Overall 2015 Capital Budget Increased by
$45 million to $185 million
CALGARY, June 24, 2015 /PRNewswire/ - Gran Tierra
Energy Inc. ("Gran Tierra" or the "Company") (NYSE MKT: GTE,
TSX: GTE), a company focused on oil exploration and production
in South America, today announced
an increased 2015 capital program. The increased capital is
intended to provide accelerated development drilling at the
Company's core producing assets in the Putumayo Basin in
Colombia, specifically the Moqueta
and Costayaco fields on the Chaza Block. In addition, the Company
expects to accelerate the required laboratory and feasibility
studies for enhanced oil recovery techniques in the Costayaco and
Moqueta fields. All dollar amounts are in United States dollars unless otherwise
indicated.
During the first quarter of 2015, the Company incurred
$74 million of the $140 million 2015 capital program. Gran Tierra's
board of Directors has approved a $45
million increase to its 2015 capital program to $185 million.
The allocation of capital includes an increase of $55 million directed at Colombia development, at negotiated reduced
services costs. At forward pricing, the additional capital
generates IRRs in excess of 30 percent, and the majority of the
increased drilling impacts the 2015 exit rate and the forecasted
2016 average production. The total 2015 capital program in
Colombia is now $115 million and the majority of Colombia's capital program is expected to be
spent on development drilling activities on the Moqueta and
Costayaco fields. The program includes an expected three wells at
Moqueta and three wells at Costayaco. These drilling programs are
expected to continue into 2016.
Peru's capital program has been
reduced to $49 million, of which
$11 million is expected to be
incurred during the remainder of 2015. The Company is focused on
limiting total costs (capital expenditures and general and
administrative expenses) in Peru
over the next 12 months to ensure retention of lands and security
of assets. The Company is exploring options to maximize shareholder
value for the assets in Peru.
Brazil's capital program has
been reduced to $20 million, of which
$6 million is expected to be incurred
during the remainder of 2015.
Of the total budget of $185
million, $97 million is
allocated for drilling, $45 million
for facilities, pipelines and other, and $43
million for geological and geophysical expenditures. The
program meets all work obligations and commitments in 2015.
The Company expects to finance its 2015 capital program through
cash flows from operations and cash on hand, while retaining
financial flexibility to undertake further development activities
and pursue diversified growth opportunities in Colombia.
Revised 2015 Capital Program ($MM)*:
Country
|
Drilling
|
Facilities
&
Pipelines &
Other
|
Geological
&
Geophysical
|
Total
|
Colombia
|
70
|
21
|
24
|
115
|
Peru
|
23
|
18
|
8
|
49
|
Brazil
|
4
|
5
|
11
|
20
|
Corporate
|
-
|
1
|
0
|
1
|
Total*
|
97
|
45
|
43
|
185
|
*Gran Tierra is
utilizing an average Brent oil price of $63.46 per barrel for
budgeting purposes during the second half of 2015.
|
Production Outlook
With the revised capital program, Gran Tierra expects 2015 gross
working interest ("WI") production to average between 22,500
and 23,500 barrels of oil equivalent per day ("BOEPD") or
between 18,400 and 19,400 BOEPD net after royalty
("NAR"). Production from Colombia is expected to be approximately
17,850 BOEPD NAR, with Costayaco contributing approximately 10,400
BOEPD NAR and Moqueta contributing approximately 5,100 BOEPD NAR,
assuming a 2% contingency for potential delivery disruptions.
Production from the Company's Brazil operation is expected to average 770
BOEPD NAR. Approximately 99% of expected production is oil, with
the balance natural gas.
The accelerated development associated with the increased
capital program at the Moqueta field is expected to provide the
production capacity for the Company to maintain consistent
production during 2016.The additional development is intended to
test Probable and Possible reserves recognized by the Company's
external reserves auditor.
Comparison ($MM):
|
Previous
Capital Program
|
Incurred
During
Q1 2015
|
Revised
Forecast
at June 25, 2015
|
%
Change
|
Total Capital
Program
|
$140*
|
$74
|
$185
|
+32
|
|
$60
|
$21
|
$115
|
+92
|
|
$55
|
$38
|
$49
|
-11
|
|
$24
|
$14
|
$20
|
-17
|
Forecasted Funds
Flow from Operations**
|
$85 to
$105***
|
|
$130 to
$140****
|
+53
|
Production
Guidance – Gross WI
|
21,800 – 22,300
BOEPD
|
|
22,500 – 23,500
BOEPD
|
+3
|
Production
Guidance – NAR*****
|
18,200 – 19,200
BOEPD
|
|
18,400 – 19,400
BOEPD
|
+1
|
2015 Exit
Production Rate – Gross WI
|
21,000 –
22,000
BOEPD
|
|
25,000 – 26,000
BOEPD
|
+18
|
* As announced
February 8, 2015, and included $1 million associated with corporate
activities.
|
** Funds flow from
continuing operations for the three months ended March 31, 2015,
was $25.6 million. See below under "Forward-Looking Statements
and Advisories".
|
*** As announced May
6, 2015, assuming an average Brent oil price of $50 for
2015.
|
**** Assuming an
average Brent oil price of $63.46 per barrel for the remainder of
2015.
|
*****When oil prices
increase, the amount of "High Priced Rights" royalties the Company
pays is increased, which results in less NAR barrels to the
Company.
|
About Gran Tierra Energy Inc.
Gran Tierra is an international oil and gas exploration and
production company, headquartered in Calgary, Canada, incorporated in the United States and operating in
South America, with its stock
trading on the NYSE MKT Exchange (GTE) and the Toronto Stock
Exchange (GTE). Gran Tierra holds interests in producing and
prospective properties in Colombia, Peru, and Brazil. Gran Tierra has a strategy that
focuses on establishing a portfolio of producing properties, plus
production enhancement and exploration opportunities as appropriate
to provide a base for future growth.
Gran Tierra'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 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,
financial outlook 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 "expect", "anticipate", "intend", "will" 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's intended capital spending program for
2015 and the increase thereto which includes: production estimates,
the product mix of such production and expectations respecting
production growth, the 2015 exit rate and maintenance of production
into 2016; expectations with respect to drilling, drilling
locations, testing, construction, exploration activities,
production and timing of these activities and results; the intended
testing of Gran Tierra's reserves; expected costs and the
allocation of Gran Tierra's capital spending program; anticipated
funding of the capital spending program; and its anticipated funds
flow from operations for 2015.
The forward-looking statements contained in this news release
reflect several material factors and expectations and assumptions
of Gran Tierra. In addition to those assumptions inherent in such
forward-looking statements or otherwise set out in this news
release, such assumptions include, without limitation, assumptions
and estimates as to: future oil prices and exchange rates; 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
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's
operations are located in South
America, and unexpected problems can arise due to guerilla
activity; disruptions on the Oleoducto Transandino pipeline may be
more than Gran Tierra expects and activities undertaken to mitigate
the impact of such disruptions may not have the impact currently
anticipated by Gran Tierra; geographic, political and weather
conditions can impede testing, which could impact or delay the
commencement of drilling exploration wells; and the risk that oil
prices could continue to fall, or current 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.
Although the current capital program is based upon the current
expectations of the management of Gran Tierra, there may be
circumstances in which, for unforeseen reasons, a change in
strategy or reallocation of funds may be necessary as may be
determined at the discretion of Gran Tierra and there can be no
assurance as at the date of this press release as to how such
strategy may change or funds be reallocated. Should any one of a
number of issues arise, Gran Tierra may find it necessary to alter
its cost savings measures, current business strategy and/or capital
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 are
included in risks detailed from time to time in Gran Tierra's
Securities and Exchange Commission filings, including, without
limitation, under the caption "Risk Factors" in Gran Tierra's
Quarterly Report on Form 10-Q filed May 6,
2015. 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. Readers are advised that the
purpose of the financial outlook provided in this press release is
to give a high-level overview of Gran Tierra's anticipated
financial position in 2015 and such financial outlook may not be
appropriate for other purposes.
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 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 have been calculated on the basis of 6 Mcf of natural gas
to 1 bbl 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.
** Funds flow from continuing operations is a non-GAAP measure
which does not have any standardized meaning prescribed under
generally accepted accounting principles in the United States of America ("GAAP").
Management uses this financial measure to analyze operating
performance and the income generated by Gran Tierra Energy's
principal business activities prior to the consideration of how
non-cash items affect that income, and believes that this financial
measure is also useful supplemental information for investors to
analyze operating performance and Gran Tierra Energy's financial
results. Investors should be cautioned that this measure should not
be construed as an alternative to net income or other measures of
financial performance as determined in accordance with GAAP.
Gran Tierra Energy's method of calculating this measure may differ
from other companies and, accordingly, it may not be comparable to
similar measures used by other companies. Funds flow from
continuing operations, as presented, is net income adjusted for
loss from discontinued operations, net of income taxes, depletion,
depreciation, accretion and impairment ("DD&A") expenses,
deferred tax expense or recovery, non-cash stock-based
compensation, unrealized foreign exchange gain or loss, unrealized
financial instrument gain or loss, cash settlement of asset
retirement obligation, equity tax and other loss.
SOURCE Gran Tierra Energy Inc.