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Gran Tierra Energy Inc. (“Gran Tierra” or the “Company”) (GTE.TO) (GTE.TO) and Petroamerica Oil Corp. (“Petroamerica”) (TSX VENTURE:PTA), both international oil and gas companies operating in Colombia, are pleased to announce that they have entered into an arrangement agreement dated November 12, 2015 (the “Arrangement Agreement”) whereby Gran Tierra has agreed to acquire all of the issued and outstanding common shares of Petroamerica by way of a statutory plan of arrangement under theBusiness Corporations Act (Alberta) (the “Acquisition”).

Under the terms of the Arrangement Agreement, Petroamerica shareholders will receive, at their election, either 0.40 of a Gran Tierra common share or C$1.33 in cash for each Petroamerica share, subject to a maximum of 70 percent of the consideration payable in cash. If Petroamerica shareholders elect to accept all share consideration, Gran Tierra expects to issue 43.6 million common shares. Gran Tierra will also be assuming the net positive working capital of Petroamerica, estimated at $25 million as at October 31, 2015, after accounting for severance and transaction costs, and including previously restricted cash which Gran Tierra expects to replace with letters of credit. Based on a 5-day volume weighted average trading price of C$3.32 per Gran Tierra common share on the facilities of the TSX, the transaction value including working capital and accounting for severance and transaction costs is $84 million.

Gran Tierra believes that the acquisition of Petroamerica is highly strategic and will strengthen its position as the premier operator and land holder in the Putumayo Basin. Petroamerica’s undeveloped land holdings and exploration and development portfolio are highly complementary to Gran Tierra’s own exploration portfolio, strong cash flow, reserves base and balance sheet strength. With expected base pro forma production of 28,000 to 30,000 boe/d in 2016, Gran Tierra believes that the combined entity will be uniquely positioned as a high growth, well-capitalized, Colombia focused oil and gas producer with a dominant position in the Putumayo basin and a growing presence in the Llanos basin. In addition, Gran Tierra has the financial capacity to pursue additional exploration and development projects within Petroamerica’s asset portfolio. The successful completion of the Acquisition is expected to be accretive to Gran Tierra’s net asset value per share. Gran Tierra will remain debt free with pro forma working capital of $135 million to $210 million, depending on the form of consideration elected by Petroamerica shareholders.

“This transaction is the first step of our corporate strategy to expand and diversify Gran Tierra’s oil and gas growth portfolio in Colombia,” commented Gary Guidry, Gran Tierra’s President and CEO, “and we are very excited to put our cash flow and balance sheet to work on the high quality Petroamerica assets.”

Ralph Gillcrist, Petroamerica’s President and CEO commented, “This transaction ensures that the high quality assets of Petroamerica will be fully developed and the combination with Gran Tierra will create one of the best-positioned companies in the prolific Putumayo and Llanos basins of Colombia. For Petroamerica’s shareholders, the resulting pro forma company will bring improved liquidity, increased diversity and scale, an outstanding near-term opportunity set and most importantly, the financial capability and balance sheet strength to maximize value of Petroamerica’s portfolio.”


  • Acquisition of before royalty, 4.5 million barrels of Proven and 8.1 million barrels Proven + Probable working interest reserves, based on an NI 51-101 compliant report prepared by GLJ Petroleum Consultants Ltd., as at December 31, 2014;
  • Approximately 3,000 boe/d of working interest production, composed of approximately 60% Llanos basin production and 40% Putumayo basin production;
  • Approximately 2.2 million gross acres in Colombia (0.8 million net acres), including approximately 0.5 million gross acres (0.3 million net acres) adjacent to or near the Company’s current acreage in the Putumayo basin, which management believes is prospective for the emerging N Sands exploration fairway;
  • Enhances near term exploration drilling inventory;
  • Significant opportunity to realize synergistic cost savings through a reduction in general & administrative expenses and tax planning opportunities;


Working Interest Production (October 2015 Average): 3,000 boe/d
Proved Reserves: (1)(4) 4.5 mmboe
Proved + Probable Reserves: (1)(4) 8.1 mmboe
Proved + Probable + Possible Reserves: (1) 13.1 mmboe
Net Working Interest Acres, October 2015: (2) 0.8 million acres
Tax Pools, October 2015: $156 million
Estimated Operating Netback, October 2015:(3) $18 – $20/boe
Estimated Annual Operating Cash Flow, 2016:(3) $20 – $22 million
(1) Based on NI 51-101 independent report prepared by GLJ Petroleum Consultants, as of December 31, 2014. Working interest basis.
(2) Approximately 0.3 million net acres of land located in the N Sands fairway in the Putumayo.
(3) Operating Netback and Operating Cash Flow – these are financial measures that do not have standardized meanings under generally accepted accounting principles in the United States of America (“GAAP”). Please refer to Disclaimer in this press release for more information about these non-GAAP measures. Brent Pricing of $50/bbl was estimated for the Estimated Annual Operating Cash Flow.
(4) Excluding working interest Proven and Proven + Probable reserves of 3.1 million barrels and 6.4 million barrels, respectively, as evaluated Petrotech Engineering Ltd., NI 51-101 compliant, effective December 31, 2014. These mostly heavy oil reserves will be re-evaluated as oil prices recover.


Based on an estimated purchase price (net of working capital) of $84 million, the acquisition metrics are as follows:

Working Interest Production: $28,000 per flowing boe
Proved Reserves :(1)(3) $18.71 per boe
Proved + Probable Reserves:(1)(3) $10.40 per boe
Proved + Probable + Possible Reserves:(1) $6.43 per boe
Cash Flow Multiple:(2) 3.8 – 4.2 times
Recycle Ratio: (4) 1.8 times
(1) Based on NI 51-101 independent report prepared by GLJ Petroleum Consultants Ltd., as of December 31, 2014. Working Interest basis.
(2) Based on the estimated operating cash flow shown above.
(3) Excluding working interest Proven and Proven + Probable reserves of 3.1 million barrels and 6.4 million barrels, respectively, as evaluated Petrotech Engineering Ltd., NI 51-101 compliant, effective December 31, 2014. These heavy oil reserves will be re-evaluated as oil prices recover.
(4) Recycle Ratio is calculated by dividing the operating netback provided above, by the Proved + Probable Reserve metric provided above.


The Acquisition increases Gran Tierra’s position in its core area of Putumayo, including significant additional acreage in the emerging N Sands exploration play.

Diagram 1: Pro Forma Land Position in the Putumayo Basin

Table 1: Petroamerica Land Acreage in Colombia.

PTA Lands Block Basin Gross Acreage W.I. W.I. Acreage
Balay Llanos 4,497 15% 675
El Eden Llanos 99,633 40% 39,853
El Porton (Explor.) Llanos 99,283 100% 99,283
Curiara (El Porton) Llanos 10,722 25% 2,681
LLA-10 Llanos 189,536 50% 94,768
LLA-19 Llanos 97,954 50% 48,977
Los Maracas Llanos 5,000 50% 2,500
Los Ocarros Expl. Llanos 52,135 50% 26,068
CPO-7 Llanos 627,735 20% 125,547
CPO-13 Llanos 466,898 20% 93,380
Suroriente Putumayo 90,263 16% 14,292
Alea 1848A Putumayo 75,764 50% 37,882
Alea 1947C Putumayo 58,068 50% 28,744
PUT-7 Putumayo 130,186 50% 65,093
PUT-2 Putumayo 96,666 100% 96,666
PUT-31 Putumayo 34,826 35% 12,189
Tinigua Putumayo 105,466 40% 42,186
TOTAL PTA Lands 2,244,632 37% 830,783


This Acquisition is consistent with the Company’s strategy to efficiently grow its current exploration, development and production opportunity base within Colombia, while diversifying into the prolific Llanos and Magdalena Valley geologic basins. In the Company’s view it is paying a fair value for the existing reserves and production established by Petroamerica, while at the same time enhancing the combined growth portfolio for both Gran Tierra and Petroamerica shareholders.

“The Acquisition is aligned with our strategy of consolidating efforts in our core area of the Putumayo basin where we have a solid land position and a strong operating team. Pro forma for the Acquisition, Gran Tierra will be a well-capitalized company with a well developed production base, free cash flow and a significant growth portfolio providing optionality to allocate capital between three major oil and gas producing basins in Colombia,” said Gary Guidry, President and CEO of Gran Tierra. “This Acquisition improves the long-term sustainability of our business model not only through diversification and per share growth, but also through the addition of high quality assets with significant growth potential. The low-cost, high-return assets add yet another layer of top-quartile locations to our expansive drilling inventory.” On a per share basis, the Acquisition is expected to be immediately accretive to Gran Tierra’s net asset value per share.

Petroamerica has identified numerous prospects in its exploration portfolio, several of which we intend to drill in 2016. With Gran Tierra’s strong balance sheet and forecasted free cash flow generation in 2016, we expect to have the necessary funding to drill the identified prospects. “The Acquisition is beneficial to Gran Tierra as it provides the potential to strategically shift its exploration investment commitments from frontier to more proven hydrocarbon producing basins with established infrastructure and production sales”, commented Mr. Guidry.

“Depending on commodity prices and the amount of capital we choose to spend, we believe the Petroamerica assets can contribute approximately 3,000 to 5,000 boe/d of production in 2016, over and above our organic growth plans,” said Guidry.

The Acquisition continues to consolidate Gran Tierra’s Putumayo core area, which is expected to generate efficiencies and synergies in the Company’s consolidated operations and capital program in the area. Although Gran Tierra’s strategy is to control capital allocation and operating efficiencies through operatorship, the Company can also add significant value as an active joint venture partner. In addition to the new operated Petroamerica assets, Gran Tierra will look to capitalize on the opportunity to transfer its horizontal drilling, completions and waterflood expertise to the non-operated fields.

Gran Tierra maintains a robust balance sheet and is in a strong financial position. The Company expects to fund the cash portion of the purchase price, if any, with existing cash-on-hand. Upon completion of the Acquisition, Gran Tierra will have no debt outstanding and an undrawn US$200 million bank line.

“Our balance sheet and financial strength allow us to execute on our growth strategy in a low oil price environment,” said Guidry. “We are acquiring significant additional N Sands resource potential in the Putumayo, while at the same time increasing our footprint in the Llanos basin where we see significant opportunity. Petroamerica’s exciting exploration lands are a tremendous fit with Gran Tierra’s current land base and are expected to enhance our long-term growth strategy.”


Petroamerica established a special committee of its board of directors that was tasked to explore various transaction alternatives available to Petroamerica, including transactions similar in nature to the Acquisition. Upon receiving an offer from Gran Tierra that was unanimously recommended to the board of directors by the special committee, the board of directors amended the mandate of the special committee to negotiate the Acquistion. The special committee, determining that the Acquisition was in the best interest of Petroamerica’s shareholders, unanimously recommended the Acquisition to its board of directors. Upon recommendation of the special committee, the board of directors of Petroamerica, with the exception of one director who recused himself for potential conflict reasons but who unequivocally supports the transaction, has unanimously recommended approval of the Acquisition and has determined that the Acquisition is in the best interests of Petroamerica shareholders. In addition, Petroamerica’s sole financial advisor, Black Spruce Merchant Capital Corp., has provided the board of directors of Petroamerica with a verbal opinion that the consideration to be received by Petroamerica shareholders pursuant to the Acquisition is fair, from a financial point of view. Officers, directors and shareholders that collectively hold approximately 10.13% of the issued and outstanding Petroamerica shares have entered into voting support agreements and have agreed to vote their 11,032,858 securities in favour of the Acquisition.

The Acquisition is subject to Petroamerica shareholder approval as well as customary regulatory, stock exchange, court and other approvals. The Acquisition provides for, among other things, a non-solicitation covenant on the part of Petroamerica, subject to customary “fiduciary out” provisions that entitle Petroamerica to consider and accept a superior proposal and gives Gran Tierra the right to match any superior proposal. The Arrangement Agreement provides for a mutual non-completion fee of US$5.0 million, payable in certain circumstances, including if Petroamerica enters into an agreement with respect to a superior proposal or if the board of directors of Petroamerica withdraws or modifies its recommendation with respect to the Acquisition. The Acquisition is expected to close on or about January 29, 2016.

Full details of the Acquisition will be included in an information circular of Petroamerica to be mailed to Petroamerica shareholders in accordance with applicable securities laws. A copy of the aforementioned information circular and related documents will be filed under Petroamerica’s issuer profile on SEDAR at at the applicable time.


Gran Tierra continues to execute its business plan of creating sustainable value-added growth in reserves, production and cash flow through management’s integrated strategy of acquiring, exploring, developing and enhancing high-quality assets in Colombia.

With an underlying base decline rate of 12 to15 percent per year at Costayaco and Moqueta, the Company has flexibility to allocate capital to the attractive Petroamerica exploration and development Assets. Gran Tierra will provide detailed 2016 budget and forecast guidance in December 2015.


FirstEnergy Capital Corp. and Peters & Co. Limited acted as financial advisors to Gran Tierra on the Acquisition.

Black Spruce Merchant Capital Corp. acted as sole financial advisor to Petroamerica on the Acquisition.