Gran Tierra Energy Inc., a company focused on oil and gas exploration and production in South America, on Monday announced it has entered into an agreement to farm into Global Energy Development PLC Block 95 in Peru's Marañon Basin. Pursuant to the terms of the agreement, Gran Tierra Energy will acquire a 60% working interest and operatorship in Block 95.
"This farm-in will allow Gran Tierra Energy to expand and diversify its exploration portfolio while also reducing technical risk given that petroleum resources have already been discovered and tested on the block," said Dana Coffield, President and Chief Executive Officer of Gran Tierra Energy. "With this agreement, Gran Tierra Energy will be amongst the largest onshore exploration acreage holders in Peru and will be well positioned to test both existing and new hydrocarbon plays in the region."
Block 95 consists of 1.3 million gross acres, and is located in northeast Peru, due south of Gran Tierra Energy's existing acreage in the prolific Marañon Basin where over 1 billion barrels of recoverable oil have been discovered to date. The contract area contains the Bretaña-1 well, which was drilled in 1974 and tested 18° API gravity oil on natural flow rates of approximately 800 barrels of oil per day. Under the agreement, Gran Tierra Energy will assume the cost of drilling an exploration well, up to a cap of US$15 million, along with its share of past costs incurred in respect of the well. Upon reaching the US$15 million cap, Gran Tierra Energy will pay only its pro rata share of costs going forward.
Gran Tierra Energy expects to start drilling the exploration well before year-end 2011, once final environmental permits are obtained.
The transaction is subject to PeruPetro S.A. approval, which is expected to take approximately four to six months.
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