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 ~~June~~September 30, 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 ~~$0.01~~$0.001 per share	GTE	NYSE American
		Toronto Stock Exchange
		London Stock Exchange

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

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

Yes ☒ No ☐

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


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

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

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

On ~~July 26,~~October 27, 2023, ~~33,287,055~~33,288,305 shares of the registrant’s Common Stock, ~~$0.01~~$0.001 par value, were issued.

Gran Tierra Energy Inc.

Quarterly Report on Form 10-Q

Quarterly Period Ended ~~June~~September 30, 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	1415
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3133
Item 4.	Controls and Procedures	3133

PART II	Other Information
Item 1.	Legal Proceedings	3234
Item 1A.	Risk Factors	3234

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3234
Item 5.	Other information	3234
Item 6.	Exhibits	3335
SIGNATURES		3436

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);~~events; 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, geopolitical events, including the ~~Russian invasion of~~ongoing conflicts in Ukraine and the Gaza region, 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 (occurred June 2023) 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~~our 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~~Common Stock or bonds; the risk that we do not receive the anticipated benefits of government programs, including government tax refunds; our ability to comply with financial covenants in 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 2022 Annual Report on Form 10-K (the “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 current volatility in the worldwide economy and oil and gas industry makes 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 interest production before royalties”.

PART I - Financial Information

Item 1. Financial Statements

Gran Tierra Energy Inc.

Condensed Consolidated Statements of Operations (Unaudited)

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


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2023		2022		2023		2022			2023		2022		2023		2022
OIL SALES (Note 6)	OIL SALES (Note 6)	$	157,902	$	205,785	$	302,092	$	380,354	OIL SALES (Note 6)	$	179,921	$	168,397	$	482,013	$	548,751

EXPENSES	EXPENSES									EXPENSES
Operating	Operating	48,491		39,494		89,860		74,429		Operating	49,367		41,837		139,227		116,266
Transportation	Transportation	3,691		2,513		6,757		5,347		Transportation	3,842		2,417		10,599		7,764
Depletion, depreciation and accretion (Note 3)	Depletion, depreciation and accretion (Note 3)	56,209		42,216		107,930		83,179		Depletion, depreciation and accretion (Note 3)	55,019		45,320		162,949		128,499
General and administrative (Note 9)	General and administrative (Note 9)	9,866		9,836		22,562		22,172		General and administrative (Note 9)	10,238		8,114		32,800		30,286
Foreign exchange loss (gain)		4,707		2,722		6,409		(1,003)
Foreign exchange loss										Foreign exchange loss	1,717		1,489		8,126		486
Derivative instruments loss (Note 9)	Derivative instruments loss (Note 9)	—		5,172		—		26,611		Derivative instruments loss (Note 9)	—		—		—		26,611
Other gain (Note 4)	Other gain (Note 4)	—		—		(615)		—		Other gain (Note 4)	(354)		(2,598)		(969)		(2,598)
Interest expense (Note 4)	Interest expense (Note 4)	12,678		12,194		24,514		24,322		Interest expense (Note 4)	13,503		11,421		38,017		35,743
		135,642		114,147		257,417		235,057			133,332		108,000		390,749		343,057

INTEREST INCOME	INTEREST INCOME	647		—		1,415		—		INTEREST INCOME	271		—		1,686		—
INCOME BEFORE INCOME TAXES	INCOME BEFORE INCOME TAXES	22,907		91,638		46,090		145,297		INCOME BEFORE INCOME TAXES	46,860		60,397		92,950		205,694

INCOME TAX EXPENSE	INCOME TAX EXPENSE									INCOME TAX EXPENSE
Current (Note 7)	Current (Note 7)	19,757		25,425		37,363		46,252		Current (Note 7)	26,343		16,820		63,706		63,072
Deferred (Note 7)	Deferred (Note 7)	13,975		13,241		29,252		31,954		Deferred (Note 7)	13,990		4,914		43,242		36,868
		33,732		38,666		66,615		78,206			40,333		21,734		106,948		99,940
NET AND COMPREHENSIVE (LOSS) INCOME		$	(10,825)	$	52,972	$	(20,525)	$	67,091
NET AND COMPREHENSIVE INCOME (LOSS)										NET AND COMPREHENSIVE INCOME (LOSS)	$	6,527	$	38,663	$	(13,998)	$	105,754

NET (LOSS) INCOME PER SHARE (1)
NET INCOME (LOSS) PER SHARE (1)										NET INCOME (LOSS) PER SHARE (1)

- BASIC	- BASIC	$	(0.33)	$	1.44	$	(0.61)	$	1.82	- BASIC	$	0.20	$	1.05	$	(0.42)	$	2.88
- DILUTED	- DILUTED	$	(0.33)	$	1.42	$	(0.61)	$	1.80	- DILUTED	$	0.20	$	1.04	$	(0.42)	$	2.84
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC (Note 5)	WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC (Note 5)	33,299,505		36,857,138		33,872,270		36,798,229		WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC (Note 5)	33,287,368		36,730,543		33,675,160		36,775,419
WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED (Note 5)	WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED (Note 5)	33,299,505		37,423,360		33,872,270		37,297,769		WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED (Note 5)	33,350,050		37,131,074		33,675,160		37,238,790

(1) Reflects our 1-for-10 reverse stock split that became effective May 5, 2023. See Note 5 in the notes to the condensed consolidated 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 June 30, 2023		As at December 31, 2022			As at September 30, 2023		As at December 31, 2022

ASSETS	ASSETS					ASSETS
Current Assets	Current Assets					Current Assets
Cash and cash equivalents (Note 10)	Cash and cash equivalents (Note 10)	$	68,529	$	126,873	Cash and cash equivalents (Note 10)	$	123,216	$	126,873
Restricted cash and cash equivalents (Note 10)	Restricted cash and cash equivalents (Note 10)	1,142		1,142		Restricted cash and cash equivalents (Note 10)	1,142		1,142
Accounts receivable	Accounts receivable	6,753		10,706		Accounts receivable	19,157		10,706
Inventory	Inventory	22,532		20,192		Inventory	25,724		20,192
Taxes receivable		82		54
Other current assets (Note 9)	Other current assets (Note 9)	9,108		9,620		Other current assets (Note 9)	12,082		9,674
Total Current Assets	Total Current Assets	108,146		168,587		Total Current Assets	181,321		168,587

Oil and Gas Properties	Oil and Gas Properties					Oil and Gas Properties
Proved	Proved	1,045,686		1,000,424		Proved	1,040,254		1,000,424
Unproved	Unproved	66,091		74,471		Unproved	70,253		74,471
Total Oil and Gas Properties	Total Oil and Gas Properties	1,111,777		1,074,895		Total Oil and Gas Properties	1,110,507		1,074,895
Other capital assets	Other capital assets	29,787		26,007		Other capital assets	30,448		26,007
Total Property, Plant and Equipment (Note 3)	Total Property, Plant and Equipment (Note 3)	1,141,564		1,100,902		Total Property, Plant and Equipment (Note 3)	1,140,955		1,100,902

Other Long-Term Assets	Other Long-Term Assets					Other Long-Term Assets
Deferred tax assets	Deferred tax assets	12,924		22,990		Deferred tax assets	9,758		22,990
Taxes receivable	Taxes receivable	40,014		27,796		Taxes receivable	46,736		27,796
Other long-term assets (Note 9)		6,717		15,335
Other long-term assets (Note 9 and 10)						Other long-term assets (Note 9 and 10)	7,265		15,335
Total Other Long-Term Assets	Total Other Long-Term Assets	59,655		66,121		Total Other Long-Term Assets	63,759		66,121
Total Assets	Total Assets	$	1,309,365	$	1,335,610	Total Assets	$	1,386,035	$	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	$	197,797	$	167,579	Accounts payable and accrued liabilities	$	176,489	$	167,579

Credit facility (Note 4)						Credit facility (Note 4)	49,067		—
Taxes payable	Taxes payable	30,442		58,978		Taxes payable	46,398		58,978
Equity compensation award liability (Note 5)	Equity compensation award liability (Note 5)	4,976		15,082		Equity compensation award liability (Note 5)	7,794		15,082

Total Current Liabilities	Total Current Liabilities	233,215		241,639		Total Current Liabilities	279,748		241,639

Long-Term Liabilities	Long-Term Liabilities					Long-Term Liabilities
Long-term debt (Notes 4 and 9)	Long-term debt (Notes 4 and 9)	585,807		589,593		Long-term debt (Notes 4 and 9)	587,444		589,593
Deferred tax liabilities	Deferred tax liabilities	22,241		28		Deferred tax liabilities	35,011		28
Asset retirement obligation	Asset retirement obligation	66,845		63,358		Asset retirement obligation	70,712		63,358
Equity compensation award liability (Note 5)	Equity compensation award liability (Note 5)	5,708		16,437		Equity compensation award liability (Note 5)	9,525		16,437

Other long-term liabilities	Other long-term liabilities	8,131		6,989		Other long-term liabilities	9,055		6,989
Total Long-Term Liabilities	Total Long-Term Liabilities	688,732		676,405		Total Long-Term Liabilities	711,747		676,405

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

Shareholders' Equity (1)	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)		10,237		10,272
Common Stock (Note 5) (33,288,305 and 36,889,862 issued, 33,288,305 and 34,615,116 outstanding shares of Common Stock, par value $0.001 per share, as at September 30, 2023, and December 31, 2022, respectively)						Common Stock (Note 5) (33,288,305 and 36,889,862 issued, 33,288,305 and 34,615,116 outstanding shares of Common Stock, par value $0.001 per share, as at September 30, 2023, and December 31, 2022, respectively)	10,237		10,272
Additional paid-in capital	Additional paid-in capital	1,254,449		1,291,354		Additional paid-in capital	1,255,044		1,291,354
Treasury Stock (Note 5)	Treasury Stock (Note 5)	—		(27,317)		Treasury Stock (Note 5)	—		(27,317)
Deficit	Deficit	(877,268)		(856,743)		Deficit	(870,741)		(856,743)
Total Shareholders’ Equity	Total Shareholders’ Equity	387,418		417,566		Total Shareholders’ Equity	394,540		417,566
Total Liabilities and Shareholders’ Equity	Total Liabilities and Shareholders’ Equity	$	1,309,365	$	1,335,610	Total Liabilities and Shareholders’ Equity	$	1,386,035	$	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 consolidated 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)


		Six Months Ended June 30,					Nine Months Ended September 30,
		2023		2022			2023		2022
Operating Activities	Operating Activities					Operating Activities
Net (loss) income	Net (loss) income	$	(20,525)	$	67,091	Net (loss) income	$	(13,998)	$	105,754
Adjustments to reconcile net (loss) income to net cash provided by operating activities:	Adjustments to reconcile net (loss) income to net cash provided by operating activities:					Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depletion, depreciation and accretion (Note 3)	Depletion, depreciation and accretion (Note 3)	107,930		83,179		Depletion, depreciation and accretion (Note 3)	162,949		128,499
Deferred tax expense (Note 7)	Deferred tax expense (Note 7)	29,252		31,954		Deferred tax expense (Note 7)	43,242		36,868
Stock-based compensation expense (Note 5)	Stock-based compensation expense (Note 5)	1,817		6,546		Stock-based compensation expense (Note 5)	3,748		6,376
Amortization of debt issuance costs (Note 4)	Amortization of debt issuance costs (Note 4)	1,800		2,018		Amortization of debt issuance costs (Note 4)	3,394		2,769
Unrealized foreign exchange gain		(7,548)		(498)
Unrealized foreign exchange (gain) loss						Unrealized foreign exchange (gain) loss	(7,814)		6,138
Other gain (Note 4)	Other gain (Note 4)	(615)		—		Other gain (Note 4)	(969)		(2,598)
Derivative instruments loss (Note 9)		—		26,611
Cash settlements on derivatives instruments		—		(26,392)

Derivative instrument loss (Note 9)						Derivative instrument loss (Note 9)	—		26,611
Cash settlement on derivative instruments						Cash settlement on derivative instruments	—		(26,611)
Cash settlement of asset retirement obligation	Cash settlement of asset retirement obligation	(156)		(242)		Cash settlement of asset retirement obligation	(376)		(1,673)
Non-cash lease expenses	Non-cash lease expenses	2,253		1,158		Non-cash lease expenses	3,488		2,009
Lease payments	Lease payments	(1,242)		(732)		Lease payments	(1,918)		(1,134)
Net change in assets and liabilities from operating activities (Note 10)	Net change in assets and liabilities from operating activities (Note 10)	(25,836)		56,329		Net change in assets and liabilities from operating activities (Note 10)	(34,235)		72,838
Net cash provided by operating activities	Net cash provided by operating activities	87,130		247,022		Net cash provided by operating activities	157,511		355,846

Investing Activities	Investing Activities					Investing Activities
Additions to property, plant and equipment	Additions to property, plant and equipment	(136,627)		(106,682)		Additions to property, plant and equipment	(179,707)		(163,717)

Changes in non-cash investing working capital (Note 10)	Changes in non-cash investing working capital (Note 10)	9,088		10,964		Changes in non-cash investing working capital (Note 10)	(11,051)		3,255
Net cash used in investing activities	Net cash used in investing activities	(127,539)		(95,718)		Net cash used in investing activities	(190,758)		(160,462)

Financing Activities	Financing Activities					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)		—
Proceeds from debt, net of issuance costs (Note 4)						Proceeds from debt, net of issuance costs (Note 4)	48,125		—
Repayment of debt						Repayment of debt	—		(67,623)
Purchase of Senior Notes (Note 4)						Purchase of Senior Notes (Note 4)	(6,805)		(17,274)
Re-purchase of shares of Common Stock (Note 5)	Re-purchase of shares of Common Stock (Note 5)	(10,825)		—		Re-purchase of shares of Common Stock (Note 5)	(10,825)		(14,365)
Proceeds from exercise of stock options	Proceeds from exercise of stock options	5		1,285		Proceeds from exercise of stock options	8		1,294
Lease payments	Lease payments	(3,035)		(1,261)		Lease payments	(5,101)		(1,991)
Net cash used in financing activities		(22,533)		(67,501)
Net cash provided by (used in) financing activities						Net cash provided by (used in) financing activities	25,402		(99,959)

Foreign exchange gain (loss) on cash, cash equivalents and restricted cash and cash equivalents	Foreign exchange gain (loss) on cash, cash equivalents and restricted cash and cash equivalents	5,759		(680)		Foreign exchange gain (loss) on cash, cash equivalents and restricted cash and cash equivalents	5,897		(1,996)

Net (decrease) increase in cash, cash equivalents and restricted cash and cash equivalents	Net (decrease) increase in cash, cash equivalents and restricted cash and cash equivalents	(57,183)		83,123		Net (decrease) increase in cash, cash equivalents and restricted cash and cash equivalents	(1,948)		93,429
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
Cash and cash equivalents and restricted cash and cash equivalents, beginning of period (Note 10)						Cash and cash equivalents and restricted cash and cash equivalents, beginning of period (Note 10)	133,358		31,404
Cash and cash equivalents and restricted cash and cash equivalents, end of period (Note 10)						Cash and cash equivalents and restricted cash and cash equivalents, end of period (Note 10)	$	131,410	$	124,833

Supplemental cash flow disclosures (Note 10)	Supplemental cash flow disclosures (Note 10)					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 June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2023		2022		2023		2022			2023		2022		2023		2022
Share Capital (1)	Share Capital (1)									Share Capital (1)
Balance, beginning of period	Balance, beginning of period	$	10,272	$	10,272	$	10,272	$	10,270	Balance, beginning of period	$	10,237	$	10,272	$	10,272	$	10,270
Issuance of common stock (Note 5)		—		—		—		2
Re-purchase of shares of common stock		(35)		—		(35)		—
Issuance of shares of Common Stock (Note 5)										Issuance of shares of Common Stock (Note 5)	—		—		—		2
Re-purchase of shares of Common Stock (Note 5)										Re-purchase of shares of Common Stock (Note 5)	—		—		(35)		—
Balance, end of period	Balance, end of period	$	10,237	$	10,272	$	10,237	$	10,272	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	$	1,291,973	$	1,289,162	$	1,291,354	$	1,287,582	Balance, beginning of period	$	1,254,449	$	1,290,075	$	1,291,354	$	1,287,582

Exercise of stock options	Exercise of stock options	5		303		5		1,283		Exercise of stock options	3		9		8		1,292
Re-purchase of shares of common stock		(38,107)		—		(38,107)		—
Re-purchase of shares of Common Stock (Note 5)										Re-purchase of shares of Common Stock (Note 5)	—		—		(38,107)		—
Stock-based compensation (Note 5)	Stock-based compensation (Note 5)	578		610		1,197		1,210		Stock-based compensation (Note 5)	592		627		1,789		1,837
Balance, end of period	Balance, end of period	$	1,254,449	$	1,290,075	$	1,254,449	$	1,290,075	Balance, end of period	$	1,255,044	$	1,290,711	$	1,255,044	$	1,290,711

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

Deficit	Deficit									Deficit
Balance, beginning of period	Balance, beginning of period	$	(866,443)	$	(981,653)	$	(856,743)	$	(995,772)	Balance, beginning of period	$	(877,268)	$	(928,681)	$	(856,743)	$	(995,772)
Net (loss) income		(10,825)		52,972		(20,525)		67,091
Net income (loss)										Net income (loss)	6,527		38,663		(13,998)		105,754
Balance, end of period	Balance, end of period	$	(877,268)	$	(928,681)	$	(877,268)	$	(928,681)	Balance, end of period	$	(870,741)	$	(890,018)	$	(870,741)	$	(890,018)

Total Shareholders’ Equity	Total Shareholders’ Equity	$	387,418	$	371,666	$	387,418	$	371,666	Total Shareholders’ Equity	$	394,540	$	396,600	$	394,540	$	396,600

(1) Reflects our 1-for-10 reverse stock split that became effective May 5, 2023. See Note 5 in the notes to the condensed consolidated 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, 2022, included in the Company’s 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 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. Property, Plant and Equipment


(Thousands of U.S. Dollars)	(Thousands of U.S. Dollars)	As at June 30, 2023		As at December 31, 2022		(Thousands of U.S. Dollars)	As at September 30, 2023		As at December 31, 2022
Oil and natural gas properties	Oil and natural gas properties					Oil and natural gas properties
Proved	Proved	$	4,765,640	$	4,617,804	Proved	$	4,812,245	$	4,617,804
Unproved	Unproved	66,091		74,471		Unproved	70,253		74,471
		4,831,731		4,692,275			4,882,498		4,692,275
Other(1)	Other(1)	65,816		61,386		Other(1)	68,954		61,386
		4,897,547		4,753,661			4,951,452		4,753,661
Accumulated depletion, depreciation and impairment	Accumulated depletion, depreciation and impairment	(3,755,983)		(3,652,759)		Accumulated depletion, depreciation and impairment	(3,810,497)		(3,652,759)
		$	1,141,564	$	1,100,902		$	1,140,955	$	1,100,902

(1) The “other” category includes right-of-use assets for operating and finance leases of ~~$44.9~~$47.9 million, which had a net book value of ~~$28.6~~$29.3 million as at ~~June~~September 30, 2023 (December 31, 2022 - $38.9 million, which had a net book value of $24.6 million).

On April 11, 2023, the Company and Ecopetrol S.A. renegotiated the terms of the contract for Company’s operatorship of the Suroriente Block ("Suroriente") which was previously scheduled to end in mid-2024. The duration of the contract was extended for 20 years from September 1, 2023 (the “Effective Date”), the date on which the Company satisfied the relevant conditions precedent and regulatory approval was received. The Company continues to be the operator of Suroriente. In connection with the contract extension, the Company paid cash consideration of $6.2 million and provided letters of credit of $123.0 million (Note 8) related to committed capital investments to be made over a three-year period from the Effective Date.

For the three and ~~six~~nine months ended ~~June~~September 30, 2023 and 2022, respectively, the Company had no ceiling test impairment losses. The Company used a 12-month unweighted average of the first-day-of the month Brent price prior to the ending date of the periods ~~June~~September 30, 2023, and 2022 of ~~$88.52~~$83.86 and ~~$87.88~~$94.85 per bbl, respectively, for the purpose of the ceiling test calculations.

4. Debt and Debt Issuance Costs

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

(Thousands of U.S. Dollars) As at June 30, 2023 As at December 31, 2022
Long-Term
6.25% Senior Notes, due February 2025 $ 271,909 $ 279,909
7.75% Senior Notes, due May 2027 300,000 300,000
Unamortized debt issuance costs (10,830) (10,992)
561,079 568,917
Long-term lease obligation(1)
24,728 20,676
Total debt $ 585,807 $ 589,593


(Thousands of U.S. Dollars)	As at September 30, 2023		As at December 31, 2022
Current
Credit facility	$	50,000	$	—
Unamortized debt issuance costs	(933)		—
	$	49,067	$	—

Long-Term
6.25% Senior Notes, due February 2025 (“6.25% Senior Notes”)	$	271,909	$	279,909
7.75% Senior Notes, due May 2027 (“7.75% Senior Notes”)	300,000		300,000
Unamortized debt issuance costs (1)	(8,334)		(10,992)
	563,575		568,917
Long-term lease obligation(2)	23,869		20,676
	$	587,444	$	589,593
Total Debt	$	636,511	$	589,593

(1) As atDecember 31, 2022, the amount of deferred financing fees included $0.3 million related to the credit facility.

(2)The current portion of the lease obligation has been included in accounts payable and accrued liabilities on the Company’s balance sheet and totaled ~~$7.8~~$10.0 million as at ~~June~~September 30, 2023 (December 31, 2022 - $4.8 million).

~~As of June~~During the three months ended September 30, 2023, the Company, ~~had a~~as guarantor, and Gran Tierra Energy Colombia GmbH and and Gran Tierra Operations Colombia GmbH, as borrowers, amended and restated their credit facility with a market ~~lender~~leader in the global commodities industry. As part of the restatement, the initial commitment was adjusted from $100 million to $50 million (maintaining the potential option of up to additional $50 million, subject to approval by the lender). Additionally, the availability period for the draws under the amendment to the credit facility was extended until December 31, 2023. The credit facility ~~has a borrowing base of up~~continues to $150 million, with $100 million as an initial commitment available at June 30, 2023, and an option for an additional $50 million upon mutual agreement by the Company and the lender. The credit facility bearsbear interest based on the secured overnight financing rate posted by the Federal Reserve Bank of New York plus a credit margin of 6.00% and a credit-adjusted spread of 0.26%. Undrawn amounts under the credit facility bear interest at 2.10% per annum, based on the amount available. The credit facility is secured by the Company’s Colombian assets and economic ~~rights. It~~rights and has a final maturity date of August 15, ~~2024, which may be extended to February 18, 2025, upon~~2024. During the ~~satisfaction of certain conditions. The availability period for the draws under~~three months ended September 30, 2023, the credit facility ~~expires on August 20, 2023. As of June 30, 2023, and December 31, 2022, the credit facility remained undrawn.~~was drawn by $50 million.

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%, 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.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 ICE Brent forward strip for the projected future cash flows.

As of September 30, 2023, the Company was in compliance with all the above covenants.

Senior Notes

During the ~~three and six~~nine months ended ~~June~~September 30, 2023, the Company ~~re-purchased~~purchased in the open market ~~nil and~~ $8.0 million ~~respectively,~~ of 6.25% Senior Notes for cash consideration of $6.8 million. The ~~re-purchase~~purchase resulted in a $1.1 million gain, which included the write-off of

deferred financing fees of $0.1 million. The ~~re-purchase~~purchase gain was recorded in “other gain” in the Company’s condensed consolidated statements of operations. ~~The re-purchased~~Subsequent to the quarter, the Company cancelled all previously purchased 6.25% Senior ~~Notes~~Notes. No notes were ~~not canceled and are held by~~purchased during the ~~Company as treasury bonds as of June~~three months ended September 30, 2023.

8Subsequent to the quarter, the Company completed exchange offers of $247.1 million of 6.25% Senior Notes and $275.8 million of 7.75% Senior Notes (together with 6.25% Senior Notes, the “Senior Notes”) for $487.6 million newly issued 9.50% Senior Secured Notes due 2029. The exchange consideration for $242.5 million of 6.25% Senior Notes included early participation premium of $80 for each $1,000 aggregate principal amount with the remainder of $4.6 million exchanged at $1,000 and for $274.2 million of 7.75% Senior Notes early participation premium of $20 for each $1,000 aggregate principal amount with remainder of $1.6 million of 7.75% Senior Notes exchanged at $950 for each $1,000 aggregate principal amount. In addition, the Company paid cash consideration of $60.0 million for 6.25% Senior Notes exchanged as part of total consideration to eligible holders on a pro rata basis, for each $1,000 aggregate principal amount tendered and accepted for the early exchange deadline. The settlement date of the exchange offer was on October 20, 2023. The Senior Notes tendered and accepted for exchange, as well as the notes held as treasury bonds, were cancelled.

Interest Expense

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


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(Thousands of U.S. Dollars)	(Thousands of U.S. Dollars)	2023		2022		2023		2022		(Thousands of U.S. Dollars)	2023		2022		2023		2022
Contractual interest and other financing expenses	Contractual interest and other financing expenses	$	11,659	$	11,063	$	22,714	$	22,304	Contractual interest and other financing expenses	$	11,909	$	10,670	$	34,623	$	32,974
Amortization of debt issuance costs	Amortization of debt issuance costs	1,019		1,131		1,800		2,018		Amortization of debt issuance costs	1,594		751		3,394		2,769
		$	12,678	$	12,194	$	24,514	$	24,322		$	13,503	$	11,421	$	38,017	$	35,743

5. Share Capital


			Shares of Common Stock
Shares issued at December 31, 2022			36,889,862
Shares re-purchased			(2,274,746)
Shares outstanding at December 31, 2022			34,615,116
Shares issued on option exercise			~~589~~1,839
Shares re-purchased			(1,328,650)
Shares issued and outstanding at ~~June~~September 30, 2023			~~33,287,055~~33,288,305

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~~Common Stock were automatically combined into one issued share of ~~common stock,~~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 year ended 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 was able to purchase at prevailing market prices up to 3,603,396 shares of Common Stock, representing approximately 10% of the issued and outstanding shares of Common Stock as of August 22, 2022.

During the three and nine months ended September 30, 2023, the Company re-purchased nil and 1,328,650 shares at a weighted average price of nil and $8.15 per share, respectively (three and nine months ended September 30, 2022 - 1,073,370 shares). As of September 30, 2023, all 3,603,396 shares held as treasury stock were canceled. The 2022 Program expired in May 2023 when 10% share maximum was reached.

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

PSUs DSUs Stock Options
Number of Outstanding Share Units Number of Outstanding Share Units Number of Outstanding Stock Options Weighted Average Exercise Price/Stock Option ($)
Balance, December 31, 2022 3,152,823 656,186 1,730,286 11.52
Granted 1,504,546 46,290 407,627 8.59
Exercised (1,523,408) — (589) 7.93
Forfeited (21,574) — (22,336) 5.79
Expired — — (129,943) 24.87
Balance, June 30, 2023 3,112,387 702,476 1,985,045 10.11


	PSUs	DSUs	Stock Options
	Number of Outstanding Share Units	Number of Outstanding Share Units	Number of Outstanding Stock Options	Weighted Average Exercise Price/Stock Option ($)
Balance, December 31, 2022	3,152,823	656,186	1,730,286	11.52
Granted	1,504,546	89,643	409,435	8.58
Exercised	(1,523,408)	—	(1,839)	4.17
Forfeited	(21,574)	—	(22,336)	5.79
Expired	—	—	(133,880)	25.15
Balance, September 30, 2023	3,112,387	745,829	1,981,666	10.06

For the three and ~~six~~nine months ended ~~June~~September 30, 2023, there was ~~$0.3~~$1.9 million and ~~$1.8~~$3.7 million of stock-based compensation expense, respectively. For the three and ~~six~~nine months ended ~~June~~September 30, 2022, there was $0.2 million of stock-based compensation recovery and $6.4 million of stock-based compensation expense, ~~was $2.0 million and $6.5 million,~~ respectively.

As at ~~June~~September 30, 2023, there was ~~$10.5~~$11.4 million (December 31, 2022 - $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 ~~1.9~~1.8 years. During the ~~six~~nine months ended ~~June~~September 30, 2023, the Company paid out $15.1 million for PSUs vested on December 31, 2022 ~~(six~~(nine months ended ~~June~~September 30, 2022 - $2.4 million for PSUs vested on December 31, 2021).

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

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

Diluted net ~~loss~~income or ~~income~~loss per share is calculated using the treasury stock method for share-based compensation arrangements. The treasury stock method assumes that any proceeds obtained on the exercise of share-based compensation arrangements would be used to purchase ~~common~~ shares of Common Stock 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 ~~loss~~income or ~~income~~loss per share as their impact would be anti-dilutive.

Weighted Average Shares Outstanding


		Three Months Ended June 30,		Six Months Ended June 30,			Three Months Ended September 30,		Nine Months Ended September 30,
		2023	2022	2023	2022		2023	2022	2023	2022
Weighted average number of common shares outstanding		33,299,505	36,857,138	33,872,270	36,798,229
Weighted average number of shares of Common Stock outstanding						Weighted average number of shares of Common Stock outstanding	33,287,368	36,730,543	33,675,160	36,775,419
Shares issuable pursuant to stock options	Shares issuable pursuant to stock options	—	1,180,686	—	1,235,124	Shares issuable pursuant to stock options	129,299	1,133,014	—	1,202,431
Shares assumed to be purchased from proceeds of stock options	Shares assumed to be purchased from proceeds of stock options	—	(614,464)	—	(735,584)	Shares assumed to be purchased from proceeds of stock options	(66,617)	(732,483)	—	(739,060)
Weighted average number of diluted common shares outstanding		33,299,505	37,423,360	33,872,270	37,297,769
Weighted average number of diluted shares of Common Stock outstanding						Weighted average number of diluted shares of Common Stock outstanding	33,350,050	37,131,074	33,675,160	37,238,790

For the three and ~~six~~nine months ended ~~June~~September 30, 2023, 1,854,307 of options and all options, respectively, on a weighted average basis (three and ~~six~~nine months ended ~~June~~September 30, 2022, ~~609,291~~616,167 and ~~573,843~~586,388 options, respectively), were excluded from the diluted income (loss) ~~income~~ per share calculation as the options were anti-dilutive.

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 ~~six~~nine months ended ~~June~~September 30, 2023, 100% of the Company’s revenue resulted from oil sales (three and ~~six~~nine months ended ~~June~~September 30, 2022 - 100%). During the three and ~~six~~nine months ended ~~June~~September 30, 2023, quality and

transportation discounts were ~~18%~~14% and ~~20%~~18% of the average ICE Brent price (three and ~~six~~nine months ended ~~June~~September 30, 2022 - ~~12%~~14% and 13%), respectively. ~~The increase in quality and transportation discounts were primarily a result of higher Vasconia and Castilla discounts.~~

During the three months ended ~~June~~September 30, 2023, the Company’s production was sold primarily to one major customer in Colombia, representing ~~98%~~96% of the total sales volumes (three months ended ~~June~~September 30, 2022 - ~~two customers,~~one major customer, representing ~~55% and 44%~~99% of the total sales volumes).

During the ~~six~~nine months ended ~~June~~September 30, 2023, the Company’s production was sold primarily to one major customer in Colombia, representing ~~98%~~97% of the total sales volumes ~~(six~~(nine months ended ~~June~~September 30, 2022 - two major customers, representing ~~56%~~71% and ~~43%~~29% of the total sales volumes).

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

7. Taxes

The Company’s effective tax rate was ~~145%~~115% for the ~~six~~nine months ended ~~June~~September 30, 2023, compared to ~~54%~~49% in the comparative period of 2022. The increase was primarily due to an increase in non-deductible foreign exchange adjustments and non-deductible third-party royalty in Colombia. These were partially offset by a decrease in valuation allowance.

Current income tax expense was ~~$37.4~~$63.7 million for the ~~six~~nine months ended ~~June~~September 30, 2023, compared to ~~$46.3~~$63.1 million in the corresponding period of 2022, primarily due to a decrease in taxable ~~income.~~income in Colombia, which is subject to a higher Colombian tax rate.

The deferred income tax expense for the ~~six~~nine months ended ~~June~~September 30, 2023, was ~~$29.3~~$43.2 million compared to $36.9 million in the corresponding period of 2022. In both cases, this can be primarily ~~as a~~attributed to higher tax depreciation compared to accounting depreciation and the utilization of tax losses to offset taxable income in Colombia.

For the nine months ended September 30, 2022, the deferred income tax expense was mainly the 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 ~~2022~~2021 was ~~$32.0 million as~~also 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 ~~six~~nine months ended ~~June~~September 30, 2023, the difference between the effective tax rate of ~~145%~~115% 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~~nine months ended ~~June~~September 30, 2022, the difference between the effective tax rate of ~~54%~~49% 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.~~compensation which were partially offset by a decrease in foreign currency translation.

8. Contingencies

Legal Proceedings

Gran Tierra has several lawsuits and claims pending. The outcome of the lawsuits and disputes cannot be predicted with certainty; Gran Tierra believes the resolution of these matters would not have a material adverse effect on the Company’s consolidated financial position, results of operations, or cash flows. Gran Tierra records costs as they are incurred or become probable and determinable.

Letters of credit and other credit support

At ~~June~~September 30, 2023, the Company had provided letters of credit and other credit support totaling ~~$109.4~~$220.1 million (December 31, 2022 - $111.1 million) as security relating to work commitment guarantees in Colombia and Ecuador contained in exploration contracts, the Suroriente Block (Note 3), and other capital or operating requirements.

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 ~~June~~September 30, 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 current assets, other long-term assets, accounts payable and accrued liabilities, credit facility, long-term debt and other long-term liabilities. The Company uses appropriate valuation techniques based on the available information to measure the fair values of assets and liabilities.

Fair Value Measurement

The following table presents the Company’s fair value measurements of its financial instruments as of ~~June~~September 30, 2023, and December 31, 2022:


(Thousands of U.S. Dollars)	(Thousands of U.S. Dollars)	As at June 30, 2023		As at December 31, 2022		(Thousands of U.S. Dollars)	As at September 30, 2023		As at December 31, 2022
Level 1	Level 1					Level 1
Assets	Assets					Assets
Prepaid equity forward (“PEF”) - current (1)	Prepaid equity forward (“PEF”) - current (1)	$	4,898	$	5,981	Prepaid equity forward (“PEF”) - current (1)	$	6,973	$	5,981
PEF - long-term(2)	PEF - long-term(2)	—		9,975		PEF - long-term(2)	—		9,975
		$	4,898	$	15,956		$	6,973	$	15,956

Liabilities	Liabilities					Liabilities
6.25% Senior Notes	6.25% Senior Notes	$	233,502	$	243,801	6.25% Senior Notes	$	255,594	$	243,801
7.75% Senior Notes	7.75% Senior Notes	227,321		241,455		7.75% Senior Notes	257,145		241,455
		$	460,823	$	485,256		$	512,739	$	485,256
Level 2	Level 2					Level 2
Assets	Assets					Assets

Restricted cash and cash equivalents - long-term(2)	Restricted cash and cash equivalents - long-term(2)	$	6,504	$	5,343	Restricted cash and cash equivalents - long-term(2)	$	7,052	$	5,343

(1) The current portion of PEF is included in the other current assets on the Company’s condensed consolidated balance sheet

(2) The long-term portion of restricted cash and PEF is included in the other long-term assets on the Company’s condensed consolidated balance sheet

The fair values of cash and cash equivalents, current restricted cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities and credit facility 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 approximated their carrying value because interest rates are variable and reflective of market rates.

~~PEF~~

Prepaid Equity Forward

To reduce the Company’s exposure to changes in the trading price of the Company’s ~~common~~ shares of Common Stock 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 of Common Stock 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 ~~June~~September 30, 2023, the Company’s PEF had a notional amount of 1.0 million shares with a fair value of ~~$4.9~~$7.0 million (As at December 31, 2022 - 1.6 million shares with a fair value of $16.0 million). During the three and ~~six~~nine months ended ~~June~~September 30, 2023, the Company recorded a ~~$4.1~~$2.2 million gain and ~~$5.8~~$3.6 million loss, respectively, on the PEF in general and administrative expenses (three and ~~six~~nine months ended ~~June~~September 30, 2022 - ~~$5.2~~$2.6 million ~~loss~~ and ~~$2.7~~$5.3 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.

Senior Notes

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

At ~~June~~September 30, 2023, the carrying amounts of the 6.25% Senior Notes and the 7.75% Senior Notes were ~~$268.9~~$269.4 million and ~~$293.9~~$294.2 million, respectively, which represented the aggregate principal amount less unamortized debt issuance costs, and the fair values were ~~$233.5~~$255.6 million and ~~$227.3~~$257.1 million, respectively.

During the three and ~~six~~nine months ended ~~June~~September 30, 2023, the Company did not have any derivative instruments and consequently did not incur any gains orand losses related to ~~derivatives~~derivative instruments (three and ~~six~~nine months ended ~~June~~September 30, 2022 - ~~$5.2~~nil and $26.6 million ~~and $26.6 million, respective~~ loss related to commodity price ~~derivatives).~~derivatives, respectively.

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,					As at September 30,				As at December 31,
(Thousands of U.S. Dollars)	(Thousands of U.S. Dollars)	2023		2022		2022		2021		(Thousands of U.S. Dollars)	2023		2022		2022		2021
Cash and cash equivalents	Cash and cash equivalents	$	68,529	$	108,558	$	126,873	$	26,109	Cash and cash equivalents	$	123,216	$	118,173	$	126,873	$	26,109
Restricted cash and cash equivalents - current	Restricted cash and cash equivalents - current	1,142		1,142		1,142		392		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)	6,504		4,827		5,343		4,903		Restricted cash and cash equivalents - long-term (1)	7,052		5,518		5,343		4,903
		$	76,175	$	114,527	$	133,358	$	31,404		$	131,410	$	124,833	$	133,358	$	31,404

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

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


		Six Months Ended June 30,					Nine Months Ended September 30,
(Thousands of U.S. Dollars)	(Thousands of U.S. Dollars)	2023		2022		(Thousands of U.S. Dollars)	2023		2022
Accounts receivable and other long-term assets	Accounts receivable and other long-term assets	$	3,898	$	2,356	Accounts receivable and other long-term assets	$	(8,484)	$	2,811
Derivatives	Derivatives	—		4,254		Derivatives	—		(2,757)
PEF	PEF	11,887		(11,215)		PEF	9,664		(13,837)

Prepaids & Inventory	Prepaids & Inventory	(3,035)		(3,811)		Prepaids & Inventory	(6,809)		(6,025)
Accounts payable and accrued and other long-term liabilities	Accounts payable and accrued and other long-term liabilities	(3,383)		8,264		Accounts payable and accrued and other long-term liabilities	(3,040)		37,862
Taxes receivable and payable	Taxes receivable and payable	(35,203)		56,481		Taxes receivable and payable	(25,566)		54,784
Net changes in assets and liabilities from operating activities	Net changes in assets and liabilities from operating activities	$	(25,836)	$	56,329	Net changes in assets and liabilities from operating activities	$	(34,235)	$	72,838

Changes in non-cash investing working capital for the ~~six~~nine months ended ~~June~~September 30, 2023, were comprised of ~~an increase~~a decrease in accounts payable and accrued liabilities of ~~$9.1~~$11.0 million ~~(six~~and an increase in accounts receivable of $0.1 million (nine months ended ~~June~~September 30, 2022, an increase in accounts payable and accrued liabilities of ~~$11.2~~$3.7 million and an increase in accounts receivable of ~~$0.2~~$0.4 million).

The following table provides additional supplemental cash flow disclosures:


		Six Months Ended June 30,					Nine Months Ended September 30,
(Thousands of U.S. Dollars)	(Thousands of U.S. Dollars)	2023		2022		(Thousands of U.S. Dollars)	2023		2022
Cash paid for income taxes		$	71,457	$	20,468
Cash paid for income taxes including withholding tax						Cash paid for income taxes including withholding tax	$	85,203	$	29,881
Cash paid for interest	Cash paid for interest	$	20,406	$	21,975	Cash paid for interest	$	29,446	$	31,455

Non-cash investing activities:	Non-cash investing activities:					Non-cash investing activities:
Net liabilities related to property, plant and equipment, end of period	Net liabilities related to property, plant and equipment, end of period	$	64,206	$	41,106	Net liabilities related to property, plant and equipment, end of period	$	44,067	$	33,397

1314

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 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 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.~~Common Stock. As a result of the reverse stock split, every ten of the Company’s issued shares of ~~common stock~~Common Stock were automatically combined into one issued share of ~~common stock, without any change to the par value per share.~~Common Stock. 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 ~~second~~third quarter of 2023

•Net ~~loss~~income in the ~~second~~third quarter of 2023 was ~~$10.8~~$6.5 million or ~~$(0.33)~~$0.20 per share basic and diluted, compared to a net income of ~~$53.0~~$38.7 million or ~~$1.44~~$1.05 per share basic and ~~$1.42~~$1.04 per share diluted in the ~~second~~third quarter of 2022

•Income before income taxes in the ~~second~~third quarter of 2023 was ~~$22.9~~$46.9 million, compared to an income before income taxes of ~~$91.6~~$60.4 million in the ~~second~~third quarter of 2022

•~~During~~Adjusted EBITDA(2) increased to $119.2 million, compared to $116.1 million in the ~~second~~third quarter of ~~2023, we re-purchased 20,439 of our common shares at a weighted average price of $5.27 per share~~2022 and increased from $97.3 million in the prior quarter

•Funds flow from operations(2) decreased by ~~49%~~16% to ~~$53.1~~$79.0 million, compared to the ~~second~~third quarter of 2022 and ~~decreased~~increased by ~~12%~~49% from ~~$60.0~~$53.1 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

•NAR production for the ~~second~~third quarter of 2023 increased by ~~17%~~14% to ~~27,204~~26,776 BOPD, compared to ~~23,215~~23,472 BOPD in the ~~second~~third quarter of 2022 and ~~increased~~decreased by 7%2% from the ~~first~~prior quarter ~~of 2023~~

•Sales volumes for the ~~second~~third quarter of 2023 increased by ~~19%~~12% to ~~27,271~~26,396 BOPD, compared to ~~22,847~~23,516 BOPD in the ~~second~~third quarter of 2022 and ~~increased~~decreased by 8%3% from the ~~first~~prior quarter ~~of 2023~~

•Oil sales for the third quarter of 2023 were ~~$157.9~~$179.9 million, ~~23% lower~~7% higher compared to the ~~second~~third quarter of 2022, primarily due to ~~a 31% decrease in Brent price, an increase of 8% in the~~lower quality and transportation discounts and ~~offset by 19% higher sales volumes.~~utilization of marketing arrangements which used Brent monthly average of the month of delivery (“M pricing”) during the current quarter compared to utilization of Brent monthly average following the month of deliveries (“M+1” pricing) which negatively impacted revenues in the third quarter of 2022. Oil sales increased by ~~10%~~14% from ~~$144.2~~$157.9 million in the ~~first~~second quarter of 2023 primarily due to ~~a 8% higher sales volumes~~an 11% increase in Brent prices and lower quality and transportation discounts, offset by 3% lower sales volumes

•Operating expenses increased by ~~23%~~18% to ~~$48.5~~$49.4 million or by ~~$0.54~~$0.99 per bbl to ~~$19.54~~$20.33 per bbl when compared to the ~~second~~third quarter of 2022, primarily as a result of higher lifting costs offset by lower workover activities. Operating expenses increased from ~~$41.4~~$48.5 million or ~~$18.26~~$19.54 per bbl in the prior quarter, ~~primarily due to higher lifting costs~~for the same reason mentioned above

•Transportation expenses per bbl increased by ~~$0.28 in~~$0.46 when compared to the ~~second~~third quarter of ~~2023~~2022, due to higher transportation tariffs affecting Acordionero sales, utilization of new transportation routes for new exploration wells in Colombia and Ecuador ~~sales~~ ~~when compared to~~and increased by $0.09 from the second ~~quarter of 2022 and increased $0.14 from the first~~ quarter of 2023 due to higher trucking costs resulting from utilization longer distance delivery points and depreciation of U.S. dollar against the Colombian peso

•Operating netback(2) ~~decreased~~increased to ~~$105.7~~$126.7 million compared to ~~$163.8~~$124.1 million in the ~~second~~third quarter of 2022 and increased from ~~$99.8~~$105.7 million in the prior ~~quarter~~

•~~Adjusted EBITDA(2)~~ decreased to $84.5 million compared to $140.1 million in the second quarter of 2022 and decreased from $88.7 million in the prior quarter. During the quarter, Adjusted EBITDA was reduced by $12.8 million due to realized foreign exchange loss primarily associated with the payment of income taxes in the second quarter

•Quality and transportation discounts for the ~~second~~third quarter of 2023 ~~increased~~decreased to ~~$14.10~~$11.83 per bbl compared to ~~$13.00~~$13.37 per bbl in the ~~second~~third quarter of 2022, primarily as a result of the ~~widening~~tightening of the Castilla and Vasconia differentials and decreased from ~~$18.45~~$14.10 per bbl in the prior quarter for the same reason mentioned above

•General and administrative (“G&A”) expenses before stock-based compensation ~~increased~~were comparable to the third quarter of 2022 and decreased by ~~22% compared to~~13% from the second quarter of ~~2022~~2023 due to ~~higher~~lower legal fees and consulting costs attributed to optimization projects ~~and decreased by 15% from the first quarter of 2023~~

•Capital additions for the ~~second~~third quarter of 2023 were ~~$65.6~~$43.1 million, ~~an increase~~a decrease of 1%24% compared to the ~~second~~third quarter of 2022, and ~~decreased 8%~~a decrease of 34% from the ~~first~~second quarter of 2023 due to the ~~acceleration~~completion of the 2023 drilling program in the first ~~quarter~~half of 2023

1415


(Thousands of U.S. Dollars, unless otherwise indicated)	(Thousands of U.S. Dollars, unless otherwise indicated)	Three Months Ended June 30,					Three Months Ended March 31,		Six Months Ended June 30,					(Thousands of U.S. Dollars, unless otherwise indicated)	Three Months Ended September 30,					Three Months Ended June 30,		Nine Months Ended September 30,
		2023		2022		% Change	2023		2023		2022		% 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	33,719		30,607		10	31,611		32,671		29,988		9	Working Interest (“WI”) Production Before Royalties	33,940		30,391		12	33,719		33,098		30,123		10
Royalties	Royalties	(6,515)		(7,392)		(12)	(6,085)		(6,301)		(6,962)		(9)	Royalties	(7,164)		(6,919)		4	(6,515)		(6,592)		(6,948)		(5)
Production NAR	Production NAR	27,204		23,215		17	25,526		26,370		23,026		15	Production NAR	26,776		23,472		14	27,204		26,506		23,175		14
Decrease (Increase) in Inventory		67		(368)		(118)	(355)		(143)		(236)		39
(Increase) Decrease in Inventory														(Increase) Decrease in Inventory	(380)		44		(964)	67		(222)		(141)		(57)
Sales(1)	Sales(1)	27,271		22,847		19	25,171		26,227		22,790		15	Sales(1)	26,396		23,516		12	27,271		26,284		23,034		14

Net (Loss) Income		$	(10,825)	$	52,972	(120)	$	(9,700)	$	(20,525)	$	67,091	(131)
Net Income (Loss)														Net Income (Loss)	$	6,527	$	38,663	(83)	$	(10,825)	$	(13,998)	$	105,754	(113)

Operating Netback	Operating Netback													Operating Netback
Oil Sales	Oil Sales	$	157,902	$	205,785	(23)	$	144,190	$	302,092	$	380,354	(21)	Oil Sales	$	179,921	$	168,397	7	$	157,902	$	482,013	$	548,751	(12)
Operating Expenses	Operating Expenses	(48,491)		(39,494)		23	(41,369)		(89,860)		(74,429)		21	Operating Expenses	(49,367)		(41,837)		18	(48,491)		(139,227)		(116,266)		20

Transportation Expenses	Transportation Expenses	(3,691)		(2,513)		47	(3,066)		(6,757)		(5,347)		26	Transportation Expenses	(3,842)		(2,417)		59	(3,691)		(10,599)		(7,764)		37
Operating Netback(2)	Operating Netback(2)	$	105,720	$	163,778	(35)	$	99,755	$	205,475	$	300,578	(32)	Operating Netback(2)	$	126,712	$	124,143	2	$	105,720	$	332,187	$	424,721	(22)

G&A Expenses Before Stock-Based Compensation	G&A Expenses Before Stock-Based Compensation	$	9,549	$	7,847	22	$	11,196	$	20,745	$	15,626	33	G&A Expenses Before Stock-Based Compensation	$	8,307	$	8,284	—	$	9,549	$	29,052	$	23,910	22
G&A Stock-Based Compensation Expense		317		1,989		(84)	1,500		1,817		6,546		(72)
G&A Stock-Based Compensation Expense (Recovery)														G&A Stock-Based Compensation Expense (Recovery)	1,931		(170)		1,236	317		3,748		6,376		(41)
G&A Expenses, Including Stock-Based Compensation	G&A Expenses, Including Stock-Based Compensation	$	9,866	$	9,836	—	$	12,696	$	22,562	$	22,172	2	G&A Expenses, Including Stock-Based Compensation	$	10,238	$	8,114	26	$	9,866	$	32,800	$	30,286	8

Adjusted EBITDA(2)	Adjusted EBITDA(2)	$	84,522	$	140,113	(40)	$	88,677	$	173,199	$	259,491	(33)	Adjusted EBITDA(2)	$	119,235	$	116,089	3	$	97,291	$	306,391	$	375,075	(18)

Funds Flow From Operations(2)	Funds Flow From Operations(2)	$	53,106	$	103,625	(49)	$	60,016	$	113,122	$	190,935	(41)	Funds Flow From Operations(2)	$	79,000	$	93,746	(16)	$	53,106	$	192,122	$	284,681	(33)

Capital Expenditures	Capital Expenditures	$	65,565	$	65,199	1	$	71,062	$	136,627	$	106,682	28	Capital Expenditures	$	43,080	$	57,035	(24)	$	65,565	$	179,707	$	163,717	10

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

(2) Non-GAAP measures

Operating netback, EBITDA, adjusted EBITDA, and funds flow from operations 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 income (loss) ~~income~~ or other measures of financial performance as determined in accordance with GAAP. Our method of calculating these measures may differ from other companies and, accordingly, may not be comparable to similar measures used by other companies. Disclosure of each non-GAAP financial measure is preceded by the corresponding GAAP measure so as not to imply that more emphasis should be placed on the non-GAAP measure.

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

EBITDA, as presented, is defined as net income (loss) ~~income~~ 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~~ and other 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 income (loss) ~~income~~ to EBITDA and adjusted EBITDA is as follows:


		Three Months Ended June 30,				Three Months Ended March 31,		Six Months Ended June 30,					Three Months Ended September 30,				Three Months Ended June 30,		Nine Months Ended September 30,
(Thousands of U.S. Dollars)	(Thousands of U.S. Dollars)	2023		2022		2023		2023		2022		(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
Net income (loss)												Net income (loss)	$	6,527	$	38,663	$	(10,825)	$	(13,998)	$	105,754
Adjustments to reconcile net income (loss) to EBITDA and Adjusted EBITDA												Adjustments to reconcile net income (loss) to EBITDA and Adjusted EBITDA
DD&A expenses	DD&A expenses	56,209		42,216		51,721		107,930		83,179		DD&A expenses	55,019		45,320		56,209		162,949		128,499
Interest expense	Interest expense	12,678		12,194		11,836		24,514		24,322		Interest expense	13,503		11,421		12,678		38,017		35,743
Income tax expense	Income tax expense	33,732		38,666		32,883		66,615		78,206		Income tax expense	40,333		21,734		33,732		106,948		99,940
EBITDA (non-GAAP)	EBITDA (non-GAAP)	$	91,794	$	146,048	$	86,740	$	178,534	$	252,798	EBITDA (non-GAAP)	$	115,382	$	117,138	$	91,794	$	293,916	$	369,936
Non-cash lease expense	Non-cash lease expense	1,109		747		1,144		2,253		1,158		Non-cash lease expense	1,235		851		1,109		3,488		2,009
Lease payments	Lease payments	(636)		(388)		(606)		(1,242)		(732)		Lease payments	(676)		(402)		(636)		(1,918)		(1,134)
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
Foreign exchange loss												Foreign exchange loss	1,717		1,489		4,707		8,126		486
Stock-based compensation expense (recovery)												Stock-based compensation expense (recovery)	1,931		(170)		317		3,748		6,376
Unrealized derivative instruments gain												Unrealized derivative instruments gain	—		(219)		—		—		—
Other gain	Other gain	—		—		(615)		(615)		—		Other gain	(354)		(2,598)		—		(969)		(2,598)

Adjusted EBITDA (non-GAAP)	Adjusted EBITDA (non-GAAP)	$	84,522	$	140,113	$	88,677	$	173,199	$	259,491	Adjusted EBITDA (non-GAAP)	$	119,235	$	116,089	$	97,291	$	306,391	$	375,075

Funds flow from operations, as presented, is defined as net income (loss) ~~income~~ 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, unrealized derivative instruments gain ~~or loss, cash settlement on derivative instruments~~ and other 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. A reconciliation from net income (loss) ~~income~~ to funds flow from operations is as follows:


		Three Months Ended June 30,				Three Months Ended March 31,		Six Months Ended June 30,					Three Months Ended September 30,				Three Months Ended June 30,		Nine Months Ended September 30,
(Thousands of U.S. Dollars)	(Thousands of U.S. Dollars)	2023		2022		2023		2023		2022		(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
Net income (loss)												Net income (loss)	$	6,527	$	38,663	$	(10,825)	$	(13,998)	$	105,754
Adjustments to reconcile net income (loss) to funds flow from operations												Adjustments to reconcile net income (loss) to funds flow from operations
DD&A expenses	DD&A expenses	56,209		42,216		51,721		107,930		83,179		DD&A expenses	55,019		45,320		56,209		162,949		128,499
Deferred income tax expense	Deferred income tax expense	13,975		13,241		15,277		29,252		31,954		Deferred income tax expense	13,990		4,914		13,975		43,242		36,868
Stock-based compensation expense		317		1,989		1,500		1,817		6,546
Stock-based compensation expense (recovery)												Stock-based compensation expense (recovery)	1,931		(170)		317		3,748		6,376
Amortization of debt issuance costs	Amortization of debt issuance costs	1,019		1,131		781		1,800		2,018		Amortization of debt issuance costs	1,594		751		1,019		3,394		2,769
Non-cash lease expense	Non-cash lease expense	1,109		747		1,144		2,253		1,158		Non-cash lease expense	1,235		851		1,109		3,488		2,009
Lease payments	Lease payments	(636)		(388)		(606)		(1,242)		(732)		Lease payments	(676)		(402)		(636)		(1,918)		(1,134)
Unrealized foreign exchange (gain) loss	Unrealized foreign exchange (gain) loss	(8,062)		4,341		514		(7,548)		(498)		Unrealized foreign exchange (gain) loss	(266)		6,636		(8,062)		(7,814)		6,138
Derivative instruments loss		—		5,172		—		—		26,611
Cash settlements on derivative instruments		—		(17,796)		—		—		(26,392)
Unrealized derivative instruments gain												Unrealized derivative instruments gain	—		(219)		—		—		—
Other gain	Other gain	—		—		(615)		(615)		—		Other gain	(354)		(2,598)		—		(969)		(2,598)

Funds flow from operations (non-GAAP)	Funds flow from operations (non-GAAP)	$	53,106	$	103,625	$	60,016	$	113,122	$	190,935	Funds flow from operations (non-GAAP)	$	79,000	$	93,746	$	53,106	$	192,122	$	284,681

1617

Additional Operational Results


		Three Months Ended June 30,					Three Months Ended March 31,		Six Months Ended June 30,						Three Months Ended September 30,					Three Months Ended June 30,		Nine Months Ended September 30,
(Thousands of U.S. Dollars)	(Thousands of U.S. Dollars)	2023		2022		% Change	2023		2023		2022		% Change	(Thousands of U.S. Dollars)	2023		2022		% Change	2023		2023		2022		% Change
Oil sales	Oil sales	$	157,902	$	205,785	(23)	$	144,190	$	302,092	$	380,354	(21)	Oil sales	$	179,921	$	168,397	7	$	157,902	$	482,013	$	548,751	(12)
Operating expenses	Operating expenses	48,491		39,494		23	41,369		89,860		74,429		21	Operating expenses	49,367		41,837		18	48,491		139,227		116,266		20
Transportation expenses	Transportation expenses	3,691		2,513		47	3,066		6,757		5,347		26	Transportation expenses	3,842		2,417		59	3,691		10,599		7,764		37
Operating netback(1)	Operating netback(1)	105,720		163,778		(35)	99,755		205,475		300,578		(32)	Operating netback(1)	126,712		124,143		2	105,720		332,187		424,721		(22)

DD&A expenses	DD&A expenses	56,209		42,216		33	51,721		107,930		83,179		30	DD&A expenses	55,019		45,320		21	56,209		162,949		128,499		27

G&A expenses before stock-based compensation	G&A expenses before stock-based compensation	9,549		7,847		22	11,196		20,745		15,626		33	G&A expenses before stock-based compensation	8,307		8,284		—	9,549		29,052		23,910		22
G&A stock-based compensation expense		317		1,989		(84)	1,500		1,817		6,546		(72)
Foreign exchange loss (gain)		4,707		2,722		73	1,702		6,409		(1,003)		739
G&A stock-based compensation expense (recovery)														G&A stock-based compensation expense (recovery)	1,931		(170)		1,236	317		3,748		6,376		(41)
Foreign exchange loss														Foreign exchange loss	1,717		1,489		15	4,707		8,126		486		1,572
Derivative instruments loss	Derivative instruments loss	—		5,172		(100)	—		—		26,611		(100)	Derivative instruments loss	—		—		—	—		—		26,611		(100)
Other gain	Other gain	—		—		—	(615)		(615)		—		100	Other gain	(354)		(2,598)		(86)	—		(969)		(2,598)		(63)
Interest expense	Interest expense	12,678		12,194		4	11,836		24,514		24,322		1	Interest expense	13,503		11,421		18	12,678		38,017		35,743		6
		83,460		72,140		16	77,340		160,800		155,281		4		80,123		63,746		26	83,460		240,923		219,027		10

Interest income	Interest income	647		—		100	768		1,415		—		100	Interest income	271		—		100	647		1,686		—		100

Income before income taxes	Income before income taxes	22,907		91,638		(75)	23,183		46,090		145,297		(68)	Income before income taxes	46,860		60,397		(22)	22,907		92,950		205,694		(55)

Current income tax expense	Current income tax expense	19,757		25,425		(22)	17,606		37,363		46,252		(19)	Current income tax expense	26,343		16,820		57	19,757		63,706		63,072		1
Deferred income tax expense	Deferred income tax expense	13,975		13,241		6	15,277		29,252		31,954		(8)	Deferred income tax expense	13,990		4,914		185	13,975		43,242		36,868		17
		33,732		38,666		(13)	32,883		66,615		78,206		(15)		40,333		21,734		86	33,732		106,948		99,940		7
Net (loss) income		$	(10,825)	$	52,972	(120)	$	(9,700)	$	(20,525)	$	67,091	(131)
Net income (loss)														Net income (loss)	$	6,527	$	38,663	(83)	$	(10,825)	$	(13,998)	$	105,754	(113)

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

Total sales volumes, BOPD	Total sales volumes, BOPD	27,271		22,847		19	25,171		26,227		22,790		15	Total sales volumes, BOPD	26,396		23,516		12	27,271		26,284		23,034		14

Brent Price per bbl	Brent Price per bbl	$	77.73	$	111.98	(31)	$	82.10	$	79.91	$	104.94	(24)	Brent Price per bbl	$	85.92	$	97.70	(12)	$	77.73	$	81.94	$	102.48	(20)

Consolidated Results of Operations per bbl Sales Volumes NAR	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)	Oil sales	$	74.09	$	77.84	(5)	$	63.63	$	67.18	$	87.27	(23)
Operating expenses	Operating expenses	19.54		19.00		3	18.26		18.93		18.04		5	Operating expenses	20.33		19.34		5	19.54		19.40		18.49		5
Transportation expenses	Transportation expenses	1.49		1.21		23	1.35		1.42		1.30		9	Transportation expenses	1.58		1.12		41	1.49		1.48		1.23		20
Operating netback(1)	Operating netback(1)	42.60		78.77		(46)	44.04		43.29		72.87		(41)	Operating netback(1)	52.18		57.38		(9)	42.60		46.30		67.55		(31)

DD&A expenses	DD&A expenses	22.65		20.31		12	22.83		22.74		20.17		13	DD&A expenses	22.66		20.95		8	22.65		22.71		20.43		11

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 expenses before stock-based compensation	3.42		3.83		(11)	3.85		4.05		3.80		7
G&A stock-based compensation expense		0.13		0.96		(86)	0.66		0.38		1.59		(76)
Foreign exchange loss (gain)		1.90		1.31		45	0.75		1.35		(0.24)		663
Derivative instruments loss		—		2.49		(100)	—		—		6.45		(100)

1718


G&A stock-based compensation expense (recovery)														G&A stock-based compensation expense (recovery)	0.80		(0.08)		1,100	0.13		0.52		1.01		(49)
Foreign exchange loss														Foreign exchange loss	0.71		0.69		3	1.90		1.13		0.08		1,313
Derivative instruments loss														Derivative instruments loss	—		—		—	—		—		4.23		(100)
Other gain	Other gain	—		—		—	(0.27)		(0.13)		—		100	Other gain	(0.15)		(1.20)		(88)	—		(0.14)		(0.41)		(66)
Interest expense	Interest expense	5.11		5.87		(13)	5.22		5.16		5.90		(13)	Interest expense	5.56		5.28		5	5.11		5.30		5.68		(7)
		33.64		34.71		(3)	34.13		33.87		37.66		(10)		33.00		29.47		12	33.64		33.57		34.82		(4)

Interest income	Interest income	0.26		—		100	0.34		0.30		—		100	Interest income	0.11		—		100	0.26		0.23		—		100

Income before income taxes	Income before income taxes	9.22		44.06		(79)	10.25		9.72		35.21		(72)	Income before income taxes	19.29		27.91		(31)	9.22		12.96		32.73		(60)

Current income tax expense	Current income tax expense	7.96		12.23		(35)	7.77		7.87		11.21		(30)	Current income tax expense	10.85		7.77		40	7.96		8.88		10.03		(11)
Deferred income tax expense	Deferred income tax expense	5.63		6.37		(12)	6.74		6.16		7.75		(21)	Deferred income tax expense	5.76		2.27		154	5.63		6.03		5.86		3
		13.59		18.60		(27)	14.51		14.03		18.96		(26)		16.61		10.04		65	13.59		14.91		15.89		(6)
Net (loss) income		$	(4.37)	$	25.46	(117)	$	(4.26)	$	(4.31)	$	16.25	(127)
Net income (loss)														Net income (loss)	$	2.68	$	17.87	(85)	$	(4.37)	$	(1.95)	$	16.84	(112)

(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 June 30,				Three Months Ended March 31,		Six Months Ended June 30,					Three Months Ended September 30,				Three Months Ended June 30,		Nine Months Ended September 30,
		2023		2022		2023		2023		2022			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	33,719		30,607		31,611		32,671		29,988		WI Production Before Royalties	33,940		30,391		33,719		33,098		30,123
Royalties	Royalties	(6,515)		(7,392)		(6,085)		(6,301)		(6,962)		Royalties	(7,164)		(6,919)		(6,515)		(6,592)		(6,948)
Production NAR	Production NAR	27,204		23,215		25,526		26,370		23,026		Production NAR	26,776		23,472		27,204		26,506		23,175
Decrease (Increase) in Inventory		67		(368)		(355)		(143)		(236)
(Increase) Decrease in Inventory												(Increase) Decrease in Inventory	(380)		44		67		(222)		(141)
Sales	Sales	27,271		22,847		25,171		26,227		22,790		Sales	26,396		23,516		27,271		26,284		23,034

Royalties, % of WI Production Before Royalties	Royalties, % of WI Production Before Royalties	19	%	24	%	19	%	19	%	23	%	Royalties, % of WI Production Before Royalties	21	%	23	%	19	%	20	%	23	%

Oil production NAR for the three and ~~six~~nine months ended ~~June~~September 30, 2023, increased by ~~17% and 15%, respectively,~~14% in each of the periods compared to the corresponding periods of 2022 due to successful drilling and workover campaigns in Acordionero, Costayaco and Moqueta fields in ~~Colombia.~~Colombia and exploration success in Ecuador.

Oil production NAR ~~increased~~decreased by 7%2% compared to the prior quarter ~~for~~due to higher royalties driven by an increase in benchmark oil prices in the ~~same reasons mentioned above.~~current quarter.

Royalties as a percentage of WI production for the three and ~~six~~nine months ended ~~June~~September 30, 2023, decreased ~~by 19%~~to 21% and 20%, respectively, compared to the corresponding periods of 2022 commensurate with the decrease in benchmark oil prices and the price sensitive royalty regime in Colombia. Royalties as a percentage of WI production ~~were comparable~~increased compared to 19% in the prior quarter due to the ~~prior quarter.~~increase in benchmark oil prices.

1819

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

Realized price per bbl for the three ~~andsix~~ months ended ~~June~~September 30, 2023 decreased by ~~36% and 31%~~5%, ~~respectively,~~ compared to the corresponding ~~periods~~period of 2022, primarily as a result of a ~~31% and 24%~~12% decrease in Brent price, offset by lower differentials in the current quarter.

Realized price per bbl for thenine months ended September 30, 2023, decreased by 23%, compared to the corresponding period of 2022, primarily as a result of 20% decrease in Brent price and higher ~~differentials.~~ differentials in the current period.

For the three and ~~six~~nine months ended ~~June~~September 30, 2023, Castilla differentials decreased to $6.64 and increased to ~~$9.41 and $12.29~~$10.41 per bbl from ~~$7.82~~$9.15 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~~$7.89 per bbl, respectively, in the corresponding periods of 2022. Vasconia differentials decreased to $3.59 and increased to $5.66 per bbl from $3.77 and $4.17 per bbl, respectively, in the corresponding periods of 2022.

Compared to the prior quarter, the average realized price per bbl ~~was comparable.~~increased due to an 11% increase in Brent price and lower differentials.

Oil sales for the three ~~and six~~ months ended ~~June~~September 30, 2023, increased by 7% to $179.9 million, compared to the corresponding period of 2022 due to lower Castilla and Vasconia differentials and utilization of marketing arrangements which used Brent monthly average of the month of delivery (“M pricing”) during the current quarter compared to marketing arrangements which used Brent monthly average following the month of deliveries (“M+1” pricing) which negatively impacted revenues in the corresponding period of 2022.

Oil sales for the nine months ended September 30, 2023, decreased by ~~23% and 21%~~12% to ~~$157.9~~$482.0 million, ~~and $302.1 million, respectively,~~ compared to the corresponding ~~periods~~period of 2022 due to a ~~31% and 24%~~20% decrease in Brent price, ~~and~~ higher Castilla and Vasconia ~~differentials. During the first quarter of 2023, we commenced oil~~differentials offset by 14% higher 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.volumes.

Compared to the prior quarter, oil sales increased by ~~10%~~14%, primarily as a result of an 8%11% increase in ~~sales volumes~~Brent price and ~~the narrowing of quality~~lower Castilla, Vasconia and ~~transportation~~Oriente differentials partially offset by a 5%3% decrease in ~~Brent price.~~sales volumes.

The following table shows the effect of changes in realized price and sale volumes on our oil sales for the three and ~~six~~nine months ended ~~June~~September 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


(Thousands of U.S. Dollars)	Third Quarter 2023 Compared with Second Quarter 2023		Third Quarter 2023 Compared with Third Quarter 2022		Nine Months Ended September 30, 2023 Compared with Nine Months Ended September 30, 2022
Oil sales for the comparative period	$	157,902	$	168,397	$	548,751
Realized sales price increase (decrease) effect	25,408		(9,095)		(144,152)
Sales volumes (decrease) increase effect	(3,389)		20,619		77,414
Oil sales for the three and nine months ended September 30, 2023	$	179,921	$	179,921	$	482,013

2021

Operating Netback


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

Oil Sales	Oil Sales	$	157,902	$	205,785	$	144,190	$	302,092	$	380,354	Oil Sales	$	179,921	$	168,397	$	157,902	$	482,013	$	548,751
Transportation Expenses	Transportation Expenses	(3,691)		(2,513)		(3,066)		(6,757)		(5,347)		Transportation Expenses	(3,842)		(2,417)		(3,691)		(10,599)		(7,764)
		154,211		203,272		141,124		295,335		375,007			176,079		165,980		154,211		471,414		540,987
Operating Expenses	Operating Expenses	(48,491)		(39,494)		(41,369)		(89,860)		(74,429)		Operating Expenses	(49,367)		(41,837)		(48,491)		(139,227)		(116,266)
Operating Netback(1)	Operating Netback(1)	$	105,720	$	163,778	$	99,755	$	205,475	$	300,578	Operating Netback(1)	$	126,712	$	124,143	$	105,720	$	332,187	$	424,721

(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	$	77.73	$	111.98	$	82.10	$	79.91	$	104.94	Brent	$	85.92	$	97.70	$	77.73	$	81.94	$	102.48
One Month Forward Brent (“M+1”) Adjustment												One Month Forward Brent (“M+1”) Adjustment	—		(6.49)		—		—		(2.23)
Quality and Transportation Discounts	Quality and Transportation Discounts	(14.10)		(13.00)		(18.45)		(16.27)		(12.73)		Quality and Transportation Discounts	(11.83)		(13.37)		(14.10)		(14.76)		(12.98)
Average Realized Price	Average Realized Price	63.63		98.98		63.65		63.64		92.21		Average Realized Price	74.09		77.84		63.63		67.18		87.27
Transportation Expenses	Transportation Expenses	(1.49)		(1.21)		(1.35)		(1.42)		(1.30)		Transportation Expenses	(1.58)		(1.12)		(1.49)		(1.48)		(1.23)
Average Realized Price Net of Transportation Expenses	Average Realized Price Net of Transportation Expenses	62.14		97.77		62.30		62.22		90.91		Average Realized Price Net of Transportation Expenses	72.51		76.72		62.14		65.70		86.04
Operating Expenses	Operating Expenses	(19.54)		(19.00)		(18.26)		(18.93)		(18.04)		Operating Expenses	(20.33)		(19.34)		(19.54)		(19.40)		(18.49)
Operating Netback(1)	Operating Netback(1)	$	42.60	$	78.77	$	44.04	$	43.29	$	72.87	Operating Netback(1)	$	52.18	$	57.38	$	42.60	$	46.30	$	67.55

2122

Operating expenses for the three months ended ~~June~~September 30, 2023, increased by ~~23%~~18% to ~~$48.5~~$49.4 million or by ~~$0.54~~$0.99 per bbl to ~~$19.54~~$20.33 per bbl, compared to the corresponding period of 2022, primarily as a result of ~~$1.94~~$3.28 per bbl higher lifting costs associated with ~~environmental activities~~road and pipeline maintenance, power generation due to to increased compressed natural gas purchases and higher diesel tariffs and equipment rental ~~in Ecuador, partially~~associated with testing exploratory wells, offset by ~~$1.40~~$2.29 per bbl of lower workovers. As a result of an El-Niño-induced drought, power costs have increased across Colombia, which relies on hydroelectricity for more than two-thirds of its installed power capacity. In addition, operating costs increased as a result of the depreciation of U.S. dollar against the Colombian peso.

Operating expenses for the ~~six~~nine months ended ~~June~~September 30, 2023, increased by ~~21%~~20% to ~~$89.9~~$139.2 million or by ~~$0.89~~$0.91 per bbl to ~~$18.93~~$19.40 per bbl, compared to the corresponding period of 2022, primarily as a result of ~~$1.62~~$2.17 higher lifting costs associated with environmental activities, equipment rental, ~~in Ecuador~~power generation and ~~water injection equipment mobilization,~~road maintenance, offset by ~~$0.73~~$1.26 per bbl lower workovers.

2223

Compared to the prior quarter, operating expenses increased by ~~17%~~2% or ~~$1.28~~$0.79 per bbl from ~~$41.4~~$48.5 million or ~~$18.26~~$19.54 per bbl, primarily due to ~~$1.35~~$1.48 per bbl higher lifting costs attributed to road maintenance and ~~environmental activities,~~power generation, partially offset by ~~$0.07~~$0.69 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 ~~six~~nine months ended ~~June~~September 30, 2023, and 2022, and the prior quarter:


		Three Months Ended June 30,				Three Months Ended March 31,		Six Months Ended June 30,					Three Months Ended September 30,				Three Months Ended June 30,		Nine Months Ended September 30,
		2023		2022		2023		2023		2022			2023		2022		2023		2023		2022
Volume transported through pipeline	Volume transported through pipeline	1	%	—	%	2	%	2	%	—	%	Volume transported through pipeline	3	%	—	%	1	%	2	%	—	%
Volume sold at wellhead	Volume sold at wellhead	46	%	48	%	45	%	46	%	48	%	Volume sold at wellhead	47	%	47	%	46	%	46	%	47	%
Volume transported via truck to sales point	Volume transported via truck to sales point	53	%	52	%	53	%	52	%	52	%	Volume transported via truck to sales point	50	%	53	%	53	%	52	%	53	%
		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 ~~six~~nine months ended ~~June~~September 30, 2023, increased by ~~47%~~59% and ~~26%~~37% to ~~$3.7~~$3.8 million and ~~$6.8~~$10.6 million, respectively, compared to the corresponding periods of 2022 due to higher transportation tariffs affecting Acordionero sales, and the utilization of new transportation routes related to sales from ~~for~~ new exploration wells in Colombia and ~~Ecuador sales.~~Ecuador.

On a per bbl basis, transportation expenses increased by ~~23%~~41% and 9%20% to ~~$1.49~~$1.58 and ~~$1.42~~$1.48 for the three and ~~six~~nine months ended ~~June~~September 30, 2023, respectively, compared to the corresponding periods of 2022 for the same reason mentioned above.

Transportation expenses increased by ~~20%~~4% from ~~$3.1~~$3.7 million in the prior quarter due to higher ~~increased~~ trucking costs resulting from using longer distance delivery points and depreciation of the U.S. dollar against the Colombian peso. On a per bbl basis, transportation ~~costs~~expenses increased by ~~$0.14~~$0.09 from $1.49 in the prior quarter for the same reasons mentioned above.

2324

DD&A Expenses


		Three Months Ended June 30,				Three Months Ended March 31,		Six Months Ended June 30,					Three Months Ended September 30,				Three Months Ended June 30,		Nine Months Ended September 30,
		2023		2022		2023		2023		2022			2023		2022		2023		2023		2022
DD&A Expenses, thousands of U.S. Dollars	DD&A Expenses, thousands of U.S. Dollars	$	56,209	$	42,216	$	51,721	$	107,930	$	83,179	DD&A Expenses, thousands of U.S. Dollars	$	55,019	$	45,320	$	56,209	$	162,949	$	128,499
DD&A Expenses, U.S. Dollars per bbl	DD&A Expenses, U.S. Dollars per bbl	22.65		20.31		22.83		22.74		20.17		DD&A Expenses, U.S. Dollars per bbl	22.66		20.95		22.65		22.71		20.43

DD&A expenses for the three and ~~six~~nine months ended ~~June~~September 30, 2023, increased by ~~33%~~21% and ~~30%~~27% or by ~~$2.34~~$1.71 and ~~$2.57~~$2.28 per bbl, respectively, due to increased production and higher costs in the depletable base compared to the corresponding periods of 2022.

DD&A expenses ~~increased 9%~~decreased by 2% compared to the prior quarter and ~~decreased~~increased by ~~$0.18~~$0.01 per bbl when compared to the prior quarter, due to ~~higher~~additions to the depletable reserves along with lower production.

2425

G&A Expenses


		Three Months Ended June 30,					Three Months Ended March 31,		Six Months Ended June 30,						Three Months Ended September 30,					Three Months Ended June 30,		Nine Months Ended September 30,
(Thousands of U.S. Dollars)	(Thousands of U.S. Dollars)	2023		2022		% Change	2023		2023		2022		% Change	(Thousands of U.S. Dollars)	2023		2022		% Change	2023		2023		2022		% Change
G&A Expenses Before Stock-Based Compensation	G&A Expenses Before Stock-Based Compensation	$	9,549	$	7,847	22	$	11,196	$	20,745	$	15,626	33	G&A Expenses Before Stock-Based Compensation	$	8,307	$	8,284	—	$	9,549	$	29,052	$	23,910	22
G&A Stock-Based Compensation Expense		317		1,989		(84)	1,500		1,817		6,546		(72)
G&A Stock-Based Compensation Expense (Recovery)														G&A Stock-Based Compensation Expense (Recovery)	1,931		(170)		1,236	317		3,748		6,376		(41)
G&A Expenses, Including Stock-Based Compensation	G&A Expenses, Including Stock-Based Compensation	$	9,866	$	9,836	—	$	12,696	$	22,562	$	22,172	2	G&A Expenses, Including Stock-Based Compensation	$	10,238	$	8,114	26	$	9,866	$	32,800	$	30,286	8
(U.S. Dollars Per bbl Sales Volumes NAR)	(U.S. Dollars Per bbl Sales Volumes NAR)													(U.S. Dollars Per bbl Sales Volumes NAR)
G&A Expenses Before Stock-Based Compensation	G&A Expenses Before Stock-Based Compensation	$	3.85	$	3.77	2	$	4.94	$	4.37	$	3.79	15	G&A Expenses Before Stock-Based Compensation	$	3.42	$	3.83	(11)	$	3.85	$	4.05	$	3.80	7
G&A Stock-Based Compensation Expense		0.13		0.96		(86)	0.66		0.38		1.59		(76)
G&A Stock-Based Compensation Expense (Recovery)														G&A Stock-Based Compensation Expense (Recovery)	0.80		(0.08)		1,100	0.13		0.52		1.01		(49)
G&A Expenses, Including Stock-Based Compensation	G&A Expenses, Including Stock-Based Compensation	$	3.98	$	4.73	(16)	$	5.60	$	4.75	$	5.38	(12)	G&A Expenses, Including Stock-Based Compensation	$	4.22	$	3.75	13	$	3.98	$	4.57	$	4.81	(5)

~~For~~G&A expenses before stock-based compensation for the three ~~and six~~ months ended ~~June~~September 30, 2023, were comparable to the corresponding period of 2022. On a per bbl basis, G&A expenses before stock-based compensation decreased by $0.41 per bbl to $3.42 due to higher sales volumes in the current quarter.

G&A expenses before stock-based compensation for the nine months ended September 30, 2023, increased by 22% ~~and 33%~~ to ~~$9.5~~$29.1 million, ~~and $20.7 million, respectively,~~ due to higher consulting costs and legal fees attributed to optimization projects when compared to the corresponding ~~periods~~period of 2022. On a per bbl basis, G&A expenses before stock-based compensation increased by ~~$0.08 and $0.58~~$0.25 per bbl to ~~$3.85 and $4.37~~$4.05 per bbl, ~~respectively,~~ for the same reason mentioned ~~above.~~above and higher sales volumes during current period.

G&A expenses after stock-based compensation for the three months ended September 30, 2023, increased 26% compared to the corresponding period of 2022 and increased by $0.47 per bbl due to share price appreciation in the current quarter.

G&A expenses after stock-based compensation for the ~~three~~nine months ended ~~June 30, 2023 were comparable to the corresponding period of 2022 and decreased by $0.75 per bbl due to a lower share price and higher sales volumes in the current quarter.~~

~~G&A expenses after stock-based compensation for the six months ended June~~September 30, 2023, increased by ~~2% per bbl~~8% due to higher G&A expenses before stock-based compensation offset by ~~a lower~~ share price devaluation and decreased by ~~$0.63~~$0.24 per bbl due to higher sales volumes when compared to the corresponding period of 2022.

Compared to the prior quarter, G&A expenses before stock-based compensation decreased by ~~15%~~13% or ~~$1.09~~$0.43 on a per bbl basis due to lower legal fees and ~~information technology~~consulting costs ~~partially offset by higher consulting fees~~ attributed to optimization projects.

Compared to the prior quarter, G&A expenses after stock-based compensation ~~decreased~~increased by ~~22%~~4% or ~~$1.62~~$0.24 on a per bbl basis due to ~~lower G&A expenses before stock-based compensation and a lower~~ share price appreciation in the ~~second~~third quarter of 2023.

2526

Foreign Exchange Gains and Losses

For the three and ~~six~~nine months ended ~~June~~September 30, 2023, we had a ~~$4.7~~$1.7 million and ~~$6.4~~$8.1 million loss on foreign exchange, compared to a ~~$2.7~~$1.5 million ~~loss~~ and ~~a $1.0~~$0.5 million ~~gain~~loss in the corresponding periods of 2022, respectively, and a ~~$1.7~~$4.7 million loss in the prior quarter. Accounts receivable, taxes receivable and payable, 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 ~~six~~nine months ended ~~June~~September 30, 2023, and 2022:


		Three Months Ended June 30,		Six Months Ended June 30,			Three Months Ended September 30,		Nine Months Ended September 30,
		2023	2022	2023	2022		2023	2022	2023	2022
Change in the U.S. dollar against the Colombian peso	Change in the U.S. dollar against the Colombian peso	weakened by	strengthened by	weakened by	strengthened by	Change in the U.S. dollar against the Colombian peso	weakened by	strengthened by	weakened by	strengthened by
		9%	10%	13%	4%		3%	10%	16%	14%
Change in the U.S. dollar against the Canadian dollar	Change in the U.S. dollar against the Canadian dollar	weakened by	strengthened by	weakened by	strengthened by	Change in the U.S. dollar against the Canadian dollar	strengthened by	strengthened by	weakened by	strengthened by
		2%	3%	2%	2%		2%	6%	—%	8%

Income Tax Expense


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended September 30,						Nine Months Ended September 30,
(Thousands of U.S. Dollars)	(Thousands of U.S. Dollars)	2023			2022			2023			2022			(Thousands of U.S. Dollars)	2023			2022			2023			2022
Income before income tax	Income before income tax	$	22,907		$	91,638		$	46,090		$	145,297		Income before income tax	$	46,860		$	60,397		$	92,950		$	205,694

Current income tax expense	Current income tax expense	$	19,757		$	25,425		$	37,363		$	46,252		Current income tax expense	$	26,343		$	16,820		$	63,706		$	63,072
Deferred income tax expense	Deferred income tax expense	13,975			13,241			29,252			31,954			Deferred income tax expense	13,990			4,914			43,242			36,868
Income tax expense	Income tax expense	$	33,732		$	38,666		$	66,615		$	78,206		Income tax expense	$	40,333		$	21,734		$	106,948		$	99,940

Effective tax rate	Effective tax rate	147		%	42		%	145		%	54		%	Effective tax rate	86		%	36		%	115		%	49		%

2627

Current income tax expense was ~~$37.4~~$63.7 million for the ~~six~~nine months ended ~~June~~September 30, 2023, compared to ~~$46.3~~$63.1 million in the corresponding period inof 2022, primarily due to a decrease in taxable ~~income.~~income in Colombia, which is subject to a higher Colombian tax rate.

The deferred income tax expense for the ~~six~~nine months ended ~~June~~September 30, 2023, was ~~$29.3~~$43.2 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.

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

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


(Thousands of U.S. Dollars)	(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	(Thousands of U.S. Dollars)	Third Quarter 2023 Compared with Second Quarter 2023		% change	Third Quarter 2023 Compared with Third Quarter 2022		% change	Nine Months Ended September 30, 2023 Compared with Nine Months Ended September 30, 2022		% change
Net (loss) income for the comparative period	Net (loss) income for the comparative period	$	(9,700)		$	52,972		$	67,091		Net (loss) income for the comparative period	$	(10,825)		$	38,663		$	105,754
Increase (decrease) due to:	Increase (decrease) due to:										Increase (decrease) due to:
Sales price	Sales price	(56)			(87,731)			(135,636)			Sales price	25,408			(9,095)			(144,152)
Sales volumes	Sales volumes	13,768			39,848			57,374			Sales volumes	(3,389)			20,619			77,414
Expenses:	Expenses:										Expenses:
Operating	Operating	(7,122)			(8,997)			(15,431)			Operating	(876)			(7,530)			(22,961)
Transportation	Transportation	(625)			(1,178)			(1,410)			Transportation	(151)			(1,425)			(2,835)
Cash G&A	Cash G&A	1,647			(1,702)			(5,119)			Cash G&A	1,242			(23)			(5,142)
Net lease payments	Net lease payments	(65)			114			585			Net lease payments	86			110			695

Interest, net of amortization of debt issuance costs	Interest, net of amortization of debt issuance costs	(604)			(596)			(410)			Interest, net of amortization of debt issuance costs	(250)			(1,239)			(1,649)
Realized foreign exchange	Realized foreign exchange	(11,581)			(14,388)			(14,462)			Realized foreign exchange	10,786			(7,130)			(21,592)
Cash settlements on derivative instruments	Cash settlements on derivative instruments	—			17,796			26,392			Cash settlements on derivative instruments	—			219			26,611
Current taxes	Current taxes	(2,151)			5,668			8,889			Current taxes	(6,586)			(9,523)			(634)
Interest income	Interest income	(121)			647			1,415			Interest income	(376)			271			1,686
Net change in funds flow from operations(1) from comparative period	Net change in funds flow from operations(1) from comparative period	(6,910)			(50,519)			(77,813)			Net change in funds flow from operations(1) from comparative period	25,894			(14,746)			(92,559)
Expenses:	Expenses:										Expenses:
Depletion, depreciation and accretion	Depletion, depreciation and accretion	(4,488)			(13,993)			(24,751)			Depletion, depreciation and accretion	1,190			(9,699)			(34,450)

Deferred tax	Deferred tax	1,302			(734)			2,702			Deferred tax	(15)			(9,076)			(6,374)
Amortization of debt issuance costs		(238)			112			218
Proceeds from debt, net of issuance costs											Proceeds from debt, net of issuance costs	(575)			(843)			(625)
Stock-based compensation	Stock-based compensation	1,183			1,672			4,729			Stock-based compensation	(1,614)			(2,101)			2,628
Derivative instruments gain or loss, net of settlements on derivative instruments	Derivative instruments gain or loss, net of settlements on derivative instruments	—			(12,624)			219			Derivative instruments gain or loss, net of settlements on derivative instruments	—			(219)			—

Unrealized foreign exchange	Unrealized foreign exchange	8,576			12,403			7,050			Unrealized foreign exchange	(7,796)			6,902			13,952
Other gain	Other gain	(615)			—			615			Other gain	354			(2,244)			(1,629)
Net lease payments	Net lease payments	65			(114)			(585)			Net lease payments	(86)			(110)			(695)
Net change in net (loss) income	Net change in net (loss) income	(1,125)			(63,797)			(87,616)			Net change in net (loss) income	17,352			(32,136)			(119,752)
Net loss for the current period		$	(10,825)	12%	$	(10,825)	120%	$	(20,525)	131%
Net income (loss) for the current period											Net income (loss) for the current period	$	6,527	160%	$	6,527	(83)%	$	(13,998)	(113)%

(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.

2729

Capital expenditures during the three months ended ~~June~~September 30, 2023, were ~~$65.6~~$43.1 million:


(Millions of U.S. Dollars)	(Millions of U.S. Dollars)	Colombia		Ecuador		Total		(Millions of U.S. Dollars)	Colombia		Ecuador		Total
Exploration	Exploration	$	3.6	$	7.5	$	11.1	Exploration	$	4.0	$	2.9	$	6.9
Development:	Development:							Development:
Drilling and Completions	Drilling and Completions	38.9		—		38.9		Drilling and Completions	9.3		—		9.3
Facilities	Facilities	9.5		0.8		10.3		Facilities	5.2		0.6		5.8
Workovers	Workovers	2.8		—		2.8		Workovers	4.8		—		4.8
Other	Other	2.5		—		2.5		Other	14.0		2.3		16.3
		$	57.3	$	8.3	$	65.6		$	37.3	$	5.8	$	43.1

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


			~~Number of wells (Gross and Net)~~
~~Colombia~~

~~Development~~			~~4.0~~
~~Service~~			~~3.0~~
			~~7.0~~

We spud four development and three water injection wells, of which two were in Midas Block and five in Chaza Block. Of the development wells spud during the quarter, three were completed, and one was in-progress as of June 30, 2023. During the three months ended June 30, 2023, we havedid not spud any wells neither in Colombia nor in Ecuador.

On April 11, 2023, we and Ecopetrol S.A. renegotiated the terms of the contract for our operatorship of the Suroriente which was previously scheduled to end in mid-2024. The duration of the contract was extended for 20 years from September 1, 2023 (the “Effective Date”), the date on which we satisfied the relevant conditions precedent and regulatory approval was received. We continue to be the operator of Suroriente. In connection with the contract extension, we paid cash consideration of $6.2 million and provided letters of credit of $123.0 million (see Note 8 in the Notes to Condensed Consolidated Financial Statements (Unaudited) in Part I, Item 1 of this Quarterly Report on Form 10-Q which incorporated herein by reference) related to committed capital investments to be made over a three-year period from the Effective Date.

Liquidity and Capital Resources


		As at						As at
(Thousands of U.S. Dollars)	(Thousands of U.S. Dollars)	June 30, 2023		% Change	December 31, 2022		(Thousands of U.S. Dollars)	September 30, 2023		% Change	December 31, 2022
Cash and Cash Equivalents	Cash and Cash Equivalents	$	68,529	(46)	$	126,873	Cash and Cash Equivalents	$	123,216	(3)	$	126,873

Credit Facility							Credit Facility	$	50,000	100	$	—

6.25% Senior Notes	6.25% Senior Notes	$	271,909	(3)	$	279,909	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.~~financing. 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.

~~At June~~During the three months ended September 30, 2023, we, ~~had a~~as guarantor, and Gran Tierra Energy Colombia GmbH and and Gran Tierra Operations Colombia GmbH, as borrowers, amended and restated their credit facility with a market ~~lender~~leader in the global commodities industry. As part of the restatement, the initial commitment was adjusted from $100 million to $50 million (maintaining the potential option of up to additional $50 million, subject to approval by the lender). Additionally, the availability period for the draws under the amendment to the credit facility was extended until December 31, 2023. The credit facility ~~has a borrowing base of up~~continues to $150 million, with $100 million readily available at June 30, 2023, and a potential option for an additional $50 million of borrowings upon mutual agreement by the lender and us. The credit facility bearsbear interest based on ~~a risk-free~~the secured overnight financing rate posted by the Federal Reserve Bank of New York plus a credit margin of 6.00% and a credit-adjusted spread of 0.26%. Undrawn amounts under the credit facility bear interest at 2.10% per annum, based on the amount available. The credit facility is secured by our Colombian assets and economic ~~rights. It~~rights and has a final maturity date of August 15, ~~2024, which may be extended to February 18, 2025, upon~~2024. During the ~~satisfaction of certain conditions. The availability period for the draws under the credit facility expires on August 20, 2023. As of June~~three months ended September 30, 2023, the credit facility ~~remained undrawn.~~was drawn by $50 million.

2830

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

i.Global Coverage ~~ratio~~Ratio of at least 150%, 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.

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 ICE Brent forward strip ~~forward~~ for the projected future cash flows.

As of September 30, 2023, the Company was in compliance with all the above covenants.

At ~~June~~September 30, 2023, we had a $271.9 million aggregate principal amount of 6.25% Senior Notes due 2025 (“6.25% Senior Notes”) and a $300.0 million aggregate principal amount of 7.75% Senior Notes due 2027 (“7.75% Senior Notes” and together with 6.25% Senior Notes, the “Senior Notes”) outstanding.

During the three and ~~six~~nine months ended ~~June~~September 30, 2023, we ~~re-purchased~~purchased in the open market nil and $8.0 million, respectively, of 6.25% Senior Notes for cash consideration of $6.8 million. The ~~re-purchase~~purchase resulted in a $1.1 million gain, which included the write-off of deferred financing fees of $0.1 million. ~~The re-purchased~~Subsequent to the quarter, the Company cancelled all previously purchased 6.25% Senior Notes. No notes were purchased during the three months ended September 30, 2023.

Subsequent to the quarter, we completed exchange offers of $247.1 million of 6.25% Senior Notes ~~were not canceled~~ and ~~held by~~$275.8 million of 7.75% Senior Notes for $487.6 million newly issued 9.50% Senior Secured Notes due 2029. The exchange consideration for $242.5 million of 6.25% Senior Notes included early participation premium of $80 for each $1,000 aggregate principal amount with the ~~Company~~remainder of $4.6 million exchanged at $1,000 and for $274.2 million of 7.75% Senior Notes early participation premium of $20 for each $1,000 aggregate principal amount with remainder of $1.6 million of 7.75% Senior Notes exchanged at $950 for each $1,000 aggregate principal amount. In addition, we paid cash consideration of $60.0 million for 6.25% Senior Notes exchanged as part of total consideration to eligible holders on a pro rata basis, for each $1,000 aggregate principal amount tendered and accepted up to the early exchange deadline. The settlement date of the exchange offer was on October 20, 2023. The Senior Notes tendered and accepted for exchange, as well as the notes held as treasury bonds, ~~as of June 30, 2023.~~were cancelled.

During the year ended 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 were able to purchase at prevailing market prices up to 3,603,396 shares of Common Stock, representing approximately 10% of the issued and outstanding shares of Common Stock as of August 22, 2022. 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 ~~six~~nine months ended ~~June~~September 30, 2023, we re-purchased ~~20,439~~nil and 1,328,650 shares at a weighted average price of ~~$5.27~~nil and $8.15 per share, respectively (three and ~~six~~nine months ended ~~June~~September 30, 2022 - ~~nil)~~1,073,370 shares). As of ~~June~~September 30, 2023, all 3,603,396 shares held as treasury stock were ~~cancelled.~~canceled. The 2022 Program expired in May 2023 when 10% share maximum was reached.

2931

Cash Flows

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


		Six Months Ended June 30,					Nine Months Ended September 30,
(Thousands of U.S. Dollars)	(Thousands of U.S. Dollars)	2023		2022		(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 (loss) income	Net (loss) income	$	(20,525)	$	67,091	Net (loss) income	$	(13,998)	$	105,754
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	107,930		83,179		DD&A expenses	162,949		128,499

Interest expense	Interest expense	24,514		24,322		Interest expense	38,017		35,743
Income tax expense	Income tax expense	66,615		78,206		Income tax expense	106,948		99,940
Other loss		—		—

Non-cash lease expenses	Non-cash lease expenses	2,253		1,158		Non-cash lease expenses	3,488		2,009
Lease payments	Lease payments	(1,242)		(732)		Lease payments	(1,918)		(1,134)
Unrealized foreign exchange gain		(7,548)		(498)
Foreign exchange loss						Foreign exchange loss	8,126		486
Stock-based compensation expense	Stock-based compensation expense	1,817		6,546		Stock-based compensation expense	3,748		6,376
Unrealized derivative instruments loss		—		219

Other gain	Other gain	(615)		—		Other gain	(969)		(2,598)

Adjusted EBITDA(1)	Adjusted EBITDA(1)	173,199		259,491		Adjusted EBITDA(1)	306,391		375,075
Current income tax expense	Current income tax expense	(37,363)		(46,252)		Current income tax expense	(63,706)		(63,072)
Contractual interest and other financing expenses	Contractual interest and other financing expenses	(22,714)		(22,304)		Contractual interest and other financing expenses	(34,623)		(32,974)
Realized foreign exchange (loss) gain						Realized foreign exchange (loss) gain	(15,940)		5,652
Funds flow from operations(1)	Funds flow from operations(1)	113,122		190,935		Funds flow from operations(1)	192,122		284,681
Proceeds from exercise of stock options	Proceeds from exercise of stock options	5		1,285		Proceeds from exercise of stock options	8		1,294

Net changes in assets and liabilities from operating activities	Net changes in assets and liabilities from operating activities	—		56,329		Net changes in assets and liabilities from operating activities	—		72,838
Foreign exchange gain on cash, cash equivalents and restricted cash and cash equivalents		5,759		—
Foreign exchange gain on cash and cash equivalents and restricted cash and cash equivalents						Foreign exchange gain on cash and cash equivalents and restricted cash and cash equivalents	5,897		—
Proceeds from debt, net of issuance costs						Proceeds from debt, net of issuance costs	48,125		—
Changes in non-cash investing working capital	Changes in non-cash investing working capital	9,088		10,964		Changes in non-cash investing working capital	—		3,255
		127,974		259,513			246,152		362,068

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	(136,627)		(106,682)		Additions to property, plant and equipment	(179,707)		(163,717)
Net changes in assets and liabilities from operating activities	Net changes in assets and liabilities from operating activities	(25,836)		—		Net changes in assets and liabilities from operating activities	(34,235)		—
Changes in non-cash investing working capital						Changes in non-cash investing working capital	(11,051)		—
Repayment of debt	Repayment of debt	—		(67,525)		Repayment of debt	—		(67,623)
Re-purchase of shares of Common Stock						Re-purchase of shares of Common Stock	(10,825)		(14,365)
Purchase of Senior Notes						Purchase of Senior Notes	(6,805)		(17,274)

Re-purchase of Common Stock		(10,825)		—
Re-purchase of Senior Notes		(6,805)		—
Debt issuance costs		(1,873)		—
Settlement of asset retirement obligations	Settlement of asset retirement obligations	(156)		(242)		Settlement of asset retirement obligations	(376)		(1,673)
Lease payments	Lease payments	(3,035)		(1,261)		Lease payments	(5,101)		(1,991)
Foreign exchange loss on cash, cash equivalents and restricted cash and cash equivalents		—		(680)
Foreign exchange loss on cash, and cash equivalents and restricted cash and cash equivalents						Foreign exchange loss on cash, and cash equivalents and restricted cash and cash equivalents	—		(1,996)
		(185,157)		(176,390)			(248,100)		(268,639)
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	Net (decrease) increase in cash and cash equivalents and restricted cash and cash equivalents	$	(1,948)	$	93,429

(1) Adjusted EBITDA and funds flow from operations are 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.

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One of the primary sources of variability in our cash flows from operating activities is the fluctuation in oil prices. Sales volume changes, costs related to operations and debt ~~service~~transactions also impact cash flows. Our cash flows from operating activities are also impacted by foreign currency exchange rate changes. During the three and ~~six~~nine months ended ~~June~~September 30, 2023, funds flow from operations decreased by ~~49%~~16% and ~~41%~~33%, respectively, compared to the corresponding periods of 2022, primarily due to a decrease in Brent price, lower and higher quality and transportation discounts, respectively, higher operating costs and realized foreign exchange loss.

Critical Accounting Policies and Estimates

Our critical accounting policies and estimates are disclosed in Item 7 of our 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 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 assets and liabilities which are monetary assets and 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 credit facility, which bears floating rates of interest. At ~~June~~September 30, 2023, our outstanding balance under the credit facility was ~~nil~~$50 million (December 31, 2022 - 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 ~~June~~September 30, 2023.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended ~~June~~September 30, 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 8 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, 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, 2022. These risk factors could materially affect our business, financial condition and results of operations. The unprecedented nature of ongoing conflicts in several parts of the ~~current pandemic and~~world, 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 (2)
April 1-30, 2023 — $ — — 20,439
May 1-31, 2023 20,439 5.27 20,439 —
June 1-30, 2023 — — — —
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 or earlier if the 10% share maximum is reached. We were able to purchase for cancellation at prevailing market prices up to 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.None.

Item 5. Other Information

During the three months ended ~~June~~September 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).

3.4	Amendment No.1 to Bylaws of Gran Tierra Energy Inc.	Incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed with the SEC on August 4, 2021 (SEC File No. 001-34018).

3.5	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).

~~3.5~~10.1	Deed of Amendment ~~No.1~~and Restatement to ~~Bylaws of~~Credit Agreement dated September 19 , 2023 by and among Gran Tierra Energy Inc., Gran Tierra Energy Colombia Gm b H , Gran Tierra Operati on s Colombia GmbH . and Trafigura PTE Ltd. as a lender.	~~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).~~Filed herewith.

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 ~~June~~September 30, 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: ~~August 1,~~October 31, 2023						/s/ Gary S. Guidry
						By: Gary S. Guidry
						President and Chief Executive Officer
						(Principal Executive Officer)


Date: ~~August 1,~~October 31, 2023						/s/ Ryan Ellson
						By: Ryan Ellson
						Executive Vice President and Chief Financial Officer
						(Principal Financial and Accounting Officer)

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	(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)
April 1-30, 2023	—	$	—	—	20,439
May 1-31, 2023	20,439	5.27		20,439	—
June 1-30, 2023	—	—		—	—
Total	20,439	$	5.27	20,439	—