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All dollar amounts are in United States (“U.S.”) dollars unless otherwise indicated.

Gran Tierra Energy Inc. (“Gran Tierra” or the “Company”) (GTE.TO)(GTE.TO) is pleased to announce its 2016 capital and operating budget. Given the current volatility in commodity prices, the board of directors of Gran Tierra has approved a flexible budget focusing capital allocation on projects to grow and expand the assets in Colombia, while maximizing the value of assets in Brazil and Peru.

“An important part of our base and development budget is underway now and will be completed over the first six months of 2016. If the price of oil remains below $50.00 per barrel through the second quarter of 2016, the Company may choose to defer some discretionary components of our exploration and development budget to preserve cash. We plan to continue to allocate capital to acquisitions and joint ventures, consistent with our strategy of expanding and diversifying the Company’s growth portfolio in Colombia,” commented Gary Guidry, President and Chief Executive Officer of Gran Tierra.

The Company’s strategy is to efficiently grow and diversify its current portfolio of exploration, development and production opportunities in Colombia. In addition to implementing a flexible approach to optimize capital allocation, the Company continues to implement both temporary and permanent cost structure reductions in operating, capital and general and administrative costs.


The Company operates over 80 percent of its production and therefore has significant flexibility on capital allocation. At a $40.00 Brent price, the Company will generate funds flow of $95 to $105 million which will fund the majority of the 2016 base capital expenditures, including required 2016 exploration commitments. At a $52.50 Brent price, the Company will generate funds flow of $155 to $165 million which would fund both the base capital and discretionary growth program.

The Company has a robust portfolio with $61 million of identified growth projects scheduled in the second half of 2016. In the event of an increase in commodity prices, the Company will deploy free cash flow to these projects.

Based on a $40.00 Brent price;

  • The Company is forecasting 20% growth in 2016 working interest (“WI”) production over 2015 average WI production.
  • The Company expects to maintain a strong balance sheet in 2016 and does not anticipate utilizing its $200 million undrawn credit facility.

The Company anticipates exiting 2015 with working capital of approximately $161 million. The net cash portion of the Petroamerica Oil Corp. (“Petroamerica”) acquisition was $45 million, and the proposed PetroGranada Colombia Limited (“PetroGranada”) acquisition is $19 million. The Petroamerica acquisition closed January 13, 2016 and was funded from cash on hand, and the Petrogranada acquisition is anticipated to close in January and will be funded with cash on hand. Estimated working capital at the beginning of 2016 is approximately $97 million, after giving consideration to these acquisitions.


The 2016 average WI production 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 (“boepd”), representing an increase of 20% over our 2015 average production of 23,400 boepd. The 2016 production guidance includes 900 to 1,000 boepd of production from the Company’s assets in Brazil.

The Company is expecting 2016 WI exit production of 29,000 to 30,000 boepd.


The base capital budget for 2016 is estimated at $107 million, with the majority of the budget allocated to Colombia. The budget includes low-risk committed exploration capital required for the Putumayo-7 block (“PUT-7 Block”) in the Putumayo Basin of Colombia. The major components of the base capital work program include the following activities:

Base Capital Program ($million)
Maintenance and Development Capital:
Chaza Block 50
– Drill 2 water injection wells at Costayaco
– Drill 3 development wells at Moqueta
– Facilities work – increased water injection, and new well tie-ins
Brazil 8
Non-Operated Blocks in Colombia 6
Total Maintenance and Development Capital 64
PUT-7 Block 20
– Drill 2 exploration wells
– Drill 1 development well
Peru 6
Other – Capital Allocations 17
Total Base Capital Program 107
Well Summary for Base Capital Program: Gross Wells Net Wells
Development Wells 6.0 6.0
Exploration Wells 3.0 2.5
Total Wells 9.0 8.5

Also included in our 2016 Base Capital Program is an exploration well on the Llanos-10 block, of which Gran Tierra is carried and has a 50% WI.


For 2016, the budgeted discretionary growth capital will target exploration and development drilling and seismic activities in Colombia. Gran Tierra’s discretionary exploration and development work program is as follows:

Discretionary Growth Capital Gross Wells Net Wells ($millions)
Putumayo Basin 7.0 3.2 37
Llanos Basin 4.0 1.9 18
Sinu Basin – 281 km of 2D seismic 6
Total Discretionary Growth Capital 11 5.1 61

Gran Tierra has additional exploration drilling opportunities that could be accelerated given higher oil prices and higher than anticipated funds flow from operations. Alternatively, the discretionary growth capital outlined above can be deferred to 2017 if low commodity prices prevail.


Gran Tierra continues to identify and analyze acquisition and joint-venture opportunities in Colombia (and potentially Mexico) to expand and diversify its growth portfolio. Gran Tierra’s strong cash and working capital position and undrawn credit facility provide the Company with the flexibility to continue its active exploration and development program, accelerate the appraisal of any new discoveries and/or expand the growth portfolio through acquisition and new joint-venture projects.


The capital program in Peru is $6 million, and includes only those activities required for retention of lands and security of assets. In Brazil, the capital program approved for 2016 is $8 million, and includes minimal activity to implement water injection for reservoir pressure maintenance, and to preserve current production levels.

In both Peru and Brazil, operations have been scaled back significantly, with the aim of allowing time for the Company to explore and execute on options to maximize shareholder value. The operations are now structured in such a way that the free cash flow from production in Brazil offsets the spend in Peru, ensuring that these assets remain in-tact without being a burden on the free cash flow generating core assets of the Company.


With expected 2016 average production of 27,500 to 29,000 boepd, the Company expects 2016 funds flow from operations and 2016 cash netbacks to be as follows.

Brent ($US/barrel) 40.00 52.50 57.50
Funds Flow from Operations ($million) 95 – 105 155 – 165 175-185
Cash Netbacks ($US/barrel) 9.00 – 10.00 15.00 – 16.00 17.00 – 18.00
Operating Netbacks ($US/barrel) 11.50 – 13.50 19.00 – 21.00 22.00 – 24.00

Cash netback is defined as operating netback less general and administrative, finance and tax expense


($million, unless otherwise indicated) 2016 Budget 2016 Budget
Brent ($US/barrel) 40.00 52.50
Average Production (boepd) 27,500-29,000 27,500-29,000
Oil Percentage of Production 99% 99%
Funds Flow from Operations 95 – 105 155 – 165
Cash Netbacks ($US/barrel) 9.00 – 10.00 15.00 – 16.00
Capital Budget
Base Capital Program:
Colombia 76 76
Brazil 8 8
Peru 6 6
Other 17 17
Total Base Capital Program 107 107
Discretionary Growth Capital:
Putumayo Basin 37
Llanos Basin 18
Sinu Basin 6
Total Discretionary Growth Capital 61
Total Capital Budget 107 168

The Company will continue to monitor and review realized oil prices and the resulting funds flow, in conjunction with the Company’s capital program. With changes in funds flow expectations, the Company will defer or accelerate discretionary capital projects and ensure capital expenditures can be funded by funds flow from operations.