GRAN TIERRA ENERGY INC.GTE
GRAN TIERRA ENERGY INC. Fair Value Disclosure
Financial Instruments, Fair Value Measurement, Credit Risk and Foreign Exchange Risk
Financial Instruments
Financial instruments are initially recorded at fair value, defined as the price that would be received to sell an asset or paid to market participants to settle liability at the measurement date. For financial instruments carried at fair value, GAAP establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. This hierarchy consists of three broad levels:
•Level 1 - Inputs representing quoted market prices in active markets for identical assets and liabilities
•Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the assets and liabilities, either directly or indirectly
•Level 3 - Unobservable inputs for assets and liabilities
The Company’s financial instruments recognized on the balance sheet consist of cash and cash equivalents, accounts receivable, derivatives, other long-term assets, accounts payable and accrued liabilities, current portion of long-term debt, long-term debt and other long-term liabilities. The Company’s valuation techniques to measure the fair values of assets and liabilities are described in the subsequent disclosures.
Fair Value Measurement
The following table presents the Company’s fair value measurements of its financial instruments as of December 31, 2025 and 2024:
| As at December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (Thousands of U.S. Dollars) | |||||||||||
| Level 1 | |||||||||||
| Liabilities | |||||||||||
6.25% Senior Notes | $ | — | $ | 24,133 | |||||||
7.75% Senior Notes | 19,784 | 21,451 | |||||||||
9.50% Senior Notes | 505,020 | 688,262 | |||||||||
| $ | 524,804 | $ | 733,846 | ||||||||
| Level 2 | |||||||||||
| Assets | |||||||||||
Commodity derivatives - current | 10,147 | 712 | |||||||||
Restricted cash and cash equivalents - long-term (1) | $ | 9,735 | $ | 6,816 | |||||||
| $ | 19,882 | $ | 7,528 | ||||||||
(1) The long-term restricted cash is included in other long-term assets on the Company’s consolidated balance sheet
The fair values of cash and cash equivalents, current restricted cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities and credit facility approximate their carrying amounts due to the short-term maturity of these instruments.
Senior Notes
Financial instruments recorded at amortized costs at December 31, 2025, include Senior Notes (Note 11).
The Senior Notes are publicly traded on Singapore Exchange and the fair value is determined using the Senior Notes trading prices at the end of each reporting period. At December 31, 2025, the carrying amounts of the 7.75% Senior Notes and 9.50% Senior Notes were $24.0 million and $673.8 million, respectively, which represents the aggregate principal amounts less unamortized debt issuance costs and discounts.
Derivative asset and derivative liability
The fair value of derivatives is estimated based on various factors, including quoted market prices in active markets and quotes from third parties. The Company also performs an internal valuation to ensure the reasonableness of third party quotes. In consideration of counterparty credit risk, the Company assessed the possibility of whether the counterparty to the derivative would default by failing to make any contractually required payments. Additionally, the Company considers that it has the ability to meet its potential repayment obligations associated with the derivative transactions.
The following table presents the nature of our financial instruments gains or losses for each of the three years ended December 31, 2025:
| Year Ended December 31, | |||||||||||||||||
| (Thousands of U.S. Dollars) | 2025 | 2024 | 2023 | ||||||||||||||
Commodity price derivative (gain) loss | $ | (10,872) | $ | 2,271 | $ | — | |||||||||||
Foreign currency derivative gain | (8,109) | — | — | ||||||||||||||
Electricity price derivative loss | 56 | — | — | ||||||||||||||
Derivative instruments (gain) loss | $ | (18,925) | $ | 2,271 | $ | — | |||||||||||
Restricted cash - long-term
The fair value of long-term restricted cash and cash equivalents approximate its carrying value because interest rates are variable and reflective of market rates.
Commodity Price Risk
The Company may at times utilize commodity price derivatives to manage the variability in cash flows associated with the forecasted sale of its oil production, reduce commodity price risk and provide a base level of cash flow in order to assure it can execute at least a portion of its capital spending. As at December 31, 2025, the Company had outstanding commodity price derivative positions in Canada and Colombia as follows:
| Oil | ||||||||||||||||||||||||||
| Type of Instrument | Start Period | End Period | Volume bbl/d | Reference | Sold Put (C$/bbl or $/bbl Weighted Average) | Purchased Put (C$/bbl or $/bbl Weighted Average) | Sold Call (C$/bbl or $/bbl Weighted Average) | Premium (C$/bbl or $/bbl Weighted Average) | ||||||||||||||||||
| 3 Way | January 01, 2026 | March 31, 2026 | 2,000 | Brent | 52.50 | 65.00 | 74.94 | — | ||||||||||||||||||
| 3 Way | January 01, 2026 | June 30, 2026 | 3,500 | Brent | 50.00 | 60.93 | 75.68 | — | ||||||||||||||||||
| 3 Way | January 01, 2026 | September 30, 2026 | 1,000 | Brent | 50.00 | 60.00 | 75.50 | — | ||||||||||||||||||
| 3 Way | January 01, 2026 | December 31, 2026 | 500 | WTI CMA | C$ | 60.00 | C$ | 70.00 | C$ | 107.00 | C$ | 1.90 | ||||||||||||||
| 3 Way | January 01, 2026 | December 31, 2026 | 3,000 | Brent | 50.00 | 60.00 | 73.08 | — | ||||||||||||||||||
| 3 Way | April 01, 2026 | September 30, 2026 | 500 | WTI CMA | C$ | 65.00 | C$ | 75.00 | C$ | 100.40 | — | |||||||||||||||
| 3 Way | April 01, 2026 | December 31, 2026 | 2,000 | Brent | 45.00 | 55.00 | 67.00 | — | ||||||||||||||||||
| 3 Way | July 01, 2026 | December 31, 2026 | 2,000 | Brent | 50.00 | 60.00 | 73.03 | — | ||||||||||||||||||
| Collar | January 01, 2026 | March 31, 2026 | 2,000 | Brent | — | 60.00 | 75.38 | — | ||||||||||||||||||
| Collar | January 01, 2026 | March 31, 2026 | 1,000 | WTI CMA | — | 60.00 | 70.60 | — | ||||||||||||||||||
| Collar | January 01, 2026 | June 30, 2026 | 1,000 | Brent | — | 60.00 | 76.75 | — | ||||||||||||||||||
| Collar | April 01, 2026 | September 30, 2026 | 500 | WTI CMA | — | C$ | 75.00 | C$ | 91.95 | — | ||||||||||||||||
| Put Option | January 01, 2026 | June 30, 2026 | 2,000 | Brent | — | 65.00 | — | 4.00 | ||||||||||||||||||
| Put Option | January 01, 2026 | December 31, 2026 | 500 | Brent | — | 60.00 | — | 4.30 | ||||||||||||||||||
Natural Gas | ||||||||||||||||||||||||||||||||||||||
| Type of Instrument | Start Period | End Period | Volume, GJ/day | Reference | Sold Swap (C$/GJ, Weighted Average) | Purchased Put (C$/GJ, Weighted Average) | Sold Call (C$/GJ, Weighted Average) | |||||||||||||||||||||||||||||||
| Swap | January 01, 2026 | March 31, 2026 | 10,000 | Aeco 5A | C$ | 3.10 | — | — | ||||||||||||||||||||||||||||||
| Swap | April 01, 2026 | October 31, 2026 | 20,000 | Aeco 5A | C$ | 2.71 | — | — | ||||||||||||||||||||||||||||||
Subsequent to the year ended December 31, 2025, the Company entered into the following commodity price derivative positions:
| Oil | ||||||||||||||||||||||||||
| Type of Instrument | Start Period | End Period | Volume bbl/d | Reference | Sold Put (C$/bbl or $/bbl Weighted Average) | Purchased Put (C$/bbl or $/bbl Weighted Average) | Sold Call (C$/bbl or $/bbl Weighted Average) | Premium (C$/bbl or $/bbl Weighted Average) | ||||||||||||||||||
| 3 Way | April 01, 2026 | December 31, 2026 | 2,000 | Brent | 45.00 | 55.00 | 67.75 | — | ||||||||||||||||||
| 3 Way | July 01, 2026 | December 31, 2026 | 3,000 | Brent | 49.33 | 59.33 | 71.30 | — | ||||||||||||||||||
| 3 Way | July 01, 2026 | March 31, 2027 | 1,000 | Brent | 55.00 | 65.00 | 74.65 | — | ||||||||||||||||||
| 3 Way | October 01, 2026 | December 31, 2026 | 1,000 | Brent | 45.00 | 55.00 | 68.80 | — | ||||||||||||||||||
| Collar | October 01, 2026 | December 31, 2026 | 500 | WTI CMA | — | C$ | 70.00 | C$ | 92.47 | — | ||||||||||||||||
Foreign Exchange Risk
The Company is exposed to foreign exchange risk in relation to its Colombian and Canadian operations predominantly in operating and transportation costs, G&A expenses and revenue for Canadian operations. To mitigate exposure to fluctuations in foreign exchange, the Company may enter into foreign currency exchange derivatives. During the year ended December 31, 2025, the Company settled $80 million nominal USD$ (COP$323,600 million) in outstanding foreign currency derivatives for a
gain of $6.1 million (COP$$30,800 million) and as at December 31, 2025 had no outstanding foreign currency exchange derivative positions.
Unrealized foreign exchange gains and losses primarily result from fluctuations of the U.S. dollar to the Colombian peso and Canadian dollar due to Gran Tierra’s accounts payable, tax and deferred tax assets and liabilities which are monetary assets and liabilities mainly denominated in the local currencies. As a result, foreign exchange gains and losses must be calculated on conversion to the U.S. dollar functional currency. A one percent strengthening in Colombian peso against the U.S. dollar results in foreign exchange loss of approximately $0.4 million of U.S. dollars on accounts payable, gain of approximately $0.2 million of U.S. dollars on taxes receivable and payable and gain of approximately $0.1 million of U.S. dollars on deferred tax assets and liabilities. This effect was calculated based on the Company’s December 31, 2025 balances of accounts payable, deferred tax assets, and taxes payable. The translation of assets and liabilities of Canadian operations from Canadian dollar functional currency does not impact consolidated statements of operations foreign exchange gains and losses.
For the year ended December 31, 2025, 70% of the Company’s oil, natural gas and NGL sales were generated in Colombia, 11% of oil, natural gas and NGL sales generated in Ecuador and 19% of oil, natural gas and NGL in Canada. For the year ended December 31, 2024, 93% of the Company’s oil, natural gas and NGL sales were generated in Colombia, 4% of oil, natural gas and NGL sales generated in Ecuador and 3% of oil, natural gas and NGL in Canada for the two months of operations (2023 - 97% of the Company's oil sales were generated in Colombia with the remainder in Ecuador). In Colombia and Ecuador, the Company receives 100% of its revenues in U.S. dollars and the majority of the capital expenditures are in U.S. dollars or are based on U.S. dollar prices. In Canada, 100% of oil, natural gas and NGL revenue is received in Canadian dollars and capital expenditures are primarily based on Canadian dollar prices. The majority of Company’s operating costs, income taxes, VAT and G&A expenses in all countries are in local currencies.
Credit Risk
Credit risk arises from the potential that the Company may incur a loss if counterparty to a financial instrument fails to meet its obligation in accordance with agreed terms. The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. The carrying value of cash and cash equivalents and accounts receivable reflects management’s assessment of credit risk.
At December 31, 2025, cash and cash equivalents and restricted cash and cash equivalents included balances in bank accounts, term deposits and certificates of deposit, placed with financial institutions with investment grade credit ratings.
Most of the Company’s accounts receivable relate to sales to customers in the oil and natural gas industry and are exposed to typical industry credit risks. The concentration of revenues in a single industry affects the Company’s overall exposure to credit risk because customers may be similarly affected by changes in economic and other conditions. The Company manages this credit risk by entering into sales contracts with only credit worthy entities and reviewing its exposure to individual entities on a regular basis. Additionally, the Company reduces the credit risk exposure by managing its accounts receivable which are paid on a weekly basis in Colombia and Ecuador and on a monthly basis in Canada. For the year ended December 31, 2025, the Company had one customer (2024 - one and 2023 - one) which accounted for over 69% of sales.
To reduce the concentration of exposure to any individual counterparty, the Company utilizes a group of investment-grade rated financial institutions for its derivative transactions. The Company monitors counterparty creditworthiness on an ongoing basis; however, it cannot predict sudden changes in counterparties’ creditworthiness. In addition, even if such changes are not sudden, the Company may be limited in its ability to mitigate an increase in counterparty credit risk. Should one of these counterparties not perform, the Company may not realize the benefit of some of its derivative instruments.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 4, 2026 | Showing above |
| 2024 | Feb 24, 2025 | |
| 2023 | Feb 20, 2024 | |
| 2022 | Feb 22, 2023 | |
| 2021 | Feb 23, 2022 | |
| 2020 | Feb 25, 2021 | |
| 2019 | Feb 27, 2020 | |
| 2018 | Feb 27, 2019 | |
| 2017 | Feb 27, 2018 | |
| 2016 | Mar 1, 2017 | |
| 2015 | Feb 29, 2016 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.