EM LATAM CREDIT: Gran Tierra Energy 1Q Earnings Preview: Potentially negative
Gran Tierra Energy (GTE; B2pos /Bpos /B+)
• Canadian based primarily Latin America oil and gas E&P company due to report first quarter 2025 earnings. WTI hit USD58 today and the company said that they need WTI to be USD71 to fund their USD 240-280mn 2025 capex program with internally generated cash.
• 2025 maturities seem manageable with cash on hand but 2026 could be a challenging year. The 9.5% 2029 senior secured notes having a sinking fund schedule with USD185mn due in October 2026 as well as other payments with total contractual obligations of USD384mn for the full year.
• The company acquired I-3 in October 2024 which has Western Canada assets that might raise their production to 60,000 boepd according to Fitch. It may also diversify their revenue sources away from Latin America as well as increase their gas production and lessen dependence on oil.
• The company earned some positive outlooks from the rating agencies last year after the news of the acquisition, but oil prices were much higher at the time.
• Last year the company authorized a stock buyback equaling 10% of the market float.
• The 2029 bonds have covenants of 2.5x interest coverage and a limit of 3x net debt/EBITDA. The company was comfortably below those metrics and in fact the rating agencies praised their low leverage last year when oil prices were higher.
• 2029 bonds were last quoted at USD77.73 according to Bloomberg though we heard from a market source that bonds were quoted lower than that. Still at USD77.73 that would be a yield of 19.2% so clearly the bonds were under pressure. At March month end bonds were quoted at nearly USD89 or 13.75% and at year end bonds were USD93, or 12%. WTI is down 16% YTD, source BBG.
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AUSSIE 3-YEAR TECHS: (H5) Contract Highs
- RES 3: 97.190 - High May 5 2023
- RES 2: 96.730/932 - High Sep 17 / 76.4% of Mar-Nov ‘23 bear leg
- RES 1: 96.370 - High Mar 31
- PRICE: 96.360 @ 15:30 GMT Mar 01
- SUP 1: 95.900 - Low Jan 14
- SUP 2: 95.760 - Low 14 Nov ‘24
- SUP 3: 95.480 - Low Jan 11 2023 and a major support
Aussie 3-yr futures are again pressing toward new contract highs - clearing resistance on the continuation contract. A close at current or higher levels opens 96.730, the Sep 17 ‘24 high. On the downside, a stronger reversal lower from current levels would signal a resumption of a downtrend. A deeper sell-off would refocus attention on 95.760, the 14 Nov ‘24 low.
US: WSJ Reports USTR Preparing Another Tariff Option For Trump
Headlines crossed a short while ago from the WSJ around a potential new tariff option being prepared by the USTR for Trump.
- The WSJ notes: "Trump's team in recent days has considered imposing a 20% universal tariff on virtually all imports, versus a reciprocal plan that would apply different tariffs to different countries. But the U.S. Trade Representative's office is preparing a third option-an across-the-board tariff on a subset of nations that likely would not be as high as the 20% universal tariff option, according to people with knowledge of the plans." See this link for more details.
- This follows overnight reports from Tuesday: The Washington Post reports that "White House aides have drafted a proposal to impose tariffs of around 20 percent on at least most imports to the United States, three people familiar with the matter said,".
- Also from the White House: "White House Press Secretary Karoline Leavitt has indicated to reporters that President Donald Trump’s reciprocal tariffs will be “effective immediately” following Trump’s White House Rose Garden announcement tomorrow, expected to take place around 16:00 ET 21:00 BST."
GOLD: Forecasters Running to Adjust Forecasts
- As the gold price hits levels that were (for many forecasters) a year end target, BofA is the first to flinch, suggesting that gold could reach US$3,500.
- Having hit $3,149.00 yesterday, gold retreated as profit taking set in and traders squared their positions ahead of the tariff announcements.
- Up 19% year to date, Gold has surged over 3% in three trading sessions, prior to the decline into the US market close.
- Demand for Gold ETFs remains strong with assets under management growing by over 5% this year.
- Gold’s rally is impacting markets globally with South African mining stocks putting in their best monthly performance on record in March.
- Wednesday sees the US President announcing wide ranging tariffs on ‘all’ of America’s trading partners, a move that inevitably will see counter measures and bring with it volatility.
