Gran Tierra Energy (NYSEMKT:GTE) traded down 6.29% today and is down to $2.68 per share (market cap ~740 million) from a peak of $8.18 in July. The Canadian headquartered oil and gas company has been beat up due to the drop in oil, reduction in expected yield from its oilfields and the firing of its CEO. Despite these headwinds to the share price, the company offers massive upside and has a large cash pile and no debt to help ride out the storm.
GTE is a Canadian headquartered oil and gas exploration and production company, which operates several fields in South America.
The company caught my eye with their massive cash pile, which was $360 million as of their 9/30/2014 10Q, which would account for almost half of market cap at current prices. While the company certainly has been affected by the sharp drop in oil prices, the company's 10Q also indicated that on a barrel of equivalent oil basis the company's operating costs are $17.88. If they can keep administrative expenses low they are likely to remain profitable, and produce substantial cash flow even at low oil prices. Another thing providing extra safety for the company is their $0 long-term debt. The company is also showing operational flexibility by cutting their capex budget down to $140 million for 2015 (down from $310 initially planned). This is obviously in response to the deeper drop in oil prices than most anticipated.
As far as recent news goes, the company has yet to release a number on the reduction in reserves of the Peru operations, but they did indicate that their Columbian operations show an increase of 14% to their existing proved reserves. Which is consistent with the company's focus on investing most of their new capex in Columbia instead of Peru.
Readers can analyze the most up-to-date company reserves in their press release here.
If we combine strong financial position with what looks like a stabilization in oil prices GTE looks like a good deep value play. Trading at only 6.8 times analyst consensus earnings of $.39 for FY14.
Disclosure: The author has no positions in any stocks mentioned, but may initiate a long position in GTE over the next 72 hours.
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