Gran Tierra’s Q3 2024 Profits Plunge 97% Amid Rising Costs and Oil Price Pressures
Gran Tierra Energy (TSX: GTE) released its third-quarter 2024 results, showing mixed performance amidst a challenging oil price environment and increased operational expenses. While the company continued its exploration successes in Ecuador, posting its sixth consecutive oil discovery, financial performance fell short compared to last quarter and last year’s figures, primarily due to unfavorable oil pricing and widening cost differentials.
The company reported net income of $1 million for Q3 2024, a stark drop from the $36.4 million net income in Q2 2024 and the $7 million achieved in Q3 2023. This significant year-over-year and quarter-over-quarter decline highlights the effect of lower global oil prices on the company’s revenues. The Brent benchmark price fell from an average of $85.92 per barrel in Q3 2023 to $78.71 in Q3 2024, further depressed by additional regional discounts.
Total oil sales revenue was down to $151 million, representing a 9% decline from Q2 2024’s $165.6 million and a 16% drop from Q3 2023’s $179.9 million. Gran Tierra attributed this revenue reduction to both the lower Brent price and widening quality and transportation discounts, which averaged $14.10 per barrel in Q3 2024, up from $12.79 in Q2 2024 and significantly higher than $11.83 in Q3 2023.
The company’s production volume averaged 32,764 barrels of oil per day (BOPD), nearly unchanged from Q2 2024’s 32,776 BOPD but slightly lower than Q3 2023’s 33,940 BOPD. While steady, this production stability masked challenges: lower output from the Acordionero field in Colombia due to downtime related to well workovers offset higher production from Costayaco and new wells in Ecuador’s Charapa and Chanangue Blocks.
Operating netback for Q3 2024 was $101 million, down from $112.9 million in Q2 2024 and from $126.7 million in Q3 2023, demonstrating the impact of narrowing margins due to rising operational costs and declining oil sales. On a per-barrel basis, Gran Tierra’s operating netback averaged $34.18 in Q3 2024, reflecting a 12% decrease from $38.80 in Q2 2024 and a 16% decline from $40.87 in Q3 2023. These results indicate that while production remained stable, cost pressures—including a 31% rise in transportation expenses and a 2% increase in operating expenses compared to Q2 2024—eroded profitability.
Operating expenses totaled $46 million, down marginally from Q2’s $47 million but still elevated compared to Q3 2023’s $49 million. Transportation expenses, on the other hand, saw a notable reduction from $6 million in Q2 2024 to $4 million in Q3 2024, although they were up 2% from Q3 2023’s $3.8 million.
Adjusted EBITDA also decreased to $93 million in Q3 2024 from $103 million in the prior quarter and was significantly lower than the $119 million reported in Q3 2023. Meanwhile, the company’s cash netback improved to $20.34 per barrel in Q3 2024, up from $15.85 in Q2 2024, primarily due to reduced tax expenses. However, this measure still trailed last year’s cash netback of $25.48 per barrel, a 20% year-over-year decline that signals the ongoing strain from rising differentials and lower Brent prices.
Gran Tierra closed the quarter with a cash reserve of $278 million, up from $140 million the previous quarter, fortifying its liquidity position despite increasing debt. The company’s total debt rose to $787 million, driven by the issuance of $150 million in 9.50% senior notes to finance the acquisition of i3 Energy.
This acquisition, which closed on October 31, 2024, expanded Gran Tierra’s portfolio with over 1.2 million acres in Canada’s prolific Montney and Clearwater formations, adding substantial reserves and production potential. However, the acquisition also contributed to higher leverage; net debt stood at $509 million by the end of Q3 2024, presenting a debt-to-adjusted EBITDA ratio of 1.3, up from the company’s long-term target of 1.0.
In terms of shareholder returns, Gran Tierra paused its share buyback program during Q3 2024 due to the i3 acquisition but has signaled intentions to resume with a new normal course issuer bid. Under this program, the company aims to repurchase up to 10% of its public float over the next 12 months, which may provide some uplift in share value but will compete with debt servicing as a priority.
Operationally, Gran Tierra’s sixth oil discovery in Ecuador at the Charapa-B7 well highlights the company’s ongoing success in South American exploration. This milestone brought cumulative Ecuadorian production to over 1 million barrels, an achievement that strengthens Gran Tierra’s growth foundation in Ecuador’s Oriente and Putumayo Basins.
Gran Tierra Energy last traded at $8.61 on the TSX.
Information for this briefing was found via Sedar and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
