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~~June 30, ~~2022~~2023


☐						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.)

500 Centre Street S.E.

Calgary,

Alberta

Canada

T2G 1A6

(Address of principal executive offices, including zip code)

(403) 265-3221

(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~~$0.01 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 31, 2022, 368,898,619~~July 26, 2023, 33,287,055 shares of the registrant’s Common Stock, ~~$0.001~~$0.01 par value, were issued.

Gran Tierra Energy Inc.

Quarterly Report on Form 10-Q

Quarterly Period Ended ~~September~~June 30, ~~2022~~2023

Table of contents


		Page
PART I	Financial Information
Item 1.	Financial Statements	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1614
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3431
Item 4.	Controls and Procedures	3431

PART II	Other Information
Item 1.	Legal Proceedings	3532
Item 1A.	Risk Factors	3532

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3532
Item 5.	Other information	32
Item 6.	Exhibits	3633
SIGNATURES		3734

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”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “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 operations are located in South America and unexpected problems can arise due to guerilla activity, strikes, local blockades or protests; technical difficulties and operational difficulties may arise which impact the production, transport or sale of our products; other disruptions to local operations; global health events (including the ongoing COVID-19 pandemic); global and regional changes in the demand, supply, prices, differentials or other market conditions affecting oil and gas, including inflation and changes resulting from a global health crisis, the Russian invasion of Ukraine, or from the imposition or lifting of crude oil production quotas or other actions that might be imposed by OPEC, such as its recent decision to cut production and other producing countries and the resulting company or third-party actions in response to such changes; changes in commodity prices, including volatility or a prolonged decline in these prices relative to historical or future expected levels; the risk that current global economic and credit conditions may impact oil prices and oil consumption more than we currently predicts, which could cause further modification of our strategy and capital spending program; prices and markets for oil and natural gas are unpredictable and volatile; the effect of hedges; the accuracy of productive capacity of any particular field; geographic, political and weather conditions can impact the production, transport or sale of our products; our ability to execute its business plan and realize expected benefits from current initiatives; the risk that unexpected delays and difficulties in developing currently owned properties may occur; the ability to replace reserves and production and develop and manage reserves on an economically viable basis; the accuracy of testing and production results and seismic data, pricing and cost estimates (including with respect to commodity pricing and exchange rates); the risk profile of planned exploration activities; the effects of drilling down-dip; the effects of waterflood and multi-stage fracture stimulation operations; the extent and effect of delivery disruptions, equipment performance and costs; actions by third parties; the timely receipt of regulatory or other required approvals for our operating activities; the failure of exploratory drilling to result in commercial wells; unexpected delays due to the limited availability of drilling equipment and personnel; volatility or declines in the trading price of our common stock or bonds; the risk that we do not receive the anticipated benefits of government programs, including government tax refunds; our ability to ~~obtain a new credit agreement and~~ comply with financial covenants in ~~its~~our credit agreement and indentures and make borrowings under any credit agreement; and those factors set out in Part II, Item 1A “Risk Factors” in this Quarterly Report on Form 10-Q and Part I, Item 1A “Risk Factors” in our ~~2021~~2022 Annual Report on Form 10-K (the ~~“2021~~“2022 Annual Report on Form 10-K”), and in our other filings with the Securities and Exchange Commission (“SEC”). during the current fiscal year. The unprecedented nature of the ~~COVID-19 pandemic and~~current 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 (other than in the context of the financial statements) 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~~“working interest production before ~~royalties."~~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,
2022 2021 2022 2021
OIL SALES (Note 7) $ 168,397 $ 135,319 $ 548,751 $ 327,435

EXPENSES
Operating 41,837 38,448 116,266 95,366
Transportation 2,417 3,130 7,764 8,731
Depletion, depreciation and accretion 45,320 38,055 128,499 98,300
General and administrative (Note 10) 8,114 6,497 30,286 25,991
Foreign exchange loss 1,489 2,650 486 15,824
Derivative instruments loss (Note 10) — 2,603 26,611 47,540
Other financial instruments gain — (13,634) — (12,425)
Gain on repurchase of Senior Notes
(Note 5)
(2,598) — (2,598) —
Interest expense (Note 5) 11,421 13,608 35,743 41,355
108,000 91,357 343,057 320,682
INCOME BEFORE INCOME TAXES 60,397 43,962 205,694 6,753
INCOME TAX EXPENSE (RECOVERY)
Current (Note 8) 16,820 — 63,072 (14)
Deferred (Note 8) 4,914 8,955 36,868 26,809
21,734 8,955 99,940 26,795
NET AND COMPREHENSIVE INCOME (LOSS) $ 38,663 $ 35,007 $ 105,754 $ (20,042)
NET INCOME (LOSS) PER SHARE
- BASIC $ 0.11 $ 0.10 $ 0.29 $ (0.05)
- DILUTED $ 0.10 $ 0.10 $ 0.28 $ (0.05)
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC (Note 6) 367,305,426 366,992,802 367,754,192 366,985,646
WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED (Note 6) 371,310,738 367,740,722 372,387,904 366,985,646


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
OIL SALES (Note 6)	$	157,902	$	205,785	$	302,092	$	380,354

EXPENSES
Operating	48,491		39,494		89,860		74,429
Transportation	3,691		2,513		6,757		5,347
Depletion, depreciation and accretion (Note 3)	56,209		42,216		107,930		83,179
General and administrative (Note 9)	9,866		9,836		22,562		22,172
Foreign exchange loss (gain)	4,707		2,722		6,409		(1,003)
Derivative instruments loss (Note 9)	—		5,172		—		26,611
Other gain (Note 4)	—		—		(615)		—
Interest expense (Note 4)	12,678		12,194		24,514		24,322
	135,642		114,147		257,417		235,057

INTEREST INCOME	647		—		1,415		—
INCOME BEFORE INCOME TAXES	22,907		91,638		46,090		145,297

INCOME TAX EXPENSE
Current (Note 7)	19,757		25,425		37,363		46,252
Deferred (Note 7)	13,975		13,241		29,252		31,954
	33,732		38,666		66,615		78,206
NET AND COMPREHENSIVE (LOSS) INCOME	$	(10,825)	$	52,972	$	(20,525)	$	67,091

NET (LOSS) INCOME PER SHARE (1)

- BASIC	$	(0.33)	$	1.44	$	(0.61)	$	1.82
- DILUTED	$	(0.33)	$	1.42	$	(0.61)	$	1.80
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC (Note 5)	33,299,505		36,857,138		33,872,270		36,798,229
WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED (Note 5)	33,299,505		37,423,360		33,872,270		37,297,769

(1) Reflects our 1-for-10 reverse stock split that became effective May 5, 2023. See Note 5 in the notes to the condensed financial statements for further discussion.

(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, 2022		As at December 31, 2021			As at June 30, 2023		As at December 31, 2022

ASSETS	ASSETS					ASSETS
Current Assets	Current Assets					Current Assets
Cash and cash equivalents (Note 11)		$	118,173	$	26,109
Restricted cash and cash equivalents (Note 11)		1,142		392
Cash and cash equivalents (Note 10)						Cash and cash equivalents (Note 10)	$	68,529	$	126,873
Restricted cash and cash equivalents (Note 10)						Restricted cash and cash equivalents (Note 10)	1,142		1,142
Accounts receivable	Accounts receivable	10,694		13,185		Accounts receivable	6,753		10,706
Inventory	Inventory	18,704		14,526		Inventory	22,532		20,192
Taxes receivable (Note 3)		52		45,506
Other current assets (Note 10)		12,035		2,083
Taxes receivable						Taxes receivable	82		54
Other current assets (Note 9)						Other current assets (Note 9)	9,108		9,620
Total Current Assets	Total Current Assets	160,800		101,801		Total Current Assets	108,146		168,587

Oil and Gas Properties	Oil and Gas Properties					Oil and Gas Properties
Proved	Proved	933,343		859,580		Proved	1,045,686		1,000,424
Unproved	Unproved	111,531		131,865		Unproved	66,091		74,471
Total Oil and Gas Properties	Total Oil and Gas Properties	1,044,874		991,445		Total Oil and Gas Properties	1,111,777		1,074,895
Other capital assets	Other capital assets	11,143		4,352		Other capital assets	29,787		26,007
Total Property, Plant and Equipment (Note 4)		1,056,017		995,797
Total Property, Plant and Equipment (Note 3)						Total Property, Plant and Equipment (Note 3)	1,141,564		1,100,902

Other Long-Term Assets	Other Long-Term Assets					Other Long-Term Assets
Deferred tax assets	Deferred tax assets	17,713		61,494		Deferred tax assets	12,924		22,990
Taxes receivable (Note 3)		25,952		17,522
Other long-term assets (Note 10)		17,873		12,497
Taxes receivable						Taxes receivable	40,014		27,796
Other long-term assets (Note 9)						Other long-term assets (Note 9)	6,717		15,335
Total Other Long-Term Assets	Total Other Long-Term Assets	61,538		91,513		Total Other Long-Term Assets	59,655		66,121
Total Assets	Total Assets	$	1,278,355	$	1,189,111	Total Assets	$	1,309,365	$	1,335,610

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	$	181,017	$	148,694	Accounts payable and accrued liabilities	$	197,797	$	167,579
Current portion of long-term debt (Note 5)		—		66,987
Derivatives		—		2,976
Taxes payable (Note 3)		25,888		6,620
Other (Note 6 and 10)		15,381		2,710

Taxes payable						Taxes payable	30,442		58,978
Equity compensation award liability (Note 5)						Equity compensation award liability (Note 5)	4,976		15,082

Total Current Liabilities	Total Current Liabilities	222,286		227,987		Total Current Liabilities	233,215		241,639

Long-Term Liabilities	Long-Term Liabilities					Long-Term Liabilities
Long-term debt (Notes 5 and 10)		575,684		587,404

Long-term debt (Notes 4 and 9)						Long-term debt (Notes 4 and 9)	585,807		589,593
Deferred tax liabilities						Deferred tax liabilities	22,241		28
Asset retirement obligation	Asset retirement obligation	58,657		54,525		Asset retirement obligation	66,845		63,358
Equity compensation award liability (Note 6 and 10)		17,826		13,718
Equity compensation award liability (Note 5)						Equity compensation award liability (Note 5)	5,708		16,437

Other long-term liabilities	Other long-term liabilities	7,302		3,397		Other long-term liabilities	8,131		6,989
Total Long-Term Liabilities	Total Long-Term Liabilities	659,469		659,044		Total Long-Term Liabilities	688,732		676,405

Contingencies (Note 9)
Contingencies (Note 8)						Contingencies (Note 8)

Shareholders' Equity
Common Stock (Note 6) (368,882,887 and 367,144,500 shares issued, 358,149,185 and 367,144,500 outstanding of Common Stock, par value $0.001 per share, as at September 30, 2022, and December 31, 2021, respectively)		10,272		10,270
Shareholders' Equity (1)						Shareholders' Equity (1)
Common Stock (Note 5) (33,287,055 and 34,615,116 issued, 33,287,055 and 34,615,116 outstanding shares of Common Stock, par value $0.01 per share, as at June 30, 2023, and December 31, 2022, respectively)						Common Stock (Note 5) (33,287,055 and 34,615,116 issued, 33,287,055 and 34,615,116 outstanding shares of Common Stock, par value $0.01 per share, as at June 30, 2023, and December 31, 2022, respectively)	10,237		10,272
Additional paid-in capital	Additional paid-in capital	1,290,711		1,287,582		Additional paid-in capital	1,254,449		1,291,354
Treasury Stock (Note 6)		(14,365)		—
Treasury Stock (Note 5)						Treasury Stock (Note 5)	—		(27,317)
Deficit	Deficit	(890,018)		(995,772)		Deficit	(877,268)		(856,743)
Total Shareholders’ Equity	Total Shareholders’ Equity	396,600		302,080		Total Shareholders’ Equity	387,418		417,566
Total Liabilities and Shareholders’ Equity	Total Liabilities and Shareholders’ Equity	$	1,278,355	$	1,189,111	Total Liabilities and Shareholders’ Equity	$	1,309,365	$	1,335,610

(1) Reflects our 1-for-10 reverse stock split that became effective May 5, 2023. See Note 5 in the notes to the condensed financial statements for further discussion.

(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,
2022 2021
Operating Activities
Net income (loss) $ 105,754 $ (20,042)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depletion, depreciation and accretion 128,499 98,300
Deferred tax expense 36,868 26,809
Stock-based compensation expense (Note 6) 6,376 6,597
Amortization of debt issuance costs (Note 5) 2,769 2,682
Unrealized foreign exchange loss 6,138 16,945
Gain on repurchase of Senior Notes
(Note 5) (2,598) —
Derivative instruments loss 26,611 47,540
Cash settlements on derivatives instruments (26,611) (45,041)
Other financial instruments gain — (12,425)
Cash settlement of asset retirement obligation (1,673) (483)
Non-cash lease expenses 2,009 1,222
Lease payments (1,134) (1,239)
Net change in assets and liabilities from operating activities (Note 11) 72,838 17,956
Net cash provided by operating activities 355,846 138,821
Investing Activities
Additions to property, plant and equipment (163,717) (109,650)
Proceeds on disposition of investment, net of transaction costs — 14,632
Changes in non-cash investing working capital (Note 11) 3,255 709
Net cash used in investing activities (160,462) (94,309)
Financing Activities
Repayment of debt (Note 5) (67,623) (40,125)
Re-purchase of Senior Notes (Note 5) (17,274) —
Re-purchase of Common Stock (Note 6) (14,365) —
Proceeds from issuance of Common Stock, net of issuance costs 2 —
Proceeds from exercise of stock options 1,292 19
Lease payments (1,991) (1,269)
Net cash used in financing activities (99,959) (41,375)
Foreign exchange loss on cash, cash equivalents and restricted cash and cash equivalents (1,996) (528)
Net increase in cash, cash equivalents and restricted cash and cash equivalents 93,429 2,609
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)
$ 124,833 $ 20,132
Supplemental cash flow disclosures (Note 11)


	Six Months Ended June 30,
	2023		2022
Operating Activities
Net (loss) income	$	(20,525)	$	67,091
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depletion, depreciation and accretion (Note 3)	107,930		83,179
Deferred tax expense (Note 7)	29,252		31,954
Stock-based compensation expense (Note 5)	1,817		6,546
Amortization of debt issuance costs (Note 4)	1,800		2,018
Unrealized foreign exchange gain	(7,548)		(498)
Other gain (Note 4)	(615)		—
Derivative instruments loss (Note 9)	—		26,611
Cash settlements on derivatives instruments	—		(26,392)


Cash settlement of asset retirement obligation	(156)		(242)
Non-cash lease expenses	2,253		1,158
Lease payments	(1,242)		(732)
Net change in assets and liabilities from operating activities (Note 10)	(25,836)		56,329
Net cash provided by operating activities	87,130		247,022

Investing Activities
Additions to property, plant and equipment	(136,627)		(106,682)

Changes in non-cash investing working capital (Note 10)	9,088		10,964
Net cash used in investing activities	(127,539)		(95,718)

Financing Activities
Debt issuance costs (Note 4)	(1,873)		—
Repayment of debt (Note 4)	—		(67,525)
Re-purchase of Senior Notes (Note 4)	(6,805)		—
Re-purchase of shares of Common Stock (Note 5)	(10,825)		—
Proceeds from exercise of stock options	5		1,285
Lease payments	(3,035)		(1,261)
Net cash used in financing activities	(22,533)		(67,501)

Foreign exchange gain (loss) on cash, cash equivalents and restricted cash and cash equivalents	5,759		(680)

Net (decrease) increase in cash, cash equivalents and restricted cash and cash equivalents	(57,183)		83,123
Cash, cash equivalents and restricted cash and cash equivalents, beginning of period (Note 10)	133,358		31,404
Cash, cash equivalents and restricted cash and cash equivalents, end of period (Note 10)	$	76,175	$	114,527

Supplemental cash flow disclosures (Note 10)

(See notes to the condensed consolidated financial statements)

Gran Tierra Energy Inc.

Condensed Consolidated Statements of Shareholders’ Equity (Unaudited)

(Thousands of U.S. Dollars)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Share Capital(1)	Share Capital(1)									Share Capital(1)
Balance, beginning of period	Balance, beginning of period	$	10,272	$	10,270	$	10,270	$	10,270	Balance, beginning of period	$	10,272	$	10,272	$	10,272	$	10,270
Issuance of common stock (Note 6)		—		—		2		—
Issuance of common stock (Note 5)										Issuance of common stock (Note 5)	—		—		—		2
Re-purchase of shares of common stock										Re-purchase of shares of common stock	(35)		—		(35)		—
Balance, end of period	Balance, end of period	10,272		10,270		10,272		10,270		Balance, end of period	$	10,237	$	10,272	$	10,237	$	10,272

Additional Paid-in Capital	Additional Paid-in Capital									Additional Paid-in Capital
Balance, beginning of period	Balance, beginning of period	1,290,075		1,286,235		1,287,582		1,285,018		Balance, beginning of period	$	1,291,973	$	1,289,162	$	1,291,354	$	1,287,582

Exercise of stock options	Exercise of stock options	9		10		1,292		18		Exercise of stock options	5		303		5		1,283

Stock-based compensation (Note 6)		627		648		1,837		1,857
Re-purchase of shares of common stock										Re-purchase of shares of common stock	(38,107)		—		(38,107)		—
Stock-based compensation (Note 5)										Stock-based compensation (Note 5)	578		610		1,197		1,210
Balance, end of period	Balance, end of period	1,290,711		1,286,893		1,290,711		1,286,893		Balance, end of period	$	1,254,449	$	1,290,075	$	1,254,449	$	1,290,075

Treasury Stock	Treasury Stock									Treasury Stock
Balance, beginning of period	Balance, beginning of period	—		—		—		—		Balance, beginning of period	$	(38,035)	$	—	$	(27,317)	$	—
Purchase of treasury shares (Note 6)		(14,365)		—		(14,365)		—
Purchase of treasury shares (Note 5)										Purchase of treasury shares (Note 5)	(107)		—		(10,825)		—
Cancellation of treasury shares										Cancellation of treasury shares	38,142		—		38,142		—
Balance, end of period	Balance, end of period	(14,365)		—		(14,365)		—		Balance, end of period	$	—	$	—	$	—	$	—

Deficit	Deficit									Deficit
Balance, beginning of period	Balance, beginning of period	$	(928,681)	$	(1,093,303)	$	(995,772)	$	(1,038,254)	Balance, beginning of period	$	(866,443)	$	(981,653)	$	(856,743)	$	(995,772)
Net income (loss)		38,663		35,007		105,754		(20,042)
Net (loss) income										Net (loss) income	(10,825)		52,972		(20,525)		67,091
Balance, end of period	Balance, end of period	(890,018)		(1,058,296)		(890,018)		(1,058,296)		Balance, end of period	$	(877,268)	$	(928,681)	$	(877,268)	$	(928,681)

Total Shareholders’ Equity	Total Shareholders’ Equity	396,600		238,867		396,600		238,867		Total Shareholders’ Equity	$	387,418	$	371,666	$	387,418	$	371,666

(1) Reflects our 1-for-10 reverse stock split that became effective May 5, 2023. See Note 5 in the notes to the condensed financial statements for further discussion.

(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” or “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”). 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 audited consolidated financial statements provide additional disclosures 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 consolidated financial statements as at and for the year ended December 31, ~~2021,~~2022, included in the Company’s ~~2021~~2022 Annual Report on Form 10-K.

The Company’s significant accounting policies are described in Note 2 of the consolidated financial statements, which are included in the Company’s ~~2021~~2022 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 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”) and income tax:~~

(Thousands of U.S. Dollars) As at September 30, 2022 As at December 31, 2021
Taxes Receivable
Current
VAT Receivable $ 52 $ 21,918
Income Tax Receivable — 23,588
$ 52 $ 45,506
Long-Term
Income Tax Receivable $ 25,952 $ 17,522
Taxes Payable
Current
VAT Payable $ 6,425 $ 6,620
Income Tax Payable 19,463 —
$ 25,888 $ 6,620
Total Taxes Receivable net of Taxes Payable $ 116 $ 56,408

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

(Thousands of U.S. Dollars) VAT Receivable (Payable) Income Tax Receivable Total Net Taxes Receivable
Balance, as at December 31, 2021 $ 15,298 $ 41,110 $ 56,408
Collected through direct government refunds (376) (99) (475)
Collected through sales contracts (124,655) — (124,655)
Taxes paid (1)
103,537 29,881 133,418
Current tax expense — (63,072) (63,072)
Foreign exchange loss (177) (1,331) (1,508)
Balance, as at September 30, 2022 $ (6,373) $ 6,489 $ 116

~~(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)	(Thousands of U.S. Dollars)	As at September 30, 2022		As at December 31, 2021		(Thousands of U.S. Dollars)	As at June 30, 2023		As at December 31, 2022
Oil and natural gas properties	Oil and natural gas properties					Oil and natural gas properties
Proved	Proved	$	4,500,932	$	4,302,473	Proved	$	4,765,640	$	4,617,804
Unproved	Unproved	111,531		131,865		Unproved	66,091		74,471
		4,612,463		4,434,338			4,831,731		4,692,275
Other(1)	Other(1)	44,550		34,943		Other(1)	65,816		61,386
		4,657,013		4,469,281			4,897,547		4,753,661
Accumulated depletion and depreciation and impairment		(3,600,996)		(3,473,484)
Accumulated depletion, depreciation and impairment						Accumulated depletion, depreciation and impairment	(3,755,983)		(3,652,759)
		$	1,056,017	$	995,797		$	1,141,564	$	1,100,902

(1) The “other” category includes right-of-use assets for operating and finance leases of ~~$22.4~~$44.9 million, which had a net book value of ~~$9.9~~$28.6 million as at ~~September~~June 30, ~~2022~~2023 (December 31, ~~2021~~2022 - ~~$13.9~~$38.9 million, which had a net book value of ~~$3.9~~$24.6 million).

For the three and ~~nine~~six months ended ~~September~~June 30, 2023 and 2022, ~~and 2021,~~respectively, the Company had no ceiling test impairment losses. The Company used ana 12-month unweighted average of the first-day-of the month Brent prprice prior to the ending date of the periods ~~ice~~ June 30, 2023, and 2022 of ~~$94.85~~$88.52 and ~~$60.12~~$87.88 per bbl, respectively, for the ~~purposes~~purpose of the ~~September 30, 2022 and 2021~~ ceiling test ~~calculations, respectively.~~calculations.

5.4. Debt and Debt Issuance Costs

The Company’s debt as at ~~September~~June 30, ~~2022,~~2023, and December 31, ~~2021,~~2022, was as follows:


(Thousands of U.S. Dollars)	(Thousands of U.S. Dollars)	As at September 30, 2022		As at December 31, 2021		(Thousands of U.S. Dollars)	As at June 30, 2023		As at December 31, 2022
Current
Revolving credit facility		$	—	$	67,500
Unamortized debt issuance costs		—		(513)

		$	—	$	66,987

Long-Term	Long-Term					Long-Term
6.25% Senior Notes, due February 2025	6.25% Senior Notes, due February 2025	$	279,909	$	300,000	6.25% Senior Notes, due February 2025	$	271,909	$	279,909
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

Unamortized debt issuance costs	Unamortized debt issuance costs	(11,572)		(14,030)		Unamortized debt issuance costs	(10,830)		(10,992)
		568,337		585,970			561,079		568,917
Long-term lease obligation(1)	Long-term lease obligation(1)	7,347		1,434		Long-term lease obligation(1)	24,728		20,676
		$	575,684	$	587,404
		$	575,684	$	654,391
Total debt						Total debt	$	585,807	$	589,593

(1) The current portion of the lease obligation has been included in accounts payable and accrued liabilities on the Company’s balance sheet and totaled ~~$2.6~~$7.8 million as at ~~September~~June 30, ~~2022~~2023 (December 31, ~~2021~~2022 - ~~$3.3~~$4.8 million).

~~During the three months ended September~~As of June 30, ~~2022,~~2023, the Company ~~terminated its prior revolving~~had a credit facility ~~agreement and entered into a new credit facility agreement~~ with a market lender in the global commodities industry. The credit facility has a borrowing base of up to $150 million, with $100 million as an initial commitment available at ~~September~~June 30, ~~2022,~~2023, and an option for an additional $50 million upon mutual agreement by the Company and the lender. The credit facility bears interest based on the secured overnight financing rate posted by the Federal Reserve Bank of New York plus a credit margin of ~~6.0%~~6.00% and a credit-adjusted spread of 0.26%. Undrawn amounts under the credit facility bear interest at ~~2.1%~~2.10% per annum, based on the amount available. The credit facility is secured by the Company’s Colombian assets and economic rights. It has a final maturity date of August 15, 2024, which may be extended to February 18, 2025, upon the satisfaction of certain conditions. The availability period for the draws ~~is six months commencing the date of~~under the credit ~~facility.~~facility expires on August 20, 2023. As of ~~September~~June 30, 2023, and December 31, 2022, the credit facility remained undrawn.

Under the terms of the credit facility, the Company is required to maintain compliance with the following financial covenants:

i.Global Coverage Ratio of at least 150% is, calculated using the net present value of the consolidated future cash flows of the Company up to the final maturity date discounted at 10% over the outstanding amount on the credit facility at each reporting period. The net present value of the consolidated future cash flows of the Company is required to be based on 80% of the prevailing ICE Brent forward strip.

ii.Prepayment Life Coverage Ratio of at least 150%, calculated using the estimated aggregate value of commodities to be delivered under the commercial contract from the commencement date to the final maturity date based on 80% of the prevailing ICE Brent forward strip and adjusted for quality and transportation discounts over the outstanding amount on the credit facility including interest and all other costs payable to the lender.

i.Liquidity ratio where the Company’s projected sources of cash exceed projected uses of cash by at least 1.15 times in each quarter period included in one year consolidated future cash flows. The future cash flows represent forecasted expected cash flows from operations, less anticipated capital expenditures, and certain other adjustments. The commodity pricing assumption used in this covenant is required to be 90% of the prevailing ICE Brent forward strip for the projected future cash flows.

~~As of September 30, 2022, the Company was in compliance with all the above covenants.~~Senior Notes

During the three and six months ended ~~September~~June 30, ~~2022,~~2023, the Company re-purchased in the open market ~~$20.1~~nil and $8.0 million, respectively, of 6.25% Senior Notes for cash consideration of ~~$17.3 million, including interest payable of $0.1~~$6.8 million. The re-purchase resulted in a ~~$2.6~~$1.1 million gain, which included the write-off of deferred financing fees of ~~$0.3~~$0.1 million. The re-purchase gain was recorded in “other gain” in the Company’s condensed consolidated statements of operations. The re-purchased 6.25% Senior Notes were not ~~cancelled~~canceled and ~~were~~are held by the Company as treasury bonds as of ~~September~~June 30, ~~2022.~~

2023.

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,					Three Months Ended June 30,				Six Months Ended June 30,
(Thousands of U.S. Dollars)	(Thousands of U.S. Dollars)	2022		2021		2022		2021		(Thousands of U.S. Dollars)	2023		2022		2023		2022
Contractual interest and other financing expenses	Contractual interest and other financing expenses	$	10,670	$	12,701	$	32,974	$	38,673	Contractual interest and other financing expenses	$	11,659	$	11,063	$	22,714	$	22,304
Amortization of debt issuance costs	Amortization of debt issuance costs	751		907		2,769		2,682		Amortization of debt issuance costs	1,019		1,131		1,800		2,018
		$	11,421	$	13,608	$	35,743	$	41,355		$	12,678	$	12,194	$	24,514	$	24,322

6.5. Share Capital


			Shares of Common Stock
Shares issued ~~and~~at December 31, 2022			36,889,862
Shares re-purchased			(2,274,746)
Shares outstanding at December 31, ~~2021~~2022			~~367,144,500~~ 34,615,116
Shares issued on option exercise			~~1,738,387~~589
Shares ~~issued at September 30, 2022~~re-purchased			~~368,882,887~~ (1,328,650)
~~Treasury stock~~			~~(10,733,702)~~
Shares issued and outstanding at ~~September~~June 30, ~~2022~~2023			~~358,149,185~~33,287,055

On May 5, 2023, the Company completed a 1-for-10 reverse stock split of the Company’s common stock. As a result of the reverse stock split, every ten of the Company’s issued shares of common stock were automatically combined into one issued share of common stock, without any change to the par value per share. All share and per share numbers have been adjusted to reflect the reverse stock split. The Company’s outstanding options were also proportionately adjusted as a result of the reverse stock split to increase the exercise price and reduce the number of shares issuable upon exercise.

During the ~~three months~~year ended ~~September 30,~~December 31, 2022, the Company implemented a share re-purchase program (the “2022 Program”) through the facilities of the Toronto Stock Exchange (“TSX”) and eligible alternative trading platforms in Canada. Under the 2022 Program, the Company iswas able to purchase at prevailing market prices up to ~~36,033,969~~3,603,396 shares of Common Stock, representing approximately 10% of the issued and outstanding shares of Common Stock as of August 22, 2022. The 2022 Program ~~will expire on August 31,~~expired in May 2023 ~~or earlier if the~~when 10% share maximum was reached. ~~Re-purchases are subject to the availability of stock, prevailing market conditions, the trading price of the Company’s stock, the Company’s financial performance and other conditions.~~

During the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, the Company re-purchased ~~10,733,702~~20,439 and 1,328,650 shares at a weighted average price of ~~$1.34~~$5.27 and $8.15 per ~~share. The re-purchased~~share, respectively (three and six months ended June 30, 2022 - nil). As of June 30, 2023, all 3,603,396 shares ~~were~~ held ~~by the Company and were recorded~~ as treasury stock ~~as of September 30, 2022.~~were canceled.

Equity Compensation Awards

The following table provides information about performance stock units (“PSUs”), deferred share units (“DSUs”), and stock option activity for the ~~nine~~six months ended ~~September~~June 30, ~~2022:~~2023:


		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, 2021		30,365,196	5,710,764	17,848,722	1.20
Balance, December 31, 2022						Balance, December 31, 2022	3,152,823	656,186	1,730,286	11.52
Granted	Granted	6,841,907	683,233	2,814,947	1.40	Granted	1,504,546	46,290	407,627	8.59
Exercised	Exercised	(4,396,646)	—	(1,738,387)	0.74	Exercised	(1,523,408)	—	(589)	7.93
Forfeited	Forfeited	(1,282,224)	—	(264,858)	1.24	Forfeited	(21,574)	—	(22,336)	5.79
Expired	Expired	—	—	(1,322,620)	2.78	Expired	—	—	(129,943)	24.87
Balance, September 30, 2022		31,528,233	6,393,997	17,337,804	1.16
Balance, June 30, 2023						Balance, June 30, 2023	3,112,387	702,476	1,985,045	10.11

For the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, there was ~~$0.2~~$0.3 million ~~of stock-based compensation recovery~~ and ~~$6.4~~$1.8 million of stock-based compensation expense, respectively. For the three and ~~nine~~six months ended ~~September~~June 30, ~~2021, there~~2022, stock-based compensation expense was ~~$1.1~~$2.0 million and ~~$6.6~~$6.5 million, ~~of stock-based compensation expense,~~ respectively.

~~At September~~As at June 30, ~~2022,~~2023, there was ~~$16.4~~$10.5 million (December 31, ~~2021~~2022 - ~~$11.8~~$10.5 million) of unrecognized compensation costs related to unvested PSUs and stock options, which are expected to be recognized over a weighted-average period of ~~1.6~~1.9 years. During the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, the Company paid out $15.1 million for PSUs vested on December 31, 2022 (six months ended June 30, 2022 - $2.4 million for PSUs vested on December 31, ~~2021 (nine months ended September 30, 2021 - $0.6 million for PSUs vested on December 31, 2020)~~2021).

Net (Loss) Income ~~(Loss)~~ per Share

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

Diluted net loss or income 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 re-purchased from the related proceeds. Anti-dilutive shares represent potentially dilutive securities excluded from the computation of diluted ~~income~~loss or ~~loss~~income 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 June 30,		Six Months Ended June 30,
		2022	2021	2022	2021		2023	2022	2023	2022
Weighted average number of common shares outstanding	Weighted average number of common shares outstanding	367,305,426	366,992,802	367,754,192	366,985,646	Weighted average number of common shares outstanding	33,299,505	36,857,138	33,872,270	36,798,229
Shares issuable pursuant to stock options	Shares issuable pursuant to stock options	11,330,144	1,574,305	12,024,315	—	Shares issuable pursuant to stock options	—	1,180,686	—	1,235,124
Shares assumed to be purchased from proceeds of stock options	Shares assumed to be purchased from proceeds of stock options	(7,324,832)	(826,385)	(7,390,603)	—	Shares assumed to be purchased from proceeds of stock options	—	(614,464)	—	(735,584)
Weighted average number of diluted common shares outstanding	Weighted average number of diluted common shares outstanding	371,310,738	367,740,722	372,387,904	366,985,646	Weighted average number of diluted common shares outstanding	33,299,505	37,423,360	33,872,270	37,297,769

For the three and ~~nine~~six months ended ~~September~~June 30, ~~2022, 6,161,672 and 5,863,881 options, respectively (three and nine months ended September 30, 2021- 16,362,882 and~~2023, all options, ~~respectively),~~ on a weighted average basis (three and six months ended June 30, 2022, 609,291 and 573,843 options, respectively), were excluded from the diluted (loss) income ~~(loss)~~ per share calculation as the options were anti-dilutive.

~~7. Oil Sales~~6. Revenue

The 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 (Colombia sales) or Oriente (Ecuador sales) crude differentials, quality and transportation discounts and premiums each month. For the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, 100% ~~(three and nine months ended September 30, 2021 - 100%)~~ of the Company’s revenue resulted from oil ~~sales.~~sales (three and six months ended June 30, 2022 - 100%). During the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, quality and transportation discounts were ~~14%~~18% and ~~13%~~20% of the average ICE Brent price (three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 - ~~16%~~12%), respectively. The increase in quality and ~~15%, respectively).~~transportation discounts were primarily a result of higher Vasconia and Castilla discounts.

During the three months ended ~~September~~June 30, ~~2022,~~2023, the Company’s production was sold primarily to one major customer in Colombia, representing 98% of the total sales volumes (three months ended ~~September~~June 30, ~~2021~~2022 - two customers, representing ~~63%~~55% and ~~25%~~44% of the total sales volumes).

During the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, the Company’s production was sold primarily to ~~two~~one major ~~customers~~customer in Colombia, representing ~~71% and 29%~~98% of the total sales volumes ~~(nine~~(six months ended ~~September~~June 30, ~~2021~~2022 - two customers, representing ~~68%~~56% and ~~24%~~43% of the total sales volumes).

As at ~~September~~June 30, ~~2022,~~2023, accounts receivable included nil of accrued sales revenue related to ~~September 2022~~June 2023 production (December 31, ~~2021~~2022 - nil related to December ~~2021~~2022 production).

7. Taxes

The ~~Company's~~Company’s effective tax rate was ~~49%~~ 145% for the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~ 2023, compared to ~~397%~~54% in the comparative period of ~~2021~~.2022. Current income tax expense was ~~$63.1~~$37.4 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~,2023, compared to ~~a small recovery~~$46.3 million in the corresponding period of ~~2021~~,2022, primarily due to ~~an increase~~a decrease in taxable income.

The deferred income tax expense for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~,2023, was ~~mainly the~~$29.3 million primarily as a result of tax depreciation being higher than accounting depreciation and the use of tax losses to offset taxable income in Colombia.

The deferred income tax expense in the comparative period of ~~2021~~2022 was ~~also~~$32.0 million as the result of tax depreciation being higher compared to accounting depreciation ~~and the use of tax losses to offset taxable income~~ in Colombia.

For the ~~nine~~six months ended ~~September~~June 30, ~~2022~~,2023, the difference between the effective tax rate of ~~49%~~145% and the 50% Colombian tax rate was primarily due to an increase in non-deductible foreign exchange adjustments, the impact of foreign taxes, non-deductible royalties in Colombia and non-deductible stock-based compensation. These were partially offset by a decrease in valuation allowance.

For the six months ended June 30, 2022, the difference between the effective tax rate of 54% and the 35% Colombian tax rate was primarily due to an increase in the impact of foreign taxes, foreign translation adjustments, increase in the valuation allowance, non-deductible third-party royalties in Colombia ~~other permanent differences,~~ and non-deductible stock-based ~~compensation which were partially offset by a decrease in foreign currency translations.~~

~~For the nine months ended September 30, 2021, the difference between the effective tax rate of~~ ~~397%~~ ~~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. shares.~~

9.8. Contingencies

Legal Proceedings

Gran Tierra has ~~a number of~~several lawsuits and claims ~~pending, including a dispute with the Agencia Nacional de Hidrocarburos (National Hydrocarbons Agency) (“ANH”) relating to the calculation of high price share royalties. Although the~~pending. The outcome of ~~these~~the lawsuits and disputes cannot be predicted with ~~certainty,~~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~~June 30, ~~2022,~~2023, the Company had provided letters of credit and other credit support totaling ~~$109.8~~$109.4 million (December 31, ~~2021~~2022 - ~~$103.0~~$111.1 million) as security relating to work commitment guarantees in Colombia and Ecuador contained in exploration contracts and other capital or operating requirements.

~~10.~~9. 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~~June 30, ~~2022,~~2023, the Company’s financial instruments recognized on the balance sheet consist of cash and cash equivalents, restricted cash and cash equivalents, accounts receivable, other long-term assets, accounts payable and accrued liabilities, ~~other short-term payables,~~ long-term debt ~~asset retirement obligation, long-term equity compensation reward liability~~ 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 its financial instruments as of ~~September~~June 30, ~~2022,~~2023, and December 31, ~~2021:~~2022:

As at September 30, 2022 As at December 31, 2021
(Thousands of U.S. Dollars)
Level 1
Assets
Prepaid equity forward - current (2)
$ 7,398 $ —
Prepaid equity forward - long-term(1)
12,339 7,578
$ 19,737 $ 7,578
Liabilities
DSUs liability - long-term(3)
$ 7,736 $ 4,346
6.25% Senior Notes 230,925 273,672
7.75% Senior Notes 234,000 271,500
$ 472,661 $ 549,518
Level 2
Assets
Derivative asset(2)
$ — 219
Restricted cash and cash equivalents - long-term(1)
5,518 4,903
$ 5,518 $ 5,122
Liabilities
Derivative liability $ — $ 2,976
Revolving credit facility — 66,987
PSUs liability - current (4)
13,657 2,710
PSUs liability - long-term(3)
10,089 9,372
$ 23,746 $ 82,045
Level 3
Liabilities
Asset retirement obligation - current(4)
$ 1,724 $ —
Asset retirement obligation - long-term 58,657 54,525
$ 60,381 $ 54,525


(Thousands of U.S. Dollars)	As at June 30, 2023		As at December 31, 2022
Level 1
Assets
Prepaid equity forward (“PEF”) - current (1)	$	4,898	$	5,981
PEF - long-term(2)	—		9,975
	$	4,898	$	15,956

Liabilities
6.25% Senior Notes	$	233,502	$	243,801
7.75% Senior Notes	227,321		241,455
	$	460,823	$	485,256
Level 2
Assets

Restricted cash and cash equivalents - long-term(2)	$	6,504	$	5,343

(1)The ~~long-term~~current portion of ~~restricted cash and Prepaid equity forward are~~PEF is 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)~~(2) ~~Long-term DSUs and PSUs liabilities are included in the~~The long-term ~~equity compensation award liability on the Company’s balance sheet~~

~~(4)Current~~ portion of ~~PSU liability~~restricted cash and ~~asset retirement obligation are~~PEF is included in the other ~~short-term liabilities~~long-term assets 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 short-term maturity of these instruments.

Restricted cash - long-term

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

~~Prepaid Equity Forward (“PEF”)~~PEF

To reduce the Company’s exposure to changes in the trading price of the Company’s common shares on outstanding PSUs and DSUs, 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 ~~September~~June 30, ~~2022,~~2023, the Company’s PEF had a notional amount of 161.0 million shares with a fair value of ~~$19.7~~$4.9 million (As at December 31, ~~2021~~2022 - 101.6 million shares with a fair value of ~~$7.6~~$16.0 million). During the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, the Company recorded a ~~$2.6~~$4.1 million and ~~$5.3~~$5.8 million ~~gain,~~loss, respectively, on the PEF in general and administrative expenses (three and ~~nine~~

six months ended ~~September~~June 30, ~~2021- $0.6~~2022 - $5.2 million loss and ~~$0.7~~$2.7 million gain, respectively). 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.

~~DSUs liability~~

~~The fair value of DSUs liability was estimated using the 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 PSUs performance factor.~~

Senior Notes

Financial instruments not recorded at fair value at ~~September~~June 30, ~~2022,~~2023, were the Senior Notes (Note 5)4).

At ~~September~~June 30, ~~2022,~~2023, the carrying amounts of the 6.25% Senior Notes and the 7.75% Senior Notes were ~~$275.5~~$268.9 million and ~~$292.9~~$293.9 million, respectively, which represented the aggregate principal amount less unamortized debt issuance costs, and the fair values were ~~$230.9~~$233.5 million and ~~$234.0~~$227.3 million, respectively.

~~Restricted cash~~During the three and six months ended June 30, 2023, the Company did not incur any gains or losses related to derivatives (three and six months ended June 30, 2022 - ~~long-term~~$5.2 million and $26.6 million, respective loss related to commodity price derivatives).

The fair value of long-term restricted cash and cash equivalents 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.

~~Asset retirement obligation~~

The Company’s non-recurring fair value measurements include asset retirement 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.

~~11.~~10. 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:


											As at June 30,				As at December 31,
(Thousands of U.S. Dollars)	(Thousands of U.S. Dollars)	As at September 30,				As at December 31,				(Thousands of U.S. Dollars)	2023		2022		2022		2021
		2022		2021		2021		2020
Cash and cash equivalents	Cash and cash equivalents	$	118,173	$	16,208	$	26,109	$	13,687	Cash and cash equivalents	$	68,529	$	108,558	$	126,873	$	26,109
Restricted cash and cash equivalents - current	Restricted cash and cash equivalents - current	1,142		392		392		427		Restricted cash and cash equivalents - current	1,142		1,142		1,142		392
Restricted cash and cash equivalents - long-term (1)	Restricted cash and cash equivalents - long-term (1)	5,518		3,532		4,903		3,409		Restricted cash and cash equivalents - long-term (1)	6,504		4,827		5,343		4,903
		$	124,833	$	20,132	$	31,404	$	17,523		$	76,175	$	114,527	$	133,358	$	31,404

(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,					Six Months Ended June 30,
(Thousands of U.S. Dollars)	(Thousands of U.S. Dollars)	2022		2021		(Thousands of U.S. Dollars)	2023		2022
Accounts receivable and other long-term assets	Accounts receivable and other long-term assets	$	2,811	$	(18,582)	Accounts receivable and other long-term assets	$	3,898	$	2,356
Derivatives	Derivatives	(16,594)		(2,427)		Derivatives	—		4,254
Inventory		(3,252)		(2,920)
Prepaids		(2,773)		42
PEF						PEF	11,887		(11,215)

Prepaids & Inventory						Prepaids & Inventory	(3,035)		(3,811)
Accounts payable and accrued and other long-term liabilities	Accounts payable and accrued and other long-term liabilities	37,862		14,417		Accounts payable and accrued and other long-term liabilities	(3,383)		8,264
Taxes receivable and payable	Taxes receivable and payable	54,784		27,426		Taxes receivable and payable	(35,203)		56,481
Net changes in assets and liabilities from operating activities	Net changes in assets and liabilities from operating activities	$	72,838	$	17,956	Net changes in assets and liabilities from operating activities	$	(25,836)	$	56,329

Changes in non-cash investing working capital for the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, were comprised of an increase in accounts payable and accrued liabilities of ~~$3.7~~$9.1 million ~~and an increase in accounts receivable of $0.4 million (nine~~(six months ended ~~September~~June 30, ~~2021,~~2022, an increase in accounts payable and accrued liabilities of ~~$0.6~~$11.2 million and ~~a decrease~~an increase in accounts receivable of ~~$0.1~~$0.2 million).

The following table provides additional supplemental cash flow disclosures:

Nine Months Ended September 30,
(Thousands of U.S. Dollars) 2022 2021
Cash paid for income taxes $ 29,881 $ 20,433
Cash paid for interest $ 31,455 $ 37,259
Non-cash investing activities:
Net liabilities related to property, plant and equipment, end of period $ 33,397 $ 29,420


	Six Months Ended June 30,
(Thousands of U.S. Dollars)	2023		2022
Cash paid for income taxes	$	71,457	$	20,468
Cash paid for interest	$	20,406	$	21,975

Non-cash investing activities:
Net liabilities related to property, plant and equipment, end of period	$	64,206	$	41,106

1513

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” as set out in Part I, Item 1 of this Quarterly Report on Form 10-Q, as well as the “Financial Statements and Supplementary Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Part II, Items 7 and 8, respectively, of our ~~2021~~2022 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” of this Quarterly Report on Form 10-Q, as well as Part I, Item 1A “Risk Factors” in our ~~2021~~2022 Annual Report on Form 10-K. On May 5, 2023, the Company completed 1-for-10 reverse stock split of the Company’s common stock. As a result of the reverse stock split, every ten of the Company’s issued shares of common stock were automatically combined into one issued share of common stock, without any change to the par value per share. All share and per share data included in this quarterly report have been retroactively adjusted to reflect the reverse stock split.

Financial and Operational Highlights

Key Highlights for the ~~third~~second quarter of ~~2022~~2023

•Net ~~income~~loss in the ~~third~~second quarter of ~~2022~~2023 was ~~$38.7~~$10.8 million or ~~$0.11~~$(0.33) per share basic and ~~$0.10 per share~~ diluted, compared to a net income of ~~$35.0~~$53.0 million or ~~$0.10~~$1.44 per share basic and $1.42 per share diluted in the ~~third~~second quarter of ~~2021~~2022

•Income before income taxes in the ~~third~~second quarter of ~~2022~~2023 was ~~$60.4~~$22.9 million compared to an income before income taxes of ~~$44.0~~$91.6 million in the ~~third~~second quarter of ~~2021~~2022

•During the ~~third~~second quarter of ~~2022,~~2023, we re-purchased ~~$20.1 million of 6.25% Senior Notes for a cash consideration of $17.3 million and re-purchased 10,733,702~~20,439 of our common shares at a weighted average price of ~~$1.34~~$5.27 per share

•Funds flow from operations(2) ~~increased~~decreased by ~~36%~~49% to ~~$93.7~~$53.1 million compared to the ~~third~~second quarter of ~~2021~~2022 and decreased by ~~10%~~12% from $60.0 million in the prior quarter. During the quarter, funds flow was reduced by $12.8 million of realized foreign exchange loss primarily associated with the payment of income taxes in the second quarter ~~of 2022~~

•~~During the third quarter, the Company generated $36.7 million of free cash flow(2). For the nine months ended September 30, 2022, the Company generated $121.0 million of free cash flow(2). Free cash flow was partially used for the re-purchase of Senior Notes and shares of Common Stock~~

•NAR production for the ~~third~~second quarter of ~~2022 was 23,472~~2023 increased by 17% to 27,204 BOPD, ~~which was comparable~~compared to ~~23,372~~23,215 BOPD ~~in the third quarter of 2021 and 23,215~~ in the second quarter of 2022 and increased by 7% from the first quarter of 2023

•Sales volumes for the ~~third~~second quarter of ~~2022 were 23,516~~2023 increased by 19% to 27,271 BOPD ~~which were comparable~~, compared to ~~23,833~~ 22,847 BOPD ~~in the third quarter of 2021 and 3% higher than 22,847~~ in the second quarter of 2022 and increased by 8% from the first quarter of 2023

•Oil sales were ~~$168.4~~$157.9 million, ~~24% higher~~23% lower compared to $135.3 million in the third quarter of 2021, as a result of a 33% increase in Brent price, offset by a 16% increase in quality and transportation discounts. Oil sales decreased by 18% compared to $205.8 million in the second quarter of 2022 as a result of a 13% decrease in Brent price and 3% higher quality and transportation discounts.

•Operating expenses were $41.8 million, 9% higher than $38.4 million in the third quarter of 2021, due to increased workovers and higher lifting costs as a result of higher environmental, community aids, and lower recoveries from partners in the Suroriente Block as a result of social blockades. Operating expenses increased by 6% from $39.5 million in the second quarter of 2022, primarily due to a 31% decrease in Brent price, an increase of 8% in the quality and transportation discounts and offset by 19% higher ~~workover activities during~~sales volumes. Oil sales increased by 10% from $144.2 million in the ~~current~~first quarter of 2023 due to a 8% higher sales volumes and lower quality and transportation discounts

•~~Transportation~~Operating expenses ~~decreased~~increased by 23% ~~compared~~ to ~~the third quarter of 2021. During the third quarter of 2021, alternative transportation routes were utilized due~~$48.5 million or by $0.54 per bbl to ~~the maintenance of the Impala terminal, which had higher transportation costs~~$19.54 per ~~bbl. Compared~~bbl when compared to the second quarter of 2022, ~~transportation~~primarily as a result of higher lifting costs offset by lower workover activities. Operating expenses ~~decreased by 4%~~increased from $41.4 million or $18.26 per bbl in the prior quarter, primarily due to higher lifting costs

•Transportation expenses per bbl increased by $0.28 in the ~~use~~second quarter of ~~alternative~~2023 due to higher transportation tariffs affecting Acordionero sales, utilization of new transportation routes ~~which resulted in lower transportation~~for new exploration wells and Ecuador sales when compared to the second quarter of 2022 and increased $0.14 from the first quarter of 2023 due to higher trucking costs inresulting from utilization longer distance delivery points and depreciation of U.S. dollar against the ~~current quarter~~Colombian peso

•Operating netback(2) ~~increased by 32%~~decreased to ~~$124.1~~$105.7 million compared to ~~$93.7 million in the third quarter of 2021 and decreased 24% from~~ $163.8 million in the second quarter of 2022 and increased from $99.8 million in the prior quarter

•Adjusted EBITDA(2) ~~increased by 48%~~decreased to ~~$121.2~~$84.5 million compared to ~~$81.8 million in the third quarter of 2021 and decreased by 13% from~~ $140.1 million in the second quarter of ~~2022. The trailing twelve-month~~2022 and decreased from $88.7 million in the prior quarter. During the quarter, Adjusted EBITDA was ~~$462.3~~reduced by $12.8 million ~~resulting~~due to realized foreign exchange loss primarily associated with the payment of income taxes in ~~Net Debt(2)~~ ~~to Adjusted EBITDA(2)~~ ~~of 1.0 times.~~the second quarter

•Quality and transportation discounts for the ~~third~~second quarter of ~~2022~~2023 increased to ~~$13.37~~$14.10 per bbl compared to ~~$11.51 per bbl in the third quarter of 2021 and~~ $13.00 per bbl in the second quarter of 2022, primarily as a result of the widening of the Castilla and Vasconia differentials and decreased from $18.45 per bbl in the prior quarter

•General and administrative ~~expenses~~ (“G&A”) ~~before stock-based compensation increased by 52% compared to the third quarter of 2021 due to higher costs for special projects and lease obligations in the current quarter. G&A~~ expenses before stock-based compensation increased by ~~6% or $0.06 per bbl from~~22% compared to the second quarter of 2022 ~~primarily~~ due to higher costs ~~for~~attributed to optimization projects and decreased by 15% from the first quarter of 2023

•Capital additions for the ~~third~~second quarter of ~~2022~~2023 were ~~$57.0~~$65.6 million, an increase of ~~64%~~1% compared to the ~~third~~second quarter of ~~2021, as a result~~2022, and decreased 8% from the first quarter of 2023 due to the acceleration of the 2023 drilling program in the ~~Acordionero field and exploration wells in Colombia and Ecuador and decreased 13% from the second~~first quarter of ~~2022~~2023

1614


(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 June 30,					Three Months Ended March 31,		Six Months Ended June 30,
		2022		2021		% Change	2022		2022		2021		% Change

															2023		2022		% Change	2023		2023		2022		% Change
Average Daily Volumes (BOPD)	Average Daily Volumes (BOPD)													Average Daily Volumes (BOPD)
Consolidated	Consolidated													Consolidated
Working Interest (“WI”) Production Before Royalties	Working Interest (“WI”) Production Before Royalties	30,391		28,957		5	30,607		30,123		25,501		18	Working Interest (“WI”) Production Before Royalties	33,719		30,607		10	31,611		32,671		29,988		9
Royalties	Royalties	(6,919)		(5,585)		24	(7,392)		(6,948)		(4,531)		53	Royalties	(6,515)		(7,392)		(12)	(6,085)		(6,301)		(6,962)		(9)
Production NAR	Production NAR	23,472		23,372		—	23,215		23,175		20,970		11	Production NAR	27,204		23,215		17	25,526		26,370		23,026		15
Decrease (Increase) in Inventory	Decrease (Increase) in Inventory	44		461		(90)	(368)		(141)		(105)		(34)	Decrease (Increase) in Inventory	67		(368)		(118)	(355)		(143)		(236)		39
Sales(1)	Sales(1)	23,516		23,833		(1)	22,847		23,034		20,865		10	Sales(1)	27,271		22,847		19	25,171		26,227		22,790		15

Net Income (Loss)		$	38,663	$	35,007	10	$	52,972	$	105,754	$	(20,042)	628
Net (Loss) Income														Net (Loss) Income	$	(10,825)	$	52,972	(120)	$	(9,700)	$	(20,525)	$	67,091	(131)

Operating Netback	Operating Netback													Operating Netback
Oil Sales	Oil Sales	$	168,397	$	135,319	24	$	205,785	$	548,751	$	327,435	68	Oil Sales	$	157,902	$	205,785	(23)	$	144,190	$	302,092	$	380,354	(21)
Operating Expenses	Operating Expenses	(41,837)		(38,448)		9	(39,494)		(116,266)		(95,366)		22	Operating Expenses	(48,491)		(39,494)		23	(41,369)		(89,860)		(74,429)		21

Transportation Expenses	Transportation Expenses	(2,417)		(3,130)		(23)	(2,513)		(7,764)		(8,731)		(11)	Transportation Expenses	(3,691)		(2,513)		47	(3,066)		(6,757)		(5,347)		26
Operating Netback(2)	Operating Netback(2)	$	124,143	$	93,741	32	$	163,778	$	424,721	$	223,338	90	Operating Netback(2)	$	105,720	$	163,778	(35)	$	99,755	$	205,475	$	300,578	(32)

G&A Expenses Before Stock-Based Compensation	G&A Expenses Before Stock-Based Compensation	$	8,284	$	5,444	52	$	7,847	$	23,910	$	19,394	23	G&A Expenses Before Stock-Based Compensation	$	9,549	$	7,847	22	$	11,196	$	20,745	$	15,626	33
G&A Stock-Based Compensation (Recovery) Expense		(170)		1,053		(116)	1,989		6,376		6,597		(3)
G&A Stock-Based Compensation Expense														G&A Stock-Based Compensation Expense	317		1,989		(84)	1,500		1,817		6,546		(72)
G&A Expenses, Including Stock-Based Compensation	G&A Expenses, Including Stock-Based Compensation	$	8,114	$	6,497	25	$	9,836	$	30,286	$	25,991	17	G&A Expenses, Including Stock-Based Compensation	$	9,866	$	9,836	—	$	12,696	$	22,562	$	22,172	2

Adjusted EBITDA(2)	Adjusted EBITDA(2)	$	121,236	$	81,804	48	$	140,113	$	380,727	$	160,007	138	Adjusted EBITDA(2)	$	84,522	$	140,113	(40)	$	88,677	$	173,199	$	259,491	(33)

Funds Flow From Operations(2)	Funds Flow From Operations(2)	$	93,746	$	69,103	36	$	103,625	$	284,681	$	121,348	135	Funds Flow From Operations(2)	$	53,106	$	103,625	(49)	$	60,016	$	113,122	$	190,935	(41)

Capital Expenditures	Capital Expenditures	$	57,035	$	34,839	64	$	65,199	$	163,717	$	109,650	49	Capital Expenditures	$	65,565	$	65,199	1	$	71,062	$	136,627	$	106,682	28

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

(2) Non-GAAP measures

Operating netback, ~~net debt,~~ EBITDA, adjusted EBITDA, and funds flow from operations ~~and free cash flow,~~ are non-GAAP measures 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 (loss) 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.

Net debt as of September 30, 2022, was $461.7 million, calculated using the sum of 6.25% Senior Notes and 7.75% Senior Notes, excluding deferred financing fees of $579.9 million, less cash and cash equivalents of $118.2 million.

EBITDA, as presented, is defined as net (loss) income ~~or loss~~ adjusted for depletion, depreciation and accretion (“DD&A”) expenses, interest expense and income tax expense. Adjusted EBITDA, as presented, is defined as EBITDA adjusted for non-cash lease expense, lease payments, unrealized foreign exchange gain or loss, stock-based compensation expense or recovery, unrealized derivative instruments gain or loss ~~gain on re-purchase of Senior Notes, other financial instruments gain or loss~~ and other ~~loss.~~gain. 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, Twelve Months Rolling Ending September 30,
(Thousands of U.S. Dollars) 2022 2021 2022 2022 2021 2022
Net income (loss) $ 38,663 $ 35,007 $ 52,972 $ 105,754 $ (20,042) $ 168,278
Adjustments to reconcile net income (loss) to EBITDA and Adjusted EBITDA
DD&A expenses 45,320 38,055 42,216 128,499 98,300 170,073
Interest expense 11,421 13,608 12,194 35,743 41,355 48,769
Income tax expense 21,734 8,955 38,666 99,940 26,795 53,799
EBITDA (non-GAAP) $ 117,138 $ 95,625 $ 146,048 $ 369,936 $ 146,408 $ 440,919
Non-cash lease expense 851 408 747 2,009 1,222 2,454
Lease payments (402) (384) (388) (1,134) (1,239) (1,516)
Unrealized foreign exchange loss 6,636 3,465 4,341 6,138 16,945 11,072
Stock-based compensation (recovery) expense (170) 1,053 1,989 6,376 6,597 8,175
Unrealized derivative instruments (gain) loss (219) (4,729) (12,624) — 2,499 (12,088)
Gain on re-purchase of Senior Notes (2,598) — — (2,598) — (2,598)
Other financial instruments (gain) loss — (13,634) — — (12,425) 15,794
Other loss — — — — — 44
Adjusted EBITDA (non-GAAP) $ 121,236 $ 81,804 $ 140,113 $ 380,727 $ 160,007 $ 462,256


	Three Months Ended June 30,				Three Months Ended March 31,		Six Months Ended June 30,
(Thousands of U.S. Dollars)	2023		2022		2023		2023		2022
Net (loss) income	$	(10,825)	$	52,972	$	(9,700)	$	(20,525)	$	67,091
Adjustments to reconcile net (loss) income to EBITDA and Adjusted EBITDA
DD&A expenses	56,209		42,216		51,721		107,930		83,179
Interest expense	12,678		12,194		11,836		24,514		24,322
Income tax expense	33,732		38,666		32,883		66,615		78,206
EBITDA (non-GAAP)	$	91,794	$	146,048	$	86,740	$	178,534	$	252,798
Non-cash lease expense	1,109		747		1,144		2,253		1,158
Lease payments	(636)		(388)		(606)		(1,242)		(732)
Unrealized foreign exchange (gain) loss	(8,062)		4,341		514		(7,548)		(498)
Stock-based compensation expense	317		1,989		1,500		1,817		6,546
Unrealized derivative instruments (gain) loss	—		(12,624)		—		—		219
Other gain	—		—		(615)		(615)		—

Adjusted EBITDA (non-GAAP)	$	84,522	$	140,113	$	88,677	$	173,199	$	259,491

Funds flow from operations, as presented, is defined as net (loss) income ~~or loss~~ adjusted for DD&A expenses, deferred income 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 ~~gain on re-purchase of Senior Notes,~~ and other ~~financial instruments gain or loss.~~gain. 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 June 30,				Three Months Ended March 31,		Six Months Ended June 30,
(Thousands of U.S. Dollars)	2023		2022		2023		2023		2022
Net (loss) income	$	(10,825)	$	52,972	$	(9,700)	$	(20,525)	$	67,091
Adjustments to reconcile net (loss) income to funds flow from operations
DD&A expenses	56,209		42,216		51,721		107,930		83,179
Deferred income tax expense	13,975		13,241		15,277		29,252		31,954
Stock-based compensation expense	317		1,989		1,500		1,817		6,546
Amortization of debt issuance costs	1,019		1,131		781		1,800		2,018
Non-cash lease expense	1,109		747		1,144		2,253		1,158
Lease payments	(636)		(388)		(606)		(1,242)		(732)
Unrealized foreign exchange (gain) loss	(8,062)		4,341		514		(7,548)		(498)
Derivative instruments loss	—		5,172		—		—		26,611
Cash settlements on derivative instruments	—		(17,796)		—		—		(26,392)
Other gain	—		—		(615)		(615)		—

Funds flow from operations (non-GAAP)	$	53,106	$	103,625	$	60,016	$	113,122	$	190,935

Three Months Ended September 30, Three Months Ended June 30, Nine Months Ended September 30,
(Thousands of U.S. Dollars) 2022 2021 2022 2022 2021
Net income (loss) $ 38,663 $ 35,007 $ 52,972 $ 105,754 $ (20,042)
Adjustments to reconcile net income (loss) to funds flow from operations
DD&A expenses 45,320 38,055 42,216 128,499 98,300
Deferred tax expense 4,914 8,955 13,241 36,868 26,809
Stock-based compensation (recovery) expense (170) 1,053 1,989 6,376 6,597
Amortization of debt issuance costs 751 907 1,131 2,769 2,682
Non-cash lease expense 851 408 747 2,009 1,222
Lease payments (402) (384) (388) (1,134) (1,239)
Unrealized foreign exchange loss 6,636 3,465 4,341 6,138 16,945
Derivative instruments loss — 2,603 5,172 26,611 47,540
Cash settlements on derivative instruments (219) (7,332) (17,796) (26,611) (45,041)
Gain on re-purchase of Senior Notes (2,598) — — (2,598) —
Other financial instruments gain — (13,634) — — (12,425)
Funds flow from operations (non-GAAP) $ 93,746 $ 69,103 $ 103,625 $ 284,681 $ 121,348
Capital expenditures $ 57,035 $ 34,839 $ 65,199 $ 163,717 $ 109,650
Free cash flow (non-GAAP) $ 36,711 $ 34,264 $ 38,426 $ 120,964 $ 11,698

Additional Operational Results


		Three Months Ended September 30,					Three Months Ended June 30,		Nine Months Ended September 30,						Three Months Ended June 30,					Three Months Ended March 31,		Six Months Ended June 30,
(Thousands of U.S. Dollars)	(Thousands of U.S. Dollars)	2022		2021		% Change	2022		2022		2021		% Change	(Thousands of U.S. Dollars)	2023		2022		% Change	2023		2023		2022		% Change
Oil sales	Oil sales	$	168,397	$	135,319	24	$	205,785	$	548,751	$	327,435	68	Oil sales	$	157,902	$	205,785	(23)	$	144,190	$	302,092	$	380,354	(21)
Operating expenses	Operating expenses	41,837		38,448		9	39,494		116,266		95,366		22	Operating expenses	48,491		39,494		23	41,369		89,860		74,429		21

Transportation expenses	Transportation expenses	2,417		3,130		(23)	2,513		7,764		8,731		(11)	Transportation expenses	3,691		2,513		47	3,066		6,757		5,347		26
Operating netback(1)	Operating netback(1)	124,143		93,741		32	163,778		424,721		223,338		90	Operating netback(1)	105,720		163,778		(35)	99,755		205,475		300,578		(32)

DD&A expenses														DD&A expenses	56,209		42,216		33	51,721		107,930		83,179		30

DD&A expenses		45,320		38,055		19	42,216		128,499		98,300		31
G&A expenses before stock-based compensation	G&A expenses before stock-based compensation	8,284		5,444		52	7,847		23,910		19,394		23	G&A expenses before stock-based compensation	9,549		7,847		22	11,196		20,745		15,626		33
G&A stock-based compensation (recovery) expense		(170)		1,053		(116)	1,989		6,376		6,597		(3)
Foreign exchange loss		1,489		2,650		(44)	2,722		486		15,824		(97)
G&A stock-based compensation expense														G&A stock-based compensation expense	317		1,989		(84)	1,500		1,817		6,546		(72)
Foreign exchange loss (gain)														Foreign exchange loss (gain)	4,707		2,722		73	1,702		6,409		(1,003)		739
Derivative instruments loss	Derivative instruments loss	—		2,603		(100)	5,172		26,611		47,540		(44)	Derivative instruments loss	—		5,172		(100)	—		—		26,611		(100)
Other financial instruments gain		—		(13,634)		(100)	—		—		(12,425)		(100)
Gain on re-purchase of Senior Notes		(2,598)		—		100	—		(2,598)		—		100
Other gain														Other gain	—		—		—	(615)		(615)		—		100
Interest expense	Interest expense	11,421		13,608		(16)	12,194		35,743		41,355		(14)	Interest expense	12,678		12,194		4	11,836		24,514		24,322		1
		63,746		49,779		28	72,140		219,027		216,585		1		83,460		72,140		16	77,340		160,800		155,281		4

Interest income														Interest income	647		—		100	768		1,415		—		100

Income before income taxes														Income before income taxes	22,907		91,638		(75)	23,183		46,090		145,297		(68)

Current income tax expense														Current income tax expense	19,757		25,425		(22)	17,606		37,363		46,252		(19)
Deferred income tax expense														Deferred income tax expense	13,975		13,241		6	15,277		29,252		31,954		(8)
															33,732		38,666		(13)	32,883		66,615		78,206		(15)
Net (loss) income														Net (loss) income	$	(10,825)	$	52,972	(120)	$	(9,700)	$	(20,525)	$	67,091	(131)

Sales Volumes (NAR)														Sales Volumes (NAR)

Income before income taxes		60,397		43,962		37	91,638		205,694		6,753		2946
Total sales volumes, BOPD														Total sales volumes, BOPD	27,271		22,847		19	25,171		26,227		22,790		15

Brent Price per bbl														Brent Price per bbl	$	77.73	$	111.98	(31)	$	82.10	$	79.91	$	104.94	(24)

Consolidated Results of Operations per bbl Sales Volumes NAR														Consolidated Results of Operations per bbl Sales Volumes NAR
Oil sales														Oil sales	$	63.63	$	98.98	(36)	$	63.65	$	63.64	$	92.21	(31)
Operating expenses														Operating expenses	19.54		19.00		3	18.26		18.93		18.04		5
Transportation expenses														Transportation expenses	1.49		1.21		23	1.35		1.42		1.30		9
Operating netback(1)														Operating netback(1)	42.60		78.77		(46)	44.04		43.29		72.87		(41)

DD&A expenses														DD&A expenses	22.65		20.31		12	22.83		22.74		20.17		13

G&A expenses before stock-based compensation														G&A expenses before stock-based compensation	3.85		3.77		2	4.94		4.37		3.79		15
G&A stock-based compensation expense														G&A stock-based compensation expense	0.13		0.96		(86)	0.66		0.38		1.59		(76)
Foreign exchange loss (gain)														Foreign exchange loss (gain)	1.90		1.31		45	0.75		1.35		(0.24)		663
Derivative instruments loss														Derivative instruments loss	—		2.49		(100)	—		—		6.45		(100)

1917

Current income tax expense (recovery) 16,820 — 100 25,425 63,072 (14) 450,614
Deferred income tax expense 4,914 8,955 (45) 13,241 36,868 26,809 38
21,734 8,955 143 38,666 99,940 26,795 273
Net income (loss) $ 38,663 $ 35,007 10 $ 52,972 $ 105,754 $ (20,042) 628
Sales Volumes (NAR)
Total sales volumes, BOPD 23,516 23,833 (1) 22,847 23,034 20,865 10
Brent Price per bbl $ 97.70 $ 73.23 33 $ 111.98 $ 102.48 $ 67.97 51
Consolidated Results of Operations per bbl Sales Volumes NAR
Oil sales $ 77.84 $ 61.72 26 $ 98.98 $ 87.27 $ 57.48 52
Operating expenses 19.34 17.53 10 19.00 18.49 16.74 10
Transportation expenses 1.12 1.43 (22) 1.21 1.23 1.53 (20)
Operating netback(1)
57.38 42.76 34 78.77 67.55 39.21 72
DD&A expenses 20.95 17.36 21 20.31 20.43 17.26 18
G&A expenses before stock-based compensation 3.83 2.48 54 3.77 3.80 3.40 12
G&A stock-based compensation (recovery) expense (0.08) 0.48 (117) 0.96 1.01 1.16 (13)
Foreign exchange loss 0.69 1.21 (43) 1.31 0.08 2.78 (97)
Derivative instruments loss — 1.19 (100) 2.49 4.23 8.35 (49)
Other financial instruments gain — (6.22) (100) — — (2.18) (100)
Gain on re-purchase of Senior Notes (1.20) — 100 — (0.41) — 100
Interest expense 5.28 6.21 (15) 5.87 5.68 7.26 (22)
29.47 22.71 30 34.71 34.82 38.03 (8)
Income before income taxes 27.91 20.05 39 44.06 32.73 1.18 2,674
Current income tax expense (recovery) 7.77 — 100 12.23 10.03 — 100
Deferred income tax expense 2.27 4.08 (44) 6.37 5.86 4.71 24
10.04 4.08 146 18.60 15.89 4.71 237
Net income (loss) $ 17.87 $ 15.97 12 $ 25.46 $ 16.84 $ (3.53) (577)


Other gain	—		—		—	(0.27)		(0.13)		—		100
Interest expense	5.11		5.87		(13)	5.22		5.16		5.90		(13)
	33.64		34.71		(3)	34.13		33.87		37.66		(10)

Interest income	0.26		—		100	0.34		0.30		—		100

Income before income taxes	9.22		44.06		(79)	10.25		9.72		35.21		(72)

Current income tax expense	7.96		12.23		(35)	7.77		7.87		11.21		(30)
Deferred income tax expense	5.63		6.37		(12)	6.74		6.16		7.75		(21)
	13.59		18.60		(27)	14.51		14.03		18.96		(26)
Net (loss) income	$	(4.37)	$	25.46	(117)	$	(4.26)	$	(4.31)	$	16.25	(127)

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

Oil Production and Sales Volumes, BOPD


		Three Months Ended September 30,				Three Months Ended June 30,		Nine Months Ended September 30,					Three Months Ended June 30,				Three Months Ended March 31,		Six Months Ended June 30,
		2022		2021		2022		2022		2021			2023		2022		2023		2023		2022
Average Daily Volumes (BOPD)	Average Daily Volumes (BOPD)											Average Daily Volumes (BOPD)
WI Production Before Royalties	WI Production Before Royalties	30,391		28,957		30,607		30,123		25,501		WI Production Before Royalties	33,719		30,607		31,611		32,671		29,988
Royalties	Royalties	(6,919)		(5,585)		(7,392)		(6,948)		(4,531)		Royalties	(6,515)		(7,392)		(6,085)		(6,301)		(6,962)
Production NAR	Production NAR	23,472		23,372		23,215		23,175		20,970		Production NAR	27,204		23,215		25,526		26,370		23,026
Decrease (Increase) in Inventory	Decrease (Increase) in Inventory	44		461		(368)		(141)		(105)		Decrease (Increase) in Inventory	67		(368)		(355)		(143)		(236)
Sales	Sales	23,516		23,833		22,847		23,034		20,865		Sales	27,271		22,847		25,171		26,227		22,790

Royalties, % of WI Production Before Royalties	Royalties, % of WI Production Before Royalties	23	%	19	%	24	%	23	%	18	%	Royalties, % of WI Production Before Royalties	19	%	24	%	19	%	19	%	23	%

Oil production NAR for the three and six months ended ~~September~~June 30, ~~2022 was consistent with the corresponding period of 2021. Oil production NAR for the nine months ended September 30, 2022,~~2023, increased by ~~11%~~17% and 15%, respectively, compared to the corresponding ~~period~~periods of ~~2021~~2022 due to ~~the~~ successful drilling and workover ~~campaign~~campaigns in ~~the~~ Acordionero, Costayaco and ~~Costayaco fields.~~ Moqueta fields in Colombia.

Oil production NAR ~~was comparable~~increased by 7% compared to the prior ~~quarter.~~quarter for the same reasons mentioned above.

Royalties as a percentage of WI production for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022, increased to 23%~~2023, decreased by 19% compared to the corresponding periods of ~~2021~~2022 commensurate with the ~~increase~~decrease in benchmark oil prices and the price sensitive royalty regime in Colombia. ~~Compared to the prior quarter, royalties~~Royalties as a percentage of WI production ~~remained comparable.~~were comparable to the prior quarter.

2118

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

Realized price per bbl for the three andsix months ended June 30, 2023, decreased by 36% and 31%, respectively, compared to the corresponding periods of 2022, primarily as a result of a 31% and 24% decrease in Brent price and higher differentials. For the three andsix months ended June 30, 2023, Castilla differentials increased to $9.41 and $12.29 per bbl from $7.82 and $7.10 per bbl, respectively, in the corresponding periods of 2022 and Vasconia differentials increased to $5.53 and $6.70 per bbl from $5.09 and $4.35 per bbl, respectively, in the corresponding periods of 2022. Compared to the prior quarter, the average realized price per bbl was comparable.

Oil sales for the three and six months ended June 30, 2023, decreased by 23% and 21% to $157.9 million and $302.1 million, respectively, compared to the corresponding periods of 2022 due to a 31% and 24% decrease in Brent price and higher Castilla and Vasconia differentials. During the first quarter of 2023, we commenced oil sales in Ecuador, which contributed $1.8 million and $4.8 million to oil sales and were subject to a $11.43 and $12.43 per bbl Oriente differential for the three and six months ended June 30, 2023, respectively.

Compared to the prior quarter, oil sales increased by 10%, primarily as a result of an 8% increase in sales volumes and the narrowing of quality and transportation differentials, partially offset by a 5% decrease in Brent price.

The following table shows the effect of changes in realized price and sale volumes on our oil sales for the three and six months ended June 30, 2023, compared to the prior quarter and the corresponding periods of 2022:


(Thousands of U.S. Dollars)	Second Quarter 2023 Compared with First Quarter 2023		Second Quarter 2023 Compared with Second Quarter 2022		Six Months Ended June 30, 2023 Compared with Six Months Ended June 30, 2022
Oil sales for the comparative period	$	144,190	$	205,785	$	380,354
Realized sales price decrease effect	(56)		(87,731)		(135,636)
Sales volumes increase effect	13,768		39,848		57,374
Oil sales for the three and six months ended June 30, 2023	$	157,902	$	157,902	$	302,092

Operating Netback


		Three Months Ended September 30,				Three Months Ended June 30,		Nine Months Ended September 30,					Three Months Ended June 30,				Three Months Ended March 31,		Six Months Ended June 30,
(Thousands of U.S. Dollars)	(Thousands of U.S. Dollars)	2022		2021		2022		2022		2021		(Thousands of U.S. Dollars)	2023		2022		2023		2023		2022

Oil Sales	Oil Sales	$	168,397	$	135,319	$	205,785	$	548,751	$	327,435	Oil Sales	$	157,902	$	205,785	$	144,190	$	302,092	$	380,354
Transportation Expenses	Transportation Expenses	(2,417)		(3,130)		(2,513)		(7,764)		(8,731)		Transportation Expenses	(3,691)		(2,513)		(3,066)		(6,757)		(5,347)
		165,980		132,189		203,272		540,987		318,704			154,211		203,272		141,124		295,335		375,007
Operating Expenses	Operating Expenses	(41,837)		(38,448)		(39,494)		(116,266)		(95,366)		Operating Expenses	(48,491)		(39,494)		(41,369)		(89,860)		(74,429)
Operating Netback(1)	Operating Netback(1)	$	124,143	$	93,741	$	163,778	$	424,721	$	223,338	Operating Netback(1)	$	105,720	$	163,778	$	99,755	$	205,475	$	300,578

(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	$	97.70	$	73.23	$	111.98	$	102.48	$	67.97	Brent	$	77.73	$	111.98	$	82.10	$	79.91	$	104.94
One Month Forward Brent (“M+1”) Adjustment		(6.49)		—		—		(2.23)		—
Quality and Transportation Discounts	Quality and Transportation Discounts	(13.37)		(11.51)		(13.00)		(12.98)		(10.49)		Quality and Transportation Discounts	(14.10)		(13.00)		(18.45)		(16.27)		(12.73)
Average Realized Price	Average Realized Price	77.84		61.72		98.98		87.27		57.48		Average Realized Price	63.63		98.98		63.65		63.64		92.21
Transportation Expenses	Transportation Expenses	(1.12)		(1.43)		(1.21)		(1.23)		(1.53)		Transportation Expenses	(1.49)		(1.21)		(1.35)		(1.42)		(1.30)
Average Realized Price Net of Transportation Expenses	Average Realized Price Net of Transportation Expenses	76.72		60.29		97.77		86.04		55.95		Average Realized Price Net of Transportation Expenses	62.14		97.77		62.30		62.22		90.91
Operating Expenses	Operating Expenses	(19.34)		(17.53)		(19.00)		(18.49)		(16.74)		Operating Expenses	(19.54)		(19.00)		(18.26)		(18.93)		(18.04)
Operating Netback(1)	Operating Netback(1)	$	57.38	$	42.76	$	78.77	$	67.55	$	39.21	Operating Netback(1)	$	42.60	$	78.77	$	44.04	$	43.29	$	72.87

~~Oil sales~~ for the three months ended September 30, 2022, increased by 24% to $168.4 million compared to the corresponding period of 2021 due to a 33% increase in Brent price, partially offset by a 16% increase in the quality and transportation discounts and M+1 Brent adjustment, (as defined below). Castilla differentials increased to $9.15 from $6.51 per bbl in the corresponding period of 2021, and Vasconia differentials decreased to $3.77 from $4.02 in the corresponding period of 2021. During the three months ended September 30, 2022, we entered into new marketing arrangements moving from the Brent monthly average of the month of delivery (“M pricing”) to the Brent monthly average following the month of deliveries (“M+1 Brent”). The Company’s revenue was negatively impacted as the Brent monthly average decreased throughout the quarter.

For the nine months ended September 30, 2022, oil sales increased by 68% to $548.8 million compared to the corresponding period of 2021 due to a 51% increase in Brent price and 10% higher sales volumes, partially offset by 24% increase in the quality and transportation discounts and M+1 Brent adjustment. Castilla and Vasconia differentials increased to $7.89 and $4.17 from $4.50 and $2.65 per bbl in the corresponding period of 2021, respectively.

~~Compared to the prior quarter, oil sales decreased by 18%, primarily as a result of a 13% decrease in Brent price, 3% higher quality and transportation discounts and M+1 Brent adjustment.~~

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, 2022, compared to the prior quarter and the corresponding periods of 2021:

(Thousands of U.S. Dollars) Third Quarter 2022 Compared with Second Quarter 2022 Third Quarter 2022 Compared with Third Quarter 2021 Nine Months Ended September 30, 2022 Compared with Nine Months Ended September 30, 2021
Oil sales for the comparative period $ 205,785 $ 135,319 $ 327,435
Realized sales price increase effect (45,744) 34,873 187,280
Sales volumes increase effect 8,356 (1,795) 34,036
Oil sales for the three and nine months ended September 30, 2022 $ 168,397 $ 168,397 $ 548,751

The average realized price for the three and nine months ended September 30, 2022, increased by 26% and 52%, compared to the corresponding periods of 2021, commensurate with the increase in benchmark oil prices, offset by higher differentials and utilization of M+1 Brent pricing for our sales.

Compared to the prior quarter, the average realized price decreased by 21% due to lower benchmark oil prices, higher Castilla differentials and utilization of M+1 Brent pricing, which were partially offset by lower Vasconia differentials.

Operating expenses for the three months ended ~~September~~June 30, ~~2022,~~2023, increased by 9%23% to ~~$41.8~~$48.5 million or by ~~$1.81~~$0.54 per bbl to ~~$19.34~~$19.54 per bbl, compared to the corresponding period of ~~2021,~~2022, primarily as a result of ~~$0.68~~$1.94 per bbl ~~increased workovers and $1.12~~ higher lifting costs ~~mainly attributed to higher~~associated with environmental ~~community aids,~~activities and equipment rental in Ecuador, partially offset by $1.40 per bbl of lower ~~recoveries from partners as a result of social blockades in the Suroriente block.~~workovers.

Operating expenses for the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, increased by ~~22%~~21% to ~~$116.3~~$89.9 million or by ~~$1.75~~$0.89 per bbl to ~~$18.49~~$18.93 per bbl, compared to the corresponding period of ~~2021,~~2022, primarily as a result of ~~$0.58 per bbl increased workovers and $1.16 per bbl~~$1.62 higher lifting costs ~~attributed to higher power generation~~associated with environmental activities, equipment rental in Ecuador and ~~chemical costs due to increased production and waterflood in all major fields.~~water injection equipment mobilization, offset by $0.73 per bbl lower workovers.

Compared to the prior quarter, operating expenses increased by 6%17% or ~~$0.34~~$1.28 per bbl from ~~$39.5~~$41.4 million or ~~$19.00~~$18.26 per bbl, primarily due to $1.35 per bbl higher ~~workover~~lifting costs attributed to road maintenance and environmental activities, ~~in the current quarter.~~partially offset by $0.07 per bbl lower workovers.

Transportation expenses

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 and Ecuador using each option for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, and ~~2021,~~2022, and the prior quarter:


		Three Months Ended September 30,				Three Months Ended June 30,		Nine Months Ended September 30,					Three Months Ended June 30,				Three Months Ended March 31,		Six Months Ended June 30,
		2022		2021		2022		2022		2021			2023		2022		2023		2023		2022
Volume transported through pipeline	Volume transported through pipeline	—	%	9	%	—	%	—	%	6	%	Volume transported through pipeline	1	%	—	%	2	%	2	%	—	%
Volume sold at wellhead	Volume sold at wellhead	47	%	42	%	48	%	47	%	55	%	Volume sold at wellhead	46	%	48	%	45	%	46	%	48	%
Volume transported via truck to sales point	Volume transported via truck to sales point	53	%	49	%	52	%	53	%	39	%	Volume transported via truck to sales point	53	%	52	%	53	%	52	%	52	%
		100	%	100	%	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 a lower realized price, offset by lower transportation expenses.

Transportation expenses for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022, decreased~~2023, increased by ~~23%~~47% and ~~11%~~26% to ~~$2.4~~$3.7 million and ~~$7.8~~$6.8 million, respectively, compared to the corresponding periods of ~~2021.~~ 2022 due to higher transportation tariffs affecting Acordionero sales, and the utilization of new transportation routes for new exploration wells in Colombia and Ecuador sales.

On a per bbl basis, transportation expenses ~~decreased~~increased by ~~22%~~23% and ~~20%~~9% to ~~$1.12~~$1.49 and ~~$1.23~~$1.42 for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, respectively, compared to the corresponding periods of ~~2021. The decrease in transportation expenses per bbl compared to~~2022 for the corresponding periods of 2021 was a result of a change in transportation routes that had lower transportation costs per bbl. During the third quarter of 2021, alternative transportation routes were utilized due to maintenance of the Impala terminal, which had higher transportation costs per bbl.same reason mentioned above.

~~For the three months ended September 30, 2022, transportation~~Transportation expenses ~~decreased~~increased by ~~4% compared to $2.5~~20% from $3.1 million in the prior ~~quarter.~~quarter due to increased trucking costs from using longer distance delivery points and depreciation of U.S. dollar against the Colombian peso. On a per bbl basis transportation ~~expenses decreased~~costs increased by 7%$0.14 from ~~$1.21 in~~ the prior quarter ~~due use of alternative transportation routes, which resulted in lower transportation costs per bbl in~~for the ~~current quarter.~~same reasons mentioned above.

2523

DD&A Expenses


		Three Months Ended September 30,				Three Months Ended June 30,		Nine Months Ended September 30,					Three Months Ended June 30,				Three Months Ended March 31,		Six Months Ended June 30,
		2022		2021		2022		2022		2021			2023		2022		2023		2023		2022
DD&A Expenses, thousands of U.S. Dollars	DD&A Expenses, thousands of U.S. Dollars	$	45,320	$	38,055	$	42,216	$	128,499	$	98,300	DD&A Expenses, thousands of U.S. Dollars	$	56,209	$	42,216	$	51,721	$	107,930	$	83,179
DD&A Expenses, U.S. Dollars per bbl	DD&A Expenses, U.S. Dollars per bbl	20.95		17.36		20.31		20.43		17.26		DD&A Expenses, U.S. Dollars per bbl	22.65		20.31		22.83		22.74		20.17

DD&A expenses for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, increased by ~~19%~~33% and ~~31%~~30% or by ~~$3.59~~$2.34 and ~~$3.17~~$2.57 per bbl, respectively, due to increased production and higher costs in the depletable base compared to the corresponding periods of ~~2021.~~2022.

~~For the three months ended September 30, 2022,~~ DD&A expenses increased ~~7% or $0.64~~9% compared to the prior quarter and decreased by $0.18 per bbl when compared to the prior quarter, due to higher ~~costs in the depletable base in the current quarter.~~production.

~~G&A Expenses~~

Three Months Ended September 30, Three Months Ended June 30, Nine Months Ended September 30,
(Thousands of U.S. Dollars) 2022 2021 % Change 2022 2022 2021 % Change
G&A Expenses Before Stock-Based Compensation $ 8,284 $ 5,444 52 $ 7,847 $ 23,910 $ 19,394 23
G&A Stock-Based Compensation (Recovery) Expense (170) 1,053 (116) 1,989 6,376 6,597 (3)
G&A Expenses, Including Stock-Based Compensation $ 8,114 $ 6,497 25 $ 9,836 $ 30,286 $ 25,991 17
(U.S. Dollars Per bbl Sales Volumes NAR)
G&A Expenses Before Stock-Based Compensation $ 3.83 $ 2.48 54 $ 3.77 $ 3.80 $ 3.40 12
G&A Stock-Based Compensation (Recovery) Expense (0.08) 0.48 (117) 0.96 1.01 1.16 (13)
G&A Expenses, Including Stock-Based Compensation $ 3.75 $ 2.96 27 $ 4.73 $ 4.81 $ 4.56 5
G&A Expenses


	Three Months Ended June 30,					Three Months Ended March 31,		Six Months Ended June 30,
(Thousands of U.S. Dollars)	2023		2022		% Change	2023		2023		2022		% Change
G&A Expenses Before Stock-Based Compensation	$	9,549	$	7,847	22	$	11,196	$	20,745	$	15,626	33
G&A Stock-Based Compensation Expense	317		1,989		(84)	1,500		1,817		6,546		(72)
G&A Expenses, Including Stock-Based Compensation	$	9,866	$	9,836	—	$	12,696	$	22,562	$	22,172	2
(U.S. Dollars Per bbl Sales Volumes NAR)
G&A Expenses Before Stock-Based Compensation	$	3.85	$	3.77	2	$	4.94	$	4.37	$	3.79	15
G&A Stock-Based Compensation Expense	0.13		0.96		(86)	0.66		0.38		1.59		(76)
G&A Expenses, Including Stock-Based Compensation	$	3.98	$	4.73	(16)	$	5.60	$	4.75	$	5.38	(12)

For the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, G&A expenses before stock-based compensation increased by ~~52%~~22% and 33% to ~~$8.3~~$9.5 million and ~~23% to $23.9~~$20.7 million, respectively, ~~primarily~~ due to higher consulting costs ~~for~~and legal fees attributed to optimization projects ~~and lease obligations~~when compared to the corresponding periods of ~~2021.~~2022. On a per bbl basis, G&A expenses before stock-based compensation increased by ~~$1.35~~$0.08 and ~~$0.40~~$0.58 per bbl to ~~$3.83~~$3.85 and ~~$3.80~~$4.37 per bbl, respectively, for the same reason mentioned above.

~~When compared~~G&A expenses after stock-based compensation for the three months ended June 30, 2023 were comparable to the ~~prior quarter, G&A expenses before stock-based compensation increased~~corresponding period of 2022 and decreased by ~~7% or $0.06 on a~~$0.75 per bbl ~~basis, primarily~~ due to a lower share price and higher ~~costs for optimization projects.~~sales volumes in the current quarter.

G&A expenses after stock-based compensation for the ~~three and nine~~six months ended ~~September~~June 30, ~~2022,~~2023, increased by ~~25% and 17% or $0.79 and $0.25~~2% per bbl ~~respectively,~~ due to higher G&A expenses before stock-based compensation offset by a ~~higher~~lower share price and decreased by $0.63 per bbl due to higher sales volumes when compared to the corresponding ~~periods~~period of ~~2021.~~2022.

Compared to the prior quarter, G&A expenses before stock-based compensation decreased by 15% or $1.09 on a per bbl basis due to lower legal and information technology costs, partially offset by higher consulting fees attributed to optimization projects.

Compared to the prior quarter, G&A expenses after stock-based compensation decreased by ~~18%~~22% or ~~$0.98~~$1.62 on a per bbl basis due to lower G&A expenses before stock-based compensation ~~resulting from~~and a lower share price in the ~~third~~second quarter of ~~2022.~~

2023.

2725

Foreign Exchange Gains and Losses

For the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, we had a $4.7 million and $6.4 million loss on foreign exchange, ~~of $1.5 million and $0.5 million, respectively,~~ compared to a $2.7 million loss and ~~$15.8~~a $1.0 million ~~loss~~gain in the corresponding periods of ~~2021.~~2022, respectively, and a $1.7 million loss in the prior quarter. Accounts receivable, taxes receivable, deferred income taxes, accounts payable, and prepaid equity forward (“PEF”) are considered monetary items and require translation from local currencies 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~~six months ended ~~September~~June 30, ~~2022,~~2023, and ~~2021:~~2022:


		Three Months Ended September 30,		Nine Months Ended September 30,			Three Months Ended June 30,		Six Months Ended June 30,
		2022	2021	2022	2021		2023	2022	2023	2022
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	weakened by	strengthened by
		10%	2%	14%	12%		9%	10%	13%	4%
Change in the U.S. dollar against the Canadian dollar	Change in the U.S. dollar against the Canadian dollar	strengthened by	strengthened by	strengthened by	strengthened by	Change in the U.S. dollar against the Canadian dollar	weakened by	strengthened by	weakened by	strengthened by
		6%	3%	8%	—%		2%	3%	2%	2%

Income Tax Expense


	Three Months Ended June 30,						Six Months Ended June 30,
(Thousands of U.S. Dollars)	2023			2022			2023			2022
Income before income tax	$	22,907		$	91,638		$	46,090		$	145,297

Current income tax expense	$	19,757		$	25,425		$	37,363		$	46,252
Deferred income tax expense	13,975			13,241			29,252			31,954
Income tax expense	$	33,732		$	38,666		$	66,615		$	78,206

Effective tax rate	147		%	42		%	145		%	54		%

2826

~~Income Tax Expense~~

Three Months Ended September 30, Nine Months Ended September 30,
(Thousands of U.S. Dollars) 2022 2021 2022 2021
Income before income tax $ 60,397 $ 43,962 $ 205,694 $ 6,753
Current income tax expense (recovery) $ 16,820 $ — $ 63,072 $ (14)
Deferred income tax expense 4,914 8,955 36,868 26,809
Total income tax expense $ 21,734 $ 8,955 $ 99,940 $ 26,795
Effective tax rate 36 % 20 % 49 % 397 %

Current income tax expense was ~~$63.1~~$37.4 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, compared to ~~a small recovery~~$46.3 million in the corresponding period in ~~2021,~~2022, primarily due to ~~an increase~~a decrease in taxable income.

The deferred income tax expense for the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, was ~~also the~~$29.3 million primarily as a result of tax depreciation being higher than accounting depreciation and the use of tax losses to offset taxable income in Colombia. The deferred income tax expense in the comparative period of 2021 resulted from excess tax depreciation compared with accounting depreciation and the use of tax losses to offset taxable income in Colombia.

For the ~~nine~~six months ended ~~September~~June 30, 2023, the difference between the effective tax rate of 145% and the 50% Colombian tax rate was primarily due to an increase in non-deductible foreign exchange adjustments, the impact of foreign taxes, non-deductible royalties in Colombia and non-deductible stock-based compensation. These were partially offset by a decrease in valuation allowance.

For the six months ended June 30, 2022, the difference between the effective tax rate of ~~49%~~54% and the 35% Colombian tax rate was primarily due to $26.6 million of hedging loss, ~~and $35.7~~$24.3 million of financing cost related to Senior Notes, and ~~$11.1~~$21.5 million of corporate costs, which were incurred in a jurisdictions where no tax benefit is ~~recognized which was partially offset by $12.5 million of non-taxable foreign exchange gain.~~

For the nine months ended September 30, 2021, the difference between the effective tax rate of 397% 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. shares.recognized.

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

(Thousands of U.S. Dollars) Third Quarter 2022 Compared with Second Quarter 2022 % change Third Quarter 2022 Compared with Third Quarter 2021 % change Nine Months Ended September 30, 2022 Compared with Nine Months Ended September 30, 2021 % change
Net income (loss) for the comparative period $ 52,972 $ 35,007 $ (20,042)
Increase (decrease) due to:
Sales price (45,744) 34,873 187,280
Sales volumes 8,356 (1,795) 34,036
Expenses:
Operating (2,343) (3,389) (20,900)
Transportation 96 713 967
Cash G&A (437) (2,840) (4,516)
Net lease payments 90 425 892
Interest, net of amortization of debt issuance costs 393 2,031 5,699
Realized foreign exchange 3,528 4,332 4,531
Cash settlements on derivative instruments 17,577 7,113 18,430
Current taxes 8,605 (16,820) (63,086)
Net change in funds flow from operations(1) from comparative period
(9,879) 24,643 163,333
Expenses:
Depletion, depreciation and accretion (3,104) (7,265) (30,199)
Deferred tax 8,327 4,041 (10,059)
Amortization of debt issuance costs 380 156 (87)
Stock-based compensation 2,159 1,223 221
Derivative instruments gain or loss, net of settlements on derivative instruments (12,405) (4,510) 2,499
Gain on re-purchase of Senior Notes 2,598 2,598 2,598
Other financial instruments gain — (13,634) (12,425)
Unrealized foreign exchange (2,295) (3,171) 10,807
Net lease payments (90) (425) (892)
Net change in net income (loss) (14,309) 3,656 125,796
Net income for the current period $ 38,663 (27)% $ 38,663 (10)% $ 105,754 628%


(Thousands of U.S. Dollars)	Second Quarter 2023 Compared with First Quarter 2023		% change	Second Quarter 2023 Compared with Second Quarter 2022		% change	Six Months Ended June 30, 2023 Compared with Six Months Ended June 30, 2022		% change
Net (loss) income for the comparative period	$	(9,700)		$	52,972		$	67,091
Increase (decrease) due to:
Sales price	(56)			(87,731)			(135,636)
Sales volumes	13,768			39,848			57,374
Expenses:
Operating	(7,122)			(8,997)			(15,431)
Transportation	(625)			(1,178)			(1,410)
Cash G&A	1,647			(1,702)			(5,119)
Net lease payments	(65)			114			585

Interest, net of amortization of debt issuance costs	(604)			(596)			(410)
Realized foreign exchange	(11,581)			(14,388)			(14,462)
Cash settlements on derivative instruments	—			17,796			26,392
Current taxes	(2,151)			5,668			8,889
Interest income	(121)			647			1,415
Net change in funds flow from operations(1) from comparative period	(6,910)			(50,519)			(77,813)
Expenses:
Depletion, depreciation and accretion	(4,488)			(13,993)			(24,751)


Deferred tax	1,302			(734)			2,702
Amortization of debt issuance costs	(238)			112			218
Stock-based compensation	1,183			1,672			4,729
Derivative instruments gain or loss, net of settlements on derivative instruments	—			(12,624)			219

Unrealized foreign exchange	8,576			12,403			7,050
Other gain	(615)			—			615
Net lease payments	65			(114)			(585)
Net change in net (loss) income	(1,125)			(63,797)			(87,616)
Net loss for the current period	$	(10,825)	12%	$	(10,825)	120%	$	(20,525)	131%

(1)Funds flow from operations is a non-GAAP measure 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.

3027

Capital expenditures during the three months ended ~~September~~June 30, ~~2022~~2023, were ~~$57.0~~$65.6 million:


~~(Millions of U.S. Dollars)~~
~~Colombia:~~
~~Exploration~~	$	~~16.9~~
~~Development:~~
~~Drilling and Completions~~	~~12.7~~
~~Facilities~~	~~6.2~~
~~Other~~	~~8.3~~
	~~44.1~~
~~Corporate & Ecuador~~	~~12.9~~
	$	~~57.0~~


(Millions of U.S. Dollars)	Colombia		Ecuador		Total
Exploration	$	3.6	$	7.5	$	11.1
Development:
Drilling and Completions	38.9		—		38.9
Facilities	9.5		0.8		10.3
Workovers	2.8		—		2.8
Other	2.5		—		2.5
	$	57.3	$	8.3	$	65.6

During the three months ended ~~September~~June 30, ~~2022,~~2023, we commenced drilling the following wells in ~~Colombia and Ecuador:~~

Colombia:


			Number of wells (Gross and Net)
Colombia
~~Exploration~~			~~2.0~~
Development			~~3.0~~4.0
Service			~~2.0~~3.0
			7.0
~~Ecuador~~
~~Exploration~~			~~1.0~~
			~~8.0~~

We spud ~~three exploration, three~~four development and ~~two~~three water injection wells, of which ~~five~~two were in Midas Block ~~one~~and five in Chaza ~~Block, one in Alea-1848A Block, and one in~~Block. Of the ~~Chanangue Block in Ecuador. Of the~~development wells spud during the quarter, ~~five~~three were completed, and ~~three were~~one was in-progress as of ~~September~~June 30, ~~2022.~~2023. During the three months ended June 30, 2023, we have not spud any wells in Ecuador.

Liquidity and Capital Resources


		As at						As at
(Thousands of U.S. Dollars)	(Thousands of U.S. Dollars)	September 30, 2022		% Change	December 31, 2021		(Thousands of U.S. Dollars)	June 30, 2023		% Change	December 31, 2022
Cash and Cash Equivalents	Cash and Cash Equivalents	$	118,173	353	$	26,109	Cash and Cash Equivalents	$	68,529	(46)	$	126,873

Credit Facility		$	—	(100)	$	67,500

6.25% Senior Notes	6.25% Senior Notes	$	279,909	(7)	$	300,000	6.25% Senior Notes	$	271,909	(3)	$	279,909

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

We believe that our capital resources, including cash on hand, cash generated from operations and available borrowings under the credit facility, will provide us with sufficient liquidity to meet our strategic objectives and planned capital program for the next 12 months, given the current oil price trends and production levels. We may also access capital markets to pursue financing or refinance our Senior Notes. In accordance with our investment policy, available cash balances are held in 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 short-term liquidity. We believe that our current financial position provides us with the flexibility to respond to both internal growth opportunities and those available through acquisitions. We intend to pursue growth opportunities and acquisitions from time to time, which may require significant

capital, be located in basins or countries beyond our current operations, involve joint ventures, or be sizable compared to our current assets and operations.

~~During the three months ended September~~At June 30, ~~2022,~~2023, we ~~terminated our prior revolving~~had a credit facility ~~agreement and entered into a new credit facility agreement~~ with a market lender in the global commodities industry. The credit facility has a borrowing base of up to $150 million, with $100 million readily available at ~~September~~June 30, ~~2022,~~2023, and a potential option for an additional $50 million of borrowings upon mutual agreement by the lender and us. The credit facility bears interest based on a risk-free rate posted by the Federal Reserve Bank of New York plus a margin of ~~6.0%~~6.00% and a credit-adjusted spread of 0.26%. Undrawn amounts under the credit facility bear interest at ~~2.1%~~2.10% per annum, based on the amount available. The credit facility is secured by our Colombian assets and economic rights. It has a final maturity date of August 15, 2024, which may be extended to February 18, 2025, upon the satisfaction of certain conditions. The availability period for the draws ~~is six months commencing the date of~~under the credit ~~facility.~~facility expires on August 20, 2023. As of ~~September~~June 30, ~~2022,~~2023, the credit facility remained undrawn.

Under the terms of the credit facility, we are required to maintain compliance with the following financial covenants:

i.Coverage ratio of at least 150% is, calculated using the net present value of the consolidated future cash flows of the Company up to the final maturity date discounted at 10% over the outstanding amount on the credit facility at each reporting period. The net present value of the consolidated future cash flows of the Company is required to be based on 80% of the prevailing ICE Brent forward strip.

ii.Prepayment Life Coverage Ratio of at least 150%, calculated using the estimated aggregate value of commodities to be delivered under the commercial contract from the commencement date to the final maturity date based on 80% of the prevailing ICE Brent forward strip, adjusted for quality and transportation discounts over the outstanding amount on the credit facility including interest and all other costs payable to the lender.

iii.Liquidity ratio where the Company’s projected sources of cash exceed projected uses of cash by at least 1.15 times in each quarter period included in one year consolidated future cash flows. The future cash flows represent forecasted expected cash flows from operations, less anticipated capital expenditures and certain other adjustments. The commodity pricing assumption used in this covenant is required to be 90% of the prevailing Brent strip forward for the projected future cash flows.

At ~~September~~June 30, ~~2022, we were in compliance with all above covenants.~~

~~At September 30, 2022,~~2023, we had a ~~$279.9~~$271.9 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.

During the three and six months ended ~~September~~June 30, ~~2022,~~2023, we ~~repurchased~~re-purchased in the open market ~~$20.1~~nil and $8.0 million, respectively, of 6.25% Senior Notes for cash consideration of ~~$17.3 million, including interest payable of $0.1 million, which~~$6.8 million. The re-purchase resulted in a ~~$2.6~~$1.1 million gain, ~~on re-purchase~~ which included the write-off of deferred financing fees of ~~$0.3~~$0.1 million. The re-purchased 6.25% Senior Notes were not ~~cancelled~~canceled and ~~are~~ held by usthe Company as treasury bonds as of ~~September~~June 30, ~~2022.~~2023.

During the ~~three months~~year ended ~~September 30,~~December 31, 2022, we implemented a share re-purchase program (the “2022 Program”) through the facilities of the Toronto Stock Exchange (“TSX”) and eligible alternative trading platforms in Canada. Under the 2022 Program, we ~~are~~were able to purchase at prevailing market prices up to ~~36,033,969~~3,603,396 shares of Common Stock, representing approximately 10% of the issued and outstanding shares of Common Stock as of August 22, 2022. ~~The 2022 Program expires on August 31, 2023, or earlier if the 10% share maximum is reached.~~ Re-purchases are subject to prevailing market conditions, the trading price of our Common Stock, our financial performance and other conditions. The 2022 Program has expired when 10% share maximum was reached in May 2023.

During the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, we re-purchased ~~10,733,702~~20,439 and 1,328,650 shares at a weighted average price of ~~$1.34~~$5.27 and $8.15 per ~~share. The re-purchased~~share (three and six months ended June 30, 2022 - nil). As of June 30, 2023, all 3,603,396 shares ~~were~~ held ~~by us and were recorded~~ as treasury stock, ~~as of September 30, 2022.~~

were cancelled.

3229

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,					Six Months Ended June 30,
(Thousands of U.S. Dollars)	(Thousands of U.S. Dollars)	2022		2021		(Thousands of U.S. Dollars)	2023		2022
Sources of cash and cash equivalents:	Sources of cash and cash equivalents:					Sources of cash and cash equivalents:
Net income (loss)		$	105,754	$	(20,042)
Net (loss) income						Net (loss) income	$	(20,525)	$	67,091
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	128,499		98,300		DD&A expenses	107,930		83,179

Interest expense	Interest expense	35,743		41,355		Interest expense	24,514		24,322
Income tax expense	Income tax expense	99,940		26,795		Income tax expense	66,615		78,206

Other loss						Other loss	—		—
Non-cash lease expenses	Non-cash lease expenses	2,009		1,222		Non-cash lease expenses	2,253		1,158
Lease payments	Lease payments	(1,134)		(1,239)		Lease payments	(1,242)		(732)
Unrealized foreign exchange loss		6,138		16,945
Unrealized foreign exchange gain						Unrealized foreign exchange gain	(7,548)		(498)
Stock-based compensation expense	Stock-based compensation expense	6,376		6,597		Stock-based compensation expense	1,817		6,546
Unrealized derivative instruments loss	Unrealized derivative instruments loss	—		2,499		Unrealized derivative instruments loss	—		219
Gain on re-purchase of Senior Notes		(2,598)		—
Other financial instruments gain		—		(12,425)
Other gain						Other gain	(615)		—

Adjusted EBITDA(1)	Adjusted EBITDA(1)	380,727		160,007		Adjusted EBITDA(1)	173,199		259,491
Current income tax (expense) recovery		(63,072)		14
Current income tax expense						Current income tax expense	(37,363)		(46,252)
Contractual interest and other financing expenses	Contractual interest and other financing expenses	(32,974)		(38,673)		Contractual interest and other financing expenses	(22,714)		(22,304)
Funds flow from operations(1)	Funds flow from operations(1)	284,681		121,348		Funds flow from operations(1)	113,122		190,935
Proceeds from exercise of stock options	Proceeds from exercise of stock options	1,292		19		Proceeds from exercise of stock options	5		1,285
Proceeds from issuance of Common Stock, net of issuance costs		2		—
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	72,838		17,956		Net changes in assets and liabilities from operating activities	—		56,329
Foreign exchange gain on cash, cash equivalents and restricted cash and cash equivalents						Foreign exchange gain on cash, cash equivalents and restricted cash and cash equivalents	5,759		—
Changes in non-cash investing working capital	Changes in non-cash investing working capital	3,255		709		Changes in non-cash investing working capital	9,088		10,964
		362,068		154,664			127,974		259,513

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	(163,717)		(109,650)		Additions to property, plant and equipment	(136,627)		(106,682)
Net changes in assets and liabilities from operating activities						Net changes in assets and liabilities from operating activities	(25,836)		—
Repayment of debt	Repayment of debt	(67,623)		(40,125)		Repayment of debt	—		(67,525)

Re-purchase of Common Stock	Re-purchase of Common Stock	(14,365)		—		Re-purchase of Common Stock	(10,825)		—
Re-purchase of Senior Notes	Re-purchase of Senior Notes	(17,274)		—		Re-purchase of Senior Notes	(6,805)		—

Debt issuance costs						Debt issuance costs	(1,873)		—
Settlement of asset retirement obligations	Settlement of asset retirement obligations	(1,673)		(483)		Settlement of asset retirement obligations	(156)		(242)
Lease payments	Lease payments	(1,991)		(1,269)		Lease payments	(3,035)		(1,261)
Foreign exchange loss on cash, cash equivalents and restricted cash and cash equivalents	Foreign exchange loss on cash, cash equivalents and restricted cash and cash equivalents	(1,996)		(528)		Foreign exchange loss on cash, cash equivalents and restricted cash and cash equivalents	—		(680)
		(268,639)		(152,055)			(185,157)		(176,390)
Net increase in cash and cash equivalents and restricted cash and cash equivalents		$	93,429	$	2,609
Net (decrease) increase in cash and cash equivalents and restricted cash and cash equivalents						Net (decrease) increase in cash and cash equivalents and restricted cash and cash equivalents	$	(57,183)	$	83,123

(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. 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. During the ~~nine~~three and six months ended ~~September~~June 30, ~~2022,~~2023, funds flow from

operations ~~increased~~decreased by ~~135%~~49% and 41%, respectively, compared to the corresponding ~~period~~periods of ~~2021~~2022, primarily due to a ~~significant increase~~decrease in Brent price, higher quality and ~~increase in production, which were partially offset by~~transportation discounts, higher ~~Castilla~~operating costs and ~~Vasconia differentials, M+1 Brent adjustment, an increase in operating expenses and cash settlements on derivative instruments.~~realized foreign exchange loss.

Critical Accounting Policies and Estimates

Our critical accounting policies and estimates are disclosed in Item 7 of our ~~2021~~2022 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. Our revenues are from oil sales at ICE Brent adjusted for quality differentials.

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 adjusted for quality differentials. 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 the 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.

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 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 ~~September~~June 30, ~~2022,~~2023, our outstanding balance under the credit facility was nil (December 31, ~~2021~~2022 - ~~$67.5 million)~~nil).

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 disclosure controls and procedures were effective as of ~~September~~June 30, ~~2022.~~2023.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended ~~September~~June 30, ~~2022,~~2023, 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 98 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, ~~2021,~~2022, 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 Discussion and Analysis of Financial Condition and Results of Operations”, you should carefully read and consider the factors set out in Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022. These risk factors could materially affect our business, financial condition and results of operations. The unprecedented nature of the current pandemic and 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

Issuer Purchases of Equity Securities


		(a) Total Number of Shares Purchased	(b) Average Price Paid per Share (1)		(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Number of Shares that May Yet be Purchased Under the Plans or Programs			(a) Total Number of Shares Purchased	(b) Average Price Paid per Share (1)		(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Number of Shares that May Yet be Purchased Under the Plans or Programs (2)
September 1-30, 2022		10,733,702	$	1.34	10,733,702	25,300,267	(2)
April 1-30, 2023								April 1-30, 2023	—	$	—	—	20,439
May 1-31, 2023								May 1-31, 2023	20,439	5.27		20,439	—
June 1-30, 2023								June 1-30, 2023	—	—		—	—
Total	Total	10,733,702	$	1.34	10,733,702	25,300,267		Total	20,439	$	5.27	20,439	—

(1) Including commission fees paid to the broker to re-purchase the Common Stock.

(2) On August 29, 2022, we announced that we intended to implement a share re-purchase program (the “2022 Program”) through the facilities of the TSX and eligible alternative trading platforms in Canada commencing September 1, 2022, and ending on August 31, ~~2023.~~2023 or earlier if the 10% share maximum is reached. We ~~will be~~were able to purchase for cancellation at prevailing market prices up to ~~36,033,969~~3,603,396 shares of Common Stock, representing approximately 10% of our issued and outstanding shares of Common Stock as of August 22, 2022. The 2022 program expired when the 10% share maximum was reached in May 2023.

Item 5. Other Information

During the three months ended June 30, 2023, no director or Section 16 officer adopted or terminated any Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements (in each case, as defined in Item 408(a) of Regulation S-K).

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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	Certificate of Amendment to Certificate of Incorporation of Gran Tierra Energy Inc., effective May 5, 2023	Incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K, filed with the SEC on May 5, 2023 (SEC File No. 001-34018).

3.3	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~~3.4	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~~3.5	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).~~

~~10.1~~	~~Credit Agreement, dated as of August 18, 2022, by and among Gran Tierra Energy Inc., Gran Tierra Energy Colombia LLC, Gran Tierra Colombia Inc. and Trafigura PTE Ltd. as a lender~~	~~Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, filed with SEC on August 23, 2022~~ (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 Quarterly Report on Form 10-Q for the quarter ended ~~September~~June 30, ~~2022,~~2023, formatted in Inline XBRL (included within the Exhibit 101 attachments).

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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~~August 1, ~~2022~~2023						/s/ Gary S. Guidry
						By: Gary S. Guidry
						President and Chief Executive Officer
						(Principal Executive Officer)


Date: ~~November~~August 1, ~~2022~~2023						/s/ Ryan Ellson
						By: Ryan Ellson
						Executive Vice President and Chief Financial Officer
						(Principal Financial and Accounting Officer)

3734


(Thousands of U.S. Dollars)	VAT Receivable (Payable)		Income Tax Receivable		Total Net Taxes Receivable
Balance, as at December 31, 2021	$	15,298	$	41,110	$	56,408
Collected through direct government refunds	(376)		(99)		(475)
Collected through sales contracts	(124,655)		—		(124,655)
Taxes paid (1)	103,537		29,881		133,418
Current tax expense	—		(63,072)		(63,072)
Foreign exchange loss	(177)		(1,331)		(1,508)
Balance, as at September 30, 2022	$	(6,373)	$	6,489	$	116



Current income tax expense (recovery)	16,820		—		100	25,425		63,072		(14)		450,614
Deferred income tax expense	4,914		8,955		(45)	13,241		36,868		26,809		38
	21,734		8,955		143	38,666		99,940		26,795		273
Net income (loss)	$	38,663	$	35,007	10	$	52,972	$	105,754	$	(20,042)	628

Sales Volumes (NAR)


Total sales volumes, BOPD	23,516		23,833		(1)	22,847		23,034		20,865		10

Brent Price per bbl	$	97.70	$	73.23	33	$	111.98	$	102.48	$	67.97	51

Consolidated Results of Operations per bbl Sales Volumes NAR
Oil sales	$	77.84	$	61.72	26	$	98.98	$	87.27	$	57.48	52
Operating expenses	19.34		17.53		10	19.00		18.49		16.74		10
Transportation expenses	1.12		1.43		(22)	1.21		1.23		1.53		(20)
Operating netback(1)	57.38		42.76		34	78.77		67.55		39.21		72


DD&A expenses	20.95		17.36		21	20.31		20.43		17.26		18
G&A expenses before stock-based compensation	3.83		2.48		54	3.77		3.80		3.40		12
G&A stock-based compensation (recovery) expense	(0.08)		0.48		(117)	0.96		1.01		1.16		(13)
Foreign exchange loss	0.69		1.21		(43)	1.31		0.08		2.78		(97)
Derivative instruments loss	—		1.19		(100)	2.49		4.23		8.35		(49)
Other financial instruments gain	—		(6.22)		(100)	—		—		(2.18)		(100)
Gain on re-purchase of Senior Notes	(1.20)		—		100	—		(0.41)		—		100
Interest expense	5.28		6.21		(15)	5.87		5.68		7.26		(22)
	29.47		22.71		30	34.71		34.82		38.03		(8)




Income before income taxes	27.91		20.05		39	44.06		32.73		1.18		2,674

Current income tax expense (recovery)	7.77		—		100	12.23		10.03		—		100
Deferred income tax expense	2.27		4.08		(44)	6.37		5.86		4.71		24
	10.04		4.08		146	18.60		15.89		4.71		237
Net income (loss)	$	17.87	$	15.97	12	$	25.46	$	16.84	$	(3.53)	(577)


(Thousands of U.S. Dollars)	Third Quarter 2022 Compared with Second Quarter 2022		Third Quarter 2022 Compared with Third Quarter 2021		Nine Months Ended September 30, 2022 Compared with Nine Months Ended September 30, 2021
Oil sales for the comparative period	$	205,785	$	135,319	$	327,435
Realized sales price increase effect	(45,744)		34,873		187,280
Sales volumes increase effect	8,356		(1,795)		34,036
Oil sales for the three and nine months ended September 30, 2022	$	168,397	$	168,397	$	548,751