notes due to 2031 at a 12% discount.

Subsequent to the second quarter, we repurchased an additional $15 million face value of 2031 senior notes at a 10% discount, further advancing our debt reduction priorities. Alongside the $127 million on cash on hand, the company currently has $53 million in undrawn credit and lending facilities. GRAN TIERRA generated oil sales of $187 million, an increase of 25% from the second quarter of 2025, and 9% from the prior quarter. The year-over-year increase was primarily driven by stronger Brent pricing, partially offset by lower sales volume and higher quality and transportation discounts in Colombia, associated with alternative transportation routes with the Colombia-Ecuador border closed. Sequentially higher rent prices, lower Columbia differentials, and stronger premiums equity were more than offset the impact of lower sales volume from having only one lifting during the quarter and higher royalties associated with stronger commodity prices.

Total operating expenses decreased by 22% to $52 million compared to the prior quarter and decreased by 7% compared to the second quarter of 2025, primarily due to lower workover activity, reduced field personnel As we move through the second half of the year, our priorities remain with allocating capital with discipline, protecting liquidity, generating free cash flow, and using our financial flexibility to reduce debt and invest in the highest return opportunities across the portfolio. The actions completed during the quarter leave GRAN TIERRA with a more focused portfolio and a stronger foundation to further contribute to long-term shareholder value.

I will now turn the call I will now turn the call over to Sebastian to discuss some of the operational highlights Thanks Ryan and good morning everyone From a production perspective GRAN TIERRA delivered second quarter 2026 average working interest production of approximately 41 barrels of oil per day which was within our annual guidance range and reflected the impact of the Canadian asset dispositions completed during the first half of the year Production was 9 lower than the prior quarter and 12 lower year over year The decrease primarily reflected the Canadian dispositions in temporary unplanned artificial system failures at Accordionero and Coimby, partially offset by strong performance from the Conejo discoveries, early water flood responses in Chenangate, and incremental production from the Perico block.

From an operational standpoint, as Ryan noted, during the quarter we completed our $123 million capital carry commitment under the Surriente joint venture with Ecopatrol through the completion of the six-well development drilling program at Coimby, which was successfully delivered under budget. In Tiscarama, execution has already begun with licensing, surveying and detailed engineering of flowlines, facilities and wells. We expect to initiate field activities in the second half of 2026, which will include well workovers, flowline installations and new facilities. In Ecuador, we received government approval for three additional field development plans covering Chirapa, Conejo and Perico, bringing total approvals to five of our six discovered fields. These approvals allow us to transition the portfolio from exploration toward development while retaining approximately 156,000 acres for 20 years with an additional approximately 16,000 acres at Espejo pending approval.

Ecuador production averaged 7,990 barrels of oil per day during the quarter, supported by the continued strength of the Conejo discoveries and an earlier than expected response to water injection at Chenange. These results further reinforces our confidence in the application of water flooding across the portfolio to significantly improve overall production performance and project economics. As Ryan highlighted, the logical disposition further sharpened our Canadian portfolio. Our focus is now on Dawson Clearwater and Mount Head, where a new resource report highlights meaningful long-term exploration and development potential. McDaniel assigned best estimate 2C contingent resources of approximately 6.5 million barrels at Dawson Clearwater, along with unrest best estimate prospective resources of approximately 55 million barrels at Dawson Clearwater and 12 million barrels at Mount Head, representing approximately 67 million barrels of combined unrest best estimate prospective resources.

Prospective resources relate to undiscovered accumulations and will require confirmation through future drilling. GRAN TIERRA operates both plays with a 100% working interest across approximately 108,000 net acres. Dawson Clearwater benefits from shallow depths and low-cost horizontal multilateral development, while Mount Head targets light oil and broadens our commodity mix in Canada. Both plays are also suited to water flooding and are expected to be a focus of our 2027 drilling activity. Overall, the quarter reflects disciplined execution across the base business and continued progress in building a more focused, durable, and opportunity-rich portfolio. 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.

Yeah. Good morning, Joseph, and thank you. For Canada, we're quite excited. As both Sebastian and Ryan outlined, in the Clearwater, we have a clear runway, and we've consolidated land, And we are putting together our program, our continuous program going forward. Mount Head is a region we just acquired the land, and we're quite excited about it as well. It worked with vertical wells, and we're going to try it with horizontal wells. So we're quite excited about both, especially being light oil. So Azerbaijan, I think, is very exciting for us because we're starting to shoot gravity over the summer here, and our plans are to drill two wells next year, two wells in an area that's very prolific in terms of oil and gas.

As you know, the gas has quite a great value in the country, and so we're going to focus a lot of effort. We're also working on a couple of joint studies on existing fields with the government, and we'll progress those over the next coming months going forward. So it's possible that we could be looking at some exploitation projects in Azerbaijan as well. So quite excited about the go-forward future of the company.

Certainly, we always look, and we have very specific criteria as a company we look at, and we're basin-driven. And so if there are opportunities for shareholders going forward, we'll certainly look at that, but not anywhere. It has to be countries like and basins like Azerbaijan or Western Canada. Thanks very much for answering my questions and congratulations for surfacing the value. Nice reaction in the market today. Thank you.

Yes. Yeah. Congrats, Gary.

Yeah, Jamie, it's about 850 barrels a day that's come off, but it also took out a bunch of the ARO, so you'll see in the press release that we netted all that out. So actually a benefit and that's a benefit to the company.

Yeah, I think, you know, as we get closer to closing, we'll provide more guidance on 2027 plans and, you know, future financial projections.

I would like to thank everyone once again for joining us today. We look forward to speaking with you over the next quarter and update you on our ongoing progress. Thank you very much. This concludes today's conference. Thank you for your participation. You may now disconnect.