Annual Report 2013
The reserves from this discovery essentially doubled the Gran Tierra Energy’s Proved plus Probable reserves, and more than doubled the Company’s Proved plus Probable plus Possible reserves. On top of this extraordinary success in reserves growth, Gran Tierra Energy grew its production and funds flow from operations to record levels. In Colombia we also made substantial progress in growing reserves and production in the Moqueta field, and maintaining reserves and production at the company’s core asset, the Costayaco Field. Based on these successes, we expect Colombia to remain the near-term growth engine for Gran Tierra Energy, which will be complemented in the mid-term by a new and independent growth platform in Peru.
We continued to grow cash flow from operating activities to record levels as production NAR after inventory adjustments increased 32% to a record average 29,099 company interest barrels of oil equivalent per day, or 22,267 barrels of oil equivalent per day, net after royalties, and adjusted for inventory changes in 2013.
Colombia contributed to growth largely through effective reservoir management and additional development drilling at the Costayaco field, and our successful appraisal program on the Moqueta field. Both of these fields are on the Chaza block in the Putumayo region of Southwest Colombia. Effective logistical planning in Colombia overcame continued pipeline disruptions as we met our production targets for the year. As the largest land-holder, reserve-holder and producer in the Putumayo Basin, Gran Tierra Energy is continuing its exploration program in this very attractive basin to supplement future growth.
In Peru, our activities included extending the Bretaña Norte-1X exploration well with a horizontal sidetrack and testing the sidetrack at 3,095 barrels of oil per day. We also completed a preliminary Front End Engineering Design study for the Bretaña field development and completed a 382 kilometer 2-D seismic program to provide a more detailed map of the Bretaña structure. This newly acquired seismic has extended the southern extent of the trap containing the Bretaña oil field, adding additional resource potential that we intend to evaluate for future reserve development with additional drilling.
Gran Tierra Energy successfully converted our drilling success at Bretaña Norte-1X on Block 95 into substantial booked probable and possible reserves as mentioned earlier. The size of this discovery has created the foundation for a significant platform for growth in the coming years, and validated our long-term commitment to Peru.
Beyond our recent success at the Bretaña field on Block 95, and with the supporting data from recent 2D seismic programs, we have identified multiple additional prospects on our acreage in Peru. With a significant unrisked recoverable resource potential of oil on four prospects alone, we intend to drill three of these prospects in 2015 and 2016.
In Brazil, we initiated drilling on a resource play in the onshore Recôncavo Basin by testing the production potential of oil-saturated tight sandstone and shale resource plays. We plan to fracture stimulate two wells in the second quarter of 2014. Expanding on our core position in the Recôncavo Basin, we added three new onshore exploration blocks in the 2013 Brazil Bid Round 11.
Despite the macro-economic challenges faced in Argentina, the Gran Tierra Energy team continues to deliver strong results. In 2013, Gran Tierra Energy further focused on developing our producing fields, including the Surubi, Puesto Morales and Rinconada Norte fields. In 2014, Gran Tierra Energy is anticipating drilling the Proa-3 development well in addition to drilling a second horizontal well in the oil-saturated tight Loma Montosa sandstones, following the success of our first horizontal last year.
I’m very proud of Gran Tierra Energy’s achievements in 2013, attaining record levels of reserves, production and funds flow from operations. I’m also pleased with how the relationships we have forged in each of the jurisdictions and communities where we operate continue to grow and develop, allowing all stakeholders to succeed in partnership. We exceeded expectations and 2014 is expected to be another impressive year as we continue our drilling programs and expect to establish our first production from Peru in the fourth quarter of 2014. We expect to continue to build upon our solid foundation of land, reserves, production and cash flow, and further leverage the talent of our team of professionals to continue delivering value creation for all our stakeholders.
Sincerely,
Dana Coffield
President and Chief Executive Officer
