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Form 10-Q GRAN TIERRA ENERGY INC. For: Mar 31

May 4, 2016 6:08 AM EDT


 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)

ý
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2016

or
o
 
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)
 
Nevada
 
98-0479924
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
 
 
200, 150 13 Avenue S.W.
Calgary, Alberta, Canada T2R 0V2
 (Address of principal executive offices, including zip code)
(403) 265-3221
(Registrant’s telephone number, including area code)

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 ý  No o

Indicate by check mark whether the registrant submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted 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 and post such files).   
Yes   ý  No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer x
Accelerated filer o
Non-accelerated filer o (Do not check if a smaller reporting company)
Smaller reporting company o
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).      Yes o No ý
 

On April 28, 2016, the following number of shares of the registrant’s capital stock were outstanding: 287,962,518 shares of the registrant’s Common Stock, $0.001 par value; one share of Special A Voting Stock, $0.001 par value, representing 3,638,889 shares of Gran Tierra Goldstrike Inc., which are exchangeable on a 1-for-1 basis into the registrant’s Common Stock; and one share of Special B Voting Stock, $0.001 par value, representing 4,875,177 shares of Gran Tierra Exchangeco Inc., which are exchangeable on a 1-for-1 basis into the registrant’s Common Stock.

 




1



Gran Tierra Energy Inc.

Quarterly Report on Form 10-Q

Quarterly Period Ended March 31, 2016

Table of contents
 
 
 
Page
PART I
Financial Information
 
Item 1.
Financial Statements
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
Item 4.
Controls and Procedures
 
 
 
PART II
Other Information
 
Item 1.
Legal Proceedings
Item 1A.
Risk Factors
Item 6.
Exhibits
SIGNATURES
EXHIBIT INDEX

2



 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 (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 those statements preceded by, followed by or that otherwise include the words “believe”, “expect”, “anticipate”, “intend”, “estimate”, “project”, “target”, “goal”, “plan”, “objective”, “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, those set out in Part II, Item 1A “Risk Factors” in this Quarterly Report on Form 10-Q and in Part I, Item 1A “Risk Factors” in our 2015 Annual Report on Form 10-K. The information included herein is given as of the filing date of this Quarterly Report on Form 10-Q with the Securities and Exchange Commission (“SEC”) and, except as otherwise required by the federal securities laws, we disclaim any obligations or undertaking to publicly release any updates or revisions to 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
BOE
barrels of oil equivalent
Mbbl
thousand barrels
BOEPD
barrels of oil equivalent per day
MMbbl
million barrels
bopd
barrels of oil per day
NAR
net after royalty
Mcf
thousand cubic feet
 
Sales volumes represent production NAR adjusted for inventory changes and losses. Our oil and gas reserves are reported NAR. Our production is also reported NAR, except as otherwise specifically noted as "working interest production before royalties." Natural gas liquids ("NGL") volumes are converted to BOE on a one-to-one basis with oil. Gas volumes are converted to BOE at the rate of 6 Mcf of gas per bbl of oil, based upon the approximate relative energy content of gas and oil. The rate is not necessarily indicative of the relationship between oil and gas prices. BOEs may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 Mcf:1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.





3



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 March 31,
 
 
2016
 
2015
OIL AND NATURAL GAS SALES (NOTE 4)
 
$
57,403

 
$
76,231

 
 


 


EXPENSES
 
 
 
 
Operating
 
19,067

 
22,661

Transportation
 
12,328

 
8,773

Depletion, depreciation and accretion (Note 4)
 
36,912

 
49,140

Asset impairment (Notes 4 and 5)
 
56,898

 
37,014

General and administrative (Notes 4 and 12)
 
8,805

 
7,294

Severance
 
1,018

 
4,378

Equity tax (Note 8)
 
3,051

 
3,769

Foreign exchange loss (gain)
 
785

 
(11,538
)
Financial instruments loss (gain) (Note 10)
 
845

 
(42
)
 
 
139,709

 
121,449

 
 
 
 
 
GAIN ON ACQUISITION (NOTE 3)
 
11,712



INTEREST INCOME (NOTE 4)
 
449

 
421

LOSS BEFORE INCOME TAXES (NOTE 4)
 
(70,145
)
 
(44,797
)
 
 
 
 
 
INCOME TAX (EXPENSE) RECOVERY
 
 
 
 
Current
 
(2,023
)
 
(2,425
)
Deferred
 
27,136

 
2,356


 
25,113

 
(69
)
NET LOSS AND COMPREHENSIVE LOSS
 
$
(45,032
)
 
$
(44,866
)
 
 
 
 
 
NET LOSS PER SHARE - BASIC AND DILUTED
 
$
(0.15
)
 
$
(0.16
)
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC (Note 6)
 
293,812,226

 
286,194,315

WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED (Note 6)
 
293,812,226

 
286,194,315

(See notes to the condensed consolidated financial statements)


4



Gran Tierra Energy Inc.
Condensed Consolidated Balance Sheets (Unaudited)
(Thousands of U.S. Dollars, Except Share and Per Share Amounts)
 
March 31,
 
December 31,
 
2016
 
2015
ASSETS
 
 
 
Current Assets
 
 
 
Cash and cash equivalents
$
51,308

 
$
145,342

Restricted cash (Notes 3 and 5)
18,474

 
92

Accounts receivable
35,573

 
29,217

Marketable securities (Note 10)
5,362

 
6,250

Inventory (Note 5)
10,690

 
19,056

Taxes receivable
34,712

 
28,635

Other current assets
5,992

 
5,848

Total Current Assets
162,111

 
234,440

 
 
 
 
Oil and Gas Properties
 

 
 

Proved
472,062

 
469,589

Unproved
373,899

 
310,771

Total Oil and Gas Properties
845,961

 
780,360

Other capital assets
8,229

 
8,633

Total Property, Plant and Equipment (Note 5)
854,190

 
788,993

 
 
 
 
Other Long-Term Assets
 

 
 

Restricted cash
6,414

 
3,317

Taxes receivable
8,978

 
8,276

Other long-term assets
13,998

 
8,511

Goodwill
102,581

 
102,581

Total Other Long-Term Assets
131,971

 
122,685

Total Assets
$
1,148,272

 
$
1,146,118

LIABILITIES AND SHAREHOLDERS’ EQUITY
 

 
 

Current Liabilities
 

 
 

Accounts payable and accrued liabilities
$
77,303

 
$
70,778

Taxes payable
943

 
1,067

Asset retirement obligation (Note 7)
3,255

 
2,146

Total Current Liabilities
81,501

 
73,991

 
 
 
 
Long-Term Liabilities
 

 
 

Deferred tax liabilities
30,880

 
34,592

Asset retirement obligation (Note 7)
43,205

 
31,078

Other long-term liabilities
8,096

 
4,815

Total Long-Term Liabilities
82,181

 
70,485

 
 
 
 
Contingencies (Note 9)


 


Subsequent Event (Note 13)
 
 
 
Shareholders’ Equity
 

 
 

Common Stock (Note 6) (287,657,518 and 273,442,799 shares of Common Stock and 8,514,066 and 8,572,066 exchangeable shares, par value $0.001 per share, issued and outstanding as at March 31, 2016, and December 31, 2015, respectively)
10,199

 
10,186

Additional paid in capital
1,047,830

 
1,019,863

Deficit
(73,439
)
 
(28,407
)
Total Shareholders’ Equity
984,590

 
1,001,642

Total Liabilities and Shareholders’ Equity
$
1,148,272

 
$
1,146,118


(See notes to the condensed consolidated financial statements)

5



Gran Tierra Energy Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(Thousands of U.S. Dollars)
 
Three Months Ended March 31,
 
2016
 
2015
Operating Activities
 
 
 
Net loss
$
(45,032
)
 
$
(44,866
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 

Depletion, depreciation and accretion (Note 4)
36,912

 
49,140

Asset impairment (Notes 4 and 5)
56,898

 
37,014

Deferred tax recovery
(27,136
)
 
(2,356
)
Stock-based compensation expense (recovery) (Note 6)
1,460

 
(513
)
Cash settlement of restricted share units
(673
)
 
(955
)
Unrealized foreign exchange gain
(183
)
 
(6,069
)
Financial instruments loss (gain) (Note 10)
845

 
(42
)
Cash settlement of financial instruments
44

 
(2,357
)
Cash settlement of asset retirement obligation (Note 7)
(104
)
 
(1,425
)
Gain on acquisition (Note 3)
(11,712
)
 

Net change in assets and liabilities from operating activities (Note 11)
(507
)
 
(25,226
)
Net cash provided by operating activities
10,812

 
2,345

 
 
 
 
Investing Activities
 

 
 

Increase in restricted cash
(10,771
)
 
(497
)
Additions to property, plant and equipment, excluding Corporate acquisitions (Note 4)
(26,180
)
 
(73,446
)
Additions to property, plant and equipment - acquisition of PetroGranada Colombia Limited (Note 5)
(19,388
)
 

Changes in non-cash investing working capital
50

 
(54,324
)
Cash paid for business combination, net of cash acquired (Note 3)
(50,909
)
 

Net cash used in investing activities
(107,198
)
 
(128,267
)
 
 
 
 
Financing Activities
 

 
 

Proceeds from issuance of shares of Common Stock (Note 6)
1,198

 
502

Net cash provided by financing activities
1,198

 
502

 
 
 
 
Foreign exchange gain (loss) on cash and cash equivalents
1,154

 
(2,968
)
 
 
 
 
Net decrease in cash and cash equivalents
(94,034
)
 
(128,388
)
Cash and cash equivalents, beginning of period
145,342

 
331,848

Cash and cash equivalents, end of period
$
51,308

 
$
203,460

 
 
 
 
Supplemental cash flow disclosures (Note 11)
 

 
 


(See notes to the condensed consolidated financial statements)

6



Gran Tierra Energy Inc.
Condensed Consolidated Statements of Shareholders’ Equity (Unaudited)
(Thousands of U.S. Dollars)
 
 
Three Months Ended March 31,
 
Year Ended December 31,
 
2016
 
2015
Share Capital
 
 
 
Balance, beginning of period
$
10,186

 
$
10,190

Issuance of Common Stock (Note 6)
13

 

Repurchase of Common Stock

 
(4
)
Balance, end of period
10,199

 
10,186

 
 
 
 
Additional Paid in Capital
 

 
 

Balance, beginning of period
1,019,863

 
1,026,873

Issuance of Common Stock (Note 6)
25,798

 

Exercise of stock options (Note 6)
1,198

 
722

Stock-based compensation (Note 6)
971

 
2,263

Repurchase of Common Stock

 
(9,995
)
Balance, end of period
1,047,830

 
1,019,863

 
 
 
 
Retained Earnings (Deficit)
 

 
 

Balance, beginning of period
(28,407
)
 
239,622

Net loss
(45,032
)
 
(268,029
)
Balance, end of period
(73,439
)
 
(28,407
)
 
 
 
 
Total Shareholders’ Equity
$
984,590

 
$
1,001,642


(See notes to the condensed consolidated financial statements)


7



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 Nevada corporation (the “Company” or “Gran Tierra”), is a publicly traded company focused on oil and natural gas exploration and production in Colombia. The Company also has business activities in Peru and Brazil.
 
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 to that required for interim unaudited condensed consolidated financial statements. Accordingly, these interim unaudited condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements as at and for the year ended December 31, 2015, included in the Company’s 2015 Annual Report on Form 10-K, filed with the SEC on February 29, 2016.

The Company’s significant accounting policies are described in Note 2 of the consolidated financial statements which are included in the Company’s 2015 Annual Report on Form 10-K and are the same policies followed in these interim unaudited condensed consolidated financial statements. The Company has evaluated all subsequent events through to the date these interim unaudited condensed consolidated financial statements were issued.

Recently Issued Accounting Pronouncements

Revenue from Contracts with Customers

In May 2014, the Financial Accounting Standards Board (the "FASB") issued guidance regarding the accounting for revenue from contracts with customers. In August 2015, the FASB issued Accounting Standards Update (“ASU") 2015-14, “Revenue from Contracts with Customers - Deferral of the Effective Date". The ASU defers the effective date of the new revenue recognition model by one year. As a result, the guidance will be effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. In March 2016, the FASB issued ASU 2016-08, “Principal versus Agent Considerations (Reporting Revenue Gross versus Net)". The amendments in this ASU affect the guidance in ASU 2014-09 and clarify implementation guidance on principal versus agent considerations. The Company is currently assessing the impact the new revenue recognition model will have on its consolidated financial position, results of operations, cash flows, and disclosure.

Simplifying the Accounting for Measurement - Period Adjustments

In September 2015, the FASB issued ASU 2015-16, "Simplifying the Accounting for Measurement - Period Adjustments". The amendments require that an acquirer recognize adjustments to provisional amounts identified during the measurement period in the reporting period in which the adjustments are determined and eliminates the requirement to retrospectively revise prior periods. Additionally, an acquirer should record in the same period the effects on earnings of any changes in the provisional accounts, calculated as if the accounting had been completed at the acquisition date. The ASU was effective for fiscal years, and interim periods within those years, beginning after December 15, 2015. The implementation of this update is not expected to materially impact the Company’s consolidated financial position, results of operations or cash flows or disclosure.

Leases

In February 2016, the FASB issued ASU 2016-02, “Leases". This ASU will require most lease assets and lease liabilities to be recognized on the balance sheet and the disclosure of key information about lease arrangements. The ASU will be effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. The Company is currently assessing the impact the new lease standard will have on its consolidated financial position, results of operations, cash flows, and disclosure.


8



Employee Share-Based Payment Accounting

In March 2016, the FASB issued ASU 2016-09, "Improvements to Employee Share-Based Payment Accounting". This ASU simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for forfeitures, income taxes, and statutory tax withholding requirements. The ASU will be effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. The Company is currently assessing the impact this update will have on its consolidated financial position, results of operations, cash flows, and disclosure.

3. Business Combination

On January 13, 2016 (the “Petroamerica Acquisition Date”), the Company acquired all of the issued and outstanding common shares of Petroamerica Oil Corp. ("Petroamerica"), a Canadian corporation, pursuant to the terms and conditions of an arrangement agreement dated November 12, 2015 (the “Arrangement”). The transaction contemplated by the Arrangement was effected through a court approved plan of arrangement in Canada. The Arrangement was approved at a special meeting of Petroamerica shareholders and by the Court of Queen's Bench of Alberta on January 11, 2016. Under the Arrangement, each Petroamerica shareholder was entitled to receive, for each Petroamerica share held, either 0.40 of a Gran Tierra common share or $1.33 Canadian dollars in cash, or a combination of shares and cash, subject to a maximum of 70% of the consideration payable in cash.

As consideration for the acquisition of all the issued and outstanding Petroamerica shares, the Company issued approximately 13.7 million shares of Gran Tierra Common Stock, par value $0.001, and paid cash consideration of approximately $70.6 million. The fair value of Gran Tierra’s Common Stock issued was determined to be $25.8 million based on the closing price of shares of Common Stock of Gran Tierra as at the Petroamerica Acquisition Date. Total net purchase price of Petroamerica was $72.2 million, after giving consideration to net working capital of $24.2 million. Upon completion of the transaction on the Petroamerica Acquisition Date, Petroamerica became an indirect wholly-owned subsidiary of Gran Tierra.

The acquisition was accounted for as a business combination using the acquisition method, with Gran Tierra being the acquirer, whereby the assets acquired and liabilities assumed were recognized at their fair values as at the Petroamerica Acquisition Date, and the results of Petroamerica were included with those of Gran Tierra from that date. Fair value estimates were made based on significant unobservable (Level 3) inputs and based on the best information available at the time.

The following table shows the allocation of the consideration transferred based on the fair values of the assets and liabilities acquired:
(Thousands of U.S. Dollars)
 
Consideration Transferred:
 
Cash
$
70,625

Shares of Common Stock issued net of share issue costs
25,811

 
$
96,436

 
 
Allocation of Consideration Transferred(1):
 
Oil and gas properties
 
  Proved
$
48,595

  Unproved
50,054

Net working capital (including cash acquired of $19.7 million, restricted cash of $2.5 million and accounts receivable of $5.0 million)
24,202

Long-term restricted cash
8,167

Other long-term assets
1,570

Long-term deferred tax liability
(10,105
)
Long-term portion of asset retirement obligation
(11,556
)
Other long-term liabilities
(2,779
)
Gain on acquisition
(11,712
)
 
$
96,436



9



(1) The allocation of the consideration transferred is incomplete and is subject to change. Management is continuing to review and assess information to accurately determine the acquisition date fair value of the assets and liabilities acquired. During the measurement period, Gran Tierra will continue to obtain information to assist in finalizing the fair value of net assets acquired, which may differ materially from the above preliminary estimates.

As indicated in the allocation of the consideration transferred, the fair value of identifiable assets acquired and liabilities assumed exceeded the fair value of the consideration transferred. Consequently, Gran Tierra reassessed the recognition and measurement of identifiable assets acquired and liabilities assumed and concluded that all acquired assets and assumed liabilities were recognized and that the valuation procedures and resulting measures were appropriate. As a result, Gran Tierra recognized a “Gain on acquisition” of $11.7 million in the interim unaudited condensed consolidated statement of operations. The gain reflects the impact on Petroamerica’s pre-acquisition market value resulting from the company's lack of liquidity and capital resources required to maintain current production and reserves and further develop and explore their inventory of prospects.

Pro Forma Results (unaudited)

Pro forma results for the three months ended March 31, 2016 and 2015, are shown below, as if the acquisition had occurred on January 1, 2015. Pro forma results are not indicative of actual results or future performance.
 
Three Months Ended March 31,
(Unaudited, thousands of U.S. Dollars, except per share amounts)
2016
2015
Oil and gas sales
$
57,874

$
93,286

Net loss
$
(56,757
)
$
(80,511
)
Net loss per share - basic and diluted
$
(0.19
)
$
(0.28
)

The supplemental pro forma net loss of Gran Tierra for the three months ended March 31, 2016, was adjusted to exclude the $11.7 million gain on acquisition and $1.3 million of acquisition costs recorded in general and administrative ("G&A") expenses because they were not expected to have a continuing impact on Gran Tierra’s results of operations.

The Company's consolidated statement of operations for the three months ended March 31, 2016, included oil and gas sales of $2.7 million and a loss after tax of $11.8 million from Petroamerica for the period subsequent to the Petroamerica Acquisition Date.

4. Segment and Geographic Reporting
 
The Company is primarily engaged in the exploration and production of oil and natural gas. The Company’s reportable segments are Colombia, Peru and Brazil based on geographic organization. The All Other category represents the Company’s corporate activities. The Company evaluates reportable segment performance based on income or loss before income taxes.


10



The following tables present information on the Company’s reportable segments and other activities:
 
Three Months Ended March 31, 2016
(Thousands of U.S. Dollars)
Colombia
 
Peru
 
Brazil
 
All Other
 
Total
Oil and natural gas sales
$
56,300

 
$

 
$
1,103

 
$

 
$
57,403

Interest income
229

 
5

 
12

 
203

 
449

Depletion, depreciation and accretion
35,736

 
141

 
718

 
317

 
36,912

Asset impairment
55,232

 
416

 
1,250

 

 
56,898

General and administrative expenses
3,265

 
409

 
292

 
4,839

 
8,805

(Loss) income before income taxes
(72,721
)
 
(712
)
 
(1,509
)
 
4,797

 
(70,145
)
Segment capital expenditures(1)
21,986

 
1,268

 
2,720

 
206

 
26,180

 
Three Months Ended March 31, 2015
(Thousands of U.S. Dollars)
Colombia
 
Peru
 
Brazil
 
All Other
 
Total
Oil and natural gas sales
$
74,067

 
$

 
$
2,164

 
$

 
$
76,231

Interest income
67

 

 
140

 
214

 
421

Depletion, depreciation and accretion
46,255

 
267

 
2,261

 
357

 
49,140

Asset impairment

 
32,681

 
4,333

 

 
37,014

General and administrative expenses
2,716

 
1,040

 
627

 
2,911

 
7,294

Income (loss) before income taxes
2,928

 
(35,442
)
 
(6,881
)
 
(5,402
)
 
(44,797
)
Segment capital expenditures
21,123

 
37,697

 
13,907

 
719

 
73,446


(1) On January 13, 2016, the Company acquired all of the issued and outstanding common shares of Petroamerica, which acquisition was accounted for as a business combination (Note 3) and, therefore, property, plant and equipment acquired are not reflected in the table above. Additionally, on January 25, 2016, the Company acquired all of the issued and outstanding common shares of PetroGranada Colombia Limited ("PGC"), which acquisition was accounted for as an asset acquisition (Note 5) and property, plant and equipment acquired in this acquisition are not reflected in the table above.
 
As at March 31, 2016
(Thousands of U.S. Dollars)
Colombia
 
Peru
 
Brazil
 
All Other
 
Total
Property, plant and equipment
$
638,097

 
$
95,867

 
$
116,314

 
$
3,912

 
$
854,190

Goodwill
102,581

 

 

 

 
102,581

All other assets
141,741

 
21,208

 
1,873

 
26,679

 
191,501

Total Assets
$
882,419

 
$
117,075

 
$
118,187

 
$
30,591

 
$
1,148,272

 
 
 
 
 
 
 
 
 
 
 
As at December 31, 2015
(Thousands of U.S. Dollars)
Colombia
 
Peru
 
Brazil
 
All Other
 
Total
Property, plant and equipment
$
574,351

 
$
95,069

 
$
115,552

 
$
4,021

 
$
788,993

Goodwill
102,581

 

 

 

 
102,581

All other assets
93,479

 
21,111

 
2,236

 
137,718

 
254,544

Total Assets
$
770,411

 
$
116,180

 
$
117,788

 
$
141,739

 
$
1,146,118




11



5. Property, Plant and Equipment and Inventory
 
Property, Plant and Equipment

(Thousands of U.S. Dollars)
As at March 31, 2016
 
As at December 31, 2015
Oil and natural gas properties
 
 
 

  Proved
$
2,088,937

 
$
1,998,330

  Unproved
373,899

 
310,771

 
2,462,836

 
2,309,101

Other
28,557

 
28,342

 
2,491,393

 
2,337,443

Accumulated depletion, depreciation and impairment
(1,637,203
)
 
(1,548,450
)
 
$
854,190

 
$
788,993


In the three months ended March 31, 2016, the Company recorded ceiling test impairment losses in its Colombia and Brazil cost centers of $54.6 million and $1.3 million, respectively, related to lower oil prices. In the three months ended March 31, 2015, the Company recorded a ceiling test impairment loss in its Brazil cost center of $4.3 million, related to lower oil prices. The Company follows the full cost method of accounting for its oil and gas properties. Under this method, the net book value of properties on a country-by-country basis, less related deferred income taxes, may not exceed a calculated “ceiling”. The ceiling is the estimated after tax future net revenues from proved oil and gas properties, discounted at 10% per year. In calculating discounted future net revenues, oil and natural gas prices are determined using the average price during the 12 months period prior to the ending date of the period covered by the balance sheet, calculated as an unweighted arithmetic average of the first-day-of-the month price for each month within such period for that oil and natural gas. That average price is then held constant, except for changes which are fixed and determinable by existing contracts. Therefore, ceiling test estimates are based on historical prices discounted at 10% per year and it should not be assumed that estimates of future net revenues represent the fair market value of the Company's reserves.

In the three months ended March 31, 2016, and 2015, the Company recorded impairment losses in its Peru cost center of $0.4 million, and $32.7 million, respectively, related to costs incurred on Block 95.

Asset impairment for the three months ended March 31, 2016, and 2015 was as follows:

 
Three Months Ended March 31,
(Thousands of U.S. Dollars)
2016
 
2015
Impairment of oil and gas properties
$
56,234

 
$
37,014

Impairment of inventory
664

 

 
$
56,898

 
$
37,014


Acquisition of PGC

On January 25, 2016, the Company acquired all of the issued and outstanding common shares of PGC, pursuant to the terms and conditions of an acquisition agreement dated January 14, 2016. Upon completion of the transaction, PGC became an indirect wholly-owned subsidiary of Gran Tierra. The net purchase price of PGC was $19.4 million, after giving consideration to net working capital of $18.3 million. The acquisition was accounted for as an asset acquisition with the excess consideration transferred over the fair value of the net assets acquired allocated on a relative fair value basis to the net assets acquired.


12



The following table shows the allocation of the cost of the acquisition based on the relative fair values of the assets and liabilities acquired:

(Thousands of U.S. Dollars)
 
Cost of asset acquisition:
 
Cash
$
37,727

 
 
Allocation of Consideration Transferred:
 
Oil and gas properties
 
  Proved
$
12,228

  Unproved
15,563

 
27,791

Net working capital (including cash acquired of $0.2 million and restricted cash of $18.6 million)
18,339

Long-term deferred tax liability
(8,402
)
 
$
37,728

Contingent consideration of $4.0 million will be payable if cumulative production from the Putumayo-7 Block plus gross proved plus probable reserves under the Putumayo Block meet or exceed eight MMbbl. PGC is an oil and gas exploration, development and production company active in Colombia. Contingent consideration will be recognized when the contingency is resolved.

Inventory

At March 31, 2016, oil and supplies inventories were $9.4 million and $1.3 million, respectively (December 31, 2015 - $17.8 million and $1.3 million, respectively). At March 31, 2016, the Company had 331 Mbbl of oil inventory (December 31, 2015 - 616 Mbbl) NAR. In the three months ended March 31, 2016, the Company recorded oil inventory impairment of $0.7 million (three months ended March 31, 2015 - $nil) related to lower oil prices.

6. Share Capital
 
The Company’s authorized share capital consists of 595,000,002 shares of capital stock, of which 570 million are designated as Common Stock, par value $0.001 per share, 25 million are designated as Preferred Stock, par value $0.001 per share, and two shares are designated as special voting stock, par value $0.001 per share.

 
Shares of Common Stock
Exchangeable Shares of Gran Tierra Exchangeco Inc.
Exchangeable Shares of Gran Tierra Goldstrike Inc.
Balance, December 31, 2015
273,442,799

4,933,177

3,638,889

Shares issued for acquisition (Note 3)
13,656,719



Options exercised
500,000



Exchange of exchangeable shares
58,000

(58,000
)

Balance, March 31, 2016
287,657,518

4,875,177

3,638,889


Income (Loss) Per Share

Basic income (loss) per share is calculated by dividing income (loss) attributable to common shareholders by the weighted average number of shares of Common Stock and exchangeable shares issued and outstanding during each period. Diluted income (loss) per share is calculated by adjusting the weighted average number of shares of Common Stock and exchangeable shares outstanding for the dilutive effect, if any, of share equivalents. The Company uses the treasury stock method to determine the dilutive effect. This method assumes that all Common Stock equivalents have been exercised at the beginning of the period (or at the time of issuance, if later), and that the funds obtained thereby were used to purchase shares of Common Stock of the Company at the volume weighted average trading price of shares of Common Stock during the period.
 

13



 
 
Three Months Ended March 31,
 
 
2016
 
2015
Weighted average number of common and exchangeable shares outstanding
 
293,812,226

 
286,194,315

Weighted average shares issuable pursuant to stock options
 

 

Weighted average shares assumed to be purchased from proceeds of stock options
 

 

Weighted average number of diluted common and exchangeable shares outstanding
 
293,812,226

 
286,194,315


For the three months ended March 31, 2016, 12,667,761 stock options (three months ended March 31, 2015 - 13,742,502 stock options), on a weighted average basis, were excluded from the diluted income per share calculation as the stock options were anti-dilutive.

Equity Compensation Awards
  
In December 2015, the Company's Board of Directors approved a new equity compensation program for 2016 to realign the Company's compensation programs with its renewed short and long-term strategy. The 2016 equity compensation program reflects the Company's emphasis on pay-for-performance. 

In prior years, all equity awards were subject to vesting conditions based solely on the recipient’s continued employment over a specified period of time. In contrast, 80% of the equity awards granted in early 2016 consisted of Performance Stock Units (“PSU”) and 20% consisted of stock options. Gran Tierra's Compensation Committee and Board of Directors believed it was important to revise the Company's equity compensation program to incorporate a new form of equity award that vests based on the achievement of certain key measures of performance. The purpose of this change was to further incentivize the Company's executives to achieve the operational goals established by the Board of Directors and to increase share and net asset value for stockholders. The Company’s equity compensation awards outstanding as of March 31, 2016, include PSUs, stock options, deferred share units ("DSUs") and restricted stock units (“RSUs”).

The Company records stock-based compensation expense, measured at the fair value of the awards that are ultimately expected to vest, in the consolidated financial statements. Fair values are determined using pricing models such as the Black-Scholes-Merton or Monte Carlo simulation stock option-pricing models and/or observable share prices. For equity-settled stock-based compensation awards, fair values are determined at the grant date and are recognized over the requisite service period. For cash-settled stock-based compensation awards, fair values are determined at each reporting date and periodic changes are recognized as compensation costs, with a corresponding change to liabilities. Stock-based compensation expense is capitalized as part of oil and natural gas properties or expensed as part of operating expenses or G&A expenses, as appropriate.

The following table provides information about PSU, DSU, RSU and stock option activity for the three months ended March 31, 2016:
 
PSUs
DSUs
RSUs
 
Stock Options
 
Number of Outstanding Share Units
Number of Outstanding Share Units
Number of Outstanding Share Units
 
Number of Outstanding Stock Options
 
Weighted Average Exercise Price/Stock Option ($)
Balance, December 31, 2015


1,015,457

 
12,851,557

 
4.60

Granted
2,297,700

59,229


 
1,286,525

 
2.65

Exercised


(272,397
)
 
(500,000
)
 
2.40

Forfeited


(166,685
)
 
(457,436
)
 
(4.71
)
Expired



 
(127,051
)
 
(6.49
)
Balance, March 31, 2016
2,297,700

59,229

576,375

 
13,053,595

 
4.46



14



The amounts recognized for stock-based compensation were as follows:

 
 
Three Months Ended March 31,
(Thousands of U.S. Dollars)
 
2016
 
2015
Compensation costs for PSUs
 
$
165

 
$

Compensation costs for stock options
 
971

 
(422
)
Compensation costs for DSUs
 
146

 

Compensation costs for RSUs
 
364

 
(60
)
 
 
1,646

 
(482
)
Less: Stock-based compensation costs capitalized
 
(186
)
 
(31
)
Stock-based compensation expense (recovery)
 
$
1,460

 
$
(513
)

Stock-based compensation expense for the three months ended March 31, 2016, was primarily recorded in G&A expenses. For the three months ended March 31, 2015, stock-based compensation was a recovery of $0.5 million due to the reversal of stock-based compensation expense for unvested stock options of terminated employees and a decrease in the Company's share price since December 31, 2014. The stock-based compensation recovery for the three months ended March 31, 2015, was primarily recorded in G&A expenses.

At March 31, 2016, there was $9.6 million (December 31, 2015 - $3.9 million) of unrecognized compensation cost related to unvested PSUs, stock options, DSUs and RSUs which is expected to be recognized over a weighted average period of 2.3 years.

PSUs
 
PSUs entitle the holder to receive, at the option of the Company, either the underlying number of shares of the Company's Common Stock upon vesting of such units or a cash payment equal to the value of the underlying shares. PSUs will cliff vest after three years, subject to the continued employment of the grantee. The number of PSUs that vest may range from zero to 200% of the target number granted based on the Company’s performance with respect to the applicable performance targets. The performance targets for the PSUs outstanding as of March 31, 2016, are as follows:

(i) 50% of the award is subject to targets relating to the total shareholder return (“TSR”) of the Company against a group of peer companies;

(ii) 25% of the award is subject to targets relating to net asset value ("NAV") of the Company per share and NAV is based on before tax net present value discounted at 10% of proved plus probable reserves;

(iii) 25% of the award is subject to targets relating to the execution of corporate strategy.

The compensation cost of PSUs is subject to adjustment based upon the attainability of these performance targets. No settlement will occur with respect to the portion of the PSU award subject to each performance target for results below the applicable minimum threshold for that target. PSUs in excess of the target number granted will vest and be settled if performance exceeds the targeted performance goals. The Company currently intends to settle PSUs in cash.

Stock Options

Each stock option permits the holder to purchase one share of Common Stock at the stated exercise price. The exercise price equals the market price at the time of grant. Stock options generally vest over three years. The term of stock options granted starting May 2013 is five years or three months after the grantee’s end of service to the Company, whichever occurs first. Stock options granted prior to May 2013 continue to have a term of ten years or three months after the grantee’s end of service to the Company, whichever occurs first.

For the three months ended March 31, 2016, 500,000 shares of Common Stock were issued for cash proceeds of $1.2 million (three months ended March 31, 2015 - $0.5 million) upon the exercise of stock options.

The weighted average grant date fair value for stock options granted in the three months ended March 31, 2016, was $1.12 (three months ended March 31, 2015 - $1.10).

15



DSUs and RSUs

DSUs and RSUs entitle the holder to receive, either the underlying number of shares of the Company's Common Stock upon vesting of such units or, at the option of the Company, a cash payment equal to the value of the underlying shares. The Company's historic practice has been to settle RSUs in cash and the Company currently intends to settle the RSUs and DSUs outstanding as of March 31, 2016 in cash. Once a DSU or RSU is vested, it is immediately settled. During the three months ended March 31, 2016, DSUs were granted to directors and will vest 100% at such time the grantee ceases to be a member of the Board of Directors.
 
7. Asset Retirement Obligation
 
Changes in the carrying amounts of the asset retirement obligation associated with the Company’s oil and natural gas properties were as follows:
 
Three Months Ended
 
Year Ended
(Thousands of U.S. Dollars)
March 31, 2016
 
December 31, 2015
Balance, December 31, 2015
$
33,224

 
$
35,812

Settlements
(194
)
 
(6,317
)
Liability incurred
923

 
1,556

Liabilities assumed in acquisition (Note 3)
11,852

 

Accretion
655

 
1,313

Revisions in estimated liability

 
860

Balance, March 31, 2016
$
46,460

 
$
33,224

 
 
 
 
Asset retirement obligation - current
$
3,255

 
$
2,146

Asset retirement obligation - long-term
43,205

 
31,078

 
$
46,460

 
$
33,224


For the three months ended March 31, 2016, settlements included cash payments of $0.1 million with the balance in accounts payable and accrued liabilities at March 31, 2016. Revisions to estimated liabilities relate primarily to changes in estimates of asset retirement costs and include, but are not limited to, revisions of estimated inflation rates, changes in property lives and the expected timing of settling the asset retirement obligation. At March 31, 2016, the fair value of assets that are legally restricted for purposes of settling the asset retirement obligation was $8.5 million (December 31, 2015 - $2.9 million). These assets are accounted for as restricted cash on the Company's interim unaudited condensed consolidated balance sheets.

8. Taxes
 
The Company's effective tax rate was 36% in the three months ended March 31, 2016, compared with 0.2% in the corresponding period in 2015. The Company's effective tax rate differed from the U.S. statutory rate of 35% primarily due to an increase in the valuation allowance, which was largely attributable to impairment losses in Brazil, as well as non-deductible, other local taxes and third party royalty in Colombia. These were partially offset by other permanent differences, which mainly related to the non-taxable gain on the acquisition of Petroamerica, foreign currency translation adjustments and the impact of foreign taxes. The deferred tax recovery for three months ended March 31, 2016, included $22.4 million associated with the ceiling test impairment loss in Colombia.

On December 23, 2014, the Colombian Congress passed a law which imposes an equity tax levied on Colombian operations for 2015, 2016 and 2017. The equity tax is calculated based on a legislated measure, which is based on the Company’s Colombian legal entities' balance sheet equity for tax purposes at January 1, 2015. This measure is subject to adjustment for inflation in future years. The equity tax rates for January 1, 2015, 2016 and 2017, are 1.15%, 1% and 0.4%, respectively. The legal obligation for each year's equity tax liability arises on January 1 of each year; therefore, the Company recognized the annual amounts of $3.1 million and $3.8 million, respectively, for the equity tax expense in the consolidated statement of operations during the three months ended March 31, 2016 and 2015. At March 31, 2016, accounts payable included $3.3 million (December 31, 2015 - $nil) which will be paid in May and September 2016.
 


16



9. Contingencies
 
Gran Tierra’s production from the Costayaco Exploitation Area is subject to an additional royalty (the "HPR royalty"), which applies when cumulative gross production from an Exploitation Area is greater than five MMbbl. The HPR royalty is calculated on the difference between a trigger price defined in the Chaza Block exploration and production contract (the "Chaza Contract") and the sales price. The Agencia Nacional de Hidrocarburos (National Hydrocarbons Agency) (“ANH”) has interpreted the Chaza Contract as requiring that the HPR royalty must be paid with respect to all production from the Moqueta Exploitation Area and initiated a noncompliance procedure under the Chaza Contract, which was contested by Gran Tierra because the Moqueta Exploitation Area and the Costayaco Exploitation Area are separate Exploitation Areas. ANH did not proceed with that noncompliance procedure. Gran Tierra also believes that the evidence shows that the Costayaco and Moqueta Fields are two clearly separate and independent hydrocarbon accumulations. Therefore, it is Gran Tierra’s view that, pursuant to the terms of the Chaza Contract, the HPR royalty is only to be paid with respect to production from the Moqueta Exploitation Area when the accumulated oil production from that Exploitation Area exceeds five MMbbl. Discussions with the ANH have not resolved this issue and Gran Tierra has initiated the dispute resolution process under the Chaza Contract by filing on January 14, 2013, an arbitration claim before the Center for Arbitration and Conciliation of the Chamber of Commerce of Bogotá, Colombia, seeking a decision that the HPR royalty is not payable until production from the Moqueta Exploitation Area exceeds five MMbbl. Gran Tierra supplemented its claim on May 30, 2013. The ANH filed a response to the claim seeking a declaration that its interpretation is correct and a counterclaim seeking, amongst other remedies, declarations that Gran Tierra breached the Chaza Contract by not paying the disputed HPR royalty, that the amount of the alleged HPR royalty is payable, and that the Chaza Contract be terminated.

Gran Tierra filed a response to the ANH's counterclaim and filed its comments on the ANH's responses to Gran Tierra's claim. The ANH filed an amended counterclaim and Gran Tierra filed a response to the ANH's amended counterclaim. The submission of evidence in the arbitration has been completed and final arguments were made by the parties to the arbitration tribunal on April 7, 2016. The arbitration tribunal indicated it would make its award on June 8, 2016. On April 30, 2015, total cumulative production from the Moqueta Exploitation Area reached 5.0 MMbbl and Gran Tierra commenced paying the HPR royalty payable on production over that threshold. The estimated compensation which would be payable on cumulative production if the ANH's claims are accepted in the arbitration is $66.3 million plus related interest of $30.7 million. Gran Tierra also disagrees with the interest rate that the ANH has used in calculating the interest cost. Gran Tierra asserts that since the HPR royalty is denominated in the U.S. dollar, the contract requires the interest rate to be three-month LIBOR plus 4%, whereas the ANH has applied the highest legally authorized interest rate on Colombian peso liabilities, which during the period of production to date has averaged approximately 29% per annum. At March 31, 2016, based on an interest rate of three-month LIBOR plus 4% related interest would be $7.1 million. At this time no amount has been accrued in the interim unaudited condensed consolidated financial statements nor deducted from the Company's reserves for the disputed HPR royalty as Gran Tierra does not consider it probable that a loss will be incurred.

Additionally, the ANH and Gran Tierra are engaged in discussions regarding the interpretation of whether certain transportation and related costs are eligible to be deducted in the calculation of the HPR royalty. Discussions with the ANH are ongoing. Based on the Company's understanding of the ANH's position, the estimated compensation which would be payable if the ANH’s interpretation is correct could be up to $44.8 million as at March 31, 2016. At this time no amount has been accrued in the interim unaudited condensed consolidated financial statements as Gran Tierra does not consider it probable that a loss will be incurred.

The Company provided the purchaser of its Argentina business unit with certain indemnifications. The Company remains responsible for certain contingent liabilities related to such indemnifications, subject to defined limitations. The Company does not believe that these obligations are probable of having a material impact on its consolidated financial position, results of operations or cash flows.

In addition to the above, Gran Tierra has a number of other lawsuits and claims pending. Although the outcome of these other 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

At March 31, 2016, the Company had provided promissory notes totaling $74.9 million (December 31, 2015 - $76.5 million) as security for letters of credit relating to work commitment guarantees contained in exploration contracts and other capital or operating requirements.


17



10. Financial Instruments, Fair Value Measurement, Credit Risk and Foreign Exchange Risk

Financial Instruments

At March 31, 2016, the Company’s financial instruments recognized in the balance sheet consist of cash and cash equivalents, restricted cash, accounts receivable, trading securities, accounts payable and accrued liabilities, contingent consideration and PSU liability included in other long-term liabilities, and RSU liability included in accounts payable and accrued liabilities and other long-term liabilities.

Fair Value Measurement

The fair value of trading securities, contingent consideration and RSU and PSU liabilities are being remeasured at the estimated fair value at the end of each reporting period. The fair value of trading securities which were received as consideration on the sale of the Company's Argentina business unit is estimated based on quoted market prices in an active market. The fair value of contingent consideration, which relates to the acquisition of the remaining 30% working interest in certain properties in Brazil, is estimated based on the consideration expected to be transferred and discounted back to present value by applying an appropriate discount rate that reflected the risk factors associated with the payment streams. The discount rate used is determined in accordance with accepted valuation methods. The fair value of the RSU liability was estimated based on quoted market prices in an active market. The fair value of the PSU liability was estimated based on quoted market prices in an active market and an option pricing model such as the Monte Carlo simulation option-pricing models. The fair value of trading securities, contingent consideration and RSU and PSU liabilities at March 31, 2016, and December 31, 2015, were as follows:

(Thousands of U.S. Dollars)
 
As at March 31, 2016
 
As at December 31, 2015
Trading securities
 
$
5,362

 
$
6,250

 
 
 
 
 
Contingent consideration liability
 
$
1,061

 
$
1,061

RSU and PSU liability
 
$
1,190

 
$
1,189

 
 
$
2,251

 
$
2,250


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

 
 
Three Months Ended March 31,
(Thousands of U.S. Dollars)
 
2016
 
2015
Trading securities loss (gain)
 
$
845

 
$
(412
)
Foreign currency derivatives loss
 

 
370

Financial instruments loss (gain)
 
$
845

 
$
(42
)

These gains and losses are presented as financial instruments gains or losses in the interim unaudited condensed consolidated statements of operations and cash flows.

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

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

At March 31, 2016, and December 31, 2015, the fair value of the trading securities acquired in connection with the disposal of the Argentina business unit and the RSU liability was determined using Level 1 inputs and the fair value of the contingent

18



consideration payable in connection with the Brazil acquisition and PSU liability was determined using Level 3 inputs. The disclosure in the paragraph above regarding the fair value of cash and restricted cash was based on Level 1 inputs.

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

11. Supplemental Cash Flow Information

Net changes in assets and liabilities from operating activities were as follows:
 
Three Months Ended March 31,
(Thousands of U.S. Dollars)
2016
 
2015
Accounts receivable and other long-term assets
(2,513
)
 
13,484

Inventory
4,339

 
2,159

Prepaids
606

 
528

Accounts payable and accrued and other long-term liabilities
(5,975
)
 
(21,414
)
Taxes receivable and payable
3,036

 
(19,983
)
Net changes in assets and liabilities from operating activities
$
(507
)
 
$
(25,226
)

The following table provides additional supplemental cash flow disclosures:

 
Three Months Ended March 31,
(Thousands of U.S. Dollars)
2016
 
2015
Non-cash investing activities:
 
 
 
Net liabilities related to property, plant and equipment, end of period
$
35,606

 
$
55,335


See Note 3 in these condensed consolidated financial statements for disclosure regarding the Company's acquisition of Petroamerica.

12. General and Administrative Expenses
 
Three Months Ended March 31,
(Thousands of U.S. Dollars)
2016
 
2015
G&A expenses before stock-based compensation
$
14,085

 
$
20,265

Stock-based compensation
1,397

 
(530
)
Capitalized G&A and overhead recoveries
(6,677
)
 
(12,441
)
 
$
8,805

 
$
7,294

13. Subsequent Event

On April 6, 2016, the Company issued $100 million aggregate principal amount of its 5.00% Convertible Senior Notes due 2021 (the "Notes") in a private placement to qualified institutional buyers. On April 22, 2016, the Company issued an additional $15 million aggregate principal amount of the Notes pursuant to the underwriters’ exercise of their option to acquire additional Notes. The Notes bear interest at a rate of 5.00% per year, payable semi-annually in arrears on April 1 and October 1 of each year, beginning on October 1, 2016. The Notes will mature on April 1, 2021, unless earlier redeemed, repurchased or converted.

The Notes are convertible at the option of the holder at any time prior to the close of business on the business day immediately preceding the maturity date. The conversion rate is initially 311.4295 shares of Common Stock per $1,000 principal amount of Notes (equivalent to an initial conversion price of approximately $3.21 per share of Common Stock). The conversion rate is subject to adjustment in some events but will not be adjusted for any accrued and unpaid interest. In addition, following certain

19



corporate events that occur prior to the maturity date, the Company will increase the conversion rate for a holder who elects to convert its Notes in connection with such a corporate event in certain circumstances.

The Company may not redeem the Notes prior to April 5, 2019, except in certain circumstances following a fundamental change (as defined in the indenture governing the Notes). The Company may redeem for cash all or any portion of the Notes, at its option, on or after April 5, 2019, if (terms below are as defined in the indenture governing the Notes):

(i) the last reported sale price of the Company's Common Stock has been at least 150% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption; and

(ii) the Company has filed all reports that it is required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act, as applicable (other than current reports on Form 8-K), during the twelve months preceding the date on which the Company provides such notice.

The redemption price will be equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. No sinking fund is provided for the Notes.

If the Company undergoes a fundamental change, holders may require the Company to repurchase for cash all or any portion of their Notes at a fundamental change repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.
Net proceeds from the sale of the Notes was approximately $109.0 million, after deducting the initial purchasers' discount and the offering expenses payable by the Company. The Company intends to use the net proceeds from the sale of Notes for general corporate purposes, which may include acquisitions and/or capital expenditures.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Please see the cautionary language at the very beginning of this Quarterly Report on Form 10-Q regarding the identification of and risks relating to forward-looking statements, as well as Part II, Item 1A “Risk Factors” in this Quarterly Report on Form 10-Q and Part I, Item 1A “Risk Factors” in our 2015 Annual Report on Form 10-K.
 
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 8 and 7, respectively, of our Annual Report on Form 10-K, filed with the SEC on February 29, 2016.

Highlights
 
Acquisitions of Petroamerica and PGC

On January 13, 2016, we acquired all of the issued and outstanding common shares of Petroamerica, a Calgary based oil and gas exploration, development and production company active in Colombia. As consideration we issued 13.7 million shares of Common Stock, and paid cash consideration of $70.6 million. The fair value of Common Stock issued was determined to be $25.8 million based on the closing price of shares of our Common Stock on the acquisition date. Total net purchase price of Petroamerica was $72.2 million, after giving consideration to net working capital of $24.2 million.

The acquisition was accounted for as a business combination using the acquisition method, with Gran Tierra being the acquirer, whereby the assets acquired and liabilities assumed were recognized at their fair values as at the acquisition date, and the results of Petroamerica were included with our results from that date.

Additionally, on January 25, 2016, we acquired all of the issued and outstanding common shares of PGC for cash consideration. The net purchase price of PGC was $19.4 million, after giving consideration to net working capital of $18.3 million. PGC's working capital on the acquisition date included restricted cash of $18.6 million and cash of $0.2 million. Of the opening balance of restricted cash, $6.6 million was released prior to March 31, 2016 and we expect that the remaining balance will be released this year. The acquisition was accounted for as an asset acquisition.

20



 
Three Months Ended December 31,
 
Three Months Ended March 31,
 
2015
 
2016
2015
% Change
Volumes (BOE)
 
 
 
 
 
Working Interest Production Before Royalties
2,128,655

 
2,330,539

2,161,331

8

Royalties
(312,534
)
 
(256,803
)
(348,776
)
(26
)
Production NAR
1,816,121

 
2,073,736

1,812,555

14

Decrease (Increase) in Inventory
(249,049
)
 
240,424

(66,653
)
(461
)
Sales(1)
1,567,072


2,314,160

1,745,902

33

 
 
 
 
 
 
Average Daily Volumes (BOEPD)
 
 
 
 
 
Working Interest Production Before Royalties
23,138

 
25,610

24,015

7

Royalties
(3,397
)
 
(2,822
)
(3,875
)
(27
)
Production NAR
19,741

 
22,788

20,140

13

Decrease (Increase) in Inventory
(2,707
)
 
2,642

(741
)
(457
)
Sales(1)
17,034


25,430

19,399

31

 
 
 
 
 


Operating Netback ($000s)
 
 
 
 
 
Oil and Natural Gas Sales
$
54,777

 
$
57,403

$
76,231

(25
)
Operating Expenses
(14,252
)
 
(19,067
)
(22,661
)
(16
)
Transportation Expenses
(12,199
)
 
(12,328
)
(8,773
)
41

Operating Netback(2)
$
28,326

 
$
26,008

$
44,797

(42
)
 
 
 
 
 
 
General and Administrative Expenses ("G&A") ($000s)
 
 
 
 


G&A Expenses Before Stock-Based Compensation, Gross
$
14,155

 
$
14,085

$
20,265

(30
)
Stock-Based Compensation
566

 
1,397

(530
)
(364
)
Capitalized G&A and Overhead Recoveries
(7,823
)
 
(6,677
)
(12,441
)
(46
)
 
$
6,898

 
$
8,805

$
7,294

21

 
 
 
 
 
 
EBITDA ($000s)(3)
$
15,052

 
$
23,665

$
41,357

(43
)
Adjusted EBITDA ($000s)(3)
19,302

 
$
12,738

$
29,819

(57
)
 
 
 
 
 
 
Net Loss ($000s)
$
(82,722
)
 
$
(45,032
)
(44,866
)

 
 
 
 
 
 
Funds Flow From Operations ($000s)(4)
$
16,828

 
$
11,423

$
28,996

(61
)
 
 
 
 
 


Capital Expenditures ($000s)
$
41,878

 
$
26,180

$
73,446

(64
)

 
As at
 
March 31, 2016
December 31, 2015
% Change
Cash, Cash Equivalents and Current Restricted Cash ($000s)
$
69,782

$
145,434

(52
)
 
 
 
 
Working Capital ($000s)
$
80,610

$
160,449

(50
)

21




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

Non-GAAP measures

Operating netback, EBITDA, adjusted EBITDA and funds flow from operations are non-GAAP measures which do not have any standardized meaning prescribed under GAAP. Investors are cautioned that these measures should not be construed as alternatives to net 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.

(2) Operating netback as presented is oil and gas sales net of royalties and operating and transportation expenses. Management believes that netback is a useful supplemental measure for management and investors to analyze operating performance and provide an indication of the results generated by our principal business activities prior to the consideration of other income and expenses.

(3) EBITDA, as presented, is net loss adjusted for depletion, depreciation and accretion (“DD&A”) expenses, asset impairment and income tax recovery or expense. Adjusted EBITDA is EBITDA adjusted for gain on acquisition and foreign exchange losses or gains. Management uses these financial measures to analyze performance and income or loss generated by our principal business activities prior to the consideration of how non-cash items affect that income or loss, and believes that these financial measures are also useful supplemental information for investors to analyze performance and our financial results. A reconciliation from net loss to EBITDA and adjusted EBITDA is as follows:
 
Three Months Ended December 31,
 
Three Months Ended March 31,
EBITDA - Non-GAAP Measure ($000s)
2015
 
2016
 
2015
Net loss
$
(82,722
)
 
$
(45,032
)
 
$
(44,866
)
Adjustments to reconcile net loss to EBITDA
 
 
 
 
 
DD&A expenses
33,044

 
36,912

 
49,140

Asset impairment
106,640

 
56,898

 
37,014

Income tax (recovery) expense
(41,910
)
 
(25,113
)
 
69

EBITDA
15,052

 
23,665

 
41,357

   Gain on acquisition

 
(11,712
)
 

Foreign exchange loss (gain)
4,250

 
785

 
(11,538
)
Adjusted EBITDA
$
19,302

 
$
12,738

 
$
29,819


(4) Funds flow from operations, as presented, is net loss adjusted for DD&A expenses, asset impairment, deferred tax recovery, stock-based compensation, cash settlement of RSUs, unrealized foreign exchange gains and losses, financial instruments gains and losses, cash settlement of foreign currency derivatives, other gain, and gain on acquisition. During the three months ended September 30, 2015, we changed our method of calculating funds flow from operations to be more consistent with our peers. Funds flow from operations is no longer net of cash settlement of asset retirement obligation. Additionally, foreign exchange losses on cash and cash equivalents have been excluded from funds flow. Comparative information has been restated to be calculated on a consistent basis. Management uses this financial measure to analyze performance and income or loss generated by our principal business activities prior to the consideration of how non-cash items affect that income or loss, and believes that this financial measure is also useful supplemental information for investors to analyze performance and our financial results. A reconciliation from net loss to funds flow from operations is as follows:
 
Three Months Ended December 31,
 
Three Months Ended March 31,
Funds Flow From Operations - Non-GAAP Measure ($000s)
2015
 
2016
 
2015
Net loss
$
(82,722
)
 
$
(45,032
)
 
$
(44,866
)
Adjustments to reconcile net loss to funds flow from operations
 
 
 
 
 
DD&A expenses
33,044

 
36,912

 
49,140

Asset impairment
106,640

 
56,898

 
37,014

Deferred tax recovery
(45,661
)
 
(27,136
)
 
(2,356
)
Stock-based compensation expense (recovery)
580

 
1,460

 
(513
)
Cash settlement of RSUs
(29
)
 
(673
)
 
(955
)
Unrealized foreign exchange loss (gain)
4,713

 
(183
)
 
(6,069
)
Financial instruments loss (gain)
765

 
845

 
(42
)
Cash settlement of financial instruments

 
44

 
(2,357
)
   Gain on acquisition

 
(11,712
)
 

   Other gain
(502
)
 

 

Funds flow from operations
$
16,828

 
$
11,423

 
$
28,996




22



Consolidated Results of Operations

 
 
Three Months Ended December 31,
 
Three Months Ended March 31,
 
 
2015
 
2016
 
2015
 
% Change
(Thousands of U.S. Dollars)
 
 
 
 
 
 
 
 
Oil and natural gas sales
 
$
54,777

 
$
57,403

 
$
76,231

 
(25
)
Operating expenses
 
14,252

 
19,067

 
22,661

 
(16
)
Transportation expenses
 
12,199

 
12,328

 
8,773

 
41

  Operating netback(1)
 
28,326

 
26,008

 
44,797

 
(42
)
 
 
 
 
 
 
 
 
 
DD&A expenses
 
33,044

 
36,912

 
49,140

 
(25
)
Asset impairment
 
106,640

 
56,898

 
37,014

 
54

G&A expenses
 
6,898

 
8,805

 
7,294

 
21

Severance expenses
 
2,163

 
1,018

 
4,378

 
(77
)
Equity tax
 

 
3,051

 
3,769

 
(19
)
Foreign exchange loss (gain)
 
4,250

 
785

 
(11,538
)
 
107

Financial instruments loss (gain)
 
765

 
845

 
(42
)
 

Other gain
 
(502
)
 

 

 

 
 
153,258

 
108,314

 
90,015

 
20

 
 
 
 
 
 
 
 
 
Gain on acquisition
 

 
11,712

 

 

Interest income
 
300

 
449

 
421

 
7

 
 
 
 
 
 
 
 

Loss before income taxes
 
(124,632
)
 
(70,145
)
 
(44,797
)
 
57

 
 
 
 
 
 
 
 
 
Current income tax expense
 
(3,751
)
 
(2,023
)
 
(2,425
)
 
(17
)
Deferred income tax recovery
 
45,661

 
27,136

 
2,356

 
1,052

 
 
41,910

 
25,113

 
(69
)
 

Net loss

$
(82,722
)
 
$
(45,032
)

$
(44,866
)


 
 
 
 
 
 
 
 

Sales Volumes(2)
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 

Oil and NGL's, bbl
 
1,552,708

 
2,292,116

 
1,734,898

 
32

Natural gas, Mcf
 
86,186

 
132,265

 
66,026

 
100

Total sales volumes, BOE

1,567,072
 
2,314,160
 
1,745,902
 
33

 
 
 
 
 
 
 
 
 
Total sales volumes, BOEPD
 
17,034

 
25,430

 
19,399

 
31

 
 
 
 
 
 
 
 

Average Prices
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 

Oil and NGL's per bbl
 
$
35.07

 
$
24.88

 
$
43.79

 
(43
)
Natural gas per Mcf
 
$
3.81

 
$
2.83

 
$
3.87

 
(27
)
 
 
 
 
 
 
 
 


Brent Price per bbl
 
$
43.57

 
$
33.70

 
53.91

 
(37
)
 
 
 
 
 
 
 
 
 
Consolidated Results of Operations per BOE sales volumes
 
 
 
 
 
 
 



23



Oil and natural gas sales
 
$
34.95

 
$
24.81

 
$
43.66

 
(43
)
Operating expenses
 
9.09

 
8.24

 
12.98

 
(37
)
Transportation expenses
 
7.78

 
5.33

 
5.02

 
6

  Operating netback(1)
 
18.08

 
11.24

 
25.66

 
(56
)
 
 
 
 
 
 
 
 
 
DD&A expenses
 
21.09

 
15.95

 
28.15

 
(43
)
Asset impairment
 
68.05

 
24.59

 
21.20

 
16

G&A expenses
 
4.40

 
3.80

 
4.18

 
(9
)
Severance expenses
 
1.38

 
0.44

 
2.51

 
(82
)
Equity tax
 

 
1.32

 
2.16

 
(39
)
Foreign exchange loss (gain)
 
2.71

 
0.34

 
(6.61
)
 
105

Financial instruments loss (gain)
 
0.49

 
0.37

 
(0.02
)
 

Other gain
 
(0.32
)
 

 

 

 
 
97.80
 
46.81
 
51.57
 
(9
)
 
 
 
 
 
 
 
 
 
Gain on acquisition
 

 
5.06

 

 

Interest income
 
0.19

 
0.19

 
0.24

 
(21
)
 
 
 
 
 
 
 
 


Loss before income taxes
 
(79.53
)
 
(30.32
)
 
(25.67
)
 
18

Current income tax expense
 
(2.39
)
 
(0.87
)
 
(1.39
)
 
(37
)
Deferred income tax recovery
 
29.14

 
11.73

 
1.35

 
769

 
 
26.75

 
10.86

 
(0.04
)
 

Net loss
 
$
(52.78
)
 
$
(19.46
)
 
$
(25.71
)
 
(24
)
 
(1) Operating netback is a non-GAAP measure which does not have any standardized meaning prescribed under GAAP. Refer to non-GAAP measures disclosure above regarding this measure.

(2) Sales volumes represent production NAR adjusted for inventory changes and losses.

Oil and gas production and sales volumes, BOEPD

 
Three Months Ended March 31, 2016
 
Three Months Ended March 31, 2015
Average Daily Volumes (BOEPD)
Colombia
Brazil
Total
 
Colombia
Brazil
Total
Working Interest Production Before Royalties
24,886

724

25,610

 
23,297

718

24,015

Royalties
(2,676
)
(146
)
(2,822
)
 
(3,778
)
(97
)
(3,875
)
Production NAR
22,210

578

22,788

 
19,519

621

20,140

Decrease (Increase) in Inventory
2,647

(5
)
2,642

 
(771
)
30

(741
)
Sales
24,857

573

25,430

 
18,748

651

19,399

 
 
 
 
 
 
 
 
Royalties, % of Working Interest Production Before Royalties
11
%
20
%
11
%
 
16
%
14
%
16
%

Oil and gas production NAR for the three months ended March 31, 2016, increased by 13% to 22,788 BOEPD compared with 20,140 BOEPD in the corresponding period in 2015. In the three months ended March 31, 2016, production from the newly acquired Petroamerica properties contributed 1,848 BOEPD NAR. Additionally, in the three months ended March 31, 2016, new wells in the Moqueta Field increased production in Colombia. The Company commenced its drilling program in the Chaza Block in late 2015 and continued into 2016. Production is expected to increase in the Chaza Block as additional wells are tied in. Royalties as a percentage of production decreased from the prior year commensurate with the decrease in oil prices.


24



In the three months ended March 31, 2016, our production in Brazil continued to be limited by a temporary capacity reduction at a third party's shipping facility due to an integrity issue with one of their oil receiving tanks. The third party operator completed repairs on the facility and the tank was fully operational as of March 21, 2016. Receiving capacity for the field's crude oil is now restored to 1,100 bopd.

In the corresponding period in Brazil in 2015, our operations in the Tiê Field were suspended by the Agência Nacional de Petróleo Gás Natural e Biocombustíveis ("ANP") from March 11, 2015, to May 15, 2015, due to alleged non-compliance with certain requirements regarding the health and safety management system identified during a safety and operational audit conducted by the ANP in early 2015. Clearance to resume production was received on May 15, 2015.

Oil and gas sales volumes for the three months ended March 31, 2016, increased by 31% to 25,430 BOEPD, compared with 19,399 BOEPD, in the corresponding period in 2015. Sales volumes increased due to higher working interest production (1,595 BOEPD), lower royalty volumes (1,053 BOEPD) and decreased inventory (3,383 bopd). During the three months ended March 31, 2016, oil inventory decreases accounted for 0.2 MMbbl or 2,642 bopd of increased sales volumes compared with oil inventory increases which accounted for 0.1 MMbbl or 741 bopd of reduced sales volumes in the corresponding period in 2015.

Operating netbacks

 
Three Months Ended March 31, 2016
 
Three Months Ended March 31, 2015
(Thousands of U.S. Dollars)
Colombia
Brazil
Total
 
Colombia
Brazil
Total
Oil and Natural Gas Sales
$
56,300

$
1,103

$
57,403

 
$
74,067

$
2,164

$
76,231

Transportation Expenses
(12,256
)
(72
)
(12,328
)
 
(8,682
)
(91
)
(8,773
)
 
44,044

1,031

45,075

 
65,385

2,073

67,458

Operating Expenses
(19,164
)
97

(19,067
)
 
(21,292
)
(1,369
)
(22,661
)
Operating Netback(1)
$
24,880

$
1,128

$
26,008

 
$
44,093

$
704

$
44,797

 
 
 
 
 
 
 
 
U.S. Dollars Per bbl
 
 
 
 
 
 
 
Brent
 
 
$
33.70

 
 
 
53.91

WTI
 
 
$
33.45

 
 
 
48.63

 
 
 
 
 
 
 
 
U.S. Dollars Per BOE
 
 
 
 
 
 
 
Oil and Natural Gas Sales
$
24.89

$
21.13

$
24.81

 
$
43.90

$
36.92

$
43.66

Transportation Expenses
(5.42
)
(1.38
)
(5.33
)
 
(5.15
)
(1.55
)
(5.02
)
 
19.47

19.75

19.48

 
38.75

35.37

38.64

Operating Expenses
(8.47
)
1.86

(8.24
)
 
(12.62
)
(23.36
)
(12.98
)
Operating Netback(1)
$
11.00

$
21.61

$
11.24

 
$
26.13

$
12.01

$
25.66


(1) Operating netback is a non-GAAP measure which does not have any standardized meaning prescribed under GAAP. Refer to non-GAAP measures disclosure above regarding this measure.

Oil and gas sales for the three months ended March 31, 2016, decreased by 25% to $57.4 million, from $76.2 million in the corresponding period in 2015 primarily due to the effect of decreased realized oil prices, partially offset by higher sales volumes. Average realized prices decreased by 43% to $24.81 per BOE for the three months ended March 31, 2016, from $43.66 per BOE in the corresponding period in 2015. These price decreases were primarily due to lower benchmark oil prices. Average Brent and WTI oil prices for the three months ended March 31, 2016, decreased 37% and 31%, respectively, compared with the corresponding period in 2015.

During periods of OTA pipeline disruptions, we have multiple transportation alternatives. Each transportation route has varying effects on realized prices and transportation costs. During the three months ended March 31, 2016, 54% of our oil volumes sold in Colombia were sold through the OTA pipeline compared with 80% in the corresponding period in 2015. Sales during the three months ended March 31, 2016, reflected an inventory decrease in Ecuador of 235 Mbbl.

Oil and gas sales for the three months ended March 31, 2016, increased by 5% to $57.4 million from $54.8 million compared with the prior quarter primarily due to higher sales volumes, partially offset by lower realized prices. Average realized prices decreased

25



by 29% to $24.81 per BOE for the three months ended March 31, 2016, compared with $34.95 per BOE in the prior quarter, primarily due to lower benchmark oil prices. Average Brent oil prices for the three months ended March 31, 2016, were $33.70 per bbl, compared with $43.57 per bbl, in the prior quarter, a 23% decrease. During the prior quarter, 6% of our oil volumes sold in Colombia were sold through the OTA pipeline compared with 54% in the current quarter.

Transportation expenses increased by 41% to $12.3 million for the three months ended March 31, 2016, compared with the corresponding period in 2015. The increase was due to higher sales volumes combined with increased transportation expenses per BOE. On a per BOE basis, transportation expenses increased by 6% to $5.33 per BOE from $5.02 per BOE in the corresponding period in 2015. The increase was primarily due to the alternative transportation routes used during periods of OTA pipeline disruptions.

Transportation expenses for the three months ended March 31, 2016, were consistent with the prior quarter. The effect of higher sales volumes was offset by decreased transportation costs per BOE. On a per BOE basis, transportation expenses decreased by 31% to $5.33 per BOE from $7.78 per BOE in the prior quarter. The decrease was primarily due to the alternative transportation routes used during periods of OTA pipeline disruptions.

Operating expenses decreased by 16% to $19.1 million for the three months ended March 31, 2016, compared with the corresponding period in 2015. The decrease was due to decreased operating costs per BOE, partially offset by higher sales volumes. On a per BOE basis, operating expenses decreased by 37% to $8.24 per BOE for the three months ended March 31, 2016, from $12.98 per BOE in the corresponding period in 2015.

In Colombia, operating costs decreased by $4.15 per BOE primarily as a result of cost saving measures and the effect of the strengthening of the U.S. dollar against the local currency in Colombia, which resulted in savings for costs denominated in local currency.

In Brazil in the three months ended March 31, 2016, we reduced the value of a contingent loss by $0.4 million, or $7.97 per bbl based on volumes sold in Brazil, after we settled a one-time penalty for less than we had estimated. The one-time penalty related to alleged non-compliance with certain requirements regarding the health and safety management system, identified during a safety and operational audit conducted by the ANP in early 2015. Additionally, in Brazil operating costs per BOE decreased as a result of a reduction in headcount and the effect of the strengthening of the U.S. dollar against the local currency in Brazil.

On a per BOE basis, operating expenses decreased by 9% to $8.24 per BOE for the three months ended March 31, 2016, from $9.09 per BOE in the prior quarter. Operating expenses increased by 34% to $19.1 million in the three months ended March 31, 2016, compared with $14.3 million in the prior quarter primarily due to higher sales volumes, partially offset by the effect of decreased operating costs per BOE.

DD&A expenses

 
Three Months Ended March 31, 2016
 
Three Months Ended March 31, 2015
 
DD&A expenses, thousands of U.S. Dollars
DD&A expenses, U.S. Dollars Per BOE
 
DD&A expenses, thousands of U.S. Dollars
DD&A expenses, U.S. Dollars Per BOE
Colombia
$
35,736

$
15.80

 
$
46,255

$
27.41

Brazil
718

13.75

 
2,261

38.58

Peru
141


 
267


Corporate
317


 
357


 
$
36,912

$
15.95

 
$
49,140

$
28.15


DD&A expenses for the three months ended March 31, 2016, decreased to $36.9 million ($15.95 per BOE) from $49.1 million ($28.15 per BOE) in the corresponding period in 2015. On a per BOE basis, the decrease was due to lower costs in the depletable base and increased proved reserves.

On a per BOE basis, DD&A expenses decreased by 24% to $15.95 per BOE for the three months ended March 31, 2016, from $21.09 per BOE in the prior quarter.


26



Asset impairment

We follow the full cost method of accounting for our oil and gas properties. Under this method, the net book value of properties on a country-by-country basis, less related deferred income taxes, may not exceed a calculated “ceiling”. The ceiling is the estimated after tax future net revenues from proved oil and gas properties, discounted at 10% per year. In calculating discounted future net revenues, oil and natural gas prices are determined using the average price during the 12 months period prior to the ending date of the period covered by the balance sheet, calculated as an unweighted arithmetic average of the first-day-of-the month price for each month within such period for that oil and natural gas. That average price is then held constant, except for changes which are fixed and determinable by existing contracts. Therefore, ceiling test estimates are based on historical prices discounted at 10% per year and it should not be assumed that estimates of future net revenues represent the fair market value of our reserves. We used an average Brent price of $48.79 per bbl for the purposes of the March 31, 2016, ceiling test calculations.

 
 
Three Months Ended March 31,
(Thousands of U.S. Dollars)
 
2016
2015
Impairment of oil and gas properties
 
 
 
Colombia
 
$
54,568

$

Brazil
 
1,250

4,333

Peru
 
416

32,681

 
 
56,234

37,014

Impairment of inventory
 
664


 
 
$
56,898

$
37,014


In the three months ended March 31, 2016, and 2015, ceiling test impairment losses in our Colombia and Brazil cost centers and inventory impairment were primarily due to lower oil prices and impairment losses in our Peru cost center related to costs incurred on Block 95.

G&A expenses

 
 
Three Months Ended December 31,
 
Three Months Ended March 31,
(Thousands of U.S. Dollars)
 
2015
 
2016
2015
% Change
G&A Expenses Before Stock-Based Compensation, Gross
 
$
14,155

 
$
14,085

$
20,265

(30
)
Stock-Based Compensation
 
566

 
1,397

(530
)
(364
)
Capitalized G&A and Overhead Recoveries
 
(7,823
)
 
(6,677
)
(12,441
)
(46
)
 
 
$
6,898

 
$
8,805

$
7,294

21

U.S. Dollars Per BOE
 
$
4.40

 
$
3.80

$
4.18

(9
)

G&A expenses before stock-based compensation and capitalized G&A and overhead recoveries decreased by 30% to $14.1 million ($6.09 per BOE), from $20.3 million ($11.61 per BOE), in the corresponding period in 2015 as a result of reductions in the number of our employees, commitment to cost control including focusing on all of our other G&A expenses, and the effect of the strengthening of the U.S. dollar against local currencies in South America and Canada which resulted in savings for costs denominated in local currency. G&A expenses in the three months ended March 31, 2016, included $1.3 million of costs relating to the acquisition of Petroamerica.

After stock-based compensation and capitalized G&A and overhead recoveries, G&A expenses for the three months ended March 31, 2016, increased by 21% to $8.8 million ($3.80 per BOE), from $7.3 million ($4.18 per BOE), in the corresponding period in 2015. The increase was mainly due to lower allocations to capital projects due to lower capital activity. Additionally, G&A expenses in the corresponding period in 2015 were net of a credit of $1.7 million relating to the reversal of stock-based compensation expense for unvested stock options and RSUs associated with terminated employees.
 

27



G&A expenses before stock-based compensation and capitalized G&A and overhead recoveries were consistent with the prior quarter, $14.1 million ($6.09 per BOE) compared with $14.2 million ($9.03 per BOE). G&A expenses for the three months ended March 31, 2016, increased by 28% to $8.8 million ($3.80 per BOE) compared with $6.9 million ($4.40 per BOE) in the prior quarter. The increase was primarily due to lower allocations to capital projects due to lower capital activity and higher stock-based compensation expense.

Severance expenses

For the three months ended March 31, 2016, severance expenses were $1.0 million, compared with $4.4 million in the corresponding period in 2015. Severance expenses were consistent with the decrease in headcount from both the corresponding period in the prior year and the prior quarter.

Equity tax expense

For the three months ended March 31, 2016, and 2015 equity tax expense of $3.1 million and $3.8 million, respectively, represented a Colombian tax which was calculated based on our Colombian legal entities' balance sheet equity for tax purposes at January 1, 2015. The legal obligation for each year's equity tax liability arises on January 1 of each year, therefore, we recognized the annual amounts of the equity tax expense in our interim unaudited condensed consolidated statement of operations during the three months ended March 31, 2016 and 2015.

Foreign exchange gains and losses

For the three months ended March 31, 2016, we had foreign exchange losses of $0.8 million, compared with foreign exchange gains of $11.5 million, in the corresponding period in 2015. Under U.S. GAAP, deferred taxes are considered a monetary liability and require translation from local currency to U.S. dollar functional currency at each balance sheet date. This translation was the main source of the foreign exchange gains and losses. The following table presents the change in the Colombian peso against the U.S. dollar for the three months ended March 31, 2016, and 2015:

 
Three Months Ended March 31,
 
2016
 
2015
Change in the Colombian peso against the U.S. dollar
strengthened by
 
weakened by
4%
 
8%

Financial instrument gains and losses

 
 
Three Months Ended March 31,
(Thousands of U.S. Dollars)
 
2016
 
2015
Trading securities loss (gain)
 
$
845

 
$
(412
)
Foreign currency derivatives loss
 

 
370

 
 
$
845

 
$
(42
)

Trading securities gains and losses related to unrealized losses on the Madalena Energy Inc. shares we received in connection with the sale of our Argentina business unit in June 2014. Foreign currency derivative gains and losses related to our Colombian peso non-deliverable forward contracts. We purchased these contracts for purposes of fixing the exchange rate at which we would purchase or sell Colombian pesos to settle our income tax installments and payments. At March 31, 2016, we did not have any open foreign currency derivative positions.

Income tax expense and recovery

For the three months ended March 31, 2016, income tax recovery was $25.1 million, compared with income tax expense of $0.1 million in the corresponding period in 2015. The income tax recovery for the three months ended March 31, 2016, was primarily due to the ceiling test impairment loss in Colombia. The income tax recovery for the three months ended March 31, 2016, included $22.4 million associated with the ceiling test impairment loss in Colombia. In the three months ended March 31, 2015, income tax recovery associated with impairment losses in Peru and Brazil was offset by a full valuation allowance.


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The effective tax rate was 36% in the three months ended March 31, 2016, compared with 0.2% in the corresponding period in 2015. The change in the effective tax rate for the three months ended March 31, 2016, was due to a decrease in other permanent differences caused by the gain on acquisition, a decrease in the valuation allowance, as well as a decrease in the foreign currency translation and the impact of foreign taxes.

For the three months ended March 31, 2016, the difference between the effective tax rate of 36% and the 35% U.S. statutory rate was primarily due to an increase in the valuation allowance, other local taxes and a non-deductible third party royalty in Colombia, partially offset by other permanent differences, the impact of foreign taxes and foreign currency translation. For the three months ended March 31, 2015, the difference between the effective tax rate of 0.2% and the 35% U.S. statutory rate was primarily a result of a loss before income taxes caused by the 2015 impairment losses in Peru and Brazil which were fully offset by an increase in the valuation allowance. Other factors that affected the effective tax rate in the three months ended March 31, 2015, were other local taxes, a non-deductible third party royalty in Colombia and other permanent differences, partially offset by foreign currency translation adjustments.

Funds flow from operations

For the three months ended March 31, 2016, funds flow from operations decreased by 61% to $11.4 million compared with the corresponding period in 2015. For the three months ended March 31, 2016, our funds flow was negatively impacted by equity tax of $3.1 million, realized foreign exchange losses of $1.0 million, transaction costs of $1.3 million and severance expenses of $1.0 million. Lower oil and natural gas sales, higher transportation and G&A expenses and realized foreign exchange losses were partially offset by lower operating, severance, equity tax and income tax expenses and the absence of cash settlement of financial instruments.

2016 Capital Program
 
In January 2016, we announced our 2016 capital budget. Our base 2016 capital program of $107.0 million consists of: $76.0 million for Colombia; $8.0 million for Brazil; $6.0 million for Peru; and $17.0 million for other. Included in other expenditures are asset retirement obligations, geological and geophysical studies, environmental impact assessments, Health, Safety, and Environmental services, other technical services and capitalized G&A.

In Colombia, our base 2016 capital program includes two water injector wells in the Costayaco Field and three development wells in the Moqueta Field, both on the Chaza Block (100% WI, operated), two exploration wells in the Putumayo-7 Block (subject to regulatory approval, 100% WI, operated) and an exploration well on the Llanos-10 Block (50% WI, non-operated) with the costs being carried by a third party. Minor facilities work is also planned for the Chaza

In Peru, the 2016 capital program includes only those activities required for retention of lands and security of assets. In Brazil, the capital program includes minimal activity to implement water injection for reservoir pressure maintenance, and to preserve current production levels. In both Peru and Brazil, operations have been scaled back significantly, with the aim of allowing time to explore and execute on options to maximize shareholder value. 


In addition to our 2016 base capital budget, we have a discretionary capital budget of $61 million that we may utilize during 2016 in the event of an increase in commodity prices. If deployed, we expect that our discretionary capital budget would target six exploration wells, five development wells and seismic activities in Colombia.

We expect to finance our 2016 capital program through cash flows from operations and cash on hand, while retaining financial flexibility to undertake further development opportunities and opportunistically pursue acquisitions.

Capital expenditures for the three months ended March 31, 2016, were $26.2 million compared with $73.4 million for the three months ended March 31, 2015. In 2016, capital expenditures included drilling of $20.5 million, seismic of $0.2 million, facilities of $1.8 million and other expenditures of $3.7 million. Included in other expenditures are geological and geophysical studies, environmental impact assessments, Health, Safety, and Environmental services, other technical services and capitalized G&A.

Capital Expenditures - Colombia
 
Capital expenditures in our Colombian segment during the three months ended March 31, 2016, were $22.0 million. Capital expenditures in the three months ended March 31, 2016, consisted of drilling of $18.7 million, seismic of $0.1 million, facilities of $0.9 million and other expenditures of $2.3 million.


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The significant elements of our first quarter 2016 capital program in Colombia were:

On the Chaza Block (100% working interest ("WI"), operated), we completed the Costayaco-24 development well and drilled and completed the Costayaco-23i, Costayaco-27i and Moqueta-20 development wells in the Costayaco and Moqueta Fields. All four wells were completed as oil producers. We completed a dual completion on the Moqueta-19i water injector well. We drilled the Moqueta-23 development well and started pre-drilling activities for the Moqueta 22 development well. The Moqueta 22 development well was spud subsequent to quarter end. 

We continued facilities work at the Moqueta Field on the Chaza Block.

Capital Expenditures – Brazil
 
Capital expenditures in our Brazilian segment during the three months ended March 31, 2016, were $2.7 million, and consisted of drilling of $1.5 million, seismic of $0.1 million, facilities of $0.9 million and other expenditures of $0.2 million. In the first quarter of 2016, we commenced work on a water injection/pressure support project with an initial workover ongoing on the 1-GTE-7HPC-BA well to assess potential as a water source well.

Capital Expenditures – Peru
 
Capital expenditures in our Peruvian segment for the three months ended March 31, 2016, were $1.3 million, and included $0.4 million on Block 95 and $0.9 million on our other blocks in Peru. In the first quarter of 2016, operations in Peru continued to focus on maintaining tangible asset integrity and security of our five blocks in Peru (95, 107 and 133, 123 and 129) and moving forward with environmental approvals on Blocks 107 and 133 (100% WI, operated).

Liquidity and Capital Resources
 
At March 31, 2016, we had working capital of $80.6 million compared with $160.4 million at December 31, 2015. Working capital included cash and cash equivalents of $51.3 million and restricted cash of $18.5 million, compared with $145.3 million of cash and cash equivalents and restricted cash of $0.1 million at December 31, 2015. Of the opening balance of PGC restricted cash of $18.6 million, $6.6 million was released prior to March 31, 2016 and we expect that the remaining balance will be released this year.

Subsequent to March 31, 2016, we issued $100 million aggregate principal amount of our 5.00% Convertible Senior Notes due 2021 (the "Notes") in a private placement to qualified institutional buyers. On April 22, 2016, we issued an additional $15 million aggregate principal amount of the Notes pursuant to the underwriters’ exercise of their option to acquire additional Notes. Net proceeds from the sale of the Notes were approximately $109.0 million, after deducting the initial purchasers' discount and the offering expenses.

We believe that our cash resources, including cash on hand and cash generated from operations, will provide us with sufficient liquidity to meet our strategic objectives and planned capital program for 2016, given current oil price trends and production levels. In accordance with our investment policy, cash balances are held in our primary cash management bank in interest earning current accounts or are 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 the flexibility to respond to both internal growth opportunities and those available through acquisitions. 

At March 31, 2016, 81% of our cash and cash equivalents were held by subsidiaries and partnerships outside of Canada and the United States. This cash was generally not available to fund domestic or head office operations unless funds were repatriated. As noted above, subsequent to March 31, 2016, our parent company in the United States received net proceeds of $109.0 million from the Notes offering. At this time, we do not intend to repatriate further funds, but if we did, we might have to accrue and pay withholding taxes in certain jurisdictions on the distribution of accumulated earnings. Undistributed earnings of foreign subsidiaries are considered to be permanently reinvested and a determination of the amount of unrecognized deferred tax liability on these undistributed earnings is not practicable.

The government in Brazil requires us to register funds that enter and exit the country with its central bank. In Brazil and Colombia, all transactions must be carried out in the local currency of the country. In Colombia, we participate in a special exchange regime, and we receive revenue in U.S. dollars offshore. We may also pay invoices denominated in U.S. dollars for our Colombian business from these U.S. dollars received offshore. In Peru, expenditures may be paid in local currency or U.S. dollars.


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Credit Facility

We have a credit facility with a syndicate of lenders. Availability under the credit facility is determined by a proven reserves-based borrowing base, and remains subject to the satisfaction of conditions precedent set forth in the credit agreement. Loans under the credit agreement are scheduled to mature on September 18, 2018. The initial borrowing base is $200 million and the borrowing base will be re-determined semi-annually based on reserve evaluation reports, subject to a maximum of $500 million. The next borrowing base redetermination is in late May 2016. The borrowing base for the credit facility is supported by the present value of the petroleum reserves of our subsidiaries with operating branches in Colombia. The credit agreement includes a letter of credit sub-limit of up to $100 million. Amounts drawn down under the facility bear interest, at our option, at the USD LIBOR rate plus a margin ranging from 2.00% per annum to 3.00% per annum, or an alternate base rate plus a margin ranging from 1.00% per annum to 2.00% per annum, in each case based on the borrowing base utilization percentage. Undrawn amounts under the credit facility bear interest at 0.75% per annum, based on the average daily amount of unused commitments. A letter of credit participation fee of 0.25% per annum will accrue on the average daily amount of letter of credit exposure. Under the terms of the credit facility, we are required to maintain compliance with certain financial and operating covenants which include: the maintenance of a ratio of debt, including letters of credit, to net income plus interest, taxes, depreciation, depletion, amortization, exploration expenses and all non-cash charges minus all non-cash income ("EBITDAX") not to exceed 4.00 to 1.0; the maintenance of a ratio of senior secured obligations to EBITDAX not to exceed 3.00 to 1.00; and the maintenance of a ratio of EBITDAX to interest expense of at least 2.5 to 1.0. As at December 31, 2015, we were in compliance with all financial and operating covenants in our credit agreement. As of March 31, 2016, no amounts have been drawn on this facility. Under the terms of the credit facility, we are limited in our ability to pay any dividends to our shareholders without bank approval.

Notes

The Notes bear interest at a rate of 5.00% per year, payable semi-annually in arrears on April 1 and October 1 of each year, beginning on October 1, 2016. The Notes will mature on April 1, 2021, unless earlier redeemed, repurchased or converted.

The Notes are convertible at the option of the holder at any time prior to the close of business on the business day immediately preceding the maturity date. The conversion rate is initially 311.4295 shares of Common Stock per $1,000 principal amount of Notes (equivalent to an initial conversion price of approximately $3.21 per share of Common Stock). The conversion rate is subject to adjustment in some events but will not be adjusted for any accrued and unpaid interest. In addition, following certain corporate events that occur prior to the maturity date, we will increase the conversion rate for a holder who elects to convert its Notes in connection with such a corporate event in certain circumstances.

We may not redeem the Notes prior to April 5, 2019, except in certain circumstances following a fundamental change as defined in the indenture governing the Notes). We may redeem for cash all or any portion of the Notes, at our option, on or after April 5, 2019, if (terms used below are as defined in the indenture governing the Notes):

(i) the last reported sale price of our Common Stock has been at least 150% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption; and

(ii) we have filed all reports that we are required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act, as applicable (other than current reports on Form 8-K), during the twelve months preceding the date on which we provide such notice.

The redemption price will be equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. No sinking fund is provided for the Notes.

If we undergo a fundamental change, holders may require us to repurchase for cash all or any portion of their Notes at a fundamental change repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.
Cash Flows
 
During the three months ended March 31, 2016, our cash and cash equivalents decreased by $94.0 million as a result of cash used in investing activities of $107.2 million (including $50.9 million and $19.4 million of cash used in investing activities in relation to the Petroamerica and PGC acquisitions, respectively), partially offset by cash provided by operating activities of

31



$10.8 million and cash provided by financing activities of $1.2 million. During the three months ended March 31, 2015, our cash and cash equivalents decreased by $128.4 million as a result of cash used in investing activities of $128.3 million, partially offset by cash provided by operating activities of $2.3 million and cash provided by financing activities of $0.5 million.
 
Cash provided by operating activities in the three months ended March 31, 2016, was primarily affected by lower oil and natural gas sales, higher transportation and G&A expenses and realized foreign exchange losses and a $0.5 million change in assets and liabilities from operating activities. These amounts were partially offset by lower operating, severance, equity tax and income tax expenses and the absence of cash settlement of financial instruments.

Cash used in investing activities in the three months ended March 31, 2016, included an increase in restricted cash of $10.8 million, capital expenditures incurred of $26.2 million plus $19.4 million of cash paid for property, plant and equipment for the PGC acquisition and net cash paid for the Petroamerica acquisition of $50.9 million, partially offset by $0.1 million of net cash inflows related to changes in assets and liabilities associated with investing activities. Cash used in investing activities in the three months ended March 31, 2015, included an increase in restricted cash of $0.5 million, capital expenditures incurred of $73.4 million, and net cash outflows related to changes in assets and liabilities associated with investing activities of $54.3 million.

Cash provided by financing activities in the three months ended March 31, 2016 and 2015, related to proceeds from issuance of shares of our Common Stock upon the exercise of stock options.

Off-Balance Sheet Arrangements
 
As at March 31, 2016, we had no off-balance sheet arrangements.

Contractual Obligations

As at March 31, 2016, there were no material changes to our contractual obligations outside of the ordinary course of business from those as of December 31, 2015.

Critical Accounting Policies and Estimates

Our critical accounting policies and estimates are disclosed in Item 7 of our 2015 Annual Report on Form 10-K, filed with the SEC on February 29, 2016, and have not changed materially since the filing of that document, other than as follows:

Full Cost Method of Accounting and Impairments of Oil and Gas Properties

In the three months ended March 31, 2016, we recorded ceiling test impairment losses in our Colombia and Brazil cost centers of $54.6 million and $1.3 million, respectively, related to lower oil prices. Holding all factors constant other than benchmark oil prices, it is reasonably likely that we will experience ceiling test impairment losses in our Brazil and Colombia cost centers in the second quarter of 2016.

It is difficult to predict with reasonable certainty the amount of expected future impairment losses given the many factors impacting the asset base and the cash flows used in the prescribed U.S. GAAP ceiling test calculation. These factors include, but are not limited to, future commodity pricing, royalty rates in different pricing environments, operating costs and negotiated savings, foreign exchange rates, capital expenditures timing and negotiated savings, production and its impact on depletion and cost base, upward or downward reserve revisions as a result of ongoing exploration and development activity, and tax attributes. Subject to these factors and inherent limitations, we believe that ceiling test impairment losses in the second quarter of 2016 could exceed $11 million in Brazil and $109 million in Colombia. The calculation of the impact of lower commodity prices on our estimated ceiling test calculation was prepared based on the presumption that all other inputs and assumptions are held constant with the exception of benchmark oil prices. Therefore, this calculation strictly isolates the impact of commodity prices on the prescribed GAAP ceiling test. This calculation was based on pro forma Brent oil price of $44.46 per bbl for the year ended June 30, 2016. These pro forma oil prices were calculated using a 12-month unweighted arithmetic average of oil prices, and included the oil prices on the first day of the month for the ten months ended April 30, 2016, and, for the two months ended June 30, 2016, estimated oil prices for the second quarter of 2016 using the forward price curve forecast of our independent reserves evaluator dated April 1 2016.

As noted above, actual cash flows may be materially affected by other factors. For example, in Colombia, cash royalties are levied at lower rates in low oil price environments and foreign exchange rates can materially impact the deferred tax

32



component of the asset base, operating costs, and the income tax calculation. In Brazil, foreign exchange rates can materially impact operating costs and the income tax calculation.

Holding all factors constant other than benchmark oil prices and related royalty rates, we do not expect any downward adjustment to our consolidated NAR reserve volumes during the second quarter of 2016. This disclosure is based on a pro forma Brent oil price of $44.46 per bbl for the year ended June 30, 2016, calculated as described above.

Business Environment Outlook
 
Our revenues are significantly affected by the continuing fluctuations in world oil prices. Oil prices are volatile and unpredictable and are influenced by concerns about the quantity of world supply and demand fundamentals, market competition between large producers, predominately members of OPEC (Organization of Petroleum Producing Countries), for market share, political influences, financial markets and the impact of the worldwide economy on oil supply and demand growth.

We believe that our current operations and 2016 capital expenditure program can be funded from cash flow from existing operations and cash on hand. Should our operating cash flow decline due to unforeseen events, including additional pipeline delivery restrictions in Colombia or continued downturn in oil and gas prices, we would consider financing our capital expenditure program with borrowings under our revolving credit facility, proceeds from the disposition of assets or capital markets transactions, or a combination thereof, or we would consider reducing our capital expenditure program. We are the operator in the majority of our blocks and therefore have discretion on the timing of our capital expenditures. Given the current economic environment and unstable conditions in the Middle East, North Africa, and Europe and the current over supply of oil in world markets, the oil price environment is unpredictable and unstable. We are unable to determine the impact, if any, these events may have on oil prices and demand. The timing and execution of our capital expenditure program are also affected by the availability of services from third party oil field contractors and our ability to obtain, sustain or renew necessary government licenses and permits on a timely basis to conduct exploration and development activities. Any delay may affect our ability to execute our capital expenditure program.

The credit markets, including the high yield bond market and other debt markets that provide capital to oil and gas companies have experienced adverse conditions. We have not been materially impacted by these conditions; however, continuing volatility in oil prices may continue to contribute to these adverse conditions, which could increase costs associated with renewing or issuing debt or affect our ability to access those markets.

Our future growth and acquisitions may depend on our ability to raise additional funds through equity and debt capital market transactions. Should we access such capital markets to fund capital expenditures or other acquisition and development opportunities, such funding may be affected by the market value of shares of our Common Stock. Issuing additional shares of Common Stock, or other equity securities convertible into Common Stock, may further dilute our existing shareholders. Any securities we issue may have rights, preferences and privileges that are senior to our existing equity securities. Borrowing money may also involve further pledging of some or all of our assets may require compliance with debt covenants and will expose us to interest rate risk. Depending on the currency used to borrow money, we may also be exposed to further foreign exchange risk. Our ability to borrow money and the interest rate we pay for any money we borrow will be affected by market conditions and we cannot predict what price we may pay for any borrowed money.

For over 40 years, the Colombian government has been engaged in a conflict with two main Marxist guerrilla groups: the Revolutionary Armed Forces of Colombia ("FARC") and the National Liberation Army ("ELN"). Both of these groups have been designated as terrorist organizations by the United States and the European Union. Another threat comes from criminal gangs formed from the former members of the United Self-Defense Forces of Colombia militia, a paramilitary group that originally sprouted up to combat FARC and ELN, which the Colombian government successfully dissolved. We operate principally in the Putumayo Basin in Colombia. Pipelines have been primary targets because such pipelines cannot be adequately secured due to the sheer length of such pipelines and the remoteness of the areas in which the pipelines are laid. The CENIT S.A-operated Trans-Andean oil pipeline (the "OTA pipeline”) which transports oil from the Putumayo region and which is one of our export routes, has been targeted by these guerrilla groups. In the three months ended March 31, 2016, the OTA pipeline was shutdown for approximately six days, however this was unrelated to the FARC and for operational reasons. 

While peace talks continue between the Colombian government and the FARC, peace process negotiations between the government and FARC may not generate the intended outcome for both parties. The impact of such a peace process is not determinable on our operations. Continuing attempts by the Colombian government to reduce or prevent guerrilla activity may not be successful and guerrilla activity may continue to disrupt our operations in the future. Our efforts to increase security measures may not be successful and there can also be no assurance that we can maintain the safety of our or our contractors'

33



field personnel and Bogota head office personnel or operations in Colombia or that this violence will not continue to adversely affect our operations in the future and cause significant loss.

Item 3. Quantitative and Qualitative Disclosures About Market Risk
 
See Part II, Item 7A Quantitative and Qualitative Disclosures About Market Risk of our Annual Report on Form 10-K for the fiscal year ended December 31, 2015. The risks facing our company have not changed materially from those set forth in Part II, Item 7A Quantitative and Qualitative Disclosures About Market Risk of our Annual Report on Form 10-K for the fiscal year ended December 31, 2015.

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, including 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(e) of the Exchange Act. Based on their evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that Gran Tierra's disclosure controls and procedures were effective as of March 31, 2016.

Changes in Internal Control over Financial Reporting
 
We acquired Petroamerica Oil Corp. and PetroGranada Colombia Limited on January 13, 2016 and January 25, 2016, respectively, and are currently in the process of integrating these companies into our existing internal controls and procedures. 
There were no changes in our internal control over financial reporting during the quarter ended March 31, 2016, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 
PART II - Other Information

Item 1. Legal Proceedings
 
See Note 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 material developments with respect to matters previously reported in our Annual Report on Form 10-K for the year ended December 31, 2015, and material matters that have arisen since the filing of such report.

Item 1A. Risk Factors

See Part I, Item 1A Risk Factors of our Annual Report on Form 10-K for the fiscal year ended December 31, 2015. The risks facing our company have not changed materially from those set forth in Part I, Item 1A Risk Factors of our Annual Report on Form 10-K for the fiscal year ended December 31, 2015.

Item 6. Exhibits

The exhibits required to be filed by Item 6 are set forth in the Exhibit Index accompanying this Quarterly Report.


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.


34



Date: May 3, 2016
 
/s/ Gary Guidry
 
 
By: Gary Guidry
 
 
President and Chief Executive Officer
 
 
(Principal Executive Officer)
  
Date: May 3, 2016
 
/s/ Ryan Ellson
 
 
By: Ryan Ellson
 
 
Chief Financial Officer
 
 
(Principal Financial and Accounting Officer)


35



EXHIBIT INDEX
Exhibit No.
Description
 
Reference
2.1
Arrangement Agreement, dated November 12, 2015, between Gran Tierra Energy Inc. and Petroamerica Oil Corp.
 
Incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K, filed with the SEC on November 18, 2015 (SEC File No. 001-34018).
 
 
 
 
3.1
Amended and Restated Articles of Incorporation.
 
Incorporated by reference to Exhibit 3.1 to the Annual Report on Form 10-K, filed with the SEC on February 26, 2014 (SEC File No. 001-34018).
 
 
 
 
3.2
Amended and Restated 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 March 3, 2016 (SEC File No. 001-34018).
 
 
 
 
4.1
Indenture related to the 5.00% Convertible Senior Notes due 2021, dated as of April 6, 2016, between Gran Tierra Energy Inc. and U.S. Bank National Association
 
Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K, filed with the SEC on April 6, 2016 (SEC File No. 001-34018).
 
 
 
 
4.2
Form of 5.00% Convertible Senior Notes due 2021.
 
Included as Exhibit A to Exhibit 4.1.
 
 
 
 
10.1
Purchase Agreement, dated as of March 31, 2016, by and between Gran Tierra Energy Inc. and Nomura Securities International, Inc., Dundee Securities Inc. and RBC Dominion Securities Inc.
 
Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, filed with the SEC on April 6, 2016 (SEC File No. 001-34018).
 
 
 
 
10.2
First Amendment to Credit Agreement, dated as of March 31, 2016, by and among Gran Tierra Energy International Holdings Ltd., Gran Tierra Energy Inc., The Bank of Nova Scotia, and the lenders party thereto.
 
Incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K, filed with the SEC on April 6, 2016 (SEC File No. 001-34018).
 
 
 
 
10.3
Form of Performance Stock Unit Award Agreement Under the 2007 Equity Incentive Plan
 
Filed herewith.
 
 
 
 
10.4
Form of Performance Stock Unit Grant Notice
 
Filed herewith.
 
 
 
 
10.5
Executive Employment Agreement effective May 11 2015, between Gran Tierra Energy Canada ULC, Gran Tierra Energy Inc. and Ryan Ellson
 
Filed herewith.
 
 
 
 
10.6
Severance Agreement and Release dated April 6, 2016, between Gran Tierra Energy Canada ULC, Gran Tierra Energy Inc. and Duncan Nightingale.
 
Filed herewith.
 
 
 
 
12.1
Statement re: Computation of Ratio of Earnings to Fixed Charges
 
Filed herewith.
 
 
 
 
31.1
Certification of Principal Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
Filed herewith.
 
 
 
 
31.2
Certification of Principal Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
Filed herewith.
 
 
 
 
32.1
Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
Furnished herewith.

101.INS  XBRL Instance Document
101.SCH  XBRL Taxonomy Extension Schema Document
101.CAL  XBRL Taxonomy Extension Calculation Linkbase Document

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101.DEF XBRL Taxonomy Extension Definition Linkbase Document
101.LAB  XBRL Taxonomy Extension Label Linkbase Document
101.PRE  XBRL Taxonomy Extension Presentation Linkbase Document
 
+ Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. Gran Tierra undertakes to furnish supplemental copies of any of the omitted schedules upon request by the SEC.




37


Exhibit 10.3
Gran Tierra Energy Inc.
2007 Equity Incentive Plan
Performance Stock Unit Award Agreement
Pursuant to the Performance Stock Unit Grant Notice (the “Grant Notice”) and this Performance Stock Unit Award Agreement (the “Agreement”), Gran Tierra Energy Inc. (the “Company”) has awarded you a Performance Stock Unit Award (the “Award”) under the Company’s 2007 Equity Incentive Plan (the “Plan”) for the target number of Performance Stock Units indicated in the Grant Notice.  Capitalized terms not explicitly defined in this Agreement but defined in the Plan will have the same definitions as in the Plan.  Except as otherwise explicitly provided herein, in the event of any conflict between the terms of this Agreement and the Plan, the terms of the Plan shall control.
The details of your Award, in addition to those set forth in the Grant Notice and the Plan, are as follows.
1.
Grant of the Award.  This Award represents your right to be issued on a future date a number of shares of Common Stock equal to the number of Performance Stock Units that vest, calculated by multiplying the portion of the Target Award eligible to vest with respect to each Performance Period by the Performance Multiplier for that Performance Period. As of the Date of Grant, the Company will credit to a bookkeeping account maintained by the Company for your benefit with the Target Award. For the avoidance of doubt, in accordance with the Plan, the Company will have the discretion to settle the Award in an amount of cash equal to the Fair Market Value of the shares of Common Stock issuable to you in respect of your Award, and any references in this Agreement to shares of Common Stock in respect of your Award shall also include an amount of cash equivalent in value to such shares, if any, that the Company elects to issue in whole or in part in settlement of your Award.
2.
Number of Performance Stock Units and Shares of Common Stock.  The number of Performance Stock Units in your Award is set forth in the Grant Notice.
a.
The number of Performance Stock Units that vest will be calculated by multiplying the portion of the Target Award eligible to vest with respect to each Performance Period by the Performance Multiplier for that Performance Period. The Performance Multiplier is calculated for each Performance Period based on performance metrics established and approved by the Board in its full discretion. Further details regarding the terms of the Award and some of the information that will be considered by the Board when establishing the Performance Multiplier for each Performance Period can be found in Appendix A, attached hereto.
b.
The number of Performance Stock Units subject to your Award may be adjusted from time to time for Capitalization Adjustments as described in Section 11(a) of the Plan.
c.
Any additional Performance Stock Units, shares of Common Stock, cash or other property that becomes subject to the Award pursuant to this Section 2 will be





subject, in a manner determined by the Board, to the same forfeiture restrictions, restrictions on transferability, and time and manner of delivery as applicable to the other Performance Stock Units and Common Stock covered by your Award.
d.
No fractional Performance Stock Units or rights for fractional shares of Common Stock will be created pursuant to this Section 2.  Any fraction of a share will be rounded down to the nearest whole share.
3.
Vesting. The Performance Stock Units will vest based on the Company’s performance during each Performance Period and your provision of Continuous Service from the Date of Grant through the date of settlement of the Award. All Performance Stock Units will be forfeited upon a termination of your Continuous Service prior to the settlement of the Award and you will have no further right, title or interest in such Award or any shares of Common Stock or cash with respect to such Award.
4.
Date of Settlement. Subject to the satisfaction of the withholding obligations set forth in Section 11 of this Agreement, the Company will issue to you one share of Common Stock (or an amount of cash equal to the Fair Market Value of one share of Common Stock determined as of the date of settlement) for each Performance Stock Unit that vested, if any, effective December 31, 2018.
5.
Payment by You.  This Award was granted in consideration of your services for the Company or one of its Affiliates.  Subject to Section 11 below, you will not be required to make any payment to the Company or the applicable Affiliate (other than your past and future services for the Company or the applicable Affiliate) with respect to your receipt of the Award, vesting of the Performance Stock Units, or the delivery of the shares of Common Stock underlying the Performance Stock Units.
6.
Securities Law Compliance.  You may not be issued any Common Stock under your Award unless the shares of Common Stock are either (i) then registered under the Securities Act, or (ii) the Company has determined that such issuance would be exempt from the registration requirements of the Securities Act.  Your Award must also comply with other applicable laws, regulations and the rules of the securities exchange(s) upon which the Company’s shares are traded, and you will not receive such Common Stock if the Company determines that such receipt would not be in material compliance with such laws, regulations and rules.
7.
Restrictive Legends.  The Common Stock issued under your Award will be endorsed with appropriate legends, if any, determined by the Company.
8.
Transfer Restrictions.  Prior to the time that shares of Common Stock have been delivered to you, you may not transfer, pledge, sell or otherwise dispose of the shares in respect of your Award.  For example, you may not use shares that may be issued in respect of your Performance Stock Units as security for a loan, nor may you transfer, pledge, sell or otherwise dispose of such shares.  This restriction on transfer will lapse upon delivery to you of shares in respect of your vested Performance Stock Units. Your Award is not transferable, except by will or by the laws of descent and distribution. Notwithstanding the foregoing, by delivering written notice to the Company, in a form satisfactory to the Company, you may designate a third party who, in the event of your





death, will thereafter be entitled to receive any distribution of Common Stock pursuant to this Agreement.
9.
Award not a Service Contract
a.
Your Continuous Service is not for any specified term and may be terminated by you or by the Company or an Affiliate at any time, for any reason, with or without cause and with or without notice. Nothing in this Agreement (including, but not limited to, the vesting of your Performance Stock Units or the issuance of the shares subject to your Performance Stock Units), the Plan or any covenant of good faith and fair dealing that may be found implicit in this Agreement or the Plan will: (i) confer upon you any right to continue in the employment or service of, or affiliation with, the Company or an Affiliate; (ii) constitute any promise or commitment by the Company or an Affiliate regarding the fact or nature of future positions, future work assignments, future compensation or any other term or condition of employment or affiliation; (iii) confer any right or benefit under this Agreement or the Plan unless such right or benefit has specifically accrued under the terms of this Agreement or Plan; or (iv) deprive the Company of the right to terminate you at will and without regard to any future vesting opportunity that you may have.
b.
 By accepting this Award, you acknowledge and agree that the right to vest in the Award (subject to the performance conditions enumerated in the Grant Notice and Agreement) is earned only by continuing as an employee, director or consultant at the will of the Company (not through the act of being hired, being granted this Award or any other award or benefit) and that the Company has the right to reorganize, sell, spin-out or otherwise restructure one or more of its businesses or Affiliates at any time or from time to time, as it deems appropriate (a “reorganization”). You further acknowledge and agree that such a reorganization could result in the termination of your Continuous Service, or the termination of Affiliate status of your employer and the loss of benefits available to you under this Agreement, including but not limited to, the termination of the right to vest in the Award.  You further acknowledge and agree that this Agreement, the Plan, the transactions contemplated hereunder and the vesting schedule set forth herein or any covenant of good faith and fair dealing that may be found implicit in any of them do not constitute an express or implied promise of continued engagement as an employee or consultant for the term of this Agreement, for any period, or at all, and shall not interfere in any way with your right or the Company’s right to terminate your Continuous Service at any time, with or without cause and with or without notice.
10.
 Unsecured Obligation.  Your Award is unfunded, and even as to any Performance Stock Units which vest, you will be considered an unsecured creditor of the Company with respect to the Company’s obligation, if any, to issue Common Stock pursuant to this Agreement.  You will not have voting or any other rights as a stockholder of the Company with respect to the Common Stock acquired pursuant to this Agreement until such Common Stock is issued to you pursuant to Section 4 of this Agreement.  Upon such





issuance, you will obtain full voting and other rights as a stockholder of the Company with respect to the Common Stock so issued.  Nothing contained in this Agreement, and no action taken pursuant to its provisions, will create or be construed to create a trust of any kind or a fiduciary relationship between you and the Company or any other person. 
11.
Withholding Obligations.
a.
On or before the time you receive a distribution of the shares underlying your Performance Stock Units, and at any other time as reasonably requested by the Company in accordance with applicable tax laws, you agree to make adequate provision for any sums required to satisfy the federal, state, local and foreign tax withholding obligations of the Company or any Affiliate that arise in connection with your Award (the “Withholding Taxes”). Specifically, the Company or an Affiliate may, in its sole discretion, satisfy all or any portion of the Withholding Taxes relating to your Award by any of the following means or by a combination of such means: (i) withholding from any compensation otherwise payable to you by the Company or an Affiliate; (ii) causing you to tender a cash payment; (iii) permitting or requiring you to enter into a “same day sale” commitment with a broker-dealer that is a member of the Financial Industry Regulatory Authority (a “FINRA Dealer”) whereby you irrevocably elect to sell a portion of the shares to be delivered in connection with your Performance Stock Units to satisfy the Withholding Taxes and whereby the FINRA Dealer irrevocably commits to forward the proceeds necessary to satisfy the Withholding Taxes directly to the Company and/or its Affiliates; or (iv) withholding shares of Common Stock from the shares of Common Stock issued or otherwise issuable to you in connection with your Performance Stock Units with a Fair Market Value (measured as of the date shares of Common Stock are issued to you) equal to the amount of such Withholding Taxes; provided, however, that the number of such shares of Common Stock so withheld will not exceed the amount necessary to satisfy the Company’s required tax withholding obligations using the minimum statutory withholding rates for federal, state, local and foreign tax purposes, including payroll taxes, that are applicable to supplemental taxable income; and provided further, that to the extent necessary to qualify for an exemption from application of Section 16(b) of the Exchange Act, such share withholding procedure shall be subject to the express prior approval of the Board or a duly authorized committee thereof. 
b.
Unless the Withholding Taxes of the Company and/or any Affiliate are satisfied, the Company will have no obligation to deliver to you any Common Stock or cash with respect to this Award.
c.
In the event the Company’s obligation to withhold arises prior to the delivery to you of Common Stock or it is determined after the delivery of Common Stock to you that the amount of the Company’s withholding obligation was greater than the amount withheld by the Company, you agree to indemnify and hold the Company harmless from any failure by the Company to withhold the proper amount.





12.
Dividends. You shall receive no benefit or adjustment to your Award with respect to any cash dividend, stock dividend or other distribution that does not result from a Capitalization Adjustment as provided in the Plan; provided, however, that this sentence shall not apply with respect to any shares of Common Stock that are delivered to you in connection with your Award after such shares have been delivered to you.
13.
Other Documents.  You hereby acknowledge receipt or the right to receive a document providing the information required by Rule 428(b)(1) promulgated under the Securities Act, which includes the Plan prospectus.  In addition, you acknowledge receipt of the Company’s policy permitting officers, directors and other specified individuals to sell shares only during certain “window” periods and the Company’s insider trading policy, in effect from time to time. 
14.
Notices.  The Company may, in its sole discretion, decide to deliver any documents related to participation in the Plan and this Award by electronic means or to request your consent to participate in the Plan by electronic means.  Any notices provided for in this Agreement or the Plan will be given in writing (including electronically) and will be deemed effectively given upon receipt or, in the case of notices provided by mail, the date that is five (5) days after deposit in the United States Post Office (whether or not actually received by the addressee), by registered or certified mail with postage and fees prepaid, addressed at the following addresses, or at such other address(es) as a party may designate by ten (10) days’ advance written notice to each of the other parties hereto: 
a.
Company:      Gran Tierra Energy Inc., Attn: President & CEO, 200,150 – 13th Avenue S.W.Calgary, Alberta. Canada T2R 0V2
b.
Participant:     Your address as on file with the Company at the time notice is given
15.
Headings.  The headings of the Sections in this Agreement are inserted for convenience only and will not be deemed to constitute a part of this Agreement or to affect the meaning of this Agreement.
16.
Amendment.  This Agreement may be amended only by a writing executed by the Company and you which specifically states that it is amending this Agreement. Notwithstanding the foregoing, this Agreement may be amended solely by the Company by a writing which specifically states that it is amending this Agreement, so long as a copy of such amendment is delivered to you, and provided that no such amendment adversely affecting your rights hereunder may be made without your written consent.  Without limiting the foregoing, the Company reserves the right to change, by written notice to you, the provisions of this Agreement in any way it may deem necessary or advisable to carry out the purpose of the grant as a result of any change in applicable laws or regulations or any future law, regulation, ruling, or judicial decision, provided that any such change will be applicable only to rights relating to that portion of the Award which is then subject to restrictions as provided herein.
17.
Miscellaneous.





a.
The rights and obligations of the Company under your Award will be transferable by the Company to any one or more persons or entities, and all covenants and agreements hereunder will inure to the benefit of, and be enforceable by the Company’s successors and assigns.
b.
You agree upon request to execute any further documents or instruments necessary or desirable in the sole determination of the Company to carry out the purposes or intent of your Award.
c.
You acknowledge and agree that you have reviewed your Award in its entirety, have had an opportunity to obtain the advice of counsel prior to executing and accepting your Award and fully understand all provisions of your Award.
d.
This Agreement will be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.
e.
All obligations of the Company under the Plan and this Agreement will be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company.
18.
Governing Plan Document.  Your Award is subject to all the provisions of the Plan, the provisions of which are hereby made a part of your Award, and is further subject to all interpretations, amendments, rules and regulations which may from time to time be promulgated and adopted pursuant to the Plan.  In the event of any conflict between the provisions of your Award and those of the Plan, the provisions of the Plan will control; provided, however, that Section 4 of this Agreement will govern the timing of any distribution of Common Stock under your Award.  In addition, your Award (and any compensation paid or shares issued under your Award) is subject to recoupment in accordance with The Dodd–Frank Wall Street Reform and Consumer Protection Act and any implementing regulations thereunder, any clawback policy adopted by the Company and any compensation recovery policy otherwise required by applicable law.  No recovery of compensation under such a clawback policy will be an event giving rise to a right to voluntarily terminate employment upon a resignation for “good reason,” or for a “constructive termination” or any similar term under any plan of or agreement with the Company.  The Company will have the power to interpret the Plan and this Agreement and to adopt such rules for the administration, interpretation, and application of the Plan as are consistent therewith and to interpret or revoke any such rules.  All actions taken and all interpretations and determinations made by the Board will be final and binding upon you, the Company, and all other interested persons.  No member of the Board will be personally liable for any action, determination, or interpretation made in good faith with respect to the Plan or this Agreement.
19.
Effect on Other Employee Benefit Plans.  The value of the Award subject to this Agreement will not be included as compensation, earnings, salaries, or other similar terms used when calculating benefits under any employee benefit plan (other than the Plan) sponsored by the Company or any Affiliate except as such plan otherwise expressly





provides. The Company expressly reserves its rights to amend, modify, or terminate any or all of the employee benefit plans of the Company or any Affiliate.
20.
Severability.  If all or any part of this Agreement or the Plan is declared by any court or governmental authority to be unlawful or invalid, such unlawfulness or invalidity will not invalidate any portion of this Agreement or the Plan not declared to be unlawful or invalid. Any Section of this Agreement (or part of such a Section) so declared to be unlawful or invalid will, if possible, be construed in a manner which will give effect to the terms of such Section or part of a Section to the fullest extent possible while remaining lawful and valid.
21.
No Obligation to Minimize Taxes.  The Company has no duty or obligation to minimize the tax consequences to you of this Award and will not be liable to you for any adverse tax consequences to you arising in connection with this Award.  You are hereby advised to consult with your own personal tax, financial and/or legal advisors regarding the tax consequences of this Award and by signing the Grant Notice, you have agreed that you have done so or knowingly and voluntarily declined to do so.
22.
Resolution of Disputes.  Any dispute arising out of, relating to, or in connection with the Award, this Agreement, the Grant Notice and/or the Plan, including any question regarding existence, construction, validity, or termination shall be settled before a sole arbitrator in accordance with the Arbitration Rules of the American Arbitration Association in Calgary, Alberta, Canada.  The proceedings shall be in the English language. The resulting arbitral award shall be final and binding without right of appeal, and judgment upon such award may be entered in any court having jurisdiction thereof. A dispute shall be deemed to have arisen when either Party notifies the other Party in writing to that effect.
23.
Translation of Documents.  The Grant Notice, this Agreement and the Plan are written in the English language.  If a Spanish language or Portuguese language translation has been provided to you, it has been provided only as a courtesy and such translation shall have no legal force or effect.  Only the English language version of the Grant Notice, this Agreement and the Plan shall have legal force and effect and shall be referred to (including in the resolution of any disputes or controversies between the Parties) in interpreting the obligations of the Parties under the Grant Notice, this Agreement and the Plan.
By clicking “Accept”, I hereby acknowledge and agree to all of the terms and conditions contained in the On-Line Performance Stock Unit Grant Notice above.






Appendix A

PERFORMANCE MULTIPLIER CALCULATION FOR
PERFORMANCE SHARE UNITS (“PSUs”)




Exhibit 10.4
Gran Tierra Energy Inc. 
On-Line Performance Stock Unit Grant Notice
(2007 Equity Incentive Plan)

Gran Tierra Energy Inc. (the “Company”) hereby awards to Participant the target number of Performance Stock Units specified and on the terms set forth below (the “Award”).  The Award is subject to all of the terms and conditions as set forth herein and in the Company’s 2007 Equity Incentive Plan (the “Plan”) and the Performance Stock Unit Award Agreement (the “Agreement”), both of which are incorporated herein in their entirety.  Capitalized terms not explicitly defined herein but defined in the Plan or the Agreement shall have the meanings set forth in the Plan or the Agreement.  Except as explicitly provided herein or in the Agreement, in the event of any conflict between the terms in the Award and the Plan, the terms of the Plan shall control.
Participant:  ###PARTICIPANT_NAME###
Date of Grant: ###GRANT_DATE###
Number of Performance Stock Units (“Target Award”): ###TOTAL_AWARDS###
Consideration: Participant’s Services
Performance Periods: The performance periods for this Award are as follows (each a “Performance Period”):  
Performance Period
Percentage of Target Award Eligible to Vest for Each Performance Period
January 1, 2016 – December 31, 2016
20%
January 1, 2017 – December 31, 2017
20%
January 1, 2018 – December 31, 2018
20%
January 1, 2016 – December 31, 2018
40%
Vesting: The number of Performance Stock Units that vest for each Performance Period will be calculated by multiplying the portion of the Target Award eligible to vest by the Performance Multiplier (as defined below) for that Performance Period. The number of Performance Stock Units that vest may range from 0 – 200% of the Target Award based on the Company’s achievement of pre-established performance metrics as approved by the Board. You must remain in the Continuous Service of the Company from the Date of Grant through the date of settlement of the Award. All Performance Stock Units will be forfeited upon a termination of your Continuous Service prior to the settlement of the Award, regardless for the reason for such termination, and you will have no further right, title or interest in such Award or any shares of Common Stock or cash with respect to such Award. Notwithstanding any provision herein or in the Agreement to the contrary, in the event of any inconsistency between the requirement to provide Continuous Service included in this Grant Notice or the Agreement and the terms of any employment agreement entered into by and between you and the Company, the terms of the employment agreement shall control.  





Performance Metrics: The “Performance Multiplier” will be calculated for each Performance Period by the Board in its discretion based upon the following metrics:
1.
50% weighting: The Company’s Relative Total Shareholder Return, which is calculated by comparing the Company’s change in share price plus reinvestment of dividends relative to the performance of a peer group of companies (selected by the Board in its sole and absolute discretion) with respect to the same measures;
2.
25% weighting: Net Asset Value per share;
3.
25% execution of strategy (as determined by the Board).
Date of Settlement: So long as you have provided Continuous Service from the Date of Grant through the date of settlement, one share of Common Stock will be issued to you for each Performance Stock Unit which vests, if any, effective December 31, 2018, in compliance with Section 4 of the Agreement. In accordance with the Plan, the Company will have the discretion to settle the Award in an amount of cash equivalent to the Fair Market Value of the shares of Common Stock issuable in respect of the Award.
Additional Terms/Acknowledgements: By clicking “Accept” below (located after the Agreement), the Participant expressly acknowledges the following:
Participant has been provided with and understands and agrees to: this Performance Stock Unit Grant Notice, the Agreement, the Plan prospectus and the Plan.  (The Plan prospectus and the Plan can be found in the “Gran Tierra Documents” folder located in the Participant’s “Personal Profile” tab, under “Miscellaneous Account Information”.)
Participant acknowledges and agrees that this Award and any other stock awards under the Plan are voluntary, occasional, awarded solely at the discretion of the Board, and do not create any contractual or other right to receive future performance stock units, stock awards or other benefits in lieu of future stock awards, even if similar stock awards have been granted repeatedly in the past.
Participant acknowledges and agrees that determinations with respect to any future stock awards, including but not limited to, the times when such stock awards are made, the number of shares of Common Stock and the performance and other conditions applied to the stock awards, will be at the sole discretion of the Board.
Participant acknowledges and agrees that as of the Date of Grant, this Performance Stock Unit Grant Notice, the Agreement and the Plan set forth the entire understanding between Participant and the Company regarding the Award and supersedes all prior oral and written agreements on that subject, with the exception of: (i) awards previously granted and delivered to you under the Plan, and (ii) if applicable to Participant, (A) the terms of any written offer letter or employment agreement entered into between the Company and Participant that specifically provides for accelerated vesting of compensatory equity awards, (B) the terms of any applicable Company change of control severance plan, and (C) any required compensation recovery provisions under applicable laws or regulations.    
Participant is responsible for properly reporting to the applicable government authorities all benefits received from the Award.  The Participant shall remit to the applicable government authorities all amounts properly payable to such government authorities with





respect to all benefits received from the Award. Participant should consult a tax advisor for more information regarding the rates and provisions that apply to Participant.
Participant consents to receive Plan documents by electronic delivery and to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company.
 Gran Tierra Energy Inc.
/s/ Gary S. Guidry
Gary S. Guidry, President & CEO



 

Exhibit 10.5
This exhibit is a corrected version of the agreement that was previously filed as Exhibit 10.3 to the Quarterly Report on Form 10-Q, filed with the SEC on November 4, 2015
EXECUTIVE EMPLOYMENT AGREEMENT
BETWEEN:
GRAN TIERRA ENERGY CANADA ULC, an Alberta corporation (“GTE ULC”) and GRAN TIERRA ENERGY INC., a Nevada corporation (“Gran Tierra”)
(GTE ULC and Gran Tierra are collectively referred to herein as, the “Company”)
- and -
RYAN ELLSON, an individual ordinarily resident in Calgary in the Province of Alberta
(the “Executive”)
(GTE ULC, Gran Tierra and the Executive are collectively referred to herein as the “Parties
and individually referred to herein as a “Party”)
RECITALS:
A.
The Executive has been employed by GTE ULC since May 11, 2015 in the position of Chief Financial Officer;
B.
GTE ULC wishes to continue to employ the Executive and the Executive wishes to continue such employment; and
C.
The Executive has also been employed by Gran Tierra and served as an officer of Gran Tierra since May 11, 2015.
In consideration of the above and for other good and valuable consideration, including enhancements to the Executive’s entitlement to an annual bonus and increasing the amount payable to the Executive in the event the Executive’s employment is terminated without cause or terminated contemporaneously with a Change of Control (as defined below), the Parties agree as follows:
Article 1
DUTIES AND RESPONSIBILITIES
1.1
Position
On the terms and subject to the conditions hereinafter contained, the Executive will continue in employment with GTE ULC as its Chief Financial Officer and as Chief Financial Officer of Gran Tierra. The Executive shall report to and be subject to the general direction of the President and Chief Executive Officer of Gran Tierra (the “President”) and shall undertake those duties customarily performed by a person holding the same or equivalent position in entities of a similar size, engaged in a similar business, as well as such other related duties that may be reasonably assigned by the President.

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1.2
Exclusive Service & Other Engagements
The Executive will faithfully serve the Company and will devote his full time and attention to the business and affairs of the Company and the performance of the Executive's duties and responsibilities hereunder.
The Executive shall not engage in any other business, profession or occupation which would conflict with the performance of his duties and responsibilities under this Agreement, either directly or indirectly, including accepting any appointment to the board of directors of another company without the prior written consent of the board of directors of Gran Tierra (the “Board”).
1.3
Reassignment
The Executive agrees that the Company may modify or remove the Executive’s assigned duties; or change the place of the Executive’s employment without additional compensation to the Executive, in accordance with the Company’s needs. The parties acknowledge and agree that any such change of duties and responsibilities will not amount to, or constitute a constructive dismissal at common law, nor provide the Executive with Good Reason, so long as the change in duties and responsibilities are comparable to the Executive’s existing duties and commensurate with the position then held by the Executive.
1.4
Travel
The Executive shall work at GTE ULC’s offices in Calgary, Alberta. The Executive shall be available for such business related travel as may be required for the purposes of carrying out the Executive’s duties and responsibilities hereunder. Such travel shall be in accordance with the Company’s travel policy as amended from time to time.
Article 2    
BASE SALARY
The Company will pay the Executive an annual salary of $325,000 Canadian Dollars, subject to applicable statutory deductions (the “Base Salary”). The Executive’s Base Salary will be payable in accordance with the Company’s practices and procedures as they may exist from time to time. Base Salary will be reviewed and may be increased on an annual basis.
Article 3    
BONUS
3.1
Bonus Eligibility
The Executive shall be eligible to receive a target annual bonus of 80% of Base Salary in addition to the Executive’s Base Salary and other compensation for each year of the Executive’s employment (the “Bonus”).
3.2
Bonus Payment
The Bonus shall be payable by the Company shortly after the finalization of year end financials, and will be based upon factors determined by the Board, including but not limited to financial, operating, and strategic goals, and the Executive’s performance during the preceding year.
Article 4    
BENEFITS

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The Executive will be entitled to participate in and to receive all rights and benefits under any life insurance, disability, medical, dental, health and accident plans maintained by the Company for its employees and for its executive officers specifically. The Company will continue to pay the Executive’s Base Salary in the event that the Executive becomes disabled until such time as the Executive begins to receive short-term or long-term disability insurance benefits or a final decision is made that there is no such entitlement.
Article 5    
VACATION
The Executive will be entitled to twenty-five (25) days’ paid vacation per year. This vacation entitlement shall be earned over the course of each year that the Executive is employed and the Executive shall be entitled to a proportionate period of vacation for any period of less than a full year of employment. The Executive will arrange vacation time to suit the essential business needs of the Company. Unused vacation entitlement in any year will be carried over into the following calendar year to a maximum entitlement of thirty (30) days in any one year. Upon termination for any reason, the Executive will be paid out any accrued but unused vacation entitlement.
Article 6    
LONG TERM INCENTIVE PROGRAM (“LTIP”)
Prior to the execution of this Agreement, the Executive was provided with an initial stock option grant of 350,000 shares of the common stock of Gran Tierra and 60,000 restricted stock units, in accordance with the terms and conditions of Gran Tierra’s 2007 Equity Incentive Plan (the “Plan”). The Executive will be eligible to participate in the Plan and in all applicable future stock option plans and/or incentive award plans as approved by the Board. In the event that the Executive’s employment is terminated for any reason, the Executive’s equity in the Company as well as any option grants (vested and non-vested options) in the Company, shall be governed by the terms and conditions of the Plan, without regard to any termination notice, payment in lieu of notice, or combination thereof that may be required pursuant to this Agreement or the common law.
Article 7    
PERQUISITES AND EXPENSES
The Executive shall be reimbursed for all reasonable out of pocket expenses incurred in the course of his employment, upon providing reasonable substantiation and appropriate receipts for such expenditures.
Article 8    
TERM AND TERMINATION OF EMPLOYMENT
8.1
Term
The Executive’s term of employment commenced on May 11, 2015 and will continue until terminated in accordance with this Article 8.
8.2
Termination Without Notice
This Agreement and the Executive’s employment hereunder may be terminated, without advance notice of termination or pay in lieu of such notice, whether under contract, statute, common law or otherwise, in the following circumstances:

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(a)
Voluntary Resignation
In the event that the Executive voluntarily resigns, except where the Executive resigns for Good Reason, the Executive will give ninety (90) days’ advance written notice. The Executive will not be entitled to receive any further compensation or benefits whatsoever other than those which have accrued up to the Executive’s last day of active service. The Company may, at its discretion, waive in whole or in part such notice by providing the Executive with payment in lieu equal to all amounts that would have been paid to the Executive for the remainder of such notice period;
(a)
Cause
The Company may terminate the employment of the Executive at any time without notice for Cause. The Executive will not be entitled to receive any further compensation or benefits whatsoever other than those which have accrued up to the Executive’s last day of active service.
"Cause" means any act or omission of the Executive which would, at common law, permit an employer to, without notice or payment in lieu of notice, terminate the employment of an employee.
(b)
Death
In the event of the death of the Executive during the term of this Agreement, the Parties agree and acknowledge that this Agreement and the Executive’s employment hereunder will be deemed to be terminated and the Company will not be obligated to provide the Executive, or his estate, with any additional compensation excepting that which had already accrued to the Executive up to and including the date of termination, and any other death benefits that may be payable pursuant to the terms of applicable insurance coverage.
The Company may not terminate the Executive’s employment for Cause unless and until you receive a copy of a resolution duly adopted by the affirmative vote of at least a majority of the Board finding that in the good faith opinion of the Board that “Cause” exists and specifying the particulars thereof in reasonable detail.
8.3
Termination by the Company without Cause
The Company may terminate the Executive’s employment without Cause at any time by providing the Executive with a separation package (the “Separation Package”) equal to one and a half (1 ½) times the Base Salary and the Bonus that was paid or was payable to the Executive during the twelve (12) month period prior to the termination date. 
The Separation Package shall be payable in a lump sum within thirty (30) days of the termination date. The Executive shall not be required to mitigate any portion of the Separation Package by seeking other employment nor shall it be reduced by any remuneration or compensation earned by the Executive after the termination date.
8.4
Termination by the Executive for Good Reason.
Should the Executive terminate his employment for Good Reason, as hereinafter defined, he shall receive the Separation Package set out in section 8.3. Failure of the Executive to terminate his employment on the occurrence of any event which would constitute Good Reason shall not constitute waiver of his rights under section 8.4 or section 8.3, provided that the Executive tenders his resignation within thirty (30) days after

4


 

the occurrence of the event that forms the basis for the resignation for Good Reason and provided, however, except in the event of a Change of Control (as hereinafter defined), that the Executive has provided written notice to the Company describing the nature of the event that the Executive believes forms the basis for the resignation for Good Reason, and the Company shall thereafter have ten (10) days to cure such event.
“Good Reason” is defined as the occurrence of any of the following without the Executive’s express written consent:
(a)
an adverse change in the Executive’s position, titles, duties or responsibilities (including new, additional or changed formal or informal reporting responsibilities) or any failure to re-elect or re-appoint him to any such positions, titles, duties or offices, except in connection with the termination of his employment for Cause;
(b)
a reduction by the Company of the Executive’s Base Salary except to the extent that the annual base salaries of all other executive officers of the Company are similarly reduced or any change in the basis upon which the Executive’s annual compensation is determined or paid if the change is or will be adverse to the Executive except that an award of any annual performance bonuses (including the Bonus) by the Company’s Compensation Committee (and approved by the Board) are discretionary and in no instance shall be considered adverse to Executive if such performance bonus is reduced from a prior year or if an annual performance bonus is not paid;
(c)
a Change in Control occurs; or
(d)
any breach by the Company of any material provision of this Agreement.
“Change in Control” is defined as:
(a)
a dissolution, liquidation, sale, lease or other disposition of all or substantially all of the assets of Gran Tierra or GTE ULC;
(b)
a majority of the voting securities of GTE ULC ceasing to be controlled, directly or indirectly, by Gran Tierra, where “voting securities” means any securities carrying a right to vote in respect of the election of directors under all circumstances or under circumstances that have occurred and are continuing; or
(c)
an amalgamation, arrangement, merger or other consolidation of Gran Tierra with or into any one or more other corporations pursuant to which any person or combination of persons thereafter hold a greater number of voting securities or other securities of the successor or continuing corporation having rights of purchase, conversion or exchange into voting securities of the successor or continuing corporation (assuming the purchase, conversion or exchange of such other securities whether then purchasable, convertible or exchangeable or not into the highest number of voting securities of the successor or continuing corporation such persons would be entitled to) than the number of voting securities of the successor or continuing corporation held directly and indirectly by former shareholders of Gran Tierra, where “voting securities” means any securities carrying a right to vote in respect of the election of directors under all circumstances or under circumstances that have occurred and are continuing.
8.5
Resignation of Offices Held

5


 

In the event that this Agreement or the Executive’s employment hereunder is terminated for any reason, the Executive agrees to resign effective the termination date from any office or directorship held with or on behalf of Gran Tierra or a subsidiary, affiliated or related corporate entity (”Member Company” or “Member Companies”). The Executive agrees that he shall execute any and all documents appropriate to evidence such resignations and that he will not be entitled to any additional payments or compensation of any kind as consideration for doing so.
Article 9    
DIRECTORS/OFFICERS LIABILITY
9.1
Indemnity
Gran Tierra shall provide to the Executive indemnification in accordance with the Indemnification Agreement dated as of May 11, 2015 entered into between Gran Tierra and the Executive.
9.2
Insurance
(a)
Gran Tierra shall purchase and maintain, throughout the period during which the Executive acts as a director or officer of Gran Tierra or a Member Company and for a period of six years after the date that the Executive ceases to act as a director or officer of Gran Tierra or a Member Company, directors’ and officers’ liability insurance for the benefit of the Executive and the Executive’s heirs, executors, administrators and other legal representatives, such that the Executive’s insurance coverage is, at all times, at least equal to or better than any insurance coverage that Gran Tierra purchases and maintains for the benefit of its then current directors and officers, from time to time.
(b)
If for any reason whatsoever, any directors’ and officers’ liability insurer asserts that the Executive or the Executive’s heirs, executors, administrators or other legal representatives are subject to a deductible under any existing or future directors’ and officers’ liability insurance purchased and maintained by Gran Tierra for the benefit of the Executive and the Executive’s heirs, executors, administrators and other legal representatives, Gran Tierra shall pay the deductible for and on behalf of the Executive or the Executive’s heirs, executors, administrators or other legal representatives, as the case may be.
9.3
Survival
The provisions of sections 9.1 and 9.2 of this Agreement shall survive the termination of this Agreement or the employment of the Executive and such provisions shall continue in full force and effect in accordance with such Indemnification Agreement and the provisions of this Agreement for the benefit of the Executive.
Article 10    
NON-COMPETITION AND CONFIDENTIALITY
10.1
Fiduciary Duties & Non-Competition
The Executive recognizes and understands that in performing the duties and responsibilities as outlined in this Agreement, he will occupy a position of high fiduciary trust and confidence, pursuant to which he has developed and will develop and acquire wide experience and knowledge with respect to all aspects of the services and businesses carried on by Gran Tierra and its Member Companies and the manner in which such businesses are conducted. The Executive agrees that such knowledge and experience shall be used solely and exclusively in the furtherance of the business interests of Gran Tierra and its Member Companies and not in any manner detrimental to them. The Executive further agrees that so long as the Executive is employed

6


 

pursuant to this Agreement, the Executive shall not engage in any practice or business in competition with the business of Gran Tierra or any of its Member Companies. The Executive further agrees that the Executive’s fiduciary duties shall survive the termination of this Agreement in accordance with applicable law.
10.2
Confidentiality
The Executive further recognizes and understands that he is a key employee and will become knowledgeable, aware and possessed of confidential and proprietary information, know-how, data, strategic studies, techniques, knowledge and other confidential information of every kind or character relating to or connected with the business or corporate affairs and operations of Gran Tierra and its Member Companies, which may include, without limitation, geophysical studies and data, market data, engineering information, shareholder data, compensation rates and methods and personnel information (collectively “Confidential Information”) concerning the business of Gran Tierra and its Member Companies. The Executive therefore agrees that, except with the consent of the President, he will not disclose such Confidential Information to any unauthorized persons; provided that the foregoing shall not apply to any Confidential Information which is or becomes known to the public or to the competitors of Gran Tierra or its Member Companies other than by a breach of this Agreement.
10.3
Following Termination of Agreement
Subject to this Article 10 and without otherwise restricting the fiduciary obligations imposed upon, or otherwise applicable to the Executive as a result of the Executive having been a senior officer and key employee, the Executive shall not be prohibited from obtaining employment with or otherwise forming or participating in a business competitive to the business of the Company after the termination of this Agreement and the Executive’s employment hereunder.
10.4
Business Records
The Executive agrees to promptly deliver to the Company, upon termination of his employment for any reason, or at any other time when the Company so requests, all documents relating to the business of Gran Tierra or its Member Companies, including, without limitation: all reports and related data, such as summaries, memoranda and opinions relating to the foregoing, contract files, notes, records, manuals, correspondence, financial and accounting information, client lists, statistical data and compilations, patents, copyrights, trademarks, trade names, methods, processes, agreements, contacts or any other documents relating to the business of Gran Tierra or its Member Companies, and all copies thereof and therefrom (collectively, the "Business Records"). The Executive confirms that all of the Business Records which are required to be delivered to the Company pursuant to this Agreement constitute the exclusive property of Gran Tierra or its Member Companies. The obligations of confidentiality set forth in this Agreement shall continue notwithstanding the Executive’s delivery of any such documents to the Company.
Article 11    
CHANGES TO AGREEMENT
Any modifications or amendments to this Agreement must be in writing and signed by all Parties or else they shall have no force and effect.
Article 12    
ENUREMENT

7


 

This Agreement shall enure to the benefit of and be binding upon the Parties and their respective successors and assigns, including without limitation, the Executive’s heirs, executors, administrators and personal representatives.
Article 13    
GOVERNING LAW AND JURISDICTION
This Agreement shall be construed in accordance with the laws of the Province of Alberta and the federal laws of Canada applicable therein. Any action arising from or relating any way to this Agreement, or otherwise arising from or relating to Executive’s employment hereunder, shall be tried in the Court of Queen's Bench situated in Calgary, Alberta. The Parties consent to jurisdiction and venue in those courts to the greatest extent possible under law.
Article 14    
NOTICES
14.1
Notice to Executive
Any notice required or permitted to be given to the Executive shall be deemed to have been received if delivered personally to the Executive or sent by courier to the Executive’s home address last known to the Company.
14.2
Notice to Company
Any notice required or permitted to be given to the Company shall be deemed to have been received if delivered personally to, sent by courier, or sent by facsimile to:
Gran Tierra Energy Inc.

200, 150-13th Avenue S.W.

Calgary, Alberta, Canada, T2R 0V2

Fax: +1 403 265-3242

Attn: President
Article 15    
WITHHOLDING
All payments made to the Executive hereunder or for the benefit of the Executive shall be less applicable statutory withholdings and deductions.
Article 16    
INDEPENDENT LEGAL ADVICE
The Executive acknowledges that the Executive has been advised to obtain independent legal advice with respect to entering into this Agreement, that he has obtained such independent legal advice or has expressly

8


 

deemed not to seek such advice, and that the Executive is entering into this Agreement with full knowledge of the contents hereof, of the Executive’s own free will and with full capacity and authority to do so.
Article 17    
COMPANY POLICIES
The Executive will comply with all Company policies and procedures (certain of which may be found on the “Corporate Responsibility” page at www.grantierra.com), as may be amended by the Company from time to time (the "Company Policies"). The Executive agrees to review and provide written acknowledgement on an annual basis of his acceptance of the Company Polices, including policies with respect to business conduct and ethics, insider trading, complaints reporting, foreign corrupt practices, information security, computer use, and disclosure.
Article 18    
WAIVER
No failure or delay by any Party in exercising any right, power or privilege under this Agreement will operate as a waiver of those rights, powers or privileges, nor will any waiver in one instance be deemed to be a continuing waiver in any other instance.
Article 19    
SEVERABILITY AND ENFORCEABILITY
If any court of competent jurisdiction declares any provision of this Agreement invalid, void or unenforceable in whole or in part, for any reason, it shall be deemed not to affect or impair the validity of the remainder of this Agreement, which shall remain in full force and effect. To the extent that any court of competent jurisdiction concludes that any provision of this Agreement is void or voidable, the court shall reform such provision(s) to render the provision(s) enforceable, but only to the extent absolutely necessary to render the provision(s) enforceable.
Article 20    
PRIVACY
The Executive acknowledges and agrees that he will take all necessary steps to protect and maintain the Personal Information (information about an identifiable individual) of the employees, consultants or customers of the Company obtained in the course of the Executive's employment with the Company. The Executive shall at all times comply, and shall assist the Company to comply, with all applicable laws relating to privacy and the collection, use and disclosure of Personal Information in all applicable jurisdictions, including but not limited to the Personal Information Protection Act (Alberta) (“Applicable Privacy Laws”).
The Executive acknowledges and agrees that the disclosure of the Executive’s Personal Information may be required as part of the ongoing operations of the Company’s business, as required by law or regulatory agencies, as part of the Company’s audit process, as part of a potential business or commercial transaction or as part of the Company’s management of the employment relationship (the "Personal Information Disclosure"), and the Executive hereby grants consent as may be required by Applicable Privacy Laws to the Personal Information Disclosure.
Article 21    
ENTIRE AGREEMENT

9


 

This Agreement, together with the documents referenced herein, constitutes the entire agreement between the Parties with respect to the subject matter hereof and supersedes all prior agreements, understandings, negotiations and discussions, whether oral or written.
[Remainder of page intentionally left blank. Signature page follows.]

10


 

Article 22    
COUNTERPART EXECUTION
This Agreement may be executed in any number of counterparts and each such counterpart shall be deemed an original Agreement for all purposes; provided that no Party shall be bound to this Agreement unless and until all Parties have executed a counterpart. Delivery of a copy of a counterpart by facsimile or email by one Party to the other Party shall be deemed to be delivery of an original by that Party.
IN WITNESS OF WHICH the Parties have duly executed this Agreement on the dates set forth below, with an effective date of May 11, 2015
GRAN TIERRA ENERGY CANADA ULC, an Alberta corporation
 
GRAN TIERRA ENERGY INC., a Nevada corporation
By:


/s/Gary Guidry
 
By:


/s/Gary Guidry
 
Name: Gary Guidry 
Title: President and Chief Executive Officer
 
 
Name: Gary Guidry 
Title: President and Chief Executive Officer
Date:

November 2, 2015
 
Date:

November 2, 2015
 
 
 
 
 

 
 
EXECUTIVE
 
 
By:
/s/Ryan Ellson
 
 
 
Ryan Ellson
 
 
Date:

November 2, 2015
SIGNED, SEALED & DELIVERED
 
In the presence of:
/s/James Evans
 
 
 
Witness
 
 
 
James Evans
 
 
 
Print Name
 
 
 


11

 

Exhibit 10.6
SEVERANCE AGREEMENT AND RELEASE
This Severance Agreement and Release (the “Agreement”) is made by and between Duncan Nightingale (“Nightingale”) and Gran Tierra Energy Inc. (the “Company”) entered in to April 6, 2016 and effective as of February 19, 2016 (the “Effective Date”). Nightingale and the Company are collectively referred to herein as the “Parties”.
WHEREAS, Nightingale was employed by the Company pursuant to an employment agreement dated July 29, 2009, as amended by amending agreements dated July 31, 2014, February 19, 2015, and May 7, 2015 (collectively the “Employment Agreement”);
WHEREAS, the Company provided working notice to Nightingale that his employment with the Company will terminate on a without cause basis effective May 31, 2016 (the “Termination Date”);
WHEREAS, the Parties wish to resolve all issues relating to Nightingale’s employment with the Company and the termination thereof and have reached the within agreement;
NOW THEREFORE, in consideration of the promises made herein and the other good and valuable consideration (the sufficiency of which is hereby acknowledged), the Parties hereby agree as follows:
1.
CONTINUOUS SERVICE TO THE COMPANY
(a)
Notwithstanding the Effective Date of this Agreement, Nightingale agrees to provide services to the Company, on an as-needed basis, immediately following the Effective Date up to and including the Termination Date. While specific duties are still to be determined, it is anticipated that Nightingale will continue to support the Company in a business development role as it relates to the Company’s clients in Mexico, as well as other ad-hoc services as requested by the Company from time to time (“Services”).
(b)
There is no requirement that Nightingale attend the offices of the Company between the Effective Date and the Termination Date. To the extent that Nightingale’s attendance at the Company’s office is required to perform the Services, Nightingale shall contact the Company in advance to schedule a mutually convenient time to attend the Company’s office.
(c)
Nightingale shall continue to receive his annual base salary and continue to be eligible to receive Company benefits up to and including the Termination Date. Please note that benefit eligibility shall continue to be governed by the terms and conditions of the Company’s benefit plans, as administered by the Company’s benefit provider. Nightingale is entitled to payment for prorated unused vacation to be paid after the Termination Date. If both parties agree to expedite an earlier termination date, any outstanding amount owed to Nightingale will be paid by the Company within thirty (30) days of the new, agreed upon termination date.
2.
SEVERANCE & BENEFITS
In accordance with section 8.2 of Nightingale’s Employment Agreement, the Company shall provide to Nightingale a lump sum payment of $1,338,000 less required statutory deductions (the “Severance Payment”), equal to 2 times the annual base salary and bonus paid and payable to Nightingale during

 

- 2 -


the 12 months immediately preceding the Termination Date. The Severance Payment shall be payable to Nightingale within 30 days of the Termination Date.
3.
STOCK OPTIONS & RESTRICTED STOCK UNITS
The treatment of all stock options and restricted stock units currently held by Nightingale shall be governed by the terms and conditions of the Company’s 2007 Equity Incentive Plan and each individual equity grant provided to Nightingale. For clarity, the Company and Nightingale agree that Nightingale shall be deemed to be providing “Continuous Service”, as the term is defined in the 2007 Equity Incentive Plan, between the Effective Date and the Termination Date. However, as per the Employment Agreement, Nightingale is entitled to retain the ability to exercise all stock options currently held for one year following the Termination Date, or May 31, 2017. Further, for clarity, all unvested RSUs and Stock Options will vest on May 7, 2016 according to the Employment Agreement and all proceeds from the vesting of the RSUs will be paid to Nightingale within 30 days of the termination date.
4.
RESIGNATION FROM OFFICES
As of the Effective Date Nightingale will immediately resign all directorships, offices and other positions (excluding the position of employee) held by Nightingale in the Company. Nightingale will not be entitled to receive any severance payment or other compensation for the resignation of such directorships, offices or other positions (excluding the position of employee).
5.
RELEASE
Nightingale does for himself and his heirs, executors, administrators and assigns, forever release, remise and discharge the Company, its parent, successors, assigns, subsidiaries and affiliates and all its officers, directors, employees and agents, jointly and severally from any and all actions, causes of actions, contracts (whether express or implied), claims and demands for damage, loss or injury, suits, debts, sums of money, indemnity, expenses, interest, costs and claims of any and every kind and nature whatsoever, at law, in equity, or pursuant to statute, which against the Company, Nightingale ever had, now has, or can hereafter have by reasons of or existing out of any causes whatsoever existing up to and inclusive of the date of this Agreement, including, but without limiting the generality of the foregoing:
(a)
the Employment Agreement;
(b)
his employment with the Company;
(c)
the termination thereof;
(d)
any and all claims for damages, salary, wages, termination pay, severance pay, vacation pay, commissions, bonuses, expenses, RSP, pension, performance warrants, stock options, allowances, incentive payments, or any other benefits arising out of his employment with the Company;
(e)
loss of position, status, future job opportunity, or reputation; and
(f)
any and all claims arising out of or by virtue of the Alberta Human Rights Act.

 

- 3 -


6.
NO ADMISSION
Nightingale agrees and acknowledges that this Agreement does not constitute any admission of liability by the Company.
7.
INDEMNITY FOR TAXES, ETC.
Nightingale further agrees that, for the aforesaid payments, including the Severance Payment, he will save harmless and indemnify the Company from and against all claims, charges, taxes, interest or penalties and demands which may be made by the Minister of National Revenue requiring the Company to pay income tax under the Income Tax Act (Canada), in respect of income tax payable by him in excess of the income tax previously withheld; and in respect of any and all claims, charges, taxes, interest, or penalties and demands which may be made on behalf of or related to the Employment Insurance Commission or the Canada Pension Commission under the applicable statutes and regulations, with respect to any amount which may, in the future, be found to be payable by the Company in respect of him.
8.
EMPLOYMENT STANDARDS CODE
Nightingale acknowledges that this settlement includes payment for any and all claims arising out of or by virtue of the Employment Standards Code (Alberta). Nightingale further acknowledges receipt of all wages, damages, overtime pay, vacation pay, general holiday pay, and pay in place of notice of termination of employment that he is entitled to by virtue of the Employment Standards Code (Alberta).
9.
BENEFITS AND INSURANCE CLAIMS
Nightingale acknowledges and agrees that the consideration paid to him includes full compensation and consideration for loss of employment benefits and all benefits will cease effective May 31, 2016. Nightingale fully accepts sole responsibility to replace those benefits that he wishes to continue and to exercise conversion privileges where applicable with respect to benefits. In the event that Nightingale becomes disabled, Nightingale covenants not to sue the Company for insurance or other benefits, or for loss of benefits. Nightingale hereby releases the Company from any further obligations or liabilities arising from his employment benefits.
10.
NON-DISCLOSURE
Nightingale agrees that he will not divulge or disclose directly or indirectly the contents of this Agreement or the terms of settlement relating to the termination of Nightingale’s employment with the Company to any person, except for his legal and financial advisors on the condition that they maintain the confidentiality thereof, or as required by law.
11.
CONFIDENTIALITY
Nightingale recognizes and agrees that during his employment with the Company he had access to certain confidential and proprietary information, the disclosure of which could be harmful to the interests of the Company. Nightingale understands that all Confidential Information (as hereinafter defined) remains the sole property of the Company. Nightingale agrees that, at all times, he shall hold and maintain in strictest confidence all Confidential Information. Nightingale further agrees not to disclose, use or publish, either directly or indirectly, Confidential Information for any purpose

 

- 4 -


without first obtaining the Company’s written permission. Nightingale agrees to hold all third party information in the strictest confidence. Nightingale acknowledges that he has taken and will in the future take appropriate precautions to safeguard the confidential information of the Company.
For the purposes of this Agreement, “Confidential Information” shall mean all non-public, confidential, or proprietary information owned, possessed or controlled by the Company, received by or disclosed to Nightingale during the course of his employment with the Company in any form (oral, written, electronic, or other form or media) including, without limitation, trade secrets, copyrights, patents, trademarks, industrial designs, and any other proprietary rights, financial information, operational information, product development plans, and information regarding the Company’s ideas, concepts, inventions, techniques, modifications, processes, improvements, products, services, employees, compensation structure, customers, vendor lists, vendor information, contract and bidding information and data, forecasts, and business plans.
Nightingale recognizes and agrees that all written and electronic drawings, manuals, letters, notebooks, reports, records and similar collections of confidential and proprietary information of the Company (hereinafter collectively called “Documents”), are the property of the Company and he expressly acknowledges and it is a condition of the Payments from the Company, that he has delivered all such Documents to the Company.
12.
NON-DISPARAGING
As of the date of this Agreement, Nightingale understands and agrees that he shall not, at any time, denigrate, through adverse or disparaging communication, written or oral, whether true or not, the operations or business of the Company or its current or former employees, officers or directors.
13.
FURTHER CLAIMS
Nightingale agrees not to make claim or take proceedings against any other person, corporation or entity, that might claim contribution or indemnity under the provisions of any statute or otherwise against the Company.
14.
GOVERNING LAW AND JURISDICTION
This Agreement shall be governed by and construed in accordance with the laws of the Province of Alberta and the federal laws of Canada applicable therein. The Parties irrevocably submit to the exclusive jurisdiction of the Courts of the Province of Alberta.
15.
COMPLETE AGREEMENT
It is understood by the Parties that this Agreement contains the entire agreement between the Parties and that the terms of this Agreement are contractual and not mere recitals.
16.
ACKNOWLEDGEMENT/INDEPENDENT LEGAL ADVICE
Nightingale acknowledges that he has carefully read and considered the provisions of this Agreement. Nightingale further acknowledges that he has had the opportunity to seek independent legal advice, and has either obtained such independent legal advice with regard to this Agreement, or has expressly determined not to seek such advice. Nightingale further acknowledges that he is entering into this Agreement with full knowledge of the contents, nature and consequences of this Agreement.

 

- 5 -


DATED at the City of Calgary, in the Province of Alberta, this “6th day of
“April” , 2016.
    

“April 6/16”
 
Gran Tierra Energy Inc.
Per:
/s/ Gary S. Guidry
Date Signed
 
Gary S. Guidry
President and CEO

SIGNED, SEALED AND DELIVERED in the presence of:

/s/ Warren Bell
 
/s/ D.J. Nightingale
Witness Signature
Duncan Nightingale

“Warren Bell”


“12th April 2016”
Print Name of Witness
Date Signed


 
Exhibit 12.1

STATEMENT RE: COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(in thousands)
 
Our earnings were insufficient to cover fixed charges for the three months ended March 31, 2016, and the years ended December 31, 2015 and 2014. The following table sets forth our ratio of earnings to fixed charges for the years ended December 31, 2013, 2012 and 2011, and our deficiency of earnings available to cover fixed charges for the three months ended March 31, 2016, and the years ended December 31, 2015 and 2014.

 
Three Months Ended March 31,
Year Ended December 31,
 
2016
2015
2014
2013
2012
2011
Fixed charges
 
 
 
 
 
 
Interest expense
$

$

$

$

$

$
1,604

Interest portion of rental expense
25

31

18

21

27

31

Total fixed charges
$
25

$
31

$
18

$
21

$
27

$
1,635

 
 
 
 
 
 
 
(Loss) income from continuing operations before tax
$
(70,145
)
$
(368,088
)
$
(17,134
)
$
309,284

$
196,349

$
266,875

Fixed charges per above
(25
)
(31
)
(18
)
(21
)
(27
)
(1,635
)
 
$
(70,170
)
$
(368,119
)
$
(17,152
)
$
309,263

$
196,322

$
265,240

 
 
 
 
 
 
 
Ratio of earnings to fixed charges



14,727

7,271

162

Deficiency of earnings available to cover fixed charges
$
(70,170
)
$
(368,119
)
$
(17,152
)
$

$

$






EXHIBIT 31.1
 
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO RULE 13A-14(A) AND RULE 15D-14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
 
I, Gary Guidry, certify that:
 
1. I have reviewed this Form 10-Q of Gran Tierra Energy Inc.;
 
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
Date: May 3, 2016
/s/ Gary Guidry
 
By: Gary Guidry
 
President and Chief Executive Officer
 
(Principal Executive Officer)
 




EXHIBIT 31.2
 
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO RULE 13A-14(A) AND RULE 15D-14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
 
I, Ryan Ellson, certify that:
 
1. I have reviewed this Form 10-Q of Gran Tierra Energy Inc.;
 
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
Date: May 3, 2016
/s/ Ryan Ellson
 
By: Ryan Ellson
 
Chief Financial Officer
 
(Principal Financial and Accounting Officer)
 
 
 




 




EXHIBIT 32.1
 
CERTIFICATIONS PURSUANT TO
18 U.S.C. §1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Gran Tierra Energy Inc. (the “Company”) for the quarter ended March 31, 2016, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Gary Guidry, President and Chief Executive Officer of the Company, and Ryan Ellson, Chief Financial Officer of the Company, each hereby certifies, to the best of his knowledge, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)
The Report, to which this Certification is attached as Exhibit 32.1, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: May 3, 2016

/s/ Gary Guidry
 
/s/ Ryan Ellson
By: Gary Guidry
 
By: Ryan Ellson
President and Chief Executive Officer
 
Chief Financial Officer
 
This certification accompanies the Form 10-Q to which it relates, is not deemed filed with the SEC and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934 (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.




v3.4.0.3
Document And Entity Information - shares
3 Months Ended
Mar. 31, 2016
Apr. 28, 2016
Document and Entity Information [Abstract]    
Entity Registrant Name GRAN TIERRA ENERGY INC.  
Entity Central Index Key 0001273441  
Current Fiscal Year End Date --12-31  
Entity Filer Category Large Accelerated Filer  
Entity Common Stock, Shares Outstanding   287,962,518
Document Fiscal Year Focus 2016  
Document Fiscal Period Focus Q1  
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Mar. 31, 2016  
v3.4.0.3
Condensed Consolidated Statements of Operations - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Income Statement [Abstract]    
Oil and natural gas sales $ 57,403 $ 76,231
EXPENSES    
Operating 19,067 22,661
Transportation 12,328 8,773
Depletion, depreciation and accretion 36,912 49,140
Asset impairment 56,898 37,014
General and administrative 8,805 7,294
Severance 1,018 4,378
Equity tax 3,051 3,769
Foreign exchange loss (gain) 785 (11,538)
Financial instruments loss (gain) 845 (42)
Total expenses 139,709 121,449
Gain on acquisition 11,712 0
INTEREST INCOME 449 421
LOSS BEFORE INCOME TAXES (70,145) (44,797)
INCOME TAX (EXPENSE) RECOVERY    
Current (2,023) (2,425)
Deferred 27,136 2,356
Income tax (expense) recovery 25,113 (69)
NET LOSS AND COMPREHENSIVE LOSS $ (45,032) $ (44,866)
NET LOSS PER SHARE - BASIC AND DILUTED (in dollars per share) $ (0.15) $ (0.16)
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC (in shares) 293,812,226 286,194,315
WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED (in shares) 293,812,226 286,194,315
v3.4.0.3
Condensed Consolidated Balance Sheets - USD ($)
$ in Thousands
Mar. 31, 2016
Dec. 31, 2015
Current Assets    
Cash and cash equivalents $ 51,308 $ 145,342
Restricted cash 18,474 92
Accounts receivable 35,573 29,217
Marketable securities 5,362 6,250
Inventory 10,690 19,056
Taxes receivable 34,712 28,635
Other current assets 5,992 5,848
Total Current Assets 162,111 234,440
Oil and Gas Properties    
Proved 472,062 469,589
Unproved 373,899 310,771
Total Oil and Gas Properties 845,961 780,360
Other capital assets 8,229 8,633
Total Property, Plant and Equipment 854,190 788,993
Other Long-Term Assets    
Restricted cash 6,414 3,317
Taxes receivable 8,978 8,276
Other long-term assets 13,998 8,511
Goodwill 102,581 102,581
Total Other Long-Term Assets 131,971 122,685
Total Assets 1,148,272 1,146,118
Current Liabilities    
Accounts payable and accrued liabilities 77,303 70,778
Taxes payable 943 1,067
Asset retirement obligation 3,255 2,146
Total Current Liabilities 81,501 73,991
Long-Term Liabilities    
Deferred tax liabilities 30,880 34,592
Asset retirement obligation 43,205 31,078
Other long-term liabilities 8,096 4,815
Total Long-Term Liabilities $ 82,181 $ 70,485
Contingencies
Shareholders’ Equity    
Common Stock (287,657,518 and 273,442,799 shares of Common Stock and 8,514,066 and 8,572,066 exchangeable shares, par value $0.001 per share, issued and outstanding as at March 31, 2016, and December 31, 2015, respectively) $ 10,199 $ 10,186
Additional paid in capital 1,047,830 1,019,863
Deficit (73,439) (28,407)
Total Shareholders’ Equity 984,590 1,001,642
Total Liabilities and Shareholders’ Equity $ 1,148,272 $ 1,146,118
v3.4.0.3
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares
Mar. 31, 2016
Dec. 31, 2015
Statement of Financial Position [Abstract]    
Common shares, par value (in dollars per share) $ 0.001 $ 0.001
Common shares, issued 287,657,518 273,442,799
Common shares, outstanding 287,657,518 273,442,799
Exchangeable shares, issued 8,514,066 8,572,066
Exchangeable shares, outstanding 8,514,066 8,572,066
v3.4.0.3
Condensed Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Operating Activities    
Net loss $ (45,032) $ (44,866)
Adjustments to reconcile net loss to net cash provided by operating activities:    
Depletion, depreciation and accretion 36,912 49,140
Asset impairment 56,898 37,014
Deferred tax recovery (27,136) (2,356)
Stock-based compensation expense (recovery) 1,460 (513)
Cash settlement of restricted share units (673) (955)
Unrealized foreign exchange gain (183) (6,069)
Financial instruments loss (gain) 845 (42)
Cash settlement of financial instruments 44 (2,357)
Cash settlement of asset retirement obligation (104) (1,425)
Gain on acquisition (11,712) 0
Net change in assets and liabilities from operating activities (507) (25,226)
Net cash provided by operating activities 10,812 2,345
Investing Activities    
Increase in restricted cash (10,771) (497)
Additions to property, plant and equipment, excluding Corporate acquisitions (26,180) (73,446)
Additions to property, plant and equipment - acquisition of PetroGranada Colombia Limited (19,388) 0
Changes in non-cash investing working capital 50 (54,324)
Cash paid for acquisition, net of cash acquired (50,909) 0
Net cash used in investing activities (107,198) (128,267)
Financing Activities    
Proceeds from issuance of shares of Common Stock 1,198 502
Net cash provided by financing activities 1,198 502
Foreign exchange gain (loss) on cash and cash equivalents 1,154 (2,968)
Net decrease in cash and cash equivalents (94,034) (128,388)
Cash and cash equivalents, beginning of period 145,342 331,848
Cash and cash equivalents, end of period $ 51,308 $ 203,460
v3.4.0.3
Condensed Consolidated Statements of Shareholders' Equity - USD ($)
$ in Thousands
Total
Share Capital [Member]
Additional Paid-in Capital [Member]
Retained Earnings [Member]
Beginning balance at Dec. 31, 2014   $ 10,190 $ 1,026,873 $ 239,622
Increase (Decrease) in Stockholders' Equity [Roll Forward]        
Issuance of Common Stock   0 0  
Exercise of stock options     722  
Stock-based compensation     2,263  
Repurchase of shares of Common Stock   (4) (9,995)  
Net loss       (268,029)
Ending balance at Dec. 31, 2015 $ 1,001,642 10,186 1,019,863 (28,407)
Increase (Decrease) in Stockholders' Equity [Roll Forward]        
Issuance of Common Stock   13 25,798  
Exercise of stock options     1,198  
Stock-based compensation     971  
Repurchase of shares of Common Stock   0 0  
Net loss (45,032)     (45,032)
Ending balance at Mar. 31, 2016 $ 984,590 $ 10,199 $ 1,047,830 $ (73,439)
v3.4.0.3
Description of Business
3 Months Ended
Mar. 31, 2016
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Description of Business
Description of Business
 
Gran Tierra Energy Inc., a Nevada corporation (the “Company” or “Gran Tierra”), is a publicly traded company focused on oil and natural gas exploration and production in Colombia. The Company also has business activities in Peru and Brazil.
v3.4.0.3
Significant Accounting Policies
3 Months Ended
Mar. 31, 2016
Accounting Policies [Abstract]  
Significant Accounting Policies
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 to that required for interim unaudited condensed consolidated financial statements. Accordingly, these interim unaudited condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements as at and for the year ended December 31, 2015, included in the Company’s 2015 Annual Report on Form 10-K, filed with the SEC on February 29, 2016.

The Company’s significant accounting policies are described in Note 2 of the consolidated financial statements which are included in the Company’s 2015 Annual Report on Form 10-K and are the same policies followed in these interim unaudited condensed consolidated financial statements. The Company has evaluated all subsequent events through to the date these interim unaudited condensed consolidated financial statements were issued.

Recently Issued Accounting Pronouncements

Revenue from Contracts with Customers

In May 2014, the Financial Accounting Standards Board (the "FASB") issued guidance regarding the accounting for revenue from contracts with customers. In August 2015, the FASB issued Accounting Standards Update (“ASU") 2015-14, “Revenue from Contracts with Customers - Deferral of the Effective Date". The ASU defers the effective date of the new revenue recognition model by one year. As a result, the guidance will be effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. In March 2016, the FASB issued ASU 2016-08, “Principal versus Agent Considerations (Reporting Revenue Gross versus Net)". The amendments in this ASU affect the guidance in ASU 2014-09 and clarify implementation guidance on principal versus agent considerations. The Company is currently assessing the impact the new revenue recognition model will have on its consolidated financial position, results of operations, cash flows, and disclosure.

Simplifying the Accounting for Measurement - Period Adjustments

In September 2015, the FASB issued ASU 2015-16, "Simplifying the Accounting for Measurement - Period Adjustments". The amendments require that an acquirer recognize adjustments to provisional amounts identified during the measurement period in the reporting period in which the adjustments are determined and eliminates the requirement to retrospectively revise prior periods. Additionally, an acquirer should record in the same period the effects on earnings of any changes in the provisional accounts, calculated as if the accounting had been completed at the acquisition date. The ASU was effective for fiscal years, and interim periods within those years, beginning after December 15, 2015. The implementation of this update is not expected to materially impact the Company’s consolidated financial position, results of operations or cash flows or disclosure.

Leases

In February 2016, the FASB issued ASU 2016-02, “Leases". This ASU will require most lease assets and lease liabilities to be recognized on the balance sheet and the disclosure of key information about lease arrangements. The ASU will be effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. The Company is currently assessing the impact the new lease standard will have on its consolidated financial position, results of operations, cash flows, and disclosure.

Employee Share-Based Payment Accounting

In March 2016, the FASB issued ASU 2016-09, "Improvements to Employee Share-Based Payment Accounting". This ASU simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for forfeitures, income taxes, and statutory tax withholding requirements. The ASU will be effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. The Company is currently assessing the impact this update will have on its consolidated financial position, results of operations, cash flows, and disclosure.
v3.4.0.3
Business Combination
3 Months Ended
Mar. 31, 2016
Business Combinations [Abstract]  
Business Combination
Business Combination

On January 13, 2016 (the “Petroamerica Acquisition Date”), the Company acquired all of the issued and outstanding common shares of Petroamerica Oil Corp. ("Petroamerica"), a Canadian corporation, pursuant to the terms and conditions of an arrangement agreement dated November 12, 2015 (the “Arrangement”). The transaction contemplated by the Arrangement was effected through a court approved plan of arrangement in Canada. The Arrangement was approved at a special meeting of Petroamerica shareholders and by the Court of Queen's Bench of Alberta on January 11, 2016. Under the Arrangement, each Petroamerica shareholder was entitled to receive, for each Petroamerica share held, either 0.40 of a Gran Tierra common share or $1.33 Canadian dollars in cash, or a combination of shares and cash, subject to a maximum of 70% of the consideration payable in cash.

As consideration for the acquisition of all the issued and outstanding Petroamerica shares, the Company issued approximately 13.7 million shares of Gran Tierra Common Stock, par value $0.001, and paid cash consideration of approximately $70.6 million. The fair value of Gran Tierra’s Common Stock issued was determined to be $25.8 million based on the closing price of shares of Common Stock of Gran Tierra as at the Petroamerica Acquisition Date. Total net purchase price of Petroamerica was $72.2 million, after giving consideration to net working capital of $24.2 million. Upon completion of the transaction on the Petroamerica Acquisition Date, Petroamerica became an indirect wholly-owned subsidiary of Gran Tierra.

The acquisition was accounted for as a business combination using the acquisition method, with Gran Tierra being the acquirer, whereby the assets acquired and liabilities assumed were recognized at their fair values as at the Petroamerica Acquisition Date, and the results of Petroamerica were included with those of Gran Tierra from that date. Fair value estimates were made based on significant unobservable (Level 3) inputs and based on the best information available at the time.

The following table shows the allocation of the consideration transferred based on the fair values of the assets and liabilities acquired:
(Thousands of U.S. Dollars)
 
Consideration Transferred:
 
Cash
$
70,625

Shares of Common Stock issued net of share issue costs
25,811

 
$
96,436

 
 
Allocation of Consideration Transferred(1):
 
Oil and gas properties
 
  Proved
$
48,595

  Unproved
50,054

Net working capital (including cash acquired of $19.7 million, restricted cash of $2.5 million and accounts receivable of $5.0 million)
24,202

Long-term restricted cash
8,167

Other long-term assets
1,570

Long-term deferred tax liability
(10,105
)
Long-term portion of asset retirement obligation
(11,556
)
Other long-term liabilities
(2,779
)
Gain on acquisition
(11,712
)
 
$
96,436


(1) The allocation of the consideration transferred is incomplete and is subject to change. Management is continuing to review and assess information to accurately determine the acquisition date fair value of the assets and liabilities acquired. During the measurement period, Gran Tierra will continue to obtain information to assist in finalizing the fair value of net assets acquired, which may differ materially from the above preliminary estimates.

As indicated in the allocation of the consideration transferred, the fair value of identifiable assets acquired and liabilities assumed exceeded the fair value of the consideration transferred. Consequently, Gran Tierra reassessed the recognition and measurement of identifiable assets acquired and liabilities assumed and concluded that all acquired assets and assumed liabilities were recognized and that the valuation procedures and resulting measures were appropriate. As a result, Gran Tierra recognized a “Gain on acquisition” of $11.7 million in the interim unaudited condensed consolidated statement of operations. The gain reflects the impact on Petroamerica’s pre-acquisition market value resulting from the company's lack of liquidity and capital resources required to maintain current production and reserves and further develop and explore their inventory of prospects.

Pro Forma Results (unaudited)

Pro forma results for the three months ended March 31, 2016 and 2015, are shown below, as if the acquisition had occurred on January 1, 2015. Pro forma results are not indicative of actual results or future performance.
 
Three Months Ended March 31,
(Unaudited, thousands of U.S. Dollars, except per share amounts)
2016
2015
Oil and gas sales
$
57,874

$
93,286

Net loss
$
(56,757
)
$
(80,511
)
Net loss per share - basic and diluted
$
(0.19
)
$
(0.28
)


The supplemental pro forma net loss of Gran Tierra for the three months ended March 31, 2016, was adjusted to exclude the $11.7 million gain on acquisition and $1.3 million of acquisition costs recorded in general and administrative ("G&A") expenses because they were not expected to have a continuing impact on Gran Tierra’s results of operations.

The Company's consolidated statement of operations for the three months ended March 31, 2016, included oil and gas sales of $2.7 million and a loss after tax of $11.8 million from Petroamerica for the period subsequent to the Petroamerica Acquisition Date.
v3.4.0.3
Segment and Geographic Reporting
3 Months Ended
Mar. 31, 2016
Segment Reporting [Abstract]  
Segment and Geographic Reporting
Segment and Geographic Reporting
 
The Company is primarily engaged in the exploration and production of oil and natural gas. The Company’s reportable segments are Colombia, Peru and Brazil based on geographic organization. The All Other category represents the Company’s corporate activities. The Company evaluates reportable segment performance based on income or loss before income taxes.

The following tables present information on the Company’s reportable segments and other activities:
 
Three Months Ended March 31, 2016
(Thousands of U.S. Dollars)
Colombia
 
Peru
 
Brazil
 
All Other
 
Total
Oil and natural gas sales
$
56,300

 
$

 
$
1,103

 
$

 
$
57,403

Interest income
229

 
5

 
12

 
203

 
449

Depletion, depreciation and accretion
35,736

 
141

 
718

 
317

 
36,912

Asset impairment
55,232

 
416

 
1,250

 

 
56,898

General and administrative expenses
3,265

 
409

 
292

 
4,839

 
8,805

(Loss) income before income taxes
(72,721
)
 
(712
)
 
(1,509
)
 
4,797

 
(70,145
)
Segment capital expenditures(1)
21,986

 
1,268

 
2,720

 
206

 
26,180

 
Three Months Ended March 31, 2015
(Thousands of U.S. Dollars)
Colombia
 
Peru
 
Brazil
 
All Other
 
Total
Oil and natural gas sales
$
74,067

 
$

 
$
2,164

 
$

 
$
76,231

Interest income
67

 

 
140

 
214

 
421

Depletion, depreciation and accretion
46,255

 
267

 
2,261

 
357

 
49,140

Asset impairment

 
32,681

 
4,333

 

 
37,014

General and administrative expenses
2,716

 
1,040

 
627

 
2,911

 
7,294

Income (loss) before income taxes
2,928

 
(35,442
)
 
(6,881
)
 
(5,402
)
 
(44,797
)
Segment capital expenditures
21,123

 
37,697

 
13,907

 
719

 
73,446



(1) On January 13, 2016, the Company acquired all of the issued and outstanding common shares of Petroamerica, which acquisition was accounted for as a business combination (Note 3) and, therefore, property, plant and equipment acquired are not reflected in the table above. Additionally, on January 25, 2016, the Company acquired all of the issued and outstanding common shares of PetroGranada Colombia Limited ("PGC"), which acquisition was accounted for as an asset acquisition (Note 5) and property, plant and equipment acquired in this acquisition are not reflected in the table above.
 
As at March 31, 2016
(Thousands of U.S. Dollars)
Colombia
 
Peru
 
Brazil
 
All Other
 
Total
Property, plant and equipment
$
638,097

 
$
95,867

 
$
116,314

 
$
3,912

 
$
854,190

Goodwill
102,581

 

 

 

 
102,581

All other assets
141,741

 
21,208

 
1,873

 
26,679

 
191,501

Total Assets
$
882,419

 
$
117,075

 
$
118,187

 
$
30,591

 
$
1,148,272

 
 
 
 
 
 
 
 
 
 
 
As at December 31, 2015
(Thousands of U.S. Dollars)
Colombia
 
Peru
 
Brazil
 
All Other
 
Total
Property, plant and equipment
$
574,351

 
$
95,069

 
$
115,552

 
$
4,021

 
$
788,993

Goodwill
102,581

 

 

 

 
102,581

All other assets
93,479

 
21,111

 
2,236

 
137,718

 
254,544

Total Assets
$
770,411

 
$
116,180

 
$
117,788

 
$
141,739

 
$
1,146,118

v3.4.0.3
Property, Plant and Equipment and Inventory
3 Months Ended
Mar. 31, 2016
Property, Plant and Equipment [Abstract]  
Property, Plant and Equipment and Inventory
Property, Plant and Equipment and Inventory
 
Property, Plant and Equipment

(Thousands of U.S. Dollars)
As at March 31, 2016
 
As at December 31, 2015
Oil and natural gas properties
 
 
 

  Proved
$
2,088,937

 
$
1,998,330

  Unproved
373,899

 
310,771

 
2,462,836

 
2,309,101

Other
28,557

 
28,342

 
2,491,393

 
2,337,443

Accumulated depletion, depreciation and impairment
(1,637,203
)
 
(1,548,450
)
 
$
854,190

 
$
788,993



In the three months ended March 31, 2016, the Company recorded ceiling test impairment losses in its Colombia and Brazil cost centers of $54.6 million and $1.3 million, respectively, related to lower oil prices. In the three months ended March 31, 2015, the Company recorded a ceiling test impairment loss in its Brazil cost center of $4.3 million, related to lower oil prices. The Company follows the full cost method of accounting for its oil and gas properties. Under this method, the net book value of properties on a country-by-country basis, less related deferred income taxes, may not exceed a calculated “ceiling”. The ceiling is the estimated after tax future net revenues from proved oil and gas properties, discounted at 10% per year. In calculating discounted future net revenues, oil and natural gas prices are determined using the average price during the 12 months period prior to the ending date of the period covered by the balance sheet, calculated as an unweighted arithmetic average of the first-day-of-the month price for each month within such period for that oil and natural gas. That average price is then held constant, except for changes which are fixed and determinable by existing contracts. Therefore, ceiling test estimates are based on historical prices discounted at 10% per year and it should not be assumed that estimates of future net revenues represent the fair market value of the Company's reserves.

In the three months ended March 31, 2016, and 2015, the Company recorded impairment losses in its Peru cost center of $0.4 million, and $32.7 million, respectively, related to costs incurred on Block 95.

Asset impairment for the three months ended March 31, 2016, and 2015 was as follows:

 
Three Months Ended March 31,
(Thousands of U.S. Dollars)
2016
 
2015
Impairment of oil and gas properties
$
56,234

 
$
37,014

Impairment of inventory
664

 

 
$
56,898

 
$
37,014



Acquisition of PGC

On January 25, 2016, the Company acquired all of the issued and outstanding common shares of PGC, pursuant to the terms and conditions of an acquisition agreement dated January 14, 2016. Upon completion of the transaction, PGC became an indirect wholly-owned subsidiary of Gran Tierra. The net purchase price of PGC was $19.4 million, after giving consideration to net working capital of $18.3 million. The acquisition was accounted for as an asset acquisition with the excess consideration transferred over the fair value of the net assets acquired allocated on a relative fair value basis to the net assets acquired.

The following table shows the allocation of the cost of the acquisition based on the relative fair values of the assets and liabilities acquired:

(Thousands of U.S. Dollars)
 
Cost of asset acquisition:
 
Cash
$
37,727

 
 
Allocation of Consideration Transferred:
 
Oil and gas properties
 
  Proved
$
12,228

  Unproved
15,563

 
27,791

Net working capital (including cash acquired of $0.2 million and restricted cash of $18.6 million)
18,339

Long-term deferred tax liability
(8,402
)
 
$
37,728


Contingent consideration of $4.0 million will be payable if cumulative production from the Putumayo-7 Block plus gross proved plus probable reserves under the Putumayo Block meet or exceed eight MMbbl. PGC is an oil and gas exploration, development and production company active in Colombia. Contingent consideration will be recognized when the contingency is resolved.

Inventory

At March 31, 2016, oil and supplies inventories were $9.4 million and $1.3 million, respectively (December 31, 2015 - $17.8 million and $1.3 million, respectively). At March 31, 2016, the Company had 331 Mbbl of oil inventory (December 31, 2015 - 616 Mbbl) NAR. In the three months ended March 31, 2016, the Company recorded oil inventory impairment of $0.7 million (three months ended March 31, 2015 - $nil) related to lower oil prices.
v3.4.0.3
Share Capital
3 Months Ended
Mar. 31, 2016
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Share Capital
Share Capital
 
The Company’s authorized share capital consists of 595,000,002 shares of capital stock, of which 570 million are designated as Common Stock, par value $0.001 per share, 25 million are designated as Preferred Stock, par value $0.001 per share, and two shares are designated as special voting stock, par value $0.001 per share.

 
Shares of Common Stock
Exchangeable Shares of Gran Tierra Exchangeco Inc.
Exchangeable Shares of Gran Tierra Goldstrike Inc.
Balance, December 31, 2015
273,442,799

4,933,177

3,638,889

Shares issued for acquisition (Note 3)
13,656,719



Options exercised
500,000



Exchange of exchangeable shares
58,000

(58,000
)

Balance, March 31, 2016
287,657,518

4,875,177

3,638,889



Income (Loss) Per Share

Basic income (loss) per share is calculated by dividing income (loss) attributable to common shareholders by the weighted average number of shares of Common Stock and exchangeable shares issued and outstanding during each period. Diluted income (loss) per share is calculated by adjusting the weighted average number of shares of Common Stock and exchangeable shares outstanding for the dilutive effect, if any, of share equivalents. The Company uses the treasury stock method to determine the dilutive effect. This method assumes that all Common Stock equivalents have been exercised at the beginning of the period (or at the time of issuance, if later), and that the funds obtained thereby were used to purchase shares of Common Stock of the Company at the volume weighted average trading price of shares of Common Stock during the period.
 
 
 
Three Months Ended March 31,
 
 
2016
 
2015
Weighted average number of common and exchangeable shares outstanding
 
293,812,226

 
286,194,315

Weighted average shares issuable pursuant to stock options
 

 

Weighted average shares assumed to be purchased from proceeds of stock options
 

 

Weighted average number of diluted common and exchangeable shares outstanding
 
293,812,226

 
286,194,315



For the three months ended March 31, 2016, 12,667,761 stock options (three months ended March 31, 2015 - 13,742,502 stock options), on a weighted average basis, were excluded from the diluted income per share calculation as the stock options were anti-dilutive.

Equity Compensation Awards
  
In December 2015, the Company's Board of Directors approved a new equity compensation program for 2016 to realign the Company's compensation programs with its renewed short and long-term strategy. The 2016 equity compensation program reflects the Company's emphasis on pay-for-performance. 

In prior years, all equity awards were subject to vesting conditions based solely on the recipient’s continued employment over a specified period of time. In contrast, 80% of the equity awards granted in early 2016 consisted of Performance Stock Units (“PSU”) and 20% consisted of stock options. Gran Tierra's Compensation Committee and Board of Directors believed it was important to revise the Company's equity compensation program to incorporate a new form of equity award that vests based on the achievement of certain key measures of performance. The purpose of this change was to further incentivize the Company's executives to achieve the operational goals established by the Board of Directors and to increase share and net asset value for stockholders. The Company’s equity compensation awards outstanding as of March 31, 2016, include PSUs, stock options, deferred share units ("DSUs") and restricted stock units (“RSUs”).

The Company records stock-based compensation expense, measured at the fair value of the awards that are ultimately expected to vest, in the consolidated financial statements. Fair values are determined using pricing models such as the Black-Scholes-Merton or Monte Carlo simulation stock option-pricing models and/or observable share prices. For equity-settled stock-based compensation awards, fair values are determined at the grant date and are recognized over the requisite service period. For cash-settled stock-based compensation awards, fair values are determined at each reporting date and periodic changes are recognized as compensation costs, with a corresponding change to liabilities. Stock-based compensation expense is capitalized as part of oil and natural gas properties or expensed as part of operating expenses or G&A expenses, as appropriate.

The following table provides information about PSU, DSU, RSU and stock option activity for the three months ended March 31, 2016:
 
PSUs
DSUs
RSUs
 
Stock Options
 
Number of Outstanding Share Units
Number of Outstanding Share Units
Number of Outstanding Share Units
 
Number of Outstanding Stock Options
 
Weighted Average Exercise Price/Stock Option ($)
Balance, December 31, 2015


1,015,457

 
12,851,557

 
4.60

Granted
2,297,700

59,229


 
1,286,525

 
2.65

Exercised


(272,397
)
 
(500,000
)
 
2.40

Forfeited


(166,685
)
 
(457,436
)
 
(4.71
)
Expired



 
(127,051
)
 
(6.49
)
Balance, March 31, 2016
2,297,700

59,229

576,375

 
13,053,595

 
4.46


The amounts recognized for stock-based compensation were as follows:

 
 
Three Months Ended March 31,
(Thousands of U.S. Dollars)
 
2016
 
2015
Compensation costs for PSUs
 
$
165

 
$

Compensation costs for stock options
 
971

 
(422
)
Compensation costs for DSUs
 
146

 

Compensation costs for RSUs
 
364

 
(60
)
 
 
1,646

 
(482
)
Less: Stock-based compensation costs capitalized
 
(186
)
 
(31
)
Stock-based compensation expense (recovery)
 
$
1,460

 
$
(513
)


Stock-based compensation expense for the three months ended March 31, 2016, was primarily recorded in G&A expenses. For the three months ended March 31, 2015, stock-based compensation was a recovery of $0.5 million due to the reversal of stock-based compensation expense for unvested stock options of terminated employees and a decrease in the Company's share price since December 31, 2014. The stock-based compensation recovery for the three months ended March 31, 2015, was primarily recorded in G&A expenses.

At March 31, 2016, there was $9.6 million (December 31, 2015 - $3.9 million) of unrecognized compensation cost related to unvested PSUs, stock options, DSUs and RSUs which is expected to be recognized over a weighted average period of 2.3 years.

PSUs
 
PSUs entitle the holder to receive, at the option of the Company, either the underlying number of shares of the Company's Common Stock upon vesting of such units or a cash payment equal to the value of the underlying shares. PSUs will cliff vest after three years, subject to the continued employment of the grantee. The number of PSUs that vest may range from zero to 200% of the target number granted based on the Company’s performance with respect to the applicable performance targets. The performance targets for the PSUs outstanding as of March 31, 2016, are as follows:

(i) 50% of the award is subject to targets relating to the total shareholder return (“TSR”) of the Company against a group of peer companies;

(ii) 25% of the award is subject to targets relating to net asset value ("NAV") of the Company per share and NAV is based on before tax net present value discounted at 10% of proved plus probable reserves;

(iii) 25% of the award is subject to targets relating to the execution of corporate strategy.

The compensation cost of PSUs is subject to adjustment based upon the attainability of these performance targets. No settlement will occur with respect to the portion of the PSU award subject to each performance target for results below the applicable minimum threshold for that target. PSUs in excess of the target number granted will vest and be settled if performance exceeds the targeted performance goals. The Company currently intends to settle PSUs in cash.

Stock Options

Each stock option permits the holder to purchase one share of Common Stock at the stated exercise price. The exercise price equals the market price at the time of grant. Stock options generally vest over three years. The term of stock options granted starting May 2013 is five years or three months after the grantee’s end of service to the Company, whichever occurs first. Stock options granted prior to May 2013 continue to have a term of ten years or three months after the grantee’s end of service to the Company, whichever occurs first.

For the three months ended March 31, 2016, 500,000 shares of Common Stock were issued for cash proceeds of $1.2 million (three months ended March 31, 2015 - $0.5 million) upon the exercise of stock options.

The weighted average grant date fair value for stock options granted in the three months ended March 31, 2016, was $1.12 (three months ended March 31, 2015 - $1.10).
DSUs and RSUs

DSUs and RSUs entitle the holder to receive, either the underlying number of shares of the Company's Common Stock upon vesting of such units or, at the option of the Company, a cash payment equal to the value of the underlying shares. The Company's historic practice has been to settle RSUs in cash and the Company currently intends to settle the RSUs and DSUs outstanding as of March 31, 2016 in cash. Once a DSU or RSU is vested, it is immediately settled. During the three months ended March 31, 2016, DSUs were granted to directors and will vest 100% at such time the grantee ceases to be a member of the Board of Directors.
v3.4.0.3
Asset Retirement Obligation
3 Months Ended
Mar. 31, 2016
Asset Retirement Obligation [Abstract]  
Asset Retirement Obligation
Asset Retirement Obligation
 
Changes in the carrying amounts of the asset retirement obligation associated with the Company’s oil and natural gas properties were as follows:
 
Three Months Ended
 
Year Ended
(Thousands of U.S. Dollars)
March 31, 2016
 
December 31, 2015
Balance, December 31, 2015
$
33,224

 
$
35,812

Settlements
(194
)
 
(6,317
)
Liability incurred
923

 
1,556

Liabilities assumed in acquisition (Note 3)
11,852

 

Accretion
655

 
1,313

Revisions in estimated liability

 
860

Balance, March 31, 2016
$
46,460

 
$
33,224

 
 
 
 
Asset retirement obligation - current
$
3,255

 
$
2,146

Asset retirement obligation - long-term
43,205

 
31,078

 
$
46,460

 
$
33,224



For the three months ended March 31, 2016, settlements included cash payments of $0.1 million with the balance in accounts payable and accrued liabilities at March 31, 2016. Revisions to estimated liabilities relate primarily to changes in estimates of asset retirement costs and include, but are not limited to, revisions of estimated inflation rates, changes in property lives and the expected timing of settling the asset retirement obligation. At March 31, 2016, the fair value of assets that are legally restricted for purposes of settling the asset retirement obligation was $8.5 million (December 31, 2015 - $2.9 million). These assets are accounted for as restricted cash on the Company's interim unaudited condensed consolidated balance sheets.
v3.4.0.3
Taxes
3 Months Ended
Mar. 31, 2016
Income Tax Disclosure [Abstract]  
Taxes
Taxes
 
The Company's effective tax rate was 36% in the three months ended March 31, 2016, compared with 0.2% in the corresponding period in 2015. The Company's effective tax rate differed from the U.S. statutory rate of 35% primarily due to an increase in the valuation allowance, which was largely attributable to impairment losses in Brazil, as well as non-deductible, other local taxes and third party royalty in Colombia. These were partially offset by other permanent differences, which mainly related to the non-taxable gain on the acquisition of Petroamerica, foreign currency translation adjustments and the impact of foreign taxes. The deferred tax recovery for three months ended March 31, 2016, included $22.4 million associated with the ceiling test impairment loss in Colombia.

On December 23, 2014, the Colombian Congress passed a law which imposes an equity tax levied on Colombian operations for 2015, 2016 and 2017. The equity tax is calculated based on a legislated measure, which is based on the Company’s Colombian legal entities' balance sheet equity for tax purposes at January 1, 2015. This measure is subject to adjustment for inflation in future years. The equity tax rates for January 1, 2015, 2016 and 2017, are 1.15%, 1% and 0.4%, respectively. The legal obligation for each year's equity tax liability arises on January 1 of each year; therefore, the Company recognized the annual amounts of $3.1 million and $3.8 million, respectively, for the equity tax expense in the consolidated statement of operations during the three months ended March 31, 2016 and 2015. At March 31, 2016, accounts payable included $3.3 million (December 31, 2015 - $nil) which will be paid in May and September 2016.
v3.4.0.3
Contingencies
3 Months Ended
Mar. 31, 2016
Commitments and Contingencies Disclosure [Abstract]  
Contingencies
Contingencies
 
Gran Tierra’s production from the Costayaco Exploitation Area is subject to an additional royalty (the "HPR royalty"), which applies when cumulative gross production from an Exploitation Area is greater than five MMbbl. The HPR royalty is calculated on the difference between a trigger price defined in the Chaza Block exploration and production contract (the "Chaza Contract") and the sales price. The Agencia Nacional de Hidrocarburos (National Hydrocarbons Agency) (“ANH”) has interpreted the Chaza Contract as requiring that the HPR royalty must be paid with respect to all production from the Moqueta Exploitation Area and initiated a noncompliance procedure under the Chaza Contract, which was contested by Gran Tierra because the Moqueta Exploitation Area and the Costayaco Exploitation Area are separate Exploitation Areas. ANH did not proceed with that noncompliance procedure. Gran Tierra also believes that the evidence shows that the Costayaco and Moqueta Fields are two clearly separate and independent hydrocarbon accumulations. Therefore, it is Gran Tierra’s view that, pursuant to the terms of the Chaza Contract, the HPR royalty is only to be paid with respect to production from the Moqueta Exploitation Area when the accumulated oil production from that Exploitation Area exceeds five MMbbl. Discussions with the ANH have not resolved this issue and Gran Tierra has initiated the dispute resolution process under the Chaza Contract by filing on January 14, 2013, an arbitration claim before the Center for Arbitration and Conciliation of the Chamber of Commerce of Bogotá, Colombia, seeking a decision that the HPR royalty is not payable until production from the Moqueta Exploitation Area exceeds five MMbbl. Gran Tierra supplemented its claim on May 30, 2013. The ANH filed a response to the claim seeking a declaration that its interpretation is correct and a counterclaim seeking, amongst other remedies, declarations that Gran Tierra breached the Chaza Contract by not paying the disputed HPR royalty, that the amount of the alleged HPR royalty is payable, and that the Chaza Contract be terminated.

Gran Tierra filed a response to the ANH's counterclaim and filed its comments on the ANH's responses to Gran Tierra's claim. The ANH filed an amended counterclaim and Gran Tierra filed a response to the ANH's amended counterclaim. The submission of evidence in the arbitration has been completed and final arguments were made by the parties to the arbitration tribunal on April 7, 2016. The arbitration tribunal indicated it would make its award on June 8, 2016. On April 30, 2015, total cumulative production from the Moqueta Exploitation Area reached 5.0 MMbbl and Gran Tierra commenced paying the HPR royalty payable on production over that threshold. The estimated compensation which would be payable on cumulative production if the ANH's claims are accepted in the arbitration is $66.3 million plus related interest of $30.7 million. Gran Tierra also disagrees with the interest rate that the ANH has used in calculating the interest cost. Gran Tierra asserts that since the HPR royalty is denominated in the U.S. dollar, the contract requires the interest rate to be three-month LIBOR plus 4%, whereas the ANH has applied the highest legally authorized interest rate on Colombian peso liabilities, which during the period of production to date has averaged approximately 29% per annum. At March 31, 2016, based on an interest rate of three-month LIBOR plus 4% related interest would be $7.1 million. At this time no amount has been accrued in the interim unaudited condensed consolidated financial statements nor deducted from the Company's reserves for the disputed HPR royalty as Gran Tierra does not consider it probable that a loss will be incurred.

Additionally, the ANH and Gran Tierra are engaged in discussions regarding the interpretation of whether certain transportation and related costs are eligible to be deducted in the calculation of the HPR royalty. Discussions with the ANH are ongoing. Based on the Company's understanding of the ANH's position, the estimated compensation which would be payable if the ANH’s interpretation is correct could be up to $44.8 million as at March 31, 2016. At this time no amount has been accrued in the interim unaudited condensed consolidated financial statements as Gran Tierra does not consider it probable that a loss will be incurred.

The Company provided the purchaser of its Argentina business unit with certain indemnifications. The Company remains responsible for certain contingent liabilities related to such indemnifications, subject to defined limitations. The Company does not believe that these obligations are probable of having a material impact on its consolidated financial position, results of operations or cash flows.

In addition to the above, Gran Tierra has a number of other lawsuits and claims pending. Although the outcome of these other 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

At March 31, 2016, the Company had provided promissory notes totaling $74.9 million (December 31, 2015 - $76.5 million) as security for letters of credit relating to work commitment guarantees contained in exploration contracts and other capital or operating requirements.
v3.4.0.3
Financial Instruments, Fair Value Measurements, Credit Risk and Foreign Exchange Risk
3 Months Ended
Mar. 31, 2016
Fair Value Disclosures [Abstract]  
Financial Instruments, Fair Value Measurements, Credit Risk and Foreign Exchange Risk
Financial Instruments, Fair Value Measurement, Credit Risk and Foreign Exchange Risk

Financial Instruments

At March 31, 2016, the Company’s financial instruments recognized in the balance sheet consist of cash and cash equivalents, restricted cash, accounts receivable, trading securities, accounts payable and accrued liabilities, contingent consideration and PSU liability included in other long-term liabilities, and RSU liability included in accounts payable and accrued liabilities and other long-term liabilities.

Fair Value Measurement

The fair value of trading securities, contingent consideration and RSU and PSU liabilities are being remeasured at the estimated fair value at the end of each reporting period. The fair value of trading securities which were received as consideration on the sale of the Company's Argentina business unit is estimated based on quoted market prices in an active market. The fair value of contingent consideration, which relates to the acquisition of the remaining 30% working interest in certain properties in Brazil, is estimated based on the consideration expected to be transferred and discounted back to present value by applying an appropriate discount rate that reflected the risk factors associated with the payment streams. The discount rate used is determined in accordance with accepted valuation methods. The fair value of the RSU liability was estimated based on quoted market prices in an active market. The fair value of the PSU liability was estimated based on quoted market prices in an active market and an option pricing model such as the Monte Carlo simulation option-pricing models. The fair value of trading securities, contingent consideration and RSU and PSU liabilities at March 31, 2016, and December 31, 2015, were as follows:

(Thousands of U.S. Dollars)
 
As at March 31, 2016
 
As at December 31, 2015
Trading securities
 
$
5,362

 
$
6,250

 
 
 
 
 
Contingent consideration liability
 
$
1,061

 
$
1,061

RSU and PSU liability
 
$
1,190

 
$
1,189

 
 
$
2,251

 
$
2,250



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

 
 
Three Months Ended March 31,
(Thousands of U.S. Dollars)
 
2016
 
2015
Trading securities loss (gain)
 
$
845

 
$
(412
)
Foreign currency derivatives loss
 

 
370

Financial instruments loss (gain)
 
$
845

 
$
(42
)


These gains and losses are presented as financial instruments gains or losses in the interim unaudited condensed consolidated statements of operations and cash flows.

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

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

At March 31, 2016, and December 31, 2015, the fair value of the trading securities acquired in connection with the disposal of the Argentina business unit and the RSU liability was determined using Level 1 inputs and the fair value of the contingent consideration payable in connection with the Brazil acquisition and PSU liability was determined using Level 3 inputs. The disclosure in the paragraph above regarding the fair value of cash and restricted cash was based on Level 1 inputs.

The Company’s non-recurring fair value measurements include asset retirement obligations. 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.
v3.4.0.3
Supplemental Cash Flow Information
3 Months Ended
Mar. 31, 2016
Supplemental Cash Flow Elements [Abstract]  
Supplemental Cash Flow Information
Supplemental Cash Flow Information

Net changes in assets and liabilities from operating activities were as follows:
 
Three Months Ended March 31,
(Thousands of U.S. Dollars)
2016
 
2015
Accounts receivable and other long-term assets
(2,513
)
 
13,484

Inventory
4,339

 
2,159

Prepaids
606

 
528

Accounts payable and accrued and other long-term liabilities
(5,975
)
 
(21,414
)
Taxes receivable and payable
3,036

 
(19,983
)
Net changes in assets and liabilities from operating activities
$
(507
)
 
$
(25,226
)


The following table provides additional supplemental cash flow disclosures:

 
Three Months Ended March 31,
(Thousands of U.S. Dollars)
2016
 
2015
Non-cash investing activities:
 
 
 
Net liabilities related to property, plant and equipment, end of period
$
35,606

 
$
55,335



See Note 3 in these condensed consolidated financial statements for disclosure regarding the Company's acquisition of Petroamerica.
v3.4.0.3
General and Administrative Expenses
3 Months Ended
Mar. 31, 2016
Income Statement [Abstract]  
General and Administrative Expenses
General and Administrative Expenses
 
Three Months Ended March 31,
(Thousands of U.S. Dollars)
2016
 
2015
G&A expenses before stock-based compensation
$
14,085

 
$
20,265

Stock-based compensation
1,397

 
(530
)
Capitalized G&A and overhead recoveries
(6,677
)
 
(12,441
)
 
$
8,805

 
$
7,294

v3.4.0.3
Subsequent Event
3 Months Ended
Mar. 31, 2016
Subsequent Events [Abstract]  
Subsequent Event
Subsequent Event

On April 6, 2016, the Company issued $100 million aggregate principal amount of its 5.00% Convertible Senior Notes due 2021 (the "Notes") in a private placement to qualified institutional buyers. On April 22, 2016, the Company issued an additional $15 million aggregate principal amount of the Notes pursuant to the underwriters’ exercise of their option to acquire additional Notes. The Notes bear interest at a rate of 5.00% per year, payable semi-annually in arrears on April 1 and October 1 of each year, beginning on October 1, 2016. The Notes will mature on April 1, 2021, unless earlier redeemed, repurchased or converted.

The Notes are convertible at the option of the holder at any time prior to the close of business on the business day immediately preceding the maturity date. The conversion rate is initially 311.4295 shares of Common Stock per $1,000 principal amount of Notes (equivalent to an initial conversion price of approximately $3.21 per share of Common Stock). The conversion rate is subject to adjustment in some events but will not be adjusted for any accrued and unpaid interest. In addition, following certain corporate events that occur prior to the maturity date, the Company will increase the conversion rate for a holder who elects to convert its Notes in connection with such a corporate event in certain circumstances.

The Company may not redeem the Notes prior to April 5, 2019, except in certain circumstances following a fundamental change (as defined in the indenture governing the Notes). The Company may redeem for cash all or any portion of the Notes, at its option, on or after April 5, 2019, if (terms below are as defined in the indenture governing the Notes):

(i) the last reported sale price of the Company's Common Stock has been at least 150% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption; and

(ii) the Company has filed all reports that it is required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act, as applicable (other than current reports on Form 8-K), during the twelve months preceding the date on which the Company provides such notice.

The redemption price will be equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. No sinking fund is provided for the Notes.

If the Company undergoes a fundamental change, holders may require the Company to repurchase for cash all or any portion of their Notes at a fundamental change repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.
Net proceeds from the sale of the Notes was approximately $109.0 million, after deducting the initial purchasers' discount and the offering expenses payable by the Company. The Company intends to use the net proceeds from the sale of Notes for general corporate purposes, which may include acquisitions and/or capital expenditures.
v3.4.0.3
Significant Accounting Policies (Policies)
3 Months Ended
Mar. 31, 2016
Accounting Policies [Abstract]  
Recently Issued Accounting Pronouncements
Recently Issued Accounting Pronouncements

Revenue from Contracts with Customers

In May 2014, the Financial Accounting Standards Board (the "FASB") issued guidance regarding the accounting for revenue from contracts with customers. In August 2015, the FASB issued Accounting Standards Update (“ASU") 2015-14, “Revenue from Contracts with Customers - Deferral of the Effective Date". The ASU defers the effective date of the new revenue recognition model by one year. As a result, the guidance will be effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. In March 2016, the FASB issued ASU 2016-08, “Principal versus Agent Considerations (Reporting Revenue Gross versus Net)". The amendments in this ASU affect the guidance in ASU 2014-09 and clarify implementation guidance on principal versus agent considerations. The Company is currently assessing the impact the new revenue recognition model will have on its consolidated financial position, results of operations, cash flows, and disclosure.

Simplifying the Accounting for Measurement - Period Adjustments

In September 2015, the FASB issued ASU 2015-16, "Simplifying the Accounting for Measurement - Period Adjustments". The amendments require that an acquirer recognize adjustments to provisional amounts identified during the measurement period in the reporting period in which the adjustments are determined and eliminates the requirement to retrospectively revise prior periods. Additionally, an acquirer should record in the same period the effects on earnings of any changes in the provisional accounts, calculated as if the accounting had been completed at the acquisition date. The ASU was effective for fiscal years, and interim periods within those years, beginning after December 15, 2015. The implementation of this update is not expected to materially impact the Company’s consolidated financial position, results of operations or cash flows or disclosure.

Leases

In February 2016, the FASB issued ASU 2016-02, “Leases". This ASU will require most lease assets and lease liabilities to be recognized on the balance sheet and the disclosure of key information about lease arrangements. The ASU will be effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. The Company is currently assessing the impact the new lease standard will have on its consolidated financial position, results of operations, cash flows, and disclosure.

Employee Share-Based Payment Accounting

In March 2016, the FASB issued ASU 2016-09, "Improvements to Employee Share-Based Payment Accounting". This ASU simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for forfeitures, income taxes, and statutory tax withholding requirements. The ASU will be effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. The Company is currently assessing the impact this update will have on its consolidated financial position, results of operations, cash flows, and disclosure.

v3.4.0.3
Business Combination (Tables) - Petroamerica [Member]
3 Months Ended
Mar. 31, 2016
Business Acquisition [Line Items]  
Allocation of the Consideration Transferred Based on the Fair Values of Assets and Liabilities Acquired
The following table shows the allocation of the consideration transferred based on the fair values of the assets and liabilities acquired:
(Thousands of U.S. Dollars)
 
Consideration Transferred:
 
Cash
$
70,625

Shares of Common Stock issued net of share issue costs
25,811

 
$
96,436

 
 
Allocation of Consideration Transferred(1):
 
Oil and gas properties
 
  Proved
$
48,595

  Unproved
50,054

Net working capital (including cash acquired of $19.7 million, restricted cash of $2.5 million and accounts receivable of $5.0 million)
24,202

Long-term restricted cash
8,167

Other long-term assets
1,570

Long-term deferred tax liability
(10,105
)
Long-term portion of asset retirement obligation
(11,556
)
Other long-term liabilities
(2,779
)
Gain on acquisition
(11,712
)
 
$
96,436


(1) The allocation of the consideration transferred is incomplete and is subject to change. Management is continuing to review and assess information to accurately determine the acquisition date fair value of the assets and liabilities acquired. During the measurement period, Gran Tierra will continue to obtain information to assist in finalizing the fair value of net assets acquired, which may differ materially from the above preliminary estimates.
Pro Forma Results of Acquisition
Pro forma results for the three months ended March 31, 2016 and 2015, are shown below, as if the acquisition had occurred on January 1, 2015. Pro forma results are not indicative of actual results or future performance.
 
Three Months Ended March 31,
(Unaudited, thousands of U.S. Dollars, except per share amounts)
2016
2015
Oil and gas sales
$
57,874

$
93,286

Net loss
$
(56,757
)
$
(80,511
)
Net loss per share - basic and diluted
$
(0.19
)
$
(0.28
)
v3.4.0.3
Segment and Geographic Reporting (Tables)
3 Months Ended
Mar. 31, 2016
Segment Reporting [Abstract]  
Reportable Geographic Segments
The following tables present information on the Company’s reportable segments and other activities:
 
Three Months Ended March 31, 2016
(Thousands of U.S. Dollars)
Colombia
 
Peru
 
Brazil
 
All Other
 
Total
Oil and natural gas sales
$
56,300

 
$

 
$
1,103

 
$

 
$
57,403

Interest income
229

 
5

 
12

 
203

 
449

Depletion, depreciation and accretion
35,736

 
141

 
718

 
317

 
36,912

Asset impairment
55,232

 
416

 
1,250

 

 
56,898

General and administrative expenses
3,265

 
409

 
292

 
4,839

 
8,805

(Loss) income before income taxes
(72,721
)
 
(712
)
 
(1,509
)
 
4,797

 
(70,145
)
Segment capital expenditures(1)
21,986

 
1,268

 
2,720

 
206

 
26,180

 
Three Months Ended March 31, 2015
(Thousands of U.S. Dollars)
Colombia
 
Peru
 
Brazil
 
All Other
 
Total
Oil and natural gas sales
$
74,067

 
$

 
$
2,164

 
$

 
$
76,231

Interest income
67

 

 
140

 
214

 
421

Depletion, depreciation and accretion
46,255

 
267

 
2,261

 
357

 
49,140

Asset impairment

 
32,681

 
4,333

 

 
37,014

General and administrative expenses
2,716

 
1,040

 
627

 
2,911

 
7,294

Income (loss) before income taxes
2,928

 
(35,442
)
 
(6,881
)
 
(5,402
)
 
(44,797
)
Segment capital expenditures
21,123

 
37,697

 
13,907

 
719

 
73,446



(1) On January 13, 2016, the Company acquired all of the issued and outstanding common shares of Petroamerica, which acquisition was accounted for as a business combination (Note 3) and, therefore, property, plant and equipment acquired are not reflected in the table above. Additionally, on January 25, 2016, the Company acquired all of the issued and outstanding common shares of PetroGranada Colombia Limited ("PGC"), which acquisition was accounted for as an asset acquisition (Note 5) and property, plant and equipment acquired in this acquisition are not reflected in the table above.
Long-lived Assets by Geographical Area
 
As at March 31, 2016
(Thousands of U.S. Dollars)
Colombia
 
Peru
 
Brazil
 
All Other
 
Total
Property, plant and equipment
$
638,097

 
$
95,867

 
$
116,314

 
$
3,912

 
$
854,190

Goodwill
102,581

 

 

 

 
102,581

All other assets
141,741

 
21,208

 
1,873

 
26,679

 
191,501

Total Assets
$
882,419

 
$
117,075

 
$
118,187

 
$
30,591

 
$
1,148,272

 
 
 
 
 
 
 
 
 
 
 
As at December 31, 2015
(Thousands of U.S. Dollars)
Colombia
 
Peru
 
Brazil
 
All Other
 
Total
Property, plant and equipment
$
574,351

 
$
95,069

 
$
115,552

 
$
4,021

 
$
788,993

Goodwill
102,581

 

 

 

 
102,581

All other assets
93,479

 
21,111

 
2,236

 
137,718

 
254,544

Total Assets
$
770,411

 
$
116,180

 
$
117,788

 
$
141,739

 
$
1,146,118

v3.4.0.3
Property, Plant and Equipment and Inventory (Tables)
3 Months Ended
Mar. 31, 2016
Property, Plant and Equipment [Abstract]  
Schedule of Property, Plant and Equipment
Property, Plant and Equipment

(Thousands of U.S. Dollars)
As at March 31, 2016
 
As at December 31, 2015
Oil and natural gas properties
 
 
 

  Proved
$
2,088,937

 
$
1,998,330

  Unproved
373,899

 
310,771

 
2,462,836

 
2,309,101

Other
28,557

 
28,342

 
2,491,393

 
2,337,443

Accumulated depletion, depreciation and impairment
(1,637,203
)
 
(1,548,450
)
 
$
854,190

 
$
788,993

Asset Impairment
Asset impairment for the three months ended March 31, 2016, and 2015 was as follows:

 
Three Months Ended March 31,
(Thousands of U.S. Dollars)
2016
 
2015
Impairment of oil and gas properties
$
56,234

 
$
37,014

Impairment of inventory
664

 

 
$
56,898

 
$
37,014

Allocation of the Cost of the Acquisition Based on the Relative Fair Values of the Assets and Liabilities Acquired
The following table shows the allocation of the cost of the acquisition based on the relative fair values of the assets and liabilities acquired:

(Thousands of U.S. Dollars)
 
Cost of asset acquisition:
 
Cash
$
37,727

 
 
Allocation of Consideration Transferred:
 
Oil and gas properties
 
  Proved
$
12,228

  Unproved
15,563

 
27,791

Net working capital (including cash acquired of $0.2 million and restricted cash of $18.6 million)
18,339

Long-term deferred tax liability
(8,402
)
 
$
37,728

v3.4.0.3
Share Capital (Tables)
3 Months Ended
Mar. 31, 2016
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Schedule of Common Stock
 
Shares of Common Stock
Exchangeable Shares of Gran Tierra Exchangeco Inc.
Exchangeable Shares of Gran Tierra Goldstrike Inc.
Balance, December 31, 2015
273,442,799

4,933,177

3,638,889

Shares issued for acquisition (Note 3)
13,656,719



Options exercised
500,000



Exchange of exchangeable shares
58,000

(58,000
)

Balance, March 31, 2016
287,657,518

4,875,177

3,638,889

Weighted Average Share Outstanding
 
 
Three Months Ended March 31,
 
 
2016
 
2015
Weighted average number of common and exchangeable shares outstanding
 
293,812,226

 
286,194,315

Weighted average shares issuable pursuant to stock options
 

 

Weighted average shares assumed to be purchased from proceeds of stock options
 

 

Weighted average number of diluted common and exchangeable shares outstanding
 
293,812,226

 
286,194,315

RSU and Stock Option Activity
The following table provides information about PSU, DSU, RSU and stock option activity for the three months ended March 31, 2016:
 
PSUs
DSUs
RSUs
 
Stock Options
 
Number of Outstanding Share Units
Number of Outstanding Share Units
Number of Outstanding Share Units
 
Number of Outstanding Stock Options
 
Weighted Average Exercise Price/Stock Option ($)
Balance, December 31, 2015


1,015,457

 
12,851,557

 
4.60

Granted
2,297,700

59,229


 
1,286,525

 
2.65

Exercised


(272,397
)
 
(500,000
)
 
2.40

Forfeited


(166,685
)
 
(457,436
)
 
(4.71
)
Expired



 
(127,051
)
 
(6.49
)
Balance, March 31, 2016
2,297,700

59,229

576,375

 
13,053,595

 
4.46


Amounts Recognized for Stock-based Compensation
The amounts recognized for stock-based compensation were as follows:

 
 
Three Months Ended March 31,
(Thousands of U.S. Dollars)
 
2016
 
2015
Compensation costs for PSUs
 
$
165

 
$

Compensation costs for stock options
 
971

 
(422
)
Compensation costs for DSUs
 
146

 

Compensation costs for RSUs
 
364

 
(60
)
 
 
1,646

 
(482
)
Less: Stock-based compensation costs capitalized
 
(186
)
 
(31
)
Stock-based compensation expense (recovery)
 
$
1,460

 
$
(513
)
v3.4.0.3
Asset Retirement Obligation (Tables)
3 Months Ended
Mar. 31, 2016
Asset Retirement Obligation [Abstract]  
Changes in Asset Retirement Obligations
Changes in the carrying amounts of the asset retirement obligation associated with the Company’s oil and natural gas properties were as follows:
 
Three Months Ended
 
Year Ended
(Thousands of U.S. Dollars)
March 31, 2016
 
December 31, 2015
Balance, December 31, 2015
$
33,224

 
$
35,812

Settlements
(194
)
 
(6,317
)
Liability incurred
923

 
1,556

Liabilities assumed in acquisition (Note 3)
11,852

 

Accretion
655

 
1,313

Revisions in estimated liability

 
860

Balance, March 31, 2016
$
46,460

 
$
33,224

 
 
 
 
Asset retirement obligation - current
$
3,255

 
$
2,146

Asset retirement obligation - long-term
43,205

 
31,078

 
$
46,460

 
$
33,224

v3.4.0.3
Financial Instruments, Fair Value Measurements, Credit Risk and Foreign Exchange Risk (Tables)
3 Months Ended
Mar. 31, 2016
Fair Value Disclosures [Abstract]  
Fair Value of Trading Securities and Contingent Consideration
The fair value of trading securities, contingent consideration and RSU and PSU liabilities at March 31, 2016, and December 31, 2015, were as follows:

(Thousands of U.S. Dollars)
 
As at March 31, 2016
 
As at December 31, 2015
Trading securities
 
$
5,362

 
$
6,250

 
 
 
 
 
Contingent consideration liability
 
$
1,061

 
$
1,061

RSU and PSU liability
 
$
1,190

 
$
1,189

 
 
$
2,251

 
$
2,250

Gains or Losses on Financial Instruments
The following table presents gains or losses on financial instruments recognized in the accompanying interim unaudited condensed consolidated statements of operations:

 
 
Three Months Ended March 31,
(Thousands of U.S. Dollars)
 
2016
 
2015
Trading securities loss (gain)
 
$
845

 
$
(412
)
Foreign currency derivatives loss
 

 
370

Financial instruments loss (gain)
 
$
845

 
$
(42
)
v3.4.0.3
Supplemental Cash Flow Information (Tables)
3 Months Ended
Mar. 31, 2016
Supplemental Cash Flow Elements [Abstract]  
Net Changes in Assets and Liabilities from Operating Activities
Net changes in assets and liabilities from operating activities were as follows:
 
Three Months Ended March 31,
(Thousands of U.S. Dollars)
2016
 
2015
Accounts receivable and other long-term assets
(2,513
)
 
13,484

Inventory
4,339

 
2,159

Prepaids
606

 
528

Accounts payable and accrued and other long-term liabilities
(5,975
)
 
(21,414
)
Taxes receivable and payable
3,036

 
(19,983
)
Net changes in assets and liabilities from operating activities
$
(507
)
 
$
(25,226
)
Additional Supplemental Cash Flow Disclosures
The following table provides additional supplemental cash flow disclosures:

 
Three Months Ended March 31,
(Thousands of U.S. Dollars)
2016
 
2015
Non-cash investing activities:
 
 
 
Net liabilities related to property, plant and equipment, end of period
$
35,606

 
$
55,335

v3.4.0.3
General and Administrative Expenses (Tables)
3 Months Ended
Mar. 31, 2016
Income Statement [Abstract]  
General and Administrative Expenses
General and Administrative Expenses
 
Three Months Ended March 31,
(Thousands of U.S. Dollars)
2016
 
2015
G&A expenses before stock-based compensation
$
14,085

 
$
20,265

Stock-based compensation
1,397

 
(530
)
Capitalized G&A and overhead recoveries
(6,677
)
 
(12,441
)
 
$
8,805

 
$
7,294

v3.4.0.3
Business Combination - Additional Information (Details)
$ / shares in Units, $ in Thousands
3 Months Ended
Jan. 13, 2016
USD ($)
shares
Mar. 31, 2016
USD ($)
$ / shares
Mar. 31, 2016
USD ($)
$ / shares
shares
Mar. 31, 2015
USD ($)
Jan. 13, 2016
CAD / shares
Jan. 13, 2016
USD ($)
$ / shares
shares
Dec. 31, 2015
$ / shares
Business Acquisition [Line Items]              
Consideration transferred for acquisition, number of shares issued | shares 13,700,000            
Common Stock, par value (in dollars per share) | $ / shares   $ 0.001 $ 0.001       $ 0.001
Gain on acquisition     $ 11,712 $ 0      
Oil and natural gas sales     57,403 76,231      
Loss after tax     45,032 $ 44,866      
General and Administrative Expense [Member]              
Business Acquisition [Line Items]              
Acquisition costs   $ 1,300 $ 1,300        
Petroamerica [Member]              
Business Acquisition [Line Items]              
Cash transferred (Canadian dollars per share) | CAD / shares         CAD 1.33    
Consideration payable in cash (up to, as a percent)           70.00%  
Cash consideration $ 70,625            
Fair value of shares issued in acquisition           $ 25,800  
Net purchase price 72,200            
Consideration transferred 96,436            
Net working capital           $ 24,202  
Gain on acquisition $ 11,712            
Common Stock [Member]              
Business Acquisition [Line Items]              
Consideration transferred for acquisition, number of shares issued | shares     13,656,719        
Common Stock [Member] | Petroamerica [Member]              
Business Acquisition [Line Items]              
Shares of Gran Tierra per share of Petroamerica | shares           0.40  
Common Stock [Member] | Petroamerica [Member]              
Business Acquisition [Line Items]              
Common Stock, par value (in dollars per share) | $ / shares           $ 0.001  
Subsidiaries [Member] | Petroamerica [Member]              
Business Acquisition [Line Items]              
Oil and natural gas sales   2,700          
Loss after tax   $ 11,800          
v3.4.0.3
Business Combination - Allocation of the Consideration Transferred Based on the Fair Values of Assets and Liabilities Acquired (Details) - USD ($)
$ in Thousands
3 Months Ended
Jan. 13, 2016
Mar. 31, 2016
Mar. 31, 2015
Oil and gas properties      
Gain on acquisition   $ (11,712) $ 0
Petroamerica [Member]      
Consideration Transferred:      
Cash $ 70,625    
Shares of Common Stock issued net of share issue costs 25,811    
Consideration transferred 96,436    
Oil and gas properties      
Proved 48,595    
Unproved 50,054    
Net working capital (including cash acquired of $19.7 million, restricted cash of $2.5 million and accounts receivable of $5.0 million) 24,202    
Long-term restricted cash 8,167    
Other long-term assets 1,570    
Long-term deferred tax liability (10,105)    
Long-term portion of asset retirement obligation (11,556)    
Other long-term liabilities (2,779)    
Gain on acquisition (11,712)    
Total consideration transferred 96,436    
Cash acquired 19,700    
Restricted cash acquired 2,500    
Accounts receivable acquired $ 5,000    
v3.4.0.3
Business Combination - Pro Forma Results of Acquisition (Details) - Petroamerica [Member] - USD ($)
$ / shares in Units, $ in Thousands
3 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Business Acquisition [Line Items]    
Oil and gas sales $ 57,874 $ 93,286
Net loss $ (56,757) $ (80,511)
Net loss per share - basic and diluted (in dollars per share) $ (0.19) $ (0.28)
v3.4.0.3
Segment and Geographic Reporting - Reportable Segments (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Segment Reporting Information [Line Items]    
Oil and natural gas sales $ 57,403 $ 76,231
Interest income 449 421
Depletion, depreciation and accretion 36,912 49,140
Asset impairment 56,898 37,014
General and administrative expenses 8,805 7,294
(Loss) income before income taxes (70,145) (44,797)
Continuing Operations [Member]    
Segment Reporting Information [Line Items]    
Oil and natural gas sales 57,403 76,231
Interest income 449 421
Depletion, depreciation and accretion 36,912 49,140
Asset impairment 56,898 37,014
General and administrative expenses 8,805 7,294
(Loss) income before income taxes (70,145) (44,797)
Segment capital expenditures 26,180 73,446
Colombia [Member]    
Segment Reporting Information [Line Items]    
Asset impairment 54,600  
Brazil [Member]    
Segment Reporting Information [Line Items]    
Asset impairment 1,300 4,300
Operating Segments [Member] | Colombia [Member] | Continuing Operations [Member]    
Segment Reporting Information [Line Items]    
Oil and natural gas sales 56,300 74,067
Interest income 229 67
Depletion, depreciation and accretion 35,736 46,255
Asset impairment 55,232 0
General and administrative expenses 3,265 2,716
(Loss) income before income taxes (72,721) 2,928
Segment capital expenditures 21,986 21,123
Operating Segments [Member] | Peru [Member] | Continuing Operations [Member]    
Segment Reporting Information [Line Items]    
Oil and natural gas sales 0 0
Interest income 5 0
Depletion, depreciation and accretion 141 267
Asset impairment 416 32,681
General and administrative expenses 409 1,040
(Loss) income before income taxes (712) (35,442)
Segment capital expenditures 1,268 37,697
Operating Segments [Member] | Brazil [Member] | Continuing Operations [Member]    
Segment Reporting Information [Line Items]    
Oil and natural gas sales 1,103 2,164
Interest income 12 140
Depletion, depreciation and accretion 718 2,261
Asset impairment 1,250 4,333
General and administrative expenses 292 627
(Loss) income before income taxes (1,509) (6,881)
Segment capital expenditures 2,720 13,907
Corporate, Non-Segment [Member] | All Other [Member] | Continuing Operations [Member]    
Segment Reporting Information [Line Items]    
Oil and natural gas sales 0 0
Interest income 203 214
Depletion, depreciation and accretion 317 357
Asset impairment 0 0
General and administrative expenses 4,839 2,911
(Loss) income before income taxes 4,797 (5,402)
Segment capital expenditures $ 206 $ 719
v3.4.0.3
Segment and Geographic Reporting - Assets (Details) - USD ($)
$ in Thousands
Mar. 31, 2016
Dec. 31, 2015
Segment Reporting Information [Line Items]    
Property, plant and equipment $ 854,190 $ 788,993
Goodwill 102,581 102,581
Total Assets 1,148,272 1,146,118
Continuing Operations [Member]    
Segment Reporting Information [Line Items]    
Property, plant and equipment 854,190 788,993
Goodwill 102,581 102,581
All other assets 191,501 254,544
Total Assets 1,148,272 1,146,118
Operating Segments [Member] | Continuing Operations [Member] | Colombia [Member]    
Segment Reporting Information [Line Items]    
Property, plant and equipment 638,097 574,351
Goodwill 102,581 102,581
All other assets 141,741 93,479
Total Assets 882,419 770,411
Operating Segments [Member] | Continuing Operations [Member] | Peru [Member]    
Segment Reporting Information [Line Items]    
Property, plant and equipment 95,867 95,069
Goodwill 0 0
All other assets 21,208 21,111
Total Assets 117,075 116,180
Operating Segments [Member] | Continuing Operations [Member] | Brazil [Member]    
Segment Reporting Information [Line Items]    
Property, plant and equipment 116,314 115,552
Goodwill 0 0
All other assets 1,873 2,236
Total Assets 118,187 117,788
Corporate, Non-Segment [Member] | Continuing Operations [Member] | All Other [Member]    
Segment Reporting Information [Line Items]    
Property, plant and equipment 3,912 4,021
Goodwill 0 0
All other assets 26,679 137,718
Total Assets $ 30,591 $ 141,739
v3.4.0.3
Property, Plant and Equipment and Inventory - Schedule of Property, Plant, and Equipment (Details) - USD ($)
$ in Thousands
Mar. 31, 2016
Dec. 31, 2015
Property, Plant and Equipment [Line Items]    
Oil and natural gas properties $ 2,491,393 $ 2,337,443
Accumulated depletion, depreciation and impairment (1,637,203) (1,548,450)
Total Property, Plant and Equipment 854,190 788,993
Proved [Member]    
Property, Plant and Equipment [Line Items]    
Oil and natural gas properties 2,088,937 1,998,330
Unproved [Member]    
Property, Plant and Equipment [Line Items]    
Oil and natural gas properties 373,899 310,771
Oil and natural gas properties [Member]    
Property, Plant and Equipment [Line Items]    
Oil and natural gas properties 2,462,836 2,309,101
Other [Member]    
Property, Plant and Equipment [Line Items]    
Oil and natural gas properties $ 28,557 $ 28,342
v3.4.0.3
Property, Plant and Equipment and Inventory - Asset Impairment (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Tangible Asset Impairment Charges [Abstract]    
Impairment of oil and gas properties $ 56,234 $ 37,014
Impairment of inventory 664 0
Total asset impairment $ 56,898 $ 37,014
v3.4.0.3
Property, Plant and Equipment and Inventory - Additional Information (Details)
$ in Thousands
3 Months Ended
Jan. 25, 2016
USD ($)
bbl
Mar. 31, 2016
USD ($)
bbl
Mar. 31, 2015
USD ($)
Dec. 31, 2015
USD ($)
bbl
Property, Plant and Equipment [Line Items]        
Asset impairment   $ 56,898 $ 37,014  
Net purchase price $ 19,400 19,388 0  
Net working capital 18,339      
Contingent consideration $ 4,000      
Threshold by which contingent consideration is due (barrels) | bbl 8      
Crude oil inventories   9,400   $ 17,800
Supplies   $ 1,300   $ 1,300
Oil inventory (barrels) | bbl   331,000   616,000
Impairment of oil inventory   $ 664 0  
Colombia [Member]        
Property, Plant and Equipment [Line Items]        
Asset impairment   54,600    
Brazil [Member]        
Property, Plant and Equipment [Line Items]        
Asset impairment   $ 1,300 4,300  
Brazil and Colombia [Member] | Oil and natural gas properties [Member] | Assets [Member] | Income Approach Valuation Technique [Member]        
Property, Plant and Equipment [Line Items]        
Discount rate (percent)   10.00%    
Peru [Member] | Block 95 [Member]        
Property, Plant and Equipment [Line Items]        
Asset impairment   $ 400 $ 32,700  
v3.4.0.3
Property, Plant and Equipment and Inventory - Allocation of the Cost of the PetroGranada Colombia Limited Acquisition (Details)
$ in Thousands
Jan. 25, 2016
USD ($)
Property, Plant and Equipment [Abstract]  
Cash $ 37,727
Oil and gas properties  
Oil and gas properties, Proved 12,228
Oil and gas properties, Unproved 15,563
Oil and gas properties, Total 27,791
Net working capital 18,339
Long-term deferred tax liability (8,402)
Asset acquisition, consideration transferred 37,728
Cash acquired 200
Restricted cash acquired $ 18,600
v3.4.0.3
Share Capital - Additional Information (Details) - USD ($)
$ / shares in Units, $ in Thousands
3 Months Ended
May. 01, 2013
Apr. 30, 2013
Mar. 31, 2016
Mar. 31, 2015
Dec. 31, 2015
Common Stock, Number of Shares, Par Value and Other Disclosures [Abstract]          
Authorized share capital     595,000,002    
Common stock, authorized     570,000,000    
Common shares, par value (in dollars per share)     $ 0.001   $ 0.001
Preferred stock, authorized     25,000,000    
Preferred stock, par value (in dollars per share)     $ 0.001    
Special voting stock-authorized (in shares)     2    
Special voting stock-par value (in dollars per share)     $ 0.001    
Stock-based compensation recovery     $ 1,460 $ (513)  
Unrecognized compensation cost related to unvested stock options     $ 9,600   $ 3,900
Unvested stock options recognition period     2 years 3 months 18 days    
Stock Options [Abstract]          
Options exercised (in shares)     500,000    
Proceeds from issuance of shares of Common Stock     $ 1,198 502  
General and Administrative Expense [Member]          
Common Stock, Number of Shares, Par Value and Other Disclosures [Abstract]          
Stock-based compensation recovery     $ 1,397 $ (530)  
Stock Options [Member]          
Common Stock, Number of Shares, Par Value and Other Disclosures [Abstract]          
Equity awards granted in period (as a percent)     20.00%    
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period     3 years    
Earnings Per Share [Abstract]          
Options excluded from the diluted income per share calculation     12,667,761 13,742,502  
Stock Options [Abstract]          
Term of stock options granted 5 years        
Term following end of service to the Company by the grantee of stock options granted 3 months 3 months      
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period   10 years      
Weighted average grant date fair value for options granted (in dollars per option)     $ 1.12 $ 1.10  
Stock Options [Member] | General and Administrative Expense [Member]          
Common Stock, Number of Shares, Par Value and Other Disclosures [Abstract]          
Stock-based compensation recovery       $ (500)  
PSUs [Member]          
Common Stock, Number of Shares, Par Value and Other Disclosures [Abstract]          
Equity awards granted in period (as a percent)     80.00%    
Award vesting percentage subject to targets relating to total shareholder return     50.00%    
Award vesting percentage subject to targets relating to net asset value     25.00%    
Discount rate for Net Asset Valuation     10.00%    
Award vesting percentage subject to targets relating to the execution of corporate strategy     25.00%    
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period     3 years    
DSUs [Member]          
Common Stock, Number of Shares, Par Value and Other Disclosures [Abstract]          
Vesting percentage     100.00%    
Minimum [Member] | PSUs [Member]          
Common Stock, Number of Shares, Par Value and Other Disclosures [Abstract]          
Vesting percentage     0.00%    
Maximum [Member] | PSUs [Member]          
Common Stock, Number of Shares, Par Value and Other Disclosures [Abstract]          
Vesting percentage     200.00%    
v3.4.0.3
Share Capital - Schedule of Common Stock (Details) - shares
3 Months Ended
Jan. 13, 2016
Mar. 31, 2016
Increase (Decrease) in Common Stock    
Beginning balance   273,442,799
Shares issued for acquisition 13,700,000  
Options exercised   500,000
Ending balance   287,657,518
Common Stock [Member]    
Increase (Decrease) in Common Stock    
Beginning balance   273,442,799
Shares issued for acquisition   13,656,719
Options exercised   500,000
Exchange of exchangeable shares   58,000
Ending balance   287,657,518
Common Stock [Member] | Gran Tierra Exchangeco Inc [Member]    
Increase (Decrease) in Common Stock    
Beginning balance   4,933,177
Shares issued for acquisition   0
Options exercised   0
Exchange of exchangeable shares   (58,000)
Ending balance   4,875,177
Common Stock [Member] | Gran Tierra Goldstrike Inc [Member]    
Increase (Decrease) in Common Stock    
Beginning balance   3,638,889
Shares issued for acquisition   0
Options exercised   0
Exchange of exchangeable shares   0
Ending balance   3,638,889
v3.4.0.3
Share Capital - Weighted Average Shares Outstanding (Details) - shares
3 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]    
Weighted average number of common and exchangeable shares outstanding 293,812,226 286,194,315
Weighted average shares issuable pursuant to stock options 0 0
Weighted average shares assumed to be purchased from proceeds of stock options 0 0
Weighted average number of diluted common and exchangeable shares outstanding 293,812,226 286,194,315
v3.4.0.3
Share Capital - PSU, DSU, RSU and Stock Option Activity (Details)
3 Months Ended
Mar. 31, 2016
$ / shares
shares
Number of Outstanding Stock Options  
Beginning Balance (in shares) 12,851,557
Granted (in shares) 1,286,525
Exercised (in shares) (500,000)
Forfeited (in shares) (457,436)
Expired (in shares) (127,051)
Ending Balance (in shares) 13,053,595
Weighted Average Exercise Price/Stock Option ($)  
Weighted Average Exercise Price $/Option, beginning balance (in dollars per share) | $ / shares $ 4.60
Weighted Average Exercise Price $/Option, Granted (in dollars per share) | $ / shares 2.65
Weighted Average Exercise Price $/Options, Exercised (in dollars per share) | $ / shares 2.40
Weighted Average Exercise Price $/Options, Forfeited (in dollars per share) | $ / shares (4.71)
Weighted Average Exercise Price $/Options, Expired (in dollars per share) | $ / shares (6.49)
Weighted Average Exercise Price $/Option, ending balance (in dollars per share) | $ / shares $ 4.46
PSUs [Member]  
Number of Outstanding Share Units  
Beginning Balance (in shares) 0
Granted (in shares) 2,297,700
Exercised (in shares) 0
Forfeited (in shares) 0
Expired (in shares) 0
Ending Balance (in shares) 2,297,700
DSUs [Member]  
Number of Outstanding Share Units  
Beginning Balance (in shares) 0
Granted (in shares) 59,229
Exercised (in shares) 0
Forfeited (in shares) 0
Expired (in shares) 0
Ending Balance (in shares) 59,229
RSUs [Member]  
Number of Outstanding Share Units  
Beginning Balance (in shares) 1,015,457
Granted (in shares) 0
Exercised (in shares) (272,397)
Forfeited (in shares) (166,685)
Expired (in shares) 0
Ending Balance (in shares) 576,375
v3.4.0.3
Share Capital - Amounts Recognized for Stock-based Compensation (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Compensation costs $ 1,646 $ (482)
Less: Stock-based compensation costs capitalized (186) (31)
Stock-based compensation expense (recovery) 1,460 (513)
PSUs [Member]    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Compensation costs 165 0
Stock Options [Member]    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Compensation costs 971 (422)
DSUs [Member]    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Compensation costs 146 0
RSUs [Member]    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Compensation costs $ 364 $ (60)
v3.4.0.3
Asset Retirement Obligation (Details) - USD ($)
$ in Thousands
3 Months Ended 12 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Dec. 31, 2015
Mar. 31, 2016
Dec. 31, 2015
Asset Retirement Obligation, Roll Forward Analysis [Roll Forward]          
Beginning Balance $ 33,224 $ 35,812 $ 35,812    
Settlements (194)   (6,317)    
Liability incurred 923   1,556    
Liabilities assumed in acquisition 11,852   0    
Accretion 655   1,313    
Revisions in estimated liability 0   860    
Balance, end of period 46,460   33,224    
Asset retirement obligation - current       $ 3,255 $ 2,146
Asset retirement obligation - long-term       43,205 31,078
Asset retirement obligation 33,224 35,812 $ 35,812 46,460 33,224
Cash settlement of asset retirement obligation $ (104) $ (1,425)      
Fair value of legally restricted assets       $ 8,500 $ 2,900
v3.4.0.3
Taxes (Details) - USD ($)
3 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Dec. 31, 2015
Income Tax Examination [Line Items]      
Effective tax rate (percent) (36.00%) (0.20%)  
U.S. Statutory rate (percent) 35.00%    
Foreign equity tax expense $ 3,051,000 $ 3,769,000  
Colombia [Member]      
Income Tax Examination [Line Items]      
Unpaid equity tax liability 3,300,000   $ 0
Foreign Tax Authority [Member] | National Taxes and Customs Direction (DIAN) [Member]      
Income Tax Examination [Line Items]      
Deferred tax recovery associated with the ceiling test adjustment $ (22,400,000)    
Tax Year 2015 [Member] | Colombia [Member]      
Income Tax Examination [Line Items]      
Equity tax rate (in hundredths) 1.15%    
Tax Year 2016 [Member] | Colombia [Member]      
Income Tax Examination [Line Items]      
Equity tax rate (in hundredths) 1.00%    
Tax Year 2017 [Member] | Colombia [Member]      
Income Tax Examination [Line Items]      
Equity tax rate (in hundredths) 0.40%    
v3.4.0.3
Contingencies (Details)
$ in Millions
3 Months Ended 27 Months Ended
Apr. 30, 2015
bbl
Mar. 31, 2016
USD ($)
hydrocarbon_accumulation
bbl
Mar. 31, 2015
USD ($)
Dec. 31, 2015
USD ($)
Loss Contingencies [Line Items]        
Number of separate hydrocarbon accumulations | hydrocarbon_accumulation   2    
Promissory notes provided as collateral for letters of credit   $ 74.9   $ 76.5
Pending Litigation Moqueta Discovery [Member]        
Loss Contingencies [Line Items]        
Threshold by which additional royalty due (barrels) | bbl   5,000,000    
Total cumulative production of oil field (barrels) | bbl 5,000,000      
Contingent consideration liability   $ 66.3    
Related interest costs     $ 30.7  
Royalty agreement basis spread on variable rate   4.00%    
Contested interest rate (percent)   29.00%    
Related interest   $ 7.1    
Pending Litigation Royalty, Transportation and Related Costs [Member]        
Loss Contingencies [Line Items]        
Contingent consideration liability   $ 44.8    
v3.4.0.3
Financial Instruments, Fair Value Measurements, Credit Risk and Foreign Exchange Risk - Additional Information (Details)
3 Months Ended
Mar. 31, 2016
Block-Brazil [Member]  
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]  
Participating interest percentage oil and gas property, remaining percentage 30.00%
v3.4.0.3
Financial Instruments, Fair Value Measurements, Credit Risk and Foreign Exchange Risk - Fair Value of Trading Securities and Contingent Consideration (Details) - USD ($)
$ in Thousands
Mar. 31, 2016
Dec. 31, 2015
Fair Value Disclosures [Abstract]    
Trading securities $ 5,362 $ 6,250
Contingent consideration liability 1,061 1,061
Share unit liability 1,190 1,189
Fair value of trading securities, contingent consideration, and RSU and PSU liabilities $ 2,251 $ 2,250
v3.4.0.3
Financial Instruments, Fair Value Measurements, Credit Risk and Foreign Exchange Risk - Gains or Losses on Financial Instruments (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Fair Value Disclosures [Abstract]    
Trading securities loss (gain) $ 845 $ (412)
Foreign currency derivatives loss 0 370
Financial instruments loss (gain) $ 845 $ (42)
v3.4.0.3
Supplemental Cash Flow Information - Net Changes in Assets and Liabilities from Operating Activities (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Supplemental Cash Flow Elements [Abstract]    
Accounts receivable and other long-term assets $ (2,513) $ 13,484
Inventory 4,339 2,159
Prepaids 606 528
Accounts payable and accrued and other long-term liabilities (5,975) (21,414)
Taxes receivable and payable 3,036 (19,983)
Net changes in assets and liabilities from operating activities $ 507 $ 25,226
v3.4.0.3
Supplemental Cash Flow Information - Additional Supplemental Cash Flow Disclosures (Details) - USD ($)
$ in Thousands
Mar. 31, 2016
Mar. 31, 2015
Supplemental Cash Flow Elements [Abstract]    
Net liabilities related to property, plant and equipment, end of period $ 35,606 $ 55,335
v3.4.0.3
General and Administrative Expenses (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]    
Stock-based compensation expense (recovery) $ 1,460 $ (513)
General and administrative expenses 8,805 7,294
General and Administrative Expense [Member]    
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]    
G&A expenses before stock-based compensation 14,085 20,265
Stock-based compensation expense (recovery) 1,397 (530)
Capitalized G&A and overhead recoveries (6,677) (12,441)
General and administrative expenses $ 8,805 $ 7,294
v3.4.0.3
Subsequent Event (Details) - Subsequent Event [Member] - 5.00% Convertible Senior Notes due 2021 - Convertible Debt [Member]
Apr. 22, 2016
USD ($)
Apr. 06, 2016
USD ($)
day
$ / shares
Subsequent Event [Line Items]    
Interest rate (as a percent)   5.00%
Additions to aggregate principal amount of Convertible Senior Notes $ 15,000,000 $ 100,000,000
Conversion rate (as a percent)   0.3114295
Initial conversion price (in dollars per share) | $ / shares   $ 3.21
Threshold percentage of stock price trigger (at least)   150.00%
Threshold trading days (at least) | day   20
Threshold consecutive trading days   30 days
Redemption price percentage   100.00%
Repurchase percentage   100.00%
Net proceeds from sale of Notes $ 109,000,000  
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/**
 * Rivet Software Inc.
 *
 * @copyright Copyright (c) 2006-2011 Rivet Software, Inc. All rights reserved.
 * Version 2.4.0.3
 *
 */

var Show = {};
Show.LastAR = null,

Show.hideAR = function(){	
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};

Show.showAR = function ( link, id, win ){
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	if( ref ){
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};
	
Show.toggleNext = function( link ){
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		if( link.textContent ){
			link.textContent = link.textContent.replace( '-', '+' );
		}else{
			link.innerText = link.innerText.replace( '-', '+' );
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	}
};

/* Updated 2009-11-04 */
/* v2.2.0.24 */

/* DefRef Styles */
.report table.authRefData{
	background-color: #def;
	border: 2px solid #2F4497;
	font-size: 1em; 
	position: absolute;
}

.report table.authRefData a {
	display: block;
	font-weight: bold;
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