24 March 2008
Gran Tierra Energy Initiates Testing of Costayaco-3 and Drilling of Costayaco-4
Production Infrastructure Upgrades Advancing to Handle New Production
CALGARY, Alberta, March 24, 2008, Gran Tierra Energy Inc. (TSX: GTE, OTCBB: GTRE), a company focused on oil exploration and production in South America, today announced that it had begun testing operations on Costayaco-3, a new well drilled in the recently discovered Costayaco Field. Gran Tierra Energy initiated drilling of Costayaco-4 while continuing new production facility upgrades to handle new production. In parallel, Gran Tierra Energy’s exploration operations are advancing in Colombia, Peru, and Argentina.
Costayaco-3, Chaza Block
Gran Tierra Energy commenced testing operations for Costayaco-3, the third well drilled in the Costayaco field, a new oil field discovered in 2007, on March 19. The Costayaco field is located in the Chaza Block in the Putumayo Basin, where Gran Tierra Energy has a 50% interest and is the Operator; Solana Resources holds the remaining 50% interest. The well drilled through the same reservoir sequences encountered in Costayaco-1 and -2, reaching a total depth of 8,620 feet on February 20. Initial log interpretations from data acquired during drilling indicate potential hydrocarbon pay in the Kg Sand Unit of the Rumiyaco Formation, the U Sandstone Unit of the Villeta Formation, the T Sandstone Unit of the Villeta Formation and the Caballos Formation. Good oil shows were encountered through these reservoir sections. Gran Tierra Energy has interpreted a potential oil-water contact from logs at a depth of 8511 feet measured depth (-7260 feet subsea) in the lower Caballos Formation, approximately 34 feet lower than the lowest known oil in Costayaco-2. No evidence of an oil-water contact has been identified in the other potential pay zones.
Gran Tierra Energy expects testing operations to last for approximately one month. Similar to Costayaco-2, which tested a maximum of over 6,600 barrels of oil per day (BOPD), only the primary T Sandstone and Caballos reservoirs will be tested.
Costayaco-4, Chaza Block
Gran Tierra Energy initiated drilling of Costayaco-4 on March 16 and is expected to take approximately six weeks to drill. Costayaco-4 will be a deviated well drilled from the Costayaco-2 pad, and will have a bottom-hole location approximately 541 meters to the north. The drilling operations will include coring of key reservoir intervals. Testing of Costayaco-4 will follow. Gran Tierra Energy has budgeted drilling of Costayaco-5, -6 and -7 for 2008.
Costayaco Production Infrastructure, Chaza Block
Gran Tierra Energy programmed a Long Term Test (LTT) for Costayaco-2 in the next four months. LTT production rates for Costayaco-2 will vary from 1,800 BOPD to 3,500 BOPD from different zones which will be determined and adjusted during the testing period. A 6 inch production flowline from Costayaco-2 to Costayaco-1 has been completed and is expected to be operational by the end of March.
Costayaco-1 continues to produce approximately 3,500 BOPD with 0.3% water cut. Gran Tierra Energy will continue utilizing trucks for transportation of crude from Costayaco-1 and new crude from the Costayaco-2 to the existing pipeline infrastructure at Uchupayaco. Pipe has been delivered to the field, and environmental permits have been approved, to initiate construction of an 8 inch 10 kilometer pipeline from Costayaco-1 to Uchupayaco. This production line will replace the current trucking operations and Gran Tierra Energy expects it to be completed in June.
Work is underway to reduce production constraints beyond Uchupayaco in order to accommodate potential production growth from Costayaco, which is expected to rise to 6,000 – 9,000 BOPD gross during the second half of 2008. Gran Tierra Energy is currently evaluating a second stage of infrastructure expansion, to incorporate additional drilling through the balance of 2008 and potentially into 2009.
Juanambu Update, Guayuyaco Block
Construction of the 6 kilometer flow line from the Juanambu oil field, another new oil field discovered in 2007, was completed on February 29. Approximately 1,300 to 1,500 BOPD is now being transported through the flow line to Gran Tierra Energy’s Toroyaco facilities. This flow line replaces trucking operations that had been utilized for the last six months. The Juanambu oil field is in the Guayuyaco Block in the Putumayo Basin, where Gran Tierra Energy is the Operator with a 35% working interest; Solana Resources holds a 35% working interest and Ecopetrol S.A. holds a 30% working interest.
Popa-2 Exploration Well, Rio Magdalena Block
Location construction for the Popa-2 exploration well in the Rio Magdalena Block in the Middle Magdalena Basin has begun, with drilling expected to begin in early April. This well will be drilled near a non-commercial oil discovery made by Gran Tierra Energy in 2006 at Popa-1, which tested approximately 160 BOPD. Gran Tierra Energy is the operator of the Rio Magdalena Block and has a 100% working interest. Under the terms of a recently completed farmin agreement, Omega Energy Colombia will earn a 60% share of Gran Tierra Energy’s interest. In the event of a commercial discovery, Ecopetrol S.A. has a right to back in for a 30% working interest, to be split proportionally between Gran Tierra Energy and Omega Energy Colombia.
Planning is continuing for the work-over of the Palmera-1 well, an old exploration well that had potential oil pay indicated on logs but which was never tested. Testing is scheduled for the second quarter. In addition, newly acquired 3-D seismic data is currently being interpreted in preparation for drilling an exploration well in the fourth quarter of 2008. Gran Tierra Energy is operator of the Azar Block and has a 40% working interest.
Acquisition of approximately 20,000 linear kilometers of new high definition airborne gravity and magnetic data over the entire area of Blocks 122 and 128 is continuing. Approximately 10,100 linear kilometers, or 51% of the program, has been acquired to date. This data will be used to define exploration leads over which 2-D seismic data will be acquired in the Second Exploration Period of each block. Block 122 encompasses approximately 1.2 million acres and Block 128 encompasses approximately 2.2 million acres of land. Gran Tierra Energy is operator and holds a 100% working interest in both exploration blocks.
Well design, rig contracting, and planning continue for the drilling of the Proa-1 exploration well in the third quarter in the Surubi Block in the Noroeste Basin of northern Argentina. Gran Tierra Energy is Operator and has a 100% working interest in this block. In addition, technical evaluation work and a variety of well work-overs continue in Gran Tierra Energy’s other six landholdings in the basin.
Commenting on progress, Dana Coffield, President and Chief Executive Officer of Gran Tierra Energy Inc., stated, “2008 is off to an extremely strong start. Production for the first two months of 2008, net after royalty, has averaged 3,126 BOPD. With field delineation drilling operations, production testing operations, exploration drilling operations, and remote sensing data acquisition operations taking place across our three operating arenas Colombia, Peru, and Argentina, we are on track to have another extremely successful year as we continue to build a substantial international oil and gas company.”
About Gran Tierra Energy Inc.:
Gran Tierra Energy Inc. is an international oil and gas exploration and production company operating in South America, headquartered in Calgary, Canada, incorporated in the United States, and trading on the Toronto Stock Exchange (GTE) and the OTC Bulletin Board (GTRE). The company holds interests in producing and prospective properties in Argentina, Colombia and Peru. The company 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. Additional information concerning Gran Tierra Energy is available at www.grantierra.com. Investor inquiries may be directed to email@example.com or 1-800-916-GTRE (4873).
Forward Looking Statements:
The statements in this news release regarding Gran Tierra Energy’s plans and expectations for testing and drilling, expectations as to results of these testing and drilling operations and infrastructure, and expectations as to completion of the pipeline from Costayaco-1, are forward looking information, forward looking statements or financial outlooks (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. These forward-looking statements 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. Although, Gran Tierra Energy believes that the assumptions underlying, and expectations reflected in, these forward-looking statements are reasonable, it can give no assurance that these assumptions and expectations will prove to be correct. Important factors that could cause the results or outcomes discussed herein to differ materially from those indicated by these forward-looking statements, include, among other things: Gran Tierra Energy’s operations are located in South America, and unexpected problems can arise due to guerilla activity, technical difficulties and operational difficulties which impact the production, transport or sale of its products, and geographic, political and weather conditions; and oil discoveries and amounts may be different than Gran Tierra Energy predicts. Further information on potential factors that could affect Gran Tierra are included in risks detailed from time to time in Gran Tierra’s Securities and Exchange Commission filings, including, without limitation, under the caption “Item 1A – Risk Factors” in Gran Tierra’s Annual Report on Form 10-K for the period ended December 31, 2007, filed with the Securities and Exchange Commission on March 14, 2008. These filings are available on a Web site maintained by the Securities and Exchange Commission at http://www.sec.gov. The forward-looking statements contained herein are made as at the date of this press release. Gran Tierra does not undertake an obligation to update forward-looking or other statements in this release. Gran Tierra’s forward-looking statements are expressly qualified in their entirety by this cautionary statement.