A method, apparatus, and program product utilize a generalized grid cell pinchout operation to remove small cells from a reservoir simulation grid, e.g., prior to running a reservoir simulation. The generalized grid cell pinchout operation may utilize a connectivity matrix representing transmissibilities of one or more “pinch” cells to be removed as well as that of “background” cells that neighbor the pinch cells. Removal of the pinch cells includes determining a Schur complement of the connectivity matrix to generate a reduced connectivity matrix from the connectivity matrix.