Gran Tierra Energy Inc. (GTE) Earnings Call Transcript & Summary

We will now proceed with the formal business of this meeting. There are 3 proposals to be considered by the stockholders at this meeting, which I will summarize and are more fully described in the proxy statement for this meeting, which has been filed with the Securities and Exchange Commission and mailed or made available to stockholders. First item is the sale proposal. The first item of business is approval of the share purchase agreement dated August 5, 2026, and the transactions contemplated thereby, including the sale by Gran Tierra Energy International Holdings GmbH of all issued and outstanding interest of Gran Tierra Energy CI GmbH to Maurel & Prom Andina S.A.S on the terms and the subject to the conditions set forth in that agreement. The sale concerns the disposition of Gran Tierra's Colombian and Ecuadorian businesses. The Board recommends voting for the sale procedure proposal. Approval requires the affirmative vote of a majority of all outstanding shares entitled to vote. The second item is to do with compensation proposal. The second item of business is approval on an advisory nonbinding basis of the compensation that may under certain circumstances, be paid or provided to Gran Tierra's named executive officers in connection with the share purchase agreement and the transactions contemplated thereby, including the sale described in the sale proposal, the Board recommends also voting for this proposal. Third item is adjournment proposal. The third item is the proposal -- item of business is the approval of the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the meeting to approve the sale proposal. The Board recommends voting for this proposal. [Voting]

We will now pause to address any stockholder questions we have received relating to these proposals. Seeing that there are no questions on the proposals, the polls for voting at our special meeting will now be closed. The polls are now closed. We will now pause briefly while the Inspector of Election confirms the voting results, including any votes cast during the meeting. The preliminary report of the Inspector of Election covering the proposals presented at this meeting is as follows: on a preliminary basis: one, the sale proposal has received support of approximately 99.8% of shares voted and has been approved, subject to final tabulation by the inspector of election; two, the compensation proposal has received approximately 49.3% support of shares voted and has not been approved on an advisory nonbinding basis, subject to final tabulation. Three, the adjournment proposal has received approximately 99.6% support of shares voted and has been approved, subject to final tabulation. The final voting results of today's meeting will be reported on a Form 8-K and filed within 4 business days of the meeting.

The Special Meeting of Stockholders is now adjourned. I want to thank all of you for attending today's meeting and for your interest you have shown in the affairs of our company. Gary Guidry, President and CEO, will now make a presentation regarding the company's recent business.

Thank you, Bob. With the formal business concluded, a brief update on the transaction and Gran Tierra after closing. My remarks include forward-looking statements. Please see the advisory on Slide #2 and our SEC and SEDAR filings. Please go to Slide 3. Three of 5 milestones have been achieved. On August 4, our Board unanimously approved the agreement. On September 22, bondholder consent was received and Maurel & Prom will assume the notes at closing. Today, shareholders approved the transaction, and thank you for your support. What's remaining is both Colombia and Ecuador regulatory approvals and both are advancing. We are targeting a close of the transaction before year-end, and the effective date remains April 1, 2026. Total consideration of $1.33 billion of enterprise value is subject to adjustment about $315 million of net cash, $250 million at close and another $65 million will be received within a year. The purchase assumes net liabilities, we expect to be debt-free, saving an estimated $80 million a year in interest. We do plan a share buyback conditional on closing, and our Board of Directors will set the terms, and this will be announced separately. The balance of funds will be maintained for both Canada and Azerbaijan. We also have $75 million in a credit facility, which is currently undrawn. So the bottom line, we expect to be debt-free with Canada and Azerbaijan growth fully funded. We use the same 5 criteria when we look at any basin or country in the world. First is a proven hydrocarbon basin. The second is established egress infrastructure that we can access. The third is actionable markets that we can find real opportunities to grow our portfolio. Next is the stability, having stability in contract sanctity and rule of law and competitive progressive fiscal terms. In our assessment, both Canada and Azerbaijan meet all 5 of these criteria. Less familiar to many of you is Azerbaijan, and I want to spend a few minutes on why we chose to enter the country. There's 180 years of oil and gas history in the country, and it was first industrial well was drilled in 1846. By 1900, Azerbaijan produced half of the world's oil. Over 15 billion barrels have been produced to date of oil, and the country still holds 92 Tcf of proven gas reserves. 3 decades of international partnerships starting in 1994 with the contract of the century. Our path at Gran Tierra, we've been studying the country and the infrastructure since 2024. We signed an exploration and development production sharing agreement earlier this year, and it was recently ratified by the parliament. The key question is how are foreign investors treated. And in Azerbaijan, the record is very strong. The flagship production sharing agreement recently extended to 2048 and 2049. The 2022 law on investment activity provides compensation at fair value, free repatriation of income and access to international arbitration. International partners in the country include BP, ExxonMobil, TotalEnergies and ADNOC to name a few. Over $89 billion has been invested by BP partners and partners in the development and export infrastructure. This is an investment-grade sovereign with 3 decades of record -- 3 decades of honoring long-term contracts. Access to international markets is extremely important. There's established export routes for both oil and gas. In terms of oil, the BTC pipeline runs almost 1,800 kilometers to Ceyhan on the Mediterranean and the Baku-Supsa to the Black Sea. About 1.3 million barrels are exported -- of capacity are available for export daily. Over 4.7 billion barrels have been loaded at Ceyhan since 2006. On the gas side, the $33 billion Southern Gas Corridor carries gas to Italy and Southeast Europe. It serves 16 countries and 10 of those are in the EU. Our contract area just north of Baku is at the head of the export system. The gas corridor runs 3,500 kilometers to Italy and our infrastructure criterion in practice, this is clear that we have access to markets in Europe and pricing in Europe. Our exploration and development production sharing agreement is defined by a 5-year term with 25 years of production plus an option to extend for another 5 years for a 30-year from discovery and development term. We are targeting both oil and natural gas in Azerbaijan. We have a defined work program. Each phase is 250 square kilometers of 3D seismic and 2 wells. The second phase is at our election. Cost recovery is settled in barrels or Mcf quarterly with an unlimited carryforward. We carry our partner SOCAR to development, and we are repaid its cost through oil or natural gas. Contractual settling in oil and gas is a natural hedge for Gran Tierra. The fiscal regime and R factor split. Operating costs are recovered first and then capital. Profit, oil or gas split by R-factor, the contractor gets 10% to 55% and the government 45% to 90%. The contractors are defined as Gran Tierra at 65% and operator and our partner, SOCAR at 35%. There's a 20% profit tax fixed and it's the only tax that we are subject to. Our share is highest while we're recovering capital, which supports early payback. Now let's move to Canada. Canada is our producing asset base after we close the transaction on Colombia and Ecuador, and we have 4 core areas in Alberta. The Central, our target -- excuse me, our largest is about 9,500 BOEs a day. Wapiti is a liquids-rich deep basin with 7 horizons and about 2,200 barrels of oil per day. Clearwater is a heavy oil play with about 300 barrels per day; Mount Head, a new light oil exploration land base that we've acquired and low decline production plus 2 high-impact oil plays. Our advantage first is the breadth. We have 4 play types across the basin in both oil and gas. Peters & Co. analogs comparable plays pay out in a little less than a year to 1.5 years. The median is about 1.1 years on oil and 1.2 years on gas. These are, of course, are analogs, not our results, but they show the short cycles and the flexibility to move capital between plays. Clearwater, we have about 89,000 net acres. We have 100% working interest in the Dawson and Seal areas, 980,000 BOEs of 2P reserves and in McDaniel's estimate 1.26 billion barrels of unrisked P50 undiscovered oil in place on our lands with an associated 54.8 million barrels of unrisked prospective resource and 28.1 million barrels of risked prospective resource. Separately, 6.5 million barrels of unrisked 2C contingent resources. Our interest in the Clearwater is higher recoveries by waterflooding from inception, similar to our recent decade of success in South America. Mount Head is a new Mississippian light oil play, about 19,200 net acres, 100% working interest. McDaniel estimate 93.6 million barrels of unrisked P50 undiscovered resource in place, 11.7 million barrels of unrisked prospective reserves and 4.9 million barrels of risk. This is a proven light oil system with 37- to 41-degree API sweet and sour crude. Vertical wells in the area have had shows and tests since the 1940s with some cumulative production greater than 50,000 barrels from vertical wells. We believe that with newer technology, we can unlock a new development horizon. In summary, shareholder approval is in hand and closing is targeted before year-end, subject to regulatory approvals. We expect to be debt-free, save an estimated $80 million a year in interest and receive $315 million of net cash. We have a share buyback plan with terms to be set by our Board of Directors and announced separately. The balance is expected to fund growth on a short-cycle production in 2 high-impact oil plays in Canada and a long-life exploration and development production sharing agreement in an investment-grade Azerbaijan with direct access to European markets. This concludes our presentation. Thank you for joining us and for your support. For details, please see our press release and our September 15 proxy statement at grantierra.com and contact Investor Relations at info@grantierra.com. Thank you very much.