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Press release from CNW Group

Gran Tierra Energy Announces $367 Million Capital Program for 2012

Friday, December 16, 2011

Gran Tierra Energy Announces $367 Million Capital Program for 201207:00 EST Friday, December 16, 2011Ten exploration wells and seventeen development wells in Colombia, Brazil, Peru and Argentina CALGARY, Dec. 16, 2011 /CNW/ - Gran Tierra Energy Inc. ("Gran Tierra Energy") (NYSE Amex: GTE, TSX: GTE), a company focused on oil exploration and production in South America, today announced a 2012 capital spending program of $367 million for its exploration and production development operations in Colombia, Brazil, Peru and Argentina.  The capital spending program allocates $246 million for drilling, $39 million for facilities, equipment and pipelines, including $2 million associated with corporate activities, and $82 million for seismic activities.  The budget contemplates the drilling of 11 wells in Colombia, 13 wells in Argentina, two wells in Brazil and one well in Peru. The approved 2012 capital spending program also includes funds for 1,154 km of 2D and 427 km2 of 3D seismic acquisition programs in Colombia, Peru, Argentina and Brazil, primarily in preparation for additional exploration and production drilling operations in 2013 and beyond.Excluding potential exploration success, production in 2012 is expected to range between 26,000 to 27,000 BOEPD gross, or 20,000 to 21,000 BOEPD NAR.  Approximately 95% of this production consists of light oil, with the balance consisting of natural gas.Gran Tierra Energy had $226 million in cash and equivalents at the end of the third quarter 2011 and has no debt. The 2012 work program and budget is expected to be funded primarily from cash flows from operations, with the balance from cash on hand as necessary, at current oil prices."Gran Tierra Energy remains committed to continue executing its strategy through 2012, a strategy that has consistently grown land, reserves and production year over year for the last six years. Our focus on execution sees us entering 2012 with a robust exploration portfolio and a balanced mix of development drilling to maintain our base of reserves and production, and exploration drilling to grow that base." said Dana Coffield, President and Chief Executive Officer of Gran Tierra Energy. "This singular focus on execution has allowed us to not only grow year over year, but allowed us to do so with an exceptionally strong balance sheet.  As before, we are entering another year fully funded from cash flow and cash on hand to execute our capital program, in spite of the current tumultuous global economic environment. Gran Tierra Energy, again, is positioned for continued growth," concluded Coffield. ColombiaGran Tierra Energy's land position in Colombia encompasses approximately 3.5 million gross acres or 3.1 million net acres on 21 blocks in the Putumayo, Llanos, Cauca and Lower Magdalena Basins.  The Colombia capital budget for 2012 is $182 million and is expected to include drilling four gross exploration wells and seven gross development wells.  Gran Tierra Energy's oil exploration drilling program will target prospects in the Putumayo and Llanos basins, while development drilling will focus on the Moqueta, Costayaco and Brillante field developments, with total drilling expenditures of $104 million. Facilities work, including continued electrification of the Costayaco and Moqueta fields, water injection facilities and a production battery at the Jilguero oil discovery is expected to be $27 million. Geological and geophysical ("G&G") work consisting of 427 km2 of 3D seismic and 201 km of 2D seismic, along with other costs, is expected to be $51 million. G&G work is planned for the Cauca-6, Cauca-7, Moqueta, Garibay, Piedmonte Norte, Piedmonte Sur, Putumayo-1 and Putumayo-10 Blocks to mature leads and prospects for drilling in 2013 and beyond.In addition to the budgeted program, there is a large portfolio of contingent drilling opportunities, some of which are expected to mature into firm drilling programs in 2012, subject to timing of permit approvals.Putumayo Basin Chaza Block (100% working interest and operator) With the continued successful appraisal of oil at the Moqueta discovery throughout 2011, plans are in place to continue drilling in the field with the Moqueta-7 development well and Moqueta-9 injector well. A full field development plan is expected to be finalized by mid-2012. Seismic acquisition is continuing on the Chaza block to further delineate the Moqueta field and to evaluate new prospects along trend with Moqueta.In addition to two development wells planned at the Moqueta field, Gran Tierra Energy continues to see positive responses from its water injection program at the Costayaco field and intends on drilling two additional water injector wells along with two production wells.The Pacayaco-1ST1 oil exploration well drilling has begun, with initial results expected in January, 2012.Azar Block (40% working interest and operator, Lewis Energy 40%, Gold Oil 20%)Gran Tierra Energy plans to begin drilling the La Vega Este-1 oil exploration well in the second quarter, 2012.Guayuyaco Block (70% working interest and operator, Ecopetrol 30%)Gran Tierra Energy intends to begin drilling the Verdeyaco-1 oil exploration well on the Guayuyaco Block in the fourth quarter, 2012.Llanos Basin Garibay Block (50% non-operated working interest; CEPSA 50% and operator)Gran Tierra Energy, together with CEPSA, plans to drill the Bordon-1 oil exploration well to the north of the Melero and Jilguero discoveries on the Garibay Block in the fourth quarter, 2012.Llanos-22 Block (45% non-operated working interest; CEPSA 50% and operator)Drilling of the Ramiriqui-1 oil exploration well is continuing, with initial results expected in January, 2012.Magdalena BasinSierra Nevada Block (100% working interest and operator)The Brillante-3 natural gas delineation well drilling is scheduled to begin in the Sierra Nevada Block of the Lower Magdelena Basin in the third quarter, 2012.Peru Gran Tierra Energy has accumulated a large land position in Peru, encompassing approximately 6.4 million gross acres or three million net acres on five blocks in the Marañon and Ucayali Basin.  The Peru budget of $62 million includes drilling one gross exploration well and preparations for drilling a second exploration well in 2013, with drilling costs anticipated to be $41 million; approximately $21 million is budgeted for seismic acquisition and facility costs.Marañon BasinBlocks 123 and 129 (20% non-operated working interest; ConocoPhillips 45% is the operator, Talisman 35%) Seismic acquisition and processing is planned to continue in 2012 in Blocks 123 and 129.  An infill seismic program consisting of 563 km of 2D seismic is planned to be acquired in the first half of 2012.Block 95 (60% working interest and operator; Global Energy Development 40%)Upon PeruPetro approval of assignment of interests to Gran Tierra Energy, the company plans to drill one exploration well in Block 95 in the second half of 2012. The contract area contains the Bretaña-1 well, which was drilled in 1974 and tested 18° API gravity oil on natural flow rates of approximately 800 barrels of oil per day.Ucayali BasinBlocks 107 and 133 (100% working interest and operator)A 390 km infill 2D seismic program is planned for the second half of 2012 on Block 107 in the Ucayali Basin in preparation for oil exploration drilling in 2013.ArgentinaGran Tierra Energy has a working interest in 11 blocks of land, encompassing approximately 1.5 million gross acres, or 0.8 million net acres. Argentina's capital budget of $53 million includes $39 million allocated to drilling and workovers, $6 million associated with facilities, pipelines and other, and $8 million in geological and geophysical work.Gran Tierra Energy is planning on drilling three gross exploration wells, 10 gross development wells and conducting 14 workovers on existing wells in Argentina.  The development wells and workovers will be concentrated in the Puesto Morales Field of the Neuquen Basin in an effort to grow production from these assets.Noroeste BasinSanta Victoria (50% working interest and operator) Gran Tierra Energy is evaluating the potential to drill a gas exploration well in 2012. Gran Tierra Energy, as operator, is interested in testing the gas potential of the Permo-Carboniferous reservoirs, a proven play in nearby wells, as well as the unconventional gas resource potential of the Los Monos formation, the primary source rock for the basin.Neuquen BasinRinconada Sur (100% working interest and operator)Gran Tierra Energy plans to drill two oil exploration wells on the Rinconada Sur Block in the Neuquen Basin targeting the Precuyo and Sierra Blancas formations.  One exploration well is expected to start drilling in the second quarter and one in the fourth quarter of 2012.Puesto Morales (100% working interest and operator)Drilling of the PMN-1121 oil development well has been initiated, with results expected in January, 2012.BrazilGran Tierra Energy holds interests in four blocks in the onshore Recôncavo Basin and two blocks in the offshore Camamu-Almada Basin. The offshore blocks are subject to obtaining regulatory approval from Agência Nacional de Petróleo, Gás Natural e Biocombustíveis ("ANP") and other customary conditions of closing. The six blocks encompass approximately 0.8 million gross acres, or 0.1 million net acres.  The Brazil capital budget for 2012 is $68 million. Gran Tierra Energy plans to drill two gross exploration pilot wells onshore which will be followed by drilling three horizontal sidetracks, including one from the recently completed 1-GTE-1-BA pilot hole. Including the cost of the recent offshore well on Block BM-CAL-10, the exploration portion of the budget is expected to be $62 million.  Approximately $3 million is intended to be dedicated to pipelines and facilities and an additional $3 million for G&G work.Brazil's exploration program could increase to seven total wells in 2012 if the onshore resource play concept is tested successfully with Gran Tierra Energy's initial horizontal drilling program. Gran Tierra Energy has identified between 20 and 40 locations on its existing land in the Recôncavo Basin.Camamu BasinBM-CAL-10 Block (15% non-operated working interest; Statoil 45% is the operator; Petrobras 40%) The ANP has announced the 1-STAT-7-BAS exploration well has been completed after reaching a total measured depth of 3,651 meters. Contractually, Gran Tierra Energy is restricted from discussing well results until its acquisition of a 15% interest in this Block has been approved by the ANP.Recôncavo BasinREC-T-142(70% working interest and operator; Alvorada Petróleo S.A. 30%)Planning for the drilling of the horizontal sidetrack for 1-GTE-01-BA oil exploration well is continuing, with sidetrack operations expected to commence in first quarter of 2012.REC-T-129 (70% working interest and operator; Alvorada Petróleo S.A. 30%)Drilling of the 1-GTE-02-BA oil exploration well is continuing, with results expected in January, 2012.REC-T-155(70% working interest and operator; Alvorada Petróleo S.A. 30%)Drilling of the 3-GTE-03-BA oil field appraisal well is continuing, with results expected in January, 2012. The 3-GTE-4-BA appraisal well is expected to spud prior to December 31, 2011.About Gran Tierra Energy Inc.Gran Tierra Energy is an international oil and gas exploration and production company, headquartered in Calgary, Canada, incorporated in the United States, trading on the NYSE Amex Exchange (GTE) and the Toronto Stock Exchange (GTE), and operating in South America. Gran Tierra Energy holds interests in producing and prospective properties in Argentina, Colombia, Peru, and Brazil. Gran Tierra Energy has a strategy that focuses on establishing a portfolio of producing properties, plus production enhancement and exploration opportunities to provide a base for future growth.Gran Tierra Energy's Securities and Exchange Commission filings are available on a web site maintained by the Securities and Exchange Commission at http://www.sec.gov and on SEDAR at http://www.sedar.com.Additional information concerning Gran Tierra Energy is available at www.grantierra.com, on SEDAR (www.sedar.com) and with the Securities and Exchange Commission (www.sec.gov).Forward-Looking Statements and Advisories This news release contains certain forward-looking information and forward-looking statements (collectively, "forward-looking statements") under the meaning of applicable securities laws, including Canadian Securities Administrators' National Instrument 51-102 - Continuous Disclosure Obligations and the United States Private Securities Litigation Reform Act of 1995. The use of the words "expected", "anticipated", "scheduled", "targeting", "potential", "positioned", "planned", "plans", "continued", "intends", "will" and similar words identify forward-looking statements. In particular, but without limiting the foregoing, this news release contains forward-looking statements regarding Gran Tierra Energy's planned and expected capital spending program for 2012, and expectations respecting drilling, drilling locations, construction, water injection, exploration activities, acquisition of seismic, production, timing of results and resource potential in South America.The forward-looking statements contained in this news release reflect several material factors and expectations and assumptions of Gran Tierra Energy including, without limitation, assumptions relating to field size and recoverability. Gran Tierra Energy believes the material factors, expectations and assumptions reflected in the forward-looking statements are reasonable at this time but no assurance can be given that these factors, expectations and assumptions will prove to be correct.The forward-looking statements contained in this news release are subject to risks, uncertainties and other factors that could cause actual results or outcomes to differ materially from those contemplated by the forward-looking statements, including, among others: unexpected technical difficulties and operational difficulties may occur, or delays in obtaining necessary permits may occur or continue which could impact or delay the commencement of drilling exploration or development wells; Gran Tierra Energy's operations are located in South America, and unexpected problems can arise due to guerilla activity; geographic, political and weather conditions can impede testing, which could impact or delay the commencement of drilling exploration wells; and the risk that current global economic and credit market conditions may impact oil prices and oil consumption more than Gran Tierra Energy currently predicts, which could cause Gran Tierra Energy to modify its exploration and drilling activities. Although the current capital spending program is based upon the current expectations of the management of Gran Tierra Energy, there may be circumstances in which, for unforeseen reasons, a reallocation of funds may be necessary as may be determined at the discretion of Gran Tierra Energy and there can be no assurance as at the date of this press release as to how those funds may be reallocated. Should any one of a number of issues arise, Gran Tierra Energy may find it necessary to alter its current business strategy and/or capital spending program. Accordingly, readers should not place undue reliance on the forward-looking statements contained herein. Further information on potential factors that could affect Gran Tierra Energy are included in risks detailed from time to time in Gran Tierra Energy's Securities and Exchange Commission filings, including, without limitation, under the caption "Risk Factors" in Gran Tierra Energy's Quarterly Report on Form 10-Q filed November 8, 2011. These filings are available on a Web site maintained by the Securities and Exchange Commission at http://www.sec.gov and on SEDAR at www.sedar.com.The forward-looking statements contained herein are expressly qualified in their entirety by this cautionary statement. The forward-looking statements included in this press release are made as of the date of this press release and Gran Tierra Energy 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 securities legislation.Barrels of oil equivalent ("BOE") 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.For further information: For investor and media inquiries please contact: Jason Crumley Director, Investor Relations 403-265-3221 info@grantierra.com.