Gran Tierra Energy Inc. Announces Operational Update Highlighted by Resumption of Production at Several Fields
CALGARY, Alberta, Sept. 22, 2020 (GLOBE NEWSWIRE) — Gran Tierra Energy Inc. (“Gran Tierra” or the “Company”) (NYSE American:GTE) (TSX:GTE) (LSE:GTE), today announced an operational update. All dollar amounts are in United States (“U.S.“) dollars and production amounts are on an average working interest before royalties (“WI“) basis unless otherwise indicated. Per barrel (“bbl“) of oil equivalent (“BOE“) amounts are based on WI sales before royalties.
Key Highlights:Production Restarted: during third quarter 2020 to date (July 1-September 21, 2020), production has averaged approximately 18,700 BOE per day (“BOEPD”); during September 1-21, 2020, production has increased to an approximate average of 21,250 BOEPD (second quarter 2020 averaged 20,165 BOEPD); Gran Tierra’s oil production volumes have been positively impacted by the resumption of production at the Suroriente and PUT-7 Blocks in the southern Putumayo region, as well as at several minor fields, and by the recommencement of workover activities at the Acordionero oil fieldWaterfloods Outperforming: waterflood response across all of Gran Tierra’s core assets has continued to outperform management’s expectations; in particular, Acordionero has continued to see material increases in reservoir pressures during third quarter 2020 to date; the continued focus on surveillance, analysis and optimization of Acordionero’s waterflood has led to a shallowing of the field’s oil production decline rateResumption of Operations: with the recent partial recovery in oil prices and tightening of differentials, Gran Tierra’s operations team has seamlessly restarted several field activities throughout the Company’s Colombian portfolio, in strict accordance with COVID-19 safety protocols for the Company’s employees and local communities; Gran Tierra has performed in excess of 2,500 COVID-19 tests and managed to safely move more than 1,500 employees in and out of the Company’s operations during five separate crew-changes since the pandemic started; although the evolving situation with the COVID-19 pandemic may impact the timing of current and planned activities, Gran Tierra remains confident that its COVID-19 protocols should allow ongoing progress in the resumption of operationsResumption of Acordionero Workover and Development Activities (100% WI):Acordionero Workover Activity Underway: the first workover rig restarted operations on September 1, 2020 and is currently on its third workover, the AC-58 oil well; the AC-52 and AC-53 oil wells have already been returned to production on schedule and under budget; this first workover rig is forecast to continue operations in the field through the end of 2020 and into first quarter 2021; a second workover rig is expected to arrive at Acordionero in October 2020 to accelerate well workover activity; a total of 10 to 12 offline oil wells are expected to be worked over by 2020 year-end to restore production; the total combined productive capacity of the 10 highest priority wells for workover is estimated to be approximately 3,500 bbl of oil per day (“BOPD”), with weighted averages for water cut of 13%, gas-oil ratio of 639 standard cubic feet per bbl and API oil gravity of 17 degrees (based on 30-day averages prior to each well going offline earlier this year)Acordionero Development Drilling Expected To Commence Q4/2020: a drilling rig is expected to restart operations during fourth quarter 2020 to drill 1 to 2 new oil wells by 2020 year-end; these new wells are expected to begin production during first quarter 2021; the drilling rig is forecast to continue drilling new development oil wells at Acordionero throughout 2021; the next 10 planned wells (8 oil producers and 2 water injectors) are scheduled to be drilled from the new southwest pad currently under construction; each of these new wells is expected to have an initial oil production rate of approximately 550 BOPD (initial 30-day average rate), in line with the strong performance of wells drilled in the field over the last yearCostayaco/Vonu Workovers Expected to Resume in October 2020 (100% WI): a workover rig is expected to start operations in October 2020 to workover 3 offline oil wells and recomplete 2 wells to add U Sand water injection; the total combined productive capacity of the offline oil wells is estimated to be approximately 1,000 BOPD with weighted averages for water cut of 44%, gas-oil ratio of 811 standard cubic feet per bbl and API oil gravity of 29 degrees (based on 30-day averages prior to each well going offline earlier this year)Suroriente Block (52% WI) Production Ramping Up: restart of the Cohembi field, previously shut-in due to local farmer blockades, commenced on August 28, 2020; Cohembi’s average WI production (September 1-21, 2020) is approximately 2,160 BOPD; volumes are expected to continue to increase to the block’s estimated WI capacity of approximately 3,600 BOPD (based on the 30-day average prior to the block being shut-in earlier this year)Majority of Minor Oil Fields Production Back Online: the restart of the majority of minor fields has commenced and the fields are coming back online at rates higher than recorded just prior to the shut-ins; current production from these restarted minor fields is approximately 1,600 BOPD, with an additional 400 BOPD expected to be added during fourth quarter 2020; the cost optimizations achieved across the Company’s assets are being realized in these reactivations, both in processes and personnel, as well as operating strategy going forwardOperating Cost Reductions: the Company’s optimization programs have reduced operating costs by approximately $3.00/bbl; these cost-saving initiatives included personnel optimization, contract renegotiations and increased utilization of associated gas in gas-to-power operations; additional operational improvements have been identified and are forecasted to provide a further operating cost reduction of approximately $0.50/bbl in fourth quarter 2020VAT & Income Tax Refunds Received: as of August 31, 2020, Gran Tierra has collected total value-added tax (“VAT”) and income tax receivables of approximately $51 million; the Company expects to collect approximately another $25 to $35 million before the end of 2020; therefore, Gran Tierra forecasts a total collection of approximately $76 to $86 million in VAT and income tax receivables during 2020Oil Price Hedges In Place To Protect Cash Flows: Gran Tierra has entered into a series of Brent oil price hedges; for second half 2020, these hedges effectively give the Company a Brent floor price of $35.68/bbl on 11,000 BOPD if Brent falls as low as $27.05/bbl, below which Gran Tierra would receive Brent plus $8.63/bbl; for first half 2021, the Company has an effective Brent floor price of $45.29/bbl on 7,000 BOPD if Brent falls as low as $35.00/bbl, below which Gran Tierra would receive Brent plus $10.29/bbl; additional detail is provided in the following table:
*Weighted Average ICE BrentGran Tierra Positioned to Thrive in 2021: The Company’s initiatives during the severe downturn of 2020 have been focused on portfolio optimization and the preservation of liquidity and value; with the recovery in oil prices, Gran Tierra is now pacing projects to allow the safe resumption of operations while following strict COVID-19 safety protocols; the Company is analyzing multiple scenarios focused on providing strong returns and free cash flow in 2021 in order to reduce debt, and to optimize the ultimate oil recovery, free cash flow and long-term value from all assets; Gran Tierra believes its robust asset base will resume average production in excess of 30,000 BOEPD in 2021, based on current assumptions, including commodity prices remaining at current levels and that the level of global economic disruption from the COVID-19 pandemic does not increase next year
Message to ShareholdersGary Guidry, President and Chief Executive Officer of Gran Tierra, commented: “We are very pleased we have safely and diligently recommenced operations throughout our extensive Colombian portfolio. The safety of our staff, contractors and the local communities where we operate is paramount. Gran Tierra’s proper management of COVID-19 safety protocols has led to an earlier restart of activities than originally forecast and we commend our teams in Colombia and Canada for all of their excellent work during the many challenges of 2020. We are also greatly appreciate the support the Colombian government continues to provide the local oil industry, as evidenced by the ongoing payments of VAT and income tax refunds. One of our key objectives is to finish 2020 strong to set up Gran Tierra for an exciting 2021. We believe we are well-positioned to withstand the current volatile environment with our low base decline, conventional oil asset base and the operational control for capital allocation and timing, while maintaining a low cost structure and the safety of our people.”Contact InformationFor investor and media inquiries please contact:Gary Guidry
President & Chief Executive OfficerRyan Ellson
Executive Vice President & Chief Financial OfficerRodger Trimble
Vice President, Investor Relationsfirstname.lastname@example.orgAbout Gran Tierra Energy Inc.Gran Tierra Energy Inc. together with its subsidiaries is an independent international energy company focused on oil and natural gas exploration and production in Colombia and Ecuador. The Company is focused on maximizing the value of its existing portfolio of assets. Gran Tierra’s common shares trade on the NYSE American, Toronto Stock Exchange and London Stock Exchange under the ticker symbol GTE. Additional information concerning Gran Tierra is available at www.grantierra.com. Information on the Company’s website does not constitute a part of this press release. Gran Tierra’s Securities and Exchange Commission filings are available on the Securities and Exchange Commission website at http://www.sec.gov and on SEDAR at http://www.sedar.com and UK regulatory filings are available on the National Storage Mechanism website at www.morningstar.co.uk/uk/nsm.Forward Looking Statements and Legal Advisories:This press release contains opinions, forecasts, projections, and other statements about future events or results that constitute forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and financial outlook and forward looking information within the meaning of applicable Canadian securities laws (collectively, “forward-looking statements”). The use of the words “expect”, “plan”, “can,” “will,” “should,” “guidance,” “forecast,” “signal,” “measures taken to” and “believes”, derivations thereof and similar terms identify forward-looking statements. In particular, but without limiting the foregoing, this press release contains forward-looking statements regarding: the Company’s strategies to adjust production volumes, capital investments and operating and general and administrative costs, including previously planned drilling and operation activities, the Company’s anticipated procedures to restart production and waterflood operations and expectations as to resumption of production amounts, future well results (including initial oil production rates and productive capacity based on past performance), expected cost reductions, the impact of hedges, average production in 2021, the impact and timing of the Company’s COVID-19 protocols, the Company’s expectations as to 2020 results and VAT and income tax receivables and its positioning for 2021. The forward-looking statements contained in this press release reflect several material factors and expectations and assumptions of Gran Tierra including, without limitation, that Gran Tierra will continue to conduct its operations in a manner consistent with its current expectations, pricing and cost estimates (including with respect to commodity pricing and exchange rates), and the general continuance of assumed operational, regulatory and industry conditions in Colombia and Ecuador, and the ability of Gran Tierra to execute its business and operational plans in the manner currently planned.Among the important factors that could cause actual results to differ materially from those indicated by the forward-looking statements in this press release are: our ability to comply with covenants in our credit agreement; our ability to obtain amendments to the covenants in our credit agreement so as to avoid an event of default under our credit agreement and senior notes; a reduction in our borrowing base and our ability to repay any excess borrowings; sustained or future declines in commodity prices and the demand for oil; continued or future excess supply of oil and natural gas; potential future impairments and reductions in proved reserve quantities and value; problems in connection with production and waterflood restart; continued spread of the COVID-19 virus and extensions or previously announced lockdowns and possible future restrictions against oil and gas activities in Colombia and Ecuador; global economic disruption from the COVID-19 pandemic in 2021; Gran Tierra’s operations are located in South America, and unexpected problems can arise due to guerrilla activity, community protests or blockades and other local events that may impact our ability to access our locations or transport oil; technical difficulties and operational difficulties may arise which impact the production, transport or sale of our products; geographic, political, global health and weather conditions can impact the production, transport or sale of our products; Gran Tierra’s ability to raise capital; Gran Tierra’s ability to identify and complete successful acquisitions; Gran Tierra’s ability to execute business plans; unexpected delays and difficulties in developing currently owned properties may occur; the timely receipt of regulatory or other required approvals for Gran Tierra’s operating activities; the failure of exploratory drilling to result in commercial wells; unexpected delays due to the limited availability of drilling equipment and personnel; current global economic and credit market conditions may impact oil prices and oil consumption differently than the Company currently predicts, which could cause it to further modify our strategy and capital spending program; volatility or declines in the trading price of Gran Tierra’s common stock and the continued listing of its shares on a national stock exchange; and the risk factors detailed from time to time in Gran Tierra’s periodic reports filed with the Securities and Exchange Commission, including, without limitation, under the caption “Risk Factors” in Gran Tierra’s Annual Report on Form 10-K for the year ended December 31, 2019 and Quarterly Reports on Form 10-Q for the three months ended March 31, 2020 and June 30, 2020, and its other filings with the Securities and Exchange Commission. These filings are available on the Securities and Exchange Commission website at http://www.sec.gov and on SEDAR at www.sedar.com.The forward-looking statements contained in this press release are based on certain assumptions made by Gran Tierra based on management’s experience and other factors believed to be appropriate. Gran Tierra believes these assumptions to be reasonable at this time, but the forward-looking statements are subject to risk and uncertainties, many of which are beyond Gran Tierra’s control, which may cause actual results to differ materially from those implied or expressed by the forward looking statements. In particular, the unprecedented nature of the current economic downturn, pandemic and industry decline may make it particularly difficult to identify risks or predict the degree to which identified risks will impact Gran Tierra’s business and financial condition. All forward-looking statements are made as of the date of this press release and the fact that this press release remains available does not constitute a representation by Gran Tierra that Gran Tierra believes these forward-looking statements continue to be true as of any subsequent date. Actual results may vary materially from the expected results expressed in forward-looking statements. Gran Tierra disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as expressly required by applicable law.The estimates of future production, tax collection figures and operating cost reductions set forth in this press release may be considered to be future-oriented financial information or a financial outlook for the purposes of applicable Canadian securities laws. Financial outlook and future-oriented financial information contained in this press release about prospective financial performance, financial position or cash flows are provided to give the reader a better understanding of the potential future performance of the Company in certain areas and are based on assumptions about future events, including economic conditions and proposed courses of action, based on management’s assessment of the relevant information currently available, and to become available in the future. These projections may not be appropriate for other purposes. These projections contain forward-looking statements and are based on a number of material assumptions and factors set out above. Actual results may differ significantly from the projections presented herein. These projections may also be considered to contain future-oriented financial information or a financial outlook. The actual results of Gran Tierra’s operations for any period will likely vary from the amounts set forth in these projections, and such variations may be material. See above for a discussion of the risks that could cause actual results to vary. The future-oriented financial information and financial outlooks contained in this press release have been approved by management as of the date of this press release. Readers are cautioned that any such financial outlook and future-oriented financial information contained herein should not be used for purposes other than those for which it is disclosed herein. The Company and its management believe that the prospective operational and financial information has been prepared on a reasonable basis, reflecting management’s best estimates and judgments, and represent, to the best of management’s knowledge and opinion, the Company’s expected course of action. However, because this information is highly subjective, it should not be relied on as necessarily indicative of future results.Presentation of Oil and Gas InformationBOEs have been converted on the basis of 6 thousand cubic feet (“Mcf”) of natural gas to 1 bbl of oil. BOEs may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 Mcf: 1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. In addition, given that the value ratio based on the current price of oil as compared with natural gas is significantly different from the energy equivalent of six to one, utilizing a BOE conversion ratio of 6 Mcf: 1 bbl would be misleading as an indication of value. Gran Tierra’s reported production is a mix of light crude oil and medium and heavy crude oil for which there is not a precise breakdown since the Company’s oil sales volumes typically represent blends of more than one type of crude oil.