Good morning, ladies and gentlemen, welcome to the Gran Tierra Energy's conference call for first quarter 2026 results. My name is Tanya, I will be your coordinator for today. At this time, all participants are in a listen-only 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, Friday, May eighth, 2026, at 11:00 A.M. Eastern Time. Today's discussion may include certain forward-looking information, oil and gas information, and non-GAAP financial measures.
Please refer to the earnings and operational update press release we issued yesterday for important advisories and disclaimers with regard to this information and for reconciliations of any non-GAAP measures discussed on today's call. This earnings call is the property of Gran Tierra Energy Inc. Any copying or rebroadcasting of this call is expressly forbidden without the written consent of Gran Tierra Energy. I will now turn the conference call over to Gary Guidry, President and Chief Executive Officer of Gran Tierra. Mr. Guidry, please go ahead.
Thank you, Tanya. Good morning, welcome to Gran Tierra's first quarter 2026 results conference call. My name is Gary Guidry, Gran Tierra's President and Chief Executive Officer. With me today are Ryan Ellson, our Executive Vice President and Chief Financial Officer, and Sebastien Morin, our Chief Operating Officer. On Thursday, May 7, 2026, we issued a press release that included detailed information about our first quarter 2026 results, which is available on our website. Ryan and Sebastien will make a few brief comments. Then we will open the line for questions. Immediately following this earnings call at 10:00 A.M. Mountain Time, 12:00 P.M. Eastern Time, we will be holding our annual general meeting of stockholders. During the meeting, I will give a brief overview of Gran Tierra and where the company is heading.
We invite you to join us on this call and dial-in instructions can be found on our website. I will now turn the call over to Ryan to discuss our financial results.
Thanks, Gary, and good morning, everyone. Our 1st quarter performance marks a solid start to 2026, with production aligning within expectations and capital spending coming in under plan, highlighting disciplined execution across the organization. With asset disposition and bond exchange completed during the quarter, we have materially strengthened the balance sheet as we exited the quarter with $125 million in cash and extended maturities. Additionally, we signed an exploration, development, and production sharing agreement with the State Oil Company of the Republic of Azerbaijan, which provides access to a world-class proven basin with established infrastructure and contiguous acreage with significant development, appraisal, and exploration opportunities. Lastly, we entered a strategic partnership with Ecopetrol, where Gran Tierra expects to earn a 49% working interest in the Tisquirama block located in the Middle Magdalena Valley Basin of Colombia.
Combined with our existing Acordionero operations, this expands our operated position in the basin and is expected to drive operational synergies and enhance long-term value. From a hedging standpoint, oil volumes are hedged throughout the year using a mix of three ways, callers, and puts with an average ceiling of approximately $76 per barrel. For gas, we have ACO swaps covering an average of 15,600 GJs per day at approximately $2.71 per GJ for 2026. We continue to evaluate market conditions and will add to our hedge position where opportunities align with our established hedging policy and support our objectives of protecting cash flow while maintaining exposure to higher commodity prices.
As a result of our strategic developments in the evolving market environment, our 2026 guidance has been revised to reflect how our portfolio and the market has changed since our original guidance announced in December 2025. The primary drivers of revised guidance were the higher commodity price assumptions, our completed Simonette disposition, the addition of the Tisquirama block through our partnership with Ecopetrol, and incremental hedges put in place after the original guidance was announced. Despite higher oil prices improving the backdrop, the benefit is partially offset by hedging losses forecast between $70 million-$72 million, the loss of Simonette production, and incremental capital spend tied to our new portfolio additions.
At approximately $84 Brent average for the year, we're guiding to production of 40,000-45,000 barrels of oil equivalent per day, EBITDA of $345 million-$395 million, and free cash flow of $95 million-$115 million, with a capital program of $130 million-$170 million. Turning now to our financial results for the first quarter of 2026, Gran Tierra incurred a net loss of $119 million compared to a net loss of $141 million in the prior quarter and net loss of $90 million in the first quarter of 2025.
The net loss position was primarily the result of non-cash charges such as unrealized hedging losses, the remeasurement of equity compensation plans, coupled with non-recurring charges such as a senior note exchange and severance. Ecuador pricing lagged during the quarter due to our M-1 structure, reducing revenue by approximately $16 million versus the average Brent. With Brent moving higher in April and May, we expect the timing effect to reverse and support stronger realizations from Ecuador in the second quarter. The company generated adjusted EBITDA of $74 million versus $52 million in the prior quarter and $85 million in the first quarter of 2025. Funds from operations were $43 million or $1.21 per share, up 60% from the prior quarter and down 20% from the first quarter of 2025.
Gran Tierra's capital expenditures of $45 million were lower than the $53 million the prior quarter and $95 million the first quarter of 2025. During the quarter, the company spudded 3 development wells in Colombia and 3 development wells in Canada in the Simonette area, which was disposed in March 2026. Gran Tierra recouped the cost associated with the drilling of the Montney wells through the purchase price adjustment related to the transaction as the effective date was January 1st. At quarter end, Gran Tierra had a cash balance of $125 million, total gross debt of $606 million, and net debt of $481 million. Furthermore, we repurchased approximately 9.2 million face value of the company's 9.75% senior notes due April 15th, 2031.
The repurchase represents a discount of 12% to the face value of the repurchased bonds. Alongside the $125 million of cash as of March 31, 2026, the company currently has approximately $54 million undrawn credit and lending facilities. Gran Tierra generated oil sales of $172 million, which was up 2% from the first quarter of 2025 and up 32% from the prior quarter, primarily due to a 24% increase in Brent price and a 12% increase in sales volume as a result of higher sale volumes in Ecuador, partially offset by higher differentials. On a per BOE basis, operating expenses decreased by 3% when compared to the first quarter of 2025 due to lower workover activities, which partially offset by higher lifting costs associated with the inventory fluctuations resulting from the Ecuador sales.
With the portfolio changes and current market conditions, we remain focused on generating free cash flow, reducing debt, and maintaining the flexibility to adjust capital allocation as conditions evolve. I'll now turn the call over to Sebastien to discuss some of the operational highlights.
Thanks, Ryan, good morning, everyone. From a production perspective, Gran Tierra delivered first quarter 2026 average working interest production of approximately 45,500 BOE per day, which was 2% lower than fourth quarter 2025 and 2% lower year-over-year. This was primarily driven by the timing of waterflood optimization responses in Colombia and the asset disposition of our Simonette assets, partially offset by strong performance from the Conejo wells in the Charapa block and incremental volumes from Perico. Turning to operations in Colombia, we continued to execute efficiently across our development program. We drilled the Raju-2 well at Cohembi and initiated infill drilling of 3 wells on pad 6 with the drilling of Cohemvi-29. Together, these 2 wells were drilled with a total cost of $7.5 million, approximately 18% below budget, reflecting continued capital discipline.
We are currently in the final execution phases of the Cohemvi program and expect completion by the end of Q2. In Ecuador, we commenced water injection at Chanangue in early February, with early results exceeding expectations and reinforcing our reservoir management approach. We finalized all injectivity tests and regulatory submissions to initiate waterflooding operations in late Q2, early Q3 at the Iguana and Perico blocks. Waterflooding operations full steam ahead in Ecuador, we expect to see both an incremental oil uplift and significant water disposal cost reductions. As Ryan previously mentioned, on the strategic front, we entered into a partnership with Ecopetrol to earn 49% working interest in the Tisquirama block in Colombia's Middle Magdalena Valley Basin. The block contains approximately 364 million barrels of original oil in place and has seen limited historical recovery of approximately 7% or 25 million barrels.
This represents a clear opportunity to apply our waterflood expertise gained at Acordionero to enhance recovery and extend field life in the Tisquirama block. By comparison, Acordionero, which has a similar original oil in place of 338 million barrels, is directly adjacent and analogous to the Tisquirama block and has achieved a current recovery factor of 16% or 53 million barrels and has a 2P recovery factor of 27% or 35 million barrels additional to recover. We expect to initiate operations at Tisquirama in the second half of 2026. We also signed an exploration, development, and production sharing agreement in Azerbaijan, securing a 65% working interest across approximately 400,000 gross acres in a proven basin with established infrastructure and long-term development potential. The agreement includes a 5-year exploration and appraisal period, followed by a 25-year development term.
Overall, the quarter reflects disciplined execution across the base business, supported by capital-efficient operations and targeted portfolio additions that enhance our long-term growth profile. I will now turn the call back to the operator, and Gary, Ryan, and I will be happy to take questions. Operator, please go ahead.
Thank you. Ladies and gentlemen, we will now conduct the question-and-answer session for securities analysts. Our first question will be coming from Massimiliano Palotto of Jefferies.
Good morning, and thank you for taking my questions. Actually two. Firstly, 2026 CapEx guidance has increased slightly. Can you please elaborate on that? Could you confirm if there is any potential spending if prices stay this high? How should we be thinking about a normalized CapEx level going forward? Secondly, on regional mix. Most of the activity recently has been in Colombia and Ecuador. The question is, what prices do you need to see to ramp up activity in Canada? Thank you.
Great. Thanks for the questions. With respect to the 2026 guidance and capital. There is a slight increase, and that really just reflects us securing the Tisquirama block, where we expect to spend $15 million-$20 million this year in the Tisquirama block in order to get water in the ground and start the injection project before we earn into the base production in Tisquirama. With respect to increasing capital with higher oil price, you know, we're going as fast as we can. We're happy with the capital program. I think it's well thought out of, and, you know, we're getting water in the ground in Ecuador. We're really going, I guess, more capital efficient way we could spend the money this year.
You know, we'll we've already started our planning for 2027 and 2028. With respect to in Canada, yeah, you know, AECO prices continue to struggle. You know, with LNG Canada fully ramping up, you know, there's been more and more activity on the LNG front. We expect AECO prices to firm, and we'd need to see AECO north of $3 in order to allocate capital Canada on the gas side.
Thank you very much.
yep. Thank you.
Gentlemen, there are no further questions at this time. Please continue.
I would once again like to thank everyone for joining us today. We look forward to speaking with you in the next quarter in our ongoing progress. Please join us for our annual general meeting of stockholders, which will commence at 10:00 A.M. Mountain Time, 12:00 P.M. Eastern Time. I will give a brief overview of Gran Tierra and where the company is heading. Dial-in instructions can be found on our website. Thank you very much.