Gran Tierra has finalized an agreement with Alvorada Petroleo, whereby Gran Tierra Energy will pay US $22.6 million and fulfill certain commitments, including in part, the drilling of 2 wells in 2011, to receive a 70% working interest in Blocks REC-T-129, -142, -155 and -224 in the on-shore Reconcavo Basin, Brazil. The transaction is subject to Gran Tierra Energy obtaining the customary regulatory approval from Brazil's Agencia Nacional de Petroleo Gas Natural e Biocombustiveis (ANP).

"This farm-in opportunity presents Gran Tierra Energy with a solid entry-point into Brazil, with new light oil reserves, production and exploration upside, including near-term drilling opportunities," said Dana Coffield, President and Chief Executive Officer of Gran Tierra Energy. "Gran Tierra Energy continues to evaluate additional exploration and production opportunities in Brazil, with the intention of expanding our presence in Brazil's growing oil and gas sector."

Under the terms of the agreement, Gran Tierra Energy will become the operator of Blocks REC-T-129, -142, -155 and -224 and has committed to pay 100% of the costs to drill an exploration well on each of Blocks REC-T-129 and -142 and its working interest share of the 130 km2 3D seismic program currently being conducted on the four blocks. These blocks were awarded to Alvorada through Brazil's 9th ANP bid round.

Blocks REC-T-129, -142, -155 and -224 are located approximately 70 km Northeast of Salvador, Brazil in the prolific Reconcavo Basin. This basin covers an area of approximately 10,000 km2, contains 129 oil and gas fields, and has produced over 1.5 billion barrels of oil to date. Production from this basin is characterized by light oil ranging between 35 degrees and 40 degrees API.

Earlier this year, a 38 degrees API oil discovery was made on Block REC-155. The current gross production from the discovery is approximately 500 barrels of oil per day from the Sergi formation. Gran Tierra Energy anticipates drilling additional wells to further delineate this discovery and potentially increase production and reserves from the field. This discovery currently has unaudited estimated gross recoverable resources of 6 million barrels of oil.

In addition to the current oil discovery on Block REC-155, Gran Tierra Energy has identified a new oil resource play that would potentially employ multi-staged frac horizontal well technology and intends to investigate this opportunity with Alvorada Petroleo.

Tags: Gran Tierra Energy Inc.