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Message: Net Production Grows to 15,000 Barrels of Oil Per Day at the End of First Quarte

Net Production Grows to 15,000 Barrels of Oil Per Day at the End of First Quarte

posted on Apr 09, 2009 05:17AM

Gran Tierra Energy Net Production Grows to 15,000 Barrels of Oil Per Day at the End of First Quarter 2009

Costayaco-7 Reaches Total Depth; Non-Strategic Assets to be Divested

Gran Tierra Energy Inc. (NYSE Amex: GTE, TSX: GTE), a company focused on oil exploration and production in South America, today provided an update on the Company's first quarter oil production, drilling operations, and planned property divestments.

"Gran Tierra Energy ended the first quarter of the year by passing another major milestone central to our growth strategy, as production reached record levels," said Dana Coffield, President and Chief Executive Officer of Gran Tierra Energy. "We remain focused on further development of the Costayaco field, as well as continuing our evaluation and drilling of exploration projects in Colombia and Peru, and maintaining our current position in Argentina."


Production at the end of the first quarter of 2009 reached a maximum of 15,334 barrels of oil per day (BOPD), net after royalty, and averaged approximately 10,000 BOPD over the quarter. The increase in production is due primarily to the continued development of the Costayaco field in the Chaza Block in Colombia where Gran Tierra Energy has a 100% working interest and is the operator.

With Costayaco-5 coming online in a matter of days, Gran Tierra Energy expects to maintain a production level of roughly 15,000 BOPD, net after royalty, through the second quarter of 2009.


Costayaco-7, spudded on February 13, 2009, was drilled in the extreme northern lobe of the Costayaco structure approximately 2 kilometers northwest of Costayaco-4, and reached total measured depth (MD) of 8,784 feet (8,783 feet true vertical depth) on March 30, 2009. Well logs indicate the presence of reservoir sandstones in the Villeta T sand formation from 8,414 feet MD to 8,463 feet MD and in the Caballos formation from 8,565 feet MD to 8,716 feet MD. The Upper Villeta T and Caballos reservoirs came in 59 feet lower than the pre-drill prognosis due to the overlying middle Villeta section being thicker than what was anticipated by seismic.

Electric logs, mud logs, and pressure gradient data all indicated the presence of an oil column in the Upper T sand although considerably less than the pre-drill prognosis. Electric logs suggest the presence of oil in the Caballos interval but pressure gradient data indicates only water is present. Gran Tierra Energy will undertake additional testing of these reservoir intervals to confirm the type of fluids present. If only water is confirmed in the Caballos reservoir and a reduced column of oil is present in the Upper T sand reservoir, the results will have a negative impact on the possible reserves category. However, the results from these tests should not impact reserves in the proved and probable categories.

Construction at the Costayaco-8 location has been initiated 600 meters south of Costayaco-1. Drilling is expected to commence in mid-May and take approximately 30 to 45 days. Gran Tierra Energy anticipates the drilling of Costayaco-9 and 10 will follow at locations yet to be determined.

Property Divestment

As part of an ongoing portfolio review of properties, Gran Tierra Energy has selected certain non-core assets for divestiture. On March 31, 2009, Gran Tierra Energy signed an asset purchase and sale agreement with Lewis Energy Colombia, Inc. for Gran Tierra Energy's interests in the Guachiria Norte, Guachiria, and Guachiria Sur blocks in the Llanos Basin of Colombia. Closing is expected to take place on or around April 16, 2009. Principal terms include consideration of US$7 million, plus settlement of outstanding issues between Lewis Energy and Gran Tierra Energy's subsidiary, Solana Resources, comprising an initial cash payment of US$4 million at closing, followed by 15 monthly installments of US$200,000 each beginning June 1, 2009 and extending through August 3, 2010. Gran Tierra Energy will retain a 10% overriding royalty interest on the Guachiria Sur block in the event of a discovery, designed to reimburse 200% of Gran Tierra Energy's net costs for previously acqui red seismic data. Gran Tierra Energy has agreed to assume any environmental liabilities existing on the properties at the date of sale, estimated at US$1.2 million. As a result of the divestiture, Gran Tierra Energy expects an approximate US$6.2 million reduction in 2009 capital spending.

"With Costayaco-7 now defining the northern limit of the field, we will turn our attention to growing production capacity with Costayaco-8," Dana Coffield added. "In addition, following careful review, we are divesting certain non-core assets which will allow us to maintain our very strong balance sheet, and allocate capital to those projects with the greatest potential to generate increased shareholder value over time."

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. 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. Investor inquiries may be directed to [email protected] or (866) 973-4873.

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.

Forward-Looking Statements:

The statements in this news release regarding Gran Tierra Energy's belief that the company's production will be 15,000 BOPD, net after royalty, in the second quarter of 2009, its plans to conduct additional testing and results of drilling operations with respect to Costayaco-7, its drilling plans for Costayaco-8, 9 and 10, its expectations for closing the asset sale and receiving approximately US$6.2 million from the March 31, 2009 divestiture, its beliefs regarding the benefits to its balance sheet from divesting certain non-core assets, and the allocation of capital to projects with the potential to increase shareholder value, are forward-looking statements or financial outlook (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 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. There are a number of important factors that could cause the results or outcomes discussed herein to differ materially from that indicated by the forward-looking statements, including, among others: Gran Tierra Energy's operations are located in South America, and unexpected problems can arise due to guerrilla activity, technical difficulties and operational difficulties which impact its testing and drilling operations and the production, transport or sale of its products; geographic, political and weather conditions can impact testing and drilling operations and the production, transport or sale of its products; the risk that the current global economic and credit crisis may impact oil prices and oil consumption more than Gran Tierra Energy currently predicts; the risk that the property divestiture does not close in accordance with its terms; and the risk that the property divestiture will not have the anticipated reduction on capital spending. 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 Annual Report on Form 10-K filed February 27, 2009. 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 document are made as of the date of this document and Gran Tierra Energy disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new inf ormation, future events or otherwise, except as expressly required by applicable securities legislation.

SOURCE: Gran Tierra Energy Inc.

Dana Coffield, Gran Tierra Energy Inc., President & Chief Executive Officer, (866) 973-4873, [email protected]; Tom McMillan, Equicom Group, Investor Relations, (403) 536-5903, [email protected]

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