Good morning, everyone, and welcome to Gran Tierra Energy's Results Conference Call for the Third Quarter 2020. I'm Victor, your coordinator for today. All participants are currently in listen-only mode. After our initial remarks, we will open the floor for a question-and-answer session for securities analysts and institutions. Instructions will be provided at that time on how to ask questions. I want to remind everyone that this conference call is being webcast and recorded today, November 3, 2020, at 11:00 a.m. Eastern time. Today's discussion may include forward-looking information as well as non-GAAP financial measures. Please refer to the earnings and operational update press release released yesterday for important disclaimers regarding this information and reconciliations of any non-GAAP measures that will be discussed during this call. The amounts per barrel of oil equivalent, or BOE, are based on a working interest sale before royalties. Lastly, this earnings call is the property of Gran Tierra Energy, Inc. Any copying or rebroadcasting of this call is strictly prohibited without written consent from Gran Tierra Energy. I will now hand the call over to Gary Guidry, President and Chief Executive Officer of Gran Tierra. Mr. Guidry, please proceed.

Thank you, operator, and good morning to everyone. You'll find our quarterly results on our website at grantierra.com. With me today are Ryan Ellson, our Executive Vice President and Chief Financial Officer. Ryan will be giving an overview of the quarter and the path that we're on. Tony Berthelet, our Chief Operating Officer, will give a summary of the operating activities and then we'll open the line to questions. Over to you Ryan.

Good morning, everyone. On our last call, we outlined aggressive actions we undertook to protect our balance sheet and cash flows given the recent volatility faced by the oil and gas industry. We have achieved significant reductions in operating and G&A costs, and we're well positioned for 2021 and beyond. We also discussed how we have initiated the required activities to safely resume several operations throughout our Colombian portfolio in strict accordance with our COVID-19 protocols. Production is now beginning to ramp up, and developments in workover activities are underway. We're pleased with the progress that Gran Tierra has achieved with the safe restart of operations. The safety of our staff, contractors, and local communities where we operate is paramount. We commend the teams for their excellent work during the many challenges of 2020 and their diligent management of COVID-19 safety protocols, which allowed an earlier restart of development activities than we originally forecast. One of our key objectives is to finish 2020 strong in order to set up for a constructive 2021. We believe we're well positioned to withstand the current volatile environment, and with our low base decline, conventional oil asset base, and the operational control for capital allocation and timing, we are maintaining a low-cost structure while ensuring the safety of our people. Now I'll discuss some of the production and financial highlights. Our oil production in the third quarter was 18,944 barrels per day, down 6% from Q2. Current production is approximately 22,000 barrels per day. Through both direct refunds from the Colombian Government and VAT on our oil sales, Gran Tierra has collected a total VAT and income tax receivable of approximately $97 million during 2020. By the end of the third quarter, Gran Tierra had also paid down its credit facility balance of $200 million compared to $200 million at the end of Q2 and had $21 million of cash and cash equivalents. During Q3, Gran Tierra's combined operated workover and transportation expenses of $12.63 per barrel were down 31% relative to the first quarter of 2020. G&A costs were down 8% on a per barrel basis over the same timeframe. On an aggregate basis, these expenses decreased from $5 million in Q1 of this year to $27 million in Q3, a 53% reduction. The majority of these cost reductions represent structural improvements in operations, which are expected to be maintained in a rising oil price environment. As a result of ongoing cost-saving initiatives, we also expect future per well drilling and completion capital costs to be reduced by approximately 30% in Acordionero and 20% at Costayaco compared to 2019. With the significant oil price volatility and logistical challenges due to COVID-19, Gran Tierra elected to keep Q3 capital expenditures at a relatively low $7 million. Our Q3 net loss was $108 million, including a non-cash ceiling test impairment of $105 million. These results are an improvement over Q2's net loss of $371 million, which included a non-cash ceiling test impairment of $398 million. These non-cash impairments resulted from significantly lower oil prices that occurred in the respective rolling trailing 12-month period. Q3 adjusted EBITDA was $22 million, up from Q2's $18 million. Q3's fund flow from operations was $8 million, up from Q2's $6 million, exceeding Q3's capital expenditures. During the quarter, we entered into additional oil price hedges to further protect production against a near-term low-price environment by securing three-way Brent collars, with a total of 11,000 barrels per day hedged for the fourth quarter of 2020 and 9,000 barrels per day for the first half of 2021. In summary, we've taken aggressive actions to protect our balance sheet and cash flows given the recent volatility facing the industry. We've achieved significant reductions in operating and G&A costs and we're well positioned for 2021. I'll now turn the call over to Tony, Chief Operating Officer, to discuss our operational highlights.

Thanks, Ryan, and good morning, everyone. At Acordionero, the first workover rig restarted operations on September 1 and is currently on its fourth workover. This first workover rig is forecast to continue operations in the field through the end of 2020 and into the first quarter of 2021. A second workover rig has now started up at Acordionero to accelerate workover activity. These workover rigs are expected to return production by year-end 2020 on a total of eight to 10 wells that went offline during the first half of 2020. The total combined productivity capacity of the 10 highest priority wells for workover is estimated to be approximately 3,500 barrels of oil per day. We also expect to restart development drilling at Acordionero during the fourth quarter. We plan to drill one to two new oil wells by year-end 2020. The drilling rig is then forecast to continue drilling new development oil wells at Acordionero throughout 2021. The next 10 planned wells, eight oil producers and water injectors, are scheduled to be drilled from the newly constructed Southwest pad. Each of these new wells is expected to have an additional oil production rate of approximately 550 barrels of oil per day. Moving to Putumayo, we are pleased that the Cohembi field commenced production on August 28 after a previous shut-in due to local farmer blockades. Prior to the blockades in late February 2020, activities were underway to expand the Cohembi water treatment injection and processing facilities under a two-phased expansion program. The combined phased expansion is expected to significantly boost water injection capacity to potentially increase ultimate oil recovery. Lastly, at Moqueta, Gran Tierra continued to optimize water flow during the quarter and oil production and water injection were in line with expectations. In summary, we're pleased that we've been able to safely resume operations in strict accordance with the COVID-19 safety protocols that we have put in place. I'll now turn the call back to the operator, and we'll be happy to answer any questions. Operator, please go ahead.

Our first question will come from Werner Riding from Peel Hunt. You may begin.

So in spite of production having restarted and Brent back at 40, your equity is obviously remaining stubbornly low because of concerns around your debt position. I don't have a specific question per se, but I'll be more interested to hear your plans on how you're going to meaningfully reduce your debt so that equity holders can see some transfer of value to their part of the capital structure?

Yes. I'll take a stab at that. I think when we look out to - we'll start with Q4 here. Obviously, the objective, as Tony mentioned, is to continue the workover program in Acordionero, as well as Costayaco and development drilling in Acordionero. The company looks a lot different at 20,000 to 30,000 barrels a day than it does at 22,000 barrels a day from a free cash flow perspective. So ultimately, there's been nothing changed to the asset base as far as original oil in place, etc. This is really just a timing issue due to your very challenging 2020 with a pandemic and the price war, so the underlying asset quality is there, and in a rising oil price environment, we do expect to generate more free cash flow, which ultimately will be used to reduce our debt.

Okay, all right. Thank you.

Thank you. Our next question will come from the line of Leo Han from Eight Capital. You may begin.

It's not really related to the quarter. Just wondering, seeing a lot of industry consolidation here in North America, whether it's in Permian or here in Canada, also known as Husky. Just wondering if you could sort of comment on the outlook on a consolidation trend in Latin America and how do you see Gran Tierra playing a role in this? Thanks.

Sure. I think across the industry you're starting to see consolidation. It's not just the Permian; it's not just Western Canada. You've seen Occidental Petroleum sell over $700 million worth of assets to a private equity-backed firm in Colombia. We fully expect the consolidation in the industry to continue; it's been a tough year for the entire industry. But don't let that mask the overarching climate change, the transition of energies, and to do that, I think the industry is facing unprecedented obstacles. I guess obstacles is the best word or headwinds for capital in the market. The consolidation in the Permian is certainly welcomed by the industry. It's hopefully going to end up in a better-managed portfolio and different reasons for different consolidation goals, and we don't expect Latin America in general to be any different. It's a matter of sustainability long-term.

Yes, thanks for the color. Just a quick follow-up, I think last time we talked a little bit about the spread widening in the markets from buyers and sellers being pretty high. Do you still see that as the case today or do you see that spread kind of starting to narrow down there?

I think there's a bit of a spread that is always tough to pin down, especially when price has been so volatile. But I think what you've seen is to get around that challenge is companies essentially merging with zero premiums, and I think we'd expect to see little to no premiums going forward.

Thanks, appreciate the color. That's it for me.

Thank you. Our next question comes from the line of David Round from BMO Capital Markets. You may begin.

Just one on the deck. I think you've got the next redetermination this month. So I was wondering if you can say anything about expectations there and whether because you were quite late in agreeing in the last redetermination whether you've already suffered the borrowing base reduction given the crisis we've seen this year. And then, there was also talk in the last set of results of possibly pre-payment facilities. Is there any update around those pieces?

On the borrowing base part of it, the objective is to have the borrowing base done by the end of November. So we've just started that process. It's a good reminder; everything is relative. If you look at last time when we started the redetermination process, Brent was $18 in April, so prices are more constructive. But it's a challenging time for not just the sector, but for the banks as well with their exposure to energy. So as we have more information on that, we'll certainly release it. We're always looking at other sources of liquidity. You mentioned prepays; that's one source. There's also potential farm-outs, asset sales, etc. Right now, we're looking at all sources of liquidity to strengthen the balance sheet for the benefit of all stakeholders.

Okay, that's great. And can I just maybe just one at Acordionero? And apologies if I missed it. But can you explain how you expect to see production ramp over at least the next couple of months?

Yes, you bet. It's Tony here. So as we mentioned in our press release, we're targeting eight to 10 high productivity wells that went offline during the first and second quarters. We chose not to repair those wells. So really, it's about continuing base waterflood optimization and then layering in that shut-in production. As I mentioned, we're in our fourth workover, and we'll look to continue that activity through the remainder of the quarter to build out the production gap.

Okay, great. Thank you.

Thank you. Our next question will come from the line of Al Stanton from RBC. You may begin.

I just want to go back to some of the guidance you gave earlier in the year for second half spending. It was things like CapEx at $25 million to $35 million. I suppose based on what you spent in Q3, those numbers are now sort of $18 million to $28 million. I was wondering if that is still reasonable guidance. And then also, with respect to money coming in, there was commentary about tax rebates. I was wondering if they were flowing in Q4 as you previously anticipated. And then, to time all that together, I appreciate you had your covenants relaxed. But there is the one outstanding one which I think is EBITDA to interest, which has to be at two times. I was wondering if that has any concern for you in the fourth quarter.

Yes, I'll touch on that. With respect to the capital, there's no changes to our previously issued guidance. With respect to the EBITDA, if you look at our financial statements, I think we're fairly robust in our disclosure in there based on our current forecast. We expect to be in compliance. But as you know, the challenges in the market right now are volatile. So I would encourage you to take a look at our financial statements and disclosures in there. And then, so what was the last question, Al?

The tax rebate?

That's actually the - thankfully it has come in, as we anticipated. Right now, most of the lumpy amounts have come in during this quarter and going forward on all of our sales. We do have VAT charged on our sales, so that really is we got that monthly from our customers.

And if I may, can I just ask one last question? I've seen the cost coming down on transportation and that's not reflected in a lower realization. So, I was wondering how the dynamics of the local oil market are, whether you're happy with wellhead prices I suppose effectively.

We actually improved our net back both at Acordionero and in Suroriente during the quarter. Acordionero started in July and then Suroriente started in September. So we're quite happy with the current arrangements that we have and also have been very pleased with the current differentials as, with the shortage of heavy oil worldwide, differentials have continued to tighten. They were fairly tight in the quarter and they've even tightened more in the last week or so.

Thanks, guys.

Thank you. Our next question will come from the line of Josef Schachter from Schachter Energy. You may begin.

Gary, two questions. Right now, what is the situation with COVID in Colombia? Are they facing the same kind of issues we're seeing in Europe where there are more caseloads and they're going into quarantine again? And if such a thing was happening, what would that do to impact your activity plans in Q4 and going forward, if there was an acceleration of caseload and more of a quarantine situation?

Okay, thanks Josef. No, Colombia is not seeing the significant spike that is occurring in Europe. I think the country has done a good job of managing COVID in the country. We operated it throughout; Tony and the team have made crew changes from the very beginning by putting protocols in place. Our view is that we're gradually bringing our staff in Bogotá back into the office. But throughout all of the COVID outbreak, we continued to operate our fields that are economic, and so we're very comfortable with our team's protocols that are in place to move people and logistically around the country to ship oil throughout the country. We monitor it closely, but the answer to your first question is no, we're not seeing the same thing that's happening in Europe. And the second is, we don't anticipate any impact with what we have in place.

Okay, super. My next question is on the cover. If we see Brent at $45.50, the extra capital would not go into more activity; it would go to pay down debt. And then on the other side of the coin, if we saw Brent go to $35 or $30 because of all the issues of maybe more COVID and less demand, would you restrain your spend and when you cut back and what price point should we be watching for the activity level to be pulled back?

Yes, I think the answer to that, Josef, is back in August and September as things started stabilizing. We had hedges in place and put more hedges in place. We started reactivating fields and the anticipation was through the middle of next year. We're comfortable that we have hedges in place to reactivate fields and start ramping production. Naturally, like the rest of the industry, we watch it. Our pressure point is $25 to $30 a barrel, where we have to reverse that, and we watch that closely because it costs us money to shut in fields. The first part of your question relates to $45 to $50 a barrel. The beauty of our portfolio is we effectively operate everything, so we have the ability to allocate capital, and you're exactly right. At $45 to $50 a barrel, we will manage our development and our operations going forward into next year, and that's really what Tony and the team watch.

Okay, super. Thanks very much. That's it for me.

Thank you. Our next question will come from the line of Miguel Ospina from Compass. You may begin.

I have three questions. The first one is if you can give us some color on OpEx going forward. You have been spending between $20 million to $25 million per quarter. So my question here is, what is a more sustainable level going forward? The second question is if you have any exit production target with all the development plans that you have. And the third question is if you can confirm that your expected CapEx for the fourth quarter will be between $25 million to $30 million, is that right? Thank you.

It's Tony here. I'll take the OpEx question. So yes, as we come into the fourth quarter, clearly, we're going to continue with some of the minor field reactivations. So looking at a lifting cost forecast coming through the quarter, I would expect us to be in that $20 million range to $22 million, somewhere in that range. On the workover costs, obviously, we're going to continue to accelerate the workover activity on those suspended wells. So some of that cost will increase as we continue that workover, and that's a split between capital and OpEx for that activity. So in the fourth quarter, yes, we will see some incremental costs, but there will be barrels coming with that, some on a per BOE basis. We like to stay relatively flat. On the exit target, much will depend on how things go with managing COVID and continuing that activity. But on that, we'll provide more formal guidance coming up. But yes, we're at 22,000 barrels now and we look to continue to add production both through minor fields and some of the workover activities.

On that, as Tony mentioned, we do have a fairly certain amount of fixed cost. Seventy percent of our costs are fixed. So as we ramp up production, we would expect to get the benefit into the end of this year and into next year, and our capital guidance was $25 million to $35 million.

Thank you, guys.

Our next question will come from the line of Ivan Fernandes. You may begin.

On VAT refunds, could you tell us exactly what was the total collected during only the third quarter? I guess the language is a little bit; I guess you could have included October and early November in the language you put in the press release.

Yes, we only included in here just for the year-to-date, now year-to-date was as of September 30.

Okay, all right. So what was the total for the third quarter?

That is a good question.

It is because I was reading the language on the second quarter and it doesn't quite make it easy to calculate the total to that point.

Do you want to come back to that one, Ryan?

Yes, I'll come back to that one.

Okay, sure. The second question is on the recalculation on the lending base for the revolver. Sorry, I joined the call a little late, so I'm not sure you already commented on this. But could you tell us how this conversations are going? I think the next calculation is on November 9, correct?

We just kicked off the process, so as we have more news, we'll update the market.

So you can't give us any feeling to how the reaction has been so far.

Literally, the process has just started. But I think in putting context of the last redetermination, prices are up quite a bit higher. Our costs are down, and we're comfortable with our reserve base.

Okay, great. So again, I don't want to hold up the call. So if you guys would like, maybe email me the answer for the VAT for the third quarter, that will be fine.

No, actually, the amount collected just during the third quarter was $50 million, and that's a combination of revenue as well as direct refunds.

Okay, and do you have any kind of expectations for the fourth quarter on VATs?

For Q4, most of it I mentioned earlier, most of it is coming through the revenue side of things and depending on pricing. We would expect between $10 million and $15 million.

Okay, thanks a lot guys.

Our next question will come from the line of Akbar Casar. You may begin.

Just a few questions from me. The first one is, I was just looking through the cash flow statement, working capital especially the accounts payable line item has been quite a large drag for the year-to-date period. Specifically, there's a line item under cash flow from investing activities. It's $69 million for the year-to-date period. Can you explain what that is?

I think if you look at Q4 of last year, there was very heavy spending, and in Q1 of this year was fairly heavy spending relative to our funds flow. We're expecting a more balanced quarter, but then prices fell at the end of February. So really, that's it to unwinding the payables. So now we've gotten all of our vendors current.

Do the payables relate to CapEx spend that was done last year?

Exactly, CapEx and OpEx, but the majority would be CapEx.

Okay, there is not a concern that suppliers want to collect faster because there's concern about the company.

No, it was just us getting all of those payables current. There was a little more; the entire industry includes our suppliers that felt a lot of stress in the dark days of April, May, and June. Everyone felt some stress during that period. Now our suppliers are in good shape and we have everyone caught up.

Okay, the next question I had, you mentioned earlier that you have settled leverage for liquidity farm-outs and asset sales being a couple of them. I guess you just mentioned that. But can you give me just some numbers around or just some details on what the options are? How fast could you execute on those plans? And on the farm-out point? I mean obviously, you've cut the capital plan quite a bit. Does it make sense to maybe farm-out just so that someone else can carry the CapEx, and you not maybe harm some of the assets by under-investing in them?

Yes, no, that's a good question. As far as timing, we said the market is quite volatile. But we're continuing to look at those options and one of them could be either sales of some reserves or a farm-out or farm-in to some of our exploration wins, and we look at both of those options. I think from our core assets from a development standpoint, we're very comfortable that we're maintaining proper reservoir management on Acordionero, Costayaco, Moqueta, and Suroriente. So to the extent that we could accelerate some of the explorations with someone else's money, that’s absolutely something that we would do.

I mean, what would be the rationale for that decision? I mean, things are pretty tough right now, so why not do it now?

Yes, like I said, we're looking at that process, and as we have any updates on that, we'll certainly let the market know.

Okay, and just a couple more questions. Is there any way to hedge the Vasconia discount, that in fact widens out in another sell-off, that you can protect yourself?

Yes, one of the challenges, we do overhead hedges with our syndicate, and right now our syndicate doesn't have the capacity to hedge Vasconia. But it is something that we'll continue to look at.

Okay, and then the last question, I also joined a few minutes late. I'm not sure you touched on this, but proforma for all these workover programs, what is your production going to be?

Yes, it's Tony here. So we've talked about adding roughly 3,500 barrels in production, some of which we already added to get to that 22,000 barrel production rate to date. So that's kind of the target that we're looking at with eight to 10 highest producers wells that are currently shut-in.

And that does not account for any of the new drilling or anything.

That's correct.

So how do I reconcile the 22,000 with the 30,000 plus that you were doing a year ago?

Well, I think the big part is we stopped drilling. We stopped our developmental drilling at Acordionero and some of the other things we're planning, and so that's really just deferred production that will catch up once we start drilling. Tony and the team are working on that now, and we expect to resume production before the end of the year.

And we do have other production behind pipe that we will work over in Q4 and Q1 of next year, as well as some other fields we'll bring on in a more constructive environment.

Constructive environment being what?

Better price.

Better price, yes.

Okay, all right. Thank you.

Thank you. And all right, gentlemen, there are no further questions at this time. Please continue.

Okay, thank you, operator, and thanks everyone for participating in today's conference call. It's been a very unusual year. We thank you for your patience and your support and look forward to talking to you after the next quarter. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.