Gran Tierra Energy Inc.
("Gran Tierra" or
the "Company") (NYSE American:GTE) (NYSE MKT:GTE)
(TSX:GTE), a company focused on oil and gas exploration and
production in Colombia, is pleased to announce its 2018 capital
budget and production guidance. All dollar amounts are in United
States (“
U.S.”) dollars and all production volumes
are on a working interest before royalties ("
WI")
basis, unless otherwise indicated.
Highlights
- Gran Tierra expects 2018 average production of 36,500 to 38,500
barrels of oil equivalent per day ("boepd"),
representing organic growth of 20 to 27% over 2017 year to date
average production1 and an increase of 39 to 47% over 2016 average
production1◦ Gran Tierra's production guidance includes only
forecasted volumes from existing operations and expected
development projects and no volumes are assumed for any exploration
success
- 2018 capital budget of $250-270 million
- 2018 cash from operating activities2 forecast of $265-285
million at $57/barrel ("bbl") Brent oil price
- Gran Tierra has significant control and flexibility on capital
allocation and timing as the Company operates over 90% of its
production, 15 out of its 16 blocks in the Putumayo Basin3 and 4
out of its 4 blocks in the Middle Magdalena Valley Basin
("MMV")◦ With the Company's operated, low
cost, high netback, and low decline asset base, Gran Tierra's focus
is on organic production growth and drilling 30 to 35 exploration
wells over the next three to five years, all expected to be funded
from expected cash from operating activities2
- Based on current evaluations of the Company's portfolio of
exploration and development opportunities, Gran Tierra anticipates
average annual production growth of 12 to 20% in 2019 over
forecasted average annual production for 2018
- If oil prices meaningfully exceed Gran Tierra's 2018 forecast,
the resulting increase in cash from operating activities2 may be
directed to accelerated capital spending, the repayment of debt or
share buybacks under our previously announced Normal Course Issuer
Bid; alternatively, if oil prices drop materially below the
Company's forecast, Gran Tierra has the ability to moderate the
rate of spending accordingly due to the Company's high operated
interest across the asset portfolio
2018 Capital Budget and
Expenses
Gran Tierra is forecasting the following ranges
for the Company’s 2018 capital budget, all to be invested in
Colombia:
2018 Budget |
Forecast |
Low Case |
High Case |
Brent Oil Price ($/bbl) |
57.00 |
45.00 |
65.00 |
Cash from Operating Activities2 ($ million) |
265-285 |
220-240 |
300-320 |
|
|
|
|
Total Capital ($ million) |
250-270 |
|
|
Development (19-21 gross wells) |
100-105 |
|
|
Exploration (8-11 gross wells) |
80-90 |
|
|
Facilities |
50-55 |
|
|
Seismic & Studies |
20 |
|
|
|
|
|
|
- Based on the midpoint of the guidance, the 2018 capital budget
is forecasted to be directed approximately 60% to development and
40% to exploration
- Approximately 30-35% of the 2018 development capital program is
expected to be directed at facilities, with approximately 75% of
this investment dedicated to the ongoing facilities expansion at
the Acordionero field that is forecasted to increase its production
capacity up to 45,000 barrels of fluid per day
("bfpd") by end of second quarter 2018
- The 2018 capital program assumes up to 4 drilling rigs being
active during the year
Gran Tierra expects approximate 2018 expenses to
be in the following ranges (barrel oil equivalent =
“boe”):
2018 Budget |
Forecast |
Brent Oil Price ($/bbl) |
57.00 |
Expenses ($/boe) |
|
Transportation and Discount |
12.00 - 14.00 |
Royalties |
7.00 - 8.00 |
Operating Costs |
7.50 - 8.50 |
General and Administrative |
2.00 - 3.00 |
Interest and Financing |
1.00 - 2.00 |
Taxes |
3.00 - 4.00 |
Gary Guidry, President and Chief Executive
Officer of Gran Tierra, commented "During 2017, we have
successfully executed our strategy of delivering profitable organic
production growth with our diversified portfolio of exploration and
development assets in Colombia. Our 2018 capital budget is expected
to build on the operational momentum achieved by our team in 2017
and to be fully funded from cash from operating activities2. With
our returns-focused capital program, we plan to deliver strong
organic production and reserves growth as we drill development and
exploration oil wells throughout our extensive Colombian
opportunity set. With our robust portfolio of reserves, we have the
ability to adjust the pace of development to changes in the oil
price. We can accelerate our cash flow funded capital program if
oil prices increase significantly in 2018 or decrease capital
investment if oil prices drop materially below our forecasts.
“In the Middle Magdalena Valley Basin
(“MMV”), we anticipate an ongoing ramp-up in
production at our Acordionero field, where results to date have
exceeded our original expectations. At Acordionero, we expect to
continuously drill both production and water injection wells
throughout 2018 and beyond, while fully implementing a waterflood
program for enhanced oil recovery during 2018. We also plan to be
generating our own power from associated natural gas production and
injecting water from non-potable subsurface water production.
“In the Putumayo Basin, we expect to further
delineate the exciting A-Limestone and N-Sandstone plays by
continuing to drill a mix of development, appraisal and exploration
wells. With the key acquisitions completed in 2016, we
believe Gran Tierra is well positioned in the most prospective
fairways of this proven, under-explored basin. We are the largest
landholder in the Putumayo Basin with 16 blocks and approximately
1.1 million gross acres (0.9 million net acres) of land and our
extensive and proprietary seismic database allows optimization of
capital allocation and focused regulatory approval.
"Today, we are also announcing strategic
farm-ins on the Alea 1848-A and 1947-C Blocks in the Putumayo Basin
which will increase Gran Tierra's WI in both blocks to 75% and
designate the Company as operator.3 The Alea farm-ins are a
continuation of Gran Tierra's focused strategy of further building
our high-quality, diversified portfolio to efficiently create value
in the multi-horizon, proven hydrocarbon producing basins of
Colombia. We expect these farm-ins to provide drill-ready prospects
targeting the multi-zone potential of the N, U and T Sands and the
A-Limestone. This further consolidation of our commanding land
position in the prolific Putumayo Basin will add additional
prospective resources to Gran Tierra’s portfolio and enhance our
ability to execute the drilling of exciting exploration prospects
over the next three to five years.
"We believe that Gran Tierra has a self-funding
sustainable business model with the portfolio to deliver
significant growth in per share values in terms of net asset value,
production, reserves and cash flow. We operate and control
virtually all of our exploration and development program, which
provides flexibility in our capital expenditures. We will continue
to review and evaluate our capital spending program with a strict
and disciplined focus on returns.”
Additional Details of 2018 Capital
Budget
2018 Development Capital Budget ($155 -
$165 Million)
- Acordionero (MMV):◦ Drill 12 wells: 8
development, 3 water injection and 1 water source ◦ Central
processing facility expansion: increase water injection capacity up
to 40,000 barrels of water per day, fluid handling capacity up to
45,000 bfpd and truck loading capacity up to 30,000 barrel of oil
per day ("bopd") ◦ Expand gas to power
project using associated natural gas production ◦ Waterflood
implementation expansion: previous injectivity and facility pilot
tests proven successful and waterflood now into full development
◦ In 2018, the field is expected to generate free cash flow
◦ In 2019, there are no major facility costs expected in
Acordionero and, with a higher anticipated production base in 2019,
the field is expected to generate significant free cash flow
- Putumayo Basin and Minor Fields:◦ Drill
7-9 development wells◦ 8-10 workovers/reactivations and
stimulations
2018 Exploration Capital Budget ($95 -
$105 Million)
Gran Tierra's 2018 exploration program is
targeted mainly at drilling in proven basins with known oil
accumulations and stacked pays. The Company believes that this
approach increases chances of success and significantly lowers the
risk of drilling dry holes.
- Putumayo Basin: ◦ Drill 5-6
exploration wells targeting prospects with multi-zone potential,
including carbonates (A, B and M2 Limestones) and N Sand ◦
Commence three 3D seismic surveys covering a total of approximately
250 square kilometers
- Llanos Basin:◦ Drill 1-2 exploration
wells
- MMV: ◦ Drill 1-2 exploration
wells
- Sinu Basin:◦ Drill 1 exploration
well
2018 Hedging Program
Gran Tierra has 10,000 bopd of oil hedges in
place for 2018, representing approximately 26-27% of forecasted
production. These ICE Brent hedges are composed 50% of swaps
(weighted average floor of $55.90/bbl) and 50% of participating
swaps (weighted average floor of $52.50/bbl, weighted average call
of $56.11/bbl); the participating swaps allow Gran Tierra to
participate in 100% of the upside over the call strike while
retaining a firm floor price. Foreign exchange hedges are also in
place on approximately 27% of expected Colombian peso
("COP") exposure. These hedges are collars with a
floor of 3,000 COP/U.S. dollar ("USD") and a
weighted average cap of 3,107 COP/USD.
Strategic Farm-Ins: Alea 1848-A and
1947-C Blocks, Putumayo Basin (Gran Tierra 75% WI and
Operator)3
Gran Tierra has entered into two agreements to
acquire, subject to approval from the Agencia Nacional de
Hidrocarburos (“ANH”), additional WI's in the Alea
1848-A and 1947-C Blocks in the Putumayo Basin. Under the terms of
the agreements, Gran Tierra will increase its position to 75% WI in
each of the blocks and will carry the farmor on current contract
phase obligations, to a combined maximum of $4.8 million. The
applications for approval to be submitted to the ANH will include
the appointment of Gran Tierra as operator of these blocks.
The Alea 1848-A & 1947-C Blocks are expected
to provide drill-ready prospects targeting the multi-zone potential
of the N, U and T Sands and the A-Limestone. Gran Tierra has
already mapped several prospects on existing Company 2D and 3D
seismic data.
1Colombia only, adjusted for sale of Brazil
assets effective June 30, 2017; average 2017 Colombia only
production through September 30, 2017 was 30,398 boepd.2“Cash from
operating activities” refers to the GAAP line item “net cash
provided by operating activities”.3Subject to ANH regulatory
approval; Gran Tierra currently operates 13 of its 16 blocks in the
Putumayo Basin; after approval of the Alea farm-ins, Gran Tierra
would operate 15 of its 16 blocks in the Putumayo.
Contact Information
For investor and media inquiries please
contact:
Gary GuidryChief Executive Officer
Ryan EllsonChief Financial Officer
Rodger TrimbleVice President, Investor
Relations
403-265-3221info@grantierra.com
About Gran Tierra Energy
Inc.
Gran Tierra Energy Inc. together with its
subsidiaries is an independent international energy company focused
on oil and natural gas exploration and production in Colombia. The
Company also has business activities in Peru, which are expected to
be sold pursuant to an agreement dated November 9, 2017, subject to
certain conditions, including a successful financing by the
purchaser. The Company is focused on its existing portfolio of
assets in Colombia and will pursue new growth opportunities
throughout Colombia, leveraging our financial strength. The
Company’s common shares trade on the NYSE American and the Toronto
Stock Exchange under the ticker symbol GTE. Additional information
concerning Gran Tierra is available at www.grantierra.com.
Information on the Company's website does not constitute a part of
this press release. Investor inquiries may be directed to
info@grantierra.com or (403) 265-3221.
Gran Tierra's Securities and Exchange Commission
(“SEC”) filings are available on the SEC website
at http://www.sec.gov and on SEDAR at http://www.sedar.com.
Forward Looking Information
Advisory
This press release contains opinions, forecasts,
projections, and other statements about future events or results
that constitute forward-looking statements within the meaning of
the United States Private Securities Litigation Reform Act of 1995,
Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended, and
financial outlook and forward looking information within the
meaning of applicable Canadian securities laws (collectively,
“forward-looking statements”). All statements
other than statements of historical facts included in this press
release regarding our financial position, estimated quantities and
net present value of reserves, business strategy, plans and
objectives for future operations, capital spending plans and those
statements preceded by, followed by or that otherwise include the
words “believe”, “expect”, “intend”, “anticipate”, “forecast”,
“budget”, “will”, “estimate”, “target”, “project”, “goal”, “plan”,
“should” or similar expressions are forward-looking statements.
Such forward-looking statements include, but are not limited to,
the Company’s capital budget, drilling and capital program
including the changes thereto along with the expected costs and the
allocation of capital and drilling including trends, infrastructure
schedules and the expected timing of certain projects and the
portion of the capital program being represented by Colombia; the
Company's operations; future projected or target production and the
growth of production including the product mix of such production
and expectations respecting production growth, expected future net
cash provided by operating activities (described in this press
release as “cash from operating activities”); our strategy
regarding changing oil prices; expected cost savings; anticipated
capital expenditures, including the location and impact of capital
expenditures, our business strategies; our ability to grow in both
the near and long term and the funding of our growth opportunities;
the plans, objectives, expectations and intentions of the Company
regarding production, exploration and exploration upside,
development; Gran Tierra's financial position including liquidity
and financial capacity, and the future development of the Company's
business. The forward-looking statements contained in this press
release reflect several material factors and expectations and
assumptions of Gran Tierra including, without limitation, that Gran
Tierra will continue to conduct its operations in a manner
consistent with its current expectations, the accuracy of testing
and production results and seismic data, pricing and cost estimates
(including with respect to commodity pricing and exchange rates),
rig availability, the effects of drilling down-dip, the effects of
waterflood and hydraulic stimulation operations, the extent and
effect of delivery disruptions and the general continuance of
current or, where applicable, assumed operational, regulatory and
industry conditions including in areas of potential expansion, the
receipt of approval from the ANH and the ability of Gran Tierra to
execute its current business and operational plans in the manner
currently planned. 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.
Among the important factors that could cause
actual results to differ materially from those indicated by the
forward-looking statements in this press release are: sustained or
future declines in commodity prices and potential resulting future
impairments and reductions in proved reserve quantities and value;
Gran Tierra’s operations are located in South America, and
unexpected problems can arise due to guerrilla activity; technical
difficulties and operational difficulties may arise which impact
the production, transport or sale of our products; geographic,
political and weather conditions can impact the production,
transport or sale of our products; the risk that current global
economic and credit conditions may impact oil prices and oil
consumption more than Gran Tierra currently predicts; the ability
of Gran Tierra to execute its business plan; the risk that
unexpected delays and difficulties in developing currently owned
properties may occur; the timely receipt of regulatory or other
required approvals for our operating activities; the failure of
exploratory drilling to result in commercial wells; unexpected
delays due to the limited availability of drilling equipment and
personnel; the risk that oil prices could decline, or current
global economic and credit market conditions may impact current oil
prices or expectations regarding future oil prices and oil
consumption, which could cause Gran Tierra to further modify its
strategy and capital spending program; and the risk factors
detailed from time to time in Gran Tierra’s periodic reports filed
with the Securities and Exchange Commission, including, without
limitation, under the caption “Risk Factors” in Gran Tierra's
Annual Report on Form 10-K filed March 1, 2017 and its other
filings with the SEC. These filings are available on the SEC
website at http://www.sec.gov and on SEDAR at http://www.sedar.com.
Although the current guidance, capital spending program and long
term strategy of Gran Tierra is based upon the current expectations
of the management of Gran Tierra, should any one of a number of
issues arise, Gran Tierra may find it necessary to alter its
business strategy and/or capital spending program and there can be
no assurance as at the date of this press release as to how those
funds may be reallocated or strategy changed and how that would
impact Gran Tierra's results of operations and financing
position.
All forward-looking statements are made as of
the date of this press release and the fact that this press release
remains available does not constitute a representation by Gran
Tierra that Gran Tierra believes these forward-looking statements
continue to be true as of any subsequent date. Actual results may
vary materially from the expected results expressed in
forward-looking statements. 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 laws. Gran
Tierra’s forward-looking statements are expressly qualified in
their entirety by this cautionary statement.
The estimates of future production, net cash
provided by operating activities (described in this press release
as “cash from operating activities”) and certain expenses may be
considered to be future-oriented financial information or a
financial outlook for the purposes of applicable Canadian
securities laws. Financial outlook and future-oriented financial
information contained in this press release about prospective
financial performance, financial position or cash flows are based
on assumptions about future events, including economic conditions
and proposed courses of action, based on management’s assessment of
the relevant information currently available, and to become
available in the future. In particular, this press release contains
projected operational information for 2018 and 2019. These
projections contain forward-looking statements and are based on a
number of material assumptions and factors set out above. Actual
results may differ significantly from the projections presented
herein. These projections may also be considered to contain
future-oriented financial information or a financial outlook. The
actual results of Gran Tierra’s operations for any period could
vary from the amounts set forth in these projections, and such
variations may be material. See above for a discussion of the risks
that could cause actual results to vary. The future-oriented
financial information and financial outlooks contained in this
press release have been approved by management as of the date of
this press release. Readers are cautioned that any such financial
outlook and future-oriented financial information contained herein
should not be used for purposes other than those for which it is
disclosed herein. The Company and its management believe that the
prospective financial information has been prepared on a reasonable
basis, reflecting management’s best estimates and judgments, and
represent, to the best of management’s knowledge and opinion, the
Company’s expected course of action. However, because this
information is highly subjective, it should not be relied on as
necessarily indicative of future results.
Oil and Gas Disclaimer
BOEs have been converted on the basis of 6
thousand cubic feet ("Mcf") of natural gas to 1 barrel of oil. BOEs
may be misleading, particularly if used in isolation. A BOE
conversion ratio of 6 Mcf: 1 barrel 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 barrel would be misleading as an indication of
value.
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