Company Reports Significant Increase in Production Volume Over Same Quarter of 2007 and Increased Profitability

CALGARY, Alberta, May 12, 2008, Gran Tierra Energy Inc. (AMEX: GTE, TSX: GTE), a company focused on oil exploration and production in South America, today announced financial and operating results for the quarter ended March 31, 2008.

Total revenue for the three months ended March 31, 2008 was $20.8 million as compared to $4.5 million for the same period in 2007.  Net income for the three months ended March 31, 2008 increased to $4.7 million or $0.05 per share basic, and $0.04 per share diluted, as compared to a loss of $6.7 million, or $(0.07) per share basic and diluted in the same period of 2007. 

The results for the first quarter of 2008 reflect the growing production from the recent oil discoveries in Colombia and a higher West Texas Intermediate (WTI) price, partially offset by higher overall operating expenses, depletion, depreciation and accretion, general and administrative expenses and income taxes resulting from the company’s increased level of activities. The results for the first quarter of 2007 were impacted by non-cash expenses of $4.1 million for liquidated damages.

At the end of the first quarter of 2008, the company reported cash and equivalents of $26.0 million as compared to $18.2 million at December 31, 2007. Working capital increased to $14.5 million as compared to $8.1 million at December 31, 2007. Shareholders’ equity increased from $76.8 million at December 31, 2007 to $87.3 million at March 31, 2008, and the company reported no outstanding long-term debt as of March 31, 2008.
Average oil sales for the three months ended March 31, 2008, net of royalties, increased 148[delete space]% to 2,842 barrels of oil per day (BOPD) from 1,157 BOPD in the same period of 2007. Production for the quarter averaged 3,065 BOPD, but sales were reduced by periods of temporary transportation capacity restrictions in both Argentina and Colombia. The average price received per barrel of oil increased 95% to $80.21 per barrel for the three months ended March 31, 2008 from $41.06 per barrel in the same period of 2007. 

At year end 2007, the company reported a 100% increase in net after royalty proved reserves to 6.4 million barrels of oil (MMBO) as compared to year-end 2006. Net probable reserves increased to 5.0 million MMBO and net possible reserves increased to 5.1 MMBO, both after royalty, as reported at year-end 2007. The year end 2007 externally audited oil reserves do not include the impact of the positive results from two recently completed and tested wells in the Costayaco oil field discovery in Colombia, and an additional well that is currently drilling in the field. The company expects to undertake an independent mid-year reserve audit at June 30, 2008 to include these and other wells that may be completed by that time.

Operations Update – Development Drilling Continuing, Exploration Drilling Initiated:
 
Drilling of the Costayaco-4 well in the Costayaco oil field in Colombia is continuing and is expected to be finished in late May.  Testing operations are expected to follow in June.  Preparations have begun for the drilling of Costayaco-5. The Costayaco field is located in the Chaza Block in the Putumayo Basin, where the company has a 50% interest and is the operator, with Solana Resources holding the remaining 50% interest.

A workover rig is being mobilized to re-enter and test Palmera-1 in the Azar Block, also in the Putumayo Basin.  Palmera-1 was an exploration well drilled in 1996 that had potential oil pay indicated on logs but was never tested.  Testing operations are expected to be completed in June.  Gran Tierra Energy is operator of the Azar Block and has a 40% working interest.

Exploration drilling operations have been initiated in the Rio Magdalena Block in the Middle Magdalena Basin in central Colombia. Popa-2 started drilling on May 8 and is expected to finish drilling in late June.  This well will be drilled near a non-commercial oil discovery made by Gran Tierra Energy in 2006 at Popa-1, which tested approximately 160 BOPD. Gran Tierra Energy is the operator of the Rio Magdalena Block and has a 100% working interest. Under the terms of a recently completed farmin agreement, Omega Energy Colombia will earn a 60% share of Gran Tierra Energy’s interest. In the event of a commercial discovery, Ecopetrol S.A. has a right to back in for a 30% working interest, to be split proportionally between Gran Tierra Energy and Omega Energy Colombia.

In Argentina, a rig contract has been signed for the drilling of the Proa-1 exploration well in the Surubi Block, where Gran Tierra Energy has a 100% working interest and is the operator.  Proa-1 is expected to spud in mid-June and finish drilling in mid-August.

In Peru, the company is 99% complete with the acquisition of approximately 20,000 linear kilometers of new high definition airborne gravity and magnetic data over the entire area of Blocks 122 and 128. This data will be used to define exploration leads over which 2-D seismic data will be acquired in the Second Exploration Period of each block. Block 122 encompasses approximately 1.2 million acres and Block 128 encompasses approximately 2.2 million acres of land. Gran Tierra Energy is operator and holds a 100% working interest in both exploration blocks.

Commenting on the results, Dana Coffield, President and Chief Executive Officer of Gran Tierra Energy Inc. stated “The first quarter of 2008 was another outstanding period of growth in production, revenue, and profitability. The combination of a higher WTI and a 53% decrease in our operating costs per barrel to $9.77, have been extremely beneficial to Gran Tierra Energy, and have helped to validate our long term business model. We will continue to execute our development drilling program through this year to grow production, in addition to advancing our exploration programs in Colombia, Peru and Argentina.”

Coffield concluded, “Gran Tierra Energy’s recent listings on the Toronto Stock Exchange and the American Stock Exchange have been very well received and have helped to expand our shareholder base considerably.  The listings complement our ongoing operational and financial successes.”

In Related News:

On May 9, 2008, the company announced that it planned to restate financial statements relating to its accounting for certain Cash Flow Statement items pertaining to the 2006 and 2007 period. Today the company filed a Form 10-K/A to amend its annual report on Form 10-K for the year ended December 31, 2007. The company discovered a misclassification of accounts payable and accrued liabilities resulting in a misstatement of cash flows from operating activities, with a corresponding offset to cash flows from investing activities.  The restatement has no effect on the previously reported net change in cash and cash equivalents and no impact on previously reported consolidated balance sheets or consolidated statements of operations and accumulated deficit. 

Conference Call Information:

Gran Tierra Energy Inc. will hold a conference call to review its first  quarter 2008 results on Tuesday, May 13, 2008 at 11:00 a.m. Eastern Daylight Time.  The call will be hosted by Mr. Dana Coffield, President and Chief Executive Officer. Interested parties may access the conference call by dialing (888) 680-0892 (domestic) or (617) 213-4858 (international), pass code # 81399744.  The call will also be available via web cast at www.grantierra.com, or http://www.streetevents.com, http://www.fulldisclosure.com  

If you are unable to participate, an audio replay of the call will be available beginning two hours after the call and will be available until 11:59 p.m. on May 20, 2008, by dialing (888) 286-8010 (domestic) or (617) 801-6888 (international) using confirmation pass code 51001211.  The web cast will be available on Gran Tierra Energy’s web site until its next earnings call.

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 Toronto Stock Exchange (GTE) and the American Stock Exchange (GTE), and operating in South America. The company holds interests in producing and prospective properties in Argentina, Colombia and Peru. The company 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 1-800-916-GTRE (4873).

Forward Looking Statements:

Estimates of total net proved oil reserves at December 31, 2007 have been prepared in accordance with the definitions for Proved reserves set out in Rule 4-10 of Regulation S-X of the U.S. Securities and Exchange Commission. Probable and Possible reserves have been prepared in accordance with the generally accepted petroleum engineering principles provided for in the document entitled Standards Pertaining to the Estimating and Auditing of Oil and Gas Reserves Information, promulgated by the Society of Petroleum Engineers (SPE). Reserve definitions utilized are those approved by the SPE and the World Petroleum Congress in March of 1997.

The statements in this news release regarding Gran Tierra Energy’s 2008 plans and expectations for development drilling program through this year, in addition to advancing its exploration programs in Colombia, Peru and Argentina, including expected completion dates for various drilling and testing operations and the use to which seismic data will be put, are forward looking information, forward looking statements or financial outlooks (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. These statements 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. There are a number of important factors that could cause the results or outcomes discussed herein to differ materially from those indicated by these forward-looking statements, including, among others, Gran Tierra Energy’s operations are located in South America, and unexpected problems can arise due to technical difficulties and operational difficulties which impact the production, transport or sale of its products, and geographic and weather conditions. 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’s Annual Report on Form 10-K/A filed May 12, 2008.  These filings are available on a Web site maintained by the Securities and Exchange Commission at http://www.sec.gov.  Gran Tierra Energy does not undertake an obligation to update forward-looking or other statements in this release.

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 Balance Sheets (Unaudited)