Gran Tierra Discovers Oil in Argentina
Gran Tierra Energy Inc. , a company focused on oil exploration and production in South America, today announced it has finished drilling and testing the Proa.x-1 exploration well in the Surubi Block, Noroeste Basin, Argentina.
Gran Tierra Energy began drilling the Proa.x-1 exploration well on July 9, 2008 and reached total measured depth of 12,920 feet on August 28, 2008. Good oil shows were encountered in Cretaceous volcanics and volcaniclastics in the Palmar Largo Formation during drilling and oil saturations were indicated on logs. Gran Tierra Energy conducted a drill-stem test in the Lower Palmar Largo formation from 12,694 to 12,713 feet and obtained no flow. The company then conducted a production test in the intervals 12,649 to 12,661 feet and 12,620 to 12,641 feet, and obtained a stabilized gross flow rate of 2,324 barrels of oil per day (BOPD) through a 35/64 inch choke with a watercut of 0.5 percent. The oil gravity was 43.8 degree API at 60 degree Fahrenheit.
Gran Tierra Energy will initiate long-term production testing in approximately one week, with commercial oil sales to begin concurrently. Crude oil transportation will be through an existing 3-1/2 inch, 15 kilometer pipeline with approximately 4,000 BOPD capacity to existing facilities at the Gran Tierra Energy-operated Chivil field in the adjacent Chivil Block. Gran Tierra Energy oil production in Argentina has been averaging approximately 570 BOPD net after royalty to date in the third quarter of 2008.
Gran Tierra Energy is the operator and has an 85% working interest in the 90,688 gross acre Surubi Block in the Formosa Province in northern Argentina. REFSA (Recursos Energeticos Formosa S.A.), the provincial government company has a 15% working interest. REFSA's costs were carried by Gran Tierra Energy during drilling of the Proa.x-1 well. Gran Tierra Energy will be reimbursed for all costs incurred during drilling from 50% of the net production assigned to REFSA. The provincial royalties payable on production in the revised contract vary from 12% for cumulative production below 750,000 cubic meters of oil (approximately 4.7 million barrels of oil), to 14% for cumulative production between 750,000 to 1,500,000 cubic meters of oil (approximately 9.4 million barrels of oil), and to 16% for cumulative production above 1,500,000 cubic meters of oil.
Commenting on the drilling and testing progress, Dana Coffield, President and Chief Executive Officer of Gran Tierra Energy Inc., stated, "The Proa.x-1 test results should prove to be a substantial reserves and production addition to our Argentine business unit. This success adds near-term production and cash flow to our Argentina business unit, in addition to increasing the prospectivity of identified leads in the Surubi Block and in the adjoining Chivil and Palmar Largo Blocks, where Gran Tierra Energy has a 100% and 14% working interest respectively."
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