Gran Tierra Energy Inc. provided updates for its operations in Colombia, Argentina and Peru.
Block 95, Marañon Basin (Gran Tierra Energy 100% WI and operator subject to PeruPetro S.A. and Peruvian Government approvals)
Gran Tierra Energy Peru S.R.L. has entered into an agreement to purchase the remaining 40 percent working interest in Block 95 from Global Energy Development PLC. Subject to PeruPetro S.A. and Peruvian Government approvals, Gran Tierra Energy will have a 100 percent working interest in Block 95.
In addition, Gran Tierra Energy announces the results of a contingent gross lease resource estimate for an oil discovery on Block 95, provided by its independent reserves auditor, GLJ Petroleum Consultants ("GLJ") effective June 1, 2012. The resource estimate has been prepared in compliance with National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities and the Canadian Oil and Gas Evaluation Handbook.
There is no certainty that it will be commercially viable to produce any portion of the resources. Contingent resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations using established technology or technology under development, but which are not currently considered to be commercially recoverable due to one or more contingencies. Contingencies may include factors such as economic, legal, environmental, political, and regulatory matters, or a lack of markets. It is also appropriate to classify as contingent resources the estimated discovered recoverable quantities associated with a project in the early evaluation stage. Contingent resources are further classified in accordance with the level of certainty associated with the estimates and may be subclassified based on project maturity and/or characterized by their economic status. The recoverable resources attributed to the Block 95 discovery were considered sub-commercial (contingent resources) due to the absence of a commitment to proceed with development and the fact that development is in the very early stages as considered from the point of view of both regulatory requirements, and development strategy. It is premature to determine the economic status; the economic status is undetermined until additional fluid samples confirm the market for the crude and Gran Tierra Energy has done additional work on the oil market, development capital and environmental/regulatory matters.
The oil field discovered on Block 95, with the Bretaña 10-16-1X discovery well drilled in 1974, flowed 807 barrels of oil per day naturally without pumps for approximately six hours from the Vivian Formation. Well records indicate inconsistent oil gravity values of 13.1 degree API and 17.6 degree API. As the Bretaña well is located in a remote location, an oil gravity of 13.1 degree API will make this project challenging to develop in the current economic environment. If the oil gravity is 17.6 degree API, this project will likely be economic to develop in the current economic environment. Gran Tierra Energy is planning to drill a new exploration well in the fourth quarter of this year to further delineate this field and to explore deeper reservoir horizons not penetrated by the discovery well. A drilling site location has been identified and civil construction initiated for the Bretaña Norte 95-2-1X exploration well on this structure.
Chaza Block, Putumayo Basin (Gran Tierra Energy 100% WI and operator)
A 3-D seismic program has now been acquired over the Moqueta Field. The new maps over the field indicate the eastern flank of the structure extends more than 1.55 miles (2.5 kilometers) to the northeast at the level of the lowest known oil in existing well bores in the field, implying additional reserve potential may exist on the east flank of the structure that had not previously been recognized. A new well to evaluate this additional potential is being designed for drilling late this year.
Mobilization for a drilling rig is underway for the Moqueta-7 appraisal well in the Moqueta field, which is expected to be spud in early July. This well is targeting additional appraisal of the down-dip extent of the oil columns encountered in the Villeta U, Villeta T and Caballos reservoirs in the field approximately 3,150 feet (960 meters) west-southwest of the Moqueta-4 appraisal well. Gran Tierra Energy intends to target the interpreted oil-water contact, which has not yet been encountered by drilling, approximately 225 feet below the lowest known oil in existing well bores in the field; Moqueta-7 could be used as an oil producer or water injector for pressure support depending on the well results.
The Costayaco-16 development well spud on June 6, 2012; this well is intended to be a producing well to assist with maintaining plateau production in the Costayaco Field.
Azar Block, Putumayo Basin (Gran Tierra Energy 40% WI and Operator, Lewis Energy Colombia Inc. 40% WI, Gold Oil 20% WI subject to Agencia Nacional de Hidrocarburos approval)
The La Vega Este-1 oil exploration well spud on May 14, 2012 and is targeting the same Cretaceous sandstone intervals present in the Costayaco and Moqueta discoveries. Gran Tierra Energy expects the La Vega Este well to reach total depth at the end of June, with results expected in July.
Garibay Block, Llanos Basin (Gran Tierra Energy 50% WI, CEPSA 50% WI and operator)
The Bordon-1 oil exploration well spud on June 6, 2012 and is expected to reach total depth in late July, with results expected in August.
Puesto Guevara Block, Neuquen Basin (Gran Tierra Energy 100% WI and operator)
The Los Incas x-1 oil exploration well in the Puesto Guevara Block has been drilled and is being plugged and abandoned after encountering only minor oil shows.
May production and sales have been impacted by additional disruptions on the Ecopetrol-operated Oleoducto Transandino ("OTA") pipeline in Colombia. Gran Tierra Energy continued production at a reduced rate while the OTA pipeline was down, selling a portion of its crude through trucking and storing excess crude. Production, net after royalties and before changes in inventory and losses for the months of April and May averaged approximately 18,000 barrels of oil equivalent per day. Production is expected to return to normal levels mid-June.
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