Executive Summary / Key Takeaways

• Gran Tierra Energy ($GTE) is strategically pivoting from a period of resource capture and exploration commitments to a focused phase of operational execution, production growth, and aggressive free cash flow generation, aiming for substantial debt reduction.
• The company has successfully completed its extensive exploration commitments in Ecuador, paving the way for a significant development phase in 2026 with potential production growth to 11,000-19,000 BOE per day, excluding recent discoveries.
• Despite temporary Q3 2025 production disruptions, GTE demonstrated strong asset recovery, expecting an exit rate of 47,000-50,000 BOE per day, underpinned by advanced waterflood techniques and efficient drilling.
• Recent financial maneuvers, including a new $200 million Ecuadorian crude prepayment facility and an expanded Canadian credit facility, significantly bolster liquidity and proactively address upcoming debt maturities.
• GTE targets gross debt reduction to $600 million by the end of 2026 and $500 million by the end of 2027, with a commitment to allocate 50% of additional free cash flow to debt reduction and 50% to share repurchases, signaling a strong focus on shareholder value.

A New Chapter: Gran Tierra's Strategic Evolution in a Dynamic Energy Landscape

Gran Tierra Energy Inc. ($GTE), founded in 2003 and headquartered in Calgary, Canada, has evolved into a focused oil and natural gas exploration and production company with a diversified asset base spanning Colombia, Ecuador, and Canada. The company's journey has been marked by strategic expansion, notably its entry into Ecuador in 2019 with a commitment to drill 14 exploration wells, and the pivotal acquisition of i3 Energy Plc on October 31, 2024. This acquisition not only diversified GTE's geographic footprint but also facilitated valuable technology transfer across its operations, contributing to record quarterly production highs in late 2024 and early 2025.

The energy sector operates within a complex global framework, influenced by fluctuating commodity prices, geopolitical events, and evolving demand dynamics. A significant emerging trend is the escalating demand for energy driven by the proliferation of AI and data centers, which could indirectly bolster demand for oil and gas for power generation. Within this landscape, GTE positions itself as a specialized operator, leveraging regional expertise in Latin America. While larger integrated players like Ecopetrol (EC), Occidental Petroleum (OXY), and Chevron (CVX) command greater scale and financial resources, GTE's focused approach allows for agility in niche markets and efficient project execution. For instance, GTE's regional expertise can lead to more robust growth by enabling effective navigation of local regulatory environments, potentially resulting in better capital efficiency compared to larger, more bureaucratic competitors.

Technological Edge: Driving Efficiency and Production

Gran Tierra's competitive advantage is significantly bolstered by its operational and technological prowess, which translates directly into enhanced efficiency, lower costs, and optimized recovery across its diverse asset base. The company's core technological differentiators are rooted in advanced reservoir management and drilling techniques.

In Colombia, GTE has implemented sophisticated waterflood optimization programs in fields like Cohembi, Costayaco, and Acordionero. These programs involve continuous gains in pump upsizing, enhanced surface capacity, and real-time waterflood surveillance. These initiatives are specifically designed to reduce unit costs, effectively offset natural production declines, and improve overall recovery factors from mature fields. For example, at Cohembi, the waterflood has led to a remarkable 135% increase in production from the northern area, pushing total field production to over 9,000 barrels a day, its highest since 2014.

The company also focuses on efficient drilling and completion designs. In Canada, the Simonette Montney program utilizes an "optimized Lower Montney completion design." This design has yielded significant benefits, with early production performance surpassing a prior offset well by 80% for the same period and exceeding budget type curves. Similarly, in Ecuador, the Iguana B1 well was drilled and completed in record time and under budget, establishing a new pacesetter for GTE's exploration campaigns in the region. The average drilling cost for wells at Cohembi was approximately $3 million per well, representing a 47% reduction from the previous operator's historical costs. These efficiencies contribute directly to a stronger competitive moat by lowering the cost of adding reserves and increasing profitability per barrel.

Operational Momentum and Strategic Acquisitions

Gran Tierra's operational performance in 2025 reflects a strategic pivot towards execution and growth. In the third quarter of 2025, the company averaged 42,685 BOE per day, a 38% increase in NAR production compared to Q3 2024, driven by the Canadian acquisition and successful exploration in Ecuador. This growth occurred despite temporary disruptions, including a landslide in Ecuador and trunk line repairs at the Moqueta field, which temporarily shut in production. Management emphasized these were "deferred barrels rather than lost production," with current production recovering to approximately 45,200 BOE per day as of late October 2025.

The Colombian segment, while experiencing a decrease in sales and segmented earnings in Q3 and 9M 2025 due to lower Brent prices and sales volumes, continues to be a cornerstone of GTE's operations. The successful waterflood at Cohembi, which increased production from 2,800 to 6,700 barrels a day in the northern area, highlights the effectiveness of GTE's reservoir management. A 6-well drilling program is underway at Cohembi to further ramp production. At Acordionero, the company plans another drilling program of 8 to 10 wells in 2026, targeting high oil saturation infill locations.

Ecuador has emerged as a significant growth engine. GTE successfully completed all 14 of its exploration commitments in the country by Q3 2025, including the Conejo A-1 and A-2 wells, and the Chanangue-1 discovery. The Conejo A-1 well successfully tested both Hollin and Basal Tena sands, flowing over 1,300 barrels a day of 26.9 degree API oil. The Conejo A-2 well discovered 41 feet of net reservoir in the Hollin formation, suggesting high deliverability. These successes position Ecuador for a transition to a development phase in 2026, with potential production ranging from 11,000 to 19,000 BOE per day, excluding the recent Conejo discovery, based on waterflood of the Basal Tena.

The Canadian segment, integrated following the i3 Energy acquisition, contributed significantly, with oil, natural gas, and NGL sales of $26.65 million in Q3 2025. The Simonette Montney program continues to outperform, with two additional Lower Montney wells brought on stream in September 2025. GTE also strategically acquired 21 sections of prospective land in Central Alberta, adding over 50 high-quality drilling opportunities. The integration of the i3 Energy team has been seamless, fostering valuable technology transfer across all regions.

Fortifying the Balance Sheet: Financial Performance and Liquidity

Gran Tierra's financial performance in Q3 2025 reflected a net loss of $19.95 million, compared to a net income of $1.13 million in Q3 2024. Oil, natural gas, and NGL sales decreased by 1% to $149.30 million year-over-year, primarily due to lower oil prices, partially offset by increased sales volumes. Operating expenses, however, increased by 48% to $68.40 million, driven by the new Canadian operations and ramp-up in Ecuador. Despite this, on a per BOE basis, operating expenses in Q2 2025 reached their lowest since Q1 2022, demonstrating efficiency gains. The effective tax rate for the nine months ended September 30, 2025, was 6%, down from 44% in 2024, largely due to lower taxable income and a deferred tax recovery of $17.56 million.

The company is proactively strengthening its liquidity and addressing debt. On October 24, 2025, GTE secured a new crude oil sale and purchase agreement, providing an advance of up to $150 million related to Ecuador production, with an additional $50 million contingent on certain conditions. This 4-year prepayment facility, priced at SOFR plus 3.8%, offers improved commercial terms over previous contracts and a low negative carry. Furthermore, the Canadian revolving credit facility was expanded to $75 million and extended to October 2027. The Colombian RBL facility was also amended, reducing its borrowing base to $60 million.

GTE repaid $24.80 million of 6.25% Senior Notes due in February 2025 and repurchased $1.80 million of 9.50% Senior Notes due 2029. The company remains in compliance with all debt covenants.

Outlook: Free Cash Flow, Deleveraging, and Shareholder Returns

Gran Tierra is firmly committed to a future defined by free cash flow generation and aggressive deleveraging. With substantially all exploration and Suroriente commitments behind it, the company anticipates a significant decrease in capital expenditures in its 2026 budget, which will be released in mid-December 2025. This shift will emphasize free cash flow generation from its diversified resource base.

Management has set clear debt reduction targets: $600 million gross debt by the end of 2026 and $500 million by the end of 2027, aiming for a net debt to EBITDA ratio of less than one times. The company plans to fund the 2026 amortization of its 9.50% Senior Notes (25% due October 15, 2026) through cash on hand and available credit facilities. GTE also plans to allocate 50% of any additional free cash flow to debt reduction and 50% to share repurchases, reflecting a dynamic capital allocation strategy aimed at enhancing shareholder value, especially given the significant discount at which its shares trade relative to its net asset value.

Beyond its core operations, GTE is exploring new "order of magnitude" opportunities, such as a potential entry into the Azerbaijani market. This initiative aims to identify multi-Tcf gas or multi-hundred-million-barrel oil fields, representing a low-cost entry into a highly prospective basin.

Conclusion

Gran Tierra Energy is at a pivotal juncture, transitioning from a phase of strategic resource capture to one of disciplined execution, production optimization, and robust financial management. The successful fulfillment of its extensive exploration commitments in Ecuador, coupled with the seamless integration of its Canadian assets, has laid a strong foundation for sustained production growth and enhanced free cash flow generation. The company's focus on advanced operational techniques, such as waterflood optimization and efficient drilling, provides a tangible competitive edge, driving down costs and maximizing recovery.

While temporary operational disruptions in Q3 2025 highlighted inherent industry risks, GTE's swift recovery and proactive financial strategies, including the new Ecuadorian prepayment facility and expanded Canadian credit lines, underscore its resilience and commitment to balance sheet strength. With clear targets for debt reduction and a balanced approach to shareholder returns through buybacks, Gran Tierra is poised to unlock significant value from its diversified, oil-weighted portfolio. The strategic pivot towards free cash flow and deleveraging, combined with a disciplined capital allocation framework and an eye on new high-impact opportunities, positions Gran Tierra Energy as a compelling investment story in the evolving energy landscape.