Gran Tierra Energy Inc. (“
Gran Tierra” or the
"
Company") (NYSE American:GTE) (NYSE MKT:GTE)
(TSX:GTE), a company focused on oil exploration and production in
Colombia, today announced the Company's 2017 year-end estimated
reserves and prospective resources as evaluated by the Company's
independent qualified reserves evaluator McDaniel & Associates
Consultants Ltd. (“
McDaniel”) in reports with
effective dates of December 31, 2017 (the “
GTE
McDaniel Reserves Report” and the "
GTE McDaniel
Prospective Resources Report").
All dollar amounts are in United States
("U.S.") dollars, unless otherwise indicated.
Unless otherwise expressly stated, all reserves and resources
values and ancillary information contained in this press release
have been prepared by McDaniel and calculated in compliance with
Canadian National Instrument 51-101 – Standards of Disclosure for
Oil and Gas Activities (“NI 51-101”) and the
Canadian Oil and Gas Evaluation Handbook
(“COGEH”). All reserves, resources and production
are on a working interest before royalties ("WI")
basis unless otherwise indicated.
Highlights
For the year ended December 31, 2017, in
Colombia only, Gran Tierra:
- Increased reserves (in million barrels of oil equivalent
("MMBOE"), reserves per share, before tax net
present values ("NPV") discounted at 10% and
before tax net asset value ("NAV") per share
(based on before tax NPV discounted at 10%) in all categories
including Proved ("1P"), Proved plus Probable
("2P") and Proved plus Probable plus Possible
("3P"):
|
|
Increase |
Increase |
|
Increase |
|
Increase |
NAV |
Increase |
|
|
from |
from |
Reserves |
from |
NPV |
from |
10% Discount |
from |
Reserves |
Reserves |
Dec.31 2016 |
Dec.31 2015 |
Per Share1 |
Dec.31 2016 |
10% Discount |
Dec.31 2016 |
Per Share1 |
Dec.31 2016 |
Category |
MMBOE |
% |
% |
MMBOE/share |
% |
$ million |
% |
$/share |
% |
1P |
74 |
14 |
75 |
0.19 |
16 |
1,394 |
26 |
2.87 |
29 |
2P |
137 |
18 |
142 |
0.35 |
20 |
2,500 |
27 |
5.69 |
30 |
3P |
203 |
10 |
194 |
0.52 |
12 |
3,625 |
17 |
8.57 |
19 |
- The increases in NPV and NAV per share were achieved despite an
overall 5% decrease in the January 1, 2018 McDaniel price forecast
relative to the January 1, 2017 McDaniel price forecast
- Achieved reserve replacements of 178% (1P), 283% (2P) and 253%
(3P) with total 2017 reserve additions of 20 MMBOE (1P), 32 MMBOE
(2P) and 29 MMBOE (3P)
- Grew Mean Prospective Resources significantly at year-end 2017
as follows:
- Increased Mean Unrisked Prospective Resources by 114% to 1,462
MMBOE, up from 682 MMBOE at year-end 2016; includes 822 MMBOE of
Mean Unrisked Prospective Resources in the Putumayo Basin
A-Limestone play
- Increased Mean Risked Prospective Resources by 94% to 346
MMBOE, up from 178 MMBOE at year-end 2016
- The Putumayo Basin's A-Limestone play represents 214 MMBOE or
62% of the Mean Risked Prospective Resources of 346 MMBOE
- Achieved finding and development ("F&D")
costs including future development costs ("FDC")
of $11.26 per barrel of oil equivalent ("BOE") for
2P reserves
- During 2017, Gran Tierra's total capital expenditures on
exploration and development were $238 million, excluding acquired
properties. Of this amount, $74 million, or
approximately 31%, was dedicated to exploring, defining and
delineating the potentially material Prospective Resources of the
Company's A-Limestone play in the Putumayo Basin
- Realized F&D recycle ratios of 2.5 times (2P)
- Achieved reserve life indices of 11 years (2P) and 16 years
(3P)
- Grew the number of Company net undeveloped drilling locations
as follows:
- Number of net 1P undeveloped drilling locations is 28, up from
19 at year-end 2016
- Number of net 2P undeveloped drilling locations is 46, up from
36 at year-end 2016
- Number of net 3P undeveloped drilling locations is 63, up from
54 at year-end 2016
- Increased annual production for 2017 to an average of
31,426 barrels of oil equivalent per day
("BOEPD"), up 20% from 2016; fourth quarter 2017
production averaged 34,477 BOEPD, up 14% from fourth quarter
2016
Gary Guidry, President and Chief Executive
Officer of Gran Tierra, commented “During 2017, Gran Tierra
achieved material organic increases in all reserves categories and
in Prospective Resources, as our diversified portfolio in Colombia
delivered significant growth in NAV per share. Our two most
exciting accomplishments this past year occurred in the Acordionero
oil field in the Middle Magdalena Valley Basin and in the
A-Limestone conventional resource play in the Putumayo Basin. In
2017, Acordionero was Gran Tierra’s growth engine in terms of
reserves additions, while the A-Limestone provided substantial new
Prospective Resources and a large inventory of future potential
drilling opportunities.
During 2017, successful appraisal and
development drilling and Phase 1 waterflood implementation at
Acordionero resulted in a 68% increase in the field’s 1P reserves
to 33 MMBOE, 46% growth in 2P reserves to 70 MMBOE, and 12%
increase in 3P reserves to 108 MMBOE. We believe ongoing growth in
this field’s 1P and 2P reserves will be achievable as we convert
Acordionero’s still significant Possible reserves of approximately
38 MMBOE into the 1P and 2P categories. The development success
achieved at Acordionero has resulted in a 19% increase in 2P
original oil in place during 2017 to 337 million barrels
("MMbbls") and an increase in 2P recovery factor
to 24%, up from 19% at year-end 2016.
Acordionero has also proved to be a stellar
acquisition in terms of value creation. After paying $525 million
in mid-2016 to acquire PetroLatina Energy Ltd. whose major asset
was Acordionero, this field's before tax 2P NPV discounted at 10%
is now approximately three times higher at $1.5 billion at 2017
year-end. Since the acquisition and during an active capital
program, the Acordionero field has generated free cash flow and we
expect that to continue as we further develop the field.
During 2017, the Putumayo Basin’s A-Limestone
conventional resource play was the main driver of Gran Tierra’s
114% increase in Mean Unrisked Prospective Resources to
approximately 1.5 billion BOE. The A-Limestone's Mean Unrisked
Prospective Resources are 822 MMBOE or 56% of Gran Tierra's total.
With the success of the A-Limestone at Costayaco, Vonu and PUT-7,
in combination with the ongoing testing at Siriri and the
Nancy-Burdine-Maxine Blocks, we are pleased that Gran Tierra can
now begin to quantify the potential size of the prize of this
exciting basin-wide play. The A-Limestone play represents 214 MMBOE
or 62% of the Company’s Mean Risked Prospective Resources of 346
MMBOE at year-end 2017. With a potential of 1,429 gross unrisked
prospective drilling opportunities distributed throughout our
blocks in the Putumayo Basin, the A-Limestone conventional
carbonate play represents a potentially exciting and rewarding
future for Gran Tierra. In addition to the A-Limestone, we also
plan to evaluate additional carbonate zones including the B and M2
Limestones.
We are pleased that Gran Tierra has
significantly grown both production and reserves on an accretive
basis for the second consecutive year, delivering on our
Colombia-focused strategy of creating long-term shareholder value.
We believe that Gran Tierra now has visible production growth from
our existing asset base through 2020 on a 2P reserves basis and a
world class exploration portfolio that can be funded through cash
flow. For 2018, we are excited to continue our development of
the prolific Acordionero field and our exploration, appraisal and
development of the regional carbonate and N-Sand plays.”
__________________
1 Based on estimated year-end 2017 net debt of
$272 million, [comprised of working capital deficit of $16 million,
senior convertible notes of $111 million (net of unamortized fees;
$115 million gross) and reserves-based credit facility of $145
million (net of unamortized fees; $148 million gross)], excluding
risk management assets and liabilities and investment in Sterling
Resources Ltd. shares, and number of shares of Gran Tierra's common
stock and exchangeable shares issued and outstanding at December
31, 2017 and 2016, of 391.3 million and 399.0 million,
respectively. Estimated net working capital and debt at December
31, 2017 and 2016, prepared in accordance with generally accepted
accounting principles in the United States of America
("GAAP").
Total Company WI Reserves
The following table summarizes Gran Tierra’s NI
51-101 and COGEH compliant reserves in Colombia derived from the
GTE McDaniel Reserves Report calculated using forecasted oil and
gas prices and costs.
|
Light andMediumCrude Oil |
Heavy CrudeOil |
ConventionalNatural Gas |
2017Year-End |
2016Year-End(1) |
Reserves
Category |
Mbbl(*) |
Mbbl(*) |
MMcf(**) |
MBOE(***) |
MBOE(***) |
Proved Developed
Producing |
30,325 |
13,933 |
1,589 |
44,523 |
46,548 |
Proved Developed
Non-Producing |
5,225 |
60 |
— |
5,285 |
3,365 |
Proved Undeveloped |
9,478 |
14,721 |
698 |
24,315 |
15,226 |
Total
Proved |
45,028 |
28,714 |
2,287 |
74,123 |
65,139 |
Total Probable |
24,221 |
38,360 |
1,741 |
62,871 |
50,832 |
Total Proved
plus Probable |
69,249 |
67,074 |
4,028 |
136,994 |
115,971 |
Total Possible |
30,878 |
34,368 |
1,671 |
65,525 |
68,969 |
Total Proved plus Probable plus Possible |
100,127 |
101,442 |
5,699 |
202,519 |
184,940 |
(*) Mbbl (thousand barrels of oil).(**) MMcf (million cubic
feet).(***) MBOE (thousand barrels of oil equivalent).
(1) Excludes any reserves for Brazil which were sold effective
June 30, 2017.
Total Company WI Reserves by Field or Block
|
Proved |
Proved plusProbable |
Proved plusProbable plusPossible |
Field or Block |
MBOE |
MBOE |
MBOE |
Acordionero |
32,619 |
70,207 |
107,861 |
Costayaco |
16,286 |
23,022 |
31,555 |
Moqueta |
9,270 |
12,713 |
16,809 |
PUT-7 |
3,533 |
9,872 |
16,120 |
PUT-1 (Vonu) |
1,074 |
1,915 |
2,871 |
Other Blocks |
11,341 |
19,265 |
27,303 |
Total |
74,123 |
136,994 |
202,519 |
Total Company WI Colombia Reserves
Reconciliation
|
Proved |
Proved plusProbable |
Proved plusProbable plusPossible |
|
MBOE |
MBOE |
MBOE |
December 31, 2016 |
65,139 |
115,971 |
184,940 |
Extensions |
11,063 |
22,594 |
22,826 |
Improved
Recoveries |
2,786 |
— |
— |
Technical
Revisions |
2,483 |
3,005 |
(4,435) |
Discoveries |
1,255 |
2,473 |
4,145 |
Acquisitions |
3,097 |
4,627 |
6,569 |
Economic Factors |
(229) |
(205) |
(55) |
Production |
(11,471) |
(11,471) |
(11,471) |
December 31, 2017 |
74,123 |
136,994 |
202,519 |
Reserve Life Index
|
2017(1) |
2016(2) |
Total
Proved |
5.9 |
|
5.9 |
|
Total Proved
plus Probable |
10.9 |
|
10.5 |
|
Total Proved plus Probable plus Possible |
16.1 |
|
16.7 |
|
(1) Calculated using average fourth quarter 2017 WI production
of 34,477 BOEPD.(2) Calculated using average fourth quarter 2016 WI
production of 30,258 BOEPD.
NPV Summary
Gran Tierra's reserves were evaluated using
McDaniel's commodity price forecasts at January 1, 2018. It should
not be assumed that the NPV of cash flow estimated by McDaniel
represents the fair market value of the reserves. The NPV of Gran
Tierra's reserves increased relative to year-end 2016, despite a 5%
decrease in the January 1, 2018 McDaniel price forecast as outlined
in the price forecast table below. NPVs on both a before- and
after-tax basis are presented below.
Total Company |
Discount Rate |
($ millions) |
0% |
|
5% |
|
10% |
|
15% |
|
20% |
|
Before
tax |
|
|
|
|
|
Proved Developed
Producing |
1,155 |
|
1,032 |
|
935 |
|
855 |
|
790 |
|
Proved Developed
Non-Producing |
133 |
|
102 |
|
80 |
|
65 |
|
53 |
|
Proved Undeveloped |
565 |
|
459 |
|
379 |
|
317 |
|
268 |
|
Total Proved |
1,853 |
|
1,593 |
|
1,394 |
|
1,237 |
|
1,111 |
|
Total Probable |
2,007 |
|
1,463 |
|
1,107 |
|
863 |
|
690 |
|
Total Proved plus
Probable |
3,860 |
|
3,056 |
|
2,501 |
|
2,100 |
|
1,801 |
|
Total Possible |
2,354 |
|
1,577 |
|
1,125 |
|
842 |
|
656 |
|
Total
Proved plus Probable plus Possible |
6,214 |
|
4,633 |
|
3,626 |
|
2,942 |
|
2,457 |
|
After
tax |
|
|
|
|
|
Proved Developed
Producing |
1,028 |
|
916 |
|
827 |
|
754 |
|
694 |
|
Proved Developed
Non-Producing |
100 |
|
77 |
|
61 |
|
49 |
|
40 |
|
Proved Undeveloped |
390 |
|
313 |
|
254 |
|
208 |
|
171 |
|
Total Proved |
1,518 |
|
1,306 |
|
1,142 |
|
1,011 |
|
905 |
|
Total Probable |
1,363 |
|
990 |
|
744 |
|
575 |
|
455 |
|
Total Proved plus
Probable |
2,881 |
|
2,296 |
|
1,886 |
|
1,586 |
|
1,360 |
|
Total Possible |
1,565 |
|
1,044 |
|
740 |
|
551 |
|
425 |
|
Total
Proved plus Probable plus Possible |
4,446 |
|
3,340 |
|
2,626 |
|
2,137 |
|
1,785 |
|
Future Development Costs
FDC reflects the independent evaluator's best
estimate of what it will cost to bring the proved undeveloped and
probable reserves on production. Changes in forecast FDC occur
annually as a result of development activities, acquisition and
disposition activities, and changes in capital cost estimates based
on improvements in well design and performance, as well as changes
in service costs. FDC for total 2P Colombia reserves increased to
$446 million at year-end 2017 from $349 million at year-end 2016.
The increase in FDC in 2017 was predominantly attributed to costs
to develop the following properties: Costayaco, Cumplidor, Santana,
Nancy Burdine Maxine and Vonu.
($ millions) |
Total Proved |
Total Proved Plus Probable |
2018 |
114 |
145 |
2019 |
132 |
260 |
2020 |
5 |
34 |
2021 |
— |
5 |
2022 |
— |
— |
Remainder |
2 |
2 |
Total
(undiscounted) |
253 |
446 |
Finding and Development Costs
Reserves (MBOE) |
2017 |
|
Total Proved |
74,123 |
|
Total Proved plus
Probable |
136,994 |
|
Total Proved plus
Probable plus Possible |
202,519 |
|
Capital
expenditures ($ millions) |
|
Exploration and
Development |
|
- excluding
acquired properties |
238 |
|
Operating
Netbacks ($/BOE, per WI sales volume) |
|
Operating
Netback - fourth quarter1 |
28.61 |
|
1 Operating netback is a non-GAAP measure and
does not have a standardized meaning under GAAP. Refer to "Non-GAAP
Measures" in this press release for a description of this non-GAAP
measure and a reconciliation to the most directly comparable
measure (oil and natural gas sales) calculated and presented in
accordance with GAAP.
Finding and Development Costs, excluding
FDC(1)
|
Year Ended December 31, 2017 |
Total Proved
plus Probable |
|
Reserve Additions
(MBOE) |
28 |
|
F&D Costs
($/BOE) |
8.53 |
|
F&D Recycle
Ratio |
3.4 |
|
Finding and Development Costs, including
FDC(1)
|
Year Ended December 31, 2017 |
Total Proved
plus Probable |
|
Change in FDC ($
millions) |
76 |
|
Reserve Additions
(MBOE) |
28 |
|
F&D Costs
($/BOE) |
11.26 |
|
F&D Recycle
Ratio |
2.5 |
|
(1) See "Disclosure of Oil and Gas Information -
Oil and Gas Metrics"
Forecast prices
The pricing assumptions used in estimating NI
51-101 and COGEH compliant reserves data disclosed above with
respect to net present values of future net revenue are set forth
below. The price forecasts are based on McDaniel’s standard price
forecast effective January 1, 2018 and 2017. McDaniel is an
independent qualified reserves auditor pursuant to NI 51-101.
|
Brent Crude Oil |
WTI Crude Oil |
Year |
$US/bbl |
$US/bbl |
|
January 1, 2018 |
January 1, 2017 |
January 1, 2018 |
January 1, 2017 |
2018 |
$ |
63.50 |
$ |
59.70 |
$ |
58.50 |
$ |
58.70 |
2019 |
$ |
61.30 |
$ |
63.40 |
$ |
58.70 |
$ |
62.40 |
2020 |
$ |
63.40 |
$ |
70.10 |
$ |
62.40 |
$ |
69.00 |
2021 |
$ |
70.10 |
$ |
76.90 |
$ |
69.00 |
$ |
75.80 |
2022 |
$ |
74.20 |
$ |
78.40 |
$ |
73.10 |
$ |
77.30 |
Prospective Resources
The following table represents Gran Tierra's Company WI
Prospective Resources prepared by McDaniel at December 31,
2017 derived from the GTE McDaniel Prospective Resources
Report.
|
Gross UnriskedNumber ofProspective
WellLocations orDrillingOpportunities (1) |
Company WI Values |
|
|
|
|
Prospective Resources (2) |
|
|
|
|
Unrisked |
|
Risked |
Chance ofDiscovery |
Chance ofDevelopment |
|
|
Low |
Best |
High |
Mean |
|
Mean |
Oil |
Basin |
MMBOE |
MMBOE |
MMBOE |
MMBOE |
|
MMBOE |
% |
% |
% |
Putumayo Basin - A
Limestone |
1,429 |
|
226 |
|
685 |
|
1,602 |
|
822 |
|
|
214 |
|
33 |
|
80 |
|
100 |
|
Putumayo Basin - N
Sand |
27 |
|
30 |
|
88 |
|
261 |
|
124 |
|
|
52 |
|
47 |
|
90 |
|
100 |
|
Putumayo Basin -
Structural |
10 |
|
51 |
|
145 |
|
448 |
|
209 |
|
|
31 |
|
18 |
|
85 |
|
100 |
|
Llanos Basin |
19 |
|
38 |
|
89 |
|
226 |
|
117 |
|
|
16 |
|
17 |
|
80 |
|
100 |
|
Sinu Basin |
4 |
|
10 |
|
51 |
|
258 |
|
101 |
|
|
9 |
|
14 |
|
60 |
|
80 |
|
Middle Magdalena Valley
Basin |
10 |
|
30 |
|
72 |
|
166 |
|
88 |
|
|
24 |
|
32 |
|
84 |
|
100 |
|
TOTALS |
1,499 |
|
385 |
|
1,131 |
|
2,961 |
|
1,462 |
|
|
346 |
|
29 |
|
81 |
|
99 |
(1) The gross unrisked number of prospective
well locations is based on the gross unrisked number of prospects
in the GTE McDaniel Prospective Resources Report with the following
two exceptions: (i) for the Putumayo Basin - A-Limestone, the gross
unrisked number of prospective drilling opportunities is an
internal Gran Tierra estimate which is calculated by dividing the
McDaniel estimate of A-Limestone property gross (100 % WI) mean
unrisked Prospective Resources of 1,072 MMBOE by Gran Tierra's
internal estimate of average mean unrisked Prospective Resources of
0.75 MMBOE per A-Limestone drilling opportunity (1,072/0.75 =
1,429); and (ii) for the Sinu Basin, the gross unrisked number of
prospective drilling opportunities is based on the gross unrisked
number of leads. Prospective drilling opportunities have not been
calculated in accordance with COGEH and are not actual drilling
locations.(2) May not add due to rounding.
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 American (GTE) and the Toronto Stock Exchange (GTE), and
operating in South America. Gran Tierra holds interests in
producing and prospective properties in Colombia. Gran Tierra 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's Securities and Exchange Commission filings are
available on the SEC website at www.sec.gov and on SEDAR at
www.sedar.com.
Contact Information
For investor and media inquiries please contact:
Gary Guidry, Chief Executive Officer
Ryan Ellson, Chief Financial Officer
Rodger Trimble, Vice President, Investor RelationsTel:
+1.403.265.3221
For more information on Gran Tierra please go
to: www.grantierra.com.
FORWARD LOOKING STATEMENTS
ADVISORY
This press release contains opinions, forecasts,
projections, and other statements about future events or results
that constitute forward-looking statements within the meaning of
the United States Private Securities Litigation Reform Act of 1995,
Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended, and
financial outlook and forward looking information within the
meaning of applicable Canadian securities laws (collectively,
"forward-looking statements"). Such forward-looking statements
include, but are not limited to, the Company’s strategies,
operations including planned operations, infrastructure schedules,
growth of referenced reserves and forecast prices.
The forward-looking statements contained in this
press release reflect several material factors and expectations and
assumptions of Gran Tierra including, without limitation, that Gran
Tierra will continue to conduct its operations in a manner
consistent with its current expectations, the accuracy of testing
and production results and seismic data, pricing and cost estimates
(including with respect to commodity pricing and exchange rates),
rig availability, the effects of drilling down-dip, the effects of
waterflood and multi-stage fracture stimulation operations, the
extent and effect of delivery disruptions, and the general
continuance of current or, where applicable, assumed operational,
regulatory and industry conditions including in areas of potential
expansion, and the ability of Gran Tierra to execute its current
business and operational plans in the manner currently planned.
Gran Tierra 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.
Among the important factors that could cause
actual results to differ materially from those indicated by the
forward-looking statements in this press release are: ; Gran
Tierra’s operations are located in South America, and unexpected
problems can arise due to guerilla activity; technical difficulties
and operational difficulties may arise which impact the production,
transport or sale of our products; geographic, political and
weather conditions can impact the production, transport or sale of
our products; the ability of Gran Tierra to execute its business
plan; the risk that unexpected delays and difficulties in
developing currently owned properties may occur; the timely receipt
of regulatory or other required approvals for our operating
activities; the failure of exploratory drilling to result in
commercial wells; unexpected delays due to the limited availability
of drilling equipment and personnel; the risk that oil prices could
remain weak or continue to decline, or global economic and credit
market conditions may impact oil prices and oil consumption more
than Gran Tierra currently predicts, which could cause Gran Tierra
to further modify its strategy and capital spending program; and
the risk factors detailed from time to time in Gran Tierra’s
periodic reports filed with the Securities and Exchange Commission,
including, without limitation, under the caption " Risk Factors" in
Gran Tierra's Annual Report on Form 10-K filed March 1, 2017, and
its Quarterly Reports on Form 10-Q . These filings are available on
the SEC website at http://www.sec.gov and on SEDAR at
www.sedar.com. Although the current capital spending program and
long term strategy of Gran Tierra is based upon the current
expectations of the management of Gran Tierra, should any one of a
number of issues arise, Gran Tierra may find it necessary to alter
its business strategy and/or capital spending program and there can
be no assurance as at the date of this press release as to how
those funds may be reallocated or strategy changed.
Statements relating to “reserves” or “resources”
are also deemed to be forward-looking statements, as they involve
the implied assessment, based on certain estimates and assumptions,
including that the reserves and resources described can be
profitably produced in the future.
All forward-looking statements are made as of
the date of this press release and the fact that this press release
remains available does not constitute a representation by Gran
Tierra that Gran Tierra believes these forward-looking statements
continue to be true as of any subsequent date. Actual results may
vary materially from the expected results expressed in
forward-looking statements. Gran Tierra 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 laws. Gran
Tierra’s forward-looking statements are expressly qualified in
their entirety by this cautionary statement.
Non-GAAP Measures
This press release includes non-GAAP measures
which do not have a standardized meaning under GAAP. Investors are
cautioned that these measures should not be construed as
alternatives to net loss or other measures of financial performance
as determined in accordance with GAAP. Gran Tierra's method of
calculating these measures may differ from other companies and,
accordingly, they may not be comparable to similar measures used by
other companies.
Operating netback as presented is oil and gas
sales net of operating and transportation expenses. Management
views operating netback as a financial performance measure.
Management believes that operating netback is a useful supplemental
measure for investors to analyze financial performance and provide
an indication of the results generated by Gran Tierra's principal
business activities prior to the consideration of other income and
expenses. A reconciliation from oil and natural gas sales (GAAP) to
operating netback is provided in the table below:
|
Three Months Ended December 31,
2017 |
|
(Thousands of U.S. Dollars) |
($/BOE, per WI sales
volume) |
Oil and natural gas
sales |
$ |
127,180 |
|
$ |
40.36 |
|
Operating expenses |
(31,403 |
) |
(9.96 |
) |
Transportation
expenses |
(5,635 |
) |
(1.79 |
) |
Operating
netback |
$ |
90,142 |
|
$ |
28.61 |
|
Unaudited Financial Information
Certain financial and operating results included
in this news release include working capital, capital expenditures,
production information and operating netbacks are based on
unaudited estimated results. These estimated results are subject to
change upon completion of the Company's audited financial
statements for the year ended December 31, 2017, and changes could
be material. Gran Tierra anticipates filing its audited financial
statements and related management's discussion and analysis for the
year ended December 31, 2017 on or before February 27, 2018.
DISCLOSURE OF OIL AND GAS
INFORMATION
Gran Tierra's Statement of Reserves Data and
Other Oil and Gas Information on Form 51-101F1 dated effective as
at December 31, 2017 (the "GTE 51-101F1"),
which includes disclosure of its oil and gas reserves and other oil
and gas information in accordance with NI 51-101 forming the basis
of this press release, is available on SEDAR at www.sedar.com.
Estimates of net present value contained herein
do not necessarily represent fair market value of reserves.
Estimates of reserves and future net revenue for individual
properties may not reflect the same level of confidence as
estimates of reserves and future net revenue for all properties,
due to the effect of aggregation.
BOEs have been converted on the basis of six
thousand cubic feet (“Mcf”) natural gas to 1
barrel of oil. BOEs 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.
Definitions
Proved reserves are those reserves that can be
estimated with a high degree of certainty to be recoverable. It is
likely that the actual remaining quantities recovered will exceed
the estimated proved reserves.
Probable reserves are those additional reserves
that are less certain to be recovered than proved reserves. It is
equally likely that the actual remaining quantities recovered will
be greater or less than the sum of the estimated proved plus
probable reserves.
Possible reserves are those additional reserves
that are less certain to be recovered than Probable reserves. There
is a 10% probability that the quantities actually recovered will
equal or exceed the sum of Proved plus Probable plus Possible
reserves. The estimate of reserves for individual properties may
not reflect the same confidence level as estimates of reserves for
all properties, due to the effects of aggregation.
See the GTE 51-101F1 for additional definitions
regarding terms used in this press release.
Oil and Gas Metrics
This press release contains a number of oil and
gas metrics, including F&D costs, F&D recycle ratio, NAV
per share, operating netback, reserve life index, reserves per
share and reserves replacement, which do not have standardized
meanings or standard methods of calculation and therefore such
measures may not be comparable to similar measures used by other
companies and should not be used to make comparisons. Such metrics
have been included herein to provide readers with additional
measures to evaluate the Company's performance; however, such
measures are not reliable indicators of the future performance of
the Company and future performance may not compare to the
performance in previous periods.
- F&D costs are calculated as estimated exploration and
development capital expenditures in Colombia, excluding
acquisitions and dispositions, divided by the applicable reserves
additions both before and after changes in FDC costs. The
calculation of F&D costs incorporates the change in FDC
required to bring proved undeveloped and developed reserves into
production. The aggregate of the exploration and development costs
incurred in the financial year and the changes during that year in
estimated FDC may not reflect the total F&D costs related to
reserves additions for that year. Management uses F&D costs per
BOE as a measure of its ability to execute its capital program and
of its asset quality.
- F&D recycle ratio is calculated as estimated Colombia
fourth quarter operating netback per WI sales volume divided by the
appropriate F&D costs per BOE. Management uses F&D recycle
ratio as an indicator of profitability of its oil and gas
activities.
- NAV per share is calculated as before tax NPV discounted at 10%
plus estimated net working capital deficit and debt, excluding risk
management assets and liabilities and investment in Sterling
Resources Ltd. shares, and number of shares of Gran Tierra's common
stock and exchangeable shares issued and outstanding. Management
uses NAV per share as a measure of the relative change of Gran
Tierra's net asset value over its outstanding common stock over a
period of time.
- Operating netback is calculated as described in this press
release. Management believes that operating netback is a useful
supplemental measure for investors to analyze financial performance
and provide an indication of the results generated by Gran Tierra's
principal business activities prior to the consideration of other
income and expenses.
- Reserve life index is calculated as reserves in the referenced
category divided by the referenced estimated Colombia production.
Management uses this measure to determine how long the booked
reserves will last at current production rates if no further
reserves were added.
- Reserve per share is calculated as reserves in the referenced
category divided by the number of common stock and exchangeable
shares issued and outstanding at December 31. Management uses this
measure to determine the relative change of its reserve base over
its outstanding common stock over a period of time.
- Reserves replacement is calculated as reserves in the
referenced category divided by estimated annual Colombia
production. Management uses this measure to determine the relative
change of its reserve base over a period of time.
Prospective Resources
Prospective Resources are those quantities of
petroleum estimated, as of a given date, to be potentially
recoverable from undiscovered accumulations by application of
future development projects. Prospective Resources have both an
associated chance of discovery and a chance of development. Not all
exploration projects will result in discoveries. The chance that an
exploration project will result in the discovery of petroleum is
referred to as the "chance of discovery." Thus, for an undiscovered
accumulation the chance of commerciality is the product of two risk
components-the chance of discovery and the chance of development.
There is no certainty that any portion of the Prospective Resources
will be discovered. If discovered, there is no certainty that it
will be commercially viable to produce any portion of the
Prospective Resources.
Estimates of the Company's Prospective Resources
are based upon the GTE McDaniel Prospective Resources Report. The
estimates of Prospective Resources provided in this press release
are estimates only and there is no guarantee that the estimated
Prospective Resources will be recovered. Actual resources may be
greater than or less than the estimates provided in this in this
press release and the differences may be material. There is no
assurance that the forecast price and cost assumptions applied by
McDaniel in evaluating Gran Tierra's Prospective Resources will be
attained and variances could be material. There is no certainty
that any portion of the Prospective Resources will be discovered.
If discovered, there is no certainty that it will be commercially
viable to produce any portion of the Prospective Resources.
Estimates of Prospective Resources are by their
nature more speculative than estimates of proved reserves and would
require substantial capital spending over a significant number of
years to implement recovery. Actual locations drilled and
quantities that may be ultimately recovered from our properties
will differ substantially. In addition, we have made no commitment
to drill, and likely will not drill, all of the drilling locations
that have been attributable to these quantities.
The following classification of Prospective
Resources is used in this press release:
- Low Estimate means there is at least a 90 percent probability
(P90) that the quantities actually recovered will equal or exceed
the low estimate.
- Best Estimate means there is at least a 50 percent probability
(P50) that the quantities actually recovered will equal or exceed
the best estimate.
- High Estimate means there is at least a 10 percent probability
(P10) that the quantities actually recovered will equal or exceed
the high estimate.
- Mean Estimate represents the arithmetic average of the expected
recoverable volume. It is the most accurate single point
representation of the volume distribution.
For a discussion of Gran Tierra’s interest in
the Prospective Resources, the location of the Prospective
Resources, the product type reasonably expected, the risks and
level of uncertainty associated with recovery of the resources, the
significant positive and negative factors relevant to the estimate
of the Prospective Resources, a description of the applicable
projects maturity sub-categories and other relevant information
regarding the Prospective Resources estimates, please see the GTE
NI 51-101F1 available on SEDAR at www.sedar.com.
Disclosure of Reserve Information and
Cautionary Note to U.S. Investors
Unless expressly stated otherwise, all estimates
of proved, probable and possible reserves and related future net
revenue disclosed in this press release have been prepared in
accordance with NI 51-101. Estimates of reserves and future net
revenue made in accordance with NI 51-101 will differ from
corresponding estimates prepared in accordance with applicable U.S.
Securities and Exchange Commission (“SEC”) rules and disclosure
requirements of the U.S. Financial Accounting Standards Board
(“FASB”), and those differences may be material. NI 51-101,
for example, requires disclosure of reserves and related future net
revenue estimates based on forecast prices and costs, whereas SEC
and FASB standards require that reserves and related future net
revenue be estimated using average prices for the previous 12
months. In addition, NI 51-101 permits the presentation of reserves
estimates on a “company gross” basis, representing Gran Tierra’s
working interest share before deduction of royalties, whereas SEC
and FASB standards require the presentation of net reserve
estimates after the deduction of royalties and similar payments.
There are also differences in the technical reserves estimation
standards applicable under NI 51-101 and, pursuant thereto, the
COGEH, and those applicable under SEC and FASB requirements.
In addition to being a reporting issuer in
certain Canadian jurisdictions, Gran Tierra is a registrant with
the SEC and subject to domestic issuer reporting requirements under
U.S. federal securities law, including with respect to the
disclosure of reserves and other oil and gas information in
accordance with U.S. federal securities law and applicable SEC
rules and regulations (collectively, "SEC requirements").
Disclosure of such information in accordance with SEC requirements
is included in the Company's Annual Report on Form 10-K and in
other reports and materials filed with or furnished to the SEC and,
as applicable, Canadian securities regulatory authorities. The SEC
permits oil and gas companies that are subject to domestic issuer
reporting requirements under U.S. federal securities law, in their
filings with the SEC, to disclose only estimated proved, probable
and possible reserves that meet the SEC's definitions of such
terms. Gran Tierra has disclosed estimated proved, probable and
possible reserves in its filings with the SEC. In addition, Gran
Tierra prepares its financial statements in accordance with United
States generally accepted accounting principles, which require that
the notes to its annual financial statements include supplementary
disclosure in respect of the Company's oil and gas activities,
including estimates of its proved oil and gas reserves and a
standardized measure of discounted future net cash flows relating
to proved oil and gas reserve quantities. This supplementary
financial statement disclosure is presented in accordance with FASB
requirements, which align with corresponding SEC requirements
concerning reserves estimation and reporting.
In this press release, the Company uses the term
Prospective Resources. The SEC guidelines strictly prohibit the
Company from including Prospective Resources in filings with the
SEC. Investors are urged to consider closely the disclosures and
risk factors in the Company's Annual Report on Form 10-K, Quarterly
Reports on Form 10-Q and in the other reports and filings with the
SEC, available from the Company's offices or website. These forms
can also be obtained from the SEC website at www.sec.gov or by
calling 1-800-SEC-0330.
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