Gran Tierra Energy Inc provides the following update on operations and recent initiatives of the Company.
Oil production for the third quarter of 2006 averaged 1,063 barrels per day, including 722 barrels per day in Colombia and 341 barrels per day in Argentina (all net after royalty). These results reflect the first full quarter of results from Colombia, with the acquisition of Argosy Energy occurring on June 20, 2006.
Testing of the Popa-1 well in Colombia is scheduled to commence in late-October and extend into November. Popa-1 was drilled in July, 2006 and encountered light oil and gas shows but testing was suspended due to physical constraints of the rig and testing equipment. Testing is expected to include perforation of zones deeper in the well bore. A 3-D seismic acquisition program is also planned to delineate the discovery and cover other exploration drilling leads adjacent to Popa-1.
Drilling rigs have been secured and are scheduled to commence drilling of three additional wells in Colombia prior to year-end. Drilling of the Laura-1 well in the Talora block is planned for late-November. The Patricia-1 well in the Rio Magdalena block is expected to commence drilling in early-December, and spudding of the Juanambu-1 well located within the Guayuyaco contract area is scheduled for late-December. Gran Tierra/Argosy is Operator for all activities. In Argentina, one well is planned for 2006. Drilling of the Vinalar sidetrack is expected to commence in early-November.
In Peru, formal signing for the Block 122 License Agreement with Perupetro and the Minister of Energy is scheduled for November 3, 2006. This exploration agreement represents Gran Tierra's entry into the country and is a starting point for future activity.
Gran Tierra expects to participate in the drilling of seven additional wells and several well work-overs in 2007, in addition to other production enhancement and remedial programs in Colombia and Argentina. Initial estimates indicate a capital budget of $18 million for 2007, in addition to $12 million of expenditures planned for the fourth quarter of 2006. The Company expects that these activities will be funded from cash flow and working capital.
On October 6, 2006 Gran Tierra/Argosy signed a Commercial and Joint Operating Agreement covering the Azar contract in the Putumayo region of Colombia. According to terms of the deal, Gran Tierra is to assume operatorship of the block and an 80% participation. Formal assignment is pending approval by ANH, the government agency.
The Azar area covers 51,618 acres (gross) and is adjacent to the Company's producing blocks in the region. Work obligations and fiscal terms are governed by an Exploration & Exploitation Contract with ANH. The contract defines a six-year exploration period and requires a seismic commitment in year one and year two, one well re-entry in year two and drilling obligations for years three to six. Two wells in the contract area have encountered oil; leads and prospects are on trend with current producing fields in the Santana block.
Gran Tierra's offer to acquire certain assets of Compania General de Combustibles S.A. (CGC) in Argentina continues to be outstanding. Completion of the acquisitions remains subject to various authorizations within Argentina including approval of the courts for the disposition of the CGC assets, waiving of rights of first refusal among joint venture partners for certain properties and other third party consents which are not predictable or under Gran Tierra's control. According to the terms of the purchase agreement, court approval is a first pre-requisite as it obligates Gran Tierra to purchase CGC's interests in four minor properties and allows the initiation of right of first refusal processes for the remaining four properties.
Dana Coffield, President and Chief Executive Officer of Gran Tierra, stated "We continue to move our business forward, executing our business plan and preparing the way for an aggressive 2007 drilling campaign. Although we have had some delays, we have had no major obstacles along our path. We have a strong working capital position, an expanding base of production and cash flow and a growing portfolio of opportunities. This allows us to take a very purposeful approach to our business over the coming year, ranking and high-grading our investment decisions and taking next steps that can have the greatest benefit for our Company."