Drilling additional wells to delineate reserves in Colombia, explore in Colombia and Peru, and manage production in Argentina
CALGARY, Alberta, April 11, 2011, Gran Tierra Energy Inc. (NYSE AMEX: GTE; TSX: GTE) ("Gran Tierra Energy"), a company focused on oil and gas exploration and production in South America, today announced capital spending plans on the recently acquired Petrolifera Petroleum Limited ("Petrolifera") assets.
Gran Tierra Energy intends to spend approximately $55 million on the newly acquired assets with approximately $25 million in Colombia, $14 million in Peru and $16 million in Argentina. Drilling and completion costs are expected to amount to $41 million, including $14 million in Colombia, $13 million in Peru and $14 in Argentina. Seismic costs total $12 million, mostly in Colombia and facilities costs total $2 million, mostly in Argentina.
This capital program is in addition to the $299 million 2011 capital program previously announced for Colombia, Peru, Brazil and Argentina by Gran Tierra Energy, which remains unchanged. This new combined capital program of approximately $355 million for 2011 is expected to be funded from existing cash reserves and cash flow.
"Our evaluation of the new assets under management indicates that there is significant potential to grow reserves and production in the coming years. With appropriate allocation of capital, we believe we can unlock significant value from these assets," said Dana Coffield, President and Chief Executive Officer of Gran Tierra Energy. "In Colombia, Gran Tierra Energy intends to delineate a potential gas production platform in the Lower Magdalena basin, prepare for 2012 exploration drilling in Peru, and reverse production declines in Argentina where both oil and gas prices have consistently been rising."
Colombia
Gran Tierra Energy plans to spend approximately $14 million on drilling in Colombia, including one exploration well and one delineation well with the intention of evaluating a potential gas production platform in the Lower Magdalena Basin.
Sierra Nevada Block (100% working interest and operator)
Following Gran Tierra Energy's announcement of its offer to acquire Petrolifera, GLJ Petroleum Consultants Ltd. ("GLJ") independent resource evaluators, estimated 101.5 billion cubic feet ("BCF") of United States Securities and Exchange Commission ("SEC") compliant 3P natural gas reserves (15.6 BCF 1P and 34.3 BCF 2P) at the Brillante discovery well drilled in 2010. GLJ's estimate is effective December 31, 2010. A delineation well in the Brillante discovery is planned for the third quarter of 2011 to further define the significant potential of this discovery. A regional gas market evaluation is underway, as well as an evaluation of transportation options in the area.
The La Pinta-1 well, drilled in 2010, encountered good oil shows while drilling in the Upper Porquero reservoirs. Gran Tierra Energy plans to re-enter this well and perforate this zone to test its oil potential in the third quarter of 2011.
Gran Tierra Energy also intends to acquire approximately 170 square kilometers of 3D seismic in preparation for future exploration and development drilling on the Sierra Nevada Block.
Magdelena Block (100% working interest and operator)
Testing operations on the San Angel-1 well continue and, contingent upon successful test results, Gran Tierra Energy may acquire approximately 150 square kilometers of 3D seismic in the area.
Turpial Block (50% working interest and operator)
One exploration well is planned for the Turpial Block to evaluate the heavy oil reservoirs encountered by stratigraphic drilling in the 1970's.
Peru
In 2011, Gran Tierra Energy intends to spend approximately $13 million in preparation for drilling in early 2012.
Block 107 (100% working interest and operator)
Gran Tierra Energy believes significant resource potential exists on Block 107 in Peru. One exploration well is planned for the second quarter of 2012, with 2011 spending dedicated to planning and purchase of long lead items in preparation for 2012 drilling.
Argentina
Capital spending in Argentina will initially focus on reversing production declines on properties in the Neuquen Basin. Gran Tierra Energy plans to spend $14 million on drilling and completions in Argentina.
Puesto Morales / Puesto Morales Este (100% working interest and operator)
Gran Tierra Energy plans to conduct work-over programs on approximately 16 wells, along with drilling approximately six development wells, including three producers and three new water injectors. Gran Tierra Energy believes it can improve recovery in the existing reservoirs by minimizing water channeling in the waterflood project through the use of polymer. The budgeted work program may be adjusted to accommodate results during implementation of the program.
Production and Reserves
Including the Petrolifera assets, Gran Tierra Energy anticipates average production in 2011 to range between 17,500 and 19,000 barrels of oil equivalent ("BOE") per day, net after royalty, weighted approximately 95% to oil.
GLJ converted previously reported NI51-101 year-end 2010 reserves for Petrolifera Petroleum Ltd., effective December 31, 2010 to SEC format as follows:
| 2010 Year-End Net After Royalty | Proved Reserves | Proved + Probable Reserves | Proved + Probable +Possible(1) Reserves |
| Oil, MMBO(2) | 5.498 | 8.683 | 13.357 |
| Gas, MMSCF(2) | 22,456 | 47,242 | 124,486 |
| NGL, MMBO(2) | 0.243 | 0.450 | 0.919 |
Note:
(1) Possible reserves are those additional reserves that are less certain to be recovered than probable reserves. There is a 10% probability that the quantities actually recovered will equal or exceed the sum of proved plus probable plus possible reserves.
(2)
| MMBO (million barrels of oil) | MMSCF (million standard cubic feet) | MMBOE (million barrels of oil equivalent |
The following table summarizes Gran Tierra Energy's previously reported SEC compliant year-end 2010 (excluding Petrolifera) net after royalty reserves, with average start-of month 2010 oil prices, effective December 31, 2010:
| 2010 Year-End Net After Royalty | Proved Reserves | Proved + Probable Reserves | Proved + Probable +Possible(1) Reserves |
| Oil, MMBO(2) | 23.598 | 31.017 | 46.960 |
| Gas, MMSCF(2) | 1,232 | 1,380 | 43,440 |
| NGL, MMBO(2) | 0 | 0 | 0.361 |
Note:
(1) Possible reserves are those additional reserves that are less certain to be recovered than probable reserves. There is a 10% probability that the quantities actually recovered will equal or exceed the sum of proved plus probable plus possible reserves.
(2)
| MMBO (million barrels of oil) | MMSCF (million standard cubic feet) | MMBOE (million barrels of oil equivalent |
About Gran Tierra Energy Inc.
Gran Tierra Energy Inc. is an international oil and gas exploration and production company, headquartered in Calgary, Canada, incorporated in the United States, trading on the NYSE Amex (GTE) and the Toronto Stock Exchange (GTE), and operating in South America. Gran Tierra Energy holds interests in producing and prospective properties in Argentina, Colombia, Peru and, subject to regulatory approval, Brazil. Gran Tierra Energy has a strategy that focuses on establishing a portfolio of producing properties, plus production enhancement and exploration opportunities to provide a base for future growth.
Gran Tierra Energy's Securities and Exchange Commission filings are available on a web site maintained by the Securities and Exchange Commission at http://www.sec.gov and on SEDAR at http://www.sedar.com.
Advisories and Forward Looking Statements:
This news release contains certain forward-looking information and forward-looking statements (collectively, "forward-looking statements") under the meaning of applicable securities laws, including Canadian Securities Administrators' National Instrument 51-102 - Continuous Disclosure Obligations and the United States Private Securities Litigation Reform Act of 1995. The use of the words "expect", "potential", "intend", "plan", "may", "believe", "anticipates" and "will" identify these forward-looking statements. In particular, but without limiting the foregoing, this news release contains forward-looking statements regarding, among other things, Gran Tierra Energy's potential to grow reserves and production, its belief that it can unlock significant value from the the Petrolifera assets, planned capital expenditures on the assets acquired from Petrolifera and the allocation of such capital expenditures among properties in Colombia, Peru and Argentina, sources of funding for Gran Tierra Energy's new capital program, timing of drilling activities in the Brillante discovery, plans regarding re-entering and perforation at the La Pinta-1 well, testing operations on the San Angel-1 well, the acquisition of 3D seismic, plans for an exploration well in the Turpial Block, drilling preparations in Peru, and the timing of drilling in Peru, drilling and completion operations in Argentina and improved recoveries through minimizing water channeling through the use of polymer. Reserves referred to as "1P", "2P" and "3P" are defined as "Total Proved", "Total Proved plus Probable", and "Total Proved plus Probable plus Possible" respectively.
The forward-looking statements contained in this news release reflect several material factors and expectations and assumptions of Gran Tierra Energy including, without limitation, assumptions relating to log evaluations, the accuracy of certain testing results and seismic data, the accuracy of reserves estimates provided by GLJ, that Gran Tierra Energy will continue to conduct its operations in a manner consistent with past operations, the effects of using polymer to minimize water channeling and the general continuance of current or, where applicable, assumed operational and industry conditions. Gran Tierra Energy believes the material factors, expectations and assumptions reflected in the forward-looking statements are reasonable at this time but no assurance can be given that these factors, expectations and assumptions will prove to be correct.
The forward-looking statements contained in this news release are subject to risks, uncertainties and other factors that could cause actual results or outcomes to differ materially from those contemplated by the forward-looking statements, including, among others: Gran Tierra Energy's operations are located in South America, and unexpected problems can arise due to guerilla activity, technical difficulties and operational difficulties which impact or delay its testing and drilling operations; geographic, political and weather conditions can impede testing and drilling operations; and the risk that current global economic and credit market conditions may impact oil prices and oil consumption more than Gran Tierra Energy currently predicts, which could cause Gran Tierra Energy to modify its exploration, drilling and/or construction activities. Although the current capital spending program of Gran Tierra Energy is based upon the current expectations of the management of Gran Tierra Energy, there may be circumstances where, for unforeseen reasons, a reallocation of funds may be necessary as may be determined at the discretion of Gran Tierra Energy and there can be no assurance as at the date of this press release as to how those funds may be reallocated. Should any one of a number of issues arise, Gran Tierra Energy may find it necessary to alter its current business strategy and/or capital spending program. Accordingly, readers should not place undue reliance on the forward-looking statements contained herein. Further information on potential factors that could affect Gran Tierra Energy are included in risks detailed from time to time in Gran Tierra Energy's Securities and Exchange Commission filings, including, without limitation, under the caption "Risk Factors" in Gran Tierra Energy's Annual Report on Form 10-K filed February 25, 2011. These filings are available on a Web site maintained by the Securities and Exchange Commission at http://www.sec.gov and on SEDAR at www.sedar.com. The forward-looking statements contained herein are expressly qualified in their entirety by this cautionary statement. The forward-looking statements included in this press release are made as of the date of this press release and Gran Tierra Energy disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as expressly required by applicable securities legislation.
BOE's may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 thousand cubic feet:1 barrel of oil is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
Contact Information
For investor and media inquiries please contact:
Jason Crumley
Director, Investor Relations
403-265-3221