GRAN TIERRA ENERGY INC. Annual Report Summary - A Deep Dive for Investors

Unlock the key insights from Gran Tierra Energy Inc.'s latest 10-K filing for the fiscal year ended December 31, 2025. This summary offers a comprehensive, accessible overview of the company's performance, strategic direction, financial health, and future outlook, tailored for retail investors.

1. Business Overview

Gran Tierra Energy Inc. is an independent oil and gas company that focuses on the exploration, development, and production of light crude oil and natural gas. Its core operations concentrate in Colombia, with additional interests in Ecuador and Canada.

For the year ended December 31, 2025, Gran Tierra reported an average daily production of 32,500 barrels of oil equivalent per day (boepd). This represented a slight decrease from the previous year, primarily due to strategic portfolio adjustments. Proved (1P) reserves totaled 125 million barrels of oil equivalent (MMboe) at year-end.

The company significantly optimized its portfolio this past year through both divestitures and acquisitions:

• Divestitures: In September 2025, Gran Tierra divested its non-core UK and North Sea operations (Gran Tierra North Sea Limited and Gran Tierra UK Limited) for approximately $50 million. This followed the sale of its Simonette Montney Block in Canada in December 2024 for $30 million. These sales aimed to streamline the portfolio and reduce debt.
• Acquisitions: To strengthen its South American focus, Gran Tierra acquired new oil and gas blocks, Perico and Espejo, in Colombia in December 2025 for $40 million. These acquisitions are expected to contribute to future production growth and reserve additions in its core region.

2. Financial Performance

Gran Tierra Energy demonstrated resilience amidst a fluctuating commodity price environment:

• Revenue: The company generated total revenues of $950 million for 2025, a 5% decrease from the previous year. This decline stemmed primarily from lower average realized oil prices and the impact of asset divestitures.
• Net Income: Gran Tierra posted a net income of $80 million, or $0.22 per diluted share, a significant improvement compared to a net loss in the prior year. This turnaround reflected effective cost management and reduced impairment charges.
• Adjusted EBITDA: Adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA), a key measure of operational profitability, reached $450 million.
• Cash Flow: Cash flow from operating activities was robust at $350 million, which enabled significant capital expenditures and debt management. Capital expenditures for the year totaled $200 million, primarily funding development drilling in Colombia.

3. Management Discussion (MD&A Highlights)

Gran Tierra strategically optimized its portfolio and returned to profitability this past year, despite a challenging commodity price environment. The 5% decrease in revenue stemmed primarily from lower average realized oil prices and the impact of asset divestitures. While these divestitures reduced top-line revenue, they were strategic moves to streamline the portfolio.

The return to net income from a prior year loss reflects successful cost management initiatives and reduced impairment charges, demonstrating operational efficiencies. The robust cash flow from operating activities of $350 million funded $200 million in capital expenditures, primarily for high-value development drilling in Colombia, and enabled proactive debt management.

The divestment of non-core assets in the UK/North Sea and Canada for $80 million enabled the company to reduce debt and sharpen its focus on high-margin, low-decline assets in Colombia. Concurrently, the acquisition of the Perico and Espejo blocks in Colombia enhances future growth prospects and consolidates Gran Tierra's position in a key operating region.

While commodity price volatility and a modest year-over-year production decline due to divestitures presented challenges, the company's strategic actions have positioned it for improved financial health and focused growth. A significant portion of debt matured in 2025; the company successfully addressed these post-period through active refinancing efforts.

4. Financial Health

Gran Tierra Energy actively manages its debt profile and maintains adequate liquidity:

• Cash Position: As of December 31, 2025, the company reported $100 million in cash and cash equivalents.
• Total Debt: Total debt outstanding at year-end totaled $600 million.
  • Senior Notes:
    • $150 million of 6.25% Senior Notes were due in October 2025.
    • $250 million of 7.75% Senior Notes are due in 2027.
    • $200 million of 9.50% Senior Notes are due in 2029.
  • Credit Facilities: The company maintains a $100 million revolving credit facility, with $50 million drawn at year-end, providing additional liquidity.
• Debt Refinancing: In March 2026, a significant post-period event, Gran Tierra issued $175 million of new 9.75% Senior Notes due 2031. The proceeds from this issuance, combined with cash on hand, primarily refinanced the maturing 6.25% Senior Notes, addressing a near-term debt obligation and extending its debt maturity profile. This proactive debt management strengthens the company's financial flexibility.

5. Risk Factors

Investors should be aware of the following principal risks:

• Customer Concentration: Approximately 40% of Gran Tierra's revenue comes from a single customer ("Customer 1"). Any disruption to this relationship or reduction in purchases could significantly impact sales and cash flow.
• Commodity Price Volatility: As an oil and gas producer, the company's financial performance is highly sensitive to global crude oil prices. While Gran Tierra uses hedging instruments (such as Brent 3-way collars, WTI CMA 3-way collars, and put options) to mitigate this risk by typically hedging 50% of its forecasted production for 2026 at average prices between $75-$85 per barrel, significant and sustained price declines could still negatively impact profitability.
• Geopolitical and Regulatory Risks: Operations in Colombia and Ecuador expose Gran Tierra to political instability, regulatory changes (e.g., environmental regulations, tax policies, royalty rates), and social licensing challenges, potentially impacting operations, costs, and project timelines.
• Operational Risks: Exploration and production activities inherently involve risks such as drilling success rates, equipment failures, and environmental incidents, which can lead to cost overruns or production shortfalls.

6. Competitive Position

Gran Tierra Energy stands out due to its established presence and operational expertise in the highly prospective Putumayo Basin of Colombia. The company benefits from:

• Low Operating Costs: Gran Tierra maintains a competitive operating cost structure, contributing to healthy margins even in moderate commodity price environments.
• Strategic Infrastructure: Ownership and access to key infrastructure in its core operating areas provide logistical advantages.
• Proven Reserves: A strong base of proved reserves underpins long-term production stability.
• Focused Portfolio: Recent divestitures have concentrated resources on assets with higher growth potential and better economic returns, enhancing its competitive edge against smaller, less diversified regional players.

7. Future Outlook

For the fiscal year 2026, Gran Tierra Energy provides the following guidance:

• Production: Projects average daily production of 30,000 to 33,000 boepd.
• Capital Expenditures: Planned capital expenditures will range from $180 million to $220 million, primarily for development drilling and infrastructure upgrades in Colombia.
• Debt Reduction: The company aims to further reduce its net debt through free cash flow generation, targeting a net debt to Adjusted EBITDA ratio below 1.5x by year-end 2026.

Management expects continued strong cash flow generation, supported by its hedging program and disciplined capital allocation, which positions the company for sustainable growth and value creation.

8. Leadership and Strategy

Gran Tierra's strategy for 2025 and beyond focuses on optimizing its asset portfolio, strengthening its balance sheet, and generating sustainable free cash flow. The recent asset sales and acquisitions highlight a deliberate shift to a more focused, high-margin asset base primarily in Colombia. The company aims to achieve this by:

• Maximizing Value from Core Assets: Prioritizing development and exploration in existing high-potential fields in Colombia.
• Maintaining Financial Discipline: Continuing to reduce net debt and manage capital expenditures prudently.
• Enhancing Shareholder Returns: Exploring opportunities for capital returns to shareholders as free cash flow generation improves.

The company made no significant changes to the executive leadership team during the fiscal year.

9. Market Trends and Regulatory Changes

Several external factors influence Gran Tierra's operations:

• Global Oil Demand: The outlook for global oil demand, particularly from emerging markets, remains a key driver for crude oil prices.
• Energy Transition Policies: While Gran Tierra focuses primarily on oil, broader global trends towards renewable energy and decarbonization could influence long-term investment sentiment and access to capital for fossil fuel companies.
• Colombian Political Landscape: The current political environment in Colombia, including discussions regarding energy policy, environmental regulations, and potential changes to fiscal terms for oil and gas companies, may impact future investment decisions and operational costs. The company actively engages with stakeholders to navigate these potential changes.
• ESG Initiatives: Gran Tierra continues to enhance its Environmental, Social, and Governance (ESG) practices by focusing on reducing its operational footprint and strengthening community relations, an increasingly important factor for investor relations and social license to operate.