Capital Budget Reduced To $140 million
CALGARY, Feb. 8, 2015 /PRNewswire/ - Gran Tierra
Energy Inc. ("Gran Tierra" or the "Company") (NYSE MKT: GTE,
TSX: GTE), a company focused on oil exploration and production
in South America, today announced
a revised preliminary 2015 capital program. This revised
program is designed to retain balance sheet strength by minimizing
or eliminating expenditures that have no immediate value at current
oil prices. The intent is to re-align the company's capital
expenditure with a view to maximizing shareholder value. In
addition to the capital spending reductions, Gran Tierra is
actively pursuing significant operating and general and
administrative cost reductions and eliminations through resource
re-allocation initiatives and working with contractors and
suppliers. The capital program will be reviewed
continually for additional future reductions. In
addition to this, Gran Tierra's entire exploration portfolio is
being reviewed and its prospect generation, evaluation and drilling
decisions will be re-evaluated with an emphasis on reducing both
its risk profile and capital exposure.
Gran Tierra has reduced its capital budget for 2015 to
$140 million. This is a
reduction of $170 million from the
previously announced budget of $310
million. The revised budget for operations in
Colombia, Peru and Brazil allocates $50
million to drilling, $40
million to facilities, equipment and pipelines, $49 million for geological and geophysical
activities and $1 million associated
with corporate activities. Of the $140
million approximately $43
million had already been spent or committed. Approximately
$37 million of the capital program is
dedicated to the maintenance of existing production while
approximately $18 million is
dedicated to drilling in Colombia.
|
|
|
|
|
Country
|
Drilling
|
Facilities
& Pipelines
|
Geological
& Geophysical
|
Total
|
Colombia
|
$24
|
$22
|
$20
|
$66
|
Peru
|
$19
|
$10
|
$16
|
$45
|
Brazil
|
$7
|
$8
|
$13
|
$28
|
Total
|
$50
|
$40
|
$49
|
*$140
|
*Total includes $1MM
associated with corporate work
(US$ MM Net)
|
Gran Tierra is utilizing an average Brent oil price of
$50 per barrel for budgeting
purposes.
"The capital spending deferrals we are announcing form part of
the refocusing effort by the Company to enhance delivery of value
to shareholders. Gran Tierra will target increased capital
spending efficiency to extract maximum value from the Company's
portfolio. A key driver of the reduced capital spend is to preserve
a strong balance sheet and maximize the Company's potential for
growth from both our existing portfolio as well as through
the opportunistic capture of external value enhancing
opportunities," said Duncan
Nightingale, Interim President and Chief Executive Officer.
"Additionally, Gran Tierra will continue to work diligently to
mature leads and prospects to a drill ready status in preparation
for an improved commodity price environment" concluded
Nightingale.
Capital Spending
The revised 2015 capital program focuses on projects with
immediate value adds. In Colombia such projects include using natural
gas produced from the Moqueta field to fuel electricity generation
and thereby provide cost savings over the life of the field.
A development well will be drilled in the Moqueta field which
is required for pressure support. At Costayaco, work continues to
increase water injection capacity to actively manage the production
profile. In addition to facilities work at Costayaco and Moqueta,
the Company plans to perform several workovers and well services.
Also, a commitment exploration well may be drilled for which
Gran Tierra is being carried for net US$5.5
million.
In Peru, the Company plans to
defer both further development drilling at the Bretaña field and
all significant exploration activities in other blocks. The
reduced Brazil capital spending
program will focus on facilities work at the Tiê field.
Gran Tierra is currently evaluating optimized and less capital
intensive development concepts for the Bretaña field and the longer
term use of the long term test ("LTT") facilities and
existing wellbores. The Company is also concurrently
re-evaluating development options for the Bretaña field. In
this regard the current front-end, engineering and design study for
the Bretaña field will be revised and simplified. LTT production
from the Bretaña-1ST well is anticipated to start
mid-2015. The goal of the LTT is to commission and test the
facilities prior to final acceptance, provide additional reservoir
performance information and test crude oil transportation routes
and sales.
A new reserve report for the Bretaña field incorporating the
recent Bretana Sur L4 well results is expected to be released
before the end of February.
Production Projections
With the revised capital spending program, Gran Tierra is
expecting 2015 production to average between 21,500 and 22,500
barrels of oil equivalent per day ("BOEPD") gross working
interest ("WI") or between 18,200 and 19,200 BOEPD net
after royalty ("NAR"). Production from Colombia is expected to be approximately
17,750 BOEPD NAR, with Costayaco contributing approximately 10,140
BOEPD NAR and Moqueta contributing approximately 5,540 BOEPD NAR
assuming a 2% contingency for potential delivery disruptions.
The revised preliminary 2015 capital program is also expected to
result in production of 958 BOEPD NAR from Brazil. Gran Tierra's 2015 production forecast
does not include any production from Peru. Approximately 99% of expected production
is oil, with the balance natural gas.
Financial Position
Gran Tierra had approximately $332
million in cash and cash equivalents and no debt at the end
of 2014. In addition, the Company has an undrawn credit facility
with a current borrowing base of $150
million. Based on current oil prices, Gran Tierra
expects the revised 2015 program to be funded from funds flow from
operations and cash on hand.
About Gran Tierra Energy Inc.
Gran Tierra is an international oil and gas exploration and
production company, headquartered in Calgary, Canada, incorporated in the United States and operating in
South America, with its stock
trading on the NYSE MKT Exchange (GTE) and the Toronto Stock
Exchange (GTE). Gran Tierra holds interests in producing and
prospective properties in Colombia, Peru, and Brazil. Gran Tierra has a strategy that
focuses on establishing a portfolio of producing properties, plus
production enhancement and exploration opportunities as appropriate
to provide a base for future growth.
Gran Tierra's Securities and Exchange Commission filings are
available on a web site maintained by the Securities and Exchange
Commission at http://www.sec.gov and on SEDAR at
http://www.sedar.com.
Additional information concerning Gran Tierra is available at
www.grantierra.com, on SEDAR (www.sedar.com) and with the
Securities and Exchange Commission (www.sec.gov).
Forward-Looking Statements and Advisories
This news release contains certain forward-looking information
and forward-looking statements (collectively,
"forward-looking statements") under the meaning of
applicable securities laws, including Canadian Securities
Administrators' National Instrument 51-102 - Continuous
Disclosure Obligations and the United States Private Securities
Litigation Reform Act of 1995. The use of the words "expects",
"anticipated", "target", "potential", "plans", "continue",
"intend", "will", "contemplate", "goal", "intent", "projections"
and variations of these and similar words identify forward-looking
statements. In particular, but without limiting the foregoing, this
news release contains forward-looking statements regarding, among
other things: Gran Tierra's planned and expected revised capital
spending program for 2015 which includes: the allocation of
expenditures, production estimates (consolidated and by country)
and the product mix of such production; the expected impact of the
revisions of the capital spending program including that such
revisions will add value and provide cost savings; expectations
with respect to Gran Tierra's 2015 operations including drilling,
drilling locations, testing, construction, electricity generation,
water injection and facilities work, and exploration activities,
the timing of such operations and the expected impact of Gran
Tierra's revised focus; our intention to continually review the
2015 program and re-evaluate evaluation and drilling decisions; our
expectation that we will release a new reserves report for the
Bretaña field before the end of February; and anticipated funding
of the capital spending program.
The forward-looking statements contained in this news release
reflect several material factors and expectations and assumptions
of Gran Tierra including, without limitation: assumptions relating
to field size and recoverability; the accuracy of testing and
production results and seismic data; the effects of certain
drilling techniques; rig availability; cost and price estimates,
including a forecasted average Brent oil price of $50 per barrel; expected cost saving from actions
taken; the extent and magnitude of future delivery disruptions; and
the general continuance of current or, where applicable, assumed
operational, regulatory and industry conditions. Gran Tierra
believes the material factors, expectations and assumptions
reflected in the forward-looking statements are reasonable at this
time but no assurance can be given that these factors, expectations
and assumptions will prove to be correct.
The forward-looking statements contained in this news release
are subject to risks, uncertainties and other factors that could
cause actual results or outcomes to differ materially from those
contemplated by the forward-looking statements, including, among
others: cost savings expectations from the reduction in the size of
the capital spending program may not be as much as Gran Tierra
expects; unexpected technical difficulties and operational
difficulties may occur which could increase capital expenditures,
or delay or reduce the amount of cost savings, from what Gran
Tierra expects; Gran Tierra's operations are located in
South America, and unexpected
problems can arise due to guerilla activity; disruptions on the
Oleoducto Transandino pipeline may be more than Gran Tierra expects
and activities undertaken to mitigate the impact of such
disruptions may not have the impact currently anticipated by Gran
Tierra; geographic, political and weather conditions can impede
testing, which could impact or delay the commencement of drilling
exploration wells; and the risk that oil prices could continue to
fall, or current global economic and credit market conditions may
impact oil prices and oil consumption more than Gran Tierra
currently predicts, which could cause Gran Tierra to modify its
capital spending program. Although the current capital program is
based upon the current expectations of the management of Gran
Tierra, there may be circumstances in which, for unforeseen
reasons, a reallocation of funds may be necessary as may be
determined at the discretion of Gran Tierra and there can be no
assurance as at the date of this press release as to how those
funds may be reallocated. Should any one of a number of issues
arise, Gran Tierra may find it necessary to alter its current
business strategy and/or capital program. Accordingly, readers
should not place undue reliance on the forward-looking statements
contained herein. Further information on potential factors that
could affect Gran Tierra are included in risks detailed from time
to time in Gran Tierra's Securities and Exchange Commission
filings, including, without limitation, under the caption "Risk
Factors" in Gran Tierra's Quarterly Report on Form 10-Q filed
November 6, 2014. These filings are
available on a Web site maintained by the Securities and Exchange
Commission at http://www.sec.gov and on SEDAR at
www.sedar.com.
The forward-looking statements contained herein are expressly
qualified in their entirety by this cautionary statement. The
forward-looking statements included in this press release are made
as of the date of this press release and Gran Tierra disclaims any
intention or obligation to update or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise, except as expressly required by applicable securities
legislation.
Barrels of oil equivalent ("BOE") may be misleading,
particularly if used in isolation. A BOE conversion ratio of 6 Mcf:
1 bbl is based on an energy equivalency conversion method primarily
applicable at the burner tip and does not represent a value
equivalency at the wellhead. In addition, given that the value
ratio based on the current price of oil as compared with natural
gas is significantly different from the energy equivalent of six to
one, utilizing a BOE conversion ratio of 6 Mcf: 1 bbl would be
misleading as an indication of value.
SOURCE Gran Tierra Energy Inc.