(Gran Tierra Energy Inc., 31.May.2016) – Gran Tierra is increasing its base 2016 capital budget by $33 million to $43 million to a revised total of $140 million to $150 million. The company’s previously announced base capital budget was $107 million.
The increased capital investment will be entirely directed at exploration in Colombia and will allow the drilling of two additional, 100 percent working interest exploration wells, including one additional N-Sands exploration well in the Putumayo Basin. The increased budget will also allow for the acquisition of additional 2D seismic in the Sinu Basin, and accelerated lease construction and environmental impact assessment work in preparation for the company’s 2017 Colombian exploration drilling program.
Gran Tierra’s 2016 production guidance remains unchanged. The 2016 average working interest production before royalties from the company’s assets in Colombia and Brazil is expected to average approximately 27,500 to 29,000 barrels of oil equivalent per day (boe/d), representing an increase of 20 percent over our 2015 average production of 23,400 boe/d. The 2016 production guidance includes 900 to 1,000 boe/d of production from the company’s assets in Brazil.
Credit Facilities Update
The committed borrowing base under Gran Tierra’s credit facility has been modestly reduced from the previous $200 million to $185 million, with $160 million readily available and $25 million subject to the consent of all lenders. Recognizing the challenging commodity price environment and the impacts on the estimated value of producing reserves, Gran Tierra management is pleased with the continued support of the lending banks to maintain liquidity which complements operating cash flow and supports future growth. The credit facility is currently undrawn and the maturity date remains the same at September 21, 2018.
Operations Update
Drilling lease construction is underway for the Cumplidor-1 exploration well in the PUT-7 block, which the company continues to expect to spud in early third quarter 2016. This well is expected to be followed immediately by the Alpha-1 exploration well from the same drilling pad. These wells are the first to test the N-Sands exploration play in PUT-7 in the Putumayo Basin, which Gran Tierra believes is highly prospective and expects to lead to long term reserve and production growth.
The Moqueta-22 development well has been successfully drilled and completed and over a combined test period of 24 hours to 23:00 Bogota time on May 30, 2016, the well produced on pump an average of 438 barrels of oil per day, 205 barrels of water per day and 654 thousand standard cubic feet per day from the Caballos and T Sand formations. Clean up and running of the final completion equipment for this well continue. The Moqueta and Costayaco 2016 development drilling programs have now concluded. Both oil fields are expected to provide significant free cash flow starting in the second half of 2016, which would allow Gran Tierra to fully fund its multi-year exploration program in Colombia.
“We are pleased to be in a position to accelerate our exciting Colombian exploration program. We are expecting regulatory approvals for several key exploration prospects over the next few months,” said Gran Tierra President and Chief Executive Officer Gary Guidry. “The substantial recovery in the Brent oil price since its multi-year low in January 2016 also gives Gran Tierra an opportunity to accelerate some key exploration drilling and seismic activities in Colombia while continuing to pursue opportunities to expand the Company’s portfolio in an effort to increase net asset value per share for shareholders. ”
Guidry continued: “We are also pleased with the result of the May 2016 redetermination of the borrowing base for our credit facility. Our credit facility provides a solid foundation and readily accessible financial resources for growth in Colombia. The ongoing support we received from the lending banks demonstrates the underlying confidence in our producing assets, our team and the business environment in Colombia. Our new hedging position provides us with downside oil price protection as we increase our exploration spending in today’s volatile commodity price environment. With $81 million of working capital at March 31, 2016, $109 million of net proceeds from our convertible senior notes offering in April 2016, strong cash flow, $160 million of available borrowings under our undrawn credit facility and, subject to lender consent, an additional $25 million available under our credit facility, we continue to be well positioned to allocate capital to explore, develop and grow reserves and add value through acquisitions. Our team is focused on emerging from this low oil price environment as one of the strongest intermediate international exploration and production companies.”
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