Gran Tierra Shuts Production In Putumayo

(Gran Tierra, 19.Jun.2019) — Gran Tierra Energy Inc. announced an operations update regarding activities and results during second quarter 2019 to date. All dollar amounts are in United States (“U.S.”) dollars unless otherwise indicated. Production amounts are unaudited and on an average working interest before royalties (“WI”) basis unless otherwise indicated.

Key Highlights

— The expansions of Acordionero’s central processing and water injection facilities, as well as the installation of gas-to-power turbines (“Acordionero Projects”), are mechanically complete with commissioning expected during July 2019, which represents a significant milestone for the Company and its largest oil producing asset

— Record drilling results achieved in Acordionero: the AC-40 and AC-41 wells were drilled in 9.5 and 7.4 days respectively, each a consecutive record short drilling time for the field

— Received the Global Environmental License for Acordionero on June 12, 2019 from the Autoridad Nacional de Licencias Ambientales, the Colombian environmental regulator; this license is expected to allow accelerated and optimized full field development of Acordionero

— The Company believes the successful drilling and operations activities at both Acordionero and Suroriente to date will support increases in Proved (“1P”) and Probable (“2P”) reserves

— Surpassed over six million person-hours without a lost time incident

— Gran Tierra has preliminarily won two blocks in the recent Agencia Nacional de Hidrocarburos (“ANH”) bid round in Colombia; the Company believes these blocks may be highly prospective; as part of the bidding process, other companies can offer more than Gran Tierra’s proposed work commitment until June 26, 2019 in an attempt to win the blocks, but Gran Tierra has a right of first refusal in respect of such offers since the Company’s initial bid was the highest

— Gran Tierra has officially signed contracts for our three exploration blocks in Ecuador; the Company is making progress and plans to drill its first exploration well in Ecuador in late 2019 or early 2020

— New personnel hired to improve operations: a new Vice President of Asset Management and a new Director of Completions both recently joined the Company

— Gran Tierra is currently addressing some temporary operational issues which have impacted our production; the Company is taking the necessary steps to get production back on track and believes our oil reserves and values remain intact as these challenges represent deferral of production; the Company does not believe these issues are related to the underlying quality of the assets; further information is provided below:

From April 1, 2019 to May 23, 2019, Company production averaged 37,700 barrels of oil per day equivalent (“BOEPD”), and was expected to meet our previously published full year 2019 guidance

Starting in late May 2019, production decreased as a result of the following:

Acordionero: the Company proactively shut-in two oil producers with high gas-oil ratios (“GOR”); two other oil producers went off-line due to electric submersible pump (“ESP”) failures; total current, temporary impact to production is approximately 4,500 BOEPD

Suroriente and PUT-7: local farmers have set up blockades in the southern Putumayo region to protest against the Colombian national government; these protests are not directed at the oil industry or Gran Tierra; as a result of these blockades, Gran Tierra has had to shut in all production at both of these blocks; total current, temporary impact to production is approximately 4,500 BOEPD

– For second quarter to June 17, 2019 Company production has averaged approximately 36,200 BOEPD; for the five days up to and including June 17, 2019, the Company’s production was approximately 29,000 BOEPD

– As a result of these events, Gran Tierra will be revisiting its guidance over the coming months and expects to revise its guidance once the impact of the blockades and the startup of the Acordionero Projects can be fully assessed

— Gran Tierra is taking the following mitigation actions to address these temporary operational issues with production:

Acordionero: the planned full commissioning of the Acordionero Projects during July 2019 is expected to allow a rapid increase in water injection from approximately 16,000 barrels of water injected per day (“bwipd”) to 40,000 bwipd and the release three rental facilities which will reduce operating costs; this full implementation of the Acordionero waterflood is forecasted to repressure the reservoir over the next few months, which should reduce the field’s GOR, which in turn would allow the Company to increase oil production rates from several wells and to bring back online those wells which were temporarily shut-in; start-up of the 20 megawatt gas-to-power project at the same time is expected to significantly improve power reliability, improve ESP reliability and significantly lower operating costs; all of these activities are expected to restore Acordionero’s production back to levels achieved in first quarter 2019 over the next few months and grow in 2020, despite the recent production decrease

Suroriente and PUT-7: Colombian government authorities are currently addressing farmers’ concerns and expect to restore normal conditions within the next several days; Gran Tierra is working closely with government officials to safely resume operations and production on these two blocks as soon as possible; the Company may continue to have short-term interruptions in the area which are difficult to predict; the Company expects to restore Suroriente’s and PUT-7’s oil production back to normal levels once the blockades are resolved

Costayaco: the Company is currently drilling the CYC-39 infill oil well which is expected to be on production in July 2019; in mid-July 2019, the Company expects to spud the first of two horizontal water injectors (one each for the T Sand and the Caballos Formation) to improve ultimate oil recovery; these actions are expected to improve Costayaco’s oil production performance

Ayombero: the Company expects to contract a snubbing unit (equipment capable of working with high pressures) to retrieve parted coiled tubing in both the AY-2 and 3 wells in order to continue with completion operations; the AY-1 well was recently successfully cleaned out and re-perforated across the entire Galembo formation and is expected to be placed on long-term production test; we are very encouraged by the three Ayombero wells drilled to date which have confirmed similar lithologies, oil saturations and over-pressure in the Galembo Member of the La Luna Carbonate reservoir, suggesting reservoir and structural continuity; the Company’s estimates of oil in place and prospective resources are unchanged by these short-term issues

“With the receipt of the Acordionero Global Environmental License and the planned commissioning of the Acordionero Projects, as well as the lifting of the blockades in the southern Putumayo, we believe we are capable of restoring our production back up to over 40,000 BOEPD. The timing of this forecasted production increase depends on the water injection response at Acordionero and the impacts of community blockades in the southern Putumayo. We believe the current production decrease is a deferral, not a loss of reserves, and that we are taking the necessary steps to get production back on track. Overall, while the delay in the Acordionero Projects has deferred production in the short term, we are very encouraged by the continuity and quality of the sands in Acordionero and the expected commissioning of these projects in July 2019 is a major milestone. Based on the drilling to date in Acordionero and the commissioning of the Acordionero Projects, we expect to increase the original oil in place and recovery factor which will increase both the 1P and 2P reserves in Acordionero.”

— Gran Tierra President and Chief Executive Officer Gary Guidry

Exploration Update (All Projects 100% WI)

Llanos Basin: Prosperidad-1 Well, El Porton Block

— While sufficient oil shows and gas log response warranted testing the lower Gacheta Formation, only formation water was recovered; as a result Gran Tierra plans to abandon this well

— This exploration commitment well was part of the Petroamerica acquisition in early 2016 and Gran Tierra was required to drill it in under the terms of the ANH contract

— The one positive result is that Prosperidad-1 was successfully drilled to a depth of approximately 17,000 feet, which was the deepest well ever drilled by the Company and demonstrated the technical skills of Gran Tierra’s drilling team

Putumayo Basin: Pomorroso, Almendrillo and Pecari Wells, PUT-7 Block

— All three exploration wells have found producible oil in multiple zones (U Sand, A-Limestone and N Sand), at rates ranging from 100 to 300 BOEPD in each zone

— We are encouraged about encountering oil in multiple wells and are currently determining the optimal completion and stimulation design; a go-forward plan is expected to be determined during July 2019

— The Company is currently working to seek approval to commingle several productive zones within a single wellbore (a production method used at the Costayaco and Moqueta fields) to further improve the ultimate recovery and enhance the economics of the wells

— Currently, activity is ceased as a result of the blockades referenced above

***

Please follow and like us:
RSS
Follow by Email
Facebook
Facebook
Twitter
Visit Us
LinkedIn
Instagram

Leave a Reply

Your email address will not be published. Required fields are marked *