Acquisition Expands Land, Reserves and Production
CALGARY, Jan. 17 /CNW/ - Gran Tierra Energy Inc. ("Gran Tierra Energy") (NYSE Amex: GTE, TSX:
GTE), a company focused on oil exploration and production in South America,
today announced it has entered into an Arrangement Agreement (the "Agreement") to acquire all the issued and outstanding shares and warrants of
Petrolifera Petroleum Limited ("Petrolifera") pursuant to a plan of arrangement (the "Arrangement"). Under the terms of the Agreement, Petrolifera shareholders will
receive 0.1241 of a share of Gran Tierra Energy, for every Petrolifera
share held. A total of approximately 19 million Gran Tierra Energy
shares are expected to be issued, which represents approximately an 8%
increase in shares outstanding. Total consideration for the transaction
is approximately US$195 million including the assumption of
Petrolifera's debt, working capital and investments as of September
30, 2010. Petrolifera's Board of Directors has unanimously approved
the Arrangement and the Arrangement Agreement and has determined that
the Arrangement is in the best interest of Petrolifera shareholders and
warrant holders and recommends that Petrolifera shareholders vote in
favor of the Arrangement.
All of the directors and officers of Petrolifera, together with
Petrolifera's largest shareholder, representing, in aggregate, 21% of
Petrolifera's issued and outstanding shares, have entered into
agreements with Gran Tierra Energy to vote in favour of and otherwise
support the Arrangement, subject to customary exceptions. A break fee
consisting of 4% of the enterprise value of the transaction will be
payable by Petrolifera in certain circumstances.
"This transaction will add substantial assets featuring both high
working interest and operatorship which complement our current assets
in three of the four South American countries in which we operate,"
said Dana Coffield, President and Chief Executive Officer of Gran
Tierra Energy. "The transaction is expected to be accretive to Gran
Tierra Energy's shareholders in terms of reserves and production per
share. It will add undeveloped oil and gas reserve potential in
Colombia, exploration opportunities in Colombia and Peru and additional
oil production and reserves in a rising oil price environment in
Argentina. Upon closing of the Arrangement, Gran Tierra Energy will
retain its strong balance sheet and cash position to be used in the
development of the assets acquired in this transaction. The successful
completion of the Arrangement will enable Petrolifera's shareholders to
participate in the exciting future growth potential of Gran Tierra
Petrolifera's third quarter 2010 reported daily sales volumes amounted
to 3,564 barrels of oil equivalent ("BOE") per day, weighted 81% to crude oil and natural gas liquids with
current production anticipated to be lower due to Petrolifera's recent
capital constraints. In addition, net after royalty reserves
(NI-51-101 basis) were evaluated by GLJ Petroleum Consultants and were
estimated to be 7.8 million BOE on a proven basis and 14.3 million BOE
on a proven plus probable basis at year-end 2009. Upon completion of
the Arrangement, Gran Tierra Energy's proven and proven plus probable
net after royalty reserves (NI-51-101 basis) are accordingly expected
to increase to 29.5 million BOE, and 41.7 million BOE, respectively,
based on year-end 2009 GLJ reserve reports. This would represent a 36%
increase in proven reserves and a 52% increase in proven plus probable
reserves. Updated 2010 reserve reports are expected to be released
later this quarter.
Petrolifera owns an interest in 11 exploration and production blocks;
three are located in Colombia, three are in Peru and five are in
Argentina. The Colombian blocks, comprising approximately 850,000
acres, are located in the Lower and Middle Magdalena Basins and are
characterized by high quality light crude oil and natural gas. One
crude oil discovery, La Pinta and one natural gas discovery,
Brilliante, have been made in the Sierra Nevada Block in the Lower
Magdalena Basin. Petrolifera is the operator of and currently owns a
100% working interest, subject to recent agreement pursuant to which
Petrolifera agreed to transfer a 25% working interest to Gran Tierra
Energy, upon receipt of approval from Colombia's National Hydrocarbon
Agency. Both discoveries require additional testing and delineation
drilling to determine commercial viability. In addition, a new
exploratory well, San Angel X-1001, is expected to be drilled in the
adjacent Magdalena Block in the first quarter of 2011; again,
Petrolifera is the operator and has a 100% working interest.
Petrolifera also holds a 50% working interest and is the operator of
the Turpial block in the Middle Magdalena Basin, which is prospective
for heavier crude oil.
Petrolifera operates three 100% working interest blocks in Peru
encompassing approximately 4.0 million acres. Block 106 is in the
prolific Marañon Basin adjacent to the Corrientes Field, which
according to industry reports, is the largest field in the Basin. This
Block is immediately west to Gran Tierra Energy's existing acreage
within Peru. Blocks 107 and 133 are located in the Ucayali Basin
north-west of the Camisea Field. Numerous leads and prospects have been
identified on this acreage with indications the region has proven
petroleum systems generating light crude oil and natural gas, with
evidence of reservoir quality sandstones.
In Argentina, there are over 220,000 net acres in five contiguous blocks
operated by Petrolifera in the prolific Neuquen Basin. Working interest
in the blocks range from 25% to 100%. In the Puesto Morales/Rinconada
Concession, which accounts for the majority of production, Petrolifera
is operator and has a 100% working interest. Recently, these producing
assets have received limited investment due to capital constraints, but
with Gran Tierra Energy's strong balance sheet, increased activity is
contemplated as steadily increasing regional commodity prices through
2009 and 2010 may facilitate the potential to realize additional
shareholder value through reinvestment of internally generated cash
flow from operations in Argentina.
A Petrolifera shareholder meeting is expected to take place in March,
2011. The successful completion of the Arrangement will be subject to
the approval of at least two-thirds of Petrolifera's shareholders
present in person or by proxy at the Petrolifera shareholder meeting.
The proposed Arrangement is also subject to regulatory, stock exchange
and court approvals.
Complete details of the Arrangement are set out in the Plan of
Arrangement, which will be filed by Gran Tierra Energy and Petrolifera
on SEDAR (www.sedar.com) and by Gran Tierra Energy with the Securities and Exchange Commission
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 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, 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", "potential", "planned", "estimated,"
"will" and similar words identify forward-looking statements. In
particular, but without limiting the foregoing, this news release
contains forward-looking statements regarding the completion of the
Arrangement, the benefits and potential that Gran Tierra Energy expects
will result from the Arrangement, Gran Tierra Energy's planned used of
its cash position following the Arrangement, and the expected timing of
the Petrolifera shareholder meeting.
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:
timing and progress of work relating to Petrolifera's assets;
continuity of reserves; future production levels; future capital
expenditures; the receipt, in a timely manner, of shareholder,
regulatory, Court and third party approvals in respect of the
Arrangement. In addition, this press release may contain
forward-looking statements attributed to or based on third party
industry sources. Undue reliance should not be placed on these
forward-looking statements, as there can be no assurance that the
plans, intentions or expectations upon which they are based will occur.
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, such risks and uncertainties
include, among others: risks relating to the termination of the
Arrangement Agreement; risks respecting the failure of the parties to
complete the Arrangement on terms satisfactory to the parties or at
all; risks related to the combination of the business and operations of
Petrolifera and Gran Tierra Energy; consummation of the Arrangement is
subject to Petrolifera shareholder, Court, regulatory and third party
approvals, which if not received will cause the Arrangement not to
close; certain other closing conditions are required to be met, which
if not met or waived will cause the Arrangement not to close; there are
risks relating to the uncertainty of estimates by independent
consultants with respect to reserves; the Petrolifera reserves are
estimates based on assumptions which, if they turn out not to be
correct, could cause actual oil reserves to be different than Gran
Tierra Energy expects; unforeseen issues or difficulties may be
encountered during the drilling process; there are risks associated
with the need to obtain required approvals and permits from regulatory
authorities and risks inherent in the exploration, development and
production of oil and natural gas. 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 4, 2010. 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.
BOEs may be misleading, particularly if used in isolation. A BOE
conversion ratio of 6 thousand cubic feet: 1 barrel is based on an
energy equivalency conversion method primarily applicable at the burner
tip and does not represent a value equivalency at the wellhead.
SOURCE Gran Tierra Energy Inc.
For further information:
For investor and media inquiries please contact:
Director, Investor Relations