Energy Prospectus

Sometime the market gives us a gift. IMO, Gran Tierra Energy (GTE) is a "SCREAMING BUY" if you can get it on this dip under $7/share. My Fair Value estimate is $10.60. - Dan

Gran Tierra Energy, Inc. (AMEX: GTE) was added to the Sweet 16 on April 6.

The company is based in Calgary, Canada. It currently holds interests in producing and prospective properties in Colombia, Brazil, Peru and Argentina.

A detailed company profile and forecast for GTE is available under the Sweet 16 tab.

For the year 2010, GTE had record average annual production of 14,325 barrels of oil per day, which is a 13% increase from 2009. Their proved reserves at year end were 23.6 MMBO. GTE grew revenues for the year to $374.5 million, which is a 42% increase from 2009. 2010 net income was $37.2 million or $0.15 per share. Cash and cash equivalents as of December 31, 2010 were $355.4 million.

Gran Tierra recently announced that they have closed on the acquisition of Petrolifera Petroleum Limited (“Petrolifera”). The deal closed several months earlier than I thought it would. This is the primary reason I decided to promote GTE to our Sweet 16 Growth Portfolio.

I believe that the combination of Gran Tierra’s successful drilling program in 2010 and their very strong debt-free balance sheet positions the company for significant growth in 2011 and beyond. The recent pullback in the share price, primarily a result of an announced dry hole on an exploration well in Peru, offers investors a very attractive entry point.

Based in my forecast, estimated current Fair Value for GTE is $10.60 per share. GTE has significant exploration upside beyond this price.

GTE is a “Pure Play” on South American oil exploration and development opportunities; a region that I believe offers investors exceptional growth potential.

A word of caution: GTE will be drilling several High Risk / High Potential exploration wells during 2011. Therefore it carries more Dry Hole Risk than the other E&P companies in our Sweet 16 Growth Portfolio.

Strong production growth is forecast in 2011. GTE’s capital program will fund an accelerated drilling program in 2011; a total of 21 wells, including their first exploration wells in Peru and Brazil. The company will be testing net risked resource potential over 250 million bbls of oil in 2011.

GTE has a $300 million capital program planned for 2011 that will be fully funded by operating cash flows.

GTE has a solid management team with international experience. They come from EnCana, ARCO, BP and Nexen; all world class organizations.

i think i will wait until at least one of these high risk wells are de-risked or a bottom appears on the charts. technically gte looks terrible.

Below is the corrected report put out by Reuters. Orginally, they said that GTE had "lowered" it's production forecast. That caused the selloff.
Per my forecast model (and how I determined the Fair Value of $10.60/share), 2011 production should average ~18,250 boepd (95% oil). First quarter production was ~14,150 boepd. GTE is going to report a sharp jump in produciton to ~18,500 boepd in the 2nd quarter. I believe the share price will take off at that point.
GTE has already made significant discoveries which they are quickly developing.
There is no production in my forecast for exploration wells.

Note that Raymond James recently increased the target price to Cdn$13.50/share.
Dan

April 11 (Reuters) - Gran Tierra Energy Inc raised its full-year production outlook and capital expenditure budget to account for the assets of Petrolifera Petroleum Ltd , which it bought in January.

Including the Petrolifera assets, Gran Tierra sees average production of 17,500-19,000 barrels of oil equivalent (boe/d) per day, net after royalty.

In late December, the company had forecast production of 16,000 to 18,000 boe/d net after royalty.

The Calgary-based company, which has assets in Colombia, Argentina and Peru, raised its capital expenditure for the year by about 19 percent to $355 million.

The company, which expects to spend about $55 million on the newly acquired assets, will fund its new capital program from existing cash reserves and cash flow, it said in a statement.

Gran Tierra acquired Petrolifera Petroleum in a $151 million deal in January, bringing together a pair of Canadian-based companies exploring for oil in South America.

Apparently there is some political risk with up coming elections in Peru. I wonder how that can get factored into GTEs valuation???

Most of GTE's production is coming from Columbia.

All of PMG's production is coming from Columbia.

gte is once again trading above its 200dma. a close above this 7.51 level today would be bullish.