Several Catalysts Materializing for GTE Stock, Risky Bet Long Term
The current higher oil price environment is largely benefitting the stocks is the sector. While GTE stock has risen by 62 percent YTD, what's the stock forecast for 2025?
Gran Tierra’s stock price has risen by 62 percent YTD due to rising oil and gas prices and investors’ interest to play this theme with penny stocks. Gran Tierra is an independent energy company, which is engaged in the acquisition, exploration, development, and production of oil and gas properties in Colombia and Ecuador.
As of December 31, 2020, the company had total proved undeveloped reserves of 26.2 million barrels of oil equivalent in Colombia alone. Due to rising oil prices, many investors want to know about Gran Tierra Energy’s (GTE) stock forecast for 2025.
The commodities space, especially the energy sector, is hot in 2021. Economies are recovering and the pent-up demand is outstripping the demand in many pockets. This has created opportunities in many resource stocks.
Gran Tierra issued a strong outlook.
Gran Tierra announced its second-quarter results in August. The results were strong and its average total production rose by 14 percent YoY. The company expects to generate a free cash flow of $100 million–$120 million in the second half of 2021 due to strong oil prices, a successful drilling program in H1 2021, and the expiry of its H1 oil price hedges. Gran Tierra also reaffirmed its guidance for a full year of 27,500–28,500 BOPD (barrels of oil per day) and outlined its exploration plan to achieve more than 40,000 BOPD.
High oil price environment benefits GTE
The current high oil price environment has enabled many energy companies to expand and grow. GTE is taking advantage of it too. The company has prioritized paying down its debt to emerge as a leaner organization. As of June 30, 2021, it paid down $5 million to lower its credit facility to $175 million with cash on hand of $22 million.
Gran Tierra's 2025 forecast
The company has come back from bankruptcy. Gran Tierra has been underdelivering on its promises, which has made investors bearish for the stock. Now, things have started turning around due to higher oil prices. Gran Tierra is also taking advantage of this environment by paying down its debt and expanding.
Another overhang on GTE stock historically has been the political turmoil and anti-government protests in Columbia. GTE was forced to shut down 5,250 BOPD of its production in May. However, there are signs that the political situation in the country might be easing. Columbia’s national strike committee might suspend the anti-government marches. Many Columbia-based drillers and explorers have announced increased activity and operations in light of these developments. This bodes well for the company as well.
Currently, two of the main catalysts for the company remain higher oil prices and the improving political situation in Columbia. While it's difficult to make a prediction for the stock four to five years down the line, these same factors should help determine GTE's fate going forward also.
Being in a cyclical industry, oil prices might not remain strong forever. For every up, there will be a down but the companies that take advantage of the upcycle to better position themselves for the downcycle come out victorious. Gran Tierra is doing everything in its control to take charge of the situation too.
Investing in penny stocks
However, investors should note that investing in penny stocks is always risky. Some penny stocks are more vulnerable to manipulation. GTE is still prone to political uncertainties in Columbia, which could cloud its outlook. While the stock offers upside at the current prices, it's still a risky bet.