Page 15 - LatAmOil Week 15 2020

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NEWS IN BRIEF
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collars. The new hedges complement Gran Tier- ra’s prior Brent oil hedges in place which cover 6,000 bpd of production in the first half of 2020.
Executive Salary and Board Compensation Reductions: In response to the current low and volatile oil price environment, Gran Tierra con- tinues to take further steps to reduce its costs. Gran Tierra’s Executive Team and Board of Directors have taken a 20% reduction in sal- ary and retainer fees, respectively. In addition, a number of cost optimisation and efficiency measures are being implemented that will fur- ther reduce the Company’s G&A costs to levels consistent with lower anticipated activity levels. Gran Tierra expects these changes to result in a reduction of 30 to 35% in G&A costs compared to the Company’s original budget.
Oil Transportation: With the pipeline dis- ruption of the OCP pipeline in Ecuador due to damage from natural landslides, Gran Tierra has made arrangements to ship its Putumayo Basin oil production to the Babillas Station located in the city of Neiva, the capital of the Department of Huila in Colombia. All other production is being shipped by pipeline or truck under normal con- tract arrangements.
Operating and G&A Cost Reductions: Signif- icant progress has been made on lowering oper- ating costs through the renegotiation of vendor contracts, with significant discounts achieved to date. Additional operating cost initiatives include personnel and rental equipment optimi- sation. In addition to reducing operating costs, the Company is also benefiting from the recent depreciation of the Canadian dollar and Colom- bian peso. The Colombian peso has declined 15% versus the US dollar from the Company’s original budget estimate. The majority of Gran Tierra’s operating costs (approximately 80%) and G&A costs within Colombia are denominated in Colombian pesos. All G&A costs in Canada are denominated in Canadian dollars.
Releasing Drilling & Workover Rigs: Follow- ing the recent substantial decrease in oil prices and the advent of the COVID-19 outbreak, Gran Tierra has taken the initiative to release all drilling and workover rigs. Activities at the Sur- oriente and PUT-7 Blocks in the southern Putu- mayo region remain suspended, pending final resolution of the local farmers’ blockade.
COVID-19 Protocols: Gran Tierra has imple- mented additional safety protocols during the COVID-19 pandemic to support the safety of employees, contractors and local communities. Such initiatives include the medical monitoring of field staff, disinfection of vehicles and loca- tions, and a modified shift change strategy to accommodate social distancing. Humanitarian and medical aid packages have also been pro- cured and distributed to support certain local communities where Gran Tierra operates.
2020 Guidance: Due to the uncertainty of the
financial and operational impact of COVID-19 and the large decrease in world oil prices, Gran Tierra is withdrawing its previously announced full-year 2020 guidance. The Company is not providing an updated fiscal outlook at this time.
Gary Guidry, President and Chief Executive Officer of Gran Tierra, commented “We believe Gran Tierra has a competitive advantage to with- stand the current challenging environment with our low decline, conventional asset base, our ability to control capital allocation and our low cost structure. We have taken aggressive actions to protect our balance sheet and cash flows by swiftly reducing our 2020 capital program and have targeted structural cash cost reductions through operational and organisational changes. In addition, we have recently added new oil price hedges to protect 2020 cash flows from further price decreases. We will continue to monitor the near and long-term commodity price environ- ment and leverage our financial and operational flexibility to further adjust our plans should it become necessary. Due to current market con- ditions, we will not initiate a share repurchase program at this time and will continue to priori- tise financial strength and liquidity.”
Gran Tierra Energy, April 16 2020
Echo Energy provides operational update on Argentina projects, cost management
Echo Energy, the Latin American focused upstream oil and gas company, provides a fur- ther update on production and operations, and on progress in relation to cost reduction and cash management initiatives to ensure cash flow pos- itive operations at Santa Cruz Sur and substan- tially reduce costs at the corporate level.
Production and Operational Update: Daily production and operations in the field continue with delivery of produced gas to customers con- tinuing without interruption. Production over the period from November 1, 2019, to April 10, 2020, reached an aggregate of 393,254 barrels of oil equivalent (boe) net to Echo including 88,728 barrels of oil and condensate and 1.827bn cubic feet (51.74mn cubic metres) of gas.
As a response to prevailing oil prices and the Company’s expectation of achieving higher gas prices moving into the southern hemisphere autumn and winter, the Company and its part- ners in Santa Cruz Sur have decided to focus field operations on the production of gas and, as part of this initiative, ten producing oil wells have been temporarily shut in, reducing gross oil pro- duction by approximately 130 bpd of oil in the first instance. Shutting in oil wells that have low
associated gas will enable resources in the field to focus on gas production and will also assist in managing ongoing monthly cash costs. The temporarily shut in oil wells can be brought back online in around five days when global oil prices recover.
To further preserve value, and as a result of progress made in reducing operating costs at Santa Cruz Sur, the Company confirms that of the 25,813 barrels of oil (net to Echo) cur- rently held in storage, it now intends to sell only approximately 13,200 barrels of oil (net to Echo) in the mid-April cargo, holding the remaining 12,613 barrels of oil in field storage tanks with the intention of selling these barrels at a later date.
Santa Cruz Sur is a collection of 5 produc- tion concessions located in the onshore Austral Basin, southern Argentina
Cost Reduction and Cash Management: Sub- stantial progress has been made with cost reduc- tion initiatives in the Santa Cruz Sur assets as a response to prevailing commodity prices. At the end of April 2020 the Company and its partners expect to have reduced monthly operating cash outflows at Santa Cruz Sur by 50% over 2019 lev- els through substantial cost reductions of ongo- ing operations and deferments or cancelation of non-essential activities in the current environ- ment whilst maintaining safe and sustainable operations.
Campo Limite Test Update: Due to the ongo- ing international travel restrictions as a result of the COVID-19 pandemic, key personnel and equipment required to continue testing of the Campo Limite well from outside of Argentina have been delayed. As a result, a decision has now been made to temporarily suspend the completion and conventional inflow testing of the well at the present time until there is clarity as to when the present restrictions will be lifted. The Company looks forward to resuming the explo- ration well test when conditions allow and reit- erates that this project remains a priority 2020 growth project for the Company and its partners.
As a result of the decision to temporarily sus- pend the completion and testing of the Campo Limite well, the Eagle workover rig, owned by Echo and its partners in the Santa Cruz Sur assets, has accordingly been temporarily rede- ployed to commence a standard programme of well interventions and maintenance. The first well intervention being undertaken, in the Cho- rillos block, is assessing the production poten- tial of bringing a historical well back online in a small field that currently produces around 20 bopd.
The new production potential of the currently non-producing well is now estimated at 41 bopd when brought into production, following a swab test that produced a cumulative 280 barrels of oil over 48-hour period.
Week 15 16•April•2020
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