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, 2022


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

For the transition period from __________ to __________

Commission file number 001-34018

GRAN TIERRA ENERGY INC.

(Exact name of registrant as specified in its charter)

Delaware

98-0479924

(State or other jurisdiction of incorporation or organization)

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

500 Centre Street S.E.

Calgary,

Alberta

Canada

T2G 1A6

(Address of principal executive offices, including zip code)

(403) 265-3221

(Registrant’s telephone number, including area code)

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


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 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 ~~August 5,~~October 31, 2022, 368,898,619~~368,871,685~~ shares of the registrant’s Common Stock, $0.001 par value, were issued.

Gran Tierra Energy Inc.

Quarterly Report on Form 10-Q

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

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	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3334
Item 4.	Controls and Procedures	3334

PART II	Other Information
Item 1.	Legal Proceedings	3435
Item 1A.	Risk Factors	3435

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3435
Item 6.	Exhibits	3536
SIGNATURES		3637

CAUTIONARY LANGUAGE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts included in this Quarterly Report on Form 10-Q regarding our financial position, estimated quantities and net present values of reserves, business strategy, plans and objectives of our management for future operations, covenant compliance, capital spending plans and benefits of the changes in our capital program or expenditures, our liquidity, the impacts of the coronavirus (COVID-19) pandemic and those statements preceded by, followed by or that otherwise include the words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “project,” “target,” “goal,” “plan,” “budget,” “objective,” “could,” “should,” or similar expressions or variations on these expressions are forward-looking statements. We can give no assurances that the assumptions upon which the forward-looking statements are based will prove to be correct or that, even if correct, intervening circumstances will not occur to cause actual results to be different than expected. Because forward-looking statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by the forward-looking statements. There are a number of risks, uncertainties and other important factors that could cause our actual results to differ materially from the forward-looking statements, including, but not limited to, our operations are located in South America and unexpected problems can arise due to guerilla activity, strikes, local blockades or protests; technical difficulties and operational difficulties may arise which impact the production, transport or sale of our products; other disruptions to local operations; global health events (including the ongoing COVID-19 pandemic); global and regional changes in the demand, supply, prices, differentials or other market conditions affecting oil and gas, including inflation and changes resulting from a global health crisis, the Russian invasion of Ukraine, or from the imposition or lifting of crude oil production quotas or other actions that might be imposed by OPEC, such as its recent decision to cut production and other producing countries and the resulting company or third-party actions in response to such changes; changes in commodity prices, including volatility or a decline in these prices relative to historical or future expected levels; the risk that current global economic and credit conditions may impact oil prices and oil consumption more than we currently predicts, which could cause further modification of our strategy and capital spending program; prices and markets for oil and natural gas are unpredictable and volatile; the effect of hedges; the accuracy of productive capacity of any particular field; geographic, political and weather conditions can impact the production, transport or sale of our products; our ability to execute its business plan and realize expected benefits from current initiatives; the risk that unexpected delays and difficulties in developing currently owned properties may occur; the ability to replace reserves and production and develop and manage reserves on an economically viable basis; the accuracy of testing and production results and seismic data, pricing and cost estimates (including with respect to commodity pricing and exchange rates); the risk profile of planned exploration activities; the effects of drilling down-dip; the effects of waterflood and multi-stage fracture stimulation operations; the extent and effect of delivery disruptions, equipment performance and costs; actions by third parties; the timely receipt of regulatory or other required approvals for our operating activities; the failure of exploratory drilling to result in commercial wells; unexpected delays due to the limited availability of drilling equipment and personnel; volatility or declines in the trading price of our common stock or bonds; the risk that we do not receive the anticipated benefits of government programs, including government tax refunds; our ability to obtain a new credit agreement and comply with financial covenants in its credit agreement and indentures and make borrowings under any credit agreement; and those factors set out in Part II, Item 1A “Risk Factors” in this Quarterly Report on Form 10-Q and Part I, Item 1A “Risk Factors” in our 2021 Annual Report on Form 10-K (the “2021 Annual Report on Form 10-K”), and in our other filings with the Securities and Exchange Commission (“SEC”). The unprecedented nature of the COVID-19 pandemic and volatility in the worldwide economy and oil and gas industry makes, including the unpredictable nature of the resurgence of cases, possible variants and governmental responses, it more difficult to predict the accuracy of forward-looking statements. The information included herein is given as of the filing date of this Quarterly Report on Form 10-Q with the SEC and, except as otherwise required by the federal securities laws, we disclaim any obligation or undertaking to publicly release any updates or revisions to or to withdraw, any forward-looking statement contained in this Quarterly Report on Form 10-Q to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any forward-looking statement is based.

GLOSSARY OF OIL AND GAS TERMS

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


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

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

PART I - Financial Information

Item 1. Financial Statements

Gran Tierra Energy Inc.

Condensed Consolidated Statements of Operations (Unaudited)

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


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			2022		2021		2022		2021
OIL SALES (Note 7)	OIL SALES (Note 7)	$	205,785	$	96,623	$	380,354	$	192,116	OIL SALES (Note 7)	$	168,397	$	135,319	$	548,751	$	327,435

EXPENSES	EXPENSES									EXPENSES
Operating	Operating	39,494		26,247		74,429		56,918		Operating	41,837		38,448		116,266		95,366
Transportation	Transportation	2,513		3,002		5,347		5,601		Transportation	2,417		3,130		7,764		8,731

Depletion, depreciation and accretion	Depletion, depreciation and accretion	42,216		28,927		83,179		60,245		Depletion, depreciation and accretion	45,320		38,055		128,499		98,300
General and administrative (Note 10)	General and administrative (Note 10)	9,836		9,006		22,172		19,494		General and administrative (Note 10)	8,114		6,497		30,286		25,991
Foreign exchange loss (gain)		2,722		91		(1,003)		13,174
Foreign exchange loss										Foreign exchange loss	1,489		2,650		486		15,824
Derivative instruments loss (Note 10)	Derivative instruments loss (Note 10)	5,172		21,239		26,611		44,937		Derivative instruments loss (Note 10)	—		2,603		26,611		47,540
Other financial instruments loss (Note 10)		—		2,614		—		1,209

Other financial instruments gain										Other financial instruments gain	—		(13,634)		—		(12,425)
Gain on repurchase of Senior Notes (Note 5)										Gain on repurchase of Senior Notes (Note 5)	(2,598)		—		(2,598)		—
Interest expense (Note 5)	Interest expense (Note 5)	12,194		13,935		24,322		27,747		Interest expense (Note 5)	11,421		13,608		35,743		41,355
		114,147		105,061		235,057		229,325			108,000		91,357		343,057		320,682

INCOME (LOSS) BEFORE INCOME TAXES		91,638		(8,438)		145,297		(37,209)
INCOME BEFORE INCOME TAXES										INCOME BEFORE INCOME TAXES	60,397		43,962		205,694		6,753

INCOME TAX EXPENSE
INCOME TAX EXPENSE (RECOVERY)										INCOME TAX EXPENSE (RECOVERY)
Current (Note 8)	Current (Note 8)	25,425		(14)		46,252		(14)		Current (Note 8)	16,820		—		63,072		(14)
Deferred (Note 8)	Deferred (Note 8)	13,241		9,203		31,954		17,854		Deferred (Note 8)	4,914		8,955		36,868		26,809
		38,666		9,189		78,206		17,840			21,734		8,955		99,940		26,795
NET AND COMPREHENSIVE INCOME (LOSS)	NET AND COMPREHENSIVE INCOME (LOSS)	$	52,972	$	(17,627)	$	67,091	$	(55,049)	NET AND COMPREHENSIVE INCOME (LOSS)	$	38,663	$	35,007	$	105,754	$	(20,042)

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

BASIC AND DILUTED		$	0.14	$	(0.05)	$	0.18	$	(0.15)

- BASIC										- BASIC	$	0.11	$	0.10	$	0.29	$	(0.05)
- DILUTED										- DILUTED	$	0.10	$	0.10	$	0.28	$	(0.05)
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC (Note 6)	WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC (Note 6)	368,571,378		366,982,456		367,982,294		366,982,008		WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC (Note 6)	367,305,426		366,992,802		367,754,192		366,985,646
WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED (Note 6)	WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED (Note 6)	374,233,600		366,982,456		372,977,695		366,982,008		WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED (Note 6)	371,310,738		367,740,722		372,387,904		366,985,646

(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, 2022		As at December 31, 2021			As at September 30, 2022		As at December 31, 2021

ASSETS	ASSETS					ASSETS
Current Assets	Current Assets					Current Assets
Cash and cash equivalents (Note 11)	Cash and cash equivalents (Note 11)	$	108,558	$	26,109	Cash and cash equivalents (Note 11)	$	118,173	$	26,109
Restricted cash and cash equivalents (Note 11)	Restricted cash and cash equivalents (Note 11)	1,142		392		Restricted cash and cash equivalents (Note 11)	1,142		392
Accounts receivable	Accounts receivable	10,987		13,185		Accounts receivable	10,694		13,185

Inventory						Inventory	18,704		14,526
Taxes receivable (Note 3)	Taxes receivable (Note 3)	42		45,506		Taxes receivable (Note 3)	52		45,506
Other current assets (Note 10)	Other current assets (Note 10)	28,082		16,609		Other current assets (Note 10)	12,035		2,083
Total Current Assets	Total Current Assets	148,811		101,801		Total Current Assets	160,800		101,801

Oil and Gas Properties	Oil and Gas Properties					Oil and Gas Properties
Proved	Proved	920,918		859,580		Proved	933,343		859,580
Unproved	Unproved	106,536		131,865		Unproved	111,531		131,865
Total Oil and Gas Properties	Total Oil and Gas Properties	1,027,454		991,445		Total Oil and Gas Properties	1,044,874		991,445
Other capital assets	Other capital assets	11,543		4,352		Other capital assets	11,143		4,352
Total Property, Plant and Equipment (Note 4)	Total Property, Plant and Equipment (Note 4)	1,038,997		995,797		Total Property, Plant and Equipment (Note 4)	1,056,017		995,797

Other Long-Term Assets	Other Long-Term Assets					Other Long-Term Assets
Deferred tax assets	Deferred tax assets	27,526		61,494		Deferred tax assets	17,713		61,494
Taxes receivable (Note 3)	Taxes receivable (Note 3)	24,473		17,522		Taxes receivable (Note 3)	25,952		17,522
Other long-term assets (Note 10)	Other long-term assets (Note 10)	16,337		12,497		Other long-term assets (Note 10)	17,873		12,497
Total Other Long-Term Assets	Total Other Long-Term Assets	68,336		91,513		Total Other Long-Term Assets	61,538		91,513
Total Assets	Total Assets	$	1,256,144	$	1,189,111	Total Assets	$	1,278,355	$	1,189,111

LIABILITIES AND SHAREHOLDERS’ EQUITY	LIABILITIES AND SHAREHOLDERS’ EQUITY					LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities	Current Liabilities					Current Liabilities
Accounts payable and accrued liabilities	Accounts payable and accrued liabilities	$	163,881	$	148,694	Accounts payable and accrued liabilities	$	181,017	$	148,694
Current portion of long-term debt (Note 5)	Current portion of long-term debt (Note 5)	—		66,987		Current portion of long-term debt (Note 5)	—		66,987
Derivatives (Note 10)		7,230		2,976
Derivatives						Derivatives	—		2,976
Taxes payable (Note 3)	Taxes payable (Note 3)	23,661		6,620		Taxes payable (Note 3)	25,888		6,620
Other (Note 6 and 10)	Other (Note 6 and 10)	15,937		2,710		Other (Note 6 and 10)	15,381		2,710
Total Current Liabilities	Total Current Liabilities	210,709		227,987		Total Current Liabilities	222,286		227,987

Long-Term Liabilities	Long-Term Liabilities					Long-Term Liabilities
Long-term debt (Notes 5 and 10)	Long-term debt (Notes 5 and 10)	595,861		587,404		Long-term debt (Notes 5 and 10)	575,684		587,404

Asset retirement obligation	Asset retirement obligation	56,783		54,525		Asset retirement obligation	58,657		54,525
Equity compensation award liability (Note 6 and 10)	Equity compensation award liability (Note 6 and 10)	14,872		13,718		Equity compensation award liability (Note 6 and 10)	17,826		13,718

Other long-term liabilities	Other long-term liabilities	6,253		3,397		Other long-term liabilities	7,302		3,397
Total Long-Term Liabilities	Total Long-Term Liabilities	673,769		659,044		Total Long-Term Liabilities	659,469		659,044

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

Shareholders' Equity	Shareholders' Equity					Shareholders' Equity
Common Stock (Note 6) (368,871,685 and 367,144,500 shares issued and outstanding of Common Stock, par value $0.001 per share, as at June 30, 2022, and December 31, 2021, respectively)		10,272		10,270
Common Stock (Note 6) (368,882,887 and 367,144,500 shares issued, 358,149,185 and 367,144,500 outstanding of Common Stock, par value $0.001 per share, as at September 30, 2022, and December 31, 2021, respectively)						Common Stock (Note 6) (368,882,887 and 367,144,500 shares issued, 358,149,185 and 367,144,500 outstanding of Common Stock, par value $0.001 per share, as at September 30, 2022, and December 31, 2021, respectively)	10,272		10,270
Additional paid-in capital	Additional paid-in capital	1,290,075		1,287,582		Additional paid-in capital	1,290,711		1,287,582
Treasury Stock (Note 6)						Treasury Stock (Note 6)	(14,365)		—
Deficit	Deficit	(928,681)		(995,772)		Deficit	(890,018)		(995,772)
Total Shareholders’ Equity	Total Shareholders’ Equity	371,666		302,080		Total Shareholders’ Equity	396,600		302,080
Total Liabilities and Shareholders’ Equity	Total Liabilities and Shareholders’ Equity	$	1,256,144	$	1,189,111	Total Liabilities and Shareholders’ Equity	$	1,278,355	$	1,189,111

(See notes to the condensed consolidated financial statements)

Gran Tierra Energy Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(Thousands of U.S. Dollars)


		Six Months Ended June 30,					Nine Months Ended September 30,
		2022		2021			2022		2021
Operating Activities	Operating Activities					Operating Activities
Net Income (Loss)		$	67,091	$	(55,049)
Net income (loss)						Net income (loss)	$	105,754	$	(20,042)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:	Adjustments to reconcile net income (loss) to net cash provided by operating activities:					Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depletion, depreciation and accretion	Depletion, depreciation and accretion	83,179		60,245		Depletion, depreciation and accretion	128,499		98,300
Deferred tax expense	Deferred tax expense	31,954		17,854		Deferred tax expense	36,868		26,809
Stock-based compensation expense (Note 6)	Stock-based compensation expense (Note 6)	6,546		5,544		Stock-based compensation expense (Note 6)	6,376		6,597
Amortization of debt issuance costs (Note 5)	Amortization of debt issuance costs (Note 5)	2,018		1,775		Amortization of debt issuance costs (Note 5)	2,769		2,682
Unrealized foreign exchange (gain) loss		(498)		13,480
Derivative instruments loss (Note 10)		26,611		44,937
Unrealized foreign exchange loss						Unrealized foreign exchange loss	6,138		16,945
Gain on repurchase of Senior Notes (Note 5)						Gain on repurchase of Senior Notes (Note 5)	(2,598)		—
Derivative instruments loss						Derivative instruments loss	26,611		47,540
Cash settlements on derivatives instruments	Cash settlements on derivatives instruments	(26,392)		(37,709)		Cash settlements on derivatives instruments	(26,611)		(45,041)
Other financial instruments gain (Note 10)		—		1,209
Other financial instruments gain						Other financial instruments gain	—		(12,425)

Cash settlement of asset retirement obligation	Cash settlement of asset retirement obligation	(242)		(248)		Cash settlement of asset retirement obligation	(1,673)		(483)
Non-cash lease expenses	Non-cash lease expenses	1,158		814		Non-cash lease expenses	2,009		1,222
Lease payments	Lease payments	(732)		(855)		Lease payments	(1,134)		(1,239)
Net change in assets and liabilities from operating activities (Note 11)	Net change in assets and liabilities from operating activities (Note 11)	56,329		27,157		Net change in assets and liabilities from operating activities (Note 11)	72,838		17,956
Net cash provided by operating activities	Net cash provided by operating activities	247,022		79,154		Net cash provided by operating activities	355,846		138,821

Investing Activities	Investing Activities					Investing Activities
Additions to property, plant and equipment	Additions to property, plant and equipment	(106,682)		(74,811)		Additions to property, plant and equipment	(163,717)		(109,650)
Proceeds on disposition of investment, net of transaction costs	Proceeds on disposition of investment, net of transaction costs	—		14,632		Proceeds on disposition of investment, net of transaction costs	—		14,632
Changes in non-cash investing working capital (Note 11)	Changes in non-cash investing working capital (Note 11)	10,964		3,176		Changes in non-cash investing working capital (Note 11)	3,255		709
Net cash used in investing activities	Net cash used in investing activities	(95,718)		(57,003)		Net cash used in investing activities	(160,462)		(94,309)

Financing Activities	Financing Activities					Financing Activities

Repayment of debt (Note 5)	Repayment of debt (Note 5)	(67,525)		(15,126)		Repayment of debt (Note 5)	(67,623)		(40,125)
Proceeds from issuance of shares of Common Stock, net of issuance costs		2		—
Re-purchase of Senior Notes (Note 5)						Re-purchase of Senior Notes (Note 5)	(17,274)		—
Re-purchase of Common Stock (Note 6)						Re-purchase of Common Stock (Note 6)	(14,365)		—
Proceeds from issuance of Common Stock, net of issuance costs						Proceeds from issuance of Common Stock, net of issuance costs	2		—
Proceeds from exercise of stock options	Proceeds from exercise of stock options	1,283		8		Proceeds from exercise of stock options	1,292		19
Lease payments	Lease payments	(1,261)		(513)		Lease payments	(1,991)		(1,269)
Net cash used in financing activities	Net cash used in financing activities	(67,501)		(15,631)		Net cash used in financing activities	(99,959)		(41,375)

Foreign exchange loss on cash, cash equivalents and restricted cash and cash equivalents	Foreign exchange loss on cash, cash equivalents and restricted cash and cash equivalents	(680)		(488)		Foreign exchange loss on cash, cash equivalents and restricted cash and cash equivalents	(1,996)		(528)

Net increase in cash, cash equivalents and restricted cash and cash equivalents	Net increase in cash, cash equivalents and restricted cash and cash equivalents	83,123		6,032		Net increase in cash, cash equivalents and restricted cash and cash equivalents	93,429		2,609
Cash, cash equivalents and restricted cash and cash equivalents, beginning of period (Note 11)	Cash, cash equivalents and restricted cash and cash equivalents, beginning of period (Note 11)	31,404		17,523		Cash, cash equivalents and restricted cash and cash equivalents, beginning of period (Note 11)	31,404		17,523
Cash, cash equivalents and restricted cash and cash equivalents, end of period (Note 11)	Cash, cash equivalents and restricted cash and cash equivalents, end of period (Note 11)	$	114,527	$	23,555	Cash, cash equivalents and restricted cash and cash equivalents, end of period (Note 11)	$	124,833	$	20,132

Supplemental cash flow disclosures (Note 11)	Supplemental cash flow disclosures (Note 11)					Supplemental cash flow disclosures (Note 11)

(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,
		2022		2021		2022		2021			2022		2021		2022		2021
Share Capital	Share Capital									Share Capital
Balance, beginning of period	Balance, beginning of period	$	10,272	$	10,270	$	10,270	$	10,270	Balance, beginning of period	$	10,272	$	10,270	$	10,270	$	10,270
Issuance of Common Stock (Note 6)		—		—		2		—
Issuance of common stock (Note 6)										Issuance of common stock (Note 6)	—		—		2		—
Balance, end of period	Balance, end of period	10,272		10,270		10,272		10,270		Balance, end of period	10,272		10,270		10,272		10,270

Additional Paid-in Capital	Additional Paid-in Capital									Additional Paid-in Capital
Balance, beginning of period	Balance, beginning of period	1,289,162		1,285,597		1,287,582		1,285,018		Balance, beginning of period	1,290,075		1,286,235		1,287,582		1,285,018

Exercise of stock options	Exercise of stock options	303		8		1,283		8		Exercise of stock options	9		10		1,292		18

Stock-based compensation (Note 6)	Stock-based compensation (Note 6)	610		630		1,210		1,209		Stock-based compensation (Note 6)	627		648		1,837		1,857
Balance, end of period	Balance, end of period	1,290,075		1,286,235		1,290,075		1,286,235		Balance, end of period	1,290,711		1,286,893		1,290,711		1,286,893

Treasury Stock										Treasury Stock
Balance, beginning of period										Balance, beginning of period	—		—		—		—
Purchase of treasury shares (Note 6)										Purchase of treasury shares (Note 6)	(14,365)		—		(14,365)		—
Balance, end of period										Balance, end of period	(14,365)		—		(14,365)		—

Deficit	Deficit									Deficit
Balance, beginning of period	Balance, beginning of period	(981,653)		(1,075,676)		(995,772)		(1,038,254)		Balance, beginning of period	$	(928,681)	$	(1,093,303)	$	(995,772)	$	(1,038,254)
Net income (loss)	Net income (loss)	52,972		(17,627)		67,091		(55,049)		Net income (loss)	38,663		35,007		105,754		(20,042)
Balance, end of period	Balance, end of period	(928,681)		(1,093,303)		(928,681)		(1,093,303)		Balance, end of period	(890,018)		(1,058,296)		(890,018)		(1,058,296)

Total Shareholders’ Equity	Total Shareholders’ Equity	$	371,666	$	203,202	$	371,666	$	203,202	Total Shareholders’ Equity	396,600		238,867		396,600		238,867

(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 consolidated financial statements provide additional disclosures required for interim unaudited condensed consolidated financial statements. Accordingly, these interim unaudited condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements as at and for the year ended December 31, 2021, included in the Company’s 2021 Annual Report on Form ~~10-K and interim financial statements as at and for the period ending March 31, 2022, included on the Company’s Form 10-Q.~~10-K.

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

3. Taxes Receivable and Payable

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


(Thousands of U.S. Dollars)	(Thousands of U.S. Dollars)	As at June 30, 2022		As at December 31, 2021		(Thousands of U.S. Dollars)	As at September 30, 2022		As at December 31, 2021
Taxes Receivable	Taxes Receivable					Taxes Receivable
Current	Current					Current
VAT Receivable	VAT Receivable	$	42	$	21,918	VAT Receivable	$	52	$	21,918
Income Tax Receivable	Income Tax Receivable	—		23,588		Income Tax Receivable	—		23,588
		$	42	$	45,506		$	52	$	45,506
Long-Term	Long-Term					Long-Term
Income Tax Receivable	Income Tax Receivable	$	24,473	$	17,522	Income Tax Receivable	$	25,952	$	17,522

Taxes Payable	Taxes Payable					Taxes Payable
Current	Current					Current
VAT Payable	VAT Payable	$	14,473	$	6,620	VAT Payable	$	6,425	$	6,620
Income Tax Payable	Income Tax Payable	9,188		—		Income Tax Payable	19,463		—
		$	23,661	$	6,620		$	25,888	$	6,620

Total Taxes Receivable net of Taxes Payable	Total Taxes Receivable net of Taxes Payable	$	854	$	56,408	Total Taxes Receivable net of Taxes Payable	$	116	$	56,408

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


(Thousands of U.S. Dollars)	(Thousands of U.S. Dollars)	VAT Receivable (Payable)		Income Tax Receivable		Total Net Taxes Receivable		(Thousands of U.S. Dollars)	VAT Receivable (Payable)		Income Tax Receivable		Total Net Taxes Receivable
Balance, as at December 31, 2021	Balance, as at December 31, 2021	$	15,298	$	41,110	$	56,408	Balance, as at December 31, 2021	$	15,298	$	41,110	$	56,408
Collected through direct government refunds	Collected through direct government refunds	(265)		(99)		(364)		Collected through direct government refunds	(376)		(99)		(475)
Collected through sales contracts	Collected through sales contracts	(86,092)		—		(86,092)		Collected through sales contracts	(124,655)		—		(124,655)
Taxes paid (1)	Taxes paid (1)	55,759		20,468		76,227		Taxes paid (1)	103,537		29,881		133,418
Current tax expense	Current tax expense	—		(46,252)		(46,252)		Current tax expense	—		(63,072)		(63,072)
Foreign exchange loss	Foreign exchange loss	869		58		927		Foreign exchange loss	(177)		(1,331)		(1,508)
Balance, as at June 30, 2022		$	(14,431)	$	15,285	$	854
Balance, as at September 30, 2022								Balance, as at September 30, 2022	$	(6,373)	$	6,489	$	116

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

4. Property, Plant and Equipment


(Thousands of U.S. Dollars)	(Thousands of U.S. Dollars)	As at June 30, 2022		As at December 31, 2021		(Thousands of U.S. Dollars)	As at September 30, 2022		As at December 31, 2021
Oil and natural gas properties	Oil and natural gas properties					Oil and natural gas properties
Proved	Proved	$	4,444,894	$	4,302,473	Proved	$	4,500,932	$	4,302,473
Unproved	Unproved	106,536		131,865		Unproved	111,531		131,865
		4,551,430		4,434,338			4,612,463		4,434,338
Other(1)	Other(1)	43,830		34,943		Other(1)	44,550		34,943
		4,595,260		4,469,281			4,657,013		4,469,281
Accumulated depletion and depreciation and impairment	Accumulated depletion and depreciation and impairment	(3,556,263)		(3,473,484)		Accumulated depletion and depreciation and impairment	(3,600,996)		(3,473,484)
		$	1,038,997	$	995,797		$	1,056,017	$	995,797

(1) The “other” category includes right-of-use assets for operating and finance leases of ~~$22.2~~$22.4 million, which had a net book value of ~~$10.7~~$9.9 million as at ~~June~~September 30, 2022 (December 31, 2021 - $13.9 million, which had a net book value of $3.9 million).

For the three and ~~six~~nine months ended ~~June~~September 30, 2022, and 2021, the Company had no ceiling test impairment losses. The Company used an average Brent price of ~~$87.88~~$94.85 and ~~$52.74~~$60.12 per bbl, for the purposes of the ~~June~~September 30, 2022 and 2021 ceiling test calculations, respectively.

5. Debt and Debt Issuance Costs

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


(Thousands of U.S. Dollars)	(Thousands of U.S. Dollars)	As at June 30, 2022		As at December 31, 2021		(Thousands of U.S. Dollars)	As at September 30, 2022		As at December 31, 2021
Current	Current					Current
Revolving credit facility	Revolving credit facility	$	—	$	67,500	Revolving credit facility	$	—	$	67,500
Unamortized debt issuance costs	Unamortized debt issuance costs	—		(513)		Unamortized debt issuance costs	—		(513)
		$	—	$	66,987		$	—	$	66,987

Long-Term	Long-Term					Long-Term
6.25% Senior Notes, due February 2025	6.25% Senior Notes, due February 2025	$	300,000	$	300,000	6.25% Senior Notes, due February 2025	$	279,909	$	300,000
7.75% Senior Notes, due May 2027	7.75% Senior Notes, due May 2027	300,000		300,000		7.75% Senior Notes, due May 2027	300,000		300,000

Unamortized debt issuance costs	Unamortized debt issuance costs	(12,550)		(14,030)		Unamortized debt issuance costs	(11,572)		(14,030)
		587,450		585,970			568,337		585,970
Long-term lease obligation(1)	Long-term lease obligation(1)	8,411		1,434		Long-term lease obligation(1)	7,347		1,434
		$	595,861	$	587,404		$	575,684	$	587,404
		$	595,861	$	654,391		$	575,684	$	654,391

(1) The current portion of the lease obligation has been included in accounts payable and accrued liabilities on the Company’s balance sheet and totaled ~~$2.8~~$2.6 million as at ~~June~~September 30, 2022 (December 31, 2021 - $3.3 million).

As of June 30, 2022, the borrowing base of the Company’s Senior Secured Credit Facility (the “revolving credit facility”) was $150 million, with $125 million readily available and $25 million subject to approval by major lenders. During the three months ended ~~June~~September 30, 2022, the Company ~~completely paid off the outstanding balance on the~~terminated its prior revolving credit facility agreement and ~~subsequent to the quarter, the revolving~~entered into a new credit facility ~~was terminated. As~~agreement with a market lender in the global commodities industry. The credit facility has a borrowing base of ~~June~~up to $150 million, with $100 million as an initial commitment available at September 30, 2022, and an option for an additional $50 million upon mutual agreement by the Company and the lender. The credit facility bears interest based on the secured overnight financing rate posted by the Federal Reserve Bank of New York plus a credit margin of 6.0% and a credit-adjusted spread of 0.26%. Undrawn amounts under the credit facility bear interest at 2.1% per annum, based on the amount available. The credit facility is secured by the Company’s Colombian assets and economic rights. It has a final maturity date of August 15, 2024, which may be extended to February 18, 2025, upon the satisfaction of certain conditions. The availability period for the draws is six months commencing the date of ~~termination, respectively,~~the credit facility. As of September 30, 2022, the credit facility remained undrawn.

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

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

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

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

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

During the three months ended September 30, 2022, the Company re-purchased in the ~~revolving credit facility.~~open market $20.1 million of 6.25% Senior Notes for cash consideration of $17.3 million, including interest payable of $0.1 million. The re-purchase resulted in a $2.6 million gain, which included the write-off of deferred financing fees of $0.3 million. The re-purchased 6.25% Senior Notes were not cancelled and were held by the Company as treasury bonds as of September 30, 2022.

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)	2022		2021		2022		2021		(Thousands of U.S. Dollars)	2022		2021		2022		2021
Contractual interest and other financing expenses	Contractual interest and other financing expenses	$	11,063	$	13,041	$	22,304	$	25,972	Contractual interest and other financing expenses	$	10,670	$	12,701	$	32,974	$	38,673
Amortization of debt issuance costs	Amortization of debt issuance costs	1,131		894		2,018		1,775		Amortization of debt issuance costs	751		907		2,769		2,682
		$	12,194	$	13,935	$	24,322	$	27,747		$	11,421	$	13,608	$	35,743	$	41,355

6. Share Capital


			Shares of Common Stock
~~Balance,~~Shares issued and outstanding at December 31, 2021			367,144,500
Shares issued on option exercise			~~1,727,185~~1,738,387
~~Balance, June~~Shares issued at September 30, 2022			~~368,871,685~~368,882,887
Treasury stock			(10,733,702)
Shares issued and outstanding at September 30, 2022			358,149,185

During the three months ended September 30, 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 is able to purchase at prevailing market prices up to 36,033,969 shares of Common Stock, representing approximately 10% of the issued and outstanding shares of Common Stock as of August 22, 2022. The 2022 Program will expire on August 31, 2023, or earlier if the 10% share maximum was reached. Re-purchases are subject to the availability of stock, prevailing market conditions, the trading price of the Company’s stock, the Company’s financial performance and other conditions.

During the three and nine months ended September 30, 2022, the Company re-purchased 10,733,702 shares at a weighted average price of $1.34 per share. The re-purchased shares were held by the Company and were recorded as treasury stock as of September 30, 2022.

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, 2022:


		PSUs	DSUs	Stock Options			PSUs	DSUs	Stock Options
		Number of Outstanding Share Units		Number of Outstanding Stock Options	Weighted Average Exercise Price/Stock Option ($)		Number of Outstanding Share Units		Number of Outstanding Stock Options	Weighted Average Exercise Price/Stock Option ($)
Balance, December 31, 2021	Balance, December 31, 2021	30,365,196	5,710,764	17,848,722	1.20	Balance, December 31, 2021	30,365,196	5,710,764	17,848,722	1.20
Granted	Granted	6,761,105	494,955	2,753,165	1.41	Granted	6,841,907	683,233	2,814,947	1.40
Exercised	Exercised	(4,396,646)	—	(1,727,185)	0.74	Exercised	(4,396,646)	—	(1,738,387)	0.74
Forfeited	Forfeited	(166,687)	—	(105,020)	1.69	Forfeited	(1,282,224)	—	(264,858)	1.24
Expired	Expired	—	—	(1,187,309)	2.80	Expired	—	—	(1,322,620)	2.78
Balance, June 30, 2022		32,562,968	6,205,719	17,582,373	1.17
Balance, September 30, 2022						Balance, September 30, 2022	31,528,233	6,393,997	17,337,804	1.16

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. For the three and ~~six~~nine months ended ~~June~~September 30, 2021, there was $1.1 million and $6.6 million of stock-based compensation expense, ~~was $1.9 million and $5.5 million,~~ respectively.

At ~~June~~September 30, 2022, there was ~~$19.7~~$16.4 million (December 31, 2021 - $11.8 million) of unrecognized compensation costs related to unvested PSUs and stock options, which are expected to be recognized over a weighted-average period of ~~1.7~~1.6 years. During the ~~six~~nine months ended ~~June~~September 30, 2022, the Company paid out $2.4 million for PSUs vested on December 31, 2021 ~~(six~~(nine months ended ~~June~~September 30, 2021 - $0.6 million for PSUs vested on December 31, 2020).

Net Income (Loss) per Share

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

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

Weighted Average Shares Outstanding


		Three Months Ended June 30,		Six Months Ended June 30,			Three Months Ended September 30,		Nine Months Ended September 30,
		2022	2021	2022	2021		2022	2021	2022	2021
Weighted average number of common shares outstanding	Weighted average number of common shares outstanding	368,571,378	366,982,456	367,982,294	366,982,008	Weighted average number of common shares outstanding	367,305,426	366,992,802	367,754,192	366,985,646
Shares issuable pursuant to stock options	Shares issuable pursuant to stock options	11,806,859	—	12,351,243	—	Shares issuable pursuant to stock options	11,330,144	1,574,305	12,024,315	—
Shares assumed to be purchased from proceeds of stock options	Shares assumed to be purchased from proceeds of stock options	(6,144,637)	—	(7,355,842)	—	Shares assumed to be purchased from proceeds of stock options	(7,324,832)	(826,385)	(7,390,603)	—
Weighted average number of diluted common shares outstanding	Weighted average number of diluted common shares outstanding	374,233,600	366,982,456	372,977,695	366,982,008	Weighted average number of diluted common shares outstanding	371,310,738	367,740,722	372,387,904	366,985,646

For the three and ~~six~~nine months ended ~~June~~September 30, 2022, ~~6,092,908~~6,161,672 and ~~5,738,428~~5,863,881 options, respectively (three and nine months ended September 30, 2021- 16,362,882 and all options, respectively), on a weighted average basis ~~(three and six months ended June 30, 2021 - all options),~~ were excluded from the diluted income (loss) per share calculation as the options were anti-dilutive.

7. ~~Revenue~~Oil Sales

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 crude differentials, quality, and transportation discounts each month. For the three and ~~six~~nine months ended ~~June~~September 30, 2022, 100% (three and ~~six~~nine months ended ~~June~~September 30, 2021 - 100%) of the Company’s revenue resulted from oil sales. During the three and ~~six~~nine months

ended ~~June~~September 30, 2022, quality and transportation discounts were ~~12%~~14% and 13% of the average ICE Brent price (three and ~~six~~nine months ended ~~June~~September 30, 2021 - ~~17%~~16% and ~~16%~~15%, respectively).

During the three months ended ~~June~~September 30, 2022, the Company’s production was sold primarily to one major customer in Colombia (three months ended September 30, 2021 - two, representing 63% and 25% of the total sales volumes). During the nine months ended September 30, 2022, the Company’s production was sold primarily to two major customers in Colombia, representing ~~55%~~71% and ~~44%~~29% of the total sales volumes ~~(three~~(nine months ended ~~June~~September 30, 2021 - two, representing ~~75%~~68% and ~~14%~~24% of ~~total sales volumes). During~~ the six months ended June 30, 2022, the Company’s production was sold primarily to two major customers in Colombia, representing 56% and 43% of total sales volumes (six months ended June 30, 2021 - two, representing 71% and 22% of total sales volumes).

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

8. Taxes

The Company's effective tax rate was ~~54%~~49% for the ~~six~~nine months ended ~~June~~September 30, 2022, compared to ~~(48)%~~397% in the comparative period of 2021. Current income tax expense was ~~$46.3~~$63.1 million for the ~~six~~nine months ended ~~June~~September 30, 2022, compared to a small recovery in the corresponding period of 2021, primarily due to an increase in taxable income.

The deferred income tax expense for the ~~six~~nine months ended ~~June~~September 30, 2022, 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 2021 was also the result of ~~excess~~ tax depreciation being higher compared ~~with~~to 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 an increase in the impact of foreign taxes, ~~foreign translation adjustments,~~ increase in ~~the~~ valuation allowance, non-deductible third-party ~~royalty~~royalties in Colombia, other permanent differences, and non-deductible stock-based ~~compensation.~~compensation which were partially offset by a decrease in foreign currency translations.

For the ~~six~~nine months ended ~~June~~September 30, 2021, the difference between the effective tax rate of ~~(48)%~~397% and the 31% Colombian tax rate was primarily due to ~~an increase in~~ the ~~impact~~non-deductibility of derivative instrument losses and financing costs; foreign ~~taxes, foreign~~currency translation adjustments, and ~~other permanent differences, which was~~stock-based compensation. These were partially offset by a decrease in the valuation ~~allowance.~~allowance and the non-taxable portion (50%) of the unrealized gain on PetroTal Corp. shares.

9. Contingencies

Legal Proceedings

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

Letters of credit and other credit support

At ~~June~~September 30, 2022, the Company had provided letters of credit and other credit support totaling ~~$105.1~~$109.8 million (December 31, 2021 - $103.0 million) as security relating to work commitment guarantees in Colombia and Ecuador contained in exploration contracts and other capital or operating requirements.

10. Financial Instruments and Fair Value Measurement

Financial Instruments

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

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

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

•Level 3 - Unobservable inputs for assets and liabilities

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

Fair Value Measurement

The following table presents the Company’s fair value measurements of its financial instruments as of ~~June~~September 30, 2022, and December 31, 2021:

As at June 30, 2022 As at December 31, 2021
(Thousands of U.S. Dollars)
Level 1
Assets
Prepaid equity forward - current (2)
$ 6,891 $ —
Prepaid equity forward - long-term(1)
11,494 7,578
$ 18,385 $ 7,578
Liabilities
DSUs liability - long-term(3)
$ 7,136 $ 4,346
6.25% Senior Notes 281,460 273,672
7.75% Senior Notes 275,124 271,500
$ 563,720 $ 549,518
Level 2
Assets
Derivative asset(2)
$ — $ 219
Restricted cash and cash equivalents - long-term(1)
4,827 4,903
$ 4,827 $ 5,122
Liabilities
Derivative liability $ 7,230 $ 2,976
Revolving credit facility — 66,987
PSUs liability - current (4)
12,516 2,710
PSUs liability - long-term(3)
7,736 9,372
$ 27,482 $ 82,045
Level 3
Liabilities
Asset retirement obligation - current(4)
$ 3,421 $ —
Asset retirement obligation - long-term 56,783 54,525
$ 60,204 $ 54,525


	As at September 30, 2022		As at December 31, 2021
(Thousands of U.S. Dollars)
Level 1
Assets
Prepaid equity forward - current (2)	$	7,398	$	—
Prepaid equity forward - long-term(1)	12,339		7,578
	$	19,737	$	7,578

Liabilities
DSUs liability - long-term(3)	$	7,736	$	4,346
6.25% Senior Notes	230,925		273,672
7.75% Senior Notes	234,000		271,500
	$	472,661	$	549,518
Level 2
Assets
Derivative asset(2)	$	—	219
Restricted cash and cash equivalents - long-term(1)	5,518		4,903
	$	5,518	$	5,122
Liabilities
Derivative liability	$	—	$	2,976
Revolving credit facility	—		66,987
PSUs liability - current (4)	13,657		2,710
PSUs liability - long-term(3)	10,089		9,372
	$	23,746	$	82,045

Level 3
Liabilities
Asset retirement obligation - current(4)	$	1,724	$	—
Asset retirement obligation - long-term	58,657		54,525
	$	60,381	$	54,525

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

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

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

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

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

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

Prepaid Equity Forward (“PEF”)

To reduce the Company’s exposure to changes in the trading price of the Company’s common shares on outstanding PSUs and DSUs, the Company entered into a PEF. At the end of the term, the counterparty will pay the Company an amount equivalent to the notional amount of the shares using the price of the Company’s common shares at the valuation date. The Company has the discretion to increase or decrease the notional amount of the PEF or terminate the agreement early. As at ~~June~~September 30, 2022, the Company’s PEF had a notional amount of 16 million shares with a fair value of ~~$18.4~~$19.7 million (As at December 31, 2021 - 10 million shares with a fair value of $7.6 million). During the three and ~~six~~nine months ended ~~June~~September 30, 2022, the Company recorded a ~~$5.2~~$2.6 million ~~loss~~ and ~~$2.7~~$5.3 million gain, respectively, on the PEF in general and administrative expenses (three and ~~six~~ nine

months ended ~~June~~September 30, 2021- ~~$0.1~~$0.6 million ~~gain)~~and $0.7 million gain respectively). The fair value of the PEF asset was estimated using the Company’s share price quoted in active markets at the end of each reporting period.

DSUs liability

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

PSUs liability

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

~~Derivative asset and derivative liability~~

The fair value of derivatives is estimated based on various factors, including quoted market prices in active markets and quotes from third parties. The Company also performs an internal valuation to ensure the reasonableness of third party quotes. In consideration of counterparty credit risk, the Company assessed whether the counterparty to the derivative would default by failing to make any contractually required payments. Additionally, the Company considers that it is of substantial credit quality and has the financial resources and willingness to meet its potential repayment obligations associated with the derivative transactions.

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

Three Months Ended June 30, Six Months Ended June 30,
(Thousands of U.S. Dollars) 2022 2021 2022 2021
Commodity price derivatives loss $ 5,172 $ 21,217 $ 26,611 $ 44,849
Foreign currency derivatives loss — 22 — 88
Derivative instruments loss $ 5,172 $ 21,239 $ 26,611 $ 44,937
Unrealized PetroTal investment loss (gain) $ — $ 2,614 $ — $ (3,861)
Loss on sale of PetroTal shares — — — 5,070
Other financial instruments loss $ — $ 2,614 $ — $ 1,209

~~Revolving credit facility and~~ Senior Notes

Financial instruments not recorded at fair value at ~~June~~September 30, 2022, ~~included~~were the Senior Notes ~~and the revolving credit facility~~ (Note 5).

At ~~June~~September 30, 2022, the carrying amounts of the 6.25% Senior Notes and the 7.75% Senior Notes were ~~$294.8~~$275.5 million and ~~$292.6~~$292.9 million, respectively, which represented the aggregate principal amount less unamortized debt issuance costs, and the fair values were ~~$281.5~~$230.9 million and ~~$275.1~~$234.0 million, respectively.

Restricted cash - long-term

The fair value of long-term restricted cash and cash equivalents ~~and the revolving credit facility~~ approximated their carrying value because interest rates are variable and reflective of market rates. The fair values of other financial instruments approximate their carrying amounts due to the short-term maturity of these instruments.

Asset retirement obligation

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

~~Commodity Price Derivatives~~

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

~~All Company’s commodity price derivatives expired on June 30, 2022 and as at June 30, 2022, the Company had no outstanding commodity price derivatives.~~

11. Supplemental Cash Flow Information

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


(Thousands of U.S. Dollars)	(Thousands of U.S. Dollars)	As at June 30,				As at December 31,				(Thousands of U.S. Dollars)	As at September 30,				As at December 31,
		2022		2021		2021		2020			2022		2021		2021		2020
Cash and cash equivalents	Cash and cash equivalents	$	108,558	$	19,573	$	26,109	$	13,687	Cash and cash equivalents	$	118,173	$	16,208	$	26,109	$	13,687
Restricted cash and cash equivalents - current	Restricted cash and cash equivalents - current	1,142		392		392		427		Restricted cash and cash equivalents - current	1,142		392		392		427
Restricted cash and cash equivalents - long-term (1)	Restricted cash and cash equivalents - long-term (1)	4,827		3,590		4,903		3,409		Restricted cash and cash equivalents - long-term (1)	5,518		3,532		4,903		3,409
		$	114,527	$	23,555	$	31,404	$	17,523		$	124,833	$	20,132	$	31,404	$	17,523

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

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

Six Months Ended June 30,
(Thousands of U.S. Dollars) 2022 2021
Accounts receivable and other long-term assets $ 2,356 $ 28
Derivatives (6,961) 6,264
Inventory (736) (1,934)
Prepaids (3,075) (631)
Accounts payable and accrued and other long-term liabilities 8,264 11,991
Taxes receivable and payable 56,481 11,439
Net changes in assets and liabilities from operating activities $ 56,329 $ 27,157


	Nine Months Ended September 30,
(Thousands of U.S. Dollars)	2022		2021
Accounts receivable and other long-term assets	$	2,811	$	(18,582)
Derivatives	(16,594)		(2,427)
Inventory	(3,252)		(2,920)
Prepaids	(2,773)		42
Accounts payable and accrued and other long-term liabilities	37,862		14,417
Taxes receivable and payable	54,784		27,426
Net changes in assets and liabilities from operating activities	$	72,838	$	17,956

Changes in non-cash investing working capital for the ~~six~~nine months ended ~~June~~September 30, 2022, ~~are~~were comprised of ~~an increase in accounts payable and accrued liabilities of $11.2 million and an increase in accounts receivable of $0.2 million (six months~~

~~ended June 30, 2021,~~ an increase in accounts payable and accrued liabilities of $3.7 million and an increase in accounts receivable of ~~$0.5~~$0.4 million (nine months ended September 30, 2021, an increase in accounts payable and accrued liabilities of $0.6 million and a decrease in accounts receivable of $0.1 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)	2022		2021		(Thousands of U.S. Dollars)	2022		2021
Cash paid for income taxes	Cash paid for income taxes	$	20,468	$	7,139	Cash paid for income taxes	$	29,881	$	20,433
Cash paid for interest	Cash paid for interest	$	11,933	$	25,659	Cash paid for interest	$	31,455	$	37,259

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	$	41,106	$	31,887	Net liabilities related to property, plant and equipment, end of period	$	33,397	$	29,420

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

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

Financial and Operational Highlights

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

•Net income in the ~~second~~third quarter of 2022 was ~~$53.0~~$38.7 million or ~~$0.14~~$0.11 per share basic and $0.10 per share diluted, compared to a net ~~loss~~income of ~~$17.6~~$35.0 million or ~~$(0.05)~~$0.10 per share basic and diluted in the ~~second~~third quarter of 2021

•Income before income taxes in the ~~second~~third quarter of 2022 was ~~$91.6~~$60.4 million compared to ~~a loss~~an income before income taxes of ~~$8.4~~$44.0 million in the ~~second~~third quarter of 2021

•During the ~~second~~third quarter of 2022, we ~~completely repaid the amount drawn under the revolving credit facility,~~re-purchased $20.1 million of 6.25% Senior Notes for a cash consideration of $17.3 million and asre-purchased 10,733,702 of ~~June 30, 2022, the credit facility remained undrawn. Subsequent to quarter-end, the credit facility was terminated~~our common shares at a weighted average price of $1.34 per share

•Funds flow from operations(2) increased by ~~345%~~36% to ~~$103.6~~$93.7 million compared to the ~~second~~third quarter of 2021 and ~~increased 19%~~decreased by 10% from the ~~first~~second quarter of 2022

•During the ~~second~~third quarter, the Company generated ~~$38.4~~$36.7 million of free cash flow(2)~~, which~~. For the nine months ended September 30, 2022, the Company generated $121.0 million of free cash flow(2). Free cash flow was partially used for ~~debt reduction~~the re-purchase of Senior Notes and shares of Common Stock

•NAR production for the ~~second~~third quarter of 2022 was ~~23,215~~23,472 BOPD, ~~representing a 22% increase from 18,976~~which was comparable to 23,372 BOPD in the ~~second~~third quarter of 2021 ~~primarily due to a successful drilling~~ and ~~workover campaign~~23,215 in the ~~Acordionero and Costayaco fields. NAR production was comparable to the first~~second quarter of 2022

•Sales volumes for the ~~second~~third quarter of 2022 were ~~22,847~~23,516 BOPD ~~representing a 24% increase from 18,454~~which were comparable to 23,833 BOPD in the ~~second~~third quarter of 2021 and ~~was comparable to~~3% higher than 22,847 in the ~~first~~second quarter of 2022

•Oil sales were ~~$205.8~~$168.4 million, ~~113%~~24% higher compared to ~~$96.6~~$135.3 million in the ~~second~~third quarter of 2021, as a result of a ~~62%~~33% increase in Brent price, ~~and higher sales volumes~~ offset by ~~higher~~a 16% increase in quality and transportation discounts. Oil sales ~~increased~~decreased by 18% compared to ~~$174.6~~$205.8 million in the ~~first~~second quarter of 2022 as a result of a ~~14% increase~~13% decrease in Brent price ~~partially offset by~~and 3% higher quality and transportation ~~discounts~~discounts.

•Operating expenses were ~~$39.5~~$41.8 million, ~~50%~~9% higher than ~~$26.2~~$38.4 million in the ~~second~~third quarter of 2021, due to increased workovers and higher ~~power generation~~lifting costs as a result of ~~increased production~~higher environmental, community aids, and lower recoveries from partners in ~~all major fields.~~the Suroriente Block as a result of social blockades. Operating expenses increased by ~~13%~~6% from ~~$34.9~~$39.5 million in the ~~first~~second quarter of 2022, primarily due to higher workover activities during the current quarter

•Transportation expenses decreased by ~~16%~~23% compared to the ~~second~~third quarter of 2021. During the ~~second~~third quarter of 2021, ~~there was a change in delivery points in response~~alternative transportation routes were utilized due to ~~national blockades in Colombia,~~the maintenance of the Impala terminal, which ~~resulted in~~had higher transportation costs ~~for the period.~~per bbl. Compared to the ~~first~~second quarter of 2022, transportation expenses decreased by ~~11% as a result~~4% due to the use of ~~a change in~~alternative transportation routes, which ~~had~~resulted in lower transportation costs ~~per bbl~~in the current quarter

•Operating netback(2) increased by ~~143%~~32% to ~~$163.8~~$124.1 million compared to ~~$67.4~~$93.7 million in the ~~second~~third quarter of 2021 and ~~increased 20%~~decreased 24% from ~~$136.8~~$163.8 million in the ~~first~~second quarter of 2022

•Adjusted EBITDA(2) increased by ~~286%~~48% to ~~$140.1~~$121.2 million compared to ~~$36.3~~$81.8 million in the third quarter of 2021 and decreased by 13% from $140.1 million in the second quarter of ~~2021 and increased 17% from $119.4~~2022. The trailing twelve-month Adjusted EBITDA was $462.3 million resulting in ~~the first quarter~~Net Debt(2) to Adjusted EBITDA(2) of ~~2022~~1.0 times.

•Quality and transportation discounts for the ~~second~~third quarter of 2022 increased to ~~$13.00~~$13.37 per bbl compared to ~~$11.54~~$11.51 per bbl in the ~~second~~third quarter of 2021 and ~~$12.57~~$13.00 per bbl in the ~~first~~second quarter of 2022

•General and administrative expenses (“G&A”) before stock-based compensation increased by ~~10%~~52% compared to the ~~second~~third quarter of 2021 due to higher costs for special projects and ~~travel costs~~lease obligations in the current quarter. G&A expenses before stock-based compensation ~~were comparable to~~increased by 6% or $0.06 per bbl from the ~~first~~second quarter of 2022, primarily due to costs for optimization projects

•Capital additions for the ~~second~~third quarter of 2022 were ~~$65.2~~$57.0 million, an increase of ~~74% and 57%, respectfully,~~64% compared to the ~~second~~third quarter of 2021, ~~and the first quarter of 2022,~~ as a result of the drilling program in the Acordionero field and ~~Costayaco fields~~exploration wells in Colombia and Ecuador and decreased 13% from the second quarter of 2022


(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,
		2022		2021		% Change	2022		2022		2021		% Change		2022		2021		% Change	2022		2022		2021		% Change

Average Daily Volumes (BOPD)	Average Daily Volumes (BOPD)													Average Daily Volumes (BOPD)
Consolidated	Consolidated													Consolidated
Working Interest (“WI”) Production Before Royalties	Working Interest (“WI”) Production Before Royalties	30,607		23,035		33	29,362		29,988		23,745		26	Working Interest (“WI”) Production Before Royalties	30,391		28,957		5	30,607		30,123		25,501		18
Royalties	Royalties	(7,392)		(4,059)		82	(6,529)		(6,962)		(3,995)		74	Royalties	(6,919)		(5,585)		24	(7,392)		(6,948)		(4,531)		53
Production NAR	Production NAR	23,215		18,976		22	22,833		23,026		19,750		17	Production NAR	23,472		23,372		—	23,215		23,175		20,970		11
Increase in Inventory		(368)		(522)		30	(103)		(236)		(393)		40
Decrease (Increase) in Inventory														Decrease (Increase) in Inventory	44		461		(90)	(368)		(141)		(105)		(34)
Sales(1)	Sales(1)	22,847		18,454		24	22,730		22,790		19,357		18	Sales(1)	23,516		23,833		(1)	22,847		23,034		20,865		10

Net Income (Loss)	Net Income (Loss)	$	52,972	$	(17,627)	401	$	14,119	$	67,091	$	(55,049)	222	Net Income (Loss)	$	38,663	$	35,007	10	$	52,972	$	105,754	$	(20,042)	628

Operating Netback	Operating Netback													Operating Netback
Oil Sales	Oil Sales	$	205,785	$	96,623	113	$	174,569	$	380,354	$	192,116	98	Oil Sales	$	168,397	$	135,319	24	$	205,785	$	548,751	$	327,435	68
Operating Expenses	Operating Expenses	(39,494)		(26,247)		50	(34,935)		(74,429)		(56,918)		31	Operating Expenses	(41,837)		(38,448)		9	(39,494)		(116,266)		(95,366)		22

Transportation Expenses	Transportation Expenses	(2,513)		(3,002)		(16)	(2,834)		(5,347)		(5,601)		(5)	Transportation Expenses	(2,417)		(3,130)		(23)	(2,513)		(7,764)		(8,731)		(11)
Operating Netback(2)	Operating Netback(2)	$	163,778	$	67,374	143	$	136,800	$	300,578	$	129,597	132	Operating Netback(2)	$	124,143	$	93,741	32	$	163,778	$	424,721	$	223,338	90

G&A Expenses Before Stock-Based Compensation	G&A Expenses Before Stock-Based Compensation	$	7,847	$	7,133	10	$	7,779	$	15,626	$	13,950	12	G&A Expenses Before Stock-Based Compensation	$	8,284	$	5,444	52	$	7,847	$	23,910	$	19,394	23
G&A Stock-Based Compensation Expense		1,989		1,873		6	4,557		6,546		5,544		18
G&A Stock-Based Compensation (Recovery) Expense														G&A Stock-Based Compensation (Recovery) Expense	(170)		1,053		(116)	1,989		6,376		6,597		(3)
G&A Expenses, Including Stock-Based Compensation	G&A Expenses, Including Stock-Based Compensation	$	9,836	$	9,006	9	$	12,336	$	22,172	$	19,494	14	G&A Expenses, Including Stock-Based Compensation	$	8,114	$	6,497	25	$	9,836	$	30,286	$	25,991	17

Adjusted EBITDA(2)	Adjusted EBITDA(2)	$	140,113	$	36,299	286	$	119,378	$	259,491	$	78,203	232	Adjusted EBITDA(2)	$	121,236	$	81,804	48	$	140,113	$	380,727	$	160,007	138

Funds Flow From Operations(2)	Funds Flow From Operations(2)	$	103,625	$	23,272	345	$	87,310	$	190,935	$	52,245	265	Funds Flow From Operations(2)	$	93,746	$	69,103	36	$	103,625	$	284,681	$	121,348	135

Capital Expenditures	Capital Expenditures	$	65,199	$	37,384	74	$	41,483	$	106,682	$	74,811	43	Capital Expenditures	$	57,035	$	34,839	64	$	65,199	$	163,717	$	109,650	49

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

(2) Non-GAAP measures

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

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

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

EBITDA, as presented, is defined as net income or loss adjusted for depletion, depreciation and accretion (“DD&A”) expenses, interest expense and income tax expense. Adjusted EBITDA, as presented, is defined as EBITDA adjusted for non-cash lease expense, lease payments, unrealized foreign exchange gain or loss, stock-based compensation expense or recovery, unrealized derivative instruments gain or loss, ~~and~~gain on re-purchase of Senior Notes, other financial instruments gain or loss and other loss. Management uses this supplemental measure to analyze performance and income generated by our principal business activities prior to the consideration of how non-cash items affect that income and believes that this financial measure is useful supplemental information for investors to analyze our performance and our financial results. A reconciliation from net income (loss) 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,				Twelve Months Rolling Ending September 30,
(Thousands of U.S. Dollars)	(Thousands of U.S. Dollars)	2022		2021		2022		2022		2021		(Thousands of U.S. Dollars)	2022		2021		2022		2022		2021		2022
Net income (loss)	Net income (loss)	$	52,972	$	(17,627)	$	14,119	$	67,091	$	(55,049)	Net income (loss)	$	38,663	$	35,007	$	52,972	$	105,754	$	(20,042)	$	168,278
Adjustments to reconcile net income (loss) to EBITDA and Adjusted EBITDA	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	42,216		28,927		40,963		83,179		60,245		DD&A expenses	45,320		38,055		42,216		128,499		98,300		170,073
Interest expense	Interest expense	12,194		13,935		12,128		24,322		27,747		Interest expense	11,421		13,608		12,194		35,743		41,355		48,769
Income tax expense	Income tax expense	38,666		9,189		39,540		78,206		17,840		Income tax expense	21,734		8,955		38,666		99,940		26,795		53,799
EBITDA (non-GAAP)	EBITDA (non-GAAP)	$	146,048	$	34,424	$	106,750	$	252,798	$	50,783	EBITDA (non-GAAP)	$	117,138	$	95,625	$	146,048	$	369,936	$	146,408	$	440,919
Non-cash lease expense	Non-cash lease expense	747		370		411		1,158		814		Non-cash lease expense	851		408		747		2,009		1,222		2,454
Lease payments	Lease payments	(388)		(393)		(344)		(732)		(855)		Lease payments	(402)		(384)		(388)		(1,134)		(1,239)		(1,516)
Unrealized foreign exchange loss (gain)		4,341		477		(4,839)		(498)		13,480
Stock-based compensation expense		1,989		1,873		4,557		6,546		5,544

Unrealized foreign exchange loss												Unrealized foreign exchange loss	6,636		3,465		4,341		6,138		16,945		11,072
Stock-based compensation (recovery) expense												Stock-based compensation (recovery) expense	(170)		1,053		1,989		6,376		6,597		8,175
Unrealized derivative instruments (gain) loss	Unrealized derivative instruments (gain) loss	(12,624)		(3,066)		12,843		219		7,228		Unrealized derivative instruments (gain) loss	(219)		(4,729)		(12,624)		—		2,499		(12,088)
Other financial instruments loss		—		2,614		—		—		1,209
Gain on re-purchase of Senior Notes												Gain on re-purchase of Senior Notes	(2,598)		—		—		(2,598)		—		(2,598)
Other financial instruments (gain) loss												Other financial instruments (gain) loss	—		(13,634)		—		—		(12,425)		15,794
Other loss												Other loss	—		—		—		—		—		44
Adjusted EBITDA (non-GAAP)	Adjusted EBITDA (non-GAAP)	$	140,113	$	36,299	$	119,378	$	259,491	$	78,203	Adjusted EBITDA (non-GAAP)	$	121,236	$	81,804	$	140,113	$	380,727	$	160,007	$	462,256

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

Three Months Ended June 30, Three Months Ended March 31, Six Months Ended June 30,
(Thousands of U.S. Dollars) 2022 2021 2022 2022 2021
Net income (loss) $ 52,972 $ (17,627) $ 14,119 $ 67,091 $ (55,049)
Adjustments to reconcile net income (loss) to funds flow from operations
DD&A expenses 42,216 28,927 40,963 83,179 60,245
Deferred tax expense 13,241 9,203 18,713 31,954 17,854
Stock-based compensation expense 1,989 1,873 4,557 6,546 5,544
Amortization of debt issuance costs 1,131 894 887 2,018 1,775
Non-cash lease expense 747 370 411 1,158 814
Lease payments (388) (393) (344) (732) (855)
Unrealized foreign exchange loss (gain) 4,341 477 (4,839) (498) 13,480
Derivative instruments loss 5,172 21,239 21,439 26,611 44,937
Cash settlements on derivative instruments (17,796) (24,305) (8,596) (26,392) (37,709)
Other financial instruments loss — 2,614 — — 1,209
Funds flow from operations (non-GAAP) $ 103,625 $ 23,272 $ 87,310 $ 190,935 $ 52,245
Capital expenditures $ 65,199 $ 37,384 $ 41,483 $ 106,682 $ 74,811
Free cash flow (non-GAAP) $ 38,426 $ (14,112) $ 45,827 $ 84,253 $ (22,566)


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

Additional Operational Results


		Three Months Ended 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)	2022		2021		% Change	2022		2022		2021		% Change	(Thousands of U.S. Dollars)	2022		2021		% Change	2022		2022		2021		% Change
Oil sales	Oil sales	$	205,785	$	96,623	113	$	174,569	$	380,354	$	192,116	98	Oil sales	$	168,397	$	135,319	24	$	205,785	$	548,751	$	327,435	68
Operating expenses	Operating expenses	39,494		26,247		50	34,935		74,429		56,918		31	Operating expenses	41,837		38,448		9	39,494		116,266		95,366		22

Transportation expenses	Transportation expenses	2,513		3,002		(16)	2,834		5,347		5,601		(5)	Transportation expenses	2,417		3,130		(23)	2,513		7,764		8,731		(11)
Operating netback(1)	Operating netback(1)	163,778		67,374		143	136,800		300,578		129,597		132	Operating netback(1)	124,143		93,741		32	163,778		424,721		223,338		90

DD&A expenses	DD&A expenses	42,216		28,927		46	40,963		83,179		60,245		38	DD&A expenses	45,320		38,055		19	42,216		128,499		98,300		31
G&A expenses before stock-based compensation	G&A expenses before stock-based compensation	7,847		7,133		10	7,779		15,626		13,950		12	G&A expenses before stock-based compensation	8,284		5,444		52	7,847		23,910		19,394		23
G&A stock-based compensation expense		1,989		1,873		6	4,557		6,546		5,544		18
Foreign exchange loss (gain)		2,722		91		2,891	(3,725)		(1,003)		13,174		(108)
G&A stock-based compensation (recovery) expense														G&A stock-based compensation (recovery) expense	(170)		1,053		(116)	1,989		6,376		6,597		(3)
Foreign exchange loss														Foreign exchange loss	1,489		2,650		(44)	2,722		486		15,824		(97)
Derivative instruments loss	Derivative instruments loss	5,172		21,239		(76)	21,439		26,611		44,937		(41)	Derivative instruments loss	—		2,603		(100)	5,172		26,611		47,540		(44)
Other financial instruments loss		—		2,614		(100)	—		—		1,209		(100)

Other financial instruments gain														Other financial instruments gain	—		(13,634)		(100)	—		—		(12,425)		(100)
Gain on re-purchase of Senior Notes														Gain on re-purchase of Senior Notes	(2,598)		—		100	—		(2,598)		—		100
Interest expense	Interest expense	12,194		13,935		(12)	12,128		24,322		27,747		(12)	Interest expense	11,421		13,608		(16)	12,194		35,743		41,355		(14)
		72,140		75,812		(5)	83,141		155,281		166,806		(7)		63,746		49,779		28	72,140		219,027		216,585		1

Income (loss) before income taxes		91,638		(8,438)		1,186	53,659		145,297		(37,209)		490

Current income tax expense		25,425		(14)		181,707	20,827		46,252		(14)		330,471
Deferred income tax expense		13,241		9,203		44	18,713		31,954		17,854		79
		38,666		9,189		321	39,540		78,206		17,840		338
Net income (loss)		$	52,972	$	(17,627)	401	$	14,119	$	67,091	$	(55,049)	222

Sales Volumes (NAR)

Total sales volumes, BOPD		22,847		18,454		24	22,730		22,847		19,357		18

Brent Price per bbl		$	111.98	$	69.08	62	$	97.90	$	104.94	$	65.23	61

Consolidated Results of Operations per bbl Sales Volumes NAR
Oil sales		$	98.98	$	57.54	72	$	85.33	$	92.21	$	54.83	68
Operating expenses		19.00		15.62		22	17.08		18.04		16.24		11
Transportation expenses		1.21		1.79		(32)	1.39		1.30		1.60		(19)
Operating netback(1)		78.77		40.13		96	66.86		72.87		36.99		97

DD&A expenses		20.31		17.23		18	20.02		20.17		17.20		17
G&A expenses before stock-based compensation		3.77		4.25		(11)	3.80		3.79		3.98		(5)
G&A stock-based compensation expense		0.96		1.12		(14)	2.23		1.59		1.58		1
Foreign exchange loss (gain)		1.31		0.05		2,520	(1.82)		(0.24)		3.76		(106)
Income before income taxes														Income before income taxes	60,397		43,962		37	91,638		205,694		6,753		2946


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

Sales Volumes (NAR)														Sales Volumes (NAR)

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

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

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

DD&A expenses														DD&A expenses	20.95		17.36		21	20.31		20.43		17.26		18
G&A expenses before stock-based compensation														G&A expenses before stock-based compensation	3.83		2.48		54	3.77		3.80		3.40		12
G&A stock-based compensation (recovery) expense														G&A stock-based compensation (recovery) expense	(0.08)		0.48		(117)	0.96		1.01		1.16		(13)
Foreign exchange loss														Foreign exchange loss	0.69		1.21		(43)	1.31		0.08		2.78		(97)
Derivative instruments loss	Derivative instruments loss	2.49		12.65		(80)	10.48		6.45		12.83		(50)	Derivative instruments loss	—		1.19		(100)	2.49		4.23		8.35		(49)
Other financial instruments loss		—		1.56		(100)	—		—		0.35		(100)

Other financial instruments gain														Other financial instruments gain	—		(6.22)		(100)	—		—		(2.18)		(100)
Gain on re-purchase of Senior Notes														Gain on re-purchase of Senior Notes	(1.20)		—		100	—		(0.41)		—		100
Interest expense	Interest expense	5.87		8.30		(29)	5.93		5.90		7.92		(26)	Interest expense	5.28		6.21		(15)	5.87		5.68		7.26		(22)
		34.71		45.16		(23)	40.64		37.66		47.62		(21)		29.47		22.71		30	34.71		34.82		38.03		(8)

Income (loss) before income taxes		44.06		(5.03)		976	26.22		35.21		(10.63)		431
Income before income taxes														Income before income taxes	27.91		20.05		39	44.06		32.73		1.18		2,674

Current income tax expense		12.23		(0.01)		122,400	10.18		11.21		—		100
Current income tax expense (recovery)														Current income tax expense (recovery)	7.77		—		100	12.23		10.03		—		100
Deferred income tax expense	Deferred income tax expense	6.37		5.48		16	9.15		7.75		5.10		52	Deferred income tax expense	2.27		4.08		(44)	6.37		5.86		4.71		24
		18.60		5.47		240	19.33		18.96		5.10		272		10.04		4.08		146	18.60		15.89		4.71		237
Net income (loss)	Net income (loss)	$	25.46	$	(10.50)	342	$	6.89	$	16.25	$	(15.73)	203	Net income (loss)	$	17.87	$	15.97	12	$	25.46	$	16.84	$	(3.53)	(577)

(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,
		2022		2021		2022		2022		2021			2022		2021		2022		2022		2021
Average Daily Volumes (BOPD)	Average Daily Volumes (BOPD)											Average Daily Volumes (BOPD)
WI Production Before Royalties	WI Production Before Royalties	30,607		23,035		29,362		29,988		23,745		WI Production Before Royalties	30,391		28,957		30,607		30,123		25,501
Royalties	Royalties	(7,392)		(4,059)		(6,529)		(6,962)		(3,995)		Royalties	(6,919)		(5,585)		(7,392)		(6,948)		(4,531)
Production NAR	Production NAR	23,215		18,976		22,833		23,026		19,750		Production NAR	23,472		23,372		23,215		23,175		20,970
Increase in Inventory		(368)		(522)		(103)		(236)		(393)
Decrease (Increase) in Inventory												Decrease (Increase) in Inventory	44		461		(368)		(141)		(105)
Sales	Sales	22,847		18,454		22,730		22,790		19,357		Sales	23,516		23,833		22,847		23,034		20,865

Royalties, % of WI Production Before Royalties	Royalties, % of WI Production Before Royalties	24	%	18	%	22	%	23	%	17	%	Royalties, % of WI Production Before Royalties	23	%	19	%	24	%	23	%	18	%

Oil production NAR for the three ~~and six~~ months ended ~~June~~September 30, 2022 was consistent with the corresponding period of 2021. Oil production NAR for the nine months ended September 30, 2022, increased by ~~22% and 17%~~11% compared to the corresponding ~~periods~~period of 2021 due to the successful drilling and workover campaign in the Acordionero and Costayaco fields. Oil production NAR was comparable to the prior quarter.

Royalties as a percentage of production for the three and ~~six~~nine months ended ~~June~~September 30, 2022, increased to ~~24% and~~ 23% compared to the corresponding periods of 2021 ~~and increased compared to the prior quarter~~ commensurate with the increase in benchmark oil prices and the price sensitive royalty regime in Colombia. Compared to the prior quarter, royalties as a percentage of production remained comparable.

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

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)	2022		2021		2022		2022		2021		(Thousands of U.S. Dollars)	2022		2021		2022		2022		2021

Oil Sales	Oil Sales	$	205,785	$	96,623	$	174,569	$	380,354	$	192,116	Oil Sales	$	168,397	$	135,319	$	205,785	$	548,751	$	327,435
Transportation Expenses	Transportation Expenses	(2,513)		(3,002)		(2,834)		(5,347)		(5,601)		Transportation Expenses	(2,417)		(3,130)		(2,513)		(7,764)		(8,731)
		203,272		93,621		171,735		375,007		186,515			165,980		132,189		203,272		540,987		318,704
Operating Expenses	Operating Expenses	(39,494)		(26,247)		(34,935)		(74,429)		(56,918)		Operating Expenses	(41,837)		(38,448)		(39,494)		(116,266)		(95,366)
Operating Netback(1)	Operating Netback(1)	$	163,778	$	67,374	$	136,800	$	300,578	$	129,597	Operating Netback(1)	$	124,143	$	93,741	$	163,778	$	424,721	$	223,338

(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	$	111.98	$	69.08	$	97.90	$	104.94	$	65.23	Brent	$	97.70	$	73.23	$	111.98	$	102.48	$	67.97
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	(13.00)		(11.54)		(12.57)		(12.73)		(10.40)		Quality and Transportation Discounts	(13.37)		(11.51)		(13.00)		(12.98)		(10.49)
Average Realized Price	Average Realized Price	98.98		57.54		85.33		92.21		54.83		Average Realized Price	77.84		61.72		98.98		87.27		57.48
Transportation Expenses	Transportation Expenses	(1.21)		(1.79)		(1.39)		(1.30)		(1.60)		Transportation Expenses	(1.12)		(1.43)		(1.21)		(1.23)		(1.53)
Average Realized Price Net of Transportation Expenses	Average Realized Price Net of Transportation Expenses	97.77		55.75		83.94		90.91		53.23		Average Realized Price Net of Transportation Expenses	76.72		60.29		97.77		86.04		55.95
Operating Expenses	Operating Expenses	(19.00)		(15.62)		(17.08)		(18.04)		(16.24)		Operating Expenses	(19.34)		(17.53)		(19.00)		(18.49)		(16.74)
Operating Netback(1)	Operating Netback(1)	$	78.77	$	40.13	$	66.86	$	72.87	$	36.99	Operating Netback(1)	$	57.38	$	42.76	$	78.77	$	67.55	$	39.21

Oil sales for the three months ended ~~June~~September 30, 2022, increased by ~~113%~~24% to $205.8 million due to a 62% increase in Brent price and 24% higher sales volumes, partially offset by a 13% increase in the quality and transportation discounts as a result of the widening of the Castilla and Vasconia differentials to $7.82 and $5.09 per bbl for the three months ended June 30, 2022 from $5.02 and $2.89 for the corresponding period of 2021, respectively. For the six months ended June 30, 2022, oil sales increased by 98% to $380.4$168.4 million compared to the corresponding period of 2021 due to ~~61%~~a 33% increase in Brent price, ~~and 18% higher sales volumes,~~ partially offset by ~~22%~~a 16% increase in the quality and transportation discounts and M+1 Brent adjustment, (as defined below). Castilla differentials increased to $9.15 from $6.51 per bbl in the corresponding period of 2021, and Vasconia differentials decreased to $3.77 from $4.02 in the corresponding period of 2021. During the three months ended September 30, 2022, we entered into new marketing arrangements moving from the Brent monthly average of the month of delivery (“M pricing”) to the Brent monthly average following the month of deliveries (“M+1 Brent”). The Company’s revenue was negatively impacted as the Brent monthly average decreased throughout the quarter.

For the nine months ended September 30, 2022, oil sales increased by 68% to $548.8 million compared to the corresponding period of 2021 due to a ~~result of widening of~~51% increase in Brent price and 10% higher sales volumes, partially offset by 24% increase in the quality and transportation discounts and M+1 Brent adjustment. Castilla and Vasconia differentials increased to ~~$7.10~~$7.89 and ~~$4.35 for the six months ended June 30, 2022~~$4.17 from $4.50 and $2.65 per bbl ~~for~~in the corresponding period of 2021, respectively.

Compared to the prior quarter, oil sales ~~increased~~decreased by 18%, primarily as a result of a ~~14% increase~~13% decrease in Brent price, ~~partially offset by~~ 3% higher quality and transportation ~~discounts.~~discounts and M+1 Brent adjustment.

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


(Thousands of U.S. Dollars)	(Thousands of U.S. Dollars)	Second Quarter 2022 Compared with First Quarter 2022		Second Quarter 2022 Compared with Second Quarter 2021		Six Months Ended June 30, 2022 Compared with Six Months Ended June 30, 2021		(Thousands of U.S. Dollars)	Third Quarter 2022 Compared with Second Quarter 2022		Third Quarter 2022 Compared with Third Quarter 2021		Nine Months Ended September 30, 2022 Compared with Nine Months Ended September 30, 2021
Oil sales for the comparative period	Oil sales for the comparative period	$	174,569	$	96,623	$	192,116	Oil sales for the comparative period	$	205,785	$	135,319	$	327,435
Realized sales price increase effect	Realized sales price increase effect	28,371		86,159		154,176		Realized sales price increase effect	(45,744)		34,873		187,280
Sales volumes increase effect	Sales volumes increase effect	2,845		23,003		34,062		Sales volumes increase effect	8,356		(1,795)		34,036
Oil sales for the three and six months ended June 30, 2022		$	205,785	$	205,785	$	380,354
Oil sales for the three and nine months ended September 30, 2022								Oil sales for the three and nine months ended September 30, 2022	$	168,397	$	168,397	$	548,751

The average realized price for the three and ~~six~~nine months ended ~~June~~September 30, 2022, increased by ~~72%~~26% and ~~68%~~52%, compared to the corresponding periods of ~~2021. The increase was~~2021, commensurate with the increase in benchmark oil prices, offset by higher ~~Castilla~~differentials and ~~Vasconia differentials.~~ utilization of M+1 Brent pricing for our sales.

Compared to the prior quarter, the average realized price ~~increased 16%~~decreased by 21% due to ~~higher~~lower benchmark oil prices, higher Castilla differentials and utilization of M+1 Brent pricing, which were partially offset by ~~higher Castilla and~~lower Vasconia differentials.

Operating expenses for the three months ended ~~June~~September 30, 2022, increased by ~~50%~~9% to ~~$39.5~~$41.8 million or by ~~$3.38~~$1.81 per bbl to ~~$19.00~~$19.34 per bbl, ~~primarily as a result of $1.16 per bbl increased workovers and $1.95 per bbl higher power generation costs as a result of increased production in all major fields~~ compared to the corresponding period of ~~2021. Lower operating activities during the second quarter~~2021, primarily as a result of ~~2021 were~~$0.68 per bbl increased workovers and $1.12 higher lifting costs mainly attributed to ~~national~~higher environmental, community aids, and lower recoveries from partners as a result of social blockades in ~~Colombia affecting all major fields.~~the Suroriente block.

Operating expenses for the ~~six~~nine months ended ~~June~~September 30, 2022, increased by ~~31%~~22% to ~~$74.4~~$116.3 million or by ~~$1.80~~$1.75 per bbl to ~~$18.04~~$18.49 per bbl, compared to the corresponding period of 2021, primarily ~~due to~~as a result of $0.58 per bbl increased workovers and ~~$1.11~~$1.16 per bbl higher lifting costs attributed to higher power generation and chemical costs ~~as a result of~~due to increased production and waterflood in all major fields.

Compared to the prior quarter, operating expenses increased by ~~13%~~6% or ~~$1.92~~$0.34 per bbl from ~~$34.9~~$39.5 million or ~~$17.08~~$19.00 per bbl, primarily due to higher workover ~~activities.~~activities in the current quarter.

We have options to sell our oil through multiple pipelines and trucking routes. Each option has varying effects on realized sales price and transportation expenses. The following table shows the percentage of oil volumes we sold in Colombia using each option for the three and ~~six~~nine months ended ~~June~~September 30, 2022, and 2021, 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,
		2022		2021		2022		2022		2021			2022		2021		2022		2022		2021
Volume transported through pipeline	Volume transported through pipeline	—	%	9	%	—	%	—	%	5	%	Volume transported through pipeline	—	%	9	%	—	%	—	%	6	%
Volume sold at wellhead	Volume sold at wellhead	48	%	67	%	47	%	48	%	58	%	Volume sold at wellhead	47	%	42	%	48	%	47	%	55	%
Volume transported via truck to sales point	Volume transported via truck to sales point	52	%	24	%	53	%	52	%	37	%	Volume transported via truck to sales point	53	%	49	%	52	%	53	%	39	%
		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, 2022, decreased by ~~16%~~23% and 5%11% to ~~$2.5~~$2.4 million and ~~$5.3~~$7.8 million, respectively, compared to the corresponding periods of 2021. On a per bbl basis, transportation expenses decreased by ~~32%~~22% and ~~19%~~20% to ~~$1.21~~$1.12 and ~~$1.30~~$1.23 for the three and ~~six~~nine months ended ~~June~~September 30, 2022, compared to the corresponding periods of 2021. The decrease in transportation expenses per bbl compared to the corresponding periods of 2021 was a result of a change in transportation routes that had lower transportation costs per bbl. During the ~~second~~third quarter of 2021, ~~there was a change in delivery points in response~~alternative transportation routes were utilized due to ~~national blockades in Colombia~~maintenance of the Impala terminal, which had higher transportation costs per bbl.

For the three months ended ~~June~~September 30, 2022, transportation expenses decreased by ~~11%~~4% compared to ~~$2.8~~$2.5 million in the prior quarter. On a per bbl basis, transportation expenses decreased by ~~13%~~7% from ~~$1.39~~$1.21 in the prior quarter due ~~to higher volumes~~use of alternative transportation routes, which resulted in lower transportation costs per bbl in the current quarter.

2425

~~sold at wellhead and lower volumes transported from Suroriente block which was impacted by local farmers blockade during the second quarter of 2022.~~

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,
		2022		2021		2022		2022		2021			2022		2021		2022		2022		2021
DD&A Expenses, thousands of U.S. Dollars	DD&A Expenses, thousands of U.S. Dollars	$	42,216	$	28,927	$	40,963	$	83,179	$	60,245	DD&A Expenses, thousands of U.S. Dollars	$	45,320	$	38,055	$	42,216	$	128,499	$	98,300
DD&A Expenses, U.S. Dollars per bbl	DD&A Expenses, U.S. Dollars per bbl	20.31		17.23		20.02		20.17		17.20		DD&A Expenses, U.S. Dollars per bbl	20.95		17.36		20.31		20.43		17.26

DD&A expenses for the three and ~~six~~nine months ended ~~June~~September 30, 2022, increased ~~46%~~by 19% and ~~38%~~31% or ~~$3.08~~by $3.59 and ~~$2.97~~$3.17 per bbl due to increased production and higher costs in the depletable base compared to the corresponding periods of 2021.

For the three months ended ~~June~~September 30, 2022, DD&A expenses increased ~~3% when compared to the prior quarter due to higher production in the current quarter. On a~~7% or $0.64 per bbl ~~basis, DD&A expenses increased by $0.29 when~~ compared to the prior quarter due to higher costs in the depletable ~~base.~~base in the current quarter.

G&A Expenses

2526


		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)	2022		2021		% Change	2022		2022		2021			% Change	(Thousands of U.S. Dollars)	2022		2021		% Change	2022		2022		2021		% Change
G&A Expenses Before Stock-Based Compensation	G&A Expenses Before Stock-Based Compensation	$	7,847	$	7,133	10	$	7,779	$	15,626	$	13,950		12	G&A Expenses Before Stock-Based Compensation	$	8,284	$	5,444	52	$	7,847	$	23,910	$	19,394	23
G&A Stock-Based Compensation Expense		1,989		1,873		6	4,557		6,546		5,544			18
G&A Stock-Based Compensation (Recovery) Expense															G&A Stock-Based Compensation (Recovery) Expense	(170)		1,053		(116)	1,989		6,376		6,597		(3)
G&A Expenses, Including Stock-Based Compensation	G&A Expenses, Including Stock-Based Compensation	$	9,836	$	9,006	9	$	12,336	$	22,172	$	19,494		14	G&A Expenses, Including Stock-Based Compensation	$	8,114	$	6,497	25	$	9,836	$	30,286	$	25,991	17
(U.S. Dollars Per bbl Sales Volumes NAR)	(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	$	3.77	$	4.25	(11)	$	3.80	$	3.79	$	3.98		(5)	G&A Expenses Before Stock-Based Compensation	$	3.83	$	2.48	54	$	3.77	$	3.80	$	3.40	12
G&A Stock-Based Compensation Expense		0.96		1.12		(14)	2.23		1.59		1.58			1
G&A Stock-Based Compensation (Recovery) Expense															G&A Stock-Based Compensation (Recovery) Expense	(0.08)		0.48		(117)	0.96		1.01		1.16		(13)
G&A Expenses, Including Stock-Based Compensation	G&A Expenses, Including Stock-Based Compensation	$	4.73	$	5.37	(12)	$	6.03	$	5.38	$	5.56		(3)	G&A Expenses, Including Stock-Based Compensation	$	3.75	$	2.96	27	$	4.73	$	4.81	$	4.56	5

For the three and ~~six~~nine months ended ~~June~~September 30, 2022, G&A expenses before stock-based compensation increased by ~~10%~~52% to ~~$7.8~~$8.3 million and ~~12%~~23% to ~~$15.6~~$23.9 million, respectively, primarily due to higher costs for ~~special~~optimization projects and ~~increase in travel expenses~~lease obligations compared to corresponding periods of 2021. On a per bbl basis, G&A expenses before stock-based compensation ~~decreased~~increased by ~~$0.48~~$1.35 and ~~$0.19~~$0.40 per bbl to ~~$3.77~~$3.83 and ~~$3.79~~$3.80 per bbl, respectively, ~~primarily due higher sales volumes in 2022~~for the same reason mentioned above.

When compared to the ~~corresponding periods of 2021. When compared to~~ prior quarter, G&A expenses before stock-based compensation ~~and~~increased by 7% or $0.06 on a per bbl basis, ~~were comparable.~~primarily due to higher costs for optimization projects.

G&A expenses after stock-based compensation for the three and ~~six~~nine months ended ~~June~~September 30, 2022, increased by ~~9% per bbl~~25% and ~~14%~~17% or $0.79 and $0.25 per bbl, respectively, due to a higher share price compared to the corresponding periods of 2021. ~~On a per bbl basis, G&A expenses after stock-based compensation decreased by $0.64 and $0.18 per bbl, respectively, compared~~

Compared to the ~~corresponding periods of 2021, mainly due to higher sales volumes in 2022. Compared to~~ prior quarter, G&A expenses after stock-based compensation decreased by ~~20%~~18% or ~~$1.30~~$0.98 on a per bbl basis due to lower stock-based compensation resulting from a lower share price in the ~~second~~third quarter of 2022.

2627

Foreign Exchange Gains and Losses

For the three and ~~six~~nine months ended ~~June~~September 30, 2022, we had a ~~$2.7 million~~ loss ~~and $1.0 million gain, respectively,~~ on foreign exchange of $1.5 million and $0.5 million, respectively, compared to a ~~$0.1~~$2.7 million and ~~$13.2~~$15.8 million loss ~~respectively, for~~in the corresponding periods of 2021. Accounts receivable, taxes receivable, deferred income taxes, accounts payable, and prepaid equity forward (“PEF”) are considered monetary items and require translation from local ~~currency~~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, 2022, and 2021:


		Three Months Ended June 30,		Six Months Ended June 30,			Three Months Ended September 30,		Nine Months Ended September 30,
		2022	2021	2022	2021		2022	2021	2022	2021
Change in the U.S. dollar against the Colombian peso	Change in the U.S. dollar against the Colombian peso	strengthened by	strengthened by	strengthened by	strengthened by	Change in the U.S. dollar against the Colombian peso	strengthened by	strengthened by	strengthened by	strengthened by
		10%	1%	4%	9%		10%	2%	14%	12%
Change in the U.S. dollar against the Canadian dollar	Change in the U.S. dollar against the Canadian dollar	strengthened by	weakened by	strengthened by	weakened by	Change in the U.S. dollar against the Canadian dollar	strengthened by	strengthened by	strengthened by	strengthened by
		3%	1%	2%	3%		6%	3%	8%	—%

~~Financial Instrument Gains and Losses~~

~~The following table presents the nature of our derivative and other financial instruments gains and losses for the three and six months ended June 30, 2022, and 2021:~~

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)	2022			2021			2022			2021			(Thousands of U.S. Dollars)	2022			2021			2022			2021
Income (loss) before income tax		$	91,638		$	(8,438)		$	145,297		$	(37,209)
Income before income tax														Income before income tax	$	60,397		$	43,962		$	205,694		$	6,753

Current income tax expense		$	25,425		$	(14)		$	46,252		$	(14)
Current income tax expense (recovery)														Current income tax expense (recovery)	$	16,820		$	—		$	63,072		$	(14)
Deferred income tax expense	Deferred income tax expense	13,241			9,203			31,954			17,854			Deferred income tax expense	4,914			8,955			36,868			26,809
Total income tax expense	Total income tax expense	$	38,666		$	9,189		$	78,206		$	17,840		Total income tax expense	$	21,734		$	8,955		$	99,940		$	26,795

Effective tax rate	Effective tax rate	42		%	(109)		%	54		%	(48)		%	Effective tax rate	36		%	20		%	49		%	397		%

Current income tax expense was ~~$46.3~~$63.1 million for the ~~six~~nine months ended ~~June~~September 30, 2022, compared to a small recovery in the corresponding period in 2021, primarily due to an increase in taxable income. The deferred income tax expense for the ~~six~~nine months ended ~~June~~September 30, 2022, was also 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 2021 resulted from excess tax depreciation compared with 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 and ~~$24.3~~$35.7 million of financing cost related to ~~senior notes,~~Senior Notes, and ~~$21.5~~$11.1 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.

For the ~~six~~nine months ended ~~June~~September 30, 2021, the difference between the effective tax rate of ~~(48)%~~397% and the 31% Colombian tax rate was primarily due to ~~$44.9 million hedging loss,~~ ~~$27.7 million~~the non-deductibility of derivative instrument losses and financing ~~cost related to Senior Notes~~costs; foreign currency translation adjustments, and ~~foreign exchange loss, which were incurred in a jurisdictions where no tax benefit is recognized.~~stock based compensation. These were partially offset by a decrease in valuation ~~allowance.~~allowance and the non-taxable portion (50%) of the unrealized gain on PetroTal Corp. shares.

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


(Thousands of U.S. Dollars)	(Thousands of U.S. Dollars)	Second Quarter 2022 Compared with First Quarter 2022		% change	Second Quarter 2022 Compared with Second Quarter 2021		% change	Six Months Ended June 30, 2022 Compared with Six Months Ended June 30, 2021		% change	(Thousands of U.S. Dollars)	Third Quarter 2022 Compared with Second Quarter 2022		% change	Third Quarter 2022 Compared with Third Quarter 2021		% change	Nine Months Ended September 30, 2022 Compared with Nine Months Ended September 30, 2021		% change
Net income (loss) for the comparative period	Net income (loss) for the comparative period	$	14,119		$	(17,627)		$	(55,049)		Net income (loss) for the comparative period	$	52,972		$	35,007		$	(20,042)
Increase (decrease) due to:	Increase (decrease) due to:										Increase (decrease) due to:
Sales price	Sales price	28,371			86,159			154,176			Sales price	(45,744)			34,873			187,280
Sales volumes	Sales volumes	2,845			23,003			34,062			Sales volumes	8,356			(1,795)			34,036
Expenses:	Expenses:										Expenses:
Operating	Operating	(4,559)			(13,247)			(17,511)			Operating	(2,343)			(3,389)			(20,900)
Transportation	Transportation	321			489			254			Transportation	96			713			967
Cash G&A	Cash G&A	(68)			(714)			(1,676)			Cash G&A	(437)			(2,840)			(4,516)
Net lease payments	Net lease payments	292			382			467			Net lease payments	90			425			892
Severance		—			—			—

Interest, net of amortization of debt issuance costs	Interest, net of amortization of debt issuance costs	178			1,978			3,668			Interest, net of amortization of debt issuance costs	393			2,031			5,699
Realized foreign exchange	Realized foreign exchange	2,733			1,233			199			Realized foreign exchange	3,528			4,332			4,531
Cash settlements on derivative instruments	Cash settlements on derivative instruments	(9,200)			6,509			11,317			Cash settlements on derivative instruments	17,577			7,113			18,430
Current taxes	Current taxes	(4,598)			(25,439)			(46,266)			Current taxes	8,605			(16,820)			(63,086)

Net change in funds flow from operations(1) from comparative period	Net change in funds flow from operations(1) from comparative period	16,315			80,353			138,690			Net change in funds flow from operations(1) from comparative period	(9,879)			24,643			163,333
Expenses:	Expenses:										Expenses:
Depletion, depreciation and accretion	Depletion, depreciation and accretion	(1,253)			(13,289)			(22,934)			Depletion, depreciation and accretion	(3,104)			(7,265)			(30,199)
Goodwill impairment		—			—			—
Asset impairment		—			—			—

Deferred tax	Deferred tax	5,472			(4,038)			(14,100)			Deferred tax	8,327			4,041			(10,059)
Amortization of debt issuance costs	Amortization of debt issuance costs	(244)			(237)			(243)			Amortization of debt issuance costs	380			156			(87)
Stock-based compensation	Stock-based compensation	2,568			(116)			(1,002)			Stock-based compensation	2,159			1,223			221
Derivative instruments gain or loss, net of settlements on derivative instruments	Derivative instruments gain or loss, net of settlements on derivative instruments	25,467			9,558			7,009			Derivative instruments gain or loss, net of settlements on derivative instruments	(12,405)			(4,510)			2,499
Other financial instruments loss		—			2,614			1,209
Gain on re-purchase of Senior Notes											Gain on re-purchase of Senior Notes	2,598			2,598			2,598
Other financial instruments gain											Other financial instruments gain	—			(13,634)			(12,425)
Unrealized foreign exchange	Unrealized foreign exchange	(9,180)			(3,864)			13,978			Unrealized foreign exchange	(2,295)			(3,171)			10,807
Other loss		—			—			—

Net lease payments	Net lease payments	(292)			(382)			(467)			Net lease payments	(90)			(425)			(892)
Net change in net income (loss)	Net change in net income (loss)	38,853			70,599			122,140			Net change in net income (loss)	(14,309)			3,656			125,796
Net income for the current period	Net income for the current period	$	52,972	275%	$	52,972	401%	$	67,091	222%	Net income for the current period	$	38,663	(27)%	$	38,663	(10)%	$	105,754	628%

(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.

2930

Capital expenditures during the three months ended ~~June~~September 30, 2022 were ~~$65.2~~$57.0 million:


(Millions of U.S. Dollars)
Colombia:
Exploration	$	~~10.0~~16.9
Development:
Drilling and Completions	~~34.6~~12.7
Facilities	~~4.7~~6.2
Other	~~12.6~~8.3
	~~61.9~~44.1
Corporate & Ecuador	~~3.3~~12.9
	$	~~65.2~~57.0

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


			Number of wells (Gross and Net)
Colombia
Exploration			2.0
Development			3.0
Service			2.0
			7.0
Ecuador
Exploration			1.0
~~Development~~			~~9.0~~
~~Service~~			~~4.0~~
			~~14.0~~8.0

We spud ~~one~~three exploration, ~~nine~~three development, and ~~four~~two water injection wells, of which 11five were in ~~the~~ Midas Block, one in Chaza Block, one in Alea-1848A Block, and ~~three were~~one in the ~~Chaza Block.~~Chanangue Block in Ecuador. Of the wells spud during the quarter 10five were completed, and three were in-progress ~~and one exploration well was dry~~ as of ~~June~~September 30, 2022.

Liquidity and Capital Resources


		As at						As at
(Thousands of U.S. Dollars)	(Thousands of U.S. Dollars)	June 30, 2022		% Change	December 31, 2021		(Thousands of U.S. Dollars)	September 30, 2022		% Change	December 31, 2021
Cash and Cash Equivalents	Cash and Cash Equivalents	$	108,558	316	$	26,109	Cash and Cash Equivalents	$	118,173	353	$	26,109

Revolving Credit Facility		$	—	(100)	$	67,500
Credit Facility							Credit Facility	$	—	(100)	$	67,500

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

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 ~~new~~the credit facility, ~~which we are planning to obtain~~ will provide us with sufficient liquidity to meet our strategic objectives and planned capital program for the next 12 months, ~~and beyond,~~ given the current oil price trends and production levels. ~~We plan to replace our prior credit facility with a smaller one to align with our current business objectives.~~ We may also access capital markets to pursue financing ~~and~~or refinance our Senior Notes. In accordance with our investment policy, available cash balances are held in our primary cash management banks or may be invested in U.S. or Canadian government-backed federal, provincial or state securities or other money market instruments with high credit ratings and short-term liquidity. We believe that our current financial position provides us with the flexibility to respond to both internal growth opportunities and those available through acquisitions. We intend to pursue growth opportunities and acquisitions from time to time, which may require significant

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

As at June 30, 2022, the borrowing base of our Senior Secured Credit Facility (the “revolving credit facility”) was $150 million, with $125 million readily available and $25 million subject to approval by majority lenders. During the three months ended ~~June~~September 30, 2022, we ~~completely paid-off the outstanding balance on the~~terminated our prior revolving credit facility agreement and ~~subsequent to the quarter, the revolving~~entered into a new credit facility ~~was terminated. At June~~agreement with a market lender in the global commodities industry. The credit facility has a borrowing base of up to $150 million, with $100 million readily available at September 30, 2022, and a potential option for an additional $50 million of borrowings upon mutual agreement by the lender and us. The credit facility bears interest based on a risk-free rate posted by the Federal Reserve Bank of New York plus a margin of 6.0% and a credit-adjusted spread of 0.26%. Undrawn amounts under the credit facility bear interest at 2.1% per annum, based on the amount available. The credit facility is secured by our Colombian assets and economic rights. It has a final maturity date of August 15, 2024, which may be extended to February 18, 2025, upon the satisfaction of certain conditions. The availability period for the draws is six months commencing the date of ~~termination, respectively,~~the credit facility. As of September 30, 2022, the credit facility remained undrawn.

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

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

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

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

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

At ~~June~~September 30, 2022, we had a ~~$300.0~~$279.9 million aggregate principal amount of 6.25% Senior Notes due 2025 and a $300.0 million aggregate principal amount of 7.75% Senior Notes due 2027 outstanding. An event of default under the revolving credit facility would result in a default under the indentures governing the senior notes, which could allow the noteholders to require us to repurchase all of the outstanding Senior Notes.

~~In accordance with our investment policy, available~~During the three months ended September 30, 2022, we repurchased in the open market $20.1 million of 6.25% Senior Notes for cash ~~balances~~consideration of $17.3 million, including interest payable of $0.1 million, which resulted in a $2.6 million gain on re-purchase which included the write-off of deferred financing fees of $0.3 million. The re-purchased 6.25% Senior Notes were not cancelled and are held by us as treasury bonds as of September 30, 2022.

During the three months ended September 30, 2022, we implemented a share re-purchase program (the “2022 Program”) through the facilities of the Toronto Stock Exchange (“TSX”) and eligible alternative trading platforms in Canada. Under the 2022 Program, we are able to purchase at prevailing market prices up to 36,033,969 shares of Common Stock, representing approximately 10% of the issued and outstanding shares of Common Stock as of August 22, 2022. The 2022 Program expires on August 31, 2023, or earlier if the 10% share maximum is reached. Re-purchases are subject to prevailing market conditions, the trading price of our ~~primary cash management banks or invested in U.S. or Canadian government-backed federal, provincial, or state securities or~~Common Stock, our financial performance and other ~~money market instruments with high credit ratings~~conditions.

During the three and ~~short-term liquidity.~~nine months ended September 30, 2022, we re-purchased 10,733,702 shares at a weighted average price of $1.34 per share. The re-purchased shares were held by us and were recorded as treasury stock as of September 30, 2022.

~~Derivative Positions~~

~~All our outstanding commodity price derivatives expired on June 30, 2022 and as at June 30, 2022, we had no outstanding foreign exchange or commodity price derivative positions.~~

3132

Cash Flows

The following table presents our primary sources and uses of 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)	2022		2021		(Thousands of U.S. Dollars)	2022		2021
Sources of cash and cash equivalents:	Sources of cash and cash equivalents:					Sources of cash and cash equivalents:
Net income (loss)	Net income (loss)	$	67,091	$	(55,049)	Net income (loss)	$	105,754	$	(20,042)
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	83,179		60,245		DD&A expenses	128,499		98,300
Interest expense	Interest expense	24,322		27,747		Interest expense	35,743		41,355
Income tax expense	Income tax expense	78,206		17,840		Income tax expense	99,940		26,795
Other loss		—		—

Non-cash lease expenses	Non-cash lease expenses	1,158		814		Non-cash lease expenses	2,009		1,222
Lease payments	Lease payments	(732)		(855)		Lease payments	(1,134)		(1,239)
Unrealized foreign exchange (gain) loss		(498)		13,480
Unrealized foreign exchange loss						Unrealized foreign exchange loss	6,138		16,945
Stock-based compensation expense	Stock-based compensation expense	6,546		5,544		Stock-based compensation expense	6,376		6,597
Unrealized derivative instruments loss	Unrealized derivative instruments loss	219		7,228		Unrealized derivative instruments loss	—		2,499
Other financial instruments loss		—		1,209
Gain on re-purchase of Senior Notes						Gain on re-purchase of Senior Notes	(2,598)		—
Other financial instruments gain						Other financial instruments gain	—		(12,425)
Adjusted EBITDA(1)	Adjusted EBITDA(1)	259,491		78,203		Adjusted EBITDA(1)	380,727		160,007
Current income tax (expense) recovery	Current income tax (expense) recovery	(46,252)		14		Current income tax (expense) recovery	(63,072)		14
Contractual interest and other financing expenses	Contractual interest and other financing expenses	(22,304)		(25,972)		Contractual interest and other financing expenses	(32,974)		(38,673)
Funds flow from operations(1)	Funds flow from operations(1)	190,935		52,245		Funds flow from operations(1)	284,681		121,348
Proceeds from issuance of exercise of stock options		1,283		8
Proceeds from issuance of shares of Common Stock, net of issuance costs		2		—
Proceeds from exercise of stock options						Proceeds from exercise of stock options	1,292		19
Proceeds from issuance of Common Stock, net of issuance costs						Proceeds from issuance of Common Stock, net of issuance costs	2		—
Proceeds from disposition of investment, net of transaction costs	Proceeds from disposition of investment, net of transaction costs	—		14,632		Proceeds from disposition of investment, net of transaction costs	—		14,632
Net changes in assets and liabilities from operating activities	Net changes in assets and liabilities from operating activities	56,329		27,157		Net changes in assets and liabilities from operating activities	72,838		17,956
Changes in non-cash investing working capital	Changes in non-cash investing working capital	10,964		3,176		Changes in non-cash investing working capital	3,255		709
		259,513		97,218			362,068		154,664

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	(106,682)		(74,811)		Additions to property, plant and equipment	(163,717)		(109,650)
Repayment of debt	Repayment of debt	(67,525)		(15,126)		Repayment of debt	(67,623)		(40,125)

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

Settlement of asset retirement obligations	Settlement of asset retirement obligations	(242)		(248)		Settlement of asset retirement obligations	(1,673)		(483)
Lease payments	Lease payments	(1,261)		(513)		Lease payments	(1,991)		(1,269)
Foreign exchange loss on cash, cash equivalents and restricted cash and cash equivalents	Foreign exchange loss on cash, cash equivalents and restricted cash and cash equivalents	(680)		(488)		Foreign exchange loss on cash, cash equivalents and restricted cash and cash equivalents	(1,996)		(528)
		(176,390)		(91,186)			(268,639)		(152,055)
Net increase in cash and cash equivalents and restricted cash and cash equivalents	Net increase in cash and cash equivalents and restricted cash and cash equivalents	$	83,123	$	6,032	Net increase in cash and cash equivalents and restricted cash and cash equivalents	$	93,429	$	2,609

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

One of the primary sources of variability in our cash flows from operating activities is the fluctuation in oil prices. Sales volume changes and costs related to operations and debt service also impact cash flows. Our cash flows from operating activities are also impacted by foreign currency exchange rate changes. During the ~~six~~nine months ended ~~June~~September 30, 2022, funds flow from

operations increased by ~~265%~~135% compared to the corresponding period of 2021 primarily due to a significant increase in Brent price and increase in production, which were partially offset by higher Castilla and Vasconia differentials, ~~and~~M+1 Brent adjustment, an increase in operating expenses and cash settlements on derivative instruments.

Critical Accounting Policies and Estimates

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Commodity price risk

Our principal market risk relates to oil prices. Oil prices are volatile and unpredictable and influenced by concerns over world supply and demand imbalance and many other market factors outside of our control. ~~Most of our~~Our revenues are from oil sales at ~~prices which reflect the blended prices received upon shipment by the purchaser at defined sales points or are defined by contract relative to~~ ICE Brent ~~and~~ adjusted for quality ~~each month.~~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 ~~or WTI oil.~~adjusted for quality differentials. We receive 100% of our revenues in U.S. dollars and the majority of our capital expenditures is in U.S. dollars or is based on U.S. dollar prices. The majority of income and value added taxes, operating and G&A expenses in Colombia are in the local currency. Certain G&A expenses incurred at our head office in Canada are denominated in Canadian dollars. While we operate in South America exclusively, the majority of our acquisition expenditures have been valued and paid in U.S. dollars.

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

Interest Rate Risk

Interest rate risk is the risk that future cash flows will fluctuate as a result of changes in market interest rates. We are exposed to interest rate fluctuations on our revolving credit facility, which bears floating rates of interest. At ~~June~~September 30, 2022, our outstanding balance under ~~revolving~~the credit facility was nil (December 31, 2021 - $67.5 million). ~~Subsequent to the quarter, the revolving credit facility was terminated and the Company is no longer exposed to fluctuations on market interest rates.~~

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, 2022.

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, 2022, that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.

~~PART II - Other Information~~

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PART II - Other Information

Item 1. Legal Proceedings

See Note 9 in the Notes to the Condensed Consolidated Financial Statements (Unaudited) in Part I, Item 1 of this Quarterly Report on Form 10-Q, which is incorporated herein by reference, for any material developments with respect to matters previously reported in our Annual Report on Form 10-K for the year ended December 31, 2021, and any material matters that have arisen since the filing of such report.

Item 1A. Risk Factors

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

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

~~None.~~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
September 1-30, 2022	10,733,702	$	1.34	10,733,702	25,300,267	(2)
Total	10,733,702	$	1.34	10,733,702	25,300,267

(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. We will be able to purchase for cancellation at prevailing market prices up to 36,033,969 shares of Common Stock, representing approximately 10% of our issued and outstanding shares of Common Stock as of August 22, 2022.

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Item 6. Exhibits


Exhibit No.	Description	Reference

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

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

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

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

~~10.1#~~10.1	~~Amended~~Credit Agreement, dated as of August 18, 2022, by and ~~Rotated~~among Gran Tierra Energy Inc. ~~2007 Equity Incentive Plan~~, Gran Tierra Energy Colombia LLC, Gran Tierra Colombia Inc. and Trafigura PTE Ltd. as a lender	Incorporated by reference to Exhibit 10.1 to the ~~Appendix of the Definitive Proxy Statement~~Current Report on Form 8-K, filed with ~~the~~ SEC on ~~March 25,~~August 23, 2022 (SEC File No. 001-34018).

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

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

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

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

101.SCH Inline XBRL Taxonomy Extension Schema Document

101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document

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

~~# Management contract or compensatory plan or arrangement.~~

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SIGNATURES

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

GRAN TIERRA ENERGY INC.


Date: ~~August 8,~~November 1, 2022						/s/ Gary S. Guidry
						By: Gary S. Guidry
						President and Chief Executive Officer
						(Principal Executive Officer)


Date: ~~August 8,~~November 1, 2022						/s/ Ryan Ellson
						By: Ryan Ellson
						Executive Vice President and Chief Financial Officer
						(Principal Financial and Accounting Officer)

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