Gran Tierra Spotlights Reserve Increase at Costayaco Field

Gran Tierra Energy Inc. announced its financial and operating results for the quarter ended June 30, 2012, in addition to an independent mid-year reserve update for the company's largest asset, the Costayaco Field in Colombia. All dollar amounts are in United States dollars unless otherwise indicated.

Highlights for the quarter include:

  • Costayaco Field reserves effective June 30, 2012, net after royalty ("NAR"), calculated in accordance with Canadian National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities ("NI 51-101") and the Canadian Oil and Gas Evaluation Handbook ("COGE Handbook"), increased from year-end 2011 reserves, adjusted for production from the first half of 2012, as follows: total Proved ("1P") reserves increased 38% to approximately 20.4 million barrels of oil ("MMbbl"), total Proved plus Probable ("2P") reserves increased 40% to approximately 23.2 MMbbl of oil, and total Proved plus Probable plus Possible ("3P") reserves increased 21% to approximately 26.7 MMbbl of oil;
  • Costayaco Field reserves effective June 30, 2012, NAR, calculated in accordance with United States Securities and Exchange Commission ("SEC") rules, increased from year-end 2011 reserves, adjusted for production from the first half of 2012, as follows: total 1P reserves increased 33% to approximately 19.6 MMbbl of oil, total 2P reserves increased 35% to approximately 22.2 MMbbl of oil, and total 3P reserves increased 18% to approximately 25.6 MMbbl of oil;
  • Confirmed oil discovery with Ramiriqui-1 exploration well in Colombia with 2,525 gross barrels of oil per day ("BOPD") test rate;
  • Quarterly production of 16,306 barrels of oil equivalent per day ("boepd") NAR before inventory adjustments, or 14,127 boepd NAR after inventory adjustments. This represents a 22% decrease in average daily production from the same period in 2011 of 18,141 boepd NAR after inventory adjustments;
  • The decrease in production during the second quarter of 2012 was primarily due to pipeline disruptions in Colombia. Gran Tierra Energy is working with the authorities, outside parties and Ecopetrol S.A. ("Ecopetrol") to look at multiple transportation and storage options to help mitigate the risk of pipeline disruptions;
  • The pipeline in Colombia was back in operation on July 14, 2012 and full production resumed July 19, 2012. Production before inventory adjustments from July 19, 2012 to July 31, 2012 averaged 21,000 boepd NAR and production before inventory adjustments for the month of July 2012 averaged 16,500 boepd NAR;
  • Revenue and other income for the quarter was $115.2 million, a 29% decrease over the same period in 2011;
  • Net income was $13.1 million or $0.05 per share basic and diluted, compared to net income of $31.6 million or $0.11 per share basic and diluted in the same period in 2011;
  • Funds flow from operations was $37.6 million compared to $88.6 million for the same period in 2011;
  • Cash and cash equivalents were $128.5 million at June 30, 2012 compared to $351.7 million at December 31, 2011. The change in cash and cash equivalents during the first half of 2012 was primarily the result of funds flow from operations being more than offset by capital expenditures, an increase in working capital excluding cash and an increase in restricted cash;
  • Announced contingent gross lease resource estimate for an oil discovery on Block 95 in Peru of low estimate "1C" contingent resources of 11.5 million stock tank barrels of oil ("MMSTB"), best estimate "2C" contingent resources of 31.6 MMSTB and high estimate "3C" contingent resources of 88.1 MMSTB;

"Gran Tierra Energy's 2012 oil reserve growth initiatives are off to a very strong start, with new oil reserves discovered with the Ramiriqui-1 new field discovery, substantial reserves added due to continued superior reservoir management and performance in the Costayaco Field, and additional reserve potential identified in the Moqueta Field, all in Colombia" said Dana Coffield, President and Chief Executive Officer of Gran Tierra Energy.

"Unfortunately, crude oil sales in Colombia were negatively impacted by repeated pipeline disruptions, in spite of the company having record production capacity established in our fields, reaching 20,700 boepd NAR average in April. Improving the security of pipeline infrastructure is a priority for Ecopetrol and the government of Colombia. Gran Tierra Energy management is in regular contact with Ecopetrol, government authorities and third parties to improve continuity of transportation by potentially adding additional tank storage and by more efficient utilization of existing pipeline capacity, expanding alternative pipeline capacity into Ecuador, and expanding trucking capacity to alternative pipelines. Corporate production has now returned to approximately 21,000 boepd net after royalty while we continue to pursue these alternative measures," added Coffield.

"We are now focused on continuing to execute the drilling program remaining in 2012, which includes additional exploration and development drilling in Colombia, Brazil, Argentina and Peru. Gran Tierra Energy remains financially strong and expects to fund its 2012 capital program with cash flow and cash on hand at current oil prices and production levels," concluded Coffield.