Gran Tierra Energy Inc. said on Tuesday that it has signed an agreement with Colombia’s Ecopetrol SA to keep the Canadian company operating the Suroriente block for another 20 years with $123 million in initial investment.
In 2019, Gran Tierra acquired Suroriente, a private company, which has since increased Gran Tierra’s gross oil production by 32 percent this year, according to the multinational.
“The additional term of the contract allows for long-term investment in infrastructure and work programs to improve the efficiency of oil recovery in existing fields, and appraisal drilling to potentially extend field life,” he said in a press release
The deal’s initial capital funding will be spent over three years from the effective date of the extension, which will be determined after the government’s contract is approved, Gran Tierra said. The Calgary-based company expects to cover the investment with its internal cash flow.
“Since becoming the operator, Gran Tierra has been able to increase gross oil production by 100 percent from an average of 6,203 barrels of oil per day (bopd) in February 2019 to an average of 8,167 bpd in the first quarter of 2023, an increase of 32 percent,” the statement said.
Gran Tierra has a 52% stake in the Suroriente project and the national oil company Ecopetrol owns the remaining 48%. Gran Tierra had a 15.83 percent stake before the 2019 acquisition.
Gran Tierra, whose common stock trades in Toronto, London and New York, said its hedged stake in Suroriente has proven more probable reserves of 6.1 million barrels of oil as of 2018.
He said the contract extension “further strengthens and consolidates Gran Tierra’s position as the first operator and largest holder of the contracted area in the Putumayo basin and provides continuity to the company’s long-term business relationship with Ecopetrol”.
“The deal represents a unique and significant opportunity in Colombia in terms of scale and upside potential, maintaining our long-term partnership with Ecopetrol in the prolific Putumayo Basin,” commented Gran Tierra President and CEO Gary Guidry, in Tuesday’s announcement.
Gran Tierra acquired the Suroriente operation of Vetra Exploration and Production Colombia SAS (Vetra E&P). In addition to Suroriente, the 2019 Colombian transaction initially valued at $104.2 million involved the sale of Vetra E&P’s 100 percent interest in the Llanos-5 block, Vetra E&P’s 50 percent interest in the block Putumayo-8 and the entire shares of Vetra Energia SL to its 100% subsidiary Vetra. Southeast SLU, according to a filing with the US Securities and Exchange Commission.
Gran Tierra produced 31,700 barrels of oil per day on average in the first quarter of 2023.
“Production in the South East block was approximately 8,167 gross bopd (4,247 bopd WI) during the quarter, the second highest quarterly production average since the second quarter of 2015, although no development wells have been drilled since from the first quarter of 2018,” he said in an operational update in April. 4.
Gran Tierra posted its highest net income on record in 2022 at $139 million. Its production last year averaged 30,746 bopd, a 16% year-on-year increase driven by drilling in Colombia’s Acordionero and Costayaco fields. Gran Tierra collected $711.4 million from oil sales, up 50 percent from 2021, according to its results released on February 21.
“Based on successful development and exploration drilling in 2022, as previously forecast, Gran Tierra expects 2023 production of 32,000-34,000 bopd, an increase of 4-11 percent over 2022,” he said in the full-year earnings report.
Gran Tierra traded up 1.626 percent on the Toronto Stock Exchange, up 1.11 percent on the New York Stock Exchange and the London Stock Exchange in flat closing trades on Tuesday.
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