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Operator
Good morning, ladies and gentlemen, and welcome to Grand Tierra Energy's results conference call for the second quarter of 2024. My name is Michelle, and I'll be your coordinator for today. At this time, all participants are in listening mode. Following the initial remarks, we will conduct a question and answer session for securities analysts and institutions. Instructions will be provided at that time for you to queue up for questions. I would like to remind everyone that this conference call is being webcast and recorded today. Thursday, August 1st, 2024 at 11 a.m. Eastern Time. Today's discussion may include certain forward-looking information as well as certain non-GAAP financial measures. Please refer to the earnings and operational update press release we issued yesterday for important disclaimers with regards to this information and reconciliations of any non-GAAP measures discussed on today's call. Any production volumes are based on working interest sales before royalties. Finally, this earnings call is the property of Grand Tierra Energy, Inc. Any copying or rebroadcasting of this call is expressly forbidden without the written consent of Grand Tierra Energy. I'll now turn the conference call over to Gary Guidry, President and Chief Executive Officer of Grand Tierra. Mr. Guidry, please go ahead.
Guidry
Thank you, Operator. Good morning, and thanks for joining Grand Tierra's second quarter 2024 results conference calls. My name is Gary Guidry, President and Chief Executive Officer, and with me today are Ryan Elson, our Executive Vice President and Chief Financial Officer, and Sebastian Morin, our Chief Operating Officer. On Wednesday, July 31st, 2024, we issued a press release that included detailed information on our second quarter 2024 results, which is available on our website. Ryan and Sebastian will make a few brief comments and then we will open the line for questions. Ryan, please go ahead.
Ryan
Thank you, Gary. Good morning, everyone. I will start off by saying that we're very pleased with how Grand Tierra has wrapped up the first half of 2024. During the second quarter, we were able to begin our high-impact exploration campaign that started off with the previously announced discovery of In addition, we have also progressed a number of our development programs, including initiating civil works in the Soriente block to kick off a five-well drilling campaign with the second rig in the second half of 2024. During the quarter, Grand Tierra delivered net income of $36 million, or $1.16 per share. Further, Grand Tierra achieved operating net back of $113 million, which is up from $105 million in the prior quarter, adjusted EBITDA of $103 million, which was up from $95 million in the prior quarter. The company also strategically revised its 2022 tax return during the quarter to use its long-term tax receivable balance to offset current tax liabilities, rather than applying net operating loss carry-fors. This decision was driven by higher current and future tax rates and increased profitability in Colombia. As a result, the current tax expense increased by $28 million, but this was offset by long-term tax receivable resulting in no cash outflow. We were able to preserve our net operating loss carry forwards of approximately $85 million for future periods, providing greater tax benefit in 2024 and in the future. The tax initiative also allowed us to recover $18 million of taxes receivable in 2024 and accelerate the recovery of an estimated $65 million of taxes receivable over the next three years. During the quarter, the company spent $61 million in capital expenditures, which were higher than the $55 million in the prior quarter due to the commencement of the 3D seismic program in Ecuador and the drilling campaign. We also installed the final completion and artificial lift systems in the Costiaco development wells. As of June 30th, the company had a cash balance of $115 million and net debt of $521 million. The 12-month trailing net debt EBITDA, adjusted EBITDA, was 1.3 times and expected to be less than one times by the year end 2024 from a combination of increased EBITDA and lower net debt. Grantier generated oil sales, $166 million, up 5% from the prior quarter due to higher Brent pricing and narrow Castilla and Vasconia oil differentials. Looking at pricing during the quarter, Brent averaged $85.03 per barrel, up 4% from the prior quarter. The company's quality and transportation discounts per barrel during the quarter were $12.79, which significantly narrowed from the $15.36 in the prior quarter. The company's operating net back was $38.80 per barrel, up 10% from the prior quarter. Share buybacks continue to be a key area in which we allocate our free cash flow. Since January 1st, 2023, Granterra has repurchased approximately 3.9 million, or 11% of the outstanding shares. During the quarter, Granterra has repurchased approximately 400,000 shares. We're looking forward to the second half of the year where we plan to drill the remainder of our high-impact near-field exploration wells in Ecuador, including drilling two wells to further appraise the exciting Arowana discovery. As part of the fast-track appraisal program at Arowana, the drilling schedule and civil works have been accelerated to allow the drilling of these two wells prior to year-end. From a development perspective, we're completing the civil works associated with the building infrastructure in the Cohembe pad in the Soriente block to begin drilling the five wells from the single pad in the fourth quarter of 2024. We're very pleased about our first half results, and there's still many more catalysts in the second half of 2024. Lastly, I want to highlight that we also issued S3 yesterday, updating our shelf prospectus that was set to expire in August 2024. This filing is routine in nature and the timing of its issuance is a direct result of the timing of the expiry. The process renews our S3 shelf prospectus for a further three years. I'll now turn the call over to Sebastian to discuss our operational highlights from our second quarter.
Soriente
Good morning, everyone. As Ryan mentioned, capital expenditures of $61 million were higher than the prior quarter of $55 million. and down from $66 million compared to the second quarter of 2023. Total average working interest production during the quarter was 32,776 barrels of oil per day, an increase of 2% compared to the prior quarter and up 4% on a per share basis since the second quarter of 2023. During the second quarter of 2024, Grand Tierra installed selective completions systematically stimulated multiple zones and added electrical submersible pumps at Costiaco 56, 57, 58, and 59, which were drilled as part of our first half 2024 development campaign. While the temporary offline status of these wells for the planned selective completion did impact second quarter production by about 700 barrels per day, the improvements have resulted in enhanced production with rates exceeding initial peak rates with all wells now back online. Given the ongoing positive performance from our core fields on water flood and recent exploration success, we remain very comfortable with our 2024 production guidance. Looking to operating expenses, they decreased by 3% to $47 million compared to the prior quarter, primarily due to lower work over activities as a result of continued improvement in artificial lift reliability. On a per-oil basis, Operating expenses also decreased by 1% when compared to the prior quarter as the company continues to focus on pushing forward further cost savings and operational efficiency initiatives. The company's transportation expenses increased by 24% to $5.7 million compared to the prior quarter of $4.6 million due to El Nino phenomena causing low water levels in the Magdalena River, resulting in Grand Tierra utilizing longer delivery points. The river levels have now returned to normal conditions, allowing for use of our preferred shorter delivery routes for the second half of 2024. Our exploration program in the Chenangé block remained very active, with the drilling and installation of a multi-zone selective completion at the Boca Chico Norte J1 well. Log and core data indicated reservoir and net pay in multiple zones, including the Basaltena Sand, the Tea Sand, and Bee Limestone. Testing is now underway and expected to continue throughout the third quarter. Note that although the B limestone was not a primary target, it had positive shows while drilling, indicating it may be connected to a productive fracture network. The completion install will allow for efficient multi-zone selective stimulation, production, and commingling of the basal tenosan, t-san, and B limestone. In addition, the Arowana J1 and Boca Chico J1 wells continue to yield strong production results with a combined 1600 to 1800 barrels of oil per day. Grand Tierra plants convert both wells from jet pump to electrical submersible pumping systems in the second half of 2024 to further increase production rates. Upon finishing the drilling of the Boca Chico Norte J1 well, the rig was moved over to the Tarapa block on July 14th. The Tarapa B6 well was spud, with the primary target being the Hoya information. The well has reached total depth of 11,170 feet on July 31st after successfully logging and coring the zones of interest. We are seeing very encouraging results in the Tarapa B6 well, which has been cored with excellent oil shows throughout the Hoya information. We anticipate finalizing drilling and completion operations early in August with testing plans to begin immediately afterwards. Following the drilling of the Tarapa B6 well, the rig will begin drilling the Tarapa B7 well from the same pad in the third quarter of 2024. Also on the Tarapa block, the 3D seismic program has been completed and the data is currently being processed. Preliminary interpretations of the high-quality 3D seismic data confirms potential prospectivity and additional areas of interest, including better definition and confidence in our reserve estimates over the Tarapa structures. The 3D seismic data will further delineate reserves, underpin future drilling locations scheduled for 2025, and support future development planning. Overall, the company continues to follow through on the capital plan and is experiencing early success in the 2024 exploration campaign. We remain optimistic about the second half of 2024, where we are drilling some very exciting wells in both the Tarapa and Chenangé blocks. I'll now turn the call back to the operator, and we will be happy to answer any questions. Operator, please go ahead.
Operator
Thank you. Ladies and gentlemen, we will now conduct the question and answer session for securities analysts. If you have a question, please press the star key followed by 11 on your touchtone phone. You will then hear an automated message advising your hand is raised. Your questions will be pulled in the order they are received. Please ensure you lift the handset if you're using a speakerphone before pressing any keys. One moment please for your first question. Our first question comes from Alejandra Andrade with JPM. Your line is open.
Alejandra Andrade
Hi, good morning. Thanks for taking my question. I just had two questions. First, I wanted to discuss a little bit the production outlook for the second half of the year. And then also, if you could give a little bit more color on all the tax moves that are happening in the numbers, that would be great. Thank you.
Soriente
I think we're very, very pleased with our first half results and continue to look forward to our exciting catalysts that are coming. As we've just stated, both of our Two new exploration wells are currently on testing, which we're happy with. And so we continue to reiterate our guidance for the year.
Alejandra Andrade
Perfect.
Ryan
And on the taxes, yeah, and probably the best thing, if you look in the notes in the financial statements, we did put a reconciliation to try to explain some of the movements. But effectively, what we were able to do with the refiling is just to keep $85 million of non-capital losses. Those rates were done at 35% tax rate with the current rate being 50%. So we get the benefit of utilizing those losses in a higher tax rate environment. That's the first one, but also allowed us to accelerate some of these long-term receivables that we had. So although we had to book a current tax expense, There was no cash outflow. We actually netted the payable that was generated from that refiling with long-term receivable that we had. So really, there was acceleration of those receivables. It allows us to collect further money, $65 million, over the next three years.
Operator
Great. Thanks.
Ryan
You're welcome.
Operator
Thank you. Our next question comes from Diego Espinoza. with BTG Paxful. Your line is open.
spk02
Hi, thank you for taking my question. Can you hear me?
Guidry
Yeah, we hear you.
spk02
Perfect. Just have a couple of questions. First one is that CapEx, right now you have around $120 million. How much do you expect to spend during the second half of the year? And... In terms of working capital, we saw some relief during this quarter. Do you expect that this should be reversed during the next quarter or in the fourth quarter? That's it.
Ryan
Great. Yeah, on the capital guidance, we're comfortable with the guidance that we have in the market right now. So we think that's a reasonable range given our first half results and our program for the second half. And with respect to working capital, yeah, a lot of that working capital release was from the tax filings and moving to the long-term receivable and into current receivable. Sorry, long-term into current. So we don't expect that to reverse in the following quarter, but it was more of a one-time item this quarter. Perfect. Thank you very much. Great. Thank you.
Operator
Thank you. Gentlemen, there are no further questions at this time. Please continue.
Guidry
Okay. Thank you, Operator. I would like to thank everyone once again for joining us today. We look forward to speaking with you over the next quarter and update you on our ongoing progress. Thank you very much.
Operator
Thank you for your participation. This does include the program. You may now disconnect. Everyone, have a great day.
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