#22 My Gran Tierra Rides Again

GTE #22 of the OB pick for 26

Dear reader

GTE is a Colombia, Ecuador and Canada O&G producer and explorer. A £104m ($130m) market cap and £573m debt ($761.8m) as at 30/09/25 putting this on an EV of £677m.

With a NAV of £275m this is at a 62.2% discount to the book value of its assets.

Of course its NPV10 is far higher putting this at a $60.54 (£45.52) per share valuation based on the NPV of its known 2P assets and its 2.6 million acres

And let’s not mention the more speculative 3P assets (hint they are even larger).

GTE produces just under 40 kboepd after royalties and at 47.2 kboepd pre-royalty is at its low case for 2025 guidance with one quarter still to go. Production is 51% higher than 2024. Part of that leap is a heavy capex budget and part is due to its acquisition of i3e in Canada.

It sees 2026 as lower Capex ($140m vs $300m) and instead to turn cash generative generating $245m-$465m in operating cash flow so that’s cash equivalent to 2X to 4X the market cap.

It has a runway of 17 years of 1P assets and nearly 30 years of 2P assets.

Depletion

Depletion in 2024 was -$223m so GTE is keeping pace with depletion at current spend levels from a capex point of view. As I said in my prior article this was a concern where in 2024 at 10.2 million BOE produced that was a -$21.90 per BOE depletion cost.

Pleasing to see in 2025 that 10.4m BOE produced to 30/09/25 and $196.29m of DD&A implies a reduced -$18.87 per BOE depletion cost.

More on that later.

Volumes

At 37.35 Kboepd for 3Q25 and the 9m average of 38.23, production is nearly 50% higher in 2025.

Prices were less co-operative, down 13%-14% year on year, although the question turns to whether Oil will remain in oversupply in 2026. If (like me) you believe we are close to or at a low point then GTE would be very well positioned for a rebound of prices but where they also have large production volumes and reserves - at a bargain price.

But 37.35 kboepd doesn’t tell the true story of production increases, and is -10% lower than 2Q25. A temporary issue (landslide) disrupted production during 3Q25. October production is ~45.2 Kboepd.

Ecuador Sales

Ecuador operating costs per BOE shrank through growing production, although a lower Oil price also meant a lower profit. DD&A rose mainly through larger volumes, and a shut in further skews the numbers.

Obviously this is generating nearly $31 per barrel cash excluding DD&A.

Similar BOE economics for Colombia too:

Canada (via the i3 energy acquisition) exhibits a different cost profile and no comparatives are given although I’d point out post period natural gas prices are over 100% higher, and are likely to remain stronger in 2026 given the LNG exports from both the USA but also from Canada is supportive to prices.

In the left-hand chart the red line for 2025/26 storage of Canadian Nat Gas is well below the 5 year average - the black line. In the 2nd while there is surplus the outlook is for the balance to move to a deficit during 2026 as Canada LNG exports ramp towards 2 bcf/day.

So Revenue is approximately 91% oil, 6% gas and 3% NGL by value.

Sales by volume was 71% oil, 19% gas and 9% NGL.

A stunning fact is Canada will be able to export via LNG 10% of Nat Gas production in 2025 with plans to grow this to 25% of domestic production in the next few years. Limits on Canadian domestic use (particularly as Canada is so vast) and export to the US has led to abundance and very low prices. Ongoing growing demand including exported production will be more supportive of prices going forward.

Simply, forecast demand growth will outstrip supply growth in Canada for the next 7 years or more.

GTE will be a large beneficiary to this macro having scooped up i3 Energy in 2024 for $204.5m. A $7.5m sale of north sea assets in 2025 nets the cost to $196m.

Where Canadian LNG exports today are 2.1 Bcf/day since 2025 - and will more than triple in the coming few years.

So 14.1 KBOEPD of production which didn’t exist last year and introduces ~20% Nat Gas Exposure for GTE (50% of Canadian volumes)

FDC is what GTE call “sunk capex” (capital expenditure) and G&A is what we would call Overheads, so this chart shows that GTE could generate $0.98bn net profit, after capex (or $2bn of FCF) based on its 1P proven reserves. Factor in the 2P and 3P and that grows to $3.7bn. Lofty numbers for 5 years.

But real ones not just lofty, or at least in 1H25 (10% of the time of 5 years) over 10% of that 1P Funds Flow ($109.2m) was generated. Yes, it dips in 3Q25 but due to lower oil prices, and the change of mix due to adding Canadian Natural Gas (the acquisition of i3).

We can see that here under per BOE economics where per BOE sales falls from $69 to $43, although costs correspondingly fall too since the per barrel margin is about the same for Nat Gas vs Oil and in 4Q25 the profitability of Nat Gas exceeds that of Oil.

In the next year a reduction in debt of $100m+ is planned to reduce debt below $600m, and a further $100m in 2027. With some debt extended in 2023-2024 at peak interest rates there are Senior Notes of 9.5% interest. There is clearly an opportunity to reduce debt costs as well as debt. A blended 8% rate and >$600m would imply a reduction of interest costs from a circa -$100m per year cost to -$80m to -$90m

That’s a $10m+ per annum boost to both profits and cash flow growing by a further $10m in 2027 if debt is further reduced.

Buy backs have been a strong feature of GTE and with a ~65% discount to assets seems an excellent way to boost shareholder returns. Ex-i3 harrumphers (including myself) might hark back to 10% dividend yields but GTE bought back 19% of its shares since 2022 despite a massive capex programme and an acquisition so I guess you need to be happy with their capital allocation priorities.

The three country approach is really a two basin approach as Ecuador and Colombia span what appears to be a single basin called Putamayo in Colombia and Oriente in Ecuador. Ecuador’s side is mature and 7.2 billion BOE have been produced there. Colombia’s side is probably the larger but not even 10% has been extracted. GTE own 0.8 million acres of prospective land, bought up for a pittance during a time when civil war raged between the government and FARC. Now peace reigns instead.

GTE speak to a potential 10 Kboepd-30 Kboepd potential increase, which of course is between 1/3rd more production to a near doubling. So the active capex programme is understandable and exciting.

Per Barrel Equivalent Analysis

In 9m25 obviously a fall in adj.EBITDA from $43.8 (1H24) → $36.05 (2024) → $23.15 → $20.09 (3Q25) is unwelcome.

But the per BOE depletion of -$18.87 is now lower than the Adj. EBITDA.

For me that is a crucial aspect I wanted to see. If the business has hidden costs in excess of its profits then what’s the point?

$1.22 per BOE “underlying” profit isn’t much to celebrate but if GTE gets to a $50+ per BOE (from today’s $43.43) then profits multiply. If Gas is currently at around $25 BOE and makes up 50% of volume and 20% of revenue value then a return to $70 Brent Oil would multiply profits.

Conclusion

GTE has fallen back again to £3.00 due to lower oil and gas prices, and perhaps concern over the location of its assets and the lack of a dividend.

But consider the ratchet effect as debt is paid down, and as Oil prices recover, supported by stronger Canadian gas prices due to LNG exports and a robust and re-industrialising US and Canada in 2026.

GTE looks to me like a solid way to take advantage of the Canadian macro of increasing LNG exports, and a rebounding Canadian Gas price (albeit from crazily low numbers) plus the idea that World Oil prices are arguably, and I do say arguably, is at a low point at a $60 per barrel range. Despite repeated reports of “oversupply” the $60 Oil price has been remarkably resilient.

If oversupply were genuinely perpetually the case in 2025 then why has Oil not dropped to $50? $40? It did in the past during past times of oversupply. I’m quite sceptical about the fundamentals of Oil and Gas demand (both at record levels) and the ability for supply to continue to keep up.

Self professed Cash Cow GTE could be a good way to position for this macro in 2026 and for the long term. At a bargain price too. That’s why it enters the picks for 26.

Regards

The Oak Bloke.

Disclaimers:

This is not advice - you make your own investment decisions.

Micro cap and Nano cap holdings might have a higher risk and higher volatility than companies that are traditionally defined as "blue chip"