EM LATAM CREDIT: Gran Tierra Energy: 1Q Earnings Results: Negative view
Gran Tierra Energy (GTE; B2pos /Bpos /B+)
• Canadian based primarily Latin America oil and gas E&P company increased production YoY but EBITDA fell 10%. Meanwhile, capex increased 73% YoY and the company continued with its stock buyback program having already repurchased 15% of outstanding stock since January 2023. At current oil prices it would seem challenging to meet all debt liabilities in 2026.
• The company used cash to pay off a bond maturity, leaving primarily the 2029 secured notes which have a USD185mn principal amortization next year. They have total contractual obligations of USD384mn for 2026.
• WTI hit USD58 yesterday. The company shows in their low oil price scenario of USD61 a USD60mn reduction in capex which would be USD200-240mn.
Colombia revenue, which a year ago represented 96% of sales, fell 30% but fortunately the company had some success in Ecuador while also benefiting from the fourth quarter 2024 I-3 Canada acquisition.
• The company acquired I-3 in October 2024 with Western Canada assets expected to raise production to 60,000 boepd according to Fitch. It will diversify their revenue sources away from Latin America as well as increase their gas production and lessen their 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.
• The 2029 bonds have covenants of 2.5x interest coverage and a limit of 3x net debt/EBITDA. The company reported net debt/TTM adjusted EBITDA of 1.9x this quarter and EBITDA/interest expense of 3.4x.
• 2029 bonds were last quoted at USD71.5, 17.5 points lower MTD and 21.5 points lower YTD. Source Bloomberg.
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US DATA: Auto Sales Soar In Light Of Tariffs, But Impact Likely To Reverse Later
March light vehicle sales sales jumped by 11% M/M to a a seasonally-adjusted annual rate of 17.77mln, per data released Tuesday evening by Wards Automotive Group. That's easily the highest total since April 2021, comprising 3.11mln cars and 14.65mln light trucks.
- Consumer anticipation of tariff impacts on prices, as well as some front-running in supply from automakers, was the main impetus.
- Per the Wards report, "March sales were proof that U.S. consumers are very much paying attention to tariffs... Buyers flocking to dealer lots to beat potential price increases, combined with some pre-tariff push by automakers raising deliveries to fleet customers lifted raw volume to over a 4-year high, not to mention a rare double-digit year-over-year gain."
- While this is likely to boost March retail sales data due out mid-month (and ex-autos growth was already looking fairly solid, per our note yesterday), the boon to the "hard" data may reverse in future months - per the report: "Regardless of any coming impacts from tariffs, March's booming results will cause lower volume in the second quarter due to the additional drain to dealer inventory that, based on industry norms, was already lean prior to the month."
EQUITY TECHS: E-MINI S&P: (M5) MA Studies Highlight A Dominant Downtrend
- RES 4: 5878.53 50-day EMA
- RES 3: 5837.25 High Mar 25 and a key resistance
- RES 2: 5757.95 20-day EMA
- RES 1: 5694.75 High Apr 1
- PRICE: 5618.00 @ 14:23 BST Apr 2
- SUP 1: 5559.75/33.75 Low Mar 13 and the bear trigger / Low Mar 31
- SUP 2: 5500.00 Round number support
- SUP 3: 5483.50 2.00 proj of the Dec 6 ‘24 - Jan 13 - Feb 19 swing
- SUP 4: 5396.00 2.236 proj of the Dec 6 ‘24 - Jan 13 - Feb 19 swing
S&P E-Minis maintain a softer tone. Sights are on key support and the bear trigger at 5559.75, the Mar 13 low. It has been pierced, a clear break of it would confirm a resumption of the downtrend that started Feb 19, and open 5483.30, a Fibonacci projection. Moving average studies are in a bear-mode position, highlighting a dominant downtrend. Key short-term resistance has been defined at 5837.25, the Mar 25 high.
GILTS: Futures Through Trendline Resistance
Gilt futures trade through both trendline resistance (92.42) and yesterday’s high (92.45) alongside the extension of the rally in U.S. Tsys, with “Liberation Day” risks continuing to underpin core global FI markets.
- Next resistance noted at the 61.8% retracement of the March 4-27 move lower (92.55), followed by the Mar 20 high (93.01).
- Yields ~4bp lower across the curve. March lows remain intact, with many of the benchmark yields comfortably off last month’s lows.
