Implements Structural Cost Cutting Measures
to Preserve its Balance Sheet
CALGARY, March 12, 2015 /PRNewswire/ - Gran Tierra
Energy Inc. ("Gran Tierra" or the "Company") (NYSE MKT: GTE, TSX:
GTE), a company focused on oil exploration and production in
South America, today announces
cost reductions in line with its strategy to preserve its strong
balance sheet and maximize potential for future growth. All dollar
amounts are in United States
("U.S.") dollars unless otherwise indicated.
In addition to recently announced reductions in 2015 capital
expenditures, the Company has focused on reductions to Gran
Tierra's operating expenses and general and administrative costs
and lower service and transportation costs. These cost reduction
initiatives and increased working efficiencies will allow the
Company the flexibility and financial capacity to react to
opportunities that may arise from a continuing low oil price
environment as well as to be able to quickly return to drilling
from its own inventory in an improving price scenario.
Gran Tierra has identified a number of expected cost savings for
2015:
- Gran Tierra has significantly reduced full-time employees. The
reduction is expected to exceed 20% from previous staffing levels,
to contribute to an overall projected 22% reduction from 2014
general and administrative costs, excluding one-time termination
costs and after allocations to capital and operating expenses. A
few replacements for certain positions may be considered in the
future, but the majority will not be replaced in the current
environment;
- In 2015, Gran Tierra expects to realize $14 million in total budgeted labor cost savings
associated with the reduced full-time employees and contractors,
excluding one-time termination costs and before allocations to
capital and operating expenses. On an annualized basis the budgeted
labor cost savings are expected to be approximately $19 million before allocations to capital and
operating expenses and excluding one-time termination costs;
- Gran Tierra is in ongoing negotiations with suppliers and
service providers to achieve further savings that it expects to
further reduce operating costs;
- In Colombia, as a result of
negotiations with Gran Tierra's crude oil transporters and a
planned increase use of pipelines instead of trucking to transport
oil, reduced transportation costs are anticipated to result in the
Company realizing a net savings of approximately $5.20 per barrel of oil equivalent
("BOE"). Gran Tierra plans to ship
approximately 75% of production via pipeline in 2015 compared to
48% shipped via pipeline in 2014. These plans are supported by
decreased downtime experienced on the Oleoducto Transandino
("OTA") pipeline and by new alternate
arrangements for shipping via the Oleoducto de Crudos Pesados
("OCP") pipeline through Ecuador. The OCP pipeline is the primary
transportation alternative when OTA is not available. Gran Tierra
has also negotiated trucking tariff reductions of between 5% and
8%.
- Due to the continued low oil price environment, Gran Tierra
expects to pay lower "High Priced Rights" royalties and current
taxes in Colombia; and,
- As a result of the strengthening of the U.S. dollar against the
local currencies in countries where Gran Tierra operates, the
Company expects to realize significant savings for costs
denominated in those local currencies.
Funds flow from continuing operations* before effects of foreign
exchange and inventory fluctuations and assuming 75% of Colombian
production is delivered via pipeline is expected to be
approximately:
- $85 to $105 million for 2015
assuming an average of Brent oil price of $50 for 2015 which corresponds to NAR production
of 18,200 to 19,200 barrels of oil equivalent per day
("BOEPD")
- $105 to $125 million for 2015
assuming an average Brent oil price of $55 for 2015 which corresponds to NAR production
of 17,700 to 18,700 BOEPD; or,
- $135 to $155 million for 2015
assuming an average of Brent oil price of $60 for 2015 which corresponds to NAR production
of 17,500 to 18,500 BOEPD.
Note: When
oil prices decrease, the amount of "High Priced Rights" royalties
the Company pays is reduced, which results in more NAR barrels to
the Company.
|
Operational Update - Colombia
Chaza Block, Putumayo Basin
(100% WI and Operator)
Gran Tierra anticipates spudding the deviated Moqueta-18i well
in mid-March, 2015. This well will be drilled from the existing
Moqueta-1 platform and will target a downhole position down dip
from the Moqueta-13 well, which is the deepest producer in the
southern block. The primary objective of the well is to test the
position of the Caballos reservoir oil-water contact in the eastern
part of the Moqueta field. Depending on results, the well could be
completed as a water injector to maintain the reservoir pressure in
the southern block of the field, or if the well intersects an oil
column in the Caballos, the well could be completed as a producer.
Water injection in the main block of the field has yielded very
positive pressure maintenance response and associated production
increases.
About Gran Tierra Energy Inc.
Gran Tierra is an international oil and gas exploration and
production company, headquartered in Calgary, Canada, incorporated in the United States and operating in
South America, with its stock
trading on the NYSE MKT Exchange (GTE) and the Toronto Stock
Exchange (GTE). Gran Tierra holds interests in producing and
prospective properties in Colombia, Peru, and Brazil. Gran Tierra has a strategy that
focuses on establishing a portfolio of producing properties, plus
production enhancement and exploration opportunities as appropriate
to provide a base for future growth.
Gran Tierra'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 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 "expects",
"anticipated", "target", "potential", "plans", "continue",
"intended", "will", "projected" and variations of these and similar
words identify forward-looking statements. In particular, but
without limiting the foregoing, this news release contains
forward-looking statements regarding, among other things: Gran
Tierra's expected cost savings from, and effectiveness of, its cost
cutting measures; its ability to negotiate lower transportation
costs; its anticipated funds flow from operations for 2015; that
the Company will pay lower "High Priced Rights" royalties and
current taxes in Colombia as a
result of the continued low oil price environment; the impact of
the strengthening U.S. dollar; and the timing of drilling of
Moqueta-18i well as well as the expected results of that drilling
including completion expectations.
The forward-looking statements contained in this news release
reflect several material factors and expectations and assumptions
of Gran Tierra. In addition to those assumptions inherent in such
forward-looking statements or otherwise set out in this news
release, such assumptions include, without limitation, assumptions
and estimates as to: compensation costs and savings; future oil
prices and currencies; the Company's ability to renegotiate the
rates and fees of suppliers and service providers as well as
transportation costs; the extent and magnitude of future delivery
disruptions; and the general continuance of current or, where
applicable, assumed operational, regulatory and industry
conditions. Gran Tierra 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: cost savings expectations from the reduction in the number
of personnel and its ability to negotiate lower transportation
costs may not be as much as, or have the impacts, Gran Tierra
expects; unexpected technical difficulties and operational
difficulties may occur which could limit the amount of cost savings
that result from the measures it is taking, from what Gran Tierra
expects; Gran Tierra's operations are located in South America, and unexpected problems can
arise due to guerilla activity; disruptions on the OTA pipeline may
be more than Gran Tierra expects and activities undertaken to
mitigate the impact of such disruptions may not have the impact
currently anticipated by Gran Tierra; geographic, political and
weather conditions can impede testing, which could impact or delay
the commencement of drilling exploration wells; and the risk that
oil prices could continue to fall, or current global economic and
credit market conditions may impact oil prices and oil consumption
more than Gran Tierra currently predicts, which could cause Gran
Tierra to further modify its strategy and capital spending program.
Although the current capital program is based upon the current
expectations of the management of Gran Tierra, there may be
circumstances in which, for unforeseen reasons, a change in
strategy or reallocation of funds may be necessary as may be
determined at the discretion of Gran Tierra and there can be no
assurance as at the date of this press release as to how such
strategy may change or funds be reallocated. Should any one of a
number of issues arise, Gran Tierra may find it necessary to alter
its cost savings measures, current business strategy and/or capital
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 are
included in risks detailed from time to time in Gran Tierra's
Securities and Exchange Commission filings, including, without
limitation, under the caption "Risk Factors" in Gran Tierra's
Annual Report on Form 10-K filed March 2,
2015. 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. Readers are advised that the
purpose of the financial outlook provided in this press release is
to give a high-level overview of Gran Tierra's anticipated
financial position in 2015 and such financial outlook may not be
appropriate for other purposes.
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 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.
BOEs 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. In addition,
given that the value ratio based on the current price of oil as
compared with natural gas is significantly different from the
energy equivalent of six to one, utilizing a BOE conversion ratio
of 6 Mcf: 1 bbl would be misleading as an indication of value.
* Funds flow from continuing operations is a non-GAAP measure
which does not have any standardized meaning prescribed under
generally accepted accounting principles in the United States of America ("GAAP").
Management uses this financial measure to analyze operating
performance and the income generated by Gran Tierra Energy's
principal business activities prior to the consideration of how
non-cash items affect that income, and believes that this financial
measure is also useful supplemental information for investors to
analyze operating performance and Gran Tierra Energy's financial
results. Investors should be cautioned that this measure should not
be construed as an alternative to net income or other measures of
financial performance as determined in accordance with GAAP.
Gran Tierra Energy's method of calculating this measure may differ
from other companies and, accordingly, it may not be comparable to
similar measures used by other companies. Funds flow from
continuing operations, as presented, is net income adjusted for
loss from discontinued operations, net of income taxes, depletion,
depreciation, accretion and impairment ("DD&A") expenses,
deferred tax expense or recovery, non-cash stock-based
compensation, unrealized foreign exchange gain or loss, unrealized
financial instrument gain or loss, cash settlement of asset
retirement obligation, equity tax and other loss.
SOURCE Gran Tierra Energy Inc.