Property, Plant and Equipment

12 Months Ended

Dec. 31, 2019

Property, Plant and Equipment [Abstract]



	As at December 31,
(Thousands of U.S. Dollars)	2019			2018
Oil and natural gas properties
Proved	$	3,850,565		$	3,226,811
Unproved	310,809			456,598
	4,161,374			3,683,409
Other⁽¹⁾	26,287			19,549
	4,187,661			3,702,958
Accumulated depletion and depreciation	(2,610,268		)	(2,390,181		)
	$	1,577,393		$	1,312,777

⁽¹⁾ Included in other is right-of-use assets for operating and finance leases which totaled $5.7 million as at December 31, 2019 (December 31, 2018 - nil).

Depletion and depreciation expense on property, plant and equipment for the year ended December 31, 2019, was $220.8 million (year ended December 31, 2018 - $197.0 million; year ended December 31, 2017 - $126.8 million). A portion of depletion and depreciation expense was recorded as oil inventory in each year.

Asset impairment for the three years ended December 31, 2019, was as follows:



(Thousands of U.S. Dollars)	Year Ended December 31,
	2019		2018		2017
Impairment of oil and gas properties	$	—	$	—	$	1,514

The Company follows the full cost method of accounting for its oil and gas properties. Under this method, the net book value of properties on a country-by-country basis, less related deferred income taxes, may not exceed a calculated “ceiling”. The ceiling is the estimated after tax future net revenues from proved oil and gas properties, discounted at 10% per year. In calculating discounted future net revenues, oil and natural gas prices are determined using the average price during the 12 months period prior to the ending date of the period covered by the balance sheet, calculated as an unweighted arithmetic average of the first-day-of-the month price for each month within such period for that oil and natural gas. That average price is then held constant, except for changes which are fixed and determinable by existing contracts. Therefore, ceiling test estimates are based on historical prices discounted at 10% per year and it should not be assumed that estimates of future net revenues represent the fair market value of the Company's reserves. In accordance with GAAP, Gran Tierra used an average Brent price of $64.20 per bbl for the purposes of the December 31, 2019 ceiling test calculations (December 31, 2018 - $72.08; December 31, 2017 - $54.19).

2019 Acquisitions

On February 20, 2019, the Company acquired 36.2% working interest ("WI") in the Suroriente Block and a 100% WI of the Llanos-5 Block for cash consideration of $79.1 million and a promissory note of $1.5 million included in current accounts payable on the Company's consolidated balance sheet. The cost of the assets was allocated to proved properties using relative fair values. The entire consideration of $0.3 million for Llanos-5 was allocated to unproved properties.



(Thousands of U.S. Dollars)
Cost of asset acquisition:
Cash	$	79,100
Promissory note	1,500
	$	80,600

Allocation of Consideration Paid:
Oil and gas properties
Proved	$	52,530
Unproved	44,768
	97,298
Net working capital (including cash acquired of $5.3 million)	(16,698		)
	$	80,600

2018 Acquisitions

On October 1, 2018, the Company acquired the remaining 45% WI in the PUT-1 Block in the Putumayo Basin for cash consideration of $28.1 million, of which $15.2 million was allocated to proved properties.

On August 6, 2018, the Company acquired a WI in the VMM-2 Block in the Middle Magdalena Valley Basin for cash consideration of $17.0 million, of which $6.2 million was allocated to proved properties. On December 1, 2018, the Company acquired a further WI in the VMM-2 Block for cash consideration of $5.0 million, of which $1.6 million was allocated to proved properties. In total, the Company has acquired an 80% WI in the VMM-2 Block. The Company acquired the remaining 20% WI in the Block in 2019.

On June 20, 2018, the Company acquired the remaining WI in the Alea 1848-A and 1947-C Blocks in the Putumayo Basin for cash consideration of $3.1 million and was entirely recorded to unproved properties.

2017 Dispositions

In 2017 Gran Tierra completed the sale of its Peru and Brazil business units. The net book value of the Peru business unit was greater than proceeds received and resulted in a $34.1 million loss on sale while the net book value of the Brazil business unit was greater than proceeds received and resulted in a $10.2 million loss on sale. Both losses were included in Other Loss.

Unproved Oil and Natural Gas Properties

At December 31, 2019, unproved oil and natural gas properties consist of exploration lands held in Colombia and Ecuador. Unproved oil and natural gas properties are being held for their exploration value and are not being depleted pending determination of the existence of proved reserves. Gran Tierra will continue to assess the unproved properties over the next several years as proved reserves are established and as exploration warrants whether or not future areas will be developed. The Company expects that approximately 100% of costs not subject to depletion at December 31, 2019, will be transferred to the depletable base within the next five years.

The following is a summary of Gran Tierra’s oil and natural gas properties not subject to depletion as at December 31, 2019:



	Costs Incurred in
(Thousands of U.S. Dollars)	2019		2018		2017		Prior to 2017		Total
Acquisition costs - Colombia	$	21,773	$	14,115	$	10,700	$	135,202	$	181,790
Exploration costs - Colombia	56,454		34,349		12,209		22,799		125,811
Exploration costs - Ecuador	3,208		—		—		—		3,208
	$	81,435	$	48,464	$	22,909	$	158,001	$	310,809