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Gran Tierra Energy Inc. Announces Second Quarter 2012 Results and a Material Increase in Reserves at its Costayaco Field, Colombia

August 7, 2012

Quarter Highlighted by Costayaco Reserve Growth

CALGARY, Aug. 7, 2012 /PRNewswire/ – Gran Tierra Energy Inc. (“Gran Tierra Energy”) (NYSE MKT: GTE, TSX: GTE), a company focused on oil and gas exploration and production in South
America, today announced its financial and operating results for the
quarter ended June 30, 2012, in addition to an independent mid-year
reserve update for the company’s largest asset, the Costayaco Field in
Colombia.  All dollar amounts are in United States dollars unless
otherwise indicated.

Highlights for the quarter include: 

        --  Costayaco Field reserves effective June 30, 2012, net after
            royalty ("NAR"), calculated in accordance with Canadian
            National Instrument 51-101 - Standards of Disclosure for Oil
            and Gas Activities("NI 51-101") and the Canadian Oil and Gas
            Evaluation Handbook ("COGE Handbook"),  increased from year-end
            2011 reserves, adjusted for production from the first half of
            2012, as follows: total Proved ("1P") reserves increased 38% to
            approximately 20.4 million barrels of oil ("MMbbl"), total
            Proved plus Probable ("2P") reserves increased 40% to
            approximately 23.2 MMbbl of oil, and total Proved plus Probable
            plus Possible ("3P") reserves increased 21% to approximately
            26.7 MMbbl of oil;

        --  Costayaco Field reserves effective June 30, 2012, NAR,
            calculated in accordance with United States Securities and
            Exchange Commission ("SEC") rules, increased from year-end 2011
            reserves, adjusted for production from the first half of 2012,
            as follows: total 1P reserves increased 33% to approximately
            19.6 MMbbl of oil, total 2P reserves increased 35% to
            approximately 22.2 MMbbl of oil, and total 3P reserves
            increased 18% to approximately 25.6 MMbbl of oil;

        --  Confirmed oil discovery with Ramiriqui-1 exploration well in
            Colombia with 2,525 gross barrels of oil per day ("BOPD") test
            rate;

        --  Quarterly production of 16,306 barrels of oil equivalent per
            day ("BOEPD") NAR before inventory adjustments, or 14,127 BOEPD
            NAR after inventory adjustments. This represents a 22% decrease
            in average daily production from the same period in 2011 of
            18,141 BOEPD NAR after inventory adjustments;

        --  The decrease in production during the second quarter of 2012
            was primarily due to pipeline disruptions in Colombia. Gran
            Tierra Energy is working with the authorities, outside parties
            and Ecopetrol S.A. ("Ecopetrol") to look at multiple
            transportation and storage options to help mitigate the risk of
            pipeline disruptions;

        --  The pipeline in Colombia was back in operation on July 14, 2012
            and full production resumed July 19, 2012. Production before
            inventory adjustments from July 19, 2012 to July 31, 2012
            averaged 21,000 BOEPD NAR and production before inventory
            adjustments for the month of July 2012 averaged 16,500 BOEPD
            NAR;

        --  Revenue and other income for the quarter was $115.2 million, a
            29% decrease over the same period in 2011;

        --  Net income was $13.1 million or $0.05per share basic and
            diluted, compared to net income of $31.6 million or $0.11per
            share basic and diluted in the same period in 2011;

        --  Funds flow from operations was $37.6 million compared to $88.6
            million for the same period in2011;

        --  Cash and cash equivalents were $128.5 million at June 30, 2012
            compared to $351.7 million at December 31, 2011. The change in
            cash and cash equivalents during the first half of 2012 was
            primarily the result of funds flow from operations being more
            than offset by capital expenditures, an increase in working
            capital excluding cash and an increase in restricted cash;

        --  Announced contingent gross lease resource estimate for an oil
            discovery on Block 95 in Peru of low estimate "1C" contingent
            resources of 11.5 million stock tank barrels of oil ("MMSTB"),
            best estimate "2C" contingent resources of  31.6 MMSTB and high
            estimate "3C" contingent resources of 88.1 MMSTB;

“Gran Tierra Energy’s 2012 oil reserve growth initiatives are off to a
very strong start, with new oil reserves discovered with the
Ramiriqui-1 new field discovery, substantial reserves added due to
continued superior reservoir management and performance in the
Costayaco Field, and additional reserve potential identified in the
Moqueta Field, all in Colombia” said Dana Coffield, President and Chief
Executive Officer of Gran Tierra Energy. “Unfortunately, crude oil
sales in Colombia were negatively impacted by repeated pipeline
disruptions, in spite of the company having record production capacity
established in our fields, reaching 20,700 BOEPD NAR average in April. 
Improving the security of pipeline infrastructure is a priority for
Ecopetrol and the government of Colombia.  Gran Tierra Energy
management is in regular contact with Ecopetrol, government authorities
and third parties to improve continuity of transportation by
potentially adding additional tank storage and by more efficient
utilization of existing pipeline capacity, expanding alternative
pipeline capacity into Ecuador, and expanding trucking capacity to
alternative pipelines.  Corporate production has now returned to
approximately 21,000 BOEPD net after royalty while we continue to
pursue these alternative measures,” added Coffield.  “We are now
focused on continuing to execute the drilling program remaining in
2012, which includes additional exploration and development drilling in
Colombia, Brazil, Argentina and Peru.  Gran Tierra Energy remains
financially strong and expects to fund its 2012 capital program with
cash flow and cash on hand at current oil prices and production
levels,” concluded Coffield.

Production review


                        Three Months Ended June 30, 2012                Three Months Ended June 30, 2011

    (Barrels of
    Oil
    Equivalent)  Colombia   Argentina   Brazil       Total      Colombia    Argentina   Brazil        Total

    Gross
    production  1,498,875     392,388    15,360   1,906,623     1,931,951     295,025    5,143     2,232,119

    Royalties   (375,506)    (45,672)   (1,579)   (422,757)     (558,795)    (34,331)    (566)     (593,692)

    Inventory
    adjustment  (185,330)    (10,674)   (2,288)   (198,292)        17,107     (4,095)    (564)        12,448

    Production,
    NAR           938,039     336,042    11,493   1,285,574     1,390,263     256,599    4,013     1,650,875

    Production
    per day,
    NAR (BOEPD)    10,308       3,693       126      14,127        15,277       2,820       44        18,141

                         Six Months Ended June 30, 2012                   Six Months Ended June 30, 2011

    (Barrels of
    Oil
    Equivalent)  Colombia   Argentina   Brazil       Total      Colombia    Argentina   Brazil       Total

    Gross
    production  3,364,523     685,716    29,266   4,079,505     3,649,647     404,967    5,143     4,059,757

    Royalties   (861,364)    (79,393)   (3,407)   (944,164)   (1,042,007)    (47,833)    (566)   (1,090,406)

    Inventory
    adjustment  (313,960)    (10,402)   (1,843)   (326,205)       (4,553)     (4,187)    (564)       (9,304)

    Production,
    NAR         2,189,199     595,921    24,016   2,809,136     2,603,087     352,947    4,013     2,960,047

    Production
    per day,
    NAR (BOEPD)    12,029       3,274       132      15,435        14,382       1,950       22        16,354

Financial review


                    Three Months Ended June 30               Six Months Ended June 30

                                               %                                      %
                  2012          2011      Change         2012          2011      Change

    Revenue
    and
    Other
    Income
    ($000s)   $ 115,150     $ 162,120       (29)     $ 271,101     $ 284,639        (5)

    Net
    Income
    ($000s)   $  13,104     $  31,567       (58)     $  12,791     $  45,280       (72)

    Net
    Income
    Per
    Share -
    Basic     $    0.05     $    0.11       (55)     $    0.05     $    0.17       (71)

    Net
    Income
    Per
    Share -
    Diluted   $    0.05     $    0.11       (55)     $    0.05     $    0.16       (69)

Net income reconciled to funds flow from operations((1)) is as follows:


                         Three Months Ended
                               June 30             Six Months Ended June 30

    Funds Flow
    From
    Operations -
    Non-GAAP
    Measure
    ($000s)              2012          2011           2012           2011

    Net income       $  13,104     $  31,567     $   12,791     $    45,280

    Adjustments to
    reconcile net
    income to
    funds flow
    from
    operations                                                             

      DD&A
      expenses          32,571        46,965         92,938         110,322

      Deferred
      taxes            (4,800)       (5,219)       (10,050)         (5,406)

      Stock-based
      compensation       3,730         2,492          6,922           5,945

      Unrealized
      gain on
      financial
      instruments      --       (1,292)        --         (1,354)

      Unrealized
      foreign
      exchange
      (gain) loss      (5,187)        11,644         16,164          16,102

      Settlement
      of asset
      retirement
      obligation       --         (305)          (404)           (309)

      Equity tax       (1,785)           119        (1,785)           6,251

      Gain on
      acquisition      --         2,601        --        (21,699)

    Funds flows      $
    from
    operations          37,633     $  88,572     $  116,576     $   155,132

((1)) Funds flow from operations is a non-GAAP measure which does not have
any standardized meaning prescribed under generally accepted accounting
principles in the United States of America (“GAAP“). Management uses this financial measure to analyze operating
performance and the income 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 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
adjusted for depletion, depreciation, accretion and impairment (“DD&A“), deferred taxes, stock-based compensation, unrealized gain on
financial instruments, unrealized foreign exchange gain or loss,
settlement of asset retirement obligation, equity tax and gain on
acquisition.

Second Quarter 2012 Financial Highlights:

Revenue and other income decreased by 29% to $115.2 million for the
second quarter of 2012 compared with $162.1 million in the comparable
quarter in 2011 due to reduced production and lower average realized
oil prices. Reduced production resulted in a 5% decrease in revenue and
other income to $271.1 million for the first half of 2012 compared with
the comparative 2011 period.

Average realized oil prices in the second quarter of 2012 decreased by
8% to $92.48 per barrel (“bbl“) from $100.68 per bbl in the second quarter of 2011 and increased by
2% to $99.49 per bbl from $97.82 per bbl for the first half of 2012.
Average West Texas Intermediate (“WTI“) oil prices for the three and six months ended June 30, 2012, were
$93.48 and $98.19 per bbl, respectively, compared with $102.55 and
$98.25 per bbl in the comparable periods in 2011. Gran Tierra Energy
received a premium to WTI in Colombia during the first half of 2012.
Average Brent oil prices for the three and six months ended June 30,
2012, were $108.07 and $113.31 per bbl.

During the second quarter of 2012, the recognition of additional
royalties resulting from an arbitrator’s decision on a third party
royalty dispute resulted in a $10.9 million revenue reduction. This
amount related to July 2009 to May 2012 production. The recognition of
this royalty resulted in a $8.48 per barrel of oil equivalent (“BOE“) reduction in the average realized price in the second quarter of 2012
and $3.88 per BOE in the first half of 2012. The arbitrator’s decision
will increase future net profit interests payable to this third party.
The third party royalty settlement represented less than 1% of the
reported revenue for the periods under dispute and it is not expected
to have a materially different effect on future revenue.

Operating expenses for the second quarter of 2012 amounted to $27.3
million, or $21.26 per BOE, compared with $23.2 million, or $14.03 per
BOE, in the comparable quarter in 2011. The increase in operating
expenses was due to an increase of $2.1 million in Colombia, primarily
due to Ecopetrol-operated Trans-Andean oil pipeline (“the OTA pipeline“) oil transportation costs included as operating costs due to the
change in sales point in February 2012 and increased trucking due to
pipeline disruptions, $1.5 million in Argentina due to increased
production and $0.5 million in Brazil due to new production. The
increase in operating costs on a per BOE basis was due to these factors
as well as reduced production in Colombia.

Operating expenses for the first half of 2012 increased to $51.8
million, or $18.45 per BOE, from $39.6 million, or $13.36 per BOE, in
the comparable period of 2011. The increase in operating costs on a per
BOE basis was due to reduced production, the addition of the $3.63 per
bbl OTA transportation costs referenced above, offset by a
corresponding increase in selling price, and the inclusion of a full
six months of operations relating to the acquisition of Petrolifera
Petroleum Limited (“Petrolifera“) in the first half of 2012 compared to only 104 days in the
comparative period.

DD&A expenses for the second quarter of 2012 were $32.6 million compared
with $47.0 million for the comparable quarter in 2011, primarily due to
reduced production. On a per BOE basis, DD&A expenses in the second
quarter of 2012 were $25.34 compared with $28.45 in the comparable
period in 2011, representing an 11% decrease. Increased reserves more
than offset increased future development costs in the depletable base.

For the first half of 2012, DD&A expenses decreased to $92.9 million
from $110.3 million in the comparable period in 2011. DD&A expenses for
the first half of 2012 included a $20.2 million ceiling test impairment
in the company’s Brazil cost center related to seismic and drilling
costs on Block BM-CAL-10. DD&A expenses for the comparable period in
2011 included a $33.4 million ceiling test impairment in the company’s
Peru cost center relating to seismic and drilling costs from a dry
well. The impairment charge in the first half of 2012 was $7.53 per BOE
compared with $11.28 per BOE in the comparable period in 2011.

General and administrative (“G&A“) expenses of $17.6 million for the second quarter of 2012 increased by
7% from $16.4 million in the comparable quarter in 2011, primarily due
to increased employee related costs reflecting expanded operations. G&A
expenses per BOE were 38% higher than in the second quarter in 2011 at
$13.69 per BOE due to the same factor and reduced production.

For the first half of 2012, G&A expenses of $33.5 million increased by
11% from $30.0 million in the comparable period in 2011. G&A expenses
in the first half of 2011 included $1.2 million of expenses associated
with the acquisition of Petrolifera. G&A expenses per BOE were 17%
higher than in the first half of 2011, at $11.92 per BOE compared with
$10.15 per BOE.

The foreign exchange loss was $4.8 million in the second quarter of 2012
and included a realized foreign exchange loss of $10.0 million. In the
second quarter of 2011, the company recorded a foreign exchange loss of
$14.5 million, which included a realized foreign exchange loss of $2.9
million.

For the first half of 2012 and 2011, the foreign exchange loss was $29.2
million and $19.7 million, of which $16.2 million and $16.1 million was
an unrealized non-cash foreign exchange loss. The Colombian Peso
strengthened by 8.1% and 7.0% against the U.S. dollar in the first half
of 2012 and 2011, respectively.

Income tax expense for the second quarter of 2012 was $19.7 million
compared with $28.0 million recorded in the comparable quarter in 2011.
Income tax expense was $50.9 million for the first half of 2012
compared with $54.7 million recorded in the comparable period in 2011.
The decrease was primarily due to lower taxable income from the
company’s Colombian operations.

Net income was $13.1 million, or $0.05 per share basic and diluted, for
the second quarter of 2012 compared with net income of $31.6 million,
or $0.11 per share basic and diluted, for the comparable quarter in
2011. In the second quarter of 2012, lower oil and natural gas sales
due to reduced production resulting from pipeline restrictions and
lower average oil prices realized, were partially offset by lower DD&A,
income tax expenses and foreign exchange losses.

For the first half of 2012, net income was $12.8 million, a 72% decrease
from the comparable period in 2011. On a per share basis, net income
decreased to $0.05 per share basic and diluted from $0.17 per share
basic and $0.16 per share diluted in the comparable period in 2011. In
the first half of 2012, lower oil and natural gas sales due to reduced
production, increased operating and G&A expenses, increased foreign
exchange losses and the absence of the comparative period gain on
acquisition were partially offset by lower impairment charges and the
absence of the Colombian equity tax expense. Net income in the
comparable half in 2011 included a gain on the acquisition of
Petrolifera of $21.7 million. The Colombian equity tax is payable in
eight semi-annual installments over four years, but was expensed in the
first quarter of 2011 at the commencement of the four-year period.

Balance Sheet Highlights:

Cash and cash equivalents were $128.5 million at June 30, 2012, compared
with $351.7 million at December 31, 2011. The change in cash and cash
equivalents during the first half of 2012 was primarily the result of
funds flow from operations of $116.6 million and proceeds from issuance
of common shares of $3.7 million being more than offset by an increase
in assets and liabilities from operating activities of $141.9 million,
capital expenditures of $178.6 million and a $23.0 million increase in
restricted cash.

Working capital (including cash and cash equivalents) was $160.6 million
at June 30, 2012, a $52.5 million decrease from December 31, 2011. The
decrease was primarily a result of a $223.2 million decrease in cash
and cash equivalents, partially offset by a $25.6 million increase in
accounts receivable due to the timing of collection of receivables, a
$19.9 million increase in inventory due to the new transportation
agreement in Colombia, an $82.4 million decrease in taxes payable due
to the payment of 2011 income taxes in Colombia, and a $42.8 million
decrease in accounts payable, accrued liabilities and other.

Production Highlights: 

Average daily consolidated light and medium crude oil and natural gas
production after inventory adjustments for the three months ended
June 30, 2012, decreased 22% to 14,127 BOEPD NAR compared to 18,141
BOEPD NAR for the same period in 2011. Approximately 95% is oil and
natural gas liquids. Second quarter production and sales reflect
increased production from the Moqueta, Jilguero and Melero oil
discoveries offset by approximately 59 days of oil delivery
restrictions due to three separate disruptions in the OTA pipeline.
Gran Tierra Energy continued production at a reduced rate while the OTA
pipeline was down, selling a portion of its oil through trucking and
storing excess oil.

Average daily Colombian production of light and medium crude oil and
natural gas for the three months ended June 30, 2012, decreased 33% to
10,308 BOEPD NAR compared to 15,277 BOEPD NAR for the same period in 2011.
Approximately 99% of the production is oil and natural gas liquids. The
production is primarily from the Costayaco field in the Chaza Block in
which Gran Tierra Energy has a 100% working interest.

Average daily Argentine production of light and medium crude oil and
natural gas for the three months ended June 30, 2012, increased 31% to
3,693 BOEPD NAR compared to 2,820 BOEPD NAR for the same period in
2011. Approximately 84% of the production is oil and natural gas
liquids.

Average daily Brazil production of light and medium crude oil for the
three months ended June 30, 2012, was 126 BOPD NAR compared to 44 BOPD
NAR for the same period in 2011.

The OTA pipeline was back in operation on July 14, 2012 and full
production resumed July 19, 2012. Production before inventory
adjustments from July 19, 2012 to July 31, 2012 averaged approximately
21,000 BOEPD NAR and production before inventory adjustments for the
month of July 2012 averaged approximately 16,500 BOEPD NAR.

Gran Tierra Energy is working with the authorities, outside parties and
Ecopetrol to look at multiple transportation and storage options to
help mitigate the risk of pipeline disruptions. These include more
continuous use of the Oleoducto San Miguel pipeline (Orito to Ecuador),
additional storage at Orito in combination with higher capacity
utilization of the OTA pipeline when it is operational, and higher
volumes of trucking to other delivery points on a continuous basis.

2012 Capital Program Update:

Gran Tierra Energy’s capital program for 2012 has been revised to $396
million from $444 million. We had initially increased our 2012 capital
budget during the second quarter of 2012 such that this represents an
approximately $60 million reduction in the capital budget. Deferred
expenditures are from areas which are not expected to impact production
capacity or near term high value reserve addition projects. Gran Tierra
Energy’s 2012 capital program includes:  $171 million for Colombia;
$111 million for Brazil; $44 million for Argentina; $68 million for
Peru; and $2 million associated with corporate activities.

The capital program includes $235 million for drilling, $48 million for
acquisitions, $48 million for facilities and pipelines and $65 million
for G&G expenditures. Of the $235 million allocated to drilling,
approximately $130 million is for exploration and the balance is for
delineation and development drilling.

Gran Tierra Energy believes that its revised 2012 capital expenditure
program can be funded from cash flow from existing operations and cash
on hand, given current pricing and production levels.

COLOMBIA  

Chaza Block, Putumayo Basin (Gran Tierra Energy 100% WI and operator)

Costayaco Field

As a result of continued superior reservoir management and performance,
a mid-year reserve update for the Costayaco Field in Colombia,
effective June 30, 2012, was undertaken by GLJ Petroleum Consultants
Ltd. (“GLJ“), calculated in accordance with SEC rules and NI 51-101.

When compared to the SEC reserves on December 31, 2011, adjusted for
cumulative NAR production of 1.7 MMbbl of oil from January 1, 2012, to
June 30, 2012:

        --  Total 1P reserves increased 33% (4.9 MMbbl) to approximately
            19.6 MMbbl of oil;
        --  Total 2P reserves increased 35% (5.8 MMbbl) to approximately
            22.2 MMbbl of oil; and
        --  Total 3P reserves increased 18% (3.9 MMbbl) to approximately
            25.6 MMbbl of oil.

When compared to the NI-51-101 reserves on December 31, 2011, adjusted
for cumulative NAR production of 1.7 MMbbl of oil from January 1, 2012,
to June 30, 2012:

        --  Total 1P reserves increased 38% (5.6 MMbbl) to approximately
            20.4 MMbbl of oil;
        --  Total 2P reserves increased 40% (6.6 MMbbl) to approximately
            23.2 MMbbl of oil; and
        --  Total 3P reserves increased 21% (4.6 MMbbl) to approximately
            26.7 MMbbl of oil.

Reservoir performance continues to exceed expectation at the Costayaco
Field as Gran Tierra Energy continues to extend the life of the
reservoir.  GLJ has increased the original oil in place estimate by
utilizing lower water saturation combined with additional production
history and pressure data. The Costayaco-15 water injector well was
successfully drilled and is intended to assist in maintaining reservoir
pressure. The Costayaco-16 development well was successfully drilled
and is intended to be a producing well to assist with maintaining
plateau production in the Costayaco Field.  Gran Tierra Energy believes
additional reserve growth is possible at Costayaco given the
reservoir’s strong response to water injection.

Moqueta Field 

A 3-D seismic program has now been acquired over the Moqueta Field. The
new maps over the field indicate the eastern flank of the structure
extends more than 2.5 kilometers to the northeast at the level of the
lowest known oil in existing well bores in the field, implying
additional reserve potential may exist on the east flank of the
structure that had not previously been recognized. A new well to
evaluate this additional potential, Moqueta-8, is expected to spud in
September 2012.

The Moqueta-7 appraisal well in the Moqueta field is scheduled to spud
in early August, 2012.  This well is intended to evaluate additional
down-dip potential of the oil columns encountered in the Villeta U,
Villeta T and Caballos reservoirs in the field approximately 960 meters
west-southwest of the Moqueta-4 appraisal well.  Gran Tierra Energy
intends to target the interpreted oil-water contact, which has not yet
been encountered by drilling, approximately 225 feet below the lowest
known oil in existing well bores in the field. The Moqueta-7 well may
be used as an oil producer or water injector for pressure support
depending on the well results.

Combining the results of the Moqueta-7 and -8 wells with the seismic
interpretation will aid in the full field development plan, which is
expected to be completed in the fourth quarter of 2012.

Llanos -22 Block, Llanos Basin (CEPSA 55% WI and operator, Gran Tierra Energy 45% WI)

Confirmed oil discovery with Ramiriqui-1 exploration well in Colombia
with 2,525 gross barrels of oil per day test rate.  Currently
evaluating options for initiating long-term testing and the drilling of
an appraisal well.

Garibay Block, Llanos Basin (CEPSA 50% WI and operator, Gran Tierra Energy 50% WI)

The Bordon-1 exploration well reached true vertical depth of 9,680 feet
on June 16, 2012. Mud log and open hole log data acquired during and
after drilling indicate only non-commercial hydrocarbons present.  The
Bordon-1 well was plugged and abandoned.

Azar Block, Putumayo Basin (Gran Tierra Energy 40% WI and operator, Lewis Energy 40%, Gold Oil 20%)

La Vega Este-1 oil exploration well is currently drilling ahead after
initiating sidetrack operations, and is now expected to reach total
depth in August.

BRAZIL

Recôncavo Basin

The 3-GTE-03D-BA and 3-GTE-4DPA-BA appraisal wells on Block REC-T-155,
located 1.2 kilometers north and 0.70 kilometers south of the
1-ALV-2-BA oil discovery well, respectively, have been drilled and
completed.  They are scheduled to be tested and expected to be on
production in the third quarter of 2012.  On July 27, 2012, Gran Tierra
Energy submitted the Declaration of Commerciality to the ANP for the
newly named Tiê Field on Block 155.

Drilling of the first horizontal sidetrack well, currently planned to be
drilled from the 1-GTE-01-BA pilot hole located on Block REC-T-142, is
expected to begin drilling in the third quarter of 2012.  This will be
the first of two horizontal sidetrack wells that Gran Tierra Energy
expects to drill in 2012 to test the productivity of the light oil
sandstone reservoir targets in the Recôncavo Basin, with a third
horizontal well deferred into early 2013.

PERU 

Block 95, Marañon Basin (Gran Tierra Energy 60% WI and operator; Global Energy Development 40%)

Gran Tierra Energy Peru S.R.L. has entered into an agreement to purchase
the remaining 40% working interest in Block 95 from Global Energy
Development PLC.  Subject to PeruPetro S.A. and Peruvian Government
approvals, Gran Tierra Energy will have a 100% working interest in
Block 95 following the purchase.

In addition, in the second quarter of 2012, Gran Tierra Energy announced
the results of a contingent gross lease resource estimate for an oil
discovery on Block 95, provided by its independent reserves auditor,
GLJ Petroleum Consultants effective June 1, 2012.  The resource
estimate has been prepared in compliance with National Instrument
51-101 – Standards of Disclosure for Oil and Gas Activities and the Canadian Oil and Gas Evaluation Handbook.

        --  Low estimate "1C" contingent resources of 11.5 MMSTB
        --  Best estimate "2C" contingent resources of 31.6 MMSTB
        --  High estimate "3C" contingent resources of 88.1 MMSTB

There is no certainty that it will be commercially viable to produce any
portion of the resources.  Contingent resources are those quantities of
petroleum estimated, as of a given date, to be potentially recoverable
from known accumulations using established technology or technology
under development, but which are not currently considered to be
commercially recoverable due to one or more contingencies. 
Contingencies may include factors such as economic, legal,
environmental, political, and regulatory matters, or a lack of
markets.  It is also appropriate to classify as contingent resources
the estimated discovered recoverable quantities associated with a
project in the early evaluation stage. Contingent resources are further
classified in accordance with the level of certainty associated with
the estimates and may be subclassified based on project maturity and/or
characterized by their economic status. The recoverable resources
attributed to the Block 95 discovery were considered sub-commercial
(contingent resources) due to the absence of a commitment to proceed
with development and the fact that development is in the very early
stages as considered from the point of view of both regulatory
requirements, and development strategy. It is premature to determine
the economic status; the economic status is undetermined until
additional fluid samples confirm the market for the crude and Gran
Tierra Energy has done additional work on the oil market, development
capital and environmental/regulatory matters.

The oil field discovered on Block 95, with the Bretaña 10-16-1X
discovery well drilled in 1974, flowed 807 barrels of oil per day
naturally without pumps for approximately six hours from the Vivian
Formation.  Well records indicate inconsistent oil gravity values of
13.1° API and 17.6° API although calculations indicate it is not
feasible to flow a 13° API crude at over 800 barrels of oil per day in
this circumstance.   As the Bretaña well is located in a remote
location, an oil gravity of 13.1° API will make this project
challenging to develop unless there are sufficiently large reserves to
offset the cost of diluent.  If the oil gravity is 17.6° API, this
project will likely be economic to develop with the best estimate “2C”
contingent resources in the current economic environment.  Gran Tierra
Energy is planning to drill a new exploration well in the fourth
quarter of this year to further delineate this field and to explore
deeper reservoir horizons not penetrated by the discovery well. A
drilling site location has been identified and civil construction
initiated for the Bretaña Norte 95-2-1X exploration well on this
structure. 

Block 107, Marañon Basin (Gran Tierra Energy 100% WI and operator)

Permitting for drilling on Block 107 is advancing, with drilling
expected to begin in 2014.   The prospects on Block 107 are on trend
with the world class gas-condensate discoveries that have been made
around the Camisea region in southern Peru.  Both oil and gas seeps are
present on Block 107.

ARGENTINA 

Puesto Morales / Puesto Morales Este Blocks, Neuquen Basin (Gran Tierra Energy 100% WI and operator)

Gran Tierra Energy continues its workover and development activity at
Puesto Morales field, which includes drilling eight development wells
for the remainder of 2012.  In the first quarter of 2012, one
development well was drilled as Gran Tierra Energy continued with the
intention of improving recovery of the remaining reserves, minimizing
water channeling through the use of polymer, and subsequently growing
production.

Conference Call Information:

Gran Tierra Energy Inc. will host its second quarter 2012 results
conference call on Tuesday, August 7, 2012, at 11:00 a.m. Mountain Time
(MT).

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

Interested parties may access the conference call by dialing
1-800-264-7882 (domestic) or 1-847-413-3708 (international), pass code
32994248. 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. 

For interested parties unable to participate, an audio replay of the
call will be available beginning two hours after the call until 11:59
p.m. on August 21, 2012.  To access the replay dial 1-888-843-7419
(domestic) or 1-630-652-3042 (international) pass code 32994248. 

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 MKT (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, Peru, and 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 (403) 265-3221.

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 and Legal Advisories:

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 the words “expect”, “plan”, “estimate”, “believe”,
“schedule”, “intend”, “will”, “may” derivations of these words and
similar expressions are intended to identify forward-looking
statements. In particular, but without limiting the foregoing,
forward-looking statements include statements regarding: drilling,
testing and production expectations; Gran Tierra Energy’s planned
capital program and the allocation of capital, including under the
caption “2012 Capital Program Update” expected funding of the capital
program out of cash flow and cash on hand; contingent resources,
production expectations; expectations respecting reserves growth at the
Costayaco field; Gran Tierra Energy’s planned operations, including as
described under the captions “Colombia”, “Peru”, “Brazil” and
“Argentina” potential increases in resources; 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.

Statements relating to “resources” are forward-looking statements as
they involve the implied assessment, based on estimates and
assumptions, that the resources described exist in the quantities
predicted or estimated and can be profitably produced in the future.

The forward-looking statements contained in this news release reflect
several material factors and expectations and assumptions of Gran
Tierra Energy including, without limitation, assumptions relating to
log evaluations, that Gran Tierra Energy will continue to conduct its
operations in a manner consistent with past operations, the accuracy of
testing and production results and seismic data, pricing and cost
estimates, rig availability, the effects of drilling down-dip and the
general continuance of current or, where applicable, assumed
operational, regulatory and industry conditions. Gran Tierra Energy
believes the material factors, expectations and assumptions reflected
in the forward-looking statements are reasonable at this time but no
assurance can be given that these factors, expectations and assumptions
will prove to be correct.

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 may impact its testing and drilling
operations, and the production, transportation or sale of its products;
geographic, political, regulatory and weather conditions can impact
testing and drilling operations and the production, transportation or
sale of its products; the OTA pipeline may continue to experience
disruptions and if further disruptions occur, service at the OTA
pipeline may not resume on the timelines or to the capacity expected by
or favorable to Gran Tierra Energy; permits and approvals from
regulatory and governmental authorities may not be received in the
manner or on the timelines expected or at all; 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, drilling and/or construction activities. Although the
current capital spending program of Gran Tierra Energy is based upon
the current expectations of the management of Gran Tierra Energy, there
may be circumstances in which, for unforeseen reasons, a reallocation
of funds may be necessary as may be determined at the discretion of
Gran Tierra Energy and there can be no assurance as at the date of this
press release as to how those funds may be reallocated. Should any one
of a number of issues arise, Gran Tierra Energy may find it necessary
to alter its current business strategy and/or capital spending program.
Accordingly, readers should not place undue reliance on the
forward-looking statements contained herein. 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 7, 2012. 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.

BOE’s may be misleading, particularly if used in isolation. A BOE
conversion ratio of 6 Mcf : 1 bbl is based on an energy equivalency
conversion method primarily applicable at the burner tip and does not
represent a value equivalency at the wellhead.  . In addition, given
that the value ratio based on the current price of oil as compared to
natural gas is significantly different from the energy equivalent of
six to one, utilizing a BOE conversion ratio of 6 Mcf: 1 bbl would be
misleading as an indication of value.

Possible reserves are those additional reserves that are less certain to
be recovered than probable reserves. There is a 10% probability that
the quantities actually recovered will equal or exceed the sum of
proved plus probable plus possible reserves.

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 June 30,           Six Months Ended June 30,

                              2012              2011              2012              2011

    REVENUE AND
    OTHER INCOME                                                                          

    Oil and natural
    gas sales          $     114,542     $     161,664     $     269,790     $     283,960

    Interest income              608               456             1,311               679

                             115,150           162,120           271,101           284,639

    EXPENSES                                                                              

    Operating                 27,333            23,160            51,820            39,556

      Depletion,
      depreciation,
      accretion and
      impairment              32,571            46,965            92,938           110,322

      General and
      administrative          17,599            16,410            33,498            30,048

      Equity tax             --               221           --             8,271

      Financial
      instruments
      gain                   --           (1,292)           --           (1,522)

      Gain on
      acquisition            --             2,601           --          (21,699)

      Foreign
      exchange loss            4,807            14,495            29,182            19,694

                              82,310           102,560           207,438           184,670

    INCOME BEFORE
    INCOME TAXES              32,840            59,560            63,663            99,969

      Income tax
      expense               (19,736)          (27,993)          (50,872)          (54,689)

    NET INCOME AND
    COMPREHENSIVE
    INCOME                    13,104            31,567            12,791            45,280

    RETAINED
    EARNINGS,
    BEGINNING OF
    PERIOD                   184,701            71,810           185,014            58,097

    RETAINED
    EARNINGS, END OF
    PERIOD             $     197,805     $     103,377     $     197,805     $     103,377

    NET INCOME PER
    SHARE --
    BASIC              $        0.05     $        0.11     $        0.05     $        0.17

    NET INCOME PER
    SHARE --
    DILUTED            $        0.05     $        0.11     $        0.05     $        0.16

    WEIGHTED AVERAGE
    SHARES
    OUTSTANDING -
    BASIC                280,714,786       277,297,728       279,726,434       269,159,453

    WEIGHTED AVERAGE
    SHARES
    OUTSTANDING -
    DILUTED              284,141,287       284,451,536       283,500,228       277,530,126

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


                                          June 30,          December 31,

                                             2012                 2011

    ASSETS                                                              

    Current Assets                                                      

      Cash and cash equivalents         $   128,528       $      351,685

      Restricted cash                         4,034                 1,655

      Accounts receivable                    95,004                69,362

      Inventory                              27,055                 7,116

      Taxes receivable                       19,267                21,485

      Prepaids                                3,444                 3,597

      Deferred tax assets                     3,223                 3,029

    Total Current Assets                    280,555               457,929

    Oil and Gas Properties (using
    the full cost method of
    accounting)                                                           

      Proved                                665,346               618,982

      Unproved                              425,922               417,868

    Total Oil and Gas Properties          1,091,268             1,036,850

      Other capital assets                    8,875                 7,992

    Total Property, Plant and
    Equipment                             1,100,143             1,044,842

    Other Long-Term Assets                                                

      Restricted cash                        33,854                13,227

      Deferred tax assets                     7,974                 4,747

      Other long-term assets                  9,299                 3,454

      Goodwill                              102,581               102,581

    Total Other Long-Term Assets            153,708               124,009

    Total Assets                        $ 1,534,406       $    1,626,780

    LIABILITIES AND SHAREHOLDERS'
    EQUITY                                                                

    Current Liabilities                                                   

      Accounts payable                  $    51,556       $       82,189

      Accrued liabilities                    55,101                66,832

      Taxes payable                          13,117                95,482

      Asset retirement obligation               167                   326

    Total Current Liabilities               119,941               244,829

    Long-Term Liabilities                                                 

      Deferred tax liability                196,241               186,799

      Equity tax payable                      5,294                 6,484

      Asset retirement obligation            12,504                12,343

      Other long-term liabilities             2,119                 2,007

    Total Long-Term Liabilities             216,158               207,633

    Commitments and Contingencies                                         

    Shareholders' Equity                                                  

    Common shares (267,819,245 and
    264,256,159 common shares and
    13,869,520 and 13,869,520
    exchangeable shares, par value
    $0.001 per share, issued and
    outstanding as at June 30, 2012
    and December 31, 2011,
    respectively)                             7,986                 7,510

      Additional paid in capital            992,516               980,014

      Warrants                              --                 1,780

      Retained earnings                     197,805               185,014

    Total Shareholders' Equity            1,198,307             1,174,318

    Total Liabilities and
    Shareholders' Equity                $ 1,534,406       $     1,626,780

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


                                                  Six Months Ended June 30,

                                                     2012            2011

    Operating Activities                                                   

    Net income                                  $    12,791     $    45,280

    Adjustments to reconcile net income to
    net cash (used in) provided by
    operating activities:                                                  

      Depletion, depreciation, accretion
      and impairment                                 92,938         110,322

      Deferred taxes                               (10,050)         (5,406)

      Stock-based compensation                        6,922           5,945

      Unrealized gain on financial
      instruments                                   --         (1,354)

      Unrealized foreign exchange loss               16,164          16,102

      Settlement of asset retirement
      obligation                                      (404)           (309)

      Equity tax                                    (1,785)           6,251

      Gain on acquisition                           --        (21,699)

    Net change in assets and liabilities
    from operating activities                                              

      Accounts and other receivables               (17,668)       (100,955)

      Inventory                                    (13,485)           (213)

      Prepaids                                          154           (211)

      Accounts payable and accrued and
      other liabilities                            (28,567)         (2,508)

      Taxes receivable and payable                 (82,262)        (18,120)

    Net cash (used in) provided by
    operating activities                           (25,252)          33,125

    Investing Activities                                                   

      Increase in restricted cash                  (23,006)         (8,139)

      Additions to property, plant and
      equipment                                   (178,644)       (182,408)

      Proceeds from disposition of oil and
      gas property                                  --           3,253

      Cash acquired on acquisition                  --           7,747

      Proceeds on sale of asset-backed
      commercial paper                              --          22,679

    Net cash used in investing activities         (201,650)       (156,868)

    Financing Activities                                                   

      Settlement of bank debt                       --        (22,853)

      Proceeds from issuance of common
      shares                                          3,745           2,523

    Net cash provided by (used in)
    financing activities                              3,745        (20,330)

    Net decrease in cash and cash
    equivalents                                   (223,157)       (144,073)

    Cash and cash equivalents, beginning of
    period                                          351,685         355,428

    Cash and cash equivalents, end of
    period                                      $   128,528     $   211,355

    Cash                                        $    78,929     $   135,142

    Term deposits                                    49,599          76,213

    Cash and cash equivalents, end of
    period                                      $   128,528     $   211,355

 

 

SOURCE Gran Tierra Energy Inc.


Source: PR Newswire