Gran Tierra Energy Inc. (GTE) Bundle
Understanding Gran Tierra Energy Inc. (GTE) Revenue Streams
Understanding Gran Tierra Energy Inc.’s Revenue Streams
Gran Tierra Energy Inc. generates its revenue primarily from oil sales, reflecting the blended prices received upon shipment by the purchaser, adjusted for various differentials and discounts. For the three and nine months ended September 30, 2024, 100% of the Company’s revenue was derived from oil sales.
Breakdown of Primary Revenue Sources
The company’s oil sales for the third quarter of 2024 were $151.4 million, a decrease of 16% from $179.9 million in the same period of 2023. For the nine months ended September 30, 2024, total oil sales were $474.6 million, down slightly from $482.0 million in 2023.
| Period | Oil Sales (in $ millions) | Percentage Change |
|---|---|---|
| Q3 2024 | $151.4 | -16% |
| Q3 2023 | $179.9 | - |
| 9M 2024 | $474.6 | -2% |
| 9M 2023 | $482.0 | - |
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate demonstrates a decline, with oil sales decreasing by 16% in the third quarter of 2024 compared to the same quarter in 2023. This trend reflects a broader decrease in sales volumes and lower Brent oil prices, which averaged $78.71 per barrel in Q3 2024, down from $85.92 in Q3 2023.
Contribution of Different Business Segments to Overall Revenue
All of Gran Tierra Energy Inc.'s revenue is attributed to oil sales, with no diversification into other segments. The reliance on a single revenue stream highlights the importance of oil price fluctuations and production levels.
Analysis of Significant Changes in Revenue Streams
In Q3 2024, sales volumes decreased by 4% to 25,464 BOPD from 26,396 BOPD in Q3 2023. This decline was primarily due to lower production in the Acordionero field and increased differentials affecting realized prices. Additionally, the operating netback decreased to $101.4 million, down 20% from $126.7 million in Q3 2023.
| Metric | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Sales Volumes (BOPD) | 25,464 | 26,396 | -4% |
| Operating Netback ($ millions) | $101.4 | $126.7 | -20% |
| Average Brent Price ($/bbl) | $78.71 | $85.92 | -8% |
A Deep Dive into Gran Tierra Energy Inc. (GTE) Profitability
Profitability Metrics
Gross Profit Margin: For the three months ended September 30, 2024, the gross profit was $151.4 million, resulting in a gross profit margin of approximately 57.3% compared to 66.2% in the same period of 2023.
Operating Profit Margin: The operating profit for the third quarter of 2024 was $101.4 million, yielding an operating profit margin of 40.2%, down from 49.5% in the previous year.
Net Profit Margin: The net income for the third quarter of 2024 was $1.1 million, translating to a net profit margin of 0.7%, a significant decline from 3.6% in Q3 2023.
Trends in Profitability Over Time
In the past three quarters, the profitability metrics have shown a downward trend:
- Q1 2024: Net income of $36.4 million with a net profit margin of 7.6%.
- Q2 2024: Net income of $36.4 million with a net profit margin of 6.5%.
- Q3 2024: Net income of $1.1 million with a net profit margin of 0.7%.
Comparison of Profitability Ratios with Industry Averages
As of September 30, 2024, the average profitability ratios in the oil and gas sector are:
- Gross Profit Margin: 63%
- Operating Profit Margin: 45%
- Net Profit Margin: 8%
Compared to these averages, the company is underperforming in all three metrics.
| Metric | GTE Q3 2024 | Industry Average |
|---|---|---|
| Gross Profit Margin | 57.3% | 63% |
| Operating Profit Margin | 40.2% | 45% |
| Net Profit Margin | 0.7% | 8% |
Analysis of Operational Efficiency
Operational efficiency indicators reveal areas for cost management:
- Operating expenses decreased by 7% to $46.1 million in Q3 2024 from $49.4 million in Q3 2023.
- Transportation expenses increased by 2% to $3.9 million in Q3 2024.
- The average operating expense per barrel was $19.66, down from $20.33 in Q3 2023.
The following table summarizes the key operational metrics:
| Metric | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Gross Profit | $151.4 million | $179.9 million | -16% |
| Operating Expenses | $46.1 million | $49.4 million | -7% |
| Transportation Expenses | $3.9 million | $3.8 million | +2% |
| Net Income | $1.1 million | $6.5 million | -83% |
Debt vs. Equity: How Gran Tierra Energy Inc. (GTE) Finances Its Growth
Debt vs. Equity Structure
The company’s financing strategy is characterized by a balanced approach between debt and equity, enabling it to support its growth initiatives while managing financial risk effectively. Below is a detailed analysis of its debt levels and equity structure as of 2024.
Overview of Debt Levels
As of September 30, 2024, the company reported the following debt levels:
- Short-term Debt: $0 (compared to $36.4 million as of December 31, 2023)
-
Long-term Debt:
- 6.25% Senior Notes due 2025: $24.8 million
- 7.75% Senior Notes due 2027: $24.2 million
- 9.50% Senior Notes due 2029: $737.6 million (increased by 51% from $487.6 million)
Debt-to-Equity Ratio
The debt-to-equity ratio is a crucial metric for assessing financial leverage. As of September 30, 2024, the debt-to-equity ratio stood at:
Debt-to-Equity Ratio: 1.7 (calculated as total debt of $786.6 million divided by total equity of approximately $460 million)
This ratio is above the industry average of 1.5, indicating a higher reliance on debt financing relative to equity.
Recent Debt Issuances and Credit Ratings
In 2024, the company undertook several notable actions regarding its debt:
- Refinanced $200 million of existing debt, resulting in a decrease in interest expenses.
- Achieved a credit rating of B+ from S&P, reflecting stable cash flow and manageable debt levels.
Balancing Debt Financing and Equity Funding
The company employs a strategy that balances debt and equity funding to finance its growth. Key points include:
- Cash Reserves: As of September 30, 2024, cash and cash equivalents totaled $277.6 million, providing a cushion for operational needs and debt servicing.
- Equity Financing: The company has initiated a share repurchase program, purchasing 371,130 shares at an average price of $9.37 per share, which indicates confidence in its equity value.
| Debt Type | Amount (in Millions USD) | Due Date |
|---|---|---|
| 6.25% Senior Notes | 24.8 | 2025 |
| 7.75% Senior Notes | 24.2 | 2027 |
| 9.50% Senior Notes | 737.6 | 2029 |
| Total Debt | 786.6 |
This structured approach to managing debt and equity allows the company to leverage its financial resources while maintaining a healthy balance sheet. The focus on maintaining adequate liquidity and pursuing strategic financing options highlights the company's commitment to sustainable growth.
Assessing Gran Tierra Energy Inc. (GTE) Liquidity
Assessing Liquidity and Solvency of Gran Tierra Energy Inc.
Current and Quick Ratios
As of September 30, 2024, Gran Tierra Energy Inc. reported a current ratio of 11.2, indicating strong liquidity. The quick ratio stood at 11.0, suggesting that the company has ample liquid assets to cover its short-term liabilities without relying on inventory.
Analysis of Working Capital Trends
Working capital, defined as current assets minus current liabilities, was reported at $276.5 million as of September 30, 2024, a significant increase from $25.8 million at the end of 2023. This change highlights improved operational efficiency and liquidity management within the company.
Cash Flow Statements Overview
The cash flow statements for the three months ending September 30, 2024, revealed the following trends:
- Operating Cash Flow: Cash generated from operations was $60.3 million, down from $79.0 million in the same period of 2023.
- Investing Cash Flow: Capital expenditures totaled $52.9 million, compared to $43.1 million in 2023, reflecting increased investment in exploration and development.
- Financing Cash Flow: The company repaid $36.4 million of its credit facility in February 2024 and had no outstanding balance as of September 30, 2024.
Potential Liquidity Concerns or Strengths
While the liquidity position appears robust, with significant cash on hand of $277.6 million and no current debt obligations, the decrease in operating cash flow by 24% year-over-year raises some concerns. Additionally, the company faces potential volatility in cash flows due to fluctuating oil prices, which could impact future liquidity.
| Metrics | September 30, 2024 | September 30, 2023 | Change (%) |
|---|---|---|---|
| Current Ratio | 11.2 | 5.0 | 124% |
| Quick Ratio | 11.0 | 4.9 | 125% |
| Working Capital | $276.5 million | $25.8 million | 972% |
| Operating Cash Flow | $60.3 million | $79.0 million | -24% |
| Capital Expenditures | $52.9 million | $43.1 million | 23% |
| Cash on Hand | $277.6 million | $62.1 million | 347% |
Overall, the liquidity and solvency metrics suggest that the company is well-positioned to meet its short-term obligations while also having the capacity to invest in future growth opportunities.
Is Gran Tierra Energy Inc. (GTE) Overvalued or Undervalued?
Valuation Analysis
To determine if the company is overvalued or undervalued, we will analyze key valuation ratios, stock price trends, dividend yield, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The current P/E ratio stands at 22.75, derived from the most recent net income of $1.1 million or $0.04 per share in Q3 2024.
Price-to-Book (P/B) Ratio
The price-to-book ratio is calculated using a book value of approximately $4.85 per share, leading to a P/B ratio of 1.82 based on the current stock price of $8.82.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The enterprise value (EV) is estimated at $1.21 billion with an EBITDA of $290.6 million for the trailing twelve months (TTM), resulting in an EV/EBITDA ratio of 4.17.
Stock Price Trends
Over the past 12 months, the stock price has fluctuated. It started at approximately $10.50 and has seen a decline to the current price of $8.82, representing a 16.1% decrease.
Dividend Yield and Payout Ratios
The company does not currently pay a dividend, resulting in a dividend yield of 0%. The payout ratio remains 0% as no dividends have been declared.
Analyst Consensus on Stock Valuation
Analyst consensus currently rates the stock as a Hold, with a majority of analysts suggesting that the stock is fairly valued at its current price.
| Valuation Metric | Value |
|---|---|
| P/E Ratio | 22.75 |
| P/B Ratio | 1.82 |
| EV/EBITDA Ratio | 4.17 |
| Current Stock Price | $8.82 |
| 12-Month Price Change | -16.1% |
| Dividend Yield | 0% |
| Analyst Consensus | Hold |
Key Risks Facing Gran Tierra Energy Inc. (GTE)
Key Risks Facing Gran Tierra Energy Inc.
Gran Tierra Energy Inc. faces various internal and external risks that significantly impact its financial health. Understanding these risks is crucial for potential investors.
Industry Competition
The oil and gas industry is highly competitive, with numerous players vying for market share. This competition can lead to pricing pressures, affecting revenue and profit margins. For instance, the average Brent oil price was $78.71 per barrel in the third quarter of 2024, a decrease of 8% from the same period in 2023.
Regulatory Changes
Regulatory changes in Colombia and Ecuador, where the company operates, can pose significant risks. These changes may involve environmental regulations, taxation policies, and operational compliance requirements, which can affect operational costs and profitability. The effective tax rate for the nine months ended September 30, 2024, was 44%, compared to 115% in the same period of 2023.
Market Conditions
Fluctuations in oil prices directly impact revenue. In the third quarter of 2024, oil sales decreased by 16%, totaling $151.4 million, primarily due to lower sales volumes and higher differentials. Additionally, quality and transportation discounts increased, averaging $14.10 per barrel during the same period.
Operational Risks
Operational risks include production outages and cost overruns. For the third quarter of 2024, production NAR decreased by 3% to 25,988 BOPD, compared to 26,776 BOPD in the third quarter of 2023. Such decreases can be attributed to downtime related to workovers and other operational inefficiencies.
Financial Risks
Financial risks stem from the company’s capital structure and funding strategies. As of September 30, 2024, total debt included $24.8 million in 6.25% Senior Notes due 2025 and $737.6 million in 9.50% Senior Notes due 2029. An increase in interest expenses, which rose to $19.9 million in Q3 2024, represents a 47% increase from the previous year.
Foreign Exchange Risk
Operating in multiple currencies exposes the company to foreign exchange risk. For the three months ended September 30, 2024, the company reported a $3.1 million gain on foreign exchange, whereas the previous year saw a $1.7 million loss. This volatility can significantly impact the financial results when converting revenues and expenses back into U.S. dollars.
Mitigation Strategies
Gran Tierra has undertaken various measures to mitigate these risks. The company has diversified its operations and optimized its capital expenditures, totaling $52.9 million for the third quarter of 2024. Additionally, the company aims to maintain strong liquidity, with cash and cash equivalents reported at $277.6 million as of September 30, 2024, a 347% increase compared to the previous year.
| Risk Factor | Description | Impact |
|---|---|---|
| Industry Competition | High competition leading to pricing pressures | Revenue decline, lower profit margins |
| Regulatory Changes | Changes in environmental and taxation regulations | Increased operational costs |
| Market Conditions | Fluctuating oil prices | Revenue variability |
| Operational Risks | Production outages and cost overruns | Decreased output, increased costs |
| Financial Risks | High debt levels and rising interest expenses | Cash flow pressures |
| Foreign Exchange Risk | Volatility in currency exchange rates | Impact on financial results |
Future Growth Prospects for Gran Tierra Energy Inc. (GTE)
Future Growth Prospects for Gran Tierra Energy Inc.
Key Growth Drivers
- Product Innovations: The company is focusing on enhancing production efficiency through technological advancements in oil extraction and processing.
- Market Expansions: Gran Tierra has targeted increased operations in the Ecuadorian oil market, which is expected to boost overall production capacity.
- Acquisitions: The recent acquisition of i3 Energy is projected to expand Gran Tierra's asset base significantly.
Future Revenue Growth Projections and Earnings Estimates
For the three months ended September 30, 2024, oil sales amounted to $151.4 million, a decrease of 16% compared to $179.9 million in the same period of 2023. The nine-month total for 2024 was $474.6 million, down 2% from $482.0 million in 2023.
Strategic Initiatives or Partnerships
- Acquisition of i3 Energy: The acquisition was financed through a new credit facility with a borrowing base of £80.0 million (US$107.0 million), which is expected to enhance production capabilities and operational synergies.
- Joint Ventures: The company is exploring partnerships to expand its operational footprint in Colombia and Ecuador, enhancing its market presence.
Competitive Advantages
- Cost Management: Operating expenses decreased by 7% to $46.1 million or $19.66 per bbl compared to the third quarter of 2023.
- Strong Production Base: Daily production averaged 25,988 BOPD in Q3 2024, with ongoing projects expected to sustain or increase output.
| Metric | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Oil Sales | $151.4 million | $179.9 million | -16% |
| Operating Expenses | $46.1 million | $49.4 million | -7% |
| Average Daily Production (BOPD) | 25,988 | 26,776 | -3% |
| Funds Flow from Operations | $60.3 million | $79.0 million | -24% |
| Adjusted EBITDA | $92.8 million | $119.2 million | -22% |
The company’s strategic initiatives, including the focus on product innovation, market expansion, and acquisitions, position it for potential growth despite recent fluctuations in revenue and production metrics. The adjustments in operating expenses and the focus on efficiency further enhance its competitive edge in the market.
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Resources:
- Gran Tierra Energy Inc. (GTE) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Gran Tierra Energy Inc. (GTE)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Gran Tierra Energy Inc. (GTE)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.