Exploration success adds near-term production and cash flow to Argentine business unit; increases exploration potential of acreage
CALGARY, Alberta, September 17, 2008, Gran Tierra Energy Inc. (AMEX: GTE; TSX: GTE), a company focused on oil exploration and production in South America, today announced it has finished drilling and testing the Proa.x-1 exploration well in the Surub Block, Noroeste Basin, Argentina.
Gran Tierra Energy began drilling the Proa.x-1 exploration well on July 9, 2008 and reached total measured depth of 12,920 feet on August 28, 2008. Good oil shows were encountered in Cretaceous volcanics and volcaniclastics in the Palmar Largo Formation during drilling and oil saturations were indicated on logs. Gran Tierra Energy conducted a drill-stem test in the Lower Palmar Largo formation from 12,694 to 12,713 feet and obtained no flow. The company then conducted a production test in the intervals 12,649 to 12,661 feet and 12,620 to 12,641 feet, and obtained a stabilized gross flow rate of 2,324 barrels of oil per day (BOPD) through a 35/64 inch choke with a watercut of 0.5 percent. The oil gravity was 43.8 degree API at 60 degree Fahrenheit.
Gran Tierra Energy will initiate long-term production testing in approximately one week, with commercial oil sales to begin concurrently. Crude oil transportation will be through an existing 3-1/2 inch 15 kilometer pipeline with approximately 4,000 BOPD capacity to existing facilities at the Gran Tierra Energy-operated Chivil field in the adjacent Chivil Block. Gran Tierra Energy oil production in Argentina has been averaging approximately 570 BOPD net after royalty to date in the third quarter of 2009.
Gran Tierra Energy is the operator and has an 85% working interest in the 90,688 gross acre Surub Block in the Formosa Province in northern Argentina. REFSA (Recursos Energ ticos Formosa S.A.), the provincial government company has a 15% working interest. REFSA's costs were carried by Gran Tierra Energy during drilling of the Proa.x-1 well. Gran Tierra Energy will be reimbursed for all costs incurred during drilling from 50% of the net production assigned to REFSA. The provincial royalties payable on production in the revised contract vary from 12% for cumulative production below 750,000 cubic meters of oil (approximately 4.7 million barrels of oil), to 14% for cumulative production between 750,000 to 1,500,000 cubic meters of oil (approximately 9.4 million barrels of oil), and to 16% for cumulative production above 1,500,000 cubic meters of oil.
Commenting on the drilling and testing progress, Dana Coffield, President and Chief Executive Officer of Gran Tierra Energy Inc., stated, "The Proa.x-1 test results should prove to be a substantial reserves and production addition to our Argentine business unit. This success adds near-term production and cash flow to our Argentina business unit, in addition to increasing the prospectivity of identified leads in the Surub Block and in the adjoining Chivil and Palmar Largo Blocks, where Gran Tierra Energy has a 100% and 14% working interest respectively."
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).
The statements in this news release regarding Gran Tierra Energy's plans and expectations for reserves, production, drilling, testing, future commodity sales, transportation, reimbursement of costs and infrastructure, including the timing of commencement and completion of these events, 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 technical difficulties and operational difficulties which impact the production, transport or sale of oil and gas; and unexpected problems due to weather conditions. In addition, the price per barrel of oil paid to Gran Tierra Energy by its refiner in Argentina is substantially less than the price received by Gran Tierra Energy in Colombia and, as a result, the percentage increase in production resulting from production in Argentina will not result in a corresponding percentage increase in Gran Tierra Energy revenues. 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 Part II of Gran Tierra Energy's Quarterly Report on Form 10-Q for the period ended June 30, 2008, filed with the Securities and Exchange Commission on August 11, 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. Subject to its obligations under applicable law, 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.