Gran Tierra sells South American oil assets for $1.33bn to eliminate debt

Gran Tierra Energy Inc. agreed to sell its entire Colombia and Ecuador oil business to Établissements Maurel & Prom S.A. in a transaction valued at approximately $1.33 billion. The NYSE American, Toronto Stock Exchange and London Stock Exchange-listed producer, which trades under $GTE, expects the buyer to assume substantially all liabilities connected with the divested operations, leaving the continuing company debt-free and holding approximately $250 million of cash at closing. Gran Tierra would retain its Canadian production assets and a 65% working interest in an early-stage exploration position in Azerbaijan, reducing pro forma production to approximately 12,000 to 13,000 barrels of oil equivalent per day. Management also intends to use part of the proceeds for a substantial share repurchase, although its size and structure have not been finalized. The central tension is that Gran Tierra is removing expensive debt and crystallizing value at a strong transaction multiple, but it is also selling approximately 70% of current production and nearly all the established operating cash flow that previously supported the business.

The South American portfolio produced approximately 29,000 barrels of oil per day during the first half of 2026 and contained about 144 million barrels of proved-plus-probable reserves at the end of 2025. The transaction is targeted to close around December 31, subject to Gran Tierra shareholder approval, creditor consents and regulatory clearances in Colombia and Ecuador.

Gran Tierra shares traded near $9.60 during August 5 trading, up approximately 40.6% from the previous close after reaching an intraday high of $11.40. The sharp reaction indicates that investors assigned substantial value to the expected debt removal, cash proceeds and possible repurchase, although the stock remained below management’s estimated pro forma proved-developed-producing net asset value of $12.49 per diluted share.

Why the $1.33 billion transaction does not mean Gran Tierra receives $1.33 billion in cash

The headline value represents the enterprise value of Gran Tierra’s Colombia and Ecuador business rather than the cash that will be transferred directly to the seller. Maurel & Prom will assume $582 million of Gran Tierra senior notes and a $350 million prepayment facility with Trafigura, accounting for approximately $932 million of the transaction value.

The assumed notes include $88 million of 9.5% senior notes due in 2029 and $494 million of 9.75% secured notes due in 2031. Transferring these obligations is economically significant because Gran Tierra will no longer be responsible for the associated principal repayments or interest expense after closing, provided the required creditor consents and releases are obtained.

After liability assumptions, transaction costs, working-capital adjustments and redemption of Gran Tierra’s remaining 7.75% notes due in 2027, management expects net cash proceeds of approximately $315 million. About $250 million would be received at closing, while another $65 million would be paid 364 days later through an unsecured note issued by the divested business.

Maurel & Prom is also required to pay a $50 million deposit upon signing. The agreement contains a mutual $50 million break fee that could become payable under specified termination circumstances, including Gran Tierra accepting a superior proposal or the buyer failing to complete the transaction under certain conditions.

Gran Tierra values the South American portfolio at approximately 4.3 times its $306.2 million of adjusted EBITDA for the 12 months ended June 30. The consideration also equals approximately $45,900 for each barrel of daily production and $9.24 for each barrel of proved-plus-probable reserves.

These metrics suggest Gran Tierra is receiving a credible price for a portfolio exposed to mature production, transportation constraints, political risk and continuing capital requirements. The valuation is close to the company’s estimated $1.37 billion after-tax net present value for the assets’ proved-plus-probable reserves.

Net present value is not the same as cash available today. It depends on future production, commodity prices, taxes, operating costs and capital spending, while the transaction transfers those risks to Maurel & Prom in exchange for immediate debt removal and liquidity.

How the sale transforms Gran Tierra from a South American producer into a Canadian operator

Gran Tierra has historically been identified with Colombia, where assets such as Acordionero, Costayaco, Moqueta and Cohembi formed the company’s principal production and reserve base. The sale also includes its Ecuadorian operations, including the Chanangue, Charapa, Conejo, Iguana, Perico and Espejo assets in the Oriente Basin.

The continuing company will retain approximately 12,000 to 13,000 barrels of oil equivalent per day of production, more than 500,000 net acres and roughly 86 million barrels of oil equivalent of proved-plus-probable reserves. Those assets are primarily in Western Canada and were assembled through Gran Tierra’s 2024 acquisition of i3 Energy plc.

The Canadian portfolio includes conventional oil, natural gas, natural gas liquids and resource opportunities in the Clearwater and Mount Head areas. This creates a more diversified commodity mix than Gran Tierra’s almost entirely oil-weighted South American business, but it also introduces greater sensitivity to Western Canadian natural gas prices.

Gran Tierra owns a 100% working interest in the Dawson Clearwater and Mount Head opportunities. Independent evaluator McDaniel & Associates assigned Dawson approximately 6.5 million barrels of best-estimate contingent resources and 55 million barrels of prospective resources, while Mount Head was assigned another 12 million barrels of prospective resources.

Prospective resources are substantially less certain than reserves. They represent estimated quantities that may be discovered through future drilling and should not be treated as production that Gran Tierra can confidently develop or monetize.

The company believes Clearwater’s shallow depths and multilateral horizontal wells can support relatively low drilling and completion costs. Mount Head targets light oil, potentially improving Gran Tierra’s commodity mix and realized pricing compared with a portfolio weighted more heavily toward natural gas and heavier crude.

Gran Tierra intends to make Dawson Clearwater and Mount Head important parts of its 2027 drilling program. A debt-free balance sheet would allow the company to fund this activity without dedicating a large portion of operating cash flow to interest payments.

The transaction therefore changes the company’s investment profile. Gran Tierra would no longer be a diversified producer with large established operations across Colombia and Ecuador. It would become a smaller Canadian operator whose valuation depends increasingly on drilling execution, resource conversion and disciplined use of the cash retained after shareholder distributions.

Why Azerbaijan provides material upside but cannot replace sold production yet

Gran Tierra signed an exploration, development and production-sharing agreement with the State Oil Company of the Republic of Azerbaijan in February 2026. The agreement covers the onshore Guba-Khazaryani region and gives Gran Tierra a 65% working interest and operatorship.

The contract includes a five-year exploration and appraisal period and a 25-year development period for any economic discoveries, with the potential for an additional five-year extension. Existing regional discoveries and export infrastructure support the geological and commercial rationale.

Azerbaijan currently contributes no established production or proved reserves to the company. Exploration success, development approval and commercial production would require drilling, appraisal, government cooperation and substantial additional capital over several years.

The retained interest should therefore be treated as an option rather than a replacement for the cash-generating barrels being sold to Maurel & Prom. Its potential value could be material if Gran Tierra identifies a commercial resource, but failure or delay would leave the Canadian assets carrying nearly all operating and valuation responsibility.

A stronger balance sheet improves the company’s ability to pursue the exploration program without threatening near-term liquidity. It does not reduce geological uncertainty or guarantee that a discovery can be developed at an acceptable return.

Gran Tierra must also decide how much capital should be allocated to Azerbaijan rather than Canadian development or shareholder returns. Large international exploration prospects can create substantial upside, but they can also absorb cash for years before producing revenue.

The post-sale company will need a clear capital-allocation framework that separates lower-risk Canadian development from higher-risk international exploration. Without that discipline, the financial benefit of eliminating debt could be replaced by another cycle of speculative spending.

What Maurel & Prom gains from its largest Latin American expansion

The transaction gives Maurel & Prom a predominantly operated conventional oil platform across the Middle Magdalena Valley, Putumayo and Llanos basins in Colombia and the Oriente Basin in Ecuador. The buyer expects the portfolio’s production to increase from approximately 29,000 barrels per day during the first half of 2026 to around 40,000 barrels per day by 2029 or 2030.

The production target depends on further development, appraisal, enhanced recovery and exploration. Maurel & Prom identified opportunities including continued Tisquirama development, expansion around Cohembi-Raju, the Pegasus prospect and longer-term potential in Colombia’s La Luna formation.

In Ecuador, the buyer is gaining producing fields alongside discoveries and exploration acreage. Gran Tierra recently received field-development approvals for Charapa, Conejo and Perico, bringing approvals to five of its six Ecuadorian fields and supporting a transition from exploration toward development.

Maurel & Prom has previous operating experience in Colombia and returned as an operator through its Sinú-9 gas licence. The Gran Tierra acquisition creates a much larger regional platform and marks the French company’s entry into Ecuador.

The buyer is financing the transaction through existing cash and available credit facilities while assuming Gran Tierra’s debt instruments. Maurel & Prom reported $257 million of net cash and $500 million of immediately available bank liquidity at June 30, with access to an additional $100 million shareholder loan.

It has also arranged a new $465 million five-year banking facility expected to provide approximately $250 million of additional liquidity once its conditions are satisfied. The financing structure reduces the immediate cash payment, but the assumed notes and prepayment facility increase the enlarged company’s financial obligations.

For Maurel & Prom, the transaction is a large bet that additional investment and operating expertise can increase production and reserve conversion across the acquired fields. For Gran Tierra, it is an opportunity to transfer those capital requirements while resetting its own balance sheet.

How debt removal and the proposed share repurchase could reshape per-share value

Gran Tierra ended June with $127 million of cash, $606 million of gross debt and $479 million of net debt. Its trailing net-debt-to-adjusted-EBITDA ratio was 1.7 times, above management’s long-term target of one times.

The company had already been repurchasing its high-coupon 2031 notes at discounts to face value. The transaction offers a much faster solution by transferring most liabilities to Maurel & Prom and using part of the cash proceeds to redeem the remaining 2027 notes.

Gran Tierra estimates that becoming debt-free will eliminate approximately $80 million of annual interest expense. The saving is large relative to the continuing company’s expected production base and could materially increase the cash available for drilling, acquisitions and shareholder returns.

Management estimates that the continuing company will have a pro forma proved-developed-producing net asset value of approximately $12.49 per diluted share. That calculation consists of approximately $315 million in expected net proceeds and about $165 million of before-tax net present value attributed to Canadian producing reserves, divided across approximately 38.4 million diluted shares.

The calculation excludes potential value from undeveloped Canadian resources and Azerbaijan. It also does not account for the amount of cash ultimately spent on the proposed share repurchase, future operating costs, taxes or changes in commodity prices.

Gran Tierra says the $315 million of expected net proceeds alone equals approximately $8.21 per diluted share. The stock’s August 5 price near $9.60 indicates that the market was assigning some additional value to Canadian production, exploration upside and the potential accretion from buying back shares.

The proposed repurchase has not been sized or structured. It remains conditional on transaction completion and shareholder approval, and the board could modify the timing or form depending on market conditions and the company’s capital needs.

A large repurchase below underlying asset value could increase the ownership percentage and net asset value attributable to every remaining share. Spending too much cash would leave the smaller operating company with less protection against drilling setbacks, weak commodity prices or unexpected acquisition opportunities.

The best outcome requires Gran Tierra to balance three competing priorities: returning enough capital to recognize the value of the sale, maintaining sufficient liquidity for Canadian development and preserving funds for Azerbaijan without recreating excessive leverage.

What second-quarter results reveal about the operations Gran Tierra is selling

Gran Tierra produced 41,501 barrels of oil equivalent per day during the second quarter, down 12% from a year earlier. Production was affected by lower Colombian output, Canadian asset sales and temporary artificial-lift failures at the Acordionero and Cohembi fields.

The company generated $187 million of oil and gas sales, net income of $25 million, adjusted EBITDA of $85 million and free cash flow of approximately $6 million. Higher Brent pricing and lower operating costs improved margins despite reduced production volumes.

Operating netback rose 62% to $34.73 per barrel of oil equivalent, while cash netback increased 23% to $15.90. The results show that the South American assets remain economically productive rather than representing distressed operations that Gran Tierra must urgently abandon.

They also demonstrate the complications of the portfolio. The closure of the Colombia-Ecuador border forced Gran Tierra to use alternative routes for some Putumayo production, creating approximately $5.9 million of additional quality and transportation discounts during the quarter.

Colombia’s sliding-scale royalties and crude-quality discounts can absorb part of the benefit from higher benchmark oil prices. The company also faces continuing expenditure requirements to maintain mature fields, develop Ecuadorian discoveries and convert resources into reserves.

Selling now allows Gran Tierra to monetize improving assets at a time of stronger oil prices and buyer interest. The risk is that Maurel & Prom captures additional value if production reaches 40,000 barrels per day and the development portfolio performs better than the transaction price assumes.

Gran Tierra’s board has concluded that immediate debt removal, liquidity and per-share capital returns offer a better risk-adjusted outcome than retaining the South American growth program. Shareholders must decide whether the smaller Canadian and Azerbaijan portfolio can generate enough future value to validate that judgment.

Key takeaways from Gran Tierra’s $1.33 billion Maurel & Prom transaction

• Gran Tierra Energy Inc. agreed to sell all its Colombian and Ecuadorian operations to Maurel & Prom for a total enterprise value of approximately $1.33 billion.
• The buyer will assume $582 million of senior notes and a $350 million prepayment facility, meaning the headline consideration is not the cash Gran Tierra receives directly.
• Gran Tierra expects approximately $315 million of net proceeds, consisting of about $250 million at closing and a $65 million note payable 364 days later.
• The divested assets produced approximately 29,000 barrels of oil per day during the first half and contained roughly 144 million barrels of proved-plus-probable reserves.
• The continuing company will retain approximately 12,000 to 13,000 barrels of oil equivalent per day of Canadian production and more than 500,000 net acres.
• Gran Tierra expects to become debt-free and save approximately $80 million annually in interest expense after the transaction closes.
• Management estimates pro forma proved-developed-producing net asset value of $12.49 per diluted share, although that calculation depends on transaction proceeds and reserve assumptions.
• Part of the proceeds is intended for a substantial share repurchase, but the amount, timing and structure remain undecided and subject to approvals.
• Maurel & Prom expects to increase acquired production toward 40,000 barrels per day by 2029 or 2030 through development and enhanced recovery.
• The outlook for $GTE depends on using its debt-free balance sheet to create per-share value from Canadian development and Azerbaijan exploration without overspending the transaction proceeds.