Gran Tierra Energy, Inc. Q4 FY2025 earnings call

Corporate Actions - Successfully executed a bond exchange of 9.5% senior secured advertising notes due in 2029 with a participation rate of approximately 88%, enhanced liquidity position and balance sheet. - Amended and expanded existing prepayment agreement, terminated Columbia credit facility but kept Canadian facility. - Entered Azerbaijan, partnering with SOCAR for early scaled entry into a stable jurisdiction. ### Hedging - Layered in hedges for cash flow stability in 2026: ~50% of oil volumes hedge with mix of three ways, callers, and puts with average floor around $60; gas has echo swaps covering on average 14,200 GJs per day at ~$2.77 per GJ. ### Reserves - Year-end 2025 reserves: 142 million barrels of oil equivalent of 1P reserves, 258 million barrels of oil equivalent of 2P reserves, and 329 million barrels of oil equivalent of 3P reserves. South American reserves replacement strong. ### Production - 2025 average working interest production 45,709 barrels per day, 32% increase from 2024, with production impacts from pipeline disruptions but some wells performing ahead of expectations like Rahu 2 well in Ecuador.

In 2025, Grand Tierra realized a net loss of $193 million, or $5.45 per share, including non-cash ceiling test impairment losses of $136 million. Capital expenditures increased slightly by $8 million or 3% to $256 million. Adjusted EBITDA was $284 million, a decrease of 23% from $367 million in 2024. Fund flow from operations were $178 million, or $5.02 per share, compared to $225 million in 2024. Net cash provided by operating activities was $313 million, an increase of 31% from $239 million in 2024. Net oil and gas sales for the year were $597 million, a slight decrease of 4% compared to 2024. Total operating expenses were $249 million compared to $202 million in 2024, a 23% increase, while operating expenses per BOE were $15.17, 6% lower than 2024. In South America, greater than 100% reserve replacement on both a PBP and 2P basis was achieved. In Canada, certain natural gas reserves were reclassified to contingent resources. 2025 average working interest production was 45,709 barrels per day, a 32% increase from 2024, with production impacted by pipeline disruptions and field shut-ins. The company entered Azerbaijan, adding to its portfolio.

Financial - Focus on disciplined debt reduction with extended runway from debt exchange. Actively pursue bond buybacks and allocate capital to high-return development opportunities. ### Production - Will revise production guidance once Azerbaijan deal closes, with effective date January 1, 2026. ### Hedging - Continuing to look at hedges for latter half of 2026 and next year, with about 50% of 2026 oil production hedged. ### Capital Allocation - Capital program for 2026 pretty well set, excess free cash either go to cash on balance sheet or repurchasing outstanding debt, with emphasis on debt reduction due to bond yield and exchange restrictions.

Q: Talk about exposure to near-term prices, how sales are priced, CapEx guidance change with higher prices, and capital allocation to Azerbaijan.

A: Sales priced differently in Colombia, Ecuador, and Canada. CapEx guidance same in base and high case but too early to say on additional funds for 2026. Capital allocation to Azerbaijan still waiting for PSE ratification, mostly 2027 and beyond with some capital this year.

Q: Incremental hedges, stretching into 2027, war premium on hedges.

A: About 50% of 2026 oil production hedged, started adding some for 2027, front month higher but curve steeply backward dated, may do short term options.

Q: Concern about Ecuador production and recovery from pipeline disruptions in Colombia.

A: No disruption in Ecuador, starting water injection pilot test; in Colombia, production flat as managing water flood, moquetta up over 1,100 barrels a day.

Q: Production guidance change upon Azerbaijan deal close.

A: Will revise guidance once deal closes in next week or two, effective January 1, 2026, not material.

Q: Activity in Clearwater and potential to accelerate/expand program.

A: Doing core work studies for cost optimization for full field development, existing pad with room for up to four to six wells in planning stages.

Q: Debt reduction target and feasibility.

A: Target net debt to EBITDA one times by 2028, pricing impacts acceleration.

Q: Average ceiling price of hedges and allocation between share buybacks and debt reduction.

A: Average ceiling price about $74, emphasis on debt reduction as per bond yield and exchange restrictions