SEC Company Response from GRAN TIERRA ENERGY INC. (GTE) (CIK 0001273441) (GTE) — Aug 26, 2019
GRAN TIERRA ENERGY INC. (GTE) (CIK 0001273441)
Date: Aug. 26, 2019 · CIK: 0001273441 · Accession: 0001144204-19-041662
AI Filing Summary & Sentiment
File numbers found in text: 001-34018
Referenced dates: July 30, 2019
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CORRESP
1
filename1.htm
August 26, 2019
Via EDGAR
United States Securities and Exchange Commission
Division of Corporation Finance
Office of Natural Resources
100 F Street, NE
Washington, D.C. 20549-3561
Attn: Joseph Klinko
Karl Hiller
Re: Gran Tierra Energy Inc.
Form 10-K for
the Fiscal Year ended December 31, 2018
Filed February
27, 2019
File No.: 001-34018
Ladies and Gentlemen:
This letter sets forth the responses of Gran
Tierra Energy Inc. (“GTE”, the “Company,” or “we”)
to the comments received from the staff of the Division of Corporation Finance (the “Staff”) of the Securities
and Exchange Commission by letter dated July 30, 2019 (the “Comment Letter”) with respect to GTE’s
Annual Report on Form 10-K for the fiscal year ended December 31, 2018 (File No. 001-34018) filed with the Commission on February
27, 2019 and amended on April 16, 2019 (the “2018 Form 10-K”).
For the Staff’s convenience, we have
repeated each comment of the Staff exactly as given in the Comment Letter and provided our responses below each such comment.
Form 10-K for the Fiscal Year ended December
31, 2018
Business and Properties
Estimated Reserves, page 10
1. The discussion of probable and possible reserves refers to various circumstances identified in the definitions under
Rule 4-10(a)(18) and (a)(17) of Regulation S-X, respectively, under which such reserves may be assigned. Expand your disclosure
to further explain the extent to which one or more of the factors you have identified apply to the probable and possible reserves
disclosed as of December 31, 2018. Refer to the disclosure requirements in Item 1202(a)(5) of Regulation S-K.
Response:
In response to the Staff’s comment, in future filings beginning with our Annual Report on Form 10-K for the year ended
December 31, 2019 (the “2019 Form 10-K”), we will expand our disclosure to further explain the
extent to which one or more of the factors we have identified apply to the probable and possible reserves disclosed as of the
applicable fiscal year end.
900, 520-3 Avenue SW, Calgary, Alberta
Canada T2P 0R3, (403) 265-3221
August 26, 2019
Page 2 of 7
With respect to the reserves included
in the 2018 Form 10-K, such disclosure would read as follows, with the new text underlined and bold:
Proved reserves are
reserves which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible
from a given date forward from known reservoirs under existing economic conditions, operating methods and government regulations
prior to the time at which contracts providing the right to operate expires, unless evidence indicates that renewal is reasonably
certain. The term “reasonable certainty” implies a high degree of confidence that the quantities of oil or natural
gas actually recovered will equal or exceed the estimate. To achieve reasonable certainty, we and the independent reserve engineers
employed technologies that have been demonstrated to yield results with consistency and repeatability. Estimates of proved reserves
are generated through the integration of relevant geological, engineering, and production data, utilizing technologies that have
been demonstrated in the field to yield repeatable and consistent results as defined in the SEC regulations. Data used in these
integrated assessments included information obtained directly from the subsurface through wellbores, such as well logs, reservoir
core samples, fluid samples, static and dynamic pressure information, production test data, and surveillance and performance information.
The data utilized also included subsurface information obtained through indirect measurements such as seismic data. The tools used
to interpret the data included proprietary and commercially available seismic processing software and commercially available reservoir
modeling and simulation software. Reservoir parameters from analogous reservoirs were used to increase the quality of and confidence
in the reserves estimates when available. The method or combination of methods used to estimate the reserves of each reservoir
was based on the unique circumstances of each reservoir and the dataset available at the time of the estimate.
Probable reserves
are reserves that are less certain to be recovered than proved reserves but which, together with proved reserves, are as likely
as not to be recovered. Estimates of probable reserves which may potentially be recoverable through additional drilling or recovery
techniques are by nature more uncertain than estimates of proved reserves and accordingly are subject to substantially greater
risk of not actually being realized by us. The probable reserves that have been assigned as of December 31, 2018 were based
on both the greater percentage of recovery of the hydrocarbons in place than assumed for proved reserves as well as to areas of
a reservoir adjacent to proved reserves where data control or interpretations of available data are less certain.
August 26, 2019
Page 3 of 7
Possible reserves
are reserves that are less certain to be recovered than probable reserves. Estimates of possible reserves are also inherently imprecise.
Estimates of probable and possible reserves are also continually subject to revisions based on production history, results of additional
exploration and development, price changes and other factors. The possible reserves that have been assigned as of December
31, 2018 were based on both the greater percentage of recovery of the hydrocarbons in place than assumed for probable reserves
as well as to areas of a reservoir adjacent to probable reserves where data control or interpretations of available data are less
certain.
2. Expand your discussion of the uncertainty relating to probable and possible reserves to incorporate appropriate cautionary
language indicating estimates of probable and possible reserves (i) are more uncertain than proved reserves, (ii) have not been
adjusted for risk attributable to that uncertainty, and (iii) may not be comparable with each other and should not be summed arithmetically
with each other or with estimates for proved reserves. Refer to Item 1202(a)(5) of Regulation S-K and the Compliance and Disclosure
Interpretation Question 105.01.
Response:
In response to the Staff’s comment, we will include in future filings beginning with the 2019 Form 10-K, the following footnote
to the table of estimated reserves:
Estimates of probable
and possible reserves are more uncertain than proved reserves, but have not been adjusted for risk due to that uncertainty. Accordingly,
estimates of probable and possible reserves are not comparable and have not been, and should not be, summed arithmetically with
each other or with estimates of proved reserves.
Additionally, we respectfully direct
the Staff to pages 10, 11 and 15 of the 2018 Form 10-K for our current disclosure indicating that probable and possible reserves
are more uncertain than proved reserves. We will include this disclosure in future filings.
Proved Undeveloped Reserves, page 11
3. Expand your disclosure of the changes in the net quantities of proved undeveloped reserves to include an explanation
of the material changes related to each line item shown in your reconciliation. To the extent that two or more unrelated factors
are combined to arrive at the line item figure, your disclosure should separately identify and quantify each individual factor
that contributed to a material change so that the change in net reserves between periods is fully explained.
The
disclosure of revisions in the previous estimates of reserves in particular should identify such factors as changes caused by
commodity prices, well performance, unsuccessful and/or uneconomic proved undeveloped locations or the removal of proved undeveloped
locations due to changes in a previously adopted development plan. Refer to Item 1203(b) of Regulation S-K.
August 26, 2019
Page 4 of 7
This comment also applies
to the disclosure provided as part of the Supplementary Data (Unaudited) on page 78 relating to the significant changes in the
net quantities of total proved reserves for each line item shown in the reconciliation, other than production, and for each of
the periods presented. Refer to FASB ASC 932-235-50-5.
Response:
In response to the Staff’s comment, in future filings beginning with our 2019 Form 10-K, we will expand our existing tabular
presentation of the categories of changes in the net quantities of proved undeveloped reserves to include a narrative explanation
of the material changes related to each line item shown in our reconciliation. For example, the reconciliation table in the 2018
Form 10-K would be accompanied by the following:
Changes in proved
undeveloped reserves during the year ended December 31, 2018 shown in the table above primarily resulted from the following significant
factors:
Acquisitions.
During the year ended December 31, 2018, we added 0.7 MMBOE of proved reserves as a result of acquisitions of the remaining
45% working interest in the PUT-1 Block in the Putumayo Basin and two working interest additions in the VMM-2 Block in the
Middle Magdalena Valley Basin.
Conversion
to Proved Producing. In 2018, we converted 12.9 MMBOE, or 66%, of 2017 proved undeveloped reserves to developed status.
This was based on the drilling of 13 wells in the Acordionero Field, three wells in the Costayaco Field, and one well in the Cumplidor
and Juglar fields.
Discoveries
and Extensions. Discoveries and extensions added 6.4 MMBOE of 2018 proved undeveloped reserves during the year ended
December 31, 2018. Extensions added 5.6 MMBOE, attributed to extensions in the Costayaco, Moqueta, Cumplidor, Ayombero and
Acordionero fields. Discoveries added 0.8 MMBOE, attributed to the Pomorroso discovery and the M2 Limestone discovery in the Costayaco
Field.
Revisions
of previous estimates. During the year ended December 31, 2018, we experienced revisions of 3.5 MMBOE of 2018 proved
undeveloped reserves to proved developed reserves, primarily as a result of positive technical revisions based on well performance
in the Acordionero Field, offset by negative revisions based on well performance in the Moqueta and Cumplidor sandstone reservoirs,
as well as the Costayaco sandstone and A limestone reservoirs.
Also in response to the Staff’s
comment, we will include similar information in the Supplementary Data in our annual financial statements.
August 26, 2019
Page 5 of 7
Developed and Undeveloped Acreage, page
12
4. Expand the disclosure of your acreage to discuss the expiration dates of material amounts of your undeveloped acreage.
Refer to the disclosure requirements under Item 1208(b) of Regulation S-K.
Response:
We acknowledge the Staff’s comment and note that, as of December 31, 2018, we did not have any material amount of undeveloped
acreage subject to leasehold expiration over the next three years or prior to the expected commercial depletion of such acreage.
As a result, we believe that no expanded disclosure is required at this time.
5. Expand your disclosure to indicate the extent to which you have assigned any proved undeveloped reserves to locations
which are currently scheduled to be drilled after expiration of the related acreage. If there are material quantities of net proved
undeveloped reserves relating to such locations, also describe the steps that will be necessary to extend the time to the expiration
of such acreage.
Response:
We acknowledge the Staff’s comment and note that, as of December 31, 2018, we did not have any proved undeveloped reserves
assigned to locations currently scheduled to be drilled after expiration of the related acreage. As a result, we believe that no
expanded disclosure is required at this time.
Production, Revenue and Price History,
page 12
6. Expand your disclosure of production and average sales prices, to include for the Costayaco, Moqueta and Acordionero
fields, and any other fields that contain 15% or more of your total proved reserves, the net quantities of natural gas production
and the related gas sales prices for each of the last three fiscal years. Refer to the disclosure requirements under Item 1204(a)
of Regulation S-K.
Response:
We acknowledge the Staff’s comment and respectfully note that we believe our disclosure of production quantities, proved
reserves and average sales prices is in compliance with Item 1204(a) of Regulation S-K. No field other than the Costayaco, Moqueta
and Acordionero fields contains more than 15% of our total proved reserves. We did not have any commercial natural gas production
or sales from these three fields for each of the last three fiscal years, as gas was either reinjected, used in operations, or flared,
and, as such, had no assigned natural gas reserves. As a result, we do not believe expanded disclosure is required at this time.
August 26, 2019
Page 6 of 7
7. Your tabular disclosure of production and price history appears to be limited to information relating specifically to
the Costayaco, Moqueta and Acordionero fields. Expand your tabulation to present comparable figures for the total aggregate amounts
of production, by final product sold of oil and natural gas, relating to all of your producing assets, for each of the last three
fiscal years. Refer to the disclosure requirements under Item 1204(a) of Regulation S-K.
Response:
In response to the Staff’s comment, we will revise our tabular disclosure in future filings, beginning with the 2019
Form 10-K, as shown below. We will include a line item for total aggregate amount of production by final product sold relating to all of our producing assets. We
note that we did not have any NGL sales or production or natural gas sales in any of the last three fiscal years.
The following table
presents oil production, net after royalty, and average sales price and operating expenses per oil production, net after royalty,
from each of our Costayaco (“CYC”), Moqueta (“MQT”) and Acordionero (“ACR”) Fields and from
all of our properties for the three years ended December 31, 2018:
Year Ended December 31,
2018
2017
2016
CYC
MQT
ACR
Total for
All
Properties
CYC
MQT
ACR
Total for
All
Properties
CYC
MQT
ACR
Total for
All
Properties
Oil, bbl (1)
2,244,497
1,020,673
5,469,072
10,604,197
3,173,659
1,550,344
3,131,577
9,776,533
3,975,842
2,091,361
648,518
8,486,294
Average sales price of oil, per bbl
$ 58.19
$ 59.87
$ 57.64
$ 58.53
$ 43.55
$ 45.05
$ 43.90
$ 43.29
$ 33.52
$ 32.86
$ 35.87
$ 33.00
Operating expenses of oil, per bbl
$ 22.23
$ 20.47
$ 11.22
$ 10.62
$ 11.70
$ 15.27
$ 10.34
$ 13.81
$ 13.71
$ 10.50
$ 8.00
$ 13.99
(1) 100% of product sales were oil.
8. The tabular presentation of production for the Costayaco, Moqueta and Acordionero fields and the preceding discussion
indicates the figures shown in the table include both oil and NGL production. However, footnote 1 to your reconciliation of the
changes in total proved reserves on page 34 indicates liquids reserves, and by extension the production figures, for all periods
are 100% oil. Revise your disclosure of production on page 12 to reconcile the apparent inconsistency in the description of your
liquids production, or tell us why a revision is not necessary.
Response:
We acknowledge the Staff’s comment and respectfully note that for each of the years ended December 31, 2018, 2017 and 2016,
as disclosed on pages 34 and 78 of the 2018 Form 10-K, our total hydrocarbon production consisted of 100% oil. The information
regarding production and sales quantities on pages 11 and 12 of the 2