Gran Tierra Energy Announces $310 Million Capital Spending Program for 2015

Prudent Capital Spending Program, Continuing Production Growth, Maintaining Balance Sheet Strength

CALGARY, Dec. 11, 2014 /PRNewswire/ - Gran Tierra Energy Inc. ("Gran Tierra Energy") (NYSE MKT: GTE, TSX: GTE), a company focused on oil exploration and production in South America, today announced its 2015 Budget with a capital spending program of $310 million for its exploration and production development operations in Colombia, Peru and Brazil.  The capital spending program allocates $183 million for drilling, $69 million for facilities, equipment and pipelines, $56 million for geological and geophysical ("G&G") activities and $2 million associated with corporate activities.  The capital spending program currently contemplates the drilling of 11 gross wells in Colombia and two gross wells in Peru.  Approximately 70% of the drilling program is for development and appraisal drilling and approximately 30% is for exploration drilling. The approved 2015 capital spending program also includes seismic acquisition in preparation for additional exploration and production drilling operations in 2015 and beyond.

Gran Tierra Energy is expecting 2015 production to average between 26,000 and 27,000 barrels of oil equivalent per day ("BOEPD") gross working interest ("WI") or between 21,000 and 22,000 BOEPD net after royalty ("NAR") assuming an average Brent oil price of $60 per barrel used for 2015 Budget purposes.  After royalty production numbers will increase with falling oil prices and conversely decrease with rising oil prices as a result of the royalty formula calculations related to our license contracts in Colombia.  Production from Colombia is expected to deliver approximately 19,000 BOEPD NAR, with Costayaco contributing approximately 10,400 BOEPD NAR and Moqueta contributing approximately 6,100 BOEPD NAR assuming a 2% contingency for potential delivery disruptions.  The 2015 Budget also includes first production from Peru of approximately 1,600 BOEPD NAR, and approximately 900 BOEPD NAR from Brazil.  Production expectations do not include potential production from successful exploration wells.  Approximately 99% of this expected production consists of oil, with the balance consisting of natural gas.

Gran Tierra Energy had $360 million in cash and cash equivalents and no debt at the end of the third quarter 2014. Based on current oil prices, Gran Tierra Energy expects the 2015 work program and budget to be funded from cash flows from operations, cash on hand and periodic draws on our credit facility if needed.

"As uncertainty in oil price continues, Gran Tierra Energy remains operationally and financially flexible to adapt to the changing environment while continuing to grow production and continuing to explore for new reserves. We have been consistent in our disciplined approach to maintaining a strong balance sheet and the recent decline in oil prices has enforced the need for continued capital program spending discipline in order to ensure a healthy balance between financial strength and growth," said Dana Coffield, President and Chief Executive Officer of Gran Tierra Energy. "Our 2015 Budget and its drilling portfolio will allow for stable production in Colombia while advancing the longer-term Bretaña project in Peru at a measured pace.  Supplementing this will be a carefully selected list of exploration wells drilled in 2015, offering additional production and reserve potential during the year.  As in prior years, we are entering 2015 debt free and fully funded from cash flow and cash on hand and periodic draws on our credit facility if needed to execute our capital spending program at current oil prices, while retaining the flexibility to adjust as 2015 unfolds." concluded Coffield.

Colombia

The Colombia capital spending program for 2015 is $156 million. Gran Tierra Energy expects this to include four gross exploration wells and seven gross appraisal and development wells.  Gran Tierra Energy's exploration drilling program will target oil prospects in the Putumayo Basin, while development drilling will focus on the Moqueta and Costayaco oil fields. In Colombia, total exploration drilling expenditures are expected to be $37 million, while total development drilling expenditures are expected to be $57.

Facilities work primarily consists of water injection and infrastructure work at Moqueta and Costayaco along with preliminary laboratory work for an Enhanced Oil Recovery pilot program.  G&G work consisting of seismic acquisition, and other costs, is expected to be $26 million.

Putumayo Basin

Chaza Block (100% WI and Operator)

After the continued successful development of the Moqueta oil discovery through 2014, Gran Tierra Energy plans to drill four development wells at Moqueta in 2015.

Gran Tierra Energy continues to see positive response from its water injection program at the Costayaco field and intends to drill two additional development wells at the Costayaco field in 2015. Costayaco-24 and -25 are expected to be drilled near the crest of the structure to supplement field production.

Exploration on the Chaza Block includes the Chimay-1 well, which Gran Tierra Energy expects to drill in the second quarter of 2015.  The well will target the same Cretaceous sandstone reservoirs found in the Costayaco and Moqueta discoveries.

Putumayo-1 Block (55% WI and Operator, Lewis Energy 45%)

Gran Tierra Energy intends to drill the Vonu-1 oil exploration well on the Putumayo-1 Block in the second quarter of 2015.

Piedemonte Sur Block (100% WI and Operator)

Gran Tierra Energy intends to drill the Garza-2 oil exploration well on the Piedemonte Sur Block in the fourth quarter of 2015.

Llanos Basin

Garibay Block (50% WI, Compania Espanola de Petroleos Colombia ("CEPCOLSA"), S.A.U. 50% WI and Operator)

Gran Tierra Energy and its partner CEPCOLSA are considering drilling the Apolo-1 exploration well on the Garibay Block in the Llanos Basin in the second quarter of 2015.

Peru

The major components of the Peru capital spending program of $118 million includes funds for the continued development of the Bretaña oil field along with planning, construction and eventual drilling of the Osheki-1 exploration well on Block 107.  Gran Tierra Energy continues its front-end engineering and design ("FEED") study for the Bretaña field and expects this to be completed in the second quarter of 2015.  The FEED study is providing detailed information on current and future development of the Bretaña project.  A revised development concept under evaluation contemplates moving plateau production for the field forward from 2021 in a staged development while requiring a reduced capital outlay taking into consideration the new low oil price environment. The Bretaña project sanctioning is expected in the second half of 2015.  

Marañon Basin

Block 95 (100% WI and Operator)

Gran Tierra Energy plans to drill a horizontal production well from the northern platform, then re-enter and sidetrack the well to provide two producing wellbores. This multilateral well is expected to provide drilling cost efficiencies while minimizing its environmental footprint. 

Long-term test ("LTT") production from the Bretaña-1ST well is anticipated to start in the first quarter of 2015, and reach a rate of approximately 2,500 barrels of oil per day gross.  This production test will provide valuable information on the reservoir and operating environment to optimize the main field development, in addition to providing early cash flow. 

Blocks 123 and 129(100% WI and Operator)

Gran Tierra Energy is continuing the permitting process and work in anticipation of drilling its first well on each of these blocks in 2016.

Ucayali Basin

Blocks 107 (100% WI and Operator)

Gran Tierra Energy plans to begin drilling the Osheki-1 exploration well on Block 107 in the fourth quarter of 2015.

Brazil

Gran Tierra Energy holds interests in seven blocks in the onshore Recôncavo Basin. The Brazil capital spending program for 2015 is $34 million. The Brazil capital spending program will focus on facilities work at the Tiê field along with seismic acquisition on the newly acquired Blocks-86, -117, and -118 in the Recôncavo Basin. Approximately $13 million is dedicated to G&G and facilities work.

Gran Tierra Energy is continuing the study of two unconventional resource plays in 2015 through core analysis, geochemistry studies, 3D seismic re-processing and evaluating ongoing fracture stimulation test results, among other activities in an effort to establish the commercial viability of the resource opportunity in oil-saturated tight sandstones and shales in the Recôncavo Basin.

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 and operating in South America, with its stock trading on the NYSE MKT Exchange (GTE) and the Toronto Stock Exchange (GTE). Gran Tierra Energy holds interests in producing and prospective properties in 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 "expect", "anticipate", "target", "potential", "plan", "continue", "intend",  "will", "contemplate" 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 Energy's planned and expected capital spending program for 2015 which includes: production estimates, the product mix of such production and  expectations respecting production growth; expectations with respect to drilling, drilling locations, testing, construction, exploration activities, acquisition of seismic, production and timing of these activities and results; the creation of additional production and reserve potential; expected costs and the allocation of Gran Tierra Energy's capital spending program; and anticipated funding of the capital spending program; and the expected efficiencies, flexibility and adaptability of Gran Tierra Energy's 2015 program..

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; the accuracy of testing and production results and seismic data; the effects of certain drilling techniques; rig availability; cost and price estimates; and the general continuance of current or, where applicable, assumed operational, regulatory and industry conditions. 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; disruptions on the Oleoducto Transandino pipeline may be more than Gran Tierra Energy expects and activities undertaken to mitigate the impact of such disruptions may not have the impact currently anticipated by Gran Tierra Energy; 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 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 6, 2014. 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. 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.

SOURCE Gran Tierra Energy Inc.

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