UPDATE 1-Gran Tierra finds oil at Colombian block it was to sell

Mon Oct 25, 2010 11:46am EDT

* Tests at Garibay block produced 3,894 bopd

* Deal fell through due to lack of approvals

* Shares rise 4 percent

By Abhiram Nandakumar

BANGALORE, Oct 25 (Reuters) - Gran Tierra Energy (GTE.TO), a Canadian oil and gas exploration company, said it planned to start production at a block in Colombia it had intended to sell off, in December, sending its shares up 4 percent.

Gran Tierra, which has assets in Colombia, Argentina and Peru, said testing at its Jilguero-1 well in the Garibay block produced 3,894 barrels of oil per day across four formations.

Gran Tierra, which owns half of the Garibay block through its unit Solana Petroleum Exploration Colombia Ltd, had intended to sell its stake to operator and part-owner CEPSA Colombia S.A. in October, but couldn't complete the deal as the required approvals were not completed on time.

BMO Capital Markets-Canada analyst Christopher Brown said the deal falling through turned out to be fortunate for Gran Tierra.

"It (the discovery) was just an unexpected surprise as no one knew that this was still in the Gran Tierra portfolio," he said, adding that the extent of the discovery would be known only after long-term testing was completed.

Calgary, Alberta-based Gran Tierra's shares, which have gained nearly 27 percent in value in the last three months, touched a high of C$7.88, before paring some gains to trade at C$7.77 Monday morning on the Toronto Stock Exchange. (Reporting by Abhiram Nandakumar in Bangalore; Editing by Don Sebastian)

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