Drilling Programs in Colombia, Peru and Argentina Dominate Activity
CALGARY, Dec. 17 /CNW/ - Gran Tierra Energy Inc. (NYSE Amex: GTE; TSX: GTE), a company focused on oil exploration and production in South America, today announced a capital spending program of US$195 million in 2010 for exploration and production development operations in Colombia, Peru, Argentina and business development activities in Brazil. This budget includes the drilling of seven exploration wells in Colombia, four exploration wells in Peru and re-entry and side-tracking of a well in Argentina. The approved 2010 budget also includes funds for 2-D and 3-D seismic acquisition programs in Colombia, Peru, and Argentina and facility upgrades in Colombia and Argentina. Excluding potential exploration success, production in 2010 is expected to range between 14-16,000 barrels of oil per day (BOPD) net after royalty.
Gran Tierra Energy had US$151.6 million in cash at the end of Q3 2009 and has no debt. The 2010 work program and budget is expected to be funded from cash-flow from operations with the balance from cash on hand as necessary. The budget is based on a West Texas Intermediate oil price of US$70 per barrel of oil in 2010.
"Gran Tierra Energy's strong balance sheet and extensive land position containing a broad portfolio of exploration opportunities, with a balance of risk and reward, places us in an excellent position to execute our 2010 exploration work program," said Dana Coffield, President and Chief Executive Officer of Gran Tierra Energy. "Going forward, we continue to sharpen our focus in Colombia by divesting non-core properties and preparing the Company to begin the largest exploration drilling program in its history in 2010. In conjunction, we are also working to derive value from our Argentine gas assets ahead of drilling in mid-2010."
The Colombia capital budget for 2010 is US$129.3 million. US$37.5 million has been approved for facilities improvements associated with ongoing development and production, and US$91.8 million for seismic acquisition and exploration drilling. The drilling program has been revised to focus on our highest impact prospects while balancing the technical risks with the commercial rewards of the program. During 2010, Gran Tierra Energy expects to drill seven exploration wells and acquire in excess of 420 Km(2) of 3-D seismic and 40 Kms of 2-D seismic in Colombia
Gran Tierra Energy is one of the largest exploration landholders in the Putumayo Basin of southern Colombia, with working interests in seven exploration and production licenses. Total acreage encompasses 420,624 gross acres, or 373,203 net acres. Gran Tierra Energy is the operator of all its Putumayo licenses.
Chaza Block (100% working interest)
New infrastructure construction planned for the Costayaco field includes crude gathering lines, water lines, pumping stations, storage batteries, crude unloading facilities, water injection and disposal, and Costayaco electrification and field support facilities. Cost savings of US$6.0 million per year are expected from the electrification project as a result of reduced diesel consumption required to generate power for the down-hole pumps at the Costayaco Field.
In addition to the ongoing Costayaco field development activities, new seismic acquisition and one exploration well are planned in the Chaza Block. The Moqueta-1 prospect is scheduled to be drilled to the north of the Costayaco field in Q1 of 2010.
Guayuyaco Block (70% working interest)
The Guayuyaco Block contains both the producing Guayuyaco and Juanambu oil fields. During Q1 2010 a 75 Km(2) 3-D is scheduled to be acquired. The 3-D program will overlap Gran Tierra Energy's adjacent Chaza Block with an approximate split of 40 Km(2) in Guayuyaco and 35 Km(2) in the Chaza Block. In addition, one exploration well (Nabueno-1) is scheduled to be drilled in Guayuyaco during Q4 of 2010.
Azar Block (40% working interest)
During 2010 a 75 Km(2) 3-D seismic program will be acquired and two exploration wells are planned to be drilled during Q3 and Q4 2010.
Rumiyaco Block (100% working interest)
During 2010 a 95 Km(2) 3-D and a 12 Km 2-D seismic programs will be acquired and one exploration well is planned to be drilled during Q4 2010.
Santana Block (35% working interest)
During 2010 upgrades to the Santana Pumping Station are scheduled to continue. The objective is to improve storage and pumping capacity and reduce the volume of oil currently being trucked between Santana and Orito, resulting in estimated cost savings in excess of US$3.0 million in 2010. No exploration activities are planned for the Santana Block during 2010.
Putumayo Piedmonte Norte Block (100% working interest)
During 2010, Gran Tierra Energy plans to acquire 120 Km(2) of 3-D seismic data and drill one high impact exploration well (Rio Blanco-1), with timing possible in Q4 2010 subject to obtain prompt permitting with authorities.
Putumayo Piedmonte Sur Block (100% working interest)
During 2010, Gran Tierra Energy plans to acquire 10 Km 2-D seismic data and drill one exploration well (Taruka-1), in Q2 2010.
Gran Tierra Energy currently has a non-operated interest in one block in the Llanos Basin.
Garibay (50% non-operated working interest)
Gran Tierra Energy continues to evaluate the prospectivity of the Garibay Block. No capital has been budgeted for 2010.
Lower Magdalena ValleyBasin
Magangue Block (37.8% working interest)
Gran Tierra Energy has nominal capital spending for facility upgrades planned for the Magangue Block in 2010.
Gran Tierra Energy continues to execute its ongoing rationalization of non-core properties in its portfolio.
On November 30, 2009 Gran Tierra Energy assigned its 40% participation interest in the Rio Magdalena Association Contract and its 15% interest in the Mecaya Exploration Contract to Alange Corp. Colombia for total proceeds of $3 million. The assignment of Gran Tierra Energy's interests in the blocks and the appointment of Alange Corp. Colombia as operator are subject to approval by the Agencia Nacional de Hidrocarburos (ANH) for Mecaya and by ANH and Ecopetrol S.A. for Rio Magdalena.
Effective October 23, 2009 Gran Tierra Energy assigned its 100% interest in the Talora Block to Petrosouth Energy Corporation Sucursal Colombia for no proceeds. The assignment has been approved by ANH.
Gran Tierra Energy has signed a letter of intent with another party covering the sale of the Company's interests in the Catguas Block in the Catatumbo basin. Approval by the regulatory authorities in Colombia will be required once an assignment agreement has been reached between Gran Tierra Energy and the receiving party.
The San Pablo Block in the Llanos basin has been relinquished, subject to final acceptance from ANH that all contractual obligations were fulfilled.
Blocks 122 & 128 (100% working interest)
These blocks are located on the eastern flank of the Maranon Basin of northern Peru, and encompass 3.4 million acres of land over the crest of the Iquitos Arch. This area is under-explored and has never before been tested by the drill-bit. To date, more than one billion barrels of recoverable oil has been discovered in the adjacent Maranon Basin on the flanks of the Iquitos Arch. Gran Tierra Energy has identified more than 20 leads based on interpretation of 20,000 linear Kms of airborne gravity and magnetic survey completed over the blocks in 2008.
Gran Tierra Energy has entered the second exploration period for both Blocks 122 and 128. An environmental impact survey has been completed in preparation for initiating a 554 Kms 2-D seismic acquisition survey beginning in the second quarter of 2010 over the principal leads identified on the two blocks. Gran Tierra Energy is planning on drilling four exploration wells in the second half of 2010. The total 2010 capital budget for Peru is US$40.8 million.
Gran Tierra Energy is the largest exploration landholder in the Noroeste Basin of northern Argentina. The Company has a working interest in eight blocks of land, seven operated by Gran Tierra Energy, encompassing approximately 1.6 million gross acres, or 1.3 million net acres. The total 2010 capital budgeted for Argentina is US$23.5 million.
The work program for 2010 consists of US$4.5 million for 2-D and 3-D seismic acquisition in the Santa Victoria Block in Q3 2010, to define structural and stratigraphic traps in a gas-condensate trend identified from existing seismic data.
In the Valle Morado block, a re-entry and sidetrack of the VM.x-1001 well is scheduled for Q3 2010, for an estimated cost of US$15.1 million. The sidetrack well is being drilled to test the resource potential discovered by the VM.x-1001 well. Existing pipeline and gas processing plant capacity is capable of handling 30 million standard cubic feet of gas per day (MMSCF/day). Gran Tierra Energy has signed a gas sales agreement with Albanesi S.A. for the sale of up to 7 MMSCF/day at a price of US$2.90 per MMbtu. This gas will be sold until the commencement of the workover and sidetrack operations; pricing can be renegotiated subsequent to the operations once new production volumes are confirmed.
The 2010 budget also includes US$3.9 million for workovers and facilities costs on other Company properties in the Noroeste Basin.
Oil production is expected to show some decline in Argentina during 2010, however, with the gas sales agreement for test production from the VM.x-1001 on a barrel oil equivalent basis, the Company's Argentina production is expected to be relatively flat for the year.
Gran Tierra Energy established a business development office in Brazil during August 2009. The Company is currently undertaking the evaluation of a variety of exploration and development new venture opportunities. An operating budget of US$2.4 million to continue this initiative in Brazil has been approved.
Gran Tierra Energy initiated drilling of the Dantayaco-1 exploration well in the Chaza Block in the Putumayo basin on December 15. Dantayaco-1 is located 4.9 miles (7.8 km) northwest of Costayaco-5. Dantayaco-1 is drilling the crest of a four-way structural closure identified on new 2-D seismic and is planned to drill to a total depth of approximately 2,600 feet with drilling expected to take approximately two weeks.
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 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 and Peru, and has opened a business development office in Rio de Janeiro, 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.
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).
The statements in this press release regarding Gran Tierra Energy's expectations, plans, projections and actions currently contemplated for 2010 relating to its 2010 capital program and its planned exploration, drilling and production activities and estimated costs, as well as statements made regarding expected production, source of cash to fund the exploration plan, divestment plans, are "forward-looking statements" within the meaning of the U.S. federal and Canadian securities laws, including Canadian Securities Administrators' National Instrument 51-102 Continuous Disclosure Obligations and the U.S. Private Securities Litigation Reform Act of 1995. Statements containing the words "estimates", "expects", "plans", "projects", "will", "scheduled", "forecast", "may", and variations of these words are forward-looking statements. 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.
Factors that could cause results to differ materially from those described in the forward-looking statements include: 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, transportation or sale of oil and gas; changing prices for crude oil may cause some scheduled projects or actions to become uneconomical, or may change Gran Tierra Energy's focus to other projects or actions which could be of more benefit to Gran Tierra Energy, which could cause projects or actions currently contemplated to be postponed or cancelled; unexpected problems due to technical difficulties, operational difficulties, and weather conditions; and those other risks found in the periodic reports filed by Gran Tierra Energy with the United States Securities and Exchange Commission, including in the section entitled "Risk Factors" in its Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 5, 2009, and available at the Securities and Exchange Commission's internet site www.sec.gov and on SEDAR at www.sedar.com.
All forward-looking statements in this press release are expressly qualified by information contained in the Company's filings with regulatory authorities and, subject to its obligations under applicable securities laws, Gran Tierra Energy does not undertake to publicly update forward-looking statements, whether as a result of new information, future events or otherwise.
SOURCE Gran Tierra Energy Inc.
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