In a Nov. 2 research note, analyst Bill Newman reported that Research
Capital Corporation increased its target price on Gran Tierra Energy Inc. (GTE:TSX; GTE:NYSE.MKT) to CA$1.95 per share from CA$1.50 because the company's cash flow is expected to remain high through 2022. The current share price, in comparison, is about CA$1.16.
Newman highlighted that with the release of Q3/21 operational and financial results, Gran Tierra maintained its full-year 2021 cash flow guidance of between US$215 million (US$215M) and US$315M, due to improved oil prices. Also, prices along with Gran Tierra's lack of hedges in 2022 should boost cash flow next year.
"Higher commodity prices are providing additional financial flexibility to service debt and to fund growth in 2022," Newman commented.
While FY21 cash flow is expected to be strong, FY21 production is estimated to be about 1,000 barrels per day (1 Mbbl/d) lower than Gran Tierra originally guided to. Revised guidance is between 26.5 Mbbl/d and 27.5 Mbbl/d. Specifically, decreased production is expected at the Suroriente and PUT-7 blocks in Q4/21 while the Colombian government resolves the current blockade by protesting farmers. Offsetting that in part, though, should be production targeted to come online in the Cohembi field in Q4/21.
As for Q3/21 results, Newman relayed, production before royalties averaged 28,957 bbl/d, 26% higher than Q2/21 production of 23,034 bbl/d. Two fields outperformed in Q3/21. One was Acordionero, where production was 14,427 bbl/d, a record high since Q4/19. The other was Costayaco, where production totaled 6,292 bbl/d versus 4,190 bbl/d in Q2/21, due to completion of a three-well infill drill program there.
Adjusted funds flow during Q3/21 was US$69.1M, consistent with Research Capital's estimate of US$71.2M. Capital expenditures during Q3/21 amounted to US$34.8M.
As for net debt, at the end of Q3/21 it was US$720.94M, down from US$799.60M at the end of Q2/21. The company's outstanding credit balance at Q3/21's end was US$150M. Gran Tierra aims to decrease it to US$80M by year-end 2021.
Research Capital has a Buy rating on Gran Tierra.
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Research Capital's Relevant Disclosures for Gran Tierra
None Applicable for this Issuer.
