Gran Tierra Energy, Inc. (NYSE:GTE) Q1 2020 Earnings Conference Call May 12, 2020 11:00 AM ET Company Participants Gary Guidry - President, CEO & Director Ryan Ellson - Gran CFO & EVP, Finance Remi Berthelet - COO Conference Call Participants David Round - BMO Capital Markets James Hubbard - Numis Securities Alejandro Demichelis - Nau Securities Josef Schachter - Schachter Energy Al Stanton - RBC Capital Markets Stephane Foucaud - Auctus Advisors Operator Good morning, ladies and gentlemen, and welcome to G ...

Financial Data and Key Metrics Changes - Average production for 2019 was 34,817 barrels of oil per day, consistent with the revised guidance of 34,800 to 35,000 barrels per day [6] - Net income for 2019 was $39 million or $0.10 per share, with EBITDA of $364 million and adjusted EBITDA of $326 million [6] - Funds flow from operations was $272 million or $0.72 per share [6] - Capital spend in Q4 totaled $69 million, down 41% from Q3 2019 amount of $116 million [7] - 1P reserves increased to 79 million barrels, representing a 200% reserves replacement [9] - 2P reserves maintained at 142 million barrels of oil, with 2P NPV increased to $2.9 billion before tax [10] Business Line Data and Key Metrics Changes - Acordionero production averaged around 15,000 to 16,000 barrels per day for the first part of 2020, on track with budget expectations [30] - Four wells of the 12- to 14-well program at Acordionero have been rig released, with ongoing infill drilling operations [16] - Current instantaneous and cumulative voidage replacement ratios at Acordionero are 1.1 and 0.3 respectively, representing increases of approximately 180% since June 2019 [18] Market Data and Key Metrics Changes - The response to the coronavirus has caused a decrease in Brent oil prices and a widening of crude oil price differentials in Colombia [11] - The company has placed Brent oil hedges of 6,000 BOE per day of production, approximately 20% of net production in the first half of 2020 [15] Company Strategy and Development Direction - The company will focus on balance sheet strength, development of core assets, and a measured, high-impact exploration program in 2020 [10] - The revised capital budget for 2020 is $175 million to $195 million, with deferrals primarily in exploration and infrastructure [12] Management's Comments on Operating Environment and Future Outlook - Management noted that local farmers have set blockades in the Southern Putumayo region, impacting operations but not directed at the oil industry [13] - The company is actively monitoring the blockade situation and has proactively shut-in fields, resulting in approximately 4,000 barrels of oil per day being shut-in [14] - Management expressed confidence in resolving current issues and emphasized ongoing support for government efforts [36] Other Important Information - Gran Tierra achieved its best safety record in 2019, with an LTI ratio of 0.02, 80% below the industry average for Latin American exploration and production companies [23] - The company is committed to environmental initiatives, including reforesting 1,000 hectares and maintaining 18,000 hectares of forest through the NaturAmazonas project [24][25] Q&A Session Summary Question: Current production number at Acordionero and expected trends - Acordionero production has been averaging around 15,000 to 16,000 barrels a day for the first part of the year, on track with budget expectations [30] Question: Operating costs and potential for further savings - Operating costs have come down, with increased power consumption due to water injection, but per unit costs are dropping dramatically [31] Question: Current downtime and its impact on production numbers - There are planned downtimes associated with routine ESP repairs, and a couple of wells are currently down, affecting production numbers [32]

Financial Data and Key Metrics Changes - The company reported a net loss of $12 million for Q3 2019, with adjusted EBITDA of $68 million and funds flow from operations of $59 million [11] - Oil production averaged 32,918 barrels per day, with current production at approximately 34,000 barrels per day [9][10] - Oil and gas sales for the quarter totaled $132 million, with an operating netback of $27.34 per BOE [12] - The net debt-to-adjusted EBITDA ratio at the end of Q3 was 1.8x on a trailing 12-month basis, expected to decrease in 2020 [11] Business Line Data and Key Metrics Changes - The Acordionero field is under Waterflood, with significant water injection averaging over 30,000 barrels per day [18] - The Costayaco-39 well produced stabilized rates of about 1,160 barrels of oil per day [22] - The Cohembi field saw an increase in water injection from 15,000 to over 22,000 barrels per day [23] Market Data and Key Metrics Changes - The company expects to generate free cash flow of $75 million to $100 million in 2020 at a $60 Brent price [14] - The company has grown Proved Plus Probable reserves by 163% over the last three years [16] Company Strategy and Development Direction - The company plans to ramp up production across its portfolio and focus on development drilling in 2020, with minimal facility CapEx [29] - The company aims to use free cash flow for net debt reduction and share buybacks [14][39] Management's Comments on Operating Environment and Future Outlook - Management views the production reduction as temporary, with expectations of increased production as Waterflood responses improve [15][43] - The company is optimistic about the asset value growth due to successful Waterflood implementation and appraisal extensions [15] Other Important Information - The company returned $38 million to shareholders through buybacks of 20.1 million shares, representing almost 5% of outstanding shares [11] - The company is working on renewing its normal course issuer bid (NCIB) for share buybacks [49] Q&A Session Summary Question: 2020 Capital Guidance - The company maintains its 2019 capital expenditure guidance of $330 million to $340 million, with expected Q4 CapEx between $30 million and $50 million [27] Question: Free Cash Flow Expectations - The company anticipates significantly lower capital and operating costs in 2020, focusing on development drilling [29] Question: EBITDA Reconciliation - Adjusted EBITDA numbers were provided to exclude the impact of revaluation of investments and losses from convertible bond repurchases [35] Question: Production Levels and Wells - Current production at Acordionero is over 16,000 barrels per day, with additional wells expected to contribute to production increases [63] Question: Working Capital and VAT Receivables - The company has a significant VAT receivable of about $100 million, impacting working capital [69]

Company Strategy & Financial Performance - Gran Tierra aims for a 3-5 times growth in NAV/share within 5 years, focusing on under-explored conventional hydrocarbon basins in Colombia & Ecuador[16] - The company targets $75-100 million in free cash flow, planning to return it to stakeholders through buybacks and net debt reduction[28] - Gran Tierra's Return on Average Capital Employed (ROACE) was over 13% in 2018 and is expected to trend towards a long-term internal rate of return target of 20%+[31] - At Q3 2019, net debt to Adjusted EBITDA was 1.8 times on a trailing 12-month basis, with Adjusted EBITDA at $340 million[33] Reserves & Production Growth - From Q2 2015 to Q3 2019, production grew by 46%[23] - Between Dec/2015 and Dec/2018, 1P reserves increased by 67% from 42 MMBOE to 70 MMBOE, 2P reserves increased by 163% from 57 MMBOE to 150 MMBOE, and 3P reserves increased by 212% from 69 MMBOE to 215 MMBOE[24] - Between Dec/2015 and Jul/2018, unrisked mean prospective resources increased by 203% from 501 MMBOE to 1,419 MMBOE[25] - Achieved reserve replacement of 195% (2P) and 196% (3P) with total 2018 reserve additions of 25.8 MMboe (2P) and 25.9 MMboe (3P)[30] Asset Portfolio & Operations - Gran Tierra has a diversified asset base with 100% oil production and over 95% operated assets[14] - The company holds 2.2 million net acres across 4 prolific oil basins in Colombia & Ecuador[71] - The company plans to drill 6-10 exploration wells targeting GTE's world class prospective resource base[28] - The company has increased water injection by 36% to 110,000 BWIPD over the last 8 months[41]