CALGARY, Alberta, June 13, 2008, Gran Tierra Energy Inc. (AMEX: GTE; TSX: GTE), a company focused on oil exploration and production in South America, today announced that it had completed drilling Costayaco-4, a new well drilled in the Costayaco Field in Colombia. Gran Tierra Energy also updated progress being made with additional drilling activities and production infrastructure development.
Gran Tierra Energy completed drilling operations for Costayaco-4, the fourth well drilled in the Costayaco field, a new oil field discovered in 2007. The Costayaco field is located in the Chaza Block in the Putumayo Basin, where the company has a 50% working interest and is the operator, with Solana Resources holding the remaining 50% working interest.
Gran Tierra Energy drilled Costayaco-4 directionally from the Costayaco-2 well site and drilled through the same reservoir sequences encountered in the previous wells drilled in the field, reaching a total measured depth of 8,884 feet (7,344 feet true vertical depth) on May 24, 2008. The bottom-hole location is approximately 541 meters north of Costayaco-2. Gran Tierra Energy successfully acquired core of the major reservoir intervals in the Villeta T sandstone and the Upper Caballos sandstone. Analysis of the core will provide additional data for reservoir modeling and full field development planning. Log interpretations from data acquired after drilling indicate approximately 16 feet of potential hydrocarbon pay in the Kg Sand Unit of the Rumiyaco Formation, 14 feet in the U Sandstone Unit of the Villeta Formation, 38 feet in the T Sandstone Unit of the Villeta Formation and 125 feet in the Caballos Formation. This is almost 25% more potential net pay than in any of the previous three wells in the field.
Gran Tierra Energy is currently designing a completion and testing program to evaluate the hydrocarbon reservoirs encountered. Gran Tierra Energy expects testing to begin in late June and take approximately one month to complete.
Gran Tierra Energy has completed construction of the drilling location for Costayaco-5. The company will drill this well on the west flank of the Costayaco field, approximately 1,120 meters west of Costayaco-2 (1,060 meters north west of Costayaco-1 discovery well) in an attempt to locate the oil-water contact in the T Sandstone Unit and to further define the reserves of the Costayaco Field. Drilling is to commence in late June and finish in late July. The company plans to drill Costayaco-6 and 7 during 2008.
Costayaco Production and Infrastructure
The Costayaco field is currently producing approximately 7,000 barrels of oil per day (bopd) gross from Costayaco-1, -2 and -3, which is being transported by truck to offloading facilities at Uchupayaco on the existing pipeline system. Construction of an 8 inch 10 kilometer oil transfer line from Costayaco-1 to Uchupayaco is approximately 53% complete. Gran Tierra Energy expects the line to be operational in early August. Once connected to existing infrastructure, plans are to ramp up Costayaco production to approximately 10,000 bopd gross, overcoming the Santana to Orito pipeline bottleneck by trucking approximately 3,000 bopd gross around this pipeline segment. Gran Tierra Energy is investigating the opportunity to possibly truck approximately another 3,000 to 5,000 bopd gross north to Neiva. Additional infrastructure expansion is being evaluated to accommodate the anticipated increase in production from the continuing Costayaco drilling program and to negate the need for any trucking.
Rio Magdalena Block
Popa-2 Exploration Well
Gran Tierra Energy initiated drilling of the Popa-2 exploration well in the Rio Magdalena Block in the Middle Magdalena Basin, on May 8, 2008. Gran Tierra Energy expects drilling to be completed in late June. This well is being drilled near a non-commercial oil discovery made by Gran Tierra Energy in 2006 at Popa-1, which tested approximately 160 bopd. Gran Tierra Energy is the operator of the Rio Magdalena Block and has a 100% working interest. Under the terms of a recently completed farm-in agreement, Omega Energy Colombia will earn a 60% share of the company's interest by paying 100% of the costs associated with the exploration well. In the event of a commercial discovery, Ecopetrol S.A. has a right to back in for a 30% working interest, to be split proportionally between Gran Tierra Energy and Omega Energy Colombia.
Gran Tierra Energy initiated re-entry operations of the Palmera-1 well on May 28, 2008, an exploration well drilled in 1996 that had potential oil pay in the Kg Sandstone of the Rumiyaco Formation indicated on logs but which was never tested. Gran Tierra Energy expects these testing operations to be completed in late June. In addition, the company is continuing to interpret newly acquired 3-D seismic data in preparation for drilling an exploration well in the block. Gran Tierra Energy is operator of the Azar Block and has a 40% working interest.
Gran Tierra Energy completed the acquisition of approximately 20,000 linear kilometers of new high definition airborne gravity and magnetic data over the entire area of Blocks 122 and 128 in May 2008. Preparations are being made to enter the Second Exploration Periods of both Blocks 122 and 128, beginning with an extensive environmental impact assessment that will be undertaken to support 2-D seismic data that will be acquired in the Second Exploration Period of each block. Block 122 encompasses approximately 1.2 million acres and Block 128 encompasses approximately 2.2 million acres of land. Gran Tierra Energy is operator and holds a 100% working interest in both exploration blocks.
Gran Tierra Energy began mobilization of a rig to drill the Proa-1 exploration well in the Surubi Block in the Noroeste Basin of northern Argentina during the second quarter of 2008. The company expects drilling to begin in early July and be completed in late August. Gran Tierra Energy is operator and has a 100% working interest in this block. In addition, technical evaluation work and a variety of well work-overs continue in Gran Tierra Energy's other six landholdings in the basin.
Production Growth Continues
Gran Tierra Energy's production for the second quarter to date has averaged approximately 3,250 bopd net after royalty. This is up from an average of 2,842 bopd reported for the first quarter of 2008. Production has grown further to an average of approximately 4,100 bopd net after royalty in early June. The majority of the production growth has taken place in Colombia, with Argentina production having grown to approximately 550 bopd net after royalty.
Commenting on progress, Dana Coffield, President and Chief Executive Officer of Gran Tierra Energy Inc., stated, The Costayaco Field in Colombia continues to exceed our expectations. Significant progress is being made on defining production infrastructure requirements, advancing production capacity and setting new production targets for the field, in addition to advancing our exploration programs in our other operated blocks in Colombia, Peru and Argentina.
About Gran Tierra Energy Inc.:
Gran Tierra Energy Inc. is an international oil and gas exploration and production company operating in South America, headquartered in Calgary, Canada, incorporated in the United States, and trading on the American Stock Exchange (GTE) and the Toronto Stock Exchange (GTE). The company holds interests in producing and prospective properties in Argentina, Colombia and Peru. The company has a strategy that focuses on growing a portfolio of producing properties, plus production enhancement and exploration opportunities to provide a base for future growth. Additional information concerning Gran Tierra Energy is available at www.grantierra.com. Investor inquiries may be directed to [email protected] or 1-800-916-GTRE (4873).
Forward Looking Statements:
The statements in this news release regarding Gran Tierra Energy’s expected production growth, plans and expectations for testing and drilling, expectations as to results of these testing and drilling operations and infrastructure, the use to which acquired seismic data will be put, the benefits that will result from the identification of the oil-water contact in the Costayaco discovery, and expectations as to completion of the pipeline from Costayaco-1 and the timing for the other events cited above, are forward looking information, forward looking statements or financial outlooks (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. These forward-looking statements 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. Although, Gran Tierra Energy believes that the assumptions underlying, and expectations reflected in, these forward-looking statements are reasonable, it can give no assurance that these assumptions and expectations will prove to be correct. Important factors that could cause the results or outcomes discussed herein to differ materially from those indicated by these forward-looking statements, include, among other things: 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 the production, transport or sale of its products, and geographic, political and weather conditions; and the usefulness of the seismic data and benefits of the discovery of the oil-water contact may be different than Gran Tierra Energy predicts. 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 Item 1A Risk Factors in Gran Tierra Energy’s Annual Report on Form 10-K/A for the period ended December 31, 2007, filed with the Securities and Exchange Commission on May 12, 2008. These filings are available on a Web site maintained by the Securities and Exchange Commission at http://www.sec.gov. The forward-looking statements contained herein are made as at the date of this press release. Gran Tierra Energy does not undertake an obligation to update forward-looking or other statements in this release. Gran Tierra Energy’s forward-looking statements are expressly qualified in their entirety by this cautionary statement.
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Chief Financial Officer
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Gran Tierra Energy Inc.