Morningstar | Gran Tierra Energy's First-Quarter Production Misses Our Expectations
No-moat Gran Tierra Energy reported first-quarter production volumes of 38.2 thousand barrels of oil equivalent per day, a new quarterly record high for the company. Quarterly production increased 9% from the year-ago period and only slightly sequentially. However, first-quarter production came in below our expectations of 40 mboe/d due to electric pump failures as a result of unreliable power generation in the Acordionero field. The company expects the issue to be resolved by the end of the second quarter but did reiterate its full-year 2019 production target to 41-43 mboe/d. We still think that the target remains optimistic, and we forecast slightly lower production.During the quarter, the company announced that it will begin drilling operations in Ecuador next year, contingent upon regulatory approvals. Gran Tierra will obtain a 100% working interest in three blocks in the Oriente Basin, consisting of 140,000 acres. Compensation for the acquired fields is tied to the company’s future drilling program and will be paid out according to crude prices. No compensation is payable upon signing the agreements.
We expect to incorporate the company’s first-quarter results into our model shortly, but for now, we are maintaining our $2.25 (CAD 3) fair value estimate and no-moat rating.
Gran Tierra Energy, together with its subsidiaries, is a company focused on oil and gas exploration and production in Colombia. Co. is primarily engaged in the exploration and production of oil and natural gas. Co. has one reportable segment based on geographic organization, Colombia. As of Dec 31 2017, Co. had total estimated proved reserves of 59.3 million barrels of oil and natural gas equivalent, consisting of 58.9 million barrels of oil and 2.1 million cubic feet of natural gas.
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