CA - Gran Tierra Energy: Making Up For Lost Time

2024-05-24 15:30:00 ET

Summary

• Gran Tierra Energy is reducing its debt to improve its balance sheet and gain market acceptance.
• The company needs higher commodity prices or more profitable wells to generate significant free cash flow.
• The company faces challenges with periodic social issues in Colombia that could impact its debt reduction efforts.
• Management has high hopes with some newer discoveries and wells. The market (on the other hand) is likely to wait for more free cash flow.

Gran Tierra Energy ( GTE ) is a company that has joined my list of companies that are reducing their debt in an effort to gain market acceptance of the balance sheet. This company did a reverse stock split in 2023. The reverse stock split was followed by a bond exchange to give the company time to build cash flow (particularly free cash flow). The debt exchange has resulted in higher interest expense. But it also gives the company time to convince the market that management is serious about the turnaround effort to meet the debt market demand of a 1.0 debt ratio and the market demand for free cash flow to return capital to shareholders.

Forward Strategy

Management admits as much in their latest overall strategy outlook.

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