Income Statement Analysis & Financial Review

Revenues for the 9-months ended September 30, 2008 were $93.9 million vs. $15.9 million in the prior year. Operating expenses were $10.8 million, as opposed to $6.7 million in 2007, increasing 60%. Selling, general & administrative expenses were $12.8 million, vs. $7.6 million for last year. Pre-tax income was $54.3 million, vs. a loss in the prior-year period of $12.6 million. 2007 amounts include a charge of $7.4 million from liquidated damages. Income taxes were $18.1 million, against $2 million (benefit), and for the first three quarters, net income was $36.2 million ($0.30 a share), vs. a loss of $10.6 million ($0.11 a share) in 2007.

In the third quarter, revenues were $40.1 million vs. $8 million in the prior year. Operating expenses were $4.5 million, as opposed to $2.6 million for the same period in 2007, rising 73%. Selling, general & administrative expenses for the quarter were $4 million, vs. $3 million in the prior-year period. Income before taxes was $30.9 million vs. $0.6 million. Income taxes were $7.9 million, against $0.5 million (benefit) for last year, and net income was $23 million ($0.18 a share), vs. $1.1 million ($0.01 a share) in the third quarter of 2007.

Key Operating Information

Average oil production for the third quarter of 2008 was 4,194 barrels per day (BOPD), net after royalty, compared to 1,491 BOPD for the same quarter of 2007, and 3,399 BOPD for the second quarter of 2008.

Cash and cash equivalents were $57.8 million at September 30, 2008 compared to $18.2 million at December 31, 2007, and $35.3 million at the end of the second quarter of 2008. Total working capital was $43.5 million at September 30, 2008 compared to $8.1 million at December 31, 2007. Shareholders' equity was $136.4 million at September 30, 2008 compared to $76.8 million at December 31, 2007. The company has no long-term debt.

Recent Developments

On December 11, 2008, GTE announced a capital spending program of US$198 million for exploration and production development operations in Colombia, Peru, and Argentina for 2009. This budget includes the drilling of seven exploration wells and six development wells in Colombia, in addition to seismic acquisition programs in Colombia, Peru, and Argentina. Production is expected to grow to approximately 20,000 barrels of oil per day (BOPD), net after royalty, in the second half of 2009.