(Gran Tierra Energy Inc., 24.Jun.2015) – Gran Tierra Energy Inc. announced an increased 2015 capital program. The increased capital is intended to provide accelerated development drilling at the company’s core producing assets in the Putumayo Basin in Colombia, specifically the Moqueta and Costayaco fields on the Chaza Block. In addition, the company expects to accelerate the required laboratory and feasibility studies for enhanced oil recovery techniques in the Costayaco and Moqueta fields.
During the 1Q:15, the company incurred $74 million of the $140 million 2015 capital program. Gran Tierra’s board of Directors has approved a $45 million increase to its 2015 capital program to $185 million.
The allocation of capital includes an increase of $55 million directed at Colombia development, at negotiated reduced services costs. At forward pricing, the additional capital generates IRRs in excess of 30%, and the majority of the increased drilling impacts the 2015 exit rate and the forecasted 2016 average production. The total 2015 capital program in Colombia is now $115 million and the majority of Colombia’s capital program is expected to be spent on development drilling activities on the Moqueta and Costayaco fields. The program includes an expected three wells at Moqueta and three wells at Costayaco. These drilling programs are expected to continue into 2016.
Peru’s capital program has been reduced to $49 million, of which $11 million is expected to be incurred during the remainder of 2015. The Company is focused on limiting total costs (CAPEX and G&A) in Peru over the next 12 months to ensure retention of lands and security of assets. The company is exploring options to maximize shareholder value for the assets in Peru.
Brazil’s capital program has been reduced to $20 million, of which $6 million is expected to be incurred during the remainder of 2015.
Of the total budget of $185 million, $97 million is allocated for drilling, $45 million for facilities, pipelines and other, and $43 million for geological and geophysical expenditures. The program meets all work obligations and commitments in 2015.
Gran Tierra expects to finance its 2015 capital program through cash flows from operations and cash on hand, while retaining financial flexibility to undertake further development activities and pursue diversified growth opportunities in Colombia.
Production Outlook
With the revised capital program, Gran Tierra expects 2015 gross working interest (WI) production to average between 22,500 and 23,500 boe/d or between 18,400 and 19,400 boe/d net after royalty (NAR). Production from Colombia is expected to be approximately 17,850 boe/d NAR, with Costayaco contributing approximately 10,400 boe/d NAR and Moqueta contributing approximately 5,100 boe/d NAR, assuming a 2% contingency for potential delivery disruptions. Production from the Company’s Brazil operation is expected to average 770 boe/d NAR. Approximately 99% of expected production is oil, with the balance natural gas.
The accelerated development associated with the increased capital program at the Moqueta field is expected to provide the production capacity for the Company to maintain consistent production during 2016.The additional development is intended to test Probable and Possible reserves recognized by the company’s external reserves auditor.
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