Gran Tierra Energy(GTE) - 2023 Q2 - Quarterly Report

General Information This section provides foundational details of Gran Tierra Energy Inc.'s Form 10-Q, including filing specifics, cautionary statements for forward-looking information, and a glossary of industry terms Filing Details This section provides the standard filing information for Gran Tierra Energy Inc.'s Form 10-Q for the quarterly period ended June 30, 2023, including its incorporation state, address, telephone number, and securities registered - Gran Tierra Energy Inc. filed its Quarterly Report on Form 10-Q for the period ended June 30, 2023[1][7] Title of each class and exchange on which registered | Title of each class | Trading Symbol(s) | Name of each exchange on which registered | | :------------------ | :---------------- | :---------------------------------------- | | Common Stock, par value $0.01 per share | GTE | NYSE American, Toronto Stock Exchange, London Stock Exchange | - The registrant is an accelerated filer[4][5] Cautionary Language Regarding Forward-Looking Statements This section outlines the inherent risks and uncertainties associated with forward-looking statements made in the report, advising readers that actual results may differ materially due to various factors including operational difficulties, commodity price volatility, and geopolitical risks in South America - The report contains forward-looking statements subject to risks and uncertainties, meaning actual results may differ materially from expectations[9] - Key risks include operational issues in South America (guerilla activity, strikes, blockades), technical difficulties, global health events (COVID-19), and volatility in oil and gas demand, supply, and prices[9] - The company disclaims any obligation to publicly release updates or revisions to forward-looking statements, except as required by federal securities laws[9] Glossary of Oil and Gas Terms This section provides definitions for key abbreviations and terms used in the oil and gas industry within the report, such as 'bbl' for barrel and 'BOPD' for barrels of oil per day, clarifying how sales volumes and production are reported Abbreviation Meanings | Abbreviation | Meaning | | :----------- | :------ | | bbl | barrel | | BOPD | barrels of oil per day | | NAR | net after royalty | - Sales volumes represent production Net After Royalty (NAR) adjusted for inventory changes, and production is also reported NAR unless specified as 'working interest production before royalties'[11] PART I - Financial Information This part presents Gran Tierra Energy Inc.'s unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition, operations, market risks, and internal controls Item 1. Financial Statements This section presents Gran Tierra Energy Inc.'s unaudited condensed consolidated financial statements, including statements of operations, balance sheets, cash flows, and shareholders' equity, along with detailed notes explaining significant accounting policies, property, debt, share capital, revenue, taxes, contingencies, financial instruments, and supplemental cash flow information for the periods ended June 30, 2023 Condensed Consolidated Statements of Operations (Unaudited) This statement details Gran Tierra Energy Inc.'s revenues, expenses, and net income or loss for the three and six months ended June 30, 2023 and 2022 Net (Loss) Income and Oil Sales (Thousands of U.S. Dollars) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Oil Sales | $157,902 | $205,785 | $302,092 | $380,354 | | Net (Loss) Income | $(10,825) | $52,972 | $(20,525) | $67,091 | | Basic EPS | $(0.33) | $1.44 | $(0.61) | $1.82 | | Diluted EPS | $(0.33) | $1.42 | $(0.61) | $1.80 | - The company experienced a significant shift from net income to net loss, with a 120% decrease in Q2 2023 and a 131% decrease in 6M 2023 compared to the prior year[13] Condensed Consolidated Balance Sheets (Unaudited) This statement presents Gran Tierra Energy Inc.'s financial position, including assets, liabilities, and shareholders' equity, as of June 30, 2023, and December 31, 2022 Key Balance Sheet Metrics (Thousands of U.S. Dollars) | Metric | As at June 30, 2023 | As at December 31, 2022 | | :-------------------------- | :------------------ | :---------------------- | | Total Assets | $1,309,365 | $1,335,610 | | Total Liabilities | $921,947 | $918,044 | | Total Shareholders' Equity | $387,418 | $417,566 | | Cash and cash equivalents | $68,529 | $126,873 | - Total assets decreased by $26.2 million, and total shareholders' equity decreased by $30.1 million from December 31, 2022, to June 30, 2023[14] Condensed Consolidated Statements of Cash Flows (Unaudited) This statement summarizes Gran Tierra Energy Inc.'s cash inflows and outflows from operating, investing, and financing activities for the six months ended June 30, 2023 and 2022 Cash Flow Summary (Six Months Ended June 30, Thousands of U.S. Dollars) | Activity | 2023 | 2022 | | :-------------------------------------- | :--------- | :--------- | | Net cash provided by operating activities | $87,130 | $247,022 | | Net cash used in investing activities | $(127,539) | $(95,718) | | Net cash used in financing activities | $(22,533) | $(67,501) | | Net (decrease) increase in cash | $(57,183) | $83,123 | - Net cash provided by operating activities decreased significantly by 64.7% in 6M 2023 compared to 6M 2022[15] - The company experienced a net decrease in cash, cash equivalents, and restricted cash of $57.2 million in 6M 2023, contrasting with an increase of $83.1 million in 6M 2022[15] Condensed Consolidated Statements of Shareholders' Equity (Unaudited) This statement outlines changes in Gran Tierra Energy Inc.'s shareholders' equity, including net income/loss and share repurchases, for the six months ended June 30, 2023 and 2022 Shareholders' Equity Changes (Six Months Ended June 30, Thousands of U.S. Dollars) | Metric | 2023 | 2022 | | :-------------------------- | :--------- | :--------- | | Balance, beginning of period | $10,272 | $10,270 | | Re-purchase of shares | $(35) | — | | Balance, end of period | $10,237 | $10,272 | - The company reported a net loss of $(20,525)K for the six months ended June 30, 2023, compared to a net income of $67,091K in the prior year[16] - Treasury Stock balance was reduced to zero as of June 30, 2023, after the cancellation of repurchased shares[16] Notes to the Condensed Consolidated Financial Statements (Unaudited) This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements, covering accounting policies, property, debt, and other financial aspects Note 1. Description of Business This note describes Gran Tierra Energy Inc.'s primary business activities as an international oil and natural gas exploration and production company - Gran Tierra Energy Inc. is a publicly traded company focused on international oil and natural gas exploration and production, with assets primarily located in Colombia and Ecuador[17] Note 2. Significant Accounting Policies This note outlines the key accounting principles and methods used in preparing Gran Tierra Energy Inc.'s interim unaudited condensed consolidated financial statements - The interim unaudited condensed consolidated financial statements are prepared in accordance with GAAP and reflect all normal recurring adjustments[18] - Significant accounting policies remain consistent with those described in the Company's 2022 Annual Report on Form 10-K[20] Note 3. Property, Plant and Equipment This note details Gran Tierra Energy Inc.'s oil and natural gas properties, including proved and unproved categories, and reports on any impairment losses Oil and Natural Gas Properties (Thousands of U.S. Dollars) | Category | As at June 30, 2023 | As at December 31, 2022 | | :--------- | :------------------ | :---------------------- | | Proved | $4,765,640 | $4,617,804 | | Unproved | $66,091 | $74,471 | | Total | $4,831,731 | $4,692,275 | - The company reported no ceiling test impairment losses for the three and six months ended June 30, 2023, or 2022[21] Note 4. Debt and Debt Issuance Costs This note provides a breakdown of Gran Tierra Energy Inc.'s long-term debt, including senior notes and lease obligations, and details debt repurchase activities Long-Term Debt (Thousands of U.S. Dollars) | Debt Type | As at June 30, 2023 | As at December 31, 2022 | | :-------------------------- | :------------------ | :---------------------- | | 6.25% Senior Notes, due Feb 2025 | $271,909 | $279,909 | | 7.75% Senior Notes, due May 2027 | $300,000 | $300,000 | | Unamortized debt issuance costs | $(10,830) | $(10,992) | | Long-term lease obligation | $24,728 | $20,676 | | Total debt | $585,807 | $589,593 | - The company repurchased $8.0 million of 6.25% Senior Notes for $6.8 million cash in the six months ended June 30, 2023, resulting in a $1.1 million gain[23] - A credit facility with a borrowing base of up to $150 million remained undrawn as of June 30, 2023[22] Note 5. Share Capital This note describes Gran Tierra Energy Inc.'s share capital structure, including details on a reverse stock split, share repurchases, and stock-based compensation expenses - On May 5, 2023, the company completed a 1-for-10 reverse stock split of its common stock[25] Share Repurchases (Six Months Ended June 30, 2023) | Metric | Shares Repurchased | Weighted Average Price per Share | | :---------------- | :----------------- | :----------------------------- | | 6 Months Ended June 30, 2023 | 1,328,650 | $8.15 | - Stock-based compensation expense for the six months ended June 30, 2023, was $1.8 million, a significant decrease from $6.5 million in the prior year[29] Note 6. Revenue This note details Gran Tierra Energy Inc.'s revenue sources, primarily from oil sales, and discusses factors affecting realized prices and customer concentration - 100% of the company's revenue for the three and six months ended June 30, 2023, was generated from oil sales[34] - Quality and transportation discounts increased to 18% and 20% of the average ICE Brent price for the three and six months ended June 30, 2023, respectively, up from 12% in the prior year, primarily due to higher Vasconia and Castilla discounts[34] - During the three and six months ended June 30, 2023, 98% of the company's production was sold to one major customer in Colombia[35][36] Note 7. Taxes This note provides an analysis of Gran Tierra Energy Inc.'s income tax expense and effective tax rate, explaining the factors influencing tax variations Effective Tax Rate and Current Income Tax Expense (Six Months Ended June 30, Thousands of U.S. Dollars) | Metric | 2023 | 2022 | | :-------------------------- | :--------- | :--------- | | Effective Tax Rate | 145% | 54% | | Current Income Tax Expense | $37,363 | $46,252 | - The increase in the effective tax rate for 6M 2023 was primarily due to non-deductible foreign exchange adjustments, foreign taxes, non-deductible royalties in Colombia, and non-deductible stock-based compensation, partially offset by a decrease in valuation allowance[41] Note 8. Contingencies This note discloses Gran Tierra Energy Inc.'s pending lawsuits, claims, and credit support for work commitment guarantees - Gran Tierra has several pending lawsuits and claims, but management believes their resolution would not have a material adverse effect on the company's financial position, results of operations, or cash flows[43] - As of June 30, 2023, the company provided $109.4 million in letters of credit and other credit support for work commitment guarantees in Colombia and Ecuador[44] Note 9. Financial Instruments and Fair Value Measurement This note details Gran Tierra Energy Inc.'s financial instruments, including the fair value of senior notes and derivative instruments Fair Value of Senior Notes (Thousands of U.S. Dollars) | Senior Notes | Carrying Amount (June 30, 2023) | Fair Value (June 30, 2023) | | :-------------------------- | :------------------------------ | :------------------------- | | 6.25% Senior Notes | $268,900 | $233,502 | | 7.75% Senior Notes | $293,900 | $227,321 | - The company recorded a $5.8 million loss on its Prepaid Equity Forward (PEF) for the six months ended June 30, 2023[48] - No gains or losses related to derivative instruments were incurred for the three and six months ended June 30, 2023, compared to a $26.6 million loss in 6M 2022[50] Note 10. Supplemental Cash Flow Information This note provides additional details on Gran Tierra Energy Inc.'s cash and cash equivalents reconciliation and cash paid for income taxes Cash and Cash Equivalents Reconciliation (Thousands of U.S. Dollars) | Metric | As at June 30, 2023 | As at December 31, 2022 | | :-------------------------------------- | :------------------ | :---------------------- | | Cash and cash equivalents | $68,529 | $126,873 | | Restricted cash and cash equivalents - current | $1,142 | $1,142 | | Restricted cash and cash equivalents - long-term | $6,504 | $5,343 | | Total | $76,175 | $133,358 | - Cash paid for income taxes significantly increased to $71.5 million for the six months ended June 30, 2023, from $20.5 million in the corresponding period of 2022[52] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's detailed analysis of Gran Tierra Energy Inc.'s financial condition and operational performance for the second quarter and six months ended June 30, 2023. It highlights key financial metrics, production volumes, revenue drivers, expense trends, capital expenditures, and liquidity, explaining the factors contributing to the company's net loss and decreased funds flow from operations Financial and Operational Highlights This section summarizes Gran Tierra Energy Inc.'s key financial and operational performance metrics for Q2 and 6M 2023, including net income, production, and funds flow from operations Key Financial and Operational Highlights (Q2 2023 vs Q2 2022) | Metric | Q2 2023 | Q2 2022 | % Change | | :-------------------------- | :--------- | :--------- | :------- | | Net (Loss) Income | $(10.8)M | $53.0M | (120)% | | Income Before Income Taxes | $22.9M | $91.6M | (75)% | | Funds Flow From Operations | $53.1M | $103.6M | (49)% | | Production NAR (BOPD) | 27,204 | 23,215 | 17% | | Sales Volumes (BOPD) | 27,271 | 22,847 | 19% | | Oil Sales | $157.9M | $205.8M | (23)% | | Operating Netback | $105.7M | $163.8M | (35)% | | Adjusted EBITDA | $84.5M | $140.1M | (40)% | | Capital Additions | $65.6M | $65.2M | 1% | - Net loss in Q2 2023 was $10.8 million, a significant decrease from $53.0 million net income in Q2 2022, primarily due to a 31% decrease in Brent price and higher quality and transportation discounts[55] - NAR production increased by 17% in Q2 2023 compared to Q2 2022, reaching 27,204 BOPD, driven by successful drilling and workover campaigns[55] Additional Operational Results This section provides further details on Gran Tierra Energy Inc.'s oil production, sales volumes, and realized prices, highlighting factors influencing these operational metrics Oil Production and Sales Volumes, BOPD This section presents Gran Tierra Energy Inc.'s average daily oil production and sales volumes, both before and after royalties, for the reported periods Average Daily Volumes (BOPD) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | WI Production Before Royalties | 33,719 | 30,607 | 32,671 | 29,988 | | Production NAR | 27,204 | 23,215 | 26,370 | 23,026 | | Sales | 27,271 | 22,847 | 26,227 | 22,790 | | Royalties, % of WI Production | 19% | 24% | 19% | 23% | - Oil production NAR increased by 17% and 15% for the three and six months ended June 30, 2023, respectively, compared to the corresponding periods of 2022, due to successful drilling and workover campaigns in Colombia[63] Realized Price per bbl This section analyzes Gran Tierra Energy Inc.'s realized oil prices per barrel, explaining the impact of Brent prices and quality differentials - Realized price per bbl decreased by 36% and 31% for the three and six months ended June 30, 2023, respectively, compared to the corresponding periods of 2022[66] - This decrease was primarily due to a 31% and 24% decrease in Brent price and higher Castilla and Vasconia differentials[66] Oil Sales This section details Gran Tierra Energy Inc.'s total oil sales revenue for the reported periods, attributing changes to price and volume factors Oil Sales (Thousands of U.S. Dollars) | Period | Oil Sales | | :-------------------------- | :--------- | | Three Months Ended June 30, 2023 | $157,902 | | Three Months Ended June 30, 2022 | $205,785 | | Six Months Ended June 30, 2023 | $302,092 | | Six Months Ended June 30, 2022 | $380,354 | - Oil sales decreased by 23% and 21% for the three and six months ended June 30, 2023, respectively, compared to the corresponding periods of 2022, mainly due to lower Brent prices and higher differentials[67] - Oil sales in Ecuador contributed $1.8 million and $4.8 million for the three and six months ended June 30, 2023, respectively[67] Operating Netback This section analyzes Gran Tierra Energy Inc.'s operating netback, both in total and per barrel, highlighting the impact of realized prices and operating costs Operating Netback (Thousands of U.S. Dollars and Per bbl Sales Volumes NAR) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operating Netback (Total) | $105,720 | $163,778 | $205,475 | $300,578 | | Operating Netback (per bbl) | $42.60 | $78.77 | $43.29 | $72.87 | - Operating netback decreased by 35% and 32% for the three and six months ended June 30, 2023, respectively, compared to the prior year, primarily due to lower realized prices[69] Operating Expenses This section details Gran Tierra Energy Inc.'s operating expenses, including total costs and per barrel figures, explaining the drivers of changes Operating Expenses (Thousands of U.S. Dollars and Per bbl) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operating Expenses (Total) | $48,491 | $39,494 | $89,860 | $74,429 | | Operating Expenses (per bbl) | $19.54 | $19.00 | $18.93 | $18.04 | - Operating expenses increased by 23% and 21% for the three and six months ended June 30, 2023, respectively, compared to the prior year, mainly due to higher lifting costs associated with environmental activities and equipment rental in Ecuador[71][72] Transportation Expenses This section outlines Gran Tierra Energy Inc.'s transportation expenses, both in total and per barrel, and discusses factors such as tariffs and new routes Transportation Expenses (Thousands of U.S. Dollars and Per bbl) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Transportation Expenses (Total) | $3,691 | $2,513 | $6,757 | $5,347 | | Transportation Expenses (per bbl) | $1.49 | $1.21 | $1.42 | $1.30 | - Transportation expenses increased by 47% and 26% for the three and six months ended June 30, 2023, respectively, due to higher tariffs affecting Acordionero sales and the utilization of new transportation routes for exploration wells and Ecuador sales[75] DD&A Expenses This section presents Gran Tierra Energy Inc.'s depreciation, depletion, and amortization expenses, explaining the impact of production volumes and asset costs DD&A Expenses (Thousands of U.S. Dollars and Per bbl) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | DD&A Expenses (Total) | $56,209 | $42,216 | $107,930 | $83,179 | | DD&A Expenses (per bbl) | $22.65 | $20.31 | $22.74 | $20.17 | - DD&A expenses increased by 33% and 30% for the three and six months ended June 30, 2023, respectively, compared to the prior year, driven by increased production and higher costs in the depletable base[78] G&A Expenses This section details Gran Tierra Energy Inc.'s general and administrative expenses, including stock-based compensation, and identifies factors contributing to changes G&A Expenses (Thousands of U.S. Dollars and Per bbl) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | G&A Expenses Before Stock-Based Compensation | $9,549 | $7,847 | $20,745 | $15,626 | | G&A Stock-Based Compensation Expense | $317 | $1,989 | $1,817 | $6,546 | | Total G&A Expenses | $9,866 | $9,836 | $22,562 | $22,172 | - G&A expenses before stock-based compensation increased by 22% and 33% for the three and six months ended June 30, 2023, respectively, due to higher consulting costs and legal fees[80] - Total G&A expenses (including stock-based compensation) were comparable for Q2 2023 YoY and increased by 2% for 6M 2023 YoY[80][82] Foreign Exchange Gains and Losses This section reports Gran Tierra Energy Inc.'s foreign exchange gains and losses, primarily due to currency fluctuations against the Colombian peso Foreign Exchange Loss (Thousands of U.S. Dollars) | Period | Foreign Exchange Loss (Gain) | | :-------------------------- | :--------------------------- | | Three Months Ended June 30, 2023 | $4,707 | | Three Months Ended June 30, 2022 | $2,722 | | Six Months Ended June 30, 2023 | $6,409 | | Six Months Ended June 30, 2022 | $(1,003) | - The company recorded a $4.7 million and $6.4 million foreign exchange loss for the three and six months ended June 30, 2023, respectively, primarily due to the weakening of the U.S. dollar against the Colombian peso[84][85] Income Tax Expense This section analyzes Gran Tierra Energy Inc.'s income tax expense and effective tax rate, explaining the key factors influencing tax liabilities Income Tax Expense (Thousands of U.S. Dollars) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Income before income tax | $22,907 | $91,638 | $46,090 | $145,297 | | Current income tax expense | $19,757 | $25,425 | $37,363 | $46,252 | | Deferred income tax expense | $13,975 | $13,241 | $29,252 | $31,954 | | Total Income tax expense | $33,732 | $38,666 | $66,615 | $78,206 | | Effective tax rate | 147% | 42% | 145% | 54% | - The effective tax rate for the six months ended June 30, 2023, was 145%, significantly higher than 54% in 2022, primarily due to non-deductible foreign exchange adjustments, foreign taxes, and non-deductible royalties[88] - Current income tax expense decreased due to a decrease in taxable income[87] Net (Loss) Income and Funds Flow from Operations (a Non-GAAP Measure) This section presents Gran Tierra Energy Inc.'s net income or loss and funds flow from operations, explaining the drivers of changes in these key financial metrics Net (Loss) Income and Funds Flow from Operations (Thousands of U.S. Dollars) | Metric | Q2 2023 | Q2 2022 | 6M 2023 | 6M 2022 | | :-------------------------- | :--------- | :--------- | :--------- | :--------- | | Net (loss) income | $(10,825) | $52,972 | $(20,525) | $67,091 | | Funds flow from operations | $53,106 | $103,625 | $113,122 | $190,935 | - Funds flow from operations decreased by 49% and 41% for the three and six months ended June 30, 2023, respectively, compared to the prior year[99] - This decrease was primarily attributed to lower Brent prices, higher quality and transportation discounts, increased operating costs, and realized foreign exchange losses[99] Capital Expenditures This section details Gran Tierra Energy Inc.'s capital expenditures by category and region, highlighting investments in exploration, development, and facilities Capital Expenditures (Three Months Ended June 30, 2023, Millions of U.S. Dollars) | Category | Colombia | Ecuador | Total | | :-------------------------- | :--------- | :-------- | :------ | | Exploration | $3.6 | $7.5 | $11.1 | | Development: Drilling and Completions | $38.9 | — | $38.9 | | Facilities | $9.5 | $0.8 | $10.3 | | Workovers | $2.8 | — | $2.8 | | Other | $2.5 | — | $2.5 | | Total | $57.3 | $8.3 | $65.6 | - Total capital expenditures for Q2 2023 were $65.6 million, with the majority allocated to drilling and completions in Colombia[91] - During Q2 2023, the company spud 7 wells in Colombia (4 development and 3 water injection wells)[91] Liquidity and Capital Resources This section assesses Gran Tierra Energy Inc.'s financial liquidity and capital resources, including cash, debt, and credit facilities, to meet future obligations Liquidity Metrics (Thousands of U.S. Dollars) | Metric | As at June 30, 2023 | As at December 31, 2022 | % Change | | :-------------------------- | :------------------ | :---------------------- | :------- | | Cash and Cash Equivalents | $68,529 | $126,873 | (46)% | | 6.25% Senior Notes | $271,909 | $279,909 | (3)% | | 7.75% Senior Notes | $300,000 | $300,000 | — | - The company believes its capital resources, including cash on hand, cash from operations, and available borrowings under its credit facility, will provide sufficient liquidity for the next 12 months[92] - A credit facility with a borrowing base of up to $150 million, with $100 million initially available, remained undrawn as of June 30, 2023[93] Cash Flows This section provides an overview of Gran Tierra Energy Inc.'s cash flow performance, focusing on the drivers behind changes in funds flow from operations - Funds flow from operations decreased by 49% and 41% for the three and six months ended June 30, 2023, respectively, compared to the prior year[99] - This decrease was primarily attributed to lower Brent prices, higher quality and transportation discounts, increased operating costs, and realized foreign exchange losses[99] Critical Accounting Policies and Estimates This section confirms the consistency of Gran Tierra Energy Inc.'s critical accounting policies and estimates with previous annual reports - The company's critical accounting policies and estimates have not materially changed since the filing of its 2022 Annual Report on Form 10-K[100] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section details Gran Tierra Energy Inc.'s exposure to various market risks, including commodity price risk, foreign currency risk, and interest rate risk, and how these factors can impact its financial performance and cash flows Commodity price risk This section discusses Gran Tierra Energy Inc.'s primary market risk related to volatile oil prices and their impact on revenues - The company's principal market risk is related to oil prices, which are volatile and unpredictable, influenced by global supply and demand and other external market factors[101] - Revenues are derived from oil sales at ICE Brent prices, adjusted for quality differentials[101] Foreign currency risk This section addresses Gran Tierra Energy Inc.'s exposure to foreign currency fluctuations, particularly the U.S. dollar against the Colombian peso - Foreign currency risk is present but mitigated by U.S. dollar-denominated revenues and a majority of capital expenditures[102] - Foreign exchange gains and losses primarily result from fluctuations of the U.S. dollar against the Colombian peso, affecting current and deferred tax liabilities denominated in local currency[103] Interest Rate Risk This section outlines Gran Tierra Energy Inc.'s exposure to interest rate fluctuations, specifically concerning its credit facility - The company is exposed to interest rate fluctuations on its credit facility, which bears floating rates of interest[104] - As of June 30, 2023, the outstanding balance under the credit facility was nil[104] Item 4. Controls and Procedures This section addresses the effectiveness of Gran Tierra Energy Inc.'s disclosure controls and procedures and reports on any changes in internal control over financial reporting during the quarter ended June 30, 2023 Disclosure Controls and Procedures This section confirms the effectiveness of Gran Tierra Energy Inc.'s disclosure controls and procedures as assessed by management - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2023[105] Changes in Internal Control over Financial Reporting This section reports on any material changes in Gran Tierra Energy Inc.'s internal control over financial reporting during the quarter - There were no changes in internal control over financial reporting during the quarter ended June 30, 2023, that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[106] PART II - Other Information This part includes additional disclosures for Gran Tierra Energy Inc., covering legal proceedings, risk factors, equity sales, other information, and a list of exhibits Item 1. Legal Proceedings This section refers to the detailed information on legal proceedings provided in the notes to the condensed consolidated financial statements - For information on legal proceedings, refer to Note 8 in the Notes to the Condensed Consolidated Financial Statements (Unaudited) in Part I, Item 1 of this Quarterly Report on Form 10-Q[108] Item 1A. Risk Factors This section directs readers to the comprehensive discussion of risk factors affecting the company's business and operations, as detailed in its Annual Report on Form 10-K for the year ended December 31, 2022 - Readers should carefully review the risk factors outlined in Part I, Item 1A 'Risk Factors' of the company's 2022 Annual Report on Form 10-K[109] - The unprecedented volatility in the worldwide economy and oil and gas industry makes it challenging to predict the ultimate impact of identified risks[109] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section reports on the company's share repurchase activities under its 2022 Program, including the number of shares purchased and the program's expiration Issuer Purchases of Equity Securities (Q2 2023) | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :---------------- | :------------------------------- | :--------------------------- | | May 1-31, 2023 | 20,439 | $5.27 | - The 2022 share repurchase program expired in May 2023 after reaching its 10% share maximum of 3,603,396 shares[110] Item 5. Other Information This section confirms that no Rule 10b5-1 trading arrangements were adopted or terminated by directors or Section 16 officers during the second quarter of 2023 - No director or Section 16 officer adopted or terminated any Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements during the three months ended June 30, 2023[111] Item 6. Exhibits This section lists all exhibits filed as part of the Form 10-Q, including corporate governance documents, officer certifications, and XBRL data files - Exhibits include the Certificate of Incorporation, Bylaws, and certifications from the Principal Executive Officer and Principal Financial Officer (Exhibits 31.1, 31.2, 32.1)[112] - The filing also includes various Inline XBRL Taxonomy Extension documents (101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE) and the cover page formatted in Inline XBRL (104)[112] SIGNATURES This section contains the official certifications by Gran Tierra Energy Inc.'s executive officers, affirming the accuracy of the quarterly report Signatures This section contains the official signatures of Gran Tierra Energy Inc.'s President and Chief Executive Officer and Executive Vice President and Chief Financial Officer, certifying the accuracy and completeness of the quarterly report - The report was signed on August 1, 2023, by Gary S. Guidry, President and Chief Executive Officer, and Ryan Ellson, Executive Vice President and Chief Financial Officer[115]