Gran Tierra Energy, Inc. – Value Analysis (NYSE AMERICAN:GTE) : October 6, 2017

Capitalcube gives Gran Tierra Energy, Inc. a score of 22.

Our analysis is based on comparing Gran Tierra Energy, Inc. with the following peers – Ecopetrol SA Sponsored ADR, YPF SA Sponsored ADR Class D, Petroleo Brasileiro SA Sponsored ADR, GeoPark Ltd and Royal Dutch Shell Plc Sponsored ADR Class A (EC-US, YPF-US, PBR-US, GPRK-US and RDS.A-US).

Investment Outlook

Gran Tierra Energy, Inc. has a fundamental score of 22 and has a relative valuation of OVERVALUED.

Fundamental Score

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Company Overview

  • Considering peers, relative underperformance over the last year and the last month suggest a lagging position.
  • It’s current Price/Book of 0.86 is about median in its peer group.
  • GTE-US‘s EBITDA-based price implies better than peer median growth.The market seems to expect a turnaround in the company’s current EBITDA-based return on equity.
  • GTE-US‘s relatively low net margins and poor asset turns suggest a problematic operating strategy.
  • Changes in annual revenues (relative to peers) are better than the change in its earnings (relative to peers), implying the company is focused more on revenues.
  • GTE-US‘s return on assets currently and over the past five years has trailed the peer median and suggests the company might be operationally challenged relative to its peers.
  • The company’s median gross margin and relatively low pre-tax margin suggest high operating costs versus peers.
  • While GTE-US‘s revenues have increased slower than peer median, the market currently gives the company a higher than peer median Price/EBITDA ratio and may be factoring in some sort of a strategic play.
  • The company seems to be over-investing in a business with median returns.
  • GTE-US does not seem to have the flexibility to raise more debt.

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Leverage & Liquidity

GTE-US does not seem able to raise more debt easily.

  • GTE-US‘s debt at 24.27% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 51.04%), and interest coverage level of 3.16x, would make major new borrowings difficult.
  • All 5 peers for the company have an outstanding debt balance.

GTE-US has moved to a relatively high liquidity from a Constrained profile at the recent year-end.

  • GTE-US‘s interest coverage has increased 3.58 points from last year’s low but is still below its five-year average interest coverage of 749.14.
  • The increase in its interest coverage to 3.16x from -0.42x (in 2016) was also accompanied by an increase in its peer median during this period to 2.27x from 0.82x.
  • Interest coverage rose 2.13 points relative to peers (and is now higher than its peer median). It is also above the 2.50x coverage benchmark unlike the peer median.
  • GTE-US‘s debt-EV is its highest relative to the last five years and compares to a low of 0% in 2015.
  • While its debt-EV increased to 24.27% from 14.41% (in 2016), its peer median decreased during this period to 51.04% from 58.30%.
  • Relative to peers, debt-EV rose 17.12 percentage points. Unlike the peer median, it is also below the 25% leverage benchmark.

Access the detailed analysis for Gran Tierra Energy, Inc.

Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
Ecopetrol SA Sponsored ADR 54.42 1.31 3.01 31.52
YPF SA Sponsored ADR Class D 64.69 1.24 0.57 33.26
Petroleo Brasileiro SA Sponsored ADR 87.71 2.04 1.53 20.82
GeoPark Ltd 46.13 1.09 1.31 21.65
Royal Dutch Shell Plc Sponsored ADR Class A 47.66 1.24 3.36 38.71
Gran Tierra Energy Inc. 24.27 1.33 3.16 66.66
Peer Median 51.04 1.27 2.27 32.39
Best In Class 24.27 2.04 3.36 66.66

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Company Profile

Gran Tierra Energy, Inc. engages in the exploration and production of oil and natural gas. It operates through the following geographical segments: Colombia, Peru, Brazil, and All Other. The company was founded on June 6, 2003 and is headquartered in Calgary, Canada.


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