Gran Tierra Cites Record Quarterly Production for 3Q 2009
Gran Tierra Energy has announced financial and operating results for the quarter ended September 30, 2009.
Key highlights of the quarter ended September 30, 2009 include:
- Increased production 209% to 12,945 barrels of oil per day (BOPD) net after royalty (NAR) for the quarter ended September 30, 2009, compared with 4,194 BOPD NAR for the same period in 2008;
- Reached daily production plateau target of 19,000 BOPD gross for the Costayaco field at the end of August, ahead of schedule. In addition, the Costayaco gross field production reached five million cumulative barrels of oil on September 10, 2009 triggering an increase in government royalties for Costayaco;
- Net loss for the quarter was $2.8 million and includes a foreign exchange loss of $18.9 million, due to a 20.3 million unrealized non-cash foreign exchange loss, offset in part by a realized foreign exchange gain of $1.4 million;
- Funds flow from operations for the quarter was $53.1 million compared with $17.8 million for the same period in 2008
- Ecopetrol's Trans-Andean oil pipeline in Southern Colombia was disrupted between July 10, 2009 and August 10, 2009; consolidated production averaged 4,700 BOPD NAR during this period;
- Costayaco-9 logging indicates that reservoirs lie completely within the field's oil column; the well was subsequently tested and put on production at approximately 2,000 BOPD gross from the lower (Caballos) of two reservoirs;
- Gran Tierra Energy opened an office in Brazil and appointed Julio Cesar Moreira as President of the Brazil business unit;
- Cash and cash equivalents of $151.6 million at September 30, 2009; and
- Gran Tierra Energy remains debt free.
"During the third quarter we executed our exploration and development program and grew production to record levels in spite of a period of reduced production due to a disruption in Ecopetrol's pipeline system. In addition, we achieved our daily production target of 19,000 BOPD gross from the Costayaco field ahead of schedule, and generated strong funds flow from operations in both Colombia and Argentina," said Dana Coffield, President and Chief Executive Officer of Gran Tierra Energy. "With a strong balance sheet and consistent funds flow from operations, we are positioned to support future growth and fund our ongoing development and exploration program, including an extensive exploration drilling campaign in Colombia and Peru beginning in late 2009 and continuing through 2010. We are expanding our South American operations into Brazil to increase our access to material exploration opportunities and to leverage our operating capabilities in a country in which our senior management already has extensive experience."
Third Quarter 2009 Financial Highlights:
Revenue and interest increased by 87% to $75.4 million for the three months ended September 30, 2009 compared with $40.3 million for the same period in 2008. For the nine months ended September 30, 2009 revenue and interest increased by 78% to $167.4 million compared with $94.3 million for the same period the previous year. Increased revenue this quarter reflects a 209% increase in production, primarily due to increased production from the continued development of the Costayaco field in the Chaza Block in Colombia, and the addition of production from Solana Resources' interests in Colombia following the acquisition on November 14, 2008. The impact of higher production was partially offset by the effect of lower oil prices. The average price received per barrel of oil in the third quarter of 2009 decreased 39% to $63.12 per barrel from $103.88 per barrel in the third quarter of 2008 and decreased by 48% to $50.84 per barrel for the nine months ended September 30, 2009 from $98.40 per barrel from the same period in 2008.
Operating expenses increased by 102% to $9.1 million for the quarter ended September 30, 2009 compared with $4.5 million for the same quarter in 2008. On a per barrel basis, operating expenses for the third quarter of 2009 declined by 35% to $7.64 per barrel compared with $11.70 per barrel for the same period in 2008. For the nine months ended September 30, 2009, operating expenses increased by 133% to $25.1 million compared with $10.8 million for the same period in 2008. On a per barrel basis, operating expenses for the nine months ended September 30, 2009 declined by 32% to $7.65 per barrel compared with $11.29 per barrel in the nine months ended September 30, 2008. Per barrel operating expenses in both periods of 2009 were lower due to higher producing wells and increases in operational efficiency.
Depletion, depreciation and accretion expenses (DD&A) for the quarter ended September 30, 2009 increased to $35.2 million, or $29.59 per barrel, from $6.8 million, or $17.51 per barrel, for the same quarter in 2008 due to higher production levels and amortization of $26.9 million in the quarter related to the fair value of property, plant and equipment recorded on the acquisition of Solana Resources. DD&A for the nine months ended September 30, 2009 was $95.5 million, or $29.14 per barrel, compared with $15.2 million, or $15.96 per barrel, for the same period in 2008 due to higher production levels and amortization of $72.4 million in the nine-month period related to the fair value of property, plant and equipment recorded on the acquisition of Solana Resources.
General and administrative expenses (G&A) increased by 75% to $7.1 million for the quarter ended September 30, 2009 compared with $4.0 million for the same period in 2008. However, on a per barrel basis, general and administrative expenses in the third quarter of 2009 decreased by 43% to $5.94 per barrel compared with $10.46 per barrel in the third quarter of 2008. G&A expenses for the nine months ended September 30, 2009 were $19.2 million, or $5.87 per barrel, compared with $12.8 million, or $13.43 per barrel, for the same period in 2008. The decrease in G&A expenses on a per barrel basis for the periods ending September 30, 2009 is the result of higher production offsetting the increase in employee related costs from expanded operations in Colombia.
Included in the third quarter 2009 results is an $18.9 million foreign exchange loss due to a $20.3 million non-cash unrealized foreign exchange loss primarily related to translation of the deferred tax liability recorded on the acquisition of Solana Resources, offset in part by a realized foreign exchange gain. For the nine months ended September 30, 2009, the company recorded a $32.4 million foreign exchange loss due to a $33.0 million non-cash unrealized foreign exchange loss primarily related to the translation of the same deferred tax liability, offset in part by a realized foreign exchange gain. A strengthening Colombian peso against the U.S. dollar resulted in foreign exchange losses, estimated at $70,000 for each one peso decrease in the exchange rate of the Colombian peso to one U.S. dollar.
The net loss for the third quarter of 2009 was $2.8 million compared with a net income of $23.0 million for the same period in 2008. On a per share basis, the net loss was ($0.01) per share basic and diluted, compared with a net income of $0.20 per share basic and $0.18 per share diluted in the third quarter of 2008. For the nine months ended September 30, 2009, the net loss was $16.9 million compared with net income of $36.2 million for the same period in 2008. The net loss for the nine months ended September 30, 2009 was ($0.07) per share basic and diluted compared to net income of $0.34 per share basic and $0.30 per share diluted for the same period in 2008.
Balance Sheet Highlights:
The company reported cash and equivalents of $151.6 million at September 30, 2009 as compared with $176.8 million at December 31, 2008. Working capital increased to $188.8 million at September 30, 2009, compared with $132.8 million at December 31, 2008. Shareholders' equity decreased to $781.4 million at September 30, 2009 from $791.9 million at December 31, 2008, and the company had no outstanding long-term debt as of September 30, 2009.
Average daily consolidated light and medium crude oil production for the three months ended September 30, 2009 increased 209% to a record 12,945 BOPD NAR compared with 4,194 BOPD NAR for the same period of 2008.
Average daily Colombian production of light and medium crude oil for the three months ended September 30, 2009 increased 233% to a record 12,035 BOPD NAR compared with 3,613 BOPD NAR for the same period in 2008.
Average daily Argentine production of light and medium crude oil for the quarter ended September 30, 2009 increased 56% to 910 BOPD NAR compared with 581 BOPD NAR for the same quarter in 2008.
While production increased on a year-over-year basis, production was negatively impacted by the 32 day disruption of Ecopetrol's Trans Andean pipeline in Southern Colombia between July 10 and August 10, 2009. During this period, Colombia production averaged approximately 3,800 BOPD NAR. As a result of this disruption, production was reduced by approximately 1,500 BOPD NAR (or 138,000 barrels of oil) for the third quarter.
Revised 2009 Capital Program
Gran Tierra Energy's revised capital program for 2009 is $95 million primarily as a result of deferring expenditures into 2010. This capital program includes planned capital expenditures of $87 million for Colombia, $5 million for Argentina and $2 million for Peru.
Colombia Operations Update
Gran Tierra Energy is one of the largest exploration landholders in the Putumayo Basin of Southern Colombia, with production from three contract areas, in addition to five other exploration blocks. The total Putumayo acreage encompasses 494,758 gross acres, or 384,329 net acres. Gran Tierra Energy is the operator of all of its Putumayo licenses.
Piedemonte Sur Block (100% working interest; 73,898 gross acres)
The Piedemonte Sur Block is located immediately west of the Orito Field, the largest oil field in the Putumayo Basin. Environmental licensing and rig contracting for an exploration well in 2010 has begun.
Piedemonte Norte Block (100% working interest; 78,742 gross acres)
The Piedemonte Norte Block lies southwest of the Chaza Block where the Costayaco field is located. A 120 Km 3D seismic program is planned for this block in 2010 which will be followed by the drilling of an exploration well.
Rumiyaco Block (100% working interest; 82,624 gross acres)
The Rumiyaco Block is south of the Piedemonte Sur Block and extends to the Ecuador border. A 125 Km 3D seismic program and an exploration well are planned for this block in 2010.
Chaza Block (100% working interest; 80,242 gross acres)
In August, Gran Tierra Energy successfully completed the drilling and logging of Costayaco-9, a vertical development well located 1,950 feet southwest of Costayaco-8. Well logs indicate that the T Sandstone of the Villeta formation lies completely within the field's oil column and that the Caballos formation encountered an oil-water contact consistent with the established Caballos oil-water contact for the field. The well has since been tied in to new infrastructure and is currently producing approximately 2,000 BOPD from only the Caballos formation; the T Sandstone will be produced at a later time once the lower reservoir is depleted.
Costayaco-10 was spudded on October 5 and is expected to be completed in late November, 2009 after coring operations in the two main reservoirs are finished. The well is located 2,100 feet southwest of Costayaco-9. It is the last development well scheduled in 2009 for the field.
Costayaco field's production plateau of 19,000 BOPD gross was achieved ahead of schedule in August. In addition, the Costayaco field reached the five million cumulative barrels of oil production milestone on September 10, 2009 which triggered an additional royalty that is dependent on West Texas Intermediate (WTI) oil price, and is approximately 17.1% at $70.00/bbl WTI. The combined royalty rate at 19,000 BOPD gross production and $70 WTI is approximately 24.8%.
In the fourth quarter of 2009, the Dantayaco-1 exploration well (previously named Rio Mocoa) is scheduled to be drilled to test an independent prospect west of the Costayaco field. Environmental licensing and rig contracting has been initiated for drilling of a second prospect, Moqueta, in early 2010.
Guayuyaco Block (70% working interest; 52,366 gross acres)
The Guayuyaco Block contains both the Guayuyaco and Juanambu producing oil fields. A development well, Juanambu-2, has been added to the 2009 work program and is scheduled to spud late in the fourth quarter of 2009.
Azar Block (40% working interest; 51,639 gross acres)
The two seismic programs were completed on the Azar Block, a 40 kilometer 2D program and a 50 square kilometer 3D program, and interpretation is underway.
Mecaya Block (15% working interest; 74,128 gross acres)
The exploration well (Mecaya-2) that was planned for the third quarter of 2009 has been deferred to 2010.
Santana Block (35% working interest; 1,119 gross acres)
No exploration activities are planned for the Santana Block during 2009.
San Pablo Block (100% working interest; 104,534 gross acres)
The company has begun the process to relinquish the San Pablo Block.
Garibay Block (50% non-operated working interest; 75,936 gross acres)
The 110 square kilometer 3D seismic program to further define the exploration potential of the area has been completed.
Gran Tierra Energy is the operator of three blocks in the Magdalena Basin encompassing 201,293 gross acres, or 58,396 net acres; two in the Middle Magdalena Basin (Rio Magdalena and Talora Blocks) and one in the Lower Magdalena (Magangue Block).
Rio Magdalena Block (40% working interest; 72,312 gross acres)
A 75 square kilometer 3D seismic program has been completed along with the long-term production test of the Popa-2 gas-condensate discovery.
Talora Block (20% working interest; 108,334 gross acres)
Approval has been sought from the National Hydrocarbon Agency of Colombia for Gran Tierra Energy to assign its interest to PetroSouth Energy. No additional work is budgeted for this block.
Magangue Block (37.8% working interest; 20,647 gross acres)
Production is currently shut in while liquid metering is being installed. No exploration activities are planned for the Magangue Block during 2009.
The Catatumbo Basin is an extension of the Maracaibo basin in Venezuela. Gran Tierra Energy is the operator of one block encompassing 393,150 gross acres, or 294,351 net acres.
Catguas Block Area A (50% working interest, 113,792 acres gross)
No work is scheduled in Catguas Area A in 2009.
Catguas Block Area B (85% working interest, 279,358 acres gross):
The well re-entry and two exploration well commitments scheduled for the second half of 2009 have been deferred until 2010.
Peru Operations Update:
Blocks 122 and 128 (100% working interest and operator)
The expanded environmental impact assessments for Blocks 122 and 128 have been submitted to the Peruvian government for review and approval. Consultations with communities in the region have concluded.
These assessments are in preparation for a 500 kilometer 2D seismic survey expected to start in the first quarter of 2010 over 16 principal leads amongst the 24 leads identified on the two blocks. Stratigraphic test drilling on up to four prospects is expected to take place in 2010. In addition, a pre-feasibility engineering field development study has been completed.
Argentina Operations Update:
Gran Tierra Energy is the largest exploration landholder in the Noroeste Basin of northern Argentina. The company has a working interest in seven blocks of land, six operated by Gran Tierra Energy, encompassing approximately 1.6 million gross acres, or 1.3 million net acres. The workover program for 2009 has been largely completed. The company has initiated testing of the VM-1001 gas well in the Valle Marado Block. Production in Argentina is expected to be maintained at approximately 1,000 BOPD NAR for the balance of 2009.
Brazil Operations Update:
In September 2009, Gran Tierra Energy announced the opening of an office in Rio de Janeiro. The Brazil office will coordinate business development activities targeted at capturing high quality exploration and production opportunities in the onshore and shallow water offshore areas of Brazil. These opportunities may include new bid round acreage, production enhancement on acreage that may be acquired with pre-existing operations, farm-in opportunities, and M&A transactions.
- Gran Tierra Receives 'Outperform' Rating After Revealing Exploration Plans (Jun 15)
- Gran Tierra Energy Reveals $38.6 Million Net Loss (Aug 05)
- Gran Tierra Touts Record Production in Colombia (Apr 17)