Gran Tierra Energy Inc.

changes in payment at $4.40, $2.00 and $10.03 on a per barrel of $1.00 base. This shows the company's relative cost when it comes to adding barrels to the portfolio. To close, I would like to point out that with a robust and diverse portfolio of assets, with 227 1P and 441 2P identified undeveloped well locations, Grand Tierra is poised to capitalize on emerging opportunities and deliver value to all our stakeholders. As we continue to profitably advance our operational and financial goals, we remain deeply committed to the well-being of our employees and the communities where we operate, recognizing their essential role in our success. We are looking forward to 2025 and how it sets Grand Tierra up for success for years to come. I will now turn the call back to the operator, and Gary, Ryan and I will be happy to take questions. Operator, please go ahead.

Thank you. Ladies and gentlemen, we will now conduct the questioning session for securities analysts. If you have a question, please press star key followed by 1-1 on your touchtone phone. You will then hear an automated message advising your hand is raised. Your questions will be pulled in the order they are received. Please ensure you lift the handset if you're using a speakerphone before pressing any keys. One moment please for your first question. Our first question comes from the line of Ann Milne with Bank of America. Your line is now open.

Hi, good morning, Gary, Ryan, everyone else in the team. Thank you for the call. I have three very different questions. The first one has to do with your higher cost of sales in 2024. Maybe you could give us an idea of going forward if you think that will go back down to previous levels in 2025 and also incorporating the Ecuadorian and the Canadian costs as well. That's the first question. The second question is if you were to look forward including these assets for 26 and 27, where do you think you might see production at that point in time? Obviously, your reserve levels are really strong and you do have a development program. I'm just looking forward a little bit more. And then the third question is, I think I've asked you this before, but maybe you could just remind me, the sale of production from all three of your regions, but more from Canada. I think most of it is domestic, but maybe you could say about that which is not domestic, where it goes. Same question on Ecuador and Colombia, obviously having in the back of my mind impact of potentially higher tariffs. Thank you.

Hey, Anne. Thanks for the questions. With respect to the higher costs in 2024, we do expect those to trend down in 2025. We got hit with a number of things in 2024. Part of it was the removal of the diesel subsidies in Colombia, but also just the increase of natural gas. We're a buyer of natural gas to generate power and just higher electricity costs in general just across the country. So that impacted. And we also have about 75% of our costs are fixed. So as we ramp up production, especially in Ecuador, these are all satellite fields right now. We don't have a ton of wells built in Ecuador, but as we move to more permanent facilities and we're starting to generate gas power in Ecuador as well, we would expect those units actually to come down, the unit costs in Ecuador come down, and really to probably lead the pack as far as lower operating costs. So we do expect that to decrease in 2025 and into 2026 as well. Looking out to 2026, we have guidance this year for 47 to 53,000 barrels. We're quite comfortable that we can grow 5 to 10% with this asset base. A lot of that depends on capital allocation, of course. We try to get the right balance between reinvestment in the portfolio and portfolio longevity, but also having that production growth. But as you point out, we have 293M BOE of 2P reserves. So that's a great proxy for the resource potential in the company and production profile growth in the company. And again, with 25% of that being natural gas, a lot will depend on natural gas prices, which obviously we expect to increase in 2026 and beyond. And with respect to where we sell our production, in Canada we sell most of our production domestically. And I think what's happened, if you look at the tariff talk, obviously there's tariff talk in Colombia as well as in Canada. We're quite well insulated. If you look what happened to all of our oil in Canada is light oil, which is consumed domestically. A lot of it is diluent. And if you look what happened to heavy oil or light oil spreads in Canada, they widen by about a dollar with the tariff talks. If you look what's happened in South America, differentials have tightened by $3. You know, Vasco is going from $5 to $2 right now. And so we produce 10 times the amount more of production in South America than in Canada. So, you know, the diversification does help us. And we'd actually be a net benefitter of tariffs to the extent that they do come in.

Okay. So the higher, let's say, price because of the lower differentials would be more than offset the potential tariff increase.

Exactly. Exactly. And also in Canada, you know, we'd expect if tariffs were to come in, WTI should widen a little bit, you know, increase, which would offset some of that. But also it would be – we'd have been quite negatively impacted on the Canadian dollar, which you've already seen the dollars at $0.70 right now. And we get paid in Canadian dollars and our costs here in Canadian dollars.

Okay. And where do you sell in Canada the natural gas?

Natural gas we sell domestically and we sell it to BP.

Okay. So if you were to take it all together, you expect minimal impact from tariffs if they were to be implemented?

Correct. To be honest, we think a net positive to the company.

Okay. Thanks very much. Not good for

the country, but positive for the brand here.

Okay. Yeah. Thank you. Our next question comes from the line of Harrison Locke with Stiefel. Your line is now open.

Hi all. Thank you for taking my question today. Just a couple from me. Firstly, I'm interested in the capital structure and looking forward ahead of this year. Can we expect any changes here? Secondly, how has the integration gone with the I3 asset package? Has there been any surprises here for you guys? And do you see any scope for realizing synergies over time with this? I appreciate it's a different asset base, but with the corporate stuff, if we can have some color around that, please.

Yeah. I'll take the first question, Gary. I'll take the second question. When you look at our current capital structure, if you look in 2026, we have $186 million maturing. So we expect to fund that through cash on hand and maybe some of our available credit facilities if required. But keeping the enterprise value constant, we should see that value move over to equity holders. So we would think, and that's what we're targeting, reducing our total net debt as well. So we are focused on that and we think we have a great free cash flow business to make those changes organically through free cash flow.

And then on integration with I3, we're very pleased that essentially all of the team came across from I3. We completely integrated, not just a Canadian asset team integrated throughout the company. The benefit of that that really we see is a very large benefit is technology transfer, taking things that are happening in the Western Canadian basin to Colombia, to Ecuador, and vice versa, being able to bring some of our team that are operating in Colombia and Ecuador to Canada for that training. And so we see it as a huge benefit and a step forward for the company. And the integration has gone quite well.

Okay, fantastic, guys. That's all from myself. So thank you very much. Thank you.

Our next question comes from the line of Alejandra Andrade with JPMorgan. Your line is now open.

Hi, good morning. Thanks for taking my question. I just had two questions. First, I wanted to ask if we were to separate kind of the Colombia business versus the others, if you could talk a little bit about discounts in Colombia specifically. And then also I know you've discussed in the past the possibility of additional committed lines. I just wanted to see kind of where were you in that process of negotiating an additional line? Thanks.

Thanks for the questions. Yeah, with Colombia, the Vasconia discount, you know, last year was around $5. It's narrowed to $2 and Castilla has gone from $8 to $9 to $5 to $6. So we've seen a significant tightening of those discounts. And that's a talk of tariff talks, a result of tariff talks on Canada and Mexico, but also just a drop in production from Mexico as well. So you've really seen some of the heavier crews tighten up. In Colombia, as you know, there's lots of ways to get your barrels to tidewater. So it's a natural counterpart to make up for some of the shortfalls seen globally on the heavies. And then as far as line, we're still working on that. We expect we obviously have an undrawn facility in Canada for $50 million. And that's really capped at our choice just to minimize our standby cost. There's the borrowing base is quite a bit high, potential borrowing base is quite a bit higher. And then we are still looking at adding on a working line for Colombia. We expect to have that closed this quarter or early next.

Great. Thank you so much.

Thank you.

Our next question comes from the line of Rob Mann with RBC Capital Markets. Your line is now open.

Hey, good morning, team. Thanks for taking my questions. Just two quick ones for me here. The first being, is there any additional information on the Iguana exploration well that you can share at this time? And secondly, you know, although natural gas is a relatively small portion of your portfolio, I know you touched on it a bit there, Ryan, but just curious if you could give us your expectations for the impact of LNG Canada Phase 1 coming online this year. That's all from me.

Thanks. Great, Rob. I'll take the first one on Iguana. We've got the well cased and we're just into completion program now. So in the next coming weeks, testing will be coming next.

And with respect to natural gas, yeah, you know, this year, you know, we still think natural gas to be fairly choppy. You know, when we purchased I3, it was taking a long term view on natural gas. So I think, you know, the budget that we're using for this year is $2.50 CAD of eco pricing. And we do have a fairly large hedge position. So we're hedging over that level. So, you know, longer term, we're very bullish on natural gas. Short term, we expect 2025 to be a little choppy. As you point out, Shell, LNG, obviously have a huge impact, taking about 10 percent of the domestic production to the export markets.

That's great. Thank you.

Thank you. Our next question comes from the line of Joseph Schachter with .E.R. Your line is now open.

Good morning, Gary, Ryan and Sebastian. First question for Ryan. Thank you for the guidance on the debt goal, net debt of 600 million at the end of 25. If there is free cash flow above that, if prices improve, what is the goal? Is it to knock down debt faster or narrow the discount, you know, given the cheapness on the NAV? Do you see more NCIB or more debt or kind of a balance between the two?

Yeah, that's a great question. Yeah, a balance between the two. We plan to put 5% of our free cash flow, additional free cash flow to debt reduction and 50% to share repurchases. Okay.

One for Gary. I gather there's an election in Ecuador coming up. Are we looking at issues there between right and left and politics impacting the oil patch or is it a central government that will continue along the same way, which has worked out well for you in terms of building a business there?

Yeah, I think the first round just occurred a couple of weeks ago. President Noboa did better than expected in the first round, achieved a higher percentage of the vote. It's going to the second round and we fully expect him to win the election going forward. And so continue with the conservative approach, business-friendly approach in the country.

Okay, good. A question for Sebastian. In the supporting material for the annual report, you break down the reserves there by country and at the end of 2023, just under 70 million for Colombia, technical revisions, production number 63.64 million at the end of the year. Is the program that you have this year able to stabilize that or should we be modeling in declines there but increases in Ecuador and Canada?

No, I think you should be able to model that and maintain essentially because we've got our whole reserve replacement plan outlined for the year, so I feel quite comfortable with maintaining that. Okay.

Last one again, this one for Gary. The market's not being very nice today to the stock. Any thoughts there of things that can be done? Sell non-core assets? The stock was down below 739 now. Any thoughts there on market reaction and what you can do to get more shareholder support?

Yeah, I think the one Ryan just mentioned, we're going to continue buying back our stock, trading at a significant discount to PDB going forward. We always look at non-core assets to shore up, number one, shore up the balance sheet but also consolidate in some other areas in Western Canada. We're doing quite well with the drill bits in Colombia and Ecuador and we'll continue that going forward. But I think the answer to your question is the only, the primary tool in our toolbox here is to continue to buy back shares.

Okay, thanks for the answer. Thanks very much, guys. Have a good day.

Thank you. Gentlemen, there are no further questions at this time. Please continue.

I would like to once again thank everyone for joining us today. I'd like to also take this opportunity to thank Grantee, our team for the commitment and all of the hard work during 2024 and thanking our shareholders for their continued support. We look forward to speaking with you in the next quarter and update you on our ongoing process. Thank you.

This concludes today's conference call. Thank you for your participation. You may now disconnect.