Advances Other Previously Announced Acquisition Initiatives; Provides Operations Update
CALGARY, Alberta, June 2, 2006 Gran Tierra Energy, Inc. (OTC Bulletin Board: GTRE.OB) today announced that a definitive securities purchase agreement has been signed regarding the acquisition of Argosy Energy International. The total consideration for the acquisition is $42 million, consisting of a cash payment of $37.5 million, the issuance of $3.5 million of Gran Tierra's common stock and certain overriding royalty and net profit interests in Argosy's assets valued at $1 million. Argosy has been active in Colombia for more than twenty years, building a diverse portfolio of producing properties, drill-ready prospects and exploration acreage in the country. The acquisition is expected to add production of 856 barrels of oil per day and proven reserves of approximately 2.3 million barrels of oil to the company (both net after royalty). The material terms of Gran Tierra's acquisition of Argosy were announced on April 3, 2006 and subsequently disclosed in a Current Report filed with the Securities and Exchange Commission. Closing of the transaction is scheduled to occur as soon as practicable but in no event later than July 21, 2006. The agreement contains standard representations and warranties as well as pre-closing and post-closing covenants of the parties. The closing of the transaction is subject to customary conditions, as well as the completion of financing contemporaneously or prior to closing.
Gran Tierra has also completed documentation to acquire a 50% interest in the El Vinalar Block in Argentina, adding approximately 44 barrels per day of oil production (after royalty) and positioning the company for a drilling program to commence later this year. The company announced its offer to acquire/farm-in to the El Vinalar property on February 28, 2006. Total consideration for the acquisition is $950,000 and includes a commitment to fund up to $2.7 million of the cost of a planned sidetrack well. Gran Tierra's offer to acquire the interests of Compania General de Combustibles S.A. (CGC) in the Noroeste Basin of Argentina is also progressing, with final agreements at an advanced stage. The CGC acquisitions remain subject to certain authorizations including the waiving of rights of first refusal of partners and regulatory, legal/judicial approvals within Argentina. Gran Tierra's offer for the CGC properties was first announced by the company on February 22, 2006. Closings of the El Vinalar and CGC acquisitions are scheduled to occur on or before June 30, 2006 and are dependent on the conclusion of financing initiatives.
With regard to current operations of Gran Tierra, the company's share of production from the Palmar Largo joint venture has grown to approximately 340 barrels of oil per day from an average of 293 barrels per day over the fourth quarter of 2005 (both net after royalty) as a result of the successful drilling of the Ramon Lista well late in 2005 and the completion of well workover activity. An update on company activity is available in presentation format on Gran Tierra's website at www.grantierra.com, which was presented to the Stock Day Resources Conference in Frankfurt, Germany on May 24/25, 2006.
Dana Coffield, President and Chief Executive Officer of Gran Tierra, stated, "Gran Tierra is moving aggressively to close its announced acquisitions and, in tandem, will be entering a drilling campaign involving up to ten wells across the acquired properties in the current year. In our short history we have been successful adding value through drilling and workover activity, and this strategy holds great potential in our expanding portfolio of assets and land. It has been an intense period of activity for our company - establishing a critical mass and platform for growth in Argentina and Colombia, the two countries which have been our priority targets for initial South American operations. We are eager to move forward into this next phase in our plan to create a substantial international oil and gas company."
About Gran Tierra Energy, Inc.
Gran Tierra Energy, Inc. is an international oil and gas exploration and production company, headquartered in Calgary, Canada, incorporated and traded in the United States and operating in South America. The Company currently holds interests in producing and non-producing properties in Argentina and is pursuing a strategy that focuses on establishing a portfolio of producing properties, and development and exploration opportunities, through selective acquisitions, to provide a base for future growth.
Gran Tierra initiated three acquisitions in the first quarter of 2006: one significant acquisition of producing properties in Argentina to expand and broaden its activities in the Noroeste region of the country; one smaller "tuck-in" acquisition, also in the Noroeste Basin, providing additional production and drilling opportunities; and a third acquisition of Argosy Energy International, which provides a sizeable entry for the company into Colombia. Gran Tierra is continuing to assess growth opportunities and expects to continue its strategy of moving aggressively and sensibly to build a diverse, self-sustaining and active international oil and gas company. Additional information concerning Gran Tierra is available at www.grantierra.com. Investor inquiries may be directed to [email protected] or 1-800-916-GTRE(4873).
Forward Looking Statements
This press release contains forward-looking statements' within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, including without limitation those statements regarding the Company's ability to exploit oil and gas exploration opportunities. These statements are expressed in good faith and based upon a reasonable basis when made, but there can be no assurance that these expectations will be achieved or accomplished. Although the forward-looking statements in this release reflect the good faith judgment of management, forward-looking statements are inherently subject to known and unknown risks and uncertainties that may cause actual results to be materially different from those discussed in these forward-looking statements including, but not limited to, our ability to complete each of the potential acquisitions discussed above on anticipated terms and in a timely manner, including the completion of financing relating thereto on satisfactory terms, our ability to discover reserves that may be extracted on a commercially viable basis, difficulties inherent in estimating oil and gas reserves, intense competition in the oil and gas industry, environmental risks, regulatory changes and general economic conditions including the price of oil and gas. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this release. We assume no obligation to update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this release, other than as may be required by applicable law or regulation. Readers are urged to carefully review and consider the various disclosures made by us in the our reports filed with the Securities and Exchange Commission, including those risks set forth in the Company's Current Report on Form 8-K filed on November 10, 2005, which attempt to advise interested parties of the risks and factors that may affect our business, financial condition, results of operation and cash flows. If one or more of these risks or uncertainties materialize, or if the underlying assumptions prove incorrect, our actual results may vary materially from those expected or projected. We undertake no obligation to update these forward looking statements.