Gran Tierra Energy Inc. Announces First Quarter 2010 Results

Attained Record Quarterly Production of 14,908 Barrels of Oil Per Day, Net After Royalty; Poised to Initiate Exploration Drilling Program in Colombia and Peru

CALGARY, May 10 /CNW/ - Gran Tierra Energy Inc. (NYSE Amex: GTE, TSX: GTE), a company focused on oil exploration and production in South America, today announced financial and operating results for the quarter ended March 31, 2010. All dollar amounts are in United States dollars unless otherwise indicated.

    
    Highlights for the quarter include:
    -   Record quarterly production of 14,908 barrels of oil per day (BOPD),
        a 43% increase in average daily oil production from the same period
        in 2009 of 10,389 BOPD, and an increase from fourth quarter 2009
        production of 14,714 BOPD, both net after royalty (NAR);
    -   Revenue and other income for the quarter of $93.1 million, a 177%
        increase over the same period in 2009, and a 3% decrease from the
        fourth quarter of 2009;
    -   Net income of $10.0 million or $0.04 per share basic and diluted,
        compared to net income of $14.1 million or $0.06 per share basic and
        diluted in 2009;
    -   Funds flow from operations of $54.3 million compared to $20.6 million
        for the same period in 2009;
    -   Working capital increased to $267.0 million at March 31, 2010
        compared to $215.2 million at December 31, 2009;
    -   Cash and cash equivalents were $265.7 million at March 31, 2010
        compared to $270.8 million at December 31, 2009. Gran Tierra Energy
        remains debt free;
    -   Attained permit approval and subsequently completed location
        construction for the drilling of Moqueta-1 in the Chaza Block,
        Putumayo Basin, Colombia. Rig mobilization has been initiated and is
        approximately 65% complete with drilling expected to commence mid-
        May, 2010;
    -   The Environmental Impact Assessment (EIA) approval for seismic and
        drilling operations has been approved for Block 128, Maranon Basin,
        Peru; amendments to this approval are being reviewed. Seismic crew
        mobilization is planned for the second quarter, with drilling of up
        to four wells expected to commence in the third quarter and continue
        through fourth quarter, 2010;
    -   Attained Gas Plus certification for the Valle Morado gas field.
        Drilling operations have been rescheduled and moved forward, with
        road improvements and location construction initiated; drilling is
        expected to commence in early third quarter, 2010.
    

"In addition to attaining another record level of production, the foundation for our 2010 exploration program has been established in the first quarter of 2010," said Dana Coffield, President and Chief Executive Officer of Gran Tierra Energy Inc. "Operations have now been initiated in Colombia, Peru and Argentina in what will be our busiest exploration drilling campaign in our history, including up to seven wells in Colombia, up to four wells in Peru and a significant sidetrack well in Argentina. Our focus in Colombia and Peru is on finding additional oil reserves, while our focus in Argentina is on defining the gas resource potential of our lands."

    
    Production Review

                 Three Months Ended               Three Months Ended
                    March 31, 2010                   March 31, 2009
            -------------------------------- --------------------------------
    (Barrels
    of Oil)   Colombia  Argentina     Total    Colombia  Argentina     Total
            -------------------------------- --------------------------------
    Gross
     Produc-
     tion   1,709,683     86,445  1,796,128    970,134    107,165  1,077,299
    Royal-
     ties    (465,131)   (10,097)  (475,228)  (125,056)   (13,362)  (138,418)
    Inventory
     Adjust-
     ment      21,017       (235)    20,782      6,193    (10,026)    (3,833)
            -------------------------------- --------------------------------
    Production
     Net After
     Royalties
     (NAR)  1,265,569     76,113  1,341,682    851,271     83,777    935,048
            -------------------------------- --------------------------------
            -------------------------------- --------------------------------
    Barrels
     of Oil
     Per Day
     (BOPD)
     (NAR)     14,062        846     14,908      9,459        931     10,389
            -------------------------------- --------------------------------
            -------------------------------- --------------------------------


    Financial Review

                                     Three Months Ended March 31,
                                   --------------------------------
                                       2010       2009   % Change
                                   --------------------------------
    (Thousands of U.S. Dollars)
    Revenue and Interest           $ 93,110   $ 33,565        177
                                   --------------------------------
                                   --------------------------------
    Net income                     $  9,960   $ 14,132        (30)
                                   --------------------------------
                                   --------------------------------

    (U.S. Dollars per Share)
    Net Income Per Share - Basic   $   0.04   $   0.06        (33)
                                   --------------------------------
                                   --------------------------------
    Net Income Per Share - Diluted $   0.04   $   0.06        (33)
                                   --------------------------------
                                   --------------------------------

    Funds flow from operations (1) reconciled to net income (loss) is as
    follows:

    Funds Flow From Operations -
    Non-GAAP Measure                 Three Months Ended March 31,
                                   --------------------------------
    (Thousands of U.S. Dollars)        2010                  2009
                                   --------------------------------

    Net income                      $ 9,960              $ 14,132
    Adjustments to reconcile net
     income to funds flow from
     operations
      Depletion, depreciation,
       accretion and impairment      40,343                27,529
      Deferred taxes                (10,054)               (3,982)
      Stock-based compensation        1,362                 1,125
      Unrealized (gain) loss on
       financial instruments            (44)                   87
      Unrealized foreign exchange
       loss (gain)                   12,707               (18,298)
                                   --------------------------------
    Funds Flows from operations    $ 54,274              $ 20,593
                                   --------------------------------
                                   --------------------------------

    (1) Gran Tierra Energy has disclosed a non-GAAP measure "funds flow from
        operations" in this press release which does not have any
        standardized meaning prescribed under U.S. generally accepted
        accounting principles ("GAAP"). Management uses this financial
        measure to analyze operating performance and the income (loss)
        generated by Gran Tierra Energy's principal business activities prior
        to the consideration of how non-cash items affect that income, and
        believes that this financial measure is also useful supplemental
        information for investors to analyze operating performance and Gran
        Tierra Energy's financial results. Investors should be cautioned that
        this measure should not be construed as an alternative to net income
        (loss) or other measures of financial performance as determined in
        accordance with GAAP. Gran Tierra Energy's method of calculating this
        measure may differ from other companies and, accordingly, it may not
        be comparable to similar measures used by other companies. Funds flow
        from operations, as presented, is net income (loss) adjusted for
        depletion, depreciation and accretion, deferred taxes, stock based
        compensation, unrealized loss (gain) on financial instruments and
        unrealized foreign exchange losses (gains).
    

First Quarter 2010 Financial Highlights:

Revenue and interest increased 177% to $93.1 million for the three months ended March 31, 2010 compared to $33.6 million in the same period in 2009. This was due to an increase of 43% in crude oil production in addition to an increase in crude oil prices.

Operating expenses for the first quarter of 2010 amounted to $10.2 million, a 44% increase from the same period in 2009 due to expanded operations and increased production levels in Colombia. For the three months ended March 31, 2010, operating expenses on a barrel of oil equivalent ("BOE") basis were $7.57, a slight increase over the same period in 2009.

Depletion, depreciation and accretion expense ("DD&A") for the current quarter increased to $40.3 million compared to $27.5 million for the same quarter in 2009. On a BOE basis, DD&A for the three months ended March 31, 2010 was $29.99 compared to $29.19 for the same period in 2009.

General and administrative expenses ("G&A") of $7.2 million for the three months ended March 31, 2010, were 40% higher than the same period in 2009 due to increased employee related costs reflecting the expanded operations in Colombia. However, due to higher production in 2010, G&A expenses per BOE decreased 2% to $5.34 for the current quarter, compared to $5.43 for the first quarter of 2009.

The foreign exchange loss of $14.3 million, of which $12.7 million is an unrealized non-cash foreign exchange loss, for the first quarter of 2010 primarily, represents a foreign exchange loss resulting from the translation of a deferred tax liability recorded on the purchase of Solana. In the first quarter of 2009, a $20.2 million foreign exchange gain was recorded, of which $18.3 million was an unrealized non-cash foreign exchange gain, primarily as a result of the translation of the deferred tax liability recorded on the purchase of Solana. The deferred tax liability is denominated in Colombian pesos and the devaluation of 6% in the U.S. dollar against the Colombian Peso in the current quarter resulted in the foreign exchange loss. This compares to a 14% appreciation in the U.S. dollar against the Colombian Peso for the three months ended March 31, 2009 which resulted in the foreign exchange gain recorded in that period.

Net income for the first quarter of 2010 was $10.0 million, or a $0.04 per share basic and diluted, compared to net income of $14.1 million, or $0.06 per share basic and diluted, for the same period in 2009.

Balance Sheet Highlights:

The company reported cash and cash equivalents of $265.7 million at March 31, 2010 as compared to $270.8 million at December 31, 2009. Working capital increased to $267.0 million at March 31, 2010, as compared to $215.2 million at December 31, 2009. Shareholders' equity increased to $846.0 million at March 31, 2010 from $816.4 million at December 31, 2009, and the company had no outstanding long-term debt as of March 31, 2010.

Production Highlights:

Average daily consolidated light and medium crude oil production for the three months ended March 31, 2010 increased 43% to a record 14,908 BOPD NAR compared to 10,389 BOPD NAR for the same period of 2009.

Average daily Colombian production of light and medium crude oil for the three months ended March 31, 2010 increased 49% to a record 14,062 BOPD NAR compared to 9,459 BOPD NAR for the same period in 2009. The increase in production is due primarily to increased production from the continued development of the Costayaco field in the Chaza Block in Colombia where Gran Tierra has a 100% working interest subsequent to the acquisition of Solana.

Average daily Argentine production of light and medium crude oil for the quarter ended March 31, 2010 decreased 9% to 846 BOPD NAR compared to 931 BOPD NAR for the same period in 2009.

Operations Update

COLOMBIA - Development Operations

Costayaco Field, Chaza Block

Location construction of Costayaco-11 has been completed and drilling commenced May 5, 2010. Costayaco-11 is being drilled in the northern portion of the Costayaco field, and will be used as a produced-water disposal well and as a water-injector to assist with pressure support maintenance in the T-Sandstone reservoir.

COLOMBIA - Exploration Operations

Moqueta-1 Exploration Well, Chaza Block

Gran Tierra Energy attained Permit approval and completed location construction for the drilling of Moqueta-1 in the Chaza Block, Putumayo Basin, Colombia. Rig mobilization has been initiated and drilling is expected to commence mid-May, 2010. Drilling is expected to take approximately 20 days.

Taruka-1 Exploration Well, Piedemonte Sur Block

Scouting of the Taruka-1 location has been initiated, with road and location construction to follow. Taruka-1 drilling will utilize the same drilling rig as is currently being used at Moqueta-1.

Additional Exploration Drilling

Five additional exploration wells have been budgeted for the second half of 2010, including two in the Azar Block, one in the Rumiyaco Block, one in the Piedemonte Norte Block and one in the Guayuyaco Block. Gran Tierra Energy is continuing the evaluation of other prospects that may be drilled in 2010 and 2011.

Seismic Operations

A combination of 2-D and 3-D seismic acquisition operations has been initiated and is ongoing in the Rumiyaco and Azar blocks. Additional 2-D and 3-D seismic acquisition programs are planned for the Chaza, Guayuyaco, Piedemonte Norte and Piedemonte Sur blocks in 2010. This data will be used for locating exploration wells to be drilled in both 2010 and 2011.

ARGENTINA

The re-entry and sidetrack of the VM.x-1001 well in the Valle Morado Block in the Noroeste Basin has been moved forward and is now scheduled to commence drilling early in the third quarter of 2010, for an estimated cost of $15 million. As a result of moving this forward, operations for access road improvements and location construction has been initiated. Planned short-term gas sales from the field have been cancelled as a result of the work.

The Secretary of Energy published a resolution on April 15 approving the Valle Morado project for Gas Plus, allowing Gran Tierra Energy to negotiate directly with industrial users for gas sales agreements.

In the Santa Victoria block, the tendering process has begun for a 150 km(2) 3D and 188 km 2D seismic acquisition program in the third quarter of 2010 to define structural and stratigraphic traps in a gas-condensate trend identified from existing seismic data.

A variety of workovers and facilities upgrades on other Gran Tierra Energy properties in the Noroeste Basin is continuing.

PERU

The Environmental Impact Assessment (EIA) approval for seismic and drilling operations has been approved for Block 128. Amendments to this approval are being reviewed. Approval for Block 122 is still pending. Gran Tierra Energy expects to begin acquiring approximately 480 kilometers of 2D seismic data in the second quarter of 2010 over 16 principal leads amongst the 24 leads identified on blocks 122 and 128. Stratigraphic test drilling on up to four prospects is expected to take place in the third and fourth quarter of 2010.

BRAZIL

Gran Tierra Energy continues to evaluate a variety of new venture exploration and development opportunities in both the onshore and offshore of Brazil.

Conference Call Information:

Gran Tierra Energy Inc. will host its first quarter 2010 results conference call on Wednesday, May 12, 2010 at 10:00 a.m. Eastern Standard Time (EST).

President and Chief Executive Officer Dana Coffield, Chief Financial Officer Martin Eden, and Chief Operating Officer Shane O'Leary will discuss Gran Tierra Energy's financial and operating results for the quarter and then take questions from securities analysts and institutional shareholders.

To pre-register for this conference call, please visit:

https://www.theconferencingservice.com/prereg/key.process?key=PLBF9GRCA

Interested parties may access the conference call by dialing 1-888-713-4214 (domestic) or 617-213-4866 (international), pass code 70246238. The call will also be available via web cast at www.grantierra.com, www.streetevents.com, or www.fulldisclosure.com. The web cast will be available on Gran Tierra Energy's website until the next earnings call.

If you are unable to participate, an audio replay of the call will be available beginning two hours after the call until 11:59 p.m. on May 19, 2010. To access the replay dial 888-286-8010 (domestic) or 617-801-6888 (international) pass code 29570075.

Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast.

About Gran Tierra Energy Inc.

Gran Tierra Energy Inc. is an international oil and gas exploration and production company, headquartered in Calgary, Canada, incorporated in the United States, trading on the NYSE Amex Exchange (GTE) and the Toronto Stock Exchange (GTE), and operating in South America. Gran Tierra Energy holds interests in producing and prospective properties in Argentina, Colombia and Peru, and has opened a business development office in Rio de Janeiro, Brazil. Gran Tierra Energy has a strategy that focuses on establishing a portfolio of producing properties, plus production enhancement and exploration opportunities to provide a base for future growth. Additional information concerning Gran Tierra Energy is available at www.grantierra.com. Investor inquiries may be directed to info@grantierra.com or (866) 973-4873.

Gran Tierra Energy's Securities and Exchange Commission filings are available on a web site maintained by the Securities and Exchange Commission at http://www.sec.gov and on SEDAR at http://www.sedar.com.

Forward Looking Statements:

This news release contains certain forward-looking information, forward-looking statements and forward-looking financial outlook (collectively, "forward-looking statements") under the meaning of applicable securities laws, including Canadian Securities Administrators' National Instrument 51-102 - Continuous Disclosure Obligations and the United States Private Securities Litigation Reform Act of 1995. The use of any of the words "expect", "anticipate", "continue", "estimate", "guidance", "objective", "may", "will", "should", "plans", "intends" and similar expressions are intended to identify forward-looking statements. In particular, but without limiting the foregoing, this news release contains forward-looking statements regarding: Gran Tierra Energy's planned operations, including as described under the caption Operations Update for each of the countries in which it operates, together with all other statements regarding expected or planned development, testing, drilling, production, expenditures or exploration, or that otherwise reflect expected future results or events.

The forward-looking statements contained in this news release are subject to risks, uncertainties and other factors that could cause actual results or outcomes to differ materially from those contemplated by the forward-looking statements, including, among others: Gran Tierra Energy's operations are located in South America, and unexpected problems can arise due to guerilla activity, technical difficulties and operational difficulties which impact its testing and drilling operations and the production, transport or sale of its products; geographic, political and weather conditions can impact testing and drilling operations and the production, transport or sale of its products; and the risk that current global economic and credit market conditions may impact oil prices and oil consumption more than Gran Tierra Energy currently predicts, which could cause Gran Tierra Energy to modify its exploration activities. Further information on potential factors that could affect Gran Tierra Energy are included in risks detailed from time to time in Gran Tierra Energy's Securities and Exchange Commission filings, including, without limitation, under the caption "Risk Factors" in Gran Tierra Energy's Quarterly Report on Form 10-Q filed May 10, 2010. These filings are available on a Web site maintained by the Securities and Exchange Commission at http://www.sec.gov and on SEDAR at www.sedar.com. The forward-looking statements contained herein are expressly qualified in their entirety by this cautionary statement. The forward-looking statements included in this press release are made as of the date of this press release and Gran Tierra Energy disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as expressly required by applicable securities legislation.

Basis of Presentation of Financial Results:

Gran Tierra Energy's financial results are reported in United States dollars and prepared in accordance with generally accepted accounting principles in the United States.

    
    Gran Tierra Energy Inc.
    Condensed Consolidated Statements of Operations and Retained Earnings
    (Unaudited)
    (Thousands of U.S. Dollars, Except Share and Per Share Amounts)

                                                 Three Months Ended March 31,
                                                -----------------------------
                                                       2010          2009
                                                -----------------------------

    REVENUE AND OTHER INCOME
      Oil and natural gas sales                   $     92,932  $     33,151
      Interest                                             178           414
                                                -----------------------------
                                                        93,110        33,565
                                                -----------------------------
    EXPENSES
      Operating                                         10,185         7,086
      Depletion, depreciation, accretion,
       and impairment                                   40,343        27,529
      General and administrative                         7,190         5,125
      Derivative financial instruments gain                (44)            -
      Foreign exchange loss (gain)                      14,294       (20,222)
                                                -----------------------------
                                                        71,968        19,518
                                                -----------------------------

    INCOME BEFORE INCOME TAXES                          21,142        14,047
      Income tax (expense) recovery                    (11,182)           85
                                                -----------------------------
    NET INCOME AND COMPREHENSIVE INCOME                  9,960        14,132
    RETAINED EARNINGS, BEGINNING OF PERIOD              20,925         6,984
                                                -----------------------------
    RETAINED EARNINGS, END OF PERIOD              $     30,885  $     21,116
                                                -----------------------------
                                                -----------------------------

    NET INCOME PER SHARE - BASIC                  $       0.04  $       0.06
    NET INCOME PER SHARE - DILUTED                $       0.04  $       0.06

    WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC    248,818,662   238,907,060

    WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED  256,863,106   248,914,219



    Gran Tierra Energy Inc.
    Condensed Consolidated Balance Sheets (Unaudited)
    (Thousands of U.S. Dollars, Except Share Amounts)

                                                    March 31,    December 31,
                                                -----------------------------
                                                       2010          2009
                                                -----------------------------
    ASSETS
    Current Assets
      Cash and cash equivalents                   $    265,676  $    270,786
      Restricted cash                                      240         1,630
      Accounts receivable                               87,024        35,639
      Inventory                                          4,160         4,879
      Taxes receivable                                   1,721         1,751
    Prepaids                                             2,489         1,820
    Deferred tax assets                                  4,311         4,252
                                                -----------------------------

    Total Current Assets                               365,621       320,757
                                                -----------------------------

    Oil and Gas Properties (using the full cost
     method of accounting)
      Proved                                           454,217       474,679
      Unproved                                         234,400       234,889
                                                -----------------------------

    Total Oil and Gas Properties                       688,617       709,568

      Other capital assets                               4,039         3,175
                                                -----------------------------

    Total Property, Plant and Equipment                692,656       712,743
                                                -----------------------------

    Other Long Term Assets
      Restricted cash                                      840           162
      Deferred tax assets                                6,903         7,218
      Other long term assets                               315           347
      Goodwill                                         102,581       102,581
                                                -----------------------------

    Total Other Long Term Assets                       110,639       110,308
                                                -----------------------------

    Total Assets                                  $  1,168,916  $  1,143,808
                                                -----------------------------
                                                -----------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current Liabilities
      Accounts payable                            $     22,149  $     36,786
      Accrued liabilities                               35,204        40,229
      Derivative financial instruments                       -            44
      Taxes payable                                     40,804        28,087
      Asset retirement obligation                          450           450
                                                -----------------------------

    Total Current Liabilities                           98,607       105,596
                                                -----------------------------

    Long Term Liabilities
      Deferred tax liabilities                         218,981       216,625
      Deferred remittance tax                              944           903
      Asset retirement obligation                        4,387         4,258
                                                -----------------------------
    Total Long Term Liabilities                        224,312       221,786
                                                -----------------------------
    Commitments and Contingencies
    Shareholders' Equity

      Common shares                                      3,022         1,431

      (232,937,045 and 219,459,361 common shares
       and 20,488,841 and 24,639,513 exchangeable
       shares, par value $0.001 per share, issued
       and outstanding as at March 31, 2010 and
       December 31, 2009 respectively)

      Additional paid in capital                       808,912       766,963
      Warrants                                           3,178        27,107
      Retained earnings                                 30,885        20,925
                                                -----------------------------

    Total Shareholders' Equity                         845,997       816,426
                                                -----------------------------

    Total Liabilities and Shareholders' Equity    $  1,168,916  $  1,143,808
                                                -----------------------------
                                                -----------------------------


    Gran Tierra Energy Inc.
    Condensed Consolidated Statements of Cash Flows (Unaudited)
    (Thousands of U.S. Dollars)

                                                 Three Months Ended March 31,
                                                -----------------------------
                                                       2010          2009
                                                -----------------------------

    Operating Activities

    Net income                                    $      9,960  $     14,132
    Adjustments to reconcile net income to
     net cash provided by (used in)
     operating activities:

      Depletion, depreciation, accretion,
       and impairment                                   40,343        27,529
      Deferred taxes                                   (10,054)       (3,982)
      Stock based compensation                           1,362         1,125
      Unrealized (gain) loss on financial
       instruments                                         (44)           87
      Unrealized foreign exchange loss (gain)           12,707       (18,298)
      Settlement of asset retirement obligations             -           (52)

    Net changes in non-cash working capital

      Accounts receivable                              (46,208)      (25,260)
      Inventory                                             97           (57)
      Prepaids                                            (669)         (460)
      Accounts payable and accrued liabilities         (17,796)       (3,176)
      Taxes receivable and payable                      12,747           774
                                                -----------------------------

    Net cash provided by (used in) operating
     activities                                          2,445        (7,638)
                                                -----------------------------

    Investing Activities
      Restricted cash                                      712             -
      Additions to property, plant and equipment       (27,072)      (21,627)
      Proceeds from disposition of oil and gas
       property                                            600             -
      Long term assets and liabilities                      32          (299)
                                                -----------------------------

    Net cash used in investing activities              (25,728)      (21,926)
                                                -----------------------------

    Financing Activities
      Proceeds from issuance of common shares           18,173           520
                                                -----------------------------

    Net cash provided by financing activities           18,173           520
                                                -----------------------------

    Net decrease in cash and cash equivalents           (5,110)      (29,044)
    Cash and cash equivalents, beginning of period     270,786       176,754
                                                -----------------------------

    Cash and cash equivalents, end of period      $    265,676  $    147,710
                                                -----------------------------
                                                -----------------------------

    Cash                                          $    101,580  $     22,877
    Term deposits                                      164,096       124,833
                                                -----------------------------
    Cash and cash equivalents, end of period      $    265,676  $    147,710
                                                -----------------------------
                                                -----------------------------

    Supplemental cash flow disclosures:
      Cash paid for taxes                         $     10,147  $      1,540
    Non-cash investing activities:
      Non-cash working capital related to
      property, plant and equipment               $     10,328  $      8,413
                                                -----------------------------
                                                -----------------------------
    

SOURCE Gran Tierra Energy Inc.

For further information: For further information: For media and investor inquiries please contact Jason Crumley, Director, Investor Relations at (403) 265-3221 or info@grantierra.com

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