Gran Tierra Energy Announces $363 Million Capital Program for 2013 and Operations Update

8 exploration wells and 11 development and appraisal wells in Colombia, Brazil, Peru and Argentina 

CALGARY, Dec. 13, 2012 /CNW/ - Gran Tierra Energy Inc. ("Gran Tierra Energy") (NYSE MKT: GTE) , (TSX: GTE), a company focused on oil exploration and production in South America, today announced a 2013 capital spending program of $363 million for its exploration and production development operations in Colombia, Brazil, Peru and Argentina.  The capital spending program allocates $202 million for drilling, $65 million for facilities, equipment and pipelines, $93 million for seismic activities and $3 million associated with corporate activities.  The budget currently contemplates the drilling of 10 wells in Colombia, 6 wells in Argentina, 2 wells in Brazil and 1 well in Peru. Approximately 50% of the drilling budget is for development and appraisal drilling, and approximately 50% is for exploration drilling. The approved 2013 capital spending program also includes funds for 1,148km of 2D and 308km2 of 3D seismic acquisition programs in Colombia, Peru, Argentina and Brazil, primarily in preparation for additional exploration and production drilling operations in 2013 and beyond.

Excluding potential exploration success, Gran Tierra Energy is expecting 2013 production to average 27,000 barrels of oil equivalent per day ("BOEPD") gross working interest with no pipeline disruptions.  Production is expected to average approximately 20,000 BOEPD net after royalty (NAR) before inventory adjustments assuming a 10% contingency for potential disruptions and $90 average price for Brent.  Approximately 96% of this production consists of light oil, with the balance consisting of natural gas.

Gran Tierra Energy had $128 million in cash and equivalents and no debt at the end of the third quarter 2012. Based on current oil prices, the 2013 work program and budget is expected to be funded primarily from cash flows from operations, cash on hand and potential periodic draws on our credit facility.

"Gran Tierra Energy will continue executing its current strategy through 2013, a strategy that has consistently grown land, reserves and production year over year for the last seven years. For the first time, we will have active drilling and development activities in all four countries of operations.  Our focus on execution sees us entering 2013 with a robust drilling portfolio with a balanced mix of development drilling to maintain our base of reserves and production, and appraisal and exploration drilling to grow that base," said Dana Coffield, President and Chief Executive Officer of Gran Tierra Energy. "This singular focus on execution has allowed us to not only grow year over year, but allowed us to do so with an exceptionally strong balance sheet," concluded Coffield.

Colombia

The Colombia capital budget for 2013 is $224 million and is expected to include drilling 4 gross exploration wells and 6 gross appraisal and development wells.  Gran Tierra Energy's oil exploration drilling program will target prospects in the Putumayo Basin, while development drilling will focus on the Moqueta and Costayaco oil fields, with total drilling expenditures of $119 million. Facilities work, including continued electrification of the Costayaco and Moqueta fields, water injection facility work at Costayaco and Moqueta, and a production battery at the Jilguero oil discovery in the Llanos Basin, is expected to be $39 million. Geological and geophysical ("G&G") work consisting of 308km2 of 3D seismic and 756km of 2D seismic, along with other costs, is expected to be $66 million. G&G work is planned for the Cauca-6, Cauca-7, Garibay, Piedmonte Norte, Piedmonte Sur, Putumayo-1, Putumayo-10 and Magdelena Blocks to mature leads and prospects for drilling in 2013 and beyond.

Putumayo Basin 

Chaza Block (100% working interest and operator) 

With the continued successful appraisal of the Moqueta oil discovery throughout 2012, plans are in place to continue drilling in the field with the Moqueta-9, -10 and -11 appraisal wells. Gran Tierra Energy is continuing to pursue its application for a global development licence, which is expected to be granted in the third quarter of 2013.  The Moqueta Deep exploration well is targeting structures analogous to those encountered in Moqueta-7, located south of the main Moqueta field, and is expected to be drilled in the third quarter of 2013.

Gran Tierra Energy continues to see positive response from its water injection program at the Costayaco field and intends to drill the Costayaco-18 water injector well in the second quarter of 2013 along with the Costayaco-19 production well in the third quarter of 2013.

Guayuyaco Block (70% working interest and operator, Ecopetrol 30%)

Gran Tierra Energy intends to drill the Miraflor West-1 oil exploration well on the Guayuyaco Block in the second quarter of 2013.  The company also intends to begin drilling the Guayuyaco Norte oil exploration well on the Guayuyaco Block in the fourth quarter of 2013.

Putumayo-1 Block (55% working interest and operator, Lewis Energy 45%)

Gran Tierra Energy intends to drill the Putumayo-1 oil exploration well on the Putumayo-1 Block in the fourth quarter of 2013.

Llanos Basin 

Garibay Block (50% non-operated working interest; CEPCOLSA 50% and operator)

Gran Tierra Energy, together with Compania Espanola de Petroleos, S.A.U. ("CEPCOLSA"), plans to convert the Jilguero-2 well to a water injection well in the first quarter of 2013.

Llanos-22 Block (45% non-operated working interest; CEPCOLSA 50% and operator)

Gran Tierra Energy, together with CEPCOLSA, plans to drill an oil appraisal well on the Llanos-22 Block in the third quarter of 2013.

Peru 

The Peru budget of $38 million includes drilling one gross exploration well.  Drilling costs are anticipated to be $21 million; approximately $17 million is budgeted for seismic acquisition, facility costs and other.

Marañon Basin

Block 95 (100% working interest and operator subject to approval)

Gran Tierra Energy is scheduled to spud the Bretaña Norte 95-2-1XD exploration well in Block 95 in December, 2012, and will continue drilling into the first quarter of 2013. The contract area contains the Bretaña-1 well, which was drilled in 1974 and tested 18° API gravity oil on natural flow rates of approximately 807 barrels of oil per day.

Ucayali Basin

Blocks 107 and 133 (100% working interest and operator)

A 392km infill 2D seismic program on Block 107 in the Ucayali Basin is planned for 2013 in preparation for oil exploration drilling in 2014.

Argentina

Gran Tierra Energy is planning on drilling one gross exploration well, four gross development wells and one gross appraisal well. Out of the $31 million total capital budget for Argentina, $19 million will be spent on drilling. In addition, the company is planning to conduct seven workovers and three conversion projects to change producing wells into water injection wells.  The development wells and workovers will be concentrated in the Puesto Morales field of the Neuquen Basin in an effort to grow production from these assets.

Noroeste Basin

Santa Victoria (50% working interest and operator; Apache 50%) 

Gran Tierra Energy is evaluating the potential to drill a gas exploration well in 2013. Gran Tierra Energy, as operator, is interested in testing the gas potential of the Devonian reservoirs, a proven play in nearby wells, as well as the unconventional gas resource potential of the Los Monos formation, the primary source rock for the basin.

Neuquen Basin

Puesto Morales (100% working interest and operator)

Development and appraisal drilling is expected to begin in the second quarter of 2013 in the Puesto Morales field in the Nequen Basin.

Brazil

Gran Tierra Energy holds interests in four blocks in the onshore Recôncavo Basin and one block in the offshore Camamu-Almada Basin. The Brazil capital budget for 2013 is $67 million. Gran Tierra Energy plans to drill two gross horizontal exploration wells in the Recôncavo Basin along with additional completion work on the GTE-3 and GTE-4 producing wells in the Tiê field. The drilling portion of the budget is expected to be $43 million.  Approximately $18 million is intended to be dedicated to pipelines and facilities and an additional $6 million for G&G work and other costs.

Brazil's exploration program could increase to six total exploration wells in 2013 if the onshore resource play concept is tested successfully with Gran Tierra Energy's initial horizontal drilling program. Gran Tierra Energy has identified between 20 and 40 drilling locations on its existing land in the Recôncavo Basin.

Recôncavo Basin

REC-T-155 (100% working interest and operator)

Planning for the 1-GTE-07-BA horizontal sidetrack oil exploration well is continuing, with operations expected to commence in first quarter of 2013.

REC-T-129 (100% working interest and operator)

Planning for the horizontal sidetrack of the 1-GTE-02-BA oil exploration well is continuing, with sidetrack operations expected to commence in first quarter of 2013.

Camamu Basin

BM-CAL-7 Block (10% non-operated working interest; Statoil 30% is the operator; Petrobras 60%)

Gran Tierra Energy, along with its partners, is conducting evaluation work through 2013 on the BM-CAL-7 Block to mature prospects for drilling expected to take place in 2014.

Operational Update

Testing of oil bearing reservoirs in the Moqueta-7 well in the Chaza Block in Colombia is continuing, with results expected before year-end 2012.

The Moqueta-8 appraisal well in the Chaza Block in Colombia spud on November 27, 2012 and is drilling ahead, with total depth ("TD") on the south flank of the Moqueta field expected to be reached before year-end 2012.

The Costayaco-17 well in the Chaza Block in Colombia spud on November 23, 2012.  This well is being drilled as a production well at the northern end of the Costayaco field to drain the northern limits of the field.

The Florida West-1 exploration well in the Sierra Nevada Block in Colombia spud on November 27, 2012 and is drilling ahead, with TD expected to be reached before year-end 2012.

The 1-GTE-05HP horizontal well in Block 142 onshore Recôncavo Basin of Brazil has begun drilling, with results expected in first quarter of 2013.

Testing of oil bearing reservoirs in PMN-1117 horizontal multi-stage fracture stimulation well in the Puesto Morales Block in Argentina is continuing, with results expected before year-end 2012.

Corporate production, NAR before inventory changes and losses, for the month of November 2012 averaged approximately 18,200 BOEPD.  Oil delivery restrictions due to disruptions in the Ecopetrol-operated Trans-Andean oil pipeline in Colombia (the "OTA pipeline") impacted production and deliveries in November, and are expected to continue to do so through December.

Gran Tierra Energy is taking the following actions to help mitigate future pipeline disruptions: 1) entering into additional trucking contracts to potentially evacuate all production capacity, 2) working through Ecopetrol to secure additional pipeline transportation capacity through Ecuador pipeline options, and 3) evaluating additional storage options to enable more continuous production during pipeline disruptions.

About Gran Tierra Energy Inc.

Gran Tierra Energy is an international oil and gas exploration and production company, headquartered in Calgary, Canada, incorporated in the United States, trading on the NYSE MKT Exchange (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 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.

Additional information concerning Gran Tierra Energy is available at www.grantierra.com, on SEDAR www.sedar.com) and with the Securities and Exchange Commission (www.sec.gov).

Forward-Looking Statements and Advisories 

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 "expected", "anticipated", "scheduled", "targeting", "potential", "planned", "plans", "continue", "intends", "will", "contemplates" and variations of these and similar words identify 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 planned and expected capital spending program for 2013; expectations respecting drilling, drilling locations, testing, well conversions, sidetrack operations, construction, water injection, exploration activities, acquisition of seismic, production and timing of activities and results; resource potential in South America; expected costs and allocation of the capital budget; anticipated funding of the capital program; continuation of the company's current strategy; granting of the company's application for a global development licence; and effects of disruptions in the OTA pipeline in Colombia.

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 field size and recoverability, the accuracy of testing and production results and seismic data; the effects of certain drilling techniques; rig availability; cost and price estimates; and the general continuance of current or, where applicable, assumed operational, regulatory 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: unexpected technical difficulties and operational difficulties may occur, or delays in obtaining necessary permits may occur or continue which could impact or delay the commencement of drilling exploration or development wells; Gran Tierra Energy's operations are located in South America, and unexpected problems can arise due to guerilla activity; disruptions on the OTA pipeline may be more than Gran Tierra Energy expects and activities undertaken to mitigate the impact of such disruptions may not have the impact currently anticipated by Gran Tierra Energy; geographic, political and weather conditions can impede testing, which could impact or delay the commencement of drilling exploration wells; 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 and drilling activities. Although the current capital spending program is based upon the current expectations of the management of Gran Tierra Energy, there may be circumstances in which, 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 Quarterly Report on Form 10-Q filed November 7, 2012. 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.

Barrels of oil equivalent ("BOE") may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 Mcf: 1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. In addition, given that the value ratio based on the current price of oil as compared with natural gas is significantly different from the energy equivalent of six to one, utilizing a BOE conversion ratio of 6 Mcf: 1 bbl would be misleading as an indication of value.


SOURCE: Gran Tierra Energy Inc.

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For investor and media inquiries please contact:
Jason Crumley
Director, Investor Relations
403-265-3221
info@grantierra.com.