On November, 14, 2008 Gran Tierra and Solana Resources announced that they had completed the business combination of Gran Tierra and Solana. Following the combination with Solana Resources, Gran Tierra now has 263.1 million fully diluted shares outstanding and a market capitalization of 973.47 million based in Tuesday’s (November 18, 2008) closing price.
Pursuant to the closing of the business combination, Gran Tierra has become an intermediate-sized producer with current production excess of 11,600 barrels of oil equivalent per day (boe/d) and an estimated 2008 exit production rate in excess of 15,000 boe/d. With regards to Gran Tierra’s production profile, Klein opines, “Productive capacity is expected to continue to grow in 2009 but actual production volumes will likely be limited by pipeline capacity constraints.”
Klein estimates Gran Tierra to be producing at least “35,000 BOE/d with the potential for additional volumes from the Costayaco field in Colombia” by Q1/10. In his production growth estimates, Klein does not account for additional volumes from any exploration success in 2009.
Klein estimates that at the end of 2008, the company will have a cash position of US$142 million and combined with cash flow from operations in 2009 of US$173 million that would make available US$315 million of cash for 2009 capital expenditures, which includes constructing a new 10km Uchupayaco to Orito pipeline. Gran Tierra has no long-term debt.
Klein resumes coverage (after being restricted since the announcement of the merger) of Gran Tierra with a BUY recommendation and a target price of US$7.00/sh. He also rates Gran Tierra as his Top Pick in the international junior E&P sector.
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