UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒						QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2021~~March 31, 2022


☐						TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission file number 001-34018

GRAN TIERRA ENERGY INC.

(Exact name of registrant as specified in its charter)

Delaware

98-0479924

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

900, 520 - 3 Avenue SW

Calgary,

Alberta

Canada

T2P 0R3

(Address of principal executive offices, including zip code)

(403) 265-3221

(~~Registrant's~~Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	GTE	NYSE American
		Toronto Stock Exchange
		London Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of large accelerated filer, accelerated filer, smaller reporting company, and emerging growth company in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☒☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

On ~~October~~April 29, ~~2021, 367,144,500~~2022, 368,460,570 shares of the ~~registrant's~~registrant’s Common Stock, $0.001 par value, were issued.

Gran Tierra Energy Inc.

Quarterly Report on Form 10-Q

Quarterly Period Ended ~~September 30, 2021~~March 31, 2022

Table of contents


		Page
PART I	Financial Information
Item 1.	Financial Statements	43
Item 2.	~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3733
Item 4.	Controls and Procedures	3733

PART II	Other Information
Item 1.	Legal Proceedings	3734
Item 1A.	Risk Factors	3734

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3834
Item 6.	Exhibits	3935
SIGNATURES		4036

CAUTIONARY LANGUAGE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the ~~"Securities Act"~~“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the ~~"Exchange Act"~~“Exchange Act”). All statements other than statements of historical facts included in this Quarterly Report on Form 10-Q regarding our financial position, estimated quantities and net present values of reserves, business strategy, plans and objectives of our management for future operations, covenant compliance, capital spending plans and benefits of the changes in our capital program or expenditures, our liquidity, the impacts of the coronavirus (COVID-19) pandemic and those statements preceded by, followed by or that otherwise include the words “believe”, “expect”, “anticipate”, “intend”, “estimate”, “project”, “target”, “goal”, “plan”, “budget”, “objective”, “could”, “should”, or similar expressions or variations on these expressions are forward-looking statements. We can give no assurances that the assumptions upon which the forward-looking statements are based will prove to be correct or that, even if correct, intervening circumstances will not occur to cause actual results to be different than expected. Because forward-looking statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by the forward-looking statements. There are a number of risks, uncertainties and other important factors that could cause our actual results to differ materially from the forward-looking statements, including, but not limited to, our ability to comply with covenants in our credit agreement and indentures and make borrowings under our credit agreement; our ability to obtain amendments to the covenants in our credit agreement so as to avoid an event of default under our credit agreement and senior notes; a reduction in our borrowing base and our ability to repay any excess borrowings; sustained or future declines in commodity prices and the demand for oil; sustained or future excess supply of oil and natural gas; potential future impairments and reductions in proved reserve quantities and value; ~~continuation~~continued spread of the COVID-19 ~~pandemic~~virus and ~~responses thereto, including~~extensions of previously announced lockdowns and possible future restrictions against oil and gas activity in ~~Colombia~~Colombia and Ecuador; our current operations are located in South America, and unexpected problems can arise due to guerilla activity, strikes, local blockades, protests, and other local conditions; technical difficulties and operational difficulties may arise which impact the production, transport or sale of our products; geographic, political and weather conditions can impact the production, transport or sale of our products; the Russian invasion of Ukraine; our ability to raise capital; our ability to identify and complete successful acquisitions, including in new countries and basins from our current operations; our ability to execute business plans; unexpected delays and difficulties in developing currently owned properties may occur; the timely receipt of regulatory or other required approvals for our operating activities; the failure of exploratory drilling to result in commercial wells; ~~unexpected~~the effects of hedges; unexpected delays due to the limited availability of drilling equipment and personnel; current global economic and credit market conditions and the regulatory environment may impact oil prices and oil consumption differently than we currently predict, which could cause us to further modify our strategy and capital spending program; volatility or declines in the trading price of our common stock and the continued listing of our shares on a national stock exchange; and those factors set out in Part II, Item 1A ~~"Risk Factors"~~“Risk Factors” in this Quarterly Report on Form 10-Q and Part I, Item 1A “Risk Factors” in our ~~2020~~2021 Annual Report on Form 10-K (the ~~"2020~~“2021 Annual Report on Form ~~10-K"~~10-K”), and in our other filings with the Securities and Exchange Commission (“SEC”). The unprecedented nature of the COVID-19 pandemic and volatility in the worldwide economy and oil and gas industry makes, including the unpredictable nature of the resurgence of cases, possible variants and governmental responses, it more difficult to predict the accuracy of forward-looking statements. The information included herein is given as of the filing date of this Quarterly Report on Form 10-Q with the SEC and, except as otherwise required by the federal securities laws, we disclaim any obligation or undertaking to publicly release any updates or revisions to, or to withdraw, any forward-looking statement contained in this Quarterly Report on Form 10-Q to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any forward-looking statement is based.

GLOSSARY OF OIL AND GAS TERMS

In this document, the abbreviations set forth below have the following meanings:


bbl			barrel
BOPD			barrels of oil per day
NAR			net after royalty

Sales volumes represent production NAR adjusted for inventory changes. Our oil and gas reserves are reported as NAR. Our production is also reported NAR, except as otherwise specifically noted as "working interest production before royalties."

PART I - Financial Information

Item 1. Financial Statements

Gran Tierra Energy Inc.

Condensed Consolidated Statements of Operations (Unaudited)

(Thousands of U.S. Dollars, Except Share and Per Share Amounts)
Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
OIL SALES (Note 8) $ 135,319 $ 53,142 $ 327,435 $ 173,045

EXPENSES
Operating 37,567 20,721 92,623 84,673
Transportation 3,021 1,286 8,448 8,549
COVID-19 related costs (Note 9) 990 1,108 3,026 1,529
Depletion, depreciation and accretion 38,055 31,340 98,300 131,118
Goodwill impairment (Note 5) — — — 102,581
Asset impairment (Note 5) — 104,731 — 507,093
General and administrative 6,497 4,562 25,072 16,476
Severance — 122 919 1,469
Foreign exchange loss 2,650 4,275 15,824 20,094
Derivative instruments loss (gain) (Note 12) 2,603 (2,173) 47,540 (9,417)
Other financial instruments (gain) loss (Note 12) (13,634) 1,460 (12,425) 61,286
Other loss — 67 — 67
Interest expense (Note 6) 13,608 14,029 41,355 40,204
91,357 181,528 320,682 965,722
INTEREST INCOME — — — 345
INCOME (LOSS) BEFORE INCOME TAXES 43,962 (128,386) 6,753 (792,332)
INCOME TAX EXPENSE (RECOVERY)
Current (Note 10) — 637 (14) 560
Deferred (Note 10) 8,955 (21,202) 26,809 (62,796)
8,955 (20,565) 26,795 (62,236)
NET AND COMPREHENSIVE INCOME (LOSS) $ 35,007 $ (107,821) $ (20,042) $ (730,096)
NET INCOME (LOSS) PER SHARE
BASIC AND DILUTED $ 0.10 $ (0.29) $ (0.05) $ (1.99)
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC (Note 7) 366,992,802 366,981,556 366,985,646 366,981,556
WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED (Note 7) 367,740,722 366,981,556 366,985,646 366,981,556


	Three Months Ended March 31,
		2022		2021
OIL SALES (Note 7)		$	174,569	$	95,493

EXPENSES
Operating		34,400		29,625
Transportation		2,834		2,506
COVID-19 related costs		535		1,139
Depletion, depreciation and accretion		40,963		31,318
General and administrative (Note 10)		12,336		10,488
Foreign exchange (gain) loss		(3,725)		13,083
Derivative instruments loss (Note 10)		21,439		23,698
Other financial instruments gain (Note 10)		—		(1,405)

Interest expense (Note 5)		12,128		13,812
		120,910		124,264


INCOME (LOSS) BEFORE INCOME TAXES		53,659		(28,771)

INCOME TAX EXPENSE
Current (Note 8)		20,827		—
Deferred (Note 8)		18,713		8,651
		39,540		8,651
NET AND COMPREHENSIVE INCOME (LOSS)		$	14,119	$	(37,422)

NET INCOME (LOSS) PER SHARE

BASIC AND DILUTED		$	0.04	$	(0.10)

WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC (Note 6)		367,386,664		366,981,556
WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED (Note 6)		372,375,245		366,981,556

(See notes to the condensed consolidated financial statements)

Gran Tierra Energy Inc.

Condensed Consolidated Balance Sheets (Unaudited)

(Thousands of U.S. Dollars, Except Share and Per Share Amounts)


		As at September 30, 2021		As at December 31, 2020			As at March 31, 2022		As at December 31, 2021

ASSETS	ASSETS					ASSETS
Current Assets	Current Assets					Current Assets
Cash and cash equivalents (Note 13)		$	16,600	$	14,114

Cash and cash equivalents (Note 11)						Cash and cash equivalents (Note 11)	$	58,707	$	26,109
Restricted cash and cash equivalents (Note 11)						Restricted cash and cash equivalents (Note 11)	1,142		392
Accounts receivable	Accounts receivable	26,431		8,044		Accounts receivable	23,471		13,185
Investment (Note 12)		44,116		48,323

Taxes receivable (Note 3)	Taxes receivable (Note 3)	47,772		49,925		Taxes receivable (Note 3)	34,774		45,506
Other current assets		17,141		13,459
Other current assets (Note 10)						Other current assets (Note 10)	20,140		16,609
Total Current Assets	Total Current Assets	152,060		133,865		Total Current Assets	138,234		101,801

Oil and Gas Properties	Oil and Gas Properties					Oil and Gas Properties
Proved	Proved	833,069		797,355		Proved	907,224		859,580
Unproved	Unproved	158,483		161,763		Unproved	97,031		131,865
Total Oil and Gas Properties	Total Oil and Gas Properties	991,552		959,118		Total Oil and Gas Properties	1,004,255		991,445
Other capital assets	Other capital assets	3,085		5,364		Other capital assets	3,665		4,352
Total Property, Plant and Equipment (Note 4)	Total Property, Plant and Equipment (Note 4)	994,637		964,482		Total Property, Plant and Equipment (Note 4)	1,007,920		995,797

Other Long-Term Assets	Other Long-Term Assets					Other Long-Term Assets
Deferred tax assets	Deferred tax assets	13,349		57,318		Deferred tax assets	42,760		61,494
Taxes receivable (Note 3)	Taxes receivable (Note 3)	14,447		42,635		Taxes receivable (Note 3)	22,026		17,522
Restricted cash and cash equivalents (Note 13)		3,532		3,409
Other		3,233		16
Other long-term assets (Note 10)						Other long-term assets (Note 10)	20,967		12,497
Total Other Long-Term Assets	Total Other Long-Term Assets	34,561		103,378		Total Other Long-Term Assets	85,753		91,513
Total Assets	Total Assets	$	1,181,258	$	1,201,725	Total Assets	$	1,231,907	$	1,189,111

LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES AND SHAREHOLDERS’ EQUITY						LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities	Current Liabilities					Current Liabilities
Accounts payable and accrued liabilities	Accounts payable and accrued liabilities	$	114,785	$	100,784	Accounts payable and accrued liabilities	$	150,907	$	148,694
Derivatives (Note 12)		14,737		12,050
Current portion of long-term debt (Note 5)						Current portion of long-term debt (Note 5)	39,617		66,987
Derivatives (Note 10)						Derivatives (Note 10)	18,875		2,976
Taxes payable (Note 3)	Taxes payable (Note 3)	5,938		—		Taxes payable (Note 3)	7,546		6,620
Equity compensation award liability (Note 7 and 12)		2,132		805
Other (Note 6 and 10)						Other (Note 6 and 10)	16,392		2,710
Total Current Liabilities	Total Current Liabilities	137,592		113,639		Total Current Liabilities	233,337		227,987

Long-Term Liabilities	Long-Term Liabilities					Long-Term Liabilities
Long-term debt (Notes 6 and 12)		735,411		774,770
Long-term debt (Notes 5 and 10)						Long-term debt (Notes 5 and 10)	587,769		587,404

Asset retirement obligation	Asset retirement obligation	54,356		48,214		Asset retirement obligation	55,478		54,525
Equity compensation award liability (Note 7 and 12)		11,469		3,955
Equity compensation award liability (Note 6 and 10)						Equity compensation award liability (Note 6 and 10)	17,436		13,718
Taxes payable (Note 3 )						Taxes payable (Note 3 )	12,736		—
Other long-term liabilities	Other long-term liabilities	3,563		4,113		Other long-term liabilities	7,370		3,397
Total Long-Term Liabilities	Total Long-Term Liabilities	804,799		831,052		Total Long-Term Liabilities	680,789		659,044

Contingencies (Note 11)		0		0
Contingencies (Note 9)						Contingencies (Note 9)	0		0

Shareholders' Equity	Shareholders' Equity					Shareholders' Equity
Common Stock (Note 7) (367,038,454 and 366,981,556 shares issued and outstanding of Common Stock, par value $0.001 per share, as at September 30, 2021, and December 31, 2020, respectively)		10,270		10,270
Common Stock (Note 6) (368,421,033 and 367,144,500 shares issued and outstanding of Common Stock, par value $0.001 per share, as at March 31, 2022, and December 31, 2021, respectively)						Common Stock (Note 6) (368,421,033 and 367,144,500 shares issued and outstanding of Common Stock, par value $0.001 per share, as at March 31, 2022, and December 31, 2021, respectively)	10,272		10,270
Additional paid-in capital	Additional paid-in capital	1,286,893		1,285,018		Additional paid-in capital	1,289,162		1,287,582
Deficit	Deficit	(1,058,296)		(1,038,254)		Deficit	(981,653)		(995,772)
Total Shareholders' Equity		238,867		257,034
Total Shareholders’ Equity						Total Shareholders’ Equity	317,781		302,080
Total Liabilities and Shareholders’ Equity	Total Liabilities and Shareholders’ Equity	$	1,181,258	$	1,201,725	Total Liabilities and Shareholders’ Equity	$	1,231,907	$	1,189,111

(See notes to the condensed consolidated financial statements)

Gran Tierra Energy Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(Thousands of U.S. Dollars)

Nine Months Ended September 30,
2021 2020
Operating Activities
Net loss $ (20,042) $ (730,096)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depletion, depreciation and accretion 98,300 131,118
Goodwill impairment (Note 5) — 102,581
Asset impairment (Note 5) — 507,093
Deferred tax expense (recovery) 26,809 (62,796)
Stock-based compensation expense (recovery) (Note 7) 6,597 (707)
Amortization of debt issuance costs (Note 6) 2,682 2,774
Unrealized foreign exchange loss 16,945 22,335
Derivative instruments loss (gain) (Note 12) 47,540 (9,417)
Cash settlements on derivatives instruments (45,041) 9,970
Other financial instruments (gain) loss (Note 12) (12,425) 61,286
Other non-cash loss — 2,026
Cash settlement of asset retirement obligation (483) (199)
Non-cash lease expenses 1,222 1,494
Lease payments (1,239) (1,404)
Net change in assets and liabilities from operating activities (Note 13) 17,956 23,288
Net cash provided by operating activities 138,821 59,346
Investing Activities
Additions to property, plant and equipment (109,650) (56,378)
Proceeds on disposition of investment, net of transaction costs (Note 12) 14,632 —
Changes in non-cash investing working capital (Note 13) 709 (69,549)
Net cash used in investing activities (94,309) (125,927)
Financing Activities
Proceeds from debt, net of issuance costs (Note 6) (125) 88,382
Repayment of debt (Note 6) (40,000) (7,000)
Proceeds from exercise of stock options 19 —
Lease payments (1,269) (307)
Net cash (used in) provided by financing activities (41,375) 81,075
Foreign exchange loss on cash, cash equivalents and restricted cash and cash equivalents (528) (754)
Net increase in cash, cash equivalents and restricted cash and cash equivalents 2,609 13,740
Cash, cash equivalents and restricted cash and cash equivalents,
beginning of period (Note 13)
17,523 11,075
Cash, cash equivalents and restricted cash and cash equivalents,
end of period (Note 13)
$ 20,132 $ 24,815
Supplemental cash flow disclosures (Note 13)


	Three Months Ended March 31,
	2022		2021
Operating Activities
Net Income (Loss)	$	14,119	$	(37,422)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depletion, depreciation and accretion	40,963		31,318
Deferred tax expense	18,713		8,651
Stock-based compensation expense (Note 6)	4,557		3,671
Amortization of debt issuance costs (Note 5)	887		881
Unrealized foreign exchange (gain) loss	(4,839)		13,003
Derivative instruments loss (Note 10)	21,439		23,698
Cash settlements on derivatives instruments	(8,596)		(13,404)
Other financial instruments gain (Note 10)	—		(1,405)

Cash settlement of asset retirement obligation	(5)		(169)
Non-cash lease expenses	411		444
Lease payments	(344)		(462)
Net change in assets and liabilities from operating activities (Note 11)	16,520		13,128
Net cash provided by operating activities	103,825		41,932

Investing Activities
Additions to property, plant and equipment	(41,483)		(37,427)
Proceeds on disposition of investment, net of transaction costs (Note 10)	—		14,632
Changes in non-cash investing working capital (Note 11)	(1,803)		(708)
Net cash used in investing activities	(43,286)		(23,503)

Financing Activities

Repayment of debt (Note 5)	(27,525)		(10,125)
Proceeds from issuance of shares of Common Stock, net of issuance costs	2		—
Proceeds from exercise of stock options	980		—
Lease payments	(777)		(513)
Net cash used in financing activities	(27,320)		(10,638)

Foreign exchange gain (loss) on cash, cash equivalents and restricted cash and cash equivalents	478		(446)

Net increase in cash, cash equivalents and restricted cash and cash equivalents	33,697		7,345
Cash, cash equivalents and restricted cash and cash equivalents, beginning of period (Note 11)	31,404		17,523
Cash, cash equivalents and restricted cash and cash equivalents, end of period (Note 11)	$	65,101	$	24,868

Supplemental cash flow disclosures (Note 11)

(See notes to the condensed consolidated financial statements)

Gran Tierra Energy Inc.

Condensed Consolidated Statements of ~~Shareholders'~~Shareholders’ Equity (Unaudited)

(Thousands of U.S. Dollars)

Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
Share Capital
Balance, beginning of period $ 10,270 $ 10,270 $ 10,270 $ 10,270
Balance, end of period 10,270 10,270 10,270 10,270
Additional Paid-in Capital
Balance, beginning of period 1,286,235 1,283,798 1,285,018 1,282,627
Exercise of stock options 10 — 18 —
Stock-based compensation (Note 7) 648 607 1,857 1,778
Balance, end of period 1,286,893 1,284,405 1,286,893 1,284,405
Deficit
Balance, beginning of period (1,093,303) (882,562) (1,038,254) (260,287)
Net income (loss) 35,007 (107,821) (20,042) (730,096)
Balance, end of period (1,058,296) (990,383) (1,058,296) (990,383)
Total Shareholders' Equity $ 238,867 $ 304,292 $ 238,867 $ 304,292


	Three Months Ended March 31,
		2022		2021
Share Capital
Balance, beginning of period		$	10,270	$	10,270
Issuance of Common Stock (Note 6)		2		—
Balance, end of period		10,272		10,270

Additional Paid-in Capital
Balance, beginning of period		1,287,582		1,285,018

Exercise of stock options		980		—

Stock-based compensation (Note 6)		600		579
Balance, end of period		1,289,162		1,285,597

Deficit
Balance, beginning of period		(995,772)		(1,038,254)
Net income (loss)		14,119		(37,422)
Balance, end of period		(981,653)		(1,075,676)

Total Shareholders’ Equity		$	317,781	$	220,191

(See notes to the condensed consolidated financial statements)

Gran Tierra Energy Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Expressed in U.S. Dollars, unless otherwise indicated)

1. Description of Business

Gran Tierra Energy Inc., a Delaware corporation (the ~~"Company"~~“Company” or ~~"Gran Tierra"~~“Gran Tierra”), is a publicly traded company focused on international oil and natural gas exploration and production with assets currently in Colombia and Ecuador.

2. Significant Accounting Policies

These interim unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America ~~("GAAP"~~(“GAAP”). The information furnished herein reflects all normal recurring adjustments that are, in the opinion of management, necessary for the fair presentation of results for the interim periods.

The note disclosure requirements of annual consolidated financial statements provide additional disclosures ~~to that~~ required for interim unaudited condensed consolidated financial statements. Accordingly, these interim unaudited condensed consolidated financial statements should be read in conjunction with the ~~Company's~~Company’s consolidated financial statements as at and for the year ended December 31, ~~2020,~~2021, included in the ~~Company's 2020~~Company’s 2021 Annual Report on Form 10-K.

The ~~Company's~~Company’s significant accounting policies are described in Note 2 of the consolidated financial statements, which are included in the ~~Company's 2020~~Company’s 2021 Annual Report on Form 10-K and are the same policies followed in these interim unaudited condensed consolidated financial statements. The Company has evaluated all subsequent events ~~through~~ to the date these interim unaudited condensed consolidated financial statements were issued.

3. Taxes Receivable and Payable

The table below shows the break-down of taxes receivable and payable, which are comprised of value added tax ~~("VAT"~~(“VAT”) and income tax:

(Thousands of U.S. Dollars) As at September 30, 2021 As at December 31, 2020
Taxes Receivable
Current
  VAT Receivable $ 31,890 $ 35,977
  Income Tax Receivable 15,882 13,948
$ 47,772 $ 49,925
Long-Term
  VAT Receivable $ — $ 28,485
  Income Tax Receivable 14,447 14,150
$ 14,447 $ 42,635
Taxes Payable
Current
VAT Payable $ 5,938 $ —
Total Taxes Receivable net of Taxes Payable $ 56,281 $ 92,560


(Thousands of U.S. Dollars)	As at March 31, 2022		As at December 31, 2021
Taxes Receivable
Current
VAT Receivable	$	12,345	$	21,918
Income Tax Receivable	22,429		23,588
	$	34,774	$	45,506
Long-Term
Income Tax Receivable	$	22,026	$	17,522

Taxes Payable
Current
VAT Payable	$	7,546	$	6,620

Long-Term
VAT Payable	$	68	$	—
Income Tax Payable	12,668		—
	$	12,736	$	—

Total Taxes Receivable net of Taxes Payable	$	36,518	$	56,408

The following table shows the movement of VAT and income tax receivables for the period identified below:


(Thousands of U.S. Dollars)	(Thousands of U.S. Dollars)	Net VAT Receivable		Income Tax Receivable		Total Net Taxes Receivable		(Thousands of U.S. Dollars)	Net VAT Receivable		Income Tax Receivable		Total Net Taxes Receivable
Balance, as at December 31, 2020		$	64,462	$	28,098	$	92,560
Balance, as at December 31, 2021								Balance, as at December 31, 2021	$	15,298	$	41,110	$	56,408
Collected through direct government refunds	Collected through direct government refunds	(518)		(14,228)		(14,746)		Collected through direct government refunds	(149)		—		(149)
Collected through sales contracts	Collected through sales contracts	(70,881)		—		(70,881)		Collected through sales contracts	(40,913)		—		(40,913)
Taxes paid (1)	Taxes paid (1)	38,278		19,923		58,201		Taxes paid (1)	29,674		9,703		39,377

Current tax expense								Current tax expense	—		(20,827)		(20,827)
Foreign exchange loss	Foreign exchange loss	(5,389)		(3,464)		(8,853)		Foreign exchange loss	821		1,801		2,622
Balance, as at September 30, 2021		$	25,952	$	30,329	$	56,281
Balance, as at March 31, 2022								Balance, as at March 31, 2022	$	4,731	$	31,787	$	36,518

(1)VAT is paid on certain goods and services and collected on sales in Colombia at a rate of 19%

4. Property, Plant and Equipment

(Thousands of U.S. Dollars) As at September 30, 2021 As at December 31, 2020
Oil and natural gas properties
Proved $ 4,236,548 $ 4,106,768
Unproved 158,483 161,763
4,395,031 4,268,531
Other(1)
32,779 32,135
4,427,810 4,300,666
Accumulated depletion and depreciation and impairment (3,433,173) (3,336,184)
$ 994,637 $ 964,482


(Thousands of U.S. Dollars)	As at March 31, 2022		As at December 31, 2021
Oil and natural gas properties
Proved	$	4,390,016	$	4,302,473
Unproved	97,031		131,865
	4,487,047		4,434,338
Other(1)	34,998		34,943
	4,522,045		4,469,281
Accumulated depletion and depreciation and impairment	(3,514,125)		(3,473,484)
	$	1,007,920	$	995,797

(1) The ~~"other"~~“other” category includes right-of-use assets for operating and finance leases of ~~$11.7~~$13.9 million, which had a net book value of ~~$2.5~~$3.3 million as at ~~September 30, 2021~~March 31, 2022 (December 31, ~~2020~~2021 - ~~$11.4~~$13.9 million, which had a net book value of ~~$4.4~~$3.9 million).

~~5. Impairment~~

~~Asset impairment~~

~~(i) Oil and gas property impairment~~

For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022, and 2021, the Company had no ~~ceiling test impairment losses. For each of the three and nine months ended September 30, 2020, Gran Tierra had $104.7 million and $502.9 million of~~ ceiling test impairment losses. The Company used an average Brent ~~price~~price of ~~$60.12~~$77.41 and ~~$47.95~~ $43.31 per bbl for ~~the September 30,~~March 31, 2022, and 2021 ~~and 2020,~~ ceiling test calculations, respectively.

~~(ii) Inventory impairment~~

For the three and nine months ended September 30, 2021, the Company had no inventory impairment. For the three and nine months ended September 30, 2020, the Company recorded $0.1 million and $4.2 million, respectively, of inventory impairment.

~~Goodwill impairment~~

The entire goodwill balance of $102.6 million was impaired during the nine months ended September 30, 2020, due to the reporting unit's carrying value exceeding its fair value due to the impact of lower forecasted commodity prices.

5. Debt and Debt Issuance Costs

The ~~Company's~~Company’s debt at ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, was as follows:


(Thousands of U.S. Dollars)	(Thousands of U.S. Dollars)	As at September 30, 2021		As at December 31, 2020		(Thousands of U.S. Dollars)	As at March 31, 2022		As at December 31, 2021
Current						Current
Revolving credit facility						Revolving credit facility	$	40,000	$	67,500
Unamortized debt issuance costs						Unamortized debt issuance costs	(383)		(513)
							$	39,617	$	66,987

Long-Term						Long-Term
6.25% Senior Notes, due February 2025	6.25% Senior Notes, due February 2025	$	300,000	$	300,000	6.25% Senior Notes, due February 2025	$	300,000	$	300,000
7.75% Senior Notes, due May 2027	7.75% Senior Notes, due May 2027	300,000		300,000		7.75% Senior Notes, due May 2027	300,000		300,000
Revolving credit facility		150,000		190,000
Unamortized debt issuance costs	Unamortized debt issuance costs	(15,566)		(18,124)		Unamortized debt issuance costs	(13,297)		(14,030)
Long-term debt		734,434		771,876
							586,703		585,970
Long-term lease obligation(1)	Long-term lease obligation(1)	977		2,894		Long-term lease obligation(1)	1,066		1,434
		$	735,411	$	774,770		$	587,769	$	587,404
							$	627,386	$	654,391

(1) The current portion of the lease obligation has been included in accounts payable and accrued liabilities on the ~~Company's~~Company’s balance sheet and totaled $2.9 million as at ~~September 30, 2021~~March 31, 2022 (December 31, ~~2020~~2021 - $3.3 million).

As at ~~September 30, 2021,~~March 31, 2022, the borrowing base of the ~~Company's~~Company’s Senior Secured Credit Facility (the ~~"revolving~~“revolving credit ~~facility"~~facility”) was ~~$215 million.~~$150 million, with $125 million readily available and $25 million subject to approval by major lenders. The maturity date of the revolving credit facility is ~~October~~November 10, 2022, and the next re-determination is to occur no later than ~~November 2021.~~May 2022.

~~The~~Under the terms of the credit facility, the Company is required to comply with various covenants, which were modified in response to market conditions including the COVID-19 pandemic until October 1, 2021 ("the covenant relief period"). During the covenant relief period, the Company's ratio of total debt to Covenant EBITDAX ("EBITDAX") was permitted to be greater than 4.0 to 1.0, Senior Secured Debt to EBITDAX ratio could not exceed 2.5 to 1.0, and EBITDAX to interest expense ratio for the trailing four-quarter periods measured as of the last day of the fiscal quarter ended September 30, 2021, was required to be 2.0 to 1.0. As of September 30, 2021, the Company was in compliance with all applicable covenants in the revolving credit facility.

~~Commencing on October 1, 2021, the Company must~~ maintain compliance with the following financial covenants: limitations on ~~Company's~~the Company’s ratio of debt to ~~EBITDAX~~earnings before interest, taxes, depletion, depreciation and accretion and exploration expenses (“EBITDAX”) to a maximum of 4.0 to 1.0; limitations on ~~Company's~~Company’s ratio of Senior Secured Debt to EBITDAX to a maximum of 3.0 to 1.0; and the maintenance of a ratio of EBITDAX to interest expense of at least 2.5 to 1.0. If the Company fails to comply with these financial covenants, it ~~would~~will result in a default under the terms of the credit agreement, which could result in an acceleration of repayment of all indebtedness under the ~~Company's~~Company’s revolving credit facility. As of March 31, 2022, the Company was in compliance with all applicable covenants in the revolving credit facility.

Amounts drawn down under the revolving credit facility bear interest, at the ~~Company's~~Company’s option, at the USD LIBOR rate plus a

margin ranging from 2.90% to 4.90%, or an alternate base rate plus a margin ranging from 1.90% to 3.90%, in each case based on the borrowing base utilization percentage. The alternate base rate is currently the U.S. prime rate. We pay a commitment fee on undrawn amounts under the revolving credit facility, which ranges from 0.73% to 1.23% per annum, based on the average daily amount of unused commitments.

The ~~Company's~~Company’s revolving credit facility is guaranteed by and secured against the assets of certain of the ~~Company's~~Company’s subsidiaries (the ~~"Credit~~“Credit Facility ~~Group"~~Group”). Under the terms of the revolving credit facility, the Company is subject to certain restrictions on its ability to distribute funds to entities outside of the Credit Facility Group, including restrictions on the ability to pay dividends to shareholders of the Company.

Interest Expense

The following table presents the total interest expense recognized in the accompanying interim unaudited condensed consolidated statements of operations:

Three Months Ended September 30, Nine Months Ended September 30,
(Thousands of U.S. Dollars) 2021 2020 2021 2020
Contractual interest and other financing expenses $ 12,701 $ 13,191 $ 38,673 $ 37,430
Amortization of debt issuance costs 907 838 2,682 2,774
$ 13,608 $ 14,029 $ 41,355 $ 40,204


	Three Months Ended March 31,
(Thousands of U.S. Dollars)		2022		2021
Contractual interest and other financing expenses		$	11,241	$	12,931
Amortization of debt issuance costs		887		881
		$	12,128	$	13,812

6. Share Capital


			Shares of Common Stock
Balance, December 31, ~~2020~~2021			~~366,981,556~~367,144,500
Shares issued on option exercise			~~56,898~~1,276,533
Balance, ~~September 30, 2021~~March 31, 2022			~~367,038,454~~368,421,033

Equity Compensation Awards

The following table provides information about performance stock units (“PSUs”), deferred share units (“DSUs”), and stock option activity for the ~~nine~~three months ended ~~September 30, 2021:~~March 31, 2022:


		PSUs	DSUs	Stock Options			PSUs	DSUs	Stock Options
		Number of Outstanding Share Units		Number of Outstanding Stock Options	Weighted Average Exercise Price/Stock Option ($)		Number of Outstanding Share Units		Number of Outstanding Stock Options	Weighted Average Exercise Price/Stock Option ($)
Balance, December 31, 2020		23,273,404	4,067,897	15,444,949	1.50
Balance, December 31, 2021						Balance, December 31, 2021	30,365,196	5,710,764	17,848,722	1.20
Granted	Granted	13,428,840	1,310,122	5,834,014	0.80	Granted	6,720,129	344,464	2,721,929	1.41
Exercised	Exercised	(2,733,209)	—	(56,898)	0.33	Exercised	(4,396,646)	—	(1,276,533)	0.77
Forfeited	Forfeited	(3,492,165)	—	(1,628,591)	0.90	Forfeited	(47,572)	—	(62,638)	1.95
Expired	Expired	—	—	(1,279,641)	3.17	Expired	—	—	(1,173,714)	2.80
Balance, September 30, 2021		30,476,870	5,378,019	18,313,833	1.22
Balance, March 31, 2022						Balance, March 31, 2022	32,641,107	6,055,228	18,057,766	1.15

For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 stock-based compensation expense was ~~$1.1~~$4.6 million and ~~$6.6~~$3.7 million, ~~respectively (three and nine months ended September 30, 2020, expense of $0.1 million and recovery of $0.7 million, respectively).~~respectively.

At ~~September 30, 2021,~~March 31, 2022, there was ~~$14.2~~$31.1 million (December 31, ~~2020~~2021 - ~~$5.9~~$11.8 million) of unrecognized compensation costs related to unvested PSUs and stock options, which is expected to be recognized over a weighted-average period of ~~1.8~~1.9 years. During the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, the Company paid out $2.4 million for PSUs vested on December 31, 2021 (three months ended March 31, 2021 - $0.6 million for PSUs vested on December 31, ~~2020 (nine months ended September 30, 2020 - $3.2 million for PSUs vested on December 31, 2019)~~2020).

Net Income (Loss) per Share

Basic net income (loss) per share is calculated by dividing net income (loss) attributable to common shareholders by the weighted average number of shares of common stock issued and outstanding during each period.

Diluted net income ~~(loss)~~ per share is calculated using the treasury stock method for share-based compensation arrangements. The treasury stock method assumes that any proceeds obtained on the exercise of share-based compensation arrangements would be used to purchase common shares at the average market price during the period. The weighted average number of shares is then adjusted by the difference between the number of shares issued from the exercise of share-based compensation arrangements and shares repurchased from the related proceeds. Anti-dilutive shares represent potentially dilutive securities excluded from the computation of diluted income or loss per share as their impact would be anti-dilutive.

Weighted Average Shares Outstanding


		Three Months Ended September 30,		Nine Months Ended September 30,			Three Months Ended March 31,
		2021	2020	2021	2020			2022	2021
Weighted average number of common shares outstanding	Weighted average number of common shares outstanding	366,992,802	366,981,556	366,985,646	366,981,556	Weighted average number of common shares outstanding		367,386,664	366,981,556
Shares issuable pursuant to stock options	Shares issuable pursuant to stock options	1,574,305	—	—	—	Shares issuable pursuant to stock options		12,950,523	—
Shares assumed to be purchased from proceeds of stock options	Shares assumed to be purchased from proceeds of stock options	(826,385)	—	—	—	Shares assumed to be purchased from proceeds of stock options		(7,961,942)	—
Weighted average number of diluted common shares outstanding	Weighted average number of diluted common shares outstanding	367,740,722	366,981,556	366,985,646	366,981,556	Weighted average number of diluted common shares outstanding		372,375,245	366,981,556

For the three months ended ~~September 30, 2021, 16,362,882~~March 31, 2022, 5,331,160 options, on a weighted average basis (three months ended ~~September 30, 2020~~March 31, 2021 - all options), were excluded from the diluted income (loss) per share calculation as the options were anti-dilutive. ~~For the nine months ended September 30, 2021 and 2020, all options on a weighted average basis were excluded from the diluted loss per share calculation as the options were anti-dilutive.~~

8.7. Revenue

The ~~Company's~~Company’s revenues are generated from oil sales at prices that reflect the blended prices received upon shipment by the purchaser at defined sales points or defined by contract relative to ICE Brent and adjusted for Vasconia or Castilla crude differentials, quality, and transportation discounts each month. For the three ~~and nine~~ months ended ~~September 30, 2021,~~March 31, 2022, 100% (three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 - 100%) of the ~~Company's~~Company’s revenue resulted from oil sales. During the three ~~and nine~~ months ended ~~September 30, 2021,~~March 31, 2022, quality and transportation discounts were ~~16% and 15%, respectively,~~13% of the average ICE Brent price (three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 - ~~22% and 27%, respectively)~~15%). During the three ~~and nine~~ months ended ~~September 30, 2021,~~March 31, 2022, the ~~Company's~~Company’s production was sold primarily to two major customers in Colombia, ~~(three~~representing 57% and ~~nine~~43% of total sales volumes (three months ended ~~September 30, 2020~~March 31, 2021 - ~~two)~~two, representing 68% and 31% of total sales volumes).

As at ~~September 30, 2021,~~March 31, 2022, accounts receivable included NaN of accrued sales revenue related to ~~September 2021~~March 2022 production (December 31, ~~2020~~2021 - ~~$0.1 million~~nil related to December ~~2020~~2021 production).

~~9. COVID-19 Costs~~

The COVID-19 pandemic has resulted in additional ongoing operating and transportation costs related to COVID-19 health and safety preventative measures, including incremental sanitation requirements and enhanced procedures for trucking barrels and crew changes in the field. Below is a break-down of the costs:

Three Months Ended September 30, Nine Months Ended September 30,
(Thousands of U.S. Dollars) 2021 2020 2021 2020
Operating expenses $ 881 $ 1,012 $ 2,743 $ 1,433
Transportation costs 109 96 283 96
Total COVID-19 costs $ 990 $ 1,108 $ 3,026 $ 1,529

~~10.~~8. Taxes

The Company's effective tax rate was ~~397%~~ 74% for the ~~nine~~three months ended ~~September 30, 2021,~~ March 31, 2022, compared to 8%(30)% in the comparative period of ~~2020.~~2021. Current income tax expense was ~~in a recovery position~~$20.8 million for the ~~nine~~three months ended ~~September 30, 2021, versus an~~March 31, 2022, compared to no current tax expense ~~position for the comparative period in 2020, primarily as a result of changes~~ in the ~~previous estimation~~corresponding period of ~~presumptive minimum tax.~~2021, primarily due to an increase in taxable income. The deferred income tax expense for the ~~nine~~three months ended ~~September 30,~~ March 31, 2022, was mainly the result of tax depreciation being higher than accounting depreciation in Colombia. The deferred income tax expense in the comparative period of 2021 ~~resulted from~~ was the result of excess tax depreciation compared towith accounting depreciation and the use of tax losses to offset taxable income in Colombia. The deferred income tax recovery in the comparative period of 2020 was mainly the result of a ceiling test impairment loss in Colombia, partially offset by losses incurred in Colombia that are now fully offset by a valuation allowance.

For the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, the difference between the effective tax rate of ~~397%~~74% and the 31% Colombian tax rate was primarily due to the non-deductibility of derivative instrument losses and financing costs; foreign currency translation adjustments, and stock based compensation. These were partially offset by a decrease in the valuation allowance and the non-taxable portion (50%) of the unrealized gain on PetroTal Corp. ("PetroTal") shares.

~~In the third quarter of 2021, Congressional authorities in Colombia enacted a new tax legislation, which includes an increase to the corporate income tax rate to~~ 35% ~~from 31%, effective January 1, 2022. Accordingly, the tax rates applied to the calculation of deferred income taxes, before valuation allowance, have been adjusted to reflect this change.~~

~~For the nine months ended September 30, 2020, the difference between the effective tax rate of 8% and the 32%~~ Colombian tax rate was primarily due to an increase in the impact of foreign taxes, foreign translation adjustments, increase in the valuation allowance, other permanent differences, and non-deductible stock-based compensation.

For the ~~non-deductibility~~three months ended March 31, 2021, the difference between the effective tax rate of ~~goodwill impairment for~~(30)% and the 31% Colombian tax ~~purposes,~~rate was primarily due to an increase in the impact of foreign taxes, foreign translation adjustments and ~~the non-deductible portion (50%) of the unrealized loss on PetroTal Corp. ("PetroTal") shares.~~other permanent differences, which was partially offset by a decrease in valuation allowance.

~~11.~~9. Contingencies

Legal Proceedings

Gran Tierra has a number of lawsuits and claims pending, including a dispute with the Agencia Nacional de Hidrocarburos (National Hydrocarbons Agency) ~~("ANH"~~(“ANH”) relating to the calculation of high price share royalties. Although the outcome of these lawsuits and disputes cannot be predicted with certainty, Gran Tierra believes the resolution of these matters would not have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows. Gran Tierra records costs as they are incurred or become probable and determinable.

Letters of credit and other credit support

At ~~September 30, 2021,~~March 31, 2022, the Company had provided letters of credit and other credit support totaling ~~$102.4~~$105.7 million (December 31, ~~2020~~2021 - ~~$100.6~~$103.0 million) as security relating to work commitment guarantees in Colombia and Ecuador contained in exploration contracts and other capital or operating requirements.

~~12.~~10. Financial Instruments and Fair Value Measurement

Financial Instruments

Financial instruments are initially recorded at fair value, defined as the price that would be received to sell an asset or paid to market participants to settle liability at the measurement date. For financial instruments carried at fair value, GAAP establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. This hierarchy consists of three broad levels:

•Level 1 - Inputs representing quoted market prices in active markets for identical assets and liabilities

•Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the assets and liabilities, either directly or indirectly

•Level 3 - Unobservable inputs for assets and liabilities

At ~~September 30, 2021,~~March 31, 2022, the Company’s financial instruments recognized on the balance sheet ~~consisted~~consist of cash and cash equivalents, restricted cash and cash equivalents, accounts receivable, ~~investment,~~ other long-term assets, accounts payable and accrued liabilities, current portion of long-term debt, derivatives, other short-term payables, long-term debt, long-term equity compensation ~~award~~reward liability ~~long-term debt,~~ and other long-term liabilities. The Company uses appropriate valuation techniques based on the available information to measure the fair values of assets and liabilities.

Fair Value Measurement

The following table presents the Company’s fair value measurements of ~~investment, derivatives,~~its financial instruments as of March 31, 2022, and December 31, 2021:


	As at March 31, 2022		As at December 31, 2021
(Thousands of U.S. Dollars)
Level 1
Assets
Prepaid equity forward - current (2)	$	3,137	$	—
Prepaid equity forward - long-term(1)	15,698		7,578
	$	18,835	$	7,578

Liabilities
DSUs liability - long-term(3)	$	9,506	$	4,346
6.25% Senior Notes	277,875		273,672
7.75% Senior Notes	278,187		271,500
	$	565,568	$	549,518
Level 2
Assets
Derivative asset(2)	$	—	$	219
Restricted cash and cash equivalents - long-term(1)	5,253		4,903
	$	5,253	$	5,122
Liabilities
Derivative liability	$	18,875	$	2,976
Revolving credit facility	39,617		66,987
PSUs liability - current (4)	15,292		2,710
PSUs liability - long-term(3)	7,930		9,372
	$	81,714	$	82,045

Level 3
Liabilities
Asset retirement obligation - current(4)	$	1,100	$	—
Asset retirement obligation - long-term	55,478		54,525
	$	56,578	$	54,525

(1)The long-term portion of restricted cash and Prepaid equity forward are included in the other long-term assets on the Company’s balance sheet

(2)Included in the other current assets on the Company’s balance sheet

(3)Long-term DSUs and PSUs liabilities are included in the long-term equity compensation award liability ~~is remeasured~~on the Company’s balance sheet

(4)Current portion of PSU liability and asset retirement obligation are recorded in other short-term liabilities on the Company’s balance sheet

The fair values of cash and cash equivalents, current restricted cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate their carrying amounts due to the ~~estimated~~short-term maturity of these instruments.

The fair value of long-term restricted cash and cash equivalents approximate its carrying value because interest rates are variable and reflective of market rates.

Prepaid Equity Forward (“PEF”)

To reduce the Company’s exposure to changes in the trading price of the Company’s common shares on outstanding PSUs, the Company entered into a PEF. At the end of the term, the counterparty will pay the Company an amount equivalent to the notional amount of the shares using the price of the Company’s common shares at the valuation date. The Company has the discretion to increase or decrease the notional amount of the PEF or terminate the agreement early. As at March 31, 2022, the Company’s PEF had a notional amount of 12 million shares with a fair value of $18.8 million (As at December 31, 2021 - 10 million shares with a fair value of $7.6 million). During the three months ended March 31, 2022, the Company recorded a gain of $7.8 million on the PEF in general and administrative expenses (three months ended March 31, 2021- nil). The fair value of the PEF asset was estimated using the Company’s share price quoted in active markets at the end of each reporting period.

~~Investment in PetroTal~~

The estimated fair value of the Company's investment in PetroTal was $44.1 million at September 30, 2021 ($48.3 million at December 31, 2020), based on the closing stock price of PetroTal of $0.41 CAD ($0.25 CAD at December 31, 2020) and the foreign exchange rate at that date. During the nine months ended September 30, 2021, the Company sold 44% (109 million common shares) of its interest in PetroTal for cash proceeds net of transaction costs of $14.6 million, resulting in a loss on sale of $5.1 million. PetroTal is a publicly-traded energy company incorporated and domiciled in Canada engaged in exploration, appraisal, and development of crude oil and natural gas in Peru. PetroTal's shares are listed on the Toronto Stock Exchange Venture under the trading symbol 'TAL' and on the London Stock Exchange Alternative Investment Market under the trading symbol 'PTAL'. As at September 30, 2021, Gran Tierra holds approximately 137 million common shares representing approximately 17% of PetroTal's issued and outstanding common shares.

~~Commodity and Foreign Currency Derivatives~~DSU liability

The fair value of ~~commodity~~DSUs liability was estimated using Company’s share price quoted in active markets at the end of each reporting period.

PSUs liability

The fair value of the PSUs liability was estimated based on a pricing model using inputs, such as Company’s share price and ~~foreign currency~~PSU performance factor.

Derivative asset and derivative liability

The fair value of derivatives is estimated based on various factors, including quoted market prices in active markets and quotes from third parties. The Company also performs an internal valuation to ensure the

reasonableness of third party quotes. In consideration of counterparty credit risk, the Company assessed ~~the possibility of~~ whether the counterparty to the derivative would default by failing to make any contractually required payments. Additionally, the Company considers that it is of substantial credit quality and has the financial resources and willingness to meet its potential repayment obligations associated with the derivative transactions.

~~PSUs and DSUs~~

The estimated fair value of the PSUs liability is based on a pricing model using inputs such as quoted market prices in an active market and PSUs performance factor. The fair value of DSUs liability is measured using quoted market prices in an active market.

~~The fair value of investment, derivatives, and PSUs and DSUs liability at September 30, 2021, and December 31, 2020, was as follows:~~

(Thousands of U.S. Dollars) As at September 30, 2021 As at December 31, 2020
Investment $ 44,116 $ 48,323
Derivative liability $ 14,737 $ 12,050
PSUs and DSUs liability
13,601 4,760
$ 28,338 $ 16,810

The following table presents gains or losses on derivatives and other financial instruments recognized in the accompanying interim unaudited condensed consolidated statements of operations:

Three Months Ended September 30, Nine Months Ended September 30,
(Thousands of U.S. Dollars) 2021 2020 2021 2020
Commodity price derivatives loss (gain) $ 2,586 $ (2,206) $ 47,435 $ (12,983)
Foreign currency derivatives loss 17 33 105 3,566
Derivative instruments loss (gain) $ 2,603 $ (2,173) $ 47,540 $ (9,417)
Unrealized PetroTal investment (gain) loss $ (13,616) $ 1,055 $ (17,477) $ 60,124
Loss on sale of PetroTal shares — — 5,070 —
Financial instruments (gain) loss (18) 405 (18) 1,162
Other financial instruments (gain) loss $ (13,634) $ 1,460 $ (12,425) $ 61,286


	Three Months Ended March 31,
(Thousands of U.S. Dollars)		2022		2021
Commodity price derivatives loss		$	21,439	$	23,632
Foreign currency derivatives loss		—		66
Derivative instruments loss		$	21,439	$	23,698

Unrealized PetroTal investment gain		$	—	$	(6,475)
Loss on sale of PetroTal shares		—		5,070
Other financial instruments gain		$	—	$	(1,405)

Revolving credit facility and Senior Notes

Financial instruments not recorded at fair value ~~include~~at March 31, 2022, included the ~~Company's 6.25%~~ Senior Notes ~~due 2025 (the "6.25% Senior Notes")~~ and ~~7.75% Senior Notes due 2027 (the "7.75% Senior Notes")~~the Revolving Credit Facility (Note 5).

The fair value of the Revolving Credit Facility approximates its carrying value. The fair value of the Revolving Credit Facility is estimated based on the amount the Company would have to pay a third party to assume the debt, including the credit spread for the difference between the issue rate and the period-end market rate. The credit spread is the Company’s default or repayment risk. The credit spread (premium or discount) is determined by comparing the debt to new issuances (secured or unsecured) and secondary trades of similar size and credit statistics for public and private debt.

At ~~September 30, 2021,~~March 31, 2022, the carrying amounts of the 6.25% Senior Notes and the 7.75% Senior Notes were ~~$293.5~~$294.4 million and ~~$291.7~~$292.3 million, respectively, which represented the aggregate principal amount less unamortized debt issuance costs, and the fair values were ~~$262.6~~$277.9 million and ~~$260.1~~$278.2 million, respectively. The fair value of long-term restricted cash and cash equivalents and the revolving credit facility approximated their carrying value because interest rates are variable and reflective of market rates. The fair values of other financial instruments approximate their carrying amounts due to the short-term maturity of these instruments.

GAAP establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. This hierarchy consists of three broad levels. Level 1 inputs consist of quoted prices (unadjusted) in active markets for identical assets and liabilities and have the highest priority. Level 2 and 3 inputs are based on significant other observable inputs and significant unobservable inputs, respectively, and have lower priorities. The Company uses appropriate valuation techniques based on the available inputs to measure the fair values of assets and liabilities.

At September 30, 2021, the fair value of the investment and DSUs liability was determined using Level 1 inputs. The fair value of the derivative and PSUs liability was determined using Level 2 inputs.

The Company uses available market data and valuation methodologies to estimate the fair value of debt. The fair value of debt is the estimated amount the Company would have to pay a third party to assume the debt, including a credit spread for the difference between the issue rate and the period-end market rate. The credit spread is the Company’s default or repayment risk. The credit spread (premium or discount) is determined by comparing the Company’s Senior Notes and revolving credit facility to new issuances (secured and unsecured) and secondary trades of similar size and credit statistics for public and private debt. The disclosure in the paragraph above regarding the fair value of cash and restricted cash and cash equivalents and Senior Notes was based on Level 1 inputs, and the fair value of credit facility was based on Level 2 inputs.Asset retirement obligation

The Company’s non-recurring fair value measurements include asset retirement ~~obligations.~~obligation. The fair value of an asset retirement obligation is measured by reference to the expected future cash outflows required to satisfy the retirement obligation discounted at the Company’s credit-adjusted risk-free interest rate. The significant level 3 inputs used to calculate such liabilities include estimates of costs to be incurred, the Company’s credit-adjusted risk-free interest rate, inflation rates, and estimated dates of abandonment. Accretion expense is recognized over time as the discounted liabilities are accreted to their expected settlement value, while the asset retirement cost is amortized over the estimated productive life of the related assets.

Commodity Price Derivatives

The Company utilizes commodity price derivatives to manage the variability in cash flows associated with the forecasted sale of its oil production, reduce commodity price risk and provide a base level of cash flows to assure it can execute at least a portion of its planned capital spending.

At ~~September 30, 2021,~~March 31, 2022, the Company had outstanding commodity price derivative positions as follows:

Period and type of instrument Volume,
bopd Reference Sold Put ($/bbl, Weighted Average) Purchased Put ($/bbl, Weighted Average) Sold Call ($/bbl, Weighted Average) Swap Price ($/bbl, Weighted Average)
Three-way Collars:
October 1, to December 31, 2021 7,000 ICE Brent 47.14 57.14 68.95 n/a
Swaps: October 1, to December 31, 2021 3,000 ICE Brent n/a n/a n/a 56.75

~~Foreign Currency Derivatives~~

The Company utilizes foreign currency derivatives to manage the variability in cash flows associated with the Company's forecasted Colombian peso ("COP") denominated expenses. At September 30, 2021, the Company had outstanding foreign currency derivative positions as follows:

Period and type of instrument Amount Hedged
(Millions of COP)
U.S. Dollar Equivalent of Amount Hedged (Thousands of U.S. Dollars)(1)
Reference Floor Price
(COP, Weighted Average) Cap Price (COP, Weighted Average)
Collars: October 1, to December 31, 2021 3,000 782 COP 3,500 3,630

~~(1)At September 30, 2021 foreign exchange rate.~~


Period and type of instrument	Volume, bopd	Reference	Sold Swap ($/bbl, Weighted Average)	Sold Put ($/bbl, Weighted Average)	Purchased Put ($/bbl, Weighted Average)	Sold Call ($/bbl, Weighted Average)	Premium ($/bbl Weighted Average)
Three-way Collars: April 1, to June 30, 2022	5,000	ICE Brent	—	64.00	74.00	91.72	—
Swaps: April 1, to June 30, 2022	3,000	ICE Brent	80.77	—	—	—	—
Deferred Puts: April 1, to June 30, 2022	1,000	ICE Brent	—	—	70.00	—	4.00

~~13.~~11. Supplemental Cash Flow Information

The following table provides a reconciliation of cash and cash equivalents and restricted cash and cash equivalents shown as a sum of these amounts in the interim unaudited condensed consolidated statements of cash flows:


(Thousands of U.S. Dollars)	(Thousands of U.S. Dollars)	As at September 30,				As at December 31,				(Thousands of U.S. Dollars)	As at March 31,				As at December 31,
		2021		2020		2020		2019			2022		2021		2021		2020
Cash and cash equivalents	Cash and cash equivalents	$	16,600	$	21,808	$	14,114	$	8,817	Cash and cash equivalents	$	58,707	$	21,225	$	26,109	$	13,687

Restricted cash and cash equivalents - current										Restricted cash and cash equivalents - current	1,142		424		392		427
Restricted cash and cash equivalents - long-term(1)	Restricted cash and cash equivalents - long-term(1)	3,532		3,007		3,409		2,258		Restricted cash and cash equivalents - long-term(1)	5,252		3,219		4,903		3,409
		$	20,132	$	24,815	$	17,523	$	11,075		$	65,101	$	24,868	$	31,404	$	17,523

(1)Included in other long-term assets on the Company’s balance sheet

Net changes in assets and liabilities from operating activities were as follows:


		Nine Months Ended September 30,					Three Months Ended March 31,
(Thousands of U.S. Dollars)	(Thousands of U.S. Dollars)	2021		2020		(Thousands of U.S. Dollars)	2022		2021
Accounts receivable and other long-term assets	Accounts receivable and other long-term assets	$	(18,582)	$	31,108	Accounts receivable and other long-term assets	$	(10,150)	$	3,803
Derivatives	Derivatives	(2,427)		694		Derivatives	(7,706)		3,841
Inventory	Inventory	(2,920)		(2,377)		Inventory	110		(1,146)
Prepaids	Prepaids	42		(183)		Prepaids	(269)		157
Accounts payable and accrued and other long-term liabilities	Accounts payable and accrued and other long-term liabilities	14,417		(57,621)		Accounts payable and accrued and other long-term liabilities	12,021		752
Taxes receivable and payable	Taxes receivable and payable	27,426		51,667		Taxes receivable and payable	22,514		5,721
Net changes in assets and liabilities from operating activities	Net changes in assets and liabilities from operating activities	$	17,956	$	23,288	Net changes in assets and liabilities from operating activities	$	16,520	$	13,128

Changes in non-cash investing working capital for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, are comprised of an ~~increase~~decrease in accounts payable and accrued liabilities of ~~$0.6~~$1.7 million and an increase in accounts receivable of $0.1 million (three months ended March 31, 2021, a decrease in accounts payable and accrued liabilities of $0.8 million and a decrease in accounts receivable of $0.1 ~~million (nine months ended September 30, 2020, a decrease in accounts payable and accrued liabilities of $69.9 million and a decrease in accounts receivable of $0.3~~ million).

The following table provides additional supplemental cash flow disclosures:


		Nine Months Ended September 30,					Three Months Ended March 31,
(Thousands of U.S. Dollars)	(Thousands of U.S. Dollars)	2021		2020		(Thousands of U.S. Dollars)	2022		2021
Cash paid for income taxes	Cash paid for income taxes	$	20,433	$	11,603	Cash paid for income taxes	$	9,703	$	6,093
Cash paid for interest	Cash paid for interest	$	37,259	$	35,408	Cash paid for interest	$	10,042	$	11,479

Non-cash investing activities:	Non-cash investing activities:					Non-cash investing activities:
Net liabilities related to property, plant and equipment, end of period	Net liabilities related to property, plant and equipment, end of period	$	29,420	$	7,805	Net liabilities related to property, plant and equipment, end of period	$	28,339	$	28,003

1516

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion of our financial condition and results of operations should be read in conjunction with the ~~"Financial Statements"~~“Financial Statements” as set out in Part I, Item 1 of this Quarterly Report on Form 10-Q, as well as the ~~"Financial~~“Financial Statements and Supplementary ~~Data"~~Data” and ~~"Management’s~~“Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations"~~Operations” included in Part II, Items 7 and 8, respectively, of our ~~2020~~2021 Annual Report on Form 10-K. Please see the cautionary language at the beginning of this Quarterly Report on Form 10-Q regarding the identification of and risks relating to forward-looking statements and the risk factors described in Part II, Item 1A ~~"Risk Factors"~~“Risk Factors” of this Quarterly Report on Form 10-Q, as well as Part I, Item 1A “Risk Factors” in our ~~2020~~2021 Annual Report on Form 10-K.

Financial and Operational Highlights

Key Highlights for the ~~third~~first quarter of ~~2021~~2022

•Net income in the ~~third~~first quarter of ~~2021~~2022 was ~~$35.0~~$14.1 million or ~~$0.10~~$0.04 per share basic and diluted, compared ~~with~~to a net loss of ~~$107.8~~$37.4 million or ~~$(0.29)~~$(0.10) per share basic and diluted in the ~~third~~first quarter of ~~2020~~2021

•Income before income taxes in the ~~third~~first quarter of ~~2021~~2022 was ~~$44.0~~$53.7 million compared to loss before income taxes of ~~$128.4~~$28.8 million in the ~~third~~first quarter of ~~2020~~2021

•During the ~~third~~first quarter of ~~2021,~~2022, we repaid ~~$25.0~~$27.5 million of the amount drawn under the revolving credit facility and by April 29, 2022, we paid down the credit facility balance to $10.0 million

•Funds flow from operations(2) increased by ~~758%~~201% to ~~$69.1~~$87.3 million compared to the ~~third~~first quarter of ~~2020~~2021 and increased ~~197%~~34% from the ~~second~~fourth quarter of 2021

•During the ~~third~~first quarter, the Company generated ~~$34.3~~$45.8 million of free cash flow(2), which was partially used for debt reduction, the highest since the fourth quarter of 2012

•~~Our third~~NAR production for the first quarter of 2022 was 22,833 BOPD representing an 11% increase compared to the first quarter of 2021, ~~average production NAR was 23,372 BOPD (sales volumes - 23,833 BOPD),~~due to a ~~37% increase (sales volumes - 40% increase) from 17,051 BOPD (sales volumes - 17,066 BOPD)~~successful drilling and workover campaign in all major fields. Compared to the ~~third quarter of 2020, and 23% increase (sales volumes - 29% increase) from the second~~fourth quarter of 2021, ~~which was impacted~~NAR production decreased by ~~national blockades~~a 3% due to higher royalties

•Sales volumes for the first quarter of 2022 were 22,730 BOPD representing a 12% increase from 20,271 BOPD in ~~Colombia affecting production~~the first quarter of 2021, and a 4% decrease from ~~major fields~~the fourth quarter of 2021

•Oil sales were ~~$135.3~~$174.6 million, ~~155%~~83% higher compared to ~~$53.1~~$95.5 million in the ~~third~~first quarter of ~~2020~~2021, as a result of an increase in Brent price, offset by higher quality and transportation discounts. Oil sales increased by ~~40%~~19% compared ~~with $96.6~~to $146.3 million in the ~~second~~fourth quarter of 2021 as a result of a 6%23% increase in Brent price, ~~and~~slightly offset by a ~~29% increase~~decrease in sales volumes

•Operating expenses increased ~~30% on a~~by $0.58 per bbl ~~basis ($3.93 per bbl)~~ compared to the ~~third quarter of 2020 due to higher power generation costs in Acordionero and increased by 13% on a per bbl basis ($1.99 per bbl) compared to the second~~first quarter of 2021 due to ~~power generation~~an increase in operating activities and ~~chemical costs~~higher expenses for chemicals used in our waterflood projects and decreased by $1.33 per bbl when compared to the fourth quarter of 2021 due to lower workovers

•Transportation expenses increased by ~~135%~~13% compared to the ~~third~~first quarter of ~~2020~~2021 due to higher truck tariffs. Compared to the fourth quarter of 2021, transportation expenses decreased by 1% as a result of higher volumes sold at wellhead during the ~~national blockades resulting in utilization of more expensive transportation routes and increased 3% compared to the second~~current quarter ~~of 2021~~

•Operating netback(2) increased by ~~204% and 39%, respectively,~~117% to ~~$94.7~~$137.3 million compared to ~~$31.1~~$63.4 million in the ~~third~~first quarter of ~~2020~~2021 and ~~$68.3~~increased 32% compared to $103.7 million in the ~~second~~fourth quarter of 2021

•Adjusted EBITDA(2) increased by ~~274% and 125%, respectively,~~185% to ~~$81.8~~$119.4 million compared to ~~$21.9~~$41.9 million in the ~~third~~first quarter of ~~2020~~2021 and ~~$36.3~~increased 46% compared to $81.5 million in the ~~second~~fourth quarter of 2021

•Quality and transportation discounts for the ~~third~~first quarter of ~~2021~~2022 increased to ~~$11.51~~$12.57 per bbl compared to ~~$9.49~~$8.98 per bbl in the ~~third~~first quarter of ~~2020 as a result of higher differentials~~2021 and ~~remained consistent when compared to $11.54~~decreased from $12.78 per bbl in the ~~second~~fourth quarter of 2021

•General and administrative expenses ("(“G~~&A"~~&A”) before stock-based compensation increased by ~~21%~~14% compared to the ~~third~~first quarter of ~~2020, consistent with the~~2021 due to higher costs for special projects and an increase ~~of operating activities~~in travel costs in the current ~~period.~~quarter. When compared to the ~~second~~fourth quarter of 2021, G&A before stock-based compensation decreased by ~~24%~~8% due to the ~~timing of certain costs incurred and expensed in~~lower accrued performance bonus for the ~~prior~~current quarter

•Capital additions for the ~~third~~first quarter of ~~2021~~2022 were ~~$34.8~~$41.5 million, an increase of ~~$27.5 million~~11% compared to the ~~third~~first quarter of ~~2020~~2021 and ~~decreased slightly~~increased 3% from the ~~$37.4~~$40.2 million incurred in the ~~second~~fourth quarter of 2021

1617


(Thousands of U.S. Dollars, unless otherwise indicated)	(Thousands of U.S. Dollars, unless otherwise indicated)	Three Months Ended September 30,					Three Months Ended June 30,		Nine Months Ended September 30,					(Thousands of U.S. Dollars, unless otherwise indicated)	Three Months Ended March 31,					Three Months Ended December 31,
		2021		2020		% Change	2021		2021		2020		% Change			2022		2021		% Change	2021

Average Daily Volumes (BOPD)	Average Daily Volumes (BOPD)													Average Daily Volumes (BOPD)
Consolidated	Consolidated													Consolidated
Working Interest ("WI") Production Before Royalties		28,957		18,944		53	23,035		25,501		22,864		12
Working Interest (“WI”) Production Before Royalties														Working Interest (“WI”) Production Before Royalties		29,362		24,463		20	29,493
Royalties	Royalties	(5,585)		(1,893)		195	(4,059)		(4,531)		(2,600)		74	Royalties		(6,529)		(3,930)		66	(6,070)
Production NAR	Production NAR	23,372		17,051		37	18,976		20,970		20,264		3	Production NAR		22,833		20,533		11	23,423
Decrease (Increase) in Inventory		461		15		2,973	(522)		(105)		117		(190)
(Increase) Decrease in Inventory														(Increase) Decrease in Inventory		(103)		(262)		(61)	354
Sales(1)	Sales(1)	23,833		17,066		40	18,454		20,865		20,381		2	Sales(1)		22,730		20,271		12	23,777

Net Income (Loss)	Net Income (Loss)	$	35,007	$	(107,821)	132	$	(17,627)	$	(20,042)	$	(730,096)	97	Net Income (Loss)		$	14,119	$	(37,422)	138	$	62,524

Operating Netback	Operating Netback													Operating Netback
Oil Sales	Oil Sales	$	135,319	$	53,142	155	$	96,623	$	327,435	$	173,045	89	Oil Sales		$	174,569	$	95,493	83	$	146,287
Operating Expenses	Operating Expenses	(37,567)		(20,721)		81	(25,431)		(92,623)		(84,673)		9	Operating Expenses		(34,400)		(29,625)		16	(39,708)

Transportation Expenses	Transportation Expenses	(3,021)		(1,286)		135	(2,921)		(8,448)		(8,549)		(1)	Transportation Expenses		(2,834)		(2,506)		13	(2,867)
Operating Netback(2)	Operating Netback(2)	$	94,731	$	31,135	204	$	68,271	$	226,364	$	79,823	184	Operating Netback(2)		$	137,335	$	63,362	117	$	103,712

G&A Expenses Before Stock-Based Compensation	G&A Expenses Before Stock-Based Compensation	$	5,444	$	4,506	21	$	7,133	$	18,475	$	17,183	8	G&A Expenses Before Stock-Based Compensation		$	7,779	$	6,817	14	$	8,473
G&A Stock-Based Compensation Expense (Recovery)		1,053		56		1,780	1,873		6,597		(707)		1,033
G&A Stock-Based Compensation Expense														G&A Stock-Based Compensation Expense		4,557		3,671		24	1,799
G&A Expenses, Including Stock-Based Compensation	G&A Expenses, Including Stock-Based Compensation	$	6,497	$	4,562	42	$	9,006	$	25,072	$	16,476	52	G&A Expenses, Including Stock-Based Compensation		$	12,336	$	10,488	18	$	10,272

Adjusted EBITDA(2)	Adjusted EBITDA(2)	$	81,804	$	21,884	274	$	36,299	$	160,007	$	74,247	116	Adjusted EBITDA(2)		$	119,378	$	41,904	185	$	81,529

Funds Flow From Operations(2)	Funds Flow From Operations(2)	$	69,103	$	8,056	758	$	23,272	$	121,348	$	36,257	235	Funds Flow From Operations(2)		$	87,310	$	28,973	201	$	65,137

Capital Expenditures	Capital Expenditures	$	34,839	$	7,354	374	$	37,384	$	109,650	$	56,378	94	Capital Expenditures		$	41,483	$	37,427	11	$	40,229

(1) Sales volumes represent production NAR adjusted for inventory changes.

(2) Non-GAAP measures

Operating netback, EBITDA, adjusted EBITDA, funds flow from operations, and free cash flow are non-GAAP measures ~~which~~that do not have any standardized meaning prescribed under GAAP. Management views these measures as financial performance measures. Investors are cautioned that these measures should not be construed as alternatives to oil sales, net income (loss) or other measures of financial performance as determined in accordance with GAAP. Our method of calculating these measures may differ from other companies and, accordingly, may not be comparable to similar measures used by other companies. Disclosure of each non-GAAP financial measure is preceded by the corresponding GAAP measure so as not to imply that more emphasis should be placed on the non-GAAP measure.

Operating netback, as presented, is defined as oil sales less operating and transportation expenses. Management believes that operating netback is a useful supplemental measure for management and investors to analyze financial performance and provides an indication of the results generated by our principal business activities prior to the consideration of other income and expenses. A reconciliation from oil sales to operating netback is provided in the table above.

EBITDA, as presented, is defined as net income or loss adjusted for depletion, depreciation and accretion ("(“DD~~&A"~~&A”) expenses, interest expense and income tax expense or recovery. Adjusted EBITDA, as presented, is defined as EBITDA adjusted for ~~goodwill impairment, asset impairment,~~ non-cash lease expense, lease payments, unrealized foreign exchange gain or loss, stock-based compensation expense or recovery, other-non cash gain or loss, unrealized derivative instruments gain or loss, and other financial instruments gain or loss. Management uses this supplemental measure to analyze performance and income generated by our principal business activities prior to the consideration of how non-cash items affect that income and believes that this financial measure is

useful supplemental information for investors to analyze our performance and our financial results. A reconciliation from net ~~loss~~income (loss) to EBITDA and adjusted EBITDA is as follows:

Three Months Ended September 30, Three Months Ended June 30, Nine Months Ended September 30,
(Thousands of U.S. Dollars) 2021 2020 2021 2021 2020
Net income (loss) $ 35,007 $ (107,821) $ (17,627) $ (20,042) $ (730,096)
Adjustments to reconcile net income (loss) to EBITDA and Adjusted EBITDA
DD&A expenses 38,055 31,340 28,927 98,300 131,118
Interest expense 13,608 14,029 13,935 41,355 40,204
Income tax expense (recovery) 8,955 (20,565) 9,189 26,795 (62,236)
EBITDA (non-GAAP) $ 95,625 $ (83,017) $ 34,424 $ 146,408 $ (621,010)
Goodwill impairment — — — — 102,581
Asset impairment — 104,731 — — 507,093
Non-cash lease expense 408 523 370 1,222 1,494
Lease payments (384) (429) (393) (1,239) (1,404)
Unrealized foreign exchange loss 3,465 3,080 477 16,945 22,335
Stock-based compensation expense (recovery) 1,053 56 1,873 6,597 (707)
Other non-cash loss — 2,026 — — 2,026
Unrealized derivative instruments (gain) loss (4,729) (6,546) (3,066) 2,499 553
Other financial instruments (gain) loss (13,634) 1,460 2,614 (12,425) 61,286
Adjusted EBITDA (non-GAAP) $ 81,804 $ 21,884 $ 36,299 $ 160,007 $ 74,247


	Three Months Ended March 31,					Three Months Ended December 31,
(Thousands of U.S. Dollars)		2022		2021			2021
Net income (loss)		$	14,119	$	(37,422)		$	62,524
Adjustments to reconcile net income (loss) to EBITDA and Adjusted EBITDA
DD&A expenses		40,963		31,318			41,574
Interest expense		12,128		13,812			13,026
Income tax expense (recovery)		39,540		8,651			(46,141)
EBITDA (non-GAAP)		$	106,750	$	16,359		$	70,983
Non-cash lease expense		411		444			445
Lease payments		(344)		(462)			(382)
Unrealized foreign exchange (gain) loss		(4,839)		13,003			4,934
Stock-based compensation expense		4,557		3,671			1,799
Other non-cash loss		—		—			44
Unrealized derivative instruments loss (gain)		12,843		10,294			(12,088)
Other financial instruments (gain) loss		—		(1,405)			15,794
Adjusted EBITDA (non-GAAP)		$	119,378	$	41,904		$	81,529

Funds flow from operations, as presented, is defined as net income or loss adjusted for DD&A expenses, ~~goodwill and asset impairment,~~ deferred tax expense or recovery, stock-based compensation expense or recovery, amortization of debt issuance costs, non-cash lease expense, lease payments, unrealized foreign exchange gain or loss, derivative instruments gain or loss, cash settlement on derivative instruments, other non-cash gain or loss and other financial instruments gain or loss. Management uses this financial measure to analyze performance and income generated by our principal business activities prior to the consideration of how non-cash items affect that income and believes that this financial measure is also useful supplemental information for investors to analyze performance and our financial results. Free cash flow, as presented, is defined as funds flow less capital expenditures. Management uses this financial measure to analyze cash flow generated by our principal business activities after capital requirements and believes that this financial measure is also useful supplemental information for investors to analyze performance and our financial results. A reconciliation from net ~~loss~~income (loss) to funds flow from operations, and free cash flow is as follows:


		Three Months Ended September 30,				Three Months Ended June 30,		Nine Months Ended September 30,					Three Months Ended March 31,					Three Months Ended December 31,
(Thousands of U.S. Dollars)	(Thousands of U.S. Dollars)	2021		2020		2021		2021		2020		(Thousands of U.S. Dollars)		2022		2021			2021
Net income (loss)	Net income (loss)	$	35,007	$	(107,821)	$	(17,627)	$	(20,042)	$	(730,096)	Net income (loss)		$	14,119	$	(37,422)		$	62,524
Adjustments to reconcile net income (loss) to funds flow from operations	Adjustments to reconcile net income (loss) to funds flow from operations											Adjustments to reconcile net income (loss) to funds flow from operations
DD&A expenses	DD&A expenses	38,055		31,340		28,927		98,300		131,118		DD&A expenses		40,963		31,318			41,574
Goodwill impairment		—		—		—		—		102,581
Asset impairment		—		104,731		—		—		507,093
Deferred tax expense (recovery)	Deferred tax expense (recovery)	8,955		(21,202)		9,203		26,809		(62,796)		Deferred tax expense (recovery)		18,713		8,651			(50,634)
Stock-based compensation expense (recovery)		1,053		56		1,873		6,597		(707)
Stock-based compensation expense												Stock-based compensation expense		4,557		3,671			1,799
Amortization of debt issuance costs	Amortization of debt issuance costs	907		838		894		2,682		2,774		Amortization of debt issuance costs		887		881			1,127
Non-cash lease expense	Non-cash lease expense	408		523		370		1,222		1,494		Non-cash lease expense		411		444			445
Lease payments	Lease payments	(384)		(429)		(393)		(1,239)		(1,404)		Lease payments		(344)		(462)			(382)
Unrealized foreign exchange loss		3,465		3,080		477		16,945		22,335
Derivative instruments loss (gain)		2,603		(2,173)		21,239		47,540		(9,417)
Unrealized foreign exchange (gain) loss												Unrealized foreign exchange (gain) loss		(4,839)		13,003			4,934
Derivative instruments loss												Derivative instruments loss		21,439		23,698			1,298
Cash settlements on derivative instruments	Cash settlements on derivative instruments	(7,332)		(4,373)		(24,305)		(45,041)		9,970		Cash settlements on derivative instruments		(8,596)		(13,404)			(13,386)
Other non-cash loss	Other non-cash loss	—		2,026		—		—		2,026		Other non-cash loss		—		—			44
Other financial instruments (gain) loss	Other financial instruments (gain) loss	(13,634)		1,460		2,614		(12,425)		61,286		Other financial instruments (gain) loss		—		(1,405)			15,794
Funds flow from operations (non-GAAP)	Funds flow from operations (non-GAAP)	$	69,103	$	8,056	$	23,272	$	121,348	$	36,257	Funds flow from operations (non-GAAP)		$	87,310	$	28,973		$	65,137
Capital expenditures	Capital expenditures	$	34,839	$	7,354	$	37,384	$	109,650	$	56,378	Capital expenditures		$	41,483	$	37,427		$	40,229
Free cash flow (non-GAAP)	Free cash flow (non-GAAP)	$	34,264	$	702	$	(14,112)	$	11,698	$	(20,121)	Free cash flow (non-GAAP)		$	45,827	$	(8,454)		$	24,908

1819

Additional Operational Results


		Three Months Ended September 30,					Three Months Ended June 30,		Nine Months Ended September 30,						Three Months Ended March 31,					Three Months Ended December 31,
(Thousands of U.S. Dollars)	(Thousands of U.S. Dollars)	2021		2020		% Change	2021		2021		2020		% Change	(Thousands of U.S. Dollars)		2022		2021		% Change	2021
Oil sales	Oil sales	$	135,319	$	53,142	155	$	96,623	$	327,435	$	173,045	89	Oil sales		$	174,569	$	95,493	83	$	146,287
Operating expenses	Operating expenses	37,567		20,721		81	25,431		92,623		84,673		9	Operating expenses		34,400		29,625		16	39,708

Transportation expenses	Transportation expenses	3,021		1,286		135	2,921		8,448		8,549		(1)	Transportation expenses		2,834		2,506		13	2,867
Operating netback(1)	Operating netback(1)	94,731		31,135		204	68,271		226,364		79,823		184	Operating netback(1)		137,335		63,362		117	103,712

COVID-19 related costs	COVID-19 related costs	990		1,108		(11)	897		3,026		1,529		98	COVID-19 related costs		535		1,139		(53)	668
DD&A expenses	DD&A expenses	38,055		31,340		21	28,927		98,300		131,118		(25)	DD&A expenses		40,963		31,318		31	41,574
Goodwill impairment		—		—		—	—		—		102,581		(100)
Asset impairment		—		104,731		(100)	—		—		507,093		(100)
G&A expenses before stock-based compensation	G&A expenses before stock-based compensation	5,444		4,506		21	7,133		18,475		17,183		8	G&A expenses before stock-based compensation		7,779		6,817		14	8,473
G&A stock-based compensation expense (recovery)		1,053		56		1,780	1,873		6,597		(707)		1,033
Severance expenses		—		122		(100)	—		919		1,469		(37)
Foreign exchange loss		2,650		4,275		(38)	91		15,824		20,094		(21)
Derivative instruments loss (gain)		2,603		(2,173)		220	21,239		47,540		(9,417)		605
G&A stock-based compensation expense														G&A stock-based compensation expense		4,557		3,671		24	1,799
Foreign exchange (gain) loss														Foreign exchange (gain) loss		(3,725)		13,083		(128)	4,653
Derivative instruments loss														Derivative instruments loss		21,439		23,698		(10)	1,298
Other financial instruments (gain) loss	Other financial instruments (gain) loss	(13,634)		1,460		(1,034)	2,614		(12,425)		61,286		(120)	Other financial instruments (gain) loss		—		(1,405)		(100)	15,794
Other loss	Other loss	—		67		(100)	—		—		67		(100)	Other loss		—		—		—	44
Interest expense	Interest expense	13,608		14,029		(3)	13,935		41,355		40,204		3	Interest expense		12,128		13,812		(12)	13,026
		50,769		159,521		(68)	76,709		219,611		872,500		(75)			83,676		92,133		(9)	87,329

Interest income		—		—		—	—		—		345		(100)

Income (loss) before income taxes	Income (loss) before income taxes	43,962		(128,386)		134	(8,438)		6,753		(792,332)		101	Income (loss) before income taxes		53,659		(28,771)		287	16,383

Current income tax expense (recovery)		—		637		(100)	(14)		(14)		560		(103)
Current income tax expense														Current income tax expense		20,827		—		100	4,493
Deferred income tax expense (recovery)	Deferred income tax expense (recovery)	8,955		(21,202)		142	9,203		26,809		(62,796)		143	Deferred income tax expense (recovery)		18,713		8,651		116	(50,634)
		8,955		(20,565)		144	9,189		26,795		(62,236)		143			39,540		8,651		357	(46,141)
Net income (loss)	Net income (loss)	$	35,007	$	(107,821)	132	$	(17,627)	$	(20,042)	$	(730,096)	97	Net income (loss)		$	14,119	$	(37,422)	138	$	62,524

Sales Volumes (NAR)	Sales Volumes (NAR)													Sales Volumes (NAR)

Total sales volumes, BOPD	Total sales volumes, BOPD	23,833		17,066		40	18,454		20,865		20,381		2	Total sales volumes, BOPD		22,730		20,271		12	23,777

Brent Price per bbl	Brent Price per bbl	$	73.23	$	43.34	69	$	69.08	$	67.97	$	42.53	60	Brent Price per bbl		$	97.90	$	61.32	60	$	79.66

Consolidated Results of Operations per bbl Sales Volumes NAR														Consolidated Results of Operations per bbl Sales Volumes NAR
Oil sales														Oil sales		$	85.33	$	52.34	63	$	66.88
Operating expenses														Operating expenses		16.82		16.24		4	18.15
Transportation expenses														Transportation expenses		1.39		1.37		1	1.31
Operating netback(1)														Operating netback(1)		67.12		34.73		93	47.42

COVID-19 related costs														COVID-19 related costs		0.26		0.62		(58)	0.31
DD&A expenses														DD&A expenses		20.02		17.17		17	19.01
G&A expenses before stock-based compensation														G&A expenses before stock-based compensation		3.80		3.73		2	3.87
G&A stock-based compensation expense														G&A stock-based compensation expense		2.23		2.01		11	0.82
Foreign exchange (gain) loss														Foreign exchange (gain) loss		(1.82)		7.17		(125)	2.13
Derivative instruments loss														Derivative instruments loss		10.48		12.99		(19)	0.59

1920

Consolidated Results of Operations per bbl Sales Volumes NAR
Oil sales $ 61.72 $ 33.85 82 $ 57.54 $ 57.48 $ 30.99 85
Operating expenses 17.13 13.20 30 15.14 16.26 15.16 7
Transportation expenses 1.38 0.82 68 1.74 1.48 1.53 (3)
Operating netback(1)
43.21 19.83 118 40.66 39.74 14.30 178
COVID-19 related costs 0.45 0.70 (36) 0.53 0.53 0.27 96
DD&A expenses 17.36 19.96 (13) 17.23 17.26 23.48 (26)
Goodwill impairment — — — — — 18.37 (100)
Asset impairment — 66.71 (100) — — 90.80 (100)
G&A expenses before stock-based compensation 2.48 2.87 (14) 4.25 3.24 3.08 5
G&A stock-based compensation expense (recovery) 0.48 0.04 1,100 1.12 1.16 (0.13) 992
Severance expenses — 0.08 (100) — 0.16 0.26 (38)
Foreign exchange loss 1.21 2.72 (56) 0.05 2.78 3.60 (23)
Derivative instruments loss (gain) 1.19 (1.38) 186 12.65 8.35 (1.69) 594
Other financial instruments (gain) loss (6.22) 0.93 (769) 1.56 (2.18) 10.97 (120)
Other loss — 0.04 (100) — — 0.01 (100)
Interest expense 6.21 8.94 (31) 8.30 7.26 7.20 1
23.16 101.61 (77) 45.69 38.56 156.22 (75)
Interest income — — — — — 0.06 (100)
Income (loss) before income taxes 20.05 (81.78) 125 (5.03) 1.18 (141.86) 101
Current income tax expense (recovery) — 0.41 (100) (0.01) — 0.10 (100)
Deferred income tax expense (recovery) 4.08 (13.50) 130 5.48 4.71 (11.24) 142
4.08 (13.09) 131 5.47 4.71 (11.14) 142
Net income (loss) $ 15.97 $ (68.69) 123 $ (10.50) $ (3.53) $ (130.72) 97


Other financial instruments (gain) loss	—		(0.77)		(100)	7.22
Other loss	—		—		—	0.02
Interest expense	5.93		7.57		(22)	5.95
	40.90		50.49		(19)	39.92




Income (loss) before income taxes	26.22		(15.76)		266	7.50

Current income tax expense	10.18		—		100	2.05
Deferred income tax expense (recovery)	9.15		4.74		93	(23.15)
	19.33		4.74		308	(21.10)
Net income (loss)	$	6.89	$	(20.50)	134	$	28.60

(1) Operating netback is a non-GAAP measure ~~which~~that does not have any standardized meaning prescribed under GAAP. Refer to ~~"Financial~~“Financial and Operational Highlights—non-GAAP ~~measures"~~measures” for a definition of this measure.

Oil Production and Sales Volumes, BOPD


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,					Three Months Ended December 31,
		2021		2020		2021		2020				2022		2021			2021
Average Daily Volumes (BOPD)	Average Daily Volumes (BOPD)									Average Daily Volumes (BOPD)
WI Production Before Royalties	WI Production Before Royalties	28,957		18,944		25,501		22,864		WI Production Before Royalties		29,362		24,463			29,493
Royalties	Royalties	(5,585)		(1,893)		(4,531)		(2,600)		Royalties		(6,529)		(3,930)			(6,070)
Production NAR	Production NAR	23,372		17,051		20,970		20,264		Production NAR		22,833		20,533			23,423
Decrease (Increase) in Inventory		461		15		(105)		117
Increase in Inventory										Increase in Inventory		(103)		(262)			354
Sales	Sales	23,833		17,066		20,865		20,381		Sales		22,730		20,271			23,777

Royalties, % of WI Production Before Royalties	Royalties, % of WI Production Before Royalties	19	%	10	%	18	%	11	%	Royalties, % of WI Production Before Royalties		22	%	16	%		21	%

Oil production NAR for the three ~~and nine~~ months ended ~~September 30, 2021,~~March 31, 2022, increased by ~~37% and 3%, respectively,~~11% compared to the corresponding ~~periods~~period of ~~2020~~2021 due to the successful drilling and workover campaign in all major ~~fields, despite production disruptions during the second quarter of 2021 caused by national blockades in Colombia.~~fields. Compared to the prior quarter, oil production NAR ~~increased 23% as the national blockades were resolved by the end of the second quarter of 2021.~~decreased 3% due to higher royalties.

Royalties as a percentage of production for the three ~~and nine~~ months ended ~~September 30, 2021,~~March 31, 2022, increased compared with the corresponding ~~periods~~period of ~~2020~~2021 and the prior quarter commensurate with the increase in benchmark oil prices and the price sensitive royalty regime in Colombia.

The Midas block includes the Acordionero, ~~Mochuelo,~~Chuira, and Ayombero oil fields, and the Chaza block includes the Costayaco and Moqueta oil fields.

Operating Netback


		Three Months Ended September 30,				Three Months Ended June 30,		Nine Months Ended September 30,					Three Months Ended March 31,					Three Months Ended December 31,
(Thousands of U.S. Dollars)	(Thousands of U.S. Dollars)	2021		2020		2021		2021		2020		(Thousands of U.S. Dollars)		2022		2021			2021

Oil Sales	Oil Sales	$	135,319	$	53,142	$	96,623	$	327,435	$	173,045	Oil Sales		$	174,569	$	95,493		$	146,287
Transportation Expenses	Transportation Expenses	(3,021)		(1,286)		(2,921)		(8,448)		(8,549)		Transportation Expenses		(2,834)		(2,506)			(2,867)
		132,298		51,856		93,702		318,987		164,496				171,735		92,987			143,420
Operating Expenses	Operating Expenses	(37,567)		(20,721)		(25,431)		(92,623)		(84,673)		Operating Expenses		(34,400)		(29,625)			(39,708)
Operating Netback(1)	Operating Netback(1)	$	94,731	$	31,135	$	68,271	$	226,364	$	79,823	Operating Netback(1)		$	137,335	$	63,362		$	103,712

(U.S. Dollars Per bbl Sales Volumes NAR)	(U.S. Dollars Per bbl Sales Volumes NAR)											(U.S. Dollars Per bbl Sales Volumes NAR)
Brent	Brent	$	73.23	$	43.34	$	69.08	$	67.97	$	42.53	Brent		$	97.90	$	61.32		$	79.66
Quality and Transportation Discounts	Quality and Transportation Discounts	(11.51)		(9.49)		(11.54)		(10.49)		(11.54)		Quality and Transportation Discounts		(12.57)		(8.98)			(12.78)
Average Realized Price	Average Realized Price	61.72		33.85		57.54		57.48		30.99		Average Realized Price		85.33		52.34			66.88
Transportation Expenses	Transportation Expenses	(1.38)		(0.82)		(1.74)		(1.48)		(1.53)		Transportation Expenses		(1.39)		(1.37)			(1.31)
Average Realized Price Net of Transportation Expenses	Average Realized Price Net of Transportation Expenses	60.34		33.03		55.80		56.00		29.46		Average Realized Price Net of Transportation Expenses		83.94		50.97			65.57
Operating Expenses	Operating Expenses	(17.13)		(13.20)		(15.14)		(16.26)		(15.16)		Operating Expenses		(16.82)		(16.24)			(18.15)
Operating Netback(1)	Operating Netback(1)	$	43.21	$	19.83	$	40.66	$	39.74	$	14.30	Operating Netback(1)		$	67.12	$	34.73		$	47.42

Oil sales for the three months ended ~~September 30, 2021,~~March 31, 2022, increased by ~~155%~~83% to ~~$135.3~~$174.6 million due to a ~~69%~~60% increase in Brent price and ~~40%~~12% higher sales volumes, partially offset by a ~~21%~~40% increase in the quality and transportation discounts as a result of the widening of the Castilla and Vasconia differentials compared to the corresponding period of ~~2020. Both the~~2021. Castilla and Vasconia differentials have widened from ~~$4.65~~$3.99 and ~~$3.01~~$2.40 in the ~~third quarter of 2020 to $6.51 and $4.02 in the third~~first quarter of 2021 ~~respectively. For~~to $6.38 and $3.60 in the ~~nine months ended September 30, 2021, oil sales increased by 89% to $327.4 million compared to the corresponding period~~first quarter of ~~2020 due to a 60% increase in Brent price, higher sales volumes, and lower quality and transportation discounts.~~2022, respectively. Compared with the prior quarter, oil sales increased ~~40%~~19%, primarily as a result of a 6%23% increase in Brent price and lower quality and transportation discounts, partially offset by a ~~29% increase~~4% decrease in sales volumes.

The following table shows the effect of changes in realized price and sales volumes on our oil sales for the three ~~and nine~~ months ended ~~September 30, 2021,~~March 31, 2022, compared to the prior quarter and the corresponding ~~periods~~period of ~~2020:~~2021:

(Thousands of U.S. Dollars) Third Quarter 2021 Compared with Second Quarter 2021 Third Quarter 2021 Compared with Third Quarter 2020 Nine Months Ended September 30, 2021 Compared with Nine Months Ended September 30, 2020
Oil sales for the comparative period $ 96,623 $ 53,142 $ 173,045
Realized sales price increase effect 9,162 61,106 150,930
Sales volumes increase effect 29,534 21,071 3,460
Oil sales for the three and nine months ended September 30, 2021 $ 135,319 $ 135,319 $ 327,435


(Thousands of U.S. Dollars)	First Quarter 2022 Compared with Fourth Quarter 2021		First Quarter 2022 Compared with First Quarter 2021
Oil sales for the comparative period	$	146,287	$	95,493
Realized sales price increase effect	37,757		67,487
Sales volumes (decrease) increase effect	(9,475)		11,589
Oil sales for the three month ended March 31, 2022	$	174,569	$	174,569

The average realized price for the three ~~and nine~~ months ended ~~September 30, 2021,~~March 31, 2022, increased ~~82% and 85%~~63%, ~~respectively,~~ compared to the corresponding ~~periods~~period of ~~2020.~~2021. The ~~increases were~~increase was commensurate with the rise in benchmark oil prices, ~~and for the nine month period lower Vasconia and Castilla differentials, but for the three month period were partially~~ offset by higher ~~Vasconia~~Castilla and ~~Castilla~~Vasconia differentials. Compared to the prior quarter, the average realized price increased 7%28% due to higher benchmark oil prices ~~offset by higher~~and lower Castilla and Vasconia differentials.

Operating expenses for the three ~~and nine~~ months ended ~~September 30, 2021,~~March 31, 2022, increased ~~$3.93 and $1.10~~by $0.58 per bbl to ~~$37.6 million and $92.6~~$34.4 million or ~~$17.13 and $16.26~~$16.82 per bbl, primarily due to increased operating activities and $0.44 per bbl higher ~~power generation costs~~expenses for chemicals used in ~~Acordionero~~our waterflood projects when compared to the corresponding ~~periods~~period of ~~2020. Lower operating activities during most of 2020 were attributed to the shut-in of higher-cost wells in response to the COVID-19 pandemic.~~2021. Compared to the prior quarter, operating expenses ~~increased $1.99~~decreased by $1.33 per bbl from ~~$25.4~~$39.7 million or ~~$15.14~~$18.15 per bbl primarily due to ~~higher costs associated with power generation and chemical costs in Acordionero and increased~~lower workover activity.

We have options to sell our oil through multiple pipelines and trucking routes. Each option has varying effects on realized sales price and transportation expenses. The following table shows the percentage of oil volumes we sold in Colombia using each option for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022, 2021, ~~2020,~~ and the prior quarter:


		Three Months Ended September 30,				Three Months Ended June 30,		Nine Months Ended September 30,					Three Months Ended March 31,					Three Months Ended December 31,
		2021		2020		2021		2021		2020				2022		2021			2021
Volume transported through pipeline	Volume transported through pipeline	9	%	—	%	9	%	6	%	5	%	Volume transported through pipeline		—	%	—	%		26	%
Volume sold at wellhead	Volume sold at wellhead	42	%	48	%	24	%	55	%	45	%	Volume sold at wellhead		47	%	48	%		24	%
Volume transported via truck to sales point	Volume transported via truck to sales point	49	%	52	%	67	%	39	%	50	%	Volume transported via truck to sales point		53	%	52	%		50	%
		100	%	100	%	100	%	100	%	100	%			100	%	100	%		100	%

Volumes transported through pipeline or via truck receive a higher realized price but incur higher transportation expenses. Conversely, volumes sold at the wellhead have the opposite effect of lower realized price, offset by lower transportation expenses.

Transportation expenses for the three months ended ~~September 30, 2021,~~March 31, 2022, increased by ~~135%~~13% to ~~$3.0~~$2.8 million and on a per bbl basis increased by ~~68%~~1% to ~~$1.38~~$1.39 compared to the corresponding period of ~~2020 due to maintenance on the Impala terminal resulting~~2021. The increase in ~~utilization of alternative transportation routes which had higher costs per bbl. For the nine months ended September 30, 2021,~~ transportation expenses ~~decreased by 1% to $8.4 million and on a~~ per bbl ~~basis decreased by 3% to $1.48 when~~ compared to the corresponding period of ~~2020, as~~2021 was a result of higher truck tariffs and higher volumes ~~sold at the wellhead during the current period which resulted~~transported via truck in ~~lower transportation costs.~~2022.

For the three months ended ~~September 30, 2021,~~March 31, 2022, transportation expenses ~~increased~~decreased by 3%1% compared to $2.9 million in the prior quarter due to ~~increased sales volumes.~~higher volumes sold at wellhead. On a per bbl basis, transportation expenses ~~decreased~~increased by ~~21%~~6% from ~~$1.74~~$1.31 in the previous quarter due to ~~the Company utilizing more favorable transportation routes as all blockades were lifted.~~higher truck tariffs and higher volumes transported via truck.

COVID-19 Costs

The COVID-19 pandemic has resulted in extra ongoing operating and transportation costs related to COVID-19 health and safety preventative measures, including incremental sanitation requirements and enhanced procedures for trucking barrels and crew changes in the field. For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022, COVID-19 costs were $0.5 million entirely related to operating activities. For three months ended March 31, 2021, COVID-19 costs were ~~$1.0~~$1.1 million ~~and $3.0 million, respectively,~~ comprised of ~~$0.9 million and $2.7~~$1.0 million related to operating activities and $0.1 million and $0.3 million related to transportation activities. There were $1.1 million and $1.5 million COVID-19 costs for the three and nine months ended September 30, 2020, respectively, comprised of $1.0 million and $1.4 million related to operating activities and $0.1 million and $0.10.1 million related to transportation activities. For the prior quarter, COVID-19 costs were ~~$0.9~~$0.7 million, ~~comprised of $0.8 million~~entirely related to operating ~~and $0.1 million to transportation~~ activities.

DD&A Expenses


		Three Months Ended September 30,				Three Months Ended June 30,		Nine Months Ended September 30,					Three Months Ended March 31,					Three Months Ended December 31,
		2021		2020		2021		2021		2020				2022		2021			2021
DD&A Expenses, thousands of U.S. Dollars	DD&A Expenses, thousands of U.S. Dollars	$	38,055	$	31,340	$	28,927	$	98,300	$	131,118	DD&A Expenses, thousands of U.S. Dollars		$	40,963	$	31,318		$	41,574
DD&A Expenses, U.S. Dollars per bbl	DD&A Expenses, U.S. Dollars per bbl	17.36		19.96		17.23		17.26		23.48		DD&A Expenses, U.S. Dollars per bbl		20.02		17.17			19.01

DD&A expenses for the three ~~and nine~~ months ended ~~September 30, 2021,~~March 31, 2022, increased ~~21% and 25%, respectively,~~31% or $2.85 per bbl due to increased production ~~compared to the corresponding periods of 2020. On a per bbl basis, DD&A expenses decreased by $2.60~~ and ~~$6.22 per bbl, respectively, due to lower~~higher costs in the depletable base ~~as a result~~compared to the corresponding period of ~~ceiling test impairment losses recorded over the last three quarters of 2020.~~2021.

For the three months ended ~~September 30, 2021,~~March 31, 2022, DD&A expenses ~~increased 32%~~decreased 1% when compared to the prior quarter due to ~~increased~~lower production ~~during~~in the current quarter. On a per bbl basis, DD&A expenses ~~were comparable~~increased by $1.01 when compared to the ~~previous quarter.~~

prior quarter due to higher costs in the depletable base.

~~Impairment~~

~~Asset impairment~~

~~(i) Oil and gas property impairment~~

For the three and nine months ended September 30, 2021, we had no ceiling test impairment losses. For the three and nine months ended September 30, 2020, we had $104.7 million and $502.9 million of ceiling test impairment losses. We used an average Brent price of $60.12 and $47.95 per bbl for September 30, 2021 and 2020, respectively, ceiling test calculations.

~~(ii) Inventory impairment~~

For the three and nine months ended September 30, 2021, we had no inventory impairment. For the three and nine months ended September 30, 2020, we recorded $0.1 million and $4.2 million, respectively, of inventory impairment.

~~Goodwill impairment~~

The entire goodwill balance of $102.6 million was impaired during the nine months ended September 30, 2020, due to the unit's carrying value exceeding its fair value as a result of the impact of lower forecasted commodity prices.

G&A Expenses


		Three Months Ended September 30,				Three Months Ended June 30,			Nine Months Ended September 30,						Three Months Ended March 31,	Three Months Ended December 31,
(Thousands of U.S. Dollars)	(Thousands of U.S. Dollars)	2021		2020			2021			2021		2020		(Thousands of U.S. Dollars)			2022		2021		2021
G&A Expenses Before Stock-Based Compensation	G&A Expenses Before Stock-Based Compensation	$	5,444	$	4,506		$	7,133		$	18,475	$	17,183	G&A Expenses Before Stock-Based Compensation			$	7,779	$	6,817	$	8,473
G&A Stock-Based Compensation Expense (Recovery)		1,053		56			1,873			6,597		(707)
G&A Stock-Based Compensation Expense														G&A Stock-Based Compensation Expense			4,557		3,671		1,799
G&A Expenses, Including Stock-Based Compensation	G&A Expenses, Including Stock-Based Compensation	$	6,497	$	4,562		$	9,006		$	25,072	$	16,476	G&A Expenses, Including Stock-Based Compensation			$	12,336	$	10,488	$	10,272
(U.S. Dollars Per bbl Sales Volumes NAR)	(U.S. Dollars Per bbl Sales Volumes NAR)													(U.S. Dollars Per bbl Sales Volumes NAR)
G&A Expenses Before Stock-Based Compensation	G&A Expenses Before Stock-Based Compensation	$	2.48	$	2.87		$	4.25		$	3.24	$	3.08	G&A Expenses Before Stock-Based Compensation			$	3.80	$	3.73	$	3.87
G&A Stock-Based Compensation Expense (Recovery)		0.48		0.04			1.12			1.16		(0.13)
G&A Stock-Based Compensation Expense														G&A Stock-Based Compensation Expense			2.23		2.01		0.82
G&A Expenses, Including Stock-Based Compensation	G&A Expenses, Including Stock-Based Compensation	$	2.96	$	2.91		$	5.37		$	4.40	$	2.95	G&A Expenses, Including Stock-Based Compensation			$	6.03	$	5.74	$	4.69

For the three ~~and nine~~ months ended ~~September 30, 2021,~~March 31, 2022, G&A expenses before stock-based compensation increased by ~~21%~~14% to $7.8 million or $0.07 per bbl to $3.80 per bbl due to higher costs for special projects and ~~8%, respectively, consistent with an~~ increase ~~of operating activities~~ in ~~2021~~travel costs in 2022 when compared to the corresponding ~~periods~~period of ~~2020. On a per bbl basis, for the three months ended September 30, 2021,~~2021. When compared to prior quarter, G&A expenses before stock-based compensation decreased by ~~14% to $2.48 as a result of higher sales volumes~~8% and increased by 5% to $3.24 for the nine months ended September 30, 2021, as a result of increased operating activities when compared to the corresponding periods of 2020. For the three months ended September 30, 2021, G&A expenses before stock-based compensation decreased by 24% to $5.4 million or 42% to $2.48were comparable on a per bbl basis ~~compared to the prior quarter~~ due to lower accrued performance bonus for the first quarter of 2022 due to timing of ~~certain costs incurred and expensed in~~ the ~~prior quarter.~~fourth quarter 2021 bonus accrual.

G&A expenses after stock-based compensation for the three ~~and nine~~ months ended ~~September 30, 2021,~~March 31, 2022, increased by ~~42% and 52% (2% and 49%~~18% or $0.29 per ~~bbl), respectively,~~bbl, compared to the corresponding ~~periods~~period of ~~2020,~~2021, mainly due to higher stock-based compensation resulting from a higher share price. Compared to prior quarter, G&A expenses after stock-based compensation ~~for the three months ended September 30, 2021, decreased~~increased by ~~28%~~20% or ~~45%~~$1.34 on a per bbl basis, ~~compared with the prior quarter,~~ due to ~~the timing of certain costs incurred and expensed~~higher stock-based compensation resulting from a higher share price in the ~~prior~~current quarter.

Foreign Exchange Gains and Losses

For the three ~~and nine~~ months ended ~~September 30, 2021,~~March 31, 2022, we had a ~~$2.7~~$3.7 million ~~and $15.8 million, respectively, loss~~gain on foreign exchange compared to a ~~$4.3 million and a $20.1~~$13.1 million loss for the corresponding ~~periods~~period of ~~2020.~~2021. Accounts receivable, taxes receivable, deferred income taxes, accounts payable, and ~~investment~~prepaid equity forward (“PEF”) are considered monetary items and require translation from local currency to U.S. dollar

functional currency at each balance sheet date. This translation was the primary source of the foreign exchange gains and losses in the periods.

The following table presents the change in the U.S. dollar against the Colombian peso and Canadian dollar for the three ~~and nine~~ months ended ~~September 30, 2021,~~March 31, 2022, and ~~2020:~~2021:


		Three Months Ended September 30,		Nine Months Ended September 30,			Three Months Ended March 31,
		2021	2020	2021	2020			2022	2021
Change in the U.S. dollar against the Colombian peso	Change in the U.S. dollar against the Colombian peso	strengthened by	strengthened by	strengthened by	strengthened by	Change in the U.S. dollar against the Colombian peso		weakened by	strengthened by
		2%	3%	12%	18%			6%	9%
Change in the U.S. dollar against the Canadian dollar	Change in the U.S. dollar against the Canadian dollar	strengthened by	weakened by	strengthened by	strengthened by	Change in the U.S. dollar against the Canadian dollar		weakened by	weakened by
		3%	2%	—%	3%			2%	1%

Financial Instrument Gains and Losses

The following table presents the nature of our derivative and other financial instruments gains and losses for the three ~~and nine~~ months ended ~~September 30, 2021,~~March 31, 2022, and ~~2020:~~2021:


	Three Months Ended March 31,
(Thousands of U.S. Dollars)		2022		2021
Commodity price derivatives loss		$	21,439	$	23,632
Foreign currency derivatives loss		—		66
Derivative instruments loss		$	21,439	$	23,698

Unrealized PetroTal investment gain		$	—	$	(6,475)
Loss on sale of PetroTal shares		—		5,070
Other financial instruments gain		$	—	$	(1,405)

Income Tax Expense


		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended March 31,
(Thousands of U.S. Dollars)	(Thousands of U.S. Dollars)	2021			2020			2021			2020			(Thousands of U.S. Dollars)		2022			2021
Income (loss) before income tax	Income (loss) before income tax	$	43,962		$	(128,386)		$	6,753		$	(792,332)		Income (loss) before income tax		$	53,659		$	(28,771)

Current income tax expense (recovery)		$	—		$	637		$	(14)		$	560
Deferred income tax expense (recovery)		8,955			(21,202)			26,809			(62,796)
Total income tax expense (recovery)		$	8,955		$	(20,565)		$	26,795		$	(62,236)
Current income tax expense														Current income tax expense		$	20,827		$	—
Deferred income tax expense														Deferred income tax expense		18,713			8,651
Total income tax expense														Total income tax expense		$	39,540		$	8,651

Effective tax rate	Effective tax rate	20		%	16		%	397		%	8		%	Effective tax rate		74		%	(30)		%

Current income tax expense was ~~in a recovery position~~$20.8 million for the ~~nine~~three months ended ~~September 30, 2021, versus an~~March 31, 2022, compared to no current tax expense ~~position for~~in the ~~comparative~~corresponding period in ~~2020,~~2021, primarily due to ~~changes~~an increase in ~~the previous estimation of presumptive minimum tax.~~taxable income. The deferred income tax expense for the ~~nine~~three months ended ~~September 30,~~March 31, 2022, was mainly the result of tax depreciation being higher than accounting depreciation in Colombia. The deferred income tax expense in the comparative period of 2021 ~~resulted from~~was the result of excess tax depreciation compared with accounting depreciation and the use of tax losses to offset taxable income in Colombia. The deferred income tax recovery in the comparative period of 2020 was mainly the result of a ceiling test impairment loss in Colombia, partially offset by losses incurred in Colombia that are now fully offset by a valuation allowance.

For the ~~nine~~three months ended ~~September 30,~~March 31, 2022, the difference between the effective tax rate of 74% and the 35% Colombian tax rate was primarily due to increase in the impact of foreign taxes, foreign translation adjustments, increase in the valuation allowance, other permanent differences, and non-deductible stock-based compensation.

For the three months ended March 31, 2021, the difference between the effective tax rate of ~~397%~~(30)% and the 31% Colombian tax rate was primarily due to the non-deductibility of derivative instrument losses and financing costs; foreign currency translation adjustments, and stock based compensation. These were partially offset by a decrease in valuation allowance and the non-taxable portion (50%) of the unrealized gain on PetroTal Corp. ("PetroTal") shares.

In the third quarter of 2021, Congressional authorities in Colombia enacted a new tax legislation, which includes an increase to the corporate income tax rate to 35% from 31%, effective January 1, 2022. Accordingly, the tax rates applied to the calculation of deferred income taxes, before valuation allowances, have been adjusted to reflect this change.

~~For the nine months ended September 30, 2020, the difference between the effective tax rate of 8% and the 32%~~ Colombian tax rate was primarily due to an increase in the ~~valuation allowance, the non-deductibility~~impact of ~~goodwill impairment for tax purposes,~~foreign taxes, foreign translation adjustments and ~~the non-deductible portion (50%) of the unrealized loss on PetroTal shares.~~

other permanent differences, which was partially offset by a decrease in valuation allowance.

Net Income and Funds Flow from Operations (a Non-GAAP Measure)


(Thousands of U.S. Dollars)	(Thousands of U.S. Dollars)	Third Quarter 2021 Compared with Second Quarter 2021		% change	Third Quarter 2021 Compared with Third Quarter 2020		% change	Nine Months Ended September 30, 2021 Compared with Nine Months Ended September 30, 2020		% change	(Thousands of U.S. Dollars)	First Quarter 2022 Compared with Fourth Quarter 2021		% change	First Quarter 2022 Compared with First Quarter 2021		% change
Net loss for the comparative period		$	(17,627)		$	(107,821)		$	(730,096)
Net income (loss) for the comparative period											Net income (loss) for the comparative period	$	62,524		$	(37,422)
Increase (decrease) due to:	Increase (decrease) due to:										Increase (decrease) due to:
Sales price	Sales price	9,162			61,106			150,930			Sales price	37,757			67,487
Sales volumes	Sales volumes	29,534			21,071			3,460			Sales volumes	(9,475)			11,589
Expenses:	Expenses:										Expenses:
Operating	Operating	(12,136)			(16,846)			(7,950)			Operating	5,308			(4,775)
Transportation	Transportation	(100)			(1,735)			101			Transportation	33			(328)
Cash G&A	Cash G&A	1,689			(938)			(1,292)			Cash G&A	694			(962)
Net lease payments	Net lease payments	47			(70)			(107)			Net lease payments	4			85
Severance	Severance	—			122			550			Severance	—			—
Interest, net of amortization of debt issuance costs	Interest, net of amortization of debt issuance costs	340			490			(1,243)			Interest, net of amortization of debt issuance costs	658			1,690
Realized foreign exchange	Realized foreign exchange	429			2,010			(1,120)			Realized foreign exchange	(1,395)			(1,034)
Cash settlements on derivative instruments	Cash settlements on derivative instruments	16,973			(2,959)			(55,011)			Cash settlements on derivative instruments	4,790			4,808
Current taxes	Current taxes	(14)			637			574			Current taxes	(16,334)			(20,827)
Other loss	Other loss	—			(1,959)			(1,959)			Other loss	—			—
COVID-19 related costs	COVID-19 related costs	(93)			118			(1,497)			COVID-19 related costs	133			604
Interest income		—			—			(345)

Net change in funds flow from operations(1) from comparative period	Net change in funds flow from operations(1) from comparative period	45,831			61,047			85,091			Net change in funds flow from operations(1) from comparative period	22,173			58,337
Expenses:	Expenses:										Expenses:
Depletion, depreciation and accretion	Depletion, depreciation and accretion	(9,128)			(6,715)			32,818			Depletion, depreciation and accretion	611			(9,645)
Goodwill impairment	Goodwill impairment	—			—			102,581			Goodwill impairment	—			—
Asset impairment	Asset impairment	—			104,731			507,093			Asset impairment	—			—
Deferred tax	Deferred tax	248			(30,157)			(89,605)			Deferred tax	(69,347)			(10,062)
Amortization of debt issuance costs	Amortization of debt issuance costs	(13)			(69)			92			Amortization of debt issuance costs	240			(6)
Stock-based compensation	Stock-based compensation	820			(997)			(7,304)			Stock-based compensation	(2,758)			(886)
Derivative instruments gain or loss, net of settlements on derivative instruments	Derivative instruments gain or loss, net of settlements on derivative instruments	1,663			(1,817)			(1,946)			Derivative instruments gain or loss, net of settlements on derivative instruments	(24,931)			(2,549)
Other financial instruments gain or loss	Other financial instruments gain or loss	16,248			15,094			73,711			Other financial instruments gain or loss	15,794			(1,405)
Unrealized foreign exchange	Unrealized foreign exchange	(2,988)			(385)			5,390			Unrealized foreign exchange	9,773			17,842
Other Loss		—			2,026			2,026
Other loss											Other loss	44			—
Net lease payments	Net lease payments	(47)			70			107			Net lease payments	(4)			(85)
Net change in net loss		52,634			142,828			710,054
Net income (loss) for the current period		$	35,007	299%	$	35,007	132%	$	(20,042)	97%
Net change in net income (loss)											Net change in net income (loss)	(48,405)			51,541
Net income for the current period											Net income for the current period	$	14,119	(77)%	$	14,119	138%

(1)Funds flow from operations is a non-GAAP measure ~~which~~that does not have any standardized meaning prescribed under GAAP. Refer to "Financial and Operational Highlights—non-GAAP measures" for a definition and reconciliation of this measure.

3129

Capital expenditures during the three months ended ~~September 30, 2021~~March 31, 2022 were ~~$34.8~~$41.5 million:


(Millions of U.S. Dollars)
Colombia:
Exploration	$	~~6.6~~3.7
Development:
Drilling and Completions	~~9.6~~18.7
Facilities	~~6.3~~2.5
Other	~~11.8~~14.1
	~~34.3~~39.0
Corporate & Ecuador	~~0.5~~2.5
	$	~~34.8~~41.5

During the three months ended ~~September 30, 2021,~~March 31, 2022, we commenced drilling the following wells in Colombia:


			Number of wells (Gross and Net)
Development			6.0
Service			2.0

8.0

We spud ~~two~~six development wells and two water injection wells, of which five were in the Midas Block, ~~both of which~~and three were ~~producing~~in the Chaza Block. Of the wells spud during the quarter three were completed, and three were in-progress as of ~~September 30, 2021.~~March 31, 2022.

Liquidity and Capital Resources


		As at						As at
(Thousands of U.S. Dollars)	(Thousands of U.S. Dollars)	September 30, 2021		% Change	December 31, 2020		(Thousands of U.S. Dollars)	March 31, 2022		% Change	December 31, 2021
Cash and Cash Equivalents	Cash and Cash Equivalents	$	16,600	18	$	14,114	Cash and Cash Equivalents	$	58,707	125	$	26,109

Revolving Credit Facility	Revolving Credit Facility	$	150,000	(21)	$	190,000	Revolving Credit Facility	$	40,000	(41)	$	67,500

6.25% Senior Notes	6.25% Senior Notes	$	300,000	—	$	300,000	6.25% Senior Notes	$	300,000	—	$	300,000

7.75% Senior Notes	7.75% Senior Notes	$	300,000	—	$	300,000	7.75% Senior Notes	$	300,000	—	$	300,000

~~The outbreak of~~We believe that our capital resources, including cash on hand, cash generated from operations and available capacity on our credit facility, will provide us with sufficient liquidity to meet our strategic objectives and planned capital program for the ~~COVID-19 virus, which was declared a pandemic by the World Health Organization~~next 12 months and beyond, given current oil price trends and production levels. We may also pursue financing through capital markets. In accordance with our investment policy, available cash balances are held in ~~March 2020, spread across the globe~~our primary cash management banks or may be invested in U.S. or Canadian government-backed federal, provincial or state securities or other money market instruments with high credit ratings and ~~impacted worldwide economic activity. In 2020, global commodity prices declined significantly during the first half of 2020 due to disputes between major oil producing countries combined~~short-term liquidity. We believe that our current financial position provides us with the ~~impact of the COVID-19 pandemic~~flexibility to respond to both internal growth opportunities and ~~associated reductions~~those available through acquisitions. We intend to pursue growth opportunities and acquisitions from time to time, which may require significant capital, be located in ~~global demand for oil. Governments worldwide, including those in Colombia~~basins or countries beyond our current operations, involve joint ventures, or be sizable as compared to our current assets and Ecuador, the countries where we operate, enacted emergency measures to combat the spread of the virus. These measures, which include the implementation of travel bans, self-imposed quarantine periods and social distancing, have caused, and may continue to cause, material disruption to businesses globally resulting in an economic slowdown. While global commodity prices have improved since historic lows during the first half of 2020, the current challenging economic climate had and may continue to have significant adverse impacts on our Company including, but not exclusively:

•~~material declines in revenue and cash flows as a result of the decline in commodity prices;~~

•~~declines in revenue and operating activities due to reduced capital programs and the shut-in of production;~~

•~~impairment charges;~~

•~~inability to comply with covenants and restrictions in debt agreements;~~

•~~inability to access financing sources;~~

•~~increased risk of non-performance by our customers and suppliers;~~

•~~interruptions in operations as we adjust personnel to the dynamic environment; and~~

•~~inability to operate or delay in operations as a result COVID-19 restrictions in the countries in which we operate~~

Based on current forecasted Brent pricing and production levels, which can change materially in very short time frames, we forecasted to comply with the financial covenants contained in the revolving credit facility for at least the next year from the date of these financial statements. The amount available under our senior secured credit facility is based on the lender's borrowing base determination. The borrowing base is determined, by the lenders, based on our reserves and commodity prices. The next renewal of the borrowing base is in November 2021, and there is a risk that the lenders may reduce the borrowing base. In addition, our ability to borrow under the credit facility may be limited by the terms of the indentures for the 6.25% Senior Notes and 7.75% Senior Notes.

The risk of non-compliance with the covenants in the lending agreements and the risk associated with maintaining the borrowing base is heightened in the current period of volatility coupled with the unprecedented disruption caused by the COVID-19 pandemic. We currently expect to continue to meet the terms of the credit facility or obtain further amendments or waivers if and when required. We also expect to maintain the borrowing base at a level in excess of the amount borrowed. However, there can be no assurances that our liquidity can be maintained at or above current levels during this period of volatility and global economic uncertainty.

~~The situation is dynamic, and the ultimate duration and magnitude of the impact on the economy and the financial effect on our Company is not known at this time.~~operations.

As at ~~September 30, 2021,~~March 31, 2022, the borrowing base of our Senior Secured Credit Facility (the ~~"revolving~~“revolving credit ~~facility"~~facility”) was ~~$215~~$150 million, with ~~the~~$125 million readily available and $25 million subject to approval by majority lenders. The next re-determination towill occur no later than May 2022. The maturity date of the borrowings under the revolving credit facility is November ~~2021.~~ 10, 2022.

We are required to comply with various covenants, which have been modified in response to the recent market conditions and the COVID-19 pandemic. We have obtained relief from compliance with certain financial covenants, which expired on October 1, 2021 ("the covenant relief period"). During the covenant relief period, our ratio of total debt to EBITDAX was permitted to be greater than 4.0 to 1.0, our Senior Secured Debt to EBITDAX ratio could not exceed 2.5 to 1.0, and our EBITDAX to interest expense ratio for the trailing four-quarter periods measured as of the last day of the fiscal quarters ending as of the last day of the fiscal quarters ended September 30, 2021, was required to be at least 2.0 to 1.0. We are required to comply with various covenants, which as disclosed above, have been modified in response to the current market conditions and the COVID-19 pandemic. As of September 30, 2021, we were in compliance with all applicable covenants in the revolving credit facility.

~~After the expiration of the covenant relief period on October 1, 2021, we must~~ maintain compliance with the following financial covenants: limitations on our ratio of debt to EBITDAX to a maximum of 4.0 to 1.0; limitations on our ratio of Senior Secured Debt to EBITDAX to a maximum of 3.0 to 1.0; and the maintenance of a ratio of EBITDAX to interest expense of at least 2.5 to 1.0. If we fail to comply with these financial covenants, it ~~would~~will result in a default under the terms of the credit agreement, which could result in an acceleration of repayment of all indebtedness under the ~~Company's~~Company’s revolving credit facility. At March 31, 2022, we were in compliance with all applicable covenants.

Amounts drawn under the revolving credit facility bear interest, at the ~~borrower's~~borrower’s option, USD LIBOR plus a margin ranging from 2.90% to 4.90%, or base rate plus a margin ranging from 1.90% to 3.90%, in each case based on the borrowing base utilization percentage. The alternate base rate is currently the U.S. prime rate. We pay a commitment fee on undrawn amounts under the revolving credit facility, which ranges from 0.73% to 1.23% per annum, based on the average daily amount of unused commitments.

At ~~September 30, 2021,~~March 31, 2022, we had $~~150.0~~40.0 million drawn under the revolving credit facility. During the ~~third~~first quarter of ~~2021,~~2022, we repaid ~~$25.0~~$27.5 million of the amount drawn under the revolving credit ~~facility.~~facility using cash flows from operations. Accordingly, we had $~~65.0~~110.0 million of availability under the revolving credit facility as of ~~September 30, 2021.~~March 31, 2022. As of ~~October~~April 29, ~~2021,~~2022, outstanding borrowings under our revolving credit facility were further reduced to $~~130.0~~10.0 million using .cash flows from operations.

At ~~September 30, 2021,~~March 31, 2022, we had a $300.0 million aggregate principal amount of 6.25% Senior Notes due 2025 and a $300.0 million aggregate principal amount of 7.75% Senior Notes due 2027 outstanding. An event of default under the revolving credit facility would result in a default under the indentures governing the senior notes, which could allow the noteholders to require us to repurchase all of the outstanding Senior Notes.

In accordance with our investment policy, available cash balances are held in our primary cash management banks or invested in U.S. or Canadian government-backed federal, provincial, or state securities or other money market instruments with high credit ratings and short-term liquidity.

Derivative Positions

At ~~September 30, 2021,~~March 31, 2022, we had outstanding commodity price derivative positions as follows:

~~Foreign Currency Derivatives~~


Period and type of instrument	Volume, bopd	Reference	Sold Swap ($/bbl, Weighted Average)	Sold Put ($/bbl, Weighted Average)	Purchased Put ($/bbl, Weighted Average)	Sold Call ($/bbl, Weighted Average)	Premium ($/bbl Weighted Average)
Three-way Collars: April 1, to June 30, 2022	5,000	ICE Brent	—	64.00	74.00	91.72	—
Swaps: April 1, to June 30, 2022	3,000	ICE Brent	80.77	—	—	—	—
Deferred Puts: April 1, to June 30, 2022	1,000	ICE Brent	—	—	70.00	—	4.00

At ~~September 30, 2021, we had outstanding foreign currency derivative positions as follows:~~

Period and type of instrument Amount Hedged
(Millions COP)
U.S. Dollar Equivalent of Amount Hedged (Thousands of U.S. Dollars)(1)
Reference Floor Price
(COP, Weighted Average) Cap Price (COP, Weighted Average)
Collars: October 1, to December 31, 2021 3,000 782 COP 3,500 3,630

~~(1)~~ ~~At September 30, 2021 foreign exchange rate.~~

~~At September 30, 2021,~~March 31, 2022, our balance sheet included ~~$14.7~~$18.9 million of current liabilities related to the above outstanding commodity price ~~and foreign currency~~ derivative positions.

3431

Cash Flows

The following table presents our primary sources and uses of cash and cash equivalents for the periods presented:


		Nine Months Ended September 30,					Three Months Ended March 31,
(Thousands of U.S. Dollars)	(Thousands of U.S. Dollars)	2021		2020		(Thousands of U.S. Dollars)	2022		2021
Sources of cash and cash equivalents:	Sources of cash and cash equivalents:					Sources of cash and cash equivalents:
Net loss		$	(20,042)	$	(730,096)
Net income (loss)						Net income (loss)	$	14,119	$	(37,422)
Adjustments to reconcile net loss to Adjusted EBITDA(1) and funds flow from operations(1)	Adjustments to reconcile net loss to Adjusted EBITDA(1) and funds flow from operations(1)					Adjustments to reconcile net loss to Adjusted EBITDA(1) and funds flow from operations(1)
DD&A expenses	DD&A expenses	98,300		131,118		DD&A expenses	40,963		31,318
Interest expense	Interest expense	41,355		40,204		Interest expense	12,128		13,812
Income tax expense (recovery)		26,795		(62,236)
Goodwill impairment		—		102,581
Asset impairment		—		507,093
Income tax expense						Income tax expense	39,540		8,651
Other loss	Other loss	—		2,026		Other loss	—		—
Non-cash lease expenses	Non-cash lease expenses	1,222		1,494		Non-cash lease expenses	411		444
Lease payments	Lease payments	(1,239)		(1,404)		Lease payments	(344)		(462)
Unrealized foreign exchange loss		16,945		22,335
Stock-based compensation expense (recovery)		6,597		(707)
Unrealized foreign exchange (gain) loss						Unrealized foreign exchange (gain) loss	(4,839)		13,003
Stock-based compensation expense						Stock-based compensation expense	4,557		3,671
Unrealized derivative instruments loss	Unrealized derivative instruments loss	2,499		553		Unrealized derivative instruments loss	12,843		10,294
Other financial instruments (gain) loss		(12,425)		61,286
Other financial instruments gain						Other financial instruments gain	—		(1,405)
Adjusted EBITDA(1)	Adjusted EBITDA(1)	160,007		74,247		Adjusted EBITDA(1)	119,378		41,904
Current income tax recovery (expense)		14		(560)
Current income tax expense						Current income tax expense	(20,827)		—
Contractual interest and other financing expenses	Contractual interest and other financing expenses	(38,673)		(37,430)		Contractual interest and other financing expenses	(11,241)		(12,931)
Funds flow from operations(1)	Funds flow from operations(1)	121,348		36,257		Funds flow from operations(1)	87,310		28,973
Proceeds from debt, net of issuance costs		—		88,382
Proceeds from issuance of Senior Notes, net of issuance costs		—		—
Proceeds from issuance of exercise of stock options	Proceeds from issuance of exercise of stock options	19		—		Proceeds from issuance of exercise of stock options	980		—
Proceeds from issuance of shares of Common Stock, net of issuance costs						Proceeds from issuance of shares of Common Stock, net of issuance costs	2		—
Proceeds from disposition of investment, net of transaction costs	Proceeds from disposition of investment, net of transaction costs	14,632		—		Proceeds from disposition of investment, net of transaction costs	—		14,632
Net changes in assets and liabilities from operating activities	Net changes in assets and liabilities from operating activities	17,956		23,288		Net changes in assets and liabilities from operating activities	16,520		13,128
Changes in non-cash investing working capital		709		—
		154,664		147,927			104,812		56,733

Uses of cash and cash equivalents:	Uses of cash and cash equivalents:					Uses of cash and cash equivalents:
Additions to property, plant and equipment	Additions to property, plant and equipment	(109,650)		(56,378)		Additions to property, plant and equipment	(41,483)		(37,427)

Repayment of debt	Repayment of debt	(40,000)		(7,000)		Repayment of debt	(27,525)		(10,125)

Debt issuance costs		(125)		—

Changes in non-cash investing working capital	Changes in non-cash investing working capital	—		(69,549)		Changes in non-cash investing working capital	(1,803)		(708)
Settlement of asset retirement obligations	Settlement of asset retirement obligations	(483)		(199)		Settlement of asset retirement obligations	(5)		(169)
Lease payments	Lease payments	(1,269)		(307)		Lease payments	(777)		(513)
Foreign exchange loss on cash, cash equivalents and restricted cash and cash equivalents		(528)		(754)
Foreign exchange gain (loss) on cash, cash equivalents and restricted cash and cash equivalents						Foreign exchange gain (loss) on cash, cash equivalents and restricted cash and cash equivalents	478		(446)
		(152,055)		(134,187)			(71,115)		(49,388)
Net increase in cash and cash equivalents and restricted cash and cash equivalents	Net increase in cash and cash equivalents and restricted cash and cash equivalents	$	2,609	$	13,740	Net increase in cash and cash equivalents and restricted cash and cash equivalents	$	33,697	$	7,345

(1) Adjusted EBITDA and funds flow from operations are a non-GAAP measures which do not have any standardized meaning prescribed under GAAP. Refer to “Financial and Operational Highlights - non-GAAP measures” for a definition and reconciliation of this measure.

One of the primary sources of variability in our cash flows from operating activities is the fluctuation in oil prices, the impact of which we partially mitigate by entering into commodity price derivatives. Sales volume changes and costs related to operations and debt service also impact cash flows. Our cash flows from operating activities are also impacted by foreign currency exchange rate ~~changes, the impact of which we partially mitigate by entering into foreign currency derivatives.~~changes. During the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, funds flow from operations increased by ~~235%~~201% compared to the corresponding period of ~~2020~~2021 primarily due to a significant increase in Brent price and increase in production,

which were partially offset by higher Castilla and Vasconia differentials and an increase in operating expenses and cash settlements on derivative instruments.

~~Off-Balance Sheet Arrangements~~

~~As at September 30, 2021, we had no off-balance sheet arrangements.~~

~~Contractual Obligations~~

~~At September 30, 2021, we had $150.0 million drawn under our revolving credit facility.~~

~~Except for noted above, as at September 30, 2021, there were no other material changes to our contractual obligations outside of the ordinary course of business from those as at December 31, 2020.~~

Critical Accounting Policies and Estimates

Our critical accounting policies and estimates are disclosed in Item 7 of our ~~2020~~2021 Annual Report on Form 10-K and have not changed materially since the filing of that document.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Commodity price risk

Our principal market risk relates to oil prices. Oil prices are volatile and unpredictable and influenced by concerns over world supply and demand imbalance and many other market factors outside of our control. Most of our revenues are from oil sales at prices which reflect the blended prices received upon shipment by the purchaser at defined sales points or are defined by contract relative to ICE Brent and adjusted for quality each month.

We have entered into commodity price derivative contracts to manage the variability in cash flows associated with the forecasted sale of our oil production, reduce commodity price risk and provide a base level of cash flow in order to assure we can execute at least a portion of our capital spending.

Foreign currency risk

Foreign currency risk is a factor for our Company but is ameliorated to a certain degree by the nature of expenditures and revenues in the countries where we operate. Our reporting currency is U.S. dollars and 100% of our revenues are related to the U.S. dollar price of Brent or WTI oil. We receive 100% of our revenues in U.S. dollars and the majority of our capital expenditures is in U.S. dollars or is based on U.S. dollar prices. The majority of income and value added taxes, operating and G&A expenses in Colombia are in local currency. Certain G&A expenses incurred at our head office in Canada are denominated in Canadian dollars. While we operate in South America exclusively, the majority of our acquisition expenditures have been valued and paid in U.S. dollars.

We have entered into foreign currency derivative contracts to manage the variability in cash flows associated with our forecasted Colombian peso denominated costs.

Additionally, foreign exchange gains and losses result primarily from the fluctuation of the U.S. dollar to the Colombian peso due to our current and deferred tax liabilities, which are monetary liabilities, denominated in the local currency of the Colombian foreign operations. As a ~~Smaller Reporting Company, we~~result, a foreign exchange gain or loss must be calculated on conversion to the U.S. dollar functional currency.

Interest Rate Risk

Interest rate risk is the risk that future cash flows will fluctuate as a result of changes in market interest rates. We are exposed to interest rate fluctuations on our revolving credit facility, which bears floating rates of interest. At March 31, 2022, our outstanding balance under revolving credit facility was $40.0 million (December 31, 2021 - $67.5 million).

Further Information

See Note 11 in the Notes to the Condensed Consolidated Financial Statements (Unaudited) in Part I, Item 1 of this Quarterly Report on Form 10-Q, which is incorporated herein by reference, for further information regarding our derivative contracts, including the notional amounts and call and put prices by expected (contractual) maturity dates. Expected cash flows from the derivatives equaled the fair value of the contract. The information is presented in U.S. dollars because that is our reporting currency. We do not ~~required to provide information under this Item 3.~~hold any of these derivative contracts for trading purposes.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

We have established disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, or Exchange Act). Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by Gran Tierra in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report, as required by Rule l3a-15(b) of the Exchange Act. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that Gran ~~Tierra's~~Tierra’s disclosure controls and procedures were effective as of ~~September 30, 2021.~~March 31, 2022.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended ~~September 30, 2021,~~March 31, 2022, that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.

PART II - Other Information

Item 1. Legal Proceedings

See Note 119 in the Notes to the Condensed Consolidated Financial Statements (Unaudited) in Part I, Item 1 of this Quarterly Report on Form 10-Q, which is incorporated herein by reference, for any material developments with respect to matters previously reported in our Annual Report on Form 10-K for the year ended December 31, ~~2020,~~2021, and any material matters that have arisen since the filing of such report.

Item 1A. Risk Factors

There are numerous factors that affect our business and results of operations, many of which are beyond our control. In addition to information set forth in this quarterly report on Form 10-Q, including in Part I, Item 2 ~~"Management's~~“Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations"~~Operations”, you should carefully read and consider the factors set out in Part I, Item 1A ~~"Risk Factors"~~“Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021. These risk factors could materially affect our business, financial condition and results of operations. The unprecedented nature of the current pandemic and ~~downturn~~the volatility in the worldwide economy and oil and gas industry may make it more difficult to identify all the risks to our business, results of operations and financial condition and the ultimate impact of identified risks.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

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Item 6. Exhibits

Exhibit No.

Description

Reference

3.1

Certificate of Incorporation.

Incorporated by reference to Exhibit 3.3 to the Current Report on Form 8-K, filed with the SEC on November 4, 2016 (SEC File No. 001-34018).

3.2

Bylaws of Gran Tierra Energy Inc.

Incorporated by reference to Exhibit 3.4 to the Current Report on Form 8-K, filed with the SEC on November 4, 2016 (SEC File No. 001-34018).

3.3

Certificate of Retirement dated July 9, 2018

Incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed with the SEC on July 9, 2018 (SEC File No. 001-34018).

3.4

Amendment No.1 to Bylaws of Gran Tierra Energy Inc.

Incorporated by reference to Exhibit 3.1 to the Current
Report on Form 8-K filed with the SEC on August 4,
2021 (SEC File No. 001-34018).

31.1

Certification of Principal Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Filed herewith.

31.2

Certification of Principal Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Filed herewith.

32.1

Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Furnished herewith.

101.INS XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH Inline XBRL Taxonomy Extension Schema Document

101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document

104.The cover page from Gran Tierra Energy Inc.'s’s Quarterly Report on Form 10-Q for the quarter ended ~~September 30, 2021,~~March 31, 2022, formatted in Inline XBRL (included within the Exhibit 101 attachments).

*Management contract or compensatory plan or arrangement

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

GRAN TIERRA ENERGY INC.


Date: ~~November 1, 2021~~May 3, 2022						/s/ Gary S. Guidry
						By: Gary S. Guidry
						President and Chief Executive Officer
						(Principal Executive Officer)


Date: ~~November 1, 2021~~May 3, 2022						/s/ Ryan Ellson
						By: Ryan Ellson
						Executive Vice President and Chief Financial Officer
						(Principal Financial and Accounting Officer)

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