Share Capital

12 Months Ended

Dec. 31, 2011

Share Capital [Abstract]

Share Capital

7.Share Capital 

The Company's authorized share capital consists of 595,000,002 shares of capital stock, of which 570 million are designated as common stock, par value $0.001 per share, 25 million are designated as preferred stock, par value $0.001 per share, and two shares are designated as special voting stock, par value $0.001 per share. As at December 31, 2011, outstanding share capital consists of 262,304,249 common voting shares of the Company, 8,512,707 exchangeable shares of Gran Tierra Exchange Co., automatically exchangeable on November 14, 2013, and 7,811,112 exchangeable shares of Goldstrike Exchange Co., automatically exchangeable on November 10, 2012. The exchangeable shares of Gran Tierra Exchange Co, were issued upon acquisition of Solana. The exchangeable shares of Gran Tierra Goldstrike Inc. were issued upon the business combination between Gran Tierra Energy Inc., an Alberta corporation, and Goldstrike, Inc., which is now the Company. Each exchangeable share is exchangeable into one common voting share of the Company. The holders of common stock are entitled to one vote for each share on all matters submitted to a stockholder vote and are entitled to share in all dividends that the Company's board of directors, in its discretion, declares from legally available funds. The holders of common stock have no pre-emptive rights, no conversion rights, and there are no redemption provisions applicable to the common stock. Holders of exchangeable shares have substantially the same rights as holders of common voting shares.

Warrants

At December 31, 2011, the Company had 6,298,230 warrants outstanding to purchase 3,149,115 common shares for $1.05 per share, expiring between June 20, 2012 and June 30, 2012. For the year ended December 31, 2011, 735,817 common shares were issued upon the exercise of 1,471,634 warrants (year ended December 31, 2010, 11,127,527 common shares were issued upon the exercise of 15,109,116 warrants). Included in warrants exercised in 2010 were 7,145,938 warrants to purchase 7,145,938 common shares for $14.4 million, assumed in the acquisition of Solana in November 2008. The Company issued 4,125, 036 Replacement Warrants in connection with its acquisition of Petrolifera during March 2011 (Note 3). The Replacement Warrants expired unexercised during August 2011.

Stock Options

As at December 31, 2011, the Company had a 2007 Equity Incentive Plan, formed through the approval by shareholders of the amendment and restatement of the 2005 Equity Incentive Plan, under which the Company's board of directors is authorized to issue options or other rights to acquire shares of the Company's common stock. On June 16, 2010, the shareholders of Gran Tierra approved an amendment to the Company's 2007 Equity Incentive Plan, which increased the number of shares of common stock available for issuance thereunder from 18,000,000 shares to 23,306,100 shares.

The Company grants options to purchase common shares to certain directors, officers, employees and consultants. Each option permits the holder to purchase one common share at the stated exercise price. The options vest over three years and have a term of ten years, or three months after the grantee's end of service to the Company, whichever occurs first. At the time of grant, the exercise price equals the market price. For the year ended December 31, 2011, 1,695,049 common shares were issued upon the exercise of 1,695,049 stock options (year ended December 31, 2010 – 2,895,553; year ended December 31, 2009 – 1,391,028). The following options are outstanding as of December 31, 2011:

	Number of Outstanding Options			Weighted Average Exercise Price $/Option			Number of Nonvested Options			Weighted Average Grant-Date Fair Value $/Option
Balance, December 31, 2010		10,943,058		$	3.49			5,516,691		$	2.68
Granted in 2011		4,215,996			7.94			4,215,996			4.84
Exercised in 2011		(1,695,049	)		(2.70	)		-			-
Vested in 2011		-			-			(2,940,822	)		(2.26	)
Forfeited in 2011		(600,003	)		(6.70	)		(576,669	)		(4.06	)
Balance, December 31, 2011		12,864,002		$	4.90			6,215,196		$	4.22

The weighted average grant date fair value for options granted in 2011 was $4.84 (2010 – $3.36; 2009 - $2.43). The weighted average grant date fair value for non-vested options at December 31, 2011 was $4.22 (2010 – $2.68). The weighted average grant date fair value for options vested in 2011 was $2.26 (2010 - $1.61; 2009 - $1.38). The total fair value of stock options vested during 2011 was $6.6 million (2010 - $5.1 million; 2009 - $4.7 million).

The aggregate intrinsic value of options outstanding at December 31, 2011 is $14.7 million (2010 - $49.9 million; 2009 - $39.0 million) based on the Company's closing stock price of $4.80 at December 31, 2011 (December 31, 2010 - $8.05; December 31, 2009 - $5.73). The intrinsic value of options exercised in 2011 was $6.2 million (2010 - $12.8 million; 2009 - $2.9 million).

In 2011, the stock-based compensation expense was $13.7 million (2010 - $8.5 million; 2009 - $5.6 million) of which $11.4 million (2010 - $7.2 million; 2009 - $4.5 million) was recorded in G&A expense and $1.3 million (2010 - $0.8 million; 2009 - $0.8 million) was recorded in operating expense and $1.0 million (2010 - $0.5 million; 2009 - $0.3 million) was capitalized as part of exploration and development costs. At December 31, 2011, there was $11.7 million (2010 - $6.1 million; 2009 - $5.4 million) of unrecognized compensation cost related to unvested stock options which is expected to be recognized over the next three years.

The table below summarizes stock options outstanding at December 31, 2011:

Range of Exercise Prices ($/option)	Number of Outstanding Options		Weighted Average Exercise Price $/Option		Weighted Average Expiry Years
0.50 to 2.00		1,195,837		1.12		4.6
2.01 to 3.50		4,310,250		2.47		6.8
3.51 to 5.50		621,666		4.52		8.3
5.51 to 7.00		3,132,753		5.94		8.4
7.01 to 8.40		3,603,496		8.23		9.1
Total		12,864,002	$	4.90		7.7

The table below summarizes exercisable stock options at December 31, 2011:

Range of Exercise Prices ($/option)	Number of Exercisable Options	Weighted AverageExercise Price $/Option		Weighted Average Expiry Years
0.50 to 2.00	1,195,837	$	1.12	4.6
2.01 to 3.50	4,128,583	$	2.47	6.8
3.51 to 5.50	283,332	$	4.47	7.8
5.51 to 7.00	897,721	$	5.90	8.2
7.01 to 8.40	143,333	$	7.67	7.2
Total	6,648,806	$	2.89	6.6

The aggregate intrinsic value of options exercisable at December 31, 2011 is $14.2 million (2010 - $49.4 million; 2009 - $19.8 million) based on the Company's closing stock price of $4.80 at December 31, 2011 (December 31, 2010 – $8.05; December 31, 2009 - $5.73)

The fair value of each stock option award is estimated on the date of grant using the Black-Scholes option pricing model based on assumptions noted in the following table.

	Year Ended December 31,
	2011			2010			2009
Dividend yield (per share)	$nil			$nil			$nil
Volatility	75% to 81%			84% to 90%			94% to 98%
Weighted average volatility		80	%		89	%		96	%
Risk-free interest rate	0.4% to 1.4%			0.2% to 0.5%			0.4% to 0.6%
Weighted average risk-free interest rate		1.2	%		0.3	%		0.5	%
Expected term	4 to 6 years			3 years			3 years

Weighted average shares outstanding	Year Ended December 31,
	2011			2010			2009
Weighted average number of common and exchangeable shares outstanding		273,491,564			253,697,076			241,258,568
Shares issuable pursuant to warrants		2,708,183			3,750,781			9,503,818
Shares issuable pursuant to stock options		5,143,498			7,402,966			5,797,322
Shares to be purchased from proceeds of stock options		(56,243	)		(545,992	)		(2,969,605	)
Weighted average number of diluted common and exchangeable shares outstanding		281,287,002			264,304,831			253,590,103

Net income per share

At December 31, 2011, 3,726,999 (December 31, 2010 - 290,000; December 31, 2009 - 1,080,000) options to purchase common shares were excluded from the diluted income per share calculation as the instruments were anti-dilutive.