Gran Tierra Energy Inc., a company focused on oil exploration and production in South America, provided an update on its advancement of development drilling and testing operations in Colombia, and oil exploration activities in Colombia, Argentina and Peru.
Drilling operations in the Costayaco field, a new oil field discovery made in 2007 in the Chaza Block in the Putumayo Basin of southern Colombia, are proceeding as planned. Testing operations on Costayaco-2, the second well in the Costayaco field, were initiated on January 26, 2008, and are expected to be completed before the end of February, 2008. Drilling of the third well, Costayaco-3, commenced on January 25 and is expected to be completed in late February, with testing to follow afterwards.
Production from the discovery well, Costayaco-1, averaged approximately 3,460 barrels of oil per day (BOPD) gross with 0.3 percent water cut, or 1,557 BOPD net after royalty, to Gran Tierra Energy in January, 2008.
Acquisition of 41 kilometers of new 2-D seismic data to define additional exploration potential in the Chaza Block is in progress.
Construction of a six kilometer six inch pipeline for the Juanambu field, another oil discovery made in 2007 on the adjacent Guayuyaco Block, is ongoing. The pipeline is expected to be operational in mid-February. The pipeline will replace trucking operations which handled approximately 1,750 BOPD gross with 0.3 percent water cut, or 551 BOPD net after royalty, to Gran Tierra Energy in January, 2008.
On the Azar Block, immediately east of the Guayuyaco Block, the acquisition of 35 square kilometers of new 3D seismic has been completed. This seismic will be used to determine the location of Mandiyaco-1, an exploration well expected to be drilled in the second half of 2008. In addition, a work-over of an untested oil discovery, Palmera-1, is scheduled for the first quarter of 2008.
Technical evaluation work continues on the Putumayo West A TEA and the Rumiyaco E&P block (previously called Putumayo West B TEA). Gran Tierra Energy holds a 100% working interest in both of these blocks.
A successful farmout of the Rio Magdalena Block in the Middle Magdalena Basin has been executed. Under the terms of the farmout agreement, Gran Tierra Energy will remain operator and will retain a 40% working interest in the block, and will receive a full carry on the cost of the drilling of the Popa-2 exploration well, which is expected to be drilled in the second quarter of 2008 near a non-commercial oil discovery made by Gran Tierra Energy in 2006 with the Popa-1 well. Transfer of the interest in the Rio Magdalena Association Contract to the farmee is subject to approval by Ecopetrol and ANH (Agencia Nacional de Hidrocarburos).
Technical evaluation work continues on all seven blocks in the Noroeste Basin in northern Argentina, with well design and planning continuing for the Proa-1 exploration well in the Surubi Block, expected to be drilled in the third quarter of 2008. An active work-over program of existing wells has been budgeted to maintain the company's base production.
Acquisition of approximately 20,000 linear kilometers of new high definition airborne gravity and magnetic data over the entire area of Blocks 122 and 128 is continuing. Approximately 3,000 linear kilometers has been acquired to date. This data will be used to define exploration leads over which 2-D seismic data will be acquired in the Second Exploration Period of each block. Block 122 encompasses approximately 1.2 million acres and Block 128 encompasses approximately 2.2 million acres of land. Gran Tierra Energy is operator and holds a 100% working interest in both exploration blocks.
2008 Capital Program Update
Gran Tierra Energy has a working interest in nineteen blocks encompassing 6.5 million gross acres, or 5.9 million net acres, of land in Colombia, Argentina and Peru. Gran Tierra Energy is the operator of eighteen of the nineteen blocks. Capital expenditures of US$26.6 million have been budgeted for 2008 for drilling three exploration wells and six development wells, all operated by the company, in addition to fourteen workovers of existing wells. Additional contingent expenditures of US$20.1 million have been budgeted for infrastructure construction which may be required for the development of oil discoveries made in 2007. The company expects to fund the capital expenditure program through existing cash on hand, cash flow from operations and, if necessary, an existing credit facility. Gran Tierra Energy's production continues to be maintained at approximately 3,300 barrels of oil per day (BOPD), net after royalty, with approximately 2,700 BOPD coming from Colombia operations and approximately 600 BOPD coming from Argentina operations.
Dana Coffield, President and Chief Executive Officer of Gran Tierra Energy Inc., stated "The first quarter of 2008 is developing into another pivotal quarter for the company on both an operational front and from the perspective of the company's shareholders. Gran Tierra Energy's 2008 oil development drilling and oil exploration programs continue to gain momentum in parallel with the satisfaction of conditions for the pending listing of common shares of Gran Tierra Energy on the Toronto Stock Exchange."