Gran Tierra announced capital spending plans on the recently acquired Petrolifera Petroleum Limited ("Petrolifera") assets.
Gran Tierra Energy intends to spend approximately $55 million on the newly acquired assets with approximately $25 million in Colombia, $14 million in Peru and $16 million in Argentina. Drilling and completion costs are expected to amount to $41 million, including $14 million in Colombia, $13 million in Peru and $14 in Argentina. Seismic costs total $12 million, mostly in Colombia and facilities costs total $2 million, mostly in Argentina.
This capital program is in addition to the $299 million 2011 capital program previously announced for Colombia, Peru, Brazil and Argentina by Gran Tierra Energy, which remains unchanged. This new combined capital program of approximately $355 million for 2011 is expected to be funded from existing cash reserves and cash flow.
"Our evaluation of the new assets under management indicates that there is significant potential to grow reserves and production in the coming years. With appropriate allocation of capital, we believe we can unlock significant value from these assets," said Dana Coffield, President and Chief Executive Officer of Gran Tierra Energy. "In Colombia, Gran Tierra Energy intends to delineate a potential gas production platform in the Lower Magdalena basin, prepare for 2012 exploration drilling in Peru, and reverse production declines in Argentina where both oil and gas prices have consistently been rising."
Gran Tierra Energy plans to spend approximately $14 million on drilling in Colombia, including one exploration well and one delineation well with the intention of evaluating a potential gas production platform in the Lower Magdalena Basin.
Sierra Nevada Block (100% working interest and operator)
Following Gran Tierra Energy's announcement of its offer to acquire Petrolifera, GLJ Petroleum Consultants Ltd. ("GLJ") independent resource evaluators, estimated 101.5 billion cubic feet ("BCF") of United States Securities and Exchange Commission ("SEC") compliant 3P natural gas reserves (15.6 BCF 1P and 34.3 BCF 2P) at the Brillante discovery well drilled in 2010. GLJ's estimate is effective December 31, 2010. A delineation well in the Brillante discovery is planned for the third quarter of 2011 to further define the significant potential of this discovery. A regional gas market evaluation is underway, as well as an evaluation of transportation options in the area.
The La Pinta-1 well, drilled in 2010, encountered good oil shows while drilling in the Upper Porquero reservoirs. Gran Tierra Energy plans to re-enter this well and perforate this zone to test its oil potential in the third quarter of 2011.
Magdelena Block (100% working interest and operator)
Testing operations on the San Angel-1 well continue and, contingent upon successful test results, Gran Tierra Energy may acquire approximately 150 square kilometers of 3D seismic in the area.
Turpial Block (50% working interest and operator)
One exploration well is planned for the Turpial Block to evaluate the heavy oil reservoirs encountered by stratigraphic drilling in the 1970's.
In 2011, Gran Tierra Energy intends to spend approximately $13 million in preparation for drilling in early 2012.
Block 107 (100% working interest and operator)
Gran Tierra Energy believes significant resource potential exists on Block 107 in Peru. One exploration well is planned for the second quarter of 2012, with 2011 spending dedicated to planning and purchase of long lead items in preparation for 2012 drilling.
Capital spending in Argentina will initially focus on reversing production declines on properties in the Neuquen Basin. Gran Tierra Energy plans to spend $14 million on drilling and completions in Argentina.
Puesto Morales / Puesto Morales Este (100% working interest and operator)
Gran Tierra Energy plans to conduct work-over programs on approximately 16 wells, along with drilling approximately six development wells, including three producers and three new water injectors. Gran Tierra Energy believes it can improve recovery in the existing reservoirs by minimizing water channeling in the waterflood project through the use of polymer. The budgeted work program may be adjusted to accommodate results during implementation of the program.
Production and Reserves
Including the Petrolifera assets, Gran Tierra Energy anticipates average production in 2011 to range between 17,500 and 19,000 barrels of oil equivalent ("BOE") per day, net after royalty, weighted approximately 95% to oil.
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