Gran Tierra Reduces 2015 Colombia Capital Budget To $66 Million USD, Slashes Entire Budget By Over Half To Ride Out Low Oil Prices

Gran Tierra announced that it has reduced its capital budget for 2015 to $140 million.  This is a reduction of $170 million from the previously announced budget of $310 million.   The revised budget for operations in Colombia, Peru and Brazil allocates $50 million to drilling, $40 million to facilities, equipment and pipelines,$49 million for geological and geophysical activities and $1 million associated with corporate activities.  Of the $140 million approximately $43 million had already been spent or committed. Roughly $37 million of the capital program is dedicated to the maintenance of existing production while approximately $18 million is dedicated to drilling in Colombia.

Gran Tierra Energy Inc.  an international oil and gas exploration and production company, headquartered in Calgary, Canada, incorporated in the United States and operating in South America, with its stock trading on the NYSE MKT Exchange (GTE) and the Toronto Stock Exchange (GTE) focused on oil exploration and production in South America, today announced a revised preliminary 2015 capital program.  This revised program is designed to retain balance sheet strength by minimizing or eliminating expenditures that have no immediate value at current oil prices. In addition to the capital spending reductions, Gran Tierra announced it is seeking operating and general and administrative cost reductions by working with contractors and suppliers. Management said, in a written statement provided to Finance Colombia, that the company’s capital program will be reviewed continually for additional future reductions, and that Gran Tierra’s exploration portfolio is will be reviewed and re-evaluated with an emphasis on reducing both its risk profile and capital exposure.

Above: Gran Tierra is utilizing an average Brent oil price of $50 per barrel for budgeting purposes.  

“The capital spending deferrals we are announcing form part of the refocusing effort by the Company to enhance delivery of value to shareholders.  Gran Tierra will target increased capital spending efficiency to extract maximum value from the Company’s portfolio. A key driver of the reduced capital spend is to preserve a strong balance sheet and maximize the Company’s potential for growth from both our existing portfolio as well as  through the opportunistic capture of external value enhancing opportunities,” said Duncan Nightingale, Interim President and Chief Executive Officer. “Additionally, Gran Tierra will continue to work diligently to mature leads and prospects to a drill ready status in preparation for an improved commodity price environment” concluded Nightingale.

Capital Spending

The revised 2015 capital program focuses on projects with immediate value adds.  In Colombia such projects include using natural gas produced from the Moqueta field to fuel electricity generation and thereby provide cost savings over the life of the field.  A development well will be drilled in the Moqueta field which is required for pressure support. At Costayaco, work continues to increase water injection capacity to actively manage the production profile. In addition to facilities work at Costayaco and Moqueta, the Company plans to perform several work-overs and well services.  Also, a commitment exploration well may be drilled for which Gran Tierra is being carried for net US$5.5 million.

Production Projections

With the revised capital spending program, production from Colombia is expected to be approximately 17,750 BOEPD (Barrels of Oil Equivalent, Per Day) NAR, with Costayaco contributing approximately 10,140 BOEPD NAR and Moqueta contributing approximately 5,540 BOEPD NAR assuming a 2% contingency for potential delivery disruptions.  Approximately 99% of expected production is oil, with the balance natural gas.

Financial Position

Gran Tierra had approximately $332 million in cash and cash equivalents and no debt at the end of 2014. In addition, the Company has an undrawn credit facility with a current borrowing base of $150 million.  Based on current oil prices, Gran Tierra expects the revised 2015 program to be funded from funds flow from operations and cash on hand.