Gran Tierra Posts $42 Million Q3 Loss as Sale Close Nears

Gran Tierra Energy (TSE:GTE) reported a $42 million net loss for the third quarter of 2026, reversing a $25 million net gain from the prior quarter and deepening the $20 million loss recorded a year earlier. The company now targets a year-end close for the proposed sale of its Colombian and Ecuadorian businesses to Maurel & Prom, while it prepares drilling campaigns in Canada and Azerbaijan for 2027.

What drove the loss?

Chief Financial Officer Ryan Ellson said the result reflected roughly $30 million in noncash stock-based compensation expense and $29 million in derivative losses, partially offset by a $30 million deferred income tax recovery. Lower realized oil prices and a 24% sequential rise in operating expenses compounded the pressure on the bottom line.

The cash generation picture softened in step. Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) fell to $68 million from $85 million in the second quarter and $69 million in the third quarter of 2025. Funds flow from operations came in at $32 million, or $0.89 per share, down 48% sequentially and 24% year over year.

Free cash flow remained marginally positive at approximately $1 million, compared with $6 million in the prior quarter and negative $16 million a year earlier. Capital expenditures dropped to $31 million from $54 million, as the company drilled no new wells during the quarter.

Where does the disposal stand?

The centerpiece of the quarter was the proposed sale of the Colombian and Ecuadorian businesses to Maurel & Prom for approximately $1.33 billion in total consideration, including the assumption of Gran Tierra's 2029 and 2031 notes and an oil prepayment obligation.

Ellson said the company received the required consents from holders of its 2031 notes in September and secured stockholder approval on October 9. The transaction still depends on remaining consents and regulatory approvals in Colombia and Ecuador.

Subject to completing the sale, Gran Tierra expects to return a portion of net cash proceeds to shareholders through a repurchase, with the board to determine the structure, size and terms. During the analyst question-and-answer session, Ellson said the company plans to renew its normal course issuer bid (a routine share buyback program) and will weigh the timing of a substantial issuer bid — a larger, one-off repurchase offer.

Ellson noted that management is still building next year's budget, including spending for the Azerbaijan exploration program. President and Chief Executive Officer Gary Guidry said the 2027 budget will incorporate cost reductions and lower general and administrative spending once the transaction closes. He pointed to a possible close in early to mid-December.

How did prices and production move?

Oil sales reached $168 million, down 10% from the previous quarter but up 13% from a year earlier. Ellson said lower South American realized prices reduced cash flow by approximately $17 million versus the prior quarter, net of lower royalties. He cited weaker Brent prices alongside wider quality and transportation discounts, including costs tied to alternative routes while the Colombian-Ecuador border remained closed.

Total operating expenses rose 24% sequentially to $64 million, though they sat 6% below the year-earlier level. Ellson attributed the increase primarily to a stronger Colombian peso, higher lifting costs linked to sales of Ecuadorian inventory accumulated in the prior quarter, and increased power costs.

Chief Operating Officer Sebastien Morin reported average working interest production of 39,904 barrels of oil per day — about 4% below the preceding quarter and 7% below a year earlier. He traced the sequential decline to the Lodgepole disposition and lower output at Cohembi, partially offset by higher production at Acordionero and better-than-forecast performance in Ecuador.

Morin added that the closed border increased transportation discounts by approximately $3.7 million during the quarter. The company continued moving Putumayo production through alternative routes.

What comes next in Canada and Azerbaijan?

In Canada, Gran Tierra is evaluating the Dawson Clearwater and Mount Head opportunities following the Simonette and Lodgepole dispositions. Morin said field work for the initial Dawson Clearwater development program is underway, with drilling planned to begin very early in the first quarter of 2027.

In Azerbaijan, the country's parliament ratified Gran Tierra's exploration, development and production sharing agreement with SOCAR for the onshore Guba region on October 5. The company has completed an airborne survey covering approximately 4,800 square kilometers and is preparing for drilling and well testing in 2027.

Gran Tierra ended the quarter with $141 million in cash and $450 million in net debt. Ellson said the company also held approximately $50 million in undrawn availability under its Canadian revolving credit facility.

Once the transaction closes, Gran Tierra's producing operations will center on Canada, with continued exploration interests in Azerbaijan and pursuit of additional growth opportunities.