Gran Tierra has provided its financial and operating results for the quarter ended June 30, 2009. All dollar amounts are in United States dollars unless otherwise indicated.
Key facts about the quarter
"During the second quarter we executed our exploration and development program, grew production to record levels, and generated strong cash flow from operations," said Dana Coffield, President and Chief Executive Officer of Gran Tierra Energy. "Non-cash depletion, depreciation and accretion expenses of $32.7 million and unrealized foreign exchange losses of $31.0 million, contributed to our net loss for the quarter of $28.2 million. However, our funds flow from operations was $36.0 million in the second quarter and our underlying asset base remains strong. We believe we have successfully positioned ourselves to generate the cash necessary to fund future growth and allow us to fund our ongoing development and exploration program, including fourteen exploration wells in Colombia and Peru beginning in late 2009 and continuing through 2010. Our balance sheet remains very strong, and we expect that our capital expenditure program for the next twelve months will be more than fully funded from cash flow and cash on hand."
Second Quarter 2009 Financial Highlights
Revenue and interest increased by 77% to $58.5 million for the three months ended June 30, 2009 compared with $33.1 million for the same period in 2008. For the six months ended June 30, 2009 revenue and interest increased by 71% to $92.1 million compared with $54.0 million for the same period the previous year. While partially offset by the effect of lower oil prices, increased revenue this quarter was the result of a 271% increase in production, primarily due to increased production from the continued development of the Costayaco field in the Chaza Block in Colombia, and the addition of production from Solana Resources' interests in Colombia following the acquisition on November 14, 2008. The average price received per barrel of oil in the second quarter of 2009 decreased 52% to $50.79 per barrel from $106.80 per barrel in the second quarter of 2008.
Operating expenses increased by 138% to $8.9 million for the quarter ended June 30, 2009 compared with $3.7 million for the same quarter in 2008. On a per barrel basis, operating expenses for the second quarter of 2009 declined by 36% to $7.74 per barrel compared with $12.04 per barrel for the same period in 2008. For the six months ended June 30, 2009, operating expenses increased by 155% to $16.0 million compared with $6.3 million for the same period in 2008. On a per barrel basis, operating expenses for the first half of 2009 declined by 30% to $7.66 per barrel compared with $11.01 per barrel in the first half of 2008. Per barrel operating expenses in both periods of 2009 were lower due to high production wells and increases in operational efficiency.
Depletion, depreciation and accretion expenses (DD A) for the first three months of 2009 increased to $32.7 million or $28.49 per barrel from $5.4 million or $17.45 per barrel for the same quarter in 2008 due to higher production levels and amortization of $24.6 million in the quarter related to the fair value of property, plant and equipment recorded on the acquisition of Solana Resources. DD A for the six months ended June 30, 2009 was $60.2 million or $28.88 per barrel, including $45.5 million related to Solana Resources property, plant and equipment, compared with $8.5 million or $14.90 per barrel for the same period in 2008.
General and administrative expenses (G A) increased by 51% to $7.0 million for the quarter ended June 30, 2009 compared with $4.6 million for the same period in 2008. However, on a per barrel basis, general and administrative costs in the second quarter of 2009 decreased by 59% to $6.12 per barrel compared with $15.00 per barrel in the second quarter of 2008. G A expenses for the six months ended June 30, 2009 were $12.2 million or $5.83 per barrel compared with $8.8 million or $15.44 per barrel for the same period in 2008. The decrease in G A expenses on a per barrel basis for the periods ending June 30, 2009 was the result of higher production offsetting the increase in employee related costs in connection with Gran Tierra Energy's expanded operations in Colombia.
Included in the second quarter 2009 results is a $33.7 million foreign exchange loss of which $31.0 million is due to a non-cash unrealized foreign exchange loss related to translation of the deferred tax liability recorded on the acquisition of Solana Resources. For the six months ended June 30, 2009, the company recorded a non-cash $12.7 million foreign exchange loss due to the translation of the same deferred tax liability. A strengthening in the Colombian peso against the U.S. dollar results in foreign exchange losses, estimated at $70,000 for each one peso decrease in the exchange rate of the Colombian peso to one U.S. dollar.
The net loss for the second quarter of 2009 was $28.2 million compared with a net income of $8.5 million for the same period in 2008. On a per share basis, the net loss was $0.12 per share basic and diluted, compared with a net income of $0.08 per share basic and $0.07 per share diluted in the second quarter of 2008. For the six months ended June 30, 2009 the net loss was $14.1 million compared with net income of $13.2 million for the same period in 2008. The net loss for the first half of 2009 was $0.06 per share basic and diluted compared to net income of $0.13 per share basic and $0.11 per share diluted for the first half of 2008.
Balance Sheet Highlights
The company reported cash and equivalents of $146.5 million at June 30, 2009 as compared with $176.8 million at December 31, 2008. Working capital increased to $152.3 million at June 30, 2009, compared with $132.8 million at December 31, 2008. Shareholders' equity decreased to $781.7 million at June 30, 2009 from $791.9 million at December 31, 2008, and the company had no outstanding long-term debt as of June 30, 2009.
Average daily consolidated light and medium crude oil production for the three months ended June 30, 2009 increased 271% to a record 12,611 BOPD NAR compared with 3,399 BOPD NAR for the same period of 2008.
Average daily Colombian production of light and medium crude oil for the three months ended June 30, 2009 increased 309% to a record 11,632 BOPD NAR compared with 2,842 BOPD NAR for the same period in 2008.
Average daily Argentine production of light and medium crude oil for the quarter ended June 30, 2009 increased 76% to a record 979 BOPD NAR compared with 557 BOPD NAR for the same quarter in 2008.
While production increased on a year-over-year basis, production was negatively impacted by the 14 day disruption of Ecopetrol's Trans Andean pipeline in Southern Colombia between June 7 and June 20, 2009. During this period, consolidated production averaged approximately 2,963 BOPD NAR. As a result of this disruption, production was reduced by approximately 3,400 BOPD NAR (or 309,400 barrels of oil) for the second quarter.
2009 Capital Plan Update
Gran Tierra Energy's planned capital program for 2009 has decreased by $9 million to $151 million for exploration and production development operations in Colombia, Peru, and Argentina for 2009. This decrease is mainly due to activity deferred to 2010. Approximately $141 million is allocated to Colombia, with $115 million for development drilling and associated facilities construction and approximately $26 million for exploration drilling and new seismic data acquisition. Approximately $5 million is allocated to Peru for seismic operations and approximately $5 million is allocated to Argentina for production maintenance operations.
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