Oil and gas company cash flow expected to remain strong through 2022, analyst says


“Rising commodity prices give Gran Tierra Energy additional financial flexibility to service debt and finance growth in 2022,” notes a report from Research Capital Corporation.

In a Nov. 2 research note, analyst Bill Newman reported that the research
Capital Corporation increased its target price on Gran Tierra Energy Inc. (GTE: TSX; GTE: NYSE.MKT) to C $ 1.95 per share, from C $ 1.50 as the company’s cash flow is expected to remain high until 2022. The current share price, by comparison, is around C $ 1.16.

Newman pointed out that with the release of Q3 / 21 operating and financial results, Gran Tierra has maintained its cash flow forecast for the year 2021 between $ 215 million ($ 215 million) and $ 315 million. US dollars, due to improving oil prices. In addition, the prices as well as the lack of hedges of Gran Tierra in 2022 are expected to increase cash flow next year.

“Rising commodity prices provide additional financial flexibility to service debt and to finance growth in 2022,” Newman commented.

While FY21 cash flows are expected to be strong, FY21 production is estimated to be approximately 1,000 barrels per day (1 Mbbl / d) less than Gran Tierra initially forecast. The revised forecast is between 26.5 Mbbl / d and 27.5 Mbbl / d. More specifically, a drop in production is expected on the Suroriente and PUT-7 blocks in Q4 / 21 as the Colombian government resolves the current blockade by protesting against farmers. However, to partially compensate, production is expected to come online in the Cohembi field in Q4 / 21.

As for Q3 / 21 results, Newman relayed, pre-royalty production averaged 28,957 bbl / d, 26% more than Q2 / 21 production of 23,034 bbl / d. Two areas outperformed in Q3 / 21. One was Acordionero, where production was 14,427 bbl / d, a record since Q4 / 19. The other was Costayaco, where production totaled 6,292 b / d versus 4,190 b / d in Q2 / 21, due to the completion of a three-well infill drilling program.

The adjusted cash flow in Q3 / 21 was US $ 69.1 million, in line with Research Capital’s estimate of US $ 71.2 million. Capital expenditure in Q3 / 21 was US $ 34.8 million.

As for net debt, it stood at the end of Q3 / 21 at US $ 720.94 million, compared to US $ 799.60 million at the end of Q2 / 21. The Company’s outstanding credit balance at the end of Q3 / 21 was US $ 150 million. Gran Tierra aims to reduce it to US $ 80 million by the end of 2021.

Research Capital has a buy rating on Gran Tierra.

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Relevant Research Capital disclosures for Gran Tierra
None Applicable for this transmitter.



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