SecProbe.io

CORRESP
1
filename1.htm

      Unassociated Document

    September
      15, 2006

    Mr.
      H.
      Roger Schwall

    Assistant
      Director

    Division
      of Corporation Finance

    Mail
      Stop
      7010

    Washington,
      D.C. 20549-7010

              Re:

              Gran
                Tierra Energy Inc. (the
“Company”)

    Amendment
      No. 1 to Registration Statement on Form SB-2

    Filed
      April 21, 2006

    File
      No. 333-132352

    Amendment
      No. 1 to Annual Report on Form 10-KSB/A for the fiscal year ended December
      31,
      2005

    Filed
      July 18, 2006

    File
      No. 333-111656

    Dear
      Mr.
      Schwall:

    This
      is
      in response to your comment letter of August 8, 2006 to Dana Coffield with
      respect to the above-referenced filings. Pursuant to a conversation with staff,
      the Company is separately responding to the comment related to the predecessor
      financial statements of Dong Won Corporation. The Company will respond to the
      remaining comments from the August 8, 2006 letter when we respond to your
      comment letter of August 31, 2006. The Company intends to file Amendment No.
      3
      to Registration Statement No. 333-132352 and Amendment No. 3 to Form 10-KSB
      when
      we respond to your remaining comments from the August 8, 2006 and August 31,
      2006 letters.

    We
      have
      set forth below the comment related to the predecessor financial statements
      of
      Dong Won Corporation in your letter of August 8, 2006 in italics with the
      Company’s response:

    Form
      10-KSB/A for the Fiscal Year Ended December 31, 2005

    Financial
      Statements, page 20

    General

              2.

              We
                note your response to prior comment 24 in our letter dated May 10,
                2006 in
                which you explain that you did not acquire substantially all the
                assets of
                Don Won Corporation. Please tell us what percent of the net assets,
                revenues and related results of operations and cash flows of Don
                Won
                Corporation you obtained when you acquired the 14 percent interest
                in the
                Palmar Largo joint venture and the 50 percent interests in the Nacatimbay
                and Ipaguazu concessions.

              We
                continue to believe complete financial statements of the predecessor
                entity are necessary to satisfy the requirements of Item 310(c) of
                Regulation S-B; therefore, if you acquired only a component of the
                business of Don Won Corporation, you should present financial statements
                of the acquired component. These carve out financial statements should
                be
                prepared in accordance with the guidance provided at SAB Topic 1:B:1
                and
                should include a complete balance sheet, income statement and statement
                of
                cash flows.

    September
      15, 2006

    Page
      2

              As
                previously indicated, the accommodation for presenting Statements
                of Gross
                Revenues and Direct Lease Operating expenses in lieu of presenting
                complete financial statements is not generally extended to situations
                calling for the financial statements of a predecessor
                entity.

    RESPONSE:
      Dong
      Won
      Corporation is a public Korea-based company involved in the provision of energy
      and natural resources. The company’s common shares trade on the Korean Stock
      Exchange and its reporting currency is the South Korea Won. According to public
      information, net assets of Dong Won Corporation at December 31, 2004 (prior
      to
      the disposition of the Argentina assets) were $114.1 million. Based on the
      acquisition cost of $7.0 million for Palmar Largo, Nacatimbay and Ipaguazu,
      we
      purchased 6% of the net assets of Dong Won Corporation. According to our audit
      of the revenues, royalties and operating expenses, gross revenue of the 14%
      interest in the Palmar Largo joint venture for the year was $4.7 million,
      representing 8% of reported revenues for Dong Won Corporation of $57.7 million.
      Revenues from Nacatimbay were minor and Ipaguazu was non-producing. Operating
      expenses and royalties for the interest in Palmar Largo for the year were $1.9
      million, approximately 3% of cost of sales for Dong Won Corporation. Dong Won
      Corporation recorded an operating deficit of $27.5 million and operating cash
      flow deficit of $9.4 million for the year due to results of operations that
      were
      not acquired by Gran Tierra.

    Dong
      Won
      operates in Argentina as a branch of the parent company. The branch reports
      its
      financial information in Argentine pesos, and is in accordance with Argentine
      GAAP to comply with statutory audit requirements. According to public
      information for 2004 (prior to Gran Tierra’s acquisition of the Argentine
      assets), the acquisition cost of $7 million for the interests at Palmar Largo,
      Nacatimbay and Ipaguazu represents 55% of the net assets of the branch. Gross
      revenue from the interest in Palmar Largo represented approximately 70% of
      revenues of the branch for the year, and operating expenses and royalties for
      Palmar Largo for the year were approximately 39% of cost of sales. Revenues
      from
      Nacatimbay were minor and Ipaguazu was non-producing. A calculation of the
      percentage of operating results and cash flows acquired is not instructive
      as
      results for the branch include significant costs of operations, in particular,
      that are not associated with the assets acquired. In other words, an assessment
      of the component parts of operating profit and operating cash flow - that is,
      revenue and expense - is appropriate.

    At
      the
      time of the acquisition, Dong Won (Argentina) had the following oil and gas
      interests:

            1.

              14%
                interest Palmar Largo - operated by Pluspetrol - acquired by Gran
                Tierra
                for $6,969,559

            2.

              50%
                interest Nacatimbay - operated by CGC - acquired by Gran Tierra for
                $50,467

            3.

              50%
                interest Ipaguazu - operated by CGC - acquired by Gran Tierra for
                $12,588

            4.

              25%
                interest El Chivil - operated by CGC - not acquired by Gran
                Tierra

            5.

              25%
                interest Surubi - operated by CGC - not acquired by Gran
                Tierra

            6.

              50%
                interest El Vinalar - operated by Dong Won - not acquired by Gran
                Tierra

      September
        15, 2006

      Page
        3

    We
      understand that Dong Won Argentina also holds interests in two properties in
      Bolivia, either directly or indirectly. We purchased Dong Won’s interests in
      three of the six properties above, and did not purchase any of the other
      interests that were operated by the branch, which would have entailed project
      management responsibilities, with associated operational activities and
      expenses.

    On
      the
      basis of the above information, we have stated that we have not acquired
“substantially all” of the assets of Dong Won Argentina.

    Topic
      2,
      Item 3(b) of the SEC Division of Corporate Finance Accounting Disclosure Rules
      & Practices Training Manual states that “Acquisition of selected parts of an
      entity may result in less than full financial statements.” Item 3(b)(3) further
      states “the staff may accept audited statements of assets acquired and
      liabilities assumed and statements of revenues and direct expenses if it is
      impractical to prepare the full financial statements required by Regulation
      S-X
      [and, presumably, Regulation S-B] and explanation of that impracticality is
      included in the filing.”

    We
      contend that it is not practical to prepare financial statements for Dong Won
      Argentina. A full audit of the financials of the branch would involve an audit
      of each of the six joint ventures, only three of which were acquired, and would
      require the cooperation and commitment of Pluspetrol (the operator of Palmar
      Largo) and CGC (the operator of Nacatimbay, Ipaguazu, Chivil and Surubi).
      Furthermore, the translation of Dong Won financials from Argentine GAAP, pesos
      and successful efforts accounting into U.S. GAAP, U.S. dollars, full-cost
      accounting would need to be performed by Dong Won, who have divested their
      interests in Argentina and have not maintained a staff in-country. Dong Won
      would also be required to grant their consent to the inclusion of the re-defined
      financials, which consent is not an obligation. The scope of the audit would
      extend into an audit of tax matters and legal diligence, in addition to an
      audit
      of fixed assets, current assets and liabilities and longer-term obligations
      that
      were not acquired by Gran Tierra and were not associated with the assets
      acquired by Gran Tierra. Ultimately, this exercise would not provide additional
      meaningful information, in our view. We believe that the statement of revenues,
      royalties and operating expenses provides investors with the complete financial
      history of the acquired business.

    We
      consider that it may not be possible to provide audited financial statements
      for
      Dong Won Argentina. An audit would otherwise be impractical, involving a
      significant time and cost, and would not provide additional material information
      relevant to our acquisition.

    Topic
      2,
      Item 3(b)(6) of the Training Manual states that “requests for substitution of
      abbreviated financial information in lieu of full financial statements should
      be
      directed to DCAO prior to filing.” We wish to request for substitution of
      abbreviated financial information on this basis.

    We
      appreciate your comment that the accommodation for presenting statements of
      revenues and operating expenses in lieu of complete financial statements is
      not
      necessarily extended to situations calling for the financial statements of
      a
      predecessor entity. However, we understand that such accommodation may be
      granted, and wish to have the staff consider the realities of our
      situation.

      September
        15, 2006

      Page
        4

    We
      also
      wish the staff to re-consider the perspective that the predecessor entity is
      not
      Dong Won but is the 14% interest in the Palmar Largo joint venture, and our
      view
      that the presentation of revenues, royalties and operating expenses and
      corresponding pro forma financial statements are an accurate representation
      of
      the financial performance of the predecessor and impact of the Palmar Largo
      acquisition.

    Having
      regard for our response, should the staff believe that complete financial
      statements of the predecessor entity are necessary, we would request an
      opportunity to discuss this issue further. If you have any questions, please
      contact me at (704) 373-8862.

Sincerely,

            /s/ Jason
              H.
              Scott

              Jason
              H. Scott

              cc:

              Donna
                Levy

              Dana
                Coffield

              James
                Hart

              Louis
                Zehil

              Jennifer
                Gallagher

              James
                Murphy